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Department of Finance

For the Fiscal Year Ended December 31, 2019

CITY OF DULUTH, MINNESOTA

COMPREHENSIVE ANNUAL FINANCIAL REPORT

DECEMBER 31, 2019

i

TABLE OF CONTENTS

Page

INTRODUCTORY SECTION

Letter of Transmittal 1

Elected and Appointed Officials 6

Organizational Chart 7

Certificate of Achievement 8

FINANCIAL SECTION

Independent Auditor’s Report 9

Management’s Discussion and Analysis 12

Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Position 22

Statement of Activities 23

Fund Financial Statements:

Balance Sheet – Governmental Funds 25

Reconciliation of Governmental Funds Balance Sheet to

the Statement of Net Position 26

Statement of Revenues, Expenditures, and Changes in

Fund Balances – Governmental Funds 27

Reconciliation of the Statement of Revenues, Expenditures, and Changes

in Fund Balances of Governmental Funds to the Statement of Activities 28

Statement of Revenues, Expenditures, and Changes in Fund Balance –

Budget and Actual (Non-GAAP Budgetary Basis) – General Fund 29

Statement of Net Position – Proprietary Funds 30

Statement of Revenues, Expenses, and Changes in Fund Net Position –

Proprietary Funds 34

Statement of Cash Flows – Proprietary Funds 36

Statement of Fiduciary Net Position 39

Statement of Changes in Fiduciary Net Position – Other Postemployment

Benefits Trust Fund 40

Statement of Net Position – Component Units 41

Statement of Activities – Component Units 42

Notes to the Financial Statements 44

Required Supplementary Information:

Other Postemployment Benefits Plan:

Schedule of Changes in the City's Net OPEB Liability and Related Ratios 93

Schedule of Investment Returns 93

Schedule of City Contributions 94

Schedule of Proportionate Share of Net Pension Liability and Schedule of

Contributions – PERA General Employees Plan 95

Schedule of Proportionate Share of Net Pension Liability and Schedule of

Contributions – PERA Police and Fire Plan 96

Notes to the Required Supplementary Information 97

CITY OF DULUTH, MINNESOTA

COMPREHENSIVE ANNUAL FINANCIAL REPORT

DECEMBER 31, 2019

ii

TABLE OF CONTENTS

Page

FINANCIAL SECTION (continued)

Combining and Individual Fund Statements and Schedules:

Governmental Funds:

Combining Balance Sheet – Nonmajor Governmental Funds 102

Combining Statement of Revenues, Expenditures, and

Changes in Fund Balances – Nonmajor Governmental Funds 108

Schedule of Revenues – Estimated and Actual – General Fund 114

Schedule of Expenditures and Encumbrances –

Budget and Actual (Non-GAAP Budgetary Basis) – General Fund 117

Schedule of Expenditures/Transfers Out – General Fund 122

Proprietary Funds:

Combining Statement of Net Position – Nonmajor Enterprise Funds 125

Combining Statement of Revenues, Expenses, and Changes

in Fund Net Position – Nonmajor Enterprise Funds 126

Combining Statement of Cash Flows – Nonmajor Enterprise Funds 127

Combining Statement of Net Position Governmental Activities –

Internal Service Funds 128

Combining Statement of Revenues, Expenses, and Changes

in Fund Net Position Governmental Activities –

Internal Service Funds 129

Combining Statement of Cash Flows Governmental Activities –

Internal Service Funds 130

Fiduciary Funds:

Statement of Changes in Assets and Liabilities – Agency Funds 132

Supplementary Information

Capital Assets Used in the Operation of Governmental Funds:

Schedule by Source 133

Schedule by Function and Activity 134

Schedule of Changes by Function and Activity 135

Schedule of Changes in Long-Term Debt

Bonds and Certificates Payable 136

Notes Payable 140

Duluth Economic Development Authority

Balance Sheet 142

Statement of Revenues, Expenditures and Changes in Fund Balances 143

Reconciliation of the Statement of Revenues, Expenditures and Changes

in Fund Balances to the Statement of Activities 144

Duluth JPE Trust

Statement of Fiduciary Net Position 145

Statement of Changes in Fiduciary Net Position 146

Schedule of Intergovernmental Revenue 147

Federal Awards

Schedule of Expenditures of Federal Awards 150

Notes to the Schedule of Expenditures of Federal Awards 153

CITY OF DULUTH, MINNESOTA

COMPREHENSIVE ANNUAL FINANCIAL REPORT

DECEMBER 31, 2019

iii

TABLE OF CONTENTS

Page

STATISTICAL SECTION

Net Position by Component 156

Changes in Net Position 157

Fund Balances of Governmental Funds 161

Changes in Fund Balances of Governmental Funds 162

Assessed and Estimated Taxable Market Value of Property 164

Property Tax Rates – Direct and Overlapping Governments 165

Principal Property Taxpayers 165

Property Tax Levies and Collections 166

Net Capacity of Real Property by Category 166

Ratios of Outstanding Debt by Type 167

Ratios of Net General Obligation Bonded Debt 168

Direct and Overlapping Governmental Activities Debt 168

Legal Debt Margin Information 169

Revenue Bond Coverage 170

Demographic and Economic Statistics 172

Principal Employers 172

Full-time Equivalent City Government Employees by Function 173

Operating Indicators by Function 174

Capital Asset Statistics by Function 176

Component Unit Statistical Data 178





Chief Financial Officer • Wayne Parson, CPA (inactive)

City Auditor • Joshua Bailey

411 West First Street • Room 120 • Duluth, Minnesota • 55802-1190

218-730-5450 • Fax: 218-730-5919

wparson@duluthmn.gov • jbailey@duluthmn.gov • www.duluthmn.gov

An Equal Opportunity Employer

June 29, 2020

To the Honorable Mayor, City Council, Administration,

and Citizens of the City of Duluth, Minnesota

State law and the City Charter mandate the City of Duluth have an annual audit of its financial statements. State

law requires the audit to be conducted within 180 days after fiscal year end. This report was prepared to satisfy

these requirements for the fiscal year ended December 31, 2019.

The City’s management assumes full responsibility for the completeness and reliability of the information

contained in this report and has established a comprehensive framework of internal control for that purpose.

The objective of the City’s internal controls is to provide reasonable, rather than absolute, assurance that the

financial statements are free of any material misstatement. Absolute assurance is not achievable because the

costs of internal controls should not exceed anticipated benefits.

The Minnesota Office of the State Auditor has issued an unmodified opinion on the City of Duluth’s financial

statements for the year ended December 31, 2019. The independent auditor’s report is located at the front of

the financial section of this report.

Management’s Discussion and Analysis (MD&A) provides a narrative introduction, overview, and analysis of the

basic financial statements. 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.

GOVERNMENT PROFILE

Duluth is the seat of St. Louis County, and is the largest city in the northern two-thirds of Minnesota. It is located

at the western tip of Lake Superior, and encompasses 67 square miles of land and nearly 50 square miles of

water. Situated on a hillside along Lake Superior’s north shore, Duluth is 23 miles long and eight miles wide at

its broadest point. Duluth’s population is approximately 86,000 and contributes to a market area of more than

500,000 from northern Minnesota, northwest Wisconsin, the Upper Peninsula of Michigan, and lower Ontario.

Duluth and its neighbor, Superior, Wisconsin, share the Great Lakes’ largest port and one of the largest inland

seaports in the world.

As one of only four first class cities in the state, Duluth operates under a Home Rule Charter granted by the

constitution and laws of the State of Minnesota. The city has operated under a mayor-council form of

government since 1956. The Mayor is the chief executive officer of the city, and is aided by a chief administrative

officer who is chosen by, and is responsible to the Mayor. All executive and administrative powers are vested

in the mayor, chief administrative officer, and other officers authorized by City Charter. The City Council is

comprised of nine councilors, four chosen at large and five from geographical districts. All legislative powers

are vested in the council. The mayor and councilors are subject to the control and direction of the people at all

times by the initiative, referendum and recall provisions in the City Charter.

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The City provides a full range of governmental services including police and fire protection, street construction

and maintenance, library and recreational facilities, and public utilities for water, gas, sewer, and storm water

services. Certain economic development activities are provided through a legally separate entity, Duluth

Economic Development Authority, a discretely presented component unit of the City. The City also is financially

accountable for several legally separate entities including an airport, convention center, transit services, and

recreation area, all of which are reported separately in the City’s financial statements. Additional information

regarding these legally separate entities is provided in Note 1 to the financial statements.

The City Council is required to adopt a final budget before year end. The budget ordinance approved by the

Council establishes appropriations for the General Fund. The total of all appropriations within a department are

defined as a budget item and form the legal level of budgetary control, as defined in the budget ordinance. The

Mayor, Chief Administrative Officer, or a designee may make transfers between appropriations; however, the

total of all transfers to or from any budget item in excess of ten percent of that budget item must be approved by

the City Council. The Council may revise the budget at any time by ordinance upon recommendation of the

Administration.

LOCAL ECONOMY

Once dependent on heavy industry for its economic health, Duluth has diversified and has become a strong

regional center for shipping, tourism, education, health care, retail sales, technology, architecture, engineering

and aviation. Duluth’s unemployment averaged 3.0% for 2019, which was slightly higher than the previous year’s

average unemployment rate of 2.9%. The total number of jobs reported to the state in 2019 peaked at 59,604.

According to the Minnesota Department of Economic Development and Employment (DEED), Duluth’s aviation

industry has grown 39% since 2007, with key anchors like Cirrus Aircraft and AAR continuing to soar, contributing

$646 million in the regional economy and directly supporting approximately 3,500 jobs in the Duluth metro area.

Cirrus Aircraft’s SF50 Vision Jet was awarded the prestigious 2017 Robert J. Collier Trophy for “the greatest

achievement in aeronautics or astronautics in America, with respect to improving the performance, efficiency,

and safety in air or space vehicles…” and is on display at the Smithsonian’s Air and Space Museum.

The Port of Duluth-Superior has been one of the backbones of the region’s economy, and has been long known

as the Great Lakes’ ”Bulk Cargo Capital.” It is the #1 tonnage port on the Great Lakes, and is the farthest-inland

freshwater seaport. The Duluth-Superior port moves an average of 35 million short tons of cargo annually,

ranking among the nation’s top 25 ports. It accommodates the maritime transportation needs of a wide range of

industries ranging from agriculture, forestry, mining and manufacturing to construction, power generation, and

passenger cruising. The Seaway Port Authority of Duluth reported that 754 ships visited the Port of Duluth-

Superior in 2019, and moved 33.5 million tons of cargo including iron ore, coal, grain, limestone, cement, salt,

wood pulp, steel, and wind turbine components, plus a variety of heavy-lift and project cargo. As the largest

tonnage port on the Great Lakes-St. Lawrence Seaway, cargo movements through the Port of Duluth-Superior

support approximately 7,881 jobs and $504.1 million in wages, and contributes over $1.4 billion to the

local/regional economy.

Duluth continues to excel in the key industry of tourism, bringing approximately 6.7 million visitors to Duluth

annually and injecting more than $957 million each year directly into the immediate area. Duluth has turned itself

into the top destination for Minnesotans as a primary getaway, according to Explore Minnesota Tourism. Duluth

offers a variety of attractions and outdoor activities, including: Canal Park, Duluth’s historic waterfront district,

which is home to the famous Aerial Lift Bridge-Minnesota’s most frequented tourist attraction, and a variety of

hotels, restaurants, and shops; the 7.5 mile Lakewalk on the shores of Lake Superior; Bayfront Festival Park-

named the “Best Outdoor Music Venue” in the 2014 “Best of Minnesota” poll by the Minneapolis Star Tribune-

which is a 20 acre waterfront park with a seasonal amphitheater, hosting outdoor summertime concerts and

events, and during the holiday season, the Bentleyville Tour of Lights-America’s largest free walk through holiday

light display; The Great Lakes Aquarium-a $30 million freshwater aquarium featuring more than 20 exhibits;

Spirit Mountain Ski and Recreation Area-a year round recreation area with the Midwest’s longest downhill ski

run, Nordic skiing, a snow tubing park, an RV park, and an adventure park featuring mini golf, disk golf, mountain

biking, scenic lift ride, alpine coaster ride, and a zip line. The City has 129 municipal parks encompassing over

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3,264 acres, two public golf courses, zoo, and over 150 miles of trails for hikers, bicyclists, and cross country

skiers. Duluth’s 104 mile Traverse Mountain Biking Trail system is close to completion, and is rated as 1 of only

6 “Gold Level” Ride Centers in the world by the International Mountain Bicycling Association (IMBA). Duluth

hosts world-class special events such as Grandma’s Marathon, the 16

th

largest marathon in the United States;

and, the Bayfront Blues Fest, which attracts over 20,000 people. Duluth has been nationally recognized by

various publications and was rated by Money magazine as one of the top four Midwestern small cities, based

on livability. In 2015, Duluth was voted as America’s “Best Town” by an online poll conducted by Outside

Magazine. In 2017, Duluth was named as America’s fittest City by Fitbit; and, SmartAsset’s 2017 edition name

Duluth as the least stressed city in America. In 2018, Duluth was recognized by the New York Post as one of

the “Best 10 Christmas Cities in America.” Indeed.com ranked Duluth #1 for “US Cities Where Salaries Go

Furthest: 2018” based upon high adjusted salaries, low unemployment, and good future prospects. Lake

Superior, the city’s unique history, premier trails, natural beauty, and quality of life continue to define Duluth as

a family friendly vacation destination and place to live.

The Duluth Entertainment Convention Center (DECC) remains a leader in convention center business and

environmental stewardship. In 2019 the DECC hosted 506 events, which were comprised of Broadway and

performing arts; rock, country, and miscellaneous concerts; meetings; and, various public, social, family, and

sporting events. There were also 47 conventions in the CitySide and the HarborSide Convention Centers with

over 32,200 attendees. AMSOIL Arena had its ninth successful year of operations, and is home to the

University of Minnesota-Duluth's (UMD) hockey teams. Fans supported the National Collegiate Hockey

Conference (NCHC) Champions, the men's Bulldog hockey team; and, also supported the women’s Western

Collegiate Hockey Conference (WCHA) team. On an average winter Saturday night, the DECC can be filled

with over 20,000 guests attending hockey in Amsoil Arena; a Duluth-Superior Symphony Orchestra (DSSO)

concert in Symphony Hall; a convention or banquet in Cityside or HarborSide Ballrooms; curling at the Duluth

Curling Club, proud home of the 2018 U.S. Olympic Gold Medal winning team; or, watching a movie at the

Duluth 10 Theater. Bayfront Park was under the management of the DECC for the eighth year with a full roster

of events, including Bentleyville, Duluth Fourth Fest, Blues Fest, Pride Festival, Tributefest, and All Pints North

Brewfest. The retired Great Lakes freighter, the SS William A. Irvin, a floating Maritime Museum and Haunted

Ship Halloween attraction, was successfully returned to the Minnesota Slip, after being moved the prior year to

make room for the Great Lakes Legacy Act sediment cleanup in the Slip. With their focus on sustainability, the

DECC strives to make a positive impact on our local community through environmental, economic and social

stewardship.

According to the Minnesota Department of Employment and Economic Development (DEED), the Duluth metro

has more than 20,000 college and university students. The American Institute of Economic Research named

the Duluth metropolitan area as one of America’s best small metropolitan areas for college students in their

“Small Metro category” in its 2012 College Destinations index. The University of Minnesota, Duluth (UMD) and

the College of St. Scholastica (CSS) are regularly ranked in the top tier of Midwestern universities by U.S. News

and World Report’s “America’s Best Colleges” issue. The University of Minnesota Duluth (UMD) is a

comprehensive regional university, and had fall enrollment of 10,858 students in 2019. Undergraduate students

can choose from 16 bachelor degrees in 87 majors and 73 minors as well as seven certificates. UMD also offers

graduate programs in 25 fields, 14 minors, and four certificates. The University of Minnesota Medical School

and the University of Minnesota College of Pharmacy, both have programs on the UMD campus. In addition to

offering the EdD, UMD participates in two all-university PhD programs (one of which is located primarily on the

UMD campus) and cooperates significantly in the delivery of a number of Twin Cities-based PhD programs. The

College of St. Scholastica has been called a “hidden gem” by the Washington Post in its “100 Schools to

Consider” and in 2014 was named by Money Magazine to the top third of all four-year colleges in the country,

based on graduation rates, educational quality, affordability and alumni earnings. Forbes Magazine named CSS

in its “Top Colleges” list for 2017 based on outcomes, measured by student satisfaction, post-graduate success

and academic success. CSS has 6 academic schools, and offers degrees in more than 75 undergraduate

majors, minors and pre-professionals; 15 masters, and 4 doctoral programs, with a total 2019 enrollment of

3,906 students. Lake Superior College (LSC) is a two-year community and technical college in Duluth, and is a

member of the Minnesota State College System, and has the third lowest college tuition in the State of

Minnesota. Lake Superior College was ranked 41

st

among the “50 Best Community Colleges in the Nation”

recently by College Consensus, an organization that combines all of the most reputable college ranking

publishers and real student reviews. The college offers pre-baccalaureate majors for students interested in

transferring to 4-year educational institutions, as well as more than 90 certificate, diploma and degree programs

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in career and technical fields. LSC's Continuing Education/Customized Training division collaborates with area

businesses and industry to design specialized opportunities for entry-level and advanced education. While

courses are typically offered in traditional classroom and lab settings, LSC also offers over 200 courses online.

LONG-TERM FINANCIAL PLANNING

Unassigned fund balance in the General Fund (15.8 percent of total General Fund expenditures and transfers)

exceeds the policy guidelines set by the Administration and Council for budgetary and planning purposes.

According to the policy, unassigned fund balance should fall within the following range of General Fund

expenditures and transfers: 5% as a minimum, 7% as a moderate scenario, with 10% regarded as optimum.

RELEVANT FINANCIAL POLICIES

The City established a Community Investment Fund in 1994. The Fund is financed by the City’s share of

revenues generated from the operation of the Fond-du-Luth Casino administered by the Fond du Lac Band of

Lake Superior Chippewa. Investment earnings from the Community Investment Fund are dedicated to the City’s

General Fund by charter provision. All other monies appropriated from the Fund must be approved by resolution

by at least seven members of the nine-member City Council. As of December 31, 2019, the Community

Investment Fund reported a fund balance of $26.9 million.

In 2007, the City established an irrevocable trust to pre-fund the City’s other postemployment benefit liability.

Contributions totaling $29.1 million have been made to the irrevocable trust. The irrevocable trust balance

including cumulative investment earnings was $71.5 million at December 31, 2019. In November 2014, the City

adopted a policy that established a funding framework for financing annual retiree healthcare costs through both

annual appropriation and utilizing the irrevocable trust. Annual appropriation costs are capped at $9 million.

Annual retiree healthcare premium costs in excess of $9 million will be paid from the irrevocable trust. For the

year ended December 31, 2019, retiree health care premium costs of $303,020 were funded by the irrevocable

trust. City pooled investment earnings were also dedicated as an additional funding source for future

contributions to the irrevocable trust.

MAJOR INITIATIVES

In November 2017, a transportation sales tax referendum was overwhelmingly approved by voters. The new

½% sales tax went into effect on October 1, 2019 and will garner an estimated $7 million annually to be

designated for the City’s Street Improvement Program.

State legislation created a Duluth Regional Exchange District that will support the two regional health care

systems headquartered in downtown Duluth. Essentia Health and St. Luke’s Hospital are constructing new

facilities that will result in a combined investment exceeding $1 billion in downtown Duluth. This investment will

be the largest private development in Duluth’s history and will act as a catalyst for additional development activity

in the downtown area. Included in the State legislation was $97.2 million earmarked for public improvements

including parking ramps and street and utility improvements in the District. Site work began in 2019 and work

on the project will continue for several years.

AWARDS AND ACKNOWLEDGMENTS

The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in

Financial Reporting to the City of Duluth, for its comprehensive annual financial report (CAFR) for the fiscal year

ended December 31, 2018. This was the forty-third consecutive year that the City has received this prestigious

award. In order to be awarded a Certificate of Achievement, the City had to publish an easily readable and

efficiently organized CAFR, whose contents conform to both generally accepted accounting principles and

applicable legal requirements.

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A Certificate of Achievement is valid for a period of one year only. We believe our current CAFR continues to

conform to the Certificate of Achievement Program’s requirements, and we are submitting it to the GFOA to

determine eligibility for another certificate.

In addition, the City of Duluth also received the GFOA's Distinguished Budget Presentation Award for its annual

budget document for the year 2019. In order to qualify for the Distinguished Budget Presentation Award, a

governmental unit's budget must be judged proficient as a policy document, a financial plan, an operations guide,

and a communications device.

When looking at a report such as this CAFR, it is sometimes difficult to comprehend how much time and effort

is devoted by employees from the beginning of the audit to the final printing and distribution of the CAFR. As

the requirements and demands of financial reporting in government increase, so too must the knowledge, effort

and skills of a government's accounting staff; I wish to acknowledge the Financial Analysts in the Finance

Department who continue to meet this challenge.

Respectfully submitted, Respectfully submitted,

Wayne Parson, CPA (inactive) Joshua Bailey,

Chief Financial Officer City Auditor

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DISTRICT

Mayor 2020

Emily Larson

City Council

Zack Filipovich

At large

2022

Arik Forsman

At large

2020

Noah Hobbs

At large

2020

Barb Russ **

At large

2022

Gary Anderson

1

2020

Joel Sipress

2

2022

Em Westerlund

3

2020

Renee Van Nett

4

2022

Jay Fosle

5

2020

Gunnar Johnson ***

Joshua Bailey

Noah Schuchman

Wayne Parson

Michael Tusken

Chelsea Helmer

Christopher Fleege

Jim Filby Williams

Elena Foshay

James Benning

Shawn Krizaj

ELECTED POSITIONS TERM EXPIRES *

*All terms expire in January

**Barb Russ Resigned in April 2020

APPOINTED POSITIONS

Attorney

Auditor

Chief Administrative Officer

Chief Financial Officer

Chief of Police

Clerk

Director of Planning and Economic Development

Director of Public Administration

Director of Workforce Development

Director of Public Works and Utilities

Fire Chief

***Gunnar Johnson Resigned in April 2020

ELECTED AND APPOINTED OFFICIALS

CITY OF DULUTH, MINNESOTA

6

CITY OF DULUTH ORGANIZATIONAL CHART

Fire Department

Information

Technology

Police Department

Public

Administration

Department

Public Works &

Utilities Department

Planning & Economic

Development

Department

City Council

Mayor

Chief

Administrative

Officer

City Attorney

Planning &

Development

Fire

Administration

Fire

Operations

Life Safety

Administration

& Investigations

Patrol

Parks &

Recreation

Human

Resources

Fleet Services

Facilities

Management

City Clerk

Library

Services

Street

Maintenance

Engineering

Utility

Operations

Director's

Office

Construction

Services &

Inspection

Business &

Economic

Development

Auditor

Budget

Purchasing

Treasurer

Finance

Department

Parking

Safety &

Training

Park

Maintenance

Energy

Management

Water

Gas

Sewer

Storm

Street

Lighting

Workforce

Development

Department

7

Government

Finance Officers Association

Certificate

of

Achievement

for Excellence

in Financial

Reporting

Presented

to

City of Duluth

Minnesota

For its Comprehensive Annual

Financial Report

for the Fiscal Year Ended

December 31, 2018

Executive Director/CEO

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



JULIE BLAHA

STATE AUDITOR

STATE OF MINNESOTA

OFFICE OF THE STATE AUDITOR

SUITE 500

525 PARK STREET

SAINT PAUL, MN 55103-2139

(651) 296-2551 (Voice)

(651) 296-4755 (Fax)

state.auditor@state.mn.us (E-mail)

1-800-627-3529 (Relay Service)

INDEPENDENT AUDITOR’S REPORT

The Honorable Emily Larson, Mayor,

and Members of the City Council

City of Duluth, Minnesota

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the

business-type activities, the aggregate discretely presented component units, each major fund, and

the aggregate remaining fund information of the City of Duluth, Minnesota, as of and for the year

ended December 31, 2019, and the related notes to the financial statements, which collectively

comprise the City’s basic financial statements, as listed in the table of contents. The financial

statements and related notes of the Spirit Mountain Recreation Area Authority component unit’s

activities are included as of and for the year ended April 30, 2019.

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

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 from 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

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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

aggregate discretely presented component units, each major fund, and the aggregate remaining

fund information of the City of Duluth as of December 31, 2019, including the Spirit Mountain

Recreation Area Authority component unit as of April 30, 2019, and the respective changes in

financial position and, where applicable, cash flows thereof and the budgetary comparison of the

General Fund for the year then ended in accordance with accounting principles generally accepted

in the United States of America.

Emphasis of Matter – Subsequent Event

As discussed in Note 20 to the financial statements, subsequent to year-end, the World Health

Organization declared the outbreak of a coronavirus (COVID-19) a pandemic, resulting in a

reduction of tax collections for 2020. Our opinion is not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the

Management’s Discussion and Analysis and Required Supplementary Information as listed in the

table of contents be presented to supplement the basic financial statements. Such information,

although not 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.

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Supplementary and Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that

collectively comprise the City of Duluth’s basic financial statements. The Introductory Section,

the Combining and Individual Fund Statements and Schedules, the Supplementary Information,

and the Statistical Section as listed in the table of contents are presented for purposes of additional

analysis and are not a required part of the basic financial statements.

The Combining and Individual Fund Statements and Schedules and the Supplementary

Information 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 information is 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 29,

2020, on our consideration of the City of Duluth’s and the Duluth Economic Development

Authority component unit’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 solely 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 effectiveness of the City of Duluth’s and the Duluth Economic Development

Authority component unit’s internal control over financial reporting or on compliance. The reports

are an integral part of an audit performed in accordance with Government Auditing Standards in

considering the City of Duluth’s and the Duluth Economic Development Authority component

unit’s internal control over financial reporting and compliance.

JULIE BLAHA GREG HIERLINGER, CPA

STATE AUDITOR DEPUTY STATE AUDITOR

June 29, 2020

11

M a n a g e m e n t ’ s

D i s c u s s i o n a n d A n a l y s i s

CITY OF DULUTH, MINNESOTA

MANAGEMENT’S DISCUSSION AND ANALYSIS

DECEMBER 31, 2019

(unaudited)

The City of Duluth’s Finance Department has prepared this narrative overview and analysis of the financial activities

of the City for the fiscal year ended December 31, 2019, to assist users of this report to gain a better understanding

of the City’s financial health and history. The information presented in this section should be considered in conjunction

with that presented in the letter of transmittal and the notes to the financial statements.

FINANCIAL HIGHLIGHTS

 The City’s assets and deferred outflows of resources exceeded its liabilities and deferred inflow of resources

at December 31, 2019, by $396.7 million; this amount is identified as net position.

 As of December 31, 2019, the City’s governmental funds reported combined ending fund balances of $83.0

million.

 Restricted fund balances were $39.4 million of fund balance or 47.5%. These fund balances are not available

for appropriation because of constraints placed on the use of these funds. The remaining fund balances of

$43.6 million, or 52.5%, are unrestricted and classified as committed, assigned, or unassigned.

 In 2007, the City created an irrevocable trust to pre-fund a portion of the City’s other postemployment benefits.

As of December 31, 2019, the trust reported net position totaling $71.5 million.

 As of December 31, 2019, the General Fund’s unrestricted, unassigned fund balance was $14.4 million, or

16.0% of total General Fund expenditures.

OVERVIEW OF THE FINANCIAL STATEMENTS

This discussion and analysis serves as an introduction to the City’s basic financial statements, which consists of three

components: 1) government-wide financial statements; 2) fund financial statements; and 3) notes to the financial

statements. This report also contains other supplementary information in addition to the basic financial statements.

GOVERNMENT-WIDE FINANCIAL STATEMENTS

The government-wide financial statements are designed to give users a broad overview of the City’s finances, in a

manner similar to that of a private-sector business. The Statement of Net Position presents information on all of the

City’s assets, deferred outflows of resources, deferred inflows of resources, and liabilities, with the net difference

between the four reported as net position. Increases or decreases in net position over time may serve as a useful

indicator of whether the City’s financial position is improving or deteriorating. The Statement of Activities shows how

the City’s net position changed during the fiscal year. All changes in net position are reported as soon as the

underlying event that caused the change occurs, regardless of the timing of the related cash flows. There are

revenues and expenses reported in this statement for some items that will only result in cash flows in future fiscal

years; examples include uncollected taxes and vacation days that are earned, but not used.

Both of the government-wide financial statements distinguish between functions that are mainly supported by taxes

and intergovernmental revenues, and other functions that are intended to recover all or a significant portion of their

costs through user fees and charges. The first functions are identified in the statements as governmental activities,

while the latter functions are reported as business-type activities.

12

CITY OF DULUTH, MINNESOTA

MANAGEMENT’S DISCUSSION AND ANALYSIS

DECEMBER 31, 2019

(unaudited)

The City’s governmental activities include general government, public safety, public works, culture and recreation,

and urban and economic development. The City’s business-type activities include water, gas, sewer, steam and

stormwater utilities, street lighting, parking, and municipal golf courses. The government-wide financial statements

include not only the City, referred to as the primary government, but also five legally separate component units, for

which the City is financially accountable. Financial information for these component units is reported separately from

the financial information of the City, as the primary government.

Financial statements for the Duluth Economic Development Authority are included in the Supplementary Information

section of this report. Complete financial statements for the Duluth Entertainment and Convention Center Authority,

the Duluth Airport Authority, the Duluth Transit Authority, and the Spirit Mountain Recreation Area Authority can be

obtained from their respective offices, the addresses of which are provided in Note 1 of the notes to the financial

statements.

The two government-wide financial statements follow immediately after this discussion and analysis.

FUND FINANCIAL STATEMENTS

A fund is a set of related accounts that is used to control resources that have been segregated to carry on specific

activities or to attain certain objectives in accordance with special regulations, restrictions, or limitations. The City,

like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-

related legal requirements. All City funds are divided into one of three categories: governmental funds, proprietary

funds or fiduciary funds.

Governmental Funds

Governmental funds are used to account for essentially the same functions reported as governmental activities in the

government-wide financial statements. A major difference between the government-wide financial statements and

the governmental fund financial statements is that the latter focuses on near-term inflows and outflows of spendable

resources, as well as on the balances of spendable resources available at the end of the fiscal year. This information

may be useful in evaluating the City’s near-term financing requirements.

Because the focus of governmental fund financial statements is narrower than the government-wide financial

statements, it is useful to compare information presented for governmental funds with similar information presented

for governmental activities in order to gain a better understanding of the long-term impact of the City’s near-term

financing decisions. The Governmental Fund Balance Sheet and the Governmental Fund Statement of Revenues,

Expenditures and Changes in Fund Balances provide reconciliation to aid in the comparison of governmental funds

with governmental activities.

The City maintains a number of individual governmental funds. Information is presented separately in the

governmental fund financial statements for the General Fund, Disaster Recovery Special Revenue Fund, Community

Investment Trust Special Revenue Fund, and General Obligation Debt Service Fund, all of which are considered to

be major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation.

Individual fund data for each of these nonmajor governmental funds are included in the combining and individual fund

section of this report.

The City adopts an annual appropriated budget for its General Fund. The Statement of Revenues, Expenditures, and

Changes in Fund Balances - Budget and Actual - General Fund, included in the basic financial statement section of

this report, demonstrates compliance with this budget. There are also two more detailed General Fund budgetary

schedules included in the combining and individual fund section of this report.

13

CITY OF DULUTH, MINNESOTA

MANAGEMENT’S DISCUSSION AND ANALYSIS

DECEMBER 31, 2019

(unaudited)

Proprietary Funds

The City maintains two different types of proprietary funds. The first type is enterprise funds, which are used to report

the same functions presented as business-type activities in the government-wide financial statements. Proprietary

fund financial statements provide the same type of information as the government-wide financial statements, only in

more detail. Information is presented separately in the proprietary fund financial statements for the Priley Drive

Parking Facility, Water, Gas, Sewer, and Steam funds, all of which are considered to be major funds. Data from the

remaining enterprise funds are combined into a single, aggregated presentation. Individual fund data for each of

these nonmajor enterprise funds are included in the combining and individual fund section of this report.

Internal service funds are the other type of proprietary fund. Internal service funds are used to accumulate and

allocate costs internally among the City’s various functions for fleet services, self-insurance, employee medical

benefits, and compensated absences. Because these services predominantly benefit governmental functions rather

than business-type functions, they have been included with the governmental activities portion of the government-

wide financial statements. The internal service funds are combined into a single, aggregated presentation in the

proprietary fund financial statements. Individual fund data for the internal service funds are included in the combining

and individual fund section of this report.

Fiduciary Funds

Fiduciary funds are used to account for resources held for the benefit of parties outside of the City and are not

included in the government-wide financial statements because their resources are not available to support the City's

programs. The accounting used for fiduciary funds is similar to that used for proprietary funds. The Statement of

Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position are included in the basic financial

statement section of this report, while the Statement of Changes in Assets and Liabilities for agency funds is included

in the combining and individual fund section 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.

Other Information

In addition to the basic financial statements and accompanying notes, this report also contains the combining and

individual fund statements referred to earlier in connection with nonmajor governmental, nonmajor proprietary,

internal service funds, fiduciary funds, and miscellaneous schedules. These schedules and statements follow the

notes to the financial statements.

GOVERNMENT-WIDE FINANCIAL ANALYSIS

As noted earlier, over time net position may serve as a useful indicator of the City’s financial position. The largest

portion of the City’s net position is invested in capital assets (land, buildings, equipment, and infrastructure) less any

related debt used to acquire those assets that is still outstanding. The City uses these assets to provide services to

its citizens; therefore, these assets are not available for future spending. Although the City’s investment in capital

assets is reported net of related debt, it is important to realize that the resources needed to repay the debt must be

provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

14

CITY OF DULUTH, MINNESOTA

MANAGEMENT’S DISCUSSION AND ANALYSIS

DECEMBER 31, 2019

(unaudited)

An additional portion of the City’s net position (11.3%) represents resources that are subject to external restrictions

on how they may be used, with the largest amount set aside for debt service. The following table presents a summary

of the City’s net position at December 31 for the past two fiscal years (dollars in thousands):

2019 2018 2019 2018 2019 2018

Current and other assets 136,082$ 131,904$ 48,127$ 43,315$ 184,209$ 175,219$

Capital assets 295,611 296,706 300,107 292,371 595,718 589,077

Total assets 431,693$ 428,610$ 348,234$ 335,686$ 779,927$ 764,296$

Deferred outflows of resources 30,546$ 42,160$ 1,434$ 5,006$ 31,980$ 47,166$

Long-term liabilities outstanding 263,368$ 291,519$ 59,908$ 72,624$ 323,276$ 364,143$

Other liabilities 16,430 13,634 9,690 10,809 26,120 24,443

Total liabilities 279,798$ 305,153$ 69,598$ 83,433$ 349,396$ 388,586$

Deferred inflows of resources 58,775$ 54,624$ 7,018$ 3,407$ 65,793$ 58,031$

Net position:

Net investment in capital assets 251,585$ 249,613$ 253,271$ 240,474$ 504,856$ 490,087$

Restricted 42,703 42,919 2,092 2,115 44,795 45,034

Unrestricted (170,622) (181,539) 17,689 11,263 (152,933) (170,276)

Total net position 123,666$ 110,993$ 273,052$ 253,852$ 396,718$ 364,845$

Business-type

Activities

Governmental

Activities Total

Overall, the City’s net position improved in 2019. The City’s total net position increased $31.9 million, an increase of

8.7%. Net position invested in capital assets continues to increase largely due to the City's utility infrastructure

replacement and the pay down of debt associated with those capital asset additions. In addition, strong investment

returns and changes in actuarial assumptions contributed to a significant reduction in the City’s OPEB liability

calculation.

In governmental activities, the decrease in total liabilities of $25.3 million was largely due to a net OPEB liability

decrease. This decrease, as mentioned above, is due to strong investment returns for the City’s OPEB trust and

changes in actuarial assumptions. Both the City’s OPEB liability and pension liability are based on actuarial

calculations. Changes in actuarial assumptions, differences between actual and projected investment earnings, and

other factors are reported as deferred outflows and deferred inflows, and are amortized and expensed over several

years in accordance with GASB accounting standards. Due to the large dollar amount that can be associated with

these actuarially determined calculations, it is expected that substantial changes can occur from year to year in

amounts reported as deferred inflows and outflows. See Notes 15 and 16 of the financial statement for more details

on the City’s pension and OPEB liabilities.

For business-type activities, the decrease in total liabilities of $13.8 million is largely due to the repayment of revenue

related bonds and notes. In addition, the business-type activities net OPEB liability decreased $6.1 million. Total

assets increased due to utility infrastructure projects.

15

CITY OF DULUTH, MINNESOTA

MANAGEMENT’S DISCUSSION AND ANALYSIS

DECEMBER 31, 2019

(unaudited)

To give users a better understanding of the sources and uses of the City’s net position, the following table presents

a summary of revenues, expenses, and changes in net position for the past two fiscal years ending December 31

(dollars in thousands):

2019 2018 2019 2018 2019 2018

Revenues:

Program revenues:

Charges for services 13,433$ 11,928$ 94,896$ 94,246$ 108,329$ 106,174$

Operating grants and contributions 12,290 12,019 61 - 12,351 12,019

Capital grants and contributions 12,733 12,913 6,134 5,603 18,867 18,516

General revenues:

Property taxes 32,996 30,266 1,301 751 34,297 31,017

Other taxes 32,728 30,518 - - 32,728 30,518

Grants and shared revenues not

restricted to specific programs 31,918 31,810 49 49 31,967 31,859

Other 8,281 1,248 307 186 8,588 1,434

Total revenues 144,379 130,702 102,748 100,835 247,127 231,537

Expenses:

General government 31,839 31,093 - - 31,839 31,093

Public safety 42,181 43,353 - - 42,181 43,353

Public works 27,785 24,997 - - 27,785 24,997

Culture and recreation 16,261 13,170 - - 16,261 13,170

Urban and economic development 14,244 13,664 - - 14,244 13,664

Interest 3,910 4,025 - - 3,910 4,025

Water - - 10,814 11,269 10,814 11,269

Gas - - 31,777 33,161 31,777 33,161

Sewer - - 16,260 16,835 16,260 16,835

Stormwater - - 3,572 3,430 3,572 3,430

Steam - - 8,350 8,185 8,350 8,185

Golf - - 1,771 1,853 1,771 1,853

Parking - - 3,405 2,980 3,405 2,980

Priley drive parking facility - - 1,249 1,254 1,249 1,254

Street lighting - - 1,836 1,910 1,836 1,910

Total expenses 136,220 130,302 79,034 80,877 215,254 211,179

Increase (decrease) in net position before

transfers 8,159 400 23,714 19,958 31,873 20,358

Transfers 4,514 4,355 (4,514) (4,355) - -

Increase in net position 12,673 4,755 19,200 15,603 31,873 20,358

Net position, January 1 110,993 106,238 253,852 238,249 364,845 344,487

Net position, December 31 123,666$ 110,993$ 273,052$ 253,852$ 396,718$ 364,845$

Business-type

Activities

Governmental

Activities Total

16

CITY OF DULUTH, MINNESOTA

MANAGEMENT’S DISCUSSION AND ANALYSIS

DECEMBER 31, 2019

(unaudited)

Governmental activities revenue increased by $13.7 million in 2019. This increase is primarily due to strong

investment returns in addition to increases in property tax revenue and general sales tax collections. Effective October

1, 2019, the City’s general sales tax increased from 1.0% to 1.5%. The 0.5% increase is dedicated to street

improvements and generated $2.0 million of revenue in 2019. The City’s property tax levy increased 11.25% from

2018 to 2019. This increase helped cover cost-of-living adjustments and a ten percent increase in health insurance

rates. The strong stock market performance in 2019 resulted in $5.6 million in investment revenue for the Community

Investment Trust fund. Business-type activities revenue remained relatively stable with a $1.9 million dollar increase.

Variable water rates increased while variable sewer rates decreased. There were no changes to natural gas rates.

There were no unusual swings in gas operations, which can often happen when there are extremely warm or cool

heating seasons. The Steam Fund received slightly over $5 million in State of Minnesota funding in 2019 associated

with the steam upgrades being performed in conjunction with the multi-year Superior Street reconstruction project.

Total expenses increased $5.9 million for governmental activities. Changes in expenditures are becoming more

difficult to easily analyze at the surface level due to the impact of GASB Statements number 68 (pension liability) and

75 (post-employment benefit liability). These liabilities, and associated deferred inflows and outflows, are actuarially

determined. Changes in actuarial assumptions, investment performance, and other factors are not expensed

immediately, but instead are reported as deferred inflows and outflows and expensed over future years. Further detail

on these two items can be found in Notes 15 and 16 of the financial statements. In 2019, the City experienced a 10%

increase in health insurance premiums. It is expected that health insurance costs will continue to increase based on

current trends. In addition, the City incurred repair expenses in 2019 related to the various windstorms that have

heavily impacted Duluth’s Canal Park area in the past few years.

Business-type activities expenses decreased $1.8 million. This decrease is largely due to the impact of the decrease

in the City’s net OPEB liability. In addition, the City’s utility funds experience the same increase in health insurance

costs that the City’s governmental funds do.

$0

$5

$10

$15

$20

$25

$30

$35

Millions

Revenue by Source - Governmental Activities

2019

2018

17

CITY OF DULUTH, MINNESOTA

MANAGEMENT’S DISCUSSION AND ANALYSIS

DECEMBER 31, 2019

(unaudited)

FUND FINANCIAL ANALYSIS

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. This information is helpful in assessing the City’s financing requirements; fund balance may be

an especially useful measure of the net resources available for spending at the end of the fiscal year.

As of December 31, 2019, the City’s governmental funds reported combined ending fund balances of $83.0 million,

an increase of $2.4 million from 2018. Of the total fund balance amount, $43.6 million, or 52.5%, is reported as

unrestricted fund balance, either committed, assigned, or unassigned. The unrestricted fund balance includes $28.5

million in committed funds which are formally designated by City Council resolution for specific purposes. The

Community Investment Trust Special Revenue fund makes up 94.2% of the committed fund balance. Restricted fund

balance of $39.4 million is primarily composed of funds dedicated to debt service and capital projects.

The General Fund is the main operating fund of the City. At December 31, 2019, fund balance of the General Fund

was $17.7 million, with $14.4 million, or 81.4% reported as unassigned. As a measure of the General Fund’s liquidity,

it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures.

Unassigned fund balance is 16.0% and total fund balance is 19.6% of total General Fund expenditures. The General

Fund’s fund balance increased $0.8 million in 2019. Positive sales tax revenue along with savings in personal costs

contributed to this outcome.

The Community Investment Trust Special Revenue fund balance increased $5.0 million in 2019. This increase was

due to the performance of the portfolio holdings in a strong year for the stock market.

The Disaster Recovery Special Revenue fund balance decreased by $1.1 million in 2019. This is due to expenses

incurred, but not yet reimbursed by state and federal disaster funds. The City experienced significant storm surge

damage in both October of 2017 and October of 2018.

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Millions

Expense by Function - Governmental Activities

2019

2018

18

CITY OF DULUTH, MINNESOTA

MANAGEMENT’S DISCUSSION AND ANALYSIS

DECEMBER 31, 2019

(unaudited)

The General Obligation Debt Service fund balance increased by $0.3 million in 2019. The City’s percentage of levy

collections remains high and contributed to the small fund balance increase for this fund.

PROPRIETARY FUNDS

The City’s proprietary funds provide the same type of information found in the government-wide financial statements,

only in more detail. The following table shows the unrestricted net position for each of the City’s major proprietary

funds, as well as the change in net position for each fund during the past two fiscal years (dollars in thousands):

2019 2018 2019 2018

Priley Drive

Parking Facility 391$ 330$ (242)$ (256)$

Water 2,545 (333) 4,318 3,625

Gas 3,481 102 5,412 3,597

Sewer 4,749 3,289 3,630 2,824

Steam (401) (411) 4,907 4,612

December 31

Increase (Decrease)

Net Position

Unrestricted

Net Position

Unrestricted Net Position for the Water, Gas, and Sewer funds was positively impacted by the decrease in the City’s

net OPEB liability. The Steam Fund incurred significant capital outlay associated with the Superior Street

reconstruction process. These expenditures are funded by a State of Minnesota grant and contributed to the

substantial increase in the Steam Fund net position.

GENERAL FUND BUDGETARY HIGHLIGHTS

During the year there was a $3.8 million increase in appropriations between the original and final amended budget.

Following are the main components of the increase:

 $2.3 million appropriation increase for prior year carryovers;

 $0.4 million appropriation for grants, gifts and donations; and

 $1.1 million appropriation for other budget allowable additions.

The carryover appropriation increase was possible due to prior year fund balance reserves. The other appropriation

increases were offset by associated revenues.

Comparison of actual results (budgetary basis) to the final modified budget disclosed the following significant

differences:

 Revenues and other financing sources were over budget by $1.3 million. This favorable variance can be

attributed to higher than anticipated sales tax revenue, licensing and permit fees, and State of Minnesota

insurance premium aid.

 Expenditures and transfers were under budget by $1.1 million due primarily to savings in personal costs and

other miscellaneous transfers.

19

CITY OF DULUTH, MINNESOTA

MANAGEMENT’S DISCUSSION AND ANALYSIS

DECEMBER 31, 2019

(unaudited)

CAPITAL ASSET AND DEBT ADMINISTRATION

CAPITAL ASSETS

The City’s investment in capital assets for its governmental and business-type activities as of December 31, 2019,

was $595.7 million, net of accumulated depreciation. This investment includes land and improvements, buildings,

equipment, roads and bridges, traffic signals, and utility-related infrastructure. In 2019, the City’s total investment in

capital assets, net of accumulated depreciation, increased by $6.6 million. Major capital assets additions in 2019

included: Superior Street reconstruction - $9.7 million; and utility related infrastructure improvements of $13.9 million.

Additional information related to the City’s capital assets can be found in Note 7 of the notes to the financial

statements. The following table shows the City’s investment in capital assets, net of accumulated depreciation at

December 31 for the past two fiscal years (dollars in thousands):

2019 2018 2019 2018

Capital Assets:

Land and improvements 22,859$ 22,859$ 4,649$ 4,649$

Buildings 39,250 40,826 47,885 49,546

Equipment 9,383 9,309 19,100 20,867

Infrastructure 200,641 195,957 207,312 202,392

Construction in progress 23,478 27,755 21,161 14,917

Total 295,611$ 296,706$ 300,107$ 292,371$

Governmental

Activities

Business-type

Activities

LONG-TERM DEBT

The City had $142.0 million of bonded debt outstanding as of December 31, 2019. Of this amount, $107.2 million is

debt backed by the full faith and credit of the City. $3.1 million is special assessment debt for which the City is

obligated only to the extent that collections from special assessments are insufficient to retire the outstanding bonds.

The City has a contingent liability for the $31.7 million outstanding revenue and general obligation bonds if income

from various enterprise operations is insufficient to retire their respective bonds. Several types of revenue bonds

constitute the remainder of the City’s debt, and are secured solely by specific revenue sources. The following table

shows the City’s outstanding bonded debt for both governmental and business-type activities as of December 31 for

the past two fiscal years (dollars in thousands):

Balance Balance

12/31/19 12/31/18

Governmental Activities:

General Obligation Bonds 81,370$ 87,485$

General Obligation Tax Abatement Bonds 11,770 12,605

Special Asessment Debt with

Government Commitment 3,125 5,165

General Obligation Certificates 14,050 14,295

Total Governmental Activities Bonded Debt 110,315$ 119,550$

Business-type Activities:

Revenue and General Obligation Bonds 31,680$ 35,097$

20

CITY OF DULUTH, MINNESOTA

MANAGEMENT’S DISCUSSION AND ANALYSIS

DECEMBER 31, 2019

(unaudited)

During 2019, the City’s total bonded debt decreased by $12.7 million.

In 2019, the City issued $1.2 million of general obligation bonds, $9.8 million of general obligation refunding bonds,

and $3.1 million of general obligation certificates. The City has an “Aa2" rating from Moody’s Investors Service and

an “AA” rating from Standard and Poor's.

State statutes limit the amount of general obligation debt the City can incur to no more than 2% of the market value

of taxable property in the City. The City’s current legal debt margin is $130.7 million, which is significantly higher than

the City’s net debt of $38.6 million. Additional information about the City’s long-term debt can be found in Note 12 of

the notes to the financial statements.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET

The final approved 2020 General Fund budget is $92.9 million. State local government aid (LGA) payments are

anticipated to supply 32.6% of General Fund revenues. State aid payments are the single biggest financing source

for the General Fund.

After nearly a decade of uncertainty in the State of Minnesota’s Local Government Aid program, the 2013 State

Legislature adopted reforms which will benefit Duluth and other cities by increasing the funding for LGA by $80 million

and revising the formula used to determine who gets aid and how much. The “need” factor will be three-tiered

depending on the population of the city with separate calculations for cities under 2,500 in population, cities between

2,500 and 10,000 in population, and cities over 10,000 in population because different factors explain variations in a

city’s revenue base for different size cities. All three formulas were derived using revenue base (levy plus aid) as a

proxy for city need. The new formula also stabilizes a city’s allocation by capping the maximum annual loss for any

city as well as distributing proportionally larger increases to cities whose current aid amount is furthest from their

unmet need. For Duluth, these changes increased LGA by $2.8 million in 2020 to $30.2 million compared to the $27.4

million received in 2011, 2012 and 2013. In 2014, 2015, 2016, 2017, 2018, and 2019 the LGA revenue was $29.0,

$29.2, $29.3, $29.3, $29.6, and $29.7 million respectively.

In 2019, the City contracted with an actuary to calculate its annual required contribution for other postemployment

benefits in accordance with Governmental Accounting Standards Board (GASB) Statement No. 75. For the year

ended December 31, 2019, the City made contributions of $1.2 million to an irrevocable trust and paid out $10.8

million in retiree claims. As of December 31, 2019, the City’s net other postemployment benefits liability is $84.5

million.

Adapting to significant changes in levels of state aids, combined with inflationary tendencies in employee salaries

and benefits, including funding other postemployment benefits, continues to be a major budget challenge for the City.

In addition, the City will be impacted by the COVID-19 pandemic. The total financial impact to the City is unknown at

this time. City Administration and City Finance staff are working, and will continue to work, on measures to minimize

the impact to the City as much as possible.

REQUESTS FOR INFORMATION

This financial report is meant to provide a general overview of the City’s finances for all those with an interest in the

City’s finances. Questions concerning information provided in the report or requests for additional financial information

should be addressed to the City Auditor’s Office, 411 West First Street, Room 120, Duluth, MN 55802, or contact the

City Auditor via email at jbailey@duluthmn.gov.

21

B a s i c F i n a n c i a l

S t a t e m e n t s

CITY OF DULUTH, MINNESOTA

STATEMENT OF NET POSITION

DECEMBER 31, 2019

Governmental

Business-type

Component

Activities

Total

Units

Assets

Cash and cash equivalents 60,374,435$ 17,144,126$ 77,518,561$ 18,848,312$

Investments, at fair value 26,871,570 - 26,871,570 -

Assets held by trustee 7,935,383 - 7,935,383 -

Receivables, net 31,145,422 10,939,467 42,084,889 10,091,023

Due from primary government - - - 814,914

Internal balances (781,857) 781,857 - -

Due from component units 1,465,871 23,701 1,489,572 -

Due from other governments 8,843,291 2,128,759 10,972,050 1,068,845

Inventories 178,064 3,253,470 3,431,534 589,457

Prepaids 50,000 7,062,533 7,112,533 222,773

Restricted assets:

Cash and cash equivalents - 4,837,832 4,837,832 1,260,724

Accounts receivable - - - 50,504

Loans receivable - 1,955,876 1,955,876 -

Grants receivable - - - 3,747,492

Planning and development costs - - - 923,015

Capital assets (Note 7):

Non-depreciable 46,336,893 25,810,816 72,147,709 12,721,284

Depreciable, net 249,273,774 274,296,032 523,569,806 266,275,562

Total Assets 431,692,846 348,234,469 779,927,315 316,613,905

Deferred Outflows of Resources

Deferred pension obligation outflows 26,647,832 1,056,694 27,704,526 785,200

Deferred OPEB outflows 1,489,259 - 1,489,259 28,487

Deferred loss from debt refunding 2,409,716 377,023 2,786,739 -

Total Deferred Outflows of Resources 30,546,807 1,433,717 31,980,524 813,687

Liabilities

Accounts payable and other short-term liabilities 11,110,686 7,243,381 18,354,067 5,606,596

Accrued interest payable 1,642,668 452,859 2,095,527 3,935

Due to component units 814,909 5 814,914 -

Due to primary government - - - 1,488,069

Due to other government 1,308,268 1,053,207 2,361,475 11,107

Unearned revenues 1,552,986 940,735 2,493,721 1,924,069

Noncurrent liabilities (Note 12):

Due within one year 16,863,628 6,919,938 23,783,566 2,145,413

Due in more than one year 246,504,720 52,987,730 299,492,450 18,740,711

Total Liabilities 279,797,865 69,597,855 349,395,720 29,919,900

Deferred Inflows of Resources

Deferred pension obligation inflows 41,692,385 2,433,762 44,126,147 1,513,337

Deferred OPEB inflows 17,083,048 4,584,594 21,667,642 301,450

Total Deferred Inflows of Resources 58,775,433 7,018,356 65,793,789 1,814,787

Net Position

Net investment in capital assets 251,585,123 253,270,775 504,855,898 268,972,194

Restricted for:

General government 5,238,569 - 5,238,569 -

Public safety 869,192 - 869,192 -

Public works - 1,375,042 1,375,042 -

Culture and recreation 3,040,367 - 3,040,367 -

Urban and economic development 6,535,625 - 6,535,625 -

Debt service 21,723,796 716,899 22,440,695 -

Capital outlay 5,295,840 - 5,295,840 13,161,768

Unrestricted (170,622,157) 17,689,259 (152,932,898) 3,558,943

Total Net Position

123,666,355

$

273,051,975

$

396,718,330

$

285,692,905

$

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

Primary Government

22

CITY OF DULUTH, MINNESOTA

STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED DECEMBER 31, 2019

Operating

Capital

Charges for

Grants and

Functions/Programs

Expenses

Services

Contributions

Primary Government:

Governmental activities:

General government 31,839,444$ 5,978,363$ 86,872$ 12,920$

Public safety 42,180,828 2,115,004 3,277,128 482,973

Public works 27,785,208 138,436 1,745,215 7,479,676

Culture and recreation 16,261,444 1,328,289 873,235 4,224,885

Urban and economic development 14,244,055 3,872,703 6,307,286 532,671

Interest 3,909,623 - - -

Total Governmental Activities 136,220,602 13,432,795 12,289,736 12,733,125

Business-type activities:

Water 10,814,241 15,142,128 11,509 11,591

Gas 31,777,159 39,886,073 19,474 100,479

Sewer 16,259,666 19,615,365 - 328,688

Stormwater 3,571,577 5,295,794 29,645 -

Steam 8,350,276 8,091,177 - 5,269,398

Golf 1,771,189 1,482,349 - -

Parking 3,404,851 4,095,285 - 423,701

Priley Drive parking facility 1,249,348 452,308 - -

Street lighting 1,836,048 835,761 - -

Total Business-type Activities 79,034,355 94,896,240 60,628 6,133,857

Total Primary Government

215,254,957

$

108,329,035

$

12,350,364

$

18,866,982

$

Component units:

Duluth Economic Development Authority 5,620,614$ 1,016,309$ 5,648$ -$

Duluth Entertainment and Convention

Center Authority 15,450,014 9,552,003 - 552,800

Duluth Airport Authority 14,887,490 7,145,963 - 13,570,892

Duluth Transit Authority 24,213,284 3,026,839 16,855,133 1,923,503

Spirit Mountain Recreation Area Authority 6,494,143 5,434,040 - 462,342

Total Component Units

66,665,545

$

26,175,154

$

16,860,781

$

16,509,537

$

(continued)

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

Program Revenues

23

CITY OF DULUTH, MINNESOTA

STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED DECEMBER 31, 2019

Governmental

Business-type

Component

Functions/Programs

Activities

Total

Units

Primary Government:

Governmental activities:

General government (25,761,289)$ -$ (25,761,289)$ -$

Public safety (36,305,723) - (36,305,723) -

Public works (18,421,881) - (18,421,881) -

Culture and recreation (9,835,035) - (9,835,035) -

Urban and economic development (3,531,395) - (3,531,395) -

Interest (3,909,623) - (3,909,623) -

Total Governmental Activities (97,764,946) - (97,764,946) -

Business-type activities:

Water - 4,350,987 4,350,987 -

Gas - 8,228,867 8,228,867 -

Sewer - 3,684,387 3,684,387 -

Stormwater - 1,753,862 1,753,862 -

Steam - 5,010,299 5,010,299 -

Golf - (288,840) (288,840) -

Parking - 1,114,135 1,114,135 -

Priley Drive parking facility - (797,040) (797,040) -

Street lighting - (1,000,287) (1,000,287) -

Total Business-type Activities - 22,056,370 22,056,370 -

Total Primary Government

(97,764,946)

22,056,370

(75,708,576)

-

Component units:

Duluth Economic Development Authority - - - (4,598,657)

Duluth Entertainment and Convention

Center Authority - - - (5,345,211)

Duluth Airport Authority - - - 5,829,365

Duluth Transit Authority - - - (2,407,809)

Spirit Mountain Recreation Area Authority - - - (597,761)

Total Component Units

-

(7,120,073)

General Revenues:

Property taxes 32,995,611 1,301,757 34,297,368 4,400,383

Sales taxes 28,867,348 - 28,867,348 1,869,144

Franchise taxes 3,534,435 - 3,534,435 -

Other taxes 326,091 - 326,091 -

Grants and shared revenues not restricted

to specific programs 31,917,733 48,566 31,966,299 -

Investment income 6,611,326 235,864 6,847,190 361,270

Gain on sale or disposition of capital assets - 26,962 26,962 -

Miscellaneous

1,670,993 45,380 1,716,373 1,354,755

Transfers 4,514,471 (4,514,471) - -

Total General Revenues and Transfers 110,438,008 (2,855,942) 107,582,066 7,985,552

Change in Net Position 12,673,062 19,200,428 31,873,490 865,479

Net Position - Beginning 110,993,293 253,851,547 364,844,840 284,827,426

Net Position - Ending

123,666,355

$

273,051,975

$

396,718,330

$

285,692,905

$

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

Net (Expense) Revenue and

Changes in Net Position

Primary Government

24

CITY OF DULUTH, MINNESOTA

BALANCE SHEET

GOVERNMENTAL FUNDS

DECEMBER 31, 2019

General

Disaster

Recovery

Community

Investment

Trust

General

Obligation

Other

Governmental

Funds

Total

Governmental

Funds

Assets

Cash and cash equivalents

10,848,170$ -$ -$ 14,125,699$ 31,196,263$ 56,170,132$

Investments, at fair value

- - 26,871,570 - - 26,871,570

Receivables, net

Taxes

3,506,074 - - 250,144 3,044,019 6,800,237

Accounts

469,144 - - - 685,357 1,154,501

Assessments

912,811 - - - 2,626,398 3,539,209

Loans

1,822,063 - - 14,385,000 3,986,650 20,193,713

Due from other funds

145,314 - - - 1,856,184 2,001,498

Due from component units

1,200,275 - - - 265,596 1,465,871

Interfund loan receivables

6,389,368 - - - - 6,389,368

Due from other governments

644,457 4,491,453 - - 3,707,381 8,843,291

Total Assets

25,937,676$ 4,491,453$ 26,871,570$ 28,760,843$ 47,367,848$ 133,429,390$

Liabilities

Accounts payable

2,050,413 140,236 - - 857,497 3,048,146

Contracts payable

59,117 331,783 - - 5,983,606 6,374,506

Due to other funds

1,058,583 - - - 1,052,519 2,111,102

Due to component units

627 - - - 814,282 814,909

Interfund loan payable

- 2,651,192 - - 665,074 3,316,266

Due to other governments

224,063 - - - 1,068,644 1,292,707

Accrued salaries payable

1,403,603 - - - 40,761 1,444,364

Unearned revenue

106,393 904,303 - - 433,785 1,444,481

Total Liabilities

4,902,799 4,027,514 - - 10,916,168 19,846,481

Deferred Inflows of Resources

Unavailable revenue

3,345,718 4,072,453 - 14,564,140 8,600,248 30,582,559

Fund Balances

Restricted

216,132 - - 14,196,703 24,945,613 39,358,448

Committed

35,958 - 26,871,570 - 1,621,490 28,529,018

Assigned

2,999,900 - - - 1,942,077 4,941,977

Unassigned

14,437,169 (3,608,514) - - (657,748) 10,170,907

Total Fund Balances

17,689,159 (3,608,514) 26,871,570 14,196,703 27,851,432 83,000,350

Total Liabilities, Deferred Inflows of

Resources, and Fund Balances

25,937,676$ 4,491,453$ 26,871,570$ 28,760,843$ 47,367,848$ 133,429,390$

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

25

CITY OF DULUTH, MINNESOTA

RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET POSITION

DECEMBER 31, 2019

Fund Balance--total governmental funds 83,000,350$

Amounts reported for governmental activities in the statement of net position

are different because:

Capital assets used in governmental activities are not financial resources,

and therefore are not reported in the funds. The cost of the assets is

$547,064,607, and the accumulated depreciation is $251,652,478. 295,412,129

Other long-term assets are not available to pay for current-period expenditures,

and therefore are deferred in the funds. 29,970,143

Deferred outlows of resources and deferred inflows of resources are created as a

result of various differences related to pensions and debt refunding that are not

recognized in the governmental funds.

Deferred pension obligation outflows 26,554,872

Deferred OPEB outflows 1,489,259

Deferred loss from debt refunding 2,409,716

Deferred pension obligation inflows (41,478,281)

Deferred OPEB inflows (17,083,048)

(28,107,482)

Internal service funds are used by management to charge the costs of fleet

services, group health insurance, loss control activities, and vacation benefits

payable to individual funds. The assets and liabilities of the internal service

funds are included in governmental activities in the statement of net position

for $4,589,452 less $4,001,238 attributed to business-type activities. 588,214

Long-term liabilities, including bonds payable, are not due and payable in the

current period, and therefore are not reported in the funds. Long-term

liabilities at year-end consist of:

Bonds and notes payable 122,540,602

Other post employment benefits 91,243,466

Pension liability 41,770,263

Interest accrued on long-term debt 1,642,668

(257,196,999)

Net position of governmental activities

123,666,355

$

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

26

CITY OF DULUTH, MINNESOTA

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE

GOVERNMENTAL FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

General

Disaster

Recovery

Community

Investment

Trust

General

Obligation

Other

Governmental

Funds

Total

Governmental

Funds

Revenues

Taxes

Property taxes

19,295,839$ -$ -$ 6,933,636$ 6,736,718$ 32,966,193$

Sales taxes

14,453,054 - - - 14,414,294 28,867,348

Other taxes

3,849,548 - - - 10,977 3,860,525

Licenses and permits

1,987,547 - - - 114,210 2,101,757

Intergovernmental revenues

34,511,555 2,456,446 - 223,993 17,868,046 55,060,040

Charges for services

7,008,232 - - - 1,144,830 8,153,062

Fines and forfeits

544,596 - - - 154,333 698,929

Special assessments

498,962 - - - 1,115,366 1,614,328

Investment income

83,511 - 5,573,211 139,772 569,523 6,366,017

Miscellaneous revenues

1,157,078 - - 1,890,387 2,389,265 5,436,730

Total Revenues

83,389,922 2,456,446 5,573,211 9,187,788 44,517,562 145,124,929

Expenditures

Current

General government

26,719,409 - - 58,878 1,826,825 28,605,112

Public safety

41,660,867 - - - 1,833,808 43,494,675

Public works

13,159,703 - - - 4,949,854 18,109,557

Culture and recreation

4,625,454 3,592,983 - - 5,597,262 13,815,699

Urban and economic development

3,341,361 - - - 11,210,875 14,552,236

Debt service

Principal retirement

- - - 9,305,000 2,055,000 11,360,000

Interest and fiscal fees

- - - 4,506,369 244,938 4,751,307

Bond issuance costs

- - - 93,913 82,459 176,372

Capital outlay

801,441 - - - 16,576,389 17,377,830

Total Expenditures

90,308,235 3,592,983 - 13,964,160 44,377,410 152,242,788

Excess (Deficiency) of Revenues Over

(Under) Expenditures

(6,918,313) (1,136,537) 5,573,211 (4,776,372) 140,152 (7,117,859)

Other Financing Sources (Uses)

Issuance of bonds

- - - - 4,260,000 4,260,000

Issuance of refunding bonds

- - - 9,755,000 - 9,755,000

Premium on issuance of bonds

- - - 2,214,482 617,982 2,832,464

Payment to refunded bond escrow agent - - - (11,849,546) - (11,849,546)

Transfers in

8,510,707 - - 5,001,164 8,959,524 22,471,395

Transfers out

(789,000) - (570,067) - (16,597,857) (17,956,924)

Total Other Financing Sources (Uses)

7,721,707 - (570,067) 5,121,100 (2,760,351) 9,512,389

Net Change in Fund Balances

803,394 (1,136,537) 5,003,144 344,728 (2,620,199) 2,394,530

Fund Balances - January 1, 2019

16,885,765 (2,471,977) 21,868,426 13,851,975 30,471,631 80,605,820

Fund Balances - December 31, 2019

17,689,159$ (3,608,514)$ 26,871,570$ 14,196,703$ 27,851,432$ 83,000,350$

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

27

CITY OF DULUTH, MINNESOTA

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED DECEMBER 31, 2019

Net change in fund balances - total governmental funds 2,394,530$

Amounts reported for governmental activities in the statement of

activities are different because:

Government funds report capital outlays as expenditures. However, in

the statement of activities, the cost of those assets is allocated over

their estimated useful lives as depreciation expense. In the current

period, these amounts are:

Capital outlay 16,103,111

Depreciation expense (17,134,238)

Excess of depreciation expense over capital outlay (1,031,127)

Internal service funds are used by management to charge the costs of certain

activities to individual funds. The net revenue of $(512,053) from internal

funds less $141,799 attributed to business-type activities is reported with

governmental activities. (653,852)

Bond proceeds provide current financial resources to governmental funds;

however, issuing debt increases long-term liabilities in the statement of

net position. In the current period, proceeds were received from:

Bonds issued, including a bond premium of $2,832,464 (16,847,464)

Repayment of long-term debt is reported as an expenditure in governmental

funds, but the repayment reduces long-term liabilities in the statement of

net position. In the current year, these amounts consist of:

Bond principal retirement 23,265,000

Because some revenues will not be collected for several months after the

City's fiscal year ends, they are not considered "available" revenues and are

deferred in the governmental funds. Unavailable revenues decreased by this

amount this year. (179,054)

Some items 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. These activities consist of:

Net decrease in accrued interest 257,610

Net decrease in interest receivable (57,055)

Decrease in net other post employment benefits payable and related 5,309,556

deferred inflows and deferred inflows

Decrease in pension obligation and related deferred inflows and 921,109

deferred outflows

Decrease in loans receivable (1,411,183)

Amortization of deferred loss on debt refunding (171,104)

Amortization of bond premiums 876,096

Total additional expenditures 5,725,029

Change in net position of governmental activities

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

12,673,062$

28

CITY OF DULUTH, MINNESOTA

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN

FUND BALANCE - BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS)

GENERAL FUND

FOR THE YEAR ENDED DECEMBER 31, 2019

Actual to

Actual Amounts Modified Budget

Budgeted Amounts (Budgetary Basis) Favorable

Original Final (Note 2) (Unfavorable)

Revenues

Taxes 37,161,800$ 37,161,800$ 37,598,441$ 436,641$

Licenses and permits 1,798,400 1,798,400 1,987,547 189,147

Intergovernmental revenues 33,767,500 34,167,913 34,511,555 343,642

Charges for services 6,959,100 6,959,100 7,008,232 49,132

Fines and forfeits 518,800 518,800 544,596 25,796

Special assessments 433,900 529,146 498,962 (30,184)

Investment income - - 83,511 83,511

Miscellaneous revenues 474,000 985,276 1,157,078 171,802

Total revenues 81,113,500 82,120,435 83,389,922 1,269,487

Expenditures

Current:

General government 27,068,700 28,988,423 28,126,748 861,675

Public safety 40,742,100 41,661,226 41,701,197 (39,971)

Public works 12,893,300 13,212,309 13,169,227 43,082

Culture and recreation 4,723,800 4,648,742 4,625,454 23,288

Urban and economic development 3,660,700 3,668,125 3,435,509 232,616

Total expenditures 89,088,600 92,178,825 91,058,135 1,120,690

Excess (deficiency) of revenues over

expenditures (7,975,100) (10,058,390) (7,668,213) 2,390,177

Other Financing Sources (Uses)

Transfers in 8,032,100 8,499,488 8,510,707 11,219

Transfers out (57,000) (765,000) (789,000) (24,000)

Total other financing sources (uses) 7,975,100 7,734,488 7,721,707 (12,781)

Net change in fund balance -

budgetary basis - (2,323,902) 53,494 2,377,396

Net adjustments to reflect operations in

accordance with generally accepted

accounting principles - - 749,900 749,900

Net change in fund balance -

GAAP basis - (2,323,902) 803,394 3,127,296$

Fund Balance - January 1, 2019 16,885,765 16,885,765 16,885,765

Fund Balance - December 31, 2019 16,885,765$ 14,561,863$ 17,689,159$

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

29

CITY OF DULUTH, MINNESOTA

STATEMENT OF NET POSITION

PROPRIETARY FUNDS

DECEMBER, 31, 2019

Priley Drive

Parking Facility Water Gas Sewer

Assets

Current assets

Cash and cash equivalents

481,638$ 3,645,869$ 4,015,211$ 3,313,602$

Restricted cash and cash equivalents

Customer deposits

- 90,380 2,767,131 -

Construction

- 1,261,807 - 716,899

Loans

- - 1,615 -

Restricted assets held by trustee

- - - -

Receivables, net

Accounts

31,084 1,473,554 5,403,978 1,940,630

Restricted loans

- - 401,780 -

Assessments

- 21,757 556 17,733

Due from other funds

- 8,690 13,975 167

Due from component units

- - - -

Interfund loan receivable

- - 2,510,937 -

Due from other governments

- 11,643 19,519 342,551

Inventories

- 1,269,610 1,231,122 89,017

Prepaids

- 1,541,549 563,768 2,927,649

Total current assets

512,722 9,324,859 16,929,592 9,348,248

Noncurrent assets

Assessments receivable

- 84,829 6,272 94,760

Restricted loans receivable

- - 1,527,193 -

Capital assets, net

18,914,086 64,815,185 58,122,115 95,976,347

Total noncurrent assets

18,914,086 64,900,014 59,655,580 96,071,107

Total Assets

19,426,808 74,224,873 76,585,172 105,419,355

Deferred Outflows of Resources

Deferred loss from debt refunding

- - - 17,673

Deferred pension obligation outflows

- 295,630 406,969 174,478

Total Deferred Outflows of Resources

- 295,630 406,969 192,151

Liabilities

Current liabilities

Accounts payable

646 71,148 2,555,788 37,667

Contracts payable

- 42,262 160,435 78,663

Claims payable

- - - -

Notes payable

- 700,000 - 1,423,000

Leases payable

- 255,251 233,980 219,800

Due to other funds

- 43,253 55,024 33,003

Interfund loan payable

- - - -

Due to other governments

- 143,902 90,967 791,488

Due to component units

- 5 - -

Accrued interest payable

120,940 97,154 17,622 88,546

Accrued salaries payable

- 115,518 166,442 68,388

Compensated absences

- 237,620 365,245 156,744

Unearned revenue

- 60,557 752,208 55,142

Deposits

- 10,000 2,788,006 -

Revenue bonds payable

219,731 284,000 - 1,035,999

Total current liabilities

341,317 2,060,670 7,185,717 3,988,440

(continued)

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

Business-type Activities - Enterprise Funds

30

CITY OF DULUTH, MINNESOTA

STATEMENT OF NET POSITION

PROPRIETARY FUNDS

DECEMBER, 31, 2019

Priley Drive

Parking Facility Water Gas Sewer

Business-type Activities - Enterprise Funds

Noncurrent liabilities

Notes payable

- 4,996,000 - 6,085,000

Loans payable

- - - -

Claims payable

- - - -

Interfund loan payable

- - - -

Leases payable

- 972,773 891,708 837,665

Pension liability

- 2,941,654 4,049,519 1,736,140

Revenue bonds payable

12,010,138 4,152,067 - 1,797,348

Total noncurrent liabilities

12,010,138 13,062,494 4,941,227 10,456,153

Total Liabilities

12,351,455 15,123,164 12,126,944 14,444,593

Deferred Inflows of Resources

Deferred pension obligation inflows

- 680,891 937,323 401,856

Deferred OPEB inflows

- 1,454,957 2,075,682 704,030

Total Deferred Inflows of Resources

- 2,135,848 3,013,005 1,105,886

Net Position

Net investment in capital assets

6,684,217 54,716,901 56,996,427 84,595,208

Restricted for health insurance trust

- - - -

Restricted for special accounts

- - - 716,899

Restricted for loans

- - 1,375,042 -

Unrestricted

391,136 2,544,590 3,480,723 4,748,920

Total Net Position

7,075,353$ 57,261,491$ 61,852,192$ 90,061,027$

(continued)

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

31

CITY OF DULUTH, MINNESOTA

STATEMENT OF NET POSITION

PROPRIETARY FUNDS

DECEMBER, 31, 2019

Steam

Other

Enterprise

Funds

Total Enterprise

Funds

Governmental

Activities -

Internal Service

Funds

Assets

Current assets

Cash and cash equivalents

-$ 5,687,806$ 17,144,126$ 4,204,303$

Restricted cash and cash equivalents

Customer deposits

- - 2,857,511 -

Construction

- - 1,978,706 -

Loans

- - 1,615 -

Restricted assets held by trustee

- - - 7,935,383

Receivables, net

Accounts

1,157,938 678,867 10,686,051 70,178

Restricted loans

- - 401,780 -

Assessments

- 26,931 66,977 -

Due from other funds

22,109 28,978 73,919 731,767

Due from component units

- 23,701 23,701 -

Interfund loan receivable

- - 2,510,937 -

Due from other governments

1,727,176 27,870 2,128,759 -

Inventories

529,804 133,917 3,253,470 178,064

Prepaids

20,571 2,008,996 7,062,533 50,000

Total current assets

3,457,598 8,617,066 48,190,085 13,169,695

Noncurrent assets

Assessments receivable

- 578 186,439 -

Restricted loans receivable

26,903 - 1,554,096 -

Capital assets, net

19,509,322 42,769,793 300,106,848 198,538

Total noncurrent assets

19,536,225 42,770,371 301,847,383 198,538

Total Assets

22,993,823 51,387,437 350,037,468 13,368,233

Deferred Outflows of Resources

Deferred loss from debt refunding

44,330 315,020 377,023 -

Deferred pension obligation outflows

- 179,617 1,056,694 92,960

Total Deferred Outflows of Resources

44,330 494,637 1,433,717 92,960

Liabilities

Current liabilities

Accounts payable

464,892 82,460 3,212,601 207,528

Contracts payable

311,875 153,892 747,127 215

Claims payable

- - - 2,895,257

Notes payable

- - 2,123,000 -

Leases payable

- - 709,031 -

Due to other funds

508,590 43,950 683,820 12,262

Interfund loan payable

2,510,937 1,059,480 3,570,417 463,622

Due to other governments

24,460 2,390 1,053,207 15,561

Due to component units

- - 5 -

Accrued interest payable

64,341 64,256 452,859 -

Accrued salaries payable

- 78,495 428,843 35,927

Compensated absences

- 158,568 918,177 3,163,371

Unearned revenue

- 72,828 940,735 108,505

Deposits

- 56,804 2,854,810 -

Revenue bonds payable

665,000 965,000 3,169,730 -

Total current liabilities

4,550,095 2,738,123 20,864,362 6,902,248

(continued)

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

Business-type Activities - Enterprise Funds

32

CITY OF DULUTH, MINNESOTA

STATEMENT OF NET POSITION

PROPRIETARY FUNDS

DECEMBER, 31, 2019

Steam

Other

Enterprise

Funds

Total Enterprise

Funds

Governmental

Activities -

Internal Service

Funds

Business-type Activities - Enterprise Funds

Noncurrent liabilities

Notes payable

- - 11,081,000 -

Loans payable

- 12,481 12,481 -

Claims payable

- - - 830,395

Interfund loan payable

- 1,550,000 1,550,000 -

Leases payable

- - 2,702,146 -

Pension liability

- 1,787,275 10,514,588 924,994

Revenue bonds payable

5,066,386 5,651,576 28,677,515 -

Total noncurrent liabilities

5,066,386 9,001,332 54,537,730 1,755,389

Total Liabilities

9,616,481 11,739,455 75,402,092 8,657,637

Deferred Inflows of Resources

Deferred pension obligation inflows

- 413,692 2,433,762 214,104

Deferred OPEB inflows

- 349,925 4,584,594 -

Total Deferred Inflows of Resources

- 763,617 7,018,356 214,104

Net Position

Net investment in capital assets

13,822,266 36,455,756 253,270,775 198,538

Restricted for health insurance trust

- - - 5,238,569

Restricted for special accounts

- - 716,899 -

Restricted for loans

- - 1,375,042 -

Unrestricted

(400,594) 2,923,246 13,688,021 (847,655)

Total Net Position

13,421,672$ 39,379,002$ 269,050,737$ 4,589,452$

Amounts reported for business-type activities in the statement of net position

are different because of the consolidation of internal service fund activities

related to enterprise funds. 4,001,238

Net position of business-type activities 273,051,975$

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

33

CITY OF DULUTH, MINNESOTA

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION

PROPRIETARY FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Priley Drive

Parking Facility Water Gas Sewer

Operating Revenues

Sales

-$ -$ 38,133,852$ -$

Charges for services

452,308 14,971,423 1,017,883 19,368,220

Fines and forfeits

- - - -

Miscellaneous revenues

- 171,297 734,382 247,189

Total Operating Revenues

452,308 15,142,720 39,886,117 19,615,409

Operating Expenses

Cost of sales and services

- - 20,067,111 -

Personal services

- 5,126,665 6,816,177 2,944,597

Supplies

- 1,431,841 1,206,487 296,247

Utilities

23,042 1,041,191 33,503 129,911

Other services and charges

212,288 1,329,277 2,132,155 10,600,536

Depreciation

520,571 1,752,474 1,515,603 2,036,253

Medical and insurance

- - - -

Total Operating Expenses

755,901 10,681,448 31,771,036 16,007,544

Operating Income (Loss)

(303,593) 4,461,272 8,115,081 3,607,865

Nonoperating Revenues (Expenses)

Property taxes

- - - -

Investment income

4,489 47,466 81,859 35,176

Intergovernmental revenue

- 28,427 42,839 8,283

Gain (loss) on sale or disposition of capital assets - 8,531 13,808 -

Interest and fiscal fees

(493,447) (245,638) (46,251) (249,757)

Total Nonoperating Revenues (Expenses)

(488,958) (161,214) 92,255 (206,298)

Income (Loss) Before Contributions and Transfers

(792,551) 4,300,058 8,207,336 3,401,567

Capital contributions

- 11,591 100,479 328,688

Transfers in

550,711 144,300 14,900 7,450

Transfers out

- (138,262) (2,911,118) (107,301)

Change in Net Position

(241,840) 4,317,687 5,411,597 3,630,404

Total Net Position - January 1, 2019

7,317,193 52,943,804 56,440,595 86,430,623

Total Net Position - December 31, 2019

7,075,353$ 57,261,491$ 61,852,192$ 90,061,027$

(continued)

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

Business-type Activities - Enterprise Funds

34

CITY OF DULUTH, MINNESOTA

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION

PROPRIETARY FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Steam

Other

Enterprise

Funds

Total Enterprise

Funds

Governmental

Activities -

Internal Service

Funds

Operating Revenues

Sales

-$ 446,891$ 38,580,743$ 2,465,355$

Charges for services

7,619,217 10,047,377 53,476,428 25,348,004

Fines and forfeits

- 947,382 947,382 -

Miscellaneous revenues

471,960 312,239 1,937,067 1,119,229

Total Operating Revenues

8,091,177 11,753,889 94,941,620 28,932,588

Operating Expenses

Cost of sales and services

- 196,811 20,263,922 2,148,694

Personal services

- 3,566,286 18,453,725 5,874,849

Supplies

3,174,722 515,305 6,624,602 44,552

Utilities

363,418 695,778 2,286,843 33,803

Other services and charges

3,184,483 4,059,484 21,518,223 3,442,184

Depreciation

1,318,551 1,389,581 8,533,033 64,038

Medical and insurance

- - - 18,087,665

Total Operating Expenses

8,041,174 10,423,245 77,680,348 29,695,785

Operating Income (Loss)

50,003 1,330,644 17,261,272 (763,197)

Nonoperating Revenues (Expenses)

Property taxes

- 1,301,757 1,301,757 -

Investment income

- 66,874 235,864 245,309

Intergovernmental revenue

- 29,645 109,194 5,835

Gain (loss) on sale or disposition of capital assets (67,895) 4,623 (40,933) -

Interest and fiscal fees

(191,220) (201,598) (1,427,911) -

Total Nonoperating Revenues (Expenses)

(259,115) 1,201,301 177,971 251,144

Income (Loss) Before Contributions and Transfers

(209,112) 2,531,945 17,439,243 (512,053)

Capital contributions

5,269,398 423,701 6,133,857 -

Transfers in

- 29,600 746,961 -

Transfers out

(152,960) (1,951,791) (5,261,432) -

Change in Net Position

4,907,326 1,033,455 19,058,629 (512,053)

Total Net Position - January 1, 2019

8,514,346 38,345,547 249,992,108 5,101,505

Total Net Position - December 31, 2019

13,421,672$ 39,379,002$ 269,050,737$ 4,589,452$

Amounts reported in business-type activities in the statement

of activities are different because:

Change in net position 19,058,629$

Adjustment to reflect the consolidation of internal service

fund activities related to enterprise funds 141,799

Change in net position of business-type activities 19,200,428$

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

Business-type Activities - Enterprise Funds

35

CITY OF DULUTH, MINNESOTA

STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Priley Drive

Parking

Facility Water Gas Sewer

Cash Flows from Operating Activities

Cash received from customers 448,606$ 14,986,471$ 40,186,963$ 19,465,359$

Cash paid to suppliers (239,057) (3,833,212) (23,557,371) (10,983,355)

Cash paid to employees - (6,258,278) (8,486,304) (3,420,949)

Other operating revenues - 57,558 156,606 168,696

Net cash provided (used) by operating activities 209,549 4,952,539 8,299,894 5,229,751

Cash Flows from Noncapital Financing Activities

Transfers from other funds

550,711

144,300

14,900

7,450

Transfers to other funds - (138,262) (2,911,118) (107,301)

Property taxes - - - -

Operating grants - 16,918 23,363 (306,545)

Interfund financing - - 86,561 -

Net cash provided (used) by noncapital financing activities 550,711 22,956 (2,786,294) (406,396)

Cash Flows from Capital and Related

Financing Activities

Capital grants and contributions - 24,031 100,709 340,933

Principal paid on bonds, notes and capitalized leases (217,606) (1,210,846) (730,358) (2,616,701)

Interest paid on bonds, notes and capitalized leases (495,599) (234,830) (59,665) (266,722)

Sale of capital assets - 4,419 7,707 -

Acquisition or construction of capital assets - (3,234,237) (3,125,410) (1,536,310)

Net cash provided (used) by capital

and related financing activities (713,205) (4,651,463) (3,807,017) (4,078,800)

Cash Flows from Investing Activities

Investment earnings 4,489 47,466 81,859 35,176

Net increase (decrease) in cash and cash equivalents 51,544 371,498 1,788,442 779,731

Cash and cash equivalents - January 1, 2019 430,094 4,626,558 4,995,515 3,250,770

Cash and cash equivalents - December 31, 2019 481,638$ 4,998,056$ 6,783,957$ 4,030,501$

Reconciliation of operating income to net cash

provided (used) by operating activities:

Net operating income (loss) (303,593)$ 4,461,272$ 8,115,081$ 3,607,865$

Adjustments to reconcile net operating income(loss) to net

cash provided (used) by operating activities:

Depreciation 520,571 1,752,474 1,515,603 2,036,253

Change in assets and liabilities:

Decrease (increase) in receivables (3,702) (87,213) 50,243 52,278

Decrease (increase) in inventories - 169,026 55,960 16,975

Decrease (increase) in prepaids - (1,541,549) (74,440) (1,648,197)

Decrease (increase) in deferred pension obligation outflows

- 339,958 467,572 204,240

Decrease (increase) in OPEB outflows - 671,232 860,316 457,219

Increase (decrease) in payables (3,727) (198,409) 38,482 19,930

Increase (decrease) in OPEB liability - (1,744,674) (4,379,221) -

Increase (decrease) in unearned revenues - 15,146 39,618 2,076

Increase (decrease) in deferred pension obligation inflows

- (279,286) (383,837) (170,271)

Increase (decrease) in pension liability - (60,395) (81,165) (52,647)

Increase (decrease) in OPEB inflows - 1,454,957 2,075,682 704,030

Total adjustments 513,142 491,267 184,813 1,621,886

Net cash provided (used) by operating activities 209,549$ 4,952,539$ 8,299,894$ 5,229,751$

(continued)

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

Business-type Activities - Enterprise Funds

36

CITY OF DULUTH, MINNESOTA

STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Governmental

Activities -

Other Total Internal

Enterprise Enterprise Service

Steam Funds Funds Funds

Cash Flows from Operating Activities

Cash received from customers 8,355,430$ 11,605,095$ 95,047,924$ 28,669,869$

Cash paid to suppliers (7,287,489) (5,444,452) (51,344,936) (22,839,572)

Cash paid to employees - (3,600,853) (21,766,384) (5,769,451)

Other operating revenues 4,155 283,184 670,199 1,755

Net cash provided (used) by operating activities 1,072,096 2,842,974 22,606,803 62,601

Cash Flows from Noncapital Financing Activities

Transfers from other funds

-

5,600

722,961

-

Transfers to other funds (152,960) (1,951,791) (5,261,432) -

Property taxes - 1,288,928 1,288,928 -

Operating grants - 29,645 (236,619) 5,835

Interfund financing (86,561) 246,367 246,367 (31,066)

Net cash provided (used) by noncapital financing activities (239,521) (381,251) (3,239,795) (25,231)

Cash Flows from Capital and Related

Financing Activities

Capital grants and contributions 5,495,954 400,000 6,361,627 -

Principal paid on bonds, notes and capitalized leases (655,000) (990,004) (6,420,515) -

Interest paid on bonds, notes and capitalized leases (161,963) (165,505) (1,384,284) -

Sale of capital assets - - 12,126 -

Acquisition or construction of capital assets (5,511,566) (3,153,761) (16,561,284) -

Net cash provided (used) by capital

and related financing activities (832,575) (3,909,270) (17,992,330) -

Cash Flows from Investing Activities

Investment earnings - 66,874 235,864 245,309

Net increase (decrease) in cash and cash equivalents - (1,380,673) 1,610,542 282,679

Cash and cash equivalents - January 1, 2019 - 7,068,479 20,371,416 11,857,007

Cash and cash equivalents - December 31, 2019 -$ 5,687,806$ 21,981,958$ 12,139,686$

Reconciliation of operating income to net cash

provided (used) by operating activities:

Net operating income (loss) 50,003$ 1,330,644$ 17,261,272$ (763,197)$

Adjustments to reconcile net operating income(loss) to net

cash provided (used) by operating activities:

Depreciation 1,318,551 1,389,581 8,533,033 64,038

Change in assets and liabilities:

Decrease (increase) in receivables 272,526 132,704 416,836 (338,039)

Decrease (increase) in inventories (91,948) 2,745 152,758 (2,781)

Decrease (increase) in prepaids 11,754 (764,577) (4,017,009) -

Decrease (increase) in deferred pension obligation outflows

- 187,043 1,198,813 206,366

Decrease (increase) in OPEB outflows - 256,905 2,245,672 -

Increase (decrease) in payables (488,790) 24,759 (607,755) 946,686

Increase (decrease) in OPEB liability - - (6,123,895) -

Increase (decrease) in unearned revenues - 18,024 74,864 -

Increase (decrease) in deferred pension obligation inflows

- (140,219) (973,613) (74,168)

Increase (decrease) in pension liability - 55,440 (138,767) 23,696

Increase (decrease) in OPEB inflows - 349,925 4,584,594 -

Total adjustments 1,022,093 1,512,330 5,345,531 825,798

Net cash provided (used) by operating activities 1,072,096$ 2,842,974$ 22,606,803$ 62,601$

(continued)

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

Business-type Activities - Enterprise Funds

37

CITY OF DULUTH, MINNESOTA

STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Noncash Investing, Capital and Financing Activities

Water

Capital contributions are reported net of timing differences totaling $12,440 due to receivables.

Gas

Capital contributions are reported net of timing differences totaling $230 due to receivables.

Sewer

Capital contributions are reported net of timing differences totaling $12,245 due to receivables.

Steam

Capital contributions are reported net of timing differences totaling $226,556 due to receivables.

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

38

CITY OF DULUTH, MINNESOTA

STATEMENT OF FIDUCIARY NET POSITION

DECEMBER 31, 2019

Other

Postemployment

Benefits Agency

Trust Fund Fund

Assets

Cash and cash equivalents 49,068$ 2,679,869$

Receivables:

Loans - 398,904

Accounts receivable 353,046 -

Investments, at fair value:

Fixed income pool 18,372,059 -

Equity pool 52,736,493 -

Total Assets 71,510,666 3,078,773$

Liabilities

Accounts payable -$ 6,939$

Due to agency - 3,071,834

Total Liabilities - 3,078,773$

Net Position Restricted for postemployment benefits

other than pensions

71,510,666$

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

39

CITY OF DULUTH, MINNESOTA

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION

OTHER POSTEMPLOYMENT BENEFITS TRUST FUND

FOR THE YEAR ENDED DECEMBER 31, 2019

Additions

Employer Contributions 11,642,994$

Investment earnings:

Interest and dividends 1,500,343

Net increase in fair value of investments 12,736,135

Less investment expenses (4,173)

Net investment earnings 14,232,305

Total Additions 25,875,299

Deductions

Benefits 10,769,326

Net increase in net position 15,105,973

Net Position - January 1, 2019 56,404,693

Net Position - December 31, 2019 71,510,666$

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

Net Position restricted for postemployment benefits other

than pensions

40

CITY OF DULUTH, MINNESOTA

STATEMENT OF NET POSITION

COMPONENT UNITS

DECEMBER 31, 2019

Duluth Spirit

Duluth

Entertainment

Mountain

Economic

and Convention

Duluth Duluth Recreation

Development Center Airport Transit Area

Authority Authority Authority Authority Authority Totals

Assets

Cash and cash equivalents 7,045,174$ 779,530$ 2,591,259$ 7,971,523$ 460,826$ 18,848,312$

Receivables, net:

Taxes 120,187 - - - - 120,187

Accounts 33,012 1,195,195 578,174 137,945 173,272 2,117,598

Loans 7,630,697 - - - - 7,630,697

Grants - - 222,541 - - 222,541

Due from primary government - 814,879 - 35 - 814,914

Due from other governments - - - 1,068,845 - 1,068,845

Inventories - 202,405 26,820 269,040 91,192 589,457

Prepaids - 45,698 62,848 69,992 44,235 222,773

Restricted assets:

Cash and cash equivalents - 1,116,724 144,000 - - 1,260,724

Accounts receivable - 1,195 49,309 - - 50,504

Grants receivable - - 3,747,492 - - 3,747,492

Planning and development costs - - 913,574 - 9,441 923,015

Capital assets, net:

Non-depreciable 4,060,403 1,622,243 4,212,955 222,367 2,603,316 12,721,284

Depreciable 7,696,592 79,183,397 120,179,894 43,760,667 15,455,012 266,275,562

Total Assets 26,586,065 84,961,266 132,728,866 53,500,414 18,837,294 316,613,905

Deferred Outflows of Resources

Deferred pension obligation outflows - 312,013 106,609 - 366,578 785,200

Deferred OPEB outflows - - 28,487 - - 28,487

Total Deferred Outflow of Resources - 312,013 135,096 - 366,578 813,687

Liabilities

Accounts payable and other

short-term liabilities 245,765 536,988 240,135 1,489,668 684,387 3,196,943

Contracts payable 170,664 - 1,129,631 - - 1,300,295

Accrued interest payable - - - - 3,935 3,935

Due to primary government 281,462 4,077 92 - 1,202,438 1,488,069

Due to other government - - - - 11,107 11,107

Unearned revenue - 850,377 104,650 118,635 850,407 1,924,069

Deposits - 1,109,358 - - - 1,109,358

Non-current liabilities:

Due within one year - 163,062 1,080,706 569,138 332,507 2,145,413

Due in more than one year - 4,845,658 11,660,105 - 2,234,948 18,740,711

Total Liabilities 697,891 7,509,520 14,215,319 2,177,441 5,319,729 29,919,900

Deferred Inflows of Resources

Deferred pension obligation inflows - 747,425 247,511 - 518,401 1,513,337

Deferred OPEB inflows - 107,048 194,402 - - 301,450

Total Deferred Inflow of Resources - 854,473 441,913 - 518,401 1,814,787

Net Position

Net investment in capital assets 11,564,495 80,805,640 115,968,959 43,983,034 16,650,066 268,972,194

Restricted for:

Capital projects 6,576,003 - - 6,585,765 - 13,161,768

Unrestricted 7,747,676 (3,896,354) 2,237,771 754,174 (3,284,324) 3,558,943

Total Net Position 25,888,174$ 76,909,286$ 118,206,730$ 51,322,973$ 13,365,742$ 285,692,905$

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

41

CITY OF DULUTH, MINNESOTA

STATEMENT OF ACTIVITIES

COMPONENT UNITS

FOR THE YEAR ENDED DECEMBER 31, 2019

Operating Capital

Charges for Grants and Grants and

Functions/Programs Expenses Services Contributions Contributions

Duluth Economic Development Authority

Governmental activities:

Economic development 5,620,614$ 1,016,309$ 5,648$ -$

Duluth Entertainment and Convention

Center Authority

Business-type activities:

Entertainment and convention facility 15,450,014 9,552,003 - 552,800

Duluth Airport Authority

Business-type activities:

Airport facility 14,887,490 7,145,963 - 13,570,892

Duluth Transit Authority

Business-type activities:

Public transportation 24,213,284 3,026,839 16,855,133 1,923,503

Spirit Mountain Recreation Area Authority

Business-type activities:

Ski hill operations 6,494,143 5,434,040 - 462,342

Total Component Units 66,665,545$ 26,175,154$ 16,860,781$ 16,509,537$

(continued)

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

Program Revenues

42

CITY OF DULUTH, MINNESOTA

STATEMENT OF ACTIVITIES

COMPONENT UNITS

FOR THE YEAR ENDED DECEMBER 31, 2019

Duluth Spirit

Duluth Entertainment Mountain

Economic and Convention Duluth Duluth Recreation

Development Center Airport Transit Area

Functions/Programs Authority Authority Authority Authority Authority Totals

Duluth Economic Development Authority

Governmental activities:

Economic development (4,598,657)$ -$ -$ -$ -$ (4,598,657)$

Duluth Entertainment and Convention

Center Authority

Business-type activities:

Entertainment and convention facility - (5,345,211) - - - (5,345,211)

Duluth Airport Authority

Business-type activities:

Airport facility - - 5,829,365 - - 5,829,365

Duluth Transit Authority

Business-type activities:

Public transportation - - - (2,407,809) - (2,407,809)

Spirit Mountain Recreation Area Authority

Business-type activities:

Ski hill operations - - - - (597,761) (597,761)

Total Component Units (7,120,073)

General Revenues:

Property taxes 2,903,174 - - 1,497,209 - 4,400,383

Sales taxes - 1,869,144 - - - 1,869,144

Investment income 200,019 28,862 31,921 100,468 - 361,270

Miscellaneous 496,351 535,989 - - 322,415 1,354,755

Total General Revenues and Transfers 3,599,544 2,433,995 31,921 1,597,677 322,415 7,985,552

Change in Net Position (999,113) (2,911,216) 5,861,286 (810,132) (275,346) 865,479

Net Position - Beginning, 26,887,287 79,820,502 112,345,444 52,133,105 13,641,088 284,827,426

Net Position - Ending 25,888,174$ 76,909,286$ 118,206,730$ 51,322,973$ 13,365,742$ 285,692,905$

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

Net (Expense) Revenue and Changes in Net Position

43

N o t e s t o t h e

F i n a n c i a l S t a t e m e n t s

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

Note Page

1 Summary of Significant Accounting Policies

46

Reporting Entity

46

Discretely Presented Component Units

46

Government-Wide and Fund Financial Statements

47

Measurement Focus, Basis of Accounting, and

Financial Statement Presentation

47

Cash and Cash Equivalents

49

Assets Held by Trustee

49

Receivables and Payables

49

Deferred Outflows/Inflows of Resources

50

Inventories and Prepaid Items

50

Restricted Assets

50

Capital Assets

51

Compensated Absences

51

Long-Term Obligations

51

Fund Equity

52

Reclassifications

52

Use of Estimates

52

Pensions

52

2 Stewardship, Compliance, and Accountability

53

Budgetary Information

53

Federal Audit Requirements

53

Deficit Fund Equity

53

3 Deposits and Investments

54

Deposits

54

Investments

54

4 Property Taxes

58

5 Receivables

58

6 Deferred Inflows of Resources

58

7 Capital Assets

59

Primary Government

59

Component Units

60

8 Purchase and Construction Commitments

61

Disaster Damage Repair Commitments

61

9 Risk Management

61

10 Lease Obligations

62

Operating Leases

62

Noncancelable Operating Leases

62

Capital Leases

63

11 Short-Term Debt

63

12 Long-Term Debt

64

Changes in Long-Term Liabilities

64

Debt Requirements and Sources of Repayments

65

Debt Limit

67

Refunding Bond Issues

69

Bonds/Certificates and Notes Payable – By Issue

71

GUIDE TO NOTES

44

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

Note Page

13 Fund Equity

74

14 Interfund Assets/Liabilities/Transfers

75

Due To/From Other Funds

75

Due To/From Primary Government/Component Units

76

Interfund Loan Receivables/Payables

76

Interfund Transfers

77

15 Pension Plans

78

Plan Description

78

Benefits Provided

78

Contributions

79

Pension Costs

79

Actuarial Assumptions

81

Discount Rate

82

Changes in Actuarial Assumptions

82

Pension Liability Sensitivity

82

Pension Plan Fiduciary Net Position

83

Defined Contribution Plan

83

Component Units' Pension Information

83

16 Other Postemployment Benefits

84

Plan Description

84

Funding Policy

84

Investments

84

Net OPEB Liability of the City

85

Changes in the Net OPEB Liability

85

Actuarial Methods and Assumptions

85

OPEB Expense and Deferred Outflows and Deferred Inflows

of Resources Related to OPEB

87

Trust Fund

87

Defined Contribution OPEB Plan

87

17 Segment Information

88

Condensed Statement of Net Position

88

Condensed Statement of Revenues, Expenses, and

Changes in Net Position

88

Condensed Statement of Cash Flows

89

18 Summary Disclosure of Significant Contingencies

89

Lake Superior Center

89

Tax Increment Districts

89

Federally Assisted Programs – Compliance Audits

89

Related Organization

89

Minneapolis-Duluth/Superior Passenger Rail Alliance

90

Tax Increment Assistance

90

Conduit Debt Obligations

91

19 Tax Abatement

91

20 Subsequent Events

92

GUIDE TO NOTES (continued)

45

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REPORTING ENTITY

DISCRETELY PRESENTED COMPONENT UNITS

Duluth Economic Development Authority

Duluth Transit Authority

411 West First Street Room 402

2402 West Michigan Street

Duluth, MN 55802

Duluth, MN 55806

Duluth Entertainment and Convention Center Authority

Spirit Mountain Recreation Area Authority

350 South Fifth Avenue West

9500 Spirit Mountain Place

Duluth, MN 55802

Duluth, MN 55810

Duluth Airport Authority

Duluth International Airport

4701 Grinden Drive

Duluth, MN 55811

The City of Duluth was first incorporated in 1870. The City has operated under the Mayor-Council form of

government since 1956, with five council members elected from geographical districts and four members

elected at-large. The term of office of the Mayor and Council members is four years.

The accounting policies of the City and its component units conform to generally accepted accounting principles.

Accounting policies of the component units are disclosed with those of the City. Any differences or additional

policies are identified by each component unit.

For financial reporting purposes, the City has included all funds, organizations, agencies, boards, commissions,

and authorities, and has considered all potential component units for which the City 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 City to impose its will on that organization, or (2) the potential for the organization to provide specific

financial benefits to, or impose specific financial burdens on the City.

As required by generally accepted accounting principles, the financial statements in this report present the City,

the primary government, and its five component units: the Duluth Economic Development Authority (DEDA), the

Duluth Entertainment and Convention Center Authority (DECC), the Duluth Airport Authority, the Duluth Transit

Authority, and the Spirit Mountain Recreation Area Authority. The component units are included as part of the

City's reporting entity because of the significance of their operational or financial relationships with the City. Each

component unit has a December 31 year-end, except for the Spirit Mountain Recreation Area Authority, which

has an April 30 year-end.

The governing board of each component unit is appointed by the Mayor and approved by the City Council,

except for the DECC, which has seven City appointees and four directors appointed by the Governor of

Minnesota. Three of the seven board members of DEDA must be City Councilors.

The Council approves the budget of each component unit. The Council also approves the issuance and funding

of debt for each component unit. The Council currently provides an annual subsidy to the DECC and the Spirit

Mountain Recreation Area Authority. For the Duluth Transit Authority, the Council approves rate changes and

approves an annual tax levy to finance operating and capital needs. The Council must approve any expenditure

greater than $100,000 for DEDA.

Combining statements for the City's component units are presented in the basic financial statements section of

this report. Financial statements for DEDA are included as schedules in the supplementary information section

of this report. Complete financial statements for each of the other component units can be obtained from their

respective offices at the following addresses:

46

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(continued)

GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS

The City reports the following major governmental funds:

General Fund

The City's primary operating fund. It accounts for all financial transactions not

accounted for in another fund.

The government-wide financial statements (i.e., the statement of net position and the statement of activities)

report information on all of the nonfiduciary activities of the primary government and its component units. For the

most part, the effect of interfund activity has been removed from these statements. Exceptions include

payments-

in-lieu of taxes and payments for utilities between the General Fund and various enterprise funds. Governmental

activities, which are supported mostly by taxes and intergovernmental revenues, are reported separately from

business-type activities, which rely to a significant extent on user fees and charges. The financial data of the

City's component units is discretely presented in a separate column in the combined financial statements to

emphasize that they are legally separate from the City.

The government-wide financial statements are reported using the economic resources measurement focus and

the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. The agency

fund type has no measurement focus. 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.

Property taxes, sales and excise taxes, franchise taxes, special assessments, licenses, charges for services,

and interest associated with the current fiscal period are all considered to be susceptible to accrual and have

been recognized as revenues of the current fiscal period. All other revenue items are considered to be

measurable and available only when cash is received by the government.

MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION

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. The City considers revenues to be available if they

are collected within 45 days of the end of the current fiscal year. Expenditures generally are recorded when a

liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when

payment is due.

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. Program revenues include 1) charges to those 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 as general revenues.

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even

though the latter are excluded from the government-wide financial statements. Major individual governmental

funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

47

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(continued)

The City reports the following major proprietary funds:

Additionally, the City reports the following fund types:

Agency Fund

Sewer Enterprise Fund

This fund accounts for the operation and maintenance of the sanitary sewer

system.

Disaster Recovery

Special Revenue Fund

This fund was established to account for grants and aids associated with the 500-

year flood event in June 2012, and continues to be used for subsequent

disasters.

Community Investment

Trust Fund

This fund accounts for the City’s share of revenues that were received from the

operation of the Fond du Luth Casino, in accordance with an agreement with the

Fond du Lac Band of Lake Superior Chippewa. Monies are to be used to finance

future capital improvements of the City, with investment earnings of the fund to be

transferred annually to the General Fund.

Gas Enterprise Fund

This fund accounts for the distribution of natural gas, as well as inspection,

maintenance and servicing of customer gas utilization equipment.

This fund accounts for the collection, treatment, and distribution of water.

Water Enterprise Fund

Priley Drive Parking Facility

Enterprise Fund

This fund accounts for the construction, operation, and maintenance of the

parking ramp located at 410 West First Street.

General Obligation Debt

Service Fund

This fund accounts for accumulation of resources for, and payment of, general

obligation bonds, notes and certificates.

Steam Enterprise Fund

This fund accounts for assets held by the City as an agent for the Duluth 1200

Loan Fund.

This fund accounts for the generation and distribution of steam in the downtown

area.

The City's financial statements are prepared in accordance with generally accepted accounting principles

(GAAP) as of and for the year ended December 31, 2019. GASB is responsible for establishing GAAP for state

and local governments through its pronouncements (statements and interpretations). The more significant

accounting policies established in GAAP and used by the City are discussed below.

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 enterprise funds and

internal service funds are charges to customers and participants for sales and services. 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.

These funds account for fleet services, insurance coverage for property, casualty,

liability, workers' compensation, medical and dental claims, and compensated

absences, provided to other departments, employees, authorities of the City, or to

other governmental units, on a cost reimbursement basis.

Internal Service Funds

Trust Fund

This fund accounts for an irrevocable trust established for funding other

postemployment benefits for eligible retired employees under a single-employer

defined benefit plan.

48

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(continued)

CASH AND CASH EQUIVALENTS

ASSETS HELD BY TRUSTEE

RECEIVABLES AND PAYABLES

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.

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

fiscal year is reported as interfund loans receivable/payable. All other outstanding balances between funds are

reported as "due to/from other funds." Any residual balances outstanding between the governmental activities

and business-type activities are reported in the government-wide financial statements as internal balances.

Assessments receivable include current, delinquent, and deferred assessments for garbage service, razings,

administration fines, as well as for street and utility improvements. Because the City requires all property owners

to contract for garbage collection, the City assesses property owners for unpaid garbage bills, as a service to the

licensed garbage haulers. These assessments are reported in the General Fund. The amount reported by the

garbage haulers as unpaid is set up as a receivable and the revenue is deferred. As payments are received, a

payable to the contractor is set up. Any unpaid assessments at year-end are certified to St. Louis County for

payment with the following year's property taxes. Revenue is recognized for any penalties and interest the

County collects on the City's behalf.

Loans receivable include both the current and long-term portions of loans issued by the City. Business

development loans are reported in both special revenue and agency funds. Most of these loans receivable are

reported as an asset in the amount of loan proceeds disbursed. However, some loans, depending on their

original funding source, report unavailable revenue equal to the loan amount, and recognize revenue when

principal payments are received. Loans made at terms where the stated interest rate is significantly less than

prevailing market interest rates are reported as an asset at the present value of the loan. Low interest home

energy loans accounted for in the Gas Enterprise Fund, report a loan receivable and a contract payable in the

amount of the loan agreement.

Amounts due from individuals, organizations, or other governmental units are recorded as receivables at year-

end. These amounts include charges for services rendered, or for goods and material provided by the City,

including amounts for unbilled services. Receivables are shown net of an allowance for uncollectible accounts

where applicable. Receivables are also recognized for property taxes, sales and excise taxes, loans,

assessments, accrued interest, and intergovernmental grants.

Taxes and tax increments receivable consist of uncollected taxes levied and payable in prior years, net of

allowance for uncollectible taxes. These receivables are deferred to indicate they are not available to finance

expenditures of the current fiscal period.

These assets are funds held pursuant to a self-insurance trust agreement.

Available cash balances from all funds are pooled and invested in accordance with Minnesota statutes. Each

fund's share of the pool is shown on the financial statements as "Cash and Cash Equivalents." For reporting

purposes, petty cash and change funds are also considered cash and cash equivalents. For proprietary fund-

type statement of cash flows, all highly liquid investments (including restricted assets) with a maturity of three

months or less when purchased, are considered to be cash equivalents. Investments are stated at fair value.

49

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(continued)

DEFERRED OUTFLOWS/INFLOWS OF RESOURCES

INVENTORIES AND PREPAID ITEMS

RESTRICTED ASSETS

Assessments for street improvements are reported in a governmental fund, and revenues are deferred until the

collections are received. Assessments for utility improvements are reported in proprietary funds.

The City Council has authorized the Department of Public Works and Utilities to enter into cooperative

agreements for the purpose of purchasing and storing natural gas for future use.

In addition to assets, the statement of financial position reports 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. Currently, the City has three items that qualify for reporting in this category:

deferred amounts from debt refunding, deferred pension obligations, and OPEB obligations.

In addition to liabilities, the statement of financial position reports 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 City has three types of items that qualify for reporting in this category: unavailable revenue,

deferred pension obligations, and OPEB inflows. These amounts are recognized as an inflow of resources in the

period that the amounts become available.

The inventories of the enterprise funds consist of expendable supplies held for consumption. Fuel, chemicals,

and service department inventories are priced at cost using the first-in, first-out method and are based on an

annual physical inventory. Other materials and supplies are on a perpetual inventory system and are priced

using the moving average method. The inventory of the internal service funds consists of materials and supplies

which are on a perpetual inventory system and are priced using the moving average method.

The inventories of the Duluth Entertainment and Convention Center Authority and the Spirit Mountain Recreation

Area Authority component units consist of merchandise held for resale and are based on a physical inventory

and priced at the lower of cost or market using the first-in, first-out method.

The inventory of the Duluth Airport Authority component unit consists of materials and supplies held for

consumption. They are priced at the lower of cost or market on a first-in, first-out method.

The inventory of the Duluth Transit Authority component unit consists of materials, supplies, and fuel. The diesel

fuel and gasoline inventories are based on perpetual records and priced using the moving average method. The

materials and supplies inventory is also based on perpetual records but priced at cost using the first-in, first-out

method.

Restricted assets consist of customer deposits, employee flexible benefits plan, sewer surcharges, bond monies

specified for construction, and monies restricted for the payment of bond principal and interest.

Several enterprise funds have prepaid assets related to positive net OPEB calculations. In these cases, assets

available for OPEB exceed the OPEB liability.

50

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(continued)

CAPITAL ASSETS

Assets

Years

Buildings

10-75

Equipment

5-40

Infrastructure

10-75

COMPENSATED ABSENCES

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, and proprietary fund type statements of net position. Bond premiums and discounts are

amortized over the life of the bonds.

In the fund financial statements, governmental fund types recognize 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.

A liability for unused vacation is reported in an internal service fund and the governmental activities column of

the government-wide statement of net position for employees paid from governmental funds. All other liabilities

for employees' unused vacation is recognized in the fund from which they are paid.

Sick leave is recorded as an expenditure or expense when paid. Employees are granted from 18 to 120 days of

sick leave each year, depending on their union bargaining unit. Employees are not compensated for unused sick

leave. Any contingent liability for unused sick leave has not been determined and is not recognized in the

financial statements.

Property, plant, and equipment is depreciated using the straight-line method over the following estimated useful

lives:

Employees are granted from 5 to 35 vacation days per year depending on their years of service and union

bargaining unit. Depending on bargaining unit, varying amounts of vacation may be accumulated and carried

over to the succeeding year.

The cost of normal maintenance and repairs that does not add to the value of the asset or materially extend an

asset's life is not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed. 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.

Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, trails,

and similar items) are reported in the applicable governmental or business-type activities columns in the

government-wide financial statements. The City defines capital assets as assets with an initial, individual cost of

more than $5,000 for equipment, $50,000 for buildings and infrastructure, and all property which has an

estimated useful life in excess of five years. Such assets are recorded at historical cost or estimated historical

cost if purchased or constructed. Donated capital assets are recorded at acquisition value.

51

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(continued)

FUND EQUITY

RECLASSIFICATIONS

USE OF ESTIMATES

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. Plan investments are reported at fair value.

Restricted - amounts to be used for specific purposes as determined by enabling legislation or imposed by

grantors or debt covenants.

In the fund financial statements, governmental funds report the following fund balance classifications:

Committed - amounts to be used for specific purposes as determined by Council resolution. The City's formal

actions, or board resolutions, are the highest decision making level and remain binding unless removed in the

same manner.

Assigned - amounts intended to be used for certain purposes as determined by Council resolution or by joint

action by the Chief Administrative Officer and Chief Financial Officer pursuant to the City’s Fund Balance

Reporting and Governmental Fund Type Definitions Policy.

Unassigned - residual balances in the General Fund that have not been restricted, committed or assigned.

Other governmental funds may report a negative unassigned fund balance should the total of nonspendable,

restricted, and committed fund balances exceed the total net resources of the fund.

It is the City's policy to use restricted resources first and then unrestricted resources as needed. When

unrestricted resources are available for use, it is the City's policy to use resources in the following order; first

committed, then assigned, and finally unassigned. Fund balance commitments may be established, modified, or

rescinded by Council resolution.

Several account balances were reclassified for the year ended December 31, 2019, as previously reported.

These reclassifications were required for the comparability to the current year's financial statements and must be

considered when comparing the financial statements of this report with those of prior reports.

The preparation of financial statements in conformity with generally accepted accounting principles requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and

disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of

revenues and expenses during the reporting period. Actual results could differ from those estimates.

Nonspendable - amounts that cannot be spent because they are not in spendable form or that are legally or

contractually required to be maintained intact.

52

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

2.

BUDGETARY INFORMATION

FEDERAL AUDIT REQUIREMENTS

DEFICIT FUND EQUITY

The Single Audit Act requires the City to have a single, independent audit of its financial operations, including

compliance with certain provisions of federal law and regulations. This audit requirement was complied with for

fiscal year ended December 31, 2019. An auditor's report on compliance and internal accounting control will be

issued at a later date.

The following special revenue funds had deficit fund balances due to grants earned but not received within 45

days of the end of the current fiscal year: Disaster Recovery - $3,608,514, Home Investment Partnerships

Program - $123,235, and Senior Employment - $2,014. These deficits will be eliminated upon receipt of the grant

funds. The Lake Superior Zoo deficit fund balance of $406,497 will be eliminated through operational changes and

efficiencies.

The Special Assessment capital project fund had a deficit fund balance of $181,434 at the end of the current fiscal

year which will be eliminated through future special assessment collections.

The Fleet Services internal service fund had a deficit net position of $900,081 at the end of the current fiscal year

which will be eliminated through future charges.

The Golf enterprise fund had a deficit net position of $1,339,743 at the end of the current fiscal year which will be

eliminated through operational changes and efficiencies.

STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

The budget is adopted on a basis consistent with generally accepted accounting principles, except that

encumbrances are treated as budgeted expenditures in the year in which the commitment to purchase is made,

and new capital leases are not budgeted.

By mid-September, the Mayor must submit a proposed budget to the City Council for its consideration and

approval. The Council meets with the various operating departments and component units to review their budget

requests. In December, a public hearing is held to discuss the proposed tax levy and budget. The Council must

then adopt a final budget before year-end.

The budget ordinance approved by the Council establishes appropriations for the General Fund. The total of all

appropriations within a department are defined as a budget item and form the legal level of budgetary control, as

defined in the budget ordinance. The Mayor, Chief Administrative Officer, or a designee may make transfers

between appropriations. However, the total of all transfers to or from any budget item in excess of 10% of that

budget item must be approved by the City Council. The budget ordinance allows the budget to be increased for

reimbursements received for damages or repairs to city property or work done for others and not anticipated in the

original budget. It also allows for grants accepted by city council resolution to be added to the budget. Finally, the

budget ordinance requires that use of the General Fund's fund balance that has been assigned in a prior year

must be approved by the Council if used for a purpose other than what had been specified. The Council may

revise the budget at any time by ordinance upon recommendation of the Administration.

Encumbrance accounting is used in governmental funds. Encumbered appropriations for purchase orders or

contracts are carried over into the following year, while the unencumbered appropriations lapse at the end of the

year. Outstanding encumbrances at year-end are reported as either an assigned or a restricted fund balance,

since they do not constitute expenditures or liabilities.

53

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

3.

DEPOSITS AND INVESTMENTS

Reconciliation of City's total cash and investments to the basic financial statements follows:

Government-wide Statement of Net Position

Governmental Activities

Cash and cash equivalents

60,374,435

$

Investments, at fair value

26,871,570

Assets held by trustee 7,935,383

Business-type Activities

Cash and cash equivalents

17,144,126

Cash and cash equivalents - restricted assets

4,837,832

Discrete Component Units

Cash and cash equivalents

18,848,312

Cash and cash equivalents - restricted assets

1,260,724

Statement of Fiduciary Net Position

Cash and cash equivalents

2,728,937

Investments, at fair value

71,108,552

Total Cash and Investments

211,109,871

$

DEPOSITS

INVESTMENTS

Minnesota Statutes § 118A.02 and § 118A.04 authorize the City to deposit its cash and to invest in

certificates of deposit in financial institutions designated by the City Council. The market value of collateral

pledged shall be at least ten percent more than the amount on deposit plus accrued interest at the close of

the financial institution's banking day, not covered by insurance or bonds.

Authorized collateral includes treasury bills, notes and bonds; issues of United States government agencies;

general obligations rated "A" or better; revenue obligations rated "AA" or better; irrevocable standard letters

of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota statutes require that

securities pledged as collateral be held in safekeeping in a restricted account at the 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.

Custodial Credit Risk - Deposits. Custodial credit risk is the risk that in the event of a financial institution

failure, the City's deposits may not be returned to it. It is the City's policy to obtain pledged collateral for all

deposits in excess of FDIC insurance. As of December 31, 2019, deposits with financial institutions were

fully insured or collateralized by securities held in the City's name.

Minnesota Statutes § 118A.04 and § 118A.05 authorize the following types of securities available to the City

for investment:

1) governmental bonds, notes, bills, mortgages (excluding high-risk mortgage-backed securities defined in

Minnesota Statute § 118A.04 subdivision 6), and other securities, which are direct obligations or are

guaranteed or insured issues of the United States, its agencies, its instrumentalities, or organizations

created by an act of Congress.

54

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

3.

DEPOSITS AND INVESTMENTS

(continued)

(1) a financial institution qualified as a "depository" of public funds of the government entity;

(2) any other financial institution which is a member of the Federal Reserve System and whose

combined capital and surplus equals or exceeds $10,000,000;

(3) a primary reporting dealer in United States government securities to the Federal Reserve Bank of

New York; or

(4) a securities broker-dealer licensed pursuant to chapter 80A, or an affiliate of it, regulated by the

Securities and Exchange Commission and maintaining a combined capital and surplus of $40,000,000 or

more, exclusive of subordinated debt.

Reverse agreements may only be entered into for a period of 90 days or less and only to meet short-term

cash flow needs. In no event may reverse repurchase agreements be entered into for the purpose of

generating cash for investments, except as stated in Minnesota Statute § 118A.05, subdivision 3.

7) securities lending agreements, including custody agreements, may be entered into with a financial

institution meeting the qualifications of Minnesota Statute § 118A.05, subdivision 2, clause (1) or (2), and

having an office in Minnesota. Securities lending transactions may be entered into with entities meeting the

qualifications of Minnesota Statute § 118A.05, subdivision 2, and the collateral for such transactions shall be

restricted to the securities described in Minnesota Statutes § 118A.04 and § 118A.05.

(3) shares of an investment company which is registered under the Federal Investment Company Act of

1940, and which holds itself out as a money market fund meeting the conditions of rule 2a-7 of the

Securities and Exchange Commission and is rated in one of the two highest rating categories for money

market funds by at least one nationally recognized statistical rating organization; or

8) agreements or contracts for:

(1) shares of a Minnesota joint powers investment trust whose investments are restricted to securities

described in Minnesota Statutes § 118A.04 and § 118A.05, subdivision 2;

(2) units of a short-term investment fund established and administered pursuant to regulation 9 of the

Office of the Comptroller of the Currency, in which investments are restricted to securities described in

Minnesota Statutes § 118A.04 and § 118A.05;

(4) shares of an investment company which is registered under the Federal Investment Company Act of

1940, and whose shares are registered under the Federal Securities Act of 1933, as long as the

investment company's fund receives the highest credit rating and is rated in one of the two highest risk

rating categories by at least one nationally recognized statistical rating organization and is invested in

financial instruments with a final maturity no longer than 13 months.

2) any security which is (1) a general obligation of any state or local government with taxing powers which is

rated "A" or better by a national bond rating service; (2) a security which is a revenue obligation of any state

or local government which is rated "AA" or better by a national bond rating service; and (3) a general

obligation of the Minnesota Housing Finance Agency which is a moral obligation of the State of Minnesota

and is rated "A" or better by a national bond rating agency.

3) commercial paper issued by United States corporations or their Canadian subsidiaries that is rated in the

highest quality category by at least two nationally recognized rating agencies and matures in 270 days or

less.

4) time deposits that are fully insured by the Federal Deposit Insurance Corporation or bankers'

acceptances of United States banks.

5) in general obligation temporary bonds of the same governmental entity issued under Minnesota Statutes

§ 429.091, subdivision 7, § 469.178, subdivision 5, or § 475.61, subdivision 6.

6) repurchase agreements consisting of collateral allowable in Minnesota Statute § 118A.04, and reverse

repurchase agreements may be entered into with any of the following entities:

55

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

3.

DEPOSITS AND INVESTMENTS

(continued)

At December 31, 2019, the City had the following investments:

Investment Type

Fair Value

Less than 1 year

1-5 years

Over 5 Years

U.S. Government Agency Securities

77,740,770

$

72,411,438

$

5,329,332

$

-

$

Negotiable Certificates of Deposit

19,811,089

1,192,901

18,618,188

-

Municipal Bonds

9,974,725

1,562,635

8,412,090

-

Commercial Paper

517,919

-

Mutual Funds

100,426,964

-

Total Investments

208,471,467

176,111,857

$

32,359,610

$

-

$

Deposits

2,638,404

Total Deposits and Investments

211,109,871

$

The City's exposure to credit risk as of December 31, 2019, is as follows:

Fair Value

AAA

5,158,079

$

AA+

79,493,885

AA

2,559,706

AA-

503,825

Aaa

2,446,842

P-1

517,919

Mutual Funds

97,980,122

Negotiable Certificates of Deposit

19,811,089

Total

208,471,467

$

S & P Rating

Moody's Rating

Not Rated

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. As of December 31, 2019, none of the

City's investments were subject to custodial credit risk.

Credit Risk. Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the

holder of the investment. This is measured by the assignment of a rating by a nationally recognized

statistical rating organization. It is the City's policy to invest only in securities that meet the ratings

requirements set by state statute.

9) agreements or contracts for a guaranteed investment contract may be entered into if they are issued or

guaranteed by United States commercial banks, domestic branches of foreign banks, United States

insurance companies, or their Canadian subsidiaries. The credit quality of the issuer's or guarantor's short-

and long-term unsecured debt must be rated in one of the two highest categories by a nationally recognized

rating agency. Should the issuer's or guarantor's credit quality be down-graded below "A", the government

entity must have withdrawal rights.

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

the fair value of an investment. The City minimizes its exposure to interest rate risk by limiting the

investment horizon to either seven or ten years depending on the investment objective.

Component Units are included in the City's cash and investment pool. The component units do not have

separately identifiable deposits or investments in the City's pool and, therefore, are aggregated with the City

in the note disclosure.

56

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

3.

DEPOSITS AND INVESTMENTS

(continued)

Issuer

Reported Amount

Federal Home Loan Bank

67,804,265

$

At December 31, 2019, the City of Duluth had the following recurring fair value measurements.

Investments By Fair Value Level

12/31/2019

Level 1

Level 2

Level 3

U.S. Government Agency Securities

77,740,770

$

5,420,183

$

72,320,587

$

-

$

Negotiable Certificates of Deposit

19,811,089

-

19,811,089

-

Municipal Bonds

9,974,725

-

9,974,725

-

Commercial Paper

517,919

-

517,919

Total Investments by Fair Value

108,044,503 5,420,183$ 102,624,320$ -$

Investments Measured at Net Asset

Value (NAV)

Mutual Funds

2,446,842

Total Investments by Fair Value

and Measured at NAV

110,491,345

Deposits

2,638,404

State Board of Investment Funds

97,980,122

Total Deposits and Investments

211,109,871$

l Level 1: Quoted prices for identical investments in active markets;

l Level 2: Observable inputs other than quoted market prices; and,

l Level 3: Unobservable inputs.

Fair Value Measurements Using:

Debt securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active

markets for those securities. Debt securities classified in Level 2 of the fair value hierarchy are valued using

a matrix pricing technique. Matrix pricing is used to value securities based on the securities' relationship to

benchmark quoted prices.

The mutual funds are liquid assets the City holds in addition to cash to ensure adequate cash flow for

operating activities.

The City holds $52,736,493 in the Internal Equity Pool and $18,372,059 in the Internal Fixed Pool, with the

State Board of Investment, an external investment pool, related to the City's Other Postemployment Benefits

Trust Fund. The fair value of the investment is the fair value per share of the underlying portfolio. Pursuant

to Minnesota Statute § 353.95, the City may only redeem these funds for the use of postemployment

benefits. The City invests in this pool due to the increased investment authority, historical rates of return on

investments, and the reduction of the postemployment benefit liability recorded in its financial statements.

Concentration of Credit Risk. The concentration of credit risk is the risk of loss that may be caused by the

City's investment in a single issuer. It is the City's policy that United States government and agency

securities can be held without limit. Other investments in a single security type or with a single financial

institution shall not exceed 50% of the City's total investment portfolio. The City limits its commercial paper

holdings to a maximum of $5,000,000 in any issuer. Investments in any one issuer that represent 5% or

more of the City's investments are as follows:

Fair Value of Investment. The City of Duluth measures and records its investments using fair value

measurement guidelines established by generally accepted accounting principles. These guidelines

recognize a three-tiered fair value hierarchy, as follows:

57

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

3.

DEPOSITS AND INVESTMENTS

(continued)

4.

PROPERTY TAXES

5.

RECEIVABLES

Water

129,839$

Gas

454,795

Sewer

222,372

Steam

36,087

Nonmajor

83,350

Total Uncollectible

926,443$

6.

DEFERRED INFLOWS OF RESOURCES

General

Assessments

912,811$

Grants

161,785

Loans

1,822,063

Taxes

449,059

Disaster Recovery

Grants

4,072,453

General Obligation

Loans

14,385,000

Taxes

179,140

Nonmajor

Assessments

2,626,398

Grants

2,038,267

Loans

3,788,756

Taxes

146,827

Total for Governmental Funds

30,582,559$

Governmental funds report deferred inflows of resources in connection with receivables for revenues that

are not considered to be available to liquidate liabilities of the current period. The following schedule shows

the detail of deferred inflows of resources at December 31, 2019:

Receivables, net of uncollectible amounts, are reported in the governmental, proprietary, and fiduciary

financial statements for goods and services, taxes, assessments, loans, grants, and interest. The amount of

delinquent assessments included for the current fiscal year is $286,816. The uncollectible amounts related

to the revenues of the City's utility enterprise funds at December 31, 2019, are as follows:

Property tax levies are set by the City Council in December each year and certified to St. Louis County for

collection in the following year. In Minnesota, counties act as collection agents for all property taxes. The

County spreads all levies over assessable property. Such taxes become a lien on January 1 and are

recorded as receivables by the City at that date. Revenues are accrued and recognized in the year

collectible, net of delinquencies.

Property taxes may be paid by taxpayers in two equal installments on May 15 and October 15. The County

is required to distribute collections to the City three times each year. Taxes which remain unpaid at year-end

are delinquent. Collections made by the County through the end of the year and remitted to the City within

45 days after year-end are recognized as revenue and the remainder is deferred. The current year

collection rate at December 31, 2019, was 98.4%.

The City also holds $20,355,715 in the Internal Equity Pool, $6,515,849 in the Internal Fixed Pool, and $6

in the Cash Pool, with the State Board of Investment, an external investment pool, related to the City's

Community Investment Trust Fund. The fair value of the investment is the fair value per share of the

underlying portfolio. The City invests in this pool, in accordance with Minnesota Statute § 11A.235, due to

the increased investment authority and historical rates of return on investments.

58

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

7.

CAPITAL ASSETS

PRIMARY GOVERNMENT

Beginning

Balance

Increases Decreases

Ending

Balance

Governmental activities:

Capital assets, not being depreciated:

Land and land improvements

22,859,321

$

-

$

-

$

22,859,321

$

Construction in progress

27,755,450

14,801,112

19,078,990

23,477,572

Total capital assets, not being depreciated 50,614,771 14,801,112 19,078,990 46,336,893

Capital assets, being depreciated:

Buildings

89,182,599

1,899,934

-

91,082,533

Equipment

39,592,155

3,085,607

209,229

42,468,533

Infrastructure

353,294,680

15,395,449

-

368,690,129

Total capital assets being depreciated

482,069,434

20,380,990

209,229

502,241,195

Less accumulated depreciation for:

Buildings

48,356,977

3,475,326

-

51,832,303

Equipment

30,282,728

3,012,268

209,229

33,085,767

Infrastructure

157,338,668

10,710,683

-

168,049,351

Total accumulated depreciation

235,978,373

17,198,277

209,229

252,967,421

Total capital assets, being depreciated, net

246,091,061

3,182,713

-

249,273,774

Governmental activities capital assets, net 296,705,832$ 17,983,825$ 19,078,990$ 295,610,667$

Business-type activities:

Capital assets, not being depreciated:

Land and land improvements

4,649,458

$

-

$

-

$

4,649,458

$

Construction in progress

14,916,988

13,854,370

7,610,000

21,161,358

Total capital assets, not being depreciated

19,566,446

13,854,370

7,610,000

25,810,816

Capital assets, being depreciated:

Buildings

83,354,294

-

83,354,294

Equipment

56,191,249

1,207,808

894,895

56,504,162

Infrastructure

265,528,450

8,884,639

144,008

274,269,081

Total capital assets, being depreciated

405,073,993

10,092,447

1,038,903

414,127,537

Less accumulated depreciation for:

Buildings

33,807,722

1,661,370

-

35,469,092

Equipment

35,324,069

2,964,142

883,569

37,404,642

Infrastructure

63,137,690

3,907,518

87,437

66,957,771

Total accumulated depreciation

132,269,481

8,533,030

971,006

139,831,505

Total capital assets, being depreciated, net

272,804,512

1,559,417

67,897

274,296,032

Business-type activities capital assets, net 292,370,958$ 15,413,787$ 7,677,897$ 300,106,848$

Capital asset activity for the year ended December 31, 2019, was as follows:

59

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

7.

CAPITAL ASSETS

(continued)

Governmental activities:

General government

1,562,525

$

Public Safety

2,200,218

Public works, including depreciation of general infrastructure assets

10,982,957

Culture and recreation

2,235,562

Urban and economic development

152,976

Capital assets held by the government's internal service funds are

charged to the various functions based on their usage of the assets

64,038

Total depreciation expense - governmental activities

17,198,277

$

Business-type activities:

Parking

567,526

$

Priley Drive Parking Facility

520,571

Water

1,752,474

Gas

1,515,603

Sewer

2,036,253

Golf

92,642

Stormwater

437,762

Steam

1,318,548

Street Lighting 291,651

Total depreciation expense - business-type activities

8,533,030

$

COMPONENT UNITS

Beginning

Balance

Increases Decreases

Ending

Balance

Capital assets, not being depreciated:

Land and land improvements

10,900,877

$

65,405

$

38,833

$

10,927,449

$

Construction in progress

896,667

14,776,547

13,879,379

1,793,835

Total capital assets, not being depreciated

11,797,544

14,841,952

13,918,212

12,721,284

Capital assets, being depreciated:

Buildings

321,025,458

438,504

1,670,356

319,793,605

Equipment

88,984,559

3,337,297

5,267,757

87,054,099

Infrastructure

127,768,251

13,846,945

-

141,615,195

Other

1,095,138

46,660

89,593

1,052,205

Total capital assets being depreciated

538,873,406

17,669,406

7,027,706

549,515,104

Less accumulated depreciation for:

Buildings

129,938,073

10,068,834

703,605

139,303,302

Equipment

58,810,572

4,807,234

5,211,424

58,406,382

Infrastructure

78,406,554

6,519,853

-

84,926,407

Other

645,195

47,849

89,593

603,451

Total accumulated depreciation

267,800,394

21,443,770

6,004,622

283,239,542

Total capital assets, being depreciated, net

271,073,012

(3,774,364)

1,023,084

266,275,562

Component unit capital assets, net

282,870,556

$

11,067,588

$

14,941,296

$

278,996,846

$

Depreciation expense was charged to component units as follows:

Duluth Economic Development Authority

956,909

$

Duluth Entertainment and Convention Center Authority

3,722,886

Duluth Airport Authority

9,830,435

Duluth Transit Authority

5,814,334

Spirit Mountain Recreation Area Authority

1,119,206

Total depreciation expense - component units

21,443,770

$

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

60

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

8.

PURCHASE AND CONSTRUCTION COMMITMENTS

Amount

General

728,570

$

Disaster Recovery

5,644,311

Other Governmental Funds

22,015,489

Total Purchase Commitments 28,388,370$

DISASTER DAMAGE REPAIR COMMITMENTS

9.

RISK MANAGEMENT

The self-insurance for workers' compensation covers up to $500,000 per single loss occurrence. At that

point, the City is covered for losses by the Workers' Compensation Reinsurance Association (WCRA), an

organization created by Minnesota statutes in 1979 to implement a mandatory program of reinsurance for

workers' compensation liability risks in the State of Minnesota for losses occurring on or after October 1,

1979. The WCRA provides full indemnification for the City for claims arising under Minnesota Statute 176 in

excess of the $500,000 retention limit.

The City incurred significant damage to its shoreline infrastructure due to three unprecedented storm surges

in October 2017, April 2018, and again in October 2018. The City submitted a request for federal and state

aid for repair work which is estimated to be $30 million as of December 31, 2019.

The accrued liability for workers' compensation is estimated by the benefits administrator at the time an injury

or illness is reported. Interest cost is not included in the estimate. The estimated liability for general liability

matters is accrued if the City determines settlement is probable, based on a case-by-case evaluation. The

estimated liability is based on the requirements of Governmental Accounting Standards Board Statement No.

10 which requires that a liability for claims be reported if information prior to the issuance of the financial

statements indicates that it is probable that a liability has been incurred at the date of the financial statements

and the amount of the loss can be reasonably estimated.

At December 31, 2019, the City had construction commitments of approximately $10,395,790 for various

utility improvements. The Duluth Airport Authority component unit had construction commitments of

$3,164,822 for airport improvements. Funding for these future expenditures or expenses will be available

from federal and state grants, municipal state aid construction funds, tax levies, bond proceeds, and special

assessments.

At December 31, 2019, the City had purchase commitments represented by open encumbrances. These are

included as part of fund balance as follows:

Fund

The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets;

errors and omissions; injuries to employees; employee health and dental; and natural disasters.

The Self-Insurance Fund, an internal service fund, was established for the reporting of all risk management

except for employee health and dental. All risk, except for building property insurance and small losses by

various funds, is assumed. No actuarial process is used to establish an estimate of the present cost of the

exposure to future liability, and consequently no actuarially established amount is reserved for property

replacement and continuance of operations. Contributions to the property insurance pool are determined by

an insurance market cost comparison, and in this sense they reflect actuarial experience of insurance

carriers. The City also purchases commercial property insurance to insure for fire and related damage for

certain buildings limited to the buildings estimated value. There were no significant reductions in insurance

coverage from the previous year. There were no settlements that exceeded insurance coverage for each of

the past three years.

61

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

9.

RISK MANAGEMENT

(continued)

Liability

January 1

Claims and

Changes in

Estimates

Less Claims

Payments

Liability

December 31

2018 1,101,722$ 547,801 479,747 1,169,776$

2019 1,169,776$ 550,575 641,115 1,079,236$

Liability

January 1

Claims and

Changes in

Estimates

Less Claims

Payments

Liability

December 31

2018 1,428,823$ 11,445,161 11,185,094 1,688,890$

2019 1,688,890$ 14,213,879 13,256,353 2,646,416$

10.

LEASE OBLIGATIONS

OPERATING LEASES

Type of Property

Governmental

Activities

Component

Units

Impound lot 3,724$ -$

Land & right-of-way 25,878 59,685

Buildings 523,999 -

Equipment 666,584 4,500

Total Expense

1,220,185

$

64,185

$

NONCANCELABLE OPERATING LEASES

Year Ending

December 31

Governmental

Activities

Component

Units

2020 20,265$ 59,685$

2021 20,264 59,685

Claims incurred but not reported have been considered in the sense that management's experience has

shown that they do not affect the predictions. An actuary was not used in determining the liabilities, but

actuarial guidelines were used. The estimated liability for claims payable at year end is present valued at 5%.

In addition, the City Attorney estimated settlements to be $76,882 for various claims and cases which are

considered reasonably possible losses to the City. Considerable prejudgment interest liability is not

considered by the City Attorney in making a liability estimate. The amount of these estimated liabilities is not

reflected in the financial statements. Changes in the balances of the self-insurance fund's liability during 2018

and 2019 were as follows:

The Group Health Fund, an internal service fund, was established for the payment of employee medical and

dental claims. The City pays Delta Dental of Minnesota, HealthPartners, and ClearScript an administrative fee

to process dental, medical, and prescription drug claims, respectively. The City assumes all risk, except that

which is covered by a medical stop-loss policy purchased from HealthPartners. The stop-loss policy has an

individual limit of $500,000 and an aggregate limit of 120% of projected claims for the year. Claims,

expenditures, and liabilities are reported when it is probable that a loss has occurred and the amount of that

loss can be reasonably estimated. These losses include an estimate of claims that have occurred but have

not been reported. The estimated liability is based on the requirements of Governmental Accounting

Standards Board Statement No. 10, which requires that a liability for claims be reported if information prior to

the issuance of the financial statements indicates that it is probable that a liability has been incurred at the

date of the financial statements and the amount of the loss can be reasonably estimated. Changes in the

balances of the Group Health Fund's liability during 2018 and 2019 were as follows:

The City and its component units are committed under various operating leases for small tracts of land or

pipe right-of-way, parking facilities and equipment. The following is a summary of the approximate operating

lease expense for 2019:

Future minimum lease payments under operating leases, which are not reflected in these financial

statements, consist of the following at December 31, 2019:

62

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

10.

LEASE OBLIGATIONS

(continued)

Year Ending

December 31

Governmental

Activities

Component

Units

2022 1,000 59,685

2023 1,000 59,685

2024 1,000 59,685

2025-2029 5,000 298,423

2030-2034 5,000 298,423

2035-2039 5,000 298,423

2040-2044 5,000 179,052

2045-2049 5,000 -

2050-2054 5,000 -

2055-2059 5,000 -

2060-2064 1,000 -

Total minimum payments required 79,529$ 1,372,746$

CAPITAL LEASES

Type of Property

Business-Type

Activities

Component

Units

Equipment 9,377,739$ 3,177,967$

Less: Accumulated amortization

(6,564,417) (1,459,579)

Total Expense

2,813,322

$

1,718,388

$

Minimum future lease payments are:

Year Ending

December 31

Business-Type

Activities

Component

Units

2020 831,661$ 257,692$

2021 831,660 213,208

2022 831,660 213,208

2023 831,661 213,208

2024 415,830 213,208

2025-2029 - 91,015

Total minimum lease payments 3,742,472 1,201,539

Less: Imputed interest (331,295) (116,862)

Present value of minimum lease payments 3,411,177$ 1,084,677$

11.

SHORT-TERM DEBT

Balance

01/01/19

Additions Deductions

Balance

12/31/19

54,167$ - 54,167 -$

Short-term debt activity for the year ended December 31, 2019, follows:

Duluth Economic Development

Authority Accounts Payable

Represents temporary financing obtained from the Duluth 1200 Fund for public costs associated with the

Cirrus Design Corporation expansion project at the Duluth International Airport; to be repaid through tax

abatement agreements, tax increment financing, and building rent receipts.

Component unit subleases of noncancelable operating leases provide for future minimum rentals to be

received totaling $1,372,746 at December 31, 2019.

Capitalized leases for the City and its component units at December 31, 2019, consist of the following capital

assets shown at original costs as summarized below:

63

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

12.

LONG-TERM DEBT

CHANGES IN LONG-TERM LIABILITIES

Long-term liability activity for the year ended December 31, 2019, follows:

Balance

01/01/19

Additions Deletions

Balance

12/31/19

Due Within

One Year

Governmental Activities:

Bonds Payable:

General Obligation Bonds

87,485,000

$

10,945,000

$

17,060,000

$

81,370,000

$

5,120,000

$

General Obligation - Tax

Abatement

12,605,000

-

835,000

11,770,000

855,000

Special Assessment Debt with

Government Commitment

5,165,000

-

2,040,000

3,125,000

1,505,000

General Obligation Certificates

14,295,000

3,070,000

3,315,000

14,050,000

3,310,000

Add Deferred Amounts:

For Bond Premiums

7,648,234

2,832,464

876,096

9,604,602

-

Revenue Notes

2,636,000

2,651,000

2,621,000

15,000

Pension Liability

41,708,117

987,140

-

42,695,257

-

Compensated Absences

3,110,129

3,356,206

3,302,964

3,163,371

Claims and Judgments

2,858,666

14,764,454

13,897,468

3,725,652

2,895,257

Net Other Postemployment

Benefits Payable

114,007,746

-

22,764,280

91,243,466

-

Total Governmental Long-Term

Liabilities

291,518,892

$

38,591,264

$

66,741,808

$

263,368,348

$

16,863,628

$

Business-Type Activities:

Bonds Payable:

Revenue and General

Obligation Bonds

35,097,475

$

-

$

3,417,607

$

31,679,868

$

3,169,730

$

Add Deferred Amounts:

For Bond Premiums

222,695

-

55,318

167,377

-

General Obligation Public

Facilities Authority Notes

15,474,000

-

2,270,000

13,204,000

2,123,000

Capital Leases Payable

4,094,080

-

682,903

3,411,177

709,031

Loans Payable

62,485

-

50,004

12,481

-

Pension Liability

10,653,355

-

138,767

10,514,588

-

Compensated Absences

896,106

1,118,950

1,096,879

918,177

Net Other Postemployment

Benefits Payable

6,123,895

-

6,123,895

-

Total Business-Type Long-Term

Liabilities

72,624,091

$

1,118,950

$

13,835,373

$

59,907,668

$

6,919,938

$

Component Unit Activities:

Duluth Entertainment and

Convention Center Authority

Compensated Absences

184,561

$

197,216

$

155,712

$

226,065

$

163,062

$

Pension Liability

3,295,268

-

66,463

3,228,805

-

Net Other Postemployment

Benefits Payable

1,639,761

-

85,911

1,553,850

-

Duluth Transit Authority

Compensated Absences

603,777

569,138

603,777

569,138

(continued)

64

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

12.

LONG-TERM DEBT

(continued)

Balance

01/01/19

Additions Deletions

Balance

12/31/19

Due Within

One Year

Duluth Airport Authority

Notes Payable

35,911

-

35,911

-

Loans Payable

9,360,556

-

936,666

8,423,890

961,667

Compensated Absences

120,905

110,116

111,982

119,039

Unearned Revenue

398,603

34,508

364,095

Pension Liability

1,037,399

2,011

-

1,039,410

-

Net Other Postemployment

Benefits Payable

2,865,609

71,232

2,794,377

-

Spirit Mountain Recreation Area

Authority

Capital Leases

1,292,960

-

208,283

1,084,677

219,984

Pension Liability

1,723,661

-

353,406

1,370,255

-

Compensated Absences

103,790

112,523

103,790

112,523

Total Component Unit Long-Term

Liabilities

22,662,761

$

991,004

$

2,767,641

$

20,886,124

$

2,145,413

$

DEBT REQUIREMENTS AND SOURCES OF REPAYMENTS

Governmental Activities Long-Term Debt

General Obligation Bonds and Certificate Covenants

Year Ending

December 31

Interest

Principal

Interest

Principal

Interest

Principal

2020

3,044,183

5,120,000

468,256

3,310,000

298,294

855,000

2021

2,990,089

5,055,000

382,250

3,450,000

281,044

870,000

2022

2,825,701

5,235,000

260,925

2,900,000

263,444

890,000

2023

2,653,408

5,290,000

156,575

2,205,000

244,166

905,000

2024

2,473,440

5,565,000

71,750

1,500,000

222,792

925,000

2025-2029

9,119,555

29,525,000

17,125

685,000

729,898

5,005,000

2030-2034

2,835,619

25,440,000

-

94,155

2,320,000

2035

2,380

140,000

-

Total 25,944,375$ 81,370,000$ 1,356,881$ 14,050,000$ 2,133,793$ 11,770,000$

United States Department of Housing and Urban Development Revenue Notes

Deferred tax levies are provided for in the general obligation bond and certificate covenants. Minnesota state laws

require these levies to be 5% in excess of bond and certificate principal and interest maturities. They are not

repealable in nature and can only be modified as they relate to current levies, and then only upon certification to the

County Auditor that funds are available to pay current maturities in whole or in part. Revenues derived from these

levies are recorded in the debt service fund for the payment of principal and interest on the general obligation bonds

and certificates.

The general obligation tax abatement bonds are payable from tax abatement collections. However, the City is

contingently liable for payments of principal and interest.

General obligation annual debt service requirements to maturity follow:

General Obligation

General Obligation Bonds General Obligation Certificates Tax Abatement

During 2005, and since refunded in 2019, $7,876,000 revenue notes were issued for the Fifth Street Redevelopment

Project. Repayment of the notes shall be from tax credit equity participation amounts, surplus cash, tax savings,

anticipated tax increment financing, interest reserve account and additional funds previously paid by the developer

and held by the City.

65

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

12.

LONG-TERM DEBT

(continued)

Year Ending

December 31

Interest

Principal

2020

71,626

15,000

2021

71,244

15,000

2022

70,858

20,000

2023

70,349

20,000

2024

69,826

30,000

2025

69,025

2,521,000

Total 422,928$ 2,621,000$

Special Assessment Bonds

Year Ending

December 31

Interest

Principal

2020

85,925

1,505,000

2021

43,525

975,000

2022

16,600

460,000

2023

3,700

185,000

Total 149,750$ 3,125,000$

Other Debt

Business-type Activities Long-Term Debt

Revenue and General Obligation Bonds

General Obligation Public Facilities Authority Notes

The City has pledged it's full faith and credit taxing powers of the City irrevocably for the payment of principal and

interest when due on such notes, as well as all net revenues to be derived from time to time from the operation of the

municipal sewer or water utilities.

Annual debt service requirements to maturity to fund special assessment bonds.

Special Assessment Bonds

Governmental activities compensated absences and net other postemployment benefit obligations are liquidated

primarily through the General Fund.

The City has a contingent liability against it's full faith and credit to the extent that income from the Water, Gas,

Steam, Sewer, Stormwater, and Parking operations is insufficient to retire their respective general obligation revenue

bonds.

Annual debt service requirement to maturity for the outstanding notes follow:

United States Dept. of Housing and

Urban Development Revenue Notes

The City has a contingent liability against its full faith and credit on $3,125,000 of special assessment bonds. The

general credit of the City is obligated only to the extent that collections from special assessments are insufficient to

retire outstanding bonds.

66

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

12.

LONG-TERM DEBT

(continued)

Year Ending

December 31

Interest

Principal

Interest

Principal

2020

983,862

3,169,730

162,078

2,123,000

2021

906,119

2,994,344

135,533

2,149,000

2022

829,780

2,751,639

108,649

2,090,000

2023

754,856

2,514,432

82,260

1,908,000

2024

681,919

2,402,741

57,843

1,932,000

2025-2029

2,490,621

7,487,937

66,654

3,002,000

2030-2034

1,683,396

3,931,240

-

2035-2039

1,035,230

2,872,243

-

2040-2044

358,189

3,555,562

-

Total 9,723,972$ 31,679,868$ 613,017$ 13,204,000$

Component Unit Long-Term Debt

Duluth Airport Authority Notes and Loans Payable

DEBT LIMIT

SCHEDULE OF BONDED INDEBTEDNESS

Amount

Issue Date

Outstanding

Total

Governmental Activities:

General Obligation Bonds Payable:

Airpark Improvement

09/01/2004

85,000

$

Capital Improvement

12/17/2009

755,000

Capital Improvement

11/23/2010

485,000

Capital Improvement

11/29/2011

620,000

Airport Improvement

05/24/2012

4,895,000

Airport Improvement

12/18/2013

2,730,000

(continued)

The City issued $3,400,000 General Obligation Airport Improvement Bonds, dated December 18, 2013, on behalf of

the Authority. Proceeds of the bonds will be used as a local match of federal and state grants to fund a new terminal

facility, parking ramp, access road and aprons. The Authority entered into a loan agreement with the City requiring the

Authority to make loan payments to the City to fund debt payments on the bonds.

Annual debt service requirements to maturity of the business-type activities follow:

Revenue and General Obligation Public

The City issued $7,650,000 General Obligation Airport Improvement Bonds, dated May 24, 2012, on behalf of the

Authority. Proceeds of the bonds will be used as a local match of federal and state grants to fund a new terminal

facility, parking ramp, access road and aprons. The Authority entered into a loan agreement with the City requiring the

Authority to make loan payments to the City to fund debt payments on the bonds.

Facilities Authority Notes

The City issued $2,855,000 General Obligation Airport Improvement Bonds, dated November 5, 2015, on behalf of

the Authority. Proceeds of the bonds will be used to finance hanger improvements. The Authority entered into a loan

agreement with the City requiring the Authority to make loan payments to the City to fund debt payments on the

bonds.

The Authority obtained a loan from the Minnesota Investment Fund. Proceeds from the loan have been used to

remedy soil conditions on Duluth Airport Authority property. The Authority has agreed to make payments when due on

the loan in the total amount of $400,000. Payments are due in 180 monthly installments of $2,222 from February 2006

to January 2021. There is no interest charged on this loan.

General Obligation Bonds

67

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

12.

LONG-TERM DEBT

(continued)

Amount

Issue Date

Outstanding

Total

Capital Improvement

12/18/2013

960,000

Capital Improvement - Lakewalk

12/18/2013

1,050,000

Wade Stadium Improvement

10/30/2014

1,820,000

Spirit Mountain Improvement

10/30/2014

1,815,000

Capital Improvement

10/30/2014

700,000

Capital Improvement

11/05/2015

1,170,000

Airport Improvement

11/05/2015

2,400,000

Capital Improvement - 1/2 & 1/2

11/05/2015

10,420,000

Duluth Entertainment and Convention Center Improvement

Refunding

03/22/2016

32,630,000

Capital Improvement

11/09/2016

935,000

Capital Improvement

11/21/2017

1,420,000

Capital Improvement - Seawall

02/14/2018

4,225,000

Capital Improvement

09/27/2018

1,310,000

Capital Improvement

10/09/2019

1,190,000

Capital Improvement Refunding

10/09/2019

9,755,000

Total General Obligation Bonds Payable

81,370,000

$

General Obligation Tax Abatement:

Spirit Mountain Tax Abatement Bonds

02/23/2012

4,850,000

GO Tax Abatement (Cirrus)

03/22/2016

6,920,000

11,770,000

Special Assessment Debt with

Government Commitment

4 issues

3,125,000

General Long-Term Debt Certificates Payable:

General Obligation Certificates Payable

6 issues

14,050,000

Total Governmental Activities Debt

110,315,000

Business-type Activities Debt:

Revenue and General Obligation Bonds Payable:

Parking Fund

1 issue

6,175,000

Priley Drive Parking Facility

1 issue

12,229,869

Water Fund

3 issues

4,391,000

Steam Fund

2 issues

5,690,000

Sewer Fund

6 issues

2,773,999

Stormwater Fund

1 issue

420,000

Total Revenue and General Obligation Bonds Payable

31,679,868

Total Business-type Activities Debt

31,679,868

Total Bonds Payable

141,994,868

Deductions Allowable:

Airpark Improvement

09/01/2004

85,000

Airport Improvement

05/24/2012

4,895,000

Spirit Mountain Tax Abatement Bonds

02/23/2012

4,850,000

Airport Improvement

12/18/2013

2,730,000

Wade Stadium Improvement

10/30/2014

1,820,000

Spirit Mountain Improvement

10/30/2014

1,815,000

Airport Improvement

11/05/2015

2,400,000

Capital Improvement 1/2 & 1/2

11/05/2015

10,420,000

Duluth Entertainment and Convention Center Authority

Refunding

03/22/2016

32,630,000

GO Tax Abatement (Cirrus)

03/22/2016

6,920,000

Special Assessment

3,125,000

(continued)

68

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

12.

LONG-TERM DEBT

(continued)

Amount

Issue Date

Outstanding

Total

Parking Fund

6,175,000

Priley Drive Parking Facility

12,229,869

Water Fund

4,391,000

Steam Fund

5,690,000

Sewer Fund

2,773,999

Stormwater Fund

420,000

Total Deductions Allowable

103,369,868

Net Debt

38,625,000

$

Legal Debt Margin for Duluth

Taxable Market Value (6,534,657,950 X 2%)

130,693,159

$

General

Percent

Amount

Obligation

Chargeable

Debt

to City

Independent School District 709

42,690,000

$

88.27%

37,681,534

$

Independent School District 704

25,390,000

6.34%

1,610,705

St. Louis County

136,015,000

38.31%

52,106,131

91,398,370

$

REFUNDING BOND ISSUES

Current Refunding Bonds

The following refunded bonds are scheduled to be recalled on February 1, 2020.

Series

Date

Balance

2009C

12/17/2009

$ 11,905,000

Improvement bonds

Advance Refunding Bonds

Overlapping Debt to Duluth

Unit

A current refunding occurs when the refunded bonds are retired within 90 days after the refunding issue is sold.

When the City issues an advance refunding bond, an escrow account is established from the proceeds. Amounts in

the escrow account are invested in special obligations of the United States Treasury or other obligations of the United

States or its agencies, which mature in such amounts and at such times to be available to meet the refunded bonds'

principal and interest requirements. Actuarial services, necessary to insure the adequacy of the escrow accounts to

provide timely payment of the debt service for which the escrow accounts are obligated, have been performed by a

certified public accounting firm.

In 2019 the City issued $9,755,000 General Obligation Capital Improvement Refunding Bonds. The transaction

resulted in a net present value savings of $1,603,081 and a reduction in future debt service payments of $1,773,978.

The proceeds from this issue were used to advance refund the City's Series 2009C General Obligation Capital

Improvement Bonds.

Issue

General Obligation Capital

69

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

12.

LONG-TERM DEBT

(continued)

Included in the City's bonded debt are the following refunding issues:

Issue Date

Issue Amount

Balance

Governmental Activities:

Current Refunding Bonds:

Street Improvement

11/27/2012

6,905,000

1,080,000

General Obligation Improvement

10/30/2014

865,000

180,000

Street Improvement

11/05/2015

2,630,000

1,500,000

Capital Improvement Refunding 10/09/2019 9,755,000 9,755,000

Advance Refunding Bonds:

Duluth Entertainment and Convention Center

03/22/2016

33,470,000

32,630,000

Improvement Refunding

Total Governmental Activities

53,625,000

$

45,145,000

$

Business-type Activities:

Current Refunding Bonds:

Steam Utility Revenue and General Obligation

11/27/2012

5,475,000

1,675,000

Water Utility Revenue and General Obligation

11/05/2015

515,000

265,000

Sewer Utility Revenue and General Obligation

11/05/2015

1,110,000

665,000

Sewer Utility Revenue and General Obligation

11/05/2015

350,000

180,000

Stormwater Utility Revenue and General Obligation

11/05/2015

790,000

420,000

Advance Refunding Bonds:

Sewer Utility Revenue and General Obligation

11/29/2011

2,265,000

345,000

Sewer Utility Revenue and General Obligation

11/27/2012

2,000,000

605,000

Parking Improvements

11/27/2012

10,270,000

6,175,000

Total Business-type Activities

22,775,000

$

10,330,000

$

All advance refunded bonds have been paid in full.

70

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

12.

LONG-TERM DEBT

(continued)

BONDS/CERTIFICATES AND NOTES PAYABLE - BY ISSUE

BONDS AND CERTIFICATES BY ISSUE

Issue

Final

Authorized

Date

Maturity

and Issued

Outstanding

Governmental Activities:

General Obligation Bonds Payable

General Obligation

Airpark Improvement

2.00 to 4.20%

02/01; 08/01

09-01-04

02-01-20

945,000

$

85,000

$

Capital Improvement

2.50 to 4.00%

02/01; 08/01

12-17-09

02-01-20

7,085,000

755,000

Capital Improvement

2.00 to 3.00%

02/01; 08/01

11-23-10

02-01-21

2,175,000

485,000

Capital Improvement

3.00%

02/01; 08/01

11-29-11

02-01-22

1,870,000

620,000

Airport Improvement

2.00 to 3.25%

02/01; 08/01

05-24-12

02-01-28

7,650,000

4,895,000

Airport Improvement

1.55 to 4.38%

02/01; 08/01

12-18-13

02-01-29

3,400,000

2,730,000

Capital Improvement

2.00 to 3.00%

02/01; 08/01

12-18-13

02-01-24

1,795,000

960,000

Capital Improvement - Lakewalk

2.50 to 4.00%

02/01; 08/01

12-18-13

02-01-29

1,460,000

1,050,000

Wade Stadium Improvement

3.00 to 3.70%

02/01; 08/01

10-30-14

02-01-30

2,330,000

1,820,000

Spirit Mountain Improvement

2.00 to 3.40%

02/01; 08/01

10-30-14

02-01-35

2,150,000

1,815,000

Capital Improvement

2.00 to 2.50%

02/01; 08/01

10-30-14

02-01-25

1,115,000

700,000

Capital Improvement

2.00 to 3.00%

02/01; 08/01

11-05-15

02-01-26

1,615,000

1,170,000

Airport Improvement

3.00 to 3.70%

02/01; 08/01

11-05-15

02-01-31

2,855,000

2,400,000

Capital Improvement - 1/2 & 1/2

3.00 to 3.80%

02/01; 08/01

11-05-15

02-01-32

13,520,000

10,420,000

Duluth Entertainment and Convention

Center Improvement Refunding

3.00 to 5.00% 02/01; 08/01 03-22-16 02-01-34 33,470,000 32,630,000

Capital Improvement

4.00%

02/01; 08/01

11-09-16

02-01-27

1,135,000

935,000

Capital Improvement

3.00%

02/01; 08/01

11-21-17

02-01-28

1,545,000

1,420,000

Capital Improvement - Seawall

3.00%

02/01; 08/01

02-14-18

02-01-34

4,450,000

4,225,000

Capital Improvement

5.00%

02/01; 08/01

10-17-18

02-01-29

1,310,000

Capital Improvement

5.00%

02/01; 08/01

10-09-19

02-01-30

1,190,000

Capital Improvement Refunding

5.00%

02/01; 08/01

10-09-19

02-01-32

9,755,000

Total General Obligation

102,820,000

81,370,000

General Obligation -Tax Abatement

Spirit Mountain Tax Abatement Bonds

2.00 to 3.00%

02/01; 08/01

02-23-12

02-01-30

7,055,000

4,850,000

GO Tax Abatement (Cirrus)

1.00 to 3.15%

02/01; 08/01

03-22-16

02-01-32

7,820,000

6,920,000

Total General Obligation - Tax Abatement

14,875,000

11,770,000

Special Assessment Debt with Government

Commitment

General Obligation Improvement

4.00%

02/01; 08/01

09-07-06

02-01-21

1,985,000

365,000

Street Improvement Refunding

2.00 to 3.00%

02/01; 08/01

11-27-12

02-01-21

6,905,000

1,080,000

General Obligation Improvement Refunding

1.50 to 2.00%

02/01; 08/01

10-30-14

02-01-20

865,000

180,000

Street Improvement Refunding

4.00%

02/01; 08/01

11-05-15

02-01-23

2,630,000

1,500,000

Total Special Assessment Debt with

Government Commitment

12,385,000 3,125,000

General Obligation Certificates Payable

Equipment

1.50 to 2.00%

02/01; 08/01

10-30-14

02-01-20

2,460,000

510,000

Equipment

2.00 to 3.00%

02/01; 08/01

11-05-15

02-01-21

3,325,000

1,390,000

Equipment

4.00%

02/01; 08/01

11-09-16

02-01-22

3,565,000

2,240,000

Equipment

3.00 to 4.00%

02/01; 08/01

11-21-17

02-01-23

3,615,000

2,955,000

Equipment

3.00 to 5.00%

02/01; 08/01

09-27-18

02-01-24

3,885,000

Equipment

5.00%

02/01; 08/01

10-09-19

02-01-25

3,070,000

Total General Obligation Certificates Payable

19,920,000

14,050,000

Total Governmental Activities

150,000,000

$

110,315,000

$

Bonds, certificates, and notes payable at December 31, 2019, are composed of the following individual issues:

Interest Rate and Dates

71

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

12.

LONG-TERM DEBT

(continued)

Issue

Final

Authorized

Date

Maturity

and Issued

Outstanding

Business-type Activities:

Revenue and General Obligation Bonds

Payable

Parking Fund

Parking Improvement Tax Increment

Refunding

1.00 to 2.75% 02/01; 08/01 11-27-12 02-01-26 10,270,000$ 6,175,000$

Priley Drive Parking Facility

Parking Improvement Tax Increment

4.00%

04/01; 10/01

05-15-14

04-01-44

11,500,000

12,229,869

Water Fund

Water Utility Revenue and General

Obligation

2.00 to 4.00% 02/01; 08/01 02-19-09 02-01-24 196,000 76,000

Water Utility Revenue and General

Obligation Refunding

2.00 to 3.00% 02/01; 08/01 11-05-15 02-01-22 515,000 265,000

Water Utility Revenue and General

Obligation

3.00 to 3.38% 02/01; 08/01 09-27-18 02-01-34 4,050,000 4,050,000

Total Water Fund

4,761,000

4,391,000

Steam Fund

Steam Utility Revenue and General

Obligation Refunding

1.00 to 2.13% 02/01; 08/01 11-27-12 02-01-22 5,475,000 1,675,000

Steam Utility Revenue and General

Obligation

3.00 to 3.20% 02/01; 08/01 11-05-15 02-01-27 4,015,000 4,015,000

Total Steam Fund

9,490,000

5,690,000

Sewer Fund

Sewer Utility Revenue and General

Obligation

2.00 to 4.00% 02/01; 08/01 02-19-09 02-01-24 1,444,000 558,999

Sewer Utility Revenue and General

Obligation

2.00 to 4.00% 02/01; 08/01 12-17-09 02-01-25 905,000 420,000

Sewer Utility Revenue and General

Obligation Refunding

1.00 to 3.00% 02/01; 08/01 11-29-11 02-01-20 2,265,000 345,000

Sewer Utility Revenue and General

Obligation Refunding

2.00% 02/01; 08/01 11-27-12 02-01-20 2,000,000 605,000

Sewer Utility Revenue and General

Obligation Refunding

2.00 to 3.00% 02/01; 08/01 11-05-15 02-01-23 1,110,000 665,000

Sewer Utility Revenue and General

Obligation Refunding

2.00 to 3.00% 02/01; 08/01 11-05-15 02-01-22 350,000 180,000

Total Sewer Fund

8,074,000

2,773,999

Stormwater Fund

Stormwater Utility Revenue and General

Obligation Refunding

2.00 to 3.00% 02/01; 08/01 11-05-15 02-01-22 790,000 420,000

Total Business-type Activities

44,885,000

$

31,679,868

$

Interest Rate and Dates

72

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

12.

LONG-TERM DEBT

(continued)

NOTES PAYABLE BY ISSUE

Issue

Final

Authorized

Date

Maturity

and Issued

Outstanding

Governmental Activities:

Revenue Note

U.S. Dept. of Housing and Urban

Development

5.23 to 5.77% 01/22; 07/22 08-01-05 08-01-25 7,876,000 2,621,000

Total Governmental Activities

7,876,000

$

2,621,000

$

Business-type Activities:

General Obligation:

Water Fund

Public Facilities Authority Note

1.258%

02/20; 08/20

07-28-10

08-20-25

1,293,200

538,000

Public Facilities Authority Note

1.076%

02/20; 08/20

12-07-10

08-20-25

3,344,131

1,442,000

Public Facilities Authority Note

1.221%

02/20; 08/20

11-18-11

08-20-26

1,221,631

576,000

Public Facilities Authority Note

1.000%

02/20; 08/20

02-25-14

08-20-29

4,778,806

3,140,000

Total Water Fund

10,637,768

5,696,000

Sewer Fund

Public Facilities Authority Note

1.150%

02/20; 08/20

07-12-07

08-20-22

1,973,033

465,000

Public Facilities Authority Note

1.969%

02/20; 08/20

08-20-09

08-20-24

796,835

298,000

Public Facilities Authority Note

2.017%

02/20; 08/20

11-25-09

08-20-24

2,414,150

931,000

Public Facilities Authority Note

1.258%

02/20; 08/20

07-28-10

08-20-25

3,753,059

1,587,000

Public Facilities Authority Note

1.258%

02/20; 08/20

07-28-10

08-20-25

8,504,224

3,540,000

Public Facilities Authority Note

1.000%

02/20; 08/20

11-18-11

08-20-21

279,117

55,000

Public Facilities Authority Note

1.000%

02/20; 08/20

11-30-11

08-20-21

265,418

57,000

Public Facilities Authority Note

1.000%

02/20; 08/20

11-18-11

08-20-21

278,149

61,000

Public Facilities Authority Note

1.000%

02/20; 08/20

09-10-12

08-20-22

476,537

145,000

Public Facilities Authority Note

1.000%

02/20; 08/20

10-29-14

08-20-24

860,847

369,000

Total Sewer Fund

19,601,369

7,508,000

Total Business-type Activities

30,239,137

$

13,204,000

$

Interest Rate and Dates

73

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

13.

FUND EQUITY

General Fund

Disaster

Recovery

Community

Investment

Trust

General

Obligation

Other

Governmental

Funds

Total

Fund Balance

Fund Balances:

Spendable:

Restricted for:

Forfeitures 216,132$ -$ -$ -$ 178,186$ 394,318$

Capital Projects - - - - 9,866,648 9,866,648

Community Development - - - - 880,087 880,087

Employment - - - - 269,641 269,641

Parks and Recreation - - - - 1,619,025 1,619,025

Public Access Television - - - - 604,330 604,330

Public Safety - - - - - -

Public Works - - - - 2,407,188 2,407,188

Economic Development - - - - 866,015 866,015

Library

- - - - 604,085 604,085

Tourism - - - - 932,313 932,313

Debt Service - - - 14,196,703 6,718,095 20,914,798

Committed for:

General Government - - - - 646,615 646,615

Community Investment - -

26,871,570

- - 26,871,570

Energy Program - - - - 172,360 172,360

Municipal Arts - - - - 175,869 175,869

Parks and Recreation - - - - 516,512 516,512

Public Safety 35,958 - - - 110,134 146,092

Assigned to:

General Government 2,282,340 - - - - 2,282,340

Public Safety 614,523 - - - - 614,523

Public Works 8,889 - - - - 8,889

Economic Development 94,148 - - - 4,334 98,482

Capital Projects - - - - 1,937,743 1,937,743

Unassigned 14,437,169 (3,608,514) - - (657,748) 10,170,907

Total Fund Balances 17,689,159$ (3,608,514)$ 26,871,570$ 14,196,703$ 27,851,432$ 83,000,350$

For governmental funds, fund balance is classified as nonspendable, restricted, committed, assigned and/or unassigned

based primarily on the extent to which the City is bound to observe constraints imposed upon the use of the resources.

Fund balance classifications as of December 31, 2019, are as follows:

74

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

14.

INTERFUND ASSETS/LIABILITIES/TRANSFERS

DUE TO/FROM OTHER FUNDS

Due from Fund

Due to Fund

Amount

General Fund

Water Enterprise

8,531

$

Gas Enterprise

13,808

Steam Enterprise

20,154

Nonmajor Governmental Funds

346,050

Nonmajor Enterprise Funds

28,623

Internal Service Funds

641,417

Water Enterprise

General Fund

2,706

Nonmajor Governmental Funds

20,252

Internal Service Funds

20,295

Gas Enterprise

General Fund

1,020

Nonmajor Governmental Funds

29,394

Internal Service Funds

24,610

Sewer Enterprise

General Fund

1,392

Nonmajor Governmental Funds

17,513

Internal Service Funds

14,098

Steam Enterprise

Nonmajor Governmental Funds

508,343

Internal Service Funds

247

Nonmajor Governmental Funds

General Fund

125,644

Water Enterprise

159

Gas Enterprise

167

Sewer Enterprise

167

Nonmajor Governmental Funds

911,697

Nonmajor Enterprise Funds

355

Internal Service Funds

14,330

Nonmajor Enterprise Funds

General Fund

14,353

Steam Enterprise

1,955

Nonmajor Governmental Funds

10,872

Internal Service Funds

16,770

Internal Service Funds

General Fund

199

Nonmajor Governmental Funds

12,063

Total

(1,2,3)

2,807,184$

Due from other funds, reported in

Balance Sheet - Governmental Funds

2,001,498

$

Statement of Net Position - Proprietary Funds:

Business-type Activities - Enterprise Funds

73,919

Governmental Activities - Internal Service Funds

731,767

Total

2,807,184$

The outstanding balances between funds results mainly from the time lag between the dates that (1)

interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded

in the accounting system, and (3) payments between funds are made. Balances at December 31, 2019 are:

75

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

14.

INTERFUND ASSETS/LIABILITIES/TRANSFERS

(continued)

DUE TO/FROM PRIMARY GOVERNMENT/COMPONENT UNITS

Receivable Entity

Payable Entity

Amount

Primary Government:

Component Unit:

General Fund

Spirit Mountain Recreation Area Authority

(4)

1,200,000

Duluth Airport Authority

(1,2,3)

92

Duluth Entertainment and Convention

Center Authority

(1,2,3)

83

Duluth Economic Development Authority

(1,2,3)

100

Nonmajor Governmental Funds

Duluth Entertainment and Convention

Center Authority

(1,2,3)

3,994

Spirit Mountain Recreation Area Authority

(1,2,3)

3,941

Duluth Economic Development Authority

(1,2,3,5)

257,661

Parking Enterprise Fund

Duluth Economic Development Authority

(1,2,3)

23,701

Total Due From Component Units

1,489,572

$

Total Due To Primary Government

1,488,069

$

Deduct Spirit Mountain Recreation Area Authority balance at April 30, 2019

(1,202,438)

Add Spirit Mountain Recreation Area Authority balance at December 31, 2019

1,203,941

Total Due From Component Units

1,489,572

$

Component Unit:

Primary Government:

Duluth Transit Authority

General Fund

30

$

Water Enterprise Fund

5

Duluth Entertainment and

Convention Center Authority

General Fund 597

Nonmajor Governmental Funds

814,282

Total Due From Primary Government 814,914$

Total Due To Component Units

814,914

$

INTERFUND LOAN RECEIVABLES/PAYABLES

Receivable Fund

Amount

General Fund

6,389,368

$

Gas Enterprise Fund

2,510,937

Total 8,900,305$

Due to/from the primary government and component unit results from the time lag between the date that (1)

goods or services are provided or reimbursable expenditures occur, (2) transactions are recorded in the

accounting systems, and (3) payments between the primary government and component units are made; or

(4) a budgetary authorized line of credit by the primary government to the component unit; or (5) a budgetary

authorized lending agreement by the primary government to the component unit. Balances as shown below

are reported on the Government-wide Statement of Net Position. Balances are for December 31, 2019, with

the exception of the Spirit Mountain Recreation Authority, whose fiscal year ended April 30, 2019.

Interfund loan balances are a result of temporary interfund financing at year-end to cover deficit cash

balances within the various funds. Balances on December 31, 2019 are:

76

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

14.

INTERFUND ASSETS/LIABILITIES/TRANSFERS

(continued)

Payable Fund

Disaster Recovery Fund

2,651,192

$

Steam Enterprise Fund

2,510,937

Nonmajor Governmental Funds

665,074

Nonmajor Enterprise Funds

2,609,480

Internal Service Funds

463,622

Total

8,900,305$

INTERFUND TRANSFERS

Transfer to, reported in fund:

Transfer from, reported in fund:

Amount

General Fund

Community Investment Trust

(1)

570,067

$

Water Enterprise

(1)

138,262

Gas Enterprise

(1,2)

2,836,118

Sewer Enterprise

(1)

107,301

Steam Enterprise

(2)

152,960

Nonmajor Governmental Funds

(1)

2,793,458

Nonmajor Enterprise Funds

(1,3)

1,912,541

General Obligation Debt Service

Fund

Nonmajor Governmental Funds (1) 5,001,164

Priley Drive Parking Facility

Enterprise Fund

Nonmajor Governmental Funds (1) 550,711

Water Enterprise

Nonmajor Governmental Funds

(1)

135,000

Nonmajor Enterprise Funds

(1)

9,300

Gas Enterprise

Nonmajor Enterprise Funds

(1)

14,900

Sewer Enterprise

Nonmajor Enterprise Funds

(1)

7,450

Nonmajor Governmental Funds

General Fund

(1)

765,000

Gas Enterprise

(1)

75,000

Nonmajor Governmental Funds

(1)

8,117,524

Nonmajor Enterprise Funds

(1)

2,000

Nonmajor Enterprise Funds

General Fund

(1)

24,000

Nonmajor Enterprise Funds

5,600

Total

23,218,356$

Statement of Revenues, Expenditures, and

Transfers out, reported in:

Change in Fund Balances:

Governmental Funds

17,956,924

$

Statement of Revenues, Expenditures, and

Change in Fund Net Position:

Business-type Activities - Enterprise Funds

5,261,432

Total

23,218,356$

The City reports transfers between many of its funds to move revenues from the fund in which they are

collected to the fund required to expend them, including: (1) debt service payments, participation in projects,

and reimbursements of expenditures; and (2) payments in lieu of taxes from enterprise funds; or (3) to

distribute budgetary authorized revenues to finance programs the government must account for in other

funds. Interfund transfers for the year ended December 31, 2019, are as follows:

77

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

15.

PENSION PLANS

PLAN DESCRIPTION

BENEFITS PROVIDED

All full-time and certain part-time employees of the City of Duluth are covered by defined benefit pension plans

administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the

General Employees Retirement Plan (the General Employees Plan) and the Public Employees Police and Fire

Plan (the Police and Fire Plan), which are cost-sharing, multiple-employer retirement plans. These plans are

established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERA’s defined

benefit pension plans are tax qualified plans under Section 401(a) of the Internal Revenue Code.

The General Employees Plan (accounted for in the General Employees Fund) has multiple benefit structures

with members belonging to the Coordinated Plan, the Basic Plan, or the Minneapolis Employees Retirement

Fund. Coordinated Plan members are covered by Social Security, and Basic Plan and Minneapolis Employees

Retirement Fund members are not. The Basic Plan was closed to new members in 1967. The Minneapolis

Employees Retirement Fund was closed to new members during 1978 and merged into the General Employees

Plan in 2015. All new members must participate in the Coordinated Plan, for which benefits vest after five years

of credited service. No City employees belong to either the Basic Plan or the Minneapolis Employees

Retirement Fund.

Police officers, firefighters, and peace officers who qualify for membership by statute are covered by the Police

and Fire Plan (accounted for in the Police and Fire Fund). For members first hired after June 30, 2010, but

before July 1, 2014, benefits vest on a prorated basis starting with 50% after 5 years and increasing 10% for

each year of service until fully vested after 10 years. Benefits for members first hired after June 30, 2014, vest

on a prorated basis from 50% after 10 years and increasing 5% for each year of service until fully vested after

20 years.

The benefit provisions stated in the following paragraph of this section are current provisions and apply to active

plan participants. Vested, terminated employees who are entitled to benefits but are not yet receiving them are

bound by the provisions in effect at the time they last terminated their public service.

PERA provides retirement benefits as well as disability benefits to members and benefits to survivors upon

death of eligible members. Benefit provisions are established by state statute and can be modified only by the

state legislature. Benefit increases are provided to benefit recipients each January.

Beginning January 1, 2019, General Employees Plan benefit recipients will receive a post-retirement increase

equal to 50% of the cost of living adjustment announced by the Social Security Administration, with a minimum

increase of at least 1.00% and maximum of 1.50%. Recipients that have been receiving the annuity or benefit

for at least a full year as of the June 30 before the effective date of the increase will receive the full increase.

For recipients receiving the annuity or benefit for at least one month but less than a full year as of the June 30

before the effective date of the increase will receive a reduced prorated increase. For members retiring on

January 1, 2024, or later, the increase will be delayed until normal retirement age (age 65 if hired prior to July 1,

1989, or age 66 for individuals hired on or after July 1, 1989). Members retiring under the Rule of 90 are exempt

from the delay to normal retirement.

Beginning January 1, 2019, Police and Fire Plan benefit recipients will receive a 1.00% post-retirement

increase. Recipients that have been receiving the annuity or benefit for at least 36 months as of the June 30

before the effective date of the increase will receive the full increase. For recipients receiving the annuity or

benefit for at least 25 months but less than 36 months as of the June 30 before the effective date of the

increase will receive a reduced prorated increase.

78

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

15.

PENSION PLANS

(continued)

CONTRIBUTIONS

General Employees Plan - Coordinated Plan Members

7.50%

Police and Fire Plan

16.95%

2019

2018

2017

General Employees Fund

2,853,467

$

2,697,667

$

2,678,076

$

Police and Fire Fund

4,286,075

3,790,774

3,843,171

Total

7,139,542

$

6,488,441

$

6,521,247

$

PENSION COSTS

General Employees Fund

For General Retirement Plan members hired prior to July 1, 1989, a full annuity is available when age plus

years of service equal 90, and normal retirement age is 65. For members hired on or after July 1, 1989, normal

retirement age is the age for unreduced Social Security benefits capped at 66. For Police and Fire Plan, normal

retirement age is 55, and for members who were hired prior to July 1, 1989, a full annuity is available when age

plus years of service equal 90. Disability benefits are available for vested members and are based on years of

service and average high-five salary.

Benefits are based on a member’s highest average salary for any 60 consecutive months of allowable service,

age, and years of credit at termination of service. In the General Employees Plan, two methods are used to

compute benefits for Coordinated Plan members. Members hired prior to July 1, 1989, receive the higher of a

step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity

accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first 10 years of service

and 1.7% of average salary for each remaining year. Under Method 2, the annuity accrual rate is 1.7% for

Coordinated Plan members for each year of service. Only Method 2 is used for members hired after June 30,

1989. For Police and Fire Plan members, the annuity accrual rate is 3.0% of average salary for each year of

service.

The City’s contributions to the pension plans ending December 31 were:

Pension benefits are funded from member and employer contributions and income from the investment of fund

assets. Rates for employer and employee contributions are set by Minnesota Statutes, Chapter 353. These

statutes are established and amended by the state legislature. General Employees Plan members were

required to contribute 6.5% of their annual covered salary in 2019. Police and Fire Plan members were required

to contribute 11.3% of their annual covered salary in 2019.

In 2019, the City was required to contribute the following percentages of annual covered salary:

The Police and Fire Plan member and employer contribution rates increased 0.50% and 0.75%, respectively,

from 2018.

The contributions are equal to the contractually required contributions as set by state statute.

At December 31, 2019, the City reported a liability of $28,633,531 for its proportionate share of the General

Employees Plan’s net pension liability. The net pension liability was measured as of June 30, 2019, 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, 2018, through June 30,

2019, relative to the total employer contributions received from all of PERA’s participating employers. At June

30, 2019, the City’s proportion was 0.5179%. It was 0.5221% measured as of June 30, 2018. The City

recognized pension expense of $3,208,079 for its proportionate share of the General Employees Plan’s pension

expense.

79

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

15.

PENSION PLANS

(continued)

$ 28,633,531

889,961

Total $ 29,523,492

Deferred

Outflows of

Resources

Deferred

Inflows of

Resources

Differences between expected and actual economic experience

$ 819,248 $ -

Changes in actuarial assumptions

- 2,333,772

Difference between projected and actual investment earnings

- 3,091,333

Changes in proportion

580,544 1,202,562

Contributions paid to PERA subsequent to the measurement date

1,477,817 -

Total

$ 2,877,609 $ 6,627,667

Year Ended

December 31

Pension

Expense

Amount

2020

(1,654,531)

$

2021

(2,983,152)

2022

(636,335)

2023

46,143

Police and Fire Fund

At December 31, 2019, the City reported a liability of $24,576,314 for its proportionate share of the Police and

Fire Plan’s net pension liability. The net pension liability was measured as of June 30, 2019, 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, 2018, through June 30, 2019,

relative to the total employer contributions received from all of PERA’s participating employers. At June 30,

2019, the City’s proportion was 2.3085%. It was 2.1951% measured as of June 30, 2018. The City recognized

pension expense of $3,210,826 for its proportionate share of the Police and Fire Plan’s pension expense.

The City also recognized $311,646 as revenue, which results in a reduction of the net pension liability, for its

proportionate share of the State of Minnesota’s on-behalf contribution to the Police and Fire Plan. Legislation

requires the State of Minnesota to contribute $9 million to the Police and Fire Plan each year, starting in fiscal

year 2014, until both this and the State Patrol Retirement Plan plan is 90% funded. In addition, the state will pay

direct state aid of $4.5 million on October 1, 2018, and October 1, 2019, and $9 million by October 1 of each

subsequent year until full funding is reached or July 1, 2048, whichever is earlier.

associated with the City

State of Minnesota’s proportionate share of the net pension liability

City's proportionate share of the net pension liability

The City reported its proportionate share of the General Employees Plan’s deferred outflows of resources and

deferred inflows of resources related to pensions from the following sources:

The City also recognized $66,650 as revenue, which results in a reduction of the net pension liability, for its

proportionate share of the State of Minnesota’s contribution to the General Employees Plan, which qualifies as

a special funding situation. Legislation required the State of Minnesota to contribute $16 million to the General

Employees Plan annually.

The $1,477,817 reported as deferred outflows of resources related to pensions resulting from contributions

subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year

ended December 31, 2020. Other amounts reported as deferred outflows and inflows of resources related to

pensions will be recognized in pension expense as follows:

80

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

15.

PENSION PLANS

(continued)

Deferred

Outflows of

Resources

Deferred

Inflows of

Resources

Differences between expected and actual economic experience

$ 1,027,537 $ 3,736,493

Changes in actuarial assumptions

20,469,537 27,588,044

Difference between projected and actual investment earnings

- 4,958,154

Changes in proportion

1,192,859 1,215,789

Contributions paid to PERA subsequent to the measurement date

2,136,984 -

Total

$ 24,826,917 $ 37,498,480

Year Ended

December 31

Pension

Expense

Amount

2020

(1,637,318)

$

2021

(3,436,800)

2022

(9,838,864)

2023

(76,213)

2024

180,648

ACTUARIAL ASSUMPTIONS

Inflation

2.50%

per year

Active member payroll growth

3.25%

per year

Investment rate of return

7.50%

The long-term expected rate of return on pension plan investments is 7.50%. The State Board of Investment,

which manages the investments of PERA, prepares an analysis of the reasonableness of the long-term

expected rate of return on a regular basis using a building-block method in which best-estimate ranges of

expected future rates of return are developed for each major asset class.

The total pension liability in the June 30, 2019, actuarial valuation was determined using the individual entry-age

normal actuarial cost method and the following additional actuarial assumptions:

The total pension expense for all plans recognized by the City for the year ended December 31, 2019, was

$6,418,905.

The City reported its proportionate share of the Police and Fire Plan’s deferred outflows of resources and

deferred inflows of resources related to pensions from the following sources:

The $2,136,984 reported as deferred outflows of resources related to pensions resulting from contributions

subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year

ended December 31, 2020. Other amounts reported as deferred outflows and inflows of resources related to

pensions will be recognized in pension expense as follows:

Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors,

and disabilitants for all plans were based on RP-2014 tables for males or females, as appropriate, with slight

adjustments. Cost of living benefit increases for retirees are assumed to be 1.25% for the General Employees

Plan. For the Police and Fire Plan, cost of living benefit increases for retirees are 1.00% as set by state statute.

Actuarial assumptions used in the June 30, 2019, valuation were based on the results of actuarial experience

studies. The experience study for the General Employees Plan was dated June 30, 2015. The experience study

for the Police and Fire Plan was dated August 30, 2016. Inflation and investment assumptions for both plans

were reviewed in the experience study report for the General Employees Plan dated June 27, 2019.

81

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

15.

PENSION PLANS

(continued)

Asset Class

Target

Allocation

Long-Term

Expected Real

Rate of Return

Domestic equity

35.50%

5.10%

International equity

17.50%

5.30%

Fixed income

20.00%

0.75%

Private markets

25.00%

5.90%

Cash equivalents

2.00%

0.00%

DISCOUNT RATE

CHANGES IN ACTUARIAL ASSUMPTIONS

PENSION LIABILITY SENSITIVITY

Discount

Rate

Net Pension

Liability

Discount

Rate

Net Pension

Liability

1.0% Decrease

6.5%

47,071,983

$

6.5%

53,719,257

$

Current

7.5%

28,633,531

7.5%

24,576,314

1.0% Increase

8.5%

13,408,923

8.5%

475,574

Proportionate Share of the

Police and Fire PlanGeneral Employees Plan

The following presents the City’s proportionate share of the net pension liability calculated using the discount

rate previously disclosed, as well as what the City’s proportionate share of the net pension liability would be if it

were calculated using a discount rate 1.0 percentage point lower or 1.0 percentage point higher than the current

discount rate:

Police and Fire Plan

• The mortality projection scale was changed from MP-2017 to MP-2018.

The following changes in actuarial assumptions occurred in 2019:

General Employees Plan

The discount rate used to measure the total pension liability was 7.5% in 2019, which remained consistent with

2018. The projection of cash flows used to determine the discount rate assumed that employee and employer

contributions will be made at the rate specified in statute. Based on that assumption, the fiduciary net positions

of the General Employees Plan and the Police and Fire Plan were projected to be available to make all

projected future benefit payments of current active and inactive employees. Therefore, the long-term expected

rate of return on pension plan investments was applied to all periods of projected benefit payments to determine

the total pension liability.

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 arithmetic

real rates of return for each major asset class are summarized in the following table:

82

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

15.

PENSION PLANS

(continued)

PENSION PLAN FIDUCIARY NET POSITION

DEFINED CONTRIBUTION PLAN

Employee

Employer

Contribution amount

6,285

$

6,285

$

Percentage of covered payroll

5.0%

COMPONENT UNITS' PENSION INFORMATION

The Duluth Transit Authority and Duluth Economic Development Authority have no employees. Personnel

services are provided through a management agreement with ATE Management and Service Company, Inc.

Detailed information concerning the management agreement is presented in its publicly available 2019 annual

report.

Qualified employees of the Duluth Entertainment and Convention Center Authority, Duluth Airport Authority, and

Spirit Mountain Recreation Area Authority belong to PERA. Contributions were made by the above component

units to PERA's Coordinated and Basic Plans in amounts required by state statutes. The PERA Coordinated

and Basic Plans are the same pension plans available to City employees. Detailed information concerning each

component unit's pension plan is presented in its publicly available 2019 annual report.

Total contributions by dollar amount and percentage of covered payroll made by the City during the year ended

December 31, 2019, were:

Detailed information about the pension plan’s fiduciary net position is available in a separately issued PERA

financial report that includes financial statements and required supplementary information. That report may be

obtained on the internet at www.mnpera.org; by writing to PERA at 60 Empire Drive, Suite 200, St. Paul,

Minnesota 55103-2088; or by calling (651) 296-7460 or 1-800-652-9026.

Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative

expenses. For those qualified personnel who elect to participate, Minnesota Statutes, § 353D.03 specifies plan

provisions, including the employee and employer contribution rates. An eligible elected official who decides to

participate contributes 5.0% of salary, which is matched by the employer. Employee and employer 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 2.0% of employer contributions and

0.25% of the assets in each member account annually.

Certain elected officials of the City are covered by the Public Employees Defined Contribution Plan, a multiple-

employer deferred compensation plan administered by PERA. The plan is established and administered in

accordance with Minnesota Statutes, Chapter 353D, which may be amended by the state legislature. The plan

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.

83

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

16.

OTHER POSTEMPLOYMENT BENEFITS

PLAN DESCRIPTION

FUNDING POLICY

INVESTMENTS

Asset Class Target Allocation

MN SBI Non-Retirement Bond Fund 30%

MN SBI Non-Retirement Equity Fund 70%

Total

100%

Investment policy – The City’s OPEB irrevocable trust fund is managed by the City of Duluth. All OPEB funds

are invested with the Minnesota State Board of Investment (SBI). It is the policy of the City to pursue an

investment strategy that reduces risk through the diversification of the portfolio. The City’s target asset allocation

as of December 31, 2019 is:

Rate of return – For the year ended December 31, 2019, the annual money-weighed return on investments, net

of investment expense, was 25.27%. The money-weighed return expresses investment performance, net of

investment expense, adjusted for the changing amounts actually invested.

The City provides postemployment health insurance and life insurance benefits for certain eligible retired

employees and their spouses under a single-employer defined benefit plan. Eligible employees are employees

with a hire date prior to January 1, 2007. Employees must retire on or after January 1, 1983, and be eligible for

retirement or disability benefits from the Public Employees Retirement Association. The extent of the benefit

provided depends on the union contract and the date of hire. Effective January 1, 2010, retirees are provided the

same benefits as are provided to active employees. Since the premium is a blended rate determined on the

entire active and retiree population, the retirees are receiving an implicit rate subsidy.

The health benefits are provided through the City's Joint Powers Enterprise Trust. The life insurance benefits are

paid directly by the fund from which the employee retires, and recorded as a deduction in the Statement of

Fiduciary Net Position for the Other Postemployment Benefits Trust Fund, under GASB 74. A separate report is

not issued for the plan. The authority to provide these benefits is established in Minnesota Statute § 471.617.

As of December 31, 2019, there were 1,128 retirees receiving health benefits from the City's health plan and

845 active employees covered under the plan.

The City has historically funded these liabilities on a pay-as-you go basis. Union contracts govern the premiums

contributed by the City and the retirees. For eligible retirees, the City pays a portion of the premium ranging from

25%-100% depending on the years of service. Retirees pay the remaining portion of the premium. Premiums are

paid to the Joint Powers Enterprise Trust which accounts for the activity of the plan. Premiums are intended to

cover the cost of providing benefits to retirees on a pay-as-you go basis. For the year ended December 31,

2019, the City contributed $9,303,050 and retirees contributed $183,686.

In July 2007, the City established an Other Postemployment Benefits (OPEB) irrevocable trust and began

prefunding a portion of the OPEB liability. Contributions of $1,176,686 were made to the irrevocable trust in

2019.

84

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

16. OTHER POSTEMPLOYMENT BENEFITS (continued)

NET OPEB LIABILITY OF THE CITY

Total OPEB liability 156,007,515$

Plan fiduciary net position (71,510,666)

City’s net OPEB liability

84,496,849

$

45.8%

CHANGES IN THE NET OPEB LIABILITY

Total OPEB

Liability (a)

Plan Fiduciary

Net Position (b)

Net OBEB

Liability (a-b)

Balance at 1/1/19 174,016,061$ 56,404,693$ 117,611,368$

Changes for the year:

Service cost 2,440,931 - 2,440,931

Interest 8,958,475 - 8,958,475

Contributions - employer - 11,642,994 (11,642,994)

Difference between expected and actual experience 1,391,711 - 1,391,711

Changes in assumptions (20,030,337) - (20,030,337)

Difference between actual and projected earnings - 10,998,469 (10,998,469)

Projected earnings - 3,238,009 (3,238,009)

Benefit payments (10,769,326) (10,769,326) -

Administrative expense - (4,173) 4,173

Net change (18,008,546) 15,105,973 (33,114,519)

Balance at 12/31/19

156,007,515

$

71,510,666

$

84,496,849

$

ACTUARIAL METHODS AND ASSUMPTIONS

Plan fiduciary net position as a percentage of the total

OPEB liability

In the January 1, 2019, actuarial valuation, the individual entry age normal as a level percentage of payroll

actuarial cost method was used. Market value was the method used to determine the actuarial value of plan

assets. The actuarial assumptions included a 5.7% investment rate of return which is based on the expected

long-term investment returns on plan assets. The price inflation rate was 2.2%. The salary increases rate is

based on the 3.5% salary scale. The annual healthcare cost trend rate is 9.0% initially, reduced incrementally to

an ultimate rate of 5.0% after ten years.

Increase (Decrease)

The components of the net OPEB liability of the City at December 31, 2019, were as follows:

The expected long-term rate projections of benefits for financial reporting purposes are based on the substantive

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

effect of short-term volatility in actuarial accrued liabilities and the actuarial value of the assets, consistent with

the long-term perspective of the calculations.

Mortality rates were based on the Society of Actuaries RPH-2014 Adjust to 2006 Total Dataset Headcount-

weighted Mortality project with Scale MP-2018.

85

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

16. OTHER POSTEMPLOYMENT BENEFITS (continued)

Long-Term

Expected Real

Rate of Return

0.9%

4.8%

5.7%

Single Equivalent Interest Rate (SEIR)

Long-Term Expected Rate of Return 5.70%

Municipal Bond Index Rate* 3.26%

0.01%

N/A

Single Equivalent Interest Rate 5.70%

* Source: S&P Municipal Bond 20 Year High Grade Rate Index

1% Decrease Discount Rate 1% Increase

(4.7%) (5.7%) (6.7%)

Net OPEB liability (asset) 103,568,321$ 84,496,849$ 69,275,923$

1% Decrease

Healthcare Cost

Trend Rate

1% Increase

(8.0% decrease

to 4.0%)

(9.0% decrease

to 5.0%)

(10.0% decrease

to 6.0%)

Net OPEB liability (asset) 68,818,052$ 84,496,849$ 104,068,796$

The discount rate is the single rate that reflects (1) the long-term expected rate of return on OPEB plan

investments that are expected to be used to finance the payment of benefits, to the extent that the OPEB plan's

fiduciary net position is projected to be sufficient to make projected benefit payments and OPEB plan assets are

expected to be invested using a strategy to achieve that return, and (2) a yield or index rate for 20-year, tax-

exempt general obligation municipal bonds with an average rating of AA/Aa or higher (or equivalent quality on

another scale), to the extent that the conditions for use of the long-term expected rate of return are not met.

Fiscal Year in which Fiduciary Net Position is Projected

to be Depleted

Sensitivity of the net OPEB liability to changes in the discount rate. The following presents the net OPEB liability

of the City, as well as what the City’s net OPEB liability would be if it were calculated using a discount rate that

is 1-percentage-point lower or 1-percentage-point higher than the current discount rate:

Sensitivity of the net OPEB liability to changes in the healthcare cost trend rates. The following presents the net

OPEB liability of the City, as well as what the City’s net OPEB liability would be if it were calculated using

healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current

healthcare cost trend rates:

Domestic Equity

Domestic Fixed Income

The projection of cash flows used to determine the discount rate assumed that City contributions will be made at

rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan's

fiduciary net position was projected to be available to make all projected OPEB payments for current active and

inactive employees. Therefore, the long-term expected rate of return on OPEB plan investments was applied to

all periods of projected benefit payments to determine the total OPEB liability.

Asset allocations fluctuate due to market performance, however, the targeted OPEB asset allocation is as

described below. The City's objective in selecting the expected long-term rate of return on assets is to estimate

the single rate of return that reflects the historical returns, future expectations for each asset class, and the

asset mix of the plan assets. The estimates of arithmetic real rates of return of each major asset class included

in the target asset allocation are:

Asset Classes

Administrative Expenses (as a percent of the market

86

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

16. OTHER POSTEMPLOYMENT BENEFITS (continued)

Deferred

Outflows of

Resources

Deferred

Inflows of

Resources

$ - $ 5,718,821

-

15,539,230

1,489,259

409,591

Total $ 1,489,259 $ 21,667,642

Year

Deferred

Outflows of

Resources

Deferred

Inflows of

Resources

2020

$ (430,422)

$ 5,782,527

2021

(430,422)

5,782,527

2022

(430,422)

5,782,532

2023

(197,993)

4,320,056

TRUST FUND

DEFINED CONTRIBUTION OPEB PLAN

For the year ended December 31, 2019, the City recognized OPEB expenses of $449,000.

The financial statements are prepared using accrual basis accounting. Contributions to the plan are recognized

when due and the City has made a formal commitment to provide the contributions. The fair value of

investments are determined by the Minnesota State Board of Investment.

The City has established an OPEB irrevocable trust to prefund a portion of the OPEB liability.

For the year ended December 31, 2019, the City recognized OPEB expenses of $8,829,530. At December 31,

2019, the City reported deferred outflows and inflows of resources related to OPEB from the following sources:

OPEB EXPENSE AND DEFERRED OUTFLOWS AND DEFERRED INFLOWS OF RESOURCES RELATED

TO OPEB

Balances at

December 31, 2019

In accordance with union bargaining agreements and effective January 1, 2008, the City provided a defined

contribution postemployment benefit in the form of a minimum 1.0% contribution of each full-time, permanent,

active employee's salary into a postemployment health care savings account known as the Minnesota Health

Care Savings Plan administered by the Minnesota State Retirement System. An additional lump sum deposit of

up to $12,000 per employee will be made depending on the union contract and the date of hire.

Amounts reported as deferred outflows and inflows of resources related to OPEB will be recognized in OPEB

expense as follows:

Source

Net difference between projected and actual earnings on

investments

Changes in actuarial assumptions

Difference between expected and economic experience

87

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

17.

SEGMENT INFORMATION

CONDENSED STATEMENT OF NET POSITION

Parking

Stormwater

Assets

Current assets

3,524,385

$

3,770,412

$

Due from other funds

-

4,978

Capital assets

18,551,916

19,039,271

Noncurrent assets

-

578

Total Assets

22,076,301

22,815,239

Deferred Outflows of Resources

341,798

123,292

Liabilities

Current liabilities

1,030,138

363,806

Due to other funds

2,134

23,042

Noncurrent liabilities

5,619,396

1,525,446

Total Liabilities

6,651,668

1,912,294

Deferred Inflows of Resources

61,674

633,890

Net Position

Net investment in capital assets

12,683,991

18,605,640

Unrestricted

3,020,766

1,786,707

Total Net Position

15,704,757

$

20,392,347

$

CONDENSED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION

Parking

Stormwater

Operating revenues (expenses)

Charges (pledged against bonds)

4,097,688

$

5,295,838

$

Depreciation expense

(567,526)

(437,762)

Other operating expenses

(2,642,090)

(3,168,582)

Operating income

888,072

1,689,494

Nonoperating revenues (expenses)

Investment earnings

37,220

14,030

Intergovernmental revenue

-

29,645

Gain (Loss) on sale of capital assets

-

4,623

Interest expense

(195,235)

(6,363)

Capital contributions

423,701

-

Transfers in

-

5,600

Transfers out

(1,386,300)

(528,241)

Change in net position

(232,542)

1,208,788

Beginning net position

15,937,299

19,183,559

Ending net position

15,704,757

$

20,392,347

$

The City has issued revenue bonds for each of the following nonmajor enterprise funds: Parking, which

accounts for the municipal parking ramps, lots, and meters; and Stormwater, which operates the stormwater

sewer collection system. Summary financial information for each of these funds for fiscal year ended

December 31, 2019, is presented below:

88

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

17.

SEGMENT INFORMATION

(continued)

CONDENSED STATEMENT OF CASH FLOWS

Parking

Stormwater

Net cash provided (used) by

Operating activities

1,616,059

$

2,021,193

$

Noncapital financing activities

(1,386,300)

(492,996)

Capital and related financing activities

(652,213)

(1,919,640)

Investing activities

37,220

14,030

Net increase (decrease)

(385,234)

(377,413)

Beginning cash and cash equivalents

3,816,478

1,509,374

Ending cash and cash equivalents

3,431,244

$

1,131,961

$

18.

SUMMARY DISCLOSURE OF SIGNIFICANT CONTINGENCIES

LAKE SUPERIOR CENTER

TAX INCREMENT DISTRICTS

FEDERALLY ASSISTED PROGRAMS - COMPLIANCE AUDITS

RELATED ORGANIZATION

The Duluth Housing and Redevelopment Authority is a legally separate organization from the City with its own

rights and powers. Although the Mayor of the City appoints all Authority Board members, there is no financial

accountability necessary for including this organization as a component unit of the City.

The City and Duluth Economic Development Authority (DEDA) entered into agreements with the Lake

Superior Center Authority (LSCA) to provide a portion of the funding for the design and construction of the

Great Lakes Aquarium at the Lake Superior Center Project. The funding provided by the City and DEDA

includes grants and loans which were financed internally and by the issuance of debt to be repaid from

tourism taxes. LSCA is a public corporation created by the Minnesota Legislature. The project was financed

by State, City, DEDA, and private contributions. The project is owned by LSCA and is operated by Lake

Superior Center Inc., a private nonprofit corporation. The Great Lakes Aquarium opened July 29, 2000.

In order to obtain State funding, the City guaranteed that any operating deficits will be funded from non-state

sources, and DEDA guaranteed that it would provide sufficient funds necessary to complete construction of

the project. In 2004, the City approved the creation of a revolving $250,000 cash management fund. Amounts

drawn from the fund are to be repaid annually by October 1st.

Tax increment districts are subject to review by the Minnesota Office of the State Auditor. Unallowable use of

tax increments could result in a liability of the City. Management is not aware of any instances of

noncompliance with tax increment regulations which would have a material effect on the financial statements.

The City has received significant financial assistance from numerous federal governmental agencies in the

form of grants and entitlements. The disbursement of funds received under these generally require

compliance with terms and conditions specified in the grant agreements and are subject to audit by grantor

agencies. Any disallowed claims resulting from such audits could become a liability of the City. However, in

the opinion of management, liabilities resulting from disallowed claims, if any, will not have a material effect

on the City's financial position at December 31, 2019.

89

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

18.

SUMMARY DISCLOSURE OF SIGNIFICANT CONTINGENCIES

(continued)

MINNEAPOLIS-DULUTH/SUPERIOR PASSENGER RAIL ALLIANCE

Total Assets

21,827

$

Total Liabilities

5,091

Total Net Position

16,736

Total Revenues

90,411

Total Expenditures

65,216

Change in Net Position

25,195

TAX INCREMENT ASSISTANCE

Maximum

Assistance

2019 Tax

Rebate

A & L Renaissance

14,327

$

161,271

$

Augusta Building

249,034

$

72,541

$

Bluestone Commons

9,896,864

$

363,002

$

Central Hillside Development, LLP

201,720

$

27,147

$

Garfield Business Park, LLC

611,069

$

22,425

$

Harbor Bay

2,387,978

$

258,903

$

NorShore Theatre, LLC

1,404,942

$

168,500

$

NorShore Theatre, LLC

360,080

$

100,642

$

Sherman Associates Hotel/Condominium

5,000,000

$

210,625

$

Pier B, LLC

3,460,605

$

163,760

$

Kenwood Village, LLC

2,862,500

$

150,759

$

Related party transactions are limited to payments by the City on various contracts for services entered into

with the Authority. The City made payments on various contracts totaling $765,749 to the Duluth Housing and

Redevelopment Authority in 2019.

The City, along with several other governmental entities, formed the Minneapolis-Duluth/Superior Passenger

Rail Alliance on February 1, 2008, under a Joint Powers Agreement in accordance with Minnesota Statues §

471.59, 398A.04, and 398A.06. The Alliance is governed by a nine-member Board composed of one elected

official selected by each party represented in the Alliance, as well as an additional member from the Mille

Lacs Band of Ojibwe. Each party contributes funds consistent with the annual budget and cost sharing

formula. The Board is organized with a chair and a vice chair elected each year. The St. Louis and Lake

County Regional Railroad Authority serves as the fiscal agent. Its purpose is to collaboratively discuss, study,

plan for, promote, and facilitate the development of intercity passenger rail transportation between the Twin

Cities Metropolitan and Twin Ports areas. The passenger rail line has been given the title of the Northern

Lights Express (NLX).

A summary of the financial information of the Minneapolis-Duluth/Superior Passenger Rail Alliance for the

Government-wide financial statements for December 31, 2019 was:

Separate financial information can be obtained from the St. Louis and Lake County Regional Railroad

Authority.

The Duluth Economic Development Authority is committed to provide tax increment assistance pursuant to

development agreements for housing projects. The assistance is provided in the form of an annual tax rebate

to developers. The annual tax rebate is contingent upon payment of annual property taxes by the developer.

The assistance for each project is limited in amount based on both the scope of the project and the life of the

tax increment district. The tax increment assistance does not result in debt proceeds and does not meet the

definition of debt. A summary of the maximum tax increment assistance to be provided as of December 31,

2019, follows:

90

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

18.

SUMMARY DISCLOSURE OF SIGNIFICANT CONTINGENCIES

(continued)

CONDUIT DEBT OBLIGATIONS

Entity

Series

Issued

Principal

Health Care Facilities (Aftenro)

2006

2,620,000

$

1,953,285

$

St. Luke's Hospital

2012

81,595,000

$

69,865,000

$

Duluth Regional Care Center, Inc

2012A

1,040,800

$

12,860

$

Benedictine Health Center

2013

5,750,000

$

4,383,352

$

Benedictine Health Center

2014

4,000,000

$

3,622,881

$

Health Sciences Education Facility Corp (Scholastica)

2015A

10,000,000

$

8,617,127

$

Health Sciences Education Facility Corp (Scholastica)

2015B

6,600,000

$

5,644,288

$

Ikonics

2016

3,415,000

$

2,907,187

$

Cambia Hills

2018

26,500,000

$

26,500,000

$

Essentia Health

2018A

682,285,000

$

682,285,000

$

St Luke's Hospital

2018A

19,750,000

$

19,750,000

$

St Luke's Hospital

2018B

19,750,000

$

19,750,000

$

19.

TAX ABATEMENT

The City has entered into a property tax agreement with a real estate developer for constructing residential

rental units, pursuant to Minnesota Statutes § 469.1812 through 469.1815, which allows local governments to

grant property tax abatements not to exceed the larger of 10% of net tax capacity or $200,000. The tax

abatement is effective for taxes payable in 2021 and continues for fifteen years. The City’s abatement will not

exceed a total aggregate amount of $400,000.

The City has entered into a property tax agreement with a real estate developer for constructing residential

rental units, pursuant to Minnesota Statutes § 469.1812 through 469.1815, which allows local governments to

grant property tax abatements not to exceed the larger of 10% of net tax capacity or $200,000. The tax

abatement is effective for taxes payable in 2018 and continues for fifteen years. The City’s abatement will not

exceed $9,179 per year and a total aggregate amount of $250,000.

The City has entered into a property tax agreement with a commercial aviation services business for

operating a heavy aircraft maintenance, repair, and overhaul facility, pursuant to Minnesota Statutes §

469.1812 through 469.1815, which allows local governments to grant property tax abatements not to exceed

the larger of 10% of net tax capacity or $200,000. The tax abatement is effective for taxes payable in 2017

and continues for seven years. 100% of the city property taxes collected are eligible for abatement if

employment covenants are met.

The City has entered into a property tax agreement with a real estate developer for constructing residential

rental units, pursuant to Minnesota Statutes § 469.1812 through 469.1815, which allows local governments to

grant property tax abatements not to exceed the larger of 10% of net tax capacity or $200,000. The tax

abatement is effective for taxes payable in 2019 and continues for twenty years. The City’s abatement will not

exceed a total aggregate amount of $278,000.

The City and Duluth Economic Development Authority (DEDA) have issued Industrial Revenue Bonds to

provide financial assistance to private sector entities for the acquisition and construction of industrial and

commercial facilities deemed to be in the public interest. The bonds are secured by the property financed

through a series of loan agreements and are payable solely from the revenues of the entities. Neither the City,

DEDA nor the State are obligated in any manner for repayment of the bonds. Accordingly, the bonds are not

reported as liabilities in the accompanying financial statements. Bonds issued and outstanding as of

December 31, 2019, are as follows:

91

Notes

CITY OF DULUTH, MINNESOTA

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2019

19.

TAX ABATEMENT

(continued)

20.

SUBSEQUENT EVENTS

Further, although the Spirit Mountain Recreation Area Authority prepares a separate audit report, the impact

of COVID-19 is not disclosed in the report due to the report being an April 30, 2019 year-end. The COVID-19

pandemic impacted the end of Spirit Mountain’s 2019-2020 ski season and any further information on the

impact will be reflected in the upcoming April 30, 2020 financial report.

The City has entered into a property tax agreement with a real estate developer for constructing residential

rental units, pursuant to Minnesota Statutes § 469.1812 through 469.1815, which allows local governments to

grant property tax abatements not to exceed the larger of 10% of net tax capacity or $200,000. The tax

abatement is effective for taxes payable in 2021 and continues for twenty years. The City’s abatement will not

exceed a total aggregate amount of $400,000.

The City has entered into a property tax agreement with a real estate developer for constructing senior care

units, pursuant to Minnesota Statutes § 469.1812 through 469.1815, which allows local governments to grant

property tax abatements not to exceed the larger of 10% of net tax capacity or $200,000. The tax abatement

is effective for taxes payable in 2021 and continues for ten years. The City’s abatement will not exceed a total

aggregate amount of $125,000.

On March 11, 2020, the World Health Organization declared the outbreak of coronavirus (COVID-19) a

pandemic. As a result, the City of Duluth expects reduced revenue in 2020 and an impact on numerous

operations. Among major revenue sources, sales taxes, both general and tourism related are expected to be

negatively impacted. Property tax collections could also be impacted due to the down turn in the economy.

The total impact is not known at this time.

In addition, the Duluth Economic Development Authority (DEDA) will be impacted by the closure of a

commercial aviation services business which was leasing DEDA owned property. DEDA does not know the

total impact to its operations at this point in time.

Separate financial reports are prepared for the Duluth Transit Authority, Duluth Entertainment and Convention

Center Authority, and Duluth Airport Authority. Further information on the COVID-19 impact to these

organizations is disclosed in their individual reports as a subsequent event.

92

Notes

R e q u i r e d S u p p l e m e n t a r y

I n f o r m a t i o n

CITY OF DULUTH, MINNESOTA

OTHER POSTEMPLOYMENT BENEFITS PLAN (OPEB)

SCHEDULE OF CHANGES IN THE CITY'S NET OPEB LIABILITY AND RELATED RATIOS AND

SCHEDULE OF INVESTMENT RETURNS

DECEMBER 31, 2019

SCHEDULE OF CHANGES IN THE CITY'S NET OPEB LIABILITY AND RELATED RATIOS

2017

2018

2019

Total OPEB liability

Service cost

2,933,971

$

2,952,513

$

2,440,931

$

Interest

9,412,409

9,609,404

8,958,475

Benefit payments

(9,747,296)

(11,145,909)

(10,769,326)

Changes in assumptions

-

(20,030,337)

Difference in expected vs. actual experience

-

1,391,711

Net change in total OPEB liability

2,599,084

1,416,008

(18,008,546)

Total OPEB liability - beginning

170,000,969

172,600,053

174,016,061

Total OPEB liability - ending (a)

172,600,053

$

174,016,061

$

156,007,515

$

Plan fiduciary net position

Contributions - employer

10,222,267

$

11,678,484

$

11,642,994

$

Net investment income

8,178,671

(1,841,168)

14,236,478

Benefit payments

(9,747,296)

(11,145,909)

(10,769,326)

Administrative expense

-

(3,853)

(4,173)

Net change in plan fiduciary net position

8,653,642

(1,312,446)

15,105,973

Plan fiduciary net position - beginning

49,063,497

57,717,139

56,404,693

Plan fiduciary net position - ending (b)

57,717,139

$

56,404,693

$

71,510,666

$

City's net OPEB liability - ending (a-b)

114,882,914

$

117,611,368

$

84,496,849

$

Plan fiduciary net position as a percentage of the

total OPEB liability

33.44% 32.41% 45.84%

Covered-employee payroll

51,597,031

$

51,597,031

$

54,243,818

$

City's net OPEB liability as a percentage of

covered-employee payroll

222.7% 227.9% 155.8%

SCHEDULE OF INVESTMENT RETURNS

2017

2018

2019

Annual money-weighted rate of return, net of

investment expense

16.68% -3.20% 24.48%

The notes to the required supplementary information are an integral part of this schedule.

These schedules are intended to show information for ten years. Additional years will be displayed as they become

available.

93

CITY OF DULUTH, MINNESOTA

OTHER POSTEMPLOYMENT BENEFITS PLAN (OPEB) TRUST

SCHEDULE OF CITY CONTRIBUTIONS

DECEMBER 31, 2019

2017

2018

2019

Actuarially determined contribution

11,456,261$ 10,536,980$ 9,619,556$

Contributions in relation to the

actuarially determined contribution

10,222,267 11,678,484 11,642,994

Contribution deficiency (excess)

(1,233,994)

$

1,141,504

$

2,023,438

$

Covered-employee payroll

51,597,031$ 51,597,031$ 54,243,818$

Contributions as a percentage of

covered-employee payroll

19.8% 22.6% 21.5%

Notes to Schedule:

Valuation date

1/1/2019

Methods and assumptions used to determine contribution rates:

Actuarial cost method

Asset valuation method

Market value

Inflation

2.2%

Healthcare cost trend rates

Salary increases

3.5%

Investment rate of return

5.7%

Retirement age

Mortality

Morbidity

Pre-65: 2.75% per pear; Post-65: 1.0% per year

The notes to the required supplementary information are an integral part of this schedule.

Based on actuary's experience with plans of a similar size, plan design,

workforce composition, and discussions with the City

SOA RPH-2014 Adjust to 2006 Total Dataset Headcount-weighted Mortality

project with Scale MP-2018

9.0% initially, reduced incrementally to an ultimate rate of 5.0% after ten years

This schedule is intended to show information for ten years. Additional years will be displayed as they become

available.

Individual Entry Age Normal as a level percentage of payroll

94

CITY OF DULUTH, MINNESOTA

SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY AND

SCHEDULE OF CONTRIBUTIONS

PERA GENERAL EMPLOYEES PLAN

DECEMBER 31, 2019

SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY *

(LAST TEN YEARS**)

Fiscal Year

Ending***

Employer's

Proportionate

Share

(Percentage)

of the Net

Pension

Liability

(Asset)

Employer's

Proportionate

Share

(Amount) of

the Net

Pension

Liability

(Asset)

(a)

State's

Proportionate

Share

(Amount) of

the Net

Pension

Liability

Associated

with the City

(b)

Employer's

Proportionate

Share of the

Net Pension

Liability and

the State's

Proportionate

Share of the

Net Pension

Liability

Associated

with the City

(a+b)

Employer's

Covered

Payroll

(c)

Employer's

Proportionate

Share of the

Net Pension

Liability

(Asset) as a

Percentage of

its Covered

Payroll

(a+b)/c

Plan

Fiduciary

Net Position

as a

Percentage

of the Total

Pension

Liability

2019 0.5179% 28,633,531$ 889,961$ 29,523,492$ 36,654,573$ 80.55% 80.20%

2018 0.5221% 28,963,967$ 950,024$ 29,913,991$ 35,092,853$ 85.24% 79.50%

2017

0.5543%

35,388,146

$

444,931

$

35,833,077

$

35,707,680

$

100.35%

75.90%

2016 0.5257% 42,684,233$ 557,508$ 43,241,741$ 32,622,333$ 132.55% 68.91%

2015 0.5499% 28,498,672$ -$ 28,498,672$ 32,321,183$ 88.17% 78.19%

SCHEDULE OF CONTRIBUTIONS

(LAST TEN YEARS *)

Fiscal Year

Ending **

Statutorily

Required

Contribution

(a)

Contributions

in Relation to

the Statutorily

Required

Contribution

(b)

Contribution

Deficiency

(Excess)

(a-b)

Covered

Payroll

(d)

Contributions

as a

Percentage

of Covered

Payroll

(b/d)

2019 2,853,467$ 2,853,467$ -$ 38,046,227$ 7.50%

2018 2,697,667$ 2,697,667$ -$ 35,968,893$ 7.50%

2017

2,678,076

$

2,678,076

$

-

$

34,694,027

$

7.72%

2016 2,446,675$ 2,446,675$ -$ 33,753,187$ 7.25%

2015 2,514,167$ 2,514,167$ -$ 33,522,227$ 7.50%

The notes to the required supplementary information are an integral part of this schedule.

** The fiscal year for the Schedule of Contributions should be the employer's fiscal year end, i.e., June 30 or December 31 for most

PERA employers.

* Option to provide RSI for ten years at transition or to provide RSI prospectively.

*** The year reported for this schedule coincides with the measurement date used for the NPL.

* This schedule is for Employers in the General Employees Plan to report their proportionate share of the State of Minnesota's

contributions to the General Employees Fund on their behalf.

** Schedule is to be provided prospectively beginning with the employer's fiscal year ended June 30, 2015, or after.

95

CITY OF DULUTH, MINNESOTA

SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY AND

SCHEDULE OF CONTRIBUTIONS

PERA POLICE AND FIRE PLAN

DECEMBER, 31, 2019

SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY

(LAST TEN YEARS*)

Fiscal Year

Ending**

Employer's

Proportionate

Share

(Percentage) of

the Net Pension

Liability (Asset)

Employer's

Proportionate

Share (Amount) of

the Net Pension

Liability (Asset)

(a)

Employer's

Covered

Payroll

(b)

Employer's

Proportionate Share

of the Net Pension

Liability (Asset) as a

Percentage of its

Covered Payroll

(a/b)

Plan Fiduciary

Net Position as

a Percentage of

the Total

Pension Liability

2019 2.309% 24,576,314$ 24,327,497$ 101.02% 89.30%

2018 2.195% 23,397,505$ 23,134,636$ 101.14% 88.80%

2017

2.311%

31,201,250

$

23,723,278

$

131.52%

85.40%

2016 2.317% 92,985,242$ 22,320,623$ 416.59% 63.88%

2015 2.268% 25,769,787$ 20,780,650$ 124.01% 86.61%

* Schedule is to be provided prospectively beginning with the employer's fiscal year ended June 30, 2015, or after.

** The year reported for this schedule coincides with the measurement date used for the NPL.

SCHEDULE OF CONTRIBUTIONS

(LAST TEN YEARS*)

Fiscal Year

Ending**

Statutorily

Required

Contribution

(a)

Contributions in

Relation to the

Statutorily

Required

Contribution

(b)

Contribution

Deficiency

(Excess)

(a-b)

Covered Payroll

(d)

Contributions as

a Percentage of

Covered Payroll

(b/d)

2019 4,286,075$ 4,286,075$ -$ 25,286,578$ 16.95%

2018 3,790,774$ 3,790,774$ -$ 23,399,840$ 16.20%

2017

3,843,171

$

3,843,171

$

-

$

22,831,389

$

16.83%

2016 3,615,941$ 3,615,941$ -$ 22,874,383$ 15.81%

2015 3,557,651$ 3,557,651$ -$ 21,960,809$ 16.20%

* Option to provide RSI for ten years at transition or to provide RSI prospectively.

The notes to the required supplementary information are an integral part of this schedule.

** The fiscal year for the Schedule of Contributions should be the employer's fiscal year end, i.e., June 30 or December

31 for most PERA employers.

96

CITY OF DULUTH, MINNESOTA

NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2019

2019

2018

• The augmentation adjustment in early retirement factors is eliminated over a five-year period starting July 1, 2019,

resulting in actuarial equivalence after June 30, 2024.

• Interest credited on member contributions decreased from 4.0% to 3.0%, beginning July 1, 2018.

• Deferred augmentation was changed to 0.0%, effective January 1, 2019. Augmentation that has already accrued for

deferred members will still apply.

• Contribution stabilizer provisions were repealed.

• Postretirement benefit increases were changed from 1.0% per year with a provision to increase to 2.50% upon

attainment of 90.0% funding ratio to 50.0% of the Social Security Cost of Living Adjustment, not less than 1.0% and not

more than 1.50%, beginning January 1, 2019.

• For retirements on or after January 1, 2024, the first benefit increase is delayed until the retiree reaches normal

retirement age; does not apply to Rule of 90 retirees, disability benefit recipients, or survivors.

• Actuarial equivalent factors were updated to reflect revised mortality and interest assumptions.

• The mortality projection scale was changed from MP-2017 to MP-2018.

• The employer supplemental contribution was changed prospectively, decreasing from $31.0 million to $21.0 million per

year. The State’s special funding contribution was changed prospectively, requiring $16.0 million due per year through

2031.

• The mortality projection scale was changed from MP-2015 to MP-2017.

• The assumed benefit increase rate was changed from 1.0% per year through 2044 and 2.5% per year thereafter, to

1.25% per year.

OTHER POSTEMPLOYMENT BENEFITS FUNDED STATUS

See Note 16 in the notes to the financial statements for additional information regarding the City's other postemployment

benefits.

EMPLOYER CONTRIBUTIONS TO OTHER POSTEMPLOYMENT BENEFITS

In 2007, the City established an irrevocable trust, pursuant to Minnesota Statute § 471.6175 to prefund a portion of the

liability of the plan. These funds are reported in the Other Postemployment Benefits Trust Fund and are included in the

actuarial valuation.

The following changes were reflected in the valuation performed on behalf of the OPEB Trust Fund as of January 1,

2019:

• The initial healthcare cost trend rate was changed from 10.0% to 9.0%.

• The mortality projection scale was changed from MP-2016 to MP-2018.

• The morbidity rate for those under 65 was changed from 2.5% to 2.75%.

DEFINED BENEFIT PENSION PLANS - CHANGES IN SIGNIFICANT PLAN PROVISION, ACTUARIAL METHODS

AND ASSUMPTIONS

The following changes were reflected in the valuation performed on behalf of the Public Employees Retirement

Association for the fiscal year June 30:

General Employees Fund

97

CITY OF DULUTH, MINNESOTA

NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2019

2017

2016

2015

2019

2018

• The assumed postretirement benefit increase rate was changed from 1.0% per year through 2030 and 2.5% per year

thereafter to 1.0% per year through 2035 and 2.5% per year thereafter.

• On January 1, 2015, the Minneapolis Employees Retirement Fund was merged into the General Employees Fund,

which increased the total pension liability by $1.1 billion and increase the fiduciary plan net position by $892 million. Upon

consolidation, state and employer contributions were revised; the State’s contribution of $6.0 million, which meets the

special funding situation definition, was due September 2015.

• The morality projection scale was changed from MP-2017 to MP-2018.

General Employees Fund (continued)

• The assumed postretirement benefit increase rate was changed from 1.0% per year through 2035 and 2.5% per year

thereafter, to 1.0% for all future years.

• The assumed investment rate was changed from 7.9% to 7.5%. The single discount rate was also changed from 7.9%

to 7.5%.

• Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed payroll growth

and inflation were decreased by 0.25%. Payroll growth was reduced from 3.5% to 3.25%. Inflation was reduced from

2.75% to 2.5%.

• The State’s contribution for the Minneapolis Employees Retirement Fund equals $16 million in 2017 and 2018, and $6

million thereafter.

• The Employer Supplemental Contribution for the Minneapolis Employees Retirement Fund changed from $21 million to

$31 million in calendar years 2019 to 2031. The state’s contribution changed from $16 million to $6 million in calendar

years 2019 to 2031.

Police and Fire Plan

• The mortality projection scale was changed from MP-2016 to MP-2017.

• postretirement benefit increases changed to 1.0% for all years, with no trigger.

• An end date of July 1, 2048 was added to the existing $9.0 million state contribution.

• New annual state aid will equal $4.5 million in fiscal years 2019 and 2020, and $9.0 million thereafter until the plan

reaches 100% funding, or July 1, 2048, if earlier.

• Member contributions were changed from 10.8% to 11.3% of pay, effective January 1, 2019 and 11.8% of pay, effective

January 1, 2020.

• Employer contributions were changed from 16.2% to 16.95% of pay, effective January 1, 2019 and 17.7% of pay,

effective January 1, 2020.

• Interest credited on member contributions decreased from 4.0% to 3.0%, beginning July 1, 2018.

• Deferred augmentation was changed to 0.0%, effective January 1, 2019. Augmentation that has already accrued for

deferred members will still apply.

• Actuarial equivalent factors were updated to reflect revised mortality and interest assumptions.

• The Combined Service Annuity (CSA) loads were changed from 0.8% for active members and 60% for vested and non-

vested deferred members. The revised CSA loads are now 0.0% for active member liability, 15% for vested deferred

member liability, and 3.0% for non-vested deferred member liability.

• The assumed postretirement benefit increase rate was changed from 1.0% per year for all years to 1.0% per year

through 2044 and 2.5% per year thereafter.

98

CITY OF DULUTH, MINNESOTA

NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2019

2017

2016

2015

• The assumed postretirement benefit increase rate was changed from 1.0% per year through 2030 and 2.5% per year

thereafter to 1.0% per year through 2037 and 2.5% per year thereafter.

• The postretirement benefit increase to be paid after the attainment of the 90.0% funding threshold was changed from

inflation up to 2.5%, to a fixed rate of 2.5%

Police and Fire Plan (continued)

• The assumed postretirement benefit increase rate was changed from 1.0% per year through 2037 and 2.50% per year

thereafter to 1.0% per year for all future years.

• The assumed investment return was changed from 7.9% to 7.5%.

• The single discount rate changed from 7.9% to 5.6%.

• The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to 3.25% for payroll

growth and 2.5% for inflation.

• The assumed salary increases were changed as recommended in the June 30, 2016, experience study. The net effect

is proposed rates that average 0.34% lower than the previous rates.

• The assumed rates of retirement were changed, resulting in fewer retirements.

• The CSA load was 30% for vested and non-vested, deferred members. The CSA has been changed to 33% for vested

members and 2.0% for non-vested members.

• The base mortality table for healthy annuitants was changed from the RP-2000 fully generational table to the RP-2014

fully generational table (with a base year of 2006), with male rates adjusted by a factor of 0.96. The mortality

improvement scale was changed from Scale AA to Scale MP-2016. The base mortality table for disabled annuitants was

changed from the RP-2000 disabled mortality table to the mortality table assumed for healthy retirees.

• The assumed termination rates were decreased to 3.0% for the first three years of service. Rates beyond the select

period of three years were adjusted, resulting in more expected terminations overall.

• The assumed percentage of married female members was decreased from 65% to 60%.

• The assumed age difference was changed from separate assumptions for male members (wives assumed to be three

years younger) and female members (husbands assumed to be four years older) to the assumption that males are two

years older than females.

• The assumed percentage of female members electing joint and survivor annuities was increased.

• The assumed postretirement benefit increase rate was changed from 1.0% for all years to 1.0% per year through 2064

and 2.5% thereafter.

• The single discount rate was changed from 5.6% per annum to 7.5% per annum.

99

C o m b i n i n g a n d I n d i v i d u a l

F u n d S t a t e m e n t s a n d

S c h e d u l e s

G o v e r n m e n t a l F u n d s

CITY OF DULUTH, MINNESOTA

NONMAJOR GOVERNMENTAL FUNDS

DECEMBER 31, 2019

SPECIAL REVENUE FUNDS

Special Revenue Funds account for the specific financial resources (other than special assessments, expendable

trusts, or other major capital projects) that are restricted to expenditures for specified purposes.

Lake Superior Zoo – to account for revenues earned from the operations of the Lake Superior Zoo which are to be

used to offset operating costs incurred by the Arrowhead Zoological Society in managing Zoo operations.

Parks – to account for a tax levy dedicated for parks and recreation facilities, recreation activities, and implementation

of the Duluth parks and recreation master plan.

Special Projects – to account for monies received as fees, donations, or grants, which are to be expended for a

specific purpose or project.

Police Grant Programs – to account for grant monies received from the U.S. Department of Justice and Minnesota

Department of Public Safety for various police programs.

Recovery Loan Program – to account for grant monies received from the Minnesota Department of Employment

and Economic Development for the establishment of an economic development loan program.

Bayfront Festival Park – to account for fees earned from the operations of the Festival Park, which are to be used

for capital maintenance and improvements to the Park.

Library Special Accounts – to account for all special gifts, donations, and trusts designated for the purchase of

books, equipment, or projects for the library.

Economic Development – to account for various grants and loans to be used for the development and revitalization

of the City’s economy.

Energy Management – to account for excess home energy funds, utility rebates, grants, and a portion of energy

savings used for managing energy in city facilities and the Cities for Climate Protection Program.

Tourism Tax – to account for the collection of food and beverage and hotel-motel excise taxes, and disbursement

of funds for tourism-related activities as dictated by state statutes and City ordinances.

Public Facility and Program – to account for the collection, administration, and disbursement of 5% of the net profits

derived from lawful gambling, with such funds to be administered by a Lawful Gambling Commission.

Home Investment Partnerships Program – to account for grant monies received from the U.S. Department of

Housing and Urban Development for the furtherance of a single-family housing rehabilitation program and various

other housing-related projects.

Community Development – to account for grant monies and Section 108 loan funds received from the U.S.

Department of Housing and Urban Development. These monies are to be expended on projects considered

necessary for the renewal and revitalization of the City.

Workforce Development – to account for monies received through the Minnesota Department of Employment and

Economic Development and St. Louis County to provide job training and employment opportunities for economically

disadvantaged, unemployed and underemployed persons.

Senior Employment – to account for monies received from the Minnesota Department of Employment and Economic

Development and the National Council of Senior Citizens under Title V of the Older Americans Act to provide useful

part-time employment for low-income elderly and to improve community services.

100

CITY OF DULUTH, MINNESOTA

NONMAJOR GOVERNMENTAL FUNDS

DECEMBER 31, 2019

SPECIAL REVENUE FUNDS (continued)

Street System Maintenance Utility – to account for monies received for street system maintenance utility fees from

residential, commercial, and industrial properties, used to fund existing street improvement debt, enhanced

maintenance, and street reconstruction.

Street Improvement Sales Tax – additional half percent general sales tax dedicated to street improvement.

Public Arts – to account for the proceeds of various fund-raising activities sponsored by the Duluth Public Arts

Commission, to be used for art in public places and art projects.

DEBT SERVICE FUNDS

Debt Service Funds account for the accumulation of resources for, and the payment of, long-term principal, interest

and related costs.

DECC Revenue – to account for food and beverage tax revenues and DECC pledged revenues dedicated towards

repayment of bonds issued to finance the expansion of the DECC.

Special Assessment Debt Service – to account for the resources accumulated and payments made for the principal

and interest on long-term special assessment debt.

Street Improvement Debt Service – to account for accumulation of resources for, and the payment of, general

obligation bonds issued for financing the City’s Street Improvement Program.

Tax Increment – to account for the collection and distribution of tax increment proceeds associated with City Tax

Increment Financing (TIF) districts.

CAPITAL PROJECTS FUNDS

Capital Projects Funds account for financial resources to be used for the acquisition, construction or improvement of

capital facilities other than those financed by enterprise funds.

Capital Equipment – to account for bond proceeds and other revenues used for purchase of equipment.

Special Assessment – to account for improvements which are financed by special assessments.

Permanent Improvement – to account for capital improvements financed by sources other than assessments.

Street Improvement Program – to account for improvements to be made as part of the City’s Street Improvement

Program.

Capital Improvement – to account for capital improvements that are financed by issuance of debt.

Tourism and Recreational Projects – Capital project fund established to account for bond proceeds for tourism and

recreational projects along the St. Louis River Corridor.

101

CITY OF DULUTH, MINNESOTA

COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS

DECEMBER 31, 2019

Lake Superior

Zoo Parks

Special

Projects

Police Grant

Programs

Recovery

Loan Program

Assets

Cash and cash equivalents

-$ 1,705,586$ 1,736,104$ 879,811$ 615,402$

Receivables, net

Taxes

- 99,928 - - -

Accounts

- 5,967 88,934 115 -

Assessments

- - 185,269 - -

Loans

247,396 - - - 772,882

Due from other funds

- - 19,989 600 -

Due from component units

- - 7,935 - 257,661

Due from other governments

46,862 220,648 80,730 413,636 -

Total Assets

294,258$ 2,032,129$ 2,118,961$ 1,294,162$ 1,645,945$

Liabilities

Accounts payable

70 26,887 5,264 583,502 -

Contracts payable

15,108 177,143 14,331 185,528 -

Due to other funds

- 10,646 5,253 61,840 -

Due to component units

- - - - -

Interfund loan payable

438,181 - - - -

Due to other governments

- 10,184 7,030 5,436 204,942

Accrued salaries payable

- 24,234 - - -

Unearned revenue

- 174 137,471 22,880 -

Total Liabilities

453,359 249,268 169,349 859,186 204,942

Deferred Inflows of Resources

`

Unavailable revenue

247,396 236,600 209,639 300,816 574,988

Fund Balances

Restricted

- 1,546,261 648,356 134,160 866,015

Committed

- - 1,091,617 - -

Assigned

- - - - -

Unassigned

(406,497) - - - -

Total Fund Balances

(406,497) 1,546,261 1,739,973 134,160 866,015

Total Liabilities, Deferred Inflows of

Resources, and Fund Balances

294,258$ 2,032,129$ 2,118,961$ 1,294,162$ 1,645,945$

(continued)

Special Revenue Funds

102

CITY OF DULUTH, MINNESOTA

COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS

DECEMBER 31, 2019

Assets

Cash and cash equivalents

Receivables, net

Taxes

Accounts

Assessments

Loans

Due from other funds

Due from component units

Due from other governments

Total Assets

Liabilities

Accounts payable

Contracts payable

Due to other funds

Due to component units

Interfund loan payable

Due to other governments

Accrued salaries payable

Unearned revenue

Total Liabilities

Deferred Inflows of Resources

Unavailable revenue

Fund Balances

Restricted

Committed

Assigned

Unassigned

Total Fund Balances

Total Liabilities, Deferred Inflows of

Resources, and Fund Balances

Bayfront

Festival Park

Library

Special

Accounts

Economic

Development

Energy

Management Tourism Tax

183,644$ 615,890$ 11,287$ 120,774$ 554,827$

- - - - 868,164

- - - - -

- - - 57,000 -

- - - - -

- - 59,897 - 126,800

183,644$ 615,890$ 71,184$ 177,774$ 1,549,791$

2,000 11,805 231 946 -

- - 63,478 - 60,002

- - 3,139 2,218 557,476

- - - - -

- - - 2,250 -

- - 2 - -

2,000 11,805 66,850 5,414 617,478

- - - - -

- 604,085 - - 932,313

181,644 - - 172,360 -

- - 4,334 - -

- - - - -

181,644 604,085 4,334 172,360 932,313

183,644$ 615,890$ 71,184$ 177,774$ 1,549,791$

(continued)

Special Revenue Funds

103

CITY OF DULUTH, MINNESOTA

COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS

DECEMBER 31, 2019

Assets

Cash and cash equivalents

Receivables, net

Taxes

Accounts

Assessments

Loans

Due from other funds

Due from component units

Due from other governments

Total Assets

Liabilities

Accounts payable

Contracts payable

Due to other funds

Due to component units

Interfund loan payable

Due to other governments

Accrued salaries payable

Unearned revenue

Total Liabilities

Deferred Inflows of Resources

Unavailable revenue

Fund Balances

Restricted

Committed

Assigned

Unassigned

Total Fund Balances

Total Liabilities, Deferred Inflows of

Resources, and Fund Balances

Public Facility

and Program

Home

Investment

Partnerships

Program

Community

Development

Workforce

Development

Senior

Employment

72,373$ 32,380$ 1,087,570$ 254,030$ -$

391 - - - -

- - 268,689 2 18,286

- - - - -

- 351,579 2,614,793 - -

- 5,187 10,002 7,833 2,683

- - - - -

- 119,743 677,338 104,616 26,076

72,764$ 508,889$ 4,658,392$ 366,481$ 47,045$

- - 46,115 26,546 -

- 109,525 629,526 20,451 -

- 5,772 5,187 11,742 1,574

- - - - -

- - - - 45,459

- - 22,198 - -

- - - 14,277 -

- 62,690 153,044 6,049 -

- 177,987 856,070 79,065 47,033

- 454,137 2,922,235 17,775 2,026

72,764 - 880,087 269,641 -

- - - - -

- (123,235) - - (2,014)

72,764 (123,235) 880,087 269,641 (2,014)

72,764$ 508,889$ 4,658,392$ 366,481$ 47,045$

(continued)

Special Revenue Funds

104

CITY OF DULUTH, MINNESOTA

COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS

DECEMBER 31, 2019

Assets

Cash and cash equivalents

Receivables, net

Taxes

Accounts

Assessments

Loans

Due from other funds

Due from component units

Due from other governments

Total Assets

Liabilities

Accounts payable

Contracts payable

Due to other funds

Due to component units

Interfund loan payable

Due to other governments

Accrued salaries payable

Unearned revenue

Total Liabilities

Deferred Inflows of Resources

Unavailable revenue

Fund Balances

Restricted

Committed

Assigned

Unassigned

Total Fund Balances

Total Liabilities, Deferred Inflows of

Resources, and Fund Balances

Street System

Maintenance

Utility

Street

Improvement

Sales Tax Public Arts

DECC

Revenue

Special

Assessment

Debt Service

818,756$ -$ 175,869$ 4,714,094$ 208,379$

100,775 1,964,649 - - -

- - - - -

- - - - 516,714

- - - - -

- - - 551,179 -

- - - - -

- - - - 36,725

919,531$ 1,964,649$ 175,869$ 5,265,273$ 761,818$

- - - - -

65,437 - - - -

337,987 - - - 33,849

- - - 814,282 -

- - - - -

1,722 - - - -

- - - - -

405,146 - - 814,282 33,849

71,846 - - - 516,714

442,539 1,964,649 - 4,450,991 211,255

- - 175,869 - -

- - - - -

442,539 1,964,649 175,869 4,450,991 211,255

919,531$ 1,964,649$ 175,869$ 5,265,273$ 761,818$

(continued)

Special Revenue Funds Debt Service Funds

105

CITY OF DULUTH, MINNESOTA

COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS

DECEMBER 31, 2019

Assets

Cash and cash equivalents

Receivables, net

Taxes

Accounts

Assessments

Loans

Due from other funds

Due from component units

Due from other governments

Total Assets

Liabilities

Accounts payable

Contracts payable

Due to other funds

Due to component units

Interfund loan payable

Due to other governments

Accrued salaries payable

Unearned revenue

Total Liabilities

Deferred Inflows of Resources

Unavailable revenue

Fund Balances

Restricted

Committed

Assigned

Unassigned

Total Fund Balances

Total Liabilities, Deferred Inflows of

Resources, and Fund Balances

Street

Improvement

Debt Service Tax Increment

Capital

Equipment

Special

Assessment

Permanent

Improvement

2,054,712$ 55,432$ 2,394,099$ -$ 3,153,785$

- - - - 10,112

- - - - 303,364

249,839 - - 319,004 -

- - - - -

1,137 - 78,031 - 508,343

- - - - -

- - - - 840,240

2,305,688$ 55,432$ 2,472,130$ 319,004$ 4,815,844$

- - 23,764 - 34,948

- - 4,211 - 3,225,933

- - - - 15,836

- - - - -

- - - 181,434 -

- - - - 817,079

- - - - -

- - 27,975 181,434 4,093,796

249,839 - - 319,004 701,430

2,055,849 - 2,444,155 - 20,618

- - - - -

- 55,432 - (181,434) -

2,055,849 55,432 2,444,155 (181,434) 20,618

2,305,688$ 55,432$ 2,472,130$ 319,004$ 4,815,844$

(continued)

Debt Service Funds Capital Projects Funds

106

CITY OF DULUTH, MINNESOTA

COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS

DECEMBER 31, 2019

Assets

Cash and cash equivalents

Receivables, net

Taxes

Accounts

Assessments

Loans

Due from other funds

Due from component units

Due from other governments

Total Assets

Liabilities

Accounts payable

Contracts payable

Due to other funds

Due to component units

Interfund loan payable

Due to other governments

Accrued salaries payable

Unearned revenue

Total Liabilities

Deferred Inflows of Resources

Unavailable revenue

Fund Balances

Restricted

Committed

Assigned

Unassigned

Total Fund Balances

Total Liabilities, Deferred Inflows of

Resources, and Fund Balances

Street

Improvement

Program

Capital

Improvement

Tourism and

Recreational

Projects

Total Nonmajor

Governmental

Funds

2,096,102$ 41,267$ 7,614,090$ 31,196,263$

- - - 3,044,019

- - - 685,357

1,355,572 - - 2,626,398

- - - 3,986,650

341,825 272,375 - 1,856,184

- - - 265,596

- 278,955 675,115 3,707,381

3,793,499$ 592,597$ 8,289,205$ 47,367,848$

- 84,802 10,617 857,497

500,184 333,488 579,261 5,983,606

- - - 1,052,519

- - - 814,282

- - - 665,074

- - 53 1,068,644

- - - 40,761

- - 51,475 433,785

500,184 418,290 641,406 10,916,168

1,355,572 63,389 356,842 8,600,248

- 110,918 7,290,957 24,945,613

- - - 1,621,490

1,937,743 - - 1,942,077

- - - (657,748)

1,937,743 110,918 7,290,957 27,851,432

3,793,499$ 592,597$ 8,289,205$ 47,367,848$

Capital Projects Funds

107

CITY OF DULUTH, MINNESOTA

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Lake Superior

Zoo Parks

Special

Projects

Police Grant

Programs

Recovery

Loan Program

Revenues

Taxes

Property taxes

-$ 2,869,541$ -$ -$ -$

Sales taxes

- - - - -

Other taxes

- - - - -

Licenses and permits

- 76,557 37,653 - -

Intergovernmental revenues

126,863 134,173 736,724 1,748,485 -

Charges for services

982,343 71,955 90,532 - -

Fines and forfeits

- - 12,165 142,168 -

Special assessments

- - - - -

Investment income

- 16,838 16,748 9,026 3,633

Miscellaneous revenues

81,264 114,868 896,571 18,672 -

Total Revenues

1,190,470 3,283,932 1,790,393 1,918,351 3,633

Expenditures

Current

General government

- - 92,686 - -

Public safety

- - 703,057 858,581 -

Public works

- - - - -

Culture and recreation

1,695,975 2,761,040 47,381 - -

Urban and economic development

- - - - -

Debt service

Principal retirement

- - - - -

Interest and fiscal fees

- - - - -

Bond issuance costs

- - - - -

Capital outlay

- 351,791 324,249 229,814 -

Total Expenditures

1,695,975 3,112,831 1,167,373 1,088,395 -

Excess (Deficiency) of Revenues Over

(Under) Expenditures

(505,505) 171,101 623,020 829,956 3,633

Other Financing Sources (Uses)

Issuance of bonds

- - - - -

Premium on issuance of bonds

- - - - -

Transfers in

510,000 10,000 - - -

Transfers out

- (237,485) (479,511) (1,287,301) -

Total Other Financing Sources (Uses)

510,000 (227,485) (479,511) (1,287,301) -

Net Change in Fund Balances

4,495 (56,384) 143,509 (457,345) 3,633

Fund Balances - January 1, 2019

(410,992) 1,602,645 1,596,464 591,505 862,382

Fund Balances - December 31, 2019

(406,497)$ 1,546,261$ 1,739,973$ 134,160$ 866,015$

(continued)

Special Revenue Funds

108

CITY OF DULUTH, MINNESOTA

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Revenues

Taxes

Property taxes

Sales taxes

Other taxes

Licenses and permits

Intergovernmental revenues

Charges for services

Fines and forfeits

Special assessments

Investment income

Miscellaneous revenues

Total Revenues

Expenditures

Current

General government

Public safety

Public works

Culture and recreation

Urban and economic development

Debt service

Principal retirement

Interest and fiscal fees

Bond issuance costs

Capital outlay

Total Expenditures

Excess (Deficiency) of Revenues Over

(Under) Expenditures

Other Financing Sources (Uses)

Issuance of bonds

Premium on issuance of bonds

Transfers in

Transfers out

Total Other Financing Sources (Uses)

Net Change in Fund Balances

Fund Balances - January 1, 2019

Fund Balances - December 31, 2019

Bayfront

Festival Park

Library

Special

Accounts

Economic

Development

Energy

Management Tourism Tax

-$ -$ -$ -$ -$

- - - - 12,416,044

- - - - -

- - 157,317 - -

- - - - -

1,875 5,922 77 1,415 5,347

47,135 170,386 19,022 27,372 -

49,010 176,308 176,416 28,787 12,421,391

- - - 145,490 -

- - - - -

- 121,708 - - -

- - 177,538 - 3,997,418

- - - - -

49,700 10,822 - - -

49,700 132,530 177,538 145,490 3,997,418

(690) 43,778 (1,122) (116,703) 8,423,973

- - - - -

- - - 135,000 -

- - - - (8,375,282)

- - - 135,000 (8,375,282)

(690) 43,778 (1,122) 18,297 48,691

182,334 560,307 5,456 154,063 883,622

181,644$ 604,085$ 4,334$ 172,360$ 932,313$

(continued)

Special Revenue Funds

109

CITY OF DULUTH, MINNESOTA

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Revenues

Taxes

Property taxes

Sales taxes

Other taxes

Licenses and permits

Intergovernmental revenues

Charges for services

Fines and forfeits

Special assessments

Investment income

Miscellaneous revenues

Total Revenues

Expenditures

Current

General government

Public safety

Public works

Culture and recreation

Urban and economic development

Debt service

Principal retirement

Interest and fiscal fees

Bond issuance costs

Capital outlay

Total Expenditures

Excess (Deficiency) of Revenues Over

(Under) Expenditures

Other Financing Sources (Uses)

Issuance of bonds

Premium on issuance of bonds

Transfers in

Transfers out

Total Other Financing Sources (Uses)

Net Change in Fund Balances

Fund Balances - January 1, 2019

Fund Balances - December 31, 2019

Public

Facility and

Program

Home

Investment

Partnerships

Program

Community

Development

Workforce

Development

Senior

Employment

-$ -$ -$ -$ -$

- - - - -

10,977 - - - -

- - - - -

- 445,508 2,862,030 2,313,541 339,811

- - - - -

644 100 31,364 2,428 -

- - 144,645 260,171 -

11,621 445,608 3,038,039 2,576,140 339,811

- - - - -

- 541,284 2,791,872 2,563,753 324,228

- - 15,000 - -

- - 100,178 - -

- - - - -

- 541,284 2,907,050 2,563,753 324,228

11,621 (95,676) 130,989 12,387 15,583

- - - - -

- - (2,500) - (17,590)

11,621 (95,676) 128,489 12,387 (2,007)

61,143 (27,559) 751,598 257,254 (7)

72,764$ (123,235)$ 880,087$ 269,641$ (2,014)$

(continued)

Special Revenue Funds

110

CITY OF DULUTH, MINNESOTA

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Revenues

Taxes

Property taxes

Sales taxes

Other taxes

Licenses and permits

Intergovernmental revenues

Charges for services

Fines and forfeits

Special assessments

Investment income

Miscellaneous revenues

Total Revenues

Expenditures

Current

General government

Public safety

Public works

Culture and recreation

Urban and economic development

Debt service

Principal retirement

Interest and fiscal fees

Bond issuance costs

Capital outlay

Total Expenditures

Excess (Deficiency) of Revenues Over

(Under) Expenditures

Other Financing Sources (Uses)

Issuance of bonds

Premium on issuance of bonds

Transfers in

Transfers out

Total Other Financing Sources (Uses)

Net Change in Fund Balances

Fund Balances - January 1, 2019

Fund Balances - December 31, 2019

Street System

Maintenance

Utility

Street

Improvement

Sales Tax Public Arts

DECC

Revenue

Special

Assessment

Debt Service

2,977,220$ -$ -$ -$ -$

- 1,998,250 - - -

- - - - -

- - - - 238,370

7,447 - 1,715 45,277 4,319

4,767 - - - -

2,989,434 1,998,250 1,715 45,277 242,689

- - - - -

707,815 33,601 - - -

- - 8,765 - -

- - - 814,282 -

- - - - 530,000

- - - - 26,760

- - - - -

707,815 33,601 8,765 814,282 556,760

2,281,619 1,964,649 (7,050) (769,005) (314,071)

- - - - -

50,000 - 15,000 3,883,440 -

(2,630,585) - - (2,838,775) -

(2,580,585) - 15,000 1,044,665 -

(298,966) 1,964,649 7,950 275,660 (314,071)

741,505 - 167,919 4,175,331 525,326

442,539$ 1,964,649$ 175,869$ 4,450,991$ 211,255$

(continued)

Special Revenue Funds Debt Service Funds

111

CITY OF DULUTH, MINNESOTA

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Revenues

Taxes

Property taxes

Sales taxes

Other taxes

Licenses and permits

Intergovernmental revenues

Charges for services

Fines and forfeits

Special assessments

Investment income

Miscellaneous revenues

Total Revenues

Expenditures

Current

General government

Public safety

Public works

Culture and recreation

Urban and economic development

Debt service

Principal retirement

Interest and fiscal fees

Bond issuance costs

Capital outlay

Total Expenditures

Excess (Deficiency) of Revenues Over

(Under) Expenditures

Other Financing Sources (Uses)

Issuance of bonds

Premium on issuance of bonds

Transfers in

Transfers out

Total Other Financing Sources (Uses)

Net Change in Fund Balances

Fund Balances - January 1, 2019

Fund Balances - December 31, 2019

Street

Improvement

Debt Service Tax Increment

Capital

Equipment

Special

Assessment

Permanent

Improvement

-$ 611,902$ -$ -$ 278,055$

- - - - -

- - - - 8,275,427

- - - - -

139,046 - - 38,114 -

25,803 - 71,627 - 20,645

- - 5,999 - 235,820

164,849 611,902 77,626 38,114 8,809,947

- - - - -

- - - - 3,836,622

- - - - -

- 500 - - -

1,510,000 - - - -

118,000 - - - -

- - 41,719 - -

- - 4,400,924 - 7,667,047

1,628,000 500 4,442,643 - 11,503,669

(1,463,151) 611,402 (4,365,017) 38,114 (2,693,722)

- - 3,070,000 - -

- - 371,475 - -

727,456 - - - 1,533,603

- (555,970) (4,205) - (50,000)

727,456 (555,970) 3,437,270 - 1,483,603

(735,695) 55,432 (927,747) 38,114 (1,210,119)

2,791,544 - 3,371,902 (219,548) 1,230,737

2,055,849$ 55,432$ 2,444,155$ (181,434)$ 20,618$

(continued)

Debt Service Funds Capital Projects Funds

112

CITY OF DULUTH, MINNESOTA

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Revenues

Taxes

Property taxes

Sales taxes

Other taxes

Licenses and permits

Intergovernmental revenues

Charges for services

Fines and forfeits

Special assessments

Investment income

Miscellaneous revenues

Total Revenues

Expenditures

Current

General government

Public safety

Public works

Culture and recreation

Urban and economic development

Debt service

Principal retirement

Interest and fiscal fees

Bond issuance costs

Capital outlay

Total Expenditures

Excess (Deficiency) of Revenues Over

(Under) Expenditures

Other Financing Sources (Uses)

Issuance of bonds

Premium on issuance of bonds

Transfers in

Transfers out

Total Other Financing Sources (Uses)

Net Change in Fund Balances

Fund Balances - January 1, 2019

Fund Balances - December 31, 2019

Street

Improvement

Program

Capital

Improvement

Tourism and

Recreational

Projects

Total Nonmajor

Governmental

Funds

-$ -$ -$ 6,736,718$

- - - 14,414,294

- - - 10,977

- - - 114,210

- 349,685 378,482 17,868,046

- - - 1,144,830

- - - 154,333

699,836 - - 1,115,366

18,839 13,221 265,213 569,523

- 137,573 225,000 2,389,265

718,675 500,479 868,695 44,517,562

- 1,588,649 - 1,826,825

- 272,170 - 1,833,808

371,816 - - 4,949,854

- 805,725 156,668 5,597,262

- - - 11,210,875

- - - 2,055,000

- - - 244,938

- 40,740 - 82,459

479,727 1,070,054 1,992,261 16,576,389

851,543 3,777,338 2,148,929 44,377,410

(132,868) (3,276,859) (1,280,234) 140,152

- 1,190,000 - 4,260,000

- 246,507 - 617,982

384,526 1,518,903 191,596 8,959,524

- (18,750) (99,903) (16,597,857)

384,526 2,936,660 91,693 (2,760,351)

251,658 (340,199) (1,188,541) (2,620,199)

1,686,085 451,117 8,479,498 30,471,631

1,937,743$ 110,918$ 7,290,957$ 27,851,432$

Capital Projects Funds

113

CITY OF DULUTH, MINNESOTA

SCHEDULE OF REVENUES - ESTIMATED AND ACTUAL

GENERAL FUND

FOR THE YEAR ENDED DECEMBER 31, 2019

Actual to

Modified

Budget

Original Modified Favorable

Budget Budget Actual (Unfavorable)

Taxes:

General property

Current 19,195,600$ 19,195,600$ 19,040,025$ (155,575)$

Delinquent 150,000 150,000 175,067 25,067

Mobile home 59,700 59,700 80,747 21,047

Forfeited tax sale apportionment 19,400 19,400 7,482 (11,918)

Franchise 3,946,700 3,946,700 3,534,434 (412,266)

Sales taxes 13,686,700 13,686,700 14,453,054 766,354

Charitable gambling 20,000 20,000 3,898 (16,102)

Other 83,700 83,700 303,734 220,034

Total Taxes 37,161,800 37,161,800 37,598,441 436,641

Licenses and Permits:

Liquor and non-intoxicating liquor 509,000 509,000 570,730 61,730

Health 25,000 25,000 31,458 6,458

Police protective 32,500 32,500 34,395 1,895

Amusement 1,000 1,000 1,261 261

Manufacturing and merchandising 38,600 38,600 46,389 7,789

Other 1,192,300 1,192,300 1,303,314 111,014

Total Licenses and Permits 1,798,400 1,798,400 1,987,547 189,147

Intergovernmental revenues:

Shared revenues

Local government aid 29,668,600 29,668,600 29,668,565 (35)

PERA aid 124,400 124,400 124,428 28

Insurance premium 1,820,000 1,820,000 2,124,504 304,504

PERA contribution - 378,296 378,296 -

State grants

Minnesota Library Information Network 5,000 5,000 4,536 (464)

Cross country ski trail 11,000 11,000 6,600 (4,400)

Snowmobile trail 13,900 13,900 16,097 2,197

Post training reimbursement 142,000 142,000 146,144 4,144

Bulletproof vests - 10,996 13,338 2,342

Market value credit - - 236 236

MSA street maintenance Allotment 1,533,400 1,533,400 1,533,400 -

Federal grants

Bulletproof Vest Partnership Program - 11,121 11,121 -

Other grants

St. Louis County 138,400 138,400 138,411 11

Payments in lieu of taxes -

Housing and Redevelopment Authority 57,400 57,400 66,939 9,539

Independent School District #709 253,400 253,400 278,940 25,540

Total Intergovernmental Revenues 33,767,500 34,167,913 34,511,555 343,642

(continued)

114

CITY OF DULUTH, MINNESOTA

SCHEDULE OF REVENUES - ESTIMATED AND ACTUAL

GENERAL FUND

FOR THE YEAR ENDED DECEMBER 31, 2019

Actual to

Modified

Budget

Original Modified Favorable

Budget Budget Actual (Unfavorable)

Charges for Services:

Departmental fees and services

Fire 6,400 6,400 4,200 (2,200)

Police 75,400 75,400 73,690 (1,710)

Engineering 363,000 363,000 164,399 (198,601)

Building inspection services 3,317,600 3,317,600 3,513,072 195,472

Attorney services 4,000 4,000 5,275 1,275

Information technology services 6,300 6,300 22,886 16,586

Grant administration services 69,000 69,000 73,648 4,648

Hydrant maintenance services 30,000 30,000 30,000 -

Assessment fees 60,600 60,600 85,670 25,070

Other services - - 105 105

Departmental sales

Copier and microfilm prints 26,800 26,800 17,457 (9,343)

Print and plan sales 100 100 15 (85)

Book sales 100 100 - (100)

Share of general expenses

Stormwater 134,400 134,400 134,400 -

Sewer 208,200 208,200 208,200 -

Steam 55,600 55,600 55,600 -

Duluth Entertainment and Convention

Center Authority 13,800 13,800 13,800 -

Duluth Transit Authority 10,300 10,300 10,300 -

Duluth Airport Authority 45,200 45,200 45,200 -

Duluth Economic Development Authority 400,000 400,000 400,000 -

Water and Gas 817,100 817,100 817,100 -

Fleet Services 145,500 145,500 145,500 -

Golf 16,100 16,100 16,100 -

Group Health 353,300 353,300 371,315 18,015

Self-Insurance 563,200 563,200 563,200 -

Spirit Mountain Recreation Area Authority 26,200 26,200 26,200 -

Parking 138,600 138,600 138,600 -

Street Lighting 55,100 55,100 55,100 -

410 West First Street Ramp 17,200 17,200 17,200 -

Total Charges for Services 6,959,100 6,959,100 7,008,232 49,132

Fines and Forfeits:

Library fines 68,000 68,000 38,510 (29,490)

Parking fines 21,600 21,600 77,714 56,114

Court fees 427,200 427,200 350,971 (76,229)

License penalties 2,000 2,000 10,351 8,351

Felony forfeitures - - 67,050 67,050

Total Fines and Forfeits 518,800 518,800 544,596 25,796

(continued)

115

CITY OF DULUTH, MINNESOTA

SCHEDULE OF REVENUES - ESTIMATED AND ACTUAL

GENERAL FUND

FOR THE YEAR ENDED DECEMBER 31, 2019

Actual to

Modified

Budget

Original Modified Favorable

Budget Budget Actual (Unfavorable)

Special Assessments 433,900 529,146 498,962 (30,184)

Investment Income:

Fair value adjustment - - 83,511 83,511

Miscellaneous Revenues:

Commission and concessions 10,000 10,000 11,934 1,934

Payments in lieu of taxes 16,000 16,000 - (16,000)

Fond du Luth proceeds 150,000 150,000 150,000 -

Police auction proceeds - - 4,994 4,994

Rent and lease 79,800 79,800 82,921 3,121

Damage claims - - 270 270

Sale of equipment - 6,350 69,254 62,904

Sale of scrap 6,000 6,000 5,760 (240)

Surcharge retainage 1,400 1,400 1,649 249

Refunds and reimbursements 137,900 589,835 678,090 88,255

Gifts and donations - 20,991 26,072 5,081

Interest temporary loans - - 4,144 4,144

Miscellaneous sales and services 72,900 104,900 121,990 17,090

Total Miscellaneous Revenues 474,000 985,276 1,157,078 171,802

Total Revenues 81,113,500 82,120,435 83,389,922 1,269,487

Other Financing Sources:

Transfers in:

Parks Fund - 37,500 37,500 -

Special Projects 233,100 340,767 344,511 3,744

Duluth Police Grant Programs 964,200 1,286,421 1,287,301 880

Community Investment Trust 425,000 425,000 570,067 145,067

Tourism Taxes 1,085,000 1,085,000 1,101,297 16,297

Senior Programs - - 17,590 17,590

Tax Increment - - 5,259 5,259

Parking Fund 1,386,300 1,386,300 1,386,300 -

Water 221,700 221,700 138,262 (83,438)

Gas 2,857,500 2,857,500 2,836,118 (21,382)

Sewer 159,400 159,400 107,301 (52,099)

Stormwater 547,100 547,100 526,241 (20,859)

Steam 152,800 152,800 152,960 160

Total Other Financing Sources 8,032,100 8,499,488 8,510,707 11,219

Total Revenues and Other Financing

Sources 89,145,600$ 90,619,923$ 91,900,629$ 1,280,706$

Reconciliation:

Original budget as approved by Duluth City Council 89,145,600$

Adjustments made in accordance with budget ordinance provisions:

Grants, gifts, and donations 421,240

Ordinance allowable 1,053,083

Total adjustments 1,474,323

Modified budget as reported above 90,619,923$

116

CITY OF DULUTH, MINNESOTA

SCHEDULE OF EXPENDITURES AND ENCUMBRANCES -

BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS)

GENERAL FUND

FOR THE YEAR ENDED DECEMBER 31, 2019

Budget Actual

Favorable

Original Modified Note Expended Encumbered Totals (Unfavorable)

Legislative and Executive

City Council

Personal services - salaries 124,200$ 124,200$ 124,200$ -$ 124,200$ -$

Personal services - benefits 11,600 11,600 9,247 - 9,247 2,353

Other expenditures 68,700 68,700 56,188 - 56,188 12,512

Total City Council 204,500 204,500 189,635 - 189,635 14,865

Mayor's Office

Personal services - salaries 420,000 492,222 1 460,670 - 460,670 31,552

Personal services - benefits 193,500 206,814 1 251,139 - 251,139 (44,325)

Other expenditures 14,600 20,490 1,4 18,509 - 18,509 1,981

Total Mayor's Office 628,100 719,526 730,318 - 730,318 (10,792)

Chief Administrative Officer

Personal services - salaries 241,300 202,950 1 232,294 - 232,294 (29,344)

Personal services - benefits 113,600 106,932 1 89,875 - 89,875 17,057

Other expenditures 10,600 10,600 12,740 - 12,740 (2,140)

Total Chief Administrative Officer 365,500 320,482 334,909 - 334,909 (14,427)

Attorney and Human Rights

Personal services - salaries 1,732,400 1,718,650 1 1,664,608 - 1,664,608 54,042

Personal services - benefits 576,700 576,700 585,319 - 585,319 (8,619)

Other expenditures 41,100 73,690 1,2 71,393 - 71,393 2,297

Total Attorney and Human Rights 2,350,200 2,369,040 2,321,320 - 2,321,320 47,720

Total Legislative and Executive 3,548,300 3,613,548 3,576,182 - 3,576,182 37,366

Public Administration

Human Resources

Personal services - salaries 791,800 751,800 1 748,606 - 748,606 3,194

Personal services - benefits 348,400 348,400 325,731 - 325,731 22,669

Other expenditures 74,500 74,500 65,677 - 65,677 8,823

Total Human Resources 1,214,700 1,174,700 1,140,014 - 1,140,014 34,686

Information Technology

Personal services - salaries 1,658,800 1,805,130 1 1,819,375 - 1,819,375 (14,245)

Personal services - benefits 695,800 755,642 1 769,509 - 769,509 (13,867)

Other expenditures 935,100 910,617 1,2 857,746 27,439 885,185 25,432

Total Information Technology 3,289,700 3,471,389 3,446,630 27,439 3,474,069 (2,680)

Clerk

Personal services - salaries 603,900 583,900 1 574,592 - 574,592 9,308

Personal services - benefits 234,800 223,800 1 222,716 - 222,716 1,084

Other expenditures 52,500 84,500 4 79,313 - 79,313 5,187

Total Clerk 891,200 892,200 876,621 - 876,621 15,579

Park Maintenance

Personal services - salaries 1,728,100 1,626,600 1,4 1,602,810 - 1,602,810 23,790

Personal services - benefits 691,100 684,100 1 661,013 - 661,013 23,087

Other expenditures 926,700 876,700 1 873,556 - 873,556 3,144

Total Park Maintenance 3,345,900 3,187,400 3,137,379 - 3,137,379 50,021

(continued)

117

CITY OF DULUTH, MINNESOTA

SCHEDULE OF EXPENDITURES AND ENCUMBRANCES -

BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS)

GENERAL FUND

FOR THE YEAR ENDED DECEMBER 31, 2019

Budget Actual

Favorable

Original Modified Note Expended Encumbered Totals (Unfavorable)

Public Administration (continued)

Library Services

Personal services - salaries 2,866,000 2,781,000 1 2,779,771 - 2,779,771 1,229

Personal services - benefits 1,140,300 1,140,300 1,127,164 - 1,127,164 13,136

Other expenditures 717,500 717,500 708,577 - 708,577 8,923

Total Library Services 4,723,800 4,638,800 4,615,512 - 4,615,512 23,288

Facilities Management

Personal services - salaries 1,649,200 1,649,200 1,659,151 - 1,659,151 (9,951)

Personal services - benefits 777,900 777,900 788,625 - 788,625 (10,725)

Other expenditures 2,216,700 2,091,700 1 2,091,767 - 2,091,767 (67)

Total Facilities Management 4,643,800 4,518,800 4,539,543 - 4,539,543 (20,743)

Total Public Administration 18,109,100 17,883,289 17,755,699 27,439 17,783,138 100,151

Finance

Budget

Personal services - salaries 304,200 304,200 351,533 - 351,533 (47,333)

Personal services - benefits 130,500 130,500 128,115 - 128,115 2,385

Other expenditures 27,100 27,100 25,678 - 25,678 1,422

Total Budget 461,800 461,800 505,326 - 505,326 (43,526)

Auditor

Personal services - salaries 789,900 789,900 704,911 - 704,911 84,989

Personal services - benefits 354,400 325,900 1 301,148 - 301,148 24,752

Other expenditures 325,100 325,100 313,260 - 313,260 11,840

Total Auditor 1,469,400 1,440,900 1,319,319 - 1,319,319 121,581

Purchasing

Personal services - salaries 153,200 153,200 155,115 - 155,115 (1,915)

Personal services - benefits 87,500 87,500 74,596 - 74,596 12,904

Other expenditures 5,700 5,700 4,513 - 4,513 1,187

Total Purchasing 246,400 246,400 234,224 - 234,224 12,176

Treasurer

Personal services - salaries 441,300 441,300 427,274 - 427,274 14,026

Personal services - benefits 217,800 217,800 196,069 - 196,069 21,731

Other expenditures 14,000 14,000 7,270 - 7,270 6,730

Total Treasurer 673,100 673,100 630,613 - 630,613 42,487

Total Finance 2,850,700 2,822,200 2,689,482 - 2,689,482 132,718

(continued)

118

CITY OF DULUTH, MINNESOTA

SCHEDULE OF EXPENDITURES AND ENCUMBRANCES -

BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS)

GENERAL FUND

FOR THE YEAR ENDED DECEMBER 31, 2019

Budget Actual

Favorable

Original Modified Note Expended Encumbered Totals (Unfavorable)

Planning and Construction Services

Planning and Development

Personal services - salaries 557,500 681,662 1 618,263 - 618,263 63,399

Personal services - benefits 230,800 275,130 1 239,920 - 239,920 35,210

Other expenditures 56,400 106,890 1,2,3 66,247 27,000 93,247 13,643

Total Planning and Development 844,700 1,063,682 924,430 27,000 951,430 112,252

Construction Services and Inspection

Personal services - salaries 1,372,100 1,319,951 1 1,315,951 - 1,315,951 4,000

Personal services - benefits 624,100 591,400 1 540,031 - 540,031 51,369

Other expenditures 147,300 172,304 2 164,368 15,000 179,368 (7,064)

Capital outlay - 52,149 - 52,148 52,148 1

Total Construction Services and

Inspection 2,143,500 2,135,804 2,020,350 67,148 2,087,498 48,306

Total Planning and Construction

Services 2,988,200 3,199,486 2,944,780 94,148 3,038,928 160,558

Business and Community Development

Personal services - salaries 466,200 303,688 1 270,057 - 270,057 33,631

Personal services - benefits 188,000 137,002 1 103,668 - 103,668 33,334

Other expenditures 18,300 18,300 13,207 - 13,207 5,093

Total Business and Community

Development 672,500 458,990 386,932 - 386,932 72,058

Fire

Administration

Personal services - salaries 355,600 445,708 1 420,153 - 420,153 25,555

Personal services - benefits 128,900 170,192 1 158,825 - 158,825 11,367

Other expenditures 59,000 60,309 4 48,290 - 48,290 12,019

Total Administration 543,500 676,209 627,268 - 627,268 48,941

Operations

Personal services - salaries 10,888,700 10,889,992 1,3,4 10,940,651 - 10,940,651 (50,659)

Personal services - benefits 4,662,000 4,669,270 4 4,721,057 - 4,721,057 (51,787)

Other expenditures 673,300 690,350 3,4 670,727 15,045 685,772 4,578

Total Operations 16,224,000 16,249,612 16,332,435 15,045 16,347,480 (97,868)

Life Safety

Personal services - salaries 784,000 784,000 773,703 - 773,703 10,297

Personal services - benefits 382,300 382,300 362,972 - 362,972 19,328

Other expenditures 58,700 70,625 2,3 66,102 - 66,102 4,523

Total Life Safety 1,225,000 1,236,925 1,202,777 - 1,202,777 34,148

Total Fire 17,992,500 18,162,746 18,162,480 15,045 18,177,525 (14,779)

(continued)

119

CITY OF DULUTH, MINNESOTA

SCHEDULE OF EXPENDITURES AND ENCUMBRANCES -

BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS)

GENERAL FUND

FOR THE YEAR ENDED DECEMBER 31, 2019

Budget Actual

Favorable

Original Modified Note Expended Encumbered Totals (Unfavorable)

Police

Administration and Investigation

Personal services - salaries 14,890,400 15,148,723 1,3,4 15,212,349 - 15,212,349 (63,626)

Personal services - benefits 6,501,600 6,417,488 1 6,566,281 - 6,566,281 (148,793)

Other expenditures 1,265,600 1,393,517 1,2,3,4 1,339,399 13,360 1,352,759 40,758

Total Administration and

Investigation 22,657,600 22,959,728 23,118,029 13,360 23,131,389 (171,661)

Police Special Accounts

Other expenditures 92,000 220,701 2 62,307 11,925 74,232 146,469

Total Police 22,749,600 23,180,429 23,180,336 25,285 23,205,621 (25,192)

Public Works and Utilities

Public Works Director's Office

Personal services - salaries 76,000 76,000 76,838 - 76,838 (838)

Personal services - benefits 27,000 27,000 27,979 - 27,979 (979)

Other expenditures 800 1,538 1 1,479 - 1,479 59

Total Public Works Director's Office 103,800 104,538 106,296 - 106,296 (1,758)

Street Maintenance

Personal services - salaries 2,782,200 2,867,200 1 2,928,813 - 2,928,813 (61,613)

Personal services - benefits 1,211,000 1,211,000 1,268,267 - 1,268,267 (57,267)

Other expenditures 3,563,500 3,938,500 1,4 3,887,958 - 3,887,958 50,542

Total Street Maintenance 7,556,700 8,016,700 8,085,038 - 8,085,038 (68,338)

Engineering

Personal services - salaries 1,263,800 1,263,800 1,273,706 - 1,273,706 (9,906)

Personal services - benefits 474,800 474,800 464,899 - 464,899 9,901

Other expenditures 148,300 156,150 1,2 84,099 8,889 92,988 63,162

Capital Outlay - 635 1 635 - 635 -

Total Engineering 1,886,900 1,895,385 1,823,339 8,889 1,832,228 63,157

Total Public Works and Utilities 9,547,400 10,016,623 10,014,673 8,889 10,023,562 (6,939)

(continued)

120

CITY OF DULUTH, MINNESOTA

SCHEDULE OF EXPENDITURES AND ENCUMBRANCES -

BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS)

GENERAL FUND

FOR THE YEAR ENDED DECEMBER 31, 2019

Budget Actual

Favorable

Original Modified Note Expended Encumbered Totals (Unfavorable)

Transfers and Other Functions:

Business improvement district 300,000 395,246 4 399,582 - 399,582 (4,336)

Public access television 182,000 182,000 182,000 - 182,000 -

State sales tax administration 120,000 120,000 97,389 - 97,389 22,611

Capital program - 2,075,000 2 1,500,806 574,193 2,074,999 1

Benefits administration 100,000 195,958 1,4 196,815 1,216 198,031 (2,073)

Retiree insurance 7,399,100 7,717,261 4 7,720,589 - 7,720,589 (3,328)

Self-insurance 1,400,000 1,400,000 1,400,000 - 1,400,000 -

PERA contribution - 378,296 4 378,296 - 378,296 -

Transfers and accruals 500,000 500,000 - - - 500,000

Other functions 686,200 642,753 1,2 511,194 3,685 514,879 127,874

Total Transfers and Other Functions 10,687,300 13,606,514 12,386,671 579,094 12,965,765 640,749

Total Expenditures and encumbrances 89,145,600$ 92,943,825$ 91,097,235$ 749,900$ 91,847,135$ 1,096,690$

Reconciliation:

Original budget as approved by

Duluth City Council 89,145,600$

Adjustments made in accordance with

Budget Ordinance

Note 1

-

Departmental transfers made in accordance with budget ordinance.

Note 2

2,323,902

-

Encumbrance, contract, reserve, or designation carryovers from prior year.

Note 3

421,240

-

Grants, gifts, and donations in accordance with budget ordinance.

Note 4

1,053,083

-

Other allowable additions made in accordance with budget ordinance.

Total adjustments 3,798,225

Modified budget as reported above 92,943,825$

121

CITY OF DULUTH, MINNESOTA

SCHEDULE OF EXPENDITURES/TRANSFERS OUT

GENERAL FUND

FOR THE YEAR ENDED DECEMBER 31, 2019

Personal Personal

Services Services Other Capital Total

Salaries Benefits

Expenditures

Outlay Transfers Actual

General Government:

Legislative and Executive

City Council 124,200$ 9,247$ 56,188$ -$ -$ 189,635$

Mayor's Office 460,670 251,139 18,509 - - 730,318

Chief Administrative Officer 232,294 89,875 12,740 - - 334,909

Attorney and Human Rights 1,664,608 585,319 71,393 - - 2,321,320

Total Legislative and Executive 2,481,772 935,580 158,830 - - 3,576,182

Public Administration

Human Resources 748,606 325,731 65,677 - - 1,140,014

Information Technology 1,819,375 769,509 857,746 - - 3,446,630

Clerk 574,592 222,716 79,313 - - 876,621

Facilities Management 1,659,151 788,625 2,067,767 - 24,000 4,539,543

Other Functions - 1,015,531 1,517,634 800,806 757,000 4,090,971

Total Public Administration 4,801,724 3,122,112 4,588,137 800,806 781,000 14,093,779

Finance

Budget 351,533 128,115 25,678 - - 505,326

Auditor 704,911 301,148 313,260 - - 1,319,319

Purchasing 155,115 74,596 4,513 - - 234,224

Treasurer 427,274 196,069 7,270 - - 630,613

Total Finance 1,638,833 699,928 350,721 - - 2,689,482

Benefits

Flexible Benefits - 196,815 - - - 196,815

Retiree Insurance - 7,720,589 - - - 7,720,589

PERA Contribution - 24,368 - - - 24,368

Total Benefits - 7,941,772 - - - 7,941,772

Total General Government 8,922,329 12,699,392 5,097,688 800,806 781,000 28,301,215

Public Safety:

Fire

Administration 420,153 158,825 48,290 - - 627,268

Operations 10,940,651 4,721,057 670,727 - - 16,332,435

Life Safety 773,703 362,972 66,102 - - 1,202,777

Total Fire 12,134,507 5,242,854 785,119 - - 18,162,480

Police

Administration and Investigation 15,212,349 6,566,281 1,339,399 - - 23,118,029

Police Special Accounts - - 62,307 - - 62,307

Total Police 15,212,349 6,566,281 1,401,706 - - 23,180,336

Benefits

PERA Contribution - 318,051 - - - 318,051

Total Public Safety 27,346,856 12,127,186 2,186,825 - - 41,660,867

(continued)

122

CITY OF DULUTH, MINNESOTA

SCHEDULE OF EXPENDITURES/TRANSFERS OUT

GENERAL FUND

FOR THE YEAR ENDED DECEMBER 31, 2019

Personal Personal

Services Services Other Capital Total

Salaries Benefits

Expenditures

Outlay Transfers Actual

Public Works:

Public Administration

Park Maintenance 1,602,810 661,013 865,556 - 8,000 3,137,379

Public Works

Public Works Director Office 76,838 27,979 1,479 - - 106,296

Street Maintenance 2,928,813 1,268,267 3,887,958 - - 8,085,038

Engineering 1,273,706 464,899 84,099 635 - 1,823,339

Total Public Works 4,279,357 1,761,145 3,973,536 635 - 10,014,673

Benefits

PERA Contribution - 16,286 - - - 16,286

Total Public Works 5,882,167 2,438,444 4,839,092 635 8,000 13,168,338

Culture and Recreation:

Public Administration

Library Services 2,779,771 1,127,164 708,577 - - 4,615,512

Benefits

PERA Contribution - 9,942 - - - 9,942

Total Culture and Recreation 2,779,771 1,137,106 708,577 - - 4,625,454

Urban and Economic Development:

Planning and Construction Services

Planning and Development 618,263 239,920 66,247 - - 924,430

Construction Services and Inspection 1,315,951 540,031 164,368 - - 2,020,350

Total Planning and Construction

Services 1,934,214 779,951 230,615 - - 2,944,780

Business and Community Development

Business and Community Development 270,057 103,668 13,207 - - 386,932

Benefits

PERA Contribution - 9,649 - - - 9,649

Total Urban and Economic Development 2,204,271 893,268 243,822 - - 3,341,361

Total Expenditures/Transfers Out 47,135,394$ 29,295,396$ 13,076,004$ 801,441$ 789,000$ 91,097,235$

123

P r o p r i e t a r y F u n d s

CITY OF DULUTH, MINNESOTA

NONMAJOR PROPRIETARY FUNDS

DECEMBER 31, 2019

ENTERPRISE FUNDS

Enterprise funds account for operations that are financed and managed in a manner similar to private business

enterprises– where the intent of the governing body is that the costs (including depreciation expense) of providing

goods or services to the general public on a continuing basis be financed or recovered through user charges.

Golf – to account for the operations of Enger Park and Lester Park, the City's two municipal 27-hole golf courses.

Parking – to account for the operation and maintenance of municipal parking ramps, municipal lots, and parking

meters.

Stormwater – to account for the operation and maintenance of the storm water sewer collection system.

Street Lighting – to account for the operation, maintenance and improvement of the City's street lighting and traffic

signal systems.

INTERNAL SERVICE FUNDS

Internal Service Funds account for the financing of goods or services provided by one department to other

departments or authorities of the City, or to other governmental units, on a cost reimbursement basis.

Self-Insurance – to account for the payment of sundry insurance premiums and loss control activities, as well as the

settlement of various claims, judgments and lawsuits against the City.

Group Health – to account for the collection of premiums and the payment of dental and health care costs for

employees of the City and various outside agencies.

Employee Vacation Compensation – to account for the funding and liability for governmental funds compensated

absences and associated benefits.

Fleet Services – to account for the costs associated with the maintenance and operation of the City's fleet of vehicles

and equipment, including fuel usage, and to charge such costs back to the various City departments which own and

use these assets.

124

CITY OF DULUTH, MINNESOTA

COMBINING STATEMENT OF NET POSITION

NONMAJOR ENTERPRISE FUNDS

DECEMBER 31, 2019

Golf Parking Stormwater

Street

Lighting

Total

Nonmajor

Enterprise

Funds

Assets

Current assets

Cash and cash equivalents

-$ 3,431,244$ 1,131,961$ 1,124,601$ 5,687,806$

Restricted cash and cash equivalents

Receivables, net

Accounts

- 69,440 510,466 98,961 678,867

Assessments

- - 26,931 - 26,931

Due from other funds

- - 4,978 24,000 28,978

Due from component units

- 23,701 - - 23,701

Due from other governments

- - - 27,870 27,870

Inventories

39,459 - 94,458 - 133,917

Prepaids

2,400 - 2,006,596 - 2,008,996

Total current assets

41,859 3,524,385 3,775,390 1,275,432 8,617,066

Noncurrent assets

Assessments receivable

- - 578 - 578

Capital assets, net

1,356,722 18,551,916 19,039,271 3,821,884 42,769,793

Total noncurrent assets

1,356,722 18,551,916 19,039,849 3,821,884 42,770,371

Total Assets

1,398,581 22,076,301 22,815,239 5,097,316 51,387,437

Deferred Outflows of Resources

Deferred loss from debt refunding

- 315,020 - - 315,020

Deferred pension obligation outflows

- 26,778 123,292 29,547 179,617

Total Deferred Outflows of Resources

- 341,798 123,292 29,547 494,637

Liabilities

Current liabilities

Accounts payable

6,460 6,777 21,126 48,097 82,460

Contracts payable

- 84,521 19,097 50,274 153,892

Due to other funds

- 2,134 23,042 18,774 43,950

Interfund loan payable

1,059,480 - - - 1,059,480

Due to other governments

1,869 - 521 - 2,390

Accrued interest payable

- 59,052 5,204 - 64,256

Accrued salaries payable

1,901 16,245 49,178 11,171 78,495

Compensated absences

- 24,313 121,906 12,349 158,568

Unearned revenue

49,329 9,230 11,774 2,495 72,828

Deposits

56,804 - - - 56,804

Revenue bonds payable

- 830,000 135,000 - 965,000

Total current liabilities

1,175,843 1,032,272 386,848 143,160 2,738,123

Noncurrent liabilities

Loans payable

12,481 - - - 12,481

Interfund loan payable

1,550,000 - - - 1,550,000

Pension liability

- 266,451 1,226,815 294,009 1,787,275

Revenue bonds payable

- 5,352,945 298,631 - 5,651,576

Total noncurrent liabilities

1,562,481 5,619,396 1,525,446 294,009 9,001,332

Total Liabilities

2,738,324 6,651,668 1,912,294 437,169 11,739,455

Deferred Inflows of Resources

Deferred pension obligation inflows

- 61,674 283,965 68,053 413,692

Deferred OPEB inflows

- - 349,925 - 349,925

Total Deferred Inflows of Resources

- 61,674 633,890 68,053 763,617

Net Position

Net investment in capital assets

1,344,241 12,683,991 18,605,640 3,821,884 36,455,756

Unrestricted

(2,683,984) 3,020,766 1,786,707 799,757 2,923,246

Total Net Position (1,339,743)$ 15,704,757$ 20,392,347$ 4,621,641$ 39,379,002$

125

CITY OF DULUTH, MINNESOTA

COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION

NONMAJOR ENTERPRISE FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Golf Parking Stormwater

Street

Lighting

Total

Nonmajor

Enterprise

Funds

Operating Revenues

Sales

446,891$ -$ -$ -$ 446,891$

Charges for services

1,024,327 2,938,417 5,255,575 829,058 10,047,377

Fines and forfeits

- 947,382 - - 947,382

Miscellaneous revenues

11,131 211,889 40,263 48,956 312,239

Total Operating Revenues

1,482,349 4,097,688 5,295,838 878,014 11,753,889

Operating Expenses

Cost of sales and services

196,811 - - - 196,811

Personal services

- 779,910 2,279,481 506,895 3,566,286

Supplies

- 26,966 254,273 234,066 515,305

Utilities

- 126,331 20,433 549,014 695,778

Other services and charges

1,481,736 1,708,883 614,395 254,470 4,059,484

Depreciation

92,642 567,526 437,762 291,651 1,389,581

Total Operating Expenses

1,771,189 3,209,616 3,606,344 1,836,096 10,423,245

Operating Income (Loss)

(288,840) 888,072 1,689,494 (958,082) 1,330,644

Nonoperating Revenues (Expenses)

Property taxes

- - - 1,301,757 1,301,757

Investment income

- 37,220 14,030 15,624 66,874

Intergovernmental revenue

- - 29,645 - 29,645

Gain (loss) on sale or disposition of

capital assets

- - 4,623 - 4,623

Interest and fiscal fees

- (195,235) (6,363) - (201,598)

Total Nonoperating Revenues (Expenses)

- (158,015) 41,935 1,317,381 1,201,301

Income (Loss) Before Contributions and

Transfers

(288,840) 730,057 1,731,429 359,299 2,531,945

Capital contributions

- 423,701 - - 423,701

Transfers in

- - 5,600 24,000 29,600

Transfers out

- (1,386,300) (528,241) (37,250) (1,951,791)

Change in Net Position

(288,840) (232,542) 1,208,788 346,049 1,033,455

Total Net Position - January 1, 2019

(1,050,903) 15,937,299 19,183,559 4,275,592 38,345,547

Total Net Position - December 31, 2019

(1,339,743)$ 15,704,757$ 20,392,347$ 4,621,641$ 39,379,002$

126

CITY OF DULUTH, MINNESOTA

COMBINING STATEMENT OF CASH FLOWS

NONMAJOR ENTERPRISE FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Total

Nonmajor

Street Enterprise

Golf Parking Stormwater Lighting Funds

Cash Flows from Operating Activities

Cash received from customers 1,500,870$ 3,924,977$ 5,265,636$ 913,612$ 11,605,095$

Cash paid to suppliers (1,697,233) (1,804,743) (918,488) (1,023,988) (5,444,452)

Cash paid to employees - (716,064) (2,353,790) (530,999) (3,600,853)

Other operating revenues - 211,889 27,835 43,460 283,184

Net cash provided (used) by operating activities (196,363) 1,616,059 2,021,193 (597,915) 2,842,974

Cash Flows from Noncapital Financing Activities

Transfers from other funds - - 5,600 - 5,600

Transfers to other funds - (1,386,300) (528,241) (37,250) (1,951,791)

Property taxes - - - 1,288,928 1,288,928

Operating Grants 29,645 29,645

Interfund financing 246,367 - - - 246,367

Net cash provided (used) by noncapital financing

activities 246,367 (1,386,300) (492,996) 1,251,678 (381,251)

Cash Flows from Capital and Related

Financing Activities

Capital grants and contributions - 400,000 - - 400,000

Principal paid on bonds, notes and capitalized

leases (50,004) (810,000) (130,000) - (990,004)

Interest paid on bonds, notes and capitalized

leases - (151,546) (13,959) - (165,505)

Acquisition or construction of capital assets - (90,667) (1,775,681) (1,287,413) (3,153,761)

Net cash provided (used) by capital

and related financing activities (50,004) (652,213) (1,919,640) (1,287,413) (3,909,270)

Cash Flows from Investing Activities

Investment earnings - 37,220 14,030 15,624 66,874

Net increase (decrease) in cash and cash

equivalents - (385,234) (377,413) (618,026) (1,380,673)

Cash and cash equivalents - January 1, 2019 - 3,816,478 1,509,374 1,742,627 7,068,479

Cash and cash equivalents - December 31, 2019 -$ 3,431,244$ 1,131,961$ 1,124,601$ 5,687,806$

Reconciliation of operating income to net cash

provided (used) by operating activities:

Net operating income (loss) (288,840)$ 888,072$ 1,689,494$ (958,082)$ 1,330,644$

Adjustments to reconcile net operating income(loss)

to net cash provided (used) by operating activities:

Depreciation 92,642 567,526 437,762 291,651 1,389,581

Change in assets and liabilities:

Decrease (increase) in receivables 821 38,955 11,687 81,241 132,704

Decrease (increase) in inventories (10,668) - 13,413 - 2,745

Decrease (increase) in prepaids 1,200 - (765,777) - (764,577)

Decrease (increase) in deferred pension obligation

outflows - 18,349 130,226 38,468 187,043

Decrease (increase) in OPEB outflows - - 256,905 - 256,905

Increase (decrease) in payables (9,218) 56,132 (33,003) 10,848 24,759

Increase (decrease) in unearned revenues 17,700 223 200 (99) 18,024

Increase (decrease) in deferred pension obligation

inflows

(6,500) (99,022) (34,697) (140,219)

Increase (decrease) in OPEB inflows - - 349,925 - 349,925

Increase (decrease) in pension liability - 53,302 29,383 (27,245) 55,440

Total adjustments 92,477 727,987 331,699 360,167 1,512,330

Net cash provided (used) by operating activities (196,363)$ 1,616,059$ 2,021,193$ (597,915)$ 2,842,974$

127

CITY OF DULUTH, MINNESOTA

COMBINING STATEMENT OF NET POSITION

GOVERNMENTAL ACTIVITIES - INTERNAL SERVICE FUND

DECEMBER 31, 2019

Self-Insurance Group Health

Employee

Vacation

Compensation Fleet Services

Total

Governmental

Activities -

Internal

Service Funds

Assets

Current assets

Cash and cash equivalents

1,178,325$ -$ 3,025,978$ -$ 4,204,303$

Restricted cash and cash equivalents

Restricted assets held by trustee

- 7,935,383 - - 7,935,383

Receivables, net

Accounts

- 69,767 - 411 70,178

Due from other funds

200,000 - 60,037 471,730 731,767

Inventories

- - - 178,064 178,064

Prepaids

50,000 - - - 50,000

Total current assets

1,428,325 8,005,150 3,086,015 650,205 13,169,695

Noncurrent assets

Capital assets, net

- - - 198,538 198,538

Total noncurrent assets

- - - 198,538 198,538

Total Assets

1,428,325 8,005,150 3,086,015 848,743 13,368,233

Deferred Outflows of Resources

Deferred pension obligation outflows

7,285 - - 85,675 92,960

Liabilities

Current liabilities

Accounts payable

1,715 720 - 205,093 207,528

Contracts payable

- - - 215 215

Claims payable

248,841 2,646,416 - - 2,895,257

Due to other funds

- - 12,063 199 12,262

Interfund loan payable

- 10,940 - 452,682 463,622

Due to other governments

15,561 - - - 15,561

Accrued salaries payable

3,043 - - 32,884 35,927

Compensated absences

5,208 - 3,064,562 93,601 3,163,371

Unearned revenue

- 108,505 - - 108,505

Total current liabilities

274,368 2,766,581 3,076,625 784,674 6,902,248

Noncurrent liabilities

Claims payable

830,395 - - - 830,395

Pension liability

72,493 - - 852,501 924,994

Total noncurrent liabilities

902,888 - - 852,501 1,755,389

Total Liabilities

1,177,256 2,766,581 3,076,625 1,637,175 8,657,637

Deferred Inflows of Resources

Deferred pension obligation inflows

16,780 - - 197,324 214,104

Net Position

Net investment in capital assets

- - - 198,538 198,538

Restricted for health insurance trust

- 5,238,569 - - 5,238,569

Unrestricted

241,574 - 9,390 (1,098,619) (847,655)

Total Net Position

241,574$ 5,238,569$ 9,390$ (900,081)$ 4,589,452$

128

CITY OF DULUTH, MINNESOTA

COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION

GOVERNMENTAL ACTIVITIES - INTERNAL SERVICE FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Self-Insurance Group Health

Employee

Vacation

Compensation Fleet Services

Total

Governmental

Activities -

Internal

Service Funds

Operating Revenues

Sales

-$ -$ -$ 2,465,355$ 2,465,355$

Charges for services

1,799,590 18,193,852 3,302,964 2,051,598 25,348,004

Miscellaneous revenues

101,243 1,016,231 - 1,755 1,119,229

Total Operating Revenues

1,900,833 19,210,083 3,302,964 4,518,708 28,932,588

Operating Expenses

Cost of sales and services

- - - 2,148,694 2,148,694

Personal services

846,622 - 3,302,964 1,725,263 5,874,849

Supplies

4,001 - - 40,551 44,552

Utilities

- - - 33,803 33,803

Other services and charges

1,111,149 1,830,565 - 500,470 3,442,184

Depreciation

- - - 64,038 64,038

Medical and insurance

622,933 17,464,732 - - 18,087,665

Total Operating Expenses

2,584,705 19,295,297 3,302,964 4,512,819 29,695,785

Operating Income (Loss)

(683,872) (85,214) - 5,889 (763,197)

Nonoperating Revenues (Expenses)

Investment income

17,215 198,078 30,016 - 245,309

Intergovernmental revenue

- - - 5,835 5,835

Total Nonoperating Revenues (Expenses)

17,215 198,078 30,016 5,835 251,144

Change in Net Position

(666,657) 112,864 30,016 11,724 (512,053)

Total Net Position - Janurary 1, 2019

908,231 5,125,705 (20,626) (911,805) 5,101,505

Total Net Position - December 31, 2019

241,574$ 5,238,569$ 9,390$ (900,081)$ 4,589,452$

129

CITY OF DULUTH, MINNESOTA

COMBINING STATEMENT OF CASH FLOWS

GOVERNMENTAL ACTIVITIES - INTERNAL SERVICE FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Total

Governmental

Activities -

Employee Internal

Self- Group Vacation Fleet Service

Insurance Health Compensation Services Funds

Cash Flows from Operating Activities

Cash received from customers 1,707,833$ 19,332,886$ 3,288,562$ 4,340,588$ 28,669,869$

Cash paid to suppliers (1,850,549) (18,339,336) - (2,649,687) (22,839,572)

Cash paid to employees (843,538) - (3,254,990) (1,670,923) (5,769,451)

Other operating revenues - - - 1,755 1,755

Net cash provided (used) by operating activities (986,254) 993,550 33,572 21,733 62,601

Cash Flows from Noncapital Financing Activities

Operating grants - - - 5,835 5,835

Interfund financing - (3,498) - (27,568) (31,066)

Net cash provided (used) by noncapital financing activities - (3,498) - (21,733) (25,231)

Cash Flows from Capital and

Related Financing Activities

Acquisition or construction of capital assets - - - - -

Net cash provided (used) by capital

and related financing activities - - - - -

Cash Flows from Investing Activities

Investment earnings 17,215 198,078 30,016 - 245,309

Net increase (decrease) in cash and cash equivalents (969,039) 1,188,130 63,588 - 282,679

Cash and cash equivalents - January 1, 2019 2,147,364 6,747,253 2,962,390 - 11,857,007

Cash and cash equivalents - December 31, 2019 1,178,325$ 7,935,383$ 3,025,978$ -$ 12,139,686$

Reconciliation of operating income to net cash

provided (used) by operating activities:

Net operating income (loss) (683,872)$ (85,214)$ -$ 5,889$ (763,197)$

Adjustments to reconcile net operating income(loss)

to net cash provided (used) by operating activities:

Depreciation - - - 64,038 64,038

Change in assets and liabilities:

Decrease (increase) in receivables (193,000) 14,298 (12,554) (146,783) (338,039)

Decrease (increase) in inventories - - - (2,781) (2,781)

Decrease (increase) in deferred pension obligation outflows 7,965 108,505 - 89,896 206,366

Increase (decrease) in payables (111,549) 955,961 46,126 56,148 946,686

Increase (decrease) in deferred pension obligation inflows (6,259) - - (67,909) (74,168)

Increase (decrease) in pension liability 461 - - 23,235 23,696

Total adjustments (302,382) 1,078,764 33,572 15,844 825,798

Net cash provided (used) by operating activities (986,254)$ 993,550$ 33,572$ 21,733$ 62,601$

130

F i d u c i a r y F u n d s

CITY OF DULUTH, MINNESOTA

FIDUCIARY FUNDS

AGENCY FUNDS

DECEMBER 31, 2019

AGENCY FUNDS

Agency Funds account for assets held by the City as an agent for private organizations and another governmental

unit.

Duluth 1200 Fund – to account for monies received from various sources for the establishment of a venture capital

fund managed by an independent non-profit corporation.

131

CITY OF DULUTH, MINNESOTA

STATEMENT OF CHANGES IN ASSETS AND LIABILITIES

AGENCY FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Balance Balance

01/01/19 Additions Deductions 12/31/19

DULUTH 1200 FUND

Assets

Cash and cash equivalents 2,698,525$ 240,136$ 258,792$ 2,679,869$

Loans receivable 330,489 205,003 136,588 398,904

Total Assets 3,029,014$ 445,139$ 395,380$ 3,078,773$

Liabilities

Accounts payable 920$ 226,472$ 220,453$ 6,939$

Due to agency 3,028,094 107,387 63,647 3,071,834

Total Liabilties 3,029,014$ 333,859$ 284,100$ 3,078,773$

132

S u p p l e m e n t a r y

I n f o r m a t i o n

CITY OF DULUTH, MINNESOTA

CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS

SCHEDULE BY SOURCE*

DECEMBER 31, 2019

Governmental Funds Capital Assets:

Land and land improvements

22,859,321

$

Buildings

90,194,027

Equipment

41,843,558

Infrastructure

368,690,129

Construction in Progress

23,477,572

Total Governmental Funds Capital Assets

547,064,607

$

Investments in Governmental Funds Capital Assets:

General fund

10,247,286

$

Special revenue fund

31,014,835

Capital projects fund

503,834,386

Donations

1,968,100

Total Governmental Funds Capital Assets

547,064,607

$

* This schedule presents only the capital asset balances related to governmental funds. Accordingly, the

capital assets reported in internal service funds are excluded from the above amounts. Generally, the

capital assets of internal service funds are included as governmental activities in the statement of net

position.

133

CITY OF DULUTH, MINNESOTA

CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS

SCHEDULE BY FUNCTION AND ACTIVITY*

DECEMBER 31, 2019

Land and

Land

Construction

Improvements

Buildings

Equipment

Infrastructure

in Progress

Total

Function and Activity

General Government

Legislative and Executive

-

$

-

$

6,319

$

-

$

-

$

6,319

$

Public Administration

-

487,215

-

487,215

Management Information Systems

-

3,944,264

-

3,944,264

Facilities Management

1,636,325

15,948,728

2,110,421

22,175,049

24,963

41,895,486

Finance

-

346,749

-

346,749

Total General Government

1,636,325

15,948,728

6,894,968

22,175,049

24,963

46,680,033

Public Safety

Fire

83,006

3,114,984

12,535,607

-

835,368

16,568,965

Police

2,000

16,627,233

5,233,043

562,251

542,563

22,967,090

Total Public Safety

85,006

19,742,217

17,768,650

562,251

1,377,931

39,536,055

Public Works

Street Construction

-

335,496,648

15,667,444

351,164,092

Maintenance Operations

54,435

1,258,641

15,183,482

60,403

-

16,556,961

Engineering

5,145,615

2,316,896

324,893

3,553,552

-

11,340,956

Total Public Works

5,200,049

3,575,537

15,508,375

339,110,603

15,667,444

379,062,009

Culture and Recreation

Libraries

51,585

7,545,987

154,981

-

7,752,554

Parks and Recreation

12,839,443

42,284,527

880,381

6,842,226

6,407,234

69,253,812

Total Culture and Recreation

12,891,028

49,830,515

1,035,363

6,842,226

6,407,234

77,006,365

Urban and Economic Development

Planning and Construction

Services

3,046,913

1,097,030

636,203

-

4,780,145

Total Governmental Funds

Capital Assets

22,859,321

$

90,194,027

$

41,843,558

$

368,690,129

$

23,477,572

$

547,064,607

$

* This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in

internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as

governmental activities in the statement of net position.

134

CITY OF DULUTH, MINNESOTA

CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS

SCHEDULE OF CHANGES BY FUNCTION AND ACTIVITY*

FOR THE YEAR ENDED DECEMBER 31, 2019

Governmental

Funds Capital

Assets

01/01/19

Additions

Deductions

12/31/19

Function and Activity

General Government

Legislative and Executive

6,319

$

-

$

-

$

6,319

$

Public Administration

487,215

-

487,215

Management Information Systems

3,910,055

34,210

-

3,944,264

Facilities Management

40,751,490

8,966,500

7,822,504

41,895,486

Finance

346,749

-

346,749

Total General Government

45,501,827

9,000,710

7,822,504

46,680,033

Public Safety

Fire

14,615,733

1,953,232

-

16,568,965

Police

22,113,826

1,019,882

166,618

22,967,090

Total Public Safety

36,729,559

2,973,114

166,618

39,536,055

Public Works

Street Construction

342,911,667

18,309,158

10,056,734

351,164,092

Maintenance Operations

15,504,336

1,074,242

21,617

16,556,961

Engineering

11,243,698

97,258

-

11,340,956

Total Public Works

369,659,702

19,480,658

10,078,351

379,062,008

Culture and Recreation

Libraries

7,752,554

-

7,752,554

Parks and Recreation

66,840,358

3,613,205

1,199,752

69,253,812

Total Culture and Recreation

74,592,912

3,613,205

1,199,752

77,006,365

Urban and Economic Development

Planning and Construction Services

4,686,724

114,414

20,993

4,780,145

Total Governmental Funds Capital Assets

531,170,724

$

35,182,101

$

19,288,218

$

547,064,607

$

* This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets

reported in internal service funds are excluded from the above amounts. Generally, the capital assets of internal

service funds are included as governmental activities in the statement of net position.

135

CITY OF DULUTH, MINNESOTA

SCHEDULE OF BONDS AND CERTIFICATES PAYABLE

FOR THE YEAR DECEMBER 31, 2019

Issue Issue Final Jan 1

Amount Date Maturity Balance

Governmental Activities:

General Obligation Bonds Payable

General Obligation - Levy Funded

Aerial Lift Bridge Improvement 1,475,000$ 08/07/2008 02/01/2019 170,000$

Capital Improvement 7,085,000 12/17/2009 02/01/2020 1,660,000

Capital Improvement - Law Enforcement Center 11,905,000 12/17/2009 02/01/2032 11,905,000

Capital Improvement 2,175,000 11/23/2010 02/01/2021 715,000

Capital Improvement 1,870,000 11/29/2011 02/01/2022 815,000

Capital Improvement 1,795,000 12/18/2013 02/01/2024 1,135,000

Capital Improvement - Lakewalk 1,460,000 12/18/2013 02/01/2029 1,135,000

Capital Improvement 1,115,000 10/30/2014 02/01/2025 810,000

Capital Improvement 1,615,000 11/05/2015 02/01/2026 1,325,000

Capital Improvement 1,135,000 11/09/2016 02/01/2027 1,035,000

Capital Improvement 1,545,000 11/21/2017 02/01/2028 1,545,000

Capital Improvement 1,310,000 10/17/2018 02/01/2029 1,310,000

Capital Improvement 1,190,000 10/09/2019 02/01/2030 -

Capital Improvement Refunding 9,755,000 10/09/2019 02/01/2032 -

Total General Obligation - Levy Funded 23,560,000$

General Obligation - Funded by Other Sources

Airpark Improvement 945,000$ 09/01/2004 02/01/2020 165,000$

Airport Improvement 7,650,000 05/24/2012 02/01/2028 5,380,000

Airport Improvement 3,400,000 12/18/2013 02/01/2029 2,955,000

Wade Stadium Improvement 2,330,000 10/30/2014 02/01/2030 1,960,000

Spirit Mountain Improvement 2,150,000 10/30/2014 02/01/2035 1,905,000

Airport Improvement 2,855,000 11/05/2015 02/01/2031 2,565,000

Capital Improvement - 1/2 & 1/2 13,520,000 11/05/2015 02/01/2032 11,075,000

Duluth Entertainment and Convention Center Improvement

Refunding

33,470,000 03/22/2016 02/01/2034 33,470,000

Capital Improvement - Seawall 4,450,000 02/14/2018 02/01/2034 4,450,000

Total General Obligation - Funded by Other Sources 63,925,000$

General Obligation - Tax Abatement

Spirit Mountain Tax Abatement Bonds 7,055,000$ 02/23/2012 02/01/2030 5,235,000$

GO Tax Abatement (Cirrus) 7,820,000 03/22/2016 02/01/2032 7,370,000

Total General Obligation - Tax Abatement 12,605,000$

Total General Obligation Bonds Payable 100,090,000$

Special Assessment Debt with Government Commitment

General Obligation Improvement 1,985,000$ 09/07/2006 02/01/2021 535,000$

General Obligation Improvement Refunding 1,205,000 11/23/2010 02/01/2019 92,600

General Obligation Improvement Refunding 1,135,000 11/23/2010 02/01/2019 87,400

Street Improvement Refunding 6,905,000 11/27/2012 02/01/2021 2,190,000

General Obligation Improvement Refunding 865,000 10/30/2014 02/01/2020 360,000

Street Improvement Refunding 2,630,000 11/05/2015 02/01/2023 1,900,000

Total Special Assessment Debt with Government

Commitment 5,165,000$

General Obligation Certificates Payable

Equipment 3,835,000$ 12/18/2013 02/01/2019 800,000$

Equipment 2,460,000 10/30/2014 02/01/2020 1,010,000

Equipment 3,325,000 11/05/2015 02/01/2021 2,055,000

Equipment 3,565,000 11/09/2016 02/01/2022 2,930,000

Equipment 3,615,000 11/21/2017 02/01/2023 3,615,000

Equipment 3,885,000 10/17/2018 02/01/2024 3,885,000

Equipment 3,070,000 10/09/2019 02/01/2025 -

Total General Obligation Certificates Payable 14,295,000$

Total Governmental Activities Bonds and Certificates

Payable 119,550,000$

(continued)

136

CITY OF DULUTH, MINNESOTA

SCHEDULE OF BONDS AND CERTIFICATES PAYABLE

FOR THE YEAR DECEMBER 31, 2019

Dec 31 Principal Interest

Issued Retired Balance Due in 2020 Due in 2020

Governmental Activities:

General Obligation Bonds Payable

General Obligation - Levy Funded

Aerial Lift Bridge Improvement -$ 170,000$ -$ -$ -$

Capital Improvement - 905,000 755,000 755,000 15,100

Capital Improvement - Law Enforcement Center - 11,905,000 - - -

Capital Improvement - 230,000 485,000 240,000 10,950

Capital Improvement - 195,000 620,000 200,000 15,600

Capital Improvement - 175,000 960,000 180,000 26,100

Capital Improvement - Lakewalk - 85,000 1,050,000 90,000 37,362

Capital Improvement - 110,000 700,000 110,000 14,262

Capital Improvement - 155,000 1,170,000 160,000 23,769

Capital Improvement - 100,000 935,000 100,000 35,400

Capital Improvement - 125,000 1,420,000 140,000 40,500

Capital Improvement - - 1,310,000 90,000 63,250

Capital Improvement 1,190,000 - 1,190,000 - 48,261

Capital Improvement Refunding 9,755,000 - 9,755,000 - 395,619

Total General Obligation - Levy Funded 10,945,000$ 14,155,000$ 20,350,000$ 2,065,000$ 726,173$

General Obligation - Funded by Other Sources

Airpark Improvement -$ 80,000$ 85,000$ 85,000$ 1,785$

Airport Improvement - 485,000 4,895,000 490,000 126,981

Airport Improvement - 225,000 2,730,000 230,000 102,111

Wade Stadium Improvement - 140,000 1,820,000 140,000 57,525

Spirit Mountain Improvement - 90,000 1,815,000 95,000 52,650

Airport Improvement - 165,000 2,400,000 170,000 74,838

Capital Improvement - 1/2 & 1/2 - 655,000 10,420,000 665,000 331,970

Duluth Entertainment and Convention Center

Improvement Refunding

- 840,000 32,630,000 955,000 1,446,775

Capital Improvement - Seawall - 225,000 4,225,000 225,000 123,375

Total General Obligation - Funded by Other Sources -$ 2,905,000$ 61,020,000$ 3,055,000$ 2,318,010$

General Obligation - Tax Abatement

Spirit Mountain Tax Abatement Bonds -$ 385,000$ 4,850,000$ 395,000$ 119,869$

GO Tax Abatement (Cirrus) - 450,000 6,920,000 460,000 178,425

Total General Obligation - Tax Abatement -$ 835,000$ 11,770,000$ 855,000$ 298,294$

Total General Obligation Bonds Payable 10,945,000$ 17,895,000$ 93,140,000$ 5,975,000$ 3,342,477$

Special Assessment Debt with Government Commitment

General Obligation Improvement -$ 170,000$ 365,000$ 180,000$ 11,000$

General Obligation Improvement Refunding - 92,600 - - -

General Obligation Improvement Refunding - 87,400 - - -

Street Improvement Refunding - 1,110,000 1,080,000 725,000 21,525

General Obligation Improvement Refunding - 180,000 180,000 180,000 1,800

Street Improvement Refunding - 400,000 1,500,000 420,000 51,600

Total Special Assessment Debt with Government

Commitment -$ 2,040,000$ 3,125,000$ 1,505,000$ 85,925$

General Obligation Certificates Payable

Equipment -$ 800,000$ -$ -$ -$

Equipment - 500,000 510,000 510,000 5,100

Equipment - 665,000 1,390,000 685,000 31,425

Equipment - 690,000 2,240,000 720,000 75,200

Equipment - 660,000 2,955,000 700,000 92,900

Equipment - - 3,885,000 695,000 139,125

Equipment 3,070,000 - 3,070,000 - 124,506

Total General Obligation Certificates Payable 3,070,000$ 3,315,000$ 14,050,000$ 3,310,000$ 468,256$

Total Governmental Activities Bonds and Certificates

Payable 14,015,000$ 23,250,000$ 110,315,000$ 10,790,000$ 3,896,658$

(continued)

137

CITY OF DULUTH, MINNESOTA

SCHEDULE OF BONDS AND CERTIFICATES PAYABLE

FOR THE YEAR DECEMBER 31, 2019

Issue Issue Final Jan 1

Amount Date Maturity Balance

Business-type Activities:

Revenue and General Obligation Bonds Payable

Parking Fund

Parking Improvement Tax Increment Refunding 10,270,000$ 11/27/2012 02/01/2026 6,985,000$

Priley Drive Parking Facility

Parking Improvement Tax Increment (Note 1) 11,500,000$ 05/15/2014 04/01/2044 12,447,475$

Water Fund

Water Utility Revenue and General Obligation 196,000$ 02/19/2009 02/01/2024 90,000$

Water Utility Revenue and General Obligation Refunding 515,000 11/05/2015 02/01/2022 350,000

Water Utility Revenue and General Obligation 4,050,000 10/17/2018 02/01/2034 4,050,000

Total Water Fund 4,490,000$

Gas Fund

Gas Utility Revenue and General Obligation Refunding 3,125,000$ 11/29/2011 02/01/2019 505,000$

Steam Fund

Steam Utility Revenue and General Obligation Refunding 5,475,000$ 11/27/2012 02/01/2022 2,330,000$

Steam Utility Revenue and General Obligation 4,015,000 11/05/2015 02/01/2027 4,015,000

Total Steam Fund 6,345,000$

Sewer Fund

Sewer Utility Revenue and General Obligation 1,444,000$ 02/19/2009 02/01/2024 660,000$

Sewer Utility Revenue and General Obligation 905,000 12/17/2009 02/01/2025 480,000

Sewer Utility Revenue and General Obligation Refunding 2,265,000 11/29/2011 02/01/2020 680,000

Sewer Utility Revenue and General Obligation Refunding 2,000,000 11/27/2012 02/01/2020 895,000

Sewer Utility Revenue and General Obligation Refunding 1,110,000 11/05/2015 02/01/2023 820,000

Sewer Utility Revenue and General Obligation Refunding 350,000 11/05/2015 02/01/2022 240,000

Total Sewer Fund 3,775,000$

Stormwater Fund

Stormwater Utility Revenue and General Obligation

Refunding 790,000 11/05/2015 02/01/2022 550,000$

Total Business-type Activities Bonds Payable 35,097,475$

(continued)

Note 1: Issue amount does not include capitalized interest of $1,020,017

138

CITY OF DULUTH, MINNESOTA

SCHEDULE OF BONDS AND CERTIFICATES PAYABLE

FOR THE YEAR DECEMBER 31, 2019

Dec 31 Principal Interest

Issued Retired Balance Due in 2020 Due in 2020

Business-type Activities:

Revenue and General Obligation Bonds Payable

Parking Fund

Parking Improvement Tax Increment Refunding -$ 810,000$ 6,175,000$ 830,000$ 134,669$

Priley Drive Parking Facility

Parking Improvement Tax Increment -$ 217,606$ 12,229,869$ 219,731$ 486,938$

Water Fund

Water Utility Revenue and General Obligation -$ 14,000$ 76,000$ 14,000$ 2,612$

Water Utility Revenue and General Obligation Refunding - 85,000 265,000 85,000 6,675

Water Utility Revenue and General Obligation - - 4,050,000 185,000 121,962

Total Water Fund -$ 99,000$ 4,391,000$ 284,000$ 131,249$

Gas Fund

Gas Utility Revenue and General Obligation Refunding -$ 505,000$ -$ -$ -$

Steam Fund

Steam Utility Revenue and General Obligation Refunding

-$ 655,000$ 1,675,000$ 665,000$ 27,068$

Steam Utility Revenue and General Obligation - - 4,015,000 - 122,388

Total Steam Fund -$ 655,000$ 5,690,000$ 665,000$ 149,456$

Sewer Fund

Sewer Utility Revenue and General Obligation -$ 101,001$ 558,999$ 105,999$ 19,150$

Sewer Utility Revenue and General Obligation - 60,000 420,000 65,000 15,500

Sewer Utility Revenue and General Obligation Refunding - 335,000 345,000 345,000 5,175

Sewer Utility Revenue and General Obligation Refunding - 290,000 605,000 300,000 9,100

Sewer Utility Revenue and General Obligation Refunding - 155,000 665,000 160,000 17,550

Sewer Utility Revenue and General Obligation Refunding - 60,000 180,000 60,000 4,500

Total Sewer Fund -$ 1,001,001$ 2,773,999$ 1,035,999$ 70,975$

Stormwater Fund

Stormwater Utility Revenue and General Obligation

Refunding -$ 130,000$ 420,000$ 135,000$ 10,575$

Total Business-type Activities Bonds Payable -$ 3,417,607$ 31,679,868$ 3,169,730$ 983,862$

139

CITY OF DULUTH, MINNESOTA

SCHEDULE OF NOTES PAYABLE

DECEMBER 31, 2019

Issue Issue Final Jan. 1

Amount Date Maturity Balance

Governmental Activities:

Revenue Note

U.S. Dept. of Housing and Urban Development 7,876,000$ 08/01/2005 08/01/2025 2,636,000$

U.S. Dept. of Housing and Urban Development 3,636,000 03/28/2019 08/01/2025 -

Total Governmental Activities 2,636,000$

Business-type Activities:

General Obligation

Water Fund -

Public Facilities Authority Note 1,668,813$ 10/28/2009 08/20/2019 174,000$

Public Facilities Authority Note 1,293,200 07/28/2010 08/20/2025 624,000

Public Facilities Authority Note 3,344,131 12/07/2010 08/20/2025 1,673,000

Public Facilities Authority Note 1,221,631 11/18/2011 08/20/2026 654,000

Public Facilities Authority Note 4,778,806 02/25/2014 08/20/2029 3,437,000

Total Water Fund 6,562,000$

Sewer Fund -

Public Facilities Authority Note 1,973,033$ 07/12/2007 08/20/2022 616,000$

Public Facilities Authority Note 796,835 08/20/2009 08/20/2024 354,000

Public Facilities Authority Note 2,414,150 11/25/2009 08/20/2024 1,106,000

Public Facilities Authority Note 3,753,059 07/28/2010 08/20/2025 1,840,000

Public Facilities Authority Note 8,504,224 07/28/2010 08/20/2025 4,105,000

Public Facilities Authority Note 279,117 11/18/2011 08/20/2021 82,000

Public Facilities Authority Note 265,418 11/30/2011 08/20/2021 85,000

Public Facilities Authority Note 278,149 11/18/2011 08/20/2021 91,000

Public Facilities Authority Note 476,537 09/10/2012 08/20/2022 192,000

Public Facilities Authority Note 860,847 10/29/2014 08/20/2024 441,000

Total Sewer Fund 8,912,000$

Total Business-type Activities 15,474,000$

Component Unit:

Duluth Airport Authority

Revenue Note 497,379$ 11/01/2005 06/01/2019 35,911$

(continued)

140

CITY OF DULUTH, MINNESOTA

SCHEDULE OF NOTES PAYABLE

DECEMBER 31, 2019

Dec 31 Principal Interest

Issued Retired Balance Due in 2020 Due in 2020

Governmental Activities:

Revenue Note

U.S. Dept. of Housing and Urban Development -$ 2,636,000$ -$ -$ -$

U.S. Dept. of Housing and Urban Development 2,636,000 15,000 2,621,000 15,000 71,626

Total Governmental Activities 2,636,000$ 2,651,000$ 2,621,000$ 15,000$ 71,626$

Business-type Activities:

General Obligation

Water Fund -

Public Facilities Authority Note -$ 174,000$ -$ -$ -$

Public Facilities Authority Note - 86,000 538,000 87,000 6,768

Public Facilities Authority Note - 231,000 1,442,000 234,000 15,516

Public Facilities Authority Note - 78,000 576,000 79,000 7,033

Public Facilities Authority Note - 297,000 3,140,000 300,000 31,400

Total Water Fund -$ 866,000$ 5,696,000$ 700,000$ 60,717$

Sewer Fund -

Public Facilities Authority Note -$ 151,000$ 465,000$ 153,000$ 5,348$

Public Facilities Authority Note - 56,000 298,000 57,000 5,868

Public Facilities Authority Note - 175,000 931,000 179,000 18,778

Public Facilities Authority Note - 253,000 1,587,000 256,000 19,964

Public Facilities Authority Note - 565,000 3,540,000 572,000 44,533

Public Facilities Authority Note - 27,000 55,000 27,000 550

Public Facilities Authority Note - 28,000 57,000 28,000 570

Public Facilities Authority Note - 30,000 61,000 31,000 610

Public Facilities Authority Note - 47,000 145,000 48,000 1,450

Public Facilities Authority Note - 72,000 369,000 72,000 3,690

Total Sewer Fund -$ 1,404,000$ 7,508,000$ 1,423,000$ 101,361$

Total Business-type Activities -$ 2,270,000$ 13,204,000$ 2,123,000$ 162,078$

Component Unit:

Duluth Airport Authority

Revenue Note -$ 35,911$ -$ -$ -$

141

CITY OF DULUTH, MINNESOTA

BALANCE SHEET

DULUTH ECONOMIC DEVELOPMENT AUTHORITY

COMPONENT UNIT - GOVERNMENTAL FUNDS

DECEMBER 31, 2019

General Loan Debt Capital

Operating Programs Service Projects Total

Assets

Cash and cash equivalents 3,390,659$ 177,391$ 914,875$ 2,562,249$ 7,045,174$

Taxes receivable, net - - 120,187 - 120,187

Accounts receivable, net 33,012 - - - 33,012

Loans receivable, net 758,603 3,563,981 - 3,714,696 8,037,280

Due from other funds 104,822 - - 761,511 866,333

Capital assets held for resale 192,500 - - - 192,500

Total Assets 4,479,596$ 3,741,372$ 1,035,062$ 7,038,456$ 16,294,486$

Liabilities

Accounts payable 45,062$ -$ 200,703$ -$ 245,765$

Contracts payable 170,664 - - - 170,664

Due to other funds - - 765,473 100,860 866,333

Due to primary government 257,761 - 23,701 - 281,462

Due to other governments - - - - -

Total Liabilities

473,487

-

989,877

100,860

1,564,224

Deferred Inflows of Resources

Unavailable revenue

758,603

3,563,766

38,194

3,714,696

8,075,259

Fund Balances

Nonspendable 192,500 - - - 192,500

Restricted - - 6,991 3,222,900 3,229,891

Assigned - 177,606 - - 177,606

Unassigned 3,055,006 - - - 3,055,006

Total Fund Balances

3,247,506

177,606

6,991

3,222,900

6,655,003

Total Liabilities, Deferred Inflows

of Resources, and Fund Balances

4,479,596

$

3,741,372

$

1,035,062

$

7,038,456

$

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

Capital assets used in governmental activities are not financial resources, and therefore

are not reported in the funds. 11,564,495

Other long-term assets are not available to pay for current-period expenditures, and therefore

are deferred in the funds. 7,668,481

Other assets that are not available to pay for current period expenditures, and therefore

are not reported in the funds. 195

Net position of governmental activities 25,888,174$

142

CITY OF DULUTH, MINNESOTA

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

DULUTH ECONOMIC DEVELOPMENT AUTHORITY

COMPONENT UNIT - GOVERNMENTAL FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

General Loan Debt Capital

Operating Programs Service Projects Total

Revenues

Taxes

Tax increments -$ -$ 2,874,258$ -$ 2,874,258$

Intergovernmental revenues

State of Minnesota grants 5,648 - - - 5,648

Charges for services

Parking meters 575,544 - - - 575,544

Building rent 407,249 - - - 407,249

Other 33,516 - - - 33,516

Miscellaneous revenues

Earnings on investments 135,297 2,771 22,973 38,978 200,019

Interest - 3,790 - - 3,790

Other

870,541

69,464

-

940,005

Total Revenues

2,027,795

76,025

2,897,231

38,978

5,040,029

Expenditures

Current

Urban and economic development

Other services and charges - - - 5,000 5,000

Economic development projects 1,786,013 - 434,654 - 2,220,667

Capital outlay

Urban and economic development

Land 51,305 - - - 51,305

Debt service

Principal retirement - - 561,978 - 561,978

Interest and fiscal fees - - 1,139,576 - 1,139,576

Total Expenditures 1,837,318 - 2,136,208 5,000 3,978,526

Excess of Revenues Over (Under) Expenditures 190,477 76,025 761,023 33,978 1,061,503

Other Financing Sources (Uses)

Transfers in

DEDA Capital Projects 100,860 - - - 100,860

DEDA Debt Service - - - 761,511 761,511

Total Transfers In 100,860 - - 761,511 862,371

Transfers out

DEDA General Operating - - - (100,860) (100,860)

DEDA Capital Projects - - (761,511) - (761,511)

Total Transfers Out - - (761,511) (100,860) (862,371)

Total Other Financing Sources (Uses) 100,860 - (761,511) 660,651 -

Excess of Revenues and Other Sources Over

(Under) Expenditures and Other Uses 291,337 76,025 (488) 694,629 1,061,503

Fund Balances

Fund Balance - January 1, 2019 2,956,169 101,581 7,479 2,528,271 5,593,500

Fund Balance - December 31, 2019 3,247,506$ 177,606$ 6,991$ 3,222,900$ 6,655,003$

143

CITY OF DULUTH, MINNESOTA

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES

DULUTH ECONOMIC DEVELOPMENT AUTHORITY

COMPONENT UNITS - GOVERNMENTAL FUNDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Net change in fund balances - total governmental funds 1,061,503$

Amounts reported for governmental activities in the statement of

activities are different because:

Government funds report capital outlays as expenditures. However, in

the statement of activities, the cost of those assets is allocated over

their estimated useful lives as depreciation expense. This is the amount

by which depreciation exceeded capital outlays in the current period.

(905,604)

In the statement of activities, only the loss on the sale of property

is reported, whereas in the governmental funds, the proceeds from

the sale increase financial resources. Thus, the change in net assets

differs from the change in fund balance by the book value of the capital asset sold. (1,128,940)

Revenues in the statement of activities that do not provide current

financial resources are not reported as revenues in the funds. Also,

some revenues provide current financial resources to governmental

funds but do not have any effect on net position. This amount is the net

effect of these differences. (26,072)

Change in net position of governmental activities (999,113)$

144

DULUTH JPE TRUST

STATEMENT OF FIDUCIARY NET POSITION

DECEMBER 31, 2019

Health

Dental

JPE

Fund

Trust Total

Assets

Investments:

Money market 2,073,082$ 164,367$ 2,237,449$

US government treasury securities 5,223,791 175,016 5,398,807

US government agency securities 273,161 25,966 299,127

Receivables:

Other 53,985 15,782 69,767

Total assets 7,624,019$ 381,131$ 8,005,150$

Liabilities

Claims payable 2,506,225$ 140,191$ 2,646,416$

Accounts payable 11,660 - 11,660

Premiums received in advance 104,930 3,575 108,505

Total liabilities 2,622,815$ 143,766$ 2,766,581$

Net Position

Held in trust 5,001,204$ 237,365$ 5,238,569$

145

DULUTH JPE TRUST

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION

FOR THE YEAR ENDED DECEMBER 31, 2019

Health Dental JPE

Fund Fund Trust Total

Additions

Health premiums:

Active employees 17,974,857$ -$ 17,974,857$

Inactive employees 9,747,580 - 9,747,580

Dental premiums - 937,722 937,722

Refunds and reimbursements:

Prescription drug rebates 888,170 - 888,170

Health Partners shared savings 127,544 - 127,544

Miscellaneous 517 - 517

Investment earnings 190,240 7,838 198,078

Total additions 28,928,908 945,560 29,874,468

Deductions

Medical and drug claims:

Active employees 16,133,864 - 16,133,864

Inactive employees 7,030,070 - 7,030,070

Medical insurance - medicare supplement 3,867,749 - 3,867,749

Dental claims - 899,356 899,356

Administrative fees:

Health Partners 805,922 - 805,922

Delta Dental - 63,743 63,743

City of Duluth 371,315 - 371,315

Trust services 18,998 917 19,915

Consulting services 101,355 - 101,355

Wellness activities 70,124 - 70,124

Patient centered outcomes research fee 3,902 - 3,902

Stop loss insurance 391,290 - 391,290

Miscellaneous 2,999 - 2,999

Total deductions 28,797,588 964,016 29,761,604

Change in Net Position 131,320 (18,456) 112,864

Net Position - January 1, 2019 4,869,884 255,821 5,125,705

Net Position - December 31, 2019 5,001,204$ 237,365$ 5,238,569$

146

CITY OF DULUTH, MINNESOTA

SCHEDULE OF INTERGOVERNMENTAL REVENUE

FOR THE YEAR ENDED DECEMBER 31, 2019

Special

Debt

Capital

Proprietary and

General

Revenue

Service

Projects

Internal Service

Fund

Funds

Totals

Shared Revenue:

State of Minnesota

Local Government Aid 29,668,565$ -$ -$ -$ -$ 29,668,565$

MSA Street Construction Allotment - - - 5,256,980 - 5,256,980

MSA Street Maintenance Allotment 1,533,400 - - - - 1,533,400

PERA Aid 124,428 - - - 54,402 178,830

PERA Contribution 378,296 - - - - 378,296

Insurance Premium 2,124,504 - - - - 2,124,504

Total Shared Revenue

33,829,193

-

5,256,980

54,402

39,140,575

State Grants:

State of Minnesota, Department of

Agriculture

Noxious Weed and Invasive Plants

- 13,600 - - - 13,600

Commerce

Auto Theft Prevention Program - 31,040 - - - 31,040

Education

Minnesota Library Information Network 4,536 - - - - 4,536

Employment and Economic Development

Dislocated Workers - 120,449 - - - 120,449

Duluth Lake Superior Zoo Project - - - 318,273 - 318,273

Women's Economic Security Act - 112,896 - - - 112,896

Workforce Housing Development Program - 60,000 - - - 60,000

Youth Program - 471,400 - - - 471,400

Employment and Economic

Development Total

- 764,745 - 318,273 - 1,083,018

Minnesota Pollution Control Agency

Minnesota Slip Dock Wall Reconstruction

and SS William Irvin Removal

- - - 215,566 - 215,566

Natural Resources

Cross Country Ski Trails 6,600 - - - - 6,600

Lake Superior Zoo - 126,863 - - - 126,863

Mud Lake Comparative Analysis - - - 5,000 - 5,000

Rural Fire Grant Project - 2,450 - - - 2,450

Snowmobile Trails 16,097 - - - - 16,097

Natural Resources Total 22,697 129,313 - 5,000 - 157,010

Peace Officers Board

Post Training Reimbursement 146,144 - - - - 146,144

Public Safety

Bulletproof Vests 13,338 - - - - 13,338

Community Justice Reinvestment Grant - 92,465 - - - 92,465

Crime Victim Services - 14,923 - - - 14,923

Firefighter Education Reimbursement - 44,333 - - - 44,333

HAZMAT Regional Response Team - 210,194 - - - 210,194

Minnesota Board of Firefighters Training &

Education

- 6,474 - - - 6,474

State of Minnesota Disaster Funds - 928,362 - - - 928,362

Violent Crime Enforcement Team - 324,584 - - - 324,584

Public Safety Total 13,338 1,621,335 - - - 1,634,673

(continued)

147

CITY OF DULUTH, MINNESOTA

SCHEDULE OF INTERGOVERNMENTAL REVENUE

FOR THE YEAR ENDED DECEMBER 31, 2019

Special

Debt

Capital

Proprietary and

General

Revenue

Service

Projects

Internal Service

Fund

Funds

Totals

Revenue

Market Value Credit 236 - - - - 236

Transportation

Corridor Investment - - - 133,993 - 133,993

Utility Design Engineering Services

Agreement

- - - - 30,982 30,982

Transportation Total - - - 133,993 30,982 164,975

Total State Grants

186,951

2,560,033

-

672,832

30,982

3,450,798

Other Grants:

St. Louis County

Job Training Services - 878,298 - - - 878,298

Other 138,411 10,000 - - - 148,411

St. Louis County Total 138,411 888,298 - - - 1,026,709

Duluth Seaway Port Authority - - - 1,150,401 - 1,150,401

Duluth Transit Authority - 106,753 - - - 106,753

Housing and Redevelopment Authority 66,939 473,095 - - - 540,034

Independent School District #709 278,940 - - - - 278,940

Total Other Grants

484,290

1,468,146

-

1,150,401

-

3,102,837

Federal Grants:

Federal, Department of

Agriculture

Cooperative Forestry Assistance

-

6,750

-

6,750

Urban and Community Forestry

Program

- 27,139 - - - 27,139

Agriculture Total - 33,889 - - - 33,889

Commerce

Coastal Zone Management Grant - 10,000 - 7,647 - 17,647

Education

Rehabilitation Services Vocational

Rehabilitation Grants to States

- 29,618 - - - 29,618

Environmental Protection Agency

Brownfields Assessment and

Cleanup Cooperative

- 157,317 - - - 157,317

Great Lakes Program - 73,434 - - 29,645 103,079

Environmental Protection Agency Total - 230,751 - - 29,645 260,396

Homeland Security

Assistance to Firefighters Grant - 61,403 - - - 61,403

Emergency Management Performance

Grants

- 20,000 - - - 20,000

FEMA Disaster Assistance - 1,528,084 - - - 1,528,084

Port Security Grant Program - 308,584 - - - 308,584

Operation Stonegarden Grant Program - 27,630 - - - 27,630

Homeland Security Total - 1,945,701 - - - 1,945,701

(continued)

148

CITY OF DULUTH, MINNESOTA

SCHEDULE OF INTERGOVERNMENTAL REVENUE

FOR THE YEAR ENDED DECEMBER 31, 2019

Special

Debt

Capital

Proprietary and

General

Revenue

Service

Projects

Internal Service

Fund

Funds

Totals

Housing and Urban Development

Community Development Block Grant - 2,335,602 - - - 2,335,602

Emergency Solutions Grant Program - 153,876 - - - 153,876

Home Investment Partnerships Program - 445,508 - - - 445,508

Housing and Urban Development Total - 2,934,986 - - - 2,934,986

Justice

Bulletproof Vest Partnership Program 11,121 - - - - 11,121

Comprehensive Opioid Abuse Site-Based

Program

- 80,688 - - - 80,688

Crime Victim Services - 56,946 - - - 56,946

Edward Bryne Memorial Formula Grant - 35,389 - - - 35,389

Grants to Encourage Arrest Policies - 101,763 - - - 101,763

Minneapolis Child Exploitation and

Human Trafficking Task Force

- 1,719 - - - 1,719

National Sexual Assault Kit Initiative - 386,957 - - - 386,957

Public Safety Partnership and Community

Policing Grants

- 72,078 - - - 72,078

Justice Total 11,121 735,540 - - - 746,661

Labor

WIA Dislocated Workers Formula Grant - 98,252 - - - 98,252

Senior Community Service Employment - 339,811 - - - 339,811

Workforce Investment Act - 602,628 - - - 602,628

Labor Total - 1,040,691 - - - 1,040,691

Transportation

Federal Highway Assistance - - - 134,119 - 134,119

Highway Planning and Construction - - - 1,734,053 - 1,734,053

Interagency Hazardous Materials

Public Sector

- 6,417 - - - 6,417

NHTSA: DWI Officers - 96,792 - - - 96,792

Recreational Trails Program - - - 47,562 - 47,562

Toward Zero Deaths Law

Enforcement Grant

- 228,334 - - - 228,334

Transportation Total - 331,543 - 1,915,734 - 2,247,277

Total Federal Grants

11,121

7,292,719

-

1,923,381

29,645

9,256,866

Other Federal:

Treasury

Build America Interest Rebate - - 223,993 - - 223,993

Total Intergovernmental Revenue 34,511,555$ 11,320,898$ 223,993$ 9,003,594$ 115,029$ 55,175,069$

149

CITY OF DULUTH, MINNESOTA

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Federal Grantor Federal

Pass-Through Agency Pass-Through CFDA

Passed Through

Grant Program Title Grant Numbers Number to Subrecipients

U.S. Department of Agriculture

Direct

Cooperative Forestry Assistance 10.664

$

6,750

$

-

Passed Through Minnesota Department of Natural Resources

Urban and Community Forestry Program 140175 10.675 42,064 -

Passed Through Minnesota Department of Agriculture

Forest Health Protection JPA-133100 10.680 65,000 -

Total U.S. Department of Agriculture

$

113,814

$

-

U.S. Department of Commerce

Passed Through Minnesota Department of Natural Resources

Coastal Zone Management Administration Awards 16-306A 11.419

$

73,177

$

-

U.S. Department of Housing and Urban Development

Direct

CDBG - Entitlement Grants Cluster

Community Development Block

Grants/Entitlement Grants 14.218

$

2,510,955

$

2,000,792

(Total expenditures for CDBG - Entitlement Grants Cluster $2,510,955)

Emergency Solutions Grant Program 14.231 163,741 150,151

Home Investment Partnerships Program 14.239 540,469 509,933

Total U.S. Department of Housing and Urban Development

$

3,215,165

$

2,660,876

U.S. Department of Justice

Direct

Grants to Encourage Arrest Policies and Enforcement

of Protection Orders Program 16.590

$

134,087

$

-

Bulletproof Vest Partnership Program 16.607 7,627 -

Public Safety Partnership and Community Policing Grants 16.710 609 -

(Total Public Safety Partnership and Community Policing Grant 16.710 $72,687)

Edward Byrne Memorial Justice Assistance

Grant Program 16.738 47,012 -

National Sexual Assault Kit Initiative 16.833 470,859 -

Comprehensive Opioid Abuse Site-Based Program 16.838 134,473 -

Passed through the Minnesota Department of Public Safety

Crime Victim Assistance A-CVSP-2018-DULUTHAO-00031 16.575 71,395 -

Public Safety Partnership and Community

Policing Grants 167077 16.710 72,078 -

(Total Public Safety Partnership and Community Policing Grant 16.710 $72,687)

Total U.S. Department of Justice

$

938,140

$

-

U.S. Department of Labor

Passed Through Senior Service America, Inc.

Senior Community Service Employment Program 116 17.235

$

202,793

$

-

(Total Senior Community Service Employment Program 17.235 $341,818)

Passed Through Minnesota Department of Employment and

Economic Development

Senior Community Service Employment Program 0045100 17.235 36,881 -

Senior Community Service Employment Program 9045100 17.235 44,329 -

Senior Community Service Employment Program 9045101 17.235 57,815 -

(Total Senior Community Service Employment Program 17.235 $341,818)

WIOA Cluster

WIA Adult Program 6043101 17.258 5,593 -

WIA Adult Program 7043100 17.258 27,341 -

WIA Adult Program

8043100

17.258

221,091

-

WIA Adult Program

9043100

17.258

1,036

-

Total CFDA # 17.258

255,061

-

(continued)

The notes to the Schedule of Expenditures of Federal Awards are an integral part of this schedule.

Expenditures

150

CITY OF DULUTH, MINNESOTA

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Federal Grantor Federal

Pass-Through Agency Pass-Through CFDA

Passed Through

Grant Program Title Grant Numbers Number to SubrecipientsExpenditures

(U.S. Department of Labor)

WIA Youth Activities 7043600 17.259 34,052 -

WIA Youth Activities 8043600 17.259 238,147 -

WIA Youth Activities 9043600 17.259 80,440 -

Total CFDA # 17.259

352,639

-

WIA Dislocated Worker Formula Grants 6048001 17.278 9,504 -

WIA Dislocated Worker Formula Grants 7048000 17.278 12,110 -

WIA Dislocated Worker Formula Grants 8048000 17.278 50,286 -

WIA Dislocated Worker Formula Grants 9048000 17.278 18,064 -

Total CFDA # 17.278 89,964 -

(Total expenditures for WIOA Cluster $697,664)

Total U.S. Department of Labor

$

1,039,482

$

-

U.S. Department of Transportation

Passed Through Minnesota Department of Transportation

Highway Planning and Construction Cluster

Highway Planning and Construction 1029940 20.205

$

1,875,440

$

-

Highway Planning and Construction 99887 20.205 14,620 -

Total CFDA # 20.205 1,890,060 -

Passed Through Minnesota Department of Natural Resources

Highway Planning and Construction Cluster

Recreational Trails Program TRAL023 20.219 28,461 -

(Total expenditures for Highway Planning and Construction Cluster $1,918,521)

Passed Through Minnesota Department of Public Safety

Highway Safety Cluster

State and Community Highway Safety A-ENFRC19-2019-DULUTHPD-037 20.600 26,129 -

Minimum Penalties for Repeat Offenders for Driving

While Intoxicated A-ENFRC-19-2019-DULUTHPD-037 20.608 137,971 -

Minimum Penalties for Repeat Offenders for Driving

While Intoxicated A-ENFRC-20-2020-DULUTHPD-082 20.608 38,841 -

Minimum Penalties for Repeat Offenders for Driving

While Intoxicated A-OFFICR19-2019-DULUTHPD-003 20.608 16,813 -

Minimum Penalties for Repeat Offenders for Driving

While Intoxicated A-OFFICR20-2020-DULUTHPD-008 20.608 48,038 -

Total CFDA # 20.608

241,663

-

Highway Safety Cluster

National Priority Safety Programs A-ENFRC-19-2019-DULUTHPD-037 20.616 17,549 -

National Priority Safety Programs A-ENFRC-20-2020-DULUTHPD-082 20.616 7,844 -

National Priority Safety Programs A-OFFICR19-2019-DULUTHPD-003 20.616 8,281 -

National Priority Safety Programs A-OFFICR20-2020-DULUTHPD-008 20.616 23,660 -

Total CFDA # 20.616 57,334 -

(Total expenditures for Highway Safety Cluster $83,463)

Interagency Hazardous Materials Public Sector

Training and Planning Grants A-HMEP-2017-DULUTHFD-012 20.703 6,417 -

Total U.S. Department of Transportation

$

2,250,064

$

-

(continued)

The notes to the Schedule of Expenditures of Federal Awards are an integral part of this schedule.

151

CITY OF DULUTH, MINNESOTA

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Federal Grantor Federal

Pass-Through Agency Pass-Through CFDA

Passed Through

Grant Program Title Grant Numbers Number to SubrecipientsExpenditures

U.S. Department of the Treasury

Direct

Equitable Sharing 21.016

$

204,425

$

-

U.S. Environmental Protection Agency

Direct

Great Lakes Program 66.469

$

103,079

$

-

Brownfields Assessment and Cleanup Cooperative

Agreements 66.818 151,992 -

Total U.S. Environmental Protection Agency

$

255,071

$

-

U.S. Department of Education

Passed through Minnesota Department of Employment and

Economic Development

Rehabilitation Services Vocational Rehabilitation

Grants to States

7047300 84.126

$

29,618

$

-

U.S. Department of Homeland Security

Direct

Assistance to Firefighters Grant 97.044 $ 61,403 $ -

Port Security Grant Program 97.056 308,584 -

Passed Through Minnesota Department of Public Safety

Disaster Grants - Public Assistance

(Presidentially Declared Disasters) FEMA-4069-DR-MN 97.036 37,210 -

Disaster Grants - Public Assistance

(Presidentially Declared Disasters) FEMA-4414-DR-MN 97.036 90,891 -

Total CFDA # 97.036 128,101 -

Emergency Management Performance Grants A-EMPG-2017-DULUTHCI-00022 97.042 20,000 -

Passed Through St. Louis County, Minnesota

Homeland Security Grant Program A-OPSG-2017-STLOUICO-008 97.067 27,630 -

Total U.S. Department of Homeland Security

$

545,718

$

-

Total Federal Awards

$

8,664,674

$

2,660,876

The notes to the Schedule of Expenditures of Federal Awards are an integral part of this schedule.

152

CITY OF DULUTH, MINNESOTA

NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

FOR THE YEAR ENDED DECEMBER 31, 2019

1. Reporting Entity

2. Basis of Presentation

3. Summary of Significant Accounting Policies

4. Reconciliation to Schedule of Intergovernmental Revenues

Federal grant revenue per Schedule of Intergovernmental Revenues

9,256,866

$

Expenditures of Revolving Loan Fund

Community Development Block Grants

130,820

Expenditures of Equitable Sharing Funds

204,425

Police Task Force Agreements

Minneapolis Child Exploitation and Human Trafficking Task Force

(1,719)

Grants received more than 45 days after year-end, unavailable in 2019

Urban and Community Forestry Program

21,016

Brownfields Assessment and Cleanup Cooperative Agreements

226

Coastal Zone Management Administration Awards

55,530

Community Development Block Grants

206,610

Comprehensive Opioid Abuse Site-Based Program

54,877

Crime Victim Assistance

14,449

Disaster Grants - Public Assistance

527,370

Edward Bryne Memorial Justice Assistance Grant Program

6,623

Emergency Solutions Grant Program

18,859

Forest Health Protection

65,000

Grants to Encourage Arrest Policies and Enforcement

of Protection Orders Program

32,324

Highway Planning and Construction

390,784

Home Investment Partnerships Program

102,558

National Sexual Assault Kit Initiative

98,326

Public Safety Partnership and Community Policing Grants

609

Senior Community Service Employment Program

2,026

WIA Adult Program

6,153

(continued)

Expenditures reported on the schedule are reported on the modified accrual basis of accounting. Such expenditures are

recognized following. as applicable, either the cost principles contained in OMB Circular A-87, Cost Principles for State,

Local and Indian Tribe Governments , or the cost principles contained in the Uniform Guidance, wherein certain types of

expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the schedule represent

adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. The

City has elected not to use the 10% de minimus indirect cost rate allowed under the Uniform Guidance.

The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of the City under

programs of the federal government for the year ended December 31, 2019. The information in this schedule is

presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform

Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance)

.

Because the schedule presents only a selected portion of the operations of the City, it is not intended to, and does not

present the financial position, changes in net position, or cash flows of the City.

The Schedule of Expenditures of Federal Awards presents the activities of federal award programs expended by the City

of Duluth. It does not include $11,882,956 and $3,110,945 in federal awards expended by the Duluth Airport Authority

and Duluth Transit Authority, respectively, component units of the City, which had separate single audits. The City's

reporting entity is defined in Note 1 to the financial statements.

153

CITY OF DULUTH, MINNESOTA

NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

FOR THE YEAR ENDED DECEMBER 31, 2019

Unavailable in 2018, recognized as revenue in 2019

Urban and Community Forestry Program

(6,091)

Brownfields Assessment and Cleanup Cooperative Agreements

(5,551)

Bulletproof Vest Partnership Program

(3,494)

Community Development Block Grants

(157,102)

Disaster Grants - Public Assistance

(1,927,353)

Emergency Solutions Grant Program

(8,994)

Highway Planning and Construction

(368,896)

Home Investment Partnerships Program

(7,597)

Recreational Trails Program

(19,101)

Senior Community Service Employment Program

(18)

WIA Dislocated Worker Formula Grant

(8,288)

WIA Adult Program

(1,081)

WIOA Dislocated Worker Formula Grants

(6)

WIA Youth Activities

(7)

Timing Differences Between Expenditures and Related Reimbursements (15,479)

Expenditures Per Schedule of Expenditures of Federal Awards

8,664,674

$

154





Financial Trends - Pages 156-162

Revenue Capacity - Pages 164-166

Debt Capacity - Pages 167-171

Demographic and Economic Information - Page 172

Operating Information - Pages 173-178

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.

These schedules offer demographic and economic indicators to help the reader understand

the environment within which the government's financial activities take place.

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.

Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial

reports for the relevant year.

STATISTICAL SECTION

This part of the City of Duluth'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.

Guide to Statistical Section

These schedules contain trend information to help the reader understand how the

government's financial performance and well-being have changed over time.

These schedules contain information to help the reader assess the government's most

significant local revenue source, the property tax.

155

CITY OF DULUTH, MINNESOTA

NET POSITION BY COMPONENT

LAST TEN FISCAL YEARS

(accrual basis of accounting)

Fiscal Year

2010 2011 2012 2013 2014

Governmental activities

Net investment in capital assets 197,355,610$ 213,619,166$ 209,484,876$ 210,631,129$ 235,177,972$

Restricted 22,294,675 43,113,335 36,781,284 40,778,013 46,063,716

Unrestricted * 9,970,184 (22,596,696) (21,202,511) (27,519,849) (45,926,755)

Total governmental activities net position 229,620,469$ 234,135,805$ 225,063,649$ 223,889,293$ 235,314,933$

Business-type activities

Net investment in capital assets 136,180,485$ 150,333,747$ 158,415,070$ 168,290,764$ 182,656,056$

Restricted 2,108,171 1,998,139 1,864,068 1,877,950 2,881,659

Unrestricted * 22,771,757 21,865,404 24,618,744 26,878,191 28,779,936

Total business-type activities net position 161,060,413$ 174,197,290$ 184,897,882$ 197,046,905$ 214,317,651$

Primary government

Net investment in capital assets 333,536,095 363,952,913 367,899,946 378,921,893 417,834,028

Restricted 24,402,846 45,111,474 38,645,352 42,655,963 48,945,375

Unrestricted * 32,741,941 (731,292) 3,416,233 (641,658) (17,146,819)

Total primary government net position 390,680,882$ 408,333,095$ 409,961,531$ 420,936,198$ 449,632,584$

Fiscal Year

2015 2016 2017 2018 2019

Governmental activities

Net investment in capital assets 242,346,774$ 242,875,012$ 245,733,061$ 249,612,707$ 251,585,123$

Restricted 43,143,639 45,703,757 46,203,035 42,919,978 42,703,389

Unrestricted * (100,062,238) (113,329,374) (117,374,039) (181,539,392) (170,622,157)

Total governmental activities net position 185,428,175$ 175,249,395$ 174,562,057$ 110,993,293$ 123,666,355$

Business-type activities

Net investment in capital assets 204,789,234$ 218,517,664$ 227,778,536$ 240,473,773$ 253,270,775$

Restricted 2,892,969 2,072,379 2,119,974 2,114,827 2,091,941

Unrestricted * 14,843,438 11,153,671 13,766,078 11,262,947 17,689,259

Total business-type activities net position 222,525,641$ 231,743,714$ 243,664,588$ 253,851,547$ 273,051,975$

Primary government

Net investment in capital assets 447,136,008 461,392,676 473,511,597 490,086,480 504,855,898

Restricted 46,036,608 47,776,136 48,323,009 45,034,805 44,795,330

Unrestricted * (85,218,800) (102,175,703) (103,607,961) (170,276,445) (152,932,898)

Total primary government net position 407,953,816$ 406,993,109$ 418,226,645$ 364,844,840$ 396,718,330$

* Implemented GASB Statement No. 68 January 1, 2015 which required restatement of Unrestricted Net Position.

Implemented GASB Statement No. 75 January 1, 2018 which required restatement of Unrestricted Net Position.

Source: Statement of Net Position Unaudited

156

CITY OF DULUTH, MINNESOTA

CHANGES IN NET POSITION

LAST TEN FISCAL YEARS

(accrual basis of accounting)

Fiscal Year

2010 2011 2012 2013 2014

Expenses

Governmental activities:

General government 36,014,153$ 38,577,305$ 40,761,298$ 24,455,977$ 27,045,420$

Public safety 38,100,958 37,895,850 38,190,780 39,860,955 40,104,416

Public works 13,657,626 9,040,308 12,320,891 26,286,454 21,622,112

Culture and recreation 25,434,289 7,986,366 15,125,570 11,872,741 11,584,949

Urban and economic development 14,549,117 15,446,838 13,275,120 14,922,283 14,294,290

Interest 5,409,679 4,692,654 4,907,447 4,535,639 4,338,915

Total governmental activities expenses 133,165,822 113,639,321 124,581,106 121,934,049 118,990,102

Business-type activities:

Water 10,810,875 11,218,488 10,243,435 11,015,475 11,255,835

Gas 35,800,001 36,217,536 30,351,746 35,174,140 49,131,965

Sewer 16,259,669 17,291,803 18,216,008 17,882,780 16,963,128

Stormwater 3,333,875 3,474,137 3,447,389 3,581,689 3,701,827

Steam 6,258,368 6,974,162 7,083,477 7,692,984 7,254,245

Golf 2,006,633 2,056,166 2,192,560 2,059,673 2,020,655

Parking 1,957,414 1,939,941 2,923,741 2,901,617 2,701,445

Priley drive parking facility - - - - -

Street lighting 1,557,525 1,480,674 1,583,897 1,545,598 1,910,875

Total business-type activities expenses 77,984,360 80,652,907 76,042,253 81,853,956 94,939,975

Total primary government expenses 211,150,182$ 194,292,228$ 200,623,359$ 203,788,005$ 213,930,077$

Program Revenues

Governmental activities:

Charges for services:

General government 4,619,911$ 4,673,037$ 4,415,328$ 4,675,590$ 5,018,181$

Public safety 3,330,905 2,975,998 2,925,524 1,948,070 1,501,647

Public works 369,068 370,237 394,422 111,061 1,320,130

Culture and recreation 1,297,370 1,273,472 1,082,261 1,332,448 1,299,671

Urban and economic development 280,880 310,839 347,895 2,816,814 3,383,810

Operating grants and contributions 14,164,865 15,685,467 13,668,138 13,309,497 11,487,629

Capital grants and contributions 17,075,628 13,067,199 12,230,295 17,878,748 19,388,699

Total governmental activities program revenues 41,138,627 38,356,249 35,063,863 42,072,228 43,399,767

Business-type activities:

Charges for services:

Water 12,024,675 11,743,510 13,911,617 14,866,657 14,529,002

Gas 39,882,397 41,415,145 34,071,373 40,587,986 58,291,132

Sewer 20,347,330 20,040,992 20,350,506 20,535,669 19,493,753

Stormwater 4,730,608 4,632,541 4,798,166 4,750,421 4,624,063

Steam 6,617,346 7,169,021 7,239,203 7,858,968 6,820,043

Golf 1,967,401 1,872,577 1,926,929 1,738,980 1,734,534

Parking 2,563,215 2,567,703 3,185,152 3,777,759 4,207,977

Priley drive parking facility - - - - -

Street lighting 1,270,118 1,894,038 2,272,395 2,147,449 2,146,270

Operating grants and contributions - - - 60,699 76,493

Capital grants and contributions 9,104,643 5,135,700 3,366,852 2,812,199 4,597,404

Total business-type activities program revenues 98,507,733 96,471,227 91,122,193 99,136,787 116,520,671

Total primary government program revenues 139,646,360$ 134,827,476$ 126,186,056$ 141,209,015$ 159,920,438$

(continued)

157

CITY OF DULUTH, MINNESOTA

CHANGES IN NET POSITION

LAST TEN FISCAL YEARS

(accrual basis of accounting)

2010 2011 2012 2013 2014

Net (expense)/revenue

Governmental activities (92,027,195)$ (75,283,072)$ (89,517,243)$ (79,861,821)$ (75,590,335)$

Business-type activities 20,523,373 15,818,320 15,079,940 17,282,831 21,580,696

Total primary government net expense (71,503,822)$ (59,464,752)$ (74,437,303)$ (62,578,990)$ (54,009,639)$

General Revenues and Other Changes in

Net Position

Governmental activities:

General Revenues:

Property taxes 16,001,873$ 16,718,385$ 21,379,384$ 21,924,954$ 22,146,676$

Market value credit aid 33,675 34,071 9,759 - -

Sales taxes 19,252,407 20,071,454 20,888,940 20,388,588 22,031,014

Franchise taxes 1,917,379 1,922,796 1,928,149 1,958,297 2,013,126

Other taxes 97,549 159,416 141,927 134,580 622,015

Casino shared revenues 6,258,727 2,096,800 579,478 - -

Grants and shared revenues not restricted to

specific programs 29,130,992 29,154,013 29,148,898 29,401,345 30,995,305

Investment income 2,307,506 2,934,301 506,168 (1,632,312) 2,148,194

Gain on sale or disposition of capital assets 19,174 169,695 19,124 550,473 54,776

Miscellaneous 13,584 1,157,996 1,172,063 2,694,159 1,996,119

Extraordinary items - - - - -

Transfers 4,552,145 5,379,481 4,671,197 4,714,434 5,008,750

Total governmental activities 79,585,011 79,798,408 80,445,087 80,134,518 87,015,975

Business-type activities:

General Revenues:

Property taxes - - - - -

Grants and shared revenues not restricted to

specific programs - 48,567 51,272 48,566 48,566

Investment income 282,545 349,471 184,954 33,206 468,471

Gain on sale or disposition of capital assets 7,256 - 55,623 (4,983) 58,974

Miscellaneous - 2,300,000 - 69,099 122,789

Transfers (4,552,145) (5,379,481) (4,671,197) (4,714,434) (5,008,750)

Total business-type activities (4,262,344) (2,681,443) (4,379,348) (4,568,546) (4,309,950)

Total primary government 75,322,667$ 77,116,965$ 76,065,739$ 75,565,972$ 82,706,025$

Change in Net Position

Governmental activities (12,442,184)$ 4,515,336$ (9,072,156)$ 272,697$ 11,425,640$

Business-type activities 16,261,029 13,136,877 10,700,592 12,714,285 17,270,746

Total primary government 3,818,845$ 17,652,213$ 1,628,436$ 12,986,982$ 28,696,386$

Source: Statement of Activities (continued)

Fiscal Year

158

CITY OF DULUTH, MINNESOTA

CHANGES IN NET POSITION

LAST TEN FISCAL YEARS

(accrual basis of accounting)

Fiscal Year

2015 2016 2017 2018 2019

Expenses

Governmental activities:

General government 26,652,865$ 28,487,636$ 29,490,639$ 31,093,037$ 31,839,444$

Public safety 40,798,398 55,526,260 47,268,796 43,352,480 42,180,828

Public works 22,230,628 25,219,128 23,999,112 24,997,278 27,785,208

Culture and recreation 18,319,587 10,407,695 12,497,000 13,169,901 16,261,444

Urban and economic development 14,265,141 17,688,597 15,406,291 13,664,386 14,244,055

Interest 4,619,216 4,543,299 3,951,480 4,025,051 3,909,623

Total governmental activities expenses 126,885,835 141,872,615 132,613,318 130,302,133 136,220,602

Business-type activities:

Water 10,187,477 10,997,029 11,159,899 11,268,976 10,814,241

Gas 29,262,281 27,526,208 31,537,930 33,160,799 31,777,159

Sewer 16,284,112 16,034,063 16,018,954 16,835,052 16,259,666

Stormwater 3,764,611 4,208,833 3,564,421 3,430,458 3,571,577

Steam 7,666,582 8,364,984 8,298,624 8,185,310 8,350,276

Golf 2,309,016 2,068,650 1,940,477 1,853,157 1,771,189

Parking 2,550,028 2,630,605 2,748,883 2,980,182 3,404,851

410 West First Street ramp - 768,011 1,266,511 1,254,483 1,249,348

Street lighting 1,914,331 2,307,565 2,123,129 1,909,552 1,836,048

Total business-type activities expenses 73,938,438 74,905,948 78,658,828 80,877,969 79,034,355

Total primary government expenses 200,824,273$ 216,778,563$ 211,272,146$ 211,180,102$ 215,254,957$

Program Revenues

Governmental activities:

Charges for services:

General government 4,854,823$ 4,934,248$ 5,706,995$ 5,869,145$ 5,978,363$

Public safety 1,562,794 1,698,161 2,869,629 2,023,574 2,115,004

Public works 2,801,089 2,723,412 56,549 82,235 138,436

Culture and recreation 1,310,840 1,182,738 1,247,455 1,270,730 1,328,289

Urban and economic development 3,095,554 2,655,700 2,183,548 2,682,020 3,872,703

Operating grants and contributions 10,096,446 12,402,217 11,758,737 12,019,093 12,289,736

Capital grants and contributions 19,174,980 15,968,844 11,096,107 12,912,987 12,733,125

Total governmental activities program revenues 42,896,526 41,565,320 34,919,020 36,859,784 38,455,656

Business-type activities:

Charges for services:

Water 14,426,316 14,479,884 14,428,987 14,910,171 15,142,128

Gas 35,495,409 31,209,095 36,122,015 39,182,666 39,886,073

Sewer 19,973,712 19,527,000 19,538,573 19,709,102 19,615,365

Stormwater 4,754,516 5,243,461 5,298,272 5,283,440 5,295,794

Steam 6,725,164 7,064,402 7,712,154 7,880,094 8,091,177

Golf 1,931,016 1,822,938 1,730,447 1,692,369 1,482,349

Parking 4,516,797 4,552,144 4,060,636 3,740,640 4,095,285

West Superior Street parking facility - 339,417 446,597 457,088 452,308

Street lighting 1,922,930 1,501,926 1,399,669 1,390,572 835,761

Operating grants and contributions - 164,101 104,170 - 60,628

Capital grants and contributions 8,380,978 2,251,332 2,832,186 5,602,821 6,133,857

Total business-type activities program revenues 98,126,838 88,155,700 93,673,706 99,848,963 101,090,725

Total primary government program revenues 141,023,364$ 129,721,020$ 128,592,726$ 136,708,747$ 139,546,381$

(continued)

159

CITY OF DULUTH, MINNESOTA

CHANGES IN NET POSITION

LAST TEN FISCAL YEARS

(accrual basis of accounting)

2015 2016 2017 2018 2019

Net (expense)/revenue

Governmental activities (83,989,309)$ (100,307,295)$ (97,694,298)$ (93,442,349)$ (97,764,946)$

Business-type activities 24,188,400 13,249,752 15,014,878 18,970,994 22,056,370

Total primary government net expense (59,800,909)$ (87,057,543)$ (82,679,420)$ (74,471,355)$ (75,708,576)$

General Revenues and Other Changes in

Net Position

Governmental activities:

General Revenues:

Property taxes 22,405,560$ 23,587,371$ 27,596,775$ 30,265,657$ 32,995,611$

Market value credit aid - - - - -

Sales taxes 24,305,293 24,585,124 25,188,254 26,267,168 28,867,348

Franchise taxes 2,008,194 1,998,457 3,883,316 3,997,060 3,534,435

Other taxes 255,491 198,546 204,587 254,096 326,091

Casino shared revenues - - - - -

Grants and shared revenues not restricted to

specific programs 31,232,887 31,345,365 31,420,457 31,810,084 31,917,733

Investment income 328,502 1,805,404 3,571,853 (440,856) 6,611,326

Gain on sale or disposition of capital assets - - - - -

Miscellaneous 1,323,545 1,726,300 997,006 1,689,582 1,670,993

Extraordinary items (13,264,958) - - - -

Transfers 6,336,860 4,881,948 4,144,712 4,354,903 4,514,471

Total governmental activities 74,931,374 90,128,515 97,006,960 98,197,694 110,438,008

Business-type activities:

General Revenues:

Property taxes 220,293 647,013 756,037 751,231 1,301,757

Grants and shared revenues not restricted to

specific programs 48,566 48,566 59,826 48,567 48,566

Investment income 124,243 99,045 86,837 43,383 235,864

Gain on sale or disposition of capital assets 79,246 2,220 57,913 81,868 26,962

Miscellaneous 56,606 53,425 90,095 61,272 45,380

Transfers (6,336,860) (4,881,948) (4,144,712) (4,354,903) (4,514,471)

Total business-type activities (5,807,906) (4,031,679) (3,094,004) (3,368,582) (2,855,942)

Total primary government 69,123,468$ 86,096,836$ 93,912,956$ 94,829,112$ 107,582,066$

Change in Net Position

Governmental activities (9,057,935)$ (10,178,780)$ (687,338)$ 4,755,345$ 12,673,062$

Business-type activities 18,380,494 9,218,073 11,920,874 15,602,412 19,200,428

Total primary government 9,322,559$ (960,707)$ 11,233,536$ 20,357,757$ 31,873,490$

Unaudited

Fiscal Year

160

CITY OF DULUTH, MINNESOTA

FUND BALANCES OF GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS

(modified accrual basis of accounting)

Fiscal Year

2010 2011* 2012 2013 2014

General fund

Reserved 368,134$ -$ -$ -$ -$

Unreserved 5,579,282 - - - -

Nonspendable* - 138,012 431,795 414,309 258,535

Restricted* - 120,766 97,811 75,741 91,324

Committed* - - 9,067 13,454 13,129

Assigned* - 332,997 583,777 821,114 1,634,029

Unassigned* - 7,664,417 7,587,726 7,746,042 9,320,545

Total general fund 5,947,416$ 8,256,192$ 8,710,176$ 9,070,660$ 11,317,562$

All other governmental funds

Reserved 22,178,725$ -$ -$ -$ -$

Unreserved, reported in:

Special revenue funds 38,712,371 - - - -

Debt service funds 13,496,346 - - - -

Capital projects funds 10,263,175 - - - -

Restricted* - 36,801,571 29,787,935 31,790,209 31,233,325

Committed* - 144,721 294,971 18,095,100 19,705,618

Assigned* - 27,983,067 23,258,693 576,094 445,627

Unassigned* - (255,786) (2,995,479) (5,512,643) (4,232,523)

Total all other governmental funds 84,650,617$ 64,673,573$ 50,346,120$ 44,948,760$ 47,152,047$

Fiscal Year

2015 2016 2017 2018 2019

General fund

Reserved -$ -$ -$ -$ -$

Unreserved - - - - -

Nonspendable* - - - - -

Restricted* 95,801 85,776 99,766 184,891 216,132

Committed* 21,781 32,075 36,242 41,996 35,958

Assigned* 2,132,059 1,616,063 2,280,311 3,236,770 2,999,900

Unassigned* 11,624,121 11,634,076 13,190,484 13,422,108 14,437,169

Total general fund 13,873,762$ 13,367,990$ 15,606,803$ 16,885,765$ 17,689,159$

All other governmental funds

Reserved -$ -$ -$ -$ -$

Unreserved, reported in:

Special revenue funds - - - - -

Debt service funds - - - - -

Capital projects funds - - - - -

Restricted* 44,269,018 45,235,185 42,708,250 41,801,543 39,142,316

Committed* 19,846,164 21,707,282 24,583,093 23,357,054 28,493,060

Assigned* 389,344 824,467 1,209,071 1,691,541 1,942,077

Unassigned* (8,155,193) (2,101,580) (1,981,450) (3,130,083) (4,266,262)

Total all other governmental funds 56,349,333$ 65,665,354$ 66,518,964$ 63,720,055$ 65,311,191$

*GASB Statement No. 54 changed fund balance classifications in 2011.

Source: Balance Sheet - Governmental Funds Unaudited

161

CITY OF DULUTH, MINNESOTA

CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS

(modified accrual basis of accounting)

Fiscal Year

2010 2011 2012 2013 2014

Revenues

Taxes:

Property taxes 15,953,934$ 16,581,461$ 21,336,285$ 21,913,489$ 22,118,257$

Sales taxes 19,252,407 20,071,454 20,888,940 20,388,588 22,031,014

Other taxes 2,014,928 2,082,212 2,070,076 2,092,877 2,635,141

Licenses and permits 1,182,044 1,407,951 1,625,826 1,863,333 1,737,068

Intergovernmental revenues 55,756,919 56,211,950 49,469,851 55,451,614 57,455,627

Charges for services 6,902,683 6,453,510 5,891,728 6,441,338 7,987,527

Fines and forfeits 1,791,604 1,579,021 1,075,167 699,846 709,213

Special assessments 2,741,754 2,837,628 2,884,597 2,328,821 2,458,912

Investment income 2,051,772 2,669,071 430,056 (1,675,875) 2,022,447

Miscellaneous revenues 3,285,276 3,956,649 4,124,685 4,521,654 4,304,525

Total revenues 110,933,321 113,850,907 109,797,211 114,025,685 123,459,731

Expenditures

General government 32,628,277 33,469,098 34,625,147 22,290,793 23,174,447

Public safety 33,901,872 34,606,780 36,476,109 35,035,481 35,512,569

Public works 7,164,216 2,081,437 6,046,513 19,397,379 12,536,734

Culture and recreation 6,570,834 6,865,686 7,761,926 9,469,074 9,645,981

Urban and economic development 14,177,365 15,251,986 20,203,006 17,762,959 13,858,327

Debt service

Principal retirement 10,254,000 11,395,000 13,045,000 8,655,000 11,350,000

Interest and fiscal fees 5,441,345 4,989,456 5,097,486 4,673,854 4,600,843

Bond issuance costs 140,135 80,184 280,600 203,741 223,753

Capital outlay 37,344,799 33,452,857 23,247,154 17,169,385 21,355,037

Total expenditures 147,622,843 142,192,484 146,782,941 134,657,666 132,257,691

Excess of revenues over (under)

expenditures (36,689,522) (28,341,577) (36,985,730) (20,631,981) (8,797,960)

Other financing sources (uses)

Issuance of bonds 4,470,000 4,965,000 17,980,000 10,490,000 8,055,000

Proceeds from refundings 4,190,000 - 6,905,000 - 865,000

Premium on issuance of bonds 109,851 138,232 868,419 271,507 153,373

Payment to refunded bond escrow agent (4,155,250) - (7,363,043) - (865,000)

Transfers in 26,903,985 23,957,020 19,166,548 16,753,906 16,540,403

Transfers out (22,207,637) (18,386,943) (14,444,663) (11,988,958) (11,500,627)

Total other financing sources (uses) 9,310,949 10,673,309 23,112,261 15,526,455 13,248,149

Net change in fund balances (27,378,573)$ (17,668,268)$ (13,873,469)$ (5,105,526)$ 4,450,189$

Debt service as a percentage of

noncapital expenditures 12.3% 14.8% 14.0% 11.4% 14.1%

General Governmental includes Capital Projects Fund.

Source: Statement of Revenues, Expenditures, and Changes in Fund Balances (continued)

162

CITY OF DULUTH, MINNESOTA

CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS

(modified accrual basis of accounting)

Fiscal Year

2015 2016 2017 2018 2019

Revenues

Taxes:

Property taxes 22,549,109$ 23,671,256$ 27,606,911$ 30,318,865$ 32,966,193$

Sales taxes 24,305,293 24,585,124 25,188,254 26,267,167 28,867,348

Other taxes 2,263,685 2,197,003 4,087,903 4,251,157 3,860,525

Licenses and permits 1,783,741 1,786,472 1,759,507 2,053,375 2,101,757

Intergovernmental revenues 55,941,414 60,343,948 51,353,893 56,877,087 55,060,040

Charges for services 9,289,681 8,510,151 6,171,005 6,576,669 8,153,062

Fines and forfeits 652,033 719,928 1,906,404 604,357 698,929

Special assessments 1,983,776 2,095,202 1,752,933 1,605,337 1,614,328

Investment income 230,692 1,740,987 3,527,779 (559,148) 6,366,017

Miscellaneous revenues 5,326,755 5,980,771 4,809,871 6,138,325 5,436,730

Total revenues 124,326,179 131,630,842 128,164,460 134,133,191 145,124,929

Expenditures

General government 24,004,445 24,378,741 24,722,755 28,330,883 28,605,112

Public safety 37,150,741 38,524,220 39,263,288 41,552,331 43,494,675

Public works 14,388,357 14,515,792 13,194,918 15,226,399 18,109,557

Culture and recreation 15,954,443 9,117,853 9,779,866 10,530,034 13,815,699

Urban and economic development 16,906,657 24,913,908 15,022,941 13,637,293 14,552,236

Debt service

Principal retirement 10,501,000 9,531,000 13,271,000 11,172,000 11,360,000

Interest and fiscal fees 4,577,976 4,422,939 4,603,199 4,487,446 4,751,307

Bond issuance costs 361,424 595,689 91,522 163,704 176,372

Capital outlay 16,962,641 15,016,363 14,753,506 25,106,738 17,377,830

Total expenditures 140,807,684 141,016,505 134,702,995 150,206,828 152,242,788

Excess of revenues over (under)

expenditures (16,481,505) (9,385,663) (6,538,535) (16,073,637) (7,117,859)

Other financing sources (uses)

Issuance of bonds 21,315,000 12,520,000 5,160,000 9,645,000 4,260,000

Proceeds from refundings 2,630,000 33,470,000 - - 9,755,000

Premium on issuance of bonds 799,031 7,185,320 326,247 553,787 2,832,464

Payment to refunded bond escrow agent (2,845,900) (39,861,356) - - (11,849,546)

Transfers in 19,136,245 22,385,436 21,369,040 21,752,295 22,471,395

Transfers out (12,799,385) (17,503,488) (17,224,328) (17,397,392) (17,956,924)

Total other financing sources (uses) 28,234,991 18,195,912 9,630,959 14,553,690 9,512,389

Net change in fund balances 11,753,486$ 8,810,249$ 3,092,424$ (1,519,947)$ 2,394,530$

Debt service as a percentage of

noncapital expenditures 12.1% 11.0% 14.7% 12.4% 11.8%

Unaudited

163

CITY OF DULUTH, MINNESOTA

ASSESSED AND ESTIMATED TAXABLE MARKET VALUE OF PROPERTY

LAST TEN FISCAL YEARS

Fiscal Real Estate

Year Residential Commercial

Ended Estimated Estimated

December 31 Market Value Tax Capacity Market Value Tax Capacity

2010 4,545,577,900 46,457,611 1,041,761,700 19,131,580

2011 4,391,758,200 44,888,003 1,026,682,900 18,853,813

2012 4,399,683,300 40,350,188 1,033,199,600 19,007,636

2013 4,276,314,100 40,087,613 1,057,616,100 19,632,127

2014 4,338,067,800 39,838,986 1,113,116,900 20,463,377

2015 4,441,627,300 40,989,014 1,144,647,100 21,018,612

2016 4,561,213,000 42,373,863 1,202,773,500 22,169,916

2017 4,694,140,900 44,079,263 1,297,252,450 23,998,224

2018 4,662,466,600 45,369,851 1,423,489,056 26,075,238

2019 4,888,714,700 47,913,563 1,504,708,550 27,222,464

Fiscal Personal Property

Year Residential Commercial

Ended Estimated Estimated

December 31 Market Value Tax Capacity Market Value Tax Capacity

2010 30,139,300 307,525 78,621,200 1,447,720

2011 28,363,500 284,857 84,724,000 1,551,297

2012 28,591,200 208,707 107,565,700 1,966,342

2013 29,300,100 217,752 109,785,500 2,011,293

2014 28,448,100 221,073 104,465,800 1,906,608

2015 33,827,800 276,580 105,380,900 1,937,051

2016 33,899,000 271,921 105,806,200 1,961,029

2017 33,802,700 271,921 99,447,550 1,815,452

2018 33,771,200 271,796 104,460,500 1,919,504

2019 33,371,800 272,762 107,862,900 1,932,529

Percentage

Fiscal of Total Tax

Year Total Capacity to

Ended Estimated Total Estimated Tax

December 31 Market Value Tax Capacity Market Value Rate

2010 5,696,100,100 67,344,436 1.18% 0.26331

2011 5,531,528,600 65,577,970 1.19% 0.27956

2012 5,569,039,800 61,532,873 1.10% 0.31597

2013 5,473,015,800 61,948,785 1.13% 0.33198

2014 5,584,098,600 62,430,044 1.12% 0.32338

2015 5,725,483,100 64,221,257 1.12% 0.32509

2016 5,903,691,700 66,776,729 1.13% 0.33378

2017 6,124,643,600 70,164,860 1.15% 0.37568

2018 6,224,187,356 73,636,389 1.18% 0.39701

2019 6,534,657,950 77,341,318 1.18% 0.42094

Unaudited

164

CITY OF DULUTH, MINNESOTA

PROPERTY TAX RATES AND PRINCIPAL PROPERTY TAXPAYERS

PROPERTY TAX RATES*

DIRECT AND OVERLAPPING GOVERNMENTS

LAST TEN FISCAL YEARS

Total Direct &

Fiscal

City

Overlapping Rates

Overlapping

Year

Operations

Debt Service

Total Direct

Schools

County

Special

Rates

2010

0.18050

0.08281

0.26331

0.20971

0.55365

0.05654

1.08321

2011

0.18686

0.09270

0.27956

0.23373

0.56011

0.05829

1.13169

2012

0.21847

0.09750

0.31597

0.27706

0.62325

0.05975

1.27603

2013

0.22411

0.10787

0.33198

0.32886

0.63885

0.06180

1.36149

2014

0.23152

0.09186

0.32338

0.34314

0.63613

0.06319

1.36584

2015

0.23089

0.09420

0.32509

0.34108

0.64457

0.06216

1.37290

2016

0.24322

0.09056

0.33378

0.31825

0.61443

0.06193

1.32839

2017

0.28416

0.09152

0.37568

0.29516

0.65056

0.06049

1.38189

2018

0.30848

0.08853

0.39701

0.28598

0.65286

0.06040

1.39625

2019

0.33397

0.08697

0.42094

0.31427

0.65174

0.06028

1.44723

* Tax Capacity Rate (per $1 of Tax Capacity Value)

Source: St. Louis County web site

Unaudited

PRINCIPAL PROPERTY TAXPAYERS

CURRENT AND NINE YEARS AGO

2019

2010

Percentage

of Total

Estimated

Market

Taxpayer

Type of Business

Value

Rank

Value

Rank

Value

Minnesota Power

Electric utility

153,774,500

1

2.35%

114,158,700

1

2.00%

Essentia Health

Healthcare & hospital

115,671,400

2

1.77%

49,824,500

3

0.87%

Simon Property, Inc.

Shopping mall

52,790,900

3

0.81%

55,091,800

2

0.97%

D M & I R Railroad

Railroad

42,025,200

4

0.64%

Ascena Retail Group

Lease administration

32,860,900

5

0.50%

Hall Equities Group

Real estate development

26,337,600

6

0.40%

Sherman Associates

Real estate development

25,949,100

7

0.40%

39,617,300

4

0.70%

Burlington Northern

Railroad

21,021,600

8

0.32%

St. Luke's Hospital

Healthcare & hospital

18,299,000

9

0.28%

NewPage (StoraEnso)

Paper mill

18,100,000

10

0.28%

22,445,100

6

0.39%

IRET Properties

Property management

24,705,900

5

0.43%

ZMC Hotels

Hotels

16,357,300

7

0.29%

US Bank

Bank & office building

12,313,000

8

0.22%

Tech Village

Office & tech building

11,744,700

9

0.21%

Centro Properties Group

Real estate investment

10,829,100

10

0.19%

506,830,200

$

7.75%

357,087,400

$

6.27%

Source: St. Louis County Assessor

Unaudited

165

CITY OF DULUTH, MINNESOTA

PROPERTY TAX LEVIES AND COLLECTIONS

LAST TEN FISCAL YEARS

AND NET CAPACITY OF REAL PROPERTY BY CATEGORY 2019

PROPERTY TAX LEVIES AND COLLECTIONS

LAST TEN FISCAL YEARS

Fiscal

Year Net Tax (1) Collections in

Ended Levy for Subsequent

December 31 Fiscal Year Amount % of Levy Years Amount % of Levy

2010 16,050,825 15,531,833 96.8% 411,885 15,943,718 99.3%

2011 16,648,242 16,102,214 96.7% 382,016 16,484,230 99.0%

2012 21,403,582 20,835,227 97.3% 408,253 21,243,480 99.3%

2013 21,966,088 21,396,584 97.4% 448,327 21,844,911 99.4%

2014 22,040,149 21,498,351 97.5% 329,017 21,827,368 99.0%

2015 22,686,100 22,310,465 98.3% 292,098 22,602,563 99.6%

2016 24,233,053 23,842,607 98.4% 226,410 24,069,017 99.3%

2017 28,039,466 27,593,516 98.4% 189,492 27,783,008 99.1%

2018 30,649,272 30,083,315 98.2% 187,276 30,270,591 98.8%

2019 33,804,643 33,259,823 98.4% - 33,259,823 98.4%

(1) Net tax levy is equal to the gross tax levy less state property tax aids. Unaudited

NET CAPACITY OF REAL PROPERTY BY CATEGORY

TAXES PAYABLE IN 2019

% of Total

Real Estate Only Net Tax Capacity Net Tax Capacity

Residential 29,826,457$ 39.70%

Non-Homestead Residential 18,087,106 24.07%

Commercial/Industrial 24,358,410 32.42%

Agricultural 16,088 0.02%

Public Utility 1,499,120 2.00%

Railroad 1,097,670 1.46%

Seasonal/Recreational 251,176 0.33%

Total 75,136,027$ 100.00%

Unaudited

Collected within the

Fiscal Year of the Levy Total Collections to Date

166

CITY OF DULUTH, MINNESOTA

RATIOS OF OUTSTANDING DEBT BY TYPE

LAST TEN FISCAL YEARS

RATIOS OF OUTSTANDING DEBT BY TYPE

LAST TEN FISCAL YEARS

(amounts expressed in thousands, except per capita amount)

Governmental Activities

Special

General Assessment Deferred

General Obligation Tax Lease Debt with General Amount

Fiscal Obligation Abatement Revenue Government Obligation for Bond

Year Bonds Bonds Bonds Commitment Certificates Premium

2010 ** 75,449 310 860 36,011 8,920 989

2011 74,561 285 715 29,569 10,275 938

2012 76,927 7,315 565 23,943 11,300 1,612

2013 80,754 7,290 415 20,901 12,625 1,579

2014 82,936 6,705 - 16,814 12,340 1,419

2015 97,340 6,350 - 13,080 12,670 1,910

2016 91,300 13,805 - 10,765 13,250 8,418

2017 86,615 13,435 - 7,320 13,670 7,917

2018 87,485 12,605 - 5,165 14,295 7,648

2019 81,370 11,770 - 3,125 14,050 9,605

Governmental Activities Business Activities

Deferred

Revenue and Revenue and Amount

and General and General for Bond

Fiscal Obligation Capital Revenue Obligation Discounts/

Year Notes Leases Bonds Bonds Premiums

2010 ** 3,171 70 285 47,900 67

2011 3,086 24 145 44,005 127

2012 2,996 - - 41,045 608

2013 2,896 - - 37,305 505

2014 2,791 - - 44,343 401

2015 2,735 110 - 42,760 496

2016 2,704 75 - 39,222 377

2017 2,673 38 - 34,927 270

2018 2,636 - - 35,097 223

2019 2,621 - - 31,680 167

Business Activities

General Total Percentage

Fiscal Obligation Capital Primary of Personal Per

Year Notes Leases Government Income* Capita*

2010 ** 10,766 8,725 193,523 8.56% 2,243

2011 20,562 8,672 192,964 8.30% 2,237

2012 23,084 8,041 197,436 8.34% 2,290

2013 21,904 7,385 193,559 7.71% 2,247

2014 24,581 6,704 199,034 7.64% 2,308

2015 23,034 5,995 206,480 7.47% 2,398

2016 20,519 5,385 205,820 7.60% 2,385

2017 18,048 4,752 189,665 6.85% 2,204

2018 15,474 4,094 184,722 6.38% 2,151

2019 13,204 3,411 171,003 5.76% 1,997

*See the Schedule of Demographic and Economic Statistics for personal income and population data.

**In 2010, Duluth Economic Development Authority became a discretely presented component unit. Unaudited

167

CITY OF DULUTH, MINNESOTA

RATIOS OF NET GENERAL OBLIGATION BONDED DEBT AND

DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT

RATIOS OF NET GENERAL OBLIGATION BONDED DEBT

LAST TEN FISCAL YEARS

Less Percent of

Gross Debt Net Net Bonded Net Bonded

Fiscal Bonded Service Bonded Debt to Debt per

Year Population Tax Capacity Debt Funds Debt Tax Capacity per Capita

2010* 86,265 67,344,436 84,679,118 19,144,190 65,534,928 97.31% 759.69

2011 86,277 65,577,970 86,059,378 18,629,920 67,429,458 102.82% 781.55

2012 86,200 61,532,873 97,154,314 17,742,090 79,412,224 129.06% 921.26

2013 86,128 61,948,785 102,247,605 19,802,762 82,444,843 133.09% 957.24

2014 86,238 62,430,044 103,399,159 22,948,537 80,450,622 128.87% 932.89

2015 86,110 64,221,257 118,269,847 19,496,773 98,773,074 153.80% 1,147.06

2016 86,293 66,776,729 126,772,630 22,581,641 104,190,989 156.03% 1,207.41

2017 86,066 70,164,860 121,637,268 7,639,067 113,998,201 162.47% 1,324.54

2018 85,884 73,636,389 122,033,234 21,344,176 100,689,058 136.74% 1,172.38

2019 85,618 77,341,318 116,794,602 20,970,230 95,824,372 123.90% 1,119.21

Note:

Gross bonded debt consists of general long-term debt bonds payable as reported on the Statement of Net Position.

Specifically excluded are special assessment and enterprise bond issues for which the city is contingently liable.

Tax increment revenue bonds are not included.

*In 2010, Duluth Economic Development Authority became a discretely presented component unit.

Unaudited

DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT

AS OF DECEMBER 31, 2019

General Percent Amount

Obligation Chargeable Chargeable

Governmental Unit

Debt

to City

Independent School District 709 $42,690,000 88.27% 37,681,534$

Independent School District 704 25,390,000 6.34% 1,610,705

St. Louis County 136,015,000 38.31% 52,106,131

Subtotal, overlapping debt 91,398,370

City of Duluth direct debt 112,936,000

Total direct and overlapping debt 204,334,370$

The overlapping debt chargeable to the City is based upon the taxable net tax capacity in the City as a

percentage of the total taxable net tax capacity of the overlapping governmental unit.

Unaudited

168

CITY OF DULUTH, MINNESOTA

LEGAL DEBT MARGIN INFORMATION

LAST TEN FISCAL YEARS

Fiscal Year

2010

2011

2012

2013

2014

Taxable market value

5,696,100,100

$

5,531,528,600

$

5,569,039,800

$

5,473,015,800

$

5,584,098,600

$

Legal debt limit %

2%

Legal debt limit

113,922,002

$

110,630,572

$

111,380,796

$

109,460,316

$

111,681,972

$

Debt applicable to limit:

Total bonds payable

169,735,000

$

159,554,999

$

161,095,000

$

159,290,002

$

163,138,242

$

Less: Deductions allowable

(128,955,882)

(117,723,976)

(123,073,029)

(118,746,296)

(123,892,674)

Total net debt applicable to limit

40,779,118

$

41,831,023

$

38,021,971

$

40,543,706

$

39,245,568

$

Total net debt applicable to the limit

as a percentage of debt limit

35.80%

37.81%

34.14%

37.04%

35.14%

Fiscal Year

2015

2016

2017

2018

2019

Taxable market value

5,725,483,100

$

5,903,691,700

$

6,124,643,600

$

6,224,187,356

$

6,534,657,950

$

Legal debt limit %

2%

Legal debt limit

114,509,662

$

118,073,834

$

122,492,872

$

124,483,747

$

130,693,159

$

Debt applicable to limit:

Total bonds payable

172,200,045

$

168,342,029

$

155,967,007

$

154,647,475

$

141,994,868

$

Less: Deductions allowable

(133,220,045)

(129,827,029)

(117,767,007)

(112,342,475)

(103,369,868)

Total net debt applicable to limit

38,980,000

$

38,515,000

$

38,200,000

$

42,305,000

$

38,625,000

$

Total net debt applicable to the limit

as a percentage of debt limit

34.04%

32.62%

31.19%

33.98%

29.55%

Unaudited

169

CITY OF DULUTH, MINNESOTA

REVENUE BOND COVERAGE

LAST TEN FISCAL YEARS

Net Revenue

Direct

Available

Fiscal

Gross

Operating

for Debt

Year

Revenue (1)

Expenses (2)

Service

Principal

Interest

Total

Coverage

2010 12,045,133 9,275,099 2,770,034 186,000 94,605 280,605 9.87

2011 11,747,715 9,395,019 2,352,696 399,428 97,166 496,594 4.74

2012 13,928,511 8,897,762 5,030,749 427,028 85,385 512,413 9.82

2013 14,892,290 9,394,544 5,497,746 433,873 73,085 506,958 10.84

2014 14,555,607 9,529,831 5,025,776 451,251 60,371 511,622 9.82

2015 14,440,052 8,528,252 5,911,800 388,095 33,951 422,046 14.01

2016 14,494,396 9,008,318 5,486,078 336,473 27,326 363,799 15.08

2017 14,443,317 9,286,000 5,157,317 348,851 17,833 366,684 14.06

2018 14,891,148 9,255,377 5,635,771 99,000 110,307 209,307 26.93

2019 15,190,186 8,928,974 6,261,212 284,000 131,249 415,249 15.08

2010 39,970,909 34,319,333 5,651,576 821,000 255,813 1,076,813 5.25

2011 41,552,067 34,549,583 7,002,484 855,957 305,411 1,161,368 6.03

2012 34,148,624 28,790,209 5,358,415 857,980 185,574 1,043,554 5.13

2013 40,611,707 33,701,058 6,910,649 896,020 161,825 1,057,845 6.53

2014 58,554,131 47,699,256 10,854,875 922,972 136,104 1,059,076 10.25

2015 35,584,151 27,708,531 7,875,620 869,955 84,237 954,192 8.25

2016 31,767,073 25,294,510 6,472,563 902,931 55,294 958,225 6.75

2017 36,217,772 29,677,464 6,540,308 480,000 29,800 509,800 12.83

2018 39,256,630 31,544,174 7,712,456 505,000 10,100 515,100 14.97

2010 20,388,169 14,482,465 5,905,704 1,008,000 482,913 1,490,913 3.96

2011 20,130,587 15,215,558 4,915,029 1,317,776 404,300 1,722,076 2.85

2012 20,387,041 15,946,629 4,440,412 1,390,440 324,927 1,715,367 2.59

2013 20,541,361 16,013,024 4,528,337 1,454,699 296,240 1,750,939 2.59

2014 19,545,030 14,653,139 4,891,891 1,506,941 257,061 1,764,002 2.77

2015 19,986,777 13,852,969 6,133,808 1,177,256 179,515 1,356,771 4.52

2016 20,670,314 13,608,142 7,062,172 1,357,475 159,416 1,516,891 4.66

2017 19,543,095 13,717,618 5,825,477 1,289,599 127,358 1,416,957 4.11

2018 19,715,390 14,511,632 5,203,758 1,001,000 98,648 1,099,648 4.73

2019 19,650,585 13,971,291 5,679,294 1,035,999 70,975 1,106,974 5.13

2010 4,734,525 2,845,983 1,888,542 95,000 67,887 162,887 11.59

2011 4,672,485 2,868,448 1,804,037 196,839 68,295 265,134 6.80

2012 4,820,629 2,897,725 1,922,904 204,552 62,297 266,849 7.21

2013 4,755,764 3,059,690 1,696,074 210,409 56,115 266,524 6.36

2014 4,670,074 3,248,954 1,421,120 218,837 49,690 268,527 5.29

2015 4,767,610 3,291,078 1,476,532 109,694 22,700 132,394 11.15

2016 5,253,324 3,670,639 1,582,685 228,121 24,001 252,122 6.28

2017 5,293,060 3,141,177 2,151,883 241,549 18,184 259,733 8.28

2018 5,280,978 2,989,079 2,291,899 130,000 13,900 143,900 15.93

2019 5,309,868 3,168,582 2,141,286 135,000 10,575 145,575 14.71

(continued)

Debt Service Requirements

WATER REVENUE BOND

GAS REVENUE BOND (3)

SEWER REVENUE BOND

STORMWATER REVENUE BOND

170

CITY OF DULUTH, MINNESOTA

REVENUE BOND COVERAGE

LAST TEN FISCAL YEARS

Net Revenue

Direct

Available

Fiscal

Gross

Operating

for Debt

Year

Revenue (1)

Expenses (2)

Service

Principal

Interest

Total

Coverage

2010 6,497,846 5,032,398 1,465,448 515,000 260,912 775,912 1.89

2011 7,169,515 5,712,409 1,457,106 495,000 241,246 736,246 1.98

2012 7,239,954 5,867,609 1,372,345 - 52,148 52,148 26.32

2013 7,847,524 6,547,268 1,300,256 600,000 73,940 673,940 1.93

2014 6,861,228 6,060,699 800,529 625,000 67,815 692,815 1.16

2015 6,728,330 6,230,054 498,276 635,000 151,946 786,946 0.63

2016 7,069,377 6,896,627 172,750 635,000 177,553 812,553 0.21

2017 7,712,154 6,845,368 866,786 650,000 170,315 820,315 1.06

2018 7,883,080 6,761,475 1,121,605 655,000 161,013 816,013 1.37

2019 8,091,177 6,722,623 1,368,554 665,000 149,456 814,456 1.68

2010 1,967,418 1,858,207 109,211 140,000 10,620 150,620 0.73

2011 1,872,594 1,789,906 82,688 145,000 5,510 150,510 0.55

2010 2,610,111 789,126 1,820,985 790,000 657,056 1,447,056 1.26

2011 2,645,997 800,256 1,845,741 825,000 620,263 1,445,263 1.28

2012 3,216,205 1,860,989 1,355,216 860,000 211,266 1,071,266 1.27

2013 3,780,214 2,085,827 1,694,387 1,045,000 234,363 1,279,363 1.32

2014 4,286,789 1,983,869 2,302,920 1,130,000 201,694 1,331,694 1.73

2015 4,513,311 1,789,669 2,723,642 780,000 186,819 966,819 2.82

2016 4,563,427 1,850,051 2,713,376 785,000 178,994 963,994 2.81

2017 4,054,780 1,971,083 2,083,697 795,000 167,119 962,119 2.17

2018 3,743,709 2,208,341 1,535,368 810,000 151,069 961,069 1.60

2019 4,134,908 2,642,090 1,492,818 830,000 134,669 964,669 1.55

Notes:

(1) Includes operating revenue and interest earnings.

(2) Includes operating expenses, excluding depreciation.

(3) Gas revenue bond was retired in 2019.

(4) Golf revenue bond was retired in 2012.

Unaudited

STEAM REVENUE BOND

GOLF REVENUE BOND (4)

PARKING REVENUE BOND

Debt Service Requirements

171

CITY OF DULUTH, MINNESOTA

DEMOGRAPHIC AND ECONOMIC STATISTICS AND

PRINCIPAL EMPLOYERS

DEMOGRAPHIC AND ECONOMIC STATISTICS

LAST TEN FISCAL YEARS

Total Per Capita

Fiscal Personal Personal School Unemployment

Year

Population

Income Income Enrollment Rate

2010 86,265 2,260,614,999 26,205 8,780 7.6%

2011 86,277 2,324,435,029 26,942 8,815 7.1%

2012 86,200 2,368,110,337 27,472 8,686 6.0%

2013 86,128 2,510,223,601 29,145 8,517 5.4%

2014 86,238 2,605,207,475 30,210 8,517 4.8%

2015 86,110 2,763,072,824 32,088 8,353 3.4%

2016 86,293 2,709,298,125 31,396 8,115 4.1%

2017 86,066 2,770,709,396 32,193 8,067 3.8%

2018 85,884 2,893,707,377 33,693 8,515 2.9%

2019 85,618 2,970,783,850

*

34,698 8,229 3.0%

Data sources:

The population figures are estimates of the US Census Bureau.

Total personal income is from the Minnesota Department of Employment and Economic Development's website.

The school enrollment figures were provided by the Duluth School District.

The unemployment rates were provided by the Minnesota Department of Employment and Economic Development.

* Estimate

Unaudited

PRINCIPAL EMPLOYERS

CURRENT YEAR AND NINE YEARS AGO

2019 2010

Percentage Percentage

of Total City of Total City

Employer Type of Business Employees Rank Employment Employees Rank Employment

Essentia Health (SMDC) Healthcare / hospital 6,569 1 11.14% 4,693 1 8.06%

St. Luke's Hospital Healthcare / hospital 2,348 2 3.98% 1,515 4 2.60%

St. Louis County Government 1,847 3 3.13% 1,301 7 2.23%

University of Minnesota - Duluth

Education

1,635 4 2.77% 1,700 2 2.92%

Independent School District No. 709

Education

1,426 5 2.42% 1,426 5 2.45%

Allete (Minnesota Power) Electric utility 1,314 6 2.23% 1,419 6 2.44%

Duluth Air National Guard Base Military 1,068 7 1.81% 1,068 8 1.83%

Cirrus Design Aviation 1,000 8 1.70%

United Health Care

Insurance

999 9 1.69% 1,634 3 2.81%

City of Duluth Government 867 10 1.47% 871 9 1.50%

US Government Government 850 10 1.46%

19,073 32.34% 16,477 28.30%

Source: Northland Connection's website.

Total city employment is from the Minnesota Department of Employment & Economic Development's website. Unaudited

172

CITY OF DULUTH, MINNESOTA

FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION

LAST TEN FISCAL YEARS

Full-time Equivalent Employees as of December 31

2010 2011 2012 2013 2014

Function:

General government 114.40 113.90 115.90 125.75 127.65

Public safety

Police 187.00 185.00 185.00 178.50 178.50

Fire 140.00 140.00 138.00 141.00 142.00

Public works 123.80 118.60 106.60 87.10 85.90

Culture and recreation

Parks and recreation 7.50 7.50 9.00 10.00 10.00

Library 43.50 43.50 48.50 49.00 49.00

Urban and economic development 59.00 62.50 61.50 60.25 59.53

Water & Gas 124.80 128.20 131.00 133.00 132.60

Sewer 38.40 38.40 39.20 40.20 39.33

Stormwater 24.20 24.20 26.00 26.00 25.52

Parking 4.00 3.00 3.00 8.00 8.00

Street lighting 4.00 5.00 5.00 5.00 5.10

Total 870.60 869.80 868.70 863.80 863.13

Full-time Equivalent Employees as of December 31

2015 2016 2017 2018 2019

Function:

General government 131.65 132.40 133.00 126.50 131.65

Public safety

Police 178.50 180.50 184.14 182.14 182.14

Fire 143.00 144.50 146.50 146.50 146.50

Public works 85.05 86.25 86.50 82.95 83.95

Culture and recreation

Parks and recreation 9.75 11.75 11.95 11.70 11.70

Library 46.50 46.50 46.70 46.70 46.70

Urban and economic development 55.50 54.05 54.05 50.64 57.64

Water & Gas 128.65 129.15 134.75 134.75 135.45

Sewer 36.93 35.80 33.15 34.65 33.05

Stormwater 26.87 27.30 25.85 23.15 24.05

Parking 8.00 9.00 9.00 9.00 9.00

Street lighting 5.10 5.10 5.10 5.10 5.10

Total 855.50 862.30 870.69 853.78 866.93

Source: City of Duluth Budget Office Unaudited

173

CITY OF DULUTH, MINNESOTA

OPERATING INDICATORS BY FUNCTION

LAST TEN FISCAL YEARS

Fiscal Year

2010 2011 2012 2013 2014

Function:

Police

Criminal offences 10,540 11,278 9,924 10,828 9,472

Cleared by arrest 4,436 4,231 3,785 4,473 4,070

Traffic violations 5,241 9,746 9,499 11,152 9,307

Parking violations 56,292 51,991 46,492 51,361 55,097

Fire

Number of calls answered 8,484 9,262 9,857 10,816 11,114

Number of inspections conducted 1,200 1,200 1,200 1,200 1,200

Public works

Construction permits:

Permits issued 2,026 1,700 2,325 2,054 2,030

Estimated cost of construction during year 238,186,019$ 173,357,959$ 104,841,877$ 137,097,967$ 182,409,369$

Culture and recreation

Parks and recreation department

Participation in special events 48,896 15,436 18,129 40,045 30,749

Participation in recreation 31,905 39,839 35,681 27,393 28,304

Zoo regular customers 102,986 93,705 71,842 58,306 65,270

Library

Registered borrowers 46,592 47,965 50,171 50,491 48,147

Items in collection 620,101 463,418 457,999 467,050 456,753

Items loaned 929,161 902,221 953,270 959,432 923,063

Library visits 380,982 376,817 460,918 484,917 492,106

Internet uses 62,379 66,394 89,070 106,662 118,825

Reference/research questions answered 80,678 79,443 90,155 84,838 89,232

Water

Meters in service 30,317 29,069 28,082 28,051 28,131

Average number of gallons treated per month 481,950,833 461,125,000 468,170,000 433,795,000 433,676,667

Water pumped - million cubic feet 773.10 739.80 756.10 695.90 695.74

Water sold - million cubic feet 665.50 589.60 644.40 605.95 591.00

Daily average consumption in gallons 15,844,958 15,160,274 13,206,643 12,418,716 14,257,863

Gas

Meters in service 26,668 26,693 27,542 27,452 26,585

MMBTU sold 4,617,923 5,184,800 4,528,009 5,355,988 5,679,683

Sewer

Number of service connections 28,845 28,845 27,250 27,956 27,956

Daily average treatment in gallons 14,859,000 13,284,575 12,137,000 12,843,000 14,257,000

Stormwater

Cleaning storm sewer pipe (in feet) 14,734 14,750 230,165 31,658 2,700

Steam

Steam sold (in 1,000 lbs) 403,085 409,295 379,257 394,762 300,669

Golf

Season passes 823 810 803 695 644

Daily tickets 32,252 32,101 35,121 31,401 28,860

Carts 10,670 12,553 14,751 14,019 15,056

Rounds played 79,430 75,480 84,740 63,196 60,172

Sources: Various government departments (continued)

174

CITY OF DULUTH, MINNESOTA

OPERATING INDICATORS BY FUNCTION

LAST TEN FISCAL YEARS

Fiscal Year

2015 2016 2017 2018 2019

Function:

Police

Criminal offences 10,262 10,447 10,561 10,437 10,890

Cleared by arrest 4,081 4,062 3,802 3,267 3,518

Traffic violations 8,525 6,819 5,196 5,421 4,568

Parking violations 50,647 55,226 34,437 31,934 42,684

Fire

Number of calls answered 12,231 12,799 13,239 13,255 13,698

Number of inspections conducted 1,200 1,200 7,490 7,367 8,382

Public works

Construction permits:

Permits issued 1,896 2,085 2,071 1,861 2,188

Estimated cost of construction during year 160,884,495$ 108,815,274$ 92,039,794$ 115,349,614$ 203,247,704$

Culture and recreation

Parks and recreation department

Participation in special events 23,122 49,125 67,300 62,925 68,725

Participation in recreation 22,586 31,555 25,210 27,197 44,373

Zoo regular customers 64,071 76,316 81,538 78,439 79,128

Library

Registered borrowers 47,086 45,424 42,674 51,636 52,178

Items in collection 444,790 435,385 424,304 419,907 346,516

Items loaned 927,389 848,293 871,704 847,237 868,740

Library visits 474,982 461,403 475,363 426,082 437,668

Internet uses 109,965 92,656 90,489 81,685 70,338

Reference/research questions answered 77,896 59,321 71,253 59,579 65,702

Water

Meters in service 28,134 28,134 28,243 28,345 28,422

Average number of gallons treated per month 431,616,667 415,642,500 408,434,167 388,512,500 374,256,680

Water pumped - million cubic feet 692.4 666.8 655.2 623.3 600.4

Water sold - million cubic feet 589.8 565.6 568.4 561.9 527.6

Daily average consumption in gallons 14,190,136 11,590,274 11,648,560 12,773,013 12,307,089

Gas

Meters in service 26,896 28,540 28,712 28,957 29,234

MMBTU sold 4,885,371 4,770,804 5,218,978 5,063,708 5,984,783

Sewer

Number of service connections 27,963 27,985 27,993 28,030 28,075

Daily average treatment in gallons 13,000,530 13,729,690 14,355,390 12,093,510 14,111,340

Stormwater

Cleaning storm sewer pipe (in feet) 3,330 20,017 107,965 125,776 82,597

Steam

Steam sold (in 1,000 lbs) 332,830 313,408 305,465 345,262 350,306

Golf

Season passes 795 731 436 462 307

Daily tickets 46,700 38,894 34,358 39,661 33,223

Carts 42,606 39,846 28,555 25,048 21,079

Rounds played 81,082 75,544 67,657 60,988 51,402

Sources: Various government departments Unaudited

175

CITY OF DULUTH, MINNESOTA

CAPITAL ASSET STATISTICS BY FUNCTION

LAST TEN FISCAL YEARS

Fiscal Year

2010 2011 2012 2013 2014

Function:

Police

Patrol units 96 94 93 93 93

Fire

Fire stations 9 9 8 8 8

Public works

Miles of streets and alleys:

Milles of streets - paved 469.00 470.23 470.43 470.49 472.51

Miles of streets - unpaved 48.02 48.02 48.02 47.96 47.96

Miles of sidewalk 277.00 409.00 409.90 410.98 410.98

Number of street lights:

Ornamental lamps (no. of bulbs) 3,930 3,930 3,930 3,930 3,930

Overhead street lamps 3,665 3,665 3,665 3,665 3,665

Culture and recreation

Parks and recreation department

Number of parks 127 127 128 128 128

Park acreage 15,255 15,255 12,000 12,000 12,000

Number of ski hills 2 2 2 2 2

Number of municipal tennis courts 17 17 17 17 19

Community clubs/field houses operated 22 22 21 21 19

Number of athletic fields 57 57 57 57 57

Number of hiking trails 13 14 14 14 14

Library department

Libraries/branches 3 3 3 3 3

Water

Miles of water mains 424.10 426.30 426.74 428.30 429.50

Number of hydrants 2,535 2,583 2,597 2,671 2,677

Maximum daily capacity of plant in gallons 32,000,000 32,000,000 32,000,000 32,000,000 32,000,000

Gas

Miles of gas mains 512.40 511.00 520.00 527.00 534.70

Sewer

Miles of sanitary sewers 392.00 382.00 406.20 398.00 402.00

Stormwater

Miles of storm sewers 431.00 431.00 431.00 443.00 435.00

Steam

Miles of line 11.00 11.00 11.00 11.00 11.00

Golf

Number of municipal golf courses 2 2 2 2 2

Sources: Various government departments. (continued)

176

CITY OF DULUTH, MINNESOTA

CAPITAL ASSET STATISTICS BY FUNCTION

LAST TEN FISCAL YEARS

Fiscal Year

2015 2016 2017 2018 2019

Function:

Police

Patrol units 93 97 102 123 120

Fire

Fire stations 8 8 8 8 8

Public works

Miles of streets and alleys:

Milles of streets - paved 473.80 475.77 475.74 475.77 475.77

Miles of streets - unpaved 47.96 47.96 47.96 47.96 47.96

Miles of sidewalk 410.98 411.08 352.00 352.13 352.13

Number of street lights:

Ornamental lamps (no. of bulbs) 3,930 3,940 3,930 3,809 3,809

Overhead street lamps 3,665 3,665 3,665 3,665 3,665

Culture and recreation

Parks and recreation department

Number of parks 128 129 129 129 129

Park acreage 12,000 12,000 12,000 12,000 12,000

Number of ski hills 2 2 2 2 2

Number of municipal tennis courts 19 17 17 17 17

Community clubs/field houses operated 19 19 19 18 17

Number of athletic fields 57 48 48 48 48

Number of hiking trails 14 14 14 14 25

Library department

Libraries/branches 3 3 3 3 3

Water

Miles of water mains 430.40 428.30 428.40 429.40 432.50

Number of hydrants 2,688 2,699 2,708 2,717 2,738

Maximum daily capacity of plant in gallons 32,000,000 32,000,000 32,000,000 32,000,000 32,000,000

Gas

Miles of gas mains 534.10 538.20 544.40 548.10 5,511.00

Sewer

Miles of sanitary sewers 395.30 397.60 398.80 398.10 398.10

Stormwater

Miles of storm sewers 398.07 404.56 412.00 413.00 413.00

Steam

Miles of line 11.00 11.00 11.00 11.00 11.00

Golf

Number of municipal golf courses 2 2 2 2 2

Sources: Various government departments. Unaudited

177

CITY OF DULUTH, MINNESOTA

COMPONENT UNIT STATISTICAL DATA

LAST TEN FISCAL YEARS

Fiscal Year

2010 2011 2012 2013 2014

COMPONENT UNITS

Duluth Entertainment and Convention

Center Authority (DECC)

Number of events 690 510 515 471 516

Number of conventions 49 46 45 51 45

Duluth Airport Authority

Number of passengers 306,330 295,212 322,208 313,839 310,893

Duluth Transit Authority

Number of buses 66 66 66 66 67

Number of routes 18 19 20 19 19

Number of passengers 3,171,087 3,264,479 3,278,682 3,195,020 3,107,305

Service area (square miles) 143 143 143 143 143

Spirit Mountain Recreation Area

Authority

Skier visits 144,579 155,450 130,013 136,990 140,017

Season passes 7,728 7,835 6,915 6,773 6,728

Fiscal Year

2015 2016 2017 2018 2019

COMPONENT UNITS

Duluth Entertainment and Convention

Center Authority (DECC)

Number of events 519 506 510 494 515

Number of conventions 52 47 45 46 47

Duluth Airport Authority

Number of passengers 266,500 251,459 244,839 275,969 313,980

Duluth Transit Authority

Number of buses 66 67 67 75 75

Number of routes 19 20 23 23 23

Number of passengers 2,850,000 2,804,000 2,786,000 2,760,000 2,645,306

Service area (square miles) 143 143 143 143 143

Spirit Mountain Recreation Area

Authority

Skier visits 95,401 89,483 78,739 46,963 101,340

Season passes 5,697 4,275 3,386 4,970 6,756

Unaudited

178

Fill Online, Printable, Fillable, Blank 2019 City Of Duluth Cafr Form

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Fillable 2019 City Of Duluth Cafr

Fill Online, Printable, Fillable, Blank 2019 City Of Duluth Cafr Form

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