01-22-2024 CC Agenda Packet - Laserfiche WebLink

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City of Orono, Minnesota Notes to the Financial Statements December 31, 2022 Note 6: Other Information (Continued) C.Flexible Benefit Plan The City offers a flexible benefit plan (the Plan). The Plan is a “cafeteria plan” under §125 of the Internal Revenue Code (IRC). All employees who meet the eligibility requirements may participate in the Plan. To be eligible, an employee must be at least 20 years of age and be regularly scheduled to work more than 20 hours per week. Eligible employees can elect to participate by contributing pre-tax dollars withheld from payroll checks to the Plan for healthcare and dependent care benefits. Payments are made from the Plan to participating employees upon submitting a request for reimbursement of eligible expenses actually incurred by the participant. All assets of the Plan are held and administered by an independent contract administrator for childcare and medical expense reimbursements, and by the City for health insurance premiums. All activity of the Plan is included in the financial statements as part of the General Fund and enterprise funds as employee benefits. All property of the Plan and income attributable to that property is solely the property of the City, subject to the claims o f the City’s general creditors. Participants’ rights under the Plan are equal to those of general creditors of the City in an amount equal to the eligible healthcare and dependent care expenses incurred by the participants. The City believes it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. D.Conditional State Grant In 2005, as a part of the City’s acquisition of Big Island Park, the City was awarded a grant from the state of Minnesota in the amount of $2,000,000. The grant is repayable to the state if the property is not maintained for low-impact recreation and conservation use. E.Police Services Contracts As of December 31, 2019, the City of Orono had several contracts to provide police services to neighboring cities. The most significant of those was a contract with the city of Mound, which the City entered into as of January 1, 2013 and which extends 10 years to December 31, 2022. The contract also included annual payments from the city of Mound starting at $1,545,000 in 2013 and increasing between 1%-5% each year through the end of the contract. The contract has been renewed as of December 31, 2022. The City also has a contract with the cities of Minnetonka Beach and Spring Park to furnish law enforcement services to each respective city. The original contract term ended December 31, 2012 and includes the option to verbally extend it each year for an additional one-year period. The contract has been extended each year through 202 3. Note 7: Change in Accounting Principles For fiscal year 2022, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. GASB Statement No. 87 enhances the relevance and consistency of information of the government’s leasing activities. It establishes requirements for lease accounting based on the principle that leases are financings of the right to use an underlying asset. A lessee is required to recognize a lease liability and an intangible right to use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. These changes were incorporated in the City’s 2022 financial statements. 83 129