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GENERAL FUND The City's General Fund accounts for the financial activity of the basic services provided to the community. The primary services included within this fund are the administration of the municipal operation, police and fire protection, building inspection, streets and highway maintenance, and parks and recreation. The graph below illustrates the change in the General Fund financial position over the last five years. We have also included a line representing annual expenditures to reflect the change in the size of the General Fund operation over the same period. General Fund Financial Position Year Ended December 31, $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 It- f S-- 2017 2018 2019 2020 2021 Fund Balance $329,141 $394,915 $495,267 $263,187 $253,845 0 Cash (Net) $358,163 $424,252 $514,910 $294,991 $313,020 Expenditures $360,300 $431,839 $376,034 $353,621 $514,334 The City's General Fund cash and investments balance at December 31, 2021 was $313,020, an increase of $18,029 from the previous year. Total fund balance decreased $9,342 in 2021, as compared to a balanced budget projected in the final budget. As the graph illustrates, the City has generally been able to maintain healthy cash and fund balance levels. This is an important factor because a government, like any organization, requires a certain amount of equity to operate. A healthy financial position allows the City to avoid volatility in tax rates; helps minimize the impact of state funding changes; allows for the adequate and consistent funding of services, repairs, and unexpected costs; and is a factor in determining the City's bond rating and resulting interest costs. Maintaining an adequate fund balance has become increasingly important given the fluctuations in state funding for cities in recent years. A trend that is typical to Minnesota local governments, especially the General Fund of cities, is the unusual cash flow experienced throughout the year. The City's General Fund cash disbursements are made fairly evenly during the year, other than the impact of seasonal services, such as snowplowing, street maintenance, and park activities. Cash receipts of the General Fund are quite a different story. Taxes comprise about 85.6 percent of the fund's total annual revenue. Approximately half of these revenues are received by the City in July and the rest in December. Consequently, the City needs to have adequate cash reserves to finance its everyday operations between these payments. The City's unassigned General Fund balance at the end of the 2021 fiscal year represents approximately 49.1 percent of annual expenditures, based on 2021 levels. -9-