PRELIMINARY OFFICIAL STATEMENT DATED AUGUST 10, 2020 NEW ISSUE BOOK ENTRY ONLY BANK QUALIFIED STANDARD & POOR’S RATING “AA” In the opinion of Dorsey & Whitney LLP, Bond Counsel, based on existing law and assuming the accuracy of certain representations and compliance with certain covenants, interest on the Bonds (i) is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”), (ii) is not an item of tax preference for purposes of the federal alternative minimum tax imposed by Section 55 of the Code, (iii) is excluded from taxable net income of individuals, estates, and trusts for Minnesota income tax purposes, and (iv) is not an item of tax preference for Minnesota alternative minimum tax purposes. Interest on the Bonds is included, however, in net income for purposes of the Minnesota franchise tax imposed on corporations and financial institutions. The County will designate the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Code relating to the ability of financial institutions to deduct from income for federal income tax purposes a portion of the interest expense that is allocable to carrying and acquiring tax-exempt obligations. See "TAX CONSIDERATIONS" herein.

STEVENS COUNTY, MINNESOTA

$4,510,000

General Obligation Ditch Bonds, Series 2020A Dated Date: Date of Delivery (Estimated to be September 15, 2020) Interest Due: Each June 1 and December 1 Commencing June 1, 2021

Amount Rate Maturity Yield Price Amount Rate Maturity Yield Price $190,000 _____% 12/01/21 _____

_____ $225,000 _____% 12/01/31 _____% _____

205,000 _____ 12/01/22 _____ _____ 225,000 _____ 12/01/32 _____ _____ 205,000 _____ 12/01/23 _____ _____ 230,000 _____ 12/01/33 _____ _____ 210,000 _____ 12/01/24 _____ _____ 235,000 _____ 12/01/34 _____ _____ 210,000 _____ 12/01/25 _____ _____ 240,000 _____ 12/01/35 _____ _____ 210,000 _____ 12/01/26 _____ _____ 240,000 _____ 12/01/36 _____ _____ 215,000 _____ 12/01/27 _____ _____ 245,000 _____ 12/01/37 _____ _____ 215,000 _____ 12/01/28 _____ _____ 250,000 _____ 12/01/38 _____ _____ 220,000 _____ 12/01/29 _____ _____ 255,000 _____ 12/01/39 _____ _____ 220,000 _____ 12/01/30 _____ _____ 265,000 _____ 12/01/40 _____ _____

The General Obligation Ditch Bonds, Series 2020A (the “Bonds” or the “Issue”) are being issued by Stevens County, Minnesota (the “County” or the “Issuer”) pursuant to Minnesota Statutes, Chapters 475 and Section 103E.635, as amended. Proceeds of the Bonds will be used to finance improvements to County Ditch 18 and to pay costs associated with issuance of the Bonds. See Authority and Purpose herein for additional information. The Bonds are valid and binding general obligations of the County and are payable from special assessments against benefitted properties. The full faith and credit of the County is also pledged to their payment. In the event of any deficiency in the Debt Service Account established for this Issue, the County has validly obligated itself to levy additional ad valorem taxes upon all of the taxable property within the County, without limitation of amount. See Security/Sources and Uses of Funds herein for additional information. The Bonds maturing on December 1, 2029 and thereafter are subject to redemption, in whole or in part, on December 1, 2028 and on any date thereafter at a price of par plus accrued interest. Principal due with respect to the Bonds is payable annually on December 1, commencing December 1, 2021. Interest due with respect to the Bonds is payable semiannually on June 1 and December 1, commencing June 1, 2021. The Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Individual purchases will be made in book-entry form only, in the principal amount of $5,000 or any whole multiple thereof. Purchasers will not receive physical delivery of Bonds. See “Book-Entry System” in Description of the Bonds herein for additional information. The Paying Agent/Registrar will be Northland Trust Services Inc., Minneapolis, Minnesota.

Proposals: Monday, August 17, 2020 11:30 A.M., Central Time Award: Tuesday, August 18, 2020 9:00 A.M., Central Time

Bids may contain a maturity schedule providing for any combination of serial or term bonds. All term bonds shall be subject to mandatory sinking fund redemption and must conform to the maturity schedule set forth above at a price of par plus accrued interest. Bids must be for not less than $4,455,880 (98.80%) and accrued interest on the total principal amount of the Bonds. Bids will not be subject to cancellation – see “Establishment of Issue Price” in the Notice of Sale herein for additional details. The rate for any maturity may not be more than 2.00% less than the rate for any preceding maturity. A Good Faith Deposit (the “Deposit”) in the amount of $90,200, in the form of a federal wire transfer payable to the order of the City, will only be required from the apparent winning bidder, and must be received within two hours after the receipt of bids. See Notice of Sale for additional details. Award of the Bonds will be on the basis of True Interest Cost (TIC).

TABLE OF CONTENTS

Page SUMMARY OF OFFERING .....................................................................................................................................2 PRINCIPAL COUNTY OFFICIALS .........................................................................................................................3 NOTICE OF SALE ....................................................................................................................................................4 AUTHORITY AND PURPOSE ...............................................................................................................................13 SECURITY/SOURCES AND USES OF FUNDS ...................................................................................................13 BONDHOLDERS’ RISKS .......................................................................................................................................13 DESCRIPTION OF THE BONDS ...........................................................................................................................16 FULL CONTINUING DISCLOSURE ....................................................................................................................18 MUNICIPAL ADVISOR .........................................................................................................................................19 FUTURE FINANCING............................................................................................................................................19 BOND RATING .......................................................................................................................................................19 LITIGATION ...........................................................................................................................................................19 CERTIFICATION ....................................................................................................................................................19 LEGALITY ..............................................................................................................................................................20 TAX CONSIDERATIONS ......................................................................................................................................20 GENERAL INFORMATION ..................................................................................................................................24 MINNESOTA VALUATIONS; PROPERTY TAX CLASSIFICATIONS .............................................................28 ECONOMIC AND FINANCIAL INFORMATION ................................................................................................32 SUMMARY OF DEBT AND DEBT STATISTICS ................................................................................................34

APPENDIX A – FORM OF LEGAL OPINION

APPENDIX B – CONTINUING DISCLOSURE UNDERTAKING

APPENDIX C – COUNTY’S FINANCIAL STATEMENT THE BONDS ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY THE UNDERWRITER(S) NAMED ON THE FRONT COVER OF THIS OFFICIAL STATEMENT AND SUBJECT TO AN OPINION AS TO VALIDITY OF THE BONDS BY BOND COUNSEL. SUBJECT TO APPLICABLE SECURITIES LAWS AND PREVAILING MARKET CONDITIONS, THE UNDERWRITER(S) INTENDS, BUT IS NOT OBLIGATED, TO EFFECT SECONDARY MARKET TRADING FOR THE BONDS. CLOSING DATE IS ESTIMATED TO BE SEPTEMBER 15, 2020. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERS MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COUNTY OR THE UNDERWRITER(S). NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COUNTY SINCE THE DATE HEREOF. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE INFORMATION SET FORTH HEREIN HAS BEEN OBTAINED FROM THE COUNTY AND OTHER SOURCES WHICH ARE BELIEVED TO BE RELIABLE, BUT IT IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS BY, AND IS NOT TO BE CONSTRUED AS A REPRESENTATION BY, THE UNDERWRITER(S). WITHIN THE MEANING OF SECURITIES AND EXCHANGE COMMISSION RULE 15C2-12, THE INFORMATION INCLUDED IN THE PRELIMINARY OFFICIAL STATEMENT IS DEEMED FINAL BY THE ISSUER AS OF ITS DATE AND IS ACCURATE AND COMPLETE IN ALL MATERIAL RESPECTS, EXCEPT FOR THE OMISSION OF THE OFFERING PRICE(S), INTEREST RATE(S), SELLING COMPENSATION, AGGREGATE PRINCIPAL AMOUNT, PRINCIPAL AMOUNT PER MATURITY, DELIVERY DATE, RATING(S), OTHER TERMS OF THE ISSUE DEPENDING ON SUCH MATTERS, AND THE IDENTITY OF THE UNDERWRITER(S).

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SUMMARY OF OFFERING

Stevens County, Minnesota $4,510,000

General Obligation Ditch Bonds, Series 2020A (Book-Entry Only)

AMOUNT - $4,510,000 ISSUER - Stevens County, Minnesota (the “County” or the “Issuer”) AWARD DATE - August 18, 2020 MUNICIPAL ADVISOR - Northland Securities, Inc. (the “Municipal Advisor”), 150 South 5th Street, Suite 3300, Minneapolis, Minnesota 55402,

telephone: 612-851-5900 or 800-851-2920 TYPE OF ISSUE - General Obligation Ditch Bonds, Series 2020A (the “Bonds” or the “Issue”) AUTHORITY, PURPOSE & SECURITY - The General Obligation Ditch Bonds, Series 2020A (the “Bonds”) are being issued by Stevens County, Minnesota (the

“County”) pursuant to Minnesota Statutes, Chapters 475 and Section 103E.635, as amended. Proceeds of the Bonds will be used to finance improvements to County Ditch 18 and to pay costs associated with issuance of the Bonds. The Bonds are valid and binding general obligations of the County and are payable from special assessments against benefitted properties. The full faith and credit of the County is also pledged to their payment. In the event of any deficiency in the Debt Service Account established for this Issue, the County has validly obligated itself to levy additional ad valorem taxes upon all of the taxable property within the County, without limitation of amount. See Authority and Purpose as well as Security/Sources and Uses of Funds herein for additional information.

DATE OF ISSUE - Date of Delivery (Estimated to be September 15, 2020) INTEREST PAID - Semiannually on each June 1 and December 1, commencing June 1, 2021, to registered owners of the Bonds appearing

of record in the bond register as of the close of business on the fifteenth day (whether or not a business day) of the calendar month next preceding such interest payment date (the “Record Date”).

MATURITIES -

12/01/21 $190,000 12/01/26 $210,000 12/01/31 $225,000 12/01/36 $240,000 12/01/22 205,000 12/01/27 215,000 12/01/32 225,000 12/01/37 245,000 12/01/23 205,000 12/01/28 215,000 12/01/33 230,000 12/01/38 250,000 12/01/24 210,000 12/01/29 220,000 12/01/34 235,000 12/01/39 255,000 12/01/25 210,000 12/01/30 220,000 12/01/35 240,000 12/01/40 265,000

REDEMPTION - The Bonds maturing on December 1, 2029 and thereafter are subject to redemption, in whole or in part, on December

1, 2028 and on any date thereafter at a price of par plus accrued interest. See Description of the Bonds herein for additional information.

BOOK-ENTRY - The Bonds will be issued as fully registered and, when issued, will be registered in the name of Cede & Co., as nominee

of The Depository Trust Company, New York, New York, to which principal and interest payments will be made. Individual purchases will be made in book-entry form only, in the principal amount of $5,000 or any whole multiple thereof. Purchasers will not receive physical delivery of the Bonds.

PAYING AGENT/REGISTRAR - Northland Trust Services Inc., Minneapolis, Minnesota TAX DESIGNATIONS - NOT Private Activity Bonds - The Bonds are not “private activity bonds” as defined in Section 141 of the Internal

Revenue Code of 1986, as amended (the “Code”). Bank Qualified Tax-Exempt Obligations - The County will designate the Bonds as “qualified tax-exempt obligations”

for purposes of Section 265(b)(3) of the Code. LEGAL OPINION - Dorsey & Whitney LLP, Minneapolis, Minnesota (“Bond Counsel”) BOND RATING - The County received an underlying rating of “AA” from S&P Global Ratings (“S&P”). See Bond Rating herein for

additional information. CLOSING - Estimated to be September 15, 2020 PRIMARY CONTACTS - Stephanie Buss, County Auditor/Treasurer, Stevens County, Minnesota 320-208-6566 Jessica Green, Managing Director, Northland Securities, Inc., 612-851-5930

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STEVENS COUNTY, MINNESOTA

PRINCIPAL COUNTY OFFICIALS

Elected Officials County Board

Name Position Term Expires Bob Kopitzke Commissioner 12/31/2020 Jeanne Ennen Commissioner 12/31/2022 Ron Staples Commissioner 12/31/2020 Donny Wohlers Commissioner 12/31/2020 Neil Wiese Commissioner 12/31/2022

Primary Contacts Stephanie Buss County Auditor/Treasurer

Rebecca Young County Coordinator

BOND COUNSEL

Dorsey & Whitney LLP Minneapolis, Minnesota

MUNICIPAL ADVISOR

Northland Securities, Inc. Minneapolis, Minnesota

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NOTICE OF SALE

$4,510,000* GENERAL OBLIGATION DITCH BONDS, SERIES 2020A

STEVENS COUNTY, MINNESOTA

(Book-Entry Only) NOTICE IS HEREBY GIVEN that these Bonds will be offered for sale according to the following terms:

TIME AND PLACE: Proposals (also referred to herein as “bids”) will be opened by the County’s Auditor/Treasurer, or designee, on Monday, August 17, 2020, at 11:30 A.M., CT, at the offices of Northland Securities, Inc. (the County’s “Municipal Advisor”), 150 South 5th Street, Suite 3300, Minneapolis, Minnesota 55402. Consideration of the Proposals for award of the sale will be by the County Board at its meeting at the County Offices beginning Tuesday, August 18, 2020 at 9:00 A.M., CT.

SUBMISSION OF PROPOSALS Proposals may be: a) submitted to the office of Northland Securities, Inc., b) faxed to Northland Securities, Inc. at 612-851-5918, c) for proposals submitted prior to the sale, the final price and coupon rates may be submitted to Northland

Securities, Inc. by telephone at 612-851-5900 or 612-851-5915, or d) submitted electronically. Notice is hereby given that electronic proposals will be received via PARITY™, or its successor, in the manner described below, until 11:30 A.M., CT, on Monday, August 17, 2020. Proposals may be submitted electronically via PARITY™ or its successor, pursuant to this Notice until 11:00 A.M., CT, but no Proposal will be received after the time for receiving Proposals specified above. To the extent any instructions or directions set forth in PARITY™, or its successor, conflict with this Notice, the terms of this Notice shall control. For further information about PARITY™, or its successor, potential bidders may contact Northland Securities, Inc. or i-Deal at 1359 Broadway, 2nd floor, New York, NY 10018, telephone 212-849-5021. Neither the County nor Northland Securities, Inc. assumes any liability if there is a malfunction of PARITY™ or its successor. All bidders are advised that each Proposal shall be deemed to constitute a contract between the bidder and the County to purchase the Bonds regardless of the manner in which the Proposal is submitted.

BOOK-ENTRY SYSTEM The Bonds will be issued by means of a book-entry system with no physical distribution of bond certificates made to the public. The Bonds will be issued in fully registered form and one bond certificate, representing the aggregate principal amount of the Bonds maturing in each year, will be registered in the name of Cede & Co. as nominee of Depository Trust Company (“DTC”), New York, New York, which will act as securities depository of the Bonds.

* The County reserves the right to increase or decrease the principal amount of the Bonds. Any such increase or decrease will be made in

multiples of $5,000 and may be made in any maturity. If any maturity is adjusted, the purchase price will also be adjusted to maintain the same gross spread.

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Individual purchases of the Bonds may be made in the principal amount of $5,000 or any multiple thereof of a single maturity through book entries made on the books and records of DTC and its participants. Principal and interest are payable by the County through Northland Trust Services, Inc., Minneapolis, Minnesota (the “Paying Agent/Registrar”), to DTC, or its nominee as registered owner of the Bonds. Transfer of principal and interest payments to participants of DTC will be the responsibility of DTC; transfer of principal and interest payments to beneficial owners by participants will be the responsibility of such participants and other nominees of beneficial owners. The successful bidder, as a condition of delivery of the Bonds, will be required to deposit the bond certificates with DTC. The County will pay reasonable and customary charges for the services of the Paying Agent/Registrar.

DATE OF ORIGINAL ISSUE OF BONDS Date of Delivery (Estimated to be September 15, 2020)

AUTHORITY/PURPOSE/SECURITY The Bonds are being issued pursuant to Minnesota Statutes, Chapter 475 and Section 103E.635, as amended. Proceeds will be used to finance improvements to County Ditch 18. The Bonds are payable from special assessments against benefitted properties. The full faith and credit of the County is pledged to their payment and the County has validly obligated itself to levy ad valorem taxes in the event of any deficiency in the debt service account established for this issue.

INTEREST PAYMENTS Interest is due semiannually on each June 1 and December 1, commencing June 1, 2021, to registered owners of the Bonds appearing of record in the Bond Register as of the close of business on the fifteenth day (whether or not a business day) of the calendar month preceding such interest payment date.

MATURITIES

Principal is due annually on December 1, inclusive, in each of the years and amounts as follows:

Year Amount Year Amount Year Amount Year Amount 2021 $190,000 2026 $210,000 2031 $225,000 2036 $240,000

2022 205,000 2027 215,000 2032 225,000 2037 245,000 2023 205,000 2028 215,000 2033 230,000 2038 250,000 2024 210,000 2029 220,000 2034 235,000 2039 255,000 2025 210,000 2030 220,000 2035 240,000 2040 265,000

Proposals for the Bonds may contain a maturity schedule providing for any combination of serial bonds and term bonds, subject to mandatory redemption, so long as the amount of principal maturing or subject to mandatory redemption in each year conforms to the maturity schedule set forth above.

INTEREST RATES

All rates must be in integral multiples of 1/20th or 1/8th of 1%. The rate for any maturity may not be more than 1.00% less than the rate for any preceding maturity. All Bonds of the same maturity must bear a single uniform rate from date of issue to maturity.

ESTABLISHMENT OF ISSUE PRICE (HOLD-THE-OFFERING PRICE RULE MAY APPLY – BIDS NOT CANCELLABLE)

In order to establish the issue price of the Bonds for federal income tax purposes, the Issuer requires bidders to agree to the following, and by submitting a bid, each bidder agrees to the following.

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If a bid is submitted by a potential underwriter, the bidder confirms that (i) the underwriters have offered or reasonably expect to offer the Bonds to the public on or before the date of the award at the offering price (the “initial offering price”) for each maturity as set forth in the bid and (ii) the bidder, if it is the winning bidder, shall require any agreement among underwriters, selling group agreement, retail distribution agreement or other agreement relating to the initial sale of the Bonds to the public to which it is a party to include provisions requiring compliance by all parties to such agreements with the provisions contained herein. For purposes hereof, Bonds with a separate CUSIP number constitute a separate “maturity,” and the public does not include underwriters of the Bonds (including members of a selling group or retail distribution group) or persons related to underwriters of the Bonds.

If, however, a bid is submitted for the bidder’s own account in a capacity other than as an underwriter of the Bonds, and the bidder has no current intention to sell, reoffer, or otherwise dispose of the Bonds, the bidder shall notify the Issuer to that effect at the time it submits its bid and shall provide a certificate to that effect in place of the certificate otherwise required below.

If the winning bidder intends to act as an underwriter, the Issuer shall advise the winning bidder at or prior to the time of award whether (i) the competitive sale rule or (ii) the “hold-the-offering price” rule applies, as described in the following paragraph.

If the Issuer advises the winning bidder that the requirements for a competitive sale have not been satisfied and that the hold-the-offering price rule applies, the winning bidder shall (1) upon the request of the Issuer confirm that the underwriters did not offer or sell any maturity of the Bonds to any person at a price higher than the initial offering price of that maturity during the period starting on the award date and ending on the earlier of (a) the close of the fifth business day after the sale date or (b) the date on which the underwriters have sold at least 10% of that maturity to the public at or below the initial offering price; and (2) at or prior to closing, deliver to the Issuer a certification substantially in the form attached hereto as Exhibit A, together with a copy of the pricing wire.

If the Issuer advises the winning bidder that the requirements for a competitive sale have been satisfied and that the competitive sale rule applies, the winning bidder will be required to deliver to the Issuer at or prior to closing a certification, substantially in the form attached hereto as Exhibit B, as to the reasonably expected initial offering price as of the award date.

Any action to be taken or documentation to be received by the Issuer pursuant hereto may be taken or received on behalf of the Issuer by the Municipal Advisor.

Bidders should prepare their bids on the assumption that the Bonds will be subject to the “hold-the-offering-price” rule. Any bid submitted pursuant to the Notice of Sale shall be considered a firm offer for the purchase of the Bonds, and bids submitted will not be subject to cancellation or withdrawal.

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ADJUSTMENTS TO PRINCIPAL AMOUNT AFTER PROPOSALS The County reserves the right to increase or decrease the principal amount of the Bonds. Any such increase or decrease will be made in multiples of $5,000 and may be made in any maturity. If any maturity is adjusted, the purchase price will also be adjusted to maintain the same gross spread. Such adjustments shall be made promptly after the sale and prior to the award of Proposals by the County and shall be at the sole discretion of the County. The successful bidder may not withdraw or modify its Proposal once submitted to the County for any reason, including post-sale adjustment. Any adjustment shall be conclusive and shall be binding upon the successful bidder.

OPTIONAL REDEMPTION Bonds maturing on December 1, 2029 through 2040 are subject to redemption and prepayment at the option of the County on December 1, 2028 and any date thereafter, at a price of par plus accrued interest. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part, the maturities and principal amounts within each maturity to be redeemed shall be determined by the County and if only part of the Bonds having a common maturity date are called for prepayment, the specific Bonds to be prepaid shall be chosen by lot by the Bond Registrar.

CUSIP NUMBERS If the Bonds qualify for assignment of CUSIP numbers such numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bond nor any error with respect thereto shall constitute cause for a failure or refusal by the successful bidder thereof to accept delivery of and pay for the Bonds in accordance with terms of the purchase contract. The CUSIP Service Bureau charge for the assignment of CUSIP identification numbers shall be paid by the successful bidder.

DELIVERY Delivery of the Bonds will be within thirty days after award, subject to an approving legal opinion by Dorsey & Whitney, LLP, Bond Counsel. The legal opinion will be paid by the County and delivery will be anywhere in the continental United States without cost to the successful bidder at DTC.

TYPE OF PROPOSAL Proposals of not less than $4,455,880 (98.80%) and accrued interest on the principal sum of $4,510,000 must be filed with the undersigned prior to the time of sale. Proposals must be unconditional except as to legality. Proposals for the Bonds should be delivered to Northland Securities, Inc. and addressed to: Stephanie Buss, County Auditor/Treasurer

400 Colorado Avenue Suite 303 Morris, MN 56267

A good faith deposit (the “Deposit”) in the amount of $90,200 in the form of a federal wire transfer (payable to the order of the County) is only required from the apparent winning bidder, and must be received within two hours after the time stated for the receipt of Proposals. The apparent winning bidder will receive notification of the wire instructions from the Municipal Advisor promptly after the sale. If the Deposit is not received from the apparent winning bidder in the time allotted, the County may choose to reject their Proposal and then proceed to offer the Bonds to the next lowest bidder based on the terms of their original proposal, so long as said bidder wires funds for the Deposit amount within two hours of said offer.

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The County will retain the Deposit of the successful bidder, the amount of which will be deducted at settlement and no interest will accrue to the successful bidder. In the event the successful bidder fails to comply with the accepted Proposal, said amount will be retained by the County. No Proposal can be withdrawn after the time set for receiving Proposals unless the meeting of the County scheduled for award of the Bonds is adjourned, recessed, or continued to another date without award of the Bonds having been made.

AWARD

The Bonds will be awarded on the basis of the lowest interest rate to be determined on a true interest cost (TIC) basis. The County’s computation of the interest rate of each Proposal, in accordance with customary practice, will be controlling. In the event of a tie, the sale of the Bonds will be awarded by lot. The County will reserve the right to: (i) waive non-substantive informalities of any Proposal or of matters relating to the receipt of Proposals and award of the Bonds, (ii) reject all Proposals without cause, and (iii) reject any Proposal which the County determines to have failed to comply with the terms herein.

INFORMATION FROM SUCCESSFUL BIDDER The successful bidder will be required to provide, in a timely manner, certain information relating to the initial offering price of the Bonds necessary to compute the yield on the Bonds pursuant to the provisions of the Internal Revenue Code of 1986, as amended.

OFFICIAL STATEMENT By awarding the Bonds to any underwriter or underwriting syndicate submitting a Proposal therefor, the County agrees that, no more than seven business days after the date of such award, it shall provide to the senior managing underwriter of the syndicate to which the Bonds are awarded, the Final Official Statement in an electronic format as prescribed by the Municipal Securities Rulemaking Board (MSRB).

FULL CONTINUING DISCLOSURE UNDERTAKING The County will covenant in the resolution awarding the sale of the Bonds and in a Continuing Disclosure Undertaking to provide, or cause to be provided, annual financial information, including audited financial statements of the County, and notices of certain material events, as required by SEC Rule 15c2-12.

BANK QUALIFICATION The County will designate the Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended.

BOND INSURANCE AT UNDERWRITER’S OPTION

If the Bonds qualify for issuance of any policy of municipal bond insurance or commitment therefor at the option of the successful bidder, the purchase of any such insurance policy or the issuance of any such commitment shall be at the sole option and expense of the successful bidder of the Bonds. Any increase in the costs of issuance of the Bonds resulting from such purchase of insurance shall be paid by the successful bidder, except that, if the County has requested and received a rating on the Bonds from a rating agency, the County will pay that rating fee. Any other rating agency fees shall be the responsibility of the successful bidder. Failure of the municipal bond insurer to issue the policy after the Bonds have been awarded to the successful bidder shall not constitute cause for failure or refusal by the successful bidder to accept delivery on the Bonds. The County reserves the right to reject any and all Proposals, to waive informalities and to adjourn the sale.

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Dated: July 21, 2020 BY ORDER OF THE STEVENS COUNTY BOARD

/s/ Stephanie Buss County Auditor/Treasurer

Additional information may be obtained from: Northland Securities, Inc. 150 South 5th Street, Suite 3300 Minneapolis, Minnesota 55402 Telephone No.: 612-851-5900

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EXHIBIT A

ISSUE PRICE CERTIFICATE – COMPETITIVE SALES WITH AT LEAST THREE BIDS FROM ESTABLISHED UNDERWRITERS

$[PRINCIPAL AMOUNT]

[BOND CAPTION] ISSUE PRICE CERTIFICATE

The undersigned, on behalf of [NAME OF UNDERWRITER] (“[SHORT NAME OF UNDERWRITER]”), hereby certifies as set forth below with respect to the sale of the obligations named above (the “Bonds”).

1. Reasonably Expected Initial Offering Price.

(a) As of the Sale Date, the reasonably expected initial offering prices of the Bonds to the Public by [SHORT NAME OF UNDERWRITER] are the prices listed in Schedule A (the “Expected Offering Prices”). The Expected Offering Prices are the prices for the Maturities of the Bonds used by [SHORT NAME OF UNDERWRITER] in formulating its bid to purchase the Bonds. Attached as Schedule B is a true and correct copy of the bid provided by [SHORT NAME OF UNDERWRITER] to purchase the Bonds.

(b) [SHORT NAME OF UNDERWRITER] was not given the opportunity to review other bids prior

to submitting its bid. (c) The bid submitted by [SHORT NAME OF UNDERWRITER] constituted a firm offer to purchase

the Bonds.

2. Defined Terms. For purposes of this Issue Price Certificate:

(a) Issuer means [DESCRIBE ISSUER].

(b) Maturity means Bonds with the same credit and payment terms. Any Bonds with different maturity dates, or with the same maturity date but different stated interest rates, are treated as separate Maturities.

(c) Member of the Distribution Group means (i) any person that agrees pursuant to a written contract

with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public).

(d) Public means any person (i.e., an individual, trust, estate, partnership, association, company, or

corporation) other than a Member of the Distribution Group or a related party to a Member of the Distribution Group. A person is a “related party” to a Member of the Distribution Group if the Member of the Distribution Group and that person are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other).

(e) Sale Date means the first day on which there is a binding contract in writing for the sale of the

respective Maturity. The Sale Date of each Maturity was [DATE].

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The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents [SHORT NAME OF UNDERWRITER]’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer[ and BORROWER (the “Borrower”)] with respect to certain of the representations set forth in the [Tax Certificate][Tax Exemption Agreement] and with respect to compliance with the federal income tax rules affecting the Bonds, and by [BOND COUNSEL] in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038[-G][-GC][-TC], and other federal income tax advice that it may give to the Issuer[ and the Borrower] from time to time relating to the Bonds.

[UNDERWRITER] By:_______________________________________ Name:_____________________________________

Dated: [ISSUE DATE]

ISSUE PRICE CERTIFICATE – COMPETITIVE SALES WITH FEWER THAN THREE BIDS FROM ESTABLISHED UNDERWRITERS

$[PRINCIPAL AMOUNT]

[BOND CAPTION] ISSUE PRICE CERTIFICATE

The undersigned, on behalf of [NAME OF UNDERWRITER/REPRESENTATIVE] ([“[SHORT NAME OF UNDERWRITER]”)][the “Representative”)][, on behalf of itself and [NAMES OF OTHER UNDERWRITERS] (together, the “Underwriting Group”),] hereby certifies as set forth below with respect to the sale of the obligations named above (the “Bonds”). 1. Initial Offering Price of the Bonds. [SHORT NAME OF UNDERWRITER][The Underwriting Group] offered the Bonds to the Public for purchase at the specified initial offering prices listed in Schedule A (the “Initial Offering Prices”) on or before the Sale Date. A copy of the pricing wire for the Bonds is attached to this certificate as Schedule B.

2. Hold the Offering Price Rule. [SHORT NAME OF UNDERWRITER][Each member of the Underwriting Group] has agreed in writing that, (i) for each Maturity, it would neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “Hold-the-Offering-Price Rule”), and (ii) any agreement among underwriters, selling group agreement, or third-party distribution agreement contains the agreement of each underwriter, dealer, or broker-dealer who is a party to such agreement to comply with the Hold-the-Offering-Price Rule. Based on the [Representative][SHORT NAME OF UNDERWRITER]’s own knowledge and, in the case of sales by other Members of the Distribution Group, representations obtained from the other Members of the Distribution Group, no Member of the Distribution Group has offered or sold any such Maturity at a price that is higher than the respective Initial Offering Price during the respective Holding Period.

3. Defined Terms. For purposes of this Issue Price Certificate:

(a) Holding Period means the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date ([DATE]), or (ii) the date on which Members of the Distribution Group have sold at least 10% of such Maturity to the Public at one or more prices, none of which is higher than the Initial Offering Price for such Maturity.

(b) Issuer means [DESCRIBE ISSUER].

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(c) Maturity means Bonds with the same credit and payment terms. Any Bonds with different maturity dates, or with the same maturity date but different stated interest rates, are treated as separate Maturities.

(d) Member of the Distribution Group means (i) any person that agrees pursuant to a written contract

with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public).

(e) Public means any person (i.e., an individual, trust, estate, partnership, association, company, or

corporation) other than a Member of the Distribution Group or a related party to a Member of the Distribution Group. A person is a “related party” to a Member of the Distribution Group if the Member of the Distribution Group and that person are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other).

(f) Sale Date means the first day on which there is a binding contract in writing for the sale of the

respective Maturity. The Sale Date of each Maturity was [DATE]. The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate

represents [NAME OF UNDERWRITING FIRM][the Representative’s] interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer[ and BORROWER (the “Borrower”)] with respect to certain of the representations set forth in the [Tax Certificate][Tax Exemption Agreement] and with respect to compliance with the federal income tax rules affecting the Bonds, and by [BOND COUNSEL] in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038[-G][-GC][-TC], and other federal income tax advice that it may give to the Issuer[ and the Borrower] from time to time relating to the Bonds.

[UNDERWRITER][REPRESENTATIVE] By:_______________________________________ Name:_____________________________________

Dated: [ISSUE DATE]

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AUTHORITY AND PURPOSE The General Obligation Ditch Bonds, Series 2020A (the “Bonds” or the “Issue”) are being issued by Stevens County, Minnesota (the “County”) pursuant to Minnesota Statutes, Chapters 475 and Section 103E.635, as amended. Proceeds from issuance of the Bonds will be used to finance improvements to County Ditch 18 and to pay costs associated with issuance of the Bonds.

SECURITY/SOURCES AND USES OF FUNDS Security The Bonds are valid and binding general obligations of the County and are payable from special assessments against benefitted properties. The full faith and credit of the County is also pledged to their payment. In the event of any deficiency in the Debt Service Account established for this Issue, the County has validly obligated itself to levy additional ad valorem taxes upon all of the taxable property within the County, without limitation of amount. Sources and Uses of Funds Following are the sources and uses of funds in connection with the issuance of the Bonds.

Sources of Funds Par Amount of Bonds $ 4,510,000

Total Sources of Funds: $ 4,510,000 Uses of Funds Deposit to Project Fund $ 4,400,000 Costs of Issuance/Underwriter’s Discount 107,120 Rounding Amount 2,880

Total Uses of Funds: $ 4,510,000

BONDHOLDERS’ RISKS An investment in the Bonds involves an element of risk. In order to identify risk factors and make an informed investment decision, potential investors should be thoroughly familiar with this entire Official Statement (including the appendices hereto) in order to make a judgment as to whether the Bonds are an appropriate investment. COVID-19 Pandemic On March 11, 2020, the World Health Organization proclaimed the Coronavirus (COVID-19) to be a pandemic. In an effort to lessen the risk of transmission of COVID-19, the United States government, state governments, local governments and private industries have taken measures to limit social interactions in an effort to limit the spread of COVID-19, affecting business activities and impacting global, state and local commerce and financial markets. The emergence of COVID-19 and the spread thereof is an emerging and evolving issue. As the federal, state and local governments, including the Issuer, continue efforts to contain and limit the spread of COVID-19 disease, future tax and other revenue collections may deviate from historical or anticipated collections and may have an adverse impact on the financial position and operations of the issuer and its ability to fund debt obligations, including the Bonds in accordance with the terms. The Issuer is not able to predict and makes no representations as to the economic impact of the COVID-19 pandemic on the Issuer or its long-term financial position.

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County’s Impact from COVID-19 The County implemented a Phased Reopening and Preparedness Plan, effective May 19, 2020, to address the gradual reopening of County offices and protocols for employees transitioning to onsite work from teleworking. As of June 22, 2020, the County is in the final phase of that plan and is back open to the public, but is encouraging the public to use drop boxes and other means to conduct their business with the County. The County’s Human Services staff are not fully back yet, although staff not in the office continue to work remotely. The County has not implemented any budget restrictions on the 2020 budget. County staff anticipates that planning for the 2021 budget will include keeping a level tax levy increase or reducing to no tax levy increase. The County anticipates possibly losing some State aid revenue, and is going to try to make up for those possible shortfalls within the budget. The County’s first-half tax collections in 2020 were above last year’s first half collections. Expectations for second-half collections are guarded and a projection for the collection rate is still uncertain at this time. Although businesses in the County are open now, that may change if confirmed cases increase in the County. Currently, Stevens County has only had 5 confirmed cases. To-date, none of the leading employers or largest taxpayers in the County are or were shut down due to the pandemic. The University of Minnesota Morris campus is planning on having students return to campus two weeks earlier than usual, in August, in order to have the first semester done by Thanksgiving. This would allow for a longer break, with students not returning to campus until after the new year, in the event the pandemic re-surges in fall. The college’s current projections are that about 90% of the student body will return in August, with the remaining 10% taking their coursework online.

Secondary Market There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history of economic prospects connected with a particular issue, any secondary marketing practices in connection with a particular bond issue are suspended or terminated. Additionally, prices of bond issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price of the Bonds.

Ratings Loss S&P Global Ratings has assigned a rating of “AA” to the Bonds. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that the rating will continue for any given period of time, or that such rating will not be revised, suspended or withdrawn, if, in the judgment of S&P, circumstances so warrant. A revision, suspension or withdrawal of a rating may have an adverse effect on the market price of the Bonds. Additional regulation of rating agencies could materially alter the methodology, rating levels, and types of ratings available, for example, and these changes, if ever, could materially affect the market value of the Bonds.

Forward-Looking Statements This Official Statement contains statements relating to future results that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. When used in this Official Statement, the words “estimate,” “forecast,” “intend,” “expect” and similar expressions identify forward-looking statements. Any forward-looking statement is subject to uncertainty. Accordingly, such statements are subject to risks that could cause actual results to differ, possibly materially, from those contemplated in such forward-looking statements. Inevitably, some assumptions used to develop forward-looking statements will not be realized or unanticipated events and circumstances may occur. Therefore, investors should be aware that there are likely to be differences between forward-looking statements and the actual results. These differences could be material and could impact the availability of funds of the Issuer to pay debt service when due on the Bonds.

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Tax Exemption, Bank Qualification and Loss of Tax Exemption If the federal government or the State of Minnesota taxes all or a portion of the interest on municipal obligations, directly or indirectly, or if there is a change in federal or state tax policy, the value of the Bonds may fall for purposes of resale. Noncompliance following the issuance of the Bonds with certain requirements of the Code and post-issuance tax covenants of the Issuer may result in the inclusion of interest on the Bonds in gross income of the recipient for federal income tax purposes or in taxable net income of individuals, estates or trusts for State of Minnesota income tax purposes. No provision has been made for redemption of the Bonds, or for an increase in the interest rate on the Bonds, in the event that interest on the Bonds becomes subject to federal or State of Minnesota income taxation, retroactive to the date of issuance. The Bonds are designated as “qualified tax-exempt obligations” under the exception provided in Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Issuer has further covenanted to comply with certain other requirements, which affords banks and certain other financial institutions more favorable treatment of their deduction for interest expense than would otherwise be allowed under Section 265(b)(2) of the Code. Actions, or inactions, by the Issuer in violation of its covenants could affect the designation, which could also affect the pricing and marketability of the Bonds. It is also possible that actions of the Issuer after the closing of the Bonds will alter the tax status of the Bonds, and, in the extreme, remove the tax exempt status from the Bonds. In that instance, the Bonds are not subject to mandatory prepayment, and the interest rate on the Bonds does not increase or otherwise reset. A determination of taxability on the Bonds, after closing of the Bonds, could materially adversely affect the value and marketability of the Bonds.

Pending Federal and State Tax Legislation From time to time, there is State legislation proposed, as well as Presidential proposals, proposals of various federal committees, and legislative proposals pending in Congress that could, if enacted, alter or amend one or more of the federal or state tax matters described herein in certain respects or would adversely affect the market value of the Bonds or otherwise prevent holders of the Bonds from realizing the full benefit of the tax exemption of interest on the Bonds. Further, such proposals may impact the marketability or market value of the Bonds simply by being proposed. It cannot be predicted whether or in what forms any of such proposals, either pending or that may be introduced, may be enacted and there can be no assurance that such proposals will not apply to the Bonds. In addition, regulatory actions are from time to time announced or proposed, and litigation threatened or commenced, which if implemented or concluded in a particular manner, could adversely affect the market value, marketability or tax status of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds would be impacted thereby. Tax Levy Procedures The Bonds are general obligations of the Issuer, payable from and secured by a continuing ad valorem tax levied against all of the property valuation within the Issuer. A failure on the part of the Issuer to make a timely levy request or a levy request by the Issuer that is inaccurate or is insufficient to make full payments of the debt service of the Bonds for a particular fiscal year may cause Bondholders to experience delay in the receipt of distributions of principal of and/or interest on the Bonds. In the event of a default in the payment of principal of or interest on the Bonds, there is no provision for acceleration of maturity of the principal of the Bonds. Consequently, the remedies of the owners of the Bonds (consisting primarily of an action in the nature of mandamus requiring the Issuer and certain other public officials to perform the terms of the resolution for the Bonds) may have to be enforced from year to year. Economy, State Aids A combination of economic, climatic, political or civil disruptions outside of the control of the Issuer, including loss of major taxpayers or major employers, could affect the local economy and result in reduced tax collections and/or increased demands upon local governments. Real or perceived threats to the financial stability of the Issuer

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may have an adverse effect on the value of the Bonds in the secondary market. State of Minnesota cash flow problems could also affect local governments, including reductions in, or delayed payments of, local government state aid (LGA) and possibly increase Issuer property taxes. Cybersecurity The Issuer, like many other public and private entities, relies on a large and complex technology environment to conduct its operations. As such, it may face multiple cybersecurity threats including, but not limited to, hacking, viruses, malware and other attacks on computer or other sensitive digital systems and networks. There can be no assurances that any security and operational control measures implemented by the Issuer will be completely successful to guard against and prevent cyber threats and attacks. The result of any such attacks could impact business operations and/or digital networks and systems and the costs of remedying any such damage could be significant. Suitability of Investment The interest rate borne by the Bonds is intended to compensate the investor for assuming the risk of investing in the Bonds. Each prospective investor should carefully examine this Official Statement and its own financial condition to make a judgment as to its ability to bear the economic risk of such an investment, and whether or not the Bonds are an appropriate investment for such investor.

Summary The foregoing is intended only as a summary of certain risk factors attendant to an investment in the Bonds. In order for potential investors to identify risk factors and make an informed investment decision, potential investors should become thoroughly familiar with this entire Official Statement and the Appendices hereto.

DESCRIPTION OF THE BONDS Details of Certain Terms The Bonds will be dated, as originally issued, as of the date of delivery (estimated to be September 15, 2020), and will be issued as fully registered Bonds in the denominations of $5,000 or any integral multiple thereof. Principal, including mandatory redemptions on the Bonds, if applicable, will be payable annually December 1, commencing December 1, 2021. Interest on the Bonds will be payable semiannually on each June 1 and December 1, commencing June 1, 2021. The Bonds when issued, will be registered in the name of Cede & Co. (the “Registered Holder”), as nominee of The Depository Trust Company, New York, New York (“DTC”), the initial custodian for the Bonds, to which principal and interest payments on the Bonds will be made so long as Cede & Co. is the Registered Holder of the Bonds. See “Book-Entry System” in Description of the Bonds herein for additional information. So long as the Book-Entry Only System is used, individual purchases of the Bonds will be made in book-entry form only, in the principal amount of $5,000 or any integral multiple thereof (“Authorized Denominations”). Individual purchasers (“Beneficial Owners”) of the Bonds will not receive physical delivery of bond certificates, and registration, exchange, transfer, tender and redemption of the Bonds with respect to Beneficial Owners shall be governed by the Book-Entry Only System. So long as the Book-Entry Only System is used, payments from Cede & Co., as the Registered Holder, to the Beneficial Owners shall be governed by the Book-Entry Only System. If the Book-Entry Only System is discontinued, the principal of and premium, if any, on the Bonds will be payable upon presentation and surrender at the offices of the Paying Agent and Bond Registrar or a duly appointed successor. Interest on the Bonds will be paid by check or draft mailed by the Bond Registrar to the registered holders thereof as such appear on the registration books maintained by the Bond Registrar as of the close of business on the fifteenth day (whether or not a business day) of the calendar month next preceding such interest payment date (the “Record Date”).

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Registration, Transfer and Exchange So long as the Book-Entry Only System is used, payments from Cede & Co., as the Registered Holder, to the Beneficial Owners shall be governed by the Book-Entry Only System. If the Book-Entry Only System is discontinued, the Bonds may be transferred upon surrender of the Bonds at the principal office of the Bond Registrar, duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or his or her attorney duly authorized in writing. The Bonds, upon surrender thereof at the principal office of the Bond Registrar, may also be exchanged for other Bonds of the same series, of any authorized denominations having the same form, terms, interest rates and maturities as the Bonds being exchanged. The Bond Registrar will require the payment by the Bond holder requesting such exchange or transfer of any tax or governmental charge required to be paid with respect to such exchange or transfer. The Bond Registrar is not required to (i) issue, transfer or exchange any Bond during a period beginning at the opening of business fifteen days before any selection of Bonds of a particular stated maturity for redemption in accordance with the provisions of the Bond resolution and ending on the day of the first mailing of the relevant notice of redemption or (ii) to transfer any Bonds or portion thereof selected for redemption. Optional Redemption The Bonds maturing on December 1, 2029 and thereafter are subject to redemption, in whole or in part, on December 1, 2028 and on any date thereafter at a price of par plus accrued interest. If redemption is in part, the selection of the amounts and maturities of the Bonds to be prepaid shall be at the discretion of the County. Notice of redemption shall be given by written notice to the registered owner of the Bonds not less than 30 days prior to such redemption date. Book-Entry System The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds (the “Bonds”). The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for the Bonds, in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtcc.org. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bonds (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written

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confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the County as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the County or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with Bonds held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or the County, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the County or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the County or Agent. Under such circumstances, in the event that a successor depository is not obtained, certificates for the Bonds are required to be printed and delivered. The County may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, certificates for the Bonds will be printed and delivered to DTC. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the County believes to be reliable, but the Stevens County takes no responsibility for the accuracy thereof.

FULL CONTINUING DISCLOSURE In order to assist the Underwriter(s) in complying with SEC Rule 15c2-12 (the “Rule”), pursuant to a resolution awarding the Issue and a Continuing Disclosure Certificate (the “Certificate”) to be executed on behalf of the County on or before Bond closing, the County has and will covenant for the benefit of holders of the Bonds to

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annually provide certain financial and operating data, relating to the County to the Municipal Securities Rulemaking Board (“MSRB”) in an electronic format prescribed by the MSRB, and to provide notices of the occurrence of certain events enumerated in the Rule to the MSRB. With the issuance of the Bonds, the County will be obligated to provide notice of two new Significant Events related to Financial Obligations, as defined in amendments to the Rule effective on February 27, 2019. The specific nature of the Certificate, as well as the information to be contained in the annual report or the notices of material events (including the two new events) is set forth in the Continuing Disclosure Certificate in substantially the form attached hereto as Appendix B. To the best of its knowledge, the County has never failed to comply in all material respects with any previous undertakings under the Rule to provide annual reports or notices of material events within the past five years. A failure by the County to comply with the Certificate will not constitute an event of default on the Bonds (although holders will have an enforceable right to specific performance). Nevertheless, such a failure must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price. Please see Appendix B – Continuing Disclosure Certificate herein for additional information.

MUNICIPAL ADVISOR The County has retained Northland Securities, Inc. as municipal advisor (the “Municipal Advisor”) in connection with the issuance of the Bonds. Northland Securities, Inc. is registered as a municipal advisor with both the Securities and Exchange Commission (SEC) and the Municipal Securities Rulemaking Board (MSRB). In preparing the Official Statement, the Municipal Advisor has relied upon governmental officials, and other sources that have access to relevant data to provide accurate information for the Official Statement, and the Municipal Advisor has not been engaged, nor has it undertaken, to independently verify the accuracy of such information. The Municipal Advisor is not a public accounting firm and has not been engaged by the County to compile, review, examine or audit any information in the Official Statement in accordance with accounting standards.

FUTURE FINANCING The County does not anticipate the need to issue any additional general obligation debt within the next three months.

BOND RATING The County received an underlying rating of “AA” from S&P Global Ratings (“S&P”). No application was made to any other rating agency for the purpose of obtaining an additional rating on the Bonds. This rating reflects only the opinion of S&P and any explanation of the significance of this rating may be obtained only from S&P. There is no assurance that a rating will continue for any given period of time, or that such rating will not be revised or withdrawn, if in the judgment of S&P, circumstances so warrant. A revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds. This rating is not a recommendation to buy, sell or hold the Bonds, and such rating may be subject to revision or withdrawal at any time by the rating agency.

LITIGATION As of the date of this Official Statement, the County is not aware of any threatened or pending litigation that questions the organization or boundaries of the County or the right of any of its officers to their respective offices or in any manner questioning their rights and power to execute and deliver the Bonds or otherwise questioning the validity of the Bonds.

CERTIFICATION The County will furnish a statement to the effect that this Official Statement to the best of its knowledge and belief, as of the date of sale and the date of delivery, is true and correct in all material respects, and does not contain any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

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The County has always promptly met all payments of principal and interest on its indebtedness when due.

LEGALITY Legal matters incident to the authorization and issuance of the Bonds are subject to the approving opinion of Dorsey & Whitney LLP, Minneapolis, Minnesota (“Bond Counsel”) as to validity and tax exemption. A copy of such opinion will be available at the time of the delivery of the Bonds. See Appendix A –Form of Legal Opinion. Bond Counsel has not participated in the preparation of this Official Statement and is not passing upon its accuracy, completeness or sufficiency. Bond Counsel has not examined, nor attempted to examine, or verify, any of the financial or statistical statements or data contained in this Official Statement, and will express no opinion with respect thereto.

TAX CONSIDERATIONS The following is a summary of certain U.S. federal and Minnesota income tax considerations relating to the purchase, ownership, and disposition of the Bonds. This summary is based on the U.S. Internal Revenue Code of 1986 (the “Code”) and the Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service (the “IRS”), all as of the date hereof and all of which are subject to change, possibly with retroactive effect. Any such change could adversely affect the matters discussed below, including the tax exemption of interest on the Bonds. The County has not sought and will not seek any rulings from the IRS regarding the matters discussed below, and there can be no assurance the IRS or a court will not take a contrary position regarding these matters.

Prospective purchasers of Bonds should consult their own tax advisors with respect to applicable federal, state, and local tax rules, and any pending or proposed legislation or regulatory or administrative actions, relating to the Bonds based on their own particular circumstances.

This summary is for general information only and is not intended to constitute a complete analysis of all tax considerations relating to the purchase, ownership, and disposition of Bonds. It does not address the application of the alternative minimum tax or the additional tax on net investment income, nor does it address the U.S. federal estate and gift tax or any state, local, or non-U.S. tax consequences except with respect to Minnesota income tax to the extent expressly specified herein. This summary is limited to consequences to U.S. holders that purchase the Bonds for cash at original issue and hold the Bonds as “capital assets” (generally, property held for investment).

This discussion does not address all aspects of U.S. federal income or state taxation that may be relevant to particular holders of Bonds in light of their specific circumstances or the tax considerations applicable to holders that may be subject to special income tax rules, such as: holders subject to special tax accounting rules under Section 451(b) of the Code; insurance companies; brokers, dealers, or traders in stocks, securities, or currencies or notional principal contracts; foreign corporations subject to the branch profits tax; holders receiving payments in respect of the Bonds through foreign entities; and S corporations, partnerships, or other pass-through entities or investors therein.

For purposes of this discussion, the “issue price” of a maturity of Bonds is the first price at which a substantial amount of Bonds of that maturity is sold for cash to persons other than bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers.

The Bonds

Tax-Exempt Interest

In the opinion of Dorsey & Whitney LLP, Bond Counsel, based on existing law and assuming the accuracy of certain representations and compliance with certain covenants, interest on the Bonds (i) is excluded from gross income for federal income tax purposes, (ii) is not an item of tax preference for federal alternative minimum tax purposes, (iii) is excluded from taxable net income of individuals, estates, and trusts for Minnesota income tax purposes, and (iv) is not an item of tax preference for Minnesota alternative minimum tax purposes. Interest on the

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Bonds is included, however, in net income for purposes of the Minnesota franchise tax imposed on corporations and financial institutions.

The Code establishes certain requirements that must be met after the issuance of the Bonds in order that interest on the Bonds be excluded from federal gross income and from Minnesota taxable net income of individuals, estates, and trusts. These requirements include, but are not limited to, provisions regarding the use of Bond proceeds and the facilities financed or refinanced with such proceeds and restrictions on the investment of Bond proceeds and other amounts. The County has made certain representations and has covenanted to comply with certain restrictions, conditions, and requirements designed to ensure interest on the Bonds will not be included in federal gross income. Inaccuracy of these representations or noncompliance with these covenants may cause interest on the Bonds to be included in federal gross income or in Minnesota taxable net income retroactively to their date of issue. Bond Counsel has not independently verified the accuracy of these representations and will not verify the continuing compliance with these covenants. No provision has been made for redemption of or for an increase in the interest rate on the Bonds in the event that interest on the Bonds is included in federal gross income or in Minnesota taxable net income.

Original Issue Discount

Bonds may be issued at a discount from their principal amount (any such Bonds being “Discount Bonds”). The excess of the principal amount payable on Bonds of a given maturity over their issue price constitutes “original issue discount” (“OID”). OID that accrues to a holder of a Discount Bond is excluded from federal gross income and from Minnesota taxable net income of individuals, estates, and trusts to the same extent that stated interest on such Discount Bond would be so excluded. The amount of OID that accrues on a Discount Bond is added to the holder’s federal and Minnesota tax bases. OID is taxable under the Minnesota franchise tax on corporations and financial institutions.

OID on a Discount Bond generally accrues pursuant to a constant-yield method that reflects semiannual compounding on dates that are determined by reference to the maturity date of the Discount Bond. The amount of OID that accrues for any particular semiannual accrual period generally is equal to the excess of (1) the product of (a) one-half of the yield on such Discount Bonds (adjusted as necessary for an initial short period) and (b) the adjusted issue price of such Discount Bonds, over (2) the amount of stated interest actually payable. For this purpose, the adjusted issue price is determined by adding to the issue price for such Discount Bonds the OID that is treated as having accrued during all prior accrual periods. If a Discount Bond is sold or otherwise disposed of between compounding dates, then the original issue discount that would have accrued for that accrual period for federal income tax purposes is allocated ratably to the days in that accrual period.

If a Discount Bond is purchased for a cost that exceeds the sum of the issue price plus accrued interest and accrued OID, the amount of OID that is deemed to accrue thereafter to the purchaser is reduced by an amount that reflects amortization of such excess over the remaining term of the Discount Bond. If the excess is greater than the amount of remaining OID, the basis reduction rules for amortizable bond premium may result in taxable gain upon sale or other disposition of the Bonds, even if the Bonds are sold, redeemed, or retired for an amount equal to or less than their cost.

It is possible under certain state and local income tax laws that original issue discount on a Discount Bond may be taxable in the year of accrual and may be deemed to accrue differently than under federal law.

Market Discount

If a Bond is purchased for a cost that is less than the Bond’s issue price (plus accrued original issue discount, if any), the purchaser will be treated as having purchased the Bond with market discount (unless a statutory de minimis rule applies). Market discount is treated as ordinary income and generally is recognized on the maturity or earlier disposition of the Bond (to the extent that the gain realized does not exceed the accrued market discount on the Bond).

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Bond Premium A holder that acquires a Bond for an amount in excess of its principal amount generally must, from time to time, reduce the holder’s federal and Minnesota tax bases for the Bond. Premium generally is amortized for federal income tax purposes and Minnesota income and franchise tax purposes on the basis of a bondholder’s constant yield to maturity or to certain call dates with semiannual compounding. Accordingly, holders who acquire Bonds at a premium might recognize taxable gain upon sale of the Bonds, even if such Bonds are sold for an amount equal to or less than their original cost. Amortized premium is not deductible for federal income tax purposes or for purposes of the Minnesota income tax applicable to individuals, estates, and trusts.

Related Tax Considerations

Section 86 of the Code and corresponding provisions of Minnesota law require recipients of certain social security and railroad retirement benefits to take interest on the Bonds into account in determining the taxability of such benefits.

Section 265(a) of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Bonds, and Minnesota law similarly denies a deduction for such interest in the case of individuals, estates, and trusts. In the case of a financial institution, generally no deduction is allowed under section 265(b) the Code for that portion of the holder’s interest expense that is allocable to interest on tax-exempt obligations, such as the Bonds, unless the obligations are “qualified tax-exempt obligations.” Indebtedness may be allocated to the Bonds for this purpose even though not directly traceable to the purchase of the Bonds.

The Bonds are “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code. Accordingly, although interest expense allocable to the Bonds is not subject to the disallowance under Section 265(b) of the Code, the deduction for interest on indebtedness incurred or continued to purchase or carry the Bonds may be subject to reduction under Section 291 of the Code.

The ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Bonds may affect a holder’s federal, state, or local tax liability in some additional circumstances. The nature and extent of these other tax consequences depends upon the particular tax status of the holder and the holder’s other items of income or deduction. Sale or Other Disposition

A holder will generally recognize gain or loss on the sale, exchange, redemption, retirement, or other disposition of a Bond equal to the difference between (i) the amount realized less amounts attributable to any accrued but unpaid stated interest and (ii) the holder’s adjusted tax basis in the Bond. The amount realized includes the cash and the fair market value of any property received by the holder in exchange for the Bond. A holder’s adjusted tax basis in a Bond generally will be equal to the amount that the holder paid for the Bond, increased by any accrued original issue discount with respect to the Bond and reduced by the amount of any amortized bond premium on the Bond. Except to the extent attributable to market discount (which will be taxable as ordinary income to the extent not previously included in income), any gain or loss will be capital gain or loss and will be long-term capital gain or loss if the holder held the Bond for more than one year. Long-term capital gains recognized by certain non-corporate persons, including individuals, generally are taxable at a reduced rate. The deductibility of capital losses is subject to significant limitations.

Information Reporting and Backup Withholding Payments of interest on the Bonds (including any allocable bond premium or accrued original issue discount) and proceeds from the sale or other disposition of the Bonds are expected to be reported to the IRS as required under applicable Treasury Regulations. Backup withholding will apply to these payments if the holder fails to provide an accurate taxpayer identification number and certification that it is not subject to backup withholding (generally on an IRS Form W-9) or otherwise fails to comply with the applicable backup withholding requirements. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against the holder’s U.S. federal income tax liability, provided that the required information is

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timely furnished to the IRS. Certain holders are exempt from information reporting. Potential holders should consult their own tax advisors regarding qualification for an exemption and the procedures for obtaining such an exemption.

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STEVENS COUNTY, MINNESOTA

GENERAL INFORMATION Location/Access/Transportation Stevens County is located in west central Minnesota. There are 5 cities, 16 townships and portions of ten school districts within the County. The largest city, Morris, is the County Seat. It is 155 miles west of the Twin Cities metropolitan area. The major highways that run through the County are U.S. Highway 59 and State highways 9 and 28. Area 368,000 (575 Square Miles) Population 1990 Census 10,634 2010 Census 9,726 2000 Census 10,053 2020 Estimate* 9,766

Labor Force Data1 Comparative average labor force and unemployment rate figures for 2020 (through May) and year-end 2019 are provided below. Figures are not seasonally adjusted and numbers of people are estimated by place of residence. 2020 (May) 2019 Civilian

Labor Force Unemployment

Rate Civilian

Labor Force Unemployment

Rate Stevens County 5,263 3.4% 5,524 2.8% Minnesota 3,080,243 5.8 3,109,648 3.2

Income Data2 Comparative income levels are listed below for Stevens County, the State of Minnesota and the United States. Stevens County State of Minnesota United States Median Family Income $79,798 $86,204 $73,965 Per Capita Income 31,694 36,245 32,621

County Government Stevens County, organized in 1862 is an organized County having the powers, duties, and privileges granted Counties by Minnesota Statutes, Chapter 373. The Board sets policies and makes program decisions for all departments and business. The County has a governing body with a chairperson and four commissioners.

* Source: Minnesota Office of the State Demographer. 1 Source: Minnesota Department of Employment and Economic Development. 2 Source: 2014-2018 American Community Survey, U.S. Census Bureau.

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Employee Pension Programs The County employs 116 people, 104 regular full-time, and 12 part-time/seasonal. The pension plan covers all eligible full-time and certain part-time employees. All full-time and certain part-time employees of the County are covered by defined benefit pension plan administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund, the Public Employees Police and Fire Fund (PEPFF), and the Local Government Correctional Service Retirement Fund, called the Public Employees Correctional Fund (PECF), which are cost-sharing, multiple employer retirement plans. These plans are administered in accordance with Minnesota Statutes Chapters 353 and 356. PERA provides retirement benefits as well as disability benefits to members and benefits to survivors upon death of eligible members. Minnesota Statutes, Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by State Legislature. The County makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Coordinated Plan members were required to contribute 6.50%, of their annual covered salary in 2018. PEPFF members were required to contribute 10.80% of their annual covered salary in 2018. The County is required to contribute the following percentages of annual covered payroll: 7.50% for Coordinated Plan GERF members, and 16.20% for PEPFF members. The County’s combined contributions for the past five years are as follows:

Year Amount Year Amount 2018 $390,019 2015 $367,242 2017 386,747 2014 394,164 2016 370,979

Other Postemployment Benefits The County does not offer any postemployment benefits to former or retired employees and has no liability with respect thereto. Cash and Investment Balances as of May 31, 2020 (unaudited) Fund

General Revenue Fund $ 3,991,361 Road and Bridge Fund 5,328,523 Human Services Fund 3,938,520 Ditch Fund 1,013,577 Capital Improvement Fund 256,750 Debt Service Fund 333,838 Total Cash and Investment Balances $14,862,569

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General Fund Budget Summary

2019 Budget 2019 Actual 2020 Budget Revenues:

Property Taxes $4,218,980 $4,080,934 $4,497,511 Licenses and Permits 16,300 20,345 16,000 Intergovernmental Revenue 921,443 1,161,521 951,004 State Grants & Contributions 88,566 169,000 88,935 Federal Grants & Contributions 81,796 69,217 80,000 Charges for Services 239,850 229,155 221,585 Earnings on Investments 181,000 468,840 150,000 Miscellaneous 155,647 177,393 169,421

Total Revenues $5,903,582 $6,376,405 $5,814,456 Expenditures:

General Government $3,158,078 $2,998,545 $3,323,331 Public Safety 1,797,127 1,856,622 1,852,296 Highway & Streets 350,000 347,439 350,000 Sanitation 205,318 196,524 202,940 Public Health 68,082 68,082 68,082 Culture and Recreation 134,755 210,522 134,744 Conservation 323,744 320,631 326,081 Economic Development 63,667 63,667 63,667

Total Expenditures $6,100,771 $6,062,032 $6,321,141 Revenues Over (Under) Expenditures (197,189) 314,373 (506,685) Transfers In (Out) 197,189 167,667 506,685 Beginning Fund Balance (January 1) $3,974,737 $3,974,737 $4,456,780 Ending Fund Balance (December 31) $3,974,737 $4,456,777 $4,456,780

Financial Institutions The following financial institutions are located within Stevens County: Dacotah Bank, Community Development Bank, FSB, Bank of the West, Bremer Bank, National Association, and Riverwood Bank. Education Five school districts are located within Stevens County including: Hancock ISD No. 768, Chokio-Alberta ISD No. 771, Herman-Norcross ISD No. 264, West Central ISD No. 2342, Lac Qui Parle Valley ISD No. 2853, Clinton-Graceville-Beardsley ISD No. 2888, and Morris ISD No. 2769.

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Major/Leading Employers1 Following are some of the major/leading employers within the County seat of Morris: Name

Product/Service

Number of Employees2

University of Minnesota- Morris University 403 Riverview Dairy Dairy Producer 370 Superior Industries Machinery Manufacturing 366 Stevens Community Medical Center Medical Center 280 Westmor Industries LLC Fuel Tanks 268 St. Francis Health Services Health Services 263 Morris Area School District Public Education 180 Riley Bros. Construction Road Construction/Paving 150 Hancock Concrete Concrete Pipe 146

Largest Taxpayers3 Following are ten of the largest taxpayers within the County:

Name Classification

2019/2020 Tax

Capacity

Percent of Total Tax Capacity

($20,618,743)4 Riverview LLP Agriculture $ 611,947 2.97% Alliance Pipeline Company Utility 360,738 1.75 BNSF Railway Company Railroad 269,715 1.31 Superior Industries LLC Industrial 192,347 0.93 Wulf Leonard and Sons Inc Agriculture 191,115 0.93 Otter Tail Power Utility 135,136 0.65 Kinder Morgan Cochin LLC Utility 130,218 0.63 Individual Residential 114,654 0.56 Individual Agriculture 107,704 0.52 Riley Bros Properties LLC Agriculture 107,446 0.52 $ 2,221,020 10.77%

1 Sources: The County, Reference USA, and the Minnesota Manufacturers Register. 2 Includes full-time, part-time and seasonal employees. 3 As reported by Stevens County. 4 Before tax increment adjustment.

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MINNESOTA VALUATIONS; PROPERTY TAX CLASSIFICATIONS Market Value State Law defines the “market value” of real property as the usual selling price at the place where the property to which the term is applied shall be at the time of assessment; being the price which could be obtained at a private sale or an auction sale, if it is determined by the assessor that the price from the auction sale represents an arm's-length transaction. The assessor uses sales and market value income trends to estimate the value of property in an open market transaction. This value is also called “estimated market value”. This value is set on January 2 of each year. Property taxes levied each year are based on the value of property on January 2 of the preceding year. According to Minnesota Statutes, Chapter 273, all real property subject to taxation is to be appraised at maximum intervals of five years. Taxable Market Value The “taxable market value” is the amount used for calculating property taxes. The taxable market value may differ from the estimated market value due to the application of special programs that exclude value from taxation. These programs currently include, but are not limited to, Homestead Market Value Exclusion and Green Acres. Market Value Exclusion In 2011, the State Legislature eliminated the Homestead Market Value Credit. The Credit was an amount paid by the State to local taxing jurisdictions to reduce taxes paid by homesteaded property. The Credit has been replaced by a Homestead Market Value Exclusion. The Exclusion reduces the taxable market value (beginning with taxes payable 2012) of a jurisdiction by excluding a portion of the value of homesteaded property from taxation. For a homestead valued at $76,000 or less, the exclusion is 40 percent of market value, yielding a maximum exclusion of $30,400 at $76,000 of market value. For a homestead valued between $76,000 and $413,800, the exclusion is $30,400 minus nine percent of the valuation over $76,000. For a homestead valued at $413,800 or more, there is no valuation exclusion. Sales Ratio The Minnesota Department of Revenue conducts the Assessment Sales Ratio Study to compare real estate sales prices to local assessor valuations. The State uses the study results to ensure consistency in property assessments across the state. There are three different sales ratio studies that cover three distinct time periods. The 12-month study includes sales that occur from October 1st of a given year to September 30th of the following year and are compared to market values used for property taxation. The median ratio from the 12-month study is the sales ratio used to calculate indicated and economic market values. Economic and Indicated Market Value “Economic market value” and “indicated market value” reflect adjustments made to account for the effects of the sales ratio. The economic market value is determined by dividing the estimated market value of the jurisdiction by the sales ratio. Economic market value provides an estimation of the full value of property if it were valued at 100% of its value in the marketplace (prior to the application of legislatively mandated exclusions). The indicated market value is determined by dividing the taxable market value of the jurisdiction by the sales ratio. This value represents an estimation of the “full value” of property for taxation, after the deduction of legislative exclusions. Net Tax Capacity Property taxes are calculated on the basis of the “net tax capacity value”. Net tax capacity is calculated by multiplying the taxable market value of a parcel by the statutory class rate for the use classification of the property. These class rates are subject to revisions by the State Legislature. The table following this section contains current and historical class rates for primary property classifications.

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Tax Cycle Minnesota local government ad valorem property taxes are extended and collected by the various counties within the state. The process begins in the fall of every year with the certification, to the county auditor, of all local taxing districts’ property tax levies. Local tax rates are calculated by dividing each taxing district’s levy by its net tax capacity. One percentage point of local tax rate represents one dollar of tax per $100 net tax capacity. A list of taxes due is then prepared by the county auditor and turned over to the county treasurer on or before the first Monday in January. The county treasurer is responsible for collecting all property taxes within the county. Real estate and personal property tax statements (excluding manufactured homes) are to be mailed out no later than March 31, and manufactured home property tax statements no later than July 15. The due dates for payment of real and personal property taxes (excluding manufactured homes) are one-half on or before May 15 (May 31 for resorts) and one-half on or before October 15 (November 15 for farm property). Personal property taxes for manufactured homes become due one-half on or before August 31 and one-half on or before November 15. Delinquent property taxes are penalized at various rates depending on the type of property and the length of delinquency. Tax Levies for General Obligation Bonds (Minnesota Statutes, Section 475.61) State Law requires the governing body of any municipality issuing general obligations, prior to delivery of the obligations, to levy by resolution a direct general ad valorem tax upon all taxable property in the municipality to be spread upon the tax rolls for each year of the term of the obligations. The tax levies for all years shall be specified and such that if collected in full will, together with estimated collections of special assessments and other revenues pledged for the payment of said obligations, produce at least five percent in excess of the amount needed to meet the principal and interest payments on the obligations when due. Such resolution shall irrevocably appropriate the taxes so levied and any special assessments or other revenues so pledged to the municipality’s debt service fund or a special debt service fund or account created for the payment of one or more issues of obligations. The governing body may, at its discretion, at any time after the obligations have been authorized, adopt a resolution levying only a portion of such taxes, to be filed, assessed, extended, collected and remitted, and the amount therein levied shall be credited against the tax required to be levied prior to delivery of the obligations. The recording officer of the municipality shall file in the office of the county auditor of each county in which any part of the municipality is located a certified copy of the resolution, together with full information regarding the obligations for which the tax is levied. No further action by the municipality is required to authorize the extension, assessment and collection of the tax, but the municipality’s liability on the obligations is not limited thereto and its governing body shall levy and cause to be extended, assessed and collected any additional taxes found necessary for full payment of the principal and interest. The auditor shall annually assess and extend upon the tax rolls the amount specified for such year in the resolution, unless the amount has been reduced as authorized below or, if the municipality is located in more than one county, the portion thereof that bears the same ratio to the whole amount as the tax capacity value of taxable property in that part of the municipality located in the county bears to the tax capacity value of all taxable property in the municipality. Tax levies so made and filed shall be irrevocable, except that if the governing body in any year makes an irrevocable appropriation to the debt service fund of moneys actually on hand or if there is on hand any excess amount in the debt service fund, the recording officer may certify to the county auditor the fact and amount thereof and the auditor shall reduce by the amount so certified the amount otherwise to be included in the rolls next thereafter prepared. All such taxes shall be collected and remitted to the municipality by the county treasurer as other taxes are collected and remitted, and shall be used only for payment of the obligations on account of that levied or to repay advances from other funds used for such payments, except that any surplus remaining in the debt service fund when the obligations and interest thereon are paid may be appropriated to any other general purpose by the municipality.

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Levy Limits The State Legislature periodically enacts limitations on the ability of cities and counties to levy property taxes. Levy limits were reenacted in 2013 and applied to all counties with a population over 5,000 and all cities with a population over 2,500 for taxes payable in 2014 only. Levies “to pay the costs of the principal and interest on bonded indebtedness” and “to provide for the bonded indebtedness portion of payments made to another political subdivision of the State of Minnesota” are designated special levies and can be levied in addition to the amount allowed by levy limitations.

(Remainder of page intentionally left blank)

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The following is a partial summary of these factors:

Property Tax Classifications Class Rate Schedule

Class Type of Property 2017/ 2018

2018/ 2019

2019/ 2020

1a Residential Homestead: First $500,000

Over $500,000 1.00% 1.25

1.00% 1.25

1.00% 1.25

1c Commercial seasonal-residential recreational- under 250 days and includes homestead First $600,000 $600,001-2,300,000 Over $2,300,000†

.50

1.00 1.25

.50

1.00 1.25

.50

1.00 1.25

2a Agricultural Homestead – House, Garage, One Acre: First $500,000

Over $500,000 Remainder of Farm∗ – First $1,880,000 Over $1,880,000 First $1,900,000 Over $1,900,000 First $1,940,000 Over $1,940,000

1.00 1.25

.50

1.00

1.00 1.25

.50

1.00

1.00 1.25

.50

1.00

Agricultural Homestead Land1 1.00 1.00 1.00 2a Non-Homestead Agricultural Productive Land* 1.00 1.00 1.00 2b Non-Homestead Rural Vacant Land2 1.00 1.00 1.00 3a Commercial/Industrial and Public Utility First $100,000

$100,001 – 150,000† First $150,000† Over $150,000†

1.50 1.50

2.00

1.50 2.00

1.50 2.00

4a Apartment (4+ units, incl. private for-profit hospitals) 1.25 1.25 1.25 4bb(1)

Residential Non-Homestead (Single Unit) First $500,000 Over $500,000

1.00 1.25

1.00 1.25

1.00 1.25

4c(1) Seasonal Residential Recreational/Commercial†

(Resort): First $500,000 Over $500,000

1.00 1.25

1.00 1.25

1.00 1.25

4c(12) Seasonal Residential Recreational† Non-Commercial (Cabin): First $500,000* Over $500,000*

1.00 1.25

1.00 1.25

1.00 1.25

4d Qualifying Low-Income Rental Housing First $121,000 .75 .75 Over $121,000 .25 .25 First $150,000 .75 Over $150,000 .25

† Subject to the state general property tax. ∗ Exempt from referendum market value-based taxes. 1 Homestead remainder & non-homestead; includes structures. 2 Homestead remainder & non-homestead; includes minor ancillary structures.

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STEVENS COUNTY, MINNESOTA

ECONOMIC AND FINANCIAL INFORMATION1

Valuations

Estimated Market Value

2019/2020

Net Tax Capacity

2019/2020 Real Property $ 2,343,259,900 $ 19,930,781 Personal Property 34,823,400 687,962 Less Tax Increment Deduction - - - ( 148,056) Less 200kV Transmission Lines - - - ( 1,142) Total Adjusted Valuation $ 2,378,083,300 $ 20,469,545

Valuation Trends (Real and Personal Property)

Levy Year/ Collection

Year Economic

Market Value Sales Ratio

Estimated Market Value

Taxable Market Value

Tax Capacity

Before Tax Increments

Tax Capacity After Tax

Increments 2019/2020 $2,412,639,858 98.58% $2,378,083,300 $2,318,756,902 $20,618,743 $20,469,545 2018/2019 2,426,453,620 97.69 2,365,481,300 2,305,952,075 20,462,588 20,316,513 2017/2018 2,341,859,101 101.40 2,370,443,300 2,310,329,979 20,354,850 20,207,497 2016/2017 2,397,393,134 99.04 2,374,728,000 2,314,290,062 20,055,349 19,953,322 2015/2016 2,362,136,472 102.17 2,411,824,600 2,352,049,529 20,146,930 19,965,993

Breakdown of Valuations 2019/2020 Tax Capacity, Real and Personal Property (before tax increment adjustment): Residential Homestead $ 2,278,610 11.05% Agricultural 15,053,236 73.01 Commercial & Industrial 1,392,588 6.75 Public Utility 53,176 0.26 Railroad 269,656 1.31 Residential Non-Homestead 813,201 3.94 Seasonal/Recreational 70,314 0.34 Personal Property 687,962 3.34 Totals: $ 20,618,743 100.00%

1 Property valuations, tax rates, and tax levies and collections are provided by Stevens County. Economic market value and sales ratio are

provided by the Minnesota Department of Revenue.

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Tax Capacity Rates Tax capacity rates for a County resident within the City of Morris, for the past five-assessable/collection years have been as follows:

Levy Year/ Collection Year

2015/16 Tax

Capacity Rates

2016/17 Tax

Capacity Rates

2017/18 Tax

Capacity Rates

2018/19 Tax

Capacity Rates

2019/20 Tax

Capacity Rates

Stevens County 34.683% 37.114% 37.190% 38.019% 38.311% City of Morris 55.765 52.522 55.601 56.633 56.207 ISD No. 2769, Morris 4.355 4.486 4.710 4.395 4.760 Stevens County HRA 1.097 1.372 1.394 1.456 1.468

Totals: 95.900% 95.494% 98.895% 100.503% 100.746% Tax Levies and Collections1

Collected During Collection

Year Collected and/or Abated as

of 12/31/19 Levy/Collect Net Levy Amount Percent Amount Percent 2019/2020 $7,678,090 In Process of Collection 2018/2019 7,550,877 $7,505,102 99.39% $7,505,102 99.39% 2017/2018 7,334,153 7,318,842 99.79 7,331,436 99.96 2016/2017 7,226,094 7,204,434 99.70 7,225,622 99.99 2015/2016 6,691,726 6,676,726 99.78 6,689,365 99.96

1 2019/2020 property taxes are currently in the process of collection/reporting and updated figures are not yet available from Stevens County.

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SUMMARY OF DEBT AND DEBT STATISTICS Statutory Debt Limit1 Minnesota Statutes, Section 475.53 states that a city or county may not incur or be subject to a net debt in excess of three percent (3%) of its estimated market value. Net debt is, with limited exceptions, debt paid solely from ad valorem taxes. Computation of Legal Debt Margin as of August 2, 2020: 2019/2020 Estimated Market Value $ 2,378,083,300 Multiplied by 3% x .03 Statutory Debt Limit $ 71,342,499 Less outstanding debt applicable to debt limit: $6,190,000 G.O. Capital Improvement Plan Bonds, Series 2016A $ 4,995,000 Total Debt Applicable to Debt Limit $ 4,995,000 Legal debt margin $ 66,347,499

1 Effective June 2, 1997 and pursuant to Minnesota Statutes 465.71, any lease revenue or public project revenue bond issues/agreements of

$1,000,000 or more are subject to the statutory debt limit. Lease revenue or public project revenue bond issues/agreements less than $1,000,000 are not subject to the statutory debt limit.

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This IssuePurpose: G.O. G.O.

Drainage Ditch Bonds, Bonds,

Series 2014A Series 2020ADated: 05/01/14 09/15/20

Original Amount: $1,980,000 $4,510,000Maturity: 1-Feb 1-Dec TOTAL TOTAL

Interest Rates: 2.0-3.5% PRINCIPAL: PRIN & INT:

2020 $0 $0 $0 $0 20202021 120,000 190,000 310,000 423,708 20212022 125,000 205,000 330,000 427,210 20222023 130,000 205,000 335,000 428,413 20232024 130,000 210,000 340,000 429,035 20242025 135,000 210,000 345,000 429,358 20252026 140,000 210,000 350,000 429,170 20262027 145,000 215,000 360,000 433,180 20272028 150,000 215,000 365,000 431,498 20282029 0 220,000 220,000 270,575 20292030 0 220,000 220,000 267,825 20302031 0 225,000 225,000 269,855 20312032 0 225,000 225,000 266,593 20322033 0 230,000 230,000 268,105 20332034 0 235,000 235,000 269,310 20342035 0 240,000 240,000 270,198 20352036 0 240,000 240,000 265,758 20362037 0 245,000 245,000 266,078 20372038 0 250,000 250,000 266,178 20382039 0 255,000 255,000 266,053 20392040 0 265,000 265,000 270,698 2040

$1,075,000 $4,510,000 $5,585,000 $6,648,793

NOTE: 30% OF GENERAL OBLIGATION DEBT PAYABLE FROM TAXES WILL BE RETIRED WITHIN TEN YEARS.

STEVENS COUNTY, MINNESOTAGENERAL OBLIGATION DEBT PAYABLE FROM SPECIAL ASSESSMENTS

(As of August 2, 2020, Plus This Issue)

– 36 –

Purpose: G.O. CapitalImprovement

PlanBonds,

Series 2016ADated: 08/15/16

Original Amount: $6,190,000Maturity: 1-Dec TOTAL TOTAL

Interest Rates: 1.60-2.10% PRINCIPAL: PRIN & INT:

2020 $425,000 $425,000 $473,109 20202021 435,000 435,000 522,718 20212022 450,000 450,000 529,018 20222023 455,000 455,000 525,018 20232024 470,000 470,000 530,918 20242025 485,000 485,000 536,518 20252026 490,000 490,000 533,758 20262027 505,000 505,000 540,183 20272028 515,000 515,000 540,840 20282029 525,000 525,000 540,540 20292030 240,000 240,000 245,040 2030

$4,995,000 $4,995,000 $5,517,656(1)

NOTE: 95% OF GENERAL OBLIGATION DEBT PAYABLE FROM TAXES WILL BE RETIRED WITHIN TEN YEARS.

(1) These bonds will full net advance refund the County HRA's $7,685,000 Public Project Revenue Bonds, Series 2009A, on August 16, 2016, at a price of par plus accrued interest.

STEVENS COUNTY, MINNESOTAGENERAL OBLIGATION DEBT PAYABLE FROM TAXES

(As of August 2, 2020)

– 37 –

Indirect Debt∗

Issuer

2019/2020 Tax

Capacity Value(1)

2019/2020 Tax

Capacity Value

in County(1)

Percentage Applicable in County

Outstanding General

Obligation Debt(2)

Taxpayers’ Share

of Debt City of Morris $ 2,862,833 $2,862,833 100.00% $6,719,000(3) $ 6,719,000 City of Hancock 224,874 224,874 100.00 60,000(4) 60,000 City of Donnelly 130,392 132,392 100.00 150,000 150,000 ISD No. 768, Hancock 3,212,093 2,291,621 71.34 12,705,000 9,063,747 ISD No. 2769, Morris 10,758,183 10,270,880 89.74 35,039,000 31,443,999

Total Indirect Debt: $ 47,436,746

(Remainder of page intentionally left blank)

∗ Only those taxing jurisdictions with general obligation debt outstanding are included. Debt figures do not include non-general obligation

debt, short-term general obligation debt, or general obligation tax/aid anticipation certificates of indebtedness. (1) Tax Capacity Value is after tax increment deduction and fiscal disparity adjustments. (2) As of August 2, 2020, unless noted otherwise. (3) The City of Morris has $12,835,000 of general obligation debt outstanding, of which $6,116,000 is payable primarily from water revenues. (4) The City of Hancock has $2,365,000 of general obligation debt outstanding, of which $2,305,000 is payable primarily from revenues.

– 38 –

General Obligation Debt Bonds secured by special assessments (includes this Issue) $ 5,585,000 Bonds secured by tax levies 4,995,000 Direct General Obligation Debt 10,580,000 Add taxpayers’ share of indirect debt 47,436,746 Direct and Indirect Debt $ 58,016,746 Facts for Ratio Computations 2019/2020 Economic Market Value (real and personal property) $2,412,639,858 Population (2020 estimate) 9,766 Debt Ratios Excluding Revenue-Supported Debt

Direct Debt

Indirect Debt

Direct and Indirect Debt

To Economic Market Value 0.44% 1.97% 2.41% Per Capita $1,083 $4,857 $5,940

– 39 –

APPENDIX A

Form of Bond Counsel Opinion

4850-6044-6914\1

Stevens County, Minnesota Morris, Minnesota

[Purchaser] [City, State]

Re: $[PAR] General Obligation Ditch Bonds, Series 2020A Stevens County, Minnesota

Ladies and Gentlemen:

As Bond Counsel in connection with the authorization, issuance and sale by Stevens County, Minnesota (the “County”), of the obligations described above, dated, as originally issued, as of September [__], 2020 (the “Bonds”), we have examined certified copies of certain proceedings taken, and certain affidavits and certificates furnished, by the County in the authorization, sale and issuance of the Bonds, including the form of the Bonds. As to questions of fact material to our opinion, we have assumed the authenticity of and relied upon the proceedings, affidavits and certificates furnished to us without undertaking to verify the same by independent investigation. From our examination of such proceedings, affidavits and certificates and on the basis of existing law, it is our opinion that:

1. The Bonds are valid and binding general obligations of the County, enforceable in accordance with their terms.

2. The principal of and interest on the Bonds are payable from special assessments to be levied on property specially benefited by the improvements financed by the Bonds which have been pledged and appropriated for this purpose, but if necessary for payment thereof, ad valorem taxes are required by law to be levied on all taxable property in the County, which taxes are not subject to any limitation as to rate or amount.

3. Interest on the Bonds (a) is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and (b) is not an item of tax preference for purposes of the federal alternative minimum tax imposed by Section 55 of the Code.

4. Interest on the Bonds (a) is excluded from taxable net income of individuals, estates, and trusts for Minnesota income tax purposes and (b) is not an item of tax preference for purposes of the Minnesota alternative minimum tax imposed on individuals, estates, and trusts.

5. The Bonds are “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code.

The opinions expressed in paragraphs 1 and 2 above are subject, as to enforceability, to the effect of any state or federal laws relating to bankruptcy, insolvency, reorganization, moratorium or creditors’ rights and the application of equitable principles, whether considered at law or in equity.

Stevens County, Minnesota [Purchaser] Page 2

4850-6044-6914\1

The opinions expressed in paragraphs 3, 4, and 5 above are subject to the compliance by the County with certain requirements of the Code that must be satisfied subsequent to the issuance of the Bonds. Noncompliance with these requirements could result in the inclusion of interest on the Bonds in gross income for federal income tax purposes and taxable net income of individuals, estates, and trusts for Minnesota income tax purposes or the Bonds failing to be qualified tax-exempt obligations, retroactive to the date of issuance of the Bonds.

Except as stated herein, we express no opinion regarding federal, state, or other tax consequences to the owner of the Bonds. We note, however, that notwithstanding the opinion expressed in paragraph 4 above, interest on the Bonds is included in net income of corporations and financial institutions for purposes of the Minnesota franchise tax.

In providing this opinion, we have relied upon representations of the County and its officers as to (i) the intended application of the proceeds of the Bonds, (ii) the nature, use, cost, and economic life of the facilities financed by the Bonds, and (iii) other matters relating to the exemption of the interest on the Bonds from federal income taxation.

This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may occur after the date hereof and which may be retroactive.

Dated this [___] day of September, 2020.

Very truly yours,

– 40 –

APPENDIX B

Continuing Disclosure Certificate

4813-3459-4242\1 1

FORM OF CONTINUING DISCLOSURE

Continuing Disclosure. (a) Purpose and Beneficiaries. To provide for the public availability of

certain information relating to the Bonds and the security therefor and to permit the Purchaser and other participating underwriters in the primary offering of the Bonds to comply with amendments to Rule 15c2-12 promulgated by the SEC under the Securities Exchange Act of 1934 (17 C.F.R. § 240.15c2-12), relating to continuing disclosure (as in effect and interpreted from time to time, the Rule), which will enhance the marketability of the Bonds, the County hereby makes the following covenants and agreements for the benefit of the Owners (as hereinafter defined) from time to time of the Outstanding Bonds. The County is the only obligated person in respect of the Bonds within the meaning of the Rule for purposes of identifying the entities in respect of which continuing disclosure must be made. If the County fails to comply with any provisions of this section, any person aggrieved thereby, including the Owners of any Outstanding Bonds, may take whatever action at law or in equity may appear necessary or appropriate to enforce performance and observance of any agreement or covenant contained in this section, including an action for a writ of mandamus or specific performance. Direct, indirect, consequential and punitive damages shall not be recoverable for any default hereunder to the extent permitted by law. Notwithstanding anything to the contrary contained herein, in no event shall a default under this section constitute a default under the Bonds or under any other provision of this resolution. As used in this section, Owner or Bondowner means, in respect of a Bond, the registered owner or owners thereof appearing in the bond register maintained by the Registrar or any Beneficial Owner (as hereinafter defined) thereof, if such Beneficial Owner provides to the Registrar evidence of such beneficial ownership in form and substance reasonably satisfactory to the Registrar. As used herein, Beneficial Owner means, in respect of a Bond, any person or entity which (i) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, such Bond (including persons or entities holding Bonds through nominees, depositories or other intermediaries), or (ii) is treated as the owner of the Bond for federal income tax purposes. (b) Information To Be Disclosed. The County will provide, in the manner set forth in subsection (c) hereof, either directly or indirectly through an agent designated by the County, the following information at the following times:

(1) on or before twelve (12) months after the end of each fiscal year of the County, commencing with the fiscal year ending December 31, 2019, the following financial information and operating data in respect of the County (the “Disclosure Information”):

(A) the audited financial statements of the County for such fiscal year, prepared in

accordance with generally accepted accounting principles in accordance with the governmental accounting standards promulgated by the Governmental Accounting Standards Board or as otherwise provided under Minnesota law, as in effect from time to time, or, if and to the extent such financial statements have not been prepared in accordance with such generally accepted accounting principles for reasons beyond the reasonable control of the County, noting the discrepancies therefrom and the effect thereof, and certified as to accuracy and completeness in all material respects by the fiscal officer of the County; and

(B) to the extent not included in the financial statements referred to in paragraph (A)

hereof, the information for such fiscal year or for the period most recently available of the type contained in the Official Statement under headings: “Economic and Financial Information – Valuations,” “– Tax Capacity Rates,” “- Tax Levies and Collections,” and “Summary of Debt and Debt Statistics,” which information may be unaudited.

4813-3459-4242\1 2

Notwithstanding the foregoing paragraph, if the audited financial statements are not available by the date specified, the County shall provide on or before such date unaudited financial statements in the format required for the audited financial statements as part of the Disclosure Information and, within 10 days after the receipt thereof, the County shall provide the audited financial statements. Any or all of the Disclosure Information may be incorporated by reference, if it is updated as required hereby, from other documents, including official statements, which have been submitted to the Municipal Securities Rulemaking Board (“MSRB”) through its Electronic Municipal Market Access System (“EMMA”) or to the SEC. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The County shall clearly identify in the Disclosure Information each document so incorporated by reference. If any part of the Disclosure Information can no longer be generated because the operations of the County have materially changed or been discontinued, such Disclosure Information need no longer be provided if the County includes in the Disclosure Information a statement to such effect; provided, however, if such operations have been replaced by other County operations in respect of which data is not included in the Disclosure Information and the County determines that certain specified data regarding such replacement operations would be a Material Fact (as defined in paragraph (2) hereof), then, from and after such determination, the Disclosure Information shall include such additional specified data regarding the replacement operations. If the Disclosure Information is changed or this section is amended as permitted by this paragraph (b)(1) or subsection (d), then the County shall include in the next Disclosure Information to be delivered hereunder, to the extent necessary, an explanation of the reasons for the amendment and the effect of any change in the type of financial information or operating data provided.

(2) In a timely manner not in excess of ten business days after the occurrence of the event, notice of the occurrence of any of the following events (each a “Material Fact”):

(A) Principal and interest payment delinquencies; (B) Non-payment related defaults, if material; (C) Unscheduled draws on debt service reserves reflecting financial difficulties; (D) Unscheduled draws on credit enhancements reflecting financial difficulties; (E) Substitution of credit or liquidity providers, or their failure to perform; (F) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or

final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security;

(G) Modifications to rights of security holders, if material; (H) Bond calls, if material, and tender offers; (I) Defeasances; (J) Release, substitution, or sale of property securing repayment of the securities, if

material; (K) Rating changes; (L) Bankruptcy, insolvency, receivership or similar event of the obligated person; (M) The consummation of a merger, consolidation, or acquisition involving an

obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;

(N) Appointment of a successor or additional trustee or the change of name of a trustee, if material;

(O) Incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar

4813-3459-4242\1 3

terms of a financial obligation of the obligated person, any of which affect security holders, if material; and

(P) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties.

For purposes of the events identified in paragraphs (O) and (P) above, the term “financial obligation” means (i) a debt obligation; (ii) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) a guarantee of (i) or (ii). The term “financial obligation” shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.

As used herein, for those events that must be reported if material, an event is “material” if it is an event as to which a substantial likelihood exists that a reasonably prudent investor would attach importance thereto in deciding to buy, hold or sell a Bond or, if not disclosed, would significantly alter the total information otherwise available to an investor from the Official Statement, information disclosed hereunder or information generally available to the public. Notwithstanding the foregoing sentence, an event is also “material” if it is an event that would be deemed material for purposes of the purchase, holding or sale of a Bond within the meaning of applicable federal securities laws, as interpreted at the time of discovery of the occurrence of the event. For the purposes of the event identified in (L) hereinabove, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.

(3) In a timely manner, notice of the occurrence of any of the following events or conditions:

(A) the failure of the County to provide the Disclosure Information required under paragraph (b)(1) at the time specified thereunder;

(B) the amendment or supplementing of this section pursuant to subsection (d), together with a copy of such amendment or supplement and any explanation provided by the County under subsection (d)(2);

(C) the termination of the obligations of the County under this section pursuant to subsection (d);

(D) any change in the accounting principles pursuant to which the financial statements constituting a portion of the Disclosure Information are prepared; and

(E) any change in the fiscal year of the County. (c) Manner of Disclosure.

(1) The County agrees to make available to the MSRB through EMMA, in an electronic format as prescribed by the MSRB, the information described in subsection (b).

(2) All documents provided to the MSRB pursuant to this subsection (c) shall be accompanied

by identifying information as prescribed by the MSRB from time to time.

4813-3459-4242\1 4

(d) Term; Amendments; Interpretation.

(1) The covenants of the County in this section shall remain in effect so long as any Bonds are Outstanding. Notwithstanding the preceding sentence, however, the obligations of the County under this section shall terminate and be without further effect as of any date on which the County delivers to the Registrar an opinion of Bond Counsel to the effect that, because of legislative action or final judicial or administrative actions or proceedings, the failure of the County to comply with the requirements of this section will not cause participating underwriters in the primary offering of the Bonds to be in violation of the Rule or other applicable requirements of the Securities Exchange Act of 1934, as amended, or any statutes or laws successory thereto or amendatory thereof.

(2) This section (and the form and requirements of the Disclosure Information) may be

amended or supplemented by the County from time to time, without notice to (except as provided in paragraph (c)(3) hereof) or the consent of the Owners of any Bonds, by a resolution of this Board filed in the office of the recording officer of the County accompanied by an opinion of Bond Counsel, who may rely on certificates of the County and others and the opinion may be subject to customary qualifications, to the effect that: (i) such amendment or supplement (a) is made in connection with a change in circumstances that arises from a change in law or regulation or a change in the identity, nature or status of the County or the type of operations conducted by the County, or (b) is required by, or better complies with, the provisions of paragraph (b)(5) of the Rule; (ii) this section as so amended or supplemented would have complied with the requirements of paragraph (b)(5) of the Rule at the time of the primary offering of the Bonds, giving effect to any change in circumstances applicable under clause (i)(a) and assuming that the Rule as in effect and interpreted at the time of the amendment or supplement was in effect at the time of the primary offering; and (iii) such amendment or supplement does not materially impair the interests of the Bondowners under the Rule.

If the Disclosure Information is so amended, the County agrees to provide, contemporaneously with the effectiveness of such amendment, an explanation of the reasons for the amendment and the effect, if any, of the change in the type of financial information or operating data being provided hereunder.

(3) This section is entered into to comply with the continuing disclosure provisions of the Rule

and should be construed so as to satisfy the requirements of paragraph (b)(5) of the Rule.

– 41 –

APPENDIX C

County’s Financial Statement The following financial statements are excerpts from the annual financial report for the year ended December 31, 2018. The complete financial report for the year 2018 and the prior two years are available for inspection at the County Offices and the office of Northland Securities, Inc. The reader of this Official Statement should be aware that the complete financial report may have further data relating to the excerpts presented in the appendix which may provide additional explanation, interpretation or modification of the excerpts.

INDEPENDENT AUDITORS' REPORT

To the Board of CommissionersStevens CountyMorris, Minnesota

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, each major fund, andthe aggregate remaining fund information of Stevens County, Minnesota, as of and for the year endedDecember 31, 2018, and the related notes to the financial statements, which collectively comprise StevensCounty's basic financial statements as listed in the table of contents.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordancewith 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 financialstatements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted ouraudit in accordance with auditing standards generally accepted in the United States of America and thestandards applicable to financial audits contained in Government Auditing Standards, issued by the ComptrollerGeneral of the United States. Those standards require that we plan and perform the audit to obtain reasonableassurance 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 thefinancial statements. The procedures selected depend on the auditors' judgment, including the assessment ofthe risks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control over financial reporting relevant to Stevens County'spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness ofStevens County's internal control. Accordingly, we express no such opinion. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of significant accounting estimates madeby 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 auditopinions.

ii

Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2018 Baker Tilly Virchow Krause, LLP

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respectivefinancial position of the governmental activities, each major fund, and the aggregate remaining fund informationof Stevens County, Minnesota, as of December 31, 2018 and the respective changes in financial positionthereof for the year then ended in accordance with accounting principles generally accepted in the United Statesof America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management'sdiscussion and analysis and other required supplementary information as listed in the table of contents bepresented to supplement the basic financial statements. Such information, although not a part of the basicfinancial statements, is required by the Governmental Accounting Standards Board who considers it to be anessential 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 supplementaryinformation in accordance with auditing standards generally accepted in the United States of America, whichconsisted of inquiries of management about the methods of preparing the information and comparing theinformation for consistency with management's responses to our inquiries, the basic financial statements, andother knowledge we obtained during our audit of the basic financial statements. We do not express an opinion orprovide any assurance on the information because the limited procedures do not provide us with sufficientevidence to express an opinion or provide any assurance.

Supplementary Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectivelycomprise Stevens County's basic financial statements. The supplementary information as listed in the table ofcontents is presented for purposes of additional analysis and is not a required part of the basic financialstatements. Such information is the responsibility of management and was derived from and relates directly tothe underlying accounting and other records used to prepare the basic financial statements. The information hasbeen subjected to the auditing procedures applied in the audit of the basic financial statements and certainadditional procedures, including comparing and reconciling such information directly to the underlying accountingand 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 ofAmerica. In our opinion, the supplementary information is fairly stated in all material respects, in relation to thebasic financial statements as a whole.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectivelycomprise Stevens County's basic financial statements. The introductory section is presented for purposes ofadditional analysis and is not a required part of the basic financial statements. Such information has not beensubjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, wedo not express an opinion or provide any assurance on it.

iii

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated September 27, 2019on our consideration of Stevens County's internal control over financial reporting and on our tests of itscompliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. Thepurpose of that report is to describe the scope of our testing of internal control over financial reporting andcompliance and the results of that testing, and not to provide an opinion on internal control over financialreporting or on compliance. That report is an integral part of an audit performed in accordance with GovernmentAuditing Standards in considering Stevens County's internal control over financial reporting and compliance.

Minneapolis, MinnesotaSeptember 27, 2019

iv

REQUIRED SUPPLEMENTARY INFORMATION

STEVENS COUNTY

MORRIS, MINNESOTA  

MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2018

(Unaudited)

 

v

The Management’s Discussion and Analysis (MD&A) provides an overview and analysis of the County’s financial activities for the fiscal year ended December 31, 2018. Since this information is designed to focus on the current year’s activities, resulting changes, and currently known facts, it should be read in conjunction with the County’s basic financial statements that follow this section.  FINANCIAL HIGHLIGHTS   Governmental activities’ total net position is $42,609,118, of which $35,490,750 is the

net investment in capital assets, and $4,571,638 is restricted for specific purposes. The $2,546,730 remaining may be used to meet the County’s ongoing obligations to citizens and creditors.

  The County’s net position increased by $1,780,711 for the year ended December 31, 2018.   The net cost of governmental activities for the current fiscal year was $6,754,208. The net

cost was funded by general revenues totaling $8,534,919.   Fund balances of the governmental funds increased by $1,119,830. The Road and

Bridge Special Revenue Fund had a fund balance increase of $402,739, due to construction costs, repair parts and fuel prices coming in below budget. General Fund had a fund balance increase of $93,958 due to an unbudgeted and unexpected increase of $354,091 in Intergovernmental Revenue.

  For the year ended December 31, 2018, the unassigned fund balance of the General Fund

was $3,120,904, or 47.2 percent, of the total General Fund expenditures for the year, an increase of $7,505, or 0.2 percent, from the prior year.

 OVERVIEW OF THE FINANCIAL STATEMENTS  This MD&A is intended to serve as an introduction to the basic financial statements. The basic financial statements consist of three parts: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. This report also contains other required supplementary information.

 

STEVENS COUNTY

MORRIS, MINNESOTA  

MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2018

(Unaudited)

 

vi

Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the County’s finances in a manner similar to a private-sector business.

The Statement of Net Position presents information on all assets, deferred outflows of resources, liabilities, and deferred inflows of resources of the County using the full accrual basis of accounting, with the difference (assets plus deferred outflows of resources, less liabilities and deferred inflows of resources) being reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial health of the County is improving or deteriorating. It is important to consider other nonfinancial factors, such as changes in the County’s property tax base and the condition of County roads and other capital assets, to assess the overall health of the County.

The Statement of Activities presents the County’s governmental activities. Most of the basic services are reported here, including general government, public safety, highways and streets, sanitation, human services, health, culture and recreation, conservation of natural resources, and economic development. Property taxes and state and federal grants finance most of these activities. The County has no business-type activities for which the County is legally accountable.

The government-wide financial statements are included on pages 1 and 2 of this report.

Fund Financial Statements

Fund financial statements provide detailed information about the significant funds--not the County as a whole. Some funds are required to be established by state law or by bond covenants. However, the County Board establishes some funds to help it control and manage money for a particular purpose or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money.

Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on how money flows into and out of these funds and the balances left at year-end that are available for spending. These funds are reported using modified accrual accounting. Such information may be useful in evaluating a government’s near-term financial requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the County’s near-term financial decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

STEVENS COUNTY

MORRIS, MINNESOTA  

MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2018

(Unaudited)

 

vii

The County adopts an annual appropriated budget for its General Fund, Road and Bridge Special Revenue Fund, Human Services Special Revenue Fund, Solid Waste Special Revenue Fund, and Debt Service Fund. Budgetary comparison schedules have been provided as either required or other supplementary information for each of these funds to demonstrate compliance with this budget. The basic governmental fund financial statements are included on pages 3 through 7 of this report. Fiduciary funds are used to account for resources held for the benefit of parties outside of the County. Fiduciary funds are not reflected in the government-wide statements because the resources of these funds are not available to support the County’s own programs or activities. The County is responsible for ensuring that the assets reported in these funds are used for their intended purposes. All fiduciary activities are reported in a separate statement shown on page 8.  Notes to the Financial Statements  Notes to the financial statements provide additional information essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements are on pages 9 through 53 of this report.  Other Information  Other information is provided as supplementary information regarding Stevens County’s intergovernmental revenue and federal award programs.  GOVERNMENT-WIDE FINANCIAL ANALYSIS  Over time, net position serves as a useful indicator of the County’s financial position. The County’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $42,609,118 at the close of 2018. The largest portion of the net position (83.3 percent) reflects the net investment in capital assets (for example: land, buildings, equipment, and infrastructure such as roads and bridges), less any related outstanding debt used to acquire those assets. However, it should be noted that these assets are not available for future spending or for liquidating any remaining debt. Comparative data for 2017 is presented.

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Net Position  

Governmental Activities 2018 2017

Assets

Current and other assets $ 14,732,626 $ 13,727,137 Capital assets 41,017,883 40,851,131

Total Assets 55,750,509 54,578,268

Deferred Outflows of Resources Deferred pension outflows 1,390,147 2,003,461

Liabilities Long-term liabilities 11,880,764 13,100,644 Other liabilities 679,782 546,021

Total Liabilities 12,560,546 13,646,665

Deferred Inflows of Resources Deferred pension inflows 1,970,992 2,106,657

Net Position Net investment in capital assets 35,490,750 34,905,372 Restricted 4,571,638 4,627,291 Unrestricted 2,546,730 1,295,744

Total Net Position $ 42,609,118 $ 40,828,407  

Unrestricted net position--the part of net position that may be used to meet the County’s ongoing obligations to citizens and creditors without constraints established by debt covenants, enabling legislation, or other legal requirements--was 6.0 percent of net position.

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Governmental Activities  The County’s activities increased net position by 4.4 percent ($42,609,118 for 2018 compared to $40,828,407 for 2017). Key elements in this increase in net position are as follows for 2018, with comparative data for 2017:  

Changes in Net Position  

Governmental Activities 2018 2017

Revenues Program revenues

Charges for services $ 2,016,783 $ 1,432,477 Operating grants and contributions 5,883,306 5,443,464 Capital grants and contributions 174,018 597,609

General revenues Property taxes 7,400,422 7,264,782 Other 1,134,497 768,898

Total Revenues 16,609,026 15,507,230

Expenses General government 3,641,980 3,194,116 Public safety 1,985,556 1,969,136 Highways and streets 4,543,970 4,035,044 Sanitation 314,790 368,378 Health and human services 3,402,774 3,431,640 Culture, recreation, and education 164,946 190,670 Conservation and development 565,098 489,442 Economic development 61,812 61,812 Interest 147,389 156,406

Total Expenses 14,828,315 13,896,644

Change in Net Position 1,780,711 1,610,586 Net Position – January 1 40,828,407 39,217,821

Net Position – December 31 $ 42,609,118 $ 40,828,407

 

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MORRIS, MINNESOTA  

MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2018

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FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS Governmental Funds

The focus of the County’s governmental funds is to provide information on short-term inflows, outflows, and the balances left at year-end available for spending. Such information is useful in assessing the County’s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of net resources available for spending at the end of the fiscal year.

At the end of the current fiscal year, governmental funds reported combined ending fund balances of $12,397,035, an increase of $1,119,830 in comparison with the prior year. Of the combined ending fund balances, $9,188,927 represents unrestricted fund balance, which is available for spending at the County’s discretion. The remainder of the fund balance is restricted to indicate that it is not available for new spending because it has already been restricted for various reasons either by state law, grant agreements, or bond covenants, or is non-spendable.

The General Fund is the main operating fund for the County. At the end of the current fiscal year, it had an unrestricted fund balance of $3,203,654. As a measure of the General Fund’s liquidity, it may be useful to compare unrestricted fund balance to total expenditures. The General Fund’s unrestricted fund balance represents 48.4 percent of total General Fund expenditures. During 2018, the ending fund balance increased by $93,958.

The Road and Bridge Special Revenue Fund had an assigned fund balance of $3,249,016 at fiscal year-end, representing 68.7 percent of its annual expenditures. The ending fund balance increased by $402,739 during 2018.

The Human Services Special Revenue Fund had an assigned fund balance of $2,736,257 at fiscal year-end, representing 81.1 percent of its annual expenditures. The ending fund balance increased by $524,094 during 2018.

The Solid Waste Special Revenue Fund had a restricted fund balance of $383,479 at fiscal year-end, representing 271.9 percent of its annual expenditures, and the fund also transferred $130,271 to the SCORE Department in the General Fund for SCORE use. The ending fund balance increased by $119,208 during 2018.

The Ditch Special Revenue Fund had a restricted fund balance of $1,791,529 at fiscal year-end, representing 485.3 percent of its annual expenditures. The ending fund balance decreased by $4,195 during 2018.

The Debt Service Fund had a restricted fund balance of $95,354 at fiscal year-end, representing 18.2 percent of its annual expenditures. The ending fund balance in the Debt Service Fund decreased by $15,974 during 2018.

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Charges for Services12%

Operating grants &

contributions35%

Capital grants & contributions

1%

Property taxes45%

Other7%

Governmental Activities The County’s total revenues were $16,609,026. Table 1 presents the percent of total County revenues by source for the year ended December 31, 2018.

Table 1 Total County Revenues

Table 2 presents the cost and revenue of each program, as well as the County’s general revenues. Total program revenues and general revenues for the County were $16,609,026, while total expenses were $14,828,315. This reflects a $1,780,711 increase in net position for the year ended December 31, 2018.

Table 2 Program Revenues, General Revenues, and Expenses

 ‐

 1,000,000

 2,000,000

 3,000,000

 4,000,000

 5,000,000

 6,000,000

 7,000,000

 8,000,000

Expenses Revenues

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MORRIS, MINNESOTA  

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The cost of all governmental activities this year was $14,828,315. However, as shown on the Statement of Activities on page 2, the amount that our taxpayers ultimately financed for these activities through County taxes was $6,754,208 because some of the cost was paid by those who directly benefited from the programs ($2,016,783) or by other governments and organizations that subsidized certain programs with grants and contributions ($6,057,324). The County paid for the remaining “public benefit” portion of governmental activities with general revenues, primarily taxes (some of which could be used only for certain programs) and other revenues, such as grants and contributions not restricted to specific programs, and investment income.

Table 3 presents the cost of each of the County’s five largest program functions, as well as each function’s net cost (total cost, less revenues generated by the activity). The net cost shows the financial burden that was placed on the County’s taxpayers by each of these functions.

Table 3

Governmental Activities

Total Cost of

Services 2018

Net Cost (Revenue) of

Services 2018

Highways and streets $ 4,543,970 $ 383,851 General government 3,641,980 2,973,258 Health and human services 3,402,774 1,338,786 Public safety 1,985,556 1,678,147 Conservation and development 565,098 154,202 All others 688,937 225,964

Totals $ 14,828,315 $ 6,754,208

BUDGETARY HIGHLIGHTS

General Fund

Actual revenues were $236,762 greater than budgeted mainly due to an increase in miscellaneous and intergovernmental revenues. Actual expenditures were $297,263 greater than budgeted. The most significant negative variance of $220,560 occurred in intergovernmental expenditures due to an unanticipated capital contribution to the new Counties Providing Technology jointly-governed organization. Road & Bridge Actual revenues were $192,531 greater than budgeted mainly due to an increase in intergovernmental revenues. Actual expenditures were $251,281 less than budgeted. The main reasons for the decreased expenditures were lower construction costs, repair parts, and fuel usage.

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MORRIS, MINNESOTA  

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Health and Human Services Actual revenues were $550,600 greater than budgeted mainly due to an increase in charges for services and intergovernmental revenues. Actual expenditures were $8,252 greater than budgeted due to unbudgeted expenditures in transitional housing and the drop-in center.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

The County’s capital assets for its governmental activities at December 31, 2018, totaled $41,017,883 (net of accumulated depreciation). This investment in capital assets includes land, buildings, infrastructure, equipment, and improvements other than buildings. The investment in capital assets increased $166,752, or 0.4 percent, from the previous year.

 Table 4

Capital Assets at Year-End (Net of Depreciation)

  2018 2017

Land $ 250,018 $ 250,018 Right-of-way 1,026,600 1,026,600 Infrastructure 28,966,894 28,434,414 Building improvements 61,960 78,999 Buildings 8,738,320 9,030,305 Improvements other than buildings 46,458 35,266 Machinery, furniture, and equipment 1,906,850 1,977,152 Construction in progress 20,783 18,377

Totals $ 41,017,883 $ 40,851,131 Additional information about the County’s capital assets can be found in Note III.C to the financial statements.

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MORRIS, MINNESOTA  

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Long-Term Debt At the end of the current fiscal year, the County had total net outstanding debt of $7,198,161, which was backed by the full faith and credit of the government.

Table 5

Outstanding Debt

2018 2017 General obligation bonds, including unamortized premium $ 7,173,576 $ 7,708,242 Capital leases - 14,974 Loans payable 24,585 27,200

Totals Outstanding Debt $ 7,198,161 $ 7,750,416 Minnesota statutes limit the amount of debt a county may levy to three percent of its total market value. At the end of 2018, the County’s outstanding debt was 10.1 percent of its total debt limit.

Additional information on the County’s long-term debt can be found in Note III.E to the financial statements of this report.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS The County’s elected and appointed officials considered many factors when setting the 2019 budget, tax rates, and fees that will be charged for the year.

The unemployment rate for Stevens County at the end of 2018 was 2.8 percent, which is the same as it was in December 2017. The state unemployment rate was 3.2 percent. The July 1, 2017, estimated County population was 9,634, a decrease of 92, or 0.9 percent, from the April 1, 2010, census of 9,726.

At the end of 2018, Stevens County set its 2019 revenue and expenditure budgets with a property tax levy increase of 2.74 percent, caused primarily by unfunded human services mandates from the federal and state governments, as compared to a 1.5 percent tax levy increase from the 2018 budget, which was caused primarily by salary increases.

REQUESTS FOR INFORMATION

This financial report is designed to provide a general overview of Stevens County’s finances. Questions concerning any of the information provided in this report, or requests for additional financial information, should be addressed to the Stevens County Auditor/Treasurer, Stevens County Courthouse, 400 Colorado Avenue, Suite 303, Morris, Minnesota 56267.

BASIC FINANCIAL STATEMENTS

GovernmentalActivities

ASSETSCash and investments 12,408,732$ Taxes receivable 20,590 Special assessments receivable 684,949 Interest receivable 43,585 Other receivables 45,242 Due from other governments 1,362,865 Inventory and prepaid items 166,663 Capital Assets Construction in progress 20,783 Land 1,276,618 Other capital assets, net of depreciation 39,720,482

Total Assets 55,750,509

DEFERRED OUTFLOWS OF RESOURCES

Pension related amounts 1,390,147

Total Deferred Outflows of Resources 1,390,147

LIABILITIESAccounts payable 171,197 Accrued liabilities 281,006 Interest payable 26,832 Due to other governments 119,135 Unearned revenues 81,612 Noncurrent Liabilities Due within one year 677,666 Due in more than one year 11,203,098

Total Liabilities 12,560,546

DEFERRED INFLOWS OF RESOURCESPension related amounts 1,970,992

Total Deferred Inflows of Resources 1,970,992

NET POSITIONNet investment in capital assets 35,490,750 Restricted for Public safety 337,132 Highways and streets 955,986 Sanitation 401,891 Human services 6,834 Conservation of natural resources 2,628,365 Debt service 88,115 Other purposes 153,315 Unrestricted 2,546,730

TOTAL NET POSITION 42,609,118$

STEVENS COUNTY

STATEMENT OF NET POSITIONAs of December 31, 2018

See accompanying notes to financial statements.1

Net (Expenses)Revenues and

Changes in

Program Revenues Net Position

Operating Capital

Charges for Grants and Grants and Governmental

Functions/Programs Expenses Services Contributions Contributions Activities

Governmental Activities General government 3,641,980$ 369,081$ 278,141$ 21,500$ (2,973,258)$ Public safety 1,985,556 103,766 183,402 20,241 (1,678,147) Highways and streets 4,543,970 451,905 3,708,214 - (383,851) Sanitation 314,790 359,232 67,729 - 112,171 Health and human services 3,402,774 454,180 1,609,808 - (1,338,786) Culture, recreation, and education 164,946 - 36,012 - (128,934) Conservation and development 565,098 278,619 - 132,277 (154,202) Economic development 61,812 - - - (61,812) Interest and fiscal charges 147,389 - - - (147,389)

Total Governmental Activities 14,828,315$ 2,016,783$ 5,883,306$ 174,018$ (6,754,208)

General Revenues Taxes Property taxes, levied for general purposes 7,400,422 Other taxes 8,539 Payments in lieu of taxes 129,224 Intergovernmental revenues not restricted to specific programs 764,654 Investment income 94,783 Miscellaneous 137,297

Total General Revenues 8,534,919

Change in Net Position 1,780,711

NET POSITION - Beginning of Year 40,828,407

NET POSITION - END OF YEAR 42,609,118$

STATEMENT OF ACTIVITIESFor the Year Ended December 31, 2018

STEVENS COUNTY

See accompanying notes to financial statements.2

Special Revenue TotalGeneral Road and Human Solid Debt Governmental

Fund Bridge Services Waste Ditch Service Funds

ASSETSCash and investments 4,119,510$ 3,307,947$ 2,672,915$ 404,291$ 1,808,715$ 95,354$ 12,408,732$ Receivables Taxes 11,610 3,039 4,462 - - 1,479 20,590 Special assessments - - - 18,411 666,538 - 684,949 Interest 43,585 - - - - - 43,585 Accounts 32,882 32 9,382 2,946 - - 45,242 Due from other governments 112,307 982,949 267,609 - - - 1,362,865 Due from other funds 1,360 5,971 - - - - 7,331 Inventory and prepaid items - 166,663 - - - - 166,663

TOTAL ASSETS 4,321,254$ 4,466,601$ 2,954,368$ 425,648$ 2,475,253$ 96,833$ 14,739,957$

LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCESLiabilities

Accounts payable 43,599$ 8,707$ 82,768$ 23,758$ 12,365$ -$ 171,197$ Accrued liabilities 135,397 55,541 89,992 - 76 - 281,006 Due to other governments 78,440 27,650 13,045 - - - 119,135 Unearned revenues 76,245 - 5,367 - - - 81,612 Due to other funds 1,226 - 1,360 - 4,745 - 7,331

Total Liabilities 334,907 91,898 192,532 23,758 17,186 - 660,281

Deferred Inflows of ResourcesUnavailable revenues 11,610 959,024 25,579 18,411 666,538 1,479 1,682,641

Total Deferred Inflows of Resources 11,610 959,024 25,579 18,411 666,538 1,479 1,682,641

STEVENS COUNTY

BALANCE SHEETGOVERNMENTAL FUNDSAs of December 31, 2018

See accompanying notes to financial statements.3

Special Revenue TotalGeneral Road and Human Solid Debt Governmental

Fund Bridge Services Waste Ditch Service Funds

Fund BalancesNonspendable Inventory and prepaid items -$ 166,663$ -$ -$ -$ -$ 166,663$ Trust Fund Conservation - U.S. Fish and Wildlife 84,496 - - - - - 84,496 Missing heirs 892 - - - - - 892 Restricted for Tax forfeitures 7,567 - - - - - 7,567 Law library 4,340 - - - - - 4,340 Election equipment 31,983 - - - - - 31,983 Recorder's technology equipment 28,435 - - - - - 28,435 E-911 274,937 - - - - - 274,937 Recorder's compliance 39,110 - - - - - 39,110 DARE 13,749 - - - - - 13,749 Gun permit fees 32,909 - - - - - 32,909 Attorney forfeitures 10,207 - - - - - 10,207 Social services youth 3,752 - - - - - 3,752 Veterans van 30,118 - - - - - 30,118 Sheriff's forfeitures 10,379 - - - - - 10,379 Sheriff's contingency 4,436 - - - - - 4,436 Extension publication 1,555 - - - - - 1,555 SAFE 3,083 - - - - - 3,083 Uniform allowance 723 - - - - - 723 Buffer strips for county ditches 188,412 - - - - - 188,412 Solid waste - - - 383,479 - - 383,479 Ditch maintenance, repair, and other - - - - 1,791,529 - 1,791,529 Debt service - - - - - 95,354 95,354 Assigned for Capital expenditures 42,750 - - - - - 42,750 Employee flexible benefits 40,000 - - - - - 40,000 Highways and streets - 3,249,016 - - - - 3,249,016 Human services - - 2,736,257 - - - 2,736,257 Unassigned 3,120,904 - - - - - 3,120,904

Total Fund Balances 3,974,737 3,415,679 2,736,257 383,479 1,791,529 95,354 12,397,035

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES 4,321,254$ 4,466,601$ 2,954,368$ 425,648$ 2,475,253$ 96,833$ 14,739,957$

BALANCE SHEETGOVERNMENTAL FUNDSAs of December 31, 2018

STEVENS COUNTY

See accompanying notes to financial statements.4

As of December 31, 2018

Total fund balance - governmental funds 12,397,035$

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 fund statements. Capital assets at year end consist of:

Capital assets 72,626,647$ Accumulated depreciation (31,608,764) 41,017,883

Certain receivables that are not considered available are report as unavailablerevenue in the fund financial statements and are recognized as revenue whenearned in the government-wide financial statements.These types of unavailable revenues at year end consist of:

Taxes receivable 20,589 Special assessments receivable 684,948 Due from other governments 977,104 1,682,641

Deferred outflows of resources related to pensions do not relate to currentfinancial resources and are not reported in the fund statements. 1,390,147

Deferred inflows of resources related to pensions do not relate to currentfinancial resources and are not reported in the fund statements. (1,970,992)

Long-term liabilities, including bond and notes payable, are not due in the current period and, therefore, are not reported in the fund statements.Long-term liabilities at year end consist of:

General obligation bonds (7,050,000) Unamortized bond premium (123,576) Loans payable (24,585) Accrued interest payable (26,832) Net pension liability (4,116,692) Compensated absences (565,911) (11,907,596)

TOTAL NET POSITION - GOVERNMENTAL ACTIVITIES 42,609,118$

STEVENS COUNTY

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEETTO THE STATEMENT OF NET POSITION

See accompanying notes to financial statements.5

STEVENS COUNTY

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES INFUND BALANCES - GOVERNMENTAL FUNDS

For the Year Ended December 31, 2018

Total

General Road and Human Solid Debt GovernmentalFund Bridge Services Waste Ditch Service Funds

REVENUES Taxes 4,208,537$ 1,020,407$ 1,677,142$ -$ -$ 507,343$ 7,413,429$ Special assessments - - - 307,343 346,725 - 654,068 Intergovernmental 1,683,673 3,668,989 1,768,849 - - - 7,121,511 Licenses and permits 18,385 - - - - - 18,385 Charges for services 268,298 313,694 401,104 - - - 983,096 Investment income 26,247 27,908 18,254 2,330 18,223 1,821 94,783 Miscellaneous 329,036 138,918 48,176 80,834 - - 596,964

Total Revenues 6,534,176 5,169,916 3,913,525 390,507 364,948 509,164 16,882,236

EXPENDITURES Current General government 3,255,767 - - - - - 3,255,767 Public safety 1,945,872 - - - - - 1,945,872 Highways and streets - 4,726,104 - - - - 4,726,104 Sanitation 201,951 - - 137,853 - - 339,804 Health and human services 89,975 - 3,371,177 - - - 3,461,152 Culture, recreation, and education 164,946 - - - - - 164,946 Conservation of natural resources 357,421 - - - 209,518 - 566,939 Economic development 61,812 - - - - - 61,812 Intergovernmental 525,560 - - - - - 525,560 Debt Service Principal retirement 14,974 - - 2,615 115,000 410,000 542,589 Interest and fiscal charges 194 - - 560 44,625 113,317 158,696

Total Expenditures 6,618,472 4,726,104 3,371,177 141,028 369,143 523,317 15,749,241

Excess (deficiency) of revenues over expenditures (84,296) 443,812 542,348 249,479 (4,195) (14,153) 1,132,995

OTHER FINANCING SOURCES (USES) Transfers in 178,254 - - - - - 178,254 Transfers out - (27,908) (18,254) (130,271) - (1,821) (178,254)

Total Other Financing Sources (Uses) 178,254 (27,908) (18,254) (130,271) - (1,821) -

Net Change in Fund Balances 93,958 415,904 524,094 119,208 (4,195) (15,974) 1,132,995

FUND BALANCES - Beginning of Year 3,880,779 3,012,940 2,212,163 264,271 1,795,724 111,328 11,277,205

Change in reserve for inventory - (13,165) - - - - (13,165)

FUND BALANCES - END OF YEAR 3,974,737$ 3,415,679$ 2,736,257$ 383,479$ 1,791,529$ 95,354$ 12,397,035$

Special Revenue

See accompanying notes to financial statements.6

AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDSTO THE STATEMENT OF ACTIVITIESFor the Year Ended December 31, 2018

Net change in fund balances - total governmental funds 1,132,995$

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

Governmental funds report capital outlays as expenditures. However, in the statement of activities,the cost of these assets is allocated over their estimated useful lives and reported as depreciationexpense. The following differ in their presentation in the two statements:

Certain expenditures charged to the functional areas were capitalized 2,367,945 Depreciation is reported in the government-wide statements (2,195,445) In the statement of activities, only the gain or loss on the disposal of capital assets is reported. (5,748)

Delinquent taxes, special assessments, and certain other receivables are reported as unavailablerevenue in the fund financial statements but are recognized as revenue when earned in the government-wide financial statements. This is the amount recognized as revenue on the fundstatements that was recognized in the government-wide statements in prior years.

Taxes receivable (4,469) Special assessments receivable (75,204) Due from other governments (170,071)

Debt issued provides current financial resources in the governmental funds, but issuing debtincreases long-term liabilities in the statement of net position. Repayment of debt principalis an expenditure in the funds, but the repayment reduces long-term liabilities in thestatement of net position.

Principal repaid 527,615

Bond premiums are reported as revenue in the fund financial statements, but are capitalized in thegovernment-wide statements and amortized over the life of the related debt. 9,666

Some expenses in the statement of activities do not require the use of current financialresources and, therefore, are not reported as expenditures in the fund financial statements.The following did not require the use of current financial resources:

Change in capital lease payable 14,981 Change in accrued interest payable 1,642 Change in compensated absences (38,107) Net pension liability (and pension related deferred outflows/inflows of resources) 228,076

The change in inventory value is reported as a change in fund balance in the fund financial

statements, but is a change in expense in the government-wide statements. (13,165)

CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES 1,780,711$

STEVENS COUNTY

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES

See accompanying notes to financial statements.7

STEVENS COUNTY

STATEMENT OF ASSETS AND LIABILITIES - AGENCY FUNDS

As of December 31, 2018

AgencyFunds

ASSETS Cash and investments 437,651$

Total Assets 437,651$

LIABILITIES Accounts payable 6,768$ Due to other governments 430,883

Total Liabilities 437,651$

See accompanying notes to financial statements.8

9

STEVENS COUNTY

INDEX TO NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

NOTE Page I. Summary of Significant Accounting Policies 10 A. Reporting Entity 10 B. Government-Wide and Fund Financial Statements 10 C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation 13 D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity 14 1. Deposits and Investments 14 2. Receivables 16 3. Inventories and Prepaid Items 16 4. Capital Assets 17 5. Deferred Outflows of Resources 17 6. Compensated Absences 18 7. Long-Term Obligations 18 8. Deferred Inflows of Resources 18 9. Equity Classifications 19 10. Pension 20 II. Stewardship, Compliance, and Accountability 21 A. Budgetary Information 21 B. Excess Expenditures Over Appropriations 21 III. Detailed Notes on All Funds 22

A. Deposits and Investments 22 B. Receivables 26 C. Capital Assets 27 D. Interfund Receivables/Payables and Transfers 28 E. Long-Term Obligations 29 F. Net Position 32 IV. Other Information 32 A. Employees’ Retirement System 32 B. Risk Management 41 C. Commitments and Contingencies 42 D. Joint Ventures 42 E. Jointly-Governed Organizations 50 F. Effect of New Accounting Standards on Current Period Financial Statements 52

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

10

NOTE I – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of Stevens County, Minnesota (the county) conform to accounting principles generally accepted in the United States of America as applicable to governmental units. The accepted standard-setting body for establishing governmental accounting and financial reporting principles is the Governmental Accounting Standards Board (GASB). A. REPORTING ENTITY The county was established February 20, 1862, and is an organized county having the powers, duties, and privileges granted counties by Minn. Statute. ch. 373. The county is governed by a five-member Board of Commissioners elected from districts within the county. The Board is organized with a chair and vice chair elected at the annual meeting in January of each year. The report includes all of the funds of the county. The reporting entity for the county consists of the primary government and its component units. Component units are legally separate organizations for which the primary government is financially accountable or other organizations for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity’s financials statements to be misleading. The county has not identified any organizations that meet this criteria. Joint Ventures and Jointly-Governed Organizations The county participates in several joint ventures described in Note IV.D. The county also participates in jointly-governed organizations described in Note IV.E.

B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Government-Wide Financial Statements The statement of net position and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. All of the county’s activities are considered governmental activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. 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. The county does not allocate indirect expenses to functions in the statement of activities. Program revenues include: (1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment, and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported as general revenues. Internally dedicated resources are reported as general revenues rather than as program revenues.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE I – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements Financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts, which constitute its assets, deferred outflows of resources, liabilities, deferred inflows of resources, net position/fund equity, revenues, and expenditures/expenses. Funds are organized as major funds or nonmajor funds within the governmental fund statements. An emphasis is placed on major funds within the governmental categories. A fund is considered major if it is the primary operating fund of the county or meets the following criteria:

a. Total assets/deferred outflows of resources, liabilities/deferred inflows of resources, revenues, or expenditures of that individual governmental fund are at least 10% of the corresponding total for all governmental funds.

b. In addition, any other governmental fund that the county believes is particularly important to

financial statement users may be reported as a major fund. Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. The county reports the following major governmental funds:

General Fund – accounts for the county’s primary operating activities. It is used to account for and report all financial resources except those required to be accounted for in another fund.

Road and Bridge Special Revenue Fund – accounts for and reports resources restricted for,

committed to, or assigned to supporting expenditures for construction and maintenance of roads, bridges, and other projects affecting county roadways.

Human Services Special Revenue Fund – accounts for restricted revenue resources from the

federal, state, and other oversight agencies, as well as assigned property tax revenues used for economic assistance and community social services programs.

Solid Waste Special Revenue Fund – accounts for restricted special assessment revenues,

miscellaneous revenues, revenue resources from the state, and through an appropriation from the General Fund for the costs relating to disposal of the county’s solid waste.

Ditch Special Revenue Fund – accounts for special assessment revenues levied against

benefitted property to finance the cost of constructing and maintaining an agricultural drainage ditch system.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

12

NOTE I – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.)

Debt Service Fund – accounts for the accumulation of restricted resources used for, and the payment of principal, interest, and related costs.

In addition, the county reports the following fund types:

Agency Funds – used to account for and report assets held by the county as a trustee or agent for individuals, private organization, other governments, or other funds.

Adult Mental Health Drop-In Fund – accounts for the collection and disbursement of funds

used for the adult mental health drop-in center. Housing and Redevelopment Authority Fund – accounts for the payroll-related collections

and disbursements of the Housing and Redevelopment Authority. Mental Health Local Advisory Council Fund – accounts for the collection and disbursement of

funds used by the Mental Health Council to advise and educate the public about mental health issues.

School Districts Fund – accounts for the collection and payment of funds due to school

districts. Social Welfare Fund – accounts for the collection and disbursement of funds held on the

behalf of individuals in the Social Welfare program. State Revenue Fund – accounts for the state’s share of collections and the payment of those

collections to the state. Stevens County Family Services Collaborative Fund – accounts for the collection and

disbursement of funds used for prevention and early intervention services primarily provided by the schools and Public Health.

Taxes and Penalties Fund – accounts for the collection and payment of funds due to towns

and cities and special taxing districts. Towns and Cities Fund – accounts for the collection and payment of funds due to towns and

cities and special taxing districts. Watershed Fund – accounts for the collection and payments of funds due to the watershed

districts. West Central Special Weapons and Tactics Team Fund – accounts for the collection and

payment of funds due to the West Central S.W.A.T. team.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE I – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION

Government-Wide Financial Statements

The government-wide statement of net position and statement of activities are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. 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 are met. Special assessments are recorded as revenue when earned. Unbilled receivables are recorded as revenues when services are provided. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements.

Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recorded when they are both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the county considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on long-term debt, claims, judgments, compensated absences, and pension expenditures, which are recorded as a fund liability when expected to be paid with expendable available financial resources. Property taxes are recorded as receivables in the year levied. They are recognized as revenues when collected in the current year and in the first 60 days of the succeeding year. Intergovernmental aids and grants are recognized as revenues in the period the county is entitled to the resources and the amounts are available. Amounts owed to the county which are not available are recorded as receivables and unavailable revenues. Amounts received before eligibility requirements (excluding time requirements) are met are recorded as liabilities. Amounts received in advance of meeting time requirements are recorded as deferred inflows. Special assessments are recorded as revenues when they become measurable and available as current assets. Annual installments due in future years are reflected as receivables and unavailable revenues. Revenues susceptible to accrual include property taxes, miscellaneous taxes, public charges for services, special assessments, and interest. Other general revenues such as fines and forfeitures, inspection fees, recreation fees, and miscellaneous revenues are recognized when received in cash or when measurable and available under the criteria described above.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE I – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (cont.) All Financial Statements 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, deferred outflows of resources, liabilities, and deferred inflows of resources and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates.

D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY

1. Deposits and Investments Minnesota statutes authorize the County Board to designate a depository for public funds and to invest in certificates of deposit. Minnesota statutes require that all deposits be covered by insurance, surety bond, or collateral. 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. Investments are limited to:

> Bonds, notes, bills, mortgages, 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 Congress.

> State and local securities that meet specified bond ratings by a national rating service.

> 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.

> Mutual fund through shares of registered investment companies provided the mutual fund receives certain ratings depending on its investments.

> Banker’s acceptances of United States banks.

The county has adopted an investment policy. This policy follows the state statutes for allowable investments.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE I – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.)

1. Deposits and Investments (cont.)

Custodial Credit Risk The county will obtain collateral or bond for all uninsured amounts on deposit and will obtain necessary documentation to show compliance with state law and a perfected security interest under federal law. For investments, the county’s policy is to permit brokers that obtained investments for the county to hold them only to the extent Securities Investor Protection Corporation (SIPC) coverage and excess SIPC coverage are available. Securities purchased that exceed available SIPC coverage shall be transferred to the county’s custodian.

Credit Risk The county will only invest in securities that meet the ratings requirements set by state statute.

Concentration of Credit Risk

The county will diversify the investment portfolio so that the impact of potential losses from any one type of security or issuer will be minimized. The county will not create a greater than 33% holding in any one issuer. Typically, the county invests in U.S. Treasury securities, U.S. agency securities, and obligations backed by the U.S. Treasury and/or U.S. agency securities which may be held without limit.

Interest Rate Risk

The county will: (1) structure the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities in the open market prior to maturity, and (2) invest operating funds primarily in shorter-term securities, liquid asset funds, money market mutual funds, or similar investment pools and limit the average maturity in accordance with the county’s cash requirements. Investments are generally stated at fair value, which is the amount at which an investment could be exchanged in a current transaction between willing parties. Fair values are based on methods and inputs as outlined in Note III.A. Adjustments necessary to record investments at fair value are recorded in the operating statement as increases or decreases in investment income. Investment income on commingled investments is allocated based on average balances except for those investments that are restricted in accordance with generally accepted accounting principles and a portion of the ditch funds. See Note III.A for further information.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE I – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES,

AND NET POSITION OR EQUITY (cont.)

2. Receivables

The county levies and collects property taxes and special assessments for all governmental units within the county. Property tax collections and payments to other governmental units are accounted for in agency funds. The county is required to distribute the collections to the various governmental units three times each year on a schedule prescribed in Minn. Statute 276. Property taxes are levied as of January 1 on property values assessed as of the same date. The tax levy notice is mailed in March with the first half payment due May 15 and second half payment due October 15. Unpaid taxes at December 31 become liens on the respective property and are classified in the financial statements as delinquent taxes receivable. No allowance for uncollectible delinquent taxes has been provided because of the county’s demonstrated ability to recover any losses through the sale of the applicable property. Advances between funds, as reported in the fund financial statements, are offset by nonspendable fund balance in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. During the course of operations, transactions occur between individual funds that may result in amounts owed between funds. Short-term interfund loans are reported as “due to and from other funds.” Long-term interfund loans (noncurrent portion) are reported as “advances from and to other funds.” Interfund receivables and payables between funds within governmental activities are eliminated in the statement of net position. It is the county’s policy to record unavailable revenue for the net amount of the notes receivable balances. As loans are repaid, revenue is recognized. When new loans are made from the repayments, expenditures are recorded. Interest received from loan repayments is recognized as revenue when received in cash. Any unspent loan repayments at year-end are presented as restricted fund balance in the fund financial statements. 3. Inventories and Prepaid Items

Inventory is valued at cost based on first-in, first-out and consists of supplies held for consumption. Reported inventories are offset by nonspendable fund balance in the fund financial statements to indicate they are not available, spendable resources. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE I – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.)

4. Capital Assets Government –Wide Statements Capital assets, which include property, plant, equipment, and infrastructure assets (such as roads, bridges, sidewalks, and similar items), are reported in the government-wide financial statements. Capital assets are defined by the county as assets with an estimated useful life in excess of two years and an initial cost of $5,000 or more. All capital assets are valued at historical cost, or estimated historical cost if actual amounts are unavailable. Donated capital assets are recorded at their estimated fair value at the date of donation. Depreciation of all exhaustible capital assets is recorded as an allocation expense in the statement of activities, with accumulated depreciation reflected in the statement of net position. Depreciation is provided over the assets’ estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is as follows: Improvements other than buildings 5-40 Years Buildings and building improvements 5-40 Years Machinery, equipment, and vehicles 3-20 Years Infrastructure 20-80 Years Fund Financial Statements In the fund financial statements, capital assets used in governmental fund operations are accounted for as expenditures of the governmental fund upon acquisition. 5. Deferred Outflows of Resources A deferred outflow of resources represents a consumption of net position/fund balance that applies to a future period and will not be recognized as an outflow of resources (expense/expenditure) until that future time.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE I – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 6. Compensated Absences Under terms of employment, employees are granted vacation, sick leave, and comp time balances in varying amounts. Only benefits considered to be vested are disclosed in these statements. All vested vacation, sick leave, and comp time pay is accrued when incurred in the government-wide financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements, and are payable with expendable available resources. Payments for vacation, sick leave, and comp time will be made at rates in effect when the benefits are used. Accumulated vacation, sick leave, and comp time liabilities at December 31, 2018 are determined on the basis of current salary rates and include salary related payments. 7. Long-Term Obligations All long-term obligations to be repaid from governmental resources are reported as liabilities in the government-wide statements. The long-term obligations consist primarily of bonds payable, loans payable, capital leases, accrued compensated absences, and net pension liability. Long-term obligations for governmental funds are not reported as liabilities in the fund financial statements. The face value of debts (plus any premiums) are reported as other financing sources and payments of principal and interest are reported as expenditures. For the government-wide statements, bond premium and discounts are amortized over the life of the issue using the straight-line method. The balance at year-end is shown as an increase or a decrease in the liability section of the statement of net position. 8. Deferred Inflows of Resources A deferred inflow of resources represents an acquisition of net position that applies to a future period and therefore will not be recognized as an inflow of resources (revenue) unit that future time.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE I – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 9. Equity Classifications

Government–Wide Statements

Equity is classified as net position and displayed in three components:

a. Net Investment in capital assets – Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances (excluding unspent bond proceeds) of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets.

b. Restricted net position – Consists of net position with constraints placed on their use either by: (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments, or (2) law through constitutional provisions or enabling legislation.

c. Unrestricted net position – All other net position that does not meet the definition of “restricted” or “net investment in capital assets.”

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

Fund Statements Governmental fund equity is classified as fund balance and displayed as follows:

a. Nonspendable – Includes fund balance amounts that cannot be spent either because they are not in spendable form or because legal or contractual requirements require them to be maintained intact.

b. Restricted – Consists of fund balances with constraints placed on their use either by: (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments, or (2) law through constitutional provisions or enabling legislation.

c. Committed – Includes fund balance amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the highest level of decision-making authority. Fund balance amounts are committed through a formal action (resolution) of the County Board. This formal action must occur prior to the end of the reporting period, but the amount of the commitment, which will be subject to the constraints, may be determined in the subsequent period. Any changes to the constraints imposed required the same formal action of the County Board that originally created the commitment.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE I – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION OR EQUITY (cont.) 9. Equity Classifications (cont.)

Fund Statements (cont.)

d. Assigned – Includes spendable fund balance amounts that are intended to be used for specific purposes that are not considered restricted or committed. Fund balance may be assigned through the following: (1) The County Board or the County Auditor/Treasurer, who has been delegated that authority by Board resolution, can assign amounts for a specific purpose, or (2) All remaining positive spendable amounts in governmental funds, other than the general fund, that are neither restricted nor committed. Assignments may take place after the end of the reporting period.

e. Unassigned – Includes residual positive fund balance within the general fund which has not been classified within the other above mentioned categories. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted, committed, or assigned for those purposes.

The county considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available unless there are legal documents / contracts that prohibit doing this, such as in grant agreements requiring dollar for dollar spending. Additionally, the county would first use committed, then assigned and lastly unassigned amounts of unrestricted fund balance when expenditures are made. The county has adopted a minimum fund balance policy for the General Fund. The General Fund is heavily reliant on property tax revenues to fund current operations. However, current property tax revenues are not available for distribution until June. Therefore, the County Board has determined that the General Fund should maintain a minimum unrestricted fund balance (committed, assigned, and unassigned) of no less than $1,500,000. 10. Pension For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA’s fiduciary net position have been determined on the same basis as they are reported by PERA, except that PERA’s fiscal year-end is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments, and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE II – STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

A. BUDGETARY INFORMATION A budget has been adopted for the general fund, certain special revenue funds, and the debt service fund. A budget has not been formally adopted for the ditch special revenue fund. B. EXCESS EXPENDITURES OVER APPROPRIATIONS

The following individual funds had 2018 expenditures in excess of appropriations: Budgeted Actual Excess

Fund Expenditures Expenditures Expenditures General Fund $ 6,321,209 $ 6,618,472 $ 297,263 Human Services 3,362,925 3,371,177 8,252 Solid Waste 136,100 141,028 4,928 Debt Service 522,818 523,317 499 The county controls expenditures at the fund level. Some individual departments experienced expenditures which exceeded appropriations. The detail of those items can be found in the county’s year-end budget to actual report.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE III – DETAILED NOTES ON ALL FUNDS

A. DEPOSITS AND INVESTMENTS The county maintains a cash and investment pool that is available for use by all funds. Each fund’s portion in this pool is displayed on the statement of net position and balance sheet as cash and investments. In addition, investments are separately held by several of the county’s funds. The county’s cash and investments at year-end were comprised of the following: Carrying Bank Associated Value Balance Risks Demand deposits $ 2,696,489 $ 2,900,308 Custodial credit Money market 512,352 513,318 Custodial credit U.S. agencies – explicitly guaranteed 72,355 72,355 Custodial credit, interest rate U.S. agencies – implicitly guaranteed 628,329 628,329 Custodial credit, interest rate, credit, concentration of credit State and local bonds 1,425,737 1,425,737 Custodial credit, interest rate, credit, concentration of credit Negotiable certificates of deposit 7,505,321 7,505,321 Custodial credit, interest rate, credit, concentration of credit Petty cash 5,800 - N/A

Total Cash and Investments $ 12,846,383 $ 13,045,368

Reconciliation to financial statements Per statement of net position Cash and investments $ 12,408,732 Per statement of assets and liabilities -

Agency Funds 437,651

Total Cash and Investments $ 12,846,383 Deposits in each local and area bank are insured by the FDIC in the amount of $250,000 for time and savings accounts (including NOW accounts) and $250,000 for demand deposit amounts (interest-bearing and noninterest bearing). In addition, if deposits are held in an institution outside of the state in which the government is located, insured amounts are further limited to a total of $250,000 for the combined amount of all deposits. The Securities Investor Protection Corporation (SIPC), created by the Securities Investor Protection Act of 1970, is an independent government-sponsored corporation (not an agency of the U.S. government). SIPC membership provides account protection up to a maximum of $500,000 per customer, of which $250,000 may be in cash.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE III – DETAILED NOTES ON ALL FUNDS (cont.)

A. DEPOSITS AND INVESTMENTS (cont.) Deposits in accounts at Bremer Bank are also secured by a $10,000,000 Federal Home Loan Bank letter of credit. The county categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The valuation methods for recurring fair value measurements are as follows:

> U.S. Agencies – explicitly and implicitly guaranteed and negotiable certificates of deposit: Matrix pricing based on the securities’ relationship to benchmark quoted prices.

> State and local bonds: Market approach using quoted prices for similar assets in active markets.

December 31, 2018 Investment Type Level 1 Level 2 Level 3 Total

U.S. agencies –

explicitly guaranteed $ -

$ 72,355

$ -

$ 72,355U.S. agencies –

implicitly guaranteed -

628,329

-

628,329State and local bonds - 1,425,737 - 1,425,737Negotiable certificates deposit

-

7,505,321

-

7,505,321 Totals $ - $ 9,631,742 $ - $ 9,631,742

Custodial Credit Risk

Deposits – Custodial credit risk is the risk that in the event of a financial institution failure, the county’s deposits may not be returned to the county. The county does not have any deposits exposed to custodial credit risk. Investments – For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the county will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The county does not have any investments exposed to custodial credit risk.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE III – DETAILED NOTES ON ALL FUNDS (cont.)

A. DEPOSITS AND INVESTMENTS (cont.)

Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. As of December 31, 2018, the county’s investments were rated as follows:

Investment Type

Credit Rating

Rating Agency

Federal Farm Credit Bureau AA+ S & P Federal National Mortgage Association (31358BAA6) Not rated n/a Federal National Mortgage Association (3136G05J6) AA+ S & P Connecticut State GO Bonds A S & P El Paso, Texas Bonds Aa2 Moody’s Florida Hurricane Catastrophe Fund Bonds AA S & P Indianapolis, Indiana Bonds AA+ S & P Mountain View California School District Bonds AA S & P State of South Carolina Public Service Authority Bonds A+ S & P State of Wisconsin Bonds AA- S & P

In addition, the county has various investments in explicitly guaranteed U.S. agency investments and negotiable certificates of deposit that are not rated.

Concentration of Credit Risk The concentration of credit risk is the risk of loss attributed to the magnitude of the county’s investment in a single issuer. At December 31, 2018, the investment portfolio was concentrated as follows:

Issuer Investment Type % of Portfolio Federal Farm Credit Bureau U.S. agencies – implicitly guaranteed 5.03%

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE III – DETAILED NOTES ON ALL FUNDS (cont.)

A. DEPOSITS AND INVESTMENTS (cont.)

Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the value of an investment. As of December 31, 2018, information related to the county’s potential investment risks were as follows:

Maturity (In Years)

Investment Type

Fair Value Less than 1

Year

1 – 5 Years

5+ Years U.S. agencies –

explicitly guaranteed $ 72,355

$ -

$ 9,056 $ 63,299 U.S. agencies –

implicitly guaranteed 628,329 69,857

73,602

484,870State and local bonds 1,425,737 - 1,283,397 142,340Negotiable certificates deposit 7,505,321

1,771,108

5,256,576

477,637

Totals $ 9,631,742 $ 1,840,965 $ 6,622,631 $ 1,168,146

See Note I.D.1 for further information on deposit and investment policies.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE III – DETAILED NOTES ON ALL FUNDS (cont.)

B. RECEIVABLES

Receivables as of December 31, 2018, for the county’s individual major funds are as follows:

Fund

Receivables and Due From

Other Governments

Amounts Not Expected to Be

Collected Within

One Year

General Fund $ 200,384 $ -Road and Bridge 986,020 -Human Services 281,453 -Solid Waste 21,357 16,309Ditch 666,538 598,823Debt Service 1,479 -

Total Governmental Funds $ 2,157,231 $ 615,132

Governmental funds report unearned or unavailable revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of unearned and unavailable revenue reported in the governmental funds were as follows:

Unearned Unavailable

Taxes receivable $ - $ 20,590 Due from other governments - 977,103Special assessments receivable - 684,948Grants received but not earned 81,612 - Total Unearned/Unavailable Revenue for

Governmental Funds $ 81,612 $ 1,682,641

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

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NOTE III – DETAILED NOTES ON ALL FUNDS (cont.)

C. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2018 was as follows:

Beginning Ending Balance Additions Deletions Balance

Capital Assets Not Being Depreciated Land $ 250,018 $ - $ - $ 250,018 Right of way 1,026,600 - - 1,026,600 Construction in progress 18,377 8,951 6,545 20,783

Total Capital Assets Not Being Depreciated $ 1,294,995 $ 8,951 $ 6,545 $ 1,297,401

Capital assets Being Depreciated

Improvements other than buildings $ 130,101 $ 18,711 $ - $ 148,812 Building improvements 99,795 - - 99,795 Buildings 13,151,657 - - 13,151,657 Machinery, furniture and equipment 6,777,609 395,120 338,466 6,834,263 Infrastructure 49,143,011 1,951,708 - 51,094,719

Total Capital Assets Being Depreciated 69,302,173 2,365,539 338,466 71,329,246

Less: Accumulated Depreciation for:

Improvements other than buildings 94,835 7,519 - 102,354 Building improvements 20,796 17,039 - 37,835 Buildings 4,121,352 291,985 - 4,413,337 Machinery, furniture and equipment 4,800,457 459,674 332,718 4,927,413 Infrastructure 20,708,597 1,419,228 - 22,127,825

Total Accumulated Depreciation 29,746,037 2,195,445 332,718 31,608,764

Net Capital Assets Being

Depreciated 39,556,136 170,094 5,748 39,720,482

Total Governmental Activities

Capital Assets, Net of Depreciation $ 40,851,131 $ 179,045 $ 12,293 $ 41,017,883

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

28

NOTE III – DETAILED NOTES ON ALL FUNDS (cont.)

C. CAPITAL ASSETS (cont.)

Depreciation expense was charged to functions as follows: Governmental Activities

General government $ 352,537Public safety 103,721Highways and streets, including depreciation of infrastructure assets 1,728,529Sanitation 251Human services 10,407

Total Governmental Activities Depreciation Expense $ 2,195,445

D. INTERFUND RECEIVABLES/PAYABLES AND TRANSFERS

Interfund Receivables/Payables The following is a schedule of interfund receivables and payables including any overdrafts on pooled cash and investment accounts:

Receivable Fund Payable Fund Amount General Fund Human Services $ 1,360 Road and Bridge General Fund 1,226 Road and Bridge Ditch 4,745

Subtotal - Fund financial statements 7,331

Less: Fund eliminations (7,331) Total - Government-Wide Statement of Net Position $ -

All amounts are expected to be repaid within one year. These interfunds resulted 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.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

29

NOTE III – DETAILED NOTES ON ALL FUNDS (cont.)

D. INTERFUND RECEIVABLES/PAYABLES AND TRANSFERS (cont.)

Transfers The following is a schedule of interfund transfers: Fund Transferred To Fund Transferred From Amount Principal Purpose General Fund Road and Bridge $ 27,908 Transfer interest earned General Fund Human Services 18,254 Transfer interest earned General Fund Debt Service 1,821 Transfer interest earned General Fund Solid Waste 2,330 Transfer interest earned General Fund Solid Waste 127,941

Provide funding for recycling activities

Subtotal - Fund Financial Statements 178,254

Less: Fund eliminations (178,254)

Total - Government-Wide Statement of Activities $ -

Generally, transfers are used to: (1) move revenues from the fund that collects them to the fund that the budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund, and (3) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations.

E. LONG-TERM OBLIGATIONS Long-term obligations activity for the year ended December 31, 2018 was as follows:

Beginning Balance Increases Decreases

Ending Balance

Amounts Due Within One Year

Bonds Payable

General obligation bonds $ 7,575,000 $ - $ 525,000 $ 7,050,000 $ 540,000 Plus: Unamortized bond premium 133,242 - 9,666 123,576 -

Subtotals 7,708,242 534,666 7,173,576 540,000 Other Liabilities

Loans payable 27,200 - 2,615 24,585 2,667 Capital lease 14,974 - 14,974 - - Net pension liability 4,822,417 80,730 786,455 4,116,692 - Compensated absences 527,804 469,858 431,751 565,911 134,999

Total Long-Term Liabilities $ 13,100,637 $ 550,588 $ 1,770,461 $ 11,880,764 $ 677,666

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

30

NOTE III – DETAILED NOTES ON ALL FUNDS (cont.)

E. LONG-TERM OBLIGATIONS (cont.)

General Obligation Bonds

All general obligation bonds payable are backed by the full faith and credit of the county. General obligation bonds will be retired by future property tax levies accumulated by the debt service fund and by future ditch special assessments accumulated by the ditch special revenue fund. In accordance with Minnesota Statutes, net indebtedness of the county may not exceed 3% of the market value of taxable property within the county's jurisdiction. The debt limit as of December 31, 2018, was $71,420,942. General obligation debt outstanding at year-end subject to the debt limit was $7,050,000. General obligation debt payable for the county at December 31, 2018, consists of the following:

General Obligation Bonds Date of Issue

Final Maturity

Interest Rates

Original Indebtedness

Balance December 31,

2018

Drainage Bonds 2014 2030 2.0 – 3.5% $ 1,980,000 $ 1,635,000 Capital Improvement Plan

Bonds

2016

2030

1.6 – 2.1% 6,190,000 5,415,000

$ 7,050,000

Debt service requirements to maturity are as follows:

General Obligation Drainage

Bonds, Series 2014A

General Obligation Capital Improvement Plan Bonds, Series

2016A Year Ending December 31

Principal

Interest

Principal

Interest

2019 $ 120,000 $ 42,275 $ 420,000 $ 104,6172020 120,000 39,875 425,000 96,2182021 120,000 37,475 435,000 87,7172022 125,000 35,025 450,000 79,0182023 130,000 32,150 455,000 70,017

2024 - 2028 700,000 107,788 2,465,000 217,2152029 - 2030 320,000 11,375 765,000 20,580

Total $ 1,635,000 $ 305,963 $ 5,415,000 $ 675,382

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

31

NOTE III – DETAILED NOTES ON ALL FUNDS (cont.)

E. LONG-TERM OBLIGATIONS (cont.)

Prior-Year Defeaseance of Debt

On August 16, 2016, the county defeased certain general obligation bonds by placing the proceeds of the new bonds and additional county contributions in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the county’s financial statements. At December 31, 2018, $5,665,000 of bonds outstanding are considered defeased. The bonds will mature when they are called on February 1, 2020.

Loans Payable The county has entered into loan agreements with the Minnesota Pollution Control Agency for the financing of clean water projects. The loans are secured by special assessments placed on the individual parcels requesting funding of a project. Loan payments will be reported in the solid waste special revenue fund. Loans payable for the county at December 31, 2018, consists of the following:

Loans Payable Date of Issue

Final Maturity

Interest Rates

Original Indebtedness

Balance December 31,

2018

Pomme de Terre River Watershed 2014 2027 2.0% $ 27,200 * $ 24,585

* Loan is authorized for up to $100,000. The county has drawn $27,200 as of December 31, 2018. Debt service requirements to maturity are as follows:

Year Ending December 31 Principal Interest

2019 $ 2,667 $ 507 2020 2,721 454 2021 2,776 399 2022 2,831 343 2023 2,888 286

2024 - 2027 10,702 553

Total $ 24,585 $ 2,542

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

32

NOTE III – DETAILED NOTES ON ALL FUNDS (cont.)

E. LONG-TERM OBLIGATIONS (cont.)

OTHER DEBT INFORMATION

Estimated payments of compensated absences and net pension liability are not included in the debt service requirement schedules. These liabilities will be liquidated by the general fund, road and bridge fund, and human services fund. There are a number of limitations and restrictions contained in the general obligation bond agreements. The county believes it is in compliance with all significant limitations and restrictions, including federal arbitrage regulations.

F. NET POSITION Net position reported on the government wide statement of net position at December 31, 2018 includes the following: Net Investment in Capital Assets Construction in progress $ 20,783 Land 1,276,618 Other capital assets, net of accumulated depreciation 39,720,482 Less: Capital related long-term debt outstanding (including premium) (5,527,133)

$ 35,490,750

NOTE IV – OTHER INFORMATION

A. EMPLOYEES’ RETIREMENT SYSTEM Public Employees Retirement Association (PERA) Plan Description. The county participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension 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.

1. General Employees Retirement Plan

All full-time and certain part-time employees of the county are covered by the General Employees Plan. General Employees Plan members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

33

NOTE IV – OTHER INFORMATION (cont.)

A. EMPLOYEES’ RETIREMENT SYSTEM (cont.) Public Employees Retirement Association (PERA) (cont.) Plan Description (cont.)

2. Public Employees Police and Fire Plan The Police and Fire Plan, originally established for police officers and firefighters not covered by a local relief association, now covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the Police and Fire Plan also covers police officers and firefighters belonging to local relief associations that elected to merge with and transfer assets and administration to PERA. Benefits. PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only be modified by the state Legislature. Vested, terminated employees who are entitled to benefits, but are not receiving them yet, are bound by the provisions in effect at the time they last terminated their public service.

1. General Employees Plan Benefits General Employees Plan benefits are based on a member’s highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated Plan members. Members hired prior to July 1, 1989, receive the higher of Method 1 or Method 2 formulas. Only Method 2 is used for members hired after June 30, 1989. Under Method 1, the accrual rate for Coordinated members is 1.2% of average salary for each of the first 10 years of service and 1.7% of average salary for each additional year. Under Method 2, the accrual rate for Coordinated members is 1.7% of average salary for all years of service. For 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. Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. General Employees Plan benefit recipients receive a future annual 1.0% increase. If the General Employees Plan is at least 90% funded for two consecutive years, the benefit increase will revert to 2.5%. If, after reverting to a 2.5% benefit increase, the funding ratio declines to less than 80% for one year or less than 85% for two consecutive years, the benefit increase will decrease to 1.0%. A benefit recipient who has been receiving a benefit for at least 12 full months as of June 30, will receive a full increase. Members receiving benefits for at least one month but less than 12 full months as of June 30, will receive a pro rata increase.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

34

NOTE IV – OTHER INFORMATION (cont.)

A. EMPLOYEES’ RETIREMENT SYSTEM (cont.) Public Employees Retirement Association (PERA) (cont.) Benefits (cont.)

2. Police and Fire Plan Benefits Benefits for Police and Fire Plan members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50% after five years up to 100% after ten years of credited service. Benefits for Police and Fire Plan members first hired after June 30, 2014, vest on a prorated basis from 50% after ten years up to 100% after twenty years of credited service. The annuity accrual rate is 3% of average salary for each year of service. A full, unreduced pension is earned when members are age 55 and vested, or for members who were first hired prior to July 1, 1989, when age plus years of service equal at least 90. Benefit increases are provided to benefit recipients each January. Police and Fire Plan benefit recipients receive a future annual 1.0% increase. The annual adjustment will equal 2.5% any time the plan exceeds a 90% funded ratio for two consecutive years. If the adjustment is increased to 2.5% and the funded ratio falls below 80% for one year or 85% for two consecutive years, the post-retirement benefit increase will be lowered to one percent. A benefit recipient who has been receiving a benefit for at least 12 full months as of June 30 will receive a full increase. Members receiving benefits for at least one month but less than 12 full months as of June 30 will receive a pro rata increase. For retirements after May 31, 2014, the first increase will be delayed two years. Contributions. Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state Legislature.

1. General Employees Fund Contributions Coordinated Plan members were required to contribute 6.50% of their annual covered salary in fiscal year 2018 and the county was required to contribute 7.50% for Coordinated Plan members. The county’s contributions to the General Employees Fund for the year ended December 31, 2018 were $309,927. The county’s contributions were equal to the required contributions as set by state statute.

2. Police and Fire Fund Contributions Plan members were required to contribute 10.80% of their annual covered salary and the county was required to contribute 16.20% of pay for members in fiscal year 2018. The county’s contributions to the Police and Fire Fund for the year ended December 31, 2018, were $80,092. The county’s contributions were equal to the required contributions as set by state statute.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

35

NOTE IV – OTHER INFORMATION (cont.) A. EMPLOYEES’ RETIREMENT SYSTEM (cont.)

Public Employees Retirement Association (PERA) (cont.)

Pension Costs

1. General Employees Fund Pension Costs

At December 31, 2018, the county reported a liability of $3,583,743 for its proportionate share of the General Employees Fund’s net pension liability. The county’s net pension liability reflected a reduction due to the State of Minnesota’s contribution of $16 million to the fund in 2018. The State of Minnesota is considered a non-employer contributing entity and the state’s contribution meets the definition of a special funding situation. The State of Minnesota’s proportionate share of the net pension liability associated with the county totaled $117,520. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The county’s proportionate share of the net pension liability was based on the county’s contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2017 through June 30, 2018, relative to the total employer contributions received from all of PERA’s participating employers. At June 30, 2018, the county’s proportionate share was .0646% which was a decrease of .0010% from its proportionate share measured as of June 30, 2017.

County’s proportionate share of the net pension liability $ 3,583,7437 State of Minnesota’s proportionate share of the net

pension liability associated with the county 117,520

Total $ 3,701,263

For the year ended December 31, 2018, the county recognized pension expense of ($53,630) for its proportionate share of the General Employees Plan’s pension expense. In addition, the county recognized an additional $27,405 as pension expense (and grant revenue) for its proportionate share of the State of Minnesota’s contribution of $16 million to the General Employees Fund.

At December 31, 2018, the county 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:

Deferred Outflows of Resources

Deferred Inflows of

Resources

Differences between expected and actual economic experience $ 96,259 $ 105,978

Changes in actuarial assumptions 347,107 406,938 Net collective difference between projected and actual

investment earnings - 361,695Changes in proportion 4,060 113,958Contributions paid to PERA subsequent to the

measurement date 157,193 -

Total $ 604,619 $ 988,569

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

36

NOTE IV – OTHER INFORMATION (cont.)

A. EMPLOYEES’ RETIREMENT SYSTEM (cont.) Public Employees Retirement Association (PERA) (cont.) Pension Costs (cont.)

1. General Employees Fund Pension Costs (cont.) The $157,193 reported as deferred outflows of resources related to pensions resulting from county contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2019. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ended December 31:

2019 $ 52,379 2020 (209,265) 2021 (309,459) 2022 (74,798)

2. Police and Fire Fund Pension Costs

At December 31, 2018, the county reported a liability of $532,949 for its proportionate share of the Police and Fire Fund’s net pension liability. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The county’s proportionate share of the net pension liability was based on the county’s contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2017 through June 30, 2018, relative to the total employer contributions received from all of PERA’s participating employers. At June 30, 2018, the county’s proportionate share was .0500% which was an increase of .0030% from its proportionate share measured as of June 30, 2017. The county also recognized $4,500 for the year ended December 31, 2018, as revenue and an offsetting reduction of net pension liability for its proportionate share of the State of Minnesota’s on-behalf contributions to the Police and Fire Fund. Legislation passed in 2013 required the State of Minnesota to begin contributing $9 million to the Police and Fire Fund each year, starting in fiscal year 2014, until the plan is 90% funded or until the State Patrol Plan (administered by the Minnesota State Retirement System) is 90% funded, whichever occurs later. For the year ended December 31, 2018, the county recognized pension expense of $23,441 for its proportionate share of the Police and Fire Plan’s pension expense.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

37

NOTE IV – OTHER INFORMATION (cont.)

A. EMPLOYEES’ RETIREMENT SYSTEM (cont.) Public Employees Retirement Association (PERA) (cont.) Pension Costs (cont.)

2. Police and Fire Fund Pension Costs (cont.)

At December 31, 2018, the county 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: Deferred Outflows

of Resources Deferred Inflows of

Resources Differences between expected and actual economic

experience $ 20,735

$ 110,565

Change of actuarial assumptions 556,573 738,566Net collective difference between projected and actual

investment earnings -

124,011Changes in proportion 167,526 9,281Contributions paid to PERA subsequent to the

measurement date 40,694 -

Total $ 785,528 $ 982,423

The $40,694 reported as deferred outflows of resources related to pensions resulting from county contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2019. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ended December 31:

2019 $ (2,398) 2020 (23,679) 2021 (54,750) 2022 (161,752)2023 4,990

Total Pension Expense

The total pension expense for all plans recognized by the county for the year ended December 31, 2018, was ($2,784).

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

38

NOTE IV – OTHER INFORMATION (cont.)

A. EMPLOYEES’ RETIREMENT SYSTEM (cont.) Public Employees Retirement Association (PERA) (cont.) Actuarial Assumptions

The total pension liability in the June 30, 2018, actuarial valuation was determined using an individual entry-age normal actuarial cost method and the following actuarial assumptions:

Inflation 2.50% per year Active Member Payroll Growth 3.25% per year Investment Rate of Return 7.50%

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 to fit PERA’s experience. Cost of living benefit increases after retirement for retirees are assumed to be 1.25% per year for the General Employees Plan and 1.0% per year for the Police and Fire Plan Actuarial assumptions used in the June 30, 2018 valuation were based on the results of actuarial experience studies. The most recent six-year experience study in the General Employees Plan was completed in 2015. The most recent four-year experience study for Police and Fire Plan was completed in 2016. The following changes in actuarial assumptions and plan provisions occurred in 2018:

General Employees Fund

Changes in Actuarial Assumptions: The mortality projection scale was changed from MP-2015 to MP-2017. The assumed benefit increase was changed from 1.00% per year through 2044 and 2.50% per

year thereafter to 1.25% per year. Changes in Plan Provisions:

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 0.00%, effective January 1, 2019. Augmentation that has

already accrued for deferred members will still apply. Contribution stabilizer provisions were repealed. Post-retirement benefit increases were changed from 1.0% per year with a provision to increase

to 2.5% upon attainment of 90% funding ratio to 50% of the Social Security Cost of Living Adjustment, not less than 1.0% and not more than 1.5%, 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.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

39

NOTE IV – OTHER INFORMATION (cont.)

A. EMPLOYEES’ RETIREMENT SYSTEM (cont.) Public Employees Retirement Association (PERA) (cont.) Actuarial Assumptions (cont.)

Police and Fire Fund

Changes in Actuarial Assumptions: The mortality projection scale was changed from MP-2016 to MP-2017.

Changes in Plan Provisions:

Post-retirement benefit increases were 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 16.20% to 16.95% of pay, effective January 1, 2019

and 17.70% 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 0.00%, 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 State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long-term expected rate of return using a building-block method in which best-estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table:

Asset Class

Target Allocation Long-Term Expected

Real Rate of Return

Domestic Stocks 36% 5.10% International Stocks 17 5.30 Bonds (Fixed Income) 20 0.75 Alternative Assets (Private Markets) 25 5.90 Cash 2 0.00 Total 100%

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

40

NOTE IV – OTHER INFORMATION (cont.)

A. EMPLOYEES’ RETIREMENT SYSTEM (cont.) Public Employees Retirement Association (PERA) (cont.) Discount Rate. The discount rate used to measure the total pension liability in 2018 was 7.50%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net positions of the General Employees Fund and the Police and Fire Fund were projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Pension Liability Sensitivity. The following presents the county’s proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the county’s proportionate share of the net pension liability would be if it were calculated using a discount rate one percentage point lower or one percentage point higher than the current discount rate:

1% Decrease in Discount Rate

(6.50%)

Current Discount Rate

(7.50%)

1% Increase in Discount Rate

(8.50%) County’s proportionate share of the

General Employees Fund net pension liability: $ 5,824,041 $ 3,583,743 $ 1,734,441

County’s proportionate share of the

Police and Fire Fund net pension liability: $ 1,142,675 $ 532,949 $ 28,730

Pension Plan Fiduciary Net Position. Detailed information about each 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.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

41

NOTE IV – OTHER INFORMATION (cont.)

A. EMPLOYEES’ RETIREMENT SYSTEM (cont.)

Public Employees Defined Contribution Plan Five County commissioners and one employee of the county are covered by the Defined Contribution Plan, a multiple-employer deferred compensation plan administered by PERA. The Defined Contribution 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. Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota Statutes, Chapter 353D.03, specifies plan provisions, including the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5% of salary which is matched by the elected official's employer. For salaried employees contributions must be a fixed percentage of salary. Employer and employee contributions are combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2% of employer contributions and twenty-five hundredths of one percent (0.25%) of the assets in each member's account annually. Total contributions made by the county during fiscal year 2018 were:

Employee Employer Contribution amount $ 8,135 $ 8,135 Percentage of covered payroll 5% 5% Required Rate 5% 5%

B. RISK MANAGEMENT

The county is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors and omissions; injuries to employees; or natural disasters for which the county carries commercial insurance. To manage these risks, the county has entered into a joint powers agreement with other Minnesota counties to form the Minnesota Counties Intergovernmental Trust (MCIT). MCIT is a public entity risk pool currently operated as a common risk management and insurance program for its members. The county is a member of both the MCIT Workers’ Compensation and Property and Casualty Divisions. For all other risks, the county carries commercial insurance. There were no significant reductions in insurance from the prior year. The amount of settlements did not exceed insurance coverage for the past three fiscal years. The Workers’ Compensation Division of MCIT is self-sustaining based on the contributions charged, so that total contributions plus compounded earnings on these contributions will equal the amount needed to satisfy claims liabilities and expenses. MCIT participates in the Workers’ Compensation Reinsurance Association with coverage at $500,000 per claim in 2018. Should the MCIT Workers’ Compensation Division liabilities exceed assets, MCIT may assess the county in a method and amount to be determined by MCIT.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

42

NOTE IV – OTHER INFORMATION (cont.)

B. RISK MANAGEMENT (cont.)

The Property and Casualty Division of MCIT is self-sustaining, and the county pays an annual premium to cover current and future losses. MCIT carries reinsurance for its property lines to protect against catastrophic losses. Should the MCIT Property and Casualty Division liabilities exceed assets, MCIT may assess the county in a method and amount to be determined by MCIT.

C. COMMITMENTS AND CONTINGENCIES From time to time, the county is party to various other pending claims and legal proceedings. Although the outcome of such matters cannot be forecasted with certainty, it is the opinion of management and the county attorney that the likelihood is remote that any such claims or proceedings will have a material adverse effect on the county's financial position or results of operations. Claims and judgments are recorded as liabilities if all the conditions of Governmental Accounting Standards Board pronouncements are met. The liability and expenditure for claims and judgments are only reported in governmental fund types if it has matured. Claims and judgments are recorded in the government-wide statements as expenses when the related liabilities are incurred. The county has received federal and state grants for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursements to the grantor agency for expenditures disallowed under terms of the grants. Management believes such disallowances, if any, would be immaterial. In March 2019, the county entered into a contract for approximately $1,800,000 for highway construction projects.

D. JOINT VENTURES

LAND OF THE DANCING SKY AREA AGENCY ON AGING

The Land of the Dancing Sky Area Agency on Aging provides services to a 21-county service area. This is a partnership between the Northwest Regional Development Commission, the 5-county service area of Region 2, and the West Central Area Agency on Aging. This combined area on aging was established to administer all aspects of the Older Americans Act by providing programs to meet the needs of the elderly in the 21-county area. The Land of the Dancing Sky umbrella board meets quarterly to discuss and approve major items such as the area plan and dollar allocations, while the advisory councils and joint powers boards of the two area agencies on aging continue to meet monthly to make decisions affecting their local counties. During 2018, the county did not contribute any funds to the agency. Complete financial statements for the Land of the Dancing Sky Area Agency on Aging can be obtained from: Dancing Sky Area Agency on Aging, 109 South Minnesota Street, Warren, Minnesota 56762.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

43

NOTE IV – OTHER INFORMATION (cont.)

D. JOINT VENTURES (cont.)

HORIZON PUBLIC HEALTH

Horizon Public Health was formed pursuant to Minn. Stat. § 471.59 by Douglas, Grant, Pope, Stevens, and Traverse Counties. Horizon Public Health began official operation on January 1, 2015, as a five-county public health organization. The primary functions of the health service are to prevent illness and to promote efficiency and economy in the delivery of community health services. Control is vested in the Community Health Board, which is responsible for all duties as set forth in Minn. Stat. ch. 145A. The Board consists of 13 members composed of 11 County Commissioners and 2 community representatives. Financing is provided by federal and state grants and appropriations from member counties. The county’s contribution for 2018 was $87,534. Complete financial statements for Horizon Public Health can be obtained from: Horizon Public Health, 809 Elm Street, Suite 1200, Alexandria, Minnesota 56308.

RAINBOW RIDER TRANSIT BOARD Douglas, Grant, Pope, Stevens, and Traverse Counties entered into a joint powers agreement to establish the West Central Multi-County Joint Powers Transit Board effective December 1, 1994, and empowered under Minn. Stat. § 471.59. Effective January 13, 2000, the Board changed its name from West Central Multi-County Joint Powers Transit Board to Rainbow Rider Transit Board. The purpose of the Board is to provide coordinated service delivery and a funding source for public transportation. Grant County terminated its membership in Rainbow Rider on May 31, 1999. Grant County rejoined and Todd County became a member county effective January 1, 2011 and 2012, respectively. The Board consists of two members appointed by each member county from its County Board for terms of one year each. Rainbow Rider is a joint venture with no county having control over the Board. Each county has an ongoing responsibility to provide funding for the operating costs of the Board allocated in accordance with the actual expenses incurred by representatives of the respective counties on the Board. The joint powers agreement remains in force until any single county notifies the other parties of its intentions to withdraw, at least 90 days before the termination takes effect. The remaining counties may agree to continue the agreement with the remaining counties as members. During 2018, the county contributed $13,500 to Rainbow Rider. Complete financial information can be obtained from: Rainbow Rider, P.O. Box 136, Lowry, Minnesota 56349.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

44

NOTE IV – OTHER INFORMATION (cont.)

D. JOINT VENTURES (cont.)

PRIMEWEST RURAL MINNESOTA HEALTH CARE ACCESS INITIATIVE

The PrimeWest Central County-Based Purchasing Initiative (since renamed PrimeWest Rural Minnesota Health Care Access Initiative) was established in December 1998 by a joint powers agreement with Big Stone, Douglas, Grant, McLeod, Meeker, Pipestone, Pope, Renville, Stevens, and Traverse Counties under the authority of Minn. Stat. § 471.59. Beltrami, Clearwater, and Hubbard Counties were later added to the PrimeWest Rural Minnesota Health Care Access Initiative. Pipestone County has since joined Southwest Health and Human Services for public health and human services functions. The partnership is organized to directly purchase health care services for county residents who are eligible for Medical Assistance and General Assistance Medical Care as authorized by Minn. Stat. § 256B.692. County-based purchasing is the local control alternative favored for improved coordination of services to prepaid Medical Assistance programs in complying with Minnesota Department of Health requirements as set forth in Minn. Stat. chs. 62D and 62N. Control of the PrimeWest Rural Minnesota Health Care Access Initiative is vested in a Joint Powers Board, composed of two Commissioners from each member county (one active and one alternate). Each member of the Joint Powers Board is appointed by the County Commissioners of the county represented. In the event of termination of the joint powers agreement, all assets owned pursuant to this agreement shall be sold, and the proceeds, together with monies on hand, will be distributed to the current members based on their proportional share of each member’s county-based purchasing eligible population. Douglas County acts as fiscal agent for the PrimeWest Rural Minnesota Health Care Access Initiative and reports the cash transactions as an investment trust fund on its financial statements. Financing is provided by Medical Assistance and General Assistance Medical Care payments from the Minnesota Department of Human Services. During 2018, the county did not contribute any funds to the Joint Powers Board. Complete financial information can be obtained from its administrative office at: PrimeWest Rural Minnesota Health Care Access Initiative, 2209 Jefferson Street, Suite 101, Alexandria, Minnesota 56308.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

45

NOTE IV – OTHER INFORMATION (cont.)

D. JOINT VENTURES (cont.)

REGIONAL FITNESS CENTER

The county, along with the University of Minnesota, the City of Morris, and Independent School District 769, entered into a joint powers agreement under the authority of Minn. Stat. § 471.59 to establish and construct a Regional Fitness Center. Control of the Regional Fitness Center is vested in a Joint Powers Board, composed of one member of the County Board of Commissioners, four members from the University of Minnesota, one member of the Morris City Council, one member of the School Board, and one member from the community at large. In the event of termination of the joint powers agreement, any surplus monies generated by the operation of the Regional Fitness Center and any movable equipment shall be returned to the parties in proportion to their original contribution. The building, property, and all nonmovable equipment and fixtures shall belong to the University of Minnesota. Financing is provided by the 1998 Minnesota legislative appropriation of $2,500,000 to the University of Minnesota and contributions in the amount of $2,500,000 from the other parties to this agreement. The county’s share, $200,000, was paid over a period of five years. Operational and maintenance expenses will be covered by membership fees and other income generated by the Regional Fitness Center. During 2018, the county did not contribute any funds to the Regional Fitness Center. Complete financial information can be obtained from: Morris Area Schools, 201 South Columbia Avenue, Morris, Minnesota 56267.

POMME DE TERRE RIVER ASSOCIATION

The Pomme de Terre River Association Joint Powers Board was established August 11, 1981, by an agreement between the county and five other counties and their respective soil and water conservation districts. The agreement was made to develop and implement plans to protect property from damage of flooding; control erosion of land; protect streams and lakes from sedimentation and pollution; and maintain or improve the quality of water in the streams, lakes, and ground water lying within the boundaries of the watershed of the Pomme de Terre River. Administrative costs are apportioned equally to the soil and water conservation districts based on actual costs. An amended and restated Joint Powers Agreement was approved on March 19, 2013. Control is vested in a Joint Powers Board, comprising of one representative of each of the county Boards of Commissioners and one representative from each soil and water conservation district board of supervisors included within the agreement. During 2018, the county did not contribute any funds to the Joint Powers Board. Complete financial information can be obtained from: Pomme de Terre River Association Joint Powers Board, 900 Robert Street, Suite 104, Alexandria, Minnesota 56308.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

46

NOTE IV – OTHER INFORMATION (cont.)

D. JOINT VENTURES (cont.)

SUPPORTING HANDS NURSE FAMILY PARTNERSHIP BOARD

The Supporting Hands Nurse Family Partnership Board was established pursuant to Minn. Stat. §§ 145A.17 and 471.59 and a joint powers agreement, effective May 31, 2007. The Board is composed of one representative from each county to the agreement. The counties in the agreement are Big Stone, Chippewa, Douglas, Grant, Kandiyohi, Lac qui Parle, Lincoln, Lyon, McLeod, Meeker, Murray, Pipestone, Pope, Redwood, Renville, Rock, Stevens, Swift, Traverse, and Yellow Medicine. Southwest Health and Human Services represents Lincoln, Lyon, Murray, Pipestone, Redwood, and Rock Counties in this agreement. Horizon Public Health represents Douglas, Grant, Pope, Stevens, and Traverse Counties in this agreement. Countryside Public Health represents Big Stone, Chippewa, Lac qui Parle, Swift, and Yellow Medicine Counties in this agreement. The purpose of this agreement is to organize, govern, plan, and administer a multi-county based nurse family partnership program specifically within the jurisdictional boundaries of the counties involved. The governing board is composed of one Board member from each of the participating counties. Each participating county will contribute to the budget of the Supporting Hands Nurse Family Partnership. During 2018, Stevens County did not contribute any funds to the Partnership. McLeod County acts as fiscal agent for the Supporting Hands Nurse Family Partnership Board. A complete financial report of the Supporting Hands Nurse Family Partnership Board can be obtained from McLeod County at: Supporting Hands Nurse Family Partnership Board, McLeod County, 830 - 11th Street East, Glencoe, Minnesota 55336.

CENTRAL MINNESOTA EMERGENCY SERVICES BOARD The Central Minnesota Regional Radio Board was established in 2007, under the authority conferred upon the member parties by Minn. Stat. §§ 471.59 and 403.39. As of June 1, 2011, the Central Minnesota Regional Radio Board changed its name to the Central Minnesota Emergency Services Board. Members include the City of St. Cloud and the Counties of Benton, Big Stone, Douglas, Grant, Kandiyohi, Meeker, Mille Lacs, Morrison, Otter Tail, Pope, Sherburne, Stearns, Stevens, Swift, Todd, Traverse, Wadena, Wilkin, and Wright. The purpose of the Central Minnesota Emergency Services Board is to provide for regional administration of enhancements to the Statewide Public Safety Radio and Communication System (ARMER) owned and operated by the State of Minnesota. The Central Minnesota Emergency Services Board is composed of one Commissioner from each county appointed by their respective County Board and one City Council member from the City appointed by the City Council, as provided in the Central Minnesota Emergency Services Board’s by-laws.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

47

NOTE IV – OTHER INFORMATION (cont.)

D. JOINT VENTURES (cont.)

CENTRAL MINNESOTA EMERGENCY SERVICES BOARD (cont.)

In the event of dissolution of the Central Minnesota Emergency Services Board, all property, assets, and funds of the Board shall be distributed to the parties of the agreement upon termination in direct proportion to their participation and contribution. Any city or county that has withdrawn from the agreement prior to termination of the Board shall share in the distribution of property, assets, and funds of the Board only to the extent it shared in the original expense. The Central Minnesota Emergency Services Board has no long-term debt. Financing is provided by the appropriations from member parties and by state and federal grants. During 2018, the county contributed $13,200 to the Board. Complete financial information can be obtained from: Central Minnesota Emergency Services Board, City of St. Cloud, Office of the Mayor, City Hall, 400 - Second Street South, St. Cloud, Minnesota 56301.

STEVENS COUNTY FAMILY SERVICES COLLABORATIVE

The Stevens County Family Services Collaborative was established in 1997 under the authority of Minn. Stat. § 124D.23. The Collaborative includes Stevens County, Independent School District 771, Horizon Public Health, the Stevens Community Medical Center, and Rural Minnesota CEP, Inc. The purpose of the Collaborative is to provide coordinated family services and to commit resources to an integrated fund. Control of the Stevens County Family Services Collaborative is vested in a Board of Directors, which is composed of one member appointed by each member party. The persons so appointed shall appoint two consumer representatives by the majority vote of the Board. In the event of withdrawal from the Stevens County Family Services Collaborative, the withdrawing party shall give a 90-day notice. The withdrawing party shall not be entitled to a refund of monies contributed to the Collaborative prior to the effective date of withdrawal. The Board shall continue to exist if the Collaborative is terminated for the limited purpose of discharging the Board’s debts and liabilities, settling its affairs, and disposing of its property, if any. Financing is provided by state and federal grants and contributions from its member parties. The county, in an agent capacity, reports the cash transactions of the Stevens County Family Services Collaborative as an agency fund on its financial statements. During 2018, the county did not contribute any funds to the Collaborative. Separate financial information can be obtained from: Stevens County Courthouse, 400 Colorado Avenue, Morris, Minnesota 56267.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

48

NOTE IV – OTHER INFORMATION (cont.)

D. JOINT VENTURES (cont.)

REGION 4 SOUTH ADULT MENTAL HEALTH CONSORTIUM

Douglas, Grant, Pope, Stevens, and Traverse Counties entered into a joint powers agreement creating and operating Region 4 South Adult Mental Health Consortium, pursuant to Minn. Stat. § 471.59, to provide a system of care that will serve the needs of adults with serious and persistent mental illness for the mutual benefit of each of the joint participants. Control of the Consortium is vested in a Governing Board, which consists of each participating county’s Director of Social Services, Family Services, or Human Services, as the case may be. The Governing Board operates under the ultimate authority of the Executive Commissioner Board. The Executive Commissioner Board is composed of one Commissioner of each county appointed by their respective County Board. Any county may withdraw by providing notice to the chair of the Board 90 days prior to the date of the proposed withdrawal. Withdrawal does not act to discharge any liability incurred or chargeable to any county before the effective date of the withdrawal. Dissolution of the Consortium shall occur by unanimous vote of the counties, or when the membership in the Consortium is reduced to less than two counties. Upon dissolution of the Consortium, the member counties shall share in the current liabilities and current financial assets, including real property, of the Consortium equally if no county has contributed during the term of the Consortium, or based upon their percentage of contribution to the Consortium’s budget during the period applicable to such liabilities and assets. During 2018, the county did not contribute any funds to the Consortium. Financing is predominantly provided by state grants. Grant County, in a fiscal host capacity, reports the cash transactions of the Consortium as an agency fund on its financial statements.

VIKING LIBRARY SYSTEM

The county, along with ten cities and five other counties, participates in the Viking Library System in order to establish, continue, strengthen, and improve library services in the participating cities and counties. The Viking Library System was created as a public library service in 1975 by the Counties of Douglas, Grant, Otter Tail, and Stevens, along with the Cities of Alexandria, Elbow Lake, Fergus Falls, Hancock, and Morris. Additions to the library system included the Cities of Browns Valley, Glenwood, New York Mills, Perham, and Wheaton in 1976; Pope County in 1981, Traverse County in 1983, and the City of Pelican Rapids in 1988. In 1992, the City of Alexandria library became the Douglas County library. The Viking Library System is governed by a Governing Board, which consists of 19 members. Each participating county’s Board of Commissioners appoints a resident of the county; each participating city’s Library Board appoints a representative; and any library with a service area population over 15,000 has an additional representative. Currently, the City of Fergus Falls and Douglas County have additional representatives. During 2018, the county provided $62,273 to the Viking Library System. Complete financial information can be obtained from: Viking Library System, 1915 Fir Avenue West, Fergus Falls, Minnesota 56537.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

49

NOTE IV – OTHER INFORMATION (cont.)

D. JOINT VENTURES (cont.)

COURT SERVICES - BIG STONE, GRANT, STEVENS, TRAVERSE, AND WILKIN COUNTIES

Big Stone, Grant, Stevens, Traverse, and Wilkin Counties participate in a joint venture to provide corrections services to the five-county area. The joint powers agreement was effective June 1, 1962. Court services are headquartered in Wheaton, Minnesota, with office locations at the county seats of the member counties. The two probation officers for the five-county area are appointed by three area judges, who also set the probation officer salaries. The Minnesota Department of Corrections reimburses Traverse County for a portion of the probation officer salaries. The remaining expenses are allocated to each participating county based on population. During 2018, the county contributed $84,084 to the entity. Traverse County acts as fiscal agent. Traverse County reports the probation activity in a separate department within its General Fund.

CHIPPEWA RIVER WATERSHED PROJECT

The Chippewa River Watershed Project Board (CRWP) was established pursuant to Minn. Stat. § 471.59 and a joint powers agreement, effective October 10, 2012, and includes Chippewa, Douglas, Grant, Kandiyohi, Pope, Stevens and Swift counties. The agreement was established to develop and implement plans to promote the orderly water quality improvement and management of the Chippewa River Watershed through information sharing, fund seeking, education, coordination and related support to the members with regard to the protection of property from damage of flooding, controlling erosion of land; protection of property, streams and lakes from sedimentation and pollution; and maintaining and improving the quality of water in the streams, lakes and ground water and improving recreation and wildlife. Control is vested in a Joint Powers Board. The Board is comprised of one representative of each County Board of Commissioners included in the agreement. A reserve account of $25,800 will be established by the member counties based on the percent of the watershed that is in each member county. The CRWP will operate on grants obtained to carry out its purpose. The annual budget will be dependent on work plans and budgets tied directly to grant agreements. Members have the right to withdraw from the agreement on December 31 with at least a 6-month notice. The CRWP shall continue indefinitely in full force and effect until all grant funds are exhausted or until all member parties, or all remaining member parties, mutually agree to terminate the agreement by joint resolution passed by the member parties respective boards. In the event of a termination of the agreement, all property, real and personal, held by the CRWP shall be distributed by resolution to the member counties by the percent of the watershed that is located in each member county. During 2018, the county contributed $1,200 to the entity. Complete financial information can be obtained from: Chippewa River Watershed Project, 629 North 11th Street, Suite 17, Montevideo, Minnesota 56265.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

50

NOTE IV – OTHER INFORMATION (cont.)

D. JOINT VENTURES (cont.)

MID-STATE COMPUTER COLLABORATIVE

In 2018, 29 counties created a joint powers organization named Mid-State Computer Collaborative (MSCC) for the purpose of providing an organization through which the counties may jointly provide for the sharing of costs of computer software, hardware, and other information technology; jointly negotiate contracts with vendors of products and services; create an entity capable of owning technology and software licenses on behalf of all the parties. During 2018, the county made no contributions to the entity. Financial information can be obtained from: Mid-State Computer Collaborative, 325 North Sibley Avenue, Litchfield, Minnesota 55355.

E. JOINTLY-GOVERNED ORGANIZATIONS

WESTERN AREA CITY/COUNTY CO-OP

The county and 24 other cities and counties entered into a joint powers agreement to establish the Western Area City/County Co-Op (WACCO) Joint Powers Board, effective September 5, 1995, and empowered under Minn. Stat. § 471.59. The purpose of WACCO is to establish a resource network that identifies common needs of the individual governmental units and reduces the financial burden on each of its members through the cooperative sharing of existing resources. The management and control of WACCO is vested in a Board of Directors composed of a representative appointed by each member city and county. During 2018, the county contributed $2,223 to WACCO.

DISTRICT IV TRANSPORTATION PLANNING

The county and 13 other cities and counties entered into a joint powers agreement to establish the District IV Transportation Planning Joint Powers Board, effective December 11, 1996, and empowered under Minn. Stat. § 471.59. The purpose of the Board is to develop a multi-model transportation plan for the geographical jurisdiction of the member cities and counties. The Board is composed of 14 members, with one member appointed by each member city and county.

REGION FOUR - WEST CENTRAL MINNESOTA HOMELAND SECURITY EMERGENCY MANAGEMENT ORGANIZATION

The Region Four - West Central Minnesota Homeland Security Emergency Management Organization was established to provide for regional coordination of planning, training, purchase of equipment, and allocating emergency services and staff in order to better respond to emergencies and natural or other disasters within the region. Control is vested in the Board, which is composed of representatives appointed by each Board of County Commissioners. The county’s responsibility does not extend beyond making this appointment.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

51

NOTE IV – OTHER INFORMATION (cont.)

E. JOINTLY-GOVERNED ORGANIZATIONS (cont.)

MINNESOTA CRIMINAL JUSTICE DATA COMMUNICATIONS NETWORK

The Minnesota Criminal Justice Data Communications Network Joint Powers Agreement exists to create access for the County Sheriff and County Attorney to systems and tools available from the State of Minnesota, Department of Public Safety, and the Bureau of Criminal Apprehension to carry out criminal justice. During 2018, the county paid $2,040 to the joint powers.

MINNESOTA RED RIVER BASIN OF THE NORTH JOINT POWERS AGREEMENT

The Minnesota Red River Basin of the North Joint Powers Board was established on November 29, 1999, by an agreement between the county and 17 other counties. The agreement was made to serve as a focal point for land and water concerns for those counties surrounding the Minnesota Red River Basin. Each county is responsible for its proportionate share of the administrative budget. Control is vested in a Joint Powers Board composed of one Commissioner from each member county. Each member of the Board is appointed by the County Commissioners of the county represented. In the event of termination of the agreement, any unexpended funds and surplus property shall be disposed of equally among the member counties. During 2018, the county contributed $50 to the Joint Powers Board. Complete financial statements can be obtained from: International Coalition for Land - Water, Stewardship in the Red River Basin, 119 - 5th Street South, Moorhead, Minnesota 56561.

MINNESOTA RURAL COUNTIES CAUCUS

The Minnesota Rural Counties Caucus was established in 1997 and includes Aitkin, Becker, Big Stone, Clay, Cottonwood, Douglas, Grant, Kittson, Koochiching, Lake of the Woods, Mahnomen, Marshall, McLeod, Meeker, Mille Lacs, Norman, Pennington, Polk, Pope, Red Lake, Redwood, Roseau, Sibley, Stevens, Todd, Traverse, Wadena, Watonwan, Wilkin, and Wright Counties. Control of the Caucus is vested in the Minnesota Rural Counties Caucus Executive Committee, which is composed of twelve appointees, each with an alternate, who are appointed annually by each respective County Board. A county’s responsibility does not extend beyond making this appointment. The county contributed $2,200 to the Minnesota Rural Counties Caucus in 2018.

SOUTHWEST MINNESOTA IMMUNIZATION INFORMATION CONNECTION

The Southwest Minnesota Immunization Information Connection (SW-MIIC) Joint Powers Board promotes an implementation and maintenance of a regional immunization information system to ensure age-appropriate immunizations through complete and accurate records. The county did not contribute to the SW-MIIC during 2018.

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

52

NOTE IV – OTHER INFORMATION (cont.)

E. JOINTLY-GOVERNED ORGANIZATIONS (cont.)

WEST CENTRAL S.W.A.T. TEAM

The West Central S.W.A.T. Team is comprised of five County Sheriff’s Offices and nine police departments including Lac Qui Parle, Pope, Stevens, Swift, and Traverse Counties, along with the Appleton, Benson, Glenwood, Hancock, Montevideo, Morris, Starbuck, University of Minnesota Morris, and Wheaton Police Departments. The purpose of the Team is to create a feasible economical way, by sharing the costs, to protect the citizens of the cities and counties involved. During the year, the county contributed $1,000 to the Team. The county is the fiscal host and reports West Central S.W.A.T. Team as an agency fund in the financial statements.

COUNTIES PROVIDING TECHNOLOGY

Counties Providing Technology (CPT) was established in 2018, under the authority conferred upon by member parties by Minn. Stat. § 471.59, for the purpose of purchasing the former software vendor, Computer Professionals Unlimited, Inc., (CPUI) and to provide for the development, operation, and maintenance of technology applications and systems. Stevens County and 22 other counties are members of CPT. Each member county provided an initial contribution to start up CPT and provide funds for the purchase of CPUI. CPT purchased CPUI in September 2018 for a purchase price of $3,600,000. Control is vested in the CPT Board, which consists of one individual appointed by each member county’s Board of Commissioners. The joint powers agreement provides that initial operating capital contributed by each member is to be repaid from any excess in fund balance at the end of the fiscal year, in proportion to the initial contribution. Once the initial contribution is repaid, there is no remaining equity interest for the member counties. Financing is primarily from county member contributions. During 2018, the county contributed $175,000 to CPT. Complete financial information for CPT can be obtained from: Stevens County Auditor / Treasurer, 400 Colorado Avenue, Suite 303, Morris, Minnesota 56267.

F. EFFECT OF NEW ACCOUNTING STANDARDS ON CURRENT PERIOD FINANCIAL STATEMENTS The Governmental Accounting Standards Board (GASB) has approved the following:

Statement No. 83, Certain Asset Retirement Obligations

Statement No. 84, Fiduciary Activities

Statement No. 85, Omnibus 2017

Statement No. 86, Certain Debt Extinguishment Issues

STEVENS COUNTY

NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2018

53

NOTE IV – OTHER INFORMATION (cont.)

F. EFFECT OF NEW ACCOUNTING STANDARDS ON CURRENT PERIOD FINANCIAL STATEMENTS (cont.)

Statement No. 87, Leases

Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements

Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period

Statement No. 90, Majority Equity Interests – an amendment of GASB Statements No. 14 and No. 61

When they become effective, application of these standards may restate portions of these financial statements.

– 42 –

PROPOSAL FORM TO: Stevens County Sale Date: July 21, 2020 C/O Northland Securities, Inc.

150 South 5th Street, Suite 3300 Minneapolis, Minnesota 55402 Phone: 612-851-5900, Fax: 612-851-5918

For all or none of the $4,510,000* General Obligation Ditch Bonds, Series 2020A, in accordance with the Notice of Sale, we will pay you $___________________________, (not less than $4,455,880) plus accrued interest, if any, to date of delivery for fully registered Bonds bearing interest rates and maturing on December 1 as follows:

% 2021 % 2026 % 2031 % 2036 % 2022 % 2027 % 2032 % 2037 % 2023 % 2028 % 2033 % 2038 % 2024 % 2029 % 2034 % 2039 % 2025 % 2030 % 2035 % 2040

True interest percentage:_______________________% Net interest cost: $__________________________

Term Bond Option: Bonds maturing in the years: To be accumulated into a Term Bond maturing in year:

________ through ________ ________ ________ through ________ ________ ________ through ________ ________ ________ through ________ ________ ________ through ________ ________

This bid is a firm offer for the purchase of the Bonds identified in the Notice of Sale, on the terms set forth in the bid form and the Notice of Sale, and is not subject to any conditions, except as permitted by the Notice of Sale. By submitting this bid, we confirm that we have an established industry reputation for underwriting new issuances of municipal bonds. As set forth in the Notice of Sale, this bid shall not be cancelled in the event that the competitive sale requirements are not satisfied. The County may determine to apply the Hold-the-Offering-Price Rule to the Bonds (such terms are used as described in the Notice of Sale). We have received and reviewed the Preliminary Official Statement and have submitted our requests for additional information or corrections to the Official Statement dated August ___, 2020. As Syndicate Manager, we agree to provide the County with the reoffering price of the Bonds within 24 hours of the bid acceptance. Account Members: Account Manager: ______________________________ By: ___________________________________

The foregoing proposal is hereby duly accepted by and on behalf of Stevens County, Minnesota at 9:00 A.M. on August 18, 2020.

_____________________________________

_____________________________________

County Auditor County Board Chair

* The County reserves the right to increase or decrease the principal amount of the Bonds. Any such increase or decrease will be made in multiples of $5,000

and may be made in any maturity. If any maturity is adjusted, the purchase price will also be adjusted to maintain the same gross spread.