By Robert Williams

Editor

The Frazee City Council reviewed the 2025 audit provided by Colleen Hoffman, Managing Partner of Hoffman, Philipp, & Martell, PLLC Wednesday, Aug. 12.

“Your books and everything is getting more streamlined and user-friendly,” Hoffman said. “Your city is worth about $15 million; that’s net worth. That’s what you own minus what you owe. You do have some debt and watching the interest rates to make sure that if there is a refinancing available where you could have a margin of savings there—you would want to do that. I’m excited about the city rockin’ and rolling with all the improvements.”

Frazee’s net worth in 2025 went up $1.5 million in one year, mostly because of money received for construction projects and fire and rescue equipment and other external sources of money, according to Hoffman. 

Financial highlights

The total net position of governmental activities is $8,766,522 of which $6,899,702 is the net investment in capital assets, $1,340,916 is restricted for economic development and debt service, and $525,904 is unrestricted. The total net position of governmental activities increased by $1,251,276 for the year ended December 31, 2025, mainly as a result of grants and donations for the Wannigan Park Project and for Fire and Rescue Equipment.

The total net position of business-type activities is $6,374,220, of which $4,566,863 is the net investment in capital assets, $356,330 is restricted for infrastructure replacement, and $1,451,027 is unrestricted. The total net position of business-type activities increased by $293,903 in 2025, as a result of above average net income in most of the enterprise funds.

At the close of 2025, the city’s governmental funds reported combined ending fund balances of $1,281,721, a decrease of $165,246 from the prior year. Of the total fund balance amount, $579,347 is legally or contractually restricted, $251,259 is formally committed for specific purposes, $48,759 is assigned for public safety, and $402,356 is noted as unassigned fund balance. 

Maintaining an adequate fund balance is necessary to provide city services throughout the year.

Hoffman reported that there were no significant audit findings other than segregation of duties, which is due to turnover in the city office.

“I know it’s hard to get new people up to speed and in that office there are a lot of tasks; there are a lot of hats to where,” she said.

As an example, Hoffman cited the enormity of managing Wannigan Regional Park and how many components are involved while being positive for Frazee.

“It’s a good thing for the city,” she said.

She also addressed the rampant fraud around the state and how important it is for the city to have controls in place to catch any fraud.

Vice Mayor Jim Rader chaired Wednesday’s meeting in the absence of Mayor Mike Sharp and brought forth a big positive from the audit to begin his comment period on the findings.

“I’m glad to see that the liquor store is making some pretty good revenue; that was a major concern a couple years ago,” he said. “I think part of that is how we are accounting for things too.”

Rader’s comment concerned how the liquor store and event center interact when it comes to sales and inventory, while also complimenting liquor store Manager Amanda Young on her efforts.

Another concern brought up by Rader was an increase in spending on general government of $125,000. 

Hoffman quickly explained that is due to wages, benefits and an increase in health insurance rates.

“It’s everywhere; it’s not just you,” she said.

Other increases are due to reclassification of expenses as the city office streamlines their process while introducing new reporting software.

Admin

City Administrator Stephanie Poegel provided an update to the personnel committee on several administrative efficiency initiatives underway.

1. Billing Invoice Module: The city will move forward with implementing a billing invoice module at a one-time cost of approximately $795 and an annual recurring cost of $295. It was estimated that this system would save approximately 10 hours of staff time per year, making it cost-effective.

2. Permit and Licensing Module: A permit and licensing software module is also being pursued, at an additional cost of approximately $4,700 in the first year with an annual fee of approximately $800 thereafter. This system would allow staff to manage code violations, building permits, rental registrations, liquor licensing, and dog licensing on a single platform. It would also provide the Police Department access to dog licensing and code enforcement data across shifts, and would integrate directly with the city’s fund accounting system to reduce manual data entry.

3. Meter Reading Modernization: Poegel expressed a desire to modernize the city’s water meter reading process, which currently involves staff manually reading meters and handwriting the results, followed by manual data entry that is time-consuming and prone to error. The committee discussed the possibility of handheld devices to replace paper-based recording in the near term, and a longer-term transition to drive-by radio-read meters. 

The committee noted that the city should consider a phased approach to meter upgrades—replacing meters in one section of town at a time over several years—to avoid the situation seen in other communities where all meters reach end-of-battery-life simultaneously.

Bond

Due to delays in funding from the Minnesota Public Facilities Authority (MPFA), the city has elected to finance the 2026 street and utility improvement projects with the issuance of a general obligation improvement note.

The MPFA provides low-interest loans and grants for local public infrastructure projects, focusing primarily on the Clean Water Revolving Fund, Drinking Water Revolving Fund, and the Water Infrastructure Fund (WIF).

MPFA has informed the city of an amount they will be contributing $2.1 million but have not distinguished between how much will be a grant and how much will be a loan.

“On the parts that are not eligible for PFA funding we would have normally had a bond and we would have done it a little closer to the end of the project, but we might as well do them both at the same time and save some costs,” said Poegel.

The recommended size of the bond is $697,000 to cover ineligible MPFA construction costs, engineering and construction services and other fees.

According to Poegel, the MPFA is so far behind they are currently not returning communications.

Assessments on the project were based on $2.1 million, so with the MPFA funding—assessments are anticipated to be lower but that remains uncertain until MPFA numbers are released.

A second bond, considered a temporary note for $2.1 million, allows the city to defer principal repayment for up to three years until the final maturity of the bond while making interest payments in the interim.

Donations

A $2,000 donation from Ameriprise—Willma Hanson, along with a $200 donation from the Lake Seven Lake Association to the Frazee Fire Department were approved.

A matching donation of $2,000 from Hanson to the Frazee Rescue Department was also approved.

EDA

Confusion about ownership of the East Main retail building in regards to whether the city or EDA should be making decisions about the future of Seip Drug, lease obligations and owed monies was clarified.

Kemper reported he received concerns from residents on if the building is specifically city or EDA-owned and which entity should be making decisions. The questions were raised by how the building ownership was reported in the Forum as city-owned, which was stated with ambiguity, as the EDA is legally a component unit of the City. 

Poegel clarified that the EDA owns the building and decision-making plays out where the EDA makes recommendations to the city council which makes the final approval and decision.

In other news, the city council approved the EDA’s recommendation to eliminate the community development coordinator position at the end of August.

Finance

In general discussion: Jim Rader presented an informal analysis comparing property tax burdens across comparable communities using Dollar General store locations as a consistent benchmark. 

He found that the Dollar General in Frazee—valued at approximately $692,000—pays roughly $8,960 in total city taxes, while comparable stores in Hawley and Lake Park, with higher estimated market values, pay $7,300 and approximately $5,960 in city taxes, respectively. Rader expressed concern that Frazee’s tax rates appear higher than neighboring communities for properties of comparable or lesser value, and urged the committee to be mindful of this as budget discussions begin. 

Poegel noted that TIF districts, enterprise fund structures, and staffing cost allocations all vary by community and contribute to differences in effective tax rates. Poegel also noted that the  Red Willow TIF district is nearing the end of its term, which will eventually return those tax dollars to the general levy and provide some relief to other taxpayers.

Liquor

Manager Amanda Young reported nearly identical sales numbers in comparison to 2025 of approximately $81,000. July sales did not include gate money or outdoor bar sales. There were more than 500 attendees to the Turkey Days street dance. 

Young was pleased with the matching sales numbers given the current construction surrounding the store and bar.

Council Member Mark Kemper complimented Young on her efforts.

“I just want to say thanks for the wonderful year we had in 2025,” Kemper said. “It’s a wonderful job by you and your staff.”

North River Drive

An engineering contract for preliminary design of utilities and streets of the North River Drive paving and stormsewer project and bidding was approved.

Bids are expected to be accepted next spring with construction set to begin next summer with coordination of water and sewer connections in Wannigan Park.

Parks

Erik Anderson provided several updates to the Parks Committee on criminal activity at Wannigan Regional Park. The pedestrian counter at the park was reported as vandalized and stolen. A police report was filed.

Additionally, on the same night as the counter theft, a bench was thrown from the bridge into the river and the concession stand was broken into. 

Poegel noted that the police department has identified the individual responsible and that restitution would be pursued. 

Regarding park security cameras, Poegel confirmed the process is moving forward, and 

Arvig is contributing 50 percent of the monthly cost through an approved donation.

Two additions were made to the covered bridge area of the park. A dock was installed by the Department of Natural Resources (DNR) near the covered bridge to allow guests to get close to the river and a paved shelter was completed between the parking lot and the bridge.

The Personnel Committee discussed Wannigan Trail Grant Capacity.

Poegel reported that she had received an email from Polly Andersen indicating that the Frazee Community Development Corporation (FCDC) wished to pursue a grant for a trail connecting Highway 87 to Wannigan Regional Park along the new North River Drive corridor—a trail  that was not included in the bonding language for the road project. 

Poegel noted that this trail was discussed with city engineer Chris Thorson and that both had agreed to wait until the road project was completed before initiating another grant application. 

She indicated she would respond to Andersen’s email to communicate that the city is at capacity with grant administration at this time, and that the trail grant could be revisited in a future year. Mayor Sharp agreed, stating that overloading city staff with grant management obligations was unsustainable and could have longer-term consequences for staff retention. The committee  noted that approximately ten grants are currently active, with two nearing closeout, and that the road project itself will require substantial management in the coming year.

In other news, the city completed a brochure and application for its new Adopt-A-Park program which operates much like the Adopt-A-Highway program.

Also, the city and FCDC finalized edits to an affirmation of business relationship between the two entities.

Police

Frazee police reported 154 Calls For Service (CFS) for the month of June in the city with 134 CFS by the Frazee Police Department. For the month, there were 13 city ordinance violations, 7 properties notified about needing to mow their yard.

Rescue

Chief Matthew Johnson reported an increase in call numbers this year with a total of 221, which is 46 more than the same time period last year and 79 more than in 2024 by the end of July. 

July was a particularly busy month for the rescue squad with 57 calls, of which they responded to 55. The next highest monthly total was 34 calls in March.

Rescue is looking to add more members with training scheduled to begin in September.