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Summary: Little Canada, Minnesota; General Obligation fiscal 2013, and has budgeted for the maintenance of those reserves for fiscal 2014. For audited fiscal 2012, reserves were $1.4 million, or 47% of expenditures, after adjustment for an interfund receivable that the city anticipates will remain at a similar level. Strong budgetary performance The city's budgetary performance has been strong overall, in our view, with a surplus of 8.2% for the general fund and a surplus of 19.7% for total governmental funds in fiscal 2012 after data adjustments. Our calculations adjust for: • A discretionary transfer from the general fund to the general capital improvements fund to draw down the reserves to a level closer to the city's fund balance policy, and • The city's use of cash on hand to pay off debt. The city anticipates a smaller general fund surplus for fiscal 2013 and has budgeted for break -even general fund operations for fiscal 2014. Very strong liquidity Supporting the city's finances is liquidity we consider very strong, with total government available cash at 76% of total governmental fund expenditures and 465% of debt service. The city projects that available cash dropped significantly in fiscal 2013 because of use of cash on hand for various projects, but we still consider the projected level to be very strong, and the city anticipates that available cash will be close to fiscal 2012 levels by fiscal year -end 2014. We believe the city has strong access to external liquidity. The city has issued GO bonds frequently during the past several years. Strong management conditions We view the city's management conditions as strong, with good financial management policies and practices. Highlights of the city's practices include quarterly budget -to- actual reports to the council and capital plans that extend at least five years and include funding sources. The city also has a reserve policy of 42.5% of expenditures. Adequate debt and contingent liability profile In our opinion, the city's debt and contingent liability profile is adequate, with total governmental fund debt service at 16% of total governmental fund expenditures, and with net direct debt at 94% of total governmental fund revenue. The city's amortization schedule for its direct debt is rapid, with 76% scheduled to mature within 10 years. We consider the city's overall debt burden low at 2.4% of market value. We understand the city has no additional debt plans. The city participates in the Public Employees Retirement Assn. of Minnesota, and is making its contractually required contributions. We understand the city has only an implicit liability for other postemployment benefits because it allows retirees to stay on its health care plan but requires them to pay the entire premium. The city's required pension costs were 1.2% of total governmental fund expenditures in fiscal 2012. Strong institutional framework We consider the Institutional Framework score for Minnesota cities with populations greater than 2,500 strong. Outlook The stable outlook reflects our view that the city's budgetary flexibility will remain very strong and that the city will WWW. STANDARDANDPOORS .COM /RATINGSDIRECT FEBRUARY 107 2014 3 1267077 3000'2..205