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CITY OF LINO LAKES, MINNESOTA
<br />MANAGEMENT'S DISCUSSION AND ANALYSIS
<br />DECEMBER 31, 2015
<br />FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS
<br />As noted earlier, the City of Lino Lakes uses fund accounting to ensure and demonstrate compliance with
<br />finance related legal requirements.
<br />Governmental funds-The focus of the City of Lino Lakes' governmental funds is to provide information
<br />on near-term inflows, outflows, and balances of spendable resources. Such information is useful in
<br />assessing the City of Lino Lakes' financing requirements. GASB Statement 54, divides fund balances into
<br />five categories: nonspendable, restricted, committed, assigned and unassigned. Definitions of these
<br />categories can be found in Note 1.Q in the Notes to the Financial Statements. In particular, unassigned
<br />fund balance may serve as a useful measure of a government's net resources available for unrestricted
<br />spending at the end of the fiscal year. Approximately 1 0% of the total fund balance amount, or
<br />$1,910,432, constitutes unassigned fund balance, which is available for spending at the government's
<br />discretion. The remainder of fund balance is not available for new spending because it is restricted or has
<br />already been committed or assigned for other purposes. As of the end of the current fiscal year, the City
<br />of Lino Lakes' governmental funds reported combined ending fund balances of $20,056,015, a decrease
<br />of $2,486,348, or 11%, from the previous year. This decrease is primarily due to a decrease in the fund
<br />balance of Capital Projects, offset by an increase in the General Fund fund balance.
<br />The general fund is the primary operating fund of the City of Lino Lakes. At the end of the current fiscal
<br />year, unassigned fund balance of the general fund stood at $5,725,736, while the total fund balance was
<br />$5,946,413. As a measure of the general fund's liquidity, it may be useful to compare unassigned fund
<br />balance and total fund balance to total fund expenditures and financing uses. Unassigned fund balance
<br />represents 58% of total general fund expenditures and other financing uses, while total fund balance
<br />represents 61% of that same amount.
<br />The fund balance of the City of Lino Lakes' general fund increased by $639,878 during the current fiscal
<br />year, while the City budget anticipated the use of $170,000 of the general fund's fund balance. Overall,
<br />signs of an economic recovery are being seen with increased building and development activities taking
<br />place which resulted in increased permit revenues for the year. In addition, reduced expenditures,
<br />primarily for personal services through vacant positions, fuel costs, and contractual services helped to
<br />increase the year end fund balance. Overall, the general fund's revenues were within 1% of the amended
<br />budget, while expenditures and transfers were 4% below amended budget levels.
<br />The G.O. improvement bonds 2005A fund has a total fund deficit of ($2,340,172). This fund is related to
<br />the bonds issued for the Legacy Woods Edge improvement project. The payment of debt service and
<br />delinquency in the collection of special assessments dedicated to this issue caused a significant
<br />decrease in this fund. The use of tax increments from TIF District 1-10 and an interfund loan from the
<br />Capital Improvements fund has aided in the payment of debt service for this issue.
<br />The Improvement Note 2009F fund, to service the debt issued to Anoka County as the City's financial
<br />commitment for the I-35E interchange project, ended the year with a fund balance of $7,384, a decrease
<br />of $27,515. This note, which was originally in the amount of $4,260,000, was reduced in 2011 to
<br />$3,695,000 to reflect cost savings during the contruction of this project. The outstanding balance as of the
<br />end of2015 is $1,720,000.
<br />The Area and Unit Charge fund has a total fund balance of $4,422,605, all of which is assigned for
<br />financing capital improvements. The fund balance during the current year increased by $38,928, due in
<br />large part to the collection of special assessments and charges for services, which were greater than the
<br />expenditures and transfers out.
<br />The 2015 Street Reconstruction fund has a total fund deficit of ($18,226). The fund balance during the
<br />current year increased by $14,045 due to the proceeds from bond issuance exceeding the expenditures
<br />incurred related to the Shenandoah Area Street Improvement project.
<br />CITY OF LINO LAKES, MINNESOTA
<br />MANAGEMENT'S DISCUSSION AND ANALYSIS
<br />DECEMBER 31, 2015
<br />FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS !CONTINUED)
<br />Proprietary funds-The City of Lino Lakes' proprietary funds provide the same type of information found
<br />in the government-wide financial statements, but in more detail.
<br />The water fund has total net position at year~nd of $20,401,628, of which $5,822,834 is unrestricted. The
<br />increase in net position of $1,579,872 was primarily due to capital contributions, partially offset by a net
<br />operating loss.
<br />Total net position in the sewer fund at the end of 2015 was $23,398,831, of which $8,849,796 was
<br />unrestricted. The increase in net position of $854,246 was primarily due to capital contributions, partially
<br />offset by a net operating loss for the year.
<br />The water rates, which reflect water conservation efforts through a tiered rate structure, and sewer rates
<br />were adjusted by 2% and 3%, respectively, in 2015. A review of utility rates is planned for 2016.
<br />GENERAL FUND BUDGETARY HIGHLIGHTS
<br />The original budget was amended several times during the year reflecting increases in business license
<br />revenue, building permit revenue, MSA maintenance aid, lease revenues and SCORE grants; reductions
<br />in police revenues and fines and forfeits; and reallocating resources within the original budget. The final
<br />amended budget is $148,650 greater than the original adopted budget.
<br />Revenues were $51,277 over budget for the year. Fiscal disparities revenues came in under budget by
<br />$178,439. This variance was more than offset by greater than anticipated license and permit revenues as
<br />well as intergovernmental state aid revenues.
<br />Expenditures came in under budget by $374,464 due to many factors including lower than expected
<br />personal services costs from vacant positions. Fuel costs were much lower than anticipated and
<br />spending on contractual services was lower overall from budgeted levels primarly due to contracted storm
<br />system maintenance that was delayed in 2015. There were also transfers from the general fund of
<br />$590,245. This resulted in a net fund balance increase of $639,878 for the fiscal year, compared to the
<br />planned reduction of $170,000. IV-6
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