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CITY OF UNO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2015 Note 1 SUMMARY OF SIGNIFlCANT ACCOUNTING POLICIES <CONTINUED) H. PROPERTY TAX REVENUE RECOGNITION The City Council annually adopts a tax levy and certifies it to the County in December (levy/assessment date) of each year for collection in the following year. The County is responsible for billing and collectiog all property taxes for itself, the City, the local School District and other taxing authorities. Such taxes become a lien on January I and are recorded as receivables by the City at that date. Real property taxes are payable (by property owners) on May 15 and October 15 of each calendar year. Personal property taxes are payable by taxpayers on February 28 and June 30 of each year. These taxes are collected by the County and remitted to the City on or before July IS and December 15 of the same year. Delinquent collections for November and December are received the following January. The City has no ability to enforce payment of property taxes by property owners. The County possesses this authority. Within the governmental fund financial statements, the City recognizes property tax revenue when it becomes both measurable and available to finance expenditores of the current period. In practice, current and delinquent taxes and State credits received by the City in July, December and the following January are recognized as revenue for the current year. Taxes and credits not received at the year-end are classified as delinquent and due from County taxes receivable. The portion of delinquent taxes not collected by the City in January is fully offset by deferred inflows of resources because it is not available to finance current expenditores. Deferred inflows of resources in governmental fund are susceptible to full accrual on the government-wide statements. The City's property. tax revenue includes payments from the Metropolitan Revenue Distribution (Fiscal Disparities Formula) per State Statote 473F. This statote provides a means of spreading a portion of the taxable valuation of commercial/industrial real property to various taxing authorities within the defined metropolitan area. The valuation "shared" is a portion of commercial/industrial property valuation growth since 1971. Property taxes paid to the City through this formula for 2015 totaled $1,221,907. Receipt of property taxes from this "fiscal disparities pool" does not increase or decrease total tax revenue. I. SPECIAL ASSESSMENT REVENUE RECOGNITION Special assessments are levied against benefited properties for the cost or a portion of the cost of special assessment improvement projects in accordance with State Statutes. These assessments are collectible by the City over a term of years usually consistent with the term of the related bond issue. Collection of annual installments (including interest) is handled by the County Auditor in the same manner as properlY taxes. Property owners are allowed to (and ofien do) prepay future instalbuents without interest or prepayment penalties. Within the fund financial statements, the revenue from special assessments is recognized by the City when it becomes measurable and available to finance expenditores of the current fiscal period. In practice, current and delinquent special assessments received by the City are recognized as revenue for the current year. Special assessments are collected by the County and remitted by December 31 (remitted to the City the following January) and are also recognized as revenue for the current year. All remaining delinquent, noncurrent and special assessments receivable in governmental funds are completely offset by deferred inflow of resources. Deferred inflows of resources in governmental funds are susceptible to full accrual on the government-wide statements. CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2015 Note 1 SUMMARY OF SIGNIFlCANT ACCOUNTING POLICIES <CONTINUED> I. SPECIAL ASSESSMENT REVENUE RECOGNITION (CONTINUED) Once a special assessment roll is adopted, the amount attributed to each parcel is a lien upon that property until full payment is made or the amount is determined to be excessive by the City Council or court action. If special assessments are allowed to go delinquent, the property is subject to tax forfeit sale and the first proceeds of that sale (after costs, penalties and expenses of sale) are remitted to the City in payment of · delinquent special assessments. Generally, the City will collect the full amount of its special assessments not adjusted by City Council or court action. Pursuant to State Statotes, a property shall be subject to a tax forfeit sale after three years unless it is homesteaded, agricultoral or seasonal recreational land in which event the property is subject to such sale after five years. J. INVENTORIES AND PREP AIDS The original cost of materials and supplies has been recorded as expenditoreslexpenses at the time of purchase in both the Governmental and Proprietary Funds. These funds do not maintain material amounts of materials and supplies. Certain payments to vendors reflect costs applicable to future accountiog periods and are reported as prepaid items under the purchases method in both government-wide and fund financial statements. K. INTERFUND RECEIVABLES/PAY ABLES During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. The year-end balances are classified as interfund receivables and payables on the governmental fund balance sheets. The non-current portion of interfund loans are reported as "advances to/from other funds." Advances between funds are classified as nonspendable fund balance account in the general fund to indicate they are not available for appropriation and are not expendable from available financial resources. L. CAPITALASSETS Capital assets, which include property, plant, equipment, and infrastructure assets (e.g. roads, sidewalks, street lights, and similar items) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets exceeding the City's capitalization threshold of $2,500 are recorded at historical cost or estimated historical cost if purchased or constructed. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. All existing City infrastructure has been capitalized regardless of date placed in service. Depreciation on exhaustible assets is recorded as an allocated expense in the statement of activities with accumulated depreciation reflected in the statement of net position. Capital assets are depreciated using the straight-line method over their estimated useful lives. Since surplus assets are sold for an inunaterial amount when declared as no longer needed for City purposes, no salvage value is taken into consideration for depreciation purposes. Useful lives vary from 3 to 30 years for Buildings, Office Furuiture and Equipment, Vehicles, Machine Shop and Equipment and Other assets, and 25 to 50 years for Inftastructore. Capital assets not being depreciated include land. IV-21