2016-145 Council Resolution - Laserfiche WebLink

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Summary: Lino Lakes City, Minnesota; Appropriations; General Obligation increase in permit revenues coupled with a favorable variance due to vacancies on budgeted expenditures. For fiscal 2016, the city budgeted for the use of $424,000 though through the first three quarters of the year are expecting better -than -budgeted results and will likely end with close to breakeven results. From a total governmental standpoint the city expect to end with breakeven operations in fiscal year 2016. Based on historical performance and budgeting practices of the city, we believe they will likely maintain strong budgetary performance as it has consistently been able to outperform the budget. Very strong budgetary flexibility Lino Lakes City's budgetary flexibility is very strong, in our view, with an available fund balance in fiscal 2015 of 67% of operating expenditures, or $5.7 million. We expect the available fund balance to remain above 30% of expenditures for the current and next fiscal years, which we view as a positive credit factor. Based on the current budget for the fiscal 2016, we believe the city's available fund balance as a percentage of expenditures will remain above 30%, which we consider very strong. Very strong liquidity In our opinion, Lino Lakes City's liquidity is very strong, with total government available cash at 2.7x total governmental fund expenditures and 10.7x governmental debt service in 2015. We believe that the city has strong access to external liquidity, having issued GO debt which demonstrates access to capital markets. We do not expect its cash position, with respect to its total governmental expenditures and debt service, to change much during the next two years and it will remain strong. We understand that currently, the city does not have any potential contingent liabilities that could have an adverse impact on the cash position. The city maintains investments in highly rated securities so we do not view their investment practices as aggressive. Weak debt and contingent liability profile In our view, Lino Lakes City's debt and contingent liability profile is weak. Total governmental fund debt service is 24.9% of total governmental fund expenditures, and net direct debt is 205.5% of total governmental fund revenue. Approximately 83.4% of the direct debt is scheduled to be repaid within 10 years, which is in our view a positive credit factor. We understand that the city currently plans to issue an additional $5 million in debt for capital needs of the city and management has confirmed that it does not use alternative financing. Lino Lakes City's combined required pension and actual other postemployment benefits (OPEB) contributions totaled 4.5% of total governmental fund expenditures in 2015. The city made its full annual required pension contribution in 2015. All full-time and certain part-time employees of the city are covered by defined benefit pension plans administered by the Public Employee Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund and the Public Employees Police and Fire Fund, which are cost-sharing, multi-employer retirement plans. The city makes its statutorily required contributions each year. Using updated reporting standards in accordance with Governmental Accounting Standard Board (GASB) Statement W W W. STANDARDANDP DORS. CO M /RATINGSDIRECT OCTOBER 21, 2016 4 1741666 302253518