Annual Financial Report 12/31/1982

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1982 Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued PROPERTY TAX REVENUE RECOGNITION - Continued Taxes on homestead property (as defined by State Statutes) are partially reduced by a homestead credit. This credit is paid to the City by the State in lieu of taxes levied against homestead property. The State remits this credit in installments each year. The City recognizes property tax revenue when it becomes both measurable and available to finance expenditures of the current period. In practice, current and delinquent taxes and homestead credits received by the City in July and December are recognized as revenue for the current year. Additionally, taxes collected by the County by December 31 (remitted to the City the following April) and taxes and credits not received at the normal time are recognized as revenue for the current year. Unpaid delinquent taxes are generally measurable but not available to finance the expenditures of the current year. Accordingly, these are not recognized as revenue until they are collected by the County. Unpaid delinquent property taxes are reflected in the balance sheets at December 31 subject to a 100% allowance for doubtful accounts and deferred revenue. This accounting practice is at nominal variance with generally accepted accounting principles in that the deferred income position (that part of delinquent taxes expected to be collected over the next several years) technically should be shown separately as a liability. However, this variance is immaterial and the cost of deter- mining this measurement and reclassification does or could exceed the benefit. Additionally, this variance has no material effect upon the operating state- ments of the City. SPECIAL ASSESSMENT REVENUE RECOGNITION Special assessments are levied against benefiting properties for the cost (or a portion of the cost) of special assessment improvement projects in accor- dance with State Statutes. The City adopts the assessment roll when the indi- vidual project is completed or substantially completed. Assessments are collectible over a term of years, generally consistent with the related bond issue. Collection of annual installments (including interest) is handled by the County in the same manner as property taxes. Property owners are allowed (and often do) to prepay future installments without interest or prepayment penalties. The City recognizes special assessment revenue when it becomes both measurable and available to finance bonded debt. In practice, special assessment prin- cipal is recognized as revenue in the year when the assessment rolls are tablu- lated and adopted by the City Council, and when it is available to finance the related bond issue principal. Special assessment interest is recognized as revenue in the year due, which generally corresponds to the period it is actually earned.