Annual Financial Report 12/31/1983

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1983 Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued PROPERTY TAX REVENUE RECOGNITION - Continued 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 effect upon the operating statements of the City. The levy certified for collection in 1983 was increased by $7,826 due to a cer- tification by the State auditor for expenses incurred, as a result of their inquiry during 1982, in the amount of $6,260. This expenditure was recognized in 1983. This levy was made pursuant to Minnesota Statute MS 6.60. The amount levied is 125% of the expenditure with the additional levy (revenue) retained by the City. The City's property tax revenue includes collections from the Metropolitan Revenue Distribution (fiscal disparities formula per State Statute 473F). This statute 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 the commercial /industrial property valuation growth since 1971. Property taxes paid to the City of Lino Lakes for 1983 and 1982 through this formula totaled $65,088 and $41,803 respectively. Receipt of property taxes from this "fiscal disparities pool" does not increase or decrease total tax revenue. 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.