Annual Financial Report 12/31/1987

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CITY OF LINO LAKES, MINNESOTA Page 7 of 19 NOTES TO FINANCIAL STATEMENTS December 31, 1987 NOTE - DETAIL NOTES ON ALL FUND AND ACCOUNT GROUPS (CONTINUEDI PROPERTY TAX (CONTINUED) Unpaid delinquent taxes are generally measurable but not available to finance the expenditures of the current year. Accordingly, these taxes are not recognized as revenue until they are collected by the County. Unpaid delinquent property taxes are reflected as defen:ed revenue. Taxes on homestead property (as defmed 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 during each year. The City's property tax revenue includes payments 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 commercial/industrial property valuation growth since 1971. Property taxes paid to the City of Lino Lakes through this formula for 1987 and 1986 totaled $197,746 and $172,431 respectively. Receipt of property taxes from this "Fiscal Disparities Pool" does not increase or decrease total tax revenue. SPECIAL ASSESSMENTS Special assessments are levied against benefiting properties for the cost or a portion of the cost of special assessment improvement projects in accordance with State Statutes. Usually, the City adopts the assessment roll when the individual project is completed or substantially completed. The City certifies the adopted assessment roll to the County for collection. Collection of annual installments including interest is handled by the County in the same manner as for property taxes. Assessments are collectible over a term of years, generally consistent with the term of years of the related bond issue. Property owners are allowed to and often do prepay future installments without interest or prepayment penalty. The City recognizes special assessment revenue when it becomes both measurable and available to finance bonded debt. Special assessment principal and interest is recognized as revenue in the year of collection. Once a special assessment roll is adopted, the amount attributed to each parcel becomes 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 become delinquent, the property is subject to tax forfeit sale. 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 Statutes, a property shall be subject to tax forfeit sale after 3 years unless it is homesteaded, agricultural, or seasonal recreational land (as defmed in State Statutes) in which event the property is subject to such sale after 5 years. PARK DEDICATION FEE REVENUE RECOGNITION The City receives park dedication fees from developers. The amount due the City is payable when land is platted. The City has granted a delay in collection from several developers pending actual development of the platted property. The amount not collected is recorded as an account receivable, offset by deferred revenue. The amount of uncollected fees totalled $5,060 at December 31, 1987 and 1986. SHARE IN GAS FRANCHISE PROFITS The City receives a share of the gross billings for natural gas sales by a neighboring City which provides service within the City of Lino Lakes. The amount earned for 1987 totaled $9,615. This amount was received in May, 1988 and will be recorded as revenue (available criteria) in 1988. INVENTORIES - GOVERNMENTAL TYPE FUNDS The original cost of materials and supplies has been recorded as expenditures and/or expenses at the time of purchase. The City does not maintain significant levels of material or supplies.