Annual Financial Report 12/31/1988

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1988 Page 7 of 19 NOTE 2 DETAIL NOTES ON ALL FUND AND ACCOUNT GROUPS (Continued) PROPERTY TAX REVENUE RECOGNITION (continued) 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 during the year are recognized as revenue for the current year. Additionally, taxes collected by the County by December 31 (remitted to the City the following January) and credits not received at the normal time are recognized as revenue for the current year. Homestead credits received by the City from the State are recognized as revenue when received in cash. 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 deferred revenue. 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 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 1988 and 1987 totaled $207,526 and $167,116 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 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 defined in State Statutes) in which event the property is subject to such sale after 5 years. 1 r 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1