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1 1 1 1 1 CITY OF LINO LAKES, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2011 As management of the City of Lino Lakes, Minnesota, we offer readers of the City of Lino Lakes' financial statements this narrative overview and analysis of the financial activities of the City of Lino Lakes for the fiscal year ended December 31, 2011. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 3 -7 of this report. FINANCIAL HIGHLIGHTS • The assets of the City of Lino Lakes exceeded its liabilities at the close of the most recent fiscal year by $90,080,344 (net assets). Of this amount $24,664,572 (unrestricted net assets) may be used to meet the City's ongoing obligations to citizens and creditors in accordance with the City's fund designations and fiscal policies. • The City's total net assets increased by $1,507,330 primarily due to reductions in community development activities, staffing levels, and interest payments on long -term debt. In addition, a prior period adjustment for unrecorded park land increased net assets by $466,800. • As of the close of the current fiscal year, the City of Lino Lakes' governmental funds reported combined ending fund balance of $16,933,540, a decrease of $4,232,807 in comparison with the prior year primarily due to expenditures for the construction of the interchange at I- 35E /CSAH14. Approximately 13% of this total amount, or $2,285,605, is available for spending at the City's discretion (unassigned fund balance). • At the end of the current fiscal year, unassigned fund balance for the general fund was $5,440,101, or 64% of total general fund expenditures. • The City's total bonded debt decreased by $2,300,000 (11.4 %) during the current fiscal period. In addition, a note the City issued in 2009 to Anoka County for $4,260,000 for the City's portion 135E /County Road 14 interchange project cost was reduced to $3,695,000 due to project cost savings. Principal in the amount of $2,420,000 was retired during the year. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the City of Lino Lakes' basic financial statements. The City of Lino Lakes' basic financial statements comprise three components: 1. Government -wide financial statements 2. Fund financial statements 3. Notes to the financial statements This report also contains other supplementary information in addition to the basic financial statements themselves. Government -wide financial statements The government -wide financial statements are designed to provide readers with a broad overview of the City of Lino Lakes' finances, in a manner similar to private - sector business. The statement of net assets presents information on all of the City of Lino Lakes' assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Lino Lakes is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated absences and OPEB liabilities). 11