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<br />City of Lino Lakes, Minnesota
<br />Management's Discussion and Analysis
<br />December 31, 2010
<br />FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS
<br />As noted earlier, the City of Lino Lakes uses fund accounting to ensure and demonstrate compliance with
<br />finance related legal requirements.
<br />Governmental Funds The focus of the City of Lino Lakes' governmental funds is to provide information
<br />on near -term inflows, outflows, and balances of spendable resources. Such information is useful in
<br />assessing the City of Lino Lakes' financing requirements. In particular, unreserved fund balance may
<br />serve as a useful measure of a government's net resources available for spending at the end of the fiscal
<br />year. As of the end of the current fiscal year, the City of Lino Lakes' governmental funds reported
<br />combined ending fund balances of $21,166,347, an increase of $93,914, or 0.4 %, over the previous year,
<br />primarily due to the receipt of excess tax increment revenue in the general fund. Approximately 80% of
<br />this total amount, or $17,012,557, constitutes unreserved fund balance, which is available for spending at
<br />the government's discretion. The remainder of fund balance is reserved to indicate that it is not available
<br />for new spending because it has already been committed 1) to liquidate contracts and purchase orders of
<br />the prior period ($183,813), 2) to pay debt service ($2,986,102), 3) to fund interfund advances
<br />($658,875), 4) to fund environmental improvements ($100,000), or for long -term notes receivable
<br />($225,000).
<br />The general fund is the primary operating fund of the City of Lino Lakes. At the end of the current fiscal
<br />year, unreserved fund balance of the general fund was $5,445,334, while the total fund balance was
<br />$5,626,805. As a measure of the general fund's liquidity, it may be useful to compare unreserved fund
<br />balance and total fund balance to total fund expenditures. Unreserved fund balance represents 65% of
<br />total general fund expenditures, while total fund balance represents 67% of that same amount.
<br />The fund balance of the City of Lino Lakes' general fund increased by $238,841 during the current fiscal
<br />year. A soft real estate market and the onset of an economic recession in December 2007, reduced
<br />building activities again this year which decreased permit revenue. Even as signs of economic recovery
<br />were being seen, the remaining effects of the recession also had an impact on property tax
<br />delinquencies, and interest rates, which made a significant impact on budgeted investment earnings.
<br />However, the City received unanticipated revenue in the form of excess tax increment revenue which
<br />helped to somewhat offset reduced revenue in other budget areas. In addition, reduced expenditures,
<br />primarily for personal services through vacant positions, and contractual services offset the reduced
<br />revenues. Overall, the general fund's revenues were within approximately 2% of the amended budget,
<br />while expenditures and transfers were 4% below budgeted levels.
<br />The G.O. improvement bonds 2005A fund has a total fund deficit of ($1,093,765). This fund is related to
<br />the bonds issued for the Legacy Woods Edge improvement project. The payment of debt service and
<br />delinquency in the collection of special assessments dedicated to this issue caused a significant
<br />decrease in this fund. An interfund loan from the Sewer fund has aided in the payment of debt service for
<br />this issue.
<br />The 135E Interchange fund has a total fund balance at year -end of $4,194,759, primarily due to the
<br />issuance of debt for construction financing. This balance will be reduced throughout 2011 as the
<br />interchange project progresses.
<br />The area and unit charge fund has a total fund balance of $3,578,910, of which $658,875 is reserved for
<br />advances to other funds, and $2,920,035 is unreserved and available for financing capital improvements.
<br />The fund balance during the current year increased by $680,748, due in large part to the reduction in the
<br />advances to other funds and to lower expenditures in 2010.
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