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<br />City of Lino Lakes, Minnesota
<br />Management's Discussion and Analysis
<br />December 31, 2009
<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 $21,072,433, an increase of $4,887,439, or 30 %, over the previous
<br />year, primarily due to the construction financing for the 135E /County Road 14 interchange. Approximately
<br />78% of this total amount, or $16,354,568, constitutes unreserved fund balance, which is available for
<br />spending at the government's discretion. The remainder of fund balance is reserved to indicate that it is
<br />not available for new spending because it has already been committed 1) to liquidate contracts and
<br />purchase orders of the prior period ($198,744), 2) to pay debt service ($3,457,349), 3) to fund interfund
<br />advances ($736,772), 4) to fund environmental improvements ($100,000), or for long -term notes
<br />receivable ($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 $5,191,396, while the total fund balance was
<br />$5,387,964. 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 57% of
<br />total general fund expenditures, while total fund balance represents 60% of that same amount.
<br />The fund balance of the City of Lino Lakes' general fund decreased by $196,177 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. The recession also had an impact on
<br />property tax delinquencies, interest rates, which made a significant impact on budgeted investment
<br />earnings, and intergovernmental revenues expected from the state. Reduced expenditures, primarily for
<br />personal services and contractual services, offset some of the reduced revenues. However, an early
<br />retirement incentive program to encourage personnel reductions, a personnel litigation settlement, and a
<br />transfer to another governmental fund toward the annual installment of an interfund loan for property
<br />acquisition, all of which were approved by City Council actions, were the primary causes of the year -end
<br />deficit. Overall, the general fund's revenues were within 4% of the amended budget, while expenditures
<br />and transfers were 2% below budgeted levels.
<br />The G.O. improvement bonds 2005A fund has a total fund deficit of ($558,443). This fund is related to the
<br />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 in 2009. An interfund loan from the Sewer fund has aided in the payment of debt
<br />service for this issue.
<br />The 135E Interchange fund has a total fund balance at year -end of $4,304,023, primarily due to the
<br />issuance of debt for construction financing. This balance will be reduced throughout 2010 and 2011 as
<br />the interchange project progresses.
<br />The area and unit charge fund has a total fund balance of $2,898,162, of which $736,772 is reserved for
<br />advances to other funds, and $2,161,390 is unreserved and available for financing capital improvements.
<br />The fund balance during the current year increased by $249,199, due in large part to the reduction in the
<br />advances to other funds and to lower expenditures in 2009.
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