Annual Financial Report 12/31/1992

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1992 Page 5 of 19 G . HOMESTEAD CREDIT AND AGRICULTURAL CREDIT AID (HACA) Property taxes on homestead property (as defined by State Statutes) are partially reduced by HACA. This credit is paid to the City by the State in lieu of taxes levied against homestead property. The State remits this credit through installments each year. The credit is recognized as revenue by the City at the time of collection. H. LOCAL GOVERNMENT AID REVENUE RECOGNITION Local govemment aid is provided to the City by the State as a shared tax based upon a statutory formula and without restrictions. Payment from the State is generally received during each calendar year for that calendar year. The City recognizes local government aid revenue when it becomes both measurable and available to finance current operations. In practice, Local government aid is recognized as revenue as it is received in cash. I. PROPERTY TAX REVENUE RECOGNITION The City Council annually adopts a tax levy and certifies it to the County in December (levy /assessment date) of each year for collection in the following year. The County is responsible for billing and collecting all property taxes for itself, the City, the local School District and other taxing authorities. Such taxes become a lien on January 1 and are recorded as receivables by the City at that date. Real property taxes are payable (by property owners) on May 15 and October 15 of each calendar year. Personal property taxes are payable by taxpayers on February 28 and June 30 of each year. These taxes are collected by the County and remitted to the City on or before July 7 and December 2 of the same year. Delinquent collections for November and December are received the following January. The City has no ability to enforce payment of property taxes by property owners. The County possesses this authority. 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 State credits received by the City in July, December and the following January are recognized as revenue for the current year. Taxes collected by the County by December 31 (remitted to the City the following January) and taxes and credits not received at the year end are classified as delinquent and due from County taxes receivable. The portion of delinquent taxes not collected by the City in January is fully offset by deferred revenue because it is not available to finance current expenditures. Cities in Minnesota operate under a levy limitation law. A City's levy limit is equal to the prior year's levy limit base (revenue levy plus local govemment aid) increased by 1) three percent; and 2) a percentage equal to one -half of the greater of the percentage increases in population or in number of households, if any, and reduced by the local government aid that the City has been certified to receive. Levies for bonded indebtedness are not limited by the law. The 1992 legislative session has repealed levy limitations for taxes payable after 1992. 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 through this formula for 1992 and 1991 totaled $345,484 and $291,783 respectively. Receipt of property taxes from this "fiscal disparities pool" does not increase or decrease total tax revenue.