Comprehensive Annual Financial Report 12/31/1996

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Mono CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1996 Note 11 DEFICIT FUND BALANCES/RETAINED EARNINGS The City has deficit fund balances/retained earnings at December 31, 1996 as follows: Fund Balance/Retained Earnings Deficit Capital Project Funds: 1994 Construction $ 17,760 1997 Construction 122,853 Town Center Project 36,536 Tax Increment Financing 1-4 4,460 Tax Increment Financing 1 -5 1,771 Tax Increment Financing 1-6 27,578 Tax Increment Financing 1 -7 179,910 Tax Increment Financing 3 -1 3,991 Enterprise Fund: Gas Utility ., Note 12 CONTINGENCIES w 8,934 Litigation - The City attorney has indicated that existing and pending lawsuits, claims and other actions in which the City is a defendant are either covered by insurance; of an immaterial amount; or, in the judgment of the City attomey, remotely recoverable by plaintiffs. Federal and State Funds - The City receives financial assistance from federal and state governmental agencies -- in the form of grants. The disbursement of funds received under these programs generally requires compliance with the terms and conditions specified in the grant agreements and is subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the applicable fund. However, in the opinion of management, any such disallowed claims will not have a material effect on any of the financial statements of the individual fund types included herein or on the overall financial position of the City at December 31, 19%. Note 13 DEFERRED AD VALOREM TAX LEVIES - BONDED DEBT General Obligation bond issues sold by the City are financed by ad valorem tax levies and special assessment bond issues sold by the City are partially financed by ad valorem tax levies in addition to special assessments levied against the benefiting properties. When a bond issue to be financed partially or completely by ad valorem tax levies is sold, specific annual amounts of such tax levies are stated in the bond resolution and the County Auditor is notified and instructed to levy these taxes over the appropriate years. The future tax levies are subject to cancellation when and if the City has provided alternative sources of financing. The City Council is required to levy any additional taxes found necessary for full payment of principal and interest. 47