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City of Lino Lakes, Minnesota <br />Management Report, Page 17 <br />A summary of the purposes and benefits of general fund reserve balances is as follows: <br />Purpose of Reserves <br />. <br />Benefits of Reserves <br />Cash flow timing differences. <br />• Favorable bond rating indicator. <br />• Supplements revenues with investment earnings. <br />• Provides resources for minor projects or <br />feasibility reports. <br />• Avoids temporary overdrafts prior to <br />major receipts. <br />• City may study effects of revenue cuts before <br />gradual program reductions. <br />• Avoids overburdening of annual budgets for <br />certain capital outlay. <br />• Provides the City greater options to deal with <br />unexpected events. <br />Expenditures are incurred somewhat evenly throughout the <br />year. Property taxes & State aids are not received until the <br />second half of the year. A reserve of one-half of such <br />revenues is therefore recommended. <br />Intergovernmental revenue cutbacks. <br />The City is vulnerable to legislative actions at both the Federal = <br />& State level. Federal funding to local government has been <br />substantially curtailed in recent years. Annual adjustment of <br />Local Government Aid & HACA formulas is a constant threat <br />Capital outlay replacement. <br />Internal escrow accumulation for purchases which may <br />exceed amounts available in any single budget cycle. This <br />may also be accomplished through transfers to dedicated <br />replacement funds. <br />Emergency or unanticipated expenditures. <br />Examples include natural disasters, lawsuits, comparable <br />worth implementation and premature breakdown <br />of vital equipment. <br />Special City Council projects, <br />Preliminary studies, interfund loans and minor projects <br />are examples of reserve uses. <br />