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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2004 <br />Note 7 METROPOLITAN COUNCIL ENVIRONMENTAL SERVICES <br />During 1971, the Metropolitan Waste Control Commission (MWCC) was organized to provide for consolidation <br />of the sanitary sewer collection, treatment and disposal in the seven county metropolitan area surrounding <br />Minneapolis and St. Paul. Previously, these operations were maintained by the city governments on an <br />individual or collective basis. The MWCC merged with the Metropolitan Council during 1994 to form <br />Metropolitan Council Wastewater Services (MCWS) and is now called the Metropolitan Council Environmental <br />Services (MCES). The MCES bills the City annually based upon estimated volume and budgeted costs. The <br />City follows the accounting policy of recognizing these charges as an expense of the sewer utility operation in <br />the year for which they are billed. <br />Note 8 STEWARDSHIP COMPLIANCE AND ACCOUNTABILITY <br />Deficit Fund Balances <br />The City has deficit fund balances at December 31, 2004 as follows: <br />Fund Balance <br />Deficit <br />Economic Development Authority $ (202) <br />Dedicated Parks (669,450) <br />Municipal State Aid (375,970) <br />Tax Increment Financing 1 -10 (7,493) <br />Tax Increment Financing 1 -11 (22,899) <br />Birch Hodgson Street Improvement (22,873) <br />Legacy Woods Edge Improvement (97,290) <br />The City intends to fund these deficits through future tax levies, special assessment levies, tax increments, <br />transfers from other funds, and various other sources. <br />Note 9 CONTINGENCIES <br />Litigation - The City attorney has indicated that existing and pending lawsuits, claims and other actions in which <br />the City is a defendant are either covered by insurance; of an immaterial amount; or, in the judgment of the City <br />attorney, remotely recoverable by plaintiffs. <br />Federal and State Funds - The City receives financial assistance from federal and state governmental agencies in <br />the form of grants. The disbursement of funds received under these programs generally requires compliance <br />with the terms and conditions specified in the grant agreements and is subject to audit by the grantor agencies. <br />Any disallowed claims resulting from such audits could become a liability of the applicable fund. However, in <br />the opinion of management, any such disallowed claims will not have a material effect on any of the financial <br />statements of the individual fund types included herein or on the overall financial position of the City at <br />December 31, 2004. <br />48 <br />