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City of Lino Lakes, Minnesota <br />Management Report <br />Capital Project Funds <br />Contract Management <br />The City of Lino Lakes collected connection charges from an area of the City which used <br />the infrastructure of a bordering City. A 1987 agreement (and two subsequent amendments) <br />required payment of specified charges to the bordering City. The City of Lino Lakes neglected <br />to make the payments as required and the border City was apparently unaware of their <br />contractual rights. On May 1, 1998, the Cities began negotiating a settlement of past charges <br />due. The 1997 financial statements reflect a net liability of $390,683 based on the amounts <br />negotiated as follows: <br />Area and Sewer <br />Unit Charge Utility <br />Fund (406) Fund (602) Total <br />Area and unit charges $297,790 $ - $297,790 <br />Sewer usage charges (107,691) (107,691) <br />Lost interest/penalty 200,584 200,584 <br />Totals $498,374 ($107,691) $390,683 <br />The adjustment to the Sewer Utility Fund was the result of determining that a number of <br />accounts were no longer using the sewer infrastructure of the neighboring City. The net amount <br />due of $390,683 was paid in May, 1998. <br />The obligation to pay connection charges was defined in the 1987 "Sanitary Sewer and <br />Watennain Extensions and Service Agreement, Shoreview - Lino Lakes Baldwin Lake Area" <br />(the Agreement) and two subsequent amendments to the Agreement. A summary of key <br />provisions of the Agreement is as follows: <br />1) Area of service defined as County Road J between Highway 49 and the western border <br />of Lino Lakes (II). <br />Page 37 <br />