Management Report and Recommendations 12/31/1992

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City of Lino Lakes, Minnesota Management Report, Page 17 A summary of the purposes and benefits of General Fund Reserve balances is as follows: Purpose of Reserves Benefits of Reserves Cash flow timing differences, • Favorable bond rating indicator. Expenditures are incurred somewhat evenly throughout the year. Property taxes & State aids are not received until the second half of the year. A reserve of one -half of such revenues is therefore recommended. • Supplements revenues with investment earnings. Intergovernmental revenue cutbacks, • Provides resources for minor projects or feasibility reports. The City is vulnerable to legislative actions at both the Federal & State leveL Federal funding to Local government has been substantially curtailed in recent years. Annual adjustment of • Avoids temporary overdrafts prior to Local Government Aid & HACA formulas is a constant threat major receipts. Capital outlay replacement, • • City may study effects of revenue cuts before gradual program reductions. Avoids overburdening of annual budgets for Internal escrow for purchases which may exceed amounts available in any single budget cycle. This may also be accomplished through transfers to dedicated replacement funds. Emergency or unanticipated expenditures, certain capital outlay. Examples include natural disasters, law suits, comparable worth implementation and premature breakdown • Provides the City greater options to deal with of vital equipment. unexpected events. Special City Council Projects. Preliminary studies, interfund loans and minor projects are examples of reserve uses. SPECIAL REVENUE FUND The financial statements for the City's Special Revenue Fund are presented in Statements 8 and 9 of the 1992 Annual Financial Report. Special Revenue Funds are a type of governmental fund to account for the proceeds of specific revenue sources (other than expendable trusts or for major capital projects) that are legally restricted to expenditures for specified purposes. During 1990, the City adopted Resolution 33 -90 which authorized the City to establish an Economic Development Authority (EDA) pursuant to Minnesota Statutes sections 469.00 through 469.108. The EDA was established with specific powers and obligations to promote and to provide incentives for economic development within the City of Lino Lakes. The financial activity of the EDA has been reported in the City's Annual Financial Report in accordance with the National Council on Governmental Accounting Statement No. 3, Defining the Governmental Reporting Entity. Statement No. 3 requires inclusion of the EDA due to the City Council having oversight responsibility of the EDA's activities.