Management Report and Recommendations 12/31/1991

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City of Lino Lakes, Minnesota Management Report, Page 44 The City of Lino Lakes had rights to receive payment of net income after the accumulated retained earnings deficit is eliminated. Prior to 1988, the City received no such distributions. The Circle Pines gas utility has accumulated a positive retained earnings balance in excess of $900,000, at December 31, 1991 the Lino Lakes Franchise has a positive fund balance of $30,073. Immo Ilmor The City has taken the following actions regarding the gas utility operations: • Successfully worked to gain special State legislation to allow a greater number of members on the Joint Gas Utility Commission. • Reviewed optional criteria for representation on the Commission to allow for a fair and equitable method of appointing members from each City. • Analyzed accounting methods of allocating expenses between each City's gas operation. • Negotiated a new franchise agreement. • Considered exercising the City's option to purchase the gas utility. The new franchise agreement provides a revenue source to the City of Lino Lakes. Key features of the new agreement are as follows: 1. Term: January 1, 1987 through March 31, 2012. 2. Revenue to the City of Lino Lakes based on 7% of sales except for interruptible sales which is based on 3 %. 3. Cancelable by the City of Circle Pines commencing on January 1, 1992. The City of Lino Lakes has the right to cancel the franchise agreement through the purchase of this system beginning on January 1, 1992. 4. Right to inspect the financial/accounting records to verify revenue calculations. 5. Revenue began accruing on January 1, 1987. Revenue will be received four and one- half months after the year end (i.e., first receipt was in May, 1988). 6. The City has the right to purchase the system at stated terms beginning on January 1, 1992. We commend the City for the successful efforts to receive a supplemental financing source for the City. The City received $19,286 in May, 1992 which represents the 1991 share of earnings. Earnings from inception of the new agreement total $68,738. Financial uncertainties facing metropolitan cities require diversity of revenue sources to assure adequate funding of operations without severe property tax increases.