Management Report and Recommendations 12/31/1990

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City of Lino Lakes, Minnesota Management Report, Page 30 1988 Temporary Improvement Bonds The City issued these bonds to finance Erickson's 2nd Addition, Phase 2 and South Reshanau Phase 2 Improvements. These bonds will mature on October 1, 1991. Bond proceeds from the City's 1991 bond issue will be required to retire these bonds. Both projects have been addressed as of December 31, 1990. We recommend that the City transfer the remaining assets of this fund into the 1991 Debt Service Fund after the bonds have been retired on October 1. 1989 Temporary Improvement Bonds The City issued these bonds to finance Reshanau Phase 2B and 3A, West Central Sewer and — Water Trunk, Sunrise Meadows, and Woodridge Estates Improvements. During 1990 West Central Sewer and Water Trunks, Sunrise Meadows and Woodridge Estates were assessed. Reshanau 2B will be assessed in 1991. 1990B Temporary Improvement Bonds The City issued these bonds to finance the 2nd Avenue Project and to retire the 1987 Temporary Improvement Bonds. The remaining assets of the 1987 Temporary Improvement Debt Service Fund have been pledged for the retirement of the 1990B issue. 1990A Public Project Revenue Bonds These bonds were issued by the City's Economic Development Authority for the construction of a fire station and the purchase of related equipment. These bonds are obligations of the EDA and will be payable solely from revenues received from the City pursuant to an Installment Purchase Contract. The City will levy taxes for payment of the installment contract. Arbitrage Regulations Federal law prohibits excess earnings on bond proceeds maintained in construction or debt service funds. The regulations are complex and for "large issuers" (over $5 million of bonds issued in one year) there are rebate requirements. If the City of Lino lakes issues over $5 million of bonds in one year, they will be required to comply with arbitrage regulations. • Measuring investment interest earned on tax exempt bond proceeds. • Determining the yield of such investment earnings. • Comparing the yield earned with the yield of the tax exempt bonds. • Calculating the amount (if any) of excess earnings. • Reporting the excess earnings to the Internal Revenue Service annually. • Rebating such excess earnings at least every five years.