Management Report and Recommendations 12/31/1988

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City of Lino Lakes, Minnesota Management Report, Page 35 The above modifications require a successful implementation of the City's general ledger computer system (see later comments). The City may receive connection charges on a cash basis (prepayment) as individual residences or businesses connect to the system. Alternatively, and more commonly, the City adds connection charges to assessment rolls. An assessment roll, therefore, consists of the lateral assessment charge for water, sewer, streets, etc. which directly correlates to construction costs incurred plus an amount in accordance with City policy for water connection, water area, sewer connection and sewer area. The assessment portion which relates directly to current construction costs (lateral assessment charges) is pledged directly to the related debt service fund to retire outstanding bonds. The area and connection charge portion of the assessment roll, however, is governed by the City's policy which was established by Resolution #1 -88. Such connection and area charges are contingently pledged to the related debt service fund in accordance with this policy. These amounts are to be segregated to the connection and area charges fund and such amounts are transferred on an as needed basis to the related debt service fund. Any surplus accruing above the amount required to retire bonds will be available for expansion of the core water and sewer systems of the City. The current practice of adopting one assessment roll for lateral charges and area and connection charges diminishes the ability of the City to segregate the different revenue types to the appropriate fund types. We recommend that the City adopt an alternate procedure whereby the lateral assessments are included on one assessment roll and area and connection charges are included on another assessment roll. For 1988, the combined assessment rolls were recorded as revenue and deferred revenue of the related debt service fund. When the City amends its procedure relative to adoption of assessment rolls on a split basis, such assessment rolls may be allocated to the appropriate fund in accordance the connection and area charge policy. Administrative Construction Charges/Public Improvement Policy The City incurs expenditures in the General Fund through use of administrative time and effort in the completion of construction projects. It is appropriate for the City to charge an interfund administrative fee for these services during the construction phase of the project. A common basis for the fee is a percent of the project or of the contract (either a flat percent or a sliding percent based on the size of the project).