Management Report and Recommendations 12/31/1987

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City of Lino Lakes, Minnesota Management Report, Page 19 The City is now approaching the minimum cash flow reserve amount of fund balance in the General Fund. This is a very commendable achievement especially in light of the fact that the City had virtually no reserves prior to 1983. When the City has met this primary reserve requirement, we recommend that the City consider adopting a formal City Council approved policy on reserves. The reserve policy can be "self- adjusting" by including formulas for reserves as follows: Cash flow reserve - One half of total General Fund property tax levies and state aids (see previous schedule). Intergovernmental revenue reductions - a Council designated intergovernmental revenue of the General Fund. Emergency /unanticipated expenditures - a Council designated operating expenditure budget. Other reserves - as adopted by specific City Council action. percent of total percent of The formula aspect of a reserve policy allows for annual adjustment without specific Council action. The City currently has enough fund balance to reserve for cash flow. Other reserve requirements may require further improvements in fund balance to fully meet the City's objectives. The level of fund balance of the City's General Fund is one indicator of the finan- cial strength or independence of a city. This often becomes critical during periods of high inflation; decreasing State aids; and, poor economic growth. With adequate reser- ves, these external factors are more manageable by the City. We commend the City for the improvements made in recent years to the General Fund reserve balance. These impro- vements indicate a responsible approach to City government which will assure the con- tinued ability of the City to deliver basic required services on a timely basis.