Management Report and Recommendations 12/31/1986

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City of Lino Lakes, Minnesota Management Report, Page 36 The City of Lino Lakes has rights to receive payment of net income after the accumu- lated retained earnings deficit is eliminated. The retained earnings for the gas utili- ties have been as follows: Retained Earnings (Deficit) City of City of Circle Pines Lino Lakes December 31, Amount Amount Total 1978 $ 85,581 $(108,627) $(23,046) 1979 124,685 (95,997) 28,688 1980 147,248 (92,392) 54,856 1981 153,463 (83,716) 69,747 1982 224,418 (64,129) 160,289 1983 285,569 (42,487) 243,082 1984 326,390 (26,444) 299,946 1985 415,421 (1,971) 413,450 The preceding two schedules indicate that the Circle Pines gas utility operation has been more profitable than the Lino Lakes operation. Additionally, the Circle Pines gas utility has a positive retained earnings balance in excess of $415,000 while the Lino Lakes retained earnings account is in a deficit position. 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. The new franchise agreement will provide 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 interrup- table sales which is based on 3 %;