Management Report and Recommendations 12/31/1984

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City of Lino Lakes, Minnesota Management Report, Page 15 The City has not achieved a sound fund balance level for its General Fund. An ade- quate level is required to meet several basic needs as follows: • Timing in receipt of major revenue sources. Property taxes are primarily received by the City in July and December. Additionally, major State aids (local government aid and homestead credits) are received in six monthly installments starting in July. A majority of expenditures are incurred evenly throughout the year yet two of the major funding sources are not available until after one -half of the operating cycle has elapsed. Cities must therefore maintain a reserve balance to fund the delivery of basic ser- vices for the six months of the year prior to receiving these major revenue sources. • Cities are often under statutory restrictions which regulate the amount of property taxes which can be levied for an operating year. Additionally, there are self - imposed restrictions on the amount of property taxes which a city is willing to tax its citizens in light of increasing school district, county, and other taxing authority increases. Property tax revenue is therefore (oftentimes) a limited financing source for cities. Additionally, full collection of these property taxes is not assured. Delinquent property taxes reduce the amount available for expenditure during the current operating cycle. • Intergovernmental revenue. The Federal government, the State government and other local units of government are addressing budget shortfalls. Solutions to their budget problems are often directly passed through to cities. Intergovernmental revenues historically have been a primary funding source for delivery of basic services by Minnesota cities. As these aids are reduced, the overall revenue available to fund expenditures is impaired. The receipt of major revenues available for the City to finance basic services are limited and are not received in a timely manner (i.e., they do not match the City's operating expenditure cycle). Additionally, as described above, necessary expenditure levels are often affected by factors which are beyond the City's direct control. For these reasons, cities must maintain operating reserve balances in their General Fund. The reserve balance must be maintained at a level which will: • Assure the continuing ability to provide basic services during temporary periods of economic crisis (such as high inflation rates). • Meet cash flow timing differences. • Be adequate and available to meet emergency and /or unanticipated expenditures. • Be adequate to offset intergovernmental revenue shortfalls on a short -term basis (i.e., when cuts are made after the operating budget for the City is established). • Be available to provide supplemental financing for other City projects (optional). 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1