Management Report and Recommendations 12/31/1984

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City of Lino Lakes, Minnesota Management Report, Page 16 The amount of General Fund reserve required to meet emergency and /or unanticipated expenditures is not readily quantifiable. Rather, the level of this requirement must be established by the City based on the history of the City and the philosophy of "adequate" reserve coverage. The reserve requirement to deal with unforeseen intergovernmental revenue reductions is also difficult to quantify. State and Federal legislation dealing with shared aids is somewhat unpredictable. The City must strive to remain current on the effects of changing legislation and budget such aids accordingly. A reserve balance in the City's General Fund will mitigate the adverse effects of aid reductions which are received after expenditure budget commitments are made. The City's minimum cash flow reserve requirement is measurable. For the City of Lino Lakes, the minimum required surplus is $485,500 computed as follows: 1985 Budgeted Levy (Includes Homestead Credit) 1985 Anticipated Local Government Aid Total $ 775,000 196,000 $ 971,000 Minimum Required Cash -Flow Reserve (One -Half of Total) $ 485,500 The City improved the financial position and undesignated reserve balance of the General Fund over the past year. We encourage the City to increase efforts toward improving this financial position until an appropriate level of reserve balance is achieved. 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.