Management Report and Recommendations 12/31/1982

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City of Lino Lakes Management Report, Page 25 finance expenditures which are paid evenly throughout the year. However, the City does not receive these monies until July and December of each year. Therefore, a cash flow surplus equal to one -half of this levy is required to meet the daily cash flow needs of the City prior to the receipt of these general property taxes. Without this level of surplus, the City will be in a cash overdraft position (for its General Fund) prior to the receipt of its first tax settlement in July of each year. For 1982 and future years, the State has changed the timing of local government aid payments to all Minnesota cities. Such a change resulted in the City not receiving any local government aid until July of each year instead of equal payments four times each year. The "minimum required reserve" has therefore increased by one -half of such aid. A second reason for maintaining operating reserves is to provide a source of emergency and /or unanticipated expenditures (i.e. extraordinary storm damage, diseased trees, inflation, etc.). Operating budgets are estimates only. Inflationary factors effecting both routine procedures and emergency type costs can adversely effect the budget process. A city requires a reserve to finance these events. One method of measuring the amount of this type of reserve is to use a percent of the City's annual operating budget (i.e. 5% to 10% or more, depending upon the overall budget philosophy of the City). 1 A third reason for maintaining an operating reserve is to provide for future changes in the level of shared taxes (i.e. aids) by the State and Federal governments. At the present time, the State is involved in a budget crisis and the Federal government is involved in a tax reduction program. Although the outcome of these situations are yet to be defined, it appears certain that past trends of increasing aids to ci ties by both the State and Federal governments will not continue. It appears likely that this trend will be reversed with a larger portion of the cost of City government being financed by revenue raised locally rather than at the State or Federal levels. Local government 1 1 1 1 1 1 1 1 1 1 1 1 1 1