Comprehensive Annual Financial Report 12/31/2003

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Long -term financial planning. The City is in the midst of working with a developer to develop the southeast quadrant of I -35W and Lake Drive. This mixed -use development would occur over a period of two to five years and would include up to 450 dwelling units, retail commercial business, a community green and park and trail amenities. The YMCA, in partnership with the City, is also planning a facility within the development. The City's participation in the YMCA will be $1.5 million plus land and infrastructure. The City has secured a CDBG grant of $125,000 to be used toward a teen center within the YMCA. WIND To facilitate this development, street, streetscape, water, sewer, and storm water improvements must be installed within the development area, as well as improvements to the existing Lake Drive. Engineering estimates for - these improvements is estimated at approximately $9 million and would be financed with G.O. special assessment bonds. The City also believes that this development could result in additional ongoing costs involved in servicing and maintaining the streets and public areas. The City's five -year financial plan, adopted in January, 2003, identifies street and utility improvements totaling $29,185,000 over the period of 2003 through 2007. These improvements are anticipated to be funded through a number of funding sources, including special assessments, municipal state aid road funds, the area and unit trunk fund, the stormwater management fund, tax increment financing and voter - approved tax levies. Improvements to several of the City's neighborhood parks and the City's trail system are also planned over this period in the amount of $825,000. These improvements will be funded through park dedication fees and the dedicated parks fund. Cash management policies and practices. The City's policy is to invest all available moneys at competitive rates in accordance with Minnesota law. Investments are made by minimizing credit and market risks while maintaining a competitive yield. Funds are invested in certificates of deposit, commercial paper and U.S. government agencies. Cash is pooled in one account to provide maximum return. The City Council reviews the investment policy annually and last amended it in 1998. Cash temporarily idle during the year was invested in certificates of deposit, commercial paper, and obligations of the U.S. Treasury. The City's investment policy's primary objective is safety of principal. Therefore, all deposits were either insured by Federal depository insurance or were collateralized as required by State Statute. Due to the weakened economy, a low interest rate environment has persisted over the few years and has had a significant impact on the City's investment earnings. The average yield on investments for 2003 was 2.39 %. Investment income includes positive or negative changes in the fair value of investments. Changes in fair value during the current year, however, do not necessarily represent trends that will continue; nor is it always possible to realize such amounts, especially in the case of temporary changes in the fair value of investments the City intends to hold to maturity. Risk management. The City's general property, liability and worker's compensation coverage is provided through the League of Minnesota Cities Trust (LMCIT. At the beginning of the insurance year, the City deposits with LMCIT a premium determined by calculating estimated payroll and applying experience modification ratios. An audit is performed at the end of the insurance year, which may produce a refund or an adjustment due. LMCIT's reserves and rates are reviewed annually by an actuary to assure that the program remains financially strong. Pension benefits. The City of Lino Lakes participates in a statewide defined benefit pension plan administered by the Public Employees Retirement Association of Minnesota (PERA). All full -time and part-time employees are covered by PERA. PERA administers the Public Employees Retirement Fund (PERF) which is a cost - sharing, multiple - employer retirement plan. A plan description and funding policy are included in the Notes to the Financial Statements beginning on page 46. 5