Comprehensive Annual Financial Report 12/31/2003

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City of Lino Lakes, Minnesota Management's Discussion and Analysis December 31, 2003 As management of the City of Lino Lakes, Minnesota, we offer readers of the City of Lino Lakes' financial statements this narrative overview and analysis of the financial activities of the City of Lino Lakes for the fiscal year ended December 31, 2003. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 3 through 6 of this report. FINANCIAL HIGHLIGHTS: • The assets of the City of Lino Lakes exceeded its liabilities at the close of the most recent fiscal year by $74,547,005 (net assets). Of this amount $19,447,162 (unrestricted net assets) may be used to meet the City's ongoing obligations to citizens and creditors in accordance with the City's fund designations and fiscal policies. • The City's total net assets increased by $4,439,650. • As of the close of the current fiscal year, the City of Lino Lakes' governmental funds reported combined ending fund balance of $15,454,578, an increase of $1,603,747 in comparison with the prior year. Approximately 70% of this total amount, or $10,890,096 is available for spending at the City's discretion (unreserved fund balance). • At the end of the current fiscal year, unreserved fund balance for the general fund was $4,775,969, or 75% of total general fund expenditures. • The City of Lino Lakes' total bonded debt increased by $735,550 (3 percent) during the current fiscal period. The key factor to the increase was the refunding of the 1996A Improvement bonds that will be called and retired in February, 2004. — OVERVIEW OF THE FINANCIAL STATEMENTS: This discussion and analysis are intended to serve as an introduction to the City of Lino Lakes' basic financial ▪ statements. The City of Lino Lakes' basic financial statements comprise three components: 1. Government -wide financial statements 2. Fund financial statements 3. Notes to the financial statements NSW AMMO This report also contains other supplementary information in addition to the basic financial statements themselves. Government -wide financial statements. The government -wide financial statements are designed to provide readers with a broad overview of the City of Lino Lakes' finances, in a manner similar to private- sector business. The statement of net assets presents information on all of the City of Lino Lakes' assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Lino Lakes is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned, but unused compensated absences). 10