Comprehensive Annual Financial Report 12/31/1999

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1999 Note 4 CITY INDEBTEDNESS (CONTINUED) Public Project Revenue Bonds and Civic Complex Lease Revenue I3onds — These bonds were issued by the Economic Development Authority (EDA) of Lino Lakes for the purpose of financing the construction of public facilities. Pursuant to Minnesota Statutes and a lease purchase contract between the EDA and the City of Lino Lakes, a Trust Indenture between the EDA and a regional bank has been established for the purpose of financing payment of these bonds. The City has pledged rental payments in amounts equal to the debt service requirements and plans to annually appropriate City funds available for this purpose. As required by bond covenant, a reserve account has been established with a trustee, which is to be used to pay principal and interest on the bonds in the event that other available resources are inadequate to do so. Through the transactions described above, the City (Primary Government) has, in substance, assumed the debt service on the revenue bonds issued by the EDA. Therefore, the bonds have been included in the Primary Government's General Long -Term Debt Account Group. Further, the lease payment made by the City will be reflected as debt service principal and interest payments on the City's operating statements. Contract for Deeds — The City has entered into two contracts for deed bearing interest at 8 %, these contracts were issued for the purchase of land for the express purpose of resale. The contracts for deed will be repaid from the proceeds of land sales. One of the contracts calls for monthly interest only payments with a balloon payment due in December of 2002. The second contract calls for payments equal to $2.50 per square foot to be made as land is sold, with the final unpaid balance due on December 1, 2002. Such payments are then applied first to interest accrued since the last payment date and then to the principal balance. The third contract for deed bears interest at 6 %, this contract calls for payments over the next three years. Liability for Compensated Absences — This liability represents vested benefits earned by governmental fund employees through the end of the year which will be paid or used in future periods. The liability for Proprietary Fund employees is included in the accrued liabilities of those funds. Refunded Bonds General Obligation Improvement Refunding Bonds, Series 1992A — In 1999, the City issued General Obligation Improvement Refunding Bonds, Series 1999A to advance refund the G.O. Improvement Refunding Bonds, Series 1992A in a crossover refunding pursuant to Minnesota Statutes § 475.67, Subd.13. The proceeds of the 1999A issue were placed into an irrevocable trust fund to provide or the future debt service of the 1992A bonds. Debt service on the series 1999A bonds will be paid from the trust fund through February 1, 2001 and the City will pay debt service thereafter. The City will continue to pay debt service on the 1992A bonds through February 1, 2001. The call date is February 1, 2001, at which time the trust fund will pay the 1992A bonds with maturity dates after February 1, 2002. As a result of the advance refunding, the City achieved a debt service savings of $54,542 on a present value basis using the yield of the bonds as the discount factor. The trust account assets and the liability for the bonds are included in the City's financial statements until defeasance occurs. General Obligation Water Revenue Refunding Bonds, Series 1992B — In 1999, the City issued General Obligation Improvement Refunding Bonds, Series 1999B to advance refund the G.O. Improvement Refunding Bonds, Series 1992B in a crossover refunding pursuant to Minnesota Statutes § 475.67, Subd.13. The proceeds of the 1999B issue were placed into an irrevocable trust fund to provide or the future debt service of the 1992B bonds. Debt service on the series 1999B bonds will be paid from the trust fund through February 1, 2001 and the City will pay debt service thereafter. The City will continue to pay debt service on the 1992B bonds through February 1, 2001. The call date is February 1, 2001, at which time the trust fund will pay the 1992B bonds with maturity dates after February 1, 2002. As a result of the advance refunding, the City achieved a debt service savings of $20,774 on a present value basis using the yield of the bonds as the discount factor. The trust account assets and the liability for the bonds are included in the City's financial statements until defeasance occurs. 33