Comprehensive Annual Financial Report 12/31/1997

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1997 Note 12 CONTINGENCIES Litigation - The City attorneys, except as described in the next paragraph, have indicated that existing and pending lawsuits, claims and other actions in which the City is a defendant are either covered by insurance; of an immaterial amount; or, in the judgment of the City attorneys, remotely recoverable by plaintiffs. A property owner has appealed levied special assessments m the amount of approximately $585,000 claiming there is no benefit to his property. The City attorneys have indicated that they would not expect the court to reduce the special assessment to less than approximately $250,000. Federal and State Grants - The City receives fmancial assistance from federal and state governmental agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with the terms and conditions specified in the grant agreements and is subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the applicable fund. However, in the opinion of management, any such disallowed claims will not have a material effect on any of the fmancial statements of the individual fund types included herein or on the overall fmancial position of the City at December 31, 1997. Tax Increment Districts - The City's tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. Management has indicated that they are not aware of any instances of noncompliance which would have a material affect on the fmancial statements. Note 13 DEFERRED AD VALOREM TAX LEVIES - BONDED DEBT General Obligation bond issues sold by the City are fmanced by ad valorem tax levies and special assessment bond issues sold by the City are partially fmanced by ad valorem tax levies in addition to special assessments levied against the benefiting properties. When a bond issue to be fmanced partially or completely by ad valorem tax levies is sold, specific annual amounts of such tax levies are stated in the bond resolution and the County Auditor is notified and instructed to levy these taxes over the appropriate years. The future tax levies are subject to cancellation when and if the City has provided alternative sources of financing. The City Council is required to levy any additional taxes found necessary for full payment of principal and interest. These future scheduled tax levies are not shown as assets in the accompanying fmancial statements at December 31, 1997 and 1996. Future scheduled tax levies for all bonds outstanding at December 31, 1997 totaled $4,544,223. 47