Comprehensive Annual Financial Report 12/31/1997

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1997 Property and casualty insurance is provided through a pooled self - insurance program through the LMCIT. The City pays an annual premium to the LMCIT. The City is subject to supplemental assessments if deemed necessary by the LMCIT. The LMCIT reinsures through commercial companies for claims in excess of various amounts. The City retains risk for the deductible portion of the insurance policies and for any exclusions from the insurance policies. These amounts are considered immaterial to the fmancial statements. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. Note 18 COMMITMENTS COMMITTED CONTRACTS At December 31, 1997, the City had the following commitments for uncompleted construction contracts: Project Amount 4th Avenue trunk utility $7,709 Laurene Avenue Lift Station 36,168 Village Phase I 9,442 Centennial School 5,334 Water storage tank #2 27,058 LEASE COMMITTMENT The City of Lino Lakes entered into a lease agreement dated December 8, 1997 whereby the City will construct a facility on property it already owns. Upon completion, this facility will be leased to the tenant on or about November 1, 1998 and continue until June 30, 2009. The tenant's payments shall be the lesser of either the City's related debt service payments or the maximum rent equated to $110 per square feet total construction costs. In no event shall the tenant be charged any amount above $110 per square foot net construction costs or a total of $1,200,000 over the term of the lease. Title to the property will remain with the City. Note 19 CONDUIT DEBT OBLIGATIONS The City has issued Industrial Development Revenue Bonds to provide fmancial assistance to private- sector entities for the acquisition and construction of industrial and commercial facilities which are deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private sector entity served by the bond issue. The City is not obligated in any manner for the repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 1997, one series of Industrial Revenue Bonds was outstanding with an aggregate remaining principal balance of $6,000,000. 50