Comprehensive Annual Financial Report 12/31/2009

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Umwr Immo City of Lino Lakes, Minnesota Management's Discussion and Analysis December 31, 2009 FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS As noted earlier, the City of Lino Lakes uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. Governmental Funds The focus of the City of Lino Lakes' governmental funds is to provide information on near -term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Lino Lakes' financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City of Lino Lakes' governmental funds reported combined ending fund balances of $21,072,433, an increase of $4,887,439, or 30 %, over the previous year, primarily due to the construction financing for the 135E /County Road 14 interchange. Approximately 78% of this total amount, or $16,354,568, constitutes unreserved fund balance, which is available for spending at the government's discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed 1) to liquidate contracts and purchase orders of the prior period ($198,744), 2) to pay debt service ($3,457,349), 3) to fund interfund advances ($736,772), 4) to fund environmental improvements ($100,000), or for long -term notes receivable ($225,000). The general fund is the primary operating fund of the City of Lino Lakes. At the end of the current fiscal year, unreserved fund balance of the general fund was $5,191,396, while the total fund balance was $5,387,964. As a measure of the general fund's liquidity, it may be useful to compare unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 57% of total general fund expenditures, while total fund balance represents 60% of that same amount. The fund balance of the City of Lino Lakes' general fund decreased by $196,177 during the current fiscal year. A soft real estate market and the onset of an economic recession in December, 2007, reduced building activities again this year which decreased permit revenue. The recession also had an impact on property tax delinquencies, interest rates, which made a significant impact on budgeted investment earnings, and intergovernmental revenues expected from the state. Reduced expenditures, primarily for personal services and contractual services, offset some of the reduced revenues. However, an early retirement incentive program to encourage personnel reductions, a personnel litigation settlement, and a transfer to another governmental fund toward the annual installment of an interfund loan for property acquisition, all of which were approved by City Council actions, were the primary causes of the year -end deficit. Overall, the general fund's revenues were within 4% of the amended budget, while expenditures and transfers were 2% below budgeted levels. The G.O. improvement bonds 2005A fund has a total fund deficit of ($558,443). This fund is related to the bonds issued for the Legacy Woods Edge improvement project. The payment of debt service and delinquency in the collection of special assessments dedicated to this issue caused a significant decrease in this fund in 2009. An interfund loan from the Sewer fund has aided in the payment of debt service for this issue. The 135E Interchange fund has a total fund balance at year -end of $4,304,023, primarily due to the issuance of debt for construction financing. This balance will be reduced throughout 2010 and 2011 as the interchange project progresses. The area and unit charge fund has a total fund balance of $2,898,162, of which $736,772 is reserved for advances to other funds, and $2,161,390 is unreserved and available for financing capital improvements. The fund balance during the current year increased by $249,199, due in large part to the reduction in the advances to other funds and to lower expenditures in 2009.