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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2007 <br />Note 4 CITY INDEBTEDNESS (CONTINUED) <br />Public Project Revenue Bonds and Civic Complex Lease Revenue Bonds — These bonds were issued by the <br />Economic Development Authority (EDA) of Lino Lakes for the purpose of financing the construction of <br />public facilities. Pursuant to Minnesota Statutes and a lease purchase contract between the EDA and the <br />City of Lino Lakes, a Trust Indenture between the EDA and a regional bank has been established for the <br />purpose of financing payment of these bonds. The City has pledged rental payments in amounts equal to the <br />debt service requirements and plans to annually appropriate City funds available for this purpose. As <br />required by bond covenant, a reserve account has been established with a trustee, which is to be used to pay <br />principal and interest on the bonds in the event that other available resources are inadequate to do so. <br />Liability for Compensated Absences — This liability represents vested benefits earned by governmental fund <br />employees through the end of the year which will be paid or used in future periods. For the governmental <br />activities, compensated absences are generally liquidated by the general fund. The liability for Proprietary <br />Fund employees is included in the accrued liabilities of those funds. <br />Note 5 LEGAL DEBT MARGIN <br />The City is subject to a statutory limitation by the State of Minnesota for bonded indebtedness payable <br />principally from property taxes. The City of Lino Lakes' legal debt margin for 2007 is computed as follows: <br />12/31/07 <br />Market value $ 1,927,807,500 <br />Applicable percentage 2.0% <br />Debt Limit 38,556,150 <br />Amount of debt applicable to debt limit: <br />Total bonded debt <br />Less: Special assessment bonds <br />Public project revenue bonds <br />Tax abatement bonds <br />Utility revenue bonds <br />Tax increment financing bonds <br />Revenue bonds <br />Total debt applicable to debt limit <br />Legal debt margin <br />47 <br />25,944,000 <br />(12,520,000) <br />(285,000) <br />(2,460,000) <br />(570,000) <br />(4,215,000) <br />(1,855,000) <br />4,039,000 <br />S 34,517,150 <br />