10-06-14 Council Packet - Laserfiche WebLink

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Capital Projects funds are created at the time that projects are undertaken by the City. Some funds are perpetual, or ‘revolving’ funds – such as the Building and Facilities fund, the Capital Equipment Replacement fund, etc. Other capital project funds exist while the project is being undertaken, after which the fund is dissolved. Most capital projects are financed through the issuance of bonded debt, grants or cooperative agreements. In nearly all of these cases, the use of the proceeds is regulated or restricted to the projects by the terms of the agreement or by the bond documents. Once the project is completed, the fund is closed and any residual balances are transferred to a related fund, i.e. balance from a bond-financed project are dedicated to the debt service fund for that bond. Enterprise funds are created at the time the City initiates a business-like venture, such as a utility, a community center, etc., where a product or service is sold. Under these circumstances there is an investment in infrastructure in order to provide the product or service. Fees are established to pay for the operation of the enterprise and for ongoing maintenance and replacement of infrastructure used in the enterprise. Lino Lakes operates water and sewer utilities and charges its customers quarterly fees for the use/consumption of these resources. The City Council has established that the cost of depreciation be included in its fee structure to provide for the maintenance and eventual replacement of system infrastructure. The cash balance of each fund reflects the accumulation of resources for this purpose. Agency and Fiduciary funds are used when the City acts as an agent and custodian of funds on behalf of an outside agency/entity. The City operates a fund for contractor’s deposits, used to finance cost of development review and land use related activities. The use of these funds is restricted by the terms of the development agreements with the developers. Once completed, any residual balances are returned to the developer. The Foxborough Environmental Trust fund is used for environmentally-related projects within this subdivision. This fund includes a $100,000 nonexpendable trust, which is intended to generate interest income to use for environmental projects. Interest Income By Fund Attached is a spreadsheet which shows city investment income by fund for each year from 2008 through 2013. At the bottom of the spreadsheet annual average investment yields are listed, along with industry benchmarks for comparison purposes. State Statutes provide for the investment of public funds not needed for immediate use. Minnesota Statute 118A establishes the authority and specific parameters for the investment of public funds. The range of investments for public funds is quite restricted in order to preserve the safety and liquidity of invested funds. Investments in commercial banking products, such as bank deposits, certificates of deposit, etc., over the FDIC insured level of $250,000 must be collateralized. Additionally, Lino Lakes, as most cities, has established an investment policy to guide the investment of city cash reserves. Staff uses a ‘pooled’ investment approach, whereby cash from all funds is pooled together for investment purposes. This allows for sizing investments such that they may be more marketable to achieve better yields. The interest income generated through the investments is allocated to the various funds using the average cash balance of the funds. Funds having a negative cash balance and contractor deposits are not allocated interest income. For budgeted funds, interest income is included in the budgeted revenue sources. Interest income in debt service funds and tax increment funds are dedicated and defined as bond/TIF proceeds. Interest income in capital project funds is dedicated to the financing of that particular project.