04-27-2015 Council Packet - Laserfiche WebLink

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Summary: Lino Lakes, Minnesota; General Obligation Management Assessment methodology, indicating financial practices exist in most areas, but that governance officials might not formalize or monitor all of them on a regular basis. Relevant management policies include monitoring budget -to -actual results on a quarterly basis. The city also maintains a five-year financial plan and a capital improvement plan, which are both updated annually. The formal fund balance policy requires an unassigned general fund balance of 40% to 50% of expenditures. Strong budgetary performance Lino Lakes' budgetary performance is strong in our opinion, with an operating surplus of 2.4% in the general fund and 7.1% across all governmental funds in fiscal 2013. The city estimates that it will report an approximate $78,000 deficit in fiscal 2014 (year ending December 2014). Although the city needed to draw down its reserves, the result was better than it had projected as the city received additional revenue from traffic control than anticipated. The city's fiscal 2015 budget calls for a drawdown from general fund reserves. Management indicates that the deficit is due to start-up costs associated with the new fire department and fire station in the city. Very strong budgetary flexibility Lino Lakes' budgetary flexibility is very strong, in our view, with an available fund balance in fiscal 2013 of 61% of operating expenditures, or $5.2 million. We expect the available fund balance will remain above 30% of expenditures for the current and next fiscal years, which we view as a positive credit factor. Very strong liquidity In our opinion, Lino Lakes' liquidity is very strong, with total government available cash of 2.8x total governmental fund expenditures and 11.3x governmental debt service in 2013. In our view, the city has strong access to external liquidity if necessary. Weak debt and contingent liability profile In our view, Lino Lakes' debt and contingent liability profile is weak. Total governmental fund debt service is 25.2% of total governmental fund expenditures, and net direct debt is 181.6% of total governmental fund revenue. Approximately 92.3% of the direct debt is scheduled to be repaid within 10 years, which is in our view a positive credit factor. Lino Lakes' combined pension and other postemployment benefit (OPEB) contributions totaled 4.0% of total governmental fund expenditures in 2013. The city made 106% of its annual required pension contribution in 2014. The city is expected to issue between $2 million and $4 million in additional debt for capital projects within the next two years. Strong institutional framework The institutional framework score for Minnesota cities with a population greater than 2,500 is strong. See the institutional framework score for Minnesota local governments. W W W. STANDARDANDPOORS. COM/RATINGSDIRECT APRIL 24, 2015 3 1395482 1 300238792