HomeMy WebLinkAboutManagement Report and Recommendations 12/31/1995... CITY OF LINO LAKES, MINNESOTA
MANAGEMENT REPORT
... AND RECOMMENDATIONS
DECEMBER 31, 1995
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TAUTGES, REDPATH & CO., LTD.
CERT F!ED PUBLIC ACCOUNTANTS
To the Honorable Mayor and
Members of the City Council
City of Lino Lakes, Minnesota
This Report is prepared in conjunction with the audit of the City's 1995 Annual Financial
Report. This report is designed to provide the City added analysis of financial trends, compliance
issues and fund position.
This report presents trend analysis to illustrate the impact of the changes on the overall
funding of basic governmental services of the City, and updates financial analysis of funds and
account balances of the City. Areas which may be of particular interest to the City are as follows:
• The fund balance of the General Fund increased $215,297 in 1995 to a total of
$2,086,231 at December 31, 1995.
• During 1995 the City completed an inventory of all City assets and implemented
computerized fixed asset records. The fixed asset inventory enabled the City to
receive a "clean" opinion on its 1995 Comprehensive Annual Financial Report.
• The City will submit the 1995 Comprehensive Annual Financial Report to the
Government Finance Officers Association of the United States and Canada's
Certificate of Achievement for Excellence in Financial Reporting program.
• Appendix A outlines certain Minnesota Statute changes that impact cities.
• Appendix B outlines upcoming accounting and financial reporting standard changes
applicable to governmental entities.
We offer recommendations for improvement as appropriate with a summary of such
recommendations on the last page of this report. Additionally, we are available to discuss this
report with the City upon request.
Respectfully submitted,
L f n
Z
TAUTGES, REDPATH & CO., LTD.
Certified Public Accountants
June 3, 1996
- 4810 White Bear Parkway • White Bear Lake, Minnesota 55110 • 612/426 -7000 • FAX /426 -5004 • Member of HLB International
City of Lino Lakes, Minnesota
Management Report, Page 2
ACCOUNT BALANCE ANALYSIS OF THE
COMBINED FINANCIAL STATEMENTS
The combined financial statements of the City of Lino Lakes are presented in Statements 1
through 5 of the 1995 Annual Financial Report. The following comments relate to the Combined
Balance Sheet - All Funds (Statement 1).
Cash and Investments
Cash and investments were as follows at December 31, 1994 and 1995:
Description
Treasurer's balance - checking
Petty cash
Investments:
Certificates of deposit
Commercial paper
FNMA notes and mortgage backed securities
NOW account
GNMA
Mutual funds
Federal Farm Credit Bank
Federal Home Loan Mortgage Corp.
notes and mortgage backed securities
Treasury notes and certificates of accrual
Federal Home Loan Bank notes
Student Loan Marketing Association notes
Federal agriculture mortgage, discount notes
Certificate of Indebtedness
Totals
December 31,
1994 1995
$3,091 $367,694
300 400
490,083
795,339
2,210,290
26,700
347,874
3,067,529
405,000
1,439,255
1,947,235
450,000
300,000
Increase
(Decrease)
$364,603
100
482,160 (7,923)
1,755,923 960,584
2,299,797 89,507
(26,700)
(347,874)
1,589,870 (1,477,659)
200,000 (205,000)
1,934,427 495,172
1,678,121 (269,114)
500,000 50,000
100,000 (200,000)
150,000 251,000 101,000
$11,632,696 $11,159,392
($473,304)
Interest on investments totaled $575,116 in 1995 and $431,078 in 1994. The increased
earnings in 1995 is the result of gains on the sale of U.S. Treasury zero - coupon investments. The
ability of a city to generate investment earnings is an indication of sound fiscal management. The
interest earnings of the General Fund indicate that the City is maintaining operating reserves in
this fund. Operating reserves are mandatory to compensate for cash flow timing differences in the
receipt of major revenue sources and for various other purposes as discussed later in this report
(see "General Fund ").
City of Lino Lakes, Minnesota
Management Report, Page 3
A schedule of cash and investment balances by fund type (as adjusted for interfund
payables/receivables) is as follows:
Fund
December 31, Increase
1994 1995 (Decrease)
General $1,848,102 $1,937,813 $89,711
Special Revenue 6,746 14,021 7,275
Debt Service 1,725 ,929 1,329,794 (396,135)
Capital Project 7,675,057 7,194,651 (480,406)
Enterprise 294,765 552,116 257,351
Agency 82,097 130,997 48,900
Total $11,632,696 $11,159,392 ($473,304)
Accounting Standards
The Governmental Accounting Standards Board (GASB) issued on March 13, 1996, a
proposed statement on accounting and financial reporting for certain investments.
This proposed statement would require investments in (a) interest - earning investment
contracts, (b) external investment pools and open -end mutual funds, (c) debt securities, and (d)
equity securities to be reported at fair value. Fair value is the amount at which a financial
investment could be exchanged in a current transaction between willing parties. If the GASB's
project on investments proceeds as planned, a final statement is expected to be issued by the end
of 1996.
Essentially, this proposed statement would require the City to record virtually all investments
at fair value. Currently, the City's investments are recorded at amortized cost in accordance with
current accounting principles. This change may result in greater "swings" in investment earnings
because of market changes. At December 31, 1995, the carrying value and market value of the
City's investments was $10,397,565 and $10,378,903 respectively.
WINIV
City of Lino Lakes, Minnesota
Management Report, Page 4
Property Taxes Receivable
Delinquent taxes receivable were as follows for the past several years:
1992 1993 1994 1995
Delinquent balance - January 1 $59,664 $76,791 $29,534 $27,804
Current Levy 1,865,188 2,073,987 2,268,950 2,634,350
Total receivable 1,924,852 2,150,778 2,298,484 2,662,154
Receipts:
County:
Current 1,408,779 1,588,279 1,815,761 2,178,795
Delinquent 24,395 50,099 15,014 21,206
State 397,193 469,323 427,284 434,924
Total receipts 1,830,367 2,107,701 2,258,059 2,634,925
Unadjusted balance
Adjust to County
Delinquent balance
Total collections as a percent
of current levy
94,485 43,077 40,425 27,229
(17,694) (13,543) (12,621) (4,862)
$76,791 $29,534 $27,804 $22,367
98% 102% 100% 100%
The City has experienced a solid tax collection rate over the past four years. The adjustments
represent amounts provided by Anoka County for abatements and other adjustments to the
delinquent balances.
City of Lino Lakes, Minnesota
Management Report, Page 5
Tax Increment Receivable
The City had delinquent tax increments in the amount of $2,640 at December 31, 1995 as
follows:
TIF TIF
1 -1 1 -2 Total
Delinquent Balance - January 1 $2,480 $3 $2,483
Current Levy 199,532 119,771 319,303
Total receviable 202,012 119,774 321,786
Receipts:
Current 198,543 118,439 316,982
Delinquent (572) (2,797) (3,369)
Total receipts 197,971 115,642 313,613
Unadjusted balance 4,041 4,132 8,173
Adjustments:
Tax forfeit property (1,401) (1,401)
Net adjustments (4,132) (4,132)
Delinquent balance - December 31
$2,640 $0 $2,640
Special Assessments Receivable
Special assessments receivable consisted of the following amounts at December 31, 1994 and
1995:
December 31, Increase
1994 1995 (Decrease)
Delinquent $36,497 $37,341 $844
Deferred 2,609,301 2,484,797 (124,504)
City property 10,510 10,510
Due from County 9,201 14,467 5,266
Totals $2,665,509 $2,547,115 ($118,394)
Delinquent assessments receivable consist of amounts collectible in 1995 and prior years
which the City has not yet received. The assessments of City property relate to parcels purchased
by the City for ponding purposes. We recommend the City determine a financing source for these
assessments or delete them from the City's financial records.
WNW
MEW
City of Lino Lakes, Minnesota
Management Report, Page 6
A summary of assessment collections for the past four years is as follows:
Delinquent balance - January 1
1992 1993 1994 1995
$126,088 $118,690 $43,036 $36,497
Add:
Current installment 379,521 632,067 387,200 394,770
Amount collectible 505,609 750,757 430,236 431,267
Less:
Current collections 306,443 580,678 355,543 353,424
Delinquent collections 82,664 39,313 32,743 26,051
Total collections 389,107 619,991 388,286 379,475
Adjustments 2,188 (87,730) (5,453) (14,451)
Delinquent balance - December 31 $118,690 S43,036 $36,497 $37,341
Current collection rate 81% 92% 92% 90%
Total collections as a percent
of current levy 103 % 98 % 100 % 96 %
As shown above, the City continues to experience a stable collection rate. The primary
funding of debt payments is special assessments. Timely collection of special assessments is
required to assure timely availability of cash to meet the scheduled debt payments. We
recommend the City continue to monitor the collection rate and provide supplemental financing if
assessment collections are not adequate to meet bonded debt payments. Prepayments temporarily
provide cash and in the short term, favorably affect the City's ability to meet temporary bond
issues debt payments. If, however, prepayments are invested at significantly lower interest rates,
and/or consumed to meet current debt requirements for permanent debt issues, the City incurs a
"loss" because the interest which would have been earned on the assessment amount is not
adequately replaced by investment income. During 1994 and 1995 the City collected $1,560,816
and $1,222,771 of prepayments respectively.
City of Lino Lakes, Minnesota
Management Report, Page 7
The City collects special assessments through Anoka County. Beginning in 1993, the County
began providing limited data regarding delinquent assessment receivables. We recommend the
City continue to request improved data from the County.
Fixed Assets
During 1995, the City conducted a physical inventory of all City assets and implemented a
computerized fixed asset records system. The fixed asset inventory enabled the City to receive a
"clean" opinion on its 1995 Comprehensive Annual Financial Report. This project required
significant effort of the finance department and others involved.
We recommend that the City continue its efforts to maintain the fixed asset system.
WNW
City of Lino Lakes,MVfinnesota
Management Report, Page 8
GENERAL FUND
The general fund of the City is maintained to account for the current operating and capital
outlay expenditures common to all cities. These basic services include general government, public
safety, public works and parks, recreation and forestry.
State aids (including local government aid, HACA and other state aids) and local property
taxes represent approximately 70% of revenue sources of the general fund for 1995 and 73% of
budgeted revenue sources for 1996.
A schedule of these revenue sources of the general fund is as follows:
State Aids Property Taxes All Other Total
Year Amount Percent Amount Percent Amount Percent Amount Percent
1988 $549 ,567 30.7% $769 ,915 42.9% S473,490 26.4% $1,792,972 100.0%
1989 682,407 32.8% 848,472 40.8% 550 ,916 26.5% 2,081,795 100.0%
1990 600,419 26.2% 994 ,399 43.3% 699,831 305% 2,294,649 100.0%
1991 452,364 18.7% 1,179,087 48.7% 790,083 32.6% 2,421,534 100.0%
1992 564 ,514 20.9% 1 ,206,998 44.6% 934 ,282 34.5% 2,705,794 100.0% '
1993 628,790 19.8% 1,420,369 44.7% 1,128,503 35.5% 3,177,662 100.0%
1994 651 ,370 19.8% 1 ,597,542 483% 1,046,486 31.8% 3,295,398 100.0%
1995 674,079 17.9% 1 ,941,415 51.5% 1,156,841 30.7% 3,772,335 100.0%
1996* 666,704 16.3% 2 ,328,302 57.0% 1,089,542 26.7% 4,084,548 100.0%
* Budgeted
City of Lino Lakes, Minnesota
Management Report, Page 9
All other revenue consists of the following as of December 31, 1994 and 1995:
December 31, Increase
1994 1995 (Decrease)
Licenses and permits $383,388 $544,267 $160,879
Federal aid 1,695 28,598 26,903
County aid 24,272 35,975 11,703
Charges for services 353,026 241,393 (111,633)
Fines and forfeits 72,454 93,861 21,407
Interest on investments 81,373 78,659 (2,714)
Refunds and reimbursements 29,077 32,481 3,404
Gas franchise fees 61,734 30,486 (31,248)
Cable TV 16,335 18,255 1,920
Miscellaneous 23,132 52,866 29,734
Total $1,046,486 $1,156,841 $110,355
In prior years, it was the City's policy to recognize gas franchise fee revenue when received
and not in the year earned. The City has amended this policy, which has resulted in both the 1993
and 1994 gas franchise revenue being recorded in 1994.
The increase in licenses and permits is due to increased new home starts in 1995 following the
1994 building moratorium, prison expansion and industrial development. The decrease in charges
for services is due to a decrease in administrative and engineering/planning fees resulting from no
bonding in 1995.
UMW
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UMW
City of Lino Lakes, Minnesota
Management Report, Page 10
State aids for the General Fund have consisted of the following amounts from 1990 through
1995 actual and 1996 budgeted:
1996
State Aids 1990 1991 1992 1993 1994 1995 Budgeted
Local Government Aid $163,165 $95,440 $94,960 $90,138 $145,445 $149,372 $155,212
Homestead Credit 324,828 251 ,303 290,428 356,182 368,324 380,335 367,492
Equalization aid 44,547 42,991 45,547 42,854
Police Aid 35,662 43,044 44,692 47,253 43,622 56,817 59,000
MSA - Streets 13,935 13,170 81,232 86,246 85,187 77,945 85,000
Other Aids 18,282 6,416 7,655 6,117 8,792 9,610
Totals $600,419 $452,364 $564,514 $628,790 $651,370 $674,079 $666,704
Percent change (12.01)% (24.66)% 24.79% 11.39% 3.59% 3.49% (1.09)%
City of Lino Lakes, Minnesota
Management Report, Page 11
Revenue of the general fund for the past two years has been as follows:
Property taxes
Licenses and permits
Intergovernmental revenue:
Federal
State
County
Charges for services
Fines and forfeits
Interest on investments
Other
Totals
1994 1995 Increase
Amount Percent Amount Percent (Decrease)
$1,597,542 48.5% $1,941,415 51.5% $343,873
383,388 11.6% 544,267 14.4% 160,879
1,695 0.1% 28,598 0.8% 26,903
651,370 19.8% 674,079 17.9% 22,709
24,272 0.7% 35,975 1.0% 11,703
353,026 10.7% 241,393 6.4% (111,633)
72,454 2.2% 93,861 2.5% 21,407
81,373 2.5% 78,659 2.1% (2,714)
130,278 3.9% 134,088 3.4% 3,810
$3,295,398 100.0% $3,772,335 100.0% $476,937
Detail of the above revenue is presented m Statement 7 of the 1995 Annual Financial Report.
General Fund
1995 Revenue By Source
Fines and Forfeits 2.5%
Charges for Services 6.4%
Interest and All Other 5.6%
Licenses and Permits
14.4%
Property Taxes
51.5%
Vamo
City of Lino Lakes, Minnesota
Management Report, Page 12
Expenditures of the general fund for the past two years are as follows:
1994 1995 Increase
Amount Percent Amount Percent (Decrease)
Current:
General government $1,020,559 32.2% $1,170,345 32.9% $149,786
Public safety 1,125,207 35.5% 1,242,959 34.9% 117,752
Public works 537,874 17.0% 692,516 19.5% 154,642
Parks, recreation and forestry 378,700 11.9% 395,297 11.1% 16,597
Capital outlay 107,522 3.4% 55,921 1.6% (51,601)
Totals $3,169,862 100.0% $3,557,038 100.0% $387,176
Details of the above expenditures are presented in Statement 7 of the 1995 Annual Financial
Report.
General Fund
1995 Expenditures By Category
Parks, Recreation &
Forestry 11.1%
Public Works
19.5%
Capital Outlay 1.6%
General Government
32.9%
Public Safety 34.9%
City of Lino Lakes, Minnesota
Management Report, Page 13
The fund balance of the general fund increased by $215,297 in 1995 as follows:
Budgeted decrease in fund balance ($50,000)
Actual revenues over (under) budgeted revenues:
Property taxes $19,062
Licenses and permits 202,497
Intergovernmental revenue (2,426)
Charges for services (78,657)
Fines and forfeits 13,861
Interest on investment 28,659
Refunds and reimbursements (4,519)
Miscellaneous (9,222)
Net revenue over budget
Actual expenditures under (over) budgeted expenditures:
General government 12,868
Public safety 26,824
Public works 27,497
Parks, recreation and forestry 7,369
Capital outlay 21,484
Net expenditures under budget
169,255
96,042
Total increase in fund balance $215,297
Detail of the preceding budget variances are presented in Statement 7 of the 1995 Annual
Financial Report.
As previously discussed, licenses and permits are over budget due to increased new home
starts in 1995 following the 1994 building moratorium, prison expansion and industrial
development. Charges for services are under budget due to decreased administrative and
engineering/planning fees being charged, which was a result of the City not issuing improvement
bonds in 1995. Public safety expenditures are under budget due mainly to an illness of the police
secretary. Public works is under budget due to the hiring of a budgeted new employee late in the
year. Capital outlay is under budget due mainly to the delay of ADA purchases and fewer trees
being purchased by the City.
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City of Lino Lakes, Minnesota
Management Report, Page 14
The City's December 31, 1995 fund balance totaled $2,086,231. The City's General Fund
balance has been as follows for the past ten years:
December 31,
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
Fund Balance
Reserved/
Designated
$83,714
52,593
96,626
53,290
1,169,624
1,265,236
1,406,296
1,673,039
1,870,934
2,086,231
Undesignated
$455,666
589,799
747,836
976,763
Total Increase
$539,380
642,392 $103,012
844,462 202,070
1,030,053 185,591
1,169,624 139,571
1,265,236 95,612
1,406,296 141,060
83,620 1,756,659 350,363
- 1,870,934 114,275
2,086 ,231 215,297
The increase in designated fund balance reflects the City's adoption of a reserve policy
pursuant to resolution 91 -3. The reserve policy addresses three areas: 1) Cash flow
requirements, 2) Contingent employee benefits, and 3) General contingencies.
As previously stated, property taxes and related state aids account for over 73% of budget
1996 revenue sources of the General Fund. This revenue is not received until July and December
of each year (the second half of the year). As a result, the City is required to have sufficient
reserves at the beginning of the year to fund operations of the first half of the year. The City's
cash flow reserve requirement is computed as follows:
1996 Budgeted Levy (Includes Homestead Credit)
1996 Anticipated Local Govemment Aid
Total
Cash -Flow Reserve (50% of total)
$2,685,794
155,212
$2,841,006
$1,420,503
City of Lino Lakes, Minnesota
Management Report, Page 15
The general contingency reserve is equal to 15% of the City's general fund expenditure budget
for the ensuing year as follows:
1996 budgeted expenditures $4,084,548
Applicable percentage 15 %
General contingency reserve $612,682
The contingent employee benefit reserve is equal to an amount computed at December 31 for
accrued vacation and sick leave.
A summary of these reserves is as follows:
Reserve General
Requirement Fund
Per City Balance
Reserve/Designation Policy Available Difference
Prepaid items $ 123,673 $ 123,673 $
Cash flow 1,420 ,503 1,420,503
General contingency 612,682 542,055 70,627
Contingent employee benefits 184,015 184,015
Totals $2,340,873 $2,086,231 $254,642
The City of Lino Lakes has improved the financial position of its General Fund over the past
several years. We commend the City for these actions and encourage the City to continue to
monitor this reserve balance. An adequate reserve structure will enable the City to retain its
financial independence and integrity during adverse economic conditions.
City of Lino Lakes, Minnesota
Management Report, Page 16
A graphic illustration of monthly cash balances of the General Fund is as follows:
$2,000,000
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$o
January
Monthly General Fund Cash Balances
March
May
July
September November
As indicated above the General Fund's cash balance decreases through June prior to the July
tax settlement. The cash balance as of June 30 was $675,432 which approximates the City's
general contingency reserve requirement. This graphic illustration emphasizes the importance of
the City's cash flow reserve.
City of Lino Lakes, Minnesota
Management Report, Page 17
A summary of the purposes and benefits of general fund reserve balances is as follows:
Purpose of Reserves
Benefits of Reserves
Cash flow tuning differences.
• Favorable bond rating indicator.
• Supplements revenues with investment earnings.
• Provides resources for minor projects or
feasibility reports.
• Avoids temporary overdrafts prior to
major receipts.
• City may study effects of revenue cuts before
gradual program reductions.
• Avoids overburdening of annual budgets for
certain capital outlay.
• Provides the City greater options to deal with
unexpected events.
Expenditures are incurred somewhat evenly throughout the
year. Property taxes & State aids are not received until the
second half of the year. A reserve of one -half of such
revenues is therefore recommended.
Intergovernmental revenue cutbacks.
The City is vulnerable to legislative actions at both the Federal
& State level. Federal funding to local government has been
substantially curtailed in recent years. Annual adjustment of
Local Government Aid & HACA formulas is a constant threat.
Capital outlay replacement.
Internal escrow accumulation for purchases which may
exceed amounts available in any single budget cycle. This
may also be accomplished through transfers to dedicated
replacement funds.
Emergency or unanticipated expenditures.
Examples include natural disasters, lawsuits, comparable
worth implementation and premature breakdown
of vital equipment.
Special City Council projects.
Preliminary studies, interfund loans and minor projects
are examples of reserve uses.
City of Lino Lakes, Minnesota
Management Report, Page 18
SPECIAL REVENUE FUNDS
The financial statements for the City's special revenue funds are presented in Statements 8 and
9 of the 1995 Annual Financial Report. Special revenue funds are a type of governmental fund to
account for the proceeds of specific revenue sources (other than expendable trusts or for major
capital projects) that are restricted to expenditures for specified purposes. The City maintained
the following special revenue funds in 1994 and 1995:
Fund Balance
December 31, Increase
Fund 1994 1995 (Decrease)
Economic Development Authority ($101) $ - $101
Program Recreation 7,942 12,680 4,738
Total $7,841 $12,680 $4,839
Economic Development Authority
During 1990, the City adopted Resolution 33 -90 which authorized the City to establish an
Economic Development Authority (EDA) pursuant to Minnesota Statutes sections 469.00
through 469.108. The EDA was established with specific powers and obligations to promote and
to provide incentives for economic development within the City of Lino Lakes. The financial
activity of the EDA has been reported in the City's Annual Financial Report in accordance with
the Governmental Accounting Standard Board (GASB) Statement No. 14 the financial reporting
entity.
City of Lino Lakes, Minnesota
Management Report, Page 19
Program Recreation
This fund was established in 1993 to account for self- supporting recreation programs. A
summary of 1995 financial activity is as follows:
Revenue:
Recreation fees $57,855
Interest 693
Total revenue 58,548
Expenditures:
Personal services 29,215
Supplies 17,371
Other services and charges 1,487
Contractual services 1,221
Capital outlay 4,516
Total expenditures 53,810
Revenue over expenditures $4,738
The City does not formally adopt a budget for this fund. Prior to 1993, this activity was
accounted and budgeted for in the General Fund. We recommend the City consider budgeting
this activity in future periods.
City of Lino Lakes, Minnesota
Management Report, Page 20
DEBT SERVICE FUNDS
The combining financial statements for the debt service funds are presented in Statements 10
Vow
and 11 of the 1995 Annual Financial Report. Debt service funds are a type of governmental fund
to account for the accumulation of resources for the payment of interest and principal on debt
(other than enterprise fund debt). Debt service funds may have one or a combination of revenue
sources pledged to retire debt including property taxes, tax increments, special assessments and
area and unit charges.
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NMI
The diverse nature of the type of debt included in the same fund type requires careful analysis
to determine the adequacy of the fund balance and projected fund balance. The following
schedule extracts information from several sections of the 1995 Annual Financial Report to assist
in this analysis. The following schedule compares outstanding debt with assets pledged for debt
retirement. This comparison provides a means to judge (on a preliminary basis) the financial
position of each debt service fund.
December 31, 1995 Scheduled Final
Fund Deferred Outstanding Property Maturity
Fund Description Balance Revenue Total Debt Taxes Date
General Debt:
1992 Certificates of Indebtedness ($47,615) $718 ($46,897) $ - $54,679 2/1/95
1994 Certificates of Indebtedness 5,243 595 5,838 75,000 82,688 12/31/96
1995 Certificates of Indebtedness - 176,000 210,728 12/31/97
Public Project Revenue Bonds of 1990A 173 794 930 174 724 1 090 000 1 806 214 2/1/10
Total general debt 131,422 2,243 133,665 1 341,000 2,154,309
Special Assessment Debt:
Improvement Bonds of 1992A 390,692 204,410 595,102 3,190,000 3,217,090 2/1/06
Temporary Improvement Bonds of 1994A 125,615 555,395 681,010 2,095,000 - 11/1/97
Total special assessment debt 516,307 759,805 1,276,112 5,285,000 3,217,090
Total - All Debt Service Funds $647 ,729 $762,048 $1,409,777 $6,626,000 $5,371,399
City of Lino Lakes, Minnesota
Management Report, Page 21
The following decision chart prompts questions to further evaluate a funds financial position:
Condition A
Fund balance plus
deferred revenue
meets or exceeds
bonds payable.
Cautions
4. Is the City experiencing favorable
collection rates for special assess-
ments?
2. Are anticipated investment interest
rates earned on prepayments ade-
quate to replace assessment interest?
3. Is the timing of receipts sufficient to
meet bonded debt payments as
they become due?
4. Are significant portions of assess-
ments not scheduled for collection
(green acres, tax forfeit, etc.)?
5. Is arbitrage or negative arbitrage
an issue?
The debt service fund
is clearly adequately
funded. Plan for eventual
use of surplus.
Conclusion 1
Condition B
Fund balance plus
deferred revenue
is lees than
bonds payable.
Questions
1. Are sufficient future assets
scheduled (such as property taxes)
to meet bonded debt payments?
2. Are cash assets sufficient to
generate investment earnings?
3. Are transfers or other funding
sources available?
4. Are there future assets to pledge
such as assessments, MSA allot-
ments, etc.?
The debt service fund is
clearly got adequately
funded. Plan for altern-
ative funding (taxes,
transfers, other sources).
Conclusion 2
Variables and possible
outcomes are too diverse.
Prepare projections to
analyze possible
scenarios and options.
Conclusion 3
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City of Lino Lakes, Minnesota
Management Report, Page 22
Improvement Bonds of 1988
The Improvement Bonds of 1988 were issued to provide permanent financing for the
Temporary Improvement Bonds of 1985 and to finance Ash Street and Main Street
improvements. The remaining assets in the Temporary Improvement Bonds of 1985 were
transferred into the 1988 Improvement Bonds Debt Service Fund in 1988. These bonds were
called for early redemption on February 1, 1995.
1990A Public Proiect Revenue Bonds
These bonds were issued by the City's Economic Development Authority for the construction
of a fire station and the purchase of related equipment. These bonds are obligations of the EDA
and will be payable solely from revenues received from the City pursuant to an Installment
Purchase Contract. The City will levy taxes for payment of the installment contract.
Improvement Bonds of 1992A
The City issued these bonds to retire the 1989 Temporary Improvement Bonds and provide
additional financing for projects originally financed by the 1989 Bonds.
Temporary Improvement Bonds of 1994A
The City issued these bonds to provide financing for Trunk Highway 49 /CSAH 23
improvements, Country Lake Estate Phase I and Hodgson Road Trunk watermain. This bond
issue will be retired by a combination of assessments, area and unit charges, tax increment and
Anoka County reimbursements.
City of Lino Lakes, Minnesota
Management Report, Page 23
CAPITAL PROJECT FUNDS
The financial statements for the capital project funds are presented in Statements 12 and 13 of
the 1995 Annual Financial Report. The fund balances (deficits) of the Capital Project Funds at
December 31, 1994 and 1995 are as follows.
Fund Balance (Deficit)
December 31, Increase
Fund 1994 1995 (Decrease)
Dedicated Park $283,883 $249,014 ($34,869)
Capital Improvement Projects 42,763 (15,526) (58,289)
Community Development Block Grant (461) (1,201) (740)
Area and Unit Charge 3,318,023 5,945,209 2,627,186
Surface Water Management 317,390 515,757 198,367
Interim Construction 15,206 16,057 851
MSA Construction 49,367 52,156 2,789
Sealcoating 149,120 203,428 54,308
SAC Revolving 473,514 500,266 26,752
1989 Construction 169,782 (169,782)
1991 Construction 155,570 (155,570)
1993 Construction 16,405 (16,405)
1994 Construction 1,139,729 (334,536) (1,474,265)
1995 Construction - (35,030) (35,030)
1996 Construction (61,560) (61,560)
Apollo Business Park (67,303) 163,316 230,619
Apollo Drive Construction 68,728 118,648 49,920
Tax Increment #1 -1 1,093,296 193,474 (899,822)
Tax Increment #1 -2 425,335 28,869 (396,466)
Tax Increment #1-4 (21,363) (36,069) (14,706)
Tax Increment #1 -5 (962) (1,342) (380)
Tax Increment #1-6 (26,039) (26,039)
Tax Increment #1 -7 (157,853) (157,853)
Tax Increment #3 -1 - (5,381) (5,381)
Totals $7,628,022 $7,311,657 ($316,365)
City of Lino Lakes, Minnesota
Management Report, Page 24
Dedicated Parks
This fund was established to account for dedicated park fees. The City uses the Parks and
Playground Fund to collect ordinance restricted fees and donations from various groups. This
fund collected $156,770 and $38,645 of park dedication fees in 1994 and 1995, respectively. The
decrease in park dedication fees in 1995 was due primarily to the City accepting land in lieu of
cash payments from developers. The fund balance of $249,014 at December 31, 1995 is available
for expenditures by the City to fund capital outlay and maintenance of dedicated park lands.
Capital Improvement Projects Fund
This fund accounts for the proceeds of Equipment Certificates. The following schedule
summarizes the activity of this fund through December 31, 1995:
Prior
Years 1995 Total
Revenue and other sources:
Proceeds from equipment certificates $1,396,822 $176,000 $1,572,822
Interest earnings 79,215 2,866 82,081
Property taxes 14,560 14,560
MSA 4,944 4,944
Donations 16,000 2,686 18,686
Transfer from Agency fund 20,156 20,156
Transfer from Debt Service fund 2,390 2,390
Total $1,534,087 $181,552 1,715,639
Expenditures:
Capital outlay $1,491,324 $239,841 1,731,165
Fund balance - December 31, 1995 ($15,526)
City of Lino Lakes, Minnesota
Management Report, Page 25
Detail of the 1995 expenditures is as follows:
Budget Actual Variance
Police:
Two patrol vehicles S35,010 533,904 (51,106)
Copier 6,800 6,800 -
Printer/backup 3,438 3,438
Elections:
Voting booths 928 928
Administration:
Computer hardware 17,958 17,958
Engineering:
Computer hardware 894 894
Government building:
Copier 15,346 15,346
Fire:
Fire budget 61,000 60,900 (100)
Streets:
Dump truck 71,270 75,227 3,957
Pickup trick 21,321 21,321
Parks:
Line striper 1,500 1,591 91
Finance:
Other 1,534 1,534
Total 5175,580 5239,841 564,261
The unbudgeted computer and voting booth purchases were financed through the funds
surplus balances. The unbudgeted copier and pickup truck purchases will be financed by the 1996
Equipment Certificate.
City of Lino Lakes, Minnesota
Management Report, Page 26
Community Development Block Grant
The Community Development Block Grant (CDBG) Fund was established in 1982 to account
for the financial activity related to the projects to be funded by the CDBG program. The City
entered into an agreement with Anoka County to receive CDBG funds. The County of Anoka,
along with other governmental units, was awarded the grant. The City of Lino Lakes is
considered to be a sub -grantee and must comply with the provisions of the grant agreement. The
City has established the compliance procedures that are required to be documented in City
records. Proper documentation with the grant agreement has aided the City in receiving the
monies applied for regarding the reimbursement of City expenditures.
As of December 31, 1995 this fund had a deficit fund balance of $1,201. This deficit is
expected to be eliminated by CDBG Funds in 1996.
VIEW
IMEr
City of Lino Lakes, Minnesota
Management Report, Page 27
Area and Unit Charge Fund
On January 11, 1988 the City Council approved Resolution 1 -88 which established the Area
and Unit Charge Fund for the City. The purpose of this fund is to collect various area and unit
charges to be used to meet debt payments. Before October 1 of each year, the City estimates the
required transfer needed to meet debt payments for the subsequent year. In December, these
estimated amounts are transferred to the various debt funds. We recommend the City continue to
monitor actual versus projected area and unit assessment collections to assure that debt payment
requirements will be met.
A schedule of transactions of this fund from inception is as follows:
Prior
Years 1995 Total
Revenue and other sources:
Area and unit charges $5,394,502 $1,030,057 $6,424 ,559
Interest on investments 569,771 214,849 784,620
MSA 11,342 - 11,342
Transfer from Tax Increment #1 -1 1,097,491 1,097,491
Transfer from Tax Increment #1 -2 512,196 512,196
Transfer from 1989 construction 29,842 - 29,842
Transfer from Water Fund 545,239 179,250 724,489
Total $6,550,696 $3,033,843 9,584,539
Expenditures and other uses:
Professional services $117,635 $1,971 119,606
Construction:
Various 12,000 12,000
Ware Road Utility Improvements 108,253 13,498 121,751
Well #3 99,613 99,613
Well #4 164,490 164,490
Blackduck lift station - 6,871 6,871
35E main/trunk 1,764 1,764
Watertower #2 1,312 1,312
Sunset Road utilities 573 573
Transfer to Interim Construction 73,183 73,183
Transfer to 1991 Construction 388,965 388,965
Debt Service:
Transfer to Temp Bonds of 1990B 665,232 665,232
Transfer to Temp Bonds of 1991A 1,698,510 1,698,510
Transfer to Water Fund 180,895 104,565 285,460
Total $3,232,673 $406,657 3,639,330
Fund balance $5,945,209
w construction balances available to the City. The financing plan for the following bond issues have
pledged area and unit charges for the repayment of debt service:
City of Lino Lakes, Minnesota
Management Report, Page 28
The transfers from the tax increment funds represent partial reimbursement for cost of the
West Central Trunk sewer main which serves Rice Lake Estates (TIF 1 -1) and Sunrise Meadows
(TIF 1 -2).
Designations of balances required for debt service is necessary to define discretionary
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Improvement Bonds of 1992A
Water Reserve Bonds of 1992B
Temporary Improvement Bonds of 1994
The Improvement Bonds of 1992A have future scheduled property tax levies totaling
$1,487,519. Revenue from area and unit charges are expected to be sufficient to cancel these
levies.
The Water Revenue Bonds of 1992B have future debt service requirements totaling
$1,487,519 (principal and interest). The City annually transfers amounts from the Area and Unit
Charge Fund to the Water Fund sufficient to cover the debt services of The Bonds of 1992B.
The Temporary Bonds of 1994 were issued to finance The Country Lakes, Hodgson Road
and Hwy 49 /CSAH 23 Improvements. The unassessed costs of The Country Lakes and Hodgson
Road Improvements (by approximately 10 %) are expected to be financed by the Area and Unit
Charge Fund. The unassessed portion is estimated to be $85,000.
The assessment portion which relates directly to current construction costs (lateral assessment
charges) is pledged directly to the related debt service fund to retire outstanding bonds. The area
and unit charge portion of the assessment roll, however, is governed by the City's policy which
was established by Resolution #1 -88. Such area and unit charges are contingently pledged to the
related debt service fund in accordance with this policy. These amounts are to be segregated to
the Area and Unit Charge Fund and such amounts are transferred on an as needed basis to the
related debt service fund. Any surplus accruing above the amount required to retire bonds will be
available for expansion of the core water and sewer systems of the City.
City of Lino Lakes, Minnesota
Management Report, Page 29
During 1989 the City amended its procedure relative to adoption of assessment rolls. The
amended procedure requires that the City split assessment rolls between the Area and Unit Charge
Fund and the related Debt Service Fund.
Surface Water Management Fund
This fund was established in 1989 to account for the financing of surface water management
planning and storm sewer trunk lines. During 1990, the City levied its first assessments for
surface water management charges. The City is currently working through a three phase surface
water management plan. The cost of the plan will be financed by developer charges.
Interim Construction
The Interim Construction Fund was established in 1985 to account for the preliminary
construction costs prior to permanent bonding or other financing determination. The fund balance
of this fund was a of $16,057 at December 31, 1995.
MSA Construction
The MSA Construction Fund was established in 1990 to account for the collection of
assessments on MSA projects in accordance with the City's Public Improvement Financing Policy.
The fund balance of this fund was $52,156 at December 31, 1995.
Sealcoating
This fund was established in 1991 to account for money received from private developers for
future sealcoating in new housing developments. A summary of transactions of this fund is as
follows:
Prior
Years 1995 Total
Revenue and other sources:
Special assessments $297,913 $30,169 $328,082
Interest earnings 13,291 9,300 22,591
Refunds and reimbursements 58,750 14,873 73,623
Total $266,871 $54,342 424,296
Expenditures $220,834 $34 220,868
Fund balance - December 31, 1995 $203,428
City of Lino Lakes, Minnesota
Management Report, Page 30
_ SAC Revolving
The SAC Revolving Fund was established in 1990 to account for a refund from the MCES
(formerly MWCC) of past SAC charges which were paid by residents that had not hooked up to
the sewer system.
Ilows
A summary of financial activity of this fund is as follows:
Prior
Years 1995 Total
Revenue
SAC refund $365,175 $ - $365,175
Interest eaming 108,339 26,752 135,091
Total revenue $473,514 $26,752 500,266
Expenditures $ - $ -
Fund Balance - December 31, 1995 $500,266
1989 Construction
This fund accounted for the various projects financed by the Temporary Improvement Bonds
of 1989. These projects were completed in 1994. The remaining assets of this fund ($164,772)
— were transferred to the Improvement Bonds of 1992 Debt Service Fund in 1995.
1991 Construction
This fund accounted for the various projects financed by the Temporary Improvement Bonds
— of 1991A. These projects were completed in 1994. The remaining assets of this fund ($144,400)
were transferred to the Closed Debt Service Fund in 1995.
1993 Construction
This fund was closed in 1995 by transferring the remaining assets ($16,741) to the Closed
— Debt Service Fund.
City of Lino Lakes, Minnesota
Management Report, Page 31
1994 Construction
This fund was established to account for the various projects financed by the Temporary
Improvement Bonds of 1994A. A summary of the financial activity of this fund is as follows:
Budget Actual Variance
Financing sources:
Bond proceeds $2,079,350 $1,903,614 ($175,736)
MN DOT Reimbursement 713,989 613,806 (100,183)
Anoka County 583,917 - (583,917)
Interest earnings 34,944 34,944
Other 9,357 9,357
Total sources $3,377,256 2,561,721 ($815,535)
Financing uses:
Construction costs:
Issuance costs $25,900 ($25,900)
Country Lake Estates 636,750 910,723 273,973
Highway 49 and Lake Drive 1,988,400 1,695,588 (292,812)
Hodgson Road watermain 200,200 289,946 89,746
Total uses $2,851,250 2,896,257 $45,007
Fund balance - December 31, 1995 ($334,536)
The above deficit will be eliminated by additional MN DOT reimbursement and County
participation on the Highway 49 project.
1995 Construction
This fund was established to account for the construction costs related to the Woods of
Baldwin Lake II. The project costs totaled $135,886 through December 31, 1995. The
construction costs were financed by the City (i.e., no bonding). This project was assessed in 1995
in the amount of $146,304.
1996 Construction
This fund was established to account for projects to be financed by 1996 Bonds. During
1995, preliminary costs were incurred on the Trappers Crossing, Marshan Lake Townhomes and
12th and Holly projects. The projects will be bonded in 1996.
NMI
NMI
City of Lino Lakes, Minnesota
Management Report, Page 32
Apollo Business Park
This fund was established in 1992 to account for construction costs in developing the City's
industrial park. This fund had a fund balance of $163,316 at December 31, 1995. The City
expects to finance these improvements through the sale of property within the park and the
adoption of assessments.
Apollo Drive Construction
This fund was established in 1992 to account for improvements to Apollo Drive. The fund
balance of this fund was $118,648 at December 31, 1995.
Tax Increment Financing #1 -1
On January 26, 1987 the City established the Economic Development District #1. Within the
District, the City established Housing District #1 -1. The housing plan calls for adequate numbers
of low to moderate housing units pursuant to MS 273.73 subd. 11.
Financial activity of this fund from inception is as follows:
Prior
Years 1995 Total
Revenue and other sources:
Tax increments $1,049,811 $197 ,970 $1,247,781
HACA 8,683 8,683
Interest on investments 148,568 58,594 207,162
Total revenue and other sources $1,207,062 $256,564 1,463,626
Expenditures and other uses:
Transfer to TIF 1 -3 $9,484 $ - 9,484
Administrative fee 18,500 20,656 39,156
Developer assistance 70,000 35,000 105,000
Professional services 13 ,502 2,408 15,910
Transfer to Area and Unit Fund - 1,097,491 1,097,491
Transfer to Special Revenue Fund 2,280 831 3,111
Total expenditures and other uses $113,766 $1,156,386 1,270,152
Fund balance - December 31, 1995 $193,474
The 1995 developer assistance consisted of payments to Blue Heron for pending
improvements. The transfer to the Area and Unit Charge Fund represents a partial reimbursement
for the West Central Trunk sewer main related to Rice Lake Estates.
City of Lino Lakes, Minnesota
Management Report, Page 33
The tax increment plan also includes an annual administrative fee. Minnesota Statute 469.176
Subd. 3 reads as follows:
Limitation on administrative expenses. (a) For districts for which certification was
requested before August 1, 1979, or after June 30, 1982, no tax increment shall be used to
pay any administrative expenses for a project which exceed ten percent of the total tax
increment expenditures authorized by the tax increment financing plan or the total tax
increment expenditures for the project, whichever is less.
Tax Increment Financing #1 -2
The City established Tax Increment Financing District #1 -2. This district qualifies as a
Economic Development TIF district pursuant to Minnesota Statutes 469.174, subdivision 12.
Financial activity of this fund from inception is as follows:
Prior Years
1995 Total
Revenue and other sources:
Tax increments $439,555 $115,641 $555,196
Interest on investments 33,036 22,944 55,980
Total revenue and other sources 472,591 138,585 611,176
Expenditures and other uses:
Administrative $35,493 22,024 57,517
Transfer to Area and Unit Charge Fund 512,196 512,196
Transfers to other funds 11,763 831 12,594
Total expenditures and other uses $47,256 $535,051 582,307
Fund balance - December 31, 1995 $28,869
Included in administrative expenses is an administrative fee of $18,500. The transfer to the
Area and Unit Charge Fund represents a reimbursement for costs of the West Central Trunk
sewer main related to Sunrise Meadows.
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City of Lino Lakes, Minnesota
Management Report, Page 34
Tax Increment Financing #1 -4
The City established Tax Increment District #1-4 during 1990 by resolution 10 -90. District
#1-4 is an Economic Development District. The duration of the district is eight years from the
date of the receipt of the first increment or ten years from the date of approval of the TIF plan.
At December 31, 1995 this fund had a deficit balance of $36,069.
District #1-4 has anticipated project requirements as follows:
Estimated Actual
Land acquisition $435,000 $ -
Public improvements 1,115,000 -
Administrative 110,000 59,955
Bond discount 40,000 -
Capitalized interest 360,000
Total $2,060,000 $59,955
Tax Increment Financing #1 -5
The City established Tax Increment District #1 -5 pursuant to MS 469.174 Subdivision 11
which qualifies it as a Housing District. The duration of the District is twenty -five years from the
date of the first increment. The plan for District #1 -5 was approved and adopted on December
14, 1992.
Tax Increment Financing #1 -6
District #1 -6 is an Economic Development district and was established in August, 1994. The
duration of the district is 10 years.
City of Lino Lakes, Minnesota
Management Report, Page 35
Tax Increment Financing #1 -7
District #1 -7 is an Economic Development district and was established in May, 1995. A
schedule of budgeted and actual transactions for this district is as follows:
Budget Actual
Revenue:
Tax increments $605,000 $ -
Refunds - 300
Total revenue $605,000 300
Expenditures:
Land acquisition $321,000 137,889
Public improvements 260,000 -
Administrative 24,000 20,264
Total expenditures 8605,000 158,153
Fund balance - December 31, 1995 (8157,853)
Tax Increment Financing #3 -1
District #3 -1 is an Economic Development district and was established in June, 1995. The
duration of the district is 11 years. This district includes the Clearwater Creek Development
Center. A summary of budgeted financial activity for this district is as follows:
Revenue:
Tax increments
Budget Actual
81,450,000 $ -
Expenditures:
Land acquisition $900,000
Public improvements 450,000
Administrative 100,000 5,381
Total expenditures $1,450,000 5,381
Fund balance - December 31, 1995 ($5,381)
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City of Lino Lakes, Minnesota
Management Report, Page 36
ENTERPRISE (UTILITY FUND)
The City maintains three enterprise operating funds. The financial statements for these funds
are presented in Statements 14 through 16 of the 1995 Annual Financial Report. Statements of
income and expense for 1995 (excluding depreciation on contributed assets) for the water and
sewer utility fund are shown in the following schedule:
Water Sewer
1994 1995 1994 1995
Operating revenue:
Charges for services $252,301 S290,588 $357,605 $439,843
Other 42,705 47,886 9,238 43,278
Total operating revenue 295,006 338,474 366,843 483,121
Operating expenses:
Personal services 51,133 69,790 44,201 63,715
Materials and supplies 48,758 47,250 1,124 865
Contractual services 4,985 17,361 11,490 8,969
Repair and maintenance 6,625 9,040 2,189 4,970
MCES sewer charges - 224,268 236,388
Depreciation 20,198 22,227 713 793
Other 38,263 34,283 30,145 36,582
Total operating expenses 169,962 199,951 314,130 352,282
Income from operations
125,044 138,523 52,713 130,839
Other income (expense):
Interest on investments 7,691 18,708 4,266 7,567
Maintenance agreement - MCES - 12,699 -
Area and unit charges 183,667 179,250 - -
Bond interest and paying agent fees (66,080) (64,118)
Total other income 125,278 133,840 16,965 7,567
Net income before transfers 250,322 272,363 69,678 138,406
Transfer from Area and Unit Charge Fund 91,548 104,565 -
Transfer to Area and Unit Charge Fund (183,667) (179,250)
Net increase in retained earnings 158,203 197,678 69,678 138,406
Retained earnings - January 1, 1995 118,627 276,830 103,722 173,400
Retained earnings - December 31, 1995 $276,830 $474,508 $173,400 $311,806
As shown above, both the water and sewer funds experienced net increases in retained
earnings for 1994 and 1995. Also as shown above, the single largest expense of the sewer fund is
MCES sewer charges.
City of Lino Lakes, Minnesota
Management Report, Page 37
The MCES bills the City annually on an estimated basis. These billings are adjusted at a later
date and the City is billed the additional amount or given a refund. The MCES billings for
calendar years 1986 through 1996 have been as follows:
Billings from MCES
Estimated Final
Percent Percent
Year Amount Change Amount Change
1986 $33,283 10.76% S29,147 16.14%
1987 37,845 13.71% 32,519 11.57%
1988 41,351 9.26% 40,197 23.61%
1989 52,098 25.99% 48,521 20.71%
1990 67,232 29.05% 70,243 44.77%
1991 78,048 16.09% 96,542 37.44%
1992 104,090 33.37% 131,251 35.95%
1993 141,730 36.16% 167,079 27.30%
1994 198,918 4035% 205,452 22.97%
1995 229,851 15.55% N/A N/A
1996 250,435 8.96% N/A
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
so
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
0 Estimated Billings 0 Actual Billings
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City of Lino Lakes, Minnesota
Management Report, Page 38
There are two basic factors which contribute to increased billings from the MCES:
1. Changes in use of the system. The MCES has increased the 1996 estimated flow for
the City of Lino Lakes by 5.5 %.
2. Increased cost to process sewage. The MCES's cost to process (per million gallons)
increased to an estimated $1,318 in 1996 from an estimated $1,276 in 1995. This
represents an increase of 3.3 %.
The combination of the above factors has increased the City's estimated cost in 1995 by 9%.
During 1988 the City adopted a policy of charging a water user fee for core system
improvements. The add -on charge is calculated based on a fixed amount per quarter. This charge
is collected as revenue of the water enterprise fund along with normal charges. Such amounts are
then transferred to the Area and Unit Charge Fund which financed (or will finance) such
improvements. During 1995 the City transferred $179,250 to the Area and Unit Charge Fund.
The area and unit charge fund transferred $104,565 to the water enterprise fund for debt service
payments on the revenue bond issue to construct the water tower.
The water and sewer operations reflect retained earnings of $474,508 and $311,806,
respectively. Retained earnings should not be equated with fund balance. The Utility operations
are financed by user fees which are billed and collected only after the services are provided. This
creates a timing difference between payment of expenses and collection of service charges (i.e.,
accounts receivable). Additionally, certain costs are paid in advance (prepaid expenses) and/or
supply items are purchased in advance (i.e., inventories). These items create a timing difference
between payment of expenses and cost recovery through service changes. Those items
(commonly referred to as Working Capital needs) are noncash assets.
City of Lino Lakes, Minnesota
Management Report, Page 39
In addition, the Retained Earnings of the Utility Operation include the fixed assets of such
operations which are depreciated and charged (annually) against income. Such undepreciated
fixed assets are also a noncash asset. The following schedule has been prepared to illustrate the
effects of working capital needs and fixed assets upon the total equity of the City's water and
sewer operations:
Water Sewer
Cash and investments $389,764 $164,776
Working capital needs:
Accounts receivable 134,121 119,438
Prepaid expenses 3,270 25,567
Due from other govemments 289 289
Payables (47,722) (19,155)
Long -term payable - bonds (995,000)
Purchased fixed assets - net 989,786 20,891
Retained earnings $474,508 $311,806
IIIMP
—
the City of Circle Pines and the City of Lino Lakes. The City of Circle Pines operates the gas
utility.
City of Lino Lakes, Minnesota
Management Report, Page 40
GAS UTILITY FUND
Portions of the City of Lino Lakes have gas service through a franchise agreement between
We have reviewed the initial distribution of gas franchise profits received by the City of Lino
— Lakes under the terms of the franchise agreement. The revenue was calculated on the following
basis:
■
1994 1995
Residential and Commercial Revenue $374,905 0 7% = $26,243 $388,417 0 7% = S27,189
Interruptible Service 127,204 0 3% = 3,816 109,892 0 3% = 3,297
Total S502,109 30,059 S498,309 30,486
Remitted by Circle Pines
Difference
30,059 30,486
SO SO
— The franchise agreement allows for adjustment from gross revenue of net bad debts. The City
of Lino Lakes had bad debts of $2,100 in 1994 and $1,830 in 1995.
City of Lino Lakes, Minnesota
Management Report, Page 41
Gas utility sales have been as follows:
Residential
Commercial Total
Increase / (Decrease) Increase/ (Decrease) Increase / (Decrease)
Year Amount Amount Percent Amount Amount Percent Amount Amount Percent
1983 $96,272 $8,077 9.16% $22,478 $3,697 19.68% $118,750 $11,774 11.01%
1984 97,007 735 0.76% 23,829 1,351 6.01% 120,836 2,086 1.76%
1985 102,156 5,149 5.31% 29,356 5,527 23.19% 131 ,512 10,676 8.84%
1986 90,407 (11,749) (11S0)% 24,764 (4 ,592) (15.64)% 115,171 (16,341) (12.43)%
1987 82,787 (7,620) (8.43)% 19,866 (4,898) (19.78)% 102,653 (12,518) (10.87)%
1988 114,883 32,096 38.77% 21,845 1,979 9.96% 136,728 34,075 33.19%
1989 120,060 5,177 431% 21 ,303 (542) (2.48)% 141 ,363 4,635 3.39%
1990 148,802 28,742 23.94% 17,669 (3,634) (17.06)% 166,471 25,108 17.76%
1991 207,162 58,360 39.22% 20,013 2 ,344 13.27% 227,175 60,704 36.47%
1992 274,811 67,649 32.66% 18,092 (1,921) (9.60)% 292,903 65,728 28.93%
1993 378,573 103,762 37.76% 21,465 3 ,373 18.64% 400,038 107,135 36.58%
1994 359,663 (18,910) (6.88)% 17 ,342 (4,123) (22.79)% 377,005 84,102 28.71%
1995 368,991 9 ,328 2.59% 21,256 3,914 22.57% 390,247 13,242 3.51%
Bad Debts
Interruptible Sales
Increase / (Decrease) Increase / (Decrease)
Year Amount Amount Percent Amount Amount Percent
1983 $ - $ $146,092 $27,358 23.04%
1984 155,626 9,534 6.53%
1985 149,590 (6,036) (3.88)%
1986 92,822 (56,768) (37.95)%
1987 3,334 3,334 3.25% 88,509 (4,313) (4.65) %
1988 2,757 (577) (17.31)% 83,363 (5,146) (5.81) %
1989 3,394 637 23.10% 111,977 28,614 34.32%
1990 53 (3,341) (98.44)% 108,699 (3,278) (2.93)%
1991 2,500 2,447 4616.98% 113,869 5,170 4.76%
1992 515 (1,985) (79.40)% 126,267 12,398 10.89%
1993 1,257 742 144.08% 125,360 (907) (0.72)%
1994 2,100 843 67.06% 127,204 1,844 1.47%
1995 1,830 (270) (12.86)% 109,892 (17,312) (13.61) %
Prior to 1987, bad debts were netted with sales.
City of Lino Lakes, Minnesota
— Management Report, Page 42
—
The City of Lino Lakes had rights to receive payment of net income after the accumulated
retained earnings deficit was eliminated. Prior to 1988, the City received no such distributions.
— The Circle Pines gas utility has accumulated a positive retained earnings balance in excess of
$1,000,000. At December 31, 1995 the Lino Lakes Franchise has a positive fund balance of
$120,046. A schedule of the City of Lino Lakes fund balance for the past four years is as follows:
limo
Una
Woo
Imp
Vow
Increase
Year Amount Amount
Percent
1991 $30,073 $ -
1992 55,669 25,596 85.11%
1993 69,368 13,699 24.61%
1994 90,630 21,262 30.65%
1995 120,046 29,416 32.46%
The current franchise agreement provides a revenue source to the City of Lino Lakes. Key
features of the new agreement are as follows:
1. Term: January 1, 1987 through March 31, 2012.
2. Revenue to the City of Lino Lakes based on 7% of sales except for interruptible sales
which are based on 3 %.
3. Cancelable by the City of Circle Pines commencing on January 1, 1992. The City of
Lino Lakes has the right to cancel the franchise agreement through the purchase of this
system beginning on January 1, 1992.
4. Right to inspect the financial/accounting records to verify revenue calculations.
5. Revenue began accruing on January 1, 1987. Revenue will be received four and one-
half months after the year end (i.e., first receipt was in May, 1988).
6. The City has the right to purchase the system at stated terms beginning on January 1,
1992.
We commend the City for the successful efforts to receive a supplemental financing source for
the City. The City received $30,486 in 1996 which represents the 1995 share of earnings.
Earnings from inception of the new agreement total $185,225. Financial uncertainties facing
metropolitan cities require diversity of revenue sources to assure adequate funding of operations
without severe property tax increases.
City of Lino Lakes, Minnesota
Management Report, Page 43
AGENCY FUNDS
An Agency Fund is designed to account for transactions for other individuals, private
organizations and/or other funds. During 1995, the City had four Agency Funds as follows:
• Contractor's Deposits
• Pending Assessments
• Investment Fund
• Deferred Compensation
The Contractor's Deposits Fund is used to account for "pass through" types of expenditures
relating to prospective developers. The City pays certain legal, engineering and planning amounts
to assure compliance with various City ordinances relating to pertinent applications. The City
receives deposits and/or bills the various developers for costs incurred. We recommend that the
City continue to maintain detailed records of amounts due from developers and assure that
adequate deposits are received prior to incurring expenses on a developer's behalf.
The Pending Assessments Fund was established in 1991 to account for the prepayment of
special assessments by contractors prior to the final assessment being adopted by the City
Council.
The Investment Fund is designed to pool all available cash balances of the City to maximize
the investment efficiency of the City. Interest is allocated to funds annually based on the average
cash balance of the participating funds.
The Deferred Compensation Fund was established in 1987 in response to the issuance of the
Governmental Accounting Standards Board (GASB) Statement No. 2. GASB Statement No. 2
requires deferred compensation plans adopted under the provisions of Internal Revenue Code
Section 457 to be included in the City's Annual Financial Report.
City of Lino Lakes, Minnesota
Management Report, Page 44
FEDERAL SINGLE AUDIT
Federal regulations require a City to obtain a federal compliance audit if the City receives over
—
$25,000 in federal funds. During 1995, the City of Lino Lakes received $72,452 of federal funds
as follows:
WWI
Grant
Amount
COPS FAST $ 19,892
Safe and Sober Campaign - Communities 4,696
Operation Buckle Down 630
Oak Wilt Cooperative Suppression Program 3,380
CDBG 43,854
Total $72,452
We have completed the federal compliance audit as required and issued our reports under a
separate cover. The finding identified in the report are summarized below:
The Lino Lakes Police Department has a drug testing program and has a written policy
and procedures for a drug -free workplace. These policies, however, have not been
formally adopted by the Lino Lakes City Council and were not effective until January 1,
1996, the Federal grant period started March 1, 1995.
City of Lino Lakes, Minnesota
Management Report, Page 45
CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING
The City plans to submit the 1995 Comprehensive Annual Financial Report (CAFR) to the
Government Finance Officers Association of the United States and Canada for a comprehensive
review. The CAFR is reviewed by two individuals and graded in ten different categories. The
CAFR must receive a unanimous approval of both reviewers.
There are 855 cities in Minnesota of which 75 cities participated in this program and received
the award.
GOVERNMENTAL ACCOUNTING STANDARDS UPDATE
The Governmental Accounting Standards Board (GASB) has issued its Preliminary Views
document on major issues related to the Governmental Financial Reporting Model: Core
Financial Statements.
This document proposes significant changes in governmental accounting which will impact
internal financial accounting and external financial reporting of the City. A summary of the key
provisions of the preliminary views document is presented below:
• Fund Perspective Financial Statements. These financial statements would be similar to
current financial statements with modified accrual basis of accounting for governmental
funds, accrual basis of accounting for business type activities (formerly enterprise and
internal service funds). However, the GASB proposes a new definition for fiduciary funds
and the elimination of the account groups.
Entity -wide Perspective Financial Statements. These financial statements include full
accrual accounting for all activities. The income statement will be replaced by a statement
of activities using the net program cost format. Additionally, capital use charges
(depreciation) on general fixed assets and infrastructure assets will be required to be
reported in the financial statements.
IMMO
ROW
City of Lino Lakes, Minnesota
Management Report, Page 46
Management's Discussion and Analysis of Financial Condition and Results of Operations
(MD &A). The MD &A letter will be similar to (although will not replace) the current
letter of transmittal. Currently, Securities and Exchange Commission (SEC) regulations
require private sector registrants to provide a MD &A letter discussing financial
conditions, results of operations, etc.
SUMMARY
During 1996, we recommend that the City:
* Determine a financing source or delete the City property special assessment receivable
from the City's financial records. (Page 5)
* Continue to monitor the assessment collection rate and provide supplemental financing if
assessment collections are not adequate to meet bonded debt payments. (Page 6)
* Continue to request improved special assessment collection data from Anoka County.
(Page 7)
* Continue its effort to maintain the fixed asset system. (Page 7)
* Consider budgeting activity in the Program Recreation Fund. (Page 18)
* Continue to monitor actual versus projected area and unit assessment collections to assure
that the debt payment requirements will be met in the Area and Unit Charge Fund.
(Page 26)
* Continue to maintain detailed records of amounts due from developers and assure that
adequate deposits are received prior to incurring expenses on a developer's behalf.
(Page 42)
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES, MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
1995
#51 Oversight of tax increment financing: The responsibility for state
oversight of tax increment financing is transferred from the Commissioner of
Revenue to the State Auditor. One tenth of one percent of tax increment
revenues generated will be paid to the State Auditors office to fund the
responsibility.
1995
#50 Pooling of tax increment revenues: The amount of increment revenues
that may be spent outside a non - redevelopment TIF district is limited to 20
percent of the total collections within the district.
1995
#49 Reduction in HACA: Cities, counties, towns and special districts share in
a one -time $16 million cut in HACA in 1996.
1994
#48 Property taxation by square footage: The Department of Revenue is
required to conduct a study on the feasibility of basing property taxation on a
square footage rather than the current system of basing property taxation on the
estimated market value of property.
1994
#47 Firefighter protective equipment: Effective July 1, 1994, personal
MS 297A.25
protective equipment for firefighter will be exempt from sales tax.
1994
#46 Gifts to local officials: Local officials may not accept a gift from an
MS 471.895
interested person and an interested person may not give a gift to a local official.
A local official includes an elected or appointed official.
1994
#45 Repeal of the local government trust fund: The trust fund will sunset on
MS 477A.03
July 1, 1996. All programs funded by the LGTF will be transferred back to the
general fund. In place of the trust fund, an inflationary increase for LGA was
established beginning with 1996 aid distribution. The inflationary increase is
based on the implicit price deflator for state and local government procedures.
This index cannot be less than 2.5% or greater than 5.0% per year. The
minimum aid distribution for each city for 1995 and future years is the sum of
1993 LGA, equalization aid, and disparity reduction aid.
1993
#44 Mortgage backed securities: As of August 1, 1993, cities are not allowed
MS 475.66
to purchase "high risk" mortgage backed securities. A definition of "high risk" is
included in MS 475.66
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PAGE 1 OF 9
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES, MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
1993
MS 6.745
#43 Budget information: Cities must provide summary budget information to
the Office of the State Auditor by December 31 of the year preceding each
budget year.
1993
MS 429.061
Subd. 5
#42 Special assessments: Cities are now required to pay to the county auditor
the administrative expenses incurred by the county auditor for administering the
collection of special assessments.
1993
MS 475.667
Subd. 6
#41 Purchase of investments: Cities must provide securities broker - dealers a
written notification of investment restrictions and include a provision that all
future transactions are to be made in accordance with State Statutes governing
investment of public funds. Additionally, the broker - dealer must acknowledge
receipt of the notification and agree to handle the city's transactions in
accordance with State Statutes.
1993
MS 412.271
Subd. 8
#40 Payment of claims prior to council approval: A city council may
delegate its authority to pay certain claims to a city administrative official
provided adequate internal accounting and administrative controls are in place.
A list of all claims paid under this procedure must be presented to the council for
informational purposes only at the next council meeting. City council delegation
must be made by resolution.
1993
MS 477A.03
#39 Aid eliminations: Equalization aid and disparity reduction aid is
eliminated. However, the 1994 LGA base includes these amounts.
1993
MS 477A.03
#38 LGA formula change: Beginning in calendar year 1994 and thereafter, a
City's LGA is determined using the following formula:
(City aid base x (100 - base reduction %)) + City aid increase = LGA
1992
MS 144.3831
Subd. 1
#37 Authorized the Commissioner of Health to assess an annual fee of $5.21 for
every service connection to a public water supply that is owned or operated by a
City or Town.
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PAGE 2 OF 9
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES, MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
1992
MS 297A.25
Subd. 11
#36 Sales tax on purchases by political subdivisions of the State is imposed.
School districts, hospitals, nursing homes and ambulance services owned and
operated by political subdivisions. The tax is effective for sales made after May
31, 1992 pursuant to Article 8 Section 39.
1992 MS
207A.10
Subd. 1
#35 Expenses incurred by Counties and Cities in the administration of the
presidential primary shall be reimbursed by the Secretary of State.
1992
MS 477A.03
Subd. 1
#34 Increased the total amount of equalization Aid to $20,011,000 for aids
payable in 1993 and thereafter.
1992
MS 477A.013
Subd. 3
#33 Adjusted LGA formula. For aids payable in 1993 and thereafter, City will
receive an amount equal to 103% of LGA it received in 1992 before any non-
permanent reductions made under 477A.0132.
1992
MS 16A.711
Subd. 5
#32 Authorize the Commissioner of Revenue to make adjustments in aid
amounts in the second fiscal year of each biennium if anticipated total revenues is
less than anticipated total obligations of the local government trust fund.
1991
MS 275.51
Subd. 7
#31 Authorized contingent addition to the levy limit by the amount of lost aid of
local governments located in a County where the local sales and use tax was not
enacted.
1991 MS
477A.0132
Subd. 1 and 2
#30 Further reductions in local government aid for aids payable in 1992.
Estimated reduction percent is 4.034% of 1992 revenue base. Revenue replaced
by property tax levy authority.
1991
MS
477A.0132
Subd. 1 and 2
#29 Approved LGA cut for December, 1991 aid payment. Cut is estimated to
be 1.6% of 1992 revenue base. Aid cut not replaced with levy authority.
1991
MS 273.1398
Subd. 1
#28 Adjusted the HACA base as the 1991 certified HACA less any 1991
permanent HACA reductions.
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PAGE 3 OF 9
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
1991
HF 1698
Section 5
#27 If any County does not approve the local option sales tax of 1/2% there
would be no payments made to the local government trust fund to the County or
to City, Town or Special Taxing Jurisdictions located in the County. (See #30
for increased levy authority).
1991
#26 Authorized the establishment of a local option sales tax of 1/2% on all retail
HF 1698
sales in the County. If the County does not authorize the additional 1/2% sales
Art. 2
tax, Cities and Towns within the County which have a majority of the population
Section 6
may override the County action by sending copies of approving resolutions to the
County Auditor by August 1, 1991.
1991
#25 The local government trust fund is authorized to make the following
HF 1698
payments to Counties, Cities, Towns and Special Taxing Districts:
Art. 2
Section 3
1) HACA
2) Disparity Reduction Aid
3) Local Government Aid and Equalization Aid
4) Increased HACA Guarantees
5) Supplemental Homestead Property Tax Relief
6) Disparity Reduction Credit
7) 25% of the State Aid for County Human Services
8) Attach Machinery Aid, a fee for the Commissioner of Revenue to
administer the local option tax ($852,000 for 1992 and $660,000 for fiscal
year 1993).
9) Other fees to the Commissioner of Finance and to the Advisory
Commission on inter - governmental relations.
If revenue is insufficient to pay each of the above amounts, the Commissioner of
Revenue is authorized to reduce the payments of the first four items (HACA and
LGA).
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PAGE 4 OF 9
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES, MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
1991
HF 1698
Art. 2
Section 2
#24 Created the local government trust fund to be used exclusively to pay local
governments for inter - governmental aid and to repay advances made by the
State's general fund as may have been required to make all required payments as
provided by law. If revenues of the trust fund are insufficient to pay
commitments, all commitments to local governments will be proportionately
reduced unless other provisions have been made. If the estimated receipts of the
trust fund exceed estimated payments by $1 million or more the appropriation
from the trust fund to each inter - governmental aid program would be increased
proportionately unless there are specific provisions which prohibit such increase.
1991
HF 1698
Art. 2
Section 1
#23 Establish the advisory commission on inter- govennmental relations with an
initial membership of twenty through July 1, 1992. After July 1, 1992 the
commission is reduced to fourteen members. The commissioners are to be
representative of the various geographic and governmental jurisdictions of the
State.
1991
MS 273.13
Subd. 32
#22 Approve further adjustments to the commercial industrial tax rate for
valuations in excess of $100,000. Adjusted rates effective through 1995 are as
follows:
1990 1991 1992 1993 1994 1995
Rate Rate Rate Rate Rate Rate
First S100,000 of
market value 3.30% 3.20% 3.10% 3.00% 3.00% 3.00%
Market value over Targeted to
5100,000 5.06% 4.95% 4.75% 4.70% 4.60% eventually be
4%
1991 .
MS 473F.02
Subd. 8
#21 Prohibits municipalities from conscientiously excluding most commercial -
industrial development within their community for reasons other than preserving
agricultural use through restrictive comprehensive zoning and planning policies.
1991
MS 273.13
Subd. 22
#20 For aid payable in 1992, HACA will increase for certain cities as a result of
the adjusted property class rates (see #19 and #22) and the net tax capacity
adjustment (see #12). The net tax capacity adjustment is calculated as follows:
(previous year total net tax capacity - current year total net tax capacity) x
current local tax rate.
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PAGE 5 OF 9
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES, MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
1991
MS 273.13
Subd. 22
#19 Approved adjustments to residential homestead property (class la).
Adjusted rates are as follows:
Payable Payable Payable
1991 1992 1993
Rate Rate Rate
First Tier of Market Value
Up to $68,000 1.00%
Up to $72,000 1.00% 1.00%
Second Tier of Market Value
$68,001 to $110,000 2.00%
$72,001 to $115,000 2.00%
over $72,000 2.00%
Third Tier of Market Value
over $110,000 3.00%
over 5115,000 2.50%
1991
MS 270.12
Subd. 2
#18 Establish methodology used in preparing assessment /sales ratio studies
requiring them to be consistent with the most recent Standard on
Assessment/Sales Ratio Studies published by the Assessment Standards
Committee of the International Association of Assessment Officers.
1991
MS
477A.0132
Subd. 1 & 2
#17 1991 LGA initially frozen at 1990 levels, then in subsequent actions, aid
was cut. The 1991 reduction equals 2.052% of the City's Revenue Base. This
aid cut will first reduce LGA. If the City's LGA is insufficient, then the cut will
affect Equalization Aid, HACA and Disparity Reduction Aid, in that order. Aid
cut not replaced by levy authority.
1991 BF 47
#16 State Aid road allotments were reduced to Cities.
1990
Ch. 604
Art. 3
Section 47
#15 Levy limits for Cities repealed starting with collectible 1993 levy.
1990
MS 273.1399
Subd. 5
#14 Approved potential LGA and HACA cuts related to tax increment districts
formed after April 30, 1990.
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PAGE 6 OF 9
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES, MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
1990
MS 477A.013
Subd. 7
#13 Further reductions in LGA to cities. The Legislature reduced LGA by
1.53% of the revenue base. This permanent cut occurred after City budgets were
adopted and the operating year was one third elapsed. The Legislation did not
provide a replacement revenue source.
1990
MS 273.1398
Subd. 2
#12 The prior year (1990) HACA cut related to LGA is extended to also reduce
1991 HACA. Established a "Homestead and Agricultural Credit Base ". HACA
base is defined as the previous year's certified HACA aid. For aid payable in
1991, HACA is determined as shown in #7. For aid payable in 1992, HACA is
determined as follows:
(HACA base x growth adjustment factor) + net tax capacity adjustment + fiscal
disparity adjustment.
1990
MS 273.13
Subd. 24 &
32
#11 Commercial property tax rates lowered. (See #22).
1990 1991 1992 1993
Rate Rate Rate Rate
First $100,000 of
market value 3.30% 3.20% 3.10% 3.00%
Market value over Targeted to
$100,000 5.06% 4.95% eventually be 4%
1990
MS 477A.013
Subd. 5,6,7
#10 Equalization Aid limited to 12% increase over 1990 Equalization Aid.
Also Equalization Aid subject to reduction if LGA is not sufficient to absorb cuts
based on revenue base. Equalization Aid capped Statewide at $19,485,684.
1989
MS 477A.013
Subd. 5
#9 Tax Base Equalization Aid, is a program that targets aid to low tax base
cities starting in 1990. Tax Base Equalization Aid is to be administered similar to
HACA whereby the county auditor is to deduct the aid from the amount of taxes
certified by the city. Payments of Tax Base Equalization Aid are to be made on
July 20 and December 15, 1990 from the Department of Revenue.
1989
SP1 Ch 1,
Art. 5
Section 51
#8 1989 levy limits for Cities repealed starting with collectible 1992 levy. In
1990 the effective date was extended to collectible 1993 levies. (See #15).
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PAGE 7 OF 9
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES, MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
1989
MS 273.1398
Subd. 2
#7 Transition Aid re- termed to Homestead and Agricultural Credit Aid
(HACA). The formula for distribution was modified from the 1988 Transition
Aid formula for Unique Taxing Jurisdictions (UTJ) as follows:
Payable 1989 gross taxes of UTJ less [Payable 1989 local tax rate X payable
1990 net tax capacity X .9767)
As with the original Transition Aid the above HACA to be distributed to local
governments based on the percent of local government levy to total UTJ levies.
HACA was subject to additional reductions if the level of local government aid
was insufficient to absorb the education aid shift and other cuts. The education
shift and the subsequent cuts were first taken from LGA, then from Equalization
Aid, then from HACA and finally from Disparity Reduction Aid.
1989
MS 273.1398
Subd. 2
#6 LGA initially increased for 1990 by approximately $30 million from the 1989
level. Funding transfer to school districts subsequently approved. The aid
transfer to school districts is a method of increasing the State financial support
for education while decreasing financial support for cities. The aid transfer for a
city is an amount equal to 3.4% of its adjusted net tax capacity. Cities received
increased property tax levy authority to replace the aid transfer.
1989
MS 477A.013
Subd. 3
#5 LGA formula revised to reduce household guarantee factor from 1.08 in
1989 to 1.04 in 1990 to reduce the expenditure /unlimited ratio factor by 50 %. A
15% ceiling increase over prior year LGA factor was also added.
1988
MS 273.13
#4 Taxes spread to property owners based on tax capacity valuations. Taxes
levied divided by tax capacity valuations equal tax capacity rates. This is a
change from the prior system in which taxes were spread to property owners
based on assessed valuations. Taxes levied divided by assessed valuations
equaled mill rates.
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PAGE 8 OF 9
YEAR &
- STATUTE
REFERENCE
VIIMMII
Vima
_.
APPENDIX A
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
1988
#3 Cities to receive Transition Aid in lieu of homestead credits. Transition
MS 273.1398
aid to be calculated on each unique taxing jurisdiction (UTJ) and then allocated
Subd. 2
to the local units of government within the UTJ based on the proportion of local
governments gross tax levy to total taxes within the UTJ as follows for 1990:
Gross taxes of UTJ less [46% X 2.17% X 1989 tax capacity rate X 1988
aggregate assessment sales ratio] X UTJ net tax capacity X 103
The above UTJ amount to be allocated to local governments based on percent of
local governments levy to total UTJ levies. Transition Aid to be frozen at 1990
levels. Considering growth and inflation, this freeze is a reduction of State
funding. Transition Aid was the replacement of the Homestead Credit Program.
This Transition Aid was subsequently re- termed as Homestead Credit and
Agricultural Aid (HACA) - see #7.
1988
#2 Targeted Cities (primarily non -metro cities) to receive disparity reduction
MS 273.1398
aid. The 1989 disparity reduction aid to be based on 1988 gross taxes and gross
Subd. 3
tax capacity rates. Disparity reduction aid will be frozen at 1989 levels.
Metropolitan suburban cities to receive one -half of one percent of this aid
($300,000 of $54.3 million).
1988
#1 Local government aid (LGA) formula modified to reflect a per household
MS 477A.013
aid factor compared to prior year tax capacity and tax base increase.
Subd. 3
Expenditure/unlimited ratio factor established as component of LGA formula.
Lower of three -part formula to calculate initial LGA increase.
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ACCOUNTING STANDARDS UPDATE
APPENDIX B
The following is a summary of statements of accounting principles issued by the Governmental
Accounting Standards Board (GASB).
GASB No. 16 Accounting For Compensated Absences
This Statement was issued in November, 1992 and provides guidance for the measurement of
accrued compensated absences liabilities by state and local governmental entities, regardless of
the reporting model or fund type used to report the transactions. Compensated absences are
absences for which employees will be paid, such as vacation, sick leave, and sabbatical leave.
This Statement requires the compensated absences liability generally to be measured using the
pay or salary rates in effect at the balance sheet date. It also requires additional amounts to be
accrued for certain salary- related payments associated with the payment of compensated
absences, for example, the employer's share of social security and medicare taxes.
This Statement is effective for financial statements for periods beginning after June 15, 1993.
GASB No. 17 Measurement Focus and Basis of Accounting - Governmental Fund
Operating Statements: Amendment of the Effective Dates of GASB No. 11 and Related
Statements.
This Statement was issued in June, 1993 and amends GASB Statements No. 10, Accounting and
Financial Reporting for Risk Financing and Related Insurance Issues, No. 11, Measurement
Focus and Basis of Accounting - Governmental Fund Operating Statements, and No. 13,
Accounting for Operating Leases with Scheduled Rent Increases. It defers the effective date of
Statement 11 to periods beginning approximately two years after an implementation standard is
issued and modifies the Statement 13 reference to Statement 11's effective date. It also
establishes an effective date for Statement 10, for entities other than pools, using the modified
accrual basis of accounting in governmental and similar trust funds, that is independent of the
effective date of Statement 11 and is effective for periods beginning after June 15, 1994.
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ACCOUNTING STANDARDS UPDATE
APPENDIX B
GASB No. 18 Accounting for Municipal Solid Waste Landfill Closure and Postclosure Care
Costs
This statement was issued in August, 1993 and establishes standards of accounting and financial
reporting for Municipal Solid Waste Landfill (MSWLF) closure and postclosure care costs that
are required to be incurred by federal, state or local laws and regulations.
Essentially, MSWLF financial statements are required to accrue a liability during the life of a
landfill for closure and postclosure care costs.
This Statement is effective for financial statements for periods beginning after June 15, 1993.
GASB No. 19 Governmental College and University Omnibus Statement
This Statement was issued in September, 1993 and requires governmental colleges and
universities that follow the AICPA College Guide model to report Pell grants in a restricted
current fund. This Statement also requires that if a single fund is used to account for risk
financing activities, that fund should be reported as an unrestricted current fund.
For Pell grants, this Statement is effective for financial statements for periods beginning after
June 15, 1993. For risk financings activities, this Statements is effective for fmancial statements
for periods beginning after June 15, 1994. Early application is encouraged.
GASB No. 20 Accounting and Financial Reporting for Proprietary Funds and Other
Governmental Entities that Use Proprietary Fund Accounting
This statement was issued in September, 1993 and redefines generally accepted accounting
principles (GAAP) for proprietary funds.
The authoritative status of guidance issued on or before the cutoff date of November 30, 1989, is
different from the authoritative status of pronouncements issued subsequently.
For guidance issued on or before the cutoff date, pronouncements of the FASB and its
predecessor bodies will continue to be applicable to proprietary funds unless they conflict with or
contradict GASB guidance.
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ACCOUNTING STANDARDS UPDATE
APPENDIX B
For guidance issued after the cutoff date, proprietary funds make use of either of the following
approaches to FASB guidance issued after November 30, 1989:
1. An entity may elect to continue to follow FASB guidance that does not conflict with or
contradict GASB guidance. If this election is made, it must be followed consistently. It
would not be appropriate to follow some FASB pronouncements, issued subsequent to
the cutoff date, but not others.
2. An entity may elect not to subject itself to FASB guidance issued subsequent to the cutoff
date. In that case, even FASB amendments of guidance issued prior to the cutoff date
would not be applicable to proprietary operations.
The provisions of this Statement are effective for financial statements for periods beginning after
December 15, 1993.
GASB No. 21 Accounting for Escheat Property
This statement was issued in October, 1993 and establishes standards for the fund type to be used
to report escheat property and for reporting liabilities and interfund transfers relating to escheat
property. An escheat is the reversion of property to a governmental entity in the absence of legal
claimants or heirs.
This Statement requires escheat property generally to be reported in either an expendable trust
fund or the fund to which the property ultimately escheats (the "ultimate fund "). Escheat revenue
should be reduced and a fund liability reported to the extent that it is probable that escheat
property will be reclaimed and paid to claimants. Payments to claimants should reduce the
liability.
If escheat property is initially reported in an expendable trust fund, amounts transferred to the
ultimate fund should be reported as an operating transfer. If, as a result of the transfer, the
remaining assets of the expendable trust fund are less than the liabilities of the fund, the
difference should be reported as an "advance to" in the expendable trust fund and an "advance
_ from" in the ultimate fund. If, however, the escheat assets of the expendable trust fund exceed
the liabilities of that fund, the difference should be reported as fund balance.
The provisions of this Statement are effective for financial statements for periods beginning after
June 15, 1994.
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APPENDIX B
GASB No. 22 Accounting for Taxpayer - Assessed Tax Revenues in Governmental Funds
This statement was issued in December, 1993 and establishes standards for the recognition of
revenues from taxpayer - assessed taxes, such as sales and income taxes, in governmental funds.
The AICPA's 1974 Industry Audit Guide essentially required cash -basis recognition of taxpayer -
assessed tax revenues. GASB No. 22 requires revenues from taxpayer - assessed taxes, net of
estimated refunds, to be recognized in the accounting period in which they become susceptible to
accrual (measurable and available to fmance expenditures of the fiscal period). This statement is
effective for financial statements for periods beginning after June 15, 1994.
GASB No. 23 Accounting and Financial Reporting for Refundings of Debt Reported by
Proprietary Activities
This Statement was issued in December, 1993 and applies to current refundings and advance
refundings that result in defeasance of debt of proprietary funds. Prior to the issuance of GASB
No. 23, the reporting of gains or losses from a defeasance was established by APB Opinion No.
26. APB Opinion No. 26 required the immediate recognition of a gain or loss in determining net
income in the period of extinguishment. GASB No. 23 now requires this gain or loss to be
deferred and amortized as a component of interest expense over the shorter of the 1) remaining
life of the old debt or 2) the life of the new debt.
This Statement is effective for financial statements issued for periods beginning after June 15,
1994.
GASB No. 24 Accounting and Financial Reporting for Certain Grants and Other Financial
Assistance
This statement was issued in June, 1994 and establishes standards for accounting and reporting
of pass - through grants, food stamps, and on- behalf payments for fringe benefits and salaries.
GASB 24 requires all cash pass - through grants received by a governmental entity to be reported
in its financial statements. Governments with administrative or direct financial involvement with
cash pass - through grants should recognize revenue and expenditures /expenses in the
governmental, proprietary or trust funds. Governments with no administrative or direct financial
involvement should report these transactions in an agency fund.
GASB 24 also requires revenue and expenditures from food stamps to be recorded in the general
or special revenue funds. The revenues and expenditures should be recognized when the food
stamps are distributed to the individual.
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APPENDIX B
Further, GASB 24 clarifies how on -behalf payments for fringe benefits and salaries should be
reported. On behalf payments for fringe benefits and salaries are direct payments by one entity
to a third -party recipient for employees of another, legally separate entity. Revenue should be
recorded at the amount the recipient received. If the employer is legally responsible for the
payment, expenditures/expenses should equal the revenue recognized. If the employer is not
legally responsible for the payment, it should follow the accounting standards for that type of
transaction to recognize expenditure/expense.
This statement is effective for fmancial statements for periods beginning after June 15, 1995.
GASB No. 25 Financial Reporting for Defined Benefit Pension Plans and Note Disclosures
for Defined Contribution Plans
This statement was issued in November, 1994 and supersedes all previous authoritative guidance
on accounting and financial reporting for defined benefit pension plans of state and local
government entities.
This statement replaces the traditional balance sheet and income statements with two different
financial statements: statement of plan net assets which reports the fair value and composition
of plan assets, liabilities, and net assets held in trust for pension benefits and statement of
changes in plan net assets which reports the principal year- to-year changes. Also required are
two supplementary schedules: the schedule of funding progress, which reports, for a minimum
of six years, the actuarial value of assets, the actuarial accrued liability and the relationship
between the two, and the schedule of employer contributions, which reports the annual required
contributions of the employer.
GASB 25 also requires defined contribution plans to disclose the plan description, summary of
significant accounting policies and if any investments in any one organization represent five
percent or more of plan net assets.
This Statement is effective for financial statements for periods beginning after June 15, 1996.
GASB No. 25 should also be implemented in the same year as GASB No. 26.
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APPENDIX B
11 I
Defined Benefit Pension Plans
This statement was issued in November, 1994 and establishes financial reporting standards for
defined benefit pension plans that administer postemployment healthcare plans. It is an interim
statement that is pending the completion of the GASB's project on accounting and financial
reporting of other postemployment benefits by plans and employers.
This statement requires two statements: statement of postemployment healthcare plan net assets,
and statement of changes in postemployment healthcare plan net assets. The notes should
include a brief description of eligibility requirements and required contribution rate(s) of the
employer(s). Supplementary schedules are not required, but if disclosed, should include all
information required for the defined benefit pension plan.
This Statement is effective for financial statements for periods beginning after June 15, 1996.
GASB No. 25 should also be implemented in the same year as GASB No. 26.
GASB No. 27 Accounting for Pensions by State and Local Governmental Employers
This statement was issued in November, 1994. It establishes standards for measurement,
recognition and display of pension expenditures/expense and related liabilities, assets, note
disclosure, and if applicable, required supplementary information in the financial reports of
governmental employers. This statement supersedes all previous authoritative guidance on
accounting for pensions.
Significant changes from previous authoritative guidance are as follows:
• eliminates the requirement for reporting standardized measure of the pension benefit
obligation and substitutes the actuarial accrued liability produced by the method used to
fund the plan.
• reduces the number of note disclosures and the level of detail previously required.
Employers that participate in cost - sharing multiple - employer plans (i.e. PERA) should recognize
annual pension expenditures equal to their contractually required contributions to the plan.
This statement is effective for periods beginning after June 15, 1997.
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APPENDIX B
A B s . i i 1 B 1 in . ' 1 , b l< rivatives and imilar
Jnvestment Transactions
This bulletin addresses fmancial statement disclosures about derivatives. If derivatives have
been held, used or written during the period covered by the financial statements, disclosure
should include a discussion of the following items:
• nature of the transaction and reason for entering into it
• exposure to credit risk, market risk, and legal risk
The provisions of this Technical Bulletin are effective for periods ending after December 15,
1994.
GASB No. 29 The Use of Not - for - Profit Accounting and Financial Reporting Principles by
Governmental Entities
This Statement was issued in August, 1995 and provides interim guidance of the use of not -for-
profit accounting and fmancial reporting principles by state and local government entities.
This Statement allows governmental entities that have followed the AICPA not - for - profit model
(SOP78 -10 or Audits of Voluntary Health and Welfare Organization) to continue to do so until
the Board's financial reporting model project is complete.
Proprietary activities that have elected to continue to follow FASB guidance under paragraph 7
of GASB Statement No. 20, should apply only those FASB statements and interpretations issued
on or after November 30, 1989, that are developed for business enterprises.
The provisions of this Statement are effective for financial statements for periods beginning after
December 15, 1994.
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ACCOUNTING STANDARDS UPDATE
GASB Interpretation No. 2 Disclosure of Conduit Debt Obligations
This Interpretation was issued in August, 1995 and provides disclosure requirements for conduit
debt obligations.
APPENDIX B
Conduit debt obligations are certain limited - obligation revenue bonds, certificates of
participation, or similar debt instruments issued by a state or local governmental entity for the
express purpose of providing capital financing for a specific third party that is not a part of the
issuer's financial reporting entity. Although conduit debt obligations bear the name of the
governmental issuer, the issuer has no obligation for such debt beyond the resources provided by
a lease or loan with the third party on whose behalf they are issued.
The required disclosures include a general description of the conduit debt transactions, the
aggregate amount of all conduit debt obligations outstanding at the balance sheet date, and a
clear indication that the issuer has no obligation for the debt beyond the resources provided by
related leases or loans.
The provisions of the Interpretation are effective for financial statements for periods beginning
after December 15, 1995.
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