HomeMy WebLinkAboutManagement Report and Recommendations 12/31/1994CITY OF LINO LAKES, MINNESOTA
MANAGEMENT REPORT
AND RECOMMENDATIONS
DECEMBER 31, 1994
s
VEINY
To the Honorable Mayor and
Members of the City Council
City of Lino Lakes, Minnesota
TAUTGES, REDPATH & CO., LTD.
CERTIFIED PUBLIC ACCOUNTANTS
This Report is prepared in conjunction with the audit of the City's 1994 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 $114,275 in 1994 to a
total of $1,870,934 at December 31, 1994.
• 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,
?fd z/g
TAUTGES, REDPATH & CO., LTD.
Certified Public Accountants
May 8, 1995
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 1994 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, 1993 and 1994:
ti
•
Description
Treasurer's balance - checking
Petty cash
Investments:
Certificates of deposit
Commercial paper
FNMA pool
NOW account
GNMA
Investment pools
Federal Farm Credit Bank
Federal Home Loan Mortgage Corp.
Treasury Security
Federal Home Loan Bank
Student Loan Marketing Association
Federal agriculture mortgage, discount notes
Certificate of Indebtedness
Totals
December 31,
1993 1994
$1,909 $3,091
150 300
389,659
1,347,997
1,468,090
596,553
3,975,538
500,000
200,000
2,604,485
842,633
Increase
(Dec)
$1,182
150
490,083 100,424
795,339 (552,658)
2,210,290 742,200
26,700 (569,853)
347,874 347,874
3,067,529 (908,009)
405,000 (95,000)
1,439,255 1,239,255
1,947,235 (657,250)
450,000 450,000
300,000 300,000
- (842,633)
150,000 150,000
$11,927,014 $11,632,696 ($294,318)
Interest on investments totaled $431,078 in 1994 and $615,011 in 1993. The increased
earnings in 1993 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 comparing the carrying value (book) and market value for investments is as
follows:
Carrying Market
Value Value
Investment 12/31/94 12/31/94 Difference
Certificates of Deposit $490,083 $480,540 ($9,543)
Commercial Paper 795,339 797,409 2,070
FNMA Pool 2,210,290 2,226,359 16,069
NOW Account 26,700 26,700
GNMA 347,874 342,948 (4,926)
FFCB 405,000 398,046 (6,954)
FHLMC 1,439,255 1,411,390 (27,865)
Treasury Securities 1,947,235 1,776,819 (170,416)
FHLB 450,000 433,500 (16,500)
Student Loan Marketing Association 300,000 300,000
Certificates of Indebtedness 150,000 150,000
Investment Pools: (Mutual Funds)
MFS Government Maturity Fund 758,638 696,665 (61,973)
MFS Government Security Fund 543,496 499,014 (44,482)
Federated Fortress Adjustable Rate 672,947 647,889 (25,058)
Fortress Adjustable Rate 815,887 773,686 (42,201)
Delaware Treasury Reserves
Intermediate Fund 276,561 241,167 (35,394)
Total $11,629,305 $11,202,132 ($427,173)
Accounting standards as they apply to governmental units require investments to be carried at
cost. However, if declines in market value are deemed to be other than temporary, the carrying
value of investments should be reduced to market value. The decrease in the market value of
treasury securities is a result of the change in market interest rates. The City will realize full value
of these investments if they are held to maturity. It is the City's intention to hold these investments
until maturity.
The market value of the mutual funds fluctuates with changes in interest rates. The City
intends to monitor the market value of these funds and liquidate these funds once the market value
has recovered.
Vow
WREN
Ner
City of Lino Lakes, Minnesota
Management Report, Page 4
Property Taxes Receivable
Delinquent taxes receivable were as follows for the past several years:
1991 1992 1993 1994
Delinquent balance - January 1 $50,963 $59,664 $76,791 $29,534
Current Levy 1,717,474 1,865,188 2,073,987 2,268,950
Total receivable 1,768,437 1,924,852 2,150,778 2,298,484
Receipts:
County:
Current 1,333,954 1,408,779 1,588,279 1,815,761
Delinquent 24,342 24,395 50,099 15,014
State 340,224 397,193 469,323 427,284
Total receipts 1,698,520 1,830,367 2,107,701 2,258,059
Unadjusted balance
Adjust to County
Delinquent balance
Total collections as a percent
of current levy
69,917 94,485 43,077 40,425
(10,253) (17,694) (13,543) (12,621)
$59,664 $76,791 $29,534 $27,804
99% 98% 102% 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 $2,483 at December 31, 1994 as
follows:
TIF TW
1 -1 1 -2 Total
Delinquent Balance - January 1 $9,433 $3 $9,436
Current Levy 198,995 114,438 313,433
Total receviable 208,428 114,441 322,869
Receipts:
Current 197,334 114,438 311,772
Delinquent 28 24,909 24,937
Total receipts 197,362 139,347 336,709
Unadjusted balance 11,066 (24,906) (13,840)
Adjustments:
Tax forfeit property (8,586) (8,586)
1993 collections 24,909 24,909
Delinquent balance - December 31 $2,480 $3 $2,483
Special Assessments Receivable
Special assessments receivable consisted of the following amounts at December 31, 1993 and
1994:
December 31, Increase
1993 1994 (Decrease)
Delinquent $43,036 $36,497 ($6,539)
Deferred 3,066,724 2,609,301 (457,423)
City property 10,510 10,510
Due from County 26,125 9,201 (16,924)
Special deferred 297,113 (297,113)
Totals $3,443,508 $2,665,509 ($777,999)
City of Lino Lakes, Minnesota
Management Report, Page 6
Delinquent assessments receivable consist of amounts collectible in 1994 and prior years which
the City has not yet received. Special deferred assessments consist of residents who had not yet
hooked up to the water and sewer system. The City's charter does not allow residents to be
assessed for water and sewer projects until they hookup to the system. During 1994, the City
eliminated these assessments from the financial statements. As residents hookup to the utility
system they will be assessed at that time.
A summary of assessment collections for the past four years is as follows:
Nor
1991 1992 1993 1994
Delinquent balance - January 1 $132,985 $126,088 $118,690 $43,036
Adck
Current installment 351,941 379,521 632,067 387,200
Amount collectible 484.926 505.609 750.757 430.236
Less:
Current collections 293,452 306,443 580,678 355,543
Delinquent collections 65,396 82,664 39,313 32,743
Total collections 358.848 389.107 619,991 388.286
Adjustments 10 2,188 (87,730) (5,453)
Delinquent balance - December 31 $126,088 $118,690 $43,036 $36,497
Current collection rate 83% 81% 92% 92%
Total collections as a percent
of current levy 102% 103% 98% 100%
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 1993 and 1994 the City collected $3,192,613 and $1,560,816.
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
As discussed in prior management reports, the City does not maintain complete fixed asset
accounting records. Advantages of maintaining such a system include the following:
• Availability of insurable value amounts
• Increased safeguarding of movable assets
• Availability of database to determine capital equipment replacement needs
• Improved financial reporting
Currently, the auditors opinion on the financial statements is qualified for lack of a fixed asset
system. A fixed asset system would enable the City to obtain an unqualified or "clean" opinion on
the financial statements. This would allow the City to submit its Annual Financial Report to the
Government Finance Officers Association's Certificate of Achievement for Excellence in Financial
Reporting program. The City has purchased a fixed asset software program and intends to compile
a complete listing of fixed assets during 1995.
City of Lino Lakes, Minnesota
- Management Report, Page 8
Vow
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 1994 and budgeted 1995.
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
1987 $585,674 36.2% $714,892 44.2% $316,720 19.6% $1,617,286 100.0%
1988 549,567 30.7% 769,915 42.9% 473,490 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 30.5% 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 48.5% 1,046,486 31.8% 3,295,398 100.0%
1995* 673,724 18.7% 1,922,353 53.4% 1,005,507 27.9% 3,601,584 100.0%
* Budgeted
All other revenue consists of the following as of December 31, 1993 and 1994:
December 31, Increase
1993 1994 (Decrease)
Licenses and permits $565,684 $383,388 ($182,296)
Federal aid 9,351 1,695 (7,656)
County aid 35,803 24,272 (11,531)
Charges for services 239,562 353,026 113,464
Fines and forfeits 83,019 72,454 (10,565)
Interest on investments 66,820 81,373 14,553
Refunds and reimbursements 57,786 29,077 (28,709)
Gas franchise fees 24,267 61,734 37,467
Cable TV 14,909 16,335 1,426
Miscellaneous 31,302 23,132 (8,170)
Total $1,128,503 $1,046,486 ($82,017)
City of Lino Lakes, Minnesota
Management Report, Page 9
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 decrease in licenses and permits is due to a planned reduction in new home starts in the
City during 1994.
State aids for the General Fund have consisted of the following amounts from 1989 through
1994 actual and 1995 budgeted:
1995
State Aids 1989 1990 1991 1992 1993 1994 Budgeted
Local Government Aid $330,823 $163,165 $95,440 $94,960 $90,138 $145,445 $149,372
Homestead Credit 270,645 324,828 251,303 290,428 356,182 368,324 381,352
Equalization aid 44,547 42,991 45,547 42,854 -
Police Aid 32,739 35,662 43,044 44,692 47,253 43,622 48,000
MSA - Streets 13,935 13,935 13,170 81,232 86,246 85,187 95,000
Other Aids 34,265 18,282 6,416 7,655 6,117 8,792
Totals $682,407 $600,419 $452,364 $564,514 $628,790 $651,370 $673,724
Percent change 24.17% (12.01)% (24.66)% 24.79% 11.39% 3.59% 3.43%
General Fund
1994 State Aids
Other Aids
City of Lino Lakes, Minnesota
Management Report, Page 10
Revenue of the general fund for the past two years has been as follows:
Property taxes
Licenses and permits
Intergovemmental revenue:
Federal
State
County
Charges for services
Fines and forfeits
Interest on investments
Other
Totals
1993
Amount Percent
$1,420,369 44.7%
565,684 17.8%
1994 Increase
Amount Percent (Decrease)
$1,597,542 48.5% $177,173
383,388 11.6% (182,296)
9,351 0.3% 1,695 0.1%
628,790 19.8% 651,370 19.8%
35,803 1.1% 24,272 0.7%
239,562 7.5% 353,026 10.7%
83,019 2.6% 72,454 2.2%
66,820 2.1% 81,373 2.5%
128,264 4.1% 130,278 4.1%
$3,177,662
(7,656)
22,580
(11,531)
113,464
(10,565)
14,553
2 014
100.0% $3,295,398 100.2% $117,736
Detail of the above revenue is presented in Statement 7 of the 1994 Annual Financial Report.
Mom
General Fund
1994 Revenue By Source
Interest and All Other 6.6%
Fines and Forfeits 2.2%
Charges for Services 10.7%
Intergovernmental
20.6%
Licenses and Permits
11.6%
Property Taxes
48.5%
City of Lino Lakes, Minnesota
Management Report, Page 11
Expenditures of the general fund for the past two years are as follows:
1993 1994 Increase
Amount Percent Amount Percent (Decrease)
Current
General government $883,095 31.2% $1,020,559 32.2% $137,464
Public safety 950,824 33.6% 1,125,207 35.5% 174,383
Public works 557,802 19.7% 537,874 17.0% (19,928)
Parks, recreation and forestry 312,257 11.0% 378,700 11.9% 66,443
Capital outlay 125 224 4.4% 107 522 3.4% (17,702)
Totals
$2,829,202 99.9% $3,169,862 100.0% $340,660
t . - -
General Fund
1994 Expenditures By Category
Parks, Recreation &
Forestry 11.9%
Public Works
17.0%
Capital Outlay 3.4%
General Government
32.2%
Public Safety 35.5%
Details of the above expenditures are presented in Statement 7 of the 1994 Annual Financial
Report.
N..
fter
City of Lino Lakes, Minnesota
Management Report, Page 12
The fund balance of the general fund increased by $114,275 in 1994 as follows:
Actual revenues over (under) budgeted revenues:
Property taxes $3,262
Licenses and permits (1,723)
Intergovernmental revenue 2,239
Charges for services 55,439
Interest on investment 37,020
Refunds and reimbursements 503
Miscellaneous 214
Net revenue over budget
Actual expenditures under (over) budgeted expenditures:
General government 5,467
Public safety 2,385
Public works 14,891
Parks, recreation and forestry 7,685
Capital outlay (1,846)
Operating transfer out (11,261)
Net expenditures under budget
$96,954
17.321
Total increase in fund balance $114,275
Detail of the preceding budget variances are presented in Statement 7 of the 1994 Annual
Financial Report.
The City's December 31, 1994 fund balance totaled $1,870,934. The City's General Fund
balance has been as follows for the past ten years:
Fund Balance
Reserved/
December 31, Designated Undesignated Total Increase
1985 $77,624 $350,675 $428,299
1986 83,714 455,666 539,380 $111,081
1987 52,593 589,799 642,392 103,012
1988 96,626 747,836 844,462 202,070
1989 53,290 976,763 1,030,053 185,591
1990 1,169,624 - 1,169,624 139,571
1991 1,265,236 1,265,236 95,612
1992 1,406,296 1,406,296 141,060
1993 1,673,039 83,620 1,756,659 350,363
1994 1,870,934 1,870,934 114,275
City of Lino Lakes, Minnesota
Management Report, Page 13
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 70% of budget 1995
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:
1995 Budgeted Levy (Includes Homestead Credit)
1995 Anticipated Local Government Aid
Total
Cash -Flow Reserve (50% of total)
$2,303,705
149,372
$2,453,077
$1,226,539
The general contingency reserve is equal to 15% of the City's general fund expenditure budget
for the ensuing year as follows:
1995 budgeted expenditures $3,601,584
Applicable percentage 15%
General contingency reserve $540,238
Nor
r►
IR or
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City of Lino Lakes, Minnesota
Management Report, Page 14
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/Designation
Reserve General
Requirement Fund
Per City Balance
Policy Available Difference
Prepaid items $70,738 $70,738 $ -
Cash flow 1,226,538 1,226,538
General contingency 540,238 540,238
Contingent employee benefits 89,559 33,420 56,139
Totals
$1,927,073 $1,870,934 $56,139
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.
A summary of the purposes and benefits of general fund reserve balances is as follows:
Purpose of Reserves
Benefits of Reserves
Cash flow timing 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 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, law suits, comparable
worth implementation and premature breakdown
of vita 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 15
SPECIAL REVENUE FUNDS
The financial statements for the City's special revenue funds are presented in Statements 8 and
9 of the 1994 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 1993 and 1994:
Fund Balance
December 31, Increase
Fund 1993 1994 (Decrease)
Economic Development Authority ($134) ($101) $33
Program Recreation 3,073 7,942 4,869
Total $2,939 $7,841 $4,902
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.
v
City of Lino Lakes, Minnesota
Management Report, Page 16
Program Recreation
This fund was established in 1993 to account for self - supporting recreation programs. A
summary of 1994 financial activity is as follows:
Revenue:
Recreation fees $47,848
Interest 255
Total revenue 48,103
Expenditures:
Personal services 27,045
Supplies 10,113
Other services 6,076
Total expenditures 43,234
Revenue over expenditures $4,869
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 17
DEBT SERVICE FUNDS
i
The combining financial statements for the debt service funds are presented in Statements 10
and 11 of the 1994 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.
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 1994 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, 1994 Scheduled Final
Fund Deferred Outstanding Property Maturity
Fund Description Balance Revenue Total Debt Taxes Date
General Debt:
1989B Certificates of Indebtedness $81,703 $969 582,672 560,000 $ - 2/1/95
1990 Certificates of Indebtedness 4,517 300 4,817 18,500 20,726 1/1/96
1992 Certificates of Indebtedness (107,349) (107,349) 50,000 166,305 2/1/95
1994 Certificates of Indebtedness 150,000 175,246 12/31/96
Public Project Revenue Bonds of 1990A 165,083 1.280 166,363 1,115,000 1,911,949 2/1/10
Total general debt 143,954 2,549 146,503 1,393,500 2,274,226
Special Assessment Debt:
Improvement Bonds of 1988 * 767,195 88,757 855,952 500,000 - 2/1/97
Improvement Bonds of 1992A 531,590 217,741 749,331 3,340,000 3,540,670 2/1/06
Temporary Improvement Bonds of 1994A 85,773 327,885 413,658 2,095,000 - 11/1/97
Total special assessment debt 1.384,558 634,383 2,018,941 5,935,000 3,540,670
Total - All Debt Service Funds $1,528,512 5636,932 $2,165,444 $7,328,500 $5,814,896
* Called for early redemption on February 1, 1995.
City of Lino Lakes, Minnesota
Management Report, Page 18
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
1. 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
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 nal 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
City of Lino Lakes, Minnesota
Management Report, Page 19
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 Project 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.
1991A Temporary Improvement Bonds
The City issued these bonds to finance various projects and to retire the 1988 Temporary
Improvement Bonds. The bonds financed White Tail Ridge, Brandywood Estates, Pheasant Hills,
Pine Ridge Addition, Reshanau Lake Sanitary Sewer Trunk and Wenzel Farms Improvements.
This bond issue matured on August 1, 1994.
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 20
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CAPITAL PROJECT FUNDS
1
The financial statements for the capital project funds are presented in Statements 12 and 13 of
the 1994 Annual Financial Report. The fund balances (deficits) of the Capital Project Funds at
December 31, 1993 and 1994 are as follows.
Fund
Dedicated Park
Capital Improvement Projects
Community Development Block Grant
Area and Unit Charge
Surface Water Management
Interim Construction
MSA Construction
Sealcoating
SAC Revolving
1989 Construction
1991 Construction
1993 Construction
1994 Construction
Industrial Park Construction
Apollo Drive Construction
Tax Increment #1 -1
Tax Increment #1 -2
Tax Increment #1-4
Tax Increment #1 -5
Totals
Fund Balance (Deficit)
December 31,
1993 1994
Increase
(Decrease)
$173,018 $283,883 $110,865
78,569 42,763 (35,806)
(8,314) (461) 7,853
3,981,637 3,318,023 (663,614)
231,007 317,390 86,383
(172,276) 15,206 187,482
45,568 49,367 3,799
157,047 149,120 (7,927)
457,274 473,514 16,240
167,256 169,782 2,526
151,138 155,570 4,432
15,842 16,405 563
(21,775) 1,139,729 1,161,504
(74,676) (67,303) 7,373
379,169 68,728 (310,441)
954,886 1,093,296 138,410
294,960 425,335 130,375
(20,329) (21,363) (1,034)
(962) (962)
$6,790,001 $7,628,022 $838,021
City of Lino Lakes, Minnesota
Management Report, Page 21
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 of park dedication fees in 1994. The fund balance of $283,883 at
December 31, 1994 is available for expenditures by the City to fund capital outlay and maintenance
of dedicated park lands.
The City normally collects park dedication fees upon subdivision. The City has made
exceptions for the Lino Air Park development to allow for payment upon development (as opposed
to subdivision). The amount of the park dedication fee receivable for Lino Air Park of $4,400 has
been outstanding for the past nine years. The City anticipates collecting this fee when additional
development occurs.
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, 1994:
Prior
Years 1994 Total
Revenue and other sources:
Proceeds from equipment certificates $1,246,822 $150,000 $1,396,822
Interest eamings 76,091 3,124 79,215
Property taxes 14,558 2 14,560
MSA 4,944 4,944
Donations 16,000 16,000
Transfer from Agency fund 20,156 20,156
Transfer from Debt Service fund 2,390 2,390
Total $1,380,961 $153,126 1,534,087
Expenditures:
Capital outlay $1,302,392 $188,932_ 1,491,324
Fund balance - December 31, 1994 $42,763
...
City of Lino Lakes, Minnesota
Management Report, Page 22
Community Development Block Grant
The Community Development Block Grant (CDBG) Fund was established in 1982 to account
for the fmancial 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, 1994 this fund had a deficit fund balance of $461. This deficit is expected
to be eliminated through a transfer in 1995.
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.
City of Lino Lakes, Minnesota
Management Report, Page 23
A schedule of transactions of this fund from inception is as follows:
Prior
Years 1994 Total
Revenue and other sources:
Area and unit charges $4,490,033 $904,469 $5,394,502
Interest on investments 425,097 144,674 569,771
MSA 11,342 - 11,342
Transfer from 1989 construction 29,842 29,842
Transfer from Water Fund 361,572 183,667 545,239
Total $5,317,886 $1,232,810 6,550,696
Expenditures and other uses:
Professional services $117,635 $ - 117,635
Construction:
Ware Road Utility Improvements 1,887 106,366 108,253
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 89,347 91,548 180,895
Total $1,336,249 $1,896,424 3,232,673
Fund balance $3,318,023
Designations of balances required for debt service is necessary to define discretionary
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:
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
$3,540,670. 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
$1,592,084 (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.
City of Lino Lakes, Minnesota
Management Report, Page 24
The Temporary Bonds of 1994 were issued to finance The Country Lakes, Hodgson Road and
Hwy 49 /CSAH 23 Improvements. The un- assessed 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 un- assessed 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.
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 various
projects accounted for in this fund are detailed in Exhibit 4 of the 1994 Annual Financial Report.
The fund balance of this fund was a of $15,206 at December 31, 1994.
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 $49,367 at December 31, 1994.
City of Lino Lakes, Minnesota
Management Report, Page 25
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 1994 Total
Revenue and other sources:
Special assessments $234,424 $63,489 $297,913
Interest earnings 7,597 5,694 13,291
Refunds and reimbursements 24,850 33,900 58,750
Total $266,871 $103,083 369,954
Expenditures $109,824 $111,010 220,834
Fund balance - December 31, 1994 $149,120
SAC Revolving
The SAC Revolving Fund was established in 1990 to account for a refund from the MCWS
(formerly MWCC) of past SAC charges which were paid by residents that had not hooked up to
the sewer system.
A summary of financial activity of this fund is as follows:
Prior
Years 1994 Total
Revenue
SAC refund $365,175 $ - $365,175
Interest earning 92,099 16,240 108,339
Total revenue $457,274 $16,240 473,514
Expenditures $ - $ - 0
Fund Balance - December 31, 1994 $473,514
City of Lino Lakes, Minnesota
Management Report, Page 26
..- 1989 Construction
This fund accounts for the various projects financed by the Temporary Improvement Bonds of
1989. During 1992, the City allocated $250,070 of additional bond proceeds from the
Improvement Bonds of 1992A to this fund. The fund balance of this fund was $169,728 at
December 31, 1994. A summary of the financial activity of this fund from inception is as follows:
NNW
Budget
Actual Variance
Financing sources:
Bond proceeds $4,120,767 $4,367,450 $246,683
MSA construction 105,800 (105,800)
Interest earnings 329,330 329,330
Special assessments - 758,312 758,312
Other 1,200 1,200
Total sources $4,226,567 5,456,292 $1,229,725
Financing uses:
Construction costs:
West Central Trunk $2,047,335 1,985,414 ($61,921)
Woodridge Estates 819,933 851,967 32,034
Sunrise Meadows 894,064 886,179 (7,885)
Reshanau 3rd 206,925 252,047 45,122
Reshanau 4th & 5th 258,310 467,785 209,475
Transfers out:
Area and unit charge 163,601 163,601
Temp Bonds of 1989 580,643 580,643
Dedicated parks 18,561 18,561
Interim construction 48,400 48,400
Surface water management 31,913 31,913
Total uses $4,226,567 5,286,510 $1,059,943
Fund balance - December 31, 1994 $169,782
The transfers to the Area and Unit Charge Fund and the Temporary Improvement Bonds of
1989 were to transfer assessment collections to the appropriate funds. The transfer to the Interim
Fund was for reimbursement of prior expenditures. During 1992 and 1993, the City recorded
costs incurred on the Reshanau 5th Addition within this Fund. These costs were not originally
budgeted at the time the bond was issued.
The projects accounted for in this fund have been completed. However, a review of the related
escrow accounts must be completed prior to closing this fund. We recommend the City review the
related escrow accounts and close this fund in 1995.
City of Lino Lakes, Minnesota
Management Report, Page 27
1991 Construction
This fund accounts for the various projects financed by the Temporary Improvement Bonds of
1991A. A summary of financial activity of this fund is as follows:
Budget Actual Variance
Financing sources:
Bond proceeds $3,949,214 $3,947,649 ($1,565)
Special assessments 13,360 13,360
Transfer from area and unit charge 388,965 388,965
Interest earnings 79,041 79,041
Refunds and reimbursements 144,977 144,977
Total sources $3,949,214 4,573,992 $624,778
Financing uses:
Construction costs:
White Tail Ridge $50,600 60,437 $9,837
Brandywood Estates 790,015 793,529 3,514
Pheasant Hills 583,762 714,511 130,749
Pine Ridge Estates 592,771 588,925 (3,846)
Reshanau Lake Trunk 1,016,286 1,233,629 217,343
Wenzel Farms 915,780 1,027,391 111,611
Total uses $3,949,214 4,418,422 $469,208
Fund balance - December 31, 1994 $155,570
The assessments for White Tail Ridge and Brandywood Estates were adopted in 1991. The
assessments for Pheasant Hills, Pine Ridge Estates, Reshanau Lake Trunk and Wenzel Farms
were adopted in 1992. During 1992, the City received a reimbursement from the MWCC for a
portion of the Reshanau Lake Trunk which was constructed by the City for the MWCC.
The projects accounted for in this fund have been completed. However, a review of the related
escrow accounts must be completed prior to closing this fund. We recommend the City review the
related escrow accounts and close this fund in 1995.
1993 Construction
The projects accounted for in this fund have been completed. However, a review of the related
escrow accounts must be completed prior to closing this fund. We recommend the City review the
related escrow accounts and close this fund in 1995.
tim
City of Lino Lakes, Minnesota
Management Report, Page 28
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 771,900 - (771,900)
Interest earnings - 5,372 5,372
Total sources $2,851,250 1,908,986 ($942,264)
Financing uses:
Construction costs:
Issuance costs $25,900 ($25,900)
Country Lake Estates 636,750 498,517 (138,233)
Highway 49 and Lake Drive 1,988,400 210,747 (1,777,653)
Hodgson Road watermain 200,200 59,993 (140,207)
Total uses $2,851,250 769,257 ($2,081,993)
Fund balance - December 31, 1994 $1,139,729
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 deficit of $67,303 at December 31, 1994. 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 $68,728 at December 31, 1994.
City of Lino Lakes, Minnesota
Management Report, Page 29
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
Yeats 1994 Total
Revenue and other sources:
Tax increments $852,448 $197,363 $1,049,811
HACA 8,683 - 8,683
Interest on investments 113,652 34,916 148,568
Total revenue and other sources $974,783 $232,279 1,207,062
Expenditures and other uses:
Transfer to TIF 1 -3 $9,484 $ - 9,484
Administrative fee 18,500 18,500
Developer assistance 70,000 70,000
Professional services 8,827 4,675 13,502
Transfer to Special Revenue Fund 1,586 694 2,280
Total expenditures and other uses $19,897 $93,869 113,766
Fund balance - December 31, 1994 $1,093,296
As shown on the preceding table, the City charged this fund an administrative fee of $18,500
in 1994. The developer assistance consisted of payments to ACCUTOOL for facility
improvements.
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.
City of Lino Lakes, Minnesota
Management Report, Page 30
Tax Increment Financing #1 -2
The City established Tax Increment Financing District #1 -2. This district qualifies as a
Economic Development TIP district pursuant to Minnesota Statutes 469.174, subdivision 12.
Financial activity of this fund from inception is as follows:
Prior Years 1994 Total
Revenue and other sources:
Tax increments $300,209 $139,346 $439,555
Interest on investments 20,185 12,851 33,036
Total revenue and other sources 320,394 152,197 472,591
Expenditures and other uses:
Administrative 14,365 21,128 35,493
Transfers to other funds 11,069 694 11,763
Total expenditures and other uses $25,434 $21,822 47,256
Fund balance - December 31, 1994 $425,335
Included in administrative expenses is an administrative fee of $18,500.
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, 1994 this fund had a deficit balance of $21,363.
District #1 -4 has anticipated project requirements as follows:
Estimated Actual
Land acquisition $400,000 $ -
Public improvements 1,050,000
Administrative 100,000 59,748
Bond discount 40,000
Capitalized interest 360,000
Total $1,950,000 $59,748
City of Lino Lakes, Minnesota
Management Report, Page 31
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.
City of Lino Lakes, Minnesota
Management Report, Page 32
ENTERPRISE (UTILITY FUND)
1
The City maintains three enterprise operating funds. The financial statements for these funds
are presented in Statements 14 through 16 of the 1994 Annual Financial Report. Statements of
income and expense for 1994 (excluding depreciation on contributed assets) for the water and
sewer utility fund are shown in the following schedule:
Nor
low
Operating revenue:
Charges for services
Other
Total operating revenue
Operating expenses:
Personal services
Materials and supplies
Contractual services
Repair and maintenance
MCWS sewer charges
Depreciation
Or
Total operating expenses
Income from operations
Other income (expense):
Interest on investments
Maintenance agreement - MCWS
Area and unit charges
Bond interest and paying agent fees
Total other income (expense) 7,671 16,965 _
Water Sewer
1993 1994
$177,536 $252,301
55,863 _ 42,705
233,399 295,006
47,796
79,808
11 ,502
8,297
18
22,028
169,449
51,133
48,758
4,985
6,625
20,198
38,263
169,962
1993 1994
$291,062 $357,605
5,237 9,238
296,299 366,843
43,942 44,201
1,192 1,124
19,983 11,490
9,702 2,189
168,891 224,268
713 713
21,324 30,145
265,747 314,130
63,950 125,044 30,552 52,713
6,251 7,691 377 4,266
7,294 12,699
132,175 183,667
(75,350) (66,080)
63,076 125,278
Net income before transfers
127,026
250,322 38,223 69,678
Transfer from Area and Unit Charge Fund 93,238 91,548
Transfer to Area and Unit Charge Fund (132,175) (183,667)
Net increase in retained earnings 88,089 158,203 38,223 69,678
Retained earnings - January 1, 1994 30,538 118.627 65.499 103.722
Retained earnings - December 31, 1994 $118,627 276 830 $103,722 $173,400
As shown above, both the water and sewer funds experienced net increases in retained
earnings for 1993 and 1994. Also as shown above, the single largest expense of the sewer fund is
MCWS sewer charges.
City of Lino Lakes, Minnesota
Management Report, Page 33
The MCWS 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 MCWS billings for
calendar years 1985 through 1995 have been as follows:
Year
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
Billings from MCWS
Estimated Final
Percent Percent
Amount Change Amount Change
$ 30,050 15.10% $25,039 13.76%
33,283 10.76% 29,147 16.41%
37,845 13.71% 32,519 11.57%
41,351 9.26% 40,197 23.61%
52,098 25.99% 48,521 20.71%
67,232 29.05% 70,243 44.77%
78,048 16.09% 96,542 37.44%
104,090 33.37% 131,251 35.95%
141,730 36.16% 167,079 27.30%
198,918 40.35% N/A N/A
229,851 15.55% N/A N/A
$250,000
$200,000
$150,000
$100,000
$50,000
$0
MCWS Billings
1985 1986 1987
1988 1989 1990 1991 1992 1993 1994 1995
Estimated Billings A Actual Billings
City of Lino Lakes, Minnesota
Management Report, Page 34
There are two basic factors which contribute to increased billings from the MCWS:
1. Changes in use of the system. The MCWS has increased the 1995 estimated flow for
the City of Lino Lakes by 11 %.
2. Increased cost to process sewage. The MCWS's cost to process (per million gallons)
increased to an estimated $1,276 in 1995 from an estimated $1,243 in 1994. This
represents an increase of 2.6 %.
The combination of the above factors has increased the City's estimated cost in 1995 by 15 %.
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 1994 the City transferred $183,667 to the Area and Unit Charge Fund.
The area and unit charge fund transferred $91,548 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 $276,830 and $173,400,
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 35
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 $236,188 $61,001
Working capital needs:
Accounts receivable 122,022 105,444
Prepaid expenses 809 22,519
Due from other govemments - 12,699
Payables (36,867) (32,655)
Long -term payable - bonds (1,035,000)
Purchased fixed assets - net 989,678 4,392
Retained earnings $276,830 $173,400
.11 Nor
low
City of Lino Lakes, Minnesota
Management Report, Page 36
1 GAS UTILITY FUND
Portions of the City of Lino Lakes have gas service through a franchise agreement between the
City of Circle Pines and the City of Lino Lakes. The City of Circle Pines operates the gas utility.
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:
1993 1994
Residential and Commercial Revenue $398,781 @ 7% = $27,915 $374,905 @ 7% = $26,243
Interruptible Service 125,360 @ 3% = 3,761 127,204 @ 3% = 3,816
Total $524,141 31,676 $502,109 30,059
Remitted by Circle Pines 31,675 30,059
Difference
$1 $0
The franchise agreement allows for adjustment from gross revenue of net bad debts. The City
of Lino Lakes had bad debts of $1,257 in 1993 and $2,100 in 1994.
City of Lino Lakes, Minnesota
Management Report, Page 37
Gas utility sales have been as follows:
Residential
Commercial
Total
Increase / ( Decrease)
Year Amount Amount Percent
1983 $96,272 $8,077 9.16%
1984 97,007 735 0.76%
1985 102,156 5,149 5.31%
1986 90,407 (11,749) (1150)%
1987 82,787 (7,620) (8.43)%
1988 114,883 32,096 38.77%
1989 120,060 5,177 4.51%
1990 148,802 28,742 23.94%
1991 207,162 58,360 39.22%
1992 274,811 67,649 32.66%
1993 378,573 103,762 37.76%
1994 359,663 (18,910) (5.00)%
Amount
$22,478
23,829
29,356
24,764
19,866
21,845
21,303
17,669
20,013
18,092
21,465
17,342
Increase / (Decrease) Increase / (Decrease)
Amount Percent Amount Amount Percent
$3,697 19.68% $118,750 $11,774 11.01%
1,351 6.01% 120,836 2,086 1.76%
5,527 23.19% 131,512 10,676 8.84%
(4,592) (15.64)% 115,171 (16,341) (12.43)%
(4,898) (19.78)% 102,653 (12,518) (10.87)%
1,979 9.96% 136,728 34,075 33.19%
(542) (2.48)% 141,363 4,635 3.39%
(3,634) (17.06)% 166,471 25,108 17.76%
2,344 13.27% 227,175 60,704 36.47%
(1,921) (9.60)% 292,903 65,728 28.93%
3,373 18.64% 400,038 107,135 36.58%
(4,123) (19.21)% 377,005 (23,033) (5.76)%
Bad Debts
Interruptible Sales
Increase / (Decrease)
Year Amount Amount Percent
1983 $
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
3,334
2,757
3,394
53
2,500
515
1,257
2,100
Increase / (Decrease)
Amount Amount Percent
$ $146,092 $27,358 23.04%
155,626 9,534 6.53%
149,590 (6,036) (3.88)%
92,822 (56,768) (37.95)%
3,334 3.25% 88,509 (4,313) (4.65)%
(577) (17.31)% 83,363 (5,146) (5.81)%
637 23.10% 111,977 28,614 34.32%
(3,341) (98.44)% 108,699 (3,278) (2.93)%
2,447 4616.98% 113,869 5,170 4.76%
(1,985) (79.40)% 126,267 12,398 10.89%
742 144.08% 125,360 (907) (0.72)%
843 67.06% 127,204 1,844 1.47%
Prior to 1987, bad debts were netted with sales.
A
City of Lino Lakes, Minnesota
Management Report, Page 38
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, 1994 the Lino Lakes Franchise has a positive fund balance of
$90,630. A schedule of the City of Lino Lakes fund balance for the past four years is as follows:
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%
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 fmancing source for
the City. The City received $30,059 in 1995 which represents the 1994 share of earnings.
Earnings from inception of the new agreement total $154,739. Financial uncertainties facing
metropolitan cities require diversity of revenue sources to assure adequate funding of operations
without severe property tax increases.
1
City of Lino Lakes, Minnesota
Management Report, Page 39
AGENCY FUNDS
An Agency Fund is designed to account for transactions for other individuals, private
organizations and/or other funds. During 1994, 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.
This fund was closed in 1994. In the future, pending assessments will be deposited directly
into the area and unit charge fund.
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.
Immo
City of Lino Lakes, Minnesota
Management Report, Page 40
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 1994, the City of Lino Lakes received $43,567 of federal funds
as follows:
Grant
Amount
Oak Wilt Cooperative Suppression Program $1,695
Re -Leaf Grant 13,000
CDBG 29,872
ICS Course Reimbursement 350
Total $44,917
We have completed the federal compliance audit as required and issued our reports under a
separate cover. The findings identified in the report are summarized below:
1) Each grant program requires submission of certain reports by a specified date identified in
the grant document. For the Oak Wilt Cooperative Suppression Program grant, the status
report was not submitted by the required date.
2) Each grant requires reports regarding fmancial activity. For two of the above grants, the
amounts reported to the grantor agency did not agree with the City's accounting records.
City of Lino Lakes, Minnesota
Management Report, Page 41
I SUMMARY 1
During 1995, we recommend that the City:
• Continue to monitor the collection rate of assessments and provide supplemental financing
if assessment collections are not adequate to meet bonded debt payments. (Page 6)
• Continue to request more detailed information from Anoka County regarding delinquent
assessment receivables. (Page 7)
• Consider adopting a budget for the City's Program Recreation Fund. (Page 16)
• Continue to compare projected and actual area and unit assessment collections to assure that
collections will be sufficient to meet debt payments. (Page 22)
• Review the escrow accounts related to the 1989 Construction Fund, 1991 Construction
Fund, and 1993 Construction Fund, and close these funds in 1995. (Pages 26 - 27)
• Continue to maintain detailed records of amounts due from developers to assure that
adequate deposits are received prior to incurring expenses on a developer's behalf. (Page
39)
II wow
Imam
INIMm
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YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
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
MS 477A.03
sunset on 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
MS 475.66
allowed to purchase "high risk" mortgage backed securities. A definition of "high
risk" is included in MS 475.66
1993
#43 Budget information: Cities must provide summary budget information
MS 6.745
to the Office of the State Auditor by December 31 of the year preceding each
budget year.
1993
#42 Special assessments: Cities are now required to pay to the county
MS 429.061
auditor the administrative expenses incurred by the county auditor for
Subd. 5
administering the collection of special assessments.
1993
#41 Purchase of investments: Cities must provide securities broker - dealers
MS 475.667
a written notification of investment restrictions and include a provision that all
Subd. 6
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.
PREPARED BY TAUTGES, REDPATH & CO., LTD.
PAGE 1 OF 8
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
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.
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.
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PAGE 2 OF 8
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YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
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.
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
HF 1698
Art. 2
Section 6
#26 Authorized the establishment of a local option sales tax of 1/2% on all retail
sales in the County. If the County does not authorize the additional 1/2% sales
tax, Cities and Towns within the County which have a majority of the population
may override the County action by sending copies of approving resolutions to the
County Auditor by August 1, 1991.
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YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
1991
HF 1698
Art. 2
#25 The local government trust fund is authorized to make the following
payments to Counties, Cities, Towns and Special Taxing Districts:
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).
1991
#24 Created the local government trust fund to be used exclusively to pay local
HF 1698
governments for inter - governmental aid and to repay advances made by the
Art. 2
State's general fund as may have been required to make all required payments as
Section 2
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
#23 Establish the advisory commission on inter - governmental relations with an
HF 1698
initial membership of twenty through July 1, 1992. After July 1, 1992 the
Art. 2
commission is reduced to fourteen members. The commissioners are to be
Section 1
representative of the various geographic and governmental jurisdictions of the
State.
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PAGE 4 OF 8
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES, MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
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
Rue Rate Rate Rate Rate Rate
First $100,000 of
market value 3.30% 3.20% 3.10% 3.00% 3.00% 3.00%
Market value over Targeted to
$100,000 5.06% 4.95% 4.75% 4.70% 4.60% eventually be
4%
- t
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.
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 $115,000 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.
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PAGE 5 OF 8
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
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 HF 47
I #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.
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.
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PAGE 6 OF 8
Ilawr
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES, MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
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
its 1989 levy limits for Cities repealed starting with collectible 1992 levy. In
1990 the effective date was extended to collectible 1993 levies. (See #15).
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 fmancial 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 mil rates.
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PAGE 7 OF 8
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES, MINNESOTA
STATE LEGISLATIVE ACTION
APPENDIX A
1988
#3 Cities to receive Transition Aid in lieu of homestead credits.
MS 273.1398
Transition aid to be calculated on each unique taxing jurisdiction (UTJ) and then
Subd. 2
allocated 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
MS 477A.013
household 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 Governmental Accounting Standards Board (GASB) issued eight statements of accounting
standards during 1993, and four statements of standards in 1994 as well as one technical bulletin in
1994. The following is a summary of those statements.
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.
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.
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ACCOUNTING STANDARDS UPDATE
APPENDIX B
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 financial 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.
For guidance issued after the cutoff date, proprietary funds make use 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.
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ACCOUNTING STANDARDS UPDATE
APPENDIX B
—
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 fmancial statements for periods beginning after
June 15, 1994.
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 finance 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.
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ACCOUNTING STANDARDS UPDATE
APPENDIX B
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.
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 financial 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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ACCOUNTING STANDARDS UPDATE
APPENDIX B
GASB No. 26 Financial Reporting for Postemployment Healthcare Plans.
Administered by 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.
GASB Technical Bulletin No. 94 -1: Disclosures About Derivatives and Similar
Debt and Investment Transactions
This bulletin addresses financial 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.
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