HomeMy WebLinkAboutManagement Report and Recommendations 12/31/1991CITY OF LINO LAKES, MINNESOTA
MANAGEMENT REPORT
AND RECOMMENDATIONS
DECEMBER 31, 1991
CITY OF LINO LAKES, MINNESOTA
MANAGEMENT REPORT AND RECOMMENDATIONS
Table of Contents
Page
Transmittal Page 1
General and Special Revenue Funds - Summary data and analysis
of revenue and expenditures compared to prior periods 6
Account Balance Analysis - A look at changes in various accounts
such as cash, investments and receivables 10
Individual Fund/Fund Type Analysis - Review of significant changes in
fund balances and other matters 16
Internal Control Report
Recommendations Summary
State Legislative Actions
46
49
Appendix A
Imam
TAUTGES, REDPATH & CO., LTD.
CERTIFIED PUBLIC ACCOUNTANTS
To the Honorable Mayor and
Members of the City Council
City of Lino Lakes, Minnesota
The first part of this report analyzes the actual and proposed changes in funding for Cities. This
information is presented to allow for an understanding of 1) aid cuts and shifts on a Statewide basis
and 2) aid cuts and shifts as they specifically affect the City of Lino Lakes. This report also presents
updated trend analysis to illustrate the impact of the changes on the overall funding of basic
governmental services of the City.
The balance of this report updates financial analysis of funds and account balances of the City.
•— Financial areas which may be of particular interest to the City are as follows:
w
1. The State continues to make significant changes that offset City finances.
2. Delinquent special assessments at December 31, 1991 are $126,088. A
substantial portion (77 %) relates to a single project.
3. General Fund Balance increased by $95,612 during 1991 to a fund balance
of $1,265,236 at December 31, 1991.
4. The Water and Sewer Operations continue to reflect net decreases in retained
earnings.
Page No.
2
13
16
39
The challenges facing local government in Minnesota continue to increase as financing becomes less
stable. We are available to discuss this report with the City upon request.
Respectfully submitted,
TAUTGES, REDPATH & CO., LTD.
Certified Public Accountants
May 6, 1992
4810 White Bear Parkway • White Bear Lake, Minnesota 55110 • 612/426 -7000 • FAX /426 -5004
City of Lino Lakes, Minnesota
— Management Report, Page 2
Imew
Imp
RECENT LEGISLATIVE ACTIONS
The State legislature has made a progression of changes in funding cities. The most
significant changes started with the 1988 Legislative session and continued through the 1992
session. Appendix A of this report presents a summary of this Legislation and an estimate of the
initial year impact on 1) cities - statewide; and 2) the City of Lino Lakes.
The 1992 legislative actions impact City finances and affect not only the General Fund, but
other funds as well. A summary of the 1992 legislative actions is as follows:
Levy Limits. The 1992 legislature did not change the 1990 law which repeals levy limits
starting with taxes payable in 1993.
Sales Tax. The omnibus tax bill imposes a sales tax on purchases by local governments.
The sales tax becomes effective June 1, 1992. The sales tax rate is 6.5% and generally applies
to purchase of goods and certain services. The 1992 impact of sales tax on the City of Lino
Lakes is as follows:
Fund Amount
General Fund $13,000
Water and Sewer 3.000
Total $16,000
Water Connection Fee. The omnibus finance bill includes a provision which requires
Cities to collect a $5.21 fee from all accounts to which the City supplies water. This fee will
be remitted to the Department of Revenue and will be used for testing water supplies.
City of Lino Lakes, Minnesota
Management Report, Page 3
The estimated effects of the 1989 through 1992 legislative changes in Statewide city funding is
as follows:
1989
1990
1991
1992
Local
Government
Aid
376,376,000
317,343,000
283,640,000
279,700,000
State Totals for Cities
Homestead and Tax Base
Agricultural Equalization
Credit Aid Aid
106,308,000
143,523,000 $19,513,000
155,690,000 19,476,000
173 ,191,000 19,427,000
Disparity
Reduction
Aid
$20,853,000
14,201,000
14,500,000
14,028,000
A chart of the above major funding categories to cities is as follows:
Total
$503,537,000
494,580,000
473,306,000
486,346,000
hicrease
(Decrease)
($8,957,000)
(21,274,000)
13,040,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
1989
1990
1991
1992
State Funding
to Cities (in
$1,000)
O Equalization
▪ Disparity
▪ HACA
El LGA
City of Lino Lakes, Minnesota
Management Report, Page 4
The 1986 through 1992 legislative changes have impacted the funding of the City of Lino
Lakes as follows:
City of Lino Lakes
Local
Government
Year Aid
1987 $232,159
1988 232,157
1989 330,823
1990 163,165
1991 95,440
1992 87,511
Homestead and
Agricultural
Credit Aid
$277,294
300,698
284,060
362,289
290,400
347,674
Tax Base
Equalization
Aid
$49,684
49,701
49,519
Increase
Total (Decrease)
$509,453
532,855 $23,402
614,883 82,028
575,138 (39,745)
435,541 (139,597)
484,704 49,163
A graph of State Aids of the City of Lino Lakes compared to Statewide totals to cities is as
follows:
City of Lino Lakes
$700,000 -
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
State (in $1,000)
- $500,000
- $400,000
- $300,000
- $200,000
- $100,000
1987 1988 1989 1990 1991 1992
Equalization Aid
HACA
Local Government
Aid
Statewide Aid (in
1,000)
City of Lino Lakes, Minnesota
Management Report, Page 5
Local government aid is the primary aid received from the State. A key variable in calculating
LGA is the "revenue base ". The revenue base consists of a city's total property tax levy plus
LGA. The revenue base is a concept which has been used to calculate funding of cities for a
number of years. Currently, revenue base is the basis for calculating aid cuts. The revenue base
for the City of Lino Lakes has been as follows:
Property
Tax
Year Levy LGA Total
1989 $1,146,850 $330,823 $1,477,673
1990 1,529,821 163,165 1,692,986
1991 1,717,473 94,735 1,812,208
1992 1,865,188 87,511 1,952,699
The calculation of LGA for the City of Lino Lakes for the last three years is as follows:
1990 1991 1992
Initial aid increase $6,625 $0 $0
Prior year aid 331,225 163,433 163,433
Reduction under 1991 law (4.034% of 1991 revenue base) (75,769)
Reduction for State demographer costs (268) (8) (153)
Subtotal 337,582 163,425 87,511
Aid transfer to schools (3.4% of net tax capacity) (148,175) 0 0
Final Aid 189,407 163,425 87,511
Aid cuts subsequent to Budget adoption and levy certification:
1990 legislative cut (1.53% of 1990 Revenue Base) (26,242)
1991 legislative cut (2.052% of 1991 Revenue Base) (37,848)
1991 legislative cut (1.60% of 1991 Revenue Base) (30,137)
Adjusted aid $1� 63,165 $95,440 $87,511
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City of Lino Lakes, Minnesota
Management Report, Page 6
GENERAL AND SPECIAL REVENUE FUNDS
The General and Special Revenue Funds of the City are maintained to account for the current
operating and capital outlay expenditures common to all cities. These basic services include (but
are not limited to) public safety, public works, public welfare and general government.
Since 1979, State aids and local property taxes used to finance the General and Special
Revenue Funds of the City of Lino Lakes were as follows:
State Aids
Year Amount Percent
1980 $239,622 40%
1981 300,971 42%
1982 283,089 37%
1983 349,076 38%
1984 403,127 35%
1985 455,059 33%
1986 491,041 35%
1987 545,674 34%
1988 549,567 30%
1989 682,407 33%
1990 600,419 28%
1991 456,273 21%
1992 * 473,991 19%
Property Taxes
Amount Percent
$171,440
212,914
305,804
355,684
510,245
550,302
585,137
714,892
769,915
848,472
994,399
1,179,087
1,225,496
* 1992 based on City budget and State estimates.
A graph of the above primary funding sources is as follows:
28%
30%
40%
38%
44%
40%
42%
44%
43%
41%
46%
55%
48%
Total
Amount
$411,062
513,885
588,893
704,760
913,372
1,005,361
1,076,178
1,260,566
1,319,482
1,530,879
1,594,818
1,635,360
1,699,487
Percent
68%
72%
77%
76%
79%
73%
77%
78%
73%
74%
74%
76%
67%
$1,300,000
$1,200,000
$1,100,000
$1,000,000
$900,000
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
General & Special Revenue Funds
1983 1984 1985 1986
1987 1988 1989 1990 1991
1992
El State Aids
® Property Taxes
City of Lino Lakes, Minnesota
Management Report, Page 7
State aids for the General Fund have consisted of the following amounts from 1986 through 1991
actual and 1992 budgeted:
1992
State Aids 1986 1987 1988 1989 1990 1991 Budgeted
Local Government Aid $219,728 $232,159 $232,157 $330,823 $163,165 $95,440 $87,511
Homestead Credit 238,336 265,530 259,384 270,645 324,828 251,303 290,241
Equalization aid 0 0 0 0 44,547 42,991 41,339
Police Aid 18,722 26,828 33,298 32,739 35,662 43,044 41,000
MSA - Streets 13,935 13,935 13,935 13,935 13,935 13,170 13,900
Other Aids 320 7,222 10,793 34,265 18 282 10,325 0
Totals $491,041 $545,674 $549,567 $ 682,407 $600,419 $456,273 $473,991
Percent change 7.91% 11.13% 0.71% 24.17% (12.01)% (24.01)% 3.88%
A graph of the above State aids (with a comparison to property tax amounts) is as follows:
$1,250,000
$1,000,000
$750,000
$500,000
$250,000
General Fund
$1,250,000
$1,000,000
$750,000
$500,000
$250,000
$0 $0
1986 1987 1988 1989 1990 1991 1992
Budgeted
®othc Aids
Equalization Aid
®HAG
WA
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M.
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City of Lino Lakes, Minnesota
Management Report, Page 8
Revenue of the General and Special Revenue Funds for the past three years has been as
follows:
Property taxes
Licenses and permits
Intergovernmental revenue:
State
County
Charges for services
Fines and forfeits
Interest on investments
Other
Totals
1991
Amount Percent
$1,179,087 48.69%
332,392 13.73%
1990
Amount _ Percent
$994,399 44.13%
254,620 11.30%
1989
Amount Percent
$848,472 40.76%
256,987 12.34%
456,273 18.84% 595,597 26.44% 682,407 32.78%
26,742 1.10% 29,500 131% 16,151 0.78%
195,190 8.06% 172,188 7.64% 96,680 4.64%
86,603 3.58% 83,618 3.71% 73,614 3.54%
47,373 1.96% 63,052 2.80% 54,930 2.64%
97,874 4.04% 60,060 2.67% 52,554 2.52%
$2,421,534 100.00% $2.253,034 100.00% $2.081.795 100.00%
Detail of the above revenue is presented in Statements 7 and 9 of the 1991 Annual Financial
Report.
1991
Interest & All Other 7.10%
Fines and fosfeiu 3.58%
(barges for Services 8.0696
Licenses & Permits 13.73%
State Aids 18.84%
Property Taxes 48.69%
City of Lino Lakes, Minnesota
Management Report, Page 9
Expenditures of the General and Special Revenue Funds for the past three years are as follows:
Current
General government
Public safety
Highways and streets
Parks, recreation
and forestry
Other
Capital outlay
Totals
1991
1990
Amount Percent Amount Percent
$660,516 29.10%
845,420 37.25%
468,616 20.65%
243,787 10.74%
28,912 1.27%
22,414 0.98%
$679,174
804,363
432,813
185,780
31,941
30 316
31.38%
37.16%
20.00%
8.58%
1.48%
1.40%
$2,269,665 99.99% $2,164,387 100.00%
1989
Amount Percent
$591,023
716,449
357,938
134,653
17,638
78 503
31.17%
37.78%
18.88%
7.10%
0.93%
4.14%
$1,896,204 100.00%
Highways & Streets 20.65%
Parks 10.74%
1991
Capital Outlay & other 2.25%
General Government 28.10%
Public Safety 37.25%
Details of the above 1991 and 1990 expenditures are presented in Statements 7 and 9 of the
1991 Annual Financial Report.
City of Lino Lakes, Minnesota
Management Report, Page 10
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 1991 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, 1991 and 1990:
December 31, Increase
Description 1991 1990 (Decrease)
Treasurer's balance - checking ($29,132) $77,666 ($106,798)
Petty cash 150 150 0
Investments:
Certificates of deposit 5,296,747 5,324,222 (27,475)
Commercial paper 598,997 1,251,759 (652,762)
4M money market fund 65 29,085 (29,020)
FNMA pool 178,301 201,830 (23,529)
NOW account 765,841 318,165 447,676
Shearson money market 0 4 (4)
GNMA 129,745 0 129,745
AIM 1,423,474 0 1,423,474
Totals
$8,364,188 $7,202,881 $1,161,307
The City occasionally maintains a negative balance in the City's checking account. These
negative balances are "book" balances only. These balances indicate that the City is depositing
cash which is not needed for current expenses into interest bearing accounts. We concur with the
City's practice of maintaining minimal balances in the City's checking account to increase interest
earnings.
Interest on investments totaled $540,063 in 1991 and $531,817 in 1990. The ability of a city
to generate investment earnings is an indication of sound fiscal management. Interest earnings are
required for the City to meet bonded debt payments in those funds which have received assessment
prepayments. Assessment prepayments reduce future interest generated from the assessment rolls
and therefore must be replaced through investment earnings. Capital project monies are restricted
through bond resolution and/or City Council policy. Interest earned in these funds increases the
restricted assets which is intended to be expended at a future date. The interest earnings of the
General and Special Revenue Type Funds indicate that the City is maintaining operating reserves in
these funds. 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 11
Due from Other Governmental Units
Included in due from other governmental units are various Federal and State grants receivable
that the City has earned as of December 31, 1991. The following schedule details these amounts.
December 31,
Description 1991 1990
State:
MSA $29,984 $33,422
Federal:
Community Development Block Grant 3,450 3,280
Local:
Anoka County:
ATAC 0 2,335
Recycling Reimbursement 13,382 14,949
Fines 5,193 6,372
Other 2,626 147
MWCC - Maintenance Agreement 14,564 7,233
MWCC - SAC Reimbursement 1,950 0
Final cost allocation 0 3,577
Circle Pines 0 57
Lexington 0 1071
Total
$71.1_4499 $72,443
Excluded from the above schedule is the gas franchise receivable which represents the City's
share in the 1991 profits of the gas franchise operated by Circle Pines within the City of Lino
Lakes. The amount is due each May following the year in which the amount is earned. As such,
the payment is measurable but not available and therefore is recognized in the year received (see
later comments).
The receivable from the MWCC for maintenance was submitted for reimbursement subsequent
to year end. The City may request this reimbursement earlier (in six month intervals) to accelerate
the reimbursement process and improve the cash flow of the City.
City of Lino Lakes, Minnesota
Management Report, Page 12
Taxes Receivable
Delinquent taxes receivable were as follows for the past several years:
- 1991 1990 1989 1988
Delinquent balance - January 1 $50,963 $46,393 $41,388 $27,995
Current Levy 1,717,474 1,529,821 1,146,850 1,146,850
Total receivable 1,768,437 1,576,214 1,188,238 1,174,845
Now
Receipts:
County:
Current 1,333,954 1,082,674 836,569 827,494
Delinquent 24,342 21,620 16,811 8,961
State 340,224 411,973 283,691 293,757
Total receipts 1,698,520 1,516,267 1,137,071 1,130,212
Unadjusted balance 69,917 59,947 51,167 44,633
Adjust to County (10,253) (8,984) (4,774) (3,245)
Delinquent balance $59,664 $50,963 $46,393 $41,388
Total collections as a percent
of current levy
99% 99% 99% 99%
The City has experienced a solid tax collection rate over the past five years. The adjustments
represent amounts provided by Anoka County for abatements and other adjustments to the
delinquent balances.
two
Tax Increment Receivable
The City had delinquent tax increments in the amount of $67,104 at December 31, 1991 as
follows:
TIF TIF
1 -1 1 -2 Total
Delinquent Balance - January 1 $60,787 $452 $61,239
Current Levy 198,890 71,050 269,940
Total receviable 259,677 71,502 331,179
Receipts:
Current 164,259 71,048 235,307
Delinquent 27,067 451 27,518
Total receipts 191,326 71,499 262,825
Unadjusted balance 68,351 3 68,354
Adjustments (1,251) 0 (1,251)
Delinquent Balance - December 31 $67,100 $3 $67,103
City of Lino Lakes, Minnesota
Management Report, Page 13
Special Assessments Receivable.
Special assessments receivable consisted of the following amounts at December 31, 1991 and
1990:
December 31, Increase
1991 1990 (Decrease)
Delinquent $126,090 $132,985 ($6,895)
Deferred 2,235,119 1,889,989 345,130
City property 142,553 142,553 0
Tax forfeit 101,508 121,425 (19,917)
Due from County 10,500 19,792 (9,292)
Special deferred 895,696 885,152 10,544
Totals $3,511,466 $3,191,896 $319,570
Delinquent assessments receivable consist of amounts collectible in 1991 and prior years which
the City has not yet received. Special deferred assessments consist of residents who have not yet
hooked up to the water and sewer system and will be assessed at the time of hook up. A summary
of assessment collections for the past four years is as follows:
Delinquent balance - January 1
Add:
Current installment
Amount collectible
1991 1990 1989 1988
$132,985 $161,751 $123,153 $189,606
351,941 245,618 326,516 312,610
484,926 407,369 449,669 502,216
Less:
Current collections 293,452 168,442 223,757 204,150
Delinquent collections 65,396 107,879 64,161 163,841
Total collections 358,848 276,321 287,918 367,991
Adjustments 10 1,937 0 (11,072)
Delinquent balance - December 31 $126,088 $132,985 $161,751 $123,153
Current collection rate 83% 69% 69% 65%
Total collections as a percent
of current levy 102% 113% 88% 118%
City of Lino Lakes, Minnesota
Management Report, Page 14
As the previous schedule shows, special assessment collection rates have fluctuated
substantially over the past several years. The ability of the City to collect special assessments is
vital to the financing of the Special Assessment Debt Service Funds of the City. The primary
funding of debt payments is special assessments. Timely collection of special assessments are
required to assure timely availability of cash to meet the scheduled debt payments. As of December
31, 1991 the City's delinquent special assessment balance was $126,088 of which $96,780 or
77% relates to the Rice Lake Estate assessments. The City's current and total overall collection
rates for 1991 excluding the Rice Lake Estate assessment were 92% and 98% respectively. We
recommend that the City monitor the collection rate and provide supplemental financing if
assessment collections are not adequate to meet bonded debt payments.
The amount listed as "City property" totaled $142,553 at December 31, 1991 and 1990. The
City acquired these properties in order to recover the assessments levied against some of these
properties. The City has received clearance to permit development of these lots from various
authorities (Army Corps of Engineers and State DNR). The City intends to sell the properties and
recover a portion of the related assessments. The City had determined that the amounts will not be
fully recoverable. The City has received bids on the property and is currently litigating a
settlement.
In addition to the above parcels which are subject to sale, the City had additional City lots (City
Hall) which were assessed in 1988. An alternative procedure to assessing City property is to adopt
a property tax levy or other City funding source to pay for the cost of assessments which benefit
either City property directly or the City of Lino Lakes' overall system. Examples of such
assessments are laterals for City Hall property, park property or general benefit improvements such
as lift stations and water storage facilities. The City generally would not "pay itself' for
assessments on property that it owns. These amounts are commonly included in the financing
arrangements as a property tax or other City Council designated element of the bond issue. We
recommend that the City consider alternate procedures relative to assessments which benefit City
property or which improve the City's overall core water and sewer distribution systems.
The City collects special assessments through Anoka County. This agency arrangement has
advantages to the City primarily in saving administrative time and effort required to bill and collect
special assessments. A certain level of control, however, is lost through the agency arrangement
insofar as accounting records are located and maintained at both the County and the City.
Correlation of these records is required to assure accurate tabulation of receivables and amounts
City of Lino Lakes, Minnesota
Management Report, Page 15
received. In order to assure that the City's best interests are guarded, the City should improve
internal records with regard to special assessments and compare such records periodically to
County records. Additionally, Anoka County is not providing detail of penalty and interest on
delinquent collections. In light of the magnitude of past delinquencies, this allocation should be
provided. We recommend that the City 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.
Our firm can assist the City in establishing fixed asset systems. Our assistance would include
the following:
1) Plan the implementation.
2) Assist in taking physical inventories.
3) Assist in defining historical or estimated historical cost.
4) Enter all such assembled data into a specialized fixed asset system for governments.
5) Generate complete fixed asset reports as of the completion date of the engagement.
City of Lino Lakes, Minnesota
Management Report, Page 16
GENERAL FUND
The financial statements of the General Fund are presented in Statements 6 and 7 of the 1991
Annual Financial Report. The fund balance of the General Fund increased by $95,612 in 1991 as
follows:
Budgeted increase in fund balance $5,879
Actual revenues over (under) budgeted revenues:
Property taxes ($9,235)
Licenses and permits 33,267
Intergovernmental revenue 5,276
Charges for services 116,016
Fines and forfeits (397)
Interest on investment 3,818
Miscellaneous 33,169
Net revenue over budget
Actual expenditures under (over)
budgeted expenditures:
General government (35,292)
Public safety 12,667
Highways and streets (7,892)
Parks 1,845
Other (5,712)
Capital outlay (514)
Operating transfer out (57,283)
Net expenditures (over) budget
Total improvement
181,914
(92,181)
$95,612
Detail of the preceding budget variances are presented in Statement 7 of the 1991 Annual
Financial Report
City of Lino Lakes, Minnesota
Management Report, Page 17
The City's December 31, 1991 fund balance totaled $1,265,236. The City's General Fund
balance has been as follows for the past ten years:
Fund Balance
Year Ended Reserved/ Increase
December 31, Designated Undesignated Total (Decrease)
1982 46,466 13,355 $59,821
1983 51,084 80,032 131,116 $71,295
1984 116,770 126,153 242,923 111,807
1985 77,624 350,675 428,299 185,376
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 0 1,169,624 139,571
1991 1,265,236 0 1,265,236 95,612
The increase in designated fund balance reflects the City's adoption of a reserve policy
pursuant to resolution 91 -3. We concur with the City's efforts to define needed levels of reserve
balances.
City of Lino Lakes, Minnesota
Management Report, Page 18
A table 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 amotmts
available in any single budget cycle. This may also be
accomplished through transfers to dedicated replacement funds.
.mergency or unanticipated expenditures,
Examples include natural disasters, law suits, 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.
The amount of General Fund reserve required to meet emergency and/or unanticipated
expenditures is not readily quantifiable. Rather, the level of this requirement must be established
by the City based on the history of the City and the philosophy of "adequate" reserve coverage.
The reserve requirement to deal with unforeseen intergovernmental revenue reductions is also
difficult to quantify. State and Federal legislation dealing with shared aids is somewhat
unpredictable. The City must strive to remain current on the effects of changing legislation and
budget such aids accordingly. A reserve balance in the City's General Fund will mitigate the
adverse effects of aid reductions which are received after expenditure budget commitments are
made.
The City of Lino Lakes maintains reserve balances in other funds of the City for portions of the
reserve components.
City of Lino Lakes, Minnesota
Management Report, Page 19
The City's minimum cash flow reserve requirement is measurable. For the City of Lino Lakes,
the minimum required surplus is $822,293 computed as follows:
1992 Budgeted Levy (Includes Homestead Credit) $1,557,076
1992 Anticipated Local Government Aid 87,511
Total $1 644 587
Minimum Required Cash -Flow Reserve $822 294
A schedule of General Fund designations at December 31, 1991 and 1990 is as follows:
1991 1990
Reserve for prepaid items $76,450 $70,667
Designated for general contingencies 366,492 217,151
Designated for cash flow reserve 822,294 824,523
Designated for installment purchase contract 57,283
Total
$1,265,236 $1,169,624
Without adequate General Fund reserve, the independence and autonomy of the City may be
impaired. The City of Lino Lakes has taken actions over the past several years to improve the
financial position of its General Fund. 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.
Recent management reports have discussed the possibility of the State targeting aid reductions
to cities based on "excess" fund balances. Past management reports have recommended that cities
strongly oppose this legislation for a variety of reasons. As discussed earlier in this report, the
legislative commission on planning and fiscal policy has recommended standardization of
accounting for cities. We believe this may be a first step in giving the State authority to target State
aid reductions to cities. We recommend City officials closely monitor future proposed legislation
in this area.
City of Lino Lakes, Minnesota
Management Report, Page 20
Aerial Map Charges
The City's General Fund incurred over $20,000 of costs for aerial maps in 1987. The maps
are required for water management purposes and to assist in development. On January 28, 1988,
the City established a system to recover the costs of the maps. The City will charge as follows:
• Sale of Maps: 1st one -half sheet = $50.00
• Sale of Maps: Additional one -half sheet = $5.00
• Per Acre Plat Charge: $10.00
• Construction Funds: 1% of construction costs
Appendix A of the City's Public Improvement Financing Policy requires the City Engineer
after a project is 85% to 100% completed to prepare a project cost summary . The project cost
summary includes aerial photo cost recovery charges. During 1990 the City charged the following
projects aerial map charges, D. Erickson 2nd Phase 1, D. Erickson Phase 2, Reshanau Phase 2A,
Reshanau Phase 2B, Sunrise Meadows, and Woodridge Estates in accordance with the City's
Public Improvement Financing Policy. We recommend that the City Accountant continue to charge
the Construction Funds for the aerial charge directly and transfer the aerial charge when the
administrative charge transfer is made. During 1991, the City collected $27,743 for the sale of
aerial maps.
SPECIAL REVENUE FUND
The financial statements for the City's Special Revenue Fund are presented in Statements 8 and
9 of the 1991 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 legally restricted to expenditures for specified purposes.
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
National Council on Governmental Accounting Statement No. 3, Defusing the Governmental
Reporting Entity. Statement No. 3 requires inclusion of the EDA due to the City Council having
oversight responsibility of the EDA's activities.
City of Lino Lakes, Minnesota
Management Report, Page 21
DEBT SERVICE FUNDS
The combining financial statements for the Debt Service Funds are presented in Statements 10
and 11 of the 1991 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 the following revenue sources pledged
to retire debt as follows:
• property Taxes. Primarily for general City benefit projects such as parks and
municipal buildings. Property taxes may also be used to fund special assessment
bonds which are not fully assessed.
• Tax Increments. Pledged exclusively for tax increment/economic development
districts.
• Capitalized Interest Portion of Bond Proceeds. After the sale of bonds, the project
may not produce revenue (tax increments or special assessments) for a period of one to
two years. Bonds are issued with this timing difference considered in the form of
capitalized interest.
• Special Assessments. Charges to benefited properties for various improvements.
In addition to the preceding pledged assets, other funding sources may be received by Debt
Service Funds as follows:
• Residual Project Proceeds from the Capital Project Fund
• Investment Earnings
• State or Federal Grants
• Transfers from Other Funds
Pledged assets may be divided into three categories: 1) Recorded as fund assets with the
revenue deferred until collected (levied assessments and levied taxes); 2) Actually received by the
fund and included in fund balances (collected assessments, interest, bond proceeds, etc.); and, 3)
Future pledged assets not recorded as assets but intended to be collected at a future date (scheduled
property taxes and estimated tax increment collections).
City of Lino Lakes, Minnesota
Management Report, Page 22
_ 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 1991 Annual Financial Report to assist in this
analysis.
December 31, 1991 Scheduled Final
Fund Defeaed Outstanding Property Maturity
Fund Description Balance Revenue Total Debt Taxes Date
General Debt
- 1989A Certificates of Indebtedness ($2,031) $2,675 $644 $180,000 $217,916 5/1/94
1989B Certificates of Indebtedness 62,233 2,234 64,467 225,000 208,297 2/1/95
1990 Certificates of Indebtedness 712 600 1,312 71,000 86,959 1/1/96
Public Project Revenue Bonds of 1990A 47,596 1,262 48,858 1,115,000 2,181,616 2/1/10
"" Total general debt 108,510 6,771 115,281 1,591,000 2,694,788
Special Assessment Debt
,_ Improvement Bonds of 1983 45,624 28,245 73,869 20,000 10/1/93
Improvement Bonds of 1984 6,731 4,290 11,021 10,500 11/1/94
Improvement Bonds of 1986 162,045 326,954 488,999 90,000 839 2/1/97
Improvement Bonds of 1988 859,989 409,410 1,269,399 935,000 2/1/97
Temporary Improvement Bonds of 1989 1,523,063 1,059,901 2,582,964 4,660,000 7/1/92
Temporary Improvement Bonds of 1990B 273,390 58,185 331,575 1,015,000 8/1/93
Temporary Improvement Bonds of 1991A 240,343 560,864 801,207 4,260,000 8/1/94
Total special assessment debt 3,111,185 2,447,849 5,559,034 10,990,500 839
Total - All Debt Service Funds $3.219.695 52.454.620 $5,674,315 $12,581,500 $2,695,627
Deferred revenue of the preceding schedule primarily consists of uncollected special
assessments. The preceding schedule compares outstanding debt with: 1) fund balance; and, 2)
deferred revenue.
City of Lino Lakes, Minnesota
Management Report, Page 23
Debt Service Funds should be evaluated at least annually. The following chart summarizes
steps to consider.
Condition A
Fund balance plus
deferred revenue
meets or exceeds
bonds payable.
Cautions
Condition B
11. 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?
1. Are sufficient future assets
scheduled (such as property taxes)
to meet bonded debt payments?
2. Are cash assets sufficient to
generate investment earnins?
3. Are transfers or other funding
sources available?
4. Are there future assets to pledge
such as assessments, MSA allot-
ments, etc
Conclusion 1
The debt service find
is clearly IIat 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
Improvement Bonds of 1986
The Improvement Bonds of 1986 were issued to refinance the Improvement Bonds of 1982
and to finance the Sunset Road Improvements. These bonds were called for redemption and
prepayment on February 1, 1992.
City of Lino Lakes, Minnesota
Management Report, Page 24
Improvement Bonds of 1988
The Improvement Bonds of 1988 were issued to provide permanent financing for the
Temporary Improvement Bonds of 1985 and to fmance 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. Final maturity of these bonds is scheduled for
February 1, 1997.
1988 Temporary Improvement Bonds
The City issued these bonds to finance Erickson's 2nd Addition, Phase 2 and South Reshanau
Phase 2 Improvements. These bonds matured during 1991. Bond proceeds in the amount of
$83,451 from the Temporary Improvement Bonds of 1991A were used to retire the 1988 Bonds.
The remaining assets of the Temporary Bonds of 1988 were transferred to the Temporary
Improvement Bonds of 1991A Debt Service Fund.
1989 Temporary Improvement Bonds
The City issued these bonds to finance Reshanau Phase 2B and 3A, West Central Sewer and
Water Trunk, Sunrise Meadows, and Woodridge Estates Improvements. During 1990 West
Central Sewer and Water Trunk, Sunrise Meadows and Woodridge Estates were assessed.
Reshanau 2B was assessed in 1991. These bonds will mature on July 1, 1992.
1990E Temporary Improvement Bonds
The City issued these bonds to finance the 2nd Avenue Project and to retire the 1987
Temporary Improvement Bonds. The remaining assets of the 1987 Temporary Improvement Debt
Service Fund have been pledged for the retirement of the 1990B issue. These bonds will mature
on August 1, 1993.
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.
City of Lino Lakes, Minnesota
Management Report, Page 25
1991A Temporary Improvement Bonds
The City issued these bonds to finance various projects and to retire the 1988 Temporary
Improvement Bonds as follows:
White Tail Ridge $50,600
Brandywood Estates 790,015
Pheasant Hills 620,747
Pine Ridge Addition 630,326
Reshanau Lake Sanitary Sewer Trunk 1,080,676
Wenzel Farms 973,800
Subtotal 4,146,164
1988 Temporary Bond Refinancing 84,045
Total $4,230,209
The remaining assets of the 1988 Temporary Improvement Debt Service Fund have been
pledged for retirement of the 1991A issue. The White Tail Ridge and Brandywood Estates
assessments were adopted in 1991.
Arbitrage Regulations
Federal law prohibits excess earnings on bond proceeds maintained in construction or debt
service funds. The regulations are complex and for "large issuers" (over $5 million of bonds
issued in one year) there are rebate requirements. If the City of Lino Lakes issues over $5 million
of bonds in one year, they will be required to comply with arbitrage regulations.
• Measuring investment interest earned on tax exempt bond proceeds.
• Determining the yield of such investment earnings.
• Comparing the yield earned with the yield of the tax exempt bonds.
• Calculating the amount (if any) of excess earnings.
• Reporting the excess earnings to the Internal Revenue Service annually.
• Rebating such excess earnings at least every five years.
Our firm has assisted another Minnesota city in seeking a ruling request from the Internal
Revenue Service which will reduce the administrative complexities of complying with the arbitrage
regulations. We recommend that the City continue efforts to monitor arbitrage compliance.
City of Lino Lakes, Minnesota
Management Report, Page 26
Reimbursement Bond Regulations,
The newly issued Treasury Regulations Section 1.103 -17 pertains to "reimbursement bonds ".
Areas affected by these regulations are; all governmental bonds, all qualified 501(c)(3) or nonprofit
borrowings issued after September 7, 1991 and which apply to reimbursement of previously paid
expenditures. With the new regulations, the city will not be allowed to issue tax exempt bonds for
expenditures it has previously paid unless it meets certain regulations. We recommend the City
confer with the fiscal consultant and bonding attorney to monitor compliance with these
regulations.
CAPITAL PROJECT FUNDS
The financial statements for the Capital Project Funds are presented in Statements 12 and 13 of
the 1991 Annual Financial Report. The fund balances (deficits) of the Capital Project Funds at
December 31, 1991 and 1990 are as follows.
Fund
Parks and playgrounds
Capital Improvement Projects
Community Development Block Grant
Area Connection Charge
Surface Water Management
Centennial Fire Station
Interim Construction
MSA Construction
Sealcoating
SAC Revolving
1988B Construction
1983 Construction
1988A Construction
1989 Construction
1990 Construction
1991 Construction
Tax Increment #1 -1
Tax Increment #1-2
Tax Increment #1 -3
Tax Increment #1-4
Totals
Fund Balance (Deficit)
December 31,
1991 1990
Increase
(Decrease)
$220,620 $188,932 $31,688
142,852 164,343 (21,491)
(13,958) (8,512) (5,446)
1,981,364 1,434,396 546,968
(23,182) (92,031) 68,849
84,072 907,503 (823,431)
(183,653) (164,931) (18,722)
25,542 15,140 10,402
2,801 0 2,801
412,459 389,904 22,555
20,938 84,658 (63,720)
0 25,157 (25,157)
0 131,839 (131,839)
290,101 540,864 (250,763)
77,218 233,234 (156,016)
194,579 0 194,579
500,393 289,919 210,474
68,220 (2,408) 70,628
(16,535) (14,397) (2,138)
(10,379) (22,262) 11,883
$3,773,452 $4,101,348 ($3271896)
City of Lino Lakes, Minnesota
Management Report, Page 27
Parks and Playground
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 $61,500 of park dedication fees in 1991. The fund balance of $220,620 at
December 31, 1991 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 and Rice Lake Addition developments to allow for payment upon
development (as opposed to subdivision). During 1991, the receivable for Rice Lake Addition
($660) was written off. The amount of the park dedication fee receivable for Lino Air Park of
$4,400 has been outstanding for the past seven 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, 1991:
Proceeds from issuance of 1981 Certificates $111,400
Proceeds from issuance of 1985 Certificates 107,500
Proceeds from issuance of 1987 Certificates 78,260
Proceeds from issuance of 1989 Certificates 300,566
Proceeds from issuance of 1989B Certificates 275,000
Proceeds from issuance of 1990 Certificates 88,642
Interest earnings 59,957
Property taxes 14,549
State - MSA, Computer purchase 4,944
Donations 16,000
Transfer from Debt Service Fund 2,390
Total revenue and other sources
Expenditures:
1981 - 1990
1991
Total expenditures
780,455
135.901
1,059,208
916.356
Fund Balance - December 31, 1991 $142,852
After the scheduled purchases of equipment are made in 1991, the remaining fund balance
should be closed to the related Certificates of Indebtedness Debt Service Fund (or be expended on
qualifying equipment purchases).
City of Lino Lakes, Minnesota
Management Report, Page 28
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, were 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 determined 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 reimbursement of City expenditures. During 1991 the City received over $25,000 in CDBG
funding which will require the City to obtain a federal single audit in accordance with OMB
Circular 128. Audit procedures disclosed that the City has not been requesting reimbursement
from the County on a timely basis.
The City has designated its allotment for the funding year 1991/1992 as follows:
Surface Water Management $ 15,000
Senior Center Coordinator 5,000
Rise Inc. 1,383
Community Action 3,800
Alexandra House 1.384
$ 26,567
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 connection and
area charges to be used to meet debt payments. Before October 1 of each year, the City will
estimate the required transfer needed to meet debt payments for the subsequent year. In December,
these estimated amounts shall be transferred to the various debt funds. The City has estimated
scheduled area and unit assessments needed to meet debt requirements. We recommend that the
City monitor actual versus projected area and unit assessment collections to assure that debt
payment requirements will be met.
This fund will eventually account for area and unit assessments for funding of various debt
issues. The City has amended collection procedures.
City of Lino Lakes, Minnesota
Management Report, Page 29
The City intends to retire debt from the various area and unit charges. Careful monitoring of
anticipated collections compared to actual is required to assure timely availability of monies to retire
debt. Balances available after debt commitments are met can then be used for non - assessable
system improvements.
A schedule of transactions of this fund from inception is as follows:
Balance 1991 Balance
January 1, Current and December 31,
1991 Prepayments Delinquent Interest 1991
Revenue and other sources:
Area and unit charges:
Temporary Bonds of 1987 (1) $56,098 $2,226 $933 $2,980 $62,237
Temporary Bonds of 1988 (2) 225,903 18,118 9,902 12,768 266,691
Temporary Bonds of 1989 1,110,264 308,951 48,176 73,785 1,541,176
Temporary Bonds of 1990 32,988 1,658 34,646
Total revenue and other sources 1,392,265 362,283 59,011 91,191 1,904,750
Expenditures and other uses:
Professional services
38,234 47,679 0 0 85,913
Transfer from 1989 construction 29,842 29,842
Transfer from Water and Sewer 80,365 52,320 132,685
Net increase in fund balance
1.4=1 434,396 $3 96 766 011 $ $1,981,364
(1) Pledged to the 1990B Temporary Improvement Bonds
(2) Pledged to the 1991A Temporary Improvement Bonds
Designations of balances by bond issue and area/unit charge type are required to monitor
financing plan performance and to define discretionary construction balances available to the City.
The accounting system and other such systems have been modified to achieve this result.
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.
Immo
City of Lino Lakes, Minnesota
Management Report, Page 30
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 Fund
and the related Debt Service Fund. Budgeted vs. actual water and sewer utility connections for the
period January 1, 1989 through December 31, 1991 are as follows:
Water Connections
1987 1988 1989 1990 1991
Temporary Temporary Temporary Temporary Temporary Total All
Bands Bonds Bonds Bonds Bonds Bonds
Total Number Lots/Units 206 76 819 16 283 1,400
Total Budgeted Connections 206 76 624 16 283 1,205
Budgeted 1989 166 47 0 0 0 213
Actual 1989 62 44 104 0 0 210
1989 Variance (104) (3) 104 0 0 (3)
Budgeted 1990 40 29 169 0 0 238
.. Actual 1990 7 15 418 0 0 440
1990 Variance (33) (14) 249 0 0 202
1990 Cumulative
Variance Year-end (137) (17) 353 0 0 199
—
—
taw
Budgeted 1991 0 0 285 10 94 389
Actual to Date 1991 5 7 164 12 30 218
1991 Variance 5 7 (121) 2 (64) (171)
1991 Cumulative
Variance Year -end (132) (10) 232 2 (64) 28
Budgeted1992 0 0 170 6 126 302
Actual to Date 1992 0 0 0 0 0 0
1992 Variance 0 0 (170) (6) (126) (302)
Balance Required Over /(Under) (132) (100 402 8 62 330
City of Lino Lakes, Minnesota
Management Report, Page 31
fewer Connections
1987 1988 1989 1990 1991
Temporary Temporary Temporary Temporary Temporary Total All
Bonds Bonds Bonds Bonds Bonds Bads
Total Number Lots/Units 120 76 748 16 639 1,599
Total Budgeted Connections 120 76 568 16 639 1,419
Budgeted 1989 166 47 0 0 0 213
Actual 1989 62 44 103 0 0 209
1989 Variance (104) (3) 103 0 0 (4)
Budgeted 1990 40 29 169 0 0 238
Actual 1990 7 15 335 0 0 357
1990 Variance (33) (14) 166 0 0 119
1990 Cumulative
Variance Year -end (137) (17) 269 0 0 115
Budgeted 1991 0 0 229 10 94 333
Actual to Date 1991 5 7 163 12 29 216
1991 Variance 5 7 (66) 2 (65) (117)
1991 Cumulative
Variance Year -end (132) (10) 203 2 (65) (2)
Budgeted 1992 0 0 170 6 115 291
Actual to Date 1992 0 0 0 0 0 0
1992 Variance 0 0 (170) (6) (115) (291)
Balance Required Over /(Under) (132) (10) 33 (4) ....._11821.
In March of 1992 the City obtained permanent financing for the Temporary Improvement
Bonds of 1989. Collection of actual area and unit charges should be compared to the above
scheduled collections to assure that projections are being met prior to obtaining permanent
fmancing.
Centennial Fire Station
This fund was established by the City's EDA in 1990 to account for construction costs of the
City's new Fire Station. The bond proceeds for this project are being held at First Trust and the
City must submit qualifying expenditures to First Trust for reimbursement. The $19,783 cash
overdraft in this fund represents expenditures incurred by the City and not submitted to First Trust
for reimbursement.
City of Lino Lakes, Minnesota
Management Report, Page 32
Surface Water Management Fund
This fund was established in 1989 to account for the fmancing 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 on phase one of a three phase
surface water management plan. The cost of the plan will be financed by developer charges. We
recommend that the City monitor the deficit fund balance and consider alternative financing if
future surface water management charges are not sufficient to eliminate the deficit.
Economic Development District #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.
The Housing District Financing Plan indicates that the original tax capacity value of the District
is $116,869. The values within the District are estimated to be $1,270,000 after completion of the
project. This would result in a captured tax capacity value of $1,153,131. The plan, however,
_ refers to a captured value estimated at $ 141,131. This inconsistency within the official plan should
be corrected. (The $141,131 appears to be the anticipated tax increment taxes receivable from the
captured value annually.)
laser
Financial activity of this fund from inception is as follows:
Prior
Years 1991 Total
Revenue and other sources:
Tax increments $262,675 $191,326 $454,001
HACA 8,683 8,683
Interest on investments 19,501 20,172 39,673
Total revenue and other sources 290,859 211.498 502.357
Expenditures and other uses:
Professional services 940 1,024 1,964
Net increase in fund balance $289,919 $210,474 500,393
Fund balance - January 1, 1989 0
Fund balance - December 31, 1991 $500,393
City of Lino Lakes, Minnesota
Management Report, Page 33
The tax increment plan also includes an annual administrative fee. Minnesota Statutes 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.
We recommend that the City determine if this fee will be received as an interfund charge of the
General Fund or if applicable expenses will be allocated to the appropriate Capital Project Fund.
Tax increment districts often generate surplus amounts over the anticipated receipts. The 1988
legislative session reduced the probability of such excesses by requiring excess amounts caused by
tax rate increases to be spread to all taxing authorities. Excess amounts may still be generated from
captured values in excess of anticipated values. As such, we recommend that if tax increment
bonds are sold that the City:
1. Include a bond provision which allows tax increment collections to be receipted to the
Economic Development #1 Capital Project Fund.
2. Approve and transfer as needed to the Debt Service Fund.
The above procedures will provide the City greater options if surpluses develop. Such
surpluses may then be allocated to the other improvements within the District as allowed by the
(amended) plan.
The City received initial tax increments of $49,808 in 1988. In 1990 and 1991 the City had tax
increment collections of $130,069 and $191,326 respectively. Additionally, this fund had as of
December 31, 1991, $67,103 of delinquent tax increments.
Vow
Immy
City of Lino Lakes, Minnesota
Management Report, Page 34
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.
District #1 -2 has anticipated projects/bonding requirements as follows:
Estimated Actual
Land acquisition:
Ross site $65,000
Luther's Marine 250,000
VFW 200,000
Demolition and site preparation:
Ross site 10,000
Luther's Marine 9,000
VFW 4,500
Sewer and water extension for Sunrise Meadows 170,000
Relocation costs 15,000
Administrative expenses 31,500 $9,517
Capitalized interest and bond discount 220,000
Total $975,000 $9,517
The Ross Site was decertified from TIF District #1 -2 and placed in TIF District #1 -3. Luther's
Marine and the VFW sites were eliminated from the District prior to certification.
The City established Tax Increment District #1 -3 during 1989 by resolution 68 -89. District #1-
3 qualifies as a redevelopment district pursuant to Minnesota Statutes 469.174 Subd. 10(a)(2).
District #1 -3 has anticipated project requirements as follows:
NNW
Estimated Actual
Land acquisition $200,000
Administrative expenses 22,000 $16,535
Total
$222,000 $16,535
The City will not issue bonds for this project. The City will enter into an agreement with the
developer to reimburse the developer for the costs of the land as increments are available.
The City established Tax Increment District #1 -4 during 1990 by resolution 10-90.
City of Lino Lakes, Minnesota
Management Report, Page 35
District #1-4 has anticipated project requirements as follows:
Land acquisition $400,000
Public improvements 1,050,000
Administrative 100,000
Bond discount 40,000
Capitalized interest 360,000
Total $1,950,000
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, 1991 this fund had a deficit balance of $10,379.
Tax increment proceeds are based on the increased captured valuation of property within the
District. Forecasted values are based on estimates of future increases and other factors including
the effects of State legislation on the property tax system. The 1990 Legislature reduced the tax
capacity rates on commercial property as follows:
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 $100,000 5.26% 4.90% Targeted to eventually be 4%
This decrease in rates may adversely affect future tax increment collections.
We recommend, therefore, that the City monitor actual revenue flows compared to projected
revenues to assure timely availability of cash to meet budgeted expenditures.
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 1991 Annual Financial Report.
The fund balance of this fund was a deficit of $183,653 at December 31, 1991. We recommend
the City review the status of the various projects in this fund and determine financing sources to
eliminate the deficit of this fund.
Vow
City of Lino Lakes, Minnesota
Management Report, Page 36
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 $25,542 at December 31, 1991.
Sealcoating
This fund was established in 1991 to account for money received from private developers for
future sealcoating in new housing developments.
SAC Revolving
The SAC Revolving Fund was established in 1990 to account for a refund from the 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:
Revenue
SAC refund
Interest earning
Total revenue
Expenditures
Fund Balance - December 31,1991
1990
$365,175
24,729
$389,904
$0
1991 Total
$365,175
$22,555 47,284
$22,555 412,459
$0 0
MI= El=11C
$412,459
Additionally, this fund is carrying a liability to MWCC for sewer availability charges of
$24,404 relating to the Baldwin Lake Mobile Home Court which will be remitted in 1992.
1983 Construction
The project consisted of installations of sewer service lines to the Baldwin Lake Mobile Home
Court. This project was financed by the $100,000 Improvement Bonds of 1983. The project was
completed and assessed in 1983. The fund was carrying a liability to MWCC for sewer availability
charges of $24,404. This liability was transferred to the SAC Revolving Fund. This fund was
closed in 1991 to the Improvement Bonds of 1983 Debt Service Fund.
City of Lino Lakes, Minnesota
Management Report, Page 37
1988A Construction
This fund accounted for the various projects financed by the Permanent Improvement Bonds of
1988. The City closed this fund in 1991 into the Improvement Bonds of 1988 Debt Service Fund.
1988B Construction
This fund accounts for the various projects financed by the Temporary Improvement Bonds of
1988. The fund balance of this fund was $20,938 at December 31, 1991 which is designated for
the final bituminous wearing surface. During 1991 the City obtained estimated amounts for final
paving and transferred the remaining balance to the Temporary Improvement Bonds of 1988 Debt
Service Fund.
1989 Construction
This fund accounts for the various projects financed by the Temporary Improvement Bonds of
1989. The fund balance of this fund was $290,101 at December 31, 1991. A summary of the
financial activity of this fund from inception is as follows:
Financing Sources:
Bond proceeds
MSA construction
Interest earnings
Special assessments
Other
Total sources
Financing Uses:
Construction costs:
West Central
Woodridge
Sunrise Meadows
Reshanau 3rd
Reshanau 4th
Transfers out
Connection and area charge
Temp Bonds of 1989
Parks & playgrounds
Interim construction
Surface water management
Total uses
Budget Actual Variance
$4,120,767 $4,117,380 ($3,387)
105,800 0 (105,800)
0 303,443 303,443
0 758,312 758,312
0 1,200 1,200
$4,226,567 5,180,335 $953,768
$2,047,335
819,933
894,064
206,925
258,310
1,985,414 ($61,921)
826,590 6,657
876,637 (17,427)
212,689 5,764
145,786 (112,524)
0 163,601 163,601
0 580,643 580,643
0 18,561 18,561
0 48,400 48,400
0 31,913 31,913
$4,226,567 4,890,234 $663,667
Fund Balance - December 31, 1991 $290,101
IMO
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City of Lino Lakes, Minnesota
Management Report, Page 38
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. The assessments for West Central,
Woodridge, and Sunrise Meadows were adopted in 1990. The assessments for Reshanau Third
were adopted in 1991.
1990 Construction
This fund accounts for the Second Avenue construction project which is financed by the
Temporary Improvement Bonds of 1990B. This project was scheduled for completion in 1991.
The fund balance of this fund was $77,218 at December 31, 1991. We recommend that upon
completion of the Second Avenue project, the City transfer the remaining balance to the Temporary
Improvement Bonds of 1990B.
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:
Financing Sources:
Bond proceeds
Interest earnings
Total sources
Financing Uses:
Construction costs:
White Tail Ridge
Brandywood Estates
Pheasant Hills
Pine Ridge
Reshanau Lake Trunk
Wenzel Farms
Total uses
Budget Actual Variance
$3,949,214 $3,947,649 ($1,565)
0 70,859 70,859
$3,949,214 4,018,508 $69,294
$50,600 60,437 $9,837
790,015 784,247 (5,768)
583,762 553,360 (30,402)
592,771 538,936 (53,835)
1,016,286 1,054,898 38,612
915,780 832,051 (83,729)
$3,949,214 3,823,929 ($125,285)
Fund Balance - December 31, 1991 $194,579
The assessments for White Tail Ridge and Brandywood Estates were adopted in 1991.
City of Lino Lakes, Minnesota
Management Report, Page 39
ENTERPRISE (UTILITY FUNDI
The financial statements for the Enterprise Funds are presented in Statements 14 through 16 of
the 1991 Annual Financial Report. Condensed comparative statements of income and expense for
the years 1991 and 1990 (excluding depreciation on contributed assets) for the Water and Sewer
Utility Fund are shown in the following schedule.
For The Year Ended December 31,
1991 1990
Amount Percent Amount Percent
Operating Income:
Water billings $127,754 40.38% $99,894 40.43%
Sewer billings 154,784 48.92% 119,112 48.20%
Other 33,839 10.70% 28,100 11.37%
Total operating income 316,377 100.00% 247,106 100.00%
Operating Expenses:
Personal services 79,127 25.01% 61,965 25.08%
MWCC 81,060 25.62% 63,655 25.76%
Repairs and maintenance 55,371 17.50% 38,845 15.72%
Depreciation 1,190 0.38% 820 0.33%
Other 71,223 22.51% 43,340 17.54%
Total operating expenses 287,971 91.02% 208,625 84.43%
Income from operations
28,406 8.98% 38,481 15.57%
Other income:
Interest on investments 623 256
MWCC maintenance agreement 14,564 7,233
Net income 43,593 45,970
Operating transfer to
area and unit fund
(52,320) (80,365)
Increase/(decrease) in retained earnings ($8,727)
As shown above, the water and sewer operations have reflected net decreases in retained
earnings. Retained earnings are required to support:
✓ working capital needs
✓ net fixed assets
✓ capital replacement requirements
City of Lino Lakes, Minnesota
Management Report, Page 40
The following schedule illustrates the effects of working capital needs and net fixed assets on
retained earnings.
1990 1991
Working capital needs $78,450 $81,432
Net fixed assets - purchased 7,345 154,489
Total _ $85,795 $235,921
Retained earnings $53,385 $44,658
As shown above, retained earnings balance is not adequate to finance working capital needs
and purchased assets.
The Utility Fund had a cash overdraft of $191,263 at December 31, 1991. The cash overdraft
is the result of 1) construction costs related to the water tower incurred prior to bonding, and 2)
insufficient retained earnings. The City reviewed water and sewer rates and increased rates
effective July 1, 1988 and January 1, 1989. The City increased rate by 5% effective July 1, 1991
and 5% on January 1, 1992 and January 1, 1993. We recommend the City charge water rates at a
level which will cover the cost of retiring debt issued to construct the water tower and maintain
adequate levels of retained earnings.
Currently the City purchases water from the City of Circle Pines. The City of Circle Pines will
discontinue the sale of water to Lino Lakes in 1992. The City is currently constructing a water
tower. As of December 31, 1991 the City has incurred $148,336 of construction costs related to
the water tower. These costs will be bonded for 1992.
City of Lino Lakes, Minnesota
Management Report, Page 41
The MWCC 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 MWCC billings for
calendar years 1982 through 1992 have been as follows:
Billings from MWCC
Estimated Final
Percent Percent
Year Amount Change Amount Change
1982 15,504 36.51% 14,592 42.88%
1983 19,027 22.72% 23,866 63.56%
1984 26,107 37.21% 22,011 (7.77)%
1985 30,050 15.10% 25,039 13.76%
1986 33,283 10.76% 29,147 16.41%
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% N/A N/A
1992 104,090 33.37% N/A N/A
$110,000
$100,000
$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
520,000
$10,000
$0
MWCC Billings
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992
R Estimated Billings g Actual Billings
The above schedule indicates that MWCC billing increases have been substantial over the past
several years.
City of Lino Lakes, Minnesota
Management Report, Page 42
There are two basic factors which contribute to increased billings from the MWCC:
1. Changes in use of the system. The MWCC has increased the 1992 estimated flow for
the City of Lino Lakes by 25%.
2. Increased cost to process sewage. The MWCC's cost to process (per million gallons)
increased to an estimated $1,157 in 1992 from an estimated $1,084 in 1991. This
represents an increase of 6.7%.
The combination of the above factors has increased the City's estimated cost in 1992 by 33%.
During 1988, the City adjusted sewer and water rates. The change became effective on July 1,
1988. Part of the adjustment was to include a charge for core system improvements. The add on
charge was to be calculated based on a fixed amount per quarter. This charge is collected as
revenue of the Enterprise Fund along with normal user charges. Such amounts are then transferred
to the Area and Unit Charge Fund which financed (or will finance) such improvement During
1990 the City transferred $80,365 to the Area and Unit Charge Fund for 1988 - 1990. During
1991 the City transferred $52,320 to the Area and Unit Charge Fund.
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:
1991 1990
Residential and Commercial Revenue $227,175 @ 7% = $15,902 $166,471 @ 7% = $11,653
Interruptible Service 113,869 @ 3% = 3,416 108,699 @ 3% = 3,261
Total $341,044 19,318 .$2757170 14,914
Remitted by Circle Pines
19,286
Diff $32
14,910
$4
City of Lino Lakes, Minnesota
Management Report, Page 43
The previous differences relate to bad debts within the City of Lino Lakes. The franchise
agreement allows for adjustment from gross revenue of net bad debts. The City of Lino Lakes had
bad debts of approximately $2,500 in 1991, $53 in 1990 and $3,400 in 1989. The City of Circle
Pines reports such bad debts on a combined expense line "administrative - other ". We recommend
the following:
1. Request that Circle Pines provide their calculation of franchise fee remittances including
bad debt adjustments.
2. Review with Circle Pines their methods of enforcing collection and consider adopting
such procedures within the City such as including significant outstanding delinquent
billings on assessment search records.
3. Annually update the following schedule to analyze fluctuation in revenue data.
Residential
Commercial Total
Increase / (Decrease)
Increase / (Decrease) Increase / (Decrease)
Year Amount Amount Percent Amount Amount Percent Amount Amount Percent
1981 $67,387 $16,526 $83,913
1982 88,195 $20,808 30.88% 18,781 $2,255 13.65% 106,976 $23,063 27.48%
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) (11.50)% 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 4.51% 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 0.00% 0.00% 0 0.00%
Bad Debts Interruptible Sales
Increase / (Decrease) Increase / (Decrease)
Year Amount Amount Percent Amount Amount Percent
1981 $105,143
1982 118,734 $13,591 12.93%
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 0.00% 0.00%
Prior to 1987, bad debts were netted with sales.
City of Lino Lakes, Minnesota
Management Report, Page 44
The City of Lino Lakes had rights to receive payment of net income after the accumulated
retained earnings deficit is 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 $900,000,
at December 31, 1991 the Lino Lakes Franchise has a positive fund balance of $30,073.
Immo
Ilmor
The City has taken the following actions regarding the gas utility operations:
• Successfully worked to gain special State legislation to allow a greater number of
members on the Joint Gas Utility Commission.
• Reviewed optional criteria for representation on the Commission to allow for a fair and
equitable method of appointing members from each City.
• Analyzed accounting methods of allocating expenses between each City's gas operation.
• Negotiated a new franchise agreement.
• Considered exercising the City's option to purchase the gas utility.
The new 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 is 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 $19,286 in May, 1992 which represents the 1991 share of earnings.
Earnings from inception of the new agreement total $68,738. 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 45
In November, 1990, at the request of the City, our office prepared a discussion draft of issues
related to the possible purchase of the Lino Lakes Gas Franchise, A summary of considerations is
as follows:
• The City must pay 125% of cost (less depreciation) for assets placed in service after July 1,
1986.
• The tasks associated with administering the system may require added or re- assigned
personnel.
• The City's current Public Works Director has gas utility operation experience. If the City
should lose this position, a replacement would be required at a possibly higher or lower
cost.
• The cost of application to the FERC was estimated in 1986 at $12,200. The cost of the
delivery (border) facility was estimated at $50,000. These amounts may be significantly
different than estimated.
• Minnesota statutes 216B.46 and 412.321 subd.2 require an election for the acquisition of a
gas utility operation.
• A more favorable revenue bond rate is probably available if the issue is "general
obligation ". The City's charter may require a vote to pledge property taxes to the purchase
of the system.
• Dealings with the City of Circle Pines has the potential to be less than harmonious. Legal
and accounting fees may, therefore, fluctuate significantly.
• The City's accounting and billing computer system must be re- evaluated to determine if gas
utility billings will be facilitated with the current system.
• The City must determine the cost of additional equipment that must be purchased in
addition to the Circle Pines system.
• Evaluation of the adequacy of existing City staff to absorb all or a portion of the task
associated with the gas utility.
• The likelihood of voters to approve the acquisition.
• Gas purchase price and contract demand negotiations.
Probability of growth of the system.
mir
law
MAININ
City of Lino Lakes, Minnesota
Management Report, Page 46
AGENCY FUNDS
At December 31, 1991, the City had four Agency Funds as follows:
• Contractor's Deposits
• Pending Assessments
• Investment Fund
• Deferred Compensation
An Agency Fund is designed to account for transactions for other individuals, private
organizations and/or other funds.
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 (see later comments).
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.
INTERNAL ACCOUNTING CONTROLS
Current auditing standards require an auditor to communicate any material weaknesses in
internal accounting controls directly to City Council and/or City Administrators. Our examination
for 1991 disclosed no material deficiencies in the City's system of internal controls not identified in
this report or past reports to the City Council.
City of Lino Lakes, Minnesota
Management Report, Page 47
We have audited the financial statements of the City of Lino Lakes, Minnesota
as of and for the year ended December 31, 1991, and have issued our report
thereon dated May 28, 1992.
We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.
In planning and performing our audit of the financial statements of the City of
Lino Lakes, Minnesota, for the year ended December 31, 1991, we considered its
internal control structure in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and not to provide
assurance on the internal control structure.
The management of the City of Lino Lakes, Minnesota is responsible for
establishing and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of internal control structure policies and
procedures. The objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and that transactions
are executed in accordance with management's authorization and recorded properly
to permit the preparation of financial statements in accordance with generally
accepted accounting principles. Because of inherent limitations in any internal
control structure, errors or irregularities may nevertheless occur and not be
detected. Also, projection of any evaluation of the structure to future periods is
subject to the risk that procedures may become inadequate because of changes in
conditions or that the effectiveness of the design and operation of policies and
procedures may deteriorate.
For the purpose of this report, we have classified the significant internal control
structure policies and procedures in the following categories.
• control environment
• accounting system
• control procedures
For all of the internal control structure categories listed above, we obtained an
understanding of the design of relevant policies and procedures and whether they
have been placed in operation, and we assessed control risk.
We noted certain matters involving the internal control structure and its
operation that we consider to be reportable conditions under standards established
by the American Institute of Certified Public Accountants. Reportable conditions
involve matters coming to our attention relating to significant deficiencies in the
design or operation of the internal control structure that, in our judgment, could
adversely affect the City's ability to record, process, summarize, and report
financial data consistent with the assertions of management in the general purpose
financial statements.
Wow
City of Lino Lakes, Minnesota
Management Report, Page 48
A substantial portion of certain accounting processes are performed by a single
employee. Ideal conditions call for segregation of duties to establish a system of
internal testing of procedures performed. Additionally, our audit disclosed that the
City does not maintain a system of control over General Fixed Assets. These
conditions are common to cities of this size. Any modification of internal control
structure in this area, however, must be viewed from a cost/benefit perspective.
A material weakness is a reportable condition in which the design or operation
of the specific intemal control structure elements does not reduce to a relatively low
level the risk that errors or irregularities in amounts that would be material in
relation to the general purpose financial statements being audited may occur and not
be detected within a timely period by employees in the normal course of performing
their assigned functions.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be reportable
conditions and, accordingly, would not necessarily disclose all reportable
conditions that are also considered to be material weaknesses as defined above.
However, we believe none of the reportable conditions described above are material
weaknesses.
This report is intended for the information of management and others within the
City of Lino Lakes, Minnesota. This restriction is not intended to limit the
distribution of this report, which is a matter of public record.
Developer Deposits
The City collects deposits from developers for costs which the City incurs during the permit
process. Remaining amounts are returned to the developer. The City has not been consistent in
coding costs against the developers deposit versus the construction funds once a project has been
started. We recommend the City develop procedures to establish at what point costs should be
charged to the construction fund rather than the developers deposit. The City's system of
calculating amounts to be returned to developers does not always produce adequate verifiable
documentation. The City has made improvements in the above areas during 1991 and we
recommend that the City continue to review the system and improve reconciliation procedures.
FINANCIAL ACCOUNTING SYSTEM
During 1988, the City purchased an in -house computer system. This system is intended to
provide the City with the following:
• Payroll System
• Utility Billing System
• General Ledger Accounting
• Word Processing
• Spreadsheet Analysis
City of Lino Lakes, Minnesota
Management Report, Page 49
The general ledger, utility billing system, payroll and word processing have been implemented.
We recommend the City examine the benefits of integrating the utility billing system into the
general ledger accounting system. By integrating these other systems into the general ledger
system, the City's general ledger system will automatically be updated. This will improve the
accuracy of the financial records along with increasing the efficiency of the City's processing
abilities.
The City may require some additional training from the vendor to accomplish the integration of
these systems. Our office is available to assist the City with the integration process with
reconciling integrated information and with developing system controls to ensure the integrity of
the data.
SUMMARY
During 1992, we recommend that the City:
• Monitor the assessment collection rate and provide supplemental financing if collections are
not adequate to meet bonded debt payments. (Page 14)
• Consider alternate procedures relative to assessments which benefit City property or
improves the City's overall core water and sewer distribution systems. (Page 14)
• Request improved special assessment data from the County. (Page 15)
• Continue to monitor the General Fund reserve balance. (Page 19)
• Monitor future proposed legislation regarding targeting of aid reductions. (Page 19)
• Continue to directly charge the Construction Funds for the aerial charge and transfer the
aerial charge when the administrative charge transfer is made. (Page 20)
• Continue efforts to monitor arbitrage compliance. (Page 25)
• Monitor compliance with Treasury Regulations pertaining to reimbursement bonds. (Page
26)
• Monitor actual versus projected area and unit assessment collections to assure that debt
payment requirements will be met. (Page 28)
• Monitor the deficit fund balance of the Surface Water Management Fund and consider
alternative financing if future surface water management charges are not sufficient to
eliminate the deficit. (Page 32)
Vow
City of Lino Lakes, Minnesota
Management Report, Page 50
• Determine if annual administrative fees will be received as an interfund charge of the
General Fund or if applicable expenses will be allocated to the appropriate Capital Project
Fund. (Page 33)
• Monitor actual revenue flows compared to projected revenues compared to projected
revenues to assure timely availability of cash to meet budgeted expenditures. (Page 35)
• Review status of various projects in the Interim Construction Fund and determine financing
sources. (Page 35)
• Upon completion of the Second Avenue Project, transfer the remaining balance to the
Temporary Improvement Bonds of 1990B. (Page 38)
• Charge water rates at a level which will cover the cost of retiring debt issued to construct
the water tower and maintain adequate levels of retained earnings. (Page 40)
• Continue to monitor the City of Circle Pines' gas utility operation. (Page 43)
• Continue 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
46)
• Develop procedures to establish at what point costs should be charged to the Construction
Fund rather than the developers deposit and continue to review the system of calculation
amounts to be returned to developers. (Page 48)
• Examine the benefits of integrating the utility billing system into the general ledger system.
(Page 49)
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
Appendix A
Page 1 of 12
INITIAL YEAR
ESTIMATED
IMPACT
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.
Statewide estimates
not yet available. No
impact on City of
Lino Lakes if fee is
passed through to
user.
1992 MS #36 Sales tax on purchases by political subdivisions of the
297A.25 Subd. State is imposed. School districts, hospitals, nursing homes
11 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.
Statewide impact of
$68 million for State
fiscal year 1993.
City of Lino Lakes
impact of $16,000
for 1992.
1992 MS #35 Expenses incurred by Counties and Cities in the
207A.10 Subd. administration of the presidential primary shall be reimbursed
1 by the Secretary of State.
1992 MS #34 Increased the total amount of equalization Aid to
477A.03 Subd. $20,011,000 for aids payable in 1993 and thereafter.
— 1
State wide increase
of $525,316.
1992 MS #33 Adjusted LGA formula. For aids payable in 1993 and
477A.013 Subd. thereafter, City will receive an amount equal to 103% of
3 LGA it received in 1992 before any non - permanent
reductions made under 477A.0132.
1992 MS #32 Authorize the Commissioner of Revenue to make
16A.711 Subd. adjustments in aid amounts in the second fiscal year of each
5 biennium if anticipated total revenues is less than anticipated
total obligations of the local government trust fund.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992
Now
low
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
Appendix A
Page 2 of 12
INITIAL YEAR
ESTIMATED
IMPACT
1991 MS 275.51 #31 Authorized contingent addition to the levy limit by the
Subd. 7 amount of lost aid of local governments located in a County
where the local sales and use tax was not enacted.
If local sales and use
tax is adopted there
will be no impact.
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.
Statewide decrease in
1992 LGA of $43
million. City of Lino
Lakes decrease
$75,900. (Replaced
by levy authority).
1991 #29 Approved LGA cut for December, 1991 aid payment.
MS 477A.0132 Cut is estimated to be 1.6% of 1992 revenue base. Aid cut
Subd. 1 and 2 not replaced with levy authority.
Statewide reduction
of $16.7 million.
City of Lino Lakes
reduction $30,000.
... 1991 #28 Adjusted the HACA base as the 1991 certified HACA
MS 273.1398 less any 1991 permanent HACA reductions.
Subd. 1
Vi wow
Statewide estimates
not yet calculated.
City of Lino Lakes -
no impact.
1991HF1698
#27 Authorized the establishment of a local option sales tax
Art. 2 Section 6 of 12% on all retail sales in the County. If the County does
not authorize the additional 12% 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.
Because it is likely
that most Counties
will approve the local
option sales tax,
there will not likely
be a competitive
disadvantage within
the State of
Minnesota. The
increase of 12% in
sales tax however,
provides a possibly
greater competitive
edge for surrounding
States.
Prepared by Tautges, Redpath & Co., Ltd.
April 30, 1992
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YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
Appendix A
Page 3 of 12
INITIAL YEAR
ESTIMATED
IMPACT
1991 HF 1698
Section 5
#26 If any County does not approve the local option sales
tax of la% 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).
If the local option
sales tax is not
passed, the City of
Lino Lakes would
lose $491,000 of
State aid beginning
in 1992.
1991 HF 1698
Art. 2 Section 3
#25 The local government trust fund is authorized to make
the following payments to Counties, Cities, Towns and
special taxing districts:
1)
2)
3)
4)
5)
6)
7)
8)
HACA
Disparity Reduction Aid
Local Government Aid and Equalization Aid
Increased HACA Guarantees
Supplemental Homestead Property Tax Relief
Disparity Reduction Credit
25% of the State Aid for County Human Services
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).
There should be no
impact on the City of
Lino Lakes or other
governmental
jurisdictions if
revenues reach
forecasted levels. If
however, revenue is
less than anticipated,
there likely will be
reductions in HACA
and local government
aid. The HACA
reductions, if made
during the year, will
cause property tax
collection rates to be
reduced. This is an
extremely
unfavorable bond
indicator which is
already impacting
Minnesota Local
Governments based
on 1991 reductions
in HACA. Note: The
tax rate "buy down"
will increase HACA.
Prepared by Tautges, Redpath & Co., Ltd.
April 30, 1992
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UMW
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
Appendix A
Page 4 of 12
INITIAL YEAR
ESTIMATED
IMPACT
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.
The creation of the
local government
trust fund will impact
the City of Lino
Lakes only if the
estimated revenues of
the fund fluctuate
significantly from
estimates. Revenue
shortfalls should be
budgeted to anticipate
cuts late in the
operating year.
Budget practices
should therefore be
amended to consider
a factor for possible
reductions based on
suppressed economic
conditions in any
given year.
1991 HF 1698
Art. 2 Section 1
#23 Establish the advisory commission on inter-
governmental 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.
The commission is in
an "advisory"
position to the
legislature. As such
the commission has
little or no power and
therefore cannot
directly impact the
State or the City of
Lino Lakes.
Prepared by Tautges, Redpath & Co., Ltd.
April 30, 1992
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YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
Appendix A
Page 5 of 12
INITIAL YEAR
ESTIMATED
IMPACT
1991 MS 273.13 #22 Approve further adjustments to the commercial
Subd. 32 industrial tax rate for valuations in excess of $100,000.
Adjusted rates effective through 1994 as follows:
First $100,000 of
market value
Market value over
$100,000
1990 1991 1992 1993 1994 1995
Rate Rate Rate Rate Rate Rate
3.30% 3.20% 3.10% 3.00% 3.00% 3.00%
Targeted to
5.06% 4.95% 4.75% 4.70% 4.60% eventually be
4%
Tax burden shifts
from commercial
industrial property.
Tax increment
districts may reflect
lower than
anticipated revenue
flows.
1991 MS
Section 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.
For those
communities deemed
to violate this statute,
they may be excluded
from the fiscal
disparities pool
within the seven
county metropolitan
area. The impact for
such excluded
communities would
likely be a significant
increase in their local
tax rates.
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.
State aid increase in
funding to cities not
yet available. 1992
HACA increase to
City of Lino Lakes of
$64,600 or 22%.
The HACA increase
is primarily due to
the net tax capacity
adjustment.
Prepared by Tautges, Redpath & Co., Ltd.
April 30, 1992
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
Appendix A
Page 6 of 12
INITIAL YEAR
ESTIMATED
IMPACT
1991 #19 Approved adjustments to residential homestead
MS 273.13 property (class la). Adjusted rates are as follows:
Subd. 22
First Tier of Market Value
Up to $68,000
Up to $72,000
Payable Payable Payable
1991 1992 1993
Rate Rate Rate
1.00%
Second Tier of Market Value
$68,001 to $110,000 2.00%
$72,001 to $115,000
over $72,000
Third Tier of Market Value
over $110,000
over $115,000
3.00%
1.00% 1.00%
2.00%
2.50%
2.00%
The change in class
rates applied to
residential property
will not impact the
total revenue raised
by the City or shift
the tax burden
between property
classes but rather will
increase the amount
of HACA received
by the City. (see
#20) Note: The
increased HACA
payments are subject
to adequate revenue
available in the local
government trust
fund. (see #25)
Prepared by Tautges, Redpath & Co., Ltd.
April 30, 1992
VOW
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
Appendix A
Page 7 of 12
INITIAL YEAR
ESTIMATED
IMPACT
1991
_ MS 270.12
Subd. 2
#18 Establish methodology used in preparing assessments
/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.
The assessment/sales
ratio factor of the
local government aid
formula affected a
variety of Cities in
1990. This current
change in
methodology should
be reviewed and
challenged by Cities
if they believe the
methodology results
in a higher
adjustment to market
values within the
City which directly
impacts tax capacity.
Recent state
legislative actions
have targeted aid
reductions to Cities
with high tax
capacity.
1991 #17 1991 LGA initially frozen at 1990 levels, then in
MS 477A.0132 subsequent actions, aid was cut. The 1991 reduction equals
Subd. 1 & 2 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.
Statewide reduction
in funding to cities
$20.5 million. City
of Lino Lakes
reduction $39,000.
1991 HF 47 #16 State Aid road allotments were reduced to Cities.
Statewide reduction
$3.8 million. City of
Lino Lakes reduction
$15,100.
Prepared by Tautges, Redpath & Co., Ltd.
April 30, 1992
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
Appendix A
Page 8 of 12
INITIAL YEAR
ESTIMATED
IMPACT
1990 Ch. 604 #15 Levy limits for Cities repealed starting with
Art. 3 Section 47 collectible 1993 levy.
Anticipated extension
and delay of start
likely to result in no
impact.
1990 #14 Approved potential LGA and HACA cuts related to
MS 273.1399 tax increment districts formed after April 30, 1990.
Subd. 5
Estimated reduction
in aids not calculated.
Legislation designed
to discourage new
tax increment
districts.
1990 #13 Further reductions in LGA to cities. The Legislature
MS 477A.013 reduced LGA by 1.53% of the revenue base. This
Subd. 7 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.
Statewide decrease
in 1990 LGA
$14.4 million, City
of Lino Lakes
decrease $26,300.
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.
Reduction equal or
greater than 1990
HACA cut. For aid
payable in 1992,
HACA will increase
for certain cities
based on the tax rate
change "buy down ".
(see #20)
Prepared by Tautges, Redpath & Co., Ltd.
April 30, 1992
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YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
Appendix A
Page 9 of 12
INITIAL YEAR
ESTIMATED
IMPACT
1990 #11 Commercial property tax rates lowered. (See #22).
MS 273.13
Subd. 24 & 32
First $100,000 of
market value
Market value over
$100,000
1990 1991
Rate Rate
3.30% 3.20%
5.06% 4.95%
1992 1993
Rate Rate
3.10% 3.00%
Targeted to
eventually be 4%
Tax burden shifted to
residential and other
property classes.
Existing commercial
based tax increment
districts to produce
lower revenue
stream to cities.
1990 #10 Equalization Aid limited to 12% increase over 1990
MS 477A.013 Equalization Aid. Also Equalization Aid subject to reduction
Subd. 5,6,7 if LGA is not sufficient to absorb cuts based on revenue
base. Equalization Aid capped Statewide at $19,485,684.
Maximum
equalization aid
established to limit
future increases.
City of Lino Lakes
increase $5,962.
1989
MS 477A.013
Subd. 5
49 Tax Base Equalization Aid, is a program that
targets aid to low tax base cities starting in 1990. Tax Base
Equalization Aid to be administered similar to HACA
whereby the county auditor to deduct the aid from the
amount of taxes certified by the city. Payments of Tax Base
Equalization Aid to be made on July 20 and December 15,
1990 from the Department of Revenue.
Statewide initial year
increase in aid
$19.5 million. City
of Lino Lakes
increase $49,684.
1989 SP1 Ch 1, #S 1989 levy limits for Cities repealed starting with
Art. 5 Section 51 collectible 1992 levy. In 1990 the effective date was
extended to collectible 1993 levies. (See #15).
Anticipated extension
and delay of start
likely to result in no
impact.
Prepared by Tautges, Redpath & Co., Ltd.
April 30, 1992
Iwo
IMMO
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
Appendix A
Page 10 of 12
INITIAL YEAR
ESTIMATED
IMPACT
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.
Statewide HACA
reductions totaled
$1.9 million . City
of Lino Lakes - no
HACA cut because
LGA was sufficient
to absorb entire cut.
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.
Statewide 1990
decrease in LGA
$44.6 million. City
of Lino Lakes
decrease related to
the transfer to
schools of $148,175
See #13 for
additional LGA
reduction.
1989 #5 LGA formula revised to reduce household guarantee
MS 477A.013 factor from 1.08 in 1989 to 1.04 in 1990 to reduce the
Subd. 3 expenditure/unlimited ratio factor by 50%. A 15% ceiling
increase over prior year LGA factor was also added.
Aid increases were
subsequently entirely
wiped out by shift
to school districts.
Initial aid increase
for 1990 was $30
million Statewide.
City of Lino Lakes
increase of $6,625.
Prepared by Tautges, Redpath & Co., Ltd.
April 30, 1992
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YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
Appendix A
Page 11 of 12
INITIAL YEAR
ESTIMATED
IMPACT
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.
Re- measurement of
valuations were
designed to have no
impact on aids or
relative valuations.
1988
MS 273.1398
Subd. 2
#3 Cities to receive Transition Aid in lieu of homestead
credits. Transition aid to be calculated on each unique
taxing jurisdiction (UTJ) and then 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.
The freeze nature of
the legislation will
result in gradual
decrease of HACA
in 1991 and future
years. Actual
comparisons not
available because
Homestead Credit no
longer calculated on
the prior method.
1988
MS 273.1398
Subd. 3
#2 Targeted Cities (primarily non -metro cities) to receive
disparity reduction aid. The 1989 disparity reduction
aid to be based on 1988 gross taxes and gross 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).
1989 increase in
Aids to Cities State-
wide $54 3 million,
City of Lino Lakes
no increase in aids.
Prepared by Tautges, Redpath & Co., Ltd.
April 30, 1992
YEAR &
STATUTE
REFERENCE
CITY OF LINO LAKES. MINNESOTA
STATE LEGISLATIVE ACTION
Appendix A
Page 12 of 12
INITIAL YEAR
ESTIMATED
IMPACT
1988
MS 477A.013
Subd. 3
#1 Local government aid (LGA) formula modified to
reflect a per household aid factor compared to prior year tax
capacity and tax base increase. Expenditure/unlimited ratio
factor established as component of LGA formula. Lower of
three -part formula to calculate initial LGA increase.
Statewide 1989 aid
increased $79.3
million, Lino Lakes
increase of
$98,666.
Prepared by Tautges, Redpath & Co., Ltd. April 30, 1992