HomeMy WebLinkAboutManagement Report and Recommendations 12/31/1989CITY OF LINO LAKES, MINNESOTA
MANAGEMENT REPORT,
AND RECOMMENDATIONS
DECEMBER 31, 1989
CITY OF LINO LAKES, MINNESOTA
MANAGEMENT REPORT AND RECOMMENDATIONS,
Table of Contents
Paae�
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
j ldividual Fund/Fund Type Analysis - Review of significant changes in
fund balances and other matters
Recommendations Summary
16
47
51
VOTO, TAUTGES, REDPATH & CO., LTD.
CERTIFIED PUBLIC ACCOUNTANTS
Birch Lake Professional Building • 1310 E. Hwy. 96 • White Bear Lake, MN 55110 • Fax (612) 426 -5004
• Phone (612) 426 -3263
ROBERT J. VOTO, CPA
ROBERT G. TAUTGES, CPA
JAMES S. REDPATH, CPA
D. KENNETH GEORGE, CPA
DAVID J. MOL, CPA
To the Honorable Mayor and
Members of the City Council
City of Lino Lakes, Minnesota
The Annual Financial Report of the City is complete and has been transmitted to the
City Council. In conjunction with our examination of the financial statements, we have
prepared this report to assist the City in the analysis of the 1989 financial statements.
Financial areas which may be of particular interest to the City are as follows:
Page No.
1. The State continues to make significant changes to the property
tax system and State aid funding systems. 2
2. The City's General Fund increased by $185,000 in 1989. 16
3. The current special assessment collection rate is less than 70%
which indicates that increased monitoring is in order. 13
4. The Area and Connection Charge Fund reflects fund balance
improvement, however, comparisons to financing plan
projections should be updated. 33
5. MWCC billings to the City are projected to increase by
29% in 1990. 41
In addition to the above areas, financial trend analysis has been updated throughout the
report.
The funding of operations of the City continue to be vulnerable to legislative actions of
the State. Our firm is committed to analyzing the effects of State actions on City financing.
We will continue to measure the impact on the financial outlook for the City of Lino Lakes.
MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • PRIVATE COMPANIES PRACTICE SECTION
MINNESOTA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
MUNICIPAL FINANCE OFFICERS ASSOCIATION • MINNESOTA ASSOCIATION OF SCHOOL, BUSINESS OFFICIALS
City of Lino Lakes, Minnesota
Management Report, Page 2
1989 and 1990 LEGISLATIVE ACTIONS
The 1989 and 1990 Legislatures approved several changes in the property tax system and state
aid distribution system. The table below summarizes the dollar impact of these changes.
Local Governmental Aid
Homestead and Agricultural Aid
Tax Base Equalization Aid
Totals
State Totals For Cities
1988
$297,037,000
111,873,000
0
1989
$376,376,000
106,308,000
0
1990
$317,343,000
146,523,000
18.339.000
1990 Percent
inaease/(Decrease) Increase
over 1989 (1 cease)
($59,033,000) (15.68)%
40,215,000 37.83%
18,339,000
$ 408, 910,000 $482,684,000 $482,205,000 ($479,000)
(0.10)%
Statewide Local Government Aid (LGA) initially increased by approximately $30 million for
1990. However, after the effect of the aid transfer for education (1989 Special Legislation
Session) of $74.7 million and the 1990 legislative retroactive aid cut, LGA will decrease by
approximately $59 million from the 1989 level. 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.
Property tax related state aids for the City of Lino Lakes have been as follows:
Local Governmental Aid
Homestead and Agricultural Aid
Tax Base Equalization Aid
City of Lino Lakes
1985 1986
$196,177
226 ,529
0
1987 1988
1989 1990
$219,728 3232,159 3232,157 3330,823 3163,103 •
249,813 277,294 289,347 283,691 357,397
0 0 0 0 49.684
Totals lemmiL7122m6 inie6m241 3509.453 521 504 5614.514 3570.184
*Net of aid transfix for education of 3148,175 and 1990 legislative aid at of 326,304
City of Lino Lakes, Minnesota
Management Report, Page 3
A graph of the above tables comparing the City of Lino Lakes with state wide totals 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
— $450,000
— $400,000
— $350,000
— $300,000
— $250,000
— $200,000
— $150,000
— $100,000
— $50,000
$0
1985 1986 1987 1988 1989 1990
IN Equalization Aid
® Homestead Credit
®LGA
a" Statewide Totals (in 1,000)
State aids for the City of Lino Lakes increased in proportion to statewide increases in 1985,
1986 and 1987. In 1988, however, the City of Lino Lakes did not compare favorably with the
statewide trend. State aids for the City decreased approximately 6% in 1990.
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City of Lino Lakes, Minnesota
Management Report, Page 4
Increases in Local Government Aid (LGA) are determined by one of five different methods.
The maximum increase in LGA for The City of Lino Lakes for 1989 and 1990 is determined by the
following:
I. Prior year City revenue:
Property tax levy
Local government aid
subtotal
Expenditure/unlimited aid ratio applicable percentage
Formula aid increase
II. City revenue guarantee:
1989 - (households x per household guarantee x 1.08)
1990 - (households x per household guarantee x 1.04)
Less prior year tax capacity
City initial aid increase (cannot be less than zero)
1989
$1,146,879
232,472
1,379,351
x 6.00%
$82,761
$1,263,453
(835,103)
$428,350
III. Prior year property tax levy $1,146,879
Less prior year fiscal disparities distribution levy (208,528)
subtotal 938,351
Statutory percent x 20.00%
Statutory tax base increase $187,670
IV . 15% of prior year local government aid N / A
V . Minimum 2% increase prior to aid transfer $4,649
1990
$1,146,874
331,225
1,478,099
x 2.00%
$29,562
$1,216,659
(1,305,168)
$0
$1,146,874
(250,613)
896,261
x 20.00%
$179,252
$49,684
$6,625
Assumptions:
Households (1988 estimate) 2,276 2,276
Per household guarantee $514 $514
The initial aid increase is the lesser of the first four calculations. If, however, the first four
calculations is less than V, then the City's initial aid increase will be the minimum 2% amount.
The 1991 LGA is frozen at the 1990 level under current law.
City of Lino Lakes, Minnesota
Management Report, Page 5
Using the above table, LGA for The City of Lino Lakes for 1989 and 1990 is determined as
follows:
1989 1990
Initial aid increase $82,761 $6,625
Additional aid increase under alternate formula 15,992 0
Prior year aid 232,472 331,225
Reduction for State demographer costs (13) (268)
Initial aid 331,212 337 ,582
Aid transfer to schools (3.4% of net tax capacity) 0 (148.175)
Final Aid - 1989 legislation 331,212 189,407
1990 legislative cut (1.53% of revenue base) 0 (26304)
Adjusted LGA $331,212 $163,103
The 1990 Legislature made further reductions in LGA to cities. The Legislature reduced LGA
by 1.53% of the revenue base. This cut occurred after City budgets were adopted and the
operating year was one third elapsed. The Legislation does not provide a replacement revenue
source. The 1990 legislature also approved potential LGA and HACA cuts related to tax increment
districts formed after April 30, 1990.
Homestead and Agricultural Credit Aid (HACA) is the replacement of the Homestead Credit
program. For payable 1990, HACA is computed as follows:
Payable 1989 Gross Taxes - (Payable 1989 Tax Rate x Payable 1990 Net Tax Capacity x .9767)
Beginning with payable 1991, HACA payments will reflect increases in the Consumer Price
Index and increases in the number of households.
Tax Base Equalization Aid, (which is new for 1990), is a program that targets aid to low tax
base cities. Tax Base Equalization Aid will work similar to HACA whereby the county auditor will
deduct the aid from the amount of taxes certified by the city. Payments of Tax Base Equalization
Aid will be made on July 20 and December 15, 1990 from the Department of Revenue. The City
of Lino Lakes is scheduled to receive Tax Base Equalization Aid in 1990 of $49,684.
In addition to changes in the State aid structure, the 1989 Legislature repealed all city levy
limits beginning with payable 1992. The 1990 Legislature extended the repeal to 1993. The State
Legislature will have the opportunity to change and/or repeal this action during its 1991 and 1992
sessions.
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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 Fund of the City of
Lino Lakes were as follows:
State Aids Property Taxes Total
Year Amount Percent Amount Percent Amount Percent
1979 $184,184 35% $166,149 32% $350,333 67%
1980 239,622 40% 171,440 28% 411,062 68%
1981 300,971 42% 212,914 30% 513,885 72%
1982 283,089 37% 305,804 40% 588,893 77%
1983 349,076 38% 355,684 38% 704,760 76%
1984 403,127 35% 510,245 44% 913,372 79%
1985 455,059 33% 550,302 40% 1,005,361 73%
1986 491,041 35% 585,137 42% 1,076,178 77%
1987 545,674 34% 714,892 44% 1,260,566 78%
1988 549,567 30% 769,915 43% 1,319,482 73%
1989 682,407 33% 848,472 41% 1,530,879 74%
1990 * 528,241 25% 1,006,389 47% 1,534,630 72%
* 1990 based on City budget and State estimates.
A graph of the above primary funding sources is as follows:
$1,100,000
$1,000,000
S900,000
$800,000
$700,000
$600,000
$500,000
5400,000
5300,000
$200,000
5100,000
50
General & Special Revenue Funds
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1981 1982 19831984 1985 1986 1987 1988 1989 1990
Budgeted
• State ,,ids
® Property Taxes
City of Lino Lakes, Minnesota
Management Report, Page 7
State aids for the General Fund have consisted of the following amounts from 1983 through
1989 actual and 1990 budgeted:
1990
State Aids 1983 1984 1985 1986 1987 1988 1989
Local Government Aid $171,011 $185,196 $196,177 $219,728 $232,159 $232,157 $330,823 $163,103
Homestead Credit 139,767 188, 906 227,711 238,336 265,530 259,384 270,645 320,595
Equalization aid 0 0 0 0 0 0 0 44,543
Police Aid 14,245 13,970 13,509 18,722 26,828 33,298 32,739 0
MSA - Streets 13,110 13,935 13,935 13,935 13,935 13,935 13,935 13,900
Other Aids 10.943 , 1.120 3.727 7.222 10.793 34.265 0
Totals $349, 076 $ 403,127 $455,059 $491,041 $545,674 $549,567 $682,407 $542,141
Percent change 23.31% 15.48% 12.88% 7.91% 11.13% 0.71% 24.17% (20.55)%
A graph of the above State aids (with a comparison to property tax amounts) is as follows:
$1,100,000 -
$1,000,000 -
$900,000 -
$800,000 -
$700,000 -
$600,000 -
S500,000 -
S400,000 -
$300,000 -
$200,000
$100,000
So
1980
General & Special
Revenue Funds
$1,100,000
$1,000,000
$900,000
$800,000
$700,000
$600,000
$500,000
$400,000
S300,000
$200,000
$100,000
SO
1981 1982 1983 1984 1985 1986 1987 1988 1989 B19 0ted
® Other Aids ® Homestead Credits • Local Government - Property Taxes
Aid
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
1989
Amount Percent
$848,472 40.76%
256,987 12.34%
682,407 32.78%
16,151 0.78%
96,680 4.64%
73,614 3.54%
54,930 2.64%
52.554 2.52%
1988
Amount Percent
$769,915 42.94%
229,511 12.80%
1987
Amount Perc_t
$714,892 4-75"4-
420 6
164,115 10.15%
549,567 30.65% 545,674
86,067 4.80% 59,069
70,142 3.91% 68,448
25,014 1.40% 16,756
62.756 3.50% 48.332
52.081.795 100.00% 51.792.972 100.00% $1.617.286
33.74%
0.00%
3.65%
4.23%
1.04%
2.99%
100.00%
Detail of the above revenue is presented in Statement 7 of the 1989 Annual Financial Report.
5900,000
5800,000
5700,000
5600,000
5500,000
5400,000
5300,000
5200,000
5100,000
$0
Property State Aids
Taxes
Licenses & Charges for
Permits Services
1987 01988 ® 1989
Fines and Interest & All
forfeits Other
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
Other
Capital outlay
Totals
1989
Amount Percent
5591,023 31.17%
716,449 37.78%
357,938 18.88%
134,653 7.10%
17,638 0.93%
78,503 4.14%
1988
Amount Percent
8588,946 37.02%
582,818 36.63%
263,129 16.54%
91,051 5.72%
64,958 4.09%
1987
Amount Percent
$409,645 26.96%
530,785 34.94%
383,271 25.23%
82,117 5.41%
14,783 0.97%
98,588 6.49%
81.896.204 100.00% 81.590.902 100.00% 81.519.189 100.00%
8800,000
$700,000
$600,000
8500,000
8400,000
8300,000
8200,000
8100,000
SO
General
Government
Public Safety
Highways &
Streets
Parks
■1987 la 1988 ® 1989
Capital Outlay &
Other
Details of the above 1989 and 1988 expenditures are presented in Statement 7 of the 1989
Annual Financial Report.
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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 1989 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, 1989 and 1988:
December 31, Increase
Description 1989 1988 (Decrease)
Treasurer's balance - checking ($69,847) ($17,198) ($52,649)
Petty cash 150 150 0
Investments:
Certificates of deposit 3,295,495 2,193,904 1,101,591
Commercial paper 2,230,875 0 2,230,875
4M money market fund 26,900 24,651 2,249
FNMA pool 231,348 264,505 (33,157)
NOW account 494,035 359,043 134,992
Totals $6,208,956 $2,825,055 $3,383,901
The City maintains an average 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 recommend that the City
continue this practice of minimal balances in the City's checking account to increase interest
earnings.
Interest on investments totaled $369,971 in 1989 and $147,742 in 1988. 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, 1989. The following schedule details these amounts.
Description
December 31,
1989 1988
State:
MSA $8,150 $4,203
Federal:
Community Development Block Grant 19,437 11,612
Local:
Anoka County 19,955 182
MWCC - Maintenance Agreement 10,656 7,319
Final cost allocation 1,567 5,326
Circle Pines 1,118 1.150
Total
$60,883 $29,792
Excluded from the above schedule is the gas franchise tax receivable which represents the
City's share in the 1989 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 in June,
1990. The City may request this reimbursement earlier (in six month intervals) to accelerate the
reimbursement process and improve the cash flow of the City.
The City currently receives approximately $14,000 annually in MSA maintenance monies. The
City also has available approximately $322,000 annually in MSA construction allotments. These
construction allotments ordinarily can be used to finance construction costs relating to MSA
designated streets. Unused construction allotments total approximately $891,000 at December 31,
1989. The City may be able to justify and request up to 25% of such annual total allotments for
maintenance purposes (i.e., 25% of $322,000 or $80,000 per year). This could increase the total
MSA receipts of the City during periods in which the City does not have qualifying MSA
construction projects. Additionally, this option normally accelerates the receipt of MSA allotments.
Once received, the City retains the option of internally allocating the receipts to construction funds
as needed. We recommend that the City consider this option.
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City of Lino Lakes, Minnesota
Management Report, Page 12
Taxes Receivable
Delinquent taxes receivable were as follows for the past several years:
Delinquent balance - January 1
Current Levy
Total receivable
Receipts:
County:
Currant
Delinquent
State
Total receipts
Unadjusted balance
Adjust to County
Delinquent balance
Total collections as a percent
of current levy
1989
$41,388
1,146,850
1.188.238
836,569
16,811
283,691
1,137,071
1988
$27,995
1,146,850
1,174,845
827,494
8,961
293,757
1.130.212
51,167 44,633
(4,774) (3,245)
1987
$99,694
990,000
1,089,694
694,652
35,455
277,295
1.007,402
82,292
(54,297)
1986
$100,004
835,500
935,504
557,533
28,464
249,813
835,810
99,694
1985
$86,141
775,000
861,141
514,978
19,630
226,529
761,137
100,004
$46,393 $41.388 $27.995 $99,694 $100.004
99%
99%
102%
100%
98%
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.
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City of Lino Lakes, Minnesota
Management Report, Page 13 1
Special Assessments Receivable
1
Special assessments receivable consisted of the following amounts at December 31, 1989 and
1988:
December 31, Increase
1989 1988 (Decease)
Delinquent $161,751 $123,153 $38,598
Defaced 1,181,528 1,636,158 (454,630)
City property 142,553 142,553 0
Tax forfeit 121,424 121,424 0
Due from County 40,236 49,649 (9,413) 1
Totals $1,647,492 $2,072,937 ($425,445)
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Delinquent assessments receivable consist of amounts collectible in 1989 and prior years which
the City has not yet received. A summary of assessment collections for the past four years is as 1
follows:
1
1989 1988 1987 1986
Delinquent balance - January 1 $123,153 $189,606 $290,525 $271,588 r
Adct
Current installment 326,516 312,610 388,798 162,553
Amount collectible 449,669 502,216 679,323 434,141
Less: r
Current collections 223,757 204,150 194,196 78,980
Delinquent collections 64,161 163,841 190,508 63,103
Total collections 287,918 367,991 384,704 142,083
Adjustments 0 (11,072) (105,013) (1,533) 1
Delinquent balance - December 31 $161,751 $123,153 $189,606 $290,525 1
Current collection rate 69% 65% 50% 49%
Total collections as a percent r
of current levy 88% 118% 99% 87%
As the above 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. If the City continues to experience
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City of Lino Lakes, Minnesota
Management Report, Page 14
high delinquency rates, the funds which rely on assessments will be unable to meet scheduled
bond maturities on a timely basis. We recommend that the City monitor the collection rate and
provide supplemental financing if assessment collections are not adequate to net bonded debt
payments.
The amount listed as "City property" totaled $142,553 at December 31, 1989. 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 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
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.
City of Lino Lakes, Minnesota
Management Report, Page 15
During 1989, the City received prepayment on a Green Acres parcel. The County had not
notified the City of the parcels Green Acre status. Consequently, two years of principal and
interest were not collected on this parcel at the time it was prepaid. We recommend that the City
review coordination procedures with the County to avoid underpayment of assessments.
The above procedures will allow the City greater assurance that all of its special assessments
are properly spread for collection. Additionally, the City will have the ability to generate year end
balances for annual financial reporting with greater ease and accuracy. The increased level of
control required is partially a function of increased assessment activity. Special assessments
receivable (City-wide) were less than $100,000 in 1979. Assessments receivable were over $1.6
million at December 31, 1989 and are projected to increase substantially over the periods if
anticipated development occurs.
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 now offers the service of establishing complete fixed asset systems for cities. We are
prepared to:
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.
Maintenance of the system for purchases, sales, disposals and transfers may be maintained on
our system or the City may require in -house systems for periodic updates. The project will require
City staff time to assist in assembling physical inventories and to edit reports. Upon request, we
will prepare an engagement letter which will include timing and estimated costs.
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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 Annual
Financial Report The fund balance of the General Fund increased by $185,000 in 1989 as
follows:
Budgeted increase (decrease) in fund balance $49,962
Actual revenues over (under) budgeted revenues:
Property taxes $2,716
Licenses and permits 31,537
Intergovernmental revenue 30,529
Charges for services 1,976
Fines and forfeits 2,814
Interest on investment 54,930
Miscellaneous 26,554
Net revenue over budget
Actual expenditures under (over)
budgeted expenditures:
General government (33,443)
Public safety (29,607)
Highways and streets 53,962
Parks (16,178)
Other (10,998)
Capital outlay 20,837
Net expenditures under budget
151,056
(15,427)
Total improvement $185,591
Detail of the preceding budget variances are presented in Statement 7 of the 1989 Annual
Financial Report.
City of Lino Lakes, Minnesota
Management Report, Page 17
The City's December 31, 1989 fund balance totaled $1,030,053. The City's General Fund
balance has been as follows for the past eleven years:
Year Ended
December 31,
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
Designated
$14,655
18,766
19,876
46,466
51,084
116,770
77,624
83,714.
52,593
96,626
53,290
Undesignated
$50,652
(19,730)
30,109
13,355
80,032
126,153
350,675
455,666
589,799
747,836
976,763
Increase
(Decrease) in
Undesignated
($597)
(70,382)
49,839
(16,754)
66,677
46,121
224,522
104,991
134,133
158,037
228,927
City of Lino Lakes, Minnesota
Management Report, Page 18
or Cash flow timing differences.
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.
or Capital . tlay replacement.
Internal escrow for purchases which
may exceed amounts available in
any single budget cycle. This may
also be accomplished through transfers
to dedicated replacement funds.
Reasons for
Reserves
Emerges or unanticjpated
expenditures. Examples include natural
disasters, law suits, comparable worth
implementation and premature breakdown
of vital equipment.
' special Lily' ojects. Preliminary oans and minor ims are examples of
or 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 & Homestead Credit
formulas is a constant threat
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.
City of Lino Lakes, Minnesota
Management Report, Page 19
o° Favorable bond rating indicator.
• Avoids temporary overdrafts
prior to major receipts.
Benefits of
Reserves
The City of Lino Lakes maintains reserve balances in other funds of the City for portions of the
above reserve components.
City of Lino Lakes, Minnesota
Management Report, Page 20
The State of Minnesota is apparently developing a unique view of what constitutes prudent
fiscal management for Minnesota cities. Currently, the Minnesota Department of Revenue is
exploring options for reducing LGA and HACA for 1990 and future years as a method of reducing
the State's budget shortfall. One method that is under consideration for cutting aids is based upon
city reserve balances. Presumably, cities with "large" reserve balances would experience "large"
aid cuts.
We recommend that the City strongly oppose this method of targeting aid reductions to cities
for the following reasons:
1. The proposed targeting would penalize those cities which do practice sound fiscal
management.
2. The proposed targeting would encourage less responsible fiscal management. This would
result in financial crisis for individual cities and ultimately affect the bond ratings of all
Minnesota cities including the City of Lino Lakes.
3. The targeting program would be virtually impossible to administer on a fair and equitable
basis because financial management practices and fund structures are not consistent or
easily comparable among cities. What may appear to be a low reserve balance of a city's
General Fund may be an adequate reserve balance for such city. Examples are as follows:
• Transferring monies from the General Fund to other funds for capital acquisitions or
anticipated acquisitions.
• The use of Special Revenue funds to account for basic services such as police, fire and
other.
• The use of Internal Service funds for compensated absences and other purposes.
• The reservation of General Fund Balance for cash flow, compensated absences, etc.
• Transferring of reserved balance amounts to other city funds.
4. Many cities have established reserve policies and made significant fiscal management
decisions based on the established/targeted reserve policy. The effectiveness of such
planning and fiscal management would be severely hampered (if not destroyed) by reserve
balance "raiding" by the State.
5. The State is possibly seeking to pass its financial crisis on to local government. This
would be a temporary solution to apparently poor fiscal management at the State level.
6. The potentially lost reserve balance could diminish the city's bond rating and potentially
deplete a city's reserve balance pledged to secure debt service requirements.
City of Lino Lakes, Minnesota
Management Report, Page 21
The State has made significant attempts to improve the "equitable distribution" of State aids to
cities over the past two years. The success of the actions to date is questionable. The proposal to
"raid" reserve balances of cities would be a clear message that the objective of the State is not
equity among cities. The objective would be to control the local decision making process as it
relates to financial matters. This would result in an erosion of the independence and effectiveness
of city government. As important, such actions could eventually effect the bond ratings of all
Minnesota cities.
The City's minimum cash flow reserve requirement is measurable. For the City of Lino Lakes,
the minimum required surplus is $846,000 computed as follows:
1990 Budgeted Levy (Includes Homestead Credit) $1,529,821
1990 Anticipated Local Government Aid 163,103
Total $1,692,924
Minimum Required Cash -Flow Reserve $846,462
The City had $1,030,053 of fund balance at December 31, 1989. This represents 121% of the
above targeted cash flow required reserve. There is, therefore, approximately $183,000 available
for other reserve requirements of the City.
As discussed throughout this report, sound fiscal management requires General Fund reserve
balances. The City of Lino Lakes currently does not have a policy which defines or targets levels
of reserve balances to be maintained in the City's General Fund. Commonly, such policies will
address the minimum cash flow reserve requirement, an emergency or contingency reserve
requirement, a reserve for compensated absences and other reserves which may be unique to the
City of Lino Lakes. A reserve policy can be established in such a manner as to allow for annual
adjustment. Adjustment is needed as circumstances change. Therefore, certain reserves can be
stated as a percent of financial indicators. One example would be the minimum cash flow reserve
would equal 50% of property taxes and local government aid. As the level of property taxes and
local government aid fluctuates, the reserve balance would automatically adjust. Emergency
expenditures and contingencies may also be stated as a percent of the operating budget. We are
available to assist the City in reviewing reserve requirements and reserve policies.
City of Lino Lakes, Minnesota
Management Report, Page 22
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.
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
During 1988 and 1989, the City did not charge the various construction funds in accordance
with the established policy. During 1989, the City transferred an administrative charge from the
Comprehensive Trunk Watermain Construction Fund to the General Fund. It was unclear whether
this charge included a 1% charge for aerial maps. 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. We
recommend that the City Accountant charge the Construction Fund for the Aerial charge directly
and transfer the aerial charge when the administrative charge transfer is made. We recommend that
the City calculate the appropriate charge for 1989 and transfer such amounts in 1990. Our office is
available to assist the City in establishing such procedures.
During 1989, the City collected $5,500 for the sale of Aerial Maps.
City of Lino Lakes, Minnesota
Management Report, Page 23
DEBT SERVICE FUNDS
The combining financial statements for the Debt Service Funds are presented in Statements 8
and 9 of the 1989 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 24
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 Annual Financial Report to assist in this analysis.
December 31.1989 &headed Final
Find Deferred Outstanding Property Mutrity
Fund Description Balance Revenue Total Debt Taxes Date
General Debt
1989A Certificates of Indebtedness (511.475) SO (511.4751 5300.000 8387.293 11/1/88
Total general debt (11,475) 0 (11,475) 300,000 387,293
Special Assessment Debt
Improvement Bonds of 1981 22,819 9,547 32366 10,000 12/1/91
Improvement Bonds of 1983 10,908 51,588 62,496 40,000 10/1/93
Improvement Bonds of 1984 11,128 7,150 18,278 17,500 11/1/94
Improvement Bonds of 1986 320,911 393,529 714,440 340,000 5,036 2/1/97
Temporary Improvement Bonds of 1987 824,879 196,523 1,021,402 1,650,000 9/1/90
Improvement Bonds of 1988 470,403 804,697 1,275,100 1,160,000 2/1/97
Temporary improvement Bonds of 1988 245,163 80,029 325,192 610,000 10/1/91
Temporary Improvement Bonds of 1989 396.201 0 396.201 4.660.000 7/1/92
Total special assessment debt 2.302.412 1.543.063 3.845.475 8.487.500 5.036
Total - All Debt Service Funds $2,290,937 S1, 543,063 $3,834,000 $8,787,500 8392,329
a�aa� assaaaaes
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 25
Debt service funds should be evaluated at least annually. The following chart summarizes
steps to consider.
Condition A
Condition B
Cautions
El. 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 earnings?
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 fund
is clearly Rol adequately
funded. Plan for altern-
ative funding (taxes,
transfers, other sources).
Conclusion 2
Variables and possible
outcomes are too diverse.
Prepare projections to
analyze possible
scenarios and options.
Conclusion 3
City of Lino Lakes, Minnesota
Management Report, Page 26
Improvement Bonds of 1982
The Improvement Bonds of 1982 were refmanced by the Improvement Bonds of 1986. Bonds
maturing in the years 1989 through 1991 representing $375,000, were called on February 1, 1987.
The remaining assets of this fund were transferred to the Improvement Bonds of 1986 in 1989.
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. Final maturity of these bonds is scheduled for
February 1, 1997.
Temporary Improvement Bonds of 1987
The City issued bonds to finance the following projects in 1987:
Band Construction
Proceeds Costs
North Road $9,473 $8,527
Deer Pass Trail 11,108 13,024
Comprehensive Water Trunk 664,671 541,446
Reshanau Lakes South 481,833 413,577
Dickson's 381,422 337,725
4th Avenue 84,942 719.869
$1,633,449 $2,034,168
North Road, Deer Pass Trail and 4th Avenue were assessed in 1987. Erickson's and
Reshanau Lakes South were assessed in 1988. The Comprehensive Water Trunk project will be
financed by area and connection charges.
Improvement Bonds of 1988
The Improvement Bonds of 1988 were issued to provide permanent financing for the
Temporary Improvement Bonds of 1985 and to finance Ash Street and Main Street improvements.
The remaining assets in the Temporary Improvement Bonds of 1985 were transferred into the 1988
Improvement Bonds Debt Service Fund in 1988. Final maturity of these bonds is scheduled for
February 1, 1997.
City of Lino Lakes, Minnesota
Management Report, Page 27
1988 Temnorary Improvement Bonds
The City issued these bonds to finance Erickson's 2nd Addition, Phase 2 and South Reshanau
Phase 2 Improvements.
1989 Tenmorary Improvement Bonds
The City issued these bonds to finance Reshanau Phase 2B and 3A, West Central Sewer and
Water Trunk, Sunrise Meadows, and Carlson Improvements.
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 28
CAPITAL PROJECT FUNDS
The financial statements for the Capital Project Funds are presented in Statements 10 and 11 of
the 1989 Annual Financial Report. Pursuant to changes in reporting standards, the Capital Project
Fund type now includes special assessment projects.
The fund balances (deficits) of the Capital Project Funds at December 31, 1989 and 1988 are
presented on the following page.
City of Lino Lakes, Minnesota
Management Report, Page 29
Rmd
Pam and playgrounds
Capital Improvement Projects
Community Development Block Grant
Lakes Addition #7
Main Strut
We Shadow Lake Drive
80th Street
Ash Street Bast Extensicn
Otter Bay
We Central Sewer & Water Trunk
1160 Main
2nd Avenue
Lakes Addition #9
Carlson
Pine Oaks Revision
Sunrise Meadows
Paul Montain
Reshanau 3rd
Area Correction Charge
Tax Increment #1 -1
Tax Inaeme t #1 -2
Ash Street Sewer
Financed by the Improvement Bonds
of 1983:
Baldwin Lake Mobile Home Court
Financed by the Improvements Bonds
of 1984:
Roiling Road
Financed by the Temporary Improvement
Bads of 1985:
Rice Lake Estates
Financed by the Improvements Bonds
of 1986:
Sunset Road
Rmanced by the Temporary Improvanau
Bonds of 1987:
4th Avenue
North Road
Deer Pau Trail
Comprehensive Area Wide Water
Reshanau Lake Estates South
Brickson'a
Financed by the Temporary Improvement
Bonds of 1988:
Erickson's 2nd
Reshanau 2nd
1983 Construction
1987 Construction
1988A Construction
1988B Construction
1989 Construction
Tax I c emau #1 -3
Tax Mamas #1-4
Interim Construction
Surface Water Management
Totals
1
1
Fund Balance (Deficit)
December 31, blame
1989 1988 (Decease)
201,209 151,454 $49,755
158,663 60,059 98,604
(2,863) (2,241) (622)
0 0 0
O 4,776 (4,776)
O (10,819) 10,819
O (18,563) 18,563
0 (7,512) 7,512
0 (1,856) 1,856
O (49,961) 49,961
O (11,324) 11,324
0 (46,170) 46,170
O (763) 763
0 (10,580) 10,580
0 (4,856) 4,856
0 (19,438) 19,438
O 701 (701)
O (3,310) 3,310
215,374 24,747 190,627
145,808 50,096 95,712
(7,536) (6,313) (1,223)
O 73,455 (73,455)
O 18,028 (18,028)
0 (2834) 2,834
O 369,827 (369,827) 1
0 162,748 (162,748)
II
0 5,431 (5,431)
0 0 0
0 0 0
O 151,170 (151,170)
0 75,787 (75,787)
0 49,214 (49,214)
O 60,079 (60,079)
0 47,125 (47,125)
21,607 0 21,607
135,944 0 135,944
164,461 0 164,461
241,299 0 241,299
1,517,794 0 1,517,794
(10,772) 0 (10,772)
(3,279) 0 (3,279)
(116,795) 0 (116,795)
(26,828) 0 (26,828)
1
82,634,086 81,108,157 81,525,929
1
City of Lino Lakes, Minnesota
Management Report, Page 30
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 $79,275 of park dedication fees in 1989. The fund balance of $201,209 at
December 31, 1989 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). The amount of these park dedication fees receivable
was $5,060 for the past five years. We recommend that the City determine the collectibility of
these park dedication fees receivable.
Capital Improvements Projects Fund
The 1987 and 1989 Certificates were issued to finance the acquisition of equipment for various
departments of the City. The following schedule reflects the budget and actual expenditures for
these certificates.
Description
Turf Mower /Snow Broom
Two Squad Cars
Two Radar Units
Front End Loader (partial)
Civil Defense Siren
Description
Police Car
Fire Equipment
Loader with Plow
Street Sweeper
Two -way Radios (4)
Blueprint Machine
Fueling Station
Brush Chipper
1987 Certificates
1988 -1989
Budget Actual
$15,000 $7,967
23,000 26,452
2,500 0
20,000 20,000
13,000 12,921
$73,500 $67,340
Variance
$7,033
(3,452)
2,500
0
79
$6,160
1989 Certificates
1989
Budget Actual Variance
$13,000 $13,079 ($79)
92,000 0 92,000
80,000 86,015 (6,015)
85,000 70,536 14,464
2,800 2,379 421
1,800 1,225 575
8,000 0 8,000
11,000 13,500 (2,500)
$293,600_ $186,734 $106,866
City of Lino Lakes, Minnesota
Management Report, Page 31
The following schedule summarizes the activity of this fund through December 31, 1989.
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
Interest earnings 32,708
Property taxes 14,491
Transfer from Debt Service Fund 2,390
Total revenue and other sources
$647,315
Expenditures:
1981 -1988 272,805
1989 215,847
Total expenditures 488,652
Fund Balance - December 31, 1989 $158,663
After the scheduled purchases of equipment are made in 1990, the remaining fund balance
should be closed to the 1989 Certificates of Indebtedness Debt Service Fund (or be expended on
qualifying equipment purchases).
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 in reimbursement of City expenditures.
City of Lino Lakes, Minnesota
Management Report, Page 32
The CDBG allotments for 1982 to 1985 were appropriated for the Alexander House and the
Senior Citizen Facility. Anoka County allocated additional CDBG amounts for the City in 1987 to
subsidize sewer improvements of low cost housing. The terms of the allotment are such that the
City has paid CDBG proceeds to Debt Service Funds of the City to retire outstanding assessments.
The City has designated its allotment for the funding year 1989/1990 as follows:
Alexander House $ 2,500
Senior Center Coordinator 4,500
Rise Inc. 2,500
Economic Development 17,037
Connection and Area Charge Fund
On January 11, 1988 the City Council approved Resolution 1 -88 which established the
Connection and Area 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 connection and area assessments needed to meet debt requirements. We
recommend that the City monitor actual versus projected connection charge and area assessment
collections to assure that debt payment requirements will be met.
This fund will eventually account for connection charges and area assessments for funding of
various debt issues. The City has amended collection procedures.
The City intends to retire debt from the various connection and area 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.
City of Lino Lakes, Minnesota
Management Report, Page 33
A schedule of transactions of this fund from inception is as follows:
Prior 1989 1989
Yeas Collections Interest Total
Revenue and other sources:
Area and connection charges:
Temporary Bonds of 1987 $24,747 $17,454 $265 $42,466
Temporary Bonds of 1988 140,792 2,138 142,930
Temporary Bonds of 1989 36,222 550 36,772
Total revenue and other sources 24 ,747 194,468 2,953 222,168
Expenditures and other uses:
Professional services 0 6,794 0 6,794
Net increase in fund balance $24,747 $187,674 $2,953 215,374
Fund balance - January 1, 1988 0
Fund balance - December 31, 1989 $215,374
Designations of balances by bond issue and connection/area 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 connection charge portion of the assessment roll, however, is governed by the City's policy
which was established by Resolution #1 -88. Such connection and area charges are contingently
pledged to the related debt service fund in accordance with this policy. These amounts are to be
segregated to the Connection and Area Charge Fund and such amounts are transferred on an as
needed basis to the related debt service fund. Any surplus accruing above the amount required to
retire bonds will be available for expansion of the core water and sewer systems of the City.
During 1989 the City amended its procedure relative to adoption of assessment rolls. The
amended procedure requires the City split assessment rolls between the Area and Connection Fund
and the related Debt Service Fund.
During 1989, the City recertified the assessments for Erickson's Phase II relating to the 1987
Temporary Improvement Bonds. The assessments relating to Reshanau 2nd phase improvement
City of Lino Lakes, Minnesota
Management Report, Page 34
project were substantially prepaid prior to the City's re- certification of assessments to the County.
Therefore, all of the area and connection charges relating to this project have been allocated to the
Temporary Bonds of 1987 debt service fund.
The Temporary Improvement Bonds of 1987 were the first issue to rely on connection charges
pursuant to the new connection and area charge policy. A summary of anticipated connections is
as follows:
Year of
Collection
1989
Source
Erickson & Uhde
Replat
Or
Total
Assessment
1990 Erickson & Uhde
RePlat
Other
Total
Assessment
1991 Erickson & Uhde
Other
Total
Assessment
Estimated
Connection Charges
Water @ Sewer @
$1,050 $650
70 70
6 6
20 20
96 96
$100,800 $62,400
Area Charges
Water @ Sewer @
$800 $750 Total
70 70
6
76 70
$
$....6.52 500 $27 500
Connection Charges Area Charges
Water @ Sewer @ water @ Sewer @
$1,103 $683 $840 $788
55 55
42 42
26 26
123 123 103 97
55 55
42 42
6
$135,669 $84,009 $86,520 $76,436 138
Connection Charges
Water @ Sewer @
$1,158 $717
55 55
40 40
95 95
$110,010 $68,115
Area Charges
Water @ Sewer @
$882 $827
55 55
40 40
95 95
$83,790 $78,565 $340,480
In September of 1990 the City will have to obtain permanent financing for the Temporary
Improvement Bonds of 1987. Collection of actual area and connection charges should be
compared to the above scheduled collections to assure that projections are being met prior to
obtaining permanent financing. Our office is available to assist city staff in obtaining this
information.
City of Lino Lakes, Minnesota
Management Report, Page 35
Surface Water Management Fund
This fund was established in 1989 to account for the financing of surface water management
planning and storm sewer trunk lines. We recommend that assessment of costs associated with
surface water management are segregated to allow for allocation to this fund.
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 #1 -1 has
anticipated projects/bonding requirements as follows:
Planning and Improvements $974,094
Legal, Planning, Fiscal and Contingency 25,000
Capitalized Interest and Bond Discount 216,404
Estimated Bond Issue $1,215,498
The above bonding was estimated for the Rice Lake Estates special assessment project. That
project is now complete. The tax increments generated from the Housing District will be available
to subsidize debt service (if required) or will be available for future extensions of the overall
construction within the District.
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 $1,250,920. 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.)
City of Lino Lakes, Minnesota
Management Report, Page 36
Financial activity of this fund from inception is as follows:
Prior
Years 1989 Total
Revenue and other sources:
Tax increments $49,808 $82,798 $132,606
Homestead Credit 90 8,593 8,683
Interest on investments 198 5,261 5,459
Total revenue and other sources 50,096 96,652 146,748
Expenditures and other uses:
Professional services
0 940 940
Net increase in fund balance $50,096 $95,712 145,808
Fund balance - January 1,1988 0
Fund balance - December 31, 1989 $145,808
The tax increment plan also includes an annual administrative fee. 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 required 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.
City of Lino Lakes, Minnesota
Management Report, Page 37
The City received initial tax increments of .$49,808 in 1988. In 1989 the City had tax
increment collections of $82,798. Additionally, this fund had as of December 31, 1989, $58,987
of delinquent tax increments.
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:
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
Capitalized interest and bond discount 220.000
Total $975,000
The City established Tax Increment District #1 -3 during 1989 by resolution 68 -89.
District #1 -3 has anticipated project requirements as follows:
Land acquisition
Administrative expenses
$200,000
22.000
Total $222,000
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 is in the process of establishing Tax Increment District #1-4. This district will qualify
as a Economic Development TIF district.
Part of required annual financial disclosure with the State of Minnesota is to include in the
annual financial report specific information regarding tax increment financing districts. Part of that
required information is the original value of the district which is used to calculate the captured value
City of Lino Lakes, Minnesota
Management Report, Page 38
as development is completed and property values increase. Part of the process is to certify the tax
increment financing district with Anoka County to freeze the original value of the district. Delays
in certifying the district may have adverse affects on subsequent captured valuation formulas (i.e.,
if the original value goes up for interim improvements, the original value of the district will be
higher, and therefore, the captured value which generates tax increments will be lower). We
recommend that the City review procedures to assure timely certification of tax increment districts
in accordance with financial projections.
The City approved Tax Increment District #1-4 and certified it with the County in 1990.
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 1989 Annual Financial Report.
The fund balance of this fund was a deficit of $116,795 at December 31, 1989. 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. During 1989, the City received federal funding for the 80th Street
project. We recommend that the City review the grant agreement for federal audit requirements
(program audit, single audit).
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 is carrying a liability to MWCC for sewer availability
charges of $24,403. We recommend that the City remit this money to MWCC in 1990.
This project was complete at December 31, 1986. We recommend that this fund be closed in
1990 to the Improvement Bonds of 1983 debt service fund. Council authorization is required to
effect this closing.
City of Lino Lakes, Minnesota
Management Report, Page 39
1987 Construction
This fund accounts for the various projects financed by the Temporary Improvement Bonds of
1987. The fund balance of this fund was $135,944 at December 31, 1989 of which approximately
$36,790 is designated for the final bituminous wearing surface.
1988A Construction
This fund accounts for the various projects financed by the Permanent Improvement Bonds of
1988. The fund balance of this fund was $164,461 at December 31, 1989 which is designated for
the fmal bituminous wearing surface.
1988B Construction
This fund accounts for the various projects financed by the Temporary Improvement Bonds of
1988. The fund balance of this fund was $241,299 at December 31, 1989 of which a portion is
designated for the final bituminous wearing surface. We recommend the City obtain estimated
amounts for final paving and transfer 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 $1,517,794 at December 31, 1989. The projects are
scheduled for completion in 1990.
City of Lino Lakes, Minnesota
Management Report, Page 40
ENTERPRISE (UTILITY FUND)
The financial statements for the Enterprise Fund are presented in Statements 12 through 14 of
the 1989 Annual Financial Report. Condensed comparative statements of income and expense for
the years 1989 and 1988 for the combined fund are shown in the following schedule.
Operating Income:
Water billings
Sewer billings
Other
Total operating income
Operating Expenses:
Personal services
MWCC
Repairs and maintenance
Depreciation
Other
Total operating expenses
Income (loss) from operations
Other income/(expenses):
MWCC maintenance agreement
Net income/(loss)
For The Year Ended December 31,
1989 1988
Amount Percent Amount Percent
$72,238 39.78% $43,708 34.13%
82,408 45.38% 69,873 54.55%
26,942 14.84% 14,498 1132%
181,588 100.00% 128,079 100.00%
35,549 19.58% 34,966 27.30%
50,531 27.83% 36,025 28.13%
35,798 19.71% 17,135 1338%
769 0.42% 813 0.63%
29,671 16.34% 13,063 1020%
152,318 83.88% 102,002 79.64%
29,270 16.12% 26,077 2036%
10,656 7,319
$39 926 $33,396
The City reviewed water and sewer rates and increased rates effective July 1,1988 and January
1, 1989.
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 1979 through 1990 have been as follows:
Billings from MWCC
Estimated Final
Percent Percent
Year Amount _Char_ ge Amount Change
1979 $8,312 133.50% $6,171 68.50%
1980 6,858 (17.49)% 7,123 15.43%
1981 11,357 65.60% 10,213 43.38%
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% N/A N/A
1990 67,232 29.05% N/A N/A
$70,000
S65,000
$60,000
$55,000
$50,000
$45,000
$40,000
$35,000
$30,000
$25,000
$20,000
515,000
$10,000
$5,000
$0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990
Estimated Billings 0 Actual Billings
The above schedule indicates that MWCC billing increases have been substantial over the past
several years.
1
1
1
1
1
1
1
II'
II'
1
t
1
1
1
1
1
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 1990 estimated flow for
the City of Lino Lakes by 18%.
2. Increased cost to process sewage. The MWCCs cost to process (per million gallons)
increased to an estimated $1,034 in 1990 from an estimated $947 in 1989. This
represents an increase of 9.1%.
The combination of the above factors has increased the City's estimated cost in 1990 by nearly
29%. The MWCC has approved a change in the district structure and will be converting rates and
other operating procedures over the next several years. We recommend that the City monitor the
effects of these changes and consider such changes on the City's sewer rates.
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 should then be
transferred to an appropriate fund which financed (or will finance) such improvement. No such
transfer was made in 1988 or 1989.
Resolution #31 -88 approved the above increase in sewer and water rates. The resolution states
effective rates as of July 1, 1988 and then a subsequent adjustment as of January 1, 1989. The
resolution has a flat fixed rate for sewer and both a variable and a fixed user fee for water. The
resolution does not however specify the amount which represents the charge related to core system
improvements. We recommend that the City adopt a subsequent clarifying resolution which
specifies the amount of Enterprise Fund revenue which is to be collected for core system
improvements and specify the timing of the transfer of such revenues to the appropriate fund which
financed such improvements.
City of Lino Lakes, Minnesota
Management Report, Page 43
AGENCY FUNDS,
At December 31, 1989, the City had three Agency Funds as follows:
• Contractor's Deposits
• 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 Investment Fund is designed to pool all available cash balances of the City to maximize the
investment efficiency of the City. Interest is allocated to funds annually based on the average cash
balance of the participating funds.
The Deferred Compensation Fund was established in 1987 in response to the issuance of the
Governmental Accounting Standards Board (GASB) Statement No. 2. GASB Statement No. 2
requires deferred compensation plans adopted under the provisions of Internal Revenue Code
Section 457 to be included in the City's annual financial report.
City of Lino Lakes, Minnesota
Management Report, Page 44
FRANCHISE AGREEMENT - GAS UTILITY
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:
Residential and Commercial Revenue
Interruptible Service
Total
1989 1988
$141,363 @ 7% =
111,977 @ 3% =
$25.
$9,895
3,359
13,254
Remitted by Circle Pines 13,052
Difference
$136,728 @ 7% = $9,571
83,363 @ 3% = 2,501
$220,091 12,072
11,875
$202 $197
The above 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 $3,400 in 1989 and $2,700 in 1988. 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
Increase/ (Decrease)
Commercial Total
Increase / (Decrease) Increase / (Decrease)
Year Amount Amount Percent Amount Amount Percent Amount Amount Percent
1981 $67,387 816,526 $83,913
1982 88,195 820,808 30.88 % 18,781 $2,255 13.65 % 106,976 823,063 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 .76 % 23,829 1,351 6.01 % 120,836 2086 1.76 %
1985 102,156 5,149 531 % 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 4,635 339 %
City of Lino Lakes, Minnesota
Management Report, Page 45
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 %
The City of Lino Lakes has 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 $700,000
while the Lino Lakes retained earnings is in a deficit position.
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.
City of Lino Lakes, Minnesota
Management Report, Page 46
The new franchise agreement will provide 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. Cancellable 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 $13,052 in March, 1990 which represents the 1989 share of earnings.
Earnings from inception of the new agreement total $34,542. 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 47
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 1989 disclosed no material deficiencies in the City's system of internal controls not identified in
this report or past reports to the City Council.
We have audited the financial statements of the City of Lino Lakes, Minnesota
as of and for the year ended December 31, 1989, and have issued our report
thereon dated June 6, 1990.
We conducted our audit in accordance with generally accepted auditing
standards. 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, 1989, 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 judgements 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.
City of Lino Lakes, Minnesota
Management Report, Page 48
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. However, our consideration of the internal control structure
disclosed the following conditions that we believe to be material weaknesses at
December 31,1989. 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.
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.
Section 89
The Tax Reform Act of 1986 created qualifications and discrimination provisions for employee
benefit plans under Section 89. The legislation requires: 1) employee notification of essential
features of plans; 2) a "written plan" for which a definition has not yet been provided; and, 3)
testing for discrimination between "highly compensated" employees and other employees.
Regulations have been repealed.
Forfeiture of Property - Public Safety
The 1988 legislature passed laws which allow local police departments to seize property which
is used during a crime associated with controlled substances. There is a variety of rules and
regulations included in Minnesota Statutes Section 609.53 related to circumstances under which
property may be forfeited and procedures regarding disposition of forfeited property. There are
several areas which may impact the financial accounting records of the City, as follows:
1. Certain property may be retained by the law enforcement agency for official use by
the agency or prosecuting agency. Under certain circumstances, the City may be
required to add these assets to any fixed assets records which the City retains
including insurance of such property.
2. 70% of the money or proceeds from the sale of the forfeited property may be retained
by the City for use in its operating fund or similar fund for use in law enforcement.
Certain other amounts must be forwarded to the County Attorney or other prosecuting
agency and 10% must be forwarded to the State Treasury for crime victim and
witness account.
City of Lino Lakes, Minnesota
Management Report, Page 49
We recommend that the City's Finance Department coordinate with the Police Department to
determine procedures to properly account for any property forfeited pursuant to the preceding
statute. And any other such monies which might be donated to the City's Police Department.
Budgeting
We recommend that in conjunction with the computer acquisition that budgeting practices be
reviewed and automated on the new system.
Utility Billing System
During 1989 the City did not reconcile utility payments from the utility system to the general
ledger. During our examination of the utility billing system, it was discovered there is no
documentation of billing adjustments. We recommend that the City establish written procedures
regarding adjustments.
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. We recommend that the City continue to review the system and improve
reconciliation procedures.
City of Lino Lakes, Minnesota
Management Report, Page 50
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
The utility billing system, payroll and word processing have been implemented.
The City is in the process of converting its general ledger accounting functions to the new
system. The conversion process should be completed in mid 1990. This new system enhances the
City's ability to produce interim financial reports useful for managing the City. Efforts required to
close the financial records will be reduced once the conversion process is complete.
We recommend the City examine the benefits of integrating the utility billing system and the
payroll 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.
City of Lino Lakes, Minnesota
Management Report, Page 51
SUMMARY
During 1990, we recommend that the City:
• Continue the practice of minimal cash balances in the City's checking account. (Page
10)
• Consider requesting MSA receipts during periods in which the City does not have
qualifying MSA construction projects. (Page 11)
• Monitor the collection rate and provide supplemental financing if assessment collections
are not adequate to meet bonded debt payments. (Page 14)
• Consider alternate procedures relative to assessing City property. (Page 14)
• Request improved data from the County in regards to assessment collections. (Page 14)
• Review coordination procedures with the County to avoid underpayment of
assessments. (Page 15)
• Oppose the State's proposed method of targeting aid reductions to cities. (Page 20)
• Continue to monitor the reserve balance of the General Fund. (Page 22)
• Calculate the appropriate charge for the 1989 aerial maps and transfer such amounts in
1990. (Page 22)
• Continue efforts to monitor arbitrage compliance. (Page 27)
• Determine the collectibility of old park dedication fees receivable. (Page 30)
• Monitor actual versus projected connection charges and area assessment collections to
assure that debt payment requirements will be met. (Page 32)
• Segregate the assessment of costs associated with surface water management to allow
for allocation to the Surface Water Management Fund. (Page 35)
• Correct the inconsistency relating to the Housing District #1 -1 Financing Plan. (Page
35)
• Determine the City's position with regard to the Tax Increment Plan annual
administrative fee. (Page 36)
• Include a bond provision which allows tax increment collections to be receipted directly
to the Economic Development District #1 Capital Project Fund. (Page 36)
• Review procedures to assure timely certification of tax increment districts in accordance
with financial projections. (Page 38)
• Review the status of the various projects in the interim construction fund and determine
financing sources to eliminate the fund deficit. (Page 38)
• Review the 80th Street grant agreement for federal audit requirements. (Page 38)
City of Lino Lakes, Minnesota
Management Report, Page 52
• Remit to MWCC sewer availability charges for the Baldwin Lake Mobile Home Court in
1990. (Page 38)
• Close the 1983 Construction Fund into the Improvement Bonds of 1983 debt service
fund. (Page 38)
• Obtain estimated amounts for final paving and transfer the remaining balance of the
1988B Construction Fund to the Temporary Improvement Bonds of 1988 debt service
fund. (Page 39)
• Monitor structure changes and increased billings from the MWCC. (Page 42)
• Adopt a clarifying resolution relating to Enterprise fund revenue which is to be collected
for core system improvements. (Page 42)
• Continue to monitor the City of Circle Pines' gas utility operation. (Page 44)
• Coordinate the City's finance department with the police department to determine
procedures to properly account for any property forfeited pursuant to Minnesota State
Statutes 609.53. (Page 49)
• Review and automate budget practices in conjunction with the computer acquisition.
(Page 49)
• Establish written procedures regarding utility billing adjustments. (Page 49)
• Continue to review and improve reconciliation procedures for developer deposits. (Page
49)
• Examine the benefits of integrating the utility billing system and the payroll system into
the general ledger accounting system. (Page 50)
Respectfully submitted,
l64t-4°6‘"A
VOTO, TAUTGES, REDPATH & CO., LTD.
Certified Public Accountants
June 15, 1990