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CITY OF HUGO, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS (CONTINUED) <br />1. Summary of Significant Accounting Policies (Continued) <br />D. Assets, Liabilities, Deferred Inflows of Resources, and Net Position or Equity (continued) <br />7. Fund equity (continued) <br />The City uses restricted/committed amounts to be spent first when both restricted and <br />unrestricted fund balance is available unless there are legal documents/contracts that <br />prohibit doing this, such as a grant agreement requiring dollar for dollar spending. <br />Additionally, the City would first use committed, then assigned and lastly unassigned <br />amounts when expenditures are made. <br />E. Concentration of Credit Risk <br />Financial instruments which expose the City to a concentration of credit risk consist primarily of <br />cash, investments and accounts and loans receivable. Credit risk associated with cash and <br />investments is discussed in Note 3. The City's accounts and loans receivable are concentrated <br />geographically, and for the most part, amounts are due from individuals residing in and <br />businesses located in the City of Hugo. <br />F. Use of estimates <br />The preparation of financial statements in accordance with accounting principles generally <br />accepted in the United States of America (GAAP) requires management to make estimates that <br />affect amounts reported in the financial statements during the reporting period. Actual results <br />could differ from such estimates. <br />G. Conduit Debt Obligations <br />The City has issued a Tax Increment Revenue Note to provide financial assistance to private - <br />sector entities for the acquisition and construction of industrial and commercial facilities deemed <br />to be in the public interest. The note is secured solely by tax increments. Neither the City, the <br />State, nor any political subdivision thereof is obligated in any manner for repayment of the note. <br />Accordingly, the note is not reported as a liability in the accompanying financial statements. <br />The outstanding principal balance of the note as of December 31, 2016 was $187,963. <br />Additionally, the City issued lease revenue bonds during 2014 to provide funding to a private <br />sector entity for a project deemed to be in the public interest. Although these bonds bear the <br />name of the City, the City has no obligation for such debt. Accordingly, the bonds are not <br />reported as liabilities in the financial statements of the City. As of December 31, 2016, the <br />outstanding principal amount of these bonds was $20,985,000. <br />fit <br />