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I I. Note 1: I I I I I I I I. I I I I I . I .. I CITY OF ARDEN HILLS, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31,1998 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED The Special Revenue funds account for revenue sources that are legally restricted to expenditures for specified purposes (not including major capital projects). The Debt Service fund accounts for the servicing of general long-term debt not being financed by proprietary funds. The Capital Projects funds account for the acquisition of fixed assets or construction of major capital projects not being financed by proprietary funds. Proprietary funds are accounted for on the flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. The City applies all applicable F ASB pronouncements issued on or before November 30, 1989 in accounting and reporting for its proprietary operations. Proprietary funds include the following fund type; Enterprise funds and used to account for those operations that are financed and operated in a manner similar to private business or where the Council has decided that the determination of revenues earned, costs incurred and/or net income is necessary for management accountability. Account Groups. The general fIXed assets account group is used to account for fixed assets not accounted for in proprietary funds. The general long-term debt account group is used to account for general long-term debt and certain other liabilities that are not specific liabilities of proprietary funds. C. Assets, Liabilities and Equity Deposits and Investments The City's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. State statutes authorize the City to invest in obligations ofthe U.S. Treasury, commercial paper, corporate bonds, repurchase agreements and shares of investment companies registered under the Federal investment Company Act of 1940 and whose only investments are obligations guaranteed by the United States or its agencies. Investments are stated at fair value. Earnings on investments are allocated to the individual funds based upon the average of month-end cash and investment balances. Property Taxes The Council annuaJly adopts a tax levy and certifies it to the County for collection. The County is responsible for collecting all property taxes for the City. These taxes attach an enforceable lien on taxable property within the City on January I and are payable by the property owners in two installments. The taxes are collected by the County Auditor - Treasurer and tax settlements are made to the City during January, July and December each year. Taxes payable on homestead property, as defmed by State statutes, are partially reduced by a homestead and agricultural credit aid. The credit is paid to the City by the State of Minnesota in lieu of taxes levied against homestead property. The State remits this credit in two equal instaJlments in July and December each year. Delinquent taxes receivable include the past six years' uncollected taxes. Delinquent taxes have been offset by a deferred revenue liability for delinquent taxes not received within 60 days after year end. -12-