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CITY OF CENTERVILLE, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2012 Note 6: OTHER INFORMATION A. Risk management The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters for which the City carries insurance. The City obtains insurance through participation in the League of Minnesota Cities Insurance Trust (LMCIT), which is a risk sharing pool with approximately 800 other governmental units. The City pays an annual premium to LMCIT for its workers compensation and property and casualty insurance. The LMCIT is self - sustaining through member premiums and will reinsure for claims above a prescribed dollar amount for each insurance event. Settled claims have not exceeded the City's coverage in any of the past three fiscal years. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The City's management is not aware of any incurred but not reported claims. B. Legal debt margin In accordance with Minnesota statutes, the City may not incur or be subject to net debt in excess of 3 percent of the market value of taxable property within the City, Net debt is payable solely from ad valorem taxes and, therefore, excludes debt financed partially or entirely by special assessments, Enterprise fund revenues or tax increments. The market value of taxable property is $312,695,800 which leaves a debt margin of $9,380,874. Currently the City has $1,024,980 of general obligation debt outstanding, leaving a debt margin of $8,355,894. C. Tax increment districts The City is the administering authority for tax increment financing district No. 1 -6. The district is a redevelopment district established in 2005. The property in the district is tax exempt; therefore there is no tax capacity. The City's tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. Management has indicated that they are not aware of any instances of noncompliance which would have a material effect on the financial statements. -69- 89