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CITY OF GEM LAKE, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2014 <br /> <br /> <br /> <br />(19) <br /> <br />NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />E. Cash and Investments (Continued) <br /> <br />Investments are stated at fair value as of the balance sheet date. Interest earnings are <br />accrued at the balance sheet date. <br /> <br />For purposes of the statement of cash flows the Proprietary Fund considers all highly <br />liquid investments with a maturity of three months or less when purchased to be cash <br />equivalents. All of the cash and investments allocated to the proprietary fund types have <br />original maturities of 90 days or less. Therefore, the entire balance in such fund types is <br />considered cash equivalents. <br /> <br />F. Prepaid Items <br /> <br />Certain payments to vendors reflect costs applicable to future accounting periods and <br />are recorded as prepayments. Prepaid items are reported using the consumption <br />method and recorded as an expense or expenditure at the time of consumption. That <br />portion of the relevant funds' balances equal to material prepaid items has been <br />segregated as nonspendable. <br /> <br />G. Property Tax Credits <br /> <br />Property taxes on homestead property (as defined by state statutes) are partially <br />reduced by property tax credits. These credits are paid to the City by the state in lieu of <br />taxes levied against homestead property. The state remits these credits through <br />installments each year. These credits are recognized as revenue by the City at the time <br />of collection. <br /> <br />H. Property Tax Revenue Recognition <br /> <br />The City Council annually adopts a tax levy and certifies it to the County in December <br />(levy/assessment date) of each year for collection in the following year. The County is <br />responsible for billing and collecting all property taxes for itself, the City, the local School <br />District and other taxing authorities. Such taxes become a lien on January 1 and are <br />recorded as receivables by the City at that date. Real property taxes are payable (by <br />property owners) on May 15 and October 15 of each calendar year. Personal property <br />taxes are payable by taxpayers on February 28 and June 30 of each year. These taxes <br />are collected by the County and remitted to the City on or before July 15 and <br />December 15 of the same year. Delinquent collections for November and December are <br />received the following January. The City has no ability to enforce payment of property <br />taxes by property owners. The County possesses this authority.