2009 CAFR - Laserfiche WebLink

Home

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) S. Self-Insurance Plan and 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; and natural disasters. The City participates in the League of Minnesota Cities Insurance Trust (LMCIT), a public entity risk pool for its general property and casualty, workers' compensation, and other miscellaneous insurance coverages. LMCIT operates as a common risk management and insurance program for a large number of cities in Minnesota. The City pays an annual premium to LMCIT for insurance coverage. The LMCIT agreement provides that the trust will be self-sustaining through member premiums and will reinsure through commercial companies for claims in excess of certain limits. The City has elected higher deductibles through LMCIT in order to keep premiums at a minimum. To supplement the commercial coverages, the City established the Self-Insurance Internal Service Fund. This fund is funded primarily through dividend paybacks from LMCIT. Expenditures from this fund consist solely of payments of those insurance related costs that are below the individual and/or commutative deductible amounts. Premiums for LMCIT policies are not paid from the Self-Insurance Internal Service Fund, but rather are budgeted and paid from the respective operating funds. The City does not retain significant uncovered risk. The City also carries commercial insurance for certain other risks of loss. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. There were no significant reductions in the City's insurance coverage in 2009. T. Loans payable to Met Council The City entered into a loan agreement with the Metropolitan (Met) Council to acquire property within the proposed right-of-way of highways designated as a part of the metropolitan highway system plan. State Highway 10, within Ramsey, is part of that highway system plan. The loans bear no interest, and are to be repaid upon the acquisition of the property by the State of Minnesota. U. Special Item The City experienced a special item in 2009. The City purchased 150 acres of Ramsey Town Center land. Prior to this purchase, the City had incurred special assessment costs of $5,851,196 which had been offset as deferred revenue. As part of the purchase agreement, those costs were assumed by the City and along with the purchase price are considered in the value of land held for resale. The entire balance of land held for resale is reserved as required under modified accrual accounting. The impact of removing the deferred revenue from the modified accrual governmental fund statements in place of a reservation of fund balance has been reported as a special item for $5,851,196. V. Use of Estimates The preparation of financial statements, in accordance with accounting principles generally accepted in the United States of America, requires management to make estimates that affect amounts reported in the financial statements during the reporting period. Actual results could differ from such estimates. W. Change in Accounting Principle The City implemented Governmental Accounting Standards Board (GASB) Statement No. 45, "Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions," during the year ended December 31, 2009. This statement provides new guidance on accounting and financial reporting for "other post-employment benefits" (OPEB) accounted for in financial statements of plan sponsors and employers. OPEB refers to non-pension benefits provided after -36-