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CITY {)FELK RIVER, MINNESOTA <br />NOTES TDFINANCIAL STATEMENTS <br />DECEMBER 31'2800 <br />Note 15: RISK MANAGEMENT <br />The City isexposed tovarious risks nfloss related to tor��theft ufdamage to and destruction Pfassets; <br />errors and omissions; injuries to employees� and natural disasters for which the City carries insurance. <br />The City obtains insurance through: participation in the League of Minnesota Cities Insurance Trust <br />(LMCIT) which is a risk sharing pool with approximately 800 other governmental units. The City pays <br />anannual premium hoLK4C|Tfor its workers compensation and property and casualty insurance. The <br />LK4C|Tis self-sustaining through member premiums and will reinsure for claims above a prescribed <br />dollar amount for each insurance event. Settled claims have not exceeded the City's coverage |nany of <br />the past three fiscal years. <br />Liabilities are reported when it is probable that akoss has occurred and the amount of the loss can be <br />reasonabiyastimnated. Liabilities, if any, include an amount for claims that have been incurred but not <br />reported (IBNRs). The City's management is not aware of any incurred but not reported claims. <br />Note 16: TERRITORIAL ACQUISITION AGREEMENT <br />The Utilities has entered into an agreement to transfer ownership of electric plant and electric service to <br />customers in certain areas currently receiving electric service from Connexus Energy. <br />The cost ofproperty purchased from Connexus Energy will benet book value. The Utilities will also pay <br />for loss of revenue for each area acquired based on a formula outlined in the agreement. <br />In addition, the Utilities will compensate Connexus Energy for the loss of revenue from the future saie of <br />electricity toelectric customers in the areas acquired from Connexus Energy for a period of ten years <br />from the date ofsale ofeach individual area. <br />During 288Oand 1QAQ'the Utilities paid $3O2.80&and $339.3G2.respectively, under this agreement, <br />including $285,170 in 2000 and $287.336 in 1999 for loss of revenues. All amounts paid are inoKuded in <br />property and equipment. <br />33 <br />