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CITY OF LINO LAKES, MINNESOTA <br />MANAGEMENT'S DISCUSSION AND ANALYSIS <br />DECEMBER 31, 2015 <br />ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES <br />• The unemployment rate for the City of Lino Lakes at year-end is 3.3%, which is a great improvement <br />from a rate of 4.5% in 2013. This is slightly lower than the state's average unemployment rate of <br />3.7% and significantly lower than the national average of 5.0% at the end of 2015. <br />• Residential growth in the City has continued to be significantly below the rates of the mid 2000's due <br />to the general residential real estate market weakness, with about half of the number of new home <br />permits issued in 2015 as in 2007, and less than 76% of new home permits issued in 2005. This is an <br />improvement over recent years. Recently increased building and development activities are signalling <br />a recovery of the housing market. Property values of the existing tax base are expected to increase <br />slightly and will continue to have an impact on the City's tax base for 2016. <br />• Energy costs are expected to continue to remain steady or slightly increase over the coming months. <br />This will have an impact on the City's budget for the coming year and thereafter. <br />• Property tax reforms have significantly impacted state aid payments the City of Lino Lakes receives. <br />The City is exempted from local government aid and the state legislature has discontinued the market <br />value homestead credit in favor of a new market value exclusion, which excludes a portion of <br />residential homestead property value from property taxes. <br />• The Federal Reserve Board has continued the federal funds rates at historical lows, currently <br />between 0.25% — 0.50%, which is expected to result in reduced investment earnings. <br />REQUESTS FOR INFORMATION <br />This financial report is designed to provide a general overview of the City of Lino Lakes' finances for all of <br />those with an interest in the government's finances. Questions concerning any of the information provided <br />in this report or requests for additional financial information should be addressed to the Director of <br />Finance, City of Lino Lakes, 600 Town Center Parkway, Lino Lakes, Minnesota, 55014. <br />21 <br />