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CITY OF LINO LAKES, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2012 21 ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES  The unemployment rate for the City of Lino Lakes at year-end is 5.6%, which is a decrease from a rate of 5.9% a year ago. This is slightly higher than the state’s average unemployment rate of 5.4% and significantly lower than the national average of 7.6% at the end of 2012.  Residential growth in the City has continued to be significantly below the rates of the mid 2000’s due to the general residential real estate market w eakness, with about one-fourth the number of new home permits issued in 2012 as in 2007, and less than 87% of new home permits issued in 2005. This is expected to level off in 2013, with hopes of the beginning of a recovery of the housing market. This, as well as falling property values of the exis ting tax base, will continue to have an impact on the City’s tax base for 2013.  Energy costs, while relatively stable in recent months, are expect ed to continue to increase over the coming months. This will have an impact on the Ci ty’s budget for the coming year and thereafter.  Property tax reforms and State budget deficits have significantly impac ted state aid payments the City of Lino Lakes receives. Local government aid and market value homestead credit was reduced to zero for 2003 and 2004-2011. The City is exempt ed from local government aid and the state legislature has discontinued the market value hom estead credit in favor of a new market value exclusion, which excludes a portion of residentia l homestead property value from property taxes.  The Federal Reserve Board has continued the federal funds rates at historical lows, currently to between 0.00% – 0.25%, which is expec ted to result in sizable decreas es in the City’s investment earnings. REQUESTS FOR INFORMATION This financial report is designed to provide a general over view of the City of Lino Lakes’ finances for all of those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for addi tional financial information should be addressed to the Director of Finance, City of Lino Lakes, 600 Town Cent er Parkway, Lino Lakes, Minnesota, 55014.