Comprehensive Annual Financial Report 12/31/2004

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Mma MIMI Imo City of Lino Lakes, Minnesota Management's Discussion and Analysis December 31, 2004 Additional information on the City's capital assets can be found in the notes to the financial statements on pages 33 -52. Long -term debt. At the end of the current fiscal year, the City of Lino Lakes had total debt outstanding of $20,049,000. Of this amount $5,764,000 comprises tax supported debt, $11,580,000 is special assessment debt and $2,705,000 is revenue supported debt. All outstanding debt carries the general obligation backing for which the city is liable in the event of default by the property owners subject to the specific taxes, special assessments or revenues pledged to the retirement of the debt. G.O. tax supported debt G.O. special assessment debt G.O. revenue debt Total Debt Outstanding at Year -end (in millions) Governmental Business -type Activities Activities Totals 2004 2003 2004 2003 2004 2003 $ 5.76 $ 6.03 11.58 12.84 $17.34 $18.87 2.71 $2.71 2.97 $2.97 $ 5.76 $ 6.03 11.58 12,84 2.71 2.97 $20.05 $21.84 The City of Lino Lakes' total bonded debt decreased by $3,130,000 (17 percent) during the current fiscal year. The key factor to the decrease was the refunding of the 1996A Improvement bonds that was called and retired in February, 2004. There was one new bond issued in the current fiscal year, a $1,330,000 improvement bond and utility bond, which is supported by special assessments levied upon benefited parcels. The City of Lino Lakes received an upgrade to an Al rating from Moody's Investors Service for general obligation debt. More detailed information on the City's long -term liabilities is presented in the notes to the financial statements. Additional information on the City's long -term debt can be found in the notes to the financial statements on pages 33 -52. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES: • The unemployment rate for the City of Lino Lakes is currently 5.0 percent, which is an increase from a rate of 4.3 percent a year ago. This compares favorably to the state's average unemployment rate of 5.0 percent and the national average of 6.0 percent. • The City of Lino Lakes continues to see increased commercial /industrial construction growth. Residential growth continues to be robust with an increase in the number of new home permits. • Property tax reforms and State budget deficits have significantly impacted local government aid payments the City of Lino Lakes receives. Local government aid and market value homestead credit was reduced to zero for 2003 and 2004, and are expected to remain at that level for the foreseeable future. • The Federal Reserve Board has begun to increase the fed funds rates, and interest rates are expected to increase over the next year, which are expected to result in increases in the city's investment earnings. 18