Comprehensive Annual Financial Report 12/31/2011

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Factors Affecting Financial Condition (Continued) In 2004, the City entered into an agreement with a master developer to develop 40 acres in the southeast quadrant of I -35W and Lake Drive. Called Legacy at Woods Edge, this mixed -use development is intended to include diverse opportunities for housing, retail and office uses. To date, the development includes the Lino Lakes Civic Complex (which houses the city hall and police station), the Chain of Lakes YMCA, a 60 -unit workforce housing project, 13,000 square feet of leasable commercial space, and an assisted living facility. The Civic Complex and YMCA provide a civic and community focus as part of the vision for Town Center. A workforce family housing and assisted living facility provide diversity in housing to underserved populations within the City. In 2006, the City placed a major focus on reconstruction of the 35W /Lake Drive interchange and completion of public improvements in Legacy at Woods Edge to accommodate planned development and completed the improvements by 2008. However, it became evident at the end of 2007 that development was stalling. The recession has had negative impacts on the Legacy development. Both the master developer and lender defaulted, sending the remaining 22 acres intended for townhomes and commercial uses into tax forfeit. However, the solid foundation that was built and strong interest by developers prior to the recession ensures that better economic times will once again bring the interest in residential and commercial growth needed to complete the vision. IN or IMMO Street, streetscape, water, sewer, and storm water improvements, as well as a small community park, have been installed within the development area and assessed to the development. This $11.1 million improvement was financed through the joint efforts of MNDOT, Anoka County and the City of Lino Lakes. The City has issued $4,215,000 in G.O. Tax Increment bonds and will use tax increment financing and Minnesota State Aid funds to finance its portion of the project cost. Once construction gains its footing again the City can assess the benefitting properties. The City continues to look for ways to resurrect the project and strives to be prepared to market the property when the economy recovers. Building activity and development continued to be soft in 2011, reflecting the nationwide market. Building permits for new homes in 2011 numbered 34, compared to 31 in 2010. This represents about 1/3 of the new home permits issued in 2007 and is down by approximately 83% from 2005. In anticipation of a strengthening economy, the City took the lead on developing the infrastructure needed to service future growth on the 35E /County Road 14 interchange area. A major reconstruction of the interchange completed a multi -year improvement of County Road 14 from Highway 61 in Hugo, through Centerville, to 35W in Lino Lakes. The City portion of the cost for this bridge reconstruction project is being financed through Anoka County, with the City issuing an initial $4.26 million General Obligation Note to the County. Due to cost savings in this project the Note was amended to $3.695 million in 2011. With both major interstate interchanges complete, the City is preparing for development of several hundred acres in the northeast quadrant of 35E/14. Interest in the commercial interchange has spurred planning for an extension of Otter Lake Road North, which will leave the City well poised to accommodate significant future industrial, commercial and residential development. 5