Comprehensive Annual Financial Report 12/31/2009

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Factors Affecting Financial Condition (Continued) A 12,582 square foot building was built by Schwan's in the Marshan Industrial Park on the southwest quadrant of I -35W and Lake Drive was completed in 2005, further contributing jobs and adding value to the city's growing commercial /industrial tax base. Construction of a two -story office building at the intersection of Lake Drive and Hodgson Road was completed in 2006 and will house E.G. Rud Surveyors and several other tenants. The City initiated an Alternative Urban Areawide Review (AUAR) in 2005 of more than 4,000 acres in the northeast quadrant of the city, which includes property in the I -35E corridor, to assess the impact of future development scenarios in this area. The AUAR provides clear direction for future development regarding environmental and transportation improvements that will be needed, relieving development interests of project - by- project environmental assessments. The City and Anoka County, with financial assistance from the American Recovery and Reinvestment Act, began reconstruction of the I -35E /County Road 14 interchange in late 2009. The City's portion of the cost for this project is being financed through Anoka County, with the City issuing a $4.26 million General Obligation Note to the County. The project is expected to be completed in 2011. Building activity and development continued to soften during 2009 reflecting the broader market trends nation- wide and the onset of an economic recession in December, 2007. Building permits for new homes in 2009 numbered 28, compared to 29 in 2008. This represents about 1/3 of new home permits issued in 2007 and is down • by over 85% from 2005. Long -term financial planning. 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. 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, police station and school district early childhood center), the Chain of Lakes YMCA, a 60 -unit workforce housing project, 13,000 square feet of leasable commercial space, and a former hotel, which is planned to be converted into an assisted living facility. Anoka County has plans to build a new regional library across the street from the development site, which is scheduled for 2011. However, the deep economic recession has stalled housing and commercial plans in the development and has forced the remaining 26 acres into foreclosure and potential tax forfeiture. The City is working with investors to be prepared to market the property when the economy turns. ▪ 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. Improvements to the existing Lake Drive and the construction of a new interchange at I -35W and Lake Drive were completed in 2008. 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. It is acknowledged that this development will result in additional ongoing costs involved in servicing and maintaining the streets and public areas, which will be addressed in future operating budgets. The city's current five -year financial plan, adopted in January, 2008, identifies street and utility improvements ▪ totaling $23,287,990 over the period of 2008 through 2012. These improvements are anticipated to be funded through a number of funding sources, including special assessments, municipal state aid road funds, the area and unit trunk fund, the stormwater management fund and voter - approved tax levies. Also included in the final year of the plan is a feasibility study for a new public works facility. Scheduled capital equipment and office equipment needs and the financing for those needs are also included in the plan. The five -year plan also includes funding projections for operations and operating impacts for the period of 2008 -2012. 5