Comprehensive Annual Financial Report 12/31/2008

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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) of property in excess of 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 was completed and accepted by the City Council in October, 2005. The AUAR included the proposed Hardwood Creek development, a 360 acre master - planned mixed -use development. If initiated, the development would include approximately 1,100 dwelling units and 600,000 square feet of commercial /retail buildings and preserve 90 acres of green space. Building activity and development continued to soften during 2008 reflecting the broader market trends nation- ` wide and the onset of an economic recession in December, 2007. Building permits for new homes in 2008 numbered 29, about 1/3 of 2007 and down by over 85% from 2005. Long -term financial planning. In 2004, the City entered into an agreement with Hartford Development LL, LLC, to develop 40 acres in the southeast quadrant of I -35W and Lake Drive. This mixed -use development was scheduled to occur over a period of two to five years and include up to 450 dwelling units, retail commercial business, a community green and park and trail amenities and a 60 -unit motel. With development at a virtual standstill due to the recession and the collapse of the real estate market, the property was foreclosed by the mortgage banks in early 2008. The banks continue to market the property to prospective developers. Country Inn and Suites was completed and opened in November, 2006 and still operating amid the economic distress. The YMCA, in partnership with the City, also opened its facility within the development in July, 2007, and is doing very well with membership on the rise. The City's participation in the YMCA is $2.35 million of the $8.2 million project, plus land and infrastructure. The City has issued G.O. Tax Abatement bonds to finance its contribution to this project, as well as $4.0 million in conduit debt. The City has also secured a CDBG grant of $125,000 to be used toward a teen center within the YMCA. Anoka County is planning to locate a branch library in close proximity to the development as well, with construction scheduled to start in 2010. _ Street, streetscape, water, sewer, and storm water improvements 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 Interstate 35W and Lake Drive were substantially completed in October, 2008. The cost of this improvement is approximately $11.1 million is 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 Immo 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