Comprehensive Annual Financial Report 12/31/2008

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City of Lino Lakes, Minnesota Management's Discussion and Analysis December 31, 2008 CAPITAL ASSET AND DEBT ADMINISTRATION (CONTINUED) Long-term debt At the end of the current fiscal year, the City of Lino Lakes had total bonded debt outstanding of $24,079,000. Of this amount $11.184.000 comprises tax supported debt, $11.385.000 is special assessment debt and $1.530`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. Outstanding Debt at Year-En Govementalxctivities Business-Type Activities Total 2008 2007 2008 2007 2008 2007 G.O. Bonds $ 11,184,000 $ 11,569,000 $ $ - $ 11.184.000 $ 11,569000 G.O. Special Assessment Bond 11,365,000 12,520000 - 11.365000 12,520000 G.O. Revenue Bonds - 1,530,000 1,855,000 1.530,00 1.855,000 Total Outstanding Debt $ 22,5*9000 $ 2*,089,000 $ 1,530,000 $ 1.855.000 $ 24.079,000 $ 25,e**000 The City of Lino Lakes total bonded debt decreased by $1,865,000 (7.2 percent) during the current fiscal year. The key factors for the change include the issuance of $209,000 in 2008A Equipment Certificates and retirement of principal in the amount of $2074,000 during the year. The City of Lino Lakes received an Aa3 rating from Moody's Investors Service for general obligation debL 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 34-57. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES • TheunemolovmemdratefovthmCdvofLinoLakesedyearendisG.S96.whichkyasi nificant increase from a rate of 4.8% a year ago. This mirrors the state's average unemployment rate of 6.8% and the national average of 7.1 %. ° Residential growth in the City has slowed significantly due to the general residential real estate market downturn and current economic neceosion, with about one-third the number of new home permits issued in 2008 as in 2007, and less than 8596 of new home permits issued in 2005. This is expected to decrease further and then level off in 2008. with the beginning of a recovery of the housing market in 2010. Thia, as well as falling property values of the existing tax baae, will have a significant impact on the City's tax base for 2010 and beyond. • Energy costs, while dropping and leveling off in recent montho, are expected to continue to increase over the coming months. This will have an impact on the City's budget for the coming year and thereafter. • 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. 2004. 2005 and 2006. While the City is exempted from local government aid, only one-half of the allocated market value homestead credit was received in 2008 and none is expected to be received in 2009. • The Federal Reserve Board has decreased the federal funds rates significantly, currently to between 0.00% — 0.25%, which is expected to result in sizable decreases in the City's investment earnings. 19