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CITY OF LINO LAKES, MINNESOTA <br />MANAGEMENT'S DISCUSSION AND ANALYSIS <br />DECEMBER 31, 2012 <br />ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES <br />• The unemployment rate for the City of Lino Lakes at year -end is 5.6 %, which is a decrease from a <br />rate of 5.9% a year ago. This is slightly higher than the state's average unemployment rate of 5.4% <br />and significantly lower than the national average of 7.6% at the end of 2012. <br />• Residential growth in the City has continued to be significantly below the rates of the mid 2000's due <br />to the general residential real estate market weakness, with about one - fourth the number of new <br />home permits issued in 2012 as in 2007, and less than 87% of new home permits issued in 2005. <br />This is expected to level off in 2013, with hopes of the beginning of a recovery of the housing market. <br />This, as well as falling property values of the existing tax base, will continue to have an impact on the <br />City's tax base for 2013. <br />• Energy costs, while relatively stable in recent months, are expected to continue to increase over the <br />coming months. This will have an impact on the City's budget for the coming year and thereafter. <br />• Property tax reforms and State budget deficits have significantly impacted state aid payments the City <br />of Lino Lakes receives. Local government aid and market value homestead credit was reduced to <br />zero for 2003 and 2004 -2011. The City is exempted from local government aid and the state <br />legislature has discontinued the market value homestead credit in favor of a new market value <br />exclusion, which excludes a portion of residential homestead property value from property taxes. <br />• The Federal Reserve Board has continued the federal funds rates at historical lows, currently to <br />between 0.00% — 0.25 %, which is expected to result in sizable decreases in the City's investment <br />earnings. <br />REQUESTS FOR INFORMATION <br />This financial report is designed to provide a general overview of the City of Lino Lakes' finances for all of <br />those with an interest in the government's finances. Questions concerning any of the information provided <br />in this report or requests for additional financial information should be addressed to the Director of <br />Finance, City of Lino Lakes, 600 Town Center Parkway, Lino Lakes, Minnesota, 55014. <br />21 <br />