Comprehensive Annual Financial Report 12/31/2006

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Building permits for new homes in 2006 numbered 91, 105 fewer than were issued 2005, reflecting the softening residential real estate market. 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. ORM 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 approved, 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. Long -term financial planning. The city has 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 will occur over a period of two to five years and will include up to 450 dwelling units, retail commercial business, a community green and park and trail amenities and a 60 -unit motel. Anoka County is planning to locate a branch library in close proximity to the development as well. Country Inn and Suites began construction in early 2006 and opened in November, 2006. The YMCA, in partnership with the city, is also planning a facility within the development. The city's participation in the YMCA will be $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. Construction on the facility began in late Fall, 2006 and the facility is scheduled to open in mid -July, 2007. To facilitate this development, 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 are planned to begin in May, 2007. This construction will be completed by July, 2008, with the bridge remaining open throughout the construction period. Engineering estimates for these improvements is estimated at approximately $10.4 million and will be financed through the joint efforts of MNDOT, Anoka County and the City of Lino Lakes. The City will issue G.O. Tax Increment bonds and use 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 five -year financial plan, adopted in December, 2006, identifies street and utility improvements totaling $35,475,545 over the period of 2007 through 2011. 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, tax increment financing and voter - approved tax levies. Improvements to _ several of the city's neighborhood parks and the city's trail system are also planned over this period in the amount of $95,000. These improvements will be funded through park dedication fees and the dedicated parks fund. The five -year plan also includes funding projections for operations and operating impacts for the period of 2007 -2011. WENN MOM 5