Comprehensive Annual Financial Report 12/31/2005

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Building permits for new homes in 2005 numbered 196, exceeding 2004 permits by 6 units. Commercial /industrial development continued at a steady pace. 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 approximately $1.3 million in value to the city's growing commercial /industrial tax base. A two -story office building is currently being constructed at the intersection of Lake Drive and Hodgson Road which 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 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 would 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 considering placing a branch library in the development as well. Country Inn and Suites began construction in early 2006 and will complete the building by fall. 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 plans to issue 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 is scheduled to begin in late spring, 2006. To facilitate this development, street, streetscape, water, sewer, and storm water improvements must be installed within the development area, as well as improvements to the existing Lake Drive. Engineering estimates for these improvements is estimated at approximately $9 million. Construction began in Fall, 2005, financed with ▪ the sale of $5,550,000 in G.O. Improvement and the future issuance of G.O. Tax Increment bonds. 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, which is currently under review, identifies street and utility improvements totaling $33,173,000 over the period of 2006 through 2010. 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 $230,000. These improvements will be funded through park dedication fees and the dedicated parks fund. Cash management policies and practices. The City's policy is to invest all available moneys at competitive rates in accordance with Minnesota law. Investments are made by minimizing credit and market risks while maintaining a competitive yield. Funds are invested in certificates of deposit, commercial paper and U.S. government agencies. Cash is pooled in one account to provide maximum return. The City Council reviews the investment policy annually and last amended it in 1998. The City is implementing the Government Accounting Standards Board (GASB) Statement No. 40 relating to Deposit and Investment Risk Disclosures and amending GASB Statement No. 3, which can be found in the Notes to the Financial Statements beginning on page 41. WIMP 5