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CITY OF LAKE ELMO, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2023 24 ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES • An update to the City’s long-range financial management plan was completed in 2023 and now includes inflated averages for capital expenses such as roads and equipment in the 5-10 year horizon. The City is projected to have small annual increases in its tax rate over the next 10-year period while still meeting current service needs, adding a public works position, and funding capital needs while maintaining a fund balance above the City’s policy of 50-60% of next year’s expenses. • Utility rate adjustments continue in accordance with the City’s long-range financial management plan. For 2024, water and sewer rates were increased by 3% and stormwater rates had no increase. • Market interest rates on investments trended higher in 2023 and have held relatively steady in 2024. The City is holding various investments that were purchased prior to 2022 that have lower rates of return due to the aforementioned increases. As a result, these investments have some unrealized losses that would only be recognized if the City had to sell them before maturity. The City has sufficient cash and does not anticipate selling before maturity. • The City is currently exploring sites for two new wells. These wells will need a treatment plant for PFAS which will be funded by 3M settlement dollars. These efforts are likely to take two to three years to complete. Other major water capital projects on the horizon include trunk main extensions and connecting existing neighborhoods vulnerable to PFAS to municipal water service; projects which are also funded by 3M settlement funds. • The City received a total of $1,006,489 in American Recover Plan Act (ARPA) funding in two installments in 2021 and 2022. All funds have been expended by early 2024. Projects included the extension of fiber to the public works building and municipal sewer trunk mains to city owned land on the western edge of town. • With its proximity to Minneapolis/St. Paul downtown area, easy access from a number of state highways, exceptional recreational offerings and low tax rate, Lake Elmo remains an attractive area for new residents and businesses. The City is seeing an increase in development interest for multi-family housing as well as from commercial and business/industrial developers. There remain hundreds of acres available for development in both the downtown area as well as along the I-94 corridor. CONTACTING THE CITY’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact City Hall at 3880 Laverne Avenue North, Lake Elmo, Minnesota 55042.