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CITY OF LAKE ELMO, MINNESOTA MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2024 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. • The City’s Long-Range Financial Management Plan for Utilities was updated in early 2025. For 2025, water and sewer rates were increased by 10% and stormwater rates had no increase. • Market interest rates on investments have fallen slightly in 2024 and 2025. 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 sel l 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. Previously expected funding for trunk main extensions have since been discontinued, which slowed the growth of the water and sewer funds. • 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. The Stillwater Area School District (ISD 834) recently broke ground on a new Elementary School and expansion of the existing Middle School in Lake Elmo, increasing the student capacity at both schools and providing improved facilities. 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.