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1 t of satisfactory finances, and manageable debt burden. EXPANDING TAXBASE IN FAVORABLE TWIN CITIES AND STRONG WEALTH INDICES Moody's expects the economy to remain strong for this affluent, mature, first-tier suburb located within Hennepin County (Aaa) mainly due to its proximity to the Twin Cities metropolitan area. The city's small, primarily residential, tax base of $460 million has been experiencing modest growth over the last five years reflecting in part some new residential and commercial development. Similar to many mature cities in the midwest, the population has declined since 1970, although the state census for 2000 shows a 3.7% jump since 1990. Wealth levels have historically been well above the state average. Unemployment rates of 3.2%, in December 2002, are below the state average of 3.7%. SATISFACTORY FINANCIAL POSITION Moody's expects the financial position of the city to continue to be satisfactory following five years of operating surpluses. In FY 2001, the General Fund balance was $1,042,706, or 30.4% of General Fund revenues compared to $976,000, or 29.0% in FY 2000. Unaudited financial statements show a slight operating surplus for FY 2002, and officials report that the city intends to keep their reserve levels in the 30% range. The city is expecting State Aid reductions of $267,000 and $375,000 for FY 2003 and 2004, respectively. The city expects to maintain adequate reserve levels in order to provide the flexibility needed to meet cash flow needs and to offset the anticipated reductions in State Aid as well as unanticipated expenditures increases. Moody's believes that the increased revenues from the growth in the taxbase and prudent budgeting will help the city maintain its satisfactory financial position. MANAGEABLE DEBT LEVELS WITH MODEST FUTURE BORROWING PLANS Moody's expects the city's average debt burden of 4.1% to remain manageable due to modest future borrowing needs and significant support from non-levy sources for debt service. Principal retirement is above average with 66.8% of total debt retired in 10 years and 90% within 15 years. Additional borrowing is anticipated next year to finance the city's building of a new fire department. Proceeds from this issue, supported by special assessments and secured by the city's general obligation, unlimited tax pledge, will finance various capital improvement projects. KEY STATISTICS 2000 population: 8,012 Unemployment (Hennepin County 12/02): 3.2% 2001 Full valuation: $460 million 2001 Full valuation per capita: $60,900 1999 Median family income: $62,500 1999 Per capita income: $26,290 Debt burden: 4.1% Payout of principal (10 years): 66.8% FY 2001 General Fund balance: $1.04 million (30.4% of General Fund revenues) Post sale parity debt: $14.9 million