2. City of Lino Lakes, Minnesota Financing Plan Highlights Citizens’ Charter Review Task Force May 15,2007 Pavement Management Report Financing Plan Presenter: Nick Dragisich, Executive Vice President

3. 2 Background TKDA hired during 2004 to complete an overall pavement management analysis including: –An evaluation of the condition of the current streets and –The costs to maintain / reconstruct them in order to maximize the useful life of these investments The outcome was a Pavement Management Report (“PMR”)

4. 3 Determine a financing plan that is sustainable over the long-term Allocate the costs of the PMR in a fair and equitable manner –Spread evenly all taxpayers –Specific costs to certain property owners –Spread based on utility usage Identify non-tax revenues to finance the PMR Maximize use of appropriate external financing sources Minimize the utilization of City property taxes Purpose of PMR Financing Plan

5. 4 Maintenance –Costs related to the sealcoating and overlay of streets whose pavement life can be extended through on-going maintenance Reconstruction –Costs related to those streets that have outlived their useful life so that pavement is in need of removal and replacement Two Primary Cost Components

6. 5 YearMaintenanceReconstructTotal 2005$ 236,538$ 0$ 236,538 2006347,500 0 2007365,0001,435,0001,800,000 2008385,0002,750,0003,135,000 2009402,5003,035,0003,437,500 2010422,5003,485,0003,907,500 2011445,0001,577,5002,022,500 2012467,5001,655,0002,122,500 2013490,0001,737,5002,227,500 2014515,0001,825,0002,340,000 Total Estimated Cost$4,077,038$17,500,000$21,577,038 Total Estimated Cost of the Plan

7. 6 Maintenance Portion of PMR –Annual property tax levy for the maintenance portion of the PMR Ongoing costs with ongoing revenues Not capital in nature-not appropriate to bond $230,000 estimated for 2005 with an average annual cost of $407,000 Recommended Financing Sources

8. 7 Reconstruction Portion of PMR –Capital in nature –Asset life of over 20 years –Typically financed over term more closely matched to life of asset Matches beneficiaries with payors (equity) Uses City’s ability to leverage funds from investors to pay for improvements –$1,435,000 recommended for 2007 with annual average cost of $2,187,500 Recommended Financing Sources

9. 8 Reconstruction Portion of PMR –General Obligation Improvement Bonds –General Obligation Street Reconstruction Bonds –Storm Water Utility –Tax Increment Financing –Municipal State Aid –Cost sharing with Anoka County –State and Federal Grants Recommended Financing Sources

10. 9 Annual property tax levies for maintenance costs of the PMR (sealcoating and overlays) The City specially assess benefiting properties 20% of the costs of reconstruction projects The City establishes a storm water utility to pay for the storm water related costs of reconstruction projects (not established as of 3-29-07) Recommendations Assumed the Following

11. 10 Property taxes for maintenance Storm Water Utility G.O. Improvement Bonds: Principal repaid from Special Assessments Principal repaid from property tax levy Total $4,077,038 $4,200,000 $3,500,000 $9,800,000 $21,577,038 Total Funding Sources 2005-2014 Maintenance and Reconstruction

12. 11 Projected G.O. Improvement Bonds * Bonding not anticipated in 2007, although recommended in 2005

13. 12 Projected Tax Rate Impacts

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15. 14 Projected Property Tax Impacts – $228,400 Residential Homestead

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17. 16 Impact of utility fee not projected because it has yet to be established and put into place Storm Water Utility

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21. 20 Charter requires each PMR reconstruction project funded by our recommended sources would need to be approved by a vote of the citizens unless a tax levy is not required Creates an additional requirement the City of Lino Lakes must follow if the PMR is to be implemented – limits ability to ensure implementation of PMR Unique charter requirement that we have not found in previous similar studies Impact of City Charter Requirements on PMR Financial Recommendations

22. 21 Impact of City Charter Requirements on PMR Financial Recommendations Where exceptions are made, allowing certain properties to be specially assessed (within specific geographical areas) without referendum, bonds become taxable because they provide a private benefit to those property owners not available to the rest of the City Taxable bonds result in interest rates of 160 basis points higher than tax-exempt bonds –For example, 4.00% becomes 5.6% if the bonds are taxable –On $3 million bond issue, this costs an extra $465,645, assuming 15 year payback

23. 22 Impact of City Charter Requirements on PMR Financial Recommendations Cost of annual referendums Deferring costs until referendums pass –Increases costs –Street condition continues to deteriorate Cost of signage to protect citizens and limit liability exposure Liability exposure –Policy and steps to protect City –Cost of defense –Insurance premiums

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26. 25 The PMR, if implemented –Save $11,000,000 over the next 10 years, according to TKDA West Shadow Drive $2,375,700 in 2005; $2,750,000 in 2008 –Improve the overall condition of streets in the City –Reduce operating cost and limit liability exposure The financing plan recommended provides widely used municipal financing practices for implementing PMR –Sustainable over the long term only if referendums are successful Conclusions