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CITY OF PEQUOT LAKES, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014 LONG-TERM LIABILITIES At year-end, the City had $2,170,518 (net of related discounts and premiums) in long-term liabilities outstanding. ♦ The City's governmental activities total long-term debt increased $509,147 due primarily to the issuance of a loan borrowed from the USDA to purchase a fire truck and the issuance of Equipment Certificates to purchase a plow truck. The City's business-type activities total long- term debt decreased $53,935 due primarily to the repayment of general obligation bonds. Additional information on the City's long-term liabilities can be found in Note 3.C.1. Table A-7 The City's Long-Term Liabilities Percentage 2014 2013 Change GOVERNMENTAL ACTIVITIES Equipment Certificates $ 220,000 $ 53,000 315.1 % Capital Leases 263,467 286,372 (8.0) Compensated Absences Payable 38,677 40,415 (4.3) Other Postemployment Benefit Payable 133,112 116,322 14.4 Total $ 1,005,256 . $ 496,109 102.6 BUSINESS-TYPE ACTIVITIES General Obligation Bonds $ 1,147,110 $ 1,202,234 (4.6)% Compensated Absences Payable 2,582 2,465 4.7 Other Postemployment Benefit Payable 15,570 14,498 7.4 Total $ 1,165,262 $ 1,219,197 (4.4) FACTORS BEARING ON THE CITY'S FUTURE Highway 371 Expansion The proposed Highway 371 project is expected to begin in 2015. Federal and state funding may have an influence on whether this project takes place in 2015 or perhaps beyond that date. MnDOT began right-of-way acquisition in 2014. The City has begun preparing for this project. Issues related to this highway project that will affect the City include roads that will possibly be turned back to the City, County Road 11 as the major corridor entrance to the City, and the City's spray irrigation field. • (15)