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1. Executive Summary Like nearly every community in the United States today, Pequot Lakes is struggling to figure out how to transition to a set of new economic realities.The hyper-growth of the recent past covered up a lot of the financial imbalances created by the City's development pattern.This pattern—typified by horizontal, decentralized growth with a strong auto-orientation—created a lot of long-term liabilities for infrastructure maintenance that the City will now struggle to meet in a more austere age. As the City is positioned today, the places where it has the greatest level of public investment—the downtown and its surrounding neighborhoods—are also the places where private-sector investment has lagged the most. Unless there is a dramatic shift in this imbalance, large amounts of public infrastructure will need to be abandoned and/or large subsidies from other property owners (predominantly higher- value lake property owners) will be necessary to meet the City's maintenance obligations. These are not easy challenges, particularly since they call into question the prosperity and growth the City has experienced over the past two decades.The greatest level of prosperity Pequot Lakes has experienced came in the years prior to the housing collapse, a market correction that began nationwide in 2008. It is difficult to confront the realization that our local prosperity was not "real"financially. It would be comforting to believe that the growth and success experienced locally was the result of wise local decision-making, instead of factors beyond the City's control. And it is difficult to acknowledge today that there is no mix of incentives or local programs that can bring back the conditions of 2005. In short, Pequot Lakes is in a new, evolving reality. It is unclear precisely what the future will bring, but it is becoming apparent that the City will need to adapt to a new set of local economic realities, including: r Lower property values. We're in the midst of a major correction in property values that appears to be continuing an aggressive downward trend. Since the City's primary revenue source is a tax on property values, declining values is distressing on many levels. Reduced state and federal support. As with most small towns, Pequot Lakes has relied on the state and federal governments to fund and finance major infrastructure improvements. Of course, the state and federal governments have long-term, structural financial problems that make them unreliable sources of future funding. Maintaining the City's sewer and water infrastructure—let alone local roads and streets --without major state and federal assistance is currently unthinkable, but it is likely to be a reality we have to face. Private sector indebtedness. In recent decades, the City has grown used to the private sector investing large amounts of leveraged funds to develop, and subsequently purchase, both commercial and residential properties.The emerging economic realities of our time suggest this is not a trend likely to continue, which will have large cash-flow implications for the City. Higher energy costs. Higher energy costs will dramatically change life in Pequot Lakes. Over 70%of the food consumed in Minnesota comes from outside of Minnesota, so energy costs will dramatically impact the cost of food. Every business in Pequot Lakes currently relies on Pequot Lakes Downtown Plan— Updated November 2014 2