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1 CURRENT TRENDS 2 As a neighborhood center, the Pequot Lakes economy is impacted by a number of factors beyond its ability to 3 control or even influence.The most pressing factors,created by the national recession,have changed dramatically 4 in just the last two years. It now appears that,for Pequot Lakes as well as other similar communities across the 5 country,the recent period of rapid growth has come to an end.Although it is not clear what will follow,there are 6 some realities that are starting to emerge as critical to the City's future economic development potential. 7 • Population migration.The current economic downturn has manifested itself most clearly in the mortgage 8 market,where home prices have fallen.National reports indicate that one in four mortgage holders owe 9 more on their homes than they are worth,which inevitably stifles the ability for people to sell and move. 10 For an area like Pequot Lakes that has been reliant on people moving to the area to start new businesses 11 and workforce growth from in-migration,reduced mobility presents a changed reality. 12 • Aging infrastructure. A tremendous amount of infrastructure has been put into the ground to 13 accommodate and,to some extent, induce growth. Whether or not the resulting tax base justifies the 14 investment,the infrastructure deteriorates and will someday require substantial,expensive maintenance. 15 In the current(and future) economy,it will be necessary to make the highest use of each infrastructure 16 investment the city chooses to maintain. 17 • Aging population.Elderly households typically have incomes that are more stable and fluctuate less with 18 market conditions,good or bad.A Pequot Lakes population that is slightly older than the state average 19 (which itself is considered disproportionately aging) indicates some built in resistance to policies that 20 involve risk or the potential for tax rate fluctuations. 21 • Less government support.State and federal governments are realizing the same kind of fiscal limitations 22 as local governments and are questioning priorities for future spending.Assistance for local governments 23 has been cut dramatically and future cuts are almost assured.With populations nationwide shifting from 24 rural to urban/suburban areas, policymakers are questioning the wisdom of future infrastructure 25 investments in less populated areas. While there will likely be some money available from state and 26 federal sources, the City of Pequot Lakes needs to prepare for the day when outside governmental 27 support is negligible. N*_�.8 • More connected world. From the Internet to cellular phones,our ability to communicate with each other 29 has vastly expanded.Where Pequot Lakes was once remote and isolated,it now has excellent city-wide 30 broadband service, with competition that drives further innovation and service improvements. This 31 presents a new opportunity that can be capitalized on. 32 • Increased technology advancements. Along with improvements in communication, other technological 33 advancements continue to benefit Pequot Lakes businesses.The ability to attract and retain an educated 34 workforce,the ability to collaborate with partners across the globe and the options for researching new, 35 innovative approaches are all enhanced by continued improvements in technology.It is clear that the next 36 era,however it manifests itself,will be led by those able to best utilize new advancements in technology. 37 It is likely that the future of Pequot Lakes will be oriented primarily toward businesses that sell goods and services 38 to the local market and businesses that utilize technology to create and/or distribute goods and services beyond 39 the area.To a lesser extent,tourism and tourism-support industries will continue to play a role. Notably absent 40 from this list are the industries of growth(land development,real estate,title closing,surveying and engineering, 41 etc..) which, while important to a functioning local economy, are unlikely in the future to be the dominant 42 industries they were over the past two decades. DRAFT-November 2010 18 1 P a g e