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Summary Letter August 76,2007,Page 2 of 6 Macroeconomic Trends The macroeconomic trends in Pequot Lakes are strong. The growth in traffic volumes that prompted discussions about Highway 371 indicates positive pressure on the region's economy. The net tax capacity of the area,when looking at the Pequot Lakes School District,the property type cluster as defined by the State,' and Crow Wing County all outstripped State trends by at least 20%during the 2003-6 period. The strong growth in enrollment, including significant open enrollment from neighboring districts, is a positive statement about the City's future. Pequot Lakes' farmland and timberland values are ranked in the top twelve cities and townships in Crow Wing County over the period 2002-6. Clearly,there are positive trends underlying the City's current status as an increasingly busy destination. Tax Base Analysis The process of assembling a tax base analysis on top of the macroeconomic snapshot followed the sequence of steps below: • Collect and assign property data by current business use and location. • Establish projections for property price behavior based on research and sources specific to project. • Evaluate changes in market value,tax capacity, and tax revenue based on current city tax rate. • Apply the opportunity cost of the land takings, and the financing costs,to estimate a net present value benefit under each development scenario. The tax base analysis used data for 224 property parcels in the City,representing an area of 1,156 acres. Parcels located along the current alignment, and which were 1-2 blocks from the current Highway 371 alignment and in non-single-family uses,were included in the analysis. Parcels along the alternative alignment, including those whose current use is light industrial,agricultural and forest management,were similarly included in the data set. A map is attached to this summary,which Community Growth Institute provided with the data collected and analyzed. The analysis classified all parcels into a range of categories; different assumptions about future property value trends were used for each category of property. The categories were: Agriculture, agriculture converted to commercial-industrial property, food service, forest management, light industrial, local commercial, local retail,multifamily housing, specialty retail,tourist retail, and tourist service. As shown graphically in the attached presentation,the composition of tax base in 2021 (ten years from anticipated highway opening)is projected to be over$50 million for each of the three scenarios. Within these values,the composition of tax base varies, based on assumptions for how particular land uses and locations will be valued under one scenario or the other. The variation in total tax base in 2021 among the three scenarios—and the fact that the expansion of the