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In Minnesota economically the drought should not have as <br />substantial effect in the Metro area as it will Outstate. To the <br />extent that those in the farming community have had a surplus on <br />hand and the drought will raise prices. The lack of a crop may <br />partially offset by this factor. It will however, probably result <br />in a downturn in revenues from the outstate area requiring the <br />1989 Legislature to deal with decreased revenues which will be <br />exascerbated by a 1989 recession. If in line with past direction <br />the Legislature will end up raising the money through tax <br />increases in the Metro area starting the second half of 1989 and <br />into 1990. Unemployment in the Metropolitan area will raise up <br />from the present 10 year low at 2.8%. <br />In the City of Orono, the strong building boomlet (69 homes) that <br />was experienced last year will be back to 1986 levels (45 homes <br />this year. The limited supply of developable lots has resulted <br />in a noticable increase in subdivisions this year, and therefore <br />should not be a factor limiting the continued rate of new <br />residences. Development along Highway 12 and any redevelopment <br />along County Road 15 may have a substantial impact on the City's <br />rate of increase in new housing. Interest rates, to the extent <br />that they remain at or telow the current levels, should not have <br />an impact on the level of building activity. However, a market <br />increase of 1 to 2 percentage points above the current rate could <br />well slow development. The market values of properties in the <br />community will continue to increase especially for those around <br />the lakeshore. The Board of Review next year is expected to be <br />well populated because of the increase in local taxes due to the <br />188 Legislative changes that people will see in the first half of <br />1989 together with :he substantial increase in selected property <br />values in the community based on increased sales prices. It is <br />not anticipated that the 1989 recession will have a great impact <br />on activity in the City of Orono apart from building activity <br />until 1990. <br />E <br />