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STRUCTURE AND RISKS <br /> <br />The Bonds are revenue obligations of the Anoka County Housing and <br />Redevelopment Authority and are payable from project revenues (including a portion <br />of the HRA's tax levy) and, if necessary, the City of Ramsey's full faith, credit, and <br />taxing powers. <br /> <br />· The current assumptions for the project are as follows: <br /> <br />The facility will open October 1, 1999. By January 1, 2000, the facility will be <br />required to fund debt service at an 80% occupancy level and will require at least <br />93% occupancy by January 1, 2001. <br /> <br />· The HRA levy will be approximately $80,000 in 1999 and thereafter.' <br /> <br />The operating expenses will be $2,270 per unit per year (tenant pays electricity <br />and telephone) plus the payment-in-lieu-of-taxes of $375 per unit and the HRA <br />management fee of $300 per unit. <br /> <br />· Debt service on the 30 year bonds, based upon a net interest cost estimate of less <br /> than 5.5%, will be $290,000 to $300,000 per year. <br /> <br />· Rents will increase at 2% per year and expenses at 4% per year. <br /> <br />· The City loan will be repaid in total within 15 years and the principal on the <br /> HRA's bond issue will be amortized after the City loan is repaid. <br /> <br />· Net cash flow, including the HRA levy, could average $35,000 to $45,000 per <br /> year in the first ten years. <br /> <br />Any occupancy less than 93% to 95% per year or expenses higher than projected <br />will result in a negative cash flow for the development. The initial operating. <br />reserve for shortfalls will be $50,000 plus any amount of funds earned in 1999. <br /> <br />· A projection of estimated income and expenses is found in Exhibit 2. <br /> <br />Page 4 <br /> <br /> <br />