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NOTE 16 — COMMITMENTS AND CONTINGENCIES (CONTINUED) C. Legal Claims The City has the usual and customary type of miscellaneous legal claims pending at year-end. Although the outcome of these lawsuits is not presently deteiniinable, the City's management believes that the City will not incur any material monetary loss resulting from these claims. No loss has been recorded on the City's financial statements relating to these claims. D. Tax Increment Districts The City's tax increment districts are subject to review by the state of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. Management has indicated that they are not aware of any instances of noncompliance which would have a material effect on the financial statements. E. COVID-19 Pandemic The COVID-19 pandemic has had significant financial and operational impacts on the City for the last two fiscal years. Any potential impact it may have on the City's future operations and financial condition cannot be deteiuiined at this time and has not been reflected in these financial statements. NOTE 17 — OPERATING LEASE The City is the lessor of an operating lease. In February 2010, the City of Ramsey entered into a five-year agreement to lease approximately 2,200 square feet of office space on the ground floor of the Ramsey Municipal Center to Anoka County for the operation of a license center. As part of the original lease, the tenant may extend the contract for three (3) five (5) year teinis. Anoka County authorized a five (5) year extension in March 2020. The cost of the leased space is included in the total municipal center building cost of $12,856,588, of which $3,857,047 has been depreciated to date. These amounts are recorded in the City's capital assets. The City of Ramsey collected $54,153 in lease revenue for the fiscal year ended December 31, 2021. The following is an estimate of the future lease payments: Year Ending December 31, Lease Payments 2022 $ 59,358 2023 63,060 2024 66,911 January 1 -June 30, 2025 34,464 Total $ 223,793 Lease payments may increase each year based on the increase in the Consumer Price Index — U.S. City Averages for ALL Urban Consumers as published by the Bureau of Labor Statistics of the United States Department of Labor for Urban Wage Earners and Clerical Workers for All Items (CPI-W). 95