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CITY OF RAMSEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1995 Note 7. TAX INCREMENT FINANCING REVENUE NOTES During 1991, the City entered into private development agreements for an area referred to as the Wood Pond Projects which consisted of three subdivisions. The subdivisions were housing tax increment projects in that there were extraordinary trunk sewer charges. The developers were responsible for these "special" trunk charges through assessments that were levied against the properties being developed. The special trunk assessments were as follows: Note 8. DEPOSITS PAYABLE Chestnut Hills $ 124,865 Cedar Hills 214,700 Windemere Woods 10,012 Total $ 349,577 Contemplated in the development agreements was the reimbursement to each of the developers for these special trunk assessments. The vehicle used for this reimbursement is called a tax increment revenue note. These notes provide for the payment of principal and interest (8 %) up to the lessor of the principal amount of the note or 97% of available tax increment. The notes began accruing interest on December 1, 1993 with the first payment due to the developers on February 1, 1995 for tax increments received during 1994. The last payment will be February 1, 2000, based on increments received during 1999. Each developer receives only the increments generated by their subdivision. Payments from available increments are applied first to accrued interest and then to principal balances. If increments received through the year 1999 are not sufficient to pay off each developer, the note will be cancelled. Any excess increments received after 1999 will be retained by the City. Included in current liabilities for the year ended December 31, 1995 is $247,806, which represents the portion of increments collected in 1995 that were payable to the developers on February 1, 1996. These payments are recorded as capital outlay as they represent a payment for sewer trunk infrastructure contributed by the developers. The outstanding principal balance as of December 31, 1995 was $349,577. This amount is not included in long- term debt because of the nature of these notes in that repayment is required only if sufficient tax increments are received. In a sense, these are really an obligation to assign a future and uncertain revenue sources. Platting and performance deposits are accounted for in the City's Expendable Trust Escrow Fund. A summary of the 1995 changes in deposits is as follows: Total deposits payable January 1, 1995 $ 182,099 Add deposits received 120,275 Less payments from deposit account (196,722) Total deposits payable December 31, 1995 $ 105,652