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NOTE 5 — LONG -TERM DEBT (CONTINUED) CITY OF RAMSEY Notes to Financial Statements (continued) December 31, 2002 D. Descriptions and Restrictions of Long -Term Debt All of the City's outstanding debt is general obligation debt backed by the full faith and credit of the City, except for the Lease Revenue Bonds which are obligations of Economic Development Authority of Ramsey. o Tax Increment Bonds — These bonds are issued for redevelopment and economic development projects. The additional tax revenue resulting from increased assessed valuation of the properties is the major source of revenue used to retire the related debt. The Tax Increment Bonds, Series I 999A will be funded by operating rental income from the Senior Housing Project if sufficient, with tax increments being pledged as the second source of funding. • Lease Revenue Bonds — These bonds were issued by the Economic Development Authority (EDA) of Ramsey for the purpose of financing the construction of a fire station. Pursuant to Minnesota Statutes § 471.64, Subd. 1 and § 465.71, lease - purchase contracts between the EDA and the City, and a Trust Indenture between the EDA and U.S. Bank Trust have been established. The bonds are special obligations of the City as issuer and owner of the land and building. The City has pledged rental payments in amounts equal to the debt service requirements and plans to annually appropriate City funds available for this purpose. Minnesota Statutes § 475.50, Subd. 5(e), allows cities to make a special levy (outside of levy limits) to pay principal and interest on bonds of another political subdivision. Through the transactions described above, the City (Primary Government) has, in substance, assumed the debt service on the revenue bonds issued by the EDA. Therefore, the bonds have been included in the City's General Long -Term Debt Account Group. • Capital Equipment Certificates — These certificates were issued to finance various capital equipment purchases and will be repaid via ad valorem levies. o Compensated Absences — The liability represents vested benefits earned by Governmental Fund employees through the end of the year which will be paid or used in future periods.