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CITY OF RAMSEY Notes to Financial Statements (continued) December 31, 2002 NOTE 13 — TAX INCREMENT FINANCING REVENUE NOTES The City has entered into several private development agreements, regarding certain tax increment properties. Contemplated in the development agreements were the reimbursements to developers for special trunk assessments. The vehicle used for this reimbursement is called a tax increment revenue note. These notes provide for the payment of principal, equal to the developer's costs, plus interest at various rates. In each case, payments on the loans will be made at the lesser of the note payment or the actual net tax increment received (or a reduced percentage received in certain cases) during specific years as stated in the agreement. Payments are first applied to accrued interest and then to principal balances. The notes are cancelled at the end of the agreement term, whether or not they have been repaid. Any additional tax increments received in years following the term are retained by the City. The outstanding principal balance as of December 31, 2002, for all of these agreements was $1,633,817. 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. The City's position is that these are obligations to assign future and uncertain revenue sources and as such, is not actual debt in substance. NOTE 14 — DEPOSITS PAYABLE Platting and performance deposits are accounted for in the City's Escrow Expendable Trust Fund. A summary of the 2002 changes in deposits is as follows: Total deposits payable January 1, 2002 $ 223,397 Add deposits received 455,168 Less payments from deposit account (270,134) Total deposits payable December 31, 2002 $ 408,431