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NOTE 15 — RESERVES AND DESIGNATED FUND EQUITY (CONTINUED) The Debt Service Funds designation represents fund balances which are presently committed to provide financial resources to pay principal and interest on the City's bonded debt. The Capital Project Funds designation is for annual street maintenance programs. NOTE 16 —FUND CHANGES The following funds were created during the fiscal year ended December 31, 2002: NOTE 17 — INDUSTRIAL REVENUE BONDS CITY OF RAMSEY Notes to Financial Statements (continued) December 31, 2002 Capital Project Funds 2002 Street Maintenance 2002A Capital Equipment Certificate From time to time, the City has issued Industrial Revenue Bonds and Housing Development Revenue Bonds to provide financial assistance to private sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private sector entity served by the bond issuance. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2002, there was one series of Industrial Revenue Bonds outstanding and one Housing Development Revenue Bond outstanding with aggregate principal amounts payable of $3,533,779 and $3,000,000, respectively. NOTE 18 — COMMITMENTS AND CONTINGENCIES A. Commitments for Construction At December 31, 2002, the City is committed to various construction contracts for the improvement of City property. The City's remaining commitment under these contracts is $871,462. B. Federal and State Revenue Amounts received or receivable from federal and state agencies are subject to agency audit and adjustment. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of claims which may be disallowed by the grantor agencies cannot be determined at this time, although the City expects such amounts, if any, to be immaterial. -35-