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City of Lino Lakes, Minnesota May 7, 2002 11. Attachments Sources and Uses of Funds Composition of the Issue (project listing) Assessment Income Schedules Debt Service Schedule Terms of Proposal DISCUSSION Proceeds of the Bonds, together with funds from other sources, will be used to finance infrastructure improvement projects in various areas of the City, including street and utility improvements. The sources and uses of funds for the Bonds are shown on Page 6. The Bonds will be repaid from special assessments levied against benefited properties. Assessments in the aggregate amount of $2,727,708 will be filed on or about October 15, 2002. Assessments will be spread over a terms of 10 to 15 years, with even annual total payments of principal and interest. Interest will be charged on the unpaid principal balance at a rate which is 2% over the rate on the Bonds, or approximately 6.25 %. The effective rate on the Bonds is estimated to be approximately 4.25 %. Two out of the three projects being financed bear special mention as to our treatment of debt service versus assessment income. First, while the assessments on the Twilight Acres project are actually spread for a term of 15 years, we recommend that the Bonds be amortized over a 10 year term. Assessment income received after the final payment on the Bonds may be used by the City for proper corporate purposes. Secondly, with regard to West Shadow Ponds, which is a new development, the assessments will actually be spread over a term of ten years. At the direction of City staff we have shown the assessment income over a term of five years, and structured the debt service payments accordingly, to take into account likely prepayments of assessments resulting from property sales. If the assessment income and anticipated prepayments are not ultimately received on the projected schedule (shown on Page 12), the City will be required to fund resulting income shortfalls from other City funds or a property tax levy. The project listing, showing the assessed costs and other project funding sources, is shown on Page 7. Our projection of assessment income is shown on Pages 8 through 12. Our recommended principal structure for the Bonds is shown on Page 13. Debt service has been structured around the projected annual assessment income to result in even annual surplus income over a term of ten years. Page 13 shows the following information: Columns 1 through 4 show the annual principal, estimated interest rates and projected total principal and interest payments, given the current market environment. Column 5 shows the capitalized interest used to make the February 1, 2003 interest payment • Column 6 shows the net debt service requirements after taking into account the capitalized interest. Column 7 shows the 5% overlevy which is required by State statutes and serves as a protection to bondholders and the City in the event of delinquencies in the collection of assessments or taxes. Page 4