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4. Development Contracts. No contracts have been entered into for development activities in the Redevelopment Project Area. 5. Development to Occur. The development which the HRA reasonably expects to occur in the Redevelopment Project Area consists of the demolition of a portion of the main center building of the Shopping Center, the construction of a new grocery store, the renovation of the remaining portion of the main center to accommodate tenants relocated as a result of the demolition, the renovation of the 90,500 square foot warehouse building, the demolition of the vacant sports and health club building, the building of a holding pond to accommodate storm water run-off from the Shopping Center and site improvements and other improvements of a public nature related to the renovation of the Shopping Center. Such redevelopment is expected to occur within the next three years. D. Payment of Public Redevelopment Costs. 1. In General. All Public Redevelopment Costs will be paid from Tax Increment either directly or indirectly by payment of debt service on Tax Increment Bonds issued to finance such cost or reimbursement for items of Public Redevelopment Costs paid directly by the HRA, City or the owner of the property in the Project Area. 2. Issuance of Bonds. It is presently expected that all or a portion of the Public Redevelopment Costs will be financed by the issuance of the Tax Increment Bonds. The Tax Increment Bonds will be issued by the HRA or the City under authority of Minnesota Statutes, Chapter 475, and Sections 469.174 to 469.179. The principal amount of the Bonds is expected to be $2,700,000. The actual principal amount of the Bonds, however, may be less than or exceed this amount, and the right to issue the Bonds in an amount greater than $2,700,000 to finance such Public Redevelopment Costs is reserved. Similarly, the amount allocated to capitalized interest covers interest payable on the Bonds (net of investment income on proceeds of the Bonds) at an initial rate now estimated to be approximately 8% per annum for a 18'-month period; and the City reserves the right to increase or decrease the amount of capitalized interest to correspond to the -interest actually payable on the Bonds over the 18-month period. 3. Security For Bonds. A portion of the Bonds (approximately $1,500,000 are expected to be general obligations of the City, and the City will pledge its full faith, credit and unlimited taxing powers to the payment of principal thereof and interest thereon. The principal of and interest on the Bonds are payable primarily, however, from the Tax Increments from the District and no ad valorem -7-