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February 1, the Finance Director shall determine the amount on hand in the Debt Service Account. If such amount is in excess of one-twelfth of the debt service payable from the Bond Fund in the immediately preceding 12 months,the Finance Director shall promptly transfer the amount in excess to the Surplus Account. The City appropriates to the Surplus Account any amounts to be transferred thereto from the Debt Service Account as herein provided and all income derived from the investment of amounts on hand in the Surplus Account. If at any time. the amount on hand in the Debt Service Account is insufficient to meet the requirements of the Bond Fund, the Finance Director shall transfer to the Debt Service Account amounts on hand in the Surplus Account to the extent necessary to cure such deficiency. 4.03. Additional Bonds. The City reserves the right to issue additional bonds payable from the Bond Fund as may be required to finance costs of the Improvements not financed hereby; provided that the City Council shall,prior to the delivery of such additional bonds, levy or agree to levy by resolution sufficient additional special assessments and ad valorem taxes, if any, which, together with other moneys or revenues pledged for the payment of said additional obligations, will produce revenues at least five percent(5%) in excess of the amount needed to pay when due the principal and interest on all bonds payable from the Bond Fund. The additional special assessments,ad valorem taxes and moneys or revenues so pledged, levied or agreed to be levied shall be irrevocably appropriated to the Bond Fund in the manner provided by Minnesota Statutes, Section 475.61. 4.04. Levy of Special Assessments. The City hereby covenants and agrees that for payment of the cost of each of the Improvements it will do and perform all acts and things necessary for the full and valid levy of special assessments against all assessable lots, tracts and parcels of land benefited thereby and located within the area proposed to be assessed therefor, based upon the benefits received by each such lot, tract or parcel, in an aggregate principal amount not less than twenty percent(20%) of the cost of the Improvements. In the event that any such assessment shall be at any time held invalid with respect to any lot,piece or parcel of land, due to any error, defect or irregularity in any action or proceeding taken or to be taken by the City or this Council or any of the City's officers or employees, either in the making of such assessment or in the performance of any condition precedent thereto,the City and this Council hereby covenant and agree that they will forthwith do all such further acts and take all such further proceedings as may be required by law to make such assessments a valid and binding lien upon such property. The Council presently estimates that the special assessments shall be in the aggregate principal amount of$180,900 payable in not more than 15 installments, the first installment to be collectible with taxes during the year 1999, and that deferred installments shall bear interest at the rate of not less than six and seven hundredths percent(6.70%)per annum from the date of the resolution levying said assessment until December 31 of the year in which the installment is payable. 4.05. Ad Valorem Taxes. The full faith and credit and taxing powers of the City are irrevocably pledged for the prompt and full payment of the principal of and interest in the -14-