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3. Purpose. The Bonds shall provide funds to finance <br />the Project. Pursuant to the Plan, tax increments derived from <br />the Tax Increment District (the "Tax Increments") established <br />pursuant to the Plan have been pledged to the payment of the <br />Bonds and interest thereon. The estimated collection of Tax <br />Increments exceeds twenty percent (20U of the cost of the <br />Project. The total cost of the Project, which shall include all <br />costs enumerated in Minnesota Statutes, Section 475.65, is <br />estimated to be at least equal to the amount of the Bonds. <br />Proceeds of the Bonds shall be expended on costs or uses <br />permitted by Minnesota Statutes, Sections 469.174 through <br />469.179, including particularly Section 469.176, Subdivision 4, <br />and shall not be expended on any costs or devoted to any other <br />uses. <br />4. Interest. The Bonds shall bear interest payable <br />semiannually on February 1 and August 1 of each year (each, an <br />"Interest Payment Date"), commencing February 1, 1998, calculated <br />on the basis of a 360 -day year of twelve 30 -day months, at the <br />respective rates per annum set forth opposite the maturity years <br />as follows: <br />Maturity <br />Year <br />2000 <br />2001 <br />2002 <br />2003 <br />2004 <br />2005 <br />2006 <br />Interest <br />Rate <br />6.80 g <br />6.90 <br />7.00 <br />7.10 <br />7.20 <br />7.30 <br />7.40 <br />Maturity <br />Year <br />2007 <br />2008 <br />2009 <br />2010 <br />2011 <br />2012 <br />Interest <br />Rate <br />7.50 <br />7.60 <br />7.70 <br />7.80 <br />7.90 <br />8.00 <br />5. Redemption. All Bonds maturing in the years 2008 <br />to 2012, both inclusive, shall be subject to redemption and <br />prepayment at the option of the City on February 1, 2007, and on <br />any date thereafter at a price of par plus accrued interest. <br />Redemption may be in whole or in part of the Bonds subject to <br />prepayment. If redemption is in part, the maturities and the <br />principal amounts within each maturity to be redeemed shall be <br />determined by the City; and if only part of the Bonds having a <br />common maturity date are called for prepayment, the specific <br />Bonds to be prepaid shall be chosen by lot by the Bond Registrar. <br />Bonds or portions thereof called for redemption shall be due and <br />payable on the redemption date, and interest thereon shall cease <br />to accrue from and after the redemption date. Notice of <br />redemption shall be given by certified mail to the paying agent <br />and to each affected registered holder of the Bonds at least <br />thirty (30) days prior to the date fixed for redemption at the <br />address shown on the registration books. <br />360858.1 3 <br />