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CITY OF ORONO, MINNESOTA <br />Notes to Financial Statements (continued) <br />December 31, 1997 <br />NOTE 5 - LONG-TERM DEBT (CONTINUED) <br />D. Descriptions and Restrictions of Long-Term Debt <br />1. General Long-Term Debt <br />General Obligation Bonds - These bonds were issued to finance various improvements and <br />will be repaid from taxes and special assessments. <br />Public Facilities Bonds of 1991 - These bonds were issued by the Housing and Redevelopment <br />Authority of Orono for the purpose of financing the construction of facilities for a City meeting <br />hall, City offices, police offices, detention and processing, public works office space, storage, <br />maintenance, and repair of machinery and equipment, and a cold storage building. Pursuant to <br />Minnesota StaUites § 469.103a, lease-purchase contracts between the Authority and the City and <br />a Trust Indenture between the Authority and American National Bank and Trust Company have <br />been established. The bonds are special obligations of the City as issuer and owner of the land <br />and buildings. The City has pledged rental payments in amounts equal to the debt service <br />requirements and plans to annually appropriate City funds available for this purpose. As <br />required by bond covenant, a reserve account has been established with a trustee which is to be <br />used to pay principal and interest on the bonds in the event that other available resources are <br />inadequate to do so. In addition, Minnesota Statutes § 475.50, Subd. 5(e) allows cities to make <br />a special levy (outside of levy limits) to pay principal and interest on bonds of another political <br />subdivision. The Minnesota Department of Revenue has determined that because a Housing and <br />Redevelopment Authority is a political subdivision of the state, a levy to pay principal and <br />interest on the bonds would be outside the City’s levy limits. <br />Vacation and Severance Benefits Payable - This liability represents vested benefits earned <br />by employees other than Proprietary Fund employees through the end of the year (other than the <br />current portion paid within 60 days), which will be paid or used in future periods. The liability <br />for Proprietary Fund employees is included in the accrued liabilities of those funds. <br />2. General Long-Term Debt and Proprietary Fund Debt <br />Refunding Bonds - In December 1995, the City issued $1,910,000 of General Obligation <br />Refunding Bonds of 1995 to advance refund $360,000 of the City’s General Obligation <br />Improvement Bonds of 1985 and to advance refund $1,550,000 of the City’s General Obligation <br />Water and Sewer Revenue Bonds of 1989. These bonds are now considered defeased. <br />E. Ultimate Responsibility for Debt <br />Long-term debt is backed by the full faith and credit of the City, except the Public Facilities Revenue Bonds <br />of 1991. <br />-41-