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I. SOURCES OF REVENUE • The anticipated source of revenue to be used to finance public costs associated with the public development projects and objectives as stated in Development District No. 1 is tax increment generated as a result of the taxation of the land and improvements in District No. 21. Tax increment financing refers to a funding technique that utilizes increases in valuation and the property taxes attributable to new development to finance, or assist in the financing of, public development costs. Additional sources of revenue may include, but are not limited to, investment income and land sales proceeds. This does not preclude the City, the Authority, or the developer from using other funds, at its discretion, to pay such costs. SOURCES OF FUNDS TOTAL Tax Increment $ 410,000 Interest 150,000 Local Contribution 50,000 Other Revenue Sources TOTAL $ 610,000 J. ORIGINAL TAX CAPACITY AND TAX RATE Pursuant to Minnesota Statutes Section 469.174, Subdivision 7 and Section 469.177, Subdivision 1, the Original Net Tax Capacity (ONTC) for the District No. 21 is based on the value placed on the property by the assessor in 1998 for taxes payable 1999. • Pursuant to Sections 469.177, subd. 1(f), the ONTC will be increased each year by a factor which represents the average percentage increase in the estimated market value of all property in District No. 21 during the five year period before certification of District No. 21 (assessment years 1993 through 1998). The County Auditor will increase the ONTC 13.33% each year over the life of District No. 21. Average 1993 1998 Annual EMV EMV Increase % Increase Increase $18,000 $30,000 $12,000 66.66% 13.33% The original local tax rate for the purpose of the projecting cashflow for District No. 21 will be the tax rate for taxes payable in 1998 of 1.1 1504. The certified original local tax rate for District No. 21 will be the tax rate for taxes payable in 1999. Each year, the Sherburne County Auditors Office will measure the amount of increase or decrease in the total tax capacity of District No. 21 to calculate the tax increment payable to the City and the Authority. In any year in which there is an increase in total tax capacity in the tax increment financing district above the average annual percentage increase based upon the 5 years prior to certification of the district, a tax increment will be payable. In any year in which the total tax capacity in District No. 21 declines below the original net tax capacity, no additional valuation will be captured and no tax increment will be payable. • Tax Increment Financing District No.21 Page II-5