The State leases building space, land, and equipment to private individuals. The minimum future lease revenues for the next five years and thereafter are as follows (amounts in thousands):
| 2005 | $ 30,126 |
| 2006 | 25,261 |
| 2007 | 27,101 |
| 2008 | 27,616 |
| 2009 | 27,909 |
| Thereafter | 22,345 |
| Total | $ 160,358 |
Contingent revenues for the year ended June 30, 2004, were $2.4 million.
State as Lessee
Obligations under capital and operating leases as of June 30, 2004, were as follows (amounts in thousands):
| Noncancelable | Capital | |
| Operating Leases | Leases | |
| 2005 | $ 26,583 | $ 7,076 |
| 2006 | 17,903 | 6,336 |
| 2007 | 12,638 | 6,037 |
| 2008 | 9,287 | 5,652 |
| 2009 | 915 | 5,248 |
| 2010-2014 | 19,073 | 27,110 |
| 2015-2019 | - | 6,156 |
| 2020-2024 | - | 6,142 |
| 2025-2029 | - | 6,110 |
| 2030-2034 | - | 2,432 |
| Total minimum lease payments | $ 86,399 | 78,299 |
| Less: Amount representing interest costs | 24,538 | |
| Present value of minimum lease payments | $ 53,761 | |
Minimum capital lease payments were discounted using an interest rate of approximately 6 percent.
Rental and lease payments for equipment charged to expenditures during the year ended June 30, 2004, totaled $11.1 million.
Lease/Lease Back Transaction (amounts in thousands)
On September 30, 2003 the State executed a U.S. Lease-to-Service Contract of Rolling Stock Agreement (Agreement) whereby the state entered into a head lease of certain rolling stock consisting of rail coaches and locomotives to statutory trusts established for the benefit of three equity investors. Simultaneously, the State executed sublease agreements to lease back the rolling stock in order to allow the State to have continued use of the property. The terms of the head leases are for periods ranging from 40 years to 67 years, expiring through March 2071, while the subleases have terms ranging from 18 years to 28 years, expiring through January 2032. At the end of the respective sublease terms, the State will have the option to purchase the statutory trusts' interest in the rolling stock for an aggregate fixed price.
In connection with the transaction, the State received net proceeds for $29,357 representing the consideration paid for the tax benefits received by the equity investors. The net proceeds received were calculated as follows:
| Prepayment of head lease rent | $ 366,405 |
| Less: deposit to irrevocable trust | 334,590 |
| Less: lease executory costs | 2,458 |
| Net proceeds received | $ 29,357 |
Proceeds from the prepayment of the head lease rents were paid to debt payment undertakers and custodians in amounts sufficient, together with investment earning thereon, to provide for all future obligations of the State under the sublease agreements and the end of lease term purchase options. With respect to payments made to custodians, the State pledged assets as collateral to the custodians for the benefit of the lessors, and granted a first security interest is such assets. The pledged assets will primarily be used to pay the end of lease term purchase options. Payments made by the State to the debt payment undertakers are irrevocable once made and will not be subject to avoidance or recapture by the State or any creditor's of the State. Further, the State has no right, title, or interest in or to the amounts paid to the debt payment undertakers upon the payment thereof and accordingly, the amounts so paid cease to be assets of the State, but are assets solely of the debt payment undertakers. In addition, per the terms of Debt Payment Undertaking Agreement Guarantees, the debt payment undertaker guarantors have unconditionally guaranteed the full and prompt payment of any and all obligations of the debt payment undertakers. The assets held by the debt payment undertakers and the custodians, as well as any related lease obligation liability, are not reflected as assets or liabilities in the accompanying financial statements. Although it is remote that the State will be required to make any additional payments under the sublease, the State is and shall remain liable for all of its obligations under the subleases. The aggregate remaining commitment under the subleases totaled approximately $343 million at June 30, 2004.
The State is obligated to insure and maintain the rolling stock. In addition, if an equity investor suffers a loss of tax deductions or incurs additional taxable income as a result of certain circumstances, as defined in the Agreement, then the State must indemnify the equity investor for the additional tax incurred, including interest and penalties thereon. The State has the right to terminate the sublease early under certain circumstances and upon payment of a termination value to the equity investors. If the State chooses early termination, then the termination value would be paid from funds available from the debt payment undertakers and the custodians, and if such amounts are insufficient, then the State would be required to pay the difference.