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JURAN & MOODY, INC. MUNICIPAL BONDS EXCLUSIVELY 114 EAST SEVENTH STREET SAINT PAUL, MINNESOTA 55101 TELEPHONE 612/298-1500 October 1, 1976 .� OCT, 4 1976 CITY OF LITTLE CANADA CITY OF LITTLE CANADA Attention: Joseph Chlebeck City Hall 579 515 Little -Canada Road CLERK'S EXHIBIT NO. Little Canada, Minnesota 55117 Meeting 10-6-76 RE: PROPOSED ADVANCE REFUNDING Gentlemen: As you know we submitted a proposal to refund certain issues of City's existing debt, which was subsequently approved. The sale of the bonds was -scheduled for October 13, 1976. On Friday, September 24, we received notice that the Internal Revenue Service had announced its intention to publish new proposed -regulations dealing with the advance refunding of tax-exempt securities, and that the regulations to be issued would apply to any refunding obligations delivered after September 24, Although the preliminary announcement of the new regulations seems to indicate that they are designed to prevent the so-called "arbitrage profit" which accrues to persons who purchase the U.S. government obli- gations to be resold to the escrow account in connection with the refund- ing, until we are able to examine the new regulations and satisfy ourselves that they do not contain any other changes, we cannot be sure that the structure of the advance refunding proposed for the City will not be substantially changed. In.addition, even the changes which are likely to be made in order to eliminate the arbitrage profit create substantial questions as to the allocation of the expenses of the refunding and other matters which may affect the benefit to be derived from the City by the refunding. Our major concern is that the City might decide to proceed with the sale -on Wednesday and enter into a binding cessittractwita th among purchaser on that date, which would, of course, other things, the issuance of the bonds was in all respects in compliance with et'Y'!pbsed regulations referred to above, only to find that the new regulations would so change the structure of the transaction that it would notlonger appear to be in the best interests of the City to issue the refunding bonds. If a binding contract for the sale of the bonds has been entered into before the impact of the new proposed regu- lations is fully assessed, the City might find itself forced to issue