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BRIGGS AND MORGAN Joel Hanson May 22, 2014 Page 2 current refinancing is interest savings. There will be no additional improvements to the projects as a result of this transaction. State and federal laws allow local government units to enter into arrangements to issue bonds and loan the proceeds to nonprofit corporations to finance or refinance capital expenditures. This assistance reduces borrowing costs for nonprofit corporations and enables them to provide their services more cost effectively. It is a fairly common means of obtaining necessary financing for all nonprofit entities, including health care and senior housing facilities. To accomplish this purpose, the City will enter into a Loan Agreement with the Borrower under which the Borrower will agree to pay all principal and interest on the Bonds. The City will assign all of its rights to payments under the Loan Agreements to a lender, in this case, Anchor Bank, N.A. (the "Lender"), who will purchase the Bonds and loan the purchase price of the Bonds directly to the Borrower. The City is merely a conduit and the money and obligations flow only between the Lender and the Borrower. The Bonds and the resolutions adopted by the City will recite that the Bonds, if and when issued, will not to be payable from or charged upon any of the City's funds, other than the revenues received under the Loan Agreement and pledged to the payment of the Bonds, and the City is not subject to any liability on the Bonds. No holder of the Bonds will ever have the right to compel any exercise by the City of its taxing powers to pay any of the principal of the Bonds or the interest or premium thereon, or to enforce payment of the Bonds against any property of the City except the interests of the City in payments to be made by the Borrower under the Loan Agreement. The Bonds will not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the City except the interests of the City in payments to be made by the Borrower under the Loan Agreement. The Bonds are not moral obligations on the part of the State or its political subdivisions, including the City, and the Bonds will not constitute a debt of the City within the meaning of any constitutional or statutory limitation. The Bonds will be issued as bank -qualified bonds since the City does not currently reasonably expect to issue its own bonds or bonds on behalf of any other 501(c)(3) organization, and the Bonds will not be in an amount greater than $10,000,000 in 2014. Because the entire financing will be approximately $20,000,000, and because Brooklyn Center does not have sufficient bank qualification capacity on its own, it is proposed that, in addition to Little Canada, the cities of Osseo and North Oaks will also issue bonds for the project. Little Canada will issue bonds in the anticipated principal amount of $3,000,000. It is expected that Osseo will issue bonds in the principal amount of $7,000,000 and that North Oaks will issue bonds in the principal amount of $10,000,000. Bach city will receive an issuer administration fee equal to 1/8 of 1% of the principal amount that such city issues. 6269743v1