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• <br />• <br />• <br />City of Lino Lakes, Minnesota <br />May 16, 2006 <br />24 -month spend down exemption periods. Both the 18- <br />month and 24 -month expenditure exceptions requrie a <br />certain percentage of the proceeds to be spent within 6 <br />month intervals. If all of the proceeds are expended <br />during one of those exemption periods, the issuer is <br />exempt from rebate and may retain the excess earnings. <br />It is our understanding that the City expects to meet the <br />24 -month expenditure exception for both Issues. Please <br />note that although the City may expect to meet an <br />expenditure exception the exceptions are based on <br />actual expenditures not expectations. <br />Springsted currently provides arbitrage rebate services to <br />the City under a separate contract. An amendment to <br />that contract adding these Issues has been provided to <br />City staff. <br />(c) Bona Fide Debt Service Fund The City must maintain a bona fide debt service fund for <br />the Issues or be subject to yield restriction. This requires <br />restricting the investments held in the debt service fund <br />to the yield on the Bonds. A bona fide debt service fund <br />is a fund for which there is an equal matching of revenue <br />to debt service expense, with carry over permitted equal <br />to the greater of the investment earnings in the fund for <br />the prior year or 1/12 the debt service of the prior year. <br />(d) Economic Life The average life of the Bonds cannot exceed 120% of <br />the economic life of the projects to be financed. <br />12. Continuing Disclosure <br />The project being financed with the proceeds of the <br />Abatement Bonds has an economic life of at least <br />20 years. The average life of the Abatement Bonds is <br />11.995 years. The project being financed with the <br />proceeds of the Utility Bonds has an economic life of at <br />least 20 years. The average life of the Utility Bonds is <br />6.369 years. Therefore, both series of Bonds meet the <br />economic life requirements. <br />The Bonds are subject to continuing disclosure <br />requirements set forth by the Securities and Exchange <br />Commission (SEC). The SEC rules require the City to <br />undertake an annual update of certain Official Statement <br />information and report any material events to the national <br />repositories. <br />- 5 9 - <br />Page 4 <br />