09/25/2006 Council Packet - Laserfiche WebLink

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City oft.Mc Lakes, Minnesota September 18, 2006 (b) Rebate Requirements (c) Bona Fide Debt Service Fund • (d) Economic Life 12. Caring Disclosure • The Series 2006E Bonds are refunding the Series 1998A Bonds that were originally issued as not bank qualified. Therefore, the Series 2006E Bonds are not designated bank qualified. All tax - exempt issues are subject to the federal arbitrage and rebate requirements, which require all excess earnings created by the financing to be rebated to the U.S. Treasury. The requirements generally cover two categories: bond proceeds and debt service funds. There are exemptions from rebate that may apply in both of these categories. Since the proceeds of the Bonds are being used to refund prior issues as current refundings, the proceeds will be expended within 90 days of closing and will therefore meet the six -month expenditure exception to rebate. The City must maintain a bona fide debt service fund for the Issues or be subject to yield restriction. This requires restricting the investments held in the debt service fund to the yield on the Bonds. A bona fide debt service fund is a fund for which there is an equal matching of revenue to debt service expense, with carry over permitted equal to the greater of the investment earnings in the fund for the prior year or 1/12 the debt service of the prior year. The average life of the Bonds cannot exceed 120% of the economic life of the projects to be financed. Since the average lives of the Series 2006E Bonds and the Series 2006F Bonds are less than the remaining average lives of the bonds being refunded, both series of Bonds meet the economic life requirements. The Bonds are subject to continuing disclosure requirements set forth by the Securities and Exchange Commission (SEC). The SEC rules require the City to undertake an annual update of certain Official Statement information and report any material events to the national repositories. - 6 0 - Page 4