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City of Lino Lakes, Minnesota <br />May 23, 2007 <br />• <br />7. Prepayment Provisions <br />8. Credit Rating Comments <br />9. Term Bonds <br />10. Federal Treasury Regulations Conceming Tax - <br />Exempt Obligations <br />(a) Bank Qualification <br />• <br />Thereafter, each year's collection of TIF revenues and <br />taxes will be used to make the August 1 interest payment <br />due in the year of collection and the February 1 principal <br />and interest payment due the following year. The City <br />anticipates using Municipal State Aid allotments from the <br />Department of Transportation to reduce its levy <br />requirement. <br />The City may elect on February 1, 2018, and on any date <br />thereafter, to prepay the Bonds due on or after <br />February 1, 2019, at a price of par plus accrued interest. <br />An application will be made to Moody's Investors Service <br />for a rating on the Bonds. The City's general obligation <br />debt is currently rated "Aa3 ". <br />We have included a provision that permits the underwriters <br />to combine multiple maturity years into a term bond, <br />subject to mandatory redemption on the same maturity <br />schedule provided in the Terms of Proposal. The <br />advantage to the underwriter is that it provides large blocks <br />of bonds, which are more attractive to bond funds, and <br />certain pension funds, which deal only with large blocks of <br />bonds. This in turn is a benefit to the City since selling <br />larger blocks of bonds reduces the risk to the underwriter, <br />allowing them to lower their costs and the interest coupons. <br />Since the Bonds are being offered on a competitive bid <br />basis and awarded on the lowest true interest cost, the City <br />will award the Bonds to the best bid regardless of whether <br />term bonds are chosen or not. <br />Under Federal Tax Law, financial institutions cannot deduct <br />from income for federal income tax purposes, expense that <br />is allocable to carrying and acquiring tax - exempt bonds. <br />There is an exemption to this for "bank qualified" bonds, <br />which can be so designated if the issuer does not issue <br />more than $10 million of tax - exempt bonds in a calendar <br />year. Issues that are bank qualified generally receive <br />slightly lower interest rates than issues that are not bank <br />qualified. Since the City does not expect to issue more <br />than $10 million of tax - exempt obligations in 2007, the <br />Bonds will be designated as bank qualified. <br />Page 2 <br />