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HomeMy WebLinkAbout2004-142 Council Resolution• • • AGENDA ITEM 2A STAFF ORIGINATOR Al Rolek MEETING DATE September 27, 2003 TOPIC Consideration of Resolution 04 -142 Providing for the Issuance and Sale of $1,330,000 G.O. Improvement and Utility Bonds, Series 2004A VOTE REQUIRED Simple Majority f The City Council has approved public improvement projects for Birch & Hodgson Street Improvements, Marshan Estates Utilities, 62 "d Street Reconstruction and Holly Drive Street Reconstruction. To finance the improvements to be made in these projects it is necessary to issue and sell General Obligation Improvement and Utility bonds. Our financial advisor, Springsted, Inc., has issued their recommendation for the issuance of $1,330,000 G.O. Improvement and Utility Bonds Series 2004A. f t� If approved the sale would occur on October 25, 2004, with consideration for award by the City Council at its meeting the same day. The issue would have a 15 -year term running from 2006 through 2020 and would be repaid through the levy of special assessments against the benefited parcels and utility revenues. Staff recommendation is for the City Council to approve Resolution 04 -142 providing for the issuance and sale of $1,330,000 G.O. Improvement and Utility Bonds, Series 2004A. 1. Adopt Resolutions 04 -142. 2. Refer to Staff for further review. 3. Deny Resolution 04 -142. Option 1 85 E. SEVENTH PLACE, SUITE 100 SAINT PAUL, MN 55101 -2887 • 651 -223 -3000 FAX: 651 -223 -3002 //7 E -MAIL: advisors(aspringsted.com • • September 23, 2004 Mr. Alan Rolek, Finance Director City of Lino Lakes 600 Town Center Parkway Lino Lakes, MN 55014 SPRINGSTED Advisors ro the Public Sector Re: Recommendations for the Issuance of $1,330,000 General Obligation Improvement and Utility Revenue Bonds, Series 2004A Dear Mr. Rolek: We have enclosed one copy of our recommendations for the above - captioned issue for distribution to Council members and City staff prior to your meeting on Monday, September 27, 2004. We have also enclosed contract amendments for services relating to continuing disclosure and arbitrage rebate to include this issue. If the City wishes to continue to engage Springsted for these services for the new issue, please sign the amendments and return them to us. If you should have any questions pertaining to the enclosed documents, or if you require additional copies, please do not hesitate to contact us. Sincerely, C%, ti7e a %an Christine M. Hogan Project Manager mb Enclosures • • Recommendations For City of Lino Lakes, Minnesota $1,330,000 General Obligation Improvement and Utility Revenue Bonds, Series 2004A Presented to: Honorable John Bergeson, Mayor Members, City Council Mr. Gordon Hetike, City Administrator Mr. Alan Rolek, Finance Director City of Lino Lakes 600 Town Center Parkway Lino Lakes, MN 55014 • Study No.: L0502V2 SPRINGSTED Incorporated September 23, 2004 • SPRINGSTED Adrisors to the Public Sector RECOMMENDATIONS Re: Recommendations for the Issuance of $1,330,000 General Obligation Improvement and Utility Revenue Bonds, Series 2004A (the "Bonds" or the "Issue ") Proceeds of the Bonds will be used to finance various street, sanitary sewer and water utility improvements projects within the City. We recommend the following for the Bonds: 1. Action Requested 2. Sale Date and Time 3. Authority for the Bond Issue 4. Repayment Term 5. Security and Source of Payment (a) Security (b) Source of Payment 6. Prepayment Provisions 7. Credit Rating Comments To establish the date and time of receiving bids and establish the terms and conditions of the offering. Monday, October 25, 2004, at 11:30 A.M., with award by the City Council at 6:30 P.M. the same day. The Bonds are being issued pursuant to Minnesota Statutes, Chapter 475. In addition the street improvement portion of the Bonds is being issued pursuant to Minnesota Statutes, Chapter 429 and the water utility fund improvement portion of the Bonds is being issued pursuant to Minnesota Statutes, Chapter 444. The Bonds will mature annually February 1, 2006 through 2020. Interest will be payable semi - annually each February 1 and August 1, commencing August 1, 2005. The Bonds will be general obligations of the City for which the City pledges its full faith and credit and power to levy general ad valorem taxes. The street improvement portion of the Bonds will be repaid from special assessments filed against benefited property. The water improvement portion of the Bonds will be repaid from net revenues of the City's water utilities. The City may elect on February 1, 2010, and on any date thereafter, to prepay the Bonds due on or after February 1, 2011, at a price of par plus accrued interest. This five year call provision was requested by the City to allow the City the flexibility to call all or a portion of the Bonds on February 1, 2011 in the event prepayments of assessments have been received. An application will be made to Moody's Investors Service for a rating on the Bonds. The City's current general obligation credit rating is "A2 ". 4 • • • City of Lino Lakes, Minnesota September 23, 2004 8. Term Bonds 9. Federal Treasury Regulations Concerning Tax - Exempt Obligations (a) Bank Qualification (b) Rebate Requirements We have included a provision that permits the underwriters to combine multiple maturity years into a term bond, subject to mandatory redemption on the same maturity schedule provided in the Terms of Proposal. The advantage to the underwriter is that it provides large blocks of bonds, which are more attractive to bond funds, and certain pension funds, which deal only with large blocks of bonds. This in turn is a benefit to the City since selling larger blocks of bonds reduces the risk to the underwriter, allowing them to lower their costs and the interest coupons. Since the Bonds are being offered on a competitive bid basis and awarded on the lowest true interest cost, the City will award the Bonds to the best bid regardless of whether term bonds are chosen or not. Under Federal Tax Law, financial institutions cannot deduct from income for federal income tax purposes, income expense that is allocable to carrying and acquiring tax - exempt bonds. There is an exemption to this for "bank qualified" bonds, which can be so designated if the issuer does not issue more than $10 million of tax - exempt bonds in a calendar year. Issues that are bank qualified typically receive slightly lower interest rates than issues that are not bank qualified. Since the City expects to issue less than $10 million of tax - exempt debt in 2004, this Issue is designated as 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. There is an exemption from rebate for a municipality that issues $5 million or less of tax - exempt obligations in a calendar year. Since the City does not expect to issue more than $5 million of tax - exempt obligations in 2004, this Issue will be exempt from rebate. Although exempt from rebate, the City must still comply with the arbitrage regulations which require yield restriction of proceeds remaining in a project fund after the three -year temporary period. Page 2 • • • City of Lino Lakes, Minnesota September 23, 2004 (c) Bona Fide Debt Service Fund (d) Economic Life (e) Federal Reimbursement Regulations 10. Continuing Disclosure 11. Attachments The City must maintain a bona fide debt service fund for the Bonds or be subject to yield restriction. This requires restricting the investments held in the debt service fund to the yield on the bonds and /or paying back excess investment earnings in the debt service fund to the federal government. 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 during that year or 1/12 the debt service of that year. Because prepayments of assessments may be collected on the street improvement portion of the Bonds, the City should be particularly careful in monitoring the debt service fund for the Bonds. Springsted currently provides arbitrage rebate services for the City under a separate contract. An amendment to that contract adding this Issue has been provided to the City. The average life of the Bonds cannot exceed 120% of the economic life of the projects to be financed. The economic life of street improvements is 20 years and the economic life of water utility improvements is 50 years. The average life of the Bonds is 8.884 years; therefore the Bonds are within the economic life requirements. Federal reimbursement regulations require the City to make a declaration, within 60 days of the actual payment, of its intent to reimburse itself from expenses paid prior to the receipt of bond proceeds. It is our understanding the City has taken whatever actions are necessary to comply with the federal reimbursement regulations in regards to the Bonds. This Issue is subject to the continuing disclosure requirements. The SEC rules require the City to undertake an annual update of its Official Statement information and report any material events to the national repositories. Springsted currently provides continuing disclosure services for the City under a separate contract. An amendment to that contract adding this Issue has been provided to City staff. • Sources and Uses of Funds • Debt Service Schedule • Assessment Income Schedule • Terms of Proposal Page 3 • City of Lino Lakes, Minnesota September 23, 2004 DISCUSSION The Bonds have been structured as a single issue although they have been broken out by project type as follows: (1) the street improvement portion and; (ii) the water improvement portion. Each portion has been structured independently and then combined into this single Bond issue. Combining the street improvement projects with the water improvement projects into a single issue enhances the marketability of the Bonds (larger principal maturities) and reduces issuance costs. Each portion of the Bonds will be repaid from different revenue sources (special assessments and net revenues of the City's water utilities). The City will need to establish a system to track each portion of the Bonds separately. The sources and uses of funds for the Bonds are detailed on page 6 and show the breakdown between the street improvement portion and the water improvement portion. Page 7 shows the total debt service on the Bonds. The Street Improvement Portion The street improvement portion of the Bonds will be used to finance various street improvements associated with the City's Birch /Hodgson project, including construction of turn lanes, realignment of Ware Road, and installation of traffic signals. The street improvement portion will be repaid from special assessments levied against benefited properties. Assessments in the aggregate amount of $600,000 will be filed on or about October 14, 2004 for first collection in 2005. Assessments will be spread over a term of 15 years, with even annual total payments of principal and interest. Interest will be charged on the unpaid principal balance at a rate of 7.0 %. The projected assessment income schedule is shown on page 8. It is expected that assessment income, if collected as scheduled, will be sufficient to pay 100% of the debt service on the street improvement portion of the Bonds. The repayment of the street improvement portion of the Bonds has been structured around the projected assessment income to provide for even annual cash flow surpluses over the repayment term. Each year's first -half collections of assessments will be used to pay the August 1 interest payment in the year of collection. Second -half collection of assessments plus surplus first -half collections will be used to pay the February 1 principal and interest payment in the following year. The principal structure for the street improvement portion of the Bonds is shown on page 9 and shows the following: • Columns 1 through 4 show the annual principal payments, estimated interest rates and projected total principal and interest payments, given the current market environment. ■ Column 5 shows the 5% overlevy which is required by State statutes and serves as a protection to bondholders and the City in the event of delinquencies in the collection of assessments. • Column 6 shows the total projected assessment income developed on page 8. • Column 7 shows the estimated difference between columns 5 and 6 and represents the projected annual surplus of assessment income over 105% of debt service. Based on projected assessment income, it is expected that the City will not be required to levy ad valorem property taxes to pay debt service on the street improvement portion of the Bonds. Page 4 • • City of Lino Lakes, Minnesota September 23, 2004 The Water Improvement Portion The water improvement portion of the Bonds will be used to finance improvements to the City's sanitary sewer and water utility related to the Marshan Estates project, the 62nd Street Utility projects, and the Holly Drive projects. The water improvement portion of the Bonds will be repaid from net revenues of the City's water utility. Pursuant to Minnesota Statutes, Chapter 444 and the resolution awarding the Bonds, the City will covenant to maintain water rates in an amount sufficient to generate revenues to support the operation of the water utility and to pay debt service. The City is required to annually review the budget of the water utility to determine whether current rates and charges are sufficient and to adjust them as necessary. The debt service schedule for the water improvement portion of the Bonds is shown on page 10. The water improvement portion is structured with even annual debt service payments over a term of 15 years. The City has two outstanding bond issues which are also being repaid in whole or in part from net revenues of the City's water utility. The table below shows the net revenues available for debt service of the City's water utility for the fiscal years ending 2003. The projected maximum annual debt service payable from net revenues of the water utility, including the water improvement portion of this Issue, is projected to be approximately $568,313. 2003 Operating Revenues $1,064,326 Less: Operating Expenses (809,789) Add Back: Depreciation 304,382 Add Back: Operating Transfers for 301,355 Connection Fees Add: Earnings on Investments 3,203 Net Revenues Available for Debt $ 863,477 Service Springsted is pleased to again be of service to the City of Lino Lakes. Respectfully submitted, s" J S v7,u2G9 . d / PI Pt o � e SPRINGSTED Incorporated mb Provided to Staff: Rebate and Continuing Disclosure Contract Amendments Page 5 • • • $1,330,000 City of Lino Lakes, Minnesota General Obligation Improvement and Utility Revenue Bonds Series 2004A Total Issue Sources And Uses Dated 11/15/2004 I Delivered 11/15/2004 Street Projects Water Utility Issue (Birch & Hodgson) Projects Summary Sources Of Funds Par Amount of Bonds $620,000.00 $710,000.00 $1,330,000.00 Total Sources $620,000.00 $710,000.00 $1,330,000.00 Uses Of Funds Deposit to Project Construction Fund 600,000.00 688,445.00 1,288,445.00 Costs of Issuance 10,698.50 12,251.50 22,950.00 Total Underwriter's Discount (1.100 %) 6,820.00 7,810.00 14,630.00 Rounding Amount 2,481.50 1,493.50 3,975.00 Total Uses $620,000.00 $710,000.00 $1,330,000.00 Sena 2004A EX 2 / Awe Summary / 9/20/2009 / 2d9 FA1 ,AESPRINGSTED Air Advisor, to the Public .Swot Page 6 $1,330,000 City of Lino Lakes, Minnesota General Obligation Improvement and Utility Revenue Bonds Series 2004A DEBT SERVICE SCHEDULE Date Principal Coupon Interest Total P +I 105% of Total 02/01/2005 - 02/01/2006 65,000.00 1.900% 58,424.00 123,424.00 129,595.20 02/01/2007 75,000.00 2.250% 47,005.00 122,005.00 128,105.25 02/01/2008 75,000.00 2.600% 45,317.50 120,317.50 126,333.38 02/01/2009 75,000.00 2.900% 43,367.50 118,367.50 124,285.88 02/01/2010 75,000.00 3.150% 41,192.50 116,192.50 122,002.13 02/01/2011 85,000.00 3.400% 38,830.00 123,830.00 130,021.50 02/01/2012 85,000.00 3.550% 35,940.00 120,940.00 126,987.00 02/01/2013 85,000.00 3.700% 32,922.50 117,922.50 123,818.63 02/01/2014 90,000.00 3.850% 29,777.50 119,777.50 125,766.38 02/01/2015 95,000.00 4.000% 26,312.50 121,312.50 127,378.13 02/01/2016 95,000.00 4.100% 22,512.50 117,512.50 123,388.13 02/01/2017 100,000.00 4.200% 18,617.50 118,617.50 124,548.38 02/01/2018 105,000.00 4.300% 14,417.50 119,417.50 125,388.38 02/01/2019 110,000.00 4.350% 9,902.50 119,902.50 125,897.63 02/01/2020 115, 000.00 4.450% 5,117.50 120,117.50 126,123.38 Total $1,330,000.00 $469,656.50 $1,799,656.50 $1,889,639.33 SIGNIFICANT DATES Dated 11/15/2004 Delivery Date 11/15/2004 First Coupon Date 8/01/2005 Yield Statistics Bond Year Dollars $11,815.78 Average Life 8.884 Years Average Coupon 3.9748251% Net Interest Cost (NIC) 4.0986426% True Interest Cost (TIC) 4.0932521% Bond Yield for Arbitrage Purposes 3.9401182% All Inclusive Cost (AIC) 4.3383891% IRS Form 8038 Net Interest Cost 3.9748251% Weighted Average Maturity 8.884 Years Interest rates are estimates. Changes in rates may cause significant alterations to this schedule. The actual underwriter's discount bid may also vary. Series 2004A EX 2 / Laue Summary / 9/20/2004 / 2:7.9 PM SPRINGSTI D ASV 4dv;.mr to rho 9,nn, Sector Page 7 $600,000 City of Lino Lakes, Minnesota General Obligation Improvement and Utility Revenue Bonds Assessments ASSESSMENT INCOME Date Principal Coupon Interest Total P +I 12/31/2004 - - - - 12/31 /2005 15,919.93 7.000% 50,866.67 66,786.60 12/31/2006 25,901.00 7.000% 40,885.60 66,786.60 12/31/2007 27,714.06 7.000% 39,072.54 66,786.60 12/31/2008 29,654.05 7.000% 37,132.56 66,786.61 12/31/2009 31,729.83 7.000% 35,056.76 66,786.59 12/31/2010 33,950.92 7.000% 32,835.68 66,786.60 12/31/2011 36, 327.49 7.000% 30,459.12 66,786.61 12/31/2012 38,870.41 7.000% 27,916.20 66,786.61 12/31/2013 41, 591.34 7.000% 25,195.26 66,786.60 12/31/2014 44, 502.73 7.000% 22, 283.86 66,786.59 12/31/2015 47,617.92 7.000% 19,168.68 66,786.60 12/31/2016 50, 951.18 7.000% 15, 835.42 66,786.60 12/31 /2017 54,517.76 7.000% 12,268.84 66,786.60 12/31/2018 58,334.00 7.000% 8,452.60 66,786.60 12/31/2019 62,417.38 7.000% 4,369.22 66,786.60 Total $600,000.00 $401,799.01 $1,001,799.01 SIGNIFICANT DATES Filing Date 10/15/2004 First Payment Date 12/31/2005 Series 2004A Asvecsments / Birch & Ho4pon / 9/20/2004 / 2:1, PM SPRINGSTIit) Advisors re the Public .Sector Page 8 City of General Obligation Street Improv $620,000 Lino Lakes, Minnesota Improvement and Utility Revenue Bonds Series 2004A vement Projects (Birch & Hodgson) NET DEBT SERVICE SCHEDULE Date Principal Coupon Interest Total P +I 105% of Total Assessment Income (1) (2) (3) (4) (5) (6) Annual Surplus (7) 02/01/2005 02/01/2006 02/01/2007 02/01 /2008 02/01/2009 02/01/2010 02/01/2011 02/01/2012 02/01/2013 02/01/2014 02/01/2015 02/01/2016 02/01/2017 02/01/2018 02/01/2019 02/01/2020 30,000.00 35,000.00 35,000.00 35,000.00 35,000.00 40,000.00 40,000.00 40,000.00 40,000.00 45,000.00 45,000.00 45,000.00 50,000.00 50,000.00 55,000.00 1.900% 2.250% 2.600% 2.900% 3.150% 3.400% 3.550% 3.700% 3.850% 4.000% 4.100% 4.200% 4.300% 4.350% 4.450% 27,240.92 21,922.50 21,135.00 20,225.00 19,210.00 18,107.50 16,747.50 15,327.50 13,847.50 12,307.50 10,507.50 8,662.50 6,772.50 4,622.50 2,447.50 57,240.92 56,922.50 56,135.00 55,225.00 54,210.00 58,107.50 56,747.50 55,327.50 53,847.50 57,307.50 55,507.50 53,662.50 56,772.50 54,622.50 57,447.50 60,102.97 59,768.63 58,941.75 57,986.25 56,920.50 61,012.88 59,584.88 58,093.88 56, 539.88 60,172.88 58,282.88 56,345.63 59,611.13 57,353.63 60,319.88 66,786.60 66,786.60 66,786.60 66,786.61 66,786.59 66,786.60 66,786.61 66,786.61 66,786.60 66,786.59 66,786.60 66,786.60 66,786.60 66,786.60 66, 786.60 6,683.63 7,017.98 7,844.85 8,800.36 9,866.09 5,773.73 7,201.74 8,692.74 10,246.73 6,613.72 8,503.73 10,440.98 7,175.48 9,432.98 6,466.73 Total $620,000.00 $219,083.42 $839,083.42 $881,037.59 $1,001,799.01 $120,761.42 Dated 11/15/2004 Delivery Date 11/15/2004 First Coupon Date 8/01 /2005 Yield Statistics Bond Year Dollars $5,510.89 Average Life 8.889 Years Average Coupon 3.9754643% Net Interest Cost (NIC) 4.0992193% True Interest Cost (TIC) 4.0937396% Bond Yield for Arbitrage Purposes 3.9401182% All Inclusive Cost (AIC) 4.3387813% IRS Form 8038 Net Interest Cost 3.9754643% Weighted Average Maturity 8.889 Years 20044 EXZ / Improvement Pmjecvv / 9/20/2004 / 2,1.9 PM SPRINGSTEI) Alr AJri.r, m the, Albite NI,J, Page 9 $710,000 City of Lino Lakes, Minnesota General Obligation Improvement and Utility Revenue Bonds Water Utility Projects (Marshan Estates, 62nd Street, Holly Drive) DEBT SERVICE SCHEDULE Date Principal Coupon Interest Total P +1 105% of Total 02/01/2005 - - 02/01/2006 35,000.00 1.900% 31,183.08 66,183.08 69,492.23 02/01/2007 40,000.00 2.250% 25,082.50 65,082.50 68,336.63 02/01/2008 40,000.00 2.600% 24,182.50 64,182.50 67,391.63 02/01/2009 40,000.00 2.900% 23,142.50 63,142.50 66,299.63 02/01/2010 40,000.00 3.150% 21,982.50 61,982.50 65,081.63 02/01/2011 45,000.00 3.400% 20,722.50 65,722.50 69,008.63 02/01/2012 45,000.00 3.550% 19,192.50 64,192.50 67,402.13 02/01/2013 45,000.00 3.700% 17,595.00 62,595.00 65,724.75 02/01/2014 50,000.00 3.850% 15,930.00 65,930.00 69,226.50 02/01/2015 50,000.00 4.000% 14,005.00 64,005.00 67,205.25 02/01/2016 50,000.00 4.100% 12,005.00 62,005.00 65,105.25 02/01/2017 55,000.00 4.200% 9,955.00 64,955.00 68,202.75 02/01/2018 55,000.00 4.300% 7,645.00 62,645.00 65,777.25 02/01/2019 60,000.00 4.350% 5,280.00 65,280.00 68,544.00 02/01/2020 60,000.00 4.450% 2,670.00 62,670.00 65,803.50 Total $710,000.00 $250,573.08 $960,573.08 $1,008,601.73 SIGNIFICANT DATES Dated 11/15/2004 Delivery Date 11/15/2004 First Coupon Date 8/01/2005 Yield Statistics Bond Year Dollars $6,304.89 Average Life 8.880 Years Average Coupon 3.9742664% Net Interest Cost (NIC) 4.0981385% True Interest Cost (TIC) 4.0928261 % Bond Yield for Arbitrage Purposes 3.9401182% All Inclusive Cost (AIC) 4.3380464% IRS Form 8038 Net Interest Cost 3.9742664% Weighted Average Maturity 8.880 Years Interest rates are estimates. Changes in rates may cause significant alterations to this schedule. The actual underwriter's discount bid may also vary. Senors 2004A EX 2 / 44Wer Utility / 9/20/2004 / 2.19 PM SPR1NGSTED Advisors re the Rrhlir terror Page 10 THE CITY HAS AUTHORIZED SPRINGSTED INCORPORATED TO NEGOTIATE THIS ISSUE ON ITS BEHALF. PROPOSALS WILL BE RECEIVED ON THE FOLLOWING BASIS: TERMS OF PROPOSAL $1,330,000 CITY OF LINO LAKES, MINNESOTA GENERAL OBLIGATION IMPROVEMENT AND UTILITY REVENUE BONDS, SERIES 2004A (BOOK ENTRY ONLY) Proposals for the Bonds will be received on Monday, October 25, 2004, until 11:30 A.M., Central Time, at the offices of Springsted Incorporated, 85 East Seventh Place, Suite 100, Saint Paul, Minnesota, after which time they will be opened and tabulated. Consideration for award of the Bonds will be by the City Council at 6:30 P.M., Central Time, of the same day. SUBMISSION OF PROPOSALS Proposals may be submitted in a sealed envelope or by fax (651) 223 -3046 to Springsted. Signed Proposals, without final price or coupons, may be submitted to Springsted prior to the time of sale. The bidder shall be responsible for submitting to Springsted the final Proposal price and coupons, by telephone (651) 223 -3000 or fax (651) 223 -3046 for inclusion in the • submitted Proposal. Springsted will assume no liability for the inability of the bidder to reach Springsted prior to the time of sale specified above. All bidders are advised that each Proposal shall be deemed to constitute a contract between the bidder and the City to purchase the Bonds regardless of the manner in which the Proposal is submitted. • DETAILS OF THE BONDS The Bonds will be dated November 15, 2004, as the date of original issue, and will bear interest payable on February 1 and August 1 of each year, commencing August 1, 2005. Interest will be computed on the basis of a 360 -day year of twelve 30 -day months. The Bonds will mature February 1 in the years and amounts as follows: 2006 $65,000 2007 $75,000 2008 $75,000 2009 $75,000 2010 $75,000 2011 $85,000 2012 $85,000 2013 $85,000 2014 $ 90,000 2015 $ 95,000 2016 $ 95,000 2017 $100,000 2018 $105,000 2019 $110,000 2020 $115,000 Proposals for the Bonds may contain a maturity schedule providing for a combination of serial bonds and term bonds. All term bonds shall be subject to mandatory sinking fund redemption and must conform to the maturity schedule set forth above at a price of par plus accrued interest to the date of redemption. In order to designate term bonds, the proposal must specify "Years of Term Maturities" in the spaces provided on the Proposal Form. BOOK ENTRY SYSTEM The Bonds will be issued by means of a book entry system with no physical distribution of Bonds made to the public. The Bonds will be issued in fully registered form and one Bond, representing the aggregate principal amount of the Bonds maturing in each year, will be Page 11 • registered in the name of Cede & Co. as nominee of The Depository Trust Company ( "DTC "), New York, New York, which will act as securities depository of the Bonds. Individual purchases of the Bonds may be made in the principal amount of $5,000 or any multiple thereof of a single maturity through book entries made on the books and records of DTC and its participants. Principal and interest are payable by the registrar to DTC or its nominee as registered owner of the Bonds. Transfer of principal and interest payments to participants of DTC will be the responsibility of DTC; transfer of principal and interest payments to beneficial owners by participants will be the responsibility of such participants and other nominees of beneficial owners. The purchaser, as a condition of delivery of the Bonds, will be required to deposit the Bonds with DTC. REGISTRAR The City will name the registrar that shall be subject to applicable SEC regulations. The City will pay for the services of the registrar. OPTIONAL REDEMPTION The City may elect on February 1, 2010, and on any day thereafter, to prepay Bonds due on or after February 1, 2011. Redemption may be in whole or in part and if in part at the option of the City and in such manner as the City shall determine. If less than all Bonds of a maturity are called for redemption, the City will notify DTC of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each participant's interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interests in such maturity to be redeemed. All prepayments shall be at a price of par plus accrued interest. SECURITY AND PURPOSE The Bonds will be general obligations of the City for which the City will pledge its full faith and credit and power to levy direct general ad valorem taxes. In addition the City will pledge special assessments against benefited property and net revenues of the City's water utility. The proceeds will be used to finance various improvement projects within the City. TYPE OF PROPOSALS Proposals shall be for not less than $1,315,370 and accrued interest on the total principal amount of the Bonds. Proposals shall be accompanied by a Good Faith Deposit ( "Deposit ") in the form of a certified or cashier's check or a Financial Surety Bond in the amount of $13,300, payable to the order of the City. If a check is used, it must accompany the proposal. If a Financial Surety Bond is used, it must be from an insurance company licensed to issue such a bond in the State of Minnesota, and preapproved by the City. Such bond must be submitted to Springsted Incorporated prior to the opening of the proposals. The Financial Surety Bond must identify each underwriter whose Deposit is guaranteed by such Financial Surety Bond. if the Bonds are awarded to an underwriter using a Financial Surety Bond, then that purchaser is required to submit its Deposit to Springsted Incorporated in the form of a certified or cashier's check or wire transfer as instructed by Springsted Incorporated not later than 3:30 P.M., Central Time, on the next business day following the award. If such Deposit is not received by that time, the Financial Surety Bond may be drawn by the City to satisfy the Deposit requirement. The Deposit received from the purchaser, the amount of which will be deducted at settlement and no interest will accrue to the purchaser, will be deposited by the City. In the event the purchaser fails to comply with the accepted proposal, said amount will be retained by the City. No proposal can be withdrawn or amended after the time set for receiving proposals unless the meeting of the City scheduled for award of the Bonds is adjourned, recessed, or continued to another date without award of the Bonds having been made. Rates shall be in integral multiples of 5/100 or 1/8 of 1 %. Rates must be in level or ascending order. Bonds of the same maturity shall bear a single rate from the date of the Bonds to the date of maturity. No conditional proposals will be accepted. Page 12 • • • AWARD The Bonds will be awarded on the basis of the lowest interest rate to be determined on a true interest cost (TIC) basis. The City's computation of the interest rate of each proposal, in accordance with customary practice, will be controlling. The City will reserve the right to: (i) waive non - substantive informalities of any proposal or of matters relating to the receipt of proposals and award of the Bonds, (ii) reject all proposals without cause, and (iii) reject any proposal that the City determines to have failed to comply with the terms herein. BOND INSURANCE AT PURCHASER'S OPTION If the Bonds qualify for issuance of any policy of municipal bond insurance or commitment therefor at the option of the underwriter, the purchase of any such insurance policy or the issuance of any such commitment shall be at the sole option and expense of the purchaser of the Bonds. Any increased costs of issuance of the Bonds resulting from such purchase of insurance shall be paid by the purchaser, except that, if the City has requested and received a rating on the Bonds from a rating agency, the City will pay that rating fee. Any other rating agency fees shall be the responsibility of the purchaser. Failure of the municipal bond insurer to issue the policy after Bonds have been awarded to the purchaser shall not constitute cause for failure or refusal by the purchaser to accept delivery on the Bonds. CUSIP NUMBERS If the Bonds qualify for assignment of CUSIP numbers such numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bond nor any error with respect thereto will constitute cause for failure or refusal by the purchaser to accept delivery of the Bonds. The CUSIP Service Bureau charge for the assignment of CUSIP identification numbers shall be paid by the purchaser. SETTLEMENT Within 40 days following the date of their award, the Bonds will be delivered without cost to the purchaser through DTC in New York, New York. Delivery will be subject to receipt by the purchaser of an approving legal opinion of Kennedy & Graven, Chartered of Minneapolis, Minnesota, and of customary closing papers, including a no- litigation certificate. On the date of settlement, payment for the Bonds shall be made in federal, or equivalent, funds that shall be received at the offices of the City or its designee not later than 12:00 Noon, Central Time. Unless compliance with the terms of payment for the Bonds has been made impossible by action of the City, or its agents, the purchaser shall be liable to the City for any loss suffered by the City by reason of the purchaser's non- compliance with said terms for payment. CONTINUING DISCLOSURE In accordance with SEC Rule 15c2- 12(b)(5), the City will undertake, pursuant to the resolution awarding sale of the Bond, to provide annual reports and notices of certain events. A description of this undertaking is set forth in the Official Statement. The purchaser's obligation to purchase the Bonds will be conditioned upon receiving evidence of this undertaking at or prior to delivery of the Bonds. Page 13 • • • OFFICIAL STATEMENT The City has authorized the preparation of an Official Statement containing pertinent information relative to the Bonds, and said Official Statement will serve as a nearly final Official Statement within the meaning of Rule 15c2 -12 of the Securities and Exchange Commission. For copies of the Official Statement or for any additional information prior to sale, any prospective purchaser is referred to the Financial Advisor to the City, Springsted Incorporated, 85 East Seventh Place, Suite 100, Saint Paul, Minnesota 55101, telephone (651) 223 -3000. The Official Statement, when further supplemented by an addendum or addenda specifying the maturity dates, principal amounts and interest rates of the Bonds, together with any other information required by law, shall constitute a "Final Official Statement" of the City with respect to the Bonds, as that term is defined in Rule 15c2 -12. By awarding the Bonds to any underwriter or underwriting syndicate submitting a proposal therefor, the City agrees that, no more than seven business days after the date of such award, it shall provide without cost to the senior managing underwriter of the syndicate to which the Bonds are awarded 55 copies of the Official Statement and the addendum or addenda described above. The City designates the senior managing underwriter of the syndicate to which the Bonds are awarded as its agent for purposes of distributing copies of the Final Official Statement to each Participating Underwriter. Any underwriter delivering a proposal with respect to the Bonds agrees thereby that if its proposal is accepted by the City (i) it shall accept such designation and (ii) it shall enter into a contractual relationship with all Participating Underwriters of the Bonds for purposes of assuring the receipt by each such Participating Underwriter of the Final Official Statement. Dated September 27, 2004 BY ORDER OF THE CITY COUNCIL /s/ Ann Blair City Clerk Page 14 • • Extract of Minutes of Meeting of the City Council of the City of Lino Lakes, Anoka County, Minnesota Pursuant to due call and notice thereof a regular meeting of the City Council of the City of Lino Lakes, Anoka County, Minnesota, was held at the City Hall in the City on Monday, September 27, 2004, commencing at 6:30 o'clock P.M. The following members of the Council were present: and the following were absent: * ** The following written resolution was presented by Councilmember , the reading of which had been dispensed with by unanimous consent, who moved its adoption: RESOLUTION NO. 04 -142 RESOLUTION PROVIDING FOR THE ISSUANCE AND SALE OF $1,330,000 GENERAL OBLIGATION IMPROVEMENT AND UTILITY REVENUE BONDS, SERIES 2004A BE IT RESOLVED By the City Council of the City of Lino Lakes, Anoka County, Minnesota (City) as follows: 1. It is hereby determined that: (a) the assessable public improvements known as the Birch and Hodgson Project (the Assessed Improvements) have been duly ordered by the City pursuant to the provisions of the City Charter; (b) the City engineer has also recommended the construction of various improvements to the City's utility system (Utility Improvements). (c) the City is authorized by Minnesota Statutes, Chapter 429 (Improvement Act) to finance all or portion of the cost of the Assessed Improvements by the issuance of general obligation bonds of the City payable from special assessments levied against benefited property, and is also authorized by Minnesota Statutes, Section 444.075 (Utility Act) to finance all or a portion of the cost of the Utility Improvements by the issuance of general obligation bonds of the City payable from the net revenues of the utility system. The cost of the Assessed Improvements and Utility Improvements are presently estimated to be as follows: Project Designation & Description Total Project Cost Assessed Improvements $ 600,000 Utility Improvements 688,445 Underwriter' s Discount (1.10 %) 14,630 Costs of Issuance 22,950 Rounding Amount 3,975 Bond Issue $ 1,330,000 (d) it is necessary and expedient to the sound financial management of the affairs of the City to issue $1,330,000 General Obligation Improvement and Utility Revenue Bonds, Series 2004A (Bonds) pursuant to the Improvement Act and Utility Act to provide financing for the Assessed Improvements and the Utility Improvements. 2. To provide financing for the Assessed Improvements and the Utility Improvements, the City will issue and sell Bonds in the amount of $1,315,370. To provide in part the additional interest required to market the Bonds at this time, additional Bonds will be issued in the amount of $14,630. The excess of the purchase price of the Bonds over the sum of $1,315,370 will be credited to the debt service fund for the Bonds for the purpose of paying interest first coming due on the additional Bonds. The Bonds will be issued, sold and delivered in accordance with the terms of the following Terms of Offering: THE CITY HAS AUTHORIZED SPRINGSTED INCORPORATED TO NEGOTIATE • THIS ISSUE ON ITS BEHALF. PROPOSALS WILL BE RECEIVED ON THE FOLLOWING BASIS: TERMS OF PROPOSAL $1,330,000 CITY OF LINO LAKES, MINNESOTA GENERAL OBLIGATION IMPROVEMENT AND UTILITY REVENUE BONDS, SERIES 2004A (BOOK ENTRY ONLY) Proposals for the Bonds will be received on Monday, October 25, 2004, until 11:30 A.M., Central Time, at the offices of Springsted Incorporated, 85 East Seventh Place, Suite 100, Saint Paul, Minnesota, after which time they will be opened and tabulated. Consideration for award of the Bonds will be by the City Council at 6:30 P.M., Central Time, of the same day. SUBMISSION OF PROPOSALS Proposals may be submitted in a sealed envelope or by fax (651) 223 -3046 to Springsted. Signed Proposals, without final price or coupons, rr;y be submitted to Springsted prior to the • time of sale. The bidder shall be responsible for submitting to Springsted the final Proposal price and coupons, by telephone (651) 223 -3000 or fax (651) 223 -3046 for inclusion in the submitted Proposal. Springsted will assume no liability for the inability of the bidder to reach Springsted prior to the time of sale specified above. All bidders are advised that each Proposal shall be deemed to constitute a contract between the bidder and the City to purchase the Bonds regardless of the manner in which the Proposal is submitted. • DETAILS OF THE BONDS The Bonds will be dated November 15, 2004, as the date of original issue, and will bear interest payable on February 1 and August 1 of each year, commencing August 1, 2005. Interest will be computed on the basis of a 360 -day year of twelve 30 -day months. The Bonds will mature February 1 in the years and amounts as follows: 2006 $65,000 2007 $75,000 2008 $75,000 2009 $75,000 2010 $75,000 2011 $85,000 2012 $85,000 2013 $85,000 2014 $ 90,000 2015 $ 95,000 2016 $ 95,000 2017 $100,000 2018 $105,000 2019 $110,000 2020 $115,000 Proposals for the Bonds may contain a maturity schedule providing for a combination of serial bonds and term bonds. All term bonds shall be subject to mandatory sinking fund redemption and must conform to the maturity schedule set forth above at a price of par plus accrued interest to the date of redemption. In order to designate term bonds, the proposal must specify "Years of Term Maturities" in the spaces provided on the Proposal Form. • BOOK ENTRY SYSTEM The Bonds will be issued by means of a book entry system with no physical distribution of Bonds made to the public. The Bonds will be issued in fully registered form and one Bond, representing the aggregate principal amount of the Bonds maturing in each year, will be registered in the name of Cede & Co. as nominee of The Depository Trust Company ( "DTC "), New York, New York, which will act as securities depository of the Bonds. Individual purchases of the Bonds may be made in the principal amount of $5,000 or any multiple thereof of a single maturity through book entries made on the books and records of DTC and its participants. Principal and interest are payable by the registrar to DTC or its nominee as registered owner of the Bonds. Transfer of principal and interest payments to participants of DTC will be the responsibility of DTC; transfer of principal and interest payments to beneficial owners by participants will be the responsibility of such participants and other nominees of beneficial owners. The purchaser, as a condition of delivery of the Bonds, will be required to deposit the Bonds with DTC. REGISTRAR The City will name the registrar that shall be subject to applicable SEC regulations. The City will pay for the services of the registrar. OPTIONAL REDEMPTION The City may elect on February 1, 2014, and on any day thereafter, to prepay Bonds due on or after February 1, 2015. Redemption may be in whole or in part and if in part at the option of the City and in such manner as the City shall determine. If less than all Bonds of a maturity are called for redemption, the City will notify DTC of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each participant's interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interests in such maturity to be redeemed. All prepayments shall be at a price of par plus accrued interest. SECURITY AND PURPOSE The Bonds will be general obligations of the City for which the City will pledge its full faith and credit and power to levy direct general ad valorem taxes. In addition the City will pledge special assessments against benefited property and net revenues of the City's water utility. The proceeds will be used to finance various improvement projects within the City. TYPE OF PROPOSALS Proposals shall be for not less than $1,315,370 and accrued interest on the total principal amount of the Bonds. Proposals shall be accompanied by a Good Faith Deposit ( "Deposit ") in the form of a certified or cashier's check or a Financial Surety Bond in the amount of $13,300, payable to the order of the City. If a check is used, it must accompany the proposal. If a Financial Surety Bond is used, it must be from an insurance company licensed to issue such a bond in the State of Minnesota, and preapproved by the City. Such bond must be submitted to Springsted SJB- 253389v1 LN 140 -88 • • • Incorporated prior to the opening of the proposals. The Financial Surety Bond must identify each underwriter whose Deposit is guaranteed by such Financial Surety Bond. If the Bonds are awarded to an underwriter using a Financial Surety Bond, then that purchaser is required to submit its Deposit to Springsted Incorporated in the form of a certified or cashier's check or wire transfer as instructed by Springsted Incorporated not later than 3:30 P.M., Central Time, on the next business day following the award. If such Deposit is not received by that time, the Financial Surety Bond may be drawn by the City to satisfy the Deposit requirement. The Deposit received from the purchaser, the amount of which will be deducted at settlement and no interest will accrue to the purchaser, will be deposited by the City. In the event the purchaser fails to comply with the accepted proposal, said amount will be retained by the City. No proposal can be withdrawn or amended after the time set for receiving proposals unless the meeting of the City scheduled for award of the Bonds is adjourned, recessed, or continued to another date without award of the Bonds having been made. Rates shall be in integral multiples of 5 /100 or 1/8 of 1 %. Rates must be in level or ascending order. Bonds of the same maturity shall bear a single rate from the date of the Bonds to the date of maturity. No conditional proposals will be accepted. AWARD The Bonds will be awarded on the basis of the lowest interest rate to be determined on a true interest cost (TIC) basis. The City's computation of the interest rate of each proposal, in accordance with customary practice, will be controlling. The City will reserve the right to: (i) waive non - substantive informalities of any proposal or of matters relating to the receipt of proposals and award of the Bonds, (ii) reject all proposals without cause, and (iii) reject any proposal that the City determines to have failed to comply with the terms herein. BOND INSURANCE AT PURCHASER'S OPTION If the Bonds qualify for issuance of any policy of municipal bond insurance or commitment therefor at the option of the underwriter, the purchase of any such insurance policy or the issuance of any such commitment shall be at the sole option and expense of the purchaser of the Bonds. Any increased costs of issuance of the Bonds resulting from such purchase of insurance shall be paid by the purchaser, except that, if the City has requested and received a rating on the Bonds from a rating agency, the City will pay that rating fee. Any other rating agency fees shall be the responsibility of the purchaser. Failure of the municipal bond insurer to issue the policy after Bonds have been awarded to the purchaser shall not constitute cause for failure or refusal by the purchaser to accept delivery on the Bonds. SJB- 253389v1 LN140 -88 • r • CUSIP NUMBERS If the Bonds qualify for assignment of CUSIP numbers such numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bond nor any error with respect thereto will constitute cause for failure or refusal by the purchaser to accept delivery of the Bonds. The CUSIP Service Bureau charge for the assignment of CUSIP identification numbers shall be paid by the purchaser. SETTLEMENT Within 40 days following the date of their award, the Bonds will be delivered without cost to the purchaser through DTC in New York, New York. Delivery will be subject to receipt by the purchaser of an approving legal opinion of Kennedy & Graven, Chartered of Minneapolis, Minnesota, and of customary closing papers, including a no- litigation certificate. On the date of settlement, payment for the Bonds shall be made in federal, or equivalent, funds that shall be received at the offices of the City or its designee not later than 12:00 Noon, Central Time. Unless compliance with the terms of payment for the Bonds has been made impossible by action of the City, or its agents, the purchaser shall be liable to the City for any loss suffered by the City o by reason of the purchaser's non - compliance with said terms for payment. CONTINUING DISCLOSURE In accordance with SEC Rule 15c2- 12(b)(5), the City will undertake, pursuant to the resolution awarding sale of the Bond, to provide annual reports and notices of certain events. A description of this undertaking is set forth in the Official Statement. The purchaser's obligation to purchase the Bonds will be conditioned upon receiving evidence of this undertaking at or prior to delivery of the Bonds. OFFICIAL STATEMENT The City has authorized the preparation of an Official Statement containing pertinent information relative to the Bonds, and said Official Statement will serve as a nearly final Official Statement within the meaning of Rule 15c2 -12 of the Securities and Exchange Commission. For copies of the Official Statement or for any additional information prior to sale, any prospective purchaser is referred to the Financial Advisor to the City, Springsted Incorporated, 85 East Seventh Place, Suite 100, Saint Paul, Minnesota 55101, telephone (651) 223 -3000. The Official Statement, when further supplemented by an addendum or addenda specifying the maturity dates, principal amounts and interest rates of the Bonds, together with any other information required by law, shall constitute a "Final Official Statement" of the City with respect to the Bonds, as that term is defined in Rule 15c2 -12. By awarding the Bonds to any underwriter or underwriting syndicate submitting a proposal therefor, the City agrees that, no more than seven business days after the date of such award, it shall provide without cost to the senior managing underwriter of the syndicate to which the Bonds are awarded 55 copies of the Official Statement and the addendum or addenda described above. The City designates the senior managing underwriter of the syndicate to which the Bonds are awarded as its agent for purposes SJB- 253389v1 LN 140 -88 • • • of distributing copies of the Final Official Statement to each Participating Underwriter. Any underwriter delivering a proposal with respect to the Bonds agrees thereby that if its proposal is accepted by the City (i) it shall accept such designation and (ii) it shall enter into a contractual relationship with all Participating Underwriters of the Bonds for purposes of assuring the receipt by each such Participating Underwriter of the Final Official Statement. Dated September 27, 2004 BY ORDER OF THE CITY COUNCIL SJB- 253389v1 LN 140 -88 /s/ Ann Blair City Clerk r + • a , • • • 3. Springsted Incorporated is authorized and directed to negotiate the Bonds in accordance with the foregoing Terms of Proposal. The City Council will meet at 6:30 o'clock P.M. on Monday, October 25, 2004, to consider proposals on the Bonds and take any other appropriate action with respect to the Bonds. The motion for the adoption of the foregoing resolution was duly seconded by Councilmember , and upon vote being taken thereon the following members voted in favor of the motion: and the following voted against: whereupon the resolution was declared duly passed and adopted. AIlr■ SJB- 253389v1 LN 140 -88 C (e —1