8.1. SR 01-21-2014 City of
Elk=' Request for Action
River
To Item Number
Mayor and City Council 8.1
Agenda Section Meeting Date Prepared by
General Business January 21, 2014 Tim Simon, Finance Director
Item Description Reviewed by
Issuance of$2,125,000 Electric Revenue Refunding Cal Portner, City Administrator
Bonds, Series 2014A Reviewed by
Action Requested
Approve,by resolution,the issuance of Electric Revenue Refunding Bonds, and authorizing certain other
actions to be taken by the Elk River Municipal Utilities Commission with respect to the issuance of
Electric Revenue Refunding Bonds, Series 2014A.
Background/Discussion
As part of the debt monitoring process, our financial advisors and staff are continually evaluating the
bond market to determine if it is feasible to refund existing bond issues. Elk River Municipal Utilities
(ERMU) staff,with the guidance from their financial advisor, Springsted,has identified a refunding
possibility with the 2006A Electric Revenue bonds. This series 2014A issue is a current refunding bond,
in which the proceeds of the bonds are used to redeem the outstanding principal of the series 2006A
bonds. These bonds will be repaid from the Electric Utility System.
The city is the qualified entity to issue the bonds. On January 14, 2014, ERMU Commissioners adopted a
resolution requesting the Council to approve the issuance of the refunding bonds. The structure of the
refunding bonds is modified to be three years shorter than the remaining term of the original bonds. The
original bonds would have matured on August 1, 2021. ERMU wants to be positioned for possible new
bond issues related to the purchase power agreement with their new provider that will take effect in 2018.
Schedule:
January 14—Utilities Commission sets sale date and terms (approved)
January 21 —City Council sets sale date and terms and authorizes Utility Commission to award the bonds
January 27—Rating conference call
February 11 —Bids received, commission action
Financial Impact
The bonds are not general obligations of the city but will be special limited obligations paid solely from
the electric utility system. Estimated interest savings of the current refunding is approximately$202,222
or 6.89% net of issuance costs and a present value benefit of$166,732.40. True interest cost (TIC) is
estimated to be 1.587% compared to the prior TIC of 3.947% on the 2006A bonds.
Attachments
• Springsted's summary of refunding bond issuance
• Resolution
P a w E A E U s r
NaA f RE]
City of Elk River, Minnesota
Recommendations for Issuance of Bonds
$2,125,000 Electric Revenue Refunding Bonds, Series 2014
The City Council and Utilities Commission have under consideration the issuance of bonds to refund an outstanding
series of electric revenue bonds. This document provides information relative to the proposed issuance.
KEY EVENTS: The following summary schedule includes the timing of some of the key events that will
occur relative to the bond issuance.
January 14, 2014 Utilities Commission sets sale date and terms
January 21, 2014 City Council sets sale date and terms and authorizes
Utilities Commission to award Bonds
Week of January 27, 2014 Rating conference is conducted
February 11, 2014, 10:00 AM Competitive bids are received
February 11, 2014, 3:30 PM Utilities Commission considers award of Bonds
March 13,2014(est.) Proceeds are received
RATING: An application will be made for a rating on the Bonds. The City's electric revenue supported
debt is currently rated 'Aa3' by Moody's Investors Service. The City and the Utility are in
discussions with Springsted to determine which is in the best interest of both entities - to
have the Bonds rated by Moody's or by Standard & Poor's Ratings Services.
THE MARKET: Performance of the tax-exempt market is often measured by the Bond Buyer's Index("BBI")
which measures the yield of high grade municipal bonds in the 20th year for general
obligation bonds (the BBI 20 Bond Index) and the 301h year for revenue bonds (the BBI 25
Bond Index). The following chart illustrates these two indices over the past five years.
BBII 25-bond(Revenue)and 20-bond(G.O.) Rates for 5 Years
Ending 1/2/2014
6.5% --- 68125 Bond
BBI 20 Bond
102014
6.0% 25 bond:5.39%
1'Ia1 1�
20 bond:4.75%
5.5%
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4.5%
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4.0% _
3.5%
3.{1%
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1 Springsted
POST ISSUANCE The issuance of these bonds will result in post-issuance compliance responsibilities. The
COMPLIANCE: responsibilities are in two primary areas: i)compliance with federal arbitrage requirements
and ii)compliance with secondary disclosure requirements.
Federal arbitrage requirements include a wide range of implications that have been taken into
account as your issue has been structured. Post-issuance compliance responsibilities for
your tax-exempt issue include both rebate and yield restriction provisions of the IRS Code. In
general terms the arbitrage requirements control the earnings on unexpended bond
proceeds, including investment earnings, moneys held for debt service payments (which are
considered to be proceeds under the IRS regulations), and/or reserves. Because the
transaction is being conducted as a current refunding in which proceeds will be spent within
90 days, the City expects to meet the 6-month spending exception and gross proceeds that
meet the test will qualify for an exception to rebate. Yield restriction provisions will apply to
the debt service fund and the debt service reserve account and the funds should be
monitored throughout the life of the Bonds.
Secondary disclosure requirements result from an SEC requirement that underwriters provide
ongoing disclosure information to investors. To meet this requirement, any prospective
underwriter will require the City to commit to providing the information needed to comply
under a continuing disclosure agreement.
Springsted will provide arbitrage and continuing disclosure compliance services to the City
under separate contracts. Contracts for these services will be provided to City staff.
SUPPLEMENTAL Supplementary information will be available to staff including detailed terms and conditions of
INFORMATION sale, comprehensive structuring schedules and information to assist in meeting post-
AND issuance compliance responsibilities.
BOND RECORD:
Upon completion of the financing, a bond record will be provided that contains pertinent
documents and final debt service calculations for the transaction.
PURPOSE: Proceeds of the Bonds, together with $359,500 available in the Debt Service Reserve
Account, will be used to (i) refund the August 1, 2014 through August 1, 2021 maturities of
the City's Electric Revenue Bonds, Series 2006A (the "Prior Bonds"), dated March 2, 2006;
(ii)fund a debt service reserve fund; and (iii) pay cost of issuance. The issuance of the Bonds
is being conducted as a "current" refunding, in which the proceeds of the Bonds are used
within ninety days of bond settlement to redeem the outstanding principal of the Prior Bonds.
The maturities to be refunded are currently outstanding in the aggregate principal amount
of$2,180,000. The purpose of the refunding is to restructure the Utility's debt and achieve
interest cost savings.
The Prior Bonds were originally issued to finance improvements and extensions to the City's
Electric Utility system.
AUTHORITY: Statutory Authority: The Bonds are being issued pursuant to Minnesota Statutes,
Chapters 453 and 475.
Parity Debt: In addition to the Bonds, the Utility has one other outstanding issue payable
from net revenues of the Electric Utility system—the Electric Revenue Bonds, Series 2007A
(the "Series 2007A Bonds"), today outstanding in the aggregate principal amount
of$2,160,000 with a final maturity of February 1, 2022.
SpringstQd Page
Rate Covenant: The Utility covenants to set charges, fees and rentals for all service and
benefits of whatsoever nature furnished and made available by the Utility sufficient to
generate net revenues in each year, as defined in the bond resolution, of not less than
110%of the average annual debt service on the Bonds.
Additional Bonds Test: The City reserves the right and privilege to issue additional revenue
bonds, from time to time, payable from net revenues of the Electric System ranking on a
parity with these Bonds and the Series 2007A Bonds. Before such additional parity bonds are
issued, the Utility must demonstrate that the average annual net revenues of the Electric
System for the last two complete fiscal years (ending December 31)were at least 1.25 times
the average annual principal and interest payment on all outstanding bonds and the bonds
then proposed to be issued. The average annual principal and interest payment on the
Series 2007A Bonds and the Bonds will be approximately$529,092.
The resolution authorizing such additional bonds provides for payment to the Reserve
Account upon delivery of such additional bonds, from the proceeds thereof or any other
source, of an amount necessary to cause the aggregate balance in the Reserve Account to
equal the Reserve Requirement.
Debt Service Reserve Account: The Utility will maintain a Debt Service Reserve Account in
the amount of the Reserve Requirement. "Reserve Requirement" means, as of the date of
reference, an amount equal to the least of (i) 10%of the original principal amount of the
outstanding bonds and Additional Bonds, or(ii)the maximum amount of principal and interest
payable during the then current Fiscal Year or any future Fiscal Year on all outstanding
bonds and Additional Bonds as of the date of reference, or(iii) 125%of the average annual
principal and interest payable on all outstanding bonds and Additional Bonds as of the date of
reference.
With the issuance of the Bonds, the Reserve Requirement will be equal to 10%of the original
issue amounts. The amount on deposit for the Series 2007A Bonds is$287,500. It is
anticipated that the total amount of the Debt Service Reserve Account necessary on the
Bonds and the Series 2007A Bonds will be $500,000. Funds are on deposit for the Prior
Bonds in the amount of$359,500, of which$212,500 will be retained to make up the balance
of the Debt Serivice Reserve requirement. The remaining $147,000 on hand from the Prior
Bonds will be used in the refunding transaction, together with proceeds of the Bonds, to
redeem the Prior Bonds.
SECURITY AND The Bonds will be not be general obligations of the City but will be special limited obligations
SOURCE OF payable solely from net revenues of the City's Electric Utility system.
PAYMENT:
The Bonds will be issued as Additional Bonds, on parity with the Series 2007A Bonds.
The table below demonstrates that the issuance of the Bonds satisfies the Additional Bonds
test described above.
SpringstQd Page
Elk River Utilities Electric Revenue Fund
Net Revenues Available For Debt Service
Fiscal Years Ended December 31, 2011 and 2012
December 31, 2011 December 31, 2012
Operating Revenue $ 28,583,986 $ 30,258,690
Operating Expense (26,433,050) (27,350,312)
Net Operating Income(Loss) $ 2,150,936 $ 2,908,378
Add Back Depreciation 2,041,717 2,099,594
Add Other Income 187,695 262,532
Available for Debt Service $ 4,380,348 $ 5,270,504
Average Available for Debt Service $ 4,825,426 $ 4,825,426
Average Annual Debt Service* $ 529,092
Coverage 9.12x
Includes a verage annual debt service for the Bonds and the Series 2007A Bonds.
Source., City of Elk River Comprehensive Annual Financial Reports, for the Years Ended
December 37,207 7 and 2072.
STRUCTURING At the direction of the Utility, the Bonds have been structured to provide for approximately
SUMMARY: level annual debt service over a term of five years. This structure results in a term of the
Bonds which is three years shorter than the remaining term of the Prior Bonds.
Consequently, the annual debt service requirements for the Bonds are higher than those of
the Prior Bonds over the same period. While the transaction is being undertaken to achieve
interest cost savings, 100%of the cash flow savings are realized through the shortening of
the term of the debt and occur in the years 2019 through 2021, after the final maturity of the
Bonds.
On May 1, 2014, the Utility will use the proceeds of the Bonds to redeem the remaining
$2,180,000 outstanding principal on the Prior Bonds and to pay interest accrued thereon from
February 1, 2014. Beginning with the August 1, 2014 principal and interest payment, the
Utility will begin to make debt service payments on the Bonds, realizing the interest cost
savings.
Based on current interest rates, this refunding is projected to result in total future value
savings of approximately$202,222, with a net present value of$166,732. These savings are
after payment of all expenses related to the transaction.
SCHEDULES Schedules attached include: a preliminary feasibility summary, proof of the debt service
ATTACHED: reserve requirement, estimated net debt service requirements, aggregate Electric Utility
system debt service after issuance of the Bonds and interest cost savings, given the current
interest rate environment.
SpringstQd Page
RISKS/SPECIAL The outcome of this financing will rely on the market conditions at the time of the sale. Any
CONSIDERATION: projections included herein are estimates based on current market conditions.
SALE TERMS AND Variability of Issue Size: A specific provision in the sale terms permits modifications to the
MARKETING: issue size and/or maturity structure to customize the issue once the price and interest rates
are set on the day of sale.
Prepayment Provisions: Based on the short duration of the Bonds, and to avoid possible
negative pricing impacts, the Bonds will not be subject to redemption prior to their stated
maturities.
Bank Qualification: The City does not expect to issue more than $10 million in tax-exempt
obligations that count against the $10 million limit for this calendar year; therefore, the Bonds
are designated as bank qualified.
5pringsted Page
Preliminary
$2,125,000
City of Elk River, Minnesota
Electric Revenue Refunding Bonds, Series 2014
Current Refunding of Series 2006A
Preliminary Feasibility Summary
Dated 03/13/2014 1 Delivered 03/13/2014
Sources Of Funds
ParAmount of Bonds............................................................................................................................................... $2,125,000.00
Transfers from Prior Issue DSR Funds.................................................................................................................... 359,500.00
TotalSources........................................................................................................................................................ $2,484,500.00
Uses Of Funds
Deposit to Current Refunding Fund.......................................................................................................................... 2,200,655.63
Deposit to Debt Service Reserve Fund(DSRF)....................................................................................................... 212,500.00
Costsof Issuance.................................................................................................................................................... 49,000.00
Total Underwriter's Discount (0.850%).................................................................................................................. 18,062.50
RoundingAmount..................................................................................................................................................... 4,281.87
TotalUses.............................................................................................................................................................. $2,484,500.00
ISSUES REFUNDEDANDCALL INFORMATION
PriorIssue Call Price................................................................................................................................................ 100.000%
PriorIssue Call Date................................................................................................................................................. 5/01/2014
SAVINGS INFORMATION
NetFuture Value Benefit.......................................................................................................................................... $202,222.12
NetPresent Value Benefit........................................................................................................................................ $166,732.40
Net PV Benefit/$2,418,756.52 PV Refunded Debt Service.................................................................................... 6.893%
BOND STATISTICS
AverageLife............................................................................................................................................................ 2.386 Years
AverageCoupon...................................................................................................................................................... 1.2236008%
NetInterest Cost(NIC)............................................................................................................................................. 1.5798924%
TrueInterest Cost(TIC)............................................................................................................................................ 1.5875482%
Series 2014Ref2006A Rev I SEVGLEPURPOSE 1 11212014 1 3.06PM
Sp1'ingsted Page
Preliminary
$2,125,000
City of Elk River, Minnesota
Electric Revenue Refunding Bonds, Series 2014
Current Refunding of Series 2006A
Proof of Reserve Fund Requirement
Date Principal Interest Existing D/S TOTAL P+I
08/01/2014 430,000.00 8,073.96 39,200.00 477,273.96
08/01/2015 420,000.00 18,912.50 284,200.00 723,112.50
08/01/2016 420,000.00 15,972.50 280,700.00 716,672.50
08/01/2017 425,000.00 12,192.50 281,900.00 719,092.50
08/01/2018 430,000.00 6,880.00 287,600.00 724,480.00
08/01/2019 - - 287,800.00 287,800.00
08/01/2020 287,600.00 287,600.00
08/01/2021 291,900.00 291,900.00
08/01/2022 290,700.00 290,700.00
Total $2,125,000.00 $62,031.46 $2,331,600.00 $4,518,631.46
PROOF OF RESERVE FUND
MAXIMUM PERIODIC DEBT SERVICE
100%of the Maximum Periodic Debt Service.................................................................................................... 724,480.00
AVERAGE PERIODIC DEBT SERVICE
TotalP+I............................................................................................................................................................... 4,518,631.46
BondYears(Delivery Date)................................................................................................................................ 7.88
125%of the Average Periodic Debt Service..................................................................................................... 716,484.90
PERCENT OF PAR
Total Par(Existing+New).................................................................................................................................. 5,000,000.00
10%of Par......................................................................................................................................................... 500,000.00
RESERVE REQUI REM ENT
computedRequirement....................................................................................................................................... 212,500.00
Proof's Requirement............................................................................................................................................ 500,000.00
Portion of reserve requirement funded externally.............................................................................................. 287,500.00
Low est Requirement less external funding........................................................................................................ 212,500.00
Series 2014 Ref2006A Rev I SINGLEPURPOSE 1 11212014 1 3.06PId
5pringsted Page
Preliminary
$2,125,000
City of Elk River, Minnesota
Electric Revenue Refunding Bonds, Series 2014
Current Refunding of Series 2006A
Debt Service Comparison
Date Total P+I DSR Net New D/S Old Net D/S Savings
08/01/2014 438,073.96 (203.62) 437,870.34 275,861.87 (162,008.47)
08/01/2015 438,912.50 (531.26) 438,381.24 318,381.24 (120,000.00)
08/01/2016 435,972.50 (531.26) 435,441.24 319,561.24 (115,880.00)
08/01/2017 437,192.50 (531.26) 436,661.24 320,253.74 (116,407.50)
08/01/2018 436,880.00 (213,031.26) 223,848.74 320,316.24 96,467.50
08/01/2019 - - 324,866.24 324,866.24
08/01/2020 323,701.24 323,701.24
08/01/2021 (32,798.76) (32,798.76)
Total $2,187,031.46 (214,828.66) $1,972,202.80 $2,170,143.05 $197,940.25
PV Analysis Summary(Net to Net)
Net FV Cashflow Savings............................................................................................................................... 197,940.25
Gross P\/Debt Service Savings..................................................................................................................... 293,756.52
Effects of changes in DSR investnents......................................................................................................... (131,305.99)
Net PV Cashflow Savings @ 1.221%(Bond Yield)........................................................................................ 162,450.53
Contingency or Rounding Amount................................................................................................................... 4,281.87
NetFuture Value Benefit................................................................................................................................. $202,222.12
Net Present Value Benefit............................................................................................................................... $166,732.40
Net PJ Benefit/$344,140.56 P\/Refunded Interest....................................................................................... 48.449%
Net P\/Benefit/$2,418,756.52 P\/Refunded Debt Service........................................................................... 6.893%
Net P\/Benefit/ $2,180,000 Refunded Principal............................................................................................ 7.648%
Net P\/Benefit/ $2,125,000 Refunding Principal........................................................................................... 7.846%
Refunding Bond Information
Refunding Dated Date..................................................................................................................................... 3/13/2014
Refunding Delivery Date.................................................................................................................................. 3/13/2014
Series 2014 Ref20064 Reis I SINGLEPURPOSE 1 1/212014 1 3.06 PM
5pringsted Page
Preliminary
$2,125,000
City of Elk River, Minnesota
Electric Revenue Refunding Bonds, Series 2014
Current Refunding of Series 2006A
NET DEBT SERVICE SCHEDULE
Date Principal Coupon Interest Total P+I DSR Net New D/S
08/01/2014 430,000.00 0.500% 8,073.96 438,073.96 (203.62) 437,870.34
08/01/2015 420,000.00 0.700% 18,912.50 438,912.50 (531.26) 438,381.24
08/01/2016 420,000.00 0.900% 15,972.50 435,972.50 (531.26) 435,441.24
08/01/2017 425,000.00 1.250% 12,192.50 437,192.50 (531.26) 436,661.24
08/01/2018 430,000.00 1.600% 6,880.00 436,880.00 (213,031.26) 223,848.74
Total $2,125,000.00 - $62,031.46 $2,187,031.46 (214,828.66) $1,972,202.80
SIGNIFICANT DATES
DatedDate.......................................................................................................................................................... 3/13/2014
DeliveryDate...................................................................................................................................................... 3/13/2014
FirstCoupon Date............................................................................................................................................... 8/01/2014
Yield Statistics
BondYear Dollars.............................................................................................................................................. $5,069.58
AverageLife....................................................................................................................................................... 2.386 Years
AverageCoupon................................................................................................................................................ 1.2236008%
Net Interest Cost(NIC)........................................................................................................................................ 1.5798924%
True Interest Cost(TIC)...................................................................................................................................... 1.5875482%
Bond Yield for Arbitrage Purposes.................................................................................................................... 1.2213241%
All Inclusive Cost(AIC)....................................................................................................................................... 2.6065083%
IRS Form 8038
NetInterest Cost................................................................................................................................................. 1.2236008%
WeightedAverage Maturity................................................................................................................................ 2.386 Years
Series 2014Ref20064 Rev 1 SEVGLEPURPOSE i,11212014 13:06PM
5pringsted Page
Prelirrinary
$2,125,000
City of Elk River, Minnesota
Electric Revenue Refunding Bonds, Series 2014
Current Refunding of Series 2006A
Aggregate Debt Service
DATE Series 2014 2007A Electric TOTAL
Ref 2006A Rev Rev Bonds-
EM
08/01/2014 438,073.96 282,400.00 720,473.96
08/01/2015 438,912.50 284,200.00 723,112.50
08/01/2016 435,972.50 280,700.00 716,672.50
08/01/2017 437,192.50 281,900.00 719,092.50
08/01/2018 436,880.00 287,600.00 724,480.00
08/01/2019 - 287,800.00 287,800.00
08/01/2020 287,600.00 287,600.00
08/01/2021 291,900.00 291,900.00
08/01/2022 290,700.00 290,700.00
Total $2,187,031.46 $2,855,000.00 $4,761,831.46
Average Annual DS 529,092.38
Par Amounts Of Selected Issues
Series 2014 Ref 2006A Rev............................................................................................................................... 2,125,000.00
Original Par 2007A Bectric Rev Bonds($1,960,000 outstanding as of 3/13/2014)........................................... 2,875,000.00
TOTAL................................................................................................................................................................ 5,000,000.00
Aggregate 111612014 1141AM
5pringsted Page 10
EXTRACT OF MINUTES OF MEETING OF THE
CITY COUNCIL OF THE
CITY OF ELK RIVER, MINNESOTA
HELD: January 21, 2014
Pursuant to due call and notice thereof, a regular meeting of the City Council of the City
of Elk River, Minnesota, was duly called and held at the City Hall in the City on the 21 st day of
January, 2014, at 6:00 P.M.
The following members were present:
and the following were absent:
Member introduced the following resolution and moved its adoption:
RESOLUTION 14-
RESOLUTION APPROVING THE ISSUANCE OF ELECTRIC REVENUE
REFUNDING BONDS,AND AUTHORIZING CERTAIN OTHER ACTIONS TO BE
TAKEN BY THE ELK RIVER MUNICIPAL UTILITIES COMMISSION WITH
RESPECT TO THE ISSUANCE OF ELECTRIC REVENUE REFUNDING BONDS,
SERIES 2014A
BE IT RESOLVED by the City Council of the City of Elk River (the "City"),
Minnesota, as follows:
1. Authority. The City is authorized by Minnesota Statutes, Chapter 453, as
amended (the "Electric Utility Act"), to issue bonds to finance the acquisition or construction of
any plant, works, system, facilities, and real and personal property of any nature, together with
all parts thereof and appurtenances thereto, used or useful in the generation, production,
transmission, purchase, sale, exchange, or interchange of electric energy or any interest therein
or capacity thereof. Rents, rates, and charges may be established, levied, and collected in
connection with the electric utility system of the Elk River Municipal Utilities Commission (the
"Commission") and may be pledged to the payment of the principal of and interest on bonds
issued by the City for the benefit of the Commission, including bonds issued to finance the
electric utility system of the Commission.
2. Terms of Proposal. The City proposes to issue and the Commission proposes to
offer and sell Electric Revenue Refunding Bonds, Series 2014A (the "Bonds"), in an aggregate
principal amount not to exceed $2,250,000, to refund the August 1, 2014 through August 1, 2021
maturities of the City's Electric Revenue Bonds, Series 2006A, dated March 2, 2006 (the "Prior
Bonds") and pay the costs of issuing the Bonds. The terms and conditions of the Bonds and the
negotiation thereof are fully set forth in the "Terms of Proposal" attached hereto as Exhibit A
438053v2 JSB EL185-25
and hereby approved and made a part hereof. The Bonds shall be special obligations of the City
payable solely from the net revenues of the electric utility system of the Commission and shall
not constitute a debt for which the full faith and credit or taxing powers of the City will be
pledged.
3. Terms of Sale. The City hereby approves the issuance of the Bonds and Terms of
Proposal and delegates to the Commission the authority to award the sale of the Bonds in an
aggregate principal amount not to exceed $2,250,000. The resolution of the Commission
awarding the sale of the Bonds, fixing the form and details of the Bonds, establishing the terms
of the Bonds and the security therefor, and providing for the execution and delivery of the Bonds
shall have the same force and effect as if such resolution had been adopted by this Council.
4. Qualified Tax Exempt Obligations. In order to qualify the Bonds as "qualified
tax-exempt obligations"within the meaning of Section 265(b)(3) of the Code, the City makes the
following factual statements and representations:
(a) the Bonds are not "private activity bonds" as defined in Section 141 of the
Code;
(b) the Prior Bonds were designated as "qualified tax-exempt obligations" for
purposes of Section 265(b)(3) of the Code, the proposed average maturity of the Bonds is not
longer than the average maturity of the Prior Bonds and the Bonds are proposed to mature not
later than 30 years after the date the Prior Bonds were issued and therefore the Bonds issued to
refund the outstanding principal amount of the Prior Bonds are deemed designated as "qualified
tax-exempt obligations" for purposes of Section 265(b)(3) of the Code;
(c) the reasonably anticipated amount of tax-exempt obligations (other than
private activity bonds that are not qualified 501(c)(3) bonds) which will be issued by the City
(and all subordinate entities of the City) during calendar year 2014 will not exceed $10,000,000;
and
(d) not more than $10,000,000 of obligations issued by the City during
calendar year 2014 have been designated for purposes of Section 265(b)(3) of the Code;
(e) the aggregate face amount of the issue of the Bonds is not greater than
$10,000,000; and
(f) the City, hereby designates the Bonds, to the extent the principal amount
exceeds the outstanding principal amount of the Prior Bonds, as "qualified tax-exempt
obligations" for purposes of Section 265(b)(3) of the Code.
5. Consultants. This Council hereby approves the selection of Springsted
Incorporated, in Saint Paul, Minnesota ("Springsted"), as financial advisor to the City and the
Commission, to assist in the offer and sale of the Bonds, and hereby approves the selection of
Kennedy & Graven, Chartered, as bond counsel to the City and the Commission, to render an
approving legal opinion with respect to the Bonds.
438053v2 JSB EL185-25 2
6. Official Statement. In connection with said competitive negotiated sale, the
Finance and Office Manager and other officers or employees of the Commission and the officers
or employees of the City are hereby authorized to cooperate with Springsted and participate in
the preparation of an official statement for the Bonds, and to execute and deliver it on behalf of
the Commission and the City upon its completion.
The motion for the adoption of the foregoing resolution was duly seconded by member
and, after full discussion thereof and upon a vote being taken thereon, the
following voted in favor thereof:
and the following voted against the same:
Whereupon said resolution was declared duly passed and adopted this 21s' day of
January, 2014.
John J. Dietz, Mayor
ATTEST:
Tina Allard, City Clerk
438053v2 JSB EL185-25 3
STATE OF MINNESOTA )
COUNTY OF SHERBURNE )
CITY OF ELK RIVER )
I, the undersigned, being the duly qualified and acting Clerk of the City of Elk River,
Minnesota, DO HEREBY CERTIFY that I have compared the attached and foregoing extract of
minutes with the original thereof on file in my office, and that the same is a full, true and
complete transcript of the minutes of a meeting of the City Council, duly called and held on the
date therein indicated, insofar as such minutes relate to the Electric Revenue Refunding Bonds,
Series 2014A.
WITNESS my hand this day of 72014.
Clerk
438053v2 JSB EL185-25 4
EXHIBIT A
THE CITY HAS AUTHORIZED SPRINGSTED INCORPORATED TO NEGOTIATE THIS ISSUE ON ITS
BEHALF. PROPOSALS WILL BE RECEIVED ON THE FOLLOWING BASIS:
TERMS OF PROPOSAL
$2,125,000
CITY OF ELK RIVER, MINNESOTA
ELECTRIC REVENUE REFUNDING BONDS, SERIES 2014A
(BOOK ENTRY ONLY)
Proposals for the Bonds and the Good Faith Deposit ("Deposit") will be received on Tuesday,
February 11, 2014, until 10:00 A.M., Central Time, at the offices of Springsted Incorporated, 380 Jackson
Street, Suite 300, Saint Paul, Minnesota, after which time proposals will be opened and tabulated.
Consideration for award of the Bonds will be by the Elk River Municipal Utilities Commission (the
"Commission") at 3:30 P.M., Central Time, of the same day.
SUBMISSION OF PROPOSALS
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, the City and the Commission to purchase the Bonds regardless of the manner in
which the Proposal is submitted.
(a) Sealed Bidding. 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.
OR
(b) Electronic Bidding. Notice is hereby given that electronic proposals will be received via PARITY®.
For purposes of the electronic bidding process, the time as maintained by PARITY° shall constitute the
official time with respect to all Proposals submitted to PARITY®. Each bidder shall be solely responsible
for making necessary arrangements to access PARITYO for purposes of submitting its electronic Proposal
in a timely manner and in compliance with the requirements of the Terms of Proposal. Neither the City,
the Commission, their agents nor PARITY° shall have any duty or obligation to undertake registration to
bid for any prospective bidder or to provide or ensure electronic access to any qualified prospective
bidder, and neither the City, the Commission, their agents nor PARITY°shall be responsible for a bidder's
failure to register to bid or for any failure in the proper operation of, or have any liability for any delays or
interruptions of or any damages caused by the services of PARITY®. The City and the Commission are
using the services of PARITY° solely as a communication mechanism to conduct the electronic bidding
for the Bonds, and PARITY° is not an agent of the City or the Commission.
If any provisions of this Terms of Proposal conflict with information provided by PARITY®, this Terms of
Proposal shall control. Further information about PARITY®, including any fee charged, may be obtained
from:
PARITY®, 1359 Broadway, 2nd Floor, New York, New York 10018
Customer Support: (212) 849-5000
Preliminary; subject to change.
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DETAILS OF THE BONDS
The Bonds will be dated as of the date of delivery and will bear interest payable on February 1 and
August 1 of each year, commencing August 1, 2014. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Bonds will mature August 1 in the years and amounts* as follows:
2014 $430,000 2017 $425,000
2015 420,000 2018 430,000
2016 420,000
* The City reserves the right, after proposals are opened and prior to award, to increase or reduce the
principal amount of the Bonds or the amount of any maturity in multiples of$5,000. In the event the
amount of any maturity is modified, the aggregate purchase price will be adjusted to result in the
same gross spread per $1,000 of Bonds as that of the original proposal. Gross spread is the
differential between the price paid to the City for the new issue and the prices at which the securities
are initially offered to the investing public.
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 at a price of par plus
accrued interest to the date of redemption scheduled to conform to the maturity schedule set forth above.
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
REGISTRAR
The City will name the registrar which shall be subject to applicable SEC regulations. The City will pay for
the services of the registrar.
OPTIONAL REDEMPTION
The Bonds will not be subject to payment in advance of their respective stated maturity dates.
SECURITY AND PURPOSE
The Bonds will be special obligations of the City payable solely from net revenues of the electric system
of the Commission and shall not constitute a debt for which the full faith and credit or taxing powers of the
City will be pledged. The proceeds will be used to refund the August 1, 2014 through August 1, 2021
maturities of the City's Electric Revenue Bonds, Series 2006A, dated March 2, 2006.
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BIDDING PARAMETERS
Proposals shall be for not less than $2,106,938 plus accrued interest, if any, on the total principal amount
of the Bonds. 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 1/100 or 1/8 of
1%. The initial price to the public for each maturity must be 98.0% or greater. 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.
GOOD FAITH DEPOSIT
Proposals, regardless of method of submission, shall be accompanied by a Deposit in the amount of
$21,250, in the form of a certified or cashier's check, a wire transfer, or Financial Surety Bond and
delivered to Springsted Incorporated prior to the time proposals will be opened. Each bidder shall be
solely responsible for the timely delivery of their Deposit whether by check, wire transfer or Financial
Surety Bond. Neither the City nor Springsted Incorporated have any liability for delays in the transmission
of the Deposit.
Any Deposit made by certified or cashier's check should be made payable to the City and delivered to
Springsted Incorporated, 380 Jackson Street, Suite 300, St. Paul, Minnesota 55101.
Any Deposit sent via wire transfer should be sent to Springsted Incorporated as the City's agent
according to the following instructions:
Wells Fargo Bank, N.A., San Francisco, CA 94104
ABA#121000248
for credit to Springsted Incorporated, Account#635-5007954
Ref: Elk River, MN Series 2014A Good Faith Deposit
Contemporaneously with such wire transfer, the bidder shall send an e-mail to
bond_services @springsted.com, including the following information; (i) indication that a wire transfer has
been made (including the fed reference number and time released), (ii) the amount of the wire transfer,
(iii) the issue to which it applies, and (iv) the return wire instructions if such bidder is not awarded the
Bonds.
Any Deposit made by the successful bidder by check or wire transfer will be delivered to the City following
the award of the Bonds. Any Deposit made by check or wire transfer by an unsuccessful bidder will be
returned to such bidder following City action relative to an award of the Bonds.
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 pre-approved 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 underwriter is required to submit its Deposit to the
City 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.
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The Deposit received from the purchaser, the amount of which will be deducted at settlement, will be
deposited by the City and no interest will accrue to the purchaser. In the event the purchaser fails to
comply with the accepted proposal, said amount will be retained by the City.
AWARD
The Bonds will be awarded on the basis of the lowest interest rate to be determined on a true interest
cost (TIC) basis calculated on the proposal prior to any adjustment made by the City and the
Commission. The Commission's computation of the interest rate of each proposal, in accordance with
customary practice, will be controlling.
The Commission 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
Neither the City nor the Commission have not applied for or pre-approved a commitment for any policy of
municipal bond insurance with respect to the Bonds. If the Bonds qualify for municipal bond insurance
and a bidder desires to purchase a policy, such indication, the maturities to be insured, and the name of
the desired insurer must be set forth on the bidder's Proposal. The Commission specifically reserves the
right to reject any bid specifying municipal bond insurance, even though such bid may result in the lowest
TIC to the City and the Commission. All costs associated with the issuance and administration of such
policy and associated ratings and expenses (other than any independent rating requested by the City)
shall be paid by the successful bidder. Failure of the municipal bond insurer to issue the policy after the
award of the Bonds shall not constitute cause for failure or refusal by the successful bidder to accept
delivery of 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
On or about March 13, 2014, 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 Issuer, 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 and the Commission will undertake, pursuant to the
resolution awarding sale of the Bonds, 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.
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OFFICIAL STATEMENT
The City and the Commission have authorized the preparation of a Preliminary Official Statement
containing pertinent information relative to the Bonds, and said Preliminary 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 Preliminary Official Statement or for any additional information prior to
sale, any prospective purchaser is referred to the Financial Advisor to the City and the Commission,
Springsted Incorporated, 380 Jackson Street, Suite 300, Saint Paul, Minnesota 55101, telephone
(651) 223-3000.
A Final Official Statement (as that term is defined in Rule 15c2-12) will be prepared, specifying the
maturity dates, principal amounts and interest rates of the Bonds, together with any other information
required by law. By awarding the Bonds to any underwriter or underwriting syndicate submitting a
proposal therefor, the City and the Commission agree 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 up to 25 copies of the Final Official Statement. The Commission
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 Commission (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 January 14, 2014 BY ORDER OF THE ELK RIVER MUNICIPAL
UTILITIES COMMISSION
/s/Theresa Slominski
Finance and Office Manager
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