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8.1. SR 06-16-2014 City of Elk - Request for Action River O. To Item Number Mayor and City Council 8.1 Agenda Section Meeting Date Prepared by General Business June 16, 2014 Tim Simon, Finance Director Item Description Reviewed by Resolution Authorizing the Bond Sale for Cal Portner, City Administrator Wastewater Treatment Facility Improvement Bonds Reviewed by Action Requested Adopt,by motion,a resolution providing for the competitive negotiated sale of$10,000,000 General Obligation Sewer Revenue Bonds, Series 2014B Background/Discussion Earlier this year,the Council discussed improvements needed at the Waste Water Treatment Facility (WWTF). The facility is debt free as the 2005 refunding bonds were paid off early on February 1, 2014. $11,237,050 in bonds are needed to fund the project,but federal law limits tax exemption to $10 million in a single year. We will authorize $10 million this year to ensure the best rate and make the bonds tax- exempt. Based on updated cash flows we anticipate issuing$1,237,050 in 2016 unless reserves and revenues are sufficient. Staff has requested the call date be set for the 8-year mark, so if we have a significant increase in development or connection fees, the city would be able to call them in early or anytime until they mature. Terri Heaton of Springsted,will be at the meeting to answer any questions. All cash flows were updated to reflect the annual debt service payment in the Sewer Enterprise Fund and projections show the city still maintains reserve requirements for the fund. This project is expected to last well beyond the 20-year life of the bonds,aside from possible modifications in future years. The true interest cost (TIC) is estimated at 3.20% over the 20 years. For comparison,the last-issued WWTF bonds (1996) had a TIC of 5.73%,which was later refunded down to 3.60%in 2005, and subsequently paid off early in 2014. Next steps • July 8"', 2014—rating tour and conference are conducted • July 21", 2014—competitive bids are received • August 21, 2014—proceeds received P a w E A E U s r Template Updated 4/14 INIM UREI Financial Impact Sewer Enterprise fund will repay the bonds related to this project via utility rates. In addition to the bonds, funding includes $3,000,000 Sewer Reserve Fund, $2,800,000 state grant, and$1,000,000 Trunk Utility Funds. The 10-year forecast has been updated to reflect the estimated bonds. Attachments • Resolution providing for the competitive negotiated sale of$10,000,000 General Obligation Sewer Revenue Bonds, Series 2014B • Springsted's sale summary N:\Public Bodies\Agenda Packets\06-16-2014\x8.1 sr GO Sewer Bond Sale.docx EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF ELK RIVER, MINNESOTA HELD: June 16, 2014 Pursuant to due call and notice thereof, a regular meeting of the City Council of City of Elk River, Minnesota, was duly called and held at the City Hall in the City on Monday, the 16th day of June, 2014, at 6:00 o'clock P.M. The following members were present: and the following were absent: Member introduced the following resolution and moved its adoption: RESOLUTION PROVIDING FOR THE COMPETITIVE NEGOTIATED SALE OF $10,000,000 GENERAL OBLIGATION SEWER REVENUE BONDS, SERIES 2014B BE IT RESOLVED by the City Council of the City of Elk River, Minnesota, as follows: 1. Finding; Amount and Purpose. It is hereby found, determined and declared that the City of Elk River, Minnesota (the "City"), should issue $10,000,000 General Obligation Sewer Revenue Bonds, Series 2014B, to finance Waste Water Treatment Facility improvements within the City. 2. Meeting. This City Council shall meet on the date and at the time and place specified in the form of Terms of Proposal attached hereto as Exhibit A for the purpose of awarding the sale of the Bonds. 3. Competitive Negotiated Sale. The City has retained Springsted Incorporated as an independent financial advisor, and the City Council hereby determines to sell the Bonds by private negotiation, by way of a competitive sale in response to Terms of Proposal for the Bonds which are not published in any newspaper or journal. 4. Terms of Proposal. The terms and conditions of the Bonds and the sale thereof are fully set forth in the "Terms of Proposal" attached hereto as Exhibit A and hereby made a part hereof. 5. Official Statement. The City Finance Director and other officers or employees of the City are hereby authorized to participate with Springsted Incorporated in the preparation of an official statement for the Bonds. 445268v1 JSB EL185-27 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. Passed and adopted this 16"'day of June, 2014. John J. Dietz,Mayor ATTEST: Tina Allard, City Clerk 2 445268v1 JSB EL185-27 STATE OF MINNESOTA ) CITY OF ELK RIVER ) SHERBURNE COUNTY ) I, the undersigned, being the duly qualified and acting Clerk of the City of Elk River (the "City"), DO HEREBY CERTIFY that I have carefully compared the attached and foregoing extract of minutes with the original minutes of a meeting of the City Council called and held on the date therein indicated, which are on file and of record in my office, and the same is a full, true and complete transcript therefrom insofar as the same relates to the City's $10,000,000 General Obligation Sewer Revenue Bonds, Series 2014B. WITNESS my hand as such Clerk of the City this 16th day of June, 2014. City Clerk 3 445268v1 JSB EL185-27 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 $10,000,000* CITY OF ELK RIVER,MINNESOTA GENERAL OBLIGATION SEWER REVENUE BONDS, SERIES 2014B (BOOK ENTRY ONLY) Proposals for the Bonds and the Good Faith Deposit ("Deposit") will be received on Monday, July 21, 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 City Council at 6:00 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 and the City 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 S. 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 PARITY®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, its 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, its 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 is using the services of PARITY® solely as a A-1 445268v1 JSB EL185-27 communication mechanism to conduct the electronic bidding for the Bonds, and PARITY® is not an agent of the City. 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 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 February 1, 2015. 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: 2016 $410,000 2020 $430,000 2024 $465,000 2028 $515,000 2032 $585,000 2017 $415,000 2021 $435,000 2025 $475,000 2029 $530,000 2033 $610,000 2018 $415,000 2022 $445,000 2026 $490,000 2030 $550,000 2034 $630,000 2019 $420,000 2023 $455,000 2027 $500,000 2031 $570,000 2035 $655,000 * 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 theprices at which the securities are initially offered to the investingpublic. 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 Bonds with DTC. A-2 445268v1 JSB EL185-27 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 City may elect on February 1, 2022, and on any day thereafter, to prepay Bonds due on or after February 1, 2023. 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 net revenues of the City's Sewer Utility Fund. The proceeds will be used to finance waste water facility improvements. BIDDING PARAMETERS Proposals shall be for not less than $9,880,000 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 $100,000, 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. A-2 445268v1 JSB EL185-27 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 4121000248 for credit to Springsted Incorporated, Account 9635-5007954 Ref: City of Elk River, Minnesota Series 2014B 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. 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. 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. A-3 445268v1 JSB EL185-27 BOND INSURANCE AT PURCHASER'S OPTION The City has 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 City 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. 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 August 21, 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 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 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. OFFICIAL STATEMENT The City has 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 A-4 445268v1 JSB EL185-27 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, 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 an underwriter or underwriting syndicate, the City agrees that, no more than seven business days after the date of such award, it shall provide without cost to the sole underwriter or to the senior managing underwriter of the syndicate (the "Underwriter" for purposes of this paragraph) to which the Bonds are awarded up to 25 copies of the Final Official Statement. The City designates the 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. Such Underwriter agrees that if its proposal is accepted by the City, (i) it shall accept 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 June 16, 2014 BY ORDER OF THE CITY COUNCIL /s/ Tina Allard City Clerk A-5 445268v1 JSB EL185-27 City of Elk River, Minnesota Recommendations for Issuance of Bonds $10,000,000 General Obligation Sewer Revenue Bonds, Series 20148 The City Council has under consideration the issuance of bonds to finance a portion of the construction of waste water facility improvements. 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. June 16, 2014 City Council sets sale date and terms July 8, 2014 Rating tour and conference are conducted July 21, 2014, 10:00 AM Competitive bids are received July 21, 2014, 6:00 PM City Council considers award of bonds August 21, 2014(est.) Proceeds are received RATING: An application will be made to Standard & Poor's Ratings Services for a rating on the Bonds. The City's general obligation debt is currently rated 'AA+' by S&P. 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 201h 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. BBI 25-bond (Revenue) and 20-bond (G.O.) Rates for 5 Years Ending 6/5/2014 6.5% ----BBI 25 Bond —BBI 20 Bond 6/5/2014 6.0% 25 bond:4.79% 20 bond:4.26% 5.5% cc iy. .! ► 4.5% r ! 4.0% iAi 3.5% 3.0% 11� ^ ©O �ti O HO �ti O H^O �l O HO h�ti O4 a HO O h�ti O 4O a 0 0\ O\h�ti 0 Dates Prepared by Springsted Incorporated °O o N O Z 5pringsted 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. The arbitrage rules provide an exception from rebate provisions for gross proceeds that are spent within an 18-month period in accordance with certain spending criteria. The City expects to meet the 18-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 any project proceeds unspent after three years under certain conditions and the funds should be monitored throughout the life of the issue. 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 currently provides arbitrage and continuing disclosure compliance services to the City under separate contracts. Contract amendments adding this issue will be provided to City staff. SUPPLEMENTAL Supplementary information will be available to staff including detailed terms and conditions INFORMATION AND of sale, comprehensive structuring schedules and information to assist in meeting post- BOND RECORD: issuance compliance responsibilities. 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 will be used, together with other sources of funding, to finance a waste water facility improvement project. The other funding sources include: (i) Sewer Utility funds and Trunk Utility funds totaling $4,000,000; (ii) a state grant in the amount of$2,800,000; and (iii) additional future borrowing necessary to provide approximately $1,237,050 of net proceeds. The total cost of the project is currently estimated at$17,857,050. The City is issuing the federal maximum permitted amount of$10 million per calendar year for the Bonds and deferring the issuance of additional debt at this time in order to take advantage of the benefit of designating the current Bonds as bank qualified obligations. In the current market there is an interest rate advantage to issuing tax exempt debt as bank qualified. There will also be an opportunity for the future debt for the project to be issued as bank qualified obligations. AUTHORITY: Statutory Authority: The Bonds are being issued pursuant to Minnesota Statutes, Chapters 444 and 475. Statutory Requirements: Pursuant to Minnesota Statutes, Chapter 444 and the resolution awarding the Bonds, the City will covenant to maintain rates in an amount sufficient to Springsted Page generate revenues to support the operation of the sewer utility and to pay debt service on the Bonds. The City is required to annually review the budget of the sewer utility to determine whether current rates and charges are sufficient and to adjust them as necessary. SECURITY AND The Bonds will be general obligations of the City, secured by its full faith and credit and SOURCE OF taxing power. The Bonds will be repaid from net revenues of the sewer utility. PAYMENT: Until recently, the City had one other outstanding bond issue, the Series 2005B Bonds, for which the net revenues of the sewer utility fund were pledged. However, the remaining principal maturities of that issue were called for early redemption on February 1, 2014. The table below shows the net revenues available for debt service based on 2013 audited financials for fiscal year ending December 31, 2013. The maximum annual debt service payment on the Bonds is estimated to be approximately$680,570. Elk River Sewer Revenue Fund Net Revenues Available For Debt Service Fiscal Year Ended December 31, 2013 12/31/2013 Operating Revenue $ 1,613,276 Operating Expense (2,298,094) Net Operating Income(Loss) (684,818) Add Back Depreciation and amortization 977,931 Net-Other Income 396,121 Available for Debt Service 689,234 Maximum Annual Debt Service (est.) 680,570 Surplus $ 8,664 Source: City of Elk River Comprehensive Annual Financial Reports, for the Year Ended December 31,2013 The City commissioned a rate study completed by Bolten & Menk. In addition, the Springsted Management Consulting Group reviewed the study and concluded that the existing reserves along with projected revenues, including planned rate increases and estimated connection fees, would be sufficient to cover debt service related to this bond issue. The City commits, as part of the bond issuance to increase rates, as necessary, to cover the costs of operations plus debt service. On April 1, 2014 the City adopted a 3% sanitary sewer user fee increase. STRUCTURING At the direction of City staff, the Bonds have been structured over a term of 20 years with SUMMARY: level annual debt service requirements. SCHEDULES Schedules attached include a sources and uses of funds and estimated debt service Springsted Page ATTACHED: requirements, given the current interest environment. RISKS/SPECIAL The outcome of this financing will rely on the market conditions at the time of the sale. Any CONSIDERATIONS: 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: Bonds maturing on or after February 1, 2023 may be prepaid at a price of par plus accrued interest on or after February 1, 2022. 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. The City did issue tax exempt current refunding bonds for the electric utility earlier this calendar year. However, the City's bond counsel has determined that because it was a current refunding and the principal amount of the refunding issue was less than the principal amount of the refunded bonds, the refunding issue did not count against the City's$10 million limit for 2014. 5pringsted Page $10,000,000 City of Elk River, Minnesota General Obligation Sewer Revenue Bonds Series 2014B Sources& Uses Dated 08/21/2014 1 Delivered 08/21/2014 Sources Of Funds ParAmount of Bonds...................................................................................................................................... $10,000,000.00 SewerUtility Cash........................................................................................................................................... 3,000,000.00 StateFunds Cash............................................................................................................................................ 2,800,000.00 Funded by Future Debt Issuance.................................................................................................................... 1,237,050.00 Trunk Utilities Fund Cash................................................................................................................................. 1,000,000.00 TotalSources............................................................................................................................................... $18,037,050.00 Uses Of Funds TotalCost of Project........................................................................................................................................ 17,857,050.00 Total Underwriter's Discount (1.200%).......................................................................................................... 120,000.00 Costsof Issuance........................................................................................................................................... 60,000.00 TotalUses..................................................................................................................................................... $18,037,050.00 Series 2014B GOSeiverRer I SLYGLEPURPOSE 1 611012 014 1 9.25-AM 5pringsted Page $10,000,000 City of Elk River, Minnesota General Obligation Sewer Revenue Bonds Series 2014B DEBT SERVICE SCHEDULE Date Principal Coupon Interest Total P+I 105%Levy 02/01/2015 - - 119,016.67 119,016.67 124,967.50 02/01/2016 410,000.00 0.700% 267,787.50 677,787.50 711,676.88 02/01/2017 415,000.00 0.950% 264,917.50 679,917.50 713,913.38 02/01/2018 415,000.00 1.250% 260,975.00 675,975.00 709,773.75 02/01/2019 420,000.00 1.450% 255,787.50 675,787.50 709,576.88 02/01/2020 430,000.00 1.700% 249,697.50 679,697.50 713,682.38 02/01/2021 435,000.00 1.950% 242,387.50 677,387.50 711,256.88 02/01/2022 445,000.00 2.150% 233,905.00 678,905.00 712,850.25 02/01/2023 455,000.00 2.350% 224,337.50 679,337.50 713,304.38 02/01/2024 465,000.00 2.450% 213,645.00 678,645.00 712,577.25 02/01/2025 475,000.00 2.600% 202,252.50 677,252.50 711,115.13 02/01/2026 490,000.00 2.750% 189,902.50 679,902.50 713,897.63 02/01/2027 500,000.00 2.900% 176,427.50 676,427.50 710,248.88 02/01/2028 515,000.00 3.050% 161,927.50 676,927.50 710,773.88 02/01/2029 530,000.00 3.250% 146,220.00 676,220.00 710,031.00 02/01/2030 550,000.00 3.350% 128,995.00 678,995.00 712,944.75 02/01/2031 570,000.00 3.450% 110,570.00 680,570.00 714,598.50 02/01/2032 585,000.00 3.550% 90,905.00 675,905.00 709,700.25 02/01/2033 610,000.00 3.650% 70,137.50 680,137.50 714,144.38 02/01/2034 630,000.00 3.700% 47,872.50 677,872.50 711,766.13 02/01/2035 655,000.00 3.750% 24,562.50 679,562.50 713,540.63 Total $10,000,000.00 - $3,682,229.17 $13,682,229.17 $14,366,340.63 SIGNIFICANT DATES Dated................................................................................................................................................................ 8/21/2014 DeliveryDate.................................................................................................................................................... 8/21/2014 FirstCoupon Date............................................................................................................................................. 2/01/2015 Yield Statistics BondYear Dollars............................................................................................................................................ $117,929.44 AverageLife.................................................................................................................................................... 11.793 Years AverageCoupon.............................................................................................................................................. 3.1224002% Net Interest Cost(NIC)...................................................................................................................................... 3.2241559% True Interest Cost(TIC).................................................................................................................................... 3.2025134% Bond Yield for Arbitrage Purposes.................................................................................................................. 3.0764907% All Inclusive Cost(AIC)..................................................................................................................................... 3.2663353% IRS Form 8038 NetInterest Cost............................................................................................................................................... 3.1224002% WeightedAverage Maturity.............................................................................................................................. 11.793 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 2014B GOS—erRes I SINGLEPURPOSE 1 611012014 I9:259M Springsted Page