5.1 ERMUSR 07-10-2018 Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
ERMU Commission Theresa Slominski, Finance and Office Manager
MEETING DATE: AGENDA ITEM NUMBER:
July 10, 2018 5.1
SUBJECT:
Bond Sale Resolution
ACTION REQUESTED:
Adopt,by motion,Resolution No. 18-9 providing for the competitive negotiated sale of$10,000,000
Electric Revenue Bonds, Series 2018A,and request that the City Council sell the 2018A Electric Bonds
in August 2018,per the attached resolution.
BACKGROUND:
As mentioned in my June staff update, we are moving forward with our final payment buy-in to
the Minnesota Municipal Power Agency(MMPA) by bonding this year, and we are estimating
another$10 million. We have been working with our financial consultants, Springsted,to bring
the sale information forward this commission meeting.
DISCUSSION:
Due to the determined funding date to MMPA of September 28, 2018, along with summer schedules and
holidays, it was necessary to start the process a month earlier to ensure timely funding, and so things are
moving faster than originally communicated. As stated last month, a projected final buy-in amount will
be provided July 12,2018 from MMPA. To accommodate our commission meeting on July 10, 2018, we
have the resolution worded for an anticipated amount of$10 million with an authorization to modify upon
receipt of final numbers July 12,2018. Springsted has provided information on the 2018A bonding for
$10 million.
Given the City of Elk River is the qualified entity to issue bonds,the resolution must be approved by the
City Council to be effective. We have the necessary resolutions for the Utility Commission and City
Council to act upon in order to authorize the sale of these bond issues. Successful action from the Utility
at the July 10,2018 meeting would bring it before the City Council on July 16,2018 for action. The
resolutions are attached for your review.
The award of the bonds by the Utility Commission would come back for a special meeting to be held on
August 29, at 3:00 p.m. Thank you in advance for your flexibility to accommodate this special meeting!
FINANCIAL IMPACT:
We have been planning for this migration to MMPA for several years now. In 2013 we joined
MMPA and entered into agreement to purchase power from them starting October 2018 (when
our agreement with Connexus/GRE ends). At that time we estimated approximately 10% lower
purchase power costs with MMPA, and estimates ran last year approximated 8% lower costs.
2017 purchased power costs were $25 million, so that is an estimated savings of$2 million at
8%. Our 2016A bond payments are an average of$680,000 with a 20 year term, and we are
Page 1 of 2
48
assuming our 2018A bond with a 20-30 year term will be approximately that same payment
amount. If the resulting difference in power costs were only 5% lower,we should be able to
make the bond payments and have no rate impact to our customers for the purchased power(only
inflationary costs for other operating expenses would need to be considered.) With a larger than
5% difference we should be able to hold the rates for a few years and then gradually increase our
rates, with the goal to be less than our neighboring utilities.
ATTACHMENTS:
• Springsted Recommendations 2018A Bonds
• Resolution No. 18-9 Providing for the Competitive Negotiated Sale of$10,000,000
Electric Revenue Bonds, Series 2018A
• Resolution for City Setting Sale 2018A Bonds
Page 2 of 2
49
City of Elk River, Minnesota
Recommendations for Issuance of Bonds
$10,000,000 Electric Revenue Bonds, Series 2018A
The City Council and Utilities Commission have under consideration the issuance of bonds (the "Bonds")to finance
the Elk River Municipal Utilities's (the "Utility") buy-in to become a member of the Minnesota Municipal Power
Agency. 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.
July 10, 2018 Utilities Commission sets sale date and terms
July 16, 2018 City Council sets sale date and terms and authorizes
Utilities Commission to award Bonds
Week of August 13, 2018 Rating conference is conducted
August 29,2018,9:30 AM Competitive bids are received
August 29,2018,3:00 PM Utilities Commission considers award of Bonds
September 26, 2018 Proceeds are received
September 28, 2018 Payment to MMPA
RATING: An application will be made to Moody's Investors Service for a rating on the Bonds. The City's
electric revenue supported debt is currently rated 'Aa3' by Moody's.
THE MARKET: General 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 30th year for revenue bonds (the BBI
Revenue Bond Index). The following chart illustrates these two indices over the past five
years.
BBI 20-bond(G.O.)and Revenue Indices for 5 Years Ending
6/28/2018
6.0%
6/28/2018
Revenue'. 4 36%
5.0% 20 bond'.3.87%
fr as-
x
—BBI Revenue"Bond
—BBI 20 Bond
3.0%
2.0%
O^O O^O D e e O�� ^1c Ory O,3 ^y �y ^6 O^83 O^O ^O O.1 O�� O, <c ^O e
Data Source:The Bond Buyer
coco
O
. co
Z N
T
Springsted
50
POST ISSUANCE The issuance of the 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 this issue has been structured. Post-issuance compliance responsibilities for
this 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. Under certain
circumstances any "excess earnings" will need to be paid to the IRS to maintain the tax-
exempt status of the Bonds. Any interest earnings on gross bond proceeds or debt service
funds should not be spent until it has been determined based on actual facts that they are not
"excess earnings"as defined by the IRS Code.
The arbitrage rules provide for spend-down exceptions for proceeds that are spent within
either a 6-month, 18-month or 24-month period in accordance with certain spending criteria.
Proceeds that qualify for an exception will be exempt from rebate. These exceptions are
based on actual expenditures and not based on reasonable expectations, and expenditures,
including any investment proceeds will have to meet the spending criteria to qualify for the
exclusion. The City expects to meet the 6-month spending exception.
Regardless of whether the issue qualifies for an exemption from the rebate provisions, yield
restriction provisions will apply to Bond proceeds (including interest earnings) unspent after
three years and both the debt service fund and the debt service reserve account throughout
the term of the Bonds. These moneys should be monitored until the Bonds are retired.
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 continuing disclosure services to the Municipal Utilities and the
City. Springsted will work with staff to include the Bonds under the existing Agreement for
Municipal Advisor Services.
SUPPLEMENTAL Supplementary information will be available to staff including detailed terms and conditions of
INFORMATION AND 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 to complete the financing of the Utility's buy-in to become
a member of the Minnesota Municipal Power Agency (the "MMPA"). The City issued its
$9,755,000 Electric Revenue Bonds, Series 2016A to finance an initial buy-in deposit of
$9,393,793.85. The City and the MMPA have entered into a Power Sales Agreement under
which the City will purchase electric power and energy from the MMPA from and after
October 1, 2018. The City has agreed to a buy in equal to 120%of its proportionate share of
the net position(equity)and related rate accruals of MMPA through an agreed upon formula.
Springsted Page2
51
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 three other outstanding issues payable
from net revenues of its electric utility system(the"Electric System"):
• Electric Revenue Refunding Bonds, Series 2014A (the "Series 2014A Bonds"),
today outstanding in the aggregate principal amount of$420,000 with a final
maturity of August 1, 2018
• Electric Revenue Bonds, Series 2016A (the "Series 2016A Bonds"), today
outstanding in the aggregate principal amount of$9,755,000 with a final maturity of
February 1, 2036
• Electric Revenue Refunding Bonds, Series 2016B (the "Series 2016B Bonds"),
today outstanding in the aggregate principal amount of$930,000 with a final
maturity of February 1, 2022
As of the closing of the Bonds on September 26, 2018, only the Series 2016A Bonds and the
Series 2016B Bonds will be outstanding (the Series 2016A Bonds and Series 2016B Bonds
are together referred to as the"Parity Bonds").
Rate Covenant: The Utility has pledged to establish user rates and charges for the Electric
System so that annual net revenues shall not be less than 110%of the average annual debt
service on the Bonds,the Parity Bonds and any additional parity bonds.
Additional Bonds: Additional bonds may be issued on a parity of lien with the Parity Bonds
so long as the net revenues of the Electric System for the audited fiscal year immediately
preceding the issuance of such additional bonds are not less than 125% of the average
annual principal and interest due on all outstanding parity bonds and the additional bonds to
be issued, during the remaining term of the outstanding bonds. A coverage ratio of about
510% is projected based on the December31, 2017 Electric Fund audited financial
statements and the projected average annual principal and interest payment on the Parity
Bonds and the Bonds of$1,013,600(see table below).
The issuance of additional bonds requires that the balance in the Reserve Account be
adjusted to equal the Reserve Requirement, which may require additional money to be
deposited into the Reserve Account from bond proceeds or any other available funds of the
Utility.
Debt Service Reserve Account: The Utility will maintain a Debt Service Reserve Account
(the"Reserve Account") in the amount of the Reserve Requirement. "Reserve Requirement"
means, as of the date of issuance of a series of bonds, 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
issuance of a series of bonds, or (iii) 125%of the average annual principal and interest
payable on all outstanding bonds and Additional Bonds as of the date of issuance of a series
of bonds.
Springsted Page 3
52
With the issuance of the Bonds, the Reserve Requirement will be equal to 125%of average
annual debt service on the Bonds and the Parity Bonds. The current amount on deposit in
the Reserve Account is $997,660. It is anticipated that the Reserve Requirement will
increase to approximately $1,273,479 with the issuance of the Bonds. The proceeds of the
Bonds will fund the difference between the new Reserve Requirement and the current
balance in the Reserve Fund of$997,660,or approximately$275,819.
A portion of the current balance in the Reserve Fund was originally funded with proceeds of
the Series 2014A Bonds, which mature on August 1, 2018. We have confirmed with Utility
staff that the final payment on the Series 2014A Bonds will be paid from net revenues of the
City's Electric System, and therefore the current balance in the Reserve Fund will be
available to fund the increase in the Reserve Requirement resulting from this new financing.
SECURITY AND The Bonds will not be a general obligation of the City but are special limited obligations
SOURCE OF payable solely from net revenues of the City's Electric System.
PAYMENT:
The Bonds are being issued as Additional Bonds, on parity with the outstanding Parity
Bonds.
The table below demonstrates that the issuance of the Bonds satisfies the Additional Bonds
test described above.
Elk River Utilities Electric Fund
Net Revenues Available for Debt Service
Fiscal Years Ended December 31,2015,2016 and 2017
December31,2015 December31,2016 December31,2017
Operating Revenue $ 32,551,722 $ 34,464,396 $ 36,120,824
Operating Expense (29,896,1541 (31,826,5991 (33,394,471)
• Net Operating Income(Loss) $ 2,655,568 $ 2,637,797 $ 2,726,353
Add Back Depreciation 1,922,359 2,005,093 2,046,935
Add Other Income 375,020 372,506 424,101
Available for Debt Service $ 4,952,947 $ 5,015,396 $ 5,197,389
Average Annual Debt Service* $ 1,013,595
Coverage 5.12x
*Includes the combined average annual debt service for the Bonds and the Parity Bonds.
Source: Elk River Municipal Utilities Annual Financial Reports for the Years Ended December 31,2015
through 2017.
Spring5ted Page4
53
STRUCTURING In consultation with the Utility, the initial principal amount of the Bonds is set at $10 million
SUMMARY: and the Bonds have been structured to provide for approximately level annual debt service
over a term of 30 years.
The principal amount of$10 million will produce approximately$9,490,155 of Bond proceeds
available for the final payment to the MMPA. On July 12, 2018 the Utility is expected to
receive the near final estimate of the final buy-in amount from the MMPA. After receipt of the
near final buy-in amount from MMPA, the Utility will decide if any adjustment is required to
the principal amount of the Bonds. If the dollar amount due to the MMPA is greater than the
estimated proceeds that can be generated from a$10 million issue, the Utility has the option
to either use available Electric System funds to fund the additional costs or increase the
principal amount of the Bonds. We would advise that such decision be made on or before
August 8, 2018; the date on which the Preliminary Official Statement is scheduled to be
posted.
SCHEDULES Schedules attached include:
ATTACHED:
• Sources and uses of funds
• Debt service requirements,given the current interest rate environment
• Proof of reserve fund requirement
• Coverage ratio including the Bonds
• Aggregate electric parity debt service including the Bonds
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.
The Bonds are payable solely from net revenues of the City's Electric Fund. The City and
Utility will need to continually review the Electric Fund budget, and user fees and charges,to
ensure annual net revenues of the Electric Fund are not less than 110% of the average
annual debt service on the Bonds and the Parity Bonds.
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, 2029 may be prepaid at a
price of par plus accrued interest on or after February 1, 2028.
Bank Qualification: A determination of whether tht Bonds will be bank qualified or not will be
made after July 12, 2018 when a near final estimate of the Utility's final buy-in cost is
provided by MMPA. This issue represents the City's only tax-exempt borrowing in calendar
year 2018. Therefore, if the principal amount of this issue is not more than $10 million, the
Bonds will be designated as bank qualified.
Springsted Pages
54
' $10,000,000
City of Elk River, Minnesota
Electric Revenue Bonds, Series 2018A
Term: 30 Years
Sources& Uses
Dated 09/26/2018 i Delivered 09/26/2018
Sources Of Funds
Par Amount of Bonds $10,000,000.00
Total Sources $10,000,000.00
Uses Of Funds
Amount Available to Complete Acquisition of Membership in MVIPA 9,490,155.71
Deposit to Debt Service Reserve Fund(DSRF) 275,819.29
Total Underwriter's Discount (1.500%) 150,000.00
Costs of Issuance 84,025.00
Total Uses $10,000,000.00
Series 2018A Electric Rev I SINGLE PURPOSE 16/28!2018 I 1:07 PM
Springsted Page6
55
r $10,000,000
City of Elk River, Minnesota
Electric Revenue Bonds, Series 2018A
Debt Service Schedule
Date Principal Coupon Interest Total P+I Fiscal Total
09/26/2018 - - - - -
02/01/2019 - - 128,146.70 128,146.70 -
08/01/2019 260,000.00 2.150% 184,531.25 444,531.25 572,677.95
02/01/2020 - - 181,736.25 181,736.25
08/01/2020 210,000.00 2.300% 181,736.25 391,736.25 573,472.50
02/01/2021 - - 179,321.25 179,321.25 -
08/01/2021 210,000.00 2.450% 179,321.25 389,321.25 568,642.50
02/01/2022 - - 176,748.75 176,748.75 -
08/01/2022 215,000.00 2.550% 176,748.75 391,748.75 568,497.50
02/01/2023 - - 174,007.50 174,007.50 -
08/01/2023 225,000.00 2.650% 174,007.50 399,007.50 573,015.00
02/01/2024 - - 171,026.25 171,026.25 -
08/01/2024 230,000.00 2.800% 171,026.25 401,026.25 572,052.50
02/01/2025 - - 167,806.25 167,806.25 -
08/01/2025 235,000.00 2.900% 167,806.25 402,806.25 570,612.50
02/01/2026 - - 164,398.75 164,398.75 -
08/01/2026 240,000.00 3.000% 164,398.75 404,398.75 568,797.50
02/01/2027 - - 160,798.75 160,798.75 -
08/01/2027 250,000.00 3.100% 160,798.75 410,798.75 571,597.50
02/01/2028 - - 156,923.75 156,923.75 -
08/01/2028 255,000.00 3.150% 156,923.75 411,923.75 568,847.50
02/01/2029 - - 152,907.50 152,907.50 -
08/01/2029 265,000.00 3.200% 152,907.50 417,907.50 570,815.00
02/01/2030 - - 148,667.50 148,667.50 -
08/01/2030 275,000.00 3.300% 148,667.50 423,667.50 572,335.00
02/01/2031 - - 144,130.00 144,130.00 -
08/01/2031 285,000.00 3.400% 144,130.00 429,130.00 573,260.00
02/01/2032 - - 139,285.00 139,285.00 -
08/01/2032 295,000.00 3.450% 139,285.00 434,285.00 573,570.00
02/01/2033 - - 134,196.25 134,196.25 -
08/01/2033 305,000.00 3.550% 134,196.25 439,196.25 573,392.50
02/01/2034 - - 128,782.50 128,782.50 -
08/01/2034 315,000.00 3.600% 128,782.50 443,782.50 572,565.00
02/01/2035 - - 123,1 12.50 123,1 12.50 -
08/01/2035 325,000.00 3.700% 123,112.50 448,112.50 571,225.00
02/01/2036 - - 117,100.00 117,100.00 -
08/01/2036 335,000.00 3.750% 117,100.00 452,100.00 569,200.00
02/01/2037 - - 110,818.75 110,818.75 -
08/01/2037 350,000.00 3.800% 110,818.75 460,818.75 571,637.50
02/01/2038 - - 104,168.75 104,168.75 -
08/01/2038 365,000.00 3.850% 104,168.75 469,168.75 573,337.50
02/01/2039 - - 97,142.50 97,142.50 -
08/01/2039 375,000.00 3.900% 97,142.50 472,142.50 569,285.00
02/01/2040 - - 89,830.00 89,830.00 -
08/01/2040 390,000.00 4.200% 89,830.00 479,830.00 569,660.00
02/01/2041 - - 81,640.00 81,640.00 -
08/01/2041 410,000.00 4.200% 81,640.00 491,640.00 573,280.00
02/01/2042 - - 73,030.00 73,030.00 -
08/01/2042 425,000.00 4.200% 73,030.00 498,030.00 571,060.00
02/01/2043 - - 64,105.00 64,105.00 -
08/01/2043 445,000.00 4.200% 64,105.00 509,105.00 573,210.00
02/01/2044 - - 54,760.00 54,760.00 -
08/01/2044 460,000.00 4.200% 54,760.00 514,760.00 569,520.00
02/01/2045 - - 45,100.00 45,100.00 -
08/01/2045 480,000.00 4.400% 45,100.00 525,100.00 570,200.00
02/01/2046 - - 34,540.00 34,540.00 -
08/01/2046 500,000.00 4.400% 34,540.00 534,540.00 569,080.00
02/01/2047 - - 23,540.00 23,540.00 -
08/01/2047 525,000.00 4.400% 23,540.00 548,540.00 572,080.00
02/01/2048 - - 11,990.00 11,990.00 -
08/01/2048 545,000.00 4.400% 11,990.00 556,990.00 568,980.00
Total $10,000,000.00 - $7,135,905.45 $17,135,905.45 -
Yield Statistics
Bond Year Dollars $178,387.22
Average Life 17.839 Years
Average Coupon 4.0002335%
Net Interest Cost(NIC) 4.0843203%
True Interest Cost(TIC) 4.0720435%
Bond Yield for Arbitrage Purposes 3.9468061%
All Inclusive Cost(AIC) 4.1434607%
IRS Form 8038
Net Interest Cost 4.0002335%
Weighted Average Maturity 17.839 Years
Series 2018A Electric Rev I SINGLE PURPOSE 16282018 I 1:07 PM
Springsted Pagel
56
' $10,000,000
City of Elk River, Minnesota
Electric Revenue Bonds, Series 2018A
Term: 30 Years
Proof of Reserve Fund Requirement
Date Principal Interest Existing DIS TOTAL P+I
08/01/2019 260,000.00 312,677.95 921,375.00 1,494,052.95
08/01/2020 210,000.00 363,472.50 929,925.00 1,503,397.50
08/01/2021 210,000.00 358,642.50 922,675.00 1,491,317.50
08/01/2022 215,000.00 353,497.50 929,575.00 1,498,072.50
08/01/2023 225,000.00 348,015.00 680,525.00 1,253,540.00
08/01/2024 230,000.00 342,052.50 680,900.00 1,252,952.50
08/01/2025 235,000.00 335,612.50 680,825.00 1,251,437.50
08/01/2026 240,000.00 328,797.50 682,925.00 1,251,722.50
08/01/2027 250,000.00 321,597.50 687,275.00 1,258,872.50
08/01/2028 255,000.00 313,847.50 686,375.00 1,255,222.50
08/01/2029 265,000.00 305,815.00 684,575.00 1,255,390.00
08/01/2030 275,000.00 297,335.00 686,806.25 1,259,141.25
08/01/2031 285,000.00 288,260.00 683,025.00 1,256,285.00
08/01/2032 295,000.00 278,570.00 683,212.50 1,256,782.50
08/01/2033 305,000.00 268,392.50 682,256.25 1,255,648.75
08/01/2034 315,000.00 257,565.00 679,350.00 1,251,915.00
08/01/2035 325,000.00 246,225.00 680,150.00 1,251,375.00
08/01/2036 335,000.00 234,200.00 690,200.00 1,259,400.00
08/01/2037 350,000.00 221,637.50 571,637.50
08/01/2038 365,000.00 208,337.50 - 573,337.50
08/01/2039 375,000.00 194,285.00 569,285.00
08/01/2040 390,000.00 179,660.00 569,660.00
08/01/2041 410,000.00 163,280.00 - 573,280.00
08/01/2042 425,000.00 146,060.00 571,060.00
08/01/2043 445,000.00 128,210.00 - 573,210.00
08/01/2044 460,000.00 109,520.00 - 569,520.00
08/01/2045 480,000.00 90,200.00 570,200.00
08/01/2046 500,000.00 69,080.00 - 569,080.00
08/01/2047 525,000.00 47,080.00 - 572,080.00
08/01/2048 545,000.00 23,980.00 - 568,980.00
Total $10,000,000.00 $7,135,905.45 $13,271,950.00 $30,407,855.45
PROOF OF RESERVE FIND
MAXIMUM PERIODIC DEBT SERVICE
Omit Last Period? Yes
100%of the Maximum Periodic Debt Service1,503,397.50
AVERAGE PERIODIC DEBT SERVICE
Total P-FI 30,407,855.45
Bond Years(Delivery Date) 29.85
125%of the Average Periodic Debt Service 1,273,479.29
PERCENT OF PAR
Total Par(Existing+New) 20,685,000.00
10%of Par 2,068,500.00
RESERVE REQUI REM ENT
Computed Requirement 275,819.29
Roof's Requirement 1,273,479.29
Portion of reserve requirement funded externally 997,660.00
Lowest Requirement less external funding 275,819.29
Series 2018A Electric Rev I SINGLE PURPOSE I 6/28/2018 I 1:07 PM
Sprin9St£d Page8
57
' $10,000,000
City of Elk River, Minnesota
Electric Revenue Bonds, Series 2018A
Coverage Ratio Including the Bonds
Date Net Electric Total Electric Parity Coverage
Fund Revenues Debt Service
08/01/2019 5,197,389.00 1,494,052.95 3.4787181 x
08/01/2020 5,197,389.00 1,503,397.50 3.4570957x
08/01/2021 5,197,389.00 1,491,317.50 3.4850989x
08/01/2022 5,197,389.00 1,498,072.50 3.4693842x
08/01/2023 5,197,389.00 1,253,540.00 4.1461692x
08/01/2024 5,197,389.00 1,252,952.50 4.1481134x
08/01/2025 5,197,389.00 1,251,437.50 4.1531351x
08/01/2026 5,197,389.00 1,251,722.50 4.1521895x
08/01/2027 5,197,389.00 1,258,872.50 4.1286064x
08/01/2028 5,197,389.00 1,255,222.50 4.1406117x
08/01/2029 5,197,389.00 1,255,390.00 4.1400593x
08/01/2030 5,197,389.00 1,259,141.25 4.1277251x
08/01/2031 5,197,389.00 1,256,285.00 4.1371098x
08/01/2032 5,197,389.00 1,256,782.50 4.1354721x
08/01/2033 5,197,389.00 1,255,648.75 4.1392061x
08/01/2034 5,197,389.00 1,251,915.00 4.1515510x
08/01/2035 5,197,389.00 1,251,375.00 4.1533425x
08/01/2036 5,197,389.00 1,259,400.00 4.1268771x
08/01/2037 5,197,389.00 571,637.50 9.0921064x
08/01/2038 5,197,389.00 573,337.50 9.0651475x
08/01/2039 5,197,389.00 569,285.00 9.1296785x
08/01/2040 5,197,389.00 569,660.00 9.1236685x
08/01/2041 5,197,389.00 573,280.00 9.0660567x
08/01/2042 5,197,389.00 571,060.00 9.1013011x
08/01/2043 5,197,389.00 573,210.00 9.0671639x
08/01/2044 5,197,389.00 569,520.00 9.1259113x
08/01/2045 5,197,389.00 570,200.00 9.1150281x
08/01/2046 5,197,389.00 569,080.00 9.1329672x
08/01/2047 5,197,389.00 572,080.00 9.0850738x
08/01/2048 5,197,389.00 568,980.00 9.1345724x
Electric Fund Net Revenues Available for Debt Service*
Operating Revenue $ 36,120,824
Operating Expense (33,394,471)
Net Operating Income (Loss) $ 2,726,353
Add Back Depreciation 2,046,935
Add Other Income 424,101
Available for Debt Service $ 5,197,389
*Source:Elk River Municipal Utilities Annual Financial Report for year ended December 31, 2017.
Series 2018A Electric Rev I SINGLE PURPOSE I 6/28/2018 I 1:07 PM
or
Springsted Page9
58
City of Elk River, Minnesota
Electric Revenue Bonds
Aggregate Electric Parity Debt Service Including the Bonds
Calendar Series 2014 Series 2016B Series 2016A Series 2018A TOTAL
Year Projected
2018 428,400.00 245,600.00 273,425.00 - 947,425.00
2019 - 246,150.00 675,225.00 572,677.95 1,494,052.95
2020 - 246,600.00 683,325.00 573,472.50 1,503,397.50
2021 - 246,950.00 675,725.00 568,642.50 1,491,317.50
2022 - 244,800.00 684,775.00 568,497.50 1,498,072.50
2023 - - 680,525.00 573,015.00 1,253,540.00
2024 - - 680,900.00 572,052.50 1,252,952.50
2025 - - 680,825.00 570,612.50 1,251,437.50
2026 - - 682,925.00 568,797.50 1,251,722.50
2027 - - 687,275.00 571,597.50 1,258,872.50
2028 - - 686,375.00 568,847.50 1,255,222.50
2029 - - 684,575.00 570,815.00 1,255,390.00
2030 - - 686,806.25 572,335.00 1,259,141.25
2031 - - 683,025.00 573,260.00 1,256,285.00
2032 - - 683,212.50 573,570.00 1,256,782.50
2033 - - 682,256.25 573,392.50 1,255,648.75
2034 - - 679,350.00 572,565.00 1,251,915.00
2035 - - 680,150.00 571,225.00 1,251,375.00
2036 - - 690,200.00 569,200.00 1,259,400.00
2037 - - - 571,637.50 571,637.50
2038 - - - 573,337.50 573,337.50
2039 - - - 569,285.00 569,285.00
2040 - - - 569,660.00 569,660.00
2041 - - - 573,280.00 573,280.00
2042 - - - 571,060.00 571,060.00
2043 - - - 573,210.00 573,210.00
2044 - - - 569,520.00 569,520.00
2045 - - - 570,200.00 570,200.00
2046 - - - 569,080.00 569,080.00
2047 - - - 572,080.00 572,080.00
2048 . - - - 568,980.00 568,980.00
- $428,400.00 $1,230,100.00 $12,560,875.00 $17,135,905.45 $31,355,280.45
Average Annual Debt Service '$1,013,595.18
Par Amounts Of Selected Issues
Series 2014A 420,000.00
Series 2016B Ref 1,150,000.00
Series 2016A 9,755,000.00
Series 2018A 10,000,000.00
TOTAL 21,325,000.00
Aggregate I 6282018 1 1:08 PM
Sri
pngsted Page 10
59
EXTRACT OF MINUTES OF MEETING OF THE
ELK RIVER MUNICIPAL UTILITIES COMMISSION
HELD: July 10, 2018
Pursuant to due call and notice thereof, a regular meeting of the Elk River Municipal
Utilities Commission, was duly held in the Utilities Conference Room, 13069 Orono Parkway in
said City on the 10th day of July, 2018, at 3:00 P.M. for the purpose in part of authorizing the
competitive negotiated sale of the $10,000,000 Electric Revenue Bonds, Series 2018A.
The following members were present:
and the following were absent:
Member introduced the following resolution and moved its adoption:
Resolution No. 18-9
RESOLUTION PROVIDING FOR THE COMPETITIVE NEGOTIATED
SALE OF $10,000,000
ELECTRIC REVENUE BONDS, SERIES 2018A
A. WHEREAS, the Elk River Municipal Utilities Commission (the
`'Commission"), has heretofore determined that it is necessary and expedient that the City of
Elk River, Minnesota (the "City") issue its $10,000,000 Electric Revenue Bonds, Series 2018A
(the `Bonds") to finance the remaining cost of the acquisition of its membership in the
Minnesota Municipal Power Agency by the electric system of the Elk River Municipal
Utilities; and
B. WHEREAS, the Commission has retained Springsted Incorporated, in Saint
Paul, Minnesota ("Springsted"), as its independent municipal advisor and is therefore authorized
to sell these obligations by a competitive negotiated sale in accordance with Minnesota Statutes,
Section 475.60, Subdivision 2(9); and
NOW, THEREFORE, BE IT RESOLVED by the Elk River Municipal Utilities
Commission, as follows:
1. Authorization; Findings. The Commission hereby authorizes Springsted to solicit
bids for the competitive negotiated sale of the Bonds.
2. Meeting; Bid Opening. This Commission shall meet at the time and place
specified in the Terms of Proposal attached hereto as Exhibit A for the purpose of considering
sealed bids for, and awarding the sale of, the Bonds. The Finance and Office Manager or
designee, shall open bids at the time and place specified in such Terms of Proposal.
529084v1 JSB EL185-55
60
3. Terms of Proposal. 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 and hereby
approved and made a part hereof.
4. Official Statement. In connection with said competitive negotiated sale, the
Finance and Office Manager and other officers or employees of the Commission 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 upon its completion.
5. Request to City Council. The Commission hereby requests that the City Council
of the City adopt a resolution on July 16, 2018, approving the issuance of the Bonds and
authorizing the Commission to take actions necessary and sufficient to provide for the issuance
of the Bonds.
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.
529084v1 JSB EL185-55 2
61
STATE OF MINNESOTA )
COUNTY OF SHERBURNE )
ELK RIVER MUNICIPAL )
UTILTIES COMMISSION )
I, the undersigned, being the duly qualified and acting Secretary of the Elk River
Municipal Utilities Commission,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 Commission, duly called and
held on the date therein indicated, insofar as such minutes relate to the $10,000,000 Electric
Revenue Bonds, Series 2018A.
WITNESS my hand this day of , 2018.
Secretary
529084v1 JSB EL185-55 3
62
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
ELECTRIC REVENUE BONDS,SERIES 2018A
(BOOK ENTRY ONLY),
Proposals for the above-referenced obligations (the"Bonds") will be received on Wednesday,August 29,
2018, (the "Sale Date") until 9:30 A.M., Central Time at the offices of Springsted Incorporated
("Springsted"), 380 Jackson Street, Suite 300, Saint Paul, Minnesota, 55101, 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 its meeting commencing at 3:00 P.M., Central Time, of the
same day.
SUBMISSIONOF PROPOSALS
Springsted will assume no liability for the inability of a 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 of Elk River,Minnesota(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 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,
Commission, 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, the Commission, 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 communication mechanism to conduct the electronic bidding for the Bonds, and
PARITY®is not an agent of the City or the Commission.
* Preliminary;subject to change.
A-1
529084v1 JSB EL185-55
63
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 1,2019. 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:
2019 $260,000 2025 $235,000 2031 $285,000 2037 $350,000 2043 $445,000
2020 $210,000 2026 $240,000 2032 $295,000 2038 $365,000 2044 $460,000
2021 $210,000 2027 $250,000 2033 $305,000 2039 $375,000 2045 $480,000
2022 $215,000 2028 $255,000 2034 $315,000 2040 $390,000 2046 $500,000
2023 $225,000 2029 $265,000 2035 $325,000 2041 $410,000 2047 $525,000
2024 $230,000 2030 $275,000 2036 $335,000 2042 $425,000 2048 $545,000
* The City and the Commission reserve 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 or maturities 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 for this purpose is the
differential between the price paid to the City for the new issue and the prices at which the proposal indicates
the securities will be 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 for 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 lowest bidder
(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 which shall be subject to applicable regulations of the Securities and
Exchange Commission. The City will pay for the services of the registrar.
A-2
529084v1 JSB EL185-55
64
OPTIONAL REDEMPTION
The City may elect on August 1, 2028 and on any day thereafter, to redeem Bonds due on or after
August 1, 2029. 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 redeemed. 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 redemptions
shall be at a price of par plus accrued interest.
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 of the Bonds will be used to finance the remaining cost of
acquisition of the Commission's membership interest in the Minnesota Municipal Power Agency
(MMPA).
BIDDING PARAMETERS
Proposals shall be for not less than$9,850,000 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 on the
Sale Date unless the meeting of the Commission 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 as stated on the proposal
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.
ESTABLISHMENT OF ISSUE PRICE
In order to provide the City with information necessary for compliance with Section 148 of the Internal
Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder(collectively,
the "Code"), the Purchaser will be required to assist the City in establishing the issue price of the Bonds
and shall complete, execute, and deliver to the City prior to the closing date, a written certification in a
form acceptable to the Purchaser, the City, and Bond Counsel (the "Issue Price Certificate") containing
the following for each maturity of the Bonds (and, if different interest rates apply within a maturity, to
each separate CUSIP number within that maturity):: (i) the interest rate; (ii) the reasonably expected
initial offering price to the "public" (as said term is defined in Treasury Regulation Section 1.148-1(f)
(the"Regulation"))or the sale price; and(iii)pricing wires or equivalent communications supporting such
offering or sale price. Any action to be taken or documentation to be received by the City pursuant hereto
may be taken or received on behalf of the City by Springsted.
The City intends that the sale of the Bonds pursuant to this Terms of Proposal shall constitute a
"competitive sale"as defined in the Regulation based on the following:
(i) the City shall cause this Terms of Proposal to be disseminated to potential bidders in a
manner that is reasonably designed to reach potential bidders;
(ii) all bidders shall have an equal opportunity to submit a bid;
(iii) the City reasonably expects that it will receive bids from at least three bidders that have
established industry reputations for underwriting municipal bonds such as the Bonds; and
A-3
529084v1 JSB EL185-55
65
(iv) the City anticipates awarding the sale of the Bonds to the bidder who provides a proposal
with the lowest true interest cost, as set forth in this Terms of Proposal (See "AWARD"
herein).
Any bid submitted pursuant to this Terms of Proposal shall be considered a firm offer for the purchase of
the Bonds, as specified in the proposal. The Purchaser shall constitute an "underwriter" as said term is
defined in the Regulation. By submitting its proposal, the Purchaser confirms that it shall require any
agreement among underwriters, a selling group agreement, or other agreement to which it is a party
relating to the initial sale of the Bonds, to include provisions requiring compliance with the provisions of
the Code and the Regulation regarding the initial sale of the Bonds.
If all of the requirements of a "competitive sale" are not satisfied, the City shall advise the Purchaser of
such fact prior to the time of award of the sale of the Bonds to the Purchaser. In such event, any
proposal submitted will not be subject to cancellation or withdrawal. Within twenty-four (24)hours
of the notice of award of the sale of the Bonds, the Purchaser shall advise the City and Springsted'if 10%
of any maturity of the Bonds (and, if different interest rates apply within a maturity, to each separate
CUSIP number within that maturity) has been sold to the public and the price at which it was sold. The
City will treat such sale price as the "issue price" for such maturity, applied on a maturity-by-maturity
basis. The City will not require the Purchaser to comply with that portion of the Regulation commonly
described as the "hold-the-offering-price" requirement for the remaining maturities, but the Purchaser
may elect such option. If the Purchaser exercises such option,the City will apply the initial offering price
to the public provided in the proposal as the issue price for such maturities. If the Purchaser does not
exercise that option, it shall thereafter promptly provide the City and Springsted the prices at which 10%
of such maturities are sold to the public; provided such determination shall be made and the City and
Springsted notified of such prices whether or not the closing date has occurred, until the 10% test has
been satisfied as to each maturity of the Bonds or until all of the Bonds of a maturity have been sold.
GOOD FAITH DEPOSIT
To have its proposal considered for award, the Purchaser is required to submit a good faith deposit to the
City in the amount of$100,000 (the "Deposit") no later than 1:00 P.M., Central Time on the Sale Date.
The Deposit may be delivered as described herein in the form of either (i) a certified or cashier's check
payable to the City; or (ii) a wire transfer. The Purchaser shall be solely responsible for the timely
delivery of its Deposit whether by check or wire transfer. Neither the City nor Springsted have any
liability for delays in the receipt of the Deposit. If the Deposit is not received by the specified time, the
City may, at its sole discretion, reject the proposal of the lowest bidder, direct the second lowest bidder to
submit a Deposit, and thereafter award the sale to such bidder.
Certified or Cashier's Check. A Deposit made by certified or cashier's check will be considered timely
delivered to the City if it is made payable to the City and delivered to Springsted Incorporated,
380 Jackson Street, Suite 300, Saint Paul,Minnesota 55101 by the time specified above.
Wire Transfer. A Deposit made by wire will be considered timely delivered to the City upon submission
of a federal wire reference number by the specified time. Wire transfer instructions will be available from
Springsted following the receipt and tabulation of proposals. The successful bidder must send an e-mail
including the following information: (i)the federal reference number and time released; (ii)the amount of
the wire transfer; and(iii)the issue to which it applies.
A-4
529084v1 JSB EL185-55
66
Once an award has been made, the Deposit received from the Purchaser will be retained by the City and
no interest will accrue to the Purchaser. The amount of the Deposit will be deducted at settlement from
the purchase price. 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 or 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 Commission determines to have failed to comply with the terms
herein.
BOND INSURANCE AT PURCHASER'S OPTION
Neither the City nor the Commission have 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 the assignment of CUSIP numbers such numbers will be printed on the Bonds;
however, 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. Springsted will
apply for CUSIP numbers pursuant to Rule G-34 implemented by the Municipal Securities Rulemaking
Board. The CUSIP Service Bureau charge for the assignment of CUSIP identification numbers shall be
paid by the Purchaser.
SETTLEMENT
On or about September 26, 2018, 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.
A-5
529084v1 JSB EL185-55
67
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.
OFFICIAL STATEMENT
The City and the Commission has authorized the preparation of a Preliminary Official Statement
containing pertinent information relative to the Bonds, and said Preliminary Official Statement has been
deemed final by the City and the Commission as of the date thereof 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 Municipal 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 the Purchaser, the Commission agrees that, no more than
seven business days after the date of such award, it shall provide without cost to the Purchaser up to
25 copies of the Final Official Statement. The Commission designates the Purchaser as its agent for
purposes of distributing copies of the Final Official Statement to each syndicate member, if applicable.
The Purchaser agrees that if its proposal is accepted by the Commission, (i) it shall accept designation and
(ii) it shall enter into a contractual relationship with its syndicate members for purposes of assuring the
receipt of the Final Official Statement by each such syndicate member.
Dated July 10, 2018BY ORDER OF THE ELK RIVER MUNICIPAL
UTILITIES COMMISSION
/s/Theresa Slominski
Finance and Office Manager
A-6
529084v1 JSB EL185-55
68
EXTRACT OF MINUTES OF MEETING OF THE
CITY COUNCIL OF THE
CITY OF ELK RIVER, MINNESOTA
HELD: July 16, 2018
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 16th day of
July, 2018, 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 APPROVING THE ISSUANCE OF ELECTRIC REVENUE BONDS, AND
AUTHORIZING CERTAIN OTHER ACTIONS TO BE TAKEN BY THE ELK RIVER
MUNICIPAL UTILITIES COMMISSION WITH RESPECT TO THE ISSUANCE OF
ELECTRIC REVENUE BONDS, SERIES 2018A
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 Bonds, Series 2018A (the `Bonds"), in an aggregate principal
amount not to exceed $10,000,000, to finance the remaining cost of the acquisition of its
membership in the Minnesota Municipal Power Agency by the electric system of the Elk River
Municipal Utilities 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 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
529086v1 JSB EL185-55
69
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 $10,000,000. 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 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 2018 will not exceed $10,000,000;
and
(c) not more than $10,000,000 of obligations issued by the City during
calendar year 2018 have been designated for purposes of Section 265(b)(3) of the Code;
(d) the aggregate face amount of the issue of the Bonds is not greater than
$10,000,000; and
(e) 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 municipal 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.
6. Continuing Disclosure. The City and the Commission will enter into a
Continuing Disclosure Certificate (the "Certificate"), dated the date of closing, a form of which
is on file with the City. The Mayor and City Clerk of the City are hereby authorized to sign the
Certificate.
7. 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.
2
529086v1 JSB EL185-55
70
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.
3
529086v1 JSB EL185-55
71
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 Bonds, Series
2018A.
WITNESS my hand this day of , 2018.
Clerk
529086v1 JSB EL185-55
72
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
ELECTRIC REVENUE BONDS, SERIES 2018A
(BOOK ENTRY ONLY)
Proposals for the above-referenced obligations (the"Bonds") will be received on Wednesday,August 29,
2018, (the "Sale Date") until 9:30 A.M., Central Time at the offices of Springsted Incorporated
("Springsted"), 380 Jackson Street, Suite 300, Saint Paul, Minnesota, 55101, 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 its meeting commencing at 3:00 P.M., Central Time, of the
same day.
SUBMISSION OF PROPOSALS
Springsted will assume no liability for the inability of a 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 of Elk River, Minnesota(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 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,
Commission, 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, the Commission, 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 communication mechanism to conduct the electronic bidding for the Bonds, and
PARITY®is not an agent of the City or the Commission.
A-2
529086v1 JSB EL185-55
73
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, 2019. 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:
2019 $260,000 2025 $235,000 2031 $285,000 2037 $350,000 2043 $445,000
2020 $210,000 2026 $240,000 2032 $295,000 2038 $365,000 2044 $460,000
2021 $210,000 2027 $250,000 2033 $305,000 2039 $375,000 2045 $480,000
2022 $215,000 2028 $255,000 2034 $315,000 2040 $390,000 2046 $500,000
2023 $225,000 2029 $265,000 2035 $325,000 2041 $410,000 2047 $525,000
2024 $230,000 2030 $275,000 2036 $335,000 2042 $425,000 2048 $545,000
* The City and the Commission reserve 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 or maturities 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 for this purpose is the
differential between the price paid to the City for the new issue and the prices at which the proposal indicates
the securities will be 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 for 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 lowest bidder
(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 which shall be subject to applicable regulations of the Securities and
Exchange Commission. The City will pay for the services of the registrar.
A-3
529086v1 JSB EL185-55
74
OPTIONAL REDEMPTION
The City may elect on August 1, 2028 and on any day thereafter, to redeem Bonds due on or after
August 1, 2029. Redemption may be in whole or in part and if in part at the option of the City and in
such mariner 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 redeemed. 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 redemptions
shall be at a price of par plus accrued interest.
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 of the Bonds will be used to finance the remaining cost of
acquisition of the Commission's membership interest in the Minnesota Municipal Power Agency
(MMPA).
BIDDING PARAMETERS
Proposals shall be for not less than$9,850,000 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 on the
Sale Date unless the meeting of the Commission 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 as stated on the proposal
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.
ESTABLISHMENT OF ISSUE PRICE
In order to provide the City with information necessary for compliance with Section 148 of the Internal
Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder(collectively,
the "Code"), the Purchaser will be required to assist the City in establishing the issue price of the Bonds
and shall complete, execute, and deliver to the City prior to the closing date, a written certification in a
form acceptable to the Purchaser, the City, and Bond Counsel (the "Issue Price Certificate") containing
the following for each maturity of the Bonds (and, if different interest rates apply within a maturity, to
each separate CUSIP number within that maturity):: (i) the interest rate; (ii) the reasonably expected
initial offering price to the "public" (as said term is defined in Treasury Regulation Section 1.148-1(f)
(the"Regulation"))or the sale price; and(iii)pricing wires or equivalent communications supporting such
offering or sale price. Any action to be taken or documentation to be received by the City pursuant hereto
may be taken or received on behalf of the City by Springsted.
The City intends that the sale of the Bonds pursuant to this Terms of Proposal shall constitute a
"competitive sale"as defined in the Regulation based on the following:
(i) the City shall cause this Terms of Proposal to be disseminated to potential bidders in a
manner that is reasonably designed to reach potential bidders;
(ii) all bidders shall have an equal opportunity to submit a bid;
(iii) the City reasonably expects that it will receive bids from at least three bidders that have
established industry reputations for underwriting municipal bonds such as the Bonds; and
A-3
529086v1 JSB EL185-55
75
(iv) the City anticipates awarding the sale of the Bonds to the bidder who provides a proposal
with the lowest true interest cost, as set forth in this Terms of Proposal (See "AWARD"
herein).
Any bid submitted pursuant to this Terms of Proposal shall be considered a firm offer for the purchase of
the Bonds, as specified in the proposal. The Purchaser shall constitute an "underwriter" as said term is
defined in the Regulation. By submitting its proposal, the Purchaser confirms that it shall require any
agreement among underwriters, a selling group agreement, or other agreement to which it is a party
relating to the initial sale of the Bonds, to include provisions requiring compliance with the provisions of
the Code and the Regulation regarding the initial sale of the Bonds.
If all of the requirements of a "competitive sale" are not satisfied, the City shall advise the Purchaser of
such fact prior to the time of award of the sale of the Bonds to the Purchaser. In such event, any
proposal submitted will not be subject to cancellation or withdrawal. Within twenty-four(24) hours
of the notice of award of the sale of the Bonds, the Purchaser shall advise the City and Springsted if 10%
of any maturity of the Bonds (and, if different interest rates apply within a maturity, to each separate
CUSIP number within that maturity) has been sold to the public and the price at which it was sold. The
City will treat such sale price as the "issue price" for such maturity, applied on a maturity-by-maturity
basis. The City will not require the Purchaser to comply with that portion of the Regulation commonly
described as the "hold-the-offering-price" requirement for the remaining maturities, but the Purchaser
may elect such option. If the Purchaser exercises such option,the City will apply the initial offering price
to the public provided in the proposal as the issue price for such maturities. If the Purchaser does not
exercise that option, it shall thereafter promptly provide the City and Springsted the prices at which 10%
of such maturities are sold to the public; provided such determination shall be made and the City and
Springsted notified of such prices whether or not the closing date has occurred, until the 10% test has
been satisfied as to each maturity of the Bonds or until all of the Bonds of a maturity have been sold.
GOOD FAITH DEPOSIT
To have its proposal considered for award, the Purchaser is required to submit a good faith deposit to the
City in the amount of$100,000 (the "Deposit") no later than 1:00 P.M., Central Time on the Sale Date.
The Deposit may be delivered as described herein in the form of either (i) a certified or cashier's check
payable to the City; or (ii) a wire transfer. The Purchaser shall be solely responsible for the timely
delivery of its Deposit whether by check or wire transfer. Neither the City nor Springsted have any
liability for delays in the receipt of the Deposit. If the Deposit is not received by the specified time, the
City may, at its sole discretion, reject the proposal of the lowest bidder, direct the second lowest bidder to
submit a Deposit, and thereafter award the sale to such bidder.
Certified or Cashier's Check. A Deposit made by certified or cashier's check will be considered timely
delivered to the City if it is made payable to the City and delivered to Springsted Incorporated,
380 Jackson Street, Suite 300, Saint Paul,Minnesota 55101 by the time specified above.
Wire Transfer. A Deposit made by wire will be considered timely delivered to the City upon submission
of a federal wire reference number by the specified time. Wire transfer instructions will be available from
Springsted following the receipt and tabulation of proposals. The successful bidder must send an e-mail
including the following information: (i)the federal reference number and time released; (ii)the amount of
the wire transfer; and(iii)the issue to which it applies.
A-4
529086v1 JSB EL185-55
76
Once an award has been made, the Deposit received from the Purchaser will be retained by the City and
no interest will accrue to the Purchaser. The amount of the Deposit will be deducted at settlement from
the purchase price. 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 or 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 Commission determines to have failed to comply with the terms
herein.
BOND INSURANCE AT PURCHASER'S OPTION
Neither the City nor the Commission have 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 the assignment of CUSIP numbers such numbers will be printed on the Bonds;
however, 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. Springsted will
apply for CUSIP numbers pursuant to Rule G-34 implemented by the Municipal Securities Rulemaking
Board. The CUSIP Service Bureau charge for the assignment of CUSIP identification numbers shall be
paid by the Purchaser.
SETTLEMENT
On or about September 26, 2018, 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.
A-5
529086v1 JSB EL185-55
77
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.
OFFICIAL STATEMENT
The City and the Commission has authorized the preparation of a Preliminary Official Statement
containing pertinent information relative to the Bonds, and said Preliminary Official Statement has been
deemed final by the City and the Commission as of the date thereof 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 Municipal 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 the Purchaser, the Commission agrees that, no more than
seven business days after the date of such award, it shall provide without cost to the Purchaser up to
25 copies of the Final Official Statement. The Commission designates the Purchaser as its agent for
purposes of distributing copies of the Final Official Statement to each syndicate member, if applicable.
The Purchaser agrees that if its proposal is accepted by the Commission, (i)it shall accept designation and
(ii) it shall enter into a contractual relationship with its syndicate members for purposes of assuring the
receipt of the Final Official Statement by each such syndicate member.
Dated July 10,2018BY ORDER OF THE ELK RIVER MUNICIPAL
UTILITIES COMMISSION
/s/Theresa Slominski
Finance and Office Manager
A-6
529086v1 JSB EL185-55
78