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8.1. SR 07-15-2019 Request for Action To Item Number Mayor and City Council 8.1 Agenda Section Meeting Date Prepared by General Business July 15, 2019 Lori Ziemer, Finance Director Item Description Reviewed by Issuance of $33,735,000 General Obligation Sales Cal Portner, City Administrator Tax Revenue Bonds, Series 2019A Reviewed by Action Requested Adopt, by motion, the resolution for the issuance of $33,735,000 General Obligation Sales Tax Revenue Bonds, Series 2019A. Background/Discussion The city received approval from Elk River residents and the state legislature to impose a local option sales tax for the issuance of bonds to finance authorized projects such as recreational facility improvements, park and trail improvements, and dredging of Lake Orono. Staff has been working with our financial advisor, Baker Tilly (formerly Springsted), in recommending the issuance of $33,735,000 General Obligation Sales Tax Revenue Bonds, Series 2019A, to finance these various projects. Financial Impact The bonds are a general obligation of the city but will be repaid from the .50% local option sales tax. Attachments  Baker Tilly’s Pre-Sale Summary for Issuance of Bonds  Resolution for Series 2019A The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity City of Elk River, Minnesota Pre-Sale Summary for Issuance of Bonds $33,735,000 General Obligation Sales Tax Revenue Bonds, Series 2019A The City Council has under consideration the issuance of bonds to finance (i) various recreational facility improvements; (ii) park improvements; (iii) dredging of Lake Orono; and (iv) trail improvements. This document provides information relative to the proposed issuance. The following summary schedule includes the timing of some of the key events that will occur KEY EVENTS: relative to the bond issuance. July 15, 2019 Council sets sale date and terms Week of August 5, 2019 Rating conference is conducted August 19, 2019, 11:00 a.m. Competitive proposals are received August 19, 2019, 7:00 p.m. Council considers award of the Bonds September 19, 2019 Proceeds are received RATING: An application will be made to S&P Global Ratings (S&P) for a rating on the Bonds. The general obligation debt is currently rated AA+P. Performance of the tax- THE MARKET: th which measures the yield of high grade municipal bonds in the 20 year for general obligation bonds -Bond GO Index) and the th 30 year for revenue bonds -Bond Revenue Index). The following chart illustrates these two indices over the past five years. 3 3 1 . 4 9 8 0 9 0 1 : 0 . 2 o , N 1 y1 d y l u t u SJ POST ISSUANCE The issuance of the Bonds will result in post-issuance compliance responsibilities. The responsibilities are in two primary areas: (i) compliance with federal arbitrage COMPLIANCE: requirements and (ii) compliance with secondary disclosure requirements. Federal arbitrage requirements include a wide range of implications that have been considered 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 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 The arbitrage rules provide for spend-down exceptions for proceeds that are spent within either a 6-month, 18-month or, for certain construction issues, a 24-month period each 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 Bonds are expected to meet the 24-month spending exception, which will require the City to comply with the following spend-down schedule: 10% spent within 6 months 45% spent within 12 months 75% spent within 18 months 100% spent within 24 months 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 the debt service fund 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. Baker Tilly Municipal Advisors, LLC will provide both arbitrage and continuing disclosure services to the District under the existing Agreement for Municipal Advisor Services. PURPOSE: Proceeds of the Bonds will be used to finance the following: Recreational facility improvements, consisting of arena improvements, community meeting/activity space, a synthetic turf field house, senior center facility improvements, youth athletic complex improvements; Various park improvements related to Lions Park consisting of meeting space and demo/utility space enhancements to Lions Park Center, additional playfields, parking lot improvements, trail improvements, and the addition of a community picnic pavilion; Page 2 Lake Orono park improvements; Dredging of Lake Orono; Various trail improvements; capitalized interest/working capital; and Related costs of issuance AUTHORITY: Statutory Authority: The Bonds are being issued pursuant to Minnesota Statutes, Chapter 475, Minnesota Laws 2019, First Special Session, Chapter 6, Article 6, Section 17 and a voter approved referendum held on November 6, 2018. Voters approved the authorization to impose a sales and use tax of one-half of one percent (0.05%) for approximately 25 years for issuance of bonds to finance $35,000,000 plus an amount equal to interest and the costs of issuance to finance the acquisition and betterment of any or all of the projects as detailed above. The ballot question passed with votes of 6,827in favor and 3,702 opposed. SECURITY AND The Bonds will be a general obligation of the City, secured by its full faith and credit and taxing power. The Bonds will be repaid from a sales and use tax of one-half of one percent SOURCE OF (0.50%). PAYMENT: Additionally, the Bonds are secured by bond funded proceeds for capitalized interest or working capital of approximately $700,000. These monies will be used as needed to pay debt service due to any shortfall of sales tax revenues before any levy would be required. STRUCTURING In consultation with the City, the Bonds have been structured with a repayment term of 25 SUMMARY: years to match the projected annual sales tax revenues. Any such shortfall of sales tax revenue will be paid from the bond funded capitalized interest/working capital or a tax levy as needed. The City has provided historical annual sales tax for years 2012-2017. Based on 2017 total sales tax of the City, 0.05% would be $2,073,978 assumed the sales tax revenue would remain at the 2017 level. Minnesota statute limits the purchase price (the principal amount of the issue plus any premium generated ) of the Bonds to the amount authorized by voter referendum, plus up to 2 percent. The current bond structure presented herein are structured assuming premium pricing based on current market conditions and have been structured to maximize project proceeds of $35M and a capital reserve fund taking into account the statutory limit and the referendum authorizing $35,000,000 plus the costs of issuance. The Bonds may be issued in one or more series depending on the final review of bond counsel and the determination of use of proceeds, which may result issuing some or all of the bonds as 501(c)3 bonds. This allows bonds to be issued as tax-exempt bonds subject to annual reporting on private usage to assure that users are qualified 501c (3) users rather than private for-profit usage. Should a determination be made to issue 501(c)3 bonds for the ice improvements, the bonds may be issued in two series to minimize the restrictions to only the $27,500,000 ice improvements with the remaining $7.5 million for public improvements issued as tax-exempt. Page 3 SCHEDULES Schedules attached for the Bonds include the sources and uses of funds, a pricing summary, and projected net debt service schedule for the Bonds, based on the current ATTACHED: interest rate environment. RISKS/SPECIAL The outcome of this financing will rely on the market conditions at the time of the sale. CONSIDERATIONS: Any projections included herein are estimates based on current market conditions. The Bonds have been structured assuming premium pricing based on current market conditions; however, actual market conditions are likely to be different. As a result, the principal amount of the Bonds could be higher or lower than what is presented herein. The principal amount will be adjusted on the day of pricing to stay within the constraints discussed above in the Structuring Summary. Additionally, the bond structure has assumed a certain level of sales tax revenues, if revenues are less than projections, the City may be required to levy taxes for any shortfall. SALE TERMS AND Variability of Issue Size: A specific provision in the sale terms permits modifications to MARKETING: the 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 December 1, 2029 may be prepaid at a price of par plus accrued interest on or after December 1, 2028. Bank Qualification: The City is issuing more than $10 million in tax-exempt obligations in 2019; therefore, the Bonds are not designated as bank qualified. SUPPLEMENTAL Supplementary information will be available to staff including detailed terms and conditions of sale, comprehensive structuring schedules and information to assist in INFORMATION AND meeting post-issuance compliance responsibilities. BOND RECORD: Upon completion of the financing, a bond record will be provided that contains pertinent documents and final debt service calculations for the transaction Baker Tilly Municipal Advisors, LLC is a registered municipal advisor and wholly-owned subsidiary of Baker Tilly Virchow Krause, LLP, an accounting firm. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2019 Baker Tilly Municipal Advisors, LLC. Page 4 $33,735,000 City of Elk River, Minnesota General Obligation Sales Tax Revenue Bonds, Series 2019A Sources & Uses Dated 09/19/2019 | Delivered 09/19/2019 Sources Of Funds Par Amount of Bonds.................................................................................................................................................................................... .$33,735,000.00 Reoffering Premium..................................................................................................................................................................................... .2,247,277.25 Total Sources.......................................................................................................................................................................................... .$35,982,277.25 Uses Of Funds Deposit to Project Fund................................................................................................................................................................................ ....35,000,000.00 Capitalized Interest/Working Capital................................................................................................................................................................... ................700,000.00 Total Underwriter's Discount (0.500%)................................................................................................................................................................. .168,675.00 Costs of Issuance...................................................................................................................................................................................... .112,650.00 Rounding Amount........................................................................................................................................................................................ .952.25 Total Uses............................................................................................................................................................................................. .$35,982,277.25 Series 2019A GO Sales Tax | SINGLE PURPOSE | 7/10/2019 | 1:56 PM Page 5 $33,735,000 City of Elk River, Minnesota General Obligation Sales Tax Revenue Bonds, Series 2019A Pricing Summary MaturityType of BondCouponYieldMaturity ValuePriceYTMCall DateCall PriceDollar Price 12/01/2020Serial Coupon4.000%1.500%605,000.00102.960% ---622,908.00 12/01/2021Serial Coupon4.000%1.530%870,000.00105.321% ---916,292.70 12/01/2022Serial Coupon4.000%1.550%905,000.00107.618% ---973,942.90 12/01/2023Serial Coupon4.000%1.580%940,000.00109.794% ---1,032,063.60 12/01/2024Serial Coupon4.000%1.600%980,000.00111.927% ---1,096,884.60 12/01/2025Serial Coupon4.000%1.630%1,015,000.00113.920% ---1,156,288.00 12/01/2026Serial Coupon4.000%1.650%1,060,000.00115.889% ---1,228,423.40 12/01/2027Serial Coupon4.000%1.700%1,100,000.00117.533% ---1,292,863.00 12/01/2028Serial Coupon4.000%1.750%1,145,000.00119.040% ---1,363,008.00 12/01/2029Serial Coupon4.000%1.850%1,190,000.00119.899% ---1,426,798.10 12/01/2030Serial Coupon4.000%1.950%1,240,000.00118.876%c2.100%12/01/2029100.000%1,474,062.40 12/01/2031Serial Coupon4.000%2.050%1,285,000.00117.863%c2.311%12/01/2029100.000%1,514,539.55 12/01/2032Serial Coupon4.000%2.300%1,340,000.00115.375%c2.615%12/01/2029100.000%1,546,025.00 12/01/2033Serial Coupon4.000%2.350%1,390,000.00114.884%c2.728%12/01/2029100.000%1,596,887.60 12/01/2034Serial Coupon3.000%2.650%1,450,000.00103.107%c2.748%12/01/2029100.000%1,495,051.50 12/01/2035Serial Coupon3.000%2.800%1,490,000.00101.761%c2.863%12/01/2029100.000%1,516,238.90 12/01/2036Serial Coupon3.050%3.050%1,535,000.00100.000% ---1,535,000.00 12/01/2037Serial Coupon3.100%3.100%1,585,000.00100.000% ---1,585,000.00 12/01/2038Serial Coupon3.200%3.200%1,630,000.00100.000% ---1,630,000.00 12/01/2039Serial Coupon3.250%3.250%1,685,000.00100.000% ---1,685,000.00 12/01/2040Serial Coupon3.300%3.300%1,740,000.00100.000% ---1,740,000.00 12/01/2041Serial Coupon3.350%3.350%1,795,000.00100.000% ---1,795,000.00 12/01/2042Serial Coupon3.400%3.400%1,855,000.00100.000% ---1,855,000.00 12/01/2043Serial Coupon3.450%3.450%1,920,000.00100.000% ---1,920,000.00 12/01/2044Serial Coupon3.500%3.500%1,985,000.00100.000% ---1,985,000.00 Total---$33,735,000.00-----$35,982,277.25 Bid Information Par Amount of Bonds.................................................................................................................................................................................... .$33,735,000.00 Reoffering Premium or (Discount)....................................................................................................................................................................... .2,247,277.25 Gross Production....................................................................................................................................................................................... .$35,982,277.25 Total Underwriter's Discount (0.500%)................................................................................................................................................................. .$(168,675.00) Bid (106.162%)......................................................................................................................................................................................... .35,813,602.25 Total Purchase Price................................................................................................................................................................................... .$35,813,602.25 Bond Year Dollars...................................................................................................................................................................................... .$510,207.00 Average Life........................................................................................................................................................................................... .15.124 Years Average Coupon......................................................................................................................................................................................... .3.4592430% Net Interest Cost (NIC)................................................................................................................................................................................ .3.0518393% True Interest Cost (TIC)............................................................................................................................................................................... .2.9459354% Series 2019A GO Sales Tax | SINGLE PURPOSE | 7/10/2019 | 1:56 PM Page 6 $33,735,000 City of Elk River, Minnesota General Obligation Sales Tax Revenue Bonds, Series 2019A NET DEBT SERVICE vs. REVENUE DatePrincipalCouponInterestTotal P+INet New D/S105% OverlevyRevenueSrpls(Shrtfall) 12/01/2019-------- 12/01/2020605,000.004.000%1,452,015.002,057,015.002,057,015.002,159,865.752,073,978.00(85,887.75) 12/01/2021870,000.004.000%1,185,812.502,055,812.502,055,812.502,158,603.132,073,978.00(84,625.13) 12/01/2022905,000.004.000%1,151,012.502,056,012.502,056,012.502,158,813.132,073,978.00(84,835.13) 12/01/2023940,000.004.000%1,114,812.502,054,812.502,054,812.502,157,553.132,073,978.00(83,575.13) 12/01/2024980,000.004.000%1,077,212.502,057,212.502,057,212.502,160,073.132,073,978.00(86,095.13) 12/01/20251,015,000.004.000%1,038,012.502,053,012.502,053,012.502,155,663.132,073,978.00(81,685.13) 12/01/20261,060,000.004.000%997,412.502,057,412.502,057,412.502,160,283.132,073,978.00(86,305.13) 12/01/20271,100,000.004.000%955,012.502,055,012.502,055,012.502,157,763.132,073,978.00(83,785.13) 12/01/20281,145,000.004.000%911,012.502,056,012.502,056,012.502,158,813.132,073,978.00(84,835.13) 12/01/20291,190,000.004.000%865,212.502,055,212.502,055,212.502,157,973.132,073,978.00(83,995.13) 12/01/20301,240,000.004.000%817,612.502,057,612.502,057,612.502,160,493.132,073,978.00(86,515.13) 12/01/20311,285,000.004.000%768,012.502,053,012.502,053,012.502,155,663.132,073,978.00(81,685.13) 12/01/20321,340,000.004.000%716,612.502,056,612.502,056,612.502,159,443.132,073,978.00(85,465.13) 12/01/20331,390,000.004.000%663,012.502,053,012.502,053,012.502,155,663.132,073,978.00(81,685.13) 12/01/20341,450,000.003.000%607,412.502,057,412.502,057,412.502,160,283.132,073,978.00(86,305.13) 12/01/20351,490,000.003.000%563,912.502,053,912.502,053,912.502,156,608.132,073,978.00(82,630.13) 12/01/20361,535,000.003.050%519,212.502,054,212.502,054,212.502,156,923.132,073,978.00(82,945.13) 12/01/20371,585,000.003.100%472,395.002,057,395.002,057,395.002,160,264.752,073,978.00(86,286.75) 12/01/20381,630,000.003.200%423,260.002,053,260.002,053,260.002,155,923.002,073,978.00(81,945.00) 12/01/20391,685,000.003.250%371,100.002,056,100.002,056,100.002,158,905.002,073,978.00(84,927.00) 12/01/20401,740,000.003.300%316,337.502,056,337.502,056,337.502,159,154.382,073,978.00(85,176.38) 12/01/20411,795,000.003.350%258,917.502,053,917.502,053,917.502,156,613.382,073,978.00(82,635.38) 12/01/20421,855,000.003.400%198,785.002,053,785.002,053,785.002,156,474.252,073,978.00(82,496.25) 12/01/20431,920,000.003.450%135,715.002,055,715.002,055,715.002,158,500.752,073,978.00(84,522.75) 12/01/20441,985,000.003.500%69,475.002,054,475.002,054,475.002,157,198.752,079,978.00(77,220.75) Total$33,735,000.00-$17,649,300.00$51,384,300.00$51,384,300.00$53,953,515.00$51,855,450.00(2,098,065.00) Dated.................................................................................................................................................................................................. .9/19/2019 Delivery Date.......................................................................................................................................................................................... .9/19/2019 First Coupon Date...................................................................................................................................................................................... .6/01/2020 Yield Statistics Bond Year Dollars...................................................................................................................................................................................... .$510,207.00 Average Life........................................................................................................................................................................................... .15.124 Years Average Coupon......................................................................................................................................................................................... .3.4592430% Net Interest Cost (NIC)................................................................................................................................................................................ .3.0518393% True Interest Cost (TIC)............................................................................................................................................................................... .2.9459354% Bond Yield for Arbitrage Purposes...................................................................................................................................................................... .2.8774304% All Inclusive Cost (AIC)............................................................................................................................................................................... .2.9735509% Series 2019A GO Sales Tax | SINGLE PURPOSE | 7/10/2019 | 1:56 PM Page 7 EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF ELK RIVER, MINNESOTA HELD: July 15, 2019 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 15th day of July, 2019, 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: CITY OF ELK RIVER RESOLUTION 19-____ RESOLUTION PROVIDING FOR THE COMPETITIVE NEGOTIATED SALE OF $33,735,000 GENERAL OBLIGATION SALES TAX REVENUE BONDS, SERIES 2019A 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 $33,735,000 General Obligation Sales Tax Revenue Bonds, Series 2019A, which may be issued in one or more series, to finance authorized projects, including without limitation, the acquisition and betterment of certain recreational facility improvements, park improvements, trail improvements, and dredging of Lake Orono. 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 Baker Tilly Municipal Advisors, LLC (“Baker Tilly MA”) as an independent municipal advisor, and the City Council hereby 589683v1EL185-44 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, provided that the Bonds may be issued in one or more series. 5. Official Statement. The City Finance Director and other officers or employees of the City are hereby authorized to participate with Baker Tilly MA in the preparation of an official statement for 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: th Whereupon said resolution was declared duly passed and adopted this 15 day of July 2019. John J. Dietz, Mayor ATTEST: Tina Allard, City Clerk 2 STATE OF MINNESOTA ) CITY OF ELK RIVER ) SS. SHERBURNE COUNTY ) I, the undersigned, being the duly qualified and acting Clerk of the City of Elk River, Minnesota (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 $33,735,000 General Obligation Sales Tax Revenue Bonds, Series 2019A. WITNESS my hand as such Clerk of the City this 15th day of July, 2019. _______________________________________ City Clerk S-1 589683v1EL185-44 EXHIBIT A THE CITY HAS AUTHORIZED BAKER TILLY MUNICIPAL ADVISORS, LLC TO NEGOTIATE THIS ISSUE ON ITS BEHALF. PROPOSALS WILL BE RECEIVED ON THE FOLLOWING BASIS: TERMS OF PROPOSAL $33,735,000* CITY OF ELK RIVER, MINNESOTA GENERAL OBLIGATION SALES TAX REVENUE BONDS, SERIES 2019A (BOOK ENTRY ONLY) Proposals for the above-referenced obligations (the “Bonds”) will be received by the City of Elk River, Minnesota (the “City”) on Monday, August 19, 2019 (the “Sale Date”) until 11:00 A.M., Central Time at the offices of Baker Tilly Municipal Advisors, LLC (“Baker Tilly MA”), 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 City Council at its meeting commencing at 6:00 P.M., Central Time, of the same day. SUBMISSION OF PROPOSALS Baker Tilly MA will assume no liability for the inability of a bidder to reach Baker Tilly MA 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 Baker Tilly MA. Signed proposals, without final price or coupons, may be submitted to Baker Tilly MA prior to the time of sale. The bidder shall be responsible for submitting to Baker Tilly MA 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, 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 * Preliminary; subject to change. A-1 589683v1EL185-44 ® of PARITY solely as a 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: ®nd PARITY, 1359 Broadway, 2 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 June 1 and December 1 of each year, commencing June 1, 2020. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Bonds will mature December 1 in the years and amounts* as follows: 2021 $605,000 2025 $1,015,000 2030 $1,240,000 2035 $1,190,000 2040 $1,740,000 2022 $870,000 2026 $1,060,000 2031 $1,285,000 2036 $1,535,000 2041 $1,795,000 2022 $905,000 2027 $1,100,000 2032 $1,340,000 2037 $1,585,000 2042 $1,855,000 2023 $940,000 2028 $1,145,000 2033 $1,390,000 2038 $1,630,000 2043 $1,920,000 2024 $980,000 2029 $1,190,000 2034 $1,450,000 2039 $1,685,000 2044 $1,985,000 * 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 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. A-2 589683v1EL185-44 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. OPTIONAL REDEMPTION The City may elect on December 1, 2028, and on any day thereafter, to redeem Bonds due on or after December 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 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 a sales and use tax of one-half of one percent (0.50%) for repayment of the Bonds. The proceeds will be used to finance the acquisition and betterment of certain recreational facility improvements, park improvements, trail improvements, and dredging of Lake Orono. BIDDING PARAMETERS Proposals shall be for not less than $33,735,000 (Par) 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 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 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 * Preliminary; subject to change. A-3 589683v1EL185-44 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 Baker Tilly MA. A-2 589683v1EL185-44 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 (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 Baker Tilly MA 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 Baker Tilly MA the prices at which 10% of such maturities are sold to the public; provided such determination shall be made and the City and Baker Tilly MA 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 $337,350 (the “Deposit”) no later than 2:00 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 * Preliminary; subject to change. A-4 589683v1EL185-44 the City nor Baker Tilly MA 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 Baker Tilly Municipal Advisors, LLC, 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 Baker Tilly MA 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. 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. The City's computation of the interest rate of each proposal, in accordance with customary practice, will be controlling. The City will reserve the right to: (i) waive non-substantive informalities of any proposal or of matters relating to the receipt of proposals and award of the Bonds, (ii) reject all proposals without cause, and (iii) reject any proposal that the City determines to have failed to comply with the terms herein. BOND INSURANCE AT PURCHASER'S OPTION 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. * Preliminary; subject to change. A-5 589683v1EL185-44 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. Baker Tilly MA 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 19, 2019, 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 has been deemed final by the City 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, Baker Tilly Municipal Advisors, LLC, 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 City 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 City designates the Purchaser as its agent for purposes of distributing copies of the Final Official Statement to each syndicate member, if * Preliminary; subject to change. A-6 589683v1EL185-44 applicable. The Purchaser 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 its syndicate members for purposes of assuring the receipt of the Final Official Statement by each such syndicate member. Dated July 15, 2019 BY ORDER OF THE CITY COUNCIL /s/ Tina Allard City Clerk A-7 589683v1EL185-44