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5.3a ERMUSR 04-13-2021City of Elk River,Minnesota Pre-Sale Summaryfor Issuance of Bonds $1,750,000,General Obligation Water Utility Revenue Bonds, Series 2021C TheCityCounciland Utilities Commissionhas under consideration the issuance of bonds (the “Bonds”) to financecosts related to the construction of a fied house facility to accommodate service trucks, inventory, and offices. 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: April 13, 2021Utilities Commissionsetssale date and terms April 19, 2021City Councilauthorizes the sale of bonds and award by Utilities Commission Week ofApril 26,2021Rating conferenceis conducted May 11,2021, 10:30a.m.Competitive bidsare received May 11,2021,3:30p.m.Utilities Commission considers award of the Bonds June 10, 2021Proceeds are received An application will be made to Standard & Poor’sfor a rating on the Bonds.The City’s RATING: general obligation debt is currently rated “AA+” by Standard & Poor’s. Performance of the tax-exempt market is often measured by the Bond Buyer’s Index (“BBI”) THE MARKET: th which measures the yield of high grade municipal bonds in the 20year for general obligation bondsrated Aa2 by Moody’s or AA by S&P (the BBI 20-Bond GO Index)and the th 30year for revenue bondsrated A1 by Moody’s or A+ by S&P (the BBI 25-Bond Revenue Index). The following chart illustrates these two indices over the past five years: 0894.139_1734989 : April 7, 2021 Study No.: Date 418 PURPOSE: Proceeds of the Bonds will be used to finance a portion of the costs associated with the construction of a field house facility to accommodate service trucks, inventory, and offices. The building will be shared with the Electric Utility also operated by the Elk River Municipal Utilities (ERMU). The total estimated cost of the facility is $13,500,000 of which the Water Utility will own 12.5% of. AUTHORITY: Statutory Authority:The Bonds are being issued pursuant toMinnesota Statutes, Chapters 444 and 475. Statutory Requirements:Pursuant to Minnesota Statutes, Chapter 444 and the resolution awarding theBonds, the City will covenant to maintain rates and charges in an amount sufficient to generate revenues to support the operation of the City’s water utilityand to pay debt service. The City is required to annually review the budget of the water utility to determine whether current rates and charges are sufficient and toadjust the rates, as necessary. In addition to the Bonds, the City currently has (2)other bond issues outstanding payable, in part,from the City’s water utility. The table below shows net revenues available to pay debt service from the water utility based on fiscal year ended December 31, 2020,including the projected debt service payable from the Bonds: City of Elk River, Minnesota Net Revenues of Utility Funds Utility Funds Net Revenues for Fiscal Year Ending December 31, 2020 Water Fund Operating revenues$2,674,544 Operating expenses2,673,85 Net operating income$59 Add back depreciation$1,133,179 Add investment income33,454 Net Utility Revenues Available for Debt Service$1,167,92 Estimated maximum annual calendar year debt service including the 2021C Bonds $715,133 Coverage1.63 **The 2020 results are preliminary and un-audited The fiscal year 2020 financials that are being used for the above calculation are unaudited as the final audited financials are not yet available. SECURITY ANDThe Bonds will be a general obligation of the City, secured by its full faith and credit and taxing power. Additionally, the City is pledging net revenues of the City’s water utility to pay SOURCE OF debt service on the Bonds as it comes due. PAYMENT: Page 2 419 STRUCTURINGIn consultation with ERMUUtility, the Bonds have been structured to provide for SUMMARY:approximately level annual debt service over a term of 20 years. SCHEDULESSchedules attached include (i) sources and uses, and (ii) debt service, given the current interest rate environment. ATTACHED: RISKS/SPECIALThe outcome of this financing will rely on the market conditions at the time of the sale. Any CONSIDERATIONS:projections included herein are estimates based on current market conditions SALE TERMS ANDVariability 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 August1, 2031may be prepaid at a price of par plus accrued interest on or after August1, 2030. Bank Qualification:The City expects to issue more than $10 million in tax-exempt obligations in 2021; therefore the Bonds are not designated as bank qualified. Post Issuance Compliance POST ISSUANCEThe issuance of the Bonds will result in post-issuance compliance responsibilities. The responsibilities arein two primary areas: (i) compliance with federal arbitrage COMPLIANCE: requirements and (ii)compliance with secondary disclosure requirements. Federal arbitrage requirementsinclude a wide range of implications that have been taken into account as this issue has been structured. Post-issuance compliance responsibilities for thistax-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, 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 Utility expects to meet the 24-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 the debt service fund throughout the term of the Bonds. These moneys should be monitored until the Bonds are retired. Page 3 420 Secondary disclosure requirementsresult 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 currently provides continuing disclosure services to the Municipal Utilities and the City. Baker Tilly will work with staff to include the Bonds under the existing Agreement for Municipal Advisor Services. SUPPLEMENTALSupplementary 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 controlled subsidiary of Baker Tilly US, LLP, an accounting firm. Baker Tilly US, 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. © 2021 Baker Tilly Municipal Advisors, LLC. Page 4 421 $1,750,000 Djuz!pg!Fml!Sjwfs-!Njooftpub! Hfofsbm!Pcmjhbujpo!Xbufs!Vujmjuz!Sfwfovf!Cpoet-!Tfsjft!3132D! Jttvf!Tvnnbsz Sources & Uses Dated 06/10/2021 | Delivered 06/10/2021 Sources Of Funds Qbs!Bnpvou!pg!Cpoet////////////////////////////////////////////////////////////////////////////////%2-861-111/11 Total Sources.........................................................................................$1,750,000.00 Uses Of Funds Efqptju!up!Qspkfdu!Dpotusvdujpo!Gvoe/////////////////////////////////////////////////////////2-798-611/11 Dptut!pg!Jttvbodf/////////////////////////////////////////////////////////////////////////////////////49-761/11 Upubm!Voefsxsjufs(t!Ejtdpvou!!)2/311&*////////////////////////////////////////////////////////32-111/11 Spvoejoh!Bnpvou/////////////////////////////////////////////////////////////////////////////////////3-961/11 Total Uses...............................................................................................$1,750,000.00 2021C GO Water Rev Bonds | SINGLE PURPOSE | 4/ 5/2021 | 8:42 AM Page 5 422 $1,750,000 Djuz!pg!Fml!Sjwfs-!Njooftpub! 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Jttvf!Tvnnbsz Debt Service Schedule DatePrincipalCouponInterestTotal P+IFiscal Total 1702103132..... 1301203133..28-241/:128-241/:1. 190120313386-111/111/461&24-459/8699-459/86216-58:/76 1301203134..24-328/6124-328/61. 190120313491-111/111/511&24-328/61:4-328/61217-546/11 1301203135..24-168/6124-168/61. 190120313591-111/111/611&24-168/61:4-168/61217-226/11 1301203136..23-968/6123-968/61. 190120313691-111/111/761&23-968/61:3-968/61216-826/11 1301203137..23-6:8/6123-6:8/61. 190120313791-111/111/861&23-6:8/61:3-6:8/61216-2:6/11 1301203138..23-3:8/6123-3:8/61. 190120313891-111/111/:11&23-3:8/61:3-3:8/61215-6:6/11 1301203139..22-:48/6122-:48/61. 190120313991-111/112/161&22-:48/61:2-:48/61214-986/11 130120313:..22-628/6122-628/61. 190120313:96-111/112/311&22-628/61:7-628/61219-146/11 1301203141..22-118/6122-118/61. 190120314196-111/112/461&22-118/61:7-118/61218-126/11 1301203142..21-544/8621-544/86. 190120314296-111/112/561&21-544/86:6-544/86216-978/61 1301203143..:-928/61:-928/61. 190120314396-111/112/761&:-928/61:5-928/61215-746/11 1301203144..:-227/36:-227/36. 190120314496-111/112/861&:-227/36:5-227/36214-343/61 1301203145..9-483/619-483/61. 1901203145:1-111/112/:61&9-483/61:9-483/61217-856/11 1301203146..8-5:6/118-5:6/11. 1901203146:1-111/113/161&8-5:6/11:8-5:6/11215-::1/11 1301203147..7-683/617-683/61. 1901203147:6-111/113/211&7-683/61212-683/61219-256/11 1301203148..6-686/116-686/11. 1901203148:6-111/113/261&6-686/11211-686/11217-261/11 1301203149..5-664/865-664/86. 1901203149:6-111/113/311&5-664/86::-664/86215-218/61 130120314:..4-619/864-619/86. 190120314:211-111/113/361&4-619/86214-619/86218-128/61 1301203151..3-494/863-494/86. 1901203151211-111/113/411&3-494/86213-494/86215-878/61 1301203152..2-344/862-344/86. 1901203152216-111/113/461&2-344/86217-344/86218-578/61 Upubm%2-861-111/11.%476-695/76%3-226-695/76. 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