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8.2 SR 04-19-2021
Request for Action To Item Number Mayor and Ci T Council 8.2 Agenda Section Meeting Date Prepared by General Business April 19, 2021 Lori Ziemer, Finance Director Item Description Reviewed by Approve the Issuance of General Obligation Cal Portner, City Administrator Water Utility Revenue Bonds, Series 2021C Reviewed by Action Requested Adopt, by motion, the Resolution Providing for the Competitive Negotiated Sale of $1,750,000 General Obligation Water Utility Revenue Bonds, Series 2021C. Background/Discussion Elk River Municipal Utilities has been working with their financial advisor, Baker Tilly, in recommending the issuance of $1,750,000 General Obligation Water Utility Revenue Bonds, Series 2021C to finance the expansion of the Field Services Facility. The City of Elk River is the qualified entity to issue the bonds and on April 13, 2021, the Elk River Municipal Utilities Commission adopted their resolution requesting the city council to adopt the resolution approving the issuance of the Water Utility Revenue Bonds. Financial Impact The bonds are a general obligation of the city payable by the revenues of the water utility. Mission/Policy/Goal Develop a sustainable and prosperous community that reflects the culture of citizens and what is important to the majority. Attachments ■ Resolution Providing for the Sale of General Obligation Water Utility Revenue Bonds, Series 2021C ■ Pre -Sale Summary for Issuance of Bonds, Series 2021C The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires pi ospei ly. M TUREJ Updated.• August 2020 EXTRACT OF MINUTES OF MEETING OF THE CITY COUNCIL OF THE CITY OF ELK RIVER, MINNESOTA HELD: April 19, 2021 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 19' day of April, 2021, 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 GENERAL OBLIGATION WATER UTILITY REVENUE BONDS, AND AUTHORIZING CERTAIN OTHER ACTIONS TO BE TAKEN BY THE ELK RIVER MUNICIPAL UTILITIES COMMISSION WITH RESPECT TO THE ISSUANCE OF GENERAL OBLIGATION WATER UTILITY REVENUE BONDS, SERIES 2021 C 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, Chapters 444 and 475, as amended (the "Act"), to issue general obligation revenue bonds to finance all or a portion of the cost of improvements to the water utility system within the City (the "Water Utility"), including without limitation the construction of a field house facility to house service trucks, inventory, and offices (the "Utility Improvements"). Water utility rates and charges may be established, levied, and collected in connection with the water utility system by the Elk River Municipal Utilities Commission (the "Commission") and may be pledged in accordance with Minnesota Statutes, Section 444.075 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 Utility Improvements. 2. Terms of Proposal. The City proposes to issue and the Commission proposes to offer and sell General Obligation Water Utility Revenue Bonds, Series 2021C (the "Bonds"), in an aggregate principal amount not to exceed $1,750,000 plus the amount of any premium, to finance the Utility Improvements 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. 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 LL185-69-710070.vl aggregate principal amount not to exceed $1,750,000 plus the amount of any premium. 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, delivery and payment of the Bonds and the execution and delivery related documents and certificates shall have the same force and effect as if such resolution had been adopted by this Council. The City Clerk or Commission staff is authorized and directed to file a certified copy of this resolution and the resolution of the Commission with the County Auditor of Sherburne County and to obtain the certificate required by Minnesota Statutes, Section 475.63. 4. No Designation of Qualified Tax -Exempt Obligations. The Bonds will not be designated as a "qualified tax-exempt obligation" within the meaning of Section 265(b)(3) of the Code. 5. General Obligation Pledge. For the prompt and full payment of the principal of and interest on the Bonds, as the same respectively become due, the full faith, credit and taxing powers of the City will be and are hereby irrevocably pledged. If the balance in the debt service fund established by the Commission for the Bonds is ever insufficient to pay all principal and interest then due on the Bonds and any other bonds payable therefrom, the deficiency will be promptly paid out of monies in the general fund of the City which are available for such purpose, and such general fund may be reimbursed with or without interest from the debt service fund when a sufficient balance is available therein. The City hereby determines that the estimated collection of net revenues of the Water Utility pledged for the payment of principal and interest on the Bonds will produce at least 5% in excess of the amount needed to meet, when due, the principal and interest payments on the Bonds. 6. Consultants. This Council hereby approves the selection of Baker Tilly Municipal Advisors, LLC, in Saint Paul, Minnesota ("Baker Tilly"), as municipal advisor to the City and the Commission, to assist in the offer and sale of the Bonds. The City and the Commission are authorized by Minnesota Statutes, Section 475.60, subdivision 2(9) to negotiate the sale of the Bonds, it being determined that the City and the Commission have retained an independent municipal advisor in connection with such sale. The actions of the City and Commission staff and the City's and Commission's municipal advisor in negotiating the sale of the Bonds are ratified and confirmed in all aspects. This Council 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. 7. 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. 8. Official Statement. In connection with said competitive negotiated sale, the Finance Manager and other officers or employees of the Commission and the officers or employees of the City are hereby authorized to cooperate with Baker Tilly and participate in the preparation of an official statement for the Bonds, and to execute and deliver it on behalf of the Commission and the City upon its completion. The motion for the adoption of the foregoing resolution was duly seconded by member and, after full discussion thereof and upon a vote being taken thereon, the following voted in favor thereof: 2 LL185-69-710070.vl and the following voted against the same: Whereupon said resolution was declared duly passed and adopted. LL185-69-710070.vl 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 General Obligation Water Utility Revenue Bonds, Series 2021C. WITNESS my hand this day of , 2021. Clerk LL185-69-710070.vl 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 $1,750,000* CITY OF ELK RIVER, MINNESOTA GENERAL OBLIGATION WATER UTILITY REVENUE BONDS, SERIES 2021C (BOOK ENTRY ONLY) Proposals for the above -referenced obligations (the "Series 2021C Bonds") will be received by the City of Elk River, Minnesota (the "City") on Tuesday, May 11, 2021 (the "Sale Date") until 10:30 A.M., Central Time (the "Sale 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 Series 2021C Bonds will be by the Utilities Commission (the "Commission") at its meeting commencing at 3:30 P.M., Central Time, of the same day. SUBMISSION OF PROPOSALS Baker Tilly MA will assume no liability for the inability of a bidder or its proposal to reach Baker Tilly MA prior to the Sale Time, and neither the City nor Baker Tilly MA shall be responsible for any failure, misdirection or error in the means of transmission selected by any bidder. All bidders are advised that each proposal shall be deemed to constitute a contract between the bidder and the City to purchase the Series 2021C Bonds regardless of the manner in which the proposal is submitted. (a) Sealed Bidding Completed, signed proposals may be submitted to Baker Tilly MA by email to bond service(a)bakertilly. com or by fax (651) 223-3046, and must be received prior to the Sale Time. OR (b) Electronic Bidding. Proposals may also 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 ofsubmitting its electronic proposal in a timely manner and in compliance with the requirements of the Terms of Proposal. Neither the City, its agents, nor PARITY® shall have any duty or obligation to undertake registration to bid for any prospective bidder or to provide or ensure electronic access to any qualified prospective bidder, and neither the City, its agents, nor PARITY® shall be responsible for a bidder's failure to register to bid or for any failure in the proper operation of, or have any liability for any delays or interruptions of or any damages caused by the services of PARITY®. The City is using the services of PARITY® solely as a communication mechanism to conduct the electronic bidding for the Series 2021C Bonds, and PARITY® is not an agent of the City. If any provisions of this Terms of Proposal conflict with information provided by PARITY®, this Terms of Proposal shall control. Further information about PARITY®, including any fee charged, may be obtained from: PARITY®, 1359 Broadway, 2nd Floor, New York, New York 10018 Customer Support: (212) 849-5000 * Preliminary; subject to change. 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 ofthe global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2021 Baker Tilly Municipal Advisors, LLC. A -I BL185-69-710070.v1 DETAILS OF THE SERIES 2021C BONDS The Series 2021C 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, 2022. Interest will be computed on the basis of a 360- day year of twelve 30-day months. The Series 2021C Bonds will mature August 1 in the years and amounts* as follows: 2022 $75,000 2026 $80,000 2030 $85,000 2034 $90,000 2038 $95,000 2023 $80,000 2027 $80,000 2031 $85,000 2035 $90,000 2039 $100,000 2024 $80,000 2028 $80,000 2032 $85,000 2036 $95,000 2040 $100,000 2025 $80,000 2029 $85,000 2033 $85,000 2037 $95,000 2041 $105,000 * The City reserves the right, after proposals are opened andprior to award, to increase or reduce the principal amount of the Series 2021 C 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 Series 2021C 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 Series 2021C 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 Series 2021C Bonds will be issued by means of a book entry system with no physical distribution of Series 2021C Bonds made to the public. The Series 2021C Bonds will be issued in fully registered form and one Series 2021C Bond, representing the aggregate principal amount of the Series 2021C 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 Series 2021C Bonds. Individual purchases of the Series 2021C 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 Series 2021C 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 Series 2021C Bonds, will be required to deposit the Series 2021C Bonds with DTC. REGISTRAR U.S. Bank National Association will serve as registrar for the Series 2021C Bonds 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 August 1, 2030, and on any day thereafter, to redeem Series 2021C Bonds due on or after August 1, 2031. 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 Series 2021C 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 A-2 LL185-69-710070.vl 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 Series 2021C 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 the net revenues of the City's Water Utility Fund. The proceeds of the Series 2021C Bonds will be used to finance costs related to the construction of a field house facility to house service trucks, inventory and offices. NOT BANK QUALIFIED TAX-EXEMPT OBLIGATIONS The City will not designate the Series 2021C Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. BIDDING PARAMETERS Proposals shall be for not less than $1,729,000 plus accrued interest, if any, on the total principal amount of the Series 2021C 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 Series 2021C Bonds is adjourned, recessed, or continued to another date without award of the Series 2021C 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. Series 2021C Bonds of the same maturity shall bear a single rate from the date of the Series 2021C 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 Series 2021C 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 Series 2021C Bonds (and, if different interest rates apply within a maturity, to each separate CUSIP number within that maturity): (1) 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 Baker Tilly MA. The City intends that the sale of the Series 2021C Bonds pursuant to this Terms of Proposal shall constitute a "competitive sale" as defined in the Regulation based on the following: (1) 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 Series 2021C Bonds; and (iv) the City anticipates awarding the sale of the Series 202IC 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). A-3 LL185-69-710070.vl Any bid submitted pursuant to this Terms of Proposal shall be considered a firm offer for the purchase of the Series 2021C 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 Series 2021C Bonds, to include provisions requiring compliance with the provisions of the Code and the Regulation regarding the initial sale of the Series 2021C 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 Series 2021C 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 Series 2021C Bonds, the Purchaser shall advise the City and Baker Tilly MA if 10% of any maturity of the Series 2021C 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 Series 2021C Bonds or until all of the Series 2021C 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 via wire transfer to the City in the amount of $17,500 (the "Deposit") no later than 1:30 P.M., Central Time on the Sale Date. The Purchaser shall be solely responsible for the timely delivery of its Deposit, and neither 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. A Deposit 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: (1) 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 Series 2021C 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: (1) waive non -substantive informalities of any proposal or of matters relating to the receipt of proposals and award of the Series 2021C 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 A-4 LL185-69-710070.vl City has not applied for or pre -approved a commitment for any policy of municipal bond insurance with respect to the Series 2021C Bonds. If the Series 2021C 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 Series 2021C Bonds shall not constitute cause for failure or refusal by the successful bidder to accept delivery of the Series 2021C Bonds. CUSIP NUMBERS If the Series 2021C Bonds qualify for the assignment of CUSIP numbers such numbers will be printed on the Series 2021C Bonds; however, neither the failure to print such numbers on any Series 2021C Bond nor any error with respect thereto will constitute cause for failure or refusal by the Purchaser to accept delivery of the Series 2021C 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 June 10, 2021, the Series 2021C 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 Series 2021C 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 Series 2021C 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 Series 2021C 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 Series 2021 C Bonds will be conditioned upon receiving evidence of this undertaking at or prior to delivery of the Series 2021C Bonds. OFFICIAL STATEMENT The City has authorized the preparation of a Preliminary Official Statement containing pertinent information relative to the Series 2021C 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 an electronic copy 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, by telephone (651) 223-3000, or by email bond service(a)bakertilly. com. The Preliminary Official Statement will also be made available at https://connect.bakertilly.com/bond-sales- calendar. 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 Series 2021C Bonds, together with any other information required by law. By awarding the Series 2021C Bonds to the Purchaser, the City agrees that, no more than seven business days after the date of such award, it shall provide to the Purchaser an electronic copy of the A-5 LL185-69-710070.vl Final Official Statement. The City designates the Purchaser as its agent for purposes of distributing the Final Official Statement to each syndicate member, if applicable. The Purchaser agrees that if its proposal is accepted by the City, (1) 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 April 13, 2021 BY ORDER OF THE ELK RIVER MUNICIPAL UTILITIES COMMISSION /s/ Melissa Karpinski Finance Manager A-6 LL185-69-710070.vl City of Elk River,Minnesota Pre-Sale Summaryfor Issuance of Bonds $1,750,000,General Obligation Water Utility Revenue Bonds, Series 2021C The City Counciland Utilities Commissionhas under consideration the issuance of bonds (the “Bonds”) to finance costs related to the construction of a filed 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 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 utilityto 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 expenses2,673,985 Net operating income$559 Add back depreciation$1,133,179 Add investment income33,454 Net Utility Revenues Available for Debt Service$1,167,192 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 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 thisissue 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 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 $1,750,000 City of Elk River, Minnesota General Obligation Water Utility Revenue Bonds, Series 2021C Issue Summary Sources & Uses Dated 06/10/2021 | Delivered 06/10/2021 Sources Of Funds Par Amount of Bonds................................................................................$1,750,000.00 Total Sources.........................................................................................$1,750,000.00 Uses Of Funds Deposit to Project Construction Fund.........................................................1,687,500.00 Costs of Issuance.....................................................................................38,650.00 Total Underwriter's Discount (1.200%)........................................................21,000.00 Rounding Amount.....................................................................................2,850.00 Total Uses...............................................................................................$1,750,000.00 2021C GO Water Rev Bonds | SINGLE PURPOSE | 4/ 5/2021 | 8:42 AM Page 5 $1,750,000 City of Elk River, Minnesota General Obligation Water Utility Revenue Bonds, Series 2021C Issue Summary Debt Service Schedule DatePrincipalCouponInterestTotal P+IFiscal Total 06/10/2021----- 02/01/2022--17,130.9017,130.90- 08/01/202275,000.000.350%13,348.7588,348.75105,479.65 02/01/2023--13,217.5013,217.50- 08/01/202380,000.000.400%13,217.5093,217.50106,435.00 02/01/2024--13,057.5013,057.50- 08/01/202480,000.000.500%13,057.5093,057.50106,115.00 02/01/2025--12,857.5012,857.50- 08/01/202580,000.000.650%12,857.5092,857.50105,715.00 02/01/2026--12,597.5012,597.50- 08/01/202680,000.000.750%12,597.5092,597.50105,195.00 02/01/2027--12,297.5012,297.50- 08/01/202780,000.000.900%12,297.5092,297.50104,595.00 02/01/2028--11,937.5011,937.50- 08/01/202880,000.001.050%11,937.5091,937.50103,875.00 02/01/2029--11,517.5011,517.50- 08/01/202985,000.001.200%11,517.5096,517.50108,035.00 02/01/2030--11,007.5011,007.50- 08/01/203085,000.001.350%11,007.5096,007.50107,015.00 02/01/2031--10,433.7510,433.75- 08/01/203185,000.001.450%10,433.7595,433.75105,867.50 02/01/2032--9,817.509,817.50- 08/01/203285,000.001.650%9,817.5094,817.50104,635.00 02/01/2033--9,116.259,116.25- 08/01/203385,000.001.750%9,116.2594,116.25103,232.50 02/01/2034--8,372.508,372.50- 08/01/203490,000.001.950%8,372.5098,372.50106,745.00 02/01/2035--7,495.007,495.00- 08/01/203590,000.002.050%7,495.0097,495.00104,990.00 02/01/2036--6,572.506,572.50- 08/01/203695,000.002.100%6,572.50101,572.50108,145.00 02/01/2037--5,575.005,575.00- 08/01/203795,000.002.150%5,575.00100,575.00106,150.00 02/01/2038--4,553.754,553.75- 08/01/203895,000.002.200%4,553.7599,553.75104,107.50 02/01/2039--3,508.753,508.75- 08/01/2039100,000.002.250%3,508.75103,508.75107,017.50 02/01/2040--2,383.752,383.75- 08/01/2040100,000.002.300%2,383.75102,383.75104,767.50 02/01/2041--1,233.751,233.75- 08/01/2041105,000.002.350%1,233.75106,233.75107,467.50 Total$1,750,000.00-$365,584.65$2,115,584.65- Yield Statistics Bond Year Dollars.................................................................................................................................................$19,522.92 Average Life..........................................................................................................................................................11.156 Years Average Coupon....................................................................................................................................................1.8725924% Net Interest Cost (NIC)...........................................................................................................................................1.9801583% True Interest Cost (TIC)..........................................................................................................................................1.9731614% Bond Yield for Arbitrage Purposes...........................................................................................................................1.8509038% All Inclusive Cost (AIC)...........................................................................................................................................2.2036491% IRS Form 8038 Net Interest Cost...................................................................................................................................................1.8725924% Weighted Average Maturity.....................................................................................................................................11.156 Years 2021C GO Water Rev Bonds | SINGLE PURPOSE | 4/ 5/2021 | 8:42 AM Page 6