HomeMy WebLinkAbout9A - Issuance and Sale of General Obligation Improvement Bonds
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U "W: Prior Lake, MN 55372-1714
~llVNESO~l'- CITY COUNCIL AGENDA REPORT
MEETING DATE:
AGENDA #:
PREPARED BY:
AGENDA ITEM:
DISCUSSION:
ALTERNATIVES:
MAY 3,2010
9A
JERIL YN ERICKSON, FINANCE DIRECTOR
CONSIDER APPROVAL OF A RESOLUTION PROVIDING FOR THE
ISSUANCE AND SALE OF $1,235,000 GENERAL OBLIGATION
IMPROVEMENT BONDS, SERIES 2010A
Introduction
The City's bond and financial advisor, Steve Mattson from Northland Securities
Inc., will present to the Council a completed resolution formally authorizing the
issuance of $1,235,000 in general obligation improvement bonds to finance
improvements associated with County Road 12 Phase III (Project 10-011),
McKenna & County Road 42 Intersection Signal (Project 09-003),2010 Lords
Street, Rustic Road, and Shady Beach Neighborhood Reconstruction (Project
10-012), and the County Road 21 Extension-CR42 North (Project 08-002). A
draft of the resolution is attached for the Council's review.
Historv
The City Council approved Resolution 10-036 on April 19, 2010 which
authorized a negotiated bond sale designed to time the sale in the market to
obtain the optimum interest rate on these bonds
Current Circumstances
At this time the general obligation bonds are estimated to be sold at an
average coupon rate of 2.99%. The bonds have been rated Aa2 by Moody's
Investor Service (see attached).
The following alternatives are available to the City Council:
1. Adopt A Resolution Providing for the Issuance and Sale of $1,235,000
General Obligation Improvement Bonds, Series 201 OA.
2. Reject bond sale for a specific reason.
RECOMMENDED Alternative 1.
MOTION:
ReVie~;
Frank BOYlf' Cit {
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EXTRACT OF MINUTES OF A MEETING OF THE
CITY COUNCIL OF THE
CITY OF PRIOR LAKE, MINNESOTA
HELD: May 3, 2010
Pursuant to due call and notice thereof, a regular or special meeting of the City Council
of the City of Prior Lake, Scott County, Minnesota, was duly held at the City Hall on May 3,
2010, at 6:00 P.M., for the purpose, in part, of authorizing the issuance and awarding the sale of
$1,235,000 General Obligation Improvement Bonds, Series 2010A.
The following members were present:
and the following were absent:
Member
introduced the following resolution and moved its adoption:
RESOLUTION NO.1 0-
RESOLUTION PROVIDING FOR THE ISSUANCE AND SALE OF
$1,235,000 GENERAL OBLIGATION IMPROVEMENT BONDS, SERIES 201OA,
PLEDGING SPECIAL ASSESSMENTS FOR
THE SECURITY THEREOF AND LEVYING A TAX FOR THE PAYMENT THEREOF
A. WHEREAS, the City Council of the City of Prior Lake, Minnesota (the "City"),
has heretofore determined and declared that it is necessary and expedient to issue $1,235,000
General Obligation Improvement Bonds, Series 2010A (the "Bonds" or individually, a "Bond"),
pursuant to Minnesota Statutes, Chapters 429 and 475, to finance the construction of various
improvements in the City (the "Improvements"); and
B. WHEREAS, the Improvements and all their components have been ordered prior
to the date hereof, after a hearing thereon for which notice was given describing the
Improvements or all their components by general nature, estimated cost, and area to be assessed;
and
C. WHEREAS, the City has retained Sound Capital Management, Inc., in Eden
Prairie, Minnesota as its independent financial advisor for the sale of the Bonds and was
therefore authorized to sell the Bonds by private negotiation in accordance with Minnesota
Statutes, Section 475.60, Subdivision 2(9); and
D. WHEREAS, it is in the best interests of the City that the Bonds be issued in book-
entry form as hereinafter provided; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Prior Lake,
Minnesota, as follows:
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1. Acceotance of Offer. The offer of Northland Securities, Inc. (the "Purchaser"), to
purchase the Bonds in accordance with the terms and at the rates of interest hereinafter set forth,
and to pay therefor the sum of $ , plus interest accrued to settlement, is hereby
confirmed and accepted.
2. Bond Terms.
(a) Original Issue Date: Denominations: Maturities: Term Bond Ootion. The Bonds
shall be dated May 15, 2010, as the date of original issue, shall be issued forthwith on or after
such date in fully registered form, shall be numbered from R-l upward in the denomination of
$5,000 each or in any integral multiple thereof of a single maturity (the "Authorized
Denominations") and shall mature on December 15 in the years and amounts as follows:
Year
Amount
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
$120,000
120,000
120,000
120,000
120,000
125,000
125,000
125,000
130,000
130,000
All dates are inclusive.
As may be requested by the Purchaser, one or more term Bonds may be issued having
mandatory sinking fund redemption and final maturity amounts conforming to the foregoing
principal repayment schedule, and corresponding additions may be made to the provisions of the
applicable Bond(s).
(b) Book Entrv Onlv Svstem. The Depository Trust Company, a limited purpose
trust company organized under the laws of the State of New York or any of its successors or its
successors to its functions hereunder (the "Depository") will act as securities depository for the
Bonds, and to this end:
(i) The Bonds shall be initially issued and, so long as they remain in book
entry form only (the "Book Entry Only Period"), shall at all times be in the form of a
separate single fully registered Bond for each maturity of the Bonds; and for purposes of
complying with this requirement under paragraphs 5 and 10, Authorized Denominations
for any Bond shall be deemed to be limited during the Book Entry Only Period to the
outstanding principal amount of that Bond.
(ii) Upon initial issuance, ownership of the Bonds shall be registered in a bond
register maintained by the Bond Registrar (as hereinafter defined) in the name of CEDE
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& CO., as the nominee (it or any nominee of the existing or a successor Depository, the
"Nominee").
(iii) With respect to the Bonds neither the City nor the Bond Registrar shall
have any responsibility or obligation to any broker, dealer, bank, or any other financial
institution for which the Depository holds Bonds as securities depository (the
"Participant") or the person for which a Participant holds an interest in the Bonds shown
on the books and records of the Participant (the "Beneficial Owner"). Without limiting
the immediately preceding sentence, neither the City, nor the Bond Registrar, shall have
any such responsibility or obligation with respect to (A) the accuracy of the records of the
Depository, the Nominee or any Participant with respect to any ownership interest in the
Bonds, or (B) the delivery to any Participant, any Owner or any other person, other than
the Depository, of any notice with respect to the Bonds, including any notice of
redemption, or (C) the payment to any Participant, any Beneficial Owner or any other
person, other than the Depository, of any amount with respect to the principal of or
premium, if any, or interest on the Bonds, or (D) the consent given or other action taken
by the Depository as the Registered Holder of any Bonds (the "Holder"). For purposes of
securing the vote or consent of any Holder under this Resolution, the City may, however,
rely upon an omnibus proxy under which the Depository assigns its consenting or voting
rights to certain Participants to whose accounts the Bonds are credited on the record date
identified in a listing attached to the omnibus proxy.
(iv) The City and the Bond Registrar may treat as and deem the Depository to
be the absolute owner of the Bonds for the purpose of payment of the principal of and
premium, if any, and interest on the Bonds, for the purpose of giving notices of
redemption and other matters with respect to the Bonds, for the purpose of obtaining any
consent or other action to be taken by Holders for the purpose of registering transfers
with respect to such Bonds, and for all purpose whatsoever. The Bond Registrar, as
paying agent hereunder, shall pay all principal of and premium, if any, and interest on the
Bonds only to the Holder or the Holders of the Bonds as shown on the bond register, and
all such payments shall be valid and effective to fully satisfy and discharge the City's
obligations with respect to the principal of and premium, if any, and interest on the Bonds
to the extent of the sum or sums so paid.
(v) Upon delivery by the Depository to the Bond Registrar of written notice to
the effect that the Depository has determined to substitute a new Nominee in place ofthe
existing Nominee, and subject to the transfer provisions in paragraph 10 hereof,
references to the Nominee hereunder shall refer to such new Nominee.
(vi) So long as any Bond is registered in the name of a Nominee, all payments
with respect to the principal of and premium, if any, and interest on such Bond and all
notices with respect to such Bond shall be made and given, respectively, by the Bond
Registrar or City, as the case may be, to the Depository as provided in the Letter of
Representations to the Depository required by the Depository as a condition to its acting
as book-entry Depository for the Bonds (said Letter of Representations, together with any
replacement thereof or amendment or substitute thereto, including any standard
procedures or policies referenced therein or applicable thereto respecting the procedures
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and other matters relating to the Depository's role as book-entry Depository for the
Bonds, collectively hereinafter referred to as the "Letter of Representations").
(vii) All transfers of beneficial ownership interests in each Bond issued in
book-entry form shall be limited in principal amount to Authorized Denominations and
shall be effected by procedures by the Depository with the Participants for recording and
transferring the ownership of beneficial interests in such Bonds.
(viii) In connection with any notice or other communication to be provided to
the Holders pursuant to this resolution by the City or Bond Registrar with respect to any
consent or other action to be taken by Holders, the Depository shall consider the date of
receipt of notice requesting such consent or other action as the record date for such
consent or other action; provided, that the City or the Bond Registrar may establish a
special record date for such consent or other action. The City or the Bond Registrar shall,
to the extent possible, give the Depository notice of such special record date not less than
15 calendar days in advance of such special record date to the extent possible.
(ix) Any successor Bond Registrar in its written acceptance of its duties under
this Resolution and any paying agency/bond registrar agreement, shall agree to take any
actions necessary from time to time to comply with the requirements of the Letter of
Representations.
(x) In the case of a partial prepayment of a Bond, the Holder may, in lieu of
surrendering the Bonds for a Bond of a lesser denomination as provided in paragraph 5
hereof, make a notation of the reduction in principal amount on the panel provided on the
Bond stating the amount so redeemed.
(c) Termination of Book-Entrv Onlv Svstem. Discontinuance of a particular
Depository's services and termination of the book-entry only system may be effected as follows:
(i) The Depository may determine to discontinue providing its services with
respect to the Bonds at any time by giving written notice to the City and discharging its
responsibilities with respect thereto under applicable law. The City may terminate the
services of the Depository with respect to the Bond if it determines that the Depository is
no longer able to carry out its functions as securities depository or the continuation of the
system of book-entry transfers through the Depository is not in the best interests of the
City or the Beneficial Owners.
(ii) Upon termination of the services of the Depository as provided in the
preceding paragraph, and if no substitute securities depository is willing to undertake the
functions of the Depository hereunder can be found which, in the opinion of the City, is
willing and able to assume such functions upon reasonable or customary terms, or if the
City determines that it is in the best interests of the City or the Beneficial Owners of the
Bond that the Beneficial Owners be able to obtain certificates for the Bonds, the Bonds
shall no longer be registered as being registered in the bond register in the name of the
Nominee, but may be registered in whatever name or names the Holder of the Bonds
shall designate at that time, in accordance with paragraph 11 hereof. To the extent that
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the Beneficial OWflers are designated as the transferee by the Holders, in accordance with
paragraph 10 hereof, the Bonds will be delivered to the Beneficial Owners.
(iii) Nothing in this subparagraph (c) shall limit or restrict the provisions of
paragraph 10 hereof.
(d) Letter of Reoresentations. The provisions in the Letter of Representations are
incorporated herein by reference and made a part of the resolution, and if and to the extent any
such provisions are inconsistent with the other provisions of this resolution, the provisions in the
Letter of Representations shall control.
3. PUfDose. The Bonds shall provide funds to finance the Improvements. The total
cost of the Improvements, which shall include all costs enumerated in Minnesota Statutes,
Section 475.65, is estimated to be at least equal to the amount of the Bonds. Work on the
Improvements shall proceed with due diligence to completion. The City covenants that it shall
do all things and perform all acts required of it to assure that work on the Improvements
proceeds with due diligence to completion and that any and all permits and studies required
under law for the Improvements are obtained.
4. Interest. The Bonds shall bear interest payable semiannually on June 15 and
December 15 of each year (each, an "Interest Payment Date"), commencing December 15,2010,
calculated on the basis of a 360-day year of twelve 30-day months, at the respective rates per
annum set forth opposite the maturity years as follows:
Maturi ty Interest Maturity Interest
Year Rate Year Rate
2011 % 2016 %
2012 2017
2013 2018
2014 2019
2015 2020
5. Redemotion. All Bonds maturing on December 15,2016, and thereafter, shall be
subject to redemption and prepayment at the option of the City on December 15,2015, and on
any date thereafter at a price of par plus accrued interest. Redemption may be in whole or in part
of the Bonds subject to prepayment. If redemption is in part, and the selection of the amounts
and maturities of the Bonds to be prepaid shall be at the discretion of the City. If only part of the
Bonds having a common maturity date are called for prepayment, the specific Bonds to be
prepaid shall be chosen by lot by the Bond Registrar. Bonds or portions thereof called for
redemption shall be due and payable on the redemption date, and interest thereon shall cease to
accrue from and after the redemption date. Mailed notice of redemption shall be given to the
paying agent and to each affected registered holder of the Bonds at least thirty (30) days prior to
the date fixed for redemption.
To effect a partial redemption of Bonds having a common maturity date, the Bond
Registrar prior to giving notice of redemption shall assign to each Bond having a common
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maturity date a distinctive number for each $5,000 of the principal amount of such Bond. The
Bond Registrar shall then select by lot, using such method of selection as it shall deem proper in
its discretion, from the numbers so assigned to such Bonds, as many numbers as, at $5,000 for
each number, shall equal the principal amount of such Bonds to be redeemed. The Bonds to be
redeemed shall be the Bonds to which were assigned numbers so selected; provided, however,
that only so much of the principal amount of each such Bond of a denomination of more than
$5,000 shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. If
a Bond is to be redeemed only in part, it shall be surrendered to the Bond Registrar (with, if the
City or Bond Registrar so requires, a written instrument of transfer in form satisfactory to the
City and Bond Registrar duly executed by the Holder thereof or the Holder's attorney duly
authorized in writing) and the City shall execute (if necessary) and the Bond Registrar shall
authenticate and deliver to the Holder of the Bond, without service charge, a new Bond or Bonds
having the same stated maturity and interest rate and of any Authorized Denomination or
Denominations, as requested by the Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal ofthe Bond so surrendered.
6. Bond Rellistrar. Northland Trust Services, Inc. in Minneapolis, Minnesota is
appointed to act as bond registrar and transfer agent with respect to the Bonds (the "Bond
Registrar"), and shall do so unless and until a successor Bond Registrar is duly appointed, all
pursuant to any contract the City and Bond Registrar shall execute which is consistent herewith.
The Bond Registrar shall also serve as paying agent unless and until a successor paying agent is
duly appointed. Principal and interest on the Bonds shall be paid to the registered holders (or
record holders) of the Bonds in the manner set forth in the form of Bond and paragraph 12.
7. Form of Bond. The Bonds, together with the Bond Registrar's Certificate of
Authentication, the form of Assignment and the registration information thereon, shall be in
substantially the following form:
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UNITED STATES OF AMERICA
STATE OF MINNESOTA
SCOTT COUNTY
CITY OF PRIOR LAKE
R-
$
GENERAL OBLIGATION IMPROVEMENT BOND, SERIES 2010A
INTEREST
RATE
MATURITY
DATE
DATE OF
ORIGINAL ISSUE
CUSIP
%
DECEMBER 15,
MAY 15,2010
REGISTERED OWNER:
CEDE & CO.
PRINCIP AL AMOUNT:
DOLLARS
THE CITY OF PRIOR LAKE, SCOTT COUNTY, MINNESOTA (the "Issuer"), certifies
that it is indebted and for value received promises to pay to the registered owner specified above,
or registered assigns, unless called for earlier redemption, in the manner hereinafter set forth, the
principal amount specified above, on the maturity date specified above, and to pay interest
thereon semiannually on June 15 and December 15 of each year (each, an "Interest Payment
Date"), commencing December 15,2010, at the rate per annum specified above (calculated on
the basis of a 360-day year of twelve 30-day months) until the principal sum is paid or has been
provided for. This Bond will bear interest from the most recent Interest Payment Date to which
interest has been paid or, if no interest has been paid, from the date of original issue hereof. The
principal of and premium, if any, on this Bond are payable upon presentation and surrender
hereof at Northland Trust Services, Inc., in Minneapolis, Minnesota (the "Bond Registrar"),
acting as paying agent, or any successor paying agent duly appointed by the Issuer. Interest on
this Bond will be paid on each Interest Payment Date by check or draft mailed to the person in
whose name this Bond is registered (the "Holder" or "Bondholder") on the registration books of
the Issuer maintained by the Bond Registrar and at the address appearing thereon at the close of
business on the first day of the calendar month of such Interest Payment Date (the "Regular
Record Date"). Any interest not so timely paid shall cease to be payable to the person who is the
Holder hereof as of the Regular Record Date, and shall be payable to the person who is the
Holder hereof at the close of business on a date (the "Special Record Date") fixed by the Bond
Registrar whenever money becomes available for payment of the defaulted interest. Notice of
the Special Record Date shall be given to Bondholders not less than ten days prior to the Special
Record Date. The principal of and premium, if any, and interest on this Bond are payable in
lawful money of the United States of America. So long as this Bond is registered in the name of
the Depository or its Nominee as provided in the Resolution hereinafter described, and as those
terms are defined therein, payment of principal of, premium, if any, and interest on this Bond and
notice with respect thereto shall be made as provided in Letter of Representations, as defined in
the Resolution, and surrender of this Bond shall not be required for payment of the redemption
price upon a partial redemption of this Bond. Until termination of the book-entry only system
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pursuant to the Resolution, Bonds may only be registered in the name of the Depository or its
Nominee.
RedemDtion. All Bonds of this issue (the "Bonds") maturing on December 15,2016, and
thereafter, shall be subject to redemption and prepayment at the option of the City on
December 15,2015, and on any date thereafter at a price of par plus accrued interest.
Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in
part, the selection of the amounts and maturities of the Bonds to be prepaid shall be at the
discretion of the Issuer; and if only part of the Bonds having a common maturity date are called
for prepayment, the specific Bonds to be prepaid shall be chosen by lot by the Bond Registrar.
Bonds or portions thereof called for redemption shall be due and payable on the redemption date,
and interest thereon shall cease to accrue from and after the redemption date. Mailed notice of
redemption shall be given to the paying agent and to each affected Holder of the Bonds at least
thirty (30) days prior to the date fixed for redemption.
Selection of Bonds for RedemDtion: Partial RedemDtion. To effect a partial redemption
of Bonds having a common maturity date, the Bond Registrar shall assign to each Bond having a
common maturity date a distinctive number for each $5,000 of the principal amount of such
Bond. The Bond Registrar shall then select by lot, using such method of selection as it shall
deem proper in its discretion, from the numbers assigned to the Bonds, as many numbers as, at
$5,000 for each number, shall equal the principal amount of the Bonds to be redeemed. The
Bonds to be redeemed shall be the Bonds to which were assigned numbers so selected; provided,
however, that only so much of the principal amount of Bond of a denomination of more than
$5,000 shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. If
a Bond is to be redeemed only in part, it shall be surrendered to the Bond Registrar (with, if the
Issuer or Bond Registrar so requires, a written instrument of transfer in form satisfactory to the
Issuer and Bond Registrar duly executed by the Holder thereof or the Holder's attorney duly
authorized in writing) and the Issuer shall execute (if necessary) and the Bond Registrar shall
authenticate and deliver to the Holder of the Bond, without service charge, a new Bond or Bonds
having the same stated maturity and interest rate and of any Authorized Denomination or
Denominations, as requested by the Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Bond so surrendered.
Issuance: Puroose: General Oblillation. This Bond is one of an issue in the total principal
amount of $1 ,235,000, all of like date of original issue and tenor, except as to number, maturity,
interest rate, denomination and redemption privilege, issued pursuant to and in full conformity
with the Constitution and laws of the State of Minnesota and pursuant to a resolution adopted by
the City Council on May 3, 2010 (the "Resolution"), for the purpose of providing money to
finance the construction of various improvements within the jurisdiction of the Issuer. This
Bond is payable out of the General Obligation Improvement Bonds, Series 201 OA Fund of the
Issuer. This Bond constitutes a general obligation of the Issuer, and to provide moneys for the
prompt and full payment of its principal, premium, if any, and interest when the same become
due, the full faith and credit and taxing powers of the Issuer have been and are hereby
irrevocably pledged.
Denominations: Exchanlle: Resolution. The Bonds are issuable solely in fully registered
form in Authorized Denominations (as defined in the Resolution) and are exchangeable for fully
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registered Bonds of other Authorized Denominations in equal aggregate principal amounts at the
office of the Bond Registrar, but only in the manner and subject to the limitations provided in the
Resolution. Reference is hereby made to the Resolution for a description of the rights and duties
of the Bond Registrar. Copies of the Resolution are on file in the office of the Bond Registrar.
Transfer. This Bond is transferable by the Holder in person or by the Holder's attorney
duly authorized in writing at the office of the Bond Registrar upon presentation and surrender
hereof to the Bond Registrar, all subject to the terms and conditions provided in the Resolution
and to reasonable regulations of the Issuer contained in any agreement with the Bond Registrar.
Thereupon the Issuer shall execute and the Bond Registrar shall authenticate and deliver, in
exchange for this Bond, one or more new fully registered Bonds in the name of the transferee
(but not registered in blank or to "bearer" or similar designation), of an Authorized
Denomination or Denominations, in aggregate principal amount equal to the principal amount of
this Bond, of the same maturity and bearing interest at the same rate.
Fees upon Transfer or Loss. The Bond Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection with the transfer
or exchange of this Bond and any legal or unusual costs regarding transfers and lost Bonds.
Treatment of Rellistered Owners. The Issuer and Bond Registrar may treat the person in
whose name this Bond is registered as the owner hereof for the purpose of receiving payment as
herein provided (except as otherwise provided herein with respect to the Record Date) and for all
other purposes, whether or not this Bond shall be overdue, and neither the Issuer nor the Bond
Registrar shall be affected by notice to the contrary.
Authentication. This Bond shall not be valid or become obligatory for any purpose or be
entitled to any security unless the Certificate of Authentication hereon shall have been executed
by the Bond Registrar.
Oualified Tax-ExemDt Oblillation. This Bond has been designated by the Issuer as a
"qualified tax -exempt obligation" for purposes of Section 265(b )(3) of the Internal Revenue
Code of 1986, as amended.
IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions and things
required by the Constitution and laws of the State of Minnesota to be done, to happen and to be
performed, precedent to and in the issuance of this Bond, have been done, have happened and
have been performed, in regular and due form, time and manner as required by law, and that this
Bond, together with all other debts of the Issuer outstanding on the date of original issue hereof
and the date of its issuance and delivery to the original purchaser, does not exceed any
constitutional or statutory limitation of indebtedness.
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IN WITNESS WHEREOF, the City of Prior Lake, Scott County, Minnesota, by its City
Council has caused this Bond to be executed on its behalf by the facsimile signatures of its
Mayor and its Manager.
Date of Registration:
Registrable by: NORTHLAND TRUST SERVICES, INC.
Payable at: NORTHLAND TRUST SERVICES, INC.
BOND REGISTRAR'S
CERTIFICATE OF
AUTHENTICATION
CITY OF PRIOR LAKE,
SCOTT COUNTY, MINNESOTA
This Bond is one of the
Bonds described in the
Resolution mentioned
within.
Isl Facsimile
Mayor
NORTHLAND TRUST
SERVICES, INC.,
Minneapolis, Minnesota,
Bond Registrar
Isl Facsimile
Manager
By
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ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this Bond, shall
be construed as though they were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UTMA - as custodian for
(Cust)
(Minor)
Uniform Transfers to Minors Act
under the
(State)
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers unto
the within Bond and does
hereby irrevocably constitute and appoint attorney to transfer the Bond on
the books kept for the registration thereof, with full power of substitution in the premises.
Dated:
Notice: The assignor's signature to this assignment must
correspond with the name as it appears upon the
face ofthe within Bond in every particular,
without alteration or any change whatever.
Signature Guaranteed:
Signature(s) must be guaranteed by a national bank or trust company or by a brokerage firm
having a membership in one of the major stock exchanges or any other "Eligible Guarantor
Institution" as defined in 17 CFR 240.17 Ad-15(a)(2).
The Bond Registrar will not effect transfer of this Bond unless the information
concerning the transferee requested below is provided.
Name and Address:
(Include information for all joint owners if the Bond is held by joint account.)
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PREPAYMENT SCHEDULE
This Bond has been prepaid in part on the date(s) and in the amount(s) as follows:
DATE
AMOUNT
12
AUTHORIZED
SIGNATURE
OF HOLDER
8. Execution: TemDorarv Bonds. The Bonds shall be printed (or, at the request of
the Purchaser, typewritten) and shall be executed on behalf of the City by the signatures of its
Mayor and Manager and be sealed with the seal of the City; provided, however, that the seal of
the City may be printed (or, at the request of the Purchaser, photocopied) facsimiles and the
corporate seal may be omitted on the Bonds as permitted by law. In the event of disability or
resignation or other absence of either officer, the Bonds may be signed by the manual or
facsimile signature of an officer who may act on behalf of the absent or disabled officer. In case
either the officer whose signature or facsimile of whose signature shall appear on the Bonds shall
cease to be such officer before the delivery of the Bonds, the signature or facsimile shall
nevertheless be valid and sufficient for all purposes, the same as if the officer had remained in
office until delivery. The City may elect to deliver, in lieu of printed definitive bonds, one or
more typewritten temporary bonds in substantially the form set forth above, with such changes as
may be necessary to reflect more than one maturity in a single temporary bond. Such temporary
bonds may be executed with photocopied facsimile signatures of the Mayor and Manager. Such
temporary bonds shall, upon the printing of the definitive bonds and the execution thereof, be
exchanged therefor and canceled.
9. Authentication. No Bond shall be valid or obligatory for any purpose or be
entitled to any security or benefit under this resolution unless a Certificate of Authentication on
the Bond, substantially in the form hereinabove set forth, shall have been duly executed by the
Bond Registrar. Certificates of Authentication on different Bonds need not be signed by the
same person. The Bond Registrar shall authenticate the signatures of officers of the City on each
Bond by execution of the Certificate of Authentication on the Bond and, by inserting as the date
of registration in the space provided, the date on which the Bond is authenticated, except that for
purposes of delivering the original Bonds to the Purchaser, the Bond Registrar shall insert as a
date of registration the date of original issue, which date is May 15, 2010. The Certificate of
Authentication so executed on each Bond shall be conclusive evidence that it has been
authenticated and delivered under this resolution.
10. Rellistration: Transfer: Exchange. The City will cause to be kept at the office of
the Bond Registrar a bond register in which, subject to such reasonable regulations as the Bond
Registrar may prescribe, the Bond Registrar shall provide for the registration of Bonds and the
registration of transfers of Bonds entitled to be registered or transferred as herein provided.
Upon surrender for transfer of any Bond at the office of the Bond Registrar, the City shall
execute (if necessary), and the Bond Registrar shall authenticate, insert the date of registration
(as provided in paragraph 9) of, and deliver, in the name of the designated transferee or
transferees, one or more new Bonds of any Authorized Denomination or Denominations of a like
aggregate principal amount, having the same stated maturity and interest rate, as requested by the
transferor; provided, however, that no Bond may be registered in blank or in the name of
"bearer" or similar designation.
At the option of the Holder, Bonds may be exchanged for Bonds of any Authorized
Denomination or Denominations of a like aggregate principal amount and stated maturity, upon
surrender of the Bonds to be exchanged at the office of the Bond Registrar. Whenever any
Bonds are so surrendered for exchange, the City shall execute (if necessary), and the Bond
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Registrar shall authenticate, insert the date of registration of, and deliver the Bonds which the
Holder making the exchange is entitled to receive.
All Bonds surrendered upon any exchange or transfer provided for in this resolution shall
be promptly canceled by the Bond Registrar and thereafter disposed of as directed by the City.
All Bonds delivered in exchange for or upon transfer of Bonds shall be valid general
obligations of the City evidencing the same debt, and entitled to the same benefits under this
resolution, as the Bonds surrendered for such exchange or transfer.
Every Bond presented or surrendered for transfer or exchange shall be duly endorsed or
be accompanied by a written instrument of transfer, in form satisfactory to the Bond Registrar,
duly executed by the Holder thereof or his, her or its attorney duly authorized in writing.
The Bond Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the transfer or exchange of any Bond and any
legal or unusual costs regarding transfers and lost Bonds.
Transfers shall also be subject to reasonable regulations of the City contained in any
agreement with the Bond Registrar, including regulations which permit the Bond Registrar to
close its transfer books between record dates and payment dates. The Manager is hereby
authorized to negotiate and execute the terms of said agreement.
11. Rillhts UDon Transfer or Exchanlle. Each Bond delivered upon transfer of or in
exchange for or in lieu of any other Bond shall carryall the rights to interest accrued and unpaid,
and to accrue, which were carried by such other Bond.
12. Interest Pavment: Record Date. Interest on any Bond shall be paid on each
Interest Payment Date by check or draft mailed to the person in whose name the Bond is
registered (the "Holder") on the registration books of the City maintained by the Bond Registrar
and at the address appearing thereon at the close of business on the first (lst) day of the calendar
month of such Interest Payment Date (the "Regular Record Date"). Any such interest not so
timely paid shall cease to be payable to the person who is the Holder thereof as of the Regular
Record Date, and shall be payable to the person who is the Holder thereof at the close of
business on a date (the "Special Record Date") fixed by the Bond Registrar whenever money
becomes available for payment of the defaulted interest. Notice of the Special Record Date shall
be given by the Bond Registrar to the Holders not less than ten days prior to the Special Record
Date.
13. Treatment of Rellistered Owner. The City and Bond Registrar may treat the
person in whose name any Bond is registered as the owner of such Bond for the purpose of
receiving payment of principal of and premium, if any, and interest (subject to the payment
provisions in paragraph 12) on, such Bond and for all other purposes whatsoever whether or not
such Bond shall be overdue, and neither the City nor the Bond Registrar shall be affected by
notice to the contrary.
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14. Deliverv: ADDlication of Proceeds. The Bonds when so prepared and executed
shall be delivered by the Manager to the Purchaser upon receipt of the purchase price, and the
Purchaser shall not be obliged to see to the proper application thereof.
15. Fund and Accounts. There is hereby created a special fund to be designated the
"General Obligation Improvement Bonds, Series 2010A Fund" (the "Fund") to be administered
and maintained by the Finance Director as a bookkeeping account separate and apart from all
other funds maintained in the official financial records of the City. The Fund shall be maintained
in the manner herein specified until all of the Bonds and the interest thereon have been fully
paid. There shall be maintained in the Fund the following separate accounts:
(a) Construction Account. To the Construction Account there shall be credited the
proceeds of the sale of the Bonds, less accrued interest received thereon, plus any special
assessments levied with respect to the Improvements and collected prior to completion of the
Improvements and payment of the costs thereof. From the Construction Account there shall be
paid all costs and expenses of making the Improvements listed in paragraph 16, including the
cost of any construction contracts heretofore let and all other costs incurred and to be incurred of
the kind authorized in Minnesota Statutes, Section 475.65. Moneys in the Construction Account
shall be used for no other purpose except as otherwise provided by law; provided that the
proceeds of the Bonds may also be used to the extent necessary to pay interest on the Bonds due
prior to the anticipated date of commencement of the collection of taxes or special assessments
herein levied or covenanted to be levied; and provided further that if upon completion of the
Improvements there shall remain any unexpended balance in the Construction Account, the
balance (other than any special assessments) shall be transferred by the Council to the Debt
Service Account or the fund of any other improvement instituted pursuant to Minnesota Statutes,
Chapter 429, and provided further that any special assessments credited to the Construction
Account shall only be applied towards payment of the costs of the Improvements upon adoption
of a resolution by the City Council determining that the application ofthe special assessments for
such purpose will not cause the City to no longer be in compliance with Minnesota Statutes,
Section 475.61, Subdivision 1.
(b) Debt Service Account. There are hereby irrevocably appropriated and pledged to,
and there shall be credited to, the Debt Service Account: (i) all collections of special
assessments herein covenanted to be levied with respect to the Improvements and either initially
credited to the Construction Account and not already spent as permitted above and required to
pay any principal and interest due on the Bonds or collected subsequent to the completion of the
Improvements and payment of the costs thereof; (ii) all accrued interest received upon delivery
of the Bonds; (iii) any collections of all taxes herein or hereafter levied for the payment of the
Bonds and interest thereon; (iv) all funds remaining in the Construction Account after
completion of the Improvements and payment of the costs thereof, not so transferred to the
account of another improvement; (v) all investment earnings on funds held in the Debt Service
Account; and (vi) any and all other moneys which are properly available and are appropriated by
the governing body of the City to the Debt Service Account. The Debt Service Account shall be
used solely to pay the principal and interest and any premiums for redemption of the Bonds and
any other general obligation bonds of the City hereafter issued by the City and made payable
from said account as provided by law.
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No portion of the proceeds of the Bonds shall be used directly or indirectly to acquire
higher yielding investments or to replace funds which were used directly or indirectly to acquire
higher yielding investments, except (1) for a reasonable temporary period until such proceeds are
needed for the purpose for which the Bonds were issued and (2) in addition to the above in an
amount not greater than the lesser of five percent (5%) ofthe proceeds of the Bonds or $100,000.
To this effect, any proceeds of the Bonds and any sums from time to time held in the
Construction Account or Debt Service Account (or any other City account which will be used to
pay principal or interest to become due on the bonds payable therefrom) in excess of amounts
which under then-applicable federal arbitrage regulations may be invested without regard to
yield shall not be invested at a yield in excess of the applicable yield restrictions imposed by said
arbitrage regulations on such investments after taking into account any applicable "temporary
periods" or "minor portion" made available under the federal arbitrage regulations. Money in the
Fund shall not be invested in obligations or deposits issued by, guaranteed by or insured by the
United States or any agency or instrumentality thereof if and to the extent that such investment
would cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the
Internal Revenue Code of 1986, as amended (the "Code").
16. Assessments. It is hereby determined that no less than twenty percent (20%) of
the cost to the City of each Improvement financed hereunder within the meaning of Minnesota
Statutes, Section 475.58, Subdivision 1(3), shall be paid by special assessments to be levied
against every assessable lot, piece and parcel of land benefitted by any of the Improvements.
The City hereby covenants and agrees that it will let all construction contracts not heretofore let
within one (1) year after ordering each Improvement financed hereunder unless the resolution
ordering the Improvement specifies a different time limit for the letting of construction contracts.
The City hereby further covenants and agrees that it will do and perform as soon as they may be
done all acts and things necessary for the final and valid levy of such special assessments, and in
the event that any such assessment be at any time held invalid with respect to any lot, piece or
parcel of land due to any error, defect, or irregularity in any action or proceedings taken or to be
taken by the City or the City Councilor any of the City officers or employees, either in the
making of the assessments or in the performance of any condition precedent thereto, the City and
the City Council will forthwith do all further acts and take all further proceedings as may be
required by law to make the assessments a valid and binding lien upon such property. The
special assessments have heretofore been authorized. Subject to such adjustments as are required
by the conditions in existence at the time the assessments are levied, it is hereby determined that
the assessments shall be payable in equal, consecutive, annual installments, with general taxes
for the years shown below and with interest on the declining balance of all such assessments at
the rates per annum not less than the rate per annum set forth opposite the collection years
specified below:
Improvement
Desillnation
Amount
Levv Years
Collection
Year
Rate
CR12 Phase III
$300,000
2010-2019
2011-2020
6.00%
At the time the assessments are in fact levied the City Council shall, based on the then-
current estimated collections of the assessments, make any adjustments in any ad valorem taxes
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required to be levied in order to assure that the City continues to be in compliance with
Minnesota Statutes, Section 475.61, Subdivision 1.
17. Tax Levv: Coverage Test. To provide moneys for payment of the principal and
interest on the Bonds there is hereby levied upon all of the taxable property in the City a direct
annual ad valorem tax which shall be spread upon the tax rolls and collected with and as part of
other general property taxes in the City for the years and in the amounts as follows:
Year of Tax Levv
Year of Tax Collection
Amount
2010-2019
2011-2020
See Attached
The tax levies are such that if collected in full they, together with estimated collections of
special assessments and other revenues herein pledged for the payment of the Bonds, will
produce at least five percent (5%) in excess of the amount needed to meet when due the principal
and interest payments on the Bonds. The tax levies shall be irrepealable so long as any of the
Bonds are outstanding and unpaid, provided that the City reserves the right and power to reduce
the levies in the manner and to the extent permitted by Minnesota Statutes, Section 475.61,
Subdivision 3.
18. Defeasance. When all Bonds have been discharged as provided in this paragraph,
all pledges, covenants and other rights granted by this resolution to the registered holders of the
Bonds shall, to the extent permitted by law, cease. The City may discharge its obligations with
respect to any Bonds which are due on any date by irrevocably depositing with the Bond
Registrar on or before that date a sum sufficient for the payment thereof in full; or if any Bond
should not be paid when due, it may nevertheless be discharged by depositing with the Bond
Registrar a sum sufficient for the payment thereof in full with interest accrued to the date of such
deposit. The City may also discharge its obligations with respect to any prepayable Bonds called
for redemption on any date when they are prepayable according to their terms, by depositing
with the Bond Registrar on or before that date a sum sufficient for the payment thereof in full,
provided that notice of redemption thereof has been duly given. The City may also at any time
discharge its obligations with respect to any Bonds, subject to the provisions of law now or
hereafter authorizing and regulating such action, by depositing irrevocably in escrow, with a
suitable banking institution qualified by law as an escrow agent for this purpose, cash or
securities described in Minnesota Statutes, Section 475.67, Subdivision 8, bearing interest
payable at such times and at such rates and maturing on such dates as shall be required, without
regard to sale andlor reinvestment, to pay all amounts to become due thereon to maturity or, if
notice of redemption as herein required has been duly provided for, to such earlier redemption
date.
19. ComDliance With Reimbursement Bond Rellulations. The provisions of this
paragraph are intended to establish and provide for the City's compliance with United States
Treasury Regulations Section 1.150-2 (the "Reimbursement Regulations") applicable to the
"reimbursement proceeds" of the Bonds, being those portions thereof which will be used by the
City to reimburse itself for any expenditure which the City paid or will have paid prior to the
Closing Date (a "Reimbursement Expenditure").
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The City hereby certifies andlor covenants as follows:
(a) Not later than 60 days after the date of payment of a Reimbursement Expenditure,
the City (or person designated to do so on behalf of the City) has made or will have made a
written declaration of the City's official intent (a "Declaration") which effectively (i) states the
City's reasonable expectation to reimburse itself for the payment of the Reimbursement
Expenditure out of the proceeds of a subsequent borrowing; (ii) gives a general and functional
description of the property, project or program to which the Declaration relates and for which the
Reimbursement Expenditure is paid, or identifies a specific fund or account of the City and the
general functional purpose thereof from which the Reimbursement Expenditure was to be paid
(collectively the "Project"); and (iii) states the maximum principal amount of debt expected to be
issued by the City for the purpose of financing the Project; provided, however, that no such
Declaration shall necessarily have been made with respect to: (i) "preliminary expenditures" for
the Project, defined in the Reimbursement Regulations to include engineering or architectural,
surveying and soil testing expenses and similar prefatory costs, which in the aggregate do not
exceed 20% of the "issue price" of the Bonds, and (ii) a de minimis amount of Reimbursement
Expenditures not in excess of the lesser of $1 00,000 or 5% of the proceeds of the Bonds.
(b) Each Reimbursement Expenditure is a capital expenditure or a cost of issuance of
the Bonds or any of the other types of expenditures described in Section 1.150-2( d)(3) of the
Reimbursement Regulations.
(c) The "reimbursement allocation" described in the Reimbursement Regulations for
each Reimbursement Expenditure shall and will be made forthwith following (but not prior to)
the issuance of the Bonds and in all events within the period ending on the date which is the later
of three years after payment of the Reimbursement Expenditure or one year after the date on
which the Project to which the Reimbursement Expenditure relates is first placed in service.
(d) Each such reimbursement allocation will be made in a writing that evidences the
City's use of Bond proceeds to reimburse the Reimbursement Expenditure and, if made within 30
days after the Bonds are issued, shall be treated as made on the day the Bonds are issued.
Provided, however, that the City may take action contrary to any of the foregoing covenants in
this paragraph upon receipt of an opinion of its Bond Counsel for the Bonds stating in effect that
such action will not impair the tax-exempt status of the Bonds.
20. General Oblillation Pledge. For the prompt and full payment of the principal and
interest on the Bonds, as the same respectively become due, the full faith, credit and taxing
powers of the City shall be and are hereby irrevocably pledged. If the balance in the Debt
Service Account is ever insufficient to pay all principal and interest then due on the Bonds and
any other bonds payable therefrom, the deficiency shall be promptly paid out of any other funds
of the City which are available for such purpose, and such other funds may be reimbursed with
or without interest from the Debt Service Account when a sufficient balance is available therein.
21. Continuinll Disclosure. The City is the sole obligated person with respect to the
Bonds. The City hereby agrees, in accordance with the provisions of Rule 15c2-12 (the "Rule"),
promulgated by the Securities and Exchange Commission (the "Commission") pursuant to the
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Securities Exchange Act of 1934, as amended, and a Continuing Disclosure Undertaking (the
"Undertaking") hereinafter described to:
(a) Provide or cause to be provided to the Municipal Securities Rulemaking Board
(the "MSRB") by filing at www.emma.msrb.org in accordance with the Rule, certain annual
financial information and operating data in accordance with the Undertaking. The City reserves
the right to modify from time to time the terms of the Undertaking as provided therein.
(b) Provide or cause to be provided, in a timely manner to the MSRB notice of the
occurrence of certain material events with respect to the Bonds in accordance with the
Undertaking.
(c) Provide or cause to be provided, in a timely manner to the MSRB notice of a
failure by the City to provide the annual financial information with respect to the City described
in the Undertaking.
(d) The City agrees that its covenants pursuant to the Rule set forth in this paragraph
and in the Undertaking is intended to be for the benefit of the Holders of the Bonds and shall be
enforceable on behalf of such Holders; provided that the right to enforce the provisions of these
covenants shall be limited to a right to obtain specific enforcement of the City's obligations under
the covenants.
The Mayor and Manager of the City, or any other officer of the City authorized to act in
their place (the "Officers") are hereby authorized and directed to execute on behalf of the City
the Undertaking in substantially the form presented to the City Council subject to such
modifications thereof or additions thereto as are (i) consistent with the requirements under the
Rule, (ii) required by the Purchaser of the Bonds, and (iii) acceptable to the Officers..
22. Certificate of Rellistration. A certified copy of this resolution is hereby directed
to be filed with the County Auditor of Scott County, Minnesota, together with such other
information as the Auditor shall require, and there shall be obtained from the County Auditor a
certificate that the Bonds have been entered in the County Auditor's Bond Register, and that the
tax levy required by law has been made.
23. Records and Certificates. The officers of the City are hereby authorized and
directed to prepare and furnish to the Purchaser, and to the attorneys approving the legality of the
issuance of the Bonds, certified copies of all proceedings and records of the City relating to the
Bonds and to the financial condition and affairs of the City, and such other affidavits, certificates
and information as are required to show the facts relating to the legality and marketability of the
Bonds as the same appear from the books and records under their custody and control or as
otherwise known to them, and all such certified copies, certificates and affidavits, including any
heretofore furnished, shall be deemed representations of the City as to the facts recited therein.
24. Negative Covenant as to Use of Bond Proceeds and ImDrovements. The City
hereby covenants not to use the proceeds of the Bonds or to use the Improvements, or to cause or
permit them to be used, or to enter into any deferred payment arrangements for the cost of the
Improvements, in such a manner as to cause the Bonds to be "private activity bonds" within the
meaning of Sections 103 and 141 through 150 of the Code.
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25. Tax-ExemDt Status of the Bonds: Rebate. The City shall comply with
requirements necessary under the Code to establish and maintain the exclusion from gross
income under Section 103 of the Code of the interest on the Bonds, including without limitation
(i) requirements relating to temporary periods for investments, (ii) limitations on amounts
invested at a yield greater than the yield on the Bonds, and (iii) the rebate of excess investment
earnings to the United States if the Bonds (together with other obligations reasonably expected to
be issued and outstanding at one time in this calendar year) exceed the small issuer exception
amount of $5,000,000.
For purposes of qualifying for the small issuer exception to the federal arbitrage rebate
requirements for governmental units issuing $5,000,000 or less of bonds, the City hereby finds,
determines and declares that
(a) the Bonds are issued by a governmental unit with general taxing powers;
(b) no Bond is a private activity bond;
(c) ninety five percent or more of the net proceeds of the Bonds are to be used for
local governmental activities of the City (or of a governmental unit the jurisdiction of which is
entirely within the jurisdiction of the City); and
(d) the aggregate face amount of all tax exempt bonds (other than private activity
bonds) issued by the City (and all entities subordinate to, or treated as one issuer with the City)
during the calendar year in which the Bonds are issued and outstanding at one time is not
reasonably expected to exceed $5,000,000, all within the meaning of Section 148(f)( 4 )(D) of the
Code.
26. Desillnation of Oualified Tax-ExemDt Obligations. In order to qualify the Bonds
as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code, the
City hereby makes the following factual statements and representations:
(a) the Bonds are issued after August 7, 1986;
(b) the Bonds are not "private activity bonds" as defined in Section 141 of the Code;
(c) the City hereby designates the Bonds as "qualified tax-exempt obligations" for
purposes of Section 265(b )(3) of the Code;
(d) the reasonably anticipated amount of tax-exempt obligations (other than private
activity bonds, treating qualified 501(c)(3) bonds as not being private activity bonds) which will
be issued by the City (and all entities treated as one issuer with the City, and all subordinate
entities whose obligations are treated as issued by the City) during this calendar year 2010 will
not exceed $30,000,000; and
(e) not more than $30,000,000 of obligations issued by the City during this calendar
year 2010 have been designated for purposes of Section 265(b)(3) of the Code; and
(f) the aggregate face amount of the Bonds does not exceed $30,000,000.
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The City shall use its best efforts to comply with any federal procedural requirements which may
apply in order to effectuate the designation made by this paragraph.
27. Pavment oflssuance EXDenses. The City authorizes the Purchaser to forward the
amount of Bond proceeds allocable to the payment of issuance expenses to the Bond Registrar,
on the closing date for further distribution as directed by the Purchaser.
28. Severabilitv. If any section, paragraph or provision of this resolution shall be held
to be invalid or unenforceable for any reason, the invalidity or unenforceability of such section,
paragraph or provision shall not affect any of the remaining provisions of this resolution.
29. Headinlls. Headings in this resolution are included for convenience of reference
only and are not a part hereof, and shall not limit or define the meaning of any provision hereof.
The motion for the adoption of the foregoing resolution was duly seconded by member
and, after a full discussion thereof and upon a vote being taken thereon, the
following voted in favor thereof:
and the following voted against the same:
Whereupon the resolution was declared duly passed and adopted.
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STATE OF MINNESOTA
COUNTY OF SCOTT
CITY OF PRIOR LAKE
I, the undersigned, being the duly qualified and acting Manager of the City of Prior Lake,
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 the minutes relate to providing for the issuance and sale of
$1,235,000 General Obligation Improvement Bonds, Series 2010A.
WITNESS my hand on May 3, 2010.
Manager
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Jerilyn Erickson
From:
Sent:
To:
Subject:
GID - Moody's Investors Service [epi@moodys.com]
Friday, April 23, 20104:19 PM
Jerilyn Erickson
Prior Lake (City of) MN
MOODY'S ASSIGNS Aa2 RATING TO THE CITY OF PRIOR LAKE'S (MN) $1.2 MILLION GO IMPROVEMENT BONDS, SERIES 2010A
Aa2 RATING APPLIES TO $29.2 MILLION OF POST SALE GO DEBT
Prior Lake (City of) MN
Municipali ty
Minnesota
Moody's Rating
Issue
Rating
General Obligation Improvement Bonds, Series 2010A
Sale Amount $1,235,000
Expected Sale Date 04/2S/10
Rating Description General Obligation Unlimited Tax
Aa2
NEW YORK, April 23, 2010 -- Moody's Investors Service has assigned an Aa2 rating to the City of Prior Lake's
(MN) $1,235,000 General Obligation Improvement Bonds, Series 2010A. The bonds are secured by the city's
general obligation unlimited tax pledge. Proceeds of the Series 2010A bonds will finance various improvement
projects, including, but not limited to, various street improvement projects. Concurrently, Moody's has
affirmed the Aa2 rating on the City of Prior Lake's outstanding general obligation debt and the Aa3 rating on
the city's lease debt. Post sale, Prior Lake will have $29.2 million of outstanding general obligation debt
and $9.5 million of lease debt. The city's high-quality Aa2 rating reflects the city's advantageous location
within the Twin Cities Metropolitan Area and above average wealth levels, healthy financial operations
supported by ample operating reserves, and above average, yet manageable debt burden typical of a growing
municipali ty.
ADVANTAGEOUS LOCATION NEAR TWIN CITIES WITH ABOVE AVERAGE WEALTH LEVELS
Moody's expects the city's tax base to continue to grow over the long-term, due to its favorable location 25
miles southwest of Minneapolis (GO rated Aaa/stable outlook) and St. Paul (GO rated Aa1/positive outlook),
future annexation, and the availability of developable land. However, Moody's acknowledges that, in the near
future taxable valuations are expected to decrease due to declines in residential home values. The city is
mostly residential and benefits from easy access to major employment centers throughout the broader
Minneapolis-St. Paul metropolitan area. The moderately sized $3 billion tax base has grown at a strong 9.4%
average annual rate for the past five years, although the rate of growth has slowed dramatically for the past
two years, increasing just 1% in 200S and 5.4% in 2009. Preliminary valuations for 2010 show a 3% decline.
Moody's believes that several factors will drive long-term growth, including an annexation agreement with
Spring Lake Township that calls for up to 3,000 acres to be annexed by 2024.
Metropolitan Council projections show the city population reaching 40,000 by 2024, nearly doubling the
current estimated population of 21,395. As population growth continues, residential development is also
expected to expand. Population grew from 11,482 to 15,917 from the 1990 to 2000 Census and by 200S population
was estimated to have increased an additional 49.8% since 200e. At 138% and 142% of state levels,
respectively, per capita and median family income are above average and increased over the 1990 census
levels.
HEALTHY FINANCIAL OPERATIONS SUPPORTED BY STRONG FUND BALANCES
Moody's expects the city's healthy financial operations to continue, given prudent management practices and
the maintenance of strong fund balances. From the end of fiscal 2004 through the end of fiscal 20eS, the city
increased its General Fund reserves from $4.4 million to $5.5 million, equivalent to a healthy 46% of General
Fund revenue. General Fund reserves for all five years were in excess of a strong 40% of annual revenues. For
fiscal 200S, the city made mid-year adjustments to budgeted revenue and expenditures due to a sharper than
expected decline in economic conditions affecting economically sensitive revenues, such as building permit
and planning revenues. Cost cutting efforts included a reorganization that reduced staff slightly. Near the
close of fiscal 2008, the state reduced the city's market value homestead credit by $113,000, nearly half of
an expected $266,000. Despite the fiscal pressures and the year-end unexpected loss of state revenues, the
city closed the year with a $468,000 surplus. For fiscal 2009, preliminary financial statements indicate the
city ended the fiscal year with a $547,000 operating surplus. The city again decreased expectations for
revenues related to residential development and state aid while reducing expenditures such as overtime and
seasonal personnel expenditures. The fiscal 2010 budget is balanced and also includes a $69,000 contingency
reserve to offset any unexpected negative variances. The most recently available projections indicate actual
operations are tracking fairly close to budgeted expectations.
The city aims to maintain 45% of annual General Fund expenditures in reserves.
MANAGEABLE DEBT PROFILE; ABOVE AVERAGE DEBT BURDEN TYPICAL OF GROWING COMMUNITY
Given the ongoing capital needs of the city and overlapping jurisdictions, Moody's believes the city's 4.2%
overall debt burden will remain above average; however, Moody's believes the city's direct debt burden will
remain manageable given limited future plans for debt. The majority of city's debt burden (81%) is due to
borrowing by Prior Lake-Savage Independent School District No. 719 (GO rated Ai). Due to limited future
borrowings with average payout (68.6% in 10 years, compared a state median payout of 76%), Moody's believes
the city's moderate 1.3% direct debt burden will remain manageable.
The city, as part of its long term street reconstruction plan, expects to issue between $1 million and $2
million annually for the next ten years. It is the city's expectation to issue future street reconstruction
debt with 10 year maturities.
KEY STATISTICS
2008 Population (estimate): 23,836 (49.8% increase since 2000)
2009 Full Value: $3.1 billion
2009 Full Value per Capita (Estimate): $126,038
2000 Per Capita Income, as a % of state: 138.3% (148.6% of US)
2000 Median Family Income, as a % of state: 142.4% (161.9% of US)
Scott County unemployment rate (02/10): 7.9% (MN: 8.1%, US: 10.4%)
Overall Debt Burden as a percentage of 2009 Full Value: 4.2% (Direct Debt:
1.3%)
Principal amortization (10 Years): 68.6%
Fiscal 2008 General Fund Balance: $5.5 million (45.7% of General Fund
revenues)
Post-sale GOULT debt: $29.2 million
RECALIBRATION OF RATING TO THE GLOBAL RATING SCALE; PRINCIPAL METHODOLOGY
The rating assigned to the City of Prior Lake was issued on Moody's global scale. Market participants should
not view the recalibration of municipal ratings as rating upgrades, but rather as a recalibration of the
ratings to a different rating scale. This recalibration does not reflect an improvement in credit quality or
a change in our credit opinion for rated municipal debt issuers. For further details regarding the
recalibration of Moody's U.S.
municipal ratings to its global scale please visit www.moodys.comfgsr.
The principal methodology used in rating the current issue was "Local Government General obligation and
Related Ratings" which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the
Index of Special Reports - U.S. Public Finance. Other methodologies and factors that may have been considered
in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory.
The last rating action was on July 29, 2009, when Moody's affirmed the City of Prior Lake's Aa3 municipal
scale rating. The rating was recalibrated to a Aa2 on the global scale on April 19, 2010.
ANALYSTS:
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David Horton, Analyst, Public Finance Group, Moody's Investors Service Rachel Cortez, Backup Analyst, Public
Finance Group, Moody's Investors Service
Henrietta Chang, Senior Credit Officer, Public Finance Group, Moody's Investors Service
CONTACTS:
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
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This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the
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