ITEM 8.2 Kadler Ave/73rd StreetOtkgo
MINNESOTA
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT
REQUESTOR:
MEETING DATE:
Administration
City Administrator/Finance Director Flaherty
May 14, 2018
PRESENTER(s)
REVIEWED BY:
ITEM #:
Administration
City Attorney MacArthur
8.2
STRATEGIC VISION
MEETS:
THE CITY OF OTSEGO:
Northland Securities, Inc. and to authorize a competitive negotiated sale of general obligation bonds.
Is a strong organization that is committed to leading the community through innovative
communication.
X
Has proactively expanded infrastructure to responsibly provide core services.
Yes — Held May 14, 2018
Is committed to delivery of quality emergency service responsive to community needs and
expectations in a cost-effective manner.
Municipal Advisory Service Agreement
Is a social community with diverse housing, service options, and employment opportunities.
services to be provided by Northland Securities, Inc. that are necessary in connection with the sale of the
Is a distinctive, connected community known for its beauty and natural surroundings.
AGENDA ITEM DETAILS
RECOMMENDATION:
City staff is recommending that the City Council approve the municipal advisory service agreement with
Northland Securities, Inc. and to authorize a competitive negotiated sale of general obligation bonds.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
IS A PUBLIC HEARING REQUIRED?
Yes
Yes — Held May 14, 2018
BACKGROUND/JUSTIFICATION:
Municipal Advisory Service Agreement
This agreement is between the City of Otsego and Northland Securities, Inc. The agreement outlines the
services to be provided by Northland Securities, Inc. that are necessary in connection with the sale of the
series 2018A general obligation improvement bonds.
The agreement outlines the compensation to Northland Securities, Inc. for the services provided. The
amount of $17,600 are considered to be costs of issuance and will be financed with proceeds of the bond.
The City has no obligation to issue the bonds under the terms of this agreement, and in the event no bonds
are issued, the City has no obligation of fees to Northland Securities, Inc.
City Attorney MacArthur has provided a review of this service agreement and has no comments.
General Obligation Improvement Bonds, Series 2018A
The City is proceeding with two significant street improvement projects during the 2018 construction
season. Those projects include: 1) the Mississippi Shores Reconstruction project; and 2) the Kadler Avenue
and 73rd Street Construction project. City staff is recommending that the City issue general obligation
bonds as the initial funding source for the projects. The repayment sources will include both special
assessments to benefitting property owners and a general property tax levy.
The Mississippi Shores project requires $1,475,000 of bonds, for a currently estimated project cost of
$1,418,841. The project costs will be allocated approximately 50% to benefiting property owners in the
form of special assessments. Those assessments will be amortized over 10 years with an estimated interest
rate of 3.95%. The remaining 50% of the project costs will be paid for with a general property tax levied
across all properties within the City of Otsego. This funding plan is consistent with the City's special
assessment policy and has been applied consistently for street reconstruction projects in the past.
The Kadler Avenue and 73rd Street project requires $1,075,000 of bonds, for a currently estimated project
cost of $1,738,596. The City was awarded a grant in the amount of $704,724 from the MN Department of
Employment and Economic Development (DEED) to help with the financing of this project. The benefitting
property owner will be assessed in the estimated amount of $886,008, with the remainder of the project
costs being paid for with a general property tax levied across all properties within the City of Otsego.
The action in front of the City Council at this meeting is to adopt Resolution 2018-34, which will authorize
Northland Securities, Inc. to provide for a competitive negotiated sale of the general obligation
improvement bonds, series 2018A. The competitive sale process includes the City receipting proposals
from the competitive marketplace on the sale of the bonds. The proposals are due on June 11 at 1030AM.
The bond proposals will then be presented to the City Council at the regular meeting on June 11 at 70OPM
for consideration. Northland Securities, Inc. will provide for a recommendation at the meeting on how the
City Council should proceed with the award. Typically, the bonds will be awarded on the basis of the lowest
true interest cost to the City.
The resolution and respective notice of sale documents were prepared by the City's Bond Counsel, Briggs
and Morgan, and have been reviewed by City Attorney MacArthur with no comments.
SUPPORTING DOCUMENTS ATTACHED:
• Municipal Advisory Service Agreement
• Resolution 2018-34
• Finance Plan
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE ITTO APPEAR IN THE MINUTES:
Motion to approve the Municipal Advisory Service Agreement between the City of Otsego and Northland
Securities, Inc.
Motion to approve Resolution 2018-34 Providing for the Competitive Negotiated Sale of General Obligation
Improvement Bonds, Series 2018A.
BUDGET INFORMATION
FUNDING:
BUDGETED:
Mississippi Shores - Fund #201
Kadler Avenue & 73rd Street — Fund #438
Yes
MUNICIPAL ADVISORY SERVICE AGREEMENT
BY AND BETWEEN
THE CITY OF OTSEGO, MINNESOTA
AND
NORTHLAND SECURITIES, INC.
This Agreement made and entered into by and between the City of Otsego, Minnesota (hereinafter
"City") and Northland Securities, Inc., of Minneapolis, Minnesota (hereinafter "NSI").
WITNESSETH
WHEREAS, the City desires to have NSI provide it with advice on the structure, terms, timing and
other matters related to the issuance of the General Obligation Improvement Bonds, Series 2018A
(the "Debt") serving in the role of municipal (financial) advisor, and
WHEREAS, NSI is a registered municipal advisor with both the Securities and Exchange
Commission ("SEC") and the Municipal Securities Rulemaking Board ("MSRB") (registration # 866-
00082-00), and
WHEREAS, NSI will act as municipal advisor in accordance with the duties and responsibilities of
Rule G-42 of the MSRB, and
WHEREAS, the MSRB provides a municipal advisory client brochure on its website (www.msrb.org)
that describes the protections that may be provided by the MSRB rules, including professional
competency, fair dealing, duty of loyalty, remedies for disputes and how to file a complaint with an
appropriate regulatory authority, and
WHEREAS, the City and NSI are entering into this Agreement to define the municipal advisory
relationship at the earliest opportunity related to the inception of the municipal advisory relationship
for the Debt, and
WHEREAS, NSI desires to furnish services to the City as hereinafter described,
NOW, THEREFORE, it is agreed by and between the parties as follows:
SERVICES TO BE PROVIDED BY NSI
NSI shall provide the City with services necessary to analyze, structure, offer for sale and close the
Debt. The services will be tailored to meet the needs of this engagement and may include:
Planning and Development
1. Assist City officials to define the scope and the objectives for the Debt.
2. Investigate and consider reasonably feasible financing alternatives.
3. Assist the City in understanding the material risks, potential benefits, structure and other
characteristics of the recommended plan for the Debt, including issue structure, estimated debt
Municipal Advisory Service Agreement
service payments, projected revenues, method of issuance, bond rating, sale timing, and call
provisions.
4. Prepare a schedule of events related to the issuance process.
5. Coordinate with bond counsel any actions needed to authorize the issuance of the Debt.
6. Attend meetings of the City Council and other project and bond issue related meetings as needed
and as requested.
Bond Sale
1. Assist the City with the preparation, review and approval of the preliminary official statement
(POS).
2. Assist the City and bond counsel with preparing and publishing the Official Notice of Sale if
required by law.
3. Prepare and submit application for bond rating(s) and assist the City with furnishing the rating
agency(s) with any additional information required to conduct the rating review. Assist the City
with preparing and conducting the rating call or other presentation.
4. Assist the City in receiving the bids, compute the accuracy of the bids received, and recommend
to the City the most favorable bid for award.
5. Coordinate with bond counsel the preparation of required contracts and resolutions.
Post Sale Support
1. Assist the City with the preparation of final official statement, distribution to the underwriter and
posting on EMMA.
2. Coordinate the bond issue closing, including making all arrangements for bond printing,
registration, and delivery.
3. Furnish to the City a complete transcript of the transaction, if not provided by bond counsel.
There are no specific limitations on the scope of this agreement
COWENSAMN
For providing these services with respect to the Debt, NSI shall be paid a lump sum of $17,600. The
fee due to NSI shall be payable by the City upon the closing of the Bonds.
NSI agrees to pay the following expenses from its fee:
• Out-of-pocket expenses such as travel, long distance phone, and copy costs.
• Production and distribution of material to rating agencies and/or bond insurance companies.
• Preparation of the bond transcript.
The City agrees to pay for all other expenses related to the processing of the bond issue(s) including,
but not limited to, the following:
• Engineering and/or architectural fees.
• Publication of legal notices.
• Bond counsel and local attorney fees.
• Fees for various debt certificates.
• The cost of printing Official Statements, if any.
• City staff expenses.
• Airfare and lodging expenses of one NSI official and City officials when and if traveling for
rating agency presentations.
• Rating agency fees, if any.
Municipal Advisory Service Agreement
• Bond insurance fees, if any.
• Accounting and other related fees.
It is expressly understood that there is no obligation on the part of the City under the terms of this
Agreement to issue the Debt. If the Debt is not issued, NSI agrees to pay its own expenses and
receive no fee for any municipal advisory services it has rendered pursuant to this Agreement.
CONFLICTS OF INTEREST
NSI is not aware of any material conflicts of interest that could reasonably be anticipated to impair
NSI's ability to provide advice to or on behalf of the City in accordance with the standards of conduct
for municipal advisors.
The compensation for services provided in this Agreement is customary in the municipal securities
market, but may pose a conflict of interest. Since the fee is payable at closing and only if the Debt is
issued, NSI may have an incentive to encourage issuance. Compensation linked to the size of the
transaction may provide incentive to increase the amount of the Debt. Compensation considerations
will not impair NSI's ability to provide unbiased and competent advice or to fulfill its fiduciary duty
to the City. In executing this Agreement, the City acknowledges and accepts the potential conflicts of
interest posed by the compensation to NSI.
Northland Capital Holdings is the parent company of NSI. Another subsidiary of Northland Capital
Holdings is Northland Trust, Inc. Northland Trust provides paying agent services to issuers of
municipal bonds. The City is solely responsible for the decision on the source of paying agent
services. Any engagement of Northland Trust is outside the scope of this Agreement. No
compensation paid to Northland Trust is shared with NSI.
NSI does not provide executive search, organizational development, compensation systems or other
management consulting services that may directly or indirectly affect City staff that recommend the
engagement of municipal advisor services and may pose a conflict of interest.
LEGAL AND DISCIPLINARY ACTIONS
There are no legal or disciplinary events reported by the Securities and Exchange Commission
contained in Form MA or Form MA -I. The City can find information about these forms and accessing
information related to NSI at www.sec.gov/municipal/ours-edgar-links.
SUCCESSORS OR ASSIGNS
The terms and provisions of this Agreement are binding upon and inure to the benefit of the City
and NSI and their successors or assigns.
Municipal Advisory Service Agreement
TERM OF THIS AGREEMENT
This Agreement may be terminated by thirty (30) days written notice by either the City or NSI and it
shall terminate sixty (60) days following kite closing date related to the issuance of the Debt.
Dated tl>is 14d, day of May, 2018.
Northlan ecurities, Inc.
By:
Tom Bartzen - Executive Vice President
City of Otsego, Minnesota
By:
Its:
EXTRACT OF MINUTES OF A MEETING
OF THE CITY COUNCIL
CITY OF OTSEGO, MINNESOTA
HELD: MAY 14, 2018
Pursuant to due call and notice thereof, a regular or special meeting of the City Council
of the City of Otsego, Wright County, Minnesota, was duly held at the City Hall on May 14,
2018, at 7:00 P.M. for the purpose in part of authorizing the competitive negotiated sale of the
$2,550,000 General Obligation Improvement Bonds, Series 2018A.
The following members were present:
and the following were absent:
Member introduced the following resolution and moved its adoption:
RESOLUTION 2018-34
RESOLUTION PROVIDING FOR THE COMPETITIVE NEGOTIATED SALE OF
GENERAL OBLIGATION IMPROVEMENT BONDS, SERIES 2018A
A. WHEREAS, the City Council of the City of Otsego, Minnesota (the "City"), has
heretofore determined that it is necessary and expedient to issue General Obligation
Improvement Bonds, Series 2018A (the 'Bonds") to finance various improvement projects in the
City; and
B. WHEREAS, the City has retained Northland Securities, Inc., in Minneapolis,
Minnesota ("Northland"), as its independent municipal advisor and is therefore authorized to sell
the Bonds by competitive negotiated sale in accordance with Minnesota Statutes, Section 475.60,
Subdivision 2(9); and
C. WHEREAS, the City has retained Briggs and Morgan, Professional Association,
in Minneapolis, Minnesota as its bond counsel for purposes of this financing.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Otsego,
Minnesota, as follows:
1. Authorization. The City Council hereby authorizes Northland to solicit proposals
for the competitive negotiated sale of the Bonds.
2. Meeting; Proposal Opening. The City Council shall meet at the time and place
specified in the Notice of Sale, in substantially the form attached hereto as Exhibit A, for the
purpose of considering sealed proposals for and awarding the sale of the Bonds. The City
Administrator/Finance Director, or designee, shall open proposals at the time and place specified
in the Notice of Sale.
8406108v1
3. Notice of Sale. The terms and conditions of the Bonds and the negotiation thereof
are in substantially in the form set forth in the Notice of Sale attached hereto as Exhibit A and
hereby approved and made a part hereof.
4. Official Statement. In connection with the competitive negotiated sale of the
Bonds, the City Administrator/Finance Director and other officers or employees of the City are
hereby authorized to cooperate with Northland and participate in the preparation of an official
statement for the Bonds, and to execute and deliver it on behalf of 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:
and the following voted against the same:
Whereupon the resolution was declared duly passed and adopted.
2
a4o61osv1
STATE OF MINNESOTA
COUNTY OF WRIGHT
CITY OF OTSEGO
I, the undersigned, being the duly qualified and acting City Administrator/Finance
Director of the City of Otsego, 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 City's
$2,550,000 General Obligation Improvement Bonds, Series 2018A.
WITNESS my hand on May t4,2018.
City Administrator/Finance Director
3
sao61oav1
EXHIBIT A
NOTICE OF SALE
$2,550,000*
GENERAL OBLIGATION IMPROVEMENT BONDS, SERIES 2018A
CITY OF OTSEGO, MINNESOTA
(Book -Entry Only)
NOTICE IS HEREBY GIVEN that these Bonds will be offered for sale according to the following terms:
TIME AND PLACE:
Proposals (also referred to herein as "bids") will be opened by the City's Administrator, or designee, on
Monday, June 11, 2018, at 10:30 A.M., CT, at the offices of Northland Securities, Inc. (the City's "Municipal
Advisor"), 150 South 5th Street, Suite 3300, Minneapolis, Minnesota 55402. Consideration of the Proposals
for award of the sale will be by the City Council at its meeting at the City Offices beginning Monday, June 11,
2018, at 7:00 P.M., CT.
SUBMISSION OF PROPOSALS
Proposals may be:
a) submitted to the office of Northland Securities, Inc.,
b) faxed to Northland Securities, Inc. at 612-851-5918,
c) for proposals submitted prior to the sale, the final price and coupon rates may be submitted to Northland
Securities, Inc. by telephone at 612-851-5900 or 612-851-5915, or
d) submitted electronically.
Notice is hereby given that electronic proposals will be received via PARITY"', or its successor, in the manner
described below, until 10:30 A.M., CT, on Monday, June 11, 2018. Proposals may be submitted electronically
via PARITYT" or its successor, pursuant to this Notice until 10:30 A.M., CT, but no Proposal will be received
after the time for receiving Proposals specified above. To the extent any instructions or directions set forth in
PARITYTn`, or its successor, conflict with this Notice, the terms of this Notice shall control. For further
information about PARITYT' or its successor, potential bidders may contact Northland Securities, Inc. or i -
Deal® at 1359 Broadway, 2nd floor, New York, NY 10018, telephone 212-849-5021.
Neither the City nor Northland Securities, Inc. assumes any liability if there is a malfunction of PARITY"` or
its successor. All bidders are advised that each Proposal shall be deemed to constitute a contract between the
bidder and the City to purchase the Bonds regardless of the manner in which the Proposal is submitted.
BOOK -ENTRY SYSTEM
The Bonds will be issued by means of a book -entry system with no physical distribution of bond certificates
made to the public. The Bonds will be issued in fully registered form and one bond certificate, representing the
aggregate principal amount of the Bonds maturing in each year, will be registered in the name of Cede & Co.
as nominee of Depository Trust Company ("DTC"), New York, New York, which will act as securities
depository of the Bonds.
*The City reserves the right to increase or decrease the principal amount of the Bonds. Any such increase or decrease will be
made in multiples of $5,000 and may be made in any maturity. If any maturity is adjusted, the purchase price will also be
adjusted to maintain the same gross spread.
A-1
8406108vl
Individual purchases of the Bonds may be made in the principal amount of $5,000 or any multiple thereof of a
single maturity through book entries made on the books and records of DTC and its participants. Principal and
interest are payable by the City through Northland Trust Services, Inc. Minneapolis, Minnesota (the "Paying
Agent/Registrar"), to DTC, or its nominee as registered owner of the Bonds. Transfer of principal and interest
payments to participants of DTC will be the responsibility of DTC; transfer of principal and interest payments
to beneficial owners by participants will be the responsibility of such participants and other nominees of
beneficial owners. The successful bidder, as a condition of delivery of the Bonds, will be required to deposit
the bond certificates with DTC. The City will pay reasonable and customary charges for the services of the
Paying Agent/Registrar.
DATE OF ORIGINAL ISSUE OF BONDS
Date of Delivery (Estimated to be July 11, 2018)
AUTHORITY/PURPOSE/SECURITY
The Bonds are being issued pursuant to Minnesota Statutes, Chapters 429 and 475. Proceeds will be used to
finance the Kadler Avenue and Mississippi Shores improvement projects. The Bonds are payable from special
assessments against benefited property, and additionally secured by ad valorem taxes on all taxable property
within the City. The full faith and credit of the City is pledged to their payment and the City has validly
obligated itself to levy ad valorem taxes in the event of any deficiency in the debt service account established
for this issue.
INTEREST PAYMENTS
Interest is due semiannually on each February 1 and August 1, commencing February 1, 2019, to registered
owners of the Bonds appearing of record in the Bond Register as of the close of business on the fifteenth day
(whether or not a business day) of the calendar month preceding such interest payment date.
MATURITIES
Principal is due annually on February 1, inclusive, in each of the years and amounts as follows:
Year
Amount
Year
Amount
Year
Amount
2020
$195,000
2025
$215,000
2030
$75,000
2021
195,000
2026
220,000
2031
80,000
2022
205,000
2027
225,000
2032
80,000
2023
205,000
2028
235,000
2033
85,000
2024
210,000
2029
240,000
2034
85,000
Proposals for the Bonds may contain a maturity schedule providing for any combination of serial bonds and
term bonds, subject to mandatory redemption, so long as the amount of principal maturing or subject to
mandatory redemption in each year conforms to the maturity schedule set forth above.
INTEREST RATES
All rates must be in integral multiples of 1/20th or 1/8th of 1%. Rates must be in level or ascending order. All
Bonds of the same maturity must bear a single uniform rate from date of issue to maturity.
ESTABLISHMENT OF ISSUE PRICE
(HOLD -THE -OFFERING -PRICE RULE MAY APPLY — BIDS NOT CANCELLABLE)
The winning bidder shall assist the City in establishing the issue price of the Bonds and shall execute and
deliver to the City at closing an "issue price" or similar certificate setting forth the reasonably expected initial
offering price to the public or the sales price or prices of the Bonds, together with the supporting pricing wires
M
8406108v1
or equivalent communications, substantially in the form attached hereto as Exhibit A, with such modifications
as may be appropriate or necessary, in the reasonable judgment of the winning bidder, the City and Bond
Counsel. All actions to be taken by the City under this Notice of Sale to establish the issue price of the Bonds
may be taken on behalf of the City by the City's Municipal Advisor and any notice or report to be provided to
the City may be provided to the City's Municipal Advisor.
The City intends that the provisions of Treasury Regulation Section 1.148-1(f)(3)(i) (defining "competitive
sale" for purposes of establishing the issue price of the Bonds) will apply to the initial sale of the Bonds (the
"competitive sale requirements") because:
(1) the City shall disseminate this Notice of Sale to potential underwriters in a manner that is reasonably
designed to reach potential underwriters;
(2) all bidders shall have an equal opportunity to bid;
(3) the City may receive bids from at least three underwriters of municipal bonds who have established
industry reputations for underwriting new issuances of municipal bonds; and
(4) the City anticipates awarding the sale of the Bonds to the bidder who submits a firm offer to purchase
the Bonds at the highest price (or lowest cost), as set forth in this Notice of Sale.
Any bid submitted pursuant to this Notice of Sale shall be considered a firm offer for the purchase of the
Bonds, as specified in the bid.
In the event that the competitive sale requirements are not satisfied, the City shall promptly so advise the
winning bidder. The City may then determine to treat the initial offering price to the public as of the award
date of the Bonds as the issue price of each maturity by imposing on the winning bidder the Hold -the -Offering -
Price Rule as described in the following paragraph (the "Hold -the -Offering -Price Rule"). Bids will not be
subject to cancellation in the event that the City determines to apply the Hold -the -Offering -Price Rule to the
Bonds. Bidders should prepare their bids on the assumption that the Bonds will be subject to the Hold -
the -Offering -Price Rule in order to establish the issue price of the Bonds.
By submitting a bid, the winning bidder shall (i) confirm that the underwriters have offered or will offer the
Bonds to the public on or before the date of award at the offering price or prices (the "Initial Offering Price"),
or at the corresponding yield or yields, set forth in the bid submitted by the winning bidder and (ii) agree, on
behalf of the underwriters participating in the purchase of the Bonds, that the underwriters will neither offer
nor sell unsold Bonds of any maturity to which the Hold -the -Offering Price Rule shall apply to any person at a
price that is higher than the Initial Offering Price to the public during the period starting on the award date for
the Bonds and ending on the earlier of the following:
(1) the close of the fifth (5t business day after the award date; or
(2) the date on which the underwriters have sold at least 10% of a maturity of the Bonds to the public at a
price that is no higher than the Initial Offering Price to the public (the "10% Test"), at which time only
that particular maturity will no longer be subject to the Hold -the -Offering -Price Rule,
The City acknowledges that, in making the representation set forth above, the winning bidder will rely on (i)
the agreement of each underwriter to comply with the Hold -the -Offering -Price Rule, as set forth in an
agreement among underwriters and the related pricing wires, (ii) in the event a selling group has been created
in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of
the selling group to comply with the Hold -the -Offering -Price Rule, as set forth in a selling group agreement
and the related pricing wires, and (iii) in the event that an underwriter is a party to a retail distribution
agreement that was employed in connection with the initial sale of the Bonds to the public, the agreement of
each broker-dealer that is a party to such agreement to comply with the Hold -the -Offering -Price Rule, as set
forth in the retail distribution agreement and the related pricing wires. The City further acknowledges that
each underwriter shall be solely liable for its failure to comply with its agreement regarding the Hold -the -
Offering -Price Rule and that no underwriter shall be liable for the failure of any other underwriter, or of any
dealer who is a member of a selling group, or of any broker-dealer that is a party to a retail distribution
agreement to comply with its corresponding agreement regarding the Hold -the -Offering -Price Rule as
applicable to the Bonds.
By submitting a bid, each bidder confirms that: (i) any agreement among underwriters, any selling group
A-3
8406108v1
agreement and each retail distribution agreement (to which the bidder is a party) relating to the initial sale of
the Bonds to the public, together with the related pricing wires, contains or will contain language obligating
each underwriter, each dealer who is a member of the selling group, and each broker-dealer that is a party to
such retail distribution agreement, as applicable, to comply with the Hold -the -Offering -Price Rule, if
applicable, in each case if and for so long as directed by the winning bidder and as set forth in the related
pricing wires, and (ii) any agreement among underwriters relating to the initial sale of the Bonds to the public,
together with the related pricing wires, contains or will contain language obligating each underwriter that is a
party to a retail distribution agreement to be employed in connection with the initial sale of the Bonds to the
public to require each broker-dealer that is a party to such retail distribution agreement to comply with the
Hold -the -Offering -Price Rule, if applicable, in each case if and for so long as directed by the winning bidder or
such underwriter and as set forth in the related pricing wires.
Notes: Sales of any Bonds to anyperson that is a relatedparty to an underwriter shall not constitute sales to
the public for purposes of this Notice of Sale. Further, for purposes of this Notice of Sale:
(1) "public" means any person other than an underwriter or a related party,
(2) "underwriter" means (A) any person that agrees pursuant to a written contract with the City (or with
the lead underwriter to form an underw sting syndicate) to participate in the initial sale of the Bonds
to the public and (B) any person that agrees pursurant to a written contract directly or indirectly with
a person described in clause (A) to participate in the initial sale of the Bonds to the public (including
a rnernber of a selling group or a party to a retail distribution agreement participating in the initial
sale of the Bonds to the public).
(3) a purchaser of any of the Bonds is a "related party" to an underwriter if the underwriter and the
purchaser are subject, directly or indirectly, to (i) at least 50% common ownership of the voting
power or the total value of their stock, if both entities are corporations (including direct ownership by
one corporation or another), (ii) more than 50% common ownership of their capital interests or
profits interests, if both entities are partnerships (including direct ownership by one partnership of
another), or (iii) more than 50% common ownership of the value of the outstanding stock of the
corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is
a corporation and the other entity is a partnership (including direct ownership of the applicable stock
or interests by one entity of the other), and
(4) "sale date" means the date that the Bonds are awarded by the City to the winning bidder.
ADJUSTMENTS TO PRINCIPAL AMOUNT AFTER PROPOSALS
The City reserves the right to increase or decrease the principal amount of the Bonds. Any such increase or
decrease will be made in multiples of $5,000 and may be made in any maturity. If any maturity is adjusted, the
purchase price will also be adjusted to maintain the same gross spread. Such adjustments shall be made
promptly after the sale and prior to the award of Proposals by the City and shall be at the sole discretion of the
City. The successful bidder may not withdraw or modify its Proposal once submitted to the City for any
reason, including post -sale adjustment. Any adjustment shall be conclusive and shall be binding upon the
successful bidder.
OPTIONAL REDEMPTION
Bonds maturing on February 1, 2027 through 2034 are subject to redemption and prepayment at the option of
the City on February 1, 2026 and 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 maturities and principal
amounts within each maturity to be redeemed shall be determined by the City 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.
84061080
CUSIP NUMBERS
If the Bonds qualify for assignment of CUSIP numbers such numbers will be printed on the Bonds, but neither
the failure to print such numbers on any Bond nor any error with respect thereto shall constitute cause for a
failure or refusal by the successful bidder thereof to accept delivery of and pay for the Bonds in accordance
with terms of the purchase contract. The CUSIP Service Bureau charge for the assignment of CUSIP
identification numbers shall be paid by the successful bidder.
DELIVERY
Delivery of the Bonds will be within forty days after award, subject to an approving legal opinion by Briggs
and Morgan, Professional Association, Bond Counsel. The legal opinion will be paid by the City and delivery
will be anywhere in the continental United States without cost to the successful bidder at DTC.
TYPE OF PROPOSAL
Proposals of not less than $2,527,050 (99.10%) and accrued interest on the principal sum of $2,550,000 must
be filed with the undersigned prior to the time of sale. Proposals must be unconditional except as to legality.
Proposals for the Bonds should be delivered to Northland Securities, Inc. and addressed to:
Adam Flaherty, City Administrator
13400 90 St. NE
Otsego, Minnesota 55330
A good faith deposit (the "Deposit") in the amount of $51,000 in the form of a federal wire transfer (payable to
the order of the City) is only required from the apparent winningb, and must be received within two
hours after the time stated for the receipt of Proposals. The apparent winning bidder will receive notification
of the wire instructions from the Municipal Advisor promptly after the sale. If the Deposit is not received from
the apparent winning bidder in the time allotted, the City may choose to reject their Proposal and then proceed
to offer the Bonds to the next lowest bidder based on the terms of their original proposal, so long as said bidder
wires funds for the Deposit amount within two hours of said offer.
The City will retain the Deposit of the successful bidder, the amount of which will be deducted at settlement
and no interest will accrue to the successful bidder. In the event the successful bidder fails to comply with the
accepted Proposal, said amount will be retained by the City. No Proposal can be withdrawn after the time set
for receiving Proposals unless the meeting of the City scheduled for award of the Bonds is adjourned, recessed,
or continued to another date without award of the Bonds having been made.
AWARD
The Bonds will be awarded on the basis of the lowest interest rate to be determined on a true interest cost
(TIC) basis. The City's computation of the interest rate of each Proposal, in accordance with customary
practice, will be controlling. In the event of a tie, the sale of the Bonds will be awarded by lot. The City will
reserve the right to: (i) waive non -substantive informalities of any Proposal or of matters relating to the receipt
of Proposals and award of the Bonds, (ii) reject all Proposals without cause, and (iii) reject any Proposal which
the City determines to have failed to comply with the terms herein.
INFORMATION FROM SUCCESSFUL BIDDER
The successful bidder will be required to provide, in a timely manner, certain information relating to the initial
offering price of the Bonds necessary to compute the yield on the Bonds pursuant to the provisions of the
Internal Revenue Code of 1986, as amended.
A-5
84o61o8vt
OFFICIAL STATEMENT
By awarding the Bonds to any underwriter or underwriting syndicate submitting a Proposal therefor, the City
agrees that, no more than seven business days after the date of such award, it shall provide to the senior
managing underwriter of the syndicate to which the Bonds are awarded, the Final Official Statement in an
electronic format as prescribed by the Municipal Securities Rulemaking Board (MSRB).
FULL CONTINUING DISCLOSURE UNDERTAKING
The City will covenant in the resolution awarding the sale of the Bonds and in a Continuing Disclosure
Undertaking to provide, or cause to be provided, annual financial information, including audited financial
statements of the City, and notices of certain material events, as required by SEC Rule 15c2-12.
BANK QUALIFICATION
The City will designate the Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the
Internal Revenue Code of 1986, as amended.
BOND INSURANCE AT UNDERWRITER'S OPTION
If the Bonds qualify for issuance of any policy of municipal bond insurance or commitment therefor at the
option of the successful bidder, the purchase of any such insurance policy or the issuance of any such
commitment shall be at the sole option and expense of the successful bidder of the Bonds. Any increase in the
costs of issuance of the Bonds resulting from such purchase of insurance shall be paid by the successful bidder,
except that, if the City has requested and received a rating on the Bonds from a rating agency, the City will pay
that rating fee. Any other rating agency fees shall be the responsibility of the successful bidder. Failure of the
municipal bond insurer to issue the policy after the Bonds have been awarded to the successful bidder shall not
constitute cause for failure or refusal by the successful bidder to accept delivery on the Bonds.
The City reserves the right to reject any and all Proposals, to waive informalities and to adjourn the sale.
Dated: May 14, 2018 BY ORDER OF THE OTSEGO CITY COUNCIL
/s/ Adam Flaherty
City Administrator
Additional information may be obtained from:
Northland Securities, Inc.
150 South 5th Street, Suite 3300
Minneapolis, Minnesota 55402
Telephone No.: 612-851-5900
FEW
8406108v1
EXHIBIT A — FORM OF ISSUE PRICE CERTIFICATES
[COMPETITIVE SALE SATISFIED]
The undersigned, on behalf of
certifies as set forth below with respect to the sale of the General
2018A (the "Bonds") of the City of Otsego, Minnesota (the "Issuer").
Reasonably Expected Initial Offering Price.
(the "Underwriter"), hereby
Obligation Improvement Bonds, Series
(a) As of the Sale Date, the reasonably expected initial offering prices of the Bonds to the Public
by the Underwriter are the prices listed in Schedule A (the "Expected Offering Prices"). The Expected
Offering Prices are the prices for the Maturities of the Bonds used by the Underwriter in formulating its bid to
purchase the Bonds. Attached as Schedule B is a true and correct copy of the bid provided by the Underwriter
to purchase the Bonds.
(b) The Underwriter was not given the opportunity to review other bids prior to submitting its
(c) The bid submitted by the Underwriter constituted a firm offer to purchase the Bonds.
2. Defined Terms.
(a) "Maturity" means Bonds with the same credit and payment terms. Bonds with different
maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate
Maturities.
(b) "Public" means any person (including an individual, trust, estate, partnership, association,
company, or corporation) other than an Underwriter or a related party to an Underwriter. The term "related
party" for purposes of this certificate generally means any two or more persons who have greater than 50
percent common ownership, directly or indirectly.
(c) "Sale Date" means the first day on which there is a binding contract in writing for the sale of
a Maturity of the Bonds. The Sale Date of the Bonds is
(d) "Underwriter" means (i) any person that agrees pursuant to a written contract with the Issuer
(or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to
the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person
described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a
member of a selling group or a party to a retail distribution agreement participating in the initial sale of the
Bonds to the Public).
The representations set forth in this certificate are limited to factual matters only. Nothing in this
certificate represents the Underwriter's interpretation of any laws, including specifically Sections 103 and 148
of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned
understands that the foregoing information will be relied upon by the Issuer with respect to certain of the
representations set forth in the Nonarbitrage Certificate and with respect to compliance with the federal income
tax rules affecting the Bonds, and by Briggs and Morgan, Professional Association, Bond Counsel in
connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal
income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income
tax advice that it may give to the Issuer from time to time relating to the Bonds.
A-7
8406108v1
[HOLD -THE -OFFERING -PRICE RULE]
The undersigned, on behalf of (the "Underwriter"), on behalf
of itself and (together, the "Underwriting Group"), hereby certifies as set forth
below with respect to the sale and issuance of General Obligation Improvement Bonds, Series 2018A (the
"Bonds") of the City of Otsego, Minnesota (the "Issuer").
1. Initial Offering Price of the Bonds.
(a) The Underwriter [The Underwriting Group] offered each Maturity of the Bonds to the Public
for purchase at the respective initial offering prices listed in Schedule A (the "Initial Offering Prices") on or
before the Sale Date. A copy of the pricing wire or equivalent communication for the Bonds is attached to this
certificate as Schedule B.
(b) As set forth in the Notice of Sale and bid award, the Underwriter [the members of the
Underwriting Group] [has][have] agreed in writing that, (i) for each Maturity of the Bonds, [it][they] would
neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial
Offering Price for such Maturity during the Holding Period for such Maturity (the "hold -the -offering -price
rule"), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the
selling group, and any retail distribution agreement shall 'contain the agreement of each broker-dealer who is a
party to the retail distribution agreement, to comply with the hold -the -offering -price rule. Pursuant to such
agreement, no Underwriter (as defined below) has offered or sold any Maturity of the Bonds at a price that is
higher than the respective Initial Offering Price for that Maturity of the Bonds during the Holding Period.
2. Defined Terms.
(a) "Holding Period" means, for each Maturity of the Bonds, the period starting on the Sale Date
and ending on the earlier of (i) the close of the fifth business day after the Sale Date ( ), or
(ii) the date on which the Underwriter [the Underwriters] [has] [have] sold at least 10% of such Maturity of the
Bonds to the Public at prices that are no higher than the Initial Offering Price for such Maturity.
(b) "Maturity" means Bonds with the same credit and payment terms. Bonds with different
maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate
Maturities.
(c) "Public" means any person (including an individual, trust, estate, partnership, association,
company, or corporation) other than an Underwriter or a related party to an Underwriter. The term "related
party" for purposes of this certificate generally means any two or more persons who have greater than 50
percent common ownership, directly or indirectly.
(d) "Sale Date" means the first day on which there is a binding contract in writing for the sale of
a Maturity of the Bonds. The Sale Date of the Bonds is , 2018.
(e) "Underwriter" means (i) any person that agrees pursuant to a written contract with the Issuer
(or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to
the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person
described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a
member of a selling group or a party to a retail distribution agreement participating in the initial sale of the
Bonds to the Public).
The representations set forth in this certificate are limited to factual matters only. Nothing in this
certificate represents the Representative's interpretation of any laws, including specifically Sections 103 and
148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The
Wo
8406108v1
undersigned understands that the foregoing information will be relied upon by the Issuer [and the Borrower]
with respect to certain of the representations set forth in the Nonarbitrage Certificate and with respect to
compliance with the federal income tax rules affecting the Bonds, and by Briggs and Morgan, Professional
Association, Bond Counsel, in connection with rendering its opinion that the interest on the Bonds is excluded
from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form
8038-G, and other federal income tax advice that it may give to the Issuer [ and the Borrower] from time to
time relating to the Bonds.
=1
8406108v1
Finance Plan
City of Otsego, Minnesota
$2,550,000
General Obligation Improvement Bonds,
Series 2018A
May 14,2018
IF NORTrHLAND
SECURITIES
45 South 7th Street, Suite 2000
Minneapolis, MN 55402
612-851-5900 800-851-2920
www,northlandsecurities.com
Member FINRA and SIPC I Registered with SEC and MSRB
Contents
Executive Summary
Issue Overview
1
................................................2
Purpose................................................................................................................................................................2
Authority............................................................................................................................................................. 2
Structure.............................................................................................................................................................. 2
Securityand Source of Repayment........................................................................................................2
PlanRationale................................................................................................................................................... 3
IssuingProcess.................................................................................................................................................3
Attachment 1- Preliminary Debt Service Schedule......................................................................................4
Attachment 2 - Preliminary 105% Levy Schedule (Mississippi Shores)................................................5
Attachment 3 - Preliminary 105% Levy Schedule (Kadler Ave.)..............................................................6
Attachment4 - Related Considerations.............................................................................................................7
NewIssue Price Rule............................................................................................................................. 7
BankQualification..................................................................................................................................8
ArbitrageCompliance...........................................................................................................................8
ContinuingDisclosure..........................................................................................................................8
Premiums.................................................................................................................................................... 9
Rating........................................................................................................................................................... 9
Attachment5 - Calendar of Events...................................................................................................................10
Attachment6 - Risk Factors..................................................................................................................................11
Northland Securities, Inc. Page 2
Executive Summary
The following is a summary of the reconunended terms for the issuance of $2,550,000 General
Obligation Improvement Bonds, Series 2018A (the "Bonds" or "2018A Bonds"). Additional
information on the proposed finance plan and issuing process can be found after the Executive
Summary, in the Issue Overview and Attachment 4 - Related Considerations.
Purpose Proceeds from the Bonds will be used to fund the Kadler
Avenue and Mississippi Shores improvements.
Security The Bonds will be a General Obligation of the City. The City
will pledge for payment of the Bonds:
• Special assessments collected from benefitted properties.
• Property tax levies.
Repayment Term The Bonds will mature annually each February 1 in the years
2020 - 2034. Interest on the Bonds will be payable on February
1, 2019 and semiannually thereafter on each August 1 and
February 1.
Estimated Interest Rate Average coupon: 2.66%
True interest cost (TIC): 2.78%
Prepayment Option Bonds maturing on and after February 1, 2027 will be subject to
redemption on February 1, 2026 and any day thereafter at a
price of par plus accrued interest.
Rating A rating will be requested from Standard and Poor's (S&P).
The City's general obligation debt is currently rated "AA" by
S&P.
Tax Status The Bonds will be tax-exempt, bank qualified obligations.
Risk Factors There are certain risks associated with all debt. Risk factors
related to the Bonds are discussed in Attachment 6.
Type of Bond Sale Public Sale - Competitive Bids
Proposals Received Monday, June 11, 2018 @ 10:30 A.M.
Council Consideration Monday, June 11, 2018 @ 7:00 P.M.
Northland Securities, Inc. Page 1
Issue Overview
Purpose
Proceeds from the Bonds will be used to fund the Kadler Avenue and Mississippi Shores
improvement projects. The Bonds have been sized based on actual construction bids received
by City staff on April 9d~ and April 23rd. The table below contains the sources and uses of funds
for the bond issue.
Mississippi Kadler Issue
Shores Avenue Summary
Sources Of Funds
Par Amount of Bonds
$1,475,000.00
$1,075,000.00
$2,550,000.00
Total Sources
$1,475,000.00
$1,075,000.00
$2,550,000.00
Uses Of Funds
Deposit to Project Construction Fund
1,418,840.61
1,033,872.00
2,452,712.61
Costs of Issuance
21,749.02
15 850.98
37 600.00
Deposit to Capitalized Interest (CIF) Fund
19,047.22
15,687.50
34,734.72
Total Underwriter's Discount (0.900%)
13,275.00
9,675.00
22,950.00
Ro nldinQ Amount
2,088.15
(85.48)
2,002.67
Total Uses $1,475,000.00 $1,075,000.00 $2,550,000.00
Authority
The Bonds will be issued pursuant to the authority of Minnesota Statutes, Chapters 475 and 429.
Structure
The Bonds have been structured to result in relatively level annual debt service payments for
each of the two projects. The Mississippi Shores project has a term of ten years with the final
maturity in 2029, and the Kadler Avenue project has a term of fifteen years with a final maturity
in 2034, As a result, overall debt service is roughly level through 2029 at around $257,000 before
dropping to around $89,000 in the years 2030-2034.
The proposed structure for the bond issue and preliminary debt service projections are
illustrated in Attachment 1.
Security and Source of Repayment
The Bonds will be general obligations of the City. The finance plan relies on the following
assumptions for the revenues used to pay debt service, as provided by City staff:
• Special Assessments. The City is expected to levy special assessments against benefited
properties in the amount of $714,104.08 for the Mississippi Shores project and $886,007,63
for the Kadler Avenue project. The Mississippi Shores assessments will be payable over
10 years, with an interest rate of 1.5% over the average coupon on the Bonds (currently
assumed to be 3.95%), and structured for level annual principal payments. The Kadler
Avenue assessments will be payable over 15 years, with an interest rate of 1.5% over the
average coupon on the Bonds (currently assumed to be 4.30%), and structured for level
annual payments of principal and interest. The assessments will be levied in 2018 for
initial payment in 2019.
• Property Taxes. The remaining revenues needed to pay debt service on the Bonds are
expected to come from property tax levies. The levy will be adjusted annually based on
actual special assessment collections, and additional monies in the debt service fund. The
initial tax levy will be made in 2018 for taxes payable in 2019.
Northland Securities, Inc. Page 2
The tables in Attachments 2 and 3 show the estimated flow of funds, including the 5% overlevy.
Plan Rationale
The Finance Plan recommended in this report is based on a variety of factors and information
provided by the City related to the financed projects and City objectives, Northland's
knowledge of the City and our experience in working with similar cities and projects. The
issuance of General Obligation Improvement Bonds provides the best means of achieving the
City's objectives and cost effective financing. The City has successfully issued and managed this
type of debt for previous projects.
Issuing Process
Northland will receive bids to purchase the Bonds on Monday, June 11, 2018 at 10:30 AM.
Market conditions and the marketability of the Bonds support issuance through a competitive
sale. This process has been chosen as it is intended to produce the lowest combination of
interest expense and underwriting expense on the date and time set to receive bids. The
calendar of events for the issuing process can be found in Attachment 5.
Municipal Advisor: Northland Securities, Inc., Minneapolis, Minnesota
Bond Counsel: Briggs & Morgan, P.A., Minneapolis, Minnesota
Paying Agent: Northland Trust Services, Inc., Minneapolis, Minnesota
Northland Securities, Inc. Page 3
Attachment 1- Preliminary Debt Service Schedule
Date Principal Coupon Interest Total P+I Fiscal Total
07/11/2018
-
-
-
02/01/2019
34,734.72
34,734.72
34,734.72
08/01/2019
-
-
31,261.25
31,261.25
-
02/01/2020
195,000.00
1.850%
31,261.25
226,261.25
257,522.50
08/01/2020
-
-
29,457.50
29,457.50
-
02/01/2021
195,000.00
1.950%
29,457.50
224,457.50
253,915.00
08/01/2021
-
-
27,556.25
27,556.25
-
02/01/2022
205,000.00
2.050%
27,556.25
232,556.25
260,112.50
08/01/2022
-
-
25,455.00
25,455.00
-
02/01/2023
205,000.00
2.150%
25,455.00
230,455.00
255,910.00
08/01/2023
-
-
23,251.25
23,251.25
-
02/01/2024
210,000.00
2.250%
23,251.25
233,251.25
256,502.50
08/01/2024
-
-
20,888.75
20,888.75
-
02/01/2025
215,000.00
2.350%
20,888.75
235,888.75
256,777.50
08/01/2025
-
-
18,362.50
18,362.50
-
02/01/2026
220,000.00
2.450%
18,362.50
238,362.50
256,725.00
08/01/2026
-
-
15,667.50
15,667.50
-
02/01/2027
225,000.00
2.550%
15,667.50
240,667.50
256,335.00
08/01/2027
-
-
12,798.75
12,798.75
-
02/01/2028
235,000.00
2.650%
12,798.75
247,798.75
260,597.50
08/01/2028
-
-
9,685.00
9,685.00
-
02/01/2029
240,000.00
2.800%
9,685.00
249,685.00
259,370.00
08/01/2029
-
-
6,325.00
6,325.00
-
02/01/2030
75,000.00
3.000%
6,325.00
81,325.00
87,650.00
08/01/2030
-
-
5,200.00
5,200.00
-
02/01/2031
80,000.00
3.000%
5,200.00
85,200.00
90,400.00
08/01/2031
-
-
4,000.00
4,000.00
-
02/01/2032
80,000.00
3.200%
4,000.00
84,000.00
88,000.00
08/01/2032
-
-
2,720.00
2,720.00
-
02/01/2033
85,000.00
3.200%
2,720.00
87,720.00
90,440.00
08/01/2033
-
-
1,360.00
1,360.00
-
02/01/2034
85,000.00
3.200%
1,360.00
86,360.00
87,720.00
Total $2,550,000.00 $502,712.22 $3,052,712.22 -
Date And Term Structure
Delivery Date 7/11/2018
First available call date 2/01/2026
Call Price 100.000%
Yield Statistics
Bond Year Dollars $18,921.67
Average Life 7.420 Years
Average Coupon 2.6568073%
Net Interest Cost (NIC) 2.7780968%
True Interest Cost (TIC) 2.7771676%
All Inclusive Cost (AIC) 3.0057014%
Northland Securities, Inc. Page 4
Attachment 2 - Preliminary 105% Levy Schedule (Mississippi Shores)
Less: Equals:
Special
Assessment City Net Levy Collection
Date Total P+I CIF 105% Lew Revenues* Lew Year Year
02/01/2019
19,047.22 (19,047.22)
-
-
-
-
-
02/01/2020
169,285.00
177,749.25
103,221.76
74,527.49
2018
2019
02/01/2021
166,787.50
175,126.88
96,796.81
78,330.07
2019
2020
02/01/2022
169,155.00
177,612.75
93,976.09
83,636.66
2020
2021
02/01/2023
166,285.00 -
174,599.25
91,155.39
83,443.86
2021
2022
02/01/2024
168,275.00 -
176,688.75
88,334.67
88,354.08
2022
2023
02/01/2025
170,012.50 -
178,513.13
85,513.97
92,999.16
2023
2024
02/01/2026
166,487.50
174,811.88
82,693.25
92,118.63
2024
2025
02/01/2027
167,812.50
176,203.13
79,872.55
96,330.58
2025
2026
02/01/2028
168,860.00
177 303.00
77 051.82
100,251.18
2026
2027
02/01/2029
169,620.00
178,101.00
74,231.12
103,869.88
2027
2028
Total
$1,701,627.22 (19,047.22)
$1,766,709.00
$872,847.43
$893,861.57
*Assumes $714,104.08 in principal spread in even principal payments for a term of 10 years with
an interest rate of 3.95%, which is 1.5% over the average coupon.
Northland Securities, Inc. Page 5
Attachment 3 - Preliminary 105% Levy Schedule (Kadler Ave.)
Total $1,351,085.00 (15,687.50) $1,402,167.38 $1,226,966.98 $175,200.40
*Assumes $886,007.63 in principal spread in even payments for a term of 15 years with an
interest rate of 4.30%, which is 1.5% over the average coupon.
Northland Securities, Inc. Page 6
Less:
Equals:
Special
Assessment
City Net
Levy
Collection
Date
Total P+I CIF
105% Levy
Revenues*
Levy
Year
Year
02/01/2019
15,687.50 (15,687.50)
-
-
-
-
-
02/01/2020
88,237.50
92,649.38
81,797.80
10,851.58
2018
2019
02/01/2021
87,127.50
91,483.88
81,797.80
9,686.08
2019
2020
02/01/2022
90,957.50
95,505.38
81,797.79
13,707.59
2020
2021
02/01/2023
89,625.00
94,106.25
81,797.80
12,308.45
2021
2022
02/01/2024
88,227.50
92,638.88
81,797.80
10,841.08
2022
2023
02/01/2025
86,765.00
91,103.25
81,797.79
9,305.46
2023
2024
02/01/2026
90,237.50
94,749.38
81,797.79
12,951.59
2024
2025
02/01/2027
88,522.50
92,948.63
81,797.80
11,150.83
2025
2026
02/01/2028
91,737.50
96,324.38
81,797.80
14,526.58
2026
2027
02/01/2029
89,750.00
94,237.50
81,797.81
12,439.69
2027
2028
02/01/2030
87,650.00
92,032.50
81,797.79
10,234.71
2028
2029
02/01/2031
90,400.00
94,920.00
81,797.80
13,122.20
2029
2030
02/01/2032
88,000.00
92,400.00
81,797.81
10,602.19
2030
2031
02/01/2033
90,440.00
94,962.00
81797.80
13164.20
2031
2032
02/01/2034
87,720.00
92,106.00
81,797.80
10,308.20
2032
2033
Total $1,351,085.00 (15,687.50) $1,402,167.38 $1,226,966.98 $175,200.40
*Assumes $886,007.63 in principal spread in even payments for a term of 15 years with an
interest rate of 4.30%, which is 1.5% over the average coupon.
Northland Securities, Inc. Page 6
Attachment 4 - Related Considerations
New Issue Price Rule
The US Treasury Department and Internal Revenue Service ("IRS") recently finalized
regulations which redefine the "issue price" determined for new tax-exempt bond issues,
effective for sales on or after June 7, 2017. The issue price factors into the arbitrage yield
determined for a new bond issue, as well as the IRS rebate rules applicable to the issuer. Issuers
are required to provide certification of these items to the IRS when issuing tax-exempt bonds.
The new changes to the IRS issue price rules (the "Rules") provide several ways for the issue
price of a new bond issue to be determined. Under prior IRS regulations, the price of each
maturity of a new bond issue was the first price at which 10% of that maturity was "reasonably
expected" to be sold to the public.
Although the "10% sold" threshold for determining the Initial Offering Price ("IOP") for a
maturity is still retained in the Rules, it must now be based on actual sales, not just "reasonable
expectations." However, the new Issue Price Rules also now include a five-day "hold the price"
alternative for establishing the IOP. If the underwriter agrees in writing to hold the price of the
bonds for five business days after the sale at a price no higher than the IOP, then the IOP will be
established at that five-day hold level. If at least 10% of a maturity is sold to the public at or
below the IOP during the five-day hold, then the 10% threshold is met and the "price hold" for
that maturity can be released.
For bond issues sold on a competitive bid basis, another alternative for determining the IOP is
provided in the new Rules. If the issuer receives at least three competitive bids (as defined in
the Rules), they can establish the IOP as the winning bidder's "reasonably expected" IOP upon
which they based their winning bid (rather than actual sales). However, this alternative only
applies if the issuer receives at least three competitive bids. If the issuer receives less than three
bids, the issuer will need to get the winning bidder to either agree to "hold the price" for five
days, or require the winning bidder to establish the IOP as the first price at which 10% of each
maturity is actually sold to the public.
We recommend that the City establish the issue price by requiring the winning bidder to "hold
the price" for five days after award, in the event fewer than three bids are received. Applying
the "hold the price" rule, rather than the "10% actual sales" rule will allow the City to finalize
the issue size and closing date immediately, and also meet the SEC requirement of providing a
Final Official Statement (which must include final pricing) within seven business days after the
sale. Underwriters have expressed a strong preference for this "hold the price" alternative for
these same reasons, and also because it eliminates the need for them to continue reporting bond
trades to the issuer until they have reached the "10% actual sales" threshold for every maturity.
In periods of market volatility, it can be difficult for an underwriter to sell certain maturities in a
timely manner, and it may even hinder their ability to get 10% actually sold before the closing
date, especially if they are hoping to "wait out" unfavorable changes u1 the market.
For both the issuer and the underwriter, the "hold the price" rule provides certainty and
simplicity in setting size, offering price, trading parameters and closing date at the outset, rather
than having those critical features in a state of flux until the actual sales thresholds have been
met.
In the section added to the Notice of Sale relating to the Issue Price Rules and bidding
requirements, we also recommend language stating that underwriters submitting bids will not
be allowed to cancel their bid after the sale. The concept of "cancellable" bidding was
introduced to the marketplace several months ago as a possible fallback for a winning bidder if
Northland Securities, Inc. Page 7
a competitive bond sale was expected, but less than three bids were received. If a winning
bidder did not want to then be required to meet the "hold the price' test or the "10% actual
sales" test, it would provide them with the option to cancel their bid. We feel this concept may
protect an underwriter, but greatly increases risk to an issuer, especially the risk of having an
unsuccessful sale with no buyer. We recommend requiring "non -cancellable" bids, since
underwriters have expressed minimal concern about having to "hold the price" and it is not
expected to reduce the number of bids you receive.
Non -cancellable bidding, coupled with hold -the -price restrictions in the Notice of Sale provide
the issuer with the greatest level of certainty for a successful sale, and minimal or no additional
cost in underwriters' bids.
Bank Qualification
We understand the City (in combination with any subordinate taxiing jurisdictions or debt
issued in the City's name by 501(c)3 corporations) anticipates issuing $10,000,000 or less in tax-
exempt debt during this calendar year. Therefore the Bonds will be designated as "bank
qualified" obligations pursuant to Federal Tax Law.
Arbitrage Compliance
The Bonds are expected to qualify for the "small issuer" exemption related to arbitrage rebate.
Other aspects of arbitrage regulations will apply to the investment of bond proceeds and the
debt service fund.
Project/ Construction Fund. All tax-exempt bond issues are subject to federal rebate
requirements which require all arbitrage earned to be rebated to the U.S. Treasury. A rebate
exemption the City expects to qualify for is the "small issuer" exemption because the City
expects to issue less than $5,000,000 of tax-exempt bonds, including any 501(c)3 conduit
financings, in calendar year 2018.
Debt Service Fund. The City must maintain a bona fide debt service fund for the Bonds or be
subject to yield restriction in the debt service fund. A bona fide debt service fund involves an
equal matching of revenues to debt service expense with a balance forward permitted equal to
the greater of the investment earnings in the fund during that year or 1/12 of the debt service of
that year.
The City should become familiar with the various Arbitrage Compliance requirements for this
bond issue. The Resolution for the Bonds prepared by Bond Counsel explains the requirements
in greater detail.
Continuing Disclosure
Type: Full
Dissemination Agent: Northland Securities
The requirements for continuing disclosure are governed by SEC Rule 15c2-12. The primary
requirements of Rule 15c2-12 actually fall on underwriters. The Rule sets forth due diligence
needed prior to the underwriter's purchase of municipal securities. Part of this requirement is
obtaining commitment from the issuer to provide continuing disclosure. The document
describing the continuing disclosure commitments (the "Undertaking") is contained in the
Official Statement that will be prepared to offer the Bonds to investors.
The City has more than $10,000,000 of outstanding debt and is required to undertake "full"
continuing disclosure. Full disclosure requires annual posting of the audit and a separate
Northland Securities, Inc. Page 8
continuing disclosure report, as well as the reporting of certain "material events." Material
events set forth in the Rule, including, but not limited to, bond rating changes and call notices,
must be reported within ten days of occurrence. The report contains annual financial
information and operating data that "mirrors" material information presented in the Official
Statement. The specific contents of the annual report will be described in the Undertaking that
appears in the appendix of the Official Statement. Northland currently serves as dissemination
agent for the City, assisting with the annual reporting. The information for the Bonds will be
incorporated into our reporting.
Premiums
In the current market environment, it is likely that bids received from underwriters will include
premiums. A premium bid occurs when the purchaser pays the City an amount in excess of the
par amount of a maturity in exchange for a higher coupon (interest rate). The use of premiums
reflects the bidder's view on future market conditions, tax considerations for investors and
other factors. Ultimately, the true interest cost ("TIC") calculation will determine the lowest bid,
regardless of premium.
A premium bid produces additional funds that can be used in several ways:
• The premium means that the City needs less bond proceeds and can reduce the size of
the issue by the amount of the premium.
The premium can be deposited in the Construction Fund and used to pay additional
project costs, rather than used to reduce the size of the issue.
The premium can be deposited in the Debt Service Fund and used to pay principal and
interest.
Northland will work with City staff on the sale day to determine use of premium (if any).
Rating
A rating will be requested from Standard and Poor's (S&P). The City's general obligation debt is
currently rated "AA" by S&P. The rating process will include a conference call with the rating
analyst. Northland will assist City staff in preparing for and conducting the rating call.
Northland Securities, Inc. Page 9
Attachment 5 - Calendar of Events
Date
Action
Responsible Party
February 1211,
Improvement Hearing
city
March 12th
DEED Grant Award Notice
City
Approve Project Specifications and Authorize Bidding
for Mississippi Shores
March 26th
Approve Project Specifications and Authorize Bidding
City
for Kadler Avenue
April 9th
Award Construction Contracts Mississippi Shores
City
April 23rd
Award Construction Contracts Kadler Avenue
City
April 27th
Set Sale Resolution and Finance Plan sent to City
Northland, Bond
Counsel
May 141h
Set Sale Resolution Adopted
Northland, City
May 151h
Preliminary Official Statement Sent to City for Sign Off
Northland, City
and to Rating Agency
Week of May 21St
Rating Conference Call
Northland, City,
Rating Agency
June 1St
Rating Received
Rating Agency,
Northland, Cit
June 111h
Bond Sale (10:30 AM)
Northland, City
Authorizing Resolution Adopted (7:00 PIVD
Proposal signed
July 11th
Closing on the Bonds (Proceeds Available)
Northland, City, Bond
Counsel
Northland Securities, Inc. Page 10
Attachment 6 - Risk Factors
Property Taxes: Property tax levies shown in this Finance Plan are based on projected debt
service and other revenues. Final levies will be set based on the results of sale. Levies should be
reviewed annually and adjusted as needed. The debt service levy must be included in the
preliminary levy for annual Truth in Taxation hearings. Future Legislative changes in the
property tax system, including the imposition of levy limits and changes in calculation of
property values, would affect plans for payment of debt service. Delinquent payment of
property taxes would reduce revenues available to pay debt service.
Special Assessments: Special assessments for the financed project have not been levied at this
time. This Finance Plan is based on the assumptions listed earlier in this report. Changes in the
terms and timing for the actual assessments will alter the projected flow of funds for payment of
debt service on the Bonds. Also, special assessments may be prepaid. It is likely that the income
earned on the investment of prepaid assessments will be less than the interest paid if the
assessments remained outstanding. Delinquencies in assessment collections would reduce
revenues needed to pay debt service. The collection of deferred assessments (if any) have not
been included in the revenue projections. Projected assessment income should be reviewed
amivally and adjusted as needed.
General: In addition to the risks described above, there are certain general risks associated with
the issuance of bonds. These risks include, but are not limited to:
• Failure to comply with covenants in bond resolution.
• Failure to comply with Undertaking for continuing disclosure.
• Failure to comply with IRS regulations, including regulations related to use of the proceeds
and arbitrage/ rebate. The IRS regulations govern the ability of the City to issue its bonds as
tax-exempt securities and failure to comply with the IRS regulations may lead to loss of tax -
exemption.
Northland Securities, Inc. Page 11