The URL can be used to link to this page

ITEM 7.1 Approve issuance of sale®tSTFCe o MINNESOTA DEPARTMENT INFORMATION Request for City Council Action ORIGINATING DEPARTMENT REQUESTOR: MEETING DATE: Administration City Administrator/Finance Director Flaherty November 25, 2019 PRESENTER(s) REVIEWED BY: ITEM #: Administration 7.1 STRATEGIC VISION MEETS: THE CITY OF OTSEGO: and Sewer Revenue Refunding Bonds, Series 2019A. Is a strong organization that is committed to leading the community through innovative communication. X Has proactively expanded infrastructure to responsibly provide core services. No Is committed to delivery of quality emergency service responsive to community needs and expectations in a cost-effective manner. The City originally financed much of the current -day water and sanitary sewer plants and infrastructure Is a social community with diverse housing, service options, and employment opportunities. recession, the intended revenues decreased with the slowed new home construction. Given that 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 issuance and sale of General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A. ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED? No No BACKG ROUND/J USTI FI CATI O N: The City originally financed much of the current -day water and sanitary sewer plants and infrastructure with bond issues intended to be repaid with utility access and connection charges. During the last recession, the intended revenues decreased with the slowed new home construction. Given that environment, the City issued refunding bonds, where the principal repayments were strategically structured with future cash flows in mind. One of the current outstanding bond issues, the 2009A, has $6,360,000 in principal outstanding. The structure does not provide for any principal repayment until 2024, with only interest payments until then. On October 28, 2019, City staff presented multiple options to the City Council regarding the options that are available to the City. In summary, those options were: 1) Refund the outstanding principal. 2) Call (prepay) a portion or all of the outstanding principal. 3) Combination of the two. On October 28, 2019 the City Council concurred to choose the combination option, with the City to call the 2027 maturity and refund the 2024-2026 maturities. City staff noted that this option would achieve debt service interest savings at an estimated $1.3 million. The City Council adopted Resolution 2019-65 which provided for the calling of the 2027 maturity. The City Council also provided direction to enter into an engagement letter with S&P Global Ratings for a bond rating on the issuance of the refunding bond. On November 6, City staff requested and completed a credit rating analysis from Standard and Poor's (S&P). A credit rating expresses S&P's opinion about the ability and willingness of the City to meet its financial obligations in full and on time. The attached rating summary report provides for the rationale behind the City's credit rating. As outlined in the report, the City's credit has been assigned an AA+ rating. The City has determined to sell the 2019A bond issue in a negotiated sale with Northland Securities, Inc. in accordance with Minnesota Statutes §475.60 subd. 2(9). The City has retained the services of AEM Financial Solutions, LLC, an independent municipal adviser for the purpose of providing an opinion on the fairness of the proposed pricing offered by Northland Securities. Essentially this service is providing an opinion that the proposed sale is fair compared to what the City could have obtained in the marketplace with a competitive bond sale. The 2019A bond, if approved by the City Council will be dated (closed) December 19, 2019. Bond proceeds will be used to call (pay off) the outstanding 2024-2026 maturities of the 2009A bond issue on December 30, 2019. The resolution was prepared by the City's Bond Counsel, Briggs and Morgan. Jessica Green from Northland Securities, Inc. will be at the meeting to present the results of the sale to the City Council. SUPPORTING DOCUMENTS ATTACHED: • Standard and Poor's — Rating Summary • Resolution 2019-78 (Preliminary) POSSIBLE MOTION PLEASE WORD MOTION AS YOU WOULD LIKE ITTO APPEAR IN THE MINUTES: Motion to approve Resolution 2019-78 Providing for the Issuance and Sale of General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A. BUDGET INFORMATION FUNDING: BUDGETED: Fund #360 — Water Debt Service Fund #361— Sanitary Sewer Debt Service N/A EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL CITY OF OTSEGO, MINNESOTA HELD: NOVEMBER 25, 2019 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 Prairie Center (8899 Nashua Avenue NE) on November 25, 2019, at 7:00 P.M., for the purpose in part of awarding the sale of $4,050,000 General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A. The following members were present: and the following were absent: Member introduced the following resolution and moved its adoption: RESOLUTION NO. 2019-78 PROVIDING FOR THE ISSUANCE AND SALE OF $4,050,000 GENERAL OBLIGATION WATER AND SEWER REVENUE REFUNDING BONDS, SERIES 2019A AND PLEDGING FOR THE SECURITY THEREOF NET REVENUES A. WHEREAS, the City of Otsego, Minnesota (the "City") hereby determines and declares that it is necessary and expedient to provide moneys for a current refunding on December 30, 2019 (the "Call Date") of the City's General Obligation Water and Sewer Revenue Refunding Bonds, Series 2009A, dated December 1, 2009, in the original principal amount of $6,360,000 (the "Prior Bonds"), which mature on December 1, 2024 through December 1, 2026, inclusive, in the aggregate principal amount of $3,960,000 (the "Refunded Bonds"), all in accordance with the provisions of the resolution adopted by the City Council on November 9, 2009 (the "Prior Resolution"); and B. WHEREAS, the City Council hereby determines and declares that it is necessary and expedient to issue $4,050,000 General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A (the "Bonds" or individually, a "Bond"), pursuant to Minnesota Statutes, Chapters 444 and 475 to provide moneys to provide for a current refunding of the Refunded Bonds on the Call Date; and C. WHEREAS, the City Council has called for the redemption of the December 1, 2027 maturity of the Prior Bonds on December 1, 2019, which maturity will be paid from available funds of the City; and D. WHEREAS, the City owns and operates a municipal water utility system (the "Water System") and a municipal sanitary sewer utility system (the "Sewer System" and together with the Water System, the "System"), as separate revenue producing public utilities; and 12190622v1 E. WHEREAS, the net revenues of the System are pledged to the payment of the City's outstanding General Obligation Water and Sewer Revenue Refunding Bonds, Series 2010C, in the original principal amount of $21,300,000, dated November 1, 2010; (the "Outstanding System Bonds"); and F. WHEREAS, the refunding of the Refunded Bonds is necessary and desirable for the reduction of debt service cost to the City; and G. WHEREAS, the City has retained Abdo, Eicic & Meyers LLP, in Edina, Minnesota, as its independent municipal 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 H. WHEREAS, it is in the best interests of the City that the Bonds be issued in book - entry form as hereinafter provided. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Otsego, Minnesota, as follows: 1. Acceptance of Offer. The proposal of Northland Securities, Inc. (the "Purchaser"), to purchase the Bonds, at the rates of interest hereinafter set forth, and to pay therefor the sum of $ , plus interest accrued to settlement, is hereby accepted, and the Bonds are hereby awarded to the Purchaser. 2. Terms of Bonds. (a) Original Issue Date; Denominations, Maturities; Term Bond O tion. The Bonds shall be dated December 19, 2019, as the date of original issue, shall be issued forthwith on or after such date in fully registered form, shall be numbered from R-1 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 1 in the years and amounts as follows: Year Amount 2024 2025 2026 The maturity schedule for the Bonds complies with Minnesota Statutes, Section 475.54, subdivision 17 in that the Bonds are payable primarily from a source other than ad valorem taxes and the City Council hereby estimates that the net revenues from the System, which is the primary source of payment for the Bonds, will be sufficient to pay, and by this Resolution is irrevocably appropriated to, the payment of the Bonds. 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). 2 12190622v1 (b) Book Entry Only System. The Depository Trust Company, a limited propose 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 & 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. 3 12190622v1 (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 of the existing Nominee, and subject to the transfer provisions in paragraph 10, 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 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 fifteen 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. (c) Termination of Book -Entry OnlSystem. 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. 4 12190622vl (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 10. To the extent that the Beneficial Owners are designated as the transferee by the Holders, in accordance with paragraph 10, the Bonds will be delivered to the Beneficial Owners. (iii) Nothing in this subparagraph (c) shall limit or restrict the provisions of paragraph 10. (d) Letter of Representations. 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. Purpose; RefundingFindings. indings. The Bonds shall provide funds for a current refunding of the Refunded Bonds (the "Refunding"). It is hereby found, determined and declared that the Refunding is pursuant to Minnesota Statutes, Section 475.67, and shall result in a reduction of debt service cost to the City. 4. Interest. The Bonds shall bear interest payable semiannually on June 1 and December 1 of each year (each, an "Interest Payment Date"), commencing June 1, 2020, 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: Maturity Year Interest Rate 2024 2025 2026 5. No Optional Redemption. The Bonds shall not be subject to redemption and prepayment prior to their stated maturity date. 6. Bond Registrar. 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. 12190622v1 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: 12190622v1 I� UNITED STATES OF AMERICA STATE OF MINNESOTA WRIGHT COUNTY CITY OF OTSEGO GENERAL OBLIGATION WATER AND SEWER REVENUE REFUNDING BOND, SERIES 2019A Interest Rate Maturity Date Date of Original Issue CUSIP December 1, December 19, 2019 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT The City of Otsego, Wright 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, in the manner hereinafter set forth, the principal amount specified above, on the maturity date specified above, without option of prior redemption, and to pay interest thereon semiannually on June 1 and December 1 of each year (each, an "Interest Payment Date"), commencing June 1, 2020, 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 the principal office of 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 fifteenth day of the calendar month next preceding 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. Until termination of the book -entry only system pursuant to the Resolution, Bonds may only be registered in the name of the Depository or its Nominee. 7 12190622v1 No Optional Redem tp ion. The Bond is not subject to redemption and prepayment prior to its stated maturity date. Issuance; Purpose; General Obligation. This Bond is one of an issue in the total principal amount of $4,050,000, all of like date of original issue and tenor, except as to number, maturity, interest rate and denomination, issued pursuant to and in full conformity with the Constitution, Charter of the Issuer and laws of the State of Minnesota and pursuant to a resolution adopted by the City Council on November 25, 2019 (the "Resolution"), for the purpose of providing funds for a partial current refunding of the Issuer's General Obligation Water and Sewer Revenue Refunding Bonds, Series 2009A, dated December 1, 2009. This Bond is payable out of the Debt Service Account of the Issuer's General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A Fund. 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; Exchange; Resolution. The Bonds are issuable solely in fully registered form in the denominations of $5,000 and integral multiples thereof of a single maturity and are exchangeable for fully 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 with 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 principal office of the Bond Registrar upon presentation and surrender hereof to the Bond Registrar, all subject to the terns 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 Registered 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. 121906220 Qualified Tax -Exempt Obli ag tion. 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, Charter of the Issuer 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; that the Issuer has covenanted and agreed with the Holders of the Bonds that it will impose and collect charges for the service, use and availability of its municipal water system and its municipal sanitary sewer system (collectively, the "System") at the times and in amounts necessary to produce net revenues, together with other sums pledged to the payment of the Bonds, adequate to pay all principal and interest when due on the Bonds; and that the Issuer will levy a direct, annual, il7epealable ad valorem tax upon all of the taxable property of the Issuer, without limitation as to rate or amount, for the years and in amounts sufficient to pay the principal and interest on the Bonds as they respectively become due, if the net revenues from the System, and any other sums irrevocably appropriated to the Debt Service Account are insufficient therefor; 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, charter or statutory limitation of indebtedness. IN WITNESS WHEREOF, the City of Otsego, Wright 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 City Administrator/Finance Director. Date of Registration: BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the Resolution mentioned within. NORTHLAND TRUST SERVICES, INC., Minneapolis, Minnesota Bond Registrar Authorized Signature 12190622v1 Registrable by: NORTHLAND TRUST SERVICES, INC. Payable at: NORTHLAND TRUST SERVICES, INC. CITY OF OTSEGO, WRIGHT COUNTY, MINNESOTA /s/ facsimile Mayor /s/ facsimile City Administrator/Finance Director 0 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) under the Uniform Transfers to Minors Act (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 of the 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 film 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.) 10 1a1906aavl 8. Execution. The Bonds shall be in typewritten form, shall be executed on behalf of the City by the signatures of its Mayor and City Administrator/Finance Director and be sealed with the seal of the City; provided, as permitted by law, both signatures may be photocopied facsimiles and the corporate seal has been omitted. 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 the officer who may act on behalf of the absent or disabled officer. In case either 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. 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 an authorized representative of 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 of December 19, 2019. The Certificate of Authentication so executed on each Bond shall be conclusive evidence that it has been authenticated and delivered under this resolution. 10. Registration; Transfer; Exchange. The City will cause to be kept at the principal 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 principal 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 principal office of the Bond Registrar. Whenever any Bonds are so surrendered for exchange, the City shall execute (if necessary), and the Bond 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. 11 12190622v1 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 the Holder's 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 City Administrator/Finance Director is hereby authorized to negotiate and execute the terms of said agreement. 11. RightsUpon Transfer or Exchange. Each Bond delivered upon transfer of or in exchange for or in lieu of any other Bond shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Bond. 12. Interest Payment; 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 fifteenth day of the calendar month next preceding 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 Registered 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. 14. Delivery; Application of Proceeds. The Bonds when so prepared and executed shall be delivered by the City Administrator/Finance Director 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 Water and Sewer Revenue Refunding Bonds, Series 2019A Fund" (the "Fund") to be administered and maintained by the City Administrator/Finance Director as a 12 12190622v1 booldceeping 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 herein authorized and the interest thereon shall have been fully paid. The Operation and Maintenance Account for the Water System and the Operation and Maintenance Account for the Sewer System (together, the "Operation and Maintenance Accounts") heretofore established by the City shall continue to be maintained in the manner heretofore provided by the City. All moneys remaining after paying or providing for the items set forth in the resolution establishing the Operation and Maintenance Accounts shall constitute and are referred to as "net revenues" until the Bonds have been paid. There shall be maintained in the Fund the following separate accounts to which shall be credited and debited all net revenues of the System as hereinafter set forth. The City Administrator/Finance Director and all officials and employees concerned therewith shall establish and maintain financial records of the receipts and disbursements of the System in accordance with this resolution. In such records there shall be established and maintained accounts of the Fund for the purposes as follows: 16. Payment Account. The proceeds of the Bonds shall be deposited in the Payment Account. On or prior to the Call Date, the City Administrator/Finance Director shall transfer $ of the proceeds of the Bonds from the Payment Account to the paying agent for the Prior Bonds. This amount is sufficient to pay the principal and interest due on the Refunded Bonds. The remainder of the monies in the Payment Account shall be used to pay the costs of issuance of the Bonds. Any monies remaining in the Payment Account after payment of all costs of issuance and payment of the Refunded Bonds shall be transferred to the Debt Service Account. 17. Debt Service Account. There are hereby irrevocably appropriated and pledged to, and there shall be credited to, the Debt Service Account: (i) the net revenues of the System not otherwise pledged and applied to the payment of other obligations of the City, in an amount, together with other funds which may herein or hereafter from time to time be irrevocably appropriated sufficient to meet the requirements of Minnesota Statutes, Section 475.61 for the payment of the principal and interest of the Bonds; (ii) any collections of all taxes which may hereafter be levied in the event that the net revenues of the System and other funds herein pledged to the payment of the principal and interest on the Bonds are insufficient therefor; (iii) any balance remaining after the Call Date, in the Prior Bonds General Obligation Water and Sewer Revenue Refunding Bonds, Series 2009A Fund established by the Prior Resolution; (iv) all investment earnings on funds in the Debt Service Account; and (v) 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. 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 of the 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 Debt Service Account (or any other City account which will be used to pay principal and interest to become 13 12190622v1 due on the Bonds) in excess of amounts which under the applicable federal arbitrage regulations may be invested without regard as to yield shall not be invested in excess of the applicable yield restrictions imposed by the arbitrage regulations on such investments after taking into account any applicable "temporary periods" or "minor portion" made available under the federal arbitrage regulations. In addition, the proceeds of the Bonds and money in the Debt Service Account 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"). 18. Coverage Test; Pledge of Net Revenues and Excess Net Revenues. It is hereby found, determined and declared that the net revenues of the System are sufficient in amount to pay when due the principal of and interest on the Bonds and the Outstanding System Bonds and a sum at least five percent in excess thereof. The net revenues of the System are hereby pledged on a parity lien with the Outstanding System Bonds and shall be applied for that purpose, but solely to the extent required to meet, together with other pledged sums, the principal and interest requirements of the Bonds as the same become due. As used herein the term net revenues means the gross revenues derived by the City from the operation of the System, including all charges for service, use, availability, and connection to the System, and all monies received from the sale of any facilities or equipment of the System or any by-products thereof, less all normal, reasonable, or current costs of owning, operating, and maintaining the System. Excess net revenues of the System in excess of those required for the foregoing may be used for any proper purpose. Nothing contained herein shall be deemed to preclude the City from making further pledges and appropriations of the net revenues of the System for the payment of other or additional obligations of the City, provided that it has first been determined by the City Council that the estimated net revenues of the System will be sufficient, in addition to all other sources, for the payment of the Bonds and such additional obligations and any such pledge and appropriation of the net revenues may be made superior or subordinate to, or on a parity with the pledge and appropriation herein. 19. Covenant to Maintain Rates and Charges. In accordance with Minnesota Statutes, Section 444.075, the City hereby covenants and agrees with the Holders of the Bonds that it will impose and collect charges for the service, use, availability and connection to the System at the times and in the amounts required to produce net revenues (together with other funds herein pledged) adequate to pay all principal and interest when due on the Bonds. Minnesota Statutes, Section 444.075, Subdivision 2, provides as follows: "Real estate tax revenues should be used only, and then on a temporary basis, to pay general or special obligations when the other revenues are insufficient to meet the obligations". 20. General Obligation Pledge. For the prompt and full payment of the principal of and interest on the Bonds as the same respectively become due, the full faith, credit and taxing powers of the City shall be and are hereby irrevocably pledged. If the net revenues of the System appropriated and pledged to the payment of the principal and interest on the Bonds, together with other funds irrevocably appropriated to the Payment Account or the Debt Service 14 12190622v1 Account, shall at any time be insufficient to pay the principal and interest when due, the City covenants and agrees to levy, without limitation as to rate or amount an ad valorem tax upon all taxable property in the City sufficient to pay such principal and interest as it becomes due. If the balance in the Payment Account or Debt Service Account is ever insufficient to pay all principal and interest then due on the Bonds payable therefrom, the deficiency shall be promptly paid out of any other accounts of the City which are available for such purpose, and such other funds may be reimbursed without interest from the Payment Account or Debt Service Account when a sufficient balance is available therein. 21. Prior Bonds; Security and Prepayment. Until retirement of the Prior Bonds, all provisions for the security thereof shall be observed by the City and all of its officers and agents. The Refunded Bonds shall be redeemed and prepaid on the Call Date in accordance with the terms and conditions set forth in the Notice of Call for Redemption attached hereto as Exhibit A, which terms and conditions are hereby approved and incorporated herein by reference. 22. Supplemental Resolution. The Prior Resolution authorizing the issuance of the Prior Bonds is hereby supplemented to the extent necessary to give effect to the provisions hereof. 23. Certificate of Registration. The City Administrator/Finance Director is hereby directed to file a certified copy of this resolution with the County Auditor of Wright County, Minnesota, together with such other information as the County Auditor shall require, and to obtain a County Auditor's Certificate that the Bonds have been entered in the Bond Register. 24. 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. 25. Negative Covenant as to Use of Bond Proceeds and Project. The City hereby covenants not to use the proceeds of the Bonds or to use the improvements financed by the Prior Bonds (the "Project"), or to cause or permit them to be used, or to enter into any deferred payment arrangements for the cost of the Project, 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. 26. Tax -Exempt 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. The City expects to satisfy the six month expenditure exemption from gross proceeds of the Bonds as provided in Section 1.148-7(c) of the Regulations. The Mayor and or City Administrator/Finance Director are hereby authorized and directed to make 15 121906220 such elections as to arbitrage and rebate matters relating to the Bonds as they deem necessary, appropriate or desirable in connection with the Bonds, and all such elections shall be, and shall be deemed and treated as, elections of the City. 27. Designation of Qualified Tax -Exempt Obligations; Issuance Limit. 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 2019 will not exceed $10,000,000; (e) not more than $10,000,000 of obligations issued by the City during this calendar year 2019 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 $10,000,000. Furthermore: (g) each of the Refunded Bonds was designated as a "qualified tax exempt obligation" for purposes of Section 265(b)(3) of the Code; (h) the average maturity of the Bonds does not exceed the remaining average maturity of the Refunded Bonds; (i) no part of the Bonds has a maturity date which is later than the date which is thirty years after the date the Refunded Bonds were issued; and 0) the Bonds are issued to refund, and not to "advance refund" the Prior Bonds within the meaning of Section 149(d)(5) of the Code, and shall not be taken into account under the $10,000,000 issuance limit to the extent the Bonds do not exceed the outstanding amount of the Prior Bonds. 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. 28. Defeasance. When the Note has been discharged as provided in this paragraph, all pledges, covenants and other rights granted by this resolution to the registered holders of the Note shall, to the extent permitted by law, cease. The City may discharge its obligations with 16 12190622v1 respect to the Note which is due on any date by irrevocably depositing with the Registrar on or before that date a sum sufficient for the payment thereof in full; or if the Note should not be paid when due, it may nevertheless be discharged by depositing with the 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 Note called for redemption on any date when they are prepayable according to their terms, by depositing with the 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 the Note, 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 and/or 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. 29. Official Statement. The Official Statement relating to the Bonds prepared and distributed by Purchaser is hereby approved and the officers of the City are authorized in connection with the delivery of the Bonds to sign such certificates as may be necessary with respect to the completeness and accuracy of the Official Statement. 30. Continuing 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 Securities Exchange Act of 1934, as amended, and a Continuing Disclosure Undertaking (the "Undertaking") hereinafter described: (a) to provide or cause to be provided to the Municipal Securities Rulemaking Board, by filing at www.emma.msrb.org, (i) at least annually, its audited financial statements for the most recent fiscal year, and (ii) notice of the occurrence of certain events with respect to the Bonds in not more than ten (10) business days after the occurrence of such event, in accordance with the Undertaking; and (b) 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 City Administrator/Finance Director 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. 31. Severability. 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 17 12190622v1 section, paragraph or provision shall not affect any of the remaining provisions of this Resolution. 32. Headings. 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 Councilmember 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. 12190622v1 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 providing for the issuance and sale of $4,050,000 General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A. WITNESS my hand on November , 2019. City Administrator/Finance Director 19 12190622v1 EXHIBIT A NOTICE OF CALL FOR REDEMPTION GENERAL OBLIGATION WATER AND SEWER REVENUE REFUNDING BONDS, SERIES 2009A CITY OF OTSEGO, WRIGHT COUNTY, MINNESOTA NOTICE IS HEREBY GIVEN that by order of the City Council of the City of Otsego, Wright County, Minnesota, there have been called for redemption and prepayment on December 30, 2019 those outstanding bonds of the City designated as General Obligation Water and Sewer Revenue Refunding Bonds, Series 2009A, dated as of December 1, 2009, having stated maturity dates in the years 2024 through 2026, inclusive, and totaling $3,960,000 in principal in principal amount and having CUSIP numbers listed below: Year CUSIP AMOUNT 2024 689146 KA5 $750,000 2025 689146 K133 1,575,000 2026 689146 KCI 1,635,000 The bonds are being called at a price of par plus accrued interest to December 30, 2019, on which date all interest on the bonds will cease to accrue. Holders of the bonds hereby called for redemption are requested to present their bonds for payment, at Northland Trust Services, Inc., 150 S. 5th St., Suite 3300, Minneapolis, MN 55402. Dated: November 25, 2019 BY ORDER OF THE CITY COUNCIL /s/ Adam Flaherty, City Administrator/Finance Director *The City shall not be responsible for the selection of or use of the CUSIP numbers, nor is any representation made as to their correctness indicated in the notice. They are included solely for the convenience of the holders. A-1 12190622vt STATE OF MINNESOTA COUNTY OF WRIGHT COUNTY AUDITOR'S CERTIFICATE AS TO REGISTRATION I, the undersigned, being the duly qualified and acting County Auditor of Wright County, Minnesota, DO HEREBY CERTIFY that on the date hereof, there was filed in my office a certified copy of a resolution adopted on November 25, 2019, by the City Council of the City of Otsego, Minnesota, authorizing the issuance of $4,050,000 General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A (the "Bonds") and the Bonds have been entered in my Bond Register. WITNESS my hand and the seal of the County Auditor on County Auditor (SEAL) 12190622v1 2019. SIGNATURE AND NONLITIGATION CERTIFICATE We, the undersigned, being respectively the duly qualified and acting Mayor and City Administrator/Finance Director of the City of Otsego, Minnesota (the "City"), DO HEREBY CERTIFY that we did, in our official capacities as such officers, sign our own proper names by photocopied facsimile signature, attested by the manual signature of Northland Trust Services, Inc., Minneapolis, Minnesota, duly designated by the City Council as Bond Registrar and authenticating agent (the "Bond Registrar"), on the $4,050,000 General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A, dated December 19, 2019, as the date of original issue (the 'Bonds"), and numbered from R-1 upward, each in the denomination of $5,000 or any integral multiple thereof. The Bonds mature on December 1 in the years and amounts and bear interest until paid or discharged as follows: Year Amount Interest Rate 2024 2025 2026 WE FURTHER CERTIFY that we are now and were on the date of signing the Bonds, the duly qualified and acting officers therein indicated, and duly authorized to execute the same, and that the Bond Registrar has been duly authorized to act as agent of the City for purposes of authenticating the Bonds, and we hereby ratify, confirm, and adopt our facsimile signatures on the Bonds as the true and proper signatures for the execution thereof. WE FURTHER CERTIFY that the Bonds have been in all respects duly executed for delivery pursuant to authority conferred upon us as such officers; and no obligations other than the Bonds have been issued pursuant to such authority, and that none of the proceedings or records which have been certified to the purchasers of the Bonds or the attorneys approving the same have been in any manner repealed, amended or changed, and that there has been no change in the financial condition of the City or of the facts affecting the Bonds. WE FURTHER CERTIFY that the Official Statement prepared for the issuance of the Bonds as of its date and the date hereof, did not and does not contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. WE FURTHER CERTIFY that there is no litigation threatened or pending questioning the organization or boundaries of the City, or the right of any of us to our respective offices, or in any manner questioning our right and power to execute and deliver the Bonds, or otherwise questioning the validity of the Bonds or the pledge of net revenues for the payment of the Bonds and the interest thereon. Dated: December 19, 2019. 12190622v1 CITY OF OTSEGO, MINNESOTA Its Mayor Its City Administrator/Finance Director 12190622v1 CITY ADMINISTRATOWFINANCE DIRECTOR'S RECEIPT I, the undersigned, being the duly qualified and acting City Administrator/Finance Director of the City of Otsego, Minnesota, DO HEREBY CERTIFY AND ACKNOWLEDGE that on the date hereof, I received from Northland Securities, Inc., the purchaser of the $4,050,000 General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A, dated December 19, 2019, as the date of original issue, the purchase price thereof, no interest having accrued to the date hereof and I did thereupon deliver the Bonds to the purchaser. Dated: December 19, 2019. 12190622v1 CITY OF OTSEGO, MINNESOTA Its City Administrator/Finance Director 12190622v1 NONARBITRAGE CERTIFICATE The undersigned are the duly qualified and acting Mayor and City Administrator/Finance Director of the City of Otsego, Minnesota (the "Issuer"), charged, either alone or with others, with the responsibility of issuing $4,050,000 General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A, dated December 19, 2019, as the date of original issue (the "Bonds"). This Certificate is being executed in accordance with the income tax regulations relating to arbitrage bonds (the "Regulations") and may be relied upon as a certification under Section 1.148-2(b)(2) of the Regulations under Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"). The undersigned, having made an investigation of the facts, circumstances and estimates pertaining to and in connection with the Bonds, hereby certify in good faith and reasonably expect as follows with respect to the Bonds: 1. PpMose. The proceeds of the Bonds will be used to provide moneys for a current refunding on December 30, 2019 (the "Call Date"), of $3,960,000 aggregate principal amount of the Issuer's General Obligation Water and Sewer Revenue Refunding Bonds, Series 2009A, in the original principal amount of $6,360,000, dated December 1, 2009 (the "Prior Bonds"), which mature on December 1, 2024 through December 1, 2026, inclusive (the "Refunded Bonds"). The Prior Bonds were issued for the purposes of providing money for a crossover refunding to refinance water system and sewer system improvements within the Issuer. As of the date hereof, all of the representations and statements of fact contained in the resolutions adopted by the City Council on November 9, 2009, relating to the Prior Bonds and on November 25, 2019, relating to the Bonds (together, the "Resolutions") are true and correct, and nothing has occurred between the date of adoption of the Resolutions and the date hereof to cause any expectation or covenant stated in the Resolutions to become unlikely or impossible of occurrence or performance, unreasonable or otherwise invalid. 2. Only Issue. No bonds (in addition to the Bonds) (i) are sold or are to be sold at substantially the same time as the Bonds, (ii) are sold pursuant to the same plan of financing with the Bonds, and (iii) are reasonably expected to be paid from substantially the same source of funds as the Bonds will be paid. 3. Proceeds and Uses. The Bonds were delivered and paid for on the date of this Certificate. The total sale proceeds of the Bonds (i.e. the issue price of the Bonds or the offering price of the Bonds to the public) $ , which together with accrued interest ($_ and earnings thereon (estimated to be $ ), do not exceed the total of: (a) $ , estimated total costs of refunding the Refunded Bonds; (b) $ , expenses anticipated to be incurred in connection with the issuance of the Bonds, including Underwriting Compensation as defined below; and (c) $ , of Bond proceeds, representing surplus funds, will be returned to the Issuer and deposited in the Debt Service Account hereinafter described. Underwriting Compensation is the difference between the amount paid by the underwriter in purchasing the Bonds from the Issuer and the amount of the issue price or reoffering price of the Bonds to the public. 121906220 4. Governmental Purposes• No Over -burdening of Tax -Exempt Market. The stated purposes of the Bonds are governmental purposes within the meaning of applicable law and regulations. The "Sale Proceeds" of the Bonds (i.e., the issue price of the Bonds less accrued interest), less any amounts used to pay issuance expenses, together with estimated earnings thereon, will not exceed the estimated dollar cost of the expense of the current refunding of the Refunded Bonds, less all other funds to be expended for paying such costs. 5. Use of Proceeds. The proceeds of the Bonds will be used to refund the Refunded Bonds on the Call Date, and to pay costs of issuance of the Bonds within ninety days from the date hereof, a temporary period within the meaning of Section 1.148-9(d)(2)(ii) of the Regulations. Any proceeds remaining after the Call Date, will not be invested at a yield in excess of the yield on the Bonds. 6. Fund and Accounts. The Bonds are payable fiom the General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A Fund (the "Fund"), which contains a Payment Account and a Debt Service Account. 7. Debt Service Account: Funding; Investment Covenants. The principal and interest on the Bonds are payable from the Debt Service Account. The Issuer has covenanted that any sums from time to time held in the Operation and Maintenance Accounts as net revenues and expected to be transferred to the Debt Service Account, and the Debt Service Account (or any other account of the Issuer which will be used to pay debt service on the Bonds) in excess of amounts which under then applicable federal arbitrage regulations may be invested without regard to yield (after taking into account all temporary periods) shall not be invested at a yield in excess of the applicable yield restrictions imposed by said arbitrage regulations on such investments. Besides the Debt Service Account and any sums held in the Operation and Maintenance Accounts as net revenues and expected to be transferred to the Debt Service Account, there is no other fund or account of cash or securities which the Issuer has set aside and expects to invest or maintain at a yield greater than the yield on the Bonds for the purpose of paying debt service on the Bonds. 8. Debt Service Account: Bona Fide Debt Service Fund; Minor Portion; Temporary Periods; Yield. The Debt Service Account and any balance (the "Holding Account") of net revenues held in the Operation and Maintenance Accounts and expected to be used to pay debt service on the Bonds serves two functions: (i) a bona fide debt service fund (within the meaning of Section 1.148-1(b) of the Regulations) which is used primarily to achieve a proper matching of revenues and principal and interest payments within each Bond Year and is depleted at least once a Bond Year except for a reasonable carryover amount not to exceed the greater of the earnings on the Debt Service Account for the immediately preceding Bond Year or one -twelfth of principal and interest payments on the Bonds for the immediately preceding Bond Year, and (ii) a sinking fund (within the meaning of Section 1.148-1(c)(2) of the Regulations), and each such function shall be treated for the purposes hereof as if it occurred in a separate account. Amounts deposited in the Debt Service Account and the Holding Account which are to be used to pay debt service on the Bonds within twelve months of their receipt by the Issuer (or which are a reasonable carryover amount with respect thereto) will be invested without regard to yield for a temporary period not longer than thirteen months. Receipts in the Debt Service 2 12190622v1 Account and the Holding Account which will not be used to pay debt service on the Bonds within thirteen months of their receipt will be invested without regard to yield to the extent they do not in the aggregate exceed the "minor portion" of $ , which is an amount equal to the lesser of $100,000 or five percent of the Net Sale Proceeds of the Bonds. Sale proceeds of the Bonds are the issue price of the Bonds less accrued interest. All receipts in the Debt Service Account and the Holding Account may be invested without regard to yield for a temporary period of thirty days from receipt by the Issuer, and investment earnings on such sums may be invested without regard to yield for a longer temporary period of one year from receipt. Amounts not entitled to a temporary period or within said minor portion will not be invested at a yield which is materially higher than the yield on the Bonds, or will be invested without regard to yield in tax-exempt bonds as defined in Section 150(a)(6) of the Code, being obligations the interest on which is excluded from gross income under Section 103(a) of the Code. 9. Yield Determination; Materially Hi her. The yield on the Bonds, based on their issue price being the initial offering price to the public as shown in the Issue Price Certificate, has been calculated to be %; this yield on the Bonds will be recalculated if and as required by the Code or the Regulations. A "materially higher" yield is defined at Section 1.148- 2(d)(2) of the Regulations and is generally one eighth of one percent (0.125%). 10. Unspent Proceeds. On the date hereof there are no unspent original proceeds or investment proceeds of the Prior Bonds and thus there will be no transferred proceeds for the Bonds. 11. Rebate. The sale proceeds of the Bonds are entitled to an exception to rebate if they will all (other than amounts constituting a bona fide debt service fund) be expended within the period of time provided in the six-month exception to the rebate requirement. The gross proceeds of the Bonds (treating amounts in a bona fide debt service fund as not being gross proceeds) will be allocated to expenditures for the governmental purposes of the issue within the six month period beginning on the date hereof. It is reasonably anticipated that no gross proceeds will arise after such six months, and for this purpose excesses over bona fide debt service fund amounts will not be permitted to accumulate in the Debt Service Account. 12. Intentional Acts. The Issuer shall not take an deliberate, intentional action after the date hereof to earn arbitrage profit except to the extent such action would not have caused the Bonds to be arbitrage bonds had it been reasonably expected on the date hereof. 13. No Abusive Arbitrage Device. No "abusive arbitrage device" within the meaning of Section 1.148-10 of the Regulations is used in connection with the Bonds. No action relating to the Bonds has the effect of (a) enabling the Issuer to exploit the difference between tax- exempt and taxable interest rates to obtain a material financial advantage and (b) overburdening of the tax-exempt bond market. 14. Monitoringof f Expenditures and Investments. The Issuer will monitor the investment of Bond proceeds to assure compliance with Section 148 of the Code, and the Issuer will consult with bond counsel periodically with regard to arbitrage issues and compliance. 121906220 15. Basis for Expectations. The facts and estimates on which the foregoing expectations are based are (a) the documents included in the "Bond Transcript" prepared for the Bond Closing, (b) all reports and recommendations of the Issuer's fiscal consultant relating to the improvements refinanced by the Refunded Bonds and the scheduling of payment of debt service on the Bonds, (c) all expenditures which were heretofore made by the Issuer from proceeds of the Refunded Bonds and (d) such other facts and estimates, if any, as may be set forth in an Exhibit A attached hereto, if any. 16. Familiarity; Conclusion. We are generally familiar with the requirements of the Regulations, and nothing has been called to our attention to cause us to believe that the proceeds of the Bonds will be used in a manner which would cause the Bonds to be arbitrage bonds within the meaning of Section 148 of the Code. 17. No Other Facts. To the best of the knowledge and belief of the undersigned, there are no other facts, estimates or circumstances which would materially change the foregoing facts and conclusions. Dated: December 19, 2019. 4 12190622vl CITY OF OTSEGO, MINNESOTA Its Mayor Its City Administrator/Finance Director 12190622v1 CERTIFICATE OF PURCHASER do hereby certify that I am the duly qualified and acting of Northland Securities, Inc., in Minneapolis, Minnesota (the "Purchaser"), and as such officer I do hereby further certify as follows: 1. The Purchaser is purchasing on the date hereof General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A, dated December 19, 2019 (the "Bonds") of the City of Otsego, Minnesota (the "Issuer"). 2. The information set forth in the resolution of the governing body of the Issuer, adopted on November 25, 2019, providing for the issuance of the Bonds, is true and correct in all respects. 3. Briggs and Morgan, Professional Association of Minneapolis, Minnesota, as bond counsel for the Bonds ("Bond Counsel"), has required that for purposes of assuring compliance with the federal arbitrage regulations no arbitrage may be diverted to any party other than the U.S. Government and the Purchaser has no reason to believe that such requirement of Bond Counsel has not or will not be met. 4. We have examined the Nonarbitrage Certificate of even date herewith and hereby certify that we furnished the Issuer the information on which the Certificate has been based, that such information is to the best of our knowledge true and correct in all respects and that no matters have come to our attention which make unreasonable or incorrect the representations made in the Nonarbitrage Certificate. 5. We hereby certify that the following information is true and correct and is furnished for the exclusive purpose of completing Form 8038-G, Information Return for Tax - Exempt Governmental Obligations ("Form 8038-G"), for the Bonds issued by the Issuer: (a) the Issuer's federal employer identification number (EIN) is: 41-0919123; (b) the weighted average maturity based on the issue price of each maturity of the Bonds and from their date of issue (not based on the face amount of the bonds or from their dated date) is years; (c) the remaining weighted average maturity of the Prior Bonds, as defined in the resolution adopted by the Issuer on November 25, 2019, to be refunded by the Bonds is years from the issue date of the Bonds to the stated maturity dates of the Prior Bonds to be refunded; and (d) the yield on the Bonds to maturity, based on the information supplied by the original purchaser of the Bonds in the Certificate of Purchaser is %. Dated: December 19, 2019. 121453950 NORTHLAND SECURITIES, INC. By Its 12145395v1 EXHIBIT A Initial Offering Price* Maturity (Exclusive of Accrued Interest) 2024 2025 2026 SUBTOTAL PLUS ACCRUED INTEREST ISSUE PRICE* (AGGREGATE) * Issue Price is the price to customers, and includes accrued interest. * * Assuming deliveries to customers on the date of delivery to the Purchaser by the Issuer. 12145395vl ISSUE PRICE CERTIFICATE The undersigned, on behalf of Northland Securities, Inc. (the "Underwriter"), hereby certifies as set forth below with respect to the sale and issuance of General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A (the 'Bonds") of the City of Otsego, Minnesota (the "Issuer"). Initial Offering Price of the Bonds. (a) The Underwriter 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 bond purchase agreement, the Underwriter has agreed in writing that, (i) for each Maturity of the Bonds, it 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 Terns. (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 has 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 , 2019. (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 12190622vl 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 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. Dated: December 19, 2019. NORTHLAND SECURITIES, INC. Its 12145395v1 By Its 12145395v1 CERTIFICATE OF BOND REGISTRAR AND AUTHENTICATING AGENT I, Scott Miles, do hereby certify that I am the Chief Operating Officer/Cashier, duly appointed and acting as such, of Northland Trust Services, Inc., located in the City of Minneapolis, Minnesota (the "Bond Registrar") and that. A. Pursuant to authorization by, and direction of, the City of Otsego, Minnesota, (the "City") certain of the authorized officers listed on the attached Exhibit A have on this day authenticated each of the $4,050,000 General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A (the "Bonds"), being in fully registered form in denominations equal to the total principal amount of the Bonds due on the specified maturity dates therefor and bearing the numbers of R-1 and upward; and have caused each Bond to be registered in the name of a "person" as defined in Section 1-201 of the Uniform Commercial Code, all in accordance with the provisions of the resolution adopted by the City Council on November 25, 2019 (the "Resolution"). B. The authorized officers who have signed the bonds have been duly authorized to sign said bonds on behalf of the Bond Registrar acting as authenticating agent. C. To the best of our knowledge the provisions of any bond registrar's agreement to be entered into between the City and the Bond Registrar will not conflict with the provisions of the Resolution with respect to the duties and responsibilities of the Bond Registrar set forth therein. D. The CUSIP (Committee of Uniform Securities Identification Procedure) number of the bonds of the above referenced issue with the latest maturity is Dated: December 19, 2019. NORTHLAND TRUST SERVICES, INC. LIM 12190622v1 Scott Miles Chief Operating Officer/Cashier CONTINUING DISCLOSURE UNDERTAKING This Continuing Disclosure Undertaking (the "Disclosure Undertaking") is executed and delivered by the City of Otsego, Minnesota (the "Issuer"), in connection with the issuance of its $4,050,000 General Obligation Water and Sewer Revenue Refunding Bonds, Series 2019A (the 'Bonds"). The Bonds are being issued pursuant to a Resolution adopted on November 12, 2019 (the "Resolution"). Pursuant to the Resolution and this Undertaking, the Issuer covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Undertaking. This Disclosure Undertaldng is being executed and delivered by the Issuer for the benefit of the Owners and in order to assist the Participating Underwriters in complying with SEC Rule 15c2 -12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Disclosure Undertaking unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any annual financial information provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Undertaldng. "Audited Financial Statements" shall mean the financial statements of the Issuer audited annually by an independent certified public accounting firm, prepared pursuant to generally accepted accounting principles promulgated by the Financial Accounting Standards Board, modified by governmental accounting standards promulgated by the Government Accounting Standards Board. "Dissemination Agent" shall mean such party from time to time designated in writing by the Issuer to act as information dissemination agent and which has filed with the Issuer a written acceptance of such designation. "Financial Obligation" shall mean a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). This term shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. "Fiscal Year" shall be the fiscal year of the Issuer. "Governing Body" shall, with respect to the Bonds, have the meaning given that term in Minnesota Statutes, Section 475.51, Subdivision 9. "MSRB" shall mean the Municipal Securities Rulemaking Board. "Occurrence(s)" shall mean any of the events listed in Section 5 of this Disclosure Undertaking. "Official Statement" shall be the Official Statement dated , 2019, prepared in connection with the Bonds. 12190622vi "Owners" shall mean the registered holders and, if not the same, the beneficial owners of any Bonds. "Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Resolution" shall mean the resolution or resolutions adopted by the Governing Body of the Issuer providing for, and authorizing the issuance of, the Bonds. "Rule" shall mean Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time or interpreted by the Securities and Exchange Commission. SECTION 3. Provision of Annual Reports. A. Beginning in connection with the Fiscal Year ending on December 31, 2019, the Issuer shall, or shall cause the Dissemination Agent to provide to the MSRB by filing at www.emma.msrb.or , together with such identifying information as prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Undertaking by not later than December 31, 2020, and by December 31 of each year thereafter. B. If the Issuer is unable to provide to the MSRB an Annual Report by the date required in subsection A, the Issuer shall send a notice of such delay and estimated date of delivery to the MSRB. SECTION 4. Content and Format of Annual Reports. The Issuer's Annual Report shall contain or incorporate by reference the financial information and operating data pertaining to the Issuer listed below as of the end of the preceding Fiscal Year. The Annual Report may be submitted to the MSRB as a single document or as separate documents comprising a package, and may cross-reference other information as provided in this Disclosure Undertaking. The following financial information and operating data shall be supplied: A. An update of the operating and financial data of the type of information contained in the Official Statement under the captions: Economic and Financial Information — "Valuations," "Tax Capacity Rates" and "Tax Levies and Collections;" and Summary of Debt and Debt Statistics. B. Audited Financial Statements of the Issuer. The Audited Financial Statements of the Issuer may be submitted to the MSRB separately from the balance of the Annual Report. In the event Audited Financial Statements of the Issuer are not available on or before the date for filing the Annual Report with the MSRB as set forth in Section 3.A. above, unaudited financial statements shall be provided as part of the Annual Report. The accounting principles pursuant to which the financial statements will be prepared will be pursuant to generally accepted accounting principles promulgated by the Financial Accounting Standards Board, as such principles are modified by the governmental accounting standards promulgated by the Government Accounting Standards Board, as in effect from time to time. If Audited Financial Statements are not provided 2 12190622v1 because they are not available on or before the date for filing the Annual Report, the Issuer shall promptly provide them to the MSRB when available. SECTION 5. Reporting of Significant Events. This Section 5 shall govern the giving of notices of the occurrence of any of the following events with respect to the Bonds: (1) Principal and interest payment delinquencies; (2) Non-payment related defaults, if material; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) Modifications to rights of security holders, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution, or sale of property securing repayment of the Bonds, if material; (11) Rating changes; (12) Bankruptcy, insolvency, receivership or similar event of the Issuer; (13) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material; (15) Incurrence of a Financial Obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the obligated person, any of which affect security holders, if material; and, (16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial difficulties. Whenever an event listed above has occurred, the Issuer shall promptly, which may not be in excess of the ten (10) business days after the Occurrence, file a notice of such Occurrence with the MSRB, by filing at www.emma.msrb.or , together with such identifying information as prescribed by the MSRB. The Issuer agrees to provide or cause to be provided, in a timely manner, to the MSRB notice of a failure by the Issuer to provide the Annual Reports described in Section 4. 3 12190622vl SECTION 6. Termination of Reporting Obli ag tion. The Issuer's obligations under this Disclosure Undertaking shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Undertaking, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Undertaking, the Issuer may amend this Disclosure Undertaking, and any provision of this Disclosure Undertaking may be waived, if (a) a change in law or change in the ordinary business or operation of the Issuer has occurred, (b) such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule, and (c) such amendment or waiver is supported by an opinion of counsel expert in federal securities laws to the effect that such amendment or waiver would not materially impair the interests of Owners. SECTION 9. Additional Information. Nothing in this Disclosure Undertaking shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Undertaking or any other means of communication, or including any other information in any Annual Report or notice of an Occurrence, in addition to that which is required by this Disclosure Undertaking. If the Issuer chooses to include any information in any Annual Report or notice of an Occurrence in addition to that which is specifically required by this Disclosure Undertaking, the Issuer shall have no obligation under this Disclosure Undertaking to update such information or include it in any future Annual Report or notice of an Occurrence. SECTION 10. Default. In the event of a failure of the Issuer to provide information required by this Disclosure Undertaking, any Owner may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Issuer to comply with its obligations to provide information under this Disclosure Undertaking. A default under this Disclosure Undertaking shall not be deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Undertaking in the event of any failure of the Issuer to comply with this Disclosure Undertaking shall be an action to compel performance. SECTION 11. Beneficiaries. This Disclosure Undertaking shall inure solely to the benefit of the Issuer, the Participating Underwriters and Owners from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 12. Reserved Rights. The Issuer reserves the right to discontinue providing any information required under the Rule if a final determination should be made by a court of competent jurisdiction that the Rule is invalid or otherwise unlawful or, subject to the provisions of Section 8 hereof, to modify the undertaking under this Disclosure Undertaking if the Issuer determines that such modification is required by the Rule or by a court of competent jurisdiction. Dated: December 19, 2019. M 12190622v1 CITY OF OTSEGO, MINNESOTA Its Mayor Its City Administrator/Finance Director 12190622x1 • a okf-alq 11,171, Otsego, Minnesota; General Obligation Primary Credit Analyst: Alexander Vargas, CFA, Chicago (1) 312-233-7093; alexander.vargas@spglobal.com Secondary Contact: David H Smith, Chicago + 1 (312) 233 7029; david.smith@spglobal.com Table Of Contents Rationale Outlook Related Research WWW.STANDARDANDPOORS.COM/RATINGSDIRECT NOVEMBER 14, 2019 1 Summary: Otsego, Minnesota; General Obligation US$4.05 mil GO wtr and swr rev rfdg bnds ser 2019A due 12/01/2026 Long Term Rating AA+/Stable New Rationale S&P Global Ratings has assigned its 'AA+' rating to Otsego, Minn.'s series 2019A general obligation (GO) water and sewer revenue refunding bonds. At the same time, S&P Global Ratings has affirmed its 'AA+' rating on the city's previously issued GO debt. The series 2019A bonds are secured by the city's unlimited -tax GO pledge, and are payable from net revenues of the city's water and sewer utility system. The city's previously issued GO debt is additionally secured by a special assessment and water and sewer revenues. We rate all debt based on the city's GO pledge. The bonds will be issued to refund a portion of the city's series 2009A bonds for interest cost savings. Credit overview Otsego benefits from its proximity to Minneapolis, leading to ongoing residential development. Development has exceeded management's budgeted expectations and has generated better-than-expected operating results, leading to sustained very strong reserves. Although we consider the local economy very strong, the city's income and wealth indicators are still below those of'AAA' rated cities and remain the primary rating constraint. The rating reflects our assessment of the city's following factors: • Very strong economy, with access to a broad and diverse metropolitan statistical area (MSA); • Strong management, with good financial policies and practices under our Financial Management Assessment (FMA) methodology; • Strong budgetary performance, with operating surpluses in the general fund and at the total governmental fund level in fiscal 2018; • Very strong budgetary flexibility, with an available fund balance in fiscal 2018 of 61% of operating expenditures; • Very strong liquidity, with total government available cash at 3.3x total governmental fund expenditures and 24.9x governmental debt service, and access to external liquidity we consider strong; • Adequate debt and contingent liability profile, with debt service carrying charges at 13.2% of expenditures and net direct debt that is 66.3% of total governmental fund revenue, as well as rapid amortization, with 98.0% of debt scheduled to be retired in 10 years; and • Strong institutional framework score. WWW.STANDAR DAN DPOORS.COM/RATINOSDI RECT NOVEMBER 14, 2019 2 Suniniary: Otsego, Minnesota, General Obligation Very strong economy We consider Otsego's economy very strong. The city, with an estimated population of 17,323, is located in Wright County in the Minneapolis -St. Paul -Bloomington, MN -WI MSA, which we consider to be broad and diverse. The city has a projected per capita effective buying income of 110% of the national level and per capita market value of $112,179. Overall, the city's market value grew by 10.4% over the past year to $1.9 billion in 2019. The county unemployment rate was 3.0% in 2018. Otsego is about 30 miles northwest of downtown Minneapolis and benefits from its proximity to the MSA, experiencing steady residential growth. It had 300 new residential construction permits in 2018, with management expecting similar results for fiscal 2019. Furthermore, multifamily housing development continues to increase. The city has no material exposure to any one taxpayer with the largest, Duke Realty, making up 6.57% and the 10 largest taxpayers making up 13.36% of total tax capacity. Strong management We view the city's management as strong, with good financial policies and practices under our FMA methodology, indicating financial practices exist in most areas, but that governance officials might not formalize or monitor all of them on a regular basis. Highlights include its: • Use of historical information in the formulation of the upcoming -year revenue and expenditure assumptions with the help of outside sources; • Monthly reporting of budget -to -actual performance to the council with the ability to make amendments to the budget as needed; • 10 -year capital plan that is updated annually, published with the annual budget, and includes sources and uses of funds; • Formalized investment management policy; monthly cash reports and more expansive investment information in the quarterly board reports; • Formalized debt management policy that sets various qualitative standards for debt issuances, and sets a goal that manages its debt service levy; however, it lacks quantitative measures we generally associate with a strong assessment; • Formalized fund balance policy to maintain 45% of subsequent years' expenditures for cash flow and contingency purposes. The policy also states that excess reserves be transferred to the capital improvements fund; and • Lack of a robust general fund forecast, though the city does forecast future tax revenue and various utilities revenue. Strong budgetary performance Otsego's budgetary performance is strong in our opinion. The city had operating surpluses of 3.6% of expenditures in the general fund and of 11.8% across all governmental funds in fiscal 2018. Fiscal 2018 results have been adjusted to reflect one-time capital projects and revenues as well as recurring transfers from the city's proprietary funds. Furthermore, we adjust for transfers out of the general fund to the capital improvement fund, as the city transfers available reserves out to maintain 45% of the subsequent year's expenditures WWW.STANDABDANDPOOBS.COM/BATINGSDIRECT NOVEMBER 14, 2019 3 Summary: Otsego, Minnesota, General Obligation in the general fund. The strong surplus in the general fund was largely fueled by an increase in license and permit revenues, as home construction expanded beyond what was budgeted for. Property taxes made up the largest part of general fund revenues at 63%, followed by licenses and permit (27%) and charges for services (5%). Total governmental revenues increased markedly as a result of capital grants, as the city undertakes several projects, and also increased funding of street maintenance for fiscal 2018. As a result, total governmental fund performance has been somewhat volatile since fiscal 2016. We expect fiscal 2019 will show similar results to fiscal 2018's. Management has indicated that public safety and public works projects are increasing; however, management still anticipates making a transfer to the capital improvement fund, consistent with what it has done in the past. We expect at least breakeven results for fiscal years 2019 and 2020. Very strong budgetary flexibility Otsego's budgetary flexibility is very strong, in our view, with an available fund balance in fiscal 2018 of 61% of operating expenditures, or $3.8 million. We expect the available fund balance to remain above 30% of expenditures for the current and next fiscal years, which we view as a positive credit factor. We expect Otsego's budgetary flexibility will remain very strong based on management's intentions to maintain general fund reserves in keeping with its fund balance policy and balanced financial operations. The general fund balance policy calls for amounts in excess of 45% of subsequent year's expenditures to be transferred to the capital fund. Our calculation excludes funds in the capital improvement fund, to which the city transfers on an annual basis, and considers the funds available. The capital improvement fund has an additional $8.1 million in reserves. Very strong liquidity In our opinion, Otsego's liquidity is very strong, with total government available cash at 3.3x total governmental fund expenditures and 24.9x governmental debt service in 2018. In our view, the city has strong access to external liquidity if necessary. This strong access to external liquidity is based on Otsego's regular issuances of GO bonds. We do not consider its use of investments aggressive because the city primarily invests in federal securities and state and local debt with a minimum rating of'A' or above. It does not have any contingent liquidity risk that could come due in the near term and put pressure its budget. Therefore, we expect liquidity will remain very strong. Adequate debt and contingent liability profile In our view, Otsego's debt and contingent liability profile is adequate. Total governmental fund debt service is 13.2% of total governmental fund expenditures, and net direct debt is 66.3% of total governmental fund revenue. Approximately 98.0% of the direct debt is scheduled to be repaid within 10 years, which is in our view a positive credit factor. With this issue, the city has about $27.16 million of GO debt outstanding, with much of it, $19.18 million, paid from net revenues of the city's water and sewer utilities. Management has indicated plans to issue additional debt, which will likely be secured by the city's water and sewer system. There are no plans to issue new GO debt. Pension and OPEB highlights We do not view pension and OPEB liabilities as an immediate source of credit pressure for Otsego, despite our expectation that costs will increase. WWW.STANDARDANDPOOHS.COM/RATINGSDIRECT NOVEMBER 14, 2019 4 Summary: Otsego, Minnesota, General Obligation • Because statutory pension contributions have generally not met actuarial requirements, this can lead to underfunding over time and the risk of unexpected contribution escalations increases. However, we expect higher contributions will likely remain affordable, given our view the city has sufficient taxing and operational flexibility to manage these expected increases. • The city has no OPEB liabilities. Otsego participates in the General Employees Retirement Fund (GERF) administered by the Public Employees Retirement Association of Minnesota: 79.53% funded as of Dec. 30, 2018 with a net pension liability of $1.193 million, The city does not prove OPEB benefits. Otsego's required pension contribution totaled 1% of total governmental fund expenditures in 2018. The city made its full annual required pension contribution in 2018. It funds 100% of pension statutory requirements, which does not meet static funding requirements and also falls short of minimum funding progress. Although we view GERF's 16 -year, closed, and level 3% of payroll amortization favorably, we believe a discount rate of 7.5% exposes the plan to market risk, which could lead to greater volatility in funding levels in a market downturn. Strong institutional framework The institutional framework score for Minnesota cities with a population greater than 2,500 is strong. Outlook The stable outlook reflects our view that Otsego will maintain reserves at or above its reserve policy amount, at least adequate budgetary performance, and very strong liquidity. We do not expect a rating change within the two-year outlook period. Upside scenario A higher rating is possible if the city's economic measures, such as its income levels and per capita market values, were to improve to levels commensurate with those of higher -rated peers, all other credit factors remaining equal. Downside scenario We could lower the rating should Otsego experience weakened budgetary performance on a sustained basis, leading to deterioration in liquidity and reserves. Related Research • Criteria Guidance: Assessing U.S. Public Finance Pension And Other Postemployment Obligations For GO Debt, Local Government GO Ratings, And State Ratings, Oct. 7, 2019 • S&P Public Finance Local GO Criteria: How We Adjust Data For Analytic Consistency, Sept. 12, 2013 Otsego GO Long Term Rating AA+/Stable Affirmed WWW.STANDARDANOPOOBS.COM/BATINGSDIBECT NOVEMBER 14, 2019 5 Summary: Otsego, Minnesota, General Obligation Otsego GO imp crossover rfdg bnds Long Term Rating AA+/Stable Affirmed Otsego GO wtr & swr rev rfdg bnds ser 2009A dtd 12/01/2009 due 12/01/2024-2027 Long Term Rating AA+/Stable Affirmed Otsego GO (AGM) Unenhanced Rating AA+(SPUR)/Stable Affirmed Many issues are enhanced by bond insurance. Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at wwwstandardandpoors.com. Use the Ratings search box located in the left column. WWW.STANOARDANDPOORS.COM/RATINGSDIRECT NOVEMBER 14, 2019 6 Copyright© 2019 by Standard & Poor's Financial Services LLC. All rights reserved. No content (including ratings, credit -related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) maybe modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third -party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Credit -related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating - related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third -party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. STANDARD & POOR'S, S&P and RATINGSDIRECT are registered trademarks of Standard & Poor's Financial Services LLC. WWW.STANDAR DAN DPOORS.COM/RATINGS DIRECT NOVEMBER 14, 2019 7