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ITEM 5.1 Approval of General Obligation Improvement Refunding Bonds, Series 2020A
0tsF e o MINNESOTA V DEPARTMENT INFORMATION Request for City Council Action ORIGINATING DEPARTMENT REQUESTOR: MEETING DATE: Administration City Administrator/Finance Director Flaherty October 12, 2020 PRESENTER(s) REVIEWED BY: ITEM #: Administration Jessica Green, Northland Securities, Inc. Mary Ippel, Taft 5.1 STRATEGIC VISION MEETS: I THE CITY OF OTSEGO: Is a strong organization that is committed to leading the community through innovative communication. X Has proactively expanded infrastructure to responsibly provide core services. Is committed to delivery of quality emergency service responsive to community needs and expectations in a cost-effective manner. Is a social community with diverse housing, service options, and employment opportunities. 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 sale of General Obligation Improvement Refunding Bonds, Series 2020A. ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED? No No BACKGROUND/J USTI FICATI ON: City staff has worked with Northland Securities, Inc. to evaluate the feasibility of issuing refunding bonds to achieve interest savings. The two bond issues identified for refunding include the Series 2010D and 2011A, which were originally issued to finance improvements to Queens Avenue and CSAH 42. The two bond issues have $3,170,000 in principal outstanding, with amortizations extending out to February 2028. The preliminary feasibility analysis provided a bond in the principal amount of $3,270,000 with interest savings of $193,770 or a net present value of debt service savings of 5.52%. The actual sale provided a bond in the principal amount of $2,950,000 with interest savings of $182,257 or a net present value of debt service savings of 5.17%. Based on this feasibility analysis, the City Council adopted Resolution 2020-58, which approved the issuance of General Obligation Improvement Refunding Bonds, Series 2020A, subject to a "trigger", or minimum total net savings threshold of $150,000. This is necessary, as the municipal bond market fluctuates daily, just like the stock market, so even though preliminary analysis showed a certain amount of savings, the actual amount of savings will not be known until the bond is priced. Should the bond pricing not provide the minimum amount of savings, City staff will abandon the process and not issue the refunding bond. On September 24, 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. City staff is recommending to sell the 2020A 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 resolution was prepared by the City's Bond Counsel, Mary Ippel with Taft. 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: I • Standard and Poor's — Rating Summary • Bond Sale Summary • Resolution 2020-68 POSSIBLE MOTION PLEASE WORD MOTION AS YOU WOULD LIKE IT TO APPEAR IN THEM I NUTES: Motion to approve Resolution 2020-68 accepting proposal on the negotiated sale of General Obligation Improvement Refunding Bonds, Series 2020A. BUDGET INFORMATION FUNDING: BUDGETED: Fund 380 — 2010D & 2011A Debt Service N/A S&P Global Ratings RatingsDirect @ Summary: Otsego, Minnesota; General Obligation Primary Credit Analyst: Coral Schoonejans, Centennial + 1 (303) 721-4948; coral.schoonejans@spglobal.com Secondary Contact: Alexander Vargas, CFA, Chicago (1) 312-233-7093; alexander.vargas@spglobal.com Table Of Contents ............................................................................................................. Rating Action Stable Outlook Related Research WWW.STANDABDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 29, 2020 1 Summary: Otsego, Minnesota; General Obligation Credit Profile US$3.27 mil GO imp rfdg bnds ser 2020A due 02/01/2028 Long Term Rating AA+/Stable New Rating Action S&P Global Ratings assigned its 'AA+' long-term rating to Otsego, Minn.'s $3.3 million series 2020A general obligation (GO) improvement refunding bonds. At the same time, S&P Global Ratings affirmed its 'AA+' long-term rating and underlying rating (SPUR) on the city's GO debt outstanding. The outlook is stable. The series 2020A bonds are secured by the city's unlimited -tax GO pledge, and are payable from special assessments against benefited properties. The city's previously issued GO debt is additionally secured by special assessments and water and sewer net revenue. We rate all debt based on the city's GO pledge. The bond proceeds will refund a portion of the city's debt outstanding for interest cost savings. Credit overview Otsego benefits from proximity to Minneapolis, which has led 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 uncertainty arising from the pandemic and economic recovery further limit upward potential. Generally, our rating outlook timeframe is up to two years, but based on the uncertainty regarding the pandemic our view of the credit risks is on the more immediate budgetary effects over the next six to 12 months. For our latest U.S. economic forecast, see "The U.S. Economy Reboots, With Obstacles Ahead," published Sept. 24th, 2020, on RatingsDirect. The rating reflects our assessment of the city's: • Very strong economy, with access to a broad and diverse metropolitan statistical area; • Strong management, with good financial policies and practices under our financial management assessment methodology; • Adequate budgetary performance, with operating surpluses in the general fund and at the total governmental fund level in fiscal 2019; • Very strong budgetary flexibility, with an available fund balance in fiscal 2019 of 60% of operating expenditures; • Very strong liquidity, with total government available cash at 3.5x total governmental fund expenditures and 27.Ox governmental debt service, and access to external liquidity we consider strong; WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 29, 2020 2 Summary: Otsego, Minnesota; General Obligation Adequate debt and contingent liability position, with debt service carrying charges at 13.1% of expenditures and net direct debt that is 179.7% of total governmental fund revenue, as well as rapid amortization, with 73.5% of debt scheduled to be retired in 10 years; and • Strong institutional framework score. Environmental, social, and governance factors The rating incorporates our view of the health and safety risks posed by the COVID-19 pandemic, which we consider a social risk factor. Although the scope of economic and financial challenges posed by the pandemic remains unknown, we believe that the city's exposure to pandemic -related risk is in line with that of sector peers. We have also analyzed the city's environmental and governance risks and believe that they align with the sector standard. Stable Outlook Downside scenario We could lower the rating should the city experience weakened budgetary performance on a sustained basis, leading liquidity and reserves to deteriorate. Upside scenario Although we are unlikely to raise the rating during the recessionary cycle, we could do so if the city's incomes and per capita market value were to improve to levels commensurate with those of higher -rated peers, with all other credit factors remaining equal. Very strong economy We consider Otsego's economy very strong. The city, with an estimated population of 18,130, is located in Wright County in the Minneapolis -St. Paul -Bloomington metropolitan statistical area, which we consider broad and diverse. The city has a projected per capita effective buying income of 111% of the national level and per capita market value of $119,446. Overall, the city's economic market value grew by 11.4% over the past year to $2.2 billion in 2020. Wright County's unemployment in July 2020 (not seasonally adjusted) was estimated at 6.2% compared with the state's rate of 7.6%. Otsego is about 30 miles northwest of downtown Minneapolis. The city continues to benefit from proximity to Minneapolis, experiencing steady residential growth. The city had 259 new residential construction permits in 2020, compared with 220 in 2019 and 300 in 2018. Furthermore, the city is experiencing growth in multifamily housing development. For fiscal 2021, officials report that preliminary assessments show an increase of 8% in economic market value as a result of increases across all taxable property types, with the exception of agricultural properties, which will remain flat from fiscal 2020. We expect the local economy to remain strong -to -very -strong and a key credit strength. Strong management We view the city's management as strong, with good financial policies and practices under our financial management assessment methodology, indicating our view that financial practices exist in most areas but that governance officials might not formalize or monitor all of them on a regular basis. Highlights include management's: WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 29, 2020 3 Summary: Otsego, Minnesota; General Obligation • Use of historical information in the formulation of 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 amend the budget as needed; • 10-year capital plan that is updated on an annual basis, 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 around debt issuances and sets a goal that manages the debt service levy but lacks in quantitative measures that we would generally associate with a strong assessment; and • Formalized fund balance policy to maintain 45% of the following year's expenditures for cash flow and contingency purposes (the policy goes on to state that excess reserves be transferred to the capital improvements fund). Adequate budgetary performance Otsego's budgetary performance is adequate, in our opinion. The city had operating surpluses of 3.1% of expenditures in the general fund and of 23.4% across all governmental funds in fiscal 2019. General fund operating results of the city have been stable over the past three years, with a result of 3.6% in 2018 and a result of 4.2% in 2017 Although budgetary performance has generated net positive results in the past three fiscal years, we believe the uncertainty resulting from the unknown duration of the pandemic and economic challenges stemming from the recession could pose budgetary challenges in the near term. We note that during the previous recession, property tax levy limits were instituted on a temporary basis in Minnesota, but no changes have been announced to date. We have made adjustments to performance data to reflect one-time capital projects and revenue 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 in an aim to maintain 45% of the following year's expenditures in the general fund. Recent large surpluses in the general fund largely resulted from an increase in license and permit revenue, as the city continues to see home construction beyond what it budgeted for. Property taxes continue to make up the largest part of general fund revenue at 63%, followed by licenses and permits (25%), and charges for services (5%). We note that compared with other Minnesota cities, Otsego has very little reliance on Local Government Aid (LGA), which is a positive credit factor, as LGA has been cut during previous recessionary times. For fiscal 2020, officials budgeted for break-even results and expect an operating surplus and a transfer of $932,000 into the capital improvement fund, consistent with prior years' trends. Management reports minimal impact from the pandemic on its financial performance, with the greatest revenue variance coming from the city's decision to not penalize for late and delinquent utility bills, whereas $50,000 to $100,000 of delinquent fee revenue may not come in. Further negative revenue variance will come from recreation programs, which may yield a $30,000 negative variance from temporary closures. Despite small reductions in these revenue items, officials report positive variances in building permit revenue and expect a year-end surplus. The city was allocated $1.3 million in Coronavirus Aid, Recovery, and WWW.STANDABDANDPOOHS.COM/RATINGSDIRECT SEPTEMBER 29, 2020 4 Summary: Otsego, Minnesota; General Obligation Economic Security (CARES) Act funds to reimburse eligible expenses incurred during the pandemic. For fiscal 2021, officials expect to budget for another break-even year with a slight decrease in its tax rate as a result of overall tax capacity growth. Expenditures will increase year over year as a result of wage and inflationary growth, but we anticipate that results will likely be on par with those of 2020. As a result, we expect budgetary performance to remain at least adequate, but we will monitor through the recessionary cycle. Very strong budgetary flexibility Otsego's budgetary flexibility is very strong, in our view, with an available fund balance in fiscal 2019 of 60% of operating expenditures, or $4 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. Over the past three years, the total available fund balance has remained consistent, totaling 61% of expenditures in 2018 and 62% in 2017. We anticipate that 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 the following 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 which it considers available. The capital improvement fund has an additional $11.3 million in unrestricted reserves. Very strong liquidity In our opinion, Otsego's liquidity is very strong, with total government available cash at 3.5x total governmental fund expenditures and 27.Ox governmental debt service in 2019. In our view, the city has strong access to external liquidity if necessary based on regular issuances of GO bonds. We do not consider its use of investments aggressive given that the city primarily invests in federal securities and state and local debt with a minimum rating of 'A' or above. The city has no contingent liquidity risk that could come due in the near term and put pressure its budget. Thus, we expect the city's liquidity position to 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 13.1% of total governmental fund expenditures, and net direct debt is 179.7% of total governmental fund revenue. Approximately 73.5% 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 $40.5 million of GO debt outstanding, with much of it, $33.7 million, paid from net revenue of the city's water and sewer utilities. Management plans to issue an additional $6.6 million in GO debt further secured by the city's water and sewer system net revenue in 2021 and as much as $31 million in debt fully supported by utility revenue in 2022 with no GO pledge. Given the city's rapid amortization, we anticipate that the city's debt profile will remain at least adequate. Otsego's pension contributions totaled 1.1% of total governmental fund expenditures in 2019. The city made its full annual required pension contribution. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 29, 2020 5 Summary: Otsego, Minnesota; General Obligation Pension and other postemployment benefit (OPEB) liabilities • We do not view pension and OPEB liabilities as an immediate source of credit pressure for Otsego, despite our expectation that costs will increase. 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 to remain affordable given our view that the city has sufficient taxing and operational flexibility to manage these expected increases. • The city does not offer any OPEB. Otsego participates in the General Employees Retirement Fund (GERF) administered by the Public Employees Retirement Assn. of Minnesota: 80.2% funded as of Dec. 30, 2019, with a net pension liability of $1.2 million. Otsego's required pension contribution totaled 1% of total governmental fund expenditures in 2019. The city made its full annual required pension contribution. It funds 100% of pension statutory requirements, which meets static funding requirements, but falls short of minimum funding progress. Although we view GERF's 30-year, closed, and level-3%-of-payroll amortization somewhat favorably, we believe a discount rate of 7.5% exposes the pension plans 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. 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 • Through The ESG Lens 2.0: A Deeper Dive Into U.S. Public Finance Credit Factors, April 28, 2020 • 2019 Update Of Institutional Framework For U.S. Local Governments Ratings Detail (As Of September 29, 2020) Otsego GO Long Term Rating AA+/Stable Affirmed Otsego GO imp crossover rfdg bnds Long Term Rating AA+/Stable Affirmed Otsego GO wtr & swr rev rfdg bnds 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 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 29, 2020 6 Summary: Otsego, Minnesota; General Obligation action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 29, 2020 7 Copyright © 2020 by Standard & Poor's Financial Services LLC. All rights reserved. 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WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 29, 2020 8 i�0� NORTHLAND SECURITIES City of Otsego, Minnesota $2,950,000 General Obligation Improvement Refunding Bonds, Series 2020A Bond Sale Summary October 7, 2020 PURPOSE: To current refund the City's General Obligation Improvement Refunding Bonds, Series 2010D (the "2010D Bonds') and General Obligation Improvement Crossover Refunding Bonds, Series 2011A (the "2011A Bonds") on November 17, 2020, and to pay costs associated with the issuance of the Bonds. FINANCE PLAN: The Bonds have been structured to result in relatively level annual savings compared to the 2010D and 2011A Bonds. RESULTS: • Bonds were underwritten by Northland Securities, Inc., Minneapolis, Minnesota. • Bonds were rated "AA+" by S&P Global Ratings. Final on 10/07/2020 Par Amount $2,950,000 True Interest Cost (TIC) 1.03% Gross Savings (Total) $182,257 Net Present Value Savings (Total) 5.17% Gross Savings (2010D) $67,713 Net Present Value Savings (2010D) 7.38 % Gross Savings (2011A) $114,544 Net Present Value Savings (2011A) 4.39 % Page 1 NORTHLAND SECURITIES EXHIBIT A - SOURCES AND USES Issue 2010D 2011A S u Sources Of Funds Par Amount of Bonds $740,000.00 $2,210,000.00 $2,950,000.00 Reoffering Premium 91,833.60 220,365.90 312,199.50 Total Sources $831,833.60 $2,430,365.90 $3,262,199.50 Uepe nfFunde Total Uses $831,833.60 $2,430,365.90 $3,262,199.50 EXHIBIT B - PRICING SUMMARY Maturity Maturity Type of Bond Coupon Yield Value Price Dollar Price 02/01/2021 Serial Coupon 4.000% 0.300% 505,000.00 100.759% 508,832.95 02/01/2022 Serial Coupon 4.000% 0.340% 475,000.00 104.399% 495,895.25 02/01/2023 Serial Coupon 4.000% 0.390% 495,000.00 107.919% 534,199.05 02/01/2024 Serial Coupon 4.000% 0.440% 270,000.00 111.318% 300,558.60 02/01/2025 Serial Coupon 4.000% 0.540% 280,000.00 114.367% 320,227.60 02/01/2026 Serial Coupon 4.000% 0.660% 290,000.00 117.062% 339,479.80 02/01/2027 Serial Coupon 4.000% 0.810% 315,000.00 119.267% 375,691.05 02/01/2028 Serial Coupon 4.000% 0.970% 320,000.00 121.036% 387,315.20 Total - - - $2,950,000.00 - $3,262,199.50 Bid Information Par Amount of Bonds 99.5 Total Underwiter's Discount (1.2001/o) $(35,400.00) Bid (109.3 83 %) 3,226,799.50 Total Purchase Price $3,226,799.50 Page 2 NORTHLAND SECURITIES EXHIBIT C — DEBT SERVICE SAVINGS (TOTAL) Date Total P+I Net New D/S Old Net D/S Savings 02/01/2021 529,255.55 525,806.28 549,236.25 23,429.97 02/01/2022 572,800.00 572,800.00 596,777.50 23,977.50 02/01/2023 573,800.00 573,800.00 593,845.00 20,045.00 02/01/2024 329,000.00 329,000.00 350,025.00 21,025.00 02/01/2025 328,200.00 328,200.00 351,325.00 23,125.00 02/01/2026 327,000.00 327,000.00 352,145.00 25,145.00 02/01/2027 340,400.00 340,400.00 362,230.00 21,830.00 02/01/2028 332,800.00 332,800.00 356,480.00 23,680.00 Total $3,333,255.55 $3,329,806.28 $3,512,063.75 $182,257.47 PV Analysis Summary (Net to Net) Gross PV Debt Service Savings ..................... 174,169.86 Net PV Cashflow Savings @ 0.6810/o(Bond Yield)..... 174,169.86 Contingency or Rounding Amount .................... 3,449.27 Net Present Value Benefit $177,619.13 Net PV Benefit / $3,436,369.36 PV Refunded Debt Service 5.169% Net PV Benefit / $3,170,000 Refunded Principal... 5.603% Page 3 NORTHLAND SECURITIES EXHIBIT D - DEBT SERVICE SCHEDULE Date Principal Coupon Interest Total P+I Fiscal Total 11/17/2020 - - - - - 02/01/2021 505,000.00 4.000% 24,255.55 529,255.55 529,255.55 08/01/2021 - - 48,900.00 48,900.00 - 02/01/2022 475,000.00 4.000% 48,900.00 523,900.00 572,800.00 08/01/2022 - - 39,400.00 39,400.00 - 02/01/2023 495,000.00 4.000% 39,400.00 534,400.00 573,800.00 08/01/2023 - - 29,500.00 29,500.00 - 02/01/2024 270,000.00 4.000% 29,500.00 299,500.00 329,000.00 08/01/2024 - - 24,100.00 24,100.00 - 02/01/2025 280,000.00 4.000% 24,100.00 304,100.00 328,200.00 08/01/2025 - - 18,500.00 18,500.00 - 02/01/2026 290,000.00 4.000% 18,500.00 308,500.00 327,000.00 08/01/2026 - - 12,700.00 12,700.00 - 02/01/2027 315,000.00 4.000% 12,700.00 327,700.00 340,400.00 08/01/2027 - - 6,400.00 6,400.00 02/01/2028 320,000.00 4.000% 6,400.00 326,400.00 332,800.00 Total $2,950,000.00 - $383,255.55 $3,333,255.55 - Date And Term Structure Dated 11/17/2020 Delivery Date 11/17/2020 First available call date Yield Statistics Net Interest Cost 1.1110712% Page 4 I NORTHLAND �`yf SECURITIES EXHIBIT E - DEBT SERVICE SAVINGS (2010D) Net New Date Total P+I D/S Old Net D/S Savings 02/01/2021 96,084.44 92,731.70 103,165.00 10,433.30 02/01/2022 111,000.00 111,000.00 118,765.00 7,765.00 02/01/2023 107,600.00 107,600.00 115,820.00 8,220.00 02/01/2024 109,200.00 109,200.00 117,875.00 8,675.00 02/01/2025 105,600.00 105,600.00 114,575.00 8,975.00 02/01/2026 107,000.00 107,000.00 116,275.00 9,275.00 02/01/2027 108,200.00 108,200.00 117,810.00 9,610.00 02/01/2028 109,200.00 109,200.00 113,960.00 4,760.00 Total $853,884.44 $850,531.70 $918,245.00 $67,713.30 PV Analysis Summary (Net to Net) Gross PV Debt Service Savings ..................... 62,764.70 Net PV Cashflow Savings @ 0.681 %(Bond Yield)..... 62,764.70 Contingency or Rounding Amount .................... 3,352.74 Net Present Value Benefit $66,117.44 Net PV Benefit / $895,441.34 PV Refunded Debt Service 7.384% WA Page 5 NORTHLAND �`y, SECURITIES EXHIBIT F - DEBT SERVICE SAVINGS (2011A) Date Total P+I Net New D/S Old Net D/S Savings 02/01/2021 433,171.11 433,074.58 446,071.25 12,996.67 02/01/2022 461,800.00 461,800.00 478,012.50 16,212.50 02/01/2023 466,200.00 466,200.00 478,025.00 11,825.00 02/01/2024 219,800.00 219,800.00 232,150.00 12,350.00 02/01/2025 222,600.00 222,600.00 236,750.00 14,150.00 02/01/2026 220,000.00 220,000.00 235,870.00 15,870.00 02/01/2027 232,200.00 232,200.00 244,420.00 12,220.00 02/01/2028 223,600.00 223,600.00 242,520.00 18,920.00 Total $2,479,371.11 $2,479,274.58 $2,593,818.75 $114,544.17 PV Analysis Summary (Net to Net) Gross PV Debt Service Savings ..................... 111,405.15 Net PVCashflowSavings car, 0.681%(Bond Yield)..... 111,405.15 Contingency or Rounding Amount .................... 96.53 Net Present Value Benefit $111,501.68 Net PV Benefit / $2,540,928.02 PV Refunded Debt Service 4.388% Net PV Page 6 NORTHLAND SECURITIES EXHIBIT G - MUNICIPAL MARKET CONDITIONS Band Buyer's Index Trends 4.5096 ........'�� \� A 4.009. -- Y-.. is r °1 3.50% -2019 -- 2018 m 0 3.00% ----- 2017 N i 2.50% _...- ..__ 2.00% c � ' E c a u O Source: Data compiledbyNorthlandSecuritiesfrom publishedBondBuyer'sIndex NORTHLAND SECURITIES 150 South 5th Street, Suite 3300, Minneapolis, MN 55402 Main 612-851-5900 /www.northiandsecurities.com Member FINRA and SIPC, Registered with SEC and MSRB Chartfor Illustration only. Misisnotan offerto buyor sell securities. Basedon sourcesbellevedtobe reliable, butnot mrrantedor guaranteedbyNorthiandSectaities, Inc. (RC 19-14A/Muni 19-_ 10A) Page 7 EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL CITY OF OTSEGO, MINNESOTA HELD: October 12, 2020 Pursuant to due call, a regular or special meeting of the City Council of the City of Otsego, Wright County, Minnesota, was duly held at the City Hall on October 12, 2020, at 7:00 P.M., for the purpose in part of authorizing the issuance and awarding the sale of $2,950,000 General Obligation Improvement Refunding Bonds, Series 2020A. The following members were present: and the following were absent: Member introduced the following resolution and moved its adoption: RESOLUTION 2020-68 ACCEPTING PROPOSAL ON THE NEGOTIATED SALE OF $2,950,000 GENERAL OBLIGATION IMPROVEMENT REFUNDING BONDS, SERIES 2020A, PLEDGING FOR THE SECURITY THEREOF SPECIAL ASSESSMENTS AND LEVYING A TAX FOR THE PAYMENT THEREOF A. WHEREAS, the City Council of the City of Otsego, Minnesota (the "City") has heretofore determined and declared that it is necessary and expedient to issue $2,950,000 General Obligation Improvement Refunding Bonds, Series 2020A for (the "Bonds" or individually, a "Bond"), pursuant to Minnesota Statutes, Chapters 475 for a current refunding on November 17, 2020 (the "Call Date") of the City's $1,220,000 original principal amount of General Obligation Improvement Refunding Bonds, Series 201 OD, dated November 1, 2010 (the "Prior 201 OD Bonds"), and $4,640,000 original principal amount of General Obligation Improvement Crossover Refunding Bonds, Series 2011 A, dated December 1, 2011 (the "Prior 2011A Bonds" and together with the Prior 2010D Bonds, the "Prior Bonds"), maturing on and after February 1, 2021, and; B. WHEREAS, (i) $805,000 aggregate principal amount of the Prior 2010D Bonds which matures on and after February 1, 2021 (the "Refunded 201 OD Bonds"), is callable on the Call Date, at a price of par plus accrued interest, as provided in the Resolution adopted by the City Council on October 25, 2010, authorizing the issuance of the Prior 201 OD Bonds (the "Prior 201OD Resolution"); and (ii) $2,365,000 aggregate principal amount of the Prior 2011 A Bonds which matures on and after February 1, 2021 (the "Refunded 2011A Bonds"), is callable on the Call Date, at a price of par plus accrued interest as provided in the resolution adopted by the City Council on November 28, 2011, authorizing the issuance of the Prior 201 IA Bonds (the "Prior 2011A Resolution" and together with the Prior 201 OD Resolution, the "Prior Resolutions"); and C. WHEREAS, the refunding of the Refunded 201 OD Bonds and the Refunded 201 IA Bonds (together, the "Refunded Bonds") on the Call Date is consistent with covenants made with the holders thereof, and is necessary and desirable for the reduction of debt service cost to the City; and 12860109vl D. WHEREAS, the City has retained AEM Financial Solutions, 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 E. WHEREAS, it is in the best interests of the City that the Bonds be issued in book - entry form as hereafter provided. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Otsego, Minnesota, as follows: Acceptance of Officer; Purchase Contract. (a) The offer of Northland Securities, Inc. (the "Purchaser"), to purchase the Bonds in accordance with the terms and at the rates of interest hereinafter set forth, and to pay therefor the sum of $3,226,799.50, plus interest accrued to settlement, is hereby accepted. 2. Bond Terms. (a) Original Issue Date; Denominations,• Maturities; Term Bond Option. The Bonds shall be dated November 17, 2020, as the date of original issue, be issued forthwith on or after such date in fully registered form, 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 mature on February 1 in the years and amounts as follows: Year Amount Year Amount 2021 $505,000 2025 $280,000 2022 475,000 2026 290,000 2023 495,000 2027 315,000 2024 270,000 2028 320,000 As may be requested by the Purchaser, one or more term Bonds may be issued having mandatory sinking fund redemption and final maturity amounts conforming to the foregoing principal repayment schedule, and corresponding additions may be made to the provisions of the applicable Bond(s). (b) Allocation. The aggregate principal amount of $740,000 maturing in each of the years and amounts hereinafter set forth are issued to finance the refunding of the Refunded 201 OD Bonds (the "201 OD Refunding Portion"); and the aggregate principal amount of $2,210,000 maturing in each of the years and amounts hereinafter set forth are issued to finance the refunding of the Refunded 2011A Bonds (the "2011A Refunding Portion"): Year 2010D Refunding Portion (Amount) 2021 $90,000 2022 85,000 2011A Refunding Portion (Amount) $415,000 390,000 Total Amount $505,000 475,000 128601090 2 2023 85,000 410,000 495,000 2024 90,000 180,000 2705000 2025 90,000 190,000 280,000 2026 95,000 195,000 290,000 2027 100,000 2155000 315,000 2028 105,000 2155000 320,000 If Bonds are prepaid, the prepayments shall be allocated to the portions of debt service (and hence allocated to the payment of Bonds treated as relating to a particular portion of debt service) as provided in this paragraph. If the source of prepayment moneys is the general fund of the City, or other generally available source, the prepayment may be allocated to either or both of the portions of debt service in such amounts as the City shall determine. If the source of the prepayment is special assessments pledged to and taxes levied for the 2010D Prior Bonds, the prepayment shall be allocated to the 201 OD Refunding Portion of debt service. If the source of the prepayment is special assessments pledged to and taxes levied for the 2011A Refunding Bonds, the prepayment shall be allocated to the 2011A Refunding Portion of debt service. (c) Book Entry Only The Depository Trust Company, a limited purpose trust company organized under the laws of the State of New York or any of its successors or its successors to its functions hereunder (the "Depository") will act as securities depository for the Bonds, and to this end: (i) The Bonds shall be initially issued and, so long as they remain in book entry form only (the 'Book Entry Only Period"), shall at all times be in the form of a separate single fully registered Bond for each maturity of the Bonds; and for purposes of complying with this requirement under paragraphs 5 and 10 Authorized Denominations for any Bond shall be deemed to be limited during the Book Entry Only Period to the outstanding principal amount of that Bond. (ii) Upon initial issuance, ownership of the Bonds shall be registered in a bond register maintained by the Bond Registrar (as hereinafter defined) in the name of CEDE & 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 3 12860109v1 by the Depository as the Registered Holder of any Bonds (the "Holder"). For purposes of securing the vote or consent of any Holder under this Resolution, the City may, however, rely upon an omnibus proxy under which the Depository assigns its consenting or voting rights to certain Participants to whose accounts the Bonds are credited on the record date identified in a listing attached to the omnibus proxy. (iv) The City and the Bond Registrar may treat as and deem the Depository to be the absolute owner of the Bonds for the purpose of payment of the principal of and premium, if any, and interest on the Bonds, for the purpose of giving notices of redemption and other matters with respect to the Bonds, for the purpose of obtaining any consent or other action to be taken by Holders for the purpose of registering transfers with respect to such Bonds, and for all purpose whatsoever. The Bond Registrar, as paying agent hereunder, shall pay all principal of and premium, if any, and interest on the Bonds only to the Holder or the Holders of the Bonds as shown on the bond register, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to the principal of and premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. (v) Upon delivery by the Depository to the Bond Registrar of written notice to the effect that the Depository has determined to substitute a new Nominee in place 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 15 calendar days in advance of such special record date to the extent possible. M 128601090 (ix) Any successor Bond Registrar in its written acceptance of its duties under this Resolution and any paying agency/bond registrar agreement, shall agree to take any actions necessary from time to time to comply with the requirements of the Letter of Representations. (x) In the case of a partial prepayment of a Bond, the Holder may, in lieu of surrendering the Bonds for a Bond of a lesser denomination as provided in paragraph 5, make a notation of the reduction in principal amount on the panel provided on the Bond stating the amount so redeemed. (d) Termination of Book -Entry Only sue. Discontinuance of a particular Depository's services and termination of the book -entry only system may be effected as follows: (i) The Depository may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the City and discharging its responsibilities with respect thereto under applicable law. The City may terminate the services of the Depository with respect to the Bond if it determines that the Depository is no longer able to carry out its functions as securities depository or the continuation of the system of book -entry transfers through the Depository is not in the best interests of the City or the Beneficial Owners. (ii) Upon termination of the services of the Depository as provided in the preceding paragraph, and if no substitute securities depository is willing to undertake the functions of the Depository hereunder can be found which, in the opinion of the City, is willing and able to assume such functions upon reasonable or customary terms, or if the City determines that it is in the best interests of the City or the Beneficial Owners of the Bond that the Beneficial Owners be able to obtain certificates for the Bonds, the Bonds shall no longer be registered as being registered in the bond register in the name of the Nominee, but may be registered in whatever name or names the Holder of the Bonds shall designate at that time, in accordance with paragraph 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 (d) shall limit or restrict the provisions of paragraph 10. (e) 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; Findings. The Bonds shall provide funds for the 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. 128601090 4. Interest. The Bonds shall bear interest payable semiannually on February 1 and August 1 of each year (each, an "Interest Payment Date"), commencing February 1, 2021, 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 Maturity Year Interest Rate 2021 4.000% 2025 4.000% 2022 4.000 2026 4.000 2023 4.000 2027 4.000 2024 4.000 2028 4.000 5. No Optional Redemption. The Bonds shall not be subject to redemption and prepayment prior to their stated maturity dates. 6. Bond Re ig strar. 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 of this resolution. 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: 6 iza6oio9vi UNITED STATES OF AMERICA STATE OF MINNESOTA WRIGHT COUNTY CITY OF OTSEGO R- $. GENERAL OBLIGATION IMPROVEMENT REFUNDING BOND, SERIES 2020A Interest Rate Maturity Date Date of Original Issue CUSIP % February 1, November 17, 2020 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, unless called for earlier redemption, and to pay interest thereon semiannually on February 1 and August 1 of each year (each, an "Interest Payment Date"), commencing February 1, 2021, 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 the Letter of Representations, as defined in the Resolution, and surrender of this Bond shall not be required for payment of the redemption price upon a partial redemption of this Bond. Until termination of the book -entry only system pursuant to the Resolution, Bonds may only be registered in the name of the Depository or its Nominee. h 12860109v1 No Optional Redemption. The Bonds shall not be subject to redemption and prepayment prior to their stated maturity dates. Issuance; PpMose; General Obligation. This Bond is one of an issue in the total principal amount of $2,950,000, all of like date of original issue and tenor, except as to number, maturity, interest rate, denomination and redemption privilege, issued pursuant to and in full conformity with the Constitution and laws of the State of Minnesota and pursuant to a resolution adopted by the City Council on October 12, 2020 (the "Resolution"), for the purpose of providing funds for a current refunding of certain outstanding general obligation bonds of the Issuer. This Bond is payable out of the General Obligation Improvement Refunding Bonds, Series 2020A Fund of the Issuer. This Bond constitutes a general obligation of the Issuer, and to provide moneys for the prompt and full payment of its principal, premium, if any, and interest when the same become due, the full faith and credit and taxing powers of the Issuer have been and are hereby irrevocably pledged. Denominations; Exchange; Resolution. The Bonds are issuable solely in fully registered form in Authorized Denominations (as defined in the Resolution) and are exchangeable for fully registered Bonds of other Authorized Denominations in equal aggregate principal amounts at the principal office of the Bond Registrar, but only in the manner and subject to the limitations provided in the Resolution. Reference is hereby made to the Resolution for a description of the rights and duties of the Bond Registrar. Copies of the Resolution are on file in the principal office of the Bond Registrar. Transfer. This Bond is transferable by the Holder in person or by the Holder's attorney duly authorized in writing at the principal office of the Bond Registrar upon presentation and surrender hereof to the Bond Registrar, all subject to the terms and conditions provided in the Resolution and to reasonable regulations of the Issuer contained in any agreement with the Bond Registrar. Thereupon the Issuer shall execute and the Bond Registrar shall authenticate and deliver, in exchange for this Bond, one or more new fully registered Bonds in the name of the transferee (but not registered in blank or to "bearer" or similar designation), of an Authorized Denomination or Denominations, in aggregate principal amount equal to the principal amount of this Bond, of the same maturity and bearing interest at the same rate. Fees upon Transfer or Loss. The Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer or exchange of this Bond and any legal or unusual costs regarding transfers and lost Bonds. Treatment of 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. 8 12860109vt Not Qualified Tax -Exempt Obligation. This Bond has not been designated by the Issuer as a "qualified tax-exempt obligation" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions and things required by the Constitution and laws of the State of Minnesota to be done, to happen and to be performed, precedent to and in the issuance of this Bond, have been done, have happened and have been performed, in regular and due form, time and manner as required by law and that this Bond, together with all other debts of the Issuer outstanding on the date of original issue hereof and the date of its issuance and delivery to the original purchaser, does not exceed any constitutional, or statutory limitation of indebtedness. 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, the corporate seal of the Issuer having been intentionally omitted as permitted by law. Date of Registration: Registrable by: NORTHLAND TRUST SERVICES, INC. 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 Payable at: NORTHLAND TRUST SERVICES, INC. CITY OF OTSEGO, WRIGHT COUNTY, MINNESOTA /s/ Facsimile Mayor /s/ Facsimile City Administrator -Finance Director 12860109vl E 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 (State) Transfers to Minors Act Additional abbreviations may also be used though not in the above list. ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto and does hereby irrevocably constitute and appoint Bond on the books kept for the registration thereof, premises. Dated: Notice Signature Guaranteed: the within Bond attorney to transfer the with full power of substitution in the 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(s) must be guaranteed by a national bank or trust company or by a brokerage firm having a membership in one of the major stock exchanges or any other "Eligible Guarantor Institution" as defined in 17 CFR 240.17 Ad- 15(a)(2). The Bond Registrar will not effect transfer of this Bond unless the information concerning the transferee requested below is provided. Name and Address: (Include information for all joint owners if the Bond is held by joint account.) 10 12860109v1 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 November 17, 2020. 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 12860109v1 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. Rights_ Upon 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 Improvement Refunding Bonds, Series 2020A Fund" (the "Fund") to be administered and maintained by the City Administrator -Finance Director as a bookkeeping account separate and apart from all other funds maintained in the official financial records of the 12 128601090 City. The Fund shall be maintained in the manner herein specified until all of the Bonds and the interest thereon have been fully paid. There shall be maintained in the Fund the following accounts: (a) Payment Account. To the Payment Account there shall be credited the proceeds of the Bonds. From the Payment Account, on or prior to the Call Date, the City Administrator - Finance Director shall transfer (i) $812,752.72 of the proceeds of the 2010D Refunding Portion of the Bonds from the Payment Account to the paying agent for the Prior 201 OD Bonds and (ii) $2,383,297.51of the proceeds of the 201 IA Refunding Portion of the Bonds from the Payment Account to the paying agent for the Prior 2011 A Bonds, which sums are sufficient, together with other funds on deposit in debt service funds for the Refunded Bonds, to pay the principal and interest due on the Refunded Bonds due after the Call Date, including the principal and any accrued interest due on the Refunded Bonds called for redemption on the Call Date. 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. (b) Debt Service Account. There are hereby irrevocably appropriated and pledged to, and there shall be credited to the Debt Service Account: (A) any balance remaining after the Call Date in the 201 OD Debt Service Account created by the Prior 201 OD Resolution; (B) any balance remaining after the Call Date in the 2011A Debt Service Account created by the Prior 201 IA Resolution; (C) any uncollected special assessments which were heretofore pledged for the payment of the Refunded 201 OD Bonds and are herein pledged to the payment of the 201 OD Refunding Portion of the Bonds; (D) any uncollected special assessments which were heretofore pledged for the payment of the Refunded 2011A Bonds and are herein pledged to the payment of the 201 IA Refunding Portion of the Bonds; (E) any taxes herein or hereinafter levied for the payment of the 201 OD Refunding Portion of the Bonds; (F) any taxes herein or hereinafter levied for the payment of the 2011A Refunding Portion of the Bonds; (G) any funds remaining in the Payment Account after the cost of issuing the Bonds have been paid; H) all investment earnings on funds held in the Debt Service Account; and (I) 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 amount of any surplus remaining in the Debt Service Account when the Bonds and interest thereon are paid shall be used consistent with Minnesota Statutes, Section 475.61, Subdivision 4. 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 or interest to become due on the bonds payable therefrom) in excess of amounts which under then applicable federal arbitrage regulations may be invested without regard to yield shall not be invested at a yield in excess of the applicable yield restrictions imposed by said arbitrage regulations on such investments after taking into account any applicable "temporary periods" or "minor portion" made available under the federal arbitrage regulations. Money in the Fund shall not be invested in obligations or deposits issued by, guaranteed by or insured by the United States or any agency 13 12860109v1 or instrumentality thereof if and to the extent that such investment would cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Internal Revenue Code of 1986, as amended (the "Code"). 16. Covenants Relating to the 201 OD Refunding Portion of the Bonds. (a) Special Assessments. The City has heretofore levied special assessments pursuant to the Prior 201 OD Resolution, which were pledged to the payment of the principal and interest on the Prior 201 OD Bonds and, after the Call Date, the uncollected special assessments for the Prior 201 OD Bonds are now pledged to the payment of principal and interest on the 201 OD Refunding Portion of the Bonds. The special assessments are such that if collected in full they, together with estimated collections of taxes herein pledged for the payment of the 201 OD Refunding Portion of the Bonds, will produce at least five percent in excess of the amount needed to meet when due the principal and interest payments on the 201 OD Refunding Portion of the Bonds. The special assessments were levied as provided below, payable in equal, consecutive, annual installments, with general taxes for the years shown below and with interest on the declining balance of all such assessments at the rate shown opposite such years: Collection Improvement Designation Levy Years Years Amount Rate Queens Avenue Project CSAH Project See Attached Schedule (b) Tax Levy' Coverage Test; Cancellation of Certain Tax Levies. To provide moneys for payment of the principal and interest on the 201 OD Refunding Portion of the Bonds there is hereby levied upon all of the taxable property in the City a direct annual ad valorem tax which shall be spread upon the tax rolls and collected with and as part of other general property taxes in the City for the years and in the amounts as follows: Year of Tax Levy Year of Tax Collection Amount See Attached Schedule The tax levies are such that if collected in full they, together with estimated collections of special assessments and any other revenues herein pledged for the payment of the 201 OD Bonds Refunding Portion of the Bonds, will produce at least five percent in excess of the amount needed to meet when due the principal and interest payments on the 201 OD Refunding Portion of the Bonds. The tax levies shall be irrepealable so long as any of the 2010D Refunding Portion of the Bonds are outstanding and unpaid, provided that the City reserves the right and power to reduce the levies in the manner and to the extent permitted by Minnesota Statutes, Section 475.61, Subdivision 3. Upon payment of the Prior 201OD Bonds, the uncollected taxes levied in the Prior 201 OD Resolution authorizing the issuance of the Prior 201 OD Bonds which are not needed to pay the Prior 201 OD Bonds as a result of the Refunding shall be canceled. 17. Covenants Relating to the 2011A Refunding Portion of the Bonds. 14 128601090 (a) Special Assessments. The City has heretofore levied special assessments pursuant to the Prior 201 lA Resolution, which were pledged to the payment of the principal and interest on the Prior 2011A Bonds and, after the Call Date, the uncollected special assessments for the Prior 2011A Bonds are now pledged to the payment of principal and interest on the 2011A Refunding Portion of the Bonds. The special assessments are such that if collected in full they, together with estimated collections of taxes herein pledged for the payment of the 2011A Refunding Portion of the Bonds, will produce at least five percent in excess of the amount needed to meet when due the principal and interest payments on the 2011A Refunding Portion of the Bonds. The special assessments were levied as provided below, payable in equal, consecutive, annual installments, with general taxes for the years shown below and with interest on the declining balance of all such assessments at the rate shown opposite such years: Collection Improvement Desi ng ation Levy Years Years Amount Rate Queens Avenue Project CSAH Project See Attached Schedule (b) Tax Levy,• Coverage Test; Cancellation of Certain Tax Levies. To provide moneys for payment of the principal and interest on the 2011A Refunding Portion of the Bonds there is hereby levied upon all of the taxable property in the City a direct annual ad valorem tax which shall be spread upon the tax rolls and collected with and as part of other general property taxes in the City for the years and in the amounts as follows: Year of Tax Levy Year of Tax Collection Amount See Attached Schedule The tax levies are such that if collected in full they, together with estimated collections of special assessments and any other revenues herein pledged for the payment of the 2011A Refunding Portion of the Bonds, will produce at least five percent in excess of the amount needed to meet when due the principal and interest payments on the 2011A Refunding Portion of the Bonds. The tax levies shall be irrepealable so long as any of the 2011A Refunding Portion of the Bonds are outstanding and unpaid, provided that the City reserves the right and power to reduce the levies in the manner and to the extent permitted by Minnesota Statutes, Section 475.61, Subdivision 3. Upon payment of the Prior 2011A Bonds, the uncollected taxes levied in the Prior 2011A Resolution authorizing the issuance of the Prior 2011A Bonds which are not needed to pay the Prior 2011A Bonds as a result of the Refunding shall be canceled. 18. General Obligation Pledge. For the prompt and full payment of the principal and interest on the Bonds, as the same respectively become due, the full faith, credit and taxing powers of the City shall be and are hereby irrevocably pledged. If the balance in the Debt Service Account is ever insufficient to pay all principal and interest then due on the Bonds and any other bonds payable therefrom, the deficiency shall be promptly paid out of any other funds 15 12860109v1 of the City which are available for such purpose, and such other funds may be reimbursed with or without interest from the Debt Service Account when a sufficient balance is available therein. 19. Prior Bonds; Approval and Security. Until retirement of the Prior Bonds, all provisions theretofore made for the security thereof shall be observed by the City and all of its officers and agents. 20. Redemption of Refunded Bonds. The City Administrator -Finance Director is hereby authorized and directed to give mailed notice of redemption prior to the Call Date to the paying agent for the Refunded Bonds, in substantially the form attached hereto as Exhibits A and B. The Refunded Bonds shall be redeemed and prepaid on the Call Date in accordance with the terms and conditions set forth in the Notices of Call for Redemption, which terms and conditions are hereby approved and incorporated herein by reference. 21. Supplemental Resolution. The Prior Resolutions authorizing the issuance of the Prior Bonds are hereby supplemented to the extent necessary to give effect to the provisions hereof. 22. Defeasance. When all Bonds have been discharged as provided in this paragraph, all pledges, covenants and other rights granted by this resolution to the registered holders of the Bonds shall, to the extent permitted by law, cease. The City may discharge its obligations with respect to any Bonds which are due on any date by irrevocably depositing with the Bond Registrar on or before that date a sum sufficient for the payment thereof in full; or if any Bond should not be paid when due, it may nevertheless be discharged by depositing with the Bond Registrar a sum sufficient for the payment thereof in full with interest accrued to the date of such deposit. The City may also at any time discharge its obligations with respect to any Bonds, subject to the provisions of law now or hereafter authorizing and regulating such action, by depositing irrevocably in escrow, with a suitable banking institution qualified by law as an escrow agent for this purpose, cash or securities described in Minnesota Statutes, Section 475.67, Subdivision 8, bearing interest payable at such times and at such rates and maturing on such dates as shall be required, without regard to sale 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. 23. 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 to: (a) Provide or cause to be provided to the Municipal Securities Rulemaking Board (the "MSRB") by filing at www.emma.msrb.org in accordance with the Rule, certain annual financial information and operating data in accordance with the Undertaking. The City reserves the right to modify from time to time the terms of the Undertaking as provided therein. IC 12860109v1 (b) Provide or cause to be provided to the MSRB notice of the occurrence of certain events with respect to the Bonds in not more than ten (10) business days after the occurrence of the event, in accordance with the Undertaking. (c) Provide or cause to be provided to the MSRB notice of a failure by the City to provide the annual financial information with respect to the City described in the Undertaking, in not more than ten (10) business days following such occurrence. (d) The City agrees that its covenants pursuant to the Rule set forth in this paragraph and in the Undertaking is intended to be for the benefit of the Holders of the Bonds and shall be enforceable on behalf of such Holders; provided that the right to enforce the provisions of these covenants shall be limited to a right to obtain specific enforcement of the City's obligations under the covenants. The Mayor and City Administrator -Finance Director of the City, or any other officer of the City authorized to act in their place (the "Officers") are hereby authorized and directed to execute on behalf of the City the Undertaking in substantially the form presented to the City Council subject to such modifications thereof or additions thereto as are (i) consistent with the requirements under the Rule, (ii) required by the Purchaser of the Bonds, and (iii) acceptable to the Officers. 24. Certificate of Registration. A certified copy of this resolution is hereby directed to be filed with the County Auditor of Wright County, Minnesota, together with such other information as the County Auditor shall require, and there shall be obtained from the County Auditor a certificate that the Bonds have been entered in the County Auditor's Bond Register, and that the tax levy required by law has been made. 25. 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. 26. 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 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. 27. Tax -Exempt Status; 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 17 12860109vl 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 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. 28. Not Designated as Qualified Tax -Exempt Obligations. The City will not designate the Bonds as "qualified tax exempt obligations" for purposes of Section 265(b)(3) of the Code. 29. Supplemental Resolution. The Prior Resolutions are hereby supplemented to the extent necessary to give effect to the provisions hereof. 30. 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 section, paragraph or provision shall not affect any of the remaining provisions of this resolution. 31. 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 member and, after a full discussion thereof and upon a vote being taken thereon, the following voted in favor thereof: and the following voted against the same: Whereupon the resolution was declared duly passed and adopted. 18 12860109vl EXHIBIT A NOTICE OF CALL FOR REDEMPTION CITY OF OTSEGO WRIGHT COUNTY, MINNESOTA GENERAL OBLIGATION IMPROVEMENT REFUNDING BONDS, SERIES 2010D NOTICE IS HEREBY GIVEN that by order of the City Council of the City of Otsego, Wright County, Minnesota (the "City"), there have been called for redemption and prepayment on November 17, 2020 those outstanding bonds of the City designated General Obligation Improvement Refunding Bonds, Series 2010D (the 'Bonds"), dated November 1, 2010, having stated maturity dates or subject to mandatory redemption in the years 2021 through 2028, inclusive, and totaling $805,000 in principal amount and having CUSIP numbers listed below: Year Principal Amount CUSIP* 2021 $90,000 689146 LP1 2023 190,000 689146 LQ9 2026 305,000 689146 LR7 2027 110,000 689146 LS5 2028 110,000 689146 LT3 The bonds are being called at a price of par plus accrued interest to November 17, 2020, 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 the offices of Northland Trust Services, Inc., 150 South Fifth Street, Suite 3300, Minneapolis, MN, 55402. Dated: October 12, 2020 BY ORDER OF THE CITY COUNCIL Isl 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 128601090 EXHIBIT B NOTICE OF CALL FOR REDEMPTION CITY OF OTSEGO WRIGHT COUNTY, MINNESOTA GENERAL OBLIGATION IMPROVEMENT CROSSOVER REFUNDING BONDS, SERIES 2011A NOTICE IS HEREBY GIVEN that by order of the City Council of the City of Otsego, Wright County, Minnesota (the "City"), there have been called for redemption and prepayment on November 17, 2020 those outstanding bonds of the City designated General Obligation Improvement Crossover Refunding Bonds, Series 201 IA (the 'Bonds"), dated December 1, 2011, having stated maturity dates or subject to mandatory redemption in the years 2021 through 2028, inclusive, and totaling $2,365,000 in principal amount and having CUSIP numbers listed below: Year Principal Amount CUSIP* 2021 $415,000 689146 MA3 2022 425,000 689146 MB1 2023 435,000 689146 MC9 2024 200,000 689146 MD7 2025 210,000 689146 ME5 2027 445,000 689146 MGO 2028 235,000 689146 MH8 The bonds are being called at a price of par plus accrued interest to November 17, 2020, 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 the offices of Northland Trust Services, Inc., 150 South Fifth Street, Suite 3300, Minneapolis, MN, 55402. Dated: October 12, 2020 BY ORDER OF THE CITY COUNCIL Isl 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 12860109vl Levy Schedule 201 OD Less: Equals: Special Assessment Revenues* Net Levy Levy Year Collection Year 41,303.78 59,584.88 2019 2020 39,353.82 77,196.18 2020 2021 37,403.85 75,576.15 2021 2022 - 114,660.00 2022 2023 110,880.00 2023 2024 - 112,350.00 2024 2025 113,610.00 2025 2026 114,660.00 2026 2027 $118,061.45 $778,517.21 * Remaining assessment revenues provided by the City of Otsego. 2011A Less: Equals: Special Assessment Revenues* Net Levy Levy Year Collection Year 73,466.50 381,363.17 2019 2020 70,950.56 413,939.44 2020 2021 68,434.62 421,075.38 2021 2022 56,476.07 174,313.93 2022 2023 54,373.24 179,356.76 2023 2024 52,270.41 178,729.59 2024 2025 50,167.58 193,642.42 2025 2026 - 234,780.00 2026 2027 $426,138.98 $2,177,200.69 * Remaining assessment revenues provided by the City of Otsego. 12860109vl STATE OF MINNESOTA COUNTY OF WRIGHT CITY OF OTSEGO I, the undersigned, being the duly qualified and acting City Clerk 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 of the City, duly called and held on the date therein indicated, insofar as the minutes relate to considering proposals and awarding the sale of $2,950,000 General Obligation Improvement Refunding Bonds, Series 2020A. WITNESS my hand on October 12, 2020. City Clerk 128601090