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4.1 Series 2021 Bond Issuance Request for City Council Action DEPARTMENT INFORMATION ORIGINATING DEPARTMENT REQUESTOR: MEETING DATE: Administration City Administrator/Finance Director Flaherty August 9, 2021 PRESENTER(s) REVIEWED BY: ITEM #: Administration Jessica Green, Northland Securities, Inc. Mary Ippel, Taft City Attorney Kendall 4.1 Series 2021 Bond Issuance STRATEGIC VISION MEETS: 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 municipal advisory service agreements with Northland Securities, Inc. and to authorize competitive negotiated sales of general obligation bonds. ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED? Yes No BACKGROUND/JUSTIFICATION: Municipal Advisory Service Agreements The agreements are between the City of Otsego and Northland Securities, Inc. The agreements outline the services to be provided by Northland Securities, Inc. that are necessary in connection with the sale of the series 2021A general obligation water revenue bond and series 2021B general obligation water and sewer revenue refunding bond. The agreements outline the compensation to Northland Securities, Inc. for the services provided. The amounts of $12,822 for series 2021A and $23,813 for series 2021B are considered to be costs of issuance and will be financed with proceeds of the bonds. The City has no obligation to issue the bonds under the terms of these agreements, and in the event no bonds are issued, the City has no obligation of fees to Northland Securities, Inc. City Attorney Kendall has reviewed the respective agreements with recommendation for approval. General Obligation Water Revenue Bonds, Series 2021A The Otsego Drinking Water System Master Plan (the Plan), adopted in January 2020 identified the need to construct a 1.5-million-gallon water tower to be centrally located to connect the Public Water Systems with serviceability to the current West Public Water System. In March 2021, the City awarded a construction contract for Water Tower #4, with project costs as bid estimated to total $5.6 million, which is within the $6.6 million project budget. Since that time, construction has been initiated, with costs incurred to date totaling more than $2.4 million. Costs to-date have been paid with cash reserves from the Water Utility fund. With adoption of Resolution 2020-35 in May 2020, the City Council declared the intent to reimburse all project costs with future bond issuance. In 2020, the City commissioned a Utility Rate Study, which was adopted by the City Council in February 2021. Both the capital project costs and respective bond issuance were included within the study; therefore, the potential impacts to utility rates and cash balance reserves have been factored. City staff is recommending that the City issue general obligation water revenue bonds as the primary funding source for the project. The repayment sources will include both user charges and system availability and connection fees. The attached finance plan outlines an overview of the estimated bond issue. The bond will carry a 15-year amortization schedule, with current estimates of a true interest cost of 1.34%. As currently estimated, annual debt service payments will be less than those projected in the Utility Rate Study. General Obligation Water and Sewer Revenue Refunding Bonds, Series 2021B City staff has worked with Northland Securities, Inc. to evaluate the feasibility of issuing refunding bonds to achieve interest savings. The bond issue identified for refunding is the Series 2010C, which originally financed much of the current-day water and sanitary sewer plants and infrastructure. City staff is recommending that the City issue general obligation water and sewer revenue refunding bonds to achieve the desired interest savings. The attached finance plan outlines an overview of the estimated bond issue. The 2021B bond will retain the same repayment term as the 2010C bond, with final payment due in December 2026. As currently estimated, the City will achieve gross interest savings of $446,720, or a net present value savings of 5.06%. Similar to the 2021A bond issuance, the assumption of refunding the 2010C bond and the respective interest savings were factored into the Utility Rate Study. Remaining Steps Pending approval by the City Council, the resolutions in the packet will provide for the competitive negotiated sale of the two bond issues, ultimately authorizing City staff to continue the process, which is outlined as follows: - August 5: Credit Rating Analysis Call with S&P Global Ratings - August 16: Credit Rating Expected from S&P Global Ratings - August 23: Competitive Negotiated Sale - August 23: City Council Consider Award of Bonds (Northland will be present for questions) The resolutions have been prepared by Northland Securities, Inc, the City’s Municipal Advisor, and have been reviewed by the City’s Bond Counsel, Mary Ippel with Taft Law, with recommendation for approval. SUPPORTING DOCUMENTS ATTACHED: • Municipal Advisory Service Agreement – 2021A • Finance Plan – 2021A • Resolution 2021-60 • Municipal Advisory Service Agreement – 2021B • Finance Plan – 2021B • Resolution 2021-61 POSSIBLE MOTION PLEASE WORD MOTION AS YOU WOULD LIKE IT TO APPEAR IN THE MINUTES: Motion to approve the Municipal Advisory Service Agreements between the City of Otsego and Northland Securities, Inc. Motion to approve Resolution 2021-60 Providing for the Competitive Negotiated Sale of General Obligation Water Revenue Bonds, Series 2021A. Motion to approve Resolution 2021-61 Providing for the Competitive Negotiated Sale of General Obligation Water and Sewer Revenue Refunding Bonds, Series 2021B. BUDGET INFORMATION FUNDING: BUDGETED: Funds 360 & 601 – Water Utility Funds 361 & 602 – Sanitary Sewer Utility Yes Finance Plan City of Otsego, Minnesota $4,575,000 General Obligation Water Revenue Bonds, Series 2021A August 9, 2021 150 South 5th Street, Suite 3300 Minneapolis, MN 55402 612-851-5900 800-851-2920 www.northlandsecurities.com Member FINRA and SIPC | Registered with SEC and MSRB Contents Executive Summary Issue Overview Purpose Authority Structure Security and Source of Repayment Plan Rationale Issuing Process Attachment 1 – Preliminary Debt Service Schedule Attachment 2 – Related Considerations Bank Qualification Arbitrage Compliance Continuing Disclosure Premiums Rating Attachment 3 - Risk Factors Northland Securities, Inc. Page 1 Executive Summary The following is a summary of the recommended terms for the issuance of $4,575,000 General Obligation Water Revenue Bonds, Series 2021A (the “Bonds” or “2021A Bonds”). Additional information on the proposed finance plan and issuing process can be found after the Executive Summary, in the Issue Overview and Attachment 2 – Related Considerations. The 2021A Bonds will be issued concurrently with the City’s 2021B Bonds, which are presented in a separate finance plan. Purpose Proceeds from the Bonds will be used to fund a new water tower. Security The Bonds will be a general obligation of the City. The City will pledge net revenues of the City’s water utility for payment of the Bonds. Repayment Term The Bonds will mature annually each February 1 in the years 2023 - 2037. Interest on the Bonds will be payable on August 1, 2022 and semiannually thereafter on each August 1 and February 1. Estimated Interest Rate Average coupon: 1.25% True interest cost (TIC): 1.34% Prepayment Option Bonds maturing on and after February 1, 2030 will be subject to redemption on February 1, 2029 and any day thereafter at a price of par plus accrued interest. Rating A rating will be requested from Standard and Poor’s (S&P). The City’s general obligation debt is currently rated "AA+" by S&P. Tax Status The Bonds will be tax-exempt, bank qualified obligations. Risk Factors There are certain risks associated with all debt. Risk factors related to the Bonds are discussed in Attachment 3. Type of Bond Sale Public Sale – Competitive Bids Proposals Received Monday, August 23, 2021 @ 10:00 A.M. Council Consideration Monday, August 23, 2021 @ 7:00 P.M. Northland Securities, Inc. Page 2 Issue Overview Purpose Proceeds from the Bonds will be used to fund construction of a new water tower. The Bonds have been sized based on City staff estimates. The table below contains the sources and uses of funds for the bond issue. Authority The Bonds will be issued pursuant to the authority of Minnesota Statutes, Chapters 475 and 444. Structure The Bonds have been structured to result in relatively level annual debt service payments over the 15-year life of the Bonds. The proposed structure for the bond issue and preliminary debt service projections are illustrated in Attachment 1. Security and Source of Repayment The Bonds will be general obligations of the City. The finance plan relies on the following assumptions for the revenues used to pay debt service, as provided by City staff: • Utility Revenues. Net revenues of the City’s water utility will be pledged for payment of the Bonds. The City will covenant to institute water rates and charges that are sufficient to produce net revenues equal to at least 105% of the debt service requirements on the Bonds. In the event there is a deficiency in the amount of net revenues available for payment of debt service, the City may levy taxes to cover the insufficiency, but only on a temporary basis until rates are adjusted. Plan Rationale The Finance Plan recommended in this report is based on a variety of factors and information provided by the City related to the financed projects and City objectives, Northland’s knowledge of the City and our experience in working with similar cities and projects. The issuance of General Obligation Water Revenue Bonds provides the best means of achieving the City’s objectives and cost effective financing. The City has successfully issued and managed this type of debt for previous projects. Issuing Process Northland will receive bids to purchase the Bonds on Monday, August 23, 2021 at 10:00 AM. Market conditions and the marketability of the Bonds support issuance through a competitive sale. This process has been chosen as it is intended to produce the lowest combination of interest expense and underwriting expense on the date and time set to receive bids. Sources Of Funds Par Amount of Bonds $4,575,000.00 Total Sources $4,575,000.00 Uses Of Funds Total Underwriter's Discount (0.800%)36,600.00 Costs of Issuance 35,697.00 Deposit to Project Construction Fund 4,500,000.00 Rounding Amount 2,703.00 Total Uses $4,575,000.00 Northland Securities, Inc. Page 3 Municipal Advisor: Northland Securities, Inc., Minneapolis, Minnesota Bond Counsel: Taft, Stettinius & Hollister LLP, Minneapolis, Minnesota Paying Agent: Northland Trust Services, Inc., Minneapolis, Minnesota Northland Securities, Inc. Page 4 Attachment 1 – Preliminary Debt Service Schedule Date Principal Coupon Interest Total P+I Fiscal Total 09/23/2021 ----- 08/01/2022 --39,558.75 39,558.75 - 02/01/2023 275,000.00 0.250%23,118.75 298,118.75 337,677.50 08/01/2023 --22,775.00 22,775.00 - 02/01/2024 290,000.00 0.300%22,775.00 312,775.00 335,550.00 08/01/2024 --22,340.00 22,340.00 - 02/01/2025 295,000.00 0.400%22,340.00 317,340.00 339,680.00 08/01/2025 --21,750.00 21,750.00 - 02/01/2026 295,000.00 0.550%21,750.00 316,750.00 338,500.00 08/01/2026 --20,938.75 20,938.75 - 02/01/2027 295,000.00 0.650%20,938.75 315,938.75 336,877.50 08/01/2027 --19,980.00 19,980.00 - 02/01/2028 300,000.00 0.750%19,980.00 319,980.00 339,960.00 08/01/2028 --18,855.00 18,855.00 - 02/01/2029 300,000.00 0.900%18,855.00 318,855.00 337,710.00 08/01/2029 --17,505.00 17,505.00 - 02/01/2030 305,000.00 1.050%17,505.00 322,505.00 340,010.00 08/01/2030 --15,903.75 15,903.75 - 02/01/2031 305,000.00 1.150%15,903.75 320,903.75 336,807.50 08/01/2031 --14,150.00 14,150.00 - 02/01/2032 310,000.00 1.250%14,150.00 324,150.00 338,300.00 08/01/2032 --12,212.50 12,212.50 - 02/01/2033 315,000.00 1.350%12,212.50 327,212.50 339,425.00 08/01/2033 --10,086.25 10,086.25 - 02/01/2034 315,000.00 1.450%10,086.25 325,086.25 335,172.50 08/01/2034 --7,802.50 7,802.50 - 02/01/2035 320,000.00 1.550%7,802.50 327,802.50 335,605.00 08/01/2035 --5,322.50 5,322.50 - 02/01/2036 325,000.00 1.600%5,322.50 330,322.50 335,645.00 08/01/2036 --2,722.50 2,722.50 - 02/01/2037 330,000.00 1.650%2,722.50 332,722.50 335,445.00 Total $4,575,000.00 -$487,365.00 $5,062,365.00 - Yield Statistics Bond Year Dollars $39,111.67 Average Life 8.549 Years Average Coupon 1.2460860% Net Interest Cost (NIC)1.3396642% True Interest Cost (TIC)1.3373883% Bond Yield for Arbitrage Purposes 1.2373580% All Inclusive Cost (AIC)1.4360045% Northland Securities, Inc. Page 5 Attachment 2 – Related Considerations Bank Qualification We understand the City (in combination with any subordinate taxing jurisdictions or debt issued in the City’s name by 501(c)3 corporations) anticipates issuing $10,000,000 or less in tax- exempt debt designated for this calendar year. Therefore the Bonds will be designated as “bank qualified” obligations pursuant to Federal Tax Law. Arbitrage Compliance The Bonds are expected to qualify for the “24-month spending” exemption related to arbitrage rebate. The City should become familiar with the various Arbitrage Compliance requirements for this bond issue. The Resolution for the Bonds prepared by Bond Counsel explains the requirements in greater detail. Continuing Disclosure Type: Full Dissemination Agent: Northland Securities The requirements for continuing disclosure are governed by SEC Rule 15c2-12. The primary requirements of Rule 15c2-12 actually fall on underwriters. The Rule sets forth due diligence needed prior to the underwriter’s purchase of municipal securities. Part of this requirement is obtaining commitment from the issuer to provide continuing disclosure. The document describing the continuing disclosure commitments (the “Undertaking”) is contained in the Official Statement that will be prepared to offer the Bonds to investors. The City has more than $10,000,000 of outstanding debt and is required to undertake “full” continuing disclosure. Full disclosure requires annual posting of the audit and a separate continuing disclosure report, as well as the reporting of certain “material events.” Material events set forth in the Rule, including, but not limited to, bond rating changes, call notices, and issuance of “financial obligations” (such as PFA loans, leases, or bank placements) must be reported within ten business days of occurrence. The report contains annual financial information and operating data that “mirrors” material information presented in the Official Statement. The specific contents of the annual report will be described in the Undertaking that appears in the appendix of the Official Statement. Northland currently serves as dissemination agent for the City, assisting with the annual reporting. The information for the Bonds will be incorporated into our reporting. Premiums In the current market environment, it is likely that bids received from underwriters will include premiums. A premium bid occurs when the purchaser pays the City an amount in excess of the par amount of a maturity in exchange for a higher coupon (interest rate). The use of premiums reflects the bidder’s view on future market conditions, tax considerations for investors and other factors. Ultimately, the true interest cost (“TIC”) calculation will determine the lowest bid, regardless of premium. A premium bid produces additional funds that can be used in several ways: • The premium means that the City needs less bond proceeds and can reduce the size of the issue by the amount of the premium. Northland Securities, Inc. Page 6 • The premium can be deposited in the Construction Fund and used to pay additional project costs, rather than used to reduce the size of the issue. • The premium can be deposited in the Debt Service Fund and used to pay principal and interest. Northland will work with City staff on the sale day to determine use of premium (if any). Rating A rating will be requested from Standard and Poor’s (S&P). The City’s general obligation debt is currently rated "AA+" by S&P. The rating process will include a conference call with the rating analyst. Northland will assist City staff in preparing for and conducting the rating call. Northland Securities, Inc. Page 7 Attachment 3 - Risk Factors Utility Revenues: The City pledges the net revenues of the Water Utility to the payment of principal and interest on the Bonds. The failure to adjust rates and charges as needed and the loss of significant customers will affect available net revenues. If the net revenues are insufficient, the City is required to levy property taxes or use other revenues to cover the deficiency. Property taxes can only be used on a temporary basis and may not be an ongoing source of revenue to pay debt service. General: In addition to the risks described above, there are certain general risks associated with the issuance of bonds. These risks include, but are not limited to: • Failure to comply with covenants in bond resolution. • Failure to comply with Undertaking for continuing disclosure. • Failure to comply with IRS regulations, including regulations related to use of the proceeds and arbitrage/rebate. The IRS regulations govern the ability of the City to issue its bonds as tax-exempt securities and failure to comply with the IRS regulations may lead to loss of tax- exemption. 13585695v1 EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL CITY OF OTSEGO, MINNESOTA HELD: August 9, 2021 Pursuant to due call and notice thereof, a regular meeting of the City Council of the City of Otsego, Wright County, Minnesota, was duly held at the Otsego Prairie Center (8899 Nashua Avenue NE) on August 9, 2021, at 7:00 P.M. for the purpose in part of authorizing the competitive negotiated sale of the $4,575,000 General Obligation Water Revenue Bonds, Series 2021A. The following members were present: and the following were absent: Member _______________ introduced the following resolution and moved its adoption: RESOLUTION NO. 2021-60 RESOLUTION PROVIDING FOR THE COMPETITIVE NEGOTIATED SALE OF GENERAL OBLIGATION WATER REVENUE BONDS, SERIES 2021A A. WHEREAS, the City Council of the City of Otsego, Minnesota (the "City"), has heretofore determined that it is necessary and expedient to issue General Obligation Water Revenue Bonds, Series 2021A (the "Bonds") to finance the construction of a new water tower; and B. WHEREAS, the City has retained Northland Securities, Inc., in Minneapolis, Minnesota ("Northland"), as its independent municipal advisor and is therefore authorized to sell the Bonds by competitive negotiated sale in accordance with Minnesota Statutes, Section 475.60, Subdivision 2(9); and C. WHEREAS, the City has retained Taft Stettinius & Hollister LLP, in Minneapolis, Minnesota as its bond counsel for purposes of this financing. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Otsego, Minnesota, as follows: 1. Authorization. The City Council hereby authorizes Northland to solicit proposals for the competitive negotiated sale of the Bonds. 2. Meeting; Proposal Opening. The City Council shall meet at the time and place specified in the Notice of Sale, in substantially the form attached hereto as Attachment A, for the purpose of considering sealed proposals for and awarding the sale of the Bonds. The City Administrator-Finance Director, or designee, shall open proposals at the time and place specified in the Notice of Sale. 13585695v1 2 3. Notice of Sale. The terms and conditions of the Bonds and the negotiation thereof are in substantially in the form set forth in the Notice of Sale attached hereto as Attachment A and hereby approved and made a part hereof. 4. Official Statement. In connection with the competitive negotiated sale of the Bonds, the Administrator-Finance Director and other officers or employees of the City are hereby authorized to cooperate with Northland and participate in the preparation of an official statement for the Bonds, and to execute and deliver it on behalf of the City upon its completion. The motion for the adoption of the foregoing resolution was duly seconded by member _______________ and, after full discussion thereof and upon a vote being taken thereon, the following voted in favor thereof: and the following voted against the same: Whereupon the resolution was declared duly passed and adopted. 13585695v1 3 STATE OF MINNESOTA COUNTY OF WRIGHT CITY OF OTSEGO I, the undersigned, being the duly qualified and acting 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 duly called and held on the date therein indicated, insofar as such minutes relate to the City's $4,575,000 General Obligation Water Revenue Bonds, Series 2021A. WITNESS my hand on August 9, 2021. __________________________________ City Clerk 13585695v1 A-1 ATTACHMENT A $4,575,000* GENERAL OBLIGATION WATER REVENUE BONDS, SERIES 2021A CITY OF OTSEGO, MINNESOTA (Book-Entry Only) NOTICE IS HEREBY GIVEN that these Bonds will be offered for sale according to the following terms: TIME AND PLACE: Proposals (also referred to herein as “bids”) will be opened by the City’s Administrator, or designee, on Monday, August 23, 2021, at 10:00 A.M., CT, at the offices of Northland Securities, Inc. (the City’s “Municipal Advisor”), 150 South 5th Street, Suite 3300, Minneapolis, Minnesota 55402. Consideration of the Proposals for award of the sale will be by the City Council at its meeting at the City Offices beginning Monday, August 23, 2021 at 7:00 P.M., CT. SUBMISSION OF PROPOSALS Proposals may be: a) submitted to the office of Northland Securities, Inc., b) faxed to Northland Securities, Inc. at 612-851-5918, c) emailed to PublicSale@northlandsecurities.com d) for proposals submitted prior to the sale, the final price and coupon rates may be submitted to Northland Securities, Inc. by telephone at 612-851-5900 or 612-851-5915, or e) submitted electronically. Notice is hereby given that electronic proposals will be received via PARITY™, or its successor, in the manner described below, until 10:00 A.M., CT, on Monday, August 23, 2021. Proposals may be submitted electronically via PARITY™ or its successor, pursuant to this Notice until 10:00 A.M., CT, but no Proposal will be received after the time for receiving Proposals specified above. To the extent any instructions or directions set forth in PARITY™, or its successor, conflict with this Notice, the terms of this Notice shall control. For further information about PARITY™, or its successor, potential bidders may contact Northland Securities, Inc. or i-Deal at 1359 Broadway, 2nd floor, New York, NY 10018, telephone 212-849-5021. Neither the City nor Northland Securities, Inc. assumes any liability if there is a malfunction of PARITY™ or its successor. All bidders are advised that each Proposal shall be deemed to constitute a contract between the bidder and the City to purchase the Bonds regardless of the manner in which the Proposal is submitted. BOOK-ENTRY SYSTEM The Bonds will be issued by means of a book-entry system with no physical distribution of bond certificates made to the public. The Bonds will be issued in fully registered form and one bond certificate, representing the aggregate principal amount of the Bonds maturing in each year, will be registered in the name of Cede & Co. as nominee of Depository Trust Company (“DTC”), New York, New York, which will act as securities depository of the Bonds. * The City reserves the right to increase or decrease the principal amount of the Bonds. Any such increase or decrease will be made in multiples of $5,000 and may be made in any maturity. If any maturity is adjusted, the purchase price will also be adjusted to maintain the same gross spread. 13585695v1 A-2 Individual purchases of the Bonds may be made in the principal amount of $5,000 or any multiple thereof of a single maturity through book entries made on the books and records of DTC and its participants. Principal and interest are payable by the City through Northland Trust Services, Inc. Minneapolis, Minnesota (the “Paying Agent/Registrar”), to DTC, or its nominee as registered owner of the Bonds. Transfer of principal and interest payments to participants of DTC will be the responsibility of DTC; transfer of principal and interest payments to beneficial owners by participants will be the responsibility of such participants and other nominees of beneficial owners. The successful bidder, as a condition of delivery of the Bonds, will be required to deposit the bond certificates with DTC. The City will pay reasonable and customary charges for the services of the Paying Agent/Registrar. DATE OF ORIGINAL ISSUE OF BONDS Date of Delivery (Estimated to be September 23, 2021) AUTHORITY/PURPOSE/SECURITY The Bonds are being issued pursuant to Minnesota Statutes, Chapters 444 and 475. Proceeds will be used to finance construction of a new water tower. The Bonds are payable from net revenues of the City’s water utility and additionally secured by ad valorem taxes on all taxable property within the City. The full faith and credit of the City is pledged to their payment and the City has validly obligated itself to levy ad valorem taxes in the event of any deficiency in the debt service account established for this issue. INTEREST PAYMENTS Interest is due semiannually on each February 1 and August 1, commencing August 1, 2022, to registered owners of the Bonds appearing of record in the Bond Register as of the close of business on the fifteenth day (whether or not a business day) of the calendar month preceding such interest payment date. MATURITIES Principal is due annually on February 1, inclusive, in each of the years and amounts as follows: Year Amount Year Amount Year Amount 2023 $275,000 2028 $300,000 2033 $315,000 2024 290,000 2029 300,000 2034 315,000 2025 295,000 2030 305,000 2035 320,000 2026 295,000 2031 305,000 2036 325,000 2027 295,000 2032 310,000 2037 330,000 Proposals for the Bonds may contain a maturity schedule providing for any combination of serial bonds and term bonds, subject to mandatory redemption, so long as the amount of principal maturing or subject to mandatory redemption in each year conforms to the maturity schedule set forth above. INTEREST RATES All rates must be in integral multiples of 1/20th or 1/8th of 1%. The rate for any maturity may not be more than 2.00% less than the rate for any preceding maturity. All Bonds of the same maturity must bear a single uniform rate from date of issue to maturity. ESTABLISHMENT OF ISSUE PRICE (HOLD-THE-OFFERING-PRICE RULE MAY APPLY – BIDS NOT CANCELLABLE) The winning bidder shall assist the City in establishing the issue price of the Bonds and shall execute and deliver to the City at closing an “issue price” or similar certificate setting forth the reasonably expected 13585695v1 A-3 initial offering price to the public or the sales price or prices of the Bonds, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit A, with such modifications as may be appropriate or necessary, in the reasonable judgment of the winning bidder, the City and Bond Counsel. All actions to be taken by the City under this Notice of Sale to establish the issue price of the Bonds may be taken on behalf of the City by the City’s Municipal Advisor and any notice or report to be provided to the City may be provided to the City’s Municipal Advisor. The City intends that the provisions of Treasury Regulation Section 1.148-1(f)(3)(i) (defining “competitive sale” for purposes of establishing the issue price of the Bonds) will apply to t he initial sale of the Bonds (the “competitive sale requirements”) because: (1) the City shall disseminate this Notice of Sale to potential underwriters in a manner that is reasonably designed to reach potential underwriters; (2) all bidders shall have an equal opportunity to bid; (3) the City may receive bids from at least three underwriters of municipal bonds who have established industry reputations for underwriting new issuances of municipal bonds; and (4) the City anticipates awarding the sale of the Bonds to the bidder who submits a firm offer to purchase the Bonds at the highest price (or lowest cost), as set forth in this Notice of Sale. Any bid submitted pursuant to this Notice of Sale shall be considered a firm offer for the purchase of the Bonds, as specified in the bid. In the event that the competitive sale requirements are not satisfied, the City shall promptly so advise the winning bidder. The City may then determine to treat the initial offering price to the public as of the award date of the Bonds as the issue price of each maturity by imposing on the winning bidder the Hold -the- Offering-Price Rule as described in the following paragraph (the “Hold-the-Offering-Price Rule”). Bids will not be subject to cancellation in the event that the City determines to apply the Hold-the-Offering- Price Rule to the Bonds. Bidders should prepare their bids on the assumption that the Bonds will be subject to the Hold-the-Offering-Price Rule in order to establish the issue price of the Bonds. By submitting a bid, the winning bidder shall (i) confirm that the underwriters have offered or will offer the Bonds to the public on or before the date of award at the offering price or prices (the “Initial Offering Price”), or at the corresponding yield or yields, set forth in the bid submitted by the winning bidder and (ii) agree, on behalf of the underwriters participating in the purchase of the Bonds, that the underwriters will neither offer nor sell unsold Bonds of any maturity to which the Hold-the-Offering Price Rule shall apply to any person at a price that is higher than the Initial Offering Price to the public during the period starting on the award date for the Bonds and ending on the earlier of the following: (1) the close of the fifth (5th) business day after the award date; or (2) the date on which the underwriters have sold at least 10% of a maturity of the Bonds to the public at a price that is no higher than the Initial Offering Price to the public (the “10% Test”), at which time only that particular maturity will no longer be subject to the Hold-the-Offering-Price Rule. The City acknowledges that, in making the representations set forth above, the winning bidder will rely on (i) the agreement of each underwriter to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the Hold-the-Offering-Price Rule, if applicable to the Bonds, as set forth in an agreement among underwriters and the related pricing wires, (ii) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Bonds, including but not limited to, its agreement to comply with the Hold- the-Offering-Price Rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (iii) in the event that an underwriter or dealer who is a member of the selling group is a party to a third-party distribution agreement that was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the Hold-the-Offering-Price Rule, if applicable to the Bonds, as set forth in the third-party 13585695v1 A-4 distribution agreement and the related pricing wires. The City further acknowledges that each underwriter shall be solely liable for its failure to comply with its agreement regarding the requirements for establishing issue price of the Bonds, including but not limited to, its agreement to comply with the Hold-the-Offering- Price Rule, if applicable to the Bonds, and that no underwriter shall be liable for the failure of any other underwriter, or of any dealer who is a member of a selling group, or of any broker -dealer that is a party to a third-party distribution agreement to comply with its corresponding agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the Hold-the-Offering-Price Rule if applicable to the Bonds. By submitting a bid, each bidder confirms that: (i) any agreement among underwriters, any selling group agreement and each third-party distribution agreement (to which the bidder is a party) relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter, each dealer who is a member of the selling group, and each broker-dealer that is a party to such third-party distribution agreement, as applicable, (A) to comply with the Hold-the- Offering-Price Rule, if applicable if and for so long as directed by the winning bidder and as set forth in the related pricing wires, (B) to promptly notify the winning bidder of any sales of Bonds that to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the underwriter, dealer or broker-dealer, the winning bidder shall assume that each order submitted by the underwriter, dealer or broker-dealer is a sale to the public, and (ii) any agreement among underwriters or selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter or dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such retail distribution agreement to comply with the Hold-the-Offering-Price Rule, if applicable, in each case if and for so long as directed by the winning bidder or the underwriter and as set forth in the related pricing wires. Notes: Sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this Notice of Sale. Further, for purposes of this Notice of Sale: (1) “public” means any person other than an underwriter or a related party, (2) “underwriter” means (A) any person that agrees pursuant to a written contract with the City (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the public). (3) a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation or another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and (4) “sale date” means the date that the Bonds are awarded by the City to the winning bidder. 13585695v1 A-5 ADJUSTMENTS TO PRINCIPAL AMOUNT AFTER PROPOSALS The City reserves the right to increase or decrease the principal amount of the Bonds. Any such increase or decrease will be made in multiples of $5,000 and may be made in any maturity. If any maturity is adjusted, the purchase price will also be adjusted to maintain the same gross spread. Such adjustments shall be made promptly after the sale and prior to the award of Proposals by the City and shall be at the sole discretion of the City. The successful bidder may not withdraw or modify its Proposal once submitted to the City for any reason, including post-sale adjustment. Any adjustment shall be conclusive and shall be binding upon the successful bidder. OPTIONAL REDEMPTION Bonds maturing on February 1, 2030 through 2037 are subject to redemption and prepayment at the option of the City on February 1, 2029 and any date thereafter, at a price of par plus accrued interest. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part, the maturities and principal amounts within each maturity to be redeemed shall be determined by the City and if only part of the Bonds having a common maturity date are called for prepayment, the specific Bonds to be prepaid shall be chosen by lot by the Bond Registrar. CUSIP NUMBERS If the Bonds qualify for assignment of CUSIP numbers such numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bond nor any error with respect thereto shall constitute cause for a failure or refusal by the successful bidder thereof to accept delivery of and pay for the Bonds in accordance with terms of the purchase contract. The CUSIP Service Bureau charge for the assignment of CUSIP identification numbers shall be paid by the successful bidder. DELIVERY Delivery of the Bonds will be within forty days after award, subject to an approving legal opinion by Taft, Stettinius & Hollister LLP, Bond Counsel. The legal opinion will be paid by the City and delivery will be anywhere in the continental United States without cost to the successful bidder at DTC. TYPE OF PROPOSAL Proposals of not less than $4,538,400 (99.20%) and accrued interest on the principal sum of $4,575,000 must be filed with the undersigned prior to the time of sale. Proposals must be unconditional except as to legality. Proposals for the Bonds should be delivered to Northland Securities, Inc. and addressed to: Adam Flaherty, City Administrator/Finance Director 13400 90 St. NE Otsego, Minnesota 55330 A good faith deposit (the “Deposit”) in the amount of $91,500 in the form of a federal wire transfer (payable to the order of the City) is only required from the apparent winning bidder, and must be received within two hours after the time stated for the receipt of Proposals. The apparent winning bidder will receive notification of the wire instructions from the Municipal Advisor promptly after the sale. If the Deposit is not received from the apparent winning bidder in the time allotted, the City may choose to reject their Proposal and then proceed to offer the Bonds to the next lowest bidder based on the terms of their original proposal, so long as said bidder wires funds for the Deposit amount within two hours of said offer. 13585695v1 A-6 The City will retain the Deposit of the successful bidder, the amount of which will be deducted at settlement and no interest will accrue to the successful bidder. In the event the successful bidder fails to comply with the accepted Proposal, said amount will be retained by the City. No Proposal can be withdrawn after the time set for receiving Proposals unless the meeting of the City scheduled for award of the Bonds is adjourned, recessed, or continued to another date without award of the Bonds having been made. AWARD The Bonds will be awarded on the basis of the lowest interest rate to be determined on a true interest cost (TIC) basis. The City’s computation of the interest rate of each Proposal, in accordance with customary practice, will be controlling. In the event of a tie, the sale of the Bonds will be awarded by lot. The City will reserve the right to: (i) waive non-substantive informalities of any Proposal or of matters relating to the receipt of Proposals and award of the Bonds, (ii) reject all Proposals without cause, and (iii) reject any Proposal which the City determines to have failed to comply with the terms herein. INFORMATION FROM SUCCESSFUL BIDDER The successful bidder will be required to provide, in a timely manner, certain information relating to the initial offering price of the Bonds necessary to compute the yield on the Bonds pursuant to the provisions of the Internal Revenue Code of 1986, as amended. OFFICIAL STATEMENT By awarding the Bonds to any underwriter or underwriting syndicate submitting a Proposal therefor, the City agrees that, no more than seven business days after the date of such award, it shall provide to the senior managing underwriter of the syndicate to which the Bonds are awarded, the Final Official Statement in an electronic format as prescribed by the Municipal Securities Rulemaking Board (MSRB). FULL CONTINUING DISCLOSURE UNDERTAKING The City will covenant in the resolution awarding the sale of the Bonds and in a Continuing Disclosure Undertaking to provide, or cause to be provided, annual financial information, including audited financial statements of the City, and notices of certain material events, as required by SEC Rule 15c2-12. BANK QUALIFICATION The City will designate the Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. BOND INSURANCE AT UNDERWRITER’S OPTION If the Bonds qualify for issuance of any policy of municipal bond insurance or commitment therefor at the option of the successful bidder, the purchase of any such insurance policy or the issuance of any such commitment shall be at the sole option and expense of the successful bidder of the Bonds. Any increase in the costs of issuance of the Bonds resulting from such purchase of insurance shall be paid by the successful bidder, except that, if the City has requested and received a rating on the Bonds from a rating agency, the City will pay that rating fee. Any other rating agency fees shall be the responsibility of the successful bidder. Failure of the municipal bond insurer to issue the policy after the Bonds have been awarded to the successful bidder shall not constitute cause for failure or refusal by the successful bidder to accept delivery on the Bonds. The City reserves the right to reject any and all Proposals, to waive informalities and to adjourn the sale. 13585695v1 A-7 Dated: August 9, 2021 BY ORDER OF THE OTSEGO CITY COUNCIL /s/ Adam Flaherty City Administrator/Finance Director Additional information may be obtained from: Northland Securities, Inc. 150 South 5th Street, Suite 3300 Minneapolis, Minnesota 55402 Telephone No.: 612-851-5900 13585695v1 A-8 EXHIBIT A [FORM OF ISSUE PRICE CERTIFICATE – COMPETITIVE SALE SATISFIED] The undersigned, on behalf of ______________________________ (the "Underwriter"), hereby certifies as set forth below with respect to the sale of the General Obligation Water Revenue Bonds, Series 2021A (the "Bonds") of the City of Otsego, Minnesota (the "Issuer"). 1. Reasonably Expected Initial Offering Price. (a) As of the Sale Date, the reasonably expected initial offering prices of the Bonds to the Public by the Underwriter are the prices listed in Schedule A (the "Expected Offering Prices"). The Expected Offering Prices are the prices for the Maturities of the Bonds used by the Underwriter in formulating its bid to purchase the Bonds. Attached as Schedule B is a true and correct copy of the bid provided by the Underwriter to purchase the Bonds. (b) The Underwriter was not given the opportunity to review other bids prior to submitting its bid. (c) The bid submitted by the Underwriter constituted a firm offer to purchase the Bonds. 2. Defined Terms. (a) "Maturity" means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities. (b) "Public" means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term "related party" for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (c) "Sale Date" means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is _______________. (d) "Underwriter" means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the Underwriter's interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Nonarbitrage Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Taft Stettinius & Hollister LLP, 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: September 23, 2021. 13585695v1 A-9 [FORM OF ISSUE PRICE CERTIFICATE – HOLD-THE-OFFERING-PRICE RULE APPLIES] The undersigned, on behalf of ________________________________(the "Underwriter"), on behalf of itself, hereby certifies as set forth below with respect to the sale and issuance of General Obligation Water Revenue Bonds, Series 2021A (the "Bonds") of the City of Otsego, Minnesota (the "Issuer"). 1. 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 Notice of Sale and bid award, 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 Perio d for such Maturity (the "hold-the-offering-price rule"), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to such agreement, no Underwriter (as defined below) has offered or sold any Maturity of the Bonds at a price that is higher than the respective Initial Offering Price for that Maturity of the Bonds during the Holding Period. 2. Defined Terms. (a) "Holding Period" means, for each Maturity of the Bonds, the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date (________________), or (ii) the date on which the Underwriter 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 ________________. (e) "Underwriter" means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the Representative's interpretation of any laws, including specifically Sections 103 13585695v1 A-10 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 Taft Stettinius & Hollister LLP, 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: September 23, 2021. Finance Plan City of Otsego, Minnesota $7,595,000 General Obligation Water and Sewer Revenue Refunding Bonds, Series 2021B August 9, 2021 150 South 5th Street, Suite 3300 Minneapolis, MN 55402 612-851-5900 800-851-2920 www.northlandsecurities.com Member FINRA and SIPC | Registered with SEC and MSRB Contents Executive Summary ............................................................................................................................................ 1 Issue Overview .................................................................................................................................................... 2 Purpose .................................................................................................................................... 2 Authority ................................................................................................................................. 2 Structure ................................................................................................................................... 2 Security and Source of Repayment ...................................................................................... 2 Plan Rationale ......................................................................................................................... 2 Issuing Process ........................................................................................................................ 2 Attachment 1 – Preliminary Debt Service Schedule ................................................................................. 4 Attachment 2 – Related Considerations ....................................................................................................... 5 Bank Qualification ........................................................................................................... 6 Arbitrage Compliance ..................................................................................................... 6 Continuing Disclosure ..................................................................................................... 6 Premiums .......................................................................................................................... 6 Rating ................................................................................................................................. 7 Attachment 3 – Calendar of Events ............................................................ Error! Bookmark not defined. Attachment 4 - Risk Factors .............................................................................................................................. 8 Northland Securities, Inc. Page 1 Executive Summary The following is a summary of the recommended terms for the issuance of $7,595,000 General Obligation Water and Sewer Revenue Refunding Bonds, Series 2021B (the “Bonds” or “2021B Bonds”). Additional information on the proposed finance plan and issuing process can be found after the Executive Summary, in the Issue Overview and Attachment 3 – Related Considerations. The 2021B Bonds will be issued concurrently with the City’s 2021A Bonds, which are presented in a separate finance plan. Purpose Proceeds from the Bonds will be used to current refund the City’s General Obligation Water and Sewer Revenue Refunding Bonds, Series 2010C on December 1, 2021. Security The Bonds will be a general obligation of the City. The City will pledge net revenues of the City’s water and sewer utilities for payment of the Bonds. Repayment Term The Bonds will mature annually each December 1 in the years 2022 - 2026. Interest on the Bonds will be payable on June 1, 2022 and semiannually thereafter on each June 1 and December 1. Refunding Summary Estimated Savings: Gross savings $446,720 Net Present Value $439,809 Net PV Percent 5.06% Other Factors: No change in the debt structure is proposed. Estimated Interest Rate Average coupon: 4.00% True interest cost (TIC): 0.59% Prepayment Option The Bonds will not be subject to prepayment or optional redemption prior to maturity. Rating A rating will be requested from Standard and Poor’s (S&P). The City’s general obligation debt is currently rated "AA+" by S&P. Tax Status The Bonds will be tax-exempt, bank qualified obligations. Risk Factors There are certain risks associated with all debt. Risk factors related to the Bonds are discussed in Attachment 4. Type of Bond Sale Public Sale – Competitive Bids Proposals Received Monday, August 23, 2021 @ 10:00 A.M. Council Consideration Monday, August 23, 2021 @ 7:00 P.M. Northland Securities, Inc. Page 2 Issue Overview Purpose Proceeds from the Bonds will be used to current refund the City’s General Obligation Water and Sewer Revenue Refunding Bonds, Series 2010C “the “2010C Bonds”) on December 1, 2021. The Bonds have been sized based on the callable principal on the 2010C Bonds. The table below contains the sources and uses of funds for the bond issue. Authority The Bonds will be issued pursuant to the authority of Minnesota Statutes, Chapters 475 and 444. Structure The Bonds have been structured to result in maximum savings, while maintaining a Weighted Average Maturity (WAM) that is lower on the 2021B Bonds than the 2010C. By maintaining a lower WAM on the 2021B Bonds, the City is able to issue both the City’s 2021A and 2021B Bonds as bank qualified and receive lower interest rates. The proposed structure for the bond issue and preliminary debt service and debt service savings projections are illustrated in Attachments 1 and 2. Security and Source of Repayment The Bonds will be general obligations of the City. The finance plan relies on the following assumptions for the revenues used to pay debt service, as provided by City staff: • Utility Revenues. Net revenues of the City’s water and sewer utilities will be pledged for payment of the Bonds. The City will covenant to institute water and sewer rates and charges that are sufficient to produce net revenues equal to at least 105% of the debt service requirements on the Bonds. In the event there is a deficiency in the amount of net revenues available for payment of debt service, the City may levy taxes to cover the insufficiency, but only on a temporary basis until rates are adjusted. Plan Rationale The Finance Plan recommended in this report is based on a variety of factors and information provided by the City related to the financed projects and City objectives, Northland’s knowledge of the City and our experience in working with similar cities and projects. The issuance of General Obligation Water and Sewer Revenue Refunding Bonds provides the best means of achieving the City’s objectives and cost effective financing. The City has successfully issued and managed this type of debt for previous projects. Issuing Process Northland will receive bids to purchase the Bonds on Monday, August 23, 2021 at 10:00 AM. Market conditions and the marketability of the Bonds support issuance through a competitive Sources Of Funds Par Amount of Bonds $7,595,000.00 Reoffering Premium 663,774.55 Total Sources $8,258,774.55 Uses Of Funds Total Underwriter's Discount (0.500%)37,975.00 Costs of Issuance 49,563.00 Deposit to Current Refunding Fund 8,170,000.00 Rounding Amount 1,236.55 Total Uses $8,258,774.55 Northland Securities, Inc. Page 3 sale. This process has been chosen as it is intended to produce the lowest combination of interest expense and underwriting expense on the date and time set to receive bids. Municipal Advisor: Northland Securities, Inc., Minneapolis, Minnesota Bond Counsel: Taft, Stettinius & Hollister LLP, Minneapolis, Minnesota Paying Agent: Northland Trust Services, Inc., Minneapolis, Minnesota Northland Securities, Inc. Page 4 Attachment 1 – Preliminary Debt Service Schedule Date Principal Coupon Interest Total P+I Fiscal Total 09/23/2021 ----- 06/01/2022 --209,284.44 209,284.44 - 12/01/2022 2,400,000.00 4.000%151,900.00 2,551,900.00 2,761,184.44 06/01/2023 --103,900.00 103,900.00 - 12/01/2023 2,575,000.00 4.000%103,900.00 2,678,900.00 2,782,800.00 06/01/2024 --52,400.00 52,400.00 - 12/01/2024 1,500,000.00 4.000%52,400.00 1,552,400.00 1,604,800.00 06/01/2025 --22,400.00 22,400.00 - 12/01/2025 550,000.00 4.000%22,400.00 572,400.00 594,800.00 06/01/2026 --11,400.00 11,400.00 - 12/01/2026 570,000.00 4.000%11,400.00 581,400.00 592,800.00 Total $7,595,000.00 -$741,384.44 $8,336,384.44 - Yield Statistics Bond Year Dollars $18,534.61 Average Life 2.440 Years Average Coupon 4.0000000% Net Interest Cost (NIC)0.6236165% True Interest Cost (TIC)0.5879877% Bond Yield for Arbitrage Purposes 0.3934791% All Inclusive Cost (AIC)0.8438374% Northland Securities, Inc. Page 5 Attachment 2 – Preliminary Debt Service Savings Schedule Date Total P+I Existing D/S Net New D/S Old Net D/S Savings 12/01/2021 -2,600,025.00 2,598,788.45 2,600,025.00 1,236.55 12/01/2022 2,761,184.44 -2,761,184.44 2,809,550.00 48,365.56 12/01/2023 2,782,800.00 -2,782,800.00 2,831,775.00 48,975.00 12/01/2024 1,604,800.00 -1,604,800.00 1,653,300.00 48,500.00 12/01/2025 594,800.00 -594,800.00 742,762.50 147,962.50 12/01/2026 592,800.00 -592,800.00 744,480.00 151,680.00 Total $8,336,384.44 $2,600,025.00 $10,935,172.89 $11,381,892.50 $446,719.61 PV Analysis Summary (Net to Net) Gross PV Debt Service Savings.....................438,571.96 Net PV Cashflow Savings @ 0.393%(Bond Yield).....438,571.96 Contingency or Rounding Amount....................1,236.55 Net Present Value Benefit $439,808.51 Net PV Benefit / $8,697,836.79 PV Refunded Debt Service 5.057% Net PV Benefit / $8,170,000 Refunded Principal...5.383% Net PV Benefit / $7,595,000 Refunding Principal..5.791% Northland Securities, Inc. Page 6 Attachment 3 – Related Considerations Bank Qualification We understand the City (in combination with any subordinate taxing jurisdictions or debt issued in the City’s name by 501(c)3 corporations) anticipates issuing $10,000,000 or less in tax- exempt debt during this calendar year that count against the bank qualification limit for 2021. The Series 2021A Bonds will count against that limit. The 2010C Bonds were originally issued as Qualified Obligations in the year of issuance. As a result, the principal amount of the 2021B Bonds attributable to refunding the outstanding principal of the 2010C Bonds can retain that original bank qualification status and does not count again the City’s bank qualification limit for the year 2021. Therefore the 2021B Bonds will be “deemed designated” as “bank qualified” obligations pursuant to Federal Tax Law. Arbitrage Compliance The Bonds are expected to qualify for the “6-month” exemption related to arbitrage rebate. The City should become familiar with the various Arbitrage Compliance requirements for this bond issue. The Resolution for the Bonds prepared by Bond Counsel explains the requirements in greater detail. Continuing Disclosure Type: Full Dissemination Agent: Northland Securities The requirements for continuing disclosure are governed by SEC Rule 15c2-12. The primary requirements of Rule 15c2-12 actually fall on underwriters. The Rule sets forth due diligence needed prior to the underwriter’s purchase of municipal securities. Part of this requirement is obtaining commitment from the issuer to provide continuing disclosure. The document describing the continuing disclosure commitments (the “Undertaking”) is contained in the Official Statement that will be prepared to offer the Bonds to investors. The City has more than $10,000,000 of outstanding debt and is required to undertake “full” continuing disclosure. Full disclosure requires annual posting of the audit and a separate continuing disclosure report, as well as the reporting of certain “material events.” Material events set forth in the Rule, including, but not limited to, bond rating changes, call notices, and issuance of “financial obligations” (such as PFA loans, leases, or bank placements) must be reported within ten business days of occurrence. The report contains annual financial information and operating data that “mirrors” material information presented in the Official Statement. The specific contents of the annual report will be described in the Undertaking that appears in the appendix of the Official Statement. Northland currently serves as dissemination agent for the City, assisting with the annual reporting. The information for the Bonds will be incorporated into our reporting. Premiums In the current market environment, it is likely that bids received from underwriters will include premiums. A premium bid occurs when the purchaser pays the City an amount in excess of the par amount of a maturity in exchange for a higher coupon (interest rate). The use of premiums reflects the bidder’s view on future market conditions, tax considerations for investors and other factors. Ultimately, the true interest cost (“TIC”) calculation will determine the lowest bid, regardless of premium. The finance plan has been prepared with premium coupons to reflect the impact of premium on the need to maintain a lower WAM on the 2021B Bonds. Northland Securities, Inc. Page 7 A premium bid produces additional funds that can be used in several ways: • The premium means that the City needs less bond proceeds and can reduce the size of the issue by the amount of the premium. • The premium can be deposited in the Debt Service Fund and used to pay principal and interest. Northland will work with City staff on the sale day to determine use of premium (if any). Rating A rating will be requested from Standard and Poor’s (S&P). The City’s general obligation debt is currently rated "AA+" by S&P. The rating process will include a conference call with the rating analyst. Northland will assist City staff in preparing for and conducting the rating call. Northland Securities, Inc. Page 8 Attachment 4 - Risk Factors Utility Revenues: The City pledges the net revenues of the Water and Sewer utilities to the payment of principal and interest on the Bonds. The failure to adjust rates and charges as needed and the loss of significant customers will affect available net revenues. If the net revenues are insufficient, the City is required to levy property taxes or use other revenues to cover the deficiency. Property taxes can only be used on a temporary basis and may not be an ongoing source of revenue to pay debt service. General: In addition to the risks described above, there are certain general risks associated with the issuance of bonds. These risks include, but are not limited to: • Failure to comply with covenants in bond resolution. • Failure to comply with Undertaking for continuing disclosure. • Failure to comply with IRS regulations, including regulations related to use of the proceeds and arbitrage/rebate. The IRS regulations govern the ability of the City to issue its bonds as tax-exempt securities and failure to comply with the IRS regulations may lead to loss of tax- exemption. 13585747v1 EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL CITY OF OTSEGO, MINNESOTA HELD: August 9, 2021 Pursuant to due call and notice thereof, a regular meeting of the City Council of the City of Otsego, Wright County, Minnesota, was duly held at the Otsego Prairie Center (8899 Nashua Avenue NE) on August 9, 2021, at 7:00 P.M. for the purpose in part of authorizing the competitive negotiated sale of the $7,595,000 General Obligation Water and Sewer Revenue Refunding Bonds, Series 2021B. The following members were present: and the following were absent: Member _______________ introduced the following resolution and moved its adoption: RESOLUTION NO. 2021-61 RESOLUTION PROVIDING FOR THE COMPETITIVE NEGOTIATED SALE OF GENERAL OBLIGATION WATER AND SEWER REVENUE REFUNDING BONDS, SERIES 2021B A. WHEREAS, the City Council of the City of Otsego, Minnesota (the "City"), has heretofore determined that it is necessary and expedient to issue General Obligation Water and Sewer Revenue Refunding Bonds, Series 2021B (the "Bonds"), to current refund the December 1, 2022 through December 1, 2026 maturities of the City's General Obligation Water and Sewer Revenue Refunding Bonds, Series 2010C on December 1, 2021; and B. WHEREAS, the City has retained Northland Securities, Inc., in Minneapolis, Minnesota ("Northland"), as its independent municipal advisor and is therefore authorized to sell the Bonds by competitive negotiated sale in accordance with Minnesota Statutes, Section 475.60, Subdivision 2(9); and C. WHEREAS, the City has retained Taft Stettinius & Hollister LLP, in Minneapolis, Minnesota as its bond counsel for purposes of this financing. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Otsego, Minnesota, as follows: 1. Authorization. The City Council hereby authorizes Northland to solicit proposals for the competitive negotiated sale of the Bonds. 2. Meeting; Proposal Opening. The City Council shall meet at the time and place specified in the Notice of Sale, in substantially the form attached hereto as Attachment A, for the purpose of considering sealed proposals for and awarding the sale of the Bonds. The City 13585747v1 2 Administrator-Finance Director, or designee, shall open proposals at the time and place specified in the Notice of Sale. 3. Notice of Sale. The terms and conditions of the Bonds and the negotiation thereof are in substantially in the form set forth in the Notice of Sale attached hereto as Attachment A and hereby approved and made a part hereof. 4. Official Statement. In connection with the competitive negotiated sale of the Bonds, the Administrator-Finance Director and other officers or employees of the City are hereby authorized to cooperate with Northland and participate in the preparation of an official statement for the Bonds, and to execute and deliver it on behalf of the City upon its completion. The motion for the adoption of the foregoing resolution was duly seconded by member _______________ and, after full discussion thereof and upon a vote being taken thereon, the following voted in favor thereof: and the following voted against the same: Whereupon the resolution was declared duly passed and adopted. 13585747v1 3 STATE OF MINNESOTA COUNTY OF WRIGHT CITY OF OTSEGO I, the undersigned, being the duly qualified and acting 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 duly called and held on the date therein indicated, insofar as such minutes relate to the City's General Obligation Water and Sewer Revenue Refunding Bonds, Series 2021B. WITNESS my hand on August 9, 2021. __________________________________ City Clerk 13585747v1 A-1 ATTACHMENT A $7,595,000* GENERAL OBLIGATION WATER AND SEWER REVENUE REFUNDING BONDS, SERIES 2021B CITY OF OTSEGO, MINNESOTA (Book-Entry Only) NOTICE IS HEREBY GIVEN that these Bonds will be offered for sale according to the following terms: TIME AND PLACE: Proposals (also referred to herein as “bids”) will be opened by the City’s Administrator, or designee, on Monday, August 23, 2021, at 10:00 A.M., CT, at the offices of Northland Securities, Inc. (the City’s “Municipal Advisor”), 150 South 5th Street, Suite 3300, Minneapolis, Minnesota 55402. Consideration of the Proposals for award of the sale will be by the City Council at its meeting at the City Offices beginning Monday, August 23, 2021 at 7:00 P.M., CT. SUBMISSION OF PROPOSALS Proposals may be: a) submitted to the office of Northland Securities, Inc., b) faxed to Northland Securities, Inc. at 612-851-5918, c) emailed to PublicSale@northlandsecurities.com d) for proposals submitted prior to the sale, the final price and coupon rates may be submitted to Northland Securities, Inc. by telephone at 612-851-5900 or 612-851-5915, or e) submitted electronically. Notice is hereby given that electronic proposals will be received via PARITY™, or its successor, in the manner described below, until 10:00 A.M., CT, on Monday, August 23, 2021. Proposals may be submitted electronically via PARITY™ or its successor, pursuant to this Notice until 10:00 A.M., CT, but no Proposal will be received after the time for receiving Proposals specified above. To the extent any instructions or directions set forth in PARITY™, or its successor, conflict with this Notice, the terms of this Notice shall control. For further information about PARITY™, or its successor, potential bidders may contact Northland Securities, Inc. or i-Deal at 1359 Broadway, 2nd floor, New York, NY 10018, telephone 212-849-5021. Neither the City nor Northland Securities, Inc. assumes any liability if there is a malfunction of PARITY™ or its successor. All bidders are advised that each Proposal shall be deemed to constitute a contract between the bidder and the City to purchase the Bonds regardless of the manner in which the Proposal is submitted. BOOK-ENTRY SYSTEM The Bonds will be issued by means of a book-entry system with no physical distribution of bond certificates made to the public. The Bonds will be issued in fully registered form and one bond certificate, representing the aggregate principal amount of the Bonds maturing in each year, will be registered in the name of Cede & Co. as nominee of Depository Trust Company (“DTC”), New York, New York, which will act as securities depository of the Bonds. * The City reserves the right to increase or decrease the principal amount of the Bonds. Any such increase or decrease will be made in multiples of $5,000 and may be made in any maturity. If any maturity is adjusted, the purchase price will also be adjusted to maintain the same gross spread. 13585747v1 A-2 Individual purchases of the Bonds may be made in the principal amount of $5,000 or any multiple thereof of a single maturity through book entries made on the books and records of DTC and its participants. Principal and interest are payable by the City through Northland Trust Services, Inc. Minneapolis, Minnesota (the “Paying Agent/Registrar”), to DTC, or its nominee as registered owner of the Bonds. Transfer of principal and interest payments to participants of DTC will be the responsibility of DTC; transfer of principal and interest payments to beneficial owners by participants will be the responsibility of such participants and other nominees of beneficial owners. The successful bidder, as a condition of delivery of the Bonds, will be required to deposit the bond certificates with DTC. The City will pay reasonable and customary charges for the services of the Paying Agent/Registrar. DATE OF ORIGINAL ISSUE OF BONDS Date of Delivery (Estimated to be September 23, 2021) AUTHORITY/PURPOSE/SECURITY The Bonds are being issued pursuant to Minnesota Statutes, Chapters 444 and 475. Proceeds will be used to current refund the City’s General Obligation Water and Sewer Revenue Refunding Bonds, Series 2010C on December 1, 2021. The Bonds are payable from net revenues of the City’s water and sewer utilities and additionally secured by ad valorem taxes on all taxable property withi n the City. The full faith and credit of the City is pledged to their payment and the City has validly obligated itself to levy ad valorem taxes in the event of any deficiency in the debt service account established for this issue. INTEREST PAYMENTS Interest is due semiannually on each June 1 and December 1, commencing June 1, 2022, to registered owners of the Bonds appearing of record in the Bond Register as of the close of business on the fifteenth day (whether or not a business day) of the calendar month preceding such interest payment date. MATURITIES Principal is due annually on December 1, inclusive, in each of the years and amounts as follows: Year Amount Year Amount Year Amount 2022 $2,400,000 2024 $1,500,000 2026 $570,000 2023 2,575,000 2025 550,000 Proposals for the Bonds may contain a maturity schedule providing for any combination of serial bonds and term bonds, subject to mandatory redemption, so long as the amount of principal maturing or subject to mandatory redemption in each year conforms to the maturity schedule set forth above. INTEREST RATES All rates must be in integral multiples of 1/20th or 1/8th of 1%. Rates must be in level or ascending order. All Bonds of the same maturity must bear a single uniform rate from date of issue to maturity. ESTABLISHMENT OF ISSUE PRICE (HOLD-THE-OFFERING-PRICE RULE MAY APPLY – BIDS NOT CANCELLABLE) The winning bidder shall assist the City in establishing the issue price of the Bonds and shall execute and deliver to the City at closing an “issue price” or similar certificate setting forth the reasonably expected initial offering price to the public or the sales price or prices of the Bonds, together with the supporting 13585747v1 A-3 pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit A, with such modifications as may be appropriate or necessary, in the reasonable judgment of the winning bidder, the City and Bond Counsel. All actions to be taken by the City under this Notice of Sale to establish the issue price of the Bonds may be taken on behalf of the City by the City’s Municipal Advisor and any notice or report to be provided to the City may be provided to the City’s Municipal Advisor. The City intends that the provisions of Treasury Regulation Section 1.148-1(f)(3)(i) (defining “competitive sale” for purposes of establishing the issue price of the Bonds) will apply to the initial sale of the Bonds (the “competitive sale requirements”) because: (1) the City shall disseminate this Notice of Sale to potential underwriters in a manner that is reasonably designed to reach potential underwriters; (2) all bidders shall have an equal opportunity to bid; (3) the City may receive bids from at least three underwriters of municipal bonds who have established industry reputations for underwriting new issuances of municipal bonds; and (4) the City anticipates awarding the sale of the Bonds to the bidder who submits a firm offer to purchase the Bonds at the highest price (or lowest cost), as set forth in this Notice of Sale. Any bid submitted pursuant to this Notice of Sale shall be considered a firm offer for the purchase of the Bonds, as specified in the bid. In the event that the competitive sale requirements are not satisfied, the City shall promptly so advise the winning bidder. The City may then determine to treat the initial offering price to the public as of the award date of the Bonds as the issue price of each maturity by imposing on the winning bidder the Hold -the- Offering-Price Rule as described in the following paragraph (the “Hold-the-Offering-Price Rule”). Bids will not be subject to cancellation in the event that the City determines to apply the Hold-the-Offering- Price Rule to the Bonds. Bidders should prepare their bids on the assumption that the Bonds will be subject to the Hold-the-Offering-Price Rule in order to establish the issue price of the Bonds. By submitting a bid, the winning bidder shall (i) confirm that the underwriters have offered or will offer the Bonds to the public on or before the date of award at the offering price or prices (the “Initial Offering Price”), or at the corresponding yield or yields, set forth in the bid submitted by the winning bidder and (ii) agree, on behalf of the underwriters participating in the purchase of the Bonds, that the underwriters will neither offer nor sell unsold Bonds of any maturity to which the Hold-the-Offering Price Rule shall apply to any person at a price that is higher than the Initial Offering Price to the public during the period starting on the award date for the Bonds and ending on the earlier of the following: (1) the close of the fifth (5th) business day after the award date; or (2) the date on which the underwriters have sold at least 10% of a maturity of the Bonds to the public at a price that is no higher than the Initial Offering Price to the public (the “10% Test”), at which time only that particular maturity will no longer be subject to the Hold-the-Offering-Price Rule. The City acknowledges that, in making the representations set forth above, the winning bidder will rely on (i) the agreement of each underwriter to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the Hold-the-Offering-Price Rule, if applicable to the Bonds, as set forth in an agreement among underwriters and the related pricing wires, (ii) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Bonds, including but not limited to, its agreement to comply with the Hold- the-Offering-Price Rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (iii) in the event that an underwriter or dealer who is a member of the selling group is a party to a third-party distribution agreement that was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the Hold-the-Offering-Price Rule, if applicable to the Bonds, as set forth in the third-party distribution agreement and the related pricing wires. The City further acknowledges that each underwriter 13585747v1 A-4 shall be solely liable for its failure to comply with its agreement regarding the requirements for establishing issue price of the Bonds, including but not limited to, its agreement to comply with the Hold-the-Offering- Price Rule, if applicable to the Bonds, and that no underwriter shall be liable for the failure of any other underwriter, or of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a third-party distribution agreement to comply with its corresponding agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the Hold-the-Offering-Price Rule if applicable to the Bonds. By submitting a bid, each bidder confirms that: (i) any agreement among underwriters, any selling group agreement and each third-party distribution agreement (to which the bidder is a party) relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter, each dealer who is a member of the selling group, and each broker-dealer that is a party to such third-party distribution agreement, as applicable, (A) to comply with the Hold-the- Offering-Price Rule, if applicable if and for so long as directed by the winning bidder and as set forth in the related pricing wires, (B) to promptly notify the winning bidder of any sales of Bonds that to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the underwriter, dealer or broker-dealer, the winning bidder shall assume that each order submitted by the underwriter, dealer or broker-dealer is a sale to the public, and (ii) any agreement among underwriters or selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter or dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such retail distribution agreement to comply with the Hold-the-Offering-Price Rule, if applicable, in each case if and for so long as directed by the winning bidder or the underwriter and as set forth in the related pricing wires. Notes: Sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this Notice of Sale. Further, for purposes of this Notice of Sale: (1) “public” means any person other than an underwriter or a related party, (2) “underwriter” means (A) any person that agrees pursuant to a written contract with the City (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the public). (3) a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation or another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and (4) “sale date” means the date that the Bonds are awarded by the City to the winning bidder. 13585747v1 A-5 ADJUSTMENTS TO PRINCIPAL AMOUNT AFTER PROPOSALS The City reserves the right to increase or decrease the principal amount of the Bonds. Any such increase or decrease will be made in multiples of $5,000 and may be made in any maturity. If any maturity is adjusted, the purchase price will also be adjusted to maintain the same gross spread. Such adjustments shall be made promptly after the sale and prior to the award of Proposals by the City and shall be at the sole discretion of the City. The successful bidder may not withdraw or modify its Proposal once submitted to the City for any reason, including post-sale adjustment. Any adjustment shall be conclusive and shall be binding upon the successful bidder. OPTIONAL REDEMPTION The Bonds are not subject to prepayment or optional redemption prior to maturity. CUSIP NUMBERS If the Bonds qualify for assignment of CUSIP numbers such numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bond nor any error with respect thereto shall constitute cause for a failure or refusal by the successful bidder thereof to accept delivery of and pay for the Bonds in accordance with terms of the purchase contract. The CUSIP Service Bureau charge for the assignment of CUSIP identification numbers shall be paid by the successful bidder. DELIVERY Delivery of the Bonds will be within forty days after award, subject to an approving legal opinion by Taft, Stettinius & Hollister LLP, Bond Counsel. The legal opinion will be paid by the City and delivery will be anywhere in the continental United States without cost to the successful bidder at DTC. TYPE OF PROPOSAL Proposals of not less than $7,557,025 (99.50%) and accrued interest on the principal sum of $7,595,000 must be filed with the undersigned prior to the time of sale. Proposals must be unconditional except as to legality. Proposals for the Bonds should be delivered to Northland Securities, Inc. and addressed to: Adam Flaherty, City Administrator/Finance Director 13400 90 St. NE Otsego, Minnesota 55330 A good faith deposit (the “Deposit”) in the amount of $151,900 in the form of a federal wire transfer (payable to the order of the City) is only required from the apparent winning bidder, and must be received within two hours after the time stated for the receipt of Proposals. The apparent winning bidder will receive notification of the wire instructions from the Municipal Advisor promptly after the sale. If the Deposit is not received from the apparent winning bidder in the time allotted, the City may ch oose to reject their Proposal and then proceed to offer the Bonds to the next lowest bidder based on the terms of their original proposal, so long as said bidder wires funds for the Deposit amount within two hours of said offer. The City will retain the Deposit of the successful bidder, the amount of which will be deducted at settlement and no interest will accrue to the successful bidder. In the event the successful bidder fails to comply with the accepted Proposal, said amount will be retained by the City. No Proposal can be withdrawn after the time set for receiving Proposals unless the meeting of the City scheduled for award of the Bonds is adjourned, recessed, or continued to another date without award of the Bonds having been made. AWARD 13585747v1 A-6 The Bonds will be awarded on the basis of the lowest interest rate to be determined on a true interest cost (TIC) basis. The City’s computation of the interest rate of each Proposal, in accordance with customary practice, will be controlling. In the event of a tie, the sale of the Bonds will be awarded by lot. The City will reserve the right to: (i) waive non-substantive informalities of any Proposal or of matters relating to the receipt of Proposals and award of the Bonds, (ii) reject all Proposals without cause, and (iii) reject any Proposal which the City determines to have failed to comply with the terms herein. INFORMATION FROM SUCCESSFUL BIDDER The successful bidder will be required to provide, in a timely manner, certain information relating to the initial offering price of the Bonds necessary to compute the yield on the Bonds pursuant to the provisions of the Internal Revenue Code of 1986, as amended. OFFICIAL STATEMENT By awarding the Bonds to any underwriter or underwriting syndicate submitting a Proposal therefor, the City agrees that, no more than seven business days after the date of such award, it shall provide to the senior managing underwriter of the syndicate to which the Bonds are awarded, the Final Official Statement in an electronic format as prescribed by the Municipal Securities Rulemaking Board (MSRB). FULL CONTINUING DISCLOSURE UNDERTAKING The City will covenant in the resolution awarding the sale of the Bonds and in a Continuing Disclosure Undertaking to provide, or cause to be provided, annual financial information, including audited financial statements of the City, and notices of certain material events, as required by SEC Rule 15c2-12. BANK QUALIFICATION The City will designate the Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. BOND INSURANCE AT UNDERWRITER’S OPTION If the Bonds qualify for issuance of any policy of municipal bond insurance or commitment therefor at the option of the successful bidder, the purchase of any such insurance policy or the issuance of any such commitment shall be at the sole option and expense of the successful bidder of the Bonds. Any increase in the costs of issuance of the Bonds resulting from such purchase of insurance shall be paid by the successful bidder, except that, if the City has requested and received a rating on the Bonds from a rating agency, the City will pay that rating fee. Any other rating agency fees shall be the responsibility of the successful bidder. Failure of the municipal bond insurer to issue the policy after the Bonds have been awarded to the successful bidder shall not constitute cause for failure or refusal by the successful bidder to accept delivery on the Bonds. The City reserves the right to reject any and all Proposals, to waive informalities and to adjourn the sale. Dated: August 9, 2021 BY ORDER OF THE OTSEGO CITY COUNCIL /s/ Adam Flaherty City Administrator/Finance Director Additional information may be obtained from: 13585747v1 A-7 Northland Securities, Inc. 150 South 5th Street, Suite 3300 Minneapolis, Minnesota 55402 Telephone No.: 612-851-5900 EXHIBIT A 13585747v1 A-8 [FORM OF ISSUE PRICE CERTIFICATE – COMPETITIVE SALE SATISFIED] The undersigned, on behalf of ______________________________ (the "Underwriter"), hereby certifies as set forth below with respect to the sale of the General Obligation Water and Sewer Revenue Refunding Bonds, Series 2021B (the "Bonds") of the City of Otsego, Minnesota (the "Issuer"). 1. Reasonably Expected Initial Offering Price. (a) As of the Sale Date, the reasonably expected initial offering prices of the Bonds to the Public by the Underwriter are the prices listed in Schedule A (the "Expected Offering Prices"). The Expected Offering Prices are the prices for the Maturities of the Bonds used by the Underwriter in formulating its bid to purchase the Bonds. Attached as Schedule B is a true and correct copy of the bid provided by the Underwriter to purchase the Bonds. (b) The Underwriter was not given the opportunity to review other bids prior to submitting its bid. (c) The bid submitted by the Underwriter constituted a firm offer to purchase the Bonds. 2. Defined Terms. (a) "Maturity" means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities. (b) "Public" means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term "related party" for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (c) "Sale Date" means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is _______________. (d) "Underwriter" means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the Underwriter's interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Nonarbitrage Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Taft Stettinius & Hollister LLP, 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: September 23, 2021. 13585747v1 A-9 [FORM OF ISSUE PRICE CERTIFICATE – HOLD-THE-OFFERING-PRICE RULE APPLIES] The undersigned, on behalf of ________________________________(the "Underwriter"), on behalf of itself, hereby certifies as set forth below with respect to the sale and issuance of General Obligation Water and Sewer Revenue Refunding Bonds, Series 2021B (the "Bonds") of the City of Otsego, Minnesota (the "Issuer"). 1. 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 Notice of Sale and bid award, 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 Terms. (a) "Holding Period" means, for each Maturity of the Bonds, the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth busi ness 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 ________________. (e) "Underwriter" means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectl y 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). 13585747v1 A-10 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 Taft Stettinius & Hollister LLP, 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: September 23, 2021.