DISCLAIMER

FINANCE COMMITTEE

08-0472R


RESOLUTION PROVIDING FOR THE ISSUANCE, SALE AND DELIVERY OF $40,665,000 GENERAL OBLIGATION DECC IMPROVEMENT BONDS, SERIES 2008A; ESTABLISHING THE TERMS AND FORM THEREOF; CREATING A DEBT SERVICE FUND THEREFOR; AND AWARDING THE SALE THEREOF.

CITY PROPOSAL:

     BE IT RESOLVED by the city council of the city of Duluth, Minnesota (the “City”), as follows:

     Section 1. Bond Purpose and Authorization.

     1.01 Under and pursuant to the provisions of Minnesota Laws 1974, Chapter 130, Minnesota Statutes, Chapter 475 and all other enabling statutes, the City is authorized to issue its general obligation DECC improvement bonds to provide the funds necessary to match state, private and federal grants for projects within the City’s boundaries, which bonds are to be payable from annual ad valorem taxes or other revenues of the City.

     1.02 The city council has, by Ordinance No. 9907 adopted on May 12, 2008, authorized the issuance and sale of General Obligation DECC Improvement Bonds (the “Bonds”) of the City to finance a portion of the costs of capital improvements at the Duluth Entertainment Convention Center, which includes a new arena (the “Project”), in an amount not to exceed $41,500,000.

     1.03 Included within the Project, as proposed, was the replacement and improvement at the Duluth Entertainment Convention Center of the existing arena refrigeration equipment and ice floor which was constructed in 2007 and financed pursuant to a Government Lease - Purchase Agreement dated as of August 22, 2007 (the “Lease”), between the Duluth Entertainment and Convention Center Authority (the “Authority”) and Wells Fargo Brokerage Services, LLC.

     1.04 The Authority has requested and the City hereby agrees that the Lease be refinanced with proceeds of the Bonds to provide long-term financing of such improvements as a part of the Project.

     1.05 The city council has solicited bids for the sale of the Bonds in the principal amount of $40,665,000 and has received and considered all bids presented pursuant to the official terms of offering and has determined that the most favorable bid is that of _____________ of _______________ (the “Purchaser”), to purchase the Bonds at a cash price of $_______, and upon condition that the Bonds mature and bear interest at the times and annual rates set forth in Section 2. The City, after due consideration, finds such offer reasonable and proper and the offer of the Purchaser is hereby accepted. The mayor and the city clerk are authorized and directed to execute on the part of the City a contract for the sale of the Bonds in accordance with the Purchaser’s bid. The city treasurer is directed to deposit the good faith check of the successful bidder.

     Section 2. Terms of Bonds.

     2.01      A. The Bonds to be issued hereunder shall be dated the date of delivery, as the date of original issue, shall be issued in the denomination of $5,000 each, or any integral multiple thereof, in fully registered form and lettered and numbered R-1 and upward. The Bonds shall mature on February 1 in the respective years and amounts stated and shall bear interest as follows:

Year

Amount

Interest Rate

Year

Amount

Interest Rate

2010

$ 120,000

 

2023

$1,560,000

 

2011

565,000

 

2024

1,690,000

 

2012

570,000

 

2025

1,830,000

 

2013

630,000

 

2026

1,975,000

 

2014

700,000

 

2027

2,135,000

 

2015

775,000

 

2028

2,300,000

 

2016

850,000

 

2029

2,475,000

 

2017

935,000

 

2030

2,665,000

 

2018

1,020,000

 

2031

2,865,000

 

2019

1,115,000

 

2032

3,075,000

 

2020

1,215,000

 

2033

3,300,000

 

2021

1,325,000

 

2034

3,535,000

 

2022

1,440,000

 

 

     B.   For purposes of complying with the provisions of Minnesota Statutes Section 475.54, the principal maturities of the Bonds are combined with the principal maturities of the City’s $3,760,000 General Obligation DECC Improvement Refunding Revenue Bonds, Series 2007E dated December 13, 2007, and the City’s General Obligation Aerial Lift Bridge Improvement Bonds, Series 2008B.

     C.   The Bonds maturing on February 1 in the years ____ and ____ shall be subject to mandatory redemption prior to maturity pursuant to the requirements of this Section 2.01C at a redemption price equal to the stated principal amount, as hereinafter provided, plus interest accrued thereon to the redemption date, without premium. The Bond Registrar, as designated below, shall select for redemption, by lot or other manner deemed fair, on February 1 in each of the following years, the following stated principal amounts:

          (1)  For Bonds maturing on February 1, ____ (the “____ Term Bonds”):

Year

Principal
Amount

 

 

          The remaining $______ stated principal amount of the ____ Term Bond shall be paid at maturity on February 1, ____.

          (2)  For Bonds maturing on February 1, ____ (the “____ Term Bonds”):

Year

Principal
Amount

 

 

     The remaining $______ stated principal amount of the ____ Term Bond shall be paid at maturity on February 1, ____.

     If less than such amount of the Term Bonds is outstanding on such payment date, the City shall pay the remaining balance of the Term Bonds then outstanding. The Bond Registrar shall select and call for redemption, in accordance with Section 2.02 hereof, from the Term Bonds the amounts specified above and the Term Bond selected by the Bond Registrar shall become due and payable on such date.

     2.02      A. The Bonds maturing in the years 2010 through 2017 shall not be subject to optional redemption and prepayment before maturity, but those maturing or subject to mandatory redemption pursuant to Section 2.01C, in the year 2018 and in subsequent years shall each be subject to redemption and prepayment at the option of the City on February 1, 2017, and on any date thereafter, in whole or in part, and if in part, in such order of maturities as selected by the City and by lot as to the Bonds maturing in the same year, at a price equal to the principal amount thereof plus accrued interest to the redemption date.

     B.   In the event any of the Bonds are called for redemption, notice thereof identifying the Bonds to be redeemed will be given by the Bond Registrar by mailing a copy of the redemption notice by first class mail (postage prepaid) at least 30 days but not more than 60 days prior to the date fixed for redemption to the registered owner of each Bond to be redeemed at the address shown on the registration books kept by the Bond Registrar; provided however, that so long as the Bonds are registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”), notice of redemption shall be given in accordance with the terms of the Representation Letter hereinafter described. Failure to give notice by mail to any registered owner, or any defect therein, will not affect the validity of any proceeding for the redemption of Bonds not affected by such defect or failure. Bonds so called for redemption will cease to bear interest after the specified redemption date, provided that the funds for the redemption are on deposit with the place of payment at that time.

     C.   If less than all the Bonds of a maturity are called for redemption while the Bonds are registered in the name of Cede & Co., the City or the Bond Registrar designated below will notify DTC of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each participant’s interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interest in such maturity to be redeemed. If less than all the Bonds of a maturity are called for redemption and the Bonds are not registered in the name of Cede & Co., the Bond Registrar will determine by lot or other manner deemed fair, the amount of each maturity to be redeemed. All prepayments shall be at a price equal to the principal amount thereof plus accrued interest.

     2.03 Interest on the Bonds shall be payable semiannually on February 1 and August 1 in each year (each referred to herein as an “Interest Payment Date”), commencing February 1, 2009. Interest will be computed on the basis of a 360-day year of twelve 30-day months and will be rounded pursuant to the rules of the municipal securities rulemaking board. The Bond Registrar designated below shall make all interest payments with respect to the Bonds by check or draft mailed to the registered owners of the Bonds shown on the bond registration records maintained by the Bond Registrar at the close of business on the 15th day (whether or not a business day) of the month next preceding the Interest Payment Date at such owners’ addresses shown on such bond registration records.

     2.04      A.  The Bonds shall be prepared for execution in accordance with the approved form and shall be signed by the manual or facsimile signature of the mayor and attested by the manual or facsimile signature of the city clerk. In case any officer whose signature or a facsimile of whose signature shall appear on the Bonds shall cease to be an officer before delivery of the Bonds, such signature or facsimile shall nevertheless be valid and sufficient for all purposes, as if he or she had remained in office until delivery.

     B.   The city clerk is authorized and directed to obtain a copy of the proposed approving legal opinion of Fryberger, Buchanan, Smith & Frederick, P.A. of Duluth, Minnesota, which is to be complete and cause the opinion to be attached to each Bond, together with a certificate to be signed by the manual signature of the city clerk in substantially the form set forth in Section 2.11, but only if the opinion is not manually executed. The city clerk is authorized and directed to execute the certificate in the name of the City upon receipt of the opinion, if required by the preceding sentence, and to file the opinion in the City offices.

     2.05 The City hereby appoints Wells Fargo Bank, National Association, in Minneapolis, Minnesota, as registrar, authenticating agent, paying agent and transfer agent for the Bonds (such bank or its successor is herein referred to as the “Bond Registrar”). To provide for the Bond Registrar services, the mayor and the city clerk are authorized and directed to execute a bond registrar/paying agent agreement substantially in the form of the agreement currently on file in the office of the city clerk as Public Document No. 04-0219-02. No Bond shall be valid or obligatory for any purpose until the Bond Registrar’s authentication certificate on such Bond, substantially set forth in Section 2.11 hereof, shall have been duly executed by an authorized representative of the Bond Registrar. Authentication certificates on different Bonds need not be signed by the same representative. The manual signature of one officer of the City or the executed authentication certificate on each Bond shall be conclusive evidence that it has been authenticated and delivered under this resolution.

     2.06      A. In order to make the Bonds eligible for the services provided by The Depository Trust Company, New York, New York (“DTC”), the City has previously agreed to the applicable provisions set forth in the blanket issuer letter of representations which has been executed by the City and DTC (the “Representation Letter”).

     B.   All of the Bonds shall be registered in the name of Cede & Co., as nominee for DTC. Payment of interest on and principal of any Bond registered in the name of Cede & Co. shall be made by wire transfer or New York Clearing House or equivalent same day funds by 10:00 a.m. CT or as soon as possible thereafter following the Bond Registrar’s receipt of funds from the City on each Interest Payment Date to the account of Cede & Co. on each Interest Payment Date at the address indicated in or pursuant to the Representation Letter.

     C.   Additional matters with respect to, among other things, notices, consents and approvals by bond holders and payments on the Bonds are set forth in the Representation Letter.

     2.07 The City shall cause to be kept by the Bond Registrar a bond register in which, subject to such reasonable regulations as the Bond Registrar may prescribe, the City shall provide for the registration of the Bonds and the registration of transfers of the Bonds entitled to be registered or transferred as herein provided. In the event of the resignation or removal of the Bond Registrar or its incapability of acting as such, the bond registration records shall be maintained at the office of the successor Bond Registrar as may be appointed by the city council. Upon surrender for transfer of any Bond at the principal corporate office of the Bond Registrar, the City shall execute and the Bond Registrar shall authenticate, if required by law or this resolution, and deliver, in the name(s) of the designated transferee or transferees, one or more new Bonds of the like aggregate principal amount, as requested by the transferor.

     2.08 Each Bond delivered upon transfer of or in exchange for or in lieu of any other Bond shall carry all of the rights to interest, accrued and unpaid and to accrue, which are carried by such other Bond. Each Bond shall be dated by the Bond Registrar as of the date of its authentication. The City and the Bond Registrar shall not be required to make any transfer or exchange of any Bonds called for redemption or to make any such exchange or transfer of the Bonds during the 15 days next preceding the date of the first publication or the mailing (if there is no publication) of the notice of redemption in the case of a proposed redemption of the Bonds.

     2.09 The City and the Bond Registrar may treat the person in whose name any Bond is registered as the owner of such Bond for the purpose of receiving payment of principal of and interest on such Bond and for all other purposes whatsoever, whether or not such Bond be overdue, and neither the City nor the Bond Registrar shall be affected by notice to the contrary.

     2.10 The principal of and interest on the Bonds shall be payable by the Bond Registrar, as paying agent, in such funds as are legal tender for the payment of debts due the United States of America. The City shall pay the reasonable and customary charges of the Bond Registrar for the disbursement of principal and interest.

     2.11 The Bonds shall be printed or typewritten in substantially the following form:

UNITED STATES OF AMERICA

STATE OF MINNESOTA

COUNTY OF ST. LOUIS

 

CITY OF DULUTH

GENERAL OBLIGATION DECC IMPROVEMENT BOND, SERIES 2008A

 

R-___                                                  $_________

 

Interest

  Rate

Maturity Date

Date of

Original Issue

CUSIP

 

February 1, ____

August __, 2008

 

 

REGISTERED OWNER:CEDE & CO.

 

PRINCIPAL AMOUNT:

 

     The City of Duluth, in St. Louis County, Minnesota (the “City”), for value received, promises to pay to the registered owner specified above, or registered assigns, the principal amount specified above on the maturity date specified above, and to pay interest on said principal amount to the registered owner hereof from the Date of Original Issue, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, until the principal amount is paid or discharged, said interest being at the rate per annum specified above. Interest is payable semiannually on February 1 and August 1 of each year (each referred to herein as an “Interest Payment Date”) commencing on February 1, 2009. Both principal and interest are payable in lawful money of the United States of America by check or draft at the office of Wells Fargo Bank, National Association, in Minneapolis, Minnesota, as the registrar, paying agent, transfer agent and authenticating agent (the “Bond Registrar”), or at the office of such successor bond registrar as may be designated by the City Council. The Bond Registrar shall make the interest payment with respect to this Bond directly to the registered owner hereof shown on the bond registration records maintained on behalf of the City by the Bond Registrar at the close of business on the 15th day of the month next preceding the Interest Payment Date (whether or not a business day), at such owner’s address shown on said bond registration records, without, except for payment of principal on the Bond, the presentation or surrender of this Bond, and all such payments shall discharge the obligations of the City to the extent of the payments so made. Payment of principal shall be made upon presentation and surrender of this Bond to the Bond Registrar when due. For the prompt and full payment of such principal and interest as they become due, the full faith and credit of the City are irrevocably pledged.

 

     This Bond is one of a series issued by the City in the aggregate amount of $40,665,000, all of like date and tenor, except as to number, amount, maturity date and interest rate, pursuant to the authority contained in Minnesota Laws 1974, Chapter 130, Chapter 475 of Minnesota Statutes and all other laws thereunto enabling, and pursuant to an authorizing resolution adopted by the governing body of the City on July 24, 2008 (the “Resolution”), and is issued for the purpose of providing a portion of the financing for the improvements to the Duluth Entertainment Convention Center and for payment of part of the interest cost of said bond issue. The principal hereof and interest hereon are payable primarily from food and beverage tax revenues and revenues of the Duluth Entertainment and Convention Center Authority as set forth in the Resolution to which reference is made for a full statement of rights and powers thereby conferred.

 

     The Bonds maturing in the years _____________________ shall be subject to mandatory redemption and redeemed in installments as provided in the Resolution, at par plus accrued interest to the date of redemption.

 

     The Bonds of this series maturing in the years 2010 through 2018 are not subject to redemption before maturity, but those maturing in the year 2019 and in subsequent years are each subject to redemption and prepayment at the option of the City on February 1, 2018, and on any date thereafter upon 30 days’ notice, in whole or in part, and if in part, in such order of maturities as selected by the City, and by lot as to Bonds maturing in the same year, at a price equal to the principal amount plus accrued interest to the redemption date.

 

     Not less than 30 nor more than 60 days prior to the date fixed for redemption and prepayment of any Bonds, notice of redemption shall be mailed to each registered owner of a Bond to be redeemed; however, that so long as the Bonds are registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”), notice of redemption shall be given in accordance with the terms of the Blanket Issuer Letter of Representations executed by the City and DTC.

 

     If less than all the Bonds of a maturity are called for redemption while the Bonds are registered in the name of Cede & Co., the City or the Bond Registrar designated below will notify DTC of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each participant’s interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interest in such maturity to be redeemed. If less than all the Bonds of a maturity are called for redemption and the Bonds are not registered in the name of Cede & Co., the Bond Registrar will determine by lot or other manner deemed fair, the amount of each maturity to be redeemed. All prepayments shall be at a price equal to the principal amount thereof plus accrued interest. If any Bond is redeemed in part, upon surrender of the Bond being redeemed, the City shall deliver or cause to be delivered to the registered owner of such Bond, a Bond in like form in the principal amount equal to that portion of the Bond so surrendered not being redeemed.

 

     The Bonds of this series are issued as fully registered bonds without coupons, in the denomination of $5,000 or any integral multiple thereof. Subject to limitations set forth in the Resolution, this Bond is transferable by the registered owner hereof upon surrender of this Bond for transfer at the principal corporate office of the Bond Registrar, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Bond Registrar and executed by the registered owner hereof or the owner’s attorney duly authorized in writing. Thereupon the City shall execute and the Bond Registrar shall authenticate, if required by law and this Resolution, and deliver, in exchange for this Bond, one or more new fully registered bonds in the name of the transferee, of an authorized denomination, in an aggregate principal amount equal to the unpaid principal amount of this Bond, of the same maturity and bearing interest at the same rate.

 

     IT IS CERTIFIED AND RECITED that all acts and conditions required by the Charter of the City and by the laws and the Constitution of the State of Minnesota to be done, and to exist precedent to and in the issuance of this Bond in order to make it a valid and binding general obligation of the City in accordance with its terms, have been done and do exist in form, time, and manner as so required; that all taxable property within the corporate limits of the City is subject to the levy of ad valorem taxes to the extent needed to pay the principal hereof and the interest hereon when due, without limitation as to rate or amount; and that the issuance of this Bond does not cause the indebtedness of the City to exceed any constitutional, statutory or charter limitation.

 

     This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Resolution until the Bond Registrar’s Authentication Certificate hereon shall have been executed by the Bond Registrar by one of its authorized representatives.

 

     IN WITNESS WHEREOF, the City of Duluth, by its City Council, has caused this Bond to be executed in its name by the signatures of the Mayor and the City Clerk.

 

Date of Authentication: __________________

 

Attest:

 

_______________________________                    ________________________________

City Clerk                                                            Mayor

 

BOND REGISTRAR’S AUTHENTICATION CERTIFICATE

 

     The Bond Registrar confirms that the books reflect the ownership of a Bond registered in the name of the owner named above, in the principal amount stated above, and this Bond is one of the Bonds of the series issued pursuant to the Resolution hereinabove described.

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

Bond Registrar

 

By__________________________________

  Authorized Representative

 

BOND COUNSEL OPINION

 

     I certify that attached hereto is a full, true, and correct copy of the legal opinion rendered by bond counsel on the issuance of the Bonds, dated as of the original date of delivery of and payment for the Bond.

 

                                   ______________________________

                                   City Clerk

 

REGISTRATION CERTIFICATE

 

     This Bond must be registered as to both principal and interest in the name of the owner on the books to be kept by Wells Fargo Bank, National Association, as Bond Registrar. No transfer of this Bond shall be valid unless made on said books by the registered owner or the owner’s attorney thereunto duly authorized and similarly noted on the registration books. The ownership of the unpaid principal balance of this Bond and the interest accruing thereon is registered on the books of the City in the name of the registered owner last noted below.

 

Date

Registered Owner

Signature of

Bond Registrar

8/__/08

Cede & Co.

c/o The Depository Trust Company

55 Water Street

New York, NY 10041

Federal Taxpayer I.D. No.: 13-2555119

_______________________

 

ASSIGNMENT

 

     FOR VALUE RECEIVED, the undersigned sells, assigns, and transfers unto ___________________________________________________

__________________________________________________________________

__________________________________________________________________

(Name and Address of Assignee)

 

____________________   Social Security or Other

____________________   Identifying Number of Assignee

 

the within Bond and all rights thereunder and does hereby irrevocably constitute and appoint _______________________________ _____________________________________________ attorney to transfer the said Bond on the books kept for registration thereof with full power of substitution in the premises.

 

Dated: ________________________.

 

                             ___________________________________________

 

                             ___________________________________________

NOTICE: The signature of this assignment must correspond with the name of the registered owner as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatsoever.

 

Signature Guaranteed:

 

 

_______________________________

(Bank, Trust Company, member of

National Securities Exchange)

 

     Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the City or its agent for registration of transfer, exchange, or payment, and any bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, inasmuch as the registered owner hereof, Cede & Co., has an interest herein.

 

     Section 3. Covenants, Accounts and Representations.

     3.01 The City hereby creates Fund No. 436 entitled “2008 DECC Capital Improvement Fund” to which there shall be credited the proceeds for the Bonds, less accrued interest paid by the Purchaser, and less additional interest authorized under Minnesota Statutes Section 475.56, together with any additional funds which may be available and are appropriated for the payment of costs of the Project. This Fund shall be used only (i) to prepay the Lease on August 22, 2008;(ii) to pay or reimburse the Authority for the costs for the Project; (iii) to pay a portion of the interest on the Bonds through August 1, 2011, and (iv) to pay costs of issuance of the Bonds, as such payments become due.

     3.02 The City imposes sales taxes on certain sales of food and beverages within the City pursuant to Minnesota Laws 1980, Chapter 511, Section 1, Subdivision 2 and Section 3, as amended, including Minnesota Laws 2008, Chapter 154, Article 5, Section 2 authorizing use of certain sales tax for the Project, and Section 42A-2(b) of the Duluth City Code (the “Food and Beverage Tax”). The Food and Beverage Tax on certain sales of food and beverages is 2.25% on gross receipts described in such sections. (Revenues received from 0.75% of the Food and Beverage Tax authorized by Section 42A-2(b) are herein referred to as the “0.75% Food and Beverage Tax.”) Pursuant to Section 42A-2(b), the tax revenues from the 0.75% Food and Beverage Tax shall be used solely to pay principal of and interest on the Bonds (and any refunding bonds), the proceeds of which financed the Project.

     3.03      A.   On or prior to the delivery of the Bonds, the mayor and city clerk are hereby authorized and directed to execute on behalf of the City a pledge agreement (the “Pledge Agreement”) with the Authority in substantially the form now on file with the city clerk as Public Document No. _________. The execution and delivery of the Pledge Agreement by the mayor and the city clerk, in the form presented to the city council with such changes, omissions, insertions and revisions as the mayor deems advisable, is hereby approved, and the execution by such officers shall be conclusive evidence of such approval. All essential terms and conditions of the Pledge Agreement, including the Authority’s pledge of DECC Lodging Tax, as hereinafter defined, and its other revenues for payment of a portion of the principal of and interest on the Bonds, when due, are hereby approved and adopted and made a part of this resolution.

     B.   The City imposes the 3% excise tax on lodging within the City pursuant to Section 54(D) of the city charter (the “Lodging Tax”). 65% of the Lodging Tax is dedicated to be used for the support and maintenance of the Arena-Auditorium of Duluth (i.e. the Duluth Entertainment Convention Center) (the “DECC Lodging Tax”). The Authority has requested and agreed in the Pledge Agreement that the City shall retain and use so much of the DECC Lodging Tax as is necessary, when combined with the 0.75% Food and Beverage Tax revenues, to pay the principal of and interest on the Bonds when due.

     C.   The City hereby creates Fund No. 281 (the “DECC Revenue Fund”), which is the City’s fund to account for the Authority’s revenues received pursuant to the Pledge Agreement. The City shall deposit the DECC Lodging Tax, and other revenues of the Authority paid pursuant to the Pledge Agreement, in the DECC Revenue Fund. Sums from the DECC Revenue Fund are available for the following purposes: (i) payment (including prepayments)of all principal of and interest on the Bonds; (ii) reimbursement to the Authority for payments of amounts by the Authority to the City in excess of those listed as “UMD Lease Revenue” and the “Authority Contribution” on Exhibit C of the Pledge Agreement, all in accordance with Section 2.2 of the Pledge Agreement; and (iii) payment of capital improvements to the Duluth Entertainment Convention Center, subject to approval of the city council.

     3.04 A separate debt service account is hereby created and designated as the “G.O. DECC Improvement Bonds, Series 2008A Debt Service Account” (the “Debt Service Account”) within the City’s Debt Service Fund. The 0.75% Food and Beverage Tax shall be periodically deposited into the Debt Service Account in accordance with the policies established by the City’s director of finance. There shall be transferred from the DECC Revenue Fund, amounts sufficient to provide for the payment of all interest and principal then due on the Bonds and all charges due to the Bond Registrar; such transfers shall be made at the times and in the amounts determined by the director of finance, in accordance with policies established by the city council. In addition to the amounts set forth above, the following amounts shall be deposited in the Debt Service Account: (i) accrued interest, if any, received from the Purchaser upon delivery of the Bonds; (ii) any amount of additional interest permitted by Minnesota Statutes Section 475.56 paid by the Purchaser; (iii) all investment earnings on monies in the Debt Service Account and (iv) any collections of ad valorem taxes hereafter levied, if any, for the payment of the Bonds. The money in the Debt Service Account shall be used for no purpose other than the payment of principal and interest on the Bonds; provided, however, that if any payment of principal or interest shall become due when there is not sufficient money in the Debt Service Account, the city treasurer shall pay the same from the DECC Revenue Fund and then from any other funds of the City and said funds shall be reimbursed for such advance out of the Debt Service Account.

     3.05 It is estimated that the 0.75% Food and Beverage Tax and the revenues under the Pledge Agreement, including the DECC Lodging Tax deposited in the DECC Revenue Fund and pledged and appropriated to said Debt Service Account, will be received at the times and in amounts not less than 5% in excess of the amounts needed to meet when due the principal and interest payments thereon and, accordingly, no tax is presently levied for this purpose. It is recognized, however, that the City’s liability on the Bonds is not limited to the revenues so pledged, and the city council covenants and agrees that it will levy upon all taxable property within the City, and cause to be extended, levied and collected, any taxes found necessary for full payment of the principal of and interest on the Bonds, without limitation as to rate or amount.

     3.06 The full faith and credit and taxing power of the City are irrevocably pledged for the prompt and full payment of the Bonds and the interest thereon, in accordance with the terms set forth in this resolution.

     3.07 Proceeds of the Bonds on deposit in the 2008 DECC Capital Improvement Fund and in the Debt Service Account and amounts on deposit in the DECC Revenue Fund shall be invested in securities permitted by Minnesota Statutes, Chapter 118A; provided, that any such investment shall mature at such time and in such amounts as will permit the payment of costs of the Project and/or payment of the principal and interest on the Bonds when due. Investment income shall be credited to the fund or account from which the monies were invested.

     Section 4. Refunding of Lease; Findings; Prepayment of the Lease.

     4.01 A.   Based on information from the Authority, it is hereby found and determined that the refunding of the Lease is consistent with the Lease and covenants and agreements, contained therein.

     B.   It is hereby found and determined that $883,043.37 of the proceeds of the Bonds will be sufficient to pay (i) interest due on the Lease through August 22, 2008 (the “Prepayment Date”); and (ii) the termination value under the Lease on the Prepayment Date.

     4.02 The Lease shall be prepaid in accordance with its terms and in accordance with the terms and conditions set forth in the form of notice of call for prepayment provided by the Authority, which terms and conditions are hereby approved and incorporated herein by reference.

     Section 5. Defeasance.

     5.01 When all the Bonds and all interest thereon have been discharged as provided in this paragraph, all pledges, covenants and other rights granted by this resolution to the holders of the Bonds shall cease, except that the pledge of the full faith and credit of the City for the prompt and full payment of the principal of and interest on the Bonds shall remain in full force and effect. The City may discharge all which are due on any date by depositing with the Bond Registrar on or before that date a sum sufficient for the payment thereof in full. If any Bond should not be paid when due, it may nevertheless be discharged by depositing with the Bond Registrar designated in Section 2.05 hereof a sum sufficient for the payment thereof in full with interest accrued to the date of such deposit. The City may also at any time discharge and cause defeasance of the Bonds in their entirety by complying with the provisions of Minnesota Statutes Section 475.67, except that the funds deposited in escrow in accordance with said provisions may (to the extent permitted by law) but need not be, in whole or in part, proceeds of bonds as therein provided, without the consent of any bondholders.

     Section 6. Certificate of Proceedings.

     6.01 The city clerk is directed to file with the county auditor a certified copy of this resolution and such other information as the county auditor may require, and to obtain from the county auditor a certificate stating that the Bonds have been duly entered on his register.

     6.02 The officers of the City are authorized and directed to prepare and furnish to the Purchaser and to bond counsel certified copies of all proceedings and records of the City relating to the authorization and issuance of the Bonds and other affidavits and certificates as may reasonably be requested to show the facts relating to the legality and marketability of the Bonds as such facts appear from the official books and records of the officers’ custody or otherwise known to them. All of such certified copies, certificates and affidavits, including any heretofore furnished, constitute representations of the City as to the correctness of facts recited therein and the actions stated herein to have been taken.

     6.03 The mayor and the city clerk are hereby authorized and redirected to certify that they have examined the official statement prepared and circulated in connection with the issuance and sale of the Bonds and that to the best of their knowledge and belief the Official Statement is a complete and accurate representation of the facts and representations made therein as of the date of the Official Statement.

     Section 7. Tax Covenants.

     7.01 The City covenants and agrees with the holders of the Bonds that the City will (i) take all action on its part necessary to assure that the interest on the Bonds will be excluded from gross income for federal income taxes including, without limitations, restricting, to the extent necessary, the yield on investments made with the proceeds of the Bonds and investment earnings thereon, making required payments to the federal government, if any, and maintaining books and records in a specified manner, where appropriate, and (ii) refrain from taking any action which would cause interest on the Bonds to be subject to federal income taxes, including, without limitation, refraining from spending the proceeds of the Bonds and investment earnings thereon on certain specified purposes.

     7.02      A.  No portion of the proceeds of the Bonds shall be used directly or indirectly to acquire higher yielding investments or to replace funds which were used directly or indirectly to acquire higher yielding investments, except (i) for a reasonable temporary period until such proceeds are needed for the purpose for which the Bonds were issued, and (ii) in addition to the above, in an amount not greater than the lesser of five percent of the proceeds of the Bonds or $100,000. To this effect, any proceeds of the Bonds and any sums from time to time held in the Debt Service Account (or any other City account which will be used solely to pay principal and interest to become due on the Bonds) in excess of amounts which under the applicable federal arbitrage regulations may be invested without regard as to yield shall not be invested at a yield in excess of the applicable yield restrictions imposed by the arbitrage regulations on such investments after taking into account any applicable temporary periods of minor portion made available under the federal arbitrage regulations.

     B.   In addition, the proceeds of the Bonds and money in the Debt Service Account shall not be invested in obligations or deposits issued by, guaranteed by or insured by the United States or any agency or instrumentality thereof if and to the extent that such investment would cause the Bonds to be federally guaranteed within the meaning of Section 149(b) of the Internal Revenue Code of 1986, as amended (the “Code”).

     C.   The City hereby covenants not to use the proceeds of the Bonds, or to cause or permit them to be used, in such a manner as to cause the Bonds to be “private activity bonds” within the meaning of Sections 103 and 141 through 150 of the Code.

     7.03 A. The City covenants and certifies to and for the benefit of the owners of the Bonds that no use will be made of the proceeds of the Bonds, which will cause the Bonds to be arbitrage bonds within the meaning of Section 148(a) of the Code and the Treasury Regulations promulgated thereunder. Pursuant to such covenant, the City hereby agrees to comply throughout the term of the Bonds with the requirements of Section 148 of the Code and any Treasury Regulations promulgated thereunder; to this end, the city shall:
         
(1)     Maintain records identifying all "gross proceeds" (as defined in Section 148(f)(6)(B) of the Code) attributable to the Bonds, the yield at which such gross proceeds are invested, any arbitrage profit derived therefrom (earnings in excess of the yield on the Bonds) and any earnings derived from the investment of such arbitrage profit;
          (2)     Make, or cause to be made as of the end of each Bond Year, the annual determinations of the amount, if any, of excess arbitrage required to be paid to the United States by the city (hereinafter, the "Rebate Amount");
          (3)     Pay, or cause to be paid, to the United States at least once every five Bond Years the amount, if any, which is required to be paid to the United States, including the last installment which shall be made no later than 60 days after the day on which the Bonds are paid in full;
          (4)     Not invest, or permit to be invested, "gross proceeds" in any acquired non-purpose obligations so as to deflect arbitrage otherwise payable to the United States as a "prohibited payment" to a third party;
          (5)     Retain all records of the annual determinations of the foregoing amounts until six years after the Bonds have been fully paid; and
          (6)     In order to comply with the foregoing paragraph, the city shall determine the Rebate Amount within 30 days after the close of each Bond Year and upon payment in full of the Bonds; upon each such determination, the City shall deposit in the Rebate Fund the Rebate Amount so determined; the City shall separately account for the earnings from the investment of the Rebate Amount and such earnings shall become part of the Rebate Amount.

     B.   For purposes of this Section, "Bond Year" shall mean the 12-month period beginning on the date of issuance of the Bonds or such other 12-month period designated by the city council which is permitted by the Code or any Treasury Regulation promulgated thereunder.

     C.   The City shall use its best efforts to comply with any federal procedural requirements which may apply in order to effectuate the designation made by this section.

     7.04 In addition to the Bonds, the City is selling, pursuant to a single offering document and on the same date, the following obligations: General Obligation Aerial Lift Bridge Improvement Bonds, Series 2008B (the “Series 2008B Bonds”), and General Obligation Street Improvement Bonds, Series 2008C (the “Series 2008C Bonds”). The Bonds will not be paid out of substantially the same source as the Series 2008B Bonds or the Series 2008C Bonds; consequently the Bonds are a separate issue under Treasury Regulations Section 1.150-1(c).

     Section 8. Continuing Disclosure. The City acknowledges that the Bonds are subject to the continuing disclosure requirements of Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (17 C.F.R. § 240.15c2-12) (the “Rule”). The Rule governs the obligations of certain underwriters to require that issuers of municipal bonds enter into agreements for the benefit of the bondholders to provide continuing disclosure with respect to the Bonds. To provide for the public availability of certain information relating to the Bonds and the security therefor and to permit underwriters of the Bonds to comply with the Rule, which will enhance the marketability of the Bonds, the mayor and the city clerk are hereby authorized and directed to execute a continuing disclosure certificate substantially in the form of the certificate currently on file in the office of the city clerk as Public Document No. 04-0219-02.

     Section 9. Declaration for Grant Agreement. The State of Minnesota has awarded a grant of $38,000,000 to the Authority for payment of part of the costs of the Project. A requirement for such grant is that the owner of the real property on which the Project is located execute and record with the county recorder a declaration restricting the use of the property financed by such grant. The City is the owner of the real property being improved by the Project. The mayor and city clerk are authorized and directed to execute the declaration substantially in the form of the declaration currently on file in the office of the clerk as Public Document No. _____________.


FINANCE

 

STATEMENT OF PURPOSE:  This resolution establishes the terms and form and awards the sale of the $40,665,000 General Obligation DECC Improvement Bonds, Series 2008A, to _________________ at a true interest cost of ___%. The proceeds of the Bonds will be used to finance the City’s portion of the costs of the improvements to the Duluth Entertainment Convention Center.