Rebate Certificate$3,000,000
General Obligation Bonds, Series 2005
City of Kalispell, Montana
REBATE CERTIFICATE
The City of Kalispell, Montana (the "City") acting through its undersigned duly
authorized officers, hereby certifies and agrees as follows with respect to the $3,000,000 General
Obligation Bonds, Series 2005, dated, as originally issued, as of April 1, 2005 (the "Bonds"),
issued by the City pursuant to Resolution No. 4992, adopted by the City Council of the City on
March 21, 2005 (the "Resolution"):
Section 1. Undertakings.
1.01 The City, pursuant to Section 5.03 of the Resolution, has covenanted to comply
with the requirements of Section 148(f) of the Internal Revenue Code of 1986, as amended (the
"Code") relating to the Bonds. The City covenants that it will consult with Bond Counsel (as
hereinafter defined) and undertake to determine what is required with respect to the rebate
provisions contained in Section 148(o of the Code from time to time and will comply with any
requirements that may be applicable to the Bonds. The methodology described in this Certificate
will be followed, except to the extent inconsistent with any requirements of future regulations or
written advice received from Bond Counsel.
1.02 Detailed records with respect to each and every Nonpurpose Investment
attributable to Gross Proceeds of the Bonds shall be maintained by the City including: (i)
purchase date, (ii) purchase price, (iii) brokerage or other transaction costs of purchase, (iv)
information establishing fair market value on the date such investment became a Nonpurpose
Investment, (v) any accrued interest paid, (vi) face amount, (vii) coupon or stated interest rate,
(viii) periodicity of interest payments, (ix) disposition price, (x) any accrued interest received,
(xi) disposition date, and (xii) brokerage or other transaction costs of disposition. Such detailed
recordkeeping is required for the calculation of the Rebatable Arbitrage which, in part, will
require a determination of the difference between the actual aggregate earnings of all the
Nonpurpose Investments and the amount of such earnings assuming a rate of return equal to the
Yield of the Bonds.
Section 2. Definitions. Unless the context hereof otherwise requires, capitalized
terms shall have the same meaning as in the Resolution or in the Officers' Certificate, of even
date herewith, executed by officers of the City in respect of the Bonds. In addition, the following
capitalized terms have the following meanings:
Available Construction Proceeds shall mean, with respect to the Bonds, as of any
date, the sum of (i) $3,003,763.81 (the issue price of the Bonds ($3,056,983.21) less costs
of issuance of the Bonds in the amount of $53,219.40 (representing underwriter's
discount and costs of legal services, financial advisor fees, printing costs, registrar and
paying agent fees, and similar items)), plus (ii) for the first three spending periods,
[$ 1 (the investment income estimated by the City's Financial Advisor on the
date hereof from proceeds of the Bonds), and for the fourth spending period, the actual
investment income from proceeds of the Bonds from the Closing Date to April 14, 2007.
Bond Counsel shall mean nationally recognized bond counsel selected by the
City.
Bond Year shall mean each one-year period (or shorter period from the Closing
Date) that ends at the close of business on each July 1, or, if earlier, the date on which the
final Bond is paid.
Closing Date shall mean April 14, 2005, the date of delivery of the Bonds.
Code shall mean the Internal Revenue Code of 1986, as amended, and the
applicable Treasury Regulations (including any proposed or temporary regulations)
promulgated thereunder.
Computation Date shall mean an installment computation date (the last day of the
fifth and each succeeding fifth Bond Year) and the final computation date (the date the
last Bond is discharged). If the Bonds are paid at their stated maturities, the installment
computation dates are expected to be July 1, 2009, July 1, 2014, July 1, 2019 and July 1,
2020.
Gross Proceeds shall mean, with respect to the Bonds, all proceeds of the Bonds
(including sale proceeds, investment proceeds and transferred proceeds) and any funds
(other than proceeds) that are part of a reserve or replacement fund for the Bonds,
including amounts on deposit in the Construction Fund, but excluding amounts on
deposit in the Debt Service Fund allocable to the Bonds to the extent it constitutes a
"bona fide debt service fund" as described in the Officers' Certificate of even date
herewith.
Investment Property shall mean any security, obligation (other than a tax-exempt
obligation), annuity contract or investment -type property.
NonppMose Investment shall mean any Investment Property that is not a purpose
investment in which Gross Proceeds of the Bonds are invested.
Opinion of Bond Counsel shall mean an opinion of nationally recognized bond
counsel selected by the City.
Rebatable Arbitrage shall mean, as of any Computation Date, the excess of the
future value of all nonpurpose receipts with respect to the Bonds over the future value of
all nonpurpose payments with respect to the Bonds.
Regulations shall mean the Treasury Regulations applicable to the Bonds and
promulgated under the Code or the Internal Revenue Code of 1954, as amended,
including, without limitation, Treasury Regulations, Sections 1.148-0 through 1.148-11,
1.149-1 and 1.150-0 through 1.150-2.
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Yield, with reference to any obligation other than the Bonds, shall mean that
discount rate which, when computing the present value of all unconditionally payable
payments of principal and interest paid and to be paid on such obligation, produces an
amount equal to the present value of the issue price of the obligation.
Yield of the Bonds shall mean 3.7943068% per annum.
Section 3. Rebatable Arbitrage Calculation and Payment.
3.01 The Bonds are a "construction issue" within the meaning of Section
148(f)(4)(C)(iv) of the Code and Section 1.148-6(e) of the Regulations in that the Bonds are not
"private activity bonds" (within the meaning of Section 141(a) of the Code) and at least 75% of
the Available Construction Proceeds are expected to be used for "construction expenditures" (as
defined in Section 1.148-6(f) of the Regulations) with respect to real property (as defined in
Section 1.148-6(o of the Regulations) owned or to be owned by the City. None of the property
to be acquired as part of the Project will be built by the City or its employees.
The City hereby elects to use its reasonable expectations in determining the qualification
of the Bonds as a construction issue pursuant to Section 1.148-6(e)(2) of the Regulations. Thus,
if the expenditure tests set forth in Section 148(f)(4)(C)(11) of the Code and Section 1.148-6(c) of
the Regulations are met (i.e., the following percentages of Available Construction Proceeds are
spent within the following periods beginning on the date of issuance: 10% within six months
(October 14, 2005), 45% within one year (April 14, 2006), 75% within 18 months (October 14,
2006) and 100% within two years (April 14, 2007) (subject to a reasonable contractual retainage
amount not exceeding five percent of the Available Construction Proceeds to be spent within
three years from the date hereof), then the City may elect that the Available Construction
Proceeds shall not be treated as Gross Proceeds for purposes of this Certificate.
3.02 To monitor compliance with Section 3.01, the City will file a report in the office
of the City Finance Director in the form attached as Exhibit A within 30 days after the end of
each six-month period set forth above (and any subsequent six-month period) until 100% of the
Available Construction Proceeds are in fact expended for costs of the Project.
3.03 For purposes of complying with Section 148(f) of the Code, the City will prepare
or has prepared a calculation of the Rebatable Arbitrage consistent with the rules described in
this Section 4. The City will prepare (and file in the office of the City Finance Director) a
completed copy of the calculation of the Rebatable Arbitrage within 45 days after each
Computation Date.
3.04 The City shall pay to the United States Department of the Treasury from the
Construction Fund, the Debt Service Fund or other legally available funds of the City (A) not
later than 60 days after each installment Computation Date, an amount equal to at least 90% of
the Rebatable Arbitrage calculated as of such Computation Date; and (B) not later than 60 days
after the final Computation Date, an amount equal to 100% of the Rebatable Arbitrage.
3.05 Each payment required to be made pursuant hereto shall be filed with the Internal
Revenue Service Center, Ogden, Utah 84201 (or at such other place as the Internal Revenue
Service shall designate), on or before the date such payment is due, and shall be accompanied by
9
a completed and executed Internal Revenue Service Form 8038-T. The City shall retain records
of the calculations required by this Section 3 until six years after the final Computation Date.
Section 4. Filing Requirements. The City shall file or cause to be filed such reports
or other documents with the Internal Revenue Service as required by the Code in accordance
with an opinion of Bond Counsel.
Section 5. Survival of Defeasance. Notwithstanding anything in this Certificate or
any other provisions of the Resolution to the contrary, the obligation to remit the Rebatable
Arbitrage to the United States Department of the Treasury and to comply with all other
requirements contained in this Certificate shall survive the defeasance or discharge of the Bonds.
Section 6. Amendments. The City may amend or supplement the provisions of this
Certificate by filing an executed copy of such amendment or supplement in the office of the City
Finance Director accompanied by an opinion of Bond Counsel to the effect that such amendment
or supplement is required by, or better complies with, the provisions of Section 148 and
applicable Regulations.
Dated: April 14, 2005.
W.
Y
Cit anager
By
inane Director
), MONTANA
11
MNia1C3(11I_\
CONSTRUCTION EXPENDITURE REPORT
This report is submitted pursuant to Section 3.02 of the Rebate Certificate, dated April
14, 2005. As of , 20_(1) the aggregate "Available Construction Proceeds" available for
expenditure were $ (2) The amount expended for costs of the Project as of
, 20_,(3) was $ ,(4) which is % of said aggregate "Available
Construction Proceeds." Consequently, the requirements of Section 3.01 of the Rebate
Certificate [have been] [have not been] met.(5)
Dated: , 20_.
CITY OF KALISPELL, MONTANA
Its
(1) Insert most recent date from Section 3.01, or semiannual date thereafter until all Available
Construction Proceeds are expended.
(2) Total of (i) $3,003,763.81 (issue price of Bonds less the sum of costs of issuance to be paid from
proceeds thereof), plus (ii) aggregate investment earnings on amounts in the Construction Account (including
amounts used to pay costs of issuance). [For the first three spending periods, the investment income is based on the
estimated investment earnings on the date of issuance of the Bonds (i.e., $ ). For the fourth spending
period, the investment income is based on actual investment earnings to that date.]
(3) Same date as first blank.
(4) Includes all disbursements for costs of the Project (excluding issuance costs but including the premium
for the Insurance Policy) from proceeds of the Bonds or investment income thereon from the Construction Account.
(5) If percentage requirement of Section 3.01 is not met, all Available Construction Proceeds are subject to
arbitrage rebate.
I:W
$3,000,000
General Obligation Bonds, Series 2005
City of Kalispell, Montana
REQUEST AND AUTHORIZATION
Wells Fargo Bank, MN
608 2„d Avenue South
Minneapolis, MN 55479
Ladies and Gentlemen:
You are hereby requested and authorized forthwith to execute the Certificate of
Authentication printed on the $3,000,000 General Obligation Bonds, Series 2005, dated as of
April 1, 2005 (the "Bonds"), of the City of Kalispell, Montana (the "City"), and to deliver the
Bonds to The Depository Trust Company, in New York, New York, on behalf of D.A. Davidson
& Co., of Great Falls, Montana, as purchaser thereof, all in accordance with the resolution
adopted by the City Council on March 21, 2005 (the "Resolution") relating to said Bonds.
We transmit to you herewith the Bonds described above, which have been duly executed
on behalf of the City, and a copy of the Resolution. We request that you acknowledge receipt of
the Bonds and the Resolution by signing the receipt attached hereto and made a part of this
document and by returning a copy hereof so signed to the City.
Dated: April 14, 2005.
And _
Finance I5irector