Loading...
4. Resolution 5566 - Refinancing General Obligation BondsFROM: Amy Robertson, Finance Director Charles Harball, Interim City Manager SUBJECT: G. O. Bond Refinancing MEETING DATE: June 18, 2012 BACKGROUND: Due to drops in interest rates, the City found it advantageous to refund the 2002 G. O. Bond for the Pool and the 2005 G. O. Bond for the North Fire Station. The sale was completed June 121h with closing scheduled for June 28th. The term of the bonds remains the same. Please find attached the Summary Information sheet. RECOMMENDATION: Adopt the Bond Resolution FISCAL IMPACT: Total Debt savings of $565,413.91 over the course of the remaining 10 years. The reduction in debt service averages $56,541 per year. This will allow a reduction in mills levied for the remaining term of the bonds. w� 9 Amy H. Robertson Finance Director Report compiled: June 13, 2012 Charles Harba Interim City Manager I'VIVelfinancing of of Kalispell's Outstanding General Obligation Bonds ftesults in Significantfor i; , ' On Wednesday, June 13, the City of Kalispell successfully completed the refinancing of its outstanding General Obligation Bonds that were issued in 2002 and 2005 to take advantage of low historic interest rates. The total overall debt service savings was $ 565 413.91 . This reduction in debt service averages approximately $�56,541.39 in each of the remaining ten years until the Bonds are paid. The true interest cost rate of the new refunding Bonds is 1.59 %, which is a significant reduction in rates from the two outstanding bonds which averaged 4.46%. Yields to investors ranged from _.038 % in the first maturity in 2013 to 2.10 % in the final maturity in 2022. The Bonds were offered locally to individual and institutional investors through D.A. Davidson & Co. The 2002 and 2005 General Obligation Bonds that are being refinanced were originally issued to construct the new swimming pool and skate park and the North Fire Sub -Station. As a part of the financing process, the City of Kalispell received an "A+" credit rating with a stable outlook from Standard & Poor's rating service. The Standard & Poor's report specifically indicates the favorable rating is due to the City's: ® Access to an area economy that serves as a regional trade center with access to multiple resort areas; ® Continued property tax base growth with assessed value growth averaging 3.5% annually since fiscal 2008; ® Improved finances, coupled with a separate health levy that supports the city's health insurance costs; and ® Low debt burden. City taxpayers will experience lower debt service levies commencing with fiscal year 2012/13, which begins with taxes due on November 30, 2012. June 13, 2012 Bond Summary Information BE IT RESOLVED By the City Council (the "City Council") of the City of Kalispell, Montana (the "City"), as follows: WHEREAS, the City previously issued its previously issued its (i) General Obligation Bonds, Series 2002 (the "Series 2002 Bonds"), in the original aggregate principal amount of $3,675,000 and (ii) General Obligation Bonds, Series 2005 (the "Series 2005 Bonds" and together with the Series 2002 Bonds, the "Prior Bonds"), in the original aggregate principal amount of $3,000,000; and WHEREAS, the Series 2002 Bonds were issued pursuant to the approval of the electors of the City given at the regular election held on November 6, 2001, and pursuant to a resolution adopted by the City Council on March 4, 2002; and WHEREAS, the Series 2005 Bonds were issued pursuant to the approval of the electors of the City given at the regular election held on November 4, 2004, and pursuant to a resolution adopted by the City Council on April 4, 2005; and WHEREAS, the proceeds of the Series 2002 Bonds were used by the City to (i) finance the costs of constructing a recreational facility including a swimming pool, bathhouse, concessions, skate park and related site development and improvements, and (ii) pay costs of issuance of the Series 2002 Bonds; and WHEREAS, the proceeds of the Series 2005 Bonds were used by the City to (i) finance the design, construction and equipping of the North Fire Sub -Station, and (ii) pay costs of issuance of the 2005 Bonds; and WHEREAS, the July 1, 2013 through July 1, 2022 maturities of the Series 2002 Bonds are callable on or after July 1, 2012 for redemption without a premium and the July 1, 2013 through July 1, 2020 maturities of the Series 2005 Bonds are callable for redemption without a premium on January 1, 2013; and WHEREAS, at its meeting on May 7, 2012, the City Council delegated to an award committee consisting of the Mayor, City Attorney/Interim City Manager, and the City Finance Director (the "Award Committee") the authority to determine the maturity dates, principal amounts of the stated maturities of the Bonds, mandatory redemption provisions with respect to the Bonds, and such other terms of the Bonds within certain parameters; and WHEREAS, on June 13, 2012, the Award Committee agreed to the terms of the Bonds with D.A. Davidson & Co. (the "Purchaser") and executed a bond purchase agreement with the Purchaser consistent with the parameters previously set forth by this City Council. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Kalispell, Montana, as follows: Section 1. Sale of Series 2012 General Obligation Bonds. 1.01. Authority. All acts, conditions and things required by the Constitution and laws of the State of Montana, including Montana Code Annotated, Title 7, Chapter 7, Parts 42 and 43, as amended (the "Act"), in order to make the Bonds valid and binding general obligations in accordance with their terms and in accordance with the terms of this resolution have been done, do exist, have happened and have been performed in regular and due form, time and manner as so required. The indebtedness to be evidenced by the Bonds, together with all other general obligation indebtedness of the City, will not exceed the limitations set forth in Section 7-7-4201 of the Act. The City has full power and authority to issue the Bonds and refund the Prior Bonds. The Bonds shall be general obligations of the City to which the City has pledged its full faith and credit and unlimited taxing power. 1.02. General Terms of the Bonds. The Bonds shall be dated as of their date of issuance, shall be issued in denominations of $5,000 or any integral multiple thereof, and each series shall be numbered from R-1 upwards in order of issuance. The Bonds shall be issued in the form and in accordance with the terms set forth in this Resolution. The Mayor and the Interim City Manager are authorized to deliver the Bonds, without cost to the Purchaser, within thirty (30) days from the date the Award Committee agreed to the final terms of the Bonds. On the date of settlement for the Bonds, payment for the Bonds shall be made in federal or equivalent funds that shall be received at the offices of the City or its designee not later than 11:00 A.M., Mountain Standard Time. The maturity dates and the principal amounts of the stated maturities of the Bonds, optional and mandatory redemption provisions with respect to the Bonds, and such other terms of the Bonds shall be as set forth in a Certificate of Award Committee (the "Award Certificate"). The Completed Award Certificate is attached to this resolution as Exhibit B. 1.03. Refunding Findings. It is hereby found and determined that the issuance of the Bonds will result in a reduction of debt service cost to the City on the Prior Bonds, such that the present value of such debt service or interest cost savings (the "Reduction') is 12.89 percent. The Reduction, after inclusion of all authorized expenses of the refunding in the computation of the effective interest rate on the Bonds is adequate to authorize the issuance of the Bonds as provided by Title 7, Chapter 7, Section 4304 of the Act. 1.04. Approval of the Bonds. The City Council hereby confirms and ratifies the maturity dates, principal amounts of the stated maturities of the Bonds, mandatory redemption provisions with respect to the Bonds as set by the Award Committee. The terms of the Award Certificate are hereby deemed to be incorporated by reference into this Resolution. Section 2. Registration and Payment. 2.01. Registered Form. The Bonds will be issued only in fully registered form. The interest thereon and, upon surrender of each Bond, the principal amount thereof, is payable by check or draft issued by the Registrar described herein. 2.02. Dates; Interest Payment Dates. Unless otherwise provided in the Award Certificate, each Bond shall be dated as of the last interest payment date preceding the date of authentication to which interest on the Bonds has been paid or made available for payment, unless: (i) the date of authentication is an interest payment date to which interest has been paid or made available for payment, in which case the Bonds will be dated as of the date of authentication; or (ii) the date of authentication is prior to the first interest payment date, in which case the Bonds will be dated as of the date of original issue. The Bonds shall bear interest at the rates per annum as indicated on the Award Certificate and shall be payable on each June 1 and July 1, commencing on January 1, 2013, computed on the basis of a 360-day year of twelve thirty -day months. The interest on the Bonds is payable to the registered owners of record thereof as of the close of business on the fifteenth (15th) day of the immediately preceding month, whether or not such day is a business day. 2.03. Registration. The City will appoint a bond registrar, transfer agent, authenticating agent and paying agent (the "Registrar" and the "Paying Agent") for the Bonds. The effect of registration and the rights and duties of the City and the Registrar with respect thereto are as follows: (a) Register. The Registrar shall keep at its principal corporate trust office a bond register in which the Registrar provides for the registration of ownership of the Bonds and the registration of transfers and exchanges of the Bonds entitled to be registered, transferred or exchanged. (b) Transfer of Bonds. Upon surrender for transfer of a Bond duly endorsed by the registered owner thereof or accompanied by a written instrument of transfer, in form satisfactory to the Registrar, duly executed by the registered owner thereof or by an attorney duly authorized by the registered owner in writing, the Registrar shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Bonds of a like aggregate principal amount and maturity, as requested by the transferor. The Registrar may, however, close the books for registration of any transfer after the fifteenth day of the month preceding each interest payment date and until that interest payment date. (c) Exchange of Bonds. When Bonds are surrendered by the registered owner for exchange, the Registrar shall authenticate and deliver one or more new Bonds of a like aggregate principal amount and maturity as requested by the registered owner or the owner's attorney in writing. (d) Cancellation. Bonds surrendered upon transfer or exchange shall be promptly cancelled by the Registrar and thereafter disposed of as directed by the City. (e) Improper or Unauthorized Transfer. When a Bond is presented to the Registrar for transfer, the Registrar may refuse to transfer the Bond until the Registrar is satisfied that the endorsement on the Bond or separate instrument of transfer is valid and genuine and that the requested transfer is legally authorized. The Registrar shall incur no liability for the refusal, in good faith, to make transfers which it, in its judgment, deems improper or unauthorized. (f) Persons Deemed Owners. The City and the Registrar may treat the person in whose name a Bond is registered in the bond register as the absolute owner of the Bond, whether the Bond is overdue or not, for the purpose of receiving payment of, or on account of, the principal of and interest on the Bond and for all other purposes, and payments so made to a registered owner or upon the owner's order shall be valid and effectual to satisfy and discharge the liability upon the Bond to the extent of the sum or sums so paid. (g) Taxes, Fees and Charges. The Registrar may impose a charge upon the owner thereof for a transfer or exchange of Bonds sufficient to reimburse the Registrar for any tax, fee or other governmental charge required to be paid with respect to the transfer or exchange. (h) Mutilated, Lost, Stolen or Destroyed Bond. If a Bond becomes mutilated or is destroyed, stolen or lost, the Registrar shall deliver a new Bond of like amount, number, maturity date and tenor in exchange and substitution for and upon cancellation of the mutilated Bond or in lieu of and in substitution for any Bond destroyed, stolen or lost, upon the payment of the reasonable expenses and charges of the Registrar in connection therewith; and, in the case of a 3 Bond destroyed, stolen or lost, upon filing with the Registrar of evidence satisfactory to it that the Bond was destroyed, stolen or lost, and of the ownership thereof, and upon furnishing to the Registrar an appropriate bond or indemnity in form, substance and amount satisfactory to it and as provided by law, in which both the City and the Registrar must be named as obligees. Bonds so surrendered to the Registrar shall be cancelled by the Registrar and evidence of such cancellation shall be given to the City. If the mutilated, destroyed, stolen or lost Bond has already matured or been called for redemption in accordance with its terms, it is not necessary to issue a new Bond prior to payment. 2.04 Redemption. Bonds with stated maturities in the years 2013 through 2019 shall not be subject to redemption prior to their stated maturities. The Bonds with stated maturities on or after July 1, 2020 will be subject to redemption on July 1, 2019, and any day thereafter, at the option of the City, in whole or in part, at a redemption price equal to the principal amount thereof to be redeemed plus interest accrued to the redemption date, without premium. The City shall exercise its option to prepay the Bonds (and thereby cause a redemption of Bonds) by giving written notice to the Registrar, not less than forty-five (45) days prior to the date selected for redemption. Notice of redemption shall be mailed by the Registrar by first-class mail, postage prepaid, at least thirty (30) days and no more than sixty (60) days before the redemption date to each Holder of the Bonds to be redeemed in whole or in part at such Holder's last address appearing on the Register, but no defect in or failure to give such notice of redemption shall affect the redemption of the validity of the proceedings for the redemption of the Bonds. Failure to give notice by publication or by mail to any registered owner, or any defect therein, shall not affect the validity of the proceedings for the redemption of Bonds. Bonds so called for redemption shall 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. 2.05. Appointment of Initial Registrar. The City appoints U.S. Bank National Association, Seattle, Washington, as the initial Registrar. The Mayor and the Interim City Manager are authorized to execute and deliver, on behalf of the City, a contract with the Registrar. Upon merger or consolidation of the Registrar with another corporation, if the resulting corporation is a bank or trust company authorized by law to conduct such business, the resulting corporation is authorized to act as successor Registrar. The City agrees to pay the reasonable and customary charges of the Registrar for the services performed. The City reserves the right to remove the Registrar upon thirty (30) days notice and upon the appointment of a successor Registrar, in which event the predecessor Registrar shall deliver all cash and Bonds in its possession to the successor Registrar and shall deliver the bond register to the successor Registrar. On or before each principal or interest due date with respect to the Bonds, without further order of this City Council, the Finance Director shall transmit to the Registrar money sufficient for the payment of all principal and interest then due. 2.06. Execution, Authentication and Delivery. Each Bond shall be executed on behalf of the City by the manual or facsimile signature of the Mayor, Interim City Manager, and the City Clerk (or other officers of the City authorized by Resolution). The seal of the City need not be affixed to or imprinted on any Bond. Any Bond bearing the manual or facsimile signature of an individual who was at any time an appropriate officer of the City shall be valid and sufficient for all purposes, regardless whether such individual held such office as of the date of sale, issue or delivery of such Bond or certificate. No Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this Resolution unless and until a certificate of authentication on such Bond has been duly executed by the manual signature of an authorized representative of the Bond Registrar. Certificates of authentication on each Bond need not be signed by the same representative. The executed certificate of authentication on each Bond shall be conclusive evidence that it has been authenticated and delivered under this Resolution and in accordance with the provisions hereof. In the event that the Mayor, Interim C! City Manager, Finance Director or City Clerk is unable to sign any documentation required to issue the Bonds, then the other duly appointed or elected officers of the City may sign such necessary certificates, and instruments. 2.07. Temporary Bonds. The City may elect to deliver, in lieu of printed definitive Bonds, one or more typewritten temporary Bonds in substantially the form set forth in Exhibit A with such changes as may be necessary to reflect more than one maturity in a single temporary bond. Upon the execution and delivery of definitive Bonds, the temporary Bonds shall be exchanged therefor and cancelled. Section 3. Form of the Bonds. 3.01. Printing of Bonds. All of the provisions of the Bonds, when executed as authorized herein, shall be deemed to be a part of this Resolution as fully and to the same extent as if incorporated herein and shall be in full force and effect from the date of execution and delivery thereof. The Bonds shall be substantially in the form attached to this Resolution as Exhibit A, which form is approved, with such necessary and appropriate variations, omissions and insertions including changes to the terms of the Bonds as provided in the Award Certificate described in Section 1.02 hereof). The execution of the Bonds with the manual or facsimile signatures of the Mayor, Interim City Manager and City Clerk, or their designee, and the delivery of the Bonds by the City shall be conclusive evidence of such determination. 3.02. Approving Legal Opinion. The Interim City Manager is authorized and directed to obtain a copy of the proposed approving legal opinion of Kennedy & Graven, Chartered, P.C., Minneapolis, Minnesota, bond counsel to the City, which shall be complete except as to dating thereof and cause the opinion to accompany each Bond. Section 4. Payment; Security; Pledges and Covenants. 4.01. Bond Funds. (a) Bonds Debt Service Fund. The Bonds shall be payable from the General Obligation Bonds, Series 2012 Debt Service Fund (the "Bonds Debt Service Fund"), herein created, and the proceeds of the ad valorem taxes hereinafter levied are pledged to the Bonds Debt Service Fund pursuant to this Section. City funds sufficient to pay the debt service payment due on the Series 2005 Bonds on July 1, 2012 are hereby appropriated to the Bonds Debt Service Fund. Two subaccounts shall be created within the Bonds Debt Service Fund as follows: (1) Escrow Account. The Escrow Account will be maintained as an Escrow Account (the "Escrow Account") with U.S Bank National Association in Seattle, Washington, which is a suitable financial institution within the State, and said financial institution is hereby designated escrow agent (the "Escrow Agent") for the Escrow Account. The City will deposit from proceeds of the Bonds and the debt service accounts for the Prior Bonds the amount of $4,216,224.19. In addition, the City may, in its discretion, deposit amounts in the Escrow Account to pay costs of issuance for the Bonds or pay such costs outside of the Escrow Account. Amounts on deposit in the Escrow Account will be used to fund the escrow for the redemption and prepayment of the Prior Bonds. Any remaining Bond proceeds not required to fund the Escrow Account shall be deposited in the Debt Service Account. The Escrow Account shall retain all investment earnings thereon. The Escrow Account will be invested in securities maturing or callable at the option of the holder on such dates and bearing interest at such rates as will be required to provide sufficient funds, together with any cash or other funds retained in the Escrow Account to pay (i) on August 3, 2012 (the "Series 2002 Bonds Redemption Date") the principal amount of the 2013-2022 maturities of the Series 2002 Bonds plus accrued interest from July 1, 2012 through the Series 2002 Bonds Redemption Date and (ii) on January 1, 2013 (the "Series 2005 Redemption Date") the principal amount of the 2013-2020 maturities of the Series 2005 Bonds plus accrued interest from July 1, 2012 through the Series 2005 Redemption Date. The Escrow Account will be irrevocably appropriated to the payment of the principal of and interest on the Refunded Bonds until the proceeds of the Bonds therein are applied to prepayment of the Refunded Bonds. The money in the Escrow Account will be used solely for the purposes herein set forth and for no other purpose, except that any surplus in the Escrow Account may be remitted to the City, all in accordance with the Escrow Agreement (hereafter defined) by and between the City and the Escrow Agent. In the event that the Escrow Agent notifies the City that there is any deficiency in the Escrow Account, then the City shall promptly deposit funds necessary to cure such deficiency. Any money remitted to the City upon termination of the Escrow Agreement will be deposited in the Debt Service Account. (2) Debt Service Account. The Finance Director will timely deposit in the Debt Service Account amounts appropriated under this Resolution and the taxes (the "Taxes") levied or to be levied for hereunder for the Bonds, which Taxes are pledged to the Debt Service Account. The Finance Director will also deposit any balance remitted to the City upon the termination of the Escrow Account. If any payment of principal or interest on the Bonds becomes due when there is not sufficient money in the Debt Service Account to pay the same, the Finance Director will pay such principal or interest from the general fund of the City, and the general fund will be reimbursed for those advances out of the proceeds of the Taxes levied by this Resolution, when collected. 4.02. Information Reporting. The City shall, with assistance from bond counsel, file with the Secretary of the Treasury, not later than August 15, 2012 a statement concerning the Bonds containing the information required by Section 149(e) of the Code. 4.03. Pledge of Tax Levy. The full faith, credit and taxing powers of the City shall be and are hereby irrevocably pledged to the payment of the Bonds and interest due thereon, and the City shall cause taxes to be levied annually on all taxable property in the City sufficient to pay the interest on the Bonds when it falls due and to pay and discharge the principal at maturity of each and all of the Bonds as they respectively come due. 4.04. Cancellation of Prior Levy after Redemption Dates. It is hereby determined that upon the deposit of proceeds of the Bonds in the Escrow Account that an irrevocable appropriation to the debt service fund for the 2013-2022 maturities of the Series 2002 Bonds and 2013-2020 maturities of the Series 2005 Bonds will have been made and the Finance Director is hereby authorized and directed to cancel any and all tax levies for taxes payable in fiscal year 2013 and thereafter made by the resolution authorizing and approving the sale of the Prior Bonds. 4.05. Escrow Agreement. On or prior to the delivery of the Bonds, the Mayor, Interim City Manager and Finance Director are hereby authorized and directed to execute on behalf of the City an escrow agreement (the "Escrow Agreement") with the Escrow Agent in substantially the form now on file with the Interim City Manager. All essential terms and conditions of the Escrow Agreement including payment by the City of reasonable charges for the services of the Escrow Agent, are hereby approved and adopted and made a part of this resolution, and the City covenants that it will promptly enforce all provisions thereof in the event of default thereunder by the Escrow Agent. 4.06. Notice of Redemption. The Prior Bonds are callable is described in Section 4.01(a)(1) of this resolution and will be redeemed and prepaid on the Series 2002 Redemption Date and the Series 2005 Redemption Date, respectively, in accordance with their terms and in accordance with the terms and 0 conditions set forth in the forms of Notice of Call for Redemption attached to the Escrow Agreement. The Registrar for the Prior Bonds is authorized and directed to send a copy of each Notice of Redemption to each registered holder of the Prior Bonds. Section 5. Authentication of Transcript. 5.01. Furnishing of Documents. The officers of the City are authorized and directed to prepare and furnish to the Purchaser and to Kennedy & Graven, Chartered, P.C., as bond counsel to the City, certified copies of proceedings and records of the City relating to the Bonds and to the financial condition and affairs of the City, and such other certificates, affidavits and transcripts as may be required to show the facts within their knowledge or as shown by the books and records in their custody and under their control, relating to the validity and marketability of the Bonds, and such instruments, including any heretofore furnished, will be deemed representations of the City as to the facts stated therein. 5.02. Official Statement. The Mayor, Interim City Manager and Finance Director are authorized and directed to examine and certify that they have examined the Preliminary Official Statement and the final Official Statement to be prepared and circulated in connection with the issuance and sale of the Bonds and will examine the final Official Statement (collectively, the "Official Statement") and to certify 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 6. Tax Covenants. 6.01. Tax -Exempt Bonds. The City covenants and agrees with the holders from time to time of the Bonds that it will not take or permit to be taken by any of its officers, employees, or agents any action which would cause the interest on the Bonds to become includable in gross income for federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations promulgated thereunder, in effect at the time of such actions, and that it will take or cause its officers, employees or agents to take, all affirmative action within its power that may be necessary to ensure that such interest will not become includable in gross income for federal income tax purposes under the Code and applicable Treasury Regulations, as presently existing or as hereafter amended and made applicable to the Bonds. 6.02. Compliance with Code. The City will comply with requirements necessary under the Code to establish and maintain the exclusion from gross income of the interest on the Bonds under Section 103 of the Code, including, without limitation, requirements relating to temporary periods for investments and limitations on gross proceeds invested at a yield greater than the yield on the Bonds. 6.03. Not Private Activity Bonds. The City further covenants not to use the proceeds of the Bonds or to cause or permit them or any of them to be used, in such a manner as to cause the Bonds to be deemed to be "private activity bonds" within the meaning of Sections 103 and 141 through 150 of the Code. 6.04. Procedural Requirements. The City will use its best efforts to comply with any federal procedural requirements which may apply in order to effectuate the designations made by this section. 6.05. Qualified Tax -Exempt Obligations. To the extent to qualify a portion of the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code, the City makes the following factual statements and representations: 7 (a) the Bonds are not "private activity bonds" as defined in Section 141 of the Code; (b) the City designates the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Code; (c) the reasonably anticipated amount of tax-exempt obligations (other than private activity bonds that are not qualified 501(c)(3) bonds which will be issued by the City (and all subordinate entities of the City) during calendar year 2012 will not exceed $10,000,000; and (d) not more than $10,000,000 of obligations issued by the City during calendar year 2012 have been designated for purposes of Section 265(b)(3) of the Code.] Section 7. Book -Entry ystem; Limited Obligation of City. 7.01. DTC. The Bonds will be initially issued in the form of a separate single typewritten or printed fully registered Bond for each of the maturities set forth in the Award Certificate. Upon initial issuance, the ownership of each Bond will be registered in the registration books kept by the Registrar in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York, and its successors and assigns ("DTC"). Except as provided in this Section, all of the outstanding Bonds will be registered in the registration books kept by the Registrar in the name of Cede & Co., as nominee of DTC. 7.02. Participants. With respect to Bonds registered in the registration books kept by the Registrar in the name of Cede & Co., as nominee of DTC, the City, the Registrar and the Paying Agent will have no responsibility or obligation to any broker dealers, banks and other financial institutions from time to time for which DTC holds Bonds as securities depository (the "Participants") or to any other person on behalf of which a Participant holds an interest in the Bonds, including but not limited to any responsibility or obligation with respect to (i) the accuracy of the records of Cede & Co., DTC or any Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Participant or any other person (other than a registered owner of Bonds, as shown by the registration books kept by the Registrar), of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any Participant or any other person, other than a registered owner of Bonds, of any amount with respect to principal of, premium, if any, or interest on the Bonds. The City, the Registrar and the Paying Agent may treat and consider the person in whose name each Bond is registered in the registration books kept by the Registrar as the holder and absolute owner of such Bond for the purpose of payment of principal, premium, if any, and interest with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes. The Paying Agent shall pay all principal of, premium, if any, and interest on the Bonds only to or on the order of the respective registered owners, as shown in the registration books kept by the Registrar, and all such payments will be valid and effectual to fully satisfy and discharge the City's obligations with respect to payment of principal of, premium, if any, or interest on the Bonds to the extent of the sum or sums so paid. No person other than a registered owner of a Bond, as shown in the registration books kept by the Registrar, will receive a certificated Bond evidencing the obligation of this Resolution. Upon delivery by DTC to the Interim City Manager of a written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the words "Cede & Co." shall refer to such new nominee of DTC; and upon receipt of such a notice, the Interim City Manager shall promptly deliver a copy of the same to the Registrar and Paying Agent. 7.03. Representation Letter. The City has heretofore executed and delivered to DTC a Blanket Issuer Letter of Representations (the "Representation Letter") which shall govern payment of principal of, premium, if any, and interest on the Bonds and notices with respect to the Bonds. Any Paying Agent or Registrar subsequently appointed by the City with respect to the Bonds shall agree to take all action necessary for all representations of the City in the Representation Letter with respect to the Registrar and Paying Agent, respectively, to be complied with at all times. 7.04. Transfers Outside Book -Entry System. In the event the City, by resolution of the City Council, determines that it is in the best interests of the persons having beneficial interests in the Bonds that they be able to obtain Bond certificates, the City will notify DTC, whereupon DTC will notify the Participants, of the availability through DTC of Bond certificates. In such event the City will issue, transfer and exchange Bond certificates as requested by DTC and any other registered owners in accordance with the provisions of this Resolution. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving notice to the City and discharging its responsibilities with respect thereto under applicable law. In such event, if no successor securities depository is appointed, the City shall issue and the Registrar shall authenticate Bond certificates in accordance with this Resolution and the provisions hereof shall apply to the transfer, exchange and method of payment thereof. 7.05. Payments to DTC. Notwithstanding any other provision of this Resolution to the contrary, so long as a Bond is registered in the name of Cede & Co., as nominee of DTC, payments with respect to principal of, premium, if any, and interest on the Bond and all notices with respect to the Bond shall be made and given, respectively, in the manner provided in DTC's Operational Arrangements, as set forth in the Representation Letter. Section 8. Continuing Disclosure. The City covenants and agrees that it shall comply with and carry out all of the provisions of the Continuing Disclosure Certificate, as defined below. Notwithstanding any other provision of this Resolution, failure of the City to comply with the Continuing Disclosure Certificate is not to be considered an event of default with respect to the Bonds, however, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the City to comply with its obligations under the Continuing Disclosure Certificate. "Continuing Disclosure Certificate" means that certain Continuing Disclosure Certificate executed by the Mayor, Interim City Manager, and Finance Director and dated the date of issuance and delivery of the Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. Section 9. Defeasance. When all Bonds and all interest thereon have been discharged as provided in this Section, all pledges, covenants and other rights granted by this Resolution to the holders of the Bonds will 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 will remain in full force and effect. The City may discharge all Bonds which are due on any date by depositing with the Registrar on or before that date a sum sufficient for the payment, including interest earned thereon, in full of the Bonds. If any Bond should not be paid when due, it may nevertheless be discharged by depositing with the Registrar a sum sufficient for the payment thereof in full with interest accrued to the date of such deposit. 0 MA Interest Rate STATE OF MONTANA COUNTY OF FLATHEAD CITY OF KALISPELL GENERAL REFUNDING BONI, SERIES 2012 Maturity Date Date of Original Issue CUSIP July 1, 20_ June 28, 2012 Registered Owner: CEDE & CO. Principal Amount: DOLLARS The City of Kalispell, Flathead County, State of Montana (the "City") acknowledges itself to be indebted and 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, with interest thereon from the date hereof at the annual rate specified above, payable June 1 and July 1 in each year, commencing January 1, 2013, to the person in whose name this Bond is registered at the close of business on the fifteenth (15th) day (whether or not a business day) of the immediately preceding month. The interest hereon and, upon presentation and surrender hereof, the principal hereof are payable in lawful money of the United States of America by check or draft by U.S. Bank National Association, Seattle, Washington, as Registrar, Paying Agent, Transfer Agent, and Authenticating Agent, or its designated successor under the Resolutions described herein. For the prompt and full payment of such principal and interest as the same respectively become due, the full faith and credit and taxing powers of the City have been and are hereby irrevocably pledged. The City may elect on July 1, 2019, and on any date thereafter, to prepay the Bonds (hereinafter defined) due on or after July 1, 2020 at a price of par plus accrued interest to the date of redemption. This Bond is one of an issue of bonds designated by the City as General Obligation Bonds, Series 2012 (the "Bonds") in the original aggregate principal amount of $4,145,000, all of like original issue date and tenor, except as to number, maturity date, redemption privilege, and interest rate, issued pursuant to resolutions adopted by the City Council of the City on May 7, 2012 and June 18, 2012 (the "Resolutions"), for the purpose of providing money to aid in refinancing the July 1, 2013 through July 1, 2022 maturities of the City's General Obligation Bonds, Series 2002 Bonds (the "Series 2002 Bonds") and the July 1, 2013 through July 1, 2020 maturities of the City's General Obligation Bonds, Series 2005 (the "Series 2005 Bonds" and together with the Series 2002 Bonds, the "Prior Bonds") pursuant to Montana Code Annotated, Title 7, Chapter 7, Parts 42 — 43, as amended (the "Act"), and the A-1 principal hereof and interest hereon are payable from ad valorem taxes, as set forth in the Resolutions to which reference is made for a full statement of rights and powers thereby conferred. The full faith and credit of the City are irrevocably pledged for payment of this Bond and the City has obligated itself to levy additional ad valorem taxes on all taxable property in the City within the limitations provided by law in the event of any deficiency, which additional taxes may be levied without limitation as to rate or amount. The Bonds are issued only as fully registered bonds in denominations of $5,000 or any integral multiple thereof of single maturities. The interest on this Bond shall be calculated on the basis of a year of 360 days and twelve 30-day months. As provided in the Resolutions and subject to certain limitations set forth therein, this Bond is transferable upon the books of the City at the principal office of the Registrar, by the registered owner hereof in person or by the owner's attorney duly authorized in writing, upon surrender hereof together with a written instrument of transfer satisfactory to the Registrar, duly executed by the registered owner or the owner's attorney; and may also be surrendered in exchange for Bonds of other authorized denominations. Upon such transfer or exchange the City will cause a new Bond or Bonds to be issued in the name of the transferee or registered owner, of the same aggregate principal amount, bearing interest at the same rate and maturing on the same date, subject to reimbursement for any tax, fee or governmental charge required to be paid with respect to such transfer or exchange. The City and the Registrar may deem and treat the person in whose name this Bond is registered as the absolute owner hereof, whether this Bond is overdue or not, for the purpose of receiving payment and for all other purposes, and neither the City nor the Registrar will be affected by any notice to the contrary. This Bond is not valid or obligatory for any purpose or entitled to any security or benefit under the Resolutions until the Certificate of Authentication hereon has been executed by the Registrar by manual signature of one of its authorized representatives. This Bond has been designated by the City as a "qualified tax-exempt" obligation pursuant to the provisions of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that all acts, conditions and things required by the Constitution and laws of the State of Montana to be done, to exist, to happen and to be performed preliminary 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, do exist, have happened and have been performed as so required, and that the issuance of this Bond does not cause the indebtedness of the City to exceed any constitutional or statutory limitation of indebtedness. A-2 IN WITNESS WHEREOF, the City of Kalispell, Flathead County, Montana, by its City Council, has caused this Bond to be executed by the facsimile signatures of the Mayor, the Interim City Manager and the City Clerk. Dated: June 28, 2012. By: Its: Mayor By: Its: Interim City Manager By: Its: City Clerk (The remainder of this page is intentionally left blank.) A-3 This is one of the Bonds delivered pursuant to the Resolutions mentioned within. LIZ • . I Authorized Representative The following abbreviations, when used in the inscription on the face of this Bond, will be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT Custodian (Cust) (Minor) under Uniform Gifts or Transfers to Minors Act, State of Additional abbreviations may also be used though not in the above list. (The remainder of this page is intentionally left blank.) ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto 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 of the within Bond, with full power of substitution in the premises. Dated: Notice: The assignor's signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or any change whatever. Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a financial institution that is a member of the Securities Transfer Agent Medallion Program ("STAMP"), the Stock Exchange Medallion Program ("SEMP"), the New York Stock Exchange, Inc. Medallion Signatures Program ("MSP") or other such "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, SEMP or MSP, all in accordance with the Securities Exchange Act of 1934, as amended. The Registrar will not affect transfer of this Bond unless the information concerning the assignee requested below is provided. Name and Address: (Include information for all joint owners if this Series 2012 Bond is held by joint account.) Please insert social security or other identifying number of assignee (The remainder of this page is intentionally left blank.) A-5 The ownership of the principal of and interest on the within Bond has been registered on the books of the Registrar in the name of the person last noted below. Signature of Officer of the Date of Registration Registered Owner Registrar Cede & Co. June 28, 2012 Federal ID #13-2555119 (The remainder of this page is intentionally left blank.) WE "AWMAM DATED JUNE 13,2012 City of Kalispell, Montana General Obligation Refunding Bonds Series 2012 June 13, 2012 CERTIFICATE O11 AWARD CO TEE The undersigned are the (i) Mayor of the City of Kalispell (the "City"), (ii) Interim City Manager, and (iii) Finance Director of the City (collectively, the "Award Committee"). The undersigned members of the Award Committee hereby certify in connection with the issuance and sale of the City of Kalispell General Obligation Refunding Bonds, Series 2012 (the `Bonds"), to be issued in the original aggregate principal amount of $4,145,000, as follows: 1. Authorization. Each of the undersigned are duly appointed and authorized by a resolution adopted by the City Council of the City on May 7, 2012 (the "Parameters Resolution"), to act as members of the Award Committee with respect to the Bonds. Such authority has not been revoked, withdrawn, or otherwise modified. 2. Duties. Pursuant to Section 1.02 of the Parameters Resolution, the Award Committee has been delegated the authority to negotiate the terms of the sale of the Bonds, with ratification of the final terms by the City Council. The Bonds are to be awarded by the Award Committee, on behalf of the City; provided that: (i) the purchase price of the Bonds shall not be less than 99.1% nor exceed 105% of the par amount of the Bonds (plus accrued interest, if any to the date of issuance), (ii) the average coupon rate on the Bonds shall not exceed 2.75% percent; (which would mean a reduction in average interest cost of at least an estimated 1.75% with the refunding) provided that the original aggregate principal amount of Bonds does not exceed $4200,000 and the Bonds do not have a final maturity later than July 1, 2022, and (iii) the combined interest rate on the Bonds is more than one-half of one percent (0.5%) less than the combined interest rate on the Prior Bonds as required by the Act and the net present value savings of debt service on the Prior Bonds is greater than or equal to 5%. 3. Pricing and Terms. In accordance with applicable terms of the Bond Resolution, the Award Committee has awarded the sale of the Bonds to D.A. Davidson & Co. (the "Purchaser") and has agreed with the Purchaser to the following terms of the Bonds: (a) the original aggregate principal amount of the Bonds is $4,145,000, which is less than $4,200,000; (b) the original purchase price of the Bonds is $4,160,459.20 or 100.3729% (the principal amount of the Bonds $4,145,000, plus original issue premium in the amount of $52,763.20 less Purchaser's discount of $37,305,00); which is not less than 99.10% nor greater than 105% of the par amount of the Bonds; (c) the true interest cost on the Bonds is 1,7235% per annum, which is less than 2.75% per annum and more than one half of one percent (0,5%) less than the interest rate on the combined Prior Bonds; (d) the net present value savings of debt service on the Prior Bonds is 12,89%, which is greater than 5%; (e) the final maturity of the Bonds is not later than July 1, 2022; C (f) the Bonds shall mature on July I of the Years and in the amounts, and shall bear interest at the rates per annum set forth on the below: Year Ending Principal (July 1) Amount Interest Rate Price Yield 2013 $445,000 1.00% 100.623% 0.380% 2014 445,000 1.00 100.957 0.520 2015 450,000 1.00 100.921 0.690 2016 455,900 1.50 102.476 0.870 2017 465,000 1.50 102.189 1.050 2018 470,000 1.50 101,268 1.280 2019 475,000 1.75 101.456 1.530 2020 485,000 2.00 101.774 1.730* 2021 225,000 2.00 100.325 1.950* 2022 230,000 2.00 99.101 2.100 *Priced to the optional redemption date ofhily 1, 2019. 4. Counterparts. This Certificate of the Award Committee may be signed in one or more - counterparts, each of which shall be an original and all of which shall constitute one instrument. 5. Bond Purchase Agreement. As authorized by the Bond Resolution, the undersigned Mayor, Interim City Manager and Finance Director have executed and delivered a bond purchase agreement with the Purchaser that incorporates the terms of this Award Committee Certificate. (The remainder of this page is intentionally left blank.) M. WITNESS our hands officially as the Mayor, Interim City Manager and Finance Director, respectively, to this AWARD COMMITTEE CERTIFICATE as of the date and year first listed above. KA225-13 (BWJ) 403077v.2 By Its; Mayor By Its: Interim By Its: Finance Di�ecto-r (Issuer Signature Page to Award Committee Certificate for the Bonds) NO