7. Rebate Certificate$2,000,000
Tax Increment Urban Renewal Revenue Bonds
Consisting of
$1,445,000 Series 2005A Bonds (Non-AMT) and
$555,000 Series 2005B Bonds (AMT)
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 $1,445,000 Tax
Increment Urban Renewal Revenue Bonds, Series2005A (Non-AMT) and $555,000 Tax
Increment Urban Renewal Revenue Bonds, Series 2005B (AMT), each dated, as originally
issued, as of September 15, 2005 (the "Bonds"), issued by the City pursuant to, among other
actions, a resolution adopted by the City Council of the City on September 6, 2005, relating to
the Bonds (the "Resolution"):
Section 1. Undertakings.
1.01 The City, pursuant to Section 12.04 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 acknowledges that, while the Internal Revenue Service
has now issued regulations with respect to computing whether any rebate amount is due the
federal government under Section 148(f) of the Code, those regulations (Sections 1.148-0
through 1.148-11, 1.148-12T, 1.148-13T and 1.150-1, of the Tax Regulations) reserve certain
matters for further elaboration, including the determination of "gross proceeds." 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(f) 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, 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 earning
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 respective meanings given them in the Resolution. In addition, the
following capitalized terms have the following respective meanings in this Certificate:
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 March 1 or, if earlier, the date the last
Bond is paid.
Closing Date shall mean September 15, 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 or upon
mandatory sinking fund redemption, the installment computation dates are expected to be
October 1, 2010, October 1, 2015, and October 1, 2020.
Gross Proceeds shall mean, with respect to the Bonds, all proceeds of the Bonds
(including original proceeds and transferred proceeds) and any funds (other than
proceeds) that are part of a reserve or replacement fund for the Bonds, including amounts
allocable to the Bonds in the Reserve Account, but excluding amounts on deposit
allocable to the Bonds in the Bond Account if the conditions set forth in Section 3.04
hereof are met during the Bond Year.
Investment Property shall mean any security, obligation (other than a tax-exempt
obligation), annuity contract or investment -type property.
Nonpurpose Investment shall mean any Investment Property that is not a purpose
investment in which Gross Proceeds of the Bonds are invested.
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
promulgated under the Code, including, without limitation, Treasury Regulations,
Sections 1.103-13, 1.103.14, 1.103-15, Sections 1.148-0 through 1.148-11, 1.148-12T,
1.148-13T, 1.149-1 and 1.150-0 through 1.150-1.
Reserve Account shall mean the Reserve Account established in the Tax
Increment Fund under the Resolution.
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Yield, with reference to any obligation, 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.
Section 3. Rebatable Arbitrage Calculation and Payment.
3.01 For purposes of complying with Section 148(f) of the Code, the City will prepare
or have prepared a calculation of the Rebatable Arbitrage consistent with the rules described in
this Section 3. The City will prepare (and file in the office of the City Controller) a completed
copy of the calculation of the Rebatable Arbitrage within 30 days after each Computation Date.
3.02 The City shall pay to the United States Department of Treasury from the
Development Account in the Tax Increment Fund or from other available funds (A) not later
than 60 days after each 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.
3.03 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 may designate), on or before the date such payment is due, and shall be accompanied by
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.
3.04 Notwithstanding anything in this certificate to the contrary, any amount earned
during a Bond Year on any bona fide debt service fund for the Bonds and amounts earned on
such amounts, if allocated to such bona fide debt service fund, shall not be taken into account in
calculating the Rebatable Arbitrage. For purposes of this paragraph 3.04, the term "gross
earnings" means the aggregate amount earned on the Nonpurpose Investments in which the
Gross Proceeds deposited to the bona fide debt service fund are invested, including amounts
earned on such amounts if allocated to the bona fide debt service fund. It is expected that the
Bond Account will be a bona fide debt service fund for the Bonds.
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 of the Bonds.
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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
Controller 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: September 15, 2005.
CITY OF KALISPELL, MONTANA
By
finance erector
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