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1. Resolution 4680 - Sewer Revenue Bond RefinancingCity of Kalispell Post Office Box 1997 - Kalispell, Montana 59903-1997 - Telephone (406)758-7700 Fa (406)758-7758 REPORT TO: FROM: SUBJECT: MEETING DATE: Mayor Kennedy and City Council Amy Robertson, Finance Director Chris Kukulski, City Manager Sewer Revenue Bond Refinancing February 19, 2002 BACKGROUND: Interest rates are at a level that it makes sense to refinance the 1991 and the 1997 Sewer Revenue Bonds. Current bonds average 6.89%; new rates could be as low as 3.77% which would yield an annual savings of $25,836 for a gross debt service savings of $233,000. RECOMMENDATION: Adopt resolution to authorize the issuance of Sewer Refunding Bonds, series 2002. FISCAL EFFECTS: As stated above ALTERNATIVES: As suggested by Council. f% Amy H. fZobertson Finance Director Report compiled: February 11, 2002 Chris A. Kukulski City Manager RESOLUTION NO.4680 A RESOLUTION RELATING TO SEWERAGE SYSTEM REFUNDING REVENUE BONDS, SERIES 2002; AUTHORIZING THE ISSUANCE AND PRIVATE NEGOTIATED SALE THEREOF AND DELEGATING CERTAIN DUTIES RELATED THERETO TO THE MAYOR OR CITY MANAGER AND FINANCE DIRECTOR BE IT RESOLVED by the City Council (the "Council") of the City of Kalispell, Montana (the "City"), as follows: Section 1. Recitals. Under the provisions of Title 7, Chapter 7, Parts 45 and 46 Montana Code Annotated (the "Act"), the City is authorized to issue bonds to refund revenue bonds issued for any of the purposes authorized in Title 7, Chapter 7, Part 44. Pursuant to such authorization, this Council issued and sold its Sewerage System Revenue Bonds, Series 1991, dated, as originally issued, as of April 15, 1991, in the original aggregate principal amount of $2,815,000 (the "Series 1991 Bonds"), and its Sewerage System Refunding Revenue Bonds, Series 1997, dated, as originally issued, as of May 15, 1997 (the "Series 1997 Bonds"). The Series 1991 Bonds are currently outstanding in the aggregate principal amount of $1,850,000, mature on July 1 in the years 2002 through 2011, and bear interest at the rates of 6.70% to 7.25% per annum, and the Series 1997 Bonds are currently outstanding in the aggregate principal amount of $585,000, mature on July 1 in the years 2002 through 2006, and bear interest at the rates of 4.90% to 5.25% per annum. The Finance Director of the City estimates that, in today's market, the Series 1991 Bonds and the Series 1997 Bonds can be refunded to achieve a net present value debt service savings of approximately $146,100, or 6.00% of the aggregate principal amount of the outstanding Series 1991 Bonds and Series 1997 Bonds (together, the "Refunded Bonds"), using the yield of the Refunded Bonds as the discount factor, calculated over the term of the Refunded Bonds. Section 2. Authorization. For the purpose of reducing the interest cost on the indebtedness authorized in Section 1, evidenced by the Refunded Bonds, it is hereby determined that it is in the best interests of the Council to sell its sewerage system refunding revenue bonds, pursuant to the Act, in order to refund the Refunded Bonds. Such bonds shall be denominated "Sewerage System Refunding Revenue Bonds, Series 2002" (the "Series 2002 Bonds"), and shall be issued in the aggregate principal amount necessary, but not greater than the amount necessary, to provide funds to pay or redeem the Refunded Bonds and to pay all costs of issuing the Series 2002 Bonds including, without limitation, the fees and expenses of bond counsel, the fees of the paying agent and registrar, the fee of the escrow agent, if any, and the costs of printing the Preliminary Official Statement, the Official Statement and the Series 2002 Bonds (the "Costs of Issuance"). The Series 1991 Bonds are subject to redemption on July 1, 2002, and any interest payment date thereafter, and the Series 1997 Bonds are subject to redemption on July 1, 2002, and any business day thereafter, each at a redemption price (as of July 1, 2002) equal to one hundred one percent (101%) of the principal amount thereof to be redeemed plus interest accrued to the date of redemption. It is hereby determined to be in the best interest of the Council that the Refunded Bonds be called for redemption on July 1, 2002 and that the Council issue its Series 2002 Bonds, as authorized by Section 7-7-4501 of the Act and the Bond Resolution, in order to refund the Refunded Bonds and pay costs associated therewith. 1 Section 3. Authorization of Sale of Bonds. Pursuant to the Act, this Council hereby determines that it would be in the best interests of the Council to sell the Series 2002 Bonds at a private negotiated sale to D. A. Davidson & Co., of Great Falls, Montana (the "Underwriter"). The Series 2002 Bonds shall be sold to the Underwriter on the terms and at a purchase price subject to the following limitations and conditions: (1) the aggregate principal amount of the Series 2002 Bonds shall not exceed the amount necessary to refund the Refunded Bonds, pay Costs of Issuance and to provide Underwriter's discount not to exceed 1.3% of such aggregate principal amount, and in any event the aggregate principal amount of the Series 2002 Bonds shall not exceed $2,500,000; (2) the debt service payable on the Series 2002 Bonds (including any additional interest) is such that the net present value of debt service savings to be achieved by the refunding is not less than 6.00% of the principal amount of the Refunded Bonds, using the yield of the Series 2002 Bonds as the discount factor, calculated over the term of the Refunded Bonds; (3) the maximum average interest rate on the Series 2002 Bonds does not exceed 4.75%; and (4) the average annual interest rate on the Series 2002 Bonds (including any additional interest) is at least three -eighths of one percent (0.375%) less than the average annual interest rate on each of the Series 1991 Bonds and the Series 1997 Bonds. All Costs of Issuance shall be paid by the City from either the proceeds of the Series 2002 Bonds (or other available funds of the City). The Mayor or the City Manager and the Finance Director are hereby authorized and directed to approve the principal amount, purchase price, maturity dates, principal amounts, interest rates, original issue premiums or discounts (if any), and redemption provisions of the Series 2002 Bonds, subject to the limitations contained in the preceding paragraph and the Act. Upon approving such terms within the limits prescribed by the previous paragraph, the Mayor or the City Manager and the Finance Director are hereby authorized and directed to approve, execute and deliver to the Underwriter a bond purchase agreement (the "Bond Purchase Agreement"), containing the agreement of the City to sell, and the agreement of the Underwriter to purchase, the Series 2002 Bonds on the terms so approved, and containing such other provisions as the Mayor, City Manager, Finance Director, and the City Attorney shall deem necessary and appropriate. In the event of the absence or disability of the Mayor, City Manager, or the Finance Director, such other officer or officers of the City as the City Attorney shall deem to be authorized, shall make such approvals and execute and deliver the Bond Purchase Agreement. The execution and delivery by appropriate officers of the City of the Bond Purchase Agreement shall be conclusive as to the approval of such officers of the terms of the Series 2002 Bonds and the agreement of the City to sell the Series 2002 Bonds on such terms in accordance with the provisions thereof. The form of the Series 2002 Bonds and the security therefor shall be prescribed by a subsequent resolution to be adopted by this Council. Section 4. Preliminary Official Statement. The Mayor or the City Manager and the Finance Director and other officers of the City, in cooperation with the Underwriter, are hereby authorized and directed to prepare a Preliminary Official Statement to be distributed by the Underwriter to potential purchasers of the Series 2002 Bonds. The Mayor (or in the event of the absence or disability of the Mayor, a member of the Council) is hereby authorized and directed on behalf of the City to approve the Preliminary Official Statement and deem it a "final" official 2 statement as of its date, in accordance with Rule 15c2-12(b)(1) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934. Section 5. Continuing Disclosure. In order to permit bidders for the Series 2002 Bonds and other participating underwriters in the primary offering of the Series 2002 Bonds to comply with paragraph (b)(5) of Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the "Rule"), the City will covenant and agree, for the benefit of the registered holders and beneficial owners from time to time of the outstanding Series 2002 Bonds, in the resolution awarding the sale and prescribing the terms of the Series 2002 Bonds to provide certain specified information, if customarily prepared and publicly available, and notice of the occurrence of certain events, if material. The City is the only "obligated person" in respect of the Series 2002 Bonds within the meaning of the Rule and, giving effect to the issuance of the Series 2002 Bonds, there will not be more than $10 million in principal amount of municipal securities outstanding on the date of issuance of the Series 2002 Bonds as to which the City is an obligated person (excluding municipal securities exempt from the Rule under paragraph (d)(1) thereof). A description of the undertaking is set forth in the Official Statement. Failure of the City to enter into an undertaking substantially similar to that described in the Official Statement would relieve the successful bidder of its obligation to purchase the Series 2002 Bonds. The City has complied in all material respects with any undertaking previously entered into by it under the Rule. PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF THE CITY OF KALISPELL THIS 19TH DAY OF FEBRUARY, 2002. Pamela B. Kennedy Mayor ATTEST: Theresa White City Clerk CERTIFICATE AS TO RESOLUTION AND VOTE I, the undersigned, being the duly qualified and acting recording officer of the City of Kalispell, Montana (the "City"), hereby certify that the attached resolution is a true copy of Resolution No. 4680, entitled: "RESOLUTION RELATING TO SEWERAGE SYSTEM REFUNDING REVENUE BONDS, SERIES 2002; AUTHORIZING THE ISSUANCE AND PRIVATE NEGOTIATED SALE THEREOF AND DELEGATING CERTAIN DUTIES RELATED THERETO TO THE MAYOR OR CITY MANAGER AND FINANCE DIRECTOR" (the "Resolution"), on file in the original records of the Council in my legal custody; that the Resolution was duly adopted by the Council at a meeting on February 19, 2002, and that the meeting was duly held by the Council and was attended throughout by a quorum, pursuant to call and notice of such meeting given as required by law; and that the Resolution has not as of the date hereof been amended or repealed. I further certify that, upon vote being taken on the Resolution at said meeting, the following Council Members voted in favor thereof: voted against the same: abstained from voting thereon: or were absent: WITNESS my hand and seal officially this day of February, 2002. (SEAL) City Clerk