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4. Discussion - Kalispell Tax Increment Bonds, Series 1996MINNEAPOLIS 127 EAST FRONT STREET NEW YORK WASHINGTON, D.C. SUITE 310 DENVER LONDON MISSOULA, MONTANA 59802 SEATTLE BRUSSELS TELEPHONE: (406) 721-6025 FARGO HONG KONG FAX: (406) 543-0863 BILLINGS DES MOINES ROCHESTER MISSOULA MRE NHN ELLINGSON COSTA MESA GREAT FALLS MEMORANDUM TO: Attached Distribution List FROM: Mae Nan Ellingson DATE: August 9, 1996 RE: Kalispell Tax Increment Bonds, Series 1996 Enclosed is a slightly revised draft Resolution authorizing the issuance of these Bonds. A few comments on the draft Resolution and the underlying concept and assumptions: 1. There will have to be inserted in Section 2.8 an estimate of the amount of Tax Increment to be received in each Fiscal Year during the term of the Series 1996 Bonds. Similar estimates in 1985 were based on a report by Clark & Torgerson, which we mentioned in the earlier memo. 2. We have assumed the Series 1985 Bonds will not be refunded but will remain outstanding. This means that in order to issue the Series 1996 Bonds payable from Tax Increment on a parity with the Series 1985 Bonds, the City must meet the conditions specified in Section 6 of the Original Resolution, which authorized issuance of the Series 1985 Bonds. These conditions include certificates of the Mayor and City Clerk -Treasurer, confirmed by the City Council, as provided in Section 2.9G of the enclosed draft. This requires a determination of the Principal and Interest Requirements of the Series 1996 Bonds. The actual interest rate applicable to the Series 1996 Bonds will not be known until the Conversion Date. Consequently, we have provided for a Maximum Rate (to be inserted in the definition in Section 1). The Principal and Interest Requirement can then be calculated using the Maximum Rate. (We assume the Maximum Rate will be calculated by Davidson and the City as the highest rate within the 125% coverage which the Original Resolution requires.) Distribution List August 9, 1996 Page 2 3. If a sufficient petition for a referendum on Ordinance No. 1243 is filed within 30 days of its second reading (July 15), Ordinance No. 1243 does not become effective until and unless approved by the electors at the referendum, so the Series 1996 Bonds could not be issued as proposed. If no sufficient petition for a referendum is filed by August 14, Ordinance No. 1243 is then effective until and unless a sufficient petition for a referendum is submitted and its repeal is approved by the electors at a referendum, which is the situation contemplated by the enclosed draft Resolution. Accordingly, the draft Resolution provides for an Escrow Account into which the proceeds of the Series 1996 Bonds are credited, to be held until the Conversion Date, as defined. On the Conversion Date the Series 1996 Bonds will either be remarketed to new Bondholders (if the Conversion Conditions, as defined, are satisfied) or redeemed (if the Conversion Conditions are not satisfied). 4. The Series 1996 Bonds will bear interest from their date of issue to the Conversion Date at a fixed rate, to be negotiated by the City and Davidson, as initial purchaser, appropriate to the relatively short term to the Conversion Date. From the Conversion Date to their maturity the Series 1996 Bonds will bear interest at new rates to be established by Davidson as Remarketing Agent appropriate to the market as it exists when the rates are determined but not exceeding the Maximum Rate. If the Series 1996 Bonds cannot be remarketed at par at rates at or below the Maximum Rate, the remarketing fails and the Series 1996 Bonds are to be redeemed at par on the Conversion Date. 5. The draft Resolution contemplates that when adopted a Bond Purchase Agreement' will have been submitted by Davidson, providing for the purchase and remarketing of the Series 1996 Bonds. If you have any questions or comments on these matters or the enclosed draft Resolution, please call. MNE:lmc Enclosure CITY OF KALISPELL TAX INCREMENT URBAN RENEWAL BONDS SERIES 1996 Distribution List ISSUER: City of Kalispell 312 1st Avenue East Kalispell, MT 59903-1997 Facsimile: (406) 758-7758 Al Thelan Acting City Manager Telephone: (406) 758-7700 Larry Gallagher Community Development Director Telephone: (406) 758-7741 Facsimile: (406) 758-7739 Glen Neier City Attorney Telephone: (406) 758-7700 UNDERWRITER: D.A. Davidson & Co. 8 Third Street North Great Falls, MT 59401 Facsimile: (406) 791-7315 Kreg Jones Senior Vice President Telephone: (406) 771-7212 BOND COUNSEL: Dorsey & Whitney LLP 127 East Front Street, Suite 310 Missoula, MT 59802 Facsimile: (406) 543-0863 Mae Nan Ellingson Telephone: (406) 721-6025 Dorsey & Whitney LLP Pillsbury Center South 220 South Sixth Street Minneapolis, MN 55402-1498 Facsimile: (612) 340-2868 Joe Gonnella Telephone: (612) 340-8712