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Officer's Certificate$242,000 Special Improvement District No. 345 Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2014 City of Kalispell, Montana OFFICERS' CERTIFICATE We, Mark Johnson, Doug Russell, and Rick Wills, are the duly qualified and acting Mayor, City Manager, and City Finance Director, respectively, of the City of Kalispell, Montana (the "City"). We further certify on behalf of the City that: l . The undersigned Mayor, City Clerk and City Finance Director have executed with our true signatures as such officers the Special Improvement District No. 345 Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2014, of the City, dated, as originally issued, as of May 15, 2014, in the maximum aggregate principal amount of $242,000 (the "Bond"). The principal installments of the Bond mature on the dates, bear interest at the rate and the Bond is substantially in the form prescribed by Resolution No. 5659 duly adopted by the City Council of the City on February 3, 2014, entitled "Resolution Relating to $242,000 Special Improvement District No. 345 Bond (DNRC Water Pollution Control State Revolving Loan Program), Series 2014; Authorizing the Issuance and Fixing the Terms and Conditions Thereof and Providing for the Security Therefor" (the "Resolution"). The Resolution and Ordinance No. 759, adopted May 13, 1969, are each in full force and effect in the form they were adopted or executed, respectively. 2. We have delivered the Bond, duly authenticated by the City Finance Director, as Registrar, to the Department of Natural Resources and Conservation of the State of Montana, as purchaser (the "Purchaser"). The Bond is in fully registered form pursuant to a system of registration established by the Resolution. 3. The Bond has been in all respects duly executed for delivery pursuant to authority conferred upon such officers; that no obligations other than those described above have been issued pursuant to such authority; that none of the proceedings or records which has been certified to the Purchaser or to the attorneys approving the validity of the Bond has been in any manner repealed, amended or changed except as shown by additional proceedings or records furnished each of them; and that there has been no material adverse change in the financial condition of the City, the Improvements (as hereinafter defined) or the circumstances affecting the Bond, Special Improvement District No. 345 of the City (the "District") or the Improvements, except as shown by the materials so furnished. 4. No litigation or other judicial or administrative proceeding is now pending, or, to the best of our knowledge, threatened (i) restraining or enjoining the issuance or delivery of the Bond, (ii) questioning the organization of the City or the right of any officers of the City to their respective offices, (iii) questioning the right and power of officers of the City to deliver the Bond, (iv) questioning the validity of the creation or extension of the District or the work to be undertaken therein or for the special benefit thereof or any contract relating thereto, (v) challenging the validity of the levy of any special assessments, or (vi) questioning the levy of any taxes, the establishment of the District Reserve Account, or the making of any loans to fund the City's Special Improvement District Revolving Fund (the "Revolving Fund") or the pledge thereof to the Bond. No sufficient petition requesting a referendum has been filed with respect to the Resolution or any of the resolutions of the City Council authorizing the issuance and sale of the Bond or any proceedings preliminary thereto, including the resolution creating the District. 5. The representations of the City contained in Section 2.1 of the Resolution are true and complete as of the date hereof as if made on this date, except to the extent that the City has specifically advised the Purchaser and the attorneys approving the validity of the Bond otherwise in writing. 6. The Bond is being delivered to the Purchaser on the date hereof and $242,000 of the principal amount thereof is being advanced on the date hereof. 7. We are among the officers of the City responsible for issuing the Bond and, pursuant to Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations promulgated thereunder (the "Regulations"), on behalf of the City we hereby certify and reasonably expect that the proceeds of the Bond will be used as follows within the meaning of applicable provisions of Section 148 of the Code and the Regulations: (a) The Bond is being issued to finance the costs of improvements to the storm water detention facility of the City (the "Facility") to bring the Facility up to City standards, including design, construction and installation of a diversion structure and improvements to the detention pond, pond outlet structure, and the outlet pipe of the Facility (the "Improvements"). The Improvements will benefit the properties in the District. (b) Based upon the most recent estimate of cost by Morrison-Maeirle, Inc., the engineer of the City in respect of the Improvements, the City has expended and expects to expend the following sums from proceeds of the Bond in connection with the Improvements, including financing costs and other incidental costs, as follows: Payment or Reimbursement for Project Costs Revolving Fund Deposit District Reserve Fund Deposit Bond Counsel Capitalized Interest Total $206,800.00 12,100.00 11,172.33 11,000.00 927.67 $242,000.00 The City has heretofore entered into contracts for the Improvements, in the form of architectural or engineering services or construction, in the sum of at least $12,100, which sum is not less than five percent of the sale proceeds of the Bond. Costs of the Improvements in excess of the proceeds of the Bond have been or will be paid from funds of the City available therefor. (c) Work on the Improvements began on or about September 30, 2013 and proceeded with due diligence to substantial completion on November 29, 2013. 2 (d) It is expected that all proceeds of the Bond (exclusive of proceeds to be deposited in the Revolving Fund and the District Reserve Fund) and income therefrom, if any, will be expended by the date hereof, a date less than three years from the date hereof. If the costs of the Improvements and costs of issuance of the Bond are less than $242,000, such excess will not be advanced as proceeds of the Bond. (e) The Bond will be purchased by the Purchaser at an aggregate purchase price equal to the principal amount of the Bond advanced thereunder. Pursuant to the Resolution and the Bond, the Purchaser has agreed to advance to the City principal amounts of the Bond from time to time upon satisfaction of certain conditions precedent set forth in the Resolution, up to the maximum principal amount of $242,000. No interest accrues on principal of the Bond unless and until it has been advanced and the City is not entitled to any investment income thereon until the principal amount is advanced. (f) Of the amount the City will receive from the Purchaser, $206,800.00 is expected to be used to pay the costs of the Improvements set forth in paragraph (b), $11,000.00 will be used to pay costs of issuance of the Bond (representing costs of legal services), $927.67 will be used to pay capitalized interest on the Bond through July 1, 2014, $12,100.00 are expected to be deposited in the Revolving Fund, and $11,172.3 3 are expected to be deposited in the District Reserve Account. (g) The amount to be received by the City from the Purchaser, less the costs of issuance of the Bond and the amount to be deposited in the Revolving Fund and the District Reserve Fund, does not exceed the amount to be spent by the City on the Improvements. (h) The Bond is not a "hedge bond" within the meaning of Section 149(g) of the Code. The City expects to spend not less than 85% of the spendable proceeds of the Bond within three years after the date hereof and less than 50% of the proceeds of the Bond are invested in nonpurpose investments having a substantially guaranteed yield for four years or more. (i) Proceeds of the Bond and investment income thereon, if any, to be used to finance the costs of the Improvements and pay costs of issuance of the Bond will be invested for a temporary period pursuant to Section 1.148-2(e)(2) of the Regulations ending on the earlier of: (i) three years from the date hereof (i.e., May 15, 2017), or (ii) the date that the Improvements would be completed in the exercise of due diligence and all costs thereof promptly paid. If, at the conclusion of such temporary period, sale proceeds of the Bond and investment income thereon, other than sale proceeds deposited in the Revolving Fund, or the District Reserve Fund, have not been allocated to the governmental purposes of the Bond, such amounts will not be invested at a yield greater than the yield of the Bond, if and to the extent such restriction is necessary to prevent the Bond from being an arbitrage bond within the meaning of Section 148 of the Code and Regulations unless the City determines to take advantage of Section 1.148-5(c) of the Regulations relating to yield reduction payments. 0) The Improvements have not been and are not expected to be sold or otherwise disposed of by the City during the term of the Bond. The City expects that the Improvements will remain owned and operated by the City substantially in the manner in which they are now owned and operated for the indefinite period concluding not earlier than then final stated maturity date of the Bond. The City reasonably expects that during the term of the Bond no private business use will be made of the Improvements or the System and that no private payments or security will be made or furnished that would cause the Bond to be a "private activity bond" within the meaning of Section 141 of the Code and applicable Regulations. No proceeds of the Bond are being or will be loaned to any nongovernmental person, and the special assessments levied in respect of the Improvements meet the exception for tax assessment loans contained in Section 1.141-5(d) of the Regulations. The City reasonably expects that the Bond will not be a private activity bond within the meaning of Section 141 of the Code. (k) No other obligations of the City are being (i) sold at substantially the same time as the Bond, (ii) sold pursuant to the same plan of financing as the Bond, and (iii) paid out of substantially the same source of funds (or which will have substantially the same claim to be paid out of substantially the same source of funds) as will be used to pay the Bond, within the meaning of Section 1.150-1(c) of the Regulations. (1) The yield of the Bond, computed in accordance with Section 148 of the Code and applicable Regulations, is 3.0002925% per annum. (m) The principal of and interest on the Bond are payable from the Special Improvement District No. 345 Fund (the "District Fund") of the City. The City expects to use only the District Fund to pay the principal of and interest on the Bond. The special assessments appropriated to the District Fund are expected to produce amounts sufficient to pay all principal of and interest on the Bond when due, except that the City shall deliver to the Purchaser $1,000 on or before July 1, 2014 in payment of the first principal installment of the Bond from funds of the City legally available therefor. Whenever there will be money in the Principal and Interest Accounts, as defined in the Resolution, in the District Fund on any interest payment date, after paying principal of and interest on the Bond then due, from the prepayment of special assessments levied in the District, the City Finance Director is required by law to call for redemption outstanding principal installments of the Bond which, together with the interest thereon to the date of redemption, will equal the amount on hand in the Principal and Interest Accounts on that date. It is expected that all amounts credited to the Principal and Interest Accounts will be used to pay the interest on and principal of the Bond within 13 months after deposit. The Principal and Interest Accounts will be used primarily to achieve a proper matching of revenues and debt service within each Bond Year (each one-year period (or shorter period from the date hereof) that ends at the close of business on each July 1) and will be fully depleted at least once a year on July 1, except for a reasonable carryover amount 4 which is not expected to exceed the greater of (i) the earnings on money in the Principal and Interest Accounts for the preceding Bond Year or (ii) one -twelfth of the annual debt service on the Bond in the preceding Bond Year. Consequently, the amounts on deposit in the Principal and Interest Accounts constitute a "bona fide debt service fund" for the Bond within the meaning of Section 1.148-1(b) of the Regulations. (n) On the first day of each month, the City Finance Director will determine the amount on hand in the Principal and Interest Accounts in the District Fund. If the amounts on deposit therein exceed the amount described in paragraph 7(m) (i.e., the sum of the amount of principal and interest payable on the Bond through the following July 1 plus one -twelfth of the debt service payable on the Bond during the 12 months preceding the previous July 1), the amount in excess thereof, except as provided in paragraph 7(q), will be applied to redeem principal installments of the Bond or will not be invested at a yield greater than the yield of the Bond. (o) The City has established the Revolving Fund pursuant to Montana Code Annotated, Sections 7-12-4221 to 7-12-4229, as amended, to secure certain special improvement district bonds and warrants of the City, including the Bond. The amount on deposit therein (including the deposit thereto in connection with the Bond, assuming the full principal amount of the Bond has been advanced as of the date hereof) is $281,116. This amount secures outstanding special improvement district bonds and warrants of the City, including the Bond (assuming the full principal amount of the Bond has been advanced on the date hereof), which were issued in the aggregate original principal amount of $6,409,082. Unless the Regulations otherwise require, the City will allocate amounts on hand in the Revolving Fund to outstanding issues of special improvement district bonds or warrants secured thereby in proportion to their respective original principal amounts; provided that sale or transferred proceeds shall be allocated to bonds of the Series. The Revolving Fund and the District Reserve Fund are required for the marketability of the Bond and, as established and implemented pursuant to Ordinance No. 759, constitutes a "reasonably required reserve" for the Bond within the meaning of Section 148(d) of the Code and Section 1.148-2(f) of the Regulations to the extent that the amount on deposit in the Revolving Fund allocable to the Bond plus the amount in the District Reserve Fund (such sum, the "Reserve Amount") does not exceed the Reserve Limitation (as hereinafter defined). For purposes of this paragraph 7(o), the "Reserve Limitation" is equal, as of the date of calculation, to the least of: (i) ten percent (10%) of the proceeds of the Bond (assuming all principal is advanced, $24,200.00); (ii) the maximum amount of principal and interest payable on the Bond in the current or any future calendar year of the City (initially, $20,915.00), and (iii) 125% of the average debt service on the Bond payable in any calendar year of the City during the term of the Bond (initially, $24,431.00). Any portion of the Reserve Amount that is in excess of the Reserve Limitation shall not be invested at a yield in excess of the yield of the Bond, except as permitted by paragraph (r) hereof. As of the date hereof, the Reserve Amount is $21,786.97. $20,915.00 of the Reserve Amount, determined as of the date hereof, is a reasonably required reserve for the Bond and may be invested at an unrestricted yield pursuant to this paragraph (p). (p) Except as set forth in paragraphs 7(m) and 7(o) hereof, the City has not created or established, and does not expect to create or establish, any sinking or similar fiord which is reasonably expected to be used to pay debt service on the Bond or which is pledged as collateral to secure the Bond. No amounts in any other funds or accounts of the City are reserved for or pledged to the payment of debt service on the Bond or will be used to replace funds that will be used to pay debt service on the Bond. (q) An aggregate amount of proceeds of the Bond not to exceed $12,100, the minor portion amount under Section 148(e) of the Code (the "Minor Portion Amount"), may be invested without restriction as to yield throughout the term of the Bond. To the extent that the sum of (i) proceeds of the Bond on deposit in the Construction Account (as defined in the Resolution) in the District Fund remain on hand therein after the earlier of three years from the date hereof or completion of the Improvements with due diligence and payment of all costs thereof, whichever is earlier; (ii) the special assessments or other money on hand in the Principal and Interest Accounts in the District Fund in excess of the limitation described in paragraph 7(n); and (iii) the Reserve Amount in excess of the Reserve Limitation described in paragraph 7(o) hereof, exceeds the Minor Portion Amount, such excess will thereafter be invested at a yield not exceeding the yield of the Bond. It is not expected that any such restrictions as to yield will be required during the term of the Bond. (r) The Bond will not be outstanding longer than necessary, within the meaning of Section 1.148-1(c)(4) of the Regulations. The weighted average maturity of the Bond (8.493 years) does not exceed 120 percent of the average reasonably expected economic life of the Improvements. Such average reasonably expected economic life is not less than 15 years. (s) To the best of the knowledge and belief of the undersigned, the expectations of the City, as set forth above, are reasonable, and there are no present facts, estimates or circumstances which would change the foregoing conclusions. (t) No portion of the Bond is issued solely for the purpose of investing such portion at a materially higher yield. None of the proceeds of the Bond will be used directly or indirectly to replace funds which were used directly or indirectly to acquire obligations with a yield that is materially higher than the yield of the Bond. (u) On the basis of all the facts, estimates and circumstances now in existence and set forth in the documents relating to the issuance of the Bond, including without limitation this instrument, it is expected that the proceeds of the Bond will be used in a manner that would not cause the Bond to be an "arbitrage bond" within the meaning of Section 148 of the Code and the Regulations. (v) To the best of our knowledge and belief, there are no other facts, estimates or circumstances that would materially change the foregoing expectations and said 0 expectations are reasonable. No matters have come to our attention, which make unreasonable or incorrect the representations made in this Certificate. 8. The provisions of this Section 8 are intended to establish and provide for compliance by the City with Treasury Regulations, Section 1.150-2 (the "Reimbursement Regulations") applicable to the "reimbursement proceeds" of the Bond, being those proceeds which will be used by the City to reimburse itself for any expenditure with respect to the Improvements which the City paid or will have paid prior to the issuance of the Bond (a "Reimbursement Expenditure"). The City hereby certifies and covenants as follows: (a) Except as hereinafter provided, on or before the date of payment of any Reimbursement Expenditure, the City made a written declaration of the City's official intent, i.e., a Resolution of Intention to Create Special Improvement District No. 345, adopted June 18, 2012 (the "Declaration") which complies with the provisions of Section 1.150-2(d) and (e) of the Reimbursement Regulations. The Declaration need not cover, however, Reimbursement Expenditures: (i) to be paid or reimbursed from sources other than the Bond, (ii) constituting "preliminary expenditures" (within the meaning of Section 1. 15 0-2(f)(2) of the Regulations) for the Improvements, including engineering or architectural expenses and similar preparatory expenses, which in the aggregate do not exceed 20% of the "issue price" of the Bond, (iii) in a "de minimus" amount (as defined in Section 1.150-2(f)(1) of the Regulations), i.e., $12,100; or (iv) Reimbursement Expenditures paid not more than 60 days before the date of the Declaration. (b) As of the date of the Declaration, no funds from sources other than the Bond were, or were reasonably expected to be, reserved, allocated on a long-term basis, or otherwise set aside by the City to provide financing for the Reimbursement Expenditure to be reimbursed from proceeds of the Bond. (c) Each Reimbursement Expenditure to be reimbursed from proceeds of the Bond, other than costs of issuing the Bond, is a capital expenditure (i.e., a cost that is properly chargeable to capital account (or would be with a proper election) under general federal income tax principles). (d) The "reimbursement allocation" described in the Reimbursement Regulations for each Reimbursement Expenditure to be reimbursed from proceeds of the Bond shall be made forthwith following (but not prior to) the issuance of the Bond and in all events within the period ending on the date which is 18 months after the later of: (i) the date of payment of the Reimbursement Expenditure or (ii) the Improvements are first placed in service or abandoned, but in no event more than three years after the Reimbursement Expenditure is paid. (e) Each such reimbursement allocation will be evidenced by an entry on the official books or records of the City maintained for and in connection with the Bond and will specifically identify the actual prior Reimbursement Expenditure to be reimbursed from proceeds of the Bond. 7 (f) The City is unaware of any facts or circumstances which would cause it to question the reasonableness or accuracy of this Section 8 or of the Declaration, or its compliance with any of the covenants herein contained. (g) As of the date hereof, the City expects that $242,000 of the Bond will be used to reimburse the City for original expenditures paid by the City in connection with the Improvements. 9. The seal impressed on this Certificate and the Bond is the true and only official corporate seal of the City. WITNESS our hands and the seal of the City as of this 15th day of May, 2014. CITY OF KALISPELL, MONTANA ` t 's�'' Mayor 6 er y ger City Finance Director