Tab 29 Opinion of Bond CounselDoRsEy &WHITNEY
PnorEssioNAL LiMITEiD LiABILITY PARTNERSHIP
127 EAST FRONT STREET
SUITE 310
MISSOULA,, MONTANA 59802
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FAX (406) 543-0863
City of Kalispell
Kalispell, Montana
D. A. Davidson & Co.
Great Falls, Montana
Re: $209,000 Special Improvement District No. 342 Bonds
City of Kalispell, Flathead County, Montana
Ladies and Gentlemen:
As Bond Counsel in connection with the authorization, issuance and sale by
the City of Kalispell, Flathead County, Montana (the "City"), of the obligations
described above, dated, as originally issued, as of November 1, 1995 (the "Bonds"),
we have examined certified copies of certain proceedings taken, and certain
certificates and affidavits furnished, by the City in the authorization, sale and
issuance of the Bonds, including the form of the Bonds and a resolution adopted by
the City Council of the City on November 6, 1995, establishing the form and terms of
the Bonds (the ""Bond Resolution"). As to questions of fact material to our opinion,
we have assumed the authenticity of and relied upon the proceedings, affidavits and
certificates furnished to us without undertaking to verify the same by independent
investigation. From our examination of such proceedings, certificates and
affidavits, and on the basis of existing law, it is our opinion that:
1. The City has validly created Special Improvement District No. 342 (the
""District"), provided for the construction of various improvements of special benefit
to the District and has covenanted to levy special assessments for a portion of the
cost of the improvements,, estimated at $209,000, against the assessable area of each
lot or parcel of land within the District. The special assessments are to be payable in
installments,, with interest on the balance of the special assessments remaining
unpaid, and are to be deposited in the Special Improvement District No. 342 Fund of
the City (the "'District Fund"). The principal of and interest on the Bonds are payable
solely from the District Fund. The City has established in the District Fund, and
funded with certain proceeds of the Bonds, a District Reserve Account (the ""Reserve
Account""), from which moneys are to be applied to pay principal of and interest on
the Bonds in the event collections of special assessments are insufficient therefor.
DORSEY & WHITNEY
City of Kalispell
D. A. Davidson & Co.
Page 2
The City has no obligation to replenish the Reserve Account if funds are withdrawn
therefrom.
2. The City has also validly established a Special Improvement District
Revolving Fund (the ""Revolving Fund") to secure the payment of certain of its
special improvement district bonds, including the Bonds. The City has also agreed,
to the extent permitted by Montana Code Annotated, Title 7, Chapter 12, Parts 41 and
42, as amended (the "Act"), to issue orders annually authorizing loans or advances
from the Revolving Fund to the District Fund, in amounts sufficient to make good
any deficiency in the District Fund to pay principal of or interest on the Bonds after
depletion of the Reserve Account,, to the extent that funds are available in the
Revolving Fund, and to provide funds for the Revolving Fund by annually making
a tax levy or loan from its general fund in an amount sufficient for that purpose,,
subject to the limitation that no such tax levy or loan may in any year cause the
balance in the Revolving Fund to exceed five percent of the principal amount of the
City's then outstanding special improvement district bonds secured thereby and
subject to the durational limitations specified in the Act.
3. The Bonds and the Bond Resolution are valid and binding special,
limited obligations of the City enforceable in accordance with their terms and the
provisions of the Constitution and laws of the State of Montana now in force,
including the Act.
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4. Interest on the Bonds: (a) is not includable in gross income for federal
income tax purposes; (b) is not an item of tax preference includable in alternative
minimum taxable income for purposes of the federal alternative minimum tax
applicable to all taxpayers; and (c) is includable in adjusted current earnings of
corporations in determining alternative minimum taxable income for purposes of
the federal alternative minimum tax.
5. The City has designated the Bonds as ""qualified tax-exempt obligations,"
within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"'), and financial institutions described in Section 265(b)(5) of the
Code may treat the Bonds for purposes of Section 265(b)(2) and 291(e)(1)(B) of the
Code as if they were acquired on August 7, 1986.
6. Interest on the Bonds is not includable in gross income for State of
Montana individual income tax purposes, but is includable in the computation of
DORSEY & WHITNEY
City of Kalispell
D. A. Davidson & Co.
Page 3
income for purposes of the Montana corporate income tax and the Montana
corporate license tax.
The opinions expressed in paragraphs 1, 2 and 3 above are subject, as to
enforceability, to the effect of any state or federal laws relating to bankruptcy,
insolvency, reorganization, moratorium or creditors" rights and the exercise of
judicial discretion.
The opinions expressed in paragraphs 4 and 5 above are subject to the
condition of the City"s compliance with all requirements of the Code that must be
satisfied subsequent to the issuance of the Bonds in order that interest thereon may
be, and continue to be, excluded from gross income for federal income tax purposes,
and the Bonds be and continue to be qualified tax-exempt obligations. The City has
covenanted to comply with these continuing requirements. Its failure to do so
could result in the inclusion of interest on the Bonds in federal gross income,
retroactive to the date of issuance of the Bonds. Except as stated in this opinion, we
express no opinion regarding federal,, state or other tax consequences to the owners
of the Bonds.
We have not been engaged, and have not undertaken, to review the
accuracy, completeness or sufficiency of any offering materials relating to the Bonds
and, accordingly, we express no opinion with respect thereto.
Dated: November 16,1995.
Very truly yours,
air