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Tab 20 Officer's Certificate$1,5819500 Special Improvement District No. 343 Bonds City of Kalispell, Montana 0 CERS' CERTIFICATE We, William Boharski, Chris Kukulski, and Amy Robertson, hereby certify that we are on the date hereof the duly qualified and acting Mayor, City Manager, and Finance Officer, respectively, of the City of Kalispell, Montana (the "City"), and that: 1. True and correct facsimiles of the signatures of the Mayor, City Manager and the Finance Officer have been affixed to $1,581,500 Special Improvement District No. 343 Bonds of the City, dated, as of June 1, 2001 (the "Bonds"). The Bonds mature on the dates, bear interest at the rates and are substantially in the form prescribed by a resolution duly adopted by the City Council on June 4, 2001, entitled "Resolution Relating to $1,581,500 Special Improvement District No. 343 Bonds; Fixing the Form and Details and Providing for the Execution and Delivery Thereof and Security Therefor" (the "Resolution"). The Resolution is in full force and effect in the form it was adopted. We have delivered the Bonds to U.S. Bank Trust National Association MT. as Registrar, for authentication and delivery to The Depository Trust Company, in New York, New York, on behalf of D.A. Davidson & Co. (the "Purchaser"). 2. The Bonds have 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to the Purchaser or to the attorneys approving the legality of the issuance of the Bonds has been in any manner repealed, amended or changed except as shown by additional proceedings or records furnished each of them; and that there has been no material adverse change in the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 or the circumstances affecting the Bonds, except as shown by the materials so furnished. 3. No litigation or other judicial or administrative proceeding is now pending, or, to the best of our knowledge, threatened, (i) restraining or enjoining the sale, issuance or delivery of the Bonds, (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 Bonds, (iv) questioning the validity of the creation of Special Improvement District No. 343 (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 to pay the principal of or interest on the Bonds, or (vi) questioning the levy of any taxes 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 Bonds. 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 Bonds or any proceedings preliminary thereto, including the resolution creating the District. 4. We have reviewed the Official Statement, dated May 25, 2001, relating to the Bonds (the "Official Statement"). The Official Statement did not, as of the date thereof, and does not, as of the date hereof, contain any misstatement of a material fact or onlit to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances under which they are made-, provided that we make no comment regarding information provided by the Purchaser for inclusion in the Official Statement relating to the Purchaser and the reoffering prices of the Bonds. 5. Pursuant to Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations applicable thereunder (the "Regulations"), we, as the officers of the City responsible for issuing the Bonds, hereby certify the present expectations of the City on the date hereof with respect to the Bonds are as follows: (a) The Bonds are being issued to finance the cost of constructing certain local improvements (the "Improvements") in or for the benefit of the District to be owned and operated by the City. The Improvements are intended for use by members of the general public. (b) Based upon the most recent estimate of cost by the City Engineer, the City expects to expend the following sums in connection with the Improvements: Improvement Costs $1,095,308.97 Engineering (Design/Construction Mgmt.) 160,000.00 Administration 40�000.00 Reserve Account Deposit 79,075.00 Revolving Fund Deposit 79,075.00 Costs of Issuance 202148.57 Underwriter's Discount 31,630.00 Contingency ....1131262.46 Total $1,618,500.00 Costs in excess of Bond proceeds will be paid from gas tax funds available therefor in the amount of $37,000. (c) The City has heretofore entered into contracts for the Improvements, in the form of architectural or engineering services, site development or construction, in the sum of at least $722,093.50, which sum is not less than five percent of the net sale proceeds of the Bonds. (d) Work on the Improvements has commenced, will proceed with due diligence to completion, and the Improvements are expected to be completed by September 30, 2001. -2- (e) The City will receive $1,552,182.49 from the Purchaser. This amount represents payment of $1,549,870.00 for the principal of the Bonds (reflecting the underwriter's discount of $31,630.00), plus $2,312.49, representing accrued interest on the Bonds from June 1, 2001, to the date hereof. M Of the amount the City will receive from the Purchaser, $1,371,571.43 will be used to pay the costs of the Improvements (Improvement Costs, Engineering, Administration, Contingency) set forth in (b), and $20,148.57 to pay costs of issuance of the Bonds (representing costs of financial advisors, legal services, bond registration, advertising and printing and similar terms); $79,075.00 will be deposited in the Revolving Fund; $79,075.00 will be deposited in the Reserve Account of the District Fund; and $2,312.49 will be deposited in the Interest Account in the District Fund created by the Resolution and used to pay interest on the Bonds on January 1, 2002. (g) The amount to be received by the City from the Purchaser, less the costs of issuance of the Bonds and the amounts deposited in the Revolving Fund, plus investment earnings thereon (which will be applied to costs of the Improvements or interest on the Bonds during construction of the Improvements), does not exceed the amount to be spent by the City with respect to the Improvements. (h) The City expects to spend on costs of the Improvements or costs of issuance of the Bonds by November 30, 2001, all of the sale proceeds of the Bonds, except the amounts deposited in the Revolving Fund. (i) The Bonds are not "hedge bonds" within the meaning of Section 149(g) of the Code. The City expects to spend not less than 85% of the sale proceeds of the Bonds within three years after the date hereof and less than 50 percent of the proceeds of the Bonds are invested in nonpurpose investments having a substantially guaranteed yield for four years or more. 0) Proceeds of the Bonds and investment income thereon to be used to finance the costs of the Improvements and pay costs of issuance of the Bonds 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 (June 12, 2004), 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, proceeds of the Bonds and investment income thereon have not been allocated to the governmental purposes of the Bonds, such amounts will not be invested at a yield greater than the yield of the Bonds (5.05196%), if and to the extent such restriction is necessary to prevent the Bonds from being arbitrage bonds 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. -3- W The Improvements have not been and are not expected to be sold or otherwise disposed of by the City during the term of the Bonds. 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 future, at least during the term of the Bonds. The City reasonably expects that during the term of the Bonds no private business use will be made of the Improvements and that no private payments or security will be made or furnished that would cause the Bonds to be "Private activity bonds" within the meaning of Section 141 of the Code and applicable Regulations. No proceeds of the Bonds 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 Bonds will not be private activity bonds within the meaning of Section 141 of the Code. (1) No other obligations of the City (a) are being issued at substantially the same time as the Bonds, (b) are being sold pursuant to the same plan of financing as the Bonds, and (c) are reasonably expected to be paid from substantially the same source of funds (determined without regard to guarantees from unrelated parties) as will be used to pay the Bonds, within the meaning of Section 1. 150-1 (c) of the Regulations - (m) The yield of the Bonds, computed in accordance with Section 148 of the Code and applicable Regulations, is 5.05196% per annum. (n) The principal of and interest on the Bonds are payable from the Special Improvement District No. 343 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 Bonds. The special assessments appropriated to the District Fund are expected to produce amounts sufficient to pay all principal of and interest on the Bonds when due. Whenever there will be money in the Principal and Interest Accounts in the District Fund on any interest payment date, after paying interest on all Bonds then due, either from the prepayment of special assessments levied on the benefitted property or from the transfer of surplus money from the Construction Account to the Principal Account, the Finance Officer of the City is required by law to call for redemption outstanding Bonds or principal installments thereof which, together with the interest thereon to the date of redemption, will equal the amount on hand in the Principal and Lnterest Accounts on that date. The Principal and Interest Accounts will be used primarily to achieve a proper matching of revenues and debt service within each bond year and will be fully depleted at least once a year on July 1 in each bond year (the 12- month period ending on July 1), except for a reasonable carryover amount which is not expected to exceed the greater of (i) the earnings on money in the Principal and Interest in Accounts for the preceding bond year or (1i) one -twelfth of the annual debt service on the Bonds 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 Bonds within the meaning of Section 1. 148-1 (b) of the Regulations. Consequently, such amounts may be invested at an unrestricted yield for a temporary period of 13 months. (o) On the first day of each month, the Finance Officer will determine the amount on hand in the Principal and Interest Accounts in the District Fund. If any amount has been on deposit therein for a period longer than 13 months, such amount will not be invested at a yield greater than the yield of the Bonds (5.05196%), except as provided in paragraph 5(s) hereof, if and to the extent such restriction is necessary to prevent the Bonds from being arbitrage bonds within the meaning of Section 148 of the Code and the Regulations. (p) 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 Bonds. The amount on deposit therein, after giving effect to the deposit from the proceeds of the Bonds, is approximately $92,408. This amount secures special improvement district bonds and warrants of the City, including the Bonds, issued in the original aggregate principal amount of $2,000,500, of which approximately $1,809,403 is outstanding. Unless the Regulations otherwise require, the City will allocate amounts on hand in the Revolving Fund, as a commingled reserve fund as provided in Section 1. 148- 6(e)(6)(i) of the Regulations, to outstanding issues of special improvement district bonds or warrants secured thereby in proportion to their respective original principal amounts. The City shall reallocate funds on deposit in the Revolving Fund to outstanding issues of bonds or warrants secured thereby upon the issuance or retirement of a series of bonds or warrants secured thereby and, if not done otherwise, at least every three years. (q) The Revolving Fund is required for the marketability of the Bonds and constitutes a "reasonably required reserve" for the Bonds 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 Bonds (the "Reserve Amount") does not exceed the Reserve Limitation (as hereinafter defined). For purposes of this paragraph (r), the "Reserve Limitation" is equal, as of the date of calculation, to the least of: (i) ten percent (10%) of the proceeds of the Bonds ($158,150.00); (ii) the maximum amount of principal and interest payable on the Bonds in the current or any future calendar year of the City (initially, $158,488.29), or (iii) 125% of the average debt service on the Bonds payable in any calendar year of the City during the term of the Bonds (initially, $152,672.86). -5- Any portion of the Reserve Amount that is in excess of the Reserve Limitation shall not be invested at a ield in excess of the yield of the Bonds (5.05196%), except as Yi permitted by paragraph 5(s) hereof As of the date hereof, the Reserve Amount is $803,768.77. All of the Reserve Amount, determined as of the date hereof, is a reasonably required reserve for the Bonds and may be invested at an unrestricted Yield pursuant to this paragraph 5(q). (r) Except as described in this Section 5, the City has not created or established, and does not expect to create or establish, any sinking or similar fund which is reasonably expected to be used to pay debt service on the Bonds or which is pledged as collateral to secure the Bonds. No amounts in any other funds or accounts of the City are reserved for or pledged to the payment of debt service on the Bonds or will be used to replace funds that will be used to pay debt service on the Bonds. (s) An aggregate amount not to exceed the "minor portionlyl amount for the Bonds ($79,075) may be invested pursuant to Section 148(e) of the Code without restriction as to yield. To the extent (i) the proceeds of the Bonds and investment income thereon in the Construction Account in the District Fund are invested beyond the date described in paragraph 50) hereof, (ii) an amount has been on hand in the Pn*ncipal and Interest Accounts for a period longer than 13 months and (iii) the Reserve Amount exceeds the Reserve Limitation described in paragraph 5(q) hereof, such amounts in the aggregate may be invested up to the minor portion amount at a yield greater than the yield of the Bonds. (t) The Bonds 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 Bonds (10.645 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 20 years. (u) The sale proceeds of the Bonds do not exceed the amount necessary to achieve the governmental purposes of the Bonds. No portion of the Bonds is issued solely for the purpose of investing such portion at a materially higher yield as less than a major portion. None of the proceeds of the Bonds will be used directly or indirectly to replace funds which were used directly or indirectly to acquire obligations with a ield Yi that is materially higher than the Yield of the Bonds. (v) We have investigated the facts, estimates and circumstances surrounding the issuance of the Bonds, which are described summarily in this Certificate. To the best of our knowledge and belief, such facts, estimates and circumstances are correct and complete and the City's expectations as to fature events, which are based thereon, are in all respects reasonable and made in good faith. To the extent that the expectations of the City are based upon estimates and representations made by others, including the 02 Purchaser, we have examined such estimates and representations and consider them to be reasonable and correct. Any statements in this Certificate involving fature events, whether or not expressly so stated, are intended as expectations of the City and not as representations of fact. On the basis of such facts, estimates and circumstances, it is expected that the proceeds of the Bonds will be used in a manner that would not cause the Bonds to be considered "arbitrage bonds" within the meaning of Section 148 of the Code, and there are no present facts, estimates or circumstances which would change the foregoing conclusion. (w) In the Resolution, the City has covenanted and agreed to comply with the provisions of Section 148(f) of the Code, to the extent applicable and to be implemented pursuant to the Rebate Certificate of even date herewith. 6. The provisions of this Section 6 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 Bonds, 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 Bonds (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 or will have made a written declaration of the City's official intent (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: (1) to be paid or reimbursed from sources other than the Bonds, (ii) constituting "preliminary expenditures" (within the meaning of Section 1. 150-2(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 Bonds, (iii) in a "de minimus" amount (as defined in Section 1. 150-2(f)(1) of the Regulations), i.e., $79,075 - 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 Bonds 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 Bonds. (c) Each Reimbursement Expenditure to be reimbursed from proceeds of the Bonds, other than costs of issuing the Bonds, 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). -7- (d) The C Creimbursement allocation" described in the Reimbursement Regulations for each Reimbursement Expenditure to be reimbursed from proceeds of the Bonds shall be made forthwith following (but not prior to) the issuance of the Bonds and in all events within the period ending on the date which is 18 months after the later of: (1) 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 Bonds and will specifically identify the actual prior Reimbursement Expenditure to be reimbursed from proceeds of the Bonds. (f) The City is unaware of any facts or circumstances which would cause it to question the reasonableness or accuracy of this Section 6 or of the Declaration, or its compliance with any of the covenants herein contained. 7. The seal impressed below is the true and official seal of the City. Dated-, June 12, 200 1. C\ "A' SEAL 0 F fif In CITY OF KALISPELL, MONTANA Mayor City Manager 2aiz le4x ljv-,� / a a_L1-/ Finance Officer