Tab 15 Official StatementOFFICIAL STATEMENT dated May 25,2001
NEW ISSUE NOT RATED
BOOK -ENTRY ONLY BANK QUALIFIED
In the opinion of Dorsey & Whitney LLP, Bond Counsel, under existing laws, regulations, rulings and decisions, assuming compliance with certain
covenants, interest on the Bonds is excludablefrom gross income ofthe recipientforpurposes offederal income taxation and State ofMontana individual
income taxation. Interest is not an item oftaxpreference in determiningfederal alternative minimum tax applicable to individuals. Interest is includable,
however, in the computation of the alternative minimum taxable income of corporationsfor purposes of the alternative minimum tax imposed under the
Internal Revenue Code. (See "Tax Exemption and Related Considerations " herein)
$1,581,500
CITY OF KALISPELL, MONTANA
SPECIAL IMPROVEMENT DISTRICT NO. 343 BONDS, SERIES 2001
Dated: June 1, 2001 Due: July 1, as shown below
City of Kalispell, Montana (the "City") provides this Official Statement in connection with the issuance of its Special hirprovement District
No. 343 Bonds, Series 2001 (the "Bonds"). If issued as serial bonds, the Bonds mature on July I in each of the years and amounts set
forth below and will bear interest from June 1, 2001 to their respective maturities or prior dates upon which they have been duly called for
redemption at the rates per annurn as shown below.
Interest Yield to Price Interest Yield to Price
Year Amount Rate Maturit (% of Par) Year Amount Rate Maturi M of Par)
2002 $76,500 3.60% 3.60% 100.00% 2012 $80,000 4.90% 4.90% 100.00%
2003 75,000 3.75 3.75 100.00 2013 80,000 5.00 5.00 100.00
2004 75,000 4.00 4.00 100.00 2014 80,000 5.10 5.10 100.00
2005 75,000 4.10 4.10 100.00 2015 80,000 5.20 5.20 100.00
2006 80,000 4.20 4.20 100.00 2016 80,000 5.30 5.30 100.00
2007 80,000 4.35 4.35 100.00 2017 80,000 5.40 5.40 100.00
2008 80,000 4.50 4.50 100.00 2018 80,000 5.50 5.50 100.00
2009 80,000 4.60 4.60 100.00 2019 80,000 5.50 5.50 100.00
2010 80,000 4.70 4.70 100.00 2020 80,000 5.50 5.50 100.00
2011 80,000 4.80 4.80 100.00 2021 80,000 5.50 5.50 100.00
The Bonds will be issued under a book -entry system, initially registered to Cede & Co., as nominee of The Depository Trust Company
("DTC"), New York, New York, which will act as securities depository for the Bonds. If issued as serial bonds, individual purchases of
the Bonds will be made in the principal amount of $5,000, or integral multiples thereof within a single maturity thereof; provided that one
Bond with a stated maturity in 2002 shall be in the principal amount of $6,500. Purchasers of the Bonds (the "Beneficial Owners") will
not receive physical bond certificates. Interest on the Bonds will be payable semi-annually on each January I and July 1, commencing
January 1, 2002. U.S. Bank Trust Company will serve as Registrar and Paying Agent (the "Registraf) for the Bonds. The principal of and
interest on the Bonds will be payable by the Registrar to DTC, which will in turn remit such principal and interest to DTC Participants for
subsequent disbursement to the Beneficial Owners of the Bonds. (See "The Bonds - Book -Entry Forin" herein.)
The Bonds are special, limited obligations of the City, payable solely from the collection of special assessments to be levied by the City
against the assessable property benefited by the improvements in Special Improvement District No. 343 ("SID 343") and under certain
circumstances, from the Special Improvement District Revolving Fund of the City (the "Revolving Fund"). The special assessments shall
be a lien against the benefited property in SID 343. The Bonds are being issued in accordance with the provisions of Title 7, Chapter 12,
Parts 41 and 42, Montana Code Annotated, for the purpose of financing the costs of certain local improvements described generallyherein
(the "Improvements"), together with available money of the City, and paying costs incidental thereto, including costs associated with the
sale and the security of special improvement district bonds drawn on SID 343 (the "Bonds"), the creation and administration of SID 343,
the funding of a deposit to the City's Special Improvement District Revolving Fund and the establishment of a Reserve Account securing
the Bonds in the District Fund. The Bonds are not general obligations of the City and the taxing power of the City is not pledged to
the payment of principal thereof or interest thereon. The Bonds are subject to mandatory and optional redemption as described
herein.
The Bonds are offered when, as and if issued by the City, subject to prior sale, to withdrawal or modification of the offer without notice,
and to the opinion as to validity and tax exemption of the Bonds by Dorsey & Whitney LLP, Missoula, Montana and Minneapolis,
Minnesota, Bond Counsel. The Bonds, in definitive form, are expected to be available for delivery through DTC on or about June 12,
2001.
This coverpage contains certain informationfor quick reference only. It is not a summary ofthis issue. Investors must read the entire
Official Statement to obtain information essential to making an informed investment decision.
D.A. DAVIDSON & CO.
CITY OF KALISPELL, MONTANA
312 1 "Avenue East
P.O. Box 1997
Kalispell, MontaDa 59903
(406) 758-7701
Certain Key City Officials:
Mayor................................................................................
CityCouncil .............................. ...............................
City Manager.. .....................
City Attorney ...................
City Clerk of the Council .....
Finance Director ......... ...... -
Public Works Director .........
................... William Boharski
............. .... Jim Atkinson
Donald Counsell
Dale Haarr
Randy Kenyon
M. Duane Larson
Fred Leistiko
Ron Van Natta
Douglas Scarff
...................... Chris Kukulski
............................. Glen Neier
................................................................. - %.1
................................................................. Amy Robertson
...................................................................... James Hansz
U n d e r w r 1 t e r
D.A. DAVIDSON & CO.
8 Third Street North
Great Falls, Montana 59401
(406) 727-4200
Bond Counsel
DORSEY & WHITNEY LLP
Millennium Building
125 Bank Street, Suite 600
Missoula, Montana 59802
NO DEALER, BROKER, SALESMAN OR OTHER PEMON HAS BEEN AUTHORIZED BY THE CITY TO GIVE ANY INFORMATION OR 1-0 MAKE
ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS OFFICIAL STATEMENT, AND IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTAT1ONS. MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CITY. THE
, )NFOFIVfATION IN
THIS OFFICIAL STATEMENT WAS OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE, BUT IS NOT GUARANTEED AS TO ACCURACYOR
COMPLETENESS. THE INFORMATION AND EXPRESSIONS Of OPINION HEREIN ARE SUBJECT TO CHANGE WITHOUTNOTICF AND NM'14['R
THE DELIVERY OF THE OFFICIAL STATEMENT NOR ANY SALE MADE HEREBY SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE P4 THE AFFAIRS OF THE CITY SINCE THE DATE THEREOF.
TABLE OF CONTENTS
SUNINIARY STATEMENT
THEBONDS
Description of the Bonds ......................................
Registrar................................................................
Redemption and Notice of Redemption ................
Book -Entry Form ..................................................
Authorization........................................................
Security and Sources of Payment ..........................
.......................................................................................... 2
.......................................................................................... 2
.......................................................................................... 2
.......................................................................................... 3
........................................................................................... 4
.......................................................................................... 5
RISK FACTORS - THE BONDS
1. Special, Limited Obligations of the City ..............................
2. Special Assessments and the Potential Inadequacy Thereof
3. Limitations of the Revolving Fund ......................................
4. Bankruptcy Proceedings ......................................................
5. Likelihood of edemntion
................................................................... 10
................................................................... 10
................................................................... I I
................................................................... 12
11)
.........................................................................................................................
6. Concentration of Ownership ...................................................................................................................... 13
7. Absence of Rating ...................................................................................................................................... 13
THE RVIPROVEMENTS
GeneralDescription ....................................................................................................................................... 13
Sourcesand Uses of Funds ............................................................................................................................ 14
AssessmentMethods ..................................................................................................................................... 14
SID 343
GeneralDescription of SID 343 .................................................................................................................... 15
PropertyOwners in SID 343 .......................................................................................................................... 16
Northwest Healthcare Corporation ...................................................................................................... I .......... 16
The Medical Center 18
Delinquent Assessments and Property Taxes ................................................................................................ 18
Outstanding or Anticipated Future Assessments ........... I ................................................................................ 19
OUTSTANDING SPECIAL IMPROVEMENT DISTRICT BONDS AND THE REVOLVING FUND
GeneralInformation ....................................................................................................................................... 19
FutureFinancing ............................................................................................................................................ 19
Policy Statement Regarding Creation of Special Improvement Districts ....................................................... 19
Summary of Outstanding Special Improvement Districts .............................................................................. 20
Special Improvement District Assessment Billings and Collections .............................................................. 20
Statement of Changes in Fund Balance of the Revolving Fund ..................................................................... 21
QUALIFIED TAX-EXEMPT OBLIGATIONS
TAX EXEWTION AND RELATED CONSIDERATIONS ......
TaxExemption ...........................................................................
Related Considerations ..............................................................
LITIGATION.............................................................
NO CONFLICTS OF INTEREST ..............................
......................................................... 21
......................................................... 21
......................................................... 21
......................................................... 22
.................................................. 22
.................................................. 22
UNDERWRITING.................................................... I... ................................................................................... 23
SECONDARY MARKET DISCLOSURE ....................................... - ............................. ................................ 23,
DISCLOSURE. STATEMENT ......................................................................................................................... 23
ADDITIONAL INFORMATION AND MISCELLANEOUS ..................... ................................................... 23
APPROVAL OF OFFICIAL STATEMENT ........ .................... — .............................................................. ..... 24
APPENDIX A - CITY GENERAL AND FINANCIAL INFORMATION,
General....................................................................................................
Government..............................................................................................
Principal Governmental Services ..............................................................
Employment and Employee Relations .................... .................................
PensionPlans ......................... ............................. ....................................
FinancialSummary .... ..............................................................................
Overlapping General Obligation Bonded Indebtedness ............................
General Obligation Debt Ratios ................................................................
eneral Oblivation Debt Limi tions
............................................... ... A-1
................................................... A-2
............................ ...................... A-2
................................................... A-3
.......... 1-1 ..................................... A-3
......................................... I ......... A-3
................................................... A-4
....................... ........................... A-4
.................... .................... I ......... A-4
-1 .......... I ..............................................
Trends in Property Valuations ............. ..................... ...................................
Valuations and Assessments of Property for Taxation Purposes ....... ...........
TaxLevies ......................................................... — .........................................
TaxCollecdons ...................................................................... .......................
MajorTaxpayers ............................................................................................
Financial Operations and Budgeting Process .................................................
.................................... ... A-4
.1.1 .............. ............... I ..... A-5
................................ ....... A-5
............................ ........... A-9
.1 ............ I ......................... A-9
........ -.1. ......................... A-10
....... I ............................. IA-10
APPENDIX B - ECONOMIC AND DEMOGRAPHIC INFORMATION... .............. — ........... I .................... B-1
GeneralDescription ... .............. .................................................................................................................. B-2
ManufacturingIndustries ............................................................................................................................. B-2
Agriculture.................................................................................................................... .............................. B-3
GovermnentalEntities ................................................................................................................................. 8-3
TradeCenter Activities ............................................ ............................................................................... ... B-3
Tourismand Recreation ...... ................................................ 7 ....................................................................... B-4
MajorEmployers ........................................................ ................................................................................ B-5
PopulationTrends ............................................................. .......................................................................... B-5
BuildingPermits .......................................................................................................................................... B-6
EarningsBy Industry ................................................................................................... ............................... B-6
LaborForce and Unemployment .............. I ... 11, ............................................................................................ B-7
PersonalIncome Trends .............................................. .......... ..................................... — ... ......................... B-7
EmploymentBy Major Industry ........................................ ......................................................................... B-8
APPENDIX C - CONTINUING DISCLOSURE ................................ ........................................................ C-1
Purposeand Beneficiaries .................. .......................................... ........ ..................................................... C-2
Informationto be Disclosed ....................................................................................... ................................. C-2
Mannerof Disclosure .................................................................................................................................. &5
Term.................................. ............................................................................ C-6
Amendments; Interpretation ........................................................................................................................ C-6
Further Limitation of Liability of City .................... ........................................................................ ..... C-6
APPENDIX D - FORM OF LEGAL OPINION ........................................................................................... D4
$1�5819500
City of Kalispell, Montana
Special Improvement District No. 343 Bonds, Series 2001
SUMMARY STATEMENT
The following summary is qualified in its entirety by reference to the detailed inforination appearing
elsewhere in this Official Statement. No person is authorized to detach this Summary Statement from this
Official Statement or to otherwise use it without this entire Official Statement.
ISSUER ................................... The City of Kalispell, Montana (the "City") is located in northwestern
Montana and had a 2000 Census population of 14,223 as estimated by the
U.S. Census Bureau. (See "The City" herein.)
INTEREST .............................. Interest is payable semi-annually each January I and July 1, commencing
January 1, 2002. For so long as the Bonds are held in book -entry format,
principal and interest payments will be made as described under the heading
"The Bonds - Book -Entry System".
F.1TffJV9V_J�
FOR ISSUANCE ................. The Bonds are being issued pursuant to Title 7, Chapter 12, Parts 41 and 42
of the Montana Code Annotated (the "Act") and to a resolution to be duly
adopted by the City Council of the City of Kalispell on or about June 4,
2001 (the "Bond Resolutioif). The Bond Resolution authorizes the
issuance of the Bonds and the levy of assessments against benefited property
in SID 343. (See "Authorization" herein.)
SOURCE OF
REPAYMENT ..................... The Bonds are special, limited obligations of the City, payable solely from
the collection of special assessments to be levied upon the assessable real
property within SID 343, monies in the Reserve Account in the District Fund
to the extent available and under certain circumstances, from the Special
Improvement District Revolving Fund of the City, subject to the limitations
contained in the Act (the "Revolving Fund"). The special assessments shall
be a lien against the benefited property in SID 343. (See "Security and
Sources of Payment" and "Risk Factors" herein.)
LUITWITI
PROCEEDS ........................ The Bonds are being issued for the purpose of financing the costs of certain
local improvements described generally herein (the "Improvements"),
together with available money of the City, and paying costs incidental
thereto, including costs associated with the sale and the security of special
improvement district bonds drawn on SID 343 (the "Bonds"), the creation
and administration of SID 343, the fimding of a deposit to the City's Special
Improvement District Revolving Fund and the establishment of a Reserve
Account securing the Bonds in the District Fund. (See "The Improvements"
herein.)
1
THE BONDS
Description of the Bonds
The Bonds will be issued as fully registered bonds and will be registered in the name of Cede & Co., as
registered owner and nominee for DTC as securities depository of the Bonds. Individual purchases and sales
of the Bonds may be made in book -entry form only, and in the principal aniount of $5,000 within a single
maturity and in integral multiples thereof; provided that one Bond with a stated maturity in 2002 shall be in
the principal amount of $6,500.. The Bonds will be dated, as originally issued, on the dated date, June 1,
2001. The Bonds shall mature on July 1 in the years and amounts set forth on the cover hereof and shall bear
interest from the date of onginal issue to their respective maturities, or prior dates upon which they have
been duly called for redemption, at the interest rates per annum as shown on the cover hereof
Interest on the Bonds will be payable semi-annually on January I and July 1, commencing January 1, 2002,
1_�
by wire transfer on the Interest Payment Dates to Cede & Co. hiter-est on the Bonds will be payable to the
Beneficial Owners of record as of the close of business on the 15th day of the month irnmediately preceding
an interest payment date. Principal and interest payments to the Beneficial Owners of the Bonds are to be
made as described herein urider "Book -Entry Only System".
Registrar
The City has appointed U.S. Bank Trust Company to serve as Registrar and Paying Agent (the "Registrar")
for the Bonds.
Redemption and Notice of Redemption
Man datoty Redemption. The Bonds will be subject to mandatory redemption, in whole or in part, on any
interest payment date, whenever, after payment of principal of or interest on the Bonds on such date, there
are funds available for this purpose in District Fund from the payment of current or delinquent special
assessments or from the prepayment of special assessments levied in SID 343 or from unexpended proceeds
of the Bonds following completion of the Improvements. Property owners may, as a matter of law, prepay
their assessments in whole, at any time after the assessment is levied, bypayinent of the remaining principal
amount on the special assessments, with interest accrued and to accrue thereon through the next date on
which interest on the Bonds is payable. 'The redemption price is equal to the amount of the principal
installment or installments of the Bonds to be redeemed plus interest accrued thereon to the date of
redemption.
Optional Redemption. The Bonds are also subject to redemption at the option of the City from sources of
flinds available therefor other than the prepayment of special assessments or unexpended proceeds on any
interest payment date; provided, however, that the City has agreed not to redeem Bonds from (i) amounts On
deposit in the Reserve Account in the District Fund or (ii) the proceeds of refLinding bonds prior to July 1,
2006.
Selection ofBondsfor Redemption. If less than all of the Bonds are to be redeemed, the Bonds are to be
redeemed in order of their stated maturities. If less than all Bonds of a stated maturity are to be redeemed,
2
the Bonds of such maturity shall be selected for redemption in $5,000 principal amounts selected by the
Registrar by lot or other manner it deems fair. The owner of any Bond redeemed in part shall receive, upon
surrender of such Bond to the Registrar, one or more new Bonds in authorized denominations equal in
principal amount to the unredeemed portion of such Bond so surrendered.
Notice andEffect ofRedemption: Notice of redemption will be given not less than 30 days before the date
of redemption by first-class mail to the registered owners of the Bonds to be redeemed at their addresses as
they appear on the bond register maintained by the Registrar. Interest on principal installments of Bonds
called for redemption will cease to accrue on the dated fixed for redemption.
Book -Entry Form
The Depository Trust Company ("DW), New York, New York will act as securities depository for the
Bonds. The Bonds will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's
partnership nominee.) One fully -registered Bond certificate will be issued for each maturity of the Bonds,
each in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC is a limited -purpose trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement of
securities transactions among Participants in deposited securities through electronic computerized book -
entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect Participants").
Ownership interest in the Bonds may be purchased only in the minimum authorized denomination of $5,000
or any multiple thereof. Purchases of bonds under the DTC. system must be made by or through Direct
Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each
actual purchaser of each Bond (the "Beneficial Owner") is in turn to be recorded on the Direct or Indirect
Participants'records. Beneficial Owners will not receive written confirmation from DTC of their purchase,
but Beneficial Owners are expected to receive written confirmations providing details ofthe transactions, as
well as periodic statements of their holdings, from the Direct or Indirect Participant through which the
Beneficial Owner entered into the transaction. Transfers of ownership interest in the Bonds are to be
accomplished by the entries made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the
event that use of the book -entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name
of DTC's partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose
accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their customers.
3
Principal and interest payments on the Bonds will be made to DTC or its nominee, Cede & Co., by U.S.
Bank Trust Company (the "Registrar"). Upon receipt of moneys, DTCs current practice is to immediately
credit Direct Participants' accounts on payable date in accordance with their respective holdings shown oil
DTC's records unless DTC has reason to believe that it will not receive payment on Payable date. Payments
by Participants to Beneficial Owners will be governed by standing instructions and customary practices and
will be the responsibility of each Participant and not of DTC, the Registrar or the City, subject to any
statutory or regulatory requirements as may be in effect from time to time. Payment ofprincipal and interest
to DTC is the responsibility of the Registrar, disbursement of such payments to Direct Participants shall be
the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
DTC may determine to discontinue providing its services as securities depository with respect to the Bonds
at any time by giving reasonable notice to the City or the Registrar and dischar&g its responsibilities with
respect thereto under applicable law. Under such circumstances (if there is not a successor securities
depository), Bond certificates will be delivered as described in the Bond Ordiance. The City may
determine that continuation of the system of book -entry only transfers through DTC (or a successor
securities depository) is not in the best interests of the Beneficial Owners. In such event, bond certificates
will be delivered as described in the Bond Ordinance.
Authorization
Constitutional, Article V11, Section 5(2) of the Montana Constitution empowers the Montana legislature to
authorize the creation of special improvement districts for capital improvements and maintenance and to
authorize the assessment of the cost thereof against benefited property. Nevertheless, to effectuate the
prohibition in both the United States and Montana Constitutions that private property not be taken for public
use without just compensation, courts have required that the amount of a special assessment levied against a
particular lot or parcel not substantially exceed the special benefit conferred on that lot or parcel by the
improvements with respect to which the assessment is levied.
Statutory. Title 7, Chapter 12, Parts 41 and 42 of the Montana Code Annotated (the "Act') authorizes
Montana cities to create special improvement districts for the purpose of ordering the construction or
maintenance of certain local improvements, including street, sidewalk, curb, gutter, alley approach, water
system, storni sewer and sanitary sewer improvements or to purchase existing improvements. Montana
statutes provide for the levy of special assessments in such districts to pay the cost of improvements. A
special improvement district maybe created only after notice of the governing bodys intention to create the
district has been published in a local newspaper and mailed to the owners of all real property in the district, a
public hearing has been held, and, in most cases, the owners of more than 5 0% of the property to be assessed
for the cost of the improvements have failed to protest against the proposed work or creation of the district.
The Act requires the bids for contracts for construction of the improvements and for the sale of the special
improvement district bonds to be issued to finance the cost of the improvements be let competitively after
published notice.
City Resolutions. On January 22,2001, the City Council adopted Resolution No. 4596 Intent to Create SID
343. The Notice of Passage of the Resolution of Intention to Create SID 343 was subsequently mailed to
each property owner within SID 343. On February 1 and February 9, 200 1, the notice was also published ill
the 7he Daily Interlake setting February 20, 200 1, as the date for holding a public hearing for the creation of
SID 343. The hearing was continued until March 5, 200 1. The City Clerk received written protests fron' two
Ell
of the property owners subject to assessment and not withdrawn for 8% of the total costs of the surface
improvements and no protests were filed by property owners subject to assessment for the costs of grading
and utility improvements. On March 5, 2001, the City Council adopted Resolution No. 4602, which created
SID 343. The City Council has therefore adopted such resolutions and has duly taken the proceedings
necessary to create SID 343 to finance construction of the Improvements. On March 19, 2001, the City
Council adopted a resolution that eliminated a property owner from SID 343 and combined such property
owner's assessments with the assessments of another property owner in SID 343.
Security and Sources of Payment
Special, Limited Obligations. The Bonds are payable primarily from the collections of special assessments
levied on the lots, parcels or tracts of land within SID 343 benefited by the improvements. Pursuant to the
Bond Resolution, all collections of such special assessments are to be deposited into the District Fund are
pledged to payment of the principal of and interest on the Bonds. In the event money on hand in the Reserve
Account in the District Fund is insufficient to pay principal of or interest on the Bonds when due, the City
Council has covenanted in the Bond Resolution to order the transfer of available money on deposit in the
City's Revolving Fund to the District Fund to satisfy the deficiency. The City has also agreed to provide
funds for the Revolving Fund by levying a tax or making a loan from the General Fund to the Revolving
Fund, subject to the limitations contained in the Act. (See "Risk Factors" herein.)
Apart from money raised to fund the Revolving Fund, payment of the principal of and interest on the
Bonds will not be made out of any funds raised by taxation by the City. The Bonds are not general
obligations of the City, the State of Montana or any political subdivision thereof and do not represent
a charge upon their general credit or taxing powers, but are payable solely from the sources specified
herein. Bondholders should be aware of the limitations with respect to funding the Revolving Fund as
described under "Risk Factors — The Bonds — Limitations of the Revolving Fund" herein.
Special Assessments. In the Bond Resolution, the City covenants to take all action necessary for the valid
levy of special assessments in an aggregate original principal amount not less than $1,581,500 in the City,
against benefited property in SID 343. The special assessments will be payable in equal semiannual principal
installments on November 30 and May 31 of each fiscal year, and shall become delinquent on such date
unless paid in full. The special assessments will bear interest on the balance thereof remaining unpaid at an
annual rate equal in a fiscal year, to the sum of (i) the average annual interest rate borne by the Bonds plus
(ii) 1/2 of 1% per annum.
A special assessment constitutes a prior lien upon and against the property against which it is levied, from
and after the date of passage of the resolution levying the assessment, which lien may be extinguished only
by payment of the assessment with all penalties, costs and interest, 'except as hereinafter described.
Delinquent installments of special assessments bear interest at rates established by Montana law, which has
changed from time to time. Current law provides that delinquent installments of a special assessment bear
interest at a rate of 5/6 of 1 % per month, and a penalty of 2%. The lien of a special assessment is junior and
subordinate to State property tax liens, even if the special assessment lien attaches first, and federal property
tax liens for which the underlying federal tax was assessed before certification of the amount of the
delinquent assessment and penalty. The lien of the special assessment attaches for each installment in the
year in which it is levied. The lien may also be subordinate to the lien of mortgages securing other
municipal bonds (there are no such liens in the case of the Bonds), including those issued on behalf of
private entities, filed of record before the attachment of the installnient of the special assessment lien.
In the event of a delinquency in the payment of a special assessment installment, the City Cowicil, at its
option and by resolution, may declare all unpaid installments of the special assessment to be delinquent. If
the delinquency is not paid, the property subject to the lien is to be sold by the county in which the property
is located (for the City, Flathead County, Montana (the "County�) in the same mamier that real property is
sold for delinquent property taxes. The tax sale proceeding is the exclusive remedy for the collection of
special assessment, neither the City nor the County may sue or otherwise proceed directly against the owner
of the property for the payment of delinquent special assessments. If no good faith purchaser bids at the tax
sale, the land is deemed sold to the County and the County receives a tax sale certificate without advancing
funds therefor. A property tax lien of the County acquired in this manner must be assigned to a third party
upon payment of all delinquent taxes and assessments, including penalties, interest and costs.
Whenever property subject to the lien of delinquent special assessments has been deemed sold to the County
and not assigned, the City may request that the County assign all of the County's rights to the property to the
City, upon payment by the City of any delinquent taxes (excluding assessments) and costs, without penalty
or interest. Property thus sold to the City must be held in trust by the City for the District Fund into which
the delinquent special assessments are payable. The City may, if the property is not redeemed from the tax
sale within the period hereinafter described, assign its rights in the property upon payment by the assignee of
the purchase price paid by the City, the delinquent assessments, interest on the purchase price and delinquent
assessments at the rate of 5 /6 of 1 % a month, and penalties and interest as provided by law. An assignment
by the City in this munner discharges the trust upon deposit of the amount of delinquent assessments and the
interest accrued thereon into the special improvement district fund. The City may sell or lease the property
so acquired in the same manner as the County may sell or lease tax -deed property. All money received by
the City from the sale or lease of such land, after the costs of sale, not to exceed $25, must be paid into the
special improvement district fund to the extent of delinquent assessments, interest and penalties. The
surplus, if any, must be paid to the Revolving Fund if it secures the payment of the special assessments.
The County is not required to take a tax deed on any property for which it holds a tax sale certificate. If the
County takes a tax deed it must, within six months after acquiring title, conduct an auction sale of the
property. The property may not be sold for less than its fair market value. In calculating the fair market
value, the County is to subtract the principal amount of the outstanding assessments that are a lien on the
land from the unencumbered value of the land, but the minimum sale price for a parcel of land may not be
less than S 10. If no bids are received at the sale, the County must conduct another auction sale within six
months or may sell the property at private sale at not less than 70% of the appraised value thereof. Tax -deed
property may thus be sold at or less than its fair market value, which may be loss than the amount of the
outstanding delinquent special assessments thereon.
Property subject to a property tax or assessment lien ruay be redeemed by the owner, the occupant, a
mortgagee, a contract vendor or any other interested party within 36 months after the date of the tax, sale or
within 60 days after notice of application for a tax deed, whichever is later; provided, however, that if the
property is subdivided as a residential or commercial lot uponwhich no habitable dwelling or commercial
structure is situated, redemption must be made within 24 months after the date of the tax sale or within 60
days after notice of application for a tax deed, whichever is later. In the event of foreclosure Of the
assessment lien when the City Council has not declared all unpaid installments of special assessments d1le
and payable, the issuauce of the tax deed conveys title to the property subject to the lien of future
installments of the special assessment.
2
Enforcement of a special assessment lien may be a lengthy process, and no assurance can be given that
proceeds from the sale or redemption of the property will be available in amounts or at times
sufficient to pay the principal of or interest on the Bonds.
ReserveAccount. A Reserve Account will be created in the Bond Resolution in the District Fund from the
proceeds of the Bonds. Upon the issuance of the Bonds, the City will deposit $79,075 in the Reserve
Account. In the event money on hand in the District Fund is insufficient to pay principal of or interest on the
Bonds when due, the Reserve Account of the District Fund will be used to satisfy any deficiency in the
District Fund from which the Bonds are payable if necessary to pay principal of and interest on the Bonds, to
the extent funds are available. Money in the Reserve Account will not be replenished if used. The City may
not apply any of the Reserve Account balance to pay the principal of or interest on any City obligation other
than the Bonds. The balance in the Reserve Account remaining after payment in full and retirement of all
Bonds shall be transferred to the City's Revolving Fund. If money in the Reserve Account is insufficient to
satisfy any deficiency in the District Fund then the City will look to the Revolving Fund as follows.
RevolvingFund. The Bonds are also being issued under the provisions of the Special Improvement District
Revolving Fund Law (Montana Code Annotated, Sections 7-12-4221 through 7-12-4229 et. seg.). This law
provides for the creation of a revolving furid by any city that has created a special improvement district. The
City has created the Special Improvement District Revolving Fund (the "Revolving Fund") for the purpose
of loaning monies to special improvement district funds of the City whenever there are insufficient Rinds
available to pay special improvement district bonds and warrants or any interest thereon. The Bonds will be
secured by the Revolving Fund.
Money for the Revolving Fund is provided by a transfer of monies from the City's General Fund or by the
levy of an ad valorem tax on all taxable property in the City as necessary to meet the financial requirements
of the Revolving Fund; provided that no such loan from the General Fund or tax levy in any fiscal year may
cause the balance in the Revolving Fund to exceed 5% of the principal amount of the City's then outstanding
special improvement district bonds and warrants secured thereby nor may any such tax levy or loan in a
single fiscal year equal in aggregate more than 5% of the principal amount of the City's then outstanding
bond or warrants secured by the Revolving Fund. Loans to a special improvement district fund from the
Revolving Fund constitute a lien upon the special improvement district fund, payable from excess funds
remaining after the payment of the outstanding bonds and any interest thereon.
In the event money on hand in the District Fund (including amounts in the Reserve Account) is insufficient
to pay principal of or interest on the Bonds when due, the City Council will covenant in the Bond Resolution
to issue annual orders authorizing loans from the Revolving Fund to the District Fund to satisfy any
deficiency in the District Fund from which the Bonds are payable if necessary to pay principal of and interest
on the Bonds, to the extent funds are available. The City has further agreed to provide funds for the
Revolving Fund, as is necessary to cause such payment, by making a loan from the General Fund to the
Revolving Fund or by levying a tax upon all taxable property within the City of Kalispell in accordance with
the Special Improvement District Revolving Fund Law. In the Bond Resolution, the City will covenant,
subject to the foregoing limitations, to maintain or restore the balance in the Revolving Fund at or to an
amount equal to 5% of the outstanding principal amount of the bonds or war -rants of the City secured
thereby.
Any property tax levy to be made by the City to provide funds for the Revolving Fund is subject to levy
limits under current law, including Senate Bill 184, adopted by the Montana Legislature in 1999, which
limits the total amount ofproperty taxes a municipality may levy to the amount levied by that municipality in
7
1996 and House Bill 124, adopted by the 2001 Legislature, which provides for property tax growth at V2the
rate of inflation. The City has agreed in the Bond Resolution to levy property taxes to provide funds for the
Revolving Fund to the extent described above and, if necessary, to reduce other property tax levies
correspondingly to meet its obligations with respect to the Revolving Fund. (See "Risk Factors" and
Appendix A — "Valuations and Assessments of Property for Tax Purposes" and "Financial Operations and
Budgeting Process" herein.)
Since 1983, Montana law has authorized the City, as part of the cost of an improvement, to deposit up to 5%
of the principal amount of special improvement district bonds and warrants in the Revolving Fund if such
bonds and warrants are secured by the Revolving Fund. The City generally has required such deposit in
connection with the issuance of special improvement district bonds and warrants, excluding refunding
bonds. For bonds issued for districts created after March 24, 1995, a 5% contribution to the Revolving Fund
has been required by law for any bonds secured by the Revolving Fund. As of the date of issuance of the
Bonds, the City will deposit an amount equal to 5% of the principal amount of the Bonds ($79,075) from the
proceeds of the Bonds into the Revolving Fund.
As of March 31, 2001, the aggregate principal amount of outstanding special improvement districtbonds and
warrants of the City secured by the Revolving Fund equaled $208,843, not including the Bonds. Also as of
this date, the City had a cash balance of $13,333 in its Revolving Fund. Following the issuance of the
Bonds, the City's cash balance in the Revolving Fund will equal approximately $92,408 and will represent
approximately 5.11 % of the total outstanding bonds and warrants of the City secured by the Revolving Fund,
including the Bonds ($1,809,403). The following table sets forth for each of the last five fiscal years at fiscal
year end the cash balance in the Revolving Fund, the principal amount of outstanding bonds and warrants
secured thereby and such cash balance expressed as a percentage of such outstanding principal arnount.
Fiscal Year End
(June 30)
200 12
2000
1999
1998
1997
1996
Revolving Fund
Cash Balance'
$92,408
10,006
12,238
22,194
31,532
30,308
Principal
Amount of Bonds
$1,809,403
262,903 3
288,080
354,597
414,983
447,814
Percentagel
5.11%
3.8 14
4.254
6.26
7.60
6.77
' The City has generally transferred excess funds from the Revolving Fund to the General Fund when the balance in the Revolving
Fund equaled more than 5% of the outstanding bonds secured thereby. During the fiscal years shown, the City transferred tile
following amounts to the General Fund; $15,122 in 1996, $16,318 in 1998 and $9,384 in 1999.
2 As of the date of issuance of the Bonds.
3 As of June 30,2000, the City had $220,000 in outstanding local improvement distrietbonds (SID 337, SID 341, and SID 342).
The Revolving Fund also secures eight City sidewalk curb and gutter districts that as of June 30, 2000, had total outstanding
assessments bonds or warrants in the amount of $42,903.
4 The City made short term loans to other City funds in anticipation of collections to be received May 3.1. Due to posting
delays collections are not are not actually received by the City until July 15. In 1999 the loan amount was $3,471 and
$2,576 in 2000. The actual amounts deposited for 1999 were $4,471 and $6,608 in 2000 resulting in fimd balance
percentages of 5.80% and 6.32% respectively.
When money is lent for the Revolving Fund to a special improvement district fund, the Revolving Fund has
a lien therefor on all money thereafter deposited in the special improvement district fund to the extent Ofthe,
loan plus interest accrued thereon at the rate of interest borne by the bond with respect to which the loan was
made. The loan is to be repaid upon order by the City Council whenever there is money in the special
9
improvement district fund not necessary for the payment of principal of or interest on bonds payable from
the special improvement district:ftmd. Any money remaining in a special improvement district fund after
payment of the principal of and interest on all bonds payable therefrom and repayment of any loans to the
Revolving Fund are to be transferred to the Revolving Fund; provided that proceeds of special improvement
district bonds remaining on deposit in the Revolving Fund may, in the discretion of the City Council, be
disbursed to the owners of the property in SID 343 in proportion to the original assessment levied against
such property or transferred to the General Fund of the City.
Montana law regards as surplus money funds on deposit in the Revolving Fund in excess of the amount of
proceeds of special improvement district bonds deposited therein, 5% of the principal amount of the special
improvement district bonds and warrants of the City secured thereby and then outstanding, and the amount
then necessary for the payment or redemption of outstanding bonds or the interest thereon. The City Council
may transfer such surplus money to the General Fund of the City upon vote of all members of the City
Council, or apply such surplus moneys to the purchase ofproperty that is then encumbered with delinquent
special assessments, either at a sale of the property for delinquent taxes or assessments, from the County.
The proceeds of the disposition of such property or tax certificates are to be deposited in the Revolving
Fund.
The Revolving Fund secures, equally and ratably, a number of special improvement district bonds and
warrants of the City. The City is obligated to loan money from the Revolving Fund to the funds of these
districts in the event of delinquencies in the payment of special assessments levied therein. Ifthe amount on
hand in the Revolving Fund is insufficient to make loans at any time required, the City is obligated to
advance funds to each of the special improvement district funds then incurring a deficiency, pro rata, in
proportion to the amount of the deficiency in the special improvement district fund.
The adequacy ofmoney in the Revolving Fund available to be lent to the District Fund to satisfy a deficiency
arising from delinquencies in collections of special assessment levied on the benefited property in SID 343 is
affected by a number of factors which the City has no control over, including, without limitation, the
following:
(1) the amount of delinquent special assessments in other special improvement district fimds of
the City into which then outstanding special improvement district bonds or warrants are
payable and which are secured by the Revolving Fund;
(2) the principal amount of special improvement district bonds or warrants of the City secured
by the Revolving Fund and then outstanding, which limits the amount that maybe levied or
lent to the Revolving Fund;
(3) the amounts of delinquencies in the collection of property taxes levied by the City for
purposes of meeting the financial requirements of the Revolving Fund, which may or may
not be levied in an amount to anticipate any shortfalls arising from the nonpayment of
property taxes; and
(4) the rate of interest earned on balances from time to time on deposit in the Revolving Fund.
The delinquency rate in the payment of any special assessments depends on a variety of factors, which may
vary in importance in each special improvement district. Such factors include, among others, the extent and
character of development of property in the district, the financial circumstances of the owners of the
property, the amount of the special assessment and other special assessments and property taxes levied
�Wllj
against the property in relation to the market value of the property, the value and marketability of the
property, permitted uses of the property under applicable zoning and land use ordinances, the availability of
or need for other public improvements or utilities serving the property and local and national economic
conditions.
Although, as described in the preceding paragraphs, Rinds raised by taxation for the Revolving FLind may,
subject to limitation, be applied to the payment of principal of or interest on the Bonds in the event of
delinquencies in the payment of special assessments levied against benefited property in SH) 343, no
assurance can be given that such money will be available in amounts or at times sufficient to provide for the
prompt payment of such principal and interest. The Bonds and interest thereon are payable from special
assessments levied against benefited property in SID 343 and those considering an investment in the Bonds
should look to the property owners of the assessable property as providing the principal security for payment
of the Bonds. (See "SID 343" herein.)
RISK FACTORS - THE BONDS
Prospective investors in the Bonds should carefully consider the following risk factors, as well as the other
infortnation contained in this Official Statement.
1. Special, Limited Obligations of the City
The Bonds are payable primarily from the collections of special assessments levied on the lots, parcels or
tracts of land within SID 343 benefited by the improvements. While the City has agreed in the Bond
Resolution that it will make loans or advances from available funds in the Revolving Fund of the City to the
District Fund from which the Bonds are payable, if necessary to pay principal and interest on the Bonds, no
assurance can be given that such money will be available in amounts or at times sufficient to provide for the
prompt payment of such principal and interest.
The Bonds are not general obligations of the City, the State of Montana or any political subdivision thereof
and do not represent a charge upon their general credit or taxing powers, but are payable solely from the
sources specified herein. (See "Security and Sources of Payment" herein.)
2. Special Assessments and the Potential Inadequacy Thereof
The Bonds and interest thereon are payable primarily from special assessments levied against the benefited
property in SID 343, and those considering an investment in the Bonds should look to the property owners
and the property assessed as providing the principal security for payment of the Bonds. (See "SED 343"
herein.)
Under Montana law, if an installment of a special assessment is not paid in full when due, the delinquent
installment bears a penalty and interest at a delinquent rate and the property is sold at tax sale. The property
owner has up to three years in most cases to redeem the property from the tax sale. As a result of this and of
factors relating to the character and ownership of the assessed property, the collections of the special
assessments by the City may not be sufficient to pay principal of and interest on the Bonds when due. The
special assessments levied to pay principal and interest on the Bonds will, however, bear interest at a rate 3/2
of 1% in excess of the average interest rate on the outstanding Bonds, which amount will be applied to the
payment of principal of and interest on the Bonds. (See "Security and Sources of Payment - Special
Assessments" herein.)
10
3. Limitations of the Revolving Fund
Pursuant to the Act, the City Council has created the Revolving Fund for the purpose of securing payment of
special improvement district bonds and warrants of the City, including the Bonds. Under the Act, the
balance in, the Revolving Fund may not be increased in a fiscal year by funds derived from taxation or by
loans from the General Fund of the City to a balance exceeding 5 % of the aggregate principal amount of the
Citys outstanding bonds and warrants secured thereby, nor may such tax levies or loans from the General
Fund for such purpose exceed in the aggregate in any single fiscal year 5% of the aggregate principal amount
of the then outstanding bonds and warrants of the City secured thereby.
Any property tax levy to be made by the City to provide funds for the Revolving Fund is subject to levy
limits under current law (including Senate Bill 184, adopted by the Montana Legislature in 1999 and House
Bill 124, adopted by the 2001 Legislature). The City is not authorized to levy an additional or excess tax for
purposes of funding the Revolving Fund. The primary source of money to fund the Revolving Fund is
amounts available in the City's General Fund or the City's regular (non -voted) property tax. (See Appendix
A - "Valuations and Assessment of Property for Tax Purposes and "Financial Operations and Budgetary
Process" herein for a discussion of the City's regular property tax collection limitations and procedures.)
Because regular property tax revenues are the primary source of revenues to operate the City, a pledge to
fund the Revolving Fund has the potential to directly affect the City's operating budget. Consequently, any
money budgeted to fund the Revolving Fund is necessarily diverted from other City services. The City has
agreed in the Bond Resolution to levy property taxes to provide funds for the Revolving Fund to the extent
described above and, if necessary, to reduce other property tax levies correspondingly to meet applicable
levy limits.
All bonds and warrants of the City secured by the Revolving Fund, are equally and ratably secured by
moneys on deposit in the Revolving Fund. Therefore, the City may from time to time create additional
special improvement districts or sidewalk, curb, gutter and alley approach projects and issue bonds drawn
against such special improvement districts or warrants secured by assessments levied against properties
benefited by such projects that will be secured on a parity with the Bonds and other special improvement
district bonds now outstanding. The timeliness of the payment of special assessments in special
improvement districts of the City and in special improvement districts created in the future, which depends
on, among other things, the degree of development in the special improvement district and the market value
of the lots in relation to the amount of the assessment, may affect the adequacy of the Revolving Fund to
make loans to the District Fund in amounts necessary to pay debt service on the Bonds when due. If the
amount on hand in the Revolving Fund is insufficient to make loans at any time required to special
improvement district funds secured thereby, the City is. obligated to advance money to each of the special
improvement district funds then incurring a deficiency, pro rata, in proportion to the amount of the
deficiency in the special improvement district fund.
Recent changes to the Act require that prior to issuing bonds secured by a revolving fund, a municipality
must take into consideration the following items: the estimated market value of the lots in the district at the
time the district is created in comparison to the estimated market value of the lots after the improvements are
made; the district's diversity of ownership of property; the amount of special assessments per lot in
comparison to the estimated market value per lot after the improvements are made; the amount of any
outstanding special assessments against property in the district; the amount of delinquencies in the payment
of outstanding special assessments or property taxes levied against property in the district; the public benefit
of the proposed improvements; and in the case of a district created to make improvements in a newly platted
subdivision, the prior subdivision development experience and credit history of the developer and any
11
contribution by property owners to the costs of the improvements Or any security given by property o-miers
to secure payment of special assessments levied in the district. In addition to the requirements in the Act, the
City also adheres to the provisions in its Special Improvement District Policy. See "Other Outstanding
Special Improvement District Bonds and the Revolving Fund" herein.
The liability of the Revolving Fund terininates on the earEer of- (1) the date on which all bonds or warrants
of the issue and interest on the bonds or warrants have been fully paid or discharged in a bankruptcy case in
which the special improvement district is the debtor; or (2) the date that is the later of. (a) the final stated
maturity date of the bonds or warrants; or (b) the date on which all special assessments levied in the district
have been either paid or discharged.
4. Bankruptcy Proceedings
A city is authorized under Montana law to file a petition for relief as a debtor under Chapter 9 of the United
States Bankniptcy Code for the adjustment of its debts. A recent decision of a United States Bankruptcy
Court held that a Montana municipality may file a petition on behalf of a special improvement district of the
municipality. In the event of a district's insolvency and if the city were to successfully file a petition under
the Bankruptcy Code on behalf of the district, the Bankruptcy Code could limit the ability of bondholders to
seek judicial action to enforce the lien of special assessments against benefited property.
As part of the bankruptcy proceeding, the city would have to file a plan for adjustment of the debts of the
districts. Any plan, in order to be confirmed by the bankruptcy court, would have to be determined to be in
the best interests of creditors and feasible, and either be accepted by the creditors of each class impaired
thereby or, if not so accepted, be determined to be fair and equitable and not to discriminate unfairly in favor
of any class of claims or interests. Consequently, it is possible that a plan of adjustment could be confirmed
by a bankniptcy court without the consent of all bondholders that would, among other things, extend the time
for payment of principal of or interest on the special improvement district bonds, reduce the interest payable
on the bonds below the originally stated rates of interest or reduce the amount of principal payable on the
bonds.
In the event that a property owner is the subject of a bankruptcy proceeding, it is possible that the lien of
special assessments levied against the owner's property in a spepial improvement district maybe discharged
in the bankruptcy proceeding without payment or provision for payment of .-the special assessment in full.
5. Likelihood of Redemption
Property owners may, as a matter of law, prepay their assessments in whole, at any time after the assessment
is levied, by payment of the assessment, with interest accrued and to accrue thereon through the next date on
which interest on the Bonds is payable. The City is required by law to redeem, on any interest payment date,
outstanding principal installments of the Bonds in order of their in order of stated maturity, in an amount
which, together with the interest thereon to the date of redemption, will equal the amount on deposit in the
District Fund from the prepayment of special assessments. In addition, the City also has the option to
redeem Bonds on any interest payment date in order of stated maturity to the extent funds are available
cial
therefor in the District Fund other than, before July 1, 2006, from proceeds of refunding sPe al
improvement district bonds. Consequently, there can be no assurance the Bonds will remain outstanding to
their stated maturity dates.
12
6. Concentration of Ownership
Two properties located in SID 343, owned by Northwest Healthcare Corporation and Flathead Healthcare
Center Inc., will be responsible for 95.13% of the assessments in SID 343. The remaining $77,097.93 or
4.87% of assessments against property in SID 343 will be against five additional parcels owned by the four
remaining property owners.
Assessments against Northwest Healthcare Corporation's two parcels in SID 343 equal $1,116,374.08 or
70.59% of the total assessments of $1,581,500. The parcel on which the Summit Health and Fitness Center
is located is developed with a market value of $5,461,117 for tax purposes as of 2000. The other parcel is
863,420.23 square feet and largely undeveloped except for a 300-stall, asphalt parking lot with a market
value of $862,843 for tax purposes as of 2000. Based on historical interactions with and levies against
properties owned by Northwest Healthcare Corporation, the City has found it to be a creditworthy property
owner. See "SID 343 — Northwest Healthcare Corporation " herein for a description of the Corporation.
Flathead Healthcare Center Inc. (the "Medical Center") owns one parcel in SID 343with assessment against
the property equaling $388,027.99 or 24.54% of the total assessments of $1,581.500. The market value of
that parcel was $240,971 for tax purposes as of 2000. See "SID 343 — The Medical Center" herein for a
description of the Medical Center.
Northwest Healthcare Corporation and Flathead Healthcare Center, Inc. are mostly tax-exempt properties
and therefore the market value is greatly reduced from the actual value of the property. Following
completion of the Improvements, market valuation in SID 343 will be increased by at least the value of the
Improvements.
7. Absence of Rating
The Bonds have not been rated by a rating agency and there is no expectation that the Bonds will be assigned
a rating in the fature. The absence of a rating may adversely affect the marketability of the Bonds in the
secondary market.
THE IMPROVEMENTS
General Description
The Improvements will generally consist of realigning a portion of Sunnyview Lane and planning, designing
and performing site grading for those portions of Heritage Way and Sunnyview Lane, as realigned, to be
constructed within SID 343 . and relocation and installation of utilities (including, without limitation, potable
water mains and services, sewer main and services, a storm drainage system and telephone, natural gas and
electrical utilities) (the "Grading and Utility Improvements") for the benefit of those portions of SID 343
described as SID Lot Numbers 4 and 9. Other Improvements consist of dismantling and removing existing
above -ground utilities along or adjacent to the existing Sunnyview Lane from the point that is approximately
119 lineal feet to the east of the eastern boundary of Windward Way to the U.S. Highway 93 and burying
substitute utilities along such segment of such roadway, and surfacing those portions of Heritage Way and
Sunnyview Lane, as existing and to be realigned, located in SID 343, and installing related surface
improvements, such as, without limitation, curbing, aprons, sidewalks, gutters, and landscaping (the
"Surface Improvements") for the benefit of those portions of SID 343 described as SID Lot Numbers 1
though 8. The Grading and Utility Improvements and Surface Improvements are collectively referred to
13
herein as the "Irnprovements". All references to "SIOD Lot Numbers" herein are merely for convenience and
are not legal descriptions or any official means of identif�ring the properties.
Sources and Uses of Funds
It is estimated by the City that the proceeds of the Bonds will be used as shown in the table that follows.
Sources of Funds':
Proceeds of the Bonds
S1,581,500.00
City Contribution'
37,000.00
Total Sources of Funds
$1,618,5�
Uses of Funds':
Improvement Costs
$1,095,308.97
Engineering (Design/Construction Management)
160,000.00
Contingency
113,262.46
Revolving Fund (5%)
79,075.00
District Reserve Account (5%)
79,075.00
City Administration
40,000.00
Underwriter's Discount (2%)
31,630.00
Costs of Issuance and MiscellaneoUS2
20,148.57
Fotal Uses of Funds
$1,618,500.00
1 Preliminary; subject to change.
2 Includes the Bond Counsel fees, Financial Advisor fees, initial Paying Agent and Registrar fees, costs ofprinting and distributing
the Preliminary and Final Official Statements, notice costs and any miscellaneous costs.
3 The City is contributing $37,000 for resurfacing the portion of Sunnyview LaDo that is not realigned. This City contribution
benefits owners of proper -ties in SID 343 that abut the non -realigned portion of Sunnyview Lane.
Assessment Methods
The costs of the project financed by the proceeds of the Bonds in the total amount of $1,581,500 (the
"Improvements') will be specially assessed against the property in SID 343 benefited by the respective
Improvements. The property included within the boundaries of SID 343 is benefited by certain of the
Improvements, and has been determined by the City Council to be the property which will be assessed and
taxed for. the costs of the Improvements. All properties in SID 343 will be assessed for their proportionate
share of the costs of the specific Improvements benefiting the respective properties. For the purposes of
equitably apportioning special benefit to each parcel in SID 343, the special assessments will be based 0-n
either front of lineal footage or the total actual area of each parcel. The special assessments are payable over
a term not exceeding 20 years, each in equal semi-annual installments of pnincipal with interest due on the
outstanding balance.
The total area to be assessed in SID 343 for Grading and Utility Improvements is 1,441,330.75 square feet
with the cost per square foot at approximately $0.67. The total lineal footage to be assessed in SID 343 fo ' r
Surface Irnprovements is 6,212.42 feet. See "SID 343 — Property Owners in SID 343" herein �for a
breakdown of the actual assessments against the property owners.
14
SID 343
General Description of SID 343
SID 343 encompasses land in the northern portion of the City with U.S. Highway 93 as the westerly border.
The Improvements are primarily along Sunnyview Lane, at the intersection of Windward Way and
Sunnyview Lane and south from Heritage Way connecting to Sunnyview Lane. Heritage Way is not
currently in the District, but when the Improvements are completed it will be extended into the District. The
Improvements are anticipated to integrate the area and help to facilitate delivery of services to the area more
efficiently. The Improvements will ease traffic congestion on Sunnyview Lane by offering an alternate route
by way of Heritage Way. Bicycle and pedestrian facilities will be among the improvements that are not
presently available to the public going to or from medical facilities located in the area. The Improvements
will aid in increasing public safety in the area.
A total of eight parcels owned by six property owners are located in SID 343. SID 343 was created upon the
request of the property owners. Of the six property owners, two (Welcare, which is located on lots owned by
Northwest Healthcare Corporation, and Evenson property) protested the creation of SID 343.
As listed on the 2000/01 tax rolls, market value totals $10,363,283. Market valuation of the SID 343
property is substantially less than the actual resale value of such property. Northwest Healthcare Corporation
and Flathead Healthcare Center, Inc. are mostly tax-exempt properties and therefore the market value is
greatly reduced from the actual value of the property. Following completion of the Improvements, market
valuation in SID 343 will be increased by at least the value of the Improvements.
Currently one of the parcels in SID 343 is almost entirely undeveloped. The undeveloped property is owned
by Northwest Healthcare Corporation and consists of approximately 863,420.23 square feet and is improved
with a 300-stall, asphalt parking lot. Given the proximity to the hospital and the medical use in the area
surrounding the undeveloped parcel, it is reasonable to conclude that it would be an advantageous place for
medical professionals and persons in the medical or health care industries to locate. (See "SID 343 -
Northwest Healthcare Corporation" and "The Medical Center" herein for a description of the two property
owners that are responsible for 95.13% of the assessments in SID 343)
[The Remainder of This Page hitentionally Left Blank.]
15
Property Owners in SID 343
The following table lists all of the individual property owners in SID 343 in declining order of assessments
payable for the hnprovements.
Lineal
Assessed
2000/01
Assessed
Square
1\4arket
Property Owner
Lots'
Lootagi
Footage
Valuation
1 4
1. Northwest Healthcare Corporation
Lots 2 & 4
5,221.12
863,420.23-'
$7,147,776
2. Flathead Healthcare Center, Inc.
Lot 9
N/A
577,910.52
240,971
3. Kalispell Medical Arts LLC
Lots 6 & 8
439.85
N/A
2,416,148
4. Evenson, Julia; Shanks, Parnela;
Lot 7
259.24
N/A
72,715
Evenson, Jay
5. Whihi LLP
Lot 1
173.21
NIA
191,818
6. Wilson, Stephen & Cheryl
Lot 3
119.00
N/A
293,860
Total
S
$10,363,288
Total % of Total
Assessments Assessments
$1,116,374.08 70-59%
388,027.99
24.54
34,209.15
2.16
20,162.28
1.27
13,471.33
0.85
9,255.17
0.59
si,
i-0Q.0-0
' Lot references are merely for convenience and reflect common usage,�vhen addressing this SID; the lot references are not
legal descriptions or any official means of referring to the lots.
2 The Surface Improvements are being assessed based on lineal front footage.
-' The Grading and Utility Jmprovements are being assessed based on square footage (or actual area).
4 The rwket valuation figures are based on valuation estimates prior to construction of the Improvements. Market value for
property tax purposes is less than the resale value of these properties. Northivest Healthcare Corporation and Flathead Healthcare
Center, Inc. are mostly tax-exerupt properties and therefore. the market value is greatly reduced from the actual value of the
property. Following couipletion of the Improvements, market valuation in SID 343 will be increased by at least the value of the
Improvements.
5 Lot 4 only; Lot 2 not assessed on actual area method.
Northwest Healthcare Corporation
Northwest Healthcare Corporation ("Northwest Healthcare") comprises $1,116,374.08 or 70.59% of the
assessments in SID 343. Northwest Healthcare, a Montana nonprofit corporation, was incorporated in May
1982 and began operations in April 1983. The primary purpose of Northwest Healthcare is to act for the
benefit of, and on behalf of Kalispell Regional Medical Center (the "Medical Center") and Northwest
Healthcare's other subsidiaries. In addition to being the sole member of the Medical Center, Northwest
Healthcare is the parent of several other corporations including Northwest Horizon, Inc., doing business as
Brendan House ("Northwest Horizons"); Kalispell Regional Medical Center Foundation ("YRMC
Foundation") and Applied Health Services Corporation ("Applied Health Services").
Northwest Horizons operates a skilled nursing, extended care facility which has a 92-bed capacity and had
an average occupancy rate for the fiscal year ended March 31, 2000 of 87,91%. KRMC Foundation was
incorporated in 1997 and has not yet been funded. Northwest Healthcare initially will pay the operating
expenses of the KRMC Foundation.
Applied Health Services operates The Sununit, a health and wellness facility that services several of the
clinical departments of the Medical Center, including outpatient therapies and cardiac rehabilitation, as well
16
as a fitness facility which is open to the community; Kalispell Medical Equipment, which sells and leases
durable medical equipment and supplies; and several other Montana clinics located in Polson, Kalispell,
Eureka, and Coram. The clinics provide primary care and obstetrical services to outlying communities in the
Medical Center's service area. The clinics refer to the Medical Center any cases that require specialized
care. Other services provided by the Applied Health Services include medical office management services,
workplace wellness and an occupational health program. In addition, Applied Health Services presently has
a 50% ownership interest in an outpatient surgery center, Flathead Outpatient Surgical Center, LLP
("FOSCF') that is located in the City.
Applied Health Services is currently in the planning stages to develop ajoint venture (the "joint venture")
with area physicians to build and operate a licensed acute care general hospital to be staffed and equipped to
provide short term stay surgical and medical services to a broad based patient population primarily in
Flathead, Lake, Glacier and Lincoln Counties, Montana. Although the precise location for the new hospital
has not yet been determined, the joint venture plans to construct a new hospital on the Medical Center
campus on undeveloped property in SID 343. The joint venture will lease the land on which its facility is to
be built from the Medical Center or from Northwest Healthcare. The joint venture will expand the
outpatient surgery services that are currently being provided by FOS Cl. The services provided at the center
operated by FOSCI (which will close after the joint venture is operational), the diagnostic imaging services
currently conducted by Northwest Imaging, P.C. and the magnetic resonance imaging services that are
currently provided by a joint venture among the Medical Center, North Valley Hospital in Whitefish,
Montana, St. John's Hospital in Libby, Montana and Northwest Imaging P.C. will all become a part of the
joint venture.
Applied Health Services will have a majority ownership interest in the new limited liability company that is
to be formed to operate the joint venture and -that physician partners, including the physician partners in
FOSCI will have a minority ownership interest in the limited liability company. The joint venture plans to
enter into service agreements with FOSCI and two other physician groups, Northwest Imaging P.C., and
Glacier Pathology Associates, pursuant to which each of the organizations will manage certain operations at
the joint venture. Northwest Imaging and Glacier Pathology also provide services to the Medical Center.
As the proposed joint venture is currently structured, the physician members and Applied Health Services
will enter into covenants not to compete which will prohibit the -physician members, Applied Health
Services and their affiliates including the Medical Center and Northwest Healthcare from directly or
indirectly acquiring, owning, operating, financing, and leasing, controlling and managing or participating in
a management or supervisory role in the operation of (i) a licensed facility (other than the j oint venture or the
Medical Center Facilities) to provide ii1patient or outpatient hospital services in thejoint venture service area
and (ii) any person or entity (other than the joint venture or the Medical Center) providing administration or
management services for inpatient or outpatient hospital services in the joint venture's service area.
Provided, however, neither Applied Health Services nor the Medical Center will be restricted from providing
or expanding inpatient or outpatient hospital services at the joint venture or at the Medical Center Facilities,
but Applied Health Services, the Medical Center or any affiliate of either of them may not establish a
competing facility or program to the joint venture unless Northwest Healthcare or the Medical Center
reasonably determines that healthcare needs in the community are not being adequately served and the joint
venture has been offered the opportunity to meet the need and has refused or is not able to meet the need.
17
The Medical Center
The Medical Center comprises $388,027.99 or24.54% of the assessments in SID 343. The Medical Center
is a Montana non-profit corporation which own and operates a private, general acute -care conu-nunity
hospital wid. other healthcare facilities (the "Medical Center Facilities") located in Kalispell, Montana (the
"City'). The Medical Center is licensed to operate 142 beds, 'including 91 medical/surgical and obstetrical
beds, and also has 12 intensive care/critical care beds and 18 neonatal bassinets. The Medical Center also
operates an 11 -bed Inpatient Rehabilitation Unit and Pathways Treatment Center, which has 16 licensed
psychiatric beds and 24 licensed chemical dependency beds. The Medical Center is accredited by the Joint
Commission on Accreditation of Healthcare Organizations until July, 2003. The average occupancy of all
available beds at the Medical Center for the Fiscal Years ended March 31, 1998, 1999, and 2000 was
approximately 69 patients per day or 46%.
The hospital was founded in 1912 as a joint venture of the community and the Sisters of Mercy, Cedar
Rapids, Iowa. A new 30-bed hospital in the City was opened on May 3, 1912. This facility served the needs
of the City and Flathead County with several additions until 1976. The Sisters of Mercy continued to own
and operate the hospital facilities until July 1973, when the Sisters transferred ownership of the hospital
facilities to the Medical Center, which was incorporated by COMMUDity leaders in 1973 under the name
Flathead Health Center, Inc. In October 1973, plans began to replace the original hospital building with a
new facility and 'in January 1976, the Medical Center moved to its current location. Adjacent to and around
the Medical Center Facilities are approximately a dozen buildings containing physicians' offices and a
pharmacy, all of which are owned and operated by local physicians and businesspeople.
The Medical Center provides medical and surgical services, including emergency care, obstetrics, intensive
care, coronary care, psychiatric care, and home health care. Supporting these services are a range of
diagnostic and therapeutic departments including radiology, laboratory, pharmacy, respiratory therapy,
physical therapy, a rural health clinic in Eureka, Montana and medical and radiation oncology. The Medical
Center employs one full time equivalent physician to staff its rural health clinic. The Medical Center also
operates ail air ambulance helicopter service and has an agreement with Dialysis Clinics, Inc., an
independent non-profit organization, to provide dialysis services in the Medical Center Facilities to the
Medical Center's patients.
The Medical Center is governed by a Board of Trustees responsible for establishing policy and directing the
functions, business and government of the Medical Center. The President of the Medical Center is charged
with implementing the policy and direction of the Board of Trustees and with general administration of the
MedicalCenter. As of March 31,2000, the Medical Center's Net Operating Revenues totaled $66,594,220
and Operating Expenses totaled $62,957,936 leaving $3,636,484 for Operating Income. The Total Revenues
over expenses as of March 31,2000 was $7,562,660.
Delinquent Assessments and Property Taxes
There are no special assessment delinquencies or delinquent taxes levied against property in SID 343, The
City concluded that the estimated market value of the parcels in SID 343 after the Improvements are
completed will exceed the sum of special assessments and current assessments.
18
Outstanding or Anticipated Future Assessments
There are no mortgage -backed bonds in SID 343. At the time of issuance of the Bonds, no other special
improvement district bonds (other than the Bonds) are planned or anticipated which levy special assessments
against the property of SID 343.
OUTSTANDING SPECIAL IMPROVEMENT DISTRICT BONDS AND THE REVOLVING FUND
General Information
In addition to SID 343, the City has created three special improvement and eight sidewalk districts which
have outstanding special assessment bonds and warrants drawn against them and which are secured by the
Revolving Fund. The City had cash on hand in its Revolving Fund in the amount of $13,333 as of March 3 1,
2001, which amount secured $208,843 in outstanding special improvement district bonds of the City, not
including the Bonds. After giving effect to the issuance of the Bonds, the City will have approximately
$92,408 on hand in its Revolving Fund which amount will secure approximately $1,809,403 in principal
amount of outstanding bonds and warrants of the City. Furthermore, the City may issue additional bonds or
warrants that are secured by the Revolving Fund.
Future Financing
The City ordinarily creates special improvement districts or undertakes sidewalk, curb and gutter projects at
the request of property owners. As a result, the City cannot predict with any certainty the number of special
improvement districts to be created or sidewalk, curb, gutter and alley approach projects to be undertaken in
the future or the principal amount of bonds to be issued, although it is clear that additional districts and
projects will be created and undertaken and additional bonds and warrants will be issued within the
foreseeable future. The City has a capital improvement program with respect to local improvements to be
financed with special assessments, however, the City has not created a special improvement district or
authorized a sidewalk, curb and gutter project for which special improvement district bonds or warrants have
not been issued and for which it is expected that such bonds �or warrants will be issued.
Policy Statement Regarding Creation of Special Improvement Districts
The City Council does not have a formal policy statement regarding the creation of Special hnprovement
Districts. The City has not created a SID in which bonds or warrants have not been issued and for which the
City expects that such bonds or warrants will be issued.
19
Summary of Outstanding Special Improvement Districts
The following table sets forth the amount of special improvement district bonds outstanding as of March 1
200 1, the final stated maturity dates thereof and the special assessments outstanding in the respective special
improvement districts and anticipated to be available to pay the respective bonds at or prior to maturity. The
schedule does not include sidewalk and curb warrants. As of June 30, 2000, the City had $220,000 in
outstanding local improvement district bonds (SIOD 337, SID 341, and SID 342). The Revolving Fund also
secures eight City sidewalk, curb and gutter districts that as of June 30, 2000, had total outstanding
assessments bonds or warrants in the amount of $42,903.
Original
Maturity
Bonds
Cash
Delinquent
Bond Issue
Amount
Date
Outstanding
Balance
Assessments*
SID No. 342
$209,000
7/1/11
$120,000
$22,850
$0
SID No. 341
100,000
7/l/11
55,000
14,592
312
SID No. 337
110,000
7/1/02
10,000
7,321
0
Total
$112
- As of the date of issuance of the Bonds, del miquent assessments for special improvement districts within the City
comprised approximately 0.07% of the original principal amount of Bonds issued.
Special Improvement District Assessment Billings and Collections
Set forth in the following table are the special improvement district assessment billing and collection history
for the City for the fiscal years ending June 30, 1998 through 2000.
Fiscal
Assessment
Year
Billing
1999/00
$39,152
1998/99
40,783
1997/98
42,413
Includes delinquent assessment collections and prepayments.
Source: City Finance Department
Total Annual
Collections*
Amount Percent
$39,445
100.75%
41,707
102.27
57,706
136.06
WE
Statement of Changes in Fund Balance of the Revolving Fund
Set forth in the following table is a summary of the changes in fund balance of the Revolving
Fund for the
period June 30, 1996 through June 30,
2000.
1995/96
1996/97
1997/98
1998/99
1999/00
Beginning Balance - July 1
$44,288
$35,272
$38,216
$24,210
$16,984
Receipts Over Disbursements
6,106
2,944
2,312
2,158
1,693
Equity Transfers 1
(15,122)
0
(16,3181
(9,384)
110
Ending Balance - June 30
$18,787
Assets:
Cash
$30,233
$31,532
$22,194
$12,238
$10,006
Receivables
2,171
1,653
1,267
693
11
Due from other City funds
4,347
6,684
2,016
4,746
8,320
Due from the County
692
0
0
0
461
Total Assets
Total Liabilities (deferred revenue)
$2,171
$1,653
$1,267
$693
$11
Total Fund Balances
35,272
38,216
24,210
16,984
18,787
Total Liabilities/Fund Balances
11&79�
' Equity transfers were made from the Revolving Fund to the General Fund for amounts in excess of 5% of
outstanding bonds. Fiscal year 1999/00 transfer into the Revolving Fund was from a closed sidewalk fund.
QUALIFIED TAX-EXEMPT OBLIGATIONS
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"). Accordingly, financial
institutions described in Section 265(b)(5) of the Code may treat the Bonds for purposes of Sections
265(b)(2) and 291 (e)(1)(b) of the Code as if they were acquired on August 7, 1986 for purposes of partial
deductibility of interest carrying costs. Non-compliance with certain requirements of the Code may cause
the Bonds retroactively to lose their character as qualified tax-exempt obligations.
TAX EXEMPTION AND RELATED CONSIDERATIONS
Tax Exemption
In the opinion of Dorsey & Whitney LLP, as Bond Counsel, under federal and state laws, regulations, rules
and decisions in effect on the date of their issuance, interest on the Bonds is not includable in gross income
for federal income tax purposes or for State of Montana individual income tax purposes. Interest on the
bonds is not excludable, however, from the computation of income for purposes of the Montana corporate
income tax and the Montana corporate license tax. Certain provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), however, impose continuing requirements that must be met after the issuance of
the Bonds in order for interest thereon to be and remain not includable in federal gross income for purposes
of federal income taxation. Noncompliance with such requirements by the City may cause the interest on the
Bonds to be includable in federal gross income retroactive to the date of issuance of the Bonds, prospectively
or retroactive to the date of issuance of the Bonds. No provision has been made for redemption of or for an
increase in the interest rate on the Bonds in the event that interest on the Bonds becomes includable in
federal gross income or Montana individual income taxation.
21
Related Considerations
Interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum taxes
applicable to all taxpayers, but such interest is includable in book income and in earnings and profits in
detem-iining the alternative minimum taxable income of corporations for purposes of the federal alternative
minimum tax. Section 86 of the Code requires recipients of certain Social Security and railroad retirement
benefits to take into account interest on the Bonds in determining the taxability of such benefits. Passive
investment income, including interest on the Bonds, may be subject to taxation under Section 1375 of the
Code for an S corporation that has accumulated earnh-igs and profits at the close of the taxable year if more
than twenty-five percent of its gross receipts is passive investment income. Interest on the Bonds may be
includable in the income of a foreign corporation for purposes of the branch profits tax imposed by Section
8 84 of the Code and is includable in the net investment income of foreign 'insurance companies for purposes
of Section 842(b) of the Code. In the case of an insurance company subject to the tax imposed by Section
831 of the Code, the amount which otherwise would be taken into account as losses incurred under Section
832(b)(5) of the Code must be reduced by an amount equal to fifteen percent of the interest on the Bonds
that is received or accrued during the taxable year. Section 256 of the code denies a deduction of interest on
indebtedness incurred or continued to purchase or carry the Bonds. Indebtedness may be allocated to the
Bonds for this purpose even though not directly traceable to the purchase of the Bonds. Federal law also
restricts the deductibility of other expenses allocable to the Bonds. (See "Qualified Tax -Exempt
Obligations" herein.)
The foregoing is not intended to be an exhaustive discussion of collateral tax consequences arising from
receipt of interest on the Bonds. Prospective purchasers or Bondholders should consult their tax advisors
with respect to collateral tax consequences, including without limitation the deten-niDation of gain or loss on
the sale of a Bond, the calculation of alternative minimum tax liability, the inclusion of Social Security or
other retirement payments in taxable income, the disallowance of deductions for certain expenses
attributable to the Bonds, and state and local tax rules.
LITIGATION
There is no controversy or litigation of any nature now pending, or to the knowledge of the City, threatened,
restraining or enjoining the issuance, sale, execution or delivery of the Bonds, or in any way contesting or
affecting the validity of the Bonds, or any proceedings of the City taken with respect to the issuance or sale
thereof
NO CONFLICTS OF INTEREST
The City is not aware of the existence of any actual or potential conflict of interests, breach of duty or less
than ann's-length transaction regarding the selection of the underwriter of the Bonds, the Citys engineer and
other participants in the offering of the Bonds. The Financial Advisor has obtained written permission from
the City to subrmit a bid in its behalf at the public sale for the purchase of the Bonds.
22
UNDERWRITING
D.A. Davidson & Co. (the "Underwriter') has agreed, subject to the terms of the Notice of Sale, to purchase
the Bonds from the City at an aggregate purchase price of 98% of the par value of the Bonds or $1,549,870,
plus accrued interest. The Bonds are being offered for sale to the public at the price shown on the cover of
this Official Statement. The initial offering price is subject to change after the date hereof.
SECONDARY MARKET DISCLOSURE
hi order to permit participating underwriters in the primary offering of the 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, as amended (the "Rule"), the City will covenant and agree, for the benefit of the
registered holders or beneficial owners from time to time of the outstanding Bonds, in the Bond Resolution,
to provide annual reports of specified information and notice of the occurrence of certain events, ifinaterial,
as hereinafter described (the "Disclosure Covenants"). The inforination to be provided on an annual basis,
the events as to which notice is to be given, if material, and a summary of other provisions of the Disclosure
Covenants, including termination, amendment and remedies, are set forth in Appendix C to this Official
Statement.
Breach of the Disclosure Covenants will not constitute a default or an "Event of Default" under the Bonds or
the Resolution. A broker or dealer is to consider a known breach of the Disclosure Covenants, however,
before recommending the purchase or sale of the Bonds in the secondary market. Thus, a failure on the part
of the Issuer to observe the Disclosure Covenants may adversely affect the transferability and liquidity ofthe
Bonds and their market price. The City has not failed to comply with the requirements of any previous
undertaking specified in paragraph (b)(5)(1) of Rule 15c2-12.
DISCLOSURE STATEMENT
The City will deliver to the Underwriter at the time of the delivery of the Bonds statements substantially to
the effect that the facts contained in this Official Statement, and in any supplements or amendments hereto,
delivered by the City (which shall be deemed an original part hereof for the purposes of such statement) did
not, at the time of award of the Bonds to the Underwriter(s) contain any untrue statement of a material fact,
and are, as of the date of delivery of the Bonds, true and correct in all material respects and did not, at the
date of award of the Bonds, and do not, as of the date of delivery of the Bonds to the Underwriter(s), contain
any untrue statement of a material fact or omit to state a material fact where necessary to make the statement
not misleading in light of the circumstances under which it was made.
ADDITIONAL INFORMATION AND MISCELLANEOUS
The descriptions herein of the Bond Resolution and other documents are brief summaries of certain
provisions thereof Such summaries do not purport to be complete, and reference is made to such documents
and contracts, copies of which are available, upon request and upon payment to the City a charge for
copying, mailing and handling, from the City. Additional information concerning the Bonds, the City and
SID 343 may be obtained by contacting Ms. Amy Robertson, Finance Director, City of Kalispell, 312 lst
Avenue East, P.O. Box 1997, Kalispell, Montana 59903, telephone (406) 758-7701.
23
The summaries and descriptions contained in this Official Statement and the Appendices hereto of the
provisions of the Bonds, the Bond Resolution and all references to other materials not purporting to be
quoted in full are only brief outlines of some of the provisions thereof and do not purport to summari e
trued as a contract or
describe all of the provisions thereof This Official Statement is not to be cons z or
agreement between the City and the Underwriter(s) or holders of any of the Bonds.
Any statements made in this Official Statement involving matters of opinion or estimates, whether or not so
expressly stated, are set forth as such and not as representations of fact. No representation is made that any
of such statements will be realized.
APPROVAL OF OFFICIAL STATEMENT
The execution and delivery of this Official Statement have been duly authorized by the City.
:CORPORATE
SEAL
ATTEST:
0 .........
MO
By:
��Z xc�
y R ertson
City Finance Director
CITY OF KALISPELL, MONTANA
WM aharski 01
William Boharski
City Mayor
24
APPENDIX A
wo ma A
City, G0�0rat"andfWancia r tio
A-1
The information presented under this heading isprovidedtogiveprospective investors an overview ofthe
general organization and economic status of the City. However, inclusion of this information is not
intended to imply that owners of the Bonds will be able to look to anyfund other than the District Fund
or the Revolving Fundforpayment ofthe Bonds. The Bonds are not general obligations ofthe City and
the unlimited taxingpowers of the City are notpledged to thepayment ofprincipal thereof or interest
thereon. (See "Securityfor the Bonds" herein.)
THE CITY - GENERAL INFORMATION
General
The City of Kalispell (the "City) is located at the junction of U.S. Highways 2 and 93 in northwestern
Montana, 115 miles north of the City of Missoula, 64 miles south of the United State/Canadian border and
238 miles east of the City of Spokane, Washington. The City is the County Seat of Flathead County (the
"County") and encompasses a land area of 2,500 acres. The U.S. Census Bureau estimated the 2000 Census
population for the City to be 14,223, an increase of 19.4% over the 1990 Census estimate of 11,917. The
City is currently the State's seventh largest municipality by population. The County had an estimated 2000
Census population of 74,471, an increase of 25.8% over the 1990 Census estimates ranking the County
currently as the State's fourth largest county based on population.
Primary components of the area's economy include manufacturing industries (largely in the wood products
industry), agriculture, industries associated with the area's status as a trade center and tourism and recreation
based industries. Government sources also comprise a significant portion of the area's economic base.
Government
The City is a municipal corporation organized under the laws of the State of Montana. A
Commission/Manager form of government governs the City with a nine member Council comprised of a
Mayor and eight Commissioners. The City's executive, legislative, and policy -making body is the City
Council who are elected every two years and serve overlapping four-year terms. The Mayor is the member
of the Council who received the highest number of votes in the regular municipal election. The current
Council members and the expiration of their respective terms of office are as follows:
Years on
Expiration
Elected Official
Title
Council
ofTerm
William Boharski
Mayor
3 years
l/l/02
Jim Atkinson
Commissioner
13 years
l/l/02
Donald Counsell
Commissioner
I years
l/l/04
Dale Haarr
Commissioner
7 years
l/l/02
Randy Kenyon
Commissioner
1 years
l/l/04
M. Duane Larson
Commissioner
I I years
l/l/04
Fred Leistiko
Commissioner
1 years
l/l/04
Ron Van Natta
Commissioner
3 years
l/l/02
Douglas Scarff
Commissioner
3 years
l/l/02
A-2
The chief administrative officer of the City is the City Manager who is hired by, responsible to, and serves at
the pleasure of the City Council. The City Manager is responsible for carrying out Council policy,
administen*ng the affairs of the City and directing, organizing, establishing, supervising and administering all
departments.., agencies, and offices of the City. The City Manager also prepares and presents the City budget
to the City Council for its approval. Chris Kukulski has served as City Manager since May 1999. Prior to
working for the City of Kalispell, Mr. Kukulski was employed by the City of Jonesville, Michigan.
Ms. Amy Roberston is the City Finance Director. Ms. Robertson has been employed as the City Finance
Director since 1985.
Principal Governmental Services
The City provides a number of basic services to its residents which include police and fire protection,
municipal water, sewer and sanitation systems, public works, transportation, planning, building inspection,
zoning enforcement, public library, and parks and recreation.
Employment and Employee Relations
As of March 1, 200 1, the City employed 13 5 full-time equivalent employees and approximately 80 seasonal
employees. State law requires municipalities to bargain collectively with formally recognized collective
bargaining units. Currently, three -unions represent approximately 80% of the City's employees. The
bargaining organization, number of employees represented and the contract expiration are shown in the table
below. The City considers its employee relations to be satisfactory.
Bargaining.. Unit
Kalispell Police Association .................................................
AFSCME — Local 256 ...........................................................
International Association of Firefighters #547 .....................
Pension Plans
Number of Ex-piration of Contract
Employees
25 6/30/01
62 6/30/03
21 6/30/01
All fall -time City employees are eligible to participate in one of the cost -sharing retirement plans listed
below. These multiple -employer plans are administered by the State of Montana for a nurnber of public
entities in the State. The City made the following contributions in fiscal year 1999/00 on behalf of the City
employees who participated in the plans listed below.
Public Employees' Retirement System (PERS)
Firefighters'Unified Retirement System (FURS)
Municipal Police Officers' Retirement System (MPORS)
Number of 1999/00 city
Particip s Contribution
82 $1771P833
23 1189148
29 153.,
,004
A-3
THE CITY - FINANCIAL INFORMATION
Financial Summary
(As of March 1,, 2001)
2000/01 Market Valuation ......................................................................... $5921339-1335
2000/01 Taxable Valuation- ............... $21,153�794
General Obligation Debt Outstanding ................................................................. $0
TotalDirect Debt ....................................................... 6 ....................................... $0
Special Assessment Bonds Outstanding (including the Bonds) .................... $11809�403
2000 Census Population .......................... 14.1223
Overlapping General Obligation Bonded Indebtedness
General
Obligation
Debt
Outstan
Kalispell High School District $2,55201000
Kalispell Elementary District 259603P00
Outstpd...n Deb mrpable
to ProDe Wit®rn �ffity
Percent
Amount
Allocable
Allocable
.to city
to cily
30.84%
$777,� 168
61.72
L8265912
Flathead Valley Community College 4133500 16.36 70
TotalOverlapping Debt ............................................................................................................ $3,313 286
TotalDirect Debt .................................................................................... 0
Total Direct and Overlapping Debt .............................................. 6 ............................................. $3.3132286
General Obligation Debt Ratios
DirectDebt Per Capita ......................................................................................................................... $0
Direct and Overlapping Debt Per Capita ................................... $232-95
DirectDebt to Market Valuation ................................................................... ............... 6 ......... 6 .......... 0%
Direct and Overlapping Debt to Market 0.56%
DirectDebt to Taxable Valuation ....................................................................................................... 0%
Direct and Overlapping Debt to Taxable Valuation ...................................................................... 15-66%
MarketValuation Per Capita.. 6 ........... 6 ...................... 6 ............................................................ $411646-58
TaxableValuation Per Capita ................................................................................................... $ 1 5487.29
General Obligation Debt Limitations
Except for special provisions concerning general obligation indebtedness incurred for purposes ofproviding
sewer and water service the limit on aggregate outstanding and unpaid general obligation indebtedness for
3P -1
cities cannot exceed 1.51% of the.total assessed value of taxable property as ascertained by the last
NMI'
assessment for state and county taxes. The 2000/01 total assessed valuation for the City was $592,339,335.
The total amount of debt the City may incur is according to State law is $8,944,324. The City currently has
no indebtedness outstanding leaving $8,944,324 of debt capacity remaining.
Trends in Property Valuations
Set forth in the following table are the market valuations and taxable valuations of real and personal
property, including tax increment districts, located within the City for the fiscal years 1996/97 through
2000/01.
Fiscal
Market
Taxable
Year
Valuation
Valuation
2000/01
$59215339�335
$23,088,006
1999/00
574�7213869
24�9323,008
1998/99
58836497254
25Y500>927
1997/98
576�856fiO
25.1376)049
1996/97
551)1123,670
24)433�839
Source: Department of Revenue
Valuations and Assessments of Property for Taxation Purposes
* 0
General Provisions. As a general rule, all real and personal property in the State of Montana is subject to
taxation by both the State and its counties,, municipalities and otherpolitical subdivisions to finance various
general and special governmental ftmctions. This rule is subject to exceptions in the case of specified classes
of exempt property, including public property, property of churches, schools, hospitals, cemeteries and
charities, household goods, certain agricultural products, automobiles, smaller trucks, business inventory,
money and credits. Property is classified according to its use and character, and the different classes of
property are taxed at different percentages of their market valuation.
All taxable property except farm land and mines is to be assessed at 100 percent of market value, as such
market value is determined by the Montana Department of Revenue (the "Department of Revenue'). In
practice, market value is generally less than the propefty's appraised value for resale purposes. Property
valuations are based on comprehensive appraisals of all taxable property performed by the Department of
Revenue each year. As of the 1999 Legislative session, reappraisals of most commercial and residential real
properties will be performed on a six -year cycle with the next reappraisal scheduled for 2003. The
Department of Revenue then fin-nishes such market values to each county prior to the second Monday in
July. The Montana Constitution requires that property tax values be equalized across the State.
The taxable value for property is determined by applying a statutorily established percentage ratio to the
market value of the property according to its property classification. The applicable ratio for most
commercial and residential real properties during the 2000/01 tax year is 3.627%, with the primary
exceptions of utility, railroad and airline properties, farmland, business equipment and most personal
property. The tax rate (mills) is determined by dividing the tax receipts budgeted to be received by a taxing
jurisdiction by the taxable value of all taxable property within such jurisdiction. The tax on each property is
then determined by applying the tax rate (mills) to the taxable value of said property.
A-5
The fiscal year of the City and other taxing bodies in the State commences July I of each year and ends June
30 of the following year. Taxes are payable in two installments, due on November 30 and May 31 of each
fiscal year. If not paid on or before these dates, taxes become delinquent and accrue interest at a rate of 5/6
of I% per month from and after such delinquency until paid, plus 2% as a penalty.
1997Legislative Session. During the 1997 Legislative session, the Legislature approved a bill that phased -
in the increases in property values resulting from the 1997 reappraisals by 2% a year. In addition, the tax
rate for residential and commercial property, which in 1996 was at 3.86%, was scheduled to be reduced by
0.022 of a percentage point annually until it reached 2.78%. Without action by the Legislature, the 1997
reappraisal would have caused property values to rise on average approximately 44%. These provisions by
the Legislature were changed at the 1999 Legislative session as described below.
1999 Legislative Session. The 1999 Legislature made significant changes in tax policyi relation to motor
vehicles, publio utilities, the valuation of several classes of property, and the rates of taxation of personal
property. The Legislature has provided some additional state funding to local governments to compensate
for the loss in taxable valuation. The additional state aid should replace an estimated 54% of the revenue
lost by the reduced taxable value. The Legislature also allowed local governments to increase local mill
levies to replace lost revenue.
Class 4 (Residential and Commercial Property) Tax Changes. Senate Bill 184, which was signed into law
during the 1999 Legislative session, modified the implementation of the provisions of the 1997 reappraisal
described above. The balance of the 1997 reappraisal (96%) will be phased in over four years at 25% each
year. Dun*ng this saxne four year period, a portion of the market value of class four property will become
ex empt from taxation in the amounts of 16% in 19 9 9, 2 3 % in 2000, 27.5 % in 2 001 and 3 1 % in 2002 and
subsequent years for residential property ("homestead exemption) and 6.5% in 1999, 9% in 2000, 11% in
2001 and 13% in 2002 for commercial property ("comstead exemption'). The increase in exemption will be
matched with changes in the tax rate from the rate of 3.794% to 3.7105% in 1999 and adjusted downward
each year by .0835 to 3.627% in 2000, 3.5435% in 2001, and 3.46% in 2002 and following years. SB 184
sets the reappraisal of class four property on a six -year cycle. The next reappraisal will be phased -in
begm*nm*g in 2003. SB 184 also creates an interim local government. fanding and structure committee to
study the funding of local government.
Class 8 (Business Equipment) Tax Changes. The Legislature f6duced the tax rate on class 8 property from
the current rate of 6% to 3% over a three-year period commencing with the 2000 property tax bill and
provided that a person or business with class 8 property valued (market) at $5,000 or less be exempt from
taxation. (Class 8 property was also reduced by the 1995 Legislative session from 9% to 6%). Class 8
property generally consists of "business equipment" which includes such property as manufacturing
machinery and equipment, and certain commercial vehicles, fixtures, and equipment.
Other Property Class Tax Changes. Property taxes on livestock and certain personal property (class 6
property) will be reduced by 1 % each year from 4% 'in 1999 until such tax is eliminated by the year 2003.
The tax rate on electrical generation facilities will be reduced from 12% to 6% as of 2000. Also as of 2000,
the tax rate on rural telecommunications services is reduced from 8% to 3%. The Legislature reduced the tax
rate on automobiles and light trucks by approximately 30% beginning in 2000 (from 2% ofthe vehicle value
to 1.4%) with further reductions possible in the following years to prevent increases in revenue from this tax.
The tax rate on forest land is set at 0.79% for tax year 1999 and will be decreased by. 11 each year until it
reaches 0.35% in the tax year 2003.
A-6
These reductions in the value ofproperty will reduce the taxable valuation of local governments during fiscal
year 1999/00, which means a loss of tax revenue. After fiscal year 1999/00, revenue reduction for local
governments will continue over the next four years as lower tax rates are phased -in. The State will provide
direct reimbursement for a portion of the lost tax revenue as described below. Local governments may also
make up a portion of the lost revenue by raising the number of property tax mills that they levy. State
reimbursement and the higher mill levies should allow local governments to collect the same total tax
revenue that was collected in- the previous year.
Reimbursement Provisions. The result of the tax changes by the 1999 Legislature described above is a
reduction in the taxable valuation and ultimately the taxes received by local governments. However,, to offset
the impact of such changes on local government, the State reimbursed local governments for property tax
and other tax losses that are attributable to certain reductions in the tax rates. For instance, cuts in business
equipment,, telecommunications and utility taxes were reimbursed in 1999/00 and 2000/01 at levels equal to
approximately 116% of actual losses.
Pursuant to HB 124 enacted by the 2001 Legislature just adjourned and effective, for the most part, July 1,
200 1, the State will replace its system of reimbursement for lost property tax revenue by local governments
with a system of local government entitlements and block grants. To fund the entitlements and block grant
programs, the State will retain various tax and revenues for the general fund that were previously allocated to
the local governments, including sources such as gaming revenues, beer and wine taxes, and automobile
licensing and registration fees .
HB 124 provides a more predicable, stable funding source for local goverrunents; more local government
6
influence over the funding sources which are under the control of State government and allocated to local
government; and more flexibility and decision making at the local level.
The 200 1 Legislature changed the largest revenue sources. Under current law, the revenue sources that are
changed in HB 124 are under the total control of the State legislature --both the amount of revenue collected
and the revenue allocation among government units. Local government personal property tax reduction
reimbursements contained in BB20 and SB417 from prior sessions are being reduced 10% a year starting in
fiscal 2000; tax reduction reimbursements contained in SB 184 from the 1999 Legislature were sunset June
303� 200 1; and motor vehicle taxes were reduced in SB260 by the 1999 Legislature and fiirther reducedi the
HB540 referendum put on the ballot by the 1999 Legislature. These revenue reductions were significant and
directly impacted local governments.
BB 124 combines a number of different reimbursements and other revenue sources controlled by the State
legislature into one "Entitlement Share" which is not tied to any specific revenue source, but rather to the
general economic condition of the State. This allows the State legislature to make tax changes and revenue
reallocations without impacting the revenue for local government, since the local government "Entitlement
Share" is not tied to any particular revenue source or revenue allocation. Therefore, the local government
revenue base, which will vary with the State's economy,, can continue at a fairly predictable level and not be
radically changed every two years by the Legislature. Ultimately, the Legislature still has the power to
change the "Entitlement Share".
A-7
The main provisions of HB 124 include:
1. Establishes a partnership between State and local government whereby revenue that was
in numerous distributions is now in a sin le statutory appropriation: motor vehicles; gaming;
9 3
financial institutions; alcohol taxes; district court fees; other miscellaneous revenues,- and
SB 184 reimbursements.
2. The entitlement share payment for local governments will provide for predictable, stable
revenue flows based on previous revenue plus a growth factor allowing all areas of the State
to share in the overall state revenue growth.
3. Ties the entitlement share growth rate to the Montana economy based on an annual
calculation using Montana Gross State Product plus Montana Personal Income - 4 year
average growth and the following percentages: cities-3.00%; consolidated overnments-
1 9
2.65%; counties-2.30%. Annual "growth" of the Entitlement Share is distributed 50% on
population and 50% on each local government's share of the base year entitlement
calculation.
4. Shares the revenue risk between the state and local governments by providing that if the
future revenues fall below 95% of the base year revenues due to causes other than legislative
action, that local governments share in the revenue loss.
5. Transfers the portion of district courts and welfare expenses funded by counties to the
State.
6. Provides an overall property tax cap on local government growth by removing individual
mill levy caps on specific programs which had been modified by the overall property tax cap
in 15-10-420, MCA. The bill allows the property tax cap to grow at !/2the rate of inflation
and provides new flexibility in levying the maximum number of mills.
7. Strengthens current law so that the state cannot put unfunded mandates on local
governments and provides block grants for school districts and countywide school
transportation and retirement funds.
The projected impact of this bill to the State for the 2002-2003 biennium is -an increase in revenue of
approximately $13§ million in fiscal year 2002 and $128 million in fiscal year 2003 along with an increase
in expenditures of $127 million and $130 million, respectively. The net impact to the State's General Fund
would be $12 million in fiscal year 2002 and ($2) million in fiscal 2003. Although projections for the first
year of implementation of HB 124 result in a positive impact to the General Fund overall, future year
projections indicate that this positive increase will be offset in subsequent years by a small net negative
impact each fiscal year.
A-8
Tax Levies
The following table shows the mill rates per $ 1,000 of taxable value ofproperty for a resident of the City for
fiscal years 1996/97 through 2000/01.
-------------
Fiscal Year -------------
Taxina E
1996/97
1997/98
1998/99
1999/00
2000/01
State University Mill Levy
6.00
6.00
6.00
6.00
6.00
State Statewide School Equalization
40.00
40.00
40.00
40.00
40.00
General Countywide School Levy
90.19
88.10
89.10
91-62
92-63
Flathead County
56.32
54.15
54.67
56.81
58.95
Flathead Valley Conimunity College
10.20
10.30
10.41
11.01
11.92
Kalispell Elementary School District
116.33
120.02
126.32
133.75
124.76
Kalispell High School District
55.09
56.95
61.73
66.43
67.50
City of Kalispell
116.16
116.16
111.16
114.25
122.00
Weed
1.62
1.56
1.55
1.63
1.71
Sheriff
23.82
21.16
21-03
22.08
23.16
Mosquito
0.35
0.40
0.39
0.40
0.40
Board of Health
4.15
4.00
1.56
4.40
4.65
Total
5.20,12
518.80
5219-2
5,48.38
..53.68
Source: Department of Revenue
Tax Collections
Set forth in the following table are the real and personal property tax levies and collections for the City for
the fiscal years ending June 3 0, 1997 through 200 1.
Taxes Collected
Total Annual
Fiscal
Tax
9
in Year Levied
Tax CollectionS2
Year
Amount' Percent'
Amount Percent
2000/01
$ 1, 5 6 8172 5
n/a n/a
n/a n/a
1999/00
1 �404�927
$15,292.1532 92.0%
$11500,,212 97.37%
1998/99
11372,1401
15,2623617 92.0
1 P589,916 98.95
1997/98
11,496.9180
15,403.1014 92.0
15835,054 99.37
1996/97
15265,639
1,164�445 92.0
1.9516,813 99.03
Due to timing of collection of the second half taxes, the City must make accruals and assumes 8% will be
collected in the
following year.
4
2 Includes real and personal property collections, delinquencies, penalties and interest.
Source: City Finance Department
A-9
Major Taxpayers
The following table lists the largest taxpayers within the City for fiscal year 2000/01 in declining order of
taxable valuation.
Tg2iggyer
1.
Energy Northwest
2.
Northwest Telephone
3.
Montana Power�
4.
Cavanaugh's Motel
5.
First Interstate Bank
6.
Weber Bank Building
7.
SFP LLD ( Dasen)
8.
Northwest Investments
9.
Equity Supply
10.
Thoft Ranch Co.
Total
Total 2000/01
Business
Taxable Value
utility
$1!4431�825
Telecommunications
L177!�311
utility
5871492
Motel
567.� 160
Bank
1091120
Bank
84)470
Developer
8 1 fil 5
Financial
72.�586
Farm/Hardware Supply
647512
Ranch
6
4$254�15 6
The top ten taxpayers according to taxable valuation in 2000/01 comprised approximately 20. 11 % of the City's
2000/01 taxable value of $21 � 153 �794.
2 Montana Power Company has entered into an agreement to sell its electric and natural gas distribution and
transmission throughout the State to Northwestern Corp. The companies expect the sale to conclude during calendar
year 200 1. It is not expected that the sale will have any impact on the taxable value of the property.
Source: Department of Revenue
Financial Operations and Budgeting Process
The City's primary source of funding for operations is property tax receipts, which 'in the fiscal year ended
June A, 2000 accounted for approximately 36 — % of total City General Fund receipts according to the
audited fiscal year 1999/00 financial results. Other sources of City funding include State, County, and
Federal revenues, fines, special assessments, charges for services, license and permit fees and investment
earnings.
The financial operations of the City are conducted primarily through its General Fund, Special Revenue
Fund, Debt Service Fund, Capital Projects Fund, Enterprise Funds, and Internal Service Funds. All revenues
not attributable to any other fund are accounted for in the General Fund and recorded therein, and any lawful
expenditure of the City may be made from its General Fund.
The Montana Municipal Budget Law st' ulates that money, other than payments from aRency funds, cannot
ip *-.1 W
be drawn from the city treasurer except pursuant to an appropriation. Therefore, a legally adopted budget is
required for all fimds, with the exception of agency funds. The City Manager is responsible for preparation
of the prelm*u*nary annual budget. The Council modifies and/or approves this budget. The Council must
meet prior to the budget adoption for the purpose of holding a public hearing on the final budget. This
hearing can be continued until the budget is finally approved and, adopted. State law requires that on or
before the second Monday in August, the City Council will fix the tax levy for each fimd. The City Clerk
forwards a copy of the final budget to the State Department of Commerce no later than October 1. Taxes
A-10
necessary to pay principal of and interest on outstanding general obligation bonds are levied without
limitation as to rate or amount.
The City is permitted by State law to levy an all-purpose property tax not to exceed 65 mills, except the levy
can be increased by 105% annually. Changes to this provision were made during the 1999 Legislative
session as described below. Special purpose levies are permitted outside this all-purpose levy for pension,
insurance, debt service, and other categories permitted by State law. For fiscal year 2000/01, the City levied
122-00 mills.
1999 Legislative Session Changes. The 1999 Legislature adopted SB 184 which limits the amount oftaxes
levied by the City to the amount of property tax revenue it received during the prior year based on the current
year's taxable value, less the value of newly taxable property, plus additional levies authorized by the voters.
The intent of this change is to pennit the City to levy the amount necessary to achieve the property tax
revenue it received in 1996, notwithstanding the reduction in property tax rates and exemptions provided in
SB 184 (see "Valuations and Assessments of Property for Taxation Purposes" herein) in addition to the
application of such tax levies to newly taxable property and property tax revenues resulting from "additional
levies authorized by voters". Tax collections may be increased due to (a) growth in the City" s. property tax
base from (a) annexation of real property and improvements, (b) construction, expansion, or remodeling, (c)
transfer of property, (d) reclassification of real property, (e) revaluation caused by expansion, addition,
replacement or remodeling.
This change in law imposes a limit on some property tax levies that were not previously subject to a levy
limit., such as property tax levies to fimd a special improvement district revolving fimd. Therefore, to fimd a
revolv M*g fimd contribution the city will need to either (a) agree to reduce other property tax levies as require
to meet the limit or (b) require voters to approve the revolving fund levy. Because regular property tax
revenues are used to operate the City, a pledge to fimd a Revolving Fund contribution directly affects a
City's operating budget. Any money budgeted to fund a Revolving Fund contribution is necessarily diverted
from other County services.
A-11
(This Page Intentionally Left Blank]
APPENDIX B
n. M091
7777
gnnc:an
ECONOMIC AND DEMOGRAPHIC INFORMATION
General Description
The City of Kalispell is the county seat of Flathead County and had a 2000 estimated population of 14,223.
Located in northwestern Montana, Flathead County is Montana's fourth most populous County with
approximately 74,471 residents in 2000 according to the U.S. Bureau of the Census. The greater Kalispell
area is the trade center of northwest Montana. The area is renowned for its Flathead cherries and Christmas
tree farms. It is also a gateway to Glacier National Park.
Primary components of the area's economy include manufacturing industries (largely in the wood products
industry), agriculture, industries associated with the area's status as a trade center and tourism and recreation
based industries. Government sources also comprise a significant portion of the area's economic base.
Manufacturing Industries
Manufacturing in Flathead County accounted for $223.55 million of total earnings by industry in 1998,
which comprised over 2 1 % of total County earned income by industry, due largely to the strong presence of
the wood products industry and to a lesser extent to primary metal refining in the area. Flathead County
generally leads all Montana counties in the amount of timber processed. Approximately 11.0% of the
employees in Flathead County are employed by the manufacturing industries, namely the wood products
industry. Plum Creek Timber Co., Semitool, Inc., and Columbia Falls Aluminum Co. are three ofthe major
employers in the County (see "Major Employers" herein).
Plum Creek Timber Co. Plum Creek is one of the largest private timberland owners in the U.S. The
company concentrates on forestry management, harvesting techniques, value-added products, and zero -waste
manufacturing techniques. Plum Creek's current operations include 6 sawmills, 2 plywood plants, I
medium density fiberboard (MDF) facility, and 2 remanufacturing plants. The company employs
approximately 2,500 people in the northwest, 1,000 ofwhich are employed in Flathead County. Plum Creek
also has land holdings 'in excess of 3 million acres.
Columbia Falls Aluminum Co. Columbia Falls Aluminum ("CFAC") is a privately owned and operated
company. The company was established in 1952 by beginning construction on two potlines with total
capacity of 67,500 tons per year at a cost of $65,000,000. Almost three years later the first aluminum was
produced. Today, CFAC has five potlines, and at full capacity produces 18 5,000 tons of aluminum ingot per
year. The potline buildings reportedly form the largest single building in Montana, covering approximately
1,740,000 square feet (40 acres). The company employs 600 when at fall capacity.
CFAC has completely shutdown operations and is reselling available electricity to Western utilities. All
CFAC employees affected by the shutdown will receive full wages and benefits through the end of 2001.
The plant hopes to resume operations in January of 2002. CFAC, however, will only have enough power
under contract to run 2.5 potlines (half of its capacity). CFAC accounts for one -fifth of all of the State's
electrical usage. In the meantime, CFAC together with other entities are working on solutions to its power
problems. SIOD 343 can not predict future trends in the wholesale electrical power market and the effect such
trends may have on the operation of CFAC. (See also "Major Employers" herein.)
Semitool, Inc. The company currently has approximately 820 employees at its corporate headquarters
located in Kalispell. Semitool delivers automated tools for copper deposition, thermal processing, chemical
processing, and wafer carrier cleaning to semiconductor manufacturers around the world. Semitool also has
many subsidiaries around the globe to conduct operations. In 1998, Senator Conrad Bums nominated
Semitool,, Inc for the Small Business Award (SBA). The criteri a examined included growth in employees,
increase in sales,, evidence of contributions to the local community, comparisons between current and past
financial reports and innovativeness of products or services offered.
Agriculture
Cash receipts from the sale of principal agricultural products and government payments in Flathead County
totaled close to $29 million dollars in 1998. The primary agricultural products of the area include evergreen
tree nursery stock, Christmas trees, cherries, potatoes,, grain, hay and livestock. In 1997, Flathead County
ranked 6th out of 56 counties in Montana in the production of potatoes and 4th for milk cow production.
Below are summarized cash receipt figures for agricultural marketings in Flathead County for the years
shown according to the Montana Agriculture Statistics Service.
---------------
Agricultural Cash Receipts --------------
Sources 1994
1995
1996
1997
1998
Livestock and Products $125493
$11,895
$103269
$102492
$8.7469
Crops 123� 113
16,460
1%642
16,414
195152
Government Payments 1,019
416
835
784
14468
TOTALS $25a:625
$28o771
$30746
$27690
$29.089
Governmental Entities
As of 1998, government sources comprised 13.93% of total earnings by industry and 9.80% of total
employment in the County. The U.S. Forest Service, local school districts, the State, and local
municipalities comprise some of the largest employers in the County. (See "Major Employers" herein.)
Trade Center Activities
The industries that employ the most people 'in Flathead County include services hnd wholesale and retail
trade. In 1998 the services industry employed 3 1. 0% of the total employed population within the County
with health care services making up a large portion of this figure. Also in 1998, wholesale and retail trade
employed 23.9% of the County's labor force. The services industry comprised approxinately 25.8% oftotal
earnings by industry in the County and wholesale and retail trade comprised approximately 15.5% of
earnings in 1998. The strong influence of both the services industry and wholesale and retail trade on the
area,) s economy emphasizes the importance and influence of tourism in the County as discussed below.
Stream InternationaL Stream International is a company based in Canton, Massachusetts that provides
customer services and technical support to computer and internet related companies. In April 2000, Stream
International opened a call center in the Gateway West Mall in Kalispell after receiving a $4 million
incentive package that offered free rent in exchange forjobs. In exchange for this deal, Stream International
committed to creating 15 0 1 ob s within the first nine months o f operation and more j ob s within three years.
The deal was a joint venture put together by a city -county partnership that included contributions from
Flathead Electric Cooperative and the State and Federal governments. In January of 2001, Stream
International employed approximately 800 call agents and an additional 50 management and support staff.
Stream is adding 15,000 square feet to the already 60,000 square feet it occupies to accommodate another
150 workstations that can accommodate 750 employees since Stream International operates 24 hours a day,
seven days a week. The company expects to increase employment by 150 sometime in spring 2001, bring
total employment to a total of approximately 1,000. The company does not expect its operations to be
impacted by increases in electrical utility prices.
Tourism and Recreation
The tourism, industry is becoming an increasingly important source of economic activity for the area.
Visitors are attracted to the areas scenic beauty and outdoor recreational opportunities. Tourism in the area
is anchored by Glacier National Park, the Bob Marshall and Great Bear Wilderness areas, Flathead and
Whitefish Lakes, Big Mountain Ski and Summer Resort.
Glacier National Park is located approximately 33 miles northeast of the City. The area is a gateway to the
Park. With more than 700 miles of trails., Glacier National Park is a popular destination for recreationalists.
The Park reported approximately 1,681,604 visitors in 1999. While traveling through the area, many scenic
and historical attractions are available.
There are many rivers and small lakes in the area that draw visitors,, the largest being Flathead Lake. The
northern edge of Flathead Lake is approximately 9 miles south of the City and encompasses nearly 200
miles. It is the largest freshwater lake west of the Mississippi and has a variety of fish including cutthroat,
mackinaw., lake trout whitefish, largemouth bass, and yellow perch. The waterways allow a number of
outdoor sports to be enjoyed including boating, fishing, swimming.
Winter sports are also popular in the area. Big Mountain Ski and Summer Resort, located 32 miles north of
the City near the City of Whitefish, offers down hill and cross-country skiing among many summer
activities. Wilderness trails are located throughout the area for the enjoyment of cross country skiing and
snowmobiling.
(am, I I
Major Employers
The major employers in the County as of January 2000 were as follows.
EMployer
1 . Federal Government
2. Northwest Healthcare.
3. Plum Creek Timber
4. Semitool, Inc.
5. Stream International
6. Flathead Valley Community College
7. Kalispell School District
8. Columbia Falls Aluminum Co.
9. State Govenunent
10. Flathead County
Approx. Number of
Iype of Business
rko
Employee.
Federal Agencies
L200
Health Care
1 '200
Wood Products
1.7000
Electronics Equipment
11000
Technical Support
900
Higher Education
690
Education
630
Aluminum Refinery
600
State Agencies
500
County Govennnent
460
' CFAC has completely shut down operations and is reselling available electricity to Western utilities. All CFAC
employees affected by the shutdown will receive full wages and benefits through the end of 2001. The plant hopes
to resume operations in January of 2002. In the meantime, CFAC together with other entities are working on
solutions to its power problems. The City can not predict future trends in the wholesale electrical power market
and the effect such trends may have on the operation of CFAC.
Source: Flathead Economic Development Authority
Population Trends
Historical population figures for the City of Kalispell, Flathead County and the State ofMontana. since 1980
are set forth below to show population trends in the area.
City of
Percent of
Flathead
Percent of
State of
Percent of
Year Kalioell
C
Co
C
Montana
C
2000 14�027/23
19.4%
74.1471
25.8%
902195
12.9%
1990 111917
11.5
593218
14.0
799.05
1.57
1980 lOY689
1.5
515966
31.7
786,690
13.29
Source: United States Census Bureau
Building Permits
Set forth in the following table is the trends in buildm*g pen -nits for the City for the past five years.
Fiscal
Year
1999/00
1998/99
1997/98
1996/97
1995/96
Source: City Building Department
Earnings By Industry
New Commercial Pennits
Number
Value
113
$21.9049)427
84
M185451
93
12163707
84
45878315
82
103P56.1024
Residential and Other Permits
Number
Value
195
$1313351226
204
M47%796
180
12 240,852
191
7,718�050
238
12J895358
The following table shows Flathead County total personal income as well as wage and salary, labor and
proprietors' earnings by major industry type for the years 1994 through 1998. Figures shown are in
thousands.
Total Personal Income
Earnings by Industry
Farrn
Non-Fann
Private
Ag. Serv., Forest., Fishing
Mining
Construction
Manufacturing
Transportation and Utilities
Wholesale Trade
Retail Trade
Finance, Insurance & Real Estate
Services
Gov't & Gov't Enterprises
Federal/Civilian
Military
State and Local
1994
1995
1996
1997
1998
$13,253�555
$1�401,255
$15401-5255
$1 �4681452
$11605,032
3)441
3�585
434 11
1.5861
3J90
840�059
866,969
908�949
938�513
1 M54P 8
709,046
736M06
7715713
7973012
9065735
7J30
71190
73,482
(D)
9.1438
51218
41344
450452
(D)
5.1)947
9L981
865441
86.9096
82,9734
92X0
140�777
1481,374
156.9077
162503
223A99
641220
63.�219
6530715
68,151
711)827
22A80
241,861
28J67
28�520
31�075
122�351
12130986
1231816
129,954
1327813
455PO75
50,652
545684
555911
66,5562
20%814
228.1939
245.X4
255,1931
273�204
131�013
1301963
137�236
1413501
147�283
40,440
39,016
40�484
423584
44,1)524
4.1785
41644
41901
55�049
5,5154
859788
87,303
91 Y85 1
93,868
97fi05
(D) Not shown to avoid disclosure of confidential information, but the estimates for this item are included in the totals.
Source: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Information System.
Labor Force and Unemployment
The table below shows Flathead County employment figures as well as Flathead County, State of Montana,
and United States unemployment rates since 1991.
-------- Unemployment Rates --------
Flathead
State of
Year
Labor Force
E
pployMen.
coupt��
Montana
United States
2000
38fi45
369271
6.1%
4.9%
4.0%
1999
38�003
35�318
7.1
5.2
4.2
1998
381453
3 5,406
7.9
5.6
4.5
1997
37fi23
34)849
7.4
5.4
4.9
1996
36�541
33�853
7.4
5.3
5.4
1-995
35.1613
32,702
8.2
5.9
5.6
1994
35,640
33�243
6.7
5.1
6.1
1993
34�244
31,713
7.4
6.0
6.8
1992
32.�748
30,117
8.0
6.7
7.4
1991
315089
28,333
8.9
6.9
6.7
Source.- Montana Department of Labor and Industry.
Personal Income Trends
The following table shows total and per capita personal income growth in Flathead County from 1989
through 1998.
Total Personal
Percent of
Per Capita
Percent of
Year
Income LO
C
Income
Ch
1998
$1,1053P32
9.3 0%
$22.X7
9.09%
1997
1,468,452
4.80
20,1467
3.70
1996
1��4013255
5.31
19,1736
3.07
1995
1,3301623
6.14
19,1149
2.78
1994
1-253 555
3.42
18,631
0.18
1993
1,21230153
9.13
185598
5.15
1992
19110,1696
8.81
17,687
5.37
1991
1,020,805
8.10
16,1785
5.82
1990
9442304
8.24
15,862
6.25
1989
8729414
11.61
14.1X9
10-78
Source: U.S. Department of Commerce, Regional Economic Information System, Bureau of Economic
Analysis
Im
Employment by Major Industry
The table below sets forth the total number of full-time and part-time employees in Flathead County for the
years and industries as shown.
1994
1995
1996
1997
1998
Employment by Place of Work:
Total Employment
41522
42�750
44,1925
457476
46�274
By Type.6
Wage and Salary
2%440
30,485
315�860
32,7162
32fi58
Proprietors
12A2
129265
13)065
133314
13P6
Farm
891
881
878
888
920
Non -Farm
111191
1 L384
121P 187
12,426
12.1696
By Industry:
Farm
11008
15011
L006
987
111043
Non -Farm
40514
4111$739
43�919
441489
45�231
Private
35�998
373�318
395407
39)977
40507
Ag. Services,, Forestry,, Fish & Other
728
708
758
(D)
839
mmomog
175
168
166
(D)
194
Construction
350541
39517
3,1412
35439
33,674
Manufacturing
4�02
430697
5)039
53,095
5X0
Transportation and Public Utilities
1 �879
L852
1 925
13,956
21P013
Wholesale Trade
933
1P052
1J48
L185
1�275
Retail Trade
8,908
9.7216
95661
99761
%794
Finance,, Insurance & Real Estate
200
31119
33271
31296
3,5494
Services
12,432
12.1989
14M27
14�276
1450344
Government & Government Enterprises
4�516
4.1421
4512
4,512
4�534
Federal/Civilian
814
815
812
834
839
Military
431
419
406
411
405
State and Local
2�729
31187
33294
3.1267
31,290
(D) Not shown to avoid disclosure of confidential information, but the estimates for this item are included in the totals.
Source: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Information
System.
APPENDIX C
t�.o., Uing, os�
C-1
CONTINUING DISCLOSURE
Purpose and Beneficiaries
To provide for the public availability of certain infon-nation relating to the Bonds and the security therefor
and to permit the original purchaser and other participating underwriters in the primary offering ofthe Bonds
to comply with amendments to Rule 15c2-12 promulgated by the Securities and Exchange Commission (the
"SEC") under the Securities Exchange Act of 1934, relating to continuing disclosure (as in effect and
interpreted from time to time, the "Rule"), which will enhance the marketability of the Bonds, the City made
the following covenants and agreements (the "Disclosure Covenants') 'in the resolution prescribing the terms
of the Bonds (the "Bond Resolution") for the benefit of the Owners (as hereinafter defined) from time to
time of the outstanding Bonds. The City, the District Fund and the Revolving Fund of the City are the only
"obligated persons" in respect of the Bonds within the meaning of the Rule for purposes of identifying the
entities in respect of which continuing disclosure must be made. The City has complied in all material
n
respects with any undertaking previously entered into by it under the Rule.
If the City fails to comply with any of the Disclosure Covenants, any person aggrieved thereby, including the
Beneficial Owners of any Outstanding Bonds, may take whatever action at law or in equity may appear
necessary or appropriate to enforce performance and observance of any such covenant contained herein,
including an action for a writ of mandamus or specific performance. Direct, indirect, consequential and
p 'tive damages shall not be recoverable for any default thereunder to the extent permitted by law.
uni
Notwithstanding anything to the contrary contained herein'. in no event shall a default under the Disclosure
Covenants constitute a default under the Bonds or under any other provision of the Bond Resolution.
As used herein, "Ownef ' or "Bondowner" means., in respect - of a Bond, the registered owner or owners
thereof appearing in the bond register maintained by the Registrar or any Beneficial Owner (as hereinafter
defined) thereof, if such Beneficial Owner provides to the Registrar evidence of such beneficial ownership in
form and substance reasonably satisfactory to the Registrar. As used herein, "Beneficial Owner" means, in
respect of a Bond, any person or entity which (i) has the power, directly or indirectly, to vote or consent with
respect to., or to dispose of ownership of, such Bond (including persons or entities holding Bonds through
nominees 1
I depositories or other intermediaries), or (b) *s treated as the owner ofthe Bond for federal income
tax purposes.
Information To Be Disclosed
The City will provide, in the manner set forth under "Manner of Disclosure" below, either directly or
indirectly through an agent designated by the City, the following inforrnation at the following times:
Annual Information. On or before 270 days after the end of each fiscal year of the City, commencing with
the fiscal year ending June 3 0, 200 1, the following financial information and operating data in respect ofthe
City (the "Disclosure Information7):
(A) the audited financial statements of the City for such fiscal year and the audit report and opinion of the
accountant or government auditor relating thereto,, as permitted or required by the laws of the State of
Montana, containing balance sheets as of the end of such fiscal year and a statement of operations,, changes
in fund balances and cash flows for the fiscal year then ended, showing in comparative form such figures for
C-2
the preceding fiscal year of the City, prepared in accordance with generally accepted accounting principles
promulgated by the Financial Accounting Standards Board as modified in accordance with the governmental
accounting standards promulgated by the Governmental Accounting Standards Board or as otherwise
provided under Montana law, as in effect from time to time,, or 5, if and to the extent such financial statements
have not been prepared in accordance with such generally accepted accounting principles for reasons beyond
the reasonable control of the City, noting the discrepancies therefrom and the effect thereof, and certified as
to accuracy and completeness in all material respects by the Finance Director; and
(B) to the extent not included in the financial statements referred to in paragraph (A) hereof, the information
of the type set forth below contained in the Official Statement for such fiscal year or for the period most
recently available, which information may be unaudited, but is to be certified as to accuracy and
completeness in all material respects by the Finance Director to the best of his or her knowledge which
certification may be based on the reliability of information obtained from third party sources:
updated information for the then most recent completed fiscal year in format similar to the table
on page 8 in the section captioned "Revolving Fund" concerning the Revolving Fund Cash
Balance and outstanding Bonds secured thereby;
2) updated information for the then most recent completed fiscal year in format similar to the table
on page 20 in the section "Summary of Outstanding Special Improvement Distficts" concerning
the Bonds and other outstanding special improvement district bonds of the City, including any
special improvement district bonds issued after the date of this Official Statement;
3) updated information for the then most recent completed fiscal year in format similar to the table
on page 20 in the section captioned "Special Improvement District Assessment Billings and
Collections";
4) updated information for the then most recent completed fiscal year in format similar to the table
on page 21 in the section captioned "Statement of Changes in Fund Balance of the Revolving
Fund",, including the amount of loans to SID 343, if any;
5) the market and taxable valuations of the City for the then current fiscal year; and
6) tax collection infon-nation for the then most recent completed fiscal year in format sinlilar to the
table on page A-9 in the section captioned "Tax Collections".
Notwithstanding the foregoing paragraph, if the audited financial statements are not available by the date
specified, the City shall provide on or before such date unaudited financial statements in the fonnat required
as part of the Disclosure Information and, within 10 days after the receipt of the audited financial statements,
the City shall provide the audited financial statements.
Any or all of the Disclosure Information may be incorporated by reference, if it is updated as required hereby
from other documents, including official statements, which have been submitted to each then nationally
recognized municipal securities information repository under the Rule (collectively, the "National
Repositories") and to any state information depository then designated or operated by the State of Montana
as contemplated by the Rule (the "State Depository") or the SEC. If the document incorporated by reference
is a final official statement, it must be available from the Municipal Securities Rulemaking Board (the
C-3
(-'MSRB"). The City shall clearly identify in the Disclosure Information each document so incorporated by
reference.
If any part of the Disclosure Information can no longer be generated because the operations of SID 343 and
the City have materially changed or been discontinued, such Disclosure Information need no longer be
provided if the City include in the Disclosure Information a statement to such effect; provided, however, if
such operations have been replaced by other City operations in respect of which data is not included in the
Disclosure Information and the City determine that certain specified data regarding such replacement
operations would be a Material Fact (as hereinafter defined), then, from and after such determination, the
Disclosure Information shall include such additional specified data regarding the replacement operations.
If the Disclosure Information is changed or the Disclosure Covenants are amended as permitted by the Bond
Resolution, then the City is to include in the next Disclosure Information to be delivered hereunder, to the
extent necessary; an explanation of the reasons for the amendment and the effect of any change 'in the type of
financial information or operating data provided.
Certain MaterialEvents. In a timely manner, notice of the occurrence of any of the following events which
is a Material Fact (as hereinafter defined):
(1) Principal and interest payment delinquencies;
(2) Non-payment related defaults;
(3) Unscheduled draws on debt service reserves reflecting financial difficulties;
(4) Unscheduled draws on credit enhancements reflectm*g financial difficulties;
(5) Substitution of credit or liquidity providers., or their failure to perform;
(6) Adverse tax opinions or events affecting the tax-exempt status of the security;
(7) Modifications to rights of security holders;
(8) Bond calls;
(9) Defeasances;
(10) Release, substitution, or sale of property securing repayment of the securities,- and
(11) Rating changes.
As used herein, a "Material Fact" is a fact as to which a substantial likelihood exists that a reasonably
prudent investor would attach importance thereto in deciding to buy or sell a Bond or, ifnot disclosed, would
significantly alter the total information otherwise available to an investor from the Official Statement,
information disclosed under the Disclosure Covenants or information generally available to the public.
Notwithstanding the foregoing sentence, a "Material Fact" is also an event that would be deemed "material"
for purposes of the purchase, holding or sale of a Bond within the meaning of applicable federal securities
laws, as interpreted at the time of discovery of the occurrence of the event.
C-4
Certain Other Information. In a timely manner, notice of the occurrence of any of the following events or
conditions:
(1) the failure of the City to provide the Disclosure Information at the time specified under "Annual
Information" herein;
(2) the amendment or supplementing of the Disclosure Covenants pursuant to the Bond Resolution,
together with a copy of such amendment or supplement and any explanation provided by the
City under "Amendments" herein';
(3) the termination of the obligations of the City under the Disclosure Covenants pursuant to the
Bond Resolution;
(4) any change in the accounting principles pursuant to which the financial statements constituting
a portion of the Disclosure Information are prepared; and
(5) any change in the fiscal year of the City.
Manner of Disclosure
The City agrees to make available the information described herein under "Information To Be Disclosed" to
the following entities by telecopy, overnight delivery, mail or other means, as appropriate:
(A) the information described under "Infort-nation To Be Disclosed - Annual Information" to each of the
then nationally recognized municipal securities information repository under the Rule and to any state
information depository then designated or operated by the State ofMontana as contemplated by the Rule (the
"State Depository), if any;
(B) the information described under "Information To Be Disclosed - Certain Material Events" and
"Information To Be Disclosed - Certain Other Information",,, to the Municipal Securities Rulernaking Board
and to the State Depository, if any; and
C-5
(C) the information described under "Infort-nation To Be Disclosed" to any rating agency then maintaining a
rating of the Bonds and, at the expense of such Bondowner, to any Bondowner who requests in writing such
information at the time of the transmission under clauses (A) or (B) above as the case may be, or, if such
information is transmitted with a subsequent time of release, at the time such information is to be released.
Term
The Disclosure Covenants are to remain in effect so long as any Bonds are outstanding.
Amendments; Interpretation
The Disclosure Covenants and the form and requirements of the Disclosure Information may be amended or
supplemented by the City from time to time, without notice to or the consent of the Bondowner of any
Bonds, by resolution or ordinance of the Council filed in the City accompanied by an opinion of Bond
Counsel, who may rely on certificates of the Finance Director and others and the opinion maybe subject to
customary qualification to the effect that: (i) such amendment or supplement (a) is made in connection with
a change in circumstances that arises from a change in law or regulation or a change in the identity, nature or
status of the City, SID 343 or the District Fund and the Revolving Fund of the City or the type of operations
conducted by the City or SID 343, or (b) is required by, or better complies with, the provisions of paragraph
(b)(5) of the Rule; (ii) the Disclosure Covenants so as amended or supplemented would have complied with,
the requirements of paragraph (b)(5) of the Rule at the time of the primary offering of the Bonds, giving
effect to any change in circumstances applicable under clause (i)(a) and assuming that the Rule as in effect
and interpreted at the time of the amendment or supplement was in effect at the time of the primary offering;
and (iii) such amendment or supplement does not materially impair the interests of the Bondowner.
If the disclosure informati ' on is so amended., the City agrees to provide, contemporaneously with the
effectiveness of such amendment, an explanation of the reasons for the amendment and the effect, if any, of
the change in the type of financial information or operating data being provided hereunder.
The Disclosure Covenants are entered into to comply with the continuing disclosure provisions of the Rule
and should be construed so as to satisfy the requirements of paragraph (b)(5) of the Rule.
Further Limitation of Liability of City
In and to the extent the limitations of liability contained in 'Turpose and Beneficiafies" are not effective,
anything contained in this section "Contm*uing Disclosure" to the contrary notwithstanding, in making the
agreements, provisions and covenants set forth in the Disclosure Covenants, the City has not obligated itself
except with respect to assessments and the Revolving Fund. None of the agreements or obligations of the
City contained here 'in shall be construed to constitute an indebtedness of the City within the meaning of any
constitutional or statutory provisions whatsoever or constitute a pledge ofthe general credit or taxing powers
of the City.
C-6
APPENDIX D
oiiL
,orm;
D-1
[form of bond counsel opinion]
City of Kalispell
Kalispell, Montana
D.A. Davidson & Co.
Great Falls, Montana
Re: $1,581,500 Special Irnprovement District No. 343 Bonds
City of Kalispell, Flathead County, Montana
Ladies and Gentlemen:
We have acted as Bond Counsel to the City of Kalispell, Flathead County, Montana (the "City"), in
connection with the authorization, issuance and sale by the City of the obligations described above, dated, as
originally issued, as of June 1, 2001 (the "Bonds"). In that capacity, we have examined certified copies of certain
proceedings taken, and certain certificates and affidavits fiznished, by the City in the authorization, sale and
issuance of the Bonds, including a resolution adopted by the City Council of the City on June 4, 2001, establishing
the form and terms of the Bonds (the "Bond Resolution7). As to questions of fact material to our opinion, we have
assumed the authenticity of and relied upon the proceedings, affidavits and certificates ftu-nished 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. 343 (the "District"), provided for the
construction of various improvements of special benefit to the District and has covenanted to levy special
assessments for the costs of the improvements, in an amount estimated at $1,581,500, against benefitted properties
within the District. The special assessments are to be payable in installments, with interest on the balance of the
special assessments remaining unpaid, and collections of such special assessments are to be deposited in the Special
Improvement District No. 343 Fund of the City (the "District Fund"). The principal of and interest on the Bonds are
payable solely from the District Fund.
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 and warrants, including the Bonds.
The City has agreed, to the extent permitted by Montana Code Annotated, Title 7, Chapter 12, Parts 41 and 42, as
amended and as applicable to the Bonds (the "Act' '), to issue orders aninually authorizing I oans. 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, to the extent that fimds are available in the Revolving Fund, and to provide
fands. 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 and warrants secured thereby and subject to the durational. limitations specified in the Act.
Any property tax levy to be made by the City to provide fimds for the Revolving Fund is subject to
levy limits under current law. The City has agreed in the Bond Resolution to levy property taxes to provide fimds
for the Revolving Fund to the extent described in the immediately preceding paragraph and, if necessary, to reduce
other property tax levies correspondingly to meet applicable levy limits.
D-2
The Bonds are not general obligations of the City and, except to the extent described in this paragraph
(2), the taxing power of the City is not pledged to the payment of the principal thereof or the interest thereon.
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.
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 nuinimurn 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 institations
described in Section 265 (b)(5) of the Code may treat the B onds for purposes of Sections 265 (b)(2) and 29 1 (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 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
principles of equity, whether considered at law or in equity.
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 the Official Statement or any other offering materials relating to the Bonds and, accordingly, we express no
opinion with respect thereto.
Dated: 112001.
Very truly yours,
D-3