Tab 07 Final Official StatementOFFICIAL STATEMENT dated June 13,2006
NEW ISSUE NOT RATED
BOOK -ENTRY ONLY BANK QUALIFIED
In the opinion ofKennedy & Graven, Chartered, Bond Counsel, under existing laws, regulations, rulings and decisions interest on the Bonds is excludablefrom
ross income of the recipientforfederal income tax purposes and State ofMontana individual income tax purposes. Interest on the Bonds is not includable in the
.;o mp uta don of the a I tern a tive m bt im u m. taxab le in com e of in dividuaLs for p u rp os es of the federa I altern a tive m in im um tax, h o w ever, in teres t o n th e Bo nds is
includable in the computation ofthe alternative minimum taxable income ofcorporationsfor purposes ofthe alternative minimum tax imposed under the Internal
Revenue Code of 1986, as amended, and in certain state taxes applicable to corporations. (See "'Tax Exemption and Related Considerations " herein)
$49520�000
CITY OF KALISPELL, MONTANA
SPECIAL IMPROVEMENT DISTRICT NO, 344 BONDS, SERIES 2006
I -
Dated: June 15, 2006 Due: July 1, as shown on the inside cover
The City of Kalispell,, Montana (the "City") provides this Official Statement in connection with the issuance of its
Special Improvement District No. 344 Bonds, Series 2006 (Old School Station) (the 1"Bonds`"). The Bonds mature
on July I in each of the years and amounts set forth on the following page and will bear interest from June 15,
2006 to their respective maturities or prior dates upon which they have been duly called for redemption at the
rates per as shown on the M*side cover herein.
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.
Individual purchases of the Bonds will be madein the principal amount of $5,000 within a single maturity or
integral multiples thereof. 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, com iencing
January 1, 2007, The City has appointed U.S. Bank National Association to serve as Registrar and Paying Agent
(the "Registrar") for the Bonds. The
principal of -and interest on the Bonds will be payable by the- Registrar to
which will *in turn remit such principal and interest to DTC Partic* ants for subsequent disbursement to the
DTC7 IP
Beneficial Owners of the Bonds. (See "THE BONDS - Book -Entry Form" herein.)
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 fmancm*g the costs of improvements 'in the District (defined below) together
with other legally available Rinds. The Bonds are special, limited obligations of the City, payable solely from (i)
the collection of special assessments to be levied by the City against the assessable property benefited by the
improvements in Special Improvement District No. 344 C'SID 344" or the "District") as deposited M' the District
Fund, (ii) the Reserve Account.of the District Fund, (iii) tax increment revenue to the limited extent available and
pledged thereto in the Bond Resolution, if available, and (iv) the Special Improvement District Revolving Fund of
the City, subject to the 1=**tations contained in the Act (the "Revolving Fund"'). The special assessments shall be
a lien against the benefited property in the District. The improvements in the District consist of the (i) design,
grading and construction of underground conveyance lines for water, wastewater and storm water; (ii) design,
grading and construction of underground utility lines for gas, electric and telephone services; and (iii) design,
grading and construction of streets, gutters and sidewalks (the "Improvements"). Proceeds of the Bonds will also
be used to fund the establishment of a Reserve Account securing the Bonds M' the District Fund, to fund a
contribution to Revolv* Fund, and to pay costs associated with the sale and issuance of the Bonds and other
mg
related costs. The Bonds are not general obligations of the City and the taxing power of the City, except to
the limited extent described in "Security and Sources of Payment" herein, is not pledged to the payment,of
principal thereof or interest thereon. The Bonds are subject to mandatory and optional redemption as described
herein. (See "THE BONDS - Security and Sources of Payment" and "Redemption/Notice of Redemption"
herein.)
The Bonds are offered when, as and if issued by the City, subject to pn'or sale, to withdrawal or modification of
the offer without notice, and to the opinion as to validity and tax exemption of the Bonds by Kennedy & Graven,
Chartered, Minneapolis, Mu'mesota, Bond Counsel, and certain other conditions. The Bonds, M' definitive forml
are expected to be available for delivery through DTC on or about June 29, 2006.
This coverpage contains certain informationfor quick reference only. It is not a summary of this issue. Investors must
read the entire Official Statement to obtain information essential to making an informed investment decision.
D.A., DAVIDSON & CO.
$4�5209000
City of Kalispell, Montana
Special Improvement District No. 344 Bonds, Series 2006
MATMTY SCHEDULE
DATED- June 15, 2006
0
DUR July 1, as shown below
Interest
Yield to
Price
Year
Amount
Rate
Maturity
(% of Py)
CUSIP1
2007
$2251000
3.70%
3.70%
100.00%
48342NAA3
2008
225.7000
3.80
3.80
100.00
48342NAB1
2009
225A0
3.85
3.85
100.00
48342NAC9
2010
225,000
3.95
3.95
100.00
48342NAD7
2011
225,000
4.00
4.00
100.00
48342NAE5
2012
225)000
4.10
4.10
100.00
48342NAF2
2013
225)000
4.20
4.20.
100.00
48342NAGO
2014
225)000
4.30
4.30
100-00
48342NAH8
2015
22500
4.40
4.40
100.00
48342NAJ4
2016
225�000
4.50
4.50
100.00
48342NAK1
2017
2251000
4.60
4.6o
100.00
48342NAL9
2018
2255,000
4.70
4.70
100.00
48342NAM7
2019
2252000
4.80
4.80
100.00
48342NAN5
2020
225,000
4.90
4.90
100.00
48342NAPO
2021
2251000
5.00
5.00
100-00
48342NAQ8
2022
225,000
5.05
5.05
100.00
48342NAR6
2023
230NO
5.10
5.10
100.00
48342NAS4
2024
230,000
5.10
5.10
100.00
48342NAT2
2025
2302000
5.10
5.10
100.00
48342NAU9
2026
230,000
5-10
5.10
100.00
48342NAV7
1 The CUSIP numbers are 'included on the inside cover of this Official Statement for convenience of the holders and potential
holders of the Bonds. No assurance can be given that the CUSIP numbers for the Bonds will remain the same after the date of
issuance and delivery of the Bonds.
CITY OF KALISPELL, MONTANA
3 12 1 A Avenue East
P.O. Box 1997
Kalispell, Montana 59903
(406) 758-7701
Certain City Officials:
Mayor................................................................................................ Pamela B. Kennedy
City Council ........... Jim Atkinson
Kari Gabn*el
Robert Hafferman
Bob Herron
kandy Kenyon
Tim Kluesner
M. Duane Larson
Hank Olson
City Manager .............................................................. James H, Patrick
City Attorney Charles Harball
city clerk ........ Theresa )NUte
Finance Director ........................... Amy Robertson, C.P.A.
Fire Chief .................... 01*019*00* . Randy Brodehl
U n d e r w ri t ex
D.A. DAVIDSON & CO.
8 Third Street North
Great Falls, Montana 59401
Bond Counsel
KENNEDY & GRAVEN, CHARTERED
470 U.S. Bank Plaza
200 South e Street
Minneapolis, Minnesota 55402
No dealer, broker, salesman or other person has been authorized by the City to give anyinformation or to
make any representations, other than those contained in this Official Statement, and if given or made, such
other information or representations must not be relied upon as having been authorized by the City. The
information in this Official Statement was obtained from sources believed to be reliable, but is not
guaranteed as to accuracy or completeness. The information and expressions of opinion herem' are subject to
change without notice and neither the delivery of the Official Statement nor any sale made hereby shall,
under any circumstances, create any impl ication that there has been no change in the affairs ofthe City since
the date hereof
The Underwnter has reviewed the informationin this Official Statement in accordance with and as a part of
its responsibilities under the federal securities laws as applied to the facts and circumstances of this
transaction, but the Underwriter does not guarantee the accuracy or completeness of the information. This
Official Statement contains, in part, estimates and matters of opinion that are not intended as statements of
fact, and no representation or warranty is made as to the correctness of such estimates and opinions or that
they will be realized.
The following descriptions of summaries of the Bonds and Bond Resolution and all references to other
documents or maten* als not claim ng to be quoted in full are only brief outlines of some of the provisions and
do not claim to summarize or describe all provisions thereof. Copies of such documents maybe obtained
ftom the issuer or Underwriter.
THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURMES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. IN MAKING AN
INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE
ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES CONMSSION OR REGULATORY AUTHORrTY. FURTHERMORE,, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
In connection with the offering and issuance of the Bonds, the Underwriter may over -allot or effect
trans actions which stab flize. or maintain the market pn* ce of the Bonds at a level - above that which might
otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.
Certain statements included or incorporated by reference in this Official Statement constitute "forward -
looking statements" within the meaning of the United States Private Secunkies Litigation Reform Act of
1995, Section 21 E of the United States Securities Act of 1934, as amended, and Section 27A of the United
States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology
used such as "Plan," "believe," "anticipated,"' "intend," "will, expect," "estimate," "-projection," "budgef
or other similar words.
The CUSIP numbers are *included on the inside cover of this Official Statement for convenience of the
holders and potential holders of the Bonds. No assurance can be iven that the CUSIP numbers for the
91
Bonds will remain the same after the date of issuance and delivery of the Bonds.
TABLE OF CONTENTS
3U`1V1MARY STATEMENT., &**+so* * ... a ........ 0 6.4**d . . 6. 04,90, 0 *..a ..0. so# 0 0-4 4 ..* a .0.1 *,.a .*.*I ***a. got am. 0 0 0. to.. a .090 Veto 09. ***, . a**- pOtt . . . . . . 1
0 00 -M vo- 110) a Ly R q
Descriptionof the Bonds .......................................................................................................................................................... 2
Registrar.....................................................................................................................................................................................
2
Redemption and Notice of Redemption ............................................................................................
Book -Entry Form ......................................................................................................................................................................
3
Authorization. a ... *w-9-o*4*o*ae
Securityand Sources of Payment ..............................................................................................................................................
6
RISK FACTORS - THE BONDS
1. Special, Limited Obligations of the City .............................................................................................................................
13
2. Special Assessments and the Potential Inadequacy
13
3. Limitations of the Revolving Fund ......................................................................................................................................
13
4. Prepayment of Bonds ..........................................................................................................................................................
15
5. Bankruptcy Proceedings ................................................
15
6. Likelihood of Redemption .............................................................. am 04-00 0 84 a *so *0o 0090**04 *@of fit V* **of met got &a* 9*044 **%**ad a made ..ago .000 094 0 044 *so* b
15
7. Undeveloped Property and Concentration of Ownership in the District ...................................................................... qe--o99
16
8. Type of Development Limited me the District ............
16
9. Limited Nature of Pledge of Tax Increments and Tax Increment Risk Factors .................................................................
17
10. Absence of Rating .......................................................... w .......................
Summary..................................................................................................................................................................................
18
THE IMPROVEMENTS
GeneralDescription ...............................................................................................................
18
Sourcesand Uses of Funds .....................................................................................................................................................
19
Assessment Methods .........
19
THE DISTRICT
General 19
No Delinquent Assessments or Property Taxes ...................................................................................................................... 21
No Other Outstanding Assessments Against Property in the District ..................................................................................... 21
Summary of Assessment Roll .................................................................................................................................................. 21
FunBeverage, Inc ............................................................................................................................................................ 4 ...... 22
Montana Venture Partners, LLC ("The Developer) .......................................... &*o&o*e*oo 22
The Master Development Agreement ....................................................................................... 4 ............................................. 23
OUTSTANDING SPECIAL IMPROVEMENT DISTRICT BONDS AND THE REVOLVING FUND
Generalq Mae., 604 ##406600 89*109.4* so* 1 .90, #04 a so &so. a***** see*** a *o4 a #*me* 23
FutureFinancing ................................................................................................................... 24
Policy Statement Regardi Creation of Special Improvement Districts ................................................................................ 24
Ing
Summary of Outstanding Special Improvement Districts ....................................................................................................... 24
Special Improvement District Assessment Billi s and Collections ..................... 60*6.*sdo ... ****&goes be 25
Mg
Statement of Changes in Fund Balance of the Revolving Fund ................................................... 25
QUALIFIED TAX-EXENMT OBLIGATIONS ..................... 00*4 0-0 W049% memo *-***a- wom*ww - ease met #04*ee a a so **4 a at * we 9 a a #*we** so a a a* **.go* a*. 9000 #*** a a. a a v* &.* 26
TAX EXEMPTION AND RELATED CONSIDERATIONS ............
Tax, Exemption ............................... r .......................................................................................... 26
Related Federal Tax Considerations ...................................................................................... 4.o.a*eo ... seats v t9oo*oeoo*4 000*o*ev*26
LITIGATION............................................................................................................................................................................. 27
LEGALMATTERS .................. 27
NO CONFLICTS OF INTEREST .................................................................................... *.*sao*4s, ... **.e27
UNDERWRITING ............. ...... 0 ........... 027
SECONDARY MARKET DISCLOSURE .................................................................................................................... ............ 27
DISCLOSURESTATEMENT .................................................................................................................................................. 28
ADDITIONAL INFORMATION AND MISCELLANEOUS .............................................................................................. oov*.28'
APPROVAL OF OFFICIAL STATEMENT ............................................................................................................................. 28
APPENDIX A —MAP OF THE DISTRICT .............. ..................... &.* ... *#&oo9w*avA-1
APPENDIX B - CITY GENERAL AND FINANCIAL INFORMATION ...................................................... ooa*B-1
THE CITY — GENERAL INFORMATION .........................................................................................................................
B-2
General....................................................................................................... a ........................................................................
Boo 2
Government.......................................................................................................................................
Princi al Governmental SerViCeS ............ to - 9 0-4 0*94 0 #4 4 . 0 - .1 - 00 W -* 4 **-Ogg . 60 6 *.0 0 *.&. a Rev# we, 0 a............................ evo..*#B-3
IP
Employment and Employee Relations ...................................... ................
PensionPlans ........................................................................................................................................................................
B-3
THE CITY — FINANCIAL INFORMATION .......................................... I ..................................
Financial Operations, Sources of Revenue and Budgeting Process ........................................ 0 .............................................
B-4
Valuations, Assessments and Reassessment of Property for Taxation Purposes ............... d ...............
2001 Legislative Revisions to System of Municipal Finance ...............................................................................................
B-6
FinancialSummary ...............................................................................................................................................................
B-8
Overlapping General Obligation Indebtedness ...................................................................................................................... B-8
General Obligation Debt
General Obligation Debt Li dtations ................
Trendsin Property Valuations ................................................................................................................................
TaxLevies ............ 0 *Seat wovs -04 ads - W -a W. awe* Met - we - , 0 0 **, .9 a .0 . .&. 0 0*0& 00* 0 00*0 004 go do 0#90 * &*so& . . .
TaxCollections ...................................................................................................................................................................
B-10
MajorTaxpayers ......................................... 4 ........................................................................................
CityGeneral Fund Summary ........................................................................................................................................ ; ......
B- 12
APPENDIX C as ECONOMIC AND DEMOGRAPHIC INFORMATION .............................................................................
C-1
The Local Economy ............................................................. R0o**o.**o@4 Road
C-2
manufacturing industries ........ a 60a..&.0.00 *sot *a. &*96 6 P.# save *..4 *Poe ov
t C-2
Agriculture.............................................................................................................................................................................
C-3
GovenunentalEntities ..........................................................................................................................................................
C-3
TradeCenter Activities ........................................................................................................................................
c-3
Tourismand Recreation ........................................................................................................................................................
C-5
PopulationTrends .................................................................................................................................................................
C-7
MajorPrivate Employers ......................................................................................................................................................
C-7
Recent Build* Permits ........................................................................................................................................................
Ing
C-7
HousingMarket Trends .....................................................................................................................................
C
EarningsBy Industry ................. @'a* ego-* a 0 .0 *44 **1 &a* of go I - owed 0 -4 **.* .0 0 0 04 6 0*946*4 food 0490 to q**.q 9 Was 4 *-a feet be 4 ..4 C-8
LaborForce and Unemployment .......................................................................................................................................... C-9
PersonalIncome Trends ....................................................................................................................................................... C-9
EmploymentBy Major Industry ......................................................................................................................................... C-10
APPENDIX D - CONTR4MG DISCLOSURE ............................................................................................................... Q..D-1
APPENDIX E we SUMMARY OF THE BOND RESOLUTION ............................................................................................ E-1
APPENDIXF - FORM OF LEGAL OPINION ..................................................................................................................... V-1
$4�5201000
City of Kalispell, Montana
Special Improvement District No. 344 Bonds, Series 2006
SUMMARY STATEMENT
0
The following summary is qualified M" its entirety by reference to the detailed information 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 is located 'in northwestern Montana and had a 2004
population of 17,381 as estimated by the United States Census Bureau, an
increase of approxn*nately 22.2% since the 2000 Census. (See "APPENDIX B -
The City" herein.)
INTEREST/
REDEMPTION ..............
........Interest is payable semi-annually each January 1 and July 1, commencing
January 1, 2007. 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 Form". The Bonds are subject to mandatory and optional
redemption. (See "THE BONDS — Redemption and Notice of Redemption7
herein.)
AUTHORITY
VOR ISSUANCE
........ 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 19, 2006 (the "Bond
Resolution"). The Bond Resolution authorizes the issuance of the Bonds and the
levy of assessments against benefited property in the District and pledges, on a
limited basis, certain tax increment revenues to the payment of the Bonds, if
available. (See "THE BONDS - Authorization" herein.)
SOURCE OF
REPAYMENT ........................ The Bonds are special, limited obligations of the City, payable solely from (i) the
collection of special assessments to be levied upon the assessable real property
w idlin SID 344, (ii) monies *in the Reserve Account in the District Fund to the
extent avai. in
*1able,(iii)certa* tax increment revenue to the limited extent necessary
and pledged pursuant to the Bond Resolution, if available, and (iv) the Special
Improvement District Revolving Fund of the City, subject to the limitations
contained M* the Act (the "Revolving Fund"), The special assessments shall be a
lien against the benefited property 'in SID 344. (See "THE BONDS - Security
and Sources of Payment" and "RISK FACTORS — THE BONDS" herein.)
USE OF
PROCEEDS ........................... The proceeds of the Bonds will be used for the purpose of financing the costs of
0
improvements in the District consisting of the (i)'design, Jing and construction
P2
of underground conveyance lines for water, wastewater and storm water; (ii)
design, grading and construction of underground utility lines for gas, electric and
telephone services; and (iii) desi n, grading and construction of streets, gutters
7 9
and sidewalks (the "Improvements"). Proceeds of the Bonds will also be used to
fund the estab lishment of a Reserve Account securing the Bonds in the District
Fund,, to fund a contribution to the City's Special hnprovement. District Revolving
Fund, and to pay costs associated with the sale and issuance of the Bonds and
other related costs. (See "THE IMPROVENIENTS" herein.)
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 The. Depository Trust Company ("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 amount of $5,000 within a single maturity and in integral multiples thereof. The Bonds will be
dated, as originally issued as of June 15, 2006. The Bonds shall mature on July I in the years and amounts set
forth on the inside cover hereof and shall bear interest from the date of original 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 inside cover hereof
Interest on the Bonds will be payable semi-annually on January I and July 1, commencing January 1, 2007, by
wire transfer on the Interest Payment Dates to Cede & Co. Interest 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 immediately preceding
an interest payment date. Principal and interest payments to the Beneficial Owners of the Bonds are to be
made as described herein under "Book -Entry Only Form".
Registrar
4
The City has appointed U. S. Bank National Association, a national banking a* ssociati.on organized under the
laws of the United States, to serve as Registrar and Paying Agent (the "Re istrar") for the Bonds. The
91
Registrar is to carry out those duties assignable to 'it under the Bond Resolution. Except for the contents of
this section, the Registrar has not reviewed or participated in the preparation of this Official Statement and
assumes no responsibility for the nature, contents, accuracy, fairness or completeness of the information set
forth in this Official Statement or for the recitals contained 'in the Bond Resolution or the Bonds, or for the
validity, sufficiency, or legal effect of any of such documents.
The mail 'Ing address of the Registrar is U.S. Bank National Association, 1420 Fifth Avenue, Seventh Floor,
Seattle, Washington 98101, Attention: Corporate Trust Services. Additional information about the Registrar
may be found at its website at httP-,//www.usbank.com/cMoratetrus . t. The U. S. Bank website 'is not
0
incorporated into this Official Statement by such reference and 'is not a part hereof
. Redemption and Notice of Redemption
Mandatory 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
fimds available for this purpose in the Debt Service Account 'in the Special Improvement District No. 344
Fund, Series 2006 (the "District Fund') from the payment of current or delinquent special assessments or from
the prepayment of special assessments levied 'in the District or from unexpended proceeds of -the Bonds.
Property owners may, as a matter of law, prepay their assessments in whole, at any time after the assessment is
levi ed, by payment 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
2
accrued thereon to the date of redemption. Tax 'increment revenue pledged, under '
the Bond Resolution to
regular scheduled debt service on the Bonds, if available, will not be applied for mandatory redemption
purposes.
Optional Redemption. The Bonds are also subject to redemption at the option of the City from sources of
funds legally available therefore, [including tax incremen t revenue available therefore], other than the
prepayment of special assessments or unexpended proceeds at a price equal to the principal amount being
redeemed plus interest accrued to the date of redemption, without premium, from the proceeds of refunding
-bonds; provided, however, that the City has agreed not to call for redemption Bonds from (i) amounts on
deposit in the Reserve Account in the District Fund or (ii) the proceeds of refunding bonds prior to July 1,
2013. The Bonds maturing on or after July 1, 2014 are subject to redemption at the option of the City on July
1, 2013 and on any date thereafter.
Selection of Bondsfor Redemption. If less than all of the Bonds are to be redeemed, the Bonds are to be
redeemedin order of their stated maturities. If less than all Bonds of a stated maturity are to be redeemed, the
Bonds of such maturity shall be selected for redemption 'in $ 5,000 principal amounts selected by the Repstrar
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 ptincipal amount to
the unredeemed portion of such Bond so surrendered.
Notice and Effect ofRedemption: Notice of redemption will be given not less than 3 0 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 regi* ster maintained by the Registrar. Interest on pri ncipal installments of Bonds called for
redemption will cease to accrue on the date fixed for redemption if funds are available to pay the redemption
price.
Book -Entry Form
When the Bonds are issued, ownershi interest will be available to purchasers only through a book -entry
ip
system (the "Book -Entry System"') maintained by DTC or such other depository institution designated by the
City pursuant to the Bond Resolut ion. If the Bonds are removed from the Book -Entry System and delivered to
the persons named as the registered owners of ' the Bonds on the registration records 'maintained by the
Registrar (the "Registered Owners") in physical form, as described below, the discussion herein of the Book -
Entry System will not apply. The following information has been provided by DTC, and the City makes no
representation as to the accuracy or completeness thereof
The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the
Bonds. The Bonds will be issued as fully re istered securities registered in the name of Cede & Co.
91
(DTC's partnership nomm"ee) or such other name as may be requested by an authorized representative
of DTC. One fully registered bond certificate will be issued for each maturity of the Bonds, each in
0 *.
the aggregate principal amount of such maturity, and will be deposited with DTC.
2. DTC, the world's largest depository, 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 and provides asset servicing for over -2
3
million issues of U.S. and non-U.S. equityissues, corporate and municipal debt issues, and money
market instruments from over 85 countries that DTC's participants (" Direct Participants") deposit,,
with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other
securities transactions 'in deposited securi ties through electroni* c computerized book -entry transfers and
pledges between Direct Participants' accounts. This eliminates the need for physical movement of
securities certificates. "Direct Participants" include both U.S. and non-U.S. securities brokers and
dealers, banks, trust. companies, clearing corporations, and certain other organizations. DTC is a
wholly -owned subsidiary of The Depository Trust & Clearing Corporations ("'DTCC"). DTCC, in
turn is owned by a number of Direct Participants of DTC and Members of the National Securities
Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and
Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of
DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
the National Association of Securities Dealers, Inc. Access to the DTC system i's also available to
others, such as U.S. and non-U.S. securities brokers and dealers, banks, and trust companies, and
clearing corporations that clear through or maintain a custodial relationship With a Direct Participant,
either directly or indirectly ("Indirect Participants"). DTC has Standard and Poor's highest rating:
AAA. The DTC rules applicable to its Participants are on file with the Securities and Exchange
Commission. More information. about DTC can be found at www.dtcc.com.
3. 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 C'Beneficial Owner") is in turn to be recorded on the Direct and Indirect Partici ants'
IP
records. Beneficial Owners are, however, expected to receive written confmnation from DTC oftheir
purchase, but Beneficial Owners are expected to receive written confirmations providing details ofthe
transaction, 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 interests in
the Bonds are to be accomplished by entries made on the books of Direct or Indirect 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.
4. To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are re istered M* the
91
name of DTC's partnership nominee, Cede & Co., or such other name as' may be requested by an
authorized representative of DTC. The deposit of Bonds with DTC and their registrationin the name
of Cede & Co.,, or such other DTC nominee, do not effect any 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
hold* s on behalf of their customers.
Ing
5. Conveyances of notices and other corin aunications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among- them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
6. Redemption notices, if any, shall be sent to DTC. If less than all of the Bonds within an issue are
0
being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
4
7. Neither DTC nor Cede & Co. (nor such other DTC nominee), will consent or vote with respect to
Bonds unless authorized by a Direct Participant in accordance with DTC`s Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date.
The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts Bonds are credited on the record date (identified *in a listing attached to the Omnibus
Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co.,.
or such other nominee as may be requested, by an authorized representative of DTC. DTC's practice
is to credit Direct Part icipants' accounts, upon DTC's receipt of funds and corresponding detail
information from the City on payable date in accordance with their respective holdings shown on
DTC's records. Payments by Parti ' ants to Beneficial Owners will be - governed by standing
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instructions and customary practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility of such Participant and not
of DTC or the C ity, subject to any statutory or regulatory requirements as may be in effect from time
to time. Payment of redemption proceeds, distributions, and dividend -payments to Cede & Co. (or
such other nominee as maybe requested by an authorized representative of DTC) 'is the responsibil. ity
of the City, disbursement of such payments to Direct Parti * ants shall be the responsibility of DTC,
CIP
and disbursement of such payments to Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.
9. DTC. may discontinue providing its services as securities depository with respect to the Bonds at any
time by giving reasonable notice to the City. Under such circumstances, in the event that a successor
securities depositoryis not obtained, Bond certificates are required to be printed and delivered.
10. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a
successor securities depository). In that event, Bond certificates will be printed and delivered.
1 The information in this section concerning DTC and DTC's book -entry system' has been obtained
from sources that the City believes to be reliable, but the City takes no responsibility for the
accuracy thereof
Authorization
ConstitutionaL Article VII, 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
prohibitionin both the United States and Montana Constitutions that *vate property not be taken for public
pn
use without just compensation, courts have required that the arnount of a special assessment levied against a
particular lot or property not substantially exceed the special benefit conferred on that lot or property by the
0
unprovements with respect to which the assessment 'is levied.
Statutoiy, Title 7, Chapter 12, Parts 41 and 42, as amended, of the Montana Code Annotated (the "Act!
authofizes 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, storm 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
5
special 'improvement district may be created only after notice of the governing body" s intention to create the
district has been published in a local newspaper and mailed to the owners of all real property M* the district, a
public hearing has been held, and, in most cases, the owners of property representing more than 50% of the
costs to be assessed for the cost of the improvements have failed to protest against the proposed work or
creation of the di strict. - 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
competitively bid after published notice.
Pursuant to Montana Code Annotated, Title 7, Chapter 15, Part 42, as amended (the "TIF Act"), the City has
the power to establish tax increment districts for various purposes. The Technology Tax Increment District
and the Industrial Tax Increment District are both located within the boundaries of tile District. Pursuant to
S ection 7-15 -4290 of the TIF Act, the City may pledge tax i ncrement derived from an industrial tax increment
district (such as the Industrial Tax Increment District) or a technology tax increment district (such as the
Technology Tax Increment District) to the payment of special assessment bonds (such as the Bonds) issued to
pay industrial tax increment district and technology tax increment district costs described in Sections 7-15-
4288 and 7-15-4289 of the TIF Act. Pursuant to Section 7-15-4288 of the TEF Act, eligible costs to be paid by
the City with tax increments 'include public improvements (such as the Improvements) authon'zed to be made
pursuant to the SID Act. The Tax Increments derived from the Technology Tax Increment District and the
Industrial Tax Increment District will'be available, to the limited extent provided in the Bond Resolution.
City Resolutions. As described below, the City Council has adopted such resolutions and has duly taken the
proceedings necessary to create the District to finance construction ofthe Improvements. On October 3. 2005)
the City Council adopted Resolution No. 5063, a Resolution of Intention to Create Special Improvement
District No. 344 (the "Resolution of Intention"). The Notice of Passage of the Resolution of Intention was
subsequently mailed to each property owner within the District. On October 18, 2005, October 25, 2005 and
November I � 2005, the notice was also published in the Daily Inter Lake setting November 7, 2005, as the
date for holding a public hearing for the creation of the District. Within the protest period, no protests were
filed with the City Clerk by property owners to be assessed in theDistrict*4 Resolution No. 5074, adopted by
the City Council on November 7,2005, -created the District. The City has received bids for the construction of
the Irnprovements and on March 20, 2006, the City awarded the contracts for construction.
The City Council has therefore adopted such resolutions and has duly taken the proceedings necessary to
create the District to finance construction of the Improvements. By adopting the Bond Resolution prior to the
date of i ssuance of the Bonds, the City Council will have authorized the issuance ofthe Bonds and covenanted
0
to levy special assessments against benefited property in the District in an aggregate principal amount not less
than the aggregate principal amount of the Bonds.
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 344 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 pfincipal of and interest on the Bonds., In the event money on hand in the Reserve
Account in the District Fund is insufficien't to pay principal of or interest on the Bonds when due and after the
application of certain tax increments (to the limited extent pledged.under the Bond Resolution and if
available), the C ity 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
6
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 — THE BONDS"'
herein.)
Apart from money raised to fund the Revolving Fund and taxincrement money generated by property
in the District as described herein,, if any, payment of the principal of and M*terest 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 taxig powers, but are payable solely from the sources specified herein. Bo olders
should be aware of the limitations with respect to fundm'g. the Revolving Fund as described under
"'RISK FACTORS — THE BONDS — Limitations of the Revolving Fund" herein and the limited nature
of the pledge of the tax m*crements under Bond Resolution, if available, as described under "RISK
FACTORS — THE BONDS — Lm-dted Nature of Pledge of Tax Increments"'.
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 $4,520,000, against
benefited property in the District. Subject to annual amortization over the then remaining term, the
outstanding special assessments wi 11 be payable 'in substantially equal semiannual installments of prin * al
cip
plus interest on November 3 0 and May 3 1 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 over the then
remaining term plus (ii) '/.z of I % per annum.
A special assessment constitutes a prior li en upon and against the property against which i t 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 have changed
from time to time. Current law provides that delinquent installments of a special assessment bear interest at a
rateOf 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. 7he I ien of the special assessment attaches for each installment in the year in whichit '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), M"cluding those issued on behalf of private entities, filed of record before the
attachment of the installment of the special assessment lien.
1n theevent of a delinquency in the payment of a special assessment installment, the City Council, at its option
and by resolution, may declare all unpaid installments of the special assessment to be delinquent. If the
delinquencyis not paid, theproperty 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 manner that real property is sold
for delinquent property taxes. The tax sale proceeding i's 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
therefore. 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.
7
Whenever property subject to the lien of delinquent special assessments has been deerned sold to the County
and not ass igned, the City may request that the County assign all of the Count3e s rights to the property to the,
City,- upon payment by the City of any del inquent 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 special improvement district
fund into which the delinquent special assessments are payable. The City may, ifthe property is not redeemed
from the tax sale within the pen' o d hereinafter described, assign its rights in the property upon payment by the
assignee of the purchase pzi ce paid by the City, the delinquent assessments, interest on the purchase price and
delinquent assessments at the rate of '/6 of 1% a month, and penalties and interest as provided by law. An
assignment by the City in this manner 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 Countyis to subtract the principal amount of the outstanding assessments that are a lien on the land from
the unencumbered value of th e land, but the minn"num sale price for a propertymaynotbe less than $10. Ifno
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 less than the amount of the outstanding delinquen�
special assessments thereon.
Property subject to a property tax or assessment lien may 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-, provi 0 ded, however, that 'if the
property 1* s subdivided as. a residential or commercial lot upon which 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 due and payable,
the issuance of the tax deed conveys title to the property subject to the lien of future installments of the special
assessment.
Enforcement of a special assessment lien may be a lengthy process, and no assurance can be i en that
91V
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*
Reserve Account. 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 $226,000 in the Reserve
Account, In the event money on hand in the Debt Service Accountin 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. Pursuant to the Bond Resolution, money in the,
Reserve Account is not required to be replenished by the City if used to pay debt service on the Bonds.
City may not apply any of the Reserve Account balance to pay the principal of or interest on any City
8
obligation other than the Bonds. The balance in the Reserve Account remaining after payment in Ul 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 utilize available tax increment
revenue or money available in the Revolving Fund described below.
Application of Certain Tax Increments as Securityfor the Bonds. By Ordinance Nos. 1557 and'1558
adopted November 7 2005, the City Council established, respectively, an industrial tax
increment district (the
"Industrial Tax Increment Distri ct' ') at Old School Station (within the District and including Lots 11 - 14 and
Lot 17) and technology tax increment district (the "Fechnology Tax Increment District' ) at Old School Station
(within the District and including Lots 2-10 and Lots 15 and 16). Only one property within the District, Fun
Beverage, Inc. is not located in either tax inorement district.
Tax 'increment revenue (the "Fax Increments") derived from the Industrial Tax Increment District and the
Technology Tax Increment District are pledged under the Bond Resolution to the limited extent necessary and
a 'lable by the City as security for the Bonds. Tax Increments derived from the Industrial Tax Increment
val
District or the Technology Tax Increment District will only be utilized by the City to act as. security for Bonds
allocable to the cost of hnprovements within such tax increment district.
In the event that a property owner is delinquent in the payment of special assessments and the City has not
received payment of any special assessments allocable to such parcel by the date that is fifteen (15) days prior
to any January I or July 1, commencing January 1, 2007 (each a "Payment Date), the City Finance Director is
authorized to transfer, after transfers from the Debt Service Reserve Account, but prior to transfers from the
Revolving Fund, any Tax Increments (but only to the extent of such delinquent special assessment payment
and to the extent that such funds are onhand in the operating account for each tax increment district and are
not pledged by the City to other purposes) derived from the tax increment district in.which the delinquent
property is located, and then on deposit with the City, to the Debt Service Account in the District Fund for the
pro-rata portion of the payment allocable the delinquent property thatis due and owing on the Bonds on the
next Payment Date. A transfer of Tax Increments described in the immediately preceding sentence will not
extinguish the hen of any special assessments due with respect to a parcel of property and such transfer does
not decrease the amount of special assessments due with respect to any parcel of property.
In the event that a property owner pays delinquent special assessments, after the application ofTax Increments
to the payment of regularly scheduled debt service on the Bonds, the City Finance Director is authorized to
transfer an amount equal to such prior payments of Tax Increments for such parcel to the applicable TIF
Operating Account for the tax 'increment fund in which such parcel of property is located. Any payment of
delinquent special assessments, after the application of Tax Increment to a payment of debt service on the
Bonds, will not be applied to the mandatory redemption of the Bonds. In the event that delinquent special
assessments are paid after either� the Industrial Tax Increment District or the Technology Tax Increment
District 'I's terminated and the Bonds are not outstanding the City will transfer such funds to the Revolving
Fund.
Revolving Fund. 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. seq.). This law
provides for the creation of a revolving fund by any city that has created a speci al improvement district. The
City has created the Special Improvement Di strict Revolving Fund (the "Revolving Fund") for the purpose of
loaning monies to special improvement district fund s of the City whenever there are insufficient funds
available to pay special improvement di strict bonds and warrants or any interest thereon. The Bonds will be
secured by the Revolving Fund.
9
Money for shortfalls 'in the Revolving Fund 'is provided by a transfer of mom* es 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 pfincipal amount of the City's then
outstanding bonds 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 and amounts
derived from tax increments) 'I's 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 fizffier
agreed to provide funds for the Revolving Fund, as are 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 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 pfincipal amount of the bonds or warrants of the City secured
thereby.
Any property tax levy to be made by the City to provide funds for the Revolving Fund is subj ect to levy limits
under current law (including Senate Bill 184, adopted by the Montana Legislature in 1999 (now codified at
15-10.-420 Montana Code Annotated)). The C ity has agreed in the Bond Resolution to levy property taxes to
p * de funds for the Revolving Fund to the extent described above and, if necessary, to reduce other property
rovi
tax levies correspondingly to meet its obligations with respect to the Revolving Fund. (See "RISK FACTORS
— THE BONDS"" and APPENDIX B — "Financial Operations, Sources of Revenue and Budgeting Process"
and "Valuations, Assessments and Reassessment of Property for Taxation Purposes" herein.)
Since 1983, Montana law has authofized 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 Wi th the issuance of special.improvement districts bonds and warrants,, excluding refimding 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 ofthe Bonds ($226,000) from the proceeds of
the Bonds into the Revolving Fund.
As of February 1, 2006, the aggregate pn- ncipal amount of outstanding special improvement district bonds and
warrants of the City secured by the Revolving Fund equaled $1,161 275, not including the Bonds. Also as of
this date, the City had a cash balance of $59,722 in its Revolving Fund. Following the issuance of the Bonds
10
in the principal amount of $4,520,000, the City's cash balance in the Revolving Fund will equal approximately
$285,722 and will represent approximately 5.03% of the total outstanding bonds and warrants of the City
secured by the Revolving Fund, including the Bonds (for a total of $5,681,275).
10
Montana law regards as surplus money amounts on deposit in the Revolving Fund in excess of the amount of
loroceeds 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 theinterest 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 of property 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 following table shows for the last nine fiscal years at fiscal year end and as of February 1, 2006, the cash
balance in the City's Revolving Fund,. the princi al amount of outstanding bonds and warrants secured thereby
IP
and the cash balance expressed as a percentage of such outstanding principal amount.
Following the issuance of the Bonds, the Revolving Fund balance will be $285,722 or 5.03% of the City's
outstanding special improvement district bonds of $5,681,275.
Fiscal Year End
Revolvm"g Fund
Principal
e 39)
Cash Balance'
Amount of Bonds
Percent�gei
February 1, 2006
$593,722
$ 1 � 161,275
5.14%
2005
64,260
L2561498
5.11
2004
711,803
12341,913
5.35
2003
70,487
13,496,139
4.71
2002
863,249
12667,590
5.17
2001
87,155
12798�275
4.85
2000
163,614
262,903
6.32'
1999
163,709
2881�080
5.802
1998
22�194
3542597
6.26
1997
31,532
414�983
7.60
The City has generally transferred excess fimd 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 the
following amounts to the General Fund: $16,318 in 1998; $9,384 in 1999; $18,146 in 2003 and $10,000 mi 2005.
2 , The City made short-term loans to other City funds Mi anticipation of collections to be received May 3 1. Due to posting delays,
collections are not actually received by the City until July 15. In 1999, the loan amount was $3,471 and the $2,576 in 2000.
When money 'is lent from 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 of the
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
improvement district fund not necessary for the payment of principal of or interest on bonds payable from the
special improvement district fund. Any money rem3irling 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 the District in proportion to the on" ginal assessment levied against
such property or transferred to the General Fund of the City.
11
ine 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. If the amount on�
hand in the Revolving Fund isinsufficient to make loans at any time required, the City is obligated to advance
funds to each of the special improvement district finids then incurring a deficiency, pro rata, *in proportion to
the amount of the deficiency in the special improvement district fund.
The adequacy of money in the Revolving Fund available to be lent to the District Fund to satisfy a.deficiency
* 0 0 V
ansing ftom delinquencies in collections of special assessment levied on the benefited property in the. District
is a.ffected by a number of -factors that the City has no control 'over, 'including, without lianitation, the
following:
(1) the amount of delinquent special assessments -in other special improvement district funds of
the City from 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 ofthe City secured b
y
the Revolving Fund and then outstanding, which I imits the amount that may be levied or lent
from 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 ofproperty in the district, the financial circumstances of the owners ofthe property,
the amount of the special assessment and other special assessments and property taxes levied agaffist 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 improvernerits or utilities serving the property and local and national economic conditions.
Although, as described in the preceding paragraphs, funds raised by taxation for the Revolving Fund 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 the District, no
assurance can be given that such money will be available m" 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 levi ed against benefited property in the District 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 "THE DISTRICT'herein.)
12
RISK FACTORS - THE BONDS
Prospectiveinvestorsin the Bonds should carefully consider the following risk factors, which is not intended
to beinclusive, as well as the other information contained *in this Official Statement.
1. Special, Lintited Obligations of the City
The Bonds are payable primarily from the collections of outstanding special assessments levied on the lots,
parcels or tracts of land Within the District benefited by the Improvements. While the City will agree in the
Bond Resolution that it will make transfers from the Reserve Account 'in the District Fund and loam or
advances from applicable Tax Increments to the limited extent available and from 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, but are payable solely from the sources
*fled herein. (See "THE BONDS - Security and Sources ofPayment" and "APPENDIX E — Summary of
specl
the Bonds Resolution" herein.)
2. Special Assessments and the Potential Inadequacy Thereof
The Bonds and interest thereon are payable primarily from the outstanding special assessments levied against
the benefited property 'in the District� 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
"THE DISTRICT"'herein.)
Under Montana law, if an 'Installment of a special assessment i's not paid in full when due, the delinquent
installment bears a penalty and interest at a delinquent rate and, if not paid, 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
'/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 "THE BONDS - Security and Sources of Payment"
herein.)
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 City's
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.
13
Any property tax levy to be made by the City to provide funds for the Revol ing Fund is subject to levy limits
vi
under current law ('including Senate Bill 184, adopted by the Montana Legislature in 1999). The City i's not
authorized to levy an additional or excess tax for purposes of funding the Revolving Fund. The prirnary�
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 APPENDDC B -,"Valuations, Assessments and Reassessment of
Property for Taxation Purposes" 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 lots benefited by such
projects that will be secured on a pan"ty 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.
The Act requires 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 outstan g special
assessments against property in the district- the amount of delinquencies in the payment of outstan g 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 makeimprovements in a newly platted subdivision, the
prior subd ivis ion development experience and credit history of the developer and any contribution by property
owners to the costs of theimprovements or any security given by property owners to secure payment of special
assessments levied in the district. See "OUTSTANDING SPECIAL RdPROVEMENTDISTRICT BONDS
AND THE REVOLVING FUND"'herein.
The liability of the Revolving Fund terminates on the earlier 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.
14
4. Prepayment of Bonds
Fhe Bonds are subject to Mandatory and Optional Redemption as described herein. (See "THE BONDS —
Redemption and Notice of Redemption" herein.) The Bonds are subj ect to Mandatory Redemption from the
payment of current or del inquent special assessments or from the prepayment of special assessments levied in
the District or from unexpended Bond proceeds, If properties are sold by the Developer, the new property
owner(s) May elect to prepay their assessments, which would cause a prepayment of the applicable portion of
the Bonds.
The Bonds maturing on or after July 1, 2014 are subject to Optional Redemption at the option of the City on
July 1, 2013. and on any date therefore from sources of funds legally available therefore, including tax
increment revenue as described herein. If tax increment revenue is generated from the development of
property in the District, the City may elect to use any such available tax 'increment revenue to redeem
outstanding Bonds.
5. Bankruptcy Proceedings
A cityis authorized under Montana law to file a petition for relief as a debtor under Chapter 9 of the United
States Bankruptcy Code for the adjustment of its debts. The United States Bankruptcy Court has held that a
It 4
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 bankruptcy court without the consent of all bondholders that would, among other things, extend the time
for payment of principal of or 'interest on the 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 M* a special 'improvement district maybe discharged in
the bankruptcy proceeding without payment or provision for payment of the special assessment in full.
6. 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 registration, 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 or from unexpended bond proceeds. The City has agreed not to call for
redemption Bonds from the proceeds of refunding bonds prior to July 1, 2013. However, the City -has the
15
option to redeem Bonds maturing on and after July 1, 2014 on July 1, 2013 and on any date thereafter in order
of principal installments from proceeds of refunding special improvement district bonds, from applicable tax
increment revenue to the extent available or other legally available sources. Consequently, there can be no
assurance the Bonds will remain outstanding to their stated maturity dates.
7. Undeveloped Property and Concentration of Ownership M* the District
The District is currently comprised of undeveloped parcels. Of the 17 lots in the District, 16 are currently
owned by Montana Venture Partners, LLC (the "Developee). The Developer indicates that at least three lots
are currently in the process of being sold and the sales are expected to be finalized by December of 2006. As
of the date of this Official Statement the likelihood of the final sale of any property M* the District cannot be
determined. As lots are sold in the District, the new owners will become responsible for the payment of the
assessments against such property. The Developer has represented to the City that it intends to sell all of the
lots to private parties that will then develop industrial, commercial and technology business facilities in the
District.
The Developer is financing and contracting for the extension of the City water and wastewater services from
the main City limits to the boundary of the Districtin the amount of $3.5 million. The extension of water and
wastewater services has commenced and is scheduled to be complete by October of 2006.
Assessments against the 16 lots owned by the Developer equal $3,519,476 or 77,85% ofthe total assessments
in the District of $4,520,000. These 16 lots encompass a total of 1,607,3 63 square feet, ranging from a low of
3 9,63 9 to a high of 3 06,227 square feet. Financial information about the Developer is not publicly available.
The Developer" s princi als, Mr. Andrew Miller and Mr. Paul Wachholz, are Kalispell area residents that have
IP
been involved in a number of. successful business ventures and developments as described herein, see "THE
DISTRICT - Montana Venture Partners, LLC (the "Developer").
The other property in the District is owned by Fun Beverage, Inc. Fun Beverage is currently building an
estimated $10 million facility in the District and wi 11 have an assessment of $1,000,523 or 22.14% of the
District. (See "THE DISTRICT — Fun Beverage, Inc." herein.)
According to the Resolution of Intent to Create the District, the City has determified that the 2005 estimated
market value of the District for tax purposes after the Improvements will be approximately $7,225,078.
Following completion of the Improvements, market valuation in the District Will be increased by at least the
value of the Improvements. See "THE DISTRICT" herein for a more detailed description of the District.
8. Type of Development Limited in the District
Only one property within the District, Fun Beverage, Inc. is not located in either tax increment district.
Because the remaining 16 properties in the District are located within either the Industrial Tax Increment
District or the Technology Tax Increment District, the type of development will be 1=**ted to the uses allowed
by State law. The permitted uses for the five lots (lots 11-14 and lot 17) 'in the Industrial Increment District
generally consist of secondary, value -adding industries. The permitted businesses for the eleven lots (lots 2-
10 and lots 15 and 16) 'in the Technology Increment District, pursuant to the TIF Act, are required to be
businesses which through the employment of knowledge or labor added value to a product, process, or export
service for which at least 50% of the sales of the business or organization occur outside of Montana or the
16
business or organization is a manufacturing company with at least 50% of its sales to other Montana
companies that have 50% of their.sales occurring outside of Montana. The limitations on development in the
District relating to tax increment law may hinder sales and dev elopment of lots in the Districts.
9. Lu'w*ted Nature of Pledge of Tax Increments and Tax Increment Risk Factors
LimitedNature ofPledge ofTax Increments. Pursuant to the Bond Resolution, the pledge of Tax Increments
as security for the Bonds is I imited in nature. The Bond Resolution does not require the deposit of any Tax
Increments directly into the District Fund. In addition, the Bond Resolution only requires application of Tax
Increments, to the extent available, to the payment of regularly scheduled debt service on the Bonds in the
event that special assessments deposited in the District Fund and amounts on deposit in the Reserve Account
are not sufficient to make such payments. The ability of the City to issue additional bonds to which the Tax
Increments are pledged is not restricted by the Bond Resolution. There is no requirement in the Bond
Resolution that. the City maintains a balance in its funds and accounts for either the Technology Tax
Increment District or the Industrial Tax Increment District. See "APPENDIX E — Summary Of The Bond
Resolution."
LimitedArea. The Technology Tax Increment D istrict. currently includes 11 separate tax parcels and contains
approximately 30.5 assessable acres of land. The Industrial Tax Increment District currently includes 5
separate tax parcels and contains approximately 6.5 assessable acres of land. The Tax Increments pledged as
security for the payment of the Bonds are derived solely from the Technology Tax Increment District and the
Industrial Tax Increment District. There is no pledge of tax increment revenues that maybe derived from any
other taxincrement financing districts of the City. Fun Beverage, the owner of the largest parcel in SID 344,
is not located in either the Technology Tax Increment District or the Industrial Tax Increment District.
Removal ofParcels. The Bond Resolution does not restrict (i) the removal of tax parcels from the Technology
Tax Increment District or the Industrial Tax Increment District or (ii) the release Tax Increments from the
pledge created by the Bond Resolution. The removal of tax parcels from either the Technology Tax Increment
D istrict. or the Industrial Tax Increment District could affect amount of Tax Increments that the City receives
from such tax increment district.
Variable Nature of Rece*t of Tax Increments. The receipt of Tax Increments by the City will be highly
1P
dependent upon the ability of the.Developer to develop the District in a timely manner. No assurance can be
given that Tax Increments will be generated in future years as the District is currently undeveloped property.
The Tax Increments derived from the Technology Tax Increment District and the Industrial Tax Increment
District *in each year will be dependent, among others, on the following factors: the extent to which the
various parcels of real property "in the District are subj ect to real. property taxes under applicable Montana law;
(I*i) the market value of the taxable parcels in the Technology Tax Increment District or the Industrial Tax
Increment District; (iii) the extent to which property taxes are paid in a timely manner by the owners of the tax
parcels in the District, and (iv) changes in law which affect any of the foregoing factors.
Reliance on District Taxpayery. Each taxpayer of the District will own substantial portions of the land 'in the
Technology Tax Increment District and the Industrial Tax Increment District because of the limited size of
such taxincrement districts. Therefore, the amounts of Tax Increments maybe disproportionately dependent
upon the Viability and creditworthiness of each of the taxpayers in the Technology Tax Increment District and
the Industrial Tax Increment District.
17
f-TL " Law. The laws of the State of Montana relating to real property taxation maybe changed through
%,utanges in
legislative enactment I judicial interpretation, or administrative ruling. Moreover, in the past, the Montana,
Legis.lature has made regular changes and amendments to the - real property taxation system *in Montana. Such�
legislative chanaes may reduce the m'aximum amount of property tax levies that . may be imposed by vari ous
taxing jurisdictions, substitute alternative revenue sources for property taxes as a method of financing
government services, expand the types of property that are exempt from property taxes, adversely affect
market value, limit the taxable value of property, shift the burden of paying property taxes between various
types ofproperty, or modify remedies for collecting taxes. Any one or more of these changes in the property
tax laws of Montana may resultin a significant or material reduction in Tax Increment that is available.for the
payment of debt service on the Bonds in the event that special assessments and amounts on deposit in the
Reserve Account are not sufficient for such purposes.
10. Absence of Rating
The Bonds have not been rated by a rating agency and there is no expectation that the Bonds Wi 11 be assigned a
ratin'g in the future. The absence of a rating may adversely affect the marketability of the Bonds in the
secondary market.'
Summary
The foregoing is intended only as a summary of certain risk factors attendant to an investment in the Bonds.
In order for potential'investors, to identify risk factors and make an informed investment decision, potential.
investors should be thoroughly familiar with this entire Official Statement and the Appendices hereto.'
THE IMPROVEMENTS
General Description
The proceeds of the Bonds will be used to finance the costs of certain improvements within the boundaries of
the District to 'include the (0 design, grading and construction of underground conveyance lines for water,
wastewater and storm. water; (ii) design, grading and construction of underground utility lines for gas, electric
and telephone services; and (iii) design, grading and construction of streets, gutters and sidewalks (the
"Improvements"). In addition, proceeds from the Bonds will be used to fund a contribution to the Reserve
Account in the District Fund and the City's Revolving Fund and to pay costs related to the sale and issuance of
the Bonds. The Bonds will be payable primandy from special assessments to be levied against property in the
District.
The general character of the Improvements consists of: (i) grading and utility improvements, consisting of
planning, design and performing site grading for the construction within the District of Schoolhouse Loop,
Schoolhouse Drive and Schoolhouse Circle (including, without limitation, potable water mains and services,
sewer mains and services, a storm drainage system, telephone, natural gas, and electrical utilities), and (ii)
surface improvements,consisting of surfacing Schoolhouse Loop, Schoolhouse Drive and Schoolhouse Circle
and installing related surface improvement, such as without I ftnitation, curbing, aprons, sidewalks, gutters and
landscaping.
18
Sources and Uses of Funds
it is estimated by the City that the proceeds of the Bonds (less accrued interest, if any) will be used as shown
i V n the table that follows.
Sources of Funds:
Proceeds of the Bonds
Total Sources of Funds
Uses of Funds:
Improvement and Engineering Costs
Revolving Fund (5 .00%) -
Reserve Account (5.00%)
City Administration Fee
Bond Discount (2,00%)
Costs of Issuance and Roundm'g'
Total Uses of Funds
TOTAL
$42520,000.00
$4 0.00
...A52
$37872,000.00
226,000.00
2269000.00
40,1000.00
90.1400.00
651,600-00
,$4152 "s 00
Includes the Financial Advisor fees, Bond Counsel fees, costs of printing and distributi the Preliminary and Final Official
Ing
Stat . ements, advertising costs and any miscellaneous costs.
Assessment Methods
The costs of the Improvements and other costs financed by the proceeds of the Bonds in the total amount of
$4520 inst
,000 will be assessed aga* the property *in the District benefited by the Improvements. The property
included within the boundaries of the District, whether or not abutting all of the hnprovements, 'is benefited by
certain of the Improvements, and has been determined by the City Council to be the property that will be
assessed and taxed for the costs of the Improvements. All properties in the District will be assessed for their
proportionate share of the costs of the specific Improvements benefiting the respective properties. For the
purposes of equitably app'ortioning special benefit to each parcel in the District, the special assessments will
be based on the total actual area of each parcel, exclusive of streets, avenues, alleys, storm water detention
ponds and like features (the "Assessment Area"). The special assessments are payable over a term not
exceeding 20 years, eachin equal semi-annual installments of principal with interest due on the outstanding
balance. The total area to be assessed in the District is estimated to be 2,064,308 square feet and the costs per
square foot are estimated not exceed $2.19. See "THE DISTRICT —Summary of Assessment Roll" herein for
a breakdown of the actual assessments against the properties.
THE DISTRICT
General Description
The District encompasses land that is located witbin the Cityjust east of Highway 93 on Demersville Road,
approximately 1.9 miles south of the Four Comers intersection and directly east of the Rocky Cliff Road
intersection. The District is comprised of approximately 55 acres of land thatis primarily used for agricultural
purposes and is known as "Old School Station". The District Will not be required to be rezoned for the future
use and development. Old School Station Will be developed as the area's first high-tech industrial/commercial
park.
19
The Improvements include widened road sections, curb and gutter, underground drainage rather than open
ditches, sidewalks handicap ramps, a walking path, street lighting, and street trees and landsc
aping. (See
"The EMPROVEMENTS" herein.) Generally, the Improvements include pedestrian facilities and an"
automobile roadway that do not currently exist in needed locations. The construction of the Improvements
will promote safe and functional access to the businesses that will be located within the District and further
increase public safety and public welfare in the area. The Improvements will enhance the economic
development of the City and provide for better traffic circulation and roadway efficiency in and around the
District and provide for safe access to and from Demersville Road.
According to the Resolution of Intent to Create the District, the City has determined that the 2005 estimated
market value of the District.for tax purposes after the Improvements will be approximately $7,225,078.
Following completion of the Improvements, market valuation in the District will be'increased by at least the
value of the Improvements and market value 'is substantially less than the actual resale of such property.
In addition to the District, the City has established an industrial tax increment district C'Old School Station
Industrial Tax Increment D istrict') and a technology tax increment -district C"Old School Station Technology
Tax Increment District') for the purposes of (i) offsetting the amount of special improvement district
assessments necessary to pay debt service on the Bonds, to the extent available (See "THE DISTRICT — The
Master Developer Agreemenf' herein), (ii) paying debt service on the Bonds to the extent necessary due to
delinquent as'sessments as described in "Security and Sources of Payment" herein, (iii) financing
infrastructure, and (iv) encouraging the location and retention of industrial and technology development
projects in the City.
SID 344 was created upon the request of Montana Venture Partners, LLC (the "Developer"). The District is,
comprised of a total of 17 parcels, of which 16 are currently owned by the Developer. The Developer's 16
parcels (including parcels currently being sold to Osprey Media and others as described h "n) encompass
erel
1,6071,364 square feet and will be assessed an aggregate of $3,519,477 (77.85%) of the total assessment of
$4,520,000. (See "THE DISTRICT - Montana Venture Partners, LLC (the "Developer") herein.)
The other property in the District not owned by the Developer is owned by Fun Warehousers 11, LLC ("Fun
Beverage"), which is currently bul*ldm'g a new building at the site for approximately $10 million. Fun
Beverage purchased lot number one from the Developer for approximately $650,000. Fun Beverage has one
lot that encompasses 457,380 square feet and will be assessed $1,000,523.32 (22.14%) of the total
assessments of $4,520,000 and is currently constructing an estimated $ 10 million beverage distribution center.
(See "The DISTRICT — Fun Beverage" herein for a description of Fun Beverage).
The Developer has represented that it intends to sell all parcels to private parties that will develop industrial,
corrimercial and technology facilities in the District. 'fhe lots in the District are. currently being marketed at
between $3.65 per square foot to $4.95 per square foot. As lots are sold in the District, the new owners will
become responsible for the payment of the assessments against such property. The Developer expects that
with completion of the Improvements at least three of the properties in the District will be sold by the end of
2006. As of the date of this Official Statement the likelihood of the final sale ofproperty 'in the District cannot
be determined.
Currently, all of the 17 parcels within the District are undeveloped. Based on information provided to the City
4
by the Developer, it is anticipated the District will be fully developed within six years With industrial,,,
commercial and technology facilities.
20
No Delinquent Assessments or Property Taxes
As of the'date of the assessment rolls, none of the parcels in the District had delinquent property taxes or
assessments. -
No Other Outstandm*g Assessments Against Property M* the District
As of the date of the assessment roll, none of the properties within the District were located in another special
improvement district or were responsible for assessments forimprovements in another special improvement
district.
Summary of Assessment Roll
The following table shows the two current property owners in the District, the total assessable square footage
of each parcel, the assessment for each parcel and the percent of the total assessments in the District. The
Developer owns 16 lots and represents that at least three lots are in the process ofbeing sold and the sales are
expected to be finalized by the end of the calendar year. As the lots are sold in the District, the new owner(s)
will be responsible for the assessments against each parcel. As of the date of this Official Statement the
likelihood of the final sale of property 'in the District cannot be determined. The lots in the District are
currently being marketed at between $3.65 per square foot to $4.95 per square foot.
PLopg!y Owner
Lot
No.
Assessable
Square Footage
Principal
Assessment
OYO of Total
Assessments
Fun Warehousers II, LLC
(Fun Beverage, Inc.)
1
4561,944-31
$1 �000�523.32
22.14%
Montana Venture Partners, LLC
(the "Develope:e")
2
19%940-36
$437,788.56
9.69%
3
306X6.74
670512.76
14.83
4
206,038.76
4511141.59
9.98
5
78,843.59
172fi3 5.58
3.82
6
65,775.59
1443021.94
3.19
7
65,339.99
143,068,16
3.17
8
116,305.18
254)661.32
5.63
9
1181047.58
258,476.47
5.72
10
53J43.19
116,362.11
2.57
11
442866.79
983240.13
2.17
12
427688.79
93�471*20
2.07
13
44�431.19
97�286.34
2.15
14
104� 108.3 8
2277955.26
5.04
15
80,585.98
176A50.73
3.90
16
3%639.58
861794.68
1.92
17
41 L3 82.00
909609.85
2.00
The Developer Total
1;1607_�363.69
$ 315_ 191.47 6.6 8
77,85%
Total
21,06413-08.00
$425202000.00
100.00%
Source: Based on the City assessment roll for the District.
21
Fun Beverage, Inc.
Fun Beverage, Inc. is currently building a new building at the site for approximately $ 10 million. Fun
Beverage purchased lot number one from the Developer for approximately $650,000. Founded in 1981 by
Paul Wachholz and Dale Collins when they purchased B&B Distributing, Fun Beverage is a diversified
wholesale beverage distributor of beer, wine and non alcoholic beverages, representing over 100 different
suppliers to over 400 accounts. In 1983. Fun Beverage acquired Frontier Coors and Ralston Wines. In 1998
and 1999, Fun Beverage also acquired Vehrs Mountain States Beverage, Lee Distributing and CL Wines.
Primary suppliers for Fun Beverage are Coors, Miller, Pabst, Gallo, Constellation, Beringer, Mondavi,
Snapple and Red Bull. Fun Beverage services Flathead and Lincoln counties as well as parts of Lake,
Missoula and Glacier counties. Fun Beverage currently employs over 70 full-time employees.
Montana Venture Partners, LLC CIThe Developer")
The District is currently comprised of 17 undeveloped parcels and all but one of the parcels (16) are currently
owned by the Developer. The Developer represents that at least three properties *in the District are currentlym'
the process of being sold with expected closings to occur by the end of 2006. The lots in the District are
currently being marketed at between $3.65 per square foot to $4.95 per square foot.
The Developer is financing and contracting for the extension of the City water and wastewater services from
the main City limits to the boundary of the Di strict at an estimated cost of $3.5 million. The extension of
water and wastewater services has commenced and is scheduled to be complete by October of 2006.
Mr. Paul Wachholz and Mr. Andrew Miller are the principals of the Developer. Financial information about
the Developer and the Developer's principals is not publicly available. The Developer's principals are
Kalispell area residents that have been involved in a number of successful business ventures and
developments as described below.
Mr. Paul Wachhok. Mr. Paul Wachholz is a real estate expert in Northwest Montana. Mr. Wachholz was
the owner/President of Coldwell. Banker Wachholz & Company from 1981 to 2002 and currently serves as a
broker and consultant to the business. Coldwell Banker Wachholz & Company is the largest real estate office
in Northwest Montana with five offices and 8 5 employees working in the business of selling commercial, land
and residential real estate. Mr. Wachholzis a shareholder of (and has been the Chairman of the Board) of Fun.
Beverage, Inc., which.1's a wholesale Wine, beer and non-alcoholic beverage distributorship serving five
counties M' Northwest Montana and the largest property owner in the District. Mr. Wachholz graduated from
Northern Colorado University and then graduated from the Colorado School of banking at the University of
Colorado and prior to his career 'in real estate was an officer -for several banks during a 20 year period in
Colorado and Montana. Mr. Wachholz is a past President of the Kalispell Chamber of Commerce, Kalispell
Network Organization and the Kalispell Development Corporation where he still serves as a Board Member.
He also serves on the Board of Directors for Jobs Now, Inc. as well as the Funding Foundation for the
Flathead Valley Conu aunity College arnong other advisory boards in the conuilunity. In 1998, Mr. Wachholz
was honored as the Business Man of the Year for Northwest Montana.
Mr. Andrew Miller. Mr. Andrew Miller has been an entrepreneur and real estate developer for over twenty-
six years in developing industrial/connnercial properties in the Southern California, Utah and Montana. Mr.
Miller graduated from the Ohio State University with a Bachelor of Science degree *in Chemistry and Physics
with advanced Business Management Education at the University of Michigan. Mr. Miller worked at the
22
General Motors Tech Center in Detroit Michigan and later with GM management teams in New York City
and Chicago, Illinois. In 1980, Mr. Miller formed A.J. Miller Consulting, Inc. where he began public and
private speaking engagements on Entrepreneurship and his real estate development career. Mr. Miller moved
to the Flathead Valley in 2004 as a permanent resident and currently serves on the boards of Flathead Valley
Corinnunity College Foundation, Montana West Econorm* c Development, and is actively involved 'in the
Flathead community.
Mr. Miller is one of the three Principals of Osprey Media. Osprey Media anticipates closing on a lot in the
District before the end of 2006 and commencing development of the lot by the spring of 2007 with the
construction of a 57,000 square foot building to house a media production center. As of the date of this
Official Statement the likelihood of the final sale of property cannot be determined. Additional information
regarding Osprey Media may be obtained at its website httR-://www.ospMMedia.net. The Osprey Media
N-0
website is not incorporated into this Official Statement by such reference and is not a part hereof The City
does not make any representation or warranty with respect to the accuracy of any information contained on the
website of Osprey Media.
The Master Development Agreement
The C ity currently anticipates that it will enter into a Master Development Agreement, dated on or about July
1, 2006 (the "Development Agreement"), with the Developer that provides certain economic development
incentives for businesses (excluding Fun Beverage) to locate *in the District. Pursuant to the Development
Agreement, the Developer will be required to take specific actions for the development of the District; and the
Development Agreement also provides minimum criteria for the development of the District as a prerequisite
to the City granting economic development incentives to the Developer or the owner of any lot in the District.
The Development Agreement also provides, among other items, for the application oftax m'crement revenues
(if generated from the development ofthe District and to the event not pledged to other eligible uses by the
City) den* ved from the Industrial Tax Increment District and the Technology Tax Increment District as a credit
against the payment of special assessment payments by property owners (subj ect to the restrictions that will be
contained in the Development Agreement).
The -amount of tax 'increments to be generated by both the Industrial Tax Increment District and the
Technology Tax Increment District cannot be determm*ed at this time and is higbly dependent upon the ability
of the Developer to timely develop the District. See "RISK FACTORS — THE BONDS - Limited Nature of
Pledge of Tax Increments and Tax Increment Risk Factors." In addition, the City also anti ' ates that 'it may
CIP
-enter into one or more 'individual development agreements with future owners of parcels in the District with
respect to the development of *individual parcels 'in the District.
OUTSTANDING SPECIAL IMPROVEMENT DISTRICT BONDS AND THE REVOLVING FUND
General Information
In addition to the District, the City has created three special improvement districts and seven sidewalk, curb
and gutter 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 handin 'Its Revolving Fund in the amount of
$59,722 as of February 1, 2006, which amount secured. $1,161,275 in outstanding special improvement
dist - rict bonds of the City, notincluding the Bonds. After giving effect to the issuance of the Bonds, the City
23
will have approximately $285,722 or 5.03% on hand in its'Revolving Fund, which amount will secure
a
approximately $5,681,275 in principal amount of outstanding bonds and warrants of the City. Furthermore,
the City may create additional special improvement districts and may issue additional bonds or warrants that
are secured by the Revolving Fund as described below.
Future Financing
Tbe.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, alth ough it is clear that additional districts and
projects will be created and undertaken and - additional bonds and warrants will be issued Within t -he
foreseeable future. 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.
Summary of Outstanding Special Improvement Districts
The following table sets forth the amount of special improvement district bonds outstanding as of
February 1, 2006, 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 3 0, 2005, the City had
$1 �200, 000 1 n outstanding local improvement district bonds (SID 3 42, SID 3 4 1, and SID 3 43). The Revolving
Fund also secures seven City sidewalk, curb and gutter districts that as of June 30, 2005, had total outstanding
assessments bonds or warrants 'in the amount of $56,499.
Original Maturity Bonds Cash Delinquent
Bond Issue Amount Date Outstanding Balance Assessments*
SID No. 341 $1007000 7/1/11 -$251000 $10)415 $0
SID No. 342 2091000 7/1/11
SID No. 343 19581,500 7/1/21
257000 61925 1 � 142
1 �0901000 752609 0
Total $11890�500 $1,140�000 $922949 $1,142
As of the date of issuance of the Bonds, delinquent assessments for special improvement districts wid-An the City comprised
approximately 0.06% of the ofiginal principal amount of Bonds issued.
24
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, 2001 through 2005. For fiscal year 2005/06, the City"s
assessment billing was $ 152,650, of which $75,540 (49.5%) had been collected as of February 1, 2006. The
second half collection billing for 2005/061"s due May 31, 2006.
Fiscal Year Assessment
BilliLig
2004/05 $1597254
2003/04
2002/03
2001/02
2000/01
1 721Y95 8
1872544
202,014
372277
* Includes delinquent assessment collections and prepayments.
Source: The City Finance Departinent
Total Annual Collections*
Amount Percent
$1592704
19LO17
2141103
2115,924
453,286
Statement of Changes in Fund Balance of the Revolving Fund
100.3%
110.4
114.2
104.9
121.5
Set forth in the following table 'is a summary of the changes *in fund balance of the Revolving Fund for the
period June 3 0, 2001 through June 3 0, 2005.
Beginning Balance — July I
Receipts Over Disbursements
Equity Tranfers'
Ending Balance — June 30
Assets:
Cash
Receivables
Due from other City funds
Total Assets
2000/01 ..200.1/02 . 2_002_/0_3__. 2003/04 2004/05
$182787 $992196 $101,980 $72�940 $73,924
807409 21784 21164 984 100
0 0 �31,20D___ 0 (103,922)_
$9%196 $1011,980 $72�940 $731,924 $642892
$87�155 $86�249 $7%488 $71,7803 $64,259
12 1 0 0 0
12,7041 152731 25452 2J21 633
$992208 $1013,981 $72,1940 $739294 $641,892
Total Liabilities (Deferred Revenue)
$12
$ 1
$0
$0
$0
Total Fund Balances
99,196
101�980
72,940
731294
641892
Total Liabilities/Fund Balances
$99:w2O8
$101 �981
$721)940
$73�294
$64,892
Equity transfers were made from the Revolving Fund to the General Fund for amounts in excess of 5% of outstanding bonds
($18 2146 mi 2002/03 and$ 10,000 in 2004/05).
25
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").
TAX EXEMPTION AND RELATED CONSIDERATIONS
Tax Exemption
In the opinion of Kennedy & Graven, Chartered, as Bond Counsel, under federal and State of Montana laws,
regulations, rules and decisions *in effect on the date of issuance of the Bonds, interest on the Bonds is
excludable from gross income for federal income tax purposes and for State ofMontana 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 Code,
however, impose continuing requirements that must be met after the issuance ofthe Bonds in order for interest
thereon to be and remain not includable in 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
gross income for purposes of federal 'income taxation, prospectively or retroactive to the date of issuance of
9 0 -urs or is ascertained. No
the Bonds irrespective in some cases of the date on which such noncompliance occ
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 taxable net income. See
"Appendix F — Form of Legal Opinion".
Related Federal Tax Considerations
Interest on the Bonds is not an item of tax preference included in alternativemu*u*mum taxable income for
purposes of the federal alternative minimum tax applicable to all taxpayers, but such 'Interest isincludablein
adjusted current earnings in determining the alternative mini num taxable M*come of corporations for purposes
of the federal alternative minimum taxes. Section 86 of the Code law 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 foran S corporation that has accumulated earnings and profits at the
close of the taxable year if more than twentyfive 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 884 of the Code and is includable in the net investment income of foreign
insurance compames 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.
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 determination of gain or loss on the
sale of a Bond, the calculations 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 the state and local tax rules in states other than Montana.
26
LITIGATION
There is no controversy or litigation of any nature now pending, or to the knowledge of the City, threatened,,
. 1 9 0
restrainiffig 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
LEGAL MATTERS
Legal, matters relating to the authorization and 'issuance of the Bonds are subj ect to the approving op i*m* on of
Kennedy & Graven, Chartered, as Bond Counsel, which will be delivered with the Bonds. (See "APPENDIX
F — Form of Legal Opinion7' herein.)
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 arm's-length, transaction regarding the selection of the underwriter of the Bonds, the City's engineer and
other participants in the offering of the Bonds. D.A. Davidson & Co. as Financial Advisor has obtained
wntten permission from the City to submit a bid 'in its behalf at the public sale for the purchase of the Bonds.
UNDERNMTING
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 98.0% of the par value of the Bonds, plus accrued
interest. The Bonds are being offered for sale to the public at the price shown on the inside cover of this
Official Statement. The initial offering price is subject to change after the date hereof
SECONDARY MARKET DISCLOSURE
0
In order to pemit 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 Corrunission under the Securities
Exchange Act of 1934, as amended (the "Rule"), because the aggregate principal amount ofthe Bonds and any
other securities required to be integrated with the Bonds is more than $ 10,000,000, 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 Disclosure Certificate, to provide annual reports of specified information and notice of the
occurrence of certain events, if material, as hereinafter described (the "Disclosure Covenants"). The
information to be provided on an annual basis, the events as to which notice is to be given, if material, and the
form of Disclosure Certificate is set forth in Appendix D to this Official Statement.
Breach of the Disclosure Covenants will not constitute a default or an "Event of Defaulf 'under the Bonds or
the Bond Resolution. A broker or dealer is to cons i'der 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 of the
Bonds and their market price.
27
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 information contained in this Official Statement, and m* any supplements or amendments hereto,
delivered by the City 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 a statement therein 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 copyi. I ng,
mailing and handling, from the City. Additional information concerning the Bonds, the City and the District
may be obtained by contacting the City, 312 1 st Avenue East, P.O. Box 1997, Kalispell, Montana 59903,
Attn., City Clerk,, telephone (406) 758-7701.
The summati es 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 summanze or describe all
of the provisions thereof. This Official Statement is not to be construed as a contract 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.
ATTEST:
BY: /s/ Theresa White'
City Clerk
28
CITY OF KALISPELL, MONTANA
Byi-1 Isl Pamela B. Kennedy
Mayor
APPENDIX A
Map of the District
A-1
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Put WVLVUC r-,
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OLD SCHOOLSTATION.
Sf 11141 $qom $31. If?& #24%V. P�K. "
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[Thi's Page Intentionally Left Blank-f
APPENDIX B'
City General and Financial Information
The information presented under this heading isprovided to giveprospective investors an overview ofthegeneralorganizadon
and economic status of the City. However, inclusion of this informadon is not intended to imply that owners of the Bonds wifl
be able to look to anyfund other than the District Fund (including the Reserve Account), applicable tax increment revenue if
available or the Revolving Fundfor payment of the Bonds. The Bonds are not general obligations of the City and the
unlimited taxingpowers of the City are notpledged to thepayment ofprinc*al thereof or interist thereon. (See"THE
1P
BONDS - Security and Sources of Payment" herein.)
THE CITY - GENERAL INFORMATION
General
The City of Kalispell (the "City") i's 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 Co- unty (the
94county") and encompasses a land area of 2,500 acres. The City had an estimated population of 17,3 81 as
of the 2004 estimates, as reported by the U.S. Census Bureau. Locatedin northwestern Montana, the County
0
is Montana's third most populous county with approximately 83,172 residents in 2005 according to the U.S.
Census gureau.
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 Council/Manager
form of government governs the City with a nine member Council comprised of a Mayor and eight Council
members. 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 current Council members and the expiration of their respective terms of office are as follows:
Elected Official
Title
Years on Council
ERiration of Term
Pamela B. Kennedy
Mayor
4 years
12/31/09
Jim Atkinson
Council Member
17 years
12/31/09
Kan" Gabriel
Council Member
2 years
12/31/07
Robert Hafferman
Council Member
4 years
12/31/09
Bob Herron
Council Member
2 years
12/31/07
Randy Kenyon
Council Member
6 years
12/31/07
Tim Kluesner
Council Member
V2year
12/31/09
M. Duane Larson
Council Member
15 years
12/31/07
Hank Olson
Council Member
4 years
12/31/09
The chief administrative officer of the Cityis the City Manager who is hired by, responsible to, and serves at
4
the pleasure of the City Council. The City Manager is responsible for carrying out Council policy,
0
.2.r%;s tefing
administering the affairs of the City and directing, organi'zing, establishing, supervism"g. and J".0 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. James Patrick has served as City Manager since November 2004. Pn*or
to working for the City of Kalispell, Mr. Patrick was employed as the City Manager of Vermillion, South
Dakota. In addition, Mr. Patrick has been recognized as a Credentialed Manager by the International City
and County Managers Association.
Ms. Amy Robertson, C.P.A., is the City Finance Director. Ms. Robertson has been employed as the City
Finance Director since 1989 and has been employed by the City since 1985.
Prm*cipal 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, ambulance, planning, building inspection,
zoning enforcement and parks and recreation.
Employment and Employee Relations
As of February 1, 2006, the City employed 176 permanent full-time and 80 seasonal employees.
State law requires municipalities to bargain collectively with formally recognized collective bargaining units..
Currently, three unions represent approximately 73% of the City's permanent full-time 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.
Number of Expiration
BEgaini* nit Ep2ployees of Contract
Kalispell Police Association 30 June 30, 2007
AFSCME — Local 256 70 June 30, 2006
International Association of Fire Fighters #547 29 June 30, 2008
Pension Plans
All full-time City employees are required 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 number of public
entitiesin the State. The City made the following contributions in fiscal year 2004/05 on behalf of the City
employees who participated in the plans listed below.
Public Employees' Retirement System (PERS)
Firefighters' Unified Retirement System (FURS)
Muni * al Police Officers' Retirement System NPORS)
cip
Number of 2004/05 City
Parti s Contribution
ill $2451330
32 193,7135
32 202IY507
THE CITY - FINANCIAL INFORMATION
Financial Operations, Sources of Revenue and Budgeting Process
General. Since their inception, Montana local governments have relied -on local property taxes as the
principal source for funding their general operations under rules prescribed by the State Legislature.
Historically, cities were permitted by law to levy an all-purpose property tax not to exceed 65 mills, plus
special purpose levies for pension, insurance, debt. service, and other categories permitted by State law.
The mill. levy rate ("mills") is determined by dividing the tax receipts budgeted to be received by a taxing
juri sdiction by the taxable value of all taxable property within such juti sdiction. The tax on each property is
then determined by appl ing the mills to the taxable value of said property.
Yi
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 1 % per month from and after such delinquency until paid, plus 2% as a penalty.
For fiscal year ended June 30, 2006, the City levied 137.00 mills in the general fund, which constituted
41.3% of the City's general fund budget. Other sources of fund 'Ing for Montana Cities M*clude State, County,
and Federal revenues, fines, special assessments, charges for services, license and permit fees and
investmenteamings. Local governments, even home rule mum' cipalitibs, do not have the authority to impose
taxes unless specifically granted by the State Legislature. (See "APPENDIX B - City General Fund
Summary" herein.)
Budget Process. 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 Intemal 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 Local Government Budget Act stipulates that money, other than payments from agency funds, cannot be
drawn from the city treasurer except pursuant to an appropriation. Therefore, a legally adopted budget is
required for all funds, with the exception of agency funds. The City Manager i s responsible for preparation
of the prelim ffiary annual budget. The City Council modifies and/or approves this budget. The City 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 fund. The City Finance
Director forwards a copy of the final budget to the State Department of Commerce no later than October 1 -
Valuations, Assessments and Reassessments of Property for Taxation Purposes
GeneraL As a general rule, all real and personal property in the State of Montana is subject to taxation by
the State and 'its counties, municipalities and other political subdivisions to finance various general and
special govermmental functions. 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 an d character, and the different classes of property are
taxed at different percentages of their market valuation.
All taxable property except farmland 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 Revenud"). In
practice, market value is generally less than the property's appraised value for resale purposes. The Montana
Constitution requires that property tax values be equalized across the State. 'fhe Department of Revenue
administers and supervises a program for the revaluation of all taxable property within classes three, four and
ten property pursuant to a Wlitten plan. (See "APPENDDC B - Tax Rates — Calculation of Taxable Value"
herein for discussion of classifications for property tax purposes). The plan provided that all class three, four
and ten property in each county was revalued by January 1, 2003 and each succeeding six years, with the
next reappraisal to be complete by January 1, 2009 effective for January 1, 2009. The resulting valuation
changes must be phased in each year until the next reappraisal at a rate of 16.66% per year unless otherwise
specified. Other property valuations are based on comprehensive appraisals of all taxable property
performed by the Department of Revenue each year. The Department of Revenue is required by law to
furnish market and taxable values to each taxing jurisdiction prior to the first Monday in August for purposes
of preparing fiscal year budgets.
The heavy reliance on property tax as the source of fimding for local governments and public school systems
resulted 'in the late 1980s and through the 1990s in numerous aittempts both legislative and through voter
initiated legislative initiatives and constitutional amendments to limit the property tax. Montana local
governments have been subject to a legislatively imposed property tax limitation since 1986. During that
same period of time, in efforts to spur economic development and achieve other purposes, the Legislature
fTequently revised (usually reducing) rates of taxation on various classes ofproperty and reallocated property
tax revenues of different kinds between the state and local governments.
Thca, reductions in the rate of taxation for various classes of property resulted in a reduction of revenues for
local governments, which the State attempted to reimburse to them or allow for 'increases above the statutory
property tax limitations, in an effort to at least keep the level of local government support.
Tax Rates - Calculation of Taxable Value. The taxable value for property is determined by applying a
statutorily established percentage ratio, to the market value of the property according to a system of
classification established by State statute. Currently, there are 13 classifications of property for tax purp . oses.
For most Montana taxing 'urisdictions, the bulk of the property tax base is in Class Four (residential and
commercial); Class Five (livestock and personal property); Class Seven (property owned by rural
cooperatives serving less than 15% of electricity consumers in an incorporated town; electric transformers
and machines, electric light and power station machines, natural gas measuring and regulating station
equipment owned by non -centrally assessed public utilities); Class Eight (mining and manufacturing
machinery, fixtures, equipment); Class Nine (allocations for centrally assessed gas and electrical distribution
systems); Class Twelve (centrally assessed railroad prope . rty); and Class Thirteen (electrical generation
facilities and centrally assessed telecommunications companies).
The 1997 and 1999 Legislatures, 'in an effort to prevent large property tax increases from the 1997
reappraisal, provided for phased -in (1) market valuation exemptions and (2) property tax rate reductions.
The 2003 Legislature adopted this same policy for the 2003 reappraisal and therefore any increases in
valuation resulting from the reappraisal are to be phased -in each year at a rate of 16.66% until the next
reappraisal. During this phase -in period, a portion of the market value of Class Four property will become
exempt from taxation in the amounts of 3 1.0% *in 2003, 31.4% 'in 2004, 32.0% 'in 2005, 32.6% in 2006,
33.2% in 2007 and 34.0% in 2008 and subsequent years for residential property ("homestead exernption7)
and for commercial property (the "cornstead exemption") the annual exemptions are 13. 0% in 2003, 13.3 %
14.2%in 2006, 14.6% in 2007 and 15.0% in 2008 and thereafter. The increase in
in 2004,, 13.8% in 2005,
9
exemption for Class Four property over a period of six years will also be matched with changes in the tax
rate from the rate of 3-46%in 2002 to 3.40% *in 2003 and adjusted downward each year as follows, 3.30% *in
2004� 3.22% in 2005,3.14%in 2006,3.07% in 2007 and 3.0.1% in 2008 and thereafter. (Priorto1999,the
rate of taxation for Class Four property had been 3.86% for many years).
The 1999 Legislature also made many other significant revisions to property tax rates as applied to other
classes of property. It reduced the tax rate on Class Eight property from 6% to 3%. The tax rate on Class
Thirteen property was reduced from 12% to 6%, the tax rate on Class Five property was reduced from 8% to
3% and the tax on Class Six property was eliminated. The 1999 Legislature also reduced the tax rate on
automobiles and light trucks from 2% of the 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 forestland (Class Ten property)
was reduced from 0.79% of its forest production value to 0.3 5%. The 2005 Legislature (pursuant to Senate
Bill 48) removed targets set during the 2003 Legislative Session to finther decrease the level of taxation on
Class Eight property to 0% and provided that Class Eight property remain taxed at 3% each year and
increased the threshold amount of Class Eight property that an entity may own and be exempt from property
taxation from $5,000 to $20,000 of market value.
Reimbursement Provisions, The result of the tax changes by the 1999 and 2003 Legislatures described
above i's a reduction in the taxable valuation and ult imately the taxes received by local governments.
However since enactment of such.changes, the State has reimbursed local govemments for property tax and
other tax losses that are attributable to reductions in the tax rates on business equipment, oil and gas
production, telecorrununications property, electrical generating facilities, and MM'M*g transportation costs but
w ill not reimburse local govemments for property tax losses attributable to the reductionin the tax rates on
r 'dential and commercial real estate.
esi
Interim Property Tax Reappraisal and Tax Reform Study Committees (2005 Legislative Session). The
2003 Legislature formed two committees to study property taxes: an'interim property tax reappraisal
4 a
committee and a tax refonn study committee. Each committee submitted a report in November of 2004 that
included recommendations and proposed legislation necessary to implement such proposals. The 59th
journed on Ap '121, 2005. No major
Montana Legislative Session conunenced January of 2005.and ad n
legislation passed during the 2005 Legislative Session that will have a significant change on property taxes
in the State. An interim committee was designated during the 2005 Legislative Session to examine the
current methods used for the classification and valuation of agricultural land for property tax purposes and to
examine alternative methods of classification and valuation. All aspects of the study are to be concluded
before September 15, 2006.
2001 Legislative Revisions to System of Municipal Finance
Pursuant to HB 124 enacted by the 2001 Legislature effective, for the most part, July 1, 200 1, the State
replaced its system of reimbursement for lost property tax revenue by local governments with a system of
local government entitlements and block grants. Prior to HB124, local govennnent personal property tax
reduction reimbursements contained in HB20 and SB417 from pn* or sessions were being reduced 10% a year
starting 'in fiscal 2000 and tax reduction reimbursements contained in SB 184 from the 1999 Legislature were
sunset June 30, 2001.
To fund the entitlements and block grant programs, the State will retain various tax and revenues for the
general -ftmd that were previously allocated to the local governments, including sources such as garning
revenues, beer and wine taxes,, and automobile licensing and registration fees.
HB124 is expected to provide a more predicable, stable funding source for local government and more
flexibility and decision making at the local level.
HB 124 combines a number of different reimbursements and other revenue sources controlled by the State
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 le islature to make tax changes and revenue
91
reallocations without acting the revenue for local government, since the local government "Entitlement
IMP
Shard" 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, by a decision of the Lepslature to reduce or eliminate a
source of taxation in which local governments rely. Ultimately, the Legislature still has the powe r- to change
the "Entitlement Share".
9 0
Summary ofHB124. The main provisions of HB 124 include:
1. Revenue that was. appropriated to local governments from vari ous sources w '111 continue in
a single statutory appropriation: certain motor vehicles-- gaming; financial institutions -
alcohol taxes; district court fees-, other Miscellaneous revenues; and SB 184 reimbursements.
2. The entitlement share payment for local govenunents 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 governments-
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. A provision providing that if the future revenues fall below 95% of the base year revenues
due to causes other than le islative action that local governments share in the revenue loss.
91
5. The State assumes financial liability for the portion of district courts and welfare expenses
previously funded by counties.
6. Provides an overall property tax cap on local government growth but provides for growth
at 1/2 the rate of inflation and provides new flexibility 'in levying the maximum number of
m ills.
i
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 entitlement share was expected to grow at a rate of 2.3%-3.0% dependent upon the performance of the
State economy. The City believes this growth rate is a more predictable revenue source than the various
revenue sources assumed by the State. The City's budget for fiscal year July 1, 2005/06 imposed a total rDill
levy of 170.00 mills for all funds with 137.00 Mills allocated to the General Fund. The City's budgeted
General Fund revenues are estimated to be co "sed of 45% local property tax receipts, 22% Entitlement
Share from the State and 33% other sources.
Financial Summary
(As of the date of issuance of the Bonds)
2004 Population Estimate ..................................................................................... 17V381
2005/06 Market Valuation ......................................... $893,657.1570
2005/06 Taxable Valuation ............ *0400 $28,16517167
General Obligation Bonds Outstanding .......................... $633452000
Other General Obligation Debt Outstanding (Notes/Loans Payable)' ........... $15�51731152
Total Direct Debt P94 a **a, a a a cocoa a cocoa 9 a* we 9 &*a a * o $728621) 152
Overlapping General Obligation Debt Outstanding $27)852�397
Total Direct and Overlappm*g General Obligation $353714�549
Special Assessment Bonds Outstanding (including the Bonds) $5fi8l,275
Includes five loans outstanding in the aggregate amount of $1,517,152.
Overlapping General Obligation Indebtedness
The followinginfortnation sets forth the general obligation indebtedness of the City following the issuance
of the Bonds and of taxing entities with boundan"es that overlap the boundaries of the City.
General
Outstanding Debt Chargeable to
Obligation Bonds
Property Within the City
Outstanding
Percent Amount
Kalispell High School District $451,033,1229
32.71% $14,728,275
Kalispell Elementary District 141910,399
67.75 103,102ffl2
Flathead Valley Conununity College 17�583,7294
17.19 31,022,090
Total Overlapping General Obligation Debt
$27)8523,397
Total Direct Debt
7,8621,152
Total Direct and Overlap -ping General Obligation Debt
$ 3 5 37 14,549
General Obligation Debt Ratios
Direct Debt Per Capita ......................... 4 a a**# 0 Ito q 0 0 0 0 * 0 0 0 0 0 0 4 0 d. a 41 0 9 .0 &
Direct and Overlapping Debt Per Capita ......
Direct Debt to Market Valuation ...................................................................................................... 0.88%
Direct and Overlapping Debt to Market Valuation .......................................................................... 4.00%
Direct Debt to Taxable Valuation ................................................................................................... 27.44%
Direct and Overlapping Debt to Taxable Valuation ................................................. 124,65%
Market Valuation Per Capita .................................................................... ....... $5 1A16
Taxable Valuation Per Capita ...... 648
General Obligation Debt Lindtations
Except for special provisions concerning general obligation indebtedness incurred for purposes of providing
sewer and water service, the limit on aggregate outstanding and unpaid general obligation indebtedness for
cities cannot exceed 1 .5 1 % of the total assessed value of taxable property as ascertained by the last
assessment for state and county taxes. The 2005/06 total assessed valuation for the City was $893,657,570.
The total amount of debt the City may incur is according to State law is $13,494,229. Given the outstanding
debt in the amount of $7,862,152, the City has $5,632,077 of debt capacity remainmg. Special
Improvement District Bonds are not general obligations bonds and do not apply to the general
obligation indebtedness outstanding or general obligation debt capacity remainm*g.
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 2001/02 through
2005/06. Since 2001/02, market valuation in the City has grown 43.5% and taxable valuation has grown
22.4%. See "APPENDIX B - Valuations, Assessments and Reassessments of Property for Taxation
Purposes" herein for a descn*ption of recently enacted property tax legislation.
Fiscal
Market
Taxable
Year
Valuation
Valuation
2005/06
$89356577570
$282651,167
2004/05
818053,572
26)914J23
2003/04
743,576,508
26,087,61-6
2002/03
678,031,534
231,8582317
2001/02
622,6101786
23304111193
Source: Department Of Revenue Appraisal and Assessment Office — Flathead County
Tax Levies
The following table shows the mill. rates per $ 1, 000 of taxable value of property for a taxpayer in the City for
the years shown.
FiscalYear --------------
Taxing E!���
2001/02
2002/03
2003/04
2004/05
2005/06
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
94.88
96.89
102.42
100-76
101-03
Flathead County
64.67
66.79
63-16
68.81
70.47
County Health Insurance
0.00
0.00
1.65
2.71
3.62
Flathead Valley Conu lunlky College
12.03
11.76
11.57
11.14
14-31
Kalispell Elementary School District
149.84
152.04
153.12
147.31
160.77
Kalispell High School District
78.04
80-35
80-00
77-81
99.40
City of Kalispell
129.42
140.60
134.43
142.00
157.50
City of Kalispell.Health Insurance
0.00
12.00
10.22
13-00
12.50
Weed
1.71
1.71
1.70
1.83
1.73
Sheriff
23.16
25-11
29.10
29.17
29.62
Mosquito
0.42
0.50
0.51
0.52
0.00
Board of Health
..4.65
4.93
5.09
5.00
5.30
Total
604.82
638.68
638-97
646.06
702.25
Source: Department of Revenue Appraisal and Assessment Office - Flathead County
Tax CoHections
Set forth in the following table are the real and personal property tax levies and collections for the City
General Fund for the fiscal years ending June 3 0, 2001 through 2005. For fiscal year' ending June 3 0, 2006,
the City levied $3,849,4721, of which $1,942,712 has been collected as of February 1, 2006. The se6ond half
property tax collections for 2005/06 are due on May 31, 2006.
Taxes Collected in
Year Levied'
Fiscal Year Tax Levy Amount Percent
Total Annual Tax
Collections'
Amount Percent
2004/05' $3,337�436 $39186,625 95.5%
$31495,530 104.7%
2003/04 21197,562 23,021,1757 92.0
2,2441771 102.2
2002/03 2,1251749 1)9557689 92.0
231153,245 99.5
2001/02 L932fiN 1 777,999 92.0
11968,781 101.9
2000/01 135682725 L4433227 92.0
12623,520 103.5
Due to timing of collection of the second half taxes, the City must make accruals has historically assumed 8% will be collected in the
following year; however, in fiscal year 2004/05 and for subsequent years the City assumes 4.5% will collected in the following year.
2 includes real and personal property collections, delinquencies, penalties and interest.
3 The City combined levies for Compensation Insurance, Health and Retirement with the General Fund levy for fiscal year 2005. This
increased the levy from 87.5 mills for the General Fund for fiscal year 2004 to 130 mills for the General Fund in fiscal year 2005.
V
Separate funds with separate levies for insurance and retirement will no longer be utilized.
Source: City Finance Department
Major Taxpayers
The follow* table lists the major taxpayers within the City for fiscal year 2005/06,, in declu*n"ng order of
M9
taxable value.
2005/06
T�x
Bus*
iness
Taxable Value
1. Centurytel .pger
Telecommunications
$9222371
2. Flathead Electric
utility
871.9584
3. Flathead Hospital Development
Healthcare
723�288
4. Northwestern Energy'
utility
585,958
5. West Coast Limited
Shopping Mall
4921Y 181
6. Lowes
Retail
341,757
7. Target
Retail
243,044
8. Home Depot
Retail
2381830
9. Northwest Healthcare
Healthcare
193�1 10
1 O.Flathead County Economic Development Authority
Economic Development
1355010
Total ...........
$4!3473,1331
1 Northwestern Energy emerged from Chapter 11 Bankruptcy on November 1, 2004. Northwestern Energy filed for Chapter 11
bankruptcym' September 2003 and filed a plan of reorganization in the Bankruptcy Court and a hearing was held in June 2004. On
October 20, 2004, the BanIcruptcy Court entered a written order co * g the second amended and restated plan of
reorganization with the effective date for emergence of Chapter I I November 1, 2004. Babcock & Brown Infiwtructure CBBI"),
an Australian investment group, has agreed to purchase Northwestern Energy for approximately $2.2 billion. The purchase must be
approved by the Montana Public Service Commission and BBI antic* ates filing a formal request by July 2006 that could take up
IP
to 9-months for a decision. The City cannot predict when a sale, if any, would become final.
.7* Represents 16.68% of the City's total 2004/05 taxable value of $28,651,167.
Source: Department of Revenue Appraisal and Assessment Office — Flathead County
[The remainder of this page 'Intentionally left blank.]
B-I 1
City -General Fund Summary
The following table is a summary of the statements of revenues collected, expenditures paid, and changes in
the General Fund balance for the fiscal years ended June 3 0, 2001 through 2005.
Audited Audited Audited Audited Audited
2000/01 2001/02 2002/03 2003/04 2004/05
Revenues:
Taxes/special assessments
Licenses and permits
Intergovennnental. Revenue'
Charges for services
Fines and forfeitures
Miscellaneous revenues
Investment and royalty eamings
Total Revenue
Expenditures,:
Current:
General government
Public safety
Publ ic works and health
Culture and recreation
Miscellaneous
Capital outlay
Debt service
Total Expenditures
Excess of Revenues Over
(Under) Expenditures
Other Financm*g Sources (Uses)
Fund Balance (July 1)
Residual equity transfers/Adjustments
Fund Balance, June 30
$15704,359
$1�968,979
$2,115�245
$2�244,771
$3,495,530
177�476
84� 118
1491104
134,583
116�257
11,5715158
13,907,895
2�4981686
225932221
218821,364
8791,585
902�045
6933,544
72030295
841A92
3863,341
399,861
4533,892
443,646
535)875
87�302
69.3,770
68.1470
63,502
111A85
2242985
1213540
85�638
28�929
252,293
$5ffll,206 $53454�208 $6)0647579 $6,228,1947 $8,235,296
$9012080 $1,2123J24 $17113�424 $1,1817677 $13,524,123
21409,3829 217217230 31495fi49 31709,528 51078,904
541,889
5742687
5621189
339,745
4233,469
.654,806
6731512'
74%069
7482777
8911469
565
2)254
2�254
11320
111517
154,730
248X5
147,029
23402
1372836
30,3769
36,855
253739
293,370
412958
$45693fi68
$5�379,7667
$67095�353
$6.1245,219
$82099.1276.
$3372538
$741541
$(30,774)
$(16)272)
$136,020
$(273,440)
$(78,332)
$(61 �818)
$46,913
$810�850
$9075,446
$1,2301681
$11228,215
$15,200,450
$1,7224�330
13,137
13,325
64,827
L62761)
_ 96�044
$1,23 01681
$1�2281,2-15
$1,200,450
$1�2241o330
$272675.244
1 The 2001 Legislature enacted HB 124, which resulted in significant changes that include several non -levy revenue sources
(motor vehicle fees and taxes, corporate license taxes, aeronautics fees, state land payments in lieu of taxeg and SB 184 property
reimbursements) being replaced by local government entitlements and state block grants. It is unknown if the local government
entitlements and state block grants.wfll completely offset the lost non -levy revenue sources. See "APPENDIX B - 2001
Legislative Revisions to System of Finance" herein.
Source: The City's Audits and Financials
B-12
APPENDIX C
Economic and Demographic -Information
C-1
ECONOMIC AND DEMOGRAPHIC INFORMATION
The Local Economy
The City of Kalispell (the "'City") is the County Seat of Flathead County (the "CounW) and had an
estimated population of 17,3 81 as of the 2004 estimates, as reported by the U.S. Census Bureau. Located M*
northwestern Montana, the County is Montana's third most populous county with approximately 8 3 � 172
residents 'in 2005 according to the U.S. Census Bureau. The greater Kalispell area is the trade center of
northwest Montana. The area i's renowned for its Flathead Cherries and Christmas tree fanns. 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.
Manufacturm*g Industries
Manufacturing 'in the County accounted for $156.2 million of total earnings by industry in 2004 and
comprised over 6.7% 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. The County generally
leads all Montana counties in the amount of timber processed. Approximately 6.3% of the employees in the
County are employed by the manufacturing industries, particularly the wood products industry. Plum Creek
Timber Co. and Semitool, Inc. are two of the major pn4vate employers in the County (see "APPENDIX C -
Major Private Employers"' herein) vn'th 1.,140 and 700 employees, respectively. Prior to recent electricity
shortages and declining metal prices, Columbia Falls Aluminum Co. had been a major employer of the
County.
Plum Creek Timber Co. Plum Creek is one of the largest, private timberland owners in the U.S. The
company concentrates on forestry managernent� harvesting techniques, value-added products, and zero -waste
manufacturing techniques nationwide. Plum Creek's current operations include 6 sawmills, 2 plywood
plants, 1 medium density fiberboard ("MDF") facility and 2 rernanufacturing plants. The company employs
approximately 2,500 people in the northwest, 1, 140 of which are employed in the County. Plum Creek also
has land holdings in excess of. 3 million acres.
Semitool, Inc. Senn*tool, Inc., currently has approximately 450 employees at its corporate headquarters
located adjacent to the City. Semitool currently employs over 1,000 people company -wide, with
approximately 725 located in the Kalispell area.. Sernitool delivers automated tools for copper deposition,
thermal processing, chemical process ing, and wafer carrier cleaning to semiconductor manufacturers around
the world. Sernitool also has many subsidiaries around the globe to conduct operations.
Columbia Falls Aluminum Co. Columbia Falls Alurnmourn ("CFAC") is a privately owned and operated
company located in Columb ia Falls, approximately 15 miles north of the City. The company was established
in 1952 by begm"ru"ng construction on two potlines With total capacity of 67,500 tons per year at a cost of
$65,000,000. Nearly three years later, the first aluminum was produced. Today, CFAC has five potlines,
and at full capacity produces 160,000 tons of alumm'um 1 0 ngot per year. The potline buildings reportedly
,form the largest single building "in Montana, covering approximately 1,740,000 square feet (40 acres). The
company has the abihty to employ 600 people when at full capacity.
C-2
In 2001, CFAC completely shutdown operations and resold available electricity to western utilities. All
CFAC employees affected by the shutdown received full wages through the end of 2001. At that time,
CFAC accounted for one -fifth of all of the State's electrical usage. After a 13-month shutdown, CFAC
restarted one potline in March 2002. In April 2002, CFAC restarted another 1.5 potlines bringing total
production up to 2.5 potlines, or 50 percent of the plant capacity and was fully operational by July 2002.
Lower power prices and higher metal prices prompted the move by CFAC. In March 2003 CFAC
announced it was laying off 175 employees and would reduce its operations by approximately 67%. Primary
factors prompting the decision included escalating aluminum prices, high-energy prices and low-water
levels, which affects hydropower that CFAC depends upon. CFAC employed approximately 340 people
prior to the most recent layoffs. As of August 2005,, CFAC employed approximately 160 employees and wa's
operating one pot -line or 20% of plant capacity. CFAC, together with other entities, 'is worldng on solutions
to its power problems, The City cannot predict future trends in the wholesale electrical power market and
the effect such trends may have on the operation of CFAC.
Agriculture
Cash receipts from the sale of pri" ncipal agricultural. products and government payments in the County totaled
close to $29 million dollarsm' 2003. The Countylias approxn"nately 1,07.5 farms that encompass 234,861 of
the County's 2,262,936 total acres. The primary agricultural products of the area 'include evergreen txee
nursery stock, Christmas trees, cherries, potatoes, grain, hay and livestock. In 2004, the County ranked Sffi of
the 56 counties 'in the State for the production ofmilk cows/heifers, 13th in alfalfa hay production, 22dfor all
other hay production and 23din barley and oats production.
Below are summarized cash receipt figures, in thousands, for agricultural. marketings in the County for the
years shown according to the Montana Agriculture Statistics Service.
Agricultural Cash Receipts (000"s) --------------
Sources 1999 2000 2001
2002
2003
Livestock and Products $8,528 $9.1426 $95,990
$8,244
$9,478
�Crops 16�350 151542 16� 168
173,152
18,286
Government Payments 1,1915 1,938 15312
851
11,199
TOTALS $26,1793 .$26)906 $27,470
$26�247
$28,963
Source.- Montana Agriculture Statistics Service
Governmental Entities
0
As of 2004, government sources comprised 9.6% of total eann*ngs by industry and 9.0% oftotdl employment
in the County. The U.S.,Forest Service, local school districts, the State, and local municipalities comprise
some of the largest public employers 'in the County.
Trade Center Activities
The industries that employ the rnio st people "in the County *include servi ces and wholesale and retail trade. In
2004 the health care services industry employed 9.7% of the total employed population within the County.
The area has a full range of medical services. Kalispell Regional Medical Center, a 109-bed acute care
C-3
facility with numerous outpatient services and clinics, is the referral center for a large area of northwestern
Montana. Kalispell Regional offers helicopter service for medical and trauma situations. Kalispell Regional
Medical Center is the largest employer in the County with approximately 1,400 employees. In December
2002, North Valley Hospital in Whitefish completed the purchase of a 45-acre property for $1.365 million
for its 'new hospital, which -is expected to be completed by late 2006 or early 2007. The new hospital
(including the land) 'is expected to cost $21 million.
Also in 2004, wholesale and retail trade employed 15.7% of the County's labor force. The wholesale and
retail trade industries comprised approximately 9.3% of total earnings by industry in the County in 2004.
The strong 'influence of both the servi ces 'industry and wholesale and retail trade on the area" s economy
emphasizes the importance and influence of toun*sm in the County as discussed below. A development
located north of the Citym'cludes a Home Depot and Target stores that recently opened. Additional retailers
that occupy space in the developmentinclude Border's and Ross Dress for Less. 'The Spring Prairie Center
retail complex that broke ground in Apn*l of 2004 with Lowe's being the first anchor tenant� which built a
134,552 square foot store across the street from Home Depot and opened in January of 2004. Walgreens
opened a new retail store in February 2005. . Costco built a 136,000 square foot facility that opened 'in
October of 2005. The Spring Prairie 'Center, when complete, will 'include 60 acres of land and
approximately 480,000 square feet of retail space. Other major national retailers 'in and around the City
include Wal-Mart, Shopko, Herbergers, JC Penney's and The Buckle, Joann Fabrics and Sears,
Teletech. It was announcedin December 2003 that Teletech, Inc. ("Teletech"), a customer service firm that
provides customer services and technical support to computer and internet related companies, finalized a
lease with the City to occupy the space previously occupied by the Stream International M' the Gateway Mall
West. Teletech initial plans were to provide approximately 125 jobs, 100 which would be MI -time, with the
number ofj obs planned to increase to a total of 425 positions, 3 40 which would be full-time. As of February
2005, Teletech employs approximately 200 people. Under the proposed lease Teletech would occupy the
space in Gateway West Mall for a minimum of five years beginning February 1, 2004. The lease also calls
for Teletech to receive 100% rent elimination from the City M* the first year in exchange for creating and
maintaining a mn* u*mum of 125 jobs 'in the first year, 250 jobs 'in the second year and 425 jobs in the
subsequent years and have at least 80% of the jobs be full-time and paying a minimum $8per hour in
addition to a benefits package equal to 20% of the minu,num wage of $8 per hour. In addition, under the
lease Stream International would be required to buy out the remainder of its financial obligations which
include a lump -sum payment of $1.36 million to cover rent for 6 '/:z years, repay $767,000 to cover the
balance of a loan the City provided Stream, pay up to $ 5 0,000 to cover any transaction costs, and to pay the
brokerage fee the Cityincurred to find a new tenant which.could reach as much as $300,000. �Teletech will
guarantee a mini'mum property tax payment to the City M' the amount of $140,000 per year. In return to meet
TeletecW s parking requirements, the City and Flathead County Port Authority (co-owner of the mall space)
w ill develop a parking area.
Resource Label Group. Resource Label Group ("'RLG"') 'I's a Tennessee -based company that is currently
constructing a 16,000 square foot building estimate to cost $4.5 million dollars near the City of Wbitefish
and is expect to employ 40-50 people within four years of opening. PLG designs and prints custom labels
for products such as shampoo, agricultural chernicals, automobiles and lunch boxes. RLG has additional
plants located 'in Memphis and Franklir4 Tennessee which employ a combined 100 people. It is expected
that RLG Will provide jobs starting at approximately $ 3 0,000 per year, with some sales positions expected to
pay in the six figures. RLG opened in early 2004 and employs approximately. 12 people as of November
2004.
C-4
Tourism and Recreation
The tourism industry is an important source of economic activity for the area. Visitors are attracted to the
5 0
area s scenic beauty and outdoor recreational opportunities. Tourism in the area is anchored by Big
Mountain SId and Summer Resort, Glacier National Park, the Bob Marshall and Great Bear Wilderness
areas, the National Bison Range and Flathead Lake, Whitefish Lake and other area waterways.
B* Mountain Ski and Summer Resort. Outdoor sports are popular in the area. Big Mountain Ski and
19
Summer Resort, located approximately 22 miles north of the City, offers down hill and cross -county skiing
among many summer activities. With more than 3,000 skiable acres, Big Mountain Ski Resort is one of the
largest ski resorts M" the U.S. and Canada. Big Mountain currently has eleven lifts, two high-speed quads
servicing 2,500 vertical feet and 83 marked runs. The readers of Ski Magazine (October 2001 issue) rated
Big Mountain Ski Resort number 21 in North America and the best resort in Montana. Wilderness trails are
located throughout the area for the enjoyment of cross-country skiing and snowmobiling.
Big Mount3in Resort, which is owned and operated by Winter Sports, i's in a growth phase of its village.
Hines Resorts, an international real estate firm, was selected as the developer of the new $300 million
Glacier Village 'in 2001. In July of 2004, Hm'es Resorts parted ways with Winter Sports to pursue other
commercial development and the Project was turned over to Walker Corporation based out of Sydney,
Australia. The improvements are scheduled to be completed over an eight to ten year period. The Glacier
Village plan calls for a pedestrian -friendly village with retail shops. and restaurants lining the streets, year-
round services and a hotel and state of the art conference center that will offer 41,000 square feet in three
stories. Hines reported bn*sk sales of its offerings, selling over $35 million in single-family home sites,
townhomes and condominiums since September 11, 2001. Construction began in 2002 on the $15-million
five -story Morning Eagle Lodge, which opened in December of 2003. The first floor of Morning Eagle
Lodge is for commercial space. The Lodge will also 'include underground parking and condominium
configurations ranging from 500-square-foot studio um*ts that sold for $190,000 to 1,500-square-foot three -
bedroom units that average $525,000. The ski-in/ski-out home -site developments at Glacier Village include
Northern Lights (with all 18 home sites sold in less than a year), The Glades (with 11 of 13 home sites sold
the first day of offering) and Slopeside (a 24-townhouse unit with 6 released last fall and all anticipated to be
completed by December 2006). The Glades and Northern Lights subdivisions have been completed with the
village area currently under construction. Winter Sports also recently announced construction of 10
reasonably priced apartments ($350-$650 per month) to be built on Big Mountain with 20 more to follow
based on demand.
Blacktail Mountain Ski Area. Blacktail Mountain SId Area ("Blacktail"') is located 28 miles south of the
City. Blacktail has more than 1 ,000 acres to ski, with the longest run at I % miles. Blacktail offers two
double -chair and one triple -chair lift and a handle tow. The lodge is a three-story buildm*g that contains the
ticket office, rental shop, a retail shop, a caf6 and a restaurant pub.
Glacier National Park. Glacier National Park is located approximately 3 3 miles northeast of the City. The
area was designated a Forest Preservein 1900. In 1910. President Taft signed the bill establishing Glacier as
the country's I O'hnational park. The construction of the Going -to -the -Sun Road through a remote section of
Glacier National Park was completed in 1932 after 11 years of work. The road, a National Historic
Landmark, is considered an engineering feat and is one of the most scenic roads in North America. With
over 1,500 square miles of wildemess, many glaciers, and lakes including Lake McDonald and more than 700
miles of trails, Glacier National Park is a popular destination for recreationalists. The Park reported
approximately 1,937,042 visitors in 2005..
C-5
Just across the border, in Canada, is Waterton Lakes National Park. In 1932, the United States and Canadian
governments voted to designate the parks as Waterton -Glacier International Peace Park, the world's first, as
a symbol of peace and friendship. More recently, the parks have received two other international honors.
The parks are both Biosphere Reserves, and were named as a World Heritage Site in 1995. Between
Waterton Lakes National Park and Glacier National Park, there are over 850 miles of maintained hiking
trails.
Bob Marshall and Other Wilderness Areas. Known as the flagship of the nation's wilderness fleet, the
"Bob" is one of the largest and best-known wilderness areas in the country. Together With the Great Bear and
Scapegoat wildemess areas, it forms a contiguous wild lands complex of more than 3 million acres that
straddle the Continental Divide. These Wilderness areas contain roughly 1,800 miles of trails. Accessible
only by trail, the complex offers fishing, hunting, camping, horseback fiding and river floating.
Flathead Lake, Whitefish Lake and other Waterways. Flathead Lake, located 'in the County approximately
9 miles south of the City, is a popular vacation destination. Flathead Lake encompasses approximately 200
m 'les and *s the largest freshwater lake west of the Miss" ' pi. Flathead an
issip Lake offers a v 'ety of fish
including cutthroat, macIdnaw, largemouth bass and yellow perch.
There are many other lakes and rivers in the area that draw recreationalists. The waterways allow a number
of outdoor sports to be enjoyed M*cluding boating, fishing and swirnming. Whitefish Lake 'is located 15
miles north of the City near Big Mountain Ski and Summer Resort. South, Middle and North Forks of the
Flathead River, near Glacier Park, form the nation's longest wild and scenic river system, stretching 219
miles across some of Montana's most rugged backcountry
Area GoYl Courses. A number of golf courses are located in the County and surrounding area. Those
located in the County include: Buffalo HIII's- Eagle Bend Golf Club; Glacier View Golf Club; Mountain
Crossroads Golf Course; Par 3 on 93 Golf Course; Whitefish Lake Golf Club; Meadow Lake Golf Resort;
Big Mountain Golf Club; and Village Green Golf Course, which all are public with the exception of the
Glacier View Golf Club, which 'is semiLprivate. Buffalo Hill's offers the 9-hole Camero n Course and 18-
hole Championship Course, which was ranked by Go . 6CDigest as the 3rd "Best in State" in 1997/98. The
Eagle Bend Golf Club offers the 9-hole Eagle Bend Course and 18-hole Lake Ridge Course, which was
ranked by GWDigest as the "Best in State" in 1995/96 and rated it 3 1 " of the "Fop 7 5 Public Courses"" in
1990. The Whitefish Lake Golf Club has two 18.-hole courses available, the South Course and the North
,Course that was rated by GWDigest as the e ""Best MO State" in 1995/96 and 2 nd M1997/98 and as the Vd
"Best Public Course" in the State in 1996. 'fhe Glacier View Golf Club, Meadow Lake Golf Resort, which
was rated by GWDigest as the 6th"Best Public Course" in the State for 1996, Big Mountain Golf Club and
Village Green Golf Course all offer 18-hole courses, while the Mountain Crossroad Golf Course and Par 3
on 93 offer 9-hole courses.
Population Trends
Historical population figures for the City, the County and the State of Montana 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
KaliTell
ChLnEe____._
Coun!y
Change
Montana
C� e
2005'
17P381
22.2%
83372
11.7%
935�670
3.7%
2000
14X3
19.4
74A71
25.8
902J95
12.9
1990
11)917
11.5
59P218
14.0
799,065
1.6
1980
10�689
1.5
512966
31.7
7861'690
13.3
Represents the intercensal estimates as of July 1, 2005. The City estftnate'is, as of July 1, �004. The city/town estimates for
2005 were not available as of the date of this Official Statement.
Source: United States Census Bureau
Major Private Employers
The major private employers in the County as of December 2004 were as follows.
Approx. Number of
gm er
nTe of Business
m ps
K--ployq
1.
Kalispell Regional Medical Center
Health Care
124N
Plum Creek T*mber
Wood Products
11140
.J..
Semi'tooll, Ine.
ipm
Electronics Equi ent
450
4.
Winter Sports, Inc.
Big Mountain Operator
450
5.
Workplace, Inc.
Professional Employer Organization
440
6.
Wal-Mart
Retail
350
7.
Burlington Northern,
Railroad
300
8.
LC Staffing Service
Employment Agency
300
9.
hAnmanuel Lutheran Home
Nursing Home
270
10. North Valley Hospital
Health Care
2.35
Source: Flathead Economic Development Authority, local chambers of commerce and telephone survey
Recent Building Permits
Shown in the table below, are the building permi*t trends for the City of Kalispell for the past five years.
New Commercial Permits Residential and Other Permits
Year Number Value Number Value
2005
6.8
$54,3031976
340
$35,4911255
2004
31
3626151,537
320
411796,390
2003
36
- 15,728ffll
206
23�754�745
2002
28
47,1072163
208
1925022083
2001
44
26�858�773
142
161224,1546
Source: City Buildm*g Department
C-7
Housing Market Trends
According to Kelley Appraisal, located in the City, as of 2005 the County was the most subdivided county M
the State with approximately 36,201 residential parcels on the tax rolls, which includes 33,599 urban, rural
and agri cultural single-family homes and 2,479 condominiums and townhouses. Of the 36,201 residential
parcels, approximately 8 5 % are sent to addresses *in the County with 15 % distributed to addresses outside the
County. The Kelley Appraisal reported that the County had 20,786 vacant parcels (on the tax rolls but do
not have taxable improvements), which is 3,294 more than the 2' highest county M*-the State, Yellowstone
County with 17,492 vacant parcels. The City Kalispell had approximately 233 SFRs, 25 duplexes,, 86
townhouses and 34 multi -family structures builtin 2005. The County, including all incorporated cities, had
1, 102 SFRs, 3 3 duplexes, 145 townhouses and 203 multi -family structures completed M" 2005. Accord ing
the Kelley Appraisal the median home price as of 2004 was $189,000 for the City.
Earnigs By Industry
The following table shows County total personal 'income, wage and salary,, labor and proprietors' earnings by
major industry type for the years 2001 through 2004. Figures shown are m' thousands,
2001 2002 2003 2004
Total Personal Income $1,984�353 $27039,407 $2� 15%703 $21319,678
Earnings by Industry:
Farin
3M9
61633
61513
7)722
Non -farm
1�36%188
11410,149
115251,332
126552818
Private
12177.7598
1)2142290
1�316�775
114322146
Ag. Services, Forestry & Fishing
24,155
25,833
24)425
2510435
M* * g
14,932
151731
13�588
16�730
Utilities
28�206
332192
441,335
472136
Construction
1351,025
142�431
163JP547
1912207
Maniifacturing
1711852
157,396
1481754
1562230
)�%olesale Trade
29,816
333417
37�472
422705
Retail Trade
1417944
151)935
158)956
1727750
Transportation& Warehous* g
56�848
55J25
561P518
597864
Information
24V327
241,746
26�533
29,533
Finance, Insurance & Real Estate
571024
67,205
832373
86,692
Real Estate and Rental and Leasing
81)726
661251
899741
107,204
Professional & Technical Services
9086
-871807
86,2001
81,928
Management of Companies
51,087
51,188
5,712
51538
ices
Adml"LM'strative & Waste Serv'
441$ 627
491,047
54928
1
62,3184
Educational Services
71146
8J31
10)384
117658
Healthcare and Social Assistance
143,374
162,110
175�263
1892674
Arts'. Entertainment & Recreation
18,622
21,151
232104
247627
Acconunodation & Food Services
621839
66,083
693907
741177
Other Services
39,362
411511
44)234
462874
Government
182,590
1952859
2082557
2231,672
Federal/Civilian
52,364
54,7565
587490
62,285
Military
6,830
8.1872
121714
13,733
State and Local
123)396
132,422
1371,353
147,654
Source: U.S. Department of Connnerce, Bureau of Econonlic Analysis, Re ional Economic Information
91
System.
Labor Force and Unemployment
The table below shows Flathead County employment figures as well as County, State of Montana, and
United States unemployment rates since 1995.
Year
Labor Force -
plo2p2ent
gm
--ployment Rates --------
Flathead State -of
C21��n Montana United States
2004
41 �868
392625
5.4%
4.4%
5.5%
2003
401,648
381,408
5.5
4.7
6.0
2002
39�996
37�961
5.1
4.6
5.8
2001
40,016
37�936
5.2
4.6
4.8
2000
39)292
3 7924.0 1 -5
5.3
4.9
4.0
1999
37A16
342741
7.1
5.2
4.2
1998
37X6
341�868
7.8
5.6
4.5
1997
371290
34,539
7.4
5.4
4.9
1996
36�781
33,1954
7.7
5.3
5.4
1995
36J47
3 3 43 8
7.5
5.9
5.6
Source: Montana Department of Labor and Industry.
Personal Income Trends
The following table shows total and per capita personal income growth 'in the County from 1995 through
2004.
Total Personal
Percent of
Per Capita
Percent of
Year
Income (000's)
Change
Income
Change
2004
'$2531%678
7.41%
$283598
5.19%
2003
2215%703
5.90
27,188
3.25
2002
220397407
2.77
26,332
1.00
2001
13,984�353
11.29
26>071
9.27
2000
127823999
10-12
23�859
8.49
1999
1,6191168
(0.90)
212992
(2-36)
1998
136333933
10.18
22-1524
9.87
1997
1,467,7541
4.52
20)301
3.41
19.96
1 A0112 5 5
5.05.
19308
2.88
1995
1,3303,623
5.79
191,043
2.61
Source: U.S. Departinent of Commerce', Regional Econorm'c Information System, Bureau of Econorru*c
Analysis
C-9
Employment by Major Industry
The table below sets forth the total number of full-time and part-time employees in the County for the years
and 'industries as shown.
Employment by Place of Work:
Total Employment
By Type:
Wageand Salary
Proprietor
Farm
Non -Farm
By Industry. -
Farm
Non-Fazm
Pri vate
Ag. Services, Forestry, Fish. & Other
Mining
Utilities
Construction
Manufacturing
Wholesale Trade
Retail Trade
Transportation and Warehousing
Information
Finance, Insurance & Real Estate
Real Estate and Rental and Leasing
Professional and Technical Services
Management of Companies
Administrative and Waste Services
Educational Services
Healthcare and Social Assistance
Art, Entertaimnent and Recreation
Accommodation and Food Services
Other Services
Government & Government Enterprises
Federal/Civill"an
Military
State and Local
2001 2002 2003 2004
502674 51 �499 52,678 542674
365039
36,535
37�262
38,678
141635
14,964
15�416
15,996
994
112013
� 993
993
13.7641
13,951
14,423
15,1003
11115
11133
13,106
L109
49,559
503,366
51,572
53�565
44,840
45,558
46,734
48,664
881
967
834
803
304
314
354
412
176
183
186
202
4�845
41984
51397
52882
4, 180
33621
31�342
31456
939
966
1,004
1�j 11
67805
710031
73145
7A62
L398
128
1)289
1,328
728
695
726
792
1 J90
1�939
2�091
2.7224
21356
2A54
27657
21844
3,379
31293
3 �054
2)757
123
132
135
104
21784
23,937
31152
31368
457
490
- 547
601
42432
41803
5J06
5�297
1,634
1,74 7
11830
1,894
41707
47668
4,827
4)948
2X2
31006
3�058
31179
4,719
41808
41P838
42901
829
856
867
880
404
415
419
416
3 486
3,537
3,552
35,605
Source: U.S. Department of Commerce, Regional Economic Information System, Bureau of Economic
Analysis
C-10
APPENDIX D
Continuing Disclosure
D-I
ICA 000
W-W15201)
City of Kalispell, Montana
Special Improvement District No. 344 Bonds
Series 2006
CONTINUING DISCLOSURE UNDERTAI<ING
June 29, 2006
Th 'is Continuing D isclosure Undertaking (the "Disclosure Undertaking") is executed and delivered by the City
0
of Kalispell, Montana, a municipal corporation and a political subdivision of the State of Montana (the "Issuer"), in
connection with the issuance of its Special Improvement District No. 344 Bonds, Series 2006 (the ""Bonde"),, in the
original aggregate principal amount of $4,520,000. The Bonds are being issued pursuant to (i) an authorizing
resolution adopted by the City Council of the Issuer on April 3, 2006, (H) an award resolution adopted by the City
Council of the Issuer on June 13, 2006, and (Iii) a bond resolution adopted by the City Council of the Issuer on
June 19, 2006 (collectively, the "Resolutions") and delivered to the Purchaser (defined herein) on the date hereof.
Pursuant to the Resolutions, the Issuer has coverianted and agreed to provide continuing disclosure of certain financial
0 0
information and operating data and timely notices of the occurrence of certam* events. The Issuer is an 'cobligated
person" with respect to the Bonds, within the meaning of SEC Rule 15c2-12(b)(5) (the"Rule"). In addition, the Issuer
hereby covenants and agrees as follows:
'I Disclosure Undertaking is be*
Section 1. Purpose of the Disclosure Und nis I ing executed and
delivered by the Issuer for the benefit of the Holders (defined herein) of the Bonds in order to assist the Participating
Underwriters (defined herein) in complying with the Rule promulgated by the Securities and Exchange Commission
(the "SEC"'). This Disclosure Undertaking, together with the Resolutions, constitutes the written agreement or contract
for the benefit of the Holders of the Bonds that i's required by the Rule.
If the Issuer fails to comply with any provisions of this Disclosure Undertaking, any person aggdeved thereby,
including the 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 agreement or covenant, contained in this Disclosure
Undertaking, including an action for a writ of mandamus or specific performance. Direct, indirect, consequential and
punitive damages shall not be recoverable for any default hereunder. Notwithstanding anythmig to the contrary
contained herein I in no event shall a default under this Disclosure Undertaking constitute a default under the Bonds or
under any other provision of the Resolutions.
Section 2. Defimitions. In addition to the defined terms set forth in the Resolutions, which apply to any
capitalized term used in this Disclosure Undertaking unless otherwise defined *in this Section, the following capitalized
terms shall have the following meanings:
"Annual Reporf'means any annual report provided by the Issuer pursuant to, and as described *in, Sections 3 and
4 of this Disclosure Undertaking.
"Audited Financial Statements" means the Issuer's. annual financial statements, prepared in accordance with
generally accepted accounting pninciples C'GAAP") for Governmental Units as Prescribed by the Governmental
Accounting Standards Board C'GASB').
"Bonde'means the Issuer" s Special Improvement District No. 3 44 Bonds, Series 2006, in the original aggregate
. principal amount of $4,520,000.
D-2
"Disclosure Information" means the same as defined 'in Section 4 hereof.
� "Disclosure Representative" shall mean the City Finance Director of the Issuer or his or her designee, or such
other person as the Issuer shall designate from time to time,
"Dissemination Agent" shall mean any Dissemination Agent designated 'in writing by the Issuer and which has
filed with the Issuer a written acceptance of such designation.
"'Final Official Statement" means the deemed final Preliminary Official Statement, dated May 30, 2006, plus
the Official Statement, dated June 13, 2006, which constitutes the final official statement delivered in connection with
the Securities, which is available from the MSRB.
"Fiscal Year" means the fiscal year of the Issuer, which currently ends on June 30.
"Holder" means the person in whose name a security is registered or a beneficial owner of a Security.
"Issuer" means the City of Kalispell, Montana which is the obligated person with respect to the Securities.
"Material Evenf' means any of the events fisted *in Section 5(a) of this Disclosure Undertaldng.
"'MSRB"' means the Municipal Securities Rulemaking Board located at 1900 Duke Street, Suite 600, Alexandria,
VA 22314.
'NRMSM!'means any nationally recognized muni i al securities information repository as recognized from time
icip
to time by the SEC for purposes of the Rule.
'Tarticipatm*g Underwriter" means any of the ori ' al underwriter(s) of the Bonds (including the Purchaser(s))
gin
required to comply with the Rule 'in connection with the offering of the Bonds.
"Purchaser" means D.A. Davidson & Co.
"Repository" means each NRMSIR and each SID, if any.
W
"Rule" means SEC Rule 15c2,12(b)(5) promulgated by the SEC under the Securities Exchange Act of 1934, as
the same may be amended from time to time, and including written *interpretations thereof by the SEC.
"SEC" means Securities and Exchange Commission.
"Securities" means the Bonds.
"SEY means any public or private repository or entity designated by the State of Montana as a state *information
depository for the purpose of the Rule. As of the date of this Certificate, there is no SID.
"State" means the State of Montana.
"Tax Exemption"" shall mean the Miterest component of the payment on the Bonds that is excludable from gross
0
income for federal 'income tax purposes, whether or not such interest is *includable as an item of tax preference or
otherwise includable directly or indirectly for purposes of calculating any other tax liability,- including any alternative
minimum tax or environmental tax.
D-3
Section 3. Delivery of Annual Revorts. The Issuer will at least -annually provide the information required
in Section 4. The Disclosure Information may be in the form of Audited Financial Statements or may be unaudited and
which, for financial statement information, shall be for the most recent Fiscal Year of the Issuer, commencing for the
Fiscal Year ended June 3 % 2006 (if in response to a request, the most recent Fiscal Year ending not less than 270 days
before the date of the request), and, for other such information, the infbrmation most recently compiled by the Issuer on
a customary basis and publicly available under applicable data pri vacy or other. laws.
Section 4. Content of Annual Roorts. The Issuer's Annual Report shall contain or incorporate by
reference the following financial information and operating data (the "Disclosure Information" in the Annual Report for
the Issuer:
(A) the Audited Financial Statements of the Issuer for the most recent 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,
containing balance sheets as of the end of such Fiscal Year and a statement of operations, changes in fimd balances and
cash flows for the Fiscal Year then ended for required funds, prepared *in accordance with generally accepted
accounting princi les promulgated by the FM*ancial Accounting Standards Board as modified in accordance with the
IP
governmental accounting standards promulgated by the Governmental Accounting Standards Board or as otherwise
provided under State law, as *in effect from time to time, or, 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 Issuer, noting the discrepancies therefrom and the effect thereof, and certified as to accuracy and completeness Mi all
material respects by the Disclosure Representative- and
7
(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 Disclosure Representative to the best of his or her knowledge which certification maybe based
on the reliability of information obtained from third party sources:
(1) . updated information for the then most recent completed fiscal year asp'rovided in the table in
the Official Statement under the section captioned "Revolving Fund" concerning the Revolving Fund Cash
Balance and outstanding Bonds secured thereby,
(2) a description of any special improvement district bonds issued by the Issuer during the Fiscal
Year;
(3) the current balance 'in each of the TIF Operating Accounts that would be available to pay debt
service on the Bonds;
(4) the number of property owners in the District;
(5) updated *information for the then most recent completed Fiscal Year *in format similar to the
table under the section captioned "Special Improvement District Assessment Billings and Collections" in the
Official Statement;
(6) updated information for the then most recent completed Fiscal Year as provided in the table
under the section captioned "Statement of Changes M* Fund Balance of the Revolving Fund" of the Official
Statement;
(7) the market and taxable valuations of the City for the then current Fiscal Year; and
(8) tax collection *information for the then most recent co�npleted Fiscal Year in format suinilar to
the table under the section captioned "Tax Collections" *in the.Official Statement.
D-4
Any or all of the items. listed above maybe incorporated by reference from other documents, including official
statements of debt issues of the Issuer or related public entities, which have been submitted to each of the Repositories,
the SID, or the SEC. If the document incorporated by reference is a final official statemeht, it must be available from
the MSRB. The Issuer shall clearly identify each such other document so incorporated by reference.
Section 5. Rgporting of Material Events.
i *
(a) Material Events. This Section 5(a) shall govern the givIng of notices of the occurrence of any of the
following applicable events (each a "Material Event"):
principal and interest payment delm*quencies-,
non-payment related defaults;
(iii) unscheduled draws on debt service reserves reflecting financial difficulties-,
(iv) unscheduled draws on credit enhancements reflecting financial difficulties;
(y) substitution of credit or liquidity providers, or their failure to perform;
* ty,
(vi) adverse tax opinions or events affecting the tax-exempt status of the secun
(vii) modifications to rights of security holders;
V -
(viii) Bond calls other than for a scheduled sinking fund redemption;
Gx) defeasances;
(x) release, substitution or sale of property securing repayment of the securities; and
(xi) rating changes.
Whenever a Material Event occurs, the Issuer shall as soon as possible determine if such event would constitute
material information for Owners ofBonds, provided, that any event under subsection subsections (a)(viii), -(ix) or (xi) will
always be deemed to be material.
If the Issuer has determined that the occurrence of a Material Event would be material, the Issuer shall file a
notice of such occurrence with the MSRB and each SID, if any.
(b) Other Events. In a timely manner, the Issuer shall give notice of the occurrence of any of the following
events or conditions:
(1) the failure of the Issuer to provide the Annual Report at the time specified under "Delivery of
Annual Reports" in Section 3;
(ii) the amendment or supplementing of this Disclosure Undertaking, together with a copy of such
amendment or supplement and any explanation provided by the Issuer under "Amendments; Waiver" below;
0 1 the termination of the obligations of the Issuer under this Disclosure Undertaking- and
0
(iv) any change in the Fiscal Year of the Issuer.
(c) Manner, closure. The issuer agreed to make available the information described above *in this
Section 5 and in Section 4 to the following entities by telecopy, overnight delivery, mail, electronic mail, or other
means, as appropriate:
(i) the Disclosure Information, to each of the Repositories, the SID, if any, or, if no SID then
exists as was the case in State as of the date of the Final Official Statement, to any person or entity upon
request;
00 the information in Sections 5(a) and 5(b), to the MSRB and to the SID, if any, and
(11*i) the Disclosure Information and the information 'in Sections 5(a) and 5 (b), to any rating agency
then maintaining a rating of the Bonds and to any bondowner, at the expense of such bondowner, who requests
0
in writing such information at the time of the transmission under clauses (c)(i) or (c)(ii) above as the case may
be, or, if such Disclosure Information or information is transmitted with a subsequent time of release, at the
time such Disclosure Information or information is to be released.
Any filing under this Disclosure Undertaking may be made solely by transmitting such filing to the Texas
Municipal Advisory Council (the "MAC") as provided at http-://www.disclosureusa.org unless the SEC has withdrawn the
mterpretive advice mi its letter to the MAC dated September 7, 2004.
Section 6. T on of KqR2rtin 1 he Resolutions and this
&Obligation. The Issuer's obligations under t
Disclosure Undertaking shall terminate upon the legal defeasance, or upon the redemption or payment in full of all the
Bonds.
. Section 7. . Dissemination The Issuer may, from time to time, appoint or engage a Dissemination
Agent to assist it in carrying out its obligations under the Resolutions and this Disclosure Undertaking, and may discharge
any Dissemination Agent, with or without appointing a successor Dissemination Agent.
Section 8. Amen aiver. Notwithstanding any other provision ofthe Resolutions or this Disclosure
Undertak�ing, the Issuer may amend this Disclosure Undertaking, and any provision of this Disclosure Undertaking maybe
w * d
aive , if such amendment or waiver is supported by an opinion of nationally recognized bond counsel to the effect that
such amendment or waiver would not, in and of itself, cause the undertakings herem' to violate the Rule if such
amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official
interpretation of the Rule
Section 9. Additional Information. Nothing 'in this Disclosure Undertaking shall be deemed to prevent the
Issuer from. disseminating any other infortnation, using the means of dissemm'ation set forth in this Disclosure Undentaldng
or any other means of communication, or including any other . information *in any Annual Report or notice of occurrence of
4
Material Event, addition to that which is required by this Disclosure Undertaking. If the Issuer chooses to include any
a in
information in any Annual Report or notice of occurrence of a Material Event. in addition to that which is specifically
r ired by th' s D ' sclosure Undertaking, the Issuer shall have no obligation under this Disclosure Undertaking to update
equ I
such *information or include it in any future Annual Report or notice of occurrence of a Material Event
Section 10. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure
Undertaking any Holder of the Bonds may take such actions as may be necessary and appropriate, including seeking
mandamus or specific performance by court order, to cause the Issuer to comply with its obligations under the Resolutions
and this Disclosure Undertaldng. A default under this Disclosure Undertaking shall not be deemed an event of default
with respect to the Bonds and the sole remedy under this Disclosure Undeftaking *in the event of any failure of the Issuer to
comply with this Disclosure Undertaking shall be an action to compel performance.
Elm
Section 11. Benefician'es. This Disclosure Undertzildng shall inure solely to the benefit of the Issuer, the
Partici ating Underwriters and Holders from time to time of the Bonds, and shall create no rights in any other person or
ip
entity.
Section 12. Countemarts. This Disclosure Undertaking may be executed in several counterparts, each of
which shall.be an original and all of which shall constitute but one and the same instrument.
Section 13. Governing La..w. This Disclosure Undertaking shall be interpreted in accordance with the laws of
the State of Montana.
Section 14. Severabili . If any portion of this Disclosure Undertaking shall be held invalid or inoperative,
then, so far as is reasonable and possible (i) the remainder of this Disclosure Undertaking shall be considered valid and
operative, and (ii) effect shall be given to the intent manifested by the portion held invalid or inoperative.
IN WITNESS WHEREOF, the following officials of the City of Kalispell, Montana have executed this
CONTRiUING DISCLOSURE UNDERTAKING as of the date and year first written above.
(SEAL)
KA225-1 (BWI)
281136v.2
CITY OF KALISPELL, MONTANA
By
Its Mayor
By
Its City Clerk
By
Its City Finance Director
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APPENDIX E
Summary of the Bond Resolution
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DEFINITIONS OF CERTAIN TERMS
In addition to the words and terms defined elsewhere in this Official Statement, thefollowing words and terms as used in
the Bond Resolution will have thefollowing meanings unless the context or use clearly indicates another or different meaning.or
intent.
Act or SLD Act means Montana Code Annotated, Title 7, Chapter 12, Parts 41 and 42,, as amended.
Bond Registration Act means the Model Public Obligations Registration Act of Montana, as amended.
Bond Resolution means a resolution approved by the City Council of the City on June 19,2006, relating to the Bonds, as
the same may be from time to time modified, amended, or supplemented.
Bonds means the City's Special Improvement District No. 344 Bonds, Series 2006, in the original aggregate principal
amount of $4,520,000,
means the City of Kalispell, Montana, its successors and assigns.
Code means Internal Revenue Code of 1986, as amended,
Construction Account means the separate account within the District Fund established by the Bond Resolution.
C means Flathead County, Montana, its successors and assigns.
Debt Service Account means the separate account within the District Fund established by the Bond Resolution.
District or District 344 means Special Improvement District No. 344 of the City.
District Fund means Special Improvement District No. 344 Fund established by the Bond Resolution for the District.
DTC means The Depository Trust Company of New York, New York.
I
mprovements means certain public infi-astructure improvements of special benefit to the properties within District 344
and financed with proceeds of the Bonds, as more fully described in the Official Statement.
Industrial District means the industrial tax micrement district established by the City within the boundaries of District 344.
Intent Resolution means Resolution No. 5063, adopted by the City Council of the City on October 3, 2005, declaring the
intention of the City Council to create the District for the purpose of making the Improvements for the special benefit ofproperty
' the District, as the same may be from time to time dified, amended or supplemented.
owners in M0
Official Stgement means the Preliminary Official Statement, dated May 31, 2006,.relating to the Bonds and any
addendum or final Official Statement relating to the Bonds.
Ordinance No. 759 means the ordinance undertakenby the City to provide funds for establisbment of the Revolving Fund.
PoMent Date means each January I and July 1, commencing January 1, 2007.
trar means U.S. Bank National Association, of Seattle, Washington, its successors and assigns.
Reserve Ac means the means the separate account within the.District Fund established by -the Bond Resolution that
secures the Bonds.
Revolvig Fund means the Special Improvement District Revolving Fund established by the City to secure the payment of
certain of its special improvement district bonds, including the Bonds.
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State means the State of Montana, its successors and assigns.
Technology District means technology tax increment district established by the City within the boundaries ofDistrict 344.
TIF Act means Montana Code Annotated, Title 7, Chapter 15, Part 42, as amended.
SUMMARY OF CERTAIN PROVISIONS OF THE BOND RESOLUTION
Yhefollowing is a summary ofcertain provisions ofthe Bond Resolution. This summary is qualified in its entirety by
reference to the Bond Resolution. A copy of the Bond Resolution is available during the offering period and after the date of
issuance of the Bondsfrom the City. Capitalized terms employed in this summary are defined in this APPENDLYE under the
caption "DEFINTIONS OF CERTAIN TERMS. "'
Costs
The total costs and expenses of the Improvements is estimated to be $4,520,000 and that the costs and expenses to be
assessed against properties benefited by the I mprovements micludi costs of preparation of plans, specifications, maps, profiles,
I Ing
engineering superintendence and ection, preparation of assessment rolls, expenses ofmalcing the assessments, the cost of work
MSP
and materials under the construction contract and all other costs and expenses, including the deposits ofproceeds in the Revolving
Fund and in the Reserve Account mi the District Fund, will be $4,520,,000. Such amount will be levied and assessed upon the
assessable real property within the District on the actual area method of assessment for the Improvements. The City will not
contribute funds to the construction of the Irnprovements, other than from proceeds of the Bonds,
This City Council has jurisdiction and is required by law to levy and assess $4,520,000, together with interest thereon, to
collect such special assessments and 6redit the same to the special hinprovement district fund created for the District (the District
'Fund), which fund is to be maintained on the official books and records of the City separate from allother City funds, for the
payment of principal and interest when due on the bonds in the Bond Resolution authorized.
Principal Amount� Maturities, Denominations, Registration
The Bonds are payable solely from amounts deposited in the District Fund and the accounts established therein. The
Bonds will be denominated "Special Improvement District No. 344 Bonds, Series 2006". The Bonds will be dated, as originally
issued, and be registered as of June 15, 2006, will each be mi the denomination of $5,000 or any integral multiple,, will mature on
July 1 in the years and principal amounts set forth on the inside front cover of the Official Statement. The Bonds will bear interest
from the date of original registration (June 15) until paid or duly called for redemption at the rates per annum set forth on the
inside front cover of the Official Statement,
Payment Dates. Interest on the Bonds will be payable on each Payment Datel commencing January- 1, 2007, to the
owners of record thereof as such appear on the bond register maintained by the Registrar at the close of business on the fifteenth
(15T'H) day of the inunediately preceding month, whether or not such day is a business day.
Method ofPayment. The Bonds will be *issued only in fiffly registered form. The interest on and principal of the Bonds
w ill be payable upon surrender thereof at the operations center of the Registrar. The principal of each Bond will be payable by
i
check or draft drawn on the Registrar.
Registration. The City will appoint U. S. Bank National Association, of Seattle, Wasbington,, to act as Registrar for the
Bonds. The City reserves the night to appoint a successor Registrar, transfer agent or paying agent, as authorized by the Bond
Registration Act. The City will agree to pay the reasonable and customary charges of the Registrar for services performed with
respect to the Bonds. The Bond Resolution also establishes a system of registration for the Bonds as required by the Bond
Registration Act.
Book -Entry Only System. The Bonds shall be initially issued as separately authenticated fully registered Bonds, and one
Bond shall be issued in the principal amount of each stated maturity of the Bonds. Upon n*1itial issuance, the ownership of such
Bonds shall be registered in the Bond register in the name of Cede & Co., as nominee of DTC. The Registrar and the City may
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treat DTC (or its nominee) as the sole and exclusive owner of the Bonds registered in its name for the purposes of payment of the
principal of or interest on the Bonds, selecting the Bonds or portions thereof to be redeemed', if any, giving any notice permitted or
required to be given to registered owners of Bonds, registering the transfer of Bonds, and for all other purposes whatsoever; and
neither the Registrar nor the City will be,affected by any notice to the contrary.
Redemption
The Bonds are subject to redemption as follows:
Mandatory Redemption. If on any Payment Date there will be a balance in the District Fund after payment of the
Principal and interest due on all Bonds drawn against it, either from (i) the prepayment of special assessments levied in the District
or (ii) from the transfer of surplus money from the Construction Account to the Debt Service Account,, the City Finance Director
will call for redemption on the Payment Date outstanding Bonds, or portions thereot in an amount which, together with the interest
thereon to the Payment Date., will equal the amount of such funds on deposit *in the District Fund on that date. The redemption
price will equal the amount of -the principal amount of the Bonds to be redeemed plus interest accrued to the date of redemption.
Tax Increments (as defined in the Bond Resolution) will not be applied to a mandatory redemption of the Bonds as described in
this paragraph.
Optional Redemption. The Bonds with stated maturities on or after July 1, 2014 are subject to redemption, in whole or in
part, on July 1, 2013, and any date thereafter, at the option of the City, in whole or 'in pazt, from sources of fimds (including Tax
Increments) available therefor other than those described under the heading "'Mandatory Redemption"", ata redemption price equal
to the principal amount thereof to be redeemed plus interest accrued to the redemption date, without premium. However, the
Bonds Will not be called for redemption (i) from amounts on deposit in the Reserve Account or (ii) before July 1, 2013, from the
proceeds of refunding special improvement district bonds or wan -ants.
Selection qfBondsfor Redemption; Partial Redemption. If less than all of the Bonds are to be redeemed, Bonds will be
redeemed in order of the stated maturities thereof. If less t1mn all Bonds of a stateA maturity are to be redeemed, the Bonds of such
maturity Will be selected for redemption in $5,000 principal amounts selected by the Registrar by lot or other manner it deems fair.
Upon partial redemption of a Bond, a new Bond or Bonds will be delivered to the registered owner without charge, representing
the remaining principal amount thereof outstanding.
Notice and Effect ofRedemption. The date ofredemption and the principal amount of the Bonds will be fixed by the City
Finance Director, who will give notice thereof to the Registrar in sufficient time for the Registrar to give notice, by first class mail,,
postage prepaid, or by other means required by the securities depository, to the owner or owners of such Bonds at their addresses
appearing in the bond register, of the numbers of the Bonds or portions thereof to be redeemed and the date on which payment will
be made, which date will be not less than thirty (30) days after the date of mailing notice. On the date so fixed -interest on the
Bonds or portionsfthereof so redeemed will cease.
The District Fund; Accounts Created Therein; Special Assessments; and Application of Tax Increments
Yhe District Fund. The Bond Resolution creates and establishes the District Fund which will be maintained by the City
Finance Director on the books and records of the City separate and apart from all other funds of the City. Within the District Fund
there wffl be created and maintained three separate accounts, designated as the "Construction Account," 'Debt Service Account"
and,,,'Reserve Account respectively -
Construction Account. There will be credited to the Construction Account proceeds of the sale of the Bonds to provide
for the construction of the Improvements. Any earnings on investment of money in the Construction Account will be retained in
the Construction Account. All costs and expenses of constructing the Improvernehts to be paid from proceeds ofthe Bonds will be
paid from time to time as incurred and allowed from the Construction Account *in accordance with the provisions of applicable law,
and money in the Construction Account will be used for no other purpose; provided that upon completion of the Improvements and
after all claims and expenses with respect to the Improvements have been fully paid and satisfied, any amount of money remamnig
in the Construction Account will b e transferred to the Debt Service Account and used to redeem Bonds as provided under the
headings"' -Redemption -Mandatory Redemption" and "Debt Service Account -Deposits to the Debt Service Accounf '
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Debt Service Account.
Debt Service Account Generally. Money Mi the Debt Service Account will be used only for (i) payment of the
principal of and interest on the Bonds as such payments become due or (ii) to redeem Bonds.
Deposits to Debt Service Account. From the proceeds of the Bonds, there will be depositedi the Debt Service
Account the accrued interest on the Bonds. Interest income on money in the Debt Service Account will be retained
therein and used as any other funds therein. Any mistallment of a special assessment paid prior to its due date with
interest accrued thereon to the next succeeding Payment Date Will be credited with respect to princi al and interest
ip
payments *in the same manner as other assessments are cre&ted to the District Fund. All money in the Debt Service
Account will be used first to pay interest -due, and any re money will be used to pay Bonds then due and, ifmoney
is available, to redeem Bonds in accordance with the provisions of the heading ""Redemption -Mandatory Redemption"
provided that any money transferred to the Debt Service Account from the Construction Account pursuant to the
provisions of the heading "The� District Fund; Accounts Created Therein; Special Assessments; and Application of Tax
Increments -The Construction Account' 'will be applied to redeem Bonds to the extent possible on the next Payment Date
for which notice of redemption may properly be given pursuant to Section 2.05(a). Provided, however, that Tax
Increments will not be available to redeem Bonds pursuant to the provisions of the heading "Redemption-Manddtory
Redemption". Redemption of Bonds will be as provided under the heading "Redemption" above, and interest will be
paid as accrued thereon to the date of redemption, in accordance with the provisions of Section 7-124206 of the Act.
Application of Tax Increments as Security for the Bonds. (i) Tax Increments derived from the Industrial
District and the Technology District will be pledged, to the extent provided in the Bond Resolution, by the City as
ity for the Bonds. Tax Increments derived from the Industrial District or the Technology District will only be
secun
utilized by the City to act as security for Bonds allocable to the cost of Improvements within the applicable tax increment
district.
and the it
(ii) In the event that a property owner is delinquent in the payment of special assessments C :y has
not received payment of any special assessments allocable to such parcel by the date that is fifteen (15) days prior to any
Payment Date, the City F miance Director is authorized to transfer, after transfers from the Debt Service Reserve Account,
but prior to transfers from the Revolving Fund, any Tax Increments (but only to the extent of such delinquent special
assessment payment., to the extent that such funds are on hand mi the operating account for each tax increment district and
are not pledged b' the City to other purposes) derived from the tax increment district in which the property is located,
y
and then on deposit with the City, to the Debt Service Account for th� pro-rata. portion of the payment allocable the
delinquent property that is due and owing on the Bonds on the next Payment Date. A transfer of Tax Increments
described in the immediately preceding sentence will not extinguish the lien of any special assessments due with respect
to a parcel of property and such transfer does, not decrease the amount of special assessments due with respect to any
parcel of property.
(iii) In the event that a property owner pays delinquent special assessments, after the application of Tax
Increments pursuant to Section 3.03(c)(ii) above, to the payment of regularly scheduled debt service on the Bonds, the
City Finance Director is authorized to trawfer an amount equal to such prior payments of Tax Increments for such parcel
to the applicable operating account for the tax increment fund in which such parcel is located. Any payment of
delinquent special assessments, after the application,ofTax Increment pursuant to Section 3.03 (c)(h) above, to a payment
of debt service on the Bonds will not be applied to the mandatory redemption of the Bonds pursuant to Section 2-05(a).
In the event that delinquent special assessments are paid after either the Industrial District or the Technology District is
terminated and the Bonds are not outstanding, the City will transfer such fiinds to the Revolving Fund.
Reserve Account. Money mi Reserve Account will be applied on any Payment Date to payment of principal of and
interest on the Bonds at the stated maturity thereof if funds on hand in the Debt Service Account, prior to the application of Tax
Increments. Funds in Reserve Account must be used for such purpose before a loan is made by the Revolving Fund therefor. If
money is on hand in Reserve Account and all Bonds have been paid or discharged, such money will be transferred to the
Revolving Fund, as required by Section 7-124169(3).
The Revolving Fund and Loansfrom the Revolving Fund. The City Council will annually or more often if necessary
issue an order authorizing a loan or advance from tile Revolving Fund to the District Fund in an amount sufficient to replenish any
E-5
deficiency then existing in the Debt Service Account and will issue an order authorizing a loan or advance from the Revolving
Fund to the District Fund in an amount sufficient to make good any deficiency then existing in the Debt Service Account in such
order to the extent that money is available in the Revolving Fund. Provided, however, that at the time any such loan or advance is
to be made, Reserve Account will have been or will remain depleted on the next Payment Date. A deficiency will be deemed to
existm' the Debt Service Account if the money on deposit therein, together with any funds on deposit in Reserve Account, on any
June 15 or December 15 (excluding amounts mi the Debt Service Account representing prepaid special assessments) is less than the
amount necessary to pay Bonds due (other than upon redemption), and interest on all Bonds payable, on the next succeeding
Payment Date.
Pursuant to Ordinance No. 759, the City has undertaken and agreed to provide funds for the Revolving Fund by levying
such tax or maldng such loan from the General Fund as authorized by Section 7-12-4222.of the Act. In the event that the balance
on hand in the Revolving Fund fifteen (15) days prior to any date when interest iis due on special improvement district bonds or
vmn-ants of the City is not sufficient to make good all deficiencies then existing in the special improvement district fimds for which
the City has covenanted to make loans from the Revolving Fund, the balance on hand in the Revolving Fund will be allocated to
the funds of the special improvement districts in which such deficiencies then exist in proportion to the amounts ofthe deficiencies
on the respective dates of receipt of such money, until all interest accrued on such special improvement district bonds or warrants
of the City has been paid. On any date when all accrued interest on special improvement district bonds and wan -ants of the City
payable from funds for which the City has covenanted to make loans from the Revolving Fund has been paid, any balance
re intheRevolvi Fund will be lent or advanced to the special ='provement district funds for payment and redemption of
Ing
bonds to the extent the special improvement district funds are deficient for such purpose, and, if money in the Revolving Fund is
insufficient therefor, pro rata, in an amount proportionate to the amount of such deficiency.
The City covenants and agrees to levy the property tax described in the immediately preceding paragraph to provide funds
for the Revolving Fund so long as any Bonds are outstanding to the extent required under the provisions of this Resolution and the
Act, even though such property tax levy may, under applicable law (Micluding SB 184, adopted by the Montana Legislature in
1999) or provisions of the home rule charter of the City, require that property tax levies of the City for other purposes be reduced
correspondingly. In addition, the City covenants to comply with the requirements ofthe Code and the Regulations in order that the
Reserve Account and the Revolving Fund comply and continue to qualify as "reasonably required7 debt service reserve fund(s) for
the Bonds.
Covenants
The City agrees to -make the following covenants with the owners from time to time of each of the Bonds that until all the
Bonds and interest thereon are fully paid.
LM ofAssessments. The City will do all acts and things necessary for the final and valid levy of special assessments
upon all assessable real property within the boundanies of the District in accordance with the Constitution and laws ofthe State and
the Constitution of the United States, *in an aggregate principal amount not less than $4,520,000. The special assessments will be
levied on the basis set forth *in the Intent Resolution (actual area method); and will be payable mi equal, serniiannual 4%0 ents
over a period of twenty (20) years, with interest on the whole amount remaining unpaid at an annual rate equal to the sum of:
(i) the average annual interest rate borne by the Bonds, plus (ii) one-half of one percent (0.50%) per annum, interestb i payable
emg
with prmicipal instaUrnents. The special assessments to be levied will, be payable on the 30th day ofNovemberin each ofthe years
2006 through 2025, and on the 3 1 st day of May in the years 2007 through 2026, inclusive, if not theretofore paid, and will become
delinquent on such date unless paid in full. The first partial payment of each special assessment will *include interest on the entire
special assessment from the date of original registration of the Bonds to Janury 1, 2007 and each subsequent partial payment will
& 0 .
include interest for six (6) months on that payment and the then remaining balance of, the special assessment. The special
assessments will constitute a lien upon and against the property against which they are made and levied, which lien may be
extinguished only by payment of the assessment with all penalties, cost and interest as provided *in Section 7-12-4191 of the Act.
No tax deed issued with respect to any lot or parcel of land will operate as payment of any installment of the assessment thereon
which is payable after the execution of such deed, and any tax deed so issued will convey title subject only to the lien of said future
installments, as provided in Montana Code Annotated, Section 15-18-214.
Reassessment. If at 4ny time. and for whatever reason any special assessment or tax in the Bond Resolution agreed to be
levied is held invalid, the City and this City Council 5 its officers and employees, will take all steps necessary to correct the Same
and to reassess and re -levy the same, including the ordering of work, with the same force and effect as ifmade at the time provided
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')y law, ordinance or resolution relating thereto, and Vaill reassess and re -levy the same with the same force and effect as an original
,evy thereof, as authorized in Section 7-12-4186 of the Act. Any special assessment, or reassessment or re -levy mnill, so far as is
practicable, be levied and collected as it would have been if the first levy had been enforced including the levy and collection of
any interest accrued on the first levy.
Application of Certain Tax Increments. The Tax Increments are pledged as security for the Bonds as set forth 'in above
under the heading "The District Fund; Accounts Created Therein; Special Assessments; and Application ofTax Increments -Debt
10
Service Account -Available Tax Increments. The City will collect and account for the Tax Increments as required by the TIF Act.
The City acknowledges that certain Tax Increments are pledged to the payment of the Bonds and the City covenants to maintain
the existence of the Industrial District and the Technology District as required by the TIF Act and Montana law.
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APPENDIX F
- --- ---- ----
Form of Legal Opinion
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CHARTERED
470 U. S - Bank Plaza
200 South Sixth Street
Minneapolis MN 55402-1458
(612) 337-9300 telephone
(612) 337-9310 fax
www.kennedy-graven.com
$4-152%000
City of Kalispell, Montana
Special Improvement District No. 344 Bonds
Series 2006
We have acted as Bond Counsel to the City of Kalispell, Montana (the "City") in connection with the
authorization, issuance and sale by the City of the above -referenced obligations (the "'Bonds"'), dated as of
June 15, 2006. -In that capacity, we have examined certified copies of certain proceedings taken, and certificates and
affidavits furnished, by the City in the authorization, sale and issuance of the Bonds, including a resolution (the
"Resolution") adopted by the City Council of the -City on June 19, 2006, prescribing the form of atid secun'ty for the
0 *
Bonds. As to questions of fact material to our opinion, we have assumed the authenticity of and relied upon the
proceedings and certificates furnished to us without undertaking to verify the same by independent investigation.
From our examination of such proceedings and other documents, assuming the genuineness of
th e sign a tures th ere on an d th e a c c uracy of th e facts sta ted th erein, a n d based upon federal an d State oj
0 0 .0 0 0
Montana laws, regulations, rulings, and decisions in effect on the date hereof, it is our opinion that:
1. The City has validly created Special Improvement District No. 344 (the "Districf), provided for the
construction of various improvement projects of special benefit to the District (collectively, the "Improvements"). The
City has covenanted to levy special assessments against such benefited lots or parcels in an amount not less than the
costs of the Improvements financed with proceeds of the Bonds, estimated at $4,520,000. The special assessments are
to be payable in installments, with interest on the balance of the special assessments remaining unpaid, and collections
thereof are to be deposited' the Special Improvement District No. 344 Fund of the City
in (the "District Fund"). The
Bonds are payable solely from fimds on deposit in the District Fund,,
2. , The City has agreed, to the extent permitted by and 'in accordance with the Resolution and to the extent
necessary for the payment of the Bonds (as described in the Resolution), to further secure the payment of the principal
of and interest due on the Bonds with tax increment revenues deposited in the District Fund (the "Tax Increments") that
are derived ftorn certain tax increment districts established in the City. The City has validly pledged Tax Increments (to
the extent such funds are on deposit in the District Fund) to the payment of debt service on the Bonds 'in accordance
with the Resolution; provided, however, we express no opinion as to the priority of such pledge or its effect against
third parties.
3. The City has validly established its Special Improvement District Revolving Fund (the "Revolving
Fund") to further secure the payment of certain of its special improvement district bonds, including the Bonds.
Pursuant to the Resolution, the City has agreed, to the extent permitted by Montana Code Annotated, Title 7, Chapter
12) . Parts 41 and 42, as amended (the "SID Acf), to issue orders annually authorizing loans or advances from ihe
Revolving Fund to the District Fund, 'in amounts sufficient to make good any deficiency in the District Fund, to th
extent that funds are available therefor in the Revolving Fund. The City has also agreed to the extent necessary. to
1 4
provide funds for the Revolving Fund by annually making a tax levy or loan from the general fund of the City in an
F-2
'tmount sufficient for that purpose, subject to the limitation that no such tax levy or loan may in any year cause the
oalance in the Revolving Fund to exceed five percent (5%) of the princi al amount of the City's then outstanding
IP
special improvement district bonds secured by the Revolving Fund. The pledge of the Revolving Fund to the payment
of debt service on the Bonds is subject to the durational limit set forth in the SII) Act and any property tax levy to be
made by the City to provide funds for the Revolving Fund is subject to levy limits under current Montana law. The
City has agreed in the Resolution to levy property taxes to provide funds for the Revolving Fund to the extent required
to replenish the Revolving Fund and to the extent described in the immediately preceding paragraph and; if necessary,
the City has also agreed to reduce other property tax levies correspondingly to meet applicable levy limits.
The Bonds are not general obligations of the City and, except to the limited extent described in this paragraph
(3), the taxing power of the City is not pledged to the Bonds.
4. The Bonds 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 SBD Act,
and the Resoliation.
5. Interest on the Bonds is excludable from gross *income for federal income tax purposes and 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. Interest on the Bonds is includable in the computation of "adjusted current
earnings" used in the calculation of determining alternative minimum taxable 'income for purposes of the federal
alternative minim tax imposed on corporations. Interest on the Bonds is excludable from 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 op M'ions expressed 'in the immediately preceding paragraph w ith respect to f6deral tax matters are subject
to the condition of the City's compliance with all requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), that must be satisfied subsequent to the issuance of the Bonds *in order that M*terest may be, and. continue to
be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with these
continumig requirements. The City's failure to do so could.result in the inclusion of interest in gross income for federal
income tax purposes, retroactive to the date of issuance of the Bonds. Except as stated Mi this opinion, we express no
opinion regarding federaL state or other tax consequences to the owners of the Bonds.
6. The Bonds have been designated by the City as "qualified tax exempt obligations" for purposes of
Section 265(b)(3) of the Code.
The rights of the owners of the Bonds and the enforceability of the Bonds may be limited by banlauptcy,
insolvency, reorganization, moratorium, and other similar laws affecting creditor's rights generally and by equitable
princi les, whether considered at law or in equity.
IP
We have not been engaged and have not undertaken to review the Official Statement or any other offering
materials relating to the Bonds and, accordingly, we express no opinion with respect to the accuracy, completeness or
sufficiency thereof.
Dated at Minneapolis, Minnesota, June -, 2006.
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