Tab 22 Opinion of Bond Counsel470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis, MN 55402
(612) 337-9300 telephone
-93 10 fax
I Graven (612)337
C H A R T E R E D http://www.kennedy-graven.com
$4�520�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 and security for the 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 the
signatures thereon and the accuracy of the facts stated therein, and based upon federal and State of
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 "District"),
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 in the Special Improvement District No. 344 Fund of the City (the "District Fund"). The Bonds
are payable solely fTom funds on deposit in the District Fund.
2. The City has agreed, to the extent permitted by and in accordance with the Resolution
and to th e 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 from 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 Act"), to issue orders
annually authorizing loans or advances from the Revolving Fund to the District Fund, in amounts
sufficient to make good any deficiency in the District Fund, to the extent that funds are available therefor
in the Revolving Fund. The City has also agreed to the extent necessary to provide funds for the
Revolving Fund by annually making a tax levy or loan from the general fund of the City in an amount
sufficient for that purpose, subject to the limitation that no such tax levy or loan may in any year cause the
balance in the Revolving Fund to exceed five percent (5%) of the principal amount of the City's then
outstanding 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 SID 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 ten-ns and the provisions of the Constitution and laws of the State of Montana now
in force, including the SID Act, and the Resolution.
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 minimum 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 opinions expressed in the immediately preceding paragraph with respect to federal 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 interest may be, and continue to be, excluded from gross income for federal income tax
purposes. The City has covenanted to comply with these continuing 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 in 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
bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditor's rights
generally and by equitable principles, whether considered at law or in equity.
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 29, 2006.
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