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<br />w' <br /> <br />City of Elk River, Minnesota <br />May 5, 1999 <br /> <br />. <br /> <br />competitive bid basis and awarded on the <br />lowest true interest cost, the City will award <br />the bonds to the best bid regardless of <br />whether term bonds were chosen or not. <br /> <br />6. Repayment Term <br /> <br />Principal on the bonds will be repaid each <br />February 1, 2001 through 2015. Interest will <br />be due each February 1 and August 1 <br />beginning February 1, 2000. <br /> <br />7. First Levy and Levy Cycle <br /> <br />The sources of payment and payment cycle <br />for the issue is discussed in the Discussion <br />section of these recommendations. <br /> <br />8. Prepayment Provisions <br /> <br />The City may elect on February 1, 2006, <br />and on any day thereafter, to prepay bonds <br />due on or after February 1, 2007 at a price <br />of par plus accrued interest. We have <br />provided an aggressive call feature in the <br />event projected revenues for the bonds <br />come in significantly faster or slower than <br />projected, thus allowing the bonds to be <br />called and debt service payments <br />restructured as necessary to coincide with <br />the available revenues. <br /> <br />. <br /> <br />9. Credit Rating Comments <br /> <br />This issue requires a rating application be <br />made to Moody's Investors Service to <br />assure continuation of the outstanding bond <br />rating of the City. The City is currently rated <br />"8aa1." This issue represents a significant <br />increase in the City's debt. In addition, the <br />local School District is expected to hold a <br />referendum this year in an effort to finance <br />significant new school building projects. We <br />feel it will be important for the City to be <br />proactive with Moody's in presenting the <br />current bond issue. <br /> <br />We have currently made plans for a <br />representative of Moody's to visit the City on <br />June 15, 1999 for a two-hour tour of the <br />community, including the new Highway 10 <br />development area being financed by this <br />issue. Approximately one week prior to the <br />sale date, representatives of the City and <br />Springsted will hold a teleconference with <br />Moody's to review, in detail, all aspects of <br />the City including finances, management <br />initiatives, debt and future borrowing and <br />the local economy. <br /> <br />. <br /> <br />Page 2 <br />