5.1 ERMUSR 07-10-2018 - Laserfiche WebLink

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POST ISSUANCE The issuance of the Bonds will result in post-issuance compliance responsibilities. The COMPLIANCE: responsibilities are in two primary areas: i)compliance with federal arbitrage requirements and ii)compliance with secondary disclosure requirements. Federal arbitrage requirements include a wide range of implications that have been taken into account as this issue has been structured. Post-issuance compliance responsibilities for this tax-exempt issue include both rebate and yield restriction provisions of the IRS Code. In general terms the arbitrage requirements control the earnings on unexpended bond proceeds, including investment earnings, moneys held for debt service payments (which are considered to be proceeds under the IRS regulations), and/or reserves. Under certain circumstances any "excess earnings" will need to be paid to the IRS to maintain the tax- exempt status of the Bonds. Any interest earnings on gross bond proceeds or debt service funds should not be spent until it has been determined based on actual facts that they are not "excess earnings"as defined by the IRS Code. The arbitrage rules provide for spend-down exceptions for proceeds that are spent within either a 6-month, 18-month or 24-month period in accordance with certain spending criteria. Proceeds that qualify for an exception will be exempt from rebate. These exceptions are based on actual expenditures and not based on reasonable expectations, and expenditures, including any investment proceeds will have to meet the spending criteria to qualify for the exclusion. The City expects to meet the 6-month spending exception. Regardless of whether the issue qualifies for an exemption from the rebate provisions, yield restriction provisions will apply to Bond proceeds (including interest earnings) unspent after three years and both the debt service fund and the debt service reserve account throughout the term of the Bonds. These moneys should be monitored until the Bonds are retired. Secondary disclosure requirements result from an SEC requirement that underwriters provide ongoing disclosure information to investors. To meet this requirement, any prospective underwriter will require the City to commit to providing the information needed to comply under a continuing disclosure agreement. Springsted currently provides continuing disclosure services to the Municipal Utilities and the City. Springsted will work with staff to include the Bonds under the existing Agreement for Municipal Advisor Services. SUPPLEMENTAL Supplementary information will be available to staff including detailed terms and conditions of INFORMATION AND sale, comprehensive structuring schedules and information to assist in meeting post- BOND RECORD: issuance compliance responsibilities. Upon completion of the financing, a bond record will be provided that contains pertinent documents and final debt service calculations for the transaction. PURPOSE: Proceeds of the Bonds will be used to complete the financing of the Utility's buy-in to become a member of the Minnesota Municipal Power Agency (the "MMPA"). The City issued its $9,755,000 Electric Revenue Bonds, Series 2016A to finance an initial buy-in deposit of $9,393,793.85. The City and the MMPA have entered into a Power Sales Agreement under which the City will purchase electric power and energy from the MMPA from and after October 1, 2018. The City has agreed to a buy in equal to 120%of its proportionate share of the net position(equity)and related rate accruals of MMPA through an agreed upon formula. Springsted Page2 51