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Page 2 <br /> <br />POST ISSUANCE <br />COMPLIANCE: <br />The issuance of the Bonds will result in post-issuance compliance responsibilities. The <br />responsibilities are in two primary areas: i) compliance with federal arbitrage requirements <br />and ii) compliance with secondary disclosure requirements. <br />Federal arbitrage requirements include a wide range of implications that have been taken <br />into account as this issue has been structured. Post-issuance compliance responsibilities for <br />this tax-exempt issue include both rebate and yield restriction provisions of the IRS Code. In <br />general terms the arbitrage requirements control the earnings on unexpended bond <br />proceeds, including investment earnings, moneys held for debt service payments (which are <br />considered to be proceeds under the IRS regulations), and/or reserves. Under certain <br />circumstances any “excess earnings” will need to be paid to the IRS to maintain the tax- <br />exempt status of the Bonds. Any interest earnings on gross bond proceeds or debt service <br />funds should not be spent until it has been determined based on actual facts that they are not <br />“excess earnings” as defined by the IRS Code. <br />The arbitrage rules provide for spend-down exceptions for proceeds that are spent within <br />either a 6-month, 18-month or 24-month period in accordance with certain spending criteria. <br />Proceeds that qualify for an exception will be exempt from rebate. These exceptions are <br />based on actual expenditures and not based on reasonable expectations, and expenditures, <br />including any investment proceeds will have to meet the spending criteria to qualify for the <br />exclusion. The City expects to meet the 6-month spending exception. <br />Regardless of whether the issue qualifies for an exemption from the rebate provisions, yield <br />restriction provisions will apply to Bond proceeds (including interest earnings) unspent after <br />three years and both the debt service fund and the debt service reserve account throughout <br />the term of the Bonds. These moneys should be monitored until the Bonds are retired. <br />Secondary disclosure requirements result from an SEC requirement that underwriters provide <br />ongoing disclosure information to investors. To meet this requirement, any prospective <br />underwriter will require the City to commit to providing the information needed to comply <br />under a continuing disclosure agreement. <br />Springsted currently provides continuing disclosure services to the Municipal Utilities and the <br />City. Springsted will work with staff to include the Bonds under the existing Agreement for <br />Municipal Advisor Services. <br />SUPPLEMENTAL <br />INFORMATION AND <br />BOND RECORD: <br />Supplementary information will be available to staff including detailed terms and conditions of <br />sale, comprehensive structuring schedules and information to assist in meeting post- <br />issuance compliance responsibilities. <br />Upon completion of the financing, a bond record will be provided that contains pertinent <br />documents and final debt service calculations for the transaction. <br />PURPOSE: Proceeds of the Bonds will be used to complete the financing of the Utility’s buy-in to become <br />a member of the Minnesota Municipal Power Agency (the “MMPA”). The City issued its <br />$9,755,000 Electric Revenue Bonds, Series 2016A to finance an initial buy-in deposit of <br />$9,393,793.85. The City and the MMPA have entered into a Power Sales Agreement under <br />which the City will purchase electric power and energy from the MMPA from and after <br />October 1, 2018. The City has agreed to a buy in equal to 120% of its proportionate share of <br />the net position (equity) and related rate accruals of MMPA through an agreed upon formula.