5.3a ERMUSR 03-09-2021 - Laserfiche WebLink

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PURPOSE:Proceeds of the Bonds will be used to finance the construction of a field house facility to accommodateservice trucks, inventory, and offices. AUTHORITY: Statutory Authority:The Bonds are being issued pursuant to Minnesota Statutes, Chapters 453 and 475. Existing Covenants/Policies:The Bonds are being issued on a parity (same pledge of revenue) as the Utility’soutstanding electric utility revenue bonds. Existing covenants and the Resolution authorizing the Bonds establishes certain conditions and/orrequirements including but not limited to (i) the issuance of additional bonds (ii) rate covenants and (iii) funding a parity debt service reserve requirement, all of which are further detailed below: Additional Bonds: Additional bonds may be issued on a parity of lien with the Utility’s existing electric utility bonds (Parity Bonds) so long as the net revenues of the Electric System for the audited fiscal year immediately preceding the issuance of such additional bonds are not less than 125% of the average annual principal and interest due on all outstanding parity bonds and the additional bonds to be issued, during the remaining term of the outstanding bonds. A coverage ratio of 470%is projected based on the December 31, 2019Electric Fund audited financial statements and the projected average annual principal and interest payment on the Parity Bonds and the Bonds of $1,515,845 The Utility has threeother outstanding issues payable from net revenues of its electric utility system (the “Electric System”): Electric Revenue Bonds, Series 2016A (the “Series 2016A Bonds”), outstanding in the aggregate principal amount of $8,465,000with a final maturity of February 1, 2036 Electric Revenue Refunding Bonds, Series 2016B (the “Series 2016B Bonds”) outstandingin the aggregate principal amount of $240,000with a final maturity of February 1, 2022 Electric Revenue Bonds, Series 2018A (the “Series 2018B Bonds”) outstanding in the aggregate principal amount of $9,600,000with a final maturity of August 1, 2048 Rate Covenant:The Utility has pledged to establish user rates and charges for the Electric System so that annual net revenues shall not be less than 110% of the average annual debt service on the Bonds, the Parity Bonds and any additional parity bonds. Debt Service Reserve Account:The Utility will maintain a Debt Service Reserve Account (the “Reserve Account”) in the amount of the Reserve Requirement. “Reserve Requirement” means, as of the date of issuance of aseries of bonds, an amount equal to the least of: (i) 10% of the original principal amount of the outstanding bonds and Additional Bonds, or (ii) the maximum amount of principal and interest payable during the then current Fiscal Year or any future FiscalYear on all outstanding bonds and Additional Bonds as of the date of issuance of a series of bonds, or (iii) 125% of the average annual principal and interest payable on all outstanding bonds and Additional Bonds as of the date of issuance of a series of bonds. Pursuant to the issuance of the Bonds, the new Reserve Requirement is estimated to be $1,901,494, which is based on 125% of average annual debt service on the Bonds and Page 2 330