HomeMy WebLinkAbout1998-12-16 PACKET 08.C.REQUEST O� CiTY COUNCIL ACT{ON COUNCIL AGENDA
MEE7ING ITEM
DATE 12/16/98 �•
PREPARED BY Economic Dev. Authority Kirsten Barsness
ORfGINATiNG DEPARTMENT STAFF AUTHOR
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COUNCIL ACTiON REQUEST:
Adopt resolution modifying the budget for TIF district 1-7 and authorizing the sale of bonds for
the Renewai by Anderson Tax Increment District
STAFF RECOMMENDATION:
Adopt the Resolution
SUPPORTING DOCUMENTS:
� MEMO/LETTER: Memo from Kirstin Barsness dated December 11, 1998
❑ RESOLUTION:
❑ ORDINANCE:
❑ ENGINEERING RECOMMENDATION:
❑ LEGAL RECOMMENDATION:
❑ OTHER:
ADMINISTRATORS COMMENTS:
The enclosed bond sale report and resulting cash flows ailow for funding of the future
reconstruction of 100th Street, which is not included in this proposed sale. The project shows
up as a$300,000 local expenditure with a$100,000 Metro Council match, which is the extent
of their cffer ±o date. Whiie negotiations may improve aur pasitior from there, giver our
obligation to construct the road, our distric cash flows must include the most conservative
possibility at this time. Likewise, cash flows do not su e appreciation in market values for
District 1-9. With these two conservat e ass ti s, e bon 'ssue casn flows.
. ���� Z f---� - � �' ° �
Gity Administrator atC��
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GOUNCIL ACTIO�I 7AKEN: ❑ APPRC7VED ❑ DENfED ❑ OTHER
• �
To: Honorable Mayor and City Council
From: Kirstin Barsness, Economic Development Director
Date: 12/11 /98
Re: Budget Modification of Tax Increment District No. 1-7 and proposed bond sale
of $1.015,000 G.O. Tax Increment Bonds Series 1999c and $300,000 G.O.
Taxable Tax Increment Bonds Series 1999D for Tax Increment District 1-9
(Renewal by Rndersen)
INTRODUCTION
Tax Increment District No. 1-7 (Target) will be decertified on December 31, 1998.
The District has been instrumental in accomplishing a number of community goals
from encouraging commercial development to providing the seed capital for
purchasing property within the industrial park.
Staff has been working with Ehlers & Associates to finalize the budget expenditure
from TIF District 1-7 and to determine a financing program for the Renewai by
Andersen District 1-9. Councii wiil be considering:
. A resolution modifying the budget for TIF District 1-7. The budget will
accurately depict the expenditure to date from the district.
• A proposed bond sale for tax increment bonds to support expenditures
made for the Renewal by Andersen project. ($1,015,000 G.O.
Improvement Tax Increment Bonds, Series 1999C and $300,000 G.O.
Taxabfe Tax Increment Bonds, Series 1999D)
DISCUSSION
On August 5, 1998, the City Council modified the Tax Increment Plan for TIF District
1-7 to allow for the expenditure of $580,000 for site improvements in the tax
increment financing district for Renewal by Andersen project. To date costs
associated with the Renewal project have been funded from internal revenue
sources including TIF District 1-7. After meeting with Ehlers & Associates, staff is
recommending that the budget for TIF District 1-7 be modified so that the excess TIF
\\CG_FS1\SYS\USERS\KBARSNES\TIF 1-TTIF 1-7 Budget.doc
funds can be used for land acquisition for the Renewal project. By allocating the
funds in this manner, the taxabie component of the bond sale for the Renewal District
can be minimized. Land acquisition is not a permitted expenditure for tax-exempt
financing. A detailed report prepared by Ehlers on the bonding for the Renewal Tax
Increment District is attached to this memorandum. In addition, a representative from
Ehlers will be at the City Councii meeting to answer any questions.
ACTION REQUIRED
The City Council should consider the passing of the Resolution for modifying the
budget for TIF District 1-7 and the authorization of a bond sale for $1,015,000
General Obligation Tax Increment Bonds, Series 1999C and $300,000 General
Obligation Taxable Tax Increment Bonds, Series 1999D for the Renewal by
Andersen Tax Increment District.
• Page 2
CITY OF COTTAGE GROVE
COUNTY OF WASHINGTON
STATE OF MINNESOTA
BELNG A RESOLUTION APPROVING THE BtiDGET MODIFIC'ATION OF
TAX INCREMENT FINANCING DISTRICT NO. 1-7
OF THE CITY OF COTTAGE GBOVE.
WHBREAS, on June 7, 1989 the Ciry of Cottage Grove (the °City") created its Tax Increment
�inancing District No 1-7, (the "District") within its Development Project and Devetopment Disirict No. 1
(the'Project"); and
WHEREAS, modifications were made on April 25, 1990, December 18, 1996, the District to
decrease Yhe authorized budgeted expenditures; and
WHEREAS, the modification of December 18, 1996 authorized the expenditure of $589,500 for a
]oan program, uaffic and roadway improvements, and industria] park land acquisition costs within
Development DistricY No. 1, and
WHEREAS, $330,000 has been expended from the District on land acquisition and road
improvements within the Project, and
WF3EREAS, currenfly there is $229,500 of aut�horrzed by the December 18, 1996 budget
modification of the District which has not been expended on any eligible ar authorized expenditures, and
WHEILEAS, it has been determined thaT $530,000 will be necessary £ar land acquisition in Tax
Increment District No. 1-9, and
WAEREAS, it has been determined that the estimated tax increments generated in Tax Increment
District No. 1-9 will be insufficient to finance the enrire land acquisition costs neeessary for the project,
znd
WHEREAS, the modificarion of August 5, 1998 authorized the expenditure of $580,000 for site
preparation costs from the DisYrict in Tax Increment Pinancing Dlstriet No. 1-9,
;vTOW TIIEREFORE, BE IT RESOLVED by the City Council of the Ciry of Cottage Grove
auThorizes that $229,500 from the December 18, 1996 modified budget and �300,500 from Yhe Au�ust 5,
1998 modified budget be reallocated, and $530,000 is hereby authorized Yo be experided on land
acquisition costs to be incurred in Tax Inerement District No. 1-9.
DATED: , 1998
Mayor
ATTEST:
City Administrator
.�..•. . . .,.. ....�. . � � .•. .� .
$1,015,000
General Obligation Tax Increment Bonds,
Series 1999C
, .
$300,000
General Obligation Taxable Tax Increment Bonds,
Series 1999D
City of Cottage Grove, Minnesota
r- - .- . •'•:
� - . ,. . . . -
OvERView
This report describes the proposed plan for the City of Cottage Grove to issue
$1,015,000 General Obligation Tax Increment Bonds, Series 1999C and
$300,000 General Obligation Taxable Tax Increment Bonds, Series 1999D. This
report has been prepared by Ehlers and Associates, in consultation with City Staff.
The concepts of the repart have been discussed with Bopd counsel who is in the
process of completing their review. This repart deals with:
• Purpose and components of the issues.
• Structure.
• Other considerations in issuing bonds.
• Marlcet conditions.
• Issuing process.
$1,015,000
GENERA� OBLIGATION TAX INCREMENT BONQS, SERIES 1999C
PURPOSE
During June, 1998, the City Council created Tax Increment District No. 1-9
in Development District No. 1("TID No. 1-9"). TID No. 1-9 was created to
finance land and public improvements for the Anderson Window Company,
Renewal Project.
The $1,015,000 General Obligation Tax Increment Bonds, Series 1999C (the
"1999C Bonds") are being issued pursuant to Minnesota Statutes, Chapters
469 and 475 for the purpose of financing the construction of the public
improvements in Tax Increment District No. 1-9.
Fiilancing these pxojects requires a bond issue in the amount of $1,015,000.
The proposed finance plan consists of the following sources and uses of funds:
Sources
Par Amowlt of 1999C Bonds
Total Sources
Uses
Total Project Costs
Contingency
Discount A11o�vance
Capitalized Interest
Finance Related Expenses
Total Uses
STRUCTURE AND REPAYMENT
� 1.015,000
$1,015,000
$938,528
807
11,165
45,000
19,5��
$1,015 ,000
The 1999C Bonds are general obligations of the City of Cottage Grove and as
such are secured by a pledge of the City's full faith, credit, and taxing powers.
It is the intent of the City to pay the entire amount of principal and interest
from a pledge of tax increments collected in Taac Increment District No. 1-9.
The repayment schedule has been structured to match anticipated collections
of tax increment revenues. The projected debt service and flow of funds can be
Page 2
found in E�ibit 1. This issue has been structured to be end-loaded so that
the 1999D Bonds are paid earlier and to allow for possible payment of the
�325,000 of project costs for 100th Street in 2001 through 2003. The
$400,000 project for 100th Street is likely to be constructed in 2000 or 2001
with $100,000 to tze paid by the Ivletropolitan Council.
The 1999C Bonds would be sold January 20, 1999 and be dated February 11,
1999. The first interest payment on the 1999C Bonds will be February l,
2000, and semiannually thereafter on August 1 and February 1. Principal on
the 1999C Bonds will be due on February 1 in the years 2004 through 2009.
We recommend that 1999C Bonds maturing February 1, 2007 and thereafter
will be subject to prepayment at the discretion of the City on February 1, 2006
and any date thereafter.
We anticipate that the City (in combination with any subordinate taxing
jurisdictions or debt issued in the City's name by 501(c)3 corporations) will
not issue more than a total of $10,000,000 in tax-exempt debt during this
calendar year. This will allow the 1999C Bonds to be designated as bmik
�{ualifie�l. Bank qualified status broadens the market and achieves lower
interest rates.
Because the City is issuing more than $5,000,000 in tax-exempt obligations
during calendar year 1999, the 1999C Bonds will not qualify for the small
issuer exemption from arbitrage rebate. Final arbitrage details �vill be stated in
the arbitrage certificate provided to you at the closing.
Page 3
$300,000
GENERAL OBLIGATION TAXABLE TAX INCREMENT BONDS,
SERIES 1999D
PURPOSE
The $300,000 General Obligation Ta�cable Tax Increment Bonds, Series 1999D
are being issued pursuant to Minnesota Statutes, Chapters 469 and 475. The
Bonds are being issued to finance the remaining 300-acre land aequisition cose in
Tax Increment District No. 1-9 in the City.
Financing these projects requires a bond issue in the amount of $300,000. The
proposed finance plan consists of the following sources and uses of funds:
Sources
Par Amount of 1999D Bonds
1997 Funds from TID No. 1-7
1998 Funds from TID No. 1-7
Total Sources
Uses
Land Purchase
Contingency
Discount Allowance
Capitalized Interest
Finance Related Expenses
Total Uses
STRUCTURE AND REPAYMENT
$300,000
250,000
520.000
$1,070,000
$1,032,000
2,800
4,200
17,000
14.000
�1,0�0,000
The Bonds are general obiigations of the City of Cottage Grove and as such are
secured by a pledge of the City's full faith, credit, and taxing powers. It is the
intention of the City to pay the entire amount of principal and interest from a
pledge of taY increments collected in Tax Increment District No. 1-9.
Page 4
The repayment schedule has been structured to match anticipated collections of
tax increment revenues. Because the 1999D Bonds are taxable and carry higher
interest rates than the 1999C Bonds, we have structured the 1999D Bonds to be
retired as quicldy as possible.
The 1999D Bonds would be dated February 11, 1999. The first interest payment
on the 1999D Bonds will be February I, 2000, and seiniannually thereafter on
August 1 and February l. Principal on the 1999D Bonds will be due on February
1 in the years 2001 through 2003. We recommend that 1999D Bonds maturing
February I, 2003 be subject to prepayment at the discretion of the City on
February l, 2002 and any date thereafter.
The 1999D Bonds are taxable and therefore, not exempt from State or Federai
income taxes. The issuance of the 1999D Bonds will not affect the City's annual
limit on bank qualified bonds or bonds eligible for the smaller issuer exemption
from arbitrage rebate.
The projected debt service and flow of funds can be found in E�ibit 2.
PROVISIONS COMMON TO BOTH ISSUES
Following is a summary of lcey factors in the finance plan:
• The 1944C and 199RI� Bonds wiil be global book eratry. As "paperless" bonds, you
will avoid the costs of bond printing and the need for registrar/paying agent.
• Moody's Investors Service will be asked to rate these issues. The City currently
has an"A2 rating on its outstanding general obligation bonds.
Page 5
We will request that the 1999C Bonds be considered for qualification for bond
insurance so that potential purchasers will have the option of bidding this issue
as "insured". If it is sold with bond insurance, the issue will be rated "Aaa" by
Moody's Investors Service and/or "AAA" by Standard & Poor's.
m New regulations of the Securities and Exchange Commission on the continuing
disclosure of municipal securities apply to long-term securities with an aggregate
principal amount of $1,000,000 or more.
Because the aggregate principal amount of the 1999C Bonds when integrated
with the 1999D Bonds is an aggregate amount of over $1,000,000, and the City
has more than $10,000,000 in total municipal obligations outstanding, you �vill
be obligated to comply with FuTI ContinuingDisclosure requirements as required
by paragraph (b)(5) of Rule 15c2-12 promulgatedby the Securities and Exchange
Commission under the Securities Exchange Act of 1934. You will be required to
provide certain financial infomlation and operating data relating to the City
annually and to provide notices of the occurrence of certain material events. The
specific nature of the Undertaking, as well as the information to be contained in
the notices of material events will be set forth in the Continuous Disclosure
Undertaking that you will enter into at the time of closing far this issue.
You are responsible for reparting any of the material events listed below
and in the Undertalcing.
1. Principal and interest payment delinquencies;
2. Non-payment related defaults;
3. Unscheduled draws on debt service reserves reflecting financial
difficulties;
4. Llnscheduled draws on credit enha�cements reflecting financial
difficulties;
5. Substitution of credit of liquidity providers, or their failure to
perform;
6. Adverse tax apinions or events affecting the taac-exempt status of
the securities;
7. Modification to rights of holders of the Securities;
S. Securities calls;
9. Defeasances;
10. Release, substitution or sale of property securing repayment of
the Securities;
11. Rating changes;
12. Failure to provide annual financial information as required; and
13. Other material events.
Page 6
REFUNDING OPPORTUNITIES
We have revie�ved all outstanding indebtedness for the City and find that there
are no other immediate refunding opportunities for the at this time. We wili
continue to monitor the market and the call dates and alert you to any future
opportunities.
MARKET CONDITIONS
The graph on the following page shows the trends in the Bond Buyer's 20-Year
G.O. Index (BBI) since 1979. Current interest rates are close to historic lows.
Page 7
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ISSUING PROCE55
Foliowing is a tentative schedule for the steps in the issuing process.
December 16, 1998
City Council adopts resolution calling for
the sale of the 1999A, 1999B, 1999C and
1999D Bonds
Weelc of January 4, 1999
January 7, 1999
Weelc of January 11, 1999
January 20, 1999
February 11, 1999
FURTHER CONSIDERATIONS
Submit draft Official Statement and rating
materials to Moody's Investors Service for
credit rating
Distribute Official Stateinent
Receive credit rating
Bond sale
Bond closing (approximate)
We recommend a reallocation within the budget for Tax Increment District No.
1-7 to reflect final adjustments in project costs.
Page 9
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Resolution No.
Council Member introduced the following resolution and moved its adoption:
Resolution Providing for the Sale of
$1,015,000 General Obligation Tax Increment Bonds, Series 1999C
A. WHEREAS, the Ciry Counci] oF the City of Cottage Grove, Minnesota, has heretofore determined that
it is necessary and expedient to issue the City's $1,015,000 General Obligation Tax Increment Bonds,
Series 1999C (the "1999C Bonds"), to finance the construction of various pablic improvements in the
City;and
B. WHEREAS, the Ciry has recained Ehlers and Associates, Inc., in Minneapolis, Minnesoea ("Ehlers"), as
its independent financial advisor for the 1999C Bonds and is therefore authorized to solicit proposals
in accordance wiCh MinnesoYa Statutes, Section 475.6Q Subdivision 2(9);
NOW, THEREFORE, BE IT RESOLVED by the City Council of Ciry of Cottage Grove, Minnesota, as
follows:
1. Authori2ation: FindinQS. The City Council hereby authorizes Ehlers Co solicit proposals for the sale of
the 1999C Bonds.
2. Meetinp; Proposal OpeninQ. The City Council shall meet at the time and place to be specified in the
Terms of Proposal For the purpose of considering sealed proposals for, and awarding the sale of the
1999C Bonds. The City Clerk, or designee, shall open proposals at the time and place specified in such
Terms of Proposal.
3. Bond Sale Report. The terms and conditions of the 1999C Bonds and the sale thereof are fully set forth
in the "Bnnd Sale Report" attached hereYO and hereby approved and made a part hereof.
4. Official Statement. In connection with said sale, the officers or employees of the City are hereby
authorized to cooperate wiCh Eh(ers and participate in the preparation of an official staCement For the
1999C Bonds and to execute and deliver it on behalf oP the City upon its compietion.
The motion for the adoption of the foregoing resolution was duly seconded by City Council Member
and, after full discussion thereof and upon a vote being taken chereon, the
following Ciry Council Members voted in favor thereof:
and the following voted a�ainst the same:
Whereupon said reso]ution was declared duly passed and adopted.
Dated this _ day of , 1998.
City Clerk
(SEAL)
Resolution No.
Council Member introduced the following reso]ution and moved its adoption:
Resolution Providing foc the Sale of
$300,000 General Obligation Taxable Tax Increment Bonds, Series 1999D
A. WHEREAS, the City Council of the City of Cottage Grove, Minnesota, has heretofore determined
that it is necessary and expedient to issue Che Ciry's $30Q000 General Obligation Taxabte Tax
Increment Bonds, Series 1949D (the "1994D Bonds"), ro finance the purchase of ????????? in the
City; and
B. WHEREAS,theCiryhasretainedEhlersandAssociates,Inc.,inMinneapolis,Minnesota(
as its independent financial advisor for the 1999D Bonds and is therefore aathorized to solicit
proposals in accoxdance with MinnesoCa Statutes, Section 475.60, Subdivisio� 2(9);
NOW, THEREFORE, BE IT RESOLVED by the City Council of City of Cottage Grove, Minnesota, as
follows:
1. AuChorization: FindinQS. The Ciry Council hereby authorizes Ehlers to solicit proposals for the sale
of ehe 1999D Sonds.
2. Meetine; Proposal QpeninQ. The Ciry Council shall meet at the time and place to be specified in the
Terms of Proposal for the purpose of considering sealed proposals for, a�d awarding the sale of the
1999D Bonds. The City Clerk, or designee, shall open proposals at the time and place specified in
such Terms oF Proposal.
3. Bond Sale Report. The terms and conditions of the 1999D Bonds and the sale thereof are fully set
forth in the "Bond Sale Report" attached hereto and hereby approved and made a part hereof.
4. Official Statement In connecfion with said sale, the officers or employees of the City are hereby
authorized to cooperate wi[h Ehlers and participate in the preparation of an official statement for the
1999D Bonds and to execute a�d deliver it on behalf of the City upon its eompletion.
The mo*.ien for !he a�option of the foregoing resolution was du(y seconded by CiCy Council Member
and, afrer full discussion thereoF and upon a vote be'rng taken thereon, the
following City Council Members voted in favor thereof:
and the following voted against the same:
Whereupon said resolution was declared duly passed and adopted.
Dated this _ day of , 1998.
City Clerk
(SEAL)