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2012-043
EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF STILLWATER, MINNESOTA HELD: March 20, 2012 Pursuant to due call, a regular meeting of the City Council of the City of Stillwater, Washington County, Minnesota, was duly called and held at the City Hall on March 20, 2012, at 7:00 P.M., for the purpose, in part, of considering proposals and awarding the competitive negotiated sale of $6,355,000 General Obligation Capital Outlay and Refunding Bonds, Series 2012A. The following members were present: Councilmembers Menikheim, Cook, Roush, Polehna and Mayor Harycki and the following were absent: None In accordance with Resolution No. 2012 -034 adopted by the City Council on February 21, 2012, the City Clerk presented proposals on $6,415,000 General Obligation Capital Outlay and Refunding Bonds, Series 2012A, which were received, opened and tabulated at 10:00 A.M., Central Time, at the offices of Springsted Incorporated ( "Springsted ") on this same day: Bidder Interest Rates See attached True Interest Cost The City Council then proceeded to consider and discuss the proposals, after which member Polehna introduced the following resolution and moved its adoption: RESOLUTION NO. 2012 -043 RESOLUTION PROVIDING FOR THE ISSUANCE AND SALE OF $6,355,000 GENERAL OBLIGATION CAPITAL OUTLAY AND REFUNDING BONDS, SERIES 2012A, AND LEVYING A TAX FOR THE PAYMENT THEREOF A. WHEREAS, the City Council of the City of Stillwater, Minnesota (the "City "), hereby determines and declares that it is necessary and expedient to (i) finance the cost of the 2012 capital outlay projects of various City departments (the "Project ") as more fully described in the resolution duly adopted by the City Council on February 21, 2012; and to provide moneys for crossover refundings of the City's (ii) $4,695,000 original principal amount of General Obligation Improvement Bonds, Series 2004A, dated March 1, 2004 (the "Prior 2004 Bonds "), which mature on and after February 1, 2014 and of the City's (iii) $6,400,000 original principal 4532200v1 amount of General Obligation Capital Outlay Bonds, Series 2006A, dated February 1, 2006 (the "Prior 2006 Bonds" and together with the Prior 2004 Bonds, the "Prior Bonds "), which mature on and after February 1, 2016; and B. WHEREAS, $1,615,000 aggregate principal amount of the Prior 2004 Bonds which mature on and after February 1, 2014, are callable on February 1, 2013, at a price of par plus accrued interest, as provided in the Resolution of the City Council, adopted on February 3, 2004 (the 'Prior 2004 Resolution "), authorizing the issuance of the Prior 2004 Bonds to finance various improvements within the City; and C. WHEREAS, $3,245,000 aggregate principal amount of the Prior 2006 Bonds which mature on and after February 1, 2016, are callable on February 1, 2015, at a price of par plus accrued interest, as provided in the Resolution of the City Council, adopted on January 17, 2006 (the 'Prior 2006 Resolution" and together with the Prior 2004 Resolution, the "Prior Resolutions "), authorizing the issuance of the Prior 2006 Bonds to finance the costs of capital outlay projects of various City departments; and D. WHEREAS, the refunding of the Prior 2004 Bonds maturing on and after February 1, 2014 (the "Refunded 2004 Bonds "), is consistent with covenants made with the holders thereof, and is necessary and desirable for the reduction of debt service cost to the City; and E. WHEREAS, the refunding of the Prior 2006 Bonds maturing on and after February 1, 2016 (the "Refunded 2006 Bonds" and together with the Refunded 2004 Bonds, the "Refunded Bonds "), is consistent with covenants made with the holders thereof, and is necessary and desirable for the reduction of debt service cost to the City; and F. WHEREAS, the City Council has heretofore determined and declared that it is necessary and expedient to issue General Obligation Capital Outlay and Refunding Bonds, Series 2012A of the City in the amount of $6,355,000 (the 'Bonds" or individually, a 'Bond "), pursuant to Minnesota Statutes, Chapter 475, to provide moneys for the Project and for crossover refundings of the Refunded Bonds; and G. WHEREAS, it is in the best interests of the City that the Bonds be issued in book - entry form as hereinafter provided; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Stillwater, Minnesota, as follows: 1. Acceptance of Offer. The offer of Robert W. Baird & Co., Inc. in Milwaukee, Wisconsin (the 'Purchaser "), to purchase the Bonds in accordance with Terms of Proposal, and at the rates of interest hereinafter set forth, and to pay therefor the sum of $6,445,781.50, plus interest accrued to settlement, is hereby accepted. 2. Bond Terms. (a) Original Issue Date; Denominations; Maturities; Term Bond Option. The Bonds shall be dated April 1, 2012, as the date of original issue, shall be issued forthwith on or after 2 4532200v1 such date in fully registered form, shall be numbered from R -1 upward in the denomination of $5,000 each or in any integral multiple thereof of a single maturity (the "Authorized Denominations ") and shall mature on February 1 in the years and amounts as follows: Year Amount Year Amount 2013 $180,000 2020 $460,000 2014 560,000 2021 310,000 2015 565,000 2022 315,000 2016 855,000 2023 320,000 2017 865,000 2024 330,000 2018 465,000 2025 335,000 2019 450,000 2026 345,000 As may be requested by the Purchaser, one or more term Bonds may be issued having mandatory sinking fund redemption and final maturity amounts conforming to the foregoing principal repayment schedule, and corresponding additions may be made to the provisions of the applicable Bond(s). (b) Book Entry OnlSystem. The Depository Trust Company, a limited purpose trust company organized under the laws of the State of New York or any of its successors or its successors to its functions hereunder (the "Depository ") will act as securities depository for the Bonds, and to this end: (i) The Bonds shall be initially issued and, so long as they remain in book entry form only (the 'Book Entry Only Period "), shall at all times be in the form of a separate single fully registered Bond for each maturity of the Bonds; and for purposes of complying with this requirement under paragraphs 5 and 10 Authorized Denominations for any Bond shall be deemed to be limited during the Book Entry Only Period to the outstanding principal amount of that Bond. (ii) Upon initial issuance, ownership of the Bonds shall be registered in a bond register maintained by the Bond Registrar (as hereinafter defined) in the name of CEDE & CO., as the nominee (it or any nominee of the existing or a successor Depository, the "Nominee "). (iii) With respect to the Bonds neither the City nor the Bond Registrar shall have any responsibility or obligation to any broker, dealer, bank, or any other financial institution for which the Depository holds Bonds as securities depository (the "Participant ") or the person for which a Participant holds an interest in the Bonds shown on the books and records of the Participant (the 'Beneficial Owner "). Without limiting the immediately preceding sentence, neither the City, nor the Bond Registrar, shall have any such responsibility or obligation with respect to (A) the accuracy of the records of the Depository, the Nominee or any Participant with respect to any ownership interest in the Bonds, or (B) the delivery to any Participant, any Owner or any other person, other than the Depository, of any notice with respect to the Bonds, including any notice of redemption, or (C) the payment to any Participant, any Beneficial Owner or any other 3 45322000 person, other than the Depository, of any amount with respect to the principal of or premium, if any, or interest on the Bonds, or (D) the consent given or other action taken by the Depository as the Registered Holder of any Bonds (the "Holder "). For purposes of securing the vote or consent of any Holder under this Resolution, the City may, however, rely upon an omnibus proxy under which the Depository assigns its consenting or voting rights to certain Participants to whose accounts the Bonds are credited on the record date identified in a listing attached to the omnibus proxy. (iv) The City and the Bond Registrar may treat as and deem the Depository to be the absolute owner of the Bonds for the purpose of payment of the principal of and premium, if any, and interest on the Bonds, for the purpose of giving notices of redemption and other matters with respect to the Bonds, for the purpose of obtaining any consent or other action to be taken by Holders for the purpose of registering transfers with respect to such Bonds, and for all purpose whatsoever. The Bond Registrar, as paying agent hereunder, shall pay all principal of and premium, if any, and interest on the Bonds only to the Holder or the Holders of the Bonds as shown on the bond register, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to the principal of and premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. (v) Upon delivery by the Depository to the Bond Registrar of written notice to the effect that the Depository has determined to substitute a new Nominee in place of the existing Nominee, and subject to the transfer provisions in paragraph 10 hereof, references to the Nominee hereunder shall refer to such new Nominee. (vi) So long as any Bond is registered in the name of a Nominee, all payments with respect to the principal of and premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, by the Bond Registrar or City, as the case may be, to the Depository as provided in the Letter of Representations to the Depository required by the Depository as a condition to its acting as book -entry Depository for the Bonds (said Letter of Representations, together with any replacement thereof or amendment or substitute thereto, including any standard procedures or policies referenced therein or applicable thereto respecting the procedures and other matters relating to the Depository's role as book -entry Depository for the Bonds, collectively hereinafter referred to as the "Letter of Representations "). (vii) All transfers of beneficial ownership interests in each Bond issued in book -entry form shall be limited in principal amount to Authorized Denominations and shall be effected by procedures by the Depository with the Participants for recording and transferring the ownership of beneficial interests in such Bonds. (viii) In connection with any notice or other communication to be provided to the Holders pursuant to this Resolution by the City or Bond Registrar with respect to any consent or other action to be taken by Holders, the Depository shall consider the date of receipt of notice requesting such consent or other action as the record date for such consent or other action; provided, that the City or the Bond Registrar may establish a special record date for such consent or other action. The City or the Bond Registrar shall, 4 4532200v] to the extent possible, give the Depository notice of such special record date not less than 15 calendar days in advance of such special record date to the extent possible. (ix) Any successor Bond Registrar in its written acceptance of its duties under this Resolution and any paying agency/bond registrar agreement, shall agree to take any actions necessary from time to time to comply with the requirements of the Letter of Representations. (x) In the case of a partial prepayment of a Bond, the Holder may, in lieu of surrendering the Bonds for a Bond of a lesser denomination as provided in paragraph 5 hereof, make a notation of the reduction in principal amount on the panel provided on the Bond stating the amount so redeemed. (c) Termination of Book -Entry Only System. Discontinuance of a particular Depository's services and termination of the book -entry only system may be effected as follows: (i) The Depository may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the City and discharging its responsibilities with respect thereto under applicable law. The City may terminate the services of the Depository with respect to the Bond if it determines that the Depository is no longer able to carry out its functions as securities depository or the continuation of the system of book -entry transfers through the Depository is not in the best interests of the City or the Beneficial Owners. (ii) Upon termination of the services of the Depository as provided in the preceding paragraph, and if no substitute securities depository is willing to undertake the functions of the Depository hereunder can be found which, in the opinion of the City, is willing and able to assume such functions upon reasonable or customary terms, or if the City determines that it is in the best interests of the City or the Beneficial Owners of the Bond that the Beneficial Owners be able to obtain certificates for the Bonds, the Bonds shall no longer be registered as being registered in the bond register in the name of the Nominee, but may be registered in whatever name or names the Holder of the Bonds shall designate at that time, in accordance with paragraph 10 hereof. To the extent that the Beneficial Owners are designated as the transferee by the Holders, in accordance with paragraph 10 hereof, the Bonds will be delivered to the Beneficial Owners. (iii) Nothing in this subparagraph (c) shall limit or restrict the provisions of paragraph 10. (d) Letter of Representations. The provisions in the Letter of Representations are incorporated herein by reference and made a part of the resolution, and if and to the extent any such provisions are inconsistent with the other provisions of this resolution, the provisions in the Letter of Representations shall control. 3. Allocation of Bonds and Proaayments to 2004 Bonds Refunding Portion, Bonds Refunding Portion and Capital Outlay Portion. The aggregate principal amount of $1,610,000 maturing in each of the years and amounts hereinafter set forth are issued to refund the Refunded 2004 Bonds (the "2004 Bonds Refunding Portion "). The aggregate principal 5 4532200v1 amount of $3,425,000 maturing in each of the years and amounts hereinafter set forth are issued to refund the Refunded 2006 Bonds (the "2006 Bonds Refunding Portion "). The aggregate principal amount of $1,320,000 maturing in each of the years and amounts hereinafter set forth are issued to finance the Project (the "Capital Outlay Portion "): Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2004 Bonds Refunding Portion -0- $400,000 400,000 405,000 405,000 2006 Bonds Refunding Portion -0- -0- -0- $280,000 290,000 295,000 300,000 305,000 310,000 315,000 320,000 330,000 335,000 345,000 Capital Outlav Portion $180,000 160,000 165,000 170,000 170,000 170,000 150,000 155,000 Total $180,000 560,000 565,000 855,000 865,000 465,000 450,000 460,000 310,000 315,000 320,000 330,000 335,000 345,000 If Bonds are prepaid, the prepayments shall be allocated to the portions of debt service (and hence allocated to the payment of Bonds treated as relating to a particular portion of debt service) as provided in this paragraph. If the source of prepayment moneys is the general fund of the City, or other generally available source, the prepayment may be allocated to any or all of the portions of debt service in such amounts as the City shall determine. If the source of a prepayment is special assessments or taxes pledged to the Prior 2004 Bonds, the prepayment shall be allocated to the 2004 Bonds Refunding Portion of debt service. If the source of a prepayment is taxes pledged to the Prior 2006 Bonds, the prepayment shall be allocated to the 2006 Bonds Refunding Portion of debt service. If the source of prepayment is taxes pledged to the Project, the prepayment shall be allocated to the Capital Outlay Portion of the Bonds. 4. Purpose; Refunding Findings. The Bonds shall provide funds for crossover refundings of the Refunded Bonds (the "Refunding ") and to finance the Project. The total cost of the Project, which shall include all costs enumerated in Minnesota Statutes, Section 475.65, is estimated to be at least equal to the amount of the Capital Outlay Portion of the Bonds. Work on the Project shall proceed with due diligence to completion. The City covenants that it shall do all things and perform all acts required of it to assure that work on the Project proceeds with due diligence to completion and that any and all permits and studies required under law for the Project are obtained. It is hereby found, determined and declared that the Refunding is pursuant to Minnesota Statutes, Section 475.67, Subdivision 13, and as of the crossover date of the 2004 Bonds Refunding Portion of the Bonds, shall result in a reduction of the present value of the dollar amount of the debt service to the City from a total dollar amount of $2,222,345.00 for the Prior 2004 Bonds to a total dollar amount of $2,147,200.00 for the 2004 Bonds Refunding 6 4532200vI Portion of the Bonds, and as of the crossover date of the 2006 Bonds Refunding Portion of the Bonds, shall result in a reduction of the present value of the dollar amount of the debt service to the City from a total dollar amount of $5,514,740.00 for the Prior 2006 Bonds to a total dollar amount of $5,377,395.00 for the 2006 Bonds Refunding Portion of the Bonds, all computed in accordance with the provisions of Minnesota Statutes, Section 475.67, Subdivision 12, and accordingly the dollar amount of such present value of the debt service for the 2004 Bonds Refunding Portion of the Bonds and the 2006 Bonds Refunding Portion of the Bonds is lower by at least three percent (3.00 %) than the dollar amount of such present value of the debt service for the Prior 2004 Bonds and Prior 2006 Bonds as required in said Subdivision 12. 5. Interest. The Bonds shall bear interest payable semiannually on February 1 and August 1 of each year (each, an "Interest Payment Date "), commencing February 1, 2013, calculated on the basis of a 360 -day year of twelve 30 -day months, at the respective rates per annum set forth opposite the maturity years as follows: Maturity Year Interest Rate Maturity Year Interest Rate 2013 2.00% 2020 2.00% 2014 2.00 2021 2.25 2015 2.00 2022 2.25 2016 2.00 2023 2.35 2017 2.00 2024 2.45 2018 2.00 2025 2.55 2019 2.00 2026 2.65 6. Redemption. All Bonds maturing on February 1, 2023, and thereafter, shall be subject to redemption and prepayment at the option of the City on February 1, 2022, and on any date thereafter at a price of par plus accrued interest. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part, the selection of the amounts and maturities of the Bonds to be prepaid shall be at the discretion of the City; and if only part of the Bonds having a common maturity date are called for prepayment, the specific Bonds to be prepaid shall be chosen by lot by the Bond Registrar. Bonds or portions thereof called for redemption shall be due and payable on the redemption date, and interest thereon shall cease to accrue from and after the redemption date. Mailed notice of redemption shall be given to the paying agent and to each affected registered holder of the Bonds at least thirty days prior to the date fixed for redemption. To effect a partial redemption of Bonds having a common maturity date, the Bond Registrar prior to giving notice of redemption shall assign to each Bond having a common maturity date a distinctive number for each $5,000 of the principal amount of such Bond. The Bond Registrar shall then select by lot, using such method of selection as it shall deem proper in its discretion, from the numbers so assigned to such Bonds, as many numbers as, at $5,000 for each number, shall equal the principal amount of such Bonds to be redeemed. The Bonds to be redeemed shall be the Bonds to which were assigned numbers so selected; provided, however, that only so much of the principal amount of each such Bond of a denomination of more than $5,000 shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. If a Bond is to be redeemed only in part, it shall be surrendered to the Bond Registrar (with, if the 7 4532200v1 City or Bond Registrar so requires, a written instrument of transfer in form satisfactory to the City and Bond Registrar duly executed by the holder thereof or the Holder's attorney duly authorized in writing) and the City shall execute (if necessary) and the Bond Registrar shall authenticate and deliver to the Holder of such Bond, without service charge, a new Bond or Bonds of the same series having the same stated maturity and interest rate and of any Authorized Denomination or Denominations, as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond so surrendered. 7. Bond Re istrar. U. S. Bank National Association, in St. Paul, Minnesota, is appointed to act as bond registrar and transfer agent with respect to the Bonds (the "Bond Registrar "), and shall do so unless and until a successor Bond Registrar is duly appointed, all pursuant to any contract the City and Bond Registrar shall execute which is consistent herewith. The Bond Registrar shall also serve as paying agent unless and until a successor paying agent is duly appointed. Principal and interest on the Bonds shall be paid to the registered holders (or record holders) of the Bonds in the manner set forth in the form of Bond and paragraph 12 of this resolution. 8. Form of Bond. The Bonds, together with the Bond Registrar's Certificate of Authentication, the form of Assignment and the registration information thereon, shall be in substantially the following form: 4532200v1 I1A UNITED STATES OF AMERICA STATE OF MINNESOTA WASHINGTON COUNTY CITY OF STILLWATER GENERAL OBLIGATION CAPITAL OUTLAY AND REFUNDING BOND, SERIES 2012A INTEREST MATURITY DATE DATE OF ORIGINAL RATE ISSUE FEBRUARY 1, APRIL 1, 2012 REGISTERED OWNER: PRINCIPAL AMOUNT: E.1 CUSIP THE CITY OF STILLWATER, WASHINGTON COUNTY, MINNESOTA (the "Issuer "), certifies that it is indebted and for value received promises to pay to the registered owner specified above, or registered assigns, in the manner hereinafter set forth, the principal amount specified above, on the maturity date specified above, unless called for prior redemption, and to pay interest thereon semiannually on February I and August 1 of each year (each, an "Interest Payment Date "), commencing February 1, 2013, at the rate per annum specified above (calculated on the basis of a 360 -day year of twelve 30 -day months) until the principal sum is paid or has been provided for. This Bond will bear interest from the most recent Interest Payment Date to which interest has been paid or, if no interest has been paid, from the date of original issue hereof. The principal of and premium, if any, on this Bond are payable upon presentation and surrender hereof at the principal office of U. S. Bank National Association, in St. Paul, Minnesota (the 'Bond Registrar "), acting as paying agent, or any successor paying agent duly appointed by the Issuer. Interest on this Bond will be paid on each Interest Payment Date by check or draft mailed to the person in whose name this Bond is registered (the "Holder" or 'Bondholder ") on the registration books of the Issuer maintained by the Bond Registrar and at the address appearing thereon at the close of business on the fifteenth day of the calendar month next preceding such Interest Payment Date (the "Regular Record Date "). Any interest not so timely paid shall cease to be payable to the person who is the Holder hereof as of the Regular Record Date, and shall be payable to the person who is the Holder hereof at the close of business on a date (the "Special Record Date ") fixed by the Bond Registrar whenever money becomes available for payment of the defaulted interest. Notice of the Special Record Date shall be given to Bondholders not less than ten days prior to the Special Record Date. The principal of and premium, if any, and interest on this Bond are payable in lawful money of the United States of America. So long as this Bond is registered in the name of the Depository or its Nominee as provided in the Resolution hereinafter described, and as those terms are defined therein, payment of principal of, premium, if any, and interest on this Bond and notice with respect thereto shall be 9 4532200v1 made as provided in the Letter of Representations, as defined in the Resolution, and surrender of this Bond shall not be required for payment of the redemption price upon a partial redemption of this Bond. Until termination of the book -entry only system pursuant to the Resolution, Bonds may only be registered in the name of the Depository or its Nominee. Redemption. All Bonds of this issue (the "Bonds ") maturing on February 1, 2023, and thereafter, are subject to redemption and prepayment at the option of the Issuer on February 1, 2022, and on any date thereafter at a price of par plus accrued interest. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part, the selection of the amounts and maturities of the Bonds to be prepaid shall be at the discretion of the Issuer, and if only part of the Bonds having a common maturity date are called for prepayment, the specific Bonds to be prepaid shall be chosen by lot by the Bond Registrar. Bonds or portions thereof called for redemption shall be due and payable on the redemption date, and interest thereon shall cease to accrue from and after the redemption date. Mailed notice of redemption shall be given to the paying agent and to each affected Holder of the Bonds at least thirty (30) days prior to the date fixed for redemption. Selection of Bonds for Redemption; Partial Redemption. To effect a partial redemption of Bonds having a common maturity date, the Bond Registrar shall assign to each Bond having a common maturity date a distinctive number for each $5,000 of the principal amount of such Bond. The Bond Registrar shall then select by lot, using such method of selection as it shall deem proper in its discretion, from the numbers assigned to the Bonds, as many numbers as, at $5,000 for each number, shall equal the principal amount of such Bonds to be redeemed. The Bonds to be redeemed shall be the Bonds to which were assigned numbers so selected; provided, however, that only so much of the principal amount of such Bond of a denomination of more than $5,000 shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. If a Bond is to be redeemed only in part, it shall be surrendered to the Bond Registrar (with, if the Issuer or Bond Registrar so requires, a written instrument of transfer in form satisfactory to the Issuer and Bond Registrar duly executed by the Holder thereof or the Holder's attorney duly authorized in writing) and the Issuer shall execute (if necessary) and the Bond Registrar shall authenticate and deliver to the Holder of such Bond, without service charge, a new Bond or Bonds of the same series having the same stated maturity and interest rate and of any Authorized Denomination or Denominations, as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond so surrendered. Issuance; Purpose; General Obligation. This Bond is one of an issue in the total principal amount of $6,355,000, all of like date of original issue and tenor, except as to number, maturity, interest rate, denomination and redemption privilege, issued pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, the Issuer's charter, and pursuant to a resolution adopted by the City Council on March 20, 2012 (the "Resolution "), for the purpose of providing money to finance the Issuer's 2012 capital outlay projects and provide funds sufficient for crossover refundings on February 1, 2013, of the Issuer's General Obligation Improvement Bonds, Series 2004A, dated March 1, 2004, which mature on and after February 1, 2014, and on February 1, 2015, of the Issuer's General Obligation Capital Outlay Bonds, Series 2006A, dated February 1, 2006, which mature on and after February 1, 2016. This Bond is payable out of the Escrow Account and the Debt Service Account of the Issuer's General Obligation Capital Outlay 10 4532200v1 and Refunding Bonds, Series 2012A Fund. This Bond constitutes a general obligation of the Issuer, and to provide moneys for the prompt and full payment of its principal, premium, if any, and interest when the same become due, the full faith and credit and taxing powers of the Issuer have been and are hereby irrevocably pledged. Denominations; Exchange; Resolution. The Bonds are issuable solely in fully registered form in Authorized Denominations (as defined in the Resolution) and are exchangeable for fully registered Bonds of other Authorized Denominations in equal aggregate principal amounts at the principal office of the Bond Registrar, but only in the manner and subject to the limitations provided in the Resolution. Reference is hereby made to the Resolution for a description of the rights and duties of the Bond Registrar. Copies of the Resolution are on file in the principal office of the Bond Registrar. Transfer. This Bond is transferable by the Holder in person or by the Holder's attorney duly authorized in writing at the principal office of the Bond Registrar upon presentation and surrender hereof to the Bond Registrar, all subject to the terms and conditions provided in the Resolution and to reasonable regulations of the Issuer contained in any agreement with the Bond Registrar. Thereupon the Issuer shall execute and the Bond Registrar shall authenticate and deliver, in exchange for this Bond, one or more new fully registered Bonds in the name of the transferee (but not registered in blank or to "bearer" or similar designation), of an Authorized Denomination or Denominations, in aggregate principal amount equal to the principal amount of this Bond, of the same maturity and bearing interest at the same rate. Fees upon Transfer or Loss. The Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer or exchange of this Bond and any legal or unusual costs regarding transfers and lost Bonds. Treatment of Registered Owners. The Issuer and Bond Registrar may treat the person in whose name this Bond is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Bond shall be overdue, and neither the Issuer nor the Bond Registrar shall be affected by notice to the contrary. Authentication. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security unless the Certificate of Authentication hereon shall have been executed by the Bond Registrar. Qualified Tax-Exempt Obligation. This Bond has been designated by the Issuer as a "qualified tax - exempt obligation" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions and things required by the Constitution and laws of the State of Minnesota and the Issuer's charter to be done, to happen and to be performed, precedent to and in the issuance of this Bond, have been done, have happened and have been performed, in regular and due form, time and manner as required by law, and that this Bond, together with all other debts of the Issuer outstanding on the date of original issue hereof and the date of its issuance and delivery to the original purchaser, does not exceed any constitutional, charter or statutory limitation of indebtedness. 11 4532200v1 IN WITNESS WHEREOF, the City of Stillwater, Washington County, Minnesota, by its City Council has caused this Bond to be executed on its behalf by the facsimile signatures of its Mayor and its City Clerk, the corporate seal of the Issuer having been intentionally omitted as permitted by law. Date of Registration: BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the Resolution mentioned within. U. S. BANK NATIONAL ASSOCIATION St. Paul, Minnesota Bond Registrar By Authorized Signature Registrable by: U. S. BANK NATIONAL ASSOCIATION Payable at: U. S. BANK NATIONAL ASSOCIATION CITY OF STILLWATER, WASHINGTON COUNTY, MINNESOTA Ken Diane F. Ward, City Clerk 12 4532200v] ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this Bond, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UTMA - as custodian for (Cust) under the (State) (Minor) Uniform Transfers to Minors Act Additional abbreviations may also be used though not in the above list. ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto the within Bond and does hereby irrevocably constitute and appoint attorney to transfer the Bond on the books kept for the registration thereof, with full power of substitution in the premises. Dated: Notice: The assignor's signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or any change whatever. Signature Guaranteed: Signature(s) must be guaranteed by a national bank or trust company or by a brokerage firm having a membership in one of the major stock exchanges or any other "Eligible Guarantor Institution" as defined in 17 CFR 240.17 Ad- 15(a)(2). The Bond Registrar will not effect transfer of this Bond unless the information concerning the transferee requested below is provided. Name and Address: (Include information for all joint owners if the Bond is held by joint account.) 13 4532200v] PREPAYMENT SCHEDULE This Bond has been prepaid in part on the date(s) and in the amount(s) as follows: AUTHORIZED SIGNATURE DATE AMOUNT OF HOLDER 14 4532200v1 9. Execution; Temporary Bonds. The Bonds shall be printed (or, at the request of the Purchaser, typewritten) and shall be executed on behalf of the City by the signatures of its Mayor and City Clerk and be sealed with the seal of the City; provided, however, -that the seal of the City may be a printed (or, at the request of the Purchaser, photocopies) facsimiles and the corporate seal may be omitted on the Bonds as permitted by law. In the event of disability or resignation or other absence of either such officer, the Bonds may be signed by the manual or facsimile signature of that officer who may act on behalf of such absent or disabled officer. In case either such officer whose signature or facsimile of whose signature shall appear on the Bonds shall cease to be such officer before the delivery of the Bonds, such signature or facsimile shall nevertheless be valid and sufficient for all purposes, the same as if he or she had remained in office until delivery. The City may elect to deliver, in lieu of printed definitive bonds, one or more typewritten temporary bonds in substantially the form set forth above, with such changes as may be necessary to reflect more than one maturity in a single temporary bond. Such temporary bonds may be executed with photocopied facsimile signatures of the Mayor and City Clerk. Such temporary bonds shall, upon the printing of the definitive bonds and the execution thereof, be exchanged therefor and canceled. 10. Authentication. No Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this resolution unless a Certificate of Authentication on such Bond, substantially in the form hereinabove set forth, shall have been duly executed by an authorized representative of the Bond Registrar. Certificates of Authentication on different Bonds need not be signed by the same person. The Bond Registrar shall authenticate the signatures of officers of the City on each Bond by execution of the Certificate of Authentication on the Bond and by inserting as the date of registration in the space provided the date on which the Bond is authenticated, except that for purposes of delivering the original Bonds to the Purchaser, the Bond Registrar shall insert as a date of registration the date of original issue, which date is April 1, 2012. The Certificate of Authentication so executed on each Bond shall be conclusive evidence that it has been authenticated and delivered under this resolution. 11. Registration; Transfer; Exchange. The City will cause to be kept at the principal office of the Bond Registrar a bond register in which, subject to such reasonable regulations as the Bond Registrar may prescribe, the Bond Registrar shall provide for the registration of Bonds and the registration of transfers of Bonds entitled to be registered or transferred as herein provided. Upon surrender for transfer of any Bond at the principal office of the Bond Registrar, the City shall execute (if necessary), and the Bond Registrar shall authenticate, insert the date of registration (as provided in paragraph 9) of, and deliver, in the name of the designated transferee or transferees, one or more new Bonds of any Authorized Denomination or Denominations of a like aggregate principal amount, having the same stated maturity and interest rate, as requested by the transferor; provided, however, that no Bond may be registered in blank or in the name of "bearer" or similar designation. At the option of the Holder, Bonds may be exchanged for Bonds of any Authorized Denomination or Denominations of a like aggregate principal amount and stated maturity, upon surrender of the Bonds to be exchanged at the principal office of the Bond Registrar. Whenever any Bonds are so surrendered for exchange, the City shall execute (if necessary), and the Bond 15 4532200v1 Registrar shall authenticate, insert the date of registration of, and deliver the Bonds which the Holder making the exchange is entitled to receive. All Bonds surrendered upon any exchange or transfer provided for in this resolution shall be promptly canceled by the Bond Registrar and thereafter disposed of as directed by the City. All Bonds delivered in exchange for or upon transfer of Bonds shall be valid general obligations of the City evidencing the same debt, and entitled to the same benefits under this resolution, as the Bonds surrendered for such exchange or transfer. Every Bond presented or surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, in form satisfactory to the Bond Registrar, duly executed by the Holder thereof or the Holder's attorney duly authorized in writing. The Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer or exchange of any Bond and any legal or unusual costs regarding transfers and lost Bonds. Transfers shall also be subject to reasonable regulations of the City contained in any agreement with the Bond Registrar, including regulations which permit the Bond Registrar to close its transfer books between record dates and payment dates. The City Clerk is hereby authorized to negotiate and execute the terms of said agreement. 12. Rights Upon Transfer or Exchange. Each Bond delivered upon transfer of or in exchange for or in lieu of any other Bond shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Bond. 13. Interest Payment; Record Date. Interest on any Bond shall be paid on each Interest Payment Date by check or draft mailed to the person in whose name the Bond is registered (the "Holder ") on the registration books of the City maintained by the Bond Registrar and at the address appearing thereon at the close of business on the fifteenth day of the calendar month next preceding such Interest Payment Date (the "Regular Record Date "). Any such interest not so timely paid shall cease to be payable to the person who is the Holder thereof as of the Regular Record Date, and shall be payable to the person who is the Holder thereof at the close of business on a date (the "Special Record Date ") fixed by the Bond Registrar whenever money becomes available for payment of the defaulted interest. Notice of the Special Record Date shall be given by the Bond Registrar to the Holders not less than ten days prior to the Special Record Date. 14. Treatment of Registered Owner. The City and Bond Registrar may treat the person in whose name any Bond is registered as the owner of such Bond for the purpose of receiving payment of principal of and premium, if any, and interest (subject to the payment provisions in paragraph 12) on, such Bond and for all other purposes whatsoever whether or not such Bond shall be overdue, and neither the City nor the Bond Registrar shall be affected by notice to the contrary. 16 4532200v1 15. Delivery; Application of Proceeds. The Bonds when so prepared and executed shall be delivered by the Administrator /Treasurer to the Purchaser upon receipt of the purchase price, and the Purchaser shall not be obliged to see to the proper application thereof. 16. Fund and Accounts. There is hereby created a special fund to be designated the "General Obligation Capital Outlay and Refunding Bonds, Series 2012A Fund" (the "Fund ") to be administered and maintained by the Administrator /Treasurer as a bookkeeping account separate and apart from all other funds maintained in the official financial records of the City. The Fund shall be maintained in the manner herein specified until all of the Bonds and the interest thereon have been fully paid. There shall be maintained in the Fund the following separate accounts: (a) Construction Account. To the Construction Account there shall be credited the proceeds of the sale of the Capital Outlay Portion of the Bonds, less accrued interest received thereon. From the Construction Account there shall be paid all costs and expenses of making the Project, including the cost of any construction contracts heretofore let and all other costs incurred and to be incurred of the kind authorized in Minnesota Statutes, Section 475.65. The moneys in the Construction Account shall be used for no other purpose except as otherwise provided by law; provided that the proceeds of the Capital Outlay Portion of the Bonds may also be used to the extent necessary to pay interest on the Capital Outlay Portion of the Bonds due prior to the anticipated date of commencement of the collection of taxes herein levied; and provided further that if upon completion of the Project there shall remain any unexpended balance in the Construction Account, the balance shall be transferred by the Council to the Capital Outlay Debt Service Subaccount. (b) Escrow Account. The Escrow Account shall be maintained as an escrow account with U.S. Bank National Association (the "Escrow Agent "), in St. Paul, Minnesota, which is a suitable financial institution within or without the State whose deposits are insured by the Federal Deposit Insurance Corporation and whose combined capital and surplus is not less than $500,000. $5,053,921.51 proceeds of the sale of the Bonds shall be received by the Escrow Agent and applied to fund the Escrow Account and to pay costs of issuing the Bonds. Proceeds of the Bonds not used to pay costs of issuance and any Bond proceeds returned to the City are hereby pledged and appropriated to the Escrow Account together with all investment earnings. The Escrow Account shall be invested in securities maturing or callable at the option of the holder on such dates and bearing interest at such rates as shall be required to provide sufficient funds, together with any cash or other funds retained in the Escrow Account, (i) to pay when due the interest to accrue on the 2004 Bonds Refunding Portion of the Bonds to and including February 1, 2013; and (ii) to pay when due the interest to accrue on the 2006 Bonds Refunding Portion of the Bonds to and including February 1, 2015; and (iii) to pay when called for redemption on February 1, 2013, the principal amount of the Refunded 2004 Bonds; and (iv) to pay when called for redemption on February 1, 2015, the principal amount of the Refunded 2006 Bonds. The Escrow Account shall be irrevocably appropriated to the payment of (i) all interest on the 2004 Bonds Refunding Portion of the Bonds to and including February 1, 2013, and (ii) all interest on the 2006 Bonds Refunding Portion of the Bonds to and including February 1, 2015, and (iii) the principal of the Refunded 2004 Bonds due by reason of their call for redemption on February 1, 2013, and (iv) the principal of the Refunded 2006 Bonds due by reason of their call for redemption on February 1, 2015. The moneys in the Escrow Account 17 4532200v1 shall be used solely for the purposes herein set forth and for no other purpose, except that any surplus in the Escrow Account may be remitted to the City, all in accordance with an agreement (the "Escrow Agreement ") by and between the City and Escrow Agent, a form of which agreement is on file in the office of the City Clerk. Any moneys remitted to the City pursuant to the Escrow Agreement shall be deposited in the Debt Service Account. (c) Debt Service Account. There shall be maintained the following separate subaccounts in the Debt Service Account and there are hereby irrevocably appropriated and pledged to, and there shall be credited to the separate subaccounts of the Debt Service Account: (i) Improvement Debt Service Subaccount. To the Improvement Debt Service Subaccount there is hereby pledged and irrevocably appropriated and there shall be credited: (i) any collections of all taxes herein or hereafter levied for the payment of the 2004 Bonds Refunding Portion of the Bonds; (ii) any collections of all taxes heretofore levied for the payment of the Prior 2004 Bonds and interest thereon which are not needed to pay the Prior 2004 Bonds as a result of the Refunding; (iii) after February 1, 2013, all uncollected special assessments pledged to the payment of the Prior 2004 Bonds; (iv) a pro rata share of any balance remitted to the City upon the termination of the Escrow Agreement; (v) any balances remaining after February 1, 2013, in the General Obligation Improvement Bonds, Series 2004A Debt Service Account created by the Prior 2004 Resolution; (vi) all investment earnings on funds in the Improvement Debt Service Subaccount; and (vii) any and all other moneys which are properly available and are appropriated by the governing body of the City to the Improvement Debt Service Subaccount. The amount of any surplus remaining in the Improvement Debt Service Subaccount when the 2004 Bonds Refunding Portion of the Bonds and interest thereon are paid shall be used consistent with Minnesota Statutes, Section 475.61, Subdivision 4. (ii) Capital Outlay Debt Service Subaccount. To the Capital Outlay Debt Service Subaccount there is hereby pledged and irrevocably appropriated and there shall be credited: (i) any collections of all taxes herein or hereafter levied for the payment of the 2006 Bonds Refunding Portion of the Bonds; (ii) any collections of all taxes heretofore levied for the payment of the Prior 2006 Bonds and interest thereon which are not needed to pay the Prior 2006 Bonds as a result of the Refunding; (iii) a pro rata share of any balance remitted to the City upon the termination of the Escrow Agreement; (iv) any balances remaining after February 1, 2015, in the General Obligation Capital Outlay Bonds, Series 2006A Sinking Fund created by the Prior 2006 Resolution; (v) all collections of taxes herein or hereafter levied for the payment of the Capital Outlay Portion of the Bonds; (vi) all investment earnings on funds in the Capital Outlay Debt Service Subaccount; and (vii) any and all other moneys which are properly available and are appropriated by the governing body of the City to the Capital Outlay Debt Service Subaccount. The amount of any surplus remaining in the Capital Outlay Debt Service Subaccount when the 2006 Bonds Refunding Portion of the Bonds and interest thereon are paid shall be used consistent with Minnesota Statutes, Section 475.61, Subdivision 4. The moneys in the Debt Service Account shall be used solely to pay the principal of and interest on the Bonds or any other bonds hereafter issued and made payable from the Fund. No portion of the proceeds of the Bonds shall be used directly or indirectly to acquire higher 18 4532200v1 yielding investments or to replace funds which were used directly or indirectly to acquire higher yielding investments, except (1) for a reasonable temporary period until such proceeds are needed for the purpose for which the Bonds were issued, and (2) in addition to the above, in an amount not greater than the lesser of five percent of the proceeds of the Bonds or $100,000. To this effect, any proceeds of the Bonds and any sums from time to time held in the Fund (or any other City account which will be used to pay principal and interest to become due on the Bonds) in excess of amounts which under the applicable federal arbitrage regulations may be invested without regard as to yield shall not be invested in excess of the applicable yield restrictions imposed by the arbitrage regulations on such investments after taking into account any applicable "temporary periods" or "minor portion" made available under the federal arbitrage regulations. In addition, the proceeds of the Bonds and money in the Fund shall not be invested in obligations or deposits issued by, guaranteed by or insured by the United States or any agency or instrumentality thereof if and to the extent that such investment would cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the federal Internal Revenue Code of 1986, as amended (the "Code "). 17. Prior Bonds; Security. Until retirement of the Prior Bonds, all provisions theretofore made for the security thereof shall be observed by the City and all of its officers and agents. 18. Covenants Relatinp, to 2004 Bonds Refunding Portion: (a) Special Assessments. The City has heretofore levied special assessments pursuant to the Prior 2004 Resolution, which were pledged to the payment of the principal and interest on the Prior 2004 Bonds and, after February 1, 2013, the uncollected special assessments for the Prior 2004 Bonds are now pledged to the payment of principal and interest on the 2004 Bonds Refunding Portion of the Bonds. The special assessments are such that if collected in full they, together with estimated collections of taxes herein pledged for the payment of the 2004 Bonds Refunding Portion of the Bonds, will produce at least five percent in excess of the amount needed to meet when due the principal and interest payments on the 2004 Bonds Refunding Portion of the Bonds. The special assessments were levied as provided below, payable in equal, consecutive, annual installments, with general taxes for the years shown below and with interest on the declining balance of all such assessments at the rate shown opposite such years: Levy Collection Improvement Designation Years Years Amount Rate North Hill 2004 -2015 2005 -2016 $1,766,609.52 4.30% 19 4532200v1 (b) Tax Levy; Coverage Test; Cancellation of Certain Tax Levies. To provide moneys for payment of the principal and interest on the 2004 Bonds Refunding Portion of the Bonds there is hereby levied upon all of the taxable property in the City a direct annual ad valorem tax which shall be spread upon the tax rolls and collected with and as part of other general property taxes in the City for the years and in the amounts as follows: Year of Tax Levy Year of Tax Collection Amount 2012 -2015 2013 -2016 See attached levy schedule The tax levies are such that if collected in full they, together with sums held in the Escrow Account and other sums pledged to the Improvement Debt Service Subaccount, will produce at least five percent in excess of the amount needed to meet when due the principal and interest payments on the 2004 Bonds Refunding Portion of the Bonds. The tax levies shall be irrepealable so long as any of the 2004 Bonds Refunding Portion of the Bonds are outstanding and unpaid, provided that the City reserves the right and power to reduce the levies in the manner and to the extent permitted by Minnesota Statutes, Section 475.61, Subdivision 3. Upon payment of the Prior 2004 Bonds, the taxes levied in the Prior 2004 Resolution authorizing the issuance of the Prior 2004 Bonds in the years 2014 through 2017 shall be canceled. 19. Covenants Relating to 2006 Bonds Refunding Portion: (a) Tax Levy; Coverage Test; Cancellation of Certain Tax Levies. To provide moneys for payment of the principal and interest on the 2006 Bonds Refunding Portion of the Bonds there is hereby levied upon all of the taxable property in the City a direct annual ad valorem tax which shall be spread upon the tax rolls and collected with and as part of other general property taxes in the City for the years and in the amounts as follows: Year of Tax Levy Year of Tax Collection Amount 2014 -2024 2015 -2025 See attached levy schedule The tax levies are such that if collected in full they, together with sums held in the Escrow Account and other sums pledged to the Capital Outlay Debt Service Subaccount, will produce at least five percent in excess of the amount needed to meet when due the principal and interest payments on the 2006 Bonds Refunding Portion of the Bonds. The tax levies shall be irrepealable so long as any of the 2006 Bonds Refunding Portion of the Bonds are outstanding and unpaid, provided that the City reserves the right and power to reduce the levies in the manner and to the extent permitted by Minnesota Statutes, Section 475.61, Subdivision 3. 20 4532200v1 Upon payment of the Prior 2006 Bonds, the taxes levied in the Prior 2006 Resolution authorizing the issuance of the Prior 2006 Bonds in the years 2016 through 2026 shall be canceled. 20. Covenants Relating to Capital Outlay Portion: (a) Tax Levy; Coverage Test. To provide moneys for payment of the principal and interest on the Capital Outlay Portion of the Bonds there is hereby levied upon all of the taxable property in the City a direct annual ad valorem tax which shall be spread upon the tax rolls and collected with and as part of other general property taxes in the City for the years and in the amounts as follows: Year of Tax Levy Year of Tax Collection Amount 2011 -2018 2012 -2019 See attached levy schedule The tax levies are such that if collected in full they, together with other sums pledged to the Capital Outlay Debt Service Subaccount, will produce at least five percent in excess of the amount needed to meet when due the principal and interest payments on the Capital Outlay Portion of the Bonds. The tax levies shall be irrepealable so long as any of the Capital Outlay Portion of the Bonds are outstanding and unpaid, provided that the City reserves the right and power to reduce the levies in the manner and to the extent permitted by Minnesota Statutes, Section 475.61, Subdivision 3. 21. Defeasance. When all Bonds have been discharged as provided in this paragraph, all pledges, covenants and other rights granted by this resolution to the registered holders of the Bonds shall, to the extent permitted by law, cease. The City may discharge its obligations with respect to any Bonds which are due on any date by irrevocably depositing with the Bond Registrar on or before that date a sum sufficient for the payment thereof in full; or if any Bond should not be paid when due, it may nevertheless be discharged by depositing with the Bond Registrar a sum sufficient for the payment thereof in full with interest accrued to the date of such deposit. The City may also discharge its obligations with respect to any prepayable Bonds called for redemption on any date when they are prepayable according to their terms, by depositing with the Bond Registrar on or before that date a sum sufficient for the payment thereof in full, provided that notice of redemption thereof has been duly given. The City may also at any time discharge its obligations with respect to any Bonds, subject to the provisions of law now or hereafter authorizing and regulating such action, by depositing irrevocably in escrow, with a suitable banking institution qualified by law as an escrow agent for this purpose, cash or securities described in Minnesota Statutes, Section 475.67, Subdivision 8, bearing interest payable at such times and at such rates and maturing on such dates as shall be required, without regard to sale and/or reinvestment, to pay all amounts to become due thereon to maturity or, if notice of redemption as herein required has been duly provided for, to such earlier redemption date. 22. General Obligation Pledge. For the prompt and full payment of the principal of and interest on the Bonds as the same respectively become due, the full faith, credit and taxing powers of the City shall be and are hereby irrevocably pledged. If the balance in the Escrow 21 4532200v1 Account or Debt Service Account is ever insufficient to pay all principal and interest then due on the Bonds payable therefrom, the deficiency shall be promptly paid out of any other accounts of the City which are available for such purpose, and such other funds may be reimbursed without interest from the Escrow Account or Debt Service Account when a sufficient balance is available therein. 23. Securities, Escrow Agent. Securities purchased from moneys in the Escrow Account shall be limited to securities set forth in Minnesota Statutes, Section 475.67, Subdivision 8, and any amendments or supplements thereto. Securities purchased from the Escrow Account shall be purchased simultaneously with the delivery of the Bonds. The City Council has investigated the facts and hereby finds and determines that the Escrow Agent is a suitable financial institution to act as escrow agent. 24. Redemption of Prior Bonds. The Prior 2004 Bonds which mature on and after February 1, 2014, shall be redeemed and prepaid on February 1, 2013 and the Prior 2006 Bonds which mature on and after February 1, 2016, shall be redeemed and prepaid on February 1, 2015, all in accordance with the terms and conditions set forth in the Notices of Call for Redemption, substantially in the forms attached to the Escrow Agreement, which terms and conditions are hereby approved and incorporated herein by reference. The Notices of Call for Redemption shall be given pursuant to the Escrow Agreement. 25. Escrow Agreement. On or prior to the delivery of the Bonds the Mayor and Administrator shall, and are hereby authorized and directed to, execute on behalf of the City an Escrow Agreement. The Escrow Agreement is hereby approved and adopted and made a part of this resolution, and the City covenants that it will promptly enforce all provisions thereof in the event of default thereunder by the Escrow Agent. 26. Purchase of SLGS or Open Market Securities. Springsted Incorporated, as agent for the City Council, is hereby authorized and directed to purchase on behalf of the Council and in its name the appropriate United States Treasury Securities, State and Local Government Series and /or open market securities from Bond proceeds and, to the extent necessary, other available funds, all in accordance with the provisions of this resolution and the Escrow Agreement and to execute all such documents (including the appropriate subscription form) required to effect such purchase in accordance with the applicable U.S. Treasury Regulations. 27. Certificate of Registration. The City Clerk is hereby directed to file a certified copy of this resolution with the County Auditor of Washington County, Minnesota, together with such other information as the Auditor shall require, and to obtain the County Auditor's Certificate that the Bonds have been entered in the County Auditor's Bond Register and that the tax levy required by law has been made. 28. Records and Certificates. The officers of the City are hereby authorized and directed to prepare and furnish to the Purchaser, and to the attorneys approving the legality of the issuance of the Bonds, certified copies of all proceedings and records of the City relating to the Bonds and to the financial condition and affairs of the City, and such other affidavits, certificates and information as are required to show the facts relating to the legality and marketability of the Bonds as the same appear from the books and records under their custody and control or as 22 45322000 otherwise known to them, and all such certified copies, certificates and affidavits, including any heretofore furnished, shall be deemed representations of the City as to the facts recited therein. 29. Neizative Covenant as to Use of Proceeds and Project. The City hereby covenants not to use the proceeds of the Bonds or to use the Project originally financed by the Prior 2004 Bonds and Prior 2006 Bonds, or to cause or permit them to be used, or to enter into any deferred payment arrangements for the cost of the Project, in such a manner as to cause the Bonds to be "private activity bonds" within the meaning of Sections 103 and 141 through 150 of the Code. 30. Tax - Exempt. Status of the Bonds; Rebate. The City is subject to the rebate requirement imposed by Section 148(f) of the Code. The City shall pay to the United States rebates of excess investment earnings in amounts at least equal to the amounts, and at times no later than the times, required by Section 148(f) of the Code and any regulations promulgated pursuant thereto. The City will purchase investments at fair market value as defined in Section 1.148- 5(d)(6). The City shall make a determination of the yield on the Bonds and the yield on investments within sixty days after the end of each fifth bond year and finally within sixty days of the final payment or redemption of the Bonds, and shall maintain records thereof until six years after the retirement of the last of the Bonds. If regulations permit the City to comply with the rebate requirement in a different manner, the City may do so. The City shall comply with requirements necessary under the Code to establish and maintain the exclusion from gross income under Section 103 of the Code of the interest on the Bonds, including without limitation (a) requirements relating to temporary periods for investments, (b) limitations on amounts invested at a yield greater than the yield on the Bonds, and (c) the rebate of excess investment earnings to the United States. 31. Designation of Qualified Tax - Exempt Obligations. In order to qualify the Bonds as "qualified tax - exempt obligations" within the meaning of Section 265(b)(3) of the Code, the City hereby makes the following factual statements and representations: (a) the Bonds are issued after August 7, 1986; (b) the Bonds are not "private activity bonds" as defined in Section 141 of the Code; (c) the City hereby designates the Bonds as "qualified tax - exempt obligations" for purposes of Section 265(b)(3) of the Code; (d) the reasonably anticipated amount of tax - exempt obligations (other than private activity bonds, treating qualified 501(c)(3) bonds as not being private activity bonds) which will be issued by the City (and all entities treated as one issuer with the City, and all subordinate entities whose obligations are treated as issued by the City) during this calendar year 2012 will not exceed $10,000,000; (e) not more than $10,000,000 of obligations issued by the City during this calendar year 2012 have been designated for purposes of Section 265(b)(3) of the Code; and (f) the aggregate face amount of the Bonds does not exceed $10,000,000. 23 4532200v1 The City shall use its best efforts to comply with any federal procedural requirements which may apply in order to effectuate the designation made by this paragraph. 32. Supplemental Resolution. The Prior Resolutions are hereby supplemented to the extent necessary to give effect to the provisions of this resolution. 33. Continuing Disclosure. The City is the sole obligated person with respect to the Bonds. The City hereby agrees, in accordance with the provisions of Rule 15c2 -12 (the "Rule "), promulgated by the Securities and Exchange Commission (the "Commission ") pursuant to the Securities Exchange Act of 1934, as amended, and a Continuing Disclosure Undertaking (the "Undertaking ") hereinafter described to: (a) Provide or cause to be provided to the Municipal Securities Rulemaking Board (the "MSRB ") by filing at www.emma.msrb.org in accordance with the Rule, certain annual financial information and operating data in accordance with the Undertaking. The City reserves the right to modify from time to time the terms of the Undertaking as provided therein. (b) Provide or cause to be provided to the MSRB notice of the occurrence of certain events with respect to the Bonds in not more than ten (10) business days after the occurrence of the event, in accordance with the Undertaking. (c) Provide or cause to be provided to the MSRB notice of a failure by the City to provide the annual financial information with respect to the City described in the Undertaking, in not more than ten (10) business days following such amendment. (d) The City agrees that its covenants pursuant to the Rule set forth in this paragraph and in the Undertaking is intended to be for the benefit of the Holders of the Bonds and shall be enforceable on behalf of such Holders; provided that the right to enforce the provisions of these covenants shall be limited to a right to obtain specific enforcement of the City's obligations under the covenants. The Mayor and City Clerk of the City, or any other officer of the City authorized to act in their place (the "Officers ") are hereby authorized and directed to execute on behalf of the City the Undertaking in substantially the form presented to the City Council subject to such modifications thereof or additions thereto as are (i) consistent with the requirements under the Rule, (ii) required by the Purchaser of the Bonds, and (iii) acceptable to the Officers. 34. Governmental Bonds Post - Issuance Compliance Policies and Procedures The City hereby approves the Governmental Bonds Post - Issuance Compliance Policies and Procedures in substantially the form presented to the City Council. 35. Severability. If any section, paragraph or provision of this resolution shall be held to be invalid or unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or provision shall not affect any of the remaining provisions of this resolution. 36. Headings. Headings in this resolution are included for convenience of reference only and are not a part hereof, and shall not limit or define the meaning of any provision hereof. 24 4532200v] The motion for the adoption of the foregoing resolution was duly seconded by member Roush and, after a full discussion thereof and upon a vote being taken thereon, the following voted in favor thereof- Councilmembers Menikheim, Cook, Roush, Polehna and Mayor Harycki and the following voted against the same: None Whereupon the resolution was declared duly passed and adopted. 25 4532200v1 Adopted March 20, 2012. Approved: u Attest: &)ZI710<1 iane F. Ward, City Clerk 26 4532200v] STATE OF MINNESOTA COUNTY OF WASHINGTON CITY OF STILLWATER I, the undersigned, being the duly qualified and acting City Clerk of the City of Stillwater, Minnesota, DO HEREBY CERTIFY that I have compared the attached and foregoing extract of minutes with the original thereof on file in my office, and that the same is a full, true and complete transcript of the minutes of a meeting of the City Council, duly called and held on the date therein indicated, insofar as such minutes relate to accepting proposal on competitive negotiated sale of $6,355,000 General Obligation Capital Outlay and Refunding Bonds, Series 2012A. WITNESS my hand on March 20, 2012. /01 �-/ J. Ae�4e�-' Diane F. Ward, City Clerk 27 4532200v1 ® Springsted $6,415,000'` CITY OF STILLWATER, MINNESOTA Springsted Incorporated 380 Jackson Street, Suite 300 Saint Paul, MN 55101 -2887 Tel: 651 - 223 -3000 Fax: 651 - 223 -3002 Email: advisors @springsted.com www.springsted.com GENERAL OBLIGATION CAPITAL OUTLAY AND REFUNDING BONDS, SERIES 2012A (BOOK ENTRY ONLY) AWARD: ROBERT W. BAIRD & COMPANY, INCORPORATED AND SYNDICATE SALE: March 20, 2012 Moody's Rating: Aa2 Interest Net Interest True Interest Bidder Rates Price Cost Rate ROBERT W. BAIRD & COMPANY, 2.00% 2013 -2020 INCORPORATED 2.25% 2021 -2022 C.L. KING & ASSOCIATES 2.35% 2023 SAMCO CAPITAL MARKETS, INC. 2.45% 2024 LOOP CAPITAL MARKETS, LLC 2.55% 2025 EDWARD D. JONES & COMPANY 2.65% 2026 CRONIN & COMPANY, INC. 2026 KILDARE CAPITAL CREWS & ASSOCIATES DAVENPORT & COMPANY LLC WEDBUSH MORGAN SECURITIES DOUGHERTY & COMPANY LLC ISAAK BOND INVESTMENTS INC. COUNTRY CLUB BANK ADVISORS ASSET MANAGEMENT ROSS, SINCLAIRE & ASSOCIATES CASTLEOAK SECURITIES, L.P. MORGAN KEEGAN & COMPANY, INC. 1.00% 2013 1.50% 2014 -2015 2.00% 2016 -2019 2.25% 2020 -2022 2.50% 2023 -2024 2.625% 2025 2.75% 2026 PIPER JAFFRAY & CO. 2.00% 2013 -2015 3.00% 2016 -2022 2.375% 2023 -2024 2.50% 2025 2.625% 2026 $6,506,648.15 $850,830.60 1.9882% $6,508,505.20 $858,462.51 2.0024% $6,681,294.65 $885,089.72 2.0400% (Continued) Public Sector Advisors (Continued) Interest Net Interest True Interest Bidder Rates Price Cost Rate RAYMOND JAMES & ASSOCIATES, INC. 2.00% 2013 -2021 $6,463,139.15 $873,883.77 2.0527% 2.125% 2022 2.25% 2023 2.375% 2024 2.50% 2025 2.625% 2026 VINING- SPARKS IBG, 2.00% 2013 -2020 $6,515,134.50 $883,207.17 2.0576% LIMITED PARTNERSHIP 2.10% 2021 2.30% 2022 2.45% 2023 2.55% 2024 3.00% 2025 -2026 UMB BANK, N.A. 0.45% 2013 $6,360,512.60 $883,918.65 2.0819% 0.60% 2014 0.75% 2015 1.00% 2016 1.20% 2017 1.45% 2018 1.70% 2019 1.85% 2020 2.00% 2021 2.20% 2022 2.35% 2023 2.55% 2024 2.75% 2025 3.00% 2026 BMO CAPITAL MARKETS GKST INC. 2.00% 2013 -2020 $6,518,477.30 $938,870.62 2.1834% 2.125% 2021 3.00% 2022 -2026 FTN FINANCIAL CAPITAL MARKETS 2.00% 2013 -2020 $6,479,027.35 $955,768.48 2.2337% 2.50% 2021 -2023 3.00% 2024 -2026 (Continued) REOFFERING SCHEDULE OF THE PURCHASER Rate Year Yield 2.00% 2013 0.30% 2.00% 2014 0.45% 2.00% 2015 0.65% 2.00% 2016 0.85% 2.00% 2017 1.05% 2.00% 2018 1.40% 2.00% 2019 1.65% 2.00% 2020 1.85% 2.25% 2021 2.05% 2.25% 2022 2.20% 2.35% 2023 Par 2.45% 2024 Par 2.55% 2025 Par 2.65% 2026 Par BBI: 3.95% Average Maturity: 6.575 Years * Subsequent to bid opening, the issue size decreased from $6,415,000 to $6,355,000. Post Sale $1,610,000 City of Stillwater, Minnesota General Obligation Capital Outlay and Refunding Bonds, Series 2012A Crossover Refunding of Series 2004A Post -Sale Tax Levies Payment Date Principal Coupon Interest Total P +I 105% Overlevy Special Levy Amount Levy /Collect Assessments Year 02/0112013 - - 26,833.33 26,833.33 28,175.00 - 28,175.00 ' 2011/2012 02/01/2014 400,000.00 2.000% 32,200.00 432,200.00 453,810.00 88,845.00 364,965.00 2012/2013 02/01/2015 400,000.00 2.000% 24,200.00 424,200.00 445,410.00 88,845.00 356,565.00 2013/2014 02/01/2016 405,000.00 2.000% 16,200.00 421,200.00 442,260.00 88,845.00 353,415.00 2014/2015 02/01/2017 405,000.00 2.000% 8,100.00 413,100.00 433,755.00 88,845.00 344,910.00 2015/2016 Total $1,610,000.00 - $107,533.33 $1,717,533.33 $1,803,410.00 $355,380.00 $1,448,030.00 The escrow account established with the proceeds of the Bonds will make the interest payments due through February 1, 2013. Series 2012A Neu and Ref / Series 2012 Rei 04A / 312012012 / 1:45 PAI Springsted Post Sale $3,425,000 City of Stillwater, Minnesota General Obligation Capital Outlay and Refunding Bonds, Series 2012A Crossover Refunding of Series 2006A Post -Sale Tax Levies Payment Date Principal Coupon Interest Total P +l 105% Overlevy Levy Amount Levy /Collect Year 02/01/2013 63,960.42 63,960.42 67,158.44 67,158.44 ' 2011/2012 02/01/2014 76,752.50 76,752.50 80,590.13 80,590.13 ' 2012/2013 02/01/2015 76,752.50 76,752.50 80,590.13 80,590.13 ' 2013/2014 02/01/2016 280,000.00 2.000% 76,752.50 356,752.50 374,590.13 374,590.13 2014/2015 02/01/2017 290,000.00 2.000% 71,152.50 361,152.50 379,210.13 379,210.13 2015/2016 02/01/2018 295,000.00 2.000% 65,352.50 360,352.50 378,370.13 378,370.13 2016/2017 02/01/2019 300,000.00 2.000% 59,452.50 359,452.50 377,425.13 377,425.13 2017/2018 02/01/2020 305,000.00 2.000% 53,452.50 358,452.50 376,375.13 376,375.13 2018/2019 02/01/2021 310,000.00 2.250% 47,352.50 357,352.50 375,220.13 375,220.13 2019/2020 02/01/2022 315,000.00 2.250% 40,377.50 355,377.50 373,146.38 373,146.38 2020/2021 02/01/2023 320,000.00 2.350% 33,290.00 353,290.00 370,954.50 370,954.50 2021/2022 02/01/2024 330,000.00 2.450% 25,770.00 355,770.00 373,558.50 373,558.50 2022/2023 02/01/2025 335,000.00 2.550% 17,685.00 352,685.00 370,319.25 370,319.25 2023/2024 02/01/2026 345,000.00 2.650% 9,142.50 354,142.50 371,849.63 371,849.63 2024/2025 Total $3,425,000.00 - $717,245.42 $4,142,245.42 $4,349,357.69 $4,349,357.69 " The escrow account established with the proceeds of the Bonds will make the interest payments due through February 1, 2015. .Series 2012A New and Ref / Series 2012 Ref 06A / 3/20/2012 / 1:98 FA9 Springsted Post Sale $1,320,000 City of Stillwater, Minnesota General Obligation Capital Outlay and Refunding Bonds, Series 2012A Post -Sale Tax Levies Payment Date Principal Coupon Interest Total P +I 105% Overlevy Levy Amount Levy /Collect Year 02/01/2013 180,000.00 2.000% 22,000.00 202,000.00 212,100.00 212,100.00 2011/2012 02/01/2014 160,000.00 2.000% 22,800.00 182,800.00 191,940.00 191,940.00 2012/2013 02/01/2015 165,000.00 2.000% 19,600.00 184,600.00 193,830.00 193,830.00 2013/2014 02/01/2016 170,000.00 2.000% 16,300.00 186,300.00 195,615.00 195,615.00 2014/2015 02/01/2017 170,000.00 2.000% 12,900.00 182,900.00 192,045.00 192,045.00 2015/2016 02/01/2018 170,000.00 2.000% 9,500.00 179,500.00 188,475.00 188,475.00 2016/2017 02/01/2019 150,000.00 2.000% 6,100.00 156,100.00 163,905.00 163,905.00 2017/2018 02/01/2020 155,000.00 2.000% 3,100.00 158,100.00 166,005.00 166,005.00 2018/2019 Total $1,320,000.00 - $112,300.00 $1,432,300.00 $1,503,915.00 $1,503,915.00 Series 2012A Neu and R f / 2012 GO Cap hW Outby bb / 31ZO 12012 / 7:95 FAf Springsted Post Sale $6,355,000 City of Stillwater, Minnesota General Obligation Capital Outlay and Refunding Bonds, Series 2012A Capital Outlay Projects and Crossover Refunding of Series 2004A, 2006A Post -Sale Tax Levies Payment Date Principal Coupon Interest Total P +I 105% Overlevy Special Assessments Levy Amount Levy /Collect Year 02/01/2013 180,000.00 2.000% 112,793.75 292,793.75 307,433.44 - 307,433.44 2011/2012 02/01/2014 560,000.00 2.000% 131,752.50 691,752.50 726,340.13 88,845.00 637,495.13 2012/2013 02/01/2015 565,000.00 2.000% 120,552.50 685,552.50 719,830.13 88,845.00 630,985.13 2013/2014 02/01/2016 855,000.00 2.000% 109,252.50 964,252.50 1,012,465.13 88,845.00 923,620.13 2014/2015 02/01/2017 865,000.00 2.000% 92,152.50 957,152.50 1,005,010.13 88,845.00 916,165.13 2015/2016 02/01/2018 465,000.00 2.000% 74,852.50 539,852.50 566,845.13 - 566,845.13 2016/2017 02/01/2019 450,000.00 2.000% 65,552.50 515,552.50 541,330.13 541,330.13 2017/2018 02/01/2020 460,000.00 2.000% 56,552.50 516,552.50 542,380.13 542,380.13 2018/2019 02/01/2021 310,000.00 2.250% 47,352.50 357,352.50 375,220.13 375,220.13 2019/2020 02/01/2022 315,000.00 2.250% 40,377.50 355,377.50 373,146.38 373,146.38 2020/2021 02/01/2023 320,000.00 2.350% 33,290.00 353,290.00 370,954.50 370,954.50 2021/2022 02/01/2024 330,000.00 2.450% 25,770.00 355,770.00 373,558.50 373,558.50 2022/2023 02/01/2025 335,000.00 2.550% 17,685.00 352,685.00 370,319.25 370,319.25 2023/2024 02/01/2026 345,000.00 2.650% 9,142.50 354,142.50 371,849.63 371,849.63 2024/2025 Total $6,355,000.00 - $937,078.75 $7,292,078.75 $7,656,682.69 $355,380.00 $7,301,302.69 Cries 2012A A'e .&Re1' / Issuc Sninmm ?• / 312012012 / 1.4.51AI Spriingsted MOOD Y 'S Henrietta Chang Vice President INVESTORS SERVICE Sr.Analyst 100 N.Riverside Plaza Suite 2220 Chicago,IL 60606 312.706.9960 tel March 19, 2012 312.706.9999 fax henrietta.chang @moodys.com www.moodys.com Mr. Larry Hansen City of Stillwater 216 N. 4th St. Stillwater, MN 55082-4898 Dear Mr. Hansen: We wish to inform you that on March 15, 2012, Moody's Investors Service reviewed and assigned a rating of • Aa2 to STILLWATER (CITY OF) MN, General Obligation Capital Outlay and Refunding Bonds, Series 2012A In order for us to maintain the currency of our ratings, we request that you provide ongoing disclosure of current financial and statistical information. Moody's will monitor this rating and reserves the right, at its sole discretion, to revise or withdraw this rating at any time in the future. The rating, as well as any revisions or withdrawals thereof, will be publicly disseminated by Moody's through normal print and electronic media and in response to verbal requests to Moody's Rating Desk. In accordance with our usual policy, assigned ratings are subject to revision or withdrawal by Moody's at any time, without notice, in the sole discretion of Moody's. For the most current rating, please visit www.moodys.com. Should you have any questions regarding the above, please do not hesitate to contact me or the analyst assigned to this transaction, Megan Roudebush at 312-706-9964 Sincerely, ejarit()km Henrietta ng CC: Mr. Mike Hoheisel Northland Securites MOODY S INVESTORS SERVICE New Issue: MOODY'S ASSIGNS Aa2 RATING TO THE CITY OF STILLWATER'S (MN) $64 MILLION GO CAPITAL OUTLAY AND REFUNDING BONDS, SERIES 2012A Global Credit Research-15 Mar 2012 Aa2 RATING APPLIES TO $23.6 MILLION OF POST-SALE GOULT DEBT STILLWATER(CITY OF)MN Cities(including Towns,Villages and Townships) MN Moody's Rating ISSUE RATING General Obligation Capital Outlay and Refunding Bonds,Series 2012A Aa2 Sale Amount $6,415,000 Expected Sale Date 03/29/12 Rating Description General Obligation Moody's Outlook NOO Opinion NEW YORK,March 15,2012—Moody's Investors Service has assigned a Aa2 rating to City of Stillwater's(MN)$6.4 million General Obligation Capital Outlay and Refunding Bonds,Series 2012A.Concurrently,Moody's has affirmed the Aa2 rating on the city's outstanding general obligation debt.Post-sale,the city will have$23.6 n iiion of outstanding general obligation debt. SUMMARY RATINGS RATIONALE The bonds are secured by the city's general obligation unlimited tax pledge.A portion of proceeds will current refund certain outstanding maturities of the city's General Obligation Improvement Bonds,Series 2004A,for an estimated net present value savings of approximately 4.5%of refunded par and certain outstanding maturities of the city's General Obligation Capital Outlay Bonds,Series 2006A,for net present value savings of approximately 5.8%of refunded par without extension of maturity.The remaining proceeds of the current issue will finance approximately$1.3 million in routine capital expenditures.Assignment and affirmation of the Aa2 rating is based on the city's sizeable tax base,advantageously located 20 miles east of the Twin Cities (Minneapolis:G.O.rated Aaa/stable outlook;St.Paul:G.O.rated Aa1/positive outlook);stable financial operations supported by healthy reserves;and manageable debt profile characterized by average amortization and only limited future borrowing plans. STRENGTHS -Favorable location within commuting distance of the Twin Cities -Consistent financial operations supported by healthy reserves CHALLENGES -Modest operational deficit in the General Fund in fiscal 2010 resulting from an unplanned expenditure -Significant increase in healthcare expenditures in fiscal 2011 -Multi-year trend of declines in full valuation -high proportion of debt service relative to general fund expenditures DETAILED CREDIT DISCUSSION SIZEABLE TAX BASE FAVORABLY LOCATED NEAR THE'TWIN CITIES The city's sizeable tax base located approximately 20 miles east of the Twin Cities in Washington County(GO rated Aaa/stable outlook)is expected to remain stable,despite recent declines in valuation,as a result of the city's proximity to employment centers and largely satisfactory operations among the city's top employers and taxpayers.Sti llwater serves as both the county seat and the headquarters for Stillwater Independent School District 834(GO rated Aa2).Not unlike other cities within the Twin Cities metropolitan area,Stillwater's sizeable$2 billion tax base has experienced declines in recent years. From 2006 through 2011,the city's full valuation declined at an average annual rate of 1.2%, Notably,full valuation decreased by a significant 9% and 5.5%in 2010 and 2011,respectively,and officials are currently expecting additional declines in 2012 of approximately 5%. The city's tax base is somewhat concentrated,with the top ten taxpayers comprising 7.5%of total assessed valuation.Officials report the operations among the ten largest employers in and around the city remain largely stable,though staffing at Andersen Window Corporation has declined significantly in recent years,from 4,000 in 2009 to 2,600 in 2012.Though Andersen is not located within the city's boundaries,the company is one of the largest employers in the area. Despite these considerable staffing reductions,officials report that none of the area's other top employers have announced staffing reductions.At 5.2%in December 2011,Washington County's unemployment rate is below state and national levels of 5.7%and 8.3%, respectively,for the same period.Resident income levels for the City of Stillwater exceed national levels,with median family income and per capita income at 137.3%and 138.1%of national levels,respectively, based on 2010 Census results.We expect the city's tax base will remain stable in the long-term due to the city's proximity to employment centers and the stability of operations among its largest employers and taxpayers. STABLE FINANCIAL OPERATIONS SUPPORTED BY HEALTHY RESERVES We expect the city will continue to maintain stable financial operations as a result of continued maintenance of healthy reserves and a lack of reliance on local government aid(LGA). In fiscal 2010,the city ended the year with a General Fund balance of $4.2 milon,or a healthy 44.1%of total General Fund revenues.Officials report the$109,000 operating deficit in the General Fund was driven by unplanned expenditures stemming from both the removal of an environmentally hazardous old boat owned by the city and unreimbursed costs incurred from building a flood wall.In fiscal 2011,unaudited results reflect the city ended the year with a General Fund balance that approximated that of 2010,though officials report audited results may reflect a modest increase in revenues from charges for services.As a result of the loss of LGA and Market Value Homestead Credit (MVHC)revenue in fiscal 2011,the city increased its general operating levy by 11%in 2011,generating$500,000 in new revenue.The 2011 budget also included a significant 15%increase in healthcare expenditures,attributable to an overall increase in plan usage.Actual results reflected a slightly higher 19.26%increase in healthcare costs.To offset this increase, management made modest expenditure reductions across departments and delayed non-essential projects,including a $125,000 seal coating project Officials expect to end fiscal 2012 with General Fund reserves that track 2011 levels.Favorably,though the budget included a 0%increase in health insurance costs,actual results are approximating a 2%decrease in expenditures.To offset moderately increasing expenditures across departments,the city increased the general operating levy again in 2012,by 3%,which is expected to generate$193,000 in new revenue.Officials expect to keep the city's hiring freeze in place through fiscal 2012. The city's financial operations should remain stable as a result of healthy reserves and management's willingness to make necessary budgetary adjustments in order to maintain balanced operations. MANAGEABLE DEBT PROFILE EXPECTED TO CONTINUE The city's debt levels should remain manageable due to average principal amortization and limited future borrowing plans.At 1.2%,the city's direct debt burden fags below the state median of 1.7%, but exceeds the national median of 1%.At 2.4%,the city's overall debt burden is lower than the state and national medians,at 2.6%and 4.1%,respectively.Amortization is average, with 79.4%of principal retired within ten years.Debt service comprised a significant 37%of total operating expenditures in 2010.Officials report the city has limited plans to issue additional debt which include borrowing between$1.3 million and$1.4 million every other year to finance capital outlay equipment All of the city's outstanding debt is fixed rate and the city is not party to any interest rate swap agreements. WHAT COULD CHANGE THE RATING-UP -Improvement in the city's socio-economic indices -Implementation of more formalized financial policies consistent with those of higher rated entities -Stabilization of valuation reversing the multi-year trend of declines WHAT COULD CHANGE THE RATING-DOWN -Further decline in property values or weakening of the city's demographic profile -Substantial declines in fund balances and/or liquidity KEY STATISTICS 2010 population: 18,225(20.4%increase since 2000) 2011 full market valuation:$2 billion(1.2%average annual decrease since 2006) 2011 full value per capita:$107,444 Per capita income as%of U.S.(2010): 138.1% Median family income as%of U.S. (2010): 137.3% Washington County unemployment rate(December 2011):5.2% FY 2010 General Fund balance:$4.1 million(44.1%of total 2010 General Fund revenues) Debt burden:2.4%(1.2%direct) Principal amortization(10 years):79.4% Post-Sale GOULT debt$23.6 million PRINCIPAL METHODOLOGY USED The principal methodology used in this rating was General Obligation Bonds Issued by U.S.Local Governments published in October 2009.Please see the Credit Policy page on www.moodys.com for a copy of this methodology. 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