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Item 08
L., July 21, 2014 Item RESOLUTION AUTHORIZING ISSUANCE, AWARDING SALE, PRESCRIBING THE FORM AND DETAILS AND PROVIDING FOR THE PAYMENT OF $13,730,000 GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014B Proposed Action Staff recommends adoption of the following motion: Move to approve the Resolution Authorizine Issuance. Awarding Sale. Prescribing the Form and Details and Providing for the Rayment of $13.73 million General Obligation Refunding Bonds, Series 2014 B Approval of the Resolution will result in the financing of the G.O. Street Reconstruction Bonds Series 2005 A and the G.O. Capital Improvement Bonds Series 2007 B. Overview The purpose of the 2014 B Bonds is to reduce future interest costs on two outstanding issues. The issuance of the 2014 B Bonds is being conducted as a "crossover" advance refunding in which the proceeds are placed in an escrow account and invested in government securities. These investments and their earnings are structured to pay interest on the 2014 B Bonds through the call dates of the two older bonds, at which time the escrow account will crossover and prepay the entire remaining principal of the two older bonds. After the call dates, the City will cross over and begin making debt service payments on the 2014 B Bonds, taking advantage of the lower interest rates. The tax levy will be reduced by $39,867 and $118,080 in 2016 and 2017 respectively. The bid opening for the bonds is at 10:00 a.m. on Monday July 21; results of the bid opening and recommendations will be presented to the City Council at its regular meeting that same night. Moody's Investor Service has assigned a favorable Aal rating. Approval of the Resolution also includes approval of Escrow Agreement with US Bank for the refunding bonds Primary Issues to Consider • Estimated cost savings. The refunding is projected to result in the City realizing interest cost savings as follows: Supporting Information • Official Statement 0 Rating Report - Moody's Investor Service. • r with US Bank Director Financial Impact: See attached Budgeted: No Source: Taxes and Special Assessments Related Documents (CIP, ERP, etc.): N o te s: Average Annual Future Present Savings Value Benefit Value Benefit 2005 A Street Reconstruction Bonds $ 38,200 $ 151,980 $ 90,840 2007 B Capital Improvement Bonds $ 80,960 $ 1,209,985 $ 934,811 Total $ 1,361,965 $ 1,025,651 Supporting Information • Official Statement 0 Rating Report - Moody's Investor Service. • r with US Bank Director Financial Impact: See attached Budgeted: No Source: Taxes and Special Assessments Related Documents (CIP, ERP, etc.): N o te s: CITY OF LAKEVILLE RESOLUTION Date July 21, 2014 Resolution No. Motion By Seconded By RESOLUTION AUTHORIZING ISSUANCE, AWARDING SALE, PRESCRIBING THE FORM AND DETAILS AND PROVIDING FOR THE PAYMENT OF $13,730,000 GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014B BE IT RESOLVED by the City Council of the City of Lakeville, Minnesota (the City), as follows: SECTION 1. AUTHORIZATION AND SALE 1.01. Authorization This City Council, by resolution adopted June 16, 2014, authorized the issuance and sale on the date hereof of its General Obligation Refunding Bonds, Series 2014B (the Bonds), in the principal amount of $13,730,000, for the purpose of (i) refunding in advance of maturity and prepaying on February 1, 2016 (the Series 2005A Crossover Date) the 2017 through 2026 maturities, aggregating $1,950,000 in principal amount, of the City's General Obligation Street Reconstruction Bonds, Series 2005A, dated, as originally issued, as of December 1, 2005 (the Refunded Series 2005A Bonds) and (ii) refunding in advance of maturity and prepaying on February 1, 2017 (the Series 2007D Crossover Date, together with the Series 2005A Crossover Date, the Crossover Dates) the 2018 through 2032 maturities, aggregating $11,185,000 in principal amount, of the City's General Obligation Capital Improvement Plan Bonds, Series 2007D, dated, as originally issued, as of August 1, 2007 (the Refunded Series 2007D Bonds; together with the Refunded Series 2005A Bonds, the Refunded Bonds). The portion of the Bonds allocable to the refunding of the Series 2005A Bonds is referred to herein as the "2005A Refunding Bonds," and the portion allocable to the refunding of the Series 2007D Bonds is referred to as the "2007D Refunding Bonds." The Crossover Dates are the earliest dates upon which the Refunded Bonds may be redeemed without payment of premium. The refunding is being carried out for the purpose described in Minnesota Statutes, Section 475.67, subdivision 3, section (b)(2)(i) and in compliance with Minnesota Statutes, Chapter 475. 1.02. Sale. Pursuant to the Terms of Proposal and the Official Statement prepared on behalf of the City by Springsted Incorporated, sealed proposals for the purchase of the Bonds were received at or before the time specified for receipt of proposals. The proposals have been opened, publicly read and considered and the purchase price, interest rates and net interest cost under the terms of each proposal have been determined. The most favorable proposal received is that of . in (the Purchaser), to purchase the Bonds at a price of $ plus accrued interest, if any, on all Bonds to the day of delivery and payment, on the further terms and conditions hereinafter set forth. 1.03. Award The sale of the Bonds is hereby awarded to the Purchaser, and the Mayor and City Clerk are hereby authorized and directed to execute a contract on behalf of the City for the sale of the Bonds in accordance with the Terms of Proposal. The good faith deposit of the Purchaser shall be retained by the City until the Bonds have been delivered, and shall be deducted from the purchase price paid at settlement. 1.04. Savings It is hereby determined that: (i) by the issuance of the Bonds, the City will realize a substantial interest rate reduction, a gross savings of approximately $ and a present value savings (using the yield on the Bonds, computed in accordance with Section 148 of the Internal Revenue Code of 1986, as amended (the "Code "), as the discount factor) of approximately $ ; and (ii) as of the respective Crossover Date, the sum of (i) the present value of the debt service on the Bonds, computed to their stated maturity dates, after deducting any premium, using the yield of the Bonds as the discount rate, plus (ii) any expenses of the refunding payable from a source other than the proceeds of the Bonds or investment earnings thereon, is lower by % than the present value of the debt service on the Refunded Bonds, exclusive of any premium, computed to their stated maturity dates, using the yield of the Bonds as the discount rate. SECTION 2. BOND TERMS; REGISTRATION; EXECUTION AND DELIVERY 2.01. Issuance of Bonds All acts, conditions and things which are required by the Constitution and laws of the State of Minnesota to be done, to exist, to happen and to be performed precedent to and in the valid issuance of the Bonds having been done, now existing, having happened and having been performed, it is now necessary for the City Council to establish the form and terms of the Bonds, to provide security therefor and to issue the Bonds forthwith. 2.02. Maturities; Interest Rates; Denominations and Payment The Bonds shall be originally dated as of August 20, 2014, shall be in the denomination of $5,000 each, or any integral multiple thereof, of single maturities, shall mature on February 1 in the years and amounts stated below, and shall bear interest from date of issue until paid or duly called for redemption at the annual rates set forth opposite such years and amounts, as follows: [REVISE MATURITY SCHEDULE FOR ANY TERM BONDS] For purposes of compliance with Minnesota Statutes, Section 475.54, subdivision 1, the maturity schedule of the Bonds shall be combined with those of the Refunded Bonds. The Bonds shall be issuable only in fully registered form. Interest shall be computed on the basis of a 360 -day year composed of twelve 30 -day months. The interest on and, upon surrender of each Bond, the principal amount thereof, shall be payable by check or draft issued by the Registrar described herein, provided that, so long as the Bonds are registered in the name of a securities depository, or a nominee thereof, in accordance with Section 2.08 hereof, principal and interest shall be payable in accordance with the operational arrangements of the securities depository. 2.03. Dates and Interest Payment Dates Upon initial delivery of the Bonds pursuant to Section 2.07 and upon any subsequent transfer or exchange pursuant to Section 2.06, the date of authentication shall be noted on each Bond so delivered, exchanged or transferred. Interest on the Bonds shall be payable on each February 1 and August 1, commencing February 1, 2015, to the owners of record thereof as of the close of business on the fifteenth day of the immediately preceding month, whether or not such day is a business day. 2.04. Redemption Bonds maturing in 2025 and later years shall be subject to redemption and prepayment at the option of the City, in whole or in part, in such order of maturity dates as the City may select and, within a maturity, by lot as selected by the Registrar (or, if applicable, by the bond depository in accordance with its customary procedures) in multiples of $5,000, on February 1, 2024, and on any date thereafter, at a price equal to the principal amount thereof and accrued interest to the date of redemption. [COMPLETE THE FOLLOWING PROVISIONS IF THERE ARE TERM BONDS - ADD ADDITIONAL PROVISIONS IF THERE ARE MORE THAN TWO TERM BONDS] [Bonds maturing on February 1, 20_ and 20 (the Term Bonds) shall be subject to mandatory redemption prior to maturity pursuant to the sinking fund requirements of this Section 2.04 at a redemption price equal to the stated principal amount thereof plus interest accrued thereon to the redemption date, without premium. The Registrar shall select for redemption, by Principal Interest Principal Interest Year Amount Rate Year Amount Rate 2017 $165,000 2025 $970,000 2018 880,000 2026 995,000 2019 880,000 2027 815,000 2020 895,000 2028 830,000 2021 905,000 2029 855,000 2022 915,000 2030 885,000 2023 930,000 2031 915,000 2024 950,000 2032 945,000 [REVISE MATURITY SCHEDULE FOR ANY TERM BONDS] For purposes of compliance with Minnesota Statutes, Section 475.54, subdivision 1, the maturity schedule of the Bonds shall be combined with those of the Refunded Bonds. The Bonds shall be issuable only in fully registered form. Interest shall be computed on the basis of a 360 -day year composed of twelve 30 -day months. The interest on and, upon surrender of each Bond, the principal amount thereof, shall be payable by check or draft issued by the Registrar described herein, provided that, so long as the Bonds are registered in the name of a securities depository, or a nominee thereof, in accordance with Section 2.08 hereof, principal and interest shall be payable in accordance with the operational arrangements of the securities depository. 2.03. Dates and Interest Payment Dates Upon initial delivery of the Bonds pursuant to Section 2.07 and upon any subsequent transfer or exchange pursuant to Section 2.06, the date of authentication shall be noted on each Bond so delivered, exchanged or transferred. Interest on the Bonds shall be payable on each February 1 and August 1, commencing February 1, 2015, to the owners of record thereof as of the close of business on the fifteenth day of the immediately preceding month, whether or not such day is a business day. 2.04. Redemption Bonds maturing in 2025 and later years shall be subject to redemption and prepayment at the option of the City, in whole or in part, in such order of maturity dates as the City may select and, within a maturity, by lot as selected by the Registrar (or, if applicable, by the bond depository in accordance with its customary procedures) in multiples of $5,000, on February 1, 2024, and on any date thereafter, at a price equal to the principal amount thereof and accrued interest to the date of redemption. [COMPLETE THE FOLLOWING PROVISIONS IF THERE ARE TERM BONDS - ADD ADDITIONAL PROVISIONS IF THERE ARE MORE THAN TWO TERM BONDS] [Bonds maturing on February 1, 20_ and 20 (the Term Bonds) shall be subject to mandatory redemption prior to maturity pursuant to the sinking fund requirements of this Section 2.04 at a redemption price equal to the stated principal amount thereof plus interest accrued thereon to the redemption date, without premium. The Registrar shall select for redemption, by lot or other manner deemed fair, on February 1 in each of the following years the following stated principal amounts of such Bonds: Term Bonds Maturing February 1, 20 Year The remaining $ maturity on February 1, 20_. Principal Amount stated principal amount of such Bonds shall be paid at Term Bonds Maturing February 1, 20 Year The remaining $ maturity on February 1, 20_.] Principal Amount stated principal amount of such Bonds shall be paid at The City Clerk shall cause notice of redemption thereof to be published if and as required by law, and at least thirty and not more than sixty days prior to the designated redemption date, shall cause notice of call for redemption to be mailed, by first class mail, to the registered holders of any Bonds to be redeemed at their addresses as they appear on the bond register described in Section 2.06 hereof, but no defect in or failure to give such mailed notice of redemption shall affect the validity of proceedings for the redemption of any Bond not affected by such defect or failure. Official notice of redemption having been given as aforesaid, the Bonds or portions of Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified and from and after such date (unless the City shall default in the payment of the redemption price) such Bonds or portions of Bonds shall cease to bear interest. Upon partial redemption of any Bond, a new Bond or Bonds will be delivered to the owner without charge, representing the remaining principal amount outstanding. 2.05. Appointment of Initial Rep-is tray The City hereby appoints U.S. Bank National Association, St. Paul, Minnesota, as the initial bond registrar, transfer agent and paying agent (the Registrar). The Mayor and City Clerk are authorized to execute and deliver, on behalf of the City, a contract with the Registrar. Upon merger or consolidation of the Registrar with another corporation, if the resulting corporation is a bank or trust company organized under the laws of the United States or one of the states of the United States and authorized by law to conduct such business, such corporation shall be authorized to act as successor Registrar. The City agrees to pay the reasonable and customary charges of the Registrar for the services performed. The City reserves the right to remove the Registrar, effective upon not less than thirty days' written notice and upon the appointment and acceptance of a successor Registrar, in which event the predecessor Registrar shall deliver all cash and Bonds in its possession to the successor Registrar and shall deliver the Bond Register to the successor Registrar. 2.06. Registration The effect of registration and the rights and duties of the City and the Registrar with respect thereto shall be as follows: (a) Register The Registrar shall keep at its principal corporate trust office a register (the Bond Register) in which the Registrar shall provide for the registration of ownership of Bonds and the registration of transfers and exchanges of Bonds entitled to be registered, transferred or exchanged. The tern Holder or Bondholder as used herein shall mean the person (whether a natural person, corporation, association, partnership, trust, governmental unit, or other legal entity) in whose name a Bond is registered in the Bond Register. (b) Transfer of Bonds Upon surrender for transfer of any Bond duly endorsed by the registered owner thereof or accompanied by a written instrument of transfer, in form satisfactory to the Registrar, duly executed by the registered owner thereof or by an attorney duly authorized by the registered owner in writing, the Registrar shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Bonds of a like aggregate principal amount and maturity, as requested by the transferor. The Registrar may, however, close the books for registration of any transfer after the fifteenth day of the month preceding each interest payment date and until such interest payment date. (c) Exchange of Bonds Whenever any Bonds are surrendered by the registered owner for exchange the Registrar shall authenticate and deliver one or more new Bonds of a like aggregate principal amount and maturity, as requested by the registered owner or the owner's attorney in writing. (d) Cancellation All Bonds surrendered for payment, transfer or exchange shall be promptly canceled by the Registrar and thereafter disposed of. The Registrar shall furnish the City at least once each year a certificate setting forth the principal amounts and numbers of Bonds canceled and destroyed. (e) Improper or Unauthorized Transfer When any Bond is presented to the Registrar for transfer, the Registrar may refuse to transfer the same until it is satisfied that the endorsement on such Bond or separate instrument of transfer is valid and genuine and that the requested transfer is legally authorized. The Registrar shall incur no liability for the refusal, in good faith, to make transfers which it, in its judgment, deems improper or unauthorized. (f) Persons Deemed Owners The City and the Registrar may treat the person in whose name any Bond is at any time registered in the bond register as the absolute owner of the Bond, whether the Bond shall be overdue or not, for the purpose of receiving payment of or on account of, the principal of and interest on the Bond and for all other purposes, and all payments made to any registered owner or upon the owner's order shall be valid and effectual to satisfy and discharge the liability upon Bond to the extent of the sum or sums so paid. (g) Taxes, Fees and Charges For every transfer or exchange of Bonds (except for an exchange upon a partial redemption of a Bond), the Registrar may impose a charge upon the owner thereof sufficient to reimburse the Registrar for any tax, fee or other governmental charge required to be paid with respect to such transfer or exchange. (h) Mutilated. Lost, Stolen or Destroyed Bonds hi case any Bond shall become mutilated or be destroyed, stolen or lost, the Registrar shall deliver a new Bond of like amount, number, maturity date and tenor in exchange and substitution for and upon cancellation of any such mutilated Bond or in lieu of and in substitution for any Bond destroyed, stolen or lost, upon the payment of the reasonable expenses and charges of the Registrar in connection therewith, and, in the case of a Bond destroyed, stolen or lost, upon filing with the Registrar of evidence satisfactory to it that the Bond was destroyed, stolen or lost, and of the ownership thereof, and upon furnishing to the Registrar of an appropriate bond or indemnity in form, substance and amount satisfactory to it, in which both the City and the Registrar shall be named as obligees. All Bonds so surrendered to the Registrar shall be canceled by it, and evidence of such cancellation shall be given to the City. If the mutilated, destroyed, stolen or lost Bond has already matured or been called for redemption in accordance with its terms it shall not be necessary to issue a new Bond prior to payment. (i) Authenticating Agent The Registrar is hereby designated authenticating agent for the Bonds, within the meaning of Minnesota Statutes, Section 475.55, Subdivision 1, as amended. 0) Valid Obligations. All Bonds issued upon any transfer or exchange of Bonds shall be the valid obligations of the City, evidencing the same debt, and entitled to the same benefits under this Resolution as the Bonds surrendered upon such transfer or exchange. 2.07. Execution. Authentication and Delivery The Bonds shall be prepared under the direction of the City Clerk and shall be executed on behalf of the City by the signatures of the Mayor and the City Clerk, provided that the signatures may be printed, engraved or lithographed facsimiles of the originals. In case any officer whose signature or a facsimile of whose signature shall appear on the Bonds shall cease to be such officer before the delivery of any Bond, 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. Notwithstanding such execution, no Bond shall be valid or obligatory for any purpose or entitled to any security or benefit under this resolution unless and until a certificate of authentication on the Bond has been duly executed by the manual signature of an authorized representative of the Registrar. Certificates of authentication on different Bonds need not be signed by the same representative. The executed certificate of authentication on each Bond shall be conclusive evidence that it has been authenticated and delivered under this resolution. When the Bonds have been prepared, executed and authenticated, the City Clerk shall deliver them to the Purchaser upon payment of the purchase price in accordance with the contract of sale heretofore executed, and the Purchaser shall not be obligated to see to the application of the purchase price. 0 2.08. Securities De osn itorv (a) For purposes of this section the following terms shall have the following meanings: "Beneficial Owner" shall mean, whenever used with respect to a Bond, the person in whose name such Bond is recorded as the beneficial owner of such Bond by a Participant on the records of such Participant, or such person's subrogee. "Cede & Co." shall mean Cede & Co., the nominee of DTC, and any successor nominee of DTC with respect to the Bonds. "DTC" shall mean The Depository Trust Company of New York, New York. "Participant" shall mean any broker - dealer, bank or other financial institution for which DTC holds Bonds as securities depository. "Representation Letter" shall mean the Representation Letter pursuant to which the City agrees to comply with DTC's Operational Arrangements. (b) The Bonds shall be initially issued as separately authenticated fully registered bonds, and one Bond shall be issued in the principal amount of each stated maturity of the Bonds. Upon initial issuance, the ownership of such Bonds shall be registered in the bond register in the name of Cede & Co., as nominee of DTC. The Registrar and the City may treat DTC (or its nominee) as the sole and exclusive owner of the Bonds registered in its name for the purposes of payment of the principal of or interest on the Bonds, selecting the Bonds or portions thereof to be redeemed, if any, giving any notice permitted or required to be given to registered owners of Bonds under this resolution, registering the transfer of Bonds, and for all other purposes whatsoever, and neither the Registrar nor the City shall be affected by any notice to the contrary. Neither the Registrar nor the City shall have any responsibility or obligation to any Participant, any person claiming a beneficial ownership interest in the Bonds under or through DTC or any Participant, or any other person which is not shown on the bond register as being a registered owner of any Bonds, with respect to the accuracy of any records maintained by DTC or any Participant, with respect to the payment by DTC or any Participant of any amount with respect to the principal of or interest on the Bonds, with respect to any notice which is permitted or required to be given to owners of Bonds under this resolution, with respect to the selection by DTC or any Participant of any person to receive payment in the event of a partial redemption of the Bonds, or with respect to any consent given or other action taken by DTC as registered owner of the Bonds. So long as any Bond is registered in the name of Cede & Co., as nominee of DTC, the Registrar shall pay all principal of and interest on such Bond, and shall give all notices with respect to such Bond, only to Cede & Co. in accordance with DTC's Operational Arrangements, 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 interest on the Bonds to the extent of the sum or sums so paid. No person other than DTC shall receive an authenticated Bond for each separate stated maturity evidencing the obligation of the City to make payments of principal and interest. Upon delivery by DTC to the Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the Bonds will be transferable to such new nominee in accordance with paragraph (e) hereof. (c) In the event the City determines that it is in the best interest of the Beneficial Owners that they be able to obtain Bonds in the form of bond certificates, the City may notify DTC and the Registrar, whereupon DTC shall notify the Participants of the availability through DTC of Bonds in the form of certificates. In such event, the Bonds will be transferable in accordance with paragraph (e) hereof. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving notice to the City and the Registrar and discharging its responsibilities with respect thereto under applicable law. In such event the Bonds will be transferable in accordance with paragraph (e) hereof. (d) The execution and delivery of the Representation Letter to DTC, if not previously filed with DTC, by the Mayor or City Clerk is hereby authorized and directed. (e) In the event that any transfer or exchange of Bonds is permitted under paragraph (b) or (c) hereof, such transfer or exchange shall be accomplished upon receipt by the Registrar of the Bonds to be transferred or exchanged and appropriate instruments of transfer to the permitted transferee in accordance with the provisions of this resolution. In the event Bonds in the form of certificates are issued to owners other than Cede & Co., its successor as nominee for DTC as owner of all the Bonds, or another securities depository as owner of all the Bonds, the provisions of this resolution shall also apply to all matters relating thereto, including, without limitation, the printing of such Bonds in the form of bond certificates and the method of payment of principal of and interest on such Bonds in the form of bond certificates. 2.09. Form of Bonds The Bonds shall be prepared in substantially the following form: UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF DAKOTA CITY OF LAKEVILLE GENERAL OBLIGATION REFUNDING BOND, SERIES 2014B Interest Rate Maturity Date Date of Original Issue CUSIP No. % February 1, 20 August 20, 2014 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: THOUSAND DOLLARS THE CITY OF LAKEVILLE, STATE OF MINNESOTA (the City), acknowledges itself to be indebted and hereby promises to pay to the registered owner named above, or registered assigns, the principal amount specified above on the maturity date specified above, with interest thereon from the date of original issue specified above or from the most recent date to which interest has been paid or duly provided for at the annual rate specified above, payable on February 1 and August 1 in each year, commencing February 1, 2015, to the person in whose name this Bond is registered at the close of business on the fifteenth day (whether or not a business day) of the immediately preceding month, all subject to the provisions hereof with respect to prior redemption of the Bonds. Interest hereon shall be computed on the basis of a 360 -day year composed of twelve 30 -day months. The interest hereon and, upon presentation and surrender hereof at the principal office of the agent of the Registrar described below, the principal hereof are payable in lawful money of the United States of America by check or draft drawn on U.S. Bank National Association, as bond registrar, transfer agent and paying agent, or its successor designated under the Resolution described herein (the Registrar), or its designated successor under the Resolution described herein. For the prompt and full payment of such principal and interest as the same respectively become due, the full faith and credit and taxing powers of the City have been and are hereby irrevocably pledged. This Bond is one of an issue (the Bonds) in the aggregate principal amount of $13,730,000, issued pursuant to a resolution adopted by the City Council on July 21, 2014 (the Resolution) to refinance the costs of various public improvements, and is issued pursuant to and in full conformity with the Constitution and laws of the State of Minnesota thereunto enabling, including Minnesota Statutes, Chapter 475. The Bonds are issuable only in fully registered form, in denominations of $5,000 or any integral multiple thereof, of single maturities. Bonds maturing in 2025 and later years are each subject to redemption and prepayment at the option of the City, in whole or in part, in such order of maturity dates as the City may select and, within a maturity, by lot as selected by the Registrar (or, if applicable, by the bond depository in accordance with its customary procedures) in multiples of $5,000 on February 1, 2024, and on any date thereafter, at a price equal to the principal amount thereof plus interest accrued to the date of redemption. The City will cause notice of the call for redemption to be published as required by law and, at least thirty days prior to the designated redemption date, will cause notice of the call thereof to be mailed by first class mail to the registered owner of any Bond to be redeemed at the owner's address as it appears on the bond register maintained by the Registrar, but no defect in or failure to give such mailed notice of redemption shall affect the validity of proceedings for the redemption of any Bond not affected by such defect or failure. Official notice of redemption having been given as aforesaid, the Bonds or portions of Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the City shall default in the payment of the redemption price) such Bonds or portions of Bonds shall cease to bear interest. Upon partial redemption of any Bond, a new Bond or Bonds will be delivered to the registered owner without charge, representing the remaining principal amount outstanding. [COMPLETE THE FOLLOWING PROVISIONS IF THERE ARE TERM BONDS - ADD ADDITIONAL PROVISIONS IF THERE ARE MORE THAN TWO TERM BONDS] [Bonds maturing on February 1, 20 and 20_ (the "Term Bonds ") shall be subject to mandatory redemption prior to maturity at a redemption price equal to the stated principal amount thereof plus interest accrued thereon to the redemption date, without premium. The Registrar shall select for redemption, by lot or other manner deemed fair, on February 1 in each of the following years the following stated principal amounts of such Bonds: Term Bonds Maturing February 1, 20 W Year The remaining $ maturity on February 1, 20_. The remaining $ maturity on February 1, 20_ Principal Amount stated principal amount of such Bonds shall be paid at Term Bonds Maturing February 1, 20 Year Principal Amount stated principal amount of such Bonds shall be paid at Notice of redemption shall be given as provided in the preceding paragraph.] As provided in the Resolution and subject to certain limitations set forth therein, this Bond is transferable upon the books of the City at the principal office of the Registrar, by the registered owner hereof in person or by the owner's attorney duly authorized in writing upon surrender hereof together with a written instrument of transfer satisfactory to the Registrar, duly executed by the registered owner or the owner's attorney, and may also be surrendered in exchange for Bonds of other authorized denominations. Upon such transfer or exchange the City will cause a new Bond or Bonds to be issued in the name of the transferee or registered owner, of the same aggregate principal amount, bearing interest at the same rate and maturing on the same date, subject to reimbursement for any tax, fee or governmental charge required to be paid with respect to such transfer or exchange. The City and the Registrar may deem and treat the person in whose name this Bond is registered as the absolute owner hereof, whether this Bond is overdue or not, for the purpose of receiving payment and for all other purposes, and neither the City nor the Registrar shall be affected by any notice to the contrary. Notwithstanding any other provisions of this Bond, so long as this Bond is registered in the name of Cede & Co., as nominee of The Depository Trust Company, or in the name of any other nominee of The Depository Trust Company or other securities depository, the Registrar shall pay all principal of and interest on this Bond, and shall give all notices with respect to this Bond, only to Cede & Co. or other nominee in accordance with the operational arrangements of The Depository Trust Company or other securities depository as agreed to by the City. IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that all acts, conditions and things required by the Constitution and laws of the State of Minnesota to be done, to exist, to happen and to be performed prior to and in the issuance of this Bond in order to make it a valid and binding general obligation of the City in accordance with its terms, have been done, do exist, have happened and have been performed as so required; that, prior to the issuance 10 hereof, the City Council has by the Resolution covenanted and agreed to levy ad valorem taxes upon all taxable property in the City and special assessments upon property specially benefited by the local improvements financed by the Bonds, which taxes and special assessments will be collectible for the years and in amounts sufficient to produce sums not less than five percent in excess of the principal of and interest on the Bonds when due, and has appropriated such special assessments and taxes to its General Obligation Refunding Bonds, Series 2014B Bond Fund for the payment of principal and interest; that if necessary for payment of principal and interest, additional ad valorem taxes are required to be levied upon all taxable property in the City, without limitation as to rate or amount and that the issuance of this Bond, together with all other indebtedness of the City outstanding on the date hereof and on the date of its actual issuance and delivery, does not cause the indebtedness of the City to exceed any constitutional or statutory limitation of indebtedness. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Resolution until the Certificate of Authentication hereon shall have been executed by the Registrar by manual signature of one of its authorized representatives. IN WITNESS WHEREOF, the City of Lakeville, Minnesota, by its City Council, has caused this Bond to be executed on its behalf by the facsimile signatures of the Mayor and City Clerk and has caused this Bond to be dated as of the date set forth below. CITY OF LAKEVILLE, MINNESOTA (facsimile signature — City Clerk) (facsimile signature — Mayor) CERTIFICATE OF AUTHENTICATION This is one of the Bonds delivered pursuant to the Resolution mentioned within. Date of Authentication: U.S. BANK NATIONAL ASSOCIATION, as Registrar By Authorized Representative 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 the applicable laws or regulations: 11 TEN COM - as tenants in common UTMA ................... as Custodian for ..................... (Gust) (Minor) TEN ENT - as tenants by the entireties under Uniform Transfers to Minors Act .............. (State) JT TEN -- as joint tenants with right of survivorship and not as tenants in common Additional abbreviations may also be used. ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto the within Bond and all rights thereunder, and does hereby irrevocably constitute and appoint attorney to transfer the said Bond on the books kept for registration of the within Bond, 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 enlargement or any change whatsoever. Signature Guaranteed: Signature(s) must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in STAMP or such other "signature guaranty program" as may be determined by the Registrar in addition to or in substitution for STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE: [end of bond form] 12 SECTION 3. USE OF PROCEEDS Upon payment for the Bonds by the Purchaser, the City Finance Director shall apply the proceeds of the Bonds as follows: (a) the amount of $ shall be deposited in the Escrow Account established with the Escrow Agent under an Escrow Agreement described hereinafter, the funds so deposited, together with funds of the City in such amount as may be required, to be invested in securities authorized for such purpose by Minnesota Statutes, Section 475.67, subdivision 13, maturing on such dates and bearing interest at such rates as are required to provide funds sufficient, with cash retained in the escrow account, (i) to pay all interest to become due on the Series 2005A Refunding Bonds to and including the Series 2005A Crossover Date; (ii) to pay all interest to become due on the Series 2007D Refunding Bonds to and including the Series 2007D Crossover Date; (iii) to pay and redeem the outstanding principal of the Refunded Series 2005A Bonds on the Series 2005A Crossover Date; (iv) to pay and redeem the outstanding principal of the Refunded Series 2007D Bonds on the Series 2007D Crossover Date; (c) the amount of $ shall be used to pay issuance expenses of the Bonds; and (d) the amount of $ shall be deposited in the Bond Fund created pursuant to Section 4 hereof. The Mayor and City Clerk are hereby authorized to enter into an Escrow Agreement (the Escrow Agreement) with U.S. Bank National Association (the Escrow Agent), the form of which has been presented to this Council, establishing the terms and conditions for the escrow account in accordance with Minnesota Statutes, Section 475.67. SECTION 4. GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014B BOND FUND AND PLEDGE OF TAXING POWERS 4.01. General Oblieation Refunding Bonds Series 2014B Bond Fund The Bonds shall be payable from a separate and special General Obligation Refunding Bonds, Series 2014B Bond Fund (the Bond Fund) of the City, which Bond Fund the City agrees to maintain until the Bonds have been paid in full. If the money in the Bond Fund should at any time be insufficient to pay principal and interest due on the Bonds, such amounts shall be paid from other moneys on hand in other funds of the City, which other funds shall be reimbursed therefor when sufficient money becomes available in the Bond Fund. The moneys on hand in the Bond Fund from time to time shall be used only to pay the principal of and interest on the Bonds. Into the Bond Fund shall be paid: (a) any amount appropriated thereto pursuant to Section 3 hereof, (b) all excess amounts on deposit in the debt service funds maintained for the payment of the Refunded Bonds upon the retirement of the Refunded Bonds on the respective Crossover Date; (c) ad valorem taxes collected in accordance with the provisions of Section 4.02 hereof; and (d) any other funds appropriated by the City Council for the payment of the Bonds. 4.02. Special Assessments The City has previously levied special assessments in the original aggregate principal amount of approximately $151,714 for collection in the years 2006- 2025 in the amounts shown on Appendix I attached hereto. The principal of the special assessments shall be made payable in annual installments, with interest as established by this City Council in accordance with law on installments thereof from time to time remaining unpaid. In the event any special assessment shall at any time be held invalid with respect to any lot or tract of land, due to any error, defect or irregularity in any action or proceeding taken or to be taken by the City or by this City Council or by any of the officers or employees of the City, 13 either in the making of such special assessment or in the performance of any condition precedent thereto, the City hereby covenants and agrees that it will forthwith do all such further things and take all such further proceedings as shall be required by law to make such special assessment a valid and binding lien upon said property. 4.02. Pledge of Taxing Powers For the prompt and full payment of the principal of and interest on the Bonds as such payments respectively come due, the full faith, credit and unlimited taxing powers of the City shall be and are hereby irrevocably pledged. In order to produce aggregate amounts which, together with the collections of special assessments as set forth in Section 5, will produce amounts not less than 5% in excess of the amounts needed to meet when due the principal and interest payments on the Bonds, ad valorem taxes are hereby levied on all taxable property in the City. The taxes will be levied and collected in years and amounts shown on the attached levy computation. Said taxes shall be irrepealable as long as any of the Bonds are outstanding and unpaid, provided that the City reserves the right and power to reduce said levies in accordance with the provisions of Minnesota Statutes, Section 475.61. SECTION 5. DEFEASANCE When all of the Bonds have been discharged as provided in this section, all pledges, covenants and other rights granted by this resolution to the registered owners of the Bonds shall cease. The City may discharge its obligations with respect to any Bonds which are due on any date by depositing with the 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 Registrar a sum sufficient for the payment thereof in full with interest accrued from the due date to the date of such deposit. 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 bank or trust company qualified by law as an escrow agent for this purpose, cash or securities which are authorized by law to be so deposited, bearing interest payable at such time and at such rates and maturing or callable at the holder's option on such dates as shall be required to pay all principal and interest to become due thereon to maturity or earlier designated redemption date, provided, however, that if such deposit is made more than ninety days before the maturity date or specified redemption date of the Bonds to be discharged, the City shall have received a written opinion of bond counsel to the effect that such deposit does not adversely affect the exemption of interest on any Bonds from federal income taxation and a written report of an accountant or investment banking firm verifying that the deposit is sufficient to pay when due all of the principal and interest on the Bonds to be discharged on and before their maturity dates or earlier designated redemption date. SECTION 6. CE RTIFICATION OF PROCEEDINGS 6.01. Reastration of Bonds The City Clerk is hereby authorized and directed to file a certified copy of this resolution with the County Auditor of Dakota County and obtain a certificate that the Bonds have been duly entered upon the Auditor's bond register. 6.02. Authentication of Transcript The officers of the City and the County Auditor are hereby authorized and directed to prepare and furnish to the Purchaser and to Dorsey & Whitney LLP, Bond Counsel, certified copies of all proceedings and records relating to the Bonds and 14 such other affidavits, certificates and information as may be required to show the facts relating to the legality and marketability of the Bonds, as the same appear from the books and records in their custody and control or as otherwise known to them, and all such certified copies, affidavits and certificates, including any heretofore furnished, shall be deemed representations of the City as to the correctness of all statements contained therein. 6.03. Official Statement The Official Statement relating to the Bonds, dated June 30, 2014, relating to the Bonds prepared and distributed by Springsted Incorporated is hereby approved. Springsted Incorporated is hereby authorized on behalf of the City to prepare and distribute to the Purchaser within seven business days from the date hereof, a supplement to the Official Statement listing the offering price, the interest rates, selling compensation, delivery date, the underwriters and such other information relating to the Bonds required to be included in the Official Statement by Rule 15c2 -12 adopted by the Securities and Exchange Commission (the SEC) under the Securities Exchange Act of 1934. The officers of the City are hereby authorized and directed to execute such certificates as may be appropriate concerning the accuracy, completeness and sufficiency of the Official Statement. SECTION 7. TAX COVENANTS, ARBITRAGE MATTERS: AND CONTINUING DISCLOSURE 7.01. General Tax Covenant The City covenants and agrees with the registered owners of the Bonds that it will not take, or permit to be taken by any of its officers, employees or agents, any actions that would cause interest on the Bonds to become includable in gross income of the recipient under the Internal Revenue Code of 1986, as amended (the Code) and applicable Treasury Regulations (the Regulations), and covenants to take any and all actions within its powers to ensure that the interest on the Bonds will not become includable in gross income of the recipient under the Code and the Regulations. It is hereby certified that the proceeds of the Refunded Bonds were used for the acquisition and betterment of municipal improvements owned and maintained by the City and available for use by members of the general public on substantially equal terms. The City covenants and agrees that, so long as the Bonds are outstanding, the City shall not enter into any lease, management agreement, use agreement or other contract with any nongovernmental entity relating to the improvements so financed which would cause the Bonds to be considered "private activity bonds" or "private loan bonds" pursuant to Section 141 of the Code. 7.02. Arbitrage Certification The Mayor and City Clerk being the officers of the City charged with the responsibility for issuing the Bonds pursuant to this resolution, are authorized and directed to execute and deliver to the Purchaser a certificate in accordance with Section 148 of the Code, and applicable Regulations, stating the facts, estimates and circumstances in existence on the date of issue and delivery of the Bonds which make it reasonable to expect that the proceeds of the Bonds will not be used in a manner that would cause the Bonds to be "arbitrage bonds" within the meaning of the Code and Regulations. 7.03. Arbitrage Rebate Exemption The City acknowledges that the Bonds are subject to the rebate requirements of Section 148(f) of the Code. The City covenants and agrees to retain such records, make such determinations, file such reports and documents and pay such amounts 15 at such rimes as are required under said Section 148(f) and applicable Regulations, unless the Bonds qualify for an exception from the rebate requirement pursuant to one of the spending exceptions set forth in Section 1.148 -7 of the Regulations and no "gross proceeds" of the Bonds (other than amounts constituting a "bona fide debt service fund ") arise during or after the expenditure of the original proceeds thereof. 7.04. Not Oualified Tax - Exempt Obligations The Bonds are not designated as "qualified tax- exempt obligations" for purposes of Section 265(b)(3) of the Code. 7.05. Continuing Disclosure (a) Purpose and Beneficiaries To provide for the public availability of certain information relating to the Bonds and the security therefor and to permit the Purchaser and other participating underwriters in the primary offering of the Bonds to comply with amendments to Rule 15c2 -12 promulgated by the SEC under the Securities Exchange Act of 1934 (17 C.F.R. § 240.15c2 -12), relating to continuing disclosure (as in effect and interpreted from time to time, the Rule), which will enhance the marketability of the Bonds, the City hereby makes the following covenants and agreements for the benefit of the Owners (as hereinafter defined) from time to time of the Outstanding Bonds. The City is the only obligated person in respect of the Bonds within the meaning of the Rule for purposes of identifying the entities in respect of which continuing disclosure must be made. The City has complied in the past five years in all material respects with any undertaking previously entered into by it under the Rule. If the City fails to comply with any provisions of this section, any person aggrieved thereby, including the Owners of any Outstanding Bonds, may take whatever action at law or in equity may appear necessary or appropriate to enforce performance and observance of any agreement or covenant contained in this section, including an action for a writ of mandamus or specific performance. Direct, indirect, consequential and punitive damages shall not be recoverable for any default hereunder to the extent permitted by law. Notwithstanding anything to the contrary contained herein, in no event shall a default under this section constitute a default under the Bonds or under any other provision of this resolution. As used in this section, Owner or Bondowner means, in respect of a Bond, the registered owner or owners thereof appearing in the bond register maintained by the Registrar or any Beneficial Owner (as hereinafter defined) thereof, if such Beneficial Owner provides to the Registrar evidence of such beneficial ownership in form and substance reasonably satisfactory to the Registrar. As used herein, Beneficial Owner means, in respect of a Bond, any person or entity which (i) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, such Bond (including persons or entities holding Bonds through nominees, depositories or other intermediaries), or (ii) is treated as the owner of the Bond for federal income tax purposes. (b) Information To Be Disclosed The City will provide, in the manner set forth in subsection (c) hereof, either directly or indirectly through an agent designated by the City, the following information at the following times: (1) on or before twelve months after the end of each fiscal year of the City, commencing with the fiscal year ending December 31, 2014, the following financial information and operating data in respect of the City (the Disclosure Information): Irl (A) the audited financial statements of the City for such fiscal year, prepared in accordance with the governmental accounting standards promulgated by the Governmental Accounting Standards Board or as otherwise provided under Minnesota law, as in effect from time to time, or, if and to the extent such financial statements have not been prepared in accordance with such generally accepted accounting principles for reasons beyond the reasonable control of the City, noting the discrepancies therefrom and the effect thereof, and certified as to accuracy and completeness in all material respects by the fiscal officer of the City; and (B) to the extent not included in the financial statements referred to in paragraph (A) hereof, the information for such fiscal year or for the period most recently available of the type contained in the Official Statement under headings: City Property Values; City Indebtedness; and City Tax Rates, Levies and Collections. Notwithstanding the foregoing paragraph, if the audited financial statements are not available by the date specified, the City shall provide on or before such date unaudited financial statements in the format required for the audited financial statements as part of the Disclosure Information and, within 10 days after the receipt thereof, the City shall provide the audited financial statements. Any or all of the Disclosure Information may be incorporated by reference, if it is updated as required hereby, from other documents, including official statements, which have been filed with the SEC or have been made available to the public on the Internet Web site of the Municipal Securities Rulemaking Board (MSRB). The City shall clearly identify in the Disclosure Information each document so incorporated by reference. If any part of the Disclosure Information can no longer be generated because the operations of the City have materially changed or been discontinued, such Disclosure Information need no longer be provided if the City includes in the Disclosure Information a statement to such effect; provided, however, if such operations have been replaced by other City operations in respect of which data is not included in the Disclosure Information and the City determines that certain specified data regarding such replacement operations would be a Material Fact (as defined in paragraph (2) hereof), then, from and after such determination, the Disclosure Information shall include such additional specified data regarding the replacement operations. If the Disclosure Information is changed or this section is amended as permitted by this paragraph (b)(1) or subsection (d), then the City shall include in the next Disclosure Information to be delivered hereunder, to the extent necessary, an explanation of the reasons for the amendment and the effect of any change in the type of financial information or operating data provided. (2) Ina timely manner not in excess often business days after the occurrence of the event, notice of the occurrence of any of the following events (each a Material Fact): (A) Principal and interest payment delinquencies; (B) Non - payment related defaults, if material; (C) Unscheduled draws on debt service reserves reflecting financial difficulties; (D) Unscheduled draws on credit enhancements reflecting financial difficulties; 17 (E) Substitution of credit or liquidity providers, or their failure to perform; (F) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 -TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security; (G) Modifications to rights of security holders, if material; (H) Bond calls, if material, and tender offers; (I) Defeasances; (J) Release, substitution, or sale of property securing repayment of the securities, if material; (K) Rating changes; (L) Bankruptcy, insolvency, receivership or similar event of the obligated person; (M) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (N) Appointment of a successor or additional trustee or the change of name of a trustee, if material. As used herein, for those events that must be reported if material, an event is "material" if it is an event as to which a substantial likelihood exists that a reasonably prudent investor would attach importance thereto in deciding to buy, hold or sell a Bond or, if not disclosed, would significantly alter the total information otherwise available to an investor from the Official Statement, information disclosed hereunder or information generally available to the public. Notwithstanding the foregoing sentence, an event is also "material" if it is an event that would be deemed material for purposes of the purchase, holding or sale of a Bond within the meaning of applicable federal securities laws, as interpreted at the time of discovery of the occurrence of the event. For the purposes of the event identified in (L) hereinabove, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (3) In a timely manner, notice of the occurrence of any of the following events or conditions: IV (A) the failure of the City to provide the Disclosure Information required under paragraph (b)(1) at the time specified thereunder; (B) the amendment or supplementing of this section pursuant to subsection (d), together with a copy of such amendment or supplement and any explanation provided by the City under subsection (d)(2); (C) the termination of the obligations of the City under this section pursuant to subsection (d); (D) any change in the accounting principles pursuant to which the financial statements constituting a portion of the Disclosure Information are prepared; and (E) any change in the fiscal year of the City. (c) Manner of Disclosure (1) The City agrees to make available to the MSRB, in an electronic format as prescribed by the MSRB from time to time, the information described in subsection (b)- (2) All documents provided to the MSRB pursuant to this subsection (c) shall be accompanied by identifying information as prescribed by the MSRB from time to time. (d) Term; Amendments; Interpretation (1) The covenants of the City in this section shall remain in effect so long as any Bonds are Outstanding. Notwithstanding the preceding sentence, however, the obligations of the City under this section shall terminate and be without further effect as of any date on which the City delivers to the Registrar an opinion of Bond Counsel to the effect that, because of legislative action or final judicial or administrative actions or proceedings, the failure of the City to comply with the requirements of this section will not cause participating underwriters in the primary offering of the Bonds to be in violation of the Rule or other applicable requirements of the Securities Exchange Act of 1934, as amended, or any statutes or laws successory thereto or amendatory thereof. (2) This section (and the form and requirements of the Disclosure Information) may be amended or supplemented by the City from time to time, without notice to (except as provided in paragraph (c)(3) hereof) or the consent of the Owners of any Bonds, by a resolution of this Council filed in the office of the recording officer of the City accompanied by an opinion of Bond Counsel, who may rely on certificates of the City and others and the opinion may be subject to customary qualifications, to the effect that: (i) such amendment or supplement (a) is made in connection with a change in circumstances that arises from a change in law or regulation or a change in the identity, nature or status of the City or the type of operations conducted by the 19 City, or (b) is required by, or better complies with, the provisions of paragraph (b)(5) of the Rule; (ii) this section as so amended or supplemented would have complied with the requirements of paragraph (b)(5) of the Rule at the time of the primary offering of the Bonds, giving effect to any change in circumstances applicable under clause (i)(a) and assuming that the Rule as in effect and interpreted at the time of the amendment or supplement was in effect at the time of the primary offering; and (iii) such amendment or supplement does not materially impair the interests of the Bondowners under the Rule. If the Disclosure Information is so amended, the City agrees to provide, contemporaneously with the effectiveness of such amendment, an explanation of the reasons for the amendment and the effect, if any, of the change in the type of financial information or operating data being provided hereunder. (3) This section is entered into to comply with the continuing disclosure provisions of the Rule and should be construed so as to satisfy the requirements of paragraph (b)(5) of the Rule. SECTION 8. REDEMPTION OF REFUNDED BONDS The City Finance Director is hereby directed to advise: U.S. Bank National Association, St. Paul, Minnesota, as paying agent for the Refunded Series 2005A Bonds and the Refunded Series 2007D Bonds, to call such bonds for redemption and prepayment on the Series 2005A Crossover Date and the Series 2007D Crossover Date, respectively, and to give thirty days mailed Notice of Redemption, all in accordance with the provisions of the resolutions authorizing the issuance of such bonds and the Escrow Agreement. APPROVED AND ADOPTED this 21" day of July, 2014. Lo ATTEST: Charlene Friedges, City Clerk CITY OF LAKEVILLE Mark Bellows, Mayor 20 APPENDIX PROJECTED TAX LEVIES Date Levy Total APPENDIX II City of Lakeville, Minnesota General Obligation Refunding Bonds, Series 2014B Payments on Special Assessments Year of Collection Principal Interest Total 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 DAKOTA COUNTY AUDITOR'S CERTIFICATE AS TO REGISTRATION AND TAX LEVY The undersigned, being the duly qualified and acting County Auditor of Dakota County, Minnesota, hereby certifies that there has been filed in my office a certified copy of a resolution duly adopted on July 21, 2014, by the City Council of the City of Lakeville, Minnesota, setting forth the form and details of an issue of $13,730,000 General Obligation Refunding Bonds, Series 2014B, dated as of August 20, 2014, and levying taxes for their payment. I further certify that the issue has been entered on my bond register and the tax required by law for their payment has been levied and filed as required by Minnesota Statutes, Sections 475.61 to 475.63. WITNESS my hand and official seal this day of 2014. Dakota County Auditor (SEAL) b° �r E y W Z V ° S 0 Az v .5 c� C V V :E 5 V C T � d y .5 c v o� a� �o G T R � U �G v a: 3y 0 z c'C d Aa � ° V V ° N C � w n o v ens � 8 V 3 E ? c ° o v - - U €0 E E o , i° c N N C 3:5 ; b 00 m c c � � F � a a 3 ^a 3 � o c g r `eo F U C C o Y =u PRELIMINARY OFFICIAL STATEMENT DATED JULY 1, 2014 NEW AND REFUNDING ISSUES NOT BANK QUALIFIED Moody's Rating: Requested In the opinion of Dorsey & "itney LLP, Bond Counsel, based on present federal and Minnesota laws, regulations, rulings and decisions, and assuming compliance with certain covenants by the City, interest on the Bonds is excluded from gross income for federal income tax purposes and from taxable net income of individuals, estates, and trusts for Minnesota income tax purposes, and is not an item of tax preference for federal or Minnesota alternative minimum tax purposes. Such interest is included in taxable income for purposes of the Minnesota franchise tax on corporations and financial institutions and in adjusted current earn ings of corporations for federal alternative minimum tax purposes. See "TAX EXEMPTION AND BELATED CONSIDERATIONS" herein. City of Lakeville, Minnesota $9 General Obligation Improvement Bonds, Series 2014A (the "Series 2014A Bonds ") $13 General Obligation Refunding Bonds, Series 2014B (the "Series 2014B Bonds ") (Book Entry Only) Dated Date: Date of Delivery Interest Due: Each February 1 and August 1, commencing February 1, 2015 The Bonds (as defined herein) will mature February 1 as shown on the inside front cover of this Official Statement. Proposals for the Bonds may contain a maturity schedule providing for a combination of serial bonds and term bonds. All term bonds shall be subject to mandatory sinking fund redemption at a price of par plus accrued interest to the date of redemption scheduled to conform to the maturity schedule set forth on the following page. The Bonds will be general obligations of the City for which the City pledges its full faith and credit and power to levy direct general ad valorem taxes. In addition, the City will pledge special assessments against benefited properties. A separate proposal must be submitted for each Issue in the amounts shown below, plus accrued interest, if any. Proposals shall specify rates in integral multiples of 1 /100 or 1/8 of 1 %. The initial price to the public for each maturity of each issue must be 98.0% or greater. Proposals must be accompanied by a good faith deposit in the amounts shown below in the form of a certified or cashier's check payable to the order of the City, a wire transfer, or a Financial Surety Bond, and delivered to Springsted Incorporated prior to the time proposals will be opened. Award of the Bonds will be made on the basis of True Interest Cost (TIC). Minimum Bid Good Faith Deposit The Series 2014A Bonds $ 9,068,400 $ 91,600 The Series 2014B Bonds 13,585,835 137,300 The City will not designate the Bonds as "qualified tax- exempt obligations" pursuant to Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. The Bonds will be issued as fully registered bonds without coupons and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ( "DTC "). DTC will act as securities depository for the Bonds. Individual purchases may be made in book entry form only, in the principal amount of $5,000 and integral multiples thereof. Investors will not receive physical certificates representing their interest in the Bonds purchased (see "Book Entry System" herein). U.S. Bank National Association, St. Paul, Minnesota will serve as registrar (the "Registrar ") for the Bonds. The Bonds will be available for delivery at DTC on or about August 20, 2014. PROPOSALS RECEIVED: July 21, 2014 (Monday) until 10:30 A.M., Central Time AWARD: July 21, 2014 (Monday) at 7:00 P.M., Central Time Springsted Further information may be obtained from SPRINGSTED Incotpomted, Municipal Advisor to the City, 380 Jackson Street, Suite 300, Saint Paul, Minnesota 55101 -2887 (651) 223 -3000 * Preliminary; subject to change. NOTICE TO BIDDERS $13 City of Lakeville, Minnesota General Obligation Refunding Bonds, Series 2014B (Book Entry Only) The City is issuing the above - referenced Series 2014B Bonds for debt service savings. If an adequate level of savings is not achieved through the competitive proposals received on July 21, 2014 the City may (i) adjust the size of the above - referenced Series 2014B Bonds; or (ii) reject all proposals for the above - referenced Series 2014B Bonds at their meeting that evening. July 1, 2014 * Preliminary; subject to change. Springsted Phone: 651- 223 -3000 Fax: 651- 223 -3046 Email: bond_services @springsted.com Website: www.springsted.com Public Sector Advisors City of Lakeville, Minnesota $9,160,000* General Obligation Improvement Bonds, Series 2014A The Series 2014A Bonds will mature February , l in the years and amounts* as follows 2016 $770,000 2020 $785,000 2024 $830,000 2028 $120,000 2032 $120,000 2017 $770,000 2021 $795,000 2025 $850,000 2029 $120,000 2033 $120,000 2018 $765,000 2022 $805,000 2026 $120,000 2030 $120,000 2034 $120,000 2019 $775,000 2023 $815,000 2027 $120,000 2031 $120,000 2035 $120,000 The City may elect on February 1, 2023, and on any day thereafter, to prepay Series 2014A Bonds due on or after February 1, 2024. $13,730,000* General Obligation Refunding Bonds, Series 2014B The Series 2014B Bonds will mature February 1 in the years and amounts* as follows 2017 $165,000 2021 $905,000 2024 $950,000 2027 $815,000 2030 $885,000 2018 $880,000 2022 $915,000 2025 $970,000 2028 $830,000 2031 $915,000 2019 $880,000 2023 $930,000 2026 $995,000 2029 $855,000 2032 $945,000 2020 $895,000 The City may elect on February 1, 2024, and on any day thereafter, to prepay Series 2014B Bonds due on or after February 1, 2025. * Preliminary; subject to change. CITY OF LAKEVILLE, MINNESOTA CITY COUNCIL Matt Little Mayor Doug Anderson Council Member Bart Davis Council Member Colleen Ratzlaff LaBeau Council Member Kerrin Swecker Council Member CITY ADMINISTRATOR Steven Mielke FINANCE DIRECTOR Dennis Feller MUNICIPAL ADVISOR Springsted Incorporated St. Paul, Minnesota BOND COUNSEL Dorsey & Whitney LLP Minneapolis, Minnesota For purposes of compliance with Rule 15c2 -12 of the Securities and Exchange Commission, this document, as the same may be supplemented or corrected by the City from time to time, may be treated as a Preliminary Official Statement with respect to the Bonds described herein that is deemed final as of the date hereof (or of any such supplement or correction) by the City. By awarding the Bonds to any underwriter or underwriting syndicate submitting a Proposal therefor, the City agrees that, no more than seven business days after the date of such award, it shall provide without cost to the senior managing underwriter of the syndicate to which the Bonds are awarded copies of the Final Official Statement in the amount specified in the each Terms of Proposal. No dealer, broker, salesman or other person has been authorized by the City to give any information or to make any representations with respect to the Bonds, other than as contained in the Preliminary Official Statement or the Final Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the City. Certain information contained in the Preliminary Official Statement or the Final Official Statement may have been obtained from sources other than records of the City and, while believed to be reliable, is not guaranteed as to completeness or accuracy. THE INFORMATION AND EXPRESSIONS OF OPINION IN THE PRELIMINARY OFFICIAL STATEMENT AND THE FINAL OFFICIAL STATEMENT ARE SUBJECT TO CHANGE, AND NEITHER THE DELIVERY OF THE PRELIMINARY OFFICIAL STATEMENT NOR THE FINAL OFFICIAL STATEMENT NOR ANY SALE MADE UNDER EITHER SUCH DOCUMENT SHALL CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CITY SINCE THE RESPECTIVE DATE THEREOF. References herein to laws, rules, regulations, resolutions, agreements, reports and other documents do not purport to be comprehensive or definitive. All references to such documents are qualified in their entirety by reference to the particular document, the full text of which may contain qualifications of and exceptions to statements made herein. Where full texts have not been included as appendices to the Preliminary Official Statement or the Final Official Statement, they will be furnished upon request. Any CUSIP numbers for the Bonds included in the Final Official Statement are provided for convenience of the owners and prospective investors. The CUSIP numbers for the Bonds are assigned by an organization unaffiliated with the City. The City is not responsible for the selection of the CUSIP numbers and makes no representation as to the accuracy thereof as printed on the Bonds or as set forth in the Final Official Statement. No assurance can be given by the City that the CUSIP numbers for the Bonds will remain the same after the delivery of the Final Official Statement or the date of issuance and delivery of the Bonds. TABLE OF CONTENTS Page(s Terms of Proposal $9,160,000* General Obligation Improvement Bonds, Series 2014A ........... ............................... i -v $13,730,000* General Obligation Refunding, Series 2014B ......................... ............................... vi -x Introductory Statement ................................................ ............................... ContinuingDisclosure ................................................ ............................... TheBonds ................................................................... ............................... TheSeries 2014A Bonds ............................................ ............................... The Series 2014B Bonds ............................................. ............................... FutureFinancing ......................................................... ............................... Litigation..................................................................... ............................... Legality....................................................................... ............................... T__ U.,,_... -- Related Tax Considerations .................. ............................... Not Qualified Tax- Exempt Obligations ............................... Ratings.................................................. ............................... MunicipalAdvisor ................................ ............................... Certification.......................................... ............................... City Property Values ............................. ............................... City Indebtedness .................................. ............................... City Tax Rates, Levies and Col lections .............................. Fundson Hand ...................................... ............................... City Investments .................................. ............................... General Information Concerning the City .......................... Governmental Organization and Services ........................... Proposed Forms of Legal Opinions .......... ............................... Continuing Disclosure Covenants ............. ............................... Summary of Tax Levies, Payment Provisions, and Minnesota Real Property Valuation ....... ............................... Excerpt of 2013 Comprehensive Annual Financial Report ..... 1 1 2 4 5 6 6 7 7 8 9 10 10 10 11 12 18 19 19 20 26 ......................... Appendix I ......................... Appendix II ......................... Appendix HI ......................... Appendix IV * Preliminary; subject to change. THE CITY HAS AUTHORIZED SPRINGSTED INCORPORATED TO NEGOTIATE THIS ISSUE ON ITS BEHALF. PROPOSALS WILL BE RECEIVED ON THE FOLLOWING BASIS: TERMS OF PROPOSAL $9,160,000* CITY OF LAKEVILLE, MINNESOTA GENERAL OBLIGATION IMPROVEMENT BONDS, SERIES 2014A (BOOK ENTRY ONLY) Proposals for the Series 2014A Bonds and the Good Faith Deposit ( "Deposit") will be received on Monday, July 21, 2014 until 10:30 A.M., Central Time, at the offices of Springsted Incorporated, 380 Jackson Street, Suite 300, Saint Paul, Minnesota, after which time proposals will be opened and tabulated. Consideration for award of the Series 2014A Bonds will be by the City Council at 7:00 P.M., Central Time, of the same day. SUBMISSION OF PROPOSALS Springsted will assume no liability for the inability of the bidder to reach Springsted prior to the time of sale specified above. All bidders are advised that each proposal shall be deemed to constitute a contract between the bidder and the City to purchase the Series 2014A Bonds regardless of the manner in which the proposal is submitted. (a) Sealed Bidding. Proposals may be submitted in a sealed envelope or by fax (651) 223 -3046 to Springsted. Signed proposals, without final price or coupons, may be submitted to Springsted prior to the time of sale. The bidder shall be responsible for submitting to Springsted the final proposal price and coupons, by telephone (651) 223 -3000 or fax (651) 223 -3046 for inclusion in the submitted proposal. OR (b) Electronic Bidding. Notice is hereby given that electronic proposals will be received via PARITY For purposes of the electronic bidding process, the time as maintained by PARITY shall constitute the official time with respect to all proposals submitted to PARITY Each bidder shall be solely responsible for making necessary arrangements to access PARITP for purposes of submitting its electronic proposal in a timely manner and in compliance with the requirements of the Terms of proposal. Neither the City, its agents nor PARITY shall have any duty or obligation to undertake registration to bid for any prospective bidder or to provide or ensure electronic access to any qualified prospective bidder, and neither the City, its agents nor PARITY shall be responsible for a bidder's failure to register to bid or for any failure in the proper operation of, or have any liability for any delays or interruptions of or any damages caused by the services of PARITY The City is using the services of P solely as a communication mechanism to conduct the electronic bidding for the Series 2014A Bonds, and PARITY is not an agent of the City. If any provisions of this Terms of proposal conflict with information provided by PARITY ® , this Terms of proposal shall control. Further information about PARITY including any fee charged, may be obtained from: PARTTY 1359 Broadway, 2 " Floor, New York, New York 10018 Customer Support: (212) 849 -5000 Preliminary; subject to change. -i- DETAILS OF THE SERIES 2014A BONDS The Series 2014A Bonds will be dated as of the date of delivery and will bear interest payable on February I and August I of each year, commencing February 1, 2015. Interest will be computed on the basis of a 360 -day year of twelve 30 -day months. The Series 2014A Bonds will mature February 1 in the years and amounts* as follows: 2016 $770,000 2020 $785,000 2024 $830,000 2028 $120,000 2032 $120,000 2017 $770,000 2021 $795,000 2025 $850,000 2029 $120,000 2033 $120,000 2018 $765,000 2022 $805,000 2026 $120,000 2030 $120,000 2034 $120,000 2019 $775,000 2023 $815,000 2027 $120,000 2031 $120,000 2035 $120,000 * The City reserves the right, afer proposals are opened and prior to award, to increase or reduce the principal amount of the Series 2014A Bonds or the amount of any maturity in multiples of $5,000. In the event the amount of any maturity is modified, the aggregate purchase price will be adjusted to result in the same gross spread per $1,000 of Series 2014A Bonds as that of the original proposal. Gross spread is the differential between the price paid to the City for the new issue and the prices at which the securities are initially offered to the investing Proposals for the Series 2014A Bonds may contain a maturity schedule providing for a combination of serial bonds and term bonds. All term bonds shall be subject to mandatory sinking fund redemption at a price of par plus accrued interest to the date of redemption scheduled to conform to the maturity schedule set forth above. In order to designate term bonds, the proposal must specify "Years of Term Maturities" in the spaces provided on the proposal form. BOOK ENTRY SYSTEM The Series 2014A Bonds will be issued by means of a book entry system with no physical distribution of Series 2014A Bonds made to the public. The Series 2014A Bonds will be issued in fully registered form and one Series 2014A Bond, representing the aggregate principal amount of the Series 2014A Bonds maturing in each year, will be registered in the name of Cede & Co. as nominee of The Depository Trust Company ( "DTC "), New York, New York, which will act as securities depository of the Series 2014A Bonds. Individual purchases of the Series 2014A Bonds may be made in the principal amount of $5,000 or any multiple thereof of a single maturity through book entries made on the books and records of DTC and its participants. ' Principal and interest are payable by the registrar to DTC or its nominee as registered owner of the Series 2014A Bonds. Transfer of principal and interest payments to participants of DTC will be the responsibility of DTC; transfer of principal and interest payments to beneficial owners by participants will be the responsibility of such participants and other nominees of beneficial owners. The purchaser, as a condition of delivery of the Series 2014A Bonds, will be required to deposit the Series 2014A Bonds with DTC. REGISTRAR The City will name the registrar which shall be subject to applicable SEC regulations. The City will pay for the services of the registrar. OPTIONAL REDEMPTION The City may elect on February 1, 2023, and on any day thereafter, to prepay Series 2014A Bonds due on or after February 1, 2024. Redemption may be in whole or in part and if in part at the option of the City and in such manner as the City shall determine. If less than all Series 2014A Bonds of a maturity are called for redemption, the City will notify DTC of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each participant's interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interests in such maturity to be redeemed. All prepayments shall be at a price of par plus accrued interest. -ii - SECURITY AND PURPOSE The Series 2014A Bonds will be general obligations of the City for which the City will pledge its full faith and credit and power to levy direct general ad valorem taxes. In addition, the City will pledge special assessments against benefited properties. The proceeds will be used to finance the City's 2014 Street Reconstruction Projects. BIDDING PARAMETERS Proposals shall be for not less than $9,068,400 plus accrued interest, if any, on the total principal amount of the Series 2014A Bonds. No proposal can be withdrawn or amended after the time set for receiving proposals unless the meeting of the City scheduled for award of the Series 2014A Bonds is adjourned, recessed, or continued to another date without award of the Series 2014A Bonds having been made. Rates shall be in integral multiples of 1 /100 or 1/8 of 1 %. The initial price to the public for each maturity must be 98.0% or greater. Series 2014A Bonds of the same maturity shall bear a single rate from the date of the Series 2014A Bonds to the date of maturity. No conditional proposals will be accepted. GOOD FAITH DEPOSIT Proposals, regardless of method of submission, shall be accompanied by a Deposit in the amount of $91,600, in the form of a certified or cashier's check, a wire transfer, or Financial Surety Bond and delivered to Springsted Incorporated prior to the time proposals will be opened. Each bidder shall be solely responsible for the timely delivery of their Deposit whether by check, wire transfer or Financial Surety Bond. Neither the City nor Springsted Incorporated have any liability for delays in the transmission of the Deposit. Any Deposit made by certified or cashier's check should be made payable to the City and delivered to Springsted Incorporated, 380 Jackson Street, Suite 300, St. Paul, Minnesota 55101. Any Deposit sent via wire transfer should be sent to Springsted Incorporated as the City's agent according to the following instructions: Wells Fargo Bank, N.A., San Francisco, CA 94104 ABA #121000248 for credit to Springsted Incorporated, Account #635 - 5007954 Ref: Lakeville, MN Series 2014A Good Faith Deposit Contemporaneously with such wire transfer, the bidder shall send an e -mail to bond_services @springsted.com, including the following information; (i) indication that a wire transfer has been made (including the fed reference number and time released), (ii) the amount of the wire transfer, (iii) the issue to which it applies, and (iv) the return wire instructions if such bidder is not awarded the Series 2014A Bonds. Any Deposit made by the successful bidder by check or wire transfer will be delivered to the City following the award of the Series 2014A Bonds. Any Deposit made by check or wire transfer by an unsuccessful bidder will be returned to such bidder following City action relative to an award of the Series 2014A Bonds. If a Financial Surety Bond is used, it must be from an insurance company licensed to issue such a bond in the State of Minnesota and pre- approved by the City. Such bond must be submitted to Springsted Incorporated prior to the opening of the proposals. The Financial Surety Bond must identify each underwriter whose Deposit is guaranteed by such Financial Surety Bond. If the Series 2014A Bonds are awarded to an underwriter using a Financial Surety Bond, then that underwriter is required to submit its Deposit to the City in the form of a certified or cashier's check or wire transfer as instructed by - iii - Springsted Incorporated not later than 3:30 P.M., Central Time on the next business day following the award. If such Deposit is not received by that time, the Financial Surety Bond may be drawn by the City to satisfy the Deposit requirement. The Deposit received from the purchaser, the amount of which will be deducted at settlement, will be deposited by the City and no interest will accrue to the purchaser. hi the event the purchaser fails to comply with the accepted proposal, said amount will be retained by the City. The Series 2014A Bonds will be awarded on the basis of the lowest interest rate to be determined on a true interest cost (TIC) basis calculated on the proposal prior to any adjustment made by the City. The City's computation of the interest rate of each proposal, in accordance with customary practice, will be controlling. The City will reserve the right to: (i) waive non - substantive informalities of any proposal or of matters relating to the receipt of proposals and award of the Series 2014A Bonds, (ii) reject all proposals without cause, and (iii) reject any proposal that the City determines to have failed to comply with the terms herein. BOND INSURANCE AT PURCHASER'S OPTION The City has not applied for or pre- approved a commitment for any policy of municipal bond insurance with respect to the Series 2014A Bonds. If the Series 2014A Bonds qualify for municipal bond insurance and a bidder desires to purchase a policy, such indication, the maturities to be insured, and the name of the desired insurer must be set forth on the bidder's proposal. The City specifically reserves the right to reject any bid specifying municipal bond insurance, even though such bid may result in the lowest TIC to the City. All costs associated with the issuance and administration of such policy and associated ratings and expenses (other than any independent rating requested by the City) shall be paid by the successful bidder. Failure of the municipal bond insurer to issue the policy after the award of the Series 2014A Bonds shall not constitute cause for failure or refusal by the successful bidder to accept delivery of the Series 2014A Bonds. CUSIP NUMBERS If the Series 2014A Bonds qualify for assignment of CUSIP numbers such numbers will be printed on the Series 2014A Bonds, but neither the failure to print such numbers on any Series 2014A Bond nor any error with respect thereto will constitute cause for failure or refusal by the purchaser to accept delivery of the Series 2014A Bonds. The CUSIP Service Bureau charge for the assignment of CUSIP identification numbers shall be paid by the purchaser. SETTLEMENT On or about August 20, 2014, the Series 2014A Bonds will be delivered without cost to the purchaser through DTC in New York, New York. Delivery will be subject to receipt by the purchaser of an approving legal opinion of Dorsey & Whitney LLP of Minneapolis, Minnesota, and of customary closing papers, including a no- litigation certificate. On the date of settlement, payment for the Series 2014A Bonds shall be made in federal, or equivalent, funds that shall be received at the offices of the City or its designee not later than 12:00 Noon, Central Time. Unless compliance with the terms of payment for the Series 2014A Bonds has been made impossible by action of the City, or its agents, the purchaser shall be liable to the City for any loss suffered by the City by reason of the purchaser's non - compliance with said terms for payment. -iv - CONTINUING DISCLOSURE hi accordance with SEC Rule 15c2- 12(b)(5), the City will undertake, pursuant to the resolution awarding sale of the Series 2014A Bonds, to provide annual reports and notices of certain events. A description of this undertaking is set forth in the Official Statement. The purchaser's obligation to purchase the Series 2014A Bonds will be conditioned upon receiving evidence of this undertaking at or prior to delivery of the Series 2014A Bonds. OFFICIAL STATEMENT The City has authorized the preparation of a Preliminary Official Statement containing pertinent information relative to the Series 2014A Bonds, and said Preliminary Official Statement will serve as a nearly final Official Statement within the meaning of Rule 15c2 -12 of the Securities and Exchange Commission. For copies of the Preliminary Official Statement or for any additional information prior to sale, any prospective purchaser is referred to the Financial Advisor to the City, Springsted Incorporated, 380 Jackson Street, Suite 300, Saint Paul, Minnesota 55101, telephone (651) 223 -3000. A Final Official Statement (as that term is defined in Rule 15c2 -12) will be prepared, specifying the maturity dates, principal amounts and interest rates of the Series 2014A Bonds, together with any other information required by law. By awarding the Series 2014A Bonds to an underwriter or underwriting syndicate, the City agrees that, no more than seven business days after the date of such award, it shall provide without cost to the sole underwriter or to the senior managing underwriter of the syndicate (the "Underwriter" for purposes of this paragraph) to which the Series 2014A Bonds are awarded up to 25 copies of the Final Official Statement. The City designates the Underwriter of the syndicate to which the Series 2014A Bonds are awarded as its agent for purposes of distributing copies of the Final Official Statement to each Participating Underwriter. Such Underwriter agrees that if its proposal is accepted by the City, (i) it shall accept designation and (ii) it shall enter into a contractual relationship with all Participating Underwriters of the Series 2014A Bonds for purposes of assuring the receipt by each such Participating Underwriter of the Final Official Statement. Dated June 16, 2014 BY ORDER OF THE CITY COUNCIL /s/ Charlene Friedges City Clerk CKIM THE CITY HAS AUTHORIZED SPRINGSTED INCORPORATED TO NEGOTIATE THIS ISSUE ON ITS BEHALF. PROPOSALS WILL BE RECEIVED ON THE FOLLOWING BASIS: TERMS OF PROPOSAL $13,730,000* CITY OF LAKEVILLE, MINNESOTA GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014B (BOOK ENTRY ONLY) Proposals for the Series 2014B Bonds and the Good Faith Deposit ( "Deposit ") will be received on Monday, July 21, 2014 until 10:30 A.M., Central Time, at the offices of Springsted Incorporated, 380 Jackson Street, Suite 300, Saint Paul, Minnesota, after which time proposals will be opened and tabulated. Consideration for award of the Series 2014B Bonds will be by the City Council at 7:00 P.M., Central Time, of the same day. SUBMISSION OF PROPOSALS Springsted will assume no liability for the inability of the bidder to reach Springsted prior to the time of sale specified above. All bidders are advised that each proposal shall be deemed to constitute a contract between the bidder and the City to purchase the Series 2014B Bonds regardless of the manner in which the proposal is submitted. (a) Sealed Bidding. Proposals may be submitted in a sealed envelope or by fax (651) 223 -3046 to Springsted. Signed proposals, without final price or coupons, may be submitted to Springsted prior to the time of sale. The bidder shall be responsible for submitting to Springsted the final proposal price and coupons, by telephone (651) 223 -3000 or fax (651) 223 -3046 for inclusion in the submitted proposal. W"i (b) Electronic Bidding. Notice is hereby given that electronic proposals will be received via PARITY For purposes of the electronic bidding process, the time as maintained by PARITY shall constitute the official time with respect to all proposals submitted to PARITY Each bidder shall be solely responsible for making necessary arrangements to access PARITI' for purposes of submitting its electronic proposal in a timely manner and in compliance with the requirements of the Terms of proposal. Neither the City, its agents nor PARITY shall have any duty or obligation to undertake registration to bid for any prospective bidder or to provide or ensure electronic access to any qualified prospective bidder, and neither the City, its agents nor PARITY shall be responsible for a bidder's failure to register to bid or for any failure in the proper operation of, or have any liability for any delays or interruptions of or any damages caused by the services of PARITY The City is using the services of PARITY' solely as a communication mechanism to conduct the electronic bidding for the Series 2014B Bonds, and PARITY is not an agent of the City. If any provisions of this Terms of proposal conflict with information provided by PARITY this Terms of proposal shall control. Further information about PARITY * , including any fee charged, may be obtained from: PARITY 1359 Broadway, 2 " Floor, New York, New York 10018 Customer Support: (212) 849 -5000 Preliminary; subject to change. - vl - DETAILS OF THE SERIES 2014B BONDS The Series 2014B Bonds will be dated as of the date of delivery and will bear interest payable on February 1 and August 1 of each year, commencing February 1, 2015. Interest will be computed on the basis of a 360 -day year of twelve 30 -day months. The Series 2014B Bonds will mature February 1 in the years and amounts* as follows: 2017 $165,000 2021 $905,000 2025 $970,000 2029 $855,000 2018 $880,000 2022 $915,000 2026 $995,000 2030 $885,000 2019 $880,000 2023 $930,000 2027 $815,000 2031 $915,000 2020 $895,000 2024 $950,000 2028 $830,000 2032 $945,000 * The City reserves the right, after proposals are opened and prior to award, to increase or reduce the principal amount of the Series 2014B Bonds or the amount of any maturity in multiples of $5,000. In the event the amount of any maturity is modified, the aggregate purchase price will be adjusted to result in the same gross spread per $1,000 of Series 2014B Bonds as that of the original proposal. Gross spread is the differential between the price paid to the City for the new issue and the prices at which the securities are initially offered to the investing public. Proposals for the Series 2014B Bonds may contain a maturity schedule providing for a combination of serial bonds and term bonds. All term bonds shall be subject to mandatory sinking fund redemption at a price of par plus accrued interest to the date of redemption scheduled to conform to the maturity schedule set forth above. In order to designate term bonds, the proposal must specify "Years of Term Maturities" in the spaces provided on the proposal form. BOOK ENTRY SYSTEM The Series 2014B Bonds will be issued by means of a book entry system with no physical distribution of Series 2014B Bonds made to the public. The Series 2014B Bonds will be issued in fully registered form and one Series 2014B Bond, representing the aggregate principal amount of the Series 2014B Bonds maturing in each year, will be registered in the name of Cede & Co. as nominee of The Depository Trust Company ( "DTC "), New York, New York, which will act as securities depository of the Series 2014B Bonds. Individual purchases of the Series 2014B Bonds may be made in the principal amount of $5,000 or any multiple thereof of a single maturity through book entries made on the books and records of DTC and its participants. Principal and interest are payable by the registrar to DTC or its nominee as registered owner of the Series 2014B Bonds. Transfer of principal and interest payments to participants of DTC will be the responsibility of DTC; transfer of principal and interest payments to beneficial owners by participants will be the responsibility of such participants and other nominees of beneficial owners. The purchaser, as a condition of delivery of the Series 2014B Bonds, will be required to deposit the Series 2014B Bonds with DTC. REGISTRAR The City will name the registrar which shall be subject to applicable SEC regulations. The City will pay for the services of the registrar. OPTIONAL REDEMPTION The City may elect on February 1, 2024, and on any day thereafter, to prepay Series 2014B Bonds due on or after February 1, 2025. Redemption may be in whole or in part and if in part at the option of the City and in such manner as the City shall determine. If less than all Series 2014B Bonds of a maturity are called for redemption, the City will notify DTC of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each participant's interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interests in such maturity to be redeemed. All prepayments shall be at a price of par plus accrued interest. vii - SECURITY AND PURPOSE The Series 2014B Bonds will be general obligations of the City for which the City will pledge its full faith and credit and power to levy direct general ad valorem taxes. The proceeds will be used to refund (i) the February 1, 2017 through February 1, 2026 maturities of the City's General Obligation Street Reconstruction Bonds, Series 2005A, dated December 1, 2005; and (ii) the February 1, 2018 through February 1, 2032 maturities of the City's General Obligation Capital Improvement Plan Bonds, Series 2007D, dated August 1, 2007. BIDDING PARAMETERS Proposals shall be for not less than $13,585,835 plus accrued interest, if any, on the total principal amount of the Series 2014B Bonds. No proposal can be withdrawn or amended after the time set for receiving proposals unless the meeting of the City scheduled for award of the Series 2014B Bonds is adjourned, recessed, or continued to another date without award of the Series 2014B Bonds having been made. Rates shall be in integral multiples of 1 /100 or 1/8 of 1 %. The initial price to the public for each maturity must be 98.0% or greater. Series 2014B Bonds of the same maturity shall bear a single rate from the date of the Series 2014B Bonds to the date of maturity. No conditional proposals will be accepted. GOOD FAITH DEPOSIT Proposals, regardless of method of submission, shall be accompanied by a Deposit in the amount of $137,300, in the form of a certified or cashier's check, a wire transfer, or Financial Surety Bond and delivered to Springsted Incorporated prior to the time proposals will be opened. Each bidder shall be solely responsible for the timely delivery of their Deposit whether by check, wire transfer or Financial Surety Bond. Neither the City nor Springsted Incorporated have any liability for delays in the transmission of the Deposit. Any Deposit made by certified or cashier's check should be made payable to the City and delivered to Springsted Incorporated, 380 Jackson Street, Suite 300, St. Paul, Minnesota 55101. Any Deposit sent via wire transfer should be sent to Springsted Incorporated as the City's agent according to the following instructions: Wells Fargo Bank, N.A., San Francisco, CA 94104 ABA #121000248 for credit to Springsted Incorporated, Account #635 - 5007954 Ref: City of Lakeville Series 2014B Good Faith Deposit Contemporaneously with such wire transfer, the bidder shall send an e -mail to bond_services @springsted.com, including the following information; (i) indication that a wire transfer has been made (including the fed reference number and time released), (ii) the amount of the wire transfer, (iii) the issue to which it applies, and (iv) the return wire instructions if such bidder is not awarded the Series 2014B Bonds. Any Deposit made by the successful bidder by check or wire transfer will be delivered to the City following the award of the Series 2014B Bonds. Any Deposit made by check or wire transfer by an unsuccessful bidder will be returned to such bidder following City action relative to an award of the Series 2014B Bonds. If a Financial Surety Bond is used, it must be from an insurance company licensed to issue such a bond in the State of Minnesota and pre- approved by the City. Such bond must be submitted to Springsted Incorporated prior to the opening of the proposals. The Financial Surety Bond must identify each underwriter whose Deposit is guaranteed by such Financial Surety Bond. If the Series 2014B Bonds are - viii - awarded to an underwriter using a Financial Surety Bond, then that underwriter is required to submit its Deposit to the City in the form of a certified or cashier's check or wire transfer as instructed by Springsted Incorporated not later than 3:30 P.M., Central Time on the next business day following the award. If such Deposit is not received by that time, the Financial Surety Bond may be drawn by the City to satisfy the Deposit requirement. The Deposit received from the purchaser, the amount of which will be deducted at settlement, will be deposited by the City and no interest will accrue to the purchaser. In the event the purchaser fails to comply with the accepted proposal, said amount will be retained by the City. IVATI. m The Series 2014B Bonds will be awarded on the basis of the lowest interest rate to be determined on a true interest cost (TIC) basis calculated on the proposal prior to any adjustment made by the City. The City's computation of the interest rate of each proposal, in accordance with customary practice, will be controlling. The City will reserve the right to: (i) waive non - substantive informalities of any proposal or of matters relating to the receipt of proposals and award of the Series 2014B Bonds, (ii) reject all proposals without cause, and (iii) reject any proposal that the City determines to have failed to comply with the terms herein. BOND INSURANCE AT PURCHASER'S OPTION City has not applied for or pre- approved a commitment for any policy of municipal bond insurance with respect to the Series 2014B Bonds. If the Series 2014B Bonds qualify for municipal bond insurance and a bidder desires to purchase a policy, such indication, the maturities to be insured, and the name of the desired insurer must be set forth on the bidder's proposal. The City specifically reserves the right to reject any bid specifying municipal bond insurance, even though such bid may result in the lowest TIC to the City. All costs associated with the issuance and administration of such policy and associated ratings and expenses (other than any independent rating requested by the City) shall be paid by the successful bidder. Failure of the municipal bond insurer to issue the policy after the award of the Series 2014B Bonds shall not constitute cause for failure or refusal by the successful bidder to accept delivery of the Series 2014B Bonds. CUSIP NUMBERS If the Series 2014B Bonds qualify for assignment of CUSIP numbers such numbers will be printed on the Series 2014B Bonds, but neither the failure to print such numbers on any Series 2014B Bonds nor any error with respect thereto will constitute cause for failure or refusal by the purchaser to accept delivery of the Series 2014B Bonds. The CUSIP Service Bureau charge for the assignment of CUSIP identification numbers shall be paid by the purchaser. SETTLEMENT On or about August 20, 2014, the Series 2014B Bonds will be delivered without cost to the purchaser through DTC in New York, New York. Delivery will be subject to receipt by the purchaser of an approving legal opinion of Dorsey & Whitney LLP of Minneapolis, Minnesota, and of customary closing papers, including a no- litigation certificate. On the date of settlement, payment for the Series 2014B Bonds shall be made in federal, or equivalent, funds that shall be received at the offices of the City or its designee not later than 12:00 Noon, Central Time. Unless compliance with the terms of payment for the Series 2014B Bonds has been made impossible by action of the City, or its agents, the purchaser shall be liable to the City for any loss suffered by the City by reason of the purchaser's non - compliance with said terms for payment. -ix - CONTINUING DISCLOSURE In accordance with SEC Rule 150- 12(b)(5), the City will undertake, pursuant to the resolution awarding sale of the Series 2014B Bonds, to provide annual reports and notices of certain events. A description of this undertaking is set forth in the Official Statement. The purchaser's obligation to purchase the Series 2014B Bonds will be conditioned upon receiving evidence of this undertaking at or prior to delivery of the Series 2014B Bonds. OFFICIAL STATEMENT The City has authorized the preparation of a Preliminary Official Statement containing pertinent information relative to the Series 2014B Bonds, and said Preliminary Official Statement will serve as a nearly final Official Statement within the meaning of Rule 15c2 -12 of the Securities and Exchange Commission. For copies of the Preliminary Official Statement or for any additional information prior to sale, any prospective purchaser is referred to the Financial Advisor to the City, Springsted Incorporated, 380 Jackson Street, Suite 300, Saint Paul, Minnesota 55101, telephone (651) 223 -3000. A Final Official Statement (as that term is defined in Rule 15c2 -12) will be prepared, specifying the maturity dates, principal amounts and interest rates of the Series 2014B Bonds, together with any other information required by law. By awarding the Series 2014B Bonds to an underwriter or underwriting syndicate, the City agrees that, no more than seven business days after the date of such award, it shall provide without cost to the sole underwriter or to the senior managing underwriter of the syndicate (the "Underwriter" for purposes of this paragraph) to which the Series 2014B Bonds is awarded up to 25 copies of the Final Official Statement. The City designates the Underwriter of the syndicate to which the Series 2014B Bonds are awarded as its agent for purposes of distributing copies of the Final Official Statement to each Participating Underwriter. Such Underwriter agrees that if its proposal is accepted by the City, (i) it shall accept designation and (ii) it shall enter into a contractual relationship with all Participating Underwriters of the Series 2014B Bonds for purposes of assuring the receipt by each such Participating Underwriter of the Final Official Statement. Dated June 16, 2014 BY ORDER OF THE CITY COUNCIL /s/ Charlene Friedges City Clerk -x- OFFICIAL STATEMENT CITY OF LAKEVILLE, MINNESOTA $9,160,000* GENERAL OBLIGATION IMPROVEMENT BONDS, SERIES 2014A $13,730,000* GENERAL OBLIGATION REFUNDING, SERIES 2014B (BOOK ENTRY ONLY) INTRODUCTORYSTATEMENT This Official Statement contains certain information relating to the City of Lakeville, Minnesota (the "City ") and its issuance of $9,160,000* General Obligation Improvement Bonds, Series 2014A (the "Series 2014A Bonds ") and $13,730,000* General Obligation Refunding Bonds, Series 2014B (the "Series 2014B Bonds "), collectively referred to as the `Bonds." The Bonds will be general obligations of the City for which the City pledges its full faith and credit and power to levy direct general ad valorem taxes. In addition, the City will pledge special assessments against benefited properties. Inquiries may be directed to Mr. Dennis Feller, Finance Director, City of Lakeville, 20195 Holyoke Avenue, Lakeville, Minnesota 55044 -0957, by telephoning (952) 985 -4481, or by emailing dfeller @lakevillemn.gov. Inquiries may also be made to Springsted Incorporated, 380 Jackson Street, Suite 300, St. Paul, Minnesota 55101 -2887, by telephoning (651) 223 -3000, or by emailing bond_services @springsted.com. If information of a specific legal nature is desired, requests may be directed to Ms. Jennifer Hanson, Dorsey & Whitney LLP, 50 South Sixth Street, 15`" Floor, Minneapolis, Minnesota 55402, Bond Counsel, by telephoning (612) 492 -6959, or by emailing hanson.jennifer@dorsey.com. CONTINUING DISCLOSURE In order to permit bidders for the Bonds and other participating underwriters in the primary offering of the Bonds to comply with paragraph h (b)(5) of Rule 15c2 -12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Rule "), the City will covenant and agree, for the benefit of the registered holders or beneficial owners from time to time of the outstanding Bonds, in the Resolutions, to provide annual reports of specified information and notice of the occurrence of certain events, if material, as hereinafter described (the "Disclosure Covenants "). The information to be provided on an annual basis, the events as to which notice is to be given, if material, and a summary of other provisions of the Disclosure Covenants, including termination, amendment and remedies, are set forth in Appendix II to this Official Statement. For the past five years the City has complied in all material respects with all previous undertakings entered into pursuant to the Rule. A failure by the City to comply with the Undertaking will not constitute an event of default on the Bonds (although holders will have any available remedy at law or in equity). Nevertheless, such a failure must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price. * Preliminary; subject to change. 1- THE BONDS General Description The Bonds are dated as of the date of delivery and will mature annually on February 1 as set forth on the inside front cover of this Official Statement. The Bonds are issued in book entry form. Interest on the Bonds is payable on February 1 and August 1 of each year, commencing February 1, 2015. Interest will be payable to the holder (initially Cede & Co.) registered on the books of the Registrar as of the fifteenth day of the calendar month next preceding such interest payment date. Principal of and interest on the Bonds will be paid as described in the section herein entitled "Book Entry System." U.S. Bank National Association, St. Paul, Minnesota will serve as Registrar for the Bonds, and the City will pay for registrar services. Redemption Provisions Thirty days' written notice of redemption shall be given to the registered owner(s) of the Bonds. Failure to give such written notice to any registered owner of the Bonds or any defect therein shall not affect the validity of any proceedings for the redemption of the Bonds. All Bonds or portions thereof called for redemption will cease to bear interest after the specified redemption date, provided funds for their redemption are on deposit at the place of payment. tional Redemntion The City may elect on Februarys 1, 2022, and on any day thereafter, to prepay the Series 2014A Bonds due on or after February 1, 2023. The City may elect on Februarys 1, 2024, and on any day thereafter, to prepay the Series 2014B Bonds due on or after February 1, 2025. Redemption may be in whole or in part and if in part at the option of the City and in such manner as the City shall determine. If less than all the Bonds of a maturity are called for redemption, the City will notify DTC of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each participant's interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interests in such maturity to be redeemed. All prepayments shall be at a price of par plus accrued interest. Book Entry System The Depository Trust Company ( "DTC "), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully- registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully- registered certificate will be issued for each maturity of each series of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC is a limited- purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries)that DTC's participants ( "Direct Participants ") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book -entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ( "DTCC "). DTCC is the holding company for DTC, National Securities Clearing 2- Corporation, and Fixed Income Clearing Corporation all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( "Indirect Participants "). DTC has a Standard & Poor's rating of AA +. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtce.com Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (`Beneficial Owner ") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book -entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's MMI procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or its agent on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment -3- of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to City or agent. Under such circumstances, in the event that a successor depository is not obtained, certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry-only transfers through DTC (or a successor securities depository). In that event, certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. THE SERIES 2014A BONDS Authority and Purpose The Series 2014A Bonds are being issued pursuant to Minnesota Statutes, Chapters 429 and 475. The proceeds of the Series 2014A Bonds will be used to finance the City's 2014 Street Reconstruction Projects. For purposes of this Official Statement, the composition of the Series 2014 A Bonds has been broken out by the source of payment for each portion of the Series 2014A Bonds. The Series 2014A Bonds consist of: • the portion of the Series 2014A Bonds payable primarily from special assessments (the "Assessment Portion "); and • the portion of the Series 2014A Bonds payable solely from tax levies (the "Street Reconstruction Portion "). Sources and Uses of Funds The composition of the Series 2014A Bonds is estimated to be as follows Street Assessment Reconstruction Portion Portion Total Sources of Funds: Principal Amount $2,520,000 $6,640,000 $9,160,000 Prepaid Assessments 21,828 0 21,828 Total Sources of Funds $2,541,828 $6,640,000 $9,181,828 Uses of Funds: Deposit to Project Fund $2,472,763 $6,479,603 $8,952,366 Allowance for Discount Bidding 25,200 66,400 91,600 Capitalized Interest 28,272 52,474 80,746 Costs of Issuance 15,593 41,523 57,116 Total Uses of Funds $2,541,828 $6,640,000 $9,181,828 Security and Financing The Series 2014A Bonds will be general obligations of the City for which the City will pledge its full faith and credit and power to levy direct general ad valorem taxes. In addition, the City will pledge special assessments against benefited properties for repayment of the Assessment Portion of the Series 2014A Bonds. Special assessments in the total principal amount of approximately $2,520,000 are expected to be filed in 2014 for first collection in 2015. The City anticipates receiving prepayments of approximately $21,828. The remaining assessments of approximately $2,498,112 will be filed over a term of 20 years with equal annual payments of principal. Interest on the unpaid balance will be charged at an interest rate estimated to be 3.75 %. The City will also levy taxes for repayment of the Series 2014A Bonds, and will make its first levy in 2014 for collection in 2015. Each year's collection of taxes and special assessments, if collected in full, will be sufficient to pay 105% of the interest payment due August 1 of the collection year and the principal and interest payment due February 1 of the following year. THE SERIES 2014B BONDS Authority and Purpose The Series 2014B Bonds are being issued pursuant to Minnesota Statutes Chapter 475. The proceeds of the Series 2014B Bonds, along with available City funds, will be used to refund: • the February 1, 2017 through February 1, 2026 (the "2005A Refunded Maturities ") of the City's General Obligation Street Reconstruction Bonds, Series 2005A, dated December 1, 2005 (the "Series 2005A Bonds ") (the "Series 2005A Refunding Portion "); and • the February 1, 2018 through February 1, 2032 maturities (the "2007D Refunded Maturities ") of the City's General Obligation Capital improvement Plan Bonds, Series 2007D, dated August 1, 2007 (the "Series 2007D Bonds ") (the "Series 2007D Refunding Portion "). The Series 2005A Refunded Maturities and the Series 2007D Refunded Maturities are collectively referred to as the "Refunded Maturities ". The Series 2005A Bonds and the Series 2007D Bonds are collectively referred to as the "Refunded Bonds ". The Series 2014B Bonds have been structured as a crossover refunding, which is being issued to achieve debt service savings. Specifically, the proceeds of the Series 2014B Bonds will be placed in an escrow account with U.S. Bank National Association, St. Paul, Minnesota (the "Escrow Agent "). The amounts on deposit with the Escrow Agent will be (i) used to pay the costs associated with the issuance of the Series 2014B Bonds; and (ii) will be invested in special obligations of the United States Treasury or other obligations of the United States or of its agencies, which shall mature in such amounts and at such times as to be available to: • pay the interest on the Series 2005A Refunding Portion of the Series 2014B Bonds to and including February 1, 2016, the anticipated call date of the Series 2005A Bonds; • pay the principal of and interest on the Series 2007D Refunding Portion of the Series 2014B Bonds to and including February 1, 2017, the anticipated call date of the Series 2007D Bonds; • redeem the Series 2005A Refunded Maturities on the anticipated call date of February 1, 2016 at a price of par plus accrued interest; and -5- • redeem the 2007D Refunded Maturities on the anticipated call date of February 1, 2017 at a price of par plus accrued interest. Verification services necessary to insure the adequacy of the escrow account to provide timely payment of the principal and interest for which the escrow account is obligated will be performed by a certified public accounting firm. Sources and Uses of Funds The composition of the Series 2014B Bonds is estimated to be as follows Security and Financing The Series 2014B will be general obligations of the City for which the City will pledge its full faith and credit and power to levy direct general ad valorem taxes. The City will make its first levy for the Series 2014B Bonds in 2014 for collection in 2015. Each year's collection of taxes, if collected in full, will be sufficient to pay 105% of the interest payment due August 1 of the collection year and the principal and interest payment due February 1 of the following year. The City also expects to use available special assessment revenues for payment for the Series 2014B Bonds. FUTURE FINANCING The City does not anticipate issuing any additional long -term general obligation debt for at least the next 90 days. LITIGATION The City is not aware of any threatened or pending litigation affecting the validity of the Bonds or the City's ability to meet its financial obligations. Series 2005A Series 2007D Refunding Refunding Portion Portion Total Sources of Funds: Principal Amount $1,810,000 $11,920,000 $13,730,000 Available City Funds 235,000 0 235,000 Total Sources of Funds $2,045,000 $11,920,000 $13,965,000 Uses of Funds: Deposit to Escrow Fund $1,992,952 $11,732,307 $13,725,259 Costs of Issuance 33,043 62,533 95,576 Allowance for Discount Bidding 19,005 125,160 144,165 Total Uses of Funds $2,045,000 $11,920,000 $13,965,000 Security and Financing The Series 2014B will be general obligations of the City for which the City will pledge its full faith and credit and power to levy direct general ad valorem taxes. The City will make its first levy for the Series 2014B Bonds in 2014 for collection in 2015. Each year's collection of taxes, if collected in full, will be sufficient to pay 105% of the interest payment due August 1 of the collection year and the principal and interest payment due February 1 of the following year. The City also expects to use available special assessment revenues for payment for the Series 2014B Bonds. FUTURE FINANCING The City does not anticipate issuing any additional long -term general obligation debt for at least the next 90 days. LITIGATION The City is not aware of any threatened or pending litigation affecting the validity of the Bonds or the City's ability to meet its financial obligations. LEGALITY The Bonds are subject to approval as to certain matters by Dorsey & Whitney LLP, of Minneapolis, Minnesota, as Bond Counsel. Bond Counsel has not participated in the preparation of this Official Statement and will not pass upon its accuracy, completeness, or sufficiency. Bond Counsel has not examined nor attempted to examine or verify, any of the financial or statistical statements, or data contained in this Official Statement and will express no opinion with respect thereto. Legal opinions in substantially the forms set out in Appendix I herein will be delivered at closing. TAX EXEMPTION It is the opinion of Dorsey & Whitney LLP, Minneapolis, Minnesota, Bond Counsel, based on current law, and on certifications to be furnished at closing, and assuming compliance by the City with certain covenants (the "Tax Covenants "), that interest on the Bonds is excluded from gross income for federal income tax purposes and from taxable net income of individuals, estates, and trusts for Minnesota income tax purposes. Interest on the Bonds is included in taxable income for purposes of Minnesota franchise taxes imposed on corporations and financial institutions. Interest on the Bonds is not an item of tax preference for federal or Minnesota alternative minimum tax purposes, but it is included in adjusted current earnings of corporations for purposes of the federal alternative minimum tax. The Code establishes certain requirements that must be met after the issuance of the Bonds in order that interest on the Bonds be excluded from federal gross income and from Minnesota taxable net income of individuals, estates, and trusts. These requirements include, but are not limited to, provisions regarding the use of Bond proceeds and the facilities financed or refinanced with such proceeds; restrictions on the investment of Bond proceeds and other amounts; and provisions requiring that certain investment earnings be rebated periodically to the federal government. Noncompliance with such requirements may cause interest on the Bonds to be included in federal gross income or in Minnesota taxable net income retroactively to their date of issue. Compliance with the Tax Covenants will satisfy the current requirements of the Code with respect to exclusion of interest on the Bonds from federal gross income and from Minnesota taxable net income of individuals, estates, and trusts. No provision has been made for redemption of or for an increase in the interest rate on the Bonds in the event that interest on the Bonds is included in federal gross income or in Minnesota taxable net income. Original Issue Discount Certain maturities of the Bonds may be issued at a discount from the principal amount payable on such Bonds at maturity (collectively, the "Discount Bonds "). The difference between the price at which a substantial amount of the Discount Bonds of a given maturity is first sold to the public (the "Issue Price ") and the principal amount payable at maturity constitutes "original issue discount" under the Code. The amount of original issue discount that accrues to a holder of a Discount Bond under section 1288 of the Code is excluded from federal gross income and from Minnesota taxable net income of individuals, estates, and trusts to the same extent that stated interest on such Discount Bond would be so excluded. The amount of the original issue discount that accrues with respect to a Discount Bond under section 1288 is added to the owner's federal and Minnesota tax basis in determining gain or loss upon disposition of such Discount Bond (whether by sale, exchange, redemption or payment at maturity). Original issue discount is taxable under the Minnesota franchise tax on corporations and financial institutions. Interest in the form of original issue discount accrues under section 1288 pursuant to a constant yield method that reflects semiannual compounding on dates that are determined by reference to the maturity date of the Discount Bond. The amount of original issue discount that accrues for any particular 7- semiannual accrual period generally is equal to the excess of (1) the product of (a) one -half of the yield on such Bonds (adjusted as necessary for an initial short period) and (b) the adjusted issue price of such Bonds, over (2) the amount of stated interest actually payable. For purposes of the preceding sentence, the adjusted issue price is determined by adding to the Issue Price for such Bonds the original issue discount that is treated as having accrued during all prior semiannual accrual periods. If a Discount Bond is sold or otherwise disposed of between semiannual compounding dates, then the original issue discount that would have accrued for that semiannual accrual period for federal income tax purposes is allocated ratably to the days in such accrual period. If a Discount Bond is purchased for a cost that exceeds the sum of the Issue Price plus accrued interest and accrued original issue discount, the amount of original issue discount that is deemed to accrue thereafter to the purchaser is reduced by an amount that reflects amortization of such excess over the remaining term of such Bond. If such excess is greater than the amount of remaining original issue discount, the Code's basis reduction rules for amortizable bond premium might result in taxable gain upon sale, redemption or maturity of the Bonds, even if the Bonds are sold, redeemed or retired for an amount equal to or less than their cost. Except for the Minnesota rules described above, no opinion is expressed as to state and local income tax treatment of original issue discount. It is possible under certain state and local income tax laws that original issue discount on a Discount Bond may be taxable in the year of accrual, and may be deemed to accrue differently than under federal law. Holders of Discount Bonds should consult their tax advisors with respect to the computation and accrual of original issue discount and with respect to the other federal, state and local tax consequences associated with the purchase, ownership, redemption, sale or other disposition of Discount Bonds. Bond Premium Certain maturities of the Bonds may be issued at a premium to the principal amount payable at maturity. Except in the case of dealers, which are subject to special rules, Bondholders who acquire Bonds at a premium, even Bonds that were not initially offered at a premium, must, from time to time, reduce their federal and Minnesota tax bases for the Bonds for purposes of determining gain or loss on the sale or payment of such Bonds. Premium generally is amortized for federal and Minnesota income and franchise tax purposes on the basis of a bondholder's constant yield to maturity or to certain call dates with semiannual compounding. Accordingly, bondholders who acquire Bonds at a premium might recognize taxable gain upon sale of the Bonds, even if such Bonds are sold for an amount equal to or less than their original cost. Amortized premium is not deductible for federal or Minnesota income tax purposes. Bondholders who acquire Bonds at a premium should consult their tax advisors concerning the calculation of bond premium and the timing and rate of premium amortization, as well as the state and local tax consequences of owning and selling Bonds acquired at a premium. RELATED TAX CONSIDERATIONS Section 86 of the Code and corresponding provisions of Minnesota law require recipients of certain social security and railroad retirement benefits to take interest on the Bonds into account in determining the taxability of such benefits. Passive investment income, including interest on the Bonds, may be subject to taxation under section 1375 of the Code, and corresponding provisions of Minnesota law, for an S corporation that has accumulated earnings and profits at the close of the taxable year, if more than 25 percent of its gross receipts is passive investment income. Section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Bonds, and Minnesota law similarly denies a deduction for such interest in the case of individuals, estates, and trusts. Indebtedness may be allocated to the Bonds for this purpose even though not directly traceable to the purchase of the !Q Bonds. Federal and Minnesota laws also restrict the deductibility of other expenses allocable to the Bonds. Because of the Code's basis reduction rules for amortizable Bond premium, Bondholders who acquire Bonds at a premium might recognize taxable gain upon sale of the Bonds, even if the Bonds are sold for an amount equal to or less than their original cost. hi the case of a financial institution, no deduction is allowed under the Code for that portion of the holder's interest expense which is allocable to interest on the Bonds within the meaning of section 265(b) of the Code. In the case of an insurance company subject to the tax imposed by section 831 of the Code, the amount which otherwise would be taken into account as losses incurred under section 832(b)(5) of the Code must be reduced by an amount equal to 15 percent of the interest on the Bonds that is received or accrued during the taxable year. Interest on the Bonds may be included in the income of a foreign corporation for purposes of the branch profits tax imposed by section 884 of the Code, and is included in net investment income of foreign insurance companies under section 842(b) of the Code. The market value and marketability of the Bonds may be adversely affected by future changes in federal or Minnesota tax treatment of interest on the Bonds or by future reductions in income tax rates. THE FOREGOING IS NOT INTENDED TO BE AN EXHAUSTIVE DISCUSSION OF COLLATERAL TAX CONSEQUENCES ARISING FROM OWNERSHIP OR DISPOSITION OF THE BONDS OR RECEIPT OF INTEREST ON THE BONDS. PROSPECTIVE PURCHASERS OR BONDHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO APPLICABLE FEDERAL, STATE AND LOCAL TAX RULES. Proposed Changes in Federal and State Tax Law From time to time, there are legislative proposals that, if enacted, could adversely effect the federal and state tax matters referred to herein, adversely affect the marketability or market value of the Bonds, or otherwise prevent holders of the Bonds from realizing the full benefit of the tax exemption of interest on the Bonds. For example, both President Obama and the Chairman of the Committee on Ways and Means of the U.S. House of Representative have proposed legislation that effectively would impose a partial tax on otherwise tax exempt interest for certain higher income taxpayers. In addition, regulatory and administrative actions may from time to time be announced that could adversely affect the market value, marketability or tax status of the Bonds. No prediction is made concerning future events. The opinions expressed by Bond Counsel in connection with the issuance of the Bonds are based upon existing law. Purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed legislation, regulatory actions, or litigation. NOT QUALIFIED TAX - EXEMPT OBLIGATIONS The City will not designate the Bonds as "qualified tax- exempt obligations" for purposes of Section 265(b)(3) of the Code relating to the ability of financial institutions to deduct from income for federal income tax purposes a portion of the interest expense that is allocable to carrying and acquiring tax - exempt obligations. RATINGS An application for ratings of the Bonds has been made to Moody's Investors Service ( "Moody's "), 7 World Trade Center, 250 Greenwich Street, 23 Floor, New York, New York If ratings are assigned, they will reflect only the opinion of Moody's. Any explanation of the significance of the ratings may be obtained only from Moody's. There is no assurance that the ratings, if assigned, will continue for any given period of time, or that such ratings will not be revised, suspended or withdrawn, if, in the judgment of Moody's, circumstances so warrant. A revision, suspension or withdrawal of the ratings may have an adverse effect on the market price of the Bonds. MUNICIPAL ADVISOR The City has retained Springsted Incorporated, Public Sector Advisors, of St. Paul, Minnesota ( "Springsted "), as municipal advisor in connection with certain aspects of the issuance of the Bonds. In preparing this Official Statement, Springsted has relied upon governmental officials, and other sources, who have access to relevant data to provide accurate information for this Official Statement, and Springsted has not been engaged, nor has it undertaken, to independently verify the accuracy of such information. Springsted is not a public accounting firm and has not been engaged by the Issuer to compile, review, examine or audit any information in this Official Statement in accordance with accounting standards. Springsted is an independent advisory firm, registered as a municipal advisor, and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities. CERTIFICATION The City has authorized the distribution of the Preliminary Official Statement for use in connection with the initial sale of the Bonds and a Final Official Statement following award of the Bonds. The Purchaser(s) will be furnished with a certificate signed by the appropriate officers of the City stating that the City examined each document and that, as of the respective date of each and the date of such certificate, each document did not and does not contain any untrue statement of material fact or omit to state a material fact necessary, in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. -10- CITY PROPERTY VALUES Trend of Values /a1 Assessment/ Assessor's Market Value 71.8% Adjusted Collection Estimated Sales Economic Homestead Taxable Taxable Net Year Market Value Ratio(b) Market Value Exclusion Market Value Tax Canaciri 2013/14 $5,303,140,500 93.1% $5,694,637,601 $249,697,332 $4,995,818,217 $57,189,869 2012/13 5,080,153,100 94.2 5,387,471,135 256,627,663 4,767,475,321 55,320,301 2011/12 5,334,195,300 99.7 5,338,375,753 238,131,979 5,030,003,164 58,325,034 2010/11 5,425,990,500 N/A N/A N/A 5,356,855,900 62,063,161 2009/10 5,821,102,500 N/A N/A N/A 5,736,602,200 65,043,115 (a) For a description of the Minnesota property tax system, see Appendix III. (b) Sales Ratio Study for the year of assessment as posted by the Minnesota Department of Revenue, hhp: //www. revenue. state. mn. us /propertytax/Pages /statistics - imv.aspx. Prior to 2011112 a different methodology was used to calculate sales ratios. (c) Economic market values for the year of assessment as posted by the Minnesota Department of Revenue, http:11www. revenue. state. mn. us /propertytax/Pages /statistics- imv.aspx. Source: Dakota County, Minnesota, May 2014, except as otherwise noted. 2013/14 Adjusted Taxable Net Tax Capacity: $57,189,869* Real Estate: Residential Homestead Commercial/Industrial, Public Utility, and Railroad Non - Homestead Residential Agricultural and Seasonal/Recreational Personal Property 2013/14 Net Tax Capacity Less: Captured Tax Increment Tax Capacity Contribution to Fiscal Disparities Plus: Distribution from Fiscal Disparities 2013/14 Adjusted Taxable Net Tax Capacity * Excludes mobile home valuation of $131,112. $41,029,548 71.8% 13,050,730 22.8 1,468,225 2.6 762,179 1.3 863,624 1.5 $57,174,306 100.0% (861,019) (5,439,491) 6.316.073 $57,189,869 -11- Ten of the Largest Taxpayers in the City 2013/14 Net Taxpayer Type of Business Tax Capacity Lakeville 2004 LLC Commercial $ 331,302 Heritage Commons LLC Retail 319,220 Dakota Electric Association Utility 268,116 Target Corporation Retail 256,414 Argonne Investments LLC Retail 254,243 Walker Highview Hills LLC Apartments 246,873 LTF Real Estate Company Inc. Real Estate 238,810 CenterPoint Energy Utility 230,222 FR/CAL Interstate South LLC Industrial 229,776 Wal -Mart Real Estate Business Trust Commercial 215,522 Total $2,590,498* * Represents 4.5% ofthe City's 2013114 adjusted taxable net tax capacity. CITY INDEBTEDNESS Legal Debt Limit and Debt Margin* Legal Debt Limit (3% of 2013/14 Estimated Market Value) $159,094,215 Less: Outstanding Debt Subject to Limit (Including the Street Reconstruction Portion of the Series 2014A Bonds and the Series 2014B Bonds and Excluding the Refunded Maturities) (51,805,0001 Legal Debt Margin as of August 20, 2014 $107,289,215 * The legal debt margin is referred to statutorily as the "Net Debt Limit" and may be increased by debt service funds and current revenues which are applicable to the payment of debt in the current fiscal year. NOTES. Certain types ofdebt are not subject to the legal debt limit. See Appendix III —Debt Limitations. The 2013 Minnesota Legislature clarified the definition of estimated market value and established it as the basis for the calculation of the Net Debt Limit. A large contributing factor to the change was to offset the effect of the Market Value Homestead Exclusion implemented by the 2012 Minnesota Legislature, which had a significant impact on taxable market values. 12- General Obligation Debt Supported Solely by Taxes(a) (a) These issues are subject to the legal debt limit. (b) Excludes the Series 2005A Refunded Maturities. (c) Excludes the Series 2007D Refunded Maturities General Obligation Special Assessment Debt Est. Principal Date Original Est. Principal Final Outstanding of Issue Amount Purpose Maturity As of 8 -20 -14 11 -1 -04 $14,445,000 Capital Improvements 2 -1 -2015 $ 360,000 12 -1-05 5,430,000 Street Reconstruction 2 -1 -2016 305,000(b) 8 -1 -07 15,115,000 Capital Improvements 2 -1 -2017 1,475,000 ( 12 -15 -07 2,810,000 Street Reconstruction 2 -1 -2028 2,260,000 12 -30 -09 4,945,000 Street Reconstruction 2 -1 -2030 4,175,000 12 -1 -11 1,215,000 Park Refunding 4 -1 -2015 410,000 8 -15 -12 22,450,000 Street Reconstruction and 8 -15 -13 4,685,000 Local Improvements 2 -1 -2034 Capital Improvements Refunding 2 -1 -2030 22,450,000 8 -20 -14 6,640,000 Street Reconstruction (the Street Portion of the Series 2014A Bonds) 2 -1 -2035 Reconstruction Portion of the Total Series 2014A Bonds) 2 -1 -2025 6,640,000 8 -20 -14 13,730,000 Street Reconstruction and Capital Est. Principal Date Improvements Refunding Final Outstanding of Issue (the Series 2014B Bonds) 2 -1 -2032 13,730,000 Total 2 -1 -07 $2,265,000 Tax Increment Refunding $51,805,000 (a) These issues are subject to the legal debt limit. (b) Excludes the Series 2005A Refunded Maturities. (c) Excludes the Series 2007D Refunded Maturities General Obligation Special Assessment Debt Est. Principal Date Original Final Outstanding of Issue Amount Purpose Maturity As of 8 -20 -14 2 -1 -07 $3,165,000 Improvement Refunding 2 -1 -2016 $ 185,000 8 -1 -07 1,310,000 Local Improvements 2 -1 -2018 200,000 10 -1 -08 620,000 Local Improvements 2 -1 -2019 150,000 12 -30 -09 4,250,000 Refunding 2 -1 -2020 2,015,000 12 -1 -11 2,385,000 Local Improvements 2 -1 -2032 1,850,000 8 -15 -12 6,805,000 Local Improvements 2 -1 -2033 6,300,000 8 -15 -13 4,685,000 Local Improvements 2 -1 -2034 4,685,000 8 -20 -14 2,520,000 Local Improvements (the Assessment Portion of the Series 2014A Bonds) 2 -1 -2035 2,520.000 Total $17,905,000 General Obligation Tax Increment Debt Est. Principal Date Original Final Outstanding of Issue Amount Purvose Maturity As of 8 -20 -14 2 -1 -07 $2,265,000 Tax Increment Refunding 2 -1 -2022 $1,890,000 -13- General Obligation Revenue Debt Est. Principal Final Outstanding Purpose Est. Principal Date Original 8 -1 -2019 Final Outstanding of Issue Amount Purpose Maturity As of 8 -20 -14 11 -1 -04 $9,735,000 Water Revenue Refunding 2 -1 -2016 $1,975,000 12 -15 -07 3,675,000 State -Aid Street 4 -1 -2018 1,660,000 1 -1 -10 2,680,000 State -Aid Street Refunding 4 -1 -2020 1,705,000 12 -1 -11 665,000 State -Aid Street Refunding 4 -1 -2021 525,000 Total Ice Arena Debt Date Original of Issue Amount 4 -1 -99 12 -1 -06 10 -1 -08 $1,250,000 9,230,000 775,000 Total $5,865,000 (a) These bonds were issued by the Housing and Redevelopment Authority of the City of Lakeville, Minnesota. Gross revenues from the Ames Ice Arena and Lakeville Hockey Association operations are pledged to the repayment of this debt. (b) These bonds were issued through means of an operating lease purchase agreement between the City and the Housing and Redevelopment Authority of the City of Lakeville, Minnesota. This issue will be repaid with annual appropriation lease payments to be made by the City. Pursuant to a joint powers agreement between the City and Independent School District No. 194 (Lakeville), Minnesota (the "District'), the District has agreed to reimburse the City for 50% of the annual debt service payments for this issue. (c) These bonds are general obligations of the City, but are payable from gross revenues of the City's Ice Arena. Revenue Debt Est. Principal Date Original Final Outstanding of Issue Amount Purpose Maturitv As of 8 -20 -14 5 -1 -07 $3,955,000 Liquor Store 2 -1 -2027 $3,070,000 -14- Est. Principal Final Outstanding Purpose Maturity As of 8 -20 -14 Recreational Facility Revenue 8 -1 -2019 $ 770,000(a) Ice Arena Lease Revenue 2 -1 -2032 8,100,000(') Ice Arena Refunding 2 -1 -2015 140,000 $9,010,000 (a) These bonds were issued by the Housing and Redevelopment Authority of the City of Lakeville, Minnesota. Gross revenues from the Ames Ice Arena and Lakeville Hockey Association operations are pledged to the repayment of this debt. (b) These bonds were issued through means of an operating lease purchase agreement between the City and the Housing and Redevelopment Authority of the City of Lakeville, Minnesota. This issue will be repaid with annual appropriation lease payments to be made by the City. Pursuant to a joint powers agreement between the City and Independent School District No. 194 (Lakeville), Minnesota (the "District'), the District has agreed to reimburse the City for 50% of the annual debt service payments for this issue. (c) These bonds are general obligations of the City, but are payable from gross revenues of the City's Ice Arena. Revenue Debt Est. Principal Date Original Final Outstanding of Issue Amount Purpose Maturitv As of 8 -20 -14 5 -1 -07 $3,955,000 Liquor Store 2 -1 -2027 $3,070,000 -14- Estimated Calendar Year Debt Service Payments Including the Bonds and Excluding the Refunded Maturities Year 2014 (at 8 -20) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Total G.O. Debt Supported Solely by Taxes Principal Principal & Interest G.O. Special Assessment Debt Principal Principal & Interest (Paid) $ 1,538 (Paid) (Paid) $ 2,365,000 4,315,018 $ 1,590,000 $ 2,040,507 2,835,000 4,858,369 1,810,000 2,228,519 2,860,000 4,488,666 1,700,000 2,081,784 3,175,000 4,457,474 1,675,000 2,020,505 3,295,000 4,490,430 1,635,000 1,941,349 3,410,000 4,509,021 1,405,000 1,673,153 3,555,000 4,548,523 1,270,000 1,504,441 3,620,000 4,508,178 1,125,000 1,327,925 3,740,000 4,524,148 1,135,000 1,303,708 3,870,000 4,543,171 705,000 844,483 4,025,000 4,579,389 400,000 523,085 3,450,000 3,887,610 395,000 505,893 2,385,000 2,728,778 395,000 493,558 2,475,000 2,735,518 395,000 480,858 2,375,000 2,554,036 395,000 467,763 2,510,000 2,605,395 390,000 449,533 915,000 952,677 395,000 441,063 945,000 952,356 395,000 427,308 350,000 369,218 225,000 233,730 120,000 122,220 $51,805,000(c) $66,240,295 $17,905,000( $21,480,603 (a) Includes the Street Reconstruction Portion of the Series 2014A Bonds and the Series 2014E Bonds at assumed average annual interest rates of2.09% and 2.67 respectively, and excludes the Refunded Maturities. (b) Includes the Assessment Portion of the Series 2014A Bonds at an assumed average annual interest rate of 3.04% (c) 63.2% of this debt will be retired within ten years. (d) 78.5 %ofthis debt will be retired within ten years. -15- Estimated Calendar Year Debt Service Payments Including the Bonds and Excluding the Refunded Maturities (continued) G.O. Tax Increment Debt G.O. Revenue Debt Principal Principal Year Principal & Interest Principal & Interest 2014 (at 8 -20) 2015 2016 2017 2018 2019 2020 2021 2022 Total Year 2014 (at 8 -20) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 (Paid) (Paid) (Paid) $ 63,541 $ 210,000 $ 282,561 $1,685,000 1,861,201 220,000 283,961 1,765,000 1,878,358 220,000 275,161 780,000 847,226 230,000 276,161 800,000 840,326 240,000 276,761 375,000 396,064 245,000 271,908 380,000 388,626 260,000 276,493 80,000 80,860 265,000 270,565 $1,890,000 $2,213,571 $5,865,000 $6,356,202 Ice Arena Debt Revenue Debt Principal Principal Principal & Interest Principal & Interest (Paid) $ 520,000 415,000 470,000 505,000 525,000 370,000 390,000 415,000 435,000 450,000 470,000 495,000 520,000 545,000 575,000 605,000 635,000 670.000 (Paid) $ 925,864 800,490 834,980 847,028 842,480 661,988 664,888 671,775 672,650 667,738 667,038 670,325 672,163 672,534 676,634 679,347 680,672 685,494 (Paid) 175,000 180,000 190,000 200,000 210,000 220,000 235,000 245,000 255,000 270,000 285,000 295,000 310,000 Total $9,010,000(a) $12,994,088 (a) 49.9% of this debt will be retired within ten years. (') 71.0% of this debt will be retired within ten years. $3,070,OOO(b) (Paid) 324,125 320,250 321,000 321,250 321,000 320,250 323,875 321,875 319,375 321,250 322,375 317,875 317,750 $4,172,250 -16- Other Debt Obligations Metropolitan Council Loan Agreement The City entered into a loan agreement with the Metropolitan Council on February 21, 2006 in the amount of $1,466,300 to finance the acquisition of property for a commuter vehicle park and pool lot. In 2013 the City made no payments on this loan. As of December 31, 2013 the balance of the loan is $1,159,843. The loan is interest -free and will be discharged by the Metropolitan Council at an undetermined future date. Overlapping Debt 2013/14 Debt Applicable to Adjusted Taxable Est. G.O. Debt Tax Capacity in the City Taxing Unit Net Tax Capacity As of 8- 20 -14 Percent Amount Dakota County ISD No. 192 (Farmington) ISD No. 194 (Lakeville) ISD No. 196 (Rosemount - Apple Valley -Eagan) Metropolitan Council Metropolitan Transit Total $ 402,262,793 27,215,403 50,181,718 145,765,904 2,999,061,916 2,381,101,627 ( Only those units with outstanding general obligation debt are shown here. (b) Excludes general obligation tax and aid anticipation certificates and revenue- supported debt. $191,420,779 (c) Excludes the outstanding principal amount of the City of Lakeville Housing and Redevelopment Authority's $9,230,000 Lease Revenue Bonds (Ice Arena Project), Series 2006, of which 50% of the debt service is paid by Independent School District No. 194 (Lakeville), pursuant to a joint powers agreement. This debt has already been included under the City's debt totals in its entirety. (d) Excludes general obligation debt supported by wastewater revenues and housing rental payments. Includes certificates ofparticipation. (e) Includes general obligation grant anticipation notes Debt Ratios* $ 40,890,000 12.7% $ 5,193,030 194,835,000 18.8 36,628,980 155,085,000(c) 87.8 136,164,630 96,477,253 5.5 5,306,249 21,040,000( 1.7 357,680 370,010,000(e) 2.1 7.770.210 G.O. G.O. Direct & Direct Debt Overlapping Debt To 2013/14 Estimated Market Value ($5,303,140,500) 1.36% 4.97% Per Capita (57,048 — 2012 MN State Demographer's Estimate) $1,263 $4,618 * Excludes general obligation revenue debt; ice arena debt; revenue debt; and other debt obligations. -17- CITY TAX RATES, LEVIES AND COLLECTIONS Tax Capacity Rates for a City Resident in Independent School District No. 194 (Lakeville) (a) The City also has a 2013114 tax rate of 0.00378% spread on the market value of property in support of debt service. (b) Independent School District No. 194 (Lakeville) also has a 2013114 tax rate of 0.25945% spread on the market value ofproperty in support of an excess operating levy. (e) Special districts include Metropolitan Mosquito Control, Metropolitan Council, Metropolitan Transit District, the Dakota County Community Development Agency, the Light Rail Authority, and the Vermillion River Watershed District. NOTE.• Taxes are determined by multiplying the net tax capacity by the tax capacity rate, plus multiplying the referendum market value by the market value rate. This table does not include the market value based rates. See Appendix III. Tax Levies and Collections Collected During Collected and/or Abated Net 2013/14 as of 5 -20 -14 Levy /Collect Lam Amount Percent Amount Percent 2013/14 $21,053,626 For 2012/13 2009/10 2010/11 2011/12 2012/13 Total Debt Onlv 20,435,146 99.8 Dakota County 27.269% 29.149% 31.426% 2009/10 33.421% 31.827% 0.963% City of Lakeville(a) 36.624 38.250 39.051 41.234 40.696 8.650 ISD No. 194 (Lakeville)(b) 27.714 32.138 32.061 33.535 33.048 25.151 Special Districts(a) 4.987 5.199 5.562 5.848 5.538 1.575 Total 96.594% 104.736% 108.100% 114.038% 111.109% 36.339% (a) The City also has a 2013114 tax rate of 0.00378% spread on the market value of property in support of debt service. (b) Independent School District No. 194 (Lakeville) also has a 2013114 tax rate of 0.25945% spread on the market value ofproperty in support of an excess operating levy. (e) Special districts include Metropolitan Mosquito Control, Metropolitan Council, Metropolitan Transit District, the Dakota County Community Development Agency, the Light Rail Authority, and the Vermillion River Watershed District. NOTE.• Taxes are determined by multiplying the net tax capacity by the tax capacity rate, plus multiplying the referendum market value by the market value rate. This table does not include the market value based rates. See Appendix III. Tax Levies and Collections ME Collected During Collected and/or Abated Net Collection Year as of 5 -20 -14 Levy /Collect Lam Amount Percent Amount Percent 2013/14 $21,053,626 (In Process of Collection) 2012/13 20,422,240 $20,196,219 98.9% $20,320,132 99.5% 2011/12 20,485,607 20,266,433 98.9 20,435,146 99.8 2010/11 20,341,647 19,955,441 98.1 20,326,951 99.9 2009/10 20,785,640 20,437,282 98.3 20,774,312 99.9 * The net levy excludes state aid for property tax relief and fiscal disparities, if applicable. The net levy is the basis for computing tax capacity rates. See Appendix III. ME FUNDS ON HAND As of April 30, 2014 Funds Cash and Investments General $ 5,477,095 Special Revenue 953,822 Debt Service: G.O. Supported by Taxes 779,314 G.O. Supported by Special Assessments 1,577,237 G.O. Supported by Tax Increment 2,887,599 G.O. State -Aid Road Bonds 23,598 Ice Arena Revenue 75,463 Capital Projects 22,427,394 Liquor 3,925,333 Utility 6,500,829 Internal Service 506,585 Escrow 7.182.794 Total $52,317,063 CITY INVESTMENTS Investments shall be undertaken so as to insure the preservation of capital in the overall portfolio. Safety of principal is the foremost objective. Liquidity and yield are also important considerations. It is essential that money is always available when needed; therefore, the City's investment goal is to maximize yield while scheduling maturity dates to coincide with expenditure needs. The City's investment portfolio shall be designed to attain a market- average rate of return during budgetary and economic cycles, taking into account the City's investment risk constraint and the cash flow characteristics of the portfolio. Each individual participating in the investment process shall seek to act responsibly as custodians of the public trust. Investment officials shall avoid any transaction that might impair public confidence in the City's ability to govern effectively. Investment Procedures Cash management is essential to the City's investment program. The Finance Department has responsibility to organize and establish procedures for effective cash management, based on the following guidelines: 1. Cash balances will be prepared based on cash received the previous day, warrants paid the previous day and sizable checks or wire transfers that present investment opportunity. 2. The investment records will be reviewed and updated as investments mature or are purchased. 3. Each month, the investment records will be balanced to the financial records. 4. Interest earnings will be allocated to the various City funds. 19- Current Cash and Investments As of April 30, 2014, the City's portfolio had a book value of $51,447,927 versus a cost to the City of $52,223,130. The composition of the portfolio was as follows: 7.57% in cash or money market funds, 33.03% in certificates of deposit, 18.25% in municipal bonds, and 41.15% in in government agency securities. The portfolio had a maturity schedule as follows: Year Cost Percent of Total 2012 MN State Demographer Liquid $ 3,895,902 7.4% 2014 7,471,990 14.3 2015 12,700,746 24.3 2016 7,529,538 14.4 2017 6,192,009 11.8 2018 -2024 13,657,743 26.1 Total investments $51,447,928 98.3% Cash 869,135 1.7 Total $52,317,063 100.0% GENERAL INFORMATION CONCERNING THE CITY The City is located in southern Dakota County, approximately 20 miles south of downtown Minneapolis and St. Paul. The area of the City is approximately 38 square miles (24,320 acres). Population The City's population trend is shown below. Year Population Percent Change 2012 MN State Demographer 57,048 2.0% 2010 U.S. Census Bureau 55,954 29.7 2000 U.S. Census Bureau 43,128 73.5 1990 U.S. Census Bureau 24,854 68.0 1980 U.S. Census Bureau 14,790 -- Sources: Minnesota State Demographic Center, http. .• / / www.demography.state.mn.us/ and United States Census Bureau, htto://www.census.Qov/ The City's population by age group for the past two years is as follows: 0 -17 18 -34 35 -64 65 and Over 2013 17,194 11,538 25,730 4,281 2012 17,790 10,818 25,332 3,981 Source: Claritas, Inc. -20- Transportation Interstate 35W runs north -south through the City. In addition, County Highways 5, 9, 23, 31,46, 50, 60, and 70 run through the City. Public transportation services are provided through Metro Transit and the Minnesota Valley Transit Authority. The City is located approximately 18 miles from the Minneapolis /St. Paul International Airport. Employment As a part of the Minneapolis -Saint Paul metropolitan area, the City's labor market is drawn from many of the surrounding communities; and, conversely, many City residents commute to other areas of the Minneapolis -Saint Paul metropolitan area for work. Major employers located within in the City are listed below: Approximate Number Emnlover Product /Service of Employees Independent School District No. 194 (Lakeville) Public education 1,273 Hearthside Food Solutions Food service contractors 715 ConAgra Store Brands Breakfast cereal manufacturing 515 Target Retail 360 Imperial Plastics, Inc. Plastics material and resin manufacturing 320 Despatch Industries, hic. Industrial furnace and oven manufacturing 300 Malt -O -Meal Brands Cereal production 250 Life Time Fitness Fitness clubs 230 Menasha Corporation Corrugated box manufacturing 221 City of Lakeville City government 195 Fleet Farm Retail 180 Image Trend Computer programming 160 Jeff Belzers Chev- Dodge -Kia Auto dealership 110 Verified Credentials, Inc. Credit bureau 100 National Polymers, Inc. Plastics material and resin manufacturing 100 Hearth & Home Technologies, Inc. Fireplaces /metal work 130 Source: City of Lakeville, Minnesota. Labor Force Data Annual Average May 2010 2011 2012 2013 2014 Labor Force: City of Lakeville 30,918 31,037 131,213 31,565 31,910 Dakota County 229,733 230,864 231,946 232,407 234,489 State of Minnesota 2,962,633 2,969,696 2,969,366 2,973,987 2,992,521 Unemployment Rate: City of Lakeville 6.7% 5.6% 4.9% 4.4% 3.7% Dakota County 7.1 6.1 5.3 4.7 3.9 State of Minnesota 7.4 6.5 5.6 5.1 4.2 Source: Minnesota Department of Employment and Economic Development, htW :Ilwww.positivelvminnesota.com 2014 data are preliminary. -21- Retail Sales and Effective Buying Income (EBI) City of Lakeville Data Year/ Total Retail Total Median RRe ort Year Sales ($000) EBI 000 Household EBI 2013/14 $682,120 $1,604,578 $70,515 2012/13 412,143 1,569,458 67,218 2011/12 449,604 1,528,938 67,621 2010/11 632,140 1,504,083 68,290 2009/10 494,077 1,554,243 72,417 Dakota Countv Data Year/ Total Retail Total Median Report Year Sales ($000) EBI 000 Household EBI 2013/14 $6,421,455 $10,844,223 $56,674 2012/13 5,794,034 10,770,815 55,539 2011/12 6,784,232 10,387,368 56,655 2010/11 6,786,831 10,287,060 56,964 2009/10 6,197,129 10,543,345 59,620 The 2013 Median Household EBI for the State of Minnesota was $48,180. The 2013 Median Household EBI for the United States was $43,715. Source: Claritas, Inc. Commerce and Industry Building construction and commercial /industrial development initiated and/or completed within the past 24 months has been as follows: New Permits in 2012, 2013, and through April 30, 2014 (in excess of $250, 000) Business Product/Service Valuation Cosmopolitan Medical $1,400,000 McDonalds Restaurant 900,000 McDonalds Restaurant 800,000 Ballet Royale Dance Studio 724,000 Advanced Auto Parts Retail 500,000 Sheila A. Lewis, Trust Office/Warehouse /Storage 474,000 _22_ Expansion or Remodel Building Permits in 2011, 2012, and through April 30, 2013 (in excess of $250,000) Business MOM Brands Jeff Belzer's National Polymers ConAgra QA -1 Precision Products MOM Brands Dick's Sanitation Progressive Rail McDonalds Park Dental Holiday Station Product /Service Valuation Corporate Headquarters $4,320,000 Automobile Dealership 2,420,000 Plastic's Manufacturer 2,094,000 Food Manufacturer 1,500,000 Motorsports products manufacturer 761,000 Admin. Offices/Technology Center 438,000 Recycling/Waste Hauler 438,000 Railroad 428,000 Restaurant 400,000 Medical 312,000 Convenience Store 289,000 In late 2012, Malt -O -Meal Brands (MOM Brands) acquired a second 65,000 square -foot building in the Fairfield Business Campus, which is adjacent to their existing 98,000 square -foot building where they currently have over 240 employees. MOM Brands was issued a building permit in February 2013 to begin a $4,320,000 renovation of their second building. MOM Brands moved their corporate headquarters from downtown Minneapolis to the City in September 2013, bringing an additional 100 corporate jobs to the community and have an approximately 250 employees in the City. Walmart constructed a new 152,000 square -foot store on Keokuk Avenue near the County Road 70/1 -35 interchange, which opened in October 2012. In February 2012, Stonehenge Development completed construction of a new 20,000 square -foot store currently being leased to Goodwill. This new commercial retail building is located on Kenrick Avenue south of Kenwood Trail. In 2012, ConAgra Foods was issued a permit valued at $1.5 million to construct a 27,000 square -foot warehouse addition to their existing manufacturing plant within the City. The addition replaces warehouse space the company previously leased in the City of Shakopee, Minnesota, and improves ConAgra's shipping and logistics operations. hi January 2012, lmageTrend, a local software development company, completed construction on a 24,000 square -foot expansion to their existing building. This expansion resulted in the ability to hire up to 100 additional employees for the company, bringing the total employment to approximately 240 people. Since 2012, over 1 million square feet of existing industrial buildings have been purchased or leased throughout the City. Some of the larger tenants /owners include: Genpak (210,000 square feet); CSC (First Park Spec. Building - 160,000 square feet); BTD (100,000 square feet); MOM Brands (65,000 square feet); Midwest Veterinary Supply (51,000 square feet); GRI Group (45,600 square feet); and Boise (41,778 square feet). Residential Development The City is reliant upon regional sanitary sewer and the allocation of Metropolitan Urban Service Area (MUSA) from the Metropolitan Council for future urban growth. To accommodate the City's forecasted 2030 growth, the City has allocated its MUSA in three stages: MUSA Expansion Areas A (2010 or thereafter), B (2015 or thereafter), and the Urban Reserve (2020 or thereafter). MUSA Expansion Area A was brought into the current MUSA on February 4, 2013, which increased the amount of available residentially zoned land within the current MUSA. -23- As of April 30, 2014, there were 500 vacant single - family lots, 185 vacant townhome unit lots that have been final platted but not yet built upon, and 359 single - family lots and 62 townhome unit lots preliminary platted pending final plat approval for development. The City is currently processing subdivision applications that would plat an additional 1,039 single - family lots and 87 townhome unit lots. A total of approximately 2,561 acres of residentially zoned land is available (has not received preliminary or final plat approval) within the current MUSA, including 1,206 acres of single - family zoned property, 265 acres of single- and two - family zoned property, 827 acres of townhome zoned property, and 263 acres of Planned Unit Development. Permits Issued by the City Source: City ofLakeville Financial Institutions The following full service banks are located in the City *: Provincial Bank Lakeview Bank Deposits As of 6 -30 -14 $ 63,726,000 50,662,000 Total $114,388,000 In addition, branch offices of Affinity Plus Credit Union; Anchor Bank; Bank of the West; Bremer Bank; Citizens Bank; Guaranty Bank; Inter Bank; K1einBank; M &I Bank; Merchants Bank; New Market Bank; Sterling State Bank; TCF National Bank; U.S. Bank National Association; and Wells Fargo Bank, National Association are located throughout the City. * This does not purport to be a comprehensive list. Source: Federal Deposit Insurance Corporation, http: / /Www2.fdic.gov/idasplmain.asp 24- New Single New Total Value* Family Residential Commercial/Industrial (All Permits) Year Number Value Number Value 2014 (to 4 -30) 104 $ 35,626,000 0 -0- $ 40,520,312 2013 374 120,393,000 5 $ 3,998,000 149,511,301 2012 280 83,894,000 2 860,000 129,305,246 2011 122 37,013,000 3 10,345,000 87,670,949 2010 138 38,240,000 3 799,000 54,308,186 * In addition to building permits, the total value includes all other permits issued by the City (ie. heating, lighting, plumbing, roof replacement, etc.). Source: City ofLakeville Financial Institutions The following full service banks are located in the City *: Provincial Bank Lakeview Bank Deposits As of 6 -30 -14 $ 63,726,000 50,662,000 Total $114,388,000 In addition, branch offices of Affinity Plus Credit Union; Anchor Bank; Bank of the West; Bremer Bank; Citizens Bank; Guaranty Bank; Inter Bank; K1einBank; M &I Bank; Merchants Bank; New Market Bank; Sterling State Bank; TCF National Bank; U.S. Bank National Association; and Wells Fargo Bank, National Association are located throughout the City. * This does not purport to be a comprehensive list. Source: Federal Deposit Insurance Corporation, http: / /Www2.fdic.gov/idasplmain.asp 24- Health Care Services The following is a summary of health care facilities located in and nearby the City: Facilitv Ebenezer Ridges Geriatric Care Center Fairview Ridges Hospital MSOCS —Hershey MSOCS — Lakeville Jonquil Location No. of Beds City of Burnsville 104 City of Burnsville 198 City of Lakeville 6 City of Lakeville 6 * This does not purport to be a comprehensive list. Source: Minnesota Department of Health, htto://www.health.state.mn.us/ Education Public Education The following districts serve the residents of the City Non - Public Education City residents are also served by the following private schools: 2013/14 School Location Grades Enrollment All Saints Catholic School Glory Academy Post - Secondary Education City of Lakeville K -8 City of Lakeville K -12 353 14 Lakeville residents and businesses have access to a number of post - secondary programs and institutions, many of which provide customized training programs for local companies. Inver Hills Community College and Dakota County Technical College are located minutes away, while the Minneapolis /Saint Paul metropolitan area offers a variety of colleges, universities and vocational schools. -25- 2013/14 School Location Grades Enrollment Independent School District No. 192 (Farmington) City of Farmington K -12 6,976 Independent School District No. 194 (Lakeville) City of Lakeville K -12 10,978 Independent School District No. 196 (Rosemount - Apple Valley -Eagan) City of Rosemount K -12 27,221 Non - Public Education City residents are also served by the following private schools: 2013/14 School Location Grades Enrollment All Saints Catholic School Glory Academy Post - Secondary Education City of Lakeville K -8 City of Lakeville K -12 353 14 Lakeville residents and businesses have access to a number of post - secondary programs and institutions, many of which provide customized training programs for local companies. Inver Hills Community College and Dakota County Technical College are located minutes away, while the Minneapolis /Saint Paul metropolitan area offers a variety of colleges, universities and vocational schools. -25- GOVERNMENTAL ORGANIZATION AND SERVICES The City has been a municipal corporation since 1967 and became a statutory City on January 1, 1974. The City's governing body consists of a Mayor and four Council members, all elected at large. The Mayor serves a two -year term of office and Council members serve overlapping four -year terms. The present Mayor and Council members are Expiration of Term Matt Little Mayor December 31, 2014 Doug Anderson Council Member December 31, 2016 Kerrin Swecker Council Member December 31, 2016 Bart Davis Council Member December 31, 2014 Colleen Ratzlaff LaBeau Council Member December 31, 2014 Mr. Steven C. Mielke is the City Administrator and has served in this capacity since June 2004. The City Administrator is responsible for the daily management of City business and the administration of policy as directed by the Council. Mr. Mielke was previously the City Manager for the City of Hopkins, Minnesota, and has 25 years of experience in local government. Mr. Mielke has resigned as City Administrator effective July 20, 2014. The City is in the recruitment process for the City Administrator position. The City's Finance Director, Mr. Dennis Feller, has been with the City in that capacity since 1977. Mr. Feller has a Bachelor of Science degree in accounting from Bemidji State University. He is an active member and past President of the Minnesota Government Finance Officers Association. Ms. Charlene Friedges has been the City Clerk since September 1989 and is currently an officer with the Minnesota Clerks and Finance Officer's Association. Mr. David L. Olson is the Community and Economic Development Director, a position he formerly held in Farmington, Minnesota. The City's current employment is 195 persons. Public Utilities The City provides water and sewer facilities to a majority of its residential areas. The City's present water system includes 17 wells and eight water storage facilities with a total capacity of 8.5 million gallons. The City's water treatment plant has a production capacity of 20 million gallons of water per day. The Metropolitan Council Environmental Service completed expansion of the Empire plant in 2008, which increases the plant's capacity to 48 million gallons per day. The plant meets discharge standards. Lakeville's daily use of the plant is approximately 4.0 million gallons per day of the total capacity. Other Services The City's Police Department consists of 53 full -time officers and 21 police reservists. The City's Fire Department has four stations and is served by 85 trained volunteers. The City has a fire rating of 3 for insurance purposes, which results in a significant reduction of fire insurance premiums for commercial and industrial buildings and apartments. 26- Additional City facilities include 62 public parks (including 40 playgrounds), 18 conservation areas, three municipal swimming beaches, six outdoor ice rinks which are fully boarded, three indoor ice rinks, and approximately 103 miles of paved trails and sidewalks. The City operates three liquor stores that are located adjacent to major highways. Two of the facilities which are located at County Road 46 (160th Street) and Kenrick Avenue and at County Road 46 (160th Street) and Galaxie Avenue are owned by the City; retail space for a third facility located at County Road 50 (Kenwood Trail) and Dodd Boulevard is leased by the City. Minnesota Statutes prohibit private off -site liquor operations if the City owns and operates a municipal liquor store. Sales for 2013 were $15,381,124, resulting in net income before transfers of $1,469,168. Sales as of April 30, 2014 were $4,453,389, which is a $93,568 (2.1 %) increase over the same period in 2013. Labor Contracts The status of labor contracts in the City is as follows: Bargaininjz Unit No. of Emplovees Law Enforcement Labor Services Inc. Local No. 177 8 Law Enforcement Labor Services Inc. 40 Minnesota Teamsters Public & Law Enforcement Employees Union Local No. 320 39 Subtotal 87 Non - unionized employees 108 Total employees 195 * In negotiations. Employee Pensions Expiration Date of Current Contract December 1, 2015 December 1, 2013* December 1, 2015 Employees of the City are covered by defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF), which are cost - sharing multiple- employer retirement plans. GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers are covered by the PEPFF. -27- The City's contributions for the past five years are as follows: PEDCP Two Council members of the City are covered by the Public Employees Defined Contribution Plan ( PEDCP), a multiple - employer deferred compensation plan administered by PERA. The PEDCP is a tax - qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until the time of withdrawal. Plan benefits depend solely on the amounts contributed to the plan plus investment earnings less administrative expenses. An eligible elected official who chooses to participate in the plan contributes 5% of their salary, which is matched by the elected official's employer. PERA receives 2% of employer contributions and 0.025% of the assets in each member's account annually for administering the plan. The City's contributions to PEDCP for the past five years are as follows: PEDCP 2013 GERF PEPFF 2013 $611,079 $693,976 2012 587,750 679,673 2011 596,142 650,578 2010 583,884 621,658 2009 578,225 602,343 PEDCP Two Council members of the City are covered by the Public Employees Defined Contribution Plan ( PEDCP), a multiple - employer deferred compensation plan administered by PERA. The PEDCP is a tax - qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until the time of withdrawal. Plan benefits depend solely on the amounts contributed to the plan plus investment earnings less administrative expenses. An eligible elected official who chooses to participate in the plan contributes 5% of their salary, which is matched by the elected official's employer. PERA receives 2% of employer contributions and 0.025% of the assets in each member's account annually for administering the plan. The City's contributions to PEDCP for the past five years are as follows: PEDCP 2013 $1,670 2012 1,311 2011 1,307 2010 869 2009 1,020 Firefighter's Association Firefighters of the City are members of the Lakeville Fire Relief Association (the "Association "). The Association is the administrator of a single - employer defined benefit pension plan that operates under the provisions of Minnesota State Statutes Chapter 424A. State aids and City contributions fund the plan. As of December 31, 2013 the plan had 104 members. The City's contributions to the Association for the past four years are as follows: Association Plan 2013 $ 60,000 2012 44,804 2011 44,804 2010 178,380 For more information regarding the liability of the City with respect to its employees, please reference Note 16, Defined Benefit Pension Plans — Statewide, Note 17, Defined Contribution Plan — Statewide, and Note 18, Lakeville Fire Relief Association, of the City's Comprehensive Annual Financial Report for fiscal year ended December 31, 2013, an excerpt of which is included as Appendix IV of this Official Statement. -28- Other Post - Employment Benefits The Governmental Accounting Standards Board (GASB) has issued Statement No. 45, Accounting and Financial Reporting by Employers for Post - employment Benefits Other Than Pensions (GASB 45), which addresses how state and local governments must account for and report their obligations related to post - employment healthcare and other non - pension benefits (referred to as Other Post - Employment Benefits or "OPEB "). The City operates a single- employer defined benefit plan that provides medical and dental insurance to eligible employees through the City's health insurance plan. The City currently finances the plan on a pay -as- you -go basis. During the fiscal year ended December 31, 2013, the City contributed $21,690 to the plan. Components of the City's annual OPEB cost, the amount actually contributed to the plan, and the changes in the City's net OPEB obligation for fiscal year ended December 31, 2013 are as follows: Annual required contribution $ 75,006 Interest on net OPEB obligation 8,587 Adjustment to annual required contribution _ C12 , 550 ) Annual OPEB cost (expense) $ 71,043 Contributions made 2( 1.690 Increase in net OPEB obligation $ 49,353 Net OPEB obligation — beginning of year 214.674 Net OPEB obligation — end of year 264 Funded status of the City's OPEB as reported in the actuarial reports received to -date The City's annual OPEB cost, the percentage of the annual OPEB cost contributed to the plan, and the net OPEB obligation for the past five years are as follows: Unfunded UAAL as Annual Actuarial Actuarial a percentage Actuarial Actuarial Value Accrued Accrued of Annual Valuation Date of Assets Liability Liability (UAALI Covered Payroll January 1, 2011 $ 88,458 $ -0- $588,458 5.0% January 1, 2008 290,424 -0- 290,424 2.6 The City's annual OPEB cost, the percentage of the annual OPEB cost contributed to the plan, and the net OPEB obligation for the past five years are as follows: For more information regarding the liability of the City with respect to its employees, please reference Note 14, Other Post - Employment Benefits (OPEB) Plan of the City's Comprehensive Annual Financial Report as of December 31, 2013, an excerpt of which is included as Appendix IV to this Official Statement. -29- Annual Net Annual Employer OPEB Cost OPEB Fiscal Year Ended OPEB Cost Contribution Contributed Obligation December 31, 2013 $71,043 $21,690 30.5% $264,027 December 31, 2012 72,144 16,594 23.0 214,674 December 31, 2011 73,281 11,356 15.5 159,124 December 31, 2010 41,447 9,809 23.7 97,199 December 31, 2009 41,866 8,484 20.3 65,561 For more information regarding the liability of the City with respect to its employees, please reference Note 14, Other Post - Employment Benefits (OPEB) Plan of the City's Comprehensive Annual Financial Report as of December 31, 2013, an excerpt of which is included as Appendix IV to this Official Statement. -29- General Fund Budget Summary Revenues: General Property Taxes Licenses and Permits Intergovernmental Charges for Services Court Fines Investment Income Miscellaneous Total Revenues Expenditures: Mayor and Council Committees and Commissions City Administration City Clerk Legal Counsel Planning Community and Economic Development Inspections General Government Facilities Finance Information Systems Human Resources Insurance Police Fire Engineering Streets Parks Recreation Heritage Center Arts Center Other Total Expenditures Other Financing Sources (Uses): Transfer from Other Funds Transfer to Other Funds Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance, January 1 Fund Balance, December 31 Source: City of Lakeville. 2013 2013 2014 Budget Actual Budget $15,920,497 $15,961,759 $16,794,367 1,345,449 2,087,937 1,947,676 621,226 800,341 608,401 1,632,580 2,027,905 2,156,037 294,809 219,535 274,590 32,735 (27,206) 44,413 63.585 103,512 61461 $19,910,881 $21,173,783 $21,886,945 5 95,275 $ 91,761 $ 97,021 82,272 56,606 62,794 392,969 347,280 403,228 114,964 114,304 184,724 65,132 72,033 82,351 392,834 361,156 427,787 300,421 293,513 295,953 794,978 840,837 851,202 442,807 401,024 417,452 610,134 612,903 626,703 481,319 460,185 490,633 363,195 334,446 351,013 227,420 227,420 289,075 8,736,220 8,648,351 8,921,850 1,444,532 1,469,731 1,431,615 693,354 666,090 904,728 2,634,403 3,100,857 2,738,702 2,202,544 2,135,103 2,235,675 578,477 562,675 584,240 72,605 90,419 78,774 416,048 425,994 405,068 105.000 0 303 497 $21,246,903 $21,312,688 $22,184,085 $ 715,297 0 $ 715,297 $ (620,725 $10,198,765 $ 9,578,040 $ 715,297 (2,401,607 $(1,686,310) $0,825,2151 $11,491,775 $ 9,666,560 $ 759,814 0 $ 759,814 $ 462,674 $ 9,666,560 $10,129,234 -30- Major General Fund Revenue Sources Revenue 2009 2010 2011 2012 2013 Property taxes $15,544,153 $16,271,094 $16,516,469 $16,529,500 $15,961,759 Charges for services 2,005,794 1,415,441 1,616,718 1,885,622 2,027,905 Licenses and permits 1,062,368 992,379 1,238,704 1,831,073 2,087,937 Intergovernmental 967,096 1,137,358 703,296 804,276 800,341 Transfers from other funds 492,645 637,831 633,008 665,631 715,297 Sources: City's Comprehensive Annual Financial Reports. (The Balance of This Page Has Been Intentionally Left Blank) -31- APPENDIX I PROPOSED FORMS OF LEGAL OPINIONS J> OORSEY DORSEY & WHITNEY LLP City of Lakeville, Minnesota [Original Purchaser] 1. Re: $ General Obligation Improvement Bonds, Series 2014A City of Lakeville, Minnesota Ladies and Gentlemen: As Bond Counsel in connection with the authorization, issuance and sale by the City of Lakeville, Minnesota (the City), of the obligations described above, dated, as originally issued, as of August 20, 2014 (the Bonds), we have examined certified copies of certain proceedings taken, and certain affidavits and certificates furnished, by the City in the authorization, sale and issuance of the Bonds, including the form of the Bonds. As to questions of fact material to our opinion, we have assumed the authenticity of and relied upon the proceedings, affidavits and certificates furnished to us without undertaking to verify the same by independent investigation. From our examination of such proceedings, affidavits and certificates and on the basis of existing law, it is our opinion that: The Bonds are valid and binding general obligations of the City, enforceable in accordance with their terms. The principal of and interest on the Bonds are payable from special assessments and ad valorem taxes heretofore duly levied on all taxable property in the City, which have been pledged and appropriated for this purpose, but if necessary for payment thereof, additional ad valorem taxes are required by law to be levied on all such property, which taxes are not subject to any limitation as to rate or amount. Interest on the Bonds (a) is not includable in gross income for federal income tax purposes or in taxable net income of individuals, estates or trusts for Minnesota income tax purposes; (b) is includable in taxable income of corporations and financial institutions for purposes of the Minnesota franchise tax; (c) is not an item of tax preference includable in alternative minimum taxable income for purposes of the federal alternative minimum tax applicable to all taxpayers or the Minnesota alternative minimum tax applicable to individuals, estates and trusts; and (d) is includable in adjusted current earnings of corporations in determining alternative minimum taxable income for purposes of federal and Minnesota alternative minimum taxes. The opinions expressed in paragraphs 1 and 2 above are subject, as to enforceability, to the effect of any state or federal laws relating to bankruptcy, insolvency, reorganization, moratorium or creditors' rights and the application of equitable principles, whether considered at law or in equity. I -1 The opinions expressed in paragraph 3 above are subject to the condition of the City's compliance with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon may be, and continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with these continuing requirements. Its failure to do so could result in the inclusion of interest on the Bonds in federal gross income and in Minnesota taxable net income, retroactive to the date of issuance of the Bonds. Except as stated in this opinion, we express no opinion regarding federal, state or other tax consequences to holders of the Bonds. We have not been asked, and have not undertaken, to review the accuracy, completeness or sufficiency of any offering materials relating to the Bonds, and, accordingly, we express no opinion with respect thereto. Dated this _ day of August, 2014. Very truly yours, I -2 City of Lakeville, Minnesota [Original Purchaser] Re: $ General Obligation Refunding Bonds, Series 2014B City of Lakeville, Minnesota Ladies and Gentlemen: As Bond Counsel in connection with the authorization, issuance and sale by the City of Lakeville, Minnesota (the City), of the obligations described above, dated, as originally issued, as of August 20, 2014 (the Bonds), we have examined certified copies of certain proceedings taken, and certain affidavits and certificates furnished, by the City in the authorization, sale and issuance of the Bonds, including the form of the Bonds. As to questions of fact material to our opinion, we have assumed the authenticity of and relied upon the proceedings, affidavits and certificates furnished to us without undertaking to verify the same by independent investigation. From our examination of such proceedings, affidavits and certificates and on the basis of existing law, it is our opinion that: The Bonds are valid and binding general obligations of the City, enforceable in accordance with their terms. The principal of and interest on the Bonds are payable from certain escrow earnings and special assessments and ad valorem taxes heretofore duly levied on all taxable property in the City, which have been pledged and appropriated for this purpose, but if necessary for payment thereof, additional ad valorem taxes are required by law to be levied on all such property, which taxes are not subject to any limitation as to rate or amount. Interest on the Bonds (a) is not includable in gross income for federal income tax purposes or in taxable net income of individuals, estates or trusts for Minnesota income tax purposes; (b) is includable in taxable income of corporations and financial institutions for purposes of the Minnesota franchise tax; (c) is not an item of tax preference includable in alternative minimum taxable income for purposes of the federal alternative minimum tax applicable to all taxpayers or the Minnesota alternative minimum tax applicable to individuals, estates and trusts; and (d) is includable in adjusted current earnings of corporations in determining alternative minimum taxable income for purposes of federal and Minnesota alternative minimum taxes. The opinions expressed in paragraphs 1 and 2 above are subject, as to enforceability, to the effect of any state or federal laws relating to bankruptcy, insolvency, reorganization, moratorium or creditors' rights and the application of equitable principles, whether considered at law or in equity. The opinions expressed in paragraph 3 above are subject to the condition of the City's compliance with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon may be, and continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with these continuing I -3 requirements. Its failure to do so could result in the inclusion of interest on the Bonds in federal gross income and in Minnesota taxable net income, retroactive to the date of issuance of the Bonds. Except as stated in this opinion, we express no opinion regarding federal, state or other tax consequences to holders of the Bonds. We have not been asked, and have not undertaken, to review the accuracy, completeness or sufficiency of any offering materials relating to the Bonds, and, accordingly, we express no opinion with respect thereto. Dated this day of August, 2014. Very truly yours, I -4 APPENDIX II CONTINUING DISCLOSURE COVENANTS Continuing Disclosure (a) Purpose and Beneficiaries To provide for the public availability of certain information relating to the Bonds and the security therefor and to permit the Purchaser and other participating underwriters in the primary offering of the Bonds to comply with amendments to Rule 15c2 -12 promulgated by the SEC under the Securities Exchange Act of 1934 (17 C.F.R. § 240.15c2 -12), relating to continuing disclosure (as in effect and interpreted from time to time, the Rule), which will enhance the marketability of the Bonds, the City hereby makes the following covenants and agreements for the benefit of the Owners (as hereinafter defined) from time to time of the Outstanding Bonds. The City is the only obligated person in respect of the Bonds within the meaning of the Rule for purposes of identifying the entities in respect of which continuing disclosure must be made. If the City fails to comply with any provisions of this section, any person aggrieved thereby, including the Owners of any Outstanding Bonds, may take whatever action at law or in equity may appear necessary or appropriate to enforce performance and observance of any agreement or covenant contained in this section, including an action for a writ of mandamus or specific performance. Direct, indirect, consequential and punitive damages shall not be recoverable for any default hereunder to the extent permitted by law. Notwithstanding anything to the contrary contained herein, in no event shall a default under this section constitute a default under the Bonds or under any other provision of this resolution. As used in this section, Owner or Bondowner means, in respect of a Bond, the registered owner or owners thereof appearing in the bond register maintained by the Registrar or any Beneficial Owner (as hereinafter defined) thereof, if such Beneficial Owner provides to the Registrar evidence of such beneficial ownership in form and substance reasonably satisfactory to the Registrar. As used herein, Beneficial Owner means, in respect of a Bond, any person or entity which (i) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, such Bond (including persons or entities holding Bonds through nominees, depositories or other intermediaries), or (ii) is treated as the owner of the Bond for federal income tax purposes. (b) Information To Be Disclosed The City will provide, in the manner set forth in subsection (c) hereof, either directly or indirectly through an agent designated by the City, the following information at the following times: (1) on or before twelve months after the end of each fiscal year of the City, commencing with the fiscal year ending December 31, 2014, the following financial information and operating data in respect of the City (the Disclosure Information): (A) the audited financial statements of the City for such fiscal year, prepared in accordance with the governmental accounting standards promulgated by the Governmental Accounting Standards Board or as otherwise provided under Minnesota law, as in effect from time to time, or, if and to the extent such financial statements have not been prepared in accordance with such generally accepted accounting principles for reasons beyond the reasonable control of the City, noting the discrepancies therefrom and the effect thereof, and certified as to accuracy and completeness in all material respects by the fiscal officer of the City; and (B) to the extent not included in the financial statements referred to in paragraph (A) hereof, the information for such fiscal year or for the period most recently available of the type contained in the Official Statement under headings: City Property Values; City Indebtedness; and City Tax Rates, Levies and Collections. II -1 Notwithstanding the foregoing paragraph, if the audited financial statements are not available by the date specified, the City shall provide on or before such date unaudited financial statements in the format required for the audited financial statements as part of the Disclosure Information and, within 10 days after the receipt thereof, the City shall provide the audited financial statements. Any or all of the Disclosure Information may be incorporated by reference, if it is updated as required hereby, from other documents, including official statements, which have been filed with the SEC or have been made available to the public on the Internet Web site of the Municipal Securities Rulemaking Board ( "MSRB "). The City shall clearly identify in the Disclosure Information each document so incorporated by reference. If any part of the Disclosure Information can no longer be generated because the operations of the City have materially changed or been discontinued, such Disclosure Information need no longer be provided if the City includes in the Disclosure Information a statement to such effect; provided, however, if such operations have been replaced by other City operations in respect of which data is not included in the Disclosure Information and the City determines that certain specified data regarding such replacement operations would be a Material Fact (as defined in paragraph (2) hereof), then, from and after such determination, the Disclosure Information shall include such additional specified data regarding the replacement operations. If the Disclosure Information is changed or this section is amended as permitted by this paragraph (b)(1) or subsection (d), then the City shall include in the next Disclosure Information to be delivered hereunder, to the extent necessary, an explanation of the reasons for the amendment and the effect of any change in the type of financial information or operating data provided. (2) In a timely manner not in excess of ten business days after the occurrence of the event, notice of the occurrence of any of the following events (each a "Material Fact'): (A) Principal and interest payment delinquencies; (B) Non- payment related defaults, if material; (C) Unscheduled draws on debt service reserves reflecting financial difficulties; (D) Unscheduled draws on credit enhancements reflecting financial difficulties; (E) Substitution of credit or liquidity providers, or their failure to perform; (F) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 -TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security; (G) Modifications to rights of security holders, if material; (H) Bond calls, if material, and tender offers; (I) Defeasances; (J) Release, substitution, or sale of property securing repayment of the securities, if material; (K) Rating changes; (L) Bankruptcy, insolvency, receivership or similar event of the obligated person; (M) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terns, if material; and (N) Appointment of a successor or additional trustee or the change of name of a trustee, if material. As used herein, for those events that must be reported if material, an event is "material' if it is an event as to which a substantial likelihood exists that a reasonably prudent investor would attach importance thereto in deciding to buy, hold or sell a Bond or, if not disclosed, would significantly alter the total information otherwise available to an investor from the Official Statement, information disclosed 11 -2 hereunder or information generally available to the public. Notwithstanding the foregoing sentence, an event is also "material" if it is an event that would be deemed material for purposes of the purchase, holding or sale of a Bond within the meaning of applicable federal securities laws, as interpreted at the time of discovery of the occurrence of the event. For the purposes of the event identified in (L) hereinabove, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (3) In a timely manner, notice of the occurrence of any of the following events or conditions: (A) the failure of the City to provide the Disclosure Information required under paragraph (b)(1) at the time specified thereunder; (B) the amendment or supplementing of this section pursuant to subsection (d), together with a copy of such amendment or supplement and any explanation provided by the City under subsection (d)(2); (C) the termination of the obligations of the City under this section pursuant to subsection (d); (D) any change in the accounting principles pursuant to which the financial statements constituting a portion of the Disclosure hnformation are prepared; and (E) any change in the fiscal year of the City. (c) Manner of Disclosure (1) The City agrees to make available to the MSRB, in an electronic format as prescribed by the MSRB from time to time, the information described in subsection (b). (2) All documents provided to the MSRB pursuant to this subsection (c) shall be accompanied by identifying information as prescribed by the MSRB from time to time. (d) Term; Amendments; Interpretation (1) The covenants of the City in this section shall remain in effect so long as any Bonds are Outstanding. Notwithstanding the preceding sentence, however, the obligations of the City under this section shall terminate and be without further effect as of any date on which the City delivers to the Registrar an opinion of Bond Counsel to the effect that, because of legislative action or final judicial or administrative actions or proceedings, the failure of the City to comply with the requirements of this section will not cause participating underwriters in the primary offering of the Bonds to be in violation of the Rule or other applicable requirements of the Securities Exchange Act of 1934, as amended, or any statutes or laws successory thereto or amendatory thereof. (2) This section (and the form and requirements of the Disclosure Information) may be amended or supplemented by the City from time to time, without notice to (except as provided in paragraph (c)(3) hereof) or the consent of the Owners of any Bonds, by a resolution of this Council filed in the office of the recording officer of the City accompanied II -3 by an opinion of Bond Counsel, who may rely on certificates of the City and others and the opinion may be subject to customary qualifications, to the effect that: (i) such amendment or supplement (a) is made in connection with a change in circumstances that arises from a change in law or regulation or a change in the identity, nature or status of the City or the type of operations conducted by the City, or (b) is required by, or better complies with, the provisions of paragraph (b)(5) of the Rule; (ii) this section as so amended or supplemented would have complied with the requirements of paragraph (b)(5) of the Rule at the time of the primary offering of the Bonds, giving effect to any change in circumstances applicable under clause (i)(a) and assuming that the Rule as in effect and interpreted at the time of the amendment or supplement was in effect at the time of the primary offering; and (iii) such amendment or supplement does not materially impair the interests of the Bondowners under the Rule. If the Disclosure Information is so amended, the City agrees to provide, contemporaneously with the effectiveness of such amendment, an explanation of the reasons for the amendment and the effect, if any, of the change in the type of financial information or operating data being provided hereunder. (3)This section is entered into to comply with the continuing disclosure provisions of the Rule and should be construed so as to satisfy the requirements of paragraph (b)(5) of the Rule. IIA APPENDIX HI SUMMARY OF TAX LEVIES, PAYMENT PROVISIONS, AND MINNESOTA REAL PROPERTY VALUATION (effective through levy year 2013 /payable year 2014) Following is a summary of certain statutory provisions effective through levy year 2013 /payable year 2014 relative to tax levy procedures, tax payment and credit procedures, and the mechanics of real property valuation. The summary does not purport to be inclusive of all such provisions or of the specific provisions discussed, and is qualified by reference to the complete text of applicable statutes, rules and regulations of the State of Minnesota. Property Valuations (Chapter 273, Minnesota Statutes) Assessor's Estimated Market Value Each parcel of real property subject to taxation must, by statute, be appraised at least once every five years as of January 2 of the year of appraisal. With certain exceptions, all property is valued at its market value, which is the value the assessor determines to be the price the property to be fairly worth, and which is referred to as the "Estimated Market Value." The 2013 Minnesota Legislature established the Estimated Market Value as the value used to calculate a municipality's legal debt limit. Economic Market Value The Economic Market Value is the value of locally assessed real property (Assessor's Estimated Market Value) divided by the sales ratio as provided by the State of Minnesota Department of Revenue plus the estimated market value of personal property, utilities, railroad, and minerals. Taxable Market Value The Taxable Market Value is the value that Net Tax Capacity is based on, after all reductions, limitations, exemptions and deferrals. Net Tax Capacity The Net Tax Capacity is the value upon which net taxes are levied, extended and collected. The Net Tax Capacity is computed by applying the class rate percentages specific to each type of property classification against the Taxable Market Value. Class rate percentages vary depending on the type of property as shown on the last page of this Appendix. The formulas and class rates for converting Taxable Market Value to Net Tax Capacity represent a basic element of the State's property tax relief system and are subject to annual revisions by the State Legislature. Property taxes are the sum of the amounts determined by (i) multiplying the Net Tax Capacity by the tax capacity rate, and (ii) multiplying the referendum market value by the market value rate. Market Value Homestead Exclusion In 2011, the Market Value Homestead Exclusion Program (MVHE) was implemented to offset the elimination of the Market Value Homestead Credit Program that provided relief to certain homesteads. The MVHE reduces the taxable market value of a homestead with an Assessor's Estimated Market Value up to $413,800 in an attempt to result in a property tax similar to the effective property tax prior to the elimination of the homestead credit. The MVHE applies to property classified as Class la or lb and Class 2a, and causes a decrease in the Issuer's aggregate Taxable Market Value, even if the Assessor's Estimated Market Value on the same properties did not decline. Property Tax Payments and Delinquencies (Chapters 275, 276, 277, 279 -282 and 549, Minnesota Statutes) Ad valorem property taxes levied by local governments in Minnesota are extended and collected by the various counties within the State. Each taxing jurisdiction is required to certify the annual tax levy to the county auditor within five (5) working days after December 20 of the year preceding the collection year. A listing of property taxes due is prepared by the county auditor and turned over to the county treasurer on or before the first business day in March. it The county treasurer is responsible for collecting all property taxes within the county. Real estate and personal property tax statements are mailed out by March 31. One -half (1/2) of the taxes on real property is due on or before May 15. The remainder is due on or before October 15. Real property taxes not paid by their due date are assessed a penalty that, depending on the type of property, increases from 2% to 4% on the day after the due date. In the case of the first installment of real property taxes due May 15, the penalty increases to 4% or 8% on June 1. Thereafter, an additional 1% penalty shall accrue each month through October 1 of the collection year for unpaid real property taxes. In the case of the second installment of real property taxes due October 15, the penalty increases to 6% or 8% on November 1 and increases again to 8% or 12% on December 1. Personal property taxes remaining unpaid on May 16 are deemed to be delinquent and a penalty of 8% attaches to the unpaid tax. However, personal property that is owned by a tax- exempt entity, but is treated as taxable by virtue of a lease agreement, is subject to the same delinquent property tax penalties as real property. On the first business day of January of the year following collection all delinquencies are subject to an additional 2% penalty, and those delinquencies outstanding as of February 15 are filed for a tax lien judgment with the district court. By March 20 the county auditor files a publication of legal action and a mailing of notice of action to delinquent parties. Those property interests not responding to this notice have judgment entered for the amount of the delinquency and associated penalties. The amount of the judgment is subject to a variable interest determined annually by the Department of Revenue, and equal to the adjusted prime rate charged by banks but in no event is the rate less than 10% or more than 14 %. Property owners subject to a tax lien judgment generally have five years (5) in the case of all property located outside of cities or in the case of residential homestead, agricultural homestead and seasonal residential recreational property located within cities or three (3) years with respect to other types of property to redeem the property. After expiration of the redemption period, unredeemed properties are declared tax forfeit with title held in trust by the State of Minnesota for the respective taxing districts. The county auditor, or equivalent thereof, then sells those properties not claimed for a public purpose at auction. The net proceeds of the sale are first dedicated to the satisfaction of outstanding special assessments on the parcel, with any remaining balance in most cases being divided on the following basis: county - 40 %; town or city - 20 %; and school district - 40 %. Property Tax Credits (Chapter 273, Minnesota Statutes) In addition to adjusting the taxable value for various property types, primary elements of Minnesota's property tax relief system are: property tax levy reduction aids; the homestead credit refund and the renter's property tax refund, which relate property taxes to income and provide relief on a sliding income scale; and targeted tax relief, which is aimed primarily at easing the effect of significant tax increases. The homestead credit refund, the renter's property tax refund, and targeted credits are reimbursed to the taxpayer upon application by the taxpayer. Property tax levy reduction aid includes educational aids, local governmental aid, equalization aid, county program aid and disparity reduction aid. 111 -2 Debt Limitations All Minnesota municipalities (counties, cities, towns and school districts) are subject to statutory "net debt' limitations under the provisions of Minnesota Statutes, Section 475.53. Net debt is defined as the amount remaining after deducting from gross debt the amount of current revenues that are applicable within the current fiscal year to the payment of any debt and the aggregate of the principal of the following: Obligations issued for improvements that are payable wholly or partially from the proceeds of special assessments levied upon benefited property. 2. Warrants or orders having no definite or fixed maturity. 3. Obligations payable wholly from the income from revenue producing conveniences. 4. Obligations issued to create or maintain a permanent improvement revolving fund. 5. Obligations issued for the acquisition and betterment of public waterworks systems, and public lighting, heating or power systems, and any combination thereof, or for any other public convenience from which revenue is or may be derived. 6. Certain debt service loans and capital loans made to school districts. 7. Certain obligations to repay loans. 8. Obligations specifically excluded under the provisions of law authorizing their issuance. 9. Certain obligations to pay pension fund liabilities. 10. Debt service funds for the payment of principal and interest on obligations other than those described above. 11. Obligations issued to pay judgments against the municipality. Levies for General Obligation Debt (Sections 475.61 and 475.74, Minnesota Statutes) Any municipality that issues general obligation debt must, at the time of issuance, certify levies to the county auditor of the county(ies) within which the municipality is situated. Such levies shall be in an amount that if collected in full will, together with estimates of other revenues pledged for payment of the obligations, produce at least five percent in excess of the amount needed to pay principal and interest when due. Notwithstanding any other limitations upon the ability of a taxing unit to levy taxes, its ability to levy taxes for a deficiency in prior levies for payment of general obligation indebtedness is without limitation as to rate or amount. Metropolitan Revenue Distribution (Chapter 473F, Minnesota Statutes) "Fiscal Disparities Law" The Charles R. Weaver Metropolitan Revenue Distribution Act, more commonly known as "Fiscal Disparities," was first implemented for taxes payable in 1975. Forty percent of the increase in commercial- industrial (including public utility and railroad) net tax capacity valuation since 1971 in each assessment district in the Minneapolis /St. Paul seven - county metropolitan area (Anoka, Carver, Dakota, excluding the City of Northfield, Hennepin, Ramsey, Scott, excluding the City of New Prague, and Washington Counties) is contributed to an area -wide tax base. A distribution index, based on the factors of population and real property market value per capita, is employed in determining what proportion of the net tax capacity value in the area -wide tax base shall be distributed back to each assessment district. HI -3 STATUTORY FORMULAE: CONVERSION OF TAXABLE MARKET VALUE (TMV) TO NET TAX CAPACITY FOR MAJOR PROPERTY CLASSIFICATIONS Local Tax Local Tax Non - Commercial (4cl2) Up to $500,000 Payable Payable Property Type 2010 2011 -2014 Residential Homestead (la) Up to $500,000 1.00% 1.00% Over $500,000 1.25% 1.25% Residential Non - homestead 1.25% 1.25% Single Unit (4bbl ) Up to $500,000 1.00% 1.00% Over $500,000 1.25% 1.25% 1 -3 unit and undeveloped land (4bl) 1.25% 1.25% Market Rate Apartments Regular (4a) 1.25% 1.25% Low- Income (4d) 0.75% 0.75% CommerciaUlndustrial/Public Utility (3a) 1.00 % / 1.00 % Up to $150,000 1.50 % (°) 1.50 % ° I Over $150,000 2.00 % ( Q) 2.00 % Electric Generation Machinery 2.00% 2.00% Commercial Seasonal Residential Homestead Resorts (lc) Up to $600,000 0.50% 0.55% $600,000 - $2,300,000 1.00% 1.00% Over $2,300,000 1.25 0 16 (°) 1.25 0 16 () Seasonal Resorts (4c) Up to $500,000 1.00 % ° / 1.00 % Over $500,000 1.25 % ( 4) 1.25 % (°) Non - Commercial (4cl2) Up to $500,000 1.00 % 101(6) 1.00 % 1Q J (6) Over $500,000 1.25 % ( a) o ) 1.25 %t ° trol Disabled Homestead (lb) Up to $50,000 0.45% 0.45% $50,000 to $500,000 1.00% 1.00% Over $500,000 1.25% 1.25% Agricultural Land & Buildings Homestead (2a) Up to $500,000 1.00% 1.00% Over $500,000 1.25% 1.25% Remainder of Farm Up to $1,500,000 0.50 % ( 6) 0.55 % ( 6) Over $1,500,000 1.00 % ( 1) 1.00 % ( b) Non - homestead (2b) 1.00 % / 1.00 % 1O) State tax is applicable to these classifications. (b) Exempt from referendum market value based taxes. 1`1 Legislative increases, payable 2014. Historical valuations are: Payable 2013 - $1,290,000; Payable 2012 - $1,210,000; Payable 1011 - $1,140, 000; and Payable 2010 - $1, 010, 000. II APPENDIX IV EXCERPT OF 2013 COMPREHENSIVE ANNUAL FINANCIAL REPORT Data on the following pages was extracted from the City's Comprehensive Annual Financial Report for fiscal year ended December 31, 2013. The reader should be aware that the complete financial statements may contain additional information which may interpret, explain or modify the data presented here. The City's comprehensive annual financial reports for the years ending 1985 through 2012 were awarded the Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association of the United States and Canada (GFOA). The Certificate of Achievement is the highest form of recognition for excellence in state and local government financial reporting. The City has submitted its CAFR for the 2013 fiscal year to GFOA. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report (CAFR), whose contents conform to program standards. Such CAFR must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. IV -1 Telhe City Council and Managmam City curl-akevillu Minnesota REPORTON THE FINANCIAL STATEMENTS We have andtad the firomend Makmenu of the govemmmlal aaivilia, the busiewo4ype activities, each major fund, and the aggregate remaining fund Infestation of the City of Lakeville, Movement (the City) as of and for the year ended December 31, 2013, and the rely d Hurd In the reencal satements, which collectively comp rm the City's basic financial m uhnsci s us listed in the table of encomia. MANAGEMENT'S MMNSIBILI" FOR THE FINANCIAL STATEMENTS Misalignment is responsible for the preparation AM fail preaenmliun of these financial slatemmis in accordance with aeauming principles generally accepted in the United Sinks of Amerieq this includes the design, implemmmtion, and mdntenance of internal control mltvans to the preparation and fair ,matchable of fommod statements that are free from modal miamkmrnt, whether due to fraud or error. AURITOB'SRES MIMLMY Our responsibility is to espoess opinions on these financial monomers based on our audit. We conducted our audit in accordance with auditing standards gcna d ly accepted in the United Smks of Amarica and the standards applicable m financial audits mnnsined in Govrrnmwr Audiong Sundurds, issued by the Comptroller General of the United Swiss. Those standards require that we plan and perform the audit to obtain rassonable assurance about whnhel the financial statements are fire from maternal cosmetician An audit involve perfofmia, procedures to obtain audit evidence about Me amounts and disclmkes in the financial statements. The Formal. selected depend on the auditor's judgment, including the assasmmt ofher Oaks of material misstatement of the financial Rtemrna, whether doe to fraud or error. In making those Ask assasmenu, the auditor considers internal counsel relevant to the City's preparation and fair presentation of the financial statements in older to design audit procedures that art appropriate in the circamaances. but rat for the purpose of expressing an opinion on the effeaivemss of Me City's inmmal consrol. Accordingly, we espres, no such opinion. An audit alw includes evaluating the appropriateness of ..faun policies used and the reusmtebleness of significant accounting emimsma made by mmagement, as well as evdu li s, the overall Rammfon ofdk fnnancial statements. We believe duo the audit evidence we have obtained is sufficient and appropriate on provide a basis for our audit opinions. ("teas In ok opinion the ftnandar "..his referred to m she previous page present (silly, in all mineral mspecH, the respeak a fioancid passion of she govcmmemal activists, the busims s -type. activities, each major fund, and the aggregate remaining fund infomation crib. City as of December 31, 2013, end the respective changes in financial position soil, where applicable, cash flows thereof, in accordance with .ling principles generally accepted in she Uthkd Smta ofArrcAc.. OTHER MATTERS Required supplementary Information Accounting principles generally aarytel in the United Smks of America require that the Management's Discussion and Analysis. the budgm ory comparison infomation for the Gmem[ Fond, and the Other PEd.dropinymem Benefits Plan - Schedule of Fuadag Progress, as listed in the cable of consents, be preseeted 10 supplanem the basic financial suloments. Such inforrratim, although rout a pan of fie basic firantiel materials. is required by the Govemmentl Accounting Standards Board who considers it to be an essential pan of financial deporting for placing the basic financial m ten in an appropriate operational, econantc, or historical contest. We have applied cemin limited procedures to the required supplementary infatuation in accordance with auditing standards generally acapkd in the United Saks of Americo, which consisted of inquiria of management about the methods of preparing the infommtan and comparing the Information far consistency with tngement's omponms tp nor inquities, me basic financial Rteucnt, and other knowledge we.1aboned during our audit of the basic financial mulch . We do no express ah oparts. or provide any ass erem on the informstion because the limited procedures do not provide us with sufficient evidence k expos an opinion or provide any assu ace. OIAa Informations Cur audit was conducted for the purpose of footing opinions on thin fnsimal snstcmrne that mllatively enmpriso the City's basic fmanetd mtements. The introductory section, combining and individual fend statements and schedule mppkmental infumushoo. and statistical section. as listed in Iba table of contents, am pr aenled foe posprom afaddifonal analysis road are trot a residual pun of the basic froncal mtemmts. The combining and individual turd mtentene and adedules and suppressions] infannotan are the responsibility of nmugemmt and were derived from and mate directly to the underlying accounting and other records u sed m prepare the basic financial mtemrnt. Such information has ban subjaTed to the auditing procedures applied in ilk mtlit of the basic financial Rtententn and cation additional procedural, including compming and reconciling such information directly In the underlying aaountag and mba records used to prepare the back financial amtemene or to the basic financial Mariana a Mementoes. and other additional procedures in awaydana with auditing standards generally accepted in the United States of Amerie In nor opinion, the combining and individual fiord Rothmans and schedules and suppamcntol informstiun are fairly stated in all material aspects, in relation to the basic financial RknMits as o Whale. The kuroduaory, and statistical sanions have not been subjected in the audifng procedures applied in the audit of the basic financial ministers ei accordingly, we do and cep. a opinion ce provide any a sumnce to them. OTNaa RLrnRrING RMWM NY G W LRNMr.M A UMTI NC STANaAaas In uxordance with Governorate Auditing Sta sl reds, we have arse issued ore report dated May X 2014 ne old madidemsion of the City's internal control over fiaaaial reporting and on our test of its compliance with certain previsions of laws. regulations centime, good agreements, and other maters. The purpose of that capon is to describe the scope of our testing of internal central over financial reporting Rod comMunoue and the results effort tealm& and ram to provide an opinion an inns$ cantrol novel fmaaal deporting a on compliance. Thad sport is an integral pun of an audit performed in acemdance with Gove amain Auditing &.odm ds to consider ng the City', internal control ova fart d reporting and comp lawn. - N,& y , / ( pa. Ar, KAA 0 agry , / 1<.a... C 4 G. P. A Mimteapolis, Minnesota o May 30, 2014 IV -2 CITY OF LAKEVILLE, MINNESOTA STATEMENT OF NET POSITION DECEMBER 31, 2013 Governmental Business -type Activities Activities Total ASSETS: Cash and investments Receivables Internal balances Inventory Prepaid items Restricted assets (temporarily): Cash and investments Investments held by trustee Capital assets Non - depreciable Depreciable, net Total capital assets Total assets LIABILITIES: Salaries, accounts, contracts, interest, and deposits Unearned revenue Non - current liabilities Due within one year Due in more than one year Total liabilities $ 41,735,486 $ 11,356,043 $ 53,091,529 10,521,158 2,529,740 13,050,898 (191,612) 191,612 - 100,632 1,721,888 1,822,520 25,382 36,210 61,592 - 324,125 324,125 23,759,815 - 23,759,815 30,350,245 4,237,441 34,587,686 159,793,262 104,073,367 263,866,629 190,143,507 108,310,808 298,454,315 266,094,368 124,470,426 390,564,794 4,359,124 1,776,002 6,135,126 381,119 - 381,119 17,097,800 388,177 17,485,977 94,498,952 3,222,095 97,721,047 116,336,995 5,386,274 121,723,269 NET POSITION: Net investment in capital assets Restricted for Special purposes Debt service Capital acquisition Unrestricted 129,599,494 105,055,746 234,655,240 42,759 - 42,759 12,114,137 324,125 12,438,262 5,489,048 5,489,048 2,511,935 13,704,281 16,216,216 Total net position See accompanying notes to basic financial statements. $ 149,757,373 $ 119,084,152 $ 268,841,525 IV-3 3 C O d H m �U C N C w V a 0 m c rn c c M U N m IV -4 N. (D to n M t0 M M N M OD c] ID N M ID 0) M M M N O co O O N O OD (� M C' O 0i O 0) O_ O O Lq 1D R (O O Ol (O (o OD h O r tD t` � �} W O O O n Y N t0 v r N O OD In "It t : N OD OD co L F N O_ v M (C ("1 ("1 N N 9 ( v N m r FA V9 c m O a N ' r IL N— V I ^ ( O to s a O� 117 OD r 'n ( �O M N �{ t O t,_ M of Z > n V' N N N N Of W O C:- O) T OD O m C r rl m 60 to W A t 1� ow n M N OD 0) 0I OD M w V � T O O � Z d m O (o (o in LO w tD ..1p�e� OD V r w c� O L ID T N O O N L(( N N 0 r M w N N N W ? O)v C a — r ^ CD (H b9 p ' C O ( O r N cq O r W 'tj (n C w M < O OD C M Lo N N W a (n sF O OD (iD m a 9 c r CD U M ( (OD w d to O _C R (o N O � ^ n O n M ti N C w cn Of N M W 01 Cl) E EL La N N - to C9 O C O V m IL co o Lo (n g rn m n m v �. �M � m �W M (M+� m m Y L omvN v �i�o a 41 C6 a N O M 0f M C N > N C .0 V 4! N E V a c C C a a G C O) L N x G a a C c c "�" O M O OD 0 M N C N M 0) O a a a1(�.�- nm 1D m m N W cm O O V . . a � N �� aOODM ma C a 0 W M LO MB 04 0) 0 h- c CL CL � d 69 c9 1= z z F O r w a F-� ~ N > m ly G M a N c W W x n d v o €m 00 ? o m E U > m 6 c > a 2` dW LiE cd 1'i c m o > ° rn m a E Qj�❑ 9�4ovo a P . a n 2 a o a 3 a . ° 9 p W Z E 0 u v o a " O F c = M M -L y ~ a � V 7 uj ma a c D; a'a. A. C CJ� �^ d Q C > a ~ i LL m U o 3 C O d H m �U C N C w V a 0 m c rn c c M U N m IV -4 F a zz £E J w ~ N W z m U m q O Ntm (.O t7 NN mtn w Qm N p Q ImO m Q Ow�m CCCCJJJJ Q� q � t0 O l0 O � Q I� f0 N !� t0 O � t9 W 69 19 Ow am m NM N E n a m b V N47OM C7 A(p C N NM N fi O � 19 f9 19 t9 M m • Q N Q N • m G P t0 O C21 N p LO �• (V h O W m r A O N O CO >> V7 m H t O N N O h Q E w w en w 6 a � p i p . . � 1 N (n0 • � A i ' V V ' O G H W O (4 C Q A m C O O O V O A b ul A m M M M N �t7 . h y h y � a � (�l � A � . • 1.. N pp � In � � pNp Cf N 2 19 �p M M p� N W. IR csi Cl! V N -- p y� N p O O M , n 1 m ' t • 8 C s3 mg� O o ' N tp7� 1 t M O V 0 W lh • O O N N O ml MN< NO N N ^ V N Yf N N Q fO Q 19 Vl (9 19 b O y C �m J9 m E J9 � a m G m C W y E C >> 9 .2 •� Y � °>� m m o� 4 c ' S •� w a r n a m m b ¢� ?�ri 3iE m m g m m a �. F' C pQ gg w b 8 3 tl S m @ s m m �c c c c a o m m ° E c 0 3 earn �a o �XcSo� � »> gzrc30 �g A ` G J O W C m 0 a S E s C c E i' ti �1 IV-5 CITY OF LAKEVILLE, MINNESOTA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION DECEMBER 31, 2013 Fund balance - total governmental funds $ 64,782,416 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported in the governmental funds. Governmental capital assets $ 311,296,089 Less accumulated depreciation (121,152,582) 190,143,507 2. Grant receivable that is applicable towards accrued bond interest payable is susceptible to full accrual on the government -wide statements. 30,933 3. Long tern liabilities are not payable with current financial resources and therefore are not reported in the governmental funds. Bonds (105,210,000) Accrued interest (1,644,629) Loan (1,159,843) Unamortized bond discount 7,846 Unamortized bond premium (2,566,425) (110,573,051) 4. Accrued compensated absences and net OPEB obligations are not Payable with current financial resources and therefore are not reported in the governmental funds. (2,668,330) 5. Deferred inflows of resources in governmental funds is susceptible to full accrual on the govemment -wide statements. 7,491,769 6. The City uses an internal service fund to charge the cost of insurance activities to individual funds. A portion of the assets and liabilities of the municipal reserves fund are included in governmental activities in the statement of net position. 550,129 Net position of governmental activities $149,757,373 See accompanying notes to basic financial statements. IV -6 T 6 az H�z 0 � W 0 7 z� b Z M . a w m w a o w Q a�zw O W b q �aa V y u > C O m �( p �p Q � N ( A (pp QmQ1f)pmp m b n b I � b N �tD p b MQ M 88 pp py q �qp m� y b a N b �p Q V bm n Q 0 4 OAS O n NO N � O y n 1tpOp V E Oi f� Obt7mNN � �N �NS� ��pp b �ANN C N OJ S V O �Qy S OIL VOOIMN NM m a r NbN � A t"1 f0 tG O 'A � w w m OtD m'OlbNm QtON� -� mom A QOb Ip Ih AOYf Cl• .m O O AOim0 mm p O A N ty S�Q b b O!l�l'••y) O mfp Om0 E ��W0 G� p � E g !p amoi m �l�i v� w mmM Q W1�O b NnQN O A Yf O m N OiQ N Wi O N Oj CW W� N N Q OO ��Oppi N � �Op N NfV Ip N M m O 8 Q� N M m tV Q Q bOb O O N N b N O N N w C ''• A ••• O m ' 1 A m E� t0 O ` n VV tmp��) h O N O Ol n N N r m N M. ' A bl b mON �NO1� � mmm(1p0 ( O p N OJ�fD n •- f0 N q N NtO b th fm0 N t1(V1 h m W N N N o n N CGHmN pl r n p )p w V (7 N � gg m o w N w w T 6 az H�z 0 � W 0 7 z� b Z M . a w m w a o w Q a�zw O W b q �aa V y u > C Q � i �• Q • p . �f m O � �o°p n n tVp $' l7 '• n �p b O A b O •- IO c C f0 ( 2 N 0 0 OJ S u 'A w G r N'•Ob'b • n • �O A Cb 1°yb� 0��� ' B N�N OO ��Oppi N � �Op N O S S O 8 O n IO M Q Q bOb O O N N b N O N N w w 1 A m O'( ' uJ mp �OpN NNNN tmp��) h N 1 C � D Abp yp pp�� bQNA mm n�Nm tbp Y m n 1 ' ' • O ' A bl b mON �NO1� � mmm(1p0 ( O p N OJ�fD n t'f NQ b � f0 N q N NtO b th fm0 N t1(V1 h m W N N N o n N CGHmN pl r n p )p ap V (7 N w w a g e m y `m g T q m W m + a °' C W L C> p Si C 2) C C W >> W E cEi W L C ppr �UNIL =O� nCl aap ac�aaa ���u � �l..m�!'r� as IL IL B W 2 c E rR IV -/ CITY OF LAKEVILLE, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2013 Net change in fund balances - total governmental funds $ 3,075,714 Amounts reported for governmental activities in the statement of activities are different because: 1. Governmental funds report capital outlays as expenditures while the government -wide statement of activities reports depreciation expense to allocate those expenditures over the life of the assets. As a result, fund balance decreases by the amount of financial resources expended, whereas net position decreases by the amount of (4,685,000) depreciation expense charged for the year. This is the amount by which depreciation 5,825,000 1,140.000 expense exceeded capital outlay. Capital outlay $ 9,973,154 Capital contributed by developer 4,138,329 Depreciation expense (8,940,423) 5,171,060 2. In the government -wide statement of activities, only the gain or loss on the sale of capital assets is reported, whereas in the governmental funds, the proceeds from the (111,576) sales increase financial resources. Thus, the change in net position differs from the (642) change in fund balance by the net book value of the capital assets disposed of. (57,771) 3. Revenues in the government -wide statement of activities that do not provide current 222,334 31,829 financial resources are not reported as revenues in the governmental funds. Deferred inflows of resources - December 31, 2012 (7,323,458) Deferred inflows of resources - December 31, 2013 7,491,769 168,311 4. Bond proceeds are reported as other financing sources in governmental funds and thus contribute to the increase in fund balance. Bond, loan, and capital lease principal maturities are reported as expenditures in governmental funds thus reducing fund balance. In the government -wide statements, however, issuing debt increases long- term liabilities while debt repayment reduces long -term liabilities thus affecting the statement of activities. Bond proceeds (4,685,000) Bond, loan, and capital lease principal maturities 5,825,000 1,140.000 5. Interest and debt premium/discounts in the government -wide statement of activities differs from the amounts reported in governmental funds because accrued interest was calculated for long -term debt payable in addition to the amortizations of debt premiums/ discounts which are recognized respectively as expenditures and other financing sources and uses in the governmental fund statements. Accrued interest payable (111,576) Grant applicable towards accrued interest payable (642) Premium on 2013 bonds issued (78,287) Amortization of debt premiums/discounts 222,334 31,829 6. Accrued compensated absences and net OPEB obligations are not payable with current financial resources and therefore are not reported in the governmental funds. Net compensated absences increase - December 31, 2013 (161,828) Net OPEB obligation increase - December 31, 2013 (41,953) (203,781) 7. Internal service funds are used by management to charge the costs of certain activities, such as insurance, to individual funds. This amount represents a portion of the change in net position of the internal service fund, which are reported in with governmental activities. (98,719) Change in net position of governmental activities $ 9,226,643 See accompanying notes to basic financial statements IV -8 CITY OF LAKEVILLE, MINNESOTA STATEMENT OF NET POSITION - PROPRIETARY FUNDS DECEMBER 31, 2013 Business -type Activities - Governmental Enterprise Funds Activities - Internal Service Liquor Oft Total Funds ASSETS Current assets Cash and investments Interest receivable Accounts receivable Inventory Prepaid expenses Total current assets Non - current assets Restricted cash and investments Capital assets $ 3,876,758 $ 7,479,285 $ 11,356,043 $ 749,526 18,942 39,870 58,812 1,737 81 2,470,847 2,470,928 - 1,679,469 42,419 1,721,888 22,710 13,500 36,210 5,597,960 10, 045, 921 15, 643, 881 761,263 324,125 Land 1,272,296 528,160 1,800,456 Buildings and improvements 3,903,664 22,041,706 25,945,370 Machinery and equipment 420,956 2,343,101 2,764,057 Infrastructure - 129,277,552 129,277,552 Construction in process 30,714 2,406,271 2,436,985 Accumulated depreciation (1,324,144) (52,589,468) (53,913,612) Net capital assets 4,303,486 104,007,322 108,310,808 Total non - current assets 4,627,611 104,007,322 108,634,933 Total assets 10,225,571 114,053,243 124,278,814 751,263 UA131LITIES Current liabilities Salaries payable Accounts payable Contracts payable Accrued interest payable Deposits payable Accrued compensated absences Long -term debt - current Total current liabilities Noncurrent liabilities Accrued compensated absences Net OPEB obligation Long -term debt Total non - current liabilities Total liabilities NET POSITION Net investment in capital assets Restricted for debt service Unrestricted Total net position 32,223 1,207,916 4,228 67,396 8,937 92,550 165,000 1,578,250 49,408 299,812 100,682 5,400 130,627 585,929 324,125 81,631 1,507,728 104,910 67,396 14,337 223,177 165,000 2,164,179 9,522 9,522 10,760 82,327 93,087 13,841 25,105 38,946 3,090,062 3,090,062 3,114,663 107,432 3,222,095 4,692,913 693,361 5,386,274 9,522 1,048,424 104,007, 322 105, 055, 746 324,125 - 324,125 4,160,109 9,352,560 13,512,669 741,741 $ 5,532,658 $ 113,359,882 118,892,540 $ 741,741 Explanation of difference between proprietary funds statement of net position and the government -wide statement of net position: The City uses an internal service fund to charge the cost of its insurance activities to individual funds. This amount consists of the necessary adjustment to reflect the consolidation of internal service fund activities: Net position of business -type activities See accompanying notes to basic financial statements. 191,612 $ 119,084,152 IV -9 CITY OF LAKEVILLE, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2013 Business -type Activities - Governmental Enterprise Funds Activities - Internal Service Li uor Utility Total Funds Sales and cost of sales Sales Cost of sales Gross profit Operating revenues User charges Other Total operating revenues Gross profit and total operating revenues Operating expenses Personnel services Commodities Other charges and services Disposal charges Depreciation Total operating expenses Operating income (loss) Non - operating revenue (expense) Intergovernmental - grants Investment income (charges) Interest, fiscal charges, bond premium (net) Disposal of capital assets Total non - operating revenue (expense) Income (loss) before contributions and transfers Contributed capital from governmental activities Contributed capital from developers Transfers from other funds Transfers to other funds Total contributions and transfers (net) Change in net position Net position, January 1 Net position, December 31 $ 15,381,124 $ 15,381,124 11,432,525 11,432,525 3,948,599 3,948,599 Explanation of difference between proprietary funds statement of revenue, expenses, and changes in fund net position and the statement of activities: The City uses an internal service fund to charge the cost of its insurance activities to individual funds. This amount represents the income that has been allocated back to the business -type activities in the government -wide statement of activities that is attributable to the City's business -type activities: Change in net position of business -type activities See accompanying notes to basic financial statements. WWR (16,904 $ 1,090,369 $ 8,966,298 8,966,298 $ 298,427 160,540 160,540 112,636 9,126,838 9,126,838 411,063 3,948,599 9,126,838 13,075,437 411,063 1,282,013 1,796,122 3,078,135 - 50,973 355,301 406,274 - 833,997 2,339,848 3,173,845 478,310 3,092,195 3,092,195 113,916 3,161,343 3,275,259 - 2,280,899 10,744,809 13,025,708 478,310 1,667,700 (1,617,971) 49,729 (67,247 3,762 179,828 183,590 - (13,469) (28,351) (41,820) (1,235) (161,309) (161,309) (27,516 (106,220 (133,736 (198,532 45,257 (153,275 (1,235) 1,469,168 (1,572,714 (103,546) (68,482 94,958 94,958 - 3,304,878 3,304,878 1,396 1,396 - (1,749,982 (440,431) (2,190,413 (47,141) (1,749,982 2,960,801 1,210,819 (47,141 (280,814 1,388,087 1,107,273 (115,623) 5,813,472 111,971,795 857,364 $ 5,532,658 $ 113,359,882 $ 741,741 Explanation of difference between proprietary funds statement of revenue, expenses, and changes in fund net position and the statement of activities: The City uses an internal service fund to charge the cost of its insurance activities to individual funds. This amount represents the income that has been allocated back to the business -type activities in the government -wide statement of activities that is attributable to the City's business -type activities: Change in net position of business -type activities See accompanying notes to basic financial statements. WWR (16,904 $ 1,090,369 CITY OF LAKEVILLE, MINNESOTA STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2013 Business4ype Activities - Governmerdal Enterprise Funds Activities - Internal Service Liquor Utility Total Funds Cash flows from operating activities Cash received from customers Cash received from general service charges Cash paid to suppliers Cash paid to and for employees Net cash flows from operating activities Cash flows from noncepital financing activities Intergovernmental -grant Transfers from other funds Transfers to other funds Net cash flows from noncapitel financing activities Cash flows from capital and related financing activities Acquisition of capital assets Proceeds from sale of capital assets Interest and fiscal charges Principal maturities Net cash flows from capital and related financing activities Cash flows from investing activities Investment income received Net change in cash and cash equivalents Cash and cash equivalents, January 1 $ 15,382,045 $ 9,317,257 $ 24,699,302 $ - - - 411,597 (12,527,013) (5,917,725) (18,444,738) (472,732) (1,297,327) (1,770,562) (3,067,889) 1,557,705 1,628,970 3,186,675 (61,135) 3,762 71,409 75,171 - - 1,396 1,396 - (1,749,982) (440,431) (2,190,413) (47,141) (1,746,220) (367,626) (2,113,846) (47,141) (116,291) (2,676,861) (2,793,152) - 108 4,474 4,582 - (166,175) - (166,175) - (160,000) (160,000) (442,358) (2,672,387) (3,114,745) (6,807) (18,212) (25,019) (355) (637,680) (1,429,255) (2,066,935) (108,631) 4,638,563 8,908,539 13,747,102 858,157 Change in Accounting Principle Cash and cash equivalents, December 31 (including restricted cash account of $324,125) Reconciliation of operating income (loss) to net cash flows from operating activities Operating Income (loss) Adjustments Depredation expense (Increase) decrease in assets Accounts receivable Inventory Prepaid expenses Increase (decrease) in liabilities Salaries payable Accounts payable Deposits payable Accrued compensated absences Net OPES obligation Total adjustments Net cash flows from operating activities Supplemental schedule of non-cash financing activities: The City assumes ownership of utility capital assets from governmental projects and land developers. Capital assets assumed were as follows: $ 4,200,883 $ 7,479,284 $ 11,680,167 $ 749,526 $ 1,667,700 $ (1,617,971) $ 49,729 $ (67,247) 113,916 3,161,343 3,275,259 - 921 190,419 191,340 534 (275,968) 87,271 (188,697) - (1,216) - (1,216) - 5,196 9,027 14,223 - 67,046 (217,152) (150,106) 5,578 620 (500) 120 - (22,976) 11,599 (11,377) - 2,466 4,934 7,400 (109,995) 3,246,941 3,136,946 6,112 $ 1,557,705 $ 1,628,970 $ 3,186,675 $ (61,135) $ 3,399,836 $ 3,399,836 See accompanying notes to basic financial statements. IV -11 CITY OF LAKEVILLE, MINNESOTA STATEMENT OF FIDUCIARY NET POSITION - AGENCY FUND DECEMBER 31, 2013 Assets Cash and investments Liabilities Deposits payable See accompanying notes to basic financial statements. Escrow Fund $ 6,851,480 $ 6,851,480 IV -12 t„°U'4 F E3 L'. - o $ 92 Y _ 8 E E V ®� E R ea i 59. 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N N N�r � � N o m a 8 v M p v N $ N G 3� 2 m N N N P e O H P �iX i1S m N o q 0 N m. N N l7 Im h A N N Y N � N N O 0 N P Y1 N i.S N CI N Yf N tTl N P M m 0 m D N m N q� € = 2 6 r1 IV -34 8 « >!# !!| § «« !. e§ e ! ƒ !!ft{ " E ! ] 22 z z \) 2 \!2 -- A/ \ %f {{ { }� / {N ` A §(( « >!# !!| ! e ! ƒ !!ft{ A/ { {{ { }� / {N ` ] / ƒ *§ || k !'■2 ;` §§ � 72 � ` � �• ƒ� \ !k ! aq! !; t5 �! !± « PROPOSAL SALE DATE: July 21, 2014 City of Lakeville, Minnesota $9,160,000 General Obligation Improvement Bonds, Series 2014A For the Series 2014A Bonds of this Issue which shall mature and bear interest at the respective annual rates, as follow, we offer a price of $ (which may not be less than $9,068,400) plus accrued interest, if any, to the date of delivery. Interest Dollar Interest Dollar Year Rate °/ Yield °/ Price Year Rate % Yield % Price 2016 % % % 2026 2017 % % % 2027 % % % 2018 % % % 2028 % % % 2019 % % % 2029 % % % 2020 % % % 2030 % % % 2021 % % % 2031 % % % 2022 % % % 2032 % % 2023 % % % 2033 % % % 2024 % % % 2034 % % 2025 % % % 2035 % % % Designation of Term Maturities Years of Term Maturities In making this offer on the sale date of July 21, 2014 we accept all of the terms and conditions of the Terms of Proposal published in the Preliminary Official Statement dated July 1, 2014, including the City's right to modify the principal amount of the Series 2014A Bonds. (See "Terms of Proposal" herein.) In the event of failure to deliver these Series 2014A Bonds in accordance with said Terms of Proposal, we reserve the right to withdraw our offer, whereupon the deposit accompanying it will be immediately returned. All blank spaces of this offer are intentional and are not to be construed as an omission. Not as a part of our offer, the above quoted prices being controlling, but only as an aid for the verification of the offer, we have made the following computations: NET INTEREST COST: TRUE INTEREST RATE: The Bidder ❑ will not ❑ will purchase municipal bond insurance from Account Members Account Manager 0 Phone: ... . ......... . . . . . . . . . . . . . . . . . . . . . . .. ...... . . .. . . .. . . . .. . . . ... . . . . . . . . . . . . . . . . .. . . . ... ..... . . . . ... . . . . . . . ... . . ... ... ... . . . . . . . .. . . . . . . .. . . . . . . . .... . ..... .. . The foregoing proposal has been accepted by the City. Attest: SURE -BID Wire Transfer Preliminary; subject to change. Springsted Date: Good Faith Check Phone: 651- 223 -3000 Fax: 651- 223 -3046 Email: bond servicesna syringsted.com Website: www.springsted.com Public Sector Advisors PROPOSAL SALE DATE: July 21, 2014 City of Lakeville, Minnesota $13,730,000 General Obligation Refunding Bonds, Series 2014B For the Series 2014B Bonds of this Issue which shall mature and bear interest at the respective annual rates, as follow, we offer a price of $ (which may not be less than $13,585,835) plus accrued interest, if any, to the date of delivery. In making this offer on the sale date of July 21, 2014 we accept all of the terms and conditions of the Terms of Proposal published in the Preliminary Official Statement dated July 1, 2014, including the City's right to modify the principal amount of the Series 2014B Bonds. (See "Terms of Proposal" herein.) In the event of failure to deliver these Series 2014B Bonds in accordance with said Terms of Proposal, we reserve the right to withdraw our offer, whereupon the deposit accompanying it will be immediately returned. All blank spaces of this offer are intentional and are not to be construed as an omission. Not as a part of our offer, the above quoted prices being controlling, but only as an aid for the verification of the offer, we have made the following computations: NET INTEREST COST: TRUE INTEREST RATE: The Bidder ❑ will not ❑ will purchase municipal bond insurance from Account Members Account Manager LM Phone: ..................................................................................................................... ............................... The foregoing proposal has been accepted by the City. Attest: ...................................................................... ............................... SURE -BID Wire Transfer ' Preliminary; subject to change. Date: Good Faith Check Phone: 651- 223 -3000 Fax: 651- 223 -3046 Email: bond services(ailsprinpsted.com Website: www.springsted.com Springsted Public Sector Advisors Interest Dollar Interest Dollar Year Rate % Yield M Price Year Rate % Yield % Price 2017 % % % 2025 2018 % % % 2026 % % % 2019 % % % 2027 % % % 2020 % % % 2028 % % % 2021 % % % 2029 % % % 2022 % % % 2030 % % % 2023 % % % 2031 % % % 2024 % % % 2032 % % % Designation of Term Maturities Years of Tenn Maturities In making this offer on the sale date of July 21, 2014 we accept all of the terms and conditions of the Terms of Proposal published in the Preliminary Official Statement dated July 1, 2014, including the City's right to modify the principal amount of the Series 2014B Bonds. (See "Terms of Proposal" herein.) In the event of failure to deliver these Series 2014B Bonds in accordance with said Terms of Proposal, we reserve the right to withdraw our offer, whereupon the deposit accompanying it will be immediately returned. All blank spaces of this offer are intentional and are not to be construed as an omission. Not as a part of our offer, the above quoted prices being controlling, but only as an aid for the verification of the offer, we have made the following computations: NET INTEREST COST: TRUE INTEREST RATE: The Bidder ❑ will not ❑ will purchase municipal bond insurance from Account Members Account Manager LM Phone: ..................................................................................................................... ............................... The foregoing proposal has been accepted by the City. Attest: ...................................................................... ............................... SURE -BID Wire Transfer ' Preliminary; subject to change. Date: Good Faith Check Phone: 651- 223 -3000 Fax: 651- 223 -3046 Email: bond services(ailsprinpsted.com Website: www.springsted.com Springsted Public Sector Advisors MOODY'S INVESTORS SERVICE New Issue: Moody's assigns Aa1 to the City of Lakeville's (MN) GO Bonds Ser. 2014A &B Global Credit Research -15 Jul 2014 Aai applies to $75.6M post -sale GO debt LAKEVILLE (CITY OF) MN Cities (including Towns, Villages and Townships) MN MoocVs Rating ISSUE RATING General Obligation Refunding Bonds, Series 2014B Aa1 Sale Amount $13,730,000 Expected Sale Date 07/21/14 Rating Description General Obligation General Obligation Improvement Bonds, Series 2014A Aa1 Sale Amount $9,160,000 Expected Sale Date 07/21/14 Rating Description General Obligation Moodys Ouflook NOO Opinion NEW YORK, July 15, 2014 — Moody's Investors Service has assigned Aa1 rating to the City of Lakeville's (MN) $9.2 million General Obligation Improvement Bonds, Series 2014A and $13.7 million General Obligation Refunding Bonds, Series 2014B. Proceeds from the Series 2014A bonds will finance street improvement plans throughout the city. Proceeds from the Series 2014B bonds will refund certain maturity's of the city's outstanding debt for net present value savings. Debt service for the city's GO debt is secured by the city's general obligation unlimited tax (GOULT) pledge which benefits from a dedicated property tax levy not limited by rate or amount. Concurrently, Moody's maintains the Aa1 underlying rating on the city's outstanding long -term general obligation (GO) debt and the Aa3 underlying rating on the city's lease revenue debt. The lease revenue debt is secured by an annual appropriation pledge of the city and is rated two notches below the GO rating due to risk of appropriation and non - essentiality of the pledged asset (an ice rink). Post -sale, the district will have $75.6 million of outstanding long -term general obligation debt and $9.0 million of outstanding lease revenue debt. SUMMARY RATINGS RATIONALE The Aa1 underlying rating reflects the city's history of excellent financial management and strong reserve levels; wealthy tax base located just south of the Twin Cities Metropolitan Area, and an above average debt burden. STRENGTHS - Wealthy diverse tax base benefiting from its proximity to the Twin Cities metro area - Strong financial management with robust general fund reserves CHALLENGES - Elevated debt service as a portion of operating expenditures DETAILED CREDIT DISCUSSION WEALTHY TAX BASE NEIGHBORING THE TWIN CITIES Due to the city's favorable location near Minneapolis (Aa1 stable) and St. Paul (Aa1 stable), as well as its growing population with strong socioeconomic indicators, the city's tax base is expected to grow over the next three to five years. The city is located in Dakota County (Aaa stable) approximately 25 miles south of downtown Minneapolis. The city's large $5.7 billion tax base benefits from its proximity to the Twin Cities as the majority of the residents commute to the Twin Cities area for work. The city is primarily residential and consists of mostly single family homes. There is also a fairly significant commercial and industrial presence which comprises roughly one -fourth of valuations. The city endured steady valuation declines ranging from 5% to 8% 2010 and 2012. Valuations experienced growth starting in 2013 increasing by 1% and 5.7% in 2013 and 2014 respectively. Preliminary estimates by the county indicate a significant 10% increase in valuations coming for 2015. Approximately $450 million in growth is attributable to appreciation in real estate values while $140 million is associated with new construction activity. Through April 30, 2014, the city has seen approximately $40 million in building permit activity, slightly behind 2013's pace but still reflective of sustained growth trends. The city has approximately 30% of its land available for development which it will rezone for residential development as demand improves. Socioeconomic indicators for the population are strong with median family income at 160% of the nation. The city's unemployment rate is very strong at 3.7% as of May 2014, compared to 4.2% in the state and 6.1 % in the nation over the same period. STRONG FINANCIAL MANAGEMENT WITH AMPLE GENERAL FUND RESERVES The city's strong financial position, supported by a proactive management team and ample General Fund reserves, is expected to remain stable over the next three to five years. After posting planned General Fund draw of $1.8 million in fiscal 2013, the city still maintained a strong available fund balance of $9.5 million in its General Fund, equivalent to a high 44% of revenues. The entirety of the deficit is attributable to a one -time year -end transfer of $2.4 million to seed a capital equipment and replacement fund. Management plans to utilize these equipment reserves to fund its equipment maintenance and replacement program over the next five years. Year to date results for fiscal 2014 point to an operating surplus of approximately $500,000 despite increased snow removal costs. Management is currently in the process of finalizing its 2015 budget but expects to maintain reserves at current levels yet again. The city abides by a policy to maintain between 40% and 50% of General Fund expenditures in its reserve balance, a level which management expects to maintain going forward. The large majority of the city's revenues are derived from property taxes which comprised 72% of General Fund revenues in 2013. The second and third largest revenue sources included charges for services (8 %) and licenses and permits (7 %). The city receives limited state and federal aid and does not have significant reliance on economically sensitive revenues. ABOVE AVERAGE DIRECT DEBT BURDEN WITH ANNUAL BORROWING PLANNED; AVERAGE PENSION BURDEN The city's debt burden will remain manageable despite elevated annual debt service costs and planned borrowing due to the city's projected tax base and budgetary growth. While debt service is an elevated 31% of operating expenditures, we believe the city's debt burden will remain manageable due to some non -levy support and the city's effort to begin cash - financing certain ongoing capital projects. The city has an above average direct debt burden of 1.6% of full value and 3.05 times 2013 operating revenues. The city plans to issue approximately $15 million for street improvements and $9 million for water system improvements in fiscal 2015. Principal amortization is average with 68% over ten years. The city does have lease revenue debt that is subject to appropriation but the city consistently appropriates for debt service and includes this expense as a part of its operating budget. All of the district's debt is fixed rate mode, and the district is not a party to any interest rate swap agreements. The city participates in two multiple - employer cost - sharing plans administered by the state, the General Employees Retirement Fund (GERF) and Public Employees Police and Fire Fund ( PEPFF). Moody's 3 -year adjusted net pension liability (ANPL) for the city, under our methodology for adjusting reported pension data, is $51.8 million, or 1.74 times operating revenues (General Fund and Debt Service Funds). In 2013, the city contributed a total of $1.7 million, equal to a manageable 5.5% of operating revenues. Moody's ANPL reflects certain adjustments we make to improve the comparability of reported pension liabilities. The adjustments are not intended to replace the city's reported liability information, but to improve comparability with other rated entities. We determined the city's share of liability for GERF and PEPFF in proportion to its contributions to the plans. WHAT COULD CHANGE RATING UP - Moderation of annual debt service costs compared to operating budget - Improvement in the city's demographic profile WHAT COULD CHANGE RATING DOWN - Material growth in the city's debt burden - Erosion of general fund liquidity and reserves KEY STATISTICS 2014 Full value: $5.7 billion 2014 Estimated full value per capita: $98,542 2008 -2012 Median family income (as a % of US): 160% Fiscal 2013 Available Operating Fund Balance: 32% of revenues Fiscal 2008 to Fiscal 2013 Change in Available Operating Fund Balance as a % of revenues: -5.7% Fiscal 2013 Operating Fund Cash Balance: 32.3% of revenues Fiscal 2008 to Fiscal 2013 Change in Operating Fund Cash Balance as a % of revenues: -6.6% Fiscal 2008 to Fiscal 2013 Average Operating Revenues / Operating Expenditures: 0.99 times Institutional Framework: Aa Net Direct Debt / Full Value: 1.6% Net Direct Debt / Operating Revenues: 3.05 times 3 -year average of Moody's ANPL / Full Value: 0.9% 3 -year average of Moody's ANPL / Operating Revenues: 1.7 times PRINCIPAL METHODOLOGY The principal methodology used in this rating was US Local Government General Obligation Debt published in January 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology. REGULATORY DISCLOSURES For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer /entity page for the respective issuer on www.moodys.com. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review. Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Please see the ratings tab on the issuer /entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Analysts Chandra Ghosal Lead Analyst Public Finance Group Moody's Investors Service Edward Damutz Additional Contact Public Finance Group Moody's Investors Service Contacts Journalists: (212) 553 -0376 Research Clients: (212) 553-1653 Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 USA MOODY'S INVESTORS SERVICE © 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and /or their licensors and affiliates (collectively, WOODY'S "). All rights reserved. CREDIT RATINGS ISSUED BY MOODY S INVESTORS SERVICE, INC. ( "MIS ") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT -LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY S ( "MOODY S PUBLICATION ") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT -LIKE SECURITIES. 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ESCROW AGREEMENT THIS ESCROW AGREEMENT, made and entered into by and between the City of Lakeville, Minnesota (the Issuer) and U.S. Bank National Association, St. Paul, Minnesota (the Agent); WITNES SETH, that the parties hereto recite and, in consideration of the mutual covenants and payments referred to and contained herein, covenant and agree as follows: The Issuer has duly issued and presently has outstanding the following issues: Title General Obligation Street Reconstruction Bonds, Series 2005A (the Refunded Series 2005A Bonds) General Obligation Capital Improvement Plan Bonds, Series 2007D (the Refunded Series 2007D Bonds) Original Principal Maturities Date of Principal Amount to Escrowed and Payment Issue Amount be Refunded Redeemed Date 12/1/2005 $5,430,000 $1,950,000 2017 -2026 2/1/2016 8/1/2007 $15,115,000 $11,185,000 2018 -2032 2/1/2017 and has issued its $ General Obligation Refunding Bonds, Series 2014B, dated August 20, 2014 (the Refunding Bonds). The Refunded Series 2005A Bonds and the Refunded Series 2007D Bonds are referred to collectively herein as the Refunded Bonds. With respect to the Refunded 2005A Bonds, the February 1, 2016 payment date is referred to herein as the Series 2005A Crossover Date. With respect to the Refunded 2007D Bonds, the February 1, 2017 payment date is referred to herein as the Series 2007D Crossover Date. The Series 2005A Crossover Date and the Series 2007D Crossover Date are referred to collectively herein as the Crossover Dates. 2. The Issuer has also, in accordance with a resolution adopted July 21, 2014 (the Resolution), simultaneously with the execution of this Agreement, transmitted Refunding Bond proceeds in the amount of $ and Issuer funds in the amount of $ to the Agent to be used as follows: (a) $ of Refunding Bond proceeds and $ of Issuer funds to purchase an equivalent principal amount of federal securities as identified in Exhibit A attached hereto; (b) $ of Refunding Bond proceeds to be deposited as a beginning cash balance to remain uninvested in the Escrow Account hereinafter established. In the opinion of [Barthe & Wahrman[, certified public accountants, the federal securities designated in paragraph (a), together with the initial cash balance designated in paragraph (b), mature at such times and bear interest at such rates that the collections of principal and interest thereon will be sufficient to pay the interest to become due on the portion of the Refunding Bonds allocated to (i) the refunding of the Refunded Series 2005A Bonds (the "Series 2005A Refunding Bonds ") to and including the Series 2005A Crossover Date and to pay and redeem the outstanding principal of the Refunded Series 2005A Bonds on the Series 2005A Crossover Date, and (ii) the refunding of the Refunded Series 2007D Bonds (the "Series 2007D Refunding Bonds ") to and including the Series 2007D Crossover Date and to pay and redeem the outstanding principal of the Refunded Series 2007D Bonds on the Series 2007D Crossover Date in accordance with the attached Exhibit B . All such expenditures (notwithstanding anything to the contrary contained in this Agreement or the resolution with respect to the Refunding Bonds) are subject to the requirement of Section 1.148- 9(c)(2) of the Regulations that the amounts constituting Refunding Bond Proceeds shall be drawn no faster than ratably with Issuer funds. 3. The Agent agrees to apply the funds received from the Issuer in the manner and for the purposes set forth in Section 2 hereof and this Section. The Agent acknowledges receipt of the cash and federal securities described in Section 2 and agrees that it will hold such cash and federal securities in a special escrow account (the Escrow Account) in the name of the Issuer, and will collect and receive on behalf of the Issuer all payments of principal and interest on such securities and as paying agent for the Refunding Bonds, (a) will remit from the Escrow Account moneys sufficient for the payment of interest to become due on the Series 2005A Refunding Bonds to and including the Series 2005A Crossover Date, (b) will remit from the Escrow Account the sum of $1,950,000 to be applied to the payment of principal of the Refunded Series 2005A Bonds called for redemption on the Series 2005A Crossover Date, (c) will remit from the Escrow Account moneys sufficient for the payment of interest to become due on the Series 2007D Refunding Bonds to and including the Series 2007D Crossover Date, and (d) will remit from the Escrow Account the sum of $11,185,000 to be applied to the payment of principal of the Refunded Series 2007D Bonds called for redemption on the Series 2007D Crossover Date. Any remaining funds in the Escrow Account after such transfer shall be remitted to the Issuer. The Agent will, not fewer than 30 days prior to the Series 2005A Crossover Date, cause the Notice of Redemption attached hereto as Exhibit C relating to the Refunded Series 2005A Bonds to be mailed to the holders of all Series 2005A Bonds to be redeemed on the Series 2005A Crossover Date. The Agent will, not fewer than 30 days prior to the Series 2007D Crossover Date, cause the Notice of Redemption attached hereto as Exhibit D relating to the Refunded Series 2007D Bonds to be mailed to the holders of all Series 2007D Bonds to be redeemed on the Series 2007D Crossover Date. 4. In order to ensure continuing compliance with the Internal Revenue Code of 1986, as amended (the Code), and present Treasury Regulations promulgated thereunder (the Regulations), the Agent agrees that it will not reinvest any cash received in payment of the principal of and interest on the federal securities held in the Escrow Account. Said prohibition on reinvestment shall continue unless and until an opinion is received from nationally recognized bond counsel that reinvestments in general obligations of the United States or obligations the principal of and interest on which are guaranteed as to payment by the United States, as specified in said opinion, may be made in a manner consistent with the Code and then existing Regulations. The federal securities described in Exhibit A hereto may, at the written direction of 2 the Issuer, be replaced, in whole or in part, with general obligations of the United States or obligations the principal of and interest on which are guaranteed as to payment by the United States and which mature as to principal and interest in such amounts and at such times as will assure the availability of sufficient moneys to pay the interest on the Series 2005A Refunding Bonds to and including and the outstanding principal amount of the Refunded Series 2005A Bonds on the Series 2005A Crossover Date, and the interest on the Series 2007D Refunding Bonds to and including and the outstanding principal amount of the Refunded Series 2007D Bonds on the Series 2007D Crossover Date, provided, however, that concurrently with such written direction, the Issuer shall provide the Agent with (a) a certification of an independent certified public accountant as to the sufficiency of the federal securities to be subject to this Agreement following such replacement and as to the yields thereof, setting forth in reasonable detail the calculations underlying such certification, (b) an unqualified opinion of nationally recognized bond counsel to the effect that such replacement (1) will not cause the Refunded Bonds or the Refunding Bonds to be subjected to treatment as "arbitrage bonds" under Section 148 of the Code and (2) is otherwise in compliance with this Agreement. Any replacement authorized by this paragraph 4 shall be accomplished by sale, transfer, request for redemption or other disposition of all or a portion of the federal securities described in Exhibit A hereto with the proceeds thereof being applied to the purchase of substitute federal securities, all as specified in the written direction of the Issuer. 5. The Agent acknowledges that arrangements satisfactory to it for payment of its compensation for all services to be performed by it as Agent under this Agreement have been made. The Agent expressly waives any lien upon or claim against the moneys and investments in the Escrow Account. 6. If at any time it shall appear to the Agent that the money in the Escrow Account will not be sufficient to make any payment due to the registered owners of any of the Refunded Bonds or Refunding Bonds, the Agent shall immediately notify the Issuer. Upon receipt of such notice the Issuer shall forthwith transmit to the Agent for deposit in the Escrow Account from moneys on hand and legally available therefor, such additional moneys as may be required to make any such payment, and the Issuer recognizes its obligation to levy ad valorem taxes on all taxable property in the Issuer to the extent required to produce the moneys necessary for this purpose. 7. Within 60 days following the close of each fiscal year and close of the Escrow Account, the Agent shall submit to the Issuer a report covering all money it shall have received and all payments it shall have made or caused to be made hereunder during the preceding fiscal year or portion thereof. 8. It is recognized that title to the federal securities and money held in the Escrow Account from time to time shall remain vested in the Issuer but subject always to the prior charge and lien thereon of this Agreement and the use thereof required to be made by the provisions of this Agreement. The Agent shall hold all such money and obligations in a special trust fund and account separate and wholly segregated from all other funds and securities of the Agent or deposited therein. It is understood and agreed that the responsibility of the Agent under this Agreement is limited to the safekeeping and segregation of the moneys and securities deposited with it in the Escrow Account, and the collection of and accounting for the principal and interest payable with respect thereto. 9. This Agreement is made by the Issuer for the benefit of the holders of the Refunded Bonds under and pursuant to Minnesota Statutes, Section 475.67, and is not revocable by the Issuer, and the investments and other funds deposited in the Escrow Account and all income therefrom have been irrevocably appropriated for the payment of outstanding principal of the Refunded Bonds on the Crossover Dates, and to pay interest on the Series 2005A Refunding Bonds and Series 2007D Refunding Bonds prior to and including the respective Crossover Dates, in accordance with this Agreement. This Agreement may not be amended except to (i) sever any clause herein deemed to be illegal, (ii) provide for the reinvestment of funds or the substitution of securities as permitted by Section 4 hereof or (iii) cure any ambiguity or correct or supplement any provision herein which may be inconsistent with any other provision, provided that the Agent shall determine that any such amendment shall not adversely affect the owners of the Refunded Bonds or Refunding Bonds. In the event an amendment to this Agreement is proposed to be made pursuant to this Section 9, prior notice shall be given by first class mail, postage prepaid, to the following organization at the following address (or such other address as may be provided by the addressee) and shall be deemed effective upon receipt: Moody's Municipal Rating Desk/Refunded Bonds, 99 Church Street, New York, New York 10007. 10. This Agreement shall be binding upon and shall inure to the benefit of the Issuer and the Agent and their respective successors and assigns. In addition, this Agreement shall constitute a third party beneficiary contract for the benefit of the holders of the Refunding Bonds and Refunded Bonds, as their interests may appear. Said third party beneficiaries shall be entitled to enforce performance and observance by the Issuer and the Agent of the respective agreements and covenants herein contained as fully and completely as if said third parry beneficiaries were parties hereto. 11. Upon merger or consolidation of the Agent, if the resulting corporation is a bank or trust company authorized by law to conduct such business, such corporation shall be authorized to act as successor Agent. Upon the resignation of the Agent, which shall be communicated in writing to the Issuer, or in the event the Agent becomes incapable of acting hereunder, the Issuer reserves the power to appoint a successor Agent. No resignation shall become effective until the appointment of a successor Agent by the Issuer. 0 IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed by their duly authorized officers, on August 20, 2014. CITY OF LAKEVILLE, MINNESOTA LZ Mayor .IAA City Clerk Security Advice Waiver: The Issuer acknowledges that to the extent regulations of the Comptroller of the Currency or any other regulatory entity grant the Issuer the right to receive brokerage confirmations of the security transactions as they occur, the Issuer specifically waives receipt of such confirmations to the extent permitted by law. The Escrow Agent will famish the Issuer with periodic cash transaction statements that include the detail for all investment transactions made by the Escrow Agent for all current and future accounts. IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT: To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. For a non - individual person such as a business entity, a charity, a Trust or other legal entity we will ask for documentation to verify its formation and existence as a legal entity. We may also ask to see financial statements, licenses, and identification and authorization documents from individuals claiming authority to represent the entity or other or other relevant documentation. [Signature Page to Escrow Agreement] U.S. BANK NATIONAL ASSOCIATION, Agent C Its: [Signature Page to Escrow Agreement] EXHIBIT A ESCROW ACCOUNT CASH RECEIPTS FROM SLGS ALLOCATED TO THE REFUNDED BONDS PURCHASED WITH REFUNDING BOND PROCEEDS AND PROOF OF YIELD [insert relevant exhibit from Verification Report ] EXHIBIT B ESCROW ACCOUNT CASH FLOW [insert relevant exhibit from Verification Report] EXHIBIT C $5,430,000 General Obligation Street Reconstruction Bonds, Series 2005A Dated December 1, 2005 City of Lakeville, Minnesota NOTICE IS HEREBY GIVEN THAT all Bonds of the above issue which mature on February 1 in the following years and amounts: Year Amount Rate CUSIP No. 2018* $330,000 3.85% 512445 QC 4 2020* 355,000 3.90 512445 QE 0 2022* 385,000 4.00 512445 QG 5 2024* 420,000 4.10 512445 QJ 9 2026* 460,000 4.20 512445 QL 4 *Indicates full call, are called for redemption and prepayment on February 1, 2016. The Bonds will be redeemed at a price of 100% of their principal amount plus accrued interest to the date of redemption. Holders of such Bonds should present them for payment on or before said date, on which date they will cease to bear interest. A form W -9, Payer's Request for Taxpayer Identification Number, must be completed and returned with the called bond or 31% of the bond redemption proceeds will be withheld. Payment of bonds to be redeemed will be made on and after February 1, 2016, by submitting said bond along with the completed form W -9 to U.S. Bank National Association, at the following addresses: If by Mail U.S. Bank Corporate Trust Services P.O. Box 64111 St, Paul, MN 55164 -0111 If by Hand or Overnight Mail U.S. Bank Corporate Trust Services 111 Fillmore Avenue East St. Paul, MN 55107 If you request payment of principal and/or interest via wire transfer, please be advised there is a wire transfer fee which will be deducted from your payment. Dated: 20_. U.S. BANK NATIONAL ASSOCIATION EXHIBIT D $15,115,000 General Obligation Capital Improvement Plan Bonds, Series 2007D . Dated August 1, 2007 City of Lakeville, Minnesota NOTICE IS HEREBY GIVEN THAT all Bonds of the above issue which mature on February 1 in the following years and amounts: Year Amount Rate CUSIP No. 2021* $2,290,000 5.000% 512445 SK 2025* 2,725,000 5.000 512445 SP3 2028* 2,400,000 5.000 512445 SS 7 2032* 3,770,000 4.625 512445 SW 8 *Indicates full call. are called for redemption and prepayment on February 1, 2017. The Bonds will be redeemed at a price of 100% of their principal amount plus accrued interest to the date of redemption. Holders of such Bonds should present them for payment on or before said date, on which date they will cease to bear interest. A form W -9, Payer's Request for Taxpayer Identification Number, must be completed and returned with the called bond or 31 % of the bond redemption proceeds will be withheld. Payment of bonds to be redeemed will be made on and after February 1, 2017, by submitting said bond along with the completed form W -9 to U.S. Bank National Association, at the following addresses: If by Mail U.S. Bank Corporate Trust Services P.O. Box 64111 St. Paul, MN 55164-0111 If by Hand or Overnight Mail U.S. Bank Corporate Trust Services I I I Fillmore Avenue East St. Paul, MN 55107 If you request payment of principal and/or interest via wire transfer, please be advised there is a wire transfer fee which will be deducted from your payment. Dated: 20 . U.S. BANK NATIONAL ASSOCIATION