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Item 08
July 20, 2020 Item No.________ RESOLUTION AUTHORIZING ISSUANCE, AWARDING SALE, PRESCRIBING THE FORM AND DETAILS AND PROVIDING FOR THE PAYMENT OF $15,700,000 GENERAL OBLIGATION BONDS, SERIES 2020A Proposed Action Staff recommends adoption of the following motion: Move to approve Resolution Authorizing Issuance, Awarding Sale, Prescribing the Form and Details, and Providing for the Payment of $15,700,000 General Obligation Bonds, Series 2020A. Passage of this motion will result in the financing of the following projects: • #20-02 - 2020 Street Reconstruction • #20-04 – 170th Street • #20-08 – 179th Street (Cedar – Flagstaff) • #22-03 – 210th Street – Engineering Fees (Holyoke – Cedar) • Ames Arena Parking Lot • Various Water Projects Overview The Bonds have a general obligation pledge, with expected repayment from a combination of property taxes, special assessments, and Water Operating Fund revenues. Contributions from the Lakeville Hockey Association, Heritage Figure Skating Club and Lakeville Arenas will be used to cancel levy requirements associated with the Ames Arena parking lot debt. The bid opening for the bonds will be held on Monday morning, July 20, 2020. The results of the bid opening will be presented to the City Council during its regular meeting on July 20th by Northland Securities Inc. A final resolution with the updated results from the bond sale will be provided to the City Council prior to the meeting. Moody’s Investors Service has assigned a favorable Aa1 bond rating. The Bond Credit Opinion is attached to this report. Primary Issues to Consider • 2020A o Bond Structure – The term of the bonds is 10 years. The structure of the 2020A bonds is compliant with the City’s Debt Policy. o Special Assessments – The terms of the assessments follow the Special Assessment Policy. o Call Provision - Bonds maturing on or after 2/1/2030 may be prepaid at a price of par plus accrued interest on 02/01/2029 or any date thereafter. Supporting Information • Draft Resolution (Prepared by Dorsey & Whitney, LLP) • Bond Credit Opinion – Moody’s Investors Service Financial Impact: $ Budgeted: Y☒ N☐ Source: Related Documents: (CIP, ERP, etc.): Envision Lakeville Community Values: Good Value for Public Services Report Completed by: Jerilyn Erickson, Finance Director Varies Taxes, Assessments, Utilities 2020-2024 CIP 4819-8581-4460\3 CITY OF LAKEVILLE RESOLUTION Date: July 20, 2020 Resolution No. Motion By Seconded By RESOLUTION AUTHORIZING ISSUANCE, AWARDING SALE, PRESCRIBING THE FORM AND DETAILS AND PROVIDING FOR THE PAYMENT OF $[PAR] GENERAL OBLIGATION BONDS, SERIES 2020A BE IT RESOLVED by the City Council (the “Council”) of the City of Lakeville, Minnesota (the “City”), as follows: SECTION 1. AUTHORIZATION AND SALE. 1.01. Authorization. This City Council, by resolution duly adopted on June 15, 2020, authorized the issuance and sale of its General Obligation Bonds, Series 2020A (the “Bonds”), pursuant to Minnesota Statutes, Sections 469.1812-469.1815 and Chapters 429, 444, and 475, for the purpose of financing (a) the City’s 2020 street improvement projects (the “Improvement Project”), (b) various improvements (the “Utility Project”) to the City’s water system (the “System”), and (c) certain parking lot improvements (the “Abatement Project,” and together with the Improvement Project and Utility Project, the “Projects”). To finance the Abatement Project, this Council, by resolution adopted after a public hearing held June 15, 2020 (the “Abatement Resolution”), granted a ten year abatement of property taxes to be imposed by the City on certain parcels in the City (the “Tax Abatement”), pursuant to Minnesota Statutes, Sections 469.1812 to 469.1815 (the “Abatement Act”). The revenues received by the City from such Tax Abatement are herein referred to as the “Tax Abatement Revenue.” The principal amount of the Bonds ($[______]) attributable to the Improvement Project and issued pursuant to Minnesota Statutes, Chapters 429 and 475 shall be designated as the “Improvement Bonds.” The principal amount of the Bonds ($[_______]) attributable to the Utility Project and issued pursuant to Minnesota Statutes, Chapters 444 and 475 shall be designated as the “Utility Bonds.” The principal amount of the Bonds ($[_______]) attributable to the Abatement Project and issued pursuant to the Abatement Act shall be designated as the “Abatement Bonds.” Maturity schedules for the Improvement Bonds, the Utility Bonds, and the Abatement Bonds are attached hereto as EXHIBIT A. 4819-8581-4460\3 2 1.02. Sale. Pursuant to the Terms of Proposal and the Preliminary Official Statement prepared on behalf of the City by Northland Securities, Inc. (“Northland”), municipal advisor to the City, sealed or electronic 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 in the principal amount of $[PAR], 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 on behalf of the City to execute a contract for the sale of the Bonds with the Purchaser in accordance with the Preliminary Official Statement. The good faith deposit of the Purchaser shall be retained and deposited by the City until the Bonds have been delivered, and shall be deducted from the purchase price paid at settlement. 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 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 13, 2020, 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: Year Principal Rate Year Principal Rate 2021 2027 2022 2028 2023 2029 2024 2030 2025 2031 2026 The Bonds shall be issuable only in fully registered form. The interest thereon 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. 4819-8581-4460\3 3 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 February 1 and August 1 in each year, commencing February 1, 2021, each such date being referred to herein as an Interest Payment Date, to the persons in whose names the Bonds are registered on the Bond Register, as hereinafter defined, at the Registrar’s close of business on the fifteenth day of the calendar month preceding that in which such Interest Payment Date occurs, whether or not such day is a business day. Interest shall be computed on the basis of a 360-day year composed of twelve 30-day months. 2.04. Redemption. Bonds maturing on or after February 1, 2030, 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 integral multiples of $5,000, on February 1, 2029, and on any date thereafter, at a price equal to the principal amount thereof and accrued interest to the date of redemption. The City Clerk shall cause notice of the call for redemption thereof to be published if and as required by law, and at least thirty (30) and not more than sixty (60) days prior to the designated redemption date, shall cause notice of call for redemption to be mailed, by first class mail, to the Registrar and registered holders of any Bonds to be redeemed at their addresses as they appear on the Bond Register described in Section 2.06 hereof, provided that notice shall be given to any securities depository in accordance with its operational arrangements. No defect in or failure to give such 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 Registrar. 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: 4819-8581-4460\3 4 (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 term 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 Holder thereof or accompanied by a written instrument of transfer, in form satisfactory to the Registrar, duly executed by the Holder thereof or by an attorney duly authorized by the Holder 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 that in which the interest payment date occurs and until such interest payment date. (c) Exchange of Bonds. At the option of the Holder of any Bond in a denomination greater than $5,000, such Bond may be exchanged for other Bonds of authorized denominations, of the same maturity and a like aggregate principal amount, upon surrender of the Bond to be exchanged at the office of the Registrar. Whenever any Bond is so surrendered for exchange the City shall execute and the Registrar shall authenticate and deliver the Bonds which the Bondholder making the exchange is entitled to receive. (d) Cancellation. All Bonds surrendered for payment, transfer or exchange shall be promptly canceled by the Registrar and thereafter disposed of as directed by the City. (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 or upon the order of such Holder shall be valid and effectual to satisfy and discharge the liability upon such 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 4819-8581-4460\3 5 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. In 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. (j) 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 any Bond shall cease to be such officer before the delivery of such Bond, such signature or facsimile shall nevertheless be valid and sufficient for all purposes, the same as if such officer had remained in office until the date of delivery of such Bond. 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, substantially in the form provided in EXHIBIT B, has been 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 any Bond shall be conclusive evidence that it has been duly 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 theretofore executed, and the Purchaser shall not be obligated to see to the application of the purchase price. 2.08. Securities Depository. (a) For purposes of this section the following terms shall have the following meanings: 4819-8581-4460\3 6 “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 physical certificates, the City may notify DTC and the Registrar, whereupon DTC shall notify the Participants of the availability through 4819-8581-4460\3 7 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 physical certificates and the method of payment of principal of and interest on such Bonds in the form of physical certificates. 2.09. Form of Bonds. The Bonds shall be prepared in substantially the form found at EXHIBIT B attached hereto. Section 3. USE OF PROCEEDS; PROJECT FUND. There is hereby created a special bookkeeping fund to be designated as the “General Obligation Bonds, Series 2020A Project Fund” (the “Project Fund”), to be held and administered by the City Finance Director separate and apart from all other funds of the City. Within the Project Fund are established the following accounts: (a) Improvement Project Account. The Improvement Project Account shall be credited with (i) $[_____] from the proceeds of the Improvement Bonds; and (ii) all special assessments collected with respect to the Improvement Project (other than prepaid assessments), until all costs of the Improvement Project have been fully paid. The City Finance Director shall maintain the Improvement Project Account until payment of all costs and expenses incurred in connection with the construction of the Improvement Project and all costs of issuance of the Improvement Bonds have been paid. (b) Utility Project Account. The Utility Project Account shall be credited with $[_____] from the proceeds of the Utility Bonds. The City Finance Director shall maintain the Utility Project Account until all costs and expenses incurred by the City in connection with the construction of the Utility Project and all costs of issuance of the Utility Bonds have been paid. (c) Abatement Project Account. The Abatement Project Account shall be credited with $[_____] from the proceeds of the Abatement Bonds. The City Finance Director shall maintain the Abatement Project Account until payment of all costs and 4819-8581-4460\3 8 expenses incurred in connection with the construction of the Abatement Project and all costs of issuance of the Abatement Bonds have been paid. The City may deposit funds, including prepaid assessments and funds from other available sources into the Project Fund. From the Project Fund there shall be paid all costs and expenses related to the construction and acquisition of the Project. In addition, costs of issuance in the amount of $[_____] are expected to be paid from proceeds of the Bonds in the Project Fund and are included in the respective accounts above. After payment of all such costs and expenses, the Project Fund shall be terminated. All funds on hand in the Project Fund when terminated shall be credited to the Bond Fund described in Section 4 hereof, unless and except as such proceeds may be transferred to some other fund or account as to which the City has received from bond counsel an opinion that such other transfer is permitted by applicable laws and does not impair the exemption of interest on the Bonds from federal income taxes. In no event shall funds remain in the Project Fund later than August 13, 2025. SECTION 4. GENERAL OBLIGATION BONDS, SERIES 2020A BOND FUND. The Bonds shall be payable from a separate General Obligation Bonds, Series 2020A Bond Fund (the “Bond Fund”) of the City, which shall be created and maintained on the books of the City as a separate debt redemption fund until the Bonds, and all interest thereon, are fully paid. Within the Debt Service Account (described below) within the Bond Fund are created the following accounts: (a) Improvement Bonds Account. Into the Improvement Bonds Account shall be paid: i. the amounts specified in Section 3 above upon termination of the Improvement Project Account; ii. any funds received from the Purchaser with respect to the Improvement Bonds in excess of the amounts specified in Section 3 above; iii. special assessments levied and collected in accordance with this Resolution except prepaid assessments applied to the Improvement Project Account; iv. any taxes collected pursuant to Section 7 hereof; and v. any other funds appropriated by this Council for the payment of the Improvement Bonds. (b) Utility Bonds Account. Into the Utility Bonds Account shall be paid: i. the amounts specified in Section 3 above upon termination of the Utility Project Account; ii. any funds received from the Purchaser with respect to the Utility Bonds in excess of the amounts specified in Section 3 above; iii. net revenues of the System, such revenues to be distributed ratably with respect to the Utility Bonds payable therefrom and any other obligations of the City payable from the same source; iv. any taxes collected pursuant to Section 7 hereof; and v. any other funds appropriated by this Council for the payment of the Utility Bonds. 4819-8581-4460\3 9 (c) Abatement Bonds Account. Into the Abatement Bonds Account shall be paid: i. the amounts specified in Section 3 above upon termination of the Abatement Project Account; ii. any funds received from the Purchaser with respect to the Abatement Bonds in excess of the amounts specified in Section 3 above; iii. Tax Abatement Revenue received by the City; iv. any taxes collected pursuant to Section 7 hereof; and v. any other funds appropriated by this Council for the payment of the Abatement Bonds. The principal of and interest on the Bonds shall be payable from the Bond Fund, and the money on hand in the Bond Fund from time to time shall be used only to pay the principal of and interest on the Bonds. On or before each principal and interest payment date for the Bonds, the City Clerk is directed to remit to the Registrar from funds on deposit in the Bond Fund the amount needed to pay principal and interest on the Bonds on the next succeeding principal and interest payment date. There are hereby established two accounts in the Bond Fund, designated as the “Debt Service Account” and the “Surplus Account.” There shall initially be deposited into the Debt Service Account upon the issuance of the Bonds the amount set forth in clause (b) above. Thereafter, during each bond year (each twelve month period commencing on February 1, except the first year which commences August 13, 2020, and ending on the following January 31, a “Bond Year”), as monies are received into the Bond Fund, the City Clerk shall first deposit such monies into the Debt Service Account until an amount has been appropriated thereto sufficient to pay all principal and interest due on the Bonds through the end of the Bond Year. All subsequent monies received in the Bond Fund during the Bond Year shall be appropriated to the Surplus Account. If at any time the amount on hand in the Debt Service Account is insufficient for the payment of principal and interest then due, the City Clerk shall transfer to the Debt Service Account amounts on hand in the Surplus Account to the extent necessary to cure such deficiency. Investment earnings (and losses) on amounts from time to time held in the Debt Service Account and Surplus Account shall be credited or charged to said accounts. If the balance in the Bond Fund is at any time insufficient to pay all interest and principal then due on all Bonds payable therefrom, the payment shall be made from any fund of the City which is available for that purpose, subject to reimbursement from the Surplus Account when the balance therein is sufficient, and the City covenants and agrees that it will each year levy a sufficient amount of ad valorem taxes to take care of any accumulated or anticipated deficiency, which levy is not subject to any constitutional or statutory limitation. SECTION 5. SPECIAL ASSESSMENTS. The City hereby covenants and agrees that, for the payment of the costs of the Improvement Project, the City has done or will do and perform all acts and things necessary for the final and valid levy of special assessments an amount not less than 20% of the cost of the Improvement Project. The principal of and interest on such special assessments are estimated to be levied and collected in the years and amounts shown on EXHIBIT C attached hereto. The principal of the assessments shall be made payable in annual installments, 4819-8581-4460\3 10 with interest as established by this Council in accordance with law on unpaid 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 Council or by any of the officers or employees of the City, 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. SECTION 6. PLEDGE OF NET REVENUES. It is hereby found, determined and declared that the City owns and operates its System as a revenue-producing utility and convenience, and that the net operating revenues of the System, after deducting from the gross receipts derived from charges for the service, use and availability of the System the normal, current and reasonable expenses of operation and maintenance thereof, will be sufficient, together with any other pledged funds, for the payment when due of the principal of and interest on the Utility Bonds and on any other bonds to which such revenues are pledged. Pursuant to Minnesota Statutes, Section 444.075, the City hereby covenants and agrees with the registered owners from time to time of the Bonds that until the Utility Bonds and the interest thereon are discharged as provided in Section 8 or paid in full, the City will impose and collect reasonable charges in accordance with said Section 444.075 for the service, use and availability of the System according to schedules sufficient to produce net revenues sufficient, with other funds pledged to payment of the Utility Bonds, to pay the Utility Bonds and any other bonds to which said net revenues have been pledged; and the net revenues, to the extent necessary, are hereby irrevocably pledged and appropriated to the payment of the Utility Bonds and interest thereon when due. Nothing herein shall preclude the City from hereafter making further pledges and appropriations of the net revenues of the System for payment of additional obligations of the City hereafter authorized if the Council determines before the authorization of such additional obligations that the estimated net revenues of the System will be sufficient, together with any other sources pledged to the payment of the outstanding and additional obligations, for payment of the outstanding bonds and such additional obligations. Such further pledges and appropriations of net revenues may be made superior or subordinate to or on a parity with, the pledge and appropriation herein made. SECTION 7. PLEDGE OF TAXING POWERS. For the prompt and full payment of the principal of and interest on the Bonds as such payments respectively become 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 other amounts as set forth in Section 4, 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 to be levied and collected in the years and amounts as shown on EXHIBIT C. The 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 the tax levies from other legally available funds, in accordance with the provisions of Minnesota Statutes, Section 475.61. 4819-8581-4460\3 11 SECTION 8. 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 Holders 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 discharge its obligations with respect to any prepayable Bonds called for redemption on any date when they are prepayable according to their terms by depositing with the Registrar on or before that date an amount equal to the principal, redemption premium, if any, and interest then due, provided that notice of such redemption has been duly given as provided herein. 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 the Registrar or with a bank or trust company qualified by law to act as an escrow agent for this purpose, cash or securities which are authorized by law to be so deposited for such purpose, bearing interest payable at such times 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, if notice of redemption as herein required has been irrevocably provided for, to an earlier designated redemption date. 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 must 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 9. TAX COVENANTS; ARBITRAGE MATTERS AND CONTINUING DISCLOSURE. 9.01. General Tax Covenant. The City agrees with the registered owners from time to time of the Bonds that it will not take, or permit to be taken by any of its officers, employees or agents, any action 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 agrees 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. All proceeds of the Bonds deposited in the Project Fund will be expended solely for the payment of the costs of the Project. The Project is and will be owned and maintained by the City and available for use by members of the general public on a substantially equal basis. The City shall not enter into any lease, management contract, use agreement, capacity agreement or other agreement with any non-governmental person relating to the use of the Project, or any portion thereof, or security for the payment of the Bonds which might cause the Bonds to be considered “private activity bonds” or “private loan bonds” pursuant to Section 141 of the Code. 9.02. 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 4819-8581-4460\3 12 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. 9.03. Arbitrage Rebate. The City acknowledges that the Bonds may be 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 at such times as are required under said Section 148(f) and applicable Regulations to preserve the exclusion of interest on the Bonds from gross income for federal income tax purposes, 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. 9.04. Reimbursement. The City certifies that the proceeds of the Bonds will not be used by the City to reimburse itself for any expenditure with respect to the Project which the City paid or will have paid more than 60 days prior to the issuance of the Bonds unless, with respect to such prior expenditures, the City shall have made a declaration of official intent which complies with the provisions of Section 1.150-2 of the Regulations, provided that this certification shall not apply (i) with respect to certain de minimis expenditures, if any, with respect to the Project meeting the requirements of Section 1.150-2(f)(1) of the Regulations, or (ii) with respect to “preliminary expenditures” for the Projects as defined in Section 1.150-2(f)(2) of the Regulations, including engineering or architectural expenses and similar preparatory expenses, which in the aggregate do not exceed 20% of the “issue price” of the Bonds. 9.05. Qualified Tax-Exempt Obligations. The Bonds are NOT designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code. 9.06. 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 the Bonds, the registered owner or owners thereof 4819-8581-4460\3 13 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 the Bonds, any person or entity which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, such Bonds (including persons or entities holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of the Bonds 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 12 months after the end of each fiscal year of the City, commencing with the fiscal year ending December 31, 2020, 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 generally accepted accounting principles 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 the headings: “Economic and Financial Information – Valuations,” “– Tax Capacity Rates,” “– Tax Levies and Collections,” and “Summary of Debt and Debt Statistics,” which information may be unaudited. 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 by the Municipal Securities Rulemaking Board (the “MSRB”) through its Electronic Municipal Market Access System (EMMA). 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, 4819-8581-4460\3 14 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 10 business days, to the MSRB through EMMA, notice of the occurrence of any of the following events (each a “Material Fact,” as hereinafter defined): (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 Bonds, or other material events affecting the tax status of the Bonds; (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 City; (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 paying agent or the change of name of a paying agent, if material. (O) Incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders, if material; and (P) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties. 4819-8581-4460\3 15 For purposes of the events identified in paragraphs (O) and (P) above, the term “financial obligation” means (i) a debt obligation; (ii) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) a guarantee of (i) or (ii). The term “financial obligation” shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. As used herein, for those events that must be reported if material, a “Material Fact” is a fact as to which a substantial likelihood exists that a reasonably prudent investor would attach importance thereto in deciding to buy, hold or sell the Bonds 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, a Material Fact is also a fact that would be deemed material for purposes of the purchase, holding or sale of the Bonds 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, to the MSRB through EMMA, 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 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 through EMMA, in an electronic format as prescribed by the MSRB, the information described in subsection (b). 4819-8581-4460\3 16 (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)(2) 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 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. 4819-8581-4460\3 17 SECTION 10. CERTIFICATION OF PROCEEDINGS. 10.01. Registration 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, together with such additional information as is required, and to obtain a certificate that the Bonds and the taxes levied pursuant hereto have been duly entered upon the County Auditor’s Bond register. 10.02. 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 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. 10.03. Official Statement. The Preliminary Official Statement relating to the Bonds prepared and distributed by Northland is hereby approved. Northland is hereby authorized on behalf of the City to prepare and distribute to the Purchaser within seven business days from the date hereof, a Final 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 l5c2-12 adopted by the Securities and Exchange Commission 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. 4819-8581-4460\3 18 APPROVED AND ADOPTED this ___ day of July, 2020. CITY OF LAKEVILLE By: Douglas P. Anderson, Mayor ATTEST: Charlene Friedges, City Clerk VOTE Anderson Hellier Lee Volk Wheeler Aye ☐ ☐ ☐ ☐ ☐ Nay ☐ ☐ ☐ ☐ ☐ Abstain ☐ ☐ ☐ ☐ ☐ Absent ☐ ☐ ☐ ☐ ☐ 4819-8581-4460\3 EXHIBIT A [To Come] Maturity Improvement Bonds Utility Bonds Abatement Bonds Total 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 4819-8581-4460\3 EXHIBIT B UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF DAKOTA CITY OF LAKEVILLE GENERAL OBLIGATION BONDS, SERIES 2020A R-___ $_________ Interest Rate Maturity Date Date of Original Issue CUSIP No. __% February 1, 20__ August 13, 2020 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: THOUSAND DOLLARS CITY OF LAKEVILLE, State of Minnesota (the “City”) acknowledges itself to be indebted and for value received hereby promises to pay to the registered owner specified above, or registered assigns, the principal amount specified above on the maturity date specified above and promises to pay interest thereon from the date of original issue specified above or from the most recent Interest Payment Date (as hereinafter defined) to which interest has been paid or duly provided for, at the annual interest rate specified above, payable on February 1 and August 1 in each year, commencing February 1, 2021 (each such date, an “Interest Payment Date”), all subject to the provisions referred to herein with respect to the redemption of the principal of this Bond before maturity. The interest so payable on any Interest Payment Date shall be paid 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 calendar month preceding that in which such Interest Payment Date occurs. 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, Saint Paul, Minnesota, as Bond registrar, transfer agent and paying agent, or its successor designated under the Resolution described herein (the “Registrar”) or other agreed-upon means of payment by the Registrar or its designated successor. For the prompt and full payment of such principal and interest as the same respectively come 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 $[_____] issued pursuant to a resolution adopted by the City Council on July 20, 2020 (the “Resolution”), to finance various street, water, and parking lot improvements. This Bond issued by authority of and in strict accordance with the provisions of the Constitution and laws of the State of Minnesota thereunto enabling, including Minnesota Statutes, Sections 469.1812-469.1815 and Chapters 429, 444, and 475. For the full and prompt payment of the principal of and interest on the Bonds as the same become due, the full faith, credit and 4819-8581-4460\3 2 taxing power of the City have been and are hereby irrevocably pledged. The Bonds are issuable only in fully registered form, in the denomination of $5,000 or any integral multiple thereof, of single maturities. Bonds maturing on February 1, 2030 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, 2029 and on any date thereafter, at a price equal to the principal amount thereof and accrued interest to the date of redemption. The City shall cause notice of the call for redemption thereof to be published if and to the extent required by law, and at least thirty (30) and not more than sixty (60) days prior to the designated redemption date, shall cause notice of call for redemption to be mailed, by first class mail (or, if applicable, provided in accordance with the operational arrangements of the securities depository), to the registered holders of any Bonds, at the holders’ addresses as they appear on the Bond register maintained by the Bond 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 owner without charge, representing the remaining principal amount outstanding. The Bonds are NOT designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. 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 designated 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 any 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 as herein provided 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 preliminary 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 hereof, the City Council has by the Resolution 4819-8581-4460\3 3 covenanted and agreed to collect and apply to payment of the bonds certain ad valorem taxes, net revenues of the water utility, special assessments upon property specially benefited by the local improvements financed with the Bonds, and tax abatement revenues, which taxes, net revenues, assessments, and abatement revenues are estimated to be collectible in years and amounts sufficient to produce sums not less than 5% in excess of the principal of and interest on the Bonds when due, and has appropriated such taxes, assessments, net revenues and abatement revenues to its General Obligation Bonds, Series 2020A Bond Fund for the payment of such principal and interest; that if necessary for the payment of such 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; that all proceedings relative to the projects financed by this Bond have been or will be taken according to law 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. 4819-8581-4460\3 4 IN WITNESS WHEREOF, the City has caused this Bond to be executed on its behalf by the facsimile signatures of its 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 4819-8581-4460\3 5 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: TEN COM --as tenants in common UTMA …………. as Custodian for ………….. (Cust) (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: 4819-8581-4460\3 EXHIBIT C LEVIES AND SPECIAL ASSESSMENTS [to come] 4819-8581-4460\3 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 20, 2020, by the City Council of Lakeville, Minnesota, setting forth the form and details of an issue of $[_____] General Obligation Bonds, Series 2020A dated the date of issuance thereof. 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 through 475.63. WITNESS my hand and official seal on the _____ day of August, 2020. Dakota County Auditor (SEAL) U.S. PUBLIC FINANCE CREDIT OPINION 29 June 2020 Contacts Benjamin J VanMetre +1.312.706.9951 AVP-Analyst ben.vanmetre@moodys.com Tatiana Killen +1.212.553.2895 VP-Senior Analyst tatiana.killen@moodys.com CLIENT SERVICES Americas 1-212-553-1653 Asia Pacific 852-3551-3077 Japan 81-3-5408-4100 EMEA 44-20-7772-5454 Lakeville (City of) MN Update to credit analysis Summary The City of Lakeville (Aa1) benefits from a large tax base located in the Twin Cities (Minneapolis; Aa1 stable; St. Paul, Aa1 stable) metropolitan area, above average resident income indices and a very strong financial profile. The credit attributes are balanced by above average leverage related to long-term debt and pension burdens, both of which contribute to high fixed costs. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. We do not see any material immediate credit risks for the city. However, the situation surrounding coronavirus is rapidly evolving and the longer term impact will depend on both the severity and duration of the crisis. If our view of the credit quality of the city changes, we will update our opinion at that time. Credit strengths »Large and affluent tax base near the Twin Cities »Very strong financial profile Credit challenges »Above average leverage related to long-term debt and pension burdens »High fixed costs Rating outlook Outlooks are generally not assigned to local government credits with this amount of debt. Factors that could lead to an upgrade »Reduced leverage and fixed cost burdens Factors that could lead to a downgrade »Substantial tax base contraction or weakening of resident income indices »Significant narrowing of operating reserves or liquidity »Growth in leverage or fixed costs MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE Key indicators Lakeville (City of) MN 2015 2016 2017 2018 2019 Economy/Tax Base Total Full Value ($000)$6,157,266 $6,520,717 $6,921,610 $7,472,127 $8,160,104 Population 58,592 59,786 61,056 62,489 62,489 Full Value Per Capita $105,087 $109,068 $113,365 $119,575 $130,585 Median Family Income (% of US Median)158.7%161.1%161.0%163.4%163.4% Finances Operating Revenue ($000)$35,704 $37,269 $39,818 $40,784 $44,566 Fund Balance ($000)$24,918 $28,536 $31,892 $33,442 $37,314 Cash Balance ($000)$39,041 $40,163 $33,625 $34,043 $44,662 Fund Balance as a % of Revenues 69.8%76.6%80.1%82.0%83.7% Cash Balance as a % of Revenues 109.3%107.8%84.4%83.5%100.2% Debt/Pensions Net Direct Debt ($000)$108,220 $115,545 $109,802 $110,212 $107,737 3-Year Average of Moody's ANPL ($000)$49,467 $57,795 $60,853 $63,612 $63,324 Net Direct Debt / Full Value (%)1.8%1.8%1.6%1.5%1.3% Net Direct Debt / Operating Revenues (x)3.0x 3.1x 2.8x 2.7x 2.4x Moody's - adjusted Net Pension Liability (3-yr average) to Full Value (%)0.8%0.9%0.9%0.9%0.8% Moody's - adjusted Net Pension Liability (3-yr average) to Revenues (x)1.4x 1.6x 1.5x 1.6x 1.4x Source: Moody's Investors Service, US Census Bureau, audited financial statements Profile The City of Lakeville is located about 20 miles south of downtown Minneapolis and encompasses nearly 40 square miles in Dakota County (Aaa stable). The city serves more than 62,000 residents. Detailed credit considerations Economy and tax base: large, affluent tax base near Twin Cities The coronavirus is driving an unprecedented economic slowdown. We currently forecast US GDP to decline significantly during 2020 with a gradual recovery commencing toward the end of the year. Local governments with the highest exposure to tourism, hospitality, healthcare, retail, and oil and gas could suffer particularly severe impacts. Going into the current economic slowdown, a combination of appreciating home values and robust residential construction drove seven consecutive years of tax base growth in the city. The tax base now exceeds $8 billion, as measured by economic market value. The growth in the city's tax base has largely been driven by the residential development needed to support the city's growing population. Between 1990 to 2010, the city's population more than doubled to nearly 56,000 residents and has shown continued growth in recent years. Despite the coronavirus pandemic, officials report generally stable operations and collections among larger employers and taxpayers as well as continued residential development underway within the city. Management expects residential development to continue, with 350 new single family home building permits annually. About 30% of the city is available to accommodate future development. The city's economic ties to the Twin Cities metropolitan area supports the strong resident income indices and favorable demographic trends. Median family income is estimated at 163% of the national median. The unprecedented economic slowdown, however, is causing a sharp spike in unemployment rates across the nation. As of April 2020, the city's unemployment rate (8.4%) was on par with the state's rate (8.6%) and well below the national rate (14.4%). This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. 2 29 June 2020 Lakeville (City of) MN: Update to credit analysis MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE Financial operations and reserves: very strong financial profile supported by ample reserves The city's financial profile is likely to remain very strong because of sizable reserves, conservative budgeting practices and limited financial pressure related to the coronavirus pandemic. Current fiscal 2020 projections reflect a modest operating surplus. The city reports that unbudgeted expenditures related to the coronavirus pandemic have been modest and that positive revenue variances and recently implemented expenditure controls will help mitigate the financial impact. Looking forward to fiscal 2021, the city plans to adopt a balanced budget that will include a decrease in the property tax collection rate and will also continue focusing on expenditure controls including holding non-personnel budgets at 2020 levels, prioritizing capital projects and deferring non-major projects as needed. The city had several years of operating surpluses before the current economic slowdown. The city closed fiscal 2019 with a combined available fund balance of about $37 million, equal to a very strong 84% of operating revenue across the general fund and debt service fund. Property taxes are the city's primary revenue source, comprising about 64% of revenue, which provides the city with a great degree of flexibility because state levy limits are not currently in place for cities. The city receives limited state and federal aid and does not have significant reliance on economically sensitive revenue. The city's two major enterprise funds include its Liquor Fund and the Utility Fund. The Liquor Fund accounts for operations of the city's three liquor stores, while the Utility Fund accounts for water and sanitary sewer activities. Both funds ended fiscal 2019 with very healthy liquidity and strong debt service coverage. Neither enterprise has relied on general fund support. LIQUIDITY The city's liquidity is strong with fiscal 2019 operating cash at $45 million, or 100% of operating revenue. Unrestricted cash and investments in the city's liquor enterprise and utility enterprise funds exceeded $13.6 million at the close of fiscal 2019. Debt and pensions: elevated leverage; high fixed costs The city’s leverage related to long-term debt and pension liabilities is elevated. Inclusive of the 2020 bonds, the city has a net debt burden equals about $110 million, or 1.4% of full value and 2.5x fiscal 2019 revenue. The city’s adjusted net pension liability (ANPL), based on a 3.5% discount rate, totals about $71 million while the three year average totals $63 million, equal to 0.8% of full value and 1.4x operating revenue. In comparison, the city’s reported net pension liability, based on a 7.5% discount rate, totals about $10 million. The city’s total fixed costs, consisting of debt service and retirement contributions, are high, typically hovering around 30% of operating revenue. The city's debt burden is the primary driver of the high fixed costs, most of which is supported by an unlimited tax levy. DEBT STRUCTURE All of the city's debt is fixed rate and long term. The city’s GOULT bonds are secured by the city’s full faith and credit pledge and the authority to levy a dedicated property tax unlimited as to rate and amount. The security also benefits from a statutory lien. The city's lease revenue debt is secured by its pledge to make annual lease payments, which are subject to annual appropriation, per the lease-purchase agreements. DEBT-RELATED DERIVATIVES The city has no debt-related derivatives. PENSIONS AND OPEB The city participates in two multiple-employer cost-sharing plans, the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF). Minnesota statutes establish local government retirement contributions as a share of annual payroll. The 2019 employer contribution rates were set at 7.5% of payroll for GERF and at 16.95% of payroll for PEPFF. The city’s total fiscal 2019 pension contribution was equal to about 4% of operating revenue. Statutory contribution levels have historically not kept pace with growing unfunded liabilities in statewide pension plans. Contributions to both PEPFF and GERF from all participating governments in aggregate, however, exceeded 100% of each plan’s “tread water” 3 29 June 2020 Lakeville (City of) MN: Update to credit analysis MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE indicator in 2019.1The state of Minnesota approved legislation in 2018 that will modify benefits and modestly increase contributions for some pension plans. Employer contributions from cities to the police and fire plan, for example, will modestly increase to 17.7% by 2020 from the previous rate of 16.2% in 2018. Because employer contributions will not rise significantly, cities are unlikely to contend with material budget strain from the increases. Other post-employment benefits (OPEB) obligations do not represent a material credit risk for the city. The city does not offer explicit OPEB benefits, but allows retired employees to stay on its healthcare plan, creating an implicit rate subsidy. Both the city’s reported net OPEB liability and our adjusted net OPEB liability for the city, based on the use of a different discount rate, total about $1 million. . ESG considerations ENVIRONMENTAL Environmental factors have not had a material impact on the city's credit profile. According to data of Moody's affiliate, Four Twenty Seven, Dakota County has notable exposure to water stress and has a relatively limited exposure to other various environmental risks going forward. SOCIAL Social factors are a key consideration for the city. Resident income levels are above average. The median age of Lakeville residents is slightly below state and national figures. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. We do not see any material immediate credit risks for the city. However, the situation surrounding coronavirus is rapidly evolving and the longer term impact will depend on both the severity and duration of the crisis. If our view of the credit quality of the city changes, we will update our opinion at that time. GOVERNANCE Minnesota cities have an Institutional Framework score of “Aa”, which is strong. The sector has one or more major revenue sources that are not subject to any caps. Revenues tend to be predictable, as cities rely primarily on property taxes and state Local Government Aid (LGA), which is distributed based on demographic and tax base factors. Revenue-raising flexibility is moderate as cities generally benefit from unlimited levying authority, except during years in which the state has imposed limits. Levy limits are not currently in place for cities. Across the sector, fixed and mandated costs are relatively high. Expenditures mostly consist of personnel costs, which are highly predictable. Rating methodology and scorecard factors The US Local Government General Obligation Debt methodology includes a scorecard, a tool providing a composite score of a local government’s credit profile based on the weighted factors we consider most important, universal and measurable, as well as possible notching factors dependent on individual credit strengths and weaknesses. Its purpose is not to determine the final rating, but rather to provide a standard platform from which to analyze and compare local government credits. 4 29 June 2020 Lakeville (City of) MN: Update to credit analysis MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE Lakeville (City of) MN Scorecard Factors Measure Score Economy/Tax Base (30%) [1] Tax Base Size: Full Value (in 000s)$8,160,104 Aa Full Value Per Capita $130,585 Aa Median Family Income (% of US Median)163.4%Aaa Finances (30%) Fund Balance as a % of Revenues 83.7%Aaa 5-Year Dollar Change in Fund Balance as % of Revenues 27.7%Aaa Cash Balance as a % of Revenues 100.2%Aaa 5-Year Dollar Change in Cash Balance as % of Revenues -13.3%Ba Management (20%) Institutional Framework Aa Aa Operating History: 5-Year Average of Operating Revenues / Operating Expenditures (x)1.0x Aa Debt and Pensions (20%) Net Direct Debt / Full Value (%)1.4%Aa Net Direct Debt / Operating Revenues (x)2.5x A 3-Year Average of Moody's Adjusted Net Pension Liability / Full Value (%)0.8%Aaa 3-Year Average of Moody's Adjusted Net Pension Liability / Operating Revenues (x)1.4x A Notching Factors:[2] Standardized Adjustments [3]: Unusually Strong or Weak Security Features - Secured by Statute Up Scorecard-Indicated Outcome Aa1 Assigned Rating Aa1 Note: The negative trend in the city's liquidity reflected in the above table is driven by the timing of various cross-over refundings. Net of these refundings, and similar to the trend fund balance, the liquidity trend has been positive. [1] Economy measures are based on data from the most recent year available. [2] Notching Factors are specifically defined in the US Local Government General Obligation Debt methodology. [3] Standardized adjustments are outlined in the GO Methodology Scorecard Inputs. Source: US Census Bureau, audited financial statements Endnotes 1 Employer contributions that tread water equal the sum of current year service cost and interest on reported net pension liabilities at the start of the year, using reported assumptions. 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REPORT NUMBER 1234917 6 29 June 2020 Lakeville (City of) MN: Update to credit analysis MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE Contacts Benjamin J VanMetre +1.312.706.9951 AVP-Analyst ben.vanmetre@moodys.com Tatiana Killen +1.212.553.2895 VP-Senior Analyst tatiana.killen@moodys.com CLIENT SERVICES Americas 1-212-553-1653 Asia Pacific 852-3551-3077 Japan 81-3-5408-4100 EMEA 44-20-7772-5454 7 29 June 2020 Lakeville (City of) MN: Update to credit analysis