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HomeMy WebLinkAboutResolution 3564 Authorize issuance of $106,000, Sidewalk 2002 bonds RESOLUTION NO. 3564 RESOLUTION RELATING TO $106,000 SPECIAL SIDEW ALK, CURB, GUTTER AND ALLEY APPROACH BOND, SERIES 2002; AUTHORIZING THE ISSUANCE AND SALE, FIXING THE FORM AND DETAILS, AND PROVIDING FOR THE EXECUTION AND DELIVERY THEREOF AND CREATING SPECIAL SIOEW ALK, CURB, GUTTER AND ALLEY APPROACH FUND AND PRESCRIBING COVENANTS OF THE CITY FOR THE SECURITY THEREFOR BE IT RESOLVED by the City Commission (the "Commission") of the City of Bozeman, Montana (the "City"), as follows: Section 1. Recitals. It is hereby found, determined and declared as follows: 1.01. Authorization. The City is authorized pursuant to Section 7-14-4109, M.C.A., to order the construction or reconstruction of sidewalks, curbs or gutters in front of any lot or parcel of land and may order alley approaches constructed or replaced adjacent to any lot or parcel of land within the City. By Resolution Nos. 3358 and 3362 adopted April 17, 2000 and May 15, 2000 (the "Orders"), the Commission set forth its intention and after notice and public hearing ordered in certain sidewalks, curbs, gutters and alley approaches which were described in the respective resolutions. The Orders were duly entered in the minutes of the Commission and set forth the names of the streets along which sidewalks, curbs or gutters are to be constructed or along which the alley approaches are to be constructed or replaced (the "Project"). As provided in the Orders and in accordance with Section 7-14-4109, M.C.A., written notice of the Orders was given to the owners or agents of owners of lots or parcels of land against which the costs of the proposed improvements were to be assessed. Upon the expiration of the 30-day notice period in the Orders, the City determined which of the proposed improvements have been or would be constructed by the owners of the adjacent property and which of the proposed improvements would be constructed by the City. The improvements to be constructed by the City (the "Improvements") are described in Exhibit A attached hereto. Pursuant to Montana Code Annotated, Section 7-7-109, the City has received an offer from the Board of Investments of the State of Montana through its INTERCAP Program to purchase the Bond (as hereinafter defined) at a price of $106,000, plus interest accrued on the Bond to the date of delivery, if any, upon the terms and conditions set forth herein and on the condition that the Bond is secured by the Revolving Fund. In Resolution No. 3554, adopted October 21,2002, this Commission found that it is in the public interest, and in the best interest of the City and the properties, to secure payment of principal of and interest on the Bond by the Special Improvement District Revolving Fund of the City, on the basis of the factors required to be considered under Section 7-12-4225 of the Act. Those findings are hereby ratified and confirmed. ---.., --. --....-- -....-.-.-.-- 1.02. Costs. Costs of the Improvements in excess of the costs to be assessed against the Improvements will be paid from available City contributions in the approximate amount of $3,000. It is currently estimated that the costs and expenses to be assessed against properties benefitted by the Improvements, including costs of preparation of plans, specifications, maps, profiles, engineering superintendence and inspection, preparation of assessment rolls, expenses of making the assessments, the cost of work and materials under the construction contract and all other costs and expenses, including the deposit of proceeds in the Revolving Fund and costs of issuance of the Bond, is not less than $106,000. Such amount will be levied and assessed upon the assessable real property benefitted by the Improvements. This Commission has jurisdiction and is required by law to levy and assess such amount, to collect such special assessments and credit the same to the special sidewalk, curb, gutter and alley approach fund created for the Improvements, which fund is to be maintained on the official books and records of the City separate from all other City funds, for the payment of principal and interest when due on the bonds herein authorized. 1.03. Compliance with Constitution and Statutes. All acts, conditions and things required by the Constitution and laws of the State of Montana, including Montana Code Annotated, Title 7, Chapter 14, Part 41, and Title 7, Chapter 12, Parts 41 and 42, as amended, in order to make the Bond a valid and binding special obligation in accordance with its terms and in accordance with the terms of this resolution have been done, do exist, have happened and have been performed in regular and due form, time and manner as required. Section 2. $106.000 Special Sidewalk, Curb, Gutter and AIley Approach Bond. Series 2002. 2.01. Principal Amount, Maturities. Date. Denominations and Interest Rate. For the purpose of paying the costs and expenses incurred in the construction of the Improvements and in anticipation of the collection of special assessments to be levied therefor, and in accordance with the proposal described in Section 1.01, the City shall forthwith issue and deliver to the Board of Investments its Special Sidewalk, Curb, Gutter and Alley Approach Bond, Series 2002 (the "Bond"), in the aggregate principal amount of $ 106,000, payable solely from the 2002 Special Sidewalk, Curb, Gutter and Alley Approach Fund of the City (the "2002 Sidewalk Fund"). The Bond to be issued and sold pursuant to this Resolution shall be designated "Special Sidewalk, Curb, Gutter and Alley Approach Bond, Series 2002," shall be in the maximum authorized principal amount of $106,000, shall be one in number, shall be dated as of the date of delivery to and payment therefor by the Board of Investments, and principal thereof shall bear interest from the date of advancement thereof under the Bond, at the rate per annum equal to the Variable Rate (as hereinafter defined), as such may be adjusted from time to time as hereinafter provided. Interest shall be computed on the basis of the actual number of days in the years and the actual number of days outstanding. Interest shall be payable on each February 15 and August 15, commencing February 15,2003 and upon the redemption of any principal thereof in respect of such prepaid principal. Principal shall be payable in equal annual installments on each August 15, commencing August 15,2003, subject to redemption as herein provided. Payments of principal of and interest on the Bond shall be made to the registered holder of the Bond, at its address as it appears on the Register on the date such principal and interest are payable, in lawful money ofthe United States of America. 2 u_.___.._"_.,,..u._.._ .___._.___ ____.,,__ ..___.____.__._ __ - .____ __...____n_ Outstanding principal of the Bond shall bear interest from the date of advancement thereof under the Bond until paid at the Variable Rate, as such may be adjusted from time to time as hereinafter provided. Until the initial Adjustment Date for the Bond, the Variable Rate shall be three and fifteen hundredths percent (3.15%) per annum. Thereafter, for each Adjustment Period (as hereinafter defined), the Variable Rate shall be the rate per annum equal to the Board of Investments Rate as determined under the INTERCAP Program. If for any reason the interest rate cannot be established as so provided or is held invalid or unenforceable by a court oflaw, the interest rate for the Bond for the Adjustment Period shall be a rate equal to the largest integral multiple of five hundredths of one percent (0.05%) that is equal to or less than eighty percent (80%) of the average yield, evaluated at par, of United States Treasury obligations with a stated or remaining maturity of one year, as reported in The Wall Street Journal (Des Moines Edition) (or, if such paper is no longer published or fails to report such information, in any other financial periodical selected by the City acceptable to the Board of Investments) on the Adjustment Date or, if the Adjustment Date is not a Business Day (as hereinafter defined), the immediately preceding Business Day, but in no event to exceed fifteen percent (15.00%) per annum. As used herein, "Adjustment Date" means February 16 during the term of the Bond and "Adjustment Period" means the period beginning on an Adjustment Date and ending on the day before the next succeeding Adjustment Date or the final maturity of the Bond (the final stated maturity being August 15,2007), whichever is earlier; provided that if the Bond is not paid at its final maturity, the final Adjustment Period with respect to the Bond shall extend until it is paid or provision has been duly made for its payment. "Business Day" means any day other than (i) a Saturday or Sunday, or (ii) a legal holiday in the State of Montana. The Bond may be sold at a private, negotiated sale without a marketability opinion, in accordance with Montana Code Annotated, Section 7 -12-4203(i)(b). If the stated maturity for the payment of any interest on or principal of the Bond or if any redemption date shall be a day which is not a Business Day, then such payment may be made on the next succeeding Business Day, with the same force and effect as if made on such stated maturity or redemption date. Upon the delivery of the Bond, all of the proceeds thereof shall be advanced thereunder. 2.02. Registration. The Bond shall be fully registered as to both principal and interest and shall be initially registered in the name of and payable to the Board of Investments. While so registered, principal of and interest on the Bond shall be payable at the office of U.S. Bank, N.A. (formerly known as First Company of Montana National Association), as Trustee for the INTERCAP Program, in Seattle, Washington, or such other place as may be designated by the Board of Investments in writing and delivered to the Administrative Services Director. The Administrative Services Director and his successors in office shall act as Registrar for the Bond and as such shall establish and maintain a Bond Register for the purpose of recording the names and addresses of the registered holder or assigns of the Bond, and the date of registration. The City reserves the right to appoint a successor Registrar which may be a financial institution. The City shall pay all fees and charges of such Registrar for such services. 2.03. Redemotion. Whenever there will be any balance in the 2002 Sidewalk Fund after payment of the principal and interest due on the Bond drawn against such fund, either from the prepayment of special assessments levied with respect to the Improvements or from the 3 ------.. ,,--.- --- --...--.--------.-..-- transfer of surplus moneys from the Principal Account, or otherwise, the Administrative Services Director shall call for redemption on any interest payment date the Bond (or that portion thereof that can be paid by the balance) in an amount which, together with the interest thereon to the date of redemption, will equal the amount in the 2002 Sidewalk Fund on the interest payment date. Since the Improvements have been completed, it is not anticipated that there will be any surplus construction funds. In addition, the City may redeem at its option any installment of principal of the Bond on any business day at a price equal to the principal amount to be redeemed plus interest accrued to the date of redemption, and without premium, provided that the City gives at least thirty days notice to the Board of Investments or the then holder of the Bond. 2.04. Execution and Delivery. The Bond shall be prepared under the direction of the Administrative Services Director and shall be executed on behalf of the City by the signature of the Mayor, City Manager and the Clerk of the Commission, and sealed with the official corporate seal of the City. When the Bond has been executed, the Administrative Services Director shall cause it to be dated as of the date of delivery and delivered to the Board of Investments, as purchaser thereof, upon payment of the purchase price heretofore agreed upon, and the Board oflnvestments shall not be obligated to see to the application of the purchase price. 2.05. Form of Bond. The Bond shall be prepared in substantially the form set forth in Exhibit B hereto, and by this reference made a part hereof, with such modifications as are permitted by the Act. Section 3. 2002 Special Sidewalk, Curb, Gutter and Allev Approach Fund. 3.0 I. 2002 Sidewalk Fund. The 2002 Sidewalk Fund is hereby created and designated as the "2002 Special Sidewalk, Curb, Gutter and Alley Approach Fund." The 2002 Sidewalk Fund shall be maintained as a separate bookkeeping account by the Administrative Services Director on the books and records of the City. Within the 2002 Sidewalk Fund there shall be maintained separate accounts, designated as the "Construction Account," the "Principal Account" and the "Interest Account," respectively. 3.02. Construction Account. There shall be credited to the Construction Account of the 2002 Sidewalk Fund the proceeds of the sale of the Bond. All costs and expenses of constructing the Improvements to be paid from proceeds of the Bond shall be paid from time to time as incurred and allowed from the Construction Account in accordance with the provisions of applicable law, and moneys in such Construction Account shall be used for no other purpose; provided that after all claims and expenses with respect to the Improvements have been fully paid and satisfied, any moneys remaining in the Construction Account shall be transferred to the Principal Account in the 2002 Sidewalk Fund and applied to the redemption of Bond. 3.03. Principal Account and Interest Account. Money in the Principal Account and the Interest Account shall be used only for payment of the principal of and interest on the Bond as such payments become due or to redeem the Bond and to pay any amounts payable to the United States in respect of any Bond under Section 148(f) of the Code. From the proceeds of the Bond, there shall be deposited in the Interest Account any interest on the Bond accrued to the date of its delivery. Interest income on funds in the Accounts shall be retained therein and used 4 -----.-.-----..-.--.-----..-.... as any other funds therein. In addition, there is hereby appropriated to the Principal Account and Interest Account: (1) collections of the special assessments covenanted to be levied pursuant to Section 4.03 if at the time the Bond is then outstanding; (2) any funds transferred to the Principal Account or Interest Account from the Construction Account as provided in Section 3.02; and (3) any other amounts appropriated from time to time by the Council to the payment of the Bond or interest thereon. 3.04. Loans From Revolving Fund. The Commission shall annually or more often if necessary issue an order authorizing a loan or advance from the Special Improvement District Revolving Fund to the 2002 Sidewalk Fund in an amount sufficient to make good any deficiency then existing in the Interest Account in the 2002 Sidewalk Fund, and shall issue an order authorizing a loan or advance from the Revolving Fund to the 2002 Sidewalk Fund in an amount sufficient to make good any deficiency then existing in the Principal Account of the 2002 Sidewalk Fund, to the extent that moneys are available in the Revolving Fund. Pursuant to Ordinance No. 612 and in connection with the public offering of the Bond, the City has undertaken and agreed to provide funds for the Revolving Fund by levying such tax or making such loan from the General Fund as authorized by Montana Code Annotated, Section 7-12-4222. In the event that the balance on hand in the Revolving Fund fifteen days prior to any date when principal and interest is due on special improvement district bonds and sidewalk, curb, gutter and alley approach warrants of the City is not sufficient to make good all deficiencies then existing in the improvement district fund or sidewalk, curb, gutter and alley approach fund for which the City has promised to make loans from the Revolving Fund, the balance on hand in the Revolving Fund shall be allocated to the funds in which such deficiencies then exist in proportion to the amounts of the deficiencies on the respective dates ofreceipt of such money, until all interest accrued on such special improvement district bonds and sidewalk, curb, gutter and alley approach warrants of the City has been paid. On any date when all accrued interest on special improvement district bonds and sidewalk, curb, gutter and alley approach warrants of the City payable from funds for which the City has promised to make loans from the Revolving Fund has been paid, any balance remaining in the Revolving Fund shall be loaned or advanced to the improvement district fund or sidewalk, curb, gutter and alley approach fund for payment and redemption of bonds or warrants to the extent the improvement district fund or sidewalk, curb, gutter and alley approach fund is deficient for such purpose, in an amount proportionate to the amount of such deficiency. The City hereby detennines, covenants and agrees to levy the property tax described in the immediately preceding paragraph to provide funds for the Revolving Fund so long as any Bonds are outstanding to the extent required under the provisions of this Resolution and the Act, even though such property tax levy may, under applicable law or provisions of the home rule charter of the City, require that property tax levies of the City for other purposes be reduced correspondingly. Section 4. City Covenants. The City covenants and agrees with the holders from time to time of each of the Bond that until the Bond and interest thereon are fully paid: 4.01. Compliance with Covenants. The City will hold the 2002 Sidewalk Fund and the Special Improvement District Revolving Fund of the City created by Ordinance No. 612, adopted October 2, 1931 (the "Revolving Fund"), as trust funds, separate and apart from all of its 5 other funds, and the City, its officers and agents, will comply with all covenants and agreements contained in this resolution. 4.02. Construction of Improvements. The City will do all acts and things necessary to enforce the provisions of the construction contracts entered into or to be entered into for the Improvements and to ensure the completion of the Improvements in accordance with the plans and specifications therefor and within the time therein provided, and will pay all costs thereof promptly as incurred and allowed, out of the Construction Account and within the amount of the bond proceeds appropriated thereto. 4.03. Assessments. The City will do all acts and things necessary for the final and valid levy of special assessments upon all assessable property benefitted by the Improvements, in accordance with the Constitution and laws of the State of Montana and the Constitution of the United States, in an aggregate principal amount not less than $106,000. Such special assessments shall be levied on each lot or parcel of land in front of which sidewalks, curbs and gutters are to be constructed and each lot or parcel of land having an access via the alley approach and, unless prepaid in full, shall be payable in equal semiannual principal installments over a period of five years. Each special assessment shall bear interest on the whole amount remaining unpaid at an annual rate equal to the sum, determined as of the date an installment of the special assessment is levied each fiscal year, of: (i) the then current Variable Rate, plus (ii) one percent (1.00%) per annum, plus (iii) if and to the extent that the Variable Rate is then less than 15.00% per annum (the maximum interest rate on the Bond), an additional one percent (1.00%) per annum, interest being payable with principal installments. The assessments to be levied will be payable on the 30th day of November and on the 31 st day of May in each fiscal year during the term of the Bond. The first partial payment of each such assessment shall include interest on the entire assessment from December 13, 2002, the date of original registration of the Bond, to February 15,2003, and each subsequent partial payment shall include interest for six months on the unpaid balance of such special assessment. All installments of special assessments not paid in full on or before the date due shall become delinquent on that date. The assessments shall constitute a lien upon and against the property against which they are made and levied, which lien may be extinguished only by payment ofthe assessment with all penalties, cost and interest as provided in Montana Code Annotated, Section 7-12-4191. No tax deed issued with respect to any lot or parcel ofland shall operate as payment of any installment of assessment thereon which is payable after the execution of such deed, and any tax deed so issued shall convey title subject only to the lien of said future installments, as provided in Montana Code Annotated, Section 15-18-309. 4.04. Re-assess and Re-levy. If at any time and for whatever reason any special assessment or tax herein agreed to be levied is held invalid, the City and this Commission, its officers and employees, will take all steps necessary to correct the same and to re-assess and re- levy the same, including the ordering of work, with the same force and effect as if made at the time provided by law, ordinance or resolution relating thereto, and will re-assess and re-levy the same with the same force and effect as an original levy thereof, as authorized in Montana Code Annotated, Section 7-12-4186. Any special assessment, or re-assessment or re-levy shall, so far as practicable, be levied and collected as it would have been if the first levy had been enforced including the levy and collection of any interest accrued on the first levy. 6 If proceeds of the Bond, including investment income thereon, are applied to the redemption of the Bond, as provided in Montana Code Annotated, Sections 7-12-4205 and 7-12- 4206, or if refunding bonds are issued and the principal amount of the outstanding bonds is decreased or increased, the City will reduce or increase, respectively, the assessments levied in the project area and then outstanding pro rata by the principal amount of such prepayment or the increment above or below the outstanding principal amount of bonds represented by the refunding bonds. The City and this Commission, its officers and employees will re-assess and re-Ievy such assessments, with the same effect as an original levy, in such reduced or increased amounts in accordance with the provisions of Montana Code Annotated, Sections 7-12-4176 through 7-12-4178, as described in Section 7-12-4192. 4.05. Absence of Litigation. There is now no litigation pending or, to the best knowledge of the City, threatened, questioning the validity or regularity of the ordering of the Improvements, any contract for construction of the Improvements, the levy and collection of special assessments as described herein or the undertaking and agreement of the City to make up any deficiency in the collection of special assessments through the levy of taxes and the making of advances from the Revolving Fund, or the right and powers of the City to issue the Bond, or in any manner questioning the existence of any condition precedent to the exercise of the City's powers in these matters. If any such litigation should be initiated or threatened, the City will forthwith notify in writing the Board of Investments, and will furnish the Board of Investments a copy of all documents, including pleadings, in connection with such litigation. Section 5. Tax Matters. 5.01. Use oflmprovements. The Improvements will be owned and operated 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, use or other agreement with any non-governmental person relating to the use of the Improvements or security for the payment of the Bond which might cause the Bond to be considered a "private activity bond" or "private loan bond" within the meaning of Section 141 ofthe Code. 5.02. General Covenant. The City covenants and agrees with the owners from time to time of the Bond that it will not take or permit to be taken by any of its officers, employees or agents any action which would cause the interest on the Bond to become includable in gross income for federal income tax purposes under the Code and applicable Treasury Regulations applicable to the Bond and promulgated under the Code, including, without limitation, Treasury Regulations (the "Regulations"), and covenants to take any and all actions within its powers to ensure that the interest on the Bond will not become includable in gross income for federal income tax purposes under the Code and the Regulations. 5.03. Arbitrage Certification. The Mayor, the City Manager and the Clerk of Commission, being the officers of the City charged with the responsibility for issuing the Bond pursuant to this resolution, are authorized and directed to execute and deliver to the Board of Investments a certificate in accordance with the provisions of Section 148 of the Code, and the Treasury Regulations, Sections 1.148-2(b), stating that on the basis of facts, estimates and circumstances in existence on the date of issue and delivery of the Bond, it is reasonably 7 expected that the proceeds of the Bond will be used in a manner that would not cause the Bond to be an "arbitrage bond" within the meaning of Section 148 of the Code and the Regulations. 5.04. Arbitrage Rebate Exemption. (a) The City hereby represents that the Bond qualifies for the exception for small governmental units to the arbitrage rebate provisions contained in Section 148(f) of the Code. Specifically, the City represents: (1) Substantially all (not less than 95%) of the proceeds of the Bond (except for amounts to be applied to the payment of costs of issuance and amounts to be deposited in the Interest Account pursuant to Section 3.03) will be used for local governmental activities of the City. (2) The aggregate face amount of all "tax-exempt bonds" (including warrants, contracts, leases and other indebtedness, but excluding private activity bonds) issued by or on behalf of the City and all subordinate entities thereof during 2002 is reasonably expected not to exceed $5,000,000. To date in 2002, the City has not issued any tax-exempt bonds, and in calendar years 1997 through 200 I, the average principal amount of such tax-exempt bonds issued by the City in a single calendar year was $ 1, I 08,000. (b) If notwithstanding the provisions of paragraph (a) of this Section 5.04, the arbitrage rebate provisions of Section 148(f) of the Code apply to the Bond, the City hereby covenants and agrees to make the determinations, retain records and rebate to the United States the amounts at the times and in the manner required by said Section 148(f). 5.05. Information Reporting. The City shall file with the Secretary of the Treasury, not later than February 15,2003, a statement concerning the Bond containing the information required by Section 149(e) of the Code. Section 6. Authentication of Transcript. The officers of the City are hereby authorized and directed to furnish to the Board of Investments and to the attorneys approving the legality of the Bond certified copies of all proceedings relating to the issuance of the Bond and such other certificates and affidavits as may be required to show the right, power and authority of the City to issue the Bond, and all statements contained in and shown by such instruments, including any heretofore furnished, shall constitute representations of the City as to the statements contained therein. Section 7. Repeals and Effective Date. 7.01. Repeal. All provisions of other resolutions and other actions and proceedings of the City and this Commission that are in any way inconsistent with the terms and provisions of this resolution are repealed, amended and rescinded to the full extent necessary to give full force and effect to the provisions of this resolution. 8 ___...n_ -.. .--...-....----------- _..--- 7.02. Effective Date. This resolution shall take effect immediately upon its passage and adoption by this Commission. Passed by the City Commission of the City of Bozeman, Montana, this 9th day of December, 2002. d1~ ~~ a~ ~ Clerk of the Commission 9 EXHIBIT A THE IMPROVEMENTS Description The Bond is being issued to pay a portion of the costs of engineering, reconstructing and installing certain local improvements to benefit certain properties in the City described above consisting of various sidewalk, curb, gutter and alley approach improvements consisting of the 2000 Sidewalk Program (the "Improvements") as shown below. 2000 SIDEWALK PROGRAM The City Commission has ordered in the installation of sidewalks along both sides of the following streets: . West Koch Street between South 15th A venue and South 19th A venue . West Koch Street between South 19th Avenue and South 23rd Avenue . Lincoln Road between Willow Way and South 19th Avenue (north side only) . Kagy Boulevard between Greek Way and South 11 th A venue (south side only) . Cypress Avenue between East Main Street and East Curtiss Street . East Curtiss Street between Cypress A venue and Aylsworth Avenue . East Babcock Street between Cypress Avenue and Aylsworth Avenue . East Olive Street between Cypress Avenue and McAdow Avenue . McAdow A venue between East Olive Street and East Curtiss Street . East Main Street between Cypress A venue and Highland Boulevard . West Dickerson/North 22nd Avenue between South 19th Avenue and West Koch Street . Wheat Drive between North ih A venue and Mandeville Lane . Mandeville Lane between Wheat Drive and North ih Avenue (south side only) . South 15th A venue between West Koch Street and West Dickerson Street . South 20th Avenue between West Koch Street and West College Street A-I EXHIBIT B [Face of the Bond] UNITED STATES OF AMERICA ST A TE OF MONT ANA GALLA TIN COUNTY CITY OF BOZEMAN SPECIAL SIDEWALK, CURB, GUTTER AND ALLEY APPROACH BOND, SERIES 2002 Interest at the rate per annum specified below payable at the stated maturity or upon redemption thereof No. R-l $106,000.00 FOR VALUE RECEIVED, THE CITY OF BOZEMAN (the "City"), a duly organized municipal corporation of the State of Montana, acknowledges itself to be specially indebted and hereby promises to pay, solely from the 2002 Special Sidewalk, Curb, Gutter and Alley Approach Fund hereinafter specified (the "Fund"), to the Board of Investments of the State of Montana (the "Board ofInvestments"), or registered assigns (the "Holder"), the principal amount of ONE HUNDRED SIX THOUSAND AND NO/IOO DOLLARS ($106,000.00), in principal installments on each August 15 in the years and in the principal amounts set forth below, solely from the Fund, at an interest rate per annum equal to the Variable Rate (as hereinafter defined), all subject to the provisions of this Bond permitting the redemption hereof prior to maturity: Year Principal Amount 2003 $21,200 2004 $21,200 2005 $21,200 2006 $21,200 2007 $21,200 Unpaid principal installments of this Bond shall bear interest from the date of delivery of the Bond at the rate per annum equal to the Variable Rate (as hereinafter defined), as determined from time to time, for the periods hereinafter described. Interest shall be payable on each February 15 and August 15, commencing February 15,2003 or upon earlier redemption, to the Holder of this Bond appearing in the registration books of the City as of the date of such payment. Interest hereon shall be computed on the basis of the actual number of days in the years and the actual number of days outstanding. The installments of principal and interest are payable at the office of the U.S. Bank, N.A., Seattle, Washington, or such other place as the Board of Investments shall designate in writing, except that in the event that the Board of B-1 ---------------....- Investments has assigned this Bond, the installments of principal and interest are payable to the Holder at his address as it appears on the Bond Register of the City. Principal and interest are payable in any coin or currency of the United States of America which on the respective dates of payment is legal tender for public and private debts. Upon the delivery of this Bond, all of the proceeds of this Bond shall be advanced hereunder. Interest on principal of this Bond shall accrue from the date of such advance. This Bond comprises an issue of "Special Sidewalk, Curb, Gutter and Alley Approach Bond, Series 2002" of the City, and is issued in the maximum authorized principal amount of $106,000. This Bond is issued pursuant to and in full conformity with the Constitution and laws of the State of Montana thereunto enabling, including Montana Code Annotated, Title 7, Chapter 14, Part 41 and Title 7, Chapter 12, Parts 41 and 42, as amended, for the purpose of financing the construction of sidewalk, curb, gutter and alley approach improvements in the City (the "Improvements"), pursuant to Resolution No. , adopted by the City Commission of the City on December 9,2002 (as such may be amended or supplemented, the "Resolution"). Outstanding principal of this Bond shall bear interest from the date it is advanced hereunder until paid at the Variable Rate (as hereinafter defined), as such may be adjusted from time to time as hereinafter provided. Until the initial Adjustment Date (as hereinafter defined), the Variable Rate shall be three and fifteen hundredths percent (3.15%) per annum. Thereafter, for each Adjustment Period (as hereinafter defined), the Variable Rate shall be the rate per annum equal to the Board ofInvestments Rate (as defined in the Resolution). If for any reason the interest rate cannot be established as so provided or is held invalid or unenforceable by a court of law, the interest rate for this Bond for the Adjustment Period shall be a rate equal to the largest integral multiple of five hundredths of one percent (.05%) that is equal to or less than eighty percent (80%) of the average yield, evaluated at par, of United States Treasury obligations with a stated or remaining maturity of one year, as reported in The Wall Street Journal (Des Moines Edition) (or, if such paper is no longer published or fails to report such information, in any other financial periodical selected by the City and acceptable to the Holder) on the Adjustment Date or, if the Adjustment Date is not a Business Day (as hereinafter defined), the immediately preceding Business Day, but in no event to exceed fifteen percent (15.00%) per annum. As used herein, "Adjustment Date" means February 16 during the term of the Bond, and "Adjustment Period" means the period beginning on the Adjustment Date and ending on the day before the next succeeding Adjustment Date or the final stated maturity of this Bond, whichever is earlier; provided that if this Bond is not paid at its final stated maturity, the Adjustment Period shall extend until all principal installments hereof are paid or provision has been duly made for their payment. As used herein, "Business Day" means any day other than (i) a Saturday or Sunday, or (ii) a legal holiday in the State of Montana. This Bond is payable from funds pledged and appropriated and from time to time credited to the Principal Account and Interest Account in the 2002 Special Sidewalk, Curb, Gutter and Alley Approach Fund of the City (the "Principal Account and Interest Account"). The City has also validly established a Special Improvement District Revolving Fund (the "Revolving Fund") to secure the payment of certain of its special improvement district bonds and sidewalk, curb, gutter and alley approach bonds or warrants, including the Bond. The City has B-2 ---------- ----- ..____. ..__n .__.___ ..-.--.. ----- .. also agreed, to the extent permitted by the Act, to issue orders annually authorizing loans or advances from the Revolving Fund to the 2002 Special Sidewalk, Curb, Gutter and Alley Approach Fund (the "2002 Sidewalk Fund"), in amounts sufficient to make good any deficiency in the 2002 Sidewalk Fund to pay principal of or interest on the Bond, to the extent that funds are available in the Revolving Fund, and to provide funds for the Revolving Fund by annually making a tax levy or loan from its general fund in an amount sufficient for that purpose, subject to the limitation that no such tax levy or loan may in any year cause the balance in the Revolving Fund to exceed five percent of the principal amount of the City's then outstanding special improvement district bonds and sidewalk, curb, gutter and alley approach bonds and warrants secured thereby and the durationallimitations specified in the Act. While any property tax levy to be made by the City to provide funds for the Revolving Fund is subject to levy limits under current law, the City has agreed in the Resolution to levy property taxes to provide funds for the Revolving Fund to the extent described in this paragraph and, if necessary, to reduce other property tax levies correspondingly to meet applicable levy limits. This Bond is not a general obligation of the City and the City's general credit and taxing powers are not pledged to the payment of this Bond or interest thereon. This Bond does not constitute an indebtedness of the City within the meaning of any constitutional or statutory provisions. This Bond is payable from the collection of a special tax or assessment levied upon all assessable property benefitted by the Improvements. Whenever there will be any balance in the 2002 Sidewalk Fund after payment of the principal and interest due on the Bond drawn against such fund, either from the prepayment of special assessments levied with respect to the Improvements or from the transfer of surplus moneys from the Principal Account, or otherwise, the Administrative Services Director shall call for redemption on any interest payment date the Bond (or that portion thereof that can be paid by the balance) in an amount which, together with the interest thereon to the date of redemption, will equal the amount in the 2002 Sidewalk Fund on the interest payment date. Since the Improvements have been completed, it is not anticipated that there will be any surplus construction funds. In addition, the City may redeem at its option any installment of principal of the Bond on any business day at a price equal to the principal amount to be redeemed plus interest accrued to the date of redemption, and without premium, provided that the City gives at least thirty days notice to the Board of Investments or the then holder of the Bond. It shall not be necessary for the Holder to surrender this Bond for payment upon the partial redemption hereof. The Holder agrees to note the date and principal amount of any partial redemption hereof hereon, but any failure to do so shall not affect the validity of any such redemption. The City has designated this Bond as a "qualified tax-exempt obligation" within the meaning of Section 265(b) of the Internal Revenue Code of 1986, as amended. This Bond shall be registered in the name of the holder on the Bond register of the City kept by the Administrative Services Director as Bond Registrar. This Bond is transferable by the registered holder or its attorney duly authorized in writing, upon presentation hereof with a written instrument of transfer satisfactory to the City and duly executed by the registered holder or its attorney. Such transfer shall be noted on the Bond register and on the following page hereof. The City will, upon request, issue to the registered holder or transferee, upon surrender of this Bond, one or more other Bonds of the same series, of an aggregate principal amount equal B-3 ..---.----.- to the principal amount hereof then remaining unpaid and maturing at the same time or times as the then unpaid principal installments hereof, subject to reimbursement for any tax, fee or governmental charge or other expense incurred by the City with respect to such exchange. The City may 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 of principal and interest and all other purposes, and shall not be affected by any notice to the contrary. IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that all things required to be done precedent to the issuance of this Bond have been properly done, happened and been performed in the manner prescribed by the laws of the State of Montana and the resolutions and ordinances of the City of Bozeman, Montana, relating to the issuance thereof; that all provisions for the security of the Holder of this Bond set forth in the Resolution will be punctually and faithfully performed as therein stipulated; and that the issuance of this Bond does not cause the general or special indebtedness of the City to exceed any constitutional or statutory limitation of indebtedness. IN WITNESS WHEREOF, the City of Bozeman, Montana, by its City Commission has caused this Bond to be executed by the facsimile signatures of the Mayor, the City Manager and the Clerk of the Commission and by a facsimile of the official seal of the City. CITY OF BOZEMAN, MONTANA Mayor (SEAL) City Manager Clerk of the Commission BA PROVISIONS FOR REGISTRATION OF TRANSFER AND EXCHANGE The ownership of this Bond and of the interest payable hereon may be transferred to a bona fide purchaser only by delivery hereof with an assignment duly executed by the registered owner or his attorney or legal representative, and the City may treat the registered owner as the person exclusively entitled to receive payments of principal of and interest on this Bond and to exercise all the rights and powers of an owner until this Bond is presented to the Administrative Services Director of the City of Bozeman, Montana, as Bond Registrar, accompanied by said assignment and by assurance of the nature provided by law that the same is genuine and effective, and until such transfer is duly registered on the books of the City and noted hereon by the Bond Registrar. REGISTER The ownership of the unpaid Principal Balance of this Bond and the interest accruing thereon is registered on the books of the City of Bozeman, Montana in the name of the registered holder appearing on the first page hereof or as last noted below: Name and Address of Administrative Date of Registration Registered Holder Services Director Board of Investments 240 I Colonial Drive P.O. Box 200126 Helena. MT 59620-0126 NO WRITING HEREON EXCEPT BY ADMINISTRATIVE SERVICES DIRECTOR AS BOND REGISTRAR The Bond Registrar has transferred on the books of the City of Bozeman, Gallatin County, Montana, on the date last noted below, to the registered assign noted opposite said date, ownership of the principal amount of and interest on this Bond, except the amounts of principal and interest theretofore paid: Signature of Bond Date of Transfer Registered Assign Registrar B-5 ------