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HomeMy WebLinkAboutGeneral Obligation Refunding Bonds, Series 2012 Arbitrage Certificate $3,080.000 General Obligation Refunding Bonds, Series 2012 City of Bozeman, Montana ARBITRAGE CERTIFICATE The undersigned, being the duly qualified and acting Mayor, City Finance Director and City Clerk of the City of Bozeman, Montana (the "City"), and being authorized to execute a certificate as to the reasonable expectations of the City regarding the use of proceeds of the issuance and sale by the City of its $3,080,000 General Obligation Refunding Bonds, Series 2012, of the City (the "Series 2012 Bonds"), in accordance with a resolution of the City Commission of the City adopted June 4, 2012 (the "Resolution"), within the meaning of applicable provisions of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations promulgated thereunder and applicable to the Series 2012 Bonds, including, without limitation, Treasury Regulations, Sections 1.148-0 through 1.148-11, and Sections 1.149(b)-I, 1.149(d)-I, 1.149(g)-1, 1.150-1 and 1.150-2 (the "Regulations"), do hereby certify on behalf of the City, as follows: 1. The Series 2012 Bonds are issued to provide funds, to be used with other available funds of the City, for refunding in advance of maturity the City's General Obligation Refunding Bonds, Series 2001 A, dated, as originally issued, as of as of December 1, 2001 (the "Series 2001 A Bonds"), maturing in the years 2013 through 2012 (the "Refunded 2001 A Bonds"), the City's General Obligation Bonds, Series 2003A, dated, as originally issued, as of as of February 1, 2003 (the "Series 2003A Bonds") maturing in the years 2013 through 2021 (the "Refunded 2003A Bonds,") and the City's General Obligation Refunding Bonds, Series 2003B, dated, as originally issued, as of as of February 1, 2003 (the "Series 2003B Bonds")maturing in the years 2013 and 2014 (the "Refunded 2003B Bonds," and together with the Refunded 2001A Bonds and the Refunded 2003A Bonds, the "Refunded Bonds"). No other obligations of the City are: (1) being issued at substantially the same time that the Series 2012 Bonds are being issued, (2) sold pursuant to the same plan of financing as the Series 2012 Bonds, and (3) paid out of substantially the same source of funds as will be used to pay the Series 2012 Bonds. 2. The Series 2001 A Bonds and the Series 2003A Bonds were issued for the purpose of acquiring land for and designing, constructing and equipping either a new public library or designing, constructing and equipping an expansion of the existing library (the "Library Project"). The Series 2003B Bonds were issued to redeem the City's General Obligation Bonds, Series 1995, dated, as originally issued as of April 15, 1995 (the "Series 1995 Bonds"), the proceeds of which were used for the purpose of financing the implementation of a series of transportation projects contained in the Bozeman Urban Transportation Plan 1993 Update (the "Transportation Project"; together with the Library Project, the "Projects"). All of the proceeds of the Series 1995 Bonds, the Series 2001 A Bonds, and the Series 2003A Bonds were expended within three years after the respective dates of issuance thereof for the purposes for which they were issued in accordance with the resolution authorizing their issuance and the Projects have been completed. The Projects have been and are expected to be used solely by the City to provide public Iibrary services and transportation services to members of the general public. All facilities financed by the Series 1995 Bonds, the Series 2001A Bonds, and the Series 2003A Bonds have been and are available for use by members of the general public on a substantially equal basis and the Series 1995 Bonds, the Series 2001 A Bonds, and the Series 2003A Bonds were not (and the Series 2003B Bonds were not and the Series 2012 Bonds will not be) "private activity bonds" under the provisions of Section 141 of the Code. The Series 1995 Bonds, the Series 2001 A Bonds, and the Series 2003A Bonds were not hedge bonds (and the Series 2003B Bonds were not and the Series 2012 Bonds will not be hedge bonds) as defined in Section 149(g) of the Code since at least 85% of the spendable proceeds of the Series 2001A Bonds and the 2003A Bonds were used to pay costs of the Library Project and of the Series 1995 Bonds were used to pay costs of the Transportation Project within three years after the date of issue of such bonds and no more than 50% of the proceeds of the Series 1995 Bonds, the Series 2001A Bonds, and the Series 2003A Bonds were invested in nonpurpose investments having a substantially guaranteed yield for four years or more. 3. The City will receive $3,149,168.45 of proceeds from the sale of the Series 2012 Bonds to D.A. Davidson & Co., of Great Falls, Montana(the "Original Purchaser"). To the best of our knowledge, the price paid by the Original Purchaser for the Series 2012 Bonds is reasonable under customary standards applicable in the municipal bond market. This amount represents payment of$3,149,168.45 for the principal amount of the Series 2012 Bonds (which price reflects an underwriter's discount of$23,100.00 and a reoffering premium of$92,268.45), no interest having accrued on the Series 2012 Bonds to the date hereof The Original Purchaser has represented in Exhibit A hereto that the issue price of the Series 2012 Bonds to the public is $3,172,268.45, and that a substantial amount of each stated maturity of the Series 2012 Bonds has been sold at initial reoffering prices resulting in such issue price. From the proceeds of the Series 2012 Bonds, (i) $3,120,000.00 will be applied, with the other funds described in paragraph 4 hereof, to the credit of the escrow account shown on Exhibit B hereto (which is hereby made a part hereof and incorporated herein) (the "Escrow Account") established to pay the Refunded Bonds pursuant to an Escrow Agreement, of even date herewith, between the City and Wells Fargo Bank, National Association, of Denver, Colorado (the "Escrow Agent"); (ii) $25,360.00 will be applied to payment of the costs described in paragraph 6 hereof; and (iii) $3,808.45 will be credited to the debt service account for the Series 2012 Bonds to pay interest on such bond on January 1, 2013. The Series 2012 Bonds constitute a current refunding of the Refunded Bonds and the Refunded Bonds will be called for redemption on the earliest date upon which they can be redeemed (July 19, 2012). 4. There is now$73,081.26 of the funds in the debt service account available for the refunding of the Series 2001A Bonds, the Series 2003A Bonds, and the Series 2003B Bonds with stated maturities in 2013 and thereafter, $6,643.00 of such amount will be applied to the payment the purchase price of the Initial Securities, as described on Exhibit B and $66,438.26 will be applied to establish a beginning cash balance. There are no other funds or accounts of the City which were used to pay or were reasonably expected to be used to pay principal of and interest on the Refunded Bonds. 5. As shown in the certificate of the Original Purchaser attached as Exhibit A, the yield of the Series 2012 Bonds, computed in accordance with Section 148 of the Code and 2 applicable Regulations, is 1.176669% per annum. The yield on the Series 2012 Bonds has been calculated, as provided in Section 1.148-4(b) of the Treasury Regulations, as that discount rate which when used in computing the present value, as of the issue date, of all unconditionally payable payments of principal, interest, and fees payable or reasonably expected to be paid as fees for qualified guarantees on the Series 2012 Bonds produces an amount which is equal to the "issue price"thereof. The "issue price" of the Series 2012 Bonds is $3,172,268.45, which is the initial offering price of the Series 2012 Bonds to the public. 6. The administrative costs of issuing, carrying and repaying the Series 2012 Bonds, including legal fees, escrow agent fees, initial bond registrar fees, rating agency fees, and printing fees (but exclusive of compensation to the Original Purchaser), are estimated to be $25,360.00. 7. The purpose for refunding the Refunded Bonds is to achieve debt service savings over the term of the Series 2012 Bonds, the present value of which, when discounted at a discount rate of 1.177% (the approximate yield of the Series 2012 Bonds), is $370,321.24. As required by Montana Code Annotated, Section 20-9-412(3), the average annual interest rate on the Series 2012 Bonds (1.933%) is at least one half of one percent (050%) less than the average annual interest rate on the Series 2001A Bonds (5.226%), the Series 2003A Bonds (4.591%), and the Series 2003B Bonds (4.768010). 8. Except as described in paragraph 9 hereof, none of the proceeds of the Refunded Bonds, the Series 2012 Bonds or funds of the City deposited as described in paragraph 4 hereof will be invested at a materially higher yield for a temporary period. 9. The proceeds of the Series 2012 Bonds in the amount of$25,360.00 to be used to pay issuance costs of the Series 2012 Bonds and of the refunding are expected to be fully expended for such purposes by July 19, 2012, and, pending such expenditure, may be invested in obligations with a yield in excess of the yield of the Series 2012 Bonds for the temporary period set forth in Section 1.148-9(d)(2)(iv) of the Regulations. Proceeds of the Series 2012 Bonds to be applied to the payment and redemption of the Refunded Bonds will be so applied on July 19, 2012, a date not more than 90 days from the date hereof, and, accordingly, pending such expenditure, such proceeds may be invested in obligations with a yield in excess of the yield of the Series 2012 Bonds for the temporary period set forth in Section 1.148-9(d)(2)(ii) of the Regulations. 10. The principal of and interest on the Series 2012 Bonds are to be paid from a 2012 debt service account maintained by the Finance Director of the City (the "Debt Service Account"). The City does not reasonably expect to use any other fund or account to pay principal of or interest on the Series 2012 Bonds. The ad valorem property taxes pledged by the resolution authorizing the issuance of the Series 2012 Bonds to the payment of the Series 2012 Bonds are to be deposited in the Debt Service Account. It is expected that amounts in the Debt Service Account to be used to pay the principal of and interest on the Series 2012 Bonds will be fully expended on each July 1 (except for an amount not exceeding one-twelfth of the debt service on the Series 2012 Bonds payable in the 12 months preceding the prior July 1). The amounts on hand in the Debt Service Account from time to time to pay principal of and interest on the Series 2012 Bonds will be expended within twelve months after receipt. Therefore, the Debt Service Account is expected to qualify as a "bona fide debt service fund" within the meaning of Sections 1.148-1(b) and 1.148-9(d)(2)(iv) of the Regulations. As such, the money therein will be eligible for investment at an unrestricted yield for a temporary period of up to 13 months, except as provided in paragraph 12 hereof. 11. If the amount on deposit in the Debt Service Account allocable to the Series 2012 Bonds ever exceeds the amount described in paragraph 10 hereof, the amount in excess thereof, except as provided in paragraph 12 hereof, will be applied to redeem Series 2012 Bonds or will not be invested at a yield greater than the yield of the Series 2012 Bonds, 1.176669%per annum, if and to the extent such use or restriction is necessary to prevent the Series 2012 Bonds from being arbitrage bonds within the meaning of Section 148 of the Code and the Regulations. 12. An aggregate amount not to exceed the "minor portion" amount for the Series 2012 Bonds ($100,000) may be invested pursuant to Section 148(e) of the Code without restriction as to Yield. To the extent the amount on hand in the Debt Service Account exceeds the amount described in paragraph 11 hereof relating thereto, such amount in the aggregate may be invested up to the minor portion amount at a yield greater than the yield of the Series 2012 Bonds. 13. Except as set forth in this Certificate, the City has not created or established, and does not expect to create or establish, any sinking or similar fund which is reasonably expected to be used to pay debt service on the Series 2012 Bonds or which is pledged as collateral to secure the Series 2012 Bonds. No amounts in any other funds or accounts of the City are reserved for or pledged to the payment of debt service on the Series 2012 Bonds or will be used to replace funds that will be used to pay debt service on the Series 2012 Bonds. 14. The City has no present intention to sell or otherwise dispose of the Projects prior to the last maturity of the Series 2012 Bonds. The City expects that such property will continue to be owned and operated by the City substantially in the manner in which it is now owned and operated for an indefinite period concluding not earlier than the final stated maturity date of the Series 2012 Bonds. 15. The proceeds of the Series 2012 Bonds will not exceed the amounts needed to accomplish the refunding of the Refunded Bonds. To the extent that proceeds of the Series 2012 Bonds constitute "excess gross proceeds" within the meaning of Section 1.148.10(c) of the Regulations, such excess gross proceeds will not exceed one percent of the sale proceeds of the Bonds. No portion of the Series 2012 Bonds is issued solely for the purpose of investing the proceeds at a materially higher yield than the yield of the Series 2012 Bonds. None of the proceeds of the Series 2012 Bonds will be used directly or indirectly to replace funds which were used directly or indirectly to acquire obligations with a yield that is materially higher than the yield of the Refunded Bonds or the yield of the Series 2012 Bonds, 16. In connection with the issuance of the Series 2012 Bonds, except as specifically provided in Sections 148(c) and (d) of the Code, the City has not engaged and will not engage in any transaction or series of transactions (i) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, and (ii) increasing 4 the burdens on the market for tax-exempt obligations in any manner including, without limitation, by selling bonds that would not otherwise be sold, or by selling more bonds, or issuing them sooner, or allowing them to remain outstanding longer, than would otherwise be necessary. 17. The Series 2012 Bonds are not expected to be outstanding longer than reasonably necessary for the governmental purposes of the issue, within the meaning of Section 1.148- 1(c)(4) of the Regulations. The weighted average maturity of the Series 1995 Bonds, the Series 2001A Bonds, and the Series 2003A Bonds did not exceed 120% of the average reasonably expected economic life of the Projects that they financed, determined under Section 147(b) of the Code, as of the date of issuance of such bonds. The Original Purchaser has represented on the attached Exhibit A that the weighted average maturity of the Series 2012 Bonds (4.212 years) does not exceed the weighted average maturity of the Refunded Bonds ( years). 18. Pursuant to Section 5.4 of the Resolution, the City Commission of the City determined the Series 2012 Bonds are subject to rebate. Accordingly, a rebate certificate is being delivered simultaneously herewith. 19. We have investigated the facts, estimates and circumstances surrounding the issuance of the Series 2012 Bonds, which are described summarily in this Certificate. To the best of our knowledge and belief, such facts, estimates and circumstances are correct and complete and the City's expectations as to future events, which are based thereon, are in all respects reasonable and made in good faith. To the extent that the expectations of the City are based upon estimates and representations made by others, including the Original Purchaser, we have examined such estimates and representations and consider them to be reasonable and correct. Any statements in this Certificate involving future events, whether or not expressly so stated, are intended as expectations of the City and not as representations of fact. On the basis of such facts, estimates and circumstances, it is expected that the proceeds of the Series 2012 Bonds will be used in a manner that would not cause the Series 2012 Bonds to be considered"arbitrage bonds" within the meaning of Section 148 of the Code. 20, The City will perform or cause to be performed rebate calculations relating to the Series 2001A Bonds, the Series 2003A Bonds, and the Series 2003B Bonds in accordance with the arbitrage and rebate certificate of the City made as of December 27, 2001, February 5, 200'), and February 5, 2003, the dates of delivery of the Series 2001A Bonds, the Series 2003A Bonds, and the Series 2003B Bonds, respectively, or otherwise verify the City is in compliance with such arbitrage and rebate certificate. 21. The terms used in this Certificate have the meanings given them in Section 148 of the Code and the Regulations. 5 Dated: June 14, 2012. CITY OF BOZEMAN, MONTANA B ;ayor And Ci Finance ector BO And .•y ty r ' � '.. }x'83 NCO. (Signature Page to Arbitrage Certificate relating to $3,080,000 General Obligation Refunding Bonds, Series 2012 City of Bozeman, Montana) 6 $3,080,000 General Obligation Refunding Bonds Series 2012 City of Bozeman, Montana EXHIBIT A TO ARBITRAGE CERTIFICATE CERTIFICATE OF ORIGINAL PURCHASER D.A. Davidson & Co., of Great Falls, Montana (the "Original Purchaser"), hereby certifies as follows with respect to the $3,080,000 General Obligation Refunding Bonds, Series 2012 (the "Bonds"), issued by the City of Bozeman, Montana(the "City"): I. The price paid for the Bonds is reasonable under customary standards applicable in the municipal bond market. 2. Based upon our records and other information available to us, which we have no reason to believe to be incorrect: (A) All of the Bonds have been the subject of a bona fide initial offering to the general public, excluding bond houses, brokers or other persons or organizations acting in the capacity of underwriters or wholesalers (the "General Public"), at the respective prices or yields (the "Offering Prices or Yields") relating to the Bonds set forth in the Official Statement dated May 31, 2012, relating to the Bonds. (B) As of the date of sale of the Bonds (i.e. May 31, 2012), based upon the then prevailing market conditions, we reasonably expected that at least 10 percent of each maturity of the Bonds would be sold to the General Public at the Offering Prices or Yields. (C) As of the date hereof, the Original Purchaser has sold at least 10 percent of each maturity of the Bonds to the General Public at the Offering Prices or Yields. 3. The yield of the Bonds, computed in accordance with Section 148 of the Code and applicable Regulations, is 1.176669% per annum. The yield on the Bonds has been calculated, as provided in Section 1.148-4(b) of the Treasury Regulations, as that discount rate which when used in computing the present value, as of the issue date, of all unconditionally payable payments of principal of and interest on the Bonds produces an amount which is equal to the "issue price"thereof. The "issue price" of the Bonds is $3,172,268.45, which is the initial offering price of the Bonds to the public. 4. The present value of the net debt service savings achieved through the refunding of the Refunded Bonds is $370,321.24 (using a discount rate of 1.177%) calculated over the term of the Refunded Bonds. 5. The weighted average maturity of the Bonds, based on the issue price of each stated maturity of the Bonds from their date of issue (not on the basis of the principal amount of the Bonds or from their dated date, if other than the date of issue), i.e., 4.212 years, does not A-1 exceed the weighted average maturity of the Refunded Bonds refunded thereby, calculated as of the date hereof, i.e., years. 6. The sum of the proceeds of the Bonds and other available funds of the City credited to the Escrow Agent, i.e., $3,193,081.26, is sufficient, without regard to any investment income thereon, to pay, when due, principal of and interest on the Refunded Bonds upon redemption thereof on July 19, 2012. In computing the foregoing dollar amount, the Original Purchaser relied on the maturity schedules, interest rates, and redemption features set forth in the bond resolution and Official Statement pertaining to the Series 2001A Bonds, the Series 2003A Bonds, and the Series 2003B Bonds. [Balance of page intentionally left blank] A-2 7. The terns used herein have the same meaning given them in Section 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder or in the foregoing Arbitrage Certificate of officers of the City of even date herewith. Dated: June 14, 2012. D.A. DAVIDSON & CO. By Its Senior Vice President A-3 $3,080.000 General Obligation Refunding Bonds, Series 2012 City of Bozeman, Montana EXHIBIT B TO ARBITRAGE CERTIFICATE Cash: $66,438.26 Initial Securities: U.S. Treasury Obligations —State and Local Government Series (SLGS) Maturity Date Principal Amount Interest Rate 07/19/2012 $3,126,643.00 0.030% B-1 Dated: .tune 14, 2012. CITY OF BOZEMAN. MONTANA By Mayor An C y Finance rector �OZ''` ` ir • y " c And {Signature Page to Arbitrage Certificate relating to S3,080,000 General Obligation Refunding Bonds, Series 2012 City of Bozeman, Montana) 6