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Economic Development Authority of the <br /> City of Ramsey, Minnesota <br />October 21, 1999 <br /> <br />o <br /> <br />10. <br /> <br />Prepayment Provisions <br /> <br />Credit Rating Comments <br /> <br />Federal Treasury Regulations Concerning <br />Tax-Exempt Obligations <br /> <br />(a) Bank Quafification <br /> <br />(b) Rebate Requirements <br /> <br />The City will make these rental payments <br />from collections of general ad valorem tax <br />levies. The City's tax levies for the project <br />are subject to annual appropriation each <br />year. Unless the City has made other <br />provisions, it must levy beginning in 1999, <br />for collection in 2000. This first levy will <br />provide for the August 1,2000, interest <br />payment and the subsequent payment on <br />February 1,2001. <br /> <br />The Authority may elect on February 1, <br />2009, and on any date thereafter, to prepay <br />the Bonds due on or after February 1, 2010, <br />at a price of par plus accrued interest. <br /> <br />An application will be made to Moody's <br />Investors Service for a rating on the Bonds. <br />We expect that, based on the lease with the <br />City, the Bonds will be rated "A2", which is <br />one grade below the City's current Moody's <br />rating of "Al ." <br /> <br />Under Federal Tax Law, financial institutions <br />cannot deduct from income for federal <br />income tax purposes, income expense that <br />is allocable to carrying and acquiring tax- <br />exempt bonds. There is an exemption to <br />this for "bank qualified" bonds, which can be <br />so designated if the issuer does not issue <br />more than $10 million of tax exempt bonds <br />in a calendar year. Issues that are bank <br />qualified receive slightly lower interest rates <br />than issues that are not bank qualified. This <br />issue is designated as bank qualified. <br /> <br />All tax-exempt issues are subject to the <br />federal arbitrage and rebate requirements, <br />which require all excess earnings created by <br />the financing to be rebated to the U.S. <br />Treasury. The requirements generally cover <br />two categories: bond proceeds and debt <br />service funds. There are exemptions from <br />rebate in both of these categories. <br />However, since the Authority expects to <br />issue less than $5 million of tax exempt <br />obligations in 1999, the Authority qualifies as <br />a "small issuer" and will be exempt from <br />rebating excess earnings on Bond proceeds <br />to the federal government. <br /> <br />Page 2 <br /> <br /> <br />