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RELATED CONSIDERATIONS <br />• Not Bank Qualified — because total tax-exempt debt issued by the City in calendar year <br />2012 is expected to be more than $10.0M, the bonds will not be designated as "bank <br />qualified" obligations pursuant to Federal Tax Law. <br />• Arbitrage Compliance — <br />o Project / Refunding Fund - All tax exempt issues are subject to federal rebate <br />requirements which require all arbitrage earned to be rebated to the U.S. <br />Treasury. Because the proceeds of the refunding bonds will be deposited into a <br />yield restricted escrow fund, arbitrage will not be generated. <br />o Debt Service Fund - The City must maintain a bona fide debt service fund for the <br />bonds or be subject to yield restriction in the debt service fund. A bona fide debt <br />service fund involves an equal matching of revenues to debt service expense <br />with a balance forward permitted equal to the greater of the investment earnings <br />in the fund during that year or 1/12 of the debt service of that year. <br />The City should become familiar with the various Arbitrage Compliance requirements <br />for this bond issue. The Bond Resolution explains the requirements in greater detail. <br />We are also available to assist the City in meeting these requirements. <br />• Continuing Disclosure - Because this issue is greater than $1,000,000, and the City's <br />outstanding debt exceeds $10.0M, it is subject to the Securities and Exchange <br />Commission's continuing disclosure requirements. Northland Securities is prepared to <br />assist the City in this capacity. <br />Page 4 <br />NORTHLANDSECURITIES <br />