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Bond Issuance
"NEAR FINAL"OFFICIAL STATEMENT DATED DECEMBER 18,2007 NEW ISSUE MOODY'S INVESTORS SERVICE RATING: • BANK-QUALIFIED MOODY'S INVESTORS SERVICE INSURED RATING: BOOK-ENTRY ONLY INSURED RATING With respect to the$7,500,000 General Obligation Capital Improvement Plan Bonds,Series 2008A,dated February 15,2008,(die"Bonds),in the opinion of Briggs and Morgan,Professional Association,Bond Counsel,based on present federal and Minnesota laws,regulations,rulings and decisions,at the time of their issuance and delivery to the original purchaser, interest on the Bonds is excluded from gross income./or purposes of United Stater income tax and is excluded, to the.came extent,in computing both gross and taxable net income.for purposes of State of Minnesota income tax(other than Minnesota franchise taxes measured by income and imposed on corporations and financial institutions).Interest is not an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations;however, interest on the Bonds is taken into account for the purpose of determining adjusted current earnings for purposes of computing the federal alternative minimum tax imposed on corporations.No opinion will be expressed by Bond Counsel regarding other state or federal tax consequences caused by the receipt or accrual of interest on the Bonds or arising with respect to ownership of the Bonds.See"Tax Exemption"herein for additional information. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued con- currently with the delivery of the Bonds by simultaneously with the delivery of the Bonds. CITY OF OAK PARK HEIGHTS, MINNESOTA $7,500,000 General Obligation Capital Improvement Plan Bonds, Series 2008A Dated Date:February 15,2008 Interest Due:Each June 15 and December 15 Commencing June 15,2008 Amount Rate Maturity Yield Price Amount Rate Maturi Yield Price $200,000 % 12/15/09 % $375,000 % 12/15/19 % 200,000 12/15/10 400,000 12/15/20 • 210,000 12/15/11 425,000 12/15/21 220,000 12/15/12 450,000 12/15/22 235,000 12/15/13 475,000 12/15/23 250,000 12/15/14 500,000 12/15/24 275,000 12/15/15 525,000 12/15/25 300,000 12/15/16 555,000 12/15/26 325,000 12/15/17 580,000 12/15/27 350,000 12/15/18 650,000 12/15/28 Bonds of this issue maturing on December 15,2017 and thereafter are subject to redemption,in whole or in part,on December 15, 2016, or any date thereafter,at a price of par plus accrued interest. The Bonds are being issued pursuant to Minnesota Statutes,Chapter 475.521,as amended.Proceeds will be used to provide moneys,along with other available City funds,to finance the new construction of an approximate 23,000 sq.ft.City Municipal Center,which will consist of a combined City Hall and Public Works Facility.See Authority and Purpose herein for additional information. Bonds are valid and binding obligations of the City of Oak Park Heights(the"City")and are payable solely from ad valorem taxes.The full faith and credit of the City is pledged to their payment and the City has validly obligated itself to levy ad valorem taxes to pay all prin- cipal and interest payments on this issue.See Security/Sources and Uses of Funds herein for additional information. Principal due with respect to the Bonds is payable annually on December 15, commencing December 15,2009 and interest due with re- spect to the Bonds is payable semiannually on June 15 and December 15 of each year commencing June 15, 2008. The Bonds will be registered in the name of Cede&Co.,as nominee of The Depository Trust Company,New York,New York.Individual purchases will be made in book-entry form only,in the principal amount of$5,000 or any whole multiple thereof.Purchasers will not receive physical deliv- ery of Bonds. See "Book-Entry System" in Description of Bonds herein for additional information. Paying Agent/Registrar will be Northland Trust Services,Inc.,Minneapolis,Minnesota. NORTHLAND SECURITIES TABLE OF CONTENTS Page Summaryof Offering.................................................................................................................................... 2 AdministrativeOfficials................................................................................................................................ 3 Authorityand Purpose................................................................................................................................... 4 Security/Sources and Uses of Funds............................................................................................................. 4 Descriptionof Bonds..................................................................................................................................... 5 -7 Explanationof Insurance Rating..................................................................................................................... 7 Issuer's Certificate......................................................................................................................................... 8 LimitedContinuing Disclosure..................................................................................................................... 8 Underwriting ................................................................................................................................................. 8 FutureFinancing............................................................................................................................................ 9 BondRating/Credit Enhancement................................................................................................................. 9 Litigation....................................................................................................................................................... 9 Certification................................................................................................................................................... 9 Legality.......................................................................................................................................................... 9 TaxExemption.............................................................................................................................................. 10 City of Oak Park Heights(General Information).......................................................................................... 11 - 15 Minnesota Valuations;Property Tax Classifications.................................................................................... 16- 18 City of Oak Park Heights(Economic and Financial Information)................................................................ 19-24 Summaryof Debt and Debt Statistics............................................................................................................ 25 Appendix A—Proposed Form of Legal Opinion • Appendix B—Proposed Form of Continuing Disclosure Undertaking Appendix C—City's Financial Statement Appendix D—Municipal Bond Insurance Policy and Information Regarding ....................................._........_....... .............................._............................................----..._._......................................_........_.._._..................._...........................-.................._.............................._................... THE BONDS ARE OFFERED,SUBJECT TO PRIOR SALE,WHEN,AS AND IF ACCEPTED BY THE UNDERWRITER(S)NAMED ON THE FRONT COVER OF THIS OFFICIAL STATEMENT AND SUBJECT TO AN OPINION AS TO VALIDITY OF THE BONDS BY BOND COUNSEL.SUBJECT TO APPLICABLE SECURITIES LAWS AND PREVAILING MARKET CONDITIONS, THE UNDERWRITER(S) INTENDS BUT IS NOT OBLIGATED,TO AFFECT SECONDARY MARKET TRADING FOR THE BONDS.ESTIMATED CLOSING DATE IS TO BE WITHIN 40 DAYS OF DATE OF ISSUE. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERS MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CITY OR THE UNDERWRITER(S). NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CITY SINCE THE DATE HEREOF.THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.THE INFORMATION SET FORTH HEREIN HAS BEEN OBTAINED FROM THE CITY AND OTHER SOURCES WHICH ARE BELIEVED TO BE RELIABLE,BUT IT IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS BY,AND IS NOT TO BE CONSTRUED AS A REPRESENTATION BY, THE UNDERWRITER(S). OTHER THAN WITH RESPECT TO INFORMATION CONCERNING (" ) CONTAINED IN APPENDIX D "MUNICIPAL BOND INSURANCE POLICY AND INFORMATION REGARDING " HEREIN, NONE OF THE INFORMATION IN THIS OFFICIAL STATEMENT HAS BEEN SUPPLIED OR VERIFIED BY AND MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO (I) THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION; (II) THE VALIDITY OF THE BONDS; OR (III) THE TAX EXEMPT STATUS OF THE INTEREST ON THE BONDS. • SUMMARY OF OFFERING $7,500,000 General Obligation Capital Improvement Plan Bonds,Series 2008A (Book-Entry Only) AMOUNT- $7,500,000 ISSUER- City of Oak Park Heights,Minnesota(the"City"). PURCHASE DATE- January_,2008 UNDERWRITER- Northland Securities,Inc.,45 South 7"Street,Suite 2500,Minneapolis,Minnesota 55402,telephone:612/851.5900 or 800/851.2920. TYPE OF ISSUE- General Obligation Capital Improvement Plan Bonds, Series 2008A(the"Bonds"). See Authority and Purpose as well as Security/Sources and Application of Funds herein for additional information. AUTHORITY,PURPOSE &SECURITY- The Bonds are being issued pursuant to Minnesota Statutes,Chapter 475.521,as amended.Proceeds will be used to provide moneys, along with other available City funds,to finance the new construction of an approximate 23,000 sq.ft.City Municipal Center,which will consist of a combined City Hall and Public Works Facility.Bonds are valid and binding obligations of the City and are payable solely from ad valorem taxes.The full faith and credit of the City is pledged to their payment and the City has validly obligated itself to levy ad valorem taxes to pay all principal and interest payments on this issue.See Authority and Purpose as well as Security/Sources and Uses of Funds herein for additional information. DATE OF ISSUE- February 15,2008. INTEREST PAID- June 15,2008,and semiannually thereafter on December 15 and June 15 to registered owners of the Bonds appearing of record in the bond register as of the close of business fifteen days prior to the interest payment date(whether or not a business day)of the immediately preceding month. MATURITIES— 12/15/09 $200,000 12/15/13 $235,000 12/15/17 $325,000 12/15/21 $425,000 12/151/25 $525,000 12/15/10 200,000 12/15/14 250,000 12/15/18 350,000 12/15/22 450,000 12/151/26 555,000 12/15/11 210,000 12/15/15 275,000 12/15/19 375,000 12/15/23 475,000 12/151/27 580,000 12/15/12 220,000 12/15/16 300,000 12/15/20 400,000 12/15/24 500,000 12/151/28 650,000 REDEMPTION- At the option of the City,Bonds maturing on December 15,2017 and thereafter,shall be subject to prior redemption on December 15,2016 and any date thereafter,at a price of par plus accrued interest.Redemption may be in whole or in part of the Bonds subject to prepayment.If redemption is in part,the bonds remaining unpaid that have the latest maturity date shall be prepaid first. BOOK-ENTRY- Bonds will be issued as fully registered and,when issued,will be registered in the name of Cede&Co.,as nominee of The Depository Trust Company,New York,New York,to which principal and interest payments will be made. Individual purchases will be made in book-entry form only,in the principal amount of$5,000 or any whole multiple thereof.Purchasers will not receive physical delivery of Bonds. PAYING AGENT,REGISTRAR— Northland Trust Services,Inc.Minneapolis,Minnesota. TAX DESIGNATIONS- NOT Private Activity Bonds—The Bonds are not"private activity bonds"as defined in Section 141 of the Internal Revenue Code of 1986,as amended(the Code). Qualified Tax-Exempt Obligations - The City will designate these Bonds "qualified tax-exempt obligations" for purposes of Section 265(b)(3)of the Code. LEGAL OPINION- Briggs and Morgan,Professional Association,St.Paul and Minneapolis,Minnesota(the"Bond Counsel"). BOND RATING/INSURANCE- As of the date of this "Near Final" Official Statement, the City will apply to Moody's Investors Service for an underlying bond rating on this issue.This rating will reflect only the opinion of Moody's. Any explanation of the significance of the rating may be obtained only from Moody's. The rating is not a recommendation to buy,sell or hold the Bonds.There is no assurance that a rating will continue for any given period of time,or that such rating will not be revised or withdrawn,if in the judgment of Moody's,circumstances so warrant.A revision or withdrawal of the rating may have an adverse affect on the market price of the Bonds.In addition,the City will apply for insurance to all respective municipal bond insurers. Moody's Investors Service will assign a rating of Aaa to bonds secured by an insurance policy issued by .See Explanation of Rating herein for additional information. CLOSING- Estimated to be within 40 days of date of issue. PRIMARY CONTACTS- Eric A.Johnson,City Administrator,City of Oak Park Heights,651/439.4439, Judy L.Holst,City Finance Director,City of Oak Park Heights,651/439.4439. Steven J.Mattson,Executive Vice President,Public Finance Department,Northland Securities,Inc.,800/8512920. —2— CITY OF OAK PARK HEIGHTS PRINCIPAL CITY OFFICIALS Elected Officials City Council Name Position Term Expires David Beaudet Mayor 12/31/08 Les Abrahamson Council Member 12/31/10 Jack Doerr Council Member 12/31/08 Mary McComber Council Member 12/31/08 Mark Swenson Council Member 12/31/10 Primary Contacts Eric A.Johnson City Administrator Judy L. Hoist City Finance Director Eckberg Lammers Briggs Wolff&Vierling,Mark J. Vierling Attorney S Bonestroo Rosene Anderlik&Assoc. Dennis Postler Engineer Bond Counsel Briggs and Morgan,Professional Association St.Paul and Minneapolis,Minnesota Underwriter Northland Securities, Inc. Minneapolis,Minnesota -3- AUTHORITY AND PURPOSE The Bonds are being issued pursuant to Minnesota Statutes, Chapter 475.521, as amended. Proceeds will be used to provide moneys, along with other available City funds, to finance the new construction of an approximate 23,000 sq. ft. City Municipal Center, which will consist of a combined City Hall and Public Works Facility. See Authority and Purpose herein for additional information. SECURITY/SOURCES AND USES OF FUNDS Security At closing Bond Counsel will render an opinion that the Bonds are valid and binding general obligations of the City of Oak Park Heights. Bonds are payable solely from ad valorem taxes. The full faith and credit of the City is pledged to their payment and the City has validly obligated itself to levy ad valorem taxes to pay all principal and L Opinion. interest payments on this issue. See Appendix A—Proposed Form of Legal Sources and Uses of Funds Following are the sources and uses of funds in connection with the issuance of the Bonds. Sources of Funds Par Amount of Bonds $ 7,500,000 Construction Fund Income 107,642 Total Sources of Funds: 7.607.642 Uses of Funds iDeposit to Project Construction Fund $ 7,075,000 Costs of Issuance/Underwriter's Discount 145,181 Capitalized Interest(16 months) 386,750 Rounding Factor 711 Total Uses of Funds: 7.607.642 -4- DESCRIPTION OF BONDS Details of Certain Terms The Bonds will be dated, as originally issued, as of February 15, 2008,and will be issued as fully registered bonds in the denominations of $5,000 or any integral multiple thereof. Principal on the Bonds will be payable on December 15 commencing December 15, 2009. Interest on the Bonds will be payable semiannually on each June 15 and December 15, commencing June 15, 2008. The Bonds when issued, will be registered in the name of Cede & Co. (the "Registered Holder"), as nominee of The Depository Trust Company, New York, New York ("DTC"), the initial custodian for the Bonds,to which principal and interest payments on the Bonds will be made so long as Cede & Co. is the Registered Holder of the Bonds. See "Book-Entry System" in Description of Bonds herein for additional information. So long as the Book-Entry Only System is used, individual purchases of the Bonds will be made in book-entry form only, in the principal amount of$5,000 or any integral multiple thereof ("Authorized Denominations"). Individual purchasers (`Beneficial Owners") of the Bonds will not receive physi- cal delivery of bond certificates, and registration, exchange, transfer, tender and redemption of the Bonds with respect to Beneficial Owners shall be governed by the Book-Entry Only System. So long as the Book-Entry Only System is used, payments from Cede & Co., as the Record Holder, to the Beneficial Owners shall be governed by the Book-Entry Only System. If the Book-Entry Only System is discon- tinued,the principal of and premium, if any, on the Bonds will be payable upon presentation and surrender at the offices of the Paying Agent and Registrar or a duly appointed successor. Interest on the Bonds will be paid by check or draft mailed by the Bond Registrar to the registered holders thereof as such appear on the registration books maintained by the Bond Registrar as of the close of business fifteen days(whether or not a business day)of the calendar month preceding each interest payment date(the"Record Date"). Registration,Transfer and Exchange So long as the Book-Entry Only System is used, payments from Cede & Co., as the Record Holder, to the Beneficial Owners shall be governed by the Book-Entry Only System. If the Book-Entry Only System is discontinued, the Bonds may be transferred upon surrender of the Bonds at the principal office of the Bond Registrar, duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or his or her attorney duly authorized in writing. The Bonds, upon surrender thereof at the principal office of the Bond Registrar may also be exchanged for other Bonds of the same series, of any authorized denominations having the same form,terms, interest rates and maturities as the Bonds being exchanged. The Bond Registrar will require the payment by the Bondholder requesting such exchange or transfer of any tax or governmental charge required to be paid with respect to such exchange or transfer. The Bond Registrar is not required to (i) issue, transfer or exchange any Bonds during a period beginning at the opening of business fifteen days before any se- lection of Bonds of a particular stated maturity for redemption in accordance with the provisions of the Resolution and ending on the day of the first mailing of the relevant notice of redemption or (ii) to transfer any Bond or portion thereof selected for redemption. Optional Redemption The Bonds having stated maturities on or after December 15, 2017 are subject to optional redemption,in whole or in part,on December 15, 2016, and on any date thereafter, at a price of par,plus accrued interest. If redemption is in part, the maturity and the principal amounts within each maturity to be redeemed shall be determined by the City and if only part of the Bonds having a common maturity date are called for prepayment, the specific Bonds to be prepaid shall be chosen by lot by the Bond Registrar. Book-Entry System The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the bonds (the "Bonds"). The Bonds will be issued as fully-registered bonds registered in the name of Cede&Co. (DTC's part- nership nominee) or such other name as may be requested by an authorized representative of DTC. One fully- registered Bond certificate will be issued for the Bonds, in the aggregate principal amount of such issue, and will be deposited with DTC. -5- DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a"clearing corporation"within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instrument from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust&Clearing Corporation("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation(NSCC,FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission.More information about DTC can be found at www.dtcc.com and www.dtc.org. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond(`Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners, Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representa- tive of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede&Co. (nor such other DTC nominee)will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede&Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy). -6- I Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from the City on pay- able date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securi- ties held for the accounts of customers in bearer form or registered in"street name,"and will be the responsibility of such Participant and not of DTC, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor securities depository is not obtained,Bond certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository).In that event,Bond certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the City believes to be reliable, and that the City takes no responsibility for the accuracy thereof. INSURANCE EXPLANATION OF NSURANC RATING The City applied for and received insurance on this issue through . Moody's Investors Service currently assigns a rating of" " to bonds insured by (the "Insurer"). Upon delivery of the Bonds, a policy insuring the payment when due the principal of and interest on the Bonds (the "Policy") will be issued by the Insurer. See Appendix D—Municipal Bond Insurance Policy and Information Regarding for additional information. No application was made to any other rating agency for the purpose of obtaining an additional rating on the Bonds. The rating reflects the rating agency's current assessment of the creditworthiness of the Insurer and its ability to pay claims on its poli- cies of insurance. Any further explanation as to the significance of the above rating may be obtained only from the rating agency. The above rating is not a recommendation to buy, sell or hold the Bonds, and such ratings may be subject to revi- sion or withdrawal at any time by the rating agency. Any downward revision or withdrawal of the bond rating may have an adverse effect on the market price of the Bonds. The Insurer does not guaranty the market price of the Bonds nor does it guaranty that the rating on the Bonds will not be reversed or withdrawn. I (Remainder of page left intentionally blank) -7- ISSUER'S CERTIFICATE The City has retained the firm of Northland Securities, Inc., Minneapolis, Minnesota(the"Underwriter")to serve as Underwriter with respect to the securities being offered in this Official Statement. All statements contained herein,while not guaranteed, have been compiled from sources believed to be reliable in all material respects. Financial statements of the City are audited annually by an independent firm of certified public accountants. Excerpts from the financial statements for the year ended December 31, 2006 are included in this Official Statement and complete financial statements are available for inspection at the City Hall as well as at the office of Northland Securities, Inc. The City has always promptly met all payments of principal and interest on its indebtedness when due. LIMITED CONTINUING DISCLOSURE In order to permit bidders for the Bonds and other participating underwriters in the primary offering of the Bonds to comply with paragraph(b)(5)of Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended(the"Rule"),the City will covenant and agree, for the benefit of the registered holders or beneficial owners from time to time of the outstanding Bonds, in the Bond Resolution,to provide, upon request, annual reports of specified information and to provide notice of the occurrence of certain events, if material, as hereinafter described (the "Disclosure Covenants"). The information to be provided on an annual basis, the events as to which notice is to be given, if material, and a summary of other provisions of the Disclosure Covenants, including termination, amendment and remedies, are set forth in Appendix B—Proposed Form of Continuing Disclosure Undertaking to this Official Statement. Breach of the Disclosure Covenants will not constitute a default or an "Event of Default" under the Bonds or the Resolution. A broker or dealer is to consider a known breach of the Disclosure Covenants, however, before rec- ommending the purchase or sale of the Bonds in the secondary market. Thus, a failure on the part of the City to • observe the Disclosure Covenants may adversely affect the transferability and liquidity of the Bonds and their market price. The name, address and telephone number of the person from whom the information, data and notices described in the Undertaking may be obtained is: City of Oak Park Heights City Administrator 14168 Oak Park Boulevard North Oak Park Heights,MN 55024 651/439.4439 UNDERWRITING The Bonds are being purchased from the City by Northland Securities, Inc. The Underwriter will receive total compensation of$ in connection with the purchase of the Bonds assuming all Bonds are sold at the rates and yields set forth on the cover page of this Official Statement,which compensation is %of the par value. The obligation to make such purchase is subject to certain terms and conditions, the approval of certain legal matters by counsel and certain other conditions. The initial public offering prices set forth on the cover page hereof may be changed from time to time by the Underwriter. -8- FUTURE FINANCING The City does not anticipate the need to finance any capital improvements with the issuance of general obligation Bonds within the next two months. BOND RATING As of the date of this "Near Final" Official Statement, the City will apply to Moody's Investors Service for an underlying bond rating on this issue. This rating will reflect only the opinion of Moody's. Any explanation of the significance of the rating may be obtained only from Moody's. The rating is not a recommendation to buy, sell or hold the Bonds. There is no assurance that a rating will continue for any given period of time, or that such rating will not be revised or withdrawn, if in the judgment of Moody's, circumstances so warrant. A revision or withdrawal of the rating may have an adverse affect on the market price of the Bonds. In addition, the City will apply for insurance to all respective municipal bond insurers. Moody's Investors Service will assign a rating of Aaa to bonds secured by an insurance policy issued by . See Explanation of Rating herein for additional information. LITIGATION As of December 10, 2007, the City Attorney, has indicated that no litigation is pending or threatened that would jeopardize the creditworthiness of the City. Claims or other actions in which the City is a defendant are covered by insurance or of insignificant amounts. CERTIFICATION The City will furnish a statement to the effect that this Official Statement to the best of their knowledge and belief, as of the date of sale and the date of delivery, is true and correct in all material respects, and does not contain any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made,not misleading. LEGALITY Legal matters incident to the authorization and issuance of the Bonds are subject to the approving opinion of Bond Counsel as to validity and tax exemption. A copy of such opinion will be available at the time of the deliv- ery of the Bonds. See Appendix A—Proposed Form of Legal Opinion. Bond Counsel has not participated in the preparation of this Official Statement and is not passing upon its accuracy, completeness or sufficiency. Bond Counsel has not examined, nor attempted to examine, or verify, any of the financial or statistical statements or data contained in this Official Statement, and will express no opinion with respect thereto. -9- TAX EXEMPTION General In the opinion of Bond Counsel, under federal and Minnesota laws, regulations, rulings and decisions in effect on the date of issuance of the Bonds, interest on the Bonds is not includable in gross income for federal income tax purposes or in taxable net income of individuals, estates and trusts for Minnesota income tax purposes. Interest on the Bonds is includable in taxable income of corporations and financial institutions for purposes of the Minnesota franchise tax. Certain P rovisions of the Internal Revenue Code of 1986, as amended (the "Code"), however, f he Bo in order for interest thereon to be impose continuing requirements that must be met after the issuance o t Bonds i o P g q and remain not includable in federal gross income and in Minnesota taxable net income. Noncompliance with such requirements by the Issuer may cause the interest on the Bonds to be includable in gross income for purposes of federal income taxation and in taxable net income for purposes of Minnesota income taxation,retroactive to the date of issuance of the Bonds, irrespective in some cases of the date on which such noncompliance is ascertained. No provision has been made for redemption of or for an increase in the interest rate on the Bonds in the event that interest on the Bonds becomes includable in federal gross income or Minnesota taxable income. Interest on the Bonds is not an item of tax preference includable in alternative minimum taxable income for pur- poses of the federal alternative minimum tax applicable to all taxpayers or the Minnesota alternative minimum tax applicable to individuals, estates and trusts, but is includable in adjusted current earnings in determining the federal alternative minimum taxable income of corporations for purposes of the federal alternative minimum tax. Interest on the Bonds may be includable in the income of a foreign corporation for purposes of the branch profits tax imposed by Section 884 of the Code and is includable in the net investment income of foreign insurance companies for purposes of Section 842(b) of the Code. In the case of an insurance company subject to the tax imposed by Section 831 of the Code, the amount which otherwise would be taken into account as losses incurred under Section 832(b)(5) of the Code must be reduced by an amount equal to fifteen percent of the interest on the Bonds that is received or accrued during the taxable year. Section 86 of the Code requires recipients of certain Social Security and railroad retirement benefits to take into account, in determining the taxability of such benefits, receipts or accruals of interest on the Bonds. Passive Investment Income of S Corporations Passive investment income, including interest on the Bonds, may be subject to federal income taxation under Section 1375 of the Code for a Subchapter S corporation that has Subchapter C earnings and profits at the close of the taxable year if greater than twenty-five percent of the gross receipts of such Subchapter S corporation is passive investment income. Section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Bonds or, in the case of a financial institution, that portion of the holder's in- terest expense allocated to interest on the Bonds, except with respect to certain financial institutions (within the meaning of Section 265(b)of the Code). The above is not a comprehensive list of all federal tax consequences that may arise from the receipt of interest on the Bonds. The receipt of interest on the Bonds may otherwise affect the federal or State of Minnesota income tax liability of the recipient based on the particular taxes to which the recipient is subject and the particular tax status of other items or deductions. Bond Counsel expresses no opinion regarding any such consequences. All prospective purchasers of the Bonds are advised to consult their own tax advisors as to the tax consequences of,or tax considerations for,purchasing or holding the Bonds. Qualified Tax-Exempt Obligations The City will designate the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Code relating to the ability of financial institutions to deduct from income for federal income tax purposes, inter- est expense that is allocable to carrying and acquiring tax-exempt obligations. "Qualified tax-exempt obligations" are treated as acquired by a financial institution before August 8, 1986. Interest allocable to such obligations re- mains subject to the 20%disallowance under prior law. -10- CITY OF OAK PARK HEIGHTS GENERAL INFORMATION Access and Transportation Oak Park Heights, situated in Washington County, is located in the east central portion of Minnesota. The City lies within the Seven County Metropolitan Area and is situated approximately 20 miles northeast of the Twin Cities Metropolitan Area. Access is provided via State Highways 36 and 95 as well as County Roads 5 and 21. There are approximately 22 miles of paved streets within the City. Tax Base For taxes collectible in 2007,the tax capacity breakdown is 27.54%residential homestead(non-agriculture); .01% agricultural; 39.29% commercial & industrial; 20.46% public utility; .04% railroad operating property; 11.60% residential non-homestead; .02%seasonal/recreational commercial&residential; and 1.04%personal property. Area 1,956.20 Acres (3.057 Square Miles) Population 1970 Census 1,238 2000 Census 3,959 1980 Census 2,591 2007 Estimate* 4,676 1990 Census 3,700 Municipal Enterprise Services The Water UtilitySystem has approximately 1,289 municipal connections and 22 private wells. The water system is served by two elevated storage facilities with a combined 750,000 gallons as well as several wells that have the capacity to pump 850 gallons per minute or 1,224,000 gallons per day. Average demand is 676,000 gallons per day while peak demand reaches 1,000,000 gallons per day.Total tap water hardness is 236 parts per million. The 2006 audited operating revenues were $502,407 with the average charge per year per household and com- mercial connection at approximately $359. The industrial water base rate is $23.10 quarterly for the first 15,000 gallons; $1.47 for 15,001 to 50,000 gallons; $2.02 for 50,001 to 99,000 gallons; and $2.43 per thousand gallons thereafter. The Sewer Utility System has approximately 1,264 municipal connections and 22 private septic systems. The sewer system consists of five lift stations and is treated by the Metropolitan Council Waste Treatment Facility. The 2006 audited operating revenues were $767,207 with the average charge per year per household and com- mercial connection at approximately $582. The sewage use base charge is $49.95 quarterly for the first 15,000 gallons and$3.40 per thousand gallons thereafter. The Storm Sewer Utility System had 2006 audited operating revenues of$74,173 with operating income before transfers of$3,300. The Solid Waste/Refuse System provides weekly collection of household wastes. The 2006 audited operating revenues were$97,266. * Source:City of Oak Park Heights. —11— Other Municipal Services Fire and Rescue/Emergency Department. The City contracts with the City of Bayport for its fire protection. The City of Bayport currently has a 23-member volunteer fire department consisting of one tanker, two various size pumpers, two grass rigs, one ladder truck, one emergency vehicle as well as other various fire fighting and res- cue/emergency equipment. Police Department. The City operates its own police department with one full-time chief of police, two full-time sergeants, six full-time officers, and one full-time dispatcher. In addition, there are six fully equipped vehicles, three of which are unmarked, as well as other miscellaneous equipment. Park and Recreational Facilities. There currently are five municipal park facilities encompassing over 105 acres of designated parkland. Facilities consist of hockey/skating rinks with warming houses; baseball/softball fields; picnic shelters;tennis courts;and general playground equipment. City Government Oak Park Heights is a Minnesota Statutory City with an 'Optional Plan A' form of government. It has a mayor elected at large for a four-year term and four council members also elected at large for four-year terms. The professional staff is appointed and consists of an administrator-treasurer, deputy clerk-finance director, attorney, and engineer. Employee Pension Programs The City employs 10 full-time people in the police department. The other 11 full-time positions in administration, finance, public works, parks, and other departments are serviced through various unions. Contracts are reviewed periodically, giving the City better control over costs. The pension plan currently covers 21 city and contract employees. The City participates in contributory pension plans through the Public Employees Retirement Association(PERA ) under Minnesota Statutes, Chapters, 353 and 356, which covers all full-time and certain part-time employees. PERA administers the Public Employees Retirement Fund (PERF) and the Public Employees Police and Fire Fund (PEPFF), which are cost sharing, multiple-employer retirement plans. Benefits are established by State Statute and vest after three years of credited service. State Statute requires the City to fund current service pension cost as it accrues. Defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Audited City contributions to PERF and PEPFF for the past ten years have been as follows: Year Amount Year Amount 2006 $109,520 2001 $85,693 2005 94,223 2000 81,000 2004 89,909 1999 81,143 2003 87,618 1998 74,297 2002 93,525 1997 62,116 -12- Labor Force Data Comparative average labor force and unemployment rate figures for 2007(as of October)and year-end 2006 from the Minnesota Department of Economic Security, Research and Statistics Office, are listed below. Figures are not seasonally adjusted and numbers of people are estimated by place of residence. October 2007 2006 Civilian Unemployment Civilian Unemployment Labor Force Rate Labor Force Rate Washington County 129,451 3.8% 128,147 3.5% Minneapolis/St. Paul MSA 1,862,772 4.0 1,844,987 3.7 Minnesota 2,951,717 4.1 2,939,304 4.0 Residential Development There are approximately 826 single-family homes and 1,305 multifamily units located within the City. In addi- tion,there has been seven single-family dwelling constructed within the past twelve months. Subdivisions planned or constructed within the past three years are as follows: Total Number of Remaining Subdivision Number of Lots/Units Lots/Units Name Lots/Units Completed Available Fox Hollow 29 29 0 McKean Square 151 151 0 Oakgreen Townhomes 9 9 0 Oakgreen Village 167 0 167 Pine Grove Gardens 26 9 17 Industrial Park(s) The City currently does not have an industrial park. Commercial/Industrial Development Building construction and commercial/industrial growth completed within the past three years have been as follows: Description Name Product/Service of Construction Excel Energy Expansion) Utility Steel/Concrete Fox Hollow Office Buildings Block/Brick Building Lowe's Retail Block Building Memorial Office Condos Fitness/Health&Daycare Block/Brick Building Montanari Office Building Office Building Block/Brick Building Oak Park Marketplace Fast Food Restaurants Block/Brick Building Oak Park Commons Retail/Restaurants Block Building St. Croix Cleaners Laundromat/Retail Block Building Shoppes of Oak Park Heights-Phase I Retail Shops Block/Brick Building Shoppes of Oak Park Heights-Phase 11 Retail Shops Block/Brick Building Stillwater Motors Expansion Auto Sales Block Building 1 Building construction and commercial/industrial growth completed within the past twelve months. —13— Commercial/Industrial Development(Cont,) Description Name Product/Service of Construction Wal-Mart Expansion) Retail Block Building W.A.T.E.Enterprises, Inc.1 Office/Warehouse Block Building Walgreen's Retail/Pharmacy Block/Brick Building Pending plans for commercial/industrial development within the City include the following: ➢ Kern Center—commercial,office and warehouse ➢ Oak Park Heights Marketplace—retail ➢ Goodwill Store—retail(construction started) Building Permits Building permits issued for the past nine years and a portion of the current year have been as follows: Commercial/ Industrial Residential Total Total Number Number Number Permit Year o Permits o Permits o Permits Valuation 2007 (as of 11/30/07) 6 16 22 $ 5,526,064 2006 20 30 50 37,798,231 2005 13 2 15 12,732,475 2004 11 48 59 18,043,522 2003 13 44 57 19,878,493 2002 75 54 129 11,651,369 2001 73 46 119 5,799,263 2000 6 13 19 19,485,026 1999 35 62 97 13,439,362 1998 5 32 37 7,738,358 Banking/Financial Institutions Banking and financial services provided within the City include First State Bank and Trust(branch of Bayport); S & C Bank (New Richmond, Wisconsin), and TCF National Bank. Reported deposits as of June 30, 2007 were $123,569,000; $8,885,000; $18,659,000, respectively. All reported deposits were obtained from the Federal Deposit Insurance Corporation website at www2.fdic.gov. Also available in nearby Stillwater are Central Bank; Eagle Valley Bank; First State Bank and Trust; Jennings State Bank;Lake Elmo Bank; TCF National Bank; US Bank,N.A.; and Wells Fargo Bank,N.A. Education The City is served by Independent School District No. 834, Stillwater, which operates nine elementary schools, grades kindergarten through six; one magnet elementary school, grades five and six; two junior high schools, grades seven through nine; and one senior high school, grades ten through twelve. Stillwater Area High School is accredited by the North Central Association. Combined enrollment for the 2007/2008 school year is approxi- mately 9,122. 1 Building construction and commercial/industrial growth completed within the past twelve months. —14— Major/Leading Employers Following are the major/leading employers within the City as reported by the City: Commercial/ Product/ Number of Industrial Service Employees 1 Andersen Corporation Window Manufacturer 650 State of Minnesota Correctional Facility Government Correctional Institution 365 Wal-Mart Stores Inc. Retail 310 ISD No. 834, Stillwater Public Education 175 Lowe's Retail Lumber/Hardware 125 Menard's Inc. Retail Lumber/Hardware 125 Kohl's Retail 113 Stillwater Motors Auto Dealership/Service Repair 111 Kowalski's Grocery Store 110 VSSA—Boutwell's Landing/McKean Square Senior Community Housing 101 Stillwater Ford Auto Dealership/Service Repair 86 Largest Taxpayers Following are the ten largest taxpayers within the City as reported by Washington County: Percent of 200612007 Real Property Taxable 200612007 to Tax Market Tax Capacity Name Service Value Ca aci ($8.383.673)2 Xcel Energy Utility $96,373,500 $ 1,924,048 22.95% St. Croix Mall,LLC Commercial 20,248,700 404,224 4.82 • OPH PAT&OPH VAL LLC Commercial 15,974,500 318,740 3.80 VSSA—Boutwell's Landing Residential 23,248,700 290,608 3.47 Prudential Insurance Company of America Commercial 12,202,200 243,294 2.90 VSSA—Mckean West,LLC Residential 17,654,500 220,682 2.63 Menard s Inc. Commercial 10,884,000 216,930 2.59 Wal-Mart RE Business TRS Commercial 9,167,100 182,592 2.18 W A T E Enterprises Inc Commercial 6,333,400 125,155 1.49 Raduenz Dealership Prop,LLC Commercial 5,721,900 113,688 1.36 L 4 48.19% Includes full-time,part-time and seasonal employees. 2 Before tax increment and fiscal disparity adjustments. —15— MINNESOTA VALUATIONS; PROPERTY TAX CLASSIFICATIONS Market Value According to Minnesota Statutes, Chapter 273, all real property subject to taxation is to be appraised at maximum intervals of four years. All real property becoming taxable in any year is listed at its taxable market value on January 2 of that year. The taxable market value is the County Assessor's appraisal of the worth of the property. Indicated Market Value The Minnesota Department of Revenue conducts the Real Estate Sales Assessment Ratio Study to accomplish equalization of property valuation in the State of Minnesota and to determine the probable selling price of a property. The study is a three-year average of sale prices as related to the latest assessor's taxable market value. The indicated market value is determined by dividing the real property taxable market value by the Sales Assessment Ratio for the City as determined by the Department of Revenue and then adding the personal property taxable market value. Tax Cycle Minnesota local government ad valorem property taxes are extended and collected by the various counties within the state. The process begins in the fall of every year with the certification, to the county auditor, of all local tax- ing districts' property tax levies.Local tax rates are calculated by dividing each taxing district's levy by its net tax capacity. One percentage point of local tax rate represents one dollar of tax per $100 net tax capacity. A list of taxes due is then prepared by the county auditor and turned over to the county treasurer on or before the first Monday in January. The county treasurer is responsible for collecting all property taxes within the county. Real estate tax statements are to be mailed out no later than March 31 and personal property tax statements no later than July 4. The due dates for payment of real property taxes are one-half on or before May 15 and one-half on or before October 15 (November 15 for farm property). The first half of property taxes on resorts is due May 31 and the second half is due October 15. Personal property taxes for manufactured homes become due one-half on or before August 31 and one-half on or before November 15. For personal property other than manufactured homes, the first half of taxes becomes due on or before May 15 and the second half becomes due on or before October 15. Following each distribution(June 21,July 4, and November 30, 2007 and January 25,2008),the county treasurer must redistribute property tax revenues to the local taxing districts in proportion to their tax capacity ratios. Delinquent property taxes are penalized at various rates depending on the type of property and the length of delinquency. Tax Credits Prior to 1990, taxes on homestead residential and agricultural property were reduced by a direct subsidy to the taxpayer. Beginning in 1990, the homestead credit has been eliminated. The state subsidy is now accomplished through lower class rates to homesteaded classifications of property and increased state aids paid directly to local taxing districts as well as a new market value credit, which is phased out with different levels of property values. This new system is intended to have generally the same impact as the former homestead credit system. Tax Levies for General Obligation Bonds (Minnesota Statutes,Section 475.61) The governing body of any municipality issuing general obligations shall, prior to delivery of the obligations, levy by resolution a direct general ad valorem tax upon all taxable property in the municipality to be spread upon the tax rolls for each year of the term of the obligations. The tax levies for all years shall be specified and such that if collected in full they,together with estimated collections of special assessments and other revenues pledged for the payment of said obligations, will produce at least five percent in excess of the amount needed to meet • when due the principal and interest payments on the obligations. -16- Such resolution shall irrevocably appropriate the taxes so levied and any special assessments or other revenues so pledged to the municipality's debt service fund or a special debt service fund or account created for the payment of one or more issues of obligations. Such resolution shall irrevocably appropriate the taxes so levied and any special assessments or other revenues so pledged to the municipality's debt service fund or a special debt service fund or account created for the payment of one or more issues of obligations. The governing body may, at its discretion, at any time after the obligation have been authorized, adopt a resolu- tion levying only a portion of such taxes, to be filed, assessed, extended, collected and remitted as hereinafter provided, and the amount or amounts therein levied shall be credited against the tax required to be levied prior to delivery of the obligations. The recording officer of the municipality shall file in the office of the county auditor of each county in which any part of the municipality is located a certified copy of the resolution, together with full information regarding the obligations for which the tax is levied. No further action by the municipality is required to authorize the extension, assessment and collection of the tax, but the municipality's liability on the obligations is not limited thereto and its governing body shall levy and cause to be extended, assessed and collected any additional taxes found necessary for full payment of the principal and interest. The auditor shall annually assess and extend upon the tax rolls the amount specified for such year in the resolution, unless the amount has been reduced as author- ized below or, if the municipality is located in more than one county, the portion thereof that bears the same ratio to the whole amount as the tax capacity value of taxable property in that part of the municipality located in his county bears to the tax capacity value of all taxable property in the municipality. Tax levies so made and filed shall be irrevocable, except that if the governing body in any year makes an irrevo- cable appropriation to the debt service fund of moneys actually on hand or if there is on hand any excess amount in the debt service fund, the recording officer may certify to the county auditor the fact and amount thereof and the auditor shall reduce by the amount so certified the amount otherwise to be included in the rolls next thereafter prepared. All such taxes shall be collected and remitted to the municipality by the county treasurer as other taxes are col- lected and remitted, and shall be used only for payment of the obligations on account of that levied or to repay advances from other funds used for such payments, except that any surplus remaining in the debt service fund when the obligations and interest thereon are paid may be appropriated to any other general purpose by the municipality. Class Rate The factors (class rates) for converting taxable market value to net tax capacity represent a basic element of the State's property tax relief system and are therefore subject to annual revisions by the State Legislature. Refer to the following page for a partial summary of these factors. (Remainder of page left intentionally blank) • -17- The following is a partial summary of these factors: Property Tax Classifications Class Rate Schedule 20021 20031 20041 20051 20061 Class Type ofProl2erty 2003 2004 2005 2006 2007 la Residential Homestead First$500,000 1.00% 1.00% 1.00% 1.00% 1.00% Over$500,000 1.25 1.25 1.25 1.25 1.25 2a Agricultural Homestead-House.Garage,One Acre: First$500,000 1.00 1.00 1.00 1.00 1.00 Over$500,000 1.25 1.25 1.25 1.25 1.25 Remainder of Farm*-First$690,000 .55 .55 .55 .55 .55 Over$690,000 1.00 1.00 1.00 1.00 1.00 2b Non-Homestead Agricultural Land* 1.00 1.00 1.00 1.00 1.00 3a Commercial-Industrial and Public Utilitvt First$150,000 1.50 1.50 1.50 1.50 1.50 Over$150,000 2.00 2.00 2.00 2.00 2.00 Rental HousinE Residential Non-Homestead: 4bb(1) 1 Unit First$500,000 1.00 1.00 1.00 1.00 1.00 1 Unit Over$500,000 1.25 1.25 1.25 1.25 1.25 1 unit 4d 1 to 3 units 1.00 N/A N/A N/A N/A 2 or 3 units 1.00 N/A N/A N/A N/A 4 or more units N/A 1.00 N/A N/A N/A Qualifying low-income-land and buildings N/A N/A NIA .75 .75 4a 4 or more units(including private for-profit hospitals) 1.50 1.25 1.25 1.25 1.25 Four or more units built after 6/30/01 1.25 N/A N/A N/A N/A Single house, garage & V acre on agricultural non- 4bb(2) homestead land-First$500,000 1.00 1.00 1.00 1.00 1.00 Over$500,000 1.25 1.25 1.25 1.25 1.25 4b(4) Residential non-homestead vacant land 1.25 1.25 1.25 1.25 1.25 4c(1) Seasonal Residential-Recreationalt,a Non-Commercial: First$500,000* 1.00 1.00 1.00 1.00 1.00 Over$500,000* 1.25 1.25 1.25 1.25 1.25 Commercial: First$500,000 1.00 1.00 1.00 1.00 1.00 Over$500,000 1.25 1.25 1.25 1.25 1.25 lc Commercial seasonal-residential recreational- under 250 days and includes homestead First$500,000 .55 .55 $500,000-2,200,000 1.00 1.00 1.00 1.00 1.00 Over$2,200,000 1.00 1.00 1.00 1.25 1.25 4c(2) Qualifying golf courses 1.25 1.25 1.25 1.25 1.25 * Exempt from referendum market value based taxes. t Subject to the state general property tax. a Note:For purposes of the state general nronerty tax only,the net tax capacity of non-commercial class 4c(1)seasonal residential recreational property has the following class rate structure:First$76,000 0.40%,$76,001-$500,000 1.00%and over$500,000 1.25%. -18- CITY OF OAK PARK HEIGHTS ECONOMIC AND FINANCIAL INFORMATION Valuations Taxable Net Tax Market Value Capacity 200612007 200612007 Real Property $574,619,500 $ 8,383,673 Personal Property 4,470,300 88,065 Fiscal Disparities) (Fiscal Disparity Contribution) ( 1,115,215) Fiscal Disparity Distribution 445,352 Total Valuation $579,0 89.800 7.801.875 Market Value After Sales Assessment Ratio The Minnesota Department of Revenue conducts the Real Estate Sales Assessment Ratio Study to accomplish equalization of property valuations in the State and to determine the probable selling price of a property. The Study is a three-year average of sale prices as related to the latest assessor's taxable market value. The latest Sales Assessment Ratio (2006) is 92.6% meaning the County Auditor's recorded real property market value of $574,619,500 is 92.6%of the probable resale taxable market value. We have made the following computations in deriving the market value figure used in the"Summary of Debt and Debt Statistics." $574,619,500 County Auditor's recorded real property market value. 92.6% Latest Composite Ratio from the Real Estate Sales Assessment Ratio Study of the Minnesota Department of Revenue. = $620,539,417 Indicated market value of real property. + 4,470,300 Personal property. = 625.009.717 Indicated market value of real and personal property used in"Summary of Debt and Debt Statistics." 1 Fiscal Disparities Law The 1971 Legislature enacted a"fiscal disparities law"which allows all the Twin City Metropolitan Area Municipalities to share in commercial/industrial growth, regardless of where the growth occurred geographically. Forty percent (40%) of every metropolitan municipality's growth in commercial/industrial assessed valuation is pooled, then redistributed to all municipalities on the basis of population and per capita valuation after the tax increment and fiscal disparity adjustments. —19— Sales Assessment Ratios Sales assessment ratios over the past ten years have been as follows: Year Ratio Year Ratio 2006 92.6% 2001 86.1% 2005 89.6 2000 86.9 2004 86.5 1999 89.6 2003 87.0 1998 89.2 2002 85.1 1997 92.1 I Valuation Trends(Real and Personal Property) Valuation trends over the past ten years have been as follows: Tax Tax Capacity Capacity Levy Year/ Indicated Taxable Before Fiscal After Fiscal Collection Year Market Value Market Value Disparities Disparities 2006/2007 $625,009,717 $579,089,800 $8,471,738 $7,801,875 2005/2006 590,016,669 529,099,400 7,485,948 6,843,710 2004/2005 560,102,104 485,026,700 6,918,930 6,306,337 2003/2004 514,133,470 447,871,200 6,445,927 5,961,554 2002/2003 477,101,149 406,640,800 5,974,543 5,569,968 2001/2002 405,738,145 349,905,800 5,163,440 4,773,711 2000/2001 372,880,049 324,531,100 7,370,050 6,795,389 1999/2000 329,206,290 295,318,900 6,691,604 6,691,604 1998/1999 329,769,652 274,454,600 6,354,756 6,076,917 1997/1998 304,030,964 238,211,800 6,108,080 5,697,086 Breakdown of Valuations 200612007 Taxable Market Value, Real and Personal Property: Real Property $574,619,500 99.23% Personal Property 4,470,300 .77 Totals: 579.089.800 100.00% 200612007 Tax Capacity, Real and Personal Property(be f ore f scal disparity adjustments): i Residential Homestead $ 2,332,924 27.54% j Agricultural 8 .01 Commercial&Industrial 3,328,632 39.29 Public Utility 1,733,703 20.46 Railroad Operating Property 3,278 .04 Residential Non-Homestead 983,149 11.60 Seasonal/Recreational Commercial&Residential 1,979 .02 Personal Property 88,065 1.04 Totals: 8.471.738 100.00% I • t Breakdown of Real Property Taxable Market Value is not available from Washington County. —20— Tax Capacity Rates Tax capacity rates over the past five-assessable/collection years for City taxpayers in Valley Branch Watershed District have been as follows: 2002103 2003104 2004105 2005106 2006107 Tax Tax Tax Tax Tax Levy Year/ Capacity Capacity Capacity Capacity Capacity Collection Year Rates Rates Rates Rates Rates Washington County 33.303% 31.201% 28.599% 26.968% 25.673% City of Oak Park Heights 35.799 34.382 36.488 36.136 35.733 ISD No. 834, Stillwater 26.566 18.746 19.393 19.405 19.004 NMISD No. 916 .098 .083 .075 .066 .000 Washington County HRA 1.132 1.145 1.047 .991 .934 Metropolitan Council 1.460 1.232 1.036 .853 .838 Metro Transit 1.789 1.714 1.499 1.505 1.232 Mosquito Abatement .563 .575 .558 .494 .477 Regional Rail Authority .120 .106 .095 .089 .082 Valley Branch Watershed District 2.836 2.501 2.102 1.743 1.293 Totals: 103.666% 91.685% 90.892% 88.250% U.266°/u Tax Levies and Collections) Levy Year/ 20021 20031 20041 20051 Collection Year 2003 2004 2005 2006 Original Gross Tax Levy $ 1,992,969 $ 2,054,057 $ 2,293,855 $ 2,474,434 Property Tax Credits2 ( 88,487) ( 88,534) ( 85,647) ( 79,412) Levy Adjustments 10,672 ( 2,144) 2 ( 251) Net Tax Levy $ 1,915,154 $ 1,963,379 $ 2,205,449 $ 2,394,771 Amount Collected during Collection Year $ 1,891,046 $ 1,938,726 $ 2,176,290 $ 2,363,192 Percent of Net Tax Levy Collected 98.74% 98.74% 98.68% 98.68% Amount Delinquent at end of Collection Year $ 24,108 $ 24,653 $ 29,159 $ 31,579 Delinquencies Collected as of (12/31/06) ( 17,298) ( 23,480) ( 22,853) ( 0) Delinquencies Abated or Cancelled as of(12/31/06) (---6.,584) ( 212) ( 242) ( 0) Total Delinquencies Outstanding as of(12/31/06) $ 226 $ 961 $ 6,064 $ 31,579 Percent of Net Tax Levy Collected 99.99% 99.95% 99.73% 98.68% Note: 2006/2007 Net Tax Levy $2,708,571 1 2006/2007 property taxes are currently in the process of collection/reporting and no updated figures are available from Washington County. 2 Property tax credits are aids provided by the State of Minnesota and paid directly to the City. -21- Statutory Debt Limits Minnesota Statutes, Section 475.53, states that a city may not incur or be subject to a net debt in excess of two percent (2%) of its taxable market value. Net debt is, with limited exceptions, debt paid solely from ad valorem taxes. Computation of Legal Debt Margin as of December 18, 2007: 2006/2007 Taxable Market Value $579,089,800 Times 15%of Taxable Market Value x .02 Statutory Debt Limit S 11,581,796 Outstanding bonds applicable to debt limit: $7,500,000 General Obligation Capital Improvement Plan Bonds, Series 2008A $ 7,500,000 Total debt applicable to debt limit $ 7,500,000 Legal debt margin 4.081.796 Estimated Cash and Investment Balances as of November 30,2007(unaudited) Fund Name General Fund $ 1,732,984 Special Revenue Fund 96,997 Capital Projects Fund 8,063,240 Debt Service Fund 392,056 Enterprise Fund 1,396,435 Agency Fund 148,297 Total Estimated Cash and Investment Balances $ 11,830,009 I 1 Effective June 2, 1997 and pursuant to Minnesota Statutes 465.7 1,Chapter 231,Section 33,any lease revenue or public project revenue bond issues/agreements of$1,000,000 or more are subject to the statutory debt limit. Lease revenue or public project revenue bond issues/agreements less than$1,000,000 are not subject to the statutory debt limit. _22_ i CITY OF OAK PARK HEIGHTS,MINNESOTA GENERAL OBLIGATION DEBT (As of December 18,2007,Plus This Issue) This Issue Purpose: G.O. G.O. Improvement Capital Bonds Improvement Plan Bonds, of 1998 Series 2008A Dated: 10/01/98 02/15/08 Original Amount: $1,990,000 $7,500,000 Maturity: 1-Dec 15-Dec Interest Rates: 3.60-4.50% -------- TOTALS. 2007 $0 $0 $0 2007 2008 125,000 0 125,000 2008 2009 125,000 200,000 325,000 2009 2010 125,000 200,000 325,000 2010 2011 125,000 210,000 335,000 2011 2012 125,000 220,000 345,000 2012 2013 125,000 235,000 360,000 2013 2014 0 250,000 250,000 2014 2015 0 275,000 275,000 2015 2016 0 300,000 300,000 2016 2017 0 325,000 325,000 2017 2018 0 350,000 350,000 2018 2019 0 375,000 375,000 2019 2020 0 400,000 400,000 2020 2021 0 425,000 425,000 2021 2022 0 450,000 450,000 2022 2023 0 475,000 475,000 2023 2024 0 500,000 500,000 2024 2025 0 525,000 525,000 2025 2026 0 555,000 555,000 2026 2027 0 580,000 580,000 2027 2028 0 650,000 650,000 2028 $750,000 $7,500,000 $8,250,000 (1) (2) NOTE.32%OF GENERAL OBLIGATION DEBT WILL BE RETIRED WITHIN TEN YEARS. (1) These bonds are payable primarily from special assessments against all benefited property and additionally secured by ad valorem taxes on all taxable property within the City and without limitation 91'amount. (2) These bonds are payable solely from ad valorem tares on all taxable property within the City and without limitation oj'amount.In addition,the bonds ARE subject to the statutory debt limit since the City's population is above the 2,500 limit established by Section 475.521.The 2007 current estimate provided by the City is 1,676. -23- Indirect Debt* 2006/2007 200612007 Tax Tax Capacity Percentage Taxpayers' Capacity Value Applicable Share Issuer Value(l) in Ci (1) in Ci Net Debt o Debt Washington County $ 273,980,996 $7,356,523 2.69 $ $ 3,379,543 125,633,5601 2> ISD No. 834, Stillwater 81,067,770 7,356,523 9.07 65,563,464(3) 5,946,606 NMISD No. 916 643,407,568 7,356,523 1.14 12,320,000(4) 140,448 Metropolitan Council 3,038,442,757 7,356,523 .24 8,673,927151 20,817 Metro Transit 2,583,170,505 7,356,523 .28 129,593,681(6) 362,862 Net Indirect Debt: &-2,850,276 (Remainder of page left intentionally blank) i Only those jurisdictions with outstanding bond indebtedness are shown above. 11) Tax Capacity Values are after tax increment, 10%of 200kV transmission line,and fiscal disparity contribution adjustments and before fiscal disparity distribution adjustment. (2) Washington County has bond indebtedness of$128,540,000 and sinking funds of$2,906,440 as of March 31,2007. (3) ISD No.834,Stillwater,reported bond indebtedness of$74,990,000 and sinking funds of$9,426,535.72 as of June 30,2007. (4) Northeast Metro Intermediate School District No.916,has bond indebtedness of$12,320,000 as of December 31,2006,as reported by Washington County. (5) Deductions: (A)$882,480,000 Metropolitan Waste Control Commission Debt as of March 15,2007 Note 1: Debt Service on A above is 100%self supported from revenues of the Metro Sanitary Sewer System,although the bonds are full faith and credit bonds. Sinking funds of$10,639,920 and escrow funds of$8,016,458 have not been deducted because said funds are attributable to A above.Sinking fund/escrow balances are as of December 31,2006. Note 2: The only tax supported bond indebtedness is$18,775,000 as of March 15,2007 and sinking funds of$10,101,073 as of December 31,2006. (6) Metro Transit has bond indebtedness of$162,505,000 as of March 15,2007 as well as sinking funds of$16,281,784 and escrow funds of$16,629,535 as of December 31,2006.This debt is issued by the Metropolitan Council for all public transit operations in the transit district, of which Metro Transit is the largest transit provider, and is payable from ad valorem taxes levied on all taxable property within the Metropolitan Transit District. —24— SUMMARY OF DEBT AND DEBT STATISTICS General Obligation Debt Bonds secured solely by special assessments $ 750,000 Bonds secured solely by ad valorem taxes(includes this issue) 7,500,000 Total General Obligation Direct Debt $ 8,250,000 Less debt service fund balance ( 392,056) Net Direct General Obligation Debt $ 7,857,944 Add taxpayers' share of net indirect debt 9,850,276 Net Direct and Indirect Debt 17.708.220 Facts for Ratio Computations 2006/2007 Indicated Market Value(real and personal property) $625,009,717 2006/2007 Net Tax Capacity(after fiscal disparity adjustments) $7,801,875 Population(2007 estimate) 4,676 Debt Ratios Net Direct Net Net and Direct Direct Indirect Indirect Debt Debt Debt Debt To Indicated Market Value 1.32% 1.26% 1.58% 2.84% Per Capita $1,764 $1,680 $ 2,107 $3,787 Per Capita Adjusted t $ 709 $ 676 $ 847 $1,523 1 The City's tax base is 39.29%commercial & industrial, 20.46%public utility,and .04%railroad operating property,which have been deducted. —25— APPENDIX A Proposed Form of Legal Opinion it �I I BRIGGS 3 2 Mi First National Bank Building 332 Minnesota Street 5t.Paul MN 55101-1336 tel651.808.6600 l�l rrr+ fax 651.808.6450 PROPOSED FORM OF LEGAL OPINION $7,500,000 GENERAL OBLIGATION CAPITAL IMPROVEMENT PLAN BONDS, SERIES 2008A CITY OF OAK PARK HEIGHTS WASHINGTON COUNTY MINNESOTA We have acted as bond counsel in connection with the issuance by the City of Oak Park Heights, Washington County, Minnesota(the "Issuer"), of its$7,500,000 General Obligation Capital Improvement Plan Bonds, Series 2008A, bearing a date of original issue of February 15, 2008 (the "Bonds"). We have examined the law and such certified proceedings and other documents as we deem necessary to render this opinion. We have not been engaged or undertaken to review the accuracy, completeness or sufficiency of any offering material relating to the Bonds, and we express no opinion relating thereto. As to questions of fact material to our opinion,we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Based upon such examinations, and assuming the authenticity of all documents submitted to us as originals,the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such documents, and the accuracy of the statements of fact contained in such documents, and based upon present Minnesota and federal laws(which excludes any pending legislation which may have a retroactive effect on or before the date hereof),regulations,rulings and decisions, it is our opinion that: (1) The proceedings show lawful authority for the issuance of the Bonds according to their terms under the Constitution and laws of the State of Minnesota now in force. (2) The Bonds are valid and binding general obligations of the Issuer and all of the taxable property within the Issuer's jurisdiction is subject to the levy of an ad valorem tax to pay the same without limitation as to rate or amount; provided that the enforceability(but not the validity) of the Bonds and the pledge of taxes for the payment of the principal and interest thereon is subject to the exercise of judicial discretion in accordance with general principles of equity,to the constitutional powers of the United States of America and to bankruptcy, Bri"sand Morn,Pro#essimwlAssocladon 2116630v 1 Minneapolis ! 5t,Paul I www.briggs com Member-Lex Mundi,a Global Association of independent law Firms B R I G G S A N D M O R G A N PROPOSED FORM OF LEGAL OPINION insolvency, reorganization, moratorium and other similar laws affecting creditors'rights heretofore or hereafter enacted. (3) At the time of the issuance and delivery of the Bonds to the original purchaser, the interest on the Bonds is excluded from gross income for United States income tax purposes and is excluded,to the same extent, from both gross income and taxable net income for State of Minnesota income tax purposes (other than Minnesota franchise taxes measured by income and imposed on corporations and financial institutions), and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations or the Minnesota alternative minimum tax applicable to individuals, estates or trusts; it should be noted, however,that for the purpose of computing the federal alternative minimum tax imposed on corporations, such interest is taken into account in determining adjusted current earnings. The opinions set forth in the preceding sentence are subject to the condition that the Issuer comply with all requirements of the Internal Revenue Code of 1986, as amended,that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes and from both gross income and taxable net income for State of Minnesota income tax purposes. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income and taxable net income retroactive to the date of issuance of the Bonds. We express no opinion regarding other state or federal tax consequences caused by the receipt or accrual of interest on the Bonds or arising with respect to ownership of the Bonds. BRIGGS AND MORGAN Professional Association 2116630vl APPENDIX B Proposed Form of Continuing Disclosure Undertaking �i PROPOSED FORM OF CONTINUING DISCLOSURE UNDERTAKING This Continuing Disclosure Undertaking (the "Disclosure Undertaking") is executed and delivered by the City of Oak Park Heights, Minnesota(the "Issuer"), in connection with the issuance of $7,500,000 General Obligation Capital Improvement Plan Bonds, Series 2008A (the 'Bonds"). The Bonds are being issued pursuant to a Resolution adopted on January 22, 2008 ("Resolution"). Pursuant to the Resolution and this Undertaking,the Issuer covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Undertaking. This Disclosure Undertaking is being executed and delivered by the Issuer for the benefit of the Owners and in order to assist the Participating Underwriters in complying with SEC Rule 15c2 12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the Resolution,which apply to any capitalized term used in this Disclosure Undertaking unless otherwise defined in this Section,the following capitalized terms shall have the following meanings: "Annual Report" shall mean any annual financial information provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Undertaking. "Audited Financial Statements" shall mean the financial statements of the Issuer audited annually by an independent certified public accounting firm, prepared pursuant to generally accepted accounting principles promulgated by the Financial Accounting Standards Board, modified by governmental accounting standards promulgated by the Government Accounting Standards Board. "Dissemination Agent" shall mean such party from time to time designated in writing by the Issuer to act as information dissemination agent and which has filed with the Issuer a written acceptance of such designation. "Fiscal Year" shall be the fiscal year of the Issuer. "Governing Body" shall, with respect to the Bonds, have the meaning given that term in Minnesota Statutes, Section 475.5 1, Subdivision 9. "MSRB" shall mean the Municipal Securities Rulemaking Board. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. Currently, the following are National Repositories: Bloomberg Municipal Repository 100 Business Park Drive Skillman,NJ 08558 Phone: 609-279-3225; Fax: 609-279-5962 www.bloomberg.com/markets/rates/municontacts.html E-mail: MunisABloomber .com DPC Data Inc. One Executive Drive Fort Lee,NJ 07024 Phone: 201-346-0701;Fax: 201-947-0107 www.dpedata.com Email: nrmsir@dpcdata.com 2116630v1 Interactive Data Pricing and Reference Data, Inc. Attn: NRMSIR 100 William Street, 15th Floor New York, NY 10038 Phone: 212-771-6999 or 800-689-8466; Fax: 212-771-7390 www interactivedata.com Email: NRMSIRAinteractivedata.com Standard& Poor's Securities Evaluations, Inc 55 Water Street-45th Floor New York,NY 10041 Phone: 212-438-4595; Fax: 212-438-3975 www.disclosuredirectory.standardandpoors.com Email: nrmsir repositoryksandp.com "Occurrence(s)" shall mean any of the events listed in Section 4.A. of this Disclosure Undertaking. "Official Statement" shall be the Official Statement dated ,prepared in connection with the Bonds. "Owners" shall mean the registered holders and, if not the same,the beneficial owners of any Bonds. "Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" shall mean each National Repository and each State Depository. ` "Resolution" shall mean the resolution or resolutions adopted by the Governing Body of the Issuer providing for, and authorizing the issuance of, the Bonds. "Rule" shall mean Rule 15c2 12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time or interpreted by the Securities and Exchange Commission. "State" shall mean the State of Minnesota. "State Depository" shall mean any public or private repository or entity designated by the State as a state depository for the purpose of the Rule. As of the date of this Disclosure Undertaking,there is no State Depository in Minnesota. SECTION 3. Provision of Annual Reports. A. The Issuer shall provide, or shall cause the Dissemination Agent to provide, upon request, to any person its Audited Financial Statements for the most recent Fiscal Year which is the only financial information or operating data which is customarily prepared by the Issuer and publicly available. Requests for information shall be sent to the attention of the Administrator, City Hall, Post Office Box 2007, Oak Park Heights, Minnesota 55082,telephone 651-439-4439. 2116630v1 B. Upon establishment of a State Depository, the Issuer may elect, in lieu of complying with the provisions of paragraph A above, to provide, as soon as available but in any event within 365 days after the end of its Fiscal Year, its Audited Financial Statements to the State Depository. SECTION 4. Reporting of Significant Events. A. This Section 4 shall govern the giving of notices of the occurrence of any of the following events with respect to the Bonds, if material: (1) principal and interest payment delinquency; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the security; (7) modifications to rights of security holders; (8) Bond calls; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Bonds; and (11) rating changes. B. Whenever an event listed in Section 4.A. above has occurred, the Issuer shall as soon as possible determine if such event would constitute material information for Owners of Bonds. If knowledge of the Occurrence would be material,the Issuer shall promptly file a notice of such Occurrence with each National Repository or the MSRB and with the State Depository, if any. SECTION 5. Termination of Reporting Obligation. The Issuer's obligations under this Disclosure Undertaking shall terminate upon the legal defeasance,prior redemption or payment in full of all of the Bonds. SECTION 6. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Undertaking, and may discharge any such Agent,with or without appointing a successor Dissemination Agent. SECTION 7. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Undertaking,the Issuer may amend this Disclosure Undertaking, and any provision of this Disclosure Undertaking may be waived, if(a) a change in law or change in the ordinary business or operation of the Issuer has occurred, (b) such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule, and (c) such amendment or waiver is supported by an opinion of counsel expert in federal securities laws to the effect that such amendment or waiver would not materially impair the interests of Owners. SECTION 8. Additional Information. Nothing in this Disclosure Undertaking shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Undertaking or any other means of communication, or including any other information in any Annual Report or notice of an Occurrence, in addition to that which is required by this Disclosure Undertaking. If the Issuer chooses to include any information in any Annual Report or notice of an Occurrence in addition to that which is specifically required by this Disclosure Undertaking, the Issuer shall have no obligation under this Disclosure Undertaking to update such information or include it in any future Annual Report or notice of an Occurrence. 2116630v1 SECTION 9. Default. In the event of a failure of the Issuer to provide information required by this Disclosure Undertaking, any Owner may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Issuer to comply with its obligations to provide information under this Disclosure Undertaking. A default under this Disclosure Undertaking shall not be deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Undertaking in the event of any failure of the Issuer to comply with this Disclosure Undertaking shall be an action to compel performance. SECTION 10. Beneficiaries. This Disclosure Undertaking shall inure solely to the benefit of the Issuer,the Participating Underwriters and Owners from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 11. Reserved Rights. The Issuer reserves the right to discontinue providing any information required under the Rule if a final determination should be made by a court of competent jurisdiction that the Rule is invalid or otherwise unlawful or, subject to the provisions of Section 7 hereof, to modify the undertaking under this Disclosure Undertaking if the Issuer determines that such modification is required by the Rule or by a court of competent jurisdiction. Dated: 52008. CITY OF OAK PARK HEIGHTS, MINNESOTA By Its Mayor I By . Its Administrator I I 2116630v1 i APPENDIX C City's Financial Statement The following financial statements are excerpts from the annual financial report for the year ended December 31, 2006. The complete financial report for the year 2006 and the prior two years are available for inspection at the City Offices and the office of Northland Securities, Inc.The reader of this Official Statement should be aware that the complete financial report may have further data relating to the excerpts presented in the appendix which may provide additional explanation, interpretation or modification of the excerpts. Excerpts from the Financial Report ➢ Managements Discussion and Analysis ➢ GovernmentWide Financial Statements: -Statement of Net Assets -Statement of Activities ➢ Fund Financial Statements: -Balance Sheet-Governmental Funds -Statement of Revenues,Expenditures and Ch anges in Fund Balance-Governmental Funds -Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds -Statement of Net Assets-Proprietary Funds -Statement of Revenues,Expenses, and Changes in Fund Net Assets-Proprietary Funds -Statement of Cash Flows-Proprietary Funds -Statement of Fiduciary Net Assets-Agency Funds ➢ Notes to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Oak Park Heights,Minnesota(the City)we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31,2006. Financial Highlights The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $29,897,965 (Net assets). Of this amount, $11,672,181 (unrestricted net assets)may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the City's fund designations and fiscal policies. The City's total net assets increased by $3,787,901. As of the close of the current fiscal year,the City's governmental funds reported combined ending fund balances of$11,176,560. At the end of the current fiscal year the general fund balance was$2,302,502 of which $2,071,633 is designated. The General Fund balance increased by$198,759 as a result of positive budget variances in revenues. The City was able to transfer an additional $190,000 from the General Fund to the Budgeted Projects Fund for capital improvements for streets,parks,police department equipment,civil defense,and general government. The G. O. Refunding Bonds of 2002 were used to finance Phase I of the City's Annexation Area Extended Trunk Facility Improvements. This bond issue was retired as of December 1, 2006. The Sanitary Sewer Connection Charge Fund,Water Connection Charge Fund and.Storm Sewer Connection Charge Fund collected $780,141 of connection charges in the year 2006. All four enterprise fund operations reported net operating income in 2006. Management's Discussion and Analysis Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements comprise three components: 1) government-wide financial statements,2)fund financial statements,and 3)notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs,regardless of the timing of related cash flows. Thus,revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods(e.g.uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges(business-type activities). The governmental activities of the City include general government,public safety,public works and parks and recreation. The business-type activities of the City include water,sanitary sewer,sanitation and storm sewer. The government-wide financial statements are statements 1 and 2 of this report. Fund Financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments,uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. Management's Discussion and Analysis J Y Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However,unlike the government-wide financial statements,governmental fund financial statements focus on near-term inflows and outflows of spendable resource,as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financial requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so,readers may better understand the long-term impact of the City's near term financial decisions.Both the governmental fund balance sheet and governmental fund statement of revenues,expenditures and change in fund balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains five individual major governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues,expenditures and changes in fund balances for the following major funds: • General Fund • G.O.Improvement Bonds of 1998—Debt Service Fund • Novak Avenue Street and Utility Improvements Fund—Capital Project Fund • Renewal and Replacement Fund—Capital Project Fund • Park Development Fund—Capital Project Fund Data from the other governmental funds are combined into a single,aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of subcombining statements elsewhere in this report. The City adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for this fund to demonstrate compliance with this budget. The basic governmental fund financial statements are statements 3 through 5 of this report. Proprietary funds. The City maintains four enterprise funds as a part of its proprietary fund type. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water,sanitary sewer, sanitation and storm sewer operations. Management's Discussion and Analysis Proprietary funds provide the same type of information as the government-wide financial statements,only in more detail. The proprietary fund financial statements provide separate information for the following funds: Ente rp r ise funds: Water Sanitary Sewer Sanitation Storm Sewer The basic proprietary fund financial statements are statements 6 through 8 of this report. Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the City. Fiduciary funds are not reflected by the government-wide financial statements because the resources of those funds are not available to support the City's own programs. The basic fiduciary fund statements are Statements 9, 19 and 20. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government—wide and fund financial statements. The notes to the financial statements can be found following Statement 9. Other information. The combining statements referred to earlier in connection with non- major governmental funds are presented immediately following the required supplementary information on budgetary comparisons. Combining and individual fund statements and schedules are presented as Statements 1 I through 20. Government-Wide Financial Analysis As noted earlier,net assets may serve over time as a useful indicator of a government's financial position. In the case of the City,assets exceeded liabilities by$29,879,965 at the close of the most recent fiscal year. The largest portion of the City's net assets($17,308,076 or 58%percent)reflects its investment in capital assets(e.g. land, improvements,buildings and structures,machinery and equipment, and furniture and fixtures) less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently,these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Management's Discussion and Analysis City of Oak Park Heights' Net Assets Governmental Activities Business-Type Activities Totals 2006 2005 2006 2005 2006 2005 Current and other assets $18,410,951 $9,423,353 $1,468,742 $1,194,780 $19,879,693 $10,618,133 Capital assets 5,756,494 10,993,521 5,826,582 5,985,350 11,583,076 16,978,871 Total assets 524,167 45 E20�416874 _ 57,295324 $7,180,130 531.462,769 $27,597,004 Long-term liabilities outstanding $946,087 $1,032,136 $22,316 $20,408 $968,403 $1,052,544 Other liabilities 550,138 386,093 64,263 66,303 614,401 452,396 Total liabilities $1,496,225 $1,418,229 $86,579 $86,711 $1582,804 $1,504,440 Net assets: Invested in capital assets,net of related debt $11,481,494 $9,928,521 $5,826,582 $5,985,350 $17,308,076 $15,913,871 Resirieted 899,708 856,611 - $99,708 856,611 Unrestricted 10,290,018 8,213,513 1,382,163 1,108,069 11,672,181 9,321,582 Total net assets $22�671t220 $18,998,645 57,208,745 $7,093,419 $29,879,965 526 092064 A p ortion of the City's net assets represent resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets may be used to meet the City's ongoing obligations to citizens and creditors. At the end of the current fiscal year,the City is able to report positive balances in all three categories of net assets,both for the government as a whole,as well as for its separate governmental and business-type activities. Management's Discussion and Analysis Governmental Activities Governmental activities increased the City's net assets by$3,672,575 during 2006, Key elements of this increase are as follows: City of Oak Park Heights' Changes in Net Assets Govemmenial Activities Business-Type Activities Totals 2006 2005 2006 2005 2006 2005 Revenues: Program revenues: Charges for services $3,365,283 $975,968 $1,441,053 $1,299,737 $4,806,336 $2,275,705 Operating grants and contributions 74,105 88,229 74,105 88,229 Capital grants and contributions 165,397 62,686 165,397 62,686 General revenues: General property taxes 2,417,014 2,222,335 2,417,014 2,222,335 Grants and contributions not restricted to specific programs 29,838 2,040 29,838 2,040 Gain on sale of capital assets 244,098 950 244,098 950 Other revenue 16,255 24,256 16,255 24,256 Unrestricted investment earnings 425,160 258,614 49,037 29,268 474,197 287,882 Total revenues 6,737,150 3,635,078 1,490,090 1,329,005 8,227,240 4,964,083 Expenses: General government 987,597 $82,800 - 987,597 882,800 Public safety 1,226,042 1,210,179 1,226,042 1,210,179 Public works 7$5,989 511,I37 755,989 511,137 Parks and recreation 152,899 138,379 152,899 138,378 Interest on long-term debt 43,965 55,695 43,965 55,695 Water 398,766 373,996 398,766 373,996 Sanitary sewer 661,367 560,876 661,367 560,876 Storm sewer 65,149 34,150 65,149 34,150 Sanitation 147,565 164,572 147,565 164,572 Total expenses 3,166,492 2,798,189 1,272,847 1,133,594 4,439,339 3,931,783 Increase in net assets before transfers 3,570,658 836,889 217,243 195,411 3,787,901 1,032,300 Transfers 141,917 (416,944) (101,917) 416,944 Change in net assets 3,672,575 419,945 115,326 612,355 3,787,901 1,032,300 Net assets-January 1 18,99815 _ 18,578,700 7,093,419 6,481,064 26,092,064 25,059,764 Net assets-December 31 _11 $7,208,745 $7,0_ 93s419 $29,879,965 526,492,064 ' x` 4'� '4':'»mss '}.-el L''"•�,' 'S.r��s'--F'.r., ''^ .. I a, 7 x1 a �.�� ,•„� ,� ac.t��"�,a �'-iC.ry7^' �"3L�`r' �-�" � "ire —�a�` a:;�"+ Oyu':,.[ -v� ^..1�Ji.�^�i.�d. � iT4.t h:ru�y'^-'•``�". r- �` 10- son gg "no --yen .: - s MP " ? rE� E2 a �.a ,m ; G � 3 pf js gE WAIT A mg wgil I, ggg µ pit sit Too Management's Discussion and Analysis sis y Financial Analysis of the Government's Funds Governmental Funds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows,and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular,unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. At the end of the current fiscal year,the City's governmental funds reported combined ending fund balances of$11,176,560. The general fund increased by$198,759 in 2006,which was due primarily to revenues exceeding budget expectations. Revenues related to building activities contributed to the revenue increase. The G.O.Improvement Bonds of 1998 debt service fund increased by$407,753 during 2006. The Novak Utility Improvements capital project fund is funded by direct charges to developers. The Renewal and Replacement capital project fund increased by$283,389 during 2006. This fund receives an annual transfer from the proprietary funds in an amount equal to JO depreciation expense. The Park Development capital project fund increased by$410,338 due to monies collected from developers for park dedication fees. The nonmajor special revenue funds increased by$10,605 during 2006. The nonmajor debt service funds decreased by$62,392 during 2006. The nonmajor capital project fund increased by$1,425,953 during 2006. $780,141 (55%) is attributable to collection of connection charges. Proprietary funds. The City's proprietary funds provide the same type of information found in the g overnment-wide financial statements but in more detail. 10 Management's Discussion and Analysis Budgetary.Highlights General Fund The expenditure budget was amended to provide for changes in activity that occurred during the year. The revenue budget was amended to recognize increased property taxes expected which are offset by the State of Minnesota's market value credit and for additional miscellaneous revenue collected. Capital Asset and Debt Administration Capital assets. The City's investment in capital assets for its governmental and business- type activities as of December 31,2006,amounts to$18,183,076(net of accumulated depreciation). This investment in capital assets includes land,buildings and structures, infrastructure,machinery and equipment and furniture and fixtures. City of Oak Park Heights' Capital Assets (Net of Depreciation) Beginning Ending Balance Tereases Decreases Balance Governmental activities: Capital assets,not being depreciated: Land $1,615,116 $278,980 ($2) $1,894,094 Construction in progress 316,569 1,353,195 (314,524) 1,355,240 Total capital assets,not being depreciated 1,931,685 1,632,I75 (314,526) 3,249,334 Capital assets,being depreciated: Buildings and structures 1,118,146 - 1,118,146 Other improvements 560,963 325,191 886,154 Machinery and equipment 409,677 32,906 442,583 Furniture and fixtures 139,921 121,269 26I,190 Infrastructure 114,100 - 11,234,100 Total capital assets,being depreciated 13,462,807 479,366 0 13,942,173 Less accumulated depreciation for: Buildings and structures 399,306 24,523 - 423,829 Other improvements 131,993 5,443 - 137,436 Machinery and equipment 254,506 33,033 287,539 Furniture and fixtures 90,717 14,990 105,707 Infrastructure 3,524,449 356,053 - 3,880,502 Total accumulated depreciation 4,400,971 434,042 0 4,835,013 Total capital assets being depreciated-net 9,061,836 45,324 0 9,107,160 Governmental activities capital assets-net $10,993,521 $1,677,499 ($314,526) $12,356,494 Management's Discussion and Analysis Beginning Ending Balance Increases Decreases Balance Business-type activities: Capital assets,not being depreciated: Land $60,000 $ - $ $60,000 Total capital assets,not being depreciated 60,000 0 0 60,000 Capital assets,being depreciated: Buildings and structures 1,320,334 - - 1,320,334 Machinery and equipment 219,167 22,255 - 241,422 Distribution and collection systems 7,022,137 - 7,022,137 Total capital assets,being depreciated 8,561,638 22,255 0 8,583,893 Less accumulated depreciation: Buildings and structures 492,622 29,860 - 522,482 Machinery and equipment 111,436 10,614 - 122,050 Distribution and collection systems 2,032,230 140,549 2,172,779 Less accumulated depreciation 2,636,288 181,023 0 2,817,311 Total capital assets being depreciated-net 5,925,350 (158,768) 0 5,766,582 Business-type activities capital assets-net $5,985,350 ($158,768) $0 $5,826,582 T Additional information on the City's capital assets can be found in Note 4. Long-term debt. At the end of the current fiscal year,the City had total long-term debt outstanding of$875,000,a decrease of$190,000 from 2005. Additional long-term debt in the amount of$231,058 for compensated absences was also outstanding at the end of 2006. City of Oak Park Heights' Outstanding Debt General obligation improvement bonds and compensated absences: Governmental Activities Business-Type Activities Totals 2006 2005 2006 2005 2006 2005 General Obligation Bonds $875,000 $1,065,000 $ - $ - $875,000 $1,065,000 Compensated absences 207,449 171,361 23,609 22,255 231,058 193,616 Total $1,082,449 $1,236,361 $23,609 $22,255 $1,106,058 $1,258,616 I Management's Discussion and Analysis State statutes limit the amount of general obligation debt a Minnesota city may issue to 2%of total estimated market value. The current debt limitation for the City is$10,787,000. Of the City's outstanding debt, none is counted within the statutory limitation. Additional information on the City's long-term debt can be found in Note 5. Requests for information. This financial report is designed to provide a general overview of the City's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Director of Finance, 14168 Oak Park Boulevard,Oak Park Heights,Minnesota 55082-2007. I i CITY OF OAK PARK HEIGHTS,MINNESOTA STATEMENT OF NET ASSETS Statement I December 31,2006 Primary Government Governmental Business-Type Totals Assets: Activities Activities 2006 2005 Cash and investments $10,996,187 $1,132,313 $12,128,500 $9,259,046 Accrued interest 318,697 36,800 355,497 194,636 Accounts receivable-net 6,907 261,222 268,129 246,920 Due from other governmental units 33,631 11,562 45,193 119,365 Due from developers 196,471 - 196,471 6,782 Prepaid items - 26,845 26,845 26,359 Taxes receivable: Delinquent 38,831 - 38,831 45,063 Due from County 31,466 - 31,466 21,167 Special assessments receivable 188,761 - 188,761 698,795 Capital assets(net of accumulated depreciation): Land 1,894,094 60,000 1,954,094 1,675,116 Building and structures 694,317 797,852 1,492,169 1,546,552 Other improvements 748,718 - 748,718 428,970 Machinery and equipment 155,044 119,372 274,416 262,902 Furniture and fixtures 155,483 - 155,483 49,204 Infrastructure 7,353,598 4,849,358 12,202,956 12,699,558 Construction in progress 1,3552240 - 1,355,240 316,569 Total assets 24,167,445 7,295,324 311462,769 27,597,004 Liabilities: Cash overdraft 156,559 - 156,559 - Accounts payable 68,968 53,294 122,262 156,337 Salaries payable 2,172 3,093 5,265 3,826 Contracts payable 182,309 - 182,309 25,504 Due to other governmental units 627 6,583 7,210 12,213 Due to developers - - - 44,733 Accrued interest payable 3,141 - 3,141 3,711 Compensated absences payable: Due within one year 11,362 1,293 12,655 16,072 Due in more than one year 196,087 22,316 218,403 177,544 Bonds payable: Due within one year 125,000 - 125,000 190,000 Due in more than one year 750,000 - 750,000 875,000 Total liabilities 1,496,225 86,579 1,582,804 1,504,940 Net assets: Invested in capital assets,net of related debt 11,481,494 5,826,582 17,308,076 15,913,871 Restricted for: Debt service 694,708 - 694,708 856,611 Autumn Hills Park 205,000 - 205,000 - Unrestricted 10,290,018 1,382,163 11,672,181 9,321,582 Total net assets $22,671,220 $7,208,745 $29,879,965 $26,092,064 The accompanying notes are an integral part of these financial statements. i CITY OF OAK PARK HEIGHTS,MINNESOTA STATEMENT OF ACTIVI'T'IES For The Year Ended December 31,2006 Charges For Functions/Programs Expenses Services Primary government: Govermnental activities: General government $987,597 $85,315 Public safety 1,226,042 456,332 Public works 755,989 1,819,396 Parks and recreation 152,899 1,004,240 Interest on long-term debt 43,965 - Total governmental activities 3,166,492 3,365,283 Business-type activities: Water 398,766 502,407 Sanitary sewer 661,367 767,207 Storm sewer 65,149 74,173 Sanitation 147,565 97,266 Total business-type activities 1,272,847 1,441,053 Total primary government $4,439,339 $4,806,336 The accompanying notes are an integral part of these financial statements. Statement 2 Net(Expense)Revenue and Program Revenues Changes in Net Assets Operating Capital Primary Government Grants and Grants and Governmental Business-Type Totals Contributions Contributions Activities Activities 2006 2005 ($902,282) $ - ($902,282) ($733,377) 72,081 - (697,629) - (697,629) (539,559 1,599 40,397 1,105,403 - 1,105,403 (227,249) 425 125,000 976,766 - 976,766 (115,426) - (43,965) - (43,965) (55,695) 74,105 165,397 438,293 0 438,293 (1,671,306) - - - 103,641 103,641 49,880 - - 105,840 105,840 144,580 - - 9,024 9,024 39,396 - - (50,299) (50,299) (67,713) 0 0 0 168,206 168,206 166,143 $74,105 $165,397 438,293 168,206 606,499 (1,505,163) General revenues: General property taxes 2,417,014 - 2,417,014 2,222,335 Grants and contributions not restricted to specific programs 29,838 - 29,838 2,040 Unrestricted investment earnings 425,160 49,037 474,197 287,882 Gain on sale of capital assets 244,099 - 244,099 950 Other 16,254 - 16,254 24,256 Transfers 101,917 (101,917) - - Total general revenues and transfers 3,234,282 (52,880) 3,181,402 2,537,463 Change in net assets 3,672,575 115,326 3,787,901 1,032,300 Net assets-beginning 18,998,645 7,093,419 26,092,064 25,059,764 Net assets-ending $22,671,220 $7,208,745 $29,879,965 $26,092,064 i The accompanying notes are an integral part of these financial statements. CITY OF OAK.PARK HEIGHTS,MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS December 31,2006 5250.0. Improvement Bonds of 1998 Debt General Fund Service Fund Assets Cash and investments $2,229,287 $496,113 Accrued interest receivable 59,373 12,989 Accounts receivable-net 6,657 - Due from other governmental units 33,631. - Due from developers - Taxes receivable: Delinquent 38,831 - Due from County 31,466 - Special assessments receivable 109 181,879 Total assets $2,399,354 $690,981 Liabilities and Fund Balances Liabilities: Cash overdraft $ - $ - Accounts payable 55,222 Salaries payable 2,172 = Contracts payable Due to other governmental units 627 - Due to developers - Deferred revenue 38,831 178,152 Total liabilities 96,852 178,152 Fund balance: Reserved. - 512,829 Unreserved: Designated reported in General Fund 2,071,633 - Designated reported in Special Revenue Funds - - Designated reported in Capital Project Funds - Undesignated reported in General Fund 230,869 - Undesignated reported in Debt Service Fund Total fund balance 2,302,502 512,829 Total liabilities and fund balance $2,399,354 $690,981 Fund balance reported above Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources,and therefore,are not reported in the funds. Other long-term assets are not available to pay for current-period expenditures and,therefore,are deferred in the funds. Long-term liabilities,are not due and payable in the current period and therefore are not reported in the funds: Bonds payable Compensated absences payable Accrued interest payable Net assets of governmental activities The accompanying notes are an integral part of these financial statements. Statement 3 732 Novak 710 Renewal and Avenue Street and Replacement Other Utility Capital Project 405 Park Governmental Improvements Fund Development Funds Total Governmental Funds 2006 2005 $ - $2,840,525 $893,814 $4,536,448 $10,996,187 $8,363,093 88,459 25,617 132,259 318,697 174,596 - - 250 6,907 3,435 - 33,631 110,422 164,175 - - 32,296 196,471 6,782 - - - - 38,831 45,063 31,466 21,167 - - - 6,773 188,761 698,795 $164,175 $2,928,984 $919,431 $4,708,026 $11,810,951 $9,423,353 $127,697 $ - $ - $28,862 $156,559 $ - 4,085 - 1,458 8,203 68,968 105,256 - - 2,172 2,988 32,393 - 148,916 1,000 182,309 25,504 - - - - 627 676 - - 44,733 - 6,773 223,756 743,041 164,175 0 150,374 44,838 634,391 921,198 - - - 205,000 717,829 214,783 - 2,071,633 1,817,533 - - 86,326 86,326 75,721 2,928,984 769,057 4,324,547 8,022,588 6,107,908 - - - 230,869 286,210 - - - 47,315 47,315 - 0 2,928,984 769,057 4,663,188 11,176,560 8,502,155 $164,175 $2,928,984 $919,431 $4,708,026 $1.1,810,951 $9,423,353 $11,176,560 $8,502,155 12,356,494 10,993,521 223,756 743,041 (875,000) (1,065,000) (207,449) (171,361) (3,141) (3,711) $22,671,220 $18,998,645 The accompanying notes are an integral part of these financial statements. CITY OF OAK PARK HEIGHTS,MINNESOTA STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS For The Year Ended December 31,2006 525 G.O. Improvement Bonds of 1998 Debt General Fund Service Fund Revenues: General property taxes $2,423,246 $ - Special assessments 36 503,257 Licenses and permits 306,266 - Intergovernmental 102,818 - Charges for services 78,765 - Direct charges to developers - Fines and forfeits 81,230 - Investment income 79,610 17,308 Refunds and reimbursements 75,213 - Donations and contributions - Miscellaneous 1,489 - Total revenues 3,148,673 520,565 Expenditures: Current: General government 941,431 - Public safety 1,173,049 - Public works 177,683 - Parks and recreation 107,071 - Capital outlay 2,000 - Debt service: Principal retirement - 125,000 Interest and other - 42,812 Construction costs Total expenditures 2,401,234 167,812 Revenues over expenditures 747,439 352,753 Other financing sources(uses): Sale of capital assets - - Transfers in - 55,000 Transfers out (548,680) - Total other financing sources(uses) (548,680) 55,000 Net change in fund balance 198,759 407,753 Fund balance-January 1 2,103,743 105,076 Fund balance-December 31 $2,302,502 $512,829 The accompanying notes are an integral part of these financial statements. Statement 4 710 Renewal 732 Novak and Avenue Street Replacement Other and Utility Capital Project 405 Park Governmental Intra-Activity Improvements Fund Development Funds Eliminations Total Governmental Funds 2006 2005 $ _ $ _ $ _ $ - $ - $2,423,246 $2,218,906 50,157 - 553,450 225,516 - - 306,266 365,512 - - 102,818 101,519 1,004,240 803,771 - 1,886,776 294,846 797,689 - - 140,609 - 938,298 139,191 - - 3,500 - 84,730 69,850 117,872 34,134 176,236 - 425,160 258,614 - - 79,867 - 155,080 125,405 126,125 - 126,125 3,750 - - - 8,900 - 10,389 5,200 797,689 117,872 1,038,374 1,389,165 0 7,012,338 35808,309 i - - - 444 - 941,875 851,437 - 7,392 - 1,180,441 1,172,803 1,228 244,099 - 423,010 208,848 - - 107,071 99,980 - - 278,980 162,842 - 443,822 21,000 - - - 65,000 - 190,000 395,000 - - - 1,723 - 44,535 56,710 797,689 - 347,828 207,678 - 1,353,195 358,344 797,689 0 628,036 689,178 0 4,683,949 3,164,122 0 117,872 410,338 699,987 0 2,328,389 644,187 _ 244,099 - 244,099 1,167 165,517 - 549,032 (579,132) 190,417 180,098 - - (118,952) 579,132 (88,500) (88,500) 0 165,517 0 674,179 0 346,016 92,765 0 283,389 410,338 1,374,166 0 2,674,405 736,952 - 2,645,595 358,719 3,289,022 - 8,502,155 7,765,203 $0 $2,928,984 $769,057 $4,663,188 $0 $11,176,560 $8,502,155 The accompanying notes are an integral part of these financial statements. CITY OF OAK PARK HEIGHTS,MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, Statement 5 EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS For The Year Ended December 31,2006 2006 2005 Amounts reported for governmental activities in the statement of activities are different because: j Net changes in fund balances-total governmental funds(Statement 4) $2,674,405 $736,952 Governmental funds report capital outlays as expenditures. However,in the statement of activities the cost of those assets is allocated over their estimated useful laves and reported as depreciation expense: Depreciation (434,042) (401,999) Capital outlay 1,797,015 379,347 Capital contribution - (508,542) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds: Change in delinquent taxes (6,232) 3,429 Change in deferred and delinquent special assessments (513,053) (177,830) The issuance of long-term debt(e.g.,bonds,leases)provides current financial resources to governmental funds,while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction,however,has any effect on net assets. The amount of this difference is: Principal payments on bonds payable 190,000 395,000 Some expenses reported in the statement of activities do not require the use of current financial resources and,therefore,are not reported as expenditures in governmental funds.Expenses reported in the statement of activities include the effects of the changes in these expense accruals as follows: Change in compensated absences payable (36,088) (7,427) Change in accrued interest payable 570 1,015 Change in net assets of governmental activities(Statement 2) $3,672,575 $419,945 The accompanying notes are an integral part of these financial statements. CITY OF OAK PARK HEIGHTS,MJNNESOTA STATEMENT OF NET ASSETS Statement 6 PROPRIETARY FUNDS December 31,2006 Business-Type Activities Enterprise Funds 707 Storm 708 705 Water 706 Sewer Sewer Utility Sanitation Utility Fund Utility Fund Fund Utility Fund Totals 2006 2005 Assets: Current assets: Cash and cash equivalents $543,599 $426,374 $120,898 $41,442 $1,132,313 $895,953 Accrued interest receivable 18,012 14,829 3,766 193 36,800 20,040 Accounts receivable: Customers 73,574 117,856 I1,109 16,277 218,816 207,720 Certified to County 6,700 20,995 2,364 2,668 32,727 35,524 Other 9,679 - - - 9,679 187 Due from other governmental units 3,438 6,528 667 929 11,562 8,997 Prepaid items - 26,845 - - 26,845 26,359 Total current assets 655,002 613,427 138,804 61,509 1,468,742 1,194,780 Noncurrent assets: Capital assets: Land 60,000 - - - 60,000 60,000 Buildings and structures 1,199,304 121,030 - - 1,320,334 1,320,334 Machinery and equipment 237,019 4,403 - - 241,422 219,167 Distribution and collection system 3,168,027 3,854,110 7,022,137 7,022,137 Total capital assets 4,664,350 3,979,543 - 0 - 0 8,643,893 8,621,638 Less: Allowance for depreciation (1,558,042) (1,259,269) - - (2,817,311) (2,636,288) Net capital assets 3,106,308 2,720,274 0 0 5,826,582 5,985,350 Total noncurrent assets 3,106,308 2,720,274 0 0 5,826,582 5,985,350 Total assets 3,761,310 3,333,701 138,804 61,509 7,295,324 7,180130 Liabilities: Current liabilities: Accounts payable 5,898 6,384 4,957 36,055 53,294 51,081 Salaries payable 1,682 1,404 7 - 3,093 3,496 Due to other governments 2,811 3,022 750 6,583 9,879 Compensated absences payable-current portion 756 463 74 - 1,293 1,847 Total current liabilities 11,147 111273 5,038 361805 64,263 66,303 Noncurrent liabilities: Compensated absences payable 13,051 7,988 1,277 - 22,316 20,408 Total liabilities 24,198 19,261 6,315 36,805 86,579 86,711 Net assets: Invested in capital assets,net of related debt 3,106,308 2,720,274 - - 5,826,582 5,985,350 Unrestricted 630,804 5941166 132,489 24,704 1,382,163 1,108,069 Total net assets $3,737,112 $3,314,440 $132,489 $24,704 $7,208,745 $7,093,419 The accompanying notes are an integral part of these financial statements, CITY OF OAK PARK HEIGHTS,MINNESOTA STATEMENT OF REVENUES,EXPENSES AND Statement 7 CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS For The Year Ended December 31,2006 Business-Type Activities Enterprise Funds 707 Storm 708 705 Water 706 Sewer Sewer Utility Sanitation Utility Fund Utility Fund Fund Utility Fund Totals 2006 2005 Operating revenues: Customer billings $463,249 $737,527 $71,926 $95,086 $1,367,788 $1,266,579 Penalties 6,600 12,967 1,427 2,180 23,174 15,672 Meter sales 14,309 - - - 14,309 4,351 Charges for services 8,815 7,960 820 17,595 13,135 Refunds and reimbursements 9,434 8,753 - - 18,187 - Total operating revenues 502,407 767,207 74,173 97,Z6G 1,441,053 1,299,737 Operating expenses: Personal services 177,528 122,465 21,146 - 321,139 291,256 Contractual services 89,560 99,145 37,483 145,095 371,283 261,681 Recycling award - - - 573 573 604 MCES charges - 316,304 - - 316,304 292,590 Materials and supplies 9,360 4,373 2,430 1,897 18,060 18,686 Administrative and personnel charges 21,175 39,200 4,090 - 64,465 94,140 Depreciation 101,143 79,880 181,023 174,637 Total operating expenses 398,766 661,367 65,149 147,565 1,272,847 1,133,594 Operating income()oss) 103,641 105,840 9,024 (50,299) 168,206 166,143 Nonoperating revenues(expenses): Eami»gs on investments 24,003 19,759 5,018 257 49,037 29,268 Income(loss)before contributions and transfers 127,644 125,599 14,042 (50,042) 217,243 195,411 Capital contributions - - - - - 508,542 Transfers: Transfers from other funds - 88,500 88,500 88,500 Transfers to other funds (99,021) (88,096) (3,300) (190,417) (180,098) Total transfers (99,021) (88,096) (3,300) 88,500 (101,917) 416,944 Change in net assets 28,623 37,503 10,742 38,458 115,326 612,355 Net assets-January 1 3,708,489 3,276,937 121,747 (13,754) 7,093,419 6,481,064 Net assets-December 31 $3,737,112 $3,314,440 $132,489 $24,704 $7,208,745 $7,093,429 The accompanying notes are an integral part of these financial statements. CITY OF OAK PARK M,IGWFS,MINNESOTA STATEMENT OF CASH FLOWS Statement 8 PROPRIETARY FUNDS 41 For The Year Ended December 31,2006 Business-Type Activities Enterprise Funds 707 Storm 708 705 Water 706 Sewer Sewer Utility Sanitation Utility Fund Utility Fund Fund Utility Fund Totals 2006 2005 Cash flows from operating activities: Receipts from customers and users $457,580 $743,220 $74,470 $95,336 $1,370,606 $1,213,515 Payment to suppliers (135,233) (451,714) (39,226) (147,739) (773,912) (574,795) Payment to employees (175,891) (121,571) (21,068) (318,530) (381,762) Miscellaneous revenue 32,558 161713 820 - 50,091 17,486 Net cash flows from operating activities 179,014 186,648 14,996 (52,403) 328,255 274,444 Cash flows from noneapital financing activities: Transfer to other funds (99,021) (88,096) (3,300) - (190,417) (180,098) Transfer from other funds - - 88,500 88,500 88,500 Net cash flows from noneapital financing activities (99,021) (88,096) (3,300) 88,500 (101,917) (9I,598) Cash flows from capital and related financing activities: Acquisition of capital assets (21,920) (335) - - (22,255) (5,208) Net cash flows from capital and related financing activities (21,920) (335) 0 0 (22,255) (51208) Cash flows from investing activities: Investment income 16,775 111995 3,431 76 32,277 18,899 Net increase in cash and cash equivalents 74,848 110,212 15,127 36,173 236,360 196,537 Cash and cash equivalents-January 1 468,751 316,162 105,771 5,269 895,953 699,416 Cash and cash equivalents-December 31 $543,599 $426,374 $120,898 $41,442 $1,132,313 $895,953 Reconciliation of operating income(loss)to net cash provided(used)by operating activities: Operating income(loss) $103,641 $105,840 $9,024 ($50,299) $168,206 $166,143 Adjustments to reconcile operating income (loss)to net cash flows from operating activities: Depreciation 101,143 79,880 - 181,023 174,637 Changes in assets and liabilities: Decrease(increase)in receivables (12,269) (7,274) 1,117 (1,930) (20,356) (68,736) Decrease(increase)in prepaid expenses - (486) - - (486) (1,976) Increase(decrease)in payables (13,501) 8,688 4,855 (174) (132) 4,376 Total adjustments 75,373 80,808 5,972 (2,104) 160,049 108,301 Net cash provided by operating activities $179,014 $186,648 $14,996 ($52,403) $328,255 $274,444 Noncash investing,capital and financing activities: Contribution of capital asset $ - $ - $ - $ - S - $508,542 The accompanying notes are an integral part of these financial statements. 0 i CITY OF OAK PARK HEIGHTS MINNESOTA STATEMENT OF FIDUCIARY NET ASSETS Statement 9 AGENCY FUNDS December 31,2006 2006 2005 Assets: Cash and investments $177,178 $339,690 Due from developers 8,934 22,111 Total assets 186,112 361,801 I Liabilities: Escrow deposits payable $78,218 $257,454 Accounts payable 6,729 12,420 Due to developers 101,165 91,927 Total liabilities 186,112 361,801 i Net assets: Unrestricted $0 $0 i i I i The accompanying notes are an integral part of these financial statements. CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Oak Park Heights,Minnesota operates under the State of Minnesota Statutory Plan A form of government. The governing body consists of a Eve member City council elected by voters of the City. The financial statements of the City of Oak Park Heights,Minnesota have been prepared in conformity with generally accepted accounting principles as applied to governmental units by the Governmental Accounting Standards Board(GASB). The following is a summary of the significant accounting policies. A. FINANCIAL REPORTING ENTITY As required by generally accepted accounting principles,the financial statements of the reporting entity include those of the City(the primary government)and its component units,entities which the City is considered to be financially accountable. Blended component units,although legally separate entities,are,in substance,part of the City's operations and so data from these units are combined with data of the primary government. BLENDED COMPONENT UNITS The HRA of the City of Oak Park Heights,Minnesota is a separate legal entity which is authorized to expend monies generated by the City's tax increment district. The City council also serve as HRA board members. Separate financial statements are not prepared for the BRA. The EDA of the City of Oak Park Heights,Minnesota is a separate legal entity. The EDA board members are substantially the same as the City council in that four of the five board members are council members and the fifth board member is the City finance director. Separate financial statements are not prepared by the EDA. B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements(i.e.,the statement of net assets and the statement of changes in net assets)report infonnation on all of the nonfiduciary activities of the primary government and its component units. For the most part,the effect of interfund activity has been removed from these statements. Governmental activities,which normally are supported by taxes and intergovernmental revenues,are reported separately from business-type activities,which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or business-type activity are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or business-type activity. Program revenues include 1)charges to customers or applicants who purchase,use,or directly benefit from goods,services,or privileges provided by a given function or business-type activity and 2)grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or business-type activity. Taxes and other items not included among program revenues are reported instead as general revenues. 0 CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 Separate financial statements are provided for governmental funds,proprietary funds,and fiduciary funds,even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. MEASUREMENT FOCUS,BASIS OF ACCOUNTING,AND FINANCIAL STATEMENT PRESENTATION The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting,as are the Proprietary Fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred,regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The City's only fiduciary funds are agency funds. Agency funds are custodial in nature(assets equal liabilities)and do not involve measurement of results of operations. Governmental fund financial statements are reported using the current financial resources measurement focus and the modifled accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose,the government considers all revenues,except reimbursement grants,to be available if they are collected within 60 days of the end of the current fiscal period. Reimbursement grants are considered available if they are collected within one year of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred,as under accrual accounting. However,debt service expenditures,as well as expenditures related to compensated absences and claims and judgments,are recorded only when payment is due. Property taxes,special assessments,intergovernmental revenues,charges for services and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government. The City reports the following major governmental funds: The General Fund is the government's primary operating fund. It accounts for all financial resources of the general government,except those required to be accounted for in another fund. The G.0.Improvement Bonds of 1998 Debt,Service Fund-$1,990,000 bond issue to fund water, sewer,storm sewer improvements in the Kern Center and construction of Phase III of 58d'Street. Bonds are to be paid over 15 years. • CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 The Novak Avenue Street and Utility Improvements Capital Project Fund—for construction of Novak Avenue street and utility improvements. Expenditures are paid by developer. No City funds are expended. The Renewal and Replacement Capital Project Fund is used to account for assets depreciated from the utility fund and water and sanitary sewer departments. Funds are used to renew or replace water and sanitary sewer system assets. The Park Development Capital Project Fund—is used to account for the development of the City's parks and recreational areas. The government reports the following major proprietary funds: The Water Utility Fund accounts for assets,liabilities,revenues and expenditures for water utility operations. The Sewer Utility Fund accounts for assets,liabilities,revenues and expenditures for sewer utility operations. The Storm Sewer Utility Fund accounts for assets,liabilities,revenues and expenditures for storm sewer utility operations. The Sanitation Fund accounts for assets,liabilities,revenues and expenditures for garbage and recycling operations. Additionally,the government reports the following fund type: Agency Funds account for the assets of various developers held by the City as an agent. Private-sector standards of accounting and financial reporting issued prior to December 1, 19 89, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private- sector guidance for their business-type activities and enterprise funds,subject to this same limitation. The government has elected not to follow subsequent private-sector guidance. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are transactions that would be treated as revenues, expenditures or expenses if they involved external organizations,such as buying goods and services or payments in lieu of taxes,are similarly treated when they involve other funds of the City. EIimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1)charges to customers or applicants for goods, services,or privileges provided,2)operating grants and contributions,and 3)capital grants and contributions,including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise,general revenues include all taxes. s CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL,STATEMENTS December 31,2006 Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services,administrative expenses,and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for an allowable use,it is the City's policy to use restricted resources first,then unrestricted resources as they are needed. D. BUDGETS Budgets are adopted on a basis consistent with generally accepted accounting principles. Annual appropriated budgets are adopted for the General Fund,but not for Special Revenue Funds. Budgeted expenditure appropriations lapse at year end. Encumbrance accounting,under which purchase orders,contracts,and other commitments for the expenditure of monies are recorded in order to reserve that portion of the appropriation,is not employed by the City because it is at present not considered necessary to assure effective budgetary control or to facilitate effective cash management. E. LEGAL COMPLIANCE-BUDGETS The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The City Administrator submits to the City Council a proposed operating budget for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. The budget is legally enacted through passage of a resolution on a departmental basis and can be expended by each department based upon detailed budget estimates for individual expenditure accounts. 4. The department heads are authorized to transfer appropriations under$500 within any department budget. Additional interdepartmental or interfund appropriations and deletions are or may be authorized by the City Council with fund(contingency)reserves or additional revenues. 5. Formal budgetary integration is employed as a management control device during the year for the General Fund. i CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 6. Legal debt obligation indentures determine the appropriation level and debt service tax levies for the Debt Service Funds. Supplementary budgets are adopted for the Proprietary Funds to determine and calculate user charges. These debt service and budget amounts represent general obligation bond indenture provisions and net income for operation and capital maintenance and are not reflected in the financial statements. 7. A capital improvement program is reviewed annually by the City Council for the Capital Project Funds. However,appropriations for major projects are not adopted until the actual bid award of the improvement. The appropriations are not reflected in the financial statements. 8. Expenditures may not legally exceed budgeted appropriations at the total fund level. Monitoring of budgets is maintained at the expenditure category level(i.e.,personal services; material and supplies;contractual services;capital outlay)within each department. All amounts over budget have been approved by the City council through the disbursement approval process. 9. The City Council may authorize transfer of budgeted amounts between City funds. F. CASH AND INVESTMENTS Cash and investment balances from all funds are pooled and invested to the extent available in authorized investments. Earnings from investments are allocated to individual funds on the basis of the fund's equity in the cash and investment pool. Investments are stated at fair value,based upon quoted market prices. Investment income is accrued at the balance sheet date. For purposes of the statement of cash flows the Enterprise Funds consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. All of the cash and investments allocated to the Enterprise Funds have original maturities of 90 days or less. Therefore the entire balance in the fund is considered cash equivalents. G. RECEIVABLES AND PAYABLES Property taxes and special assessments(see notes lH and 1)have been reported net of estimated uncollectible accounts. Because utility bills are considered liens on property,no estimated uncollectible amounts are established. Uncollectible amounts are not material for other receivables and have not been reported. CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 H. PROPERTY TAX REVENUE RECOGNITION The City Council annually adopts a tax levy and certifies it to the County in December (levy/assessment date)of each year for collection in the following year. The County is responsible for billing and collecting all property taxes for itself,the City,the local School District and other taxing authorities. Such taxes become a lien on January I and are recorded as receivables by the City at that date. Real property taxes are payable(by property owners)on May 15 and October 15 of each calendar year. Personal property taxes are payable by taxpayers on February 28 and June 30 of each year. These taxes are collected by the County and remitted to the City on or before July 7 and December 2 of the same year. Delinquent collections for November and December are received the following January. The City has no ability to enforce payment of property taxes by property owners. The County possesses this authority. Government-Wide Financial Statements The City recognizes property tax revenue in the period for which the taxes were levied. Uncollectible property taxes are not material and have not been reported. Governmental Fund Financial Statements The City recognizes property tax revenue when it becomes both measurable and available to finance expenditures of the current period. In practice,current and delinquent taxes and State credits received by the City in July,December and January are recognized as revenue for the current year. Taxes collected by the County by December 31(remitted to the City the following January)and taxes and credits not received at the year end are classified as delinquent and due from County taxes receivable. The portion of delinquent taxes not collected by the City in January are fully offset by deferred revenue because they are not available to finance current expenditures. I. SPECIAL ASSESSMENT REVENUE RECOGNITION Special assessments are levied against benefited properties for the cost or a portion of the cost of special assessment improvement projects in accordance with State Statutes. These assessments are collectible by the City over a term of years usually consistent with the term of the related bond issue. Collection of annual installments(including interest)is handled by the County Auditor in the same manner as property taxes. Property owners are allowed to(and often do)prepay future installments without interest or prepayment penalties. Once a special assessment roll is adopted,the amount attributed to each parcel is a lien upon that property until full payment is made or the amount is determined to be excessive by the City Council or court action. If special assessments are allowed to go delinquent,the property is subject to tax forfeit sale. Proceeds of sales from tax forfeitproperties are allocated first to the County's costs of administering all tax forfeit properties. Generally,the City will collect the full amount of its special assessments not adjusted by City Council or court action. Pursuant to State Statutes,a property shall be subject to a tax forfeit sale after three years unless it is homesteaded,agricultural or seasonal recreational land in which event the property is subject to such sale after five years. CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 Govemnicat-Wide Financial statements The City recognizes special assessment revenue in the period that the assessment roll was adopted by the City Council. Uncollectible special assessments are not material and have not been reported. Governmental Fund Financial Stateme_l Revenue from special assessments is recognized by the City when it becomes measurable and available to finance expenditures of the current fiscal period. In practice,current and delinquent special assessments received by the City are recognized as revenue for the current year. All remaining delinquent and deferred assessments receivable in governmental funds are offset by deferred revenues. J. INVENTORIES The original cost of materials and supplies has been recorded as expenditures at the time of purchase. The City does not maintain material amounts of inventories of goods and supplies. K. PREPAID ITEMS Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. L. CAPITAL ASSETS Capital assets,which include property,plant,equipment and infrastructure assets(e.g.,roads,bridges, sidewalks,and similar items),are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial,individual cost of more than$5,000(amount not rounded)and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. In the case of the initial capitalization of general infrastructure assets(i.e.,those reported by governmental activities)the government chose to include all such items regardless of their acquisition date. These assets are reported at historical cost. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. For the year ended December 31,2006,no interest was capitalized in connection with construction in progress. CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 Property,plant and equipment of the primary government,as well as the component units,is depreciated using the straight line method over the following estimated useful lives: Buildings and structures 50 years Machinery and equipment 3—20 years Distribution and collection systems 50 years Streets 25 years Storm sewers 50 years Pathways 20 years M. COMPENSATED ABSENCES It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. All vacation pay and accumulated sick leave benefits that is vested as accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured,for example, . as a result of employee resignations and retirements. In accordance with the provisions of Statement of Government Accounting Standards No. 16,Accounting for Compensated Absences,no liability is recorded for nonvesting accumulating rights to receive sick pay benefits. N. LONG-TERM OBLIGATIONS in the government-wide financial statements and proprietary fund types in the fund financial statements,long-tern debt and other long-term obligations are reported as liabilities in the applicable governmental activities,business-type activities,or proprietary fund type statement of net assets. Bond premiums and discounts,as well as issuance costs,are immaterial and are expensed in the year of bond issuance. In the fund financial statements,governmental fund types recognize bond premiums and discounts,as well as bond issuance costs,during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs,whether or not withheld from the actual debt proceeds received,are reported as debt service expenditures. O. FUND EQUITY In the fund financial statements,governmental funds report reservations of fund balance for amounts not appropriable for expenditure or legally segregated for a specific future use. Designated fund balances represent tentative plans for future use of financial resources. CITY OF, OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL,STATEMENTS December 31,2006 P. INTERFUND TRANSACTIONS I Interfund services provided and used are accounted for as revenues,expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund,are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. Interfund loans are reported as an interfund loan receivable or payable which offsets the movement of cash between funds. All other interfund transactions are reported as transfers. Q. USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles (GAAP)requires management to make estimates that affect amounts reported in the financial statements during the reporting period. Actual results could differ from such estimates. Note 2 DEPOSITS AND INVESTMENTS A. DEPOSITS • In accordance with Minnesota Statutes,the City maintains deposits at those depository banks authorized by the City Council,all of which are members of the Federal Reserve System. Minnesota Statutes require that all City deposits be protected by insurance,surety bond,or collateral. The market value of collateral pledged must equal I10%of the deposits not covered by insurance or bonds. Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the City Treasurer or in a financial institution other than that furnishing the collateral. Authorized collateral includes the following: a) United States government treasury bills,treasury notes,treasury bonds; b) Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; c) General obligation securities of any state or Iocal government with taxing powers which is rated "A"or better by a national bond rating service,or revenue obligation securities of any state or local government with taxing powers which is rated"AA"or better by a national bond rating service; d) Unrated general obligation securities of a local government with taxing powers may be pledged as collateral against funds deposited by that same local government entity: e) Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank's public debt is rated"AA"or better by Moody's CITY OF OAK PARK HEIGHTS,MINNESOTA NO'T'ES TO FINANCIAL STATEMENTS December 31,2006 �I Investors Service,Inc.or Standard&Poor's Corporation;and f) Time deposits that are fully insured by any Federal agency. At December 31,2006 the carrying amount of the City's deposits with financial institutions was $10,124,729,all of which were collateralized. B. INVESTMENTS Minnesota Statutes authorize the City to invest in the following: a) Direct obligations or obligations guaranteed by the United States or its agencies,its instrumentalities or organizations c rea t d b y an act of con gress,excluding mortgage-backed securities defined as high risk. b) Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in(a)above,general obligation tax-exempt securities,or repurchase or reverse repurchase agreements. ic) Obligations of the State of Minnesota or any of its municipalities as follows: I) any security which is a general obligation of any state or local government with taxing powers which is rated"A"or better by a national bond rating service; 2) any security which is a revenue obligation of any state or local government with taxing powers which is rated"AA"or better by a national bond rating service;and 3) a general obligation of the Minnesota housing finance agency which is a moral obligation of the State of Minnesota and is rated"A"or better by a national bond rating agency. d) Bankers acceptance of United States banks eligible for purchase by the Federal Reserve System. e) Commercial paper issued by United States corporations or their Canadian subsidiaries,of the highest quality,and maturing in 270 days or Iess. f) Re Repurchase repurchase agreements with banks that are members of the Federal Reserve P or reverse P urc �' System with capitalization exceeding$10,000,000;a rim 'reporting dealer in U.S.government securities to the Federal Reserve Bank of New York;certain Minnesota securities broker-dealers; or,a bank qualified as a depositor. General obligation temporary bonds of the same governmental entity issued under section g) g P rY g tY 429.091,subdivision 7;469.178,subdivision 5;or 475.61,subdivision 6. CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 As of December 31,2006 the City had the following investments and maturities: Investment Maturities(in Years) Fair Less Investment Type Value Than 1 1-5 6-10 Federal National Mortgage Assn.Notes(') $346,500 $ - $346,500 $ - Federal Home Loan Mortgage Corp.Notes(2) 842;686 - 194,875 647,811 Federal Home Loan Bank Notes(3) 446,097 - 346,097 100,000 External investment pool-4M Fund 389,007 389,007 - - Total $2,024,290 $389,007 $887,472 $747,811 ()$250,000 of these notes have call dates that occur Total investments $2,024,290 in less than one year. Deposits 10,124,729 (2)$399,750 of these notes have call dates that Petty cash 100 occur in less than one year Total cash and investments $1 149,119 �3)These notes o all have call dates that occur in less than one year. i Following is a reconciliation of the City's cash and investment balances as of December 31,2006: Government-wide statement of net assets: Cash and investments $12,128,500 Cash overdraft (156,559) Fiduciary funds statement of net assets 177,178 $12- _.1--4-9'.-11. -9 C. INVESTMENT RISKS The City's investment policy is to follow Minnesota State Statutes as described above which reduces the City's exposure to credit,custodial credit,and interest rate risks. Specific risk information for the City is as follows: III IItt;rest rate risk--The City's investment policy requires the City to diversify its investment portfolio to eliminate the risk of loss resulting from over concentration of assets in a specific maturity. The policy also states the City's investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated. I Credit risk—As of December 31,2006,the City's investments in the FNMA,FHLMC,and FHLB Notes were all rated AAA by Standard&Poor's,and Aaa by Moody's Investors Service. The City's external investment pool investment is with the 4M fund which is regulated by Minnesota Statutes and I I CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 the Board of Directors of the League of Minnesota Cities. The 4M fund is an unrated 20-like pool and the fair value of the position in the pool is the same as the value of pool shares. Concentration of credit risk—The City places no limit on the amount the City may invest in any one issuer. More than 5%of the City's investments are with the Federal Home Loan Mortgage Corporation. These investments are 6.9%of the City's total cash and investments. Note 3 RECEIVABLES Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received,but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned • Delinquent property taxes receivable(General Fund) $38,831 $ Special assessments receivable(Nonmajor Funds) 6,773 Special assessments receivable(G.O.Improvement Bonds of 1998 Fund) 178,152 Total deferred/unearned revenue for governmental funds $223,756 $0 CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 Note 4 CAPITAL ASSETS Capital asset activity for the year ended December 31,2006 was as follows: Beginning Ending Balance Increases Decreases Balance Governmental activities: Capital assets,not being depreciated: Land $1,615,116 $278,980 ($2) $1,894,094 Construction in progress 316,569 1,353,195 (314,524) 1,355,240 Total capital assets,not being depreciated 1,931,685 1,632,175 (314,526) 3,249:334 Capital assets,being depreciated: Buildings and structures 1,118,146 - - 1,118,146 Other improvements 560,963 325,191 886,154 Machinery and equipment 409,677 32,906 - 442,583 Furniture and fixtures 139,921 121,269 - 261,190 Infrastructure 11,234,100 - - 11,234100 Total capital assets,being depreciated 13,462,807 479,366 0 13,942-173 • Less accumulated depreciation for: Buildings and structures 399,306 24,523 - 423,829 Other improvements 131,993 5,443 - 137,436 Machinery and equipment 254,506 33,033 - 287,539 Furniture and fixtures 90,717 14,990 - 105,707 Infrastructure 3,524,449 356,053 - 3,880,502 Total accumulated depreciation 4,400,971 434,042 0 4,835,013 Total capital assets being depreciated-net 9,061,836 45,324 0 9,107,160 Governmental activities capital assets-net $10,993,521 $I,677,499 ($314,526) $126356,494 CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 Beginning Ending Balance Increases Decreases Balance Business-type activities: Capital assets,not being depreciated: Land $60,000 $ - $ - $60,000 Total capital assets,not being depreciated 60,000 0 0 60,000 Capital assets,being depreciated: Buildings and structures 1,320,334 - 1,320,334 Machinery and equipment 219,167 22,255 - 241,422 Distribution and collection systems 7,022,137 - - 7,022,137 Total capital assets,being depreciated 8,561,638 22,255 0 8,583,893 Less accumulated depreciation: Buildings and structures 492,622 29,860 - 522,482 Machinery and equipment 111,436 10,614 - 122,050 Distribution and collection systems 2,032,230 140,549 - 2,172,779 • Less accumulated depreciation 2,636,288 181,023 0 2,817,311 Total capital assets being depreciated-net 5,925,350 {158,768) 0 5,766,582 Business-type activities capital assets-net $5,985,350 ($158 768 $0 $5,826,582 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government $35,203 Public safety 21,067 Public works 333,451 Recreation 44,321 Total depreciation expense-governmental activities $434,042 Business-type activities: Water $101,143 Sewer 79,880 Total depreciation expense-business-type activities $181,023 r CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 Note 5 LONG-TERM DEBT The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. The reporting entity's long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business-type activities. As of December 31,2006,the long-term debt of the financial reporting entity consisted of the following: Final Authorized Issue Maturity Interest And Outstanding Date Date Rate Issued 12/31/06 Governmental Activities: Improvement bonds: G.O.Improvement Bonds of 1998 10/01/98 12/01/13 4.00-4.50 $1,990,000 $875,000 Compensated absences payable 207,449 Total governmental activities 1,082,449 Business-Type Activities: Compensated absences payable 23,609 Total City indebtedness $12106,058 Annual debt service requirements to maturity for long-term debt are as follows: Year G.O.Improvement Bonds Ending Governmental Activities December 31, Principal Interest 2007 $125,000 $37,687 2008 125,000 32,500 2009 125,000 27,250 2010 125,000 21,938 2011 125,000 16,562 2012 125,000 11,125 2013 125,000 5,625 Total $875,000 $152,687 It is not practicable to determine the specific year for payment of accrued compensated absences. CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 Change in Long Term Liabilities Long-term liability activity for the year ended December 31,2006,was as follows: Balance Balance Due Within 01/01/06 Additions Reductions 12/31/06 One Year Governmental Activities: Bonded debt: General obligation $65,000 $ - $65,000 $ - $ - Improvement bonds 1,000,000 125,000 875,000 125,000 Compensated absences 171,361 74,735 38,647 207,449 11,362 Total governmental activities $1,236,361 $74,735 $228,647 $1,082,449 $136,362 Business-Type Activities: Compensated absences $22,255 $10,508 $9,154 $23,609 $1,293 Total business-type activities $22,255 $10,508 $9,I54 $23,609 $1,293 For the governmental activities,compensated absences are generally liquidated by the General Fund. All long-term bonded indebtedness outstanding at December 31,2006 is backed by the full faith and credit of the City,including improvement bond issues. Delinquent assessments receivable at December 31,2006 were$2,259. Note 6 PENSION PLANS A. PERA DEFINED BENEFIT PLAN PLAN DESCRIPTION All full-time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota(PERA). PERA administers the Public Employees Retirement Fund(PERF)and the Public Employees Police and Fire Fund(PEPFF)which are cost-sharing,multiple-employer retirement plans. These plans are established and administered in accordance with Minnesota Statute,Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers,firefighters and peace officers who qualify for membership by statute are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members,and benefits to survivors upon death of eligible members. Benefits are established by State Statute,and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service,age,and years of credit at termination of service. CITY OF OAK.PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested,terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained on the internet at rvww.mnM ore,by writing to PERA,60 Empire Drive#200,St.Paul,Minnesota,55103-2088 or by calling(651)296-7460 or 1-900-652-9026. FUNDING POLICY Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes.PERF Basic Plan members and Coordinated Plan members were required to contribute 9.10%and 5.50%,respectively,of their annual covered salary in 2006. Contribution rates in the Coordinated Plan will increase in 2007 to 5.7%. PEPFF members were required to contribute 7.0%of their annual covered salary in 2006. That rate will increase to 7.8%in 2007. The City is required to contribute the following percentages of annual covered payroll: 11.78%for Basic Plan PERF members,6.0%for Coordinated Plan PERF members, and 10.5%for PEPFF members. Employer contribution rates for the Coordinated Plan and PEPFF will increase to 6.25%and 113%respectively,effective January 1,2007. The City's contributions to the Public Employees Retirement Fund for the years ending December 31,2006,2005 and 2004 were $38,951,$33,500 and$31,632,respectively. The City's contributions to the Public Employees Police and Fire Fund for the years ending December 31,2006,2005 and 2004 were$70,569,$60,723 and $58,277,respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute. B. DEFINED CONTRIBUTION PLAN The City administrator does not participate in PERA,but is covered by a defined contribution plan administered by the ICMA Retirement Corporation. The Plan is a tax qualified plan under Section 457 of the Internal Revenue Code and all contributions by or on behalf of the employee are tax deferred until time of withdrawal. I The City is required to contribute 10%of the annual base salary. Plan provisions and contribution requirements are established and may be amended by the City council. Employer contributions were $8,636 for the year ended December 31,2006. II I CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 i Note 7 INTERFUND T&ANffERS Transfer In Major Business- Major Funds Type Fund Q.O.Improvement Nonmajor Sanitation Bonds of Renewal and Governmental Utility 1998 Fund Replacement Fund Funds Fund Total Transfer out: Qovernmental Activities: General Fund $ - $ $460,180 $88,500 $548,680 Nonmajor Governmental Funds 55,000 63,952 - 118,952 Business-Type Activities: Water Utility Fund - 88,221 10,800 99,021 Sewer Utility Fund 96 10,800 88,096 - 77,2 Storm Sewer Utility Fund - 3,300 - 3,300 Total transfers $55,000 $165,517. $549,032 $88 500 $858049 Interfund transfers allow the City to allocate financial resources to the funds that receive benefit from services provided by another fund_ With the exception of Renewal and Replacement,all of the City's interfund transfers fall under that category. The transfer to Renewal and Replacement allows the City to accumulate resources to be used for improvements. All of the 2006 transfers are considered routine and consistent with previous practices. Note 8 CONTINGENCIES A. LITIGATION The City attorney has indicated there are no existing and pending lawsuits,claims and other actions in Th h' Y g P g which the City is a defendant. B. FEDERAL AND STATE FUNDS v The City receives financial assistance from federal and state governmental agencies in the form of grants. Th e disbursement of funds received under these programs generally requires compliance with i e rant agreements and is subject to audit b the grantor the terms and conditions specified nth g g J Y g agencies. Any disallowed claims resulting from such audits could become a liability of the applicable will of have a material fund. However,in the opinion of management,an such disallowed claims 11 n > P g Y effect on any of the financial statements of the individual fund types included herein or on the overall financial position of the City at December 31,2006. CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 Note 9 RISK MANAGEMENT The City is exposed to various risks of loss related to torts;theft of,damage to,and destruction of assets;errors and omissions;injuries to employees;and natural disasters. Workers compensation coverage is provided through a pooled self-insurance program through the League of Minnesota Cities Insurance Trust(LMCIT). The City pays an annual premium to LMCIT. The City is subject to supplemental assessments if deemed necessary by the LMCIT. The LMCIT reinsures through Workers Compensation Reinsurance Association(WCRA)as required by law. For workers compensation,the City is not subject to a deductible. The City's workers compensation coverage is retrospectively rated. With this type of coverage,final premiums are determined after loss experience is known. The amount of premium adjustment,if any,is considered immaterial and not recorded until received or paid. Property and casualty insurance coverage is provided through a pooled self-insurance program through the premium the LMCIT. The City is subject to supplemental assessments if LMCIT. The City pays an annual prem to ty ) PP deemed necessary by the LMCIT. The LMCIT reinsures through commercial companies for claims in excess various amounts. The City retains risk for deductible portions. These deductibles are considered immaterial to the financial statements. Employee health and disability insurance is provided through commercial insurance. The City does not have a deductible or yearly maximum on this insurance. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. it I it CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 Note 10 DESIGNATIONS AND RESERVATIONS OF FUND EQUITY At December 31,2006 the City had designated and reserved portions of its various fund equities through legal restriction and City Council authorization. Major fund equity appropriations at December 31,2006 are shown on the various balance sheets as segregations of the fund equity. A summary of such reservations and designations is as follows: December 31, 2006 Governmental Funds: Major Funds: General Fund: Designated for cash flow $1,409,000 Designated for contingent employee benefit 169,633 Designated for general contingency 493,000 G.O.Improvement Bonds of 1998: Reserved for debt service 512,829 • Renewal and Replacement Fund: I Designated for capital improvements 2,928,984 Park Development Fund: Designated for capital improvements 769,057 ' r i Nonmajo Funds: Reserved for Autumn Hills Park 205,000 Designated for special revenue programs 86,326 Designated for capital improvements 4,324,547 Totals $10,898,376 Note 11 MAJOR TAXPAYER The City has one major tax a taxpayer, cel Ener gy. The total tax capacity value for this taxpayer represented approximately 22%of the City's total tax capacity value for taxes payable in 2006. CITY OF OAK PARK HEIGHTS,MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2006 Nate 12 CONDUIT DEBT OBLIGATIONS From time to time,the City has issued Rental Housing or Industrial Revenue Bonds to provide financial assistance to private-sector entities for the acquisition and construction of rental housing,office space or a clinic deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds,ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the City,the State,nor any political subdivision thereof is obligated in any manner for repayment of the bonds, Accordingly,the bonds are not reported as liabilities in the accompanying financial statements. As of December 31,2006,there were six series of Industrial Revenue Bonds outstanding. The principal amount payable at December 3I,2006 could not be determined;however,their original issue amounts totaled $54,985,000. Note 13 COMMITMENTS Construction commitments at December 31,2006 were composed of the following: Expended Remaining Contract as of Contract • Description Authorized 12/31/06 Commitment Novak Avenue Street and Utility Improvements $806,661 $647,862 $158,799 Oakgreen Avenue Street and Utility Improvements 160,770 156,924 3,846 Autumn Hills Park Shelter 415,232 305,767 109,465 Total $1,382,663 $1,110,553 $272,110 i 4 u � � N N w V r m W C:D Y W z 4F4' N K W aN0 S N r O a�O S. m h m N N N A ;O V; b m 0 cc Z. x z N?W W T O O Q N m a rz 4 iFFQQ Ft O z�+1 FE-1 M V a°Z O 8 2 N N 0�„ qv i!!" u 88 e eeve v e>e o �-g< {r14J 0 F U Q <�0 N m O v�rG h W W O�N N N N N N N N U 0 Q F,; w We omN�� ommry v8°O 00o0 ° � S ° mo w tt ,u O 5a V ag rn ro N�o'nb c _ c om e r O QO FF„z F 0.' --r N M ZZ ! 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NH N N N N N N N N M en M 7 7 7 V I V 1 H W p gp Q U W Vj y y W v� p7 a w Q dWFd W Pl W W vN�>< O O W 0 m N N p o N N^N N N vN+N�o nN N oo N o N N N N N N�N 0 N o nN p N oN C N o •1 v a 0(y Q Y EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF OAK PARK HEIGHTS, MINNESOTA HELD: November 27th,2007 Pursuant to due call and notice thereof, a regular or special meeting of the City Council of the City of Oak Park Heights, Minnesota,was duly called and held at the City Hall in Oak Park Heights,Minnesota on November 27th,2007,at 7:00 p.m. for the purpose, in part, of giving preliminary approval to the issuance of general obligation capital improvement plan bonds and adopting the capital improvement plan. The following members were present: Mayor David Beaudet and Councilmembers: Les Abrahamson,Jack Doerr, Mary McComber and Mark Swenson and the following were absent: none. Councilmember Mark Swenson introduced the Resolution(07-11-63 as attached)and moved its adoption: i ed: E ' Jo on,City Administrator STATE OF MINNESOTA COUNTY OF WASHINGTON CITY OF OAK PARK HEIGHTS I,the undersigned,being duly qualified and acting Administrator of the City of Oak Park Heights,Minnesota,DO HEREBY CERTIFY that I have carefully compared the attached and foregoing extract of minutes with the original minutes of a meeting of the City Council,duly called and held on the date therein indicated,which are on file and of record in my office, and the same is a full,true and complete transcript therefrom insofar as the same relates to a resolution giving preliminary approval for the issuance of the City's general obligation capital improvement plan bonds and adopting the City's capital improvement plan therefor. WITNESS my hand on November 29, 2007. • 'strator Extract of Minutes - Nov 27th 2007 Relating to the Issue of$7.5 Million Dollars in Bond Proceeds- City Hall Facility A. City Hall Facility—Resolution Givin¢Preliminary Approval for Issuance of up to$7.5 Million in Capital Improvement Plan Bonds Consistent with the Adopted 2008-2012 Capital Improvement Plan:Mayor Beaudet reported that the Resolution allows the bond counsel to prepare documentation to issue bonds but that the amount will be determined at a later date. City Administrator Johnson reviewed the vital issues of the current city hall that need attention. Ann and Kevin Simpson came forward and stated that they canvassed the neighborhood and a lot of people in the area object to having their taxes raised for this purpose and were unaware that the City was considering the idea. Mr.Simpson stated that they would like the residents to be able to vote on the issue. They stated that they do not disagree that a renovation may be necessary but would like to see the bond issue capped at$2 million. Mayor Beaudet explained that the amount of the bond issue will be determined at a later date,most likely one of the council meetings in January. Councilmember Swenson noted that the building has several issues that need to be addressed now or in the near future and it came down to whether the council wanted to renovate an old building or build a new building that will last for many years. Mayor Beaudet stated that the proposed Resolution in the council's packet should be revised to state that the council authorizes the bond counsel to prepare paperwork for a bond issue and obtain a credit rating for the City. He stated that the idea has been around for almost a year and that the issue was in the fall newsletter and every residence was sent a postcard inviting them to a public hearing. Councilmember Swenson,seconded by Mayor Beaudet,moved to approve the Resolution. • Mayor Beaudet,seconded by Councilmember Swenson,moved to amend the Resolution to state that the City Council authorizes the bond counsel to prepare paperwork and obtain a credit rating for up to a 7.5 million bond issue. Attorney Nodes added that the paperwork and credit rating be prepared for the City Council to review,not bonding agencies. Mayor Beaudet and Councilmember Swenson accepted the addition. Carried 4-1,McComber opposed. On the main motion,roll call vote taken. Carried 4-1,McComber opposed. Councilmember Abrahamson stated that he would like to see that less money is spent and has pushed for other options to be considered. Councilmember McComber stated she was concerned that the city hall project would end up taking longer than expected and that somehow more money that anticipated would be spent. STILLWATER COURIER and LAKE ELMO LEADER AFFIDAVIT OF PUBLICATION and INVOICE STATE OF MINNESOTA ) )SS. COUNTY OF WASHINGTON) CITY OF OAK PARK Barbara Boelk HEIGHTS Being duly sworn, on oath says that he/she is the publisher or authorized agent NOTICE OF PUBLIC HEARING ON and employee of the publisher of the newspaper known as The Stillwater INTENTION TO ISSUE GENERAL Courier, and has full knowledge of the facts which are stated below: OBLIGATION CAPITAL IMPROVE- (A) The newspaper has complied with all of the requirements constituting MENT PLAN BONDS AND THE PRO- POSALTOADOPTACAPITAL qualification as a legal newspaper, as provided by Minnesota Statute 331.02, IMPROVEMENT 331.06, and other applicable laws as amended. PLAN THEREFOR (B) The printed NOTICE IS HEREBY GIVEN,that the CITY OF OAK PARK HF.IGHTS - PH: CAPITAL, IMPROVEMENT City Council of the City of Oak Park Heights,Minnesota,will meet on October 23,2007,at 7:00 p.m.at the City Hall,in which is attached was cut from the columns of said newspaper, and was printed Oak Park Heights,Minnesota,for the pur- and published once a week, for I week;it was first published on Thursday,the pose conducting public hearing (a) 4th day of October,2007 and was thereafter printed and published on the intention to issue e general obligation capi- Y P p every tal improvement plan bonds in an amount Thursday to and including Thursday,the 4th day of October, 2007 not to exceed$7500,000 and(b)the propos- al to adopt a capital improvement plan there- for. The proceeds of the bonds will be used to finance a municipal center facility,con- BY: sisting of a city hall,library,public works and police station to be located at or near TITLE: A HORIZED AGENT 14168 Oak Park Boulevard North in the Subscribed and sworn to before me on ursuant to Minnesota Statutes,Section hORYN J FRANSON �s2t. this 4th day of .etcher, 2007. �' a; 11 persons interested may appear and be _ NOTARY PUBLIC heard at the time and place set forth above. MINNESOTA If a petition requesting a vote on the a Jen.3i,2011 issuance of the bonds is signed by voters Notary Public,W hington County, inne ota equal to five percent of the votes cast in the City in the last general election and is filed My Commission Expires...... . ............20.............. with the City within thirty days after the public hearing,the bonds may only be issued upon obtaining the approval of the majority of the voters voting on the question of issuing the bonds.Individuals unable to attend the public hearing can make written comment by writing to the City Reference Order # 20441871 Administrator,Oak Park Heights City Hall, 14168 Oak Park Boulevard,Oak Park FEES: 21.80 Heights,Minnesota 55082-3007. Written ^^ comments must be received prior to the date I First Insertion' `J and time of the public hearing. BY ORDER OF THE ClT`Y COUNCIL /s/Eric Johnson City Administrator 6 inches, @ $ 3.80 /in. _ $ 22.80 (Published in the Stillwater Courier and /Lake Elmo Leader on Thursday,October 4, M07.) Add'1 Insertions @$ _ $ Total $ 22.80 • a� assumed name under ne board of County Commissioners reserves the right to reject any or all bids and which the business is or will be conducted: waive any defects therein. Weichert Realtors-Advantage 2.State the street address of-the principal Transportation rtat on &Physical Development Engineer place of business. A complete street Washington County,Minnesota addressor rural route and rural route box Pit T number is required;the address cannot be a P.O.Box. 10/3 4732 Larkspur Lane, Lake Elmo, I Minnesota 55042 3. List the namb and street address of all CITY OF persons conducting business under the I above Assumed Name. Oak Park Heights i Advantage Partners, LLC.4732 Larkspur Lane,Lake Eima,Minnesota 55042 Stillwater Gazette,October 3,2007 j NOTICE OF/3 4,I certify that I am authorized to sign this CITY OF OAK PARK HEIGHTS PUBLIC HEARING ON INTENTION TO ISSUE certificate and I further certify that lunder- GENERAL OBLIGATION CAPITAL IMPROVEMENT PLAN BONDS stand that by signing this certificate, I am AND THE PROPOSAL TO ADOPT A CAPITAL IMPROVEMENT PLAN THEREFOR subject to the penalties of perjury as set' forth in Minnesota Statutes section 609.48 NOTICE IS HEREBY GIVEN,that the City Council of the City of Oak Park Heights, Y as if I had signed this certificate under Minnesota,will meet,on October 23,2007,at 7:00 P.M.at the City Hall,in Oak Park oath. Heights,Minnesota,for the purpose of conducting a public hearing on(a)the intention to issue general obligation capital improvement plan bonds in an amount not to exceed Date 7-31-07 $7,500,000 and(b)the proposal to adopt a capital improvement plan therefor. The pro- ceeds of the bonds will be used to finance a municipal center facility,consisting of a /s/Mark LaQua city hall,library,public works and police station to be located at or near 14168 Oak Mark LaQua,President Park Boulevard North in the City pursuant to Minnesota Statutes,Section 475.521. Mark LaQua 651.275.9228 All persons interested may appear and be heard at the time and place set forth above. 9/26, 10/3 If a petition requesting a vote on the issuance of the bonds is signed by voters equal to five percent of the votes cast in the City in the last general election and is filed with the City,within thirty days after the public hearing,the bonds may only be issued upon obtaining the approval of the majority of the voters voting on the question of issuing the bonds. Indtviduals unable to attend the public hearing can make written comment by writing to WHAT'S the City Administrator,Oak Park Heights City Hall, 14168 Oak Park Boulevard,Oak Park Heights,'Minnesota 55082-3007. Written comments must be received prior to the date and time of the public hearing. YOUR BY ORDER OF THE CITY COUNCIL PLEASURE CityAdministrator The Stillwater 10/3 1� Gazette STILLWATER GAZETTE has something SEPTEMBER 26,2007 STILLWATER GAZETTE € MINNESOTA SECRETARY OF STATE g for everyone. AMENDMENTTO SEPTEMBER 26,2007 CERTIFICATE OF ASSUMED NAME MINNESOTA SECRETARY OF STATE From local Minnesota Statutes Chapter 333 CERTIFICATE OF ASSUMED NAME Minnesota Statutes Chapter 333 news t0 The filing of.an assumed'name does The filing of an assumed name does not provide a user with exclusive not provide a use with exclusive sports to rights to that!name. The filing Is re rights to that name. The filing Is re- entertainment, 9uired as a consumer;protection In qulred as a consumer order to enable consumers to be able protection In You'll find to'identify the true owner of a buss- order to enable consumers to be able ness. to Identify the true owner of a busl- in-depth 1.Name of Company: ness. Crayons to Castles Childcare 1.State the exact assumed name under In coverage of which the business its or will be conducted: rt, 2.State the street address of the principal Koala-T Daycare the topics that place of business. A complete street 2.State the street address of the principal id address or rural route and rural route box In matter most number is required;the address cannot be place of business. A complete street I a P.O.Box. address or rural route and rural route box to you. 1213 15th St SE Forest Lake,MN 55025 number is required;the address cannot be a P.O.Box. 3. List the name and street address of ail 20562 Enfield Circle N Forest Lake, MN s 55025 i Is To order persons conducting business under the home delivery, calf : e above Assumed Name. Miranda Oliver 1213 15th St SE Forest 3• List the name and street address of all s 651-439-3130 Lake,MN 55025 persons conducting business under the Kevin Oliver 1213 15th St SE Forest Lake, above Assumed Name. MN 55025 - Peggy Babcock 20562 Enfield Circle N a Forest Lake,MN 55025 4. This Cert Certificate ro'fcAssumed amendment number Of 4.1 certify I am authorized to sign this 1009170-2 certificate and I further certify that 1 under- °' stand that bysigning this certificate, I am i 5.1 certify that I am authorized to si n this subject to the penalties of perjury as set a certificate and I further certify that l 9n this forth in Minnesota Statutes section 609.48 stand that by signing this certificate,I am as if 1 had signed this certificate under Subscribe to the subject to the penalties of perjury as set oath. forth in Minnesota Statutes section 609.48 Date 05-08-06 (0u3ettrl The Valleys as if I had signed this certificate under only daily newspape date. r. Date 8-15-07 /s/Peggy Babcock 651.439.3130 /s/Miranda Olilver Peggy Babcock,Owner Miranda Olilver,owner Pe Babcock 651-653.1797 3 Miranda Olilver 651-982-2913 9/26,10/3 9/26, 10/3 CITY OF OAK PARK HEIGHTS NOTICE OF PUBLIC HEARING ON INTENTION TO ISSUE GENERAL OBLIGATION CAPITAL IMPROVEMENT PLAN BONDS AND THE PROPOSAL TO ADOPT A CAPITAL IMPROVEMENT PLAN THEREFOR NOTICE IS HEREBY GIVEN,that the City Council of the City of Oak Park Heights, Minnesota,will meet on October 23, 2007, at 7:00 p.m. at the City Hall,in Oak Park Heights, Minnesota, for the purpose of conducting a public hearing on(a)the intention to issue general obligation capital improvement plan bonds in an amount not to exceed$7,500,000 and(b)the proposal to adopt a capital improvement plan therefor. The proceeds of the bonds will be used to finance a municipal center facility,consisting of a city hall,library,public works and police station to be located at or near 14168 Oak Park Boulevard North in the City pursuant to Minnesota Statutes, Section 475.521. All persons interested may appear and be heard at the time and place set forth above. If a petition requesting a vote on the issuance of the bonds is signed b voters equal to five p q g g Y percent of the votes cast in the City in the last general election and is filed with the City within thirty days after the public hearing,the bonds may only be issued upon obtaining the approval of the majority of the voters voting on the question of issuing the bonds. Individuals unable to attend the public hearing can make written comment by writing to the City Administrator, Oak Park Heights City Hall, 14168 Oak Park Boulevard, Oak Park Heights, Minnesota 55082-3007. Written comments must be rec ' pri o the date and time of the P ublic hearing. OkD ' THE CITY COUNCIL ity A strator I [Submit October 1, 2007; Publish October 4, 2007] 2089234vl PWAV Y • EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF OAK PARK HEIGHTS, MINNESOTA HELD: Pursuant to due call and notice thereof, a regular or special meeting of the City Council of the Citv of Oak Park Heights, Washington County, Minnesota,was duly held at the City Hall on at P.M., for the purpose, in part, of authorizing the issuance and awarding the sale of$ General Obligation Capital Improvement Plan Bonds, Series 2008A. The following members were present: and the following were absent: Member introduced the following resolution and moved its adoption: RESOLUTION PROVIDING FOR THE ISSUANCE AND SALE OF $ GENERAL OBLIGATION CAPITAL IMPROVE L S, SERIES 2008A AND LEVYING A TAX FOR N THEREOF A. WHEREAS, on November 7, 2007, the City Council of the City Oak Park • Heights,Minnesota(the "City"),held a public hearing on the proposed issuance of general obligation capital improvement plan bonds and,pursuant to Resolution No. 7-11-62, approved and adopted the 2008 through 2012 Five-Year Capital Improvement Plan for City of Oak Park Heights, Minnesota(the "Plan"), all in accordance with the provisions of Minnesota Statutes, Section 475.521; and B. WHEREAS, on November 27, 2007,the City Council adopted Resolution No. 07- 11-63,which approved the issuance of general obligation capital improvement plan bonds to finance the rehabilitation and/or replacement of city hall facilities, including the police department and public works areas(the "Project"), all pursuant to the Plan; and C. WHEREAS,no petition signed by voters equal to five percent of the votes cast in the City in the last general election requesting a vote on the issuance of the general obligation capital improvement plan bonds has been filed with the Administrator within thirty days after the public hearing on the Plan and on the issuance of the general obligation capital improvement plan bonds; and D. WHEREAS,the City Council hereby determines and declares that it is necessary and expedient to issue $ General Obligation Capital Improvement Plan Bonds, Series 2008A (the 'Bonds" or, individually, a 'Bond"),pursuant to Minnesota Statutes, Section 475.521 and Chapter 475, to provide funds to finance the Project; and E. WHEREAS,the City has heretofore determined, in accordance with Minnesota • Statutes, Section 475.521, Subd. 4, that the principal and interest to become due in any year on 2116597v1 Y T i • i i • all the outstanding bonds issued by the City under Minnesota Statutes, Section 475.521, including the Bonds, will be less than 0.16 percent of the taxable market value of property in the City; and F. WHEREAS,the City has retained , in , Minnesota, as its independent financial advisor for the sale of the Bonds and was therefore authorized to sell the Bonds by private negotiation in accordance with Minnesota Statues, Section 475.60, Subdivision 2(9); and G. WHEREAS, it is in the best interests of the City that the Bonds be issued in book- entry form as hereinafter provided; and NOW,THEREFORE,BE IT RESOLVED by the Council of the City of Oak Park Heights, Minnesota, as follows: 1. Acceptance of Offer. The offer of Northland Securities, Inc. (the "Purchaser"), to purchase the Bonds in accordance with the terms and at the rates of interest hereinafter set forth, and to pay therefor the sum of$ ,plus interest accrued to settlement, is hereby accepted. 2. Bond Terms. (a) Original Issue Date; Denominations; Maturities; Term Bond Option. The Bonds shall be dated February 15, 2008, as the date of original issue,be issued forthwith on or after • such date in fully registered form,be numbered from R-1 upward in the denomination of$5,000 each or in any integral multiple thereof of a single maturity(the "Authorized Denominations"), and shall mature on December 15 in the years and amounts as follows: Year Amount Year Amount 2009 2019 2010 2020 2011 2021 2012 2022 2013 2023 2014 2024 2015 2025 2016 2026 2017 2027 2018 2028 As may be requested by the Purchaser, one or more term Bonds may be issued having mandatory sinking fund redemption and final maturity amounts conforming to the foregoing principal repayment schedule, and corresponding additions may be made to the provisions of the applicable Bond(s). (b) Book Entry Only System. The Depository Trust Company, a limited purpose • trust company organized under the laws of the State of New York or any of its successors or its 21165970 2 t successors to its functions hereunder (the "Depository")will act as securities depository for the Bonds, and to this end: (i) The Bonds shall be initially issued and, so long as they remain in book entry form only (the "Book Entry Only Period"), shall at all times be in the form of a separate single fully registered Bond for each maturity of the Bonds; and for purposes of complying with this requirement under paragraphs 5 and 10 Authorized Denominations for any Bond shall be deemed to be limited during the Book Entry Only Period to the outstanding principal amount of that Bond. (ii) Upon initial issuance, ownership of the Bonds shall be registered in a bond register maintained by the Bond Registrar(as hereinafter defined) in the name of CEDE & CO., as the nominee (it or any nominee of the existing or a successor Depository, the "Nominee"). (iii) With respect to the Bonds neither the City nor the Bond Registrar shall have any responsibility or obligation to any broker, dealer, bank, or any other financial institution for which the Depository holds Bonds as securities depository(the "Participant") or the person for which a Participant holds an interest in the Bonds shown on the books and records of the Participant(the "Beneficial Owner"). Without limiting the immediately preceding sentence,neither the City,nor the Bond Registrar, shall have any such responsibility or obligation with respect to (A)the accuracy of the records of the Depository,the Nominee or any Participant with respect to any ownership interest in the . Bonds, or(B)the delivery to any Participant, any Owner or any other person, other than the Depository, of any notice with respect to the Bonds, including any notice of redemption, or(C)the payment to any Participant, any Beneficial Owner or any other person,other than the Depository, of any amount with respect to the principal of or premium, if any, or interest on the Bonds, or(D)the consent given or other action taken by the Depository as the Registered Holder of any Bonds (the "Holder"). For purposes of securing the vote or consent of any Holder under this Resolution,the City may, however, rely upon an omnibus proxy under which the Depository assigns its consenting or voting rights to certain Participants to whose accounts the Bonds are credited on the record date identified in a listing attached to the omnibus proxy. t Depository to iv The City and the Bond Registrar may treat as and deem he De os ( ) Y g Y p rY be the absolute owner of the Bonds for the purpose of payment of the principal of and premium,if any, and interest on the Bonds, for the purpose of giving notices of redemption and other matters with respect to the Bonds, for the purpose of obtaining any consent or other action to be taken by Holders for the purpose of registering transfers with respect to such Bonds, and for all purpose whatsoever. The Bond Registrar, as paying agent hereunder, shall pay all principal of and premium, if any, and interest on the Bonds only to the Holder or the Holders of the Bonds as shown on the bond register,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 premium, if any,and interest on the Bonds to the extent of the sum or sums so paid. 2116597v] 3 (v) Upon delivery by the Depository to the Bond Registrar of written notice to the effect that the Depository has determined to substitute a new Nominee in place of the existing Nominee, and subject to the transfer provisions in paragraph 10,references to the Nominee hereunder shall refer to such new Nominee. (vi) So long as any Bond is registered in the name of a Nominee, all payments with respect to the principal of and premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given,respectively,by the Bond Registrar or City, as the case may be, to the Depository as provided in the Letter of Representations to the Depository required by the Depository as a condition to its acting as book-entry Depository for the Bonds (said Letter of Representations,together with any replacement thereof or amendment or substitute thereto,including any standard procedures or policies referenced therein or applicable thereto respecting the procedures and other matters relating to the Depository's role as book-entry Depository for the Bonds,collectively hereinafter referred to as the "Letter of Representations"). (vii) All transfers of beneficial ownership interests in each Bond issued in book-entry form shall be limited in principal amount to Authorized Denominations and shall be effected by procedures by the Depository with the Participants for recording and transferring the ownership of beneficial interests in such Bonds. viii In connection with an notice or other communication to be provided to (viii) Y the Holders pursuant to this Resolution by the City or Bond Registrar with respect to any consent or other action to be taken by Holders,the Depository shall consider the date of receipt of notice requesting such consent or other action as the record date for such consent or other action;provided,that the City or the Bond Registrar may establish a special record date for such consent or other action. The City or the Bond Registrar shall, to the extent possible,give the Depository notice of such special record date not less than 15 calendar days in advance of such special record date to the extent possible. (ix) Any successor Bond Registrar in its written acceptance of its duties under this Re so lution an d any pay i ng agency/bond registrar agreement, shall agree to take any actions necessary from time to time to comply with the requirements of the Letter of Representations. (x) In the case of a partial prepayment of a Bond,the Holder may,in lieu of surrendering the Bonds for a Bond of a lesser denomination as provided in paragraph 5, make a notation of the reduction in principal amount on the panel provided on the Bond stating the amount so redeemed. c Termination of Book-En Only System. Discontinuance of a articular O try—y Y P Depository's services and termination of the book-entry only system may be effected as follows: (i) The Depository may determine to discontinue providing its services with respect to the Bonds at an time b giving written notice to the City and discharging its P Y Yg g Y g g responsibilities with respect thereto under applicable law. The City may terminate the services of the Depository with respect to the Bond if it determines that the Depository is P n' P P rY 2116S97vt 4 no longer able to carry out its functions as securities depository or the continuation of the system of book-entry transfers through the Depository is not in the best interests of the City or the Beneficial Owners. (ii) Upon termination of the services of the Depository as provided in the preceding paragraph, and if no substitute securities depository is willing to undertake the functions of the Depository hereunder can be found which, in the opinion of the City,is willing and able to assume such functions upon reasonable or customary terms,or if the City determines that it is in the best interests of the City or the Beneficial Owners of the Bond that the Beneficial Owners be able to obtain certificates for the Bonds, the Bonds shall no longer be registered as being registered in the bond register in the name of the Nominee,but may be registered in whatever name or names the Holder of the Bonds shall designate at that time, in accordance with paragraph 10. To the extent that the Beneficial Owners are designated as the transferee by the Holders, in accordance with paragraph 10,the Bonds will be delivered to the Beneficial Owners. (iii) Nothing in this subparagraph(c) shall limit or restrict the provisions of paragraph 10. (d) Letter of Representations. The provisions in the Letter of Representations are incorporated herein by reference and made a part of the resolution, and if and to the extent any such provisions are inconsistent with the other provisions of this resolution,the provisions in the Letter of Representations shall control. 3. Purpose. The Bonds shall provide funds to finance the Project. The total cost of the Project,which shall include all costs enumerated in Minnesota Statutes, Section 475.65, is estimated to be at least equal to the amount of the Bonds. Work on the Project shall proceed with due diligence to completion. The City covenants that it shall do all things and perform all acts required of it to assure that work on the Project proceeds with due diligence to completion and that any and all permits and studies required under law for the Project are obtained. 4. Interest. The Bonds shall bear interest payable semiannually on June 15 and December 15 of each year(each, an "Interest Payment Date"),commencing December 15, 2008, calculated on the basis of a 360-day year of twelve 30-day months, at the respective rates per annum set forth opposite the maturity years as follows: Maturity Year Interest Rate Maturity Year Interest Rate 2009 % 2019 % 2010 2020 2011 2021 2012 2022 2013 2023 2014 2024 2015 2025 2016 2026 2017 2027 2018 2028 21>6597v1 5 5. Redemption. All Bonds maturing on December 15, 2017, and thereafter shall be subject to redemption and prepayment at the option of the City on December 15, 2016, and on any date thereafter at a price of par plus accrued interest. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part,the maturities and the principal amounts within each maturity to be redeemed shall be determined by the City and if only part of the Bonds having a common maturity date are called for prepayment,the specific Bonds to be prepaid shall be chosen by lot by the Registrar. Bonds or portions thereof called for redemption shall be due and payable on the redemption date, and interest thereon shall cease to accrue from and after the redemption date. Mailed notice of redemption shall be given to the paying agent and to each affected registered holder of the Bonds. To effect a partial redemption of Bonds having a common maturity date,the Registrar prior to giving notice of redemption shall assign to each Bond having a common maturity date a distinctive number for each$5,000 of the principal amount of such Bond. The Registrar shall then select by lot,using such method of selection as it shall deem proper in its discretion, from the numbers so assigned to the Bonds, as many numbers as, at$5,000 for each number, shall equal the principal amount of the Bonds to be redeemed. The Bonds to be redeemed shall be the Bonds to which were assigned numbers so selected;provided,however, that only so much of the principal amount of each Bond of a denomination of more than$5,000 shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. If a Bond is to be redeemed only in part, it shall be surrendered to the Registrar(with, if the City or Registrar so requires,a written instrument of transfer in form satisfactory to the City and Registrar duly executed by the Holder thereof or the Holder's attorney duly authorized in writing)and the City shall execute(if necessary) and the Registrar shall authenticate and deliver to the Holder of the Bond,without service charge, a new Bond or Bonds having the same stated maturity and interest rate and of any Authorized Denomination or Denominations, as requested by the Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond so surrendered. i Minneapolis,Minnesota is 6. Bond Re istrar. Northland Trust Services,Inc., n , g p nd appointed to act as bond registrar and transfer agent with respect to the Bonds (the "Bond Registrar"), and shall do so unless and until a successor Bond Registrar is duly appointed, all pursuant to any contract the City and Bond Registrar shall execute which is consistent herewith. The Bond Registrar shall also serve as paying agent unless and until a successor paying agent is duly appointed. Principal and interest on the Bonds shall be paid to the registered holders(or record holders)of the Bonds in the manner set forth in the form of Bond and paragraph 12. 7. Form of Bond. The Bonds,together with the Bond Registrar's Certificate of Authentication,the form of Assignment and the registration information thereon, shall be in substantially the following form: 2116597v1 6 UNITED STATES OF AMERICA STATE OF MINNESOTA WASHINGTON COUNTY CITY OF OAK PARK HEIGHTS R- $ GENERAL OBLIGATION CAPITAL IMPROVEMENT PLAN BOND,SERIES 2008A Interest Rate Maturity Date Date of Original Issue CUSIP % December 15, February 15,2008 REGISTERED OWNER: CEDE &CO. PRINCIPAL AMOUNT: THE CITY OF OAK PARK HEIGHTS, Washington County, Minnesota(the "Issuer"), certifies that it is indebted and for value received promises to pay to the registered owner specified above, or registered assigns,in the manner hereinafter set forth,the principal amount specified above, on the maturity date specified above,unless called for prepayment, and to pay interest thereon semiannually on June 15 and December 15 of each year(each, an "Interest . Payment Date"),commencing December 15, 2008, at the rate per annum specified above (calculated on the basis of a 360-day year of twelve 30-day months)until the principal sum is paid or has been provided for. This Bond will bear interest from the most recent Interest Payment Date to which interest has been paid or, if no interest has been paid, from the date of original issue hereof. The principal of and premium, if any, on this Bond are payable upon presentation and surrender hereof at the principal office of Northland Trust Services, Inc., in Minneapolis,Minnesota(the 'Bond Registrar"), acting as paying agent, or any successor paying agent duly appointed by the Issuer. Interest on this Bond will be paid on each Interest Payment Date by check or draft mailed to the person in whose name this Bond is registered(the "Holder" or'Bondholder")on the registration books of the Issuer maintained by the Bond Registrar and at the address appearing thereon at the close of business on the first day of the calendar month of such Interest Payment Date (the 'Regular Record Date"). Any interest not so timely paid shall cease to be payable to the person who is the Holder hereof as of the Regular Record Date, and shall be payable to the person who is the Holder hereof at the close of business on a date (the "Special Record Date") fixed by the Bond Registrar whenever money becomes available for payment of the defaulted interest. Notice of the Special Record Date shall be given to Bondholders not less than ten days prior to the Special Record Date. The principal of and premium, if any, and interest on this Bond are payable in lawful money of the United States of America. So long as this Bond is registered in the name of the Depository or its Nominee as provided in the Resolution hereinafter described,and as those terms are defined therein,payment of principal of, premium, if any, and interest on this Bond and notice with respect thereto shall be made as provided in the Letter of Representations, as defined in the Resolution. Until termination of the book-entry only system pursuant to the Resolution,Bonds may only be registered in the name of the Depository or its Nominee. 21165970 7 Optional Redemption. The Bonds of this issue (the "Bonds")maturing on December 15, 2017, and thereafter, are subject to redemption and prepayment at the option of the Issuer on December 15, 2016, and on any date thereafter at a price of par plus accrued interest. Redemption may be in whole or in part of the Bonds subject to prepayment. If redemption is in part,the maturities and the principal amounts within each maturity to be redeemed shall be determined by the Issuer; and if only part of the Bonds having a common maturity date are called for prepayment,the specific Bonds to be prepaid shall be chosen by lot by the Bond Registrar. Bonds or portions thereof called for redemption shall be due and payable on the redemption date, and interest thereon shall cease to accrue from and after the redemption date. Mailed notice of redemption shall be given to the paying agent and to each affected Holder of the Bonds prior to the date fixed for redemption. Selection of Bonds for Redemption; Partial Redemption. To effect a partial redemption of Bonds having a common maturity date, the Bond Registrar shall assign to each Bond having a common maturity date a distinctive number for each $5,000 of the principal amount of such Bond. The Bond Registrar shall then select by lot, using such method of selection as it shall deem proper in its discretion, from the numbers assigned to the Bonds, as many numbers as, at $5,000 for each number, shall equal the principal amount of the Bonds to be redeemed. The Bonds to be redeemed shall be the Bonds to which were assigned numbers so selected;provided, however, that only so much of the principal amount of such Bond of a denomination of more than$5,000 shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. If a Bond is to be redeemed only in part, it shall be surrendered to the Bond Registrar (with, if the Issuer or Bond Registrar so requires, a written instrument of transfer in form satisfactory to the Issuer and Bond Registrar duly executed by the Holder thereof or the Holder's attorney duly authorized in writing)and the Issuer shall execute (if necessary)and the Bond Registrar shall authenticate and deliver to the Holder of the Bond, without service charge, a new Bond or Bonds having the same stated maturity and interest rate and of any Authorized Denomination or Denominations, as requested by the Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond so surrendered. Issuance• Pu ose• General Obligation. This Bond is one of an issue in the total principal � g.— p p amount of$ , all of like date of original issue and tenor, except as to number, maturity, interest rate and denomination,issued pursuant to and in full conformity with the Constitution and laws of the State of Minnesota and pursuant to a resolution adopted by the City Council of the Issuer on January 22,2008 (the "Resolution"),to finance the rehabilitation and/or replacement of the city hall facilities, including the police department and public works areas, as provided in the 2008 through 2012 Five-Year Capital Improvement Plan for City of Oak Park Heights,Minnesota. This Bond is payable out of the General Obligation Capital Improvement Plan Bonds, Series 2008A Fund of the Issuer. This Bond constitutes a general obligation of the Issuer, and to provide moneys for the prompt and full payment of its principal,premium, if any, and interest when the same become due,the full faith and credit and taxing powers of the Issuer have been and are hereby irrevocably pledged. Denominations; Exchange; Resolution. The Bonds are issuable solely in fully registered form in Authorized Denominations(as defined in the Resolution)and are exchangeable for fully registered Bonds of other Authorized Denominations in equal aggregate principal amounts at the principal office of the Bond Registrar,but only in the manner and subject to the limitations 2u6597vt 8 iprovided in the Resolution. Reference is hereby made to the Resolution for a description of the rights and duties of the Bond Registrar. Copies of the Resolution are on file in the principal office of the Bond Registrar. Transfer. This Bond is transferable by the Holder in person or by the Holder's attorney duly authorized in writing at the principal office of the Bond Registrar upon presentation and surrender hereof to the Bond Registrar, all subject to the terms and conditions provided in the Resolution and to reasonable regulations of the Issuer contained in any agreement with the Bond Registrar. Thereupon the Issuer shall execute and the Bond Registrar shall authenticate and deliver, in exchange for this Bond, one or more new fully registered Bonds in the name of the transferee (but not registered in blank or to "bearer" or similar designation), of an Authorized Denomination or Denominations, in aggregate principal amount equal to the principal amount of this Bond,of the same maturity and bearing interest at the same rate. Fees upon Transfer or Loss. The Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer or exchange of this Bond and any legal or unusual costs regarding transfers and lost Bonds. Treatment of Registered Owners. The Issuer and Bond Registrar may treat the person in whose name this Bond is registered as the owner hereof for the purpose of receiving payment as j herein provided(except as otherwise provided herein with respect to the Record Date) and for all other purposes,whether or not this Bond shall be overdue, and neither the Issuer nor the Bond Registrar shall be affected by notice to the contrary. Authentication. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security unless the Certificate of Authentication hereon shall have been executed by the Bond Registrar. Qualified Tax-Exempt Obligation. This Bond has been designated by the Issuer as a "qualified tax-exempt obligation" for purposes of Section 265(b)(3)of the Internal Revenue Code of 1986, as amended. IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions and things required by the Constitution and laws of the State of Minnesota to be done,to happen and to be performed, precedent to and in the issuance of this Bond,have been done,have happened and have been performed, in regular and due form,time and manner as required by law, and that this Bond,together with all other debts of the Issuer outstanding on the date of original issue hereof and the date of its issuance and delivery to the original purchaser, does not exceed any constitutional or statutory limitation of indebtedness. IN WITNESS WHEREOF,the City of Oak Park Heights, Washington County, Minnesota, by its City Council has caused this Bond to be executed on its behalf by the facsimile signatures of its Mayor and its Administrator, the corporate seal of the Issuer having been intentionally omitted as permitted by law. 2116597v1 9 Date of Registration: Registrable by: NORTHLAND TRUST SERVICES, INC. Payable at: NORTHLAND TRUST SERVICES, INC. CITY OF OAK PARK HEIGHTS, WASHINGTON COUNTY, MINNESOTA BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION /s/Facsimile This Bond is one of the Bonds Mayor described in the Resolution mentioned within. Northland Trust Services,Inc. /s/Facsimile Minneapolis, Minnesota, Administrator Bond Registrar By Authorized Signature i i 2116597v1 10 ABBREVIATIONS 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 applicable laws or regulations: TEN COM- as tenants in common TEN ENT- as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UTMA- as custodian for (Cult) (Minor) under the Uniform Transfers to Minors Act (State) Additional abbreviations may also be used though not in the above list. ASSIGNMENT For value received,the undersigned hereby sells, assigns and transfers unto the within Bond and does hereby irrevocably constitute and appoint attorney to transfer the Bond on the books kept for the registration thereof,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 any change whatever. Signature Guaranteed: Signature(s) must be guaranteed by a national bank or trust company or by a brokerage firm having a membership in one of the major stock exchanges or any other "Eligible Guarantor Institution" as defined in 17 CFR 240.17 Ad-I5(a)(2). The Bond Registrar will not effect transfer of this Bond unless the information concerning the transferee requested below is provided. Name and Address: (Include information for all joint owners if the Bond is held by joint account.) 2116597v1 1 1 PREPAYMENT SCHEDULE This Bond has been prepaid in part on the date(s) and in the amount(s) as follows: AUTHORIZED SIGNATURE DATE AMOUNT OF HOLDER 21165970 12 8. Execution; Temporary Bonds. The Bonds shall be in typewritten form, shall be executed on behalf of the City by the signatures of its Mayor and Administrator and be sealed with the seal of the City;provided, as permitted by law,both signatures may be photocopied facsimiles and the corporate seal has been omitted. In the event of disability or resignation or other absence of either officer,the Bonds may be signed by the manual or facsimile signature of the officer who may act on behalf of the absent or disabled officer. In case either officer whose signature or facsimile of whose signature shall appear on the Bonds shall cease to be such officer before the delivery of the Bonds,the signature or facsimile shall nevertheless be valid and sufficient for all purposes, the same as if the officer had remained in office until delivery. 9. Authentication. No Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this resolution unless a Certificate of Authentication on the Bond, substantially in the form hereinabove set forth, shall have been duly executed by an authorized representative of the Bond Registrar. Certificates of Authentication on different Bonds need not be signed by the same person. The Bond Registrar shall authenticate the signatures of officers of the City on each Bond by execution of the Certificate of Authentication on the Bond and, by inserting as the date of registration in the space provided, the date on which the Bond is authenticated, except that for purposes of delivering the original Bonds to the Purchaser,the Bond Registrar shall insert as a date of registration the date of original issue, which date is February 15, 2008. The Certificate of Authentication so executed on each Bond shall be conclusive evidence that it has been authenticated and delivered under this resolution. 10. Registration, Transfer, Exchange. The City will cause to be kept at the principal . office of the Bond Registrar a bond register in which,subject to such reasonable regulations as the Bond Registrar may prescribe,the Bond Registrar shall provide for the registration of Bonds and the registration of transfers of Bonds entitled to be registered or transferred as herein provided. Upon surrender for transfer of any Bond at the principal office of the Bond Registrar,the City shall execute (if necessary), and the Bond Registrar shall authenticate, insert the date of registration(as provided in paragraph 9) of, and deliver, in the name of the designated transferee or transferees, one or more new Bonds of any Authorized Denomination or Denominations of a like aggregate principal amount,having the same stated maturity and interest rate, as requested by the transferor;provided,however,that no Bond may be registered in blank or in the name of "bearer" or similar designation. At the option of the Holder,Bonds may be exchanged for Bonds of any Authorized Denomination or Denominations of a like aggregate principal amount and stated maturity,upon surrender of the Bonds to be exchanged at the principal office of the Bond Registrar. Whenever any Bonds are so surrendered for exchange,the City shall execute (if necessary), and the Bond Registrar shall authenticate, insert the date of registration of, and deliver the Bonds which the Holder making the exchange is entitled to receive. All Bonds surrendered upon any exchange or transfer provided for in this resolution shall be promptly canceled by the Bond Registrar and thereafter disposed of as directed by the City. 2116597v 1 13 All Bonds delivered in exchange for or upon transfer of Bonds shall be valid general obligations of the City evidencing the same debt, and entitled to the same benefits under this resolution,as the Bonds surrendered for such exchange or transfer. Every Bond presented or surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, in form satisfactory to the Bond Registrar, duly executed by the Holder thereof or the Holder's attorney duly authorized in writing. The Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer or exchange of any Bond and any legal or unusual costs regarding transfers and lost Bonds. Transfers shall also be subject to reasonable regulations of the City contained in any agreement with the Bond Registrar, including regulations which permit the Bond Registrar to close its transfer books between record dates and payment dates. The Administrator is hereby authorized to negotiate and execute the terms of said agreement. 11. Rights Upon Transfer or Exchange. Each Bond delivered upon transfer of or in exchange for or in lieu of any other Bond shall carry all the rights to interest accrued and unpaid, and to accrue,which were carried by such other Bond. 12. Interest Payment; Record Date. Interest on any Bond shall be paid on each Interest Payment Date by check or draft mailed to the person in whose name the Bond is registered (the "Holder")on the registration books of the City maintained by the Bond Registrar and at the address appearing thereon at the close of business on the first day of the calendar month of such Interest Payment Date (the "Regular Record Date"). Any such interest not so timely paid shall cease to be payable to the person who is the Holder thereof as of the Regular Record Date, and shall be payable to the person who is the Holder thereof at the close of business on a date (the "Special Record Date") fixed by the Bond Registrar whenever money becomes available for payment of the defaulted interest. Notice of the Special Record Date shall be given by the Bond Registrar to the Holders not less than ten days prior to the Special Record Date. 13. Treatment of Registered Owner. The City and Bond Registrar may treat the person in whose name any Bond is registered as the owner of the Bond for the purpose of receiving payment of principal of and premium, if any, and interest(subject to the payment provisions in paragraph 12)on,the Bond and for all other purposes whatsoever whether or not the Bond shall be overdue, and neither the City nor the Bond Registrar shall be affected by notice to the contrary. 14. Delivery;Application of Proceeds. The Bonds when so prepared and executed shall be delivered by the Administrator to the Purchaser upon receipt of the purchase price, and the Purchaser shall not be obliged to see to the proper application thereof. 15. Fund and Accounts. There is hereby created a special fund to be designated the "General Obligation Capital Improvement Plan Bonds, Series 2008A Fund" (the "Fund")to be administered and maintained by the Finance Director as a bookkeeping account separate and apart from all other funds maintained in the official financial records of the City. The Fund shall i 21165970 14 be maintained in the manner herein specified until all of the Bonds and the interest thereon have been fully paid. There shall be maintained in the Fund the following separate accounts: (a) Construction Account. To the Construction Account there shall be credited the proceeds of the sale of the Bonds, less accrued and capitalized interest. From the Construction Account there shall be paid all costs and expenses of financing the Project listed in paragraph 16, including the cost of any construction contracts heretofore let and all other costs incurred and to be incurred of the kind authorized in Minnesota Statutes, Section 475.65. Moneys in the Construction Account shall be used for no other purpose except as otherwise provided by law; provided that the proceeds of the Bonds may also be used to the extent necessary to pay interest on the Bonds due prior to the anticipated date of commencement of the collection of taxes herein levied or covenanted to be levied;and provided further that if upon completion of the Project there shall remain any unexpended balance in the Construction Account,the balance shall be transferred by the City Council to the Debt Service Account. (b) Debt Service Account. There are hereby irrevocably appropriated and pledged to, and there shall be credited to,the Debt Service Account: (i) accrued interest received upon delivery of the Bonds; (ii)capitalized interest in the amount of$ (together with interest earnings thereon and subject to such other adjustments as are appropriate to provide sufficient funds to pay interest due on the Bonds on or before ); (iii) all collections of taxes herein or hereafter levied for the payment of the Bonds; (iv)all funds remaining in the Construction Account after completion of the Project and payment of the costs thereof; (v)all investment earnings on funds held in the Debt Service Account;and(vii)any and all other moneys which are properly available and are appropriated by the governing body of the City to the Debt Service Account. The Debt Service Account shall be used solely to pay the principal and interest of the Bonds and any other general obligation bonds of the City hereafter issued by the City and made payable from said account as provided by law. No portion of the proceeds of the Bonds shall be used directly or indirectly to acquire higher yielding investments or to replace funds which were used directly or indirectly to acquire higher yielding investments, except(1) for a reasonable temporary period until such proceeds are needed for the purpose for which the Bonds were issued and(2)in addition to the above in an amount not greater than the lesser of five percent of the proceeds of the Bonds or$100,000. To this effect, any proceeds of the Bonds and any sums from time to time held in the Construction Account or Debt Service Account(or any other City account which will be used to pay principal or interest to become due on the bonds payable therefrom)in excess of amounts which under then applicable federal arbitrage regulations may be invested without regard to yield shall not be invested at a yield in excess of the applicable yield restrictions imposed by said arbitrage regulations on such investments after taking into account any applicable "temporary periods" or "minor portion"made available under the federal arbitrage regulations. Money in the Fund shall not be invested in obligations or deposits issued by,guaranteed by or insured by the United States or any agency or instrumentality thereof if and to the extent that such investment would cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b)of the Internal Revenue Code of 1986, as amended (the "Code"). 16. Tax Lew; Coverage Test. To provide moneys for payment of the principal and interest on the Bonds there is hereby levied upon all of the taxable property in the City a direct 2116597v 1 15 annual ad valorem tax which shall be spread upon the tax rolls and collected with and as part of other general property taxes in the City for the years and in the amounts as follows: Levy Years Collection Years Amount 2008-2027 2009-2028 See Attached Schedule The tax levies are such that if collected in full they,together with other revenues herein pledged for the payment of the Bonds, will produce at least five percent in excess of the amount needed to meet when due the principal and interest payments on the Bonds. The tax levies shall be irrepealable so long as any of the Bonds are outstanding and unpaid,provided that the City reserves the right and power to reduce the levies in the manner and to the extent permitted by Minnesota Statutes, Section 475.61, Subdivision 3. 17. Defeasance. When all Bonds have been discharged as provided in this paragraph, all pledges,covenants and other rights granted by this resolution to the registered holders of the Bonds shall,to the extent permitted by law, cease. The City may discharge its obligations with respect to any Bonds which are due on any date by irrevocably depositing with the Bond 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 Bond Registrar a sum sufficient for the payment thereof in full with interest accrued 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 Bond Registrar on or before that date a sum sufficient for the payment thereof in full, provided that notice of redemption thereof has been duly given. 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 a suitable banking institution qualified by law as an escrow agent for this purpose, cash or securities described in Minnesota Statutes, Section 475.67, Subdivision 8,bearing interest payable at such times and at such rates and maturing on such dates as shall be required,without regard to sale and/or reinvestment, to pay all amounts to become due thereon to maturity. 18. Compliance With Reimbursement Bond Regulations. The provisions of this paragraph are intended to establish and provide for the City's compliance with United States Treasury Regulations Section 1.150-2 (the "Reimbursement Regulations")applicable to the "reimbursement proceeds" of the Bonds,being those portions thereof which will be used by the City to reimburse itself for any expenditure which the City paid or will have paid prior to the Closing Date (a "Reimbursement Expenditure"). The City hereby certifies and/or covenants as follows: (a) Not later than 60 days after the date of payment of a Reimbursement Expenditure, the City(or person designated to do so on behalf of the City)has made or will have made a written declaration of the City's official intent(a "Declaration")which effectively(i) states the City's reasonable expectation to reimburse itself for the payment of the Reimbursement Expenditure out of the proceeds of a subsequent borrowing; (ii)gives a general and functional description of the property,project or program to which the Declaration relates and for which the 2116597v l 16 Reimbursement Expenditure is paid, or identifies a specific fund or account of the City and the general functional purpose thereof from which the Reimbursement Expenditure was to be paid (collectively the "Project"); and(iii) states the maximum principal amount of debt expected to be issued by the City for the purpose of financing the Project; provided, however, that no such Declaration shall necessarily have been made with respect to: (i) "preliminary expenditures" for the Project, defined in the Reimbursement Regulations to include engineering or architectural, surveying and soil testing expenses and similar prefatory costs,which in the aggregate do not exceed twenty percent of the "issue price" of the Bonds, and(ii)a de minimis amount of Reimbursement Expenditures not in excess of the lesser of$100,000 or five percent of the proceeds of the Bonds. (b) Each Reimbursement Expenditure is a capital expenditure or a cost of issuance of the Bonds or any of the other types of expenditures described in Section 1.150-2(d)(3)of the Reimbursement Regulations. (c) The "reimbursement allocation" described in the Reimbursement Regulations for each Reimbursement Expenditure shall and will be made forthwith following (but not prior to) the issuance of the Bonds and in all events within the period ending on the date which is the later of three years after payment of the Reimbursement Expenditure or one year after the date on which the Project to which the Reimbursement Expenditure relates is first placed in service. (d) Each such reimbursement allocation will be made in a writing that evidences the City's use of Bond proceeds to reimburse the Reimbursement Expenditure and, if made within 30 days after the Bonds are issued, shall be treated as made on the day the Bonds are issued. Provided,however, that the City may take action contrary to any of the foregoing covenants in this paragraph upon receipt of an opinion of its Bond Counsel for the Bonds stating in effect that such action will not impair the tax-exempt status of the Bonds. 19. General Obligation Pledge. For the prompt and full payment of the principal and interest on the Bonds, as the same respectively become due,the full faith, credit and taxing powers of the City shall be and are hereby irrevocably pledged. If the balance in the Debt Service Account is ever insufficient to pay all principal and interest then due on the Bonds and any other bonds payable therefrom,the deficiency shall be promptly paid out of any other funds of the City which are available for such purpose, and such other funds may be reimbursed with or without interest from the Debt Service Account when a sufficient balance is available therein. 20. Continuing Disclosure. The City is the sole obligated person with respect to the Bonds. The City hereby agrees, in accordance with the provisions of Rule 15c2-12 (the "Rule"), promulgated by the Securities and Exchange Commission(the "Commission")pursuant to the Securities Exchange Act of 1934,as amended, and a Continuing Disclosure Undertaking(the "Undertaking")hereinafter described to: (a) to provide or cause to be provided, (i)(a)upon request to any person, or(b)upon establishment of a state information depository ("SID"),to the SID,its audited financial statements for the most recent fiscal year, and(ii)to each nationally recognized municipal securities information repository or to the Municipal Securities Rulemaking Board and the SID, 2116597v 1 17 if any, notice of the occurrence of certain material events with respect to the Bonds in accordance with the Undertaking; and (b) its covenants pursuant to the Rule set forth in this paragraph and in the Undertaking is intended to be for the benefit of the Holders of the Bonds and shall be enforceable on behalf of such Holders; provided that the right to enforce the provisions of these covenants shall be limited to a right to obtain specific enforcement of the City's obligations under the covenants. The Mayor and Administrator,or any other officer of the City authorized to act in their Y place are hereby authorized and directed to execute on behalf of the City the Undertaking in substantially the form presented to the City Council subject to such modifications thereof or additions thereto as are (i) consistent with the requirements under the Rule, (ii)required by the Purchaser of the Bonds, and(iii)acceptable to the Mayor and Administrator. 21. Certificate of Registration. The Administrator is hereby directed to file a certified copy of this resolution with the County Auditor of Washington County, Minnesota,together with such other information as the County Auditor shall require,and to obtain from the County Auditor the certificate that the Bonds have been entered in the County Auditor's Bond Register and that the tax levy required by law has been made. 22. Records and Certificates. The officers of the City are hereby authorized and directed to prepare and furnish to the Purchaser,and to the attorneys approving the legality of the issuance of the Bonds, certified copies of all proceedings and records of the City relating to the Bonds and to the financial condition and affairs of the City, and such other affidavits, certificates and information as are required to show the facts relating to the legality and marketability of the Bonds as the same appear from the books and records under their custody and control or as otherwise known to them,and all such certified copies, certificates and affidavits, including any heretofore furnished, shall be deemed representations of the City as to the facts recited therein. 23. Negative Covenant as to Use of Bond Proceeds and Project. The City hereby covenants not to use the proceeds of the Bonds or to use the Project,or to cause or permit them to be used, or to enter into any deferred payment arrangements for the cost of the Project,in such a manner as to cause the Bonds to be "private activity bonds"within the meaning of Sections 103 and 141 through 150 of the Code. 24. Tax-Exempt Status of the Bonds; Rebate. The City shall comply with requirements necessary under the Code to establish and maintain the exclusion from gross income under Section 103 of the Code of the interest on the Bonds NEED EXEMPTION. 25. Designation of Qualified Tax-Exempt Obligations. In order to qualify the Bonds as "qualified tax-exempt obligations"within the meaning of Section 265(b)(3)of the Code, the City hereby makes the following factual statements and representations: (a) the Bonds are issued after August 7, 1986; (b) the Bonds are not "private activity bonds" as defined in Section 141 of the Code; 2116597v 1 18 (c) the City hereby designates the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Code; (d) the reasonably anticipated amount of tax-exempt obligations(other than private activity bonds,treating qualified 501(c)(3)bonds as not being private activity bonds)which will be issued by the City(and all entities treated as one issuer with the City, and all subordinate entities whose obligations are treated as issued by the City)during this calendar year 2008 will not exceed $10,000,000; and (e) not more than $10,000,000 of obligations issued by the City during this calendar year 2008 have been designated for purposes of Section 265(b)(3)of the Code. The City shall use its best efforts to comply with any federal procedural requirements which may apply in order to effectuate the designation made by this paragraph. 26. Payment of Issuance Expenses. The City authorizes the Purchaser to forward the amount of Bond proceeds allocable to the payment of issuance expenses to the Bond Registrar on the closing date for further distribution as directed by the Purchaser. 27. Severability. If any section,paragraph or provision of this resolution shall be held to be invalid or unenforceable for any reason,the invalidity or unenforceability of such section, paragraph or provision shall not affect any of the remaining provisions of this resolution. 28. Headings. Headings in this resolution are included for convenience of reference only and are not a part hereof, and shall not limit or define the meaning of any provision hereof. The motion for the adoption of the foregoing resolution was duly seconded by member and, after a full discussion thereof and upon a vote being taken thereon,the following voted in favor thereof: and the following voted against the same: Whereupon the resolution was declared duly passed and adopted. 2116597v] 19 STATE OF MINNESOTA COUNTY OF WASHINGTON CITY OF OAK PARK HEIGHTS I,the undersigned,being the duly qualified and acting Administrator of the City of Oak Park Heights, Minnesota, DO HEREBY CERTIFY that I have compared the attached and foregoing extract of minutes with the original thereof on file in my office, and that the same is a full, true and complete transcript of the minutes of a meeting of the City Council, duly called and held on the date therein indicated, insofar as such minutes relate to authorizing the issuance and awarding the sale of$ General Obligation Capital Improvement Plan Bonds, Series 2008A. WITNESS my hand on Administrator 2116597v1 20 1 . CITY OF OAK PARK HEIGHTS,MINNESOTA RULE 15c2-12 Certificate for the $7,500,000 General Obligation Capital Improvement Plan Bonds,Series 2008A The undersigned hereby certifies and represents to the Participating Underwriter or Underwriters (within the meaning of the hereinafter defined Rule) (collectively,the"Underwriters")that she is the duly appointed Finance Director of the City of Oak Park Heights, Minnesota (the "Issuer") authorized to execute and deliver this Certificate and further certifies on behalf of the Issuer to the Underwriters as follows: 1. This Certificate is delivered to enable the Underwriters to comply with Rule 15c2-12, as amended, under the Securities Exchange Act of 1934 (the "Rule") in connection with the offering and sale of the $7,500,000 General Obligation Capital Improvement Plan Bonds, Series 2008A(the"Bonds"). 2. In connection with the offering and sale of the Bonds, there has been prepared a Near Final Official Statement, dated the date hereof, setting forth information concerning the Bonds and the Issuer (the "NFOS"). 3. As used herein, "Permitted Omissions" shall mean the offering price(s), interest rate(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds and any underlying obligations depending on such matters and the identity of the Underwriters,all with respect to the Bonds and any underlying obligations. 4. The information with respect to the Issuer included in the NFOS is final within the meaning of the Rule except for Permitted Omissions and is accurate and complete in all material respects except for Permitted Omissions. • 5. If, at any time prior to the formal award of the Bonds to the Underwriters, any event occurs as a result of which the NFOS might include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading,the Issuer shall promptly notify the Underwriter thereof. 6. The section of the NFOS entitled Limited Continuing Disclosure describes the agreement the Issuer expects to make for the benefit of the Bondholders in the issuing resolution by which the Issuer will undertake to provide,upon request,disclosure in accordance with Section(b)(5)(i)of the Rule. DATED this 19`h day of December 2007. Oak Park Heights,Minnesota i J 'L.Hol y Financ Director • NORTHLAND SECURITIES Member FINRA/SIPC 45 South 7th Street,Suite 2500,Minneapolis,MN 55402 Toll Free:(800)851-2920 Local:(612)851-5900 Fax:(612)851-5917 E - M A I L T R A N S M I S S I O N DATE: December 17,2007 TO: JUDY L.HOLST CITY FINANCE DIRECTOR Email:jholst @cityofoakparkheights.com Fax: 651/439.0574 Phone:651/439.4439 FROM: SCOTT MILES, SENIOR FINANCIAL ANALYST PUBLIC FINANCE DEPARTMENT Phone: 612/851.5914 Email: smiles @northlandsecurities.com NUMBER OF PAGES TO FOLLOW(Including Cover Page): RE: "Near Final' Official Statement for the City of Oak Park Heights, Minnesota $7,500,000 General Obligation Capital Improvement Plan Bonds,Series 2008A,dated February 15,2008 COMMENTS: Attached is the Near Final Official Statement regarding tthe above-referenced issue. Please review and make any comments or suggestions back to myself. Also the Official Statement needs to be signed as to validity on the enclosed Rulel5c2-12 Certificate_ This should be done ASAP and no later than Wednesday 12/26 by 10:00 AM. The Certificate can be faxed back to myself when completed. Please call me when you fax the Certificate back so it doesn't eg_t delayed in the system. THANK YOU FOR YOUR TIME AND YOUR FAST RESPONSE AND HAVE A GREAT DAY! This message is intended for the addressee's use,and may contain privileged or confidential information. If you are not the addressee,or an agent or employee of the addressee, take notice that copying, or dissemination of, this communication is prohibited. If you have received this communication in error,please immediately notify us at the toll-free number provided. Thank you.(REV.04/05) City of Oak Park Heights 14168 Oak Park Blvd.N. Box 2007 Oak Park Heights,N N 55082 Phone(651)439-4439 facsimile transmittal Facsimile(651)439-0574 To: ti�1 � r> From: �� t(, l Fax: �: .?�, GJ c l Pages: :71 Phone: Date: Re: cc: ❑Urgent ❑For Review ❑Please Comment ❑Please Reply ❑Please Recycle Message: t c (,3Y� Uri iv I"Y/n � } ** *** *** ** -IND. XMT JOURNAL- DATE DEC-31-2007 *** * TIME 11:00 * *** DATE/TIME = DEC-31-2007 10:45 JOURNAL No. = 38 COMM.RESULT = OK i PAGECS) = 002/002 DURATION = 00:00'48 ' FILE No. = 249 MODE = MEMORY TRANSMISSION DESTINATION = 6128515917 RECEIVED ID = i 6128515917 RESOLUTION = STD >K3K�kyK�K�K�K�K>KSk�K�K7K7K�K�k�K�K�K�K�k3K�K�K3K�K�KyKylcaK>K�K�K�K>Kxc — — �K�K�K�k}k — — *7K7F:�t:�K?K���F: III i F. RESOLUTION 07-11-63 RESOLUTION GIVING PRELIMIINARY APPROVAL FOR THE ISSUANCE OF GENERAL OBLIGATION CAPITAL IMPROVEMENT PLAN BONDS IN AN AMOUNT NOT TO EXCEED$71500,000 FOR PURPOSES STATED IN THE ADOPTED , 2008-2012 ANTICIPATED FIVE-YEAR CAPITAL IMPROVEMENT PLAN AS ADOPTED ON NOVEMBER 7'ftl 2007. WHEREAS, the City Council of the City of Oak Park Heights,Minnesota(the "City")proposes to issue general obligation capital improvement plan bonds (the "Bonds")and has adopted the City of Oak Park Heights, Minnesota, 2008-2012 Anticipated Five-Year Capital Improvement Plan(the "Plan')on November 7'h, 2007; and WHEREAS, the City has caused notice of the public hearing on the intention to issue the Bonds and on the adoption of the Plan to be published pursuant to and in accordance with Minnesota Statutes, Section 475.521; and WHEREAS, a public hearing on the intention to issue the Bonds and on the Plan has been held on this October 23d,2007 and continued to November 7h, 2007, following published notice of the public hearing as required by law; and • WHEREAS, in approving the Plan,the City Council considered for each project and for the overall Plan: 1. The condition of the City's existing infrastructure, including the projected need for repair and replacement; 2. The likely demand for the improvement; 3. The estimated cost of the improvement; 4. The available public resources; 5. The level of overlapping debt in the City; 6. The relative benefits and costs of alternative uses of the funds; 7. Operating costs of the proposed improvements; and 8. Alternatives for providing services more efficiently through shared facilities with other local governmental units; and WHEREAS,the City Council has determined that the issuance of general obligation capital improvement plan bonds in the aggregate principal amount not to exceed � . • 1 I $7,500,000 is the best way to finance those portions of Plan eligible under Minnesota Statutes, Section 475.521. NOW,THEREFORE,BE IT RESOLVED by the City Council of the City of Oak its bond counsel to prepare Park Heights, Minnesota,that the City hereby authorizes P P t review, facilitating the for the City Council o g paperwork and obtain a credit rating o ty ce of u to $7,500,000 a re ate principal amount of general obligation future issuance p gg g P P capital improvement plan bonds and is consistent with the Plan. Passed by the City Council for the City oADII;WlBeaudet,is this 27th d of November, 07. Mayor A st ri Johnson: City Ci Administrator �I • • 2 I r - • RESOLUTION 07-11 -62 A Resolution Approving the Capital Improvement Plan Documents Related To and Necessary For the Future Issuance of Capital Improvement Bonds as Permitted Under MN STAT. 475.521,to Fund Proposed Improvements or Replacement of the Current City Ball Facility. Whereas,the City of Oak Park Heights currently coordinates the majority of its municipal operations from the City Hall Facility(hereafter referred to as the"Facility") located at 14168 Oak Park Blvd and which houses general administrative operations and public meeting space, all law enforcement operations and significant public works activities,and; Whereas,part of the current Facility was initially constructed in 1968 with additions in 1980,and 1989,bringing the current Facility to 15,000+/-square feet,and; Whereas, considering the age and configuration of the Facility,the City will soon be required invest significant funds to maintain the current Facility, including replacement of HVAC systems,roof replacements,ADA compliance initiative and other code compliance improvements, and; Whereas,the investment of significant dollars to bring the aged Facility into significant code compliance and efficient operability may not an be an economical long-term investment as compared to a major renovation or the construction of a new building, and; Whereas the City Council has invested considerable time and dollars in the discussion and investigation of numerous options for possible replacement and/or renovation of the Facility,including but not limited to the following: • Dec 12th, 2006, At CC Meeting: `Discussion of Break Room Improvements' • Jan 23`d,2007 At CC Meeting: `Planning for City Hall's Future' -Issue Architectural RFPs-City Hall Facilities Space Needs and Facilities Study. • Feb 6th,2007 City Council Worksession:-Narrow Down RFP Submissions for City Hall's Future. • Feb 6th,2007 At CC Meeting: `City Hall Improvements' -Request RFP Respondents to Submit Additional Information. • Feb 27th,2007 At CC Meeting: `City Hall Improvements' -Award RFP to Buetow and Associates for$9,600 to review current Facility and provide cost estimates for rehab/expansion or a new building. • May 22nd, 2007 At CC Meeting: `City Hall Facilities Needs and Assessment Report' -Current Facilities Report given by Randy Engel of Buetow &Assoc. • City's Municipal Facility was discussed as part of the City's 2008 Budget Discussions • Aug 28th,2007 At CC Meeting: `Accept Final Report from Buetow and Associates' Approving a resolution concluding and accepting the initial RFP study for Space Needs and Facilities Use Study. • Sep 12th,2007 City Council Work session-City Hall Facility Space Needs and 2008 Budget' -Additional layout options were examined with the Architect and cost estimates reviewed. Additional discussion was held with Steve ii r '' Mattson of Northland Securities about timing of possible bond financing. • Sep 12', 2007 At CC Meeting: `New Building Update' —City Council set the necessary public hearing date as part of the legal requirements for possible bonding—Date set for October 23,2007. • Sept, 2007 City published the Fall 2007 Newsletter with a full— discussion of the Facility issues. This notice also referenced the City's website where the public hearing information was placed and building site renderings. • Sep 25th, 2007 At CC Meeting: City Hall Facility —City Administrator reported that the Architect may provide more detailed plans of layouts at$4,200 per option,Council approved up to $10,000 for additional layout refinement. • Oct 9m,2007 `City Council Work session' —City Hall Facility discussion —refinement of possible building options and discussion of financing. • Oct 9d',2007 At CC Meeting: `City Hall Facility' —City Council directed staff to have the Architect provide additional refinements with certain criteria and which will be ultimately presented at the Public Hearing on Oct 23rd,2007 • Oct 23rd,2007 At CC Meeting: `City Hall Facility' -City Council Held a Public Hearing on the issuance of up to $7.5 Million Capital Improvement Bonds and the update to the CIP—necessary to fund a new Municipal Facility or a Rehabilitated and Expanded Facility. City Council continued the public hearing to Nov 7d',2007 and mailed out Public Hearing notice cards to all residents. • Nov 7d',2007 At CC Meeting: `City Hall Facility' -Following additional direct public notice to City residents,the City Council continued the public hearing as initiated on October 23rd,2007 in an effort to encourage additional public input, and; Whereas,the City has not received material adverse public comment on the proposed • improvement options. Now,Therefore,Be It Resolved that the City has determined that there is a need to address the long-term condition of the City Hall Facility and does hereby adopt the Five- Year Capital Improvement Plan(Attached as `Exhibit A')being necessary for the issuance of Capital Improvement Bonds up to $7,500,000 to fund a possible renovation or replacement of the current City Hall Facility. Passed by the City Council of the City of Oak Park Heights this 7th day of November,2007. vid Beaudet,Mayor 4c J s son,City Administrator i • i `Exhibit A' As Attached to Resolution 07-11 -62 2008 through 2012 Capital Improvement Plan 10/16/07 City Hall Facility �s 2008 through 2012 Five-Year Capital Improvement Plan for City of Oak Park Heights,Minnesota 10/16/07 • Prepared by: Eric Johnson, City Administrator City of Oak Park Heights,MN Table. of Contents. - - I. Introduction 2 II. Purpose 2 III. The Capital Improvement Planning Process 3 IV. Project Summary .. 4 V. Financing the Capital Improvement Plan . 5 Project Costs............................................................:.. Appendix A Proposed CIP Bond Issue............................................... Appendix B Pre-Sale Schedule........................................................... Appendix C CITY OF OAK PARK HEIGHTS FIVE-YEAR CAPITAL IMPROVEMENT PLAN 2008 THROUGH 2012 I. INTRODUCTION In 2003, the Minnesota State Legislature adopted a statute that generally exempts City bonds issued under a capital improvement program from the referendum requirements usually required for city halls, town halls, public works, libraries and public safety facilities. II. PURPOSE A capital improvement is a major expenditure of City funds for the acquisition or betterment to public lands, buildings, or other improvements used as a City Hall, town hall,public safety,or public works facility,which has a useful live of five years or more. For the purposes of Minnesota Statutes, Section 475.521, capital improvements do not include light rail transit or related activities, parks, road/bridges, administrative buildings other than City Hall or town hall or land for those facilities. A Capital Improvement Plan (CIP) is a document designed to anticipate capital improvement expenditures and schedule them over a five-year period so that they may be purchased in the most efficient and cost effective method possible. A CIP allows the matching of expenditures with anticipated income. As potential expenditures are reviewed, the City considers the benefits, costs, alternatives and impact on operating expenditures. The City of Oak Park Heights, Minnesota (the "City") believes the capital improvement process is an important element of responsible fiscal management. Major capital expenditures can be anticipated and coordinated so as to minimize potentially adverse financial impacts caused by the timing and magnitude of capital outlays. This coordination of capital expenditures is important to the City in achieving its goals of adequate physical assets and sound fiscal management. In these financially difficult times, good planning is essential for the wise use of limited financial resources. The CIP is designed to be updated on an annual basis. In this mariner, it becomes At ongoing fiscal planning tool that continually anticipates future capital expenditures and funding sources. III. THE CAPITAL IMPROVEMENT PLANNING PROCESS The capital improvement planning process is as follows: the City Council.authorizes the preparation of the CIP. City staff is instructed to assemble he capital expenditures to be undertaken within the next five years. The City Council then reviews the expenditures according to their priority, fiscal impact, and available funding. From this information, a preliminary capital improvement plan is prepared. Changes are made based on that input and a final project list is established. The City Council then prepares a plan based on the available funding sources. If general obligation bonding is necessary, the City works with its financial advisor to prepare a bond sale and repayment schedule. Over the life of the CIP, once the funding, including proceeds from the bond sales becomes available; the individual capital expenditures can be made. In subsequent years, the process is repeated as expenditures are completed and new needs arise. Capital improvement planning looks five years into the future. For a City to use its authority to finance expenditures under Section 415.521, it must rove" meet the requirements provided therein. Specifically, the City Council must approve improvement bonds b a three-fifth majority of its membership. In the sale of capital im rov y J h' P P addition, it must hold a public hearing for public input. Notice of such hearing must be published in the official newspaper of the City at least fourteen, but not more than twenty-eight days prior to the date of the public hearing. The City Council approves � the CIP following the public hearing. g Although a referendum is not required, a reverse referendum is allowable. If a petition bearing the signatures of at least five percent of the votes cast in the last general election requesting a vote on the issuance of bonds is received by the municipal cl e rk within thirty s after the public hearing,, a referendum vote on the issuance of the bonds shall be.called (if a vote is taken and the referendum passes,the taxes would be levied on market value rather than tax capacity). i IV. PROJECT SUMMARY The expenditures to be undertaken with this CIP are limited to those listed below. All other foreseeable capital expenditures within the City government will come through other means. The following expenditures have been submitted for inclusion in this CIP: Rehabilitation and/or Replacement of the City Hall Facility, including the Police Department and Public Works Areas There are not other projects constituting a capital improvement within the meaning of Minnesota Statutes Section 475.521 contemplated at this time. To be undertaken within the next 5 Y ears. The statute has established certain criteria that must be met. Under these criteria,the City has considered the following eight points: 1. Condition of the City's infrastructure and need for the project. 2. Demand for the improvement. 3. Cost of the improvement. 4. Availability of public resources. 5. Level of overlapping debt. 6. Cost/benefits of alternative uses of funds. 7. Operating costs of the proposed improvements. 8. Options for shared facilities with other cities or local governments. The CIP is composed of projects that will allow the City's departments more space in an expanded area. The City has analyzed the eight points required per statute for each p tY Y project on an individual basis and as a whole. Their findings are as follows: PROJECT: Rehabilitation and/or Replacement of the City Hall Facility Conditions of City Infrastructure and Need for the Project The current City Hall Facility, hereafter referred to as the "Facility" is in average condition and large approximately 35 years old with major updates in 1980 and 1989 However, due to continued growth in the area, additional space is needed to house personnel, equipment and supplies necessary to continue to provide adequate_public services for the next 50 years. (please see Exhibit A) Demand for Project As mentioned above the current Facility does not provide adequate space for personnel, equipment and supplies. Moreover, in the next few years, the current Facility will need major repairs to its roof, HVAC systems, compliance with Americans with Disabilities Act and other improvements to bring the City facilities into compliance with its own zoning codes. Estimated Cost of the Project The project is estimated to cost of the project ranges between$7.5 Million for a new Facility to approximately$1.75 million for a rehabilitation and expansion of the Current Facility. Availability of Public Resources The City's portion of the project may be funded by a combination of general property tax levy and available resources on hand.. Relative Costs and Benefits of Alternative Uses of the Funds The need for additional space and pending building repairs has been discussed for several years. The space limitations with the current Facility make this project necessary for the City. There are no significant alternatives for funds designated for this project. Operating Costs of the Proposed Improvements A larger Facility will likely require higher maintenance costs, but it is hoped that through the application of LEBD certified building elements, these cost differential will be minimal. The current Facility is not economical nor energy efficient by current standards. Options for Shared Facilities with Other Cities or Local Government The Facility is and will be entirely owned by the City. r Level of Overlapping Debt The City does not have any other capital improvement bonds outstanding. Indirect Debt* 2006/2007 200612007 Tax Tax Capacity Percentage Taxpayers' Capacity Value Applicable Share Issuer Value(1) in Ci (1) in Ci Net Debt o Debt Washington County $ 273,358,492 $7,356,523 2.69% $ 54,295,000(2) $ 1,460,536 ISD No. 834,Stillwater 85,874,241 7,356,523 8.57 65,563,464(3) 5,618,789 NMISD No.916 261,805,893 7,356,523 2.81 12,320,000(4) 346,192 Metropolitan Council 3,038,442,757 7,356,523 .24 8,673,927(5) 20,817 Metro Transit 2,583,170,505 7,356,523 .28 122,283,681(6) 342.394 Net Indirect Debt. ' Only those jurisdictions with outstanding bond indebtedness are shown above. (11 Tax Capacity Values are after tax increment, 10%of 200kV transmission line,and fiscal disparity contribution adjustments and before fiscal disparity distribution adjustment. (2) Washington County has bond indebtedness of$54,295,000 as of December 31,2006. (3) 1Sb No.834,Stillwater,has bond indebtedness of$74,990,000 and sinking fluids of$9,426,536 as of lone 30,2007. (4) Northeast Metro Intermediate School District No.916,reported bond indebtedness of$12;320,000 as of December 31,2006. (5) Deductions:(A)$882,480,000 Metropolitan Waste Control Commission Debt as of March 15,20 07. Note 1: Debt Service on(A)above is 100%self supported from revenues of the Metro Sanitary Sewer System,although the bonds are full faith and credit bonds.Sinking funds of$10,639,920 and escrow funds of$8,016,458 have not been deducted because said funds are attributable to (A) above. Sinking fund/escrow balances are as of December 31,2006. Note 2: The only tax supported bond indebtedness is $18,775,000 as of March 15, 2007 and sinking funds of $10,101,073 as of December 31,2006. (6) Metro Transit has bond indebtedness of$162,505,000 as of March 15, 2007 as well as sinking funds of$16,281,784 and escrow funds of$16,629,535 as of December 31,2006.This debt is issued by the Metropolitan Council for all public transit operations in the transit district,of which Metro Transit is the largest public transit provider,and is payable from ad valorem taxes levied on all taxable property within the Metropolitan Transit District. V. FINANCING THE CAPITAL IMRPOVEMENT PLAN The total amount of requested expenditures under the CIP is $7,358,000. If these expenditures are to be funded, that amount of money is anticipated to be generated through the tax levy and the sale of$7,500,000 in bonds over the five-year period. In the financing of the CIP, two statutory limitations apply. Under Chapter 475, with few exceptions, cities cannot incur debt in excess of 2% of the assessor's Taxable Market Value (TMV)for the City. In the City,the TMV is $579,089,800. Therefore, the total amount of outstanding debt cannot exceed $11,581,796. As of October 23, 2007,the City had no debt subject to the legal debt limit. Another limitation on -bonding under the CIP Statute (475.521) is that without referendum, the total amount of principal and interest in any one year for CIP debt cannot exceed 0.16% of the TMV for the City. Fear the City of Oak Park Heights, the amount is $,926,544($579,089,800 x.0016). The principal and interest payments for the City portion of the debt are estimated to be approximately $657,500 in collection year 2008, gradually increasing to $820,000 in collection year 2022 (this amount takes into account the required 105% debt service coverage for the City's portion of the bonds). Under the CIP, the City will secure$7,500,000 in 20-year general obligation bonds in the year 2007 to finance the Municipal Government Center. The par amount of the Bond Issue is based on the amounts listed in Appendix A. The City's proposed general obligation capital improvement bonds(including issuance costs) are shown in Appendix B. Continuation of the Capital Improvement Plan This CIP should be reviewed annually by the City Council using the process outlined in this plan. The City Council should review proposed expenditures, make priority decisions and seek funding for those expenditures it deems necessary for the City. If deemed appropriate,the City Council should prepare an update to this plan. i APPENDIX A PROJECT.COSTS (Capital Expenditures to be Funded with Bond Proceeds) 2008 Expenditures Estimated Hard Cost of New City Hall Facility $ 7,358,000 Estimated Soft Costs 253,900 Less: Estimated Construction Interest Draw ( 111,9001 Total Uses of Funds: 7:500:000 APPENDIX B PROPOSED CIP..BOND ISSUE 2007 General.Obligation Ch?Issue Net Debt Service Schedule EST. TOTAL (12-1) INTEREST DEBT YEAR PRINCIPAL RATES, INTEREST SERVICE 2007 . 2008 $340,000.00 3.55% 286,08730 626,08730 2609 350,000.00 3.55% 274;017.50 624,017.50 2010 365,000.00 3.55% 261;592.50 626,592.50 2011 385,000.00 3.60% 248,635.00 633,635.00 2012 400,000.OQ 160% 234;775.00 634,775.00 2013 425,000:00 3.60% 220,375.00 645;375.00 2014 440,000.00 3.65% 205,075.00 645,075:00 2015 475,000.00 3.75% 189,015.00 664,015.00 2016. 500,000.00 3.80% 171,202.50 671,202.50 2017 540,000.00 3.856/o 152,202.50 692,202.50 2018 575,000:00 3:90% 131,412.50 706,412.50 2019 615,000.00 3.95% 108,987.50 723,987.50 2020 650,000.00 4.00% 84,695.00 734,695.00 2021 690,000.00 4.05% 58,695.00 748,695.00 2022 150,000.00 4.10% 30,750.00 780,750.00 2023 0.00 0.00% 0:00 0.00 2024 0.00 0.00% 0.00 0.00 2025 0.00 0.00% 0.00 0.00 2026 0.00 0.00% 0.00 0.00 2027 0.00. 0.00% 0.00 0.00 7,500,000.00 2,657,517.50 10,157,517.50 • APPENDIX C 5-Year City Capital Improvement Plan Bond Issuance City of Oak Park Heights,Minnesota The City Council must take the following actions before bonds can be issued: • City Council directs preparation of a 5-year Capital Improvement Plan • City Council conducts a Public Hearing on issuance of bonds and Capital Improvement Plan • City Council approves bonds and Capital Improvement Plan by at least a three-fifths vote of the Council membership The table below lists the steps in issuing process: 9/12/07: City Council adopts Resolution Calling for Public Hearing on Issuance of Bonds and on Capital Improvement Plan. 9/28/07: Close date to get Notice of Public Hearing on Issuance of Bonds and on Capital Improvement Plan to official newspaper for publication. 10/4/07: Publish Notice of Public Hearing on Issuancg of Bonds and on Capital Improvement Plan (publication no more than 28 days and no less than 14 days prior to hearing date). 10/23/07 @ 7:00 p.m.: City Council holds Public Hearing on Bonds and on Capital Improvement Plan and adopts resolution giving preliminary approval for their issuance and approving Capital Improvement Plan by at least a three-fifths vote of the Council membership. 11/22/07: Reverse referendum period ends(within 30 days of the public hearing). 12/10/07: City Council accepts offer for bonds and adopts resolution approving sale of bonds. 1/8/08: Tentative closing/receipt of funds. Net Debt Limit Assessor's Taxable Market Value $ 570,089,800 Multiply by 2% 0.02 Statutory Debt Limit 11,581,796 Less Debt Paid Solely from Taxes 0 Unused Debt Limit $ 11,581,796 Annual Levy Limit per County Value Assessor's Taxable Market Value $ 579,089,800 Multiply by.16% . 0.0016 Statutory Levy Limit 926,544 Less City Debt Issued under CIP 0 Unused Levy Limit $ 926,544 NORTHLANDOECURITIES September 5,2007 �' � r Lw Mayor Beaudet City Council Members Eric Johnson,City Administrator Judy Hoist,Finance Director City of Oak Park Heights 14168 Oak Park Blvd. Oak Park Heights,MN 55082 Re: City Capital Improvement Bonds Fire Hall Project Dear City Officials: The City has asked us to look into the possibility of using General Obligation Bonds to finance a new City Hall Project. Legislation was adopted in 2003 granting cities the authority to issue General Obligation Capital Improvement Bonds if the following criteria are met: • Capital Improvement -means acquisition or betterment of public lands,buildings or other improvements for the purpose of a city hall, public safety facility, and public works facility. An improvement must have an expected useful life of five years or more to qualify. • CaRital Improvement Plan - A city must have an adopted capital improvement plan. The plan must cover at least a five-year period. The plan must set forth the estimated schedule, timing, and details of specific capital improvements by year, together with the estimated cost, the need for the improvement, and sources of revenue to pay for the improvement_ The plan is adopted following a public hearing and a copy is filed with the city's bond attorney. Public Hearing required- Notice must be published in the official newspaper of the City at least 14 days but not more than 28 days prior to the hearing. • Not Subject to Referendum - But subject to reverse referendum if a petition requesting a vote on the issuance of bonds is signed by voters equal to five percent of the votes cast in the last municipal general election and is filed with the city clerk within 30 days of the public hearing,the municipality may issue the bonds only Main Office 45 South 7th Street,Suite 2500,Minneapolis,Minnesota 55402 Main Office Toll Free 1-800-851-2920 Iowa Office 1309 South Main Avenue,Sioux Center,Iowa 51250 Toll Free 1-888-794-2370 Direct 712 722-2370 Fax 712 722-2376 South Dakota Office 215 West Sioux Avenue,Pierre,South Dakota 57501 Toll Free 1-877-224-5557 Direct 605-224-5557 Fax 605-224-9554 www.northlandsecunties.com Member NASD and SIPC City of Oak Park Heights 9/6/2007 Page 2 after obtaining the approval of a majority of the voters voting on the question of the issuance of the bonds. • Majority Vote of Council Needed-The bond must be approved by a three-fifths vote of the Council. • Maximum Principal & Interest-The maximum principal and interest to become due in any year cannot exceed 0.16%of the taxable market value(TMV)of property in the city. The City of Oak Park Height's Pay 2007 TMV=$579,089,800 x 0.16%= $926,544 The preliminary G.O.bond is within the maximum principal and interest allowed by Statute. • Subject to Net Debt Limit - Capital Improvement bonds are subject a city's net debt limit. Net debt is two percent of a city's taxable market value (TMV). Using the City's pay 2007 TMV of $579,089,800, the net debt margin-equals $11,581,000. The proposed Capital Improvement Bond would be approximately$6,650,000 and therefore within the City's net debt limit. Assuming the City moves forward with this financing, the remaining debt margin for 2007 would be approximately $4,930,000. We have worked with a number of cities in Minnesota who have taken advantage of the CIP legislation to finance Municipal Building Projects. The following is a list of the most recent: Lake Elmo $4,090,000 Winsted $2,635,000 Eden Prairie $4,290,000 Starbuck $1,100,000 5 Luverne $1,500,000 Wadena $ 675,000 Appleton $ 365,000 Elysian $ 500,000 Sincerely, Northland Securities Inc. Steven J.Mattson Executive Vice President Main Office 45 South 7th Street,Suite 2500,Minneapolis,Minnesota 55402 Main Office Toll Free 1-800-851-2920 Iowa Office 1309 South Main Avenue,Sioux Center,Iowa 51250 Toll Free 1-888-794-2370 Direct 712 722-2370 Fax 712 722-2376 South Dakota Office 215 West Sioux Avenue,Pierre,South Dakota 57501 Toll Free 1-877-224-5557 Direct 605-224-5557 Fax 605-224-9554 www.northlandsecurities.com Member NASD and SIPC � W a > %0coJmUAwta o�oco� C3 Q < c r m nrs�o�> p� 0 Di",�t'ih1�� C C3"�..'� �pocoo25�}5o��•c'4c''iaS°oS°oS,S �" y ti no � vocr�� `�an� °ogSSO$ a� $8�88$ $� c oil � x � w b O p4 O ps p� p8 b rr p4 CM o8 o ,,*, ?-K0 b {� n b`4 x O+U y Y YC Y�p Y�pp�Y�pp Nt N� N N N N� ts1-0 a+QY.bOOJWOO P WQA�"1 ,,tea C•4 O N w Ai,Ta is wv t�n,a.'o001:1 1 eA 73� u � ooppaaoccnoN� n nc>cv v ooN Nan m i�.l Z-+ SCG7SS°o°d'988 SSSSSSSnoo° nD w Jq .arnrn0.aa� U04UUU to ¢ +� Z O � � p`o 400�OC��A00v$00 �wb�m W o pG npp p0 p0p0 p0pN0 tOiI Vni C7 pQ "JAI NLnp 0 0 S O S g S S Q C S S S S S S S S G GU) O O p5 0 -4 7�n��.I �w Jv aa, o coo a\ c,V '.A LAtl CA LA C7 W W O A 06 U W N C7 ONJVI 4�+V' UDo �•.5J UI WY N SSPp�yy 00 0pp00yy0,� 6�t� wjW Oo l W CA WdDo ii�� CAS 000` Ippn Cppl qCp L�j, O.V' SO pOQPOOVJiO�JN •lwi. 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