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City of Bethel, Alaska
$2,000,000 Lease Revenue Refunding Bond, 2016
I, HANSEL L. MATHLAW, Finance Director of the City of Bethel, Alaska (the
"Issuer"), HEREBY CERTIFY that, as of the date hereof, the Issuer reasonably expects
the following regarding the amount and use of the gross proceeds of its Lease Revenue
Refunding Bond, 2016 (the "Bond").
Preliminary Matters
1. Purpose of Certificate. This certificate is provided pursuant to § 1.148-
2(b)(2) of the Treasury Regulations for purposes of demonstrating the tax-exempt status
of the Bond under the relevant provisions of the Treasury Regulations and the Internal
Revenue Code of 1986, as amended (together with the Treasury Regulations, the
"Code") and to establish the facts and circumstances that form the basis for the Issuer's
expectations that the Bond is not an "arbitrage bond" within the meaning of Code. The
Issuer understands that Jermain Dunnagan & Owens, P.C., will rely in part on this
certificate in its opinion that interest on the Bond is excludable from gross income for
federal income tax purposes under § 103 of the Code.
2. Officer of Issuer. I am the duly chosen, qualified and acting officer of the
Issuer charged, along with other officers of the Issuer, with the responsibility for issuing
the Bond. I am familiar with the facts herein certified and I am duly authorized to
execute and deliver this certificate on behalf of the Issuer. To the best of my knowledge,
information and belief, the expectations stated herein are reasonable and there are no
other facts or estimates that would materially change such expectations.
3. Definitions. All capitalized terms not otherwise defined herein shall have
the meanings provided in Ordinance 2016-28 of the Issuer adopted on September 27,
2016 (the "Ordinance"). Any other terms shall have the meanings ascribed to them in
the Code.
II. Authorization and Governmental Purpose of the Issue
1. Authorization and Purpose. The Bond is authorized under the laws of the
State of Alaska and by the Ordinance. The Alaska Municipal Bond Bank (the "Bond
Bank") is purchasing the Bond with a portion of the proceeds of its General Obligation
and Refunding Bonds, 2016 Series Three (the "Series Three Bonds") pursuant to a
Loan Agreement, dated July 1, 2007, and an Amendatory Loan Agreement dated as of
October 18, 2016 (together, the "Loan Agreement"), between the Issuer and the Bond
Bank.
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2. Governmental Purpose, The Bond is being issued for the following
purposes:
a) To provide funds to advance refund a portion of the Issuer's Lease
Revenue Bond, 2007 (Alaska Municipal Bond Bank Loan), dated July 10, 2007
(the "2007 Bond"); and
b) To pay issuance costs of the Bond.
1. Sale Proceeds. The total amount of sale proceeds of the Bond is
$2,327,897.35 (consisting of the face amount of the Bond, plus $327,897.35 of original
issue premium). There is no direct monetary benefit, such as a rebate of bond
insurance premium, surety bond premium or letter of credit fee, being received by the
Issuer in connection with the issuance of the Bond.
2. Allocation of Sale Proceeds. The sale proceeds of the Bond will be
allocated as follows:
a) $2,296,464.10 of sale proceeds, plus $102,183.64 of other
available funds heretofore on deposit in the reserve fund related to the Refunded
Bonds, has been irrevocably placed in escrow by the Bond Bank and is allocated
to pay the costs of refunding the principal amount of $2,295,000 of the 2007
Bond callable on September 1, 2017 (the "Refunded Bond");
L\ 'O.1 rti U) , ,. has been allocated for issuance cost of U LU IUILUI
the Bond, including $13,321.90 allocated to the Bond Bank costs of issuance;
and
c) $411.35 has been deposited into the debt service fund.
IV. Replacement Proceeds
1. Bond Not Outstanding Longer than Necessary. The Bond will not be
outstanding for a period longer than 120% of the average reasonably expected
economic life of the projects financed with proceeds of the Refunded Bond determined
in the manner set forth in §147(b) of the Code.
2. Bona Fide Debt Service Fund, The Bond is a revenue bond of the Issuer
and is payable from revenues deposited into the debt service account. The deposits
into the debt service account will be used primarily to achieve a proper matching of
revenue of the Issuer and debt service on the Bond within each bond year. It is
expected that the money in the debt service account will be depleted at least once a
year, except for a reasonable carryover amount not to exceed the greater of one year's
earnings on that account or one-twelfth of the annual debt service on the Bond.
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3. No Other Replacement Proceeds. Other than amounts specifically
identified as replacement proceeds of the Bond in this certificate, there are no amounts
(including without limitation sinking funds, pledged funds and other replacement
proceeds) that:
a) Are held by or derived from the Issuer, or any related party to the
Issuer or the State of Alaska, and has have a sufficiently direct nexus to the Bond
or to the governmental purposes of the Bond to conclude that the amounts would
have been used for those governmental purposes if the proceeds of the Bond
were not used or to be used for those governmental purposes; or
b) Are reasonably expected to be used directly or indirectly to pay
debt service on the Bond, or to be available to pay debt service on the Bond if
the Issuer were to encounter financial difficulties.
V. Reserve Fund
1. Issuer Common Reserve Fund. On the date of issuance of the Refunded
Bond, the Issuer established a reserve fund as a common reserve securing all bonds,
including the Refunded Bond and any future parity bonds. The Issuer's reserve fund is
funded at an amount equal to the least of (i) Maximum Annual Debt Service on all
outstanding Parity Bonds, (ii) 125 percent of average Annual Debt Service on all
outstanding Parity Bonds, or (iii) 10 percent of the face amount of all Parity Bonds. On
the date the Bond is issued, amounts held in the Issuer's reserve fund (except for those
amounts to be applied as set forth in Section 3(a) above) will satisfy the Reserve
Requirement. The Issuer has agreed to yield restrict amounts held in its reserve fund
allocated to the Bond.
2. Bond Bank Reserve Fund, The Bond Bank has established the 2005
General Bond Resolution Reserve Fund (the "Bond Bank Reserve Fund") as a common
reserve fund securing all bonds, including the Bond Bank Series Three Bonds, issued
under the 2005 General Bond Resolution. The Bond Bank Reserve Fund is funded at
an amount equal to the least of (i) maximum annual debt service on the bonds issued
under the 2005 General Bond Resolution, (ii) 125 percent of average annual debt
service of each series of bonds issued under the 2005 General Bond Resolution, (iii) 10
percent of the initial principal amount of each series of bonds issued under the 2005
General Bond Resolution, or (iv) or such lower amount as may be required by law.
UI:T11T
1. Advance Refunding; Retirement of Refunded Bond. The Refunded Bond
will be redeemed on a date occurring later than 90 days from the date hereof,
consequently, the Bond is an advance refunding bond for purposes of the Code. The
Bond is being issued to provide a present value savings approximately equal to
12.033% of the principal amount of the Refunded Bond. The Issuer is not receiving any
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rebate of any insurance premium paid to insure the Refunded Bond. The Refunded
Bond will be retired on September 1 2017.
2. Transferred Proceeds. Except as provided below, there are no transferred
proceeds with respect to the Bond because all original and investment proceeds of the
Nfurideo Bond were exp ended prio r to the first date on which amounts were uiSuurSeA Au
to pay principal on the Refunded Bond.
On July 10, 2007, the Issuer issued its Lease Revenue Bond, 2007 (the '2007
Bond") in the principal amount of $3,680,000. Proceeds of the 2007 Bond, in the
amount of $299,750.00 were deposited into the Issuer's reserve fund. On the date of
issuance of the Bond, the amount of $319,683.64 will be held in the reserve fund,
securing payment of the outstanding 2007 Bond and the Bond. On the date of issuance
of the Bond, the amount of $102,183.64 will be released from the reserve fund and
applied to the redemption of the Refunded Bond. On September 1, 2017, the 2007
Bond will no longer be outstanding.
3. No Excess Gross Proceeds. The gross proceeds of the Bond, other than
gross proceeds allocable to (I) payment of principal and interest on the Refunded Bond
and (ii) payment of issuance costs of the Bond, do not exceed an amount equal to one
percent of the sale proceeds of the Refunded Bond.
4. 2007 Bond; Conduit Loan Refunding. The Issuer sold the 2007 Bond to
the Bond Bank. The Issuer used all of the proceeds from the sale of the 2007 Bond to
finance the costs of an expansion of the City's court complex. The Bond Bank funded
its purchase of the 2007 Bond with a portion of the proceeds of its General Obligation
Bonds, 2007 Series Three (the "2007 Series Three Bonds"), issued on the same date
as the issue date of the 2007 Bond.
Investments Without Yield Limitation. Gross proceeds of the Bond allocated to
pay issuance costs of the Bond may be invested without yield limitation for a period not
to exceed 30 days from the date hereof.
1. Computation of Yield on the Bond. Pursuant to Section 1.148-4(a) of the
Treasury Regulations, the yield on the Bond is deemed to be equal to the yield on the
Series Three Bonds. The yield on the Series Three Bonds is the discount rate that,
when used in computing the present value as of the issue date of all unconditionally
payable payments of principal, and interest on the Series Three Bonds and fees for
qualified guarantees on the Series Three Bonds and amounts reasonably expected to
be paid as fees for qualified guarantees on the Series Three Bonds, produces an
amount equal to the present value, using the same discount rate, of the aggregate issue
price of the Series Three Bonds as of the issue date. The issue price of the Series
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Three Bonds is the initial offering price of the Series Three Bonds to the public
(excluding bonds houses, brokers and other intermediaries) at which price at least 10%
of each maturity of the Series Three Bonds were sold or reasonably expected to be
sold.
The yield on the Series Three Bonds has been determined to be 2.5984%, based
on certain representations by RBC Capital Markets, LLC, the managing underwriter of
the Series Three Bonds. See Exhibit A attached hereto.
2. Computations of Yield on Investments. The yield on an investment
allocated to the Bond is the discount rate that, when used in computing the present
value as of the date the investment is first allocated to the Bond of all unconditionally
payable receipts from the investment, produces an amount equal to the present value of
all unconditionally payable payments for the investment. The frequency of compounding
interest that is used to calculate yields on investments allocated to the Bond is the same
as that used to calculate the yield on the Series Three Bonds. The Bond Bank has
certified that it will not invest proceeds or investments of the Series Three Bonds above
the stated yield.
IX. Hedge Bond Representations
The Bond is not a "hedge bond" because not more than fifty percent (50%) of the
proceeds of the Refunded Bond was invested in nonpurpose investments (as defined in
§ 148(f)(6)(A) of the Code), have a substantially guaranteed yield for four years or more
within the meaning of § 149(g)(3)(A)(ii) of the Code, and the Issuer reasonably expected
at the time of issue of the Refunded Bond that at least 85% of the spendable proceeds
of such issue would be used to carry out the governmental purpose of such issue within
the three-year period beginning on the date of issue of the Refunded Bond.
X. Reimbursement Representations
None of the proceeds of the Bond will be allocated to reimburse the Issuer for
expenditures paid before the issue date of the Bond.
XI. General Representations
1. Single Issue. There are no other obligations of the Issuer which are
issued at substantially the same time as the Bond (less than 15 days apart), are sold
pursuant to a common plan of financing together with the Bond, and will be paid out of
substantially the same source of funds as the Bond.
2. Abusive Transactions. The Bond is not and will not be part of a
transaction or series of transactions that attempt to circumvent the provisions of § 148
of the Code and the regulations thereunder by (a) enabling the Issuer to exploit the
difference between tax exempt and taxable interest rates to gain a material financial
advantage, or (b) overburdening the tax exempt bond market. The Issuer has
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covenanted in the Ordinance that it will make no use or investment of the proceeds of
the Bond which will cause the Bond to be an "arbitrage bond" subject to federal income
taxation under the Code.
i1I4iii.ii
1. Based on the matters in (2) below, the Issuer reasonably expects that
neither the proceeds of the Bond, nor the property refinanced with the proceeds of the
Bond, will be used in such a manner as to cause the Bond to be a private activity bond
under § 141 of the Code.
2. General Private Activity Bonds Tests.
(i) General. The Issuer reasonably expects, as of the date hereof, that
no action or event during the entire stated term of the Bond will, cause the
"private business use tests," the "private security test" or the "private loan
financing test," as such terms are defined in the Treasury Regulations to be met.
Specifically,
a. No more than 10 percent of the proceeds of the Bond will be
used and no portion of the proceeds of the Refunded Bond has
been used in a trade or business of a nongovernmental person
(referred to as "Private Use"). For purposes of determining
Private Use, the Issuer will apply rules set forth in the applicable
Treasury Regulations and Revenue Procedures promulgated by
the Internal Revenue Service, including, among others, the
following rules: (A) any activity carried on by a person other
than a natural person or a state or local governmental unit will
be treated as a trade or business of a nongovernmental person;
(B) the use of all or any portion of the project financed by the
Refunded Bond (the "Project") is treated as the direct use of
proceeds; (C) a nongovernmental person will be treated as a
private business user of proceeds of the Bond or the Refunded
Bond as a result of ownership, actual or beneficial use of
proceeds pursuant to a lease, or a management or incentive
payment contract, or certain other arrangements such as a
take-or-pay or other output-type contracts; and (D) a
nongovernmental person will be treated as a private business
user of the proceeds of the Bond if the person has special legal
entitlements to use directly or indirectly the Project.
b. The Issuer has not taken and will not take any deliberate action
that would cause or permit the use of any portion of the Project
to change such that such portion will be deemed to be a Private
Use for so long as the Bond remains outstanding (or until an
opinion of nationally recognized bond counsel is received to the
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effect that such change in use will not adversely affect the
excludability from gross income for federal income tax purposes
of interest payable on the Bond). For this purpose any action
within the control of the Issuer is treated as a deliberate action.
A deliberate action occurs on the date the Issuer enters into a
binding contract with a nongovernmental person for use of the
Project that is not subject to any material contingencies.
c. No portion of the proceeds of the Bond will be directly or
indirectly used to make or finance a loan to any person.
(ii) The term "Private Use" includes any contract for services relating to
or the management operation of any such facilities not in compliance with the
guidelines set forth in Revenue Procedure 97-13, as modified by Revenue
Procedure 2001-39, and Notice 2014-67, and/or Revenue Procedure 2016-44, as
updated.
The Issuer will calculate and pay any rebate amount due on the Refunded Bond
within 60 days after the Refunded Bond is retired.
XIV. Post Issuance Compliance Matters
The Issuer has adopted written procedures to facilitate post-issuance compliance
+--1 ;- +kk r+if -+ VVtLI I 'thecovenantscontained I ..4 III LI II
Dated this 3rd day of November 2016.
CITY OF BETHEL, ALASKA
0V I C~~kw k3wd
HANSEL L. MATHLAW
Finance Director
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EXHIBIT A
Certificate of RBC Capital Markets, LLC
$80,435,000
General Obligation and Refunding Bonds
201.6 Series ihree
$29,400,000
General Obligation and Refunding Bonds
2016 Series Four (AMT)
RBC Capital Markets, LLC, as managing underwriter (the "Underwriter") of the
$80,435,000 aggregate principal amount of Alaska Municipal Bond Bank General Obligation
and Refunding Bonds, 2016 Series Three (the "Non-AMT Bonds") and the $29,400,000
aggregate prináipal amount of Alaska Municipal Bond Bank General Obligation and Refunding
Bonds, 2016 Series Four (AMT) (the "AMT Bonds" and, together with the Non-AMT Bonds,
the "Bonds"), of the Alaska Municipal Bond Bank, certify the following facts for purpose of
determining the issue price of the Bonds:
1. Authorized Representative. The undersigned is the duly authorized representative
of RBC Capital Markets,
2. On October 18, 2016 (the "Sale Date"), the Underwriters made a bona fide public
offering of the Non-AMT Bonds to the public (excluding bond houses, brokers, and similar
persons acting in the capacity of underwriters or wholesalers, "Public Buyers"), at the following
reoffering prices expressed as a percentage of the principal amount (the "Initial Reoffering
Prices"):
Maturity Year (December 1) Principal Amount Reoffering Price
2016 460,000 100.084
2017 7,150,000 100.982
2018 9,110,000 105.516
2019 8,220,000 107.679
2020 9,105,000 109.561
2021 8,230,000 111.194
2022 4,490,000 118.216
2023 4,885,000 119.414
2024 4,450,000 120.452
2025 4,735,000 121.274
2026 5,005,000 122.048
2027 4,855,000 121.358
2028 2,755,000 119.587
2029 675,000 98.612
2030 700,000 98.595
OHSUSA:765956927.5 A-i
2031 720,000 97.699
2033 1,535,000 97.559
2037 3,355,000 96,838
3. On October 18, 2016 (the "Sale Date"), the Underwriters made a bona fide public
offering of the AMT Bonds to the public (excluding bond houses, brokers, and similar persons
acting in the capacity of underwriters or wholesalers, "Public Buyers"), at the following
reoffering prices expressed as a percentage of the principal amount (the "Initial Reoffering
Prices"):
Maturity Year (December 1) Principal Amount
Reoffering Price
2016 610,000 100.077
2017 950,000 101.888
2018 990,000 107.303
2019 1,045,000 110.043
2020 1,090,000 112.441
2021 1,145,000 114.519
2022 1,205,000 116.216
2023 1,260,000 117.113
2024 1,325,000 118.021
2025 1,390,000 118.582
2026 1,460,000 119.102
2027 1,535,000 117.756
2028 1,615,000 116.523
2029 1,690,000 115.772
2030 1,780,000 114.934
2031 1,865,000 114.287
2032 1,960,000 113.736
2033 2,055,000 113.188
2034 2,165,000 112.734
2035 2,265,000 112.372
4. On the Sale Date, based upon our assessment of market conditions, investor
demand, sale and offering prices for comparable bonds, and the recent behavior of interest rates,
the Underwriter reasonably expected that the Initial Reoffering Prices could be a market clearing
price for the Bonds of each maturity. On the Sale Date, the Initial Reoffering Prices did not
exceed the fair market value of the Bonds. Based upon the Underwriter's records, the Initial
Reoffering Prices were the first prices at which a substantial portion (at least 10%) of the Bonds
of each maturity were sold to Public Buyers, except that the Underwriter did not sell a substantial
portion of the Non-AMT Bonds maturing on December 1 of the following years: 2024, 2025,
2026 and 2028 or the AMT Bonds maturing on December 1 of the following years: 2017, 2019,
2020, 2021, 2022, 2030, 2031, 2032, 2033, or 2034, at the Initial Reoffering Price to Public
Buyers.
5. These representations are provided to (i) Orrick, Herrington & Sutcliffe LLP and
the Bond Bank to provide them with information concerning the Bonds; (ii) Foster Pepper PLLC
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and Levesque Law Group, LLC to provide them with information concerning the municipal
bonds of Aleutians East and Kodiak Island; (iii) K&L Gates, LLP to provide it with information
concerning the municipal bonds of Skagway and Juneau; and Jermaine, Dunnagan & Owens,
PC. to provide it with information concerning the municipal bonds of Bethel, Seward and Kenai,
(iv) Landye Bennett Blumstein LLP to provide it with information concerning the municipal
bonds of Northwest Arctic and Wasilla; Stradling Yocca Carlson & Rauth, P.C. to provide it
with information concerning the municipal bonds of Ketchikan and Sitka; Birch, Horton, Bittner
and Cherot to provide it with information concerning the municipal bonds of Dillingham,
Kodiak, Nome, Wasilla, Petersburg and Northwest Arctic, in each case for purposes of
formulating their opinions in respect of such municipal bonds, and are not to be used or relied
upon by any other person. The Underwriter expresses no view regarding the legal sufficiency or
the correctness of any legal interpretation made by bond counsel, and nothing herein represents
the Underwriter's interpretation of any laws or regulations under the Internal Revenue Code of
1986, and the Underwriter expresses no view regarding the legal sufficiency of any
representations made herein.
[SIGNATURE PAGE FOLLOWS]
OHSUSA:765956927.5 A-3
and Levesque Law Group, LLC to provide them with information concerning the municipal
bonds of Aleutians East and Kodiak Island; (iii) K&L Gates, LLP to provide it with information
concerning the municipal bonds of Skagway and Juneau; and Jermaine, Duimagan & Owens,
P.C. to provide it with information concerning the municipal bonds of Bethel, Seward and Kenai,
(iv) Landye Bennett Blumstein LLP to provide it with information concerning the municipal
bonds of Northwest Arctic and Wasilla; Stradling Yocca Carlson & Rauth, P.C. to provide it
with information concerning the municipal bonds of Ketchikan and Sitka; Birch, Horton, Bittuer
and Cherot to provide it with information concerning the municipal bonds of Dillingham,
Kodiak, Nome, Wasilla, Petersburg and Northwest Arctic, in each case for purposes of
formulating their opinions in respect of such municipal bonds, and are not to be used or relied
upon by any other person. The Underwriter expresses no view regarding the legal sufficiency or
the correctness of any legal interpretation made by bond counsel, and nothing herein represents
the Underwriter's interpretation of any laws or regulations under the Internal Revenue Code of
1986, and the Underwriter expresses no view regarding the legal sufficiency of any
representations made herein.
Dated: November 3, 2016
RBC CAPITAL MARKETS, LLC
By:
Authorize Officer
A3
OHSUSA: 765956927.5