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Kenai Peninsula Borough
$2,660,000 South Kenai Peninsula Hospital Service Area
General Obligation Refunding Bond, 2016
I, CRAIG C. CHAPMAN, Finance Director of the Kenai Peninsula Borough,
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 South Kenai Peninsula Hospital Service Area General Obligation Refunding Bond,
2016 (the "Bond").
I. 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 Resolution 2016-046 of the Issuer adopted on September 6,
2016 (the "Resolution"). Any other terms shall have the meanings ascribed to them in
the Code.
Authorization and Governmental Purpose of the Issue
1. Authorization and Purpose. The Bond is authorized under the laws of the
State of Alaska, by the approval of Proposition No. I at the election held on July 1,
2003, and by the Resolution. 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 the terms
of a Loan Agreement dated August 1, 2003, as amended, and an Amendatory Loan
Agreement dated as of October18, 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 currently refund a portion of the Issuer's South
Kenai Peninsula Hospital Service Area General Obligation Refunding Bond,
Series 2007, dated April 5, 2007 (the "2007 Bond"); and
b) To pay issuance costs of the Bond.
Ill. Sources and Uses of Sale Proceeds of the Bond
1. Sale Proceeds. The total amount of sale proceeds of the Bond is
$3,050,412.20 (consisting of the face amount of the Bond, plus $390,412.20 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) $3,010,212.28 has been irrevocably placed in escrow by the Bond
Bank and is allocated to pay the costs of refunding the principal amount of
$2,945,000 of the 2007 Bond, callable on December 5, 2016 (the "Refunded
Bond");
b) $36,401.94 has been allocated to expenditures for issuance cost of
the Bond, including, $17,501.94 allocated to the Bond Bank costs of issuance;
and
c) $3,797.98 has been deposited into the debt service account.
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 refinanced 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 Issuer annually will appropriate
amounts to pay debt service on the Bond. The Issuer may deposit the amounts so
appropriated in a fund used primarily to achieve a proper matching of revenues of the
Issuer and debt service on the Bond. At least once each bond year, the Issuer will
expend all amounts that the Issuer has deposited in such fund except for a reasonable
amount not exceeding the greater of (a) the earnings on such amounts for the
immediately preceding bond year, or (b) one-twelfth of the principal and interest
payments on the Bond for the immediately preceding bond year.
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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.
I!.. 'i ii ii 11T 111T1 :IiT!
1. Current Refunding; Retirement of Refunded Bond. The Refunded Bond
will be redeemed on a date occurring less than 90 days from the date hereof,
consequently, the Bond is a current refunding bond for purposes of the Code. The
Bond is being issued to provide a present value savings approximately equal to
11.614% of the principal amount of the Refunded Bond. The Issuer is not receiving any
rebate of any insurance premium paid to insure the Refunded Bond. The Refunded
Bond will be retired on or about December 5, 2016.
2. Transferred Proceeds. There are no transferred proceeds with respect to
the Bond. All original and investment proceeds of the Refunded Bond have been
expended prior to the first date on which amounts were disbursed to pay principal on
the Refunded Bond.
VI. Yield Limitations on Investments of Gross Proceeds of the 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.
Y4 I ft.iiiiwk r•ii. 1"dT1r.l
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
{00657520} 3
price of the Series Three Bonds as of the issue date. The issue price of the Series
Three Bonds is the initial offering price of the Series Three Bonds to the public
(excluding bond 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.
VIII. 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 § 1 49(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.
IX. 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.
X. 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
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advantage, or (b) overburdening the tax exempt bond market. The Issuer has
covenanted in the Resolution 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.
XL Expectations as to Private Activity Bonds
1. Based on the matters provided 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 under141 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,
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 refinanced 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 use of proceeds of the Bond or the Refunded
Bond as a result of ownership, actual or beneficial user 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
00657520} 5
opinion of nationally recognized bond counsel is received to the
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.
Xli. Arbitrage Rebate
The Issuer will calculate and pay any rebate amount due on the Refunded Bond
within 60 days after the Refunded Bond is retired.
XIII. Post Issuance Compliance Matters
The Issuer has adopted written procedures to facilitate post-issuance compliance
with the covenants contained in this certificate.
Dated this 3rd day of November 2016.
KENAI PENINSULA BOROUGH, ALASKA
CRAIG WCHAPMAN V
Finance Director
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I 1 :11 u U
Certificate of RBC Capital Markets, LLC
$80,435,000
General Obligation and Refunding Bonds
2016 Series Three
$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 principal amount of Alaska Muhicipal 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
OHSIJSA:765956927.5 A-1
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
L, J .) I 1 o'z (\rr1 I,OUJ'JJU
114 )O"1 I I'l.Z.O I
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
OHSUSA:765956927,5 A-2
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,
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, 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, Dunnagan & 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, 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.
Dated: November 3, 2016
EBC CAPITAL MARKETS, LLC
By:
Authorize Officer
A-3
OF1SUSA;765956927.5