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9076.2844 '207 tjdc
November 3, 2016
Mayor and Members of the Kenai Peninsula Borough Assembly
Kenai Peninsula Borough
144 North Binkley Street
Soldotna, Alaska 99669
Alaska Municipal Bond Bank
State Office Building, 11th Floor
333 Willoughby
Juneau, Alaska 99811
RE: $2,660,000 South Kenai Peninsula Hospital Service Area
General Obligation Refunding Bond, 2016
Ladies and Gentlemen:
We have served as bond counsel to the Kenai Peninsula Borough, Alaska (the
"Borough"), and have examined a transcript of proceedings taken in the matter of the
issuance by the Borough of its South Kenai Peninsula Hospital Service Area General
Obligation Refunding Bond, 2016 (the "Bond") in the aggregate principal amount of
$2,660,000. The Bond refunds a portion of the Borough's South Kenai Peninsula
Hospital Service Area General Obligation Refunding Bond, 2007 (the "Refunded Bond"),
issued pursuant to Resolution No. 2006-096, Resolution No. 2003-86 and Ordinance
No. 2003-12 (together, the "Bond Ordinance").
The Bond is issued pursuant to Resolution No. 2016-046 of the Borough
approved September 6, 2016 (the "Resolution," and together with the Bond Ordinance,
the "Bond Legislation"). The Borough entered into a loan agreement (the "Loan
Agreement") with the Alaska Municipal Bond Bank (the "Bond Bank") dated September
1, 2003, as amended by an Amendatory Loan Agreement dated April 1, 2007 for the
sale of the Refunded Bond. The terms of the Bond are established by an Amendatory
Loan Agreement dated as of October 18, 2016, between the Bond Bank and the
Borough (the "Amendatory Loan Agreement").
As to questions of fact material to our opinion and in connection with the
issuance of the Bond, we have relied on representations of the Borough contained in
the Bond Legislation, the Loan Agreement, the Amendatory Loan Agreement, and the
federal tax certificate of the Borough dated the date hereof (the "Tax Certificate"), and in
the certified proceedings and other certifications of public officials and others furnished
to us without undertaking to verify the same by independent investigation.
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November 3, 2016
Page 2 of 3
The opinions expressed herein are based on an analysis of existing laws,
regulations, rulings and court decisions and cover certain matters not directly addressed
by such authorities. Such opinions may be affected by actions taken or omitted or
events occurring after the date hereof. We have not undertaken to determine, or to
inform any person, whether any such actions or events are taken or do occur. We
disclaim any obligation to update this letter. We have assumed the genuineness of all
documents and signatures presented to us (whether as originals or as copies) by any
parties other than the Borough and the due and legal execution and delivery thereof by
any parties other than the Borough. Furthermore, we have assumed compliance with
the covenants and agreements contained in the Resolution and the Tax Certificate,
including (without limitation) covenants and agreements compliance with which is
necessary to assure that future actions, omissions or events will not cause interest on
the Bond to be included in gross income for federal income tax purposes. We call
attention to the fact that the rights and obligations under the Bond, the Resolution and
the Amendatory Loan Agreement may be subject to bankruptcy, insolvency,
reorganization, arrangement, fraudulent conveyance, moratorium and other laws
relating to or affecting creditors' rights generally and to the application of equitable
principles.
Based upon the foregoing, we are of the opinion, as of this date and under
existing law, that:
1. The Borough is duly organized and legally existing under the laws of the State
of Alaska.
2. The Bond has been duly authorized, executed, and issued in accordance with
law, including the Resolution, and constitutes a valid, binding general
obligations of the South Kenai Peninsula Hospital Service Area of the
Borough (the "Service Area").
3. By the Bond Legislation, the Borough has covenanted that, unless the
principal of and interest on the Bond are paid from other sources, it will make
annual levies of property taxes in the Service Area, without limitation as to
rate or amount, and in amounts sufficient together with other legally available
revenues, to pay such principal and interest as the same shall become due.
The full faith and credit of the Service Area are irrevocably pledged for the
annual levy and collection of such property taxes and for the payment of such
principal and interest.
4. The Amendatory Loan Agreement has been duly authorized, executed and
delivered by the Borough and is a valid and binding agreement of the
Borough enforceable in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors' rights generally, general
principals of equity, or the exercise of judicial discretion in appropriate cases.
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November 3, 2016
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5. Interest on the Bond is excludable from gross income for federal income tax
purposes, and is not an item of tax preference for purposes of determining the
federal alternative minimum tax imposed on individuals and corporations;
however, interest on the Bond is taken into account in determining adjusted
current earnings for the purpose of computing the alternative minimum tax
imposed on certain corporation. The opinion set forth in the preceding
sentence is subject to the condition that the Borough comply with all
requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), that must be satisfied subsequent to the issuance of the Bond in
order that interest thereon be, or continue to be, excludable from gross
income for federal income tax purposes. The Borough has covenanted to
comply with all applicable requirements. Failure to comply with certain of
such requirements may cause the inclusion of interest on the Bond in gross
income for federal income tax purposes to be retroactive to the date of
issuance of the Bond.
6. Interest on the Bond is not included in taxable income for purposes of Alaska
income tax imposed on corporations. Interest on the Bond may be indirectly
subject to the Alaska alternative minimum tax imposed on corporations to the
extent that interest on the Bond is subject to the federal alternative minimum
tax.
Except as stated herein, we express no opinion regarding any other federal, state
or local tax consequences arising with respect to ownership of the Bond.
This opinion is given as of the date hereof and we assume no obligation to
update, revise or supplement this opinion to reflect any facts or circumstances that may
hereafter come to our attention or any changes in law that may hereafter occur.
We have not been engaged nor have we undertaken to review the accuracy,
completeness or sufficiency of the official statement or other offering material related to
the Bond Bank's General Obligation and Refunding Bonds, 2016 Series Three and
General Obligation and Refunding Bonds, 2016 Series Four (AMT).
Sincerely,
JERMAIN DUNNAGAN & OWENS, P.C.
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