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Tab_137STRADLING YUCCA CARLSON & RAUTH CALIFORNIA A PROFESSIONAL CORPORATION NEWPORT BEACH ATTORNEYS AT LAW SACRAMENTO SAN DIEGO 800 FIFTH AVENUE, SUITE 4100 SAN FRANCISCO SEATTLE, WA 98104 SANTA BARBARA SANTA MONICA COLORADO DENVER NEVADA RENO WASHINGTON SEATTLE November 3, 2016 City of Ketchikan Ketchikan, Alaska Alaska Municipal Bond Bank Juneau, Alaska Re: City of Ketchikan, Alaska, Port Revenue Refunding Bond, 2016 - $28,565,000 Ladies and Gentlemen: We have acted as bond counsel to the City of Ketchikan, Alaska (the "City"), and have examined a certified transcript of the proceedings taken in the matter of the issuance by the City of its Port Revenue Refunding Bond, 2016, dated the date hereof, in the total principal amount of $28,565,000 (the "Bond"). The Bond refunds by exchange the City's Port Revenue Bond, 2006, dated July 26, 2006 (the "Refunded Bond"). The Refunded Bond was issued pursuant to Ordinance No. 06.1549 and Resolution No. 06-2171 of the City and sold to the Alaska Municipal Bond Bank (the "Bond Bank") pursuant to a Loan Agreement dated as of July 1, 2006, between the City and the Bond Bank (the "Loan Agreement"). The Bond is issued pursuant to Ordinance No. 06-1549, as amended by Ordinance No. 16- 1828, passed by the City Council on October 6, 2016 (together, the "Bond Ordinance"), and Resolution No. 16-2636 of the City Council adopted on September 15, 2016 (the "Bond Resolution," and, together with the Bond Ordinance, the "2016 Bond Legislation"). The terms of the Bond are established under an Amendatory Loan Agreement dated October 18, 2016, between the Bond Bank and the City (the "2016 Loan Agreement"), which authorizes the exchange of the Bond for the Refunded Bond. Capitalized terms not otherwise defined in this opinion have the meanings given such terms in the 2016 Bond Legislation. In connection with the opinions expressed below, we have examined executed originals, or copies certified or otherwise identified to our satisfaction, of the Bond, the Loan Agreement, the 2016 Bond Legislation, and the 2016 Loan Agreement. As to questions of fact material to our opinion, we have relied upon representations of the City contained in the 2016 Bond Legislation, the 2016 Loan Agreement, 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. We have DOCS SF/ 132978v2/200661-0032 City of Ketchikan, Alaska Alaska Municipal Bond Bank November 3, 2016 Page 2 assumed the authenticity of all documents, the genuineness of all signatures and that such documents have been or will be duly authorized, executed and delivered by the Bond Bank, as appropriate. Based on the foregoing, we are of the opinion, under existing law, that: The City is duly organized and legally existing under the laws of the State of Alaska. 2. The Bond has been legally issued and constitutes a valid and binding special obligation of the City, both principal thereof and interest thereon being payable solely out of a special fund of the City known as the City of Ketchikan Port Revenue Bond Fund (the "Bond Fund"), except to the extent that the enforcement of the rights and remedies of the owner of the Bond may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles, and by the exercise of judicial discretion. 3. By the 2016 Bond Legislation, the City has obligated and bound itself to set aside and pay into the Bond Fund and the accounts therein, from money in the Port Revenue Fund, the various amounts required by the 2016 Bond Legislation to be paid into and maintained in the Bond Fund and the accounts therein, all within the times provided by the 2016 Bond Legislation. 4. The amounts so pledged to be paid out of the Port Revenue Fund into the Bond Fund and accounts therein are a prior lien and charge upon all the money in the Port Revenue Fund superior to all other charges of any kind or nature except the Costs of Maintenance and Operation and equal in rank to any charges that may be made on money in the Port Revenue Fund to pay and secure the payment of any Future Parity Bonds. The City has reserved the right to issue Future Parity Bonds on the terms and conditions set forth in the 2016 Bond Legislation. 5. The Bond has been duly authorized and executed by the City and is issued in full compliance with the provisions of the Constitution and laws of the State of Alaska and the 2016 Bond Legislation. 6. The 2016 Loan Agreement has been duly authorized, executed, delivered by, and (assuming due authorization, execution and delivery by the Bond Bank) constitutes a binding agreement of the City, enforceable in accordance with its terms, except to the extent that the enforcement of the rights and remedies of the Bond Bank may be subject to the laws of bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise of judicial discretion. 7. Interest on the Bond is excludable from gross income for federal income tax purposes, except for interest on any Bond for any period during which such Bond is held by a "substantial user" of the facilities financed by the Bond, or by a "related person" within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended (the "Code"); however, interest on the Bond is an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. The opinion set forth in the preceding sentence is subject to the condition that the City comply with all requirements of the Code that must be satisfied subsequent to DOCSSF/132978v2/20066 10032 City of Ketchikan, Alaska Alaska Municipal Bond Bank November 3, 2016 Page 3 the issuance of the Bond in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The City has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause interest on the Bond to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bond. 8. Interest on the Bond is not included in taxable income for purposes of the 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. The City has not designated the Bond as a "qualified tax-exempt obligation" within the meaning of Section 265(b)(3) of the Code. 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. 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 Bonds, 2016 Series Three, and we express no opinion relating thereto. 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. Very truly yours, STRADLING YOCCA CARLSON & RAUTH, P.C. I) . DOCSSF/132978v2/2OO66-0032