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I, TROY TANKERSLEY, Finance Director of the City of Wasilla, Alaska (the
"Issuer"), HEREBY CERTIFY that, as of the date hereof (the "Issue Date"), the Issuer
reasonably expects the following regarding the amount and use of the gross proceeds
of the Issuer's $815,000 General Obligation Refunding Bond, 2016 Series A (the
Bond").
I. Preliminary Matters.
1. Officer of Issuer. I am the duly appointed, qualified, and acting Finance
Director of the Issuer, and an officer of the Issuer responsible for issuing the Bond.
2. Purpose of Certificate. This certificate states the Issuer's expectations as
of the Issue Date regarding the Bond for the purposes of the applicable provisions of
§103 and §141 through 150 of the Internal Revenue Code of 1986 and the Income Tax
Regulations thereunder (the "Code") concerning the exclusion of interest on the Bond
from gross income for federal income tax purposes, and the facts and estimates that
form the basis for the Issuer's expectations. It includes the certification required in
§1 .148-2(b)(2)(i) of the Income Tax Regulations concerning the Issuer's expectations
regarding the amount and use of the gross proceeds of the Bond.
3. Reasonable Expectations. To the best of my knowledge, information, and
belief, the facts, estimates, and circumstances stated herein are accurate as of the
Issue Date, and the expectations stated herein are the bona fide reasonable
expectations of the Issuer.
4. Definitions. All capitalized terms not otherwise defined herein shall have
the meanings provided in Resolution Serial No. 16-20 of the Issuer adopted
September 12, 2016 (the "Resolution"). Any other terms shall have the meanings
ascribed to them in the Code.
Authorization and Governmental Puroose of the Issue.
1. Authorization. The Bond has been authorized by the Resolution pursuant
to the laws of the State of Alaska, and is issued pursuant to a Loan Agreement dated as
of April 1, 1998, as amended by an Amendatory Loan Agreement dated as of January 1,
2007, and as amended by an Amendatory Loan Agreement dated October 18, 2016
(together, the "Loan Agreement"), between the Issuer and the Alaska Municipal Bond
Bank (the "Bond Bank") in connection with the issuance by the Bond Bank of its General
Obligation Refunding Bonds, 2016 Series Three (the "Bond Bank Bonds").
2. Governmental Purposes. The Bond is being issued for the following
purposes:
(a) To provide funds for transfer to The Bank of New York Mellon Trust
Company, N.A., as Escrow Agent (the "Escrow Agent"), pursuant to an Escrow
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Agreement dated November 3, 2016 (the "Escrow Agreement"), to currently refund
$810,000 principal amount of the Bond Bank's General Obligation Bonds, 2007 Series
One, maturing in the years 2017 and 2018 (the "Refunded Bonds"), corresponding to
the principal of the Issuer's General Obligation Refunding Bond, 2007 Series A (the
"Prior Bond"), maturing in such years, and to discharge the Refunded Bonds on
December 5, 2016; and
(b) to pay issuance costs that are allocated to the Bond.
3. Capital Project. The proceeds of the Prior Bond were used to advance
refund part of the Issuer's General Obligation Street Improvement Bond, 1998A (the
"1998A Bond"), which was issued to provide funds to pay the cost of street capital
improvements in the City of Wasilla (the "Project"). The Project is a capital project.
4. No Overissuance. As shown in Sections III and lV.1, the total amount of
the proceeds of the Bond, less issuance costs, will not exceed the amount necessary
for the governmental purposes of the Bond.
III. Sale of the Bond; Sources and Uses of Sale Proceeds.
1. Sale. The Issuer will sell the Bond to the Bond Bank pursuant to the
Resolution and the Loan Agreement. The Bond Bank is purchasing the Bond with
proceeds of the Bond Bank Bonds.
2. Sale Proceeds. The total amount of sale proceeds of the Bond is
$841,231.30, consisting of the $815,000.00 face amount of the Bond, plus $26,231.30
of original issue premium.
3. Allocation of Sale Proceeds. The sale proceeds of the Bond will be
allocated as follows:
(a) $828,898.16 will be deposited with the Escrow Agent under the
Escrow Agreement, and allocated to an investment in $828,897.00 principal amount of
direct, non-callable obligations of the United States of America, plus a $1.16 cash
deposit;
(b) $8,851.33, including allocation to Bond Bank Bonds issuance costs
of $4,351.33, will be allocated to expenditures for issuance costs of the Bond; and
(c) $3,841.81 will be allocated to pay part of the first interest payment
on the Bond.
IV. Replacement Proceeds.
1. Bond not Outstanding Longer than Necessary. The Project was placed in
service on or after April 1, 1998. The average reasonably expected economic life of the
Project as of the date the Project was placed in service was at least 20 years, based on
the guideline lives for structures and land improvements specified by Revenue
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Procedure 62-21. The average remaining reasonably expected economic life of the
Project as of the Issue Date is at least 1.417 years. The weighted average maturity of
the Bond is 1.5679 years, which does not exceed 120% of the average remaining
reasonably expected economic life of the Project.
2. Bona Fide Debt Service Fund. The Issuer annually will appropriate
amounts to pay debt service on the Bond from the general fund of the Issuer. The
Issuer may deposit the amounts so appropriated in an account used primarily to achieve
a proper matching of revenues of the Issuer and debt service on the Bond. At least
once each bond year (on or before each December 1), the Issuer will expend all
amounts that the Issuer has deposited in such an account, except for an 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.
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 person that is a
related party to the Issuer or the State of Alaska, and 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. Transferred Proceeds.
All proceeds allocable to the Prior Bond have been expended. There are no
amounts which will be transferred proceeds of the Bond.
VI. Yield Limitations on Investments of Gross Proceeds of the Bond.
1. Investment of Bond Proceeds. It is expected that the Issuer will invest
gross proceeds of the Bond only in investments purchased at fair market value in bona
fide arm's-length transactions. Where there is an established securities market for an
investment, the Issuer will purchase the investment on that market.
2. Investments without Yield Limitation. The following gross proceeds of the
Bond may be invested without yield limitation:
(a) Amounts allocated to any fund described in Section IV.2 may be
invested without yield limitation for a period not to exceed 13 months from the date of
their deposit therein.
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(b) Amounts allocated to the deposit under the Escrow Agreement for
the purpose of currently refunding the Refunded Bonds may be invested without yield
limitation for a period not to exceed 90 days from the date hereof.
(c) In addition to gross proceeds of the Bond described in Section
Vl.2(a) and (b), an amount of gross proceeds of the Bond not exceeding $40,750 may
be invested without yield limitation as a minor portion of the proceeds of the Bond.
3. Investments Sublect to Yield Limitation. Gross proceeds of the Bond that
cannot be invested without yield limitation under this section will be invested at a yield,
computed in the manner described in Section VIl.2, which does not exceed the yield on
the Bond by more than 0.125%.
VII. Computation of Yield.
1. Computation of Yield on Bond. Pursuant to §1.148-4(a) of the Income Tax
Regulations, the yield on the Bond is deemed to be equal to the yield on the Bond Bank
Bonds. The yield on the Bond Bank 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 Bond Bank Bonds and amounts reasonably
expected to be paid as fees for qualified guarantees on the Bond Bank Bonds, produces
an amount equal to the present value, using the same discount rate, of the aggregate
issue price of the Bond Bank Bonds as of the Issue Date. The issue price of the Bond
Bank Bonds is the initial offering price of the Bond Bank Bonds to the public (excluding
bond houses, brokers and other intermediaries) at which price at least 10% of each
maturity of the Bond Bank Bonds was sold.
The yield on the Bond Bank Bonds has been determined to be 2.598457%.
Such determination as to yield has been made by RBC Capital Markets, LLC, based on
the representations made to the Bond Bank by RBC Capital Markets, LLC, that the
issue price of the Bond Bank Bonds is not greater than $89,615,555.75.
2. Computation 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 Bond Bank Bonds.
VIII. Arbitrage Rebate.
The Issuer will, in the manner and to the extent required by §148(f) of the Code,
calculate and rebate to the United States any investment earnings on gross proceeds of
the Bond which are in excess of the amounts that would have been earned if those
gross proceeds had been invested at the yield on the Bond, plus any income
attributable to such excess earnings.
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IX. Hedge Bond Representations.
More than 85% of the spendable proceeds of the 1 998A Bond have been used to
carry out the governmental purposes of the 1998A Bond within the three-year period
beginning on the issue date for the 1998A Bond. None of the proceeds of the Bond will
be invested in investments having a substantially guaranteed yield for four years or
more.
X. Reimbursement Reixesentations.
None of the proceeds of the Bond will be allocated to reimburse the Issuer for
expenditures paid before the Issue Date.
XI. General Representations.
1. Other Obligations. There are no other obligations of the Issuer which are
sold at substantially the same time as the Bond, are sold pursuant to the same plan of
financing together with the Bond, and are reasonably expected to 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
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.
XI 1. No Impermissible Private Business Use of the Project.
1. Use in Trade or Business of Nongovernmental Persons.
(a) The Project will be owned and used by the Issuer in furtherance of
its governmental purposes. The Issuer reasonably expects that no more than 10% of
the Project will be used in the trade or business of a nongovernmental person,
excluding use as a member of the general public.
(b) A nongovernmental person is any person or entity other than a
state or local governmental unit, including the federal government and an organization
described in Section 501(c)(3) of the Code. A nongovernmental person uses the Project
as a member of the general public only if the Project is intended to be available and in
fact is reasonably available for use on the same basis by natural persons not engaged
in a trade or business. Use by a nongovernmental person other than as a member of
the general public includes ownership, or use under an arrangement that conveys
priority rights or other preferential benefits, including actual or beneficial use under a
lease, management contract, service or incentive payment contract, output contract or
other special arrangement.
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2. Private Loan Financing. No proceeds of the Bond will be used (directly or
indirectly) to make or finance loans to any nongovernmental person.
3. Unrelated or Disproportionate Private Business Use. There will be no
unrelated or disproportionate private business use of the Project.
(a) Private business use is unrelated unless (i) the use must be located
within, or adjacent to, the Project; (ii) the use is for the same purpose as use of the
Project by the Issuer, and the Issuer's use is not insignificant; or (iii) the Project is used
in the same manner as a private business use of a nongovernmental person that is
related to a governmental use, and the related use is not insignificant.
(b) Private business use is disproportionate to a related government
use only to the extent that the amount of proceeds used in private business use
exceeds the amount of proceeds used for the related governmental use.
4. Sale of Proiect. The Issuer will not sell, encumber or otherwise dispose of
any part of the Project, except such parts that may be disposed of because of normal
wear, obsolescence or depreciation, prior to the final maturity of the Bond.
DATED this 3rd day of November, 2016.
CITY OF WASILLA, ALASKA
TROY TANKERS Y, nce Director
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