Tab_271W614 113 Wlw
1,11 WAR-11 Irvi 11 LSIhI (Ii I 1111111 IIXI 13 :%tI ri
$80,435,000
General Obligation and Refunding Bonds
2016 Series Three
$29,400,000
General Obligation and Refunding Bonds
2016 Series Four (AMT)
THIS TAX CERTIFICATE is by the Alaska Municipal Bond Bank (the "Issuer") and is
executed pursuant to Section 919 of the General Obligation Bond Resolution, adopted by the
Board of Directors of the Issuer on July 13, 2005 (the "Master Resolution") and Resolution
No. 2016-5, adopted on September 6, 2016 (the "Series Resolution") with respect to the Issuer's
General Obligation and Refunding Bonds, 2016 Series Three (the "Non-AMT Bonds") and the
Issuer's General Obligation and Refunding Bonds, 2016 Series Four (the "AMT Bonds" and,
together with the Non-AMT Bonds, the "Bonds"). The Master Resolution and the Series
Resolution will be referred to collectively as the "Resolution." In connection with the issuance
of the Bonds, the Issuer hereby certifies and covenants as follows:
ARTICLE I
IN GENERAL
1.1 Delivery of Bonds. The Bonds are being issued by the Issuer as an agency or
instrumentality of the State of Alaska and are being delivered to RBC Capital Markets, LLC as
the managing underwriter (the "Underwriter") in exchange for good funds on the date hereof (the
"Closing Date").
1.2 Purpose of Tax Certificate. The Issuer is delivering this Tax Certificate to Orrick,
Herrington & Sutcliffe LLP, as Bond Counsel, with the understanding that Orrick, Herrington &
Sutcliffe LLP will rely in part upon this Tax Certificate in rendering its opinion that interest on
the Bonds is excluded from gross income for federal income tax purposes under Section 103 of
the Internal Revenue Code of 1986.
1.3 Purpose of Financing. The Bonds are being issued to acquire bonds (the "Loans")
evidenced through Loan Agreements (the "Loan Agreements") to the following political
subdivisions of the State of Alaska (the "Borrowers") for the identified purposes:
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Borrower Proceeds Purpose Refunded Issue -Project
City and 18,841,115.25 Current CBJ2006B
Borough of refunding
Juneau
City and 3,016,918.80 New Money N/A
Borough of
Juneau
Aleutians East 20,027,744.10 Current 2007-2
Borough Refunding
City of Bethel 2,327,897.35 Advance 2007-3
refunding
City of 9,808,707.90 Advance 2008-1
Dillingham refunding
Kenai Peninsula 3,050,412.20 Current 2007-2
Borough Refunding
City of Kodiak 5,421,212.70 Advance 2007-5
refunding
City of Kodiak 6,744,398.40 Advance 2008-1
refunding
City of Kodiak 929,978.10 Advance 2008-2
refunding
Kodiak Island 5,711,205.15 Advance 2008-1
Borough refunding
City of Nome 688,753.00 Current 2007-1
Refunding
Northwest Arctic 4,736,530.10 Current 2007-1
Borough Refunding
City of 1,317,009.85 Current 2007-1 Harbor and
Petersburg Refunding School
City of Seward 1,130,424.25 Current 2007-1
Refunding
City and 1,682,462.60 Current 2007-1
Borough of Sitka Refunding
Municipality of 3,339,554.70 Advance 2008-2
Skagway refunding
City of Wasilla 841,231.30 Current 2007-1
Refunding
City of 31,500,982.25 Current 2006-2
Ketchikan Refunding
City of 2,017,887.30 New Money N/A
Ketchikan
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The assets financed or refinanced by the Non-AMT Bonds will be referred to as the
"Non-AMT Projects," and the assets allocable. The assets financed or refinanced by the AMT
Bonds will be referred to as the "AMT Projects." The Non-AMT Projects refinanced by the Non-
AMT Bonds will be referred to as the Refunded Non-AMT Projects," and the AMT Projects
refinanced by the AMT Bonds will be referred to as the "Refunded AMT Projects." The Non-
AMT Projects financed by the Nonrefunding Portion will be referred to as the "2016 Non-AMT
Project," the AMT Projects financed by the Nonrefunding Portion will be referred to as the
"2016 AMT Projects," and the 2016 Non-AMT Projects and the 2016 AMT Projects will be
referred to collectively as the "2016 Projects." The Refunded Non-AMT Projects and the
Refunded AMT Projects will be referred to, collectively, as the "Refunded Projects." The 2016
Projects and the Refunded Projects, collectively, will be referred to as the "Projects."
Each of the Advance Refunded Bonds funded capital costs of improvements to the
Borrowers' governmentally owned facilities. The Current Refunded Bonds in some cases
refunded new money obligations and in some cases refunded either advance or current refunding
obligations.
In addition, the Issuer is refunding Non-AMT Refunded Bonds and AMT Refunded
Bonds allocable to funding of the Issuer's Reserve Fund for the following prior issue of the
Issuer's Tax-Exempt Obligations:
Prior Issue Type of Refunding Proceeds Used to Refund
2006-2 Current refunding 1,809,734.06
Finally, the Issuer or the Borrowers will use proceeds to pay costs of issuance of the
Bonds and the Loans and to pay the costs of the Insurance Policy.
1.4 Single Issue. All the Bonds were sold to the Underwriter on October 18, 2016
(the "Sale Date"), pursuant to the same plan of financing, and are expected to be paid out of
substantially the same source of funds. No other governmental obligations which are expected to
be paid out of substantially the same source of funds as the Bonds have been or will be sold
within the 31-day period beginning 15 days before the Sale Date pursuant to the same plan of
financing as the Bonds. All of the Loans were acquired by the Issuer on the same date.
1.5 Multipurpose Issue. The Issuer hereby elects, pursuant to Treasury Regulations
Sections 1.141-13(d) and 1.150-1(c)(3), to treat the Non-AMT Bonds and the AMT Bonds as a
separate issue of obligations for certain purposes. Debt Service on the Refunding Portion of the
Bonds allocable to the Non-AMT Bonds and the AMT Bonds is less than debt service on the
respective issues of Refunded Bonds in each Bond Year, and the Non-AMT Bonds and the AMT
Bonds allocable to the Nonrefunding Portion thereof consists of the remaining portions of the
Non-AMT Bonds and the AMT Bonds respectively as set forth in Exhibit C. Further, the Issuer
has allocated the Bonds to each Loan in such manner that the principal and interest payments on
the allocated Bonds and the related Loan coincide in time and amount.
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1.6 Definitions. Capitalized terms used and not otherwise defined herein shall have
the respective meanings set forth in the Trust Agreement. Unless the context otherwise requires,
the following capitalized terms have the following meanings:
"Adjusted Gross Proceeds" means Gross Proceeds, adjusted as set forth in
Treasury Regulations Section 1,148-7(c)(3). Thus, Adjusted Gross Proceeds
generally means Gross Proceeds less the amounts held in Bona Fide Debt Service
Fund and in the Reserve Fund.
"Advance Refunded Bonds" means the followings Series of the issuer's
Tax-Exempt Obligations: 2007-3, 2007-5, 2008-1, 2008-2.
"Advance Refunding Portion" means the portion of the Refunding Portion
used to advance refund the Advance Refunded Bonds and to pay related common
costs.
"Bona Fide Debt Service Fund" means those funds and accounts (or
portions of those funds and accounts) identified in Section 3.8 of this Tax
Certificate.
"Bond Year" means the period beginning on the Closing Date and ending
on December 1 (or on an earlier date selected by the Issuer in accordance with
Treasury Regulations Section 1.148-1(b)) and each successive one-year period
thereafter. The last Bond Year will end on the last day on which any Bond is
outstanding for federal tax purposes.
"Borrower Reserve Funds" means the debt serve reserve funds established
by certain of the Borrowers with respect to their Loans.
"Closing Date" means the date of this Tax Certificate.
"Code" means the Internal Revenue Code of 1986 (including amendments
thereto).
"Current Refunded Bonds" means the following Series of the Issuer's Tax-
Exempt Obligations: 2006-2, 2007-1, and 2007-2 and the Consolidated Borough
of Juneau's Series 2006B Bonds.
"Governmental Unit" means any state, or political subdivision of a state,
but excludes the United States and its agencies or instrumentalities.
"Gross Proceeds" has the meaning used in Section 1.148-1(b) of the
Treasury Regulations, and generally means all proceeds derived from or relating
to the Bonds, including Sale Proceeds, Investment Proceeds, and other amounts
expected to be used to pay debt service on the Bonds.
"Income Funds" means the debt service fund established pursuant to each
Bond Loan Agreement.
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"Insurance" means the policy insuring payment of debt service on certain
of the Bonds.
"Insurer" means National Public Finance Guarantee Corporation, the
provider of the Insurance Policy and the Surety.
"Investment Proceeds" means earnings received from investing and
reinvesting Sale Proceeds and from investing and reinvesting such earnings.
"Investment Property" means any security or obligation, any annuity
contract, or any other investment-type property, but does not include any Tax-
Exempt Bond unless such obligation is a "specified private activity bond" within
the meaning of Section 57(a)(5)(C) of the Code.
"Issuer Reserve Fund" means the debt service reserve fund established by
the Issuer under the Master Resolution.
"Net Sale Proceeds" means the Sale Proceeds allocable to the New Money
Loans, minus the amount of such Sale Proceeds deposited in the Issuer Reserve
Fund and the Borrower Reserve Funds and minus the amount invested as part of
the "minor portion" for such Loans, as described in Code Section 148(e).
"New Money Loans" means the Loans to [to come].
"Nongovernmental Person" means any person or entity other than a
Governmental Unit.
"Nonpurpose Investment" means any Investment Property in which Gross
Proceeds are invested.
"Nonrefunding Portion" means the portion of the Bonds used to pay costs
of the 2016 Projects and to pay related common costs.
"Opinion of Counsel" means a written opinion of nationally recognized
bond counsel to the effect that the exclusion from gross income for federal
income tax purposes of interest on the Bonds will not be adversely affected.
"Proceeds" means Sale Proceeds plus Investment Proceeds.
"Project Fund" means the fund or funds established pursuant to any Bond
Loan Agreement or otherwise to hold amounts used to finance Projects.
"Rebate Requirement" means the amount of rebatable arbitrage computed
as of the last day of any Bond Year pursuant to Section 1.148-3 of the Treasury
Regulations.
"Refunded Bonds" means the Current Refunded Bonds and the Advance
Refunded Bonds.
OHSU5A:765956927.5
"Refunding Portion" means the portion of the Bonds used to refund the
Refunded Bonds and to pay related common costs.
"Reserve Limitation" shall mean an amount equal to the lesser of 10% of
the original principal amount of the Bonds, (ii) maximum annual debt service on
the Bonds, or (iii) 125% of average annual debt service on the Bonds.
"Sale Proceeds" means the amount of $123,134,425.30, comprising the
principal amount of the Non-AMT Bonds ($80,435,000.00), plus net original
issue premium thereon ($9,180,555.75), plus the principal amount of the AMT
Bonds ($29,400,000.00), plus net original issue premium thereon ($4,118,869.55).
"Surety" means the surety policy deposited in the Issuer Reserve Fund.
"Tax-Exempt Bond" means any obligation the interest on which is
excluded from gross income for federal income tax purposes pursuant to Section
103 of the Code or Section 103 of the Internal Revenue Code of 1954, as
amended (the "1954 Code"), and Title XIII of the Tax Reform Act of 1986, as
amended, as well as stock in a regulated investment company to the extent at least
95 percent of income to the stockholder is treated as interest that is excludable
from gross income under Section 103 of the Code.
"Verification Agent" means Causey, Demgen & Moore P.C..
"Yield" means that discount rate described in Section 3.14 of this Tax
Certificate.
1.7 Issuer Reliance on Other Parties. The Borrowers will execute Loan Agreements
and Tax Certificates with respect to the Loans. Such documents include various representations
and covenants of each Borrower relating to federal tax matters. The expectations of the Issuer
concerning certain uses of the proceeds of the Bonds and certain other moneys described herein
and other matters are based in whole or in part upon representations of other parties set forth in
this Tax Certificate or exhibits hereto and documents referred to herein. For example, each of
the Borrowers' Loans has been issued as Tax-Exempt Bonds, with respect to which each Issuer's
Bond Counsel has rendered an opinion as to their tax status (the "Borrower's Bond Counsel
Opinion"), and each of the Borrowers has delivered a Tax Certificate in support of the related
Borrower's Bond Counsel Opinion. The Issuer is not aware of any facts or circumstances that
would cause it to question the accuracy or reasonableness of any representation made in this Tax
Certificate or exhibits hereto and documents referred to herein.
1.8 General Tax Covenant of Issuer. The Issuer hereby covenants to take any action
or refrain from taking any action, and to cause the Borrowers to take any action or refrain from
taking any action, in order to maintain the exclusion from gross income of interest on the Bonds.
OHSUSA:765956927.5 -6-
[ii I * II
REPRESENTATIONS, CERTIFICATIONS, EXPECTATIONS
AND WARRANTIES RELATING TO GENERAL TAX MATTERS
2.1 Application of Sale Proceeds and Other Amounts.
2. 1.1 Sale Proceeds. The Sale Proceeds will be used as set forth in Exhibit D.
2.1.2 Proceeds of Refunded Bonds. Exhibit E sets forth the amounts of any
Gross Proceeds of the Refunded Bonds and the uses thereof.
2.1.3 No Other Amounts. Other than the amounts in Section 2.1.2, above, there
are no amounts that represent Proceeds of the Advance Refunded Bonds or the Current Refunded
Bonds or that would have been used to pay debt service on the Advance Refunded Bonds or the
Current Refunded Bonds in the event the Bonds had not been issued.
2.1.4 Costs of Issuance. A portion of the costs of issuance is being paid from
Proceeds of the Loans. In addition, the Issuer is making a contribution from sources other than
Proceeds to pay a portion of the costs of issuance of allocable to the Bonds benefiting the
Consolidated Borough of Juneau.
2.2 Expenditure of Gross Proceeds. For purposes of this Tax Certificate, Gross
Proceeds will be treated as spent when they are: (i) used by the Issuer or the Borrowers for costs
of issuing the Bonds or the Loans, (ii) used by the Borrowers to pay debt
service on the Refunded Bonds, (iii) used by the Borrowers to pay capital expenditures of the
Projects, or (iv) used for miscellaneous expenditures described in Treasury Regulations
Section 1. 148-6(d)(3)(ii).
2.3 Governmental Bond Status. Absent an Opinion of Counsel, the Issuer will not
loan Proceeds in an amount more than 5% of the Sale Proceeds of the Non-AMT Bonds to one or
more Nongovernmental Persons. Absent an Opinion of Counsel, the Issuer will not allow more
than 10% of Proceeds or the Projects allocated to each Loan financed or refinanced by the Non-
AMT Bonds to be used directly or indirectly by any Nongovernmental Person in any trade or
business, other than as a member of the general public (a "Private Use"). For purposes of the
preceding sentence, "10%" is reduced to "5%" for nongovernmental use of any facilities
financed or refinanced from proceeds of the Bonds which are disproportionate to or not related to
the governmental purposes of the Bonds. Absent an Opinion of Counsel, for purposes of this
Section 2.3, a Nongovernmental Person will be treated as "using" Bond proceeds to the extent
the Nongovernmental Person:
(a) borrows Proceeds, or
(b) uses the Projects (çg., as owner, lessee, service provider, operator or manager).
All of the Sale Proceeds of the Bonds will be used to pay costs of issuing the Bonds and
to make the Loans. Each Loan will be a Tax-Exempt Bond and the Issuer will receive an
unqualified opinion of the Borrower's respective bond counsel to that effect. As such, it will be
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established that each Borrower does not expect to and shall not perform any act, enter into any
agreement, or use or permit more than 10% of the proceeds of the Bonds relating to its Loan
financed with Proceeds of the Non-AMT Bonds or its portion of the Non-AMT Projects to be
used in any manner by a Nongovernmental Person unless the Borrower provides written notice to
the Issuer of the proposed act, agreement or use and the Borrower and the Issuer receive an
Opinion of Counsel with respect to such act, agreement or use.
2.4 Qualified Private Activity Bond Status. More than 10% of the AMT Projects will
be treated as used in the trades or businesses of Nongovernmental Persons. Accordingly, as
reflected in the Tax Certificates of the Borrower of Proceeds of the AMT Bonds and herein, the
AMT Borrower and the Issuer have taken the following steps to insure that the AMT Bonds are
treated as qualified private activity bonds within the meaning of Section 141 (e) of the Code:
2.4.1 Qualifying Costs. At least 95% of the Net Proceeds of the AMT Bonds
(treating proceeds used to redeem the Refunded AMT Bonds as used to finance the Refunded
AMT Projects) have been or will be used, directly or by way of reimbursement, to acquire or
construct property which constitutes "dock or wharf' facilities within the meaning of Section
142(a)(2) of the Code, the costs of which are chargeable to the capital accounts of property
subject to the allowance for depreciation for federal income tax purposes ("Good Costs").
Good Costs do not include costs paid or incurred in respect of: (i) any lodging
facility, (ii) any retail facility (including food and beverage facilities) in excess of a size
necessary to serve passengers and employees at the port, (iii) any retail facility (other than
parking) for passengers or the general public located outside the port terminals, (iv) any office
building for individuals who are not employees of the Borrower or other governmental unit, or
any office space which is not located at the port facilities and is not directly related to the day-to-
day operations of the port facilities, or (v) any industrial park or manufacturing facility.
2.4.2 No Imputed Proceeds. The purchase price of each obligation that is part
of the AMT Bonds is at least 95% of the obligations face amount. The stated interest rate of
each obligation that is part of the AMT Bonds does not increase over the term of the obligation.
2.4.3 Governmental Ownership. The City of Ketchikan (the "City") has been
and will be the exclusive owner of the AMT Projects. Any lease that the City shall enter into
with respect to the AMT Projects will comply with the provisions of Section 142(b) of the Code;
specifically, (i) the lessee under any such lease shall make an irrevocable election not to claim
depreciation or an investment credit with respect to the leased property, (ii) the lease term shall
not be more than 80% of the reasonably expected economic life of the leased property, and (iii)
the lessee shall have no option to purchase the leased property other than at fair market value.
2.4.4 No Volume Cap Required. As described in Section 2.5(a) hereof, the City
has used at least 95% of the Net Proceeds of the AMT Bonds, by way of funding the 2016 AMT
Project or, indirectly, by way of refunding the Refunded AMT Bonds to provide a "dock or
wharf, and facilities functionally related and subordinate thereto, within the meaning of Section
142(a)(1) of the Code. No private activity bond volume cap will be allocated to the AMT Bonds.
OHSUSA:765956927,5 -8
2.4.5 Limitation on Maturity. The weighted average maturity of the AMT
Bonds is 11.3395 years. As set forth in Exhibit G hereto, and based upon information in the
City's Tax Certificates, 120% of the remaining life of the AMT Projects is 26.62 years.
Consequently, the weighted average maturity of the Bonds is not more than 120% of the
remaining weighted average reasonably expected economic useful life of the AMT Projects.
2.4.6 Land Expenditures. Less than 25% of the Net Proceeds of the Refunded
AMT Bonds were be used (directly or indirectly) to acquire land, or spent on costs chargeable to
the capital account of land or interests in land. Less than 25% of the Net Proceeds of the
Nonrefunding Portion of the AMT Bonds will be used (directly or indirectly) to acquire land, or
spent on costs chargeable to the capital account of land or interests in land.
2.4.7 Existing Facilities. None of the proceeds of the AMT Bonds has been or
will be used to finance or refinanced the acquisition of any property (except for land and interests
in land) unless such property was or is first used in connection with such acquisitions.
2.4.8 Prohibited Facilities. None of the proceeds of the AMT Bonds has been or
will be used to finance or refinance any airplane, skybox or other private luxury box, health club
facility, facility primarily used for gambling, or store the principal business of which is the sale
of alcoholic beverages for consumption off premises.
2.4.9 Public Hearing and Approval. The AMT Bonds are being issued to refund
the Refunded AMT Project and finance the 2016 AMT Project. On September 2, 2016, the
Issuer published notice of a public hearing in the Juneau Empire, the Fairbanks Daily News, and
the Anchorage Dispatch, newspapers of general circulation in the State. On September 16, 2016,
the Issuer held a public hearing relating to the issuance of the AMT Bonds at which all interested
persons were given the opportunity so speak. The issuance of the AMT Bonds was approved by
the Governor of the State on September 30, 2016, giving both issuer and host approval pursuant
to Section 147(f) of the Code, following appropriate public notice and hearing.
2.4.10 Costs of Issuance. No more than 2% of the Sale Proceeds of the AMT
Bonds (or of Gross Proceeds of the Refunded AMT Bonds) will be used to pay costs of issuing
the AMT Bonds or any other obligations. Costs of issuance properly allocable to the AMT
Bonds in excess of such limitation, if any, shall be paid from other available moneys of the
County not including proceeds of the AMT Bonds or other bonds or obligations for borrowed
money of the County. No more than 2% of the Sale Proceeds of the Refunded AMT Bonds (or of
Gross Proceeds of any obligations refunded by such Refunded AMT Bonds) will be used to pay
costs of issuing the AMT Bonds or any other obligations.
2.5 Change in Use. As indicated in the Tax Certificates of the Borrowers, the
Borrowers reasonably expect to use all proceeds of their respective Loans and all facilities that
are financed with proceeds of the their respective Loans as set forth in Article II of this Tax
Certificate for the entire stated term to maturity of the Bonds. In its Tax Certificate, each
Borrower has covenanted that it in fact will use all proceeds of the Bonds and each facility
financed from proceeds of the Bonds as set forth in the respective Borrower Tax Certificate.
2.6 Registered Form. The Bonds are being issued in registered form.
OHSUSA:765956927.5
2.7 Federal Guarantee. The Issuer will not directly or indirectly use or permit the use
of any proceeds of the Bonds or any other funds of the Issuer or any related party or take or omit
to take any action that would cause the Bonds to be obligations that are "federally guaranteed"
within the meaning of Section 149(b) of the Code. In furtherance of this covenant, the Issuer
will not allow the payment of principal or interest with respect to the Bonds to be guaranteed
(directly or indirectly) in whole or in part by the United States or any agency or instrumentality
thereof. Except as provided in the next sentence, the Issuer will not use 5% or more of the
proceeds of the Bonds to make or finance loans the payment of principal or interest with respect
to which is guaranteed in whole or in part by the United States or any agency or instrumentality
thereof, nor will it invest 5% or more of the proceeds in federally insured deposits or accounts.
The preceding sentence shall not apply to:
(a) investments in the Project Fund during the temporary period described in Section
3.4 of this Tax Certificate;
(b) investments in Issuer Reserve Fund and the Borrower Reserve Funds;
(c) investments in Bona Fide Debt Service Fund; and
(d) investments in obligations issued by the United States Department of the
Treasury.
2.8 Information Reporting. The Issuer will cause a properly completed and executed
IRS Form 8038-G and Form 8038 to be filed with respect to the Non-AMT Bonds and the AMT
Bonds, respectively, no later than February 15, 2017.
2.9 Pool Bonds. The Issuer will loan at least 95% of the Sale Proceeds of the Bonds
on the Closing Date to the Borrowers.
2.10 No Hedge Bonds.
2. 10.1 Refunding Portion. On the dates that the Refunded Bonds were issued,
each of the Borrowers reasonably expected that more than 85% of proceeds of each such
obligation would be expended for the governmental purposes of each such obligation within
three years. Not more than 50% of proceeds of any such obligation was invested in Nonpurpose
Investments having a substantially guaranteed yield for four years or more.
2.10.2 Nonrefunding Portion. As of the Closing Date, each of the Borrowers of
the New Money Loans has represented, in its Tax Certificate, that Proceeds of the respective
New Money Loan will be expended for the governmental purposes of such Loan within three
years. Not more than 50% of proceeds of such New Money Loans will be invested in
Nonpurpose Investments having a substantially guaranteed yield for four years or more.
I (SiU :4111
REPRESENTATIONS, CERTIFICATIONS, EXPECTATIONS
AND WARRANTIES OF THE ISSUER RELATING TO ARBITRAGE
OH5U5A:765 956927.5 -10-
3.1 Reasonable Expectations. This Article III states the reasonable expectations of
the Issuer with respect to the amounts and uses of the proceeds of the Bonds and certain other
funds.
3.2 No Replacement Proceeds. No portion of the proceeds of the Bonds will be used
directly or indirectly to replace funds of the Issuer or of any of the Borrowers or any related
person if such funds are or will be used directly or indirectly to acquire investment property
reasonably expected to produce a yield materially higher than the yield on the Bonds. The
weighted average maturity of the Bonds does not exceed 120% of the expected weighted average
economic useful life of the Projects. The weighted average maturity of each Loan does not
exceed 120% of the expected weighted average economic useful life of the Projects financed or
refinanced by such Loan.
3.3 No Abusive Arbitrage Device. The Bonds are not and will not be part of a
transaction or series of transactions that attempts to circumvent the provisions of Section 148 of
the Code, or any successor thereto, and the regulations promulgated thereunder or under any
predecessor thereto, (i) enabling the Issuer, any of the Borrowers or any related person, to exploit
the difference between tax-exempt and taxable interest rates to gain a material financial
advantage, and (ii) increasing the burden on the market for tax-exempt obligations in any
manner, including, without limitation, by selling bonds that would not otherwise be sold or
selling more bonds, or issuing them sooner, or allowing them to remain outstanding longer, than
would otherwise be necessary.
3.4 Overissuance. Proceeds from the sale of the Bonds and anticipated investment
earnings thereon do not exceed the amount necessary for the purposes of the Bonds.
3.5 Yield on the Loans. The Issuer has made or will make the Loans at various
interest rates and over various terms. All of the Loans are and will continue to be Tax-Exempt
Bonds.
3.6 Funds and Accounts. Pursuant to the Master Resolution and the Escrow
Agreement, the Issuer has established the following Accounts:
Debt Service Fund
Interest Account
Principal Account
Redemption Account
Reserve Fund
Operating Fund
Rebate Fund
Escrow Accounts (one for each issue of Advance Refunded Bonds)
Pursuant to the Loan Agreements, each Borrower has created the following funds and
accounts with respect to its Loan (or will, for ease of reference, be referred to as having created):
Project Fund
Costs of Issuance Fund
OHSU5A:765956927.5 -11-
In addition, each Borrower whose Loan Agreement is not secured by a General
Obligation pledge has created a Borrower Reserve Fund.
3.7 Receipts and Revenues. The Bonds are general obligations of the Issuer payable
principally from amounts received by the Issuer or the Trustee from or with respect to the Loans
or the Other Bond Loans and any other amounts including investment earnings on Bond
proceeds held in funds (except the Rebate Account to the extent of the Rebate Requirement)
established pursuant to the Trust Agreement (the "Receipts and Revenues").
3.8 Debt Service Fund and Accounts. Under the Master Resolution, all payments on
the Loans are to be deposited in the Debt Service Fund and applied as provided in the Master
Resolution. Revenues that are used to pay debt service with respect to the Bonds are expected to
equal or exceed debt service on the Bonds during each payment period. The Debt Service Fund
(to the extent of amounts transferred to the Interest Account, the Principal Account, and the
Redemption Account) (hereinafter such funds and accounts to be collectively referred to as the
"Debt Service Fund") will be used primarily to achieve a proper matching of revenues and debt
service within each Bond Year. To the extent the Debt Service Fund is expected to be depleted
in the aggregate at least once a year except for a carryover amount not to exceed the greater of
the prior year's earnings on such fund or 1/12th of the prior year's debt service on the Bonds, it
will be referred to herein as the "Bona Fide Debt Service Fund." Amounts deposited to the Debt
Service Fund are expected to be spent within thirteen months after the date of such deposit.
3.9 Eligibility for Temporary Period. Based on the representations of the Borrowers
as set forth in the Borrower Tax Certificates, the Issuer reasonably expects that at least
85 percent of the Net Sale Proceeds of the Nonrefunding Portion will be allocated to
expenditures for the Projects and costs of issuance of the Nonrefunding Portion within three
years after the Closing Date. Each of the Borrowers of the new Money Loans has represented, in
its Borrower Tax Certificate, that it has incurred or expects to incur within six months after the
Closing Date a substantial binding obligation to a third party for costs of its Project involving an
expenditure of at least 5 percent of the Net Sale Proceeds of the Nonrefunding Portion allocable
to such purpose. Each of the Borrowers of the new Money Loans has represented, in its
Borrower Tax Certificate, that it reasonably expects that completion of respective Project and the
allocation of the Net Sale Proceeds of the Nonrefunding Portion to costs of such Project will
proceed with due diligence.
3.10 Escrow Accounts.
3.10.1 General. The Sale Proceeds, the Old Reserve Moneys, and the Old Project
Fund Moneys deposited in the Escrow Accounts will be used to pay principal, interest, and call
premium on the Advance Refunded Bonds. The Proceeds of the Bonds, the Old Reserve
Moneys and the Old Project Fund Moneys will be allocated (with adjustments for rounding) to
the payment of principal of, and interest and redemption premiums on the Refunded Bonds,
ratably both between sources (i.e., Sale Proceeds, Old Reserve Moneys, and Escrow Equity
Contribution) for expenditures and between uses (i.e., principal, interest, and stated redemption
prices on the respective issues of Refunded Bonds).
OHSUSA:765956927.5 -12-
3.10.2 Acquisition of Escrow Securities. The Escrow Account has been funded
exclusively with SLGS. The yield on the investments in the Escrow Accounts allocable to
Proceeds of the Bonds, including Proceeds of the Refunded Bonds in the Escrow Accounts that
will become Transferred Proceeds of the Bonds, is 0.67510%.
3.10.3 Excess Proceeds. With the exception of an ending cash balance in the
Escrow Accounts of $7.02, all Sale Proceeds and Investment Proceeds of the Advance
Refunding Portion, and all investment earnings thereon will be used for one or more (but not
necessarily all) of the following purposes: (i) to pay debt service on the Refunded Bonds, (ii) to
pay pre-issuance accrued interest on the Bonds, (iii) to fund a reasonably required debt service
reserve fund, (iv) to pay costs of issuance of the Bonds, (v) to pay administrative costs allocable
to repaying the Refunded Bonds and carrying and repaying the Bonds and Nonpurpose
Investments allocable to the Bonds, (vi) Transferred Proceeds that will be used or maintained for
the governmental purpose of the Refunded Bonds, (vii) interest on Purpose Investments, (viii)
Replacement Proceeds in a sinking fund for the Bonds, (ix) qualified guarantee fees for the
Bonds, or (xii) fees for a qualified hedge for the Bonds. For purposes of this Section 3.10.3 only,
Transferred Proceeds of the Bonds include all Proceeds of the Advance Refunded Bonds unspent
as of the date hereof.
3.11 Advance Refunding Requirements. The Bonds are the first advance refunding of
the Advance Refunded Bonds. The callable Refunded Bonds will be redeemed on the first date
after the date hereof on which they are callable.
3.12 Debt Service Reserve Funds
3.12.1 Issuer Reserve Fund. The Issuer Reserve Fund serves as a parity reserve
fund for the Bonds and other obligations on a parity with the Bonds. Equity in the Issuer
Reserve Fund will be used to acquire a surety (the "Surety Bond") for deposit in the Issuer
Reserve Fund. No Proceeds of the Bonds will be deposited in the Issuer Reserve Fund as cash.
The Financial Advisor has certified that the funding of the Issuer Reserve Fund at the levels
specified in the Resolution is reasonably required in order to market the Bonds at the yields set
forth in the Official Statement. See Exhibit B.
3.12.2 Borrower Reserve Funds, The Issuer requires each Borrower (other than
Borrowers whose Loans have been issued on a general obligation basis) to maintain a debt
service reserve fund to secure the repayment of its Loan. The Financial Advisor has certified
that the funding of the Borrower Reserve Funds is reasonably required to secure repayment of
the Loans to the Issuer. See Exhibit B.
3.12.3 Tax Limitations on Reserve Funds. The amount of Proceeds of the Bonds
used to fund the Issuer Reserve Fund and the Borrower Reserve Funds does not exceed 10% of
the Proceeds of the Bonds; in fact, no proceeds of the Bonds will be deposited in the Issuer
Reserve Fund or the Borrower Reserve Fund, although the Issuer Reserve Fund will contain
Transferred Proceeds of the Bonds. Amounts in the Issuer Reserve Fund allocable to the Bonds
as Gross Proceeds of the Bonds will be subject to yield restriction to the extent such amounts
exceed the Reserve Limitation. Amounts in the Borrower Reserve Funds allocable to each Loan
OHSUSA:765956927.5 -13-
will be subject to yield restriction to the extent such amounts exceed the Reserve Limitation,
applied solely with reference to the amount and debt service characteristics of the relevant Loan.
3.13 Rebate Fund. The Issuer covenants not to use moneys on deposit in any fund or
account in connection with the Bonds in a manner which will cause the Bonds to be arbitrage
bonds within the meaning of Section 148 of the Code. To that end, the Rebate Fund has been
created. Moneys in the Rebate Fund are neither pledged to nor expected to be used to pay debt
service on the Bonds.
3.14 Transferred Proceeds. There are no proceeds of or other amounts relating to the
Prior Obligations remaining unspent other than the amounts in the Issuer Reserve Fund and the
Borrower Reserve Funds for the Prior Obligations and the Old Project Moneys allocable to the
Series 2008-1 Refunded Non-AMT Bonds. A portion of the Old Reserve Moneys in the
Borrower Reserve Funds will remain there to function as a reasonably required reserve for the
Bonds and the Loan associated with the Bonds, and the remaining portion will be used to pay
debt service on the respective issue of Refunded Bonds. The Old Project Fund Moneys will be
deposited in the Escrow and used to pay debt service on the Refunded Non-AMT Bonds.
3.15 Yield. For purposes of this Tax Certificate, yield is calculated as set forth in
Section 148(b) of the Code and Treasury Regulations Sections 1.148-4 and 1.148-5. Thus, yield
on the Bonds or yield on Investment Property generally means that discount rate which, when
used in computing the present value of all unconditionally payable payments representing
principal adjusted, as required, for any substantial discounts, interest and costs of qualified
guarantees, produces an amount equal to the issue price of the Bonds or the purchase price of the
Investment Property, as appropriate. The aggregate issue price of the Bonds is $123,134,425.30,
which represents the price at which the Bonds were offered to the ultimate purchaser(s), as
represented by the Underwriter in Exhibit A hereto. The yield on the Bonds has been calculated
to be 2.598457%.
3.16 Qualified Guarantee. In computing the yield on the Bonds, the premiums paid or
to be paid for the Surety Bond (to the extent not properly allocable to a cost other than the cost of
the Surety Bond) are treated as a qualified guarantee payment with respect to the Bonds, as
provided in Treasury Regulations Section 1.148-4(f). This is based upon (i) representations of
the Insurer (set forth in the certificate attached hereto as Exhibit F) that the premiums paid or to
be paid for the Surety Bond were negotiated at arms' length and are within the normal range of
charges charged by the Insurer for the transfer of credit risk with respect to similar tax-exempt
obligations and that the premium for the Surety Bond does not include any direct or indirect
payment for a cost, risk or other element that is not customarily borne by guarantors of tax-
exempt bonds in transactions in which the guarantor has no involvement other than as guarantor
and (ii) representations of the Financial Advisor contained in Exhibit B hereto that the present
value of interest saved as a consequence of the Surety, assuming the expected releases of equity
from the Issuer Reserve Fund in 2017 and 2018, exceeds the present value of the premium for
the Surety Bond and that the premium paid for the Surety Bond is not unreasonable.
3.17 Qualified Hedge. No contract (such as an interest rate swap or cap) has been and
(absent an Opinion of Counsel) no contract will be entered into such that failure to take the
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contract into account would distort the yield on the Bonds or otherwise would fail clearly to
reflect the economic substance of the transaction.
3.18 Permitted Investment Without Regard To Yield Restriction. Amounts identified
below may be invested without regard to yield for the periods set forth below, in each case,
except as otherwise indicated, measured from the Closing Date:
Fund Period
Project and Costs of Issuance Funds 3 years
(Sale Proceeds used to pay costs
of 2016 Projects and costs of issuance
of Nonrefunding Portion)
Costs of Issuance Funds (Sale Proceeds used 13 months
to pay costs of issuance of
Refunding Portion)
Project and Costs of Issuance Funds Later of 3 years or one
(Investment Proceeds used to year from date of receipt
pay costs of 2016 Projects and costs
of issuance of Nonrefunding Portion)
Costs of Issuance Funds (Investment Proceeds Later of 13 months or one
used to pay costs of issuance year from date of receipt
of Refunding Portion)
Sale Proceeds and Investment Proceeds None
used to repay Advance Refunded Bonds
Sale Proceeds used to pay Current Refunded 90 days
Bonds
Bona Fide Debt Service Fund 13 months
Reserve Funds (amounts not in excess of Reserve In perpetuity
Limitation)
Reserve Funds (amounts in None
excess of Reserve Limitation)
Amounts in Debt Service Fund 30 days
not included in Bona Fide Debt
Service Funds
Rebate Fund (Proceeds) None
OH5U5A:765 956927.5 -15-
3.19 Yield Restriction.
3.19.1 General. Absent an Opinion of Counsel, if the sum of (A) any amounts in
the Debt Service Fund other than amounts held in the Bona Fide Debt Service Fund, plus (B) any
Proceeds of the Nonrefunding Portion in the Costs of Issuance Funds and Project Funds held
after November 2, 2019, plus (C) any Proceeds of the Refunding Portion in the Costs of Issuance
Fund held after December 2, 2017, plus (D) any Sale Proceeds or Investment Proceeds held in
the Rebate Account, at any time in the aggregate exceeds $100,000, such excess will be invested
either (i) in Investment Property with a yield not exceeding the yield on the Bonds, (ii) in assets
that are not treated as Investment Property (e.g., Tax-Exempt Obligations), or (iii) in assets that
satisfy the requirements for qualified yield reduction payments set forth in Treasury Regulations
Section 1.148-5(c), subject to the limitation set forth in Section 1.148-10(b)(1)(ii).
3.19.2 Escrow Accounts. The Issuer hereby waives the temporary period for
Proceeds of the Advance Refunding Portion deposited in the Escrow Accounts. The Old
Reserve Moneys and the Old Project Account Moneys in the Escrow Accounts may not be
invested at a yield in excess of the yield on the respective issues of Advance Refunded Bonds.
The Proceeds of the Bonds in the Escrow Accounts may not be invested at a yield in excess of
the Yield on the Bonds.
ARTICLE IV
COVENANTS OF THE ISSUER
WITH RESPECT TO REBATE; DEFINITIONS
4.1 Undertakings. Pursuant to the Resolutions, the Issuer has covenanted to comply
with certain requirements of the Code. The Issuer acknowledges that the United States
Department of the Treasury has issued regulations with respect to certain of these undertakings,
including the proper method for computing whether any rebate amount is due the federal
government under Section 148(f) of the Code. (Treas. Reg. Sections 1.148-1 through 1.148-11,
1.150-1 and 1.150-2.) The Issuer further acknowledges that the United States Department of the
Treasury may yet issue additional regulations with respect to certain other of these undertakings.
The Issuer covenants that it will undertake to determine what is required with respect to the
rebate provisions contained in Section 148(f) of the Code and said regulations from time to time
and will comply with any requirements that may apply to the Bonds. Except to the extent
inconsistent with any requirements of the Code or future regulations, the Issuer will undertake
the methodology described in this Tax Certificate. Treasury Regulations Section 1.148-
9(h)(1)(ii) provides that the portions of the Bonds relating to each Loan, since each Loan is a
Tax-Exempt Bond, will be treated as separate issues of Tax-Exempt Bonds with separate yields
and requirements to make rebate payments. The Issuer will calculate and pay the Rebate
Requirement with respect to the Bonds. Each of the Borrowers shall calculate and pay rebate
with respect to its Loan.
4.2 Recordkeeping. The Issuer shall maintain or cause to be maintained detailed
records with respect to each Nonpurpose Investment attributable to Gross Proceeds, including:
OHSUSA:765956927,5 -16-
(a) purchase date; (b) purchase price; (c) information establishing fair market value on the date
such investment became a Nonpurpose Investment; (d) any accrued interest paid; (e) face
amount; (f) coupon rate; (g) periodicity of interest payments; (h) disposition price; (i) any
accrued interest received; and (j) disposition date. Such detailed recordkeeping is required to
facilitate the calculation of the Rebate Requirement.
4.3 Rebate Requirement Calculation and Payment.
(a) Subject to the exceptions described in Section 4.4 hereof, beginning at the end of
the fifth Bond Year, the Issuer will prepare or cause to be prepared a calculation every five years
of the Rebate Requirement consistent with the rules described in this Section 4.3. The Issuer will
complete the calculations of the Rebate Requirement within 55 days after the close of each fifth
Bond Year and within 55 days after the first date on which there are no outstanding Bonds.
(b) For purposes of calculating the Rebate Requirement (i) the aggregate amount
earned with respect to a Nonpurpose Investment shall be determined by assuming that the
Nonpurpose Investment was acquired for an amount equal to its fair market value (determined as
provided in Section 1.148-5(d)(6) of the Treasury Regulations, as applicable) at the time it
becomes a Nonpurpose Investment, and (ii) the aggregate amount earned with respect to any
Nonpurpose Investment shall include any unrealized gain or loss with respect to the Nonpurpose
Investment (based on the assumed purchase price at fair market value and adjusted to take into
account amounts received with respect to the Nonpurpose Investment and earned original issue
discount or premium) on the first date when there are no outstanding Bonds or when the
investment ceases to be a Nonpurpose Investment.
(c) The Issuer shall pay to the United States Department of the Treasury not later than
60 days after the end of the fifth Bond Year and each succeeding fifth Bond Year, an amount
equal to 90% and, not later than 60 days after the first date when there are no outstanding Bonds,
an amount equal to 100% of the Rebate Requirement (determined as of the end of the
immediately preceding Bond Year), all as set forth in Section 1.148-3 of the Treasury
Regulations.
(d) Each payment required to be made pursuant hereto shall be filed with the Internal
Revenue Service Center, Ogden Utah, on or before the date such payment is due, and shall be
accompanied by Form 8038-T. The Issuer shall retain records of the calculations required by
this Section 43 until six years after the retirement of the last of the Bonds.
4.4 Exceptions from Rebate Requirement.
(a) Bona Fide Debt Service Fund Exception. To the extent the requirements of
Section 3.10 of this Tax Certificate are satisfied in any Bond Year, the Bona Fide Debt Service
Fund will be exempted from the Rebate Requirement for such Bond Year.
(b) Issuer Exempt. The Issuer is exempt from the rebate requirement for all Gross
Proceeds, except for Gross Proceeds held in the Debt Service Fund (as defined in Section 3.8 of
this Tax Certificate), so long as each Borrower is satisfying the rebate requirement for its Loan.
4.5 Investments and Dispositions.
OHSUSA:765956927.5 -17-
(a) General Rule. No Investment Property may be acquired with Gross Proceeds for
an amount (including transaction costs, except as otherwise provided in Section 1.148-5(e) of the
Treasury Regulations) in excess of the fair market value of such Investment Property. No
Investment Property may be sold or otherwise disposed of for an amount (including transaction
costs, except as otherwise provided in Section 1.148-5(e) of the Treasury Regulations) less than
the fair market value of the Investment Property.
(b) Fair Market Value. In general, the fair market value of any Investment Property
is the price a willing buyer would pay to a willing seller to acquire the Investment Property, with
no amount paid artificially to reduce or increase the yield on such Investment Property. This
Section 4.5 describes various safe harbors for determining fair market value. With an Opinion of
Counsel, other methods may be used to establish fair market value, provided, however, that such
methods comply with the requirements of Section 1. 148-5(d)(6) of the Treasury Regulations.
(c) Arm's-length Purchases and Sales. If Investment Property is acquired pursuant to
an arm's length transaction without regard to any amount paid to reduce the yield on the
Investment Property, the fair market value of the Investment Property shall be the amount paid
for the Investment Property (without increase for transaction costs, except as otherwise provided
in Section 1.148-5(e) of the Treasury Regulations). If Investment Property is sold or otherwise
disposed of in an arm's length transaction without regard to any reduction in the disposition price
to reduce the Rebate Requirement, the fair market value of the Investment Property shall be the
amount realized from the sale or other disposition of the Investment Property (without reduction
for transaction costs, except as otherwise provided in Section 1.148-5(e) of the Treasury
Regulations).
(d) SLGS. If a United States Treasury obligation is acquired directly from or
disposed of directly to the United States Department of the Treasury (as in the case of the United
States Treasury Securities - State and Local Government Series), such acquisition or disposition
shall be treated as establishing a market for the obligation and as establishing the fair market
value of the obligation.
(e) Investment Contracts. The purchase price of any Investment Property acquired
pursuant to an investment contract (within the meaning of Section 1.148-1(b) of the Treasury
Regulations) shall be determined as provided in Section 1.148-5 of the Treasury Regulations.
No investment contract shall be acquired with Gross Proceeds unless the requirements of Section
1.148-5 of the Treasury Regulations are satisfied. With respect to any investment contract, the
Issuer will obtain from any provider of the investment contract, broker thereof or other party,
such information, certification or representation as will enable the Issuer to determine that these
requirements are satisfied.
(f) General Rule. Pursuant to Section 1.148-5 of the Treasury Regulations, the
purchase price of an investment contract will be considered to be fair market value if:
(1) the Issuer makes (or has made on its behalf) a bona fide written
solicitation for the investment contract, timely forwarded to potential providers. The
solicitation specifies all the material terms of the investment contract (i.e., all the terms
that could directly or indirectly affect the yield or the cost of the investment). The
OHSUSA:765956927.5 -18-
solicitation has a legitimate business purpose (i.e., a purpose other than to increase the
purchase price or reduce the yield) for every term of the bid specification. The terms of
the solicitation take into account the Issuer's reasonably expected deposit and drawdown
schedule for the amounts to be received;
(2) all bidders have an equal opportunity to bid so that, for example, no bidder
is given the opportunity to review other bids (a last look) before bidding;
(3) the Issuer solicits bids from at least three (3) investment contract providers
with established industry reputations as competitive providers of investment contracts;
(4) the Issuer includes in the bid specifications a statement to potential bidders
that by submitting a bid, the provider is making certain representations that the bid is
bona fide, and specifically that 1) the bidder did not consult with any other potential
provider about its bid, 2) the bid was determined without regard to any other formal or
informal agreement that the potential provider had with the issuer or any other person,
and 3) the bid was not submitted solely as a courtesy to the issuer or any other person for
purposes of satisfying the requirements of Section 1.148-5 of the Treasury Regulations;
(5) the Issuer receives at least three (3) bids from providers that do not have a
material financial interest in the issue (the following investment contract providers are
considered to have a material financial interest in the issue: 1) a lead underwriter in a
negotiated underwriting, but only until 15 days after the issue date of the issue, 2) an
entity acting as a financial advisor with respect to the purchase of the investment contract
at the time the bid specifications were forwarded to potential providers; and 3) any
related party to a provider that is disqualified for one of the two preceding reasons);
(6) at least one (1) of the bids received by the Issuer that meets the
requirements of the preceding paragraph is from an investment contract provider with an
established industry reputation as a competitive provider of investment contracts;
(7) if an agent for the Issuer conducts the bidding process, the agent does not
bid;
(8) the winning bid is the highest yielding bona fide bid (determined net of
any broker's fees); and
(9) the provider of the investment contract certifies as to all administrative
costs to be paid on behalf of the Issuer, including any fees paid as broker commissions in
connection with the investment contract.
(g) Deemed Acquisition or Sale. The fair market value of any Investment Property
not directly purchased with Gross Proceeds for which there is an established securities market
generally is the price at which a willing buyer would purchase Investment Property from a
willing seller in a bona fide, arm's length transaction.
(h) Certificates of Deposit. The purchase price of a certificate of deposit issued by a
commercial bank that has a fixed interest rate, a fixed principal payment schedule, a fixed
OHSUSA:765956927.5 -19-
maturity and a substantial penalty for early withdrawal, will be considered to be fair market
value if:
(1) the yield on the certificate of deposit is not less than the yield on
reasonably comparable direct obligations of the United States; and
(2) the yield on the certificate of deposit is not less than the highest published
yield of the provider thereof which is currently available on comparable certificates of
deposit offered to the public.
(i) Broker Compensation.
(1) Guaranteed Investment Contracts. For purposes of computing the yield on
any investment contract acquired through a broker, any compensation received by such
broker, whether payable by or on behalf of the obligor or obligee of such investment
contract may be taken into account in determining the cost of the investment contract to
the extent that the amount of the fee the Issuer treats as a "qualified administrative cost"
(within the meaning of Section 1. 148-5(e)(2)(iii) of the Treasury Regulations): (i) is, in
the Opinion of Bond Counsel, "reasonable" (within the meaning of Section 1.148-
5(e)(2)(i) of the Treasury Regulations), or (ii) does not exceed the lesser of: (a) $39,000
and (b) 0.2% of the amount of Gross Proceeds of the Bonds that the Issuer reasonably
expects, as of date the investment contract is acquired, to be deposited in the investment
contract over the term of the investment contract (i.e., the "computational base" within
the meaning of Section 1. 148-5(e)(2)(iii)(B)(2)(i) of the Treasury Regulations) or, if
more, $4,000; and with respect to the Bonds, the Issuer does not treat as qualified
administrative costs more than $110,000 in brokers' commissions or similar fees with
respect to all investment contracts and investments for yield restricted defeasance
escrows purchased with Gross Proceeds of the Bonds. The dollar amounts specified in
this Section 4.5(h)(1) are subject to the cost-of-living adjustment provided in Section
1. 148-.5(e)(2)(iii)(B) of the Treasury Regulations.
(2) Securities in a Yield Restricted Defeasance Escrow. For purposes of
computing the yield on any investment securities in an Escrow Account acquired through
a broker, any compensation received by such broker, whether payable by or on behalf of
the obligor or obligee of such investment securities may be taken into account in
determining the cost of the investment securities to the extent that the amount of the fee
the Issuer treats as a "qualified administrative cost" (within the meaning of
Section 1.148-5(e)(2)(iii) of the Treasury Regulations): (i) is, in the Opinion of Bond
Counsel, "reasonable" (within the meaning of Section 1.148-5(e)(2)(i) of the Treasury
Regulations), or (ii) does not exceed the lesser of: (a) $39,000 and (b) 0.2% of the
amount of Gross Proceeds of the Bonds invested in the investment securities (i.e., the
"computational base" within the meaning of Section 1. 148-5(e)(2)(iii)(B)(2)(ii) of the
Treasury Regulations) or, if more, $4,000; and with respect to the Bonds, the Issuer does
not treat as qualified administrative costs more than $110,000 in brokers' commissions or
similar fees with respect to all investments for yield restricted defeasance escrows and
investment contracts purchased with Gross Proceeds of the Bonds. The dollar amounts
OHSUSA:765956927,5 -20-
specified in this Section 4.5(h)(2) are subject to the cost-of-living adjustment provided in
Section 1.1 48-5(e)(2)(iii)(B) of the Treasury Regulations.
4.6 Segregation of Proceeds. In order to perform the calculations required by the
Code, it is necessary to track separately all of the Gross Proceeds. To that end, the Issuer shall
cause to be established separate accounts or subaccounts, or shall cause the Trustee to take such
other accounting measures as are necessary in order to account fully for all Gross Proceeds.
4.7 Filing Requirements. The Issuer will file or cause to be filed such reports or other
documents with the Internal Revenue Service as are required by the Code.
4.8 Retention of Firm. The Issuer has decided not, at this time, to designate a party
responsible for performing rebate calculations that may be required to be made from time to time
with respect to the Bonds and as a result undertakes and assumes full responsibility for rebate
compliance and acknowledges that Orrick, Herrington & Sutcliffe LLP has no such
responsibility (unless later engaged in writing for such purpose).
4.9 Post Issuance Compliance Procedures. The Issuer has adopted written post-
issuance compliance procedures to facilitate post-issue compliance with the covenants contained
in this Tax Certificate. Each of the Borrowers has adopted written post-issuance compliance
procedures to assure post-issuance compliance with the covenants contained in each Borrower
Tax Certificate.
ARTICLE V
OTHER MATTERS
5.1 The undersigned is an authorized representative of the Issuer and is acting for and
on behalf of the Issuer in executing this Tax Certificate. To the best of the knowledge and belief
of the undersigned, there are no other facts, estimates or circumstances that would materially
change the expectations as set forth herein, and said expectations are reasonable.
[SIGNATURE PAGE FOLLOWS]
OHSUSA:765956927.5 -21-
5.2 Notwithstanding any provision of this Tax Certificate, the Issuer may agree to
amend this Tax Certificate and thereby alter any actions allowed or required by this Tax
Certificate if such amendment is based on a written opinion of nationally recognized bond
counsel.
ALASKA MUNICIPAL ONI) BANK
By: "\
DeverfJ. Mitchell
Executive Director
OHSUSA:765956927.5 -22-