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07KODIAK ISLAND BOROUGH ALAsKA VERIFICATION REPORT FOR THE DEFEASANCEOF THE LONG-TERMCARECEÑTERREVENUE BONDS 2013 PROVIDENCE KODIAK ISLAND MEDICAL CENTER CAUSEY DEMGENMOORE i.c Certifed PubIic Accountants and Consultants CAUSEY DEMGENMOORE RC Certified Public Accountantsand Consultants 1125 Seventeenth StreetSuite 1450 Denver Colorado80202-2025 Telephone 303296-2229 Facsimile 303 296-3731 www.causeycpas.com November 22 2016 Alaska Municipal BondBank Westem Financial Group LLC 333 Willoughby Avenue 3300 NW lSS Avenue 270 Juneau Alaska 99811 Portland Oregon 97229 Kodiak Island Borough Foster Pepper PLLC 710 Mill Bay Road 1111 Third Avenue Suite 3400 Kodiak Alaska 99615 Seattle Washington 98101 We have completed our engagement to verif the mathematical accuracy of the computations relating tothe adequacy of cash plus U.S Treasury Securitiesto be heid in escrow to pay the debt service requirements of the Long-Term CareCenter Revenue Bonds 2013 Providence Kodiak Island Medical Center those bonds described in Exhibit B-1 herein referred to as the Defeased Bonds issued by the Kodiak Island Borough Alaska herein referred to as the Borough and the yield on the escrowed securities We express no opinion as to the attainability of thc assumptions underlying the computations or the tax-exempt status of the Defeased BondsOur verification was performed solely on the schedules of proposed transactions provided by Westem Financial Group LLC In the course of our engagement to verify the mathematical aceuracy of the computations in the schedules provided to us we prepared Exhibits through attached heretoand made part hereof The seope of our engagement consisted of performing the procedures described herein These procedures were performed in manner that we deem to be appropriate The accompanying exhibits of proposed transactions were prepared on thebasis of assumptions underlying the computations and iii accordance with the procedures described herein We did not independently confirm the information used with outside parties OUR UNDERSTANDINGOF TÍIE TRANSACTION On November 22 2016 the Borough intendsto use portion of available funds together with contribution to be made from thedebt servicereserve fund associated with the Defeased Bonds to purchase U.S Treasury Securities and to provide cash that will be placed into an escrow account to defease the Defeased Bonds The Trustee will pay the debt service requirements of the Defeased Bondson each scheduled payment date through and ineluding June 2018 will redeem those Defeased Bonds maturing onJune 2025 through and including June 2030 at redemption price equal to 100%of par on June 2018 which is the first optional redemption date forthis portion of the Defeased Bonds will continue to pay the debt service requirements of those Defeased Bonds maturing on June CAUSEY Kodiak Island Borough Noveinber 22 2016 Page 2024 andJune 2031 through and including June2033 on each scheduled payment date from December2018 through and including June2023and will redeemthoseDefeased Bonds maturing on June 2024 and June 2031 through and including June 2033 at redemption price equal to 100%of par on June 2023 which is the first optional redemption date for this portion of the Defeased Bonds The interest requirement due on the Defeased Bonds on December 2016 will be paid from sources outside of the escrowaccount ESCROW ACCOUNT TRANSACTIONS We verified the mathematical accuracy of the accompanying calculations of the escrow account transactions proposed to defease the Defeased Bonds The presently outstanding debt service requirements of the Defeased Bonds will be satisfied by the purchase of U.S Treasury Securities as described in Exhibit A-2 plus $0.35 in cash The securities and cash will be placed in an irrevocable escrow accountandheid therein until the Defeased Bonds are redeemed as previously described We read copy ofExhibit of the Loan Agreement for the Defeased Bonds insofar as these obligations are described with respect to principal amounts interest rates maturity dates and redemptionprovisions We assumed this document to be accurate ah debt service payments on the Defeased Bonds to be current as of November 22 2016 We compared the aboye information set forth in this docurnent with the related information contained in the schedules provided to us and found the information to be consistent We compared the subscribed interestrates of the U.S Treasury Securities State andLocal Government Series to be purchased and placed in escrow with the maximum ahlowable interest rates as published in the SLGS Daily RateTable by the Bureau of the FiscalService for November 14 2016 andfound the subscribed ratesto be less than or equal to the maximum allowable ratesthat were in effect on the subscription date for each applicable maturity date Based on the procedures and information set forth aboye the computationsprovided to usand represented in Exhibits through B-which indicatethatthesecurities andcash proposed to be placed in escrow by the Borough will produce the amounts necessary to provide for the tiniely payment of the proposed debt payment scheduleon the Defeased Bonds are mathematically correct YIELD ON THE INVESTMENT 114 THEESCROWEJ OBLIGATIONS We verified the mathematical accuracy of the accompanying computation of the yield on the investment in the escrowed U.S Treasury Securities based on anassurned settlernent date of November 22 2016 and purchase price of $4892769.00 For purposes of this calculationyield is defined as therate of interest which using the assurnptions and procedures set forth herein discountsthe cash receipts from the escrowed securitiesto an amount equal tothe purchase price of the escrowed securities The computations were made using360-dayyear with interest Kodlak Island Borough982837_1 Kodiak Island Borough November 22 2016 Page compounded semi-annually and were based on the dates the funds are to be received in the escrow account and assume that al cash balances are not reinvested Based upon the procedures and information set forth aboye the computationsprovided to us and represented in Exhibit which indicatethatthe yield on the escrowed securities is 1.60874%are mathernaticay correct USE OF TUIS REPORT Itis understood that this report is soely for the information of and assistance to the addressees hereof in connection with the defeasance of the Defeased Bonds and is notto be used reied upon circulated quoted or otherwise referred to for any other purpose without our written consent except thatreference may be made tothe report in any closing documents pertaining tothe defeasance of the Defeased Bonds the report may be used in its entirety as an exhibit to the escrow agreement for the Defeased Bonds iii the report may be relied upon by Bond Counsel in connection with its opinion concerning the Defeased Bonds iv the report may be reied upon by any rating agency or bond insurer thatshall have rated or insured or that will rate or insurethe Defeased Bonds and the report may be relied upon by the Trustee for the Defeased Bonds The scope of our engagement is deemed by the addressees hereto to be sufficient toassist such parties in evaluating the mathematical accuracy of the various computations cited aboye The sufficiency of this scope solely the responsibility of the specified users of this report and should not be taken to supplantany additional inquines or procedures thatthe users wouldundertake in their consideration of the defeasance of the bonds reated tothetransactiondescribed herein We make no representation regarding the sufficiency of the scope of this engagement This report should not beused by any party who doesnot agree to the scope set forth herein and who does not take responsibility for the sufficiency and appropriateness of such scope fortheir purposes We haveno obligation to update this report because of events circumstances or transactions occurringsubsequent tothedate of this report Very truly yours Co47 0474 1L/1 KodlakIsland Borougb982837_1 EXHIBIT KODIAK ISLAND BOROIJGH ALASKA DEFEASANCEOFTHE LONG-TERMCARE CENTERREVENUE BONDS 2013 PROVIDENCE KODIAK ISLAND MEDICAL CENTER ESCROW ACCOUNT CASH FLOW AS OFNOVEMBER 22 2016 Cash Receipts From Cash U.S Treasury Disbursements Securities From EscrowCash Date Exhibit A-1 Exhibit Balance Beginning Balance $0.35 1-Jun-1 $270005.90$270006.25 0.00 01-Dec-17 96607.16 96606.25 0.91 01-Jun-1 2021606.23 2021606.25 0.89 01-Dec-1 50281.22 50281.25 0.86 01 -Jun-1 240281.01 240281.25 0.62 1-Dec-19 47431.39 47431.25 0.76 01-Jun-20 242431.14 242431.25 0.65 01-Dec-20 43531.53 43531.25 0.93 01-Jun-21 248530.72 24853 1.25 0.40 1-Dec-2 39431.26 39431.25 0.41 01-Jun-22 254430.99 254431.25 0.15 1-Dec-22 34056.43 34056.25 0.33 l-Jun-23 1589055.931589056.25 0.01 $5177680.91$5177681.25 EXHIBIT A-1 Page of2 KODIAK ISLAND BOROUGH ALASKA DEFEASANCE OFTRE LONG-TERMCARE CENTERREVENUE BONDS 2013 PROVIDENCE KODIAK ISLAND MEDICAL CENTER CASB RECEIPTS FROM THEESCROWED SECURITIES AS OF NOVEMBER 222016 $236722.00 $65580.00$1990825.00 527961.00 5218095.00526434.008221595.00 524169.00$229341.00 0.590000%0.750000%0.850000%0.960000%1.090000%1.220000%1.330000%1.430000%1.530000% Payment SLGS SLGS SLGS SLGS SLGSSLGS SLGSSLGS SLGS Date 01-Jun-1701-Dec-17 01-Jun-1801-Dec-1801-Jun-19 01-Dec-1901-Jun-2001-Dec-2001-Jun-21 01-Jun-17 5237452.85 $258.02 58877.12 $140.81 $1247.07 5169.18 $1546.08 $18131 51840.74 01-Dec-17 65825.93 8461.01 134.21 1188.62 161.25 1473.61 172.81 1754.46 01-Jun-18 1999286.01 134.21 1188.62 161.25 1473.61 172.81 1754.46 01-Dec-18 28095.21 1188.62 161.25 1473.61 172.81 1754.46 01-Jun-19 219283.62 161.25 1473.61 172.81 1754.46 01-Dec-19 26595.25 1473.61 172.81 1754.46 01-Jun-20 223068.61 172.81 1754.46 01-Dec-20 24341.81 1754.46 O1-Jun-21 231095.46 01-Dec-21 1-Jun-22 01-Dec-22 01-Jun-23 $237452.85$66083.95$2016624.14 528504.44 5224096.55$27409.43$231982.74525559.98$245217.42 U.S Treasury Certificate of Indebtedness State and Local Government Series U.S Treasury Note or Bond State and Local Government Series KODIAK ISLAND BOROUGH ALASKA DEFEASA1CEOFTHE LONG-TERM CAItE CENTERREVENUE BONDS 2013 PRO VIDENCE KODIAK ISLAND MEDICAL CENTER CASH RECEIPTS FROM TIJE ESCROWED SECURITIES AS OF NOVEMBER 222016 $21996.00 $2371 75.00 $18852.001574024.00 1.630000%1.730000%1.830000%1.910000%Total Payment SLGS SLGSSLGS SLGS Cash Date 01-Dec-21 01-Jun-2201-Dec-2201-Jun-23 Receipts 01-Jun-17 $188.08 $2152.46 $180.98 15771.20 $270005.90 01-Dec-17 179.27 2051.56 172.50 15031.93 96607.16 01-Jun-18 179.27 2051.56 172.50 15031.93 2021606.23 01-Dec-18 179.27 2051.56 172.50 15031.93 50281.22 01-Jun-19 179.27 2051.56 172.50 1503 1.93 240281.01 01-Dec-19 179.27 205 1.56 172.50 1503 1.93 4743 1.39 01-Jun-20 179.27 2051.56 172.50 15031.93 242431.14 01-Dec-20 179.27 2051.56 172.50 15031.93 43531.53 01-Jun-21 179.27 2051.56 172.50 15031.93 248530.72 01-Dec-21 22175.272051.56 172.50 15031.93 39431.26 01-Jun-22 239226.56 172.50 15031.93 254430.99 01-Dec-22 19024.50 15031.93 34056.43 1-Jun-23 1589055.931589055.93 $23797.5$259843.06$20930.48$1770178.36$5177680.91 U.S Treasury Note or Bond State and Local Govermnent Series EXIIIBIT A-1 Page of EXHIBIT A-2 KODIAK ISLAND BOROUGH ALASKA DEFEASANCEOFTHE LONG-TERMCARECENTERREVENUE BONDS 2013 PROVIDENCE KODIAK ISLAND MEDICAL CENTER DESCRIPTION OFTHE ESCROWED SECURITIES AS OFNOVEMBER 222016 Settlement Maturity Par Coupon Total Type Date Date Amount RatePrice Cost SLGS 22-Nov-1601-Jun-17 $236722.00 0.590%100.000000%$236722.00 SLGS 22-Nov-1601-Dec-17 65580.00 0.750%100.000000%65580.00 SLGS 22-Nov-1601-Jun-18 1990825.00 0.850%100.000000%1990825.00 SLGS 22-Nov-1601-Dec-18 27961.00 0.960%100.000000%27961.00 SLGS 22-Nov-1601-Jun-19 218095.00 1.090%100.000000%218095.00 SLGS 22-Nov-1601-Dec-19 26434.00 1.220%100.000000%26434.00 SLGS 22-Nov-16 01-Jun-20 221595.00 1.330%100.000000%221595.00 SLGS 22-Nov-16 01-Dec-20 24169.00 1.430%100.000000%24169.00 SLGS 22-Nov-16 01-Jun-21 229341.00 1.530%100.000000%229341.00 SLGS 22-Nov-16 01-Dec-21 21996.00 1.630%100.000000%21996.00 SLGS 22-Nov-1601-Jun-22 237175.00 1.730%100.000000%237175.00 SLGS 22-Nov-1601-Dec-22 18852.00 1.830%100.000000%18852.00 SLGS 22-Nov-16O1-Jun-23 1574024.00 1.910%100.000000%1574024.00 $4892769.00 $4892769.00 EXHIBIT KODIAK ISLAND BOROUGH ALASKA DEFEASANCE OF THE LONG-TERM CARECENTER REVENUE BONDS 2013 PRO VIDENCEKODIAK ISLAND MEDICAL CENTER ESCROW ACCOUNT DISBURSEMENT REQUIREMENTS FOR THE DEFEASED BONDS AS OF NOVEMBER 222016 Payment For Payment Maturing Principal Date Rate Principal Redeemed Interest Total 01 -Jun-17 4.000%$1 70000.00 100006.25 $270006.25 01-Dec-17 96606.25 96606.25 01-Jun-18 Various 180000.00$1745000.0096606.252021606.25 01-Dec-18 50281.2550281.25 1-Jun-19 3.000%190000.00 50281.25240281.25 01-Dec-19 47431.2547431.25 01-Jun-20 4.000%19500000 47431.25242431.25 01-Dec-20 43531.2543531.25 01-Jun-21 4.000%205000.00 43531.25248531.25 01-Dec-21 39431.2539431.25 01 -Jun-22 5.000%215000.00 39431.25254431.25 01-Dec-22 34056.2534056.25 01 -Jun-23 Various 225000.001330000.00 34056.251589056.25 $13 80000.00$3075000.00$72268 1.25 $5 177681.25 The interest payment dueon the DefeasedBondsonDecember2016 will be paid from sources outside of the escrow EXHIBIT B-1 KOIMAK ISLAND BOROUGil ALASKA DEFEASANCE OF THE LONG-TERMCARE CENTERREVENUE BONDS 2013 PROVIDENCE KODIAK ISLAND MEDICAL CENTER DEBT SERVICE REQUIREMENTS FOR THE DEFEASED BONDS ASSUMING NO OPTIONALREDEMPTIONS PRIOR TO MATURITY AS OF NOVEMBER 22 2016 FOR INFORMATIONAL PURPOSES ONLY Payment Debt Payment For Total Debt Date Rate Principal Interest Payxnent 01-Jun-17 4.000%$170000.00$100006.25$270006.25 01-Dec-17 96606.25 96606.25 01-Jun-18 3.000%180000.00 96606.25276606.25 01-Dec-1 93906.25 93906.25 01-Jun-19 3.000%190000.00 93906.25283906.25 01-Dec-19 91056.25 91056.25 01-Jun-20 4.000%195000.00 91056.25 286056.25 01-Dec-20 87156.25 87156.25 01-Jun-21 4.000%205000.00 87156.25292156.25 01-Dec-21 83056.25 83056.25 01-Jun-22 5.000%215000.00 83056.25298056.25 01-Dec-22 77681.25 77681.25 01 -Jun-23 5.000%225000.00 77681.25302681.25 01-Dec-23 72056.25 72056.25 01-Jun-24 5.000%245000.00 72056.25 17056.25 01-Dec-24 65931.25 65931.25 01-Juri-25 5.000%250000.00 65931.25315931.25 01-Dec-25 59681.25 59681.25 01 -Jun-26 5.000%270000.00 59681.25 329681.25 01-Dec-26 52931.25 52931.25 01 -Jun-27 5.000%280000.00 52931.25332931.25 01-Dec-27 45931.25 45931.25 1-Jun-28 5.000%300000.00 45931.25345931.25 01-Dec-28 38431.25 38431.25 01 -Jun-29 5.000%310000.00 38431.25 348431.25 01-Dec-29 30681.25 30681.25 01-Jun-30 5.000%335000.00 30681.25365681.25 01-Dec-30 22306.25 22306.25 01-Jun-31 5.000%350000.00 22306.25372306.25 01-Dec-31 13556.25 13556.25 01-Jun-32 3.625%360000.00 13556.25373556.25 01-Dec-32 7031.25 7031.25 01 -Jun-33 3.750%375000.00 7031.25 382031.25 $4455000.00 $1 976006.25$643 1006.25 The interest payrnent dueon the DefeasedBondson Deceniber 2016 will be paid from sources outside of the escrow EXHIBIT B-2 KODIAK ISLAND BOROUGH ALASKA DEFEASANCEOFTHE LONG-TERMCARECENTERREVENUE BONDS 2013 PROVIDENCE KODIAK ISLAND MEDICAL CENTER DEBT SERVICE REQUIREMENTS FOR THE UNDEFEASED BONDS ASSUMING NO OPTIONALREDEMPTIONS PRIOR TO MATURITY AS OF NOVEMBER 22 2016 FOR INFORMATIONAL PURPOSES ONLY Debt Payment For Payment Defeased Total Debt DateRate Principal Interest Payment 01 -Dec-16 $255887.50$255887.50 01-Jun-17 4.000%$475000.00255887.50730887.50 01-Dec-17 246387.50246387.50 1-Jun-l 3.000%490000.00246387.50736387.50 01-Dec-18 239037.50239037.50 1-Jun-19 3.000%500000.00239037.50739037.50 01-Dec-19 23 1537.50 23 1537.50 01 -Jun-20 4.000%520000.00231537.50751537.50 01-Dec-20 221137.50221137.50 01-Jun-21 4.000%540000.00221137.50761137.50 01-Dec-21 210337.50210337.50 01 -Jun-22 5.000%560000.00210337.50770337.50 01-Dec-22 196337.50 196337.50 01 -Jun-23 5.000%590000.00196337.50786337.50 01-Dec-23 181587.50 181587.50 01-Jun-24 5.000%615000.00 181587.50 796587.50 01 -Dec-24 166212.50166212.50 01-Jun-25 5.000%650000.00 166212.50 816212.50 01 -Dec-25 149962.50 149962.50 01-Jun-26 5.000%680000.00 149962.50 829962.50 01 -Dec-26 132962.50132962.50 01-Jun-27 5.000%715000.00 132962.50 847962.50 01-Dec-27 115087.50 115087.50 01-Jun-28 5.000%750000.00 115087.50 865087.50 0I-Dec-28 96337.50 96337.50 01 -Jun-29 5.000%790000.00 96337.50 886337.50 01-Dec-29 76587.50 76587.50 01 -Jun-30 5.000%825000.00 76587.50901587.50 01-Dec-30 55962.50 55962.50 01 -Jun-3 5.000%870000.00 55962.50 925962.50 01-Dec-31 34212.50 34212.50 01 -Jun-32 3.625%910000.00 34212.50944212.50 01-Dec-32 17718.75 17718.75 01-Jun-33 3.750%945000.00 17718.75 962718.75 $1 1.425.000.00$5.254.587.5016.679.587.50 EXHIBIT B-3 KODIAK ISLAND BOROUGH ALASKA DEFEASANCEOFTHE LONC-TERM CARECENTERREVENUE BONDS 2013 PROVIDENCE KODIAK ISLAND MEDICAL CENTER DEBT SERVICE REQUIREMENTSFORTHE BONDS ASSUMINC NO OPTIONAL REDEMPTIONS PRIOR TO MATURITY AS OF NOVEMBER 22 2016 FOR INFORMATIONAL PURPOSES ONLY Original Undefeased Payment Principal Defeased Principal Date Outstanding Bond Principal Remaining 01-Jun-17 $645000.00$170000.00 $475000.00 01-Dec-17 01-Jun-18 670000.00 180000.00 490000.00 01-Dec-1 1-Jun-19 690000.00 190000.00 500000.00 01-Dec-19 01-Jun-20 715000.00 195000.00 520000.00 01 -Dec-20 01-Jun-21 745000.00205000.00 540000.00 1-Dec-2 01-Jun-22 775000.00215000.00 560000.00 01 -Dec-22 01-Jun-23 815000.00225000.00 590000.00 01 -Dec-23 01-Jun-24 860000.00245000.00 615000.00 01 -Dec-24 01-Jun-25 900000.00250000.00 650000.00 01-Dec-25 01 -Jun-26 950000.00270000.00 680000.00 01 -Dec-26 0J-Jun-27 995000.00 280000.00 715000.00 01 -Dec-27 01-Jun-28 1050000.00 300000.00 750000.00 01-Dec-28 01-Jun-29 1100000.00 310000.00 790000.00 01 -Dec-29 01 -Jun-30 1160000.00 335000.00 825000.00 O1-Dec-30 01-Jun-31 1220000.00 350000.00 870000.00 01 -Dec-3 01-iun-32 1270000.00 360000.00 910000.00 01 -Dec-32 01 -Jun-33 1320000.00 375000.00 945000.00 $1 5880000.00 $4.455.000.00 $0.00$11.425.000.00 EXHIBIT KODIAK ISLAND BOROUGH ALASKA DEFEASANCEOFTHE LONG-TERMCARECENTERREVENUE BONDS 2013 PROVIDENCE KODIAK ISLAND MEDICAL CENTER YIELD ON THE ESCROWED SECURITIES AS OF NOVEMBER 22 2016 Total Cash Present Value at Receipts From November 22 2016 U.S Treasury Using Semi-Annually Securities Compounded Yieldof Date Exhbit 1.60874% 01-Jun-1 $270005.90 $267744 12 01-Dec-17 96607.16 95033.48 01-Jun-1 2021606.23 1972806.75 01-Dec-18 50281.22 48675.95 01-Jun1 240281.01 23 0753.73 01-Dec-19 47431.39 45187.24 01-Jun-20 24243 1.14 229117.88 01-Dec-20 4353 1.53 40812.68 01-Jun-21 248530.72 231148.96 01-Dec-21 39431.26 36380.88 01-Jun-22 254430.99 232875.16 01-Dec-22 34056.43 30922.38 01-Jun-23 1589055.93 1431309.79 $5177680.91 $4892769.00 TotalCost of the Securities $4892769.00 EXHIBIT KODIAK ISLAND BOROUGH ALASKA DEFEASANCE OF THE LONG-TERMCARE CENTER REVENUE BONDS 2013 PROVIDENCE KODIAK ISLAND MEDICAL CENTER ESTIMATED SOURCES AND USES OFFUNDS AS OFNOVEMBER 22 2016 Sources of Funds KIB Contribution 84540656.85 DSRF Contribution 1346687.50 Total Sources of Funds 85887344.35 Uses of Funds Beginning EscrowAccountCash Balance $0.35 Cost of the Escrowed Securities 4892769.00 DSRF Deposit 983075.00 IssuanceCosts 11500.00 Total Uses of Funds $5887344.35