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08-19-03 agendaG~~ CITY OF RICHFIELD, MINNESOTA TUESDAY, AUGUST 19, 2003 SPECIAL CITY COUNCIL MEETING COUNCIL CHAMBERS 6700 PORTLAND AVENUE 5:30 P.M. AGENDA 1. Consideration of resolution awarding sale of $4,965,000 Taxable General Obligation Tax Increment Bonds, Series 2003A, fixing form and specifications, directing execution and delivery, and providing for payment; Lyndale Gateway West Project (tabled from August 12, 2003) Staff Report No. 191 Notes: 2. Consideration of resolution authorizing Richfield HRA's internal loans for advance of public redevelopment costs in connection with Lyndale Gateway West Tax Increment Financing District Staff Report No. 192 Notes: 3. Adjournment Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96 hours in advance to the Administrative Services Director at 612-861-9702. STAFF REPORT AGENDA ITEM # REPORT # CITY COUNCIL MEETING AUGUST 19, 2003 2 19 REPORT PREPARED BY: JOHN STARK, COMMUNITY DEVELOPMENT MANAGER NAME, Tlr'Lr• COUNCIL PRESENTER: ACTING DEPARTMENT DIRECTOR ~ _. REVIEW: SIC ATURE REVIEWED BY CITY MANAGER: ITEM FOR COUNCIL CONSIDERATION: Consideration of the attached resolution approving the Richfield Housing and Redevelopment Authority's Internal Loans for Advance of Public Redevelopment Costs in Connection with Lyndale Gateway West Tax Increment Financing District. I. RECOMMENDED ACTION: By Motion: Approve the attached resolution approving the Richfield Housing and Redevelopment Authority's Internal Loans for Advance of Public Redevelopment Costs in Connection With Lyndale Gateway West Tax Increment Financing District. II. BACKGROUND • On May 19, 2003, the Richfield Housing and Redevelopment Authority (HRA) approved a $1.1 million internal loan for the Lyndale Gateway redevelopment project. • The source of revenue for this internal loan is the HRA's Bonds of 1996 account. • The repayment sources for this internal loan include: a $500,000 mortgage on the commercial portion of the redevelopment project, tax increment to be generated by the project, and a $500,000 letter of credit from the developer. • On August 18, 2003, the Richfield HRA considered approval of an additional $855,000 in internal loan funds. 081903 LGW Internal Loan • The sources of revenue for this additional internal loan are the HRA's Bonds of 1988 and the HRA's Bonds of 1996. • The repayment source for this internal loan will be the proceeds of a long term general obligation tax increment financing bond that is contemplated for issuance at the time that a developer moves ahead with the redevelopment of the area. • The HRA's financial analysts, Ehlers and Associates, Inc., have reviewed the proposed internal loan and have determined that there are sufficient repayment sources with which to service the loan regardless of whether the current developer proceeds or a new developer ultimately constructs a redevelopment project on this site. • The HRA is both the recipient of these loans and the source of payment for these loans; hence the name Internal Loan. • By State ordinance, the City Council must approve of internal loans within the Housing and Redevelopment Authority. III. BASIS OF RECOMMENDATION A. POLICY • The HRA has, or is anticipated to, approve $1,855,000 in internal loans. • The HRA has identified repayment sources for these internal loans. • The City Council must approve of the internal loans of the HRA. B. CRITICAL ISSUES • Without the funds authorized through the HRA's internal loans, it will be impossible to assemble the Lyndale Gateway West redevelopment area. C. FINANCIAL • The HRA's financial analysts, Ehlers and Associates, Inc., have reviewed the proposed internal loan and have determined that there are sufficient repayment sources with which to service the loan regardless of whether the current developer proceeds or a new developer ultimately constructs a redevelopment project on this site. D. LEGAL • The City's legal counsel drafted the attached resolution. IV. ALTERNATIVE RECOMMENDATION(S~ • N/A L V. ATTACHMENTS • Resolution VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Legal counsel. RESOLUTION NO. RESOLUTION APPROVING INTERNAL LOANS FOR ADVANCE OF PUBLIC REDEVELOPMENT COSTS IN CONNECTION WITH LYNDALE GATEWAY WEST TAX INCREMENT FINANCING DISTICT BE IT RESOLVED by the City Council of the City Richfield, Minnesota ("City") as follows: Section 1. Background. 1.01. Pursuant to Minnesota Statutes, Sections 469.174 to 469.179 (the "TIF Act") the Housing and Redevelopment Authority in and for the City of Richfield ("HRA") previously established the Lyndale Gateway West Tax Increment Financing District (the "TIF District") within the Richfield Redevelopment Project Area (the "Project Area"). 1.02. The HRA may incur certain costs related to the TIF District, which costs may be financed on a temporary basis from available funds in the account for other tax increment financing districts administered by the HRA, or from other HRA funds available for such purposes. 1.03. Under Section 469.178, Subdivision 7 of the TIF Act, the HRA is authorized to advance or loan money from any fund from which such advances may be legally made in order to finance expenditures that are eligible to be paid with tax increments under the TIF Act. 1.04. The HRA has approved an Amended and Restated Contract for Private Redevelopment (the "Contract") between the HRA and Lyndale Gateway LLC, ("Redeveloper") under which, among other things, the HRA will provide the Redeveloper proceeds from general obligation tax increment bonds to be issued by the City and an interfund loan fund to finance certain Public Development Costs as defined in the Contract. 1.05. By resolution approved May 19, 2003, the HRA established an interfund loan in the amount of $1,100,000 (the $1,100,000 Loan") to finance certain Public Redevelopment Costs (as defined in the. Contract) on a temporary basis. 1.06. The City intends to issue its $4,965,000 Taxable General Obligation Temporary Tax Increment Bonds, Series 2003A (the "Short Term Bonds") to provide financing for part of the Public Redevelopment Costs. A portion of the Short Term Bonds will be paid with proceeds. of long-term general obligation tax increment bonds (the "Long Term Bonds") to be issued at or before maturity of the Short Term Bonds. 1.07. The HRA has determined a need to provide additional temporary financing for Public Redevelopment Costs through an additional interfund loan in the amount of $855,000 (the "$855,000 Loan") to be repaid in accordance with the terms of a resolution approved by the HRA on August 18, 2003. 081903 LGW Internal Loan Section 2. Internal Loans Approved. 2.01. The City ratifies and approves the $1,100,000 Loan and the $855,000 Loan, as described in the respective resolutions of the HRA authorizing such loans. 2.02. City staff and officials are authorized and directed to execute any collateral documents and take any other actions necessary to carry out the internal loans described in this resolution. Adopted by the City Council of the City of Richfield, Minnesota this 19th day of August, 2003. Martin J. Kirsch, Mayor ATTEST: Nancy Gibbs, City Clerk AGENDA ITEM # j REPORT # 19 I STAFF REPORT CITY COUNCIL MEETING AUGUST 19, 2003 REPORT PREPARED BY: CHRIS REGIS, FINANCE MANAGER NAME, TITLE COUNCIL PRESENTER: NAME, I E DEPARTMENT DIRECTOR REVIEW: ~ ,~vl SIGNATURE REVIEWED BY CITY MANAGER: ITEM FOR COUNCIL CONSIDERATION: Consideration of the attached resolution awarding the sale of $4,965,000 Taxable General Obligation Tax Increment Bonds, Series 2003A; fixing their form and specifications; .directing their execution and delivery; and providing for their payment (tabled from August 12, 2003). I. RECOMMENDED ACTION: By Motion: Approve the attached resolution awarding the sale of $4,965,000 Taxable General Obligation Tax Increment Bonds, Series 2003A; fixing their form and specifications; directing their execution and delivery; and providing for their payment. III. BACKGROUND ~ • ~n order to provide time to respond to comments by the developer's lender, this item was tabled from the August 12,2003 City Council meeting. The issue of collateral levels have since been resolved. • On April 22, 2003, the City Council adopted a resolution providing for the sale of $6,000,000 General Obligation Tax Increment Bonds, Series 2003, (G.O. TIF Bond) to help provide funding to fulfill the financial commitments of the Kensington Park Project. • Since that time, however, the bond has been restructured and temporarily reduced to an amount of $4,965,000. The purpose of the restructuring is to advance site assembly funds on an interim basis until the private development financing is available. A second bond issuance will be sought when the current developer (The Cornerstone Group) or a new developer, in the event that the 0326awardbond.doc current developer is unable to secure private construction financing, secures their private financing. • This second bond issuance would be in an amount necessary to provide a total of up to $6,000,000 in bond funds as was approved on April 22, 2003. • The level of bonds to be issued now includes approximately $4.59 million in bond proceeds plus $406,000 in interest and issuance fees. • The source of funding for the debt service on these bonds is to be the tax increment generated by the project and proceeds from the sales of housing units. • On April 21, 2003, the Housing and Redevelopment Authority (HRA) approved a resolution authorizing the execution of a Tax Increment Pledge Agreement (Pledge Agreement) with the City for this bond issue. The Pledge Agreement provides the HRA with the authority to transfer to the City the tax increment from the Kensington Park project to pay debt service on the bonds. At the August 18, 2003 HRA meeting the pledge agreement approved April 21, 2003 will be amended to reflect the new bond amount. • The City's resolution awarding the sale of the bonds also includes language that authorizes and directs the Mayor and City Manager to execute and deliver the Pledge Agreement on behalf of the City • Bids on the bonds are due in the offices of Ehlers & Associates on Tuesday August 19. Mr. Sid Inman will be at the City Council meeting to recommend the successful bidder, review the attached documents, and provide information that is absent from the resolution and available only after the bidding on the bonds has closed. • Following Mr. Inman's recommendation, it would be appropriate for the City Council to award the bond sale to the qualified buyer and undertake other related actions as necessary as delineated in the approving resolution. The closing on the G.O. TIF Bonds is scheduled for September 9, 2003. III. BASIS OF RECOMMENDATION A. POLICY • The HRA signed a Contract for Private Development with Lyndale Gateway LLC for the Lyndale Gateway West area on August 5, 2002 and has made financial commitments, a component of which includes the issuance of G.O. TIF Bonds. • The City Council approved the issuance of G.O. TIF Bonds on April 22, 2003. • The HRA approved execution of a Pledge Agreement relating to the G.O. TIF Bonds on April 21, 2003. The Pledge Agreement is to be amended at the August 18, 2003 HRA meeting to reflect the new amount of the bonds. B. CRITICAL ISSUES • In order for the development to move forward, the bond financing is critical to the success of the .project. • The closing on the bond sale is scheduled for September 9, 2003. C. FINANCIAL • The bond sale will help make it possible to meet the financial commitments needed for the project to proceed. • The funding for the debt service on the G.O. TIF Bonds is to be the tax increment generated by the Kensington Park development and proceeds from the sale of housing units. D. LEGAL • Legal counsel has been involved in the bond sale transaction as bond counsel to the City. IV. ALTERNATIVE RECOMMENDATION(S) • The City Council may decide to not proceed with awarding the sale of the bonds or delay action until a future City Council meeting. However, both of these alternatives would jeopardize the Kensington Park project and make it impossible for the developer to honor purchase agreements with property owners calling for a September 9, 2003 closing. V. ATTACHMENTS • Resolution Awarding the Sale of $4,965,000 General Obligation Tax Increment Bonds, Series 2003A; fixing their form and specifications; directing their execution and delivery; and providing for their payment. VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Sid Inman, Ehlers & Associates, Inc. Extract of Minutes of Meeting of the City Council of the City of Richfield, Hennepin County, Minnesota Pursuant to due call and notice thereof, a regular meeting of the City Council of the City of Richfield, Minnesota, was duly held in the City Hall in said City on Tuesday, August 19, 2003 commencing at 7:00 o'clock P.M. The following members were present: and the following were absent: The Mayor announced that the next order of business was consideration of the proposals which had been received for the purchase of the City's approximately $4,965,000 Taxable General Obligation Temporary Tax Increment Bonds, Series 2003A. The City Manager presented a tabulation of the proposals that had been received in the manner specified in the Official Terms of Proposal for the Bonds. The proposals were as follows: SJB-235672v1 RC145-506 After due consideration of the proposals, Member then introduced the following written resolution, the reading of which was dispensed with by unanimous consent, and moved its adoption: RESOLUTION NO. A RESOLUTION AWARDING THE SALE OF $ TAXABLE GENERAL OBLIGATION TEMPORARY TAX INCREMENT BONDS, SERIES 2003A; FIXING THEIR FORM AND SPECIFICATIONS; DIRECTING THEIR EXECUTION AND DELIVERY; AND PROVIDING FOR THEIR PAYMENT BE IT RESOLVED By the City Council of the City of Richfield, Hennepin County, Minnesota (City) as follows: Section 1. Sale of Bonds. 1.01. It is hereby determined that: (a) the City and the Housing and Redevelopment Authority in and for the City of Richfield (Authority) previously established the Richfield Redevelopment Project Area (Project Area) pursuant to Minnesota Statutes, Sections 469.001 through 469.047 (Act); (b) the City has duly established the Lyndale Gateway West Tax Increment Financing District (TIF District) within the Project Area pursuant to Minnesota Statutes, Sections 469.174 to 469.179 (TIF Act); (c) the City is authorized by section 469.178 of the TIF Act to issue and sell its general obligations to pay all or a portion of the public redevelopment costs (Costs) related to the Project Area as identified in the plan (Plan) for the TIF District. (d) general obligations: the Plan authorizes the following Costs to be financed by the SJB-235672v1 RC145-506 Public Redevelopment Cost Amount Land acquisition, demolition, site work And related costs Project Costs $4,559,224 Contingency 1,848 Discount Allowance 49,650 Finance Related Expenses 45,000 Capitalized Interest 309.278 Total Uses $4,965,000 (e) it is necessary and expedient to the sound financial management of the affairs of the City to issue $ Taxable General Obligation Temporary Tax Increment Bonds, Series 2003A (Bonds) to provide temporary financing for the Costs; (f) the Authority has requested the City to issue and sell its general obligations to provide temporary financing for a portion of the Costs. (g) the Amended Tax Increment Pledge Agreement between the Authority and the City (Pledge Agreement) is approved in substantially the form on file with the City, and the Mayor and City Manager are authorized to execute such agreement on behalf of the City. 1.02. The proposal of (Purchaser) to purchase $ Taxable General Obligation Temporary Tax Increment Bonds, Series 2003A (Bonds) of the City described in the Terms of Proposal thereof is found and determined to be a reasonable offer and is hereby accepted, the proposal being to purchase the Bonds at a price of $ plus accrued interest to date of delivery, for Bonds bearing interest at the rate of % per annum. True interest cost: 1.03. The sum of $ being the amount proposed by the Purchaser in excess of $4,915,350 will be credited to the Debt Service Fund hereinafter created. The City Finance Manager is directed to retain the good faith check of the Purchaser, pending completion of the sale of the Bonds, and to return the good faith checks of the unsuccessful proposers forthwith. The Mayor and City Manager are directed to execute a contract with the Purchaser on behalf of the City. 1.04. The City will forthwith issue and sell the Bonds pursuant to Minnesota Statutes, Chapter 469 (Act), in the total principal amount of $ ,originally dated as of the date of delivery, in the denomination of $5,000 each or any integral multiple thereof, numbered No. R-1, upward, bearing interest as above set forth, and maturing serially on February 1, 2006. SJB-235672v1 RC 145-506 1.05. Optional Redemption. The City may elect on February 1, 2004, and on any day thereafter to prepay Bonds due on February 1, 2006. Redemption may be in whole or in part and if in part, at the option of the City and in such manner as the City will determine. If less than all Bonds of a maturity are called for redemption, the City will notify DTC (as defined in Section 6 hereof) of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each participant's interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interests in such maturity to be redeemed. Prepayments will be at a price of par plus accrued interest. Section 2. Registration and Payment. 2.01. Re:;istered Form. The Bonds will be issued as a single typewritten bond, only in registered form. The interest thereon and, upon surrender of each Bond, the principal amount thereof, is payable by check or draft issued by the Registrar described herein. 2.02. Dates; Interest Payment Dates. The Bond will be dated as of the last interest payment date preceding the date of authentication to which interest on the Bond has been paid or made available for payment, unless (i) the date of authentication is an interest payment date to which interest has been paid or made available for payment, in which case the Bond will be dated as of the date of authentication, or (ii) the date of authentication is prior to the first interest payment date, in which case the Bond will be dated as of the date of original issue. The interest on the Bonds is payable on February 1 and August 1 of each year, commencing February 1, 2004, to the registered owners of record thereof as of the close of business on the fifteenth day of the immediately preceding month, whether or not such day is a business day. 2.03. Registration. The City will appoint a bond registrar, transfer .agent, authenticating agent and paying agent (Registrar). The effect of registration and the rights and duties of the City and the Registrar with respect thereto are as follows: (a) Re ig ster. The Registrar must keep at its principal corporate trust office a bond register in which the Registrar provides for the registration of ownership of Bonds and the registration of transfers and exchanges of Bonds entitled to be registered, transferred or exchanged. (b) Transfer of Bonds. Upon surrender for transfer of a Bond duly endorsed by the registered owner thereof or accompanied by a written instrument of transfer, in form satisfactory to the Registrar, duly executed by the registered owner thereof or by an attorney duly authorized by the registered owner in writing, the Registrar will authenticate and deliver, in the name of the designated transferee or transferees, one or more new Bonds of a like aggregate principal amount and maturity, as requested by the transferor. The Registrar may, however, close the books for registration of any transfer after the fifteenth day of the month preceding each interest payment date and until that interest payment date. SJB-235672v1 RC 145-506 (c) Exchange of Bonds. When Bonds are surrendered by the registered owner for exchange the Registrar will authenticate and deliver one or more new Bonds of a like aggregate principal amount and maturity as requested by the registered owner or the owner's attorney in writing. (d) Cancellation. Bonds surrendered upon transfer or exchange will be promptly cancelled by the Registrar and thereafter disposed of as directed by the City. (e) Imp~er or Unauthorized Transfer. When a Bond is presented to the Registrar for transfer, the Registrar may refuse to transfer the Bond until the Registrar is satisfied that the endorsement on the Bond or separate instrument of transfer is valid and genuine and that the requested transfer is legally authorized. The Registrar will incur no liability for the refusal, in good faith, to make transfers which it, in its judgment, deems improper or unauthorized. (f) Persons Deemed Owners. The City and the Registrar may treat the person in whose name a Bond is registered in the bond register as the absolute owner of the Bond, whether the Bond is overdue or not, for the purpose of receiving payment of, or on account of, the principal of and interest on the Bond and for all other purposes, and payments so made to a registered owner or upon the owner's order will be valid and effectual to satisfy and discharge the liability upon the Bond to the extent of the sum or sums so paid. (g) Taxes, Fees and Charges. The Registrar may impose a charge upon the owner thereof for a transfer or exchange of Bonds sufficient to reimburse the Registrar for any tax, fee or other governmental charge required to be paid with respect to the transfer or exchange. (h) Mutilated, Lost, Stolen or Destroyed Bonds. If a Bond becomes mutilated or is destroyed, stolen or lost, the Registrar will deliver a new Bond of like amount, number, maturity date and tenor in exchange and substitution for and upon cancellation of the mutilated Bond or in lieu of and in substitution for a Bond destroyed, stolen or lost, upon the payment of the reasonable expenses and charges of the Registrar in connection therewith; and, in the case of a Bond destroyed, stolen or lost, upon filing with the Registrar of evidence satisfactory to it that the Bond was destroyed, stolen or lost, and of the ownership thereof, and upon furnishing to the Registrar an appropriate bond or indemnity in form, substance and amount satisfactory to it and as provided by law, in which both the City and the Registrar must be named as obligees. Bonds so surrendered to the Registrar will be cancelled by the Registrar and evidence of such cancellation must be given to the City. If the mutilated, destroyed, stolen or lost Bond has already matured or been called for redemption in accordance with its terms it is not necessary to issue a new Bond prior to payment. (i) Redemption. In the event any of the Bonds are called for redemption, notice thereof identifying the Bonds to be redeemed will be given by the Registrar by mailing a copy of the redemption notice by first class mail (postage prepaid) to the SJB-235672v1 RC 145-506 registered owner of each Bond to be redeemed at the address shown on the registration books kept by the Registrar and by publishing the notice if required by law. Failure to give notice by publication or by mail to any registered owner, or any defect therein, will not affect the validity of the proceedings for the redemption of Bonds. Bonds so called for redemption will cease to bear interest after the specified redemption date, provided that the funds for the redemption are on deposit with the place of payment at that time. 2.04. Appointment of Initial Registrar. The City appoints U.S. Bank Trust National Association, St. Paul, Minnesota, as the initial Registrar. The Mayor and the City Manager are authorized to execute and deliver, on behalf of the City, a contract with the Registrar. Upon merger or consolidation of the Registrar with another corporation, if the resulting corporation is a bank or trust company authorized by law to conduct such business, the resulting corporation is authorized to act as successor Registrar. The City agrees to pay the reasonable and customary charges of the Registrar for the services performed. The City reserves the right to remove the Registrar upon 30 days' notice and upon the appointment of a successor Registrar, in which event the predecessor Registrar must deliver all cash and Bonds in its possession to the successor Registrar and must deliver the bond register to the successor Registrar. On or before each principal or interest due date, without further order of this Council, the City Finance Manager must transmit to the Registrar monies sufficient -for the payment of all principal and interest then due. 2.05. Execution, Authentication and Delivery. The Bonds will be prepared under the direction of the City Manager and executed on behalf of the City by the signatures of the Mayor and the City Manager, provided that those signatures may be printed, engraved or lithographed facsimiles of the originals. If an officer whose signature or a facsimile of whose signature appears on the Bonds ceases to be such officer before the delivery of a Bond, such signature or facsimile will nevertheless be valid and sufficient for all purposes, the same as if the officer had remained in office until delivery. Notwithstanding such execution, a Bond will not be valid or obligatory for any purpose or entitled to any security or benefit under this Resolution unless and until a certificate of authentication on the Bond has been duly executed by the manual signature of an authorized representative of the Registrar. Certificates of authentication on different Bonds need not be signed by the same representative. The executed certificate of authentication on a Bond is conclusive evidence that it has been authenticated and delivered under this Resolution. When the Bonds have been so prepared, executed and authenticated, the City Manager will deliver the same to the Purchaser upon payment of the purchase price in accordance with the contract of sale heretofore made and executed, and the Purchaser is not obligated to see to the application of the purchase price. 2.06. Temporary Bonds. The City may elect to deliver in lieu of printed definitive Bonds one or more typewritten temporary Bonds in substantially the form set forth in Section 3 with such changes as may be necessary to reflect more than one maturity in a single temporary bond. Upon the execution and delivery of definitive Bonds the temporary Bonds will be exchanged therefor and cancelled. SJB-235672vi RC 145-506 Section 3. Form of Bond. 3.01. The Bond will be printed or typewritten in substantially the following form: No. R-1 UNITED STATES OF AMERICA $ STATE OF MINNESOTA COUNTY OF HENNEPIN CITY OF RICHFIELD TAXABLE GENERAL OBLIGATION TEMPORARY TAX INCREMENT BOND, SERIES 2003A Date of Rate Maturity Original Issue CUSIP February 1, 2006 , 2003 Registered Owner:- Cede & Co. The City of Richfield, Minnesota, a duly organized and existing municipal corporation in Hennepin County, Minnesota (City), acknowledges itself to be indebted and for value received hereby promises to pay to the Registered Owner specified above or registered assigns, the principal sum of $ on the maturity date specified above, with interest thereon from the date hereof at the annual rate specified above, payable February 1 and August 1 in each year, commencing February 1, 2004, to the person in whose name this Bond is registered at the close of business on the fifteenth day (whether or not a business day) of the immediately preceding month. The interest hereon and, upon presentation and surrender hereof, the principal hereof are payable in lawful money of the United States of America by check or draft by U.S. Bank Trust National Association, St. Paul, Minnesota, as Bond Registrar, Paying Agent, Transfer Agent and Authenticating Agent, or its designated successor under the Resolution described herein. For the prompt and full payment of such principal and interest as the same respectively become due, the full faith and credit and taxing powers of the City have been and are hereby irrevocably pledged. The City may elect on February 1, 2004, and on any day thereafter to prepay the Bonds. Redemption may be in whole or in part and if in part, at the option of the City and in such manner as the City will determine. If less than all Bonds of a maturity are called for redemption, the City will notify The Depository Trust Company (DTC) of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each participant's interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interests in such maturity to be redeemed. Prepayments will be at a price of par plus accrued interest. SJB-235672v1 RC 145-506 This Bond is one of an issue in the aggregate principal amount of $ all of like original issue date and tenor, except as to number, maturity date, redemption privilege, and interest rate, all issued pursuant to a resolution adopted by the City Council on August 19, 2003 (the Resolution), for the purpose of providing money to aid in financing public redevelopment costs in a redevelopment project (Project) in the City, pursuant to and in full conformity with the home rule charter of the City and the Constitution and laws of the State of Minnesota, including Minnesota Statutes, Sections 469.174 through 469.179, the Minnesota Tax Increment Financing Act, and Minnesota Statutes, Sections 469.001 through 469.047, and the principal hereof and interest hereon are payable primarily from tax increments resulting from increases in taxable valuation of real property in a tax increment financing district (TIF District) within the Project as set forth in the Resolution to which reference is made for a full statement of rights and powers thereby conferred. The full faith and credit of the City are irrevocably pledged for payment of this Bond and the City Council has obligated itself to issue and sell definitive or additional temporary bonds to redeem the Bonds and to levy ad valorem taxes on all taxable property in the City in the event of any deficiency of tax increments pledged, which taxes may be levied without limitation as to rate or amount. The Bonds of this series are issued only as fully registered Bonds in denomination of $5,000 or integral multiples thereof. As provided in the Resolution and subject to certain limitations set forth therein, this Bond is transferable upon the books of the City at the principal office of the Bond Registrar, by the registered owner hereof in person or by the owner's attorney duly authorized in writing, upon surrender hereof together with a written instrument of transfer satisfactory to the Bond Registrar, duly executed by the registered owner or the owner's attorney; and may also be surrendered in exchange for Bonds of other authorized denominations. Upon such transfer or exchange the City will cause a new Bond or Bonds to be issued in the name of the transferee or registered owner, of the same aggregate principal amount, bearing interest at the same rate and maturing on the same date, subject to reimbursement for any tax, fee or governmental charge required to be paid with respect to such transfer or exchange. The City and the Bond Registrar may deem and treat the person in whose name this Bond is registered as the absolute owner hereof, whether this Bond is overdue or not, for the purpose of receiving payment and for all other purposes, and neither the City nor the Bond Registrar will be affected by any notice to the contrary. IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that all acts, conditions and things required by the home rule charter of the City and the Constitution and laws of the State of Minnesota to be done, to exist, to happen and to be performed preliminary to and in the issuance of this Bond in order to make it a valid and binding general obligation of the City in accordance with its terms, have been done, do exist, have happened and have been performed as so required, and that the issuance of this Bond does not cause the indebtedness of the City to exceed any constitutional, statutory or charter limitation of indebtedness. This Bond is not valid or obligatory for any purpose or entitled to any security or benefit under the Resolution until the Certificate of Authentication hereon has been executed by the Bond Registrar by manual signature of one of its authorized representatives. SJB-235672v1 RC 145-506 IN WITNESS WHEREOF, the City of Richfield, Hennepin County, Minnesota, by its City Council, has caused this Bond to be executed on its behalf by the facsimile or manual signatures of the Mayor and City Manager and has caused this Bond to be dated as of the date set forth below. Dated: CITY OF RICHFIELD, MINNESOTA City Manager Mayor CERTIFICATE OF AUTHENTICATION This is one of the Bonds delivered pursuant to the Resolution mentioned within. U.S. BANK TRUST NATIONAL ASSOCIATION By Authorized Representative The following abbreviations, when used in the inscription on the face of this Bond, will be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by entireties UNIF GIFT MIN ACT Custodian (Gust) JT TEN -- as joint tenants with right of survivorship and not as tenants in common under Uniform Gifts or Transfers to Minors Act............ (State) Additional abbreviations may also be used though not in the above list. SJB-235672v1 RC 145-506 ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto the within Bond and all rights thereunder, and does hereby irrevocably constitute and appoint attorney to transfer the said Bond on the books kept for registration of the within Bond, with full power of substitution in the premises. Dated: Notice: The assignor's signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or any change whatever. Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a financial institution that is a member of the Securities Transfer Agent Medallion Program ("STAMP"), the Stock Exchange Medallion Program ("SEMP"), the New York Stock Exchange, Inc. Medallion Signatures Program ("MSP") or other such "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, SEMP or MSP, all in accordance with the Securities Exchange Act of 1934, as amended. The Bond Registrar will not effect transfer of this Bond unless the information concerning the assignee requested below is provided. Name and Address: (Include information for all joint owners if this Bond is held by joint account.) SJB-235672v1 RC 145-506 Please insert social security or other identifying number of assignee PROVISIONS AS TO REGISTRATION The ownership of the principal of and interest on the within Bond has been registered on the books of the Registrar in the name of the person last noted below. Signature of Date of Registration Registered Owner Officer of the Re ig'strar Cede & Co. Federal ID #13-2555119 3.02. The City Manager is directed to obtain a copy of the proposed approving legal opinion of Kennedy & Graven, Chartered, Minneapolis, Minnesota, which is to be complete except as to dating thereof and will cause the opinion to be printed on or accompany each Bond. Section 4. Payment; Security. 4.01. The Bonds are payable from the Taxable General Obligation Temporary Tax Increment Bonds, Series 2003A Debt Service Fund (Debt Service Fund) hereby created. All tax increments (Tax Increments) received by the City from the TIF District pursuant to the Pledge Agreement described in Section 1.01 hereof are pledged to the Debt Service Fund. If a payment of principal or interest on the Bonds becomes due when there is not sufficient money in the Debt Service Fund to pay the same, the City Manager will pay such principal or interest from the general fund of the City, and the general fund will be reimbursed for those advances out of the proceeds of Tax Increments when received. There is hereby appropriated to the Debt Service Fund: (i) capitalized interest financed from Bond proceeds, if any, and (ii) any amount over the minimum purchase price of the Bonds paid by the Purchaser. 4.02. Net proceeds of the Bonds will be applied in accordance with the terms of the Pledge Agreement. 4.03. In accordance with its statutory duties under Minnesota Statutes, Section 478.178, Subdivision 5, the City covenants and agrees with the holders of the Bonds that if the Bonds cannot be paid at maturity from tax increments pledged or from other funds appropriated by the ~ ~' City Council, the Bonds will be paid from the proceeds of definitive or additional temporary bonds that will be issued and sold prior to the maturity date of the Bonds. SJB-235672v1 RC 145-506 4.04. It is hereby determined that the estimated collection of Tax Increments for payment of principal and interest on the Bonds, together with proceeds of any definitive or additional temporary bonds, will produce at least five percent in excess of the amount needed to meet, when due, the principal and interest payments on the Bonds and that no tax levy is needed at this time. 4.05. The City Manager is authorized and directed to file a certified copy of this resolution with the Taxpayer Services Division Manager of Hennepin County and to obtain the certificate required by Minnesota Statutes, Section 475.63. Section 5. Authentication of Transcript. 5.01. The officers of the City are authorized and directed to prepare and furnish to the Purchaser and to the attorneys approving the Bonds, certified copies of proceedings and records of the City relating to the Bonds and to the financial condition and affairs of the City, and such other certificates, affidavits and transcripts as may be required to show the facts within their knowledge or as shown by the books and records in their custody and under their control, relating to the validity and marketability of the Bonds, and such instruments, including any heretofore furnished, may be deemed representations of the City as to the facts stated therein. 5.02. The Mayor, City Manager and Finance Manager are hereby authorized and directed to certify that they have examined the Official Statement prepared and circulated in connection with the issuance and sale of the Bonds and that to the best of their knowledge and belief the Official Statement is a complete and accurate representation of the facts and representations made therein as of the date of the Official Statement. 5.03. The City authorizes the Purchaser to forward the amount of Bond proceeds allocable to the payment of issuance expenses (other than amounts payable to Kennedy & Graven, Chartered as Bond Counsel) to U.S. Trust Company, Minneapolis, Minnesota on the closing date for further distribution as directed by the City's financial adviser, Ehlers & Associates, Inc. Section 6. Book-Entry System; Limited Obligation of City. 6.01. The Bonds will be initially issued in the form of a separate single typewritten or printed fully registered Bond for each of the maturities set forth in Section 1.03 hereof. Upon initial issuance, the ownership of each Bond will be registered in the registration books kept by the Bond Registrar in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York, and its successors and assigns (DTC). Except as provided in this section, all of the outstanding Bonds will be registered in the registration books kept by the Bond Registrar in the name of Cede & Co., as nominee of DTC. 6.02. With respect to Bonds registered in the registration books kept by the Bond _ Registrar in the name of Cede & Co., as nominee of DTC, the City, the Bond Registrar and the Paying Agent will have no responsibility or obligation to any broker dealers, banks and other financial institutions from time to time for which DTC holds Bonds as securities depository SJB-235672v1 RC 145-506 (Participants) or to any other person on behalf of which a Participant holds an interest in the Bonds, including but not limited to any responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Participant or any other person (other than a registered owner of Bonds, as shown by the registration books kept by the Bond Registrar,) of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any Participant or any other person, other than a registered owner of Bonds, of any amount with respect to principal of, premium, if any, or interest on the Bonds. The City, the Bond Registrar and the Paying Agent may treat and consider the person in whose name each Bond is registered in the registration books kept by the Bond Registrar as the holder and absolute owner of such Bond for the purpose of payment of principal, premium and interest with respect to such Bond, for the purpose of registering transfers with respect to such Bonds, and for all other purposes. The Paying Agent will pay all principal of, premium, if any, and. interest on the Bonds only to or on the order of the respective registered owners, as shown in the registration books kept by the Bond Registrar, and all such payments will be valid and effectual to fully satisfy and discharge the City's obligations with respect to payment of principal of, premium, if any, or interest on the Bonds to the extent of the sum or sums so paid. No person other than a registered owner of Bonds, as shown in the registration books kept by the Bond Registrar, will receive a certificated Bond evidencing the obligation of this resolution. Upon delivery by DTC to the City Manager of a written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the words "Cede & Co.," will refer to such new nominee of DTC; and upon receipt of such a notice, the City Manager will promptly deliver a copy of the same to the Bond Registrar and Paying Agent. 6.03. Representation Letter. The City has heretofore executed and delivered to DTC a Blanket Issuer Letter of Representations (Representation Letter) which shall govern payment of principal of, premium, if any, and interest on the Bonds and notices with respect to the Bonds. Any Paying Agent or Bond Registrar subsequently appointed by the City with respect to the Bonds will agree to take all action necessary for all representations of the City in the Representation letter with respect to the Bond Registrar and Paying Agent, respectively, to be complied with at all times. 6.04. Transfers Outside Book-Entry System. In the event the City, by resolution of the City Council, determines that it is in the best interests of the persons having beneficial interests in the Bonds that they be able to obtain Bond certificates, the City will notify DTC, whereupon DTC will notify the Participants, of the availability through DTC of Bond certificates. In such event the City will issue, transfer and exchange Bond certificates as requested by DTC and any other registered owners in accordance with the provisions of this Resolution. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving notice to the City and discharging its responsibilities with respect thereto under applicable law. In such event, if no successor securities depository is appointed, the City will issue and the Bond Registrar will authenticate Bond certificates in accordance with this resolution and the provisions hereof will apply to the transfer, exchange and method of payment thereof. 6.05. Payments to Cede & Co. Notwithstanding any other provision of this Resolution to the contrary, so long as a Bond is registered in the name of Cede & Co., as nominee of DTC, SJB-235672v1 RCI45-506 payments with respect to principal of, premium, if any, and interest on the Bond and notices with respect to the Bond will be made and given, respectively in the manner provided in DTC's Operational Arrangements, as set forth in the Representation Letter. Section 7. Continuing Disclosure. 7.01. The City hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this Resolution, failure of the City to comply with the Continuing Disclosure Certificate is not to be considered an event of default with respect to the Bonds; however, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this section. 7.02. "Continuing Disclosure Certificate" means that certain Continuing Disclosure Certificate executed by the Mayor and City Manager and dated the date of issuance and delivery of the Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. The motion for the adoption of the foregoing resolution was duly seconded by Member and upon vote being taken thereon, the following voted in favor thereof: and the following voted against the same: whereupon said resolution was declared duly passed and adopted. SJB-235672v1 RC 145-506 STATE OF MINNESOTA ) COUNTY OF HENNEPIN ) SS. CITY OF RICHFIELD ) I, the undersigned, being the duly qualified and acting City Clerk of the City of Richfield, Hennepin County, Minnesota, do hereby certify that I have carefully compared the attached and foregoing extract of minutes of a regular meeting of the City Council of the City held on August 19, 2003 with the original minutes on file in my office and the extract is a full, true and correct copy of the minutes insofar as they relate to the issuance and sale of $ Taxable General Obligation Temporary Tax Increment Bonds, Series 2003A of the City. WITNESS My hand officially as such City Clerk and the corporate seal of the City this day of , 2003. City Clerk Richfield, Minnesota (SEAL) S1B-235672v1 RC 145-506 STATE OF MINNESOTA TAXPAYER SERVICES DIVISION MANAGER'S CERTIFICATE AS TO COUNTY OF HENNEPIN REGISTRATION WHERE NO AD VALOREM TAX LEVY I, the undersigned County Auditor of Hennepin County, Minnesota, hereby certify that a resolution adopted by the City Council of the City of Richfield, Minnesota, on August 19, 2003, relating to Taxable General Obligation Temporary Tax Increment Bonds, Series 2003A, in the amount of $ ,dated September 2, 2003, has been filed in my office and said obligations have been registered on the register of obligations in my office. WITNESS My hand and official seal this day of 2003. Taxpayer Services Division Manager Hennepin County, Minnesota (SEAL) By Deputy SJB-235672v1 RC 145-506