HomeMy WebLinkAbout2023-04-03 J02A_01 Sewer Revenue CLN Series 2023A_Approve TECAGENDA ITEM:
CITY OF WAUKEE, IOWA
CITY COUNCIL MEETING COMMUNICATION
MEETING DATE: April 3, 2023
AGENDA ITEM:Consideration of approval of a motion to file and approve the form of
Tax Exemption Certificate and Loan and Disbursement Agreement
[$13,200,000 Sewer Revenue Capital Loan Notes, Series 2023A]
FORMAT:Consent Agenda
SYNOPSIS INCLUDING PRO & CON: On 11/07/2022, the Waukee City Council held a
public hearing and approved additional action on the issuance of Not to
exceed $15,000,000 Sewer Revenue Capital Loan Notes:
(H) Public Hearings:
1) On the authorization of a Loan and Disbursement
Agreement and the issuance of Notes to evidence the
obligation of the City thereunder [Not to exceed
$15,000,000 Sewer Revenue Capital Loan Notes] – Mayor
Pro Tem Bottenberg opened the public hearing and asked if
any written correspondence had been received; City Clerk
Schuett replied that none had been received in the clerk’s
office. Public Works Director/City Engineer Koester reviewed
the NE Outfall Sewer Project to be funded through the
issuance. No comments were made by the public in
attendance.
(I) Public Hearing Action Items:
1) Resolution: Consideration of approval of a resolution
instituting proceedings to take additional action [Not to
exceed $15,000,000 Sewer Revenue Capital Loan Notes] –
Council Member Sinclair moved to approve the resolution;
seconded by Council Member Crone. Council Member
Bottenberg stated that he would abstain from voting due to a
professional conflict of interest. Results of vote: Ayes: Crone,
Lyon, Pierce, Sinclair. Nays: None. Abstentions: Bottenberg
(professional conflict of interest). Motion carried 4 – 0 – 1.
(Resolution #2022-452)
FISCAL IMPACT INCLUDING COST/BENEFIT ANALYSIS:$13,200,000
COMMISSION/BOARD/COMMITTEE COMMENT:
STAFF REVIEW AND COMMENT: City Bond Counsel has provided the proceedings.
RECOMMENDATION: Receive and file the Tax Exemption Certificate.
J2A1
ATTACHMENTS: I. Tax Exemption Certificate
PREPARED BY:Becky Schuett
REVIEWED BY:
PUBLIC NOTICE INFORMATION –
NAME OF PUBLICATION:
DATE OF PUBLICATION:
TAX EXEMPTION CERTIFICATE
of
CITY OF WAUKEE, COUNTY OF DALLAS, STATE OF IOWA, ISSUER
$13,200,000 Sewer Revenue Capital Loan Notes, Series 2023A
This instrument was prepared by:
Ahlers & Cooney, P.C.
100 Court Avenue, Suite 600
Des Moines, Iowa 50309
(515) 243-7611
i
TABLE OF CONTENTS
This Table of Contents is not a part of this Tax Exemption Certificate and is provided
only for convenience of reference.
INTRODUCTION..................................................................................................................... - 1 -
ARTICLE I DEFINITIONS .................................................................................................... - 1 -
ARTICLE II SPECIFIC CERTIFICATIONS, REPRESENTATIONS AND
AGREEMENTS ............................................................................................................ - 4 -
Section 2.1 Authority to Certify and Expectations .................................................... - 4 -
Section 2.2 Receipts and Expenditures of Sale Proceeds .......................................... - 6 -
Section 2.3 Purpose of Bonds .................................................................................... - 7 -
Section 2.4 Facts Supporting Tax-Exemption Classification .................................... - 7 -
Section 2.5 Facts Supporting Temporary Periods for Proceeds ................................ - 7 -
Section 2.6 Resolution Funds at Restricted or Unrestricted Yield ............................ - 8 -
Section 2.7 Pertaining to Yields................................................................................. - 9 -
Section 2.8 Reimbursement Bonds ............................................................................ - 9 -
ARTICLE III REBATE ......................................................................................................... - 10 -
Section 3.1 Records ................................................................................................. - 10 -
Section 3.2 Rebate Fund .......................................................................................... - 10 -
Section 3.3 Exceptions to Rebate............................................................................. - 11 -
Section 3.4 Calculation of Rebate Amount.............................................................. - 12 -
Section 3.5 Rebate Requirements and the Bond Fund ............................................. - 12 -
Section 3.6 Investment of the Rebate Fund ............................................................. - 13 -
Section 3.7 Payment to the United States ................................................................ - 13 -
Section 3.8 Records ................................................................................................. - 13 -
Section 3.9 Additional Payments ............................................................................. - 14 -
ARTICLE IV INVESTMENT RESTRICTIONS ................................................................ - 14 -
Section 4.1 Avoidance of Prohibited Payments ....................................................... - 14 -
Section 4.2 Market Price Requirement .................................................................... - 14 -
Section 4.3 Investment in Certificates of Deposit ................................................... - 15 -
Section 4.4 Investment Pursuant to Investment Contracts and Agreements ........... - 15 -
Section 4.5 Records ................................................................................................. - 17 -
Section 4.6 Investments to be Legal ........................................................................ - 17 -
ARTICLE V GENERAL COVENANTS ............................................................................. - 18 -
ARTICLE VI AMENDMENTS AND ADDITIONAL AGREEMENTS .......................... - 18 -
Section 6.1 Opinion of Bond Counsel; Amendments .............................................. - 18 -
Section 6.2 Additional Covenants, Agreements ...................................................... - 18 -
Section 6.3 Internal Revenue Service Audits .......................................................... - 18 -
Section 6.4 Amendments ......................................................................................... - 18 -
EXHIBIT A...................................................................................................................................20
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TAX EXEMPTION CERTIFICATE
CITY OF WAUKEE, STATE OF IOWA
THIS TAX EXEMPTION CERTIFICATE made and entered into on April 28, 2023, by
the City of Waukee, County of Dallas, State of Iowa (the "Issuer").
INTRODUCTION
This Certificate is executed and delivered in connection with the issuance by the Issuer of
its $13,200,000 Sewer Revenue Capital Loan Notes, Series 2023A (the "Bonds"). The Bonds are
issued pursuant to the provisions of the Resolution of the Issuer authorizing the issuance of the
Bonds. Such Resolution provides that the covenants contained in this Certificate constitute a
part of the Issuer's contract with the owners of the Bonds.
The Issuer recognizes that under the Code (as defined below) the tax-exempt status of the
interest received by the owners of the Bonds is dependent upon, among other things, the facts,
circumstances, and reasonable expectations of the Issuer as to future facts not in existence at this
time, as well as the observance of certain covenants in the future. The Issuer covenants that it
will take such action with respect to the Bonds as may be required by the Code, and pertinent
legal regulations issued thereunder in order to establish and maintain the tax-exempt status of the
Bonds, including the observance of all specific covenants contained in the Resolution and this
Certificate.
ARTICLE I
DEFINITIONS
The following terms as used in this Certificate shall have the meanings set forth below.
The terms defined in the Resolution shall retain the meanings set forth therein when used in this
Certificate. Other terms used in this Certificate shall have the meanings set forth in the Code or
in the Regulations.
• "Annual Debt Service" means the principal of and interest on the Bonds
scheduled to be paid during a given Bond Year.
• "Bonds" means the $13,200,000 aggregate principal amount of Sewer
Revenue Capital Loan Notes, Series 2023A, of the Issuer issued in registered form
pursuant to the Resolution.
• "Bond Counsel" means Ahlers & Cooney, P.C., Des Moines, Iowa, or an
attorney at law or a firm of attorneys of nationally recognized standing in matters
pertaining to the tax-exempt status of interest on obligations issued by states and their
political subdivisions, duly admitted to the practice of law before the highest court of any
State of the United States of America.
• "Bond Fund" means the Sinking Fund described in the Resolution.
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• "Bond Purchase Agreement" means the binding contract in writing for the
sale of the Bonds.
• "Bond Year" as defined in Regulation 1.148-1(b), means a one-year period
beginning on the day after expiration of the preceding Bond Year. The first Bond Year
shall be the one-year or shorter period beginning on the Closing Date and ending on a
principal or interest payment date, unless Issuer selects another date.
• "Bond Yield" means that discount rate which produces an amount equal to
the Issue Price of the Bonds when used in computing the present value of all payments of
principal and interest to be paid on the Bonds, using semiannual compounding on a 360-
day year as computed under Regulation 1.148-4.
• "Certificate" means this Tax Exemption Certificate.
• "Closing" means the delivery of the Bonds in exchange for the agreed
upon purchase price.
• "Closing Date" means the date of Closing.
• "Code" means the Internal Revenue Code of 1986, as amended, and any
statutes which replace or supplement the Internal Revenue Code of 1986.
• "Computation Date" means each five-year period from the Closing Date
through the last day of the fifth and each succeeding fifth Bond Year.
• "Excess Earnings" means the amount earned on all Nonpurpose
Investments minus the amount which would have been earned if such Nonpurpose
Investments were invested at a rate equal to the Bond Yield, plus any income attributable
to such excess.
• "Final Bond Retirement Date" means the date on which the Bonds are
actually paid in full.
• "Financial Advisor" means PFM Financial Advisors LLC.
• "Governmental Obligations" means direct general obligations of, or
obligations the timely payment of the principal of and interest on which is
unconditionally guaranteed by the United States.
• "Gross Proceeds" as defined in Regulation 1.148-l(b), means any Proceeds
of the Bonds and any replacement proceeds (as defined in Regulation 1.148-1(c)) of the
Bonds.
• "Gross Proceeds Funds" means the Project Fund, Proceeds held to pay
cost of issuance, and any other fund or account held for the benefit of the owners of the
Bonds or containing Gross Proceeds of the Bonds except the Bond Fund and the Rebate
Fund.
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• "Issue Price" as defined in Regulation 1.148-l(b) and (f)(2), means the
price paid by the Purchaser of the Bonds. The Issue Price is $13,200,000, as set forth in
Exhibit A.
• "Issuer" means the City of Waukee, a municipal corporation in the County
of Dallas, State of Iowa.
• "Minor Portion of the Bonds", as defined in Regulation 1.148-2(g), means
the lesser of five (5) percent of Proceeds or $100,000. The Minor Portion of the Bonds is
computed to be $100,000.
• "Nonpurpose Investments" means any investment property which is
acquired with Gross Proceeds and is not acquired to carry out the governmental purpose
of the Bonds, and may include but is not limited to U.S. Treasury bonds, corporate bonds,
or certificates of deposit.
• "Proceeds" as defined in Regulation 1.148-l(b), means Sale Proceeds,
investment proceeds and transferred proceeds of the Bonds.
• "Project" means the acquisition, construction, reconstruction, extending,
remodeling, improving, repairing and equipping all or part of the Municipal Sewer
Utility, including construction of gravity flow sanitary sewer, manholes, diversion
structure, clearing and grubbing, surface restoration, streambank stabilization and
miscellaneous associated work for the NE Outfall Sewer, and the water resource
restoration project for the Little Walnut Creek watershed including sums already
expended that meet the requirements of Section 2.8 hereof, as more fully described in the
Resolution.
• "Project Fund" shall mean the fund required to be established by the
Resolution for the deposit of the Proceeds of the Notes.
• "Purchasers" means Iowa Finance Authority of Des Moines, Iowa,
constituting the initial purchasers of the Bonds from the Issuer.
• "Rebate Amount" means the amount computed as described in this
Certificate.
• "Rebate Fund" means the fund to be created, if necessary, pursuant to this
Certificate.
• "Rebate Payment Date" means a date chosen by the Issuer which is not
more than 60 days following each Computation Date or the Final Bond Retirement Date.
• "Regulations" means the Income Tax Regulations, amendments and
successor provisions promulgated by the Department of the Treasury under Sections 103,
148 and 149 of the Code, or other Sections of the Code relating to "arbitrage bonds",
including without limitation Regulations 1.148-1 through 1.148-11, 1.149(b)-1, 1.149-
d(1), 1.150-1 and 1.150-2.
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• "Replacement Proceeds" include, but are not limited to, sinking funds,
amounts that are pledged as security for an issue, and amounts that are replaced because
of a sufficiently direct nexus to a governmental purpose of an issue.
• "Resolution" means the resolution of the Issuer adopted on April 3, 2023,
authorizing the issuance of the Bonds.
• "Sale Proceeds" as defined in Regulation 1.148-1(b), means any amounts
actually or constructively received from the sale of the Bonds, including amounts used to
pay underwriter's discount or compensation and accrued interest other than pre-issuance
accrued interest.
• "Sinking Fund" means the Bond Fund.
• "SLGS" means demand deposit Treasury securities of the State and Local
Government Series.
• "Tax Exempt Obligations" means bonds or other obligations the interest
on which is excludable from the gross income of the owners thereof under Section 103 of
the Code and include certain regulated investment companies, stock in tax-exempt mutual
funds and demand deposit SLGS.
• "Taxable Obligations" means all investment property, obligations or
securities other than Tax Exempt Obligations.
• "Verification Certificate" means the certificate attached to this Certificate
as Exhibit A, establishing that the Purchaser will not reoffer or sell the Bonds to the
public.
ARTICLE II
SPECIFIC CERTIFICATIONS, REPRESENTATIONS
AND AGREEMENTS
The Issuer hereby certifies, represents and agrees as follows:
Section 2.1 Authority to Certify and Expectations
(a)The undersigned officer of the Issuer along with other officers of the
Issuer, are charged with the responsibility of issuing the Bonds.
(b)This Certificate is being executed and delivered in part for the purposes
specified in Section 1.148-2(b)(2) of the Regulations and is intended (among other
purposes) to establish reasonable expectations of the Issuer at this time.
(c)The Issuer has not been notified of any disqualification or proposed
disqualification of it by the Commissioner of the Internal Revenue Service as a bond
issuer which may certify bond issues under Section 1.148-2(b)(2) of the Regulations.
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(d)The certifications, representations and agreements set forth in this Article
II are made on the basis of the facts, estimates and circumstances in existence on the date
hereof, including the following: (1) with respect to amounts expected to be received from
delivery of the Bonds, amounts actually received, (2) with respect to payments of
amounts into various funds or accounts, review of the authorizations or directions for
such payments made by the Issuer pursuant to the Resolution and this Certificate, (3)
with respect to the Issue Price, the certifications of the Purchasers as set forth in the
Verification Certificate, (4) with respect to expenditure of the Proceeds of the Bonds,
actual expenditures and reasonable expectations of the Issuer as to when the Proceeds
will be spent for purposes of the Project, and (5) with respect to Bond Yield, review of
the Verification Certificate. The Issuer has no reason to believe such facts, estimates or
circumstances are untrue or incomplete in any material way.
(e)To the best of the knowledge and belief of the undersigned officer of the
Issuer, there are no facts, estimates or circumstances that would materially change the
representations, certifications or agreements set forth in this Certificate, and the
expectations herein set out are reasonable.
(f)No arrangement exists under which the payment of principal or interest on
the Bonds would be directly or indirectly guaranteed by the United States or any agency
or instrumentality thereof.
(g)After the expiration of any applicable temporary periods, and excluding
investments in a bona fide debt service fund or reserve fund, not more than five percent
(5%) of the Proceeds of the Bonds will be (a) used to make loans which are guaranteed
by the United States or any agency or instrumentality thereof, or (b) invested in federally
insured deposits or accounts.
(h)The Issuer will file with the Internal Revenue Service in a timely fashion
Form 8038-G, Information Return for Tax-Exempt Governmental Obligations with
respect to the Bonds and such other reports required to comply with the Code and
applicable Regulations.
(i)The Issuer will take no action which would cause the Bonds to become
"private activity bonds" as defined in Section 141 (a) of the Code, including any use of
the Project by any person other than a governmental unit if such use will be by other than
a member of the general public. None of the Proceeds of the Bonds will be used directly
or indirectly to make or finance loans to any person other than a governmental unit.
(j)The Issuer will make no change in the nature or purpose of the Project
except as provided in Section 6.1 hereof.
(k)Except as provided in the Resolution, the Issuer will not establish any
sinking fund, bond fund, reserve fund, debt service fund or other fund reasonably
expected to be used to pay debt service on the Bonds (other than the Bond Fund and any
Reserve Fund), exercise its option to redeem Bonds prior to maturity or effect a refunding
of the Bonds.
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(l)No bonds or other obligations of the Issuer (1) were sold in the 15 days
preceding the date of sale of the Bonds, (2) were sold or will be sold within the 15 days
after the date of sale of the Bonds, (3) have been delivered in the past 15 days or (4) will
be delivered in the next 15 days pursuant to a common plan of financing for the issuance
of the Bonds and payable out of substantially the same source of revenues.
(m)None of the Proceeds of the Bonds will be used directly or indirectly to
replace funds of the Issuer used directly or indirectly to acquire obligations having a yield
higher than the Bond Yield.
(n)No portion of the Bonds is issued for the purpose of investing such portion
at a higher yield than the Bond Yield.
(o)The Issuer does not expect that the Proceeds of the Bonds will be used in a
manner that would cause them to be "arbitrage bonds" as defined in Section 148(a) of the
Code. The Issuer does not expect that the Proceeds of the Bonds will be used in a
manner that would cause the interest on the Bonds to be includible in the gross income of
the owners of the Bonds under the Code. The Issuer will not intentionally use any
portion of the Proceeds to acquire higher yielding investments.
(p)The Issuer will not use the Proceeds of the Bonds to exploit the difference
between tax-exempt and taxable interest rates to obtain a material financial advantage.
(q)The Issuer has not issued more Bonds, issued the Bonds earlier, or allowed
the Bonds to remain outstanding longer than is reasonably necessary to accomplish the
governmental purposes of the Bonds and in fact, the Bonds will not remain outstanding
longer than 120% of the economic useful life of the assets financed with the Proceeds of
the Bonds.
(r)The Bonds will not be Hedge Bonds as described in Section 149(g)(3) of
the Code because the Issuer reasonably expects that it will meet the Expenditure test set
forth in Section 2.5(b) hereof and that 50% or more of the Proceeds will not be invested
in Nonpurpose Investments having a substantially guaranteed yield for four or more
years.
Except for costs of issuance, all Sale Proceeds and investment earnings thereon will be
expended for costs of the type that would be chargeable to capital accounts under the Code
pursuant to federal income tax principles if the Issuer were treated as a corporation subject to
federal income taxation.
Section 2.2 Receipts and Expenditures of Sale Proceeds
Sale Proceeds disbursed one time after Closing are expected to be deposited and
expended as follows:
(a)$101,900 representing costs of issuing the Bonds and the Initiation Fee
($66,000) for the Loan will be used within six months of the Closing Date to pay the
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costs of issuance of the Bonds (with any excess remaining on deposit in the Project
Fund); and
(b)$13,098,100 will be available to draw into the Project Fund and will be
used together with earnings thereon to pay the costs of the Project and will not exceed the
amount necessary to accomplish the governmental purposes of the Bonds.
Section 2.3 Purpose of Bonds
The Issuer is issuing the Bonds to pay the costs of acquisition, construction,
reconstruction, extending, remodeling, improving, repairing and equipping all or part of the
Municipal Sewer Utility, including construction of gravity flow sanitary sewer, manholes,
diversion structure, clearing and grubbing, surface restoration, streambank stabilization and
miscellaneous associated work for the NE Outfall Sewer, and the water resource restoration
project for the Little Walnut Creek watershed.
Section 2.4 Facts Supporting Tax-Exemption Classification
The Bonds are considered to be governmental bonds, not subject to the provisions of the
alternate minimum tax. Proceeds of the Bonds will be used for the purpose of paying costs of
acquisition, construction, reconstruction, extending, remodeling, improving, repairing and
equipping all or part of the Municipal Sewer Utility, including construction of gravity flow
sanitary sewer, manholes, diversion structure, clearing and grubbing, surface restoration,
streambank stabilization and miscellaneous associated work for the NE Outfall Sewer, and the
water resource restoration project for the Little Walnut Creek watershed. All of the financed
facilities are owned by the City and are expected to be used by the public generally, including
industrial users. There are no contractual arrangements or agreements between the City and any
contributing industry using the Sewer System Utility, and there are no other lease, management
contract or other similar arrangements with respect to the Sewer System Utility. Contributing
industries using the Sewer System Utility may be or become subject to additional surcharges
above the current user charges, depending on the strength and volume of the waste they generate.
All such surcharges, however, are or will be imposed by virtue of City ordinances applicable to
all entities meeting the standards set forth therein. No other charges or payments will be
imposed or paid to the City by any contributing industry for wastewater treatment services or
Project-related construction and acquisition beyond those mandated by ordinance for certain
classes of users.
No amount of Proceeds of the Bonds is to be used directly or indirectly to make or
finance loans to persons other than governmental units.
Section 2.5 Facts Supporting Temporary Periods for Proceeds
(a)Time Test. Not later than six months after the Closing Date, the Issuer
will incur a substantial binding obligation to a third party to expend at least 5% of the net
Sale Proceeds of the Bonds.
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(b)Expenditure Test. Not less than 85% of the net Sale Proceeds will be
expended for Project costs, including the reimbursement of other funds expended to date,
within a three-year temporary period from the Closing Date.
(c)Due Diligence Test. Not later than six months after Closing, work on the
Project will have commenced and will proceed with due diligence to completion.
(d)Proceeds of the Bonds representing less than six months accrued interest
on the Bonds will be spent within six months of this date to pay interest on the Bonds,
and will be invested without restriction as to yield for a temporary period not in excess of
six months.
Section 2.6 Resolution Funds at Restricted or Unrestricted Yield
(a)Proceeds of the Bonds will be held and accounted for in the manner
provided in the Resolution. The Issuer has not and does not expect to create or establish
any other bond fund, reserve fund, or similar fund or account for the Bonds. The Issuer
has not and will not pledge any moneys or Taxable Obligations in order to pay debt
service on the Bonds or restrict the use of such moneys or Taxable Obligations so as to
give reasonable assurances of their availability for such purposes.
(b)Any monies which are invested beyond a temporary period are expected to
constitute less than a major portion of the Bonds or to be restricted for investment at a
yield not greater than one-eighth of one percent above the Bond Yield.
(c)The Issuer has established and will use the Bond Fund primarily to
achieve a proper matching of revenues and debt service within each Bond Year and the
Issuer will apply moneys deposited into the Bond Fund to pay the principal of and
interest on the Bonds. Such Fund will be depleted at least once each Bond Year except
for a reasonable carryover amount. The carryover amount will not exceed the greater of
(1) one year's earnings on the Bond Fund or (2) one-twelfth of Annual Debt Service. The
Issuer will spend moneys deposited from time to time into such fund within 13 months
after the date of deposit. Revenues, intended to be used to pay debt service on the Bonds,
will be deposited into the Bond Fund as set forth in the Resolution. The Issuer will spend
interest earned on moneys in such fund not more than 12 months after receipt.
Accordingly, the Issuer will treat the Bond Fund as a bona fide debt service fund as
defined in Regulation 1.148-1(b).
Investment of amounts on deposit in the Bond Fund will not be subject to
arbitrage rebate requirements as [the Bonds meet the safe harbor set forth in Regulation
1.148-3(k), because the average annual debt service on the Bonds will not exceed
$2,500,000, the Bonds meet the safe harbor set forth in Code Section 148(f)(A)(4)(ii)
because the Bonds are not private activity bonds, the average maturity of the issue
(determined in accordance with Code Section 147(b)(2)(A)) is at least 5 years and the
rates of interest on the bonds which are part of the issue do not vary during the term of
the issue and the Bonds are expected to meet one or more of the spending exemptions
from rebate as provided in Section 3.3 hereof.
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(d)The Minor Portion of the Bonds will be invested without regard to yield.
Section 2.7 Pertaining to Yields
(a)The purchase price of all Taxable Obligations to which restrictions apply
under this Certificate as to investment yield or rebate of Excess Earnings, if any, has been
and shall be calculated using (i) the price taking into account discount, premium and
accrued interest, as applicable, actually paid or (ii) the fair market value if less than the
price actually paid and if such Taxable Obligations were not purchased directly from the
United States Treasury. The Issuer will acquire all such Taxable Obligations directly
from the United States Treasury or in an arm's length transaction without regard to any
amounts paid to reduce the yield on such Taxable Obligations. The Issuer will not pay or
permit the payment of any amounts (other than to the United States) to reduce the yield
on any Taxable Obligations. Obligations pledged to the payment of debt service on the
Bonds, or deposited into any reserve fund after they have been acquired by the Issuer will
be treated as though they were acquired for their fair market value on the date of such
pledge or deposit. Obligations on deposit in any reserve fund on the Closing Date shall
be treated as if acquired for their fair market value on the Closing Date.
(b)Qualified guarantees have not been used in computing yield.
(c)The Bond Yield has been computed as not less than 1.750053% percent.
This Bond Yield has been computed on the basis of a purchase price for the Bonds equal
to the Issue Price.
Section 2.8 Reimbursement Bonds
(a)Not later than 60 days after payment of Original Expenditures, the Issuer
has adopted an Official Intent and has declared its intention to make a Reimbursement
Allocation of Original Expenditures incurred in connection with Project Segment(s) from
proceeds of the Reimbursement Bonds.
(b)The Reimbursement Allocation will occur on or before the later of (i)
eighteen months after the Original Expenditures are paid or (ii) eighteen months after the
first Project Segment is placed in service, but in no event more than three years after the
Original Expenditures are paid.
(c)No other Reimbursement Allocation will be made except for Preliminary
Expenditures.
(d)The Reimbursement Allocation has not been undertaken to avoid, in
whole or in part, arbitrage yield restrictions or arbitrage rebate requirements and will not
employ an abusive arbitrage device under Regulation 1.148-10.
(e)Within one year of the Closing Date, the Reimbursement Allocation will
not be used in a manner that results in the creation of replacement proceeds, as defined in
Regulation 1.148-1.
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(f)For purposes of Section 2.8, the following terms shall have the meanings
set forth below:
(1)"Official Intent" means a declaration of intent described under
Regulation 1.150-2 to reimburse Original Expenditures with the proceeds of the
Bonds.
(2)"Original Expenditure" means an expenditure for a governmental
purpose that is originally paid from a source other than the Reimbursement
Bonds.
(3)"Preliminary Expenditures", as defined in Regulation 1.150-
2(f)(2), means architectural, engineering, surveying, soil tests, Reimbursement
Bond issuance costs, and similar costs incurred prior to commencement of
construction, rehabilitation or acquisition of a Project Segment which do not
exceed 20% of the Issue Price of the portion of the Bonds that finances the Project
Segment for which they were incurred.
(4)"Project Segment" means the costs, described in an Official Intent
of the Issuer, incurred prior to the Closing Date to acquire, construct, or improve
land, buildings or equipment excluding current operating expenses but including
costs of issuing the Reimbursement Bonds.
(5)"Reimbursement Allocation" means written evidence of the use of
Reimbursement Bond proceeds to reimburse a fund of the Issuer for Original
Expenditures paid or advanced prior to the Closing Date and incurred in
connection with a Project Segment.
(6)"Reimbursement Bonds" means the portion of the Bonds which are
allocated to reimburse the Original Expenditures paid prior to the Closing Date
and incurred in connection with a Project Segment.
ARTICLE III
REBATE
Section 3.1 Records
Sale Proceeds of the Bonds will be held and accounted for in the manner provided in the
Resolution. The Issuer will maintain adequate records for funds created by the Resolution and
this Certificate including all deposits, withdrawals, transfers from, transfers to, investments,
reinvestments, sales, purchases, redemptions, liquidations and use of money or obligations until
six years after the Final Bond Retirement Date.
Section 3.2 Rebate Fund
(a)In the Resolution, the Issuer has covenanted to pay to the United States the
Rebate Amount, an amount equal to the Excess Earnings on the Gross Proceeds Funds, if
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any, at the times and in the manner required or permitted and subject to stated special
rules and allowable exceptions.
(b)The Issuer may establish a fund pursuant to the Resolution and this
Certificate which is herein referred to as the Rebate Fund. The Issuer will invest and
expend amounts on deposit in the Rebate Fund in accordance with this Certificate.
(c)Moneys in the Rebate Fund shall be held by the Issuer or its designee and,
subject to Sections 3.4, 3.5 and 6.1 hereof, shall be held for future payment to the United
States as contemplated under the provisions of this Certificate and shall not constitute
part of the trust estate held for the benefit of the owners of the Bonds or the Issuer.
(d)The Issuer will pay to the United States from legally available money of
the Issuer (whether or not such available money is on deposit in any fund or account
related to the Bonds) any amount which is required to be paid to the United States.
Section 3.3 Exceptions to Rebate
The Issuer reasonably expects that the Bonds are eligible for one or more exceptions from
the arbitrage rebate rules set forth in the Regulations. If any Proceeds are ineligible, or become
ineligible, for an exception to the arbitrage rebate rules, the Issuer will comply with the
provisions of this Article III. A description of the applicable rebate exception(s) is as follows:
• Eighteen-Month Exception
The Gross Proceeds of the Bonds are expected to be expended for the governmental
purposes for which the Bonds were issued in accordance with the following schedule:
1) 15 percent spent within six months of the Closing Date;
2) 60 percent spent within one year of the Closing Date;
3) 100 percent spent within eighteen months of the Closing Date (subject to 5
percent retainage for not more than one year).
In any event, the Issuer expects that the 5% reasonable retainage will be spent within 30 months
of the Closing Date. For purposes of determining compliance with the six-month and twelve-
month spending periods, the amount of investment earnings included shall be based on the
Issuer's reasonable expectations that the average annual interest rate on investments will be not
more than 4%. For purposes of determining compliance with the eighteen-month spending
period, the amount of investment earnings included shall be based on actual earnings. If the
Issuer fails to meet the foregoing expenditure schedule, the Issuer shall comply with the arbitrage
rebate requirements of the Code.
• Election to Treat as Construction Bonds.
The Issuer reasonably expects that more than 75 percent of the "available construction
proceeds" ("ACP") of the Bonds, as defined in Section 148(f)(4)(C)(vi) of the Code, will be used
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for construction expenditures. ACP includes the issue price of the issue plus the earnings on
such issue. Not less than the following percentages of the ACP will be spent within the
following periods:
1) 10 percent spent within six months of the Closing Date;
2) 45 percent spent within one year of the Closing Date;
3) 75 percent spent within eighteen months of the Closing Date;
4) 100 percent spent within two years of the Closing Date (subject to 5
percent retainage for not more than one year).
In any event, the Issuer expects that the 5% reasonable retainage will be spent within a three-year
period beginning on the Closing Date. A failure to spend an amount that does not exceed the
lesser of (i) 3% of the issue price or (ii) $250,000, is disregarded if the Issuer exercises due
diligence to complete the Project.
• Election with respect to future earnings
Pursuant to Section 1.148-7(f)(2) of the Regulations, the Issuer elects to use actual
investment earnings of the ACP in determining compliance with the above schedule.
If the Issuer fails to meet the foregoing expenditure schedule, the Issuer shall comply
with the arbitrage rebate requirements of the Code.
Section 3.4 Calculation of Rebate Amount
(a)As soon after each Computation Date as practicable, the Issuer shall, if
necessary, calculate and determine the Excess Earnings on the Gross Proceeds Funds (the
"Rebate Amount"). All calculations and determinations with respect to the Rebate
Amount will be made on the basis of actual facts as of the Computation Date and
reasonable expectations as to future events.
(b)If the Rebate Amount exceeds the amount currently on deposit in the
Rebate Fund, the Issuer may deposit an amount in the Rebate Fund such that the balance
in the Rebate Fund after such deposit equals the Rebate Amount. If the amount in the
Rebate Fund exceeds the Rebate Amount, the Issuer may withdraw such excess amount
provided that such withdrawal can be made from amounts originally transferred to the
Rebate Fund and not from earnings thereon, which may not be transferred, and only if
such withdrawal may be made without liquidating investments at a loss.
Section 3.5 Rebate Requirements and the Bond Fund
It is expected that the Bond Fund described in the Resolution and Section 2.6(c) of this
Certificate will be treated as a bona fide debt service fund as defined in Regulation 1.148-1(b).
As such, any amount earned during a Bond Year on the Bond Fund and amounts earned on such
amounts, if allocated to the Bond Fund, will not be taken into account in calculating the Rebate
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Amount for the reasons outlined in Section 2.6(c) hereof. However, should the Bond Fund cease
to be treated as a bona fide debt service fund, the Bond Fund will become subject to the rebate
requirements set forth in Section 3.4 hereof.
Section 3.6 Investment of the Rebate Fund
(a)Immediately upon a transfer to the Rebate Fund, the Issuer may invest all
amounts in the Rebate Fund not already invested and held in the Rebate Fund, to the
extent possible, in (1) SLGS, such investments to be made at a yield of not more than
one-eighth of one percent above the Bond Yield, (2) Tax Exempt Obligations, (3) direct
obligations of the United States or (4) certificates of deposit of any bank or savings and
loan association. All investments in the Rebate Fund shall be made to mature not later
than the next Rebate Payment Date.
(b)If the Issuer invests in SLGS, the Issuer shall file timely subscription
forms for such securities (if required). To the extent possible, amounts received from
maturing SLGS shall be reinvested immediately in zero yield SLGS maturing on or
before the next Rebate Payment Date.
Section 3.7 Payment to the United States
(a)On each Rebate Payment Date, the Issuer will pay to the United States at
least ninety percent (90%) of the Rebate Amount less a computation credit of $1,000 per
Bond Year for which the payment is made.
(b)The Issuer will pay to the United States not later than sixty (60) days after
the Final Bond Retirement Date all the rebatable arbitrage as of such date and any income
attributable to such rebatable arbitrage as described in Regulation 1.148-3(f)(2).
(c)If necessary, on each Rebate Payment Date, the Issuer will mail a check to
the Internal Revenue Service Center, Ogden, UT 84201. Each payment shall be
accompanied by a copy of Form 8038-T, Arbitrage Rebate, filed with respect to the
Bonds or other information reporting form as is required to comply with the Code and
applicable Regulations.
Section 3.8 Records
(a)The Issuer will keep and retain adequate records with respect to the
Bonds, the Gross Proceeds Funds, the Bond Fund, and the Rebate Fund until six years
after the Final Bond Retirement Date. Such records shall include descriptions of all
calculations of amounts transferred to the Rebate Fund, if any, and descriptions of all
calculations of amounts paid to the United States as required by this Certificate. Such
records will also show all amounts earned on moneys invested in such funds, and the
actual dates and amounts of all principal, interest and redemption premiums (if any) paid
on the Bonds.
(b)Records relating to the investments in such Funds shall completely
describe all transfers, deposits, disbursements and earnings including:
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(1)a complete list of all investments and reinvestments of amounts in
each such Fund including, if applicable, purchase price, purchase date, type of
security, accrued interest paid, interest rate, dated date, principal amount, date of
maturity, interest payment dates, date of liquidation, receipt upon liquidation,
market value of such investment on the Final Bond Retirement Date if held by the
Issuer on the Final Bond Retirement Date, and market value of the investment on
the date pledged to the payment of the Bonds or the Closing Date if different from
the purchase date.
(2)the amount and source of each payment to, and the amount,
purpose and payee of each payment from, each such Fund.
Section 3.9 Additional Payments
The Issuer hereby agrees to pay to the United States from legally available money of the
Issuer (whether or not such available money is on deposit in any fund or account related to the
Bonds) any amount which is required to be paid to the United States, but which is not available
in a fund related to the Bonds for transfer to the Rebate Fund or payment to the United States.
ARTICLE IV
INVESTMENT RESTRICTIONS
Section 4.1 Avoidance of Prohibited Payments
The Issuer will not enter into any transaction that reduces the amount required to be
deposited into the Rebate Fund or paid to the United States because such transaction results in a
smaller profit or a larger loss than would have resulted if the transaction had been at arm's length
and had the Bond Yield not been relevant to either party. The Issuer will not invest or direct the
investment of any funds in a manner which reduces an amount required to be paid to the United
States because such transaction results in a small profit or larger loss than would have resulted if
the transaction had been at arm's length and had the Bond Yield not been relevant to the Issuer.
In particular, notwithstanding anything to the contrary contained herein or in the Resolution, the
Issuer will not invest or direct the investment of any funds in a manner which would violate any
provision of this Article IV.
Section 4.2 Market Price Requirement
(a)The Issuer will not purchase or direct the purchase of Taxable Obligations
for more than the then available market price for such Taxable Obligations. The Issuer
will not sell, liquidate or direct the sale or liquidation of Taxable Obligations for less than
the then available market price.
(b)For purposes of this Certificate, United States Treasury obligations
purchased directly from the United States Treasury will be deemed to be purchased at the
market price.
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Section 4.3 Investment in Certificates of Deposit
(a)Notwithstanding anything to the contrary contained herein or in the
Resolution, the Issuer will invest or direct the investment of funds on deposit in the
Reserve Fund, any other Gross Proceeds Fund, the Bond Fund, and the Rebate Fund, in a
certificate of deposit of a bank or savings bank which is permitted by law and by the
Resolution only if the purchase price of such a certificate of deposit is treated as its fair
market value on the purchase date and if the yield on the certificate of deposit is not less
than (1) the yield on reasonably comparable direct obligations of the United States; and
(2) the highest yield that is published or posted by the provider to be currently available
from the provider on reasonably comparable certificates of deposit offered to the public.
(b)The certificate of deposit described in paragraph 4.3(a) above must be
executed by a dealer who maintains an active secondary market in comparable
certificates of deposit and must be based on actual trades adjusted to reflect the size and
term of that certificate of deposit and the stability and reputation of the bank or savings
bank issuing the certificate of deposit.
Section 4.4 Investment Pursuant to Investment Contracts and Agreements
The Issuer will invest or direct the investment of funds on deposit in the Gross Proceeds
Funds, the Bond Fund, and the Rebate Fund pursuant to an investment contract (including a
repurchase agreement) only if all of the following requirements are satisfied:
(a)The Issuer makes a bona fide solicitation for the purchase of the
investment. A bona fide solicitation is a solicitation that satisfies all of the following
requirements:
(1)The bid specifications are in writing and are timely forwarded to
potential providers.
(2)The bid specifications include all material terms of the bid. A term
is material if it may directly or indirectly affect the yield or the cost of the
investment.
(3)The bid specifications include a statement notifying potential
providers that submission of a bid is a representation that the potential provider
did not consult with any other potential provider about its bid, that the bid was
determined without regard to any other formal or informal agreement that the
potential provider has with the issuer or any other person (whether or not in
connection with the Bonds), and that the bid is not being submitted solely as a
courtesy to the issuer or any other person for purposes of satisfying the
requirements of paragraph (d)(6)(iii)(B)(1) or (2) of Section 1.148-5 of the
Regulations.
(4)The terms of the bid specifications are commercially reasonable.
A term is commercially reasonable if there is a legitimate business purpose for the
- 16 -
term other than to increase the purchase price or reduce the yield of the
investment.
(5)For purchases of guaranteed investment contracts only, the terms
of the solicitation take into account the Issuer's reasonably expected deposit and
drawdown schedule for the amounts to be invested.
(6)All potential providers have an equal opportunity to bid and no
potential provider is given the opportunity to review other bids (i.e., a last look)
before providing a bid.
(7)At least three reasonably competitive providers are solicited for
bids. A reasonably competitive provider is a provider that has an established
industry reputation as a competitive provider of the type of investments being
purchased.
(b)The bids received by the Issuer meet all of the following requirements:
(1)The Issuer receives at least three bids from providers that the
Issuer solicited under a bona fide solicitation meeting the requirements of
paragraph (d)(6)(iii)(A) of Section 1.148-5 of the Regulations and that do not
have a material financial interest in the issue. A lead underwriter in a negotiated
underwriting transaction is deemed to have a material financial interest in the
issue until 15 days after the issue date of the issue. In addition, any entity acting
as a financial advisor with respect to the purchase of the investment at the time
the bid specifications are forwarded to potential providers has a material financial
interest in the issue. A provider that is a related party to a provider that has a
material financial interest in the issue is deemed to have a material financial
interest in the issue.
(2)At least one of the three bids described in paragraph
(d)(6)(iii)(B)(1) of Section 1.148-5 of the Regulations is from a reasonably
competitive provider, within the meaning of paragraph (d)(6)(iii)(A)(7) of Section
1.148-5 of the Regulations.
(3)If the Issuer uses an agent to conduct the bidding process, the agent
did not bid to provide the investment.
(c)The winning bid meets the following requirements:
(1)Guaranteed investment contracts. If the investment is a guaranteed
investment contract, the winning bid is the highest yielding bona fide bid
(determined net of any broker's fees).
(2)Other investments. If the investment is not a guaranteed
investment contract, the winning bid is the lowest cost bona fide bid (including
any broker's fees).
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(d)The provider of the investments or the obligor on the guaranteed
investment contract certifies the administrative costs that it pays (or expects to pay, if
any) to third parties in connection with supplying the investment.
(e)The Issuer will retain the following records with the bond documents until
three years after the last outstanding bond is redeemed:
(1)For purchases of guaranteed investment contracts, a copy of the
contract, and for purchases of investments other than guaranteed investment
contracts, the purchase agreement or confirmation.
(2)The receipt or other record of the amount actually paid by the
Issuer for the investments, including a record of any administrative costs paid by
the Issuer, and the certification under paragraph (d)(6)(iii)(D) of Section 1.148-5
of the Regulations.
(3)For each bid that is submitted, the name of the person and entity
submitting the bid, the time and date of the bid, and the bid results.
(4)The bid solicitation form and, if the terms of the purchase
agreement or the guaranteed investment contract deviated from the bid solicitation
form or a submitted bid is modified, a brief statement explaining the deviation and
stating the purpose for the deviation.
(5)For purchases of investments other than guaranteed investment
contracts, the cost of the most efficient portfolio of State and Local Government
Series Securities, determined at the time that the bids were required to be
submitted pursuant to the terms of the bid specifications.
Section 4.5 Records
The Issuer will maintain records of all purchases, sales, liquidations, investments,
reinvestments, redemptions, disbursements, deposits, and transfers of amounts on deposit.
Section 4.6 Investments to be Legal
All investments required to be made pursuant to this Certificate shall be made to the
extent permitted by law. In the event that any such investment is determined to be ultra vires, it
shall be liquidated and the proceeds thereof shall be invested in a legal investment, provided that
prior to reinvesting such proceeds, the Issuer shall obtain an opinion of Bond Counsel to the
effect that such reinvestment will not cause the Bonds to become arbitrage bonds under Sections
103, 148, 149, or any other applicable provision of the Code.
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ARTICLE V
GENERAL COVENANTS
The Issuer hereby covenants to perform all acts within its power necessary to ensure that
the reasonable expectations set forth in Article II hereof will be realized. The Issuer reasonably
expects to comply with all covenants contained in this Certificate.
ARTICLE VI
AMENDMENTS AND ADDITIONAL AGREEMENTS
Section 6.1 Opinion of Bond Counsel; Amendments
The various provisions of this Certificate need not be observed and this Certificate may
be amended or supplemented at any time by the Issuer if the Issuer receives an opinion or
opinions of Bond Counsel that the failure to comply with such provisions will not cause any of
the Bonds to become "arbitrage bonds" under the Code and that the terms of such amendment or
supplement will not cause any of the Bonds to become "arbitrage bonds" under the Code, or
otherwise cause interest on any of the Bonds to become includable in gross income for federal
income tax purposes.
Section 6.2 Additional Covenants, Agreements
The Issuer hereby covenants to make, execute and enter into (and to take such actions, if
any, as may be necessary to enable it to do so) such agreements as may be necessary to comply
with any changes in law or regulations in order to preserve the tax-exempt status of the Bonds to
the extent that it may lawfully do so. The Issuer further covenants (1) to impose such limitations
on the investment or use of moneys or investments related to the Bonds, (2) to make such
payments to the United States Treasury, (3) to maintain such records, (4) to perform such
calculations, and (5) to perform such other lawful acts as may be necessary to preserve the tax-
exempt status of the Bonds.
Section 6.3 Internal Revenue Service Audits
The Internal Revenue Service has not audited the Issuer regarding any obligations issued
by or on behalf of the Issuer. To the best knowledge of the Issuer, no such obligations of the
Issuer are currently under examination by the Internal Revenue Service.
Section 6.4 Amendments
Except as otherwise provided in Section 6.1 hereof, all the rights, powers, duties and
obligations of the Issuer shall be irrevocable and binding upon the Issuer and shall not be subject
to amendment or modification by the Issuer.
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IN WITNESS WHEREOF, the Issuer has caused this Certificate to be executed by its
duly authorized officer, all as of the day first above written.
___________________________________
Director of Finance, City of Waukee, State of
Iowa
(SEAL)
EXHIBIT A
VERIFICATION CERTIFICATE OF THE PURCHASER
The undersigned officer of the Iowa Finance Authority (the "Purchaser"), hereby certifies
as follows:
1. The Purchaser and the City of Waukee, Iowa (the "Issuer"), have entered into a Loan
and Disbursement Agreement (the "Agreement"), providing for the purchase of a $13,200,000
Sewer Revenue Capital Loan Note, Series 2023A of the City dated as of the date of delivery (the
"Notes").
2. The Agreement is in full force and effect and has not been repealed, rescinded or
amended.
3. The Purchaser hereby confirms that the Notes were purchased at par and will not be
reoffered to the public, the terms of purchase being as follows:
Principal
Amount
Issued
Principal
Amount
Sold
Interest
Rate
Price
(% of par) (do not include
accrued interest)
$13,200,000 None 1.75%100%
IN WITNESS WHEREOF, the Purchaser has caused this Verification Certificate to be
executed by its duly authorized officer this __________ day of _______________, 2023.
IOWA FINANCE AUTHORITY
By: ________________________________
02176760-1\21938-278