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<br />NORTHLAND.SECURITIES <br /> <br />August 19, 2009 <br /> <br />Honorable Mary Capra and Members of tbe City Council <br />Mr. Dallas Larson, Administrator <br />Mr. Mike Jeziorski, Finance Director <br />City of Centerville <br />1880 Main Street <br />Centerville, MN 55038-9794 <br /> <br />Re: Possible Refinance of tbe following Bond Issue: <br />).> $2,700,000 General Obligation Improvement Bonds, Series 2006A <br /> <br />Dear Mayor Capra, Council Members, Mr. Larson and Mr. Jeziorski: <br /> <br />Thank you for taking tbe time to discuss tbe possible refunding of tbe Series 2006A Bond. Interest rates in <br />tbe municipal bond market remain low, allowing an opportunity for local units of government to refinance <br />existing debt to achieve debt service savings. <br /> <br />The Series 2006A Bonds become callable on March 1, 2010. The City may consider tbe issuance of an <br />advance refunding bond to lock in a debt service savings. As per State Statutes, an advance refunding must <br />achieve at least a 3.00% or greater present value savings. <br /> <br />Bond Structure <br />The final debt service payment on tbe original 2006A Bonds was scheduled for March I, 2022. We have <br />reviewed several bond refmancing structures witb tbe City Administrator and Finance Director. The optimal <br />structure identified was to shorten tbe final maturity to 2018 and to place tbe call date (when tbe bonds can <br />pre-paid or refinanced) at February 1, 2015. This structure allows tbe City flexibility to pay ofItbe bonds at <br />a relatively early date while locking into a payment structure that achieves a favorable debt service reduction. <br /> <br />Debt Service Savinl!s <br />The Series 2006A Bonds have a remaining average interest rate of approximately 4.10%. Based upon <br />municipal interest rates available in tbe current market, new refunding bonds could be issued at an average <br />interest rate of approximately 2.71%. This interest rate reduction would result in a net debt service reduction <br />of approximately $234.585 which is a 5.42% net present value savings. Note - tbis is a net savings in tbat <br />any costs of issuance have already been considered. <br /> <br />Please let me know if you have any questions regarding tbe content of tbis letter. Feel free to contact me at <br />612-851-5906. Thank you. <br /> <br />Sincerely, <br />Northland Securities Inc. <br /> <br />~t.6~ D ~~(\~... <br /> <br />George D. Eilertson <br />Sr. Vice President <br /> <br />Northland Securities, Inc. 45 South 7" Stroet, Suire 2500, Minneapolis, MN 554112 Toll Free 800-85] .2920 Main 612-851-5992 <br />Member FINRA and SIPC <br />