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<br />NORTHLAND. SECURITIES <br /> <br />August 19,2009 <br /> <br />Honorable Mary Capra and Members of the 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 Refmance of the 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 the time to discuss the possible refunding of the Series 2006A Bond. Interest rates in <br />the 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 the 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"10 or greater present value savings. <br /> <br />Bond Structure <br />The final debt service payment on the original 2006A Bonds was scheduled for March 1,2022. We have <br />reviewed several bond refmancing structures with the City Administrator and Finance Director. The optimal <br />structure identified was to shorten the final maturity to 2018 and to place the call date (when the bonds can <br />pre-paid or refinanced) at February 1,2015. This structure allows the City flexibility to pay off the bonds at <br />a relatively early date while locking into a payment structure that achieves a favorable debt service reduction. <br /> <br />Debt Service Savin!!s <br />The Series 2006A Bonds have a remaining average interest rate of approximately 4.10%. Based upon <br />municipal interest rates available in the 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 - this is a net savings in that <br />any costs of issuance have already been considered. <br /> <br />Please let me know if you have any questions regarding the content of this letter. Feel free to contact me at <br />612-851-5906. Thank you. <br /> <br />Sincerely, <br />Northland Securities Inc. <br /> <br />~t.6~ ~ ccs.~(\~r- <br /> <br />George D. Eilertson <br />Sr. Vice President <br /> <br />Northland Securities, /m:. 45 South 7'" Street, Suire 2500, Minneapolis. MN 55402 Toll Free 800-85] .2920 Main 612-85] .5992 <br />Member FINRA and SIPC <br />