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payments on the Bonds. Currently, state credit enhancement provides a significant interest cost savings, to lower or non -rated cities/counties. To qualify for the credit enhancement; a City must. submit -an -application and $50.0 fee to the State, There will also. be a credit rating ,fee that. is lower than the standard fee to either rating agency. .Ehlers will take care of the application to the State on your behalf. Basis for Recommendation; Based ,on our knowledge of your situation, your objectives communicated to. us, our advisory relationship. as well as characteristics of various municipal financing options, we are recommending the: issuance of general obligation improvement bonds as a suitable financing option for the following reasons: ■ The. City's policy and past practice has. been to finance municipal projects like this with this type of debt issue. • This. is a cost-effective option among the limited other options available to finance this type of project. ■ General. obligation bonds with the State Credit Enhancement provides the lowest possible interest cost. Method of Sale.IPla.cement: In -order -to obtain the Iowest interest cost. to the City.; we. will competitively bid the.purchase of the Bonds from local and national underwriters/banks. We have: included an allowance for discount bidding equal to 1.30%Q of.the principal amount. of the issue. The discount is. treated as.. an interest item and provides the underwriter with all or a portion of their compensation in the. transaction. Ifthe.Bonds are purchased at a. price greater than the minimum bid amount (maximum discount), the unused allowance may be used to lower your borrowing amount:. Premium Bids: Under current market conditions, most. investors in Municipal bonds prefer "premium" pricing structures. A premium is achieved when. the coupon for any maturity (the interest rate paid by the issuer) exceeds the yield to the investor, resulting in a price paid :that is :greater than the face value of the.bonds. The.sum o£the..amounts paid in -excess -of face. value is considered reoffering. premium." For this issue. of Bonds we have been directed to use the premium to reduce the. size of the issue. The adjustments may slightly change the true interest cost of tho.original bid, either up or down. Review of Existing Debt: We have reviewed .all outstanding indebtedness for the City and find that there are no refunding opportunities at .this -time. We will continue to monitor the market and the call dates for the City's outstanding debt. and will alert.you to any future. refunding opportunities. Continuing Disclosure: Because the amount of the Bonds to be issued is less than $1,000,000, this. issue could be exempt from the Continuing Disclosure. requirements of the. Securities and: Exchange Commission (SEC); however; some underwriters require limited disclosure as one of the parameters for bidding, we recommend that the City provide for the limited disclosure by agreeing to provide its Presale. Repot May 15, 2018 City of Gem Lake; Minnesota Page 2