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Summary: Gem Lake, Minnesota; Non -School State Programs ProfileCredit US$0.665 mil GO imp bnds ser 2018A dtd 07/12/2018 due 02/01/2034 Long Term Rating AA+/Stable New Rationale Minnesota Credit Enhancement Program for Cities and Counties S&P Global Ratings assigned its 'AA+' rating to Gem Lake, Minn.'s series 2018A GO improvement bonds. The outlook is stable. Officials intend to use bond proceeds to finance the construction of the 2018 Schueneman Road Reconstruction Project. The bonds are payable from special assessments levied on benefited property and are also general obligations (GO) of the city for which its full faith, credit and taxing powers are pledged without limitation as to rate or amount. Governing statutes Authorized by Minnesota Statutes, Section 446A.086, the Minnesota Credit Enhancement Program was established in 2000 for counties, and cities were added to the program in 2008, to provide for the timely payment of principal and interest on a debt obligation and prevent a potential city or county default. Payments from the state represent a standing appropriation from the state's general fund. We view this standing appropriation pledge as equivalent to a general fund pledge because the standing appropriation does not require adoption of a budget or any action of the legislature to make payment, although a legislative action could repeal the standing appropriation. Furthermore, the standing appropriation is not subject to executive unallotment authority. Additionally, the credit enhancement program supports projects that are central to the state of Minnesota's operations and purpose. In our opinion, there is no unusual political, timing, or administrative risk related to the debt payment. This rating moves in conjunction with that of the state GO rating. Eligibility requirements To qualify for participation in the Minnesota Credit Enhancement Program, cities and counties must apply to the Minnesota Public Facilities Authority (PFA) prior to issuing the bonds. The issuer must submit the application for program participation, the credit enhancement agreement signed by the city/county and the paying agent, bond counsel opinion, and the authorizing resolution binding it to the provisions of Minnesota Statutes, Section 446A.086. Program provisions Participation in the program is voluntary, and the prospective entity must apply for enhancement before the bond sale of each issue. A participating city or county must covenant in its authorizing resolution to: • Notify the authority no less than 15 business days before the payment date if the city/county is unable to make full or partial payment on the due date; WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 14, 2018 2