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City of Roseville, Minnesota <br />February 4,2004 <br />7. <br />8. <br />9. <br />10 <br />Prepayment Provisions <br />Credit Rating Comments <br />collection of assessments and taxes will be <br />used to pay the interest payment due <br />September 1 in the year of collection. <br />Second-half collections of assessments and <br />taxes plus surplus first-half collections will be <br />used to pay the March 1 principal and <br />interest payment due in the following year. <br />Due to their short duration, the Bonds will <br />not be subject to prepayment prior to their <br />stated maturities. <br />Applications will be made to Moody's <br />Investors Service and to Standard & Poor's <br />Ratings Services for ratings on the Bonds. <br />The City's current general obligation credit <br />ratings are "Aal" by Moody's and R�' by <br />Standard & Poor's. <br />Term Bonds We have included a provision that permits <br />the underwriters to combine multiple maturity <br />years into a term bond, subject to mandatory <br />redemption on the same maturity schedule <br />provided in the Terms of Proposal. The <br />advantage to the underwriter is that it <br />provides large blocks of bonds, which are <br />more attractive to bond funds, and certain <br />pension funds. This in turn is a benefit to <br />the City since selling larger blocks of bonds <br />reduces the risk to the underwriter, allowing <br />them to lower their costs and the interest <br />coupons. Since the Bonds are being offered <br />on a competitive bid basis and awarded on <br />the lowest true interest cost, the City will <br />award the Bonds to the best bid regardless <br />of whether term bonds are chosen or not. <br />Federal Treasury Regulations Concerning <br />Tax-Exempt Obligations <br />(a) Bank Qualification Under Federal Tax Law, financial institutions <br />cannot deduct from income for federal <br />income tax purposes, expense that is <br />allocable to carrying and acquiringtax- <br />exempt bonds. There is an exemption to <br />this for "bank qualified" bonds, which can be <br />so designated if the issuer does not issue <br />more than $10 million of tax exempt bonds <br />in a calendar year. Issues that are bank <br />qualified generally receive slightly lower <br />interest rates than issues that are not bank <br />qualified. Since the City expects to issue <br />less than $10 million of tax exempt <br />obligations in 2004, this Issue is designated <br />as bank qualified. <br />Page 2 <br />