City of Shakopee, Minnesota Recommendations for Issuance of Bonds

$31,845,000 General Obligation Tax Abatement Bonds, Series 2016A

The City Council has under consideration the issuance of bonds to fund renovations to the City’s existing community center, as described in more detail below. This document provides information relative to the proposed issuance.

KEY EVENTS: The following summary schedule includes the timing of some of the key events that will occur relative to the bond issuance.

September 22, 2015 Tax Abatement Public Hearing conducted, City Council approval of issuance of Bonds

November 17, 2015 City Council sets sale date and terms Week of November 23, 2015 Contruction bids are due December 2, 2015 Rating conference is conducted Est. December 11, 2015 Rating is received December 17, 2015, 10:00 AM Competitive proposals are received December 17, 2015, 7:00 PM Special Council meeting

City Council considers award of bonds

On or about January 21, 2016 Proceeds are received

RATING: An application will be made to Standard & Poor’s Ratings Services for a rating on the Bonds. The City’s general obligation debt is currently rated 'Aa2' by Moody’s Investors Service and is not currently rated by S&P.

THE MARKET: Performance of the tax-exempt market is often measured by the Bond Buyer’s Index (“BBI”) which measures the yield of high grade municipal bonds in the 20th year for general obligation bonds (the BBI 20 Bond Index) and the 30th year for revenue bonds (the BBI 25 Bond Index). The following chart illustrates these two indices over the past five years.

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POST ISSUANCE COMPLIANCE:

The issuance of these bonds will result in post-issuance compliance responsibilities. The responsibilities are in two primary areas: i) compliance with federal arbitrage requirements and ii) compliance with secondary disclosure requirements.

Federal arbitrage requirements include a wide range of implications that have been taken into account as this issue has been structured. Post-issuance compliance responsibilities for tax-exempt issues include both rebate and yield restriction provisions of the IRS Code. In general terms the arbitrage requirements control the earnings on unexpended bond proceeds, including investment earnings, moneys held for debt service payments (which are considered to be proceeds under the IRS regulations), and/or reserves. Under certain circumstances any “excess earnings” will need to be paid to the IRS to maintain the tax-exempt status of the Bonds. Any interest earnings on gross bond proceeds or debt service funds should not be spent until it has been determined based on actual facts that they are not “excess earnings” as defined by the IRS Code.

The arbitrage rules provide spend-down exceptions for proceeds that are spent within either a 6-month, 18-month or 24-month period in accordance with certain spending criteria. Proceeds that qualify for an exception will be exempt from rebate. These exceptions are based on actual expenditures and not based on reasonable expectations; and expenditures, including any investment proceeds, will have to meet the spending criteria to qualify for the exclusion. The City expects to meet the 24-month spending exception.

Regardless of whether the issue qualifies for an exemption from the rebate provisions, yield restriction provisions will apply to the debt service fund under certain conditions and any unspent bond proceeds remaining after three years. These funds should be monitored throughout the life of the Bonds.

Secondary disclosure requirements result from an SEC requirement that underwriters provide ongoing disclosure information to investors. To meet this requirement, any prospective underwriter will require the City to commit to providing the information needed to comply under a continuing disclosure agreement.

Springsted and the City will enter into an Agreement for Municipal Advisor Services, under which Springsted will provide arbitrage and continuing disclosure compliance services for the City.

SUPPLEMENTAL INFORMATION AND BOND RECORD:

Supplementary information will be available to staff including detailed terms and conditions of sale, comprehensive structuring schedules and information to assist in meeting post-issuance compliance responsibilities.

Upon completion of the financing, a bond record will be provided that contains pertinent documents and final debt service calculations for the transaction.

PURPOSE: Proceeds of the Bonds will be used to finance (i) a new, two-sheet ice arena that will be built on the existing community center site and (ii) renovation of the existing community center. The renovations to the Community Center will include repurposing the existing ice arena space - a component within the current community center - into an indoor aquatics center, increasing the fitness area and adding a senior area, indoor playground and drop in child care. The renovated Community Center will also include a teen center, community room and increased office space.

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AUTHORITY: Statutory Authority: The Bonds are being issued pursuant to Minnesota Statutes, Sections 469.1813 through 469.1815 and Chapter 475.

Statutory Requirements: The City must specify the public benefit of the abatement, identify properties located within its jurisdiction whose value will equal the proposed amount of abatement and the term of the abatement, and further comply with the public hearing requirements. A public hearing was held on September 22, 2015 at which time the statutory requirements for issuing Tax Abatement bonds was met.

SECURITY AND SOURCE OF PAYMENT:

The Bonds will be general obligations of the City, secured by its full faith and credit and taxing power. The Bonds will be paid from available tax abatement revenue.

The City will make its first levy for the Bonds in 2016 for collection in 2017. Capitalized interest has been included in the par amount of the Bonds in an amount sufficient to pay the August 1, 2016 and February 1, 2017 interest payments. Thereafter, each year’s collection of taxes will be used to make the August 1 interest payment due in the collection year and the February 1 principal and interest payment due in the following year.

STRUCTURING SUMMARY:

In consultation with the City, the Bonds have been structured over a term of 20 years with level annual payments of debt service. The City has indicated the par amount of Bonds is not to exceed $32,225,000 and the annual levy, including the 5% overlevy, for the Bonds is not to exceed $2,500,000.

Construction bids for the project will be received in late November, prior to the sale of the Bonds.

Due to the size, term and credit profile of the issue, it is likely that the sale of the Bonds will result in premium pricing by underwriters. This occurs when the interest rates the underwriter bids for the Bonds are higher than market yields, resulting in premium reoffering prices and net proceeds to the City greater than the total principal amount of the Bonds. The additional proceeds may be used to reduce the size of the borrowing or be deposited into the project construction fund. The City will decide how to apply any premium received after taking construction bids.

SCHEDULES ATTACHED:

Schedules attached include sources and uses of funds and estimated debt service requirements, given the current interest environment.

RISKS/SPECIAL CONSIDERATIONS:

The outcome of this financing will rely on the market conditions at the time of the sale. Any projections included herein are estimates based on current market conditions.

SALE TERMS AND MARKETING:

Variability of Issue Size: A specific provision in the sale terms permits modifications to the issue size and/or maturity structure to customize the issue once the price and interest rates are set on the day of sale.

Prepayment Provisions: Bonds maturing on or after February 1, 2026 may be prepaid at a price of par plus accrued interest on or after February 1, 2025.

Bank Qualification: The City expects to issue more than $10 million in tax-exempt obligations in calendar year 2016; therefore the Bonds are not designated as bank qualified.

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Good Faith Deposit: The lowest bidder will be required to provide a good faith deposit within a specified time after receipt of proposals. The good faith deposit will be deducted from the purchase price otherwise due at the time of closing. In the event the lowest bidder fails to comply with the accepted bid proposal, the Issuer will retain the good faith deposit.

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$31,845,000 City of Shakopee, Minnesota

General Obligation Tax Abatement Bonds, Series 2016A

Sources & Uses Dated 01/21/2016 | Delivered 01/21/2016

Sources Of Funds Par Amount of Bonds.......................................................................................................................................... $31,845,000.00 Total Sources................................................................................................................................................... $31,845,000.00 Uses Of Funds Ice Arena............................................................................................................................................................. 18,797,770.00Aquatics Center.................................................................................................................................................. 11,619,009.00Deposit to Capitalized Interest (CIF) Fund........................................................................................................... 932,885.63Total Underw riter's Discount (1.200%).............................................................................................................. 382,140.00Costs of Issuance............................................................................................................................................... 109,125.00Rounding Amount................................................................................................................................................ 4,070.37 Total Uses......................................................................................................................................................... $31,845,000.00

Series 2016A GO Tax Abate | Summary | 11/ 5/2015 | 10:20 AM

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$31,845,000 City of Shakopee, Minnesota

General Obligation Tax Abatement Bonds, Series 2016A

NET DEBT SERVICE SCHEDULE

Date Principal Coupon Interest Total P+I CIF Net New D/S 105% Overlevy02/01/2016 - - - - - - -02/01/2017 - - 932,885.63 932,885.63 (932,885.63) - -02/01/2018 1,365,000.00 1.000% 907,672.50 2,272,672.50 - 2,272,672.50 2,386,306.1302/01/2019 1,380,000.00 1.200% 894,022.50 2,274,022.50 - 2,274,022.50 2,387,723.6302/01/2020 1,395,000.00 1.450% 877,462.50 2,272,462.50 - 2,272,462.50 2,386,085.6302/01/2021 1,415,000.00 1.700% 857,235.00 2,272,235.00 - 2,272,235.00 2,385,846.7502/01/2022 1,440,000.00 1.950% 833,180.00 2,273,180.00 - 2,273,180.00 2,386,839.0002/01/2023 1,465,000.00 2.100% 805,100.00 2,270,100.00 - 2,270,100.00 2,383,605.0002/01/2024 1,500,000.00 2.350% 774,335.00 2,274,335.00 - 2,274,335.00 2,388,051.7502/01/2025 1,535,000.00 2.550% 739,085.00 2,274,085.00 - 2,274,085.00 2,387,789.2502/01/2026 1,570,000.00 2.650% 699,942.50 2,269,942.50 - 2,269,942.50 2,383,439.6302/01/2027 1,615,000.00 2.900% 658,337.50 2,273,337.50 - 2,273,337.50 2,387,004.3802/01/2028 1,660,000.00 3.100% 611,502.50 2,271,502.50 - 2,271,502.50 2,385,077.6302/01/2029 1,710,000.00 3.300% 560,042.50 2,270,042.50 - 2,270,042.50 2,383,544.6302/01/2030 1,770,000.00 3.450% 503,612.50 2,273,612.50 - 2,273,612.50 2,387,293.1302/01/2031 1,830,000.00 3.550% 442,547.50 2,272,547.50 - 2,272,547.50 2,386,174.8802/01/2032 1,895,000.00 3.600% 377,582.50 2,272,582.50 - 2,272,582.50 2,386,211.6302/01/2033 1,965,000.00 3.650% 309,362.50 2,274,362.50 - 2,274,362.50 2,388,080.6302/01/2034 2,035,000.00 3.700% 237,640.00 2,272,640.00 - 2,272,640.00 2,386,272.0002/01/2035 2,110,000.00 3.750% 162,345.00 2,272,345.00 - 2,272,345.00 2,385,962.2502/01/2036 2,190,000.00 3.800% 83,220.00 2,273,220.00 - 2,273,220.00 2,386,881.00

Total $31,845,000.00 - $12,267,113.13 $44,112,113.13 (932,885.63) $43,179,227.50 $45,338,188.88

SIGNIFICANT DATES Dated Date................................................................................................................................................................................ 1/21/2016Delivery Date............................................................................................................................................................................. 1/21/2016First Coupon Date..................................................................................................................................................................... 8/01/2016 Yield Statistics Bond Year Dollars..................................................................................................................................................................... $377,209.58Average Life............................................................................................................................................................................. 11.845 YearsAverage Coupon....................................................................................................................................................................... 3.2520683% Net Interest Cost (NIC).............................................................................................................................................................. 3.3533753%True Interest Cost (TIC)............................................................................................................................................................. 3.3333893%Bond Yield for Arbitrage Purposes........................................................................................................................................... 3.2071519%All Inclusive Cost (AIC)............................................................................................................................................................. 3.3698279% IRS Form 8038 Net Interest Cost....................................................................................................................................................................... 3.2520683%Weighted Average Maturity...................................................................................................................................................... 11.845 Years

Series 2016A GO Tax Abate | Summary | 11/ 5/2015 | 10:20 AM