AGENDA ADJOURNED PUBLIC UTILITIES COMMISSION MEETING. New Ulm, Minnesota CITY HALL COUNCIL CHAMBERS. June 4, : 30 P. M.

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1 AGENDA ADJOURNED PUBLIC UTILITIES COMMISSION MEETING New Ulm, Minnesota CITY HALL COUNCIL CHAMBERS June 4, : 30 P. M. 1. COMMUNICATIONS: a. From Moody's Investors Services regarding notification that Moody's has assigned a rating to the General Obligation Public Utility Revenue Bonds, Series 2013B. FA NEW BUSINESS: a. Consider resolution authorizing the issuance, awarding the sale and fixing the form and details for $ 2, 950, 000 General Obligation Public Utility Revenue Bonds, Series COMMISSIONER' S COMMENTS:

2 City of New Ulm Request for Public Utilities Commission Action Meeting Date: June 4, 2013 Agenda Item Number: La. Agenda Section: Communications Originating Department: CCT Resolution: N/A Prepared By: Reginald K. Vorwerk Number of Attachments: One Presented By: Reginald K. Vorwerk Item From Moody' s Investors Services regarding notification that Moody' s has assigned an Aa2 rating to the General Obligation Public Utility Revenue Bonds, Series 2013B. Director' s Proposed Action: Motion by Second by to receive notification that Moody' s Investors Services has assigned an Aa2 rating to the $2,950,000 General Obligation Public Utility Revenue Bonds, Series 2013B. Board /Commission Recommendation: Overview: For each bond sale, Moody' s provides the City/PUC with a credit rating. Once again the rating was very good as Moody' s likes the conservative manner that the City/PUC uses to conduct business and solve problems. Primary Issues /Alternatives to Consider: Budgetary/Fiscal Issues: Attachments: Moody' s Investors Service Credit Rating Letter.

3 MOODY'S INVESTORS SERVICE New Issue: Moody' s assigns Aa2 rating to the City of New Ulm' s ( MN) $ 2.9 million GO Permanent Improvement Revolving Fund Bonds, Series 2013Aand $ 3.0 million GO Public Utility Revenue Bonds, Series 2013B Global Credit Research - 30 May 2013 Aa2 rating applies to $35. 7 million of post -sale GOULT debt NEW ULM (CITY OF) MN Cities ( including Towns, Villages and Townships) MN Moody' s Rating ISSUE General Obligation Permanent Improvement Revolving Fund Bonds, Series 2013A Sale Amount $ 2,875,000 Expected Sale Date 06/04/ 13 Rating Description General Obligation RATING Aa2 General Obligation Public Utility Revenue Bonds, Series 2013B Sale Amount 2, 950,000 Expected Sale Date 06/04/ 13 Rating Description General Obligation Aa2 Moody's Outlook NOO Opinion NEW YORK, May 30, Ivbody's Investors Service has assigned a Aa2 rating to the City of New Ulm' s ( MN) 2.9 million General Obligation Permanent Improvement Revolving Fund Bonds, Series 2013Aand $3.0 million General Obligation Public Utility Revenue Bonds, Series 2013B. Concurrently, Moody's affirms the Aa2 rating on the city's general obligation debt which totals $ 35.7 million, post -sale. SUMMARY RATING RATIONALE Proceeds from the Series 2013A bonds will be used to finance various municipal improvements throughout the city and proceeds of the Series 2013B bonds will finance various capital improvements to the city's water utility. While debt service on the Series 2013Aand 2013B bonds are expected to be paid from special assessments and net revenues of the water utility, respectively, debt service on both series are ultimately secured by the city's general obligation unlimited tax pledge which benefits from a dedicated tax levy unlimited as to rate or amount. Assignment and affirmation of the Aa2 rating reflects the city's moderately sized tax base that serves as a regional center in the southern portion of the state of Minnesota ( general obligation Aa1 /negative outlook), stable financial profile supported by ample reserves; elevated debt burden with high fixed costs compared to budget; and conservative management team. STRENGTHS: History of operating surpluses leading to healthy reserves for modest budget Tax base serves as a commercial center for surrounding rural area CHALLENGES:

4 Relatively smaller tax base compared to rating category with weak demographic profile High fixed costs as a percentage of operating expenditures Elevated debt burden leading to leveraged tax base DETAILED CREDIT DISCUSSION MODESTLY SIZED TAX BASE SERVES AS REGIONAL CENTER IN RURAL SOUTHERN MINNESOTA The city's tax base will remain stable, despite some recent declines in full valuation, due to the city's role as county seat and commercial center for the surrounding rural areas in Brown County (not rated) and the availability of land to support future development. Located 90 miles southwest of the Twin Cities metropolitan area, the modestly sized $802 million tax base, as measured by estimated market value, has declined at a modest average annual rate of 0.5% since Despite the overall decline, valuations actually increased by 3.8% from 2011 to 2012, followed by a slight decline of 0. 6% for While the market valuation has remained relatively stable in recent years, the city's net tax capacity has declined more rapidly due to the implementation of the Market Value Exclusion, a legislative action that reduced the taxable value of certain residential properties, effective collection year As a result of this legislative change, the city's net tax capacity declined by nearly 12% from 2011 to The city has increased the property tax levy rate to achieve level property tax revenues, but does not expect an increase in delinquencies or appeals as a result. The city's market values are expected to remain stable in the near term due to a number of commercial development projects that are currently in progress. In 2012 a Menard' s store was constructed, which is valued at approximately $7.5 million. The city expects a $ 3.4 million expansion of the New Ulm Medical Center and a $ 5 million expansion of the Catholic Pastoral Center in Total building permit activity was approximately $ 15 million through April 2013, tracking ahead of 2012 which had $ 20 million in activity for the entire year. The city's tax base is primarily residential ( comprising 63% of full value in 2013) supported by a sizeable commercial and industrial presence ( 36 %). The city's serves as a regional retail and employment center for the surrounding rural area. Officials estimate the city's commercial sector pulls customers in from a 15 to 30 mile radius. The city is home to several large retail stores, including Target Corporation ( long term rated A2/stable outlook) and Wal -Mart Stores Inc. ( Aa2 /stable outlook). The city also benefits from its proximity to Mankato ( general obligation rated Aa2), which is 30 miles away and home to a campus of the Mankato State University ( enrollment of 15, 000). The city's top two employers are Kraft Foods Inc. ( 595 employees, senior unsecured rated Baa2/stable outlook) and 3M Company (625 employees, senior unsecured Aa2 /stable outlook). The presence of health care and education also provide stability to the local economy. New Ulm Medical Center employs 600, and the local school district employs 306. Resident income levels are below state levels, with median family income at 80.5% of the state and 91. 2% of the nation and per capita income at 85.3% of the state and 92.4% of the nation. At 6.7% in March 2013, the unemployment rate in Brown County above the state ( 5.8 %) but below national ( 7.8 %) unemployment rates for the same time period. The city's population has been relatively stable since 1980, declining from 13,755 to 13,522 as of the 2010 census. STRONG FINANCIAL OPERATIONS WITH AMPLE RESERVES LEVELS The city's financial position are expected to remain strong due to conservative budgeting and ample reserve levels. Due to cuts in Local Government Aid ( LGA) since 2008, the city has reduced expenditures accordingly to ensure balanced operations. The city posted three consecutive years of operating surpluses between fiscals 2009 and 2011 in the face of declining state revenues, which was the largest revenue source at 42% of General Fund revenues in fiscal Reserve levels grew from an already healthy $ 5.7 million or % of General Fund revenues to an ample $6.9 million or 70.4% of General Fund revenues. For fiscal 2012, there was a planned use of nearly $900,000 for one time capital expenditures related to flood remediation, reducing the total fund balance to 6. 1 million or a still robust 63% of General Fund revenues. Despite the use of reserves, unassigned reserve levels actually grew from $ 5. 1 million or 52% of General Fund revenues in 2011 to $5.3 million or 54% of General Fund revenues in The city anticipates closing fiscal 2013 with balanced operations which would leave reserve levels largely unchanged compared to fiscal Management's policy is to maintain 50% of reserves unassigned and has continued to meet this goal, supporting strong financial operations. While state aid comprised 42% of General Fund revenues in fiscal 2012, property taxes made up 20% of revenues followed by transfers from the Public Utility Commission ( PUC) which comprised 14% of General Fund revenues. The transfers are equivalent to a payment in lieu of taxes from the PUC, which equals 5% of gross utility revenues annually, and has been stable in recent years. Additional financial cushion is provided by alternate liquidity available in the Capital Improvement Fund. While this fund can see variability in its reserve levels depending on equipment

5 purchases and recurring maintenance of city buildings, it held a balance of $4.0 million at the end of fiscal 2012, which can be used for general purposes. Given the city's history of conservative budgeting, demonstrated willingness of reducing expenditures in the face of budgetary pressures, reserve policies and commitment to balanced operations, we expect the city's financial position to remain strong in the near to medium term. ABOVE AVERAGE DEBT LEVELS WITH RAPID PRINCIPAL AMORTIZATION; AVERAGE PENSION LIABILITIES The city's above average direct and overall debt burdens of 2.9% and 3. 3% of full value will remain above average given future borrowing plans. However, the debt profile is expected to remain manageable due to rapid amortization and non -levy support which includes sales taxes, specials assessments, and utility revenues, for nearly all of the city's general obligation debt. Thus far, alternate revenues have supported all debt as planned, with sales tax revenues coming in at over 1. 5 times debt service and utility revenue supported debt coming in above 2.0 times debt service. While the property tax base has been insulated from the high debt burden, should there be any indication that the alternate revenue sources are falling short of expectations, this could pressure the property tax base as it would have to bear the burden of disproportionately high debt service expenditures. Debt service as a percentage of operating expenditures was a very high 34. 7% in fiscal 2012; this number is inflated somewhat because it includes approximately $ 1 million in debt service associated with the city's redemption of its Series 2005 bonds. However, excluding the redemption, debt service would still comprise over 25% of operating expenditures, reflecting a high fixed cost burden for the city's budget. Further growth in the city's debt burden could cause credit pressure as fixed costs comprise a larger portion of the city's budget. Principal amortization is rapid with 89.8% of all debt retired within 10 years. The city annually issues approximately $3 million for capital projects and expects to continue this practice. All of the city's outstanding debt is in fixed rated and the city is not a party to any interest swap agreements. The city has an average employee pension burden, based on unfunded liabilities for its share of two multiple - employer plans administered by the state and one single employer plan which it administers. Moody's has allocated liabilities of state cost - sharing plans in proportion to its contributions to each plan for analytic purposes. The city's share of unfunded pension liabilities allocated by Moody's on a reported basis consist of an estimated 3.3 million share of the statewide Government Employees Retirement Fund ( GERF), an estimated $2. 1 million share of the Public Employees Police and Fire Fund ( PEPFF), and a reported $397,000 for the city's New Ulm Fire Department Relief Association. The actuarial valuation dates for the state plans are as of June 30, 2011 and is December 31, 2011 for the city's plan. The combined reported liability is equal to approximately 0.4 times the city's fiscal 2011 operating revenues. The city's annual contribution to the retirement systems in fiscal 2011 was 624,000, equal to 4.6% of operating revenues. Moody's adjusted combined net pension liability (ANPL) for the city as of fiscal 2011 related to GERG, PEPFF and the city's fire department pension plan, under our methodology for adjusting reported pension data, is $ million, or a slightly above average 1. 2 times operating revenues, compared to less than 1 times on average in the sector. Moody's ANPL reflects certain adjustments we make to improve comparability of reported pension liabilities. The adjustments are not intended to replace the district's reported liability information, but to improve comparability with other rated entities WHAT COULD MOVE THE RATING UP Significant diversification and expansion of the city's tax base Strengthening of the resident demographic profile Moderation in the city's debt burden WHAT COULD MOVE THE RATING DOWN Declines in liquidity and General Fund reserves Increase to the city's debt burden Declines in the city's full value Deterioration in any non -levy debt service sources KEY STATISTICS

6 2010 Census population: 13,522 ( decrease of 0. 5% since 2000) 2013 Full valuation: $ 802 million ( 0. 5% average annual decline since 2008) 2013 Estimated full value per capita: $59, Median Family Income (American Community Survey 5 -Year Estimates): $ 57,415 ( 80.5% of MN, 91. 2% of US) Per Capita Income (American Community Survey 5 -Year Estimates): $ 25,245 (85.3% of MN, 92.4% of US) Brown County unemployment rate ( March 2013): 6.7% ( MN at 5.8 %, US at 7.6 %) Direct debt burden: 2.9% ( overall at 3.3 %) Principal amortization ( 10 years): 89.8% Fiscal 2012 General Fund balance: $6. 1 million ( 63. 1% of General Fund revenues) Post -sale GOULT debt: $35.7 million PRINCIPAL METHODOLOGY USED The principal methodology used in this rating was General Obligation Bonds Issued by US Local Governments published in April Please see the Credit Policy page on com for a copy of this methodology. REGULATORY DISCLOSURES For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider' s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer /entity page for the respective issuer on Please see for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Please see the ratings tab on the issuer /entity page on com for additional regulatory disclosures for each credit rating. Analysts Chandra Ghosal Lead Analyst Public Finance Group Moody's Investors Service Soo Yuri Chun Additional Contact Public Finance Group Moody's Investors Service Contacts Journalists: (212) Research Clients: ( 212)

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9 City of New Ulm Request for Public Utilities Commission Action Meeting Date: June 4, 2013 Agenda Item Number: 2. a. Agenda Section: New Business Originating Department: CCT Resolution: Yes Prepared By: Reg Vorwerk Number of Attachments: None Presented By: Jon Burmeister, PFM Item: resolution authorizing the issuance, awarding the sale and fixing the form and details for $2, 950,000 General Obligation Public Utility Revenue Bonds, Series 2013B. Director' s Proposed Action: Moved by Second by to approve resolution and waive the reading authorizing the issuance, awarding the sale and fixing the form and details for $ 2,950,000 General Obligation Public Utility Revenue Bonds, Series 2013B and authorize the Mayor and Finance Director /City Clerk- Treasurer to execute the bond documents on behalf of the City of New Ulm/New Ulm Public Utilities to finance Water Department capital improvement projects. Board /Commission Recommendation: Overview: This is to consider and approve the revenue bonds sold June 4, 2013 at 10: 00 A.M. Bond proceeds will fund various capital projects in 2013 and 2014 for the Public Utilities Commission Water Department. July 24, 2012 PUC Meeting: The Commission approved the preliminary site for the Nehls Park Elevated Water Storage Tank. August 12, 2012 City Council Meeting_ The City Council approved Nehls Park for the Hilltop Area Elevated Water Storage Tank. November 27, 2012 PUC Meeting: The Commission authorized staff to prepare plans and specifications, advertise for bids and set bid date for the Nehls Park 250, 000 Gallon Elevated Water Storage Tank. December 20, 2012 PUC Meetina: The Commission adopted the 2013 Budget for New Ulm Public Utilities. The Budget included the following Water Department Capital Projects funded with proceeds from General Obligation Public Utility Revenue Bonds: ( 1) Nehls Park Elevated Water Storage Tank; ( 2) SCADA System Upgrades; ( 3) Repaint Airport Elevated Water Storage Tank; ( 4) 3. 0 and 4. 5 MG Storage Tanks Repair; and ( 5) Pressure Reducing Station at Boundary and 23rd North Streets. February 26, 2013 PUC Meeting: The Commission awarded the bid for the Nehls Park 250, 000 Elevated Water Storage Tank in the amount of $1, 443, April 23, 2013 PUC Meeting; The Commission authorized the sale of bonds to fund various Water Department Capital Projects. Other necessary projects may also be approved. Primary Issues /Alternatives to Consider: Budgetary/Fiscal Issues: Attachments: Bid tabulation to be presented by representative from Public Finance Management, Inc.