$7,460,000 CITY OF MINNEAPOLIS, MINNESOTA TAX INCREMENT REFUNDING REVENUE BONDS (GRANT PARK PROJECT) SERIES 2015

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1 REFUNDING ISSUE Book-Entry Only In the opinion of Bond Counsel, under existing laws as presently enacted and construed, interest on the Bonds is not includable in gross income for federal income tax purposes and, to the same extent, is not includable in the net taxable income of individuals, estates, or trusts for State of Minnesota income tax purposes. Interest on the Bonds is not an item of tax preference includable in alternative minimum taxable income for purposes of the federal alternative minimum tax applicable to taxpayers under Section 55 of the Code or the Minnesota alternative minimum tax applicable to individuals, estates, and trusts. Interest on the Bonds is includable in adjusted current earnings of corporations in determining alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on corporations. Interest on the Bonds is subject to State of Minnesota franchise taxes measured by income and imposed on corporations, including financial institutions. The opinion of Bond Counsel contains greater detail, and is subject to exceptions, as noted in TAX EXEMPTION OF BONDS, LEGAL MATTERS, and APPENDIX A FORM OF BOND COUNSEL OPINION herein. Dated: Date of Delivery $7,460,000 CITY OF MINNEAPOLIS, MINNESOTA TAX INCREMENT REFUNDING REVENUE BONDS (GRANT PARK PROJECT) SERIES 2015 Due: March 1, as shown on inside front cover The Tax Increment Refunding Revenue Bonds (Grant Park Project) Series 2015 described in this Official Statement (the Bonds or the Series 2015 Bonds ) are being issued by the City of Minneapolis (the Issuer ). The Series 2015 Bonds are payable solely from certain tax increments resulting from increases in taxable valuation of certain property included in a tax increment financing district in the City of Minneapolis pledged to the payment hereof under the Indenture of Trust dated as of March 1, 2015 (the Indenture ), between the Issuer and U.S. Bank National Association (the Trustee ) and are not otherwise payable from any of the Issuer s general funds, taxes, revenues or any other assets of the Issuer. The Series 2015 Bonds are being issued for the purpose of refunding the outstanding principal of the Tax Increment Revenue Refunding Bonds (Grant Park Project), Series 2006 (the Refunded Bonds ) which refunded certain Taxable Tax Increment Revenue Notes (Grant Park Project), Series 2002 (the Series 2002 Notes ) issued by the Minneapolis Community Development Agency (the Agency ) for the purpose of financing certain Public Redevelopment Costs, as defined in the Contract for Private Redevelopment dated as of August 1, 2002, between the Agency and Urban Condos, L. L. C., its successors and assigns (the Redeveloper ), in connection with the development by the Redeveloper of a twenty-seven story residential tower with 284 for-sale condominium units, an adjacent above-grade parking structure with approximately 533 surface and structured stalls, and 43 for-sale residential units located adjacent to the tower and parking structure (the Project ) within the Grant Park Tax Increment Financing District (the TIF District ) established by the Agency and the Issuer. The Series 2015 Bonds are payable solely from tax increments attributable to increases in taxable valuation of property located in the TIF District. Interest on the Series 2015 Bonds is payable on March 1 and September 1 of each year, commencing September 1, All Series 2015 Bonds bear interest from their date of delivery, at the interest rates per annum set forth below in the maturity schedule and are scheduled to mature on the dates and in the principal amounts for each of such dates as set forth in the following maturity schedule. The Series 2015 Bonds are subject to optional redemption, special redemption and scheduled mandatory redemption as described under the caption THE SERIES 2015 BONDS Redemption in this Official Statement. THE SERIES 2015 BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE ISSUER, THE STATE OF MINNESOTA, OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION. THE SERIES 2015 BONDS ARE NOT GENERAL OR MORAL OBLIGATIONS OF THE ISSUER AND ARE NOT PAYABLE FROM THE GENERAL REVENUES OF THE ISSUER. THE SERIES 2015 BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM AMOUNTS PLEDGED TO THE PAYMENT THEREOF UNDER THE INDENTURE. The Series 2015 Bonds are offered when, as and if issued by the Issuer and received by Dougherty & Company LLC, as Underwriter, subject to prior sale, to withdrawal or modification of the offer without any notice and to the approval of legality of the Series 2015 Bonds by Kennedy & Graven, Chartered, Minneapolis, Minnesota, Bond Counsel. Certain legal matters will be passed on for the Issuer by the Minneapolis City Attorney, and for the Underwriter by its counsel, Faegre Baker Daniels LLP, Minneapolis, Minnesota. For details of the Underwriter s compensation, see UNDERWRITING herein. It is expected that the Series 2015 Bonds in definitive form will be available for delivery through the facilities of the Depository Trust Company in New York, New York, on or about March 12, DOUGHERTY & COMPANY LLC The date of this Official Statement is March 3, 2015

2 MATURITY SCHEDULE Maturity (March 1) Principal Amount Interest Rate Price CUSIP 2016 $ 365, % % CZ , DA , DB , DC , DD , DE , DF , DG , DH , DJ1 $1,120,000 Term Bonds at 4.000% due March 1, 2027, Price % *, CUSIP DK8 $2,050,000 Term Bonds at 4.000% due March 1, 2030, Price %, CUSIP DL6 * Yield to call 3.920% ii

3 TABLE OF CONTENTS INTRODUCTORY STATEMENT... 1 INVESTMENT CONSIDERATIONS... 2 Limited Obligations; Risk of Non-Payment of Taxes... 2 Risks Associated with Collection of Tax Increment... 2 Risk of Destruction... 3 Environmental Matters... 3 Limited Remedies Upon an Event of Default... 3 Enforceability of Remedies... 4 Risk of Relying on Projections... 4 Reserve Requirement; Non-Level Debt Service... 4 Lack of Secondary Market... 4 Restrictions on Transfer... 4 THE SERIES 2015 BONDS... 5 General... 5 Book-Entry Only System... 5 Redemption... 7 SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2015 BONDS... 8 General... 8 Tax Increment... 8 Pledge of Available Tax Increment... 8 Application of Excess Available Tax Increment... 9 Calculation of Tax Increment Limitations on Tax Increment Revenues Reserve Fund...10 TAX INCREMENT CASH FLOW PROJECTIONS SOURCES AND USES OF FUNDS THE ISSUER THE PROJECT CONTINUING DISCLOSURE TAX EXEMPTION OF BONDS Related Considerations...15 Original Issue Premium...15 Original Issue Discount...16 Other Tax Matters...16 UNDERWRITING LEGAL MATTERS APPENDIX A - Form of Bond Counsel Opinion... A-1 APPENDIX B - Certain Definitions and Summary of Documents... B-1 APPENDIX C - Tax Increment Analysis... C-1 APPENDIX D - Continuing Disclosure Certificate... D-1 iii

4 No person has been authorized to give any information or to make any representations other than those contained in this Official Statement in connection with the offering made hereby, and if given or made, such information or representations must not be relied upon as having been authorized by the Issuer or the Underwriter. Neither the delivery of this Official Statement nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Issuer or applicable Minnesota laws relating to tax increment since the date hereof. This Official Statement does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. The information set forth in this Official Statement has been obtained from the Issuer and other sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness and it is not to be construed as a representation by the Underwriter. The Underwriter has reviewed the information in this Official Statement in accordance with its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guaranty the accuracy or completeness of the information set forth in this Official Statement. In connection with the offering of the Bonds, the Underwriter may over-allot or effect transactions that stabilize or maintain the market price of such Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION BY REASON OF THE PROVISIONS OF SECTION 3(a)(2) OF THE SECURITIES ACT OF 1933, AS AMENDED. THE REGISTRATION OR QUALIFICATION OF THESE SECURITIES UNDER THE SECURITIES OR BLUE SKY LAWS OF THE JURISDICTIONS IN WHICH THEY HAVE BEEN REGISTERED OR QUALIFIED, IF ANY, AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER JURISDICTIONS SHALL NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE JURISDICTIONS NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THESE SECURITIES OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATIONS TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. The statements contained in this Official Statement that are not purely historical, are forwardlooking statements. Forward-looking statements may be found under INTRODUCTORY STATEMENT, SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2015 BONDS, and TAX INCREMENT CASH FLOW PROJECTIONS as well as other sections of the Official Statement. Also, forward-looking statements include statements in which words such as believe, expect, anticipate, intend, will, or similar expressions are used. Potential investors should not place undue reliance on forward-looking statements. All forward-looking statements are made as of the date of this Official Statement, but are necessarily based on assumptions of future events, which have been provided by the Issuer. The Issuer has not assumed any obligation to update any such forward-looking statements. While the Issuer has no reason to believe that the assumptions that have been used in these forwardlooking statements are not reasonable, these assumptions involve judgments with respect to, among other things, future economic conditions, future business decisions, and future legal and regulatory circumstances and conditions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Issuer. As a result, actual results will undoubtedly differ, and may differ materially, from those discussed in such forward-looking statements. iv

5 OFFICIAL STATEMENT $7,460,000 CITY OF MINNEAPOLIS, MINNESOTA TAX INCREMENT REFUNDING REVENUE BONDS (GRANT PARK PROJECT) SERIES 2015 INTRODUCTORY STATEMENT The purpose of this Official Statement, including the cover page of and the appendices to this Official Statement, is to provide material information with respect to the above-referenced obligations (the Bonds or the Series 2015 Bonds ) of the City of Minneapolis (the Issuer ). This Introductory Statement is not a summary of this Official Statement. This Introductory Statement provides information with respect to the Series 2015 Bonds and the transactions related to the issuance of the Series 2015 Bonds and is a guide to additional information contained in this Official Statement, including the cover page of and the appendices to this Official Statement, and the documents described, set forth, or summarized herein. The Series 2015 Bonds are offered to potential investors by means of this entire Official Statement, including the cover page and the appendices to this Official Statement. Purchasers of the Series 2015 Bonds should review the entire Official Statement prior to purchasing any of the Series 2015 Bonds and are encouraged to consult with their investment advisors with respect to the purchase, ownership, and transfer of Series 2015 Bonds. The Issuer and the Minneapolis Community Development Agency (the Agency ) have previously approved a redevelopment plan for The Towers at Elliot Park Redevelopment Project Area (the Project Area ) and a tax increment financing plan for the Grant Park Tax Increment Financing District (the TIF District ) within the Project Area (collectively, the Plans ), all pursuant to Minnesota Statutes, Sections to and Sections to , as amended. The purpose of the Plans is to assist in financing certain costs related to the redevelopment of the Project Area. In order to provide for the redevelopment of the Project Area and the TIF District, and specifically to provide for the development of a twenty-seven story residential tower with 284 for-sale condominium units, an adjacent above-grade parking structure with approximately 533 surface and structured stalls, and 43 for-sale residential units located adjacent to the tower and parking structure (the Project ), the Agency entered into a Contract for Private Redevelopment with Urban Condos, L. L. C. (the Redeveloper ) dated as of August 1, 2002 (the Contract ), which was subsequently assigned by the Agency to the Issuer. Pursuant to the Contract, the Agency agreed to pay for or reimburse the Redeveloper for certain public redevelopment costs incurred in connection with the Project, including costs of land acquisition, parking construction and to the extent necessary to reimburse $7.3 million, any other cost legally eligible for reimbursement. In order to fund such payment or reimbursement, the Agency issued its Taxable Tax Increment Revenue Notes (Grant Park Project), Series 2002, in the original aggregate principal amount of $9,825,000. Construction of the Project was completed, and all of the 327 residential units were sold, and in compliance with its agreement under the Contract, the Issuer issued its Tax Increment Refunding Revenue Bonds (Grant Park Project), Series 2006 (the Refunded Bonds ) for the purpose of refunding the Series 2002 Notes. The proceeds derived from the sale of the Series 2015 Bonds will be applied to the redemption and prepayment of the Refunded Bonds. The Series 2015 Bonds are not general or moral obligations of the Issuer and general revenues of the Issuer will not be used for the payment of the Series 2015 Bonds. The Series 2015 Bonds are special limited obligations of the Issuer payable solely from certain tax increment derived from and in connection with the TIF District. The Series 2015 Bonds do not constitute a debt of the Issuer, Hennepin County or the State of Minnesota within the meaning of any constitutional or statutory debt limitation, nor do they constitute or give rise to a charge against the general credit or taxing power of the Issuer. 1

6 INVESTMENT CONSIDERATIONS Investment in the Series 2015 Bonds involves risk. This section discusses some of these risks but is not intended to be a comprehensive listing of all risks associated with an investment in the Series 2015 Bonds. Any purchaser of the Series 2015 Bonds (a Purchaser ) should give careful consideration to the matters referred to in the following summary as well as to other information set forth in this Official Statement. Limited Obligations; Risk of Non-Payment of Taxes The Series 2015 Bonds are not general or moral obligations of the Issuer. The Series 2015 Bonds are limited obligations of the Issuer, payable only to the extent of Available Tax Increment. The Issuer has no obligation to make payments with respect to the Series 2015 Bonds except as provided in the Indenture. In the event that individual property owners fail to pay their taxes when due, the amount of Available Tax Increment may not be sufficient to pay principal and interest when due on the Series 2015 Bonds. Risks Associated with Collection of Tax Increment There are many factors that can influence the tax increment generated by a tax increment district. Increases or decreases in the values of property in tax increment districts and in the taxing jurisdictions in which the tax increment districts are located will often have a significant impact on tax increment revenues. This impact can be difficult to measure, however. While a sudden and significant increase in property values in a tax increment district will almost certainly result in an increase in tax increment, other economic impacts are less predictable. For example, if property values in a jurisdiction are increasing substantially this might result in a reduction in local tax rates. Such a reduction could lead to a reduction in tax increment, particularly if the tax increment district has not experienced the same increases in property values as the jurisdiction generally. Reduction in Market Value. The Issuer s projections of Available Tax Increment assume that the tax capacity of the property in the TIF District in each year is as actually determined for taxes payable in 2015, increasing at the rate of 1% per year thereafter. There are no agreements with the property owners which establish a minimum market value for the property in the TIF District, or which restrict the rights of such owners to appeal assessed market values in any year. Any reduction in the assessed market value of the property in the TIF District will most likely lead to a reduction in Available Tax Increment. Changes in Law. Legislative changes to the method of imposing and collecting taxes can have a significant impact on tax increment revenues. The Minnesota State Legislature has the power and authority to modify tax rates, as well as the general formula for calculating tax increment revenues, at any time in the future, including during the period while the Series 2015 Bonds remain outstanding. Such alterations could directly affect the amount of tax increment revenues available to pay debt service on the Series 2015 Bonds. In addition, the Legislature could alter local government financing mechanisms in a way that reduces reliance on local property taxes. For example, increased state aids, grants or other revenue sources could reduce the need of one or more of the local governments to levy property taxes, which in turn would reduce the total local tax rate applicable to the Project. Local Tax Rate Risk. The local tax rate varies depending on aggregate tax capacity, local fiscal needs and other sources of financing for local government. Although increases, if any, in the local tax rate above the original local tax rate do not result in increases in Available Tax Increment, an aggregate reduction in local tax levies by the Issuer, county, school district and miscellaneous taxing jurisdictions would reduce the local tax rate and therefore the amount of Available Tax Increment. The original local tax rate applicable to the TIF District is %. The proposed local tax rate applicable to the TIF 2

7 District for taxes payable in 2015 is %. If finalized as proposed, this will be the first year since taxes payable 2011 that the local tax rate applicable to the TIF District is less than the ceiling of the original local tax rate. The total local tax rate in the past six years for the property which is included in the TIF District has been as follows: Pay %* Pay %* Pay %* Pay % Pay % Pay % *Tax increment based on original local tax rate of %. The local tax rate used for projections of available tax increment for the Series 2015 Bonds is %. Risk of Destruction The availability of the tax increment is dependent upon the payment of taxes on the properties in the TIF District. In the event that any of the buildings are destroyed, under the terms of the condominium agreement related to the properties, the building must be rebuilt unless (i) the condominium association is terminated and the members vote not to rebuild, (ii) the rebuilding would be illegal under any state or local health or safety statute or ordinance or (iii) 80 percent of the unit owners, including every unit owner and holder of a first mortgage on a unit or assigned limited common element which will not be rebuilt, vote not to rebuild. During any such rebuilding period, the property value would be substantially diminished, resulting in reduced taxes and a potentially substantial reduction or elimination of the tax increment. In such an event, because the Series 2015 Bonds are payable solely from the Available Tax Increment, payments on the Series 2015 Bonds would also be reduced or eliminated. Environmental Matters There are numerous environmental risks that can arise in connection with real estate investments, including, without limitation: (1) areas of on-site and off-site environmental contamination; (2) past, present, or future violations of environmental laws; (3) adequacy of waste handling procedures; and (4) potential environmental restrictions on future uses of property. The Project, like other types of commercial real estate, may be subject to such environmental risks which can result in a decrease in the market value. Limited Remedies Upon an Event of Default Pursuant to the Indenture, Events of Default include a failure to pay principal or interest on the Bonds, a failure by the Issuer to perform or observe any other covenants, agreements, or conditions under the Indenture or the Issuer becomes a debtor under the United States Bankruptcy Code. Upon the occurrence of an Event of Default, the Trustee is authorized to exercise remedies including the acceleration of the principal of and interest on the Bonds. The Trustee may also pursue, and at the written direction of the Holders of at least twenty-five percent (25%) of the outstanding principal amount of the Bonds is required to pursue, any other available remedy by suit at law or in equity to enforce the payment of principal of and interest due on the Bonds. The Issuer is only obligated under the Indenture to make payments due on the Bonds from the Available Tax Increment and from money held in the Reserve Fund and, upon any such Event of Default, no other funds or sources of revenues are pledged or available to 3

8 pay the principal of or interest on the Bonds. The Bonds are not secured by the full faith and credit or taxing powers of the Issuer and are not general or moral obligations of the Issuer within the meaning of any constitutional or statutory authority. Enforceability of Remedies The ability to compel payment and otherwise to enforce the terms and agreements of the Indenture will depend upon the exercise of various remedies specified by such document. The exercise of these remedies may require judicial actions, which are often subject to discretion and delay. Under existing law, the remedies specified by the Indenture may not be readily available or may be limited by a court in the exercise of judicial discretion. For example, a court may decide not to order the specific performance of the covenants contained in the Indenture. The opinion of Bond Counsel to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments, including the Indenture, due to limitations imposed by state and federal laws, rulings and decisions affecting remedies and by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors rights generally. Risk of Relying on Projections Projections of Available Tax Increment set forth in Appendix C to this Official Statement are based on the assumption that Available Tax Increment will be paid on the dates due to the Trustee in each of the years 2015 through 2029, and in part on other assumptions and information prepared by employees of the Issuer. These projections were reviewed by the Issuer and have not been verified by any other source. The projections are based upon certain assumptions deemed reasonable by the Issuer. Actual future events, however, may prove to be substantially different from the assumptions made by the Issuer. Accordingly, actual future Available Tax Increment will likely vary from such projections. No assurance can be given that events will not cause the collection of Available Tax Increment to vary materially from the projections set forth in this Official Statement. Reserve Requirement; Non-Level Debt Service The Reserve Requirement at which the Reserve Fund is initially funded and required to be maintained is $310,000, which is equal to approximately half of the first year s annual debt service. Debt service increases in each year. Therefore, the amount on deposit in the Reserve Fund will generally be less than the amount of the semi-annual payment due on the Bonds on each March 1 and September 1 payment date. The Reserve Requirement is approximately 44% of maximum annual debt service on the Bonds. Lack of Secondary Market Neither the Underwriter nor any other securities dealer is obligated to engage in secondary market trading of the Bonds or to purchase any of the Bonds at the request of the Holders thereof. No assurance can be given that a secondary market in the Bonds will be created or, if created, that such a market will continue to exist. Restrictions on Transfer Purchase and transfer of the Bonds is restricted to accredited investors as described in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933 and qualified institutional buyers as described in Rule 144A under the Securities Act of This requirement may adversely affect the ability of a Holder to dispose of its interest in the Bonds. 4

9 THE SERIES 2015 BONDS General The Series 2015 Bonds are issuable only as fully registered bonds without coupons in denominations of $50,000 and in any integral multiples of $5,000 in excess thereof. The Series 2015 Bonds will be dated as of their date of delivery, and will bear interest from that date at the rates and will mature on the dates and in the amounts set forth on the inside front cover to this Official Statement. Interest on the Series 2015 Bonds will be payable semi-annually on each March 1 and September 1, commencing September 1, Book-Entry Only System The Depository Trust Company ( DTC ), New York New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of each series of the Bonds in the principal amount of Bonds maturing on that date, and will be deposited with DTC. At the election of the Issuer, one fully-registered Bond certificate will be issued for each series of Bonds, each in the aggregate principal amount of such series of Bonds, and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has Standard & Poor s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and Purchase of Bonds under the DTC system must be made by or through Direct Participants which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Director or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of the ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of 5

10 Beneficial l Owners. Beneficial Owners will not receive certificates representing their ownership interest in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co., or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to related documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Issuer on the payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC (nor its nominee) or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of the principal of and interest of the Bonds to Cede &Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The Issuer may request withdrawal from the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. 6

11 The information in this Official Statement under the Caption THE SERIES 2015 BONDS Book-Entry Only System concerning DTC and DTC s book-entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. Redemption The Series 2015 Bonds are subject to redemption and payment prior to maturity only under the conditions and subject to the terms as summarized below. Optional Redemption. The Series 2015 Bonds may be redeemed at the option of the Issuer on or after March 1, 2023, on any date for which timely notice of redemption can be given, at a redemption price equal to the principal amount of the Series 2015 Bonds so redeemed plus interest accrued thereon to the Redemption Date. Optional redemption of the Bonds may be conditioned on sufficient funds being deposited in the Bond Fund if this condition is stated in the notice of redemption. Scheduled Mandatory Redemption. The Series 2015 Bonds are subject to scheduled mandatory redemption on the dates set forth immediately below in the principal amounts set forth immediately below, at a redemption price equal to the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, subject to reduction of the scheduled mandatory redemption payments to the extent that the Series 2015 Bonds are redeemed prior to maturity otherwise than pursuant to such scheduled mandatory redemption: Term Bonds Due March 1, 2027 Date Principal Date Principal (March 1) Amount (March 1) Amount 2026 $545, (maturity) $575,000 Term Bonds Due March 1, 2030 Date (March 1) Principal Amount Date (March 1) Principal Amount 2028 $605, (maturity) $810, ,000 Partial Redemption. If less than all Series 2015 Bonds of a maturity are to be called for optional redemption, the Issuer shall select the stated maturities of the Series 2015 Bonds to be redeemed and the principal amount (in increments of $5,000) to be redeemed from each stated maturity. The Trustee shall promptly notify the Issuer, in writing, of the Series 2015 Bonds selected for redemption and, in the case of any Series 2015 Bond selected for partial redemption, the principal amount thereof to be redeemed, provided that any Series 2015 Bonds outstanding after a partial redemption shall be in Authorized Denominations. If less than all of the Series 2015 Bonds are to be redeemed other than in accordance with the scheduled mandatory redemption, the Series 2015 Bonds so to be redeemed shall be selected by maturity as set forth in the Indenture and the scheduled mandatory redemption requirements for each maturity described therein shall be adjusted so that the resulting decrease in debt service on the Series 2015 Bonds (including scheduled mandatory redemption payments) during each six-month period commencing on each Interest Payment Date is proportional, as nearly as practicable. Notice of Redemption. Notice of redemption will be given to each registered owner of Series 2015 Bonds to be redeemed by first-class mail, postage prepaid, by the Trustee not less than thirty days prior to the redemption date. The notice must state (i) the redemption date; (ii) the redemption price; (iii) the 7

12 principal amount of Series 2015 Bonds to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the Series 2015 Bonds to be redeemed, specifying the CUSIP numbers of the Series 2015 Bonds to be redeemed and their registration number and stated maturity; (iv) that on the redemption date, the redemption price will become due and payable upon each such Series 2015 Bond, and that interest thereon shall cease to accrue from and after such date, provided that if redemption is conditioned on funds being deposited in the Bond Fund in an amount sufficient to effect such redemption, this condition shall be stated in the notice and if sufficient funds are not so deposited in the Bond Fund, the Bonds to be redeemed shall not be due and payable on the Redemption Date and interest shall continue to accrue thereon; and (v) the place or places where such Series 2015 Bonds are to be surrendered for payment of the redemption price. General SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2015 BONDS Payment of the principal of, premium, if any, and interest on the Series 2015 Bonds is payable solely from certain Tax Increment revenues described herein. Tax Increment Tax increment financing is a method of financing the public redevelopment costs associated with the development and redevelopment of project areas established within the jurisdictional boundaries of various governmental entities in the State. In order to eliminate blighted conditions or the economic underutilization of certain areas of a municipality, an authority may determine that it is necessary to undertake certain public activities to induce private development or redevelopment of such areas. Such activities include land acquisition (through negotiation or the exercise of the power of eminent domain), site improvements such as the demolition and clearance of acquired parcels, and the construction of public improvements such as streets, sidewalks, street lighting, parking lots, parking ramps, and similar facilities. The taxes generated by the subsequently constructed private improvements in such project areas are specially allocated to pay the costs of the public activities under the theory that such additional taxes would not have been present were it not for the development or redevelopment activities undertaken by the authority in such project areas. The term Tax Increment under the Tax Increment Act refers to the portion of property taxes generated within a tax increment financing district that is permitted by the Tax Increment Act to be allocated to pay the costs of the public activities undertaken in a project area (including payment of the principal of and interest on bonds issued to pay such costs). The Tax Increment Act authorizes the use of tax increment financing to pay certain capital and administration costs of a redevelopment project. The Project site is included within a tax increment district created by the Issuer and the Agency within a redevelopment project and, therefore, is eligible to use tax increment financing. Pledge of Available Tax Increment The Issuer has pledged all Available Tax Increment to the payment of the principal of and interest on the Series 2015 Bonds. The term Available Tax Increment means that portion of the real property taxes generated by the TIF District that is actually remitted to the Issuer as tax increment under Minnesota Statutes, Section to , as amended during the period preceding each Payment Date (as defined in the Indenture) after deducting the amount of tax increment, if any, which the Issuer must pay to the school district, the County and the State pursuant to Minnesota Statutes, Sections , subdivisions 9, 10 and 11; , subdivision 4h; and , subdivision 1a, as the same may be amended from time to time; and administrative costs (as defined in Minnesota Statutes, Section , subdivision 14) of the Issuer in an amount not to exceed 10% of the Tax Increment. 8

13 Application of Excess Available Tax Increment On each March 1 Payment Date, after the application of Available Tax Increment in payment of Trustee fees and accrued interest and principal due on the Series 2015 Bonds and to the Reserve Fund in such amount as may be required so that the amount on deposit in the Reserve Fund after the deposit is equal to the Reserve Requirement, if amounts on deposit in the Tax Increment Account of the Revenue Fund are equal to or exceed an amount equal to 15% of the sum of the principal and interest due on the Series 2015 Bonds on such Payment Date and on the preceding Payment Date, then all such amounts on deposit in the Tax Increment Account of the Revenue Fund shall be disbursed to the Issuer. On each March 1 Payment Date, after the application of Available Tax Increment as specified above, if amounts on deposit in the Tax Increment Account are less than an amount equal to 15% of the sum of the principal and interest due on the Bonds on such Payment Date and on the preceding Payment Date, then all such amounts on deposit in the Tax Increment Account of the Revenue Fund shall be transferred to the Reserve Fund until the balance on deposit therein is equal to the least of 1) $746,000 (10% of the original principal amount), 2) 125% of average annual debt service on the Series 2015 Bonds, or 3) 100% of maximum annual debt service on the Bonds, and thereafter, Excess Available Tax Increment shall be disbursed to the Issuer. The Issuer makes no warranties or representations that Available Tax Increment will be sufficient to pay all or any portion of the principal or interest on the Series 2015 Bonds. Calculation of Tax Increment. In order to calculate the portion of the property taxes generated in a tax increment district that qualify as tax increment and is available to be allocated to payment of the public costs of the development or redevelopment of a project area, it is necessary to ascertain (1) the estimated market value of the taxable property in the tax increment financing district on the date the district is initially established and for each year thereafter while the district exists, (2) the class rates for each type of taxable property in the district, (3) the tax capacity of the taxable property in the tax increment financing district on the date the district was initially established and for each year thereafter while the district exists, and (4) the local tax rates for all taxing jurisdictions in which the taxable property in the district is located. The estimated market value (the Market Value ) of taxable property for ad valorem property tax purposes in Minnesota is established as of January 2 of the year of assessment. Through a statutory process consisting of a city appraisal with a mechanism for administrative appeals, a Market Value is assigned to each parcel of taxable property in the city or other taxing unit. At least one-fourth of all existing real estate in a taxing unit must be inspected and reappraised by the local assessor each year. The appraisal and review is completed by June 30 of each year and the Commissioner of Revenue of the State certifies final Market Values to the auditors of each county as of July 1. The tax capacity of taxable property (the Tax Capacity ) is determined by multiplying the Market Value for such property by percentage rates referred to as the class rates (the Class Rates ). The Class Rates of taxable property differ depending on the use and Market Values of such property. Minnesota law treats various types of taxable property differently for assessment purposes. The captured tax capacity of a tax increment financing district (the Captured Tax Capacity ) is the sum of the Tax Capacities of all taxable property in the district in excess of the original tax capacity (the Original Tax Capacity ). The Original Tax Capacity of the taxable property in a tax increment financing district is the sum of the Tax Capacities of all taxable property in the district on the date of certification of the district for tax increment financing purposes (subject to certain adjustments required by the Tax Increment Act). Changes in Captured Tax Capacity can result from many factors including changes in Class Rates, the construction of improvements in the tax increment financing district, or increases or decreases in the Market Values of existing property due to economic factors, inflation or deflation, administrative or judicial adjustments, casualties or wear and tear, or other factors. 9

14 The annual tax increment derived from a tax increment financing district is determined by multiplying the Captured Tax Capacity of the district by the combined local tax rates (the Local Tax Rates ) of all taxing jurisdictions in which the tax increment financing district is located. The taxing jurisdictions for the TIF District include the Issuer, Hennepin County, Special School District Number 1 and a number of special taxing entities (e.g., Metropolitan Council, Metropolitan Transit Commission and Metropolitan Mosquito Control District). The combined Local Tax Rate is determined by the county auditors. Each of the taxing jurisdictions submits its tax levy to the county auditor. The county auditor determines the Local Tax Rate for each taxing authority by determining the rate at which the Tax Capacity of the taxable property in such jurisdiction, excluding the Captured Tax Capacities of all tax increment financing districts, must be taxed in order to generate the money required by such taxing authority. The lesser of (i) the combined Local Tax Rate of all taxing authorities in which a tax increment financing district is located for the current year, or (ii) the original Local Tax Rate, which is the combined Local Tax Rates of all taxing authorities in which a tax increment financing district is located at the time of initial certification of the district, is then applied to the Tax Capacity of all taxable property, including the Captured Tax Capacities of all tax increment financing districts. The money generated by the application of the combined Local Tax Rate to the Captured Tax Capacity is the tax increment, which, if collected, is paid to the municipality or authority that established the tax increment district. In addition to taxes based on Tax Capacity of property as described above, certain taxes required by statute to be approved by voters are levied against the referendum market value of property, and not against the Tax Capacity. Such taxes, although assessed against property within the TIF District, are not included in the calculation of Tax Increment. Limitations on Tax Increment Revenues. There are many factors that can influence the Tax Increment generated by a tax increment district. See INVESTMENT CONSIDERATIONS Risks Associated with Collection of Tax Increment for a discussion of such factors. Reserve Fund The Indenture establishes the Reserve Fund. On the date of issuance of the Series 2015 Bonds, the Issuer will deposit $310,000 of the proceeds of the Series 2015 Bonds to the Reserve Fund securing the obligations issued under the Indenture. This is approximately half of the first year s annual debt service. Debt service increases in each year. After this initial deposit to the Reserve Fund, the Reserve Fund will be maintained at this level (the Reserve Requirement ) solely from: (i) certain excess Available Tax Increment which remains in the Revenue Fund after payment of the debt service obligations on the Series 2015 Bonds; and (ii) earnings from the investment of amounts in the Reserve Fund. Additional amounts will from time to time be deposited to the Reserve Fund from Excess Available Tax Increment on March 1 of any year in which the Excess Available Tax Increment on deposit in the Tax Increment Account is less than an amount equal to 15% of the sum of the principal and interest due on the Bonds on such Payment Date and on the preceding Payment Date following the payment of such principal and interest. See SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2015 BONDS Application of Excess Available Tax Increment. Money credited to the Reserve Fund will be transferred as necessary to provide for the payment of the principal of, premium, if any, and interest on all outstanding Series 2015 Bonds when due and, to the extent not so used, will be used to pay the last installments of principal due on any Bonds then outstanding and interest thereon. Money credited to the Reserve Fund in excess of the Reserve Requirement (but not including Excess Available Tax Increment transferred from the Revenue Fund) will be transferred (i) to 10

15 the Rebate Fund, to the extent such amounts consist of any Rebate Amount and (ii) to the Earnings Account of the Revenue Fund. TAX INCREMENT CASH FLOW PROJECTIONS Estimates of the annual Available Tax Increment to be generated from the TIF District and projected debt service coverage are shown in charts attached as Appendix C. The debt service coverage table included in Appendix C also shows actual historical collections of Available Tax Increment for taxes payable years 2012, 2013 and 2014, as compared to actual historical debt service in such years. The Estimated Available Tax Increment is based on certain assumptions regarding the components of tax increment: the total market value of the improvements within the TIF District in each year; the class rates applicable to market value in the calculation of net tax capacity; and the local tax rate. Such assumptions are as follows: Market Value and Tax Capacity. For taxes payable in 2015, the improvements have a taxable market value of $106,711,166 and a net tax capacity of $1,072,446. These are the actual assessed market values as determined by the Minneapolis City Assessor and the actual tax capacities based on class rates in effect in such year (as set forth in Appendix C). For taxes payable in 2016 and thereafter, the net tax capacity is assumed to increase at 1% per year. Local Tax Rate. The local tax rate is %. This is the proposed local tax rate for taxes payable in Deducted Fees. The schedule also shows that the County will retain 0.36% of the annual tax increment as an administrative fee for the state auditor and that the Issuer will retain 10% of the remaining net amount as an administrative fee for the Issuer. For discussion of the risk factors associated with these assumptions, see INVESTMENT CONSIDERATIONS. The Projected Bond Cash Flow Schedule shows the projection of Available Tax Increment through 2029 based on the assumptions described above. The column titled Estimated TIF Net of State Auditor & Admin Payment is the annual amount of Available Tax Increment that is projected to be available to pay the Series 2015 Bonds. The resultant debt coverage ratio is a projection based on the foregoing assumptions and estimates, which the Issuer believes to be reasonable. Actual results will undoubtedly differ, and may differ materially, from the projections. 11

16 SOURCES AND USES OF FUNDS The following schedule shows the anticipated sources and use of funds in connection with issuance of the Series 2015 Bonds, net of accrued interest: Sources Par Amount of Series 2015 Bonds $7,460,000 Net Original Issue Discount (22,374) Transfers from Refunded Bonds Funds 1,258,909 Total Sources $8,696,535 Uses Refunding of Refunded Bonds $8,246,274 Reserve Fund 310,000 Costs of Issuance (including underwriting discount) 137,210 Rounding Amount 3,051 Total Uses $8,696,535 THE ISSUER The Issuer is a municipal corporation and political subdivision duly organized and existing under the laws of the State of Minnesota and its city charter. Neither the full faith and credit nor the taxing power of the Issuer is pledged to the payment of the principal of, premium, if any, or interest on the Series 2015 Bonds. THE PROJECT The Project is located in the City of Minneapolis, within the Elliot Park Neighborhood. The site of the Project, which is all of the property included in the TIF District, is the entire block bounded by Tenth Street South to the north, Portland Avenue South to the east, Grant Street to the south and the Interstate 35W, 5 th Avenue South exit to the west. The site contains approximately 138,000 square feet or approximately 3.18 acres. Housing Tower. The twenty-seven story housing tower is located at the southwest corner of the block with a street and pedestrians entrance on Grant Street. The tower includes 284 units of for-sale housing as follows: # of Units Unit Type Approx. Sq. Ft. 1 1 bedroom 1 bath bedroom 1 bath bedroom 1 bath bedroom 1 bath bedroom 1 bath 1, bedroom 2 bath 1, bedroom 2 bath 1, bedroom 2 bath 1, bedroom 2 bath 1, bedroom 2 bath 1, bedroom & den 2 bath 1, bedroom & den 2.5 bath 1,937 4 Presidential Homes 3, units 12

17 Multi Story Row/Townhomes. One free-standing housing building is located at the corner of Interstate 35 exit ramp and 10 th Street South, and includes 13 two-story side by side townhome units with tuck-under parking, with units as follows: # of Units Unit Type Approx. Sq. Ft. 4 TH 1 1,958 2 TH 2 2,452 4 TH 3 2,200 1 TH 4 2,126 1 TH 5 2,882 1 TH 6 2, units Multi-Story CityHomes. 30 units of urban style three-story CityHomes cover approximately half the exterior perimeter of the block including half of Tenth Street, all of Portland Avenue South and a portion of Grant Street. Each CityHome unit can be directly accessed from the street and from the parking structure. The multi-story CityHomes include the following: # of Units Unit Type Approx. Sq. Ft bedroom 1 bath 1, bedroom 1.5 bath 1, bedroom 1 bath bedroom 1.5 bath 1, bedroom 2.5 bath 2, bedroom 2.5 bath 2, bedroom 2.5 bath 2, bedroom 2 bath 1, bedroom 2.5 bath 2, units Site Parking & Parking Structure. The Project includes a six-level controlled parking structure located on the eastern most portion of the site and constructed mid-block. The parking structure is wrapped by, and hidden from view by the thirty units of CityHomes. Ingress and egress to the parking structure is available from Grant Street. The parking structure provides off street parking for residents and visitors to the development, and the development accommodates approximately 533 cars in surface and structured stalls. CONTINUING DISCLOSURE In order to assist the Underwriter in complying with the terms of Securities and Exchange Commission Rule 15c2-12 (the Rule ), promulgated under the Securities Exchange Act of 1934, the Issuer will execute and deliver a Continuing Disclosure Certificate, dated March 1, 2015 (the Certificate ), substantially in the form attached hereto as APPENDIX D, under the terms of which the Issuer will covenant, for the benefit of the holders of the Bonds, to annually provide certain financial information and operating data relating to the Issuer and the Bonds described in the Certificate and to provide notices of the occurrence of certain material events with respect to the Issuer and the Bonds that are listed in the Certificate. The financial information, operating data, and notices are required by the terms of the Certificate to be provided to the Electronic Municipal Market Access system ( EMMA ) 13

18 maintained by the Municipal Securities Rulemaking Board (the MSRB ) in an electronic format prescribed by the MSRB. The Issuer has fully complied in all material respects with its continuing disclosure undertakings with respect to the Series 2004 Bonds and the Series 2005 Bonds and all other tax increment revenue bonds issued by the Issuer and all general obligation bonds issued by the Issuer. The Issuer satisfies its continuing disclosure undertakings with the assistance of Digital Assurance Certification, LLC. The Issuer also operates a Common Bond Fund Program (the CBF Program ). The CBF Program was created in 1982 to provide conduit revenue bond financing for industrial, manufacturing, and commercial projects in the Issuer to promote economic development. The Common Bond Fund Program has provided financing for companies located in Minneapolis and the greater Hennepin County area that are unable to borrow funds in the capital markets without a bond rating. The Issuer has established reserves of approximately $33,000,000 to secure the private activity bonds issued under the CBF Program and has pledged to levy an ad valorem tax at the rate of up to one-half of one percent of its tax capacity to fund deficiencies in the reserves established under the CBF Program for the limited, taxsupported revenue bonds issued under the CBF Program. The reserves are drawn upon if the Issuer is notified by the trustee for the bonds that a deficiency will occur with respect to principal and interest payments on obligations issued through the CBF Program. The reserves do not need to be funded from the limited tax levy until and to the extent of such a deficiency. No property tax levies have been required in the past and none are anticipated to be required to fund the pledged reserve for bonds issued under the CBF Program. As a result of the funded reserves and the limited tax pledge by the Issuer, the bonds issued under the CBF Program are currently rated A+ by Standard & Poor s. As of December 31, 2014, the total principal amount of the thirteen separate series of bonds issued and outstanding under the CBF Program total $90,100,000. The continuing disclosure agreements entered into by the Issuer and the CBF Program trustee require the Issuer to provide: (i) updates to certain information set forth in the CBF Program official statements comprised of schedules of Tax Rates, Tax Levies and Collections, and Tax Capacity of the Issuer; (ii) annual financial statements of the CBF Program; and (iii) as an obligated person in excess of ten percent (10%) of the principal amount of outstanding CBF Program bonds, annual financial statements of the Issuer. With respect to clause (i), the Issuer has not annually filed with EMMA the updated financial information described in clause (i) (but did file such information in the two most recent years). With respect to clause (iii), the Issuer is required to file its general financial statements only with respect to a series of CBF Program bonds issued in The Issuer has not filed with EMMA in all years subsequent to 2005 the information described in clause (iii) above. All other information required to be filed annually and all event notices have been timely filed with EMMA. The information described in clause (i) and clause (iii) that was not timely filed with respect to the bonds issued under the CBF Program was filed with EMMA with respect to the outstanding general obligation bonds issued by the Issuer. TAX EXEMPTION OF BONDS In the opinion of Kennedy & Graven, Chartered, as Bond Counsel, under laws, regulations, rulings and judicial decisions existing as of the date hereof, and assuming continuing compliance with applicable restrictions imposed by the Internal Revenue Code of 1986, as amended (the Code ), and the regulations applicable thereto: (i) interest on the Bonds is not includable in gross income for federal income tax purposes and, to the same extent, is not includable in the net taxable income of individuals, estates, or trusts for State of Minnesota income tax purposes; (ii) interest on the Bonds is not an item of tax preference includable in alternative minimum taxable income for purposes of the federal alternative minimum tax applicable to taxpayers under Section 55 of the Code or the Minnesota alternative minimum tax applicable to individuals, estates, and trusts; (iii) interest on the Bonds is includable in adjusted current 14

19 earnings of corporations in determining alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on corporations; and (iv) interest on the Bonds is subject to State of Minnesota franchise taxes measured by income and imposed on corporations, including financial institutions. The opinions expressed in the preceding paragraph are subject to the condition of compliance by the Issuer with all requirements of the Code and certain provisions in the Indenture, that must be satisfied subsequent to the issuance of the Bonds in order that interest on the Bonds may be, and continues to be, excluded from gross income for federal income tax purposes. Noncompliance with such requirements could cause interest on the Bonds to become includable in gross income for federal and State of Minnesota income tax purposes, retroactive to the date of issuance of the Bonds. Except as expressly stated in its opinion, Bond Counsel expresses no opinion regarding other tax consequences to owners of the Bonds under applicable federal or State of Minnesota laws. Related Considerations Alternative Minimum Tax. Interest on the Series 2015 Bonds is not subject to the federal alternative minimum tax applicable to individuals and corporations and the Minnesota alternative minimum tax, but is includable in the adjusted current earnings of certain corporations for the purposes of the federal and Minnesota alternative minimum taxes imposed on corporations. Branch Profits Tax. A tax is imposed on any foreign corporation in an amount equal to thirty percent (30%) of the dividend equivalent amount for the taxable year. The dividend equivalent amount is the foreign corporation s effectively connected earnings and profits for the taxable year reduced for the increase (or increased for the decrease) in U.S. net equity. According to the Conference Committee Report provided in connection with the adoption of the Tax Reform Act of 1986, the conferees intend that a branch s earnings and profits include income that would be effectively connected with a United States trade or business if such income were taxable, such as tax-exempt municipal bond interest. Passive Investment Income of S Corporation. Treasury regulations state that passive investment income also includes tax-exempt interest. Passive investment income, including interest on the Series 2015 Bonds, may be subject to federal income taxation under Section 1375 of the Code for S corporations that have subchapter C earnings and profits at the close of the taxable year if more than twenty-five percent (25%) of the gross receipts of such S corporations is passive investment income and may subject the S corporation to termination of its S corporation status under Section 1362(d) of the Code. Financial Institutions. The Code limits the ability of financial institutions to deduct any portion of the interest expense allocable to the ownership of certain tax-exempt obligations acquired after August 7, The Series 2015 Bonds have not been designated as qualified tax-exempt obligations. Property and Casualty Insurance Companies. Under the Code, property and casualty insurance companies are required, for taxable years beginning after December 31, 1986, to reduce the amount of their loss reserve deduction by fifteen percent (15%) of the amount of tax-exempt interest received or accrued during the taxable year on certain obligations acquired after August 7, 1986, including interest on the Series 2015 Bonds. Original Issue Premium The Bonds maturing on March 1, 2027, have been sold to the public at an amount in excess of their stated redemption price at maturity. Such excess of the purchase price of a Bond over its stated redemption price at maturity constitutes premium on such Bond. A purchaser of a Bond must amortize any premium over such Bond s term using constant yield principles, based on the purchaser s yield to 15

20 maturity. As premium is amortized, the purchaser s basis in such Bond is reduced by a corresponding amount, resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Bond prior to its maturity. Even though the purchaser s basis is reduced, no federal income tax deduction is allowed. Purchasers of any Bonds at a premium, whether at the time of initial issuance or subsequent thereto, should consult with their own tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to state and local tax consequences of owning such Bonds. Original Issue Discount The Bonds maturing on March 1, 2030 (the Discount Bonds ), are being sold at a discount from the principal amount payable on such Discount Bonds at maturity. The difference between the price at which a substantial amount of the Discount Bonds of a given maturity is first sold to the public (the Issue Price ) and the principal amount payable at maturity constitutes original issue discount under the Code. The amount of original issue discount that accrues to a holder of a Discount Bond under section 1288 of the Code is excluded from federal gross income to the same extent that stated interest on such Discount Bond would be so excluded. The amount of the original issue discount that accrues with respect to a Discount Bond under section 1288 is added to the owner s federal tax basis in determining gain or loss upon disposition of such Discount Bond (whether by sale, exchange, redemption or payment at maturity). Interest in the form of original issue discount accrues under section 1288 pursuant to a constant yield method that reflects semiannual compounding on dates that are determined by reference to the maturity date of the Discount Bond. The amount of original issue discount that accrues for any particular semiannual accrual period generally is equal to the excess of (1) the product of (a) one-half of the yield on such Bonds (adjusted as necessary for an initial short period) and (b) the adjusted issue price of such Bonds, over (2) the amount of stated interest actually payable. For purposes of the preceding sentence, the adjusted issue price is determined by adding to the Issue Price for such Bonds the original issue discount that is treated as having accrued during all prior semiannual accrual periods. If a Discount Bond is sold or otherwise disposed of between semiannual compounding dates, then the original issue discount that would have accrued for that semiannual accrual period for federal income tax purposes is allocated ratably to the days in such accrual period. If a Discount Bond is purchased for a cost that exceeds the sum of the Issue Price plus accrued interest and accrued original issue discount, the amount of original issue discount that is deemed to accrue thereafter to the purchaser is reduced by an amount that reflects amortization of such excess over the remaining term of such Bond. No opinion is expressed as to state and local income tax treatment of original issue discount. It is possible under certain state and local income tax laws that original issue discount on a Discount Bond may be taxable in the year of accrual, and may be deemed to accrue differently than under federal law. Holders of Discount Bonds should consult their tax advisors with respect to computation and accrual of original issue discount and with respect to the state and local tax consequences of owning Discount Bonds. Other Tax Matters No assurance can be given that any future legislation or clarification or amendments to the Code, if enacted into law, will not contain a proposal which could cause the interest on the Series 2015 Bonds to be subject directly or indirectly to federal or State of Minnesota income taxation, adversely affect the market price or marketability of the Bonds or otherwise prevent the owners from realizing the full current benefit of the status of the interest thereon. INVESTORS SHOULD CONSULT WITH THEIR TAX 16

21 ADVISORS AS TO THE TAX CONSEQUENCES OF THEIR ACQUISITION, HOLDING OR DISPOSITION OF THE BONDS. UNDERWRITING The Series 2015 Bonds are being purchased from the Issuer by Dougherty & Company LLC, Minneapolis, Minnesota (the Underwriter ). The Underwriter has agreed to purchase the Series 2015 Bonds for a purchase price of $7,336, (par amount of the Series 2015 Bonds minus net original issue discount of $22, less the Underwriter s discount of $100,710.00), subject to the terms of a certain Bond Purchase Agreement (the Bond Purchase Agreement ), between the Issuer and the Underwriter. The Bond Purchase Agreement provides that the Underwriter shall purchase all Series 2015 Bonds if any are purchased and that the obligation to make such purchase is subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The initial public offering prices set forth on the front cover page hereof may be changed from time to time by the Underwriter. The Issuer has agreed under the Bond Purchase Agreement to indemnify the Underwriter against certain liabilities, including certain liabilities under the federal and state securities laws. LEGAL MATTERS The authorization and validity of the Bonds will be subject to the approving opinion of Kennedy & Graven, Chartered, Minneapolis, Minnesota, Bond Counsel. The Bond Opinion will be limited to matters relating to authorization and validity of the Series 2015 Bonds and to the tax-exempt status of interest on the Series 2015 Bonds as described in the Section TAX EXEMPTION OF BONDS. Bond Counsel has not been engaged to investigate the financial resources of the Issuer or its ability to provide for payment of the Series 2015 Bonds, and the Bond Opinion will make no statement as to such matters or as to the accuracy or completeness of this Official Statement or any other information that may have been relied on by anyone in making the decision to purchase the Series 2015 Bonds. Certain legal matters will be passed upon for the Underwriter by Faegre Baker Daniels LLP, Minneapolis, Minnesota. 17

22 APPENDIX A FORM OF BOND COUNSEL OPINION

23 $7,460,000 City of Minneapolis, Minnesota Tax Increment Refunding Revenue Bonds (Grant Park Project) Series 2015 We have acted as bond counsel in connection with the issuance by the City of Minneapolis, a home rule city, municipal corporation, and political subdivision organized and existing under its Charter and the laws of the State of Minnesota (the Issuer ), of its Tax Increment Refunding Revenue Bonds (Grant Park Project), Series 2015 (the Bonds ), dated March 12, 2015, issued by the Issuer in the original aggregate principal amount of $7,460,000. The Bonds are issued under the provisions of Minnesota Statutes, Sections , as amended (the Act ), Resolution 2015R-010, adopted by the City Council of the Issuer on January 16, 2015 (the Bond Resolution ), and the terms of an Indenture of Trust, dated as of March 1, 2015 (the Indenture ), between the Issuer and U.S. Bank National Association, a national banking association (the Trustee ). The Bonds are being issued to redeem and prepay the Tax Increment Refunding Revenue Bonds (Grant Park Project), Series 2006 (the Series 2006 Bonds ), issued by the Issuer in the principal amount of $10,545,000, dated September 26, The Series 2006 Bonds were issued to redeem and prepay the Taxable Tax Increment Revenue Notes (Grant Park Project), Series 2002 (the Series 2002 Notes ), issued by the Minneapolis Community Development Agency, a public body corporate and politic of the State of Minnesota (the Agency ) in the original stated principal amount of $9,825,000, dated as of August 28, The Series 2002 Notes were issued in connection with the redevelopment of the Grant Park Tax Increment Financing District (the TIF District ) in accordance with the terms and conditions of a Contract for Private Redevelopment, dated August 1, 2002 (the Redevelopment Contract ), by and between the Issuer (as successor to the Agency) and Urban Condos, L.L.C., its successors and assigns. We have examined the Bond Resolution, the Indenture, the Bonds, and such laws, certified proceedings, and other documents, materials, and papers as deemed necessary to render this opinion. The Bonds mature on the dates and in the principal amounts, bear interest and are payable, are subject to redemption and prepayment on such dates and in such amounts, and have such other terms as provided in the Bond Resolution, the Indenture, and the Bonds. As to questions of fact material to our opinion, we have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. We have also examined originals or copies of such other documents and records and other certificates, opinions, and instruments and have made such other investigation and reviewed such questions of law as we have deemed necessary in connection with the opinions hereinafter set forth. We have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies. In examining documents executed by parties in addition to the Issuer, we have assumed that such parties have all necessary power to enter into and perform all of their obligations thereunder and have also assumed the due authorization by all requisite action of the execution, delivery, A-1

24 and performance of such documents by such parties and that such documents are legal, valid, and binding on such parties in accordance with their respective terms. Based on the foregoing, we are of the opinion that, as of the date hereof, under existing laws as presently enacted and construed: 1. The Issuer is a home rule city, municipal corporation, and political subdivision of the State of Minnesota, validly existing under its Charter and the Constitution and laws of the State of Minnesota, and is authorized to issue the Bonds. 2. The Issuer has complied with all applicable provisions of its Charter and the Constitution and laws of the State of Minnesota, including the Act, and has full power and authority to execute and deliver the Bonds and the Indenture, and to carry out the terms thereof. 3. The Indenture has been duly and validly authorized, executed, and delivered by the Issuer and, assuming the due and valid authorization, execution, and delivery thereof by the other party thereto, is in full force and effect and is a valid and binding obligation of the Issuer enforceable in accordance with its terms. 4. The Issuer duly established the TIF District in accordance with the Act. The Available Tax Increment (as defined in the Indenture) has been duly and validly pledged to the payment of the Bonds. 5. The Bonds have been duly and validly authorized, executed, and delivered by the Issuer, and are valid and binding special obligations of the Issuer secured by and entitled to the benefits provided by the Indenture, enforceable in accordance with their terms and the terms of the Indenture. The Bonds are not general obligations of the Issuer, but are payable solely from the Available Tax Increment (as defined in the Indenture) and the remainder of the Trust Estate (as defined in the Indenture), as provided in the Indenture. By the Indenture, the Issuer has validly pledged and assigned to the Trustee and granted to the Trustee a security interest in all of its rights and interest in the Available Tax Increment. 6. Under laws, regulations, rulings, and judicial decisions existing as of the date hereof, and assuming continuing compliance with applicable restrictions imposed by the Internal Revenue Code of 1986, as amended (the Code ), and the regulations applicable thereto, interest on the Bonds is not includable in gross income for federal income tax purposes and, to the same extent, is not includable in the net taxable income of individuals, estates, or trusts for State of Minnesota income tax purposes. Interest on the Bonds is not an item of tax preference includable in alternative minimum taxable income for purposes of the federal alternative minimum tax applicable to taxpayers under Section 55 of the Code or the Minnesota alternative minimum tax applicable to individuals, estates, and trusts. Interest on the Bonds is includable in adjusted current earnings of corporations in determining alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on corporations. Interest on the Bonds is subject to State of Minnesota franchise taxes measured by income and imposed on corporations, including financial institutions. The opinions expressed in the preceding paragraph are subject to the condition of compliance by the Issuer with all requirements of the Code and certain provisions in the Indenture, that must be satisfied subsequent to the issuance of the Bonds in order that interest on the Bonds be, and continue to be, excluded from gross income for federal income tax purposes. Noncompliance with such requirements could cause interest on the Bonds to become includable in gross income for federal and State of Minnesota income tax purposes, retroactive to the date of issuance of the Bonds. Except as stated in this A-2

25 opinion, we express no opinion regarding other tax consequences to owners of the Bonds under applicable federal or State of Minnesota laws. The obligations of the parties, and the enforceability thereof, with respect to the documents described above are subject, in part, to the provisions of the bankruptcy laws of the United States of America and to other applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting creditors rights, now or hereafter in effect. Certain of the obligations, and the enforcement thereof, contained in the Indenture are also subject to general equity principles which may limit the specific enforcement of certain remedies, but which do not affect the validity of such documents. Dated at Minneapolis, Minnesota,, MN (JU) v.2 A-3

26 APPENDIX B CERTAIN DEFINITIONS AND SUMMARY OF DOCUMENTS

27 CERTAIN DEFINITIONS AND SUMMARY OF DOCUMENTS A summary of the Indenture is included in this Appendix B of the Official Statement under the caption SUMMARY OF THE INDENTURE. Defined terms used in the summary of the Indenture are set forth below under the caption DEFINITIONS OF CERTAIN TERMS. DEFINITIONS OF CERTAIN TERMS The following are definitions of certain terms used in the Indenture and in this Official Statement. Agency means the Minneapolis Community Development Agency, its successors and assigns. Available Tax Increment means the Tax Increment derived from the TIF District during the period preceding each Payment Date after deducting: (i) the amount of Tax Increment, if any, which the Agency must pay to the school district, the County and the State pursuant to Minnesota Statutes, Sections , subdivisions 9, 10, and 11; Section , subdivision 4h; and Section , subdivision 1a, as the same may be amended from time to time; and (ii) administrative costs of the Agency or the Issuer, as defined in Minnesota Statutes, Sections , subdivision 14, in an amount not to exceed ten percent (10%) of the Tax Increment. Bond Closing means the date of issuance of and payment for the Bonds. Bond Counsel means any attorney or firm of attorneys designated by the Issuer and nationallyrecognized in the field of municipal finance. Bondholder or Holder means a person in whose name a Bond is registered in the Bond Register. Bond Purchase Agreement means the Bond Purchase Agreement between the Issuer and the Underwriter providing for the purchase of the Bonds, and any amendments or supplements thereto. Bond Register means the register maintained as provided in the Indenture. Bond Registrar means the Trustee, who shall act as bond registrar, transfer agent and paying agent, or any successor trustee or other fiduciary acting as bond registrar, transfer agent or paying agent for the Bonds. Bonds or Series 2015 Bonds means the Tax Increment Refunding Revenue Bonds (Grant Park Project), Series 2015, issued by the Issuer pursuant to the Indenture. Bond Year means initially the period from the date of Bond Closing to and including March 11, 2016, and thereafter each twelve month calendar year period beginning on each March 12 and ending on March 11, of the following year. Business Day means any day other than a Saturday, Sunday, legal holiday or a day on which banking institutions in the city where the principal corporate trust office of the Trustee is located are authorized by law or executive order to close. City Council means the governing body of the Issuer. Code means the Internal Revenue Code of 1986, as amended. B-1

28 Contract means the Contract for Private Redevelopment, dated August 1, 2002, between the Issuer, as successor to the Agency, and Redeveloper, as the same has or may be amended from time to time. Counsel means any attorney designated by the Issuer or Trustee, as appropriate, duly admitted to practice law before the highest court of any state. County means Hennepin County, Minnesota. DTC means The Depository Trust Company, New York, New York, and its successors and assigns. Bonds. Depository means a trust company or other fiduciary acting as a depository with respect to the Earnings Account means the account by that name established in the Revenue Fund pursuant to Article Five of the Indenture. Event of Default means any of the events described as such in the Indenture. Excess Available Tax Increment means, as of each Principal Payment Date, the Available Tax Increment deposited in the Tax Increment Account of the Revenue Fund that is in excess of the amount transferred to the Bond Fund and the Reserve Fund in accordance with the Indenture. Fund means any of the funds created and described in the Indenture. Government Obligations means bonds, notes, bills and other securities which are direct general obligations of the United States of America. Indenture means the Indenture of Trust dated as of March 1, 2015 between the Issuer and the Trustee, together with any supplement or amendment thereto. Interest Payment Date means March 1 and September 1 of each year, commencing September 1, Issuer means the City of Minneapolis, a municipal corporation organized and existing under its Charter and the laws of the State of Minnesota. Issuer Order means a written order or certificate of the Issuer executed by its Finance Officer or the designee of the Finance Officer. Maturity means, when used with respect to any Bond, the date on which the principal of such Bond becomes due and payable, whether at the Stated Maturity or by scheduled redemption or declaration of acceleration or call for redemption or otherwise. Outstanding means, when used with reference to Bonds, as of the date of determination, all Bonds theretofore authenticated and delivered under the Indenture except: (a) cancellation; Bonds theretofore cancelled by the Trustee or delivered to the Trustee for (b) Bonds and portions of Bonds for whose payment or redemption money or Government Obligations (as provided in the Indenture) shall have been theretofore irrevocably deposited with the Trustee or any other paying agent for such Bonds in trust for the Holders of B-2

29 such Bonds, provided, however, that if such Bonds are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or irrevocable instructions to call such Bonds for redemption at a stated Redemption Date has been given to the Trustee; and (c) Bonds in exchange for or in lieu of which other Bonds shall have been authenticated and delivered pursuant to the Indenture; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Bonds have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Bonds owned by the Issuer or purchased by the Trustee as provided in the Indenture will be disregarded and deemed not to be Outstanding, except that in determining whether the Trustee will be protected in relying upon any such request, demand, authorization, direction, notice, consent, or waiver, only Bonds which the Trustee actually knows to be so owned will be disregarded. Participants means those broker-dealers, banks and other financial institutions from time to time for which DTC holds Bonds as securities depository. Paying Agent means any paying agent or agents for Bonds appointed by or pursuant to the Indenture, and its successors or assigns. Payment Date means any Interest Payment Date or Principal Payment Date. Permitted Investments means any of the following which at the time of investment are legal investments under the laws of the State for the money proposed to be invested: (a) U. S. Treasury Securities and obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America: (i) Export- Import Bank; (ii) Farm Credit System Financial Assistance Corporation; (iii) Rural Economic Community Development Administration (formerly the Farmers Home Administration); (iv) General Services Administration; (v) U.S. Maritime Administration; (vi) Small Business Administration; (vii) Government National Mortgage Association (GNMA); (viii) U.S. Department of Housing & Urban Development (PHA s); and (ix) Federal Housing Administration; (b) Senior debt obligations rated Aaa by Moody s Investor Service, Inc. and AA- by Standard & Poor s Rating Service issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC); (c) U.S. dollar denominated deposit accounts, federal funds and bankers acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of A-1 or A-1+ by Standard & Poor s Rating Service and P-1 by Moody s Investor Service, Inc. and maturing no more than 360 days after the date of purchase; (d) Commercial paper which is rated at the time of purchase in the single highest classification, A-1+ by Standard & Poor s Rating Service and P-1 by Moody s Investor Service, Inc. and which matures not more than 270 days after the date of purchase; (e) Investments in a money market fund rated AAAm or AAAm-G by Standard & Poor s Rating Service including any fund managed or offered by the Trustee; (f) Pre-refunded state and local government obligations which are bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local B-3

30 government unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and: (i) which are rated, based on an irrevocable escrow account or fund (the escrow ), in the highest rating category of Standard & Poor s Rating Service and Moody s Investor Service, Inc. or any successors thereto; or (ii) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations, which escrow may be applied only to the payment of such principal and interest and redemption premium, if any, on such bonds or other obligations on the maturity dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate; (g) General obligations of the State or political subdivisions thereof with a rating of Aaa by Moody s Investor Service, Inc. or AAA by Standard & Poor s Rating Service; and (h) An investment agreement with a bank, insurance company or other provider whose unsecured debt obligations are rated at least as high as AA- by Standard & Poor s Rating Service or Aa-3 by Moody s Investor Service, Inc. Person means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government, or any agency or political subdivision thereof. Principal Payment Date means each March 1, commencing on March 1, Rating Agency means Standard & Poor s Rating Service, a division of McGraw-Hill, Inc., Moody s Investors Service, Inc. or Fitch Ratings Investors Service, L.P., for so long as any such entity maintains a rating for any of Outstanding Bonds. Rebate Amount means any amount required or permitted to be paid to the United States in order to comply with Section 148(a) of the Code. Rebate Fund means the Fund by that name created and established by the Indenture. Record Date means with respect to any Interest Payment Date on the Bonds, (a) the fifteenth day of the month (whether or not a Business Day) next preceding such Interest Payment Date (each, a Regular Record Date ) or (b) if there is a default in payment of interest due on such Interest Payment Date, a Special Record Date for the payment of such defaulted interest established by the Trustee in accordance with the Indenture. Redemption Date means, with respect to any Bond to be redeemed, the date on which it is to be redeemed pursuant to the Indenture. Redemption Price means, with respect to any Bond to be redeemed, the price (principal amount plus accrued interest plus premium, if any) at which it is to be redeemed pursuant to the Indenture. Redeveloper means Urban Condos, L. L. C., a Minnesota limited liability company, and its successors and assigns. Redevelopment Project means The Towers at Elliot Park Redevelopment Project Area. B-4

31 Refunded Bonds means the Tax Increment Refunding Revenue Bonds (Grant Park Project), Series Refunding Fund means the Fund by that name established pursuant to the Indenture. Representation Letter means any letter of representations or agreement from the Issuer or the Trustee to DTC with respect to the Bonds, and any similar letter or other agreement with any successor depository for the Bonds. Reserve Fund means the Fund by that name, created and established pursuant to the Indenture. Reserve Requirement means $310,000. Revenue Fund means the Fund by that name, created and established pursuant to the Indenture. State means the State of Minnesota. Stated Maturity means, with respect to any Bond, the date specified in such Bond and the Indenture as the fixed date on which the principal of such Bond is due. Tax Increment means all tax increment revenues derived from the TIF District. Tax Increment Account means the account by that name established in the Revenue Fund pursuant to the Indenture. Tax Increment Act means Minnesota Statutes, Sections through , as amended. TIF District means the Grant Park Tax Increment Financing District established by the Agency and the Issuer. Treasury Regulations means the income tax regulations promulgated by the United States Department of the Treasury under the Code and applicable to the Bonds. Trust Estate means all property, rights, interests, privileges, rentals, revenues and income granted to the Trustee in the Indenture. Trustee means U.S. Bank National Association, a national banking association, and any successor or co-trustee appointed, qualified and acting as such under the provisions of the Indenture. Underwriter means Dougherty & Company LLC B-5

32 SUMMARY OF THE INDENTURE A summary of the Indenture is set forth below. Such summary does not purport to be comprehensive or definitive. All references herein to the Indenture are qualified in their entirety by reference to the Indenture, a copy of which are available for review prior to the issuance of the Bonds at the offices of the Underwriter and following delivery of the Bonds will be on file at the offices of the Trustee. All references to the Bonds are qualified in their entirety by reference to the definitive forms thereof and the information with respect thereto included in the Indenture. Trust Estate The Indenture grants to the Trustee a security interest in: (i) all right, title and interest of the Issuer in the Available Tax Increment; (ii) all amounts on hand at any time in any of the Funds including investment earnings, and the proceeds thereof; and (iii) all other property of every kind which is now or hereafter subjected to the lien of the Indenture or pledged or assigned to the Trustee pursuant to the provisions of the Indenture, including without limitation all cash and securities now or hereafter held in the Funds created or established under the Indenture. Funds and Accounts The Funds established by the Indenture are a Refunding Fund, a Costs of Issuance Fund, a Revenue Fund (and in the Revenue Fund a Tax Increment Account and an Earnings Account), a Bond Fund, a Reserve Fund and a Rebate Fund. Refunding Fund. On April 13, 2015, amounts on deposit in the Refunding Fund shall be applied to the redemption and prepayment of the Refunded Bonds. The Trustee shall provide such notice of redemption on behalf of the Issuer as directed by the Issuer in order to provide for the redemption and prepayment of the Refunded Bonds as soon as practicable on or after the Bond Closing. Costs of Issuance Fund. The Trustee shall use the money on deposit to the credit of the Costs of Issuance Fund, on the Bond Closing or as soon thereafter as practicable, to pay the costs of issuance in accordance with the written instructions to be given to the Trustee by the Issuer. Amounts remaining on deposit in the Costs of Issuance Fund thirty (30) days after Bond Closing shall be transferred to the Earnings Account of the Revenue Fund. Upon such final disbursement, the Trustee shall close the Costs of Issuance Fund. Revenue Fund. The Trustee will deposit all Available Tax Increment received in the Tax Increment Account of the Revenue Fund and will deposit all earnings on all amounts held by the Trustee from time to time in all Funds except the Refunding Fund (less the Rebate Amount, if any) into the Earnings Account of the Revenue Fund. The Trustee will, at least five (5) days before any Payment Date, (i) disburse any fees due and owing to the Trustee to the Trustee, first from the Earnings Account and then from the Tax Increment Account, and (ii) transfer from the Revenue Fund to the Bond Fund (to the extent available) such amount which is sufficient for payment of all accrued interest or principal due on the Bonds on the next Payment Date, first from the Earnings Account and then from the Tax Increment Account. On each Payment Date, after making the transfers provided above, the Trustee is required to transfer from the Revenue Fund to the Reserve Fund, such amount as may be required so that the amount on deposit in the Reserve Fund after such transfer is equal to the Reserve Requirement. Such transfer to the Reserve Fund will be made first from the Earnings Account and then from the Tax Increment Account. B-6

33 On each Principal Payment Date, after the transfers of Available Tax Increment in accordance with the terms of the Indenture, if the Excess Available Tax Increment in the Tax Increment Account is equal to or exceeds an amount equal to fifteen percent (15%) of the sum of the principal and interest due on the Bonds on such Payment Date and on the preceding Interest Payment Date, then all Excess Available Tax Increment is required to be disbursed to the City. On each Principal Payment Date, after the transfers of Available Tax Increment in accordance with the terms of the Indenture, if the Excess Available Tax Increment in the Tax Increment Account is less than an amount equal to fifteen percent (15%) of the sum of the principal and interest due on the Bonds on such Payment Date and on the preceding Interest Payment Date, then all Excess Available Tax Increment shall be transferred to the Reserve Fund until the balance on deposit therein is equal to the least of 1) $746,000 (10% of the original principal amount), 2) 125% of average annual debt service on the Series 2015 Bonds, or 3) 100% of maximum annual debt service on the Bonds, and thereafter, Excess Available Tax Increment shall be disbursed to the Issuer. Bond Fund. The Trustee will use amounts on deposit in the Bond Fund to pay principal and interest on the Bonds when due, including the Redemption Price due on any Redemption Date and, to the extent lawful, any interest accrued on overdue installments of interest. The Trustee will transfer any amount remaining in the Bond Fund on the Business Day following each Payment Date to the Revenue Fund. If at any time sums in the Bond Fund are insufficient to pay the principal of or interest on Bonds due and unpaid or payable within two days, such deficiency is required to be cured first from amounts on deposit in the Revenue Fund and then from amounts on deposit in the Reserve Fund. Reserve Fund. The Trustee will deposit in the Reserve Fund (i) from Bond proceeds, an amount equal to $310,000, representing the Reserve Requirement, as described in the Indenture, and (ii) amounts transferred from the Revenue Fund. The Trustee will transfer from the Reserve Fund to the Bond Fund on the day preceding any Payment Date, such amount which, together with amounts already on deposit in the Bond Fund (after amounts (if any) have been transferred from the Revenue Fund), is required for the payment from the Bond Fund of interest and principal due on the next Interest Payment Date. The Trustee will transfer any amount in excess of the Reserve Requirement held in the Reserve Fund (but not including Excess Available Tax Increment transferred from the Revenue Fund) on the day after a Payment Date (i) to the Rebate Fund, to the extent such amounts consists of any Rebate Amount and (ii) to the Revenue Fund any other amounts. Rebate Fund. The Trustee will deposit in the Rebate Fund any Rebate Amount pursuant to the provisions of the Indenture. Subject to the transfer provisions provided, all money at any time deposited in the Rebate Fund is required to be held by the Trustee in trust, to the extent required to satisfy the obligation of the Issuer to rebate arbitrage profits to the United States of America. Neither the Issuer nor the Holder of any Bonds shall have rights in or claim to such money. Covenants of the Issuer The Issuer has made the following covenants under the terms of the Indenture. The Issuer will promptly pay or cause to be paid from funds pledged to the Bond Fund the principal of and interest on every Bond at the place, on the dates and in the manner provided in the Bonds and in the Indenture. The principal and interest are payable from the Available Tax Increment and other funds which are part of the Trust Estate assigned and pledged to the payment thereof for the benefit of the Bondholders in the manner and to the extent provided in the Indenture, and nothing in the Bonds or in the Indenture will be considered as assigning or pledging any other funds or assets of the Issuer for such purposes, except as expressly provided in the Indenture. B-7

34 The Issuer will not act or omit to act in any way that would reduce Available Tax Increment revenues, or deprive the Issuer of the right to receive Available Tax Increment revenues or use Available Tax Increment revenues as provided in the Indenture. The Issuer will not pledge or encumber Available Tax Increment in any manner that would create a pledge, lien or encumbrance against the Available Tax Increment superior to, or on a parity with, the pledge of Available Tax Increment provided for in the Indenture, except as expressly set forth in the Indenture. The Issuer may make a subordinate pledge of Available Tax Increment. The Issuer will cause Hennepin County to remit all tax increment revenues from the TIF District to the Issuer promptly, and the Issuer will promptly determine the amount thereof that constitutes Tax Increment and Available Tax Increment and will promptly remit all Available Tax Increment to the Trustee for deposit in the Tax Increment Account of the Revenue Fund in accordance with the terms of the Indenture. In the event that at any time following the issuance of the Bonds: (i) either the Act is amended in such a manner as to reduce Available Tax Increment revenues or Available Tax Increment revenues are reduced as a result of changes in the law regarding the levying of real property taxes; and (ii) in lieu of such reduced Available Tax Increment revenues the Issuer is authorized to receive and receives additional revenues in any form in substitution for the lost Available Tax Increment revenues, which additional revenues the Issuer is authorized to spend for the same purposes and under the same conditions that apply to Available Tax Increment revenues, then the share of such additional revenues attributable to the reduced Available Tax Increment revenues will be deemed to be Available Tax Increment for purposes of the Indenture and paid or remitted as Available Tax Increment as provided in the Indenture, and the Issuer will use reasonable efforts to access any funds that might be available through the State for the payment of the Bonds under such circumstances. The Issuer will not change the method of computation of Tax Increment pursuant to Minnesota Statutes, Section , subdivision 3(c), in such a way that the amount of Tax Increment revenues (or pledged funds in lieu of Tax Increment revenues) available to pay the Bonds will be reduced. The Issuer will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions on its part contained in the Indenture and the Contract with respect to the Bonds executed, authenticated and delivered under the Indenture and in all proceedings of the Issuer pertaining thereto. The Issuer is duly authorized under the Constitution and laws of the State of Minnesota to issue the Bonds, to execute the Indenture, to assign and pledge the Available Tax Increment and the Trust Estate in the manner and to the extent set forth in the Indenture. All actions on the Issuer s part for the issuance of the Bonds and the execution and delivery of the Indenture and the Contract have been duly and effectively taken. All Bonds in the hands of the Holders thereof are and will be valid and enforceable special limited obligations of the Issuer according to the terms thereof. Covenants of the Issuer as to the Tax Exempt Status of the Bonds The Issuer makes the following representations with respect to the exclusion from gross income of interest on the Bonds for federal income tax purposes: (i) In addition to the Bonds, no other obligations have been or are expected to be issued under Section 103 of the Code for sale at substantially the same time as the Bonds: (A) that are sold pursuant to the same plan of financing; and (B) that are payable in whole or part by the Issuer or otherwise have with the Bonds any common or pooled security for the payment of debt service thereon; or (C) which are otherwise treated as the same issue of obligations as the Bonds under Section 103(a) of the Code. B-8

35 (ii) The Issuer will not use the proceeds of the Bonds in such a manner as to cause the Bonds to be arbitrage bonds within the meaning of Section 148 of the Code; to this end, the Issuer will: (A) maintain, or cause to be maintained, records identifying all gross proceeds (as defined in Section 148(f)(6)(B) of the Code) attributable to the Bonds and the yield derived from all investments thereof, including specifically earnings in excess of the yield on the Bonds and any earnings derived from the investment of such arbitrage profit; (B) make, or cause to be made, as of the end of each fifth Bond Year (or so often as the Issuer determines or as may be required by the Treasury Regulations), a determination of the Rebate Amount, if any, required by Section 148(f) of the Code to be paid to the United States by the Issuer as the rebate of arbitrage profits; (C) as additional consideration for the purchase of the Bonds by the Underwriter and the loan of the money represented thereby, and in order to induce such purchase by measures designed to ensure the excludability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, pay, or cause to be paid, to the United States at least once every five Bond Years the amount, if any, which is required to be paid to the United States as the Rebate Amount, including the last installment which must be made no later than sixty (60) days after the day on which the Bonds are paid in full; and (D) exercise reasonable diligence to assure that no errors are made in the calculations and payments required by (B) and (C) above; and (E) retain, or cause to be retained, all records of the annual determination of the foregoing amounts until six years after the Bonds have been fully paid. In order to comply with the foregoing, the Issuer will determine the Rebate Amount within thirty (30) days after the close of the fifth Bond Year and every five years thereafter, while Bonds have not been paid (or such other time as may be required by the Treasury Regulations), and after payment in full of the Bonds. Upon each such determination, the Issuer will credit a sum equal to the Rebate Amount to the Rebate Fund; provided that the Issuer may direct the Trustee to transfer the Rebate Amount from the Revenue Fund to the Issuer for payment to the United States. The Issuer may retain a law firm, accounting firm or other Person experienced in arbitrage and arbitrage rebate matters to perform calculations of Rebate Amounts, and the Issuer and Trustee may rely in good faith upon the accuracy and compliance with law of the calculations of such Person selected with reasonable care by the Issuer. (iii) The Issuer will not, at any time prior to the final Maturity of the Bonds, enter into any transaction that reduces the Rebate Amount because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm s length and had the yield of the Bonds not been relevant to either party. Code. (iv) The Issuer will file all informational returns required by Section 149(e) of the (v) No portion of the proceeds of the Bonds will be used directly or indirectly to acquire higher yielding investments or to replace funds which were used directly or indirectly to acquire higher yielding investments, except (A) for a reasonable temporary period until such proceeds are needed for the purpose for which the Bonds were issued, (B) as part of a reasonably B-9

36 Investments required reserve or replacement fund not in excess of the least of (1) maximum principal and interest to become due on the Bonds in any Bond Year as of the date of issuance thereof, (2) one hundred twenty-five percent (125%) of the average principal and interest to become due on the Bonds in each Bond Year, or (3) ten percent (10%) of the original amount of proceeds of the Bonds (or in a higher amount which the Issuer establishes is necessary to the satisfaction of the Secretary of the Treasury of the United States), and (C) in addition to the above in an amount not greater than $100,000. To this end, any proceeds of the Bonds and any sums from time to time held in the Funds for the Bonds (or any other Issuer account which will be used to pay debt service to become due on the Bonds) in excess of amounts which under then-applicable federal arbitrage regulations may be invested without regard to yield will not be invested at a yield in excess of the applicable yield restrictions imposed by said arbitrage regulations on such investments, after taking into account any applicable temporary periods, minor portion or reserve made available under the federal arbitrage regulations. Money in the Funds for the Bonds may not be invested in obligations or deposits issued by, guaranteed by or insured by the United States or any agency or instrumentality thereof if and to the extent that such investment would cause the Bonds to be federally guaranteed within the meaning of Section 149(b) of the Code. The proceeds of the Bonds may not be invested in other tax-exempt obligations the interest on which is subject to alternative minimum tax under the Code, unless the Issuer has received an opinion of Bond Counsel to the effect that such investment will not jeopardize the tax-exempt status of the Bonds. (vi) The Issuer will not use the proceeds of the Bonds, or cause or permit them or any of them to be used, or enter into any deferred payment arrangements for the cost of the Project, in such a manner as to cause the Bonds to be private activity bonds within the meaning of Sections 103 and 141 through 150 of the Code. (vii) Notwithstanding any other provisions of the Indenture to the contrary, the Issuer will not otherwise use any of the proceeds of the Bonds or take or fail to take any action the effect of which would cause interest on the Bonds to be included in gross income of the Holders thereof for federal income tax purposes. Money held for the credit of the Funds, to the extent practicable and permitted by law, will be invested as received and reinvested by the Trustee pursuant to an Issuer Order in Permitted Investments. The type, amount and maturity of such investments will be in the discretion of the Issuer, but will be consistent with the purpose and operation of the Fund from which the investment is made. The Trustee will sell and reduce to cash funds a sufficient portion of investments whenever the cash balance in the Fund for which the investment was made is insufficient for its current requirements. Securities so purchased as an investment of money will be held by the Trustee and will be deemed at all times a part of the applicable Fund. Any loss resulting from such investment will be debited against the Fund from which the investment was made. The Trustee may purchase from or sell to itself or any related company, as principal or agent, any Permitted Investments. The Issuer and Trustee covenant and certify to each other and to and for the benefit of the purchasers and Holders of the Bonds from time to time Outstanding that money on deposit in any Fund is not intended to be used in a manner which will cause the interest on the Bonds to become includable in gross income for federal income tax purposes. Investments held for the credit of the Bond Fund, Reserve Fund and Revenue Fund will be valued on a quarterly basis by the Trustee in accordance with the terms of the Indenture. Investments held for the credit of the Reserve Fund will be valued no later than fifteen (15) days prior to each Interest Payment B-10

37 Date, and otherwise as provided in the Indenture. If the valuation of the investments held for the credit of the Reserve Fund results in a valuation which is less than the Reserve Requirement, the Trustee will immediately notify the Issuer of that fact in writing. Defeasance of Bonds The Issuer may pay and discharge at any time all or a portion of the Bonds by irrevocably depositing in escrow with the Trustee non-callable Government Obligations in such aggregate face amount, bearing interest at such rates and maturing or callable at the option of the Holder thereof on such dates as required to provide amounts sufficient to pay all applicable redemption premiums, if any, and all principal and interest due on all or a portion of the Bonds to their Stated Maturity or any earlier date upon which they may be redeemed prior to the Stated Maturity in accordance with their terms and in accordance with law, provided that notice of such redemption has been duly given as herein required; and provided further that said discharge may only become effective upon the Issuer filing with the Trustee: (i) a certificate or report of a certified public accountant or firm of certified public accountant s acceptable to the Trustee stating in effect that the cash and Government Obligations deposited in escrow satisfy said discharge requirements; and (ii) an opinion of Bond Counsel stating in effect that the discharge will not cause interest on the Bonds to become includable in gross income for federal income tax purposes. In such event, all liability of the Issuer to the Holders of such Bonds for the payment of the principal of, redemption premium, if any, and interest on the Bonds will forthwith cease, terminate and be completely discharged upon payment and discharge of such Bonds. Events of Default and Remedies Events of Default. Any of the following events is an Event of Default under the Indenture: (a) Default in the due and punctual payment of any interest on any Bond; or (b) Default in the due and punctual payment of the principal of any Bond, whether at the Stated Maturity thereof or any date fixed for redemption; or (c) Default in the performance or observance of any other of the covenants, agreements or conditions on the part of the Issuer contained in the Indenture if such default continues for a period of thirty (30) days after written notice thereof specifying such default shall have been given by the Trustee to the Issuer, or to the Issuer and Trustee by the Holders of a majority in aggregate principal amount of the Bonds with respect to which an Event of Default has occurred at the time Outstanding; provided, however, if such default cannot be corrected within such thirty-day period, it will not constitute an Event of Default if corrective action is instituted by the Issuer within said time and diligently pursued until the default is corrected; or (d) If the Issuer becomes a debtor in a proceeding instituted by the Issuer under the United States Bankruptcy Code (11 United States Code, Section 101 et seq.). Remedies. Upon an Event of Default specified in (a) or (b) above, the Trustee may and will, upon the written request of the Holders of a majority of the Outstanding principal amount of the Bonds, by notice in writing delivered to the Issuer, declare the principal of all Bonds then Outstanding and the interest accrued thereon immediately due and payable, and such principal and interest will thereupon become and be immediately due and payable. Upon an Event of Default specified in (c) or (d) above, the Trustee will, upon the written request of the Holders of one hundred percent (100%) of the Outstanding principal amount of the Bonds, by notice in writing delivered to the Issuer, declare the principal of all Bonds then Outstanding and the interest accrued thereon immediately due and payable without premium, and such principal and interest will thereupon become and be immediately due and payable. B-11

38 The foregoing provisions are subject to the condition that if at any time after the principal of the Bonds have been so declared due and payable, and before any judgment or decree for the payment of the money due has been obtained or entered as hereinafter provided, there is paid or deposited with the Trustee a sum sufficient to pay all principal of the Bonds matured (or due upon mandatory redemption) prior to such declaration and all matured installments of interest (if any) upon all the Bonds, with interest at the rate borne by the Bonds on such overdue principal and premium, if any, and (to the extent legally enforceable) on such overdue installments of interest, and the reasonable fees and expenses of the Trustee (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration) have been made good or cured or adequate provisions have been made therefor, then, and in every case, the Holders of at least a majority of the Outstanding principal amount of the Bonds, by written notice to the Trustee and the Issuer, may direct the Trustee on behalf of the Holders of all the Bonds to rescind and annul such declaration and its consequences; but no such rescission and annulment will extend to or will affect any subsequent default, nor will it impair or exhaust any right or power consequent thereon. Upon the occurrence of an Event of Default, the Trustee may pursue, and upon the written direction of the Holders of at least twenty-five percent (25%) of the Outstanding principal amount of the Bonds, will pursue any available remedy by suit at law or in equity to enforce the payment of the principal of and interest on the Bonds then Outstanding, including without limitation, mandamus and enforcement of any rights against the Issuer. No remedy by the terms of the Indenture conferred upon or reserved to the Trustee is intended to be exclusive of any other remedy, but each and every such remedy is cumulative and is in addition to any other remedy given to the Trustee or Bondholders hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default or Event of Default will impair any such right or power or will be construed to be a waiver of any such default or Event of Default, or acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient. No waiver of any default or Event of Default hereunder will extend to or will affect any subsequent default or Event of Default or will impair any rights or remedies consequent thereon. Direction of Proceedings by Bondholders. The Holders of at least a majority of the Outstanding principal amount of the Bonds have the right, at any time during the continuance of an Event of Default, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the time, method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture, or for the appointment of a receiver or any other proceedings under the Indenture; provided that: (i) such direction will not be otherwise than in accordance with the provisions of law and of the Indenture; (ii) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and (iii) the Trustee has been indemnified as provided in the Indenture. Receiver. Upon the occurrence of an Event of Default, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and Bondholders under the Indenture, the Trustee will to the extent permitted by law be entitled, as a matter of right, to the appointment of a receiver or receivers of the Trust Estate and of the Available Tax Increment revenues, issues, earnings, income, and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer. Application of Money. All money received by the Trustee as a result of remedies taken by the Trustee, after payment of the costs and expenses of the proceedings resulting in the collection of such money and of the expenses, liabilities and advances incurred or made by the Trustee, are to be deposited in the Bond Fund, Revenue Fund or Reserve Fund, as the Trustee deems appropriate under the Indenture, and all available sums in the Bond Fund (other than sums held for redemption of Bonds duly called for redemption prior to the operative Event of Default) will be applied as follows: FIRST: To the payment of B-12

39 the fees of the Trustee; SECOND: To the payment to the Persons entitled thereto of all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest, and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or privilege; THIRD: To the payment to the Persons entitled thereto of the unpaid principal of any of the Bonds which shall have become due (other than Bonds matured or called for redemption for the payment of which money is held pursuant to the provisions of this Indenture), upon acceleration or maturity or otherwise in the order of their due dates, with interest on such Bonds from the respective dates upon which they become due at the rate borne by the Bonds, to the extent such interest has not previously been paid and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, then to the payment ratably, according to the amount of principal due on such date, to the Persons entitled thereto without any discrimination or privilege; FOURTH: To be held for the payment to the Persons entitled thereto as the same shall become due of the principal of and interest on the Bonds which may thereafter become due either at maturity or upon call for redemption prior to maturity and, if the amount available shall not be sufficient to pay in full obligations due on any particular date, together with interest then due and owing thereon, payment shall be made in accordance with the order of priority hereinabove established; and FIFTH: After the principal and interest due on the Bonds has been paid in full, to the Issuer. If the principal of all Bonds become due or have been declared due and payable, then in lieu of the FIRST and SECOND clauses above, all such money will be applied to the payment of all amounts due and unpaid upon the Bonds, without preference or priority of principal, or of any installment of interest over any other installment of interest, according to the amounts due for principal and interest, to the persons entitled thereto without any discrimination or privilege. If the principal of all the Bonds have been declared due and payable, and if such declaration has been rescinded and annulled, then the money will be applied in accordance with FIRST through FIFTH above. Rights and Remedies of Bondholders. No Holder of any Bond will have any right to institute any suit, action or proceeding in equity or at law for the enforcement of the Indenture or for the execution of any trust hereof or for the appointment of a receiver or for any other remedy under the Indenture, unless a default has become an Event of Default and the Bondholders have made written request to the Trustee and have offered it reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name, nor unless also they have offered to the Trustee indemnity as provided in the Indenture, nor unless the Trustee thereafter fail or refuse to exercise the remedies hereinbefore granted, or to institute such action, suit or proceeding in its own name. Nothing in the Indenture will affect or impair the right of any Bondholder to enforce the payment of the principal of and interest on any such Bond at and after the maturity thereof, or the obligation of the Issuer to pay the principal of and interest on each of the Bonds to the respective Holders thereof at the time and place, from the source and in the manner provided in said Bonds. Waiver of Events of Default. The Trustee may in its discretion waive any Event of Default and its consequences and rescind any declaration of maturity of principal; provided, however, that there may not be waived (i) any Event of Default in the payment of the principal of any Outstanding Bonds at the dates of maturity specified therein or (ii) any default in the payment when due of the interest on any Outstanding Bonds, unless prior to such waiver or rescission all arrears of interest, with interest (to the extent permitted by law) at the rate borne by the Bonds with respect to which such default has occurred in overdue installments of interest, or all arrears of payments of principal when due, as the case may be, and all expenses of the Trustee and Paying Agent, in connection with such default has been paid or provided for. No such waiver or rescission will extend to any subsequent or other default, or impair any right consequent thereon. B-13

40 The Trustee Duties of the Trustee. The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in the Indenture. In case an Event of Default has occurred (which has not been cured or waived), the Trustee will exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. No implied covenants or obligations shall be read into the Indenture against the Trustee. Trustee s Fees, Charges and Expenses. The Trustee and any Paying Agent will be entitled to payment and/or reimbursement for reasonable fees for services rendered and all advances, Counsel fees and other expenses reasonably and necessarily made or incurred by the Trustee in and about the execution of the trusts created by the Indenture and in and about the exercise and performance of the powers and duties of the Trustee under the Indenture and for the reasonable and necessary costs and expenses incurred in defending any liability under the Indenture (unless such liability is adjudicated to have resulted from the negligence or willful default of the Trustee). Upon an Event of Default, but only upon an Event of Default, the Trustee will have a lien with right of payment prior to payment on account of interest or principal of any Bond upon the Trust Estate, for said fees, advances, Counsel fees, costs and expenses incurred by it. Resignation and Removal of Trustee. The Trustee may at any time resign from the trusts hereby created by giving written notice to the Issuer and to each Holder of Bonds then Outstanding as shown by the Bond Register, and such resignation shall take effect upon the acceptance of the appointment by a successor trustee by the Bondholders or Issuer. The Trustee may be removed at any time upon thirty (30) days prior written notice to the Trustee by the Issuer, which written instrument must designate a successor Trustee. The Trustee may be removed at any time upon thirty (30) days prior written notice to the Trustee by the owners of not less than a majority in aggregate principal amount of Bonds then Outstanding, which written instrument must designate a successor Trustee. Such resignation or removal will not be effective until a successor Trustee is appointed and has accepted its appointment. In case the Trustee resigns or is removed, or is dissolved, or otherwise become incapable of acting under the Indenture or in case it be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor may be appointed by the Holders of a majority in aggregate principal amount of Bonds then Outstanding, by an instrument or concurrent instruments in writing signed by such Holders, or by their attorney-in-fact, duly authorized. Prior to the appointment of a successor trustee by the Bondholders, the Issuer by resolution of its governing body may appoint a trustee to fill such vacancy until a successor trustee is appointed by the Bondholders. Co-Trustee. At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Estate may at the time be located, the Issuer and Trustee have the power to appoint, and, upon the request of the Trustee or of the Holders of at least twenty-five percent (25%) in aggregate principal amount of Bonds Outstanding, the Issuer will for such purpose join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint one or more persons approved by the Trustee either to act as co-trustee or co-trustees, jointly with the Trustee. Supplemental Indentures Supplemental Indentures Not Requiring Consent of Bondholders. The Issuer and Trustee may, from time to time and at any time, without the consent of, or notice to, any of the Bondholders enter into an indenture or indentures supplemental to the Indenture for the following purposes: (i) cure any ambiguity or formal defect or omission in this Indenture or in any supplemental indenture; (ii) grant to or B-14

41 confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Bondholders or Trustee; (iii) subject to the lien and pledge of the Indenture additional revenues, properties or collateral; (iv) evidence the appointment of a separate trustee or a co-trustee or the succession of a new Trustee or Paying Agent or both hereunder; (v) modify, eliminate and/or add to the provisions of the Indenture to such extent as shall be necessary to prevent any interest on the Bonds from becoming includable in gross income for federal income tax purposes or to effect the qualification of the Indenture under the Trust Indenture Act of 1939, as then amended, or under any similar federal statute hereafter enacted, and to add to the Indenture such other provisions as may be expressly permitted by said Trust Indenture Act of 1939, excluding, however, the provisions referred to in Section 316(a)(2) of said Trust Indenture Act of 1939; (vi) make any other change which is required by any provision of the Indenture or any amendment thereto, (vii) defease or partially defease the Bonds as provided in Section 7-2, or (viii) make any other change which is not, in the reasonable judgment of the Trustee, to the material prejudice of the Holders of the Bonds then Outstanding. Supplemental Indentures Requiring Consent of Bondholders. The Trustee, upon receipt of evidence of the consent by the Holders of a majority in aggregate principal amount of the Bonds Outstanding, will join with the Issuer in the execution of supplemental indentures necessary and desirable for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Indenture or in any supplemental indenture; provided, however, that following the issuance of the Bonds, nothing contained in the Indenture will permit or be construed as permitting: (i) an extension of the maturity of the principal of or the interest on any Bonds; or (ii) a reduction in the principal amount of any Bonds or the rate of interest thereon; or (iii) the granting of a privilege or priority of any Bond or Bonds over any other Bond or Bonds except as expressly provided in the Indenture; or (iv) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indenture; or (v) the creation of any lien ranking prior to or on a parity with the lien of the Indenture on the Trust Estate or any part thereof, except as hereinbefore expressly permitted; or (vi) deprive the Holder of any Bond of the lien hereby created on the Trust Estate; or (vii) modify any of the foregoing provisions, without the consent of the Holders of one hundred percent (100%) of the principal amount of the Bonds then Outstanding ( 100% Bondholders Consent ); subject, however, to the right of any Bondholder or Bondholders to consent to any supplement or amendment to the Indenture which adversely affects only such consenting Bondholder or Bondholders. If at any time the Issuer requests the Trustee to enter into any such supplemental indenture which does not require 100 percent Bondholders consent, the Trustee will, upon being satisfactorily indemnified with respect to expenses, cause a written notice thereof to be mailed to all Holders in the same manner as required for the redemption of Bonds. Such notice must briefly set forth the nature of the proposed supplemental indenture and will state that copies thereof are on file at the principal office of the Trustee for inspection by all Bondholders. At least ten (10) days must elapse after the mailing of said notice before the Trustee may give its consent. If the Holders of a majority in aggregate principal amount of the Bonds Outstanding at the time of the execution of any such supplemental indenture have consented to and approved the execution thereof, no Holder of any Bond will have any right to object to any of such terms and provisions, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or Issuer from executing the same or from taking any action pursuant to the provisions thereof. Upon the execution of any such supplemental indenture as permitted and provided in this Section, the Indenture will be deemed to be modified and amended in accordance therewith. B-15

42 APPENDIX C TAX INCREMENT ANALYSIS

43 C-1

44 C-2

45 C-3

46 C-4

47 C-5

48 C-6