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DRAFT 6/12/09 CERTIFICATE AS TO RESOLUTION AND ADOPTING VOTE I, the undersigned, being the duly qualified and acting recording officer of the City of Missoula, Montana (the “City”), hereby certify that the attached resolution is a true copy of a Resolution entitled: “RESOLUTION RELATING TO SPECIAL IMPROVEMENT DISTRICT NO. 544; DECLARING IT TO BE THE INTENTION OF THE CITY COUNCIL TO CREATE THE DISTRICT FOR THE PURPOSE OF UNDERTAKING CERTAIN LOCAL IMPROVEMENTS AND FINANCING THE COSTS THEREOF AND INCIDENTAL THERETO THROUGH THE ISSUANCE OF SPECIAL IMPROVEMENT DISTRICT BONDS SECURED BY THE CITY’S SPECIAL IMPROVEMENT DISTRICT REVOLVING FUND; PROVIDING FOR THE REPAYMENT TO THE CITY OF THE COSTS OF IMPROVEMENTS FOR EXCLUDED PROPERTIES” (the “Resolution”), on file in the original records of the City in my legal custody; that the Resolution was duly adopted by the City Council of the City at a meeting on June 15, 2009, and that the meeting was duly held by the City Council and was attended throughout by a quorum, pursuant to call and notice of such meeting given as required by law; and that the Resolution has not as of the date hereof been amended or repealed. I further certify that, upon vote being taken on the Resolution at said meeting, the following Council Members voted in favor thereof: voted against the abstained from voting or were absent: WITNESS my hand officially this day of June, 2009. City Clerk ---PAGE BREAK--- 2 RESOLUTION NO. RESOLUTION RELATING TO SPECIAL IMPROVEMENT DISTRICT NO. 544; DECLARING IT TO BE THE INTENTION OF THE CITY COUNCIL TO CREATE THE DISTRICT FOR THE PURPOSE OF UNDERTAKING CERTAIN LOCAL IMPROVEMENTS AND FINANCING THE COSTS THEREOF AND INCIDENTAL THERETO THROUGH THE ISSUANCE OF SPECIAL IMPROVEMENT DISTRICT BONDS SECURED BY THE CITY’S SPECIAL IMPROVEMENT DISTRICT REVOLVING FUND; PROVIDING FOR THE REPAYMENT TO THE CITY OF THE COSTS OF IMPROVEMENTS FOR EXCLUDED PROPERTIES BE IT RESOLVED by the City Council of the City of Missoula (the “City”), Montana, as follows: Section 1. Proposed Improvements; Intention To Create District. 1.01. The City proposes to undertake certain local improvements (the “Improvements”) to benefit certain property located in the City. The Improvements consist of planning, designing, constructing and installing sanitary sewer mains, service lines and related improvements (the “Sewer Main Improvements”) and sewer service stubs (the “Service Line Stubs”), as more particularly described in Section 5, in the upper Rattlesnake Valley neighborhood, more specifically described herein. The total costs of the Improvements is estimated to be $4,013,000 and will be paid for from the following sources: a Treasure State Endowment Grant in the amount of $500,000; an Environmental Protection Agency Grant in the amount of $482,100; a Department of Natural Resources Grant in the amount of $70,000; proceeds of Sanitary Sewer System Revenue Bonds issued by the City in the amount of $750,000, of which $390,700 in principal amount will be forgiven; special improvement district bonds in the estimated amount of $2,019,542; and contributions from the City in the amount necessary to keep the assessments to be levied against the property in the proposed district to the amounts proposed to be levied against the value of sanitary sewer improvements for the properties in Special Improvement District 528 of the City, which amount is estimated to be $184,000. 1.02. The City has previously notified the owners of all real property proposed to be in the proposed district of the proposed creation of the district and the financing available and which would be benefited by the availability of the Improvements and has given them an opportunity to not be included in the proposed district. The City has received four letters from the owners of the properties described on Exhibit A hereto evidencing their desire not to be included in the special improvement district (the “Excluded Properties”), copies of which letters are on file in the office of the City Clerk. The City will pay the costs of the Improvements attributable to the Excluded Properties, subject to reimbursement as provided in Section 10 hereof. 1.03. It is the intention of this Council to create and establish in the City under Montana Code Annotated Title 7, Chapter 12, Parts 41 and 42, as amended, a special ---PAGE BREAK--- 3 improvement district (the “District”) for the purpose of financing a portion of the costs of the Improvements attributable to the properties to be included in the District and paying costs incidental thereto, including costs associated with the sale and the security of special improvement district bonds drawn on the District (the “Bonds”), the creation and administration of the District, and the funding of a deposit to the City’s Special Improvement District Revolving Fund (the “Revolving Fund”). The Bonds are to be payable primarily from special assessments to be levied against property in the District, which property will be specially benefited by the Improvements in an amount not less than $2,019,542. Section 2. Number of District. The District, if the same shall be created and established, shall be known and designated as Special Improvement District No. 544 of the City of Missoula, Montana. Section 3. Boundaries of District. The limits and boundaries of the District are depicted on a map attached as Exhibit B hereto (which is hereby incorporated herein and made a part hereof), exclusive of the Excluded Properties, which boundaries are designated and confirmed as the boundaries of the District. A listing of each of the properties in the District is shown on Exhibit C hereto (which is hereby incorporated herein and made a part hereof). Section 4. Benefited Property. The District and territory included within the limits and boundaries described in Section 3 and as shown on Exhibits B and C are hereby declared to be the special improvement district and the territory which will benefit and be benefited by the Improvements and will be assessed for the costs of the Improvements as described in Section 5. The property included within said limits and boundaries is hereby declared to be the property benefited by the Improvements. Section 5. General Character of the Improvements. The purpose of the Improvements is to make sanitary sewer available to each lot, tract or parcel of land in the District. The general character of the Improvements which are to be made and assessed by Special Improvement District No. 544 consists of planning, designing, constructing and installing gravity sanitary sewer mains and gravity or pressure service line stubs from the mains to the right-of-way for each of the properties as shown on Exhibit C, along with related appurtenances, and paying costs associated with the sale and the security of Special Improvement District Bonds and the creation of the Special Improvement District, as more fully described on Exhibit D hereto (which is hereby incorporated herein and made a part hereof). Section 6. Engineer and Estimated Cost. Morrison-Maierle, Inc. shall be the engineer for the District (the “Engineer”). The Engineer has estimated that the costs of the Improvements, including all incidental costs, which will be funded by the Special Improvement District Bonds will be no greater than $2,019,542. The costs of the Improvements for the Excluded Property is estimated to be $33,476, which amount will be contributed by the City, subject to reimbursement as provided in Section 10. The City will contribute an estimated amount of $184,000 to subsidize project costs consistent with Special Improvement District 528. ---PAGE BREAK--- 4 Section 7. Assessment Methods. 7.01. Combination of Methods; Property To Be Assessed. All properties within the District are to be assessed for a portion of the costs of the Improvements, as specified herein. The costs of the Improvements shall be assessed against the property in the District benefiting from the Improvements, based on the assessable area, assessed valuation and the lump sum method of assessment described in Sections 7-12-4162 and 7-12-4164, M.C.A., as particularly applied and set forth in this Section 7. 7.02. Sewer Mains – Assessable Area and Assessed Valuation. All properties in the District will be assessed for their proportionate share of the costs of the Sewer Main Improvements, related costs and costs associated with the creation of the District and the issuance and sale of the Bonds as set forth in Section 6 and as follows: One-half of the cost of the Sewer Main Improvements or $738,269 shall be assessed against each lot, tract or parcel of land in the District for that part of one-half of the costs of the Sewer Main Improvements, so that the assessable area of such lot, tract or parcel bears to the total assessable area of all lots, tract or parcels of land in the District, exclusive of streets, avenues and alleys. “Assessable Area” shall mean the actual area of each lot, tract or parcel of land. The Assessable Area of each lot, tract or parcel of land in the District is shown on Exhibit C. The total Assessable Area of the District is 5,028,245 square feet, and the estimated cost of the Sewer Main Improvements per square foot of assessable area is $0.147. The assessment for each lot, tract or parcel of land for the Sewer Main Improvements is shown on Exhibit C hereto. One-half of the cost of the Sewer Main Improvements or $738,269 shall be assessed against each lot, tract or parcel of land (whether or not it currently has structures on it) for that part of one-half of the costs of the Sewer Main Improvements which the assessed valuation of the tract, lot or parcel of land without improvements as of January 1, 2002 bears to the total assessed valuation of all lots, tract or parcels of land without improvements in the District as of January 1, 2002. The total assessed valuation of the land without improvements in the District was, as of January 1, 2002, $11,716,155 and the estimated assessment of the costs of the Sewer Main Improvements per dollar of assessed value in the District is $0.063. Property that is exempt from taxation under Montana law is liable for special assessments and such properties have been assigned an assessed valuation by the County Assessor for purposes of calculating such properties assessment of the District and such valuation are included in the total assessed valuation of the District. The total estimated amount of the Sewer Main Improvements assessment for each lot, tract or parcel of land in the District is shown on Exhibit C hereto. 7.03. Lump Sum – Service Line Stubs. Each lot, tract or parcel of land in the District receiving a Service Line Stub shall be assessed for the cost of the Service Line Stub on a lump sum basis based on the bid process to be received for the District. Each lot, tract or parcel of land that is to receive a Service Line Stub as part of the Improvements as shown on Exhibit B hereto. The lump sum assessment for each Service Line Stub to be assessed against each property benefited by the Service Line Stub will not exceed $1,804 per Service Line Stub. ---PAGE BREAK--- 5 7.04. Assessment Methodology Equitable and Consistent with Benefit. This Council hereby determines that the method of assessment and the assessment of costs of the Improvements against the properties benefited thereby as prescribed in this Section 7 are equitable and in proportion to and not exceeding the special benefits derived from the Improvements by the lots, tracts and parcels to be assessed therefor within the District. Section 8. Payment of Assessments. The special assessments for the costs of the Improvements shall be payable over a term not exceeding 20 years, each in equal semiannual installments of principal, plus interest, or equal semiannual payments of principal and interest, as this Council shall prescribe in the resolution authorizing the issuance of the Bonds. Property owners have the right to prepay assessments as provided by law. Section 9. Method of Financing; Pledge of Revolving Fund; Findings and Determinations. The City will issue the Bonds in an aggregate principal amount not to exceed $2,019,541.78 in order to finance a portion of the costs of the Improvements to be assessed against the District. Principal of and interest on the Bonds will be paid from special assessments levied against the property in the District. This Council further finds it is in the public interest, and in the best interest of the City and the District, to secure payment of principal of and interest on the Bonds by the Revolving Fund and hereby authorizes the City to enter into the undertakings and agreements authorized in Section 7-12-4225 M.C.A. in respect of the Bonds. In determining to authorize such undertakings and agreements, this Council has taken into consideration the following factors: Estimated Market Value of Parcels and Assessments. The market value of the properties in the District is substantially greater than the amount of the assessments to be levied against each of the lots, tracts or parcels in the District, as shown on Exhibit C. It is generally accepted and supported that the availability of public sanitary sewer service increases property values. In the judgment of the City and based on the current market values of the properties for property tax purposes, the special assessments to be levied under Section 7 against each lot, parcel or tract in the District is less than the increase in estimated market value of the lot, parcel or tract as a result of the construction of the Improvements. Diversity of Property Ownership. There are 312 separate parcels or tracts of land in the District to be assessed, substantially all of which are under individual ownership. Comparison of Special Assessments and Property Taxes and Market Value. The properties on Lolo Street from Rattlesnake Creek to Rattlesnake Drive are subject to an 8-year special assessment for sidewalks with the assessments ranging from $3,660 to $14,190. All of the property in the District will be subject to principal assessment of $459.00 payable over 20 years for improvements to the Pineview Park. These small assessments, with the assessments for the Improvements, do not create an excessive burden on the property owners nor do the total assessments outweigh the market value of the parcels. ---PAGE BREAK--- 6 Delinquencies. The annual delinquency rates for the City and the County of Missoula taxes in the District is no greater than the rate of delinquency throughout the City. The City does not anticipate that failure to pay special assessments on time will be an issue in the District, given the diversity of ownership, the level of development in the District, the small amount of assessments in relation to the value of the property in the District and the relatively low rate of delinquent property tax payments. The Public Benefit of the Improvements. The City has determined that it is in the public interest to reduce the number of residences relying on septic systems and has taken affirmative action to get as many residences connected to the municipal sewer system as possible as soon as possible. The City’s commitment to this goal is evidenced by the significant contribution of the City Sewer Utility toward the costs of the Improvements. Section 10. Reimbursement of the City by Excluded Properties. When the Excluded Properties wish to connect to the City’s Sanitary Sewer System, the owners of the Excluded Properties will be responsible for repaying the City for the costs of the Sewer Main Improvements, the Service Line Stubs, plus other fees and costs as specified in City ordinances and resolutions. Section 11. Reimbursement Expenditures. 11.01. Regulations. The United States Department of Treasury has promulgated final regulations governing the use of proceeds of tax-exempt bonds, all or a portion of which are to be used to reimburse the City for project expenditures paid by the City prior to the date of issuance of such bonds. Those regulations (Treasury Regulations, Section 1.150-2) (the “Regulations”) require that the City adopt a statement of official intent to reimburse an original expenditure not later than 60 days after payment of the original expenditure. The Regulations also generally require that the bonds be issued and the reimbursement allocation made from the proceeds of the bonds within 18 months (or three years, if the reimbursement bond issue qualifies for the “small issuer” exception from the arbitrage rebate requirement) after the later of the date the expenditure is paid or (ii) the date the project is placed in service or abandoned, but (unless the issue qualifies for the “small issuer” exception from the arbitrage rebate requirement) in no event more than three years after the date the expenditure is paid. The Regulations generally permit reimbursement of capital expenditures and costs of issuance of the bonds. 11.02. Prior Expenditures. Other than expenditures to be paid or reimbursed from sources other than the Bonds, (ii) expenditures constituting preliminary expenditures within the meaning of Section 1.150-2(f)(2) of the Regulations, or (iii) expenditures in a “de minimus” amount (as defined in Section 1.150-2(f)(1) of the Regulations), no expenditures for the Improvements have been paid by the City before the date 60 days before the date of adoption of this resolution. 11.03. Declaration of Intent. The City reasonably expects to reimburse the expenditures made for costs of the Improvements out of the proceeds of Bonds in an estimated maximum aggregate principal amount of $2,019,542 after the date of payment of all or a portion of the ---PAGE BREAK--- 7 costs of the Improvements. All reimbursed expenditures shall be capital expenditures, a cost of issuance of the Bonds or other expenditures eligible for reimbursement under Section 1.150- 2(d)(3) of the Regulations. 11.04. Budgetary Matters. As of the date hereof, there are no City funds reserved, allocated on a long-term basis or otherwise set aside (or reasonably expected to be reserved, allocated on a long-term basis or otherwise set aside) to provide permanent financing for the expenditures related to the Improvements, other than pursuant to the issuance of the Bonds. The statement of intent contained in this resolution, therefore, is determined to be consistent with the City’s budgetary and financial circumstances as they exist or are reasonably foreseeable on the date hereof. 11.05. Reimbursement Allocations. The City’s financial officer shall be responsible for making the “reimbursement allocations” described in the Regulations, being generally the transfer of the appropriate amount of proceeds of the Bonds to reimburse the source of temporary financing used by the City to make prior payment of the costs of the Improvements. Each allocation shall be evidenced by an entry on the official books and records of the City maintained for the Bonds or the Improvements and shall specifically identify the actual original expenditure being reimbursed. Section 12. Public Hearing; Protests. At any time within fifteen (15) days from and after the date of the first publication of the notice of the passage and approval of this resolution, any owner of real property within the District subject to assessment and taxation for the cost and expense of making the Improvements may make and file with the City Clerk until 5:00 p.m., M.T. on July 6, 2009 which date is greater than 15 days from the date of the first publication of notice, on the expiration date of said 15-day period (July 6, 2009), written protest against the proposed Improvements, or against the extension or creation of the District or both, and this Council will at its next regular meeting after the expiration of the fifteen (15) days in which such protests in writing can be made and filed, proceed to hear all such protests so made and filed; which said regular meeting will be held on Monday, July 6, 2009 at 7:00 p.m., M.T., of said day in the City Council chambers at 140 W Pine, Missoula, Montana. Section 13. Notice of Passage of Resolution of Intention. The City Clerk is hereby authorized and directed to publish or cause to be published a copy of a notice, attached as Exhibit E hereto (which is hereby incorporated herein and made a part hereof), of the passage of this resolution in the Missoulian, a newspaper of general circulation in the county on June 19, 2009 and June 26, 2009 in the form and manner prescribed by law, and to mail or cause to be mailed a copy of said notice to every person, firm, corporation, or the agent of such person, firm, or corporation having real property within the District listed in his or her name upon the last completed assessment roll for state, county, and school district taxes, at his or her last-known address, on or before the same day such notice is first published. Section 14. Dissolution of Special Improvement District No. 528. Upon the creation of Special Improvement District No. 544, all of the properties included in the boundaries of Special Improvement District No. 528 created by the City on February 24, 2003 for the purposes of providing sanitary sewer services for such properties will have been included in other special ---PAGE BREAK--- 8 improvement districts created for the purposes of providing sanitary sewer services. Special Improvement District No. 528 is hereby dissolved for all purposes. PASSED AND ADOPTED by the City Council of the City of Missoula, Montana, this 15th of June, 2009. Mayor Attest: City Clerk ---PAGE BREAK--- A-1 EXHIBIT A OWNERS OF THE PROPERTIES IN THE DISTRICT ---PAGE BREAK--- B-1 EXHIBIT B DISTRICT MAP ---PAGE BREAK--- C-1 EXHIBIT C PROPERTIES IN THE DISTRICT AND PROPOSED ASSESSMENTS ---PAGE BREAK--- D-1 EXHIBIT D DESCRIPTION AND COSTS OF PROJECT