HomeMy WebLinkAboutLand PreservationNo. 8R- 1
$1,550,000
UNITED STATES OF AMERICA
STATE OF NEW YORK
COUNTY OF SUFFOLK
TOWN OF SOUTHOLD
BOND ANTICIPATION NOTE FOR FERRY DISTRICT AND LAND PRESERVATION-2011
PRINCIPAL SUM: ONE MILLION FIVE HUNDRED FIFTY THOUSAND DOLLARS ($1,550,000)
INTEREST RATE: eighty-five hundredths of one per centum (.85%) per annum
DATE OF ISSUE: June 3, 2011
MATURITY DATE: April 12, 2012
The Town of Southold, in the County of Suffolk, a municipal corporation of the State of New York, hereby
acknowledgas itself indebted and for value received promises to pay to JPMorgan Chase Bank, N.A., Melville, New York. the
regislered owner hereol; the PRINCIPAL SUM (stated above) on the MATURITY DATE (stated above), together with interest
thereon from the DATE OF ISSUE (stated above) at the INTEREST RATE (stated above), payable at maturity. Both principal
of and interest on this Note will be paid in lawful money of the United States of America, at JPMorgan Chase Bank, N.A.,
Melville, New York.
Both priocipal of and interest on this Note shall be payable only to tile registered owner, his legal representatives,
successors or transferees. This Note shall be transferable only upon presentation to such registered owner with a written transfer
of title and such Town Clerk shall thereupon register this Note in the name of the transferee in his books and shall endorse a
certificate of such registration hereon. Such transfer shall be dated, and signed by the registered owner, or his legal
representatives, and it shall be duly acknowledged or proved, or in the alternative the signature thereto shall be certified as to its
genuineness by an otEcer ora bank or trust company located and authorized to do business in this State.
Tbis Note is the only Note of an authorized issue, the principal amount of which is $1,550,000.
This Note is issued pursuant to the provisions of the Local Finance Law, constituting Chapter 33-a of the Consolidated
Laws of the State of New York, two bond resolution adopted by the Town Board on their respective dates, authorizing the
issuance of serial bonds lbr various purposes in and lbr the Town, and the Certificate of Determination executed by the
Snpervisor on lune 3,201 I.
The lhith and credit of such Town are hereby irrevocably pledged for the punctual payment of the principal of and
interest on this Note according to its terms. It is hereby certified and recited that all conditions, acts and things required by the
Constitation and statutes of the State of New York to exist, to have happened and to have been performed precedent to and in the
issuance of this Note, exist, have happened and have been performed, and that this Note, together with all other indebtedness of
such Town, is withio every debt and other limit prescribed by the Constitution of such State.
IN WITNESS WHEREOF, the Town of Southold has caused this Note to be signed by its Supervisor, and its
corporate seal (or a facsiraile thereol) to be affixed, impressed, imprinted or otherwise reproduced hereon and attested by its
'fown Clerk and this Note to be dated as of the DATE OF ISSUE:
(SEAL)
ATTEST:
Tow~ Clerk
OF SOUTHOLD
S u peerv"isor
CERTIFICATE OF DETERMINATION BY THE SUPERVISOR
RELATIVE TO AUTHORIZATION, SALE, ISSUANCE, FORM
AND CONTENTS OF THE $1,550,000 BOND ANTICIPATION
NOTE FOR FERRY DISTRICT AND LAND PRESERVATION-
2011 OF THE TOWN OF SOUTHOLD, NEW YORK
I, Scott A. Russell, Supervisor of the Town of Southold, New York (herein called
the "Town"), HEREBY CERTIFY that pursuant to the powers and duties delegated to me, the
chief fiscal officer of the Town, by the Town Board of the Town, pursuant to the bond
resolutions duly adopted and amended and as referred to in paragraphs I and 2 hereof, and
subject to the limitations prescribed in said bond resolutions, I have made the following
determinations:
1. A bond anticipation note of the Town in the principal amount of $650,000
shall be issued to renew, in part, the bond anticipation note in the principal amount of $750,000
heretofore issued in anticipation of the sale of the serial bonds authorized pursuant to the bond
resolution entitled:
"Bond Resolution of the Town of Southold, New York, adopted July
31, 2001 and amended October 21, 2003, appropriating the amount of
$10,500,000, including the amounts of any grants that may be received
from the United States and the State of New York for the increase and
improvement of the facilities of the Fishers Island Ferry District, in
said Town and authorizing the issuance of serial bonds of said Town in
the principal amount of not to exceed $4,800,000 to finance that
portion of said appropriation for which such grants are not available,"
duly adopted and amended by the Town Board on the dates therein referred to, and the
Certificate of Determination executed by the Supervisor on June 4, 2010, the redemption of said
$750,000 note having been provided to the extent of $100,000 from a source other than the
proceeds of serial bonds.
2. A bond anticipation note of the Town in the principal amount of $900,000
shall be issued in anticipation of the sale of the serial bonds authorized pursuant to the bond
resolution entitled:
"Bond Resolution of the Town of Southold, New York, adopted
August 28, 2007, authorizing the acquisition of interests or rights in
agricultural lands, including development rights in open agricultural
lands; provided, however, that no such interests or rights in such
agricultural lands shall be acquired until all relevant provisions of the
State Environmental Quality Review Act have been complied with and
a final declaration as to environmental impact has been duly declared;
stating the estimated maximum cost thereof is $4,000,000; further
authorizing the Town to reserve the right to sell, lease, alienate or
otherwise transfer such interests or rights in agricultural lands
hereinafter acquired pursuant hereto and to provide financing for the
preparation of plans and specifications and other studies relative to the
development and use of the acquired agricultural lands; appropriating
said amount therefor; authorizing the issuance of $4,000,000 serial
bonds of said Town to finance said appropriation; stating that land
installment purchase obligations are authorized to be issued pursuant
to this bond resolution; and determining that this bond resolution shall
be subject to a mandatory referendum,"
duly adopted by the Town Board on the date therein referred to
3. Said $650,000 note and said $900,000 note shall be combined for
purposes of sale into a single note issue in the aggregate principal amount of $1,550,000
(hereinafter referred to as the "Note").
4. The terms, form and details of said Note shall be as follows:
Amount and Title:
$1,550,000 Bond Anticipation Note for Ferry District
and Land Preservation-2011
Dated: June 3,2011
Matures: April 12, 2012
Number and
Denomination:
Number 8R-l, at $1,550,000
Interest Rate
per annum: .85%
5. The amount of bond anticipation notes and serial bonds originally issued
pursuant to the bond resolution referred to in paragraphs 1 and 2, hereof, is (1) $4,800,000 and
(2) $900,000. The amount of bond anticipation notes which will be outstanding after the
issuance of the Note, including said Note, will be (I) $650,000 and (2) $900,000.
6. The serial bonds authorized pursuant to the resolution referred to in
paragraph 1, hereof, are for improvements which are assessable. The serial bonds authorized
pursuant to the resolution referred to in paragraph 2, hereof, are for improvements which are
non-assessable
7. Pursuant to said powers and duties delegated to me, I DO HEREBY
AWARD AND SELL said Note to JPMorgan Chase Bank, N.A., Melville, New York, for the
purchase price of $1,550,000, plus accrued interest, if any, from the date of said Note to the date
of delivery thereof, payable to JPMorgan Chase Bank, N.A., as registered owner, and I
FURTHER DETERMINE that said Note shall be payable as to both principal and interest at
JPMorgan Chase Bank, N.A., Melville, New York and shall bear interest at the rate of eighty-
five hundredths of one per centum (.85%) per annum, payable at maturity.
8. Said Note shall be executed in the name of the Town by its Supervisor and
the corporate seal of the Town or a facsimile thereof shall be affixed, impressed, imprinted or
otherwise reproduced thereon and attested by the Town Clerk.
I HEREBY FURTHER CERTIFY that the powers and duties delegated to me to
issue and sell the Note hereinabove referred to are in full force and effect and have not been
modified, amended or revoked.
IN WITNESS WHEREOF,
I have hereunto set my hand this 3rd day of June,
2011.
Supervisor
959518.1 019513 CLD
CLERK' S CERTIFICATE
I, Elizabeth A. Neville, Town Clerk of the Town of Southold, in the County of
Suffolk, New York, HEREBY CERTIFY that I have compared the foregoing copy of the
Certificate of Determination executed by the Supervisor and the same is a true and complete
copy of the Certificate filed with said Town in my office as Town Clerk on or before the 3rd day
of June, 2011, and
I FURTHER CERTIFY that no resolution electing to reassume any of the powers
or duties mentioned in said Certificate and delegated to the Supervisor by the resolutions cited in
said Certificate and exercised by the Supervisor has been adopted by said Town Board.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal of said Town this 3rd day of June,
2011.
(SEAL)
Town Clerk
AFFIDAVIT AS TO NO CONFLICT OF INTEREST
STATE OF NEW YORK )
:SS:
COUNTY OF SUFFOLK )
Elizabeth A. Neville, being duly swom upon her oath deposes and says:
1. I am the duly appointed, qualified and acting Town Clerk of the Town of
Southold, in the County of Suffolk, New York (herein and in Schedule A annexed hereto called
the "Town");
2. That with respect to the contract of sale of the Note of the Town described
in the Certificate of Determination executed by the Supervisor on the 3rd day of June, 2011, to
the financial institution indicated in such Certificate, I have made a careful inquiry of each
officer and employee of the Town having the power or duty to (a) negotiate, prepare, authorize
or approve the contract or authorize or approve payment thereunder, (b) audit bills or claims
under the contract, or (c) appoint an officer or employee who has any of the powers or duties set
forth above, as to whether or not such officer or employee has an interest (as defined pursuant to
Article 18 of the General Municipal Law) in such contract;
3. That upon information and belief, as a result of such inquiry, no such
officer or employee has any such interest in said contract unless otherwise noted in Schedule A
annexed hereto and by this reference made a part hereof.
Subscribed and sworn to before me
thi~ J~O 1 L~
~/~ Notary Public, State of New York
Notary ~ubllc, State of New York
NO, 01CU6174322
Qualified in Suffolk Coun~
Commission Expires September
959518.l 019513 CLD
SCHEDULE A
1. , is a stockholder of the Purchaser owning or
controlling, directly or indirectly, less than five per centum (5%) of the outstanding stock thereof
but no disclosure of such interest by said officer is required pursuant to said Law.
2. , has an interest in the Purchaser solely by
reason of employment as an officer or employee thereof, but the remuneration of such
employment will not be directly affected as a result of said contract and the duties of such
employment do not directly involve the procurement, preparation or performance of any such
part of such contract.
3. , has publicly disclosed the nature and extent
of such interest in writing to the governing board of the Town. Such written disclosure has been
made a part of and set forth in the official record of proceedings of the Town.
959518.1 019513 CLD
CERTIFICATES AS TO SIGNATURES, LITIGATION,
AND DELIVERY AND PAYMENT
WE, the undersigned officers of the Town of Southold, in the County of Suffolk,
a municipal corporation of the State of New York (herein referred to as the "Town") HEREBY
CERTIFY that on or before June 3, 2011, we officially signed and properly executed by manual
signatures the $1,550,000 Bond Anticipation Note for Ferry District and Land Preservation-2011
(the "Note") of the Town, payable to JPMorgan Chase Bank, N.A., as registered owner, and
otherwise described in Schedule A annexed hereto and by this reference made a part hereof, and
that at the time of such signing and execution and on the date hereof we were and are the duly
chosen, qualified and acting officers of the Town authorized to execute the Note and holding the
offices indicated by the title set opposite our signatures hereto for term expiring on the date set
opposite such titles.
WE FURTHER CERTIFY that no litigation of any nature is now pending or
threatened restraining or enjoining the issuance or delivery of said Note or the levy or collection
of any taxes to pay the interest on or principal of said Note, or in any manner questioning the
authority or proceedings for the issuance of said Note or for the levy or collection of said taxes,
or relating to said Note or affecting the validity thereof or the levy or collection of said taxes,
that neither the corporate existence or boundaries of the Town nor the title of any of the present
officers thereof to their respective offices is being contested, and that no authority or proceedings
for the issuance of said Note has or have been repealed, revoked or rescinded.
WE FURTHER CERTIFY that the seal which is impressed upon this certificate
has been affixed, impressed, imprinted or otherwise reproduced upon said Note and is the legally
adopted, proper and only official corporate seal of the Town.
And I, Scott A. Russell, Supervisor, HEREBY FURTHER CERTIFY that on June
3, 2011, I delivered or caused said Note to be delivered to JPMorgan Chase Bank, N.A.,
Melville, New York, the purchaser thereof, and that at the time of such delivery, the Town
received from said purchaser the amount hereinbelow stated, in full payment for said Note,
computed as follows:
Price ...................................................................................... $1,550,000.00
Interest on said Note accrued to the
date of such delivery ...........................................................
-0-
Amount Received ................................................................. $1,550,000.00
(SEAL)
IN WITNESS WHEREOF, we have hereunto set our hands and said corporate
seal has hereunto been affixed this 3rd day of June, 2011.
Term of Office Expires
December 31,2011
December 31, 2013
Title
Supervisor
Town Clerk
I HEREBY CERTIFY that the signatures of the officers of the above-named
Town, which appear above, are tree and genuine and that I know said officers and know them to
hold 5h~ respective offices set opposite their signatures.
(Sig~mre) (Title) (Name of Bank)
959518.1019513 CLD
ATTORNEY'S CERTIFICATE
I, Martin D. Finnegan, Esq., HEREBY CERTIFY that I am a licensed attorney at
law of the State of New York, and am the duly chosen, qualified and acting Town Attorney of
the Town of Southold, in the County of Suffolk, a municipal corporation of the State of New
York (herein referred to as the "Town"); that no litigation of any nature is now pending or
threatened restraining or enjoining the issuance or delivery of the Note of the Town, payable to
JPMorgan Chase Bank, N.A., as registered owner, and otherwise described as set forth in
Schedule A annexed hereto and by this reference made a part hereof, or the levy or collection of
any taxes to pay the interest on or principal of said Note, or in any manner questioning the
authority or proceedings for the issuance of said Note or for the levy or collection of said taxes,
or relating to said Note or affecting the validity thereof or the levy or collection of said taxes;
that neither the corporate existence or boundaries of the Town nor the title of any of the present
officers thereof to their respective offices is being contested; and that no authority or proceedings
for the issuance of said Note has or have been repealed, revoked or rescinded.
IN WITNESS WHEREOF,
I have hereunto set my hand this 3rd day of June,
2011.
----o Attorney
959518.1 019513 CLD
Amount and Title:
Dated:
Matures:
Number:
Interest Rate
per annum:
SCHEDULE A
$1,550,000 Bond Anticipation Note for Ferry District and Land
Preservation-2011
June 3, 2011
April 12, 2012
8R-1
.85%
ARBITRAGE AND USE OF PROCEEDS CERTIFICATE
I, Scott A. Russell, Supervisor of the Town of Southold, in the County of Suffolk,
New York (the "Issuer"), HEREBY CERTIFY and reasonably expect with respect to the
issuance of the Issuer's $1,550,000 Bond Anticipation Note for Ferry District and Land
Preservation-2011 (herein referred to as the "Note" or "Notes"), dated and issued on June 3,
2011, as follows:
Unless the context clearly requires otherwise, all capitalized terms used but not
otherwise defined herein shall have the meanings set forth in Article II hereof or in the
Resolutions, the Code or the Regulations (each as defined below). Unless the context clearly
requires otherwise, all capitalized terms not otherwise defined herein shall have the meanings set
forth below or in the Resolutions, the Code or the Regulations (each as defined below):
Unless the context clearly requires otherwise, all capitalized terms not otherwise
defined herein shall have the meanings set forth below or in the Resolutions, the Code or the
Regulations (each as defined below):
ARTICLE I
General
I. 1. Authority of Signatory. I am an officer of the Issuer charged with the
responsibility for the execution, delivery, and issuance of the Note and am acting for and on
behalf of the Issuer in signing this certificate.
1.2. Description of Note. The Issuer represents that the Note is described as
set forth in the Certificate of Determination executed by the Supervisor as of June 3,2011.
1.3. Purpose of Certificate. This certificate is made for the purpose of
establishing evidence of the expectations of the Issuer as of the date hereof as to future events
regarding the amount and use of proceeds of the Note. It is intended and may be relied upon for
purposes of Sections 103 and 148 of the Internal Revenue Code of 1986, as amended (the
"Code"), and as a certification described in Section 1.148-2(b)(2) of the Treasury Regulations.
This certificate is executed and delivered as part of the record of proceedings in connection with
the issuance of the Note. The provisions of this certificate constitute a contractual obligation of
the Issuer in consideration for the purchase of and payment for the Note by the purchaser(s)
thereof.
1.4. No Hedge Bond. The Issuer reasonably expects that at least 85% of the
spendable proceeds of the Note will be used to carry out the governmental purposes of the issue
within tb_ree years of the respective issue dates thereof and not more than 50% of the proceeds of
the Note has been or will he invested in investment property which would be acquired with the
amounts received as a result of investing original proceeds of the Note and would have a
substantially guaranteed yield of four years or more.
959518.1 019513 CLD
1.5. Reasonable Expectations. This certificate sets forth the facts, estimates
and circumstances now in existence which form the basis for the Issuer's expectation that the
proceeds of the Note will not be used in a manner that would cause the Note to be an arbitrage
bond under Section 148 of the Code or a private activity bond under Sections 103 and 141 of the
Code. To the best of my knowledge and belief, such expectation is reasonable and there are no
other facts, estimates or circumstances that would materially change that expectation.
1.6. Composite Issue. No other governmental obligations have been sold
fewer than 15 days prior to, or will be sold fewer than 15 days after, the sale date of the Note,
pursuant to a common plan of financing which are expected to be paid from substantially the
same source of funds as the Note.
1.7. Federal Guarantee of Investments. The Issuer represents and covenants
that, except for the gross proceeds of the Note which are: invested during the temporary period
referred to in Article III, held in any refunding escrow or invested in obligations of the United
States Treasury or in obligations issued pursuant to Section 2lB(d)(3) of the Federal Home Loan
Bank Act, as amended by Section 511(a) of the Financial Institutions Reform, Recovery and
Enfomement Act of 1989, or any successor provision to Section 21B(d)(3) of the Federal Home
Loan Bank Act, as amended:
(a) No portion of the payment of principal or interest with respect to the Note is
or will be guaranteed directly or indirectly by the United States or any agency or instrumentality
thereof (herein "federally guaranteed"); and
(b) No portion of the gross proceeds of the Note in excess of five percent of such
gross proceeds is or will be (A) used in making loans the payment of principal or interest with
respect to which is to be federally guaranteed, or (B) invested directly or indirectly in federally
insured deposits or accounts.
1.8. Tax Representation. The Issuer expects to be able to and will comply with
all the procedures and provisions set forth herein, and will do and perform all acts and things
necessary and desirable within its reasonable control in order to assure that interest paid on the
Note shall be excluded from gross income of the owners thereof for the purpose of federal
income taxation.
1.9. Additional Information. The Issuer will provide such other information as
may be required to assure the exclusion from gross income of interest on the Note for federal
income taxation purposes.
1.10. Noncompliance. The Issuer shall perform each of the covenants
undertaken by it in this Certificate unless, in the written opinion of Bond Counsel,
noncompliance therewith will not cause interest on the Note to be included in gross income for
purposes of Federal income taxation.
1.11. Non-Puroose Investments. Not more than 50% of the proceeds of the
Note are being invested in investments not acquired to carry out the governmental purposes of
the issue at a guaranteed yield and having a term of 4 years or more.
959518.1 019513 CLD
1.12. Reliance by Bond Counsel. The representations and covenants of the
Issuer expressed in this Certificate may be relied upon by Bond Counsel in connection with the
rendering of any opinion with respect to the Note.
1.13. IRS Form 8038-G. The Issuer shall file IRS Form 8038-G by the 15th day
of the second month after the calendar quarter in which the Note is issued.
1.14. Definitions.
"Available Construction Proceeds" means the issue price of that portion of the
Note constituting a Construction Bond (i) plus earnings on the issue price and on amounts in any
reserve fund not funded from note proceeds, and earnings on such earnings and (ii) less the
amount of the issue price representing a reasonably required reserve or replacement fund and
costs of issuance funded with proceeds received from the sale of the Note. For purposes of this
definition earnings include earnings on any tax-exempt note. If only a portion of the Note
constitutes a Construction Bond, a pro-rata portion of the above-described amount will constitute
available construction proceeds. Pre-issuance accmed interest and earnings thereon may be
disregarded.
"Bona Fide Debt Service Fund" means a fund, which may include proceeds of
an issue, that is used primarily to achieve a proper matching of revenues with principal and
interest payments within each Bond Year and is depleted at least once each Bond Year except for
a reasonable carry over amount (not in excess of the earnings on the fund for the immediately
preceding Bond Year or one-twelfth of the principal and interest payments on the issue for the
immediately preceding Bond Year).
"Bond Counsel" means any nationally recognized attorney or firm of attorneys,
knowledgeable in the requirements of the Code, and the Regulations, and retained by the Issuer.
"Bond Year" means each one-year period (or shorter period) from the date of
issue that ends at the close of business on the day in the calendar year selected by the Issuer
which day is the last day within one year of the dated date of the Note.
"Capital Project" means all capital expenditures, plus related working capital
expenditures to which the de minimis rule under Treas. Reg. Section 1.148-6(d)(3)(ii)(A)
applies, that carry out the governmental purposes of an issue.
"Capitation Fee" means a fixed periodic amount paid under a management or
other services contract or agreement for each person for whom the service provider assumes the
responsibility to provide all needed services for a specified period, provided the quantity and
type of services actually provided vary substantially.
"Code" means the Internal Revenue Code of 1986, as amended.
"Computation Date" means any Installment Computation Date or the Final
Computation Date.
959518.1019513 CLD
"Computation Date Credit" means, for any issue of obligations, an amount
equal to the Future Value of $1,000 for each Bond Year during which there are gross proceeds of
the Note on a Computation Date other than the Final Computation Date, and $1,000 on the Final
Computation Date.
"Computation Period" means the period beginning on the day following a
Computation Date (or in the case of the first period, the date of issuance of the Note) and ending
on the next succeeding Computation Date.
"Construction Bond" means an issue in which all of the bonds or notes are either
(i) Governmental Bonds; (ii) Qualified 501 (c)(3) bonds or (iii) Private Activity Bond to finance
property owned by a governmental unit or a 501(c)(3) organization, if at least 75 percent of the
net proceeds of the issue are to be used, or are expected to be used if such an election has been
made, for expenditures for construction, reconstruction and rehabilitation of property which is
owned by a govemmental entity or a 501 (c)(3) organization.
"Construction Expenditures" means capital expenditures (as defined in Treas.
Reg. § 1.150-1) (i.e., amounts used for construction, reconstruction or rehabilitation of buildings
or other inherently permanent structures, including items that are structural components of such
buildings or structures, and architectural and engineering fees, site survey fees, legal expenses,
insurance premiums and development fees to the extent such fees and expenses directly relate to
other construction costs).
"Controlled Group" means a group of entities controlled directly or indirectly
by the same entity or group of entities. In general, "direct control" exists while a controlling
entity possesses either of the following rights or powers and such rights or powers are
discretionary and non-ministerial: The right or power (i) both to approve and to remove without
cause a controlling portion of the goveming body of the controlled entity, or (ii) to require the
use of funds or assets of the controlled entity for any purpose of the controlling entity. If one
entity (the "Controlling Entity") directly controls another (the "Controlled Entity"), then the
Controlling Entity indirectly controls any entity controlled directly or indirectly by such
Controlled Entity. However, an entity is not a Controlled Entity if it possesses substantial taxing,
eminent domain and police powers.
"Current Refunded Note" means the Prior Issue as described herein.
"Extraordinary Working Capital Item" means expenditures for extraordinary,
nonrecurring items that are not customarily payable from current revenues, such as casualty
losses or extraordinary legal judgments in amounts in excess of reasonable insurance coverage.
"Fair Market Value" of an Investment shall have the following meanings:
(a) In General. Except as elsewhere specifically stated below, the Fair Market
Value of an Investment is the price at which a willing buyer would purchase the Investment from
a willing seller in a bona fide, arm's-length transaction.
959518.1 019513 CLD
(b) United States Treasury Obligation. The Fair Market Value of a United States
Treasury Obligation that is purchased directly from the United States Treasury is its purchase
price.
(c) Certificate of Deposit. The Fair Market Value ora certificate of deposit with a
fixed interest rate, a fixed payment schedule, and a substantial penalty for early withdrawal is its
purchase price provided, the yield on the certificate of deposit is not less than (i) the yield on
reasonably comparable direct obligations of the United States and (ii) the highest yield published
by the provider and currently available from the provider on reasonably comparable certificates
of deposit offered to the public.
(d) Guaranteed Investment Contracts. The Fair Market Value of a guaranteed
investment contract is its purchase price, provided (i) the Issuer makes a bona fide solicitation for
such contract and receives at least three bona fide bids from providers with no material interest in
the issue; (ii) the Issuer purchases the highest-yielding guaranteed investment contract for which
a qualifying bid is made (determined net of broker's fees); (iii) the yield on such contract
(determined net of broker's fees) is not less than the yield then available from the provider on
reasonably comparable investment contracts, if any, offered to other persons from a source of
funds other than gross proceeds of tax-exempt notes; (iv) the determination of the terms of a
guaranteed investment contract takes into account as a significant factor the Issuer's reasonably
expected drawdown schedule for mounts to be invested, exclusive of float and reserves, (v) the
terms of the contract, including collateral security requirements are reasonable, and (vi) the
obligor certifies the administrative costs it is paying to third parties in connection with the
contract. To the extent that a broker's commission does not exceed .05 percent of the amount
expected to be invested per year, it may be taken into account in determining yield, with the
effect that it will increase the payments for, or decrease the receipts from, Investments.
"Final Computation Date" means the day the last Note that is part of the Issue is
discharged.
"Future Value" or "FV" of a payment or receipt means the amount, determined
by using the economic accrual method (the method of computing yield based on the
compounding of interest at the end of each compounding period), equal to the value of such
payment or receipt at the time it is paid or received (or treated as paid or received), plus interest
assumed to be earned and compounded over the period at a rate equal to the yield on the issue,
using the same compounding interval and financial conventions used to compute yield.
"Governmental Bond" means bonds or notes which are not Private Activity
Bonds.
"Gross Proceeds" means Sale Proceeds, Transferred Proceeds, Investment
Proceeds andReplacementProceeds.
"Installment Computation Date" means the last day of the fifth Bond Year and
the last day of each succeeding fifth Bond Year (until and excluding the Final Computation
Date) and, if the Issuer so elects, the last day of any Bond Year.
959518.1 019513 CLD
"Investment" means (i) any security (within the meaning of Section 165(g)(2)(A)
or (B) of the Code, (ii) any obligation (other than tax-exempt obligations which are not
"specified private activity notes" within the meaning of Section 57(a)(5)(C) of the Code), (iii)
any annuity contract within the meaning of Section 72 of the Code, (iv) any residential real
property for family units not located within the jurisdiction of the Issuer and which is not
required to implement a court-ordered or approved housing desegregation plan or (v) any
investment-type property that is held as a passive vehicle for the production of income, including
any prepayment for property or services if a principal purpose of prepayment is to receive an
investment return from the time the prepayment is made until the time payment would otherwise
have been made.
"Investment Proceeds" means any amounts actually or constructively received
from investing proceeds of the Note.
"Issuer" means the Town of Southold, in the County of Suffolk, New York.
"Multipurpose Issue" means an issue the proceeds of which are used for two or
more separate purposes determined in accordance with Section 1.148-9(h) of the Regulations.
"Net Sale Proceeds" means sale proceeds less the portion of those sale proceeds
invested in a reasonably required reserve or replacement fund or as part of a minor portion.
"Nonpurpose Investment" means any Investment in which Gross Proceeds are
invested and which is not acquired to carry out the governmental purpose of the issue.
"Note" or "Notes" means the$1,550,000 Bond Anticipation Note for Ferry
District and Land Preservation-2011, dated June 3,2011.
"Official Statement" means the Official Statement, if any, of the Issuer relating
to the Note.
"Periodic Fixed Fee" means a stated dollar amount for services rendered during
a specified period of time (e.g., Sxx per month).
"Per Unit Fee" means a stated dollar amount for each unit of service provided
(e.g., Sxx per medical procedure).
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Plain Par Bond" means a qualified tender bond or a bond that (i) is issued with
original issue discount equal to not more than 2 percent of the stated redemption price at maturity
plus the amount of original issue premium attributable exclusively to underwriters'
compensation, (ii) is issued for a price that does not include Pre-Issuance Accrued Interest, (iii)
bears interest from the issue date at a single stated fixed rate or is a variable rate obligation under
Section 1275 of the Code, in either case, that pays interest unconditionally payable at least
959518.1019513 CLD
annually, and (iv) has a lowest stated redemption price not less than its outstanding stated
principal amount.
"Plain Par Investment" means an investment that is an obligation that (i) is
issued with original issue discount (or if acquired on a date other than the issue date, acquired
with market discount or premium) equal to not more than 2 percent of the stated redemption
price at maturity, (ii) is issued for a price that does not include Pre-Issuance Accrued Interest,
(iii) bears interest from the issue date at a single stated fixed rate or is a variable rate obligation
under Section 1275 of the Code that pays interest unconditionally payable at least annually, and
(iv) has a lowest stated redemption price not less than its outstanding stated principal amount.
formula:
"Present Value" or "PV" means the amount determined by using the following
PV= FV
I1
(l+i)
where i equals the discount rate divided by the number of compounding intervals in a year and n
equals the sum of(i) the number of whole compounding intervals for the period beginning on the
date as of which Present Value is computed and ending on the date the amount is to be received
or paid or on a Computation Date and (ii) a fraction the numerator of which is the length of any
short compounding interval during such period and the denominator of which is the length of a
whole compounding interval.
"Prior Issues" or "Prior Issue" means the Bond Anticipation Notes issued to
finance the Projects and currently outstanding in the aggregate principal amount of $750,000, as
referred to in the Certificate of Determination executed by the Supervisor as of June 3,2011 (the
"Certificate").
Issues.
"Prior Project" or "Prior Projects" means the project financed by the Prior
"Private Activity Bond" means bonds which meet the definition contained in
Section 141(a) of the Code and that are not "qualified bonds" as defined in Section 141(e) of the
Code.
"Project" or "Projects" means the projects referred to in the Resolutions.
"Qualified 501(c)(3) Bond" means bonds which meet the definition contained in
Section 145 of the Code.
"Qualified Administrative Costs" mean:
(a) In General. All reasonable, direct administrative costs, other than carrying
costs, such as separately stated brokerage or selling commissions, but not legal and accounting
fees, record keeping, custody, and similar costs. General overhead costs and similar indirect
959518.1019513 CLD
costs of the Issuer such as employee salaries and office expenses and costs associated with
computing the Rebate Amount are not qualified administrative costs. In general, administrative
costs are not reasonable unless they are comparable to administrative costs that would be charged
for the same investment or a reasonably comparable investment if acquired with a source of
funds other than gross proceeds of tax-exempt bonds.
Co) Regulated Investment Companies and External Commingled Funds. For
publicly offered regulated investment companies (as defined in section 67(c) (2) (B)) and
commingled funds in which the Issuer and any Controlled Entity do not own more than 10
percent of the beneficial interest in the fund, Qualified Administrative Costs are all reasonable
administrative costs, without regard to the limitation on indirect costs described in the preceding
paragraph.
(c) GICs. For a guaranteed investment contract, a broker's commission paid
on behalf of either an issuer or the provider is a Qualified Administrative Cost to the extent that
it does not exceed five one-hundredths of one percent (0.05%) of the amount reasonably
expected to be invested per year.
(d) Purpose Investments. Qualified Administrative Costs include costs or
expenses paid, directly or indirectly, to purchase, carry, sell, or retire the investment; costs of
issuing, carrying, or repaying the issue, and any underwriters' discount, which are paid by the
conduit borrower, even if such payments merely reimburse the Issuer, but only to the extent the
present value of those payments does not exceed the present value of the reasonable
administrative costs paid by the Issuer using the yield on the Note as the discount rate.
(e) Program Investments. Qualified Administrative Costs include only costs
of issuing, carrying, or repaying the issue, and any underwriters' discount, subject to the
limitation contained in the preceding paragraph.
"Qualified Guarantee" means, with respect to a bond or note, an unconditional
transfer, in any form, of substantially all of the credit risk for all or part of the payments, such as
payments for principal and interest, redemption prices or tender prices, on the guaranteed bonds.
The guarantor must not expect to make any payments other than those pursuant to a direct-pay
letter of credit or similar arrangement for which the guarantor will be immediately reimbursed.
Reasonable procedural or administrative requirements or, in the case of a guarantee against
failure to remarket a qualified tender bond, commercially reasonable limitations based on credit
risk, will not cause the guarantee to be conditional. The guarantor may not be a co-obligor, nor
may the obligor and any related parties combined use more than 10 percent of proceeds of the
guaranteed portion of the bonds. The guarantee fee must not exceed a reasonable arm's-length
charge solely for the transfer of the credit risk. A guarantee will not be qualified unless, as of the
date the guarantee is obtained, the issuer reasonably expects that the present value of all fees for
the guarantee will be less than the present value of the expected interest savings on the issue as a
result of the guarantee. For this purpose, present value is computed using the yield on the issue,
determined with regard to the guarantee fees, as the discount rate.
"Rebate Amount" means the amount computed as described in Article V.
959518.1019513 CLD
"Refunded Issue" means the Prior Issue as defined above.
"Refunding Note" means the Note the proceeds of which will be used to refund
the Prior Issue.
"Regulations" means the Income Tax Regulations promulgated under Section
148 of the Code by the Department of the Treasury from time to time including the Regulations
published on June 18, 1993 in the Federal Register, as they may be amended from time to time.
"Replacement Proceeds" means amounts with a sufficiently direct nexus to the
Note or Projects to conclude that such amounts would have been used for the Projects if the
proceeds of the Note were not so used to the extent held by or derived from the Issuer or a
controlled entity of the Issuer, including: sinking funds, pledged funds (including negative
pledges), certain other amounts if the term of the issue is longer than necessary for the
governmental purposes of the issue, and a bond-funded working capital reserve unless the issue
qualifies for the TRAN deemed 6-month expenditure exception or the under $5,000,000 small
issuer exception.
"Resolutions" means the bond resolutions of the Issuer, as referred to in the
Certificate of Determination executed by the Supervisor as of June 3,2011.
"Restricted Working Capital Expenditures" means working capital
expenditures subject to the Gross-Proceeds-spent-last role in Treas. Reg. Section 1.148-6(d)(3)(i)
that are ineligible for any exception to that rule.
"Sale Proceeds" means any amounts actually or constructively received from the
sale of an issue, including amounts used to pay underwriters' discount or compensation, accrued
interest other than Pre-Issuance Accrued Interest, or derived from the sale of a fight associated
with a bond as further described in Treas. Reg. Section 1.148-4(b)(4).
Series.
"SLG" means a U.S. Treasury Book Entry Security, State and Local Government
"Transferred Proceeds" means unexpended original or investment proceeds of a
refunded issue which transfer and become proceeds of the refunding issue when proceeds of the
refunding issue are applied to pay principal of the refunded issue.
"Treasury" means the United States Department of Treasury.
"Universal Cap" means the maximum value of Nonpurpose Investments which
may be allocated to the Note and is determined by reference to the Value of all outstanding Note
of the issue. Nonpurpose investments shall be taken into account as Nonpurpose Receipts at
their Value on a Valuation Date.
"Valuation Date" means the date on which the value of the Universal Cap and
the Nonpurpose Investments allocable to the Note thereunder are determined. With respect to
new money issues, the first Valuation Date shall be the second year anniversary date of the date
959518.1 019513 CLD
of issuance of the Note; thereafter, the first day of each Bond Year shall constitute a Valuation
Date. With respect to a refunding issue, each date on which proceeds of the refunded issue
would become transferred proceeds of the refunding issue, e.g. each date on which principal of
the refunded issue is paid with proceeds of the refunding bonds, shall constitute a Valuation
Date. In addition, the first date of each Bond Year shall also be a Valuation Date.
"Value" means, in the case of a Bond or Note, the Value of a Bond or Note and
in the case of an Investment, the Value of an Investment.
"Value of a Bond or Note" means, in the case of a Plain Par Bond or Note, its
outstanding stated principal amount, plus accrued unpaid interest or in the case of a Plain Par
Bond or Note actually redeemed, or treated as redeemed, its stated redemption price on the
redemption date plus accrued unpaid interest. In the case of a bond or note other than a Plain Par
Bond or Note, the value on a date of such a bond or note is its Present Value on that date, using
the yield on the issue of which the bonds or notes are a part as the discount factor. In
determining the Present Value of a variable rate bond or note, the initial interest rate thereon
established by the index or other rate setting mechanism is used to determine the interest
payments thereon.
"Value of an Investment" means, as of any date, unless the Investment is
required invested as a restricted yield, for any Investment, Fair Market Value as of that date; for
any Fixed Rate Investment, Present Value on that date; and for any Plain Par Investment, the
outstanding stated principal amount, plus accrued unpaid interest, as of that date. Yield
restricted investments must be valued at Present Value, amounts allocated or that cease to be
allocated to an issue must be allocated at Fair Market Value, except in cases in which such
Nonpurpose Investments are allocated as a result of the Universal Cap or Transferred Proceeds
rules in which case they may be valued at Present Value, and amounts allocated to Transferred
Proceeds may not be valued in excess of the value used for arbitrage restrictions applicable to the
Refunded Issue.
"Working Capital Expenditure" means any cost of a type that does not
constitute a Capital Expenditure.
"Yield" means, as of any Computation Date, that discount rate that, when used in
computing the Present Value of (i) all unconditionally payable payments of principal and interest
of or on the bonds or notes included in such Fixed Yield Issue, (ii) all unconditionally payable
fees for Qualified Guarantees and Qualified Hedges on such bonds and (iii) all fees expected to
be paid for Qualified Guarantees and Qualified Hedges, produces an amount equal to the sum of
the Present Value of the aggregate Issue Prices of the bonds or notes comprising the issue
(determined using the same discount rate used to determine the Present Value of payments for
principal, interest and Qualified Hedges and Qualified Guarantees). The Yield is computed as of
the issue date of the Fixed Yield Issue by treating each bond or note included in the issue that is
either subject to mandatory or contingent early redemption or to certain optional redemption
provisions as being redeemed on its expected early redemption date for an amount equal to its
Value on that date. If a Fixed Yield Note is subject to optional redemptions within 5 years of its
issue date and the Yield not taking into account the optional redemption is more than 1/8 of I%
959518.1 019513 CLD
above its Yield assuming the early redemption, is issued at an issue price that exceeds the stated
redemption price at maturity by more than 1/4 of 1% multiplied by the product of the stated
redemption price to maturity and the number of complete years to the first optional redemption
date for the bond, or bears interest at increasing interest rates, the Yield on the issue including
such Fixed Yield Note is computed by treating the Fixed Yield Note as redeemed at its stated
redemption price on the optional redemption date that produces the lowest Yield on the issue.
No adjustment will be made on any Computation Date to the Yield on a Fixed Yield Issue as
computed on its issue date unless redemption rights are subsequently transferred to a third party
or termination payments are received with respect to Qualified Hedges. The Yield on a Fixed
Yield Note is calculated in the same manner as Yield on a Fixed Yield Issue.
ARTICLE II
Use of Projects and Proceeds
2.1. Authorization. (a) The Note is authorized to be issued pursuant to
applicable provisions of the laws of the State of New York and two bond resolutions duly
adopted by the Town Board on their respective dates (the "Resolutions"), as referred to in the
Certificate of Determination executed by the Supervisor as of June 3,2011 (the "Certificate").
(b) For purposes of this Article II the term "proceeds" means the net amount
(after payment of all costs and expenses associated with issuing the Note) received by the Issuer
from the sale of the Note excluding accrued interest.
2.2. Purpose of Issue. The proceeds from the sale of the Note will be used to
provide financing for various purposes in and for the Town (collectively, the "Projects").
2.3. Use of Proceeds. A portion of the proceeds of sale of the Note in the
amount of $650,000 (the "Current Refunding Note") together with $100,000 in available funds,
will be used to redeem bond anticipation notes in the principal amount of $750,000, which
matures on June 3,2011 (the "Prior Issue"), heretofore issued to finance a portion of the Project.
The balance of the proceeds of the sale of the Note in the amount of $900,000 (the "New Money
Note") will be used to provide additional original funds for the Project.
2.4. Ownership/Lease/Sale. The Projects will be owned by the Issuer or
another state or local governmental unit and will not be leased to any person who is not a state or
local govermnental unit. They will not (except to the extent that any of the projects financed
involve grants) be sold or otherwise disposed of, in whole or in part, except for incidental sales
of surplus items the proceeds of which will not constitute net operating profits or net capital
profits to the Issuer, prior to the maturity date of the Note.
2.5. Private Loans. Not more than the lesser of 5 percent or $5,000,000 of the
proceeds of the Note will be used directly or indirectly to make loans to persons other than a
governmental unit.
2.6. Private Use. The aggregate amount of proceeds of the Note used directly
or indirectly in a trade or business carried on by a person other than a state or local
959518.1019513 CLD
governmental unit ("Private Use"), will not exceed 10% of such proceeds in the event that more
than 10% of the principal or 10% of the interest due on the Note during the term thereof is, under
the terms of the Note or any underlying arrangement, directly or indirectly, secured by any
interest in property used or to be used for a Private Use or in payments in respect of property
used or to be used for a Private Use or is to be derived from payments, whether or not to the
Issuer, in respect of property or borrowed money used or to be used for a Private Use.
2.7. Unrelated/Related Disproportionate Use. No more than 5% of the
proceeds of the Note will be used directly or indirectly in the trade or business of a person other
than a governmental unit that is unrelated or related and disproportionate to the governmental use
of the property being financed, including any private loan financing described in Section 2.5
which meets this test. For purposes of this Arbitrage and Use of Proceeds Certificate, proceeds
of the Note are allocable to an unrelated Private Use if such use is neither directly nor
operationally related to a governmental use and proceeds of the Note are allocable to a
disproportionate related Private Use to the extent that the proceeds of the Note which are to be
used to finance property used by a nongovernmental person in a trade or business wh/ch is
related to the governmental use of the property referred to in Section 2.6 above, exceeds the
proceeds of the Note which are to be used for the governmental use to which such Private Use
relates.
2.8. Other Private Uses Defined. For purposes of Section 2.6 and 2.7, a
Private Use consists of any contract or other arrangement including, without limitation, leases,
management contracts, guarantee contracts, take or pay contracts, or put or pay contracts, which
provides for a use of the Projects by a person or persons who are not State or local governments
on a basis different than the general public. Any management, or operations contract or
agreement which provides for nongovernmental use will provide for reasonable compensation
which is in no part based on net profits and will satisfy the provisions of(a), (b) or (c) below:
1. for contracts which provide compensation for each annual period based on
a periodic fixed fee, a capitation fee or combination thereof, (i) the contract has a term (including
renewal options) not exceeding five years; (ii) the issuer may terminate the contract, without
penalty, at the end of any three year period, and (iii) at least 50% of the compensation paid is on
a periodic, fixed fee basis;
2. for contracts entered into or materially modified (other than pursuant to a
renewal option) after March 15, 1993, which provide compensation based on a per unit fee or a
combination per trait and periodic fixed fee, (i) the contract has a term (including renewal
options) not exceeding three years; (ii) the issuer may terminate such contract (without penalty)
at the end of the second year of the term, and (iii) the amount of the per unit fee is specified in
the contract or otherwise limited by the qualified user or a third party;
3. contracts entered into or materially modified (other than pursuant to a
renewal option) after March 15, 1993, which provide compensation based on a percentage of
fees charged, (i) the contract has a term (including renewal options) not exceeding two years, (ii)
the issuer may terminate the contract (without penalty) at the end of the first year, and (iii) the
959518.1 019513 CLD
service provider primarily provides services to third parties or the contract involves a facility
during an initial start-up period;
4. For purposes of this Section 2.8:
(i) "capitation fee" means a fixed periodic amount paid under a management
contract or agreement for each person for whom the service provider assumes the responsibility
to provide all needed services for a specified period, provided the quantity and type of services
actually provided vary substantially;
(ii) "periodic fixed fee" means a stated dollar amount for services rendered
during a specified period of time (i.e. SXX per month) which amount may automatically increase
according to a specified, objective, external standard; and
(iii) "per trait fee" means a stated dollar amount for each unit of service
provided (i.e. SXX per medical procedure).
2.9. Pooled Loan Financings. To the extent the amount of proceeds of the
Note to be used to make loans to any borrowers (including loans referred to in Section 2.5 above
and loans to state or local govermnental units) exceeds $5,000,000, at least 95% of the net
proceeds of the issue (as defined in Section 150 of the Code but without including proceeds used
to finance costs of issuance or capitalized interest) that are to be used to make loans, will have
been used within 3 years of the date hereof to make such loans. The payment of legal and
underwriting costs is not contingent and at least 95% of the reasonably expected legal and
underwriting costs associated with issuance will be paid within 180 days of the date hereof.
2.10. Output Facilities. No more than 5% of the proceeds of the Note are to be
used with respect to any output facility (other than a facility for the furnishing of water). No
more than the lesser of $5,000,000 or 5% of the proceeds of the Note are to be used (directly or
indirectly) for the acquisition of a nongovernmental output facility.
2.11. In the event the Issuer sells or otherwise disposes of or lesses any real
property acquired with the proceeds of the Note, the Issuer shall consult with Bond Counsel prior
to taking any such action.
ARTICLE III
ARBITRAGE
3.1. Temporary Period-Refunding. With respect to the Current Refunding
Note and the Prior Issue:
(a) All of the proceeds of the Prior Issue have been expended, or any such
proceeds which have not been expended will be treated as Transferred Proceeds of the Current
Refunding Note as of the date the Prior Issue is redeemed. Such Transferred Proceeds may be
invested without restriction as to Yield until three years after the date of original issuance of the
Prior Issue. If any Transferred Proceeds remain unexpended after three years after the date of
959518.1 019513 CLD
original issuance of the Prior Issue, such proceeds will be invested at a Yield not in excess of the
Yield on the Note.
(b) All or a portion of the Proceeds of the Current Refunding Note will be
used to refund the Prior Issue within 90 days of the Issue Date. Such proceeds and any related
Investment Proceeds may be invested during such time without restriction as to Yield. The
balance, if any, of the Proceeds of the Current Refunding Note will be used to pay cost of
issuance of the Current Refunding Note. Such proceeds and any related Investment Proceeds
may be invested for a period of thirteen months after the Issue Date without restriction as to
Yield.
3.2. Temporary Period-New Money. With respect to the New Money Note:
(a) The Issuer has entered into or will enter into within six months from the
Issue Date, binding commitment(s) for the acquisition, construction or accomplishment of the
Projects, and the amount of such conunitment(s) with respect to the Projects will or do exceed
the amount equal to 5% of the Sale Proceeds of the New Money Note.
(b) In the event that any part of the Projects to which the New Money Note
relates has not been completed, work on the acquisition, construction or accomplishment of the
Projects will proceed or is proceeding with due diligence to completion and the Sale Proceeds of
the New Money Note will be expended with due diligence.
(c) The Issuer reasonably expects that at least 85% of the Sale Proceeds of the
New Money Note will be expended within three years from the Issue Date.
(d) The Sale Proceeds and Investment Proceeds of the New Money Note may
be invested without restriction as to Yield for a temporary period of three years from the Issue
Date, subject to the rebate requirements, if any, set forth in Article IV of this Certificate.
3.3. No Overissuance. The Sale Proceeds of the Note do not exceed the total
cost of the Projects, the amount required to refund the Prior Issue and the amount required to pay
costs of issuance of the Note.
3.4. Source of Repayment Funds. The Note will be paid from taxes and other
revenues of the Issuer.
3.5. Debt Service Fund. The taxes and revenues used to pay principal and
interest on the Note, whether or not deposited in a debt service fund (the "Debt Service Fund"),
will be expended within 13 months of the date of deposit in such fund, or the date of their
accumulation, in the payment of debt service on the Note. Any amounts received from the
investment of such deposit or accumulation will be expended within one year of receipt. The
Debt Service Fund, if any, will be used to achieve a proper matching of revenues and debt
service and will be depleted at least annually except for a reasonable carryover amount which
will not exceed the greater of the earnings on such fund for the immediately preceding Bond
Year or one-twelfth of the debt service on the Note for the immediately preceding Bond Year.
959518.1 019513 CLD
3.6. Sinking Funds. Except for the Debt Service Fund described in Section 3.5
above, the Issuer has not created or established, and does not expect to create or establish, any
sinking fund, debt service reserve fund or other similar fund which the Issuer reasonably expects
to use to pay principal or interest on the Note.
3.7. Universal Cap. On each Valuation Date, the Issuer will value the
Universal Cap and the Nonpurpose Investments allocable to the Note under the Universal Cap.
Nonpurpose Investments in a bona fide debt service fund such as the Debt Service Fund
described in Section 3.5 above do not reduce the aggregate value of Nonpurpose Investments
that may be allocated to the Note under the Universal Cap. Nonpurpose Investments cease to be
allocated to the Note to the extent such Nonpurpose Investments have been expended for the
governmental purpose of the Note, or to the extent the Value of such investments exceeds the
value permitted to be allocated to the Note under the Universal Cap. To the extent Nonpurpose
Investments cease to be allocated to the Note and the Value of the Universal Cap exceeds the
Value of the remaining Nonpurpose Investment allocated to the Note, other Nonpurpose
Investments may become allocated to the Note, provided that such Nonpurpose Investments are
not already properly allocated to another bond issue and provided that such allocation does not
cause the Value of Nonpurpose Investments allocated to the Note to exceed the Universal Cap.
Generally, if Gross Proceeds of the Note invested in Nonpurpose Investments
exceed the Universal Cap on a Valuation Date, such Nonpurpose Investments cease to be
allocated to the Note in the following order:
(A) amounts allocable to Replacement Proceeds,
(B) amounts allocable to Transferred Proceeds,
(C) amounts allocable to Sale Proceeds and Investment Proceeds of the Note.
Where a Nonpurpose Investment ceases to be allocated to the Note, such
Nonpurpose Investment may be reallocated under the Universal Cap calculated with respect to
another bond issue. A Nonpurpose Investment which is reallocated to another bond issue may be
valued under the same valuation method pursuant to which it was valued for purposes of
applying the Universal Cap with respect to the Note.
Notwithstanding anything in this Certificate to the contrary, the failure to perform
the determination of Nonpurpose Investments allocable to the Note as of a Valuation Date will
not be considered a violation of this provision if the Value of Nonpurpose Investments allocated
to the Note did not exceed the Value of the Note outstanding on such date.
3.8. Yield. When used in this Certificate, the term "Yield" is computed as
described in the Regulations and, in connection with the Note or any investment acquired with
the Gross Proceeds of the Note, refers to the Yield computed by the actuarial or present worth
method using a 360-day year and semiannual compounding, and means that discount rate which,
when used in computing the Present Value of all payments of principal and interest to be paid on
an obligation, produces an amount equal to, in the case of the Note, the Issue Price of the Note
with certain adjustments as required by the Regulations, and in the case of an Investment, the
959518.1 019513 CLD
purchase price of such Investment. The purchaser(s) of the Note has/have made certain
representations regarding the Issue Price of the Note, which representations are included as part
of the record of legal proceedings relating to the Note. The Yield on the Note is as shown in
Form 8038-G.
The Issuer will not enter into any hedge, contract to sell call right options or other
arrangement with respect to the Note without first consulting with Bond Counsel.
3.9. Yield Reduction Payments. The Issuer may make Yield Reduction
Payments, as such term is defined in the Regulations, to the Internal Revenue Service for the
purpose of reducing the Yield on investments under certain circumstances. The Issuer will
consult with Bond Counsel prior to making any such payments.
3.10. No Replacement Proceeds. The weighted average maturity of the Note, as
set forth in the Form 8038-G, does not exceed 120 percent of the average reasonably expected
useful life of the Projects.
3.11. Investments at Fair Market Value. The Issuer has not entered and will not
enter into any transaction to reduce the Yield on the investment of the Gross Proceeds of the
Note in such a manner that the amount to be rebated to the Federal government pursuant to
Article IV below is less than it would have been had the transaction been at arm's length and the
Yield on the Note not been relevant to either party to the transaction. All investments of Gross
Proceeds of the Note will be made on an arms' length, Fair Market Value basis.
ARTICLE IV
REBATE
4.1. Rebate Compliance. The Issuer understands that the continued non-
inclusion of interest on the Note for purposes of federal income taxation depends, in part, upon
compliance with the arbitrage limitations imposed by Section 148 of the Code, including, the
rebate requirements described in Sections 4.3 and 4.5 below with respect to the Note (and the
Prior Issue) unless the Issuer complies with Sections 4.2(a) and 4.2(b) below or qualifies for one
or more of the rebate exceptions described in Section 4.4 below.
4.2. Rebate Options. With respect to the investment of the Proceeds of the
Note, the Issuer will:
(a) invest all Gross Proceeds of the Note at all times from the Issue Date until
expended in Investments not constituting Investment Property for purposes of Section 148 of the
Code such as obligations ora state or ora political subdivision of a state, the interest on which is
excluded fi'om gross income for purposes of Federal income taxation under Section 103 of the
Code and is not a preference item for purposes of the alternative minimum tax imposed by
Section 55 of the Code,
(b) invest all Gross Proceeds of the Note in obligations having a Yield that
does not exceed the Yield on the Note, or
959518.1019513 CLD
(c) comply with the provisions regarding rebate or qualify for one or more of
the exceptions to rebate as described in this Article IV.
4.3. Rebate Requirement for the Note. Section 148(0 of the Code requires the
payment to the United States of the excess of the amount earned on the investment of Gross
Proceeds in Nonpurpose Investments over the amount that would have been earned had the
amount so invested been invested at a rate equal to the Yield on the Note, together with any
income attributable to such excess. Except as provided in Section 4.4 below, all Gross Proceeds
of the Note are subject to this requirement. In order to meet the rebate requirement of the Code,
the Issuer will take the following actions:
(a) Record of Investments. The Issuer will record the date of receipt, amount
and source of any Gross Proceeds, e.g., Proceeds from the sale of the Note, loan repayments,
investment eamings and Transferred Proceeds. For each Nonpurpose Investment acquired with
or allocated to Gross Proceeds of the Note, the Issuer will record the purchase date or allocation
date of such investment, its pumhase price (excluding any broker or dealer's commission or
discount), or, if not acquired directly with Gross Proceeds, its value on the date the Nonpurpose
Investment is allocated to Gross Proceeds, accrued interest due on its purchase date or allocation
date, its face amount, its coupon rate, its Yield, the frequency of its interest payment, its
disposition price (excluding any broker or dealer's commission or discount), the accrued interest
due on its disposition date and its disposition date. In addition, the Issuer will record the date
and amount of all expenditures of Gross Proceeds of the Note, including expenditures for rebate,
other than expenditures to acquire Investments.
(b) Computation of Rebate Amount. Subject to the special rules set forth in
Section 4.4 below, the Issuer will determine the Rebate Amount on each Computation Date. The
Rebate Amount as of any Computation Date is the excess of the Future Value of all receipts with
respect to Nonpurpose Investments over the Future Value of all payments with respect to the
purchase of Nonpurpose Investments or the allocation of such investments to the Gross Proceeds
of the Note, determined as of each Computation Date. To the extent amounts received from
Investments are reinvested, these amounts may be netted against each other and not taken into
account in the Computation of Rebate Amount. The Issuer will determine the nonpurpose
receipts and nonpurpose payments as described below.
(D) Receipts. Receipts with respect to Nonpurpose Investments include (A)
amounts actually or constructively received from a Nonpurpose Investment (including amounts
treated as received from a commingled fund), such as earnings and return of principal; (B) for a
Nonpurpose Investment that ceases to be allocated to the Note before its disposition or
redemption date (e.g., an Investment that becomes allocable to transferred proceeds of another
issue or that ceases to be allocable to the Note pursuant to the Universal Cap under Section 1.148
6 of the Regulations) or that ceases to be subject to the rebate requirement on a date earlier than
its disposition or redemption date (e.g., an investment allocated to a fund initially subject to the
rebate requirement but that subsequently qualifies as a bona fide debt service fund), the Value of
that Nonpurpose Investment on that date; (C) for a Nonpurpose Investment that is held at the end
of a Computation Period, the Value of that Investment at the end of that period; and (D) any
recovery of an overpayment of rebate.
959518.1019513 CLD
(E) Payments. Payments with respect to Nonpurpose Investments include: (A)
mounts actually or constructively paid to acquire a Nonpurpose Investment (or treated as paid to
a commingled fund); (B) for a Nonparpose Investment that is first allocated to the Note on a date
after it is actually acquired (e.g., an investment that becomes allocable to Transferred Proceeds
or to Replacement Proceeds) or that becomes subject to the rebate requirement on a date after it
is actually acquired (e.g., an Investment allocated to a reasonably required reserve or
replacement fund for a Construction Issue at the end of the 2 year spending period), the Value of
that Investment on that date; (C) for a Nonpurpose Investment that was allocated to the Note at
the end of the preceding Computation Period, the Value of that Investment at the beginning of
the Computation Period; (D) on the last day of each Bond Year during which there are mounts
allocated to Gross Proceeds of the Note that are subject to the rebate requirement, and on the
final maturity date, a Computation Credit of $1,000; (E) Yield Reduction Payments on
Nonpurpose Investments made pursuant to Section 1.148 5(c) of the Regulations; and (F)
payments of rebate amounts when made.
4.4. Exceptions to Rebate Requirement. Notwithstanding anything in Section
4.3 above to the contrary, some or all of the Gross Proceeds of the Note are not subject to the
rebate requirement if the conditions described below are satisfied.
(a) Exception for Gross Proceeds Entirely Spent Within Six Months. If all of
the Gross Proceeds of the New Money Note or the Current Refunding Note (other than amounts
in the Debt Service Fund and proceeds of the Prior Issue that become Transferred Proceeds of
the Current Refunding Note), as the case may be, including investment earnings received with
respect to all funds and accounts established with respect to the Note except the Debt Service
Fund, have been expended for the governmental purpose of the New Money Note or the Current
Refunding Note, as the case may be, within six months (or alternatively with respect to the Gross
Proceeds of the New Money Note, 95% within six months and 100% within one year) after the
Issue Date, then the only Nonpurpose Investments to be taken into account in the calculation of
the Rebate Amount with respect to the New Money Note or the Current Refunding Note, as the
case may be, are any Gross Proceeds of the New Money Note or the Current Refunding Note, as
the case may be, arising after such six months which were not reasonably anticipated as of the
Issue Date and proceeds of the Prior Issue that become Transferred Proceeds of the Current
Refunding Note unless such Transferred Proceeds qualify for one or more of the rebate
exceptions applicable to the Prior Issue. The existence of sinking fund or pledged fund proceeds
or the expectation that such proceeds will arise within six months of the Issue Date will make the
six-month expenditure exception to rebate inapplicable. For purposes of this exception, Gross
Proceeds used to pay principal of the Note are not treated as expended for the governmental
purpose of the Note.
(b) Exception for Gross Proceeds Entirely Spent Within Eighteen Months. If
all of the Gross Proceeds of the New Money Note (other than amounts in the Debt Service
Fund), including investment earnings received with respect to all funds and accounts established
with respect to the New Money Note except the Debt Service Fund, have been expended for the
governmental purpose of the New Money Note in accordance with the following schedule
measured from the Issue Date: (a) at least 15 percent within 6 months (the "first spending
period"); (b) at least 60 percent within 12 months (the "second spending period"); and (c) 100
959518.1 019513 CLD
percent within 18 months (the "third spending period"); then the only Nonpurpose Investments
to be taken into account in the calculation of the Rebate Amount with respect to the New Money
Note are any Gross Proceeds arising after such 18 months which were not reasonably anticipated
as of the Issue Date. The existence of sinking fund or pledged fund proceeds or the expectation
that such proceeds will arise within eighteen months of the Issue Date will make the eighteen-
month expenditure exception to rebate inapplicable. For purposes of this exception, Gross
Proceeds used to pay principal of the Note are not treated as expended on the governmental
purpose of the issue. For purposes of determining compliance with the first two spending
periods, the amount of Investment Proceeds included in Gross Proceeds of the New Money Note
is determined based on the Issuer's reasonable expectations on the Issue Date. The spending
requirement for the third spending period is, nevertheless, satisfied if the unspent amount is a
result ora Reasonable Retainage as defined in Section 1.148-7(h) of the Regulations as modified
by Section 1.148-7(d)(2) of the Regulations and such unspent amount is expended within 30
months of the Issue Date. The spending requirement for the third spending period is also,
nevertheless, satisfied if the Issuer exercises due diligence to complete the Projects and the
unspent amount does not exceed the lesser of 3% of the Issue Price of the New Money Note or
an amount equal to the product of $250,000 times the ratio of the Issue Price of the New Money
Note over the Issue Price of the Note.
(c) Exception for Gross Proceeds Entirely Spent Within Twenty-Four
Months. The Issuer reasonably expects the New Money Note to qualify as a Construction Bond
because at least seventy five percent (75%) of the Available Construction Proceeds are to be
used for expenditures of construction, reconstruction or rehabilitation of property which is
owned by the Issuer. If all of the Available Construction Proceeds of the New Money Note have
been expended for the governmental purpose of the New Money Note in accordance with the
following schedule measured from the Issue Date: 10% within 6 months (the "first spending
period"), 45% within 12 months (the "second spending period"), 75% within 18 months (the
"third spending period") and 100% within 24 months (the "fourth spending period"), then no
Nonpurpose Investments are to be taken into account in the calculation of the Rebate Amount
with respect to the New Money Note. For purposes of this exception, Available Construction
Proceeds used to pay principal of bonds are not treated as expended on the governmental purpose
of the New Money Note. For purposes of determining compliance with the first three spending
periods, the amount of Investment Proceeds included in Available Construction Proceeds of the
New Money Note is determined based on the Issuers's reasonable expectations on the Issue
Date. The spending requirement for the fourth spending period is, nevertheless, satisfied if the
unspent amount is a result of a Reasonable Retainage as defined in Section 1.148-7(h) of the
Regulations and such unspent amount is expended within 36 months of the Issue Date. The
spending requirement for the fourth spending period is also, nevertheless, satisfied if the Issuer
exercises due diligence to complete the Projects and the unspent amount does not exceed the
lesser of 3% of the Issue Price of the New Money Note or an amount equal to the product of
$890,000 times the ratio of the Issue Price of the New Money Note over the Issue Price of the
Note. In connection with this rebate exception, the Issuer elects to pay the Rebate Amount
calculated for the period starting from the Issue Date in the event of noncompliance with the two
(2) year phased expenditure requirement.
959518.1 019513 CLD
(d) Debt Service Fund Exception. If the average maturity of the Note is at
least 5 years and the rates of interest do not vary during the term of the Note, then any amount
earned on the Debt Service Fund (including amounts representing accrued interest but excluding
amounts representing capitalized interest) will not be taken into account in determining the
Rebate Amount.
4.5. Payment to United States. (a) If the Issuer is required to make a rebate
payment to the United States. Unless the Note is redeemed prior to such time, the Issuer will pay
to the United States, not later than 60 days after each Installment Computation Date, an amount
which, when added to previous rebate payments made with respect to the Note, is equal to not
less than 90 percent of the Rebate Amount, less the Computation Date Credit. The Issuer will
pay to the United States, not later than 60 days after the Note is fully paid or redeemed, 100
percent of the Rebate Amount, less the Computation Date Credit. If the final rebate payment is
made within 60 days after the Final Computation Date, interest on the Rebate Amount will be
deemed to accrue at the underpayment rate under Section 6201 of the Code, beginning on the
date the Rebate Amount is due and ending on the date 10 days before it is paid.
(b) The Issuer will mail each payment to the Internal Revenue Service Center,
Philadelphia, Pennsylvania 19255. Each payment shall be accompanied by the copy of the Form
8038-T and the Form 8038-G or 8038-GC filed with respect to the Note issue and a statement
identifying the Issuer and the Note, including the CUSIP number for the Note with the latest
maturity for which there is a CUSIP number.
4.6. Recordkeeping. In connection with rebate requirement, the Issuer will
maintain the following records:
(a) The Issuer will retain records of the determinations made pursuant to
Section 4.3 until six years after the retirement of the last obligation of the issue.
(b) The Issuer will record all amounts paid to the United States pursuant to
Sdction 4.5.
4.7 Rebate Regarding Prior Issues. The Issuer understands that it must make a
final rebate accounting and submit a Form 8038-T, if applicable, to the Internal Revenue Service
with any required rebate or penalty payments within 60 days of the final redemption date of the
Prior Issue with respect to the Prior Issue being refunded with Proceeds of the Current Refunding
Note.
(SEAL)
IN WITNESS WHEREOF,
I have hereunto set my hand and affixed the
corporate seal o,f~the Town of Southold as of the 3rd
day of June~j'l ~
Supervisor
959518.1019513 CLD