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08.c Resolution 05-19-26-02 - 2026B Temp GO Improvement Bond Staff Report Date of Meeting: May 19, 2026 For: Honorable Mayor and Council From: Kyle Morell, City Administrator Subject: Resolution 05-19-26-02 - Scandia 2026B Temporary GO Improvement Note - $1,200,000 – Gateway Trail Project Background: The City received $2,689,000 from LCCMR to construct a section of the Gateway Trail. The project was awarded to Peterson Companies by the City Council in December 2025 for $3,624.814.97. The County has committed $800,000 to the project, and the DNR has committed another $640,000. The LCCMR grant funds are reimbursable, meaning the City needs to show payment before it can request the funds. To ensure the City has sufficient funds to make the monthly payments to the contractor, a short-term bond is required. The City worked with its bond attorney to set up a short-term borrowing arrangement for $1.2 million to bridge the gap between payment and reimbursement. We received two bids, which are attached, and recommend awarding the bond sale to Security Bank & Trust due to its lowest interest rate. The bond term is 12 months, and there is no prepayment penalty. The City will look to repay the bond as soon as possible once the project is completed. Resolution 05-19-26-02 authorizes the issuance of the temporary GO improvement note. Options: 1) Approve Resolution 05-19-26-02 2) Table for future discussion Recommendation: Options 1 Attachments: Resolution 05-19-26-02 Loan Agreement Security Bank and Trust Bid Frandsen Bank and Trust Bid RESOLUTION NO. 05-19-26-02 RESOLUTION AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF A $1,200,000 TEMPORARY GENERAL OBLIGATION IMPROVEMENT NOTE, SERIES 2026B BE IT RESOLVED, by the City Council (the “Council”) of the City of Scandia, Washington County, Minnesota (the “Issuer”), as follows: Section 1. Note Purpose, Authorization, and Award. 1.01 Statutory Authority. A. Pursuant to authority contained in Minnesota Statutes, Chapters 429 and 475, the City Council is authorized and directs the issuance and sale of its $1,200,000 Temporary General Obligation Improvement Note, Series 2026B of the Issuer (the “Note”), for the purpose of providing funds for the temporary financing of various public improvements within the City, including those related to the Gateway Trail Project (collectively, the “Project”), in anticipation of grant funding (the “Grant”) or the issuance of permanent obligations to be offered for sale in advance of the maturity of the Note (the “Permanent Obligations”). The Project is ordered as required by Minnesota Statutes, Section 429.091, Subdivision 1. B. To the extent that the principal of and interest on the Note cannot be paid when due from Grant funds, receipts of special assessments levied against property specially benefited by the Project (the “Special Assessments”), ad valorem taxes, or other funds appropriated by the Issuer for the purpose (collectively, the “Pledged Revenues”), the Note shall be paid from the proceeds of an improvement note or an additional temporary improvement note which the Council shall offer for sale in advance of the maturity of the Note. C. The Note shall provide funds to temporarily finance the Project. The total cost of the Project, which shall include all costs enumerated in Minnesota Statutes, Section 475.65, is estimated to be at least equal to the amount of the Note. Work on the Project shall proceed with due diligence to completion. The Issuer covenants that it shall do all things and perform all acts required of it to assure that work on the Project proceeds with due diligence to completion and that any and all permits and studies required under law for the Project are obtained. 1.02 Findings. It is necessary and desirable that the Issuer issue its $1,200,000 Temporary General Obligation Improvement Note, Series 2026B (the “Note”), to finance the Project. 1.03 No Public Sale. The Issuer has received two or more proposals solicited privately for the Note, pursuant to Minnesota Statutes, Section 475.60, subdivision 2(3). 1.04 Award. The Issuer has received a proposal for a loan to be evidenced by the Note from Security Bank & Trust Co., located in Winsted, Minnesota (the “Lender”), in the amount of $1,200,000 to pay costs of the Project, upon condition that the Note matures and bears interest at the times and annual rate set forth in Section 2. The Issuer, after due consideration, finds such offer 2 reasonable and proper and the offer of the Lender is accepted. All actions of the Mayor and the City Administrator, taken with regard to the sale of the Note are ratified and approved. Section 2. Terms of the Note. 2.01 Interest Rate and Principal Maturity. The Note shall be dated the date of its closing and delivery as the date of original issue, shall be issued in the denomination equal to the principal amount thereof, shall be issued in fully registered form and lettered and numbered R-1. The Note shall bear interest at the annual rate of 4.22% percent and shall mature on May 1, 2027 (the “Maturity Date”). The Note shall be payable as to principal on the Maturity Date. 2.02 Prepayment. The Note is prepayable in whole or in part on any date at a price of par plus accrued interest to the prepayment date. 2.03 Interest Payment Dates. The interest on the Note shall be payable monthly on the first day of every month (each referred to herein as an “Interest Payment Date”), commencing July 1, 2026. Interest will be computed upon the basis of a 360-day year of twelve 30-day months. 2.04 Preparation and Execution. A. The Note shall be prepared for execution in accordance with the approved form and shall be signed by the manual signature of the Mayor and attested by the manual signature of the City Administrator. The corporate seal of the Issuer may be omitted from the Note as permitted by law. In case any officer whose signature shall appear on the Note shall cease to be an officer before delivery of the Note, such signature shall nevertheless be valid and sufficient for all purposes, the same as if he or she had remained in office until delivery. B. The City Administrator is authorized and directed to obtain a copy of the proposed approving legal opinion of Fryberger, Buchanan, Smith & Frederick, P.A., Duluth, Minnesota, which is to be complete thereof and cause the opinion to be attached to the Note. 2.05 Appointment of Registrar. The City Council hereby appoints the City Administrator, as registrar, authenticating agent, paying agent and transfer agent for the Note (the “Registrar”). The manual signature of at least one officer of the Issuer on the Note shall be conclusive evidence that it has been authenticated and delivered under this Resolution. The Issuer reserves the right to name a substitute, successor Registrar upon giving prompt written notice to the registered Note holder. 2.06 Registered Owner. The Note shall be registered in the name of the Lender. 2.07 Note Register. The Issuer shall cause to be kept by the Registrar a bond register in which, subject to such reasonable regulations as the Registrar may prescribe, the Issuer shall provide for the registration of the Note and the registration of transfers of the Note entitled to be registered or transferred as herein provided. In the event of the resignation or removal of the Registrar or its incapability of acting as such, the Note registration records shall be maintained at the office of the successor Registrar as may be appointed by the City Council. 3 2.08 Payment. A. The Issuer and the Registrar may treat the person in whose name the Note is registered as the owner of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and neither the Issuer nor the Registrar shall be affected by notice to the contrary. B. The principal of and interest on the Note shall be payable by the Registrar in such funds as are legal tender for the payment of debts due the United States of America. The Issuer shall pay the reasonable and customary charges of the Registrar for the disbursement of principal and interest. 2.09 Delivery. Delivery of the Note and payment of the purchase price shall be made at a place mutually satisfactory to the Issuer and the Lender. A typewritten and executed Note shall be furnished by the Issuer without cost to the Lender. The Note, when prepared in accordance with this Resolution and executed, shall be delivered by or under the direction of the City Administrator to the Lender upon receipt of the purchase price plus accrued interest. Section 3. Form of the Note. 3.01 The Note shall be printed or typewritten in substantially the following form: UNITED STATES OF AMERICA STATE OF MINNESOTA WASHINGTON COUNTY R-1 $1,200,000 CITY OF SCANDIA TEMPORARY GENERAL OBLIGATION IMPROVEMENT NOTE, SERIES 2026B Rate Maturity Date Date of Original Issue 4.22% May 1, 2027 May ___, 2026 REGISTERED OWNER: SECURITY BANK & TRUST CO. PRINCIPAL AMOUNT: ONE MILLION TWO HUNDRED THOUSAND DOLLARS The City Council (the “City Council”) of the City of Scandia, Washington County, Minnesota (the “Issuer”), for value received, promises to pay to the registered owner specified above, or registered assigns, the principal amount specified above, and to pay interest on said principal amount to the registered owner hereof from date of original issue set forth above, or from the most recent Interest Payment Date (defined below) to which interest has been paid or duly provided for, until the principal amount is paid, said interest being at the rate per annum specified above. 4 Interest is payable monthly on the first day of every month (each referred to herein as an “Interest Payment Date”) commencing on July 1, 2026. This Note is payable as to principal on the maturity date set forth above. Payments shall be applied first to interest due on the outstanding principal balance and thereafter to reduction of the principal balance. The Note is prepayable in whole or in part on any date at a price of par plus accrued interest to the prepayment date. Both principal hereof and interest hereon are payable in lawful money of the United States of America by check or draft at the main office of the City Administrator, as Registrar, authenticating agent, paying agent and transfer agent (the “Registrar”), or at the office of such successor Registrar as may be designated by the governing body of the Issuer. The Registrar shall make all payments with respect to this Note directly to the registered owner hereof shown on the Note registration records maintained on behalf of the Issuer by the Registrar at the close of business on the 15th day of the month next preceding the Interest Payment Date (whether or not a business day) at such owner’s address shown on said Note registration records, without, except for final payment of principal of this Note, the presentation or surrender of this Note, and all such payments shall discharge the obligation of the Issuer to the extent of the payments so made. The final payment of principal of this Note shall be made upon presentation and surrender of this Note to the Registrar when due. This Note comprises the entire series issued by the Issuer in the aggregate amount of $1,200,000 pursuant to authority contained in Minnesota Statutes, Chapters 429 and 475 and all other laws thereunto enabling and pursuant to an authorizing resolution adopted by the governing body of the Issuer on May 19, 2026 (the “Resolution”), and is issued for the purpose of financing, on a temporary basis, a portion of the costs of local public improvements, including those related to the Gateway Trail Project. As more fully described in the Resolution, the principal of and interest on the Note are payable primarily from the receipt of grant funding, and secondarily from special assessments levied or to be levied against benefited property and from the proceeds of an improvement note or an additional temporary improvement note which the Issuer shall offer for sale in advance of the maturity date of this Note as set forth in the Resolution to which reference is made for a full statement of rights and powers thereby conferred (collectively, the “Pledged Revenues”). The principal amount evidenced by this Note was drawn upon by Issuer in accordance with the Loan Agreement between Issuer and Lender dated as of the date of the date hereof. In the Resolution the Issuer has covenanted and agreed that if this Note cannot be paid at maturity from the grant funding or the other Pledged Revenues or 5 from other funds appropriated by the governing body of the Issuer, this Note will be paid from the proceeds of additional definitive obligations which will be issued and sold prior to the maturity date of this Note. The holder of this Note shall have and may enforce, by mandamus or other appropriate proceedings, all rights respecting the levy and collection of taxes that are granted by law to holders of permanent bonds, except the right to require the levies to be collected prior to the maturity of this Note. If this Note is not paid in full at maturity, the holder hereof may require the issuance in exchange for it, at par, of a new temporary bond maturing within one year from its date of issue but not subject to any other maturity limitation, and bearing interest at the maximum rate permitted by law. Reference is made to the Resolution to which reference is made for a full statement of rights and powers thereby conferred. For the prompt and full payment of such principal and interest as they become due, the full faith and credit and taxing power of the Issuer are irrevocably pledged. The Issuer has designated this Note as “qualified tax-exempt obligations” pursuant to Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. IT IS CERTIFIED AND RECITED that all acts and conditions required by the laws and the Constitution of the State of Minnesota to be done and to exist precedent to and in the issuance of this Note, in order to make it a valid and binding general obligation of the Issuer in accordance with its terms, have been done and do exist in form, time and manner as so required; that all taxable property within the limits of the Issuer is subject to the levy of ad valorem taxes to the extent needed to pay the principal hereof and the interest hereon when due, without limitation as to rate or amount and that the issuance of this Note does not cause the indebtedness of the Issuer to exceed any constitutional or statutory limitation. IN WITNESS WHEREOF, the City Council of the City of Scandia, Washington County, Minnesota, by its governing body, has caused this Note to be executed in its name by the signature of the Mayor and attested by the signature of the City Administrator. ATTEST: (form – no signature required ) (form – no signature required) City Administrator Mayor REGISTRATION CERTIFICATE This Note must be registered as to both principal and interest in the name of the owner on the books to be kept by the City Administrator of the Issuer, as Registrar. No transfer of this Note shall be valid unless made on said books by the 6 registered owner or the owner’s attorney thereunto duly authorized and similarly noted on the registration books. The ownership of the unpaid principal balance of this Note and the interest accruing thereon is registered on the books of the Issuer in the name of the registered owner last noted below. Date Registered Owner Signature of City Administrator 5/__/2026 Security Bank & Trust Co. 110 First Street North Winsted, MN 55395 Federal Tax I.D. No.: 41-0531690 (form – no signature required ) ASSIGNMENT FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto (Name and Address of Assignee) ____________________ Social Security or Other ____________________ Identifying Number of Assignee the within Note and all rights thereunder and irrevocably constitutes and appoints _____________________________________ attorney to transfer the said Note on the books kept for registration thereof with full power of substitution in the premises. Dated: _________________ NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears upon the face of the within Note in every particular, without alteration or enlargement or any change whatsoever. Signature Guaranteed: _______________________________ (Bank, Trust Company, member of 7 National Securities Exchange) THIS INSTRUMENT HAS NOT BEEN REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF FOR VALUE, OR TRANSFERRED, WITHOUT (i) AN OPINION OF COUNSEL THAT SUCH SALE, DISPOSITION OR TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED AND UNDER APPLICABLE STATE SECURITIES LAWS, OR (ii) SUCH REGISTRATION. THE TRANSFERABILITY OF THIS INSTRUMENT IS SUBJECT TO RESTRICTIONS REQUIRED BY (1) FEDERAL AND STATE SECURITIES LAWS GOVERNING UNREGISTERED SECURITIES; AND (2) THE RULES, REGULATIONS, AND INTERPRETATIONS OF THE GOVERNMENTAL AGENCIES ADMINISTERING SUCH LAWS. THIS INSTRUMENT HAS NOT BEEN REGISTERED UNDER CHAPTER 80A OF MINNESOTA STATUTES OR OTHER APPLICABLE STATE BLUE SKY LAWS AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF FOR VALUE EXCEPT PURSUANT TO REGISTRATION OR OPERATION OF LAW. 3.02 Delivery of the Note. Delivery of the Note and payment of the purchase price shall be made at a place mutually satisfactory to the Issuer and the Purchaser. Printed or typewritten, and executed Note shall be furnished by the Issuer without cost to the Purchaser. The Note, when prepared in accordance with this Resolution and executed, shall be delivered by or under the direction of the City Administrator to the Purchaser upon receipt of the purchase price plus accrued interest. Section 4. Covenants, Funds and Accounts. 4.01 Covenants. It is determined that the Project will directly and indirectly benefit abutting property, and the Issuer covenants with the holders from time to time of the Note as follows: A. The Issuer has caused or will cause the Special Assessments to be promptly levied so that the first installment will be collectible not later than 2027 and will take all steps necessary to assure prompt collection, and the levy of the Special Assessments is authorized for purposes of Minnesota Statutes, Section 475.55, Subdivision 3. The City Council will cause all further actions and proceedings to be taken with due diligence that are required for the construction of each portion of the Project financed wholly or partly from the proceeds of the Note, and for the final and valid levy of the Special Assessments and the appropriation of any other funds needed to pay the Note and interest thereon when due. B. It is recognized that the Issuer’s liability on the Note is not limited to the Pledged Revenues, and the City Council covenants and agrees that in the event of any current or anticipated deficiency in Pledged Revenues, it will levy upon all taxable property 8 within the Issuer and cause to be extended, assessed, and collected, any additional taxes found necessary for full payment of the principal of and interest on the Note, without limitation as to rate or amount. C. The Issuer will keep complete and accurate books and records showing: receipts and disbursements in connection with the improvements and Special Assessments levied therefor and other funds appropriated for their payment, collections and disbursements thereof, moneys on hand and the balance of unpaid Special Assessments. D. The Issuer will cause its books and records to be audited and will furnish copies of such audit reports to any interested person upon request. E. The City Council covenants and agrees with the holders of the Note and with its taxpayers that it will assess against benefited property not less than 20% of the cost of each Project financed hereunder within the meaning of Minnesota Statutes, Section 475.58, Subdivision 1(3). F. The Issuer covenants and agrees that it will let all construction contracts not heretofore let within one year after ordering each Project financed hereunder unless the resolution ordering the Project specifies a different time limit for the letting of construction contracts. G. The Issuer further covenants and agrees that it will do and perform as soon as they may be done all acts and things necessary for the final and valid levy of such Special Assessments, and in the event that any such assessment be at any time held invalid with respect to any lot, piece or parcel of land due to any error, defect, or irregularity in any action or proceedings taken or to be taken by the Issuer or the City Council, or any of the Issuer officers or employees, either in the making of the Special Assessments or in the performance of any condition precedent thereto, the Issuer and the City Council will forthwith do all further acts and take all further proceedings as may be required by law to make the assessments a valid and binding lien upon such property. 4.02 2026B Temporary General Obligation Improvement Note Fund. There is created a special fund to be designated the “2026B Temporary General Obligation Improvement Program Fund” (the “Fund”) to be administered and maintained by the City Administrator as a bookkeeping account separate and apart from all other funds maintained in the official financial records of the Issuer. The Fund shall be maintained in the manner herein specified until the Note and the interest thereon have been fully paid. There shall be maintained in the Fund two (2) separate accounts, to be designated the “Construction Account” and “Debt Service Account,” respectively: A. Construction Account. (1) On receipt of the purchase price of the Note, the Issuer shall credit (a) proceeds from the sale of the Note and less amounts used to pay part of the interest cost of the issue as allowed by Minnesota Statutes, Section 475.56 (the “Additional Interest”), less amounts allocated to capitalized interest (“Capitalized 9 Interest”), less the accrued interest paid by the Purchaser upon closing and delivery of the Note (the “Accrued Interest”); plus (b) any Special Assessments levied with respect to the Project and collected prior to completion of the Project and payment of the costs thereof, to the Construction Account. (2) From the Construction Account there shall be paid all costs and expenses of making the Project, including the cost of any construction contracts heretofore let and all other costs incurred and to be incurred of the kind authorized in Minnesota Statutes, Section 475.65; and the moneys in said account shall be used for no other purpose except as otherwise provided by law; provided that the proceeds of the Note may also be used to the extent necessary to pay interest on the Note due prior to the anticipated date of commencement of the collection of; and provided further that if upon completion of the Project there shall remain any unexpended balance in the Construction Account, the balance (other than any Special Assessments) may be transferred by the City Council to the fund of any other improvement instituted pursuant to Minnesota Statutes, Chapter 429, and provided further that any Special Assessments credited to the Construction Account shall only be applied towards payment of the costs of the Project upon adoption of a resolution by the City Council determining that the application of the Special Assessments for such purpose will not cause the Issuer to no longer be in compliance with Minnesota Statutes, Section 475.61, Subdivision 1. Other costs for which payment from the Construction Account is authorized shall include costs of legal, financial advisory, and other professional services, printing and publication costs, and costs of issuance of the Note. B. Debt Service Account. (1) There is pledged and appropriated and there shall be credited to the Debt Service Account: (i) Grant funds; (ii) the Accrued Interest; (iii) the Additional Interest, if any; (iv) Special Assessments levied or to be levied for the Project and either initially credited to the Construction Account and not already spent as permitted above and required to pay any principal and interest due on the Note or collected subsequent to the completion of the Project and payment of the costs thereof; (v) taxes heretofore or hereafter levied for the Project; (vi) all funds remaining in the Construction Account after completion of the Project and payment of the costs thereof, not so transferred to the account of another improvement; (vii) any and all other moneys which are properly available and are appropriated by the governing body of the Issuer to the Debt Service Account; and (viii) investment earnings on the monies identified in the foregoing clauses (i) through (vii). The proceeds of the Note described in clauses (i) through (iv) of the preceding sentence shall be used for payment of interest on the Note. (2) The money in such account shall be used for no purpose other than the payment of principal and interest and redemption premium, if any, on the Note and any other general obligation note of the Issuer hereafter issued by the Issuer and made payable from said account as provided by law; provided, however, that 10 if any payment of principal or interest shall become due when there is not sufficient money in the Debt Service Account, the City Administrator shall pay the same from any other fund of the Issuer, which fund shall be reimbursed from the Debt Service Account when the balance therein is sufficient. C. Investments. Monies on deposit in the Construction Account and in the Debt Service Account may, at the discretion of the Issuer, be invested in securities permitted by Minnesota Statutes, Chapter 118A; provided, that any such investments shall mature at such times and in such amounts as will permit for payment of the principal and interest on the Note when due 4.03 No Tax Levy. It is determined that the Grant funding, other Pledged Revenues, and Permanent Obligations pledged for payment of principal and interest on the Note will produce at least five percent in excess of the amount needed to meet when due, the principal and interest payments on the Note, and that no tax levy is needed at this time. 4.04 Definitive Bonds. In accordance with its statutory duties under Minnesota Statutes, Section 475.61, Subdivision 5, the Issuer covenants and agrees with the holders of the Note that if the Note cannot be paid at maturity from the Grant funding or other Pledged Revenues, or from other funds appropriated by the Issuer, the Note will be paid from the proceeds of Permanent Obligations which the City Council shall offer for sale in advance of their maturity but the indebtedness funded by the Note shall not be extended by the issuance of additional temporary bonds for more than six years from the date of the Note. The holder of the Note shall have and may enforce, by mandamus or other appropriate proceedings, all rights respecting the levy and collection of taxes that are granted by law to holders of permanent bonds, except the right to require the levies to be collected prior to the maturity of the Note. If the Note is not paid in full at maturity, the holder may require the issuance in exchange for them, at par, of new temporary bonds maturing within one year from their date of issue but not subject to any other maturity limitation, and bearing interest at the maximum rate permitted by law. 4.05 General Obligation. It is recognized, however, that the Issuer’s liability on the Note is not limited to the Pledged Revenues and Permanent Obligations and other appropriated funds so pledged, and the Issuer covenants and agrees that it will levy upon all taxable property within the Issuer, and cause to be extended, assessed, and collected, any taxes found necessary for full payment of the principal of and interest on the Note and any definitive obligations, without limitation as to rate or amount. Section 5. Tax Covenants. 5.01 A. The Issuer covenants and agrees with the holders of the Note that the Issuer will (i) take all action on its part necessary to cause the interest on the Note to be exempt from federal income taxes including, without limitation, restricting, to the extent necessary, the yield on investments made with the proceeds of the Note and investment earnings thereon, making required payments to the federal government, if any, and maintaining books and records in a specified manner, where appropriate, and (ii) refrain from taking any action which would cause interest on the Note to be subject to federal income taxes, including, without limitation, refraining from spending the proceeds of the Note and investment earnings thereon on certain specified purposes. 11 B. For purposes of qualifying for the small issuer exception to the federal arbitrage rebate requirements, the Issuer finds, determines and declares: (i) the Issuer is a governmental unit with general taxing powers; (ii) the Note is not a “private activity bond” as defined in Section 141 of the Internal Revenue Code of 1986, as amended (the “Code”); (iii) 95% or more of the net proceeds of the Note is to be used for local governmental activities of the Issuer; and (iv) the aggregate face amount of the tax-exempt obligations (other than private activity bonds) issued by the Issuer during the calendar year in which the Note is issued is not reasonably expected to exceed $5,000,000, all within the meaning of Section 148(f)(4)(D) of the Code. C. In order to qualify the Note as a “qualified tax-exempt obligation” within the meaning of Section 265(b)(3) of the Code, the Issuer makes the following factual statements and representations: (i) the Note is not a “private activity bond” as defined in Section 141 of the Code; (ii) the Issuer designates the Note as a “qualified tax-exempt obligation” for purposes of Section 265(b)(3) of the Code; (iii) the reasonably anticipated amount of tax-exempt obligations (other than private activity bonds, treating qualified 501(c)(3) bonds as not being private activity bonds) which will be issued by the Issuer (and all entities whose obligations will be aggregated with those of the Issuer) during the calendar year in which the Note is being issued will not exceed $10,000,000; and (iv) not more than $10,000,000 of obligations issued by the Issuer during the calendar year in which the Note is being issued have been designated for purposes of Section 265(b)(3) of the Code. Section 6. Certificate of Proceedings; Miscellaneous. 6.01 The City Administrator or the designee thereof is directed to file with the County Auditor a certified copy of this resolution and such other information as the County Auditor may require, and to obtain from the County Auditor a certificate stating that the Note herein authorized have been duly entered on the County Auditor’s register. 6.02 The officers of the Issuer are authorized and directed to prepare and furnish to the Lender of the Note and to bond counsel for the Note certified copies of all proceedings and records of the Issuer relating to the authorization and issuance of the Note and other affidavits and 12 certificates as may reasonably be requested to show the facts relating to the legality and marketability of the Note as such facts appear from the official books and records of the officers’ custody or otherwise known to them. All of such certified copies, certificates and affidavits, including any heretofore furnished, constitute representations of the Issuer as to the correctness of facts recited therein and the actions stated therein to have been taken. 6.03 In the event of the absence or disability of the Mayor, the City Administrator, or such officers or members of the City Council as in the opinion of the Issuer’s attorney, may act in their behalf, shall without further act or authorization, execute and deliver the Note, and do all things and execute all instruments and documents required to be done or executed by such absent or disabled officers. Section 7. Loan Agreement. The proceeds of the Note will be advanced to the Issuer in accordance with the terms of this Resolution and with a Loan Agreement between the Issuer, and the Lender (the “Loan Agreement”). The Mayor and City Administrator of the Issuer are hereby authorized and directed to execute the Loan Agreement substantially in the form currently on file in the office of the Issuer. Section 8. Post-Issuance Tax Compliance. The Issuer has previously approved a Pre- and Post-Issuance Compliance Policy and Procedures which applies to qualifying obligations to provide for compliance with all applicable federal regulations for tax-exempt obligations or tax- advantaged obligations (collectively, the “Policy and Procedures”). The Issuer hereby ratifies the Policy and Procedures for the Note. The City Administrator continues to be designated to be responsible for post-issuance compliance in accordance with the Policy and Procedures. Adopted: May 19, 2026. ____________________________________ Mayor ATTEST: ___________________________________ City Administrator EXTRACT OF MINUTES OF A REGULAR MEETING OF THE CITY COUNCIL OF THE CITY OF SCANDIA, MINNESOTA HELD: May 19, 2026 Pursuant to due call and notice thereof, a regular meeting of the City Council of the City of Scandia, Washington County, Minnesota, was duly held on May 19, 2026 at the City Hall, at 7:00 p.m. The following Members were present: and the following Members were absent: Member _____________ introduced the following resolution and moved its adoption: RESOLUTION AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF A $1,200,000 TEMPORARY GENERAL OBLIGATION IMPROVEMENT NOTE, SERIES 2026B The motion for the adoption of the foregoing resolution was duly seconded by Member ______________ and upon a vote being taken thereon, the following voted in favor thereof: and the following Members voted against the same: Whereupon the resolution was declared duly passed and adopted. LOAN AGREEMENT This Loan Agreement is made as of this 19th day of May, 2026, by and between the City of Scandia, Washington County, Minnesota (the “City”) and Security Bank & Trust, Co., located in Winsted, Minnesota (the “Lender”). R E C I T A L S WHEREAS, the City desires to obtain a loan from the Lender to be evidenced by the City’s $1,200,000 Temporary General Obligation Improvement Note, Series 2026B, dated May __, 2026 (the “Note”). The proceeds of such loan shall be used for public purposes, including: A. providing funds for the temporary financing of various public improvements within the City, including those related to the Gateway Trail Project (the “Project”) as more fully described in the City’s resolution adopted on May 19, 2026 (the “Resolution”); and B. to provide for the costs of issuance of the Note. WHEREAS, the parties hereto desire to set out the terms and conditions of such loan and the Note and the terms and conditions of advancing funds pursuant to the Note. NOW, THEREFORE, it is hereby agreed as follows: 1. The City agrees to issue the Note to the Lender and the Lender agrees that such loan will be repaid with interest at the rate of 4.22% per annum in accordance with the terms and conditions of the Note set forth in the Resolution. 2. The Lender shall agree to accept the debt instrument for investment and not with a present view to the distribution, transfer or resale thereof. The Lender intends to hold and book the Note as a loan in its loan portfolio; the Lender acknowledges that the use of the word “Note” in the name of the debt instrument is for convenience only and is not intended to indicate that the instrument is a security within the meaning of the Securities Act of 1933. 3. The Lender agrees to hold the Note for its own account until its maturity or early redemption and does not intend to dispose of all or any portion of such Note and understands that transfer of such Note is restricted pursuant to the terms of the Resolution, the Note and this Loan Agreement. 4. On the date of issuance of the Note, the Lender shall advance the entire loan amount of $1,200,000 in exchange for delivery of the Note by the City. 5. All capitalized terms not defined herein shall have the meaning, as defined, in the Resolution. [Signature page to Loan Agreement by and between the City of Scandia, Minnesota, and Security Bank & Trust, Co., located in Winsted, Minnesota] This Agreement is dated as of the date and year first above written. CITY OF SCANDIA, MINNESOTA By Mayor By Clerk-Treasurer [Signature page to Loan Agreement by and between the City of Scandia, Minnesota, and Security Bank & Trust, Co., located in Winsted, Minnesota] This Agreement is dated as of the date and year first above written. SECURITY BANK & TRUST, CO. By Name: Adam Birkholz Its: Vice President – Commercial Loan Officer frandsenbank.com Member FDIC 128 South Main Street • PO Box 68 • Pine Island, MN 55963 Phone 507.892.7000 • Fax 507.414.5219 Financing Proposal City of Scandia Temporary General Obligation Improvement Note Borrower: City of Scandia, Minnesota Purpose of Financing: The proposed financing is intended to provide interim funding for City improvement projects, with the expectation that state grant proceeds will be received later in the year and used to retire the obligation. Proposed Financing Structure: • Par Amount: $1,200,000 • Term: 12 months • Interest Rate: 4.75% (tax-exempt) • Interest Structure: Interest-only payments through maturity • Prepayment: No prepayment penalty; the city may prepay at any time • Tax Status: Interest is expected to be exempt from federal and state income taxes The note will be issued as a direct obligation of the City and backed by its full faith, credit, and taxing power. Repayment Source: The City anticipates receiving state grant funds approximately nine to ten months into the term of the note. Upon receipt, those grant proceeds are expected to be used to pay off the outstanding balance of the note prior to maturity. Should grant funding be delayed, the City retains the ability to repay the note at maturity through its general obligation authority. Legal and Documentation: Fryberger, Buchanan, Smith & Frederick, P.A. is expected to serve as bond counsel and will prepare all legal documentation associated with the issuance of the General Obligation Improvement Note, ensuring compliance with applicable state statutes and tax-exempt requirements. Frandsen Bank & Trust would like to receive documentation on the grant for documentation verification. Benefits to the City: • Provides short-term, flexible financing aligned with the timing of grant reimbursements • Interest-only structure minimizes cash flow requirements during the term • Competitive tax-exempt interest rate of 4.75% • No prepayment penalty allows early retirement upon receipt of grant funds • General obligation pledge offers favorable borrowing terms and strong investor confidence Conclusion: This Temporary General Obligation Improvement Note provides the City of Scandia with a cost -effective and flexible financing solution to bridge project funding needs while awaiting anticipated grant proceeds. The proposed structure aligns repayment with kn own funding sources while preserving the City’s long-term financial flexibility and grant alignment.