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City of Hastings, Minnesota September 26, 2005 DISCUSSION The Series 2005A Bonds The Series 2005A Bonds have been structured as a single issue although it will have three primary purposes. First, $2,935,000, together with City and other contributions will be used to finance various improvement projects within the City and is herein referred to as the Project Portion of the Series 2005A Bonds. Second, $1,305,000 will be used to refinance the City's General Obligation Swimming Pool Bonds, Series 1998A (the .Series 1998A Bonds"); and third, $665,000, will be used to refund the City's General Obligation Water Revenue Bonds, Series 1997B (the .Series 1997B Bonds"). Each purpose has been structured independently and then combined into this single bond issue, which enhances the marketability of the Series 2005A Bonds (larger principal maturities) and reduces issuance costs. The sources and uses for the Series 2005A Bonds are detailed on page 12 and show the breakdown between the three different purposes. The Series 2005A Bonds will be general obligations of the City, secured by its full faith and credit and taxing power. The Series 2005A Bonds will be repaid with a combination of ad valorem property taxes, special assessments, and net revenues of the City's water utility. A more detailed discussion regarding each purpose and the source of payment for each is discussed on the following pages. The debt service schedule for the Series 2005A Bonds as a whole is shown on page 13 with the following information: . Columns 1 through 4 show the principal payment dates, annual principal amounts, estimated interest rates, projected interest payments and the projected total principal and interest payments, given the current market environment. . Column 5 shows the capitalized interest included in the par amount to make the interest payments due through February 1, 2007 on the Project Portion of the Series 2005A Bonds. . Column 6 shows the net debt service. . Column 7 shows the debt service for the Refunding Portion of the Series 1997B Bonds that will be paid with net revenues of the City's Water Utility. . Column 8 shows the difference between 6 and 7, and is the new net debt service that would be applicable to the 5% overlevy. . Column 9 shows the 5% overlevy which is required by State statute and serves as a protection to bondholders and the City in the event of delinquencies in the collection of assessments and/or taxes. . Column 10 shows the projected assessment income of the Project Portion developed on page 14. . Column 11 shows the difference between columns 7 and 8, and represents the City's annual levy requirement for the Series 2005A Bonds. Page 6