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City of Hastings, Minnesota September 26, 2005 Refundina Portion The issuance of the Refunding Portion is being conducted as a .current" refunding. The current refunding method requires that the bonds to be called for early redemption be redeemed within ninety days of the dated date of the new refunding bonds (Refunding Portion of the Series 2005A Bonds). The dated date of the Series 2005A Bonds is December 1, 2005 and the bonds included in the Refunding Portion are callable on February 1, 2006, thereby meeting the ninety day requirement. Current refundings do not require the establishment of an escrow account. However, the City will need to invest the proceeds of the Refunding Portion of the Series 2005A Bonds for the period between the closing date and the call date (February 1, 2006) in order to achieve the estimated interest earnings necessary for this transaction. Proceeds from the Refunding Portion will be used to prepay the remaining maturities of the two issues being refunded. The refundings are being undertaken to allow the City to take advantage of lower interest rates. A detailed description of the two refunding purposes, Refunding of the Series 1998A Bonds and Refunding of the Series 1997B Bonds, is set forth below. Refunding of the Series 1998A Bonds A portion of the proceeds of the Refunding Portion for the Series 2005A Bonds will be used to refund the February 1, 2007 through February 1, 2019 maturities of the City's General Obligation Swimming Pool Bonds, Series 1998A, dated August 1,1998. The Series 1998A Bonds were originally issued to finance the construction of an outdoor swimming pool within the City. The Refunding of the Series 1998A Bonds will be general obligations of the City and paid with ad valorem property taxes. On February 1, 2006, the City will use (i) funds on hand from 2005 collectiohs of tax levies to pay the scheduled principal and interest due on the Series 1998A Bonds; and (ii) the proceeds of the Refunding Portion of the Series 2005A Bonds to redeem the remaining $1,280,000 of outstanding principal on the Series 1998A Bonds. Based on current interest rate estimates, the refunding is projected to produce cash flow savings averaging approximately $6,500 annually beginning with the 2005 levy for taxes collected in 2006. This results in future value savings of approximately $93,000 with a net present value benefit to the City of approximately $75,000. These estimates are net of all costs associated with the refunding. The City will begin to realize cash flow savings beginning with the City's 2005 levy and the August 1, 2006 interest payment. The City will make its first levy for the Refunding Portion related to the Refunding of the Series 1998A Bonds in 2005 for first collection in 2006. Each year's first-half collection of taxes will be used to pay the interest payment due August 1 in the year of collection. Second-half collections of taxes, plus surplus first-half collections, will be used to pay the February 1 principal and interest payment due in the following year. We have attached a set of schedules that summarize the refunding statistics and the projected savings resulting from the sale of the Refunding Portion related to the Refunding of the Series 1998A Bonds. These schedules include the following information: . Prior Original Debt Service: shows the existing debt service requirements for the Series 1998A Bonds without a refunding - Page 16 Page 8