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documents and certifications furnished to us without <br />undertaking to verify such facts by independent investigation. <br />We have not been engaged of undertaken to verify the <br />accuracy, completeness or sufficiency of the Official Statement <br />or other offering material relating to the Bonds (except to the <br />extent, if any, stated in the Official Statement), and we <br />express no opinion relating thereto (excepting only matters set <br />forth as our opinion in the Official Statement). <br />Based on our examination, we are of the opinion, as of <br />the date hereof, as follows: <br />1. The B-nds are valid and binding general <br />obligations of the City issued under authority of Section <br />444.075 and Chapter 475, Minnesota Statutes. <br />2. The Bonds are payable as to principal and <br />interest primarily from the net revenues of the water and sewer <br />system of the City to the extent provided by the Bond <br />Resolution, but the City is required to levy general ad valorem <br />taxes on all taxable property in the City without limitation as <br />to rate or amount, if necessary, to pay principal and interest <br />when due. <br />3. The interest on the Bonds is not includable in <br />gross income for purposes of federal income taxation or in <br />taxable net income of individuals, estates and trusts for <br />purposes of Minnesota income taxation under present laws and <br />rulings. The Bonds are not "private activity bonds" within the <br />meaning of Section 141(a) of the Internal Revenue Code of 1986 <br />(the "Code"). Interest on the Bonds is not an item of tax <br />preference required to be included in the computation of <br />"alternative minimum taxable income" for purposes of federal <br />alternative minimum tax applicable to individuals and other <br />taxpayers under Section 55 of the Code or Minnesota alternative <br />minimum tax applicable to individuals, trusts and estates. <br />Interest on the Bonds is includable in "book income" or in <br />"earnings and profits" for the purpose of determining the <br />"alternative minimum taxable income" of corporations under <br />Section 55 of the Code and is subject to the Minnesota <br />franchise tax imposed upon corporations, including financial <br />institutions, measured by taxable income and the alternative <br />mini,am tax base. The alternative minimum taxable income is <br />also used to determine the environmental tax imposed by <br />Section 59A of the Code. In addition, interest on the Bonds <br />may be included in the income of a foreign corporation for <br />purposes of the branch profits tax imposed by Section B84 of <br />the Code. Deductions for "losses incurred" by property and <br />cas,.i'i-y insurance companies must be reduced by 15% of the <br />in+ received or accrued on the Bonds. The Bonds have been <br />dF d as "qualified tax-exempt obligations" within the <br />met Section 265(b)(3) of the Code and financial <br />c• <br />B-2 <br />