Loading...
685 Sewer Revenue BondCITY OF YELM, WASHINGTON ORDINANCE NO. 685 AN ORDINANCE of the City of Yelm, Washington, relating to the sewer utility of the City; providing for the issuance of $3,857,000 aggregate principal amount of sewer revenue bonds of the City, to provide funds with which to pay and redeem a portion of the City's outstanding Washington State Water Pollution Control Revolving Fund Loan between the State of Washington Department of Ecology and the City; setting forth certain terms and covenants of the bonds; and approving the sale and providing for the delivery of the bonds as a single bond to the United States of America, Department of Agriculture, Rural Utilities Service. This documentprepared by: Foster Pepper & Shefelman PLLC 1111 Third Avenue, Suite 3400 Seattle, Washington 98101 (206) 447 -4400 5014010403 TABLE OF CONTENTS Page Section1. Definitions ................................................................................ ............................... 4 Section 2. Findings as to Parity Provisions ................................................ ............................... 6 Section 3. Adoption of Plan of Additions .................................................. ............................... 7 Section 4. Description of the Bond ............................................................ ............................... 7 Section 5. Registration and Transfer of Bond ............................................ ............................... 8 Section6. Payment of the Bond ................................................................ ............................... 8 Section 7. Optional Prepayment and Notice .............................................. ............................... 8 Section 8. Failure to Pay Installments ........................................................ ............................... 9 Section 9. Payments into Bond Fund ......................................................... ............................... 9 Section 10. Finding as to Sufficiency of Revenue, Pledge of Revenue and Lien Position.......... 12 Section 11. Deposit of Bond Proceeds ....................................................... ............................... 12 Section12. Covenants ............................................................................... ............................... 13 Section13. Flow of Funds ......................................................................... ............................... 16 Section 14. Provisions for Future Parity Bonds ......................................... ............................... 16 Section 15. Preservation of Tax Exemption for Interest on Bond ............... ............................... 17 Section 16. Small Governmental Issuer Arbitrage Rebate Exception and Designation of Bond as a "Qualified Tax- Exempt Obligation" ................... ............................... 17 Section 17. Form and Execution of the Bond ............................................ ............................... 18 Section18. Bond Registrar ........................................................................ ............................... 19 Section 19. Covenant to Abide by Loan Documents .................................. ............................... 19 Section20. Sale of the Bond ..................................................................... ............................... 19 Section 21. Effective Date of Ordinance .................................................... ............................... 21 i 50140104.03 CITY OF YELM, WASHINGTON ORDINANCE NO. 685 AN ORDINANCE of the City of Yelm, Washington, relating to the sewer utility of the City; providing for the issuance of $3,857,000 aggregate principal amount of sewer revenue bonds of the City, to provide funds with which to pay and redeem a portion of the City's outstanding Washington State Water Pollution Control Revolving Fund Loan between the State of Washington Department of Ecology and the City; setting forth certain terms and covenants of the bonds; and approving the sale and providing for the delivery of the bonds as a single bond to the United States of America, Department of Agriculture, Rural Utilities Service. WHEREAS, the City of Yelm, Washington (the "City ") maintains and operates as a separate system the sanitary sewage disposal system of the City (the "System "); and WHEREAS, the City by Resolution No. 353 adopted November 26, 1996, authorized its Mayor to execute a loan agreement, as amended, between the City and the State of Washington Department of Ecology to provide interim financing for the improvements comprising the Plan of Additions through a Washington State Water Pollution Control Revolving Fund loan in an amount not to exceed $5,000,000 (the "Outstanding Loan"); and WHEREAS, pursuant to Ordinance No. 511, the City heretofore issued its $1,131,000 par value Sewer Revenue Bond, 1994, Series A (the "1994 A Bond "), its $425,000 par value Sewer Revenue Bond, 1994, Series B (the "1994 B Bond ") and its $271,500 par value Sewer Revenue Bond, 1994, Series C (the "1994 C Bond" and, collectively, the "1994 Bonds "), and by that ordinance the City provided for the issuance of additional sewer revenue bonds on a parity of lien and charge of the gross revenue of the sewer system of the City and Utility Local Improvement Assessments with the 1994 Bonds if the following conditions were met and complied with at the time of issuance of those bonds: "(a) There shall be no deficiency in the Bond Fund." 5014010t03 "(b) The ordinance providing for the issuance of the Future Parity Bonds shall provide that all assessments and interest thereon that may be levied in any ULID created for the purpose of paying, in whole or in part, the principal of and interest on those Future Parity Bonds, shall be paid directly into the Bond Fund, except for any prepaid assessments permitted by law to be paid into a construction fund or account." "(c) The ordinance providing for the issuance of those Future Parity Bonds shall provide for the payment of the principal thereof and interest thereon out of the Bond Fund." "(d) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the deposit into the Reserve Account of (i) an amount equal to the Reserve Requirement for those Future Parity Bonds from the Future Parity Bond proceeds or other money legally available, or, (ii) to the extent that the Reserve Requirement is not funded from Future Parity Bond proceeds or other legally available money at the time of issuance of those Future Parity Bonds, within five years from the date of issue of the Future Parity Bonds from ULID Assessments, if any, levied and first collected for the payment of the principal of and interest on those Future Parity Bonds and, to the extent that ULID Assessments are insufficient, then from the Net Revenue of the System, an amount equal to the Reserve Requirement for those Future Parity Bonds in five approximately equal annual payments." "(e) The ordinance authorizing the issuance of such Future Parity Bonds shall provide for the payment of mandatory redemption or sinking fund requirements into the Bond Fund for any Term Bonds to be issued and for regular payments to be made for the payment of the principal of such Term Bonds on or before their maturity, or, as an alternative, the mandatory redemption of those Term Bonds prior and up to their maturity date from money in the Principal and Interest Account." "(f) There shall be on file a certificate from a licensed professional engineer experienced in the design, construction and operation of municipal utilities showing that in his or her professional opinion, the annual Net Revenue will provide amounts annually at least equal to the Coverage Requirement payable from such sources. In determining the amount of debt service subject to such Coverage Requirement, there shall be deducted from the Annual Debt Service an amount equal to the portion of the Annual Debt Service for the proposed issue of Future Parity Bonds and for each issue of outstanding Future Parity Bonds secured by ULID Assessments, if any, which portion is to be calculated by dividing the original total amount of the ULID Assessments specifically pledged or paid to the Bond Fund for that issue by the total principal amount of such issue." "Such annual Net Revenue available for revenue bond debt service shall be determined by using the following data and adjustments:" 2 50140104.03 "(1) The historical Net Revenue for any 12 consecutive months out of the 24 months immediately preceding the month of delivery of such additional bonds to the purchaser thereof." "(2) Such historical Net Revenue shall be adjusted to reflect the sewer rates and charges effective on the date of such certificate if there has been any change in such effective rates and charges during or after such 12 -month period." "(3) The following amounts may be added to such adjusted Net Revenue:" "(i) Any rate change that has taken place or has been approved prior to the issuance of the Future Parity Bonds may be reflected;" "(ii) Revenue may be added from customers actually added to the System subsequent to the beginning of the 12 -month base period, and a full year's revenue may be allowed for those customers during such period;" "(iii) Revenue may be added from customers to be served by the improvements under construction or proposed to be under construction at the time of delivery of the Future Parity Bonds; and" "(iv) Actual or reasonably anticipated changes in the Operating and Maintenance Expenses subsequent to the 12 -month base period shall be added or deducted as applicable." "In the case of refunding bonds, no engineer's certificate shall be required if the Annual Debt Service of the proposed refunding bonds is not increased in excess of $5,000 for any year over the Annual Debt Service for the bonds being refunded;" and WHEREAS, the United States of America, Department of Agriculture, Rural Utilities Service has offered to purchase the bonds authorized by this ordinance as a single bond under the terms and conditions set forth herein; and WHEREAS, the City Council has determined it to be in the best interests of the City to accept that offer and to issue its sewer revenue bond on a parity with the 1994 Bonds to the cost of 3 5014010..0.3 paying and redeeming a portion of the Outstanding Loan and paying the costs of issuance and sale of the bond; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF YELM, WASHINGTON, as follows: Section 1. Definitions. As used in this ordinance the following words shall have the following meanings: "Annual Debt Service" for the Parity Bonds for any calendar year means all the interest, plus all principal (except principal of Term Bonds due in any Term Bond Maturity Year), plus all mandatory redemption and sinking installments for that year, less all bond interest payable from the proceeds of any such bonds in that year. "Average Annual Debt Service" means, as of its date of calculation, the sum of the Annual Debt Service for the remaining calendar years to the last scheduled maturity of the applicable issue or issues of bonds divided by the number of those years. "Bond" means the $3,857,000 par value Sewer Revenue Bond, 1999, issued pursuant to and for the purposes provided in this ordinance. "Bond Fund" means that special fund of the City known as the Sewer Revenue Bond Fund, 1994, created by Ordinance No. 511 for the payment of the principal of and interest on the Parity Bonds. "Bond Register" means the registration books of the Bond Registrar on which is recorded the name of the owner of the Bond. "Bond Registrar" means the Clerk- Treasurer of the City. "1994 Bonds" means the City's outstanding $1,131,000 par value Sewer Revenue Bond, 1994, Series A, the $425,000 par value Sewer Revenue Bond, 1994, Series B, and the $271,500 par value Sewer Revenue Bond, 1994, Series C, all of which were issued pursuant to Ordinance No. 511. "City" means the City of Yelm, Washington. "Code" means the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. "Coverage Requirement" in any calendar year means an amount of Net Revenue of the System equal to at least 1.10 times the Annual Debt Service in that year on all bonds payable from the Bond Fund actually paid from Net Revenue and not from ULID Assessments. In determining 4 50140104.03 the amount of debt service subject to coverage, there shall be deducted from the annual principal and interest required to be paid each year on each issue of Parity Bonds an amount equal to the ULID Assessments due in that year and not delinquent. "Future Parity Bonds" means any and all sewer revenue bonds of the City issued after the date of the issuance of the Bond, the payment of the principal of and interest on which constitutes a charge or lien on the Gross Revenue of the System and ULID Assessments equal in rank with the charge and lien upon such revenue and assessments required to be paid into the Bond Fund to pay and secure the payment of the principal of and interest on the 1994 Bonds and the Bond. "Gross Revenue of the System" or "Gross Revenue" means all earnings and revenue received by the System and all earnings from the investment of money in the Bond Fund which earnings are deposited in the Principal and Interest Account, and all connection and capital improvement charges collected for the purpose of defraying the cost of capital facilities of the System, except ULID Assessments, government grants, proceeds from the sale of System property, City taxes collected by or through the System, principal proceeds of bonds or other obligations and earnings or proceeds from any investments in a trust, defeasance or escrow fund created to defease or refund System obligations (unless commingled with other earnings and revenue of the System) or held in a special account for the purpose of paying a rebate to the United States Government under the Internal Revenue Code. "Installment Payment Date" means the date that is six months from the dated date of the Bond and semiannually thereafter to and including the date of fmal maturity of the Bond. If the date of the Bond is the 29th, 30th or 31st of the month, the due date will be the 28th day of the month. "Maximum Annual Debt Service" means at the time of calculation the maximum amount of Annual Debt Service that will mature or come due in the current calendar year or any future year on the Parity Bonds. "Net Revenue of the System" or "Net Revenue" means the Gross Revenue less Operating and Maintenance Expenses. "Operating and Maintenance Expenses" means all reasonable expenses incurred by the City in causing the System to be operated and maintained in good repair, working order and condition, but shall not include any depreciation or taxes or charges in lieu of taxes levied or imposed by the City or capital additions or capital replacements to the System. "Outstanding Loan" means the funds owed by the City to the State of Washington under the contract that the Mayor was authorized to enter into on behalf of the City by Resolution No. 353 to provide interim fmancing for the Plan of Additions through a State Revolving Fund loan, a portion of which shall be paid and redeemed with the proceeds of the Bond. "Outstanding Parity Bonds" means the 1994 A Bond, the 1994 B Bond, and the 1994 C :• . 5 50140104.03 "Parity Bonds" means the outstanding 1994 A Bond, the 1994 B Bond, the 1994 C Bond, the Bond and any Future Parity Bonds. "Plan of Additions" means that system or plan of additions and betterments to and extensions of the System specified, passed and ordered to be carried out by Section 3 of this ordinance. "Principal and Interest Account" means the account of that name created in the Bond Fund for the payment of the principal of and interest on Parity Bonds. "Purchaser" means the United States of America, Department of Agriculture, Rural Utilities Service. "Reserve Account" means the account of that name created in the Bond Fund for the purpose of securing the payment of the principal of and interest on Parity Bonds. "Reserve Requirement" means, for the 1994 A Bond, an amount of cash and investments equal to $61,234, for the 1994 B Bond, an amount of cash and investments equal to $23,010, for the 1994 C Bond, an amount of cash and investments equal to $14,700, for the Bond, an additional amount to total $173,026 within ten years of the date of issuance of the Bond, and any amounts required as part of the issuance of Future Parity Bonds. "System" means the sanitary sewage disposal system and water reuse facilities of the City, and all additions and betterments thereto and extensions thereof at any time made, including any utility system made a part thereof. "Term Bond Maturity Year" means any calendar year in which Term Bonds are scheduled to mature. "Term Bonds" means those bonds designated as such in the ordinance authorizing the issuance and sale of those bonds. "ULID" means utility local improvement district. "ULID Assessments" means all assessments levied and collected in any ULID of the City created for the acquisition or construction of additions and betterments to and extensions of the System if such assessments are pledged to be paid into the Bond Fund (less any prepaid assessments permitted by law to be paid into a construction fund or account). ULID Assessments shall include installments thereof and any interest or penalties that may be due thereon. Section 2. Findings as to Parity Provisions. The City Council finds that: (a) There is no deficiency in either the Principal and Interest Account or the Reserve Account of the Bond Fund; 6 50140104.03 (b) Provision is made by Section 8 herein for the payment of the principal of and interest on the Bond from the Bond Fund and for the payment of the Reserve Requirement into the Reserve Account within the time prescribed; and (c) On or before the time of issuance of the Bond there will be on file with the City a certificate from a licensed professional engineer experienced in the design, construction and operation of municipal utilities, showing that in his or her professional opinion the Net Revenue of the System will provide amounts annually at least equal to the Coverage Requirement established by Ordinance No. 511; Section 3. Adoption of Plan of Additions. The City specifies, adopts and orders the carrying out of the system or plan of additions to and betterments and extensions of the System including construction of a Class A water reclamation treatment facility, distribution lines and reuse sites, including Cochrane Memorial Park (the "Plan of Additions "). The City may modify the details of the Plan of Additions where, in its judgment, it appears advisable if such modifications do not substantially alter the purposes of that plan. The estimated cost of the acquisition, construction and financing of the Plan of Additions, including the costs of issuance and sale of the Bonds and funding a reserve therefor, is declared to be $9,648,153, which costs shall be paid from the proceeds of the Bond, Rural Development grants, prepayments and assessment payments of Local Improvement District No. 1, Centennial Clean Water grant of the State of Washington Department of Ecology and other funds of the City. Section 4. Description of the Bond. For the purpose of providing part of the money required to pay the cost of carrying out the Plan of Additions, including paying and redeeming a portion of the Outstanding Loan, and to pay the costs of issuing and selling the Bond, the City shall issue the Bond in the principal amount of $3,857,000. The Bond shall be designated as the Sewer Revenue Bond, 1999; shall be dated its date of issuance; shall mature on the date that is 40 years from the date of the issuance of the Bond; shall be numbered R -1; and shall bear 7 50140104.03 interest at the rate of 3.25% per annum (computed on the basis of a 365/366 day year for the actual number of days elapsed). Principal of and interest shall on the Bond be payable semiannually in amortized installments of $86,513 on each Installment Payment Date, but the last payment may be in an amount of more or less than $86,513, as required to retire the entire indebtedness with interest. Section 5. Registration and Transfer of Bond. The Bond shall be issued only in registered form as to both principal and interest and shall be recorded on the Bond Register. The Bond Register shall contain the name and mailing address of the Bond Owner. The Bond may be transferred only if endorsed in the manner provided thereon and surrendered to the Bond Registrar. Any exchange or transfer shall be without cost to the owner or transferee. The Bond Registrar shall not be obligated to exchange or transfer the Bond during the 15 days preceding any Installment Payment Date. Section 6. Payment of the Bond. Installments of principal and interest on the Bond shall be payable in lawful money of the United States of America and shall be paid by a check or draft of the Bond Registrar mailed on the Installment Payment Date to the registered owner at the address appearing on the Bond Register 15 days prior to the Installment Payment Date, except that the last installment of principal and interest on the Bond shall be payable upon presentation and surrender of the Bond by the registered owner at the office of the Bond Registrar in Yelm, Washington. Section 7. Optional Prepayment and Notice. The City may prepay the entire unpaid principal of the Bond or such lesser portion as the City may determine of the unpaid principal amount thereof. Upon prepayment of a portion of the principal of the Bond, the amount of the semiannual installments of principal and interest on the Bond shall remain unchanged but shall 8 50140104.03 be recalculated to reflect the reduction in the principal amount remaining unpaid and the resulting increase in the portion of each installment payment credited to the principal of the Bond. The final Installment Payment Date shall be adjusted to reflect the prepayment and increased amount applied to principal from each semiannual installment payment on the Bond. Notice of any such optional prepayment shall be given at least 30 days prior to the prepayment date by mailing to the registered owner of the Bond a notice fixing the prepayment date and the amount of principal to be prepaid. Section 8. Failure to Pay Installments. If any installment of principal and interest is not paid when due, the City shall be obligated to pay interest on that installment at the rate provided in the Bond from and after its payment date until that installment, both principal and interest, is paid in full. Section 9. Payments into Bond Fund. A special fund of the City known as the Sewer Revenue Bond Fund, 1994 (the "Bond Fund "), was created in the office of the City Clerk- Treasurer and divided into a Principal and Interest Account and a Reserve Account. So long as any portion of any of the Parity Bonds is outstanding against the Bond Fund, the City Clerk- Treasurer shall set aside and pay into the Principal and Interest Account all ULID Assessments and, out of the Net Revenue of the System, at least five days prior to each Installment Payment Date, certain fixed amounts without regard to any fixed proportion, namely amounts, together with ULID Assessments and other money on deposit therein, sufficient to pay the installment of principal and interest due on all Outstanding Parity Bonds payable from the Bond Fund on that Installment Payment Date. There has been deposited into the Reserve Account from the Net Revenue and ULID Assessments, beginning on the Outstanding Parity Bonds' second Installment Payment Date and 9 50140104.03 shall be deposited annually hereafter, an annual total amount of $9,894.40. Those annual deposits shall continue until an amount equal to the total aggregate Reserve Requirement for the Series A Bond, the Series B Bond and the Series C Bond has been accumulated therein, but by no later than ten years after the dated date of the Bonds or July 20, 2004. The City shall also deposit into the Reserve Account ten approximately equal annual payments from the proceeds of Net Revenue and ULID Assessments, and those ten payments shall comprise the Bond's Reserve Requirement of $17,303. The City also may contribute the amounts into the Reserve Account, in whole or in part, in lump sums in advance. The Reserve Account shall be maintained at the Reserve Requirement, except for withdrawals therefrom as authorized herein, at all times so long as any portion of the Parity Bonds is unpaid. When the total amount in the Bond Fund shall equal the total amount of principal and interest for all outstanding bonds payable out of the Bond Fund to the last maturity thereof, no further payment need be made into the Bond Fund. The amount in the Reserve Account may be reduced at any time prior to the redemption of all of the Parity Bonds to an amount not less than the Reserve Requirement for all bonds then payable from the Bond Fund. If there shall be a deficiency in the Principal and Interest Account in the Bond Fund to meet maturing installments of either principal or interest, as the case may be, that deficiency shall be made up from the Reserve Account by the withdrawal of cash therefrom for that purpose. Any deficiency created in the Reserve Account by reason of any such withdrawal shall then be made up from the Net Revenue of the System and/or ULID Assessments payable into the Bond Fund first available after making necessary provision for the required payments into the Principal and Interest Account. The money and investments in the Reserve Account otherwise shall be held intact and may be applied against the last outstanding bonds payable out of the Bond Fund, except that if the 10 50140104.03 Reserve Account is fully funded, money in excess of the Reserve Requirement shall be withdrawn and deposited, at the option of the City Treasurer, either in the Principal and Interest Account and spent for the purpose of retiring bonds payable from the Bond Fund or in the System operating fund and spent for other lawful System purposes. The City may provide for the purchase, redemption or defeasance of bonds payable from the Bond Fund by the use of money on deposit in any account in the Bond Fund as long as the money remaining in those accounts is sufficient to satisfy the required deposits in those accounts for the remaining bonds outstanding payable from the Bond Fund. Notwithstanding the above, for as long as the Purchaser is the owner of the Bond, the City agrees not to defease or refund the Bond. All money in the Bond Fund may be kept in cash or invested in legal investments maturing not later than the date when the funds are required for the payment of principal of or interest on the outstanding bonds payable from the Bond Fund (for investments in the Principal and Interest Account) or having a guaranteed redemption price prior to maturity and in no event maturing later than the last maturity of any remaining outstanding bonds payable from the Bond Fund (for investments in the Reserve Account). Earnings from investments in the Principal and Interest Account shall be deposited in that account. Income from investments in the Reserve Account shall be deposited in that account. The City may create sinking fund accounts or other accounts or subaccounts in the Bond Fund for the payment or securing the payment of bonds payable from the Bond Fund as long as the maintenance of such accounts does not conflict with the rights of the owners of bonds payable from the Bond Fund. 5014010 4.03 If the City fails to set aside and pay into the Bond Fund the amounts set forth above, the owner of any of the outstanding bonds payable out of the Bond Fund may bring action against the City and compel such setting aside and payment. Section 10. Finding as to Sufficiency of Revenue. Pledge of Revenue and Lien Position. The City Council finds and determines that the Gross Revenue and benefits to be derived from the operation and maintenance of the System at the rates to be charged for sewer services from the System will be more than sufficient to meet all Operating and Maintenance Expenses and debt service requirements on the 1994 Bonds and the Bond and to permit the setting aside into the Bond Fund out of the Gross Revenue of amounts sufficient to pay the principal of and interest on the Parity Bonds when due. The City Council declares that in fixing the amounts to be paid into the Bond Fund under this ordinance it has exercised due regard for Operating and Maintenance Expenses and debt service requirements of the 1994 Bonds and the Bond and has not obligated the City to set aside and pay into the Bond Fund a greater amount of Gross Revenue of the System than in its judgment will be available over above such Operating and Maintenance Expenses and debt service requirements. The Net Revenue of the System and ULID Assessments are pledged to the payment of the Parity Bonds, and the Parity Bonds shall constitute a lien and charge upon such Net Revenue and ULID Assessments prior and superior to any other charges whatsoever. Section 11. Deposit of Bond Proceeds. There previously has been created in the office of the City Clerk- Treasurer an account of the City known as the Construction Account (the "Construction Account "). The proceeds of the sale of the Bond shall be deposited in the Construction Account to be used to redeem a portion of the Outstanding Loan, and the costs of issuance and sale of the Bond. Until needed to redeem a portion of the Outstanding Loan and 12 50140104.43 pay the costs of issuance and sale of the Bond, the City may invest money on deposit in the Construction Account temporarily in any legal investment, and the investment earnings may be retained in the Construction Account and be spent for any purpose of that account. Section 12. Covenants. The City covenants and agrees with the owner of the Bond at any time outstanding, as follows: (a) ULID Assessments. All ULID Assessments shall be paid into the Bond Fund and may be used to build up the required reserves in the Reserve Account and to pay the principal of and interest on the Parity Bonds, without those ULID Assessments' being particularly allocated to the payment of the principal of and interest on any particular issue of bonds. (b) Operation and Maintenance. It will at all times maintain, preserve and keep the properties of the System in good repair, working order and condition, will make all necessary and proper additions, betterments, renewals and repairs thereto and improvements, replacements and extensions thereof, and will at all times operate or cause to be operated the properties of the System and the business in connection therewith in an efficient manner and at a reasonable cost. (c) Establishment and Collection of Rates and Charges. It will establish, maintain and collect rates and charges for all services and facilities provided by the System which will be fair and nondiscriminatory, and will adjust those rates and charges from time to time so that: (1) The Gross Revenue of the System will at all times be sufficient to (i) pay all Operating and Maintenance Expenses on a current basis, (ii) pay when due all amounts that the City is obligated to pay into the Bond Fund and the accounts therein, (iii) pay all taxes, assessments or other governmental charges lawfully imposed on the System or the revenue therefrom or payments in lieu thereof and any and all other amounts which the City may now or hereafter become obligated to pay from the Gross Revenue of the System by law or contract; and (2) The Net Revenue of the System in each calendar year will be at least equal to the Coverage Requirement. To the extent allowable by law, those to which service of the System is available will be charged for that service at the prevailing rate within 30 days of the availability of that service. (d) Sale or Disposition of the System. It will not sell or otherwise dispose of the System in its entirety unless, simultaneously with such sale or other 13 50140104.03 disposition, all of the Parity Bonds are redeemed and retired, or defeased under the ordinances pursuant to which they were issued. It will not sell, lease, mortgage or in any manner encumber or otherwise dispose of any part of the System, including all additions and improvements thereto and extensions thereof at any time made, that are used, useful or material in the operation of the System, unless provision is made for the replacement thereof or for payment into the Bond Fund of the greatest of the following: (1) An amount which will be in the same proportion to the net amount of the Parity Bonds then outstanding (defined as the total amount of those bonds less the amount of cash and investments in the Bond Fund and accounts therein) that the Gross Revenue of the System from the portion of the System sold or disposed of for the preceding year bears to the total Gross Revenue of the System for that period; or (2) An amount which will be in the same proportion to the net amount of the Parity Bonds then outstanding (as defined above) that the Net Revenue from the portion of the System sold or disposed of for the preceding year bears to the total Net Revenue of the System for such period; or (3) An amount which will be in the same proportion to the net amount of the Parity Bonds then outstanding (as defined above) that the depreciated cost value of the facilities sold or disposed of bears to the depreciated cost value of the entire System immediately prior to such sale or disposition. Notwithstanding any other provision of this subsection, (1) the City in its discretion may sell or otherwise dispose of any of the works, plant, properties or facilities of the System or any real or personal property comprising a part of the same which shall have become unserviceable, inadequate, obsolete or unfit to be used in the operation of the System, or no longer necessary, material to or useful to the operation of the System, without making any deposit into the Bond Fund, and (2) the City may transfer the System to another municipal corporation so long as ULID Assessments and Net Revenue of the portion of the System so transferred are used for payment of debt service on the Parity Bonds prior to any other purpose. (e) Liens Upon the S,, stem. It will not at any time create or permit to accrue or to exist any lien or other encumbrance or indebtedness upon the Gross Revenue of the System, or any part thereof, prior or superior to the lien thereon for the payment of the Parity Bonds, and will pay and discharge, or cause to be paid and discharged, any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Gross Revenue of the System, or any part thereof, prior to or superior to the lien of the Parity Bonds, or which might impair the security of the Parity Bonds. 14 50140104.03 (f) Books and Accounts. It will keep proper books, records and accounts with respect to the operations, income and expenditures of the System in accordance with proper accounting procedures and any applicable rules and regulations prescribed by the State of Washington. It will prepare annual financial and operating statements within 180 days of the close of each fiscal year showing in reasonable detail the financial condition of the System as of the close of the previous year, and the income and expenses for such year, including the amounts paid into the Bond Fund and into any and all special funds or accounts created pursuant to the provisions of this ordinance, the status of all funds and accounts as of the end of such year, and the amounts expended for maintenance, renewals, replacements and capital additions to the System. Such statements shall be sent to any owner of a Parity Bond upon written request therefor being made to the City. (g) No Free Service. Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish or supply or permit the furnishing or supplying of any service or facility in connection with the operation of the System free of charge to any person, firm or corporation, public or private, other than the City, so long as the Parity Bonds are outstanding. (h) Collection of Delinquent Accounts. On at least an annual basis, it will determine all accounts that are delinquent and will take all necessary action to enforce payment of such accounts against those property owners whose accounts are delinquent. (i) Fire and Extended Coverage Insurance. It at all times will carry fire and extended coverage and such other forms of insurance with responsible insurers and with policies payable to the City on such of the buildings, equipment, works, plants, facilities and properties of the System as are ordinarily carried by municipal or privately owned utilities engaged in the operation of like systems, or will implement and maintain a self - insurance or an insurance pool program with reserves adequate, in the reasonable judgment of the City, to protect the System and the owners of the Parity Bonds against loss. 0) Public Liability and Property Damage Insurance. It at all times will keep or arrange to keep in full force and effect such policies of public liability and property damage insurance with responsible insurers and with policies payable to the City against such claims for damages as are ordinarily carried by municipal or privately owned utilities engaged in the operation of like systems, or will implement and maintain a self - insurance or an insurance pool program with reserves adequate, in the reasonable judgment of the City Council, to protect the System and the owners of the Parity Bonds against loss. 15 50140104.03 Section 13. Flow of Funds. The Gross Revenue of the System shall be used for the following purposes only in the following order of priority: (a) To pay Operating and Maintenance Expenses; (b) To pay the principal of and interest on the Parity Bonds when due or as the principal is required to be paid and to make all payments required to be made into any mandatory redemption or sinking fund account created to provide for the payment of the principal of Term Bonds; (c) To make all payments required to be made into the Reserve Account; (d) To make all payments required to be made into any revenue bond, note, warrant or other revenue obligation redemption fund, debt service account or reserve account created to pay or secure the payment of the principal of and interest on any revenue bonds, notes, warrants or other obligations of the City having a lien upon the revenue of the System subordinate to the lien thereon for the payment of the principal of and interest on the Parity Bonds; and (e) To make necessary additions, betterments and improvements and repairs to or extensions and replacements of the System, to retire by redemption or purchase in the open market any outstanding revenue obligations or other obligations of the System, or to provide for any other lawful City purpose. The City may transfer any money from any funds or accounts of the System legally available therefor, except bond redemption funds, refunding escrow funds, defeasance or other trust funds, to meet the required payments to be made into the Bond Fund. Section 14. Provisions for Future Parity Bonds. The City reserves the right to issue Future Parity Bonds if the conditions set forth in Section 12 of Ordinance No. 511, which section is incorporated herein by this reference, are met and complied with at the time of the issuance of those Future Parity Bonds. Nothing herein contained shall prevent the City from issuing sewer revenue bonds which are a charge upon the Gross Revenue of the System of the City junior or inferior to the payments required to be made therefrom into the Bond Fund for the payment of the Parity Bonds or from 16 50140104.03 pledging the payment of utility local improvement district assessments into the bond redemption fund created for the payment of the principal of and interest on those junior lien bonds as long as such utility local improvement district assessments are levied for improvements constructed from the proceeds of those junior lien bonds. Section 15. Preservation of Tax Exemption for Interest on Bond. The City covenants that it will take all actions necessary to prevent interest on the Bond from being included in gross income for federal income tax purposes, and it will neither take any action nor make or permit any use of proceeds of the Bond or other funds of the City treated as proceeds of the Bond at any time during the term of the Bond which shall cause interest on the Bond to be included in gross income for federal income tax purposes. The City certifies that it has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be relied upon. Section 16. Small Governmental Issuer Arbitrage Rebate Exception and Designation of Bond as a "Qualified Tax - Exempt Obligation". The City finds and declares that (a) it is a duly organized and existing governmental unit of the State of Washington and has general taxing power; (b) this Bond is not a "private activity bond" within the meaning of Section 141 of the Code; (c) at least 95% of the net proceeds of the Bond will be used for local governmental activities of the City (or of a governmental unit the jurisdiction of which is entirely within the jurisdiction of the City); (d) the aggregate face amount of all tax - exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) issued by the City and all entities subordinate to the City (including any entity which the City controls, which derives its authority to issue tax- exempt obligations from the City or which issues tax- exempt obligations on behalf of the City) during the calendar year 17 50140104.03 in which the Bond is issued is not reasonably expected to exceed $5,000,000; and (e) the amount of tax- exempt obligations, including the Bond, designated by the City as "qualified tax- exempt obligations" for the purposes of Section 265(b)(3) of the Code during the calendar year in which the Bond is issued does not exceed $10,000,000. The City therefore certifies that the Bond is eligible for the arbitrage rebate exception under Section 148(f)(4)(D) of the Code and designates the Bond as a "qualified tax- exempt obligation" for the purposes of Section 265(b)(3) of the Code. Section 17. Form and Execution of the Bond. The Bond shall be typewritten, printed or lithographed on good bond paper in a form consistent with the provisions of this ordinance and state law and shall be signed by the Mayor and City Clerk- Treasurer, either or both of whose signatures may be manual or in facsimile, and the seal of the City or a facsimile reproduction thereof shall be impressed or printed thereon. Only a Bond bearing a Certificate of Authentication in the following form, manually signed by the Bond Registrar, shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance: CERTIFICATE OF AUTHENTICATION This Bond is the fully registered City of Yelm, Washington, Sewer Revenue Bond, 1999, described in the Bond Ordinance. City Clerk - Treasurer, Bond Registrar The authorized signing of a Certificate of Authentication shall be conclusive evidence that the Bond so authenticated has been duly executed, authenticated and delivered and is entitled to the benefits of this ordinance. 18 50140104.43 If any officer whose facsimile signature appears on the Bond ceases to be an officer of the City authorized to sign bonds before the Bond bearing his or her facsimile signature is authenticated or delivered by the Bond Registrar or issued by the City, the Bond nevertheless may be authenticated, issued and delivered and, when authenticated, issued and delivered, shall be as binding on the City as though that person had continued to be an officer of the City authorized to sign bonds. The Bond also may be signed on behalf of the City by any person who, on the actual date of signing of the Bond, is an officer of the City authorized to sign bonds, although he or she did not hold the required office on the date of issuance of the Bond. Section 18. Bond Re ig strar. The Bond Registrar shall keep, or cause to be kept, at its office, sufficient books for the registration and transfer of the Bond, which shall be open to inspection by the City at all times. The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver the Bond if it is transferred or exchanged in accordance with its provisions and this ordinance, to serve as the City's paying agent for the Bond and to carry out all of the Bond Registrar's powers and duties under this ordinance and City Ordinance No. 375 establishing a system of registration for the City's bonds and obligations. The Bond Registrar shall be responsible for its representations contained in the Bond Registrar's Certificate of Authentication on the Bond. Section 19. Covenant to Abide by Loan Documents. The City covenants and agrees with the Purchaser as the owner of the Bond to abide by the conditions of Resolution No. 364b, adopted August 13, 1997, which sets forth the terms of the agreement between the Purchaser and the City related to the Bond, for so long as the Purchaser is the owner of the Bond. Section 20. Sale of the Bond. The Purchaser has offered to purchase the Bond at a price of par, and the City is to furnish the Bond and the approving legal opinion of Foster 19 50140104.03 Pepper & Shefelman PLLC, municipal bond counsel of Seattle, Washington, relative to the issuance of the Bond, at the City's expense. Bond counsel shall not be required to review or express any opinion concerning the completeness or accuracy of any official statement, offering circular or other sales material issued or used in connection with the Bond and bond counsel's opinion shall so state. The City Council being of the opinion that it is in the best interest of the City to accept such offer, accepts the same. The proper City officials are authorized and directed to do everything necessary for the prompt delivery of the Bond to the Purchaser and for the proper application and use of the proceeds of the sale thereof. 20 50140104.03 Section 21. Effective Date of Ordinance. This ordinance shall take effect and be in force from and after the date of its passage and five days following its publication as required by law. PASSED by the City Council and APPROVED by the Mayor of the City of Yelm, Washington, at a regular meeting thereof, this 8th day of December, 1999. 1/ W may6r ATTEST: Cit lerk- Treasurer APPROVED AS TO FORM: City Attorney 21 50140104.03 I, AGNES P. BENNICK, City Clerk - Treasurer of the City of Yelm, Washington, certify that the attached copy of Ordinance No. 685 is a true and correct copy of the original ordinance passed on the 8fl' day of December, 1999, as such ordinance appears on the Minute Book of the City. DATED this 4 ,2L day of December, 1999. /yZ AG 4S P. BENNICK, City Clerk - Treasurer 50140104.03