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HomeMy WebLinkAbout2010.10.25 Council Workshop Packet AGENDA PASCO CITY COUNCIL Workshop Meeting 7:00 p.m. October 25,2010 1. CALL TO ORDER 2. ROLL CALL: (a) Pledge of Allegiance. 3. VERBAL REPORTS FROM COUNCILMEMBERS: 4. ITEMS FOR DISCUSSION: (a) Human Resources Division Presentation. (NO WRITTEN MATERIAL ON AGENDA) Presented by Lynne Jackson,Human Resources Manager. (b) Tourism Promotion Area: 1. Agenda Report from Gary Crutchfield, City Manager dated October 19, 2010. 2. 2011 TPA Business and Marketing Plan (Council packets only; copy available in City Manager's office for public review). 3. 2011 TPA Budget Summary. 4. 2011 TPA Special Project Expenditure. (c) Public Development Authority (PDA) Option for City of Pasco Involvement in Downtown Revitalization: 1. Agenda Report from Rick White, Community & Economic Development Director dated October 19,2010. 2. Downtown Revitalization Advisory Group Report. 3. Draft Charter of a possible PDA. 4. RCW 35.21.730-755 Public Corporations. (d) Local Improvement District No. 145 Bond Ordinance: 1. Agenda Report from Stan Strebel, Deputy City Manager dated October 20,2010. 2. Proposed Ordinance. 3. Preliminary Official Statement. (Council packets only, copies of both documents available for public review in the City Manager's office, the Pasco Library or on the city's webpage at http://www.pasco- wa.gov/webgpp/ciiycouncilreports). 5. OTHER ITEMS FOR DISCUSSION: (a) (b) (c) 6. EXECUTIVE SESSION: (a) (b) (c) 7. ADJOURNMENT REMINDERS: 1. 4:00 p.m., Monday, October 25, Port of Benton — Hanford Area Economic Investment Fund Committee Meeting. (COUNCILMEMBER AL YENNEY,Rep.; SAUL MARTINEZ,Alt.) 2. 7:30 a.m., Thursday, October 28, 7130 W. Grandridge Blvd — Tri-Cities Visitor & Convention Bureau Board Meeting. (COUNCILMEMBER MIKE GARRISON,Rep.; TOM LARSEN,Alt.) 3. 3:30 p.m., Thursday, October 28, Franklin County Emergency Management Office—Franklin County Emergency Management Board Meeting. (MAYOR MATT WATKINS, Rep.; COUNCILMEMBER TOM LARSEN,Alt.) 4. 4:00 p.m., Thursday, October 28, 7130 W. Grandridge Blvd — TRIDEC Board Meeting. (COUNCILMEMBER MIKE GARRISON,Rep.; TOM LARSEN,Alt.) 5. 5:30 p.m., Thursday, October 28, 710 W. Court Street — Benton-Franklin Community Action Committee Meeting. (COUNCILMEMBER AL YENNEY,Rep.; REBECCA FRANCIK, Alt.) CITY OF PASCO, WASHINGTON ORDINANCE NO. AN ORDINANCE relating to Local Improvement District No. 145; fixing the amount, form, date, interest rates, maturity and denominations of the Local hmprovement District No. 145 Bonds; providing for the sale and delivery thereof to Piper Jaffray& Co. in Seattle, Washington; and fixing the interest rate on Local Improvement District No. 145 assessment installments. THE CITY COUNCIL OF THE CITY OF PASCO, WASHINGTON, DO ORDAIN as follows: Section 1. Recitals; LID Formation and Puraose. (a) Pursuant to Ordinance 3872, passed August 4, 2008, the City of Pasco, Washington (the "City"), created Local Improvement District No. 145 (the "District") to finance the costs of certain street and sidewalk improvements to "A" Street between Elm Avenue and East Road 40 within the City(the "Project"). (b) It appears to the City Council of the City that it is in the best interest of the City to issue, sell and deliver the local improvement district bonds authorized and described in this ordinance (the "Bonds") for the purpose of providing long-term financing for the Project. (c) Piper Jaffray & Co., Seattle, Washington, has presented a purchase contract (the"Bond Purchase Contract") to the City offering to purchase the Bonds under the terms and conditions provided in the Bond Purchase Contract, which written Bond Purchase Contract is on file with the City Clerk and is incorporated herein by this reference. (d) The total amount of the assessment roll in the LID was $1,460,522.76. The 30-day period for making cash payments of assessments without interest to the District expired on October 19, 2010, and $675,393.5 of assessments were paid during this period. The balance of assessments unpaid on the assessment roll is therefore $785,129.25. Local Improvement District No. 145 Bonds (the "Bonds") shall, therefore, be issued in the total principal sum of $785,129.25. Section 2. Authorization and Description of Bonds. The City shall issue "City of Pasco, Washington, Local Improvement District No. 145 Bonds, 2010" (the "Bonds") to (i) pay the costs of the Project, (ii) reimburse or repay funds obtained from interfund loans, interest-bearing warrants, installment notes, or other short-term obligations issued to pay costs of the Project, and (iii) to pay the costs of issuance of the Bonds. The Bonds shall be issued in the total principal sum of $785,129.25, being the total amount on the assessment roll of the LID subject to assessment and remaining uncollected after the expiration of the 30-day interest-free prepayment period for assessments on the assessment roll for that LID. The Bonds shall be dated the date of the initial delivery, shall mature on November 15, 2022, and shall be numbered in such manner and with any additional designation (including CUSIP numbers) as the fiscal agent of the State of Washington (as the same may be designated by the State of Washington from time to time) (the "Bond Registrar") deems necessary for the purpose of identification. The Bonds shall mature on November 15, 2022, shall be in the denomination of $5,000.00 each or any integral multiple thereof, except for one Bond within the first annual group on the Estimated Redemption Schedule assigned CUSIP Number shall be in the principal amount of$5,129.25, and shall bear interest from their date to the maturity or earlier redemption of the Bonds, payable annually on November 15 of each year beginning November 15, 2011, at the rates per annum shown on the following Estimated Redemption Schedule: ESTIMATED REDEMPTION SCHEDULE Estimated Redemption Dates CUSIP Estimated Interest (November 15) Numbers Amounts Rates 2011 75,129.25 2012 75,000.00 2013 75,000.00 2014 75,000.00 2015 75,000.00 2016 75,000.00 2017 75,000.00 2018 75,000.00 2019 75,000.00 2020 110,000.00 Interest on the Bonds shall be calculated on the basis of a 360-day year with 30-day months. As used in this ordinance, "CUSIP Numbers" shall mean the identification numbers (or replacement identification numbers) assigned by the CUSIP Service Bureau or its successor to any of the Bonds. Section 3. Registration and Transfer of Bonds. The Bonds shall be issued only in registered form as to both principal and interest and shall be recorded on books or records maintained by the Bond Registrar (the "Bond Register"). Such Bond Register shall contain the name and mailing address of the owner of each Bond and the principal amount and number of each of the Bonds held by each owner. Bonds may be transferred only if endorsed in the manner provided thereon and surrendered to the Bond Registrar. The transfer of a Bond shall be by the Bond Registrar's receiving the Bond to be transferred, canceling it and issuing a new certificate in the form of the Bonds to the transferee after registering the name and address of the transferee on the Bond Register. The new certificate shall bear the same CUSIP number as the transferred Bond but may have a different inventory reference number or control number. Any exchange or transfer shall be without cost to the owner or transferee. The Bond Registrar shall not be obligated to exchange or transfer any Bond during the 15 days preceding any principal payment or redemption date. The Bonds initially shall be registered in the name of Cede & Co., as the nominee of The Depository Trust Company, New York, New York ("DTC"). The Bonds so registered shall be held in fully immobilized form by DTC as depository in accordance with the provisions of a Blanket Issuer Letter of Representations dated August 31, 1998,between the City and DTC (as it may be amended from time to time, the "Letter of Representations"). Neither the City nor the Bond Registrar shall have any responsibility or obligation to DTC participants or the persons for whom they act as nominees with respect to the Bonds regarding accuracy of any records maintained by DTC or DTC participants of any amount in respect of principal of or interest on the Bonds, or any notice which is permitted or required to be given to registered owners hereunder(except such notice as is required to be given by the Bond Registrar to DTC). For as long as any Bonds are held in fully immobilized form, DTC, its nominee or its successor depository shall be deemed to be the registered owner for all purposes hereunder and all references to registered owners, bondowners, bondholders or the like shall mean DTC or its nominee and, except for the purpose of the City's undertaking herein to provide continuing disclosure, shall not mean the owners of any beneficial interests in the Bonds. Registered ownership of such Bonds, or any portions thereof,may not thereafter be transferred except: (i) to any successor of DTC or its nominee, if that successor shall be qualified under any applicable laws to provide the services proposed to be provided by it; (ii) to any substitute depository appointed by the City or such substitute depository's successor; or (iii) to any person if the Bonds are no longer held in immobilized form. Upon the resignation of DTC or its successor (or any substitute depository or its successor) from its functions as depository, or a determination by the City that it no longer wishes to continue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the City may appoint a substitute depository. Any such substitute depository shall be qualified under any applicable laws to provide the services proposed to be provided by it. If (i) DTC or its successor (or substitute depository or its successor) resigns from its functions as depository, and no substitute depository can be obtained, or (ii) the City determines that the Bonds are to be in certificated form, the ownership of Bonds may be transferred to any person as provided herein and the Bonds no longer shall be held in fully immobilized form. Section 4. Pavment of Bonds. Both principal of and interest on the Bonds shall be payable solely out of the Local Improvement Fund, District No. 145 (the "Bond Fund"), created pursuant to Section 5 of Ordinance No. 3872, and the Local Improvement Guaranty Fund of the City (the "Guaranty Fund"), created pursuant to 3.08.010 of the Pasco Municipal Code. The Bonds shall be payable in lawful money of the United States of America. Interest on the Bonds shall be paid by checks or drafts mailed on the interest payment date, or if requested in writing prior to the Record Date by a Registered Owner of Bonds, by electronic transfer on the interest payment date to Registered Owners of the Bonds as those Registered Owners and their addresses and accounts appear on the Bond Register on the Record Date (or other record date established in the Bond Resolution), but only if the requesting Registered Owner pays the costs of such electronic transfer. Principal of and premium, if any, on the Bonds shall be payable at maturity or on such date as may be specified for prior redemption upon presentation and surrender of the Bonds by the Registered Owners to the Bond Register. Notwithstanding the foregoing, for as long as the Bonds are registered in the name of DTC or its nominee, payment of principal of and interest on the Bonds shall be made in the manner set forth in the Letter of Representations. Section 5. Guaranty Fund. The Guaranty Fund was established for the purposes of guaranteeing, to the extent amounts are available, the payment of the City's current and future local improvement bonds, including the Bonds. The City shall maintain an amount in the Guaranty Fund equal to the greater of 10 percent of the principal amount of all outstanding local improvement district bonds or the aggregate debt service due in the next calendar year based on the Estimated Redemption Schedule shown in Section 2. Section 6. Bond Redemption Fund. Prior to the issuance of the Bonds, any money on hand representing collections pertaining to prepayments or installments of assessments, and interest thereon, shall be transferred to and deposited in the Bond Fund; that money may be used for costs of the Project or for the redemption of Bonds, as determined by the City Financial Services Manager. All collections pertaining to assessments on the assessment roll of Local Improvement District No. 145 that are collected after the issuance of the Bonds shall, when received, be deposited in the Bond Fund, and until the Bonds are redeemed or otherwise provided for, those collections shall be used to redeem Bonds or to pay for costs of collecting delinquent assessments. Accrued interest on the Bonds received from the sale and delivery of the Bonds, if any, together with any net premium received from the sale and delivery of the Bonds that is not necessary to pay the costs of issuance and sale of the Bonds, shall be paid or allocated into the Bond Fund prior to the first debt service payment date with respect to those Bonds. Until needed to pay the costs described herein, the City may invest principal proceeds of the Bonds temporarily in any legal investment, and the investment earnings shall be deposited in the Bond Fund. Earnings subject to a federal tax or rebate requirement may be withdrawn from any such fund or account and used for those tax or rebate purposes. Section 7. Redemption Provisions. The City reserves the right to redeem the Bonds prior to their stated maturity on any interest payment date, in chronological order, beginning with the lowest CUSIP number as described on the Estimated Redemption Schedule shown in Section 2, as indicated by the respective CUSIP Numbers assigned to each annual group and shall call Bonds for redemption in order of the Estimated Redemption Schedule whenever there shall be sufficient money in the Bond Fund to pay the Bonds so called over and above the amount required for the payment of the interest payable on that interest payment date on all unpaid Bonds. All Bonds redeemed under this section shall be cancelled. Portions of the principal amount of any Bond, in integral amounts of$5,000 (or $5,000 plus such other denomination within the first estimated redemption group assigned by CUSIP number) may be redeemed, unless otherwise provided in the Bond Resolution. If fewer than all of the outstanding Bonds of an annual group from the Estimated Redemption Schedule are to be called for redemption, the selection of specific Bonds for redemption within that annual group shall be at random, and for as long as the Bonds are registered in the name of DTC or its nominee, the selection shall be in accordance with the operational arrangements of DTC, then in effect, as referenced in the Letter of Representations. Section 8. Notice of Redemption. The City shall cause notice of any intended redemption of Bonds to be given not less than 15 nor more than 30 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the registered owner of any Bond to be redeemed at the address appearing on the Bond Register at the time the Bond Registrar prepares the notice, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the registered owner of any Bond. Interest on Bonds called for redemption shall cease to accrue on the date fixed for redemption unless the Bond or Bonds called are not redeemed when presented pursuant to the call. In addition, the redemption notice shall be mailed within the same period to any rating agency then maintaining a rating on the bonds at the request of the City, and to such other persons and with such additional information as the Financial Services Manager shall determine, or as specified in the Bond Resolution,but none of these additional mailings shall be a condition precedent to the redemption of Bonds. Notwithstanding the foregoing, for as long as the Bonds are registered in the name of DTC or its nominee, notice of redemption shall be given in accordance with the Letter of Representations. Section 9. Failure to Redeem Bonds. If any Bond is not redeemed when properly presented at its maturity or call date, the City shall be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or call date until that Bond, both principal and interest, is paid in full or until sufficient money for its payment in full is on deposit in the Bond Fund and the Bond has been called for payment by giving notice of that call, postage prepaid, to the registered owner of each of those unpaid Bonds. Section 10. Pledge of Assessment Payments. Assessments collected in the District, together with interest and penalties, if any, are pledged to the payment of the Bonds which are payable solely out of the Bond Fund and the Local Improvement Guaranty Fund of the City in the manner provided by law. The Bonds are not general obligations of the City. Section 11. Form and Execution of Bonds. The Bonds shall be prepared in a form consistent with the provisions of this ordinance and state law, shall be signed by the Mayor and the City Clerk, 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 Bonds 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 one of the fully registered City of Pasco, Washington, Local Improvement District No. 145 Bonds, 2010 described in the Bond Ordinance. WASHINGTON STATE FISCAL AGENT Bond Registrar By Authorized Signer 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. If any officer whose facsimile signature appears on the Bonds ceases to be an officer of the City authorized to sign bonds before the Bonds bearing his or her facsimile signature are authenticated or delivered by the Bond Registrar or issued by the City, those Bonds 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. Any 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 12. Bond Registrar. The fiscal agent of the State of Washington (as the same may be designated by the State of Washington from time to time) is appointed as the Bond Registrar for the Bonds. The Bond Registrar shall keep, or cause to be kept, sufficient books for the registration and transfer of the Bonds 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 Bonds transferred or exchanged in accordance with the provisions of the Bonds and this ordinance, to serve as the City's paying agent for the Bonds and to carry out all of the Bond Registrar's powers and duties under this ordinance and City Ordinance No. 2845 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 Bonds. The Bond Registrar may become the owner of Bonds with the same rights it would have if it were not the Bond Registrar and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as members of, or in any other capacity with respect to, any committee formed to protect the rights of Bond owners. Section 13. Preservation of Tax Exemption for Interest on Bonds. The City covenants that it will take all actions necessary to prevent interest on the Bonds 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 Bonds or other funds of the City treated as proceeds of the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross income for federal income tax purposes. The City also covenants that it will, to the extent the arbitrage rebate requirement of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), is applicable to the Bonds, take all actions necessary to comply (or to be treated as having complied) with that requirement in connection with the Bonds, including the calculation and payment of any penalties that the City has elected to pay as an alternative to calculating rebatable arbitrage, and the payment of any other penalties if required under Section 148 of the Code to prevent interest on the Bonds from being included in gross income for federal income tax purposes. Section 14. Designation of Bonds as "Qualified Tax Exempt Obligations." The City has determined and certifies that (a) the Bonds are not"private activity bonds"within the meaning of Section 141 of the Code; (b) the reasonably anticipated amount of tax exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) which the City and any entity 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) will issue during the calendar year in which the Bonds are issued will not exceed $30,000,000; and (c) the amount of tax exempt obligations, including the Bonds, 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 Bonds are issued does not exceed $30,000,000. The City designates the Bonds as "qualified tax exempt obligations" for the purposes of Section 265(b)(3) of the Code. Section 15. Use of Bond Proceeds. The principal proceeds of the Bonds shall be used to finance the costs of carrying out improvements in the District and repaying interim financing for District improvements and to pay the costs of issuance of the Bonds. Until needed to pay those costs, the City may invest principal proceeds temporarily in any legal investment, and the investment earnings may be retained in the Bond Fund and be spent for the purposes of that fund, and earnings subject to a federal tax or rebate requirement may be used for those tax or rebate purposes. Section 16. Approval of Bond Purchase Contract. Piper Jaffray & Co., of Seattle, Washington, has presented a purchase contract (the "Bond Purchase Contract") to the City offering to purchase the Bonds under the terms and conditions provided in the Bond Purchase Contract, which written Bond Purchase Contract is on file with the City Clerk and is incorporated herein by this reference. The City Council finds that entering into the Bond Purchase Contract is in the City's best interest and therefore accepts the offer contained therein and authorizes its execution by City officials. The Bonds will be printed at City expense and will be delivered to the purchaser in accordance with the Bond Purchase Contract, together with the approving legal opinion of Foster Pepper PLLC,municipal bond counsel, regarding the Bonds. The proper City officials are authorized and directed to do everything necessary for the prompt delivery of the Bonds to the purchaser, including without limitation the execution of the Official Statement on behalf of the City, and for the proper application and use of the proceeds of the sale thereof. Section 17. Preliminary Official Statement Deemed Final. The City Council has been provided with copies of a preliminary official statement dated October _, 2010 (the"Preliminary Official Statement"), prepared in connection with the sale of the Bonds. For the sole purpose of the Bond purchaser's compliance with Securities and Exchange Commission Rule 15c2-12(b)(1), the City "deems final" that Preliminary Official Statement as of its date, except for the omission of information as to offering prices, interest rates, selling compensation, aggregate principal amount, principal amount per maturity, maturity dates, options of redemption, delivery dates,ratings and other terms of the Bonds dependent on such matters. Section 18. Fixing Interest Rate on Assessments. The interest rate on installment payments of special assessments are [revised/confirmed] and fixed at the rate of %. Each delinquent installment is subject, at the time of delinquency, to a charge of 5%penalty levied on both principal and interest due upon that installment, and all delinquent installments also will be charged interest at the rate of 8%per annum as set forth in Pasco Municipal Code 14.04.050. Section 19. Effective Date of Ordinance. This ordinance shall take effect and be in force from and after 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 Pasco, Washington, at a regular open public meeting thereof this 1St day of November, 2010. Mayor ATTEST: Debra L. Clark, City Clerk APPROVED AS TO FORM: Leland B. Kerr, City Attorney PUBLISHED: PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER 21,2010 NEW ISSUE NON-RATED BOOB-ENTRY ONLY BANK QUALIFIED E F, Ir rise opinion oJBorrd Counsr�under existing lerlernl lain aria assuming mnrjrliarrde will)rrpplicanle regturcments of Ibc ruder;ra!Renenus Code ref 1986,as amended(the E.a 'Code')that mdr,�7 he satisfied svbsequem to the issue date of the Bandr,intewt on the Bonds is e alurled/iorngrrirs iudome Jor federg�l sirrorne taxputposed mJd a roI .ml jca t0 dfA'JCdC7%1l alfelYlallLY Ivia4im m tay. H&Awi er:hidena on Bonds fraiped by cezladn S cntomdow tv y"he sabiecY to tax.and rnteast on the Bonds received by p JOJrtgn alrpola/eoru ryifh I;nL*ed States bmnthes mn),Ix.cu6jett to a 6 dgii hwneb prbfrh tax. Recept of interZSt on the Bourh=9 have other felon!tax rnnreguvues ,for da7tain ta.\Pa m See Ifie Cabdions'TAX EXEMP770;\"and'CER'l AIN O"THEK FEDERAL TAX CONSE2UM'�CES"herein. � R CITY OF PASCO,WASHINGTON •Q u $785,129.25M LOCAL IMPROVEMENT DISTRICT NO.145 BONDS,2010 t; DATED: Date of Initial Delivery DUE:November 15,2022 �a o The City of Pasco,Vrashingron,Local Improvement District No. 145 Bonds,2010(the"Bonds")will be issued as fully registered bonds under a book-entry only system,registered in the name of Cede&Co-as bondowner and nominee for DTC. DTC will act as initial securities depository for the Bonds. Individual purchases of the Bonds will be made in book-entry form in the r: r denomination of$5,000 or any integral multiple thereof, except for one Bond in the amount of$5,129.25. Purchasers will not § receive certificates representing their interest in the Bonds purchased. " Interest on the Bonds will be paid annually on each November 15, begiuuung November 15,2011,to and including the maturity. 3! date or earlier redemption datc.'1"he principal of and interest on the Bonds are payable by the City's Bond Registrar,currently the b a fiscal agent of the State of Washington (currently The Bank of New York Mellon in New York, Nea--York), to DTC,which is "o obligated in turn to reinit such payments to its participants for subsequent disbursement to beneficial owners of the Bonds,as s LA P Y P' P' 9 e described in"Description of the Bonds -Book-Entry Transfer System"and in appendix C. c ° � The Bonds are being issued to a for the costs of certain improvements (including with interest, an interfund loan 3 � � being pay P (� g s T, drawn upon during construction of the improvements),as described herein under"Local Improvement District No. 145 - The a Js' Project," and to pay the costs of issuance of the Bonds. See "Use of Proceeds." The Bonds may be redeemed prior to their estimated redemption date on November IS of any year if sufficient assessment payments arc available in die Local Improvement r Fund,District No. 145 (the "Bond Fund') for such puiposc,The Bonds will be redeemed in order of their CUSIP Numbers,as shown on the inside front cover, in accordance with DTC procedures, in such amounts as are available in the Bond Fund in excess of the amoiuit necessary to pay interest currently due on all unpaid Bonds. See"Description of the Bonds-Redemption." ° The principal amount of Bonds to be retired each year is only an estimate. Depending on the rate of payment of assessments, d O c Bonds may be called earlier or later than shown (but in no event later than November 15, 2022) wDiets could affect the yield on the Bonds. �� a i_ tF The Bonds are special fluid obligations of the City of Pasco,Washington (the"Cited'),payable solely out of the Bond Fund,to be r g horded from collections of local improvement district assessments le-cried against the benefited properties located within the ^o` boundaries of Local Improvement District No. 145,and the City's Local Improvement Guaranty Fund,as more fully described " ? herein under "Security and Sources of Payment for the Bonds." The Bonds do not constitute an obligation of the State of W6'ashin on or an political subdivision thereof other than the City,and neither the fiill faith and credit nor the taxin power of .5 � any t}',. gP R g�g the City is pledged to the payment of the Bonds. r City has designated the Bonds as "QUALIFIED T X-FXF.IIPT OBLIGATIONS" for banks, thrift institutions:aid other b 3 Financial institutions. ESTIMATED REDEMP'T'ION SCHEDULE LOCATED ON INSIDE FRONT COVER ts.� 6-0.d a The Bonds are offered for delivery by the Undenvriters when,as and if issued,subject to the approving legal opinion of Foster do a Pepper PLLC, Seattle, Washington, Bond Counsel. The form of Bond Counsel's opinion is attached as Appendix B. It is anticipated that the Bonds will be available for delivery at DTC's facilities in New York, New York, or delivered to the Bond o.'^ Registrar on behalf of DTC by Fast Automated Securities Transfer on or about November 16,2010. z This:-omrpage domains drrxain i*ixtatioit fir quick nfereno only. It it riot a rwnmarg of thu issue. Investors must rears the entire Offiaal Statement to obtain cinformakoa ersenkal to the making ofau iufomied investimia dedarim. R^ B '�Prefiminar subjea to c&,n e. a a 4e PiperJaffray. ESTIMATED REDEMPTION SCHEDULE CITY OF PASCO,WASHINGTON $785,129.25' LOCAL IMPROVEMENT DISTRICT NO. 145 BONDS,2010 TERM BONI) ESTIMATED REDEMPTION DATE ESTIMATED INTEREST YIELD/ NOVEMBER 15(1) .AMOUNT(t) RATE PRICE CUSIP No.nl 2011 $75,129.25 702i62— 2012 75,,000.00 702562— 2013 75,000.00 7 02562— 2014 75,000.00 7 02562 , 2015 75,000.00 702562 _ 2016 75,000.00 702562— 2017 75,000.00 702562— 2018 75,000.00 702562— 2019 75,000.00 702502— 2020 110,000.00 702562— (t) The maturity date of the.Bonds is November 15,2022. '11c estimated redemption schedule is hawed ran an assumpdon that there will be uo additional prepayments of asses-,waents, but the City attticipatac there ,%iU be such prepayments, although it is difficult to predict whether or when assessment prepayments would occur.Bonds may be called earlier than shown above depending on the receipt of the payment of asscssincnts. See"Description of die Bonds - Redemption of }fonds" M Copyright Cc's 2010 CUS111 Global Services. The CUSIP numbers are included for cunvcnience of the holders and potential holders of the Bondq. (:IISIP is a rgiistered trademark of the uncriean Bankers Association. CUSIP Global Services (CC,,;) is managed on behalf of the American Bankers Association by Standa,d and Pour'r. No assucancc can be given that the(XS1P numbers for the Bands will remain the same after the date of issuance and delivery of the Bond. t Prelimitiavy snbjecr to change. i No dealer,broker, sales represcnrative or other person has been aurhori7-ed by the City ox Yiper.J,tffiay& Co. (tine "Undenvuter") to give. any information or to make any representations with respect to the Bonds other than those contained herein and,if given or made,such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does nut constitute an offer to sell or the solicitation of an offer to buy, nor there be any sale of the Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such offer,solicitation or sale. The information set forth or included in this Official Statement has been provided by the City and from other sources believed bN the City to be reliable but is not guaranteed as to accLuacy or completeness and it is not to be construed as a representation by the Underwriter. The Undemriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilitics to investors under the federal securities haws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information and expressions of opinion hereiui are subject to change without notice, and neither the delivery of this Official Statement nor ,uny sale hereunder shall create any implication that there has been no change in the funaii6d condition or operations of the City described herein since the date hereof. Thin Official Statement contaians,in part,estimates and matters of opinion that ate not untended as sratcsnctnts of fact, and no represcntation or warranty-is made as to the corxcctness of Ruch estimates and opinions or that they will be realized. The Bonds have nor been registered with the Secwiries and Exchange Commission under the Securities Act of 1933, in reliance upon a specific exemption contained in such act. The Bonds may, however, be subject to regisnation or qualification under the securities laws of various states, and may nor be transferred in violation of such state laws. The registration or qualification of the Bonds in accordance with appticable provisions of the securities laws of the Mates in which the Bonds have been registered or qualified,if any, and exemption from registration or qualification in other states,shall not be,-egarded as a recommendation thereof No state nor any state or federal agency has passed upon the merits of these Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. This Preliminary Official Statement has been"deemed final"as of its date by the City pursuant to Rule 15c2-12 of the Securities and Exchange Cortltnissnon except for the omission of offmi ng prices, interest rates, selling compensation,aggregate principal amount, principal amount per maturity, delivery dates, and other terms of the Bonds depending on such matters,in accordance with Section 240.15c2.12(h)(1) of Chapter 11 of Title 17 of the Code of Federal Regulations. The City has also undertaken to provide continuing disclosure on ceLrain matters, including annual funancial information and specific material events, as more frilly described herein under"CONTINUING DISCLOSURE UNDERT A K I N CY." ii CITY OF PASCO,WASHINGTON 525 NORTH THIRD AVENUE P.O.BOX 293 PAsCo,WA 99301 (509)545-3404 www.pasco-wa.gov* ELECTED OFFICIALS fVletnbels Term W'igpirES Matt\Watkins Mayor December 31,2011 Rebecca Fraticik Mayor Pro-Tem December 31,2011 Robert Iloffmann Council Member December 31,2013 Michael Garrison Council Member December 31,2013 Tom Larsen Council Member December 31,2013 Saul Martinez Council Member December 31,2011 Al Yenncy Council Member December 31,2011 CITY ADMINISTRATIVE STAFF Gary Crutchfield City Manager Richard Tenvay Administrative and Community Scirviccs Director Dunyele Mason Financial Services Manager Ahmad Qayouni Public\Yorks Director Michael McShane City Engineer Denis Austin Police Chief Robert Gear Fire Chief BOND REGISTRA.RAND PAYINGAGENT The Bank of New York Mellon New York,New York BOND COUNSEL Foster Pepper PLLC Seattle,Washington UNDERWRITER Piper Jaffray Seattle,Washington The City's website is not part of this Official Staternen,and investors should not rely on iniforinadOn presented in the City's ;vebsite in determining whether to purchase the Bonds. This inactive textual reference to the City's website is not a hyperlink and does not incorporatc the City's websire by reference, iii TABLE OF CONTENTS INTRODUCTION............................................. 1 CITY PROFILE(Cont.') Budgeting Process..........................................._ 12 DESCRIPTION OF THE BONDS ...................... 1 Auditing of City Finances.................................. 12 General .............................................. I Authorized Investments.................................... 13 Redemption of Bonds...................................... I City Failure to Pny Bonds„- .................... 2 GENERAL AND ECONOMIC INFORMATION.. 14 Book Enrry Transfer System.............................. 2 Population..................................................... 14 Pa)anent of the Bonds...................................... 2 Largest Employcis------------------- ....................... 14 Economic Data............................................... 14 USE OF PROCEEDS ......................................... 3 Sources and Uses of Funds ............................... 3 INITIATIVE AND REFERENDUM.................... 16 SECURITY AND SOURCES OF PAYMENT TAX MATTERS................................................. 16 FOR THE BONDS ......................................... 3 Exclusion from Gross Income .------------------........ 16 Sources of Payment-------------- 3 Continuing Requirements....... __,_-_____......•__.... 16 Payment of Assessment....---,-•-------------------------- 3 Alternative Minimum`fax ................................. 16 Delinquent Assessments,Assessment Lien Tax on Certain Passive investment Income and Foreclosure...................----------------------- 4 of S Corpotations ----.- 16 Guaranty Fund............................................... 4 Foreign Branch Profits Tax................................ 17 ---------------------------- Possible Consequences of Tax Compliance Audit... 17 LOCAL IMPROVEMENT DISTRICT NO.145..... 5 Certain Other Federal Tax Consequences.............. 17 Local Improvement Districts-Generally.............. 5 The Pn-oject anti Subject Properties...................... 5 ABSENCE OF MATERIAL LITIGA'T'ION ........... 17 Assessed Valuation Determination...................•.. 6 Assessments .................................................. 8 CONTINUING DISCLOSURE ........................... 17 BONDOWNERS'CONSIDERATIONS............... 8 BOND RATING................................................. IS Special Obligations of the City........................... S Estimated Redcrnption Dams ............................ h APPROVAL OF BOND COUNSEL ..................... 18 Secondary Market...... .................................... 8 Debt Service Payr ncn t______________________________________ 8 CONFLICTS OF INTEREST.............................. 18 Foreclosure ... .................... ---------- -------------- 9 Priority of Lien----------------------------------------------- 9 LT NDERWRITING.--....------------........•----..........._. 18 Debt Pa}nnent Record-------------- 9 Future LID Financings...... ..................... 9 CONCLUDING STATEMENT........................... 18 CITY PROFILE........................ ------------- .......... 9 City Council ..................................... 9 APPENDIX A: 2()09 A1JD1T1!',I)FINANCIAL Key A dministra6veStaff..--------------------------------- 9 STAT&NIENTS Labor Relations................................. ------------ 10 Rctircment Plans ---------------------•....... .............. 10 APPENDIX B: FORM OF LEGAL OPINION Other Post-Employment Bane&......................... 11 Insurance Cove-rage......................................... 12 APPENDIX C: DTC c4:BOOK-ENTRY SYSTEM iv PRELIMINA R Y OFFICLILL STATEML'NT CITY OF PASCO,WASHINGTON $785,129.25* LOCAL IMPROVEMENT DISTRICT NO.145 BONDS,2010 INTRODUCTION The City of Pasco,Washington(the"City"),a municipal corporation duly organized and existing under and by virtue of the lams of the State of Washington (the "State"), furnishes this Official Statement ul connection with the offering of $787,129.25*principal amount of Local Improvement District No. 145 Bonds (the"Bonds"),dated the date of their initial delivery. 1'he aggregate principal amount of the Bonds represents the portion of the assessment roll for Local Improvement District No. 145 (the"Lill")remaining uncollected after the expiration of the 30-day prepayment period for making cash payments without interest penalty or cost. This Official Statement, which includes the cover page and the appendices, contains certain information rrlated to such offering and sale concerning the City and the Bonds. The Bonds are being issued to pay for the costs of certain improvements, as described under "Use of Proceeds." The Bonds are issued by the City pursuant to Titles 35 and 39 Revised Code of Washington ("RCW") and as authorized by Ordinance (the"Bond Ordinance")of the City Council passed on November 1,2010. Appendix A to the Official Statement contains excerpts of the City's 2009 ?audited Financial Statements. appendix B includes the form of legal opinion of Foster Pepper PLLC of Seattle,NNashington (the "Bond Counsel"). Appendix C is a description of DTC procedures with respect to book-entry=bonds. Capitalized terms that are not defined herein have tine meanings set forth in the Bond Ordinance. DESCRIPTION OF THE BONDS General The Bonds will be dated the date of their initial delivery and will be issued in the principal amount of$787,129.25*. The Bonds will bear interest at the rate and mature oil the dates set forth on the inside cover page of this Official Statement. Interest on the Bonds shall be calculated on the basis of a 360 day year consisting of twelve 30 day months, and shall be payable annually on each November 15,cotmnencing November 15,2011. The Bonds will be issued only as fully registered bonds under a book entry system,initially registered in the name of Cede & Co., as notninee for DTC,which will act as securities depository for the Bonds. Individual purchases of the Bonds will be made in the principal amount of$5,000 each or any integral multiple thereof within a single mattu-ity, except for one Bond in the amount of$5,129.25. Both principal of and itnterest on the Bonds shall be payable in lawful money of the United States of America. The fiscal agency of the State of Washington in New York,New York (cnruentlti The Bank of New York Mellon) will act as Bond Registrar for the Bonds. Purchasers will not receive certificates representing their interest in the Bonds. Sec Appendix C.—"BOOK-ENTRY SYSTEM." Redemption of Bonds The Bonds may be redeemed prior to their estimated redemption date oil any interest payment date (i.e., any November 15).The Bonds will be redeemed at par in order of their CUSIP numbers from lowest to highest (as indicated on the inside front cover) if sufficient assessment payments are available in the Local Improvement fund, District No. 145 (the "Bond Fund") over and above the amount necessary to pay interest currently due on all outstanding Bonds. All Bonds so redeemed will be canceled. The principal amount of Bonds to be redeemed each year is only an estimate.The Bonds may be redeemed earlier or later than indicated by the estimated redemption schedule shown on the inside front coves of this Official Statement,dclxnding on the rate at which property assessments are paid (but no later than November 15,2022) which could affect the yield on the Bonds. The estimated redemption schedule and the interest rates on the Bonds are based on an assumption that the assessments not paid at the expiration of the 30-day prepayment period will be paid in 10 equal annual principal installments.Property owners may prepay those assessments at any time,arith interest to the next installment due date.Tile estimated redemption schedule on the uiside front cover is based on an assumption that there will be no additional prepayments of assessments,but the City anticipates that there will be such repayments,recognizing that it is difficult to Trclimtnary,subject to change. 1 to predict whether or when prepayinnents might occur. In addition, it is possible that some property owners will not liay their assessments when due. See "Security and Sources of Payment for the Bonds - Payment of assessments" for tnore information on the estunated redemption schedule and delinquent assessments. For as long as the Bonds are in book-entry only form, if fewer than all of the Bonds of a CUSIP number are called for redemption, the selection of Bonds within a CUSIP number to be redeemed will be made by DTC in accordance with its operational procedures then in effect. See .ipl-)endix C attached hereto. If the Bond-, are too longer held in boob-entry only form, then the Bond Registrar would randomly select Bonds within a CUSIP number for redemption in increments of $5,000(or$5,000 plus such other denominations within the first estimated redemption group assigned by CUSIP number). Notice nt'Redenrption. Notice of any intended redemption will be given not less than 15 nor more than 30 days prior to the redemption date by first-class mail, postage prepaid, to the registered owner of any Bond to be redeemed at the address appearing on the Bond Register at the time the Bond Registrar prepares the notice.The requirements of this section will be deemed to have been fulfilled when notice is mailed,whether or not it actually is received by the Registered Owner of any Bond. As long as the Bonds are held in book entry form, notices will follow procedures established by the securities depository, See"Descriptiun of the Bonds—Book-Entry Transfer System" Interest on the Bonds will cease to accrue on the date fixed for redemption unless the Bond or Bonds called are not redeemed when presented. The redemption notice will be mailed wwitivn the same period to any rating agency then maintaining a rating on the Bonds at the request of the City,and to such other person and with such additional information as the Financial Services'Manager determines or as specified in the Bond Ordinance. None of the mailings are a condition precedent to redemption of the Bonds. City Failure to Pay Bonds If any Bond is not paid when properly presented at its maturity or call date, the City is obligated to pay interest on that Bond at the rate shown on the inside front co-ver until that Bond is paid in full or until sufficient money for its payment in fill is on deposit in the Bond Fund and that Bond has been called for payment_ Book-Entry Transfer System Book Ewliy Bomh-. DTC will act as initial securities depository for the Bonds. The ownership of one fully registered Bond for each estimated annual redemption date group (i.e., for each CUSIP number) of the Bonds, as set forth on the inside front cover of this Official Statement, each in the aggregate principal amount of all the Bonds in that group (CUSIP number),will be registered in the name of Cede and Co.,as nominee for DTC. See appendix C for additional information. As indicakd themin, certain in{arnsation in Appendix C bas been provided by DTC. The City makes no presentation as to the accxracy or completener.r Mary' purchasers of the Bonds shxild coeiiom dais inn iimation with D'1.'C or its panhipants. Termination of Book-Entry Transfer System. If DTC resigns as the securities depository and the City is unable to retain a qualified successor to DTC,or if the City determines that a continuation of the book-entry transfer system is not in the best interest of the City, the City will deliver at no cost to the beneficial o-wners of the Bonds or their nominees Bonds in registered certificate form,in the denomination of$5,000(or$5,000 plus such other denomination) or any integral multiple thereof.Thereafter,the principal of the Bonds will be.payable upon due presentment and surrender thereof at the principal office of the Bond Registrar.interest on the Bonds ,will be payable by check or draft mailed on the interest pal^nietnt date to the persons in whose name the Bonds are registered,at the address appearing upon the Bond Register on the 15th day of the month prcccding an into•cst payment date. Payment of the Bonds Both principal of and interest on the Bands are payable solely out of the Local Improvement Fund,District No. 145 (the "Bond Fund'} and the Local Improvement Guaranty Fund of the City, created pursuant to chapter 3.08 of the Pasco Municipal Code. See "Security and Sources of Payment for. the Bonds." The Bonds are payable in lawful money of the United States of America. Interest on the Bonds will be paid by checks or drafts of the Bond Registrar nnailed on the interest payment date, or,if requested in writing prior to the Record Date by a Registered Owner of Bonds, by electronic transfer on die interest payment date to Registered Owners of the Bond-, as those Registered ClNvners and their addresses, and accounts appear on the Bond Register on the Record Date (or other record date established in the Bond Resolution), but only if the requesting Registered Owner pays the costs of such electronic transfer. Principal of and premium,if any,on the Bonds shall be payable at muaturity or on such date as may be specified for prior redemption upon presentation and surrender of the Bonds by the Registered Owners at the principal corporate trust office or offices of the Bond Registrar. Noty ithstanding the foregoing, payment of any Bonds registered in the name of DTC or its nominee will be made in accordance,x ith the Fetter of Rept;esentations. 2 USE OF PROCEEDS The proceeds of the Bonds will be used(i) to pay for costs of improvements to "A"Street(from Him Ave. to East Rd 40) to the City's standards, includuig curb, gutter, storm water utility system, bicycle path and roadway and certain water and sewer utility system improvcrnents (the "Project"), and (ii) to pay the costs of issuance of the Bonds. See "Local Improvement District No. 145-The Project." Sources and Uses of Funds The proceeds of the Bonds will be applied as follows: SOURCES OF FUNDS Par:Irnount of Bonds USES OF FUNDS Deposit to Project Fund $ Costs of Issuance Total Uscs of Funds __ SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Sources of Payment Both the principal of and interest on the I3onds are payable solely from (i) the amounts deposited into the Local Improvement 1{imd, District No, 145 (the "Bond Fund!') collected from assessments made in the LID, together with interest and any penalties thereon, and (ii) the Local Improvement Guaranty fund (the "Guaranty Fund") of the City, created pursuant to chapter 3.08 of the Pascu-Municipal Code, The Bonds are not general obligations of the City, the State, or any other municipal corporation, and neither the full faith and credit nor the taxing power of the City are pledged to the payment of the Bonds. The payment of assessment installments are secured by a lieu on each of the properties within the LID that are subject to assessment.The remedy of the holder or owner of a bond is confined to the enforcement of the assessment and to the Guaranty Fund, as set forth in RCW 35.45.070. See "Delinquent Assessments, Assessment Lien and Foreclosure"below. Payment of Assessments The Bonds are a special fund obligation of the City, payable ftotn certain amounts in the Bond Fund and the Guaranty Fund.Local Improvement District(LID)No. 145 was fortned to improve"A"Street (from Elm Ave. to East Rd 40) to the City's standards, including curb,gutter, storm water utility system, bicycle path and roadway and certain water and sewer utility system improvements, and was formed pursuant to Ordinance. No. 3872, adopted and passed by the Pasco City Council (the"City Council")on August 4,2008 and filed with the City Clerk. The City is required by law ro deposit assessments (and interest and penalties)Ictizcd within LID No. 145 in the Bond Fund as received. The City levied assessments against the benefiting property within I.ID No, 145 by adoption of Ordinance No. 3966. The £trial assessment roll was confl=ed in the amount of$1,460,522.76 by ordinance passed on July 26, 2010. Of this total amount, $675,393.51 has been prepaid as of October 19, 2010, leaving the balance of $785,129.25 payable as described below. Assessments are payable in 10 equal annual installs cents of principal, together with interest on the unpaid principal. The first annual installment is due and payable during the 30-day period fallowing the date that is one year from the date the City first published notice that the assessment roll is in its hands for collection.The end of this period,and due date for the First installment, is Nuvember la, 2011. Thereafter, each succeeding installment, together with the interest due on the remaining unpaid balance, will become due annually each November 15. It is anticipated that interest on outstanding assessments will be charged at a rate of 0.50% above the City's cost of borrowing on the Bonds. A 5% penalty on the principal and interest due upnn that installment,and all delinquent installments will be charged interest at the rate.of 8%per annum. 3 Property owners may elect to prepay some or all of the outstanding annual installment,payments at any time;however,any payment made must be accompanied by interest on the ai-now-a prepaid that wound accrue to the next annual installttrent due date. Any installment not paid when due will become delinquent. The method for enforcing the collection of delinquent installments is described below. Delinquent Assessments,Assessment Lien and Foreclosure Payment of the principal of and interest on the Bonds is dependent on the timely collection of assessments when due. tinder Washington lativ,the special assessments on the unproved and unimproved property=within the LID are secured by a lien thereon which is superior to any other lien or encumbrances, except any lien For general property taxes. If pruperty owners fail to make assessment pavments when due,the City=is required,as described below,to pursue foreclosure and sale of the liened property on which delinquencies occur to collect unpaid assessments. The City's ordinance provides that each delinquent installment is subject to a 5.0% penalty on both the principal of the installment and interest due on that installment.All delinquent installments also continue to be charged interest at the rate of 8% per annum applicable to all unpaid assessment installments in the LID. A City ordinance also pro-'ides that upon failure to pay any installment due, the assessment becomes immediately due and payable, and the collection is enforced by foreclosure. Lander State law and City ordinance, foreclosure proceedings must be commenced at any time on or before November 15 of the year in which, on the first day of January of such year, two installments were delinquent or the final installment was delinquent for more than one year. Once a foreclosure lawsuit has begun, a property owner with a delinquent LID assessment must pay the delinquent balance,including interest,penalties and City attorney fees incurred,in order to avoid foreclosure. If a judgment is taken against the o,.ner,the property will be sold at public auction.The owner has the right to prevent the sale by paying the amount of the judgment at any time prior to the sale. If the property is sold, it may be redeemed by the owner or any junior lienholder at any time up to two years after the date of the sale, by paying the amount for which the property was sold,phis interest and costs of the sale. Any money received by the City as a result of such foreclosure action is deposited in the Bond Fund and used to repay the Bonds. If the Bonds have been fully redeemed,money received from a foreclosure is deposited in the Guaranty Fund. Chapter 6.13 RCS'permits any head of a family to protect a certain portion of the homestead(residence) from forced sale. In 0y ofl4lgonu tl SJ)arp, 30 11%'arjr..�1 . 837, 638 P.29 627,decided January 4, 1982,Division I of the Washington Co-art of Appeals held that the filing of a homestead exemption before a scheduled foreclosure sale of a residential property valued at $25,000 or less effectively exempted that property from a forced sale to enforce delinquent special assessments in a special benefit assessment district such as a local improvement district or utility local improvement district. The statutory homestead exemption has been raised to$125,000. Guaranty Fund The City,in chapter 3.08 of the Pasco 'Municipal Code,has established the Guaranty Fund pursuant to chapter 35.54 RCNX for the purpose of guaranteeing, to the extent amounts are available in the Guaranty Fund,the payment of its cturcnt and future local improvement bonds (including the Bonds),warrants or other obligations issued to pay for local improvements within the City.Defaulted bonds,notes and warrants will be purchased with funds on deposit in the Guaranty Fund in the order of their presentation without preference.Warrants against the Guaranty=Fund bearing interest at a rate not to exceed 6% may be issued by the City to meet any liability accruing against the Guaranty* Fund; provided, that the warrants so issued crust not exceed five percent of the outstandung obligations guaranteed by the Guaranty Fund. The balance in the Guaranty Fund as of September 30,2010 was approximately* $ $778,464, Other than the Bonds, the City currently has no local improvement bonds outstanding. The City may at any time issue additional local improvement bonds guaranteed by the Guaranty Fund, and there is no statutory requirement that the amount in the Guaranty Fund be increased upon the issuance of such bonds. However,the Citv has covenanted in the Bond Ordinance to maintain an amount in the Guaranty Fund equal to the greater of 10 percent of the principal amount of all outstanding local improvement district bonds or the aggregate debt service due in the next calendar year based on the estimated redemption schedule shown on the inside front cover of this Official Statement. For the purpose of maintaining the Guaranty Rind,the City is required by statute to protide for the annual levy of a Bunn sufficient, together with other sources of the Guaranty Fund, to pay warrants issued against the Guaranty Fund during the preceding fiscal year,if any, and to establish a balance therein; provided that the levy in any one year will not exceed the greater of either (i) 12 percent of the outstanding obligations guaranteed by the Guaranty Fund, or(i) the total amount of delinquent assessments and interest acctuuulated on the delinquent assessments before the levy, as of September 1. RCV, 35.54,060 provides that the taxes levied for the maintenance of the Guaranty Fund would be in addition to and,if need be, in excess of all statutory and charter limitations applicable to tax levies in the City. 4 LOCAL IMPROVEMENT DISTRICT NO. 145 By Resolution No, 3089 adopted July 7,2008, the City Council declared its intention to £grin a LID in order to finance the Project (as described below). LID No. 145 was formed pursuant to Ordinance No. 3872, passed by the City Council on Augusr 4,2008 and filed with the City Clerk(the"Lill Ordinance"). Local Ttnprovemeint Districts—Generally In Washington State, the State constitution and State law authorize the formation of special a�sessmctlt districts (generauy known as local improvement districts when formed by cities) for the purpose of paying the costs of improvements that are. deemed by a an to Provide special benefits to certaui properties within the city. Local improvement projects are initiated either by petition of property owners or by resolution of the city council. Eligible projects are limited to those local improvements described in RCW 35.43.040. Upon the filing of a sufficient petition, and also in the case of a local improvement district initiated by city council resolution,a city board,officer or authority designated by ordinance causes an estimate to be made of the cost and expense of the proposed improvement and certifies it to the city coruncil together with a description of the boundaries of the local improvement district and a statement of what portion of the cost and expense should be borne by the property within the proposed district.A preliminary assessment roll or other document is prepared and placed on file,listisig the lots, tracts, and parcels of land or other property in the proposed local improvement district that will be specially benefited by the proposed improvements and estimating the amount of the cost and expense to be borne by each lot,tract,or parcel of land or other property. Before an improvement project is approved,a public notice and hearing is required (M V35.43.125).35.43.125).Notices are mailed to the affected property owners as well as published. The notice provides each owner with the proposed project description and an estimate of benefits and costs. After:the hearing,the city council dctcinnines whether the local improvement district should be formed. If the district-was initiated by resolution of the city(as the LID was initiated), and within 30 days after passage of the ordinance foinning the local improvement district, property owners representing at least 60 Percent of the proposed assessments protest the formation of the local improvement district, the local improvement district may not be formed. Within a period of 30 days following the 30-day protest period, a lawsuit challenging the local improvement district formation may be filed, This 30- day period expired without the filing of a lawsuit. Upon completion of construction, or earlier, as in the case of the LID, the final costs are determined and assessments calculated and levied after a hearing. The method of assessment is normally selected at this tithe. When a property owner receives a notice of that property's final assessment collection, he or she has the option of making a cash payment in frill during a period of 30 days following the notice or making annual installment payments. Alien against the property secures timely payment. There is no prepayment penalty if a property owner prepays all or some instalhnnents, and prepayments of assessments are common. The Project and Subject Properties The Project consists of improvements to "A" Street (from Elm.Ave. to East Rd 40) to the City's standards,including curb, gutter,storm water utility system,bicycle path and roadnvay and certain water and sewer utility system improvements: The largest assessment of the LID is for Columbia East LLC with a proposed combined assessment of $417,091. Columbia Fast is a partnership tLit owns about 400 acres, the northern portion of which is adjacent to and served by A Street; consequently, their entire acreage is enhanced by the improvements. Ail of the acreage is zoned for industrial use and, though it is currently being faimed, the owner is actively marketing the acreage for industrial sale/use and is working with Burlington Northern Santa Fc Railway("BNSF"),which also considers this acreage prime rail use. The City and Port of Pasco have collaborated with this uwnnr to arrange for extension of a rail spur line from BNSF. The rail switch, an investment of$600,000,is already in place and can be readily extended when needed by an industrial user, The second largest assessment is for CASH LLC which is for$345,004. CASA LLC is owner of about 90 acres along the North side of A Street, all of which was approved as preliminary plat several years ago. Phase I of the plat has been finished (residential} and Phase II includes street and utility improvements along 1 Street. The owner has supported the LID to finance the required improvements to facilitate phase II. The new phase of development (about 20 acres) will include commercial and higher density residential(apartments),all on the North side of A Street(the south side of A Street is all zoned for commercial/industrial use). The pxiuiaiy member in CASA LLC is Broetje Orchards, a large Walla`Walla counA,agricultural producer. The housing portion of the development is partially used by Broetje's employees while the balance is to be sold on the open market. 5 These.are.a total of 24 tax parcels (otaliug approximately 84,5 acres within the I.M. "Me C3«7iers include the following. (1) Percent Assessment Account No.of Zoning Assessed Total orTotal Paid as of Chmer/Mopiyor Numbers Parcels Classification Value Assessment Assessments 10/19/10 C Wumbia r-no LLC 17,19.2,19.3 3 1 S 307,(xx) s 417,M).81 2836' CASA l.f,L' 4.6 2 C.R13 519,600 345,1814.31 23.62 345,(x}4.31 Cite of 1'nsco 16 1 (, 114,100 151,738.74 10.39 157,738,74 ROJO v enuae LLC: 18,19.1 2 I 308,900 126259.92 8.64 126.259.42 Dororh)•b,0511 n(rrustcc) 20,21 22 3 1 5118,200 121,24954 8.30 12,124.95 mc(ireery t•:nterprises LT.(: 1,2 2 (; 237,200 66,687.25 4.57 - Kenneth L.Reisinger 11,1) 1; 3 12'1' 85,800 5x),614.36 4.03 luau 7,9 2 RT los,G1x1 44,710,77 3.06 - J uhilee foundation 5 1 C 868,70(1 30,599 41 2.51 36,598.41 Turner&Liliana(ETA1)1+,liia n6, f 4 1 51,00() 29,990.63 2,05 - KL Laud LLC 15 1 C 5],01x) 29,996.63 2.05 Gnn7alc,Alciandtn 1)&Tcresa M S 1 C 33,000 16,671.81 1.14 1,667.18 Edna1>.l`%ants tr,t11 2 RT 8,800 14,903.58 1.02 2,000.00 Totals; 24 3,201.900 51,46Q,322J6 100,W°'o 5675,393,51 (1) Zunaig Classifications: C(Cointnercial),RT(Residential Transit ion;;R•3(Rc•idcntiaI Medium Density);I(Industrial) Assessed Valuation Determination The assessed value of the properties is determined by the Franklin County assessor, (the "assessor"). The assessor determines the value of all teal proper and personal property that is subject to ad ialorem taxadorl, with the exception of certain utility properties which are valued by the State Department of Revenue. The Assessor is an elected official whose duties and methods of determining value are prescribed and controlled by statute and by detailed regulations promt42ted by the State Department of Revenue. For tax purposes, the assessed value of property is 100 percent of its market value.. Assessed valuations for all properties are statistically updated each year. Physical inspections are performed by the Assessot for each property even}-six pears. The property is hstcd by the Assessor on a roll at its current assessed value and the roll is tiled in the Assessors office. The Assessor's deteruvnations are subject to revision by the County Board of Equalization. After all administrative procedures are completed, the County Commissioners receive the Assessor's final certificates of assessed value of property within the County. Follo-wing is a snap of LID No, 145 showing the parcels that are contained within the LID, 6 LID No.145"A}}STREET IMPROVEMFNTS u atvtMu 4 Y Q L ll�° Y M1J pn �1 Q IS Y1np5q/1 1 r i a7 9wwN , ti7 arena � W � e J • _him � � R 6 w � D 4 ar Donn s < ax mm tp zlv) �« IT, JL2 jh]E rs Q Laaranr>rs s m ��J 1 E s Ell � O C>ffill LW srmx I I Assessments The City levied assessments against the benefited properties located within the LID pursuant to the LTD Ordinance. The final assessment roll for the LID was confirmed by Ordinance No. 3966. LOCAL IMPROVEMENT DISTRICT No.145 LID assessment Roll $ 1,460,522.76 Less:Prepayments $ 675,393.51 Remainingrlssessment Balance $ 785,129.25 Number of Parcels in LID 24 Number of Parccls Paid in Full 6 Numher of Parcels with Assessments Remaining 18 Franklin County Assessed Value for Total LID,with Improvements $4,662,423.00 Fra:ilclin County Assessed Value for Non-Prepaid parcels $3,719,823.00 Ratio of Remaining Assessment Balance to assessed Value For Non-Prepaid Parcels 21.1% Average Franklin County Assessed Value per Non-Prepaid Parcel $206,657 Average LID assessment per Non-Prepaid Parcel $43,618 BONDOWNERS' CONSIDERATIONS Prospective purchasers of the Bonds should carefully consider the follou*ing factors,as well as other information contained in this Official Statement,prior to purchasing the Bonds.This list is not intended to be exhaustive. Special Obligations of the City The Bonds are special fund obligations of the City, payable solely from collections of installments of assessments and the ar Guanty Fund. The Bonds are not general obligations of the City, and neither the full faith and credit nor the taxing power of the City is pledged to the payment of the Bonds. No money raised from taxation by the City,other than to the extent required for deposit into the Guaranty Fund, will be available to pay principal of or interest on the Bonds. See "Security and Source of Payment for the Bonds"herein. Estimated Redemption Dates The Bonds are sold based on an estimated redemption schedule. The Principal of and interest on the Bonds are payable from special assessments levied against real property in the LID, and property owners may prepay their assessments in whole at any time after the assessment is levied by paying the assessment plus interest accrued and accruing thereon through the next interest payment date. 11ne amount of principal which will be redeemed on any payment date depends upon the amount of payments and prepayments received and any delinquencies of assessments. To the extent that funds from assessment payments are available above and beyond the interest currently due on the Bonds on any payment date, the Ciih- may redeem more Bonds than indicated by the estimated redemption schedule. Early payment of assessments is on comm , but thrse can be no assurance that Bonds will be redeemed in the amounts or on the dates in the estimated redemption schedule;Bonds may be,and likely will be,redeemed earlier or later than estimated. Secondary Market There can be no assurance that a secondary market for the Bonds can or will be maintained by the Unnderwritex or others after their issuance, and purchasers of the Bonds should be prepared to hold their Bonds to maturity or an earlier redemption date. The secondary market for assessment bonds, such as the Bonds, is not as liquid as it is for many other types of municipal obligations. Debt Service Payment Payment of the prisncipal and interest on the Bonds is dependent on the ability of property owners within the LID to pay special assessments on their property. Makeup of any Bond Fund shortages caused by nonpayment of assessments is dependent upon the City's ability to draw upon the funds in the Guaranty Fund and/or to collect taxes for the Guamnty Fund in an annowit sufficient to cover delinquent assessments and in pursuing the foreclosure and site of the property on which delinquencies occur. See"Security and Sources of Payment for tine Bonds - (;uaxanty Fund." 8 Foreclosure State statute and City ordinance provide that foreclosure of property may begin on or before November 15 of the year following the date when two annual installments of assessments are delinquent. Proceeds from the foreclosure of property in the LID may be subject to considerable delay and may not be sufficient to cover delinquent assessments and interest.See "Security and Sources of Payment for the Bonds—Assessment Lien and Foreclosure." Priority of Lien Under State law, any future overlapping local improvement district assessments will have the same priority of lien as the assessments levied in the LID. Special assessments on unproved and unimproved property within a local improvement district are secured by a lien which is superior to all other liens or encumbrances except any lien for general property taxes. Debt Payment Record The City has promptly met all debt service requirements on outstanding obligations. No refua&ig bonds have been issued to avoid an impending default. Future LID Financings The City reserves the right to issue,at any tune,additional local improvement district bonds secured by the Guaranty Fund, and the City is not required to increase the amount in,or to be deposited in,the Guaranty fund upon the issuance of future LID bonds. CITY PROFILE The City of Pasco, located in southeastern Washington, encompasses approximately 33.6 square miles and has a 2010 estimated population of 56,300. The City and the adjacent cities of Richland and Kennewick snake up what is known as the Tri-Cities. The City serves as the Franklin County (the "County") Seat and is the largest city in the County. The City was incorporated in 1891. The City has a Council-Manager form of government.The City Manager is appointed by the City Council and is responsible for the administration of all aspects of City operations. Council members are part-time officials, elected every four years through rite-wide elections. The Cowicil is comprised of seven members, one of whonn is selected by the members to serve as Mayor for a two-year temi. The City provides a full range of services normally associated with a municipality. These sen^iccs include police and fire protection, ambulance service,parks and recreational activities, street maintenance and construction, planning and zoning and general administrative services. The City owns and operates a water/sewer/stom-water utility and a cemetery. The City owns a golf course which is leased to an operator. City Council Following are the current members of the City Council and their term expiration dates. Members Position Term Expires 'Matt Watkins Mayor December 31,2011 Rebecca Ytancik Mayor Pro-Tern December 31,2011 Robert Hoffmann Council Nlember December 31,2013 .\lichael Garrison Council Alember December 31,2013 Tour Larsen Council?Member December 31,2013 Saul Nfartine7. Council Member December 31,2011 .'l Yenney Council Member December 31,2011 Key Administrative Staff Gary Crutchfield, Cif Manager, was appointed City Manager in October 1984. He has 35 years of experience in municipal government as a planner and manager. Prior to being appointed Citv h-lanager, fix Crutchfield setved as Community Development Director of the City between 19'8 and 1981. 9 Rut.-A Towety, Adrminix1ratiwe and Gomrrcvdi ! Services Dhraor, began sen•ing as the Director of the City's Department of ,Wrninistrative and Comtnuriity-Services Department on July 13, 2009. The department consists of fivc sciirice divisions: Administration,Facilittes, Finance,Infonnation Systems, and Recreation. Prior to corning to the City, Air. Terway served as Parks, Recreation and Forestry lfanager for the City of Fergus balls, tliutnesota for three. years and as Public Service Director for the City of 11"adnais Heights, Minnesota. His experience also includes more than 12 years working for Washington State barks. Air. Tenvay holds a Bachelor of Science in Applied Management from National American University and an associate of Applied Science in Natural Resources from the University of Minnesota, Dugyele Mason, Financial Seruicer Manager, began as the Financial Services Manager for the City on august 10, 2010. The Financial Services division is responsible for internal and external financial reporting,financial analysis and cost accountin& budget preparation, city,audit coordination as well as utility, special asecssment, ambulance, grant and other miscellaneous billings, payables and debt management and city investments. Prior to coming to Pasco, 14Ss. Mason worked as Finance Manager for the cities of auburn and Walla Walla and as r\ccounting Operations Supenisor fur the City of Richland. Her professional experience includes over '19 years of government accounting experience and five years of professional audit experience.She holds a Bachelor of arts degree in Business/Accounting from the University of Washington and has been a licensed Certified Public accountant for 24 years. Labor Relations The (amity currently employs 286 (not including 83 seasonal employees) people including part-time workers. There are 183 employees represented by 5 bargaining units as follows: Number of Current Contract Bargaining Unit Employees Expiration Date International 1.7nion of Opetating Engineers,local Nu.280 60 December 31,2012 International Association of Firefighters 48 December 31,2010 Pasco Police Officers Assoc"Uniformed"Employee Bargaining Unit 62 December 31,2010 Pasco Police Officers Assoc"Nun-uniformed" Employee Bargaining Unit 8 December 31,2011 Pasco Code.Enlforcement Officer's and Permit Technicians 5 December 31,2010 TOTAL 183 The City considers labor relations with its bargaining units to be good. There have been no recent strikes or major labor reLntions problems. Retirement Plans Substantially all full-time-arid qualifying part-time employees participate in one of the following statewide local government retirement systems adnunistered by the Washington State Department of Retirement Systems,mider cost-sharing,multiple- employer public employee retirement systems. Actuarial information is on a system-wide basis. Police officers and firefighters are covered by the Law Enforcenacrrt Officers and Fire Fighters Retirement System (r'LEOFF"). Other City employees are covered by the Public Employees' Retirement System ("PERS"). Contributions to the systems by both employee and employer are based upon gross wages covered by plan benefits. PERS and LEOFF participants who joined the system by September 30, 19�7 are Plan i members. Those PERS participants who joined on or after October 1, 1977 are Plan 2 members, runless they exercise an option to transfer to Plan 3. PERS participants joining on or after September 1, 2002 have the irrevocable option of choosing membership in PERS Plan 2 or PERS Plan 3. LEOFF participants who joined on or after October 1, 1977 are Plan 2 members. The City contributed $657,196 to PERS and $496,483 to LEOFF in 2009 for all of the City's employees that are covered under PERS and I.EOFF. The following tables outline the contribution rates of employees and employers under PERS and LEOFF. FERS_Cantribution lutes as of Dccembrr 31,20 Plan 1 Plan 2 Plan 3 Employer(1) 5.31% 5.31% 5.31% Employee 6.00% 3.90% Variable(2% (1) Includer a O.i ou admix ieva6un fee. (�} Rares eary from 5.0%minimum to 15.(11%maumum ha cud nn rate:selected by the P1 ILS 3 member. 10 LEOFF CgaUi Lmdan 13 rite®m,of I3eeerxaber 31.?rO1F9 Plan 1 Plan 2 Employer(1) 0.16% 5.24% Employee 0.00 8.46 State N/A 3.38 (1) 111CILLdN�3{1.1G"S,3�inuniFlrutinn fee. Wvhile the City's contributions in 2009 represent its full current liability under the Systems, any unfunded pension benefit obligations could be reflected i, future years as higher contribution rates. It is expected that the contribution rates for employees and employers in the 11125 Plaits will increase in the coming years. The State Act iary's website (which is not incorporated into this Official Statement by reference) includes information regarding the values and funnding levels of these retirement plans,including the underfilnding of PERS Plan 1. Defined Compensadon. The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan permits employees to defer a portion of their salary until future years. The defined compensation is not available to employees or their beneficiaries until tenritration,retirement, or unforeseeable emergency or upon death. Firrrnun'.r Pensim Fund. The City is the administrator of the Fireman's Pension Svatems C 1 PF'}, which is shown as the pension trust fund in the City's financial statements. 14TF is a single-employer closed pension system that was established in conformance with Revised Code of'Washington (RC\X,) Chapter 41.18. Membership is limited to fire fighters employed prior to March 1, 1970 when the LEOFF retirement system was established. The City's liability under the FPF consists of all benefits, including payments to beneficiaries, for firemen retired prior to !\•larch 1, 1970, and excess benefits over aruounts provided by LROFF for covered fire fighters retired after 2,farch 1, 1970. Under the FPF, eligible fie fighters may retire at age 50 with 25 years of service. Death and disability benefits are also provided, as established under the governing State law. Individuals -who terminate employment prior to retirement may withdraw their contributions to the plan plus accumulated interest, but by doing so, forfeit their rights to future pension benefits. No separate financial reporting is issued for die plan. As of December 31, 2009, there were a total of 12 individuals covered by this system. Seven of these individuals were retirees,one was actively employed and four were widows drawing benefits. All of the retirees are drawing excess petasion benefits under the system over the amotunt of frill benefit provided through LF,OFF. The most recent actuarial study of the Fireman's Pension System was done to determine future funding requirements as of January 1,2007. The City's obligations under the PPF are limited to the benefits provided to firefighters retired prior to March 1, 1970, plus payments of excess retirement benefits to active members as of that date. In order to meet these obligations, the City may contribute annually to the FPF the amount raised by IcN7 itng all or part of a tax of up to$0.45 per $1,000 of true and fair market value. of assessed property, the maximum provided by law for retaining the FPF. '111e City has inet frill liability under the system. Historical trend information regarding all of these plans is presented in Washington State's Department of Retirement Systems'annual financial report.A copy of this report may be obtained at Department of Retirement Systems Point Plaza West 1025 Last Union Street P.O.Box 48380 Olympia,WA 98504-8380 Internet Address:,v!xw.drs.wa.m)i Other Post-Employment Benefits The City is required by State law to pay for the full medical costs of its LEOFF flan 1 employees. Currently,30 members meet those eligibility requirements. The City provides medical insurance and reimbursements for all necessary hospital, medical and nursing care expenses not payable by worker's compensation, social security, insurance provided by another employer,other pension flan or any other sinular source are covered. Medical insurance for the retirees is provided by the City's employee medical insurance program. Direct paymcnt is made for other retiree medical expenses not covered by 11 standard medical plan benefits provisions. The City ales pays the Medicare premium for qualifying LEOFF 1 retirees as outlined in Chapter 41 RCW The cost of this preiniutn of approximately $96 per month in 2009, is offset by a lower insurance prennium. The City's funding policy for these benefits is based upon pay-as-you-go financing requirements. During the years 2008,200-1,2006 and 2005,expenditures of$232,067,$307,328,$256,866 and$211,212,respectively,were recognized for post-employinent health care. Expenditures for 2009 were$367,014. The City provides certain healthcare benefits to retired firefighters and police officers who tivere hissed prior to 1978 as required by RCV/41.26.150.Entry into this system is now Bused. The City is currently preparing to do a study to calculate the City's Annual Required Contribution to consider funding the anticipated costs associated with Other Post Employment Benefits ("OPEB"). At present, the City= has 17 former firefighters,21 former police and five employed firefighters subject to OPEB. Insurance Coverage Tlme City is a member of the Washington Cities Insurance authority (the `.authority") which now includes over 120 members. Liability coverage is written on an occurrence basis, without deductibles. The authority provides coverage for comprehensive general liability, automobile, police, public official errors or omissions, stop gap and employee benefits liability. Limits are $4,000,000 per occurrence self-insured layer, and$16,000,000 per occurrence in the re-insured excess layer. The excess layer is insured by the purchaser of reinsurance. Total Ianits are$20,000,000 per occurrence. The Board of Directors of the Authority determines the limits and terns of rho coverage annually. Accounting and Budgeting Process BCUtt Of A roynff qg. The accounting and reporting policies of the City conform to the Budgeting,Accounting and Reporting Srstern (R:1RS) as prescribed by the State Auditor. The accounts of the City arc organized on the basis of funds, each of which is considered a separate accounting entity. Each fund is accounted for with a separate set of self-balancing accounts that comprise its assets,liabilities,fund equity,revenues and expenditures,as appropriate. The City's resources are allocated to and accounted for in individual funds depending on their iimtended purpose. The Budget Prowess V%ashington law,chapter 35A.33 RCW, prescribes the method and schedule for annual budgeting for the City. Annual appioprLated budgets arc adopted at [lie fund level. Local improvement district debt seiN-ice and certain custodial agency fluids,however,are not budgeted. A budget increase or decrease to a fund must be authorized by the City Council,while appropriation transfers within a fund may be authorized by the City Manager. All budgets are controlled oil an organizational basis. The budgets constitute the legal authority for expenditures at that level.Annual appropriations for all funds lapse at the fiscal period end. Auditing of City Finances The City's financial statet-petits are prepared in conformity -,6th generally accepted accounting principles ("GAAP") as applied to governmen[al units, and are regulated by the Washington State ,Auditor's Office, division of Audit. The Government accounting Standards Board ("C.sASB") is the accepted standard setting body for establishing goverrimental accounting and financial reporting principles. Accounting systems and budgetaiv controls are prescribed by the Office of the State Auditor ("SAO'S in accordance with RCV7 43.09.200, RCW 43.09,230 and GAAP. State statutes require audits for cities to be conducted by the SAO. The City complies with the systems and controls prescribed by the SAC) and establishes procedures and records which reasonably assure safeguarding of assets and the reliability of financial reporting. The SAO is required to examine the affairs of cities;. The City is audited annually. The examination must include, among other things, the financial condition and resources of the City, whether the laws and constitution of the State are being complied with,and the methods and accuracy of the accounts and reports of the City. The City's 2009 audited Financial Report is attached at appendix A. The SAO revieured the City's financial statemments and accounting practices for fiscal year 2009, and issued an unqualified opinion on the financial statements of the governmental activities, the business-type activities,each major fund,and the aggregate.remaining fund information. However,the SAO made a finding of significant deficiency,while noting that there were no instances of noncompliance that were material to the financial statcmctits of the City. Specifically,the SAO noted finding that the City lacked intmuil controls for fuiaticial reporting. The deficiency noted was a result of the turnover of key personnel in the accounting department. Tlie City has since replaced all personnel with experienced professionals and has made it a priority to train key staff. 12 Authorized Investments Chapter 35.39 RCW limits the investment by a city or town of its inactive thuds or other funds in excess of current needs to the following authorized investments: United States bonds;United States certificates of indebtedness;bonds or warrants of the State and any local government in the State;its own bonds or warrants of a local improvement district winch are within the protection of the local trnprovernent guaranih, fund law; and any other investment authorized by law for any other taxing districr or the State 'Treasurer. Under chapter 43.84 RCW, the State Treasurer may invest in non-negotiable certificates of deposit in designated qualified public depositories;in obligations of the U.S.govertunelit,its agencies, and wholly owned corporations;in bankers'acceptances;in commercial paper;in the obligations of the federal home loan bank, federal national mortgage association, and other government corporations subject to statutory provisions; and may enter into repurchase agreements. Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW 35.39.030). Money available for investment may be invested nn an individual fund basis or may,unless other,visc restricted by law, be commingled within one common investment portfolio. All income derived from such innvestment may be either apportioned to and used by the carious participating funds or for the berncfxt of the general government in accordance with city ord nmices or resolutions. Funds derived from the sale of bonds or other instruments of indebtedness will be invested or used is such manner as the authorizing ordinances,resolutions,or bond covenants may lawfully prescribe. Local Government Inivstment Pool. The State Treasurer's Office administers the Washington State Local Goverrnnent Investment Pool (the "LGIP"), a $8.7 billion fund that invests money on behalf of more than 460 participants (as of December 31, 2009). In its management of LGIP, the State Treasurer is required to adhere., at all times, to the principles appropriate for the prudent investment of public fiends. 'l'hese are, ui priority order, (i) the safety of principal; (ii) the assurance of sufficient liquidity to meet cash flow demands; and (iii) to attaun the highest possible yield within the constraints of the first two goals. Historically,the LGIP has had sufficient liquidity to meet all cash flow demands. The LGIP, authorized by chapter 43.250 RCW, is a voluntary pool which provider. its participants the opportunity to benefit from the econornies of scale inherent in pooling, It is also untended to offer participants increased safety of principal and the ability to achieve a higher investment yield than would otherwise be available to them. The pool is restricted to investments with maturities of one year or less,and the average life typically is less than 90 days. Investments permitted under the pool's guidelines include U.S.government and agency securities, bankers' acceptances, high quality commercial paper,repurchase and reverse repurchase agreements, motor vehicle fund warrants, and certificates of deposit issued by qualified Washington State depositories. .4xtboriZerllntestnrerte for t3onr!Proceeds. In addition to the eligible investments discussed above,bond proceeds max also be invested in mutual funds ,with portfolios consisting of U.S.government and guaranteed agency securities with average maturities of less than four years;municipal securities rated ii-i one of the four highest categories;and money market funds consisting of the same,so long as municipal securities held in the Rind(s)are in one of the two highest rating categories of a nationally recognized rating agency. Bond proceeds may also be invested in shares of money market fiords with portfolios of securities otherwise authorized by law for investment by local governments (R(-,W 39.59.030). The City's investments arc categorized to give an indication of the risk assumed at Year-end. The following suurmaty shows the City's investments at`ear-end categorized by risk. Category 1 includes investments that are either insured or legistered and held by the City or its agent in the City's name. Category 2 includes uninsured and unregistered investments that arc held by the cotunerparty's trust department of agent in the City's name Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty, or its oust department or agent, but not in the City's name. The fair market value of investments is based upon quoted market prices as of December 31,2009. The City's investments at December 31, 2009,at boos:value,are as follows: Fail Investrrterrt __ _ Mattuities Market Value Pederal Securities $30,489,791 $30,498,791 Mutual Funds 1,938,019 2,365,742 LGTP 8,876,203 8,876,203 Savings:accounts 50,419 50.419 Total 41.363.432 $41.79]_155 13 GENERAL AND ECONOMIC INFORMATION The City is located in southeastern Washington in Franklin County (the "County") at the confluence of the Columbia and the Yakima rivers,npprowimately 200 miles southeast of Seatde, 150 miles southwest of Spokanc and 200 miles northeast of Portland, Oregon. Pasco is one of three cities which make up the urban area known as the Tri-Cities, the others being Kennewick and Richland in neighboring Benton County. Population Vrith a 2010 estimated population of 56,300, the City is the largest of four incorporated communities in Franklin County. Historical pol uLations for the City and Franklin County are as follows: City of Franklin Year aSCO Colin 2010 56,300 75.500 2009 54,490 72,700 2008 52,290 70,200 2007 50,210 67,400 2006 47,610 64,200 Cnrrnr: IY'ur/kn{Jnn Srarr Oj,re uJ Fiilam:ruLllar„roourni Largest Employers The table below shows a list of the top ten employers ranked by number of employees. PASCO AREA MAJOR EMPLOYERS 2009 FInpinyer — SenicelProduci P.ni}rlo{•ecs Pasco School District Schools 2,100 Lourdes Health Network Health Care 807 Wal-NIart Grocery-Retail 410 Columbia Basin College Schools—Universities 552 Pasco Processing LLC Frozen Food Processing 350 Con Agra Foods Lamb-1lreston Frozen Food Processing 320 City of Pasco Government 286 Franklin County Government 257 Zirkle Fruit Company Farms 200-400 Sagemoor Fauna Agriculture 150-27 5 Rcscrs Fine Foods food Products—Retail 190 La Cliriica Community Health Care Health Care 184 McCurley Integrity Dealerships Autntnobile Sales 160 Lowes Hardware 117 Samar: Pasco 2010 Economic Data Following are additional economic indicators for the City,Franklin County and the Tri-Cities Area. CITY OF PASCO BUILDING PERMrrS Residential Cl> Commercial Total Year Permits Value Permits Value Permits Value 2010(2) 1,232 $82,485,645 144 $17,569,311 1,376 $100,054,956 2009 1,499 102,114,296 350 59,980,045 1,849 162,094,341 2008 1,403 82,936.295 274 40,022,768 1,677 122,959,064 2007 1,577 106,210,440 310 81,570,866 1,887 187,781,328 2006 1,221 136,939,576 98 43,807,691 842 177,057,403 (t)Includes S;nglc family,Two F nn0y,Three or more ramifies, 0 Aa of August 1,201(1 Sawa: City of Paaa hidle ir{G 1),p Y mwl 14 TAXABLE RETAIL SALES City of Franklin Year Pasco County 11; 2010(2) $414,735,294 $480,109,396 2009 802,641,083 917,095,762 2008 877,529,074 1,052,102,171 2007 856,422,037 1,057,004,462 2000 811,292,311 929,717,630 2005 781,596,534 862,138,345 1i)14anklin cJuunty Agurci including City of Pasco. P Through the.2nd quartet'of 2010, 'Taxable rcmil;alas rhroiigh die 2nd quarter n,2069 for the City was$379,654,324 and$438,251,856 fur Franklin Council. .Sarre•: !6"itrlvr;tau Stcrlc Ure ofltinu»idl:1?:a�,Uetrral PERSONAL AND PER CAPITA INCOME Franklin County State of W�ffh�Lmn Total Personal Per Capita Total Personal Per Capita Year Income(000's) Personal Income income(000's) Personal Income 2008'i) $1,827,068 $24,965 $280,677,561 $42,747 2007 1,684.,797 24,235 271,007,842 41,919 2006 1,498,163 22,650 252,022,976 39,55() 2005 1,388,493 22,187 230,001,881 36,734 2004 1,276,722 19,831 222,378,678 35,959 it1 Most trcent arailablc. Sown,: („S',Otparlivew rrf U.9ime re.R-irrou of hojuowic 41na6,.4a MEDIAN HOUSEHOLD INCOMEM Franklin Washington Year County State 2009 $37,818 $52,413 2008 39,299 54,086 2007 40,876 55,771 2006 43,230 56,808 2005 42,533 54,618 (1)figures for 2008 and prtUnn%taq eetunate,2[x19 art.pruiceted. Sam,, 1S'd Augton State Office of Pirtnnaialfl?arragelrrer�t RESIDENT CIVILIAN LABOR FORCE AND EAfPLO"IIENT Ayc.Ldgc_Annual _— 20100) 2009 2008 2007 2006 2005 State of Washington Labor Force 3,534,900 3,528,710 3,476,370 3,390,410 3,317,390 3,255,530 Employed 3,207,610 3,214,500 3,290,090 3,235,960 3,154,420 3,075,970 %Unemployed 9.30/) 8.9% 5.4% 4.61/16 4.9% 5.5% Franklin County Tabor route 37,590 35,980 34,090 31,180 29,7510 29,140 Employed 34,560 33,100 32,040 29,250 27,720 27,090 %Unemployed 8.10/0 8.0% 6A 9/6 6.2% 7.0% 7.0% (1)AcernXe through September 2010,moat rccenr available, Not seasonally adjusted. ,S'orme: 11 irrlau��ton SYrrte Euif.+Io}wecnl.t`anrri$1)t/rmtmeul. 15 AVERAGE CIVILIAN NON-AGtucuLTun,WAGE AND SALARY EMPLOYMENT KENNEwicx-RICIILAND-PAsco MSA Employment Sector 20100) 2009 2008 2007 2006 2008 Natural Resources and Construction 5,900 6,300 7,000 5,800 6,000 5,800 lfanufacturing 6,800 6,900 6,500 6,200 5,800 5,800 Trade, Transportation&Utilities 16,400 16,200 16,400 16,200 15,900 15,000 Financial Activities 3,400 3,400 3,600 3,500 3,500 3,400 Professional&Business Services 24,000 21,900 20,800 19,700 18,800 20,500 Education&Health Services 10,800 10,500 10,100 9,600 9,200 8,700 Leisure and Hospitality 8,900 8,800 8,900 8,300 7,900 7,900 Government 17,700 17,400 16,700 16,300 16,000 16,000 {1) Ari�i�r through Srphemhrr 2l!]tl. lumix: 1!'a 1Jg1dn S'&Or fear ly Deplaftleul. INITIATIVE AND REFERENDUM Under the State Constitution, the voters of the State have the ability to iniri<ate legislation and modify existing legislation through the powers of initiative and referendum, respectively. The initiative power in Washington may not be used to amend the State Constitution. Initiatives and referenda are submitted to the voters upon receipt of a petition signed by at least 8% (initiatives) and 4% (referenda) of the number of voters registered and voting for the office of Governor at the prece6ig regular gubernatorial election. Any law approved in this manner by a majority of the voters may not be amended or repealed by the Legislature within a period of two years fulluwing enactment, except by a vote of taro-thirds of all the members elected to each house of the Legislature. after two years, the late is subject to amendment or repeal by the Legislature in the same matuaer as other laws. TAX MATTERS Exclusion from Gross Income In the opinion of Bond Counsel, under existing federal law and assuming compliance with applicable requirements of the Internal Revenue Cade of 1986,as amended(the"Code"), that must be satisfied subsequent to the issue date of the Bonds, interest on the Bonds is excluded from gros s income for federal income tax purposes. Continuing Requirements The City is regttired to comply with certain requirements of the Code after the date of issuance of the Bonds in order to maintain the exclusion of the interest on the Bonds from grass income for federal income tax purposes,including,without limitation, requirements concerning the qualified use of bond proceeds and the facilities financed or refinanced with bond proceeds,limitations on investing gross proceeds of the Bonds in higher yielding investments in certain circumstances and the requirement to comply arith arbitrage rebate requirements to the extent applicable to the Bonds. The City has covenanted in the Bond Oklinance to comply with those requirements, but if the City fails to comply with those requirements,interest on the Bonds could become taxable retroactive to the date of issuance of the Bonds. Bond Counsel has not undertaken and does not undertake to monitor the City's compliance with such requirements. Alternative Minimum Tax Under the existing federal laws,interest on the Bonds received by individuals and corporations is not treated as an item of tax preference for purposes of the federal alternative rr ini+rmum tax, and interest on the Bonds received by corporations is not taken into account in determining adjusted current earnings of corporations for purposes of the federal alternative minimum tax. Tax on Certain Passive Investment Income of S Corporations Under Section 1375 of the Code,certain excess net passive investment income,including interest on the Bonds,received b,, an S corporation(a corporation treated as a partnership for most federal tax purposes) that has Subchapter C earnings and profits at the close of tine taxable year may be subject to federal income taxation at the highest rate applicable to corporations if more than 25%of the gross receipts of such S corporation is passive investment income. 16 Foreign Branch Profits Tax Interest on the Bonds may be subject to the foreign branch profits tax imposed by Section 884 of the Code when the Bonds are owned by,and effectively connected with a trade or business of,a t)nited States branch of a foreign corporation. Possible Consequences of Tax Compliance Audit The Internal Revenue Scn­,7ce (the "IRS") has established a general audit program to detcrnnine. whether issuers of tax- exempt obligations,such as the Bonds, are in compliance with requirements of the Code that must be satisfied in order for the interest on those obligations to be., and continue to be,excluded from gross income for federal income tax purposes. Bond Counsel cannot predicr whether the IRS will continence an audit of the Bonds. Depending on all the facts and circumstances and the hpe of audit involved, it is possible that connmencenmenr of an audit of the Bonds could adversely affect the market value and liquidity of the Bonds until the audit is concluded,regardless of its ultimate outcome. Certain Other Federal Tax Consequences '1..'he.Bonds Am `,Quali#ed Tax-Exempt Obliggataons"for Financial institutions Section 265 of the Code generally provides that 100% of any interest expense incurred by banks and other financial institutions that is allocable to tax-exempt obligations acquired after.august 7, 1986,will be disallowed as a tax deduction. However,if the tax-exempt obligations arc obligations other than certain private activity bonds, are issued by a governmental unit that, together with all entities suboidinatc to it, does not reasonably anticipate issuing more than$30,000,000 of tax-exempt obligations (other than certain private activity bonds and other obligations not required to be included in such calculation)in the current calendar year,and are designated by the governmental unit as "qualified tax-exempt obligations," only 20% of any interest expense deduction allocable to those obligations will be disallowed. The City is a governmental unit that, together with all suburd riate entities, reasonably anticipates issuing less than $30,000,000 of tax-exempt obligations (other than certain private activity bonds and other obligations not required to be included in such calculation) during the current calendar bear, and has designated the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Code. Therefore, only 20'/+- of the interest expense deduction of a financial institution allocable to the Bonds will be disallowed for federal income tax purpose,. Redlue on of v,-i-Reserve Deditelions for Properly &Caauall?lnsutaw C:omparaiej. Under Section 832 of the Code,interest on the Bonds received by property and casualt}� insurance companies will reduce tax deductions for loss reserves otherwise available to such companies by an amount equal to I i%of tax-exempt interest received during the taxable year. Let on C er4ain Social Semrz} and Retitrmetat iiertts. Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take receipts or accruals of interest on the Bonds into account in detemnining gross income. Other Possible Pedetal Tax Consequences. Receipt of interest on the Bonds may have other federal tax consequences as to which prospective purchasei's of the.Bonds may wish to consult their okrn tax advisors. ABSENCE OF MATERIAL LITIGATION There is no litigation of any kind now pending or,to the knowledge of the City,threatened to restrain or enjoin the issuance or delivery of the Bonds or in any manner gucstioning the proceedings and authority under which the Bonds are issued or affecting(lie ability of the City to pay the principal of or the interest on the Bonds. CONTINUING DISCLOSURE The aggregate principal amount of the Bonds does not exceed$1 million,thus the issuance of the Bonds does not constitute an "Offering" under Securities and Rxchange Commission Rule 15c2-12 (the "Rule"). The City is not required to enter into an undertaking with respect to the Bonds to comply with the requirements under the Rule to provide certain financial information and operating data and notices of certain material events with respect to the Bonds. Prior Cotrrpliawr ii,#b Canlintdag Disclosure Undrizakings.The City has not faded to comply with any prior undertaking under the Rule in the past five yews. 17 BOND XKf ING The City will not apply for a rating on the Bonds. APPROVAL OF BOND COUNSEL Legal matters incident to the authorization, issuatrcc and sale of Bonds by the City are subject to the approving legal opinion of Foster. Pepper PLLC;, Seattle, Washington, Bond Counsel. The form of the opinion of Bond Counsel with respect to the Bonds is attached hereto as Appendix B. The opinion of Bund Counsel is given based on factual representations made to Bond Counsel,and under existing law, as of the date of initial delivery of the Bonds,and Bond Counsel assumes no obligation to re Axe or supplement its opinion to reflect any facts or circumstances that may thereafter come to its attention,or any changes in law that may thereafter occur. The opinion of Bond Counscl is an expression of its professional judgment on the matters expressly addressed in its opinion and does not constitute a guarantee of result. Bond Counsel will be compensated only upon the issuance and sale of Bonds. CONFLICTS OF INTEREST Some or all of the fees of the. Underwriter and Bond Counsel are contingent upon the issuance and sale of the Bonds. Furthermore, Bond Counsel from time to time serves as counsel to the Underwriter with respect to issuers other than the City and transactions other than the issuance of the Bonds. None of the council members or other officers of the City have interests in the issuance of the Bowls that arc prohibited by applicable law. UNDERWRITING The Underwriter has agreed, subject to certain conditions, to purchase all of the Bonds, at a price equal to the principal amount thereof, less an underwriting discount of$ . The Underwriter has represented that the Bonds will be reoffered at the prices or yields set foith on the cover hereof,and such initial offering prices may be changed from time to time by the Underwriter. After the initial public offering the public offering prices may be varied from time to time. The Underwriter has entered into an agreement (the "Distribution Agreement") ;xith Advisors Asset 1�lanagement, Inc. ("A M'J, for the distribution of certain municipal securities offerings allocated to the Underwriter at the original offering prices, Under the Distribution Agreement,if applicable to the Bonds, the Underwriter will share with AANf a portion of the fee or commission,exclusive of management fees,paid to the Underwriter. CONCLUDING STATEMENT 11 estimates, asswnptrons, statistical information and other statements contained herein, while taken from sources considered reliable,are not guaranteed by the City or the Underwriter. So far as any statement herein includes matters of opinion,or estimates of future expenses and income,whether or not expressly so stated, they are intended merely as such and not as representations of fact. The information contained hereiii should not be construed as representing all conditions affecting the City or the Bonds. Additional mfortmation may be obtained directly from the City or the Underwriter. The foregoing statements relating to the Bond Ordinances and other documents are in all respects subject to and qualified in their entirety by provisions of such documents. This Official Statement, starting with the cover page and all subsequent pages, including any appendices, comprise the entire Official Statement, which has been approved by the City. The City has represented to the Underwriter that the portions of this Official Statement directly pertaining to the City neither contain any rr isrepresentatio,i of material fact nor omit any material fact necessary to understand the financial, economic or legal nature of the City or any information presented herein. CITY OF PASCO,WASHTNG TON By. Authorized RepresentatiVe 18 APPENDIX A 2009 AUDITED FINANCIAL STATEMENTS APPENDIX B FORM OF LEGAL OPINION FOSTER PEPPER ,,,, November 16,2010 City of Pasco,Washington Re: City of Pasco,Washington, $ Local Improvement District No. 145 Bonds We have ser%ed as bond counsel to the City of Pasco, Washington (the "City"), in connection with the issuance of the above referenced bonds (the "Bonds"), and in that capacity have examined such law and such certified proceedings and other documents as we have deemed necessary to render this opinion. As to matters of fact material to this opinion,we have relied upon represCntations contained in the certified proceedings and other certifications of public officials furnished to us,without undertaking to v erifs the same by independent investigation. The Bonds are issued by the City pursuant to Ordinance No. (the"Bond Ordinance") for the purpose of providing the funds necessan, to pay so much of the cost and expense of the improvements as provided by Ordinance No. 3872 establishing Local Improvement District No. 145 as is levied and assessed against the property included hi the local improvement district and benefited by those improvements. The Bonds are payable solely from special assessments levied in Local Improvement District No. 145 and paid into the Local Improvement Fund, District No. 145,of the City(the"Bond Fund"),and from the Local Improvement Guaranty!Fund of the City. We have not been engaged to review and thus express no opinion concerning the completeness or accuracy of any official statement, offering circular or other sales or disclosure material relating to the issuance of the Bonds or otherwise used iin conection with the Bonds. Under the Internal Revenue Code of 1980, as amended (the "Code', the City is required to comply with certain requirements after the date of issuance of the Bonds in order to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes,including,without lirnitatiori,requirements concerning the qualified use of Bond proceeds and the facilities financed or refinanced with Bond proceeds, limitations on investing gross proceeds of the Bonds in higher yielding investments in certain circumstances and the arbitrage rebate requirement to the extent applicable to the Bonds. The City has covenanted in the Bond Ordinance to comply with those requirements, but if the City fails to comply with such requirements, interest on the Bonds could become taxable retroactive to the date of issuance of the Bonds. We have not undertaken and do not undertake to monitor the 0 ty's compliance with such requirements. City of Pasco,Washington November 16,24]4 Page 2 Based upon the foregoing,as of the date of initial delivery of the Bonds to the purchaser thereof and full payment therefor,it is our opij-iion that under existing law: 1, The City is a duly organized and legally existing axle city under the laws of the State of NY'a."hington; 2. The Bonds have been dull authorized and executed by the City and are issued in full compliance with die provisions of the Constitution and laws of the State of NI ashington and the ordinances of the City relating thereto; 3. The Bonds constitute valid and binding obligations of the Bond Fund and the Local Improvement Guaranty Fund of the City, except only to the extent that enforcement of payment may be limited by bankruptcy, insolvency or other laws affecting creditors' rights and by the application of equitable principles and the exercise of judicial discretion in appropriate cases; 4. The Bonds are not general obligations of the City;and 5. Assuming compliance by the City after the date of issuance of the Bonds with applicable requirements of the Code, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative nuitiintun tax applicable to individuals; however, interest on the Bonds received by certain S corporations may be subject to tax, and interest on die Bonds received by foreign corporations with United States branches may be subject to a foreign branch profits tax. We express no opinion regarding any other federal tax consequences of receipt of interest on die Bonds. This opinion is given m of the date hereof, and use assume no obligation to revise or supplement thus opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. We bring to your attention the fact that the foregoing opinions are expressions of our professional judgment on the matters expressly addressed and do not constitute guarantees of result. Respectfully submitted, FOSTER h)EPPER PTIC APPENDIX C DTC& BOOK-ENTRY SYSTEM The in/ormation in this,redion concerning the Deposhgy Tinst Coritpaly.Nop York,Vew Fork (`DTC' and DTC's book-envy syrtew bas been obtained firont sources that the Di idd believes to be rrliable, but/ht Uiririet rakes no responnbik,.2,for the aawmr y thereo%' BenejiJa! Ormers(ar beraittafle,r defttred)slmuld tberefore confirm tbe.folkwittg nitb DTC or the l)atricipants(as hetpinatler defrned). For purposes of this section, r-eferences to the I ewer mean the D4rf&l, and rrfmoces to Agent mean the Bond Registrar: I'or the purposes a f this Offrcial.Statemenl, the term `Bens0 al Owner"includes the petson for ndium ibe Ilat Y pant acq;dres an ialerest in the Bonds. 1. DTC will act as securities depositors for the. Bonds. The Bonds will be issued as fully-registered in the. name of Cede&Co. (DTC's partnership notninee) or such other nature as may be requested by an autltotimd representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds in the principal ainount of such maturity and will be deposited with DTC. 2. DTC, the world's largest securities depository,is a limited-purpose trust company organized under the flew York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Resen*e System, a "cleaning corporation" within the meaning of the New York Uniform Commercial Code,and a"clearing agency"registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S, and non-U.S. equity issues, corporate and municipal debt issues, and money- market instruments (froth over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC.DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, batiks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsicliary of The Depository Trust,&, Clearing Corporation ("DTC;C"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are. registered clearing seniees. DTC:C is owned by the users of its regulated subsidiaries. A.ecer;s to the ll'1'C: system is also available to others such as both U.S. and non-U.S. securities brokers and dealers,banks,and trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or.indirectly ("Indirect Participants"). DTC has Standard& Poor's highest rating. A. A. The DTC Rides applicable to its Participants are on file with the Securities and Exchange Commission. More information about D'1 7C can be found at www.dtcc.com and www.dtc.org. 3. Purehascs of the Bonds under the DTC system,in denominations of$5,000 or any integral multiple thereof,must be trade by or through Direct Participants, which xU receive a credit for the Bonds on 91'C's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Chvner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Chvners grill not receive written confirmation from DTC of their purchase. Beneficial Owners are, however,expected to receive written confirmations protdding details of the transaction, as well as periodic statements of their holdings, from the Director Indirect Participant.through-,%>hich the Beneficial Owner entered isito the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Boiids,except in the event that use of the book-entry system for the Bonds is discontinued. 4. To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede&Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede& Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds;DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may of may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings can behalf of their customers. 5. When notices are given, they will be sent by the Bond Registrar to DTC only. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them,subject to any statutory or regulatory=requirements as may be in effect from time to tune. 6. Redemption notices will be sent to DTC. if less than all of the Bonds are being redeemed, DTC's practice 1fi to detennine by lot the amount of the interest of each Dircct Participant in such issue to be redeemed. 7. Neither DTC not Cede&Co. (nor any other DTC nominee)will consent or%-ote with respccr to the Bonds unless authorized by a Direct Participant in accordance with DTC's N241 Procedures. Under its usual procedures, DTC mails an Omnibus Pro%7, to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede&Co.'s consenting or toting rights to those Direct Participants to whose accounts Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede& Cu. or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants'accounts upon DTC's receipt of fuads and corresponding detail information from the District or the Bond Registrar,on payable date in accordance with their respective holdings shuwn on DTC's records. Payments by Participants to Beneficial Owners will he.governed by standing instructions and customary practices, as is the case with seciuities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of ITC, the Bond Registrar,or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede.&Co. (or any, other nominee as may be requested by an authorized representative of DTC) is the responsibility of the [District) or the Bond Registrar, disbursement of such payrnetits to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Tndireet Participants. 9. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the [District] and the Bond Registrar. Under such circumstances, iii the event that a successor sectuities depository is not obtained,Bond certificates are required to be printed and delivered. 10. Issuer may decide to discontinue use of the system of the book-entry transfers through DTC (or a successor securities depository).In that event,Bond certificates will be printed and delivered to DTC. The infoniantion in this section concerning DTC and DTC's book-entry system has been obtained Sion: sources that Issuer believes to be reliable,but Issuer takes no responsibility for the accuracy thereof.