HomeMy WebLinkAbout3740 Ordinance CITY OF PASCO, WASHINGTON
ORDINANCE NO. 31 -!Q
AN ORDINANCE RELATING TO THE WATERWORKS UTILITY OF
THE CITY, INCLUDING THE SANITARY SEWERAGE SYSTEM AND THE
SYSTEM OF STORM OR SURFACE WATER SEWERS AS A PART
THEREOF; ADOPTING A SYSTEM OR PLAN OF ADDITIONS TO AND
BETTERMENTS AND EXTENSIONS OF THE WATERWORKS UTILITY OF
THE CITY; PROVIDING FOR THE ISSUANCE AND SALE OF $4,400,000
PAR VALUE OF WATER AND SEWER REVENUE BONDS, 2005, FOR THE
PURPOSE OF CARRYING OUT THE SYSTEM OR PLAN ADOPTED BY
THIS ORDINANCE AND TO PAY THE COST OF ISSUING AND SELLING
THOSE BONDS; FIXING THE DATE, FORM, DENOMINATION,
MATURITIES, INTEREST RATES, TERMS AND COVENANTS OF THE
BONDS AUTHORIZED HEREIN; PROVIDING FOR BOND INSURANCE;
AND PROVIDING FOR THE SALE AND DELIVERY OF THE BONDS TO
BANC OF AMERICA SECURITIES LLC OF SEATTLE, WASHINGTON.
PASSED: NOVEMBER 21, 2005
This document was prepared by:
FOSTER PEPPER & SHEFELMAN PLLC
1111 Third Avenue, Suite 3400
Seattle, Washington 98101
(206) 447-4400
50590614.3
TABLE OF CONTENTS
Section1. Definitions...................................................................................................................3
Section2. System or Plan.............................................................................................................7
Section3. Findings .......................................................................................................................8
Section 4. Purpose and Description of the Bonds ........................................................................8
Section 5. Registration and Transfer of Bonds.............................................................................9
Section6. Payment of Bonds......................................................................................................10
Section 7. Redemption Provisions and Open Market Purchase of Bonds..................................10
Section 8. Notice of Redemption................................................................................................1 l
Section 9. Failure to Redeem Bonds ..........................................................................................1 I
Section 10. Form and Execution of Bonds...................................................................................11
Section11. Bond Registrar...........................................................................................................12
Section 12. Bond Fund; Payments into Bond Fund......................................................................13
Section 13. Pledge, Lien and Charge for Payment of the Bonds..................................................14
Section14. Flow of Funds............................................................................................................14
Section15. Covenants ..................................................................................................................15
Section 16. Provisions for Future Parity Bonds ...........................................................................16
Section 17. Preservation of Tax Exemption for Interest on the Bonds ........................................18
Section 18. Small Governmental Issuer Arbitrage Rebate Exception and Designation of
Bonds as "Qualified Tax-Exempt Obligations." .......................................................18
Section 19. Deposit of Bond Proceeds .,.......................................................................................19
Section 20. Refunding or Defeasance of Bonds...........................................................................19
Section 21. Approval of Bond Purchase Agreement....................................................................20
Section 22. Undertaking to Provide Continuing Disclosure.........................................................20
Section23. Bond Insurance..........................................................................................................23
Section24. Effective Date............................................................................................................28
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50590614.3
CITY OF PASCO, WASHINGTON
ORDINANCE NO. 31q0
AN ORDINANCE RELATING TO THE WATERWORKS UTILITY OF
THE CITY, INCLUDING THE SANITARY SEWERAGE SYSTEM AND THE
SYSTEM OF STORM OR SURFACE WATER SEWERS AS A PART
THEREOF; ADOPTING A SYSTEM OR PLAN OF ADDITIONS TO AND
BETTERMENTS AND EXTENSIONS OF THE WATERWORKS UTILITY OF
THE CITY; PROVIDING FOR THE ISSUANCE AND SALE OF $4,400,000
PAR VALUE OF WATER AND SEWER REVENUE BONDS, 2005, FOR THE
PURPOSE OF CARRYING OUT THE SYSTEM OR PLAN ADOPTED BY
THIS ORDINANCE AND TO PAY THE COST OF ISSUING AND SELLING
THOSE BONDS; FIXING THE DATE, FORM, DENOMINATION,
MATURITIES, INTEREST RATES, TERMS AND COVENANTS OF THE
BONDS AUTHORIZED HEREIN; PROVIDING FOR BOND INSURANCE;
AND PROVIDING FOR THE SALE AND DELIVERY OF THE BONDS TO
BANC OF AMERICA SECURITIES LLC OF SEATTLE, WASHINGTON.
WHEREAS, the City of Pasco, Washington (the "City"), by Ordinance No. 531, passed
March 7, 1944, provided that the system of sewerage of the City, including all additions,
extensions and betterments thereto, should be operated as a part of and as belonging to the
waterworks utility of the City pursuant to the provisions of Chapter 193 of the Laws of 1941 of
the State of Washington (RCW 35.67.320 et seq.) (the "Waterworks Utility"); and
WHEREAS, pursuant to Ordinance No. 2839, the City heretofore issued $2,305,000 par
value Water and Sewer Revenue and Refunding Bonds, 1991 (the "1991 Bonds"), and provided
for the issuance of additional water and sewer revenue bonds of the City on a parity with the
1991 Bonds ("Future Parity Bonds") if the conditions set forth in Ordinance No. 2058 were met
and complied with at the time of issuance of those additional bonds; and
WHEREAS, the 1991 Bonds are no longer outstanding; and
WHEREAS, pursuant to Resolution No. 2133, the City entered into a Washington State
Water Pollution Control State Revolving Fund (SRF) Loan Agreement as of May 26, 1994 (the
"State SRF Loan"), to borrow $3,802,779 for the purpose of paying a part of the cost of
constructing certain Waterworks Utility facilities, the payment of which Loan Agreement once
was to be a claim and charge on the Net Revenue of the Waterworks Utility and ULID
Assessments on a parity of lien with the 1991 Bonds, and subsequent amendments to that Loan
Agreement have increased the total amount of the loan to $23,700,000; and
WHEREAS, pursuant to Ordinance No. 3054, the City heretofore issued $8,705,000 par
value Water and Sewer Revenue Bonds, 1994 (the "1994 Bonds"), on a parity of lien with the
1991 Bonds and the State SRF Loan, for the purpose of paying the cost of carrying out a system
50590614.3
or plan of additions to and betterments and extensions of the Waterworks Utility of the City
adopted and ordered to be carried out by Ordinance No. 3040; and
WHEREAS, pursuant to Ordinance No. 3314, the City heretofore issued $2,255,000 par
value Water and Sewer Revenue Bonds, 1998, Series A (Taxable) (the "1998A Bonds"), on a
parity of lien with the 1994 Bonds and the State SRF Loan, for the purpose of paying the cost of
carrying out a system or plan of additions to and betterments and extensions of the Waterworks
Utility of the City adopted and ordered to be carried out by Ordinance No. 3314 and to pay costs
of issuance of those bonds; and
WHEREAS, pursuant to Ordinance No. 3314, the City heretofore issued $6,725,000 par
value Water and Sewer Revenue Refunding Bonds, 1998, Series B (Tax-Exempt) (the "199813
Bonds"), on a parity of lien with the 1994 Bonds, the State SRF Loan and the 1998A Bonds to
advance refund the callable portion of the City's 1994 Bonds and to pay the administrative costs
of such refunding and costs of issuance of those bonds; and
WHEREAS, pursuant to Ordinance No. 3314, the City heretofore issued $1,515,000 par
value Water and Sewer Revenue Bonds, 1998, Series C (Tax-Exempt) (the "1998C Bonds"), on
a parity of lien with the 1994 Bonds, the State SRF Loan, the 1998A Bonds and 1998B Bonds to
pay the costs of improvements in Utility Local Improvement Districts Nos. 130 and 131 and to
pay costs of issuance of those bonds; and
WHEREAS, pursuant to Ordinance No. 3378, the City heretofore issued $985,000 par
value Water and Sewer Revenue Bonds, 1999 (the "1999 Bonds") on a parity of lien with the
1994 Bonds, the State SRF Loan, the 1998A Bonds and 1998B Bonds to pay the costs of
improvements in Utility Local Improvement Districts Nos. 133 and 134 and to pay costs of
issuance of those bonds; and
WHEREAS, pursuant to Ordinance No. 3503, the City heretofore issued $995,000 par
value Water and Sewer Revenue Bonds, 2001 (the "2001 Bonds") on a parity of lien with the
1994 Bonds, the State SRF Loan, the 1998A Bonds, 1998B Bonds and 1999 Bonds, to pay the
costs of improvements in Utility Local Improvement Districts Nos. 136 and 137 and to pay costs
of issuance of those bonds; and
WHEREAS, the City also has four Washington State Public Works Trust Fund loans
outstanding in the total principal amount of$4,487,904, which loans are subordinate to the 1994
Bonds, the State SRF Loan, the 1998A Bonds, 1998B Bonds, 1998C Bonds, 1999 Bonds and
2001 Bonds; and
WHEREAS, pursuant to City Council action on September 17, 2001, the Agreement
relating to the State SRF Loan was amended to provide that the State SRF Loan be junior and
subordinate to the Parity Bonds (as defined in Section 1 below); and
WHEREAS, by Ordinance No. 3104, passed on August 21, 1995, the City Council
adopted the City of Pasco Comprehensive Plan 1995-2015, including as a part thereof the City of
Pasco Comprehensive Sewer Plan,November 1992 (the "Comprehensive Sewer Plan"); and
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WHEREAS, by Ordinance No. 3567, passed on October 7, 2002, the City heretofore
issued $5,945,000 par value Water and Sewer Revenue Bonds, 2002 (the "2002 Bonds") on a
parity lien with the 1994 Bonds, the 1998A Bonds, 1998B Bonds, 1999 Bonds and 2001 Bonds
to pay the costs of carrying out the plan of additions specified, adopted and ordered to be carried
out pursuant to Ordinance No. 3567 and to pay the costs of issuance of those bonds; and
WHEREAS, the City Council has determined that it is necessary and in the best interests
of the City that certain additional improvements be made and there be adopted a system or plan
of additions to and betterments and extensions of the Waterworks Utility of the City(the "Plan of
Additions"); and
WHEREAS, the City Council has determined that it is necessary to issue and sell
$4,400,000 par value of water and sewer revenue bonds (the "Bonds") to provide the funds
necessary to carry out the Plan of Additions and to pay the costs of issuance and sale of the
Bonds; and
WHEREAS, Financial Security Assurance Inc. (the "Insurer"), has made a commitment
to issue an insurance policy (the "Insurance Policy") insuring the payment when due of the
principal of and interest on the Bonds as provided therein, and the City Council of the City
deems that the purchase of the Insurance Policy is in the best interest of the City; and
WHEREAS, Banc of America Securities LLC of Seattle, Washington, has offered to
purchase the Bonds on the terms and conditions hereinafter set forth; NOW, THEREFORE,
THE CITY COUNCIL OF THE CITY OF PASCO, WASHINGTON, DO ORDAIN as
follows:
Section 1. Definitions. As used in this ordinance, the following words shall have the
following meanings:
"AIternate Security" means any bond insurance, collateral, security, letter of credit,
guaranty, surety bond or similar credit enhancement device providing for or securing the
payment of all or part of the principal of and interest on any specified Parity Bonds, issued by an
institution which has been assigned a credit rating at the time of issuance of the applicable Parity
Bonds, respectively, secured by such Alternate Security in the highest rating categories by both
Moody's Investors Service, Inc., and Standard & Poor's Ratings Group.
"Annual Debt Service" for any or all Parity Bonds for any year means all the interest,
plus all principal which will mature or come due in such year, less all bond interest payable from
the proceeds of any such bonds in that year.
"Assessment Bonds" means, at the time of determination, Parity Bonds then outstanding
equal to the sum of the nondelinquent unpaid principal amount of ULID Assessments then
outstanding plus any ULID Assessment payments then on deposit in the Principal and Interest
Account of the Bond Fund. Assessment Bonds shall be allocated to each remaining maturity of
Parity Bonds in the same proportion as the total of the Assessment Bonds relates to the total of
the Parity Bonds then outstanding.
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50590614.3,
"Average Annual Debt Service" means, at the time of its calculation, the sum of the
Annual Debt Service for the remaining years to the last scheduled maturity of the applicable
Parity Bonds divided by the number of those years.
"Bond Fund" means the Water and Sewer Revenue and Refunding Bond Redemption
Fund, 1991, of the City created and established by Ordinance No. 2839 in the office of the
Finance Director of the City.
"Bond Register" means the registration books of the Bond Registrar on which are
recorded the names of the owners of the Bonds.
"Bond Registrar"means the Fiscal Agent.
"Bonds" means the Water and Sewer Revenue Bonds, 2005, authorized to be issued by
this ordinance.
"City"means the City of Pasco, Washington, a duly organized code city.
"Code" means the United States Internal Revenue Code of 1986, as amended, and
applicable rules and regulations promulgated thereunder.
"Coverage Requirement" in any year means an amount of Net Revenue of the
Waterworks Utility, together with the ULID Assessments collected in that year, equal to at least
the Maximum Annual Debt Service on all Assessment Bonds plus an amount of the Net Revenue
of the Waterworks Utility not used to calculate the Coverage Requirement on Assessment Bonds
equal to at least 1.25 times Maximum Annual Debt Service on all bonds payable from the Bond
Fund that are not Assessment Bonds.
"DTC"means The Depository Trust Company, New York,New York.
"Fiscal Agent" means the fiscal agent of the State of Washington as the same may be
designated by the State of Washington from time to time.
"Future Parity Bonds" means any and all water and sewer revenue bonds or other
obligations of the City issued or incurred after the date of the issuance of the Bonds pursuant to
the provisions of Ordinance No. 2839, Ordinance No. 3054, Ordinance No. 3314, Ordinance No.
3378, Ordinance No. 3503 and Ordinance No. 3567 and this ordinance, the payment of the
principal of and interest on which constitutes a Iien and charge upon the Net Revenue of the
Waterworks Utility and ULID Assessments on a parity with the lien and charge upon such Net
Revenue and ULID Assessments for the outstanding Parity Bonds, but shall not include variable
rate obligations.
"Government Obligations" means those government obligations defined by RCW
39.53.010(9) as it now reads or hereafter may be amended and which are otherwise lawful
investments of the City at the time of such investment.
"Gross Revenue of the Waterworks Utility" or "Gross Revenue" means all of the
earnings and revenues received by the City from the maintenance and operation of the
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50590614.3
Waterworks Utility and all earnings from the investment of money on deposit in the Bond Fund,
except ULID Assessments, government grants, proceeds from the sale of Waterworks Utility
property, City taxes collected by or through the Waterworks Utility, principal proceeds of bonds
and earnings or proceeds from any investments in a trust, defeasance or escrow fund created to
defease or refund Waterworks Utility obligations (until commingled with other earnings and
revenues of the Waterworks Utility) or held in a special account for the purpose of paying a
rebate to the United States Government under the Code.
"Insurance Policy" shall mean the insurance policy issued by the Insurer guaranteeing the
scheduled payment of the principal of and interest on the Bonds when due.
"Insurer" means Financial Security Assurance Inc., a New York stock insurance
company, or any successor thereto or assignee thereof.
"Letter of Representations" means the Blanket Issuer Letter of Representations between
the City and DTC dated August 31, 1998.
"Maximum Annual Debt Service" means, at the time of calculation, the maximum
amount of Annual Debt Service that will mature or come due in the current year or any future
year on the outstanding Parity Bonds.
"Net Revenue of the Waterworks Utility" or "Net Revenue" means the Gross Revenue
less Operating and Maintenance Expenses.
"1991 Bonds" means the Water and Sewer Revenue and Refunding Bonds, 1991, dated
October 1, 1991, authorized to be issued by Ordinance No. 2839, which bonds are no longer
outstanding.
"1998 Bonds" means, collectively, the Series 1998A Bonds, Series 1998B Bonds and
Series 1998C Bonds.
"1999 Bonds" means the Water and Sewer Revenue Bonds, 1999, dated October 1, 1999,
authorized to be issued by Ordinance No. 3378.
"2001 Bonds" means the Water and Sewer Revenue Bonds, 2001, dated November 15,
2001, authorized to be issued by Ordinance No. 3503.
"2002 Bonds" means the Water and Sewer Revenue Bonds, 2002, dated October 1, 2002,
authorized to be issued by Ordinance No. 3567.
"Operating and Maintenance Expenses" means all reasonable expenses incurred by the
City in causing the Waterworks Utility to be operated and maintained in good repair, working
order and condition, including payments made to any other municipal corporation or private
entity for water service and for sewage treatment and disposal service or other utility service in
the event the City combines such service in the Waterworks Utility and enters into a contract for
such service, but not including any depreciation or taxes levied or imposed by the City or
payments to the City in lieu of taxes, or capital additions or capital replacements to the
Waterworks Utility.
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"Outstanding Parity Bonds" means the outstanding 1998 Bonds, the 1999 Bonds, the
2001 Bonds, and the 2002 Bonds.
Bonds. "Parity Bonds" means the Outstanding Parity Bonds, the Bonds and any Future Parity
"Plan of Additions" means the system or plan of additions to and betterments and
extensions of the Waterworks Utility specified, adopted and ordered to be carried out by this
ordinance.
"Principal and Interest Account" means the account of that name created in the Bond
Fund for the payment of the principal of and interest on all Parity Bonds.
"Reserve Account" means the account of that name created in the Bond Fund for the
purpose of securing the payment of the principal of and interest on the Parity Bonds.
"Reserve Insurance" means, in lieu of cash and investments, insurance obtained by the
City to fund all or a portion of the Reserve Requirement for any Parity Bonds then outstanding
for which such insurance is obtained; and for the 1998 Bonds, the 1999 Bonds, the 2001 Bonds,
the 2002 Bonds and the Bonds means the Debt Service Reserve Surety Bond provided by the
applicable Reserve Insurer.
"Reserve Insurer" means Ambac Assurance Corporation for the Series 1998A Bonds, the
Series 1998B Bonds, the Series 1998C Bonds, the 1999 Bonds, the 2001 Bonds, the 2002 Bonds,
and the Bonds.
"Reserve Requirement"means:
(1) For the Outstanding Parity Bonds and the Bonds, an amount equal
to the least of(a) 10% of the issue price of the then outstanding Parity Bonds, (b)
Maximum Annual Debt Service on the then outstanding Parity Bonds and (c) 1.25
times Average Annual Debt Service on the outstanding Parity Bonds. For the
purposes of determining Maximum Annual Debt Service and Average Annual
Debt Service for calculating the Reserve Requirement, all bonds payable or
proposed to be paid from the Bond Fund shall be treated as a single issue and the
number of years to the last scheduled maturity for any of those issues shall be
used as the denominator.
(2) For any Future Parity Bonds, an amount equal to the difference
between the Reserve Requirement for the then outstanding Parity Bonds and the
least of(a) 10% of the issue price of the then outstanding Parity Bonds and the
Future Parity Bonds proposed to be issued, (b) Maximum Annual Debt Service on
the then outstanding Parity Bonds and the Future Parity Bonds proposed to be
issued and (c) 1.25 times Average Annual Debt Service on the outstanding Parity
Bonds and the Future Parity Bonds proposed to be issued, but in no event to
exceed an amount equal to the least of 10% of the issue price of the proposed
Future Parity Bonds, Maximum Annual Debt Service on those bonds and 1.25
times Average Annual Debt Service on the proposed bonds. For the purposes of
50590614.3 _�
determining Maximum Annual Debt Service and Average Annual Debt Service
for calculating the Reserve Requirement, all bonds payable or proposed to be paid
from the Bond Fund shall be treated as a single issue and the number of years to
the last scheduled maturity for any of those issues shall be used as the
denominator.
"Series 1998A Bonds" means the Water and Sewer Revenue Bonds, 1998, Series A
(Taxable), authorized to be issued pursuant to Ordinance No. 3314.
"Series 1998B Bonds" means the Water and Sewer Revenue Refiniding Bonds, 1998,
Series B (Tax-Exempt), authorized to be issued pursuant to Ordinance No. 3314.
"Series 1998C Bonds"means the Water and Sewer Revenue Bonds, 1998, Series C (Tax-
Exempt), authorized to be issued pursuant to Ordinance No. 3314.
"Surety Bond" means the surety bond issued by the Ambac Assurance guaranteeing
certain payments into the Reserve Account with respect to the Series 1998A Bonds, the Series
1998 B Bonds, the Series 1998C Bonds, the 1999 Bonds, the 2001 Bonds, the 2002 Bonds and
the Bonds as provided in and subject to the limitations set forth in the Surety Bond.
"Term Bonds" means those bonds of any single issue or series of other Parity Bonds
designated as such in the ordinance providing for those bonds.
"ULID"means utility local improvement district.
"ULID Assessments" means all ULID assessments and installments thereof, plus interest
and penalties thereon, in any ULID created to secure the payment of any Parity Bonds and
pledged to be paid into the Bond Fund.
"Water and Sewer Revenue Fund" means that special fund of the City into which all of
the Gross Revenue of the Waterworks Utility of the City shall be deposited.
"Waterworks Utility" means the combined sewerage system and water system of the
City, together with the storm or surface water sewers and agricultural/industrial wastewater
treatment facilities heretofore or hereafter authorized to be constructed and installed as a part of
such combined systems, and together with all additions thereto and betterments and extensions
thereof now or hereafter made.
Section 2. System or Plan. The City specifies, adopts and orders the carrying out of a
system or plan of additions to and betterments and extensions of the Waterworks Utility
consisting of constructing a 2,500,000 gallon composite water storage tower to be located
between Roads 68 and 76 on the south side of the Sandifer Parkway (the "Plan of Additions").
There shall be included in the foregoing system or plan the acquisition and installation of all
necessary valves, pumps, fittings, couplings, connections, equipment and appurtenances, and
replacements and improvements necessary or desirable to maintain or increase the effectiveness
of the service provided by such facilities, other improvements to and extensions of the
Waterworks Utility, the acquisition of any easements, rights of way and land that may be
required and the performance of such work as may be incidental and necessary.
50590614.3 _�
All of the foregoing shall be in accordance with the plans and specifications therefor
prepared by the staff and consulting engineers of the City.
The City Council may modify the details of the Plan of Additions where, in its judgment,
it appears advisable if such modifications do not substantially alter the purposes of that system or
plan.
The life of the improvements comprising the Plan of Additions is declared to be at least
the term of the bonds. The estimated cost of the acquisition, construction, installation and
financing of the above described improvements is declared to be approximately $4,500,000,
Such cost shall be paid from the proceeds of the Bonds and from other money of the City made
available therefor.
Section 3. Findings. The City Council finds that (1) all payments required by the the
1998 Bonds, the 1999 Bonds, the 2001 Bonds and the 2002 Bonds are provided for in this
ordinance or have been provided for or made into the Bond Fund for those outstanding bonds
and that no deficiency exists in such fund; (2) provision is hereinafter made for the deposit in the
Reserve Account of the Bond Fund of the Reserve Requirement for the Bonds; and (3) on or
before the time of issuance of the Bonds there will be on file with the City from a City
representative a certificate based solely upon actual historical Net Revenue of the Waterworks
Utility without any adjustment showing that the Net Revenue of the Waterworks Utility for any
12 consecutive calendar months out of the immediately preceding 24 calendar months shall be
equal to the Coverage Requirement for each year thereafter. In the judgment of the City Council
the Gross Revenue of the Waterworks Utility at the rates to be charged for water and sanitary
sewage disposal service furnished on the entire Utility will be more than sufficient to (a) meet all
Operating and Maintenance Expenses thereof (and the cost of maintenance and operation as
contemplated by RCW 3592.100), and the debt service requirements of the outstanding 1998
Bonds, 1999 Bonds, the 2001 Bonds and 2002 Bonds, and (b) permit the setting aside into the
Bond Fund out of the Net Revenue of the Waterworks Utility of the City of amounts sufficient to
pay the principal of and interest on the Bonds when due. The City Council further declares that
in creating the Bond Fund and in fixing the amounts to be paid into that fund, it has exercised
due regard for Operating and Maintenance Expenses (and the cost of maintenance and operation
contemplated by RCW 35.92.100) and the debt service requirements of the 1998 Bonds, 1999
Bonds, 2001 Bonds and 2002 Bonds, and the City has not bound and obligated itself to set aside
and pay into the Bond Fund a greater amount or proportion of the Gross Revenue of the
Waterworks Utility of the City than in the judgment of the City Council will be available over
and above such Operating and Maintenance Expenses and debt service requirements of the 1998
Bonds, 1999 Bonds, 2001 Bonds and 2002 Bonds, and that no portion of the Gross Revenue of
the Waterworks Utility of the City has been previously pledged for any indebtedness other than
the 1998 Bonds, 1999 Bonds, 2001 Bonds and 2002 Bonds.
Section 4. Purpose and Description of the Bonds. The Bonds are being issued for the
purpose of providing the funds to pay the cost of carrying out the Plan of Additions, including
the reimbursement of City funds previously used to carry out the Plan of Additions and to pay
the costs of issuance of the Bonds. The Bonds shall be called Water and Sewer Revenue Bonds,
2005, of the City; shall be in the aggregate principal amount of$4,400,000; shall be dated their
date of initial delivery; shall be in the denomination of$5,000 or any integral multiple thereof
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50540614.3
within a single maturity; shall be numbered separately in the manner and with any additional
designation as the Bond Registrar deems necessary for purposes of identification; shall bear
interest (computed on the basis of a 360 day year of twelve 30 day months) payable
semiannually on each March I and September 1, commencing March 1, 2006, to the maturity or
earlier redemption of the Bonds; and shall mature on September I in years and amounts and bear
interest at the rates per annum as follows:
Maturity Principal Interest
Years Amounts Rates
2006 $190,000 3.50%
2007 1 50,000 4.00
2008 160,000 4.00
2009 165,000 4.00
2010 170,000 4.00
2011 180,000 4.00
2012 185,000 4.00
2013 190,000 4.00
2014 200,000 4.00
2015 205,000 4.00
2016 215,000 4.00
2017 225,000 4.00
2018 235,000 4.00
2019 245,000 4.00
2020 255,000 4.00
2021 265,000 4.00
2022 275,000 4.00
2023 285,000 4.15
2024 295,000 4.20
2025 310,000 4.25
Section 5. Registration and Transfer of Bonds. The Bonds shall be issued only in
registered form as to both principal and interest and recorded on books or records maintained by
the Bond Registrar (the "Bond Register"). The 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 surrendered to the Bond Registrar may be exchanged for Bonds in any authorized
denomination of an equal aggregate principal amount and of the same series, interest rate and
maturity. Bonds may be transferred only if endorsed in the manner provided thereon and
surrendered to the Bond Registrar. Any exchange or transfer shall be without cost to the owner
or transferee. The Bond Registrar shall not be obligated to exchange or transfer 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 the
50590614.3 _7 r
Blanket Issuer Letter of Representations with DTC between the City and DTC dated August 31,
1998 (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 so long as any Bonds are held in fully immobilized form, DTC 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 Iike shall mean DTC or its
nominees and 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 6. Payment of Bonds. Both principal of and interest on 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 to the registered owners at the addresses
appearing on the Bond Register on the 15'h day of the month preceding the interest payment date.
Principal of the Bonds shall be payable upon presentation and surrender of the Bonds by the
registered owners at either of the principal offices of the Bond Registrar at the option of the
owners. Notwithstanding the foregoing, 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. The Bonds are payable solely out of the Bond Fund and
shall not be general obligations of the City.
Section 7. Redemption Provisions and Open Market Purchase of Bonds. Bonds
maturing in the years 2006 through 2015, inclusive, shall be issued without the right or option of
the City to redeem those Bonds prior to their stated maturity dates. The City reserves the right
and option to redeem Bonds maturing on or after September 1, 2016, prior to their stated
maturity dates at any time on or after September 1, 2015, as a whole or in part (within one or
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more maturities selected by the City and randomly within a maturity in such manner as the Bond
Registrar shall determine), at par plus accrued interest to the date fixed for redemption.
Portions of the principal amount of any Bond, in installments of$5,000 or any integral
multiple thereof, may be redeemed. If less than all of the principal amount of any Bond is
redeemed, upon surrender of that Bond at either of the principal offices of the Bond Registrar,
there shall be issued to the registered owner, without charge therefor, a new Bond (or Bonds, at
the option of the registered owner) of the same series, interest rate and maturity in any of the
denominations authorized by this ordinance in the aggregate principal amount remaining
unredeemed.
The City further reserves the right and option to purchase any or all of the Bonds in the
open market at any time at any price plus accrued interest to the date of purchase.
All Bonds purchased or redeemed under this section shall be cancelled.
Notwithstanding the foregoing, for so long as the Bonds are registered in the name of
Cede & Co., as nominee of DTC, selection of Bonds for redemption shall be in accordance with
the Letter of Representations (as it may be changed).
Section 8. Notice of Redemption. The City shall cause notice of any intended
redemption of Bonds to be given not less than 30 nor more than 60 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 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, postage prepaid,
to Moody's Investors Service, Inc. at their offices in New York, New York, or their successor, to
the Insurer at its principal office in New York, New York, or its successor, to each NRMSIR or
the MRSB, and to such other persons and with such additional information as the City Finance
Director shall determine, but these additional mailings shall not be a condition precedent to the
redemption of Bonds. Notwithstanding the foregoing, for so long as the Bonds are registered in
the name of Cede & Co., as nominee of DTC, notice of redemption shall be given in accordance
with the Letter of Representations (as it may be changed).
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 to the
registered owner of each of those unpaid Bonds.
Section 10. Form and Execution of Bonds. The Bonds shall be printed or lithographed
on good bond paper in a form consistent with the provisions of this ordinance and state law, shall
be signed by the Mayor and City Clerk, either or both of whose signatures may be manual or in
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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, Water and
Sewer Revenue Bonds, 2005, described in the Bond Ordinance.
WASHINGTON STATE FISCAL AGENCY
Bond Registrar
By
Authorized Signer
The authorized signing of a Certificate of Authentication shall be conclusive evidence that the
Bonds so authenticated have been duly executed, authenticated and delivered and are 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, delivered and issued 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 Bonds.
Section 11. Bond Registrar. The Bond Registrar shall keep, or cause to be kept, at its
principal corporate trust office, 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. 2838 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.
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Section 12. Bond Fund; Payments into Bond Fund. The Bond Fund has been created and
established in the office of the Finance Director as a special fund known and designated as the
Water and Sewer Revenue and Refunding Bond Redemption Fund, 1991, which fund has been
divided into two accounts, namely, the Principal and Interest Account and the Reserve Account.
So long as any Parity Bonds are outstanding against the Bond Fund, the Finance Director shall
set aside and pay into the Bond Fund all ULID Assessments upon their collection and, out of the
Net Revenue of the Waterworks Utility, certain fixed amounts without regard to any fixed
proportion, namely, amounts, together with any ULID Assessments collected by the City and
deposited into the applicable account in the Bond Fund and investment earnings in that account,
as follows:
(a) Into the Principal and Interest Account, on or before each interest or
principal and interest payment date, an amount equal to the interest or the principal and
interest to become due and payable on that interest or principal and interest payment
date of all Parity Bonds; and
(b) Into the Reserve Account, on the issue date of the Bonds, an amount
sufficient, together with the Reserve Insurance, to fully fund the Reserve Requirement
for all Parity Bonds.
Money deposited in the Reserve Account for the Reserve Requirement for all Parity
Bonds may be decreased for any issue of Parity Bonds when and to the extent the City has
provided for an Alternate Security or Reserve Insurance for those bonds.
The City may establish additional accounts in the Bond Fund for the deposit of ULID
Assessments after the deposit of the required amount in the other funds.
The Reserve Account for any Future Parity Bonds may be accumulated from any other
funds which the City legally may have available for such purpose in addition to using ULID
Assessments and Net Revenue of the Waterworks Utility.
The City further agrees that when the required amounts have been paid into the Reserve
Account in the Bond Fund, the City will maintain those amounts therein at all times, except for
withdrawals therefrom as authorized herein, until there is sufficient money in the Bond Fund,
including the Reserve Account therein, to pay the principal of and interest to maturity on all
outstanding bonds payable from the Bond Fund, at which time no further payments need be
made into the Bond Fund, and the money in the Bond Fund, including the Reserve Account, may
be used to pay that principal and interest.
If there shall be a deficiency in the Principal and Interest Account to meet maturing
installments of either principal or interest, as the case may be, on the Bonds, the deficiency shall
be made up from the Reserve Account by first the withdrawal of cash and investments therefrom
and after all cash and investments have been depleted, then by the draws on the Reserve
Insurance for that purpose on a pro rata basis. Any deficiency created in the Reserve Account by
reason of any withdrawal shall then be made up from the Net Revenue of the Waterworks Utility
first available after making necessary provisions for the required payments into the Principal and
Interest Account. The Reserve Insurers shall be reimbursed first on a pro rata basis, within one
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year, to reinstate the Reserve Insurance, before the balance of the Reserve Requirement is
restored.
All money in the Reserve Account not needed to meet the payments of principal and
interest when due may be kept on deposit in the official bank depository of the City or in any
national bank or may be invested in any legal investment for City funds maturing not later than
the interest or principal and interest payment date when the money will be needed. Interest on
any of those investments or on that bank account shall be deposited in and become a part of the
Reserve Account until the Reserve Requirement shall have been accumulated therein, after
which time the interest shall be deposited in the Principal and Interest Account.
Notwithstanding the provisions for the deposit or maintenance of earnings in accounts of
the Bond Fund, any earnings which are subject to a federal tax or rebate requirement may be
withdrawn from the Bond Fund for deposit into a separate fund or account for that purpose.
If the City shall fail to set aside and pay into the Bond Fund the amounts which it has
obligated itself by this section to set aside and pay therein, the owner of any Bond may bring suit
against the City to compel it to do so.
Section 13. Pledge, Lien and Charge for Payment of the Bonds. The Net Revenue of the
Waterworks Utility and ULID Assessments are pledged to the payment of the principal of and
interest on the Bonds when due and shall constitute a lien and charge upon that Net Revenue of
the Waterworks Utility and ULID Assessments prior and superior to any other charges
whatsoever, except that the lien and charge upon such Net Revenue and ULID Assessments for
the Bonds shall be on a parity with the lien and charge thereon for any outstanding Parity Bonds.
Section 14. Flow of Funds. Funds in the Water and Sewer Revenue Fund shall be used
in the following order of priority:
(1) To pay Operating and Maintenance Expenses;
(2) To make all payments required to be made into the Bond Fund to pay and
secure the payment of the Annual Debt Service on all outstanding Parity
Bonds;
(3) To make all payments required to be made into the Reserve Account and
to make all payments (principal and interest) required to be made in
connection with Reserve Insurance and any Alternate Security, except if
there is not sufficient money to make all payments for Reserve Insurance
and any Alternate Security, the payments shall be made on a pro rata basis
with deposits in the Reserve Account.
(4) To make all payments required to be made into the loan redemption funds
or accounts, and other revenue bond redemption funds created to pay the
debt service on any revenue obligation having a lien upon the Net
Revenue of the Waterworks Utility subordinate to the lien of the Bonds;
and
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(5) To make necessary additions, betterments, improvements or repairs to the
Waterworks Utility, and to retire by redemption or purchase any
outstanding Parity Bonds, or for any other lawful purpose.
Section 15. Covenants. The City covenants and agrees with the owner of each of the
Bonds as follows:
(a) It will not sell, lease, mortgage, or in any manner encumber or dispose of
all the properties of the Waterworks Utility unless provision is made for payment into
the Bond Fund of an amount sufficient either to defease all outstanding Parity Bonds or
to pay the principal of and interest on all the outstanding Parity Bonds in accordance
with the terms thereof; and further binds itself irrevocably not to mortgage, sell, lease or
in any manner dispose of any part of the Waterworks Utility that is used, useful and
material to the operation of such utility unless provision is made for replacement thereof
or for payment into the Bond Fund of an amount which shall bear the same ratio to the
amount of outstanding Parity Bonds as the Net Revenue available for debt service for
such bonds for the twelve months preceding such sale, lease, encumbrance or disposal
from the portion of the Waterworks Utility so leased, encumbered or disposed of bears
to the Net Revenue available for debt service for such bonds from the entire Waterworks
Utility for the same period. Any such money so paid into the Bond Fund shall be used
to retire outstanding Parity Bonds at the earliest possible date.
(b) It will maintain and keep the Waterworks Utility in good repair, working
order and condition and to operate such utility and the business in connection therewith
in an efficient manner and at a reasonable cost.
(c) It will maintain and collect such rates as will produce sufficient Net
Revenue of the Waterworks Utility, together with ULID Assessment collections, as will
make available for the payment of the principal of and interest on the Parity Bonds as
they come due and for payments as required to be made into the Reserve Account
therein an amount at least equal to the Coverage Requirement and, in addition thereto,
that it will pay all Operating and Maintenance Expenses and otherwise meet the
obligations of the City as herein set forth,
(d) It will keep proper books of accounts and records separate and apart from
other accounts and records, in which complete and correct entries will be made of all
transactions relating to the Waterworks Utility of the City, and it will make available to
any Bondowner on written request the annual operating and income statements of the
Waterworks Utility.
(e) Except to aid the poor or infirm, to provide for resource conservation or
to provide for the proper handling of hazardous materials, it will not furnish water or
sewerage service to any customer whatsoever free of charge and it shall, not later than
60 days after the end of each calendar year, take such legal action as may be feasible to
enforce collection of all collectible delinquent accounts and, in addition thereto, shall
promptly avail itself of its utility lien rights, as set forth in applicable statutes.
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(0 It will carry the types of insurance on its Waterworks Utility properties in
the amounts normally carried by private water and sewer companies engaged in the
operation of water and sewerage systems, and the cost of such insurance shall be
considered a part of Operating and Maintenance Expenses, or it will implement and
maintain a self insurance program or an insurance pool program with reserves adequate,
in the judgment of the City Council, to protect the owners of the Parity Bonds against
loss.
(g) To the extent permitted by State law, it will maintain its corporate
identity and existence so long as any Bonds remain outstanding.
(h) It will not grant any competing utility service franchise and will use all
legal means to prevent competition with the Waterworks Utility.
(i) If on the first day of January in any year, two installments of any ULID
Assessment are delinquent, or the final installment of any ULID Assessment has been
delinquent for more than one year, the City shall proceed with the foreclosure of the
delinquent assessment or delinquent installments thereof in the manner provided by law.
Section 16. Provisions for Future Parity Bonds. The City reserves the right to issue
Future Parity Bonds if the following conditions are met and complied with at the time of the
issuance of those Future Parity Bonds:
(a) There shall be no deficiency in the Bond Fund.
(b) The ordinance providing for the issuance of the Future Parity Bonds shall
provide that all ULID Assessments shall be paid directly into the Bond Fund, except for
any prepaid assessments permitted by law to be paid into a construction fund or account.
(c) The ordinance providing for the issuance of such Future Parity Bonds
shall provide for the deposit into the Reserve Account of (i) an amount equal to the
Reserve Requirement for those Future Parity Bonds from the Future Parity Bond
proceeds, or, (ii) Reserve Insurance or Alternate Security or an amount plus Reserve
Insurance or Alternate Security equal to the Reserve Requirement for those Future
Parity Bonds, or (iii) to the extent that the Reserve Requirement is not funded from
Future Parity Bond proceeds or Reserve Insurance or Alternate Security at the time of
issuance of those Future Parity Bonds, by no later than the fifth anniversary date from
the dated date of the respective issue of Future Parity Bonds from ULID Assessments, if
any, levied and first collected for the payment of the principal of and interest on those
Future Parity Bonds and, to the extent that ULID Assessments are insufficient, then
from the Net Revenue of the Waterworks Utility in approximately equal annual
payments, the Reserve Requirement for those Future Parity Bonds. No Reserve
Insurance or Alternate Security may be used to satisfy the Reserve Requirement for
Future Parity Bonds unless (i) the insurance policy or Alternate Security is non
cancelable and (ii) the insurer or provider of the Alternate Security as of the time of
issuance of such insurance or Alternate Security is rated in the highest rating categories
by both Moody's Investors Service, Inc., and Standard &Poor's Ratings Group.
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(d) The ordinance authorizing the issuance of such Future Parity Bonds shall
provide for the payment of mandatory redemption or sinking fund requirements into the
Bond Fund for any Term Bonds to be issued and for regular payments to be made for the
payment of the principal of such Term Bonds on or before their maturity, or, as an
alternative, the mandatory redemption of those Term Bonds prior to their maturity date
from money in the Principal and Interest Account.
(e) There shall be on file from a licensed professional engineer experienced in
the design, construction and operation of municipal utilities, or from an independent
certified public accountant, a certificate showing that in his or her professional opinion
the Net Revenue of the Waterworks Utility for any 12 consecutive calendar months out of
the immediately preceding 24 calendar months shall be equal to the Coverage
Requirement for each year thereafter, except that such certificate may be provided by a
City representative if it is based solely upon actual historical Net Revenue of the
Waterworks Utility without any adjustment.
The certificate, in estimating the Net Revenue of the Waterworks Utility
available for debt service, shall use the historical Net Revenue of the Waterworks
Utility for any 12 consecutive months out of the 24 months immediately
preceding the month of delivery of the Future Parity Bonds. Net Revenue of the
Waterworks Utility may be adjusted to reflect:
(1) Any changes in rates in effect and being charged or
expressly adopted by ordinance to take effect within 180 days after the
date of this Certificate;
(2) Income derived from customers of the Waterworks Utility
that have become customers during the 12 consecutive month period or
thereafter adjusted to reflect one year's net revenue from those customers;
(3) Revenue from any customers to be connected to the
Waterworks Utility who have paid the required connection charges;
(4) Revenue received or to be received which is derived from
any person, firm, corporation or municipal corporation under any executed
contract for water, sewage disposal or other utility service, which revenue
was not included in the historical Net Revenue of the Waterworks Utility;
(5) The engineer's or accountant's estimate of the Net Revenue
of the Waterworks Utility to be derived from customers to connect within
180 days after the date of the completion of the additions to and
improvements and extensions of the Waterworks Utility to be paid for out
of the proceeds of the sale of the additional Future Parity Bonds or from
other additions to and improvements and extensions of the Waterworks
Utility then under construction and not fully connected to the facilities of
the Waterworks Utility when such additions, improvements and
extensions are completed; and
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(6) Any increases or decreases in Net Revenue as a result of
any actual or reasonably anticipated changes in Operating and
Maintenance Expense subsequent to the 12 month period.
If Future Parity Bonds proposed to be so issued are for the sole purpose of
refunding outstanding bonds payable from the Bond Fund, such certification of
coverage shall not be required if the amount required for the payment of the
principal and interest in each year for the refunding bonds is not increased over
the amount for that year required for the bonds to be refunded thereby and if the
maturities of such refunding bonds are not extended beyond the maturities of the
bonds to be refunded thereby.
Nothing herein contained shall prevent the City from issuing Future Parity Bonds to
refund any maturing Parity Bonds then outstanding, money for the payment of which is not
otherwise available.
Nothing herein contained shall prevent the City from issuing revenue bonds or incurring
other obligations that are a charge upon the Net Revenue of the Waterworks Utility of the City
subordinate or inferior to the payments required to be made therefrom into the Bond Fund for the
payment of Parity Bonds or from pledging the payment of utility local improvement district
assessments into a redemption fund created for the payment of the principal of and interest on
those subordinate lien bonds or obligations as long as such utility local improvement district
assessments are levied for improvements constructed from the proceeds of those subordinate lien
bonds or obligations.
Section 17. Preservation of Tax Exemption for Interest on the 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 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 18. Small Governmental Issuer Arbitrage Rebate Exception and Designation
of Bonds as "Qualified Tax-Exempt Obligations." The City finds and declares that (a) it is a
duly organized and existing governmental unit of the State of Washington and has general taxing
power; (b) no Bond which is part of this issue of Bonds is a "private activity bond" within the
meaning of Section 141 of the Code; (c) at least 95% of the net proceeds of the Bonds will be
used for local governmental activities of the City (or of a governmental unit the jurisdiction of
which is entirely within the jurisdiction of the City); (d) the aggregate face amount of all tax-
exempt obligations (other than private activity bonds and other obligations not required to be
included in such calculation) issued by the City and all entities subordinate to the City (including
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any entity that the City controls, that derives its authority to issue tax-exempt obligations from
the City, or that issues tax-exempt obligations on behalf of the City) during the calendar year in
which the Bonds are issued is not reasonably expected to exceed $5,000,000; and (e)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 $10,000,000. The City therefore certifies that the Bonds
are eligible for the arbitrage rebate exception under Section 148(f)(4)(D) of the Code and
designates the Bonds as "qualified tax-exempt obligations" for the purposes of Section 265(b)(3)
of the Code.
Section 19. Deposit of Bond Proceeds. A portion of the proceeds of the Bonds received
by the City from the Purchaser (defined below) shall be deposited into the Water and Sewer
Utility Fund and used to reimburse the City for certain expenditures made prior to the issuance of
the Bonds and the remaining proceeds of the Bonds shall be deposited into the Water and Sewer
Utility Fund, and used to pay the other costs of carrying out the Plan of Additions and the costs
of issuance and sale of the Bonds. Until needed to pay those costs, the City may invest principal
proceeds deposited in a construction fund temporarily in any legal investment, and the
investment earnings may be retained in such fund and be spent for the purposes of that fund,
except that earnings subject to a federal tax or rebate requirement may be withdrawn therefrom
and used for those tax or rebate purposes.
Section 20. Refunding or Defeasance of Bonds. The City may issue refunding bonds
pursuant to the laws of the State of Washington and use money available from other lawful
sources to pay the principal of and interest on the Bonds, or such portion thereof included in a
refunding or defeasance plan, as the same become due and payable and to redeem and retire,
release, refund or defease any or all such then outstanding Bonds (hereinafter collectively called
the "defeased Bonds") and to pay the costs of such refunding or defeasance. If money and/or
Government Obligations sufficient in amount, together with known earned income from the
investments thereof, to redeem and retire, release, refund or defease the defeased Bonds in
accordance with their terms, are set aside irrevocably in a special fund for and pledged
irrevocably to such redemption, retirement or defeasance (hereinafter called the "trust account"),
then all right and interest of the owners of the defeased Bonds in the covenants of this ordinance
and in the Gross Revenue of the Waterworks Utility, ULID Assessments, funds and accounts
obligated to the payment of such defeased Bonds, other than the right to receive the funds so set
aside and pledged, thereafter shall cease and become void. Such owners thereafter shall have the
right to receive payment of the principal of and interest on the defeased Bonds from the trust
account.
After the establishing and full funding of such a trust account, the City then may apply
any money in any other fund or account established for the payment or redemption of the
defeased Bonds to any lawful purposes as it shall determine, subject only to the rights of the
owners of any other Bonds or bonds then outstanding.
If the refunding plan provides that the defeased Bonds or the refunding bonds to be
issued be secured by money and/or Government Obligations pending the prior redemption of the
defeased Bonds and if such refunding plan also provides that certain money and/or Government
Obligations are pledged irrevocably for the prior redemption of the defeased Bonds included in
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that refunding plan, then only the debt service on the Bonds which are not defeased Bonds and
the refunding bonds, the payment of which is not so secured by the refunding plan, shall be
included in the computation of the coverage requirement for the issuance of Future Parity Bonds
and the annual computation of coverage for determining compliance with the rate covenants.
Notwithstanding anything in this section to the contrary, if the principal of and/or interest
due on the Bonds is paid by the Insurer pursuant to the Insurance Policy, the Bonds shall be
treated as remaining outstanding for all purposes and shall not be considered paid by the City,
and the covenants, agreements and other obligations of the City to the registered owners of the
Bonds shall continue to exist and run to the benefit of the Insurer, and the Insurer shall be
subrogated to the rights of the registered owners.
Section 21. Approval of Bond Purchase Agreement. Banc of America Securities LLC of
Seattle, Washington (the "Purchaser"), has presented a bond purchase agreement (the "Bond
Purchase Agreement") to the City by which the Purchaser has offered to purchase the Bonds
under the terms and conditions provided in the Bond Purchase Agreement, which written Bond
Purchase Agreement is on file with the City Clerk and is incorporated herein by this reference.
The City Council finds that entering into the Bond Purchase Agreement is in the City's best
interest and, therefore, accepts the offer contained therein and authorizes the execution of the
Bond Purchase Agreement by City officials.
The Bonds will be printed at City expense and will be delivered to the Purchaser in
accordance with the terms of the Bond Purchase Agreement with the approving legal opinion of
Foster Pepper & Shefelman PLLC, municipal bond counsel of Seattle, Washington, relative to
the Bonds.
The proper City officials are authorized and directed to do everything necessary for the
prompt authentication and delivery of the Bonds to the Purchaser, including the execution of the
Official Statement on behalf of the City and execution of documents relative to acquisition of
bond insurance, and for the proper application and use of the proceeds of the sale thereof.
Section 22. Undertaking to Provide Continuing Disclosure. To meet the requirements of
United States Securities and Exchange Commission ("SEC")Rule 15c2-12(b)(5) (the "Rule"), as
applicable to a participating underwriter for the Bonds, the City makes the following written
undertaking (the "Undertaking") for the benefit of holders of the Bonds:
(a) Und-,rtaki ig to Provide Annual Financial Information and Notice of
Material Events. The City undertakes to provide or cause to be provided, either directly
or through a designated agent:
(i) To each nationally recognized municipal securities
information repository designated by the SEC in accordance with the Rule
("NRMSIR") and to a state information depository, if any, established in
the State of Washington (the "SID") annual financial information and
operating data of the type included in the final official statement for the
Bonds and described in subsection (b) of this section ("annual financial
information");
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(ii) To each NRMSIR or the Municipal Securities Rulemaking
Board ("MSRB"), and to the SID, timely notice of the occurrence of any
of the following events with respect to the Bonds, if material: (1) principal
and interest payment delinquencies; (2) non-payment related defaults; (3)
unscheduled draws on debt service reserves reflecting financial
difficulties; (4) unscheduled draws on credit enhancements reflecting
financial difficulties; (5) substitution of credit or liquidity providers, or
their failure to perform; (6) adverse tax opinions or events affecting the
tax-exempt status of the Bonds; (7) modifications to rights of holders of
the Bonds; (8)Bond calls (other than scheduled mandatory redemptions of
Term Bonds); (9) defeasances; (10) release, substitution, or sale of
property securing repayment of the Bonds; and (11) rating changes; and
(iii) To each NRMSIR or to the MSRB, and to the SID, timely
notice of a failure by the City to provide required annual financial
information on or before the date specified in subsection (b) of this
section.
(b) Type of Annual Financial Information Undertaken to be Provided. The
annual financial information that the City undertakes to provide in subsection (a) of this
section:
(i) Shall consist of (1) annual financial statements prepared
(except as noted in the financial statements) in accordance with applicable
generally accepted accounting principles applicable to governmental units,
as such principles may be changed from time to time and as permitted by
State law, which statements shall not be audited, except, however, that if
and when audited financial statements are otherwise prepared and
available to the City they will be provided; (2) a statement of authorized,
issued and outstanding bonded debt secured by the Net Revenue of the
Waterworks Utility; (3) debt service coverage ratios; and (4) general
customer statistics for the Waterworks Utility;
(ii) Shall be provided to each NRMSIR and the SID, not later
than the last day of the ninth month after the end of each fiscal year of the
City (currently, a fiscal year ending December 31), as such fiscal year
may be changed as required or permitted by State law, commencing with
the City's fiscal year ending December 31, 2005; and
(iii) May be provided in a single or multiple documents, and
may be incorporated by reference to other documents that have been filed
with each NRMSIR and the SID, or, if the document incorporated by
reference is a "final official statement" with respect to other obligations of
the City, that has been filed with the MSRB.
(c) Amendment of Undertaking. The Undertaking is subject to amendment
after the primary offering of the Bonds without the consent of any holder of any Bond,
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or of any broker, dealer, municipal securities dealer, participating underwriter, rating
agency, NRMSIR, the SID or the MSRB, under the circumstances and in the manner
permitted by the Rule.
The City will give notice to each NRMSIR or the MSRB, and the SID, of
the substance (or provide a copy) of any amendment to the Undertaking and a
brief statement of the reasons for the amendment. If the amendment changes the
type of annual financial information to be provided, the annual financial
information containing the amended financial information will include a narrative
explanation of the effect of that change on the type of information to be provided.
(d) Beneficiaries. The Undertaking evidenced by this section shall inure to
the benefit of the City and any holder of Bonds, and shall not inure to the benefit of or
create any rights in any other person.
(e) Termination of Undertaking. The City's obligations under this
Undertaking shall terminate upon the legal defeasance of all of the Bonds. In addition,
the City's obligations under this Undertaking shall terminate if those provisions of the
Rule which require the City to comply with this Undertaking become legally
inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of
nationally recognized bond counsel or other counsel familiar with federal securities laws
delivered to the City, and the City provides timely notice of such termination to each
NRMSIR or the MSRB and the SID.
(fl Remedy for Failure to Comply with Undertaking. As soon as practicable
after the City learns of any failure to comply with the Undertaking, the City will proceed
with due diligence to cause such noncompliance to be corrected. No failure by the City
or other obligated person to comply with the Undertaking shall constitute a default in
respect of the Bonds. The sole remedy of any holder of a Bond shall be to take such
actions as that holder deems necessary, including seeking an order of specific
performance from an appropriate court, to compel the City or other obligated person to
comply with the Undertaking.
(g) Designation of Official Responsible to Administer Undertaking. The
Finance Manager of the City (or such other officer of the City who may in the future
perform the duties of that office) or his or her designee is authorized and directed in his
or her discretion to take such further actions as may be necessary, appropriate or
convenient to carry out the Undertaking of the City in respect of the Bonds set forth in
this section and in accordance with the Rule, including, without limitation, the following
actions:
(i) Preparing and filing the annual financial information
undertaken to be provided;
(ii) Determining whether any event specified in subsection (a)
has occurred, assessing its materiality with respect to the Bonds, and, if
material, preparing and disseminating notice of its occurrence;
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(iii) Determining whether any person other than the City is an
"obligated person" within the meaning of the Rule with respect to the
Bonds, and obtaining from such person an undertaking to provide any
annual financial information and notice of material events for that person
in accordance with the Rule;
(iv) Selecting, engaging and compensating designated agents
and consultants, including but not limited to financial advisors and legal
counsel, to assist and advise the City in carrying out the Undertaking; and
(v) Effecting any necessary amendment of the Undertaking.
Section 23. Bond Insurance. The City Council finds that it is in the City's best interest to
purchase, and that a savings will result from purchasing the Insurance Policy for the Bonds. The
City shall purchase from the Insurer the Insurance Policy insuring the prompt payment of the
principal of and interest on the Bonds and agrees to the conditions for obtaining that policy,
including the payment of the premium therefor and the following provisions entitled "Provisions
Relating to Bond Insurance"required by the Insurer to be included in this ordinance, the provisions
of this section or article shall govern, notwithstanding anything to the contrary set forth in this
ordinance, or individually in the appropriate sections:
"(a) The prior written consent of the Insurer shall be a condition precedent to the deposit of
any credit instrument provided in lieu of a cash deposit into the Debt Service Reserve
Fund if any. Notwithstanding anything to the contrary set forth in the Ordinance,
amounts on deposit in the Debt Service Reserve Fund shall be applied solely to the
payment of debt service due on the Bonds.
"(b) The insurer shall be deemed to be the sole holder of the Insured Bonds for the purpose of
exercising any voting right or privilege or giving any consent or direction or taking any
other action that the holders of the Bonds insured by it are entitled to take pursuant to law
and the Ordinance pertaining to (i) defaults and remedies and (ii)the duties and
obligations of the Fiscal Agent.
"(c) The Insurer shall be included as a third party beneficiary to the Ordinance.
"(d) Upon the occurrence of an extraordinary optional, special or extraordinary mandatory
redemption in part, the selection of Bonds to be redeemed shall be subject to the approval
of the Insurer. The exercise of any provision of the Ordinance which permits the
purchase of Bonds in lieu of redemption shall require the prior written approval of the
Insurer if any Bond so purchased is not cancelled upon purchase.
"(e) Any amendment, supplement, modification to, or waiver of, the Ordinance, that requires
the consent of Bondowners or adversely affects the rights and interests of the Insurer
shall be subject to the prior written consent of the Insurer.
"(f) Unless the Insurer otherwise directs, upon the occurrence and continuance of a default or
an event which with notice or lapse of time would constitute a default amounts on deposit
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in the Construction Fund shall not be disbursed, but shall instead be applied to the
payment of debt service or redemption price of the Bonds.
"(g) The rights granted to the Insurer under the Ordinance to request, consent to or direct any
action are rights granted to the Insurer in consideration of its issuance of the Insurance
Policy. Any exercise by the Insurer of such rights is merely an exercise of the Insurer's
contractual rights and shall not be construed or deemed to be taken for the benefit, or on
behalf, of the Bondholders and such action does not evidence any position of the Insurer,
affirmative or negative, as to whether the consent of the Bondowners or any other person
is required in addition to the consent of the Insurer.
"(h) Only (1) cash, (2) non-callable direct obligations of the United States of America
("Treasuries"), (3) evidences of ownership of proportionate interests in future interest and
principal payments on Treasuries held by a bank or trust company as custodian, under
which the owner of the investment is the real party in interest and has the right to proceed
directly and individually against the obligor and the underlying Treasuries are not
available to any person claiming through the custodian or to whom the custodian may be
obligated, (4) subject to the prior written consent of the Insurer, pre-refunded municipal
obligations rated "AAA" and "Aaa" by S&P and Moody's, respectively, or (5) subject to
the prior written consent of the Insurer, securities eligible for "AAA" defeasance under
then existing criteria of S & P or any combination thereof, shall be used to effect
defeasance of the Bonds unless the Insurer otherwise approves.
To accomplish defeasance, the Issuer shall cause to be delivered (i) a report of an
independent firm of nationally recognized certified public accountants or such other
accountant as shall be acceptable-to the Insurer ("Accountant") verifying the sufficiency
of the escrow established to pay the Bonds in full on the maturity or redemption date
("Verification"), (ii) an Escrow Deposit Agreement (which shall be acceptable in form
and substance to the Insurer), (iii) an opinion of nationally recognized bond counsel to
the effect that the Bonds are no longer "Outstanding" under the Ordinance and (iv) a
certificate of discharge of the Fiscal Agent with respect to the Bonds; each Verification
and defeasance opinion shall be acceptable in form and substance, and addressed, to the
Issuer, Fiscal Agent and Insurer. The Insurer shall be provided with final drafts of the
above-referenced documentation not less than five business days prior to the funding of
the escrow.
Bonds shall be deemed "Outstanding" under the Ordinance unless and until they are in
fact paid and retired or the above criteria are met.
"(i) Amounts paid by the Insurer under the Insurance Policy shall not be deemed paid for
purposes of the Ordinance and the Bonds relating to such payments shall remain
Outstanding and continue to be due and owing until paid by the Issuer in accordance with
the Ordinance. The Ordinance shall not be discharged unless all amounts due or to
become due to the Insurer have been paid in full or duly provided for.
Claims Upon the Insurance Policy and Payments by and to the Insurer.
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If, on the third Business Day prior to the related scheduled interest payment date or
principal payment date ("Payment Date") there is not on deposit with the Fiscal Agent,
after making all transfers and deposits required under the Ordinance, moneys sufficient to
pay the principal of and interest on the Bonds due on such Payment Date, the Fiscal
Agent shall give notice to the Bond Insurer and to its designated agent (if any) (the
"Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency by
12:00 noon, New York City time, on such Business Day. If, on the second Business Day
prior to the related Payment Date, there continues to be a deficiency in the amount
available to pay the principal of and interest on the Bonds due on such Payment Date, the
Fiscal Agent shall make a claim under the Insurance Policy and give notice to the Insurer
and the Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and
the allocation of such deficiency between the amount required to pay interest on the
Bonds and the amount required to pay principal of the Bonds, confirmed in writing to the
Insurer and the Insurer's Fiscal Agent by 12:00 noon, New York City time, on such
second Business Day by filling in the form of Notice of CIaim and Certificate delivered
with the Insurance Policy.
The Fiscal Agent shall designate any portion of payment of principal on Bonds paid by
the Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other
advancement of maturity, on its books as a reduction in the principal amount of Bonds
registered to the then current Bondholder, whether DTC or its nominee or otherwise, and
shall issue a replacement Bond to the Insurer, registered in the name of Financial Security
Assurance Inc., in a principal amount equal to the amount of principal so paid (without
regard to authorized denominations); provided that the Fiscal Agent's failure to so
designate any payment or issue any replacement Bond shall have no effect on the amount
of principal or interest payable by the Issuer on any Bond or the subrogation rights of the
Insurer.
The Fiscal Agent shall keep a complete and accurate record of all funds deposited by the
Insurer into the Policy Payments Account (defined below) and the allocation of such
funds to payment of interest on and principal of any Bond. The Insurer shall have the
right to inspect such records at reasonable times upon reasonable notice to the Fiscal
Agent.
Upon payment of a claim under the Insurance Policy, the Fiscal Agent shall establish a
separate special purpose trust account for the benefit of Bondholders referred to herein as
the "Policy Payments Account" and over which the Fiscal Agent shall have exclusive
control and sole right of withdrawal. The Fiscal Agent shall receive any amount paid
under the Insurance Policy in trust on behalf of Bondholders and shall deposit any such
amount in the Policy Payments Account and distribute such amount only for purposes of
making the payments for which a claim was made. Such amounts shall be disbursed by
the Fiscal Agent to Bondholders in the same manner as principal and interest payments
are to be made with respect to the Bonds under the sections hereof regarding payment of
Bonds. It shall not be necessary for such payments to be made by checks or wire
transfers separate from the check or wire transfer used to pay debt service with other
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funds available to make such payments. Notwithstanding anything herein to the contrary,
the Issuer agrees to pay to the Insurer (i) a sum equal to the total of all amounts paid by
the Insurer under the Insurance Policy (the "Insurer Advances"); and (ii) interest on such
Insurer Advances from the date paid by the Insurer until payment thereof in full, payable
to the Insurer at the Late Payment Rate per annum. "Late Payment Rate" means the
lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from
time to time by JPMorgan Chase Bank at its principal office in the City of New York, as
its prime or base lending rate (any change in such rate of interest to be effective on the
date such change is announced by JPMorgan Chase Bank) plus 3%. and (ii)the then
applicable highest rate of interest on the Bonds and (b) the maximum rate permissible
under applicable usury or similar laws limiting interest rates. The Late Payment Rate
shall be computed on the basis of the actual number of days elapsed over a year of 360
days.
Funds held in the Policy Payments Account shall not be invested by the Fiscal Agent and
may not be applied to satisfy any costs, expenses or liabilities of the Fiscal Agent. Any
funds remaining in the Policy Payments Account following a Bond payment date shall
promptly be remitted to the Insurer.
"(k) The Insurer shall, to the extent it makes any payment of principal of or interest on the
Bonds, become subrogated to the rights of the recipients of such payments in accordance
with the terms of the Insurance Policy. Each obligation of the Issuer to the Insurer under
the Related Documents shall survive discharge or termination of such Related
Documents.
"(1) The Issuer shall pay or reimburse the Insurer any and all charges, fees, costs and
expenses that the Insurer may reasonably pay or incur in connection with (i)the
administration, enforcement, defense or preservation of any rights or security in any
Related Document; (ii) the pursuit of any remedies under the Ordinance or any other
Related Document or otherwise afforded by law or equity, (iii) any amendment, waiver
or other action with respect to, or related to, the Ordinance or any other Related
Document whether or not executed or completed, or (iv) any litigation or other dispute in
connection with the Ordinance or any other Related Document or the transactions
contemplated thereby, other than costs resulting from the failure of the Insurer to honor
its obligations under the Insurance Policy. The Insurer reserves the right to charge a
reasonable fee as a condition to executing any amendment, waiver or consent proposed in
respect of the Ordinance or any other Related Document.
"(m) After payment of reasonable expenses of the Fiscal Agent, the application of funds
realized upon default shall be applied to the payment of expenses of the Issuer or rebate
only after the payment of past due and current debt service on the Bonds and amounts
required to restore the Debt Service Reserve Fund to the Debt Service Reserve
Requirement.
"(n) The Insurer shall be entitled to pay principal or interest on the Bonds that shall become
Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer (as such
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terms are defined in the Insurance Policy) and any amounts due on the Bonds as a result
of acceleration of the maturity thereof in accordance with the Ordinance, whether or not
the Insurer has received a Notice of Nonpayment (as such terms are defined in the
Insurance Policy) or a claim upon the Insurance Policy.
"(o) The notice address of the Insurer is: Financial Security Assurance Inc., 31 West 52nd
Street, New York, New York 10019, Attention: Managing Director -Surveillance, Re:
Policy No. , Telephone: (212) 826-0100; Telecopier: (212) 339-3556. In each
case in which notice or other communication refers to an Event of Default, then a copy of
such notice or other communication shall also be sent to the attention of the General
Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED."
"(p) The Insurer shall be provided with the following information by the Issuer or Fiscal
Agent, as the case may be:
(i) Annual audited financial statements within nine months after the end of the
Issuer's fiscal year (together with a certification of the Issuer that it is not aware
of any default under the Ordinance), and the Issuer's annual budget within 30
days after the approval thereof together with such other information, data or
reports as the Insurer shall reasonably request from time to time;
(ii) Notice of any draw upon the Debt Service Reserve Fund within two Business
Days after knowledge thereof other than (i) withdrawals of amounts in excess of
the Debt Service Reserve Requirement and (ii)withdrawals in connection with a
refunding of Bonds;
(iii) Notice of any default known to the Fiscal Agent or Issuer within five Business
Days after knowledge thereof;
(iv) Prior notice of the advance refunding or redemption of any of the Bonds,
including the principal amount, maturities and CUSIP numbers thereof,
(v) Notice of the resignation or removal of the Fiscal Agent and Bond Registrar and
the appointment of, and acceptance of duties by, any successor thereto;
(vi) Notice of the commencement of any proceeding by or against the Issuer or
Obligor commenced under the United States Bankruptcy Code or any other
applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an
"Insolvency Proceeding");
(vii) Notice of the making of any claim in connection with any Insolvency Proceeding
seeking the avoidance as a preferential transfer of any payment of principal of, or
interest on, the Bonds;
(viii) A full original transcript of all proceedings relating to the execution of any
amendment, supplement, or waiver to the Related Documents; and
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(ix) All reports, notices and correspondence to be delivered to Bondholders under the
terms of the Related Documents.
"(q) Notwithstanding satisfaction of the other conditions to the issuance of Additional Bonds
set forth in the Ordinance,no such issuance may occur(1) if an Event of Default (or any
event which, once all notice or grace periods have passed, would constitute an Event of
Default) exists unless such default shall be cured upon such issuance and (2) unless the
Debt Service Reserve Fund is fully funded at the Debt Service Reserve requirement
(including the proposed issue) upon the issuance of such Additional Bonds, in either
case unless otherwise permitted by the Insurer.
"(r) In determining whether any amendment, consent or other action to be taken, or any
failure to take action, under the Ordinance would adversely affect the security for the
Bonds or the rights of the Bondholders,the Fiscal Agent shall consider the effect of any
such amendment,consent, action or inaction as if there were no Insurance Policy.
"(s) No contract shall be entered into or any action taken by which the rights of the Insurer
or security for or sources of payment of the Bonds may be impaired or prejudiced in any
material respect except upon obtaining the prior written consent of the Insurer.
Section 24. Effective Date. This ordinance shall take effect and be in force from and
after its passage and 5 days following its publication as provided by law.
PASSED by the City Council of the City of Pasco, Washington, this Zl 17-day of
November, 2005, at a regular open public meeting, and sign in authentication of its passage
this day of November,2005.
�ftayor
ATTEST:
_City Clerk
Clerk
APPROVED AS TO FORM:
Foster Pepper& Shefelman PLLC
Bond Counsel
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