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Home My WebLink About3835 Ordinance CITY OF PASCO, WASHINGTON ORDINANCE NO. g 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 $845,000 PAR VALUE OF WATER AND SEWER REVENUE BONDS, 2007, FOR THE PURPOSE OF OBTAINING THE FUNDS WITH WHICH TO PAY THE COST OF IMPROVEMENTS IN UTILITY LOCAL IMPROVEMENT DISTRICTS NOS. 141 AND 142, FIXING THE DATE, FORM, DENOMINATION, MATURITIES, INTEREST RATES, TERMS AND COVENANTS OF THE BONDS AUTHORIZED HEREIN; AND PROVIDING FOR THE SALE AND DELIVERY OF THE BONDS TO PIPER JAFFRAY & CO. OF SEATTLE, WASHINGTON, PASSED: JUNE 18, 2007 This document was prepared by FOSTER PEPPER PLLC 1111 Third Avenue, Suite 3400 Seattle, Washington 98101 (206) 447-4400 soxiznso s TABLE OF CONTENTS P, Section1. Definitions...............................................................................................................3 Section2. Findings...................................................................................................................8 Section 3. Purpose and Description of the Bonds ....................................................................8 Section 4. Registration and Transfer of Bonds.........................................................................9 Section5. Payment of Bonds..................................................................................................10 Section 6. Redemption Provisions and Open Market Purchase of Bonds..............................10 Section7. Notice of Redemption............................................................................................ 12 Section 8. Failure to Redeem Bonds ...................................................................................... 12 Section 9. Form and Execution of Bonds............................................................................... 12 Section10. Bond Registrar.......................................................................................................13 Section 11. Bond Fund; Payments into Bond Fund..................................................................13 Section 12. Assessments from ULIDs Nos. 141 and 142.........................................................15 Section 13. Pledge, Lien and Charge for Payment of the Bonds.............................................. 15 Section 14. Deposit of Bond Proceeds ..................................................................................... 15 Section15. Flow of Funds—,.............................. ..................................................................... 15 Section16. Covenants .............................................................................................................. 16 Section 17. Provisions for Future Parity Bonds .......................................................................17 Section 18. Preservation of Tax Exemption for Interest on the Bonds ....................................19 Section 19. Small Governmental Issuer Arbitrage Rebate Exception and Designation of Bonds as "Qualified Tax-Exempt Obligations."...............................................20 Section 20. Refunding or Defeasance of Bonds.......................................................................20 Section 21. Approval of Bond Purchase Agreement................................................................21 Section 22. Fixing Interest Rate on ULID Assessments ..........................................................21 Section23, Effective Date........................................................................................................21 -i- 50812G54.5 CITY OF PASCO, WASHINGTON � ORDINANCE NO. 3Z 3 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 $845,000 PAR VALUE OF WATER AND SEWER REVENUE BONDS, 2007, FOR THE PURPOSE OF OBTAINING THE FUNDS WITH WHICH TO PAY THE COST OF IMPROVEMENTS IN UTILITY LOCAL IMPROVEMENT DISTRICTS NOS, 141 AND 142, FIXING THE DATE, FORM, DENOMINATION, MATURITIES, INTEREST RATES, TERMS AND COVENANTS OF THE BONDS AUTHORIZED HEREIN; AND PROVIDING FOR THE SALE AND DELIVERY OF THE BONDS TO PIPER JAFFRAY & CO. 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. 2846, 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 $22,726,011.33; 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 -1- 508126545 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, the 1994 Bonds are no longer outstanding; 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 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 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 "1998B Bonds"), on a parity of lien with 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", and collectively with the 1998A Bonds and the 1998B Bonds, the "1998 Bonds"), on a parity of lien with 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 State SRF Loan and the 1998 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 State SRF Loan, the 1998 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 State SRF Loan, the 1998 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 -2_ 5U8I26S4.5 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 1998 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, by Ordinance No. 3740, passed on November 21, 2005, the City heretofore issued $4,400,000 par value Water and Sewer Revenue Bonds, 2005 (the "2005 Bonds"), on a parity lien with the 1998 Bonds, 1999 Bonds, 2001 Bonds and 2002 Bonds, to pay the costs of carrying out the plan of additions specified, adopted and ordered to be carried out pursuant to Ordinance No. 3740 and to pay the costs of issuance of those bonds; and WHEREAS, pursuant to Ordinance No. 3656, passed on February 17, 2004, the City created Utility Local Improvement District No. 141 ("ULID No. 141") and ordered the expansion and extension and improvement of a portion of the City's sewer collection system to certain areas of the City by the construction of sewer lines, sewer stubs, a street overlay and all work necessary for or incidental to the provision of sewer service to that area as more particularly described in Ordinance No. 3656; and WHEREAS, pursuant to Ordinance No. 3712, passed on February 22, 2005, the City created Utility Local Improvement District No. 142 ("ULID loo. 142") and ordered the expansion and extension and improvement of a portion of the City's sewer collection system to certain areas of the City by the construction of sewer lines, sewer stubs, a street overlay and all work necessary for or incidental to the provision of sewer service to that area as more particularly described in Ordinance No. 3712; and WHEREAS, by Ordinance No. 3737, passed November 7, 2005, the City Council confirmed the assessments and assessment roll in ULID No. 14.1 in the total amount of$632,790; and WHEREAS, by Ordinance No. 3815, passed January 16, 2007, the City Council confirmed the assessments and assessment roll in ULID No. 142 in the total amount of$688,000; and WHEREAS, the City Council has determined that it is necessary to issue and sell $84S,000 par value of water and sewer revenue bonds (the `Bonds") to provide the funds necessary to carry out the improvements in ULIDs Nos. 141 and 142 and to pay the costs of issuance and sale of the Bonds, and WHEREAS, Piper Jaffray & Co. of Seattle, Washington, has offered to purchase the Bonds on the terms and conditions hereinafter set forth;NOW, THEREFORE, THE CITY COC.iNCIL 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: -3- S08126sas "Alternate 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 UI.1D 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. "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. 2846 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, 2007, 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. _4_ 5M2654 5 "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. 3314, Ordinance No. 3378, Ordinance No. 3503, Ordinance No. 3567 and Ordinance No. 3740, and this ordinance, the payment of the principal of and interest on which constitutes a lien 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 and the 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 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. "Improvements" means the improvements in ULIDs Nos. 141 and 142 ordered to be carried out by Ordinance No. 3656 and Ordinance No. 3712, respectively. "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. "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. -5- 50812654.5 "2002 Bonds" means the Water and Sewer Revenue Bonds, 2002, dated October 1, 2002, authorized to be issued by Ordinance No. 3567. "2005 Bonds" means the Water and Sewer Revenue Bonds, 2005, dated December 5, 2005, authorized to be issued by Ordinance No. 3740. "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. "Outstanding Parity Bonds" means the outstanding 1998 Bonds, the 1999 Bonds, the 2001 Bonds, 2002 Bonds and the 2005 Bonds. "Parity Bonds" means the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds. "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 Ordinance No. 3104, passed on August 21, 1995. "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. "Purchaser"means Piper Jaffray & Co. of Seattle, Washington. "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, the 2005 Bonds and the Bonds means the Surety Bond provided by the applicable Reserve Insurer. "Reserve Insurer" means Ambac Assurance Corporation for the 1998 Bonds, the 1999 Bonds, the 2001 Bonds, the 2002 Bonds, the 2005 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 -6- 50812654.5 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 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 Refunding 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 1998 Bonds, the 1999 Bonds, the 2001 Bonds, the 2002 Bonds, the 2005 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. "tJLID 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. "ULID No. 141" means that ULID of the City created by Ordinance No. 3656. "ULID No. 142" means that ULID of the City created by Ordinance No. 3712. "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. -7- S0812654 5 "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. Finding s. The City Council finds that (1) all payments required by the Outstanding Parity 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 35.92.100), and the debt service requirements of the Outstanding Parity 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 Outstanding Parity 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 Outstanding Parity 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 Outstanding Parity Bonds; and (4) provision is hereinafter made for the deposit in the Bond Fund of all UL1D Assessments collected in ULIDs Nos. 141 and 142. Section 3. 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 Improvements, including the reimbursement of City funds previously used to carry out the portion of the Plan of Additions relating to the Improvements, and to pay the costs of issuance of the Bonds. The Bonds shall be called Water and Sewer Revenue Bonds, 2007, of the City; shall be in the aggregate principal amount of$845,000; shall be dated their date of initial delivery; shall be in the denomination of $5,000 or any integral multiple thereof 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 1 and September 1, commencing March 1, 2008, to the maturity or earlier redemption of the Bonds; and shall mature on September 1 in years and amounts and bear interest at the rates per annum as follows: -8- 50812654 S Maturity Interest Years Principal Amounts Rates 2008 $ 50,000 4.50% 2009 50,000 4.50 2012* 150,000 4.25 2015* 150,000 4.40 2016 130,000 4.50 2022* 315,000 4.75 *Term Bonds Section 4. 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 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 DTC. The Bonds so registered shall be held in fully immobilized form by DTC as depository in accordance with the provisions of 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 like 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 Iaws 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. -9- 50812654.5 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 5. 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 l 5t' 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 to the Bond Registrar. ]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 6, Redemption Provisions and Open Market Purchase of Bonds. (a) Optional Redemption. Bonds maturing on or prior to September 1, 2016, shall not be subject to optional redemption by the City prior to their stated maturity dates The City reserves the right and option to redeem Bonds maturing in 2022 prior to their stated maturity date at any time on or after September 1, 2017, as a whole or in part (randomly in such manner as the Bond Registrar shall determine), at par plus accrued interest to the date fixed for redemption. (b) Extraordinary Redemption. Bonds maturing on September 1, 2016, are subject to extraordinary call at any time, in whole or in part, at a price of par plus accrued interest solely from ULID Assessments up to the amount that there are ULID Assessments on deposit in the Bond Fund over and above the amount needed to pay currently maturing installments of the principal of and interest on the Parity Bonds. (c) Mandatory Redemption. Bonds maturing in 2012, 2015 and 2022 are Term Bonds and, if not redeemed under the optional redemption provisions set forth above or purchased in the open market under the provisions set forth below, shall be called for redemption randomly (in such manner as the Bond Registrar shall determine) at par plus accrued interest on September 1 in years and amounts as follows: -10- 50812654 5 2012 Term Bond Mandatory Mandatory Redemption Redemption Years Amounts 2010 $50,000 2011 50,000 2012 (maturity) 50,000 2015 Term Bond Mandatory Mandatory Redemption Redemption Years Amounts 2013 $50,000 2014 50,000 2015 (maturity) 50,000 2022 Term Bond Mandatory Mandatory Redemption Redemption Years Amounts 2017 $50,000 2018 50,000 2019 50,000 2020 55,000 2021 55,000 2022 (maturity) 55,000 It' the City redeems under the optional redemption provisions, purchases in the open market or defeases Term Bonds, the par amount of the "Perm Bonds so redeemed, purchased or defeased (irrespective of their actual redemption or purchase prices) shall be credited against one or more scheduled mandatory redemption amounts for those Term Bonds. The City shall determine the manner in which the credit is to be allocated and shall notify the Bond Registrar in writing of its allocation at least 60 days prior to the earliest mandatory redemption date for that maturity of Term Bonds for which notice of redemption has not already been given. (d) Owen Market Purchase, 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. (e) General. All Bonds purchased or redeemed under this section shall be cancelled. -11- 50912654.5 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 to 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 interest rate and maturity in any of the denominations authorized by this ordinance in the aggregate principal amount remaining unredeemed. 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 7. 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 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 8. 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 9. 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 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: -12- 50812654.5 CERTIFICATE OF AUTHENTICATION This Bond is one of the Fully registered City of Pasco, Washington, Water and Sewer Revenue Bonds, 2007, 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 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 10. 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. Section 11. Bond Fund; Payments into Bond Fund, The Bond Fund has been previously 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 -13- %091265a 5 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 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 -14- 50812654.$ 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 12. Assessments from ULIDs Nos. 141 and 142. The City hereby covenants and agrees that all ULID Assessments levied in ULIDs Nos. 141 and 142 of the City shall be deposited in the Bond Fund, 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. Deposit of Bond Proceeds. Proceeds of the Bonds shall be deposited into the Construction Funds-ULIDs Nos. 141 and 142 created by Ordinances Nos. 3656 and 3712, respectively, and used to reimburse the City for certain expenditures made prior to the issuance of the Bonds 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 15. 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 -15- 50x12654.5 service on any revenue obligation having a lien upon the Net Revenue of the Waterworks Utility subordinate to the lien of the Bonds; and (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 16. 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 -16- 50812654.5 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. (f) 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 17. 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 -17- 50812654 5 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. (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 -18- snaizesa s 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 (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 18. 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 -19- 50812654 5 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 19. 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 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 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, UI.,ID 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 Parity 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 -20- 50812654 5 Obligations are pledged irrevocably for the prior redemption of the defeased Bonds included in 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. Section 21. Approval of Bond Purchase Agreement. Piper Jaffray & Co. 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, including the Finance Director. 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 PLL,C, 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 for the proper application and use of the proceeds of the sale thereof. Section 22. Fixing Interest Rate on ULID Assessments. The interest rates on the installments and delinquent payments of the special assessments in ULIDs Nos. 141 and 142 are revised and fixed at the rate of 5.5% per annum, Section 23. 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, -21- 50812654.5 PASSED by the City Council of the City of Pasco, Washington, this 18th day of June, 2007, at a regular open public meeting, and signed in authentication of its passage this 18th day of June, 2007. Mayor ATTEST: 1 ri��L lam,i—t City Clerks -P APPROVED AS TO FORM: Foster Pepper PLLC Bond Counsel -22- 50812654.2 PASSED by the City Council of the City of Pasco, Washington, this 18th day of June, 2007, at a regular open public meeting, and signed in authentication of its passage this 18th day of June, 2007. Mayor ATTEST: City Clerk j i APPR 0 F m 1A VA Foster Pep er PLLC Bond Counsel -22- 50812654.2 CERTIFICATION I, the undersigned, City Clerk of the City of Pasco, Washington (the "City"), hereby certify as follows: I. The attached copy of Ordinance No. (the "Ordinance") is a full, true and correct copy of an ordinance duly passed at a regular meeting of the City Council of the City held at the regular meeting place thereof on June 18, 2007, as that ordinance appears on the minute book of the City; and the Ordinance will be in full force and effect five days after the publication of its summary in the City's official newspaper. 2. A quorum of the members of the City Council was present throughout the meeting and a majority of those members present voted in the proper manner for the passage of the Ordinance. IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of June, 2007. CITY OF PASCO, WASHINGTON Debra L. Clark, City Clerk SOS12654 5