HomeMy WebLinkAbout3915 Ordinance CITY OF PASCO, WASHINGTON
ORDINANCE NO. 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 $10,045,000
PAR VALUE OF WATER AND SEWER REVENUE BONDS, 2009, FOR THE
PURPOSE OF OBTAINING THE FUNDS WITH WHICH TO PAY THE COST
OF CARRYING OUT SUCH PLAN OF ADDITIONS AND OF
IMPROVEMENTS IN UTILITY LOCAL IMPROVEMENT DISTRICT
NO. 143, AND TO PAY COSTS OF ISSUANCE OF SUCH 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 PIPER JAFFRAY & CO. OF
SEATTLE, WASHINGTON.
PASSED: APRIL 6, 2009
This document was prepared by:
FOSTER PEPPER PLLC
1111 Third Avenue, Suite 3400
Seattle, Washington 98101
(206) 447-4400
50972572.5
TABLE OF CONTENTS
Paze
Section1. Definitions...........................................................................................................4
Section2. Findings...............................................................................................................8
Section3. Plan of Additions.................................................................................................8
Section 4. Purpose and Description of the Bonds..................................................................9
Section 5. Registration and Transfer of Bonds....................................................................10
Section6. Payment of Bonds..............................................................................................1 i
Section 7. Redemption Provisions and Open Market Purchase of Bonds.............................l I
Section 8. Notice of Redemption........................................................................................12
Section 9. Failure to Redeem Bonds...................................................................................13
Section 10. Form and Execution of Bonds............................................................................13
Section11. Bond Registrar...................................................................................................14
Section 12. Bond Fund; Payments into Bond Fund...............................................................14
Section 13. Assessments from ULID No. 143.......................................................................15
Section 14. Pledge, Lien and Charge for Payment of the Bonds............................................15
Section 15. Creation of Project Account; Deposit of Bond Proceeds.....................................15
Section16. Flow of Funds....................................................................................................16
Section17. Covenants..........................................................................................................16
Section 18. Provisions for Future Parity Bonds.....................................................................18
Section 19. Preservation of Tax Exemption for Interest on the Bonds...................................20
Section 20. Designation of Bonds as"Qualified Tax-Exempt Obligations."..........................20
Section 21. Refunding or Defeasance of Bonds ....................................................................20
Section 22. Approval of Bond Purchase Agreement..............................................................21
Section 24. Undertaking to Provide Continuing Disclosure...................................................22
Section 25. Fixing Interest Rate on ULID Assessments........................................................24
Section 26. Bond Insurance..................................................................................................25
Section27. Effective Date....................................................................................................25
Exhibit A—Bond Insurer Document Provisions
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50972572.5
CITY OF PASCO, WASHINGTON
ORDINANCE NO. J� l J-
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 $10,045,000
PAR VALUE OF WATER AND SEWER REVENUE BONDS, 2009, FOR THE
PURPOSE OF OBTAINING THE FUNDS WITH WHICH TO PAY THE COST
OF CARRYING OUT SUCH PLAN OF ADDITIONS AND OF
IMPROVEMENTS IN UTILITY LOCAL IMPROVEMENT DISTRICT
NO. 143, AND TO PAY COSTS OF ISSUANCE OF SUCH 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 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
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1991 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. 3040; and
WHEREAS, the 1994 Bonds are no longer outstanding; 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
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
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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. 3835, the City heretofore issued $845,000 par
value Water and Sewer Revenue Bonds, 2007 (the "2007 Bonds"), on a parity of lien with the
1998 Bonds, 1999 Bonds, 2001 Bonds, 2002 Bonds and 2005 Bonds to pay the costs of
improvements in Utility Local Improvement Districts Nos. 141 and 142 and to pay costs of
issuance of those bonds; and
WHEREAS, pursuant to Ordinance No. 3794, passed on October 2, 2006, as amended by
Ordinance No. 3814, passed on December 18, 2006, the City created Utility Local Improvement
District No. 143 C'ULID No. 143") 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. 3794, as
amended; and
WHEREAS, by Ordinance No. 3891, passed December 1, 2008, the City Council
confirmed the assessments and assessment roll in ULID No. 143 in the total amount of
$1,200,000; 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
$10,045,000 par value of water and sewer revenue bonds (the "Bonds") to provide the funds
necessary to carry out the Plan of Additions and improvements in ULID No. 143 and to pay the
costs of issuance and sale of the Bonds; and
WHEREAS, Assured Guaranty Corp. (the "Bond Insurer") has made a commitment to
issue an insurance policy (the "Financial Guaranty Insurance Policy") insuring the payment
when due of the principal of and interest on the Bonds as provided therein, and the City Council
deems that the purchase of the Financial Guaranty Insurance Policy is in the best interest of the
City; 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 COUNCIL OF THE CITY OF PASCO, WASHINGTON, DO ORDAIN as
follows:
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Section 1. Definitions. As used in this ordinance, the following words shall have the
following meanings:
"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 Services.
"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.
"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 Insurance Policy" means the Financial Guaranty Insurance Policy issued by the
Bond Insurer insuring the payment when due of the principal of and interest on the Bonds as
provided therein.
"Bond Insurer" means Assured Guaranty Corp. of New York, New York, a Maryland
insurance corporation, and its successors and assigns.
"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, 2409, authorized to be issued by
this ordinance.
"1998A Bonds" means the Water and Sewer Revenue Bonds, 1998, Series A (Taxable),
issued pursuant to Ordinance No. 3314.
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"1998B Bonds" means the Water and Sewer Revenue Refunding Bonds, 1998, Series B
(Tax-Exempt), issued pursuant to Ordinance No. 3314.
"1998C Bonds" means the Water and Sewer Revenue Bonds, 1998, Series C (Tax-
Exempt), issued pursuant to Ordinance No. 3314.
"1998 Bonds" means, collectively, the 1998A Bonds, 1998B Bonds and 1998C Bonds.
"1999 Bonds" means the Water and Sewer Revenue Bonds, 1999, issued pursuant to
Ordinance No. 3378.
"2001 Bonds" means the Water and Sewer Revenue Bonds, 2001, issued pursuant to
Ordinance No. 3503.
"2002 Bonds" means the Water and Sewer Revenue Bonds, 2002, issued pursuant to
Ordinance No. 3567.
"2005 Bonds" means the Water and Sewer Revenue Bonds, 2005, issued pursuant to
Ordinance No. 3740.
"2007 Bonds" means the Water and Sewer Revenue Bonds, 2007, issued pursuant to
Ordinance No. 3 83 5.
"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. 3314, Ordinance No. 3378, Ordinance No. 3503, Ordinance
No. 3567, Ordinance No. 3740, Ordinance No. 3835 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.
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"Government Obligations" means those government obligations defined by RC W
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 ULID No. 143 ordered to be carried out by
Ordinance No. 3794, as amended by Ordinance No. 3814.
"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.
"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, 1999 Bonds, 2001
Bonds, 2002 Bonds, 2005 Bonds and 2007 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 this
ordinance.
"Principal and Interest Account" means the account of that name created in the Band
Fund for the payment of the principal of and interest on all Parity Bonds.
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"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, the 2007 Bonds and the Bonds means the Surety Bond
provided by the Reserve Insurer.
"Reserve Insurer" means Ambac Assurance Corporation for the 1998 Bonds, the 1999
Bonds, the 2001 Bonds, the 2002 Bonds, the 2005 Bonds, the 2007 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 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.
"Surety Bond" means the surety bond issued by the Reserve Insurer 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, the 2007 Bonds and the Bonds as provided in and
subject to the limitations set forth in that 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.
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"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.
"ULID No. 143" means that ULID of the City created by Ordinance No. 3794, as
amended by Ordinance No. 3814.
"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. Findings. 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 ULID Assessments
collected in ULID No. 143.
Section 3. Plan of Additions. 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 the design and construction of a water supply treatment plant to be located at I-182
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and Court Street in the City (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.
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 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 $9,000,000.
Such cost shall be paid from the proceeds of the Bonds and from other money of the City made
available therefor.
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 and the
Improvements, and to pay the costs of issuance of the Bonds. The Bonds shall be called Water
and Sewer Revenue Bonds, 2009, of the City; shall be in the aggregate principal amount of
$10,045,000; 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 May 1 and November 1, commencing November 1, 2009,
to the maturity or earlier redemption of the Bonds; and shall mature on May 1 in years and
amounts and bear interest at the rates per annum as follows:
Maturity Principal Interest Maturity Principal Interest
Years Amounts Rates Years Amounts Rates
2010 $365,000 3.000% 2021 $470,000 4.000%
2011 390,000 3.000 2022 120,000 4.400
2012 400,000 3.000 2023 990,000 4.200
2013 410,000 3.000 2024 530,000 4.300
2014 420,000 3.500 2024 120,000 4.500
2015 430,000 3.500 2025 550,000 4.375
2016 450,000 4.000 2026 575,000 4.500
2017 455,000 4.000 2027 600,000 4.500
2018 475,000 4.000 2028 630,000 4.625
2019 495,000 4.000 2029 660,000 4.750
2020 510,000 4.000
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. l
The above maturity amounts are allocated to the Plan of Additions and the
Improvements, including a ratable share of the proceeds used to provide a reserve for and pay the
costs of issuance of the Bonds, all in accordance with the following schedule:
Maturity Principal Allocable Principal Allocable to
Years to Plan of Additions Improvements
2010 $305,000 $60,000
2011 330,000 60,000
2012 340,000 60,000
2013 350,000 60,000
2014 360,000 60,000
2015 370,000 60,000
2016 390,000 60,000
2017 395,000 60,000
2018 415,000 60,000
2019 435,000 60,000
2020 450,000 60,000
2021 470,000 --
2022 -- 120,000
2023 990,000 --
2024 530,000 120,000
2025 550,000 --
2026 575,000 --
2027 600,000 --
2028 630,000 --
2029 660,000 --
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 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).
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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
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 151h 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 7. Redemption Provisions and Open Market Purchase of Bonds.
(a) Optional Redemption. Bonds maturing on or prior to May 1, 2019, 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 on or after May 1, 2020, prior to their
stated maturity date at any time on or after May 1, 2019, 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 May 1, 2022, bearing
interest at the rate of 4.40%, and on May 1, 2024, bearing interest at the rate of 4.50%, 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.
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(c) Mandatory Redemption. Bonds maturing in 2023 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 May 1 in years and
amounts as follows:
Mandatory Mandatory
Redemption Redemption
Years Amounts
2022 $485,000
2023 (maturity) 505,000
If the City redeems under the optional redemption provisions, purchases in the open
market or defenses Term Bonds, the par amount of the Term 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) Open 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.
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 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,
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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 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 prepared 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:
CERTIFICATE OF AUTHENTICATION
This Bond is one of the fully registered City of Pasco, Washington, Water
and Sewer Revenue Bonds, 2009, 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.
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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.
Section 12. Bond Fund; Payments into Bond Fund. The Bond Fund has been
previously created and established in the office of the Finance Manager 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
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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 Insurer shall be reimbursed first, 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
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. Assessments from ULID No. 143. The City hereby covenants and agrees
that all ULID Assessments levied in ULID No. 143 of the City shall be deposited in the Bond
Fund,
Section 14. Pledjze 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 15. Creation of Protect Account; Deposit of Bond Proceeds. There is created
and established in the office of the Finance Manager of the City a special account in the City's
Water/Sewer Utility Fund designated Project #09-2-01 (the "Project Account"). Principal
proceeds of the Bonds allocable to the Plan of Additions shall be deposited into the Project
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Account and used to pay the costs of carrying out the Plan of Additions and allocable costs of
issuance and sale of the Bonds. Principal proceeds of the Bonds allocable to the Improvements
shall be deposited into the Construction Fund -ULID No. 143 created by Ordinance No. 3794,
and used to reimburse the City for certain expenditures made prior to the issuance of the Bonds
and certain allocable 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 16. 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
(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 17. 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
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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.
(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
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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 18. 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 Services.
(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
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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 184 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;
(S) 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.
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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 19. 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 20. Designation of Bonds as "Oualified Tax-Exempt Obligations." The City
has determined and certifies that (a) the Bonds are not "private activity bonds" within the
meaning of Section 141 of the Code; (b) the reasonably anticipated amount of tax-exempt
obligations (other than private activity bonds and other obligations not required to be included in
such calculation) which the City and any entity subordinate to the City (including any entity 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) will issue during the calendar year in which
the Bonds are issued will not exceed $30,000,000; and (c) the amount of tax-exempt obligations,
including the Bonds, designated by the City as "qualified tax-exempt obligations" for the
purposes of Section 265(b)(3) of the Code during the calendar year in which the Bonds are
issued does not exceed $30,000,000, The City designates the Bonds as "qualified tax-exempt
obligations" for the purposes of Section 265(b)(3) of the Code.
Section 21. 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
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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 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
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.
Notwithstanding anything in this section to the contrary, if the principal of and/or interest
due on the Bonds is paid by the Bond Insurer pursuant to the Bond Insurance Policy, the Bonds
shall be treated as remaining outstanding for all purposes, not defeased or otherwise satisfied and
shall not be considered paid by the City, and the assignment and pledge of the revenues and all
other covenants, agreements and other obligations of the City to the registered owners of the
Bonds shall continue to exist and shall run to the benefit of the Bond Insurer, and the Bond
Insurer shall be subrogated to the rights of those registered owners including, without limitation,
any rights that such registered owners may have in respect of securities law violations arising
from the offer and sale of the Bonds.
Section 22. 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 PLLC, municipal bond counsel of Seattle, Washington, relative to the Bonds.
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5M2572.5
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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 23. Preliminary Official Statement Deemed Final. The City Council has been
provided with copies of a preliminary official statement dated March 30, 2009 (the "Preliminary
Official Statement"), prepared in connection with the sale of the Bonds. For the sole purpose of
the Purchaser's compliance with Securities and Exchange Commission Rule 15c2-12(b)(1), the
City "deems final" that Preliminary Official Statement as of its date, except for the omission of
information as to offering prices, interest rates, selling compensation, aggregate principal
amount, principal amount per maturity, maturity dates, options of redemption, delivery dates,
ratings and other terms of the Bonds dependent on such matters.
Section 24. 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) Undertaking 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");
(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.
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(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, 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, 2009; 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, 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
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.i
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.
(f) 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;
(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.
(h) Centralized Dissemination_Agent. To the extent authorized by the SEC,
the City may satisfy the Undertaking by transmitting the required filings using
http://www.diselosureusa.org (or such other centralized dissemination agent as may be
approved by the SEC).
Section 25. Fixing Interest Rate on ULID Assessments. The interest rate on the
installments of the special assessments in ULID No. 143 are revised and fixed at the rate of 4.5%
per annum.
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Section 26. Bond Insurance. The City Council finds that a savings will result from
purchasing the Bond Insurance Policy for the Bonds, and that such purchase is in the City's best
interest. The City is hereby authorized to purchase from the Bond Insurer the Bond 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. The
Mayor and the Finance Director are hereby each acting alone authorized to execute on behalf of
the City a commitment for the purchase of the Bond Insurance and any and all other documents
required or requested in connection with the Bond Insurance Policy.
The provisions set forth in Exhibit A, attached hereto and by this reference made a part
hereof, shall apply with respect to the Bond Insurer and Bond Insurance.
Section 27. 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 and APPROVED by the Mayor of Pasco, Washington, at a
regular open public meeting,this 60'day of April, 2009.
Joyce 01 t"r
ATTEST:
�0
Debra L. Clark, City C r
APPROVED AS TO FORM:
Foster Pepper PLLC
Bond Counsel
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EXHIBIT A
BOND INSURER DOCUMENT PROVISIONS
Notices and Other Information.
1. Any notice that is required to be given to holders of the Bonds (the
"Bondholders"), nationally recognized municipal securities information repositories or state
information depositories pursuant to Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission or to the Bond Registrar pursuant to the ordinance authorizing the Bonds to which
this exhibit is attached (the "Bond Ordinance") shall also be provided to Assured Guaranty,
simultaneously with the sending of such notices. In addition, to the extent that the City has
entered into a continuing disclosure agreement, covenant or undertaking with respect to the
Bonds, all information furnished pursuant to such agreements shall also be provided to Assured
Guaranty, simultaneously with the furnishing of such information.
2. All demands, notices and other information required to be given to Assured
Guaranty under the Bond Ordinance shall be in writing and shall be mailed by registered or
certified mail or personally delivered or telecopied to the recipient as follows:
Assured Guaranty Corp.
1325 Avenue of the Americas
New York,New York 10019
Attn: Risk Management Department
(Re: Policy No. [��)
Telecopy No.: (212) 581-3268
Confirmation: (212) 974-0100
Email: riskmanagementdept @ assuredguaranty.com
(In each case in which notice or other communication refers to an event of default, a
claim on the Bond Insurance Policy or any event with respect to which failure on the part of
Assured Guaranty to respond shall be deemed to constitute consent or acceptance, then such
demand, notice or other communication shall be marked to indicate "URGENT MATERIAL
ENCLOSED" and shall also be sent to the attention of the General Counsel at the same address
and telecopy number above or at generalcounsel @assuredguaranty.com.)
3. Assured Guaranty shall have the right to receive such additional information as it
may reasonably request.
4. The City will permit Assured Guaranty to discuss the affairs, finances and
accounts of the City or any information Assured Guaranty may reasonably request regarding the
security for the Bonds with appropriate officers of the City will use commercially reasonable
efforts to enable Assured Guaranty to have access to the facilities, books and records of the City
on any business day upon reasonable prior notice.
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5. The Bond Registrar shall notify Assured Guaranty of any failure of the City to
provide notices, certificates and other information under the Bond Ordinance.
Defeasance.
So long as the Bond Insurance Policy is in effect, the following documents will be
required with respect to any refunding or defeasance pursuant to Section 21 of the Bond
Ordinance:
1. An opinion of Bond Counsel to the effect (i) that the defeasance will not
adversely impact the exclusion from gross income for federal income tax purposes of interest on
the Bonds or refunded bonds and (ii) that the Bonds are no longer"Outstanding"under the Bond
Ordinance;
2. A refunding trust or escrow agreement (the "Escrow Agreement") and an opinion
of counsel regarding the validity and enforceability of the Escrow Agreement; and
3. The Escrow Agreement shall provide that:
i. Any substitution of securities shall require verification by an independent
certified public accountant and the prior written consent of Assured Guaranty.
ii. The City will not exercise any optional redemption of Bonds secured by
the Escrow Agreement or any other redemption other than mandatory sinking fund redemptions
unless (i) the right to make any such redemption has been expressly reserved in the Escrow
Agreement and such reservation has been disclosed in detail in the official statement for the
refunding bonds, and (ii) as a condition of any such redemption there shall be provided to
Assured Guaranty a verification of an independent certified public accountant as to the
sufficiency of escrow receipts without reinvestment to meet the escrow requirements remaining
following such redemption.
iii. The City shall not amend the Escrow Agreement or enter into a forward
purchase agreement or other agreement with respect to rights in the escrow without the prior
written consent of Assured Guaranty.
Bond Registrar.
1. Assured Guaranty shall receive prior written notice of any name change of the
Bond Registrar or the removal or resignation of the Bond Registrar.
2. No removal or resignation of the Bond Registrar shall take effect until a
successor, acceptable to Assured Guaranty, shall be appointed.
3. The Bond Registrar may be removed at any time, at the request of Assured
Guaranty, for any breach of its Bonds under the Bond Ordinance,
4. Notwithstanding any other provision of the Bond Ordinance, in determining
whether the rights of Bondholders will be adversely affected by any action taken pursuant to the
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terms and provisions thereof, the Bond Registrar shall consider the effect on the Bondholders as
if there were no Bond Insurance Policy.
Assured Guaranty as Third Party Beneficiary.
To the extent that the Bond Ordinance confers upon or give or grant to Assured Guaranty
any right, remedy or claim under or by reason of the Bond Ordinance, the Bond Ordinance must
contain a provision which states that: "Assured Guaranty is explicitly recognized as being a third
party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or
granted hereunder."
Control Rights.
Assured Guaranty shall be deemed to be the holder of all of the Bonds for purposes of(a)
exercising all remedies and directing the City to take actions or for any other purposes following
an event of default, and (b) granting any consent, waiver, direction or approval or taking any
action permitted by or required under the Bond Ordinance to be granted or taken by the holders
of such Bonds.
Consent Rights of Assured Guaranty.
1. Consent of Assured Guaranty. Any provision of the Bond Ordinance expressly
recognizing or granting rights in or to Assured Guaranty may not be amended in any manner that
affects the rights of Assured Guaranty hereunder without the prior written consent of Assured
Guaranty.
2. Consent of Assured Guaranty in Addition to Bondholder Consent. Wherever the
Bond Ordinance requires the consent of Bondholders, Assured Guaranty's prior written consent
shall also be required.
3. Consent of Assured Guaranty in the Event of Insolvency. Any reorganization or
liquidation plan with respect to the City must be acceptable to Assured Guaranty. In the event of
any such reorganization or liquidation, Assured Guaranty shall have the right to vote on behalf of
all Bondholders who hold Bonds guaranteed by Assured Guaranty absent a payment default by
Assured Guaranty under the Bond Insurance Policy.
4. Consent of Assured Guaranty Upon Default. Anything in the Bond Ordinance to
the contrary notwithstanding, upon the occurrence and continuance of an event of default,
Assured Guaranty shall be entitled to control and direct the enforcement of all rights and
remedies granted to the Bondholders for the benefit of the Bondholders under this Financing
Document.
Reimbursement Bonds.
1. The City hereby agrees to pay or reimburse Assured Guaranty (A) all amounts
paid by Assured Guaranty under the Bond Insurance Policy, and (B) to the extent permitted by
law, any and all charges, fees, costs and expenses which Assured Guaranty may reasonably pay
or incur, including, but not limited to, fees and expenses of attorneys, accountants, consultants
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and auditors and reasonable costs of investigations, in connection with (i) any accounts
established to facilitate payments under the Bond Insurance Policy, (ii) the administration,
enforcement, defense or preservation of any rights in respect of the Bond Ordinance or any other
financing document, including defending, monitoring or participating in any litigation or
proceeding (including any bankruptcy proceeding in respect of the City or any affiliate thereof)
relating to Bond Ordinance or any other financing document, any party to this Bond Ordinance
or any other financing document or the transaction contemplated by the Bond Ordinance, (iii)the
foreclosure against, sale or other disposition of any collateral securing any Bonds under Bond
Ordinance or any other financing document, or the pursuit of any remedies under Bond
Ordinance or any other financing document, to the extent such costs and expenses are not
recovered from such foreclosure, sale or other disposition, or (iv) any amendment, waiver or
other action with respect to, or related to, Bond Ordinance or any other financing document
whether or not executed or completed; costs and expenses shall include a reasonable allocation
of compensation and overhead attributable to time of employees of Assured Guaranty spent in
connection with the actions described in clauses (ii) - (iv) above. In addition, Assured Guaranty
reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver
or consent proposed in respect of Bond Ordinance or any other financing document. The City
will pay interest on the amounts owed in this paragraph from the date of any payment due or
paid, at the per annum rate of interest publicly announced from time to time by JP Morgan Chase
Bank, National Association at its principal office in New York, New York as its prime lending
rate (any change in such prime rate of interest to be effective on the date such change is
announced by JPMorgan Chase Bank, National Association) plus three percent (3%) per annum
(the "Reimbursement Rate"). The Reimbursement Rate shall be calculated on the basis of the
actual number of days elapsed over a 360-day year, In the event JPMorgan Chase Bank ceases
to announce its prime rate publicly, the prime rate shall be the publicly announced prime rate or
base lending rate of such national bank, as Assured Guaranty shall specify.
2. In addition to any and all rights of reimbursement, subrogation and any other
rights pursuant hereto or under law or in equity, the City agrees to pay or reimburse Assured
Guaranty, to the extent permitted by law, any and all charges, fees, costs, claims, losses,
liabilities (including penalties), judgments, demands, damages, and expenses which Assured
Guaranty or its officers, directors, shareholders, employees, agents and each Person, if any, who
controls Assured Guaranty within the meaning of either Section 15 of the Securities Act of 1933,
as amended, or Section 20 of the Securities Exchange Act of 1934, as amended, may reasonably
pay or incur, including, but not limited to, fees and expenses of attorneys, accountants,
consultants and auditors and reasonable costs of investigations, of any nature in connection with,
in respect of or relating to the transactions contemplated by Bond Ordinance or any other
financing document by reason of-
a. any omission or action (other than of or by Assured Guaranty) in
connection with the offering, issuance, sale, remarketing or delivery of the Bonds;
b. the negligence, bad faith, willful misconduct, misfeasance, malfeasance or
theft committed by any director, officer, employee or agent of the City in connection with any
transaction arising from or relating to Bond Ordinance or any other financing document;
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a ' !
C. the violation by the City of any law, rule or regulation, or any judgment,
order or decree applicable to it;
d. the breach by the City of any representation, warranty or covenant under
Bond Ordinance or any other financing document or the occurrence, in respect of the City, under
Bond Ordinance or any other financing document of any "event of default" or any event which,
with the giving of notice or lapse of time or both, would constitute any"event of default"; or
e. any untrue statement or alleged untrue statement of a material fact
contained in any official statement relating to the Bonds, if any, or any omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such claims arise out of or are based upon
any untrue statement or omission in information included in an official statement, if any, and
furnished by Assured Guaranty in writing expressly for use therein.
Payment Procedure Under the Bond Insurance Policy.
1. At least two (2) Business Days prior to each payment date on the Bonds, the Bond
Registrar will determine whether there will be sufficient funds to pay all principal of and interest
on the Bonds due on the related payment date and shall immediately notify Assured Guaranty or
its designee on the same Business Day by telephone or electronic mail, confirmed in writing by
registered or certified mail, of the amount of any deficiency. Such notice shall specify the
amount of the anticipated deficiency, the Bonds to which such deficiency is applicable and
whether such Bonds will be deficient as to principal or interest or both. If the deficiency is made
up in whole or in part prior to or on the payment date, the Bond Registrar shall so notify Assured
Guaranty or its designee.
2. The Bond Registrar shall, after giving notice to Assured Guaranty as provided
above, make available to Assured Guaranty and, at Assured Guaranty's direction, to any Fiscal
Agent, the registration books of the City maintained by the Bond Registrar and all records
relating to the funds maintained under the Bond Ordinance.
3. The Bond Registrar shall provide Assured Guaranty with a list of registered
owners of Bonds entitled to receive principal or interest payments from Assured Guaranty under
the terms of the Bond Insurance Policy, and shall make arrangements with Assured Guaranty or
another designee of Assured Guaranty to (i) mail checks or drafts to the registered owners of
Bonds entitled to receive full or partial interest payments from Assured Guaranty and (ii) pay
principal upon Bonds surrendered to Assured Guaranty, the Bond Registrar or another designee
of Assured Guaranty by the registered owners of Bonds entitled to receive full or partial
principal payments from Assured Guaranty.
4. The Bond Registrar shall, at the time it provides notice to Assured Guaranty of
any deficiency pursuant to clause 1. above, notify registered owners of Bonds entitled to receive
the payment of principal or interest thereon from Assured Guaranty (i) as to such deficiency and
its entitlement to receive principal or interest, as applicable, (ii) that Assured Guaranty will remit
to them all or a part of the interest payments due on the related payment date upon proof of its
entitlement thereto and delivery to Assured Guaranty or the Bond Registrar, in form satisfactory
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to Assured Guaranty, of an appropriate assignment of the registered owner's right to payment,
(iii) that, if they are entitled to receive partial payment of principal from Assured Guaranty, they
must surrender the related Bonds for payment first to the Bond Registrar, which will note on
such Bonds the portion of the principal paid by the Bond Registrar and second to Assured
Guaranty or its designee, together with an appropriate assignment, in form satisfactory to
Assured Guaranty, to permit ownership of such Bonds to be registered in the name of Assured
Guaranty, which will then pay the unpaid portion of principal, and (iv)that, if they are entitled to
receive full payment of principal from Assured Guaranty, they must surrender the related Bonds
for payment to Assured Guaranty or its designee, rather than the Bond Registrar, together with
the an appropriate assignment, in form satisfactory to Assured Guaranty, to permit ownership of
such Bonds to be registered in the name of Assured Guaranty.
5. In addition, if the Bond Registrar has notice that any holder of the Bonds has been
required to disgorge payments of principal or interest on the Bonds previously Due for Payment
pursuant to a final non-appealable order by a court of competent jurisdiction that such payment
constitutes an avoidable preference to such holder within the meaning of any applicable
bankruptcy laws, then the Bond Registrar shall notify Assured Guaranty or its designee of such
fact by telephone or electronic notice, confirmed in writing by registered or certified mail.
6. The Bond Registrar will be hereby irrevocably designated, appointed, directed
and authorized to act as attorney-in-fact for holders of the Bonds as follows:
a. If and to the extent there is a deficiency in amounts required to pay interest
on the Bonds, the Bond Registrar shall (a) execute and deliver to Assured Guaranty, in form
satisfactory to Assured Guaranty, an instrument appointing Assured Guaranty as agent for such
holders in any legal proceeding related to the payment of such interest and an assignment to
Assured Guaranty of the claims for interest to which such deficiency relates and which are paid
by Assured Guaranty, (b) receive as designee of the respective holders (and not as Bond
Registrar) in accordance with the tenor of the Bond Insurance Policy payment from Assured
Guaranty with respect to the claims for interest so assigned, and (c) disburse the same to such
respective holders; and
b. If and to the extent of a deficiency in amounts required to pay principal of
the Bonds, the Bond Registrar shall (a) execute and deliver to Assured Guaranty, in form
satisfactory to Assured Guaranty, an instrument appointing Assured Guaranty as agent for such
holder in any legal proceeding related to the payment of such principal and an assignment to
Assured Guaranty of the Bond surrendered to Assured Guaranty in an amount equal to the
principal amount thereof as has not previously been paid or for which moneys are not held by the
Bond Registrar and available for such payment (but such assignment shall be delivered only if
payment from Assured Guaranty is received), (b) receive as designee of the respective holders
(and not as Bond Registrar) in accordance with the tenor of the Bond Insurance Policy payment
therefore from Assured Guaranty, and (c) disburse the same to such holders.
7. Payments with respect to claims for interest on and principal of Bonds disbursed
by the Bond Registrar from proceeds of the Bond Insurance Policy shall not be considered to
discharge the obligation of the City with respect to such Bonds, and Assured Guaranty shall
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become the owner of such unpaid Bond and claims for the interest in accordance with the tenor
of the assignment made to it under the provisions of this subsection or otherwise.
S. Irrespective of whether any such assignment is executed and delivered, the City
and the Bond Registrar hereby agree for the benefit of Assured Guaranty that:
a. they recognize that to the extent Assured Guaranty makes payments
directly or indirectly (e.g., by paying through the Bond Registrar), on account of principal of or
interest on the Bonds, Assured Guaranty will be subrogated to the rights of such holders to
receive the amount of such principal and interest from the City, with interest thereon as provided
and solely from the sources stated in the Bond Ordinance and the Bonds; and
b. they will accordingly pay to Assured Guaranty the amount of such
principal and interest, with interest thereon as provided in the Bond Ordinance and the Bonds,
but only from the sources and in the manner provided herein for the payment of principal of and
interest on the Bonds to holders, and will otherwise treat Assured Guaranty as the owner of such
rights to the amount of such principal and interest.
9. Assured Guaranty 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 (as such terms are
defined in the Bond Insurance Policy) and any amounts due on the Bonds as a result of
acceleration of the maturity thereof in accordance with this agreement, whether or not Assured
Guaranty has received a Notice (as defined in the Bond Insurance Policy) of Nonpayment or a
claim upon the Bond Insurance Policy.
10. In addition, Assured Guaranty shall, to the extent it makes any payment of
principal or interest on the Bonds become subrogated to the rights of the recipients of such
payments in accordance with the terms of the Bond Insurance Policy, and to evidence such
subrogation (i) in the case of claims for interest, the Bond Registrar shall note Assured
Guaranty's rights as subrogee on the registration books of the City maintained by the Bond
Registrar, upon receipt of proof of payment of interest thereon to the registered holders of the
Bonds, and (ii) in the case of claims for principal, the Bond Registrar, if any, shall note Assured
Guaranty's rights as subrogee on the registration books of the City maintained by the Bond
Registrar, upon surrender of the Bonds together with receipt of proof of payment of principal
thereof.
No Purchase by City.
Without the prior written consent of Assured Guaranty, no Bonds insured by Assured
Guaranty shall be purchased by the City, or any of its affiliates, in lieu of redemption, unless
such Bonds are redeemed, defeased or cancelled.
Interest Rate Exchange Agreement.
Any interest rate exchange agreement (an "Interest Rate Exchange Agreement"), entered
into in connection with the Bonds or any parity debt issued subsequent to the date hereof, shall
meet the following conditions (so long as any Bonds remain outstanding): (i) the Interest Rate
Exchange Agreement must be entered into to manage interest costs related to, or a hedge against
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50972572.5
(a) assets then held, (b) debt then outstanding, or (c) debt reasonably expected to be issued or
incurred within thirty-six months of the proposed interest rate swap, and (ii) the Interest Rate
Exchange Agreement shall not contain any leverage element or multiplier component greater
than I.Ox unless there is a matching hedge arrangement which effectively off-sets the exposure
from any such element or component. Unless otherwise consented to in writing by Assured
Guaranty, the net settlement, breakage or other termination amount then in effect shall be
subordinate to debt service on the Bonds and on any debt on parity with the Bonds. The City
shall not terminate Interest Rate Exchange Agreement unless it demonstrates to the satisfaction
of Assured Guaranty prior to the payment of any such termination amount that (a) the City has
sufficient amounts on hand to make pay the termination amount, and (b) such payment will not
cause the City to be in default under the Bond Ordinance, as such ordinance may be amended or
supplemented, including but not limited to, any monetary obligations thereunder. All
counterparties or guarantors to the Interest Rate Exchange Agreement must have a rating of at
least "A-" and "A3" by Standard & Poor's ("S&P") and Moody's Investors Service
("Moody's"). If the counterparty or guarantor's rating falls below "A-" or "A3" by either S&P
or Moody's, the counterparty or guarantor shall execute a credit support annex to the Interest
Rate Exchange Agreement, which credit support annex shall be acceptable to Assured Guaranty.
If the counterparty or the guarantor's long term unsecured rating falls below `Baal" or"BBB+"
by either Moody's or S&P, a replacement counterparty or guarantor, acceptable to Assured
Guaranty, shall be required.
Reporting Requirements.
The City will furnish to Assured Guaranty:
a. prior to issuing additional Bonds secured by Net Revenue from the City's
Waterworks Utility and ULID Assessments, any disclosure document or financing agreement
pertaining to such debt, which disclosure document or financing agreement shall include, without
limitation, the applicable maturity schedule, interest rate or rates, redemption and security
provisions pertaining to any such debt; and
b. within thirty (30) days following any litigation or investigation that may have a
material adverse affect on the financial position of the City, notice of such litigation or
investigation.
A-8
50972572.5
CERTIFICATION
1, the undersigned, City Clerk of the City of Pasco, Washington (the "City"), hereby
certify as follows:
1. The attached copy of Ordinance No. 'S(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 April 6, 2009, 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 6'h day of April, 2009.
CITY OF PASCO, WASHINGTON
'0 1 �0 0 .0
Debra L. C ark, ity Clerk
50772572.5