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2013.11.18 Council Meeting Packet
AGENDA PASCO CITY COUNCIL Regular Meeting 7:00 p.m. November 18, 2013 1. CALL TO ORDER 2. ROLL CALL: (a) Pledge of Allegiance 3. CONSENT AGENDA: All items listed under the Consent Agenda are considered to be routine by the City Council and will be enacted by roll call vote as one motion (in the form listed below). There will be no separate discussion of these items. If further discussion is desired by Councihmmbers or the public, the item may be removed from the Consent Agenda to the Regular Agenda and considered separately. is 5. 6. (a) Approval of Minutes: 1. Minutes of the Pasco City Council Meeting dated November 4, 2013. (b) Bills and Communications: (A detailed listing of claims is available for review in the Finance Manager's office.) To approve General Claims in the amount of $2,107,913.36 ($242,775.12 in the form of Electronic Fund Transfer Nos. 17157, 17180, 17181, 17182, 17183 and 17248; and $1,865,138.24 in the form of Wire Transfer Nos. 1377 and 1378; and Claim Warrants numbered 195496 through 195708). 2. To approve bad debt write -offs for utility billing, ambulance, cemetery, general accounts, miscellaneous accounts, and Municipal Court (non - criminal, criminal, and parking) accounts receivable in the total amount of $218,597.19 and, of that amount, authorize $157,539.88 be turned over for collection. *(c) Access Easement — Easement for Sidewalk from CDSK 28 LLC (MF #ESMT2013 -003): 1. Agenda Report from Dave McDonald, City Planner dated November 13, 2013. 2. Overview Map. 3. Vicinity Map. 4. Utility Easement from CDSK 28 LLC. To accept the sidewalk/access easement from CDSK 28 LLC. (RC) MOTION: I move to approve the Consent Agenda as read. PROCLAMATIONS AND ACKNOWLEDGMENTS: (a) (b) (c) VISITORS - OTHER THAN AGENDA ITEMS: (a) (b) (e) REPORTS FROM COMMITTEES AND /OR OFFICERS: (a) Verbal Reports from Councilmembers (b) Finance Manager: General Fund Operating Statement through October 2013. (c) Regular Meeting 2 November 18, 2013 7. HEARINGS AND COUNCIL ACTION ON ORDINANCES AND RESOLUTIONS RELATING THERETO: (a) 2014 Property Tax Levy Report. L Agenda Report from Dunyele Mason, Finance Manager dated November 15, 2013. 2. Assessed Value History Chart. 3. Tax Levy Rate History Chart. 4. Summary of Options. 5. Proposed Ordinance for the 2014 Ad Valorem Tax. 6. Proposed Ordinance Preserving Property Tax Levy Capacity. CONDUCT A PUBLIC HEARING Ordinance No. , an Ordinance providing for the 2014 Ad Valorem Tax Levy, and a levy for the 1999 Unlimited Tax General Obligation Bonds in the City of Pasco in accordance with state law. MOTION: I move to adopt Ordinance No. providing for the 2014 Ad Valorem Tax Levy, and a levy for the 1999 Unlimited Tax General Obligation Bonds. Ordinance No. , an Ordinance preserving the Property Tax Levy capacity in the City of Pasco, Washington for fiscal years after 2013 in accordance with state law. MOTION: I move to adopt Ordinance No. , preserving property tax levy capacity for fiscal years after 2013 in accordance with state law. 8. ORDINANCES AND RESOLUTIONS NOT RELATING TO HEARINGS: *(a) Ordinance No. 4126, 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 of one or more series of water and sewer revenue bonds of the city in the aggregate principal amount of not to exceed $10,050,000 to provide funds to pay the cost of carrying out the plan of additions, make a deposit to the debt service reserve account and pay the costs of issuance and sale of the bonds; fixing or setting parameters with respect to certain terms and covenants of the bonds; appointing the city's designated representative to approve the final terns of the sale of the bonds; and providing for other related matters. 1. Agenda Report from Dunyele Mason, Finance Manager dated November 14, 2013. 2. Proposed Ordinance. 3. Preliminary Official Statement. (Attachments in Council packets only; copies available for public review in the City Manager's office, the Pasco Library and on the city's webpage at www.pasco- wa.2ov). MOTION: I move to adopt Ordinance No. 4126, 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 of one or more series of water and sewer revenue bonds of the city in the aggregate principal amount of not to exceed $10,050,000 to provide funds to pay the cost of carrying out the plan of additions, make a deposit to the debt service reserve account and pay the costs of issuance and sale of the bonds; fixing or setting parameters with respect to certain terms and covenants of the bonds; appointing the city's designated representative to approve the final terms of the sale of the bonds; and providing for other related matters and, further, to authorize publication by title only. 9. UNFINISHED BUSINESS: (None) 10. NEW BUSINESS: *(a) Lodging Tax Allocations: 1. Agenda Report from Gary Crutchfield, City Manager dated November 14, 2013. 2. 2014 Lodging Tax Requests. 3. Lodging Tax Sources and Uses, 2010 -2013. 4. Lodging Tax Advisory Committee Minutes dated 10/16/13. MOTION: I move to approve the allocation of 2014 Lodging Tax receipts as recommended by the Lodging Tax Advisory Committee minutes of October 16, 2013. (b) Community Survey Policy Questions: 1. Agenda Report from Stan Strebel, Deputy City Manager dated November 15, 2013. 2. Community Survey Questions from Prior Years. Regular Meeting 3 November 18, 2013 11. MISCELLANEOUS (a) (b) (c) 12. EXECUTIVE SESSION: (a) (b) (c) 13. ADJOURNMENT. (RC) Roll Call Vote Required * Item not previously discussed MF# "Master File #...... Q Quasi - Judicial Matter REMINDERS: 1. 6:00 p.m., Monday, November 18, City Hall Conference Room #1 — LEOFF Disability Board Meeting. (MAYOR MATT WATKINS and COUNCILMEMBER REBECCA FRANCIK) 2. 12:00 p.m., Thursday, November 21, Richland Red Lion — TRIDEC Luncheon Meeting. (COUNCILMEMBER MIKE GARRISON) 3. 4:00 p.m., Thursday, November 21, 7130 W. Grandridge Blvd — TRIDEC Board Meeting. (COUNCILMEMBER MIKE GARRISON, Rep.; TOM LARSEN, Alt.) REGULAR MEETING CALL TO ORDER: MINUTES PASCO CITY COUNCIL NOVEMBER 4, 2013 The meeting was called to order at 7:00 p.m. by Matt Watkins, Mayor. ROLL CALL: Councilmembers present: Rebecca Francik, Mike Garrison, Robert Hoffmann, Tom Larsen, Saul Martinez, Matt Watkins and Al Yenney. Staff present: Gary Crutchfield, City Manager; Leland Kerr, City Attorney; Stan Strebel, Deputy City Manager; Richard Terway, Administrative & Community Services Director; Rick White, Community & Economic Development Director; Ahmad Qayoumi, Public Works Director; Bob Metzger, Police Chief and Mike Pawlak, City Engineer. The meeting was opened with the Pledge of Allegiance led by Chad and fellow members of Cub Scout Troop No. 923. CONSENT AGENDA: (a) Approval of Minutes: Minutes of the Pasco City Council Meeting dated October 21, 2013. (b) Bills and Communications: To approve General Claims in the amount of $899,132.37 ($137,565.47 in the form of Electronic Fund Transfer Nos. 17020, 17071 and 17091; and $761,566.90 in the form of Wire Transfer Nos. 1366, 1367, 1371 through 1374; and Claim Warrants numbered 195317 through 195495). To approve Payroll Claims in the amount of $2,408,729.37, Voucher Nos. 46198 through 46273 and 80320 through 80329; and EFT Deposit Nos. 30062565 through 30063170. (c) Shoreline Master Program Consultant Agreement (MF #PLAN2013 -001): To approve the professional services agreement with Anchor QEA for the update of the City's Shoreline Master Program and, further, authorize the City Manager to sign the agreement. (d) Resolution No. 3517, a Resolution waiving competitive bidding requirements for the purchase of spray park equipment for Kurtzman Park and authorizing the purchase. To approve Resolution No. 3517, waiving competitive bidding requirements for the purchase of spray park equipment for Kurtzman Park and approve the purchase of the Kurtzman Spray Park Equipment from Vortex in the amount of $93,088.66. Removed from Consent Agenda and moved to Item 8(b). (e) Resolution No. 3518, a Resolution accepting work performed by C &E Trenching, LLC under contract for the Riverview Pump Station Meter /Chlorine Vault Replacement Project. To approve Resolution No. 3518, accepting the work performed by C &E Trenching, LLC under contract for the Riverview Pump Station Meter /Chlorine Vault Replacement Project. (f) Resolution No. 3519, a Resolution accepting work performed by Ray Poland & Sons under contract for the 4th & Clark Waterline Project. To approve Resolution No. 3519, accepting the work performed by Ray Poland & Sons under contract for the 4th and Clark Waterline Project. 3(a).1 MINUTES REGULAR MEETING PASCO CITY COUNCIL NOVEMBER 4, 2013 (g) Resolution No. 3520, a Resolution accepting work performed by Michels Corporation under contract for the 2013 Sewer Re- Lining Project, Project Nos. C7- SE- 2R -13 -03 and C7- SE- 24- 12 -20. To approve Resolution No. 3520, accepting the work performed by Michels Corporation under contract for the 2013 Sewer Re- Lining Project. MOTION: Ms. Francik moved to approve the Consent Agenda as amended. Mr. Garrison seconded. Motion carried by unanimous Roll Call vote. REPORTS FROM COMMITTEES AND /OR OFFICERS: Mr. Hoffmann attended the UA Local Union 598 Plumbers and Steamfitters Tripartite Conference. Mayor Watkins received the ACW Certificate of Advanced Leadership. HEARINGS AND COUNCIL ACTION ON ORDINANCES AND RESOLUTIONS RELATING THERETO: Street Vacation (MF #VAC2013 -006) A Portion of an unnamed street east of First Avenue (Junvenal). Mr. White explained the details of the proposed vacation. MAYOR WATKINS DECLARED THE PUBLIC HEARING OPEN TO CONSIDER THE PROPOSED VACATION. FOLLOWING THREE CALLS FOR COMMENTS, EITHER FOR OR AGAINST, AND THERE BEING NONE, MAYOR WATKINS DECLARED THE PUBLIC HEARING CLOSED. Ordinance No. 4124, an Ordinance vacating a portion of an unnamed street in the NP Plat. MOTION: Ms. Francik moved to adopt Ordinance No. 4124, vacating a portion of an unnamed right -of -way located near the southeast corner of First Avenue and Columbia Street and, further, to authorize publication by summary only. Mr. Garrison seconded. Motion carried unanimously. Kurtzman Park Area LID 148. Mr. Crutchfield explained the details of the LID. MAYOR WATKINS REOPENED THE PUBLIC HEARING TO CONSIDER THE FINAL ASSESSMENT OF LID 148. Mr. C.W. Brown, 631 S. Waldemar, thanked Council and staff for working with the area residents in a cooperative way. FOLLOWING THREE CALLS FOR COMMENTS, EITHER FOR OR AGAINST, MAYOR WATKINS DECLARED THE PUBLIC HEARING CLOSED. Ordinance No. 4125, an Ordinance of the City of Pasco, Washington, relating to Local Improvement District No. 148; approving and confirming the assessments and assessment roll of Local Improvement District No. 148 for the purpose of making improvements to Waldemar, Cedar, Hugo and Sycamore Avenues and Alton, and Helena Streets in the Kurtzman area to city street standards, including road widening, curb, gutter, sidewalk, storm drain system and street lighting, as provided by Ordinance No. 3988; levying and assessing a part of the cost and expense of the improvements against the lots, tracts, parcels of land and other property as shown on the assessment roll; and, providing for collection of assessments. 2 MINUTES REGULAR MEETING PASCO CITY COUNCIL NOVEMBER 4, 2013 MOTION: Ms. Francik moved to adopt Ordinance No. 4125, approving and confirming the final assessment roll of Local Improvement District No. 148 and, further, to authorize publication by summary only. Mr. Yenney seconded. Motion carried unanimously. Kurtzman Park Area LID 149: Mr. Crutchfield explained the details of the LID. MAYOR WATKINS REOPENED THE PUBLIC HEARING TO CONSIDER THE FINAL ASSESSMENT OF LID 149. FOLLOWING THREE CALLS FOR COMMENTS, EITHER FOR OR AGAINST, AND THERE BEING NONE, MAYOR WATKINS DECLARED THE PUBLIC HEARING CLOSED. MOTION: Ms. Francik moved to close the Public Hearing on LID 149 and direct staff to implement a new final assessment process using Option 2 to allocate the costs to LID 149. Mr. Yenney seconded. Motion carried unanimously. ORDINANCES AND RESOLUTIONS NOT RELATING TO HEARINGS: Resolution No. 3521, a Resolution approving a historic preservation plan entitled the Pasco Historic Preservation Work Plan. MOTION: Ms. Francik moved to approve Resolution No. 3521, adopting the Historic Preservation Plan. Mr. Martinez seconded. Motion carried unanimously. Resolution No. 3517, a Resolution waiving competitive bidding requirements for the purchase of spray park equipment for Kurtzman Park and authorizing the purchase. Council commented on the quality and versatility of Vortex equipment. MOTION: Ms. Francik moved to approve Resolution No. 3517, waiving competitive bidding requirements for the purchase of spray park equipment for Kurtzman Park and approve the purchase of the Kurtzman Spray Park Equipment from Vortex in the amount of $93,088.66. Mr. Yenney seconded. Motion carried unanimously. NEW BUSINESS: Reject Bids for 2011 Filtration Plant Improvements (Storage Building) Project No. C3- 11- 52 -WTR: Mr. Qayoumi explained the details of the bids. MOTION: Ms. Francik moved to reject all bids for the 2011 Filtration Plant Improvements (Storage Building) Project in as much as all of the bids received significantly exceeded the Engineer's estimate and approved project budget. Mr. Garrison seconded. Motion carried unanimously. Kurtzman Park Splashpad, Project No. C5- PF- 8R- 13 -01: Mr. Terway explained the details of the bids. MOTION: Ms. Francik moved to award the low bid for the Kurtzman Park Splashpad Project to Big D's Construction of Tri- Cities, Inc., in the amount of $115,534.11 and, further, authorize the Mayor to sign the contract documents. Mr. Garrison seconded. Motion carried by unanimous Roll Call vote. MINUTES REGULAR MEETING PASCO CITY COUNCIL NOVEMBER 4, 2013 MISCELLANEOUS DISCUSSION: Mr. Crutchfield noted the 2014 Preliminary Budget will be presented at the next workshop meeting, starting at 6 p.m. November 12. ADJOURNMENT: There being no further business, the meeting was adjourned at 7:34 p.m. APPROVED: Matt Watkins, Mayor ATTEST: Debra L. Clark, City Clerk PASSED and APPROVED this 18th day of November, 2013. 10 CITY OF PASCO Council Meeting of: November 18, 2013 Accounts Payable Approved The City Council City of Pasco, Franklin County, Washington We, the unde i ned, do hereby certify under penalty of perjury that the materials have been furnished, the rvices nde or the labor performed as described herein and that the claim is a just, due and unpaid o ligation against the city and that we are authorized to authenticate and certify to said claim. / / Dunyele Mas t, Finance Services Manager We, the undersigned City Councilmembers of the City Council of the City of Pasco, Franklin County, Washington, do hereby certify on this 18 day of November, 2013 that the merchandise or services hereinafter specified have been received: Check Numbers and 195496- 195708 In The Amount Of: $ 1,865,138.24 Electronic Funds Transfers: 1377, 1378 Electronic Funds Transfers: 17157, 17180, 17181 In The Amount Of: $ 242,775.12 (Journal Entries) 17182, 17183, 17248 Combined total of $2,107,913.36 Councilmember GENERAL FUND: Legislative Judicial Executive Police Fire Administration & Community Services Community Development Engineering Non - Departmental Library TOTAL GENERAL FUND: Councilmember SUMMARY OF CLAIMS BY FUND: STREET ARTERIAL STREET STREET OVERLAY C. D. BLOCK GRANT HOME CONSORTIUM GRANT NSP GRANT KING COMMUNITY CENTER AMBULANCE SERVICE CEMETERY ATHLETIC PROGRAMS GOLF COURSE SENIOR CENTER OPERATING MULTI MODAL FACILITY SCHOOL IMPACT FEES RIVERSHORE TRAIL & MARINA MAIN SPECIAL ASSESSMENT LODGING FUND REVOLVING ABATEMENT TRAC DEVELOPMENT & OPERATING ECONOMIC DEVEL & INFRASTRUCT STADIUM /CONVENTION CENTER GENERAL CAP PROJ CONSTRUCTION WATER/SEWER EQUIPMENT RENTAL - OPERATING GOVERNMENTAL EQUIPMENT RENTAL - OPERATING BUSINESS EQUIPMENT RENTAL - REPLACEMENT GOVERNMENTAL EQUIPMENT RENTAL - REPLACEMENT BUSINESS MEDICAL/DENTAL INSURANCE CENTRALSTORES PAYROLL CLEARING LID CONSTRUCTION PUBLIC FACILITIES DIST TRI CITY ANIMAL CONTROL SENIOR CENTER ASSOCIATION GRAND TOTAL ALL FUNDS: 535,290.06 13,648.79 16,573.38 0.00 2,610.95 58.29 0.00 808.13 $ 2,107,913.36 3(b).1 AGENDA REPORT FOR: City Council '\ ` DATE: November 13, 2013 TO: Gary Crutchfield anagerf I" REGULAR: November 18, 2013 Rick Terway, Administrative. Co 'ty Services Director FROM: Dunyele Mason, Financial Services Manager SUBJECT: BAD DEBT WRITE -OFF'S /COLLECTION. I. REFERENCE (S): Write -off and collection lists are on file in the Finance Department. II. ACTION REQUESTED OF COUNCIL /STAFF RECOMMENDATIONS: III. IV. MOTION: I move to approve bad debt write -offs for utility billing, ambulance, cemetery, general accounts, miscellaneous accounts, and Municipal Court (non - criminal, criminal, and parking) accounts receivable in the total amount of $218,597.19 and, of that amount, authorize $157,539.88 be turned over for collection. HISTORY AND FACTS BRIEF: 1. UTILITY BILLING - These are all inactive accounts, 60 days or older. Direct write -offs are under $10 with no current forwarding address, or are accounts in "occupant" status. Accounts submitted for collection exceed $10.00. 2. AMBULANCE - These are all delinquent accounts over 90 days past due or statements are returned with no forwarding address. Those submitted for collection exceed $10.00. Direct write offs including DSHS and Medicare customers; the law requires that the City accept assignment in these cases. 3. COURT ACCOUNTS RECEIVABLE - These are all delinquent non - criminal and criminal fines, and parking violations over 30 days past due. 4. CODE ENFORCEMENT — LIENS — These are Code Enforcement violation penalties which are either un- collectable or have been assigned for collections because the property owner has not complied or paid the fine. There are still liens in place on these amounts which will continue to be in effect until the property is brought into compliance and the debt associated with these liens are paid. 5. CEMETERY — These are delinquent accounts over 120 days past due or statements are returned with no forwarding address. Those submitted for collection exceed $10.00. 6. GENERAL - These are delinquent accounts over 120 days past due or statements are returned with no forwarding address. Those submitted for collection exceed $10.00. 7. MISCELLANEOUS - These are delinquent accounts over 120 days past due or statements are returned with no forwarding address. Those submitted for collection exceed $10.00. ADMINISTRATIVE ROUTING: cc: Dot French, Municipal Court Clerk 3(b).2 Amount Direct Referred to Total Write -offs Collection Write -offs Utility Billing $ 92.17 .00 92.17 Ambulance $ 59,825.14 14,823.88 74,649.02 Court A/R $ .00 135,983.00 135,983.00 Code Enforcement $ 1,140.00 6,290.00 7,430.00 Cemetery $ .00 .00 .00 General $ .00 63.00 63.00 Miscellaneous $ .00 380.00 380.00 TOTAL: $ 61,057.31 157,539.88 218,597.19 ADMINISTRATIVE ROUTING: cc: Dot French, Municipal Court Clerk 3(b).2 AGENDA REPORT FOR: City Council November 13, 2013 TO: Gary Crutchfi anager Regular Mtg.: 11/18/13 Rick White, Community & conomic Development Director FROM: David I. McDonald, City Planner SUBJECT: ACCESS EASEMENT: Easement for sidewalk from CDSK 28ACCESS EASEMENT: Easement for sidewalk from CDSK 28 LLC�F It ESMT 2013 -003) I. REFERENCE(S): 1. Overview Map 2. Vicinity Map 3. Utility Easement from CDSK 28 LLC H. ACTION REQUESTED OF COUNCIL /STAFF RECOMMENDATIONS: 11/18: MOTION: I move to accept the sidewalk/access easement from CDSK 28 LLC. III. FISCAL IMPACT None IV. HISTORY AND FACTS BRIEF: A. Recent parking lot and building improvements at the Riverview Shopping Plaza required modification of at least one driveway and a sidewalk related thereto. To comply with new ADA standards a portion of the new sidewalk extended northerly outside the existing right -of -way. The owners of the Riverview Shopping Plaza have provided the city with an easement for that portion of the sidewalk extending onto private property. 3(c) VV S W • _ a xmx� jtb <µ "�• - ktkl�f4l1 A 1Ff Ja 'Ldp �P 1' s t.v U.1 1914 ct�O� yryi- uj ct w .. • r--� � >� � �` ,�-r« �: U _ is o �--•1 ;tom ., � ' .' x ,� F t � _ � w m " � t �•� xx �E adob r � I sE awn <' I �Y . I i T �'t 1 4/ O O Si ✓ I A� a� FM ct U ddow 0 Poo 0 Poo i - 1 l� l V � � I After Recordin¢ Return To: CDSK 28 LLC 2011 Kennewick Pl, NE Renton WA 98056 -2254 SIDEWALK/ACCESS EASEMENT Tax Parcel No. 119272181 3407 West Court Street Pasco, WA 99301 CDSK 28 LLC i nr, UXAN I OR, UDSK 28 LLC, a Washington Limited Liability Company, conveys and hereby grants to the GRANTEE, City of Pasco, an access easement for public sidewalk and public access, over across and upon the following described property: That portion of Parcel # 119272181,commencing at the southwest corner of Lot 3, binding site plan #2011 -05 as recorded in Franklin County Washington; thence N 89 012'43" E a distance of 127.21 feet to the true point of beginning; thence N 00047'17" W a distance of 10.00 feet; thence N 89 012'43" E a distance of 20.00 feet; thence S 00047'17" E a distance of 10.00 feet; thence S 89 012'43" W a distance of 20.00 feet to the true point of beginning. DATED this 4+4^ day of N09MI29rO 13. GRANTOR(S) STATE OF WASHINGTON ) ss. County of Franklin ) On this V- day of _NOV WU� 2013, before me, the 'Td .pigned duly commissioned and sworn, .personally appeared �`� R tome known to be individual(s) described above and an authorized representative of CDSD 28 LLC and who executed the within and foregoing instrument as owner(s) of record, and acknowledged to me that he /she /they signed the same as his/her /their free and voluntary act and deed, for the uses and purposes therein mentioned, and on oath stated that he /she /they is /are authorized to execute the said instrument. GIVEN under by hand and official seal this _ day of - MV4*1- 2013. Notf Print Name: shi waabICASTEL NOTARY PUBLIC in and for a State �YSM ANDS Residing at: MY COMMISSION EXPIRES My Commission Expires: June 10, 2017 Sew,+- . -r•R: "MM'!. „X,� / Ti,G�/ G(/vn REVENUE SOURCES: TAXES: PROPERTY SALES PUBLIC SAFETY UTILITY OTHER LICENSES & PERMITS INTERGOV'T REVENUE CHARGES FOR SERVICES FINES & FORFEITS MISC. REVENUE OTHER FINANCING SOURCES TOTALREVENUES BEGINNING FUND BALANCE TOTAL SOURCES EXPENDITURES: -.,ITY COUNCIL MUNICIPAL COURT CITY MANAGER POLICE FIRE FIRE- RETRO` ADMIN & COMMUNITY SVCS COMMUNITY DEVELOPMENT ENGINEERING MISC. NON - DEPARTMENT LIBRARY TOTAL EXPENDITURES ENDING FUND BALANCE GENERAL FUND OPERATING STATEMENT THROUGH OCTOBER 2013 YTD 2013 % OF YTD 2013 ORIGINAL ANNUAL 2012 ACTUAL BUDGET BUDGET ACTUAL 5,242,997 7,947,190 941,956 6,637,075 1,017,345 1,413,523 1,548,047 3,917,210 761,948 528,909 117,724 30,073,924 6,400,000 8,195,000 1,000,000 7,798,000 1,065,000 1,108,200 1,495,150 4,498,459 794,650 631,450 1,295,303 34,281,212 8,546,455 7,573,573 38,620,379 41,854,785 81.9% 97.0% 94.2% 85.1% 95.5% 127.6% 103.5% 87.1% 95.9% 83.8% 9.1% 87.7% 4,024,089 7,254,675 479,564 6,663,928 988,457 1,468,298 1,574,754 3,436,528 681,092 620,628 135,274 27,327,287 TOTAL 2012 BUDGET 6,200,000 8,265,000 0 6,526,660 2,260,000 1,093,700 1,679,700 4,531,330 977,200 673,245 138,000 32,344,835 10,649,694 10,143,620 92.3% 37,976,981 42,488,455 % OF TOTAL ACTUAL 64.9% 87.8% 102.1% 43.7% 134.3% 93.8% 75.8% 69.7% 92.2% 98.0% 84.5% 89.4% 88,421 121,315 72.9% 92,095 118,807 77.5% 1,134,966 1,376,639 82.4% 1,078,308 1,332,334 80.9% 831,807 962,755 86.4% 777,586 951,034 81.8% 9,421,358 12,096,846 77.9% 8,815,441 11,451,115 77.0% 3,726,545 4,431,366 84.1% 3,506,339 4,164,541 84.2% 862,171 5,371,172 6,022,454 89.2% 5,226,062 6,201,703 84.3% 1,007,452 1,332,076 75.6% 949,413 1,208,878 78.5% 1,336,797 1,535,558 87.1% 1,073,258 1,514,469 70.9% 3,797,233 8,125,335 46.7% 5,490,425 7,469,966 73.5% 960,052 1,148,380 83.6% 955,577 1,148,380 83.2% 28,537,974 37,152,724 76.8% 27,964,504 35,561,227 78.6% 10,082,405 4,702,061 TOTAL EXPEND & END FUND BAL 38,620,379 41,854,785 AVAILABLE CASH BALANCE 7,959,740 PERCENTAGE OF BUDGET ALLOCATED FOR 10 MONTHS 83% These statements are intended for Management use only. 6ettlement of fire contract resulted in one time payment of back wages and benefits. 10,012,477 6,927,228 37, 976, 981 42,488,455 8,596,887 6(b) FOR: City Council TO: Gary Crutchfi Rick Terway, AGENDA REPORT & Community Services Director FROM: Dunyele Mason, Financial Services Manager SUBJECT: 2014 Property Tax Levy — Report I. REFERENCE(S): 1. Assessed Value History Chart 2. Tax Levy Rate History Chart 3. Summary of Options 4. Proposed Ordinance for the 2014 Ad Valorem Tax 5. Proposed Ordinance Preserving Property Tax Levy Capacity November 15, 2013 Regular Mtg.: 11/18/13 II. ACTION REQUESTED OF COUNCIL /STAFF RECOMMENDATIONS: CONDUCT A PUBLIC HEARING 11/18: Motion: I move to adopt Ordinance No , providing for the 2014 Ad Valorem Tax Levy, and a levy for the 1999 Unlimited Tax General Obligation Bonds. Motion: I move to adopt Ordinance No. , preserving property tax levy capacity for fiscal years after 2013 in accordance with State law. III. HISTORY AND FACTS BRIEF: NOTE: The attached information has been updated from the November 12, 2013 workshop meeting to reflect the changes in total assessed valuation, in state assessed value of utilities, and revisions to new construction values. The maximum allowed levy rate, per State statute, that the city can levy (per $1,000 of assessed value) is $3.60. The last time Pasco's levy rate was near that number was in 1994. From 1994 through 1999, the levy rate was reduced by not levying any of the allowable 6% increase available at that time. In November 1999, the legislature reduced the Motor Vehicle Excise Tax (MVET) to $30 per vehicle. To compensate for this loss, Council elected to use most of the unused or banked levy capacity. The levy rate for 2000 taxes was set at $3.07 per $1,000 of assessed value — still well below the $3.60 maximum. In 2001, the voters approved Initiative 747, limiting the amount taxing districts could raise the property tax levy over the previous year by the lesser of 101% or the Implicit Price Deflator (IPD), without voter approval. In November 2007, that initiative was challenged and ruled unconstitutional in the Washington State Supreme Court; that decision returned the limit to the lesser of 6% or IPD. Council chose not to increase the 2008 property tax levy rate by any allowable legal limit. In January 2008, the legislature placed into law those limits (suggested by I -747). The legal limit was to be the lesser of 1% or IPD; this limit is still in effect today. IPD is a national inflation indicator much like the Consumer Price Index. The IPD figure to be used for the 2014 tax calculation is 1.314 %. The preliminary budget document has been prepared using an estimated property tax levy of $6,845,170 which is less than Option 1 and Option 2 as can be seen in the attached Summary of Options. Option 1 reflects an increase of $505,061 allowed by the 101% limit while Option 2 retains 100% of the 2012 levy. Option 3 shows the maximum amount the City could collect if 7(a) Council chose to levy all prior property tax authority that has been preserved for future use (according to the State Department of Revenue calculations). Pasco has been holding steady and been buffered from the worst of the poor overall economic conditions that affect other parts of the country. The State of Washington's economic challenges could negatively affect 2014's outcomes if revenue sources from the state are sharply curtailed. Overall major tax revenues for 2014 are projected to hold steady with 2013 year end estimates. Pasco has been fortunate in using conservative budgeting practices which has resulted in stable fund balances to prepare the 2014 budget. Staff is projecting $5.4 million ending fund balance in the General Fund for next year as compared to the $4.7 million dollar ending fund balance in the 2013 original budget. The increases in fund balance is a planned recovery of fund balance to rebuild after using fund balance in the last couple of years to fund construction projects. Notably the 2013 budget called for a $2.3 million cash payment for the Municipal Court project. Paying cash as compared to a 20 year debt service payment for the Municipal Court project is estimated to save Pasco citizens over $1 million of interest payments. The property tax levy for 2014 will be comprised of the following two elements: 1. General Property Tax Levy 2. 1999 Unlimited Tax General Obligation Fire Station/Library Bonds Debt Service The City is required to certify property tax levies with the County by November 30 of each year. IV. DISCUSSION: The Franklin County Assessor has provided a preliminary assessed valuation of $3,543,038,495 which is used to calculate the 2014 property taxes. This amount includes new construction of $82,229,133 an increase in the State assessed utilities values of $2,636,379 and annexations of property before the cutoff date of March 31 of $138,924,844. The Franklin County Assessor's office re- assesses all properties in the County each year. GENERAL PROPERTY TAX LEVY Several options for setting the 2014 levy are outlined as follows: Option 1• Since the IPD of 1.314% is greater than 1 %, last year's levy would be increased by the allowed 1% (of $64,925) plus the value of new construction, new annexations and any increases in State Assessed Utility values at last year's rate and adding those numbers to last year's total levy. • 2013 (prior year) Total General Property Tax Levy ................. .....................$6,492,514 • I% increase in the levy rate based on the allowable maximum increase amount (lesser of IPD or 1 %) ................................... ............................... ........................$64,925 • New Construction Values of $82,215,933 using the 2013 (prior year) rate of $1.96673311,000 Assessed Value ............. ............................... .......................$161,723 • New Annexation Values of $138,924,844 using the 2013 (prior year) rate of $1.96673351,000 Assessed Value ........... ............................... .......................$273,228 • Increase in the State Assessed Utilities of $0 using the 2012 (prior year) rate of $1.966733/$1,000 Assessed Value ....................... ............................... $5,185 Total Proposed 2014 Levy $6,997,575 A 2014 General Levy of $6,997,575 using the assessed value of $3,543,038,495 calculates to a levy rate of $1.97502 per $1,000 of assessed value. Under this option, the 2014 levy rate would be approximately $0.0077 (three - quarters of one cent) per $1,000 more than the 2013 rate of $1.96732. Option 2• Council could choose not to assess the 1% allowed and there would be no increase from 2013 to 2014's levy except to add increased value related to new construction, annexations and the changes in the value of state assessed utilities. Under Option 2, the 2014 General Property Tax "base" levy would remain unchanged at $6,492,514. Adding new construction, annexations and state utilities, the 2014 total General Property Tax Levy would be $6,932,650. This would set the levy rate at $1.95670 per $1,000 of assessed value. The decrease in the levy rate of $0.0106 is a function of changes in the assessed value between 2013 and 2014. Option 3• Beginning in 1993 and continuing through 2013, the City has preserved its accumulated taxing capacity of $8,173,728. If the City was to levy all of the tax available in Option 3 and choose to levy all the preserved levy capacity, the general levy would increase to $8,695,601. The levy rate would calculate to $2.45428 per $1,000 of assessed value, still well below the maximum rate allowed per State statute of $3.60 per $1,000 of assessed value. Selecting this option would require a "super majority" vote of the Council, or five affirmative votes. PRESERVING FUTURE LEVY CAPACITY Preserved levy capacity, also referred to as "banked" levy capacity, is NOT money that has been put into a bank account. It is merely capacity that has not been used and, therefore, dollars left in the pockets of the taxpayers. The purpose of RCW 84.55.092 allowing a governmental entity to preserve future levy capacity is to `remove the incentive for a taxing district to maintain its tax levy at the maximum level permitted under this chapter, and to protect the fixture levy capacity of a taxing district that reduces its tax levy below the level that it otherwise could impose under this chapter, by removing the adverse consequences to future levy capacities resulting from such levy reductions." This simply means if the tax is not needed, a City does not have to set the levy at the maximum amount. The City can reserve that resource for future use. Preserving any unused levy capacity requires a "super majority" vote of the Council. A preservation ordinance has been prepared should any unused levy capacity be available to preserve. If council enacts Option 2, then the banked (unused) levy capacity for future years would be $1,762,951 which is the highest lawful levy amount of $8,695,601 less the actual levy amount of $6,932,650. 1999 UNLIMITED TAX GENERAL OBLIGATION BOND DEBT SERVICE The 2014 debt service requirement for the 1999 UTGO Bonds issued for the purpose of the Library Remodel and Fire Station Relocation is $58,746 and $74,404, respectively. Staff recommends the 1999 Unlimited Tax General Obligation Bond tax levy be set at those amounts. The two numbers are not combined because they appeared on the official ballot separately when voted upon. The county assessor's office requires we set these levies separately. The estimated assessed value for properties subject to the tax is $2,942,975,693; this will result in levy rates of approximately $0.0200 and $0.0253 respectively, or a combined levy rate of $0.0453. The 2013 levy rates were $0.0229 and $0.0290, respectively, or $0.0519 combined. The schedule of payments calls for principal payments of $100,000 each year. This will result in decreased levy rates for the remaining payment schedule as the interest portion declines. The final payment for these bonds occurs in December 2019. Council should note that the 1993 UTGO Bond for renovation of the old high school to serve as City Hall was retired in 2013, thus reducing the overall levy rate by 0.1488. Using Option 2, the combined levy rate for those portions of the city subject to the 1999 UTGO has declined from 2.1648 in 2013 to 2.0019 in 2014, a drop of more than 16 -cents per $1,000 (or $24 on a home valued at $150,000). 2014 SUMMARY OF OPTIONS Assessed Value (including New Construction, Annexations & Utilities) $ 3,543,038,495 OPTION 1 Prior Year Total General Property Tax Levy $ 6,492,514 1.000% 1 % or IPD - Increase in the levy rate based on the 64,925 allowable maximum increase amount (Lesser of IPD 1.314% or I%) 1 % New Construction Values of $ 82,229,133 at the 2013 rate of $ 1.966733 per $1,000 161,723 of Assessed Value Annexation Values of $ 138,924,844 at the 2013 rate of $ 1.966733 per $1,000 273,228 of Assessed Value Increase in the State Assessed Utilities $ 2,636,379 at the 2013 rate of $ 1.966733 per $1,000 5,185 of Assessed Value Levy rate of $ 1.97502 per $1,000 of Total Assessed Value $ 6,997,575 OPTION 2 Prior Year Total General Property Tax Levy $ 6,492,514 IPD - No Increase of I % in the levy rate 0 New Construction Values of $ 82,229,133 161,723 at the 2013 rate of $ 1.966733 per $1,000 of Assessed Value Annexation Values of $ 138,924,844 273,228 at the 2013 rate of $ 1.966733 per $1,000 of Assessed Value Increase in the State Assessed Utilities $ 2,636,379 at the 2013 rate of $ 1.966733 per $1,000 5,185 of Assessed Value Levy rate of $ 1.95670 per $1,000 of Total Assessed Value $ 6,932,650 OPTION 3 Highest Lawful Levy from Previous Years $ 8,173,728 Declare substantial need and increase highest allowed by 1% 81,737 New Construction Values of $ 82,229,133 at the 2013 rate of $ 1.966733 per $1,000 161,723 of Assessed Value Annexation Values of $138,924,844 at the 2013 rate of $ 1.966733 per $1,000 273,228 of Assessed Value Increase in the State Assessed Utilities $ 2,636,379 at the 2013 rate of $ 1.966733 per $1,000 5,185 of Assessed Value Levy rate of $ 2.45428 per $1,000 of Total Assessed Value $ 8,695,601 C: \Users\zunkert\HppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook\A967LH3B\2014 SUMMARY OF OPTIONS - 11/12/2013 2:64 PM DM 9 19 13 ORDINANCE NO. AN ORDINANCE PROVIDING FOR THE 2014 AD VALOREM TAX LEVY, AND A LEVY FOR THE 1999 UNLIMITED TAX GENERAL OBLIGATION BONDS IN THE CITY OF PASCO IN ACCORDANCE WITH STATE LAW. THE CITY COUNCIL OF THE CITY OF PASCO, WASHINGTON DO ORDAIN AS FOLLOWS: §l. The City Council of the City of Pasco (the population of which is greater than 10,000) has met and considered its budget for the calendar year 2014; §2. The City Council of the City of Pasco after public hearing and after duly considering all relevant evidence and testimony presented, determined that the City of Pasco requires a regular levy in the amount of $6,932,650, which does NOT include any of the allowable percentage increase in property tax revenues from the previous year, and does include amounts resulting from the addition of new construction and improvements to property and any increases in the value of state - assessed property, and amounts authorized by law as a result of any annexations that have occurred and refunds made, in order to discharge the expected expenses and obligations of the district. RCW 84.55.120 requires a specific statement regarding the amount of any increase in regular property tax from the previous year. The actual general levy amount from the previous year (2013) was $6,492,514. The City Council of the City of Pasco hereby authorizes the following increase in the regular property tax levy to be collected in the 2014 tax year. The dollar amount of the increase over the actual levy amount from the previous year shall be $0 (ZERO) which is a percentage INCREASE of 0% (ZERO PERCENT) from the previous year. This increase is exclusive of additional revenue resulting from the addition of new construction and improvements, newly constructed wind turbines to property, any increase in the value of state assessed property, and any additional amounts resulting from any annexations that have occurred and refunds made. The property tax from new construction to be included in the actual levy is calculated to be $161,723. This number is the result of the amount of new construction and improvements to property of $82,229,133, provided by the Franklin County Assessor's Office, multiplied by the 2013 (prior year) levy rate of $1.966733 per $1,000 of that value. The property tax from annexation to be included in the actual levy is calculated to be $273,228. This number is the result of Annexation property values of $138,924,844 provided by the Franklin County Assessor's Office, multiplied by the 2013 (prior year) levy rate of $1.966733 per $1,000 of that value. The property tax from the increase in state assessed utilities to be included in the actual levy is calculated to be $5,185. This number is the result of the amount of new increase of $2,636,379, provided by the Franklin County Assessor's Office, multiplied by the 2013 (prior year) levy rate of $1.966733 per $1,000 of that value. §3. A tax for the following sums of money which includes new construction and annexations to defray the expense and liabilities of the City of Pasco be and the same is hereby levied for the purposes specified against all taxable property in the City for the fiscal year 2014: General Expense, including Councilmanic Bond Debt Service $6,932,650 1999 Unlimited Tax General Obligation Bond /Library Remodel 58,746 1999 Unlimited Tax General Obligation Bond/Fire Station 74,404 $7,065,800 §4. This Ordinance shall take effect five (5) days after passage and publication. Adopted by the City Council of the City of Pasco, on this 18th day of November, 2013. City of Pasco: Matt Watkins, Mayor Attest: Debra L. Clark, City Clerk Approved As To Form: Leland B. Kerr, City Attorney ORDINANCE NO. AN ORDINANCE PRESERVING THE PROPERTY TAX LEVY CAPACITY IN THE CITY OF PASCO, WASHINGTON FOR FISCAL YEARS AFTER 2013 IN ACCORDANCE WITH STATE LAW. WHEREAS, to provide the property tax revenues required by the general operating budget of the City for fiscal year 2014, City Council of the City of Pasco levied property taxes on all taxable property in the City for collection in fiscal year 2014 in the total amount of $6,932,650, which dollar amount is the sum of (a) $6,492,514 is the amount of property taxes levied by the City in fiscal year 2013, plus (b) $0 of the allowable increase of the lesser of 1% or the Implicit Price Deflator (1.314 %), (c) $161,723 which is the amount of additional taxes at the 2013 (prior year) levy rate of 1.966733 cents per $1,000 of assessed value resulting from the addition of new construction and improvements to property in the City, plus (d) $273,228 relating to property annexed into the City during fiscal year 2013, and (e) $5,185, which is the amount of additional taxes at the 2013 (prior year) levy rate of 1.966733 cents per $1,000 of assessed value resulting from the $2,636,379 increase in value of State - assessed utility property in the City; and, WHEREAS, the City Council of the City desires to preserve in accordance with State law (including but not limited to Chapter 84.55 RCW) the capacity of the City to levy property taxes in future fiscal years after 2013, calculated as if the City in fiscal year 2013 had levied the full amount allowed by state law upon a finding of substantial need therefore; and WHEREAS, upon a finding of substantial need and based upon limit factors of the lesser of 101% or IPD (1.314 %) for the previous year and limit factors of 101% or 106% and IPD for previous years as provided by RCW 84.55.0101 and $3.60 per $1,000 of assessed value by RCW 84.52.043 and 41.16.060, the City would be permitted to levy property taxes for fiscal year 2014 in a total amount of $8,695,601 (the "full amount allowed by law "), which dollar amount is the sum of (a) $8,173,728 (the actual highest lawful levy as of 2013), plus (b) $81,737 which represents the lesser of 1% or the IPD; (c) $161,697, which is the amount of additional taxes at the 2013 (prior year) levy rate of $1.966733 cents per $1,000 of assessed value resulting from the addition of new construction and improvements to property in the City, plus (d) $273,228 which is the amount of additional taxes at the 2013 (prior year) levy rate of $1.966733 cents per $1,000 of assessed value resulting from property annexed into the City during fiscal year, and (e) $5,185, which is the amount of additional taxes at the 2013 (prior year) levy rate of $1.966733 cents per $1,000 of assessed value resulting from no increase in value of State assessed utility; and WHEREAS, the full amount allowed by law for fiscal year 2014 of $8,695,601 is $1,762,951 greater than the actual property tax levy of the City for fiscal year 2014 of $6,932,650 and such excess represents the unused 2014 property tax levy capacity that the City desires to preserve for future fiscal years after 2013; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PASCO, WASHINGTON, DO ORDAIN AS FOLLOWS: Section 1. The City Council of the City finds and determines that there is substantial need for the City to preserve, for future fiscal years after 2013, the capacity to levy property taxes on all taxable property in the City in the amount of $1,762,951, which is equal to the unused levy capacity of the City for fiscal year 2014. This substantial need includes, without limitation, the anticipated future requireients for additional property tax revenues that will be needed for the construction and/or maintenance of roads, streets, bridges and other transportation facilities of the City; to satisfy anticipated and unanticipated new regulatory requirements applicable to the City, to provide for potential excess costs of capital facilities; and generally to meet other substantial future financial requirements of the City. Section 2. This ordinance shall take effect and be in force from and after its passage and five days following its publication as required by law. ADOPTED by the City Council by the affirmative vote of a majority plus one vote of the members thereof and APPROVED by the Mayor of Pasco, Washington, at a regular open public meeting thereof, this 18th day of November, 2013. Matt Watkins, Mayor ATTEST: Debra L. Clark, City Clerk APPROVED AS TO FORM: Leland B. Kerr, City Attorney AGENDA REPORT FOR: City Counci( TO: Gary Crutchfi\ Rick Terway, FROM: Dunyele Mason, Finance Manager SUBJECT: 2013 Waterworks Utility Revenue Bonds I. REFERENCE(S): November 14, 2013 Regular Mtg.: 11/18/13 1. Proposed Ordinance 2. Preliminary Official Statement (Note: attachments in Council packets only; copies available for public review in the City Manager's office, the Pasco Library and on the city's webpage at www.pasco- wa.gov.) II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: 11/18: MOTION: I move to adopt Ordinance No. 4126, 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 of one or more series of water and sewer revenue bonds of the City in the aggregate principal amount of not to exceed $10,050,000 to provide funds to pay the cost of carrying out the plan of additions, make a deposit to the debt service reserve account and pay the costs of issuance and sale of the bonds; fixing or setting parameters with respect to certain terms and covenants of the bonds; appointing the City's designated representative to approve the final terms of the sale of the bonds; and providing for other related matters and, further, authorize publication by title only. III. FISCAL IMPACT: IV. HISTORY AND FACTS BRIEF: A) It is proposed that the city issue an estimated combined total of $9,980,070 in Waterworks Utility bonds for completing approximately $2.4 million in sewer system improvements (3d primary clarifier and partial funding for sewer line extensions); $6.4 million in Process Water Reuse Facility system improvements; adding approximately $998,000 to the utility's debt service reserve fund and providing for payment of the debt issuance costs. B) The 2013 Waterworks Revenue Bonds would be issued in two series: 2013A ($7,260,000) and 2010T ($7,260,000) for the combined amount of $9,980,070. The 2013A series would be payable over 15 years as will the taxable series payment. The taxable series is necessary due to the fact that a portion of the refunded bonds were originally issued as taxable due to private beneficiaries (PWRF). C) Favorable interest rates support combining the sewer projects (some accelerated from the capital plan schedule). D) Coupon interest rates on the bonds are expected to range from 1.026% to 4.881 % on the taxable series and from 2.00% to 4.00% on the non - taxable series. An estimated $195,000 premium is expected to be received on the non - taxable series. 8(a) V. DISCUSSION: A) Standard & Poor's again assigned a rating of AA- to the issue, reaffirming the upgrade received on our 2009 and 2010 revenue bonds. Given the favorable rating, it will not be necessary to consider bond insurance in order to gain the most favorable rates. B) The bonds will be sold on November 21, 2013. C) John D Peterson, Senior Vice President of Public Finance with Piper Jaffray & Co. will be present at the November 18 meeting to report on the sale of the bonds. D) Staff recommends adoption of the proposed ordinance. EXECUTION VERSION CITY OF PASCO, WASHINGTON ORDINANCE NO. 4126 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 of one or more series of water and sewer revenue bonds of the City in the aggregate principal amount of not to exceed $10,050,000 to provide funds to pay the cost of carving out the plan of additions, make a deposit to the debt service reserve account and pay the costs of issuance and sale of the bonds; fixing or setting parameters with respect to certain terms and covenants of the bonds; appointing the City's designated representative to approve the final terns of the sale of the bonds; and providing for other related matters. Passed: November 18, 2013 This document was prepared by: FOSTER PEPPER PLLC 1111 Third Avenue, Suite 3400 Seattle, Washington 98101 (206) 447-4400 5132]565.3 TABLE OF CONTENTS Page Section1. Definitions................................................................................................................1 Section 2. Findings and Determinations...................................................................................7 Section3. Plan of Additions.....................................................................................................8 Section 4. Authorization of the Bonds......................................................................................9 Section 5. Appointment of Designated Representative; Description of the Bonds..................9 Section 6. Registration and Transfer of Bonds.........................................................................9 Section 7. Form and Execution of Bonds. ..............................................................................10 Section8. Payment of Bonds..................................................................................................10 Section 9. Redemption Provisions and Purchase of Bonds....................................................11 Section 10. Failure to Pay Bonds..............................................................................................12 Section 11. Bond Fund; Payments into Bond Fund..................................................................12 Section 12. Pledge, Lien and Charge for Payment of the Bonds..............................................14 Section 13. Creation of Project Accounts; Use of Bond Proceeds...........................................14 Section14. Flow of Funds........................................................................................................14 Section15. Covenants...............................................................................................................14 Section 16. Provisions for Future Parity Bonds........................................................................16 Section 17. Tax Covenants; Designation of Tax-Exempt Bonds as "Qualified Tax ExemptObligations.".............................................................................................16 Section 18. Refunding or Defeasance of Bonds.......................................................................17 Section 19. Sale and Delivery of the Bonds .............................................................................17 Section 20. Official Statement; Continuing Disclosure............................................................18 Section 21. General Authorization and Ratification.................................................................18 Section22. Severability............................................................................................................18 Section 23. Effective Date of Ordinance..................................................................................19 Exhibit A Parameters for Final Terms Exhibit B Parity Conditions Exhibit C Form of Undertaking to Provide Continuing Disclosure -1- 51327565.3 CITY OF PASCO, WASHINGTON ORDINANCE NO. 4126 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 of one or more series of water and sewer revenue bonds of the City in the aggregate principal amount of not to exceed $10,050,000 to provide funds to pay the cost of carrying out the plan of additions, make a deposit to the debt service reserve account and pay the costs of issuance and sale of the bonds; fixing or setting parameters with respect to certain terms and covenants of the bonds; appointing the City's designated representative to approve the final terms of the sale of the bonds; and providing for other related matters. THE CITY COUNCIL OF THE CITY OF PASCO, WASHINGTON, DO ORDAIN as follows: Section 1. Definitions. As used in this ordinance, the following words shall have the following meanings: (a) "2002 Bonds"means the outstanding Water and Sewer Revenue Bonds, 2002, of the City issued pursuant to Ordinance No. 3567. (b) "2005 Bonds" means the outstanding Water and Sewer Revenue Bonds, 2005, of the City issued pursuant to Ordinance No. 3740. (c) "2007 Bonds"means the outstanding Water and Sewer Revenue Bonds, 2007, of the City issued pursuant to Ordinance No. 3835. (d) "2009 Bonds"means the outstanding Water and Sewer Revenue Bonds, 2009, of the City issued pursuant to Ordinance No. 3915. (e) "2010A Bonds" means the outstanding Water and Sewer Improvement and Refunding Revenue Bonds, 2010A, of the City issued pursuant to Ordinance No. 3962. (f) "2010T Bonds" means the outstanding Water and Sewer Refunding Revenue Bonds, 2010T(Taxable), of the City issued pursuant to Ordinance No. 3962. (g) `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 Panty 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. -1- 5132]565.3 (h) `Annual Debt Service" for any or all Panty 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. (i) `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 Panty Bonds then outstanding. 0) `Authorized Denomination" means $5,000.00 or any integral multiple thereof within a maturity. (k) `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. 0) "Beneficial Owner" means, with respect to a Bond, the owner of any beneficial interest in that Bond. (m) "Bond Counsel" means the firm of Foster Pepper PLLC, its successor, or any other attorney or firm of attorneys selected by the City with a nationally recognized standing as bond counsel in the field of municipal finance. (n) "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 Manager of the City for the payment of the principal of and interest on the Parity Bonds. (o) "Bond Purchase Agreement"means an offer to purchase the Bonds, or a Series of Bonds, setting forth certain terms and conditions of the issuance, sale and delivery of that Series of the Bonds, which offer is authorized to be accepted by the Designated Representative on behalf of the City, if consistent with this ordinance. (p) "Bond Register" means the books or records maintained by the Bond Registrar for the purpose of identifying ownership of the Bonds. (q) "Bond Registrar" means the Fiscal Agent, or any successor bond registrar selected by the City. (r) "Bonds" means the bonds of the City issued pursuant to and for the purposes provided in this ordinance in one or more series and with such additional series and other designation as the Designated Representative may deem appropriate. (s) "City" means the City of Pasco, Washington, a municipal corporation duly organized and existing under the laws of the State. -2- 5133]565.3 (t) "City Council" means the legislative authority of the City, as duly and regularly constituted from time to time. (u) "Code" means the United States Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. (v) "Construction Accounts"means such accounts created in the Water/Sewer Utility Fund as the Finance Manager shall designate for the purpose of paying the costs of the Plan of Additions and the costs of issuance of the Bonds. (w) "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. (x) "DTC" means The Depository Trust Company, New York, New York., or its nominee. (y) `Designated Representative" means an officer of the City appointed in Section 5 of this ordinance to serve as the City's designated representative in accordance with RCW 39.46.040(2). (z) "Final Terms" means the terms and conditions for the sale of a Series of Bonds including, but not limited to the amount, date or dates, denominations, interest rate or rates (or mechanism for determining interest rate or rates), payment dates, final maturity, redemption rights,price, and other terms or covenants. (aa) "Finance Manager" means the City's Financial Services Manager or such other officer of the City who succeeds to substantially all of the responsibilities of that office. (bb) "Fiscal Agent"means the fiscal agent of the State, as the same may be designated by the State from time to time. (cc) "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 the Parity Bond Ordinances, 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. (dd) "Government Obligations" has the meaning given in RCW 39.53.010, as now in effect or as may hereafter be amended. (ee) "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, -3- 5133]565.3 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. (fl) "Issue Date" means, with respect to a Bond, the date of initial issuance and delivery of that Bond to the Purchaser in exchange for the purchase price of that Bond. (gg) `Letter of Representations" means the Blanket Issuer Letter of Representations between the City and DTC dated August 31, 1998. (hh) "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. (ii) "MSRB"means the Municipal Securities Rulemaking Board. (j) "Net Revenue of the Waterworks Utility" or "Net Revenue" means the Gross Revenue less Operating and Maintenance Expenses. (kk) "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. 01) "Outstanding Parity Bonds" means the outstanding 2002 Bonds, 2005 Bonds, 2007 Bonds, 2009 Bonds, 2010A Bonds and 2010T Bonds. (mm) "Owner" means, without distinction, the Registered Owner and the Beneficial Owner. (nn) "Parity Bonds" means the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds. (oo) "Parity Bond Ordinances" means Ordinance No. 3567, Ordinance No. 3740, Ordinance No. 3835, Ordinance No. 3915, Ordinance No. 3962 and this ordinance. (pp) "Parity Conditions" means the conditions for issuing Future Parity Bonds set forth in Exhibit C to this ordinance, which is incorporated herein by this reference. -4- 5132]565.3 (qq) "Plan ofAdditions"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. (rr) "Principal and Interest Account" means the account of that name created in the Bond Fund for the payment of the principal of and interest on all Parity Bonds. (ss) "Purchaser" means Piper Jaffray & Co. of Seattle, Washington, or such other purchaser of the Bonds whose offer is accepted by the Designated Representative in accordance with this ordinance. (tt) "Rating Agency" means any nationally recognized rating agency then maintaining a rating on the Bonds at the request of the City. (uu) "Record Date" means the Bond Registrar's close of business on the 15th day of the month preceding an interest payment date. With respect to redemption of a Bond prior to its maturity, the Record Date shall mean the Bond Registrar's close of business on the date on which the Bond Registrar sends the notice of redemption in accordance with Section 9. (w) `Registered Owner" means, with respect to a Bond, the person in whose name that Bond is registered on the Bond Register. For so long as the City utilizes the book-entry only system for the Bonds under the Letter of Representations, Registered Owner shall mean the Securities Depository. (ww) "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. (xx) "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 Outstanding Parity Bonds and the Bonds means the Surety Bond provided by the Reserve Insurer. (yy) "Reserve Insurer" means Ambac Assurance Corporation for the Outstanding Parity Bonds and the Bonds. (zz) "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 then-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% -5- 51327565.3 of the issue price of the then-outstanding Parity Bonds and the Future Panty Bonds proposed to be issued, (b) Maximum Annual Debt Service on the then-outstanding Panty Bonds and the Future Panty Bonds proposed to be issued and (c) 1.25 times Average Annual Debt Service on the then-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. (aaa) "Rule 15c2 12" means Rule 15c2 12 promulgated by the SEC under the Securities Exchange Act of 1934, as amended. (bbb) "SEC"means the United States Securities and Exchange Commission. (ccc) "Series of the Bonds" or "Series"means a series of the Bonds issued pursuant to this ordinance. (ddd) "State"means the State of Washington. (eee) "Surety Bond"means the surety bond issued by the Reserve Insurer guaranteeing certain payments into the Reserve Account with respect to the Outstanding Panty Bonds and the Bonds as provided in and subject to the limitations set forth in that surety bond. (f It) "Taxable Bonds"means any Series issued on a taxable basis. (ggg) "Taxable Improvements" means that portion of the Plan of Additions financed with proceeds of the Taxable Bonds. (hhh) "Tax-Exempt Bonds"means any Series issued on a tax-exempt basis. (iii) "Tax-Exempt Improvements" means that portion of the Plan of Additions financed with proceeds of the Tax-Exempt Bonds. (ib) "Term Bonds" means each Bond designated as a Term Bond and subject to mandatory redemption in the years and amounts set forth in the Bond Purchase Agreement. For any Outstanding Parity Bonds or Future Parity Bonds, "Term Bonds" means those bonds of any single issue or series designated as Term Bonds pursuant to the ordinance authorizing their issuance or sale and which are subject to mandatory prior redemption or for which mandatory sinking fund installments are provided. (kkk) "ULID"means utility local improvement district. 011) "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. -6- 51327565.3 (mrmm) "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. (nnn) "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 and Determinations. The City takes note of the following facts and makes the following findings and determinations: (a) Background. 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.). (b) Plan of Additions. The City has determined that it is necessary and in the best interests of the City that certain improvements be made and there be adopted a system or plan of additions to and betterments and extensions of the Waterworks Utility(the"Plan of Additions"). (c) Outstanding Parity Bonds. Pursuant to Ordinance No. 2846, the City heretofore issued and sold its 1991 Bonds (all of which have been paid and retired), and reserved the right to issue additional water and sewer revenue bonds of the City which would have a lien and charge upon the Net Revenue of the Waterworks Utility and ULID Assessments on a parity with those 1991 Bonds if the Parity Conditions are met. The City currently has outstanding the following water and sewer revenue bonds issued on a parity of lien and charge on the Net Revenue of the Waterworks Utility and ULID Assessments with the 1991 Bonds: Original Ordinance Principal Dated Authorizing Passage Name of Issue Amount($) Date Ordinance Date 2002 Bonds 5,945,000 10/01/2002 3567 10/07/2002 2005 Bonds 4,400,000 12/05/2005 3740 11/21/2005 2007 Bonds 845,000 7/02/2007 3835 6/18/2007 2009 Bonds 10,045,000 4/17/2009 3915 4/06/2009 2010A Bonds 9,070,000 6/03/2010 3962 5/17/2010 2010T Bonds 1,240,000 6/03/2010 3962 5/17/2010 (d) Parity Conditions Met. The City Council finds and declares 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)that all other conditions set forth in the Parity Conditions will have been met and satisfied before the Bonds are delivered to the initial purchaser. -7- 51327565.3 (e) Sufficiency of Gross Revenue; Due Regard. The City Council finds and determines that the Gross Revenue of the Waterworks Utility will be more than sufficient to (1)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 (2)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 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. (f) Issuance of Bonds. Based on the foregoing, the City Council finds that it is in the best interest of the City to issue and sell the Bonds to the Purchaser, pursuant to the terms set forth in the Bond Purchase Agreement as approved by the Designated Representative consistent with this ordinance. 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 following(the"Plan of Additions"): (a) Improvements to the City's sewer system, including upgrades to the wastewater treatment plant and SW area sewer main; and (b) System upgrades and improvements to the process water reuse facility. 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 the Plan of Additions. The estimated cost of the acquisition, construction, installation and financing of the above-described improvements to be paid from the proceeds of the Bonds is declared to be approximately $8,805,286. Any excess proceeds of the Bonds remaining following payment of -8- 5132]565.3 the costs of the Plan of Additions shall be applied to costs of other improvements to the Waterworks Utility of the City heretofore or hereafter approved in the City's Capital Budget Section 4. Authorization of the Bonds. For the purpose of providing the funds necessary (a) to pay costs of carrying out the Plan of Additions, (b) to make a deposit to the Reserve Account and (c) to pay the costs of issuance and sales of the Bonds, the City shall issue water and sewer revenue bonds in one or more series in the aggregate principal amount of not to exceed $10,050,000. Section 5. Appointment of Designated Representative: Description of the Bonds. The Finance Manager and the Deputy City Manager are each appointed as the Designated Representative of the City, both with the individual authority to conduct the sale of the Bonds in the manner and upon the terms deemed most advantageous to the City, and to approve the Final Terms of the Bonds, with such additional terms and covenants as the Designated Representative deems advisable, within the parameters set forth in Exhibit A, which is attached to this ordinance and incorporated by this reference. Section 6. Registration and Transfer of Bonds. (a) Registration of Bonds. Each Bond shall be issued only in registered form as to both principal and interest and the ownership of each Bond shall be recorded on the Bond Register. (b) Bond Registrar; Duties. The Fiscal Agent is appointed as initial Bond Registrar. The Bond Registrar shall keep, or cause to be kept, sufficient books for the registration and transfer of the Bonds, which shall be open to inspection by the City at all times. The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of the Bonds and this ordinance, to serve as the City's paying agent for the Bonds and to carry out all of the Bond Registrar's powers and duties under this ordinance and the System of Registration. The Bond Registrar shall be responsible for its representations contained in the Bond Registrar's Certificate of Authentication on each Bond. The Bond Registrar may become an Owner 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 Owners. (c) Bond Register; Transfer and Exchange. The Bond Register shall contain the name and mailing address of each Registered Owner and the principal amount and number of each Bond held by each Registered Owner. A Bond surrendered to the Bond Registrar may be exchanged for a Bond or Bonds in any Authorized Denomination of an equal aggregate principal amount and of the same Series, interest rate and maturity. A Bond may be transferred only if endorsed in the manner provided thereon and surrendered to the Bond Registrar. Any exchange or transfer shall be without cost to the Owner or transferee. The Bond Registrar shall not be obligated to exchange any Bond or transfer registered ownership during the period between the applicable Record Date and the next upcoming interest payment or redemption date. -9- 5132]565.3 (d) Securities Depository; Book-Entry Only Form. DTC is appointed as initial Securities Depository. Each Bond initially shall be registered in the name of Cede & Co., as the nominee of DTC. Each Bond registered in the name of the Securities Depository shall be held fully immobilized in book-entry only form by the Securities Depository in accordance with the provisions of the Letter of Representations. Registered ownership of any Bond registered in the name of the Securities Depository may not be transferred except: (i) to any successor Securities Depository; (ii) to any substitute Securities Depository appointed by the City; or (iii) to any person if the Bond is no longer to be held in book-entry only form. Upon the resignation of the Securities Depository, or upon a termination of the services of the Securities Depository by the City, the City may appoint a substitute Securities Depository. If (i) the Securities Depository resigns and the City does not appoint a substitute Securities Depository, or (ii) the City terminates the services of the Securities Depository, the Bonds no longer shall be held in book- entry only form and the registered ownership of each Bond may be transferred to any person as provided in this ordinance. Neither the City nor the Bond Registrar shall have any obligation to participants of any Securities Depository or the persons for whom they act as nominees regarding accuracy of any records maintained by the Securities Depository or its participants. Neither the City nor the Bond Registrar shall be responsible for any notice that is permitted or required to be given to a Registered Owner except such notice as is required to be given by the Bond Registrar to the Securities Depository. Section 7. Form and Execution of Bonds. (a) Form of Bonds; Signatures and Seal. Each Bond shall be prepared in a form consistent with the provisions of this ordinance and State law. Each Bond shall be signed by the Mayor and the City Clerk, either or both of whose signatures may be manual or in facsimile, and the seal of the City or a facsimile reproduction thereof shall be impressed or printed thereon. If any officer whose manual or facsimile signature appears on a Bond ceases to be an officer of the City authorized to sign bonds before the Bond bearing his or her manual or facsimile signature is authenticated by the Bond Registrar, or issued or delivered by the City, that Bond nevertheless may be authenticated, issued and delivered and, when authenticated, issued and delivered, shall be as binding on the City as though that person had continued to be an officer of the City authorized to sign bonds. 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 its Issue Date. (b) Authentication. Only a Bond bearing a Certificate of Authentication in substantially 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, [Name of Issue]." The authorized signing of a Certificate of Authentication shall be conclusive evidence that the Bond so authenticated has been duly executed, authenticated and delivered and is entitled to the benefits of this ordinance. Section 8. Payment of Bonds. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. Principal of and interest on each Bond -10- 5133]565.3 registered in the name of the Securities Depository is payable in the manner set forth in the Letter of Representations. Interest on each Bond not registered in the name of the Securities Depository is payable by electronic transfer on the interest payment date, or by check or draft of the Bond Registrar mailed on the interest payment date to the Registered Owner at the address appearing on the Bond Register on the Record Date. However, the City is not required to make electronic transfers except pursuant to a request by a Registered Owner in writing received on or prior to the Record Date and at the sole expense of the Registered Owner. Principal of each Bond not registered in the name of the Securities Depository is payable upon presentation and surrender of the Bond by the Registered Owner to the Bond Registrar. The Bonds are not subject to acceleration under any circumstances. Section 9. Redemption Provisions and Purchase of Bonds. (a) Optional Redemption. The Bonds shall be subject to redemption at the option of the City on terms acceptable to the Designated Representative, as set forth in the Bond Purchase Agreement, consistent with the parameters set forth in Exhibit A. (b) Mandatory Redemption. Each Bond that is designated as a Term Bond in the Bond Purchase Agreement, consistent with the parameters set forth in Exhibit A and except as set forth below, shall be called for redemption at a price equal to the stated principal amount to be redeemed, plus accrued interest, on the dates and in the amounts as set forth in the Bond Purchase Agreement. If a Term Bond is redeemed under the optional redemption provisions, defeased or purchased by the City and surrendered for cancellation, the principal amount of the Term Bond so redeemed, defeased or purchased (irrespective of its actual redemption or purchase prices) shall be credited against one or more scheduled mandatory redemption installments for that Term Bond. 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 prior to the earliest mandatory redemption date for that Term Bond for which notice of redemption has not already been given. (c) Selection of Bonds for Redemption; Partial Redemption. If fewer than all of the outstanding Bonds are to be redeemed at the option of the City, the City shall select the Series and maturities to be redeemed. If fewer than all of the outstanding Bonds of a maturity of a Series are to be redeemed, the Securities Depository shall select Bonds registered in the name of the Securities Depository to be redeemed in accordance with the Letter of Representations, and the Bond Registrar shall select all other Bonds to be redeemed randomly in such manner as the Bond Registrar shall determine. All or a portion of the principal amount of any Bond that is to be redeemed may be redeemed in any Authorized Denomination. If less than all of the outstanding 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, a new Bond (or Bonds, at the option of the Registered Owner) of the same Series, maturity and interest rate in any Authorized Denomination in the aggregate principal amount to remain outstanding. (d) Notice of Redemption. Notice of redemption of each Bond registered in the name of the Securities Depository shall be given in accordance with the Letter of Representations. Notice of redemption of each other Bond, unless waived by the Registered Owner, shall be given by the Bond Registrar not less than 20 nor more than 60 days prior to the date fixed for -11- 5132]565.3 redemption by first-class mail, postage prepaid, to the Registered Owner at the address appearing on the Bond Register on the Record Date. The requirements of the preceding sentence shall be satisfied when notice has been mailed as so provided, whether or not it is actually received by an Owner. In addition, the redemption notice shall be mailed or sent electronically within the same period to the MSRB (if required under the Undertaking), to each Rating Agency, and to such other persons and with such additional information as the Finance Manager shall determine, but these additional mailings shall not be a condition precedent to the redemption of any Bond. (e) Rescission of Optional Redemption Notice. hi the case of an optional redemption, the notice of redemption may state that the City retains the right to rescind the redemption notice and the redemption by giving a notice of rescission to the affected Registered Owners at any time on or prior to the date fixed for redemption. Any notice of optional redemption that is so rescinded shall be of no effect, and each Bond for which a notice of redemption has been rescinded shall remain outstanding. (f) Effect of Redemption. Interest on each Bond called for redemption shall cease to accrue on the date fixed for redemption, unless either the notice of optional redemption is rescinded as set forth above, or money sufficient to effect such redemption is not on deposit in the Bond Fund or in a trust account established to refund or defease the Bond. (g) Purchase of Bonds. The City reserves the right to purchase any or all of the Bonds offered to the City at any time at any price acceptable to the City plus accrued interest to the date of purchase. Section 10. Failure to Pay Bonds. If the principal of any Bond is not paid when the Bond is properly presented at its maturity date or date fixed for redemption, 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 date fixed for redemption 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, or in a trust account established to refund or defease the Bond, and the Bond has been called for payment by giving notice of that call to the Registered Owner. Section 11. 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 Manager 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 -12- 51321565.3 (b) Into the Reserve Account, on the issue date of the Bonds, an amount sufficient, together with the Reserve Insurance, to fully fund the Reserve Requirement for all Parity Bonds. Money deposited in the Reserve Account for the Reserve Requirement for all Parity Bonds may be decreased for any issue of Parity Bonds when and to the extent the City has provided for an Alternate Security or Reserve Insurance for those bonds. The City may establish additional accounts in the Bond Fund for the deposit of ULID Assessments after the deposit of the required amount in the other funds. The Reserve Account for any Future Parity Bonds may be accumulated from any other funds which the City legally may have available for such purpose in addition to using ULID Assessments and Net Revenue of the Waterworks Utility. The City further agrees that when the required amounts have been paid into the Reserve Account in the Bond Fund, the City will maintain those amounts therein at all times, except for withdrawals therefrom as authorized herein, until there is sufficient money in the Bond Fund, including the Reserve Account therein, to pay the principal of and interest to maturity on all outstanding bonds payable from the Bond Fund, at which time no further payments need be made into the Bond Fund, and the money in the Bond Fund, including the Reserve Account,may be used to pay that principal and interest. If there shall be a deficiency in the Principal and Interest Account to meet maturing installments of either principal or interest, as the case may be, on the Bonds, the deficiency shall be made up from the Reserve Account by first the withdrawal of cash and investments therefrom and after all cash and investments have been depleted, then by the draws on the Reserve Insurance for that purpose on a pro rata basis. Any deficiency created in the Reserve Account by reason of any withdrawal shall then be made up from the Net Revenue of the Waterworks Utility first available after making necessary provisions for the required payments into the Principal and Interest Account. The Reserve 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. -13- 5132]565.3 Section 12. Pledge, Lien and Charge for Payment of the Bonds. The Net Revenue of the Waterworks Utility and ULID Assessments are pledged to the payment of the principal of and interest on the Bonds when due and shall constitute a lien and charge upon that Net Revenue of the Waterworks Utility and ULID Assessments prior and superior to any other charges whatsoever, except that the lien and charge upon such Net Revenue and ULID Assessments for the Bonds shall be on a parity with the lien and charge thereon for any outstanding Parity Bonds. Section 13. Creation of Project Accounts: Use of Bond Proceeds. The Finance Manager is authorized to establish one or more special accounts within the Water/Sewer Utility Fund, designated as the Construction Accounts. The principal proceeds and premium, if any, received from the sale and delivery of the Bonds remaining after satisfaction of the Reserve Requirement shall be paid into the Construction Accounts and used to pay the costs of the Plan of Additions and the costs of issuing the Bonds. Until needed to pay those costs, the City may invest principal proceeds deposited in the Project Accounts 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 14. Flow of Funds. Funds in the Water and Sewer Revenue Fund shall be used in the following order of priority: (1) To pay Operating and Maintenance Expenses; (2) To make all payments required to be made into the Bond Fund to pay and secure the payment of the Annual Debt Service on all outstanding Parity Bonds; (3) To make all payments required to be made into the Reserve Account and to make all payments (principal and interest) required to be made in connection with Reserve Insurance and any Alternate Security, except if there is not sufficient money to make all payments for Reserve Insurance and any Alternate Security, the payments shall be made on a pro rata basis with deposits in the Reserve Account. (4) To make all payments required to be made into the loan redemption funds or accounts, and other revenue bond redemption funds created to pay the debt service on any revenue obligation having a lien upon the Net Revenue of the Waterworks Utility subordinate to the lien of the Bonds; and (5) To make necessary additions, betterments, improvements or repairs to the Waterworks Utility, and to retire by redemption or purchase any outstanding Parity Bonds, or for any other lawful purpose. Section 15. Covenants. The City covenants and agrees with the owner of each of the Bonds as follows: (a) It will not sell, lease, mortgage, or in any manner encumber or dispose of all the properties of the Waterworks Utility unless provision is made for payment into the Bond Fund of an amount sufficient either to defease all outstanding Parity Bonds or to pay the principal of and -14- 5133]565.3 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 Panty Bonds as the Net Revenue available for debt service for such bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the Waterworks Utility so leased, encumbered or disposed of bears to the Net Revenue available for debt service for such bonds from the entire Waterworks Utility for the same period. Any such money so paid into the Bond Fund shall be used to retire outstanding Parity Bonds at the earliest possible date. (b) It will maintain and keep the Waterworks Utility in good repair, working order and condition and to operate such utility and the business in connection therewith in an efficient manner and at a reasonable cost. (c) It will maintain and collect such rates as will produce sufficient Net Revenue of the Waterworks Utility, together with ULID Assessment collections, as will make available for the payment of the principal of and interest on the Parity Bonds as they come due and for payments as required to be made into the Reserve Account therein an amount at least equal to the Coverage Requirement and, in addition thereto, that it will pay all Operating and Maintenance Expenses and otherwise meet the obligations of the City as herein set forth. (d) It will keep proper books of accounts and records separate and apart from other accounts and records, in which complete and correct entries will be made of all transactions relating to the Waterworks Utility of the City, and it will make available to any Owner 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. (f) It will carry the types of insurance on its Waterworks Utility properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems, and the cost of such insurance shall be considered a part of Operating and Maintenance Expenses, or it will implement and maintain a self insurance program or an insurance pool program with reserves adequate, in the judgment of the City Council, to protect the owners of the Parity Bonds against loss. (g) To the extent permitted by State law, it will maintain its corporate identity and existence so long as any Bonds remain outstanding. (h) It will not grant any competing utility service franchise and will use all legal means to prevent competition with the Waterworks Utility. -15- 5132/565.3 (i) If on the first day of January in any year, two installments of any ULID Assessment are delinquent, or the final installment of any ULID Assessment has been delinquent for more than one year, the City shall proceed with the foreclosure of the delinquent assessment or delinquent installments thereof in the manner provided by law. Section 16. Provisions for Future Parity Bonds. The City reserves the right to issue Future Parity Bonds if the Panty Conditions set forth in Exhibit B are met and complied with at the time of the issuance of those Future Parity Bonds. Nothing herein contained shall prevent the City from issuing Future Parity Bonds to refund any maturing Parity Bonds then outstanding, money for the payment of which is not otherwise available. Nothing herein contained shall prevent the City from issuing revenue bonds or incurring other obligations that are a charge upon the Net Revenue of the Waterworks Utility of the City subordinate or inferior to the payments required to be made therefrom into the Bond Fund for the payment of Parity Bonds or from pledging the payment of utility local improvement district assessments into a redemption fund created for the payment of the principal of and interest on those subordinate lien bonds or obligations as long as such utility local improvement district assessments are levied for improvements constructed from the proceeds of those subordinate lien bonds or obligations. Section 17. Tax Covenants; Designation of Tax-Exempt Bonds as "Qualified Tax Exempt Obligations." (a) Preservation of Tax Exemption for Interest on Tax-Exempt Bonds. The City covenants that it will take all actions necessary to prevent interest on the Tax-Exempt 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 Tax-Exempt Bonds or other funds of the City treated as proceeds of the Tax-Exempt Bonds that will cause interest on the Tax-Exempt 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 requirements of Section 148 of the Code are applicable to the Tax-Exempt Bonds, take all actions necessary to comply (or to be treated as having complied) with those requirements in connection with the Tax-Exempt Bonds. (b) Post-Issuance Compliance. The Finance Manager is authorized and directed to adopt, implement, periodically review and update the City's written procedures to facilitate compliance by the City with the covenants in this ordinance and the applicable requirements of the Code that must be satisfied after the Issue Date to prevent interest on the Tax-Exempt Bonds from being included in gross income for federal tax purposes. (c) Designation of Tax-Exempt Bonds as "Qualified Tax-Exempt Obligations. " The Tax-Exempt Bonds may be designated as "qualified tax-exempt obligations" for the purposes of Section 265(b)(3)of the Code, if the following conditions are met: (1) the Tax-Exempt Bonds are not "private activity bonds" within the meaning of Section 141 of the Code; -16- 5132]565.3 (2) the reasonably anticipated amount of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) that 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 Tax-Exempt Bonds are issued will not exceed$10,000,000; and (3) the amount of tax-exempt obligations, including the Tax-Exempt 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 Tax-Exempt Bonds are issued does not exceed $10,000,000. Section 18. Refunding or Defeasance of Bonds. The City may issue refunding bonds pursuant to State law or use money available from other lawful sources to carry out a refunding or defeasance plan, which may include (a) paying when due the principal of and interest on any or all of the Bonds (the "defeased Bonds"); (b) redeeming the defeased Bonds prior to their maturity; and (c) paying the costs of the refunding or defeasance. If the City sets aside special trust fund or escrow account irrevocably pledged to that redemption or defeasance (the "trust account'), money and/or Government Obligations maturing at a time or times and bearing interest in amounts sufficient to redeem, refund or defease the defeased Bonds in accordance with their terms, 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 the defeased Bonds, other than the right to receive the funds so set aside and pledged, shall cease and become void. Thereafter, the Owners of defeased Bonds shall have the right to receive payment of the principal of and interest on the defeased Bonds solely from the trust account and the defeased Bonds shall be deemed no longer outstanding. In that event, the City may apply money remaining in any fund or account (other than the trust account) established for the payment or redemption of the defeased Bonds to any lawful purpose, subject only to the rights of the Owners of any other Parity Bonds then outstanding. If the refanding 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. Section 19. Sale and Delivery of the Bonds. (a) Manner of Sale of Bonds; Delivery of Bonds. The Designated Representative is authorized to sell the Bonds by negotiated sale to the Purchaser, based on the assessment of the Designated Representative of market conditions, in consultation with appropriate City officials and staff, Bond Counsel and other advisors. In accepting the Final Terms, the Designated -17- 51327565.3 Representative shall take into account those factors that, in the judgment of the Designated Representative, may be expected to result in the lowest true interest cost to the City. The Bond Purchase Agreement shall set forth the Final Terms of each Series of Bonds. The Designated Representative is authorized to execute the Bond Purchase Agreement on behalf of the City, so long as the terms provided therein are consistent with the terms of this ordinance. (b) Preparation, Execution and Delivery of the Bonds. The Bonds will be prepared at City expense and will be delivered to the Purchaser in accordance with the Bond Purchase Agreement, together with the approving legal opinion of Bond Counsel regarding the Bonds. Section 20. Official Statement: Continuing Disclosure. (a) Preliminary Official Statement Deemed Final. The City has been provided with copies of a preliminary official statement dated November 14, 2013, prepared in connection with the sale of the Bonds. For the sole purpose of the Purchaser's compliance with paragraph (b)(1) of Rule 15c2-12, the City deems that preliminary official statement final as of its date, except for the omission of information permitted to be omitted by Rule 15c2-12. The City approves the distribution to potential purchasers of the Bonds of a preliminary official statement that has been deemed final in accordance with this subsection. (b) Approval of Final Official Statement. The City approves the preparation of a final official statement for the Bonds to be sold to the public in the form of the preliminary official statement, with such modifications and amendments as the Designated Representative deems necessary or desirable, and further authorizes the Designated Representative to execute and deliver such final official statement to the Purchaser. The City authorizes and approves the distribution by the Purchaser of that final official statement to purchasers and potential purchasers of the Bonds. (c) Undertaking to Provide Continuing Disclosure. To meet the requirements of paragraph (b)(5) of Rule 15c2-12, as applicable to a participating underwriter for the Bonds, the Designated Representative is authorized to execute a written undertaking to provide continuing disclosure for the benefit of holders of the Bonds in substantially the form attached as Exhibit C. Section 21. General Authorization and Ratification. The Designated Representative and other appropriate officers of the City are severally authorized to take such actions and to execute such documents as in their judgment may be necessary or desirable to carry out the transactions contemplated in connection with this ordinance, and to do everything necessary for the prompt delivery of the Bonds to the Purchaser and for the proper application, use and investment of the proceeds of the Bonds. All actions taken prior to the effective date of this ordinance in furtherance of the purposes described in this ordinance and not inconsistent with the terms of this ordinance are ratified and confirmed in all respects. Section 22. Severability. The provisions of this ordinance are declared to be separate and severable. If a court of competent jurisdiction, all appeals having been exhausted or all appeal periods having run, finds any provision of this ordinance to be invalid or unenforceable as to any person or circumstance, such offending provision shall, if feasible, be deemed to be modified to be within the limits of enforceability or validity. However, if the offending provision -18- 5132]565.3 cannot be so modified, it shall be null and void with respect to the particular person or circumstance, and all other provisions of this ordinance in all other respects, and the offending provision with respect to all other persons and all other circumstances, shall remain valid and enforceable. Section 23. Effective Date of Ordinance. This ordinance shall take effect and be in force from and after its passage and five days following its publication as provided by law. PASSED by the City Council and APPROVED by the Mayor of Pasco, Washington, at a regular open public meeting, this 18th day of November, 2013. Matt Watkins, Mayor ATTEST: Debra L. Clark, City Clerk APPROVED AS TO FORM: Foster Pepper PLLC Bond Counsel -19- 513]]565.3 EXHIBIT A DESCRIPTION OF THE BONDS (i) Principal Amount. The Bonds may be issued in one or more Series and shall not exceed the aggregate principal amount of $10,050,000. The aggregate principal amount of Bonds issued as Tax-Exempt Bonds shall not exceed $2,750,000 and the aggregate principal amount of Bonds issued as Taxable Bonds shall not exceed$7,300,000. (ii) Date or Dates. Each Bond shall be dated the Issue Date, which date may not be later than December 31, 2013. (iii) Denominations. Name. etc. The Bonds shall be issued in Authorized Denominations and shall be numbered separately in the manner and shall bear any name and additional designation as deemed necessary or appropriate by the Designated Representative. (iv) Interest Rate(s). Each Bond shall bear interest at a fixed rate per annum (computed on the basis of a 360-day year of twelve 30-day months) from the Issue Date or from the most recent date for which interest has been paid or duly provided for, whichever is later. One or more rates of interest may be fixed for the Bonds. No rate of interest for any Tax-Exempt Bond may exceed 5.0%, and the true interest cost to the City for the Tax-Exempt Bonds may not exceed 3.4%. No rate of interest for any Taxable Bond may exceed 5.5%, and the true interest cost to the City for the Taxable Bonds may not exceed 5.0%. (v) Payment Dates. Interest shall be payable semiannually on each June 1 and December 1 (or such other semiannual dates acceptable to the Designated Representative), commencing no later than the next such semiannual date following the Issue Date. Principal payments shall commence on a date acceptable to the Designated Representative and shall be payable at maturity or in mandatory redemption installments annually thereafter, on dates acceptable to the Designated Representative. (vi) Final Maturity. The Bonds shall mature no later than December 1, 2028. (vii) Redemption Rights. The Designated Representative may approve in the Bond Purchase Agreement provisions for the optional and mandatory redemption of Bonds, subject to the following: (1) Optional Redemption. Any Bond may be designated as being (A) subject to redemption at the option of the City prior to its maturity date on the dates and at the prices set forth in the Bond Purchase Agreement; or (B) not subject to redemption prior to its maturity date. If a Bond is subject to optional redemption prior to its maturity, it must be subject to such redemption on one or more dates occurring not more than 10'/2 years after the Issue Date. (2) Mandatory Redemption. Any Bond may be designated as a Term Bond, subject to mandatory redemption prior to its maturity on the dates and in the amounts set forth in the Bond Purchase Agreement. A-1 51327565.3 (viii) Price. The purchase price for the Tax-Exempt Bonds may not be less than 98% or more than 110% of the stated principal amount of the Tax-Exempt Bonds. The purchase price for the Taxable Bonds may not be less than 99% or more than 101% of the stated principal amount of the Taxable Bonds. (ix) Other Terms and Conditions. (1) The Designated Representative may determine whether it is in the City's best interest to provide for bond insurance or other credit enhancement; and may accept such additional terms, conditions and covenants as he or she may determine are in the best interests of the City, consistent with this ordinance. (2) The Designated Representative must have determined that the Parity Conditions have been met and satisfied as of the Issue Date of the Bonds. A-2 51327565.3 EXHIBIT B PARITY CONDITIONS (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 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: B-1 5132]565.3 (1) Any changes in rates in effect and being charged or expressly adopted by ordinance to take effect within 180 days after the date of this Certificate; (2) Income derived from customers of the Waterworks Utility that have become customers during the 12 consecutive month period or thereafter adjusted to reflect one year's net revenue from those customers; (3) Revenue from any customers to be connected to the Waterworks Utility who have paid the required connection charges; (4) Revenue received or to be received which is derived from any person, firm, corporation or municipal corporation under any executed contract for water, sewage disposal or other utility service, which revenue was not included in the historical Net Revenue of the Waterworks Utility; (5) The engineer's or accountant's estimate of the Net Revenue of the Waterworks Utility to be derived from customers to connect within 180 days after the date of the completion of the additions to and improvements and extensions of the Waterworks Utility to be paid for out of the proceeds of the sale of the additional Future Parity Bonds or from other additions to and improvements and extensions of the Waterworks Utility then under construction and not fully connected to the facilities of the Waterworks Utility when such additions, improvements and extensions are completed; and (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. Prior: Ordinance No. 3567, Section 16 (2002 Bonds) Ordinance No. 3740, Section 16 (2005 Bonds) Ordinance No. 3835, Section 17 (2007 Bonds) Ordinance No. 3915, Section 18 (2009 Bonds) Ordinance No. 3962, Section 21 (2010 Bonds) B-2 5132]565.3 EXHIBIT C [Form of] UNDERTAKING TO PROVIDE CONTINUING DISCLOSURE City of Pasco,Washington 2013A Bonds and 2013T Bonds The City of Pasco, Washington(the"City"), makes the following written Undertaking for the benefit of holders of the above-referenced bonds (the "Bonds"), for the sole purpose of assisting the Purchaser in meeting the requirements of paragraph (b)(5) of Rule 15c2-12, as applicable to a participating underwriter for the Bonds. Capitalized terms used but not defined below shall have the meanings given in Ordinance No. 4126 of the City(the"Bond Ordinance"). (a) Undertaking to Provide Annual Financial Information and Notice of Listed Events. The City undertakes to provide or cause to be provided, either directly or through a designated agent, to the MSRB, in an electronic format as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB: (i) Annual financial information and operating data of the type included in the final official statement for the Bonds and described in paragraph (b) ("annual financial information"); (ii) Timely notice(not in excess of 10 business days after the occurrence of the event) of the occurrence of any of the following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (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, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notice of Proposed Issue (IRS Form 5701 —TEB) or other material notices or determinations with respect to the tax status of the Tax-Exempt Bonds; (7) modifications to rights of holders of the Bonds, if material; (8)bond calls (other than scheduled mandatory redemptions of Term Bonds), if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (1 l) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the City, as such "Bankruptcy Events" are defined in Rule 15c2-12; (13) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material. C-1 5132]565.3 (iii) Timely notice of a failure by the City to provide required annual financial information on or before the date specified in paragraph(b). (b) Type of Annual Financial Information Undertaken to be Provided. The annual financial information that the City undertakes to provide in paragraph(a): (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 local governmental units of the State such as the City, as such principles may be changed from time to time, which statements may be unaudited, provided, that if and when audited financial statements are prepared and available 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 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, 2013; and (iii) May be provided in a single or multiple documents, and may be incorporated by specific reference to documents available to the public on the Internet website of the MSRB or filed with the SEC. (c) Amendment of Undertakine. This 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 or the MSRB, under the circumstances and in the manner penmitted by Rule 15c2-12. The City will give notice to the MSRB 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. This Undertaking shall inure to the benefit of the City and the holder of each Bond, and shall not inure to the benefit of or create any rights in any other person. (e) Termination of Undertakine. 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 the provisions of Rule 15c2-12 that require the City to comply with this Undertaking become legally inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of Bond Counsel delivered to the City, and the City provides timely notice of such termination to the MSRB. (f) Remedy for Failure to Comply with Undertaking. As soon as practicable after the City learns of any failure to comply with this Undertaking, the City will proceed with due diligence to cause such noncompliance to be corrected. No failure by the City or other obligated C-2 51327565.3 person to comply with this Undertaking shall constitute a default in respect of the Bonds. The sole remedy of any holder of a Bond shall be to take action to compel the City or other obligated person to comply with this Undertaking, including seeking an order of specific performance from an appropriate court. (g) Designation of Official Responsible to Administer Undertaking. The Finance Manager or his or her designee is the person designated, in accordance with the Bond Ordinance, to carry out the Undertaking in accordance with Rule 15c2-12, 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 paragraph (a) has occurred, assessing its materiality, where necessary, with respect to the Bonds, and preparing and disseminating any required notice of its occurrence; (iii) Determining whether any person other than the City is an "obligated person" within the meaning of Rule 15c2-12 with respect to the Bonds, and obtaining from such person an undertaking to provide any annual financial information and notice of listed events for that person required under Rule 15c2-12; (iv) Selecting, engaging and compensating designated agents and consultants, including financial advisors and legal counsel, to assist and advise the City in carrying out this Undertaking; and (v) Effecting any necessary amendment of this Undertaking. C-3 51327565.3 CERTIFICATION I, the undersigned, City Clerk of the City of Pasco, Washington (the "City"), hereby certify as follows: 1. The attached copy of Ordinance No. 4126 (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 November 18, 2013, as that ordinance appears on the minute book of the City. 2. The Ordinance will be in full force and effect five days after publication in the City's official newspaper, which publication date is _ 12013. 3. A quorum of the members of the City Council was present throughout the meeting and a majority of the members voted in the proper manner for the passage of the Ordinance. IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of November, 2013. CITY OF PASCO, WASHINGTON Debra L. Clark, City Clerk 5132]565.3 PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 14,2013 a c m° NEW ISSUE RATING: "AA-"(S&P) 5 BOOK-ORDER ENTRY BANK QUALIFIED—2013A Bonds `o NIn the opinion of Bond Counre4 under existing federal law and asiuming compliance with appkrcable requirements of the Internal Revenue Code of 1986,as amended(the m `Cade'), that must be satlsed subsequent to the urge date of the 2013A Bonds,interest on the 2013A Bonds is excluded from gross income for federal income tax 'E purposes and is not an item of taxprejerence forpurpoiei of the akemative miramum tax appluable to individuals. However,while interest on the 2013A Bonds also is not an item of tax preference forpurposes of the alternative minimum tau appheable to corporations,intemn on the 2013A Bonds maned by amwrations is taken into account in the computation of adjusted earnent earnings forpurporer of the akernative minimum tau apph abk to mrpora*onr,interest on the 20134 Bondi received by Lretrain S corporations may be subject to tax,and interest on the 2013A Bondi received by jaeign rorpomtionr with United States branches may be Subject to a Joreign Z brancbprofcu tax. Recept ofinteren on the 2013A Bonds may have otherjederal tax consequences for certain taxpayers. See `TAX MATTERS." a In the furtheropinion ojBond Coume!imerest on the 2013T Bondr is not excludable f amgmrr income under Section 103 of the Code. See `TAX MATTERS- 6 No Tax Fxemptionfor2013TBondr"herein e $2,525,000` $7,260,000* CITY OF PASCO,WASHINGTON CITY OF PASCO,WASHINGTON WATER AND SEWER WATER AND SEWER REVENUE BONDS, REVENUE BONDS, 2013A 2013T(TAXABLE) E m w DATED: Date of Delivery DUE: December 1,as shown on inside covet A o The City of Pasco,Washington (the "City',Water and Sewer Revenue Bonds,2013A (the "2013A Bonds") and Water and z Sewer Bonds,2013T(Taxable) (the"2013T Bonds"and,together with the 2013A Bonds,the`Bonds',will be issued as fully Eregistered bonds under a book-entry only system, registered in the name of Cede and Co. as bond owner and nominee for L DTC. DTC will act as initial securities depository for the Bonds. Individual purchases of the Bonds will be made in book- entry form, in the denomination of $5,000 or any integral multiple thereof. Purchasers will not receive certificates o representing their interests in the Bonds. Interest on the Bonds will be paid semiannually on each June 1 and December 1, `o_ beginning June 1,2014,to the maturity or earlier redemption of the Bonds.The principal of,and premium,if any,and interest a on the Bonds are payable by the City's Bond Registrar,the fiscal agent of the State of Washington currently The Bank of New a York Mellon in New York, New York, to DTC, which, in tam,is obligated to remit such payments to its participants for t subsequent disbursement to beneficial owners of the Bonds,as described in Appendix D- "BOOK-ENTRY SYSTEM". a d N s MATURITY SCHEDULES - See Inside Cover t The Net Revenue of the City's Waterworks Utility, including any Utility Local Improvement District Assessments ("ULID Z' Assessments' in any ULID created to secure the payment of any Parity Bonds,are pledged to the payment of the principal of d € and interest on the Outstanding Parity Bonds,the Bonds and any Future Parity Bonds when due. The lien and charge of the Bonds, the Outstanding Parity Bonds and any Future Parity Bonds on the Net Revenue and ULID Assessments is prior and m superior to any other liens and charges whatsoever. See"SECURITY OF THE BONDS" herein. The Bonds are not general obligations of the City,and neither the full faith and credit nor the taxing power of the City or of the State of Washington,nor any revenues of the City derived from sources other than the Waterworks Utility,are pledged to the payment thereof as y Certain Bonds are subject to redemption prior to their stated maturity dates. See "DESCRIPTION OF THE BONDS — oRedemption Provisions." o a N The City has designated the Series 2013A Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3)(b)of the Code. See`TAX MATTERS—The 2013A Bonds." do E ` The Bonds are offered when, as and if issued, subject to the final approving legal opinion of Foster Pepper PLLC, Seattle, v m Washington, Bond Counsel. The forth of Bond Counsel's opinion is attached as Appendix C. It is expected that the Bonds A a will be available for delivery in New York,New York,through the facilities of DTC by Fast Automated Securities Transfer on oor about December 5,2013. a This coverpage contains certain information for quick reference only. It is not a.summary of this issue. Investors must read the entire Official E g Statement to obtain information essential to the making of an informed investment decision. d_ M ; * " Prekminary,sulyect to cbange. E U L F PiperJaffray, CITY OF PASCO,WASHINGTON $2,525,000* WATER AND SEWER REVENUE BONDS,2013A MATURITY SCHEDULE Due Interest Price/ CUSIP Base Dec.1 Amount Rate Yield No.7025710) 2014 $100,000 2015 100,000 2016 100,000 2017 100,000 2018 100,000 2019 170,000 2020 175,000 2021 185,000 2022 190,000 2023 195,000 2024 205,000 2025 215,000 2026 220,000 2027 230,000 2028 240,000 $7,260,000* WATER AND SEWER REVENUE BONDS,2013T(TAXABLE) MATURITY SCHEDULE Due Interest Price/ CUSIP Base Dec.I Amount Rate Yield No.7025710) 2015 $435,000 2016 440,000 2017 445,000 2018 455,000 2019 460,000 2020 475,000 2021 490,000 2022 505,000 2023 525,000 2024 550,000 2025 575,000 2026 605,000 2027 635,000 2028 665,000 (1) Copyright 2013 CUSIP Global Services.CUSIP is a registered trademark of the American Bankers Association.These CUSIP numbers were provided by CUSIP Global Services and are not intended to create a database and do not serve in any way as a substitute for the CUSIP Global Services.CUSIP numbers are provided for convenience of reference only.CUSIP numbers are subject to change.Neither the City not the Underwriter takes any responsibility for the accuracy of such CUSIP numbers. *Pnhmwan,nrbjea m ebang.. No dealer, broker, salesperson, or other person has been authorized by the City or the Underwriter to give any information or to make any representations with respect to the Bonds other than those contained in this Official Statement and,if given or made,such information or representations must not be relied upon,as having been authorized by the City or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy,nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer,solicitation or sale. The information set forth herein has been obtained from sources that are believed to be current and reliable. The City, however, makes no representation regarding the accuracy or completeness of the information in Appendix D- "BOOK-ENTRY SYSTEM," which has been obtained from DTC's website. Estimates and opinions should not be interpreted as statements of fact. Summaries of documents do not purport to be complete statements of their provisions and such summaries are qualified by references to the entire contents of the summarized documents. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made by use of this Official Statement shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction,but the Underwriter does not guarantee the accuracy or completeness of such information. In connection with the offering of the Bonds, the Underwriter may over allot or effect transactions which stabilize or maintain the market price of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing,if commenced,may be discontinued or recommenced at any time. The initial public offering prices or yields set forth on the inside cover page hereof may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers, unit investment trusts or money market funds at prices lower than or at yields higher than the public offering prices or yields stated on the inside cover page hereof. The CUSIP numbers provided in this Official Statement are included for convenience of the holders and potential holders of the Bonds. No assurance can be given that the CUSP numbers for the Bonds will remain the same after the date of issuance and delivery of the Bonds. This Official Statement contains forecasts,projections and estimates that are based upon expectations and assumptions that existed at the time such forecasts,projections and estimates were prepared. In light of the important factors that may materially affect economic conditions in the City, the inclusion in this Official Statement of such forecasts, projections and estimates should not be regarded as a representation by the City that such forecasts, projections and estimates will occur. Such forecasts, projections and estimates are not intended as representations of fact or as guarantees of results. If and when included in this Official Statement,the words"plan,""expect,""forecast,""estimate,""budget,""project," "intends," "anticipates"and similar words are intended to identify forward-looking statements,and any such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date they were prepared. The Bonds will not be registered under the Securities Act of 1933,as amended,in reliance upon an exception contained in such act. The Bonds have not been registered under the Securities Act of 1933,as amended,and the Bond Ordinance has not been qualified under the Trust Indenture Act of 1939, as amended,in reliance upon exemptions contained in such acts. The Bonds have not been recommended by any federal or state securities commission or regulatory authority. Furthermore,the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary may be a criminal offense. This Preliminary Official Statement,as of its date,is in a form"deemed final"by the City for purposes of Securities and Exchange Commission Rule 15c2-12(b)(1) but is subject to revision, amendment, and completion in a final Official Statement which will be available within seven business days of the sale date. CITY OF PASCO,WASHINGTON 525 NORTH THIRD AVENUE P.O.Box 293 PASCO,WA 99301 (509)545-3404 www.pasco-wa.gov■ ELECTED OFFICIALS Members Position Matt Watkins Mayor Rebecca Francik Mayor Pro-Tem Robert Hoffmann Council Member Michael Garrison Council Member Saul Martinez Council Member Tom Larsen Council Member Al Yenney Council Member CITY ADMINISTRATIVE STAFF Gary Crutchfield City Manager Stan Strebel Deputy City Manager Rick Terway Administrative and Community Services Director Dunyele Mason Financial Services Manager Ahmad Qayoumi Public Works Director BOND REGISTRAR AND PAYING AGENT The Bank of New York Mellon New York,New York BOND COUNSEL Foster Pepper PLLC Seattle,Washington UNDERWRITER Piper Jaffray&Co. Seattle,Washington * The City's websile it not part of this Official Statement, and investors should not my on information which is presented in the CIO's webrite in determining whether to punhare the Bonds This inactive textual nfenna to the City i website a not a h*erh'nk and does not incorporate the City's webrite by rennin. TABLE OF CONTENTS rAge- pAge- /rvTm,,uvwCcuOa ------- ---------- 1 S0N]OR/0LAVD ECONOMIC INFORMATION_ 27 Popnbbou----------------_____________ 27 I��S���I�3�����>��D�]8�{0���----------___ 1 Largest Employers ---------------------------------------------- 27 General................ ............................ ------ .......... 1 Economic Data---------___________ 28 Bond Registrar and Registration................................ 1 Transfer and ...................... _ 2 �8RT�NINVESTMENT-C--O-N-S-I-D-E--RATIOy � 30 ^oomuuoouofuooa'eu�y System--------______. z lu�m6�and De��/eudux _� 30 De� nybouProvisions---------------_____` 2 Limitations ouRemedies ---_____ Pu,ddDedupbouofBonds ---------------_____ 30 Notice [ ------------_____ � � Bankruptcies---------------_____. }V _________ ........_ 3 Effect o«Call for Redemption--------------------------------- 3 TAX MATTERS-------------------............................... 30 Open Market Purchase---------------------- 3 The 20136 Bonds_-_______-_______-----__ 30 *"uo�^oOedeen�Bonds--------------______. ] Cruuiu()#xzFodeuUTm, ---'_ 31 Refunding ouI*feaomce... ------------------------------------- 3 Preservation ofTax Exemption of 201l6Doudo- ...... 32 �«o Tax Bxmuptoukr201II Bonds. . .. -. . .. . . . 32 9�}RP��8E�I��U8E��F���������---_______ 4 Purpose -- - --- - . .. . . .. . . . . . . . .. . . .. . . . . . . 8RIS& -------------___ 32 Sources and Uses of Proceeds------------_____� 4 CONTINUING DISCLOSURE l2 SECURITY FOR THE BONDS------------------------------- 4 Basic Undertaking,oProvide Annual Financial Pledge of Revenue and Len Position--------_____ 4 Information and Notice o[Listed Events______^_ 32 Oa�Co`eu�uand Cov»m��Degu6zmxnt-----____. 4 Auuu�{�uuu�l6`hxoa�ou ____________ 33 Bond Fund_----------------------------- 5 Aueuduuu of -_ �� Reserve Auxmuc � ]l�o�uu�/u f - -------------------------- » __ 2J Fkn�^[Funds---------------------------- 6 Remedy&o&,F�kue to Comply nid�Undertaking /yadxuu�Corcmmmof8uCky---------------. 6 Prior with Co i � I6so�ooze - Future Parity Bonds............. .................................. 7 Undertakings_________________----___-' THE WATERWORKS U������--------------- Y LEGAL INFORMATION---------- 34 The Water System_-________________________- 9 --------------___ J4 Du�Coog,m�ouo-------------------____ 11 /V,�mu�o[K�a�6�I�i��/u------------____. 34 The Suxe,System-------------------------------------------------- 11 Rate Comparisons-------------------------------------------------- 12 BOND X0kTIlfG------- --------------------------------- 34 The Process Water Reuse Facility--- ..........-- ........ 13 The Su/uowxur Management System............ ............ 14 CONFLICTS OF INTEREST The Irrigation System_................................. ...... ... 15 Capital Improvement Plan .......... -------------___------- 15 UNDERWRITINQ--- ----------------------------------- 35 .-- 16 Debt Service Requirements.................. -------------_ --- 16 CONCLUDING STATEMENT______________ 35 Other\omemodo Utility Debt.............. ----------------_ l6 Debt Payment Record............. .............. --------------- 17 Other Financing---------------------------------................. 17 APP8l9DIX& CERTAIN DEFINITIONS voutemwo6a Utility Budget Summary------------------ 17 }{isuxic Operating Results....................................... 18 APPENDIX B. 2012 AUDITED FINANCIAL Comparative Statement o{Net Position ------------ --------- 1y STATEMENTS CITY PROFILE----------------------------------------------------- 20 APPENDIX C. OPINION OF BOND COUNSEL City Council ....----------------------------------------------------- 2V Key Administrative Staff.......................................... 2* APPENDIX D. BOOK`ENTRYSYSIEM Labor Relations---�--�--'-------�___________ 21 Pension Funding---------------------------------------------------- 21 Other ----______- 23 Risk Management -------------------------------- ................ 24 Accounting and Budgeting Process ---------------------------- 25 Auditing of City Finances_---------'-------------- 25 PRELIMINARY OFFICIAL STATEMENT $2,525,000* $7,260,000* CITY OF PASCO,WASHINGTON CITY OF PASCO,WASHINGTON WATER AND SEWER WATER AND SEWER REVENUE BONDS, REVENUE BONDS 2013A 2013T(TAXABLE) INTRODUCTION This Official Statement,including the cover page and any appendices attached hereto,is being distributed by the City of Pasco,Washington(the"City'),a municipal corporation duly organized and existing under and by virtue of the laws of the State of Washington,to furnish information in connection with the issuance and sale by the City of its Water and Sewer Revenue Bonds, 2013A (the "2013A Bonds") and Water and Sewer Revenue Bonds,2013T (Taxable) (the"2013T Bonds"and,together with the 2013A Bonds,the`Bonds'. The Bonds are being issued in accordance with the provisions of the Constitution and applicable statutes of the State and pursuant to Ordinance No._(the`Bond Ordinance"),passed by the City Council on November 18, 2013. Capitalized terms used herein, if not specifically defined herein, are used as defined in the Bond Ordinance. See APPENDIX A-"CERTAIN DEFINITIONS." DESCRIPTION OF THE BONDS General The 2013A Bonds will be issued in the principal amount of$2,525,000*and the 2013T Bonds will be issued in the principal amount of$7,260,000*. The Bonds will be dated and bear interest from the date of their initial delivery. The Bonds will mature on the dates and in the principal amounts and will beat interest payable semiannually on each June 1 and December 1,beginning June 1,2014,at the respective rates as set forth on the inside cover of this Official Statement. Interest on the Bonds will be calculated on the basis of a 360-day year comprised of twelve 30- day months. The Bonds will be issued in registered form, as to both principal and interest, initially registered in the name Cede& Co., as nominee for The Depository Trust Company, New York, New York ("DTC"), in the denomination of $5,000 each or any integral multiple thereof within a single maturity ("Authorized Denomination'. Individual purchases of the Bonds will be made initially in book-entry form only and purchasers will not receive certificates representing their interest in the Bonds purchased. See Appendix D-`BOOK-ENTRY SYSTEM." The Bonds are being issued on a parity with the City's 2002 Bonds,2005 Bonds,2007 Bonds,2009 Bonds,2010A Bonds and 2010T Bonds (the "Outstanding Parity Bonds" and, together with the Bonds and any Future Parity Bonds the"Parity Bonds"). THE BONDS ARE NOT A GENERAL OBLIGATION OF THE CITY, AND NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY,FRANKLIN COUNTY,THE STATE OF WASHINGTON OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED FOR THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE BONDS. Bond Registrar and Registration The fiscal agent of the State of Washington,currently The Bank of New York Mellon in New York,New York,is the initial registrar and paying agent for the Bonds (the `Bond Registrar"). The Bonds will be issued in fully registered form initially in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ("DTC' . DTC will act as securities depository for the Bonds. Individual purchases may be made in book-entry form only. Purchasers will not receive certificates representing their interest in the Bonds purchased. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the "registered owners" or "bondowners" shall mean Cede & Co. and shall not mean the "Beneficial Owners"of the Bonds. In this Official Statement,the term`Beneficial Owner" shall mean the person for whom a DTC participant or indirect participant acquires an interest in the Bonds. *P-h—nary,=hied to change. 1 So long as Cede&Co.is the registered owner of the Bonds,principal of and interest on the Bonds are payable by wire transfer by the Bond Registrar to DTC,which in turn is obligated to remit such principal and interest to the DTC participants for subsequent disbursements to Beneficial Owners of the Bonds. See APPENDIX D - "BOOK-ENTRY SYSTEM." Transfer and Exchange;Record Date The Bond Registrar is not obligated to exchange any Bond or transfer registered ownership during the period between the applicable Record Date and the next upcoming interest payment or redemption date. For purposes hereof,Record Date means in the case of each interest payment date,the Bond Registrar's close of business on the 15th day of the month immediately preceding such interest payment date, and, with respect to redemption of a Bond prior to its maturity,the Bond Registrar's close of business on the date on which the Bond Registrar sends the notice of redemption in accordance with the Bond Ordinance. Termination of Book-Entry System. If the Bonds are no longer held in book-entry form by DTC,the City will execute, authenticate and deliver,at no cost to the Beneficial Owners,Bonds in fully registered form,in Authorized Denominations.The principal of the Bonds will then be payable upon due presentment and surrender to the Bond Registrar,and interest on the Bonds will then be payable by electronic transfer on the interest payment date,or by check or draft of the Bond Registrar mailed on the interest payment date, to the Registered Owners, at the address appearing upon the registration books on the Record Date.The City is not required to make electronic transfers except pursuant to a request by a Registered Owner in writing received on or prior to the Record Date and at the sole expense of the Registered Owner. Redemption Provisions Obtiona!I{edemption. The Bonds maturing on or after December 1,2024 are subject to redemption at the option of the City, in whole or in part (and if in part, with maturities to be selected by the City) on any date on or after December 1, 2023 at the price equal to the principal amount to be redeemed, without premium, plus accrued interest,if any,to the date fixed for redemption. [lYlandatog R dempdon. The 2013_ Bonds maturing on December 1, 20_, and if not redeemed under the optional redemption provisions, defeased or purchased, are subject to mandatory redemption at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the date fixed for redemption, and without premium,on December 1 in the years and principal amounts as follows: 2013_Bonds 20_Term Bonds Year Sinking Fund Installment Maturity. If the City redeems, purchases or defeases the 2013_ Term Bonds, the 2013_ Term Bonds so redeemed, purchased or defeased (irrespective of their actual purchase prices) will be credited at the par amount thereof against one or more scheduled mandatory redemption amounts for those 2013_ Term Bonds in the manner described below regarding partial redemption of the 2013_Bonds] Partial Redemption of Bonds If fewer than all of the Bonds are to be redeemed,the City may select the maturity or maturities to be redeemed. If fewer than all of the Bonds of a single maturity of a series are to be redeemed,so long as the Bonds are held by DTC in book-entry form, selection of Bonds for redemption will be made in accordance with the operational arrangements between the City and DTC (the "Letter of Representations"), and the Bond Registrar will select all other Bonds to be redeemed randomly in such manner as the Bond Registrar shall determine. All or a portion of the principal amount of any Bond that is to be redeemed may be redeemed in any Authorized Denomination. If less than all of the outstanding principal amount of any Bond is redeemed, upon surrender of that Bond to the Bond Registrar,there will be issued to the Registered Owner,without charge therefor, a new Bond,at the option of the Registered Owner) of the same series, maturity and interest rate in any Authorized Denomination in the aggregate principal amount remaining outstanding. 2 Notice of Redemption So long as the Bonds are held by DTC in book-entry only form,any notice of redemption will be given at the time, to the entity and in the manner required by the Letter of Representations. If a Bond ceases to be held in book- entry only form,unless waived by the registered owner of the Bond to be redeemed, the City is required to cause notice of an intended redemption of Bonds to be given by the Bond Registrar not less than 20 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the registered owner of each Bond to be redeemed at the address appearing on the Bond Register on the Record Date. The requirements of the preceding sentence will be satisfied when notice has been mailed as so provided, whether or not it is actually received by an owner of any Bond. In the case of an optional redemption,the notice may state that the City retains the right to rescind the redemption notice and the related optional redemption of Bonds by giving a notice of rescission to the affected registered owners at any time prior to the scheduled optional redemption date. Any notice of optional redemption that is so rescinded shall be of no effect, and the Bonds for which the notice of optional redemption has been rescinded shall remain outstanding. Effect of Call for Redemption Interest on each Bond called for redemption will cease to accrue on the date fixed for redemption, unless either the notice of optional redemption is rescinded as described above,or money sufficient to effect such redemption is not on deposit in the City's Water and Sewer Revenue and Refunding Bond Redemption Fund, 1991 (the "Bond Fund") (or in a trust account established to refund or defease the Bond). Open Market Purchase The City reserves the right and option to purchase any or all of the Bonds in the open market at any time at any price acceptable to the City plus accrued interest to the date of purchase. Failure to Redeem Bonds If any Bond is not paid when properly presented at its maturity date or date fixed for redemption,the City will be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or date fixed for redemption 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, or in a trust account established to refund or defease the Bond, and the Bond has been called for payment by giving notice of that call to the registered owner thereof. Refunding or Defeasance The City may issue refunding bonds pursuant to the laws of the State or use money available from any other lawful source to carry out a refunding or defeasance plan, which may include (a) paying when due the principal of and interest on any or all of the Bonds (the "defeased Bonds'; (b) redeeming the defeased Bonds prior to their maturity; and (c) paying the costs of the refunding or defeasance. If the City sets aside in a special trust fund or escrow account irrevocably pledged to that redemption or defeasance (the "trust account"), money and/or non- callable, non-prepayable "government obligations" (as defined in RCW 39.53.010, as now in effect or hereafter amended) maturing at a time or times and bearing interest in amounts sufficient to redeem, refund or defease the defeased Bonds in accordance with their terms,then all right and interest of the owners of the defeased Bonds in the covenants of the Bond Ordinance and in the funds and accounts obligated to the payment of the defeased Bonds will cease and become void. Thereafter, the owners of defeased Bonds will have the right to receive payment of the principal of and interest on the defeased Bonds solely from the trust account and the defeased Bonds will be deemed no longer outstanding. As defined in chapter 39.53 RCW, "government obligations" means (a)direct obligations of or obligations the principal and interest on which are unconditionally guaranteed by the United States of America and bank certificates of deposit secured by such obligations; (b)bonds, debentures,notes,participation certificates or other obligations issued by the Banks for Cooperatives, the Federal Intermediate Credit Bank, the Federal Home Loan Bank System,the Export-import Bank of the United States,federal land banks or the Federal National Mortgage Association; (c)public housing bonds and project notes fully secured by contracts with the United States; and 3 (d)obligations of financial institutions insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, to the extent insured or guaranteed as permitted under any other provision of State law. If the City defeases any 2013T Bonds, such 2013T Bonds may be deemed to be retired and"reissued"for federal income tax purposes as a result of the defeasance. See"TAX MATTERS-No Tax Exemption for 2013T Bonds." PURPOSE AND USE OF PROCEEDS Purpose The proceeds from the sale of the 2013A Bonds will be used to pay costs of construction of additions to the City's sewage treatment facility and sewer line extensions and to pay costs of issuing the 2013A Bonds. The proceeds from the sale of the 2013T Bonds will be used to finance the expansion and upgrades of the City's process water reuse facility and to pay costs of issuing the 2013T Bonds. Proceeds of the Bonds also will be used to make a deposit to the debt service reserve account in the Bond Fund(the"Reserve Account'. Sources and Uses of Proceeds The proceeds of the Bonds are estimated to be applied as follows: Sources 2013A Bonds 2013T Bonds Principal Amount $ $ Net Original Issue Premium Total Sources $ $ Uses Project Requirements $ $ Deposit to Reserve Account Costs of Issuance(t) Total Uses $ $ (1) Includes bond counsel fee,rating fee, underwriter's discount,underwriter's counsel fee,sating agency fees,printing and mailing costs of the Preliminary Official Statement and Official Statement,and other expenses associated with the issuance of the Bonds. SECURITY FOR THE BONDS Pledge of Revenue and Lien Position 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. Rate Covenant and Coverage Requirement So long as any Parity Bonds are outstanding, the City has covenanted in the Bond Ordinance that 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 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 set forth in the Bond Ordinance. "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. 4 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 Manager 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. If the City shall fail to set aside and pay into the Bond Fund the amounts which it has obligated itself by the Bond Ordinance to set aside and pay therein,the owner of any Bond may bring suit against the City to compel it to do SO. Reserve Account The Reserve Account for any Future Parity Bonds may be accumulated from any other funds which the City legally may have available for such purpose in addition to using ULID Assessments and Net Revenue of the Waterworks Utility. The City further agrees that when the required amounts have been paid into the Reserve Account in the Bond Fund,the City will maintain those amounts therein at all times,except for withdrawals therefrom as authorized in the Bond Ordinance,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 fast,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. 5 The City currently has in place, to meet a portion of the Reserve Requirement for Parity Bonds, a surety bond issued by Ambac Assurance Corporation("Ambac'� in the amount of$2,108,930,which expires in 2019. Ambac is currently rated Caa2 by Moody's Investors Service Inc. and Standard & Poor's Ratings Services withdrew its rating in November 2010. The City also currently has $410,000 of cash and investments in the Reserve Account. In anticipation of the expiration of the Ambac surety bond, the City expects to use approximately ten percent of the proceeds of the Bonds to increase the amount of cash and investments in the Reserve Account to approximately$ .See Appendix A—"CERTAIN DEFINITIONS." Flow of Funds Funds in the Water and Sewer Revenue Fund shall be used in the following order of priority: a) To pay Operating and Maintenance Expenses; b) 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; c) 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. d) 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 e) 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. Additional Covenants of the City The City covenants and agrees with the owner of each of the Bonds as follows: a) It will not sell, lease, mortgage, or in any manner encumber or dispose of all the properties of the Waterworks Utility unless provision is made for payment into the Bond Fund of an amount sufficient either to defease all outstanding Parity Bonds or to pay the principal of and interest on all the outstanding Parity Bonds in accordance with the terms, thereof,and further binds itself irrevocably not to mortgage, sell,lease or in any manner dispose of any part of the Waterworks Utility that is used,useful and material to the operation of such utility unless provision is made for replacement thereof or for payment into the Bond Fund of an amount which shall bear the same ratio to the amount of outstanding Parity Bonds as the Net Revenue available for debt service for such bonds for the twelve months preceding such sale,lease,encumbrance or disposal from the portion of the Waterworks Utility so leased,encumbered or disposed of bears to the Net Revenue available for debt service for such bonds from the entire Waterworks Utility for the same period. Any such money so paid into the Bond Fund shall be used to retire outstanding Parity Bonds at the earliest possible date. b) It will maintain and keep the Waterworks Utility in good repair,working order and condition and operate such utility and the business in connection therewith in an efficient manner and at a reasonable cost. c) 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 Owner on written request the annual operating and income statements of the Waterworks Utility. d) 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. 6 e) 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. f) To the extent permitted by State law, it will maintain its corporate identity and existence so long as any Bonds remain outstanding. g) It will not grant any competing utility service franchise and will use all legal means to prevent competition with the Waterworks Utility. h) If on the first day of January in any year,two installments of any ULID Assessment are delinquent,or the final installment of any ULID Assessment has been delinquent for more than one year, the City will proceed with the foreclosure of the delinquent assessment or delinquent installments thereof in the manner provided by law. 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 Tenn Bonds to be issued and for regular payments to be made for the payment of the principal of such Term Bonds on or before their maturity,or,as an alternative,the mandatory redemption of those Term Bonds prior to their maturity date from money in the Principal and Interest Account. e) There shall be on file from a licensed professional engineer experienced in the design, construction and operation of municipal utilities,or from an independent certified public accountant, a certificate showing that in his or her professional opinion the Net Revenue of the Waterworks Utility for any 12 consecutive calendar months out of the immediately preceding 24 calendar months shall be equal to the Coverage Requirement for each year thereafter,except that such certificate may be provided by a City representative if it is based solely upon actual historical Net Revenue of the Waterworks Utility without any adjustment. 7 The certificate,in estimating the Net Revenue of the Waterworks Utility available for debt service, shall use the historical Net Revenue of the Waterworks Utility for any 12 consecutive months out of the 24 months immediately preceding the month of delivery of the Future Parity Bonds. Net Revenue of the Waterworks Utility may be adjusted to reflect: 1) Any changes in rates in effect and being charged or expressly adopted by ordinance to take effect within 180 days after the date of the Certificate; 2) Income derived from customers of the Waterworks Utility that have become customers during the 12 consecutive month period or thereafter adjusted to reflect one year's net revenue from those customers; 3) Revenue from any customers to be connected to the Waterworks Utility who have paid the required connection charges; 4) Revenue received or to be received which is derived from any person, firm, corporation or municipal corporation under any executed contract for water, sewage disposal or other utility service,which revenue was not included in the historical Net Revenue of the Waterworks Utility; 5) The engineer's or accountant's estimate of the Net Revenue of the Waterworks Utility to be derived from customers to connect within 180 days after the date of the completion of the additions to and improvements and extensions of the Waterworks Utility to be paid for out of the proceeds of the sale of the additional Future Parity Bonds or from other additions to and improvements and extensions of the Waterworks Utility then under construction and not fully connected to the facilities of the Waterworks Utility when such additions, improvements and extensions are completed;and G) 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. In connection with the Bonds,the City will provide a certificate executed by a City representative. If Future Parity Bonds proposed to be so issued are for the sole purpose of refunding outstanding bonds payable from the Bond Fund, such certification of coverage shall not be required if the amount required for the payment of the principal and interest in each year for the refunding bonds is not increased over the amount for that year required for the bonds to be refunded thereby and if the maturities of such refunding bonds are not extended beyond the maturities of the bonds to be refunded thereby. Nothing contained in the Bond Ordinance 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 contained in the Bond Ordinance 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. 8 THE WATERWORKS UTILITY The Waterworks Utility's primary activity is the operation and maintenance of a domestic water system which supplies and distributes potable water and water for fire protection purposes for City residents (the "Water System', a sanitary system which collects sanitary sewage and delivers it to a municipal sewage treatment facility (the "Sewer System"), a stormwater management system to manage surface and stormwater and delivery to the City's stomwater facilities (the "Stormwater System"), an irrigation system for residential landscaping (the "Irrigation System") and a process water reuse facility for food preparation process wastewater (the "Process Water Reuse Facility"). The City owns and operates the Waterworks Utility as a separate enterprise fund that provides water and/or sewer service to virtually all of the City's residents. The City operates its Waterworks Utility in compliance with federal and State environmental and health laws. The Water System The Water System receives its water supply from the Columbia River via two intake structures in the river. The intake facilities have multiple pumps with pumping capacity of 24 million gallons per day (mgd) at the Butterfield Plant and 6 mgd at the West Pasco Water Treatment Plant. The raw or untreated water is pumped through four lines to both treatment facilities. The Butterfield water treatment plant was originally constructed in 1949, expanded in 1958, and upgraded and automated in 1987. The treatment plant consists of the following main process components: two flocculation basins,two sedimentation basins,eight dual media filters,a clearwell and five treated water pumps which discharge into the transmission/distribution system. The plant is automated and routinely operates in an unmanned mode 16 hours out of each 24-hoar day. The West Pasco Water Treatment Plant(the"WPWTP'o was completed in 2011 and it has been producing water for the City since April of 2011. It consists of the latest technology in water treatment. The raw water is treated through micro filtration which removes impurities to meet or exceed the Department of Health requirements. The plant currently has the capacity of producing 6 mgd; however, the plant has the capacity of 18 mgd when it is expanded in the future to meet the growth needs in West Pasco. The plant infrastructure includes automated sand filtration, two 3 mgd microfiltration racks and a one milli on gallon clearwell. The plant is automated and can function in automated mode more than 20 hours per day. Present water demands on the water system can vary from a minimum winter day demand of 4.7 mgd to a peak summer day demand of 23.84 mgd.The year-round average daily flow is 14.06 mgd. The treated water from the metered plant is pumped into the transmission and distribution system which consists of 290 miles of main line varying in size from 6 to 36 inches. The distribution system is divided into three separate zones,with each zone servicing its respective elevation. Storage is provided by a one 10 million gallon ground level reservoir, two 1 million gallon reservoirs, and a 2.5 milli on gallon water tower. Curmmerr. The City's Water System presently serves approximately 18,100 customers,of which approximately 88% are single-family residential customers. Historical customer statistics are shown in the following charts. WATER SYSTEM CUSTOMERS Customer Class 2008 2009 2010 2011 2012 Single Family Residential 13,549 14,344 14,670 15,204 15,612 Multi-Family Residential 504 507 453 463 468 Commercial 1,058 1,112 1,272 1,296 1,321 Other(1) 456 426 402 407 422 TOTAL. 15,567 16,389 16,797 17,370 17,823 (1)Industrial,Irrigation,the City and schools. Soarre:The City of Pmo 9 LARGEST CUSTOMERS OF THE WATER SYSTEM %of 2012 Water Utility Annual Annual Total Operating Customer Industry Consumption() Revenue Revenue(2) Pasco Processing Processing 39,412,800 $262,680 3.65% Twin City Foods Processing 25,448,100 171,870 2.39 City of Pasco Municipal government 9,825,400 142,130 1.98 Bybee Foods Processing 20,697,200 139,170 1.94 Resei s Fine Foods Processing 15,110,800 101,280 1.41 Pasco School District Education 4,078,300 74,710 1.04 Pasco Housing Authority Government housing 7,111,100 67,500 0.94 Med Villas Homeowners Assoc. Housing 3,162,300 24,890 0.35 Sundance Home Park 0324 Housing 3,360,600 23,720 0.33 Lake View Mobile Home Park Housing 3,253,900 22,450 0.31 TOTAL 131,460,500 $1,030,400 14.33% (1)Consumption in cubic feet,rounded to nearest hundred,based on 2012 water use. Total consumption for 2012 was 574,734,800 cubic feet. (2) Based on 2012 audited Water System total operating revenue of$7,190,455. Does not include connection fees and one-time revenue sources. Soum:The City of Paso Water Rater and Char ees. Water rates include a charge for the amount of water used plus a monthly service charge deteravned by the size of the waterline serving the premises. The following rates and charges went into effect on July 1,2010. The most recent rate increase by the City prior to the 2010 increase was in 2004. Upon City Council approval,the City anticipates increasing rates approximately 12%to be effective January 1,2014. WATER RATES AND CHARGES Multi-Family Residential Single-Family Residential &Commercial Size of Service Service Charge Size of Service Service Charge '/4 inch $12.50 %inch $17.61 1 inch 18.74 1 inch 25.43 1 '/z inch 49.61 2 inch 79.59 3 inch 108.69 4 inch 156.60 6 inch 244.46 8 inch 338.77 Soum:The City ofParo. In addition to the monthly service charge,users pay$0.65 per 100 cubic feet of water. A 90% surcharge is added to accounts located outside the City limits. Users qualifying for a senior low income discount receive services at one-third of the normal applicable rate. 10 Rate Comparisons The following table provides rate comparisons for similar utilities. A one-month period is assumed with a water usage of 1,000 cubic feet and a 3/4 inch meter. This level of usage is representative of single family residential usage with moderate irrigation or lawn watering. COMPARATIVE MONTHLY SINGLE FAMILY RESIDENTIAL WATER SERVICE RATES Single Family Average Number of Connections Monthly Charge(1,000/cf) Daily Flow City Residential Commercial Inside City Outside City (million gal) City of Kennewick 20,582 2,417 $21.44 $47.19 11.92 City of Moses Lake 6,839 1,383 22.00 27.50 8.50 City of Pasco 15,761 2,012 19.00 30.25 11.97 City of Richland 15,733 2,103 34.50 n/a 14.70 City of Walla Walla 9,417 1,126 40.30 60.45 n/a Som= Individual m&iiies,GY of P"m ninny of rates m ofSepkmber30,2013. The Sewer System The City's sewage treatment plant was originally constructed in 1954, upgraded from primary treatment to secondary treatment in 1970,and upgraded to advanced secondary treatment and expanded in 1997. The upgrade in 1997 included a new digester,aeration basins,an ultraviolet disinfection system,and additional drying beds. The plant currently has an average flow of 4.09 mgd,with a peak of 4.85 mgd,and is capable of serving a population of 80,000 people. The Waste Water Treatment Plant (the "W WI'P") has capacity of treating up to 7.1 to 7.8 mgd. However, the primary clarifier which is the initial stage of wastewater treatment,has only 5 mgd capacity. In order to meet the needs of near future growth and peak demands,a second primary clarifier will be constructed with proceeds of the 2013A Bonds. The proposed primary clarifier will add 5 to 7 mgd capacity to the average flows and will meet current and future demands.The City is in the process of completing master plans for the Citywide Sanitary Sewer System.Recommended improvements for the WWI?include capacity improvements to treat wastewater up to 12 mgd in order to meet the projected City growth of 95,000 to 100,000 in the next 15 to 20 years. The sewer collection consists of 229 miles of 8-inch to 36-inch diameter collection pipelines.The sewer collection system is being expanded into residential areas currently utilizing septic tanks in which utility local improvement districts are being formed to convert properties from septic tanks to City sewers. The collection system is also being expanded into both the residential and industrial growth areas of the City. Customers. The City's Sewer System, which excludes what is treated at the process water reuse facility, presently serves approximately 15,500 customers,of which 90%are single-family residential customers. SEWER SYSTEM CUSTOMERS Customer Class 2008 2009 2010 2011 2012 Single Family Residential 11,887 12,148 12,841 13,373 13,746 Multi-Family Residential 504 482 442 449 454 Commercial 921 1,017 935 949 969 TOTAL 13,312 13,647 14,218 14,771 15,169 Som The City of Pa 11 LARGEST CUSTOMERS OF THE SEWER SYSTEM %of 2012 Sewer Utility Annual Annual Total Operating Customer Industry Consumption([) Revenue Revenue(2) Reser's Fine Foods Processing 2,729,900 $35,460 0.52% Port of Pasco Port district 2,313,200 32,290 0.48 Pasco School District Education 1,808,600 28,980 0.43 Franklin County Municipal government 1,969,800 27,860 0.41 City of Pasco Municipal government 1,307,400 23,740 0.35 Easterday Processing 1,503,700 20,380 0.30 Frank Tiegs LLC Processing 1,487,100 20,170 0.30 Double Tree(Red Lion) Hospitality 1,431,300 19,690 0.29 Oxarc Manufacturing 1,296,100 17,700 0.26 Lourdes Medical Center Health 972,200 13,770 0.20 TOTAL 16,819,300 $240,040 3.54% (1)Consumption in cubic feet,rounded to nearest hundred,based on 2012 water use. Total consumption for 2012 was 63,852,200 cubic feet.. (2) Based on 2012 audited Sewer System total operating revenue of$6,776,798. Does not include connection fees and one-time revenue sources. Sou=:The Gry ofPauro. Seiner Charger. The following rates and charges were approved on April 26, 2010 and went into effect on July 1, 2010. Upon City Council approval, the City anticipates increasing rates approximately 4% to be effective January 1,2014. SEWER RATES Monthly Customer Class Base Cha= Residential dwellings or four units or less $24.80 Residential dwellings more than four units 20.00 St.Citizen/Low Income 8.30 Commercial 33.35 Hotel/Motel(per unit) 5.25 Souris: The G)y of Parm. For commercial users and hotel/motels consuming in excess of 1,000 cubic feet, the overage is charged at$1.29 per 100 cubic feet of water used. A 50%surcharge is added to accounts located outside the City limits. De6nquendes. After notice of delinquency of a water and/or sewer bill is given and the bill remains unpaid,the City staff is directed to cut off water service to the premises and enforce a lien upon the property. Such alien is superior to all other liens or encumbrances,except those for general taxes and special assessments. Less than one- half of one percent of water and sewer bills were uncollected by the City in 2012. Rate Comparisons The following table provides rate comparisons for similar utilities. A one-month period is assumed with a water usage of 1,000 cubic feet and a'/4 inch meter. Single family residential charges are based on a flat rate and usage is not metered. 12 COMPARATIVE MONTHLY SINGLE FAMILY RESIDENTIAL SEWER SERVICE RATES Single Family Number of Connections Monthly Charge City Residential Commercial Inside City Outside City City of Kennewick 16,428 1,666 $20.79 $31.11 City of Moses Lake 6,817 920 32.15 31.60 City of Pasco 13,952 1,480 24.70 37.20 City of Richland 16,618 1,107 25.60 n/a City of Walla Walla 9,469 929 48.70 73.05 Soum:InNtidual ud&des,G'ry ofPmw survg of mles m of September 30,2013. RECENT HISTORICAL WATER AND SEWER RATE CHANGES Percent Change for In City Service Year Water Sewer 2011 0.00% 5.0%reduction 2010 19.0-20.3% 5.0-5.6% reduction 2007 0.0% 10.0% reduction 2004 3.9%-4.9% 2.0%-4.0% 2003 4.1%-5.2% 2.0%-4.2% 2000 0.0% 0.0%-4.5% Soum:The GTy ofPmro The Process Water Reuse Facility The Process Water Reuse Facility (the "Facility') was constructed by the City and placed in operation in 1995. The Facility services four food processing plants. The food processing wastewater is pumped and sprayed onto farmland crop circles as the means of disposal. The Facility and processing plants operate year-round,with peak usage in March and December. The Facility originally consisted of two pump stations,pipelines,a 5 million gallon equalization basin and 10 irrigation circles totaling 1,600 acres. In 1997, a 115 million gallon winter storage pond was added. In 2002, four additional circles were added to the operation, increasing the irrigated total to 2,200 acres.The winter storage pond allows food processors at the Pasco Processing Center to operate year round. The City issued its 1994 Water and Sewer Revenue Bonds to finance the initial construction of the Facility, which bonds were refunded in 1998. The food processing users are responsible for payment of the debt service and operation and maintenance costs of the Facility through the rates and charges described below. In 2011 the City completed the optimization master plan to improve the Facility to ensure the City remains compliant with the permit requirements issued by the Department of Ecology and to provide increased capacity for process water. Planned improvements to be funded in part or whole by the 2013T Bonds are designed to create 170 million gallons of additional capacity, 110,000 pounds of additional nitrogen capacity and 15,000 pounds/day of additional biological oxygen demand capacity. The expansion meets the currently requested needs of existing processors and does not provide excess capacity to allow for the addition of new customers. CUSTOMERS OF THE PROCESS WATER REUSE FACILITY %of 2012 Permitted Actual Total Total Customer Flows(l) Flows(t) Revenues Revenues Pasco Processing 384 283 $423,893 46% Twin City Foods 200 157 192,201 21 Bybee Foods 205 136 166,551 18 Reset'Fine Foods 115 91 143,758 16 Total 904 667 $926,403 100% (1)Million gallons per year. Soum:The City ofPmro 13 Rater and Cbar_ges. Food processing users are subject to rates and charges established by the City in Ordinance No. 3291 passed on April 6, 1998. This ordinance requires the industrial users connecting to the Facility to pay the following rates and charges,which are subject to annual adjustments. In addition,the City may negotiate a special operation and maintenance or contract rate with individual customers or industrial users of the Facility. Monthly Cbas Base Operation and Maintenance Cha=s - Actual costs of operating and maintaining the Facility are shared proportionally among all users based on estimated annual flows of each user. The minimum annual charge for each user is$12,000. Customized Operation and Maintenance Chares-The actual costs of operation and maintenance associated with any specifically constructed or customized facility are charged directly to the user(s) based upon actual monthly flows of each during the period. Overage Charges (for effluent characteristics) - These charges are based on individual wastewater discharge pemrits. The average charges to be assessed and paid monthly by the user when exceeding a 15-day accumulation allowance are as follows: Effluent Characteristic Overage Rate Volume/Hydraulic(Millions of Gallons) $800.00/MG Bio-Chemical Oxygen Demand 0.03/lb Total Suspended Solids 0.01/lb Total Nitrogen 0.90/lb Capital Champs-All capital charges related to all outstanding debt of the Facility are allocated to the users,based on their proportionate share of the total permitted combined annual flows,as determined in each user's discharge permit. The minimum annual capital charge for any user is$12,000 per year. Customized Specific Capital Charges - In addition to the capital charges described above, any capital projects which benefit a single user are directly charged to and paid by such user. For any new customer, a rate will be established which is considered reimbursement of any non-capital charges made by the City for establishment and reservation of excess capacity. The Stormwater Management System The Storarwater System was established by the City in 1999 pursuant to Chapters 35.67 and 35A.80.010 of the Revised Code of Washington C RCW`�. Its purpose is to promote public health, safety and welfare by promoting an approach to the management of surface and stormwater runoff created on City streets and delivery to City- owned stormwater facilities. The City's Stormwater System is managed using a ground infiltration process which, after it is treated, meets the Department of Ecology NPDES requirements. The infiltration process applies to approximately 75%of the City. The water runoff from streets for the balance of the City is discharged to the Columbia River.The City has annual program that provides for routine upgrades and catch basin additions as needed. Citywide street sweeping averages eight times per year. The City and cleans catch basins regularly, in compliance with NPDES permits. The City completes annual reports to the Department of Ecology on the Stormwater System. Stormwater Rater&Charges. The following monthly rates for the Stormwater System are currently billed to property owners throughout the City using the following general classifications. Between 2002 and 2010 rates were not adjusted. In 2011 rates increased 66.7% and then increased another 30% in 2012. Upon City Council approval, the City anticipates increasing rates upon City Council approval by approximately 26% to be effective January 1, 2014. 14 STORMWATER RATES Customer Class Rate per Month Single Family Residential $3.90 Apartments(per unit) 1.95 Multi-Family Residential(per unit) 1.95 Undeveloped Parcels 0.00 Vacant Buildings 3.90 Industrial/Commercial Parking for 0-5 vehicles $3.90 Parking for 6-10 vehicles 7.80 Parking for 11-15 vehicles 15.60 Parking for 16 plus vehicles 19.50 Additional Charges Property runoff to City systems($1.25 min.) $86.71/acre State Highway right-of-way 21.71/acre The Irrigation System The Irrigation System was purchased by the City in 2002 from a private utility. At the time of purchase the system serviced approximately 900 customers in an area where new homes were being built. Since the purchase and through expansion of the system, it now services approximately 5,435 residential customers. At the time of purchase, customers were being charged $32 per month for seven months during the irrigation season, April through October. In 2004, after evaluating the increase in customer base and projected annual expenditures, the monthly fee was reduced to$24 per month. Effective January 1, 2011, the base fee was increased to$26.00 per month and that remains the current rate. Capital Improvement Plan The City annually adopts a six-year Capital Improvement Plan('CIP"),which includes a water and sewer system component.The currently adopted CIP includes the following projects. The City anticipates proposing a new CIP plan to be adopted by the City Council in December 2013. Project Type 2014 2015 2016 2017 2018 Water Supply,Treatment, Distribution and Storage $829,000 $5,077,000 $1,299,000 $1,657,000 $1,796,000 Sewer Treatment&Collection 3,652,000 7,371,000 1,348,000 1,487,000 1,352,000 Process Water Reuse Facility Stormwater Collection 115,000 Irrigation 170,000 150,000 150,000 150,000 150,000 $4,766,000 $12,598,000 $2,797,000 $3,294,000 $3,298,000 The City intends to pay for CIP projects through Bond proceeds,existing reserves,and water and sewer customer charges. The City is planning to issue additional water and sewer revenue bonds in 2015. See "—Other Financings." 15 Endangered Species Act In planning future projects,the City evaluates the construction and operation of the facilities to determine if there will be any impact on endangered species through the use of site evaluations, special environmental studies, and preparation of State Environmental Policy Act ("SEPA') checklists or environmental impact statements, as appropriate. Alternatives are developed to minimize or avoid impacts on endangered species. Where federal permits or funding are involved, the City also complies with the Endangered Species Act's "consultation" requirement, which serves to evaluate and address any potential effect on endangered species. Best management practices are employed during routine operation and maintenance activities to minimize impacts on the environment. Debt Service Requirements WATERWORKS UTILITY DEBT SERVICE SCHEDULE(1) OUTSTANDING BONDS THE BONDS(a) Assessment Bonds Non-Assessment Bonds Non-Assessment Bonds Series 2013A Bonds Series 2013B Bonds Year Princip lateres t rinci al Interest Principal Int TOTAL erect Principal n rest 2014 $110,000 $45,192 $1,695,000 $804,878 $100,000 $93,944 $260,411 $3,109,426 2015 110,000 40,893 995,000 752,049 100,000 93,000 $435,000 263,337 2,789,278 2016 60,000 36,443 1,045,000 711,373 100,000 91,000 440,000 258,874 2,742,689 2017 110,000 34,043 1,080,000 668,025 100,000 88,000 445,000 252,837 2,777,905 2018 110,000 29,268 1,125,000 623,032 100,000 85,000 455,000 244,115 2,771,414 2019 110,000 24,493 1,355,000 580,478 170,000 81,000 460,000 234,060 3,015,030 2020 115,000 19,718 1,410,000 524,291 175,000 74,200 475,000 221,810 3,015,018 2021 55,000 15,905 1,470,000 465,228 185,000 67,200 490,000 207,261 2,955,593 2022 175,000 10,653 1,525,000 402,238 190,000 59,800 505,000 189,959 3,057,649 2023 - 5,400 1,150,000 335,903 195,000 52,200 525,000 170,107 2,433,610 2024 120,000 2,700 1,200,000 286,640 205,000 44,400 550,000 147,894 2,556,634 2025 - - 1,250,000 234,759 215,000 36,200 575,000 121,049 2,432,008 2026 - - 985,000 178,175 220,000 27,600 605,000 92,983 2,108,758 2027 - - 1,030,000 130,738 230,000 18,800 635,000 63,453 2,107,991 2028 - - 1,080,000 80,669 240,000 9,600 665,000 32,459 2,107,727 2029 - - 1.130.000 27.425 - 1.157.425 81 0. I� Z05 gl� S2 LL 8421 . 3�k� $ $�3 (1) A8 Bonds are Parity Bonds. Assessment Bonds and Non-Assessment Bonds are shown separately for analysis Purposes only. (2) Interest on the Bonds is estimated at yields ranging from 0.400%to 4.881% Other Waterworks Utility Debt In addition to the Outstanding Parity Bonds, the City has loans outstanding in the combined total principal amount of$9,255,123, as of October 1, 2013, through the State Department of Ecology State Revolving Fund Loan program('SRF Loan'.The next payment will be due in July 2014. The SRF Loan was originally issued on a parity with the City's then outstanding Parity Bonds. In 2001, the Washington State Department of Ecology modified the terms of the SRF Loan to be subordinate to the Parity Bonds. The City has used money obtained from the SRF Loan to upgrade the City's wastewater treatment facility, construct an interceptor and primping station serving West Pasco, and an interceptor serving the eastern part of the central business district. The City has established a cash-funded reserve for the subordinate SRF Loan equal to one year's debt service which is $1,719,955.30. If the City defaults in its payments on the SRF Loan,the Department of Ecology would have the option to declare the principal and interest on the loan immediately payable,in addition to other remedies specified in the SRF Loan agreement. 16 The City also has Public Works Trust Fund Loans outstanding in the combined principal amount of$1,078,753 as of October 1,2013. This debt is a subordinate lien to the Parity Bonds. If the City defaults in its payments on one or more of the Public Works Trust Fund Loans, the State Department of Community, Trade and Economic Development (now designated as the Department of Commerce) would have the option to declare the principal and interest on the affected loan(s) immediately payable, in addition to other remedies specified in the Public Works Trust Fund Loan agreements. Debt Payment Record The City has always promptly met principal and interest payments on outstanding bonds,notes and warrants when due. No refunding bonds have been issued or other debt received for the purpose of preventing an impending default. Other Financings The City does not anticipate issuing additional water and sewer revenue bonds within the next year. The City is considering issuing$12 million of limited tax general obligation bonds to finance the construction of a new police facility within the next year. Waterworks Utility Budget Summary Adopted 2013 Revenues Intergovernmental $1,931,212 Charges for Services 18,714,596 Miscellaneous 334,775 Other Financing Sources 7,907,077 Interfund Transfers 200,000 Total Revenues 29,087,660 Beginning Fund Balance 8,492,896 Total Resources $37,580,556 Expenditures Salary&Wages $2,770,395 Personnel Benefits 465,990 Supplies 1,464,900 Other Services&Charges 2,605,887 Intergovernmental Services&Taxes 2,307,689 Capital Outlay 15,609,968 Debt Service 5,022,796 Interfund payments for Services 2,794,997 Interfund Transfers 64,675 Total Expenditures 33,107,297 Ending Fund Balance 4,473,259 Total Expenditures $37,580,556 Operations for 2013 have progressed primarily as planned. The largest construction project in 2013 was the process water facility expansion, the cost of which will be reimbursed with proceeds of the 2013T Bonds. With the addition of a new lift station,a new processor started operations in 2013 and is expected to add approximately $160,000 annually in new utility revenues.This processor is sending its wastewater to the sewer plant as there is no planned capacity for additional customers at the process water reuse facility. 17 Historical Operating Results The following table shows historical operating results of the Waterworks Utility for the years 2008 through 2012. This table has been compiled by the City based on the definitions of Gross Revenue and Operating and Maintenance Expenses contained in the Bond Ordinance and reflected in APPENDIX A - CERTAIN DEFINITIONS. These definitions are required by the Bond Ordinance to be used to calculate Debt Service Coverage, emphasize cash flows in the Waterworks Utility, and differ in certain respects from the full accrual definitions of revenue and expenses under Generally Accepted Accounting Principles that are used to report the results of operations of the Waterworks Utility in the City's Audit. WATERWORKS UTILITY HISTORICAL OPERATING RESULTS (As of December 31) Actual Actual Actual Actual Actual 2008 2009 2010 2011 2012 Operating Revenues Water Sales $5,304,341 $5,515,937 $6,235,328 $6,797,470 $6,989,958 Irrigation Sales 678,321 717,653 823,231 955,231 1,002,269 Sewer Sales 5,997,993 6,265,581 6,422,027 6,250,095 6,352,826 Stormwater Sales 442,174 462,205 478,695 1,001,825 1,081,469 Process Water Reuse Sales 1,654,699 1,720,517 1,724,140 1,493,592 1,943,532 Other Utility Charges(1) 1,851,282 2,320,023 2,510,388 2,172,631 2,346,943 Total Operating Revenues(2) $15,928,810 $17,001,916 $18,193,810 $18,670,843 $19,716,997 Operating&Maintenance Expenses Salaries&Wages $2,205,177 $2,662,207 $2,703,481 $2,578,698 $2,463,588 Personnel Benefits 423,330 478,162 421,885 442,045 481,596 Supplies 673,157 479,289 728,625 945,819 890,298 Services 1,645,437 2,052,767 1,884,393 2,493,214 2,310,839 Inter-Gov't.Services&Other(2) 422,810 554,061 608,670 707,927 650,496 Interfund Services(3) 1,690,744 1,841,740 1,809,856 2,242,041 2,704,349 Total Operating Expenses $7,060,655 $8,068,226 $8,156,910 $9,409,743 $9,501,166 Operating Income $8,868,155 $8,933,691 $10,036,900 $9,261,100 $10,215,831 Non-Operating Revenue Interest Income $371,318 $359,244 $228,784 $116,848 $39,607 Net Farmland Rental 530,307 698,974 375,599 498,413 - Total Non-Operating Revenues(4) $901,625 $1,058,218 $604,383 $615,261 $39,607 Net Revenues $9,769,780 $9,991,908 $10,641,283 $9,876,361 $10,255,438 Other Sources of Funds Special Assessment Repayments $575,461 $382,267 $387,867 $283,861 $225,507 Total Other Sources $575,461 $382,267 $387,867 $283,861 $225,507 Max Annual Assessment Debt Service $449,529 $224,839 $220,463 $220,463 $212,489 Net Revenue Available for Non-Assessment Debt Service $9,895,712 $10,149,336 $10,808,687 $9,939,758 $10,268,456 Non-Assessment Bond Debt Service $1,856,078 $2,119,329 $2,309,689 $2,852,381 $2,905,851 Non-Assessment Bond Debt Service Coverage 5.33 4.79 4.68 3.48 3.53 Bate: The above table does not include debt service on junior Gen bonds. 1) Includes one time sources such as connection,meter,capital facility,penalty,etc.fees. (2) Excludes revenue raised and used to pay interfund Cary taxes. (3) Includes equipment rental and replacement,medical insurance,engineering,and administration. (4) Excludes non-cash capital contributions,gains/losses,etc. Source: The Cqy ofPmo 18 Comparative Statement of Net Position As of December 310) ASSETS: 2010 2011 2012 Current assets: Cash and cash equivalents $5,025,157 $2,685,884 $5,726,048 Restricted cash equivalents: Customer deposits 551,093 568,054 561,657 Unspent bond proceeds 3,000,000 2,670,000 1,005,365 Revenue bond covenants 1,304,142 2,657,140 3,316,293 Investments 2,000,000 2,000,000 2,000,000 Receivables(net of allowances): Customers 1,056,116 1,091,837 881,264 Grants 108,588 87,030 40,418 Inventory 385,205 377,455 317,348 Total current assets 13,430,301 12,137,400 13,848,393 Noncurrent assets: Restricted cash equivalents 410,000 410,000 410,000 Special Assessments 1,010,193 699,201 608,241 Land 6,598,676 6,598,676 2,494,425 Construction work in progress 12,871,898 13,899,412 15,512,175 Capital assets net of accumulated depreciation: Building and structures 36,513,178 34,119,516 31,975,044 Machinery and equipment 1,115,694 996,684 1,040,048 Infrastructure 107,802,974 112,295,371 114,357,869 Total noncurrent assets 166,322,613 169,018,860 166,397,802 TOTAL ASSETS 179,752,914 181,156,260 180,246,195 LIABILITIES: Current liabilities: Accounts payable 692,749 799,680 618,386 Due to other governments 77,025 126 3,173 Other liabilities 32,103 0 0 Customer deposits payable 551,093 568,054 561,657 Accrued interest payable 380,385 696,800 639,468 Compensated absences-current portion 184,790 120,149 55,378 Loans due other governments-current position 1,530,552 1,575,357 1,621,743 Revenue bonds-current portion 2,135,000 1,980,000 2,035,000 Total current liabilities 5,583,697 5,740,166 5,534,805 Noncurrent liabilities: Compensated absences 144,162 264,491 384,639 Loans due other governments 13,530,951 11,955,593 10,333,849 Revenue bonds payable 26,990,000 24,260,000 22,225,000 Total noncurrent liabilities 40,665,113 36,480,084 32,943,488 TOTAL LIABILITIES 46,248,810 42,220,250 38,478,293 NET POSITION Net investment in capital assets 123,715,917 128,138,709 129,163,969 Unrestricted 9,788,187 10,797,301 12,603,933 Total Net Position 133,504,104 138,936,010 141,767,902 Adjustment to reflect the consolidation of internal service fund activity related to proprietary funds 2,666,455 2,962,296 3,271,829 TOTAL NET POSITION $136,170,559 $141,898,306 $145,039,731 (1) Due to a change in accounting classifications,only three years of comparative figures are relevant. Source: The City of Pram 19 CITY PROFILE The City, located in southeastern Washington, encompasses approximately 33.6 square miles and has a 2013 estimated population of 65,600. The City and the adjacent cities of Richland and Kennewick make up what is known as the Tri-Cities.The City serves as the Franklin County seat and is the largest city in the County. The City was incorporated in 1891. The City has a Council-Manager form of government. The City Manager is appointed by the City Council and is responsible for the administration of all aspects of City operations. Council members are part-time officials, elected every four years through city-wide elections. The Council is comprised of seven members,one of whom is selected by the members to serve as Mayor for a two-year term. The City provides a full range of services normally associated with a municipality. These services include police and fire protection, ambulance service, parks and recreational activities, street maintenance and construction, planning and zoning and general administrative services. The City owns and operates a water, sewer and stormwater utility and a cemetery. The City owns and operates a golf course. City Council Following are the current members of the City Council and their term expiration dates. Members Position Term Expires Matt Watkins Mayor December 31,2015 Rebecca Francik Mayor Pro-Tem December 31,2015 Robert Hoffmann Council Member December 31,2017* Michael Garrison Council Member December 31,2017* Saul Martinez Council Member December 31,2017* Tom Larsen Council Member December 31,2017* Al Yenney Council Member December 31,2015 *Preliminary;pending election certification by November 26,2013. Key Administrative Staff Gary Crmtcbfeld, City Manager, was appointed City Manager in October 1984. He has 37 years of experience in municipal government as a planner and manager. Prior to being appointed City Manager,Mr. Crutchfield served as Community Development Director of the City between 1978 and 1984. Stan Strebel,Deputy City Mawger, assumed his current responsibilities in July 2009. Prior to then,he served as City's Director of Administrative and Community Services from 1999. Mr. Strebel has also served as City Manager of the City of Ferndale, Washington for seven years and as City Manager of the City of Bisbee,Arizona for four years. He has a total of 35 years experience in local government administration. He holds a Bachelor of Arts Degree in Urban Planning from the University of Washington and an MPA from Brigham Young University. Rick Terway,Administrative and Community Services Director,began serving as the Director of the City's Department of Administrative and Community Services Department in July 2009. The department consists of five service divisions: Administration, Facilities, Finance, Information Systems, and Recreation. Prior to coming to the City, Mr. Terway served as Parks, Recreation and Forestry Manager for the City of Fergus Falls, Minnesota for three years and as Public Service Director for the City of Vadnais Heights,Minnesota.His experience also includes more than 12 years working for Washington State Parks. Mr. Terway holds a Bachelor of Science in Applied Management from National American University and an Associate of Applied Science in Natural Resources from the University of Minnesota. Dunyele Mason,Financial Services Manager, began as the Financial Services Manager for the City in August 2010.The Financial Services division is responsible for internal and external financial reporting, financial analysis and cost accounting,budget preparation, city audit coordination as well as utility, special assessment,ambulance,grant and other miscellaneous billings,payables and debt management and city investments.Prior to coming to the City,Ms. Mason worked as Finance Manager for the cities of Auburn and Walla Walla and as Accounting Operations Supervisor for the City of Richland. Her professional experience includes over 21 years of government accounting experience and five years of professional audit experience. She holds a Bachelor of Arts degree in Business/Accounting from the University of Washington and has been a licensed Certified Public Accountant for 27 years. 20 ,Qgoumi,Pak&Works Director,was hired by the City of Pasco in 2010.Mr. Qayoumi has worked in the public sector for over 24 years and for five different cities. He worked for six years as Assistant City Engineer at the City of Montgomery, for two years as Chief Engineer for the City of Mason, Ohio and then worked as Director of Engineering Services for the City of Sherwood, Oregon. He worked for eleven years at the City of Vancouver before coming to the City of Pasco as Public Works Director, where he currently manages the Public Works Department. The department includes three divisions;Engineering,Operations and Plant Operations.He holds a Bachelor of Science degree in Civil Engineering from the University of Cincinnati and a Master's Degree in Civil Engineering from Portland State University. Labor Relations The City currently employs 292 employees (284 full time equivalents, not including 93 seasonal employees) including part-time workers. There are 194 employees represented by 5 bargaining units as follows: Number of Current Contract Bargaining Unit Employees Expiration Date International Union of Operating Engineers,Local No.280 60 December 31,2012(1) International Association of Firefighters 54 December 31,2013 Pasco Police Officers Assoc."Uniformed"Employee Bargaining Unit 67 December 31,2013 Pasco Police Officers Assoc."Non-uniformed"Employee Bargaining Unit 8 December 31,20110 Pasco Code Enforcement Officer's and Permit Technicians 5 December 31,2012(1) TOTAL 194 (1) Contracts are in negotiations. (2) Memorandum of Understanding expires December 31,2014. The City considers labor relations with its bargaining units to be good. There have been no recent strikes or major labor relations problems. There have been no strikes or major labor relations problems in excess of 30 years. Pension Funding The City provides most of its employee pensions through the following statewide cost-sharing multiple-employer plans administered by the State's Department of Retirement Systems ("DRS' : the State Public Employees Retirement System("PERS") or the Law Enforcement Officers and Fire Fighters Retirement System("LEOFF"). Contributions by both employees and employers are based on gross wages. PERS and LEOFF participants who joined the system by September 30, 1977 are Plan 1 members. Those PERS participants who joined on or after October 1, 1977 are Plan 2 members, unless they exercise an option to transfer to Plan 3. PERS participants joining on or after September 1, 2002 have the irrevocable option of choosing membership in PERS Plan 2 or PERS Plan 3.LEOFF participants who joined on or after October 1,1977 ate Plan 2 members. State law requires systematic actuarial funding to finance the retirement plans.Actuarial calculations to determine employer and employee contributions are prepared by the Office of the State Actuary ("OSA"), a nonpartisan legislative agency charged with advising the Legislature and Governor on pension benefits and funding policy.To calculate employer and employee contribution rates necessary to pre-fund the plans' benefits, OSA uses actuarial cost and asset valuation methods selected by the Legislature as well as economic and demographic assumptions. The Legislature adopted the following economic assumptions for contribution rates beginning July 1, 2013: (1) 7.9%rate of investment return(7.5%for LEOFF Plan 2);(2)general salary increases of 3.75%;(3)3.0%rate of Consumer Price Index increase; and (4) 0.95% growth in membership (1.25% for LEOFF). The long-tern investment return assumption is used as the discount rate for determining the liabilities for a plan. The 10-year average annual return on the investment of the retirement funds was 9.24%. Plan Funding Contribution Rates and Amounts.All State-administered retirement plans are funded by a combination of funding sources: (1) contributions from the State; (2) contributions from employers (including the State as employer and the City and other governmental employers); (3) contributions from employees; and (4) investment returns.Retirement funds are invested by the Washington State Investment Board,a 15-member board created by the Legislature in 1981. 21 The City's total contribution for the year ended December 31, 2012, was $1,227,761, representing 5.99% of covered payroll. The City contributed $722,906 to PERS and $504,855 to LEOFF in 2012 for all of the City's employees that are coveted under PERS and LEOFF. Under State statute,contribution rates are adopted by the Pension Funding Council(`TTFC'� (and,for LEOFF 2, by the LEOFF 2 Board) in even-numbered years for the next ensuing State biennium. The rate-setting process begins with an actuarial valuation by the OSA,who makes non-binding recommendations to the Select Committee on Pension Policy who then recommends contribution rates to the PFC and the LEOFF 2 Board. No later than the end of July in even-numbered years,the PFC and LEOFF 2 Board adopt contribution rates,which are subject to revision by the Legislature. The following table outlines the current contribution rates of employees and employers. CONTRIBUTION RATES FOR THE 2013-15 BIENNIUM EXPRESSED AS A PERCENTAGE OF COVERED PAYROIL Employer(r) Employee PERS Plan 1 9.21% 6.00% PERS Plan 2 9.21 4.92 PERS Plan 3 9.21 Variable(z) LEOFF Plan 1 0.18 0.00 LEOFF Plan 2 5.23 8.41(3) (1) Includes a 0.18%DRS administration expense fee. (2) Rates vary from 5.0%minimum to 15.0%maximum based on rate selected by the PERS 3 member. (3) The State also contributes 3.36%to this plan. Souse: Warin'ngton State Department ofRetirement Systems Plan Funding Status and Unfunded.9ttuanal Liabikty. While the City's prior contributions represent its full current liability under the retirement systems, any unfunded pension benefit obligations could be reflected in future years as higher contribution rates. It is expected that the contribution rates for employees and employers in the PERS Plans 2 and 3 will increase in the coming years. The OSA website (which is not incorporated into this Official Statement by reference) includes information regarding the values, funding levels and investments of these retirement plans. According to OSA,as of June 30,2012,PERS Plans 2 and 3 and LEOFF Plans 1 and 2 had no unfunded actuarial accrued liability; however, during the years 2001 through 2010 the rates adopted by the Legislature were lower than those that would have been required to produce actuarially required contributions to PERS Plan 1, a closed plan with a Inge proportion of the retirees. The State Actuary's June 30, 2012 actuarial valuation showed that the funded status of PERS Plan 1 had an unfunded accrued liability of$3.8 billion (a 69% funded ratio on an actuarial value basis),compared to a 71%funded ratio as of June 30,2011;PERS Plans 2 and 3 had a surplus of$2.3 billion (a 111% funded ratio);LEOFF Plan 1 had a surplus of$1.4 billion (a 135% funded ratio); and LEOFF Plan 2 had a surplus of$1.15 billion (a 119% funded ratio). OSA uses the Projected Unit Credit("PUC' cost method and the Actuarial Value of Assets ("AVA'� to report a plan's funded status. PUC is one of several acceptable measures of a plan's funded status under current GASB rules. The PUC cost method projects future benefits under the plan,using salary growth and other assumptions and applies the service that has been earned as of the valuation date to determine accrued liabilities. The Actuarial Value of Assets ("AVA") is calculated using a methodology which smoothes the effect of short-term volatility in the Market Value of Assets by deferring a portion of annual investment gains or losses over a period of up to eight years. PERS Plans 2 and 3 are accounted for in the same pension trust fund and may legally be used to pay the defined benefits of any PERS Plan 2 and 3 member. Otherwise,assets for one plan may not be used to fund benefits for another plan: however,all employers in PERS are required to make contributions at a rate (percentage of payroll) determined by the OSA every two years for the sole purpose of amortizing the PERS Plan 1 unfunded actuarial accrued liability within a tolling 10-year period.The Legislature has established certain maximum contribution rates that began in 2009 and will continue until 2015 and certain minimum contribution rates that are to become effective in 2015 and remain in effect until the actuarial value of assets in PERS Plan 1 equals 100%of the actuarial accrued liability of PERS Plan 1. These rates are subject to change by future legislation enacted by the State 22 Legislature to address future changes in actuarial and economic assumptions and investment performance.In 2011, the Legislature ended the future automatic annual increase, which is a fixed dollar amount multiplied by the member's total years of service, for most retirees in the PERS Plan 1 plan, which is forecast to reduce the unfunded accrued actuarial liability in PERS Plan 1. A lawsuit has been filed challenging this legislation and remains pending. Firemen's Pendon Plan. The City's Firemen's Pension Board administers the Firemen's Pension Plan (the "FPP'), a dosed, single-employer defined benefit pension plan established pursuant to chapter 41.18 RCW. The FPP provided retirement and disability benefits,annual cost-of-living adjustments,and death benefits to FPP members and beneficiaries. Retirement benefit provisions are established in State statute and may be amended only by the State Legislature. Membership is limited to firefighters employed prior to March 1, 1970 when the LEOFF retirement system was established.The City's obligation under the FPP consists of paying the difference between pension and medical benefits provided by LEOFF and those provided by the FPP for covered firefighters who retire after March 1, 1970. Benefits and refunds of the FPP are recognized when due and payable in accordance with the terms of the FPP.As of December 31,2012,12 individuals were covered by this system. For more detailed information on the City's retirement plans,see Note 5(C)of Appendix B. Other Post-Employment Benefits In addition to pensions, many State and local governmental employers provide other post-employment benefits ("OPEB'� as a part of total compensation to attract and retain the services of qualified employees. OPEB includes post-employment health care as well as other forms of post-employment benefits when provided separately from a pension plan. The Governmental Accounting Standards Board ("GASB") standard concerning Accounting and Financial Reporting by Employers for Post-Employment Benefits Other than Pensions (GASB 45) provides for the measurement, recognition and display of OPEB expenses/expenditures, related liabilities (assets), note disclosures,and,if applicable,required supplementary information in the financial reports. In accordance with chapter 41.26 RCW, the City provides continuation of medical insurance coverage to employees that retire under the LEOFF retirement system,which includes all police officers and fire fighters who were hired prior to October 1, 1977. Medical coverage continues for the life of the retiree. The plan is a closed, single employer defined benefit healthcare plan administered by the City.As of December 31,2012,there were 29 retirees and four active employees in this plan. The City's annual OPEB cost (expense) is calculated based on the annual required contribution of the employer ("ARC"),an amount actuarially determined in accordance with the parameters of GASB 45.The ARC represents a level of funding that,if paid on an ongoing basis,is projected to cover the normal cost each yen and to amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the City's annual OPEB cost for 2012,the amount actually contributed to the plan, and changes in the City's net OPEB obligation. Fiscal Year Ending Determination of Net OPEB Obligation: 12/31/2012 Annual Required Contribution("ARC'S $969,799 Interest on prior year Net OPEB Obligation 51,716 Adjustment to ARC (107,011) Annual OPEB Cost $914,504 Contributions made 370,815 Increase in Net OPEB Obligation $543,689 Net OPEB Obligation-beginning of year 1,163,400 Net OPEB Obligation-end of year $1,707,089 23 The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the years 2010 through 2012 were as follows: Percentage of Net Fiscal Year Annual Annual OPEB OPEB Ended Cost Contributed Obligation 12/31/2012 $914,504 41% $1,707,089 12/31/2011 951,626 39 1,163,400 12/31/2010 946,632 38 582,589 The City currently funds post-employment healthcare benefits on a pay-as-you-go basis.The City finances the plan by purchasing medical insurance and self-funding vision and medical benefits not covered by the insurance. For more detailed information on the City's OPEB obligation,see Note 5(F)of Appendix B. Risk Management The City is a member of the Washington Cities Insurance Authority("WCIA').Utilizing chapter 48.62 RCW(self- insurance regulation) and chapter 39.34 RCW(Interlocal Cooperation Act),nine cities originally formed WCIA on January 1, 1981. WCIA was created for the purpose of providing a pooling mechanism for jointly purchasing insurance,jointly self-insuring,and/or jointly contracting for risk management services.WCIA currently has a total of 153 Members. New members initially contract for a three-year term, and thereafter automatically renew on an annual basis. A one-year withdrawal notice is required before membership can be terminated. Termination does not relieve a former member from its unresolved loss history incurred during membership. Liability coverage is written on an occurrence basis.Effective January 2011 the City's coverage has a$100,000 per incident deductible. Coverage includes general, automobile, police,public officials' errors or omissions, stop gap, and employee benefits liability. WICA limits are $4 million per occurrence self-insured layer, and$16 million per occurrence in the re-insured excess layer. The excess layer is insured by the purchase of reinsurance and insurance and is subject to aggregate limits. Total limits me$20 milli on per occurrence subject to aggregate sublimits in the excess layers.The board of directors of WCIA determines the limits and terms of coverage annually. Insurance coverage for property,automobile physical damage,fidelity,inland marine,and boiler and machinery are purchased on a group basis. Various deductibles apply by type of coverage.The City does not participate in these programs. Its property, inland marine, boiler, machinery and employee fidelity insurance is purchased through commercial insurance brokers. In-house services include risk management consultation, loss control field services, claims and litigation administration,and loss analyses.WCIA contracts for the claims investigation consultants for personnel issues and land use problems,insurance brokerage,and lobbyist services. WCIA is fully funded by its members,who make annual assessments on a prospectively rated basis,as determined by an outside,independent actuary. The assessment covers loss,loss adjustment,and administrative expenses. As outlined in the interlocal agreement,WCIA retains the right to additionally assess the membership for any funding shortfall. An investment committee,using investment brokers,produces additional revenue by investment of WCIA's assets in financial instruments which comply with all State guidelines. These revenues directly offset portions of the membership's annual assessment. A board of directors governs WCIA,which is comprised of one designated representative from each member.The board elects an executive committee and appoints a treasurer to provide general policy direction for the organization. The WCIA executive director reports to the executive committee and is responsible for conducting the day to day operations of WCIA. The City self-insures for medical and dental coverage for its employees. A third-party administrator, Benefits Management, Inc. provides claims administration. To limit the exposure for large claims, the City purchases individual stop-loss coverage from a commercial insurance carrier that limits the City's exposure for claim losses to $80,000 per individual. During 2011 and 2012, the amount of medical/dental claims in excess of commercial insurance was$3,748,763 and$3,905,030,respectively. 24 Accounting and Budgeting Process Basis afAccaunting: The accounting and reporting policies of the City conform to the Budgeting,Accounting and Reporting System ("BARS") as prescribed by the State Auditor. The accounts of the City are organized on the basis of funds,each of which is considered a separate accounting entity.Each fund is accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures, as appropriate. The City's resources are allocated to and accounted for in individual funds depending on their intended purpose. The Budget Pmcerr. Washington law, chapter 35A.33 RCW, prescribes the method and schedule for annual budgeting for the City. Annual appropriated budgets are adopted at the fund level Local improvement district debt service and certain custodial agency funds, however, are not budgeted. A budget increase or decrease to a fund must be authorized by the City Council,while appropriation transfers within a fund may be authorized by the City Manager. All budgets are controlled on an organizational basis.The budgets constitute the legal authority for expenditures at that level.Annual appropriations for all funds lapse at the fiscal period end. Auditing of City Finances The City's financial statements are prepared in conformity with generally accepted accounting principles ("GAAP'� as applied to governmental units, and are regulated by the Washington State Auditor's Office,division of Audit. The Government Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Accounting systems and budgetary controls are prescribed by the Office of the State Auditor ("SAO') in accordance with RCW 43.09.200, RCW 43.09.230 and GAAP. State statutes require audits for cities to be conducted by the SAO. The City complies with the systems and controls prescribed by the SAO and establishes procedures and records which reasonably assure safeguarding of assets and the reliability of financial reporting. The SAO is required to examine the affairs of cities. The City is audited annually. The exams u lion must include, among other things, the financial condition and resources of the City,whether the laws and constitution of the State are being complied with, and the methods and accuracy of the accounts and reports of the City. The SAO reviewed the City's financial statements and accounting practices for fiscal year 2012, and issued an unqualified opinion finding no material issues with the financial statements of the governmental activities, the business-type activities,each major fund,and the aggregate remaining fund information. The City's audited financial statements for the year ended December 31,2012 are attached herein as Appendix B. Authorized Investments Chapter 35.39 RCW limits the investment by a city or town of its inactive funds or other funds in excess of current needs to the following authorized investments: United States bonds; United States certificates of indebtedness; bonds or warrants of the State;general obligation or utility revenue bonds or warrants of its own or any other city or town in the State;its own bonds or warrants of a local improvement district which are within the protection of the local improvement guaranty fund law; and any other investment authorized by law for any other taxing districts. RCW 39.59.010 permits local governments to invest in any investment authorized for the State Treasurer or other local governments. Under chapter 43.84 RCW,the State Treasurer may invest in negotiable certificates of deposit in designated qualified public depositories;in obligations of the U.S.government,its agencies,and wholly owned corporations; in bankers' acceptances; in commercial paper; in the obligations of the federal home loan bank, federal land bank bonds, federal national mortgage association, and other government sponsored corporations subject to statutory provisions; and general obligation State, county, municipal, or school district bonds,or in warrants of taxing districts of the State. Money available for investment may be invested on an individual fund basis or may,unless otherwise restricted by law,be commingled within one common investment portfolio. All income derived from such investment may be either apportioned to and used by the various participating funds or for the benefit of the general government in accordance with city ordinances or resolutions. Funds derived from the sale of bonds or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances, resolutions, or bond covenants may lawfully prescribe. 25 Local Government Investment Pool. The State Treasurer's Office administers the Washington State Local Government Investment Pool (the "LGIP'), a $9.6 billion fund, as of September 30, 2013, that invests money on behalf of more than 450 participants. In its management of LGIP,the State Treasurer is required to adhere,at all times,to the principles appropriate for the prudent investment of public funds. These me,in priority order, (i) the safety of principal; (ii)the assurance of sufficient liquidity to meet cash flow demands; and (iii)providing a competitive interest rate relative to other comparable investment alternatives. Historically, the LGIP has had sufficient liquidity to meet all cash flow demands. The LGIP,authorized by chapter 43.250 RCW,is a voluntary pool which provides its participants the opportunity to benefit from the economies of scale inherent in pooling. It is also intended to offer participants increased safety of principal and the ability to achieve a higher investment yield than would otherwise be available to them. The pool is restricted to investments with maturities of one year or less, and the average life typically is less than 90 days. Investments permitted under the pool's guidelines include,but are not limited to, U.S.government and agency securities, bankers' acceptances, high quality commercial paper, repurchase and reverse repurchase agreements, motor vehicle fund warrants, and certificates of deposit issued by qualified Washington State depositories. Participants may withdraw their funds in their entirety on less than 24-hour's notice. Authorized Investments for Bond Proceeds. In addition to the eligible investments discussed above,bond proceeds may also be invested in mutual funds with portfolios consisting of U.S.government and guaranteed agency securities with average maturities of less than four years;municipal securities rated in one of the four highest categories;and money market funds consisting of the same, so long as municipal securities held in the fund(s) are in one of the two highest rating categories of a nationally recognized rating agency. Bond proceeds may also be invested in shares of money market funds with portfolios of securities otherwise authorized by law for investment by local governments (RCW 39.59.030). The City's investments at August 31,2013 are as follows: Fair Investments Market Value Federal Securities $1,572,084 Mutual Funds 3,558,191 Bank CD 3,000,000 LID Note 75,014 LGIP 31,042,179 TOTAL $39,247,468 (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 26 GENERAL AND ECONOMIC INFORMATION The City is located in southeastern Washington in Franklin County (the "County") at the confluence of the Columbia and the Yakima rivers, approximately 200 miles southeast of Seattle, 150 miles southwest of Spokane and 200 miles northeast of Portland,Oregon. Pasco is one of three cities which make up the urban area known as the Tri-Cities,the others being Kennewick and Richland in neighboring Benton County. Population With a 2013 estimated population of 65,600, the City is the largest of four incorporated communities in Franklin County. Historical populations for the City and Franklin County are as follows: Year City of Pasco Franklin County 2013 65,600 84,800 2012 62,670 82,500 2011 61,000 80,500 2010 59,781 78,163 2009 54,490 72,700 Somne: W-.hnngton State Office ofFinamial Management Largest Employers The table below shows a list of the major employers in the Pasco area ranked by number of employees. PASCO AREA MAJOR EMPLOYERS 2013 Employer Service/Product Employees Pasco School District Schools 1,900 Tyson Foods Food Processing 1,300 Broetje Orchards Food Processing 1,100 Columbia Basin College Schools—Universities 762 Boise Cascade Manufacturing 725 Con Agra Foods Lamb-Weston Frozen Food Processing 670 Coyote Ridge Correctional Facility 650 Lourdes Health Network Health Care 635 Bybee Foods Food Processing 500 Wal-Mart Grocery-Retail 410 Pasco Processing LLC Frozen Food Processing 400 Franklin County Government 350 City of Pasco Government 292 Douglas Fruit Food Processing 260 Reser's Fine Foods Food Processing 213 Somne: TIUDEC,October 2013 27 Economic Data Following are additional economic indicators for the City,the County and the Tri-Cities Area. CITY OF PASCO BUILDING PERMITS Residential(t) Commercial Total Year Permits Value(2) Permits Value(2) Permits Value(2) 2013(3) 1,309 $60,002 280 $42,788 1,589 $102,790 2012 1,507 85,314 382 56,677 1,889 141,991 2011 1,817 113,320 317 20,110 2,134 133,430 2010 1,908 119,197 279 38,575 2,187 157,772 2009 1,499 102,110 351 59,988 1,850 162,098 (1)Includes Single Family,Two Family,Three or more families,accessory structures and alterations. (2)In thousands. (3)As of August 31,2013. Source: City fP-w BwA*ng Department TAXABLE RETAIL SALES City of Franklin Year Pasco County 20130) $212,292,345 $252,665,198 2012 861,063,371 1,037,096,483 2011 839,174,222 1,007,226,495 2010 825,267,329 964,585,066 2009 802,641,083 917,095,762 2008 877,529,074 1,052,102,171 (1) Through the first quarter of 2013. The taxable retail sales through the fast quarter of 2012 for the City of Pasco were $191,916,372 and$232,928,725 for Franklin County. Source: Waskngton State Offer of Fitanaalklanagement PERSONAL AND PER CAPITA INCOME(t) Franklin County State of Washington Total Personal Per Capita Total Personal Per Capita Year Income ($000's) Personal Income Income($000's) Personal Income 2012 n/a n/a $313,212,035 $45,413 2011 $2,479,492 $29,711 299,685,263 43,878 2010 2,273,045 28,695 283,367,864 42,024 2009 2,066,196 27,742 276,727,871 41,504 2008 1,941,340 27,430 289,433,693 44,106 2007 1,720,283 25,453 272,624,864 42,192 (1) Most recent data available. Source U.S.Department ofCommene,Bureau ofEmnomrcAnalyrir. 28 ESTIMATED MEDIAN HOUSEHOLD INCOME(1) Year Franklin County Washington State 2012(2) $56,221 $56,444 2011 (2) 53,644 55,500 2010 53,355 54,888 2009 48,754 55,458 2008 44,797 57,858 (1) Figures me presented in current dollars. (2) Figures for 2012 are projections;figures for 2011 are preliminary estimates. Some Warin'ngton State Offite ojFinanaal Mauagement. RESIDENT CIVILIAN LABOR FORCE AND EMPLOYMENT AND AvERAGE CIVILIAN NON-AGRICULTURE WAGE AND SALARY EMPLOYMENT 2013(1) 2012 2011 2010 2009 State of Washington Labor Force 3,482,820 3,481,460 3,482,240 3,516,010 3,523,740 Employed 3,230,510 3,197,290 3,161,820 3,166,880 3,194,240 %Unemployed 7.2% 8.2% 9.2% 9.9% 9.4% Franklin County Labor Force 37,470 37,580 38,090 37,180 36,450 Employed 33,820 34,050 34,730 33,930 33,410 %Unemployed 9.7% 9.4% 8.8% 8.7% 8.3% Kennewick-Pasco-Richland MSA Mining,Logging&Construction 6,200 6,000 6,500 6,200 6,300 Manufacturing 7,100 7,400 7,100 7,100 6,900 Trade,Transportation&Utilities 17,400 17,100 16,700 16,600 16,200 Financial Activities 3,900 3,800 3,700 3,600 3,400 Professional&Business Services 20,600 21,800 24,900 24,500 21,700 Educational&Health Services 11,700 11,400 11,300 10,900 10,500 Leisure&Hospitality 9,300 9,400 9,400 9,000 8,800 Other Services 3,600 4,100 4,200 3,900 4,100 Government 18,300 18,200 18,100 18,000 17,400 Total Non-Agriculture 98,100 99,300 101,900 99,800 95,300 Total Private 80,000 81,100 83,800 81,900 77,900 NOTE: Detail may not add to indicated totals due to rounding. Excludes proprietors,agriculture,self-employed,unpaid family,domestic workers and military. Includes all full-and part-time wage and salary workers receiving pay during the pay period including the 12�of the month by place of work. (1) Preliminary report as of August 2013. Source: State oJW-kngton Employment Se-ny Department. 29 CERTAIN INVESTMENT CONSIDERATIONS Initiative and Referendum Under the State constitution, the voters of the State have the ability to initiate legislation by initiative and to modify, approve or reject all or a part of recently existing statutes by referendum. The initiative power in Washington may not be used to amend the State Constitution. Initiatives and referenda are submitted to the voters upon receipt of a petition signed by at least 8% (for initiatives) and 4% (for referenda) of the number of voters registered and voting for the office of Governor at the preceding regular gubernatorial election. Any law approved in this manner by a majority of the voters may not be amended or repealed by the Legislature within a period of two years following enactment,except by a vote of two-thirds of all the members elected to each house of the Legislature. After two years, the law is subject to amendment or repeal by the Legislature in the same manner as other laws. In recent years there has been an increase in the number of initiatives and referenda filed in the State, including initiatives affecting the powers of local jurisdictions. The City cannot predict whether this trend will continue, whether any filed initiatives will receive the requisite signatures to be certified to the ballot, and whether such initiatives will be approved by the voters and,if challenged,upheld by the courts. Limitations on Remedies Any remedies available to the owners of the Bonds upon the occurrence of an event of default under the Bond Ordinance are in many respects dependent upon judicial actions,which are in turn often subject to discretion and delay and could be both expensive and time consuming to obtain. If the City fails to comply with its covenants under the Bond Ordinance or to pay principal of or interest on the Bonds,there can be no assurance that available remedies will be adequate to fully protect the interests of the owners of the Bonds. In addition to the limitations on remedies contained in the Bond Ordinance,the rights and obligations under the Bonds and the Bond Ordinance may be limited by and are subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, and other laws relating to or affecting creditors' rights, to the application of equitable principles,and to the exercise of judicial discretion in appropriate cases. Municipal Bankruptcies A municipality such as the City must be specifically authorized under state law in order to seek relief under Chapter 9 of the U.S.Bankruptcy Code(the`Bankruptcy Code'). Chapter 39.64 RCW,entitled the"Taxing District Relief Act," permits any "taxing district" (defined to include counties) to voluntarily petition for relief under the Bankruptcy Code. A creditor, however, cannot bring an involuntarily bankruptcy proceeding against a municipality, including the City. The federal bankruptcy courts have broad discretionary powers under the Bankruptcy Code. The legal opinion of Bond Counsel regarding the validity of the Bonds will be qualified by reference to bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium and other similar laws affecting the rights of creditors generally,and by general principles of equity. TAX MATTERS The 2013A Bonds Exclusion From Grow Income. In the opinion of Bond Counsel,under existing federal law and assuming compliance with applicable requirements of the Internal Revenue Code of 1986, as amended (the "Code', that must be satisfied subsequent to the issue date of the 2013A Bonds, interest on the 2013x1 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals. Continuing Requirements. The City is required to comply with certain requirements of the Code after the date of issuance of the 2013A Bonds in order to maintain the exclusion of the interest on the 2013A Bonds from gross income for federal income tax purposes,including,without limitation,requirements concerning the qualified use of bond proceeds and the facilities financed or refinanced with bond proceeds, limitations on investing gross proceeds of the 2013A Bonds in higher yielding investments in certain circumstances, and the requirement to 30 comply with the arbitrage rebate requirement to the extent applicable to the 2013A Bonds. The City has covenanted in the Bond Ordinance to comply with those requirements,but if the City fails to comply with those requirements,interest on the 2013A Bonds could become taxable retroactive to the date of issuance of the 2013A Bonds. Bond Counsel has not undertaken and does not undertake to monitor the City's compliance with such requirements. Corporate Alternative Minimum Tax. While interest on the 2013A Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, under Section 55 of the Code, tax exempt interest,including interest on the 2013A Bonds,received by corporations is taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations (as defined for federal income tax purposes). Under the Code, alternative minimum taxable income of a corporation will be increased by 75% of the excess of the corporation's adjusted current earnings (including any tax exempt interest) over the corporation's alternative minimum taxable income determined without regard to such increase. A corporation's alternative minimum taxable income, so computed, that is in excess of an exemption of$40,000, which exemption will be reduced (but not below zero) by 25% of the amount by which the corporation's alternative minimum taxable income exceeds$150,000,is then subject to a 20%minimum tax. A small business corporation is exempt from the corporate alternative minimum tax for any taxable year beginning after December 31, 1997,if its average annual gross receipts during the three-taxable-year period beginning after December 31, 1993,did not exceed$5,000,000,and its average annual gross receipts during each successive three- taxable-year period thereafter ending before the relevant taxable year did not exceed$7,500,000. Tax on Certain Pasave Investment Income of S Corporations. Under Section 1375 of the Code,certain excess net passive investment income,including interest on the 2013A Bonds,received by an S corporation(a corporation treated as a partnership for most federal tax purposes) that has Subchapter C earnings and profits at the dose of the taxable year may be subject to federal income taxation at the highest rate applicable to corporations if more than 25%of the gross receipts of such S corporation is passive investment income. Foreign Branch Profits Tax. Interest on the 2013A Bonds may be subject to the foreign branch profits tax imposed by Section 884 of the Code when the 2013A Bonds are owned by, and effectively connected with a trade or business of,a United States branch of a foreign corporation. Potable Consequences of Tax Compliance Audit. The Internal Revenue Service (the "IRS") has established a general audit program to determine whether issuers of tax-exempt obligations, such as the 2013A Bonds, are in compliance with requirements of the Code that must be satisfied in order for interest on those obligations to be, and continue to be, excluded from gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS would commence an audit of the 2013A Bonds. Depending on all the facts and circumstances and the type of audit involved,it is possible that commencement of an audit of the 2013A Bonds could adversely affect the market value and liquidity of the 2013A Bonds until the audit is concluded, regardless of its ultimate outcome. Certain Other Federal Tax Consequences The 2013A Bonds Are `©ualifred Tax-Fxem-pt Obligations"for Finanial Instihrtionr. Section 265 of the Code provides that 100% of any interest expense incurred by banks and other financial institutions for interest allocable to tax-exempt obligations acquired after August 7, 1986, will be disallowed as a tax deduction. However, if the tax-exempt obligations are obligations other than private activity bonds, are issued by a governmental unit that, together with all entities subordinate to it, does not reasonably anticipate issuing more than $10,000,000 of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) in the current calendar year, and are designated by the governmental unit as "qualified tax-exempt obligations,"only 20%of any interest expense deduction allocable to those obligations will be disallowed. The City is a governmental unit that,together with all subordinate entities,reasonably anticipates issuing less than $10,000,000 of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) during the current calendar year, and has designated the 2013A Bonds as "qualified tax-exempt obligations" for purposes of the 80% financial institution interest expense deduction. Therefore, only 20%of the interest expense deduction of a financial institution allocable to the 2013A Bonds will be disallowed for federal income tax purposes. 31 Reduction of Lots Reserve Deductions for Properly and Casualty Insurance Companies. Under Section 832 of the Code, interest on the 2013A Bonds received by property and casualty insurance companies will reduce tax deductions for loss reserves otherwise available to such companies by an amount equal to 15% of tax exempt interest received during the taxable year. Effect on Certain Social Securely and Retirement Benefits. Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take receipts or accruals of interest on the 2013A Bonds into account in determining gross income. Other Possible Federal Tax Consequences. Receipt of interest on the 2013A Bonds may have other federal tax consequences as to which prospective purchasers of the 2013A Bonds may wish to consult their own tax advisors. Potential Future Federal Tax Law Changes. Current and future legislative proposals,if enacted into law,may directly or indirectly cause interest on the 2013A Bonds to be subject in whole or in part to federal income taxation, prevent the beneficial owners of the 2013A Bonds from realizing the fiill benefits of the current federal tax status of interest on the 2013A Bonds, or affect, perhaps significantly, the market value or marketability of the 2013A Bonds. Prospective purchasers of the 2013A Bonds should consult with their own tax advisors regarding the potential impact of any pending or proposed legislation or regulations. Preservation of Tax Exemption of 2013A Bonds The City covenants,by the Bond Ordinance,that it will take all actions necessary to prevent interest on the 2013A 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 2013A Bonds or other funds of the City treated as proceeds of the 2013A Bonds at any time during the term of the 2013A Bonds which will cause interest on the 2013A Bonds to be included in gross income for federal income tax purposes. No Tax Exemption for 2013T Bonds Interest on the 2013T Bonds is not excluded from gross income for federal income taxation. Prospective purchasers of the 2013T Bonds should consult their own tax advisors regarding federal tax consequences of owning Series 2013T Bonds. ERISA CONSIDERATION The Employees Retirement Income Security Act of 1974,as amended("ERISA'�,and the Code generally prohibit certain transactions between a qualified employee benefit plan under ERISA or tax-qualified retirement plans and individual retirement accounts under the Code(collectively,the "Plans' and persons who,with respect to a Plan, are fiduciaries or other "parties in interest" within the meaning of ERISA or "disqualified persons" within the meaning of the Code. All fiduciaries of Plans should consult their own tax advisors with respect to the consequences of any investment in the 2013T Bonds. CONTINUING DISCLOSURE Basic Undertaking to Provide Annual Financial Information and Notice of Listed Events To meet the requirements of paragraph(b)(5) of United States Securities and Exchange Commission("SEC's Rule 15c2-12 ("Rule 15c2-12'x, as applicable to a participating underwriter for the Bonds, the City will undertake (the "Undertaking's for the benefit of holders of the Bonds to provide or cause to be provided, either directly or through a designated agent, to the Municipal Securities Rulemaking Board ("MSRB'), in an electronic format as prescribed by the MSRB,accompanied by identifying information as prescribed by the MSRB: (a) annual financial information and operating data of the type include in this Official Statement as general described below ("annual financial information");and(b) timely notice(not in excess of ten business days after the occurrence of the event) of the occurrence of any of the following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (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,the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notice of Proposed Issue (IRS Form 32 5701 —TEB) or other material notices or determinations with respect to the tax status of the 2013A Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) Bond calls (other than scheduled mandatory redemptions of Term Bonds),if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the City, as such `Bankruptcy Events" are defined in Rule 15c2-12; (13) the consummation of a merger,consolidation,or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms,if material;and (14) appointment of a successor or additional trustee or the change of name of a trustee,if material. The City also will provide to the MSRB timely notice of a failure by the City to provide required annual financial information on or before the date specified below. Annual Financial Information The annual financial information that the City undertakes to provide will consist of (1) the City's annual financial statements prepared(except as noted in the financial statements)in accordance with generally accepted accounting principles applicable to Washington governmental units such as the City,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. The annual financial information that the City undertakes to provide will be provided to the MSRB 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 permitted or required by State law, commencing with the City's fiscal year ending December 31,2013. The annual financial information may be provided in a single or multiple documents and may be incorporated by reference to other documents available to the public on the Internet website of the MSRB or filed with the SEC. 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, or the MSRB,under the circumstances and in the manner permitted by the Rule. The City will give notice to the MSRB 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 in the type of informati on to be provided. Termination of Undertaldng The City's obligations under the Undertaking shall terminate upon the legal defeasance of all of the Bonds. In addition,the City's obligations under the Undertaking shall terminate if those provisions of the Rule which require the City to comply with the Undertaking become legally inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of nationally recognized bond counsel or other counsel familiar with federal securities laws delivered to the City,and the City provides timely notice of such termination to the MSRB. Remedy for the Failure to Comply with Undertaking If the City or any other obligated person fails to comply with the Undertaking, the City will proceed with due diligence to cause such noncompliance to be corrected as soon as practicable after the City learns of that failure. No failure by the City or other obligated person to comply with the Undertaking will constitute a default in respect of the Bonds. The sole remedy of any holder of a Bond will 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. 33 Prior Compliance with Continuing Disclosure Undertakings The City previously entered into undertakings under the Rule with respect to certain of its outstanding bonds. During the preparation of this Official Statement,the City discovered that it failed to (1) submit event notices with respect to downgrades to the insured ratings on its Unlimited Tax General Obligation Bonds,1999,Unlimited Tax General Obligation Refunding Bonds,2002,and Water and Sewer Revenue Bonds,2009,and(2)timely file certain financial information as required by undertakings entered into in connection with certain outstanding bonds.As of the date of this Official Statement,the City has filed the necessary material event notices and additional financial information with the MSRB. The City has otherwise complied in all material respects with the provisions of its various continuing disclosure undertakings, and has taken affirmative action to ensure full compliance with the undertakings by assigning appropriate staff to the tasks and enrolling in the MSRB's e-mail reminder system. LEGAL INFORMATION Approval of Counsel Legal matters incident to the authorization,issuance and sale of the Bonds by the City are subject to the approving legal opinion of Foster Pepper PLLC, Bond Counsel, Seattle, Washington. The form of the opinion of Bond Counsel with respect to the Bonds is attached as Appendix C. The opinion of Bond Counsel is given based on factual representations made to Bond Counsel, and under existing law, as of the date of initial delivery of the Bonds, and Bond Counsel assumes no obligation to revise or supplement its opinion to reflect any facts or circumstances that may thereafter come to its attention, or any changes in law that may thereafter occur. The opinion of Bond Counsel is an expression of its professional judgment on the matters expressly addressed in its opinion and does not constitute a guarantee of result. Bond Counsel will be compensated only upon the issuance and sale of the Bonds. Absence of Material Litigation There is no litigation pending or threatened questioning the validity of the Bonds nor the power and authority of the City to issue the Bonds. There is no litigation pending or threatened which would materially affect the City's ability to meet debt service requirements on the Bonds.Because of the nature of its activities,the City is subject to certain pending legal actions which arise in the ordinary, course of business. Based on the information presently known,the City believes that the ultimate liability for any of such legal actions will not be material to the financial position of the City. BOND RATING Standard&Poor's Rating Services has assigned a rating of"AA--"to the Bonds. The rating was applied for by the City and certain information was supplied by the City to the rating agency to be considered in evaluating the Bonds. The rating reflects only the view of the rating agency and an explanation of the significance of the rating may be obtained from the rating agency. There is no assurance that the rating will be retained for any given period of time or that the rating will not be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of the rating would be likely to have an adverse effect on the market price of the Bonds. CONFLICTS OF INTEREST Some or all of the fees of the Underwriter and Bond Counsel are contingent upon the issuance and sale of the Bonds.Furthermore,Bond Counsel from time to time serves as counsel to the Underwriter with respect to issuers other than the City and transactions other than the issuance of the Bonds. None of the council members or other officers of the City have interests in the issuance of the Bonds that are prohibited by applicable law. 34 UNDERWRITING The Underwriter has agreed, subject to certain conditions, to purchase all of the 2013A Bonds at an aggregate purchase price of$ The Underwriter has agreed, subject to certain conditions, to purchase all of the 2013T Bonds at an aggregate purchase price of$ The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the initial offering prices set forth on the cover hereof,and such initial offering prices may be changed from time to time by the Underwriter. After the initial public offering, the public offering prices may be varied from time to time. The Underwriter and its affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The Underwriter and its affiliates have, from time to tune, performed, and may in the future perform, various investment banking services for the City, for which they received or will receive customary fees and expenses. In the ordinary course of their various business activities, the Underwriter and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the City. The Underwriter and Pershing LLC, a subsidiary of The Bank of New York Mellon Corporation,entered into an agreement (the "Agreement") which enables Pershing LLC to distribute certain new issue municipal securities underwritten by or allocated to the Underwriter,including the Bonds. Under the Agreement,the Underwriter will share with Pershing LLC a portion of the fee or commission paid to the Underwriter. The Underwriter has entered into a distribution agreement ("Distribution Agreement's with Charles Schwab & Co.,Inc. ("CS&Co'D for the retail distribution of certain securities offerings at the original issue prices. Pursuant to the Distribution Agreement,CS&Co.will purchase Bonds from the Underwriter at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that CS&Co.sells. CONCLUDING STATEMENT At the time of delivery of the Bonds,one or more officials of the City will furnish a certificate stating that to the best of his,her or their knowledge this Official Statement,as of its date and as of the date of delivery of the Bonds, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein,in light of the circumstances under which they were made,not misleading. Statements in this Official Statement, including matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the City and the owners of the Bonds. The execution and distribution of this Official Statement has been authorized by the City. The information contained herein should not be construed as representing all conditions affecting the City or the Bonds. Additional information may be obtained from the City. The statements relating to the Bond Ordinance are in summarized foam, and in all respects are subject to and qualified in their entirety by express reference to the provisions of the Bond Ordinance. 35 APPENDIX A CERTAIN DEFINITIONS Certain terms used in this Official Statement that are not specifically defined herein have the meanings as set forth in the Bond Ordinance. The following terms shall have the following meanings in this Official Statement as defined in the Bond Ordinance: "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.3835. "2009 Bonds"means the Water and Sewer Revenue Bonds,2009,issued pursuant to Ordinance No.3195. "2010A Bonds"means the Water and Sewer Improvement and Refunding Revenue Bonds,201011,issued pursuant to Ordinance No.3962. "2010T Bonds"means the Water and Sewer Refunding Revenue Bonds,2010T(Taxable),issued pursuant to Ordinance No.3962. "2013A Bonds"means the Water and Sewer Revenue Bonds,2013A,issued pursuant to the Bond Ordinance. "2013T Bonds"means the Water and Sewer Revenue Bonds,2013T(Taxable),issued pursuant to the Bond Ordinance. "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 Manager of the City for the payment of the principal of and interest on the Parity Bonds. "Bond Register"means the books or records maintained by the Bond Registrar for the purpose of identifying ownership of the Bonds. "Bond Registrar"means the Fiscal Agent,or any successor Bond Registrar selected by the City. "Bonds"means,collectively,the 2013A Bonds and the 2013T Bonds. "City"means the City of Pasco,Washington,a municipal corporation duly organized and existing under the laws of the State. "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. A-1 "DTC"means The Depository Trust Company,New York,New York,or its nominee. "Finance Manager" means the City's Financial Services Manager or such other officer of the City who succeeds to substantially all of the responsibilities of that office. "Fiscal Agent"means the fiscal agent of the State,as the same may be designated by the State 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 the Parity Bond Ordinances, the payment of the principal of and interest on which constitutes a lien and charge upon the Net Revenue of the Waterworks Utility and ULID Assessments on a parity with the lien and charge upon such Net Revenue and ULID Assessments for the Outstanding Parity Bonds and the Bonds,but shall not include variable rate obligations. "Government Obligations"has the meaning given in RCW 39.53.010,as now in effect or as may hereafter be amended. "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. "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. "MSRB"means the Municipal Securities Rulemaking Board. "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 2002 Bonds,2005 Bonds, 2007 Bonds,2009 Bonds,2010A Bonds and 2010T Bonds. "Parity Bond Ordinances"means Ordinance No.3567,Ordinance No.3740,Ordinance No.3835,Ordinance No.3195, Ordinance No.3962 and the Bond Ordinance. "Parity Bonds"means the Outstanding Parity Bonds,the Bonds and any Future Parity Bonds. "Principal and Interest Account" means the account of that name created in the Bond Fund for the payment of the principal of and interest on all Parity Bonds. "Purchaser"means Piper Jaffray&Co.of Seattle,Washington. "Reserve Account"means the account of that name created in the Bond Fund for the purpose of securing the payment of the principal of and interest on the Parity Bonds. "Reserve Insurance"means,in lieu of cash and investments,insurance obtained by the City to fund all or a portion of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained, and for the Outstanding Parity Bonds and the Bonds means the Surety Bond provided by the Reserve Insurer. "Reserve Insurer"means Ambac Assurance Corporation for the Outstanding Parity Bonds and the Bonds. A-2 "Reserve Requirement"means: (1) For the Outstanding Parity Bonds and the Bonds,an amount equal to the least of(a)109/6 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 Avenge 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 Avenge 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 Avenge Annual Debt Service on the proposed bonds. For the purposes of determining Maximum Annual Debt Service and Avenge 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. "SEC"means the United States Securities and Exchange Commission. "State"means the State of Washington. "Surety Bond" means the surety bond issued by the Reserve Insurer guaranteeing certain payments into the Reserve Account with respect to the Outstanding Parity Bonds and the Bonds as provided in and subject to the limitations set forth in that surety bond. "Tema Bonds" means those bonds of any single issue or series of Parity Bonds designated as such pursuant to the ordinance authorizing their issuance and sale and which are subject to mandatory prior redemption or for which mandatory sinking fund installments are provided. "ULID"means utility local improvement district. "ULID Assessments"means all ULID assessments and installments thereof,plus interest and penalties thereon,in any ULID created to secure the payment of any Parity Bonds and pledged to be paid into the Bond Fund. "Water and Sewer Revenue Fund" means that special fund of the City into which all of the Gross Revenue of the Waterworks Utility of the City shall be deposited. "Waterworks Utility" means the combined sewerage system and water system of the City, together with the storm or surface water sewers and agricultural/industrial wastewater treatment facilities heretofore or hereafter authorized to be constructed and installed as a part of such combined systems, and together with all additions thereto and betterments and extensions thereof now or hereafter made. 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U y T 5 C Z Z �r �i Z $ O F c 3 02 APPENDIX C FORM OF LEGAL OPINION 0 FOSTER PEPPER [FORM OF APPROVING LEGAL OPINION] City of Pasco, Washington Re: City of Pasco, Washington, $ Water and Sewer Revenue Bonds, 2013A $ Water and Sewer Revenue Bonds, 2013T(Taxable) We have served as bond counsel to the City of Pasco, Washington (the"City"), in connection with the issuance of the above referenced bonds (the "2013A Bonds"and the "2013T Bonds,"and together,the"Bonds"),and in that capacity have examined such law and such certified proceedings and other documents as we have deemed necessary to render this opinion. As to matters of fact material to this opinion,we have relied upon representations contained in the certified proceedings and other certifications of public officials furnished to us,without undertaking to verify the same by independent investigation. The Bonds are issued by the City pursuant to Ordinance No._(the"Bond Ordinance")to provide funds to pay the cost of carrying out the Plan of Additions adopted by the Bond Ordinance, to make a deposit to the Reserve Account and to pay the costs of issuance and sale of the Bonds, all as set forth in the Bond Ordinance. Reference is made to the Bonds and the Bond Ordinance for the definitions of capitalized terms used and not otherwise defined herein. We express no opinion herein concerning the completeness or accuracy of any official statement, offering circular or other sales or disclosure material relating to the issuance of the Bonds or otherwise used in connection with the Bonds. Under the Internal Revenue Code of 1986, as amended(the"Code"),the City is required to comply with certain requirements after the date of issuance of the 2013A Bonds in order to maintain the exclusion of the interest on the 2013A Bonds from gross income for federal income tax purposes,including, without limitation, requirements concerning the qualified use of 2013A Bond proceeds and the facilities financed or refinanced with 2013A Bond proceeds,limitations on investing gross proceeds of the 2013A Bonds in higher yielding investments in certain circumstances and the arbitrage rebate requirement to the extent applicable to the 2013A Bonds. The City has covenanted in the Bond Ordinance to comply with those requirements,but if the City fails to comply with those requirements,interest on the 2013A Bonds could become taxable retroactive to the date of issuance of the Bonds. We have not undertaken and do not undertake to monitor the City's compliance with such requirements. TEL:206.447.4400 FAX:206.447.9700 1111 THIRD AVENUE,SUUE3 SEATTLE,WASI-IINGTON9sloi-32w www.FOSTER.com SEATTLE wAS GToN SPOKANE wA.SIUNGNN City of Pasco,Washington [Date] Page 1 Based upon the foregoing, as of the date of initial delivery of the Bonds to the purchaser thereof and full payment therefor, it is our opinion that under existing law: 1. The City is a duly organized and legally existing code city under the laws of the State of Washington. 2. The Bonds have been duly authorized and executed by the City and are issued in full compliance with the provisions of the Constitution and laws of the State of Washington and the ordinances of the City relating thereto. 3. The Bonds constitute valid obligations of the City payable solely out of the Net Revenue of the Waterworks Utility and ULID Assessments to be paid into the Bond Fund, except only to the extent that enforcement of payment may be limited by bankruptcy, insolvency or other laws affecting creditors'rights and by the application of equitable principles and the exercise of judicial discretion in appropriate cases. 4. The Bonds are not general obligations of the City. 5. Assuming compliance by the City after the date of issuance of the 2013A Bonds with applicable requirements of the Code,the interest on the 2013A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals; however,while interest on the 2013A Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, interest on the 2013A Bonds received by corporations is to be taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations, interest on the 2013A Bonds received by certain S corporations may be subject to tax, and interest on the 2013A Bonds received by foreign corporations with United States branches may be subject to a foreign branch profits tax. We express no opinion regarding any other federal tax consequences of receipt of interest on the 2013A Bonds. 6. Interest on the 2013T Bonds is not excludable from gross income under Section 103 of the Code. We express no opinion regarding any federal tax consequences of receipt of interest on the 2013T Bonds. This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention,or any changes in law that may hereafter occur. We bring to your attention the fact that the foregoing opinions are expressions of our professional judgment on the matters expressly addressed and do not constitute guarantees of result. Respectfully submitted, C-2 APPENDIX D BOOK-ENTRY SYSTEM The following information has been proedded by DTC The City taker no rerpondbikty for the accuracy or completeness thereof, or for the absence of material changer in such information subsequent to the date hereof. Beneficial Owners should confirm the following with DTC or the Participants(as hereinafter defined). The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede & Co. (OTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds,each in the aggregate principal amount represented by such Bonds,and will be deposited with DTC. DTC, the world's largest depository,is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a"clearing corporation"within the meaning of the New York Uniform Commercial Code,and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ('Direct Participants' deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of Bond certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks,trust companies,clearing corporations,and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust&Clearing Corporation ("DTCC'). DTCC is the holding company for DTC,National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly("Indirect Participants' . DTC has Standard&Poor's rating of AA+, The DTC Rules applicable to its Participants ate on file with the Securities and Exchange Commission. More information about DTC can be found at wwwAtcc.com (which website is not incorporated herein by reference). Purchases of Bonds under the DTC system must be made by or through Direct Participants,which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (`Beneficial Owner' is in tum to be recorded on the Direct and Indirect Participants'records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are expected, however, to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds,except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers,all Bonds deposited by Direct Participants with DTC are to be registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede&Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. D-1 When notices are given, they shall be sent by the Fiscal Agent to DTC only. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them,subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Bonds of a maturity are being redeemed,DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC not Cede&Co. (nor any other DTC nominee)will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's NMI Procedures. Under its usual procedures,DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Prosy assigns Cede& Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy). Payments on the Bonds will be made to Cede&Co.or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants'accounts upon DTC's receipt of funds and corresponding detail information from the City or the Bond Registrar,on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and are the responsibility of such Participant and not of DTC, the Bond Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to tune. Payments to Cede & Co. (or any other nominee as may be requested by an authorized representative of DTC) are the responsibility of the City or the Bond Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the City or the Bond Registrar. Under such circumstances, in the event that a successor depository is not obtained,Bonds are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event,Bonds will be printed and delivered to DTC. The information in this appendix concerning DTC and DTC's book-entry system has been obtained from sources that the City believes to be reliable,but the City takes no responsibility for the accuracy thereof. D-2 TO: FROM: SUBJECT: I. H. AGENDA REPORT City Council Gary Crutchfle - Manager 3 Lodging Tax Alllocations REFERENCE(S): 1. 2014 Lodging Tax Requests 2. Lodging Tax Sources and Uses, 2010 -2013 3. Lodging Tax Advisory Committee Minutes dated 10/16/13 November 14, 2013 Regular Mtg.: 11/18/13 ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: 11/18: MOTION: I move to approve the allocation of 2014 Lodging Tax receipts as recommended by the Lodging Tax Advisory Committee minutes of October 16, 2013. III. FISCAL IMPACT: None IV. V. HISTORY AND FACTS BRIEF: A) State law has authorized collection of the 2% local tax on lodging facilities (hotels and motels) since the mid- 1970s. The funds originally could be used for stadiums and for tourism promotion activities. In 1993, like several cities prior to that time, Pasco was granted an additional 2% lodging tax authority to help pay specifically for the city's share of TRAC expenses. Several years later, the legislature increased the base lodging tax to 4% and eliminated the individual taxing authorizations, thus making the use of lodging tax simpler for everyone. The law was also amended to require a Lodging Tax Advisory Committee (LTAC) to review and recommend proposed uses of the lodging tax annually. In 2013, the legislature (in response to the lodging industry) required additional annual reporting on the use of the lodging tax. B) The Pasco LTAC convened on 10/16/13 to review the four proposals received for use of the 2014 lodging tax receipts (reference #1). After reviewing historical uses of the lodging tax (reference #2) and the individual requests, the LTAC recommended allocation as outlined in the LTAC minutes (reference #3). DISCUSSION: A) Essentially, the LTAC concurred in the staff recommendation that the 2014 lodging tax be allocated consistent with recent years. The TRAC expense is a contractual obligation, as are the Visitor and Convention Bureau payment and the stadium debt expense. The $10,000 recommended for the Pasco Chamber Ag show is also consistent with the past recommendations of the LTAC. B) Staff requests formal Council approval of the LTAC recommendations. 10(a) 2014 LODGING TAX REQUESTS TRAC* ................. ............................... .......................$220,000 BaseballStadium .. ............................... .......................$127,000 Chamber of Commerce ........................ ........................$10,000 Tri- Cities Visitor & Convention Bureau * * ............... $113,580 TOTAL REQUESTED ....................... S470,580 AMOUNT AVAILABLE (est.) .......... $460,000 * Interlocal Agreement between City of Pasco and Franklin County ** hiterlocal Agreement between cities of Pasco, Kennewick and Richland with Tri- Cities Visitor and Convention Bureau (VCB) to provide 50% of annual 2% lodging tax receipts to VCB. ct yL ' rqVJJ M 1 O r� N O rl O V N Q r r1 Q O V N N � o � V � i O W M �y H W W O rA M M � I W M! M N N 69 69 I M� M Nj N O O C C> C> c OI O C N N �tf 69 j 69 ff. � U M F F a o � o N. N M'i MM-r dw M 0 �a oo M � 69 69 M b � N 69 69 n M N bn M i N_ I � i N_ �I Q W d d U � �I F, r 0 i I 69 69 i r ! FJ CIA en 00 O N O M N O r cq � 169 I GOS i '. � i d i IX cx i rq I i ds 6F 1 0 j 0 C14 O 00 O C I j i Iq y U � o I y V1 I c C. L U I ' D M'i MM-r dw M 0 �a oo M � 69 69 M b � N 69 69 n M N bn M i N_ I � i N_ �I Q W d d U � �I F, r LODGING TAX ADVISORY COMMITTEE October 16, 2013 MINUTES Call To Order: The meeting was called to order at 10:05 a.m., by Mike Garrison, in conference room #1 at Pasco City Hall. Roll Call: Board Members Present: Mike Garrison (Council); Allison White (Sleep Inn); Colin Hastings (Chamber); Monica Hammerberg (Red Lion); and Michael Goins (Downtown Pasco). Also Present: Gary Crutchfield, City Manager. Business: Mr. Crutchfield presented the 10/8/12 minutes. Motion by Monica Hammerberg, seconded by Michael Goins, to approve the October 8, 2012 minutes as submitted. Motion passed. Mr. Crutchfield explained the purpose and function of the Lodging Tax Advisory Committee (LTAC), historical allocation of lodging tax receipts, current contractual commitments, and the new reporting requirements under ESHB1253. Committee discussed the four requests for use of the 2014 Lodging Tax receipts, estimated to total $460,000. Motion by Monica Hammerberg, seconded by Michael Goins to recommend the 2014 allocation estimate as follows: TRAC, 50% of actual loss • VCB Promotion Services: Pasco Chamber Ag Show: Baseball Stadium Debt: TOTAL Motion carried unanimously. Adjournment: Committee meeting adjourned at 10:25 a.m. $230,000 (est) $117,280 (est) $10,000 $103.00 (will vary to fit amount available) $460,000 AGENDA REPORT FOR: City Council TO: Gary Crutchfie�anager FROM: Stan Strebel, Deiluty City Manager SUBJECT: Community Survey Policy Questions I. REFERENCE(S): Community Survey Questions from Prior Years November 15, 2013 Business Mtg.: 11/18/13 R. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: 11/18: Reach consensus, direction to staff III. FISCAL IMPACT: N/A IV. HISTORY AND FACTS BRIEF: Note: Following Council review of proposed questions at the meeting of November 12, staff developed additional questions for consideration by Council, as indicated below. A) The City is contracting again with the National Research Center (NRC) to conduct the National Citizens Survey, a biennial community survey consisting primarily of standard questions regarding the availability and quality of municipal services. Additionally, the City may include up to three "policy" issues to be included as questions in the survey. B) The City has contracted for the survey to be completed in odd years since 2005. In each case, policy questions were asked. Attachment 1 includes the questions asked in prior survey rounds. C) The City will have to provide NRC with draft policy questions/topics by late November in order to have them included in the survey this fall. The completed survey will provide policy guidance to the City Council in preparation for its biennial retreat in spring 2014. V. DISCUSSION: Staff offers the following for Council consideration: Ambulance Service to Fire District: The donut hole (surrounded by Pasco) has received ambulance service from the Pasco Fire Department under a contract with Fire District #3, whereby the District has paid a small annual fee, but donut hole residents do not pay the same monthly ambulance utility fee ($6.25 /month) that is paid by Pasco residents. If the city continues to provide the same ambulance service to Fire District #3 that it provides to city residents, to what extent do you agree or disagree that the contract should require the District to pay an annual fee based on the same monthly ambulance fee paid by Pasco residents. a) Strongly Agree b) Agree c) Disagree d) Strongly Disagree 10(b) Development Standards in Urban Growth Area: State law in 1990 required counties to plan under the new Growth Management Act and to designate an Urban Growth Area (UGA) for each city. The purpose of a UGA concept is to have cities plan for their growth and for cities and counties to minimize the development conflicts within the designated areas, as such areas are expected to eventually be within the adjacent city. Franklin County does not apply the city's development standards in the Pasco UGA, so the city must spend Pasco tax dollars after annexation to make the roads, hydrants and other improvements meet city standards. To what extent do you agree or disagree that Franklin County should require new developments in the Pasco UGA be consistent with development requirements of the city? a) Strongly Agree b) Agree c) Disagree d) Strongly Disagree Public Records Requests: The State Public Records Act provides that units of state and local government must be responsive to citizen requests to view or obtain copies of public documents. While most requests are specific in nature and limited in scope, some requestors have used the system to make burdensome or harassing requests for huge volumes of non- specific documents — resulting in significant public costs for responding to such requests. To what extent do you agree that public records requestors, if making frequent, large volume requests, should be required to pay a proportionate share of the costs of making such requests? a) Strongly Agree b) Somewhat Agree c) Somewhat Disagree d) Strongly Disagree Mana¢ement Merit Pay: Pasco's population (65,500) is similar to that of Richland (51,150) and Kennewick (76,410) but its tax resources are considerably less. As a result, the City pays its management employees typically between 10 % -20% less than comparable employees in the other two cities. To remain competitive and partially close the gap in compensation, the City Council has authorized a "merit pay" program whereby a manager's performance in meeting goals, effecting productivity improvements and cost savings during the year may be rewarded with a one -time cash award rather than increasing the manager's salary for the next year. The cost of the program (sometimes called a "bonus ") for 2013 was capped at $50,000. The cost to raise the 20 managers' salaries to be comparable to Kennewick and Richland would be at least $100,000 annually. To what degree do you agree or disagree with the concept of the management merit pay program? a) Strongly Agree b) Somewhat Agree c) Somewhat Disagree d) Strongly Disagree Pasco Public Facility District In August of 2013, Tri-City voters rejected a one -cent sales tax to construct and operate a regional aquatic facility, which was planned to be located in Pasco. Though the measure was approved by Pasco voters, Kennewick and Richland voters did not approve it. The Regional Public Facilities District, because it includes all three cities, could finance a project of at least $35 million; the Pasco Public Facilities District, because it includes only Pasco, could finance a project of about $10 million. Do you feel that the City should: a) Continue to participate with the Regional Public Facilities District to try to identify a large project that can be approved by the voters of the three cities? b) Try to work with its own resources and the Pasco Public Facilities District to identify a small project for Pasco? c) Abandon efforts to consider fixture facilities? Community Survey Questions 2011 Survey 1. "Impact Fees" are assessed on all new housing construction to help pay for related public infrastructure (like roads and parks). To what extent do you support or oppose an impact fee to pay a portion of new school construction costs in Pasco? 2. The City of Pasco is considering asking the state to change the process arbitrators use in organized -labor negotiations to ensure that an individual city's budget or "ability to pay" is factored into the arbitration decision. To what extent do you support or oppose a change to reflect the city's "ability to pay ?" 3. There are seven members of the City Council; five positions require a candidate to reside within a geographical district within the City and two positions are elected "at large" without regard to district residency. The purpose of having some districts is to assure reasonable geographic representation of Council members throughout the city. Please indicate which of the following best reflects your view: favor the current system as described above; prefer fewer at large representatives; prefer more at large representatives. 2009 Survey 1. To what extent do you support or oppose establishing curbside recycling service, if it requires an increase to your garbage pickup service cost of $4 to $5 dollars per month? 2. To what extent do you support or oppose the City continuing to add fluoride to the City's drinking water system? 3. A committee, consisting of representatives of the cities of Kennewick, Richland and Pasco, has been studying the feasibility of developing regional centers (e.g., aquatic center, performing arts center, etc.) that could be used by all residents in the region and considering voter approved sales tax and property tax options to finance them. Because a sales tax would be paid by visitors as well as residents and would be paid in much smaller increments throughout the year, among other reasons, the committee has tentatively concluded that a sales tax increase would be preferable to a property tax increase. To what extent do you agree or disagree with this conclusion? 2007 Survey 1. To what extent do you support or oppose the City taking a more active role in working to improve the downtown business area? 2. To what extent do you support or oppose the City installing and maintaining landscaping along select major street corridors to improve the appearance of the community? 3. As you may know, the three public pools in Pasco are in need of complete renovation. As an alternative, to what degree would you support or oppose the City building a new water park (including a pool slide and other water features) that would replace one (or possibly two) existing swimming pools? 2005 Survey: 1. To what extent do you agree or disagree with the following statement: "The City of Pasco should assume all the cost of maintaining and operating Chiawana Park "? 2. To what extent do you support or oppose an increased sales tax of 1 /10 of one percent (one extra penny on each $10 purchase) to have a regional aquatic center in the Tri- Cities? 3. The City has a history of supporting Pasco School District programs and facilities with City funds. To what extent do you support or oppose the City of Pasco continuing to support Pasco School District programs and facilities with City funds?