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HomeMy WebLinkAbout3314 OrdinanceCITY OF PASCO, WASHINGTON ORDINANCE NO 33/11 AN ORDINANCE relating to the waterworks utility of the City, including the sanitary sewerage system and the system of storm or surface water sewers as a part thereof, adopting a system or plan of additions to and betterments and extensions of the waterworks utility of the City, providing for the issuance and sale of $2,255,000 par value of Water and Sewer Revenue Bonds, 1998, Series A (Taxable), for the purpose of obtaining the funds with which to carry out the system or plan adopted by this ordinance and to pay the cost of issuing and selling those Series A Bonds, providing for the issuance and sale of $6,725,000 par value Wdter and Sewer Revenue Refunding Bonds, 1998, Series B (Tax-Exempt), for the purpose of obtaining the funds to advance refund the callable portion of the City's Water and Sewer Revenue Bonds, 1994, and to pay the administrative costs of such refunding and the costs of issuance and sale of those Series B Bonds, providing for the issuance and sale of $1,515,000 par value Water and Sewer Revenue Bonds, 1998, Series C (Tax-Exempt), for the purpose of obtaining the funds with which to pay the cost of improvements in Utility Local Improvement Districts Nos 130 and 131 and to pay the costs of issuance and sale of those Series C Bonds, fixing the date, form, denomination, matunties, interest rates, terms and covenants of the bonds authorized herein, providing for and authorizing the purchase of certain obligations out of the proceeds of the sale of the Series B Bonds and for the use and application of the money derived from those investments, authorizing the execution of an agreement with Chase Manhattan Trust Company, National Association of Seattle, Washington, as refunding trustee, providing for the call, payment and redemption of the bonds to be refunded, providing for reserve insurance for the City's Water and Sewer Revenue Bonds, 1991, and the bonds authorized by this ordinance, providing for bond insurance, and providing for the sale and delivery of the bonds to BancAmenca ROBERTSON STEPHENS of Seattle, Washington This document was prepared by FOSTER PEPPER & SHEFELMAN PLLC 1111 Third Avenue, Suite 3400 Seattle, Washington 98101 (206) 447-4400 50034587 04 TABLE OF CONTENTS Section 1 Definitions 5 Section 2 System or Plan 13 Section 3 Findings 14 Section 4 Purpose and Description of Series 1998A Bonds 16 Section 5 Purpose and Description of Series 1998B Bonds 16 Section 6 Purpose and Description of Series 1998C Bonds 17 Section 7 Registration and Transfer of Bonds 18 Section 8 Payment of Bonds 20 Section 9 Redemption Provisions and Open Market Purchase of Bonds 21 Section 10 Notice of Redemption 24 Section 11 Failure to Redeem Bonds 25 Section 12 Form and Execution of Bonds 25 Section 13 Bond Registrar 26 Section 14 Bond Fund, Payments into Bond Fund 27 Section 15 Assessments from ULIDs Nos 130 and 131 29 Section 16 Pledge, Lien and Charge for Payment of the Bonds 29 Section 17 Flow of Funds 29 Section 18 Covenants 30 Section 19 Provisions for Future Parity Bonds 32 50034587 04 Section 20 Preservation of Tax Exemption for Interest on Series 1998B and Series 1998C Bonds 35 Section 21 Designation of Series 1998B and Senes 1998C Bonds as "Qualified Tax-Exempt Obligations " 36 Section 22 Bonds Negotiable 36 Section 23 Deposit of Bond Proceeds 36 Section 24 Refunding of the Refunded Bonds 37 Section 25 Call for Redemption of the Refunded Bonds 41 Section 26 City Findings with Respect to Refunding 41 Section 27 Refunding or Defeasance of Bonds 42 Section 28 Approval of Bond Purchase Contract 43 Section 29 Preliminary Official Statement Deemed Final 44 Section 30 Undertaking to Provide Continuing Disclosure 44 Section 31 Fixing Interest Rate on ULID Assessments 47 Section 32 Bond and Reserve Insurance 47 Section 33 Payment Procedures Under Bond Insurance 49 Section 34 Parties Interested Herein 50 Section 35 Payment Procedures Under Surety Bond 52 Section 36 Effective Date 53 50034587 04 CITY OF PASCO, WASHINGTON ORDINANCE NO 331'71 AN ORDINANCE relating to the waterworks utility of the City, including the samtary sewerage system and the system of storm or surface water sewers as a part thereof, adopting a system or plan of additions to and betterments and extensions of the waterworks utility of the City, providing for the issuance and sale of $2,255,000 par value of Water and Sewer Revenue Bonds, 1998, Series A (Taxable), for the purpose of obtaining the funds with which to carry out the system or plan adopted by this ordinance and to pay the cost of issuing and selling those Series A Bonds, providing for the issuance and sale of $6,725,000 par value Water and Sewer Revenue Refunding Bonds, 1998, Series B (Tax-Exempt), for the purpose of obtaining the funds to advance refund the callable portion of the City's Water and Sewer Revenue Bonds, 1994, and to pay the administrative costs of such refunding and the costs of issuance and sale of those Series B Bonds, providing for the issuance and sale of $1,515,000 par value Water and Sewer Revenue Bonds, 1998, Series C (Tax-Exempt), for the purpose of obtaining the funds with which to pay the cost of improvements in Utility Local Improvement Districts Nos 130 and 131 and to pay the costs of issuance and sale of those Series C Bonds, fixing the date, form, denomination, maturities, interest rates, terms and covenants of the bonds authorized herein, providing for and authorizing the purchase of certain obligations out of the proceeds of the sale of the Series B Bonds and for the use and application of the money derived from those investments, authorizing the execution of an agreement with Chase Manhattan Trust Company, National Association of Seattle, Washington, as refunding trustee, providing for the call, payment and redemption of the bonds to be refunded, providing for reserve insurance for the City's Water and Sewer Revenue Bonds, 1991, and the bonds authorized by this ordinance, providing for bond insurance, and providing for the sale and delivery of the bonds to BancAmenca ROBERTSON STEPHENS of Seattle, Washington WHEREAS, the City of Pasco, Washington (the "City"), by Ordinance No 531, passed March 7, 1944, provided that the system of sewerage of the City, including all additions, extensions and betterments thereto, should be operated as a part of and as belonging to the waterworks utility of the City pursuant to the provisions of Chapter 193 of the Laws of 1941 of the State of Washington (RCW 35 67 320 et seq ) (the "Waterworks Utility"), and 50034587 04 WHEREAS, pursuant to Ordinance No 2839, the City heretofore issued $2,305,000 par value Water and Sewer Revenue and Refunding Bonds, 1991 (the "1991 Bonds"), and provided for the issuance of additional water and sewer revenue bonds of the City on a parity with the 1991 Bonds ("Future Parity Bonds") if the conditions set forth in Ordinance No 2058 were met and complied with at the time of issuance of those additional bonds, and WHEREAS, pursuant to Resolution No 2133, the City entered into a Washington State Water Pollution Control State Revolving Fund (SRF) Loan Agreement as of May 26, 1994 (the "State SRF Loan"), to borrow $3,802,779 for the purpose of paying a part of the cost of constructing certain Waterworks Utility facilities, the payment of which Loan Agreement is a claim and charge on the Net Revenue of the Waterworks Utility and ULID Assessments on a 4 parity of hen with the 1991 Bonds, and subsequent amendments to that Loan Agreement have increased the total amount of the loan to $23,700,000, and WHEREAS, pursuant to Ordinance No 3054, the City heretofore issued $8,705,000 par value Water and Sewer Revenue Bonds, 1994 (the "1994 Bonds"), on a parity of hen with the 1991 Bonds and the State SRF Loan, for the purpose of paying the cost of carrying out a system or plan of additions to and betterments and extensions of the Waterworks Utility of the City adopted and ordered to be carried out by Ordinance No 3040, and WHEREAS, the City Council has determined that it is necessary and in the best interests of the City that certain additional improvements be made and there be adopted a system or plan of additions to and betterments and extensions of the Waterworks Utility of the City (the "Plan of Additions"), and WHEREAS, the City Council has determined that it is necessary to issue and sell $2,255,000 par value of taxable water and sewer revenue bonds (the "Series 1998A Bonds") to -2- 50034587 04 provide the funds necessary to carry out the Plan of Additions and to pay the costs of issuance and sale of the Series 1998A Bonds, and WHEREAS, there are presently outstanding $5,925,000 par value of 1994 Bonds maturing or subject to mandatory redemption on June 1 of each of the years 2005 through 2014, inclusive, and beanng various interest rate from 5 80% to 6 40% (the "Refunded Bonds"), and WHEREAS, after due consideration, it appears to the City Council that the Refunded Bonds may be refunded by the issuance and sale of $6,725,000 par value of tax-exempt water and sewer revenue refunding bonds authorized herein (the "Series 1998B Bonds") so that a substantial savings will be effected by the difference between the principal and interest cost over the life of the Series 1998B Bonds and the principal and interest cost over the life of the Refunded Bonds but for such refunding, which refunding will be effected by (a) The issuance of the Series 1998B Bonds and the payment of the costs of the issuance and sale of the Series 1998B Bonds and the costs of the refunding, and (b) The payment of the interest on the Refunded Bonds when due up to and including June 1, 2004, and the call, payment and redemption on June 1, 2004, of all of the Refunded Bonds at a price of par, and WHEREAS, to effect that refunding in the manner that will be most advantageous to the City and its ratepayers it is found necessary and advisable that certain Acquired obligations (hereinafter defined) bearing interest and maturing at such time or times as necessary to accomplish the refunding as aforesaid be purchased out of the proceeds of the Series 1998B Bonds, and -3- 50034587 04 WHEREAS, by Ordinance No 3104, passed on August 21, 1995, the City Council adopted the City of Pasco Comprehensive Plan 1995-2015, including as a part thereof the City of Pasco Comprehensive Sewer Plan, November 1992 (the "Comprehensive Sewer Plan"), and WHEREAS, pursuant to Ordinance No 3175, passed on October 7, 1996, the City created Local Improvement District No 130 and ordered the extension and improvement of a portion of the sewer collection system of the City to a portion of the Riverview Area as more particularly described in Ordinance No 3175, and WHEREAS, pursuant to Ordinance No 3216, passed on February 3, 1997, as amended, the City created Local Improvement District No 131 and ordered the extension and improvement of a portion of the sewer collection system of the City to a portion of the Riverview Area as more particularly described in Ordinance No 3216, and WHEREAS, pursuant to Ordinance No 3239, passed on June 16, 1997, the City specified and adopted the Comprehensive Sewer Plan as a system or plan relating to sewers for the Waterworks Utility, determined that the improvements ordered to be carried out by Ordinance No 3175 and Ordinance No 3216, as amended (the "Improvements"), constitute a part of the improvements described in the Comprehensive Sewer Plan, and converted Local Improvement District No 130 to Utility Local Improvement District No 130 ("ULID No 130") and Local Improvement District No 131 to Utility Local Improvement District No 131 ("ULID No 131"), and WHEREAS, by Ordinance No 3252, the City Council confirmed the assessments and assessment roll in ULID No 130 in the total amount of $615,367 70, and WHEREAS, by Ordinance No 3279, the City Council confirmed the assessments and assessment roll in ULID No 131 in the total amount of $1,445,817 59, and -4- 50034587 04 WHEREAS, the City Council has determined that it is necessary to issue and sell $1,515,000 par value of tax-exempt water and sewer revenue bonds (the "Series 1998C Bonds") to provide the funds necessary to carry out the Improvements in ULIDs Nos 130 and 131 and to pay the costs of issuance and sale of the Series 1998C Bonds, and WHEREAS, BancAmenca ROBERTSON STEPHENS of Seattle, Washington, has offered to purchase the Series 1998A Bonds, the Senes 1998B Bonds and the Series 1998C Bonds (collectively, the "Bonds") on the terms and conditions hereinafter set forth, and WHEREAS, Ambac Assurance Corporation, a Wisconsin-domiciled stock insurance company ("Ambac Assurance" or the "Bond Insurer"), has made a commitment to issue a bond insurance policy relative to the Bonds and a reserve insurance policy relative to the 1991 Bonds, the State SRF Loan, the Senes 1998A Bonds and the Senes 1998C Bonds effective as of the date of issuance of the Bonds, and the City Council deems that the purchase of such insurance is in the best interest of the City, NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PASCO, WASHINGTON, DO ORDAIN as follows Section 1 Definitions As used in this ordinance, the following words shall have the following meanings "Acquired Obligations" means those United States Treasury Certificates of Indebtedness, Notes and Bonds—State and Local Government Series and other direct, noncallable obligations of the United States of America purchased to accomplish the refunding of the Refunded Bonds as authorized by this 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 -5- 50034587 04 payment of all or part of the pnncipal 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 Panty Bonds, respectively, secured by such Alternate Security in the highest rating categories by both Moody's Investors Service, Inc , and Standard & Poor's Ratings Group "Annual Debt Service" for any or all 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 "Assessment Bonds" means, at the time of determination, Panty 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 Panty Bonds in the same proportion as the total of the Assessment Bonds relates to the total of the Panty 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 Panty Bonds divided by the number of those years "Bond Fund" means the Water and Sewer Revenue and Refunding Bond Redemption Fund, 1991, of the City created and established by Ordinance No 2839 in the office of the Finance Director of the City "Bond Insurance" means the insurance for payment of the pnncipal of and interest on the Bonds provided by the Bond Insurer "Bond Insurer" or "Ambac Assurance" means Ambac Assurance Corporation, a Wisconsin- domiciled stock insurance company -6- 50034587 04 "Bond Register" means the registration books of the Bond Registrar on which are recorded the names of the owners of the Bonds "Bond Registrar" means the fiscal agencies of the State of Washington located in Seattle, Washington, and New York, New York, as the same may be designated from time to time "Bonds" means, collectively, the Series 1998A Bonds, the Series 1998B Bonds and the Series 1998C Bonds "City" means the City of Pasco, Washington, a duly organized code city "Code" means the United States Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder "Coverage Requirement" in any year means an amount of Net Revenue of the Waterworks Utility, together with ULID Assessments, equal to at least 1 25 times an amount equal to the Maximum Annual Debt Service on all bonds payable from the Bond Fund After all 1991 Bonds and the State SRF Loan are redeemed, defeased or otherwise are no longer deemed outstanding as Parity Bonds, or after the written consent to this definition is given by the holder or owner of the remaining 1991 Bonds and the State SRF Loan, "Coverage Requirement" in any year means an amount of Net Revenue of the Waterworks Utility, together with the ULID Assessments collected in that year, equal to at least the Maximum Annual Debt Service on all Assessment Bonds plus an amount of the Net Revenue of the Waterworks Utility not used to calculate the Coverage Requirement on Assessment Bonds equal to at least 1 25 times Maximum Annual Debt Service on all bonds payable from the Bond Fund that are not Assessment Bonds. "DTC" means The Depository Trust Company, New York, New York -7- 50034537 04 "Future Panty Bonds" means any and all water and sewer revenue bonds or other obligations of the City issued or incurred after the date of the issuance of the Bonds pursuant to the provisions of Ordinance No 2839, Ordinance No 3054 and this ordinance, the payment of the principal of and interest on which constitutes a hen and charge upon the Net Revenue of the Waterworks Utility and ULID Assessments on a panty with the lien and charge upon such Net Revenue and ULID Assessments for the outstanding Panty Bonds, but shall not include variable rate obligations "Government Obligations" means those government obligations defined by RCW 39 53 010(9) as it now reads or hereafter may be amended and which are otherwise lawful investments of the City at the time of such investment "Gross Revenue of the Waterworks Utility" or "Gross Revenue" means all of the earnings and revenues received by the City from the maintenance and operation of the Waterworks Utility and all earnings from the investment of money on deposit in the Bond Fund, except ULID Assessments, government grants, proceeds from the sale of Waterworks Utility property, City taxes collected by or through the Waterworks Utility, principal proceeds of bonds and earnings or proceeds from any investments in a trust, defeasance or escrow fund created to defease or refund Waterworks Utility obligations (until commingled with other earnings and revenues of the Waterworks Utility) or held in a special account for the purpose of paying a rebate to the United States Government under the Code "Improvements" means the improvements in ULIDs Nos 130 and 131 ordered to be carried out by Ordinance No 3175 and Ordinance No 3216, as amended "Letter of Representations" means the Blanket Issuer Letter of Representations between the City and DTC authorized to be issued by Section 7 of this ordinance -8- 50034587 04 "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 "Municipal Bond Insurance Policy" means the municipal bond insurance policy issued by the Bond Insurer insuring the payment when due of the principal of and interest n the Bonds as provided therein "Net Revenue of the Waterworks Utility" or "Net Revenue" means the Gross Revenue less Operating and Maintenance Expenses "1991 Bonds" means the Water and Sewer Revenue and Refunding Bonds, 1991, dated October 1, 1991, authorized to be issued by Ordinance No 2839 "1994 Bonds" means the Water and Sewer Revenue Bonds, 1994, dated November 1, 1994, authorized to be issued by Ordinance No 3054 "Nonrefunded 1994 Bonds" means the outstanding 1994 Bonds maturing up to and including June 1, 2004 "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 -9- 50034587 04 "Outstanding Panty Bonds" means the outstanding 1991 Bonds, Nonrefunded 1994 Bonds and the State SRF Loan "Panty Bonds" means the Outstanding Panty Bonds, the Bonds and any Future Panty Bonds "Permitted investment" means any Government Obligations, except that as long as the Municipal Bond Insurance Policy or the Surety Bond is in effect, Permitted Investment shall be restricted to those listed in Exhibit A of this ordinance, but shall not include any investment not allowed as "Permitted Investments" in Exhibit A of Ordinance No 3054 "Plan of Additions" means the system or plan of additions to and betterments and extensions of the Waterworks Utility specified, adopted and ordered to be earned out by Section 2 herein "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 Panty Bonds "Refunded Bonds" means the 1994 Bonds maturing or subject to mandatory redemption on June 1 in the years 2005 through 2014, inclusive "Refunding Plan" means (a) the placement of sufficient proceeds of the Series 1998B Bonds which, with other money of the City, if necessary, will acquire the Acquired Obligations to be deposited, with cash, if necessary, with the Refunding Trustee, (b) The payment of interest on the Refunded Bonds when due up to and including June 1, 2004, and on June 1, 2004, the call, payment and redemption of the Refunded Bonds at a price of par, and (c) the payment of the costs of issuing the Series 1998B Bonds, including bond insurance for the Series 1998B Bonds and reserve insurance for the 1991 Bonds and the State SRF Loan, and the costs of carrying out the foregoing elements of the Refunding Plan -10- 50034587 04 "Refunding Trust Agreement" means a Refunding Trust Agreement between the City and the Refunding Trustee substantially in the form of that which is on file with the City Clerk and by this reference incorporated herein "Refunding Trustee" means Chase Manhattan Trust Company, National Association, of Seattle, Washington, or any successor trustee or agent "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 equal to all of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained, and for the Nonrefunded 1994 Bonds, the 1991 Bonds, the State SRF Loan and the Bonds means the Debt Service Reserve Surety Bonds provided by the applicable Reserve Insurer "Reserve Insurer" means, for the Nonrefimded 1994 Bonds and the Series 1998B Bonds, the Municipal Bond Investors Assurance Corporation of Armonk, New York, and for the 1991 Bonds, the State SRF Loan, the Series 1998A Bonds and the Series 1998C Bonds, means Ambac Asurance "Reserve Requirement" means (1) For the Outstanding Parity Bonds and the Bonds, an amount equal to the least of (a) 10% of the issue price of the then outstanding Parity Bonds, (b) Maximum Annual Debt Service on the then outstanding Parity Bonds and (c) 1 25 times Average Annual Debt Service on the outstanding Parity Bonds For the purposes of determining Maximum Annual Debt Service and Average Annual Debt Service for calculating the Reserve Requirement, all bonds payable or proposed to be paid from the Bond Fund shall be treated as a single issue and the 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 50034587 04 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 outstanding Panty Bonds and the Future Panty 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 Panty 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 last scheduled maturity for any of those issues shall be used as the denominator "Series 1998A Bonds" means the Water and Sewer Revenue Bonds, 1998, Series A (Taxable), authorized to be issued by this ordinance "Series 1998B Bonds" means the Water and Sewer Revenue Refunding Bonds, 1998, Series B (Tax-Exempt), authorized to be issued by this ordinance "Series 1998C Bonds" means the Water and Sewer Revenue Bonds, 1998, Series C (Tax- Exempt), authorized to be issued by this ordinance "Surety Bond" means the surety bond issued by the Ambac Assurance guaranteeing certain payments into the Reserve Account with respect to the 1991 Bonds, the State SRF Loan, the Series 1998A Bonds and the Series 1998C Bonds as provided in and subject to the limitations set forth in the Surety Bond "State PWTF Loan" means the Public Works Trust Fund Loan, as amended, dated May 15, 1989 "State SRF Loan" means the Washington State Water Pollution Control State Revolving Fund (SRF) Loan Agreement L9400013, executed on May 26, 1994, as amended in 1995, 1996 and 1997 "Term Bonds" means the Series 1998A Bonds maturing in the years 2003, 2008, 2013 and 2018, the Series 1998C Bonds maturing in the year 2014, and those bonds of any single -12- 50034587 04 issue or series of other Panty Bonds designated as such in the ordinance providing for those bonds "ULID" means utility local improvement district "ULID Assessments" means all ULID assessments and installments thereof, plus interest and penalties thereon, in any ULID created to secure the payment of any Panty Bonds and pledged to be paid into the Bond Fund "ULID No 130" means that ULID of the City created by Ordinances Nos 3175 and 3239 "ULID No 131" means that ULID of the City created by Ordinances Nos 3216, as amended, and 3239 "Water and Sewer Revenue Fund" means that special fund of the City into which all of the Gross Revenue of the Waterworks Utility of the City shall be deposited "Waterworks Utility" means the combined sewerage system and water system of the City, together with the storm or surface water sewers and agricultural/industrial wastewater treatment facilities heretofore or hereafter authorized to be constructed and installed as a part of such combined systems, and together with all additions thereto and betterments and extensions thereof now or hereafter made Section 2 System or Plan The City specifies, adopts and orders the carrying out of a system or plan of additions to and betterments and extensions of the Waterworks Utility consisting of the construction of a 115 million gallon lined winter storage pond with aerators as part of the Pasco Industrial Reuse Facility (the "Plan of Additions") There shall be included in the foregoing system or plan the acquisition and installation of all necessary valves, pumps, fittings, couplings, connections, equipment and appurtenances, and replacements and -13- 50034587 04 improvements necessary or desirable to maintain or increase the effectiveness of the service provided by such facilities, other improvements to and extensions of the Waterworks Utility, the acquisition of any easements, rights-of-way and land that may be required and the performance of such work as may be incidental and necessary All of the foregoing shall be in accordance with the plans and specifications therefor prepared by the staff and consulting engineers of the City The City Council may modify the details of the Plan of Additions where, in its judgment, it appears advisable if such modifications do not substantially alter the purposes of that system or plan The life of the improvements comprising the Plan of Additions is declared to be at least twenty years The estimated cost of the acquisition, construction, installation and financing of the above-described improvements is declared to be approximately $3,000,000 Such cost shall be paid from the proceeds of the Series 1998A Bonds and from other money of the City made available therefor Section 3 Findings The City Council finds that (1) all payments required by the 1991 Bonds, the 1994 Bonds, State PWTF Loan and the State SRF Loan are provided for in this ordinance or have been provided for or made into the bond and loan redemption funds for those outstanding bonds and loans and that no deficiency exists in such funds, (2) provision is hereinafter made for the deposit in the Reserve Account of the Bond Fund of the Reserve Requirement for the Bonds, (3) provision is hereinafter made for the deposit in the Bond Fund of all ULID Assessments collected in ULIDs Nos 130 and 131, and (4) on or before the time of issuance of the Bonds there will be on file with the City a certificate from a licensed professional engineer experienced in the design, construction and operation of municipal utilities, or from an -14- 50034587 04 independent certified public accountant, a certificate showing that in his or her professional opinion the Net Revenue of the Waterworks Utility for any 13 consecutive calendar months out of the immediately preceding 24 calendar months shall be equal to the Coverage Requirement for each year thereafter In the judgment of the City Council the Gross Revenue of the Waterworks Utility at the rates to be charged for water and sanitary sewage disposal service furnished on the entire Utility will be more than sufficient to (a) meet all Operating and Maintenance Expenses thereof (and the cost of maintenance and operation as contemplated by RCW 35 92 100), and the debt service requirements of the outstanding State PWTF Loan, State SRF Loan, 1991 Bonds and Nonrefunded 1994 Bonds and (b) permit the setting aside into the Bond Fund out of the Net Revenue of the Waterworks Utility of the City of amounts sufficient to pay the principal of and interest on the Bonds when due The City Council further declares that in creating the Bond Fund and in fixing the amounts to be paid into that fund, it has exercised due regard for Operating and Maintenance Expenses (and the cost of maintenance and operation contemplated by RCW 35 92 100) and the debt service requirements of the State PWTF Loan, State SRF Loan, 1991 Bonds and the Nonrefunded 1994 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 such State PWTF Loan, State SRF Loan, 1991 Bonds and Nonrefunded 1994 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 State PWTF Loan, State SRF Loan, 1991 Bonds and 1994 Bonds -15- 50034587 04 Section 4 Purpose and Description of Series 1998A Bonds The Series 1998A Bonds are being issued for the purpose of providing the funds to pay the cost of carrying out the Plan of Additions and to pay the costs of issuance of the Series 1998A Bonds, including reserve and bond insurance The Bonds shall be called Water and Sewer Revenue Bonds, 1998, Series A (Taxable), of the City, shall be in the aggregate principal amount of $2,255,000, shall be dated September 15, 1998, shall be in the denomination of $5,000 or any integral multiple thereof within a single maturity, shall be numbered separately in the manner and with any additional designation as the Bond Registrar deems necessary for purposes of identification, shall bear interest (computed on the basis of a 360-day year of twelve 30-day months) payable semiannually on each June 1 and December 1, commencing December 1, 1998, to the maturity or earlier redemption of the Series 1998A Bonds, and shall mature on June 1 in years and amounts and bear interest at the rates per annum as follows Maturity Principal Interest Years Amounts Rates 1999 $125,000 5 50% ** ** ** 2003 270,000 5 70 ** ** ** 2008 440,000 6 00 ** ** ** 2013 595,000 625 ** ** ** 2018 825,000 645 It is the intention of the City that the interest on the Series 1998A Bonds shall be included in gross income for federal income tax purposes Section 5 Purpose and Description of Series 1998B Bonds The Series 1998B Bonds are being issued for the purpose of providing the funds to carry out the Refunding Plan The Bonds shall be called Water and Sewer Revenue Refunding Bonds, 1998, Series B (Tax- -16- 50034587 04 Exempt), of the City, shall be in the aggregate principal amount of $6,725,000, shall be dated September 15, 1998, shall be in the denomination of $5,000 or any integral multiple thereof within a single maturity, shall be numbered separately in the manner and with any additional designation as the Bond Registrar deems necessary for purposes of identification, shall bear interest (computed on the basis of a 360-day year of twelve 30-day months) payable semiannually on each June 1 and December 1, commencing December 1, 1998, to the maturity or earlier redemption of the Series 1998B Bonds, and shall mature on June 1 in years and amounts and bear interest at the rates per annum as follows Maturity Principal Interest Years Amounts Rates 2000 $ 70,000 3 80% 2001 75,000 3 90 2002 80,000 4 00 2003 85,000 4 10 2004 85,000 4 15 2005 525,000 4 15 2006 535,000 420 2007 560,000 425 2008 590,000 4 30 2009 615,000 425 2010 640,000 435 2011 665,000 440 2012 700,000 445 2013 735,000 455 2014 765,000 460 Section 6 Purpose and Description of Series 1998C Bonds The Series 1998C Bonds are being issued for the purpose of providing the funds to pay the cost of the Improvements and to pay the costs of issuance of the Series 1998C Bonds, including reserve and bond insurance The Bonds shall be called Water and Sewer Revenue Bonds, 1998, Series C (Tax-Exempt), of the City, shall be in the aggregate principal amount of $1,515,000, shall be dated September 15, 1998, shall be in the denomination of $5,000 or any integral multiple thereof within a single -17- 50034587 04 maturity, shall be numbered separately in the manner and with any additional designation as the Bond Registrar deems necessary for purposes of identification, shall bear interest (computed on the basis of a 360-day year of twelve 30-day months) payable semiannually on each June 1 and December 1, commencing December 1, 1998, to the maturity or earlier redemption of the Series 1998C Bonds, and shall mature on June 1 in years and amounts and bear interest at the rates per annum as follows Maturity Years Principal Amounts Interest Rates 1999 $ 70,000 3 70% 2000 70,000 3 80 2001 70,000 3 90 2002 75,000 400 2003 75,000 4 10 2004 80,000 4 15 2005 100,000 420 2006 100,000 425 2007 100,000 430 2008 100,000 435 2009 100,000 435 2010 105,000 440 2011 115,000 445 ** ** ** 2014 360,000 480 Section 7 Registration and Transfer of Bonds The Bonds shall be issued only in registered form as to both principal and interest and recorded on books or records maintained by the Bond Registrar (the "Bond Register") The Bond Register shall contain the name and mailing address of the owner of each Bond and the principal amount and number of each of the Bonds held by each owner Bonds surrendered to the Bond Registrar may be exchanged for Bonds in any authorized denomination of an equal aggregate principal amount and of the same series, interest rate and maturity Bonds may be transferred only if endorsed in the manner provided thereon and -18- 50034587 04 surrendered to the Bond Registrar Any exchange or transfer shall be without cost to the owner or transferee The Bond Registrar shall not be obligated to exchange or transfer any Bond during the 15 days preceding any principal payment or redemption date The Bonds initially shall be registered in the name of CEDE & CU, as the nominee of The Depository Trust Company, New York, New York ("DTC") The Bonds so registered shall be held in fully immobilized form by DTC as depository in accordance with the provisions of a Blanket Issuer Letter of Representations with DTC substantially in the form on file with the Finance Director of the City and by this reference made a part hereof (the "Letter of Representations") To induce DTC to accept the Bonds as eligible for deposit at DTC, the City approves the Letter of Representations The Mayor or Finance Director of the City is authonzed and directed to execute and deliver the Letter of Representations, on behalf of the City, to DTC on or before the date of delivery of the Bonds to the purchaser thereof and the payment therefor, with such changes as the Mayor or Finance Director of the City deems to be in the best interests of the City, and such execution and delivery of the Letter of Representations shall evidence irrevocably the approval of the Letter of Representations by the City Neither the City nor the Bond Registrar shall have any responsibility or obligation to DTC participants or the persons for whom they act as nominees with respect to the Bonds regarding accuracy of any records maintained by DTC or DTC participants of any amount in respect of principal of or interest on the Bonds, or any notice which is permitted or required to be given to registered owners hereunder (except such notice as is required to be given by the Bond Registrar to DTC) For so long as any Bonds are held in fully immobilized form, DTC or its successor depository shall be deemed to be the registered owner for all purposes hereunder and all references to registered owners, bondowners, bondholders or the like shall mean DTC or its nominees and -19- 50034587 04 shall not mean the owners of any beneficial interests m the Bonds Registered ownership of such Bonds, or any portions thereof, may not thereafter be transferred except (i) to any successor of DTC or its nommee, if that successor shall be qualified under any applicable laws to provide the services proposed to be provided by it, (11) to any substitute depository appointed by the City or such substitute depository's successor, or (iii) to any person if the Bonds are no longer held in immobilized form Upon the resignation of DTC or its successor (or any substitute depository or its successor) from its functions as depository, or a determination by the City that it no longer wishes to continue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the City may appoint a substitute depository Any such substitute depository shall be qualified under any applicable laws to provide the services proposed to be provided by it If (i) DTC or its 'successor (or substitute depository or its successor) resigns from its functions as depository, and no substitute depository can be obtained, or (n) the City determines that the Bonds are to be in certificated form, the ownership of Bonds may be transferred to any person as provided herein and the Bonds no longer shall be held in fully immobilized form Section 8 Payment of Bonds Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America Interest on the Bonds shall be paid by checks or drafts mailed on the interest payment date to the registered owners at the addresses appearing on the Bond Register on the 15th day of the month preceding the interest payment date Principal of the Bonds shall be payable upon presentation and surrender of the Bonds by the registered owners at either of the principal offices of the Bond Registrar at the option of the owners Notwithstanding the foregoing, as long as the Bonds are registered in the name of DTC or its nominee, payment of pnncipal of and interest on the Bonds shall be made in the manner set forth -20- 50034587 04 in the Letter of Representations The Bonds are payable solely out of the Bond Fund and shall not be general obligations of the City Section 9 Redemption Provisions and Open Market Purchase of Bonds Bonds maturing in the years 1998 through 2008, inclusive, shall be issued without the right or option of the City to redeem those Bonds prior to their stated maturity dates The City reserves the right and option to redeem Bonds maturing on or after June 1, 2009, prior to their stated maturity dates at any time on or after June 1, 2008, as a whole or in part (within one or more maturities selected by the City and by lot within a maturity in such manner as the Bond Registrar shall determine), at par plus accrued interest to the date fixed for redemption Series 1998A Bonds maturing in 2003, 2008, 2013 and 2018 are Term Bonds and, if not redeemed under the optional redemption provisions set forth above or purchased in the open market under the provisions set forth below, shall be called for redemption by lot (in such manner as the Bond Registrar shall determine) at par plus accrued interest on June 1 in years and amounts as follows 2003 Term Bonds—Series 1998A Mandatory Mandatory Redemption Redemption Years Amounts 2000 $60,000 2001 65,000 2002 70,000 2003 75,000 -21- 50034587 04 2008 Term Bonds — Series 1998A Mandatory Redemption Years , Mandatory Redemption Amounts 2004 $ 80,000 2005 80,000 2006 85,000 2007 95,000 2008 100,000 2013 Term Bonds—Series 1998A Mandatory Mandatory Redemption Redemption Years Amounts 2009 $105,000 2010 110,000 2011 120,000 2012 125,000 2013 135,000 2018 Term Bonds — Series 1998A Mandatory Mandatory Redemption Redemption Years Amounts 2014 $145,000 2015 155,000 2016 165,000 2017 175,000 2018 185,000 Series 1998C Bonds maturing in 2014 are Term Bonds and, if not redeemed under the optional redemption provisions set forth above or purchased in the open market under the provisions set forth below, shall be called for redemption by lot (in such manner as the Bond Registrar shall determine) at par plus accrued interest on June 1 in years and amounts as follows -22- 50034587 04 2014 Term Bonds — Series 1998C Mandatory Redemption Years Mandatory Redemption Amounts 2012 $115,000 2013 120,000 2014 125,000 If the City shall redeem Term Bonds under the optional redemption provisions set forth above or purchase Term Bonds in the open market as set forth below, the par amount of the Term Bonds so redeemed or purchased (irrespective of their actual redemption or purchase prices) shall be credited against one or more scheduled mandatory redemption amounts for those Term Bonds (as allocated by the City) beginning not earlier than 60 days after the date of the optional redemption or purchase, and the City shall promptly notify the Bond Registrar in wnting of the manner in which the credit for the Term Bonds so redeemed or purchased has been allocated The Series 1998C Bonds maturing in the 2014 are subject to extraordinary redemption at the option of the City prior to their stated maturities, in whole or in part (by lot within a maturity in such manner as the Bond Registrar shall determine) on any interest payment date, at the price of par plus accrued interest, if any, to the date fixed for redemption, solely from ULID Assessments up to the amount that there are ULID Assessments on deposit in the Bond Fund over and above the amount needed to pay currently maturing installments of the principal of and interest on the Panty Bonds Portions of the principal amount of any Bond, in installments of $5,000 or any integral multiple thereof, may be redeemed If less than all of the principal amount of any Bond is redeemed, upon surrender of that Bond at either of the principal offices of the Bond Registrar, there shall be issued to the registered owner, without charge therefor, a new Bond (or Bonds, at -23- 50034587 04 the option of the registered owner) of the same series, interest rate and maturity in any of the denominations authorized by this ordinance in the aggregate principal amount remauung unredeemed The City further reserves the right and option to purchase any or all of the Bonds in the open market at any time at a price not in excess of par plus accrued interest to the date of purchase All Bonds purchased or redeemed under this section shall be cancelled Notwithstanding the foregoing, for so long as the Bonds are registered in the name of Cede & Co , as nominee of DTC, selection of Bonds for redemption shall be in accordance with the Letter of Representations (as it may be changed) Section 10 Notice of Redemption The City shall cause notice of any intended redemption of Bonds to be given not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the registered owner of any Bond to be redeemed at the address appearing on the Bond Register at the time the Bond Registrar prepares the notice, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the owner of any Bond Interest on Bonds called for redemption shall cease to accrue on the date fixed for redemption unless the Bond or Bonds called are not redeemed when presented pursuant to the call In addition, the redemption notice shall be mailed within the same period, postage prepaid, to Moody's Investors Service, Inc , at its offices in New York, New York, or its successor, to BancAmenca ROBERTSON STEPHENS at its principal office in Seattle, Washington, to ambac Assurance Corporation at its principal office in New York, New York, or its successor, or its successor, and to such other persons and with such additional information as the City Finance -24- 50034587 04 Director shall determine, but these additional mailings shall not be a condition precedent to the redemption of Bonds Notwithstanding the foregoing, for so long as the Bonds are registered in the name of Cede & Co, as nominee of DTC, notice of redemption shall be given in accordance with the Letter of Representations (as it may be changed) Section 11 Failure to Redeem Bonds If any Bond is not redeemed when properly presented at its maturity or call date, the City shall be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or call date until that Bond, both principal and interest, is paid in full or until sufficient money for its payment in full is on deposit in the Bond Fund and the Bond has been called for payment by giving notice of that call to the registered owner of each of those unpaid Bonds Section 12 Form and Execution of Bonds The Bonds shall be printed or lithographed on good bond paper in a form consistent with the provisions of this ordinance and state law, shall be signed by the Mayor and City Clerk, either or both of whose signatures may be manual or in facsimile, and the seal of the City or a facsimile reproduction thereof shall be impressed or printed thereon Only Bonds bearing a Certificate of Authentication in the following form, manually signed by the Bond Registrar, shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance CERTIFICATE OF AUTHENTICATION This Bond is one of the fully registered City of Pasco, Washington, [Water and Sewer Revenue Bonds, 1998, Series A (Taxable)] [Water and Sewer Revenue Refunding Bonds, 1998, Series B (Tax-Exempt)] [Water and Sewer Revenue Bonds, 1998, Series C (Tax-Exempt)], described in the Bond Ordinance -25- 50034587 04 WASHINGTON STATE FISCAL AGENCY Bond Registrar By Authorized Signer The authorized signing of a Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered and are entitled to the benefits of this ordinance If any officer whose facsimile signature appears on the Bonds ceases to be an officer of the City authorized to sign bonds before the Bonds bearing his or her facsimile signature are authenticated or delivered by the Bond Registrar or issued by the City, those Bonds nevertheless may be authenticated, delivered and issued and, when authenticated, issued and delivered, shall be as binding on the City as though that person had continued to be an officer of the City authorized to sign bonds Any Bond also may be signed on behalf of the City by any person who, on the actual date of signing of the Bond, is an officer of the City authorized to sign bonds, although he or she did not hold the required office on the date of issuance of the Bonds Section 13 Bond Registrar The Bond Registrar shall keep, or cause to be kept, at its principal corporate trust office, sufficient books for the registration and transfer of the Bonds which shall be open to inspection by the City at all times The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of the Bonds and this ordinance, to serve as the City's paying agent for the Bonds and to carry out all of the Bond Registrar's powers and duties under this ordinance and City Ordinance No 2838 establishing a system of registration for the City's bonds and obligations The Bond Registrar shall be responsible for its representations contained in the Bond Registrar's Certificate of Authentication on the Bonds The Bond Registrar may become the -26- 50034587 04 owner of Bonds with the same rights it would have if it were not the Bond Registrar and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as members of, or in any other capacity with respect to, any committee formed to protect the rights of Bond owners Section 14 Bond Fund, Payments into Bond Fund The Bond Fund has been created and established in the office of the Finance Director as a special fund known and designated as the Water and Sewer Revenue and Refunding Bond Redemption Fund, 1991, which fund has been divided into two accounts, namely, the Principal and Interest Account and the Reserve Account So long as any Parity Bonds are outstanding against the Bond Fund, the Finance Director shall set aside and pay into the Bond Fund all ULID Assessments upon their collection and, out of the Net Revenue of the Waterworks Utility, certain fixed amounts without regard to any fixed proportion, namely, amounts, together with any ULID Assessments collected by the City and deposited into the applicable account in the Bond Fund and investment earnings in that account, as follows (a) Into the Principal and Interest Account, on or before each interest or principal and interest payment date, an amount equal to the interest or the principal and interest to become due and payable on that interest or principal and interest payment date of all bonds payable from the Bond Fund, and (b) Into the Reserve Account, on the issue date of the Bonds, Reserve Insurance in an amount no less than the Reserve Requirement for the 1991 Bonds, the State SRF Loan, the Series 1998A Bonds and the Series 1998B 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 -27- 50034587 04 The Reserve Account for any Future Parity Bonds may be accumulated from any other funds which the City legally may have available for such purpose in addition to using ULID Assessments and Net Revenue of the Waterworks Utility The City further agrees that when the required amounts have been paid into the Reserve Account in the Bond Fund, the City will maintain those amounts therein at all times, except for withdrawals therefrom as authorized herein, until there is sufficient money in the Bond Fund, including the Reserve Account therein, to pay the principal of and interest to maturity on all outstanding bonds payable from the Bond Fund, at which time no further payments need be made into the Bond Fund, and the money in the Bond Fund, including the Reserve Account, may be used to pay that principal and interest If there shall be a deficiency in the Principal and Interest Account to meet maturing installments of either principal or interest, as the case may be, on the Bonds, the deficiency shall be made up from the Reserve Account by first the withdrawal of cash and investments therefrom and after all cash and investments have been depleted, then by the draws on the Reserve Insurance for that purpose on a pro rata basis Any deficiency created in the Reserve Account by reason of any withdrawal shall then be made up from the Net Revenue of the Waterworks Utility first available after making necessary provisions for the required payments into the Principal and Interest Account The Reserve Insurers shall be reimbursed first on a pro rata basis, within one year, to reinstate the Reserve Insurance, before the balance of the Reserve Requirement is restored All money in the Reserve Account not needed to meet the payments of principal and interest when due may be kept on deposit in the official bank depository of the City or in any national bank or may be invested in any legal investment for City funds maturing not later than -28- 50034587 04 the interest or principal and interest payment date when the money will be needed Interest on any of those investments or on that bank account shall be deposited in and become a part of the Reserve Account until the Reserve Requirement shall have been accumulated therein, after which time the interest shall be deposited in the Principal and Interest Account Notwithstanding the provisions for the deposit or maintenance of earnings in accounts of the Bond Fund, any earnings which are subject to a federal tax or rebate requirement may be withdrawn from the Bond Fund for deposit into a separate fund or account for that purpose If the City shall fail to set aside and pay into the Bond Fund the amounts which it has obligated itself by this section to set aside and pay therein, the owner of any Bond may bring suit against the City to compel it to do so Section 15 Assessments from ULIDs Nos 130 and 131 The City hereby covenants and agrees that all ULID Assessments levied in ULIDs Nos 130 and 131 of the City shall be deposited in the Bond Fund Section 16 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 hen and charge thereon for any outstanding Parity Bonds Section 17 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, -29- 50034587 04 (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 Panty 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 State PWTF Loan redemption fund 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 Panty Bonds, or for any other lawful purpose Section 18 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 Panty Bonds or to pay the principal of and interest on all the outstanding Panty 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 Panty 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 -30- 50034587 04 (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 meet the debt service requirements of the outstanding State PWTF Loan and otherwise meet the obligations of the City as herein set forth (d) It will keep proper books of accounts and records separate and apart from other accounts and records, in which complete and correct entries will be made of all transactions relating to the Waterworks Utility of the City, and it will make available to any Bondowner on written request the annual operating and income statements of the Waterworks Utility (e) Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish water or sewerage service to any customer whatsoever free of charge and it shall, not later than 60 days after the end of each calendar year, take such legal action as may be feasible to enforce collection of all collectible delinquent accounts and, in addition thereto, shall promptly avail itself of its utility lien rights, as set forth in applicable statutes (0 It will carry the types of insurance on its Waterworks Utility properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems, and the cost of such insurance shall be considered a part of Operating and Maintenance Expenses, or it will implement and maintain a self-insurance program or an insurance pool program with reserves adequate, in the judgment of the City Council, to protect the owners of the Parity Bonds against loss (g) To the extent permitted by State law, it will maintain its corporate identity and existence so long as any Bonds remain outstanding (h) It will not grant any competing utility service franchise and will use all legal means to prevent competition with the Waterworks Utility (i) If on the first day of January in any year, two installments of any ULID Assessment are delinquent, or the final installment of any ULID Assessment 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 -31- 50034587 04 Section 19 Provisions for Future Panty Bonds The City reserves the right to issue Future Panty Bonds if the following conditions are met and complied with at the time of the issuance of those Future Panty 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 Panty Bonds shall provide for the deposit into the Reserve Account of (i) an amount equal to the Reserve Requirement for those Future Panty Bonds from the Future Panty Bond proceeds, or, (11) Reserve Insurance or Alternate Security or an amount plus Reserve Insurance or Alternate Security equal to the Reserve Requirement for those Future Panty Bonds, or (in) to the extent that the Reserve Requirement is not funded from Future Panty Bond proceeds or Reserve Insurance or Alternate Security at the time of issuance of those Future Panty Bonds, and if the Bond Insurance for the Nonrefunded 1994 Bonds is no longer in effect, by no later than the third anniversary date from the dated date of the respective issue of Future Panty Bonds from ULID Assessments, if any, levied and first collected for the payment of the principal of and interest on those Future Panty Bonds and, to the extent that ULID Assessments are insufficient, then from the Net Revenue of the Waterworks Utility in six approximately equal semiannual payments, the Reserve Requirement for those Future Panty Bonds No Reserve Insurance or Alternate Security may be used to satisfy the Reserve Requirement for Future Panty Bonds unless (i) the insurance policy or Alternate Security is non-cancelable and (n) the insurer or provider of the Alternate Security as of the time of issuance of such insurance or Alternate Security is rated in the highest rating categories by both Moody's Investors Service, Inc , and Standard & Poor's Ratings Group When all of the Outstanding Parity Bonds have been redeemed, defeased or otherwise are no longer outstanding as Parity Bonds, this subsection (c) shall be amended to read as follows: (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, (u) 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 (m) to the extent that the Reserve Requirement is not funded from Future Parity Bond proceeds or -32- 50034587 04 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 00 the insurer or provider of the Alternate Security as of the tune of issuance of such insurance or Alternate Security is rated in the highest rating categories by both Moody's Investors Service, Inc., and Standard & Poor's Ratings Group. (d) The ordinance authorizing the issuance of such Future Parity Bonds shall provide for the payment of mandatory redemption or sinking fund requirements into the Bond Fund for any Term Bonds to be issued and for regular payments to be made for the payment of the principal of such Term Bonds on or before their maturity, or, as an alternative, the mandatory redemption of those Term Bonds prior to their maturity date from money in the Principal and Interest Account (e) There shall be on file from a licensed professional engineer experienced in the design, construction and operation of municipal utilities, or from an independent certified public accountant, a certificate showing that in his or her professional opinion the Net Revenue of the Waterworks Utility for any 12 consecutive calendar months out of the immediately preceding 24 calendar months shall be equal to the Coverage Requirement for each year thereafter When all of the Outstanding Parity Bonds have been redeemed, defeased or otherwise are no longer outstanding as Parity Bonds, this paragraph shall be amended to read as follows: 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 -33- 50034587 04 (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 dunng the 12 consecutive month penod 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 denved 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 Panty 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 Panty Bonds proposed to be so issued are for the sole purpose of refunding outstanding bonds payable from the Bond Fund, such certification of coverage shall not be required if the amount required for the payment of the principal and interest in each year for the refunding bonds is not increased over the amount for that year required for the bonds to be refunded thereby and if the maturities of such refunding bonds are not extended beyond the maturities of the bonds to be refunded thereby Nothing herein contained shall prevent the City from issuing Future Panty Bonds to refund any maturing Parity Bonds then outstanding, money for the payment of which is not otherwise available -34- 50034587 04 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 20 Preservation of Tax Exemption for Interest on Series 1998B and Series 1998C Bonds The City covenants that it will take all actions necessary to prevent interest on the Series 1998B Bonds and the Series 1998C (collectively, the "1998 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 1998 Tax-Exempt Bonds or other funds of the City treated as proceeds of the 1998 Tax-Exempt Bonds at any time during the term of the 1998 Tax-Exempt Bonds which will cause interest on the 1998 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 requirement of Section 148 of the Code is applicable to the 1998 Tax-Exempt Bonds, take all actions necessary to comply (or to be treated as having complied) with that requirement in connection with the 1998 Tax-Exempt Bonds, including the calculation and payment of any penalties that the City has elected to pay as an alternative to calculating rebatable arbitrage, and the payment of any other penalties if required under Section 148 of the Code to prevent interest on the 1998 Tax-Exempt Bonds from being included in gross income for federal income tax purposes The City certifies that it has not been notified of any listing or -35- 50034587 04 proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be relied upon Section 21 Designation of Series 1998B and Series 1998C Bonds as "Qualified Tax-Exempt Obligations" The City has determined and certifies that (a) the Series 1998B and 1998C Bonds are not "private activity bonds" within the meaning of Section 141 of the Code, (b) the reasonably anticipated amount of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) which the City and any entity subordinate to the City (including any entity which the City controls, which derives its authority to issue tax-exempt obligations from the City or which issues tax-exempt obligations on behalf of the City) will issue during the calendar year in which the Series 1998B and 1998C Bonds are issued will not exceed $10,000,000, and (c) the amount of tax-exempt obligations, including the Series 1998B and 1998C 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 Series 1998B and 1998C Bonds are issued does not exceed $10,000,000 The City designates the Series 1998B and 1998C Bonds as "qualified tax-exempt obligations" for the purposes of Section 265(b)(3) of the Code Section 22 Bonds Negotiable The Bonds shall be negotiable instruments to the extent provided by RCW 62A 8-102 and 62A 8-105 Section 23 Deposit of Bond Proceeds The accrued interest, if any, received from the sale of the Bonds shall be deposited in the Principal and Interest Account and used to pay interest on the Bonds on their first interest payment date Principal proceeds of the Series 1998A Bonds shall be deposited in a construction account created or to be created in the Water/Sewer Fund and used to pay the costs of carrying out the Plan of Additions and the costs of issuance and sale of -36- 50034587 04 the Series 1998A Bonds, including the cost of Bond Insurance and Reserve Insurance for those bonds Principal proceeds of the Series 1998B Bonds shall be deposited and used in accordance with the provisions of Section 24 of this ordinance Principal proceeds of the Series 1998C Bonds shall be deposited in Construction Fund—ULID No 130 and 131 created by Ordinance No 3239 and used to pay the costs of the Improvements and the costs of issuance and sale of the Series 1998C Bonds, including the cost of Bond Insurance and Reserve Insurance for those bonds Until needed to pay those costs, the City may invest principal proceeds deposited in a construction fund temporarily in any legal investment, and the investment earnings may be retained in such fund and be spent for the purposes of that fund, except that earnings subject to a federal tax or rebate requirement may be withdrawn therefrom and used for those tax or rebate purposes Section 24 Refunding of the Refunded Bonds (a) Appointment of Refunding Trustee Chase Manhattan Trust Company, National Association, of Seattle, Washmgton, is appointed Refunding Trustee (b) Use of Series 1998B Bond Proceeds, Acquisition of Acquired Obligations The prmcipal proceeds of the sale of the Series 1998B Bonds shall be deposited immediately upon the receipt thereof with the Refunding Trustee and used to discharge the obligations of the City relatmg to the Refunded Bonds under Ordinance No 3054 by providmg for the payment of the amounts required to be paid by the Refundmg Plan To the extent practicable, such obligations shall be discharged fully by the Refunding Trustee's simultaneous purchase of the Acquired Obligations, bearing such interest and maturmg as to principal and interest m such amounts and at such times so as to provide, together with a beginning cash balance, if necessary, for the payment of the amount required to be paid by the Refunding Plan The Acquired Obligations are listed and -37- 50034587 04 more particularly described m Schedule A attached to the Refunding Trust Agreement between the City and the Refundmg Trustee, but are subject to substitution as set forth below Any Series 1998B Bond proceeds or other money deposited with the Refunding Trustee not needed to purchase the Acquired Obligations and provide a beginning cash balance, if any, and pay the costs of issuance of the Series 1998B Bonds shall be returned to the City at the time of delivery of the Series 1998B Bonds to the initial purchaser thereof and deposited m the Principal and Interest Account to pay mterest on the Series 1998B Bonds on the first interest payment date (c) Substitution of Acquired Obligations Prior to the purchase of any Acquired Obligations, the City reserves the right to substitute other Government Obligations that are Permitted Investments for any of the Acquired Obligations and to use any savings created thereby for any lawful City purpose if, (a) m the opinion of Foster Pepper & Shefelman PLLC, the City's bond counsel, the interest on the Series 1998B Bonds and the Refunded Bonds will remain excluded from gross income for federal income tax purposes under Sections 103, 148 and 149(d) of the Code, and (b) such substitution shall not impair the timely payment of the amounts required to be paid by the Refunding Plan, as verified by a nationally recognized independent certified public accounting firm After the purchase of the Acquired Obligations by the Refunding Trustee, the City reserves the right to substitute therefor cash or Government Obligations that are Permitted Investments subject to the conditions that such money or securities held by the Refunding Trustee shall be sufficient to carry out the Refundmg Plan, that such substitution will not cause the Series 1998B Bonds and the Refunded Bonds to be arbitrage bonds within the meaning of Section 148 of the Code and regulations thereunder m effect on the date of such substitution and applicable to obligations issued on the issue date of the Bonds, and that the City obtain, at its expense (1) a -38- 50034587 04 verification by a nationally recognized independent certified public accounting firm acceptable to the Refunding Trustee confirming that the payments of principal of and interest on the substitute securities, if paid when due, and any other money held by the Refunding Trustee will be sufficient to carry out the Refunding Plan, and (2) an opinion from Foster Pepper & Shefelman PLLC, bond counsel to the City, its successor, or other nationally recognized bond counsel to the City, to the effect that the disposition and substitution or purchase of such securities, under the statutes, rules and regulations then m force and applicable to the Series 1998B Bonds, will not cause the interest on the Series 1998B Bonds or the Refunded Bonds to be included in gross income for federal income tax purposes and that such disposition and substitution or purchase is in compliance with the statutes and regulations applicable to the Series 1998B Bonds Any surplus money resulting from the sale, transfer, other disposition or redemption of the Acquired Obligations and the substitutions therefor shall be released from the trust estate and transferred to the City to be used for any lawful City purpose (d) Administration of Refunding Plan The Refunding Trustee is authorized and directed to purchase the Acquired Obligations (or substitute obligations) and to make the payments required to be made by the Refunding Plan from the Acquired Obligations (or substitute obligations) and money deposited with the Refunding Trustee pursuant to this ordinance All Acquired Obligations (or substitute obligations) and the money deposited with the Refunding Trustee and any income therefrom shall be held irrevocably, invested and applied m accordance with the provisions of Ordinance No 3054, this ordinance, chapter 39 53 RCW and other applicable statutes of the State of Washington and the Refunding Trust Agreement All necessary and proper fees, compensation and expenses of the Refunding Trustee for the Series 1998B Bonds and all other costs incidental to the setting up of the escrow to accomplish the refunding of the -39- 50034587 04 Refunded Bonds and costs related to the issuance and delivery of the Series 1998B Bonds, including bond printing, verification fees, bond counsel's fees, bond and reserve msurance premiums and other related expenses, shall be paid out of the proceeds of the Series 1998B Bonds (e) Authorization for Refunding Trust Agreement To carry out the Refunding Plan provided for by this ordinance, the Mayor of the City is authorized and directed to execute and deliver to the Refunding Trustee a Refunding Trust Agreement substantially in the form on file with the City Clerk and by this reference made a part hereof setting forth the duties, obligations and responsibilities of the Refunding Trustee in connection with the payment, redemption and retirement of the Refunded Bonds as provided herein and stating that the provisions for payment of the fees, compensation and expenses of such Refundmg Trustee set forth therein are satisfactory to it Prior to executmg the Refunding Trust Agreement, the Mayor of the City is authorized to make such changes therein which do not change the substance and purpose thereof or which assure that the escrow provided therein and the Series 1998B Bonds are in compliance with the requirements of federal law govermng the exclusion of interest on the Series 1998B Bonds from gross income for federal mcome tax purposes -40- 50034587 04 Section 25 Call for Redemption of the Refunded Bonds The City calls for redemption on June 1, 2004, all of the Refunded Bonds at par plus accrued interest Such call for redemption shall be irrevocable after the delivery of the Series 1998B Bonds to the initial purchaser thereof The date on which the Refunded Bonds are herein called for redemption is the first date on which the those bonds may be called The proper City officials are authorized and directed to give or cause to be given such notices as required, at the times and m the manner required, pursuant to Ordinance No 3054 m order to effect the redemption prior to their maturity of the Refunded Bonds Section 26 City Findings with Respect to Refunding The City Council finds and determines that the issuance and sale of the Series 1998B Bonds at this time will effect a savings to the City and is in the best interest of the City and its ratepayers and in the public interest In making such finding and determination, the City Council has given consideration to the fixed maturities of the Series 1998B Bonds and the Refunded Bonds, the costs of issuance of the Series 1998B Bonds and the known earned income from the investment of the proceeds of the issuance and sale of the Series 1998B Bonds pending payment and redemption of the Refunded Bonds The City Council further finds and determines that the money to be deposited with the Refunding Trustee for the Refunded Bonds in accordance with Section 24 of this ordinance will discharge and satisfy the obligations of the City under Ordinance No 3054 with respect to the Refunded Bonds, and the pledges, charges, trusts, covenants and agreements of the City therein made or provided for as to the Refunded Bonds, and that the Refunded Bonds shall no longer be deemed to be outstanding under such ordinance immediately upon the deposit of such money with the Refunding Trustee -41- 50034587 04 Section 27 Refunding or Defeasance of Bonds The City may issue refunding bonds pursuant to the laws of the State of Washington and use money available from other lawful sources to pay the principal of and interest on the Bonds, or such portion thereof included in a refunding or defeasance plan, as the same become due and payable and to redeem and retire, release, refund or defease any or all such then-outstanding Bonds (hereinafter collectively called the "defeased Bonds") and to pay the costs of such refunding or defeasance If money and/or Government Obligations that are Permitted Investments sufficient in amount, together with known earned income from the investments thereof, to redeem and retire, release, refund or defease the defeased Bonds in accordance with their terms, are set aside irrevocably in a special fund for and pledged irrevocably to such redemption, retirement or defeasance (hereinafter called the "trust account"), then all right and interest of the owners of the defeased Bonds in the covenants of this ordinance and in the Gross Revenue of the Waterworks Utility, ULID Assessments, funds and accounts obligated to the payment of such defeased Bonds, other than the right to receive the funds so set aside and pledged, thereafter shall cease and become void Such owners thereafter shall have the right to receive payment of the principal of and interest on the defeased Bonds from the trust account After the establishing and full funding of such a trust account, the City then may apply any money in any other fund or account established for the payment or redemption of the defeased Bonds to any lawful purposes as it shall determine, subject only to the rights of the owners of any other Bonds or bonds then outstanding If the refunding plan provides that the defeased Bonds or the refunding bonds to be issued be secured by money and/or Government Obligations that are Permitted Investments pending the prior redemption of the defeased Bonds and if such refunding plan also provides that -42- 50034587 04 certain money and/or Government Obligations that are Permitted Investments 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 Panty Bonds and the annual computation of coverage for determining compliance with the rate covenants Notwithstanding anything in this section to the contrary, if the principal of and/or interest due on the Bonds is paid by the Bond Insurer pursuant to the Municipal Bond Insurance Policy, the Bonds shall be treated as remaining outstanding for all purposes and shall not be considered paid by the City, and the covenants, agreements and other obligations of the City to the registered owners of the Bonds shall continue to exist, and the Bond Insurer shall be subrogated to the rights of the registered owners Section 28 Approval of Bond Purchase Contract BancAmenca ROBERTSON STEPHENS of Seattle, Washington (the "Purchaser"), has presented a bond purchase contract (the "Bond Purchase Contract") to the City by which the Purchaser has offered to purchase the Bonds under the terms and conditions provided in the Bond Purchase Contract, which written Bond Purchase Contract is on file with the City Clerk and is incorporated herein by this reference The City Council finds that entering into the Bond Purchase Contract is in the City's best interest and, therefore, accepts the offer contained therein and authorizes the execution of the Bond Purchase Contract by City officials The Bonds will be printed at City expense and will be delivered to the Purchaser in accordance with the terms of the Bond Purchase Contract with the approving legal opinion of Foster Pepper & Shefelman PLLC, municipal bond counsel of Seattle, Washington, relative to -43- 50034587 04 each series of the Bonds Bond counsel has not been retained to and shall not be required to review or express any opinion concerning the completeness or accuracy of any official statement, offering circular or other sales or disclosure material issued or used in connection with the Bonds, and bond counsel's opinion shall so state The proper City officials are authorized and directed to do everything necessary for the prompt authentication and delivery of the Bonds to the Purchaser, including the execution of the Official Statement on behalf of the City and execution of documents relative to acquisition of bond and reserve insurance, and for the proper application and use of the proceeds of the sale thereof Section 29 Preliminary Official Statement Deemed Final The City Council has been provided with copies of a preliminary official statement dated August 19, 1998 (the "Preliminary Official Statement"), prepare in connection with the sale of the Bonds For the sole purpose of the Purchaser's compliance with Securities and Exchange Commission ("SEC") Rule 15c2-12(b)(1), the City "deems final" that Preliminary Official Statement as of its date except for the omission of information as to offering prices, interest rates, selling compensation, aggregate principal amount, principal amount per maturity, maturity dates, options of redemption, delivery date, ratings and other terms of the Bonds dependent on such matters Section 30 Undertaking to Provide Continuing Disclosure To meet the requirements of SEC Rule 15c2-12(b)(5) (the "Rule"), as applicable to a participating underwriter for the Bonds, the City makes the following written undertaking (the "Undertaking") for the benefit of holders of the Bonds (a) Undertaking to Provide Annual Financial Information and Notice of Material Events The City undertakes to provide or cause to be provided, either directly or through a designated agent -44- 50034587 04 (i) To each nationally recognized municipal securities information repository designated by the SEC in accordance with the Rule ("NRMSIR") and to a state information depository, if any, established in the State of Washington (the "SID") annual fmancial information and operating data of the type included in the final official statement for the Bonds and described in subsection (b) of this section ("annual financial information"), (n) To each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB"), and to the SID, timely notice of the occurrence of any of the following events with respect to the Bonds, if matenal (1) pnncipal and interest payment delinquencies, (2) non-payment related defaults, (3) unscheduled draws on debt service reserves reflecting financial difficulties, (4) unscheduled draws on credit enhancements reflecting financial difficulties, (5) substitution of credit or liquidity providers, or their failure to perform, (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds, (7) modifications to nghts of holders of the Bonds, (8) Bond calls (other than scheduled mandatory redemptions of Term Bonds), (9) defeasances, (10) release, substitution, or sale of property securing repayment of the Bonds, and (11) rating changes, and (m) To each NRMSIR or to the MSRB, and to the SID, timely notice of a failure by the City to provide required annual financial information on or before the date specified in subsection (b) of this section (b) Type of Annual Financial Information Undertaken to be Provided The annual financial information that the City undertakes to provide in subsection (a) of this section (i) Shall consist of (1) annual financial statements prepared (except as noted in the financial statements) in accordance with applicable generally accepted accounting principles promulgated by the Government Accounting Standards Board ("GASB"), 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, (11) Shall be provided to each NRMSIR and the SID, not later than the last day of the ninth month after the end of each fiscal year of the City (currently, a fiscal year ending December 31), as such fiscal year may be changed as required or permitted by State law, commencing with the City's fiscal year endmg December 31, 1998, and -45- 50034587 04 (m) May be provided in a single or multiple documents, and may be incorporated by reference to other documents that have been filed with each NRMSIR and the SID, or, if the document incorporated by reference is a "final official statement" with respect to other obligations of the City, that has been filed with the MSRB (c) Amendment of Undertaking The Undertalung is subject to amendment after the pnmary offenng of the Bonds without the consent of any holder of any Bond, or of any broker, dealer, municipal securities dealer, participating underwriter, rating agency, NRMSIR, the SID or the MSRB, under the circumstances and in the manner permitted by the Rule The City will give notice to each NRMSIR or the MSRB, and the SID, of the substance (or provide a copy) of any amendment to the Undertaking and a bnef statement of the reasons for the amendment If the amendment changes the type of annual financial information to be provided, the annual fmancial information contanung the amended financial information will include a narrative explanation of the effect of that change on the type of information to be provided (d) Beneficiaries The Undertaking evidenced by this section shall mure to the benefit of the City and any holder of Bonds, and shall not inure to the benefit of or create any nghts in any other person (e) Termination of Undertaking The City's obligations under this Undertaking shall terminate upon the legal defeasance of all of the Bonds In addition, the City's obligations under this Undertaking shall terminate if those provisions of the Rule which require the City to comply with this Undertaking become legally inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of nationally recogmzed bond counsel or other counsel familiar with federal securities laws delivered to the City, and the City provides timely notice of such termination to each NRMSIR or the MSRB and the SID (0 Remedy for Failure to Comply with Undertaking As soon as practicable after the City learns of any failure to comply with the Undertaking, the City will proceed with due diligence to cause such noncompliance to be corrected No failure by the City or other obligated person to comply with the Undertaking shall constitute a default in respect of the Bonds The sole remedy of any holder of a Bond shall be to take such actions as that holder deems necessary, mcludmg seeking an order of specific performance from an appropriate court, to compel the City or other obligated person to comply with the Undertaking (g) Designation of Official Responsible to Administer Undertaking The Finance Director of the City (or such other officer of the City who may in the future perform the duties of the Finance Director) or his or her designee is authonzed and directed in his or her discretion to take such further actions as may be necessary, appropnate or convenient to carry out the Undertalung of the City in respect of the -46- 50034587 04 Bonds set forth m this section and m accordance with the Rule, including, without limitation, the following actions (i) Preparing and filing the annual financial information undertaken to be provided, (n) Determining whether any event specified in subsection (a) has occurred, assessing its matenality with respect to the Bonds, and, if matenal, preparing and disseminating notice of its occurrence, (m) Determining whether any person other than the City is an "obligated person" within the meaning of the Rule with respect to the Bonds, and obtaining from such person an undertaking to provide any annual financial information and notice of matenal events for that person in accordance with the Rule, (iv) Selecting, engaging and compensating designated agents and consultants, including but not limited to financial advisors and legal counsel, to assist and advise the City in carrying out the Undertaking, and (v) Effecting any necessary amendment of the Undertaking Section 31 Fixing Interest Rate on ULID Assessments The interest rates on the installments and delinquent payments of the special assessments in ULIDs Nos 130 and 131 are revised and fixed at the rate of 5 0% per annum Section 32 Bond and Reserve Insurance The City is authorized to purchase from the Bond Insurer the Municipal Bond Insurance Policy insuring the prompt payment of the principal of and interest on the Bonds and the Reserve Insurance in the form of a Surety Bond providing the Reserve Requirement for the 1991 Bonds, the SRF Loan, the Series 1998A Bonds and the Series 1998C Bonds and agrees to the conditions for obtaining such policies, including the payment of the premiums therefor Any notice required to be given to the Bond Insurer shall be sent by certified or registered mail to Ambac Assurance Corporation, One State Street Plaza, New York, New York 10004 -47- 50034587 04 While the Municipal Bond Insurance Policy and Surety Bond are in effect, the City or the Bond Registrar shall furnish to the Bond Insurer (to the attention of the Surveillance Department, unless otherwise indicated) (a) As soon as practicable after the filing thereof, copies of any financial statements, audits and annual reports of the City, (b) copies of any notices given to the registered owners of the Bonds, including, without limitation, notices of any redemption of or defeasance of Bonds, and any certificate rendered pursuant to this ordinance relating to the security for the Bonds, and (c) such additional information the Bond Insurer may reasonably request The Bond Registrar shall notify the Bond Insurer of any failure of the City to provide relevant notices and certificates The City will permit the Bond Insurer to discuss the affairs, finances and accounts of the City or any information the Bond Insurer may reasonably request regarding the security for the Bonds with appropriate officers of the City The Bond Registrar and the City will permit the Bond Insurer to have access to and make copies of all books and records relatmg to the Bonds at any reasonable time The Bond Insurer shall have the right to direct an accounting at the City's expense, and the City's failure to comply with such direction within 30 days after receipt of written notice of the direction from the Bond Insurer shall be deemed a default hereunder unless compliance cannot occur within such period In that event and only if an extension would not materially adversely affect the interest of any registered owner of the Bonds, that 30-day period will be extended so long as compliance is begun within that period and diligently pursued -48- 50034587 04 Section 33 Payment Procedures Under Bond Insurance The Bond Insurer requires that the following sections be included in this ordinance "As long as the bond insurance shall be in full force and effect, the Issuer, the Trustee and any Paying Agent agree to comply with the following provisions "(a) At least one (1) day prior to all Interest Payment Dates the Trustee or Paying Agent [the Bond Registrar], if any, will determine whether there will be sufficient funds in the Funds and Accounts to pay the pnncipal of or interest on the Bonds on such Interest Payment Date If the Trustee or Paying Agent, if any, determines that there will be insufficient funds m such Funds or Accounts, the Trustee or Paying Agent, if any, shall so notify Ambac Assurance Such notice shall specify the amount of the anticipated deficiency, the Bonds to which such deficiency is applicable and whether such Bonds will be deficient as to principal or interest, or both If the Trustee or Paying Agent, if any, has not so notified Ambac Assurance at least one (1) day prior to an Interest Payment Date, Ambac Assurance will make payments of principal or interest due on the Bonds on or before the first (1st) day next following the date on which Ambac Assurance shall have received notice of nonpayment from the Trustee or Paying Agent, if any "(b) the Trustee or Paying Agent, if any, shall, after giving notice to Ambac Assurance as provided in (a) above, make available to Ambac Assurance and, at Ambac Assurance's direction, to the United States Trust Company of New York, as insurance trustee for Ambac Assurance or any successor insurance trustee (the "Insurance Trustee"), the registration books of the Issuer maintained by the Trustee or Paying Agent, if any, and all records relating to the Funds and Accounts maintained under this ordinance "(c) the Trustee or Paying Agent, if any, shall provide Ambac Assurance and the Insurance Trustee with a list of registered owners of Bonds entitled to receive principal or interest payments from Ambac Assurance under the terms of the Municipal Bond Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of Bonds entitled to receive full or partial interest payments from Ambac Assurance and (n) to pay principal upon Bonds surrendered to the Insurance Trustee by the registered owners of Bonds entitled to receive full or partial principal payments from Ambac Assurance "(d) the Trustee or Paying Agent, if any, shall, at the time it provides notice to Ambac Assurance pursuant to (a) above, notify registered owners of Bonds entitled to receive the payment of pnncipal or interest thereon from Ambac Assurance (i) as to the fact of such entitlement, (n) that Ambac Assurance will remit to them all or a part of the interest payments next coming due upon proof of Bondholder entitlement to interest payments and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropnate assignment of the -49- 50034587 04 registered owner's nght to payment, (m) that should they be entitled to receive full payment of pnncipal from Ambac Assurance, they must surrender their Bonds (along with an appropnate instrument of assignment m form satisfactory to the Insurance Trustee to permit ownership of such Bonds to be registered in the name of Ambac Assurance) for payment to the Insurance Trustee, and not the Trustee or Paying Agent, if any, and (iv) that should they be entitled to receive partial payment of pnncipal from Ambac Assurance, they must first surrender their Bonds for payment thereon first to the Trustee or Paying Agent, if any, who shall note on such Bonds the portion of the pnncipal paid by the Trustee or Paying Agent, if any, and the, along with an appropnate instrument of assignment m form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of pnncipal "(e) in the event that the Trustee or Paying Agent, if any, has notice that any payment of pnncipal of or Interest on a Bond which has become Due for Payment and which is made to a Bondholder by or on behalf of the Issuer has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent Jurisdiction, the Trustee or Paying Agent, if any, shall, at the time Ambac Assurance is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee or Paying Agent, if any, shall furnish to Atnbac Assurance its records evidencing the payments of pnncipal of and interest on the Bonds which have been made by the Trustee or Paying Agent, if any, and subsequently recovered from registered owners and the dates on which such payments were made "(f)in addition to those nghts granted Ambac Assurance under this ordinance, Ambac Assurance shall, to the extent it makes payment of pnncipal of or interest on Bonds, become subrogated to the nghts of the recipients of such payments in accordance with the terms of the Municipal Bond Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee or Paying Agent, if any, shall note Ambac Assurance's nghts as subrogee on the registration books of the Issuer maintained by the Trustee or Paymg Agent, if any, upon receipt from Ambac Assurance of proof of the payment of interest thereon to the registered owners of the Bonds, and (11) in the case of subrogation as to claims for past due pnncipal, the Trustee or Paying Agent, if any, shall note Ambac Assurance's nghts as subrogee on the registration books of the Issuer maintained by the Trustee or Paying Agent, if any, upon surrender of the Bonds by the registered owners thereof together with the proof of the payment of principal thereof" Section 34 Parties Interested Herein To the extent that this ordinance confers upon or gives or grants to the Bond Insurer any right, remedy or claim under or by reason of this -50- 50034587 04 ordinance, the Bond Insurer is explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted hereunder Nothing expressed or implied in this ordinance is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than the City, the Bond Insurer and the registered owners of the Bonds, any right, remedy or claim under or by reason of this ordinance or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this ordinance contained by and on behalf of the City shall be for the sole and exclusive benefit of the City, the Bond Insurer and the registered owners of the Bonds Notwithstanding any other provision of this ordinance, the City shall notify the Bond Insurer immediately if at any time there are insufficient funds to make any payments of principal and/or interest as required and immediately upon the occurrence of any event of default hereunder Any provision of this ordinance expressly recognizing or granting nghts in or to the Bond Insurer may not be amended in any manner which affects the rights of the Bond Insurer hereunder without the pnor vvntten consent of the Bond Insurer Unless otherwise provided in this section, the Bond Insurer's consent shall be required, in addition to Bond owner consent, when required, for the following purposes (i) execution and delivery of any supplemental ordinance, and (n) imtiation or approval of any other action which requires Bond owner consent Anything in this ordinance to the contrary notwithstanding, upon the occurrence and continuance of an event of default, the Bond Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Bond owners for the benefit of the Bond owners under this ordinance Any reorganization or liquidation plan with respect to the City must be acceptable to the Bond Insurer In the event of any reorganization or liquidation, the Bond Insurer shall have the right to vote on behalf of all bondholders who hold Ambac Assurance-insured bonds absent a -51- 50034587 04 default by the Bond Insurer under the applicable Municipal Bond Insurance Policy insuring such bonds Section 35 Payment Procedures Under Surety Bond The Bond Insurer requires that the following sections be included in this ordinance As long as the Surety Bond shall be in full force and effect, the Issuer, and the Bond Registrar, if appropriate, agree to comply with the following provisions (a) In the event and to the extent that moneys on deposit in the Principal and Interest Account, plus all amounts on deposit in and credited to the Reserve Account in excess of the amount of the Surety Bond, are insufficient to pay the amount of principal and interest coming due, then upon the later of (i) one (1) day after receipt by the General Counsel of Ambac of a demand for payment in the form attached to the Surety Bond as Attachment 1 (the "Demand for Payment"), duly executed by the Bond Registrar certifying that payment due under this ordinance has not been made to the Bond Registrar, or (n) the payment date of the Obligations as specified in the Demand for Payment presented by the Bond Registrar to the General Counsel of Ambac, Ambac will make a deposit of funds in an account with the Bond Registrar or its successor, in New York, New York, sufficient for the payment to the Bond Registrar, of amounts which are then due to the Bond Registrar under this ordinance (as specified in the Demand for Payment) up to but not in excess of the Surety Bond Coverage, as defined in the Surety Bond, provided, however, that in the event that the amount on deposit in, or credited to, the Reserve Account, in addition to the amount available under the Surety Bond, includes amounts available under a letter of credit, insurance policy, surety bond or other such funding instrument (the "Additional Funding Instrument"), draws on the Surety Bond and the Additional Funding Instrument shall be made on a pro rata basis to fund the insufficiency (b) The Bond Registrar shall, after submitting to Ambac Assurance the Demand for Payment as provided in (a) above, make available to Ambac Assurance all records relating to the Funds and Accounts maintained under this ordinance (c) The Bond Registrar shall, upon receipt of moneys received from the draw on the Surety Bond, as specified in the Demand for Payment, credit the Reserve Account to the extent of moneys received pursuant to such Demand (d) The Reserve Account shall be replenished in the following priority (i) principal and interest on the Surety Bond and on the Additional Funding Instrument shall be paid from first available Net Revenue of the Waterworks Utility on a pro rata basis, (n) after all such amounts are paid in full, amounts necessary to fund the Reserve Account to the required level, after taking -52- 50034587 04 Mayor into account the amounts available under the Surety Bond and the Additional Funding Instrument shall be deposited from next available Net Revenue of the Waterworks Utility Section 36 Effective Date This ordinance shall take effect and be in force from and after its passage and 5 days following its publication as provided by law PASSED by the City Council of the City of Pasco, Washington, this 31st day of August, 1998, at a special open public meeting of which notice has been given as required by law, and signed in authentication of its passage thid / day of August, 1998 ntliY ATTEST APPROVED AS TO FORM Foster Pepper & Shefelman PLLC Bond Counsel -53- 50034587 04 AFF11DLY11`11 -' OF PUDILI7OLMORg COUNTY OF BENTON SS STATE OF WASHINGTON Diana Hudon ,beingdulysworn, deposes and says, I am the Legal Clerk of the Tr-City Herald, a daily newspaper That said newspaper is a legal newspaper and has been approved as a legal newspaper by order of the superior court in the county in which it is published and it is now and has been for more than six months prior to the date of the publication hereinafter referred to, published countinually as a daily newspa- per in Benton County, Washington That the attached is a true copy of a 4*1227 ORD . 7 -314 as it was printed in the regular and entire issue of the Tr-City Herald itself and not in a supplement thereof, 1 time(s), commencing on OD/06 /1398 , and ending on 09/ OE: /1393 , and that said newspaper was regulary distributed to its subscribers during all of this period SUBSCRIBED AND SWORN BEFORE ME THIS DAY OF , tv2-thir 0-02/ Trait Notary public in and for the State of Wash- ington, residingatIN-. -ichland COMMISSION EXPIRESOF-3/ 15/ 2000 exkll BOX 2608 PASCO, WASHINGTON 99302-2608 PHONE (509) 582 1500 LOW& ADVE1W0011012 INVOICE DATE973/06/199E1 LEGAL NO #1227 ACCOUNT NO 1922 DESCRIPTION.#1227 ORE' . 3314 TIMES 1 LINES SOLD TO PASCO CITY OF LEGALS F.O. BOX 293 PASCO WA 99701 TOTZM $ 108.52 NOTICE This is an invoice for legal advertising space Please pay from this invoice as no statement will be rendered Please detach at perforation and return with payment CITY OF °ASCO WASHIRC;-70N ORDINANCE NO 3314 AN ORDINANCE relating to the waterworks utility of the City including the sani- tary sewerage system and the system of storm or sur face water sewers as a part thereof adopting a system or plan of additions to and betterments and exten sions of the waterworks utility of the City providing for the issuance and sale of $2 255 000 par value of Water and Sewer Revenue Bonds 1998 Series A (Taxable) for the purpose of obtaining the funds with which to carry out the sys- tern or plan adopted by this ordinance and to pay the cost of issuing and selling those Series A Bonds I providing for the issuance and sale of $6 725 000 par I value Water and Sewer 1Revenue Refunding Bonds 1998 Series B (Tax Exempt) for the pur pose of obtaining the funds to advance refund the call able portion of the City s Water and Sewer Revenue Bonds 1994 and to pay the administrative costs of such refunding and the costs of issuance and sale of those Series B Bonds providing for the issuance and sale of $1 515 000 par value Water and Sewer Revenue Bonds 1998 Se- ries C (Tax-Exempt) for the purpose of obtaining the funds with which to pay the cost of improvements in Utility Local Improvement I Districts Nos 130 and 131 and to pay the costs of issuance s,nd sale of those I Series C Bonds fixing the date form denomination maturities interest rates terms and covenants of the bonds authorized herein providing for and authoriz- ing the purchaGe of certain obligations out of the pro coeds f the sale of the Series B Bonds and for the use and application of the money derived from those investments authorizing the execution of an agreement with Chase Manhattan Trust Company National Association of Se- attle Washington as refunding trustee providing for the call payment and redemption of the bonds to be refunded ty oviding for reserve ,psurande for the City s i War and Sewer Revenue Bonds 1991 and, the bonds authorized by this ordinance providing for bond insurance and providing ,for the sale and delivery Of the bonds to BancAmerica ROBERT SON STEPHENS of Seat- tle Washington PASSED by the City Coun- cil of the City of Pasco Washington this 31st day of August 1998 at a spe- cial open public meeting of which notice has been given as required by law and signed in authentica- tion of its passage this 31 day of August 1998 -s- Charles D Kilbury Mayor ATTEST -s Catherine D Seaman City Clerk APPROVED AS TO FORM Foster Pepper & Shefelman PLLC Bond Counse 150034587 04 #1227 - 9/6/98