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HomeMy WebLinkAbout2017.11.13 Council Workshop PacketWorkshop Meeting AGENDA PASCO CITY COUNCIL 7:00 p.m. November 13, 2017 Page 1. CALL TO ORDER: 2. ROLL CALL: (a) Pledge of Allegiance 3. VERBAL REPORTS FROM COUNCILMEMBERS: 4. ITEMS FOR DISCUSSION: (a) Creating Communities through Partnerships and Collaboration Presented by Brent Kubalek, Recreation Services Manager (b) Winter Readiness Plan Presented by John Millan, Public Works Superintendent and Dave Hare, Assistant Fire Chief 3 - 6 (c) Recycling Update Presented by Darrick Dietrich, Basin Disposal 7 - 9 (d) Cross Connect Policy Proposal 10 - 16 (e) Contract for Collection Services with Washington Collectors Tri-Cities, Inc. 17 - 106 (f) Revenue Bonds for Waterworks Utility 107 - 115 (g) Bid Award: Oregon Avenue (SR 397) Corridor Improvements, Phase 1 116 - 124 (h) Code Amendment: Amending PMC 26.28 to Allow Administrative Approval of Final Plats (MF# CA 2017-007) 125 - 140 (i) Property Purchase 5. MISCELLANEOUS COUNCIL DISCUSSION: Page 1 of 140 Workshop Meeting November 13, 2017 6. EXECUTIVE SESSION: 7. ADJOURNMENT. REMINDERS: 1. 11:45 a.m., Monday, November 13, Pasco Red Lion – Pasco Chamber of Commerce Membership Luncheon. (Presenter: Bob Metzger, Pasco Police Chief) 2. 4:00 p.m., Monday, November 13, Three-Rivers Convention Center – Visit Tri- Cities 2017 Annual Meeting and Tourism Showcase. (COUNCILMEMBERS REBECCA FRANCIK, CHI FLORES AND SAUL MARTINEZ) 3. 11:30 a.m., Friday, November 17, 107 E. Columbia Drive, Kennewick – Benton- Franklin Council of Governments Board Meeting. (MAYOR MATT WATKINS, Rep.; COUNCILMEMBER REBECCA FRANCIK, Alt.) This meeting is broadcast live on PSC-TV Channel 191 on Charter Cable and streamed at www.pasco-wa.gov/psctvlive. Audio equipment available for the hearing impaired; contact the Clerk for assistance. Page 2 of 140 Current Recyclables Market Conditions Frequently Asked Questions (FAQ) Isn’t there always a place for recycled material? Why do we rely on China? The recycling system is 100% dependent on a marketplace for recyclable materials. Whether it is plastic, paper, or aluminum, we are only able to offer a service to collect and process it for you, if in turn, someone is going to buy it from us and use it for manufacturing or other purposes. A strong recycling system is good for the environment and for the economy. Today’s situation is unique because China is a primary source of manufactured products and packaging. Their policy change transpired quickly, something that is challenging for infrastructure services like solid waste and recycling collections and processing because it is so complex. Why do Chinese policies affect my recycling service? Washington, Oregon, and California are particularly impacted by China’s policy change because the West Coast is active in trade with China and other countries where imports/exports are made easier because of where they are located. Washington’s recycling rate hovers around 50%, well above the national average, in part because of its proximity to China. China is also one of the biggest manufacturers in the world – named the #1 Most Competitive Manufacturing Nation in 2016 by Deloitte, a global financial and consulting firm and consuming 2/3 of all recyclable materials that are collected worldwide. What has been done since China announced the changes that will impact the system here? We have been searching for markets, both domestically and internationally, and fine-tuning our processing practices here at home. Internationally, we have representatives overseas in China working with processors, manufacturers, and the Chinese government. We are also developing and searching for new markets across the globe and in the United States to ensure as many materials as possible have a place to go. Working in conjunction with state and local agencies, we have been actively seeking solutions to strengthen and improve our recycling stream since China announced the new policy. One domestic example, among many, has been in our members’ investments at their facilities to better sort materials so that the recyclable materials can be diverted efficiently and effectively. Our members are adapting in real-time, adjusting routes and working with our local government partners. Industry-wide, up and down the west coast, we have been focused on addressing this current chall enge and ensuring that in the long-term, the recycling system is stronger than ever. Every city and county may have differences in the system in place, but specific actions that we have taken system- wide include:  slowed down the conveyor belts that carry potential recyclable goods past people and machines so they can be sorted and re-sorted with a higher level of precision  hired more people so that there are more eyes and hands picking non -recyclable contaminants out of the recycle stream  decreased the tolerances of the machines which are automated versions of what the employees are doing so that they reject more non-recyclable contaminants from the recycle stream  overseas, we are actively seeking new markets for recyclables and continue to work with Chines e partners to secure outlets for the most materials possible under the new restrictions. How long will this situation last? At this point, it’s unclear, but we have received no indication that the change in China’s policies are temporary . The ban on unsorted paper, certain plastics, and other material goes into effect on January 1, 2018. Along with the ban, China also announced stringent new contaminant standards. In recycling, “contaminants” are non -permittable materials that are mixed in with the desirable materials, something that everyone in the recycling system works to prevent, but because of the nature of the solid waste stream, can be very challenging to manage. After January 1, 2018, China will only accept materials with a contaminant rate of 0.3%, something that is virtually unattainable. The impacts of all these polices will be felt before they are implemented, as shipments can take a month or more Page 3 of 140 to reach China. We are actively searching for new markets and solutions, but as everyone realizes, the solid waste stream never stops and recycled materials are already accumulating at various facilities. Why can’t we set aside recycled materials at a new location in Washington until we can find a marketplace to re - use them? Recyclable materials are considered solid waste and are heavily regulated for a reason. There is not enough available warehousing in the state for safe storage especially since many recyclables are highly flammable. They cannot and should not be “set aside” anywhere that hasn’t been vetted extensively under our regulatory system, which prioritizes public health and safety. The solid waste system is strong and intact and we should dispose of all items safely while we seek solutions to the issue at-hand with the recycling market. Has something like this ever happened before? No. This is the first time a policy change overseas has had such swift and direct impacts to recycling. But our system is strong, and we are confident we will find solutions in the middle and long-term. In the short-term, it’s crucial that a problem in the international recycling markets does not become multiple problems for public health and safety. The solid waste collection, handling, and processing infrastructure to responsibly handle these materials exists and we will rely on it until solutions can be put in place. Page 4 of 140 WASHINGTON REFUSE & RECYCLING ASSOCIATION FOR IMMEDIATE RELEASE: October 18, 2017 Contact: Brad Lovaas, WRRA Executive Director, info@wrra.org ATTACHMENT: WRRA FAQ Washington’s Solid Waste and Recycling Industry Details Response to China’s New Restrictions for Recyclable Materials Imports New restrictions temporarily eliminate a key market for many recyclable materials, forcing diversion to domestic landfills WASHINGTON – Today the Washington Refuse and Recycling Association (WRRA) detailed the state industry’s response to new and significant restrictions set by China on the import of recyclable materials to their country. The restrictions announced by the Chinese government in mid-July dramatically impact the amount and type of recyclable materials that China will import going forward. As a direct result of the significant and swift reduction in the size of the marketplace for recycled goods, Washington State’s waste and recycling industry will be forced to temporarily divert recyclable materials to our state’s landfills while new markets are developed. While the short-term impacts to our recycling system are significant, the adjustment is also an opportunity to review and improve our state’s curbside recycling programs. “Our region’s commitment to recycling is a bedrock value that makes the Pacific Northwest special – we’re proud of that,” said Brad Lovaas, Executive Director of the WRRA. “Our member companies – from major publicly-traded corporations to family-owned independent businesses – are proud of how our industry has partnered with the public to make our state’s ambitious recycling goals a reality.” Lovaas continued: “We share the public’s disappointment that materials that normally would be recycled are instead going to be diverted to a landfill. I know I speak for our entire membership when I say that we are dedicated to identifying short, mid- and long-term solutions for supporting a system that allows us to honor our shared commitment to holding on to one of the country’s leading recycling rate.” China notified the World Trade Organization in July that it plans to ban the import of at least 24 varieties of solid waste and recyclables, including types of plastic, unsorted paper, and metals commonly sold by U.S. recyclers. China will also apply stringent new quality standards to the remaining materials not covered by the ban. The ban, set to go into effect by the end of 2017, is part of a broader Chinese customs program called “Operation Green Fence,” which began in 2013, aims to reduce waste importation and contamination of recyclable materials. Page 5 of 140 The latest phase of this operation is called “National Sword,” which increases enforcement and bans the import of many materials. Wastes and recyclable materials are the sixth largest U.S. export to China. The combination of the ban on the import of many materials and dramatically increased standards to guard against contamination of other materials are together causing the current dramatic reduction in the recyclables marketplace. “For purposes of public health and safety, sanitation, and fire safety, we encourage people to stick to their normal routine for sorting garbage, recycling, and food waste,” said Lovaas. “If you want to help, please pay attention to the sticker on your co-mingled recycle bin or other information you have from your provider and local government solid waste divisions as to what can be recycled. If you are unsure – throw it in the garbage. When in doubt, throw it out.” The recycling system is 100% dependent on a marketplace for recyclable materials. Whether it is plastic, paper, or aluminum, the waste and recycling industry is only able to recycle waste if a marketplace exists for the waste products. The current situation is unique because China is a primary source of manufactured products and packaging and their policy change transpired abruptly, something that is challenging for infrastructure services like solid waste and recycling collections and processing because it is so complex. Washington, Oregon, and California are particularly impacted by China’s policy change because the West Coast is active in trade with China and other countries where imports/exports are made easier because of where they are located. Washington’s recycling rate hovers around 50 percent, well above the national average, in part because of its proximity to China. China is the largest importer of recyclable materials, consuming approximately 2/3 of all recyclable materials that are collected worldwide and is one of the biggest manufacturers in the world – named the #1 Most Competitive Manufacturing Nation in 2016 by Deloitte, a global financial and consulting firm. This is a national and international issue, but the negative effects are very local. At this point, there is no excess capacity in the recycling facilities or markets in our region that can absorb the materials that China will no longer accept. Hence, this means there is not enough storage or processing capacity for the recyclable materials that are generated by the recycling programs in our state. As a result, this could create a potential crisis in which no markets would exist that can take the recyclable material. In the short term, this is forcing our waste and recycling industry to dispose of typically-recyclable materials in our system’s landfills while it continues to seek long- term market and processing solutions. About WRRA The WRRA is a statewide trade association representing Washington’s diverse and multifaceted solid waste handling industry. WRRA is the oldest solid waste trade association in the western United States, having been formed in 1947. We represent your local curbside solid waste and recycling services companies. Member companies provide services in virtually every community throughout the state, providing those services under state law, administered by the Washington Utilities and Transportation Commission or by city contract. WRRA Member companies also operate many of the material recovery facilities where the collected recyclables are sorted and processed for shipping. ### Page 6 of 140 AGENDA REPORT FOR: City Council November 8, 2017 TO: Rick Terway, Interim Public Works Director Workshop Meeting: 11/13/17 FROM: Troy Phillips, Senior Management Analyst Public Works SUBJECT: Cross Connect Policy Proposal I. REFERENCE(S): Cross Connect Program Review Powerpoint II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: Discussion III. FISCAL IMPACT: IV. HISTORY AND FACTS BRIEF: Council established and implemented a Cross Connection Control Program in 2001, per WAC 246-290-490. Key assumptions of program implementation included: the development and staffing of a Cross Connect Specialist position, requirement of annual testing of cross connection devices to ensure compliance, ongoing surveying of all connections, and program administration to include documentation, tracking, and reporting on all connections. In an effort to minimize costs to residents, a Cost -Sharing program was implemented, in which residents were given the option to pay $120-$140 for a backflow prevention device, whereby the City would cover the balance of the device cost, typically averaging $630. V. DISCUSSION: The City of Pasco is 1 of only 2 municipalities in the State who "own" or control resident Cross Connect devices. All other municipalities require residents to pay for and submit annually a 3rd party device test, which is then documented and administered by the municipalities' Cross Connection Control Program manager or specialist. The costs associated with testing residential backflow prevention devices as a service Page 7 of 140 provided by the utility are shared by all water utility users, including those who do not have or need backflow prevention devices. The salient policy question here being: Should all ratepayers continue to subsidize the cost of testing cross connect devices required of and benefitting 22% of ratepayers? Staff is requesting Council direction on this matter and offers the following options for discussion: 1. Continue Current Program (City conducts testing at cost to all Utility Customers). 2. Property Owner Responsibility (Regional standard, transfer ownership of backflow prevention devices to property owner and require annual testing conducted by a private party). 3. City Tests for User Fee (Property owners with cross connection devices to pay the cost for said testing services). Page 8 of 140 Page 9 of 140 AGENDA REPORT FOR: City Council November 2, 2017 TO: Dave Zabell, City Manager Workshop Meeting: 11/13/17 FROM: Stan Strebel, Deputy City Manager Executive SUBJECT: Contract for Collection Services with Washington Collectors Tri-Cities, Inc. I. REFERENCE(S): Proposed Contract II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: Discussion III. FISCAL IMPACT: The contract provides that the City will receive its full principal amount, plus interest (50%) on collected amounts. The collection agency fees (40%) are added to principal amounts and payable to the collection agency. The collection agency receives the other 50% of interest collected. IV. HISTORY AND FACTS BRIEF: The City has had a contract with Washington Collectors, a Pasco business, for many years for the collection of its delinquent accounts and other unpaid bills. Most typically, the delinquencies experienced are related to utility billings, infractions, civil judgments that have been imposed by the Municipal Court. The City most recently entered into a five-year collection agreement in 2013. The current proposal is also for a five-year agreement (2018-2022). This agreement covers collection needs for Municipal Court as well as the Finance Department. In 2013, staff worked with Washington Collectors to update and clarify contract language and procedures. Collection agencies must follow procedures set out in state law. V. DISCUSSION: Page 10 of 140 Staff recommends approval of the contract. Page 11 of 140 CITY OF PASCO COLLECTION AGENCY CONTRACT THIS CONTRACT is made and entered into by and between the City of Pasco,a municipal corporation of the State of Washington,hereinafter referred to as “City”,and Washington Collectors Tri—Cities,Inc,a collection agency duly licensed under and pursuant to the laws of the State of Washington,hereinafter referred to as “Agent”. RECITALS: WHEREAS,City desires Agent to undertake the collection of delinquent accounts from time to time in the manner and under the terms and conditions hereinafter set forth;and WHEREAS,the parties contemplate a future course of dealing as City and Agent,and desire to set forth and define herein the mutual rights,obligations,and liabilities of the parties hereto in such course of dealings; NOW,THEREFOR,in consideration of the promises and of the mutual agreements of the parties hereto,it is hereby agreed as follows: 1.AGENT APPOINTED: City hereby appoints Agent as its agent to collect and receive for the City all sums of money due and payable to the City of Pasco for debts which the City lists with the Agent. 2.COMPLIANCE WITH LAW: Agent shall comply with the collection laws of the State of Washington and Public Law 95—109(Fair Debt Collection Practices Act)and all Federal regulations and laws governing collections,including those mandated under the Health Insurance Portability and Accountability Act (HIPAA).New legislation affecting City or Agent with respect to terms and conditions of this contract shall be made a part of this contract by notice of either party to the other and in all cases compliance with the statute on its effective date shall be implemented until such time as an addendum to the contract can be written. 3.DEFINITIONS: A.“City”means the City of Pasco and all of its departments and divisions,including, but not limited to the Finance Division and the Municipal Court. B.“Collections”means monies collected from Debtor by Agent after date on which Agent acknowledges receipt of the account.Remittance statements for collections will show amounts for principal,contingent fees and interest separately. Page 1 of 5 Page 12 of 140 C.“Court”means the City of Pasco Municipal Court. D.“Debt”means unpaid amounts owed to the City including,but not limited to,utility billings,ambulancebillings,cemetery or other miscellaneous billings referred by the Finance Division,plus unpaid infractions,criminal ?nes,civil judgments,and other costs,assessments and forfeitures that have been imposed by the Court. E.“Direct Payments”means the City receives money due from debtor.The City will not accept payment on any account which has been listed with Agent,but will refer the debtor to the Agent for payment.Furthermore,City agrees that any holds (i.e., DOL adjudication,water lien or other);will not be released until all principal, contingent fees and interest are satis?ed. F.“Debtor”means any individual,partnership,corporation or other entity which owes money to City. G.“Contingent Fees”means money due Agent from the City in payment for collection services rendered,pursuant to RCW l9.l6.500. 4.TERM: This Contract shall continue in effect for a period beginning January 1,2018 and ending December 31.2022.unless earlier terminated as provided for in Section 10 of this contract. 5.COMPROMISE SETTLEMENT: Agent shall not accept any compromise settlement of principal amounts due the City without prior approval of the City. City shall not accept any compromise settlement of contingent fees and/or interest due the Agent without prior approval of the Agent. City will only request an account be cancelled and returned under special circumstances (such as an error or failure of reasonable notice).Cancellations require prior approval ofthe Agent. 6.RELATIONSHIP OF PARTIES: Agent is an independent contractor and nothing contained in this contract shall be construed as constituting Agent as servant,agent or employee of City.Agent is solely responsible for the employment,acts and omissions,control and direction of its employees. Page 2 of 5 Page 13 of 140 7.INDEMNIFICATION: Agent shall indemnify and save City harmless from any and all claims,demands,or causes ofaction asserted against City,arising out of or in any way connected with the collection activities of Agent on accounts referred to Agent by City,except due to the sole negligence of the City. 8.DESCRIPTION OF SERVICES: Agent’s services to be provided under the following conditions: A.All costs associated with pre—collectionand collection,including postage,supplies, and staff,will be provided by Agent. B.Pre-collection services and monies collected during pre—collectionare not subject to contingent fees.No monies will be collected by Agent during pre—collection.All payments during pre—collectionshall be forwarded to the City. C.Monies collected during regular collection will be subject to contingent fees and reported as applicable to the City Finance Division and remitted on a semi-monthly (by the 15“‘and 31“of each month respectively)basis or reported as applicable to the Court and remitted on a monthly basis.In both cases,remittance statements will show principal amounts and contingent fees separately.Interest postings will be remitted monthly on a separate statement. D.In all cases where the Revised Code of Washington (RCW 19.l6.500)allows contingent fees,such contingent fees will be added to the account balance pursuant to statute,at a rate of 40%,after pre—collection.Interest collect shall be split equally between the City and Agent. E.Direct contact with Debtors will be by trained collection staff. F.Agent will advance legal costs and have an attorney on retainer. G.Agent will provide reports and a variety of specialize reports monthly.Semi—annual and annual recaps of performance,for all types of accounts,will also be provided. H.The License Restoration Program and its process will be at the discretion of Agent. City shall not waive or reduce Agent’s processing fee. I.In cases where the Court places a “DOL”hold,the hold will remain in place until all principal,contingent fees and interest are satis?ed.In cases where payment is made by personal check.a two week clearing time will be placed on the posting before the “DOL”hold will be released. Page 3 of 5 Page 14 of 140 9.KEY CONTACT PERSONS: The authorized contact personnel for the City are: 0 Finance Divisions 0 Richa Sigdel,Financial Services Manager: 0 Stephanie Brock,Customer Service/Utility Billing Manager; 0 Tami Hewett,Accounts Receivable Clerk 0 Municipal Court o Dot French,Municipal Court Administrator The key contact personnel for Agent are: 0 Marcie Grace 0 J eana Mathews 10.EARLY TERMINATION: Either party may at any time cause this contract to terminate without cause,upon giving ninety (90) days written notice to the other party.The contract shall terminate at the end of the ninety days. 11.ASSURANCE OF NON-DISCRIMINATION: Agent hereby con?rms,agrees to,and assures compliance with non-discriminatory practices consistent with Titles VI and VII of the 1964 Civil Rights Act as amended in 1972;Executive Order 11246 as amended by Executive Order 11375:Sections 503 and 504 of the Rehabilitation Act of 1975 and the Age Discrimination in Employment Act of l967;the 1974 Vietnam Era Veteran ReadiustmentAssistance Act:and the Washington State Laws Against Discrimination,Chapter 490 RCW. Approved and executed on the ,day of ,2017. Page 4 of5 Page 15 of 140 WASHINGTON COL CTORS TRI-CITIES,INC. SEAN LAMB President Approved and executed on the ,day of ,2017. CITY OF PASCO Dave Zabe? City Manager ATTEST APPROVED AS TO FORM: Daniela Erickson,City Clerk Lee Kerr,City Attorney Page 5 of5 Page 16 of 140 AGENDA REPORT FOR: City Council November 8, 2017 TO: Dave Zabell, City Manager Workshop Meeting: 11/13/17 FROM: Richa Sigdel, Finance Director Finance SUBJECT: Revenue Bonds for Waterworks Utility I. REFERENCE(S): PROPOSED Ordinance Preliminary Official Statement Project Listing II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: Discussion III. FISCAL IMPACT: Estimated total bonds of approximately $10 million to be issued. Debt service requirements to be met from revenue generated by utility user fees. IV. HISTORY AND FACTS BRIEF: As previously planned and discussed with Council during rate, Capital Improvement Plan (CIP) and preliminary budget presentations, the proposed revenue bonds will finance the design, construction, equipment and furnishings for water and sewer system projects per the CIP and an additional amount to fund the required reserve fund to assure bond repayment. The subject bonds are expected to be repaid over a 20-year period. The City has retained the services of a financial advisor to assist with decisions relating to the structuring and sale of the bonds. The City has also applied for a bond rating with Standard and Poor's (S & P) which is expected to be beneficial to the City in time of sale and interest on the bonds. The proposed ordinance names the City Manager as the City's Designated Representative to conduct the bond sale in the manner and upon the terms deemed Page 17 of 140 most advantageous to the City. The ordinance, when completed for November 20, will provide the parameters within which the Designated Representative may act (See Proposed Ordinance Exhibit A. Please note that at the time of writing this report, not all parameters had been proposed. Recommended parameters will be provided in the proposed final ordinance.) The attachment provides some flexibility to the Designated Representative in making final sale decisions, in the event that conditions change prior to the actual date of the sale (anticipated to take place on December 4). V. DISCUSSION: A listing of projects included in the funding is attached. Staff anticipates being able to provide final information, including the rating for the bonds at the December 4 Council Meeting. The City's current S & P rating for Water and Sewer bond is AA -. Page 18 of 140 51615205.7 CITY OF PASCO, WASHINGTON ORDINANCE NO. 4365 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; specifying, adopting and ordering the carrying out of a system or plan of additions to and betterments and extensions of the waterworks utility of the City; providing for the issuance of one or more series of water and sewer revenue bonds of the City in an aggregate principal amount of not to exceed $20,000,000 for the purpose of providing the funds necessary (a) to pay all or a portion of the costs of carrying out the plan of additions, (b) to make a deposit to the debt service reserve account as needed, (c) to refund and redeem outstanding water and sewer revenue bonds of the City and (d) to pay the costs of issuance and sale of the bonds and the administrative costs of the refunding; fixing or setting parameters with respect to certain terms and covenants of the bonds; appointing the City’s designated representative to approve the final terms of the sale of the bonds; and providing for other related matters. Passed: November 20, 2017 This document was prepared by: FOSTER PEPPER PLLC 1111 Third Avenue, Suite 3400 Seattle, Washington 98101 (206) 447-4400 Page 19 of 140 -i- 51615205.7 TABLE OF CONTENTS Page Section 1. Definitions................................................................................................................1  Section 2. Findings and Determinations ...................................................................................8  Section 3. Plan of Additions ...................................................................................................10  Section 4. Authorization of the Bonds ....................................................................................10  Section 5. Appointment of Designated Representative; Description of the Bonds ................10  Section 6. Registration and Transfer of Bonds .......................................................................11  Section 7. Form and Execution of Bonds. ..............................................................................12  Section 8. Payment of Bonds ..................................................................................................12  Section 9. Redemption Provisions and Purchase of Bonds ....................................................13  Section 10. Failure to Pay Bonds ..............................................................................................14  Section 11. Bond Fund; Payments into Bond Fund ..................................................................14  Section 12. Pledge, Lien and Charge for Payment of the Bonds ..............................................15  Section 13. Flow of Funds ........................................................................................................16  Section 14. Covenants ...............................................................................................................16  Section 15. Provisions for Future Parity Bonds ........................................................................17  Section 16. Tax Covenants .......................................................................................................18  Section 17. Refunding or Defeasance of Bonds .......................................................................18  Section 18. Deposit of Bond Proceeds; Creation of Construction Accounts ............................19  Section 19. Use of Refunding Proceeds; the Refunding Plan ...................................................20  Section 20. Sale and Delivery of the Bonds .............................................................................22  Section 21. Official Statement; Continuing Disclosure ............................................................22  Section 22. General Authorization and Ratification .................................................................23  Section 23. Severability ............................................................................................................23  Section 24. Effective Date of Ordinance ..................................................................................23  Exhibit A Parameters for Final Terms Exhibit B Parity Conditions Exhibit C Form of Undertaking to Provide Continuing Disclosure Page 20 of 140 -1- 51615205.7 CITY OF PASCO, WASHINGTON ORDINANCE NO. 4365 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; specifying, adopting and ordering the carrying out of a system or plan of additions to and betterments and extensions of the waterworks utility of the City; providing for the issuance of one or more series of water and sewer revenue bonds of the City in an aggregate principal amount of not to exceed $20,000,000 for the purpose of providing the funds necessary (a) to pay all or a portion of the costs of carrying out the plan of additions, (b) to make a deposit to the debt service reserve account as needed, (c) to refund and redeem outstanding water and sewer revenue bonds of the City and (d) to pay the costs of issuance and sale of the bonds and the administrative costs of the refunding; fixing or setting parameters with respect to certain terms and covenants of the bonds; appointing the City’s designated representative to approve the final terms of the sale of the bonds; and providing for other related matters. THE CITY COUNCIL OF THE CITY OF PASCO, WASHINGTON, DO ORDAIN as follows: Section 1. Definitions. As used in this ordinance, the following words shall have the following meanings: (a) “2009 Bonds” means the outstanding Water and Sewer Revenue Bonds, 2009, of the City issued pursuant to Ordinance No. 3915. (b) “2010A Bonds” means the outstanding Water and Sewer Improvement and Refunding Revenue Bonds, 2010A, of the City issued pursuant to Ordinance No. 3962. (c) “2010T Bonds” means the outstanding Water and Sewer Refunding Revenue Bonds, 2010T (Taxable), of the City issued pursuant to Ordinance No. 3962. (d) “2013A Bonds” means the outstanding Water and Sewer Revenue Bonds, 2013A, of the City issued pursuant to Ordinance No. 4126. (e) “2013T Bonds” means the outstanding Water and Sewer Revenue Bonds, 2013T (Taxable), of the City issued pursuant to Ordinance No. 4126. (f) “2015 Bonds” means the outstanding Water and Sewer Improvement and Refunding Revenue Bonds, 2015, of the City issued pursuant to Ordinance No. 4254. (g) “Acquired Obligations” means the United States Treasury Certificates of Indebtedness, Notes, and Bonds-State and Local Government Series and/or other Government Obligations, as identified in the Refunding Trust Agreement, purchased to carry out the Refunding Plan. Page 21 of 140 -2- 51615205.7 (h) “Alternate Security” means any bond insurance, collateral, security, letter of credit, guaranty, surety bond or similar credit enhancement device providing for or securing the payment of all or part of the principal of and interest on any specified Parity Bonds, issued by an institution which has been assigned a credit rating at the time of issuance of the applicable Parity Bonds, respectively, secured by such Alternate Security in the highest rating categories by both Moody’s Investors Service, Inc., and S&P Global. (i) “Annual Debt Service” for any or all Parity Bonds for any year means all the interest, plus all principal which will mature or come due in such year, less all bond interest payable from the proceeds of any such bonds in that year. (j) “Assessment Bonds” means, at the time of determination, Parity Bonds then outstanding equal to the sum of the nondelinquent unpaid principal amount of ULID Assessments then outstanding plus any ULID Assessment payments then on deposit in the Principal and Interest Account of the Bond Fund. Assessment Bonds shall be allocated to each remaining maturity of Parity Bonds in the same proportion as the total of the Assessment Bonds relates to the total of the Parity Bonds then outstanding. (k) “Authorized Denomination” means $5,000.00 or any integral multiple thereof within a maturity. (l) “Average Annual Debt Service” means, at the time of its calculation, the sum of the Annual Debt Service for the remaining years to the last scheduled maturity of the applicable Parity Bonds divided by the number of those years. (m) “Beneficial Owner” means, with respect to a Bond, the owner of any beneficial interest in that Bond. (n) “Bond” means each Project Bond and each Refunding Bond issued pursuant to and for the purposes provided in this ordinance. (o) “Bond Counsel” means the firm of Foster Pepper PLLC, its successor, or any other attorney or firm of attorneys selected by the City with a nationally recognized standing as bond counsel in the field of municipal finance. (p) “Bond Fund” means the Water and Sewer Revenue and Refunding Bond Redemption Fund, 1991, of the City created and established by Ordinance No. 2846 for the payment of the principal of and interest on the Parity Bonds. (q) “Bond Purchase Agreement” means an offer to purchase the Bonds, or a Series of Bonds, setting forth certain terms and conditions of the issuance, sale and delivery of those Bonds, which offer is authorized to be accepted by the Designated Representative on behalf of the City, if consistent with this ordinance. (r) “Bond Register” means the books or records maintained by the Bond Registrar for the purpose of identifying ownership of each Bond. Page 22 of 140 -3- 51615205.7 (s) “Bond Registrar” means the Fiscal Agent, or any successor bond registrar selected by the City. (t) “City” means the City of Pasco, Washington, a municipal corporation duly organized and existing under the laws of the State. (u) “City Clerk” means the City Clerk of the City or the successor to the functions of that officer. (v) “City Contribution” means legally available money of the City, in addition to proceeds of the Bonds, necessary or advisable to carry out the Refunding Plan, as determined by the Designated Representative. (w) “City Council” means the legislative authority of the City, as duly and regularly constituted from time to time. (x) “Code” means the United States Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. (y) “Construction Accounts” means such accounts created in the Water/Sewer Fund as the Finance Director shall designate for the purpose of paying the costs of the Plan of Additions and the costs of issuance of the Bonds. (z) “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. (aa) “DTC” means The Depository Trust Company, New York, New York, or its nominee. (bb) “Designated Representative” means an officer of the City appointed in Section 5 of this ordinance to serve as the City’s designated representative in accordance with RCW 39.46.040(2). (cc) “Final Terms” means the terms and conditions for the sale of a Series of Bonds including, but not limited to the amount, date or dates, denominations, interest rate or rates (or mechanism for determining interest rate or rates), payment dates, final maturity, redemption rights, price, and other terms or covenants, including minimum savings for refunding bonds (if the refunding bonds are issued for savings purposes). (dd) “Finance Director” means the City’s Finance Director or such other officer of the City who succeeds to substantially all of the responsibilities of that office. (ee) “Fiscal Agent” means the fiscal agent of the State, as the same may be designated by the State from time to time. Page 23 of 140 -4- 51615205.7 (ff) “Future Parity Bonds” means any and all water and sewer revenue bonds or other obligations of the City issued or incurred after the date of the issuance of the Bonds pursuant to the provisions of the Parity Bond Ordinances, the payment of the principal of and interest on which constitutes a lien and charge upon the Net Revenue of the Waterworks Utility and ULID Assessments on a parity with the lien and charge upon such Net Revenue and ULID Assessments for the Outstanding Parity Bonds and the Bonds, but shall not include variable rate obligations. (gg) “Government Obligations” has the meaning given in RCW 39.53.010, as now in effect or as may hereafter be amended. (hh) “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. (ii) “Issue Date” means, with respect to a Bond, the date of initial issuance and delivery of that Bond to the Purchaser in exchange for the purchase price of that Bond. (jj) “Letter of Representations” means the Blanket Issuer Letter of Representations between the City and DTC dated August 31, 1998. (kk) “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. (ll) “Mayor” means the Mayor of the City or the successor to the functions of that office. (mm) “MSRB” means the Municipal Securities Rulemaking Board. (nn) “Net Revenue of the Waterworks Utility” or “Net Revenue” means the Gross Revenue less Operating and Maintenance Expenses. (oo) “Official Statement” means an offering document, disclosure document, private placement memorandum or substantially similar disclosure document provided to purchasers and potential purchasers in connection with the initial offering of the Bonds in conformance with Rule 15c2-12 or other applicable regulations of the SEC. (pp) “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 Page 24 of 140 -5- 51615205.7 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. (qq) “Outstanding Parity Bonds” means the outstanding 2009 Bonds, 2010A Bonds, 2010T Bonds, 2013A Bonds, 2013T Bonds, and 2015 Bonds. Outstanding Parity Bonds do not include any Refunded Bonds. (rr) “Owner” means, without distinction, the Registered Owner and the Beneficial Owner. (ss) “Parity Bonds” means the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds. (tt) “Parity Bond Ordinances” means Ordinance No. 3915, Ordinance No. 3962, Ordinance No. 4126, Ordinance No. 4254 and this ordinance. (uu) “Parity Conditions” means the conditions for issuing Future Parity Bonds set forth in Exhibit B to this ordinance, which is incorporated herein by this reference. (vv) “Plan of Additions” means the system or plan of additions to and betterments and extensions of the Waterworks Utility specified, adopted and ordered to be carried out by this ordinance. (ww) “Principal and Interest Account” means the account of that name created in the Bond Fund for the payment of the principal of and interest on all Parity Bonds. (xx) “Project Bond” means each bond issued pursuant to this ordinance for the purpose of providing money required to carry out and accomplish the Plan of Additions, including without limitation paying the allocable share of the costs related to the issuance, sale and delivery of such bond and providing for the Reserve Requirement with respect to the Project Bonds. (yy) “Purchaser” means D.A. Davidson & Co. of Seattle, Washington, or such other purchaser of the Bonds whose offer is accepted by the Designated Representative in accordance with this ordinance. (zz) “Rating Agency” means any nationally recognized rating agency then maintaining a rating on the Bonds at the request of the City. (aaa) “Record Date” means the Bond Registrar’s close of business on the 15th day of the month preceding an interest payment date. With respect to redemption of a Bond prior to its maturity, the Record Date shall mean the Bond Registrar’s close of business on the date on which the Bond Registrar sends the notice of redemption in accordance with Section 9. (bbb) “Redemption Date” means, with respect to each series of the Refunded Bonds, a date or dates selected by the Designated Representative. Page 25 of 140 -6- 51615205.7 (ccc) “Refunded Bonds” means the Refunding Candidates selected by the Designated Representative and identified in the Refunding Plan. (ddd) “Refunding Bond” means each bond issued pursuant to this ordinance for the purpose of carrying out the Refunding Plan, including without limitation paying the administrative costs of the refunding and the allocable share of costs related to the issuance, sale and delivery of such bond and providing for the Reserve Requirement with respect to the Refunding Bonds. (eee) “Refunding Candidates” means: (1) the currently outstanding $6,485,000 principal amount of the 2009 Bonds not subject to extraordinary redemption maturing on December 1 of each of the years 2018 through 2021 and 2023 through 2029; and (2) the currently outstanding $4,480,000 principal amount of the 2010A Bonds maturing on June 1 of each of the years 2018 through 2020, 2025 and 2029. (fff) “Refunding Plan” means (as further described in the Refunding Trust Agreement): (1) the deposit with the Refunding Trustee of proceeds of the Bonds in an amount, together with the City Contribution (if any), sufficient to acquire the Acquired Obligations and establish a beginning cash balance; (2) the receipt by the Refunding Trustee of the maturing principal of and interest on the Acquired Obligations, and the application of such amounts (together with any other cash held by it) to pay principal of and interest on the Refunded Bonds when due up to and including the applicable Redemption Dates, and the call, payment and redemption of the Refunded Bonds on the applicable Redemption Dates at a price equal to the principal amount to be redeemed; and (3) payment of the costs of issuing the Bonds and the costs of carrying out the foregoing elements of the Refunding Plan, if payment of such costs is so specified in the Refunding Trust Agreement. (ggg) “Refunding Trust Agreement” means the refunding trust agreement between the City and the Refunding Trustee, providing for the carrying out of the Refunding Plan. (hhh) “Refunding Trustee” means the trustee, or any successor trustee, designated by the Designated Representative to serve as refunding trustee to carry out the Refunding Plan. (iii) “Registered Owner” means, with respect to a Bond, the person in whose name that Bond is registered on the Bond Register. For so long as the City utilizes the book-entry only system for the Bonds under the Letter of Representations, Registered Owner shall mean the Securities Depository. (jjj) “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. Page 26 of 140 -7- 51615205.7 (kkk) “Reserve Insurance” means, in lieu of cash and investments, insurance obtained by the City to fund all or a portion of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained; and for the Outstanding Parity Bonds and the Bonds means the Surety Bond provided by the Reserve Insurer. (lll) “Reserve Insurer” means Ambac Assurance Corporation for the Outstanding Parity Bonds and the Bonds. (mmm) “Reserve Requirement” means: (1) For the Outstanding Parity Bonds and the Bonds, an amount equal to the least of (a) 10% of the issue price of the then-outstanding Parity Bonds, (b) Maximum Annual Debt Service on the then-outstanding Parity Bonds and (c) 1.25 times Average Annual Debt Service on the then-outstanding Parity Bonds. For the purposes of determining Maximum Annual Debt Service and Average Annual Debt Service for calculating the Reserve Requirement, all bonds payable or proposed to be paid from the Bond Fund shall be treated as a single issue and the number of years to the last scheduled maturity for any of those issues shall be used as the denominator. (2) For any Future Parity Bonds secured by the Reserve Account, an amount equal to the difference between the Reserve Requirement for the then-outstanding Parity Bonds secured by the Reserve Account and the least of (a) 10% of the issue price of the then-outstanding Parity Bonds secured by the Reserve Account and the Future Parity Bonds proposed to be issued, (b) Maximum Annual Debt Service on the then-outstanding Parity Bonds secured by the Reserve Account and the Future Parity Bonds proposed to be issued and (c) 1.25 times Average Annual Debt Service on the then-outstanding Parity Bonds secured by the Reserve Account and the Future Parity Bonds proposed to be issued, but in no event to exceed an amount equal to the least of 10% of the issue price of the proposed Future Parity Bonds, Maximum Annual Debt Service on those bonds and 1.25 times Average Annual Debt Service on the proposed bonds. For the purposes of determining Maximum Annual Debt Service and Average Annual Debt Service for calculating the Reserve Requirement, all bonds payable or proposed to be paid from the Bond Fund secured by the Reserve Account shall be treated as a single issue and the number of years to the last scheduled maturity for any of those issues shall be used as the denominator. (nnn) “Rule 15c2-12” means Rule 15c2-12 promulgated by the SEC under the Securities Exchange Act of 1934, as amended. (ooo) “SEC” means the United States Securities and Exchange Commission. (ppp) “Series of Bonds” or “Series” means a series of the Bonds issued pursuant to this ordinance. (qqq) “State” means the State of Washington. Page 27 of 140 -8- 51615205.7 (rrr) “Surety Bond” means the surety bond issued by the Reserve Insurer guaranteeing certain payments into the Reserve Account with respect to the Outstanding Parity Bonds and the Bonds as provided in and subject to the limitations set forth in that surety bond. (sss) “Term Bonds” means each Bond designated as a Term Bond and subject to mandatory redemption in the years and amounts set forth in the Bond Purchase Agreement. For any Outstanding Parity Bonds or Future Parity Bonds, “Term Bonds” means those bonds of any single issue or series designated as Term Bonds pursuant to the ordinance authorizing their issuance or sale and which are subject to mandatory prior redemption or for which mandatory sinking fund installments are provided. (ttt) “ULID” means utility local improvement district. (uuu) “ULID Assessments” means all ULID assessments and installments thereof, plus interest and penalties thereon, in any ULID created to secure the payment of any Parity Bonds and pledged to be paid into the Bond Fund. (vvv) “Undertaking” means the undertaking to provide continuing disclosure entered into pursuant to Section 21(c) of this ordinance. (www) “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. (xxx) “Waterworks Utility” means the combined sewerage system and water system of the City, together with the storm or surface water sewers and agricultural/industrial wastewater treatment facilities heretofore or hereafter authorized to be constructed and installed as a part of such combined systems, and together with all additions thereto and betterments and extensions thereof now or hereafter made. Section 2. Findings and Determinations. The City takes note of the following facts and makes the following findings and determinations: (a) Background. The City, by Ordinance No. 531, passed March 7, 1944, provided that the system of sewerage of the City, including all additions, extensions and betterments thereto, should be operated as a part of and as belonging to the Waterworks Utility of the City pursuant to the provisions of Chapter 193 of the Laws of 1941 of the State of Washington (RCW 35.67.320 et seq.). (b) Plan of Additions. The City has determined that it is necessary and in the best interests of the City that certain improvements be made and there be adopted a system or plan of additions to and betterments and extensions of the Waterworks Utility (the “Plan of Additions”). (c) Outstanding Parity Bonds. Pursuant to Ordinance No. 2846, the City heretofore issued and sold its 1991 Bonds (all of which have been paid and retired), and reserved the right to issue additional water and sewer revenue bonds of the City which would have a lien and charge upon the Net Revenue of the Waterworks Utility and ULID Assessments on a parity with those 1991 Bonds if the Parity Conditions are met. The City currently has outstanding the Page 28 of 140 -9- 51615205.7 following water and sewer revenue bonds issued on a parity of lien and charge on the Net Revenue of the Waterworks Utility and ULID Assessments with the 1991 Bonds: Name of Issue Original Principal Amount Dated Date Authorizing Ordinance Ordinance Passage Date 2009 Bonds 10,045,000 4/17/2009 3915 4/06/2009 2010A Bonds 9,070,000 6/03/2010 3962 5/17/2010 2010T Bonds 1,240,000 6/03/2010 3962 5/17/2010 2013A Bonds 2,520,000 12/05/2013 4126 11/18/2013 2013T Bonds 7,235,000 12/05/2013 4126 11/18/2013 2015 Bonds 14,380,000 12/22/2015 4254 11/30/2015 (d) Parity Conditions Met. The City Council finds and declares that (1) all payments required by the Outstanding Parity Bonds are provided for in this ordinance or have been provided for or made into the Bond Fund for those outstanding bonds and that no deficiency exists in such fund; (2) provision is hereinafter made for the deposit in the Reserve Account of the Bond Fund of the Reserve Requirement for the Bonds; and (3) that all other conditions set forth in the Parity Conditions will have been met and satisfied before the Bonds are delivered to the initial purchaser. (e) Refunding Candidates. In order to realize a debt service savings to the City and its ratepayers, the City Council wishes to refund all or a portion of the Refunding Candidates. Chapter 39.53 RCW and other laws of the State authorize the City to carry out the Refunding Plan. (f) Sufficiency of Gross Revenue; Due Regard. The City Council finds and determines that the Gross Revenue of the Waterworks Utility will be more than sufficient to (1) meet all Operating and Maintenance Expenses thereof (and the cost of maintenance and operation as contemplated by RCW 35.92.100), and the debt service requirements of the Outstanding Parity Bonds, and (2) permit the setting aside into the Bond Fund out of the Net Revenue of the Waterworks Utility of the City of amounts sufficient to pay the principal of and interest on the Bonds when due. The City Council declares that in creating the Bond Fund and in fixing the amounts to be paid into that fund, it has exercised due regard for Operating and Maintenance Expenses (and the cost of maintenance and operation contemplated by RCW 35.92.100) and the debt service requirements of the Outstanding Parity Bonds, and the City has not bound or obligated itself to set aside and pay into the Bond Fund a greater amount or proportion of the Gross Revenue of the Waterworks Utility of the City than in the judgment of the City Council will be available over and above such Operating and Maintenance Expenses and debt service requirements of the Outstanding Parity Bonds, and that the City has not pledged any portion of the Gross Revenue of the Waterworks Utility of the City for any indebtedness other than the Outstanding Parity Bonds. (g) Issuance of Bonds. Based on the foregoing, the City Council finds that it is in the best interest of the City to issue and sell the Bonds to the Purchaser, pursuant to the terms set forth in the Bond Purchase Agreement as approved by the Designated Representative consistent with this ordinance. Page 29 of 140 -10- 51615205.7 Section 3. Plan of Additions. The City specifies, adopts and orders the carrying out of a system or plan of additions to and betterments and extensions of the Waterworks Utility consisting of the following improvements (the “Plan of Additions”), which are included and more particularly described in the City’s Capital Improvement Plan 2018-2023 approved September 5, 2017: (a) Water system improvements, including pumping capacity and filter backwash capability improvements to the West Pasco Water Treatment Plant and water line replacement improvements in Richardson Road; and (b) Sewer system improvements, including suction valve, access hatch, pump and pipe improvements to the 9th and Washington lift station, transmission main improvements in the northwest area, Pearl Street lift station replacement, repair and relining improvements to the West Pasco trunk sewer transmission line, and other improvements identified in the capital facility plan for the wastewater treatment plant facility, as may be further developed and amended. There shall be included in the foregoing system or plan the acquisition and installation of all necessary valves, pumps, fittings, couplings, connections, equipment and appurtenances, and replacements and improvements necessary or desirable to maintain or increase the effectiveness of the service provided by such facilities, other improvements to and extensions of the Waterworks Utility, the acquisition of any easements, rights-of-way and land that may be required and the performance of such work as may be incidental and necessary. All of the foregoing shall be in accordance with the plans and specifications therefor prepared by the staff and consulting engineers of the City. The City Council may modify the details of the Plan of Additions where, in its judgment, it appears advisable if such modifications do not substantially alter the purposes of the Plan of Additions. The estimated cost of the acquisition, construction, installation and financing of the above-described improvements to be paid from the proceeds of the Bonds is declared to be approximately $9,995,000. Any excess proceeds of the Project Bonds remaining following payment of the costs of the Plan of Additions shall be applied to costs of other improvements to the Waterworks Utility of the City heretofore or hereafter approved in the City’s Capital Budget Section 4. Authorization of the Bonds. The City is authorized to issue, sell and deliver water and sewer revenue bonds in one or more Series (as determined by the Designated Representative pursuant to the parameters for Final Terms set forth in Exhibit A, which is attached to this ordinance and incorporated by this reference) for the purpose of providing funds necessary to (a) pay costs of carrying out the Plan of Additions, (b) carry out the Refunding Plan; (c) make a deposit to the Reserve Account as needed to satisfy the Reserve Requirement and (d) pay the costs of issuance and sale of the Bonds. Section 5. Appointment of Designated Representative; Description of the Bonds. The Finance Director and the Deputy City Manager are each appointed as the Designated Representative of the City, both with the individual authority to conduct the sale of the Bonds in Page 30 of 140 -11- 51615205.7 the manner and upon the terms deemed most advantageous to the City, and to approve the Final Terms of the Bonds, with such additional terms and covenants as the Designated Representative deems advisable, within the parameters set forth in Exhibit A. Section 6. Registration and Transfer of Bonds. (a) Registration of Bonds; Bond Register. Each Bond shall be issued only in registered form as to both principal and interest, and the ownership of each Bond shall be recorded on the Bond Register. The Bond Register shall contain the name and mailing address of each Registered Owner and the principal amount and number of each Bond held by each Registered Owner. (b) Bond Registrar; Duties. The Fiscal Agent is appointed as initial Bond Registrar. The Bond Registrar shall keep, or cause to be kept, the Bond Register, which shall be open to inspection by the City at all times. The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of the Bonds and this ordinance, to serve as the City’s paying agent for the Bonds and to carry out all of the Bond Registrar’s powers and duties under this ordinance and the System of Registration. The Bond Registrar shall be responsible for its representations contained in the Bond Registrar’s Certificate of Authentication on each Bond. The Bond Registrar may become an Owner with the same rights it would have if it were not the Bond Registrar and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as members of, or in any other capacity with respect to, any committee formed to protect the rights of Owners. (c) Transfer or Exchange. A Bond surrendered to the Bond Registrar may be exchanged for a Bond or Bonds in any Authorized Denomination of an equal aggregate principal amount and of the same Series, interest rate and maturity. A Bond may be transferred only if endorsed in the manner provided thereon and surrendered to the Bond Registrar. Any exchange or transfer shall be without cost to the Owner or transferee. The Bond Registrar shall not be obligated to exchange any Bond or transfer registered ownership during the period between the applicable Record Date and the next upcoming interest payment or redemption date. (d) Securities Depository; Book-Entry Only Form. DTC is appointed as initial Securities Depository. Each Bond initially shall be registered in the name of Cede & Co., as the nominee of DTC. Each Bond registered in the name of the Securities Depository shall be held fully immobilized in book-entry only form by the Securities Depository in accordance with the provisions of the Letter of Representations. Registered ownership of any Bond registered in the name of the Securities Depository may not be transferred except: (i) to any successor Securities Depository; (ii) to any substitute Securities Depository appointed by the City; or (iii) to any person if the Bond is no longer to be held in book-entry only form. Upon the resignation of the Securities Depository, or upon a termination of the services of the Securities Depository by the City, the City may appoint a substitute Securities Depository. If (i) the Securities Depository resigns and the City does not appoint a substitute Securities Depository, or (ii) the City terminates the services of the Securities Depository, the Bonds no longer shall be held in book- entry only form and the registered ownership of each Bond may be transferred to any person as provided in this ordinance. Page 31 of 140 -12- 51615205.7 Neither the City nor the Bond Registrar shall have any obligation to participants of any Securities Depository or the persons for whom they act as nominees regarding accuracy of any records maintained by the Securities Depository or its participants. Neither the City nor the Bond Registrar shall be responsible for any notice that is permitted or required to be given to a Registered Owner except such notice as is required to be given by the Bond Registrar to the Securities Depository. Section 7. Form and Execution of Bonds. (a) Form of Bonds; Signatures and Seal. Each Bond shall be prepared in a form consistent with the provisions of this ordinance and State law. Each Bond shall be signed by the Mayor and the City Clerk, either or both of whose signatures may be manual or in facsimile, and the seal of the City or a facsimile reproduction thereof shall be impressed or printed thereon. If any officer whose manual or facsimile signature appears on a Bond ceases to be an officer of the City authorized to sign bonds before the Bond bearing his or her manual or facsimile signature is authenticated by the Bond Registrar, or issued or delivered by the City, that Bond nevertheless may be authenticated, issued and delivered and, when authenticated, issued and delivered, shall be as binding on the City as though that person had continued to be an officer of the City authorized to sign bonds. Any Bond also may be signed on behalf of the City by any person who, on the actual date of signing of the Bond, is an officer of the City authorized to sign bonds, although he or she did not hold the required office on its Issue Date. (b) Authentication. Only a Bond bearing a Certificate of Authentication in substantially the following form, manually signed by the Bond Registrar, shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance: “Certificate of Authentication. This Bond is one of the fully registered City of Pasco, Washington, Water and Sewer Revenue [Bonds] [Refunding Bonds] [Improvement and Refunding Bonds], [2017] [2018] described in the Bond Ordinance.” The authorized signing of a Certificate of Authentication shall be conclusive evidence that the Bond so authenticated has been duly executed, authenticated and delivered and is entitled to the benefits of this ordinance. Section 8. Payment of Bonds. Principal of and interest on each Bond shall be payable in lawful money of the United States of America. Principal of and interest on each Bond registered in the name of the Securities Depository is payable in the manner set forth in the Letter of Representations. Interest on each Bond not registered in the name of the Securities Depository is payable by electronic transfer on the interest payment date, or by check or draft of the Bond Registrar mailed on the interest payment date to the Registered Owner at the address appearing on the Bond Register on the Record Date. The City is not required to make electronic transfers except pursuant to a request by a Registered Owner in writing received on or prior to the Record Date and at the sole expense of the Registered Owner. Principal of each Bond not registered in the name of the Securities Depository is payable upon presentation and surrender of the Bond by the Registered Owner to the Bond Registrar. The Bonds are payable solely out of the Bond Fund and shall not be general obligations of the City. The Bonds are not subject to acceleration under any circumstances. Page 32 of 140 -13- 51615205.7 Section 9. Redemption Provisions and Purchase of Bonds. (a) Optional Redemption. The Bonds shall be subject to redemption at the option of the City on terms acceptable to the Designated Representative, as set forth in the Bond Purchase Agreement, consistent with the parameters set forth in Exhibit A. (b) Mandatory Redemption. Each Bond that is designated as a Term Bond in the Bond Purchase Agreement, consistent with the parameters set forth in Exhibit A and except as set forth below, shall be called for redemption at a price equal to the stated principal amount to be redeemed, plus accrued interest, on the dates and in the amounts as set forth in the Bond Purchase Agreement. If a Term Bond is redeemed under the optional redemption provisions, defeased or purchased by the City and surrendered for cancellation, the principal amount of the Term Bond so redeemed, defeased or purchased (irrespective of its actual redemption or purchase price) shall be credited against one or more scheduled mandatory redemption installments for that Term Bond. The City shall determine the manner in which the credit is to be allocated and shall notify the Bond Registrar in writing of its allocation prior to the earliest mandatory redemption date for that Term Bond for which notice of redemption has not already been given. (c) Selection of Bonds for Redemption; Partial Redemption. If fewer than all of the outstanding Bonds are to be redeemed at the option of the City, the City shall select the Series and maturities to be redeemed. If fewer than all of the outstanding Bonds of a maturity of a Series are to be redeemed, the Securities Depository shall select Bonds registered in the name of the Securities Depository to be redeemed in accordance with the Letter of Representations, and the Bond Registrar shall select all other Bonds to be redeemed randomly in such manner as the Bond Registrar shall determine. All or a portion of the principal amount of any Bond that is to be redeemed may be redeemed in any Authorized Denomination. If less than all of the outstanding principal amount of any Bond is redeemed, upon surrender of that Bond to the Bond Registrar, there shall be issued to the Registered Owner, without charge, a new Bond (or Bonds, at the option of the Registered Owner) of the same Series, maturity and interest rate in any Authorized Denomination in the aggregate principal amount to remain outstanding. (d) Notice of Redemption. Notice of redemption of each Bond registered in the name of the Securities Depository shall be given in accordance with the Letter of Representations. Notice of redemption of each other Bond, unless waived by the Registered Owner, shall be given by the Bond Registrar not less than 20 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the Registered Owner at the address appearing on the Bond Register on the Record Date. The requirements of the preceding sentence shall be satisfied when notice has been mailed as so provided, whether or not it is actually received by an Owner. In addition, the redemption notice shall be mailed or sent electronically within the same period to the MSRB (if required under the Undertaking), to each Rating Agency, and to such other persons and with such additional information as the Finance Director shall determine, but these additional mailings shall not be a condition precedent to the redemption of any Bond. (e) Rescission of Optional Redemption Notice. In the case of an optional redemption, the notice of redemption may state that the City retains the right to rescind the redemption notice and the redemption by giving a notice of rescission to the affected Registered Owners at any time Page 33 of 140 -14- 51615205.7 on or prior to the date fixed for redemption. Any notice of optional redemption that is so rescinded shall be of no effect, and each Bond for which a notice of redemption has been rescinded shall remain outstanding. (f) Effect of Redemption. Interest on each Bond called for redemption shall cease to accrue on the date fixed for redemption, unless either the notice of optional redemption is rescinded as set forth above, or money sufficient to effect such redemption is not on deposit in the Bond Fund or in a trust account established to refund or defease the Bond. (g) Purchase of Bonds. The City reserves the right to purchase any or all of the Bonds offered to the City or in the open market at any time at any price acceptable to the City plus accrued interest to the date of purchase. Section 10. Failure to Pay Bonds. If the principal of any Bond is not paid when the Bond is properly presented at its maturity date or date fixed for redemption, the City shall be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or date fixed for redemption until that Bond, both principal and interest, is paid in full or until sufficient money for its payment in full is on deposit in the Bond Fund, or in a trust account established to refund or defease the Bond, and the Bond has been called for payment by giving notice of that call to the Registered Owner. Section 11. Bond Fund; Payments into Bond Fund. The Bond Fund has been previously created and established as a special fund of the City known and designated as the Water and Sewer Revenue and Refunding Bond Redemption Fund, 1991, which fund has been divided into two accounts, namely, the Principal and Interest Account and the Reserve Account. So long as any Parity Bonds are outstanding against the Bond Fund, the Finance Director shall set aside and pay into the Bond Fund all ULID Assessments upon their collection and, out of the Net Revenue of the Waterworks Utility, certain fixed amounts without regard to any fixed proportion, namely, amounts, together with any ULID Assessments collected by the City and deposited into the applicable account in the Bond Fund and investment earnings in that account, as follows: (a) Into the Principal and Interest Account, on or before each interest or principal and interest payment date, an amount equal to the interest or the principal and interest to become due and payable on that interest or principal and interest payment date of all Parity Bonds; and (b) Into the Reserve Account, on the Issue Date of the Bonds, an amount sufficient, together with the Reserve Insurance, to fully fund the Reserve Requirement for all Parity Bonds. Money deposited in the Reserve Account for the Reserve Requirement for all Parity Bonds may be decreased for any issue of Parity Bonds when and to the extent the City has provided for an Alternate Security or Reserve Insurance for those bonds. When the 2009 Bonds, 2010A Bonds, 2010T Bonds, 2013A Bonds, 2013T Bonds are no longer outstanding, the following paragraph shall become effective: The City may establish, for one or more series of Future Parity Bonds, a separate reserve requirement (which may be zero), to be held in a separate reserve account, for the purpose of securing those Future Parity Bonds, Page 34 of 140 -15- 51615205.7 and those Future Parity Bonds shall not be secured by amounts in the Reserve Account or by any Reserve Insurance credited to the Reserve Account. The City may establish additional accounts in the Bond Fund for the deposit of ULID Assessments after the deposit of the required amount in the other funds. The Reserve Account for any Future Parity Bonds may be accumulated from any other funds which the City legally may have available for such purpose in addition to using ULID Assessments and Net Revenue of the Waterworks Utility. The City further agrees that when the required amounts have been paid into the Reserve Account in the Bond Fund, the City will maintain those amounts therein at all times, except for withdrawals therefrom as authorized herein, until there is sufficient money in the Bond Fund, including the Reserve Account therein, to pay the principal of and interest to maturity on all outstanding bonds payable from the Bond Fund, at which time no further payments need be made into the Bond Fund, and the money in the Bond Fund, including the Reserve Account, may be used to pay that principal and interest. If there shall be a deficiency in the Principal and Interest Account to meet maturing installments of either principal or interest, as the case may be, on the Bonds, the deficiency shall be made up from the Reserve Account by first the withdrawal of cash and investments therefrom and after all cash and investments have been depleted, then by the draws on the Reserve Insurance for that purpose on a pro rata basis. Any deficiency created in the Reserve Account by reason of any withdrawal shall then be made up from the Net Revenue of the Waterworks Utility first available after making necessary provisions for the required payments into the Principal and Interest Account. The Reserve Insurer shall be reimbursed first, within one year, to reinstate the Reserve Insurance, before the balance of the Reserve Requirement is restored. All money in the Reserve Account not needed to meet the payments of principal and interest when due may be kept on deposit in the official bank depository of the City or in any national bank or may be invested in any legal investment for City funds maturing not later than the interest or principal and interest payment date when the money will be needed. Interest on any of those investments or on that bank account shall be deposited in and become a part of the Reserve Account until the Reserve Requirement shall have been accumulated therein, after which time the interest shall be deposited in the Principal and Interest Account. Notwithstanding the provisions for the deposit or maintenance of earnings in accounts of the Bond Fund, any earnings which are subject to a federal tax or rebate requirement may be withdrawn from the Bond Fund for deposit into a separate fund or account for that purpose. If the City shall fail to set aside and pay into the Bond Fund the amounts which it has obligated itself by this section to set aside and pay therein, the Owner of any Bond may bring suit against the City to compel it to do so. Section 12. Pledge, Lien and Charge for Payment of the Bonds. The Net Revenue of the Waterworks Utility and ULID Assessments are pledged to the payment of the principal of and interest on the Bonds when due and shall constitute a lien and charge upon that Net Revenue of the Waterworks Utility and ULID Assessments prior and superior to any other charges Page 35 of 140 -16- 51615205.7 whatsoever, except that the lien and charge upon such Net Revenue and ULID Assessments for the Bonds shall be on a parity with the lien and charge thereon for any outstanding Parity Bonds. Section 13. Flow of Funds. Funds in the Water and Sewer Revenue Fund shall be used in the following order of priority: (1) To pay Operating and Maintenance Expenses; (2) To make all payments required to be made into the Bond Fund to pay and secure the payment of the Annual Debt Service on all outstanding Parity Bonds; (3) To make all payments required to be made into the Reserve Account and to make all payments (principal and interest) required to be made in connection with Reserve Insurance and any Alternate Security, except if there is not sufficient money to make all payments for Reserve Insurance and any Alternate Security, the payments shall be made on a pro rata basis with deposits in the Reserve Account; (4) To make all payments required to be made into the loan redemption funds or accounts, and other revenue bond redemption funds created to pay the debt service on any revenue obligation having a lien upon the Net Revenue of the Waterworks Utility subordinate to the lien of the Bonds; and (5) To make necessary additions, betterments, improvements or repairs to the Waterworks Utility, and to retire by redemption or purchase any outstanding Parity Bonds, or for any other lawful purpose. Section 14. Covenants. The City covenants and agrees with the owner of each of the Bonds as follows: (a) It will not sell, lease, mortgage, or in any manner encumber or dispose of all the properties of the Waterworks Utility unless provision is made for payment into the Bond Fund of an amount sufficient either to defease all outstanding Parity Bonds or to pay the principal of and interest on all the outstanding Parity Bonds in accordance with the terms thereof; and further binds itself irrevocably not to mortgage, sell, lease or in any manner dispose of any part of the Waterworks Utility that is used, useful and material to the operation of such utility unless provision is made for replacement thereof or for payment into the Bond Fund of an amount which shall bear the same ratio to the amount of outstanding Parity Bonds as the Net Revenue available for debt service for such bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the Waterworks Utility so leased, encumbered or disposed of bears to the Net Revenue available for debt service for such bonds from the entire Waterworks Utility for the same period. Any such money so paid into the Bond Fund shall be used to retire outstanding Parity Bonds at the earliest possible date. (b) It will maintain and keep the Waterworks Utility in good repair, working order and condition and to operate such utility and the business in connection therewith in an efficient manner and at a reasonable cost. Page 36 of 140 -17- 51615205.7 (c) It will maintain and collect such rates as will produce sufficient Net Revenue of the Waterworks Utility, together with ULID Assessment collections, as will make available for the payment of the principal of and interest on the Parity Bonds as they come due and for payments as required to be made into the Reserve Account therein an amount at least equal to the Coverage Requirement and, in addition thereto, that it will pay all Operating and Maintenance Expenses and otherwise meet the obligations of the City as herein set forth. (d) It will keep proper books of accounts and records separate and apart from other accounts and records, in which complete and correct entries will be made of all transactions relating to the Waterworks Utility of the City, and it will make available to any Owner on written request the annual operating and income statements of the Waterworks Utility. (e) Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish water or sewerage service to any customer whatsoever free of charge and it shall, not later than 60 days after the end of each calendar year, take such legal action as may be feasible to enforce collection of all collectible delinquent accounts and, in addition thereto, shall promptly avail itself of its utility lien rights, as set forth in applicable statutes. (f) It will carry the types of insurance on its Waterworks Utility properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems, and the cost of such insurance shall be considered a part of Operating and Maintenance Expenses, or it will implement and maintain a self-insurance program or an insurance pool program with reserves adequate, in the judgment of the City Council, to protect the owners of the Parity Bonds against loss. (g) To the extent permitted by State law, it will maintain its corporate identity and existence so long as any Bonds remain outstanding. (h) It will not grant any competing utility service franchise and will use all legal means to prevent competition with the Waterworks Utility. (i) If on the first day of January in any year, two installments of any ULID Assessment are delinquent, or the final installment of any ULID Assessment has been delinquent for more than one year, the City shall proceed with the foreclosure of the delinquent assessment or delinquent installments thereof in the manner provided by law. Section 15. Provisions for Future Parity Bonds. The City reserves the right to issue Future Parity Bonds if the Parity Conditions set forth in Exhibit B are met and complied with at the time of the issuance of those Future Parity Bonds. Nothing herein contained shall prevent the City from issuing Future Parity Bonds to refund any maturing Parity Bonds then outstanding, money for the payment of which is not otherwise available. Nothing herein contained shall prevent the City from issuing revenue bonds or incurring other obligations that are a charge upon the Net Revenue of the Waterworks Utility of the City subordinate or inferior to the payments required to be made therefrom into the Bond Fund for the Page 37 of 140 -18- 51615205.7 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 16. Tax Covenants. (a) Preservation of Tax Exemption for Interest on Bonds. The City covenants that it will take all actions necessary to prevent interest on the Bonds from being included in gross income for federal income tax purposes, and it will neither take any action nor make or permit any use of proceeds of the Bonds or other funds of the City treated as proceeds of the Bonds that will cause interest on the Bonds to be included in gross income for federal income tax purposes. The City also covenants that it will, to the extent the arbitrage rebate requirements of Section 148 of the Code are applicable to the Bonds, take all actions necessary to comply (or to be treated as having complied) with those requirements in connection with the Bonds. (b) Post-Issuance Compliance. The Finance Director is authorized and directed to review and update the City’s written procedures to facilitate compliance by the City with the covenants in this ordinance and the applicable requirements of the Code that must be satisfied after the Issue Date to prevent interest on the Bonds from being included in gross income for federal tax purposes. (c) Designation of Bonds as “Qualified Tax-Exempt Obligations.” The Designated Representative may designate the Bonds as “qualified tax-exempt obligations” for the purposes of Section 265(b)(3) of the Code, if the following conditions are met: (1) the Bonds are not “private activity bonds” within the meaning of Section 141 of the Code; (2) the reasonably anticipated amount of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) that the City and any entity subordinate to the City (including any entity that the City controls, that derives its authority to issue tax-exempt obligations from the City, or that issues tax-exempt obligations on behalf of the City) will issue during the calendar year in which the Bonds are issued will not exceed $10,000,000; and (3) the amount of tax-exempt obligations, including the Bonds, designated by the City as “qualified tax-exempt obligations” for the purposes of Section 265(b)(3) of the Code during the calendar year in which the Bonds are issued does not exceed $10,000,000. Section 17. Refunding or Defeasance of Bonds. The City may issue refunding bonds pursuant to State law or use money available from other lawful sources to carry out a refunding or defeasance plan, which may include (a) paying when due the principal of and interest on any or all of the Bonds (the “defeased Bonds”); (b) redeeming the defeased Bonds prior to their maturity; and (c) paying the costs of the refunding or defeasance. If the City sets aside in a Page 38 of 140 -19- 51615205.7 special trust fund or escrow account irrevocably pledged to that redemption or defeasance (the “trust account”), money and/or Government Obligations maturing at a time or times and bearing interest in amounts sufficient to redeem, refund or defease the defeased Bonds in accordance with their terms, then all right and interest of the Owners of the defeased Bonds in the covenants of this ordinance and in the Gross Revenue of the Waterworks Utility, ULID Assessments, funds and accounts obligated to the payment of the defeased Bonds, other than the right to receive the funds so set aside and pledged, shall cease and become void. Thereafter, the Owners of defeased Bonds shall have the right to receive payment of the principal of and interest on the defeased Bonds solely from the trust account and the defeased Bonds shall be deemed no longer outstanding. In that event, the City may apply money remaining in any fund or account (other than the trust account) established for the payment or redemption of the defeased Bonds to any lawful purpose, subject only to the rights of the Owners of any other Parity Bonds then outstanding. If the refunding or defeasance plan provides that the defeased Bonds or the refunding bonds to be issued be secured by money and/or Government Obligations pending the prior redemption of the defeased Bonds and if such refunding plan also provides that certain money and/or Government Obligations are pledged irrevocably for the prior redemption of the defeased Bonds included in that refunding plan, then only the debt service on the Bonds which are not defeased Bonds and the refunding bonds, the payment of which is not so secured by the refunding plan, shall be included in the computation of the Coverage Requirement for the issuance of Future Parity Bonds and the annual computation of the Coverage Requirement for determining compliance with the rate covenants. Section 18. Deposit of Bond Proceeds; Creation of Construction Accounts. Immediately upon the issuance and delivery of the Bonds, the City shall cause the following to occur: (a) Reserve Account. Proceeds of the Bonds as needed to satisfy the Reserve Requirement shall either be deposited in the Reserve Account or used to acquire Reserve Insurance in an amount sufficient to satisfy the Reserve Requirement with respect to the Bonds. (b) Refunding Plan. The remaining proceeds of the Refunding Bonds shall be deposited with the Refunding Trustee as set forth in Section 19. (c) Construction Accounts. The Finance Director is authorized to establish one or more special accounts within the Water/Sewer Fund, designated as the Construction Accounts. The remaining proceeds of the Project Bonds shall be paid into the Construction Accounts and used to pay the costs of the Plan of Additions and the costs of issuing the Project Bonds (if not included in the Refunding Plan). Until needed to pay those costs, the City may invest principal proceeds deposited in the Construction Accounts temporarily in any legal investment, and the investment earnings may be retained in such accounts and be spent for the purposes of those accounts, except that earnings subject to a federal tax or rebate requirement may be withdrawn therefrom and used for those tax or rebate purposes. Page 39 of 140 -20- 51615205.7 Section 19. Use of Refunding Proceeds; the Refunding Plan. (a) Appointment of Refunding Trustee. The Designated Representative is authorized and directed to appoint a financial institution to serve as the Refunding Trustee and to perform the duties of Refunding Trustee under this ordinance. (b) Selection of Refunded Bonds. The Designated Representative is authorized and directed to select the Refunding Candidates to be refunded by the Bonds. The Designated Representative may choose to refund fewer than all of the Refunding Candidates. The Refunded Bonds, as selected by the Designated Representative, shall be identified in the Refunding Plan set forth in the Refunding Trust Agreement. (c) Use of Refunding Proceeds; Purchase of Acquired Obligations. On the Issue Date, sufficient proceeds of the sale of the Refunding Bonds, together with any City Contribution, shall be deposited with the Refunding Trustee and used to discharge the obligations of the City relating to the Refunded Bonds under the applicable Parity Bond Ordinances by providing for the payment of the amounts required to be paid by the Refunding 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 maturing as to principal and interest in 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 shall be listed and more particularly described in a schedule attached to the Refunding Trust Agreement, but are subject to substitution as set forth below. The Designated Representative is authorized and directed to approve the Acquired Obligations, if any, to be purchased. Any Project Bond proceeds deposited with the Refunding Trustee and not used to pay the costs of issuance of the Project Bonds shall be returned to the City for deposit in the Construction Accounts. Any Refunding Bond proceeds or other money deposited with the Refunding Trustee not needed to carry out the Refunding Plan shall be returned to the City for deposit in the Principal and Interest Account to pay interest on the Refunding Bonds on the next upcoming interest payment date. (d) Substitution of Acquired Obligations. The City reserves the right at any time to substitute cash or other direct, noncallable obligations of the United States of America (“Substitute Obligations”) for any of the Acquired Obligations if the City obtains (1) an opinion of Bond Counsel to the effect that the interest on the Refunding 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 (2) a verification by a nationally recognized independent certified public accounting firm that such substitution will not impair the timely payment of the amounts required to be paid by the Refunding Plan. 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 purpose. (e) Administration of Refunding Plan. The Refunding Trustee is authorized and directed to purchase the Acquired Obligations (or Substitute Obligations) and to make the Page 40 of 140 -21- 51615205.7 payments required to be made pursuant to the Refunding Plan from the Acquired Obligations (or Substitute Obligations) and money deposited with the Refunding Trustee pursuant to this ordinance and the Refunding Trust Agreement. All Acquired Obligations (or Substitute Obligations) and money deposited with the Refunding Trustee and any income therefrom shall be held irrevocably, invested and applied in accordance with the provisions of the applicable Parity Bond Ordinance authorizing the Refunded Bonds, this ordinance, chapter 39.53 RCW and other applicable laws of the State and the Refunding Trust Agreement. All necessary and proper fees, compensation and expenses of the Refunding Trustee and all other costs incidental to the setting up of the escrow to accomplish the Refunding Plan and costs related to the issuance, sale and delivery of the Bonds, including bond printing, rating agency fees, verification fees, Bond Counsel's fees and other related expenses, shall be paid out of the proceeds of the Bonds. (f) Authorization for Refunding Trust Agreement. To carry out the Refunding Plan, the Designated Representative is authorized and directed to execute and deliver to the Refunding Trustee the Refunding Trust Agreement 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 the Refunding Trustee set forth therein are satisfactory to it. (g) Call for Redemption of the Refunded Bonds. The Designated Representative is authorized to call the Refunded Bonds for redemption on their applicable Redemption Dates at par, plus accrued interest. Such call for redemption shall be irrevocable after the delivery of the Bonds to the Purchaser. The Refunding Trustee is authorized and directed to give or cause to be given such notices as required, at the times and in the manner required, pursuant to the ordinances authorizing the issuance of the Refunded Bonds and the Refunding Trust Agreement to carry out the Refunding Plan. (h) Additional Finding with Respect to Refunding. Prior to the execution and delivery of the Bond Purchase Agreement, the Designated Representative shall determine, on behalf of the City, that the issuance, sale and delivery of the Refunding Bonds will effect a net present value savings to the City and its ratepayers as set forth in paragraph (i)(2) of Exhibit A. The City Council finds and determines that such net present value savings is a substantial savings and that achieving such net present value savings by issuing the Bonds is in the best interest of the City and in the public interest. In making the finding and determination that the issuance, sale and delivery of the Bonds will effect such net present value savings, the Designated Representative shall give consideration to the fixed maturities of the Refunding Bonds and the Refunded Bonds, the costs related to the issuance, sale and delivery of the Refunding Bonds and the known earned income from the investment of the proceeds of the issuance and sale of the Refunding Bonds and the City Contribution, if any, used in the Refunding Plan pending payment and redemption of the Refunded Bonds. The Designated Representative further shall find and determine that the money to be deposited with the Refunding Trustee to carry out the Refunding Plan will discharge and satisfy the obligations of the City under the applicable Parity Bond Ordinance, 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 will no longer be deemed to be outstanding under Page 41 of 140 -22- 51615205.7 applicable Parity Bond Ordinance immediately upon the deposit of such money with the Refunding Trustee. Section 20. Sale and Delivery of the Bonds. (a) Manner of Sale of Bonds; Delivery of Bonds. It is anticipated that each Series of Bonds will be sold by negotiated sale to the Purchaser and that the Purchaser will present a Bond Purchase Agreement to the City offering to purchase each or multiple Series of Bonds. The Designated Representative is authorized on the City’s behalf to accept the Final Terms of, and execute, one or more Bond Purchase Agreements, based on the assessment of the Designated Representative of market conditions, in consultation with appropriate City officials and staff, Bond Counsel and other advisors, and so long as the terms provided therein are consistent with the terms of this ordinance. In accepting the Final Terms, the Designated Representative shall take into account those factors that, in the judgment of the Designated Representative, may be expected to result in the lowest true interest cost to the City. The Bond Purchase Agreement shall set forth the Final Terms of each Series of Bonds. (b) Preparation, Execution and Delivery of the Bonds. The Bonds will be prepared at City expense and will be delivered to the Purchaser in accordance with the Bond Purchase Agreement, together with the approving legal opinion of Bond Counsel regarding the Bonds. Section 21. Official Statement; Continuing Disclosure. (a) Preliminary Official Statement Deemed Final. The Designated Representative shall review and, if acceptable to him or her, approve the preliminary Official Statement prepared in connection with the sale of the Bonds to the public. For the sole purpose of the Purchaser’s compliance with paragraph (b)(1) of Rule 15c2-12, the Designated Representative is authorized to deem that preliminary Official Statement final as of its date, except for the omission of information permitted to be omitted by Rule 15c2-12. The City approves the distribution to potential purchasers of the Bonds of a preliminary Official Statement that has been approved by the Designated Representative and been deemed final, if applicable, in accordance with this subsection. (b) Approval of Final Official Statement. The City approves the preparation of a final Official Statement for the Bonds to be sold to the public in the form of the preliminary Official Statement that has been approved and deemed final in accordance with subsection (a), with such modifications and amendments as the Designated Representative deems necessary or desirable, and further authorizes the Designated Representative to execute and deliver such final Official Statement to the Purchaser. The City authorizes and approves the distribution by the Purchaser of the final Official Statement so executed and delivered to purchasers and potential purchasers of the Bonds. (c) Undertaking to Provide Continuing Disclosure. If necessary to meet the requirements of paragraph (b)(5) of Rule 15c2-12, as applicable to the Purchaser acting as a participating underwriter for the Bonds, the Designated Representative is authorized to execute a written undertaking to provide continuing disclosure for the benefit of holders of the Bonds in substantially the form attached as Exhibit C. Page 42 of 140 -23- 51615205.7 Section 22. General Authorization and Ratification. The Designated Representative and other appropriate officers of the City are severally authorized to take such actions and to execute such documents as in their judgment may be necessary or desirable to carry out the transactions contemplated in connection with this ordinance, and to do everything necessary for the prompt delivery of the Bonds to the Purchaser and for the proper application, use and investment of the proceeds of the Bonds. All actions taken prior to the effective date of this ordinance in furtherance of the purposes described in this ordinance and not inconsistent with the terms of this ordinance are ratified and confirmed in all respects. Section 23. Severability. The provisions of this ordinance are declared to be separate and severable. If a court of competent jurisdiction, all appeals having been exhausted or all appeal periods having run, finds any provision of this ordinance to be invalid or unenforceable as to any person or circumstance, such offending provision shall, if feasible, be deemed to be modified to be within the limits of enforceability or validity. However, if the offending provision cannot be so modified, it shall be null and void with respect to the particular person or circumstance, and all other provisions of this ordinance in all other respects, and the offending provision with respect to all other persons and all other circumstances, shall remain valid and enforceable. Section 24. Effective Date of Ordinance. This ordinance shall take effect and be in force from and after its passage and five days following its publication as provided by law. PASSED by the City Council and APPROVED by the Mayor of the City of Pasco, Washington, at a regular open public meeting, this 20th day of November, 2017. Matt Watkins, Mayor ATTEST: Daniela Erickson, City Clerk APPROVED AS TO FORM: Foster Pepper PLLC Bond Counsel Page 43 of 140 A-1 51615205.7 EXHIBIT A PARAMETERS FOR FINAL TERMS (i) Principal Amount. The Bonds may be issued in one or more Series and shall not exceed the aggregate principal amount of $20,000,000. (ii) Date or Dates. Each Bond shall be dated its Issue Date, which date may not be later than December 31, 2018. (iii) Denominations, Name, etc. The Bonds shall be issued in Authorized Denominations and shall be numbered separately in the manner and shall bear any name and additional designation as deemed necessary or appropriate by the Designated Representative. (iv) Interest Rate(s). Each Bond shall bear interest at a fixed rate per annum (computed on the basis of a 360-day year of twelve 30-day months) from the Issue Date or from the most recent date for which interest has been paid or duly provided for, whichever is later. One or more rates of interest may be fixed for each Bond or any Series of Bonds. No rate of interest for any Bond or any Series of Bonds may exceed 5.50%, and the true interest cost to the City for each Series of Bonds may not exceed 5.00%. (v) Payment Dates. Interest shall be payable semiannually on each June 1 and December 1 (or such other semiannual dates acceptable to the Designated Representative), commencing no later than the next such semiannual date following the Issue Date of such Series of Bonds. Principal payments shall commence on a date acceptable to the Designated Representative and shall be payable at maturity or in mandatory redemption installments annually thereafter, on dates acceptable to the Designated Representative. (vi) Final Maturity. The final maturity date of the Project Bonds following allocation, if necessary under (xi) below, shall be no later than the date that is 30 years after the Issue Date. The final maturity date of the Refunding Bonds following allocation, if necessary under (xi) below, shall be no later than the final maturity date of the Refunded Bonds refunded by such Refunding Bonds. (vii) Redemption Rights. The Designated Representative may approve in the Bond Purchase Agreement provisions for the optional and mandatory redemption of Bonds, subject to the following: (1) Optional Redemption. Any Bond may be designated as being (A) subject to redemption at the option of the City prior to its maturity date on the dates and at the prices set forth in the Bond Purchase Agreement; or (B) not subject to redemption prior to its maturity date. If a Bond is subject to optional redemption prior to its maturity, it must be subject to such redemption on one or more dates occurring not more than 10½ years after the Issue Date. (2) Mandatory Redemption. Any Bond may be designated as a Term Bond, subject to mandatory redemption prior to its maturity on the dates and in the amounts set forth in the Bond Purchase Agreement. Page 44 of 140 A-2 51615205.7 (viii) Price. No rate of interest for any Bond or any Series of Bonds may exceed 98%, and the true interest cost to the City for each Series of Bonds may not exceed 130%. (ix) Section 265(b)(3) Designation. Pursuant to Section 16(c) of this ordinance, the Designated Representative may designate any qualifying Series of Bonds as “qualified- tax exempt obligations” for purposes of Section 265(b)(3) of the Code. (x) Selection of Refunded Bonds. Under the terms and conditions of this ordinance, the Designated Representative is authorized to select the Refunded Bonds to be refunded by the Refunding Bonds. Refunded Bonds, as selected by the Designated Representative, shall be identified in the applicable Bond Purchase Agreement and/or the applicable Refunding Trust Agreement. (xi) Allocation of Bonds. For any combined Series of Bonds, the Designated Representative shall allocate the maturing principal amounts to the Project Bonds and the Refunding Bonds in such manner as will comply with applicable requirements of the Code, meet restrictions of State law and effectuate any other allocation deemed necessary or advisable for accounting and debt administration purposes. (xii) Minimum Savings. Each Series of Refunding Bonds shall produce a minimum net present value savings to the City and its ratepayers of 5.00% (as a percentage of the Refunded Bonds refunded by such Series of Refunding Bonds). Net present value savings means the aggregate difference between (i) annual debt service on the Refunded Bonds, less (ii) annual debt service on the Refunding Bonds (including expenses related to costs of issuance of such Refunding Bonds) discounted to the Issue Date using the yield on the Bonds as the discount rate, plus (iii) excess cash, if any distributed to the City on the Issue Date, and less (iv) the amount of the City Contribution, if any, made on such Issue Date. (xiii) Other Terms and Conditions. (1) The Designated Representative may determine whether it is in the City’s best interest to provide for bond insurance or other credit enhancement; and may accept such additional terms, conditions and covenants as he or she may determine are in the best interests of the City, consistent with this ordinance. (2) The Designated Representative must have determined that the Parity Conditions have been met and satisfied as of the Issue Date of the Bonds. Page 45 of 140 B-1 51615205.7 EXHIBIT B PARITY CONDITIONS (a) There shall be no deficiency in the Bond Fund. (b) The ordinance providing for the issuance of the Future Parity Bonds shall provide that all ULID Assessments shall be paid directly into the Bond Fund, except for any prepaid assessments permitted by law to be paid into a construction fund or account. (c) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the deposit into the Reserve Account (if such Future Parity Bonds are secured by the Reserve Account) of (i) an amount equal to the Reserve Requirement for those Future Parity Bonds from the Future Parity Bond proceeds, or (ii) Reserve Insurance or Alternate Security or an amount plus Reserve Insurance or Alternate Security equal to the Reserve Requirement for those Future Parity Bonds, or (iii) to the extent that the Reserve Requirement is not funded from Future Parity Bond proceeds or Reserve Insurance or Alternate Security at the time of issuance of those Future Parity Bonds, by no later than the fifth anniversary date from the dated date of the respective issue of Future Parity Bonds from ULID Assessments, if any, levied and first collected for the payment of the principal of and interest on those Future Parity Bonds and, to the extent that ULID Assessments are insufficient, then from the Net Revenue of the Waterworks Utility in approximately equal annual payments, the Reserve Requirement for those Future Parity Bonds. No Reserve Insurance or Alternate Security may be used to satisfy the Reserve Requirement for Future Parity Bonds unless (i) the insurance policy or Alternate Security is non- cancelable and (ii) the insurer or provider of the Alternate Security as of the time of issuance of such insurance or Alternate Security is rated in the highest rating categories by both Moody’s Investors Service, Inc., and Standard & Poor’s Ratings Services; however, when the 2009 Bonds, 2010A Bonds, 2010T Bonds, 2013A Bonds, 2013T Bonds are no longer outstanding, the Reserve Insurance or Alternate Security may be rated as of the time of issuance of such insurance or Alternate Security in one of the two-highest categories by either Moody’s Investors Service, Inc., or S&P Global. (d) The ordinance authorizing the issuance of such Future Parity Bonds shall provide for the payment of mandatory redemption or sinking fund requirements into the Bond Fund for any Term Bonds to be issued and for regular payments to be made for the payment of the principal of such Term Bonds on or before their maturity, or, as an alternative, the mandatory redemption of those Term Bonds prior to their maturity date from money in the Principal and Interest Account. (e) There shall be on file from a licensed professional engineer experienced in the design, construction and operation of municipal utilities, or from an independent certified public accountant, a certificate showing that in his or her professional opinion the Net Revenue of the Waterworks Utility for any 12 consecutive calendar months out of the immediately preceding 24 calendar months shall be equal to the Coverage Requirement for each year thereafter, except that such certificate may be provided by a City representative if it is based solely upon actual historical Net Revenue of the Waterworks Utility without any adjustment. Page 46 of 140 B-2 51615205.7 The certificate, in estimating the Net Revenue of the Waterworks Utility available for debt service, shall use the historical Net Revenue of the Waterworks Utility for any 12 consecutive months out of the 24 months immediately preceding the month of delivery of the Future Parity Bonds. Net Revenue of the Waterworks Utility may be adjusted to reflect: (1) Any changes in rates in effect and being charged or expressly adopted by ordinance to take effect within 180 days after the date of this Certificate; (2) Income derived from customers of the Waterworks Utility that have become customers during the 12 consecutive month period or thereafter adjusted to reflect one year’s net revenue from those customers; (3) Revenue from any customers to be connected to the Waterworks Utility who have paid the required connection charges; (4) Revenue received or to be received which is derived from any person, firm, corporation or municipal corporation under any executed contract for water, sewage disposal or other utility service, which revenue was not included in the historical Net Revenue of the Waterworks Utility; (5) The engineer’s or accountant’s estimate of the Net Revenue of the Waterworks Utility to be derived from customers to connect within 180 days after the date of the completion of the additions to and improvements and extensions of the Waterworks Utility to be paid for out of the proceeds of the sale of the additional Future Parity Bonds or from other additions to and improvements and extensions of the Waterworks Utility then under construction and not fully connected to the facilities of the Waterworks Utility when such additions, improvements and extensions are completed; and (6) Any increases or decreases in Net Revenue as a result of any actual or reasonably anticipated changes in Operating and Maintenance Expense subsequent to the 12 month period. If Future Parity Bonds proposed to be so issued are for the sole purpose of refunding outstanding bonds payable from the Bond Fund, such certification of coverage shall not be required if the amount required for the payment of the principal and interest in each year for the refunding bonds is not increased over the amount for that year required for the bonds to be refunded thereby and if the maturities of such refunding bonds are not extended beyond the maturities of the bonds to be refunded thereby. Prior: Ordinance No. 3915, Section 18 (2009 Bonds) Ordinance No. 3962, Section 21 (2010A Bonds; 2010T Bonds) Ordinance No. 4126, Section 16 (2013A Bonds; 2013T Bonds) Ordinance No. 4254, Section 15 (2015 Bonds) Page 47 of 140 C-1 51615205.7 EXHIBIT C [Form of] UNDERTAKING TO PROVIDE CONTINUING DISCLOSURE City of Pasco, Washington [Name of Series] The City of Pasco, Washington (the “City”), makes the following written Undertaking for the benefit of holders of the above-referenced bonds (the “Bonds”), for the sole purpose of assisting the Purchaser in meeting the requirements of paragraph (b)(5) of Rule 15c2-12, as applicable to a participating underwriter for the Bonds. Capitalized terms used but not defined below shall have the meanings given in Ordinance No. 4365 of the City (the “Bond Ordinance”). (a) Undertaking to Provide Annual Financial Information and Notice of Listed Events. The City undertakes to provide or cause to be provided, either directly or through a designated agent, to the MSRB, in an electronic format as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB: (i) Annual financial information and operating data of the type included in the final official statement for the Bonds and described in paragraph (b)(i) (“annual financial information”); (ii) Timely notice (not in excess of 10 business days after the occurrence of the event) of the occurrence of any of the following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notice of Proposed Issue (IRS Form 5701 – TEB) or other material notices or determinations with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) bond calls (other than scheduled mandatory redemptions of Term Bonds), if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the City, as such “Bankruptcy Events” are defined in Rule 15c2-12; (13) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material. Page 48 of 140 C-2 51615205.7 (iii) Timely notice of a failure by the City to provide required annual financial information described in paragraph (b)(i) on or before the date specified in paragraph (b)(ii). (b) Type of Annual Financial Information Undertaken to be Provided. The annual financial information that the City undertakes to provide in paragraph (a): (i) Shall consist of (1) annual financial statements prepared (except as noted in the financial statements) in accordance with applicable generally accepted accounting principles applicable to local governmental units of the State such as the City, as such principles may be changed from time to time; (2) a statement of authorized, issued and outstanding bonded debt secured by the Net Revenue of the Waterworks Utility; (3) debt service coverage ratios; and (4) general customer statistics for the Waterworks Utility; (ii) Shall be provided not later than the last day of the ninth month after the end of each fiscal year of the City (currently, a fiscal year ending December 31), as such fiscal year may be changed as required or permitted by State law, commencing with the City’s fiscal year ending December 31, 2017; and (iii) May be provided in a single or multiple documents, and may be incorporated by specific reference to documents available to the public on the Internet website of the MSRB or filed with the SEC. If not submitted as part of the annual financial information described in paragraph (b)(i) above, the City will provide or cause to be provided to the MSRB audited financial statements, when and if available. (c) Amendment of Undertaking. This Undertaking is subject to amendment after the primary offering of the Bonds without the consent of any holder of any Bond, or of any broker, dealer, municipal securities dealer, participating underwriter, Rating Agency or the MSRB, under the circumstances and in the manner permitted by Rule 15c2-12. The City will give notice to the MSRB of the substance (or provide a copy) of any amendment to the Undertaking and a brief statement of the reasons for the amendment. If the amendment changes the type of annual financial information to be provided, the annual financial information containing the amended financial information will include a narrative explanation of the effect of that change on the type of information to be provided. (d) Beneficiaries. This Undertaking shall inure to the benefit of the City and the holder of each Bond, and shall not inure to the benefit of or create any rights in any other person. (e) Termination of Undertaking. The City’s obligations under this Undertaking shall terminate upon the legal defeasance, maturity or prior redemption of all of the Bonds. In addition, the City’s obligations under this Undertaking shall terminate if the provisions of Rule 15c2-12 that require the City to comply with this Undertaking become legally inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of Bond Counsel delivered to the City, and the City provides timely notice of such termination to the MSRB. Page 49 of 140 C-3 51615205.7 (f) Remedy for Failure to Comply with Undertaking. As soon as practicable after the City learns of any failure to comply with this Undertaking, the City will proceed with due diligence to cause such noncompliance to be corrected. No failure by the City or other obligated person to comply with this Undertaking shall constitute a default in respect of the Bonds. The sole remedy of any holder of a Bond shall be to take action to compel the City or other obligated person to comply with this Undertaking, including seeking an order of specific performance from an appropriate court. (g) Designation of Official Responsible to Administer Undertaking. The Finance Director or his or her designee is the person designated, in accordance with the Bond Ordinance, to carry out the Undertaking in accordance with Rule 15c2-12, including, without limitation, the following actions: (i) Preparing and filing the annual financial information undertaken to be provided; (ii) Determining whether any event specified in paragraph (a) has occurred, assessing its materiality, where necessary, with respect to the Bonds, and preparing and disseminating any required notice of its occurrence; (iii) Determining whether any person other than the City is an “obligated person” within the meaning of Rule 15c2-12 with respect to the Bonds, and obtaining from such person an undertaking to provide any annual financial information and notice of listed events for that person required under Rule 15c2-12; (iv) Selecting, engaging and compensating designated agents and consultants, including financial advisors and legal counsel, to assist and advise the City in carrying out this Undertaking; and (v) Effecting any necessary amendment of this Undertaking. Page 50 of 140 51615205.7 CERTIFICATION I, the undersigned, City Clerk of the City of Pasco, Washington (the “City”), hereby certify as follows: 1. The attached copy of Ordinance No. 4365 (the “Ordinance”) is a full, true and correct copy of an ordinance duly passed at a regular meeting of the City Council of the City held at the regular meeting place thereof on November 20, 2017, as that ordinance appears on the minute book of the City. 2. The Ordinance will be in full force and effect five days after publication in the City’s official newspaper, which publication date is __________ ___, 2017. 3. A quorum of the members of the City Council was present throughout the meeting and a majority of the members voted in the proper manner for the passage of the Ordinance. Dated: __________ ___, 2017. CITY OF PASCO, WASHINGTON Daniela Erickson, City Clerk Page 51 of 140 This is a Preliminary Official Statement, subject to correction and change. The City has authorized the distribution of the Preliminary Official Statement to prospective purchasers and others. Upon the sale of the Bonds, the City will complete and deliver an Official Statement substantially in this form. PRELIMINARY OFFICIAL STATEMENT (Draft DATED November 8, 2017) NEW ISSUE RATING: __ (S&P GLOBAL) BOOK-ORDER ENTRY BANK QUALIFIED In the opinion of Foster Pepper PLLC, Seattle, Washington (“Bond Counsel”), under existing federal law and assuming compliance by the City with applicable requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issue date of the Bonds, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals. However, while interest on the Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, interest on the Bonds received by corporations is taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations, interest on Bonds received by certain S corporations may be subject to tax, and interest on the Bonds received by foreign corporations with United States branches may be subject to a foreign branch profits tax. Receipt of interest on the Bonds may have other federal tax consequences for certain taxpayers. See the captions “TAX MATTERS” herein. CITY OF PASCO, WASHINGTON $9,305,000* WATER AND SEWER IMPROVEMENT REVENUE BONDS, 2017 DATED: Date of Delivery DUE: December 1, as shown on inside cover The City of Pasco, Washington (the “City”), Water and Sewer Improvement Revenue Bonds, 2017 (the “Bonds”), will be issued as fully registered bonds under a book-entry only system, registered in the name of Cede & Co. as nominee of the Depository Trust Company (“DTC”), New York, New York. DTC will act as initial securities depository for the Bonds. Individual purchases of the Bonds will be made in book-entry form, in the denomination of $5,000 or any integral multiple thereof. Purchasers of beneficial interest in the Bonds (the “Beneficial Owners”) will not receive certificates representing their ownership interest in the Bonds. Interest on the Bonds will be paid semiannually on each June 1 and December 1, beginning June 1, 2018, to the maturity or earlier redemption of the Bonds. The principal of, and premium, if any, and interest on the Bonds are payable by the fiscal agent of the State of Washington (the “State”), currently, U.S. Bank National Association, to DTC, which, in turn, is obligated to remit such payments to its participants for subsequent disbursement to Beneficial Owners, as described in Appendix D—“BOOK-ENTRY SYSTEM.” MATURITY SCHEDULE - See Inside Cover The City has designated the Bonds as “Qualified Tax-Exempt Obligations” for purposes of Section 265(b)(3)(B) of the Code. See the caption “TAX MATTERS” herein for a discussion of this designation. The Net Revenue of the City’s Waterworks Utility, including any Utility Local Improvement District (“ULID”) Assessments in any ULID created to secure the payment of any Parity Bonds, are pledged to the payment of the principal of and interest on the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds when due. The lien and charge of the Bonds, the Outstanding Parity Bonds and any Future Parity Bonds on the Net Revenue and ULID Assessments is prior and superior to any other liens and charges whatsoever. See “SECURITY FOR THE BONDS” herein. The Bonds are not general obligations of the City, and neither the full faith and credit nor the taxing power of the City, Franklin County or the State nor any revenues of the City derived from sources other than the Waterworks Utility are pledged to the payment thereof. Certain Bonds are subject to redemption prior to their stated maturity dates. See “DESCRIPTION OF THE BONDS – Redemption Provisions.” Proceeds of the Bonds will be used to (a) finance the costs of capital improvements to the Waterworks Utility; (b) fund a reserve account; and (c) pay costs of issuance of the Bonds. The Bonds are offered when, as and if issued, subject to the final approving legal opinion of Foster Pepper PLLC, Seattle, Washington, Bond Counsel. The form of Bond Counsel’s opinion is attached as Appendix C. Certain legal matters will be passed upon for the underwriter by its counsel, Kutak Rock LLP. It is expected that the Bonds will be available for delivery in New York, New York, through the facilities of DTC by Fast Automated Securities Transfer on or about ___________, 2017. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. * Preliminary, subject to change. D.A. DAVIDSON & CO. Page 52 of 140 CITY OF PASCO, WASHINGTON $9,305,000* WATER AND SEWER IMPROVEMENT REVENUE BONDS, 2017 MATURITY SCHEDULE Serial Maturities Due Interest December 1 Amount* Rate Yield CUSIP No. (1) 2030 $410,000 2031 425,000 2032 440,000 2033 455,000 2034 475,000 2035 495,000 2036 515,000 2037 535,000 2038 555,000 2039 580,000 2040 605,000 2041 1,870,000 2042 1,945,000 Term Bonds Due Interest December 1 Amount* Rate Yield CUSIP No. (1) _______________________ (1) The CUSIP numbers are included for convenience of the holders and potential holders of the Bonds. CUSIP is a registered trademark of the American Bankers Association. CUSIP Global Services is managed on behalf of the American Bankers Association by S&P Global. No assurance can be given that the CUSIP numbers for the Bonds will remain the same after the date of issuance and delivery of the Bonds. The City does not take any responsibility for the accuracy of such CUSIP numbers. * Preliminary, subject to change. Page 53 of 140 i CITY OF PASCO, WASHINGTON 525 NORTH THIRD AVENUE P.O. BOX 293 PASCO, WA 99301 (509) 545-3404 www.pasco-wa.gov(1) ELECTED OFFICIALS Members Position Term Expires(2) Matt Watkins Mayor December 31, 2017 Rebecca Francik Mayor Pro-Tem December 31, 2017 Robert Hoffmann Council Member December 31, 2017 Chi Flores Council Member December 31, 2017 Saul Martinez Council Member December 31, 2017 Tom Larsen Council Member December 31, 2017 Al Yenney Council Member December 31, 2017 CITY ADMINISTRATIVE STAFF Dave Zabell City Manager Rick Terway Public Works Director Richa Sigdel Finance Director BOND REGISTRAR AND PAYING AGENT U.S. Bank National Association Seattle, Washington BOND COUNSEL Foster Pepper PLLC Seattle, Washington FINANCIAL ADVISOR Northwest Municipal Advisors Bellevue, Washington UNDERWRITER D.A. Davidson Seattle, Washington __________________ (1) The City’s website is not part of this Official Statement, and investors should not rely on information which is presented in the City’s website in determining whether to purchase the Bonds. This inactive textual reference to the City’s website is not a hyperlink and does not incorporate the City’s website by reference. (2) The City changed the process for election of City Council members to a district-based system with all positions up for election in 2017. Page 54 of 140 ii This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. No dealer, broker, salesperson, or other person has been authorized by the City or the Underwriter to give any information or to make any representations with respect to the Bonds other than those contained in this Official Statement and, if given or made, such information or representations must not be relied upon. The City makes no representation regarding the accuracy or completeness of Bond Counsel’s form of opinion, information related to the Underwriter or information provided by the Underwriter regarding the reoffering prices, or the information in Appendix D—“Book-Entry Transfer System,” which has been provided by DTC, or information under the heading “CITY PROFILE Authorized Investments Local Government Investment Pool,” which was extracted from the State Treasurer’s website, or information provided under the heading “CITY PROFILE Risk Management,” which was provided by the Washington Cities Insurance Authority. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made by use of this Official Statement shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Certain statements contained in this Official Statement do not reflect historical facts, but are forecasts and “forward-looking statements.” No assurance can be given that the future results discussed herein will be achieved, and actual results may differ materially from the forecasts described herein. In this respect, words such as “estimated,” “projected,” “anticipate,” “expect,” “intend,” “plan,” “believe” and similar expressions are intended to identify forward-looking statements. All projections, assumptions and other forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth in this Official Statement. These forward-looking statements speak only as of the date they were prepared. The City specifically disclaims any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of this Official Statement, except as otherwise expressly provided in “CONTINUING DISCLOSURE.” The presentation of certain information, including tables of revenues of the Waterworks Utility, is intended to show recent historic information and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience, as it might be shown by such financial and other information, will necessarily continue or be repeated in the future. Information relating to debt and tax limitations is based on existing statutes and constitutional provisions. Changes in State law could also alter these provisions. The order and placement of materials in this Official Statement, including the appendices, are not to be deemed to be a determination of relevance, materiality or importance, and this Official Statement, including the appendices, must be considered in its entirety. The offering of the Bonds is made only by means of this entire Official Statement. The Bonds have not been registered under the Securities Act of 1933, as amended, and the Bond Ordinance has not been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such acts. The registration or qualification of the Bonds in accordance with applicable provisions of securities laws of the state in which the Bonds have been registered or qualified and the exemption from the registration or qualification in other states cannot be regarded as a recommendation thereof. Neither these states nor any of their agencies have passed upon the merits of the Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. In connection with this offering, the Underwriter may over-allot or effect transactions that stabilize or maintain the market price of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilization, if commenced, may be discontinued at any time without prior notice to any person. This Preliminary Official Statement, as of its date, is in a form deemed final by the City for purposes of Securities and Exchange Commission Rule 15c2-12(b)(1) but is subject to revision, amendment, and completion in a final Official Statement which will be available within seven business days after the sale date. Page 55 of 140 iii TABLE OF CONTENTS Page Page INTRODUCTION ......................................................................... 1  DESCRIPTION OF THE BONDS ............................................. 1  General ......................................................................................... 1  Bond Registrar and Registration Features ............................. 1  Redemption Provisions and Purchase of Bonds .................. 2  Failure to Pay Bonds ................................................................. 3  Refunding or Defeasance ......................................................... 3  PURPOSE AND USE OF PROCEEDS ..................................... 3  Purpose ......................................................................................... 3  Sources and Uses of Proceeds* ............................................... 4  Plan of Additions ....................................................................... 4  Security for the Bonds............................................................... 5  Pledge of Revenue and Lien Position .................................... 5  Utility Local Improvement Districts ...................................... 5  Rate Covenant and Coverage Requirement .......................... 5  Bond Fund ................................................................................... 5  Reserve Account ........................................................................ 6  Flow of Funds ............................................................................. 7  Additional Covenants of the City ........................................... 7  Future Parity Bonds ................................................................... 8  WATERWORKS UTILITY DEBT INFORMATION ........... 9  Outstanding Waterworks Utility Revenue Obligations ...... 9  Debt Service Requirements .................................................... 10  Other Waterworks Utility Debt ............................................. 10  Debt Payment Record ............................................................. 10  Other Financings ...................................................................... 11  THE WATERWORKS UTILITY ............................................. 11  The Water System .................................................................... 11  The Sewer System ................................................................... 13  The Process Water Reuse Facility ........................................ 15  The Stormwater System .......................................................... 16  The Irrigation System .............................................................. 17  Capital Improvement Plan ...................................................... 17  Endangered Species Act ......................................................... 17  Historical Operating Results .................................................. 17  CITY PROFILE ............................................................................ 20  City Council .............................................................................. 20  Key Administrative Staff ........................................................ 20  Labor Relations ........................................................................ 21  Pensions ..................................................................................... 21  Other Post-Employment Benefits ......................................... 23  Risk Management .................................................................... 24  Accounting and Budgeting Process ...................................... 25  Auditing of City Finances ...................................................... 25  Authorized Investments .......................................................... 25  GENERAL AND ECONOMIC INFORMATION ................ 26  Population .................................................................................. 26  Largest Employers ................................................................... 26  Economic Data ......................................................................... 27  TAX MATTERS .......................................................................... 28  Tax Exemption ......................................................................... 28  Certain Other Federal Tax Consequences ........................... 29  Preservation of Tax Exemption ............................................. 30  RATING ........................................................................................ 30  CONTINUING DISCLOSURE ................................................ 30  CERTAIN INVESTMENT CONSIDERATIONS ................ 31  INITIATIVE AND REFERENDUM ....................................... 31  LEGAL AND UNDERWRITING ............................................ 32  Approval of Counsel ................................................................ 32  Financial Advisor ..................................................................... 32  Litigation .................................................................................... 32  Conflicts of Interest ................................................................. 32  Underwriting ............................................................................. 32  CONCLUDING STATEMENT ................................................ 32  APPENDIX A. CERTAIN DEFINITIONS APPENDIX B. 2016 AUDITED FINANCIAL STATEMENTS APPENDIX C. OPINION OF BOND COUNSEL APPENDIX D. BOOK-ENTRY SYSTEM Page 56 of 140 iv THIS PAGE INTENTIONALLY LEFT BLANK. Page 57 of 140 1 OFFICIAL STATEMENT CITY OF PASCO, WASHINGTON $9,305,000* WATER AND SEWER IMPROVEMENT REVENUE BONDS, 2017 INTRODUCTION The City of Pasco, Washington (the “City”), a municipal corporation duly organized and existing under and by virtue of the laws of the State of Washington (the “State”), furnishes this Official Statement in connection with the issuance and sale by the City of its $9,305,000* Water and Sewer Improvement Revenue Bonds, 2017 (the “Bonds”). The Bonds are issued pursuant to the Constitution of the State, Title 35A and chapters 35.92 and 39.46 of the Revised Code of Washington (“RCW”) and Ordinance No. 4365 (the “Bond Ordinance”), passed by the City Council on November 20, 2017. The Bonds are secured by a pledge of the Net Revenues of the Waterworks Utility. See “SECURITY FOR THE BONDS.” The Waterworks Utility, as defined in the Bond Ordinance, 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. Capitalized terms used herein, if not specifically defined herein, are used as defined in the Bond Ordinance. See APPENDIX A—“CERTAIN DEFINITIONS.” DESCRIPTION OF THE BONDS General The Bonds will be issued in the aggregate principal amount of $9,305,000* and will be dated and bear interest from the date of their initial delivery. The Bonds will mature on the dates and in the principal amounts and will bear interest payable semiannually on each June 1 and December 1, beginning June 1, 2018, at the respective rates as set forth on the inside cover of this Official Statement. Interest on the Bonds will be calculated on the basis of a 360-day year comprised of twelve 30-day months. The Bonds are being issued on parity with the City’s Water and Sewer Revenue Bonds, 2009, outstanding in the amount of $6,485,000** (the (“2009 Bonds”), Water and Sewer Improvement and Refunding Revenue Bonds, 2010A, and Water and Sewer Revenue Refunding Bonds, 2010T, outstanding in the aggregate amount of $4,660,000 (the “2010 Bonds”), Water and Sewer Revenue Bonds, 2013A and 2013T, outstanding in the aggregate amount of $8,585,000 (the “2013 Bonds”) and Water and Sewer Improvement and Refunding Revenue Bonds, 2015, outstanding in the amount of $14,170,000 (the “2015 Bonds”) (collectively the “Outstanding Parity Bonds” and, together with the Bonds and any Future Parity Bonds, the “Parity Bonds”). The Bonds are not general obligations of the City, and neither the full faith and credit nor the taxing power of the City, Franklin County, the State or any political subdivision thereof is pledged for the payment of the principal of or interest on the Bonds. Bond Registrar and Registration Features Bond Registrar. The State’s fiscal agent, currently U.S. Bank National Association (the “Bond Registrar”), will authenticate the Bonds and act as the paying agent and registrar for the purpose of paying the principal of and interest on the Bonds, recording the purchase and registration, exchange or transfer, and payment of the Bonds and performing the other respective obligations of the paying agent and registrar. No resignation or removal of the Bond Registrar shall become effective until a successor has been appointed and has accepted the duties of Bond Registrar. Book-Entry System. The Bonds will be issued as fully registered bonds and, when issued, will be initially registered in the name of Cede & Co., as the nominee for the Depository Trust Company (“DTC”). DTC will act as initial securities depository for the Bonds (“Securities Depository”). Individual purchases and sales of the Bonds may be made in book-entry form only in minimum denominations of $5,000 or integral multiples thereof within a maturity (“Authorized Denominations”). So long as * Preliminary; subject to change. ** Excludes 2009 Bonds maturing on May 1, 2022 and May 1, 2024 that are subject to extraordinary redemption provisions and are scheduled to be redeemed on December 5, 2017. Page 58 of 140 2 the Bonds are in book-entry only form, principal of and interest on the Bonds will be payable as required by the operational arrangements DTC referenced in the Blanket Issuer Letter of Representations between the City and DTC, dated August 31, 1998 (the “Letter of Representations”). The Beneficial Owners will not receive certificates representing their interest in the Bonds. For information about DTC and its book-entry system, see Appendix D—“BOOK ENTRY SYSTEM.” The City makes no representation as to the accuracy or completeness of the information in Appendix D provided by DTC. Purchasers of the Bonds should confirm this information with DTC or its broker-dealer participants. Interest on each Bond not registered in the name of the Securities Depository is payable by check or draft of the Bond Registrar mailed on the interest payment date to the person in whose name a Bond is registered on the Bond Register (the “Registered Owner”) at the addresses appearing on the Bond Register on the 15th day of the month preceding an interest payment date (“Record Date”) or by electronic transfer on the interest payment date. The City is not required to make electronic transfers except pursuant to a request by a Registered Owner of the Bonds in writing received on or prior to the Record Date and at the sole expense of that Registered Owner. Principal of each Bond not registered in the name of the Securities Depository is payable upon presentation and surrender of the Bond by the Registered Owner to the Bond Registrar. Procedure in the Event of Revisions of Book-Entry System. If (i) the Securities Depository resigns and the City does not appoint a substitute Securities Depository, or (ii) the City terminates the services of the Securities Depository, the Bonds will no longer be held in book-entry only form and the registered ownership of each Bond may be transferred to any person as provided in the Bond Ordinance. Transfer and Exchange of Bonds. The Bonds will be subject to transfer and exchange as provided in the Bond Ordinance. Redemption Provisions and Purchase of Bonds Optional Redemption. The Bonds maturing in the years 20__ through 20__, inclusive, are not subject to redemption prior to their stated maturity dates. The Bonds maturing on or after December 1, 20__ are subject to redemption prior to their stated maturity dates, at the option of the City, at any time on or after _________ 1, 20__ as a whole or in part at par plus accrued interest to the date fixed for redemption. Mandatory Redemption. The Bonds maturing on December 1 in each of the years [__________] are term bonds (the “Term Bonds”), and, if not optionally redeemed or purchased, will be called for redemption at a price equal to the principal amount to be redeemed plus accrued interest, if any, to the date fixed for redemption on December 1 in the years and principal amount as follows: 20__ Term Bonds 20__ Term Bonds 20__ Term Bonds Redemption Date (December 1) Principal Amount Redemption Date (December 1) Principal Amount* Redemption Date (December 1) Principal Amount If a Term Bond is redeemed under the optional redemption provisions, defeased or purchased by the City and surrendered for cancellation, the principal amount of the Term Bond so redeemed, defeased or purchased (irrespective of its actual redemption or purchase price) will be credited against one or more scheduled mandatory redemption installments for that Term Bond in the manner described below regarding the selection of Bonds for redemption. Selection of Bonds for Redemption. If fewer than all of the outstanding Bonds are to be redeemed at the option of the City, the City will select the maturities to be redeemed. For as long as the Bonds are in book-entry only form, if fewer than all of the Bonds of a maturity are called for redemption, the selection of Bonds within a maturity to be redeemed will be made by the Securities Depository in accordance with the Letter of Representations. If the Bonds are no longer held in book-entry only form, then the Bond Registrar would select Bonds for redemption randomly within a maturity in such manner as the Bond Registrar determines. Partial Redemption. All or a portion of the principal amount of any Bond that is to be redeemed may be redeemed in any Authorized Denomination. If less than all of the outstanding principal amount of any Bond is redeemed, upon surrender of that Bond to the Bond Registrar, there will be issued to the Registered Owner, without charge a new Bond (or Bonds, at the option of the Registered Owner) of the same maturity and interest rate in any Authorized Denomination in the aggregate principal amount remaining unredeemed. Notice of Redemption (Book-Entry). So long as the Bonds are in book-entry only form, notice of any redemption of Bonds will be given as required by the Letter of Representations. Page 59 of 140 3 Notice of Redemption (No Book-Entry). During any period in which the Bonds are not in book-entry only form, unless waived by any Registered Owner of the Bonds to be redeemed, official notice of any redemption of Bonds will be given by the Bond Registrar on behalf of the City by mailing a copy of an official redemption notice by first class mail, postage prepaid, at least 20 days and not more than 60 days prior to the date fixed for redemption, to the Registered Owners of the Bonds to be redeemed at the address shown on the books or records maintained by the Bond Registrar for the purpose of identifying ownership of the Bonds (the “Bond Register”) on the Bond Registrar’s close of business on the date the Bond Registrar sends the notice of redemption, and such requirement will be satisfied when notice has been mailed as so provided, whether or not it is actually received by the Registered Owner or Beneficial Owner. Conditional Notice of Redemption. In the case of an optional redemption, the notice of redemption may state that the City retains the right to rescind the redemption notice and the redemption by giving a notice of rescission to the affected Registered Owners at any time on or prior to the date fixed for redemption. Any notice of optional redemption that is so rescinded will be of no effect, and each Bond for which a notice of redemption has been rescinded will remain outstanding. Effect of Redemption. Interest on each Bond called for redemption will cease to accrue on the date fixed for redemption, unless either the notice of optional redemption is rescinded, or money sufficient to effect such redemption is not on deposit in the City’s Water and Sewer Revenue and Refunding Bond Redemption Fund, 1991 (the “Bond Fund”) or in a trust account established to refund or defease the Bond. Purchase of Bonds. The City has reserved the right to purchase any or all of the Bonds offered to the City at any time at any price acceptable to the City plus accrued interest to the date of purchase. Failure to Pay Bonds If the principal of any Bond is not paid when the Bond is properly presented at its maturity or date fixed for redemption, as applicable, the City will be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or date fixed for redemption until that Bond, both principal and interest, is paid in full or until sufficient money for its payment in full is on deposit in the Bond Fund, or in a trust account established to refund or defease the Bond, and the Bond has been called for payment by giving notice of that call to the Registered Owner. Refunding or Defeasance The City may issue refunding bonds pursuant to State law or use money available from any other lawful source to carry out a refunding or defeasance plan, which may include (a) paying when due the principal of and interest on any or all of the Bonds (the “defeased Bonds”); (b) redeeming the defeased Bonds prior to their maturity; and (c) paying the costs of the refunding or defeasance. If the City sets aside in a special trust fund or escrow account irrevocably pledged to that redemption or defeasance (the “trust account”) money and/or “government obligations” (as defined by chapter 39.53 Revised Code of Washington (“RCW”), as now in effect or hereafter amended) maturing at a time or times and bearing interest in amounts sufficient to redeem, refund or defease the defeased Bonds in accordance with their terms, then all right and interest of the owners of the defeased Bonds in the covenants of the Bond Ordinance and in the Gross Revenue of the Waterworks Utility, ULID Assessments, funds and accounts obligated to the payment of the defeased Bonds will cease and become void. Thereafter, the owners of defeased Bonds will have the right to receive payment of the principal of and interest on the defeased Bonds solely from the trust account and the defeased Bonds will be deemed no longer outstanding. In that event, the City may apply money remaining in any fund or account (other than the trust account) established for the payment or redemption of the defeased Bonds to any lawful purpose, subject only to the rights of the Owners of any other Parity Bonds then outstanding. As currently defined in RCW 39.53.010(4), “government obligations” means (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America and bank certificates of deposit secured by such obligations; (b) bonds, debentures, notes, participation certificates, or other obligations issued by the Banks for Cooperatives, the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Export-Import Bank of the United States, federal land banks, or the Federal National Mortgage Association; (c) public housing bonds and project notes fully secured by contracts with the United States; and (d) obligations of financial institutions insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, to the extent insured or guaranteed as permitted under any other provision of State law. PURPOSE AND USE OF PROCEEDS Purpose Proceeds of the Bonds will be used to (a) finance the costs of a plan of additions and betterments and extensions of the Waterworks Utility (see “Plan of Additions” below); (b) fund the reserve account in the Bond Fund (the “Reserve Account”); and (c) pay the costs of issuance of the Bonds. Page 60 of 140 4 Sources and Uses of Proceeds* The proceeds of the Bonds are estimated to be applied as follows: Sources Principal Amount Original Issue Premium Total Sources Uses Plan of Additions Deposit to Reserve Account Costs of Issuance(1) Underwriter’s Discount Total Uses (1) Includes Bond Counsel fee, Financial Advisor fee, rating agency fee, and other related fees and expenses. Plan of Additions Proceeds of the Bonds will be used to improve various aspects of the City’s sewer system, water system, and storm water infrastructure that have been deemed inefficient or of future risk of failure, and general system improvements. Planned projects include:  Lift station: construct new suction valves, access hatches, pumps and pipes to increase worker safety and keep up with increased waste water flows  Northwest Area Sewer Transmission Main: construct extension to aid in future development in the northwest area of the City.  Pearl Street Lift Station Improvements: replace the existing 1950s lift station.  Richardson Road Water Line Replacement: replace thin-wall polyvinyl chloride (PVC) irrigation class line with 8” ductile iron pipe from road 92 to road 96 and provide fire protection by via three new hydrants.  West Pasco Trunk Sewer Line: repair and reline the 30” trunk line and manholes from road 60 to road 100 to prevent failure of the line that currently has rebar exposed from sulfide gas corrosion.  West Pasco Water Treatment Plant (“WTP”) Backwash Recovery Improvements & High Service Pump and Yard Piping: add needed pumping capacity to the high-service pump station and provide additional filter backwash capability. The project will coincide with the PALL-brand micro-filter expansion project and include the required piping to connect to the Zone 1 transmission main.  Wastewater Treatment Plant Facility (“WWTP”) Plan Improvements: determine capital improvement projects needed to keep compliance with the WWTP National Pollutant Discharge Elimination System (“NPDES”) Permit, and help meet future capacity needs. The Facility Plan will identify projects expected to total $25,000,000 and align with the City’s future NPDES Permit; a portion of which may be financed with proceeds of the Bonds. Additionally, this plan will tie together previous planning efforts. Page 61 of 140 5 SECURITY FOR THE BONDS Pledge of Revenue and Lien Position The Net Revenue of the Waterworks Utility and ULID Assessments are pledged to the payment of the principal of and interest on the Bonds when due and shall constitute a lien and charge upon that Net Revenue of the Waterworks Utility and ULID Assessments prior and superior to any other charges whatsoever, except that the lien and charge upon such Net Revenue and ULID Assessments for the Bonds shall be on a parity with the lien and charge thereon for any outstanding Parity Bonds. Utility Local Improvement Districts The City currently has three utility local improvement districts (“ULIDs”) with assessments currently outstanding that have been pledged to the Bond Fund for payment of Parity Bonds. The City may create ULIDs in the future and may issue Future Parity Bonds to finance improvements within a ULID, consistent with the Parity Conditions described below under the heading “Future Parity Bonds.” The term “ULID assessments” (not capitalized) is used in this document to refer generically to any assessments in a ULID, whether or not such assessments are pledged to the Bond Fund. If capitalized (“ULID Assessments”), the term refers specifically to assessments that have been pledged to the Bond Fund for payment of Parity Bonds. In General. Under State law, the City may establish ULIDs and may levy special assessments to pay in whole or in part the costs of any improvements within the ULID, under a mode of annual installments on all property specially benefited by any local improvement, with the amount of the assessment based on the special benefit to each parcel within the ULID. The City must permit each property owner to pay its assessment in full within a 30-day prepayment period and to pay the remaining outstanding balance in annual installments of principal and interest. Lien of Assessments. ULID assessments constitute a lien on the property assessed from the time the City places the assessment roll in the hands of the county treasurer for collection. The interest and penalties are included in and become a part of the assessment lien. State law provides that an assessment lien is paramount to all other liens, except the lien for general property taxes and the homestead exemption. Under State law, the homestead exemption permits any head of a family to protect a certain portion of the homestead (residence) from forced sale. In 1982, the Washington State Court of Appeals held, in City of Algona v. Sharp, et al., that the filing for a homestead exemption before a scheduled foreclosure sale of residential property valued at less than the statutory homestead exemption (currently $125,000) effectively exempted that property from a forced sale to enforce delinquent special assessments in a special benefit assessment district such as a local improvement district or utility local improvement district. Foreclosure of Assessments. The manner in which delinquent ULID assessments may be foreclosed is set forth in detail in State law. Foreclosure proceedings may be initiated if on the first day of January two installments of any assessment are delinquent, or if the final installment has been delinquent for more than one year. Property foreclosed upon is sold by the county, and the laws governing appeals from general tax foreclosure judgments apply similarly to appeals from judgments obtained in a local improvement assessment lien foreclosure action. Proceeds of the sale of any property foreclosed upon in the manner required by law, up to the amount of the unpaid assessment and interest and penalties thereon, are deposited into and become a part of the Bond Fund. Rate Covenant and Coverage Requirement So long as any Parity Bonds are outstanding, the City has covenanted in the Bond Ordinance that it will maintain and collect such rates as will produce sufficient Net Revenue of the Waterworks Utility, together with ULID Assessment collections, as will make available for the payment of the principal of and interest on the Parity Bonds as they come due and for payments as required to be made into the Reserve Account an amount at least equal to the Coverage Requirement and, in addition thereto, that it will pay all Operating and Maintenance Expenses and otherwise meet the obligations of the City as set forth in the Bond Ordinance. “Coverage Requirement” in any year means an amount of Net Revenue of the Waterworks Utility, together with the ULID Assessments collected in that year, equal to at least the Maximum Annual Debt Service on all Assessment Bonds plus an amount of the Net Revenue of the Waterworks Utility not used to calculate the Coverage Requirement on Assessment Bonds equal to at least 1.25 times Maximum Annual Debt Service on all bonds payable from the Bond Fund that are not Assessment Bonds. Bond Fund The Bond Fund is divided into two accounts, 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 Page 62 of 140 6 Assessments upon their collection and, out of the Net Revenue of the Waterworks Utility, certain fixed amounts without regard to any fixed proportion, namely, amounts, together with any ULID Assessments collected by the City and deposited into the applicable account in the Bond Fund and investment earnings in that account, as follows: a) Into the Principal and Interest Account, on or before each interest or principal and interest payment date, an amount equal to the interest or the principal and interest to become due and payable on that interest or principal and interest payment date of all Parity Bonds; and b) Into the Reserve Account, on the issue date of the Bonds, an amount sufficient, together with the Reserve Insurance, to fully fund the Reserve Requirement for all Parity Bonds. Money deposited in the Reserve Account for the Reserve Requirement for all Parity Bonds may be decreased for any issue of Parity Bonds when and to the extent the City has provided for an Alternate Security or Reserve Insurance for those bonds. When the 2009, 2010, 2013 and 2015 Parity Bonds are no longer outstanding, the following shall become effective: The City may establish, for one or more series of Future Parity Bonds, a separate reserve requirement (which may be zero), to be held in a separate reserve account, for the purpose of securing those Future Parity Bonds, and those Future Parity Bonds will not be secured by amounts in the Reserve Account or by any Reserve Insurance credited to the Reserve Account. The City may establish additional accounts in the Bond Fund for the deposit of ULID Assessments after the deposit of the required amount in the other funds. If the City shall fail to set aside and pay into the Bond Fund the amounts which it has obligated itself by the Bond Ordinance to set aside and pay therein, the owner of any Bond may bring suit against the City to compel it to do so. Reserve Account The Reserve Account for any Future Parity Bonds may be accumulated from any other funds which the City legally may have available for such purpose in addition to using ULID Assessments and Net Revenue of the Waterworks Utility. When the required amounts have been paid into the Reserve Account in the Bond Fund, the City will maintain those amounts therein at all times, except for withdrawals therefrom as authorized in the Bond Ordinance, until there is sufficient money in the Bond Fund, including the Reserve Account therein, to pay the principal of and interest to maturity on all outstanding bonds payable from the Bond Fund, at which time no further payments need be made into the Bond Fund, and the money in the Bond Fund, including the Reserve Account, may be used to pay that principal and interest. If there shall be a deficiency in the Principal and Interest Account to meet maturing installments of either principal or interest, as the case may be, on the Bonds, the deficiency shall be made up from the Reserve Account by first the withdrawal of cash and investments therefrom and after all cash and investments have been depleted, then by the draws on the Reserve Insurance for that purpose on a pro rata basis. Any deficiency created in the Reserve Account by reason of any withdrawal shall then be made up from the Net Revenue of the Waterworks Utility first available after making necessary provisions for the required payments into the Principal and Interest Account. The Reserve Insurer shall be reimbursed first, within one year, to reinstate the Reserve Insurance, before the balance of the Reserve Requirement is restored. All money in the Reserve Account not needed to meet the payments of principal and interest when due may be kept on deposit in the official bank depository of the City or in any national bank or may be invested in any legal investment for City funds maturing not later than the interest or principal and interest payment date when the money will be needed. Interest on any of those investments or on that bank account shall be deposited in and become a part of the Reserve Account until the Reserve Requirement shall have been accumulated therein, after which time the interest shall be deposited in the Principal and Interest Account. Notwithstanding the provisions for the deposit or maintenance of earnings in accounts of the Bond Fund, any earnings which are subject to a federal tax or rebate requirement may be withdrawn from the Bond Fund for deposit into a separate fund or account for that purpose. The City currently has in place, to meet a portion of the Reserve Requirement for Parity Bonds, a surety bond issued by Ambac Assurance Corporation (“Ambac”) in the amount of $2,108,930, which expires on December 1, 2019. Ambac is currently rated Caa2 by Moody’s Investors Service Inc. and S&P Global withdrew its rating in November 2010. The City also currently has $2,900,240 of cash and investments in the Reserve Account. In anticipation of the expiration of the Ambac surety bond, the City will use up to ten percent of the proceeds of the Bonds to increase the amount of cash and investments in the Reserve Account to approximately $3,262,114. Further, the City will make additional payments into the Reserve Account, or obtain a new surety bond, as required to replace the Ambac surety bond prior to its expiration in 2019. See Appendix A“CERTAIN DEFINITIONS” for a definition of the Reserve Requirement. Page 63 of 140 7 Flow of Funds Funds in the Water and Sewer Revenue Fund shall be used in the following order of priority: a) To pay Operating and Maintenance Expenses; b) To make all payments required to be made into the Bond Fund to pay and secure the payment of the Annual Debt Service on all outstanding Parity Bonds; c) To make all payments required to be made into the Reserve Account and to make all payments (principal and interest) required to be made in connection with Reserve Insurance and any Alternate Security, except if there is not sufficient money to make all payments for Reserve Insurance and any Alternate Security, the payments shall be made on a pro rata basis with deposits in the Reserve Account; d) To make all payments required to be made into the loan redemption funds or accounts, and other revenue bond redemption funds created to pay the debt service on any revenue obligation having a lien upon the Net Revenue of the Waterworks Utility subordinate to the lien of the Parity Bonds; and e) To make necessary additions, betterments, improvements or repairs to the Waterworks Utility, and to retire by redemption or purchase any outstanding Parity Bonds, or for any other lawful purpose. Additional Covenants of the City The City has further covenanted and agreed with the Owner of each of the Bonds as follows: a) It will not sell, lease, mortgage, or in any manner encumber or dispose of all the properties of the Waterworks Utility unless provision is made for payment into the Bond Fund of an amount sufficient either to defease all outstanding Parity Bonds or to pay the principal of and interest on all the outstanding Parity Bonds in accordance with the terms thereof; and further binds itself irrevocably not to mortgage, sell, lease or in any manner dispose of any part of the Waterworks Utility that is used, useful and material to the operation of such utility unless provision is made for replacement thereof or for payment into the Bond Fund of an amount which shall bear the same ratio to the amount of outstanding Parity Bonds as the Net Revenue available for debt service for such bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the Waterworks Utility so leased, encumbered or disposed of bears to the Net Revenue available for debt service for such bonds from the entire Waterworks Utility for the same period. Any such money so paid into the Bond Fund shall be used to retire outstanding Parity Bonds at the earliest possible date. b) It will maintain and keep the Waterworks Utility in good repair, working order and condition and operate such utility and the business in connection therewith in an efficient manner and at a reasonable cost. c) It will keep proper books of accounts and records separate and apart from other accounts and records, in which complete and correct entries will be made of all transactions relating to the Waterworks Utility of the City, and it will make available to any Owner on written request the annual operating and income statements of the Waterworks Utility. d) Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish water or sewerage service to any customer whatsoever free of charge and it will, 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, will promptly avail itself of its utility lien rights, as set forth in applicable statutes. e) It will carry the types of insurance on its Waterworks Utility properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems, and the cost of such insurance will be considered a part of Operating and Maintenance Expenses, or it will implement and maintain a self-insurance program or an insurance pool program with reserves adequate, in the judgment of the City Council, to protect the owners of the Parity Bonds against loss. f) To the extent permitted by State law, it will maintain its corporate identity and existence so long as any Bonds remain outstanding. g) It will not grant any competing utility service franchise and will use all legal means to prevent competition with the Waterworks Utility. Page 64 of 140 8 h) If on the first day of January in any year, two installments of any ULID Assessment are delinquent, or the final installment of any ULID Assessment has been delinquent for more than one year, the City will proceed with the foreclosure of the delinquent assessment or delinquent installments thereof in the manner provided by law. Future Parity Bonds The City has reserved the right to issue Future Parity Bonds if the following conditions are met and complied with at the time of the issuance of those Future Parity Bonds: a) There shall be no deficiency in the Bond Fund. b) The ordinance providing for the issuance of the Future Parity Bonds shall provide that all ULID Assessments shall be paid directly into the Bond Fund, except for any prepaid assessments permitted by law to be paid into a construction fund or account. c) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the deposit into the Reserve Account (if such Future Parity Bonds are secured by the Reserve Account) of (i) an amount equal to the Reserve Requirement for those Future Parity Bonds from the Future Parity Bond proceeds, or (ii) Reserve Insurance or Alternate Security or an amount plus Reserve Insurance or Alternate Security equal to the Reserve Requirement for those Future Parity Bonds, or (iii) to the extent that the Reserve Requirement is not funded from Future Parity Bond proceeds or Reserve Insurance or Alternate Security at the time of issuance of those Future Parity Bonds, by no later than the fifth anniversary date from the dated date of the respective issue of Future Parity Bonds from ULID Assessments, if any, levied and first collected for the payment of the principal of and interest on those Future Parity Bonds and, to the extent that ULID Assessments are insufficient, then from the Net Revenue of the Waterworks Utility in approximately equal annual payments, the Reserve Requirement for those Future Parity Bonds. No Reserve Insurance or Alternate Security may be used to satisfy the Reserve Requirement for Future Parity Bonds unless (i) the insurance policy or Alternate Security is non-cancelable and (ii) the insurer or provider of the Alternate Security as of the time of issuance of such insurance or Alternate Security is rated in the highest rating categories by both Moody’s Investors Service, Inc., and S&P Global; however, when the Outstanding Parity Bonds are no longer outstanding, the Reserve Insurance or Alternate Security may be rated as of the time of issuance of such insurance or Alternate Security in one of the two-highest categories by either Moody’s Investors Service, Inc., or S&P Global. d) The ordinance authorizing the issuance of such Future Parity Bonds shall provide for the payment of mandatory redemption or sinking fund requirements into the Bond Fund for any Term Bonds to be issued and for regular payments to be made for the payment of the principal of such Term Bonds on or before their maturity, or, as an alternative, the mandatory redemption of those Term Bonds prior to their maturity date from money in the Principal and Interest Account. e) There shall be on file from a licensed professional engineer experienced in the design, construction and operation of municipal utilities, or from an independent certified public accountant, a certificate showing that in his or her professional opinion the Net Revenue of the Waterworks Utility for any 12 consecutive calendar months out of the immediately preceding 24 calendar months shall be equal to the Coverage Requirement for each year thereafter, except that such certificate may be provided by a City representative if it is based solely upon actual historical Net Revenue of the Waterworks Utility without any adjustment. The certificate, in estimating the Net Revenue of the Waterworks Utility available for debt service, shall use the historical Net Revenue of the Waterworks Utility for any 12 consecutive months out of the 24 months immediately preceding the month of delivery of the Future Parity Bonds. Net Revenue of the Waterworks Utility may be adjusted to reflect: 1) Any changes in rates in effect and being charged or expressly adopted by ordinance to take effect within 180 days after the date of the Certificate; 2) Income derived from customers of the Waterworks Utility that have become customers during the 12 consecutive month period or thereafter adjusted to reflect one year’s net revenue from those customers; 3) Revenue from any customers to be connected to the Waterworks Utility who have paid the required connection charges; 4) Revenue received or to be received which is derived from any person, firm, corporation or municipal corporation under any executed contract for water, sewage disposal or other utility service, which revenue was not included in the historical Net Revenue of the Waterworks Utility; Page 65 of 140 9 5) The engineer’s or accountant’s estimate of the Net Revenue of the Waterworks Utility to be derived from customers to connect within 180 days after the date of the completion of the additions to and improvements and extensions of the Waterworks Utility to be paid for out of the proceeds of the sale of the additional Future Parity Bonds or from other additions to and improvements and extensions of the Waterworks Utility then under construction and not fully connected to the facilities of the Waterworks Utility when such additions, improvements and extensions are completed; and 6) Any increases or decreases in Net Revenue as a result of any actual or reasonably anticipated changes in Operating and Maintenance Expense subsequent to the 12-month period. In connection with the issuance of the Bonds, the City will provide a certificate executed by a City representative, based solely upon actual/historical Net Revenue of the Waterworks Utility without any adjustment. If Future Parity Bonds proposed to be so issued are for the sole purpose of refunding outstanding bonds payable from the Bond Fund, such certification of coverage shall not be required if the amount required for the payment of the principal and interest in each year for the refunding bonds is not increased over the amount for that year required for the bonds to be refunded thereby and if the maturities of such refunding bonds are not extended beyond the maturities of the bonds to be refunded thereby. Nothing contained in the Bond Ordinance shall prevent the City from issuing Future Parity Bonds to refund any maturing Parity Bonds then outstanding, money for the payment of which is not otherwise available. Nothing contained in the Bond Ordinance shall prevent the City from issuing revenue bonds or incurring other obligations that are a charge upon the Net Revenue of the Waterworks Utility of the City subordinate or inferior to the payments required to be made therefrom into the Bond Fund for the payment of Parity Bonds or from pledging the payment of utility local improvement district assessments into a redemption fund created for the payment of the principal of and interest on those subordinate lien bonds or obligations as long as such utility local improvement district assessments are levied for improvements constructed from the proceeds of those subordinate lien bonds or obligations. WATERWORKS UTILITY DEBT INFORMATION Outstanding Waterworks Utility Revenue Obligations The City has the following Waterworks Utility revenue obligations currently outstanding: Amount Outstanding Dated Maturity Amount as of Waterworks Utility Revenue Obligations Date Date Issued 9/30/17 Parity Bonds Water and Sewer Revenue Bonds, 2009(1) 04/17/09 05/01/29 $10,045,000 $6,725,000 Water & Sewer Improvement and Refunding Revenue Bonds, 2010A 06/03/10 06/01/29 9,070,000 4,480,000 Water and Sewer Refunding Revenue Bonds, 2010T (Taxable) 06/03/10 06/01/18 1,240,000 180,000 Water and Sewer Revenue Bonds, 2013A 12/05/13 12/01/28 2,520,000 2,220,000 Water and Sewer Revenue Bonds, 2013T (Taxable) 12/05/13 12/01/28 7,235,000 6,365,000 Water and Sewer Improvement and Refunding Revenue Bonds, 2015 12/22/15 12/01/40 14,020,000 14,170,000 Total Parity Bonds $44,130,000 $34,140,000 Subordinate Lien Obligations Drinking Water State Revolving Fund (“DWSRF”) Loan(2) 09/09/15 10/01/34 $6,810,450 $1,783,250 Public Works Trust Fund Loan 00-691-043 04/27/00 06/01/20 2,100,000 333,422 Total Subordinate Lien Obligations $8,910,450 $2,116,672 TOTAL WATERWORKS UTILITY REVENUE OBLIGATIONS $53,040,450 $36,256,672 __________________ (1) Includes 2009 Bonds maturing on May 1, 2022 and May 1, 2024 subject to an extraordinary call provision, and which the City will redeem on December 5, 2017. (2) The City has a Drinking Water State Revolving Fund (“DWSRF”) loan for the Columbia Water Supply: DM15-952-037, which allows the City to borrow up to $6,810,450. The City may draw more funds from the loan in the future. The DWSRF lien is subordinate to the Parity Bonds. * Preliminary, subject to change Page 66 of 140 10 Debt Service Requirements Annual debt service requirements for the Outstanding Parity Bonds and the Bonds are presented in the following table. WATERWORKS UTILITY DEBT SERVICE SCHEDULE(1) OUTSTANDING PARITY BONDS THE BONDS* Assessment Bonds Non-Assessment Bonds Year Principal Interest Principal Interest Principal* Interest* TOTAL* 2017(2) $110,000 $31,180 $1,605,000 $1,464,962 - $ - $3,211,142 2018 110,000 27,280 1,650,000 1,412,351 - 353,590 3,553,221 2019 110,000 22,880 1,935,000 1,357,081 - 372,200 3,797,161 2020 115,000 18,480 2,000,000 1,284,889 - 372,200 3,790,569 2021 55,000 15,080 2,080,000 1,206,746 - 372,200 3,729,026 2022 175,000 10,240 1,780,000 1,123,300 - 372,200 3,460,740 2023 5,400 1,845,000 1,049,498 - 372,200 3,272,098 2024 120,000 2,700 1,930,000 971,335 - 372,200 3,396,235 2025 2,015,000 886,325 - 372,200 3,273,525 2026 - - 1,810,000 795,187 - 372,200 2,977,387 2027 - - 1,895,000 709,776 - 372,200 2,976,976 2028 - - 1,985,000 619,886 - 372,200 2,977,086 2029 - - 1,130,000 524,975 - 372,200 2,027,175 2030 - - 745,000 497,550 410,000 372,200 2,024,750 2031 - - 785,000 460,300 425,000 355,800 2,026,100 2032 - - 825,000 421,050 440,000 338,800 2,024,850 2033 - - 865,000 379,800 455,000 321,200 2,021,000 2034 - - 910,000 336,550 475,000 303,000 2,024,550 2035 - - 955,000 291,050 495,000 284,000 2,025,050 2036 - - 1,000,000 243,300 515,000 264,200 2,022,500 2037 - - 1,050,000 193,300 535,000 243,600 2,021,900 2038 - - 1,105,000 140,800 555,000 222,200 2,023,000 2039 - - 1,160,000 85,550 580,000 200,000 2,025,550 2040 - - 1,200,000 43,500 605,000 176,800 2,025,300 2041 - - - - 1,870,000 152,600 2,022,600 2042 - - - - 1,945,000 77,800 2,022,800 $795,000 $133,240 $34,260,000 $16,499,061 $9,305,000 $7,759,990 $68,752,291 __________________ (1) All Bonds are Parity Bonds. Assessment Bonds and Non-Assessment Bonds are shown separately for analysis purposes only. (2) Includes all principal and interest payments for 2017, including amounts already paid. * Preliminary, subject to change Other Waterworks Utility Debt In addition to the Outstanding Parity Bonds, the City has the ability to borrow funds on a Drinking Water State Revolving Fund (“DWSRF”) line (DM15-952-037) for a maximum of $6,810,430. The lien is subordinate to the Parity Bonds. The City also has a Public Works Trust Fund Loan from the State Public Works Board with an outstanding principal amount of $333,421 at publication of this document. The lien of the Public Works Trust Fund Loan on Net Revenue is subordinate to the lien of the Parity Bonds on Net Revenue. Debt Payment Record The City has always promptly met principal and interest payments on outstanding bonds, notes and warrants when due. No refunding bonds have been issued or other debt received for the purpose of preventing an impending default. Page 67 of 140 11 Other Financings The City periodically reviews its outstanding debt for refunding opportunities, and may issue refunding bonds in the next 24 months. The City does not anticipate issuing other water and sewer revenue bonds within the next 12 months. THE WATERWORKS UTILITY The Waterworks Utility’s primary activity is the operation and maintenance of a domestic water system which supplies and distributes potable water and water for fire protection purposes for City residents (the “Water System”), a sanitary system which collects sanitary sewage and delivers it to a municipal sewage treatment facility (the “Sewer System”), a stormwater management system to manage surface and stormwater and delivery to the City’s stormwater facilities (the “Stormwater System”), an irrigation system for residential landscaping (the “Irrigation System”) and a process water resource facility for food preparation process wastewater (the “Process Water Reuse Facility”). The City owns and operates the Waterworks Utility as a separate enterprise fund that provides water and/or sewer service to virtually all of the City’s residents. The City operates its Waterworks Utility in compliance with federal and State environmental and health laws. The Water System The Water System receives its water supply from the Columbia River via two intake structures in the river. The intake facilities have multiple pumps with pumping capacity of 26.8 million gallons per day (“mgd”) at the Butterfield Water Treatment Plant and 6 mgd at the West Pasco Water Treatment Plant. The raw or untreated water is pumped through three lines to both treatment facilities. The Butterfield water treatment plant was originally constructed in 1949, expanded in 1958, and upgraded and automated in 1987. This conventional treatment plant consists of the following main process components: two flocculation basins, two sedimentation basins, eight dual media filters, a clearwell and five treated water pumps which discharge into the transmission/distribution system. The plant routinely operates in an unmanned mode 16 hours out of each 24-hour day. The West Pasco Water Treatment Plant was completed in 2011. The raw water is treated through micro filtration which removes impurities to meet or exceed the Department of Health requirements. The plant currently has the capacity of producing 6 mgd; however, the plant has a total design capacity of 18 mgd when it is expanded in the future to meet the growth needs in West Pasco. The plant infrastructure includes raw water strainers, two 3 mgd microfiltration racks and a 1.6 million gallon clearwell. The plant operates in an unmanned mode more than 16 hours out of each 24-hour day. Present water demands on the Water System can vary from an average winter day demand of 6.3 mgd to a peak summer day demand of 26.7 mgd. The yearly average day demand currently is approximately 12.9 mgd. The treated water from the filter plants is pumped into the transmission and distribution system which consists of 326 miles of main line varying in size from 6 to 36 inches. The distribution system is divided into three separate zones, with each zone servicing its respective elevation. Storage is provided by one 10 million-gallon ground level reservoir, a 1 million-gallon reservoir, and a 2.5 million-gallon water tower. Customers and Consumption. The City’s Water System presently serves approximately 19,779 customers, of which approximately 88% are single-family residential customers. Historical statistics are shown in the following charts. Where consumption is shown, usage is measured in cubic feet (“cf”). WATER SYSTEM CUSTOMERS Customer Class 2016 2015 2014 2013 2012 Single-Family Residential 16,749 16,347 15,965 15,788 15,604 Multi-Family Residential 501 499 491 493 481 Commercial 1,443 1,431 1,375 1,347 1,317 Other (1) 480 469 452 443 423 TOTAL 19,173 18,746 18,283 18,071 17,825 __________________ (1) Industrial, irrigation, the City and schools. Page 68 of 140 12 ANNUAL CONSUMPTION(1) (1,000 cf) Customer Class 2016 2015 2014 2013 2012 Single-Family Residential 280,380 281,660 278,286 291,281 277,306 Multi-Family Residential 50,353 54,178 53,957 53,513 52,175 Commercial 82,203 79,251 72871 61,126 57,275 Other (2) 163,248 181,099 184,421 150,972 153,361 TOTAL 576,183 596,189 589,535 556,893 540,116 __________________ (1) Annual variations in consumption are due, in part, to weather conditions. (2) Industrial, irrigation, the City and schools. LARGEST CUSTOMERS OF THE WATER SYSTEM % of 2016 Water Utility Annual Annual Operating Customer Industry Consumption(1) Revenue Revenue(2) Pasco Processing Processing 45,856,100 $348,197 3.67% Twin City Foods Processing 32,195,900 245,603 2.59 Grimmway Enterprises Processing 15,315,900 121,442 1.28 Reser's Fine Foods Processing 14,777,100 113,411 1.20 Pasco Housing Authority Government Housing 6,998,400 80,871 0.85 Pasco School District Education 6,334,350 119,390 1.26 CRF Processing 4,990,200 44,201 0.47 Oregon Potato Company Processing 3,865,700 31,268 0.33 Sygenta Processing 3,560,600 24,212 0.19 Frank Tiegs LLC Processing 3,202,400 28,488 0.30 TOTAL 137,096,650 $1,157,083 12.14% __________________ (1) Consumption in cf, rounded to nearest hundred, based on 2016 water use. Total consumption for 2016 was 583,610,389 cf, including usage through fire hydrant meters. (2) Based on 2016 audited Water System total operating revenue of $9,480,798. Does not include connection fees or one-time revenue sources. New Connections. For new connections, a fee of $20 plus $0.0388 per square foot of property is assessed inside the City, in addition to a size-based fee as shown below. Customers outside the City limits are assessed a 90% surcharge on system fees. Size of Service Service Charge ¾ inch $360 1 inch 601 1 ½ inch 1,198 2 inch 1,918 Water Rates and Charges. Water rates include a charge for the amount of water used plus a monthly service charge determined by the size of the waterline serving the premises. In November 2015 the City adopted Resolution 4254, which called for 5% rate increases for 2016, 2017 and 2018. The following rates and charges became effective on January 1, 2017. Page 69 of 140 13 MONTHLY WATER RATES AND CHARGES Single-Family Residential Multi-Family Residential & Commercial Size of Service Service Charge Size of Service Service Charge ¾ inch $17.92 ¾ inch $25.25 1 inch 26.85 1 inch 36.93 1 ½ inch 71.11 2 inch 114.05 3 inch 155.78 4 inch 224.47 6 inch 350.37 8 inch 485.54 In addition to the monthly service charge, users pay $0.77 per 100 cf of water. A 90% surcharge for all usage is added to accounts located outside the City limits. Users qualifying for a senior low-income discount receive services at one-third of the normal applicable rate. Ambulance and storm drain charges are only charged inside the City limits. Rate Comparisons. The following table provides rate comparisons for similar utilities. A one-month period is assumed with a water usage of 1,000 cf and a ¾ inch meter. This level of usage is representative of single-family residential usage with moderate irrigation or lawn watering. COMPARATIVE MONTHLY SINGLE-FAMILY RESIDENTIAL WATER SERVICE RATES Single-Family Monthly Charge (1,000/cf) City Inside City Outside City City of Kennewick 22.96 50.50 City of Pasco 25.62 48.65 City of Richland 36.75 55.13 City of Walla Walla 55.50 83.25 __________________ Source: Individual utilities, City of Pasco survey of rates as of June 1, 2017. The Sewer System The City’s sewage treatment plant was originally constructed in 1954, upgraded from primary treatment to secondary treatment in 1970, and upgraded to advanced secondary treatment and expanded in 1997. The plant currently has an average flow of 4.09 mgd, with a peak of 4.85 mgd, and is capable of serving a population of 80,000 people. The Waste Water Treatment Plant (the “WWTP”) has capacity of treating between 7.1 and 7.8 mgd. However, the primary clarifier, which is the initial stage of wastewater treatment, has only 5 mgd capacity. Funding supplied by the 2013 and 2015 bonds was used, in part, to support the construction and material improvement of additional clarifier infrastructure. This infrastructure work modernized the operational processes of the sewer system while making the system more reliable. The City is in the process of completing a facility plan for the wastewater treatment plant. Recommended improvements for the WWTP include capacity improvements to treat wastewater up to 12 mgd in order to meet the projected City population growth to between 95,000-100,000 in the next 15 to 20 years. The sewer collection system consists of 240 miles of 8-inch to 36-inch diameter collection pipelines. The sewer collection system is being expanded into residential areas currently utilizing septic tanks in which utility local improvement districts are being formed to convert properties from septic tanks to City sewers. The collection system is also being expanded into both the residential and industrial growth areas of the City. Customers and Statistics. The City’s Sewer System, which excludes what is treated at the Process Water Reuse Facility, presently serves approximately 16,900 customers, of which 92% are single-family residential customers. Page 70 of 140 14 SEWER SYSTEM CUSTOMERS Customer Class 2016 2015 2014 2013 2012 Single-Family Residential 14,789 14,451 14,125 13,929 13,723 Multi-Family Residential 520 518 511 510 496 Commercial 1,055 1,048 1,005 991 969 Other(1) 72 72 74 76 74 TOTAL 16,364 16,017 15,728 15,430 15,188 __________________ (1) Industrial, irrigation, the City and schools. LARGEST CUSTOMERS OF THE SEWER SYSTEM % of 2016 Sewer Utility Annual Annual Operating Customer Industry Consumption(1) Revenue Revenue(2) Grimmway Enterprises Processing 15,291,900 $218,023 2.74% Pasco Housing Authority(3) Government Housing 5,300 98,338 1.24% Oregon Potato Company Processing 3,637,800 52,050 0.65% RL Pasco LLC Hospitality 1,477,700 41,699 0.52% Pasco School District Education 2,184,250 40,135 0.50% Sundance Home Park(4) Housing n/a 32,135 0.40% City of Pasco Manufacturing 1,608,400 31,649 0.40% Reser’s Fine Foods Processing 1,342,200 29,927 0.38% Port of Pasco Manufacturing 1,868,000 28,212 0.35% Easterday Farms Processing 1,873,100 27,916 0.35% 36,416,022 $359,314 7.53% __________________ (1) Consumption in cf, rounded to nearest hundred, based on 2016 water use for all accounts above except those classified as housing. The housing sewer revenue is determined by the number of residential units. Total consumption for 2016 was 86,257,746 cf. (2) Based on 2016 audited Sewer System total operating revenue of $7,958,262. Does not include connection fees or one-time revenue sources. (3) Pasco Housing Authority (“PHA”) consumption is measured only on commercial property. PHA pays the City for sewer services to many residential units. (4) Sundance Home Park pays the City sewer charges based on residential units and not on a consumption basis. Source: The City of Pasco. New Connections. New connections inside or outside the City are charged a $25 fee plus $0.0468 per square foot of property and a system fee ($1,288 for a home, or $524 for a hotel/motel). For customers outside the City, a 50% surcharge applies to system fees. Sewer Charges. The following rates and charges were approved on November 30, 2015, with the adoption of Ordinance 4252, and went into effect on January 1, 2017. Ordinance 4252 also adopted rate increases of 9% for 2017 and 6% for 2018. SEWER RATES Monthly Customer Class Base Charge Residential dwellings or four units or less $29.67 Residential dwellings more than five units 23.93 Sr. Citizen/Low Income 9.93 Commercial 39.90 Hotel/Motel (per unit) 6.28 __________________ Source: The City of Pasco For commercial users and hotel/motels consuming in excess of 1,000 cf, the overage is charged at $1.29 per 100 cf of water used. A 50% surcharge is added to accounts located outside the City limits. Page 71 of 140 15 Delinquencies. After notice of delinquency of a water and/or sewer bill is given and the bill remains unpaid, the City staff is directed to cut off water service to the premises and enforce a lien upon the property. Such a lien is superior to all other liens or encumbrances, except those for general taxes and special assessments. Less than 0.032% of water and sewer bills were uncollected by the City in 2016. Rate Comparisons. The following table provides rate comparisons for similar utilities. A one-month period is assumed with a water usage of 1,000 cf and a ¾ inch meter. Single-family residential charges are based on a flat rate and usage is not metered. COMPARATIVE MONTHLY SINGLE-FAMILY RESIDENTIAL SEWER SERVICE RATES Single-Family Monthly Charge City Inside City Outside City City of Kennewick $22.68 $34.02 City of Pasco 29.67 44.51 City of Richland 25.60 51.20 City of Walla Walla 53.30 106.60 __________________ Source: Individual utilities, City of Pasco survey of rates as of June 1, 2017. RECENT AND ADOPTED WATER AND SEWER RATE CHANGES Percent Change for In-City Service Year Water Sewer 2018 5.00% 6.00% 2017 5.00% 9.00% 2016 5.00% 9.75% 2014 30.00% 0% 2011 0.00% 5.0% reduction 2010 19.0 - 20.3% 5.0 - 5.6% reduction __________________ Source: The City of Pasco The Process Water Reuse Facility The Process Water Reuse Facility (the “PWRF”) was constructed by the City and placed in operation in 1995. The PWRF services four food processing plants. The food processing wastewater is pumped and sprayed onto farmland crop circles as the means of disposal. The PWRF and processing plants operate year-round, with peak usage in June through September. The PWRF consists of two pump stations, pipelines, a 5 million-gallon equalization basin and 14 irrigation circles totaling 1,800 acres, and a 115 million-gallon winter storage pond was added. The winter storage pond allows food processors at the Pasco Processing Center to operate year-round. The food processing users are responsible for payment of the debt service and operation and maintenance costs of the PWRF through the rates and charges described below. In 2011, the City completed the optimization master plan to improve the PWRF to ensure the City remains compliant with permit requirements issued by the State’s Department of Ecology (“Ecology”) and to provide increased capacity for processing water. In 2013, the City made improvements to the PWRF which created 170 million gallons of additional capacity, 110,000 pounds of additional nitrogen capacity and 15,000 pounds/day of additional biological oxygen demand capacity. The expansion meets the needs of existing processors and does not provide excess capacity to allow for the addition of new customers. CUSTOMERS OF THE PROCESS WATER REUSE FACILITY Permitted Actual Total % of 2016 Total Customer Flows(1) Flows(1) Revenues Revenues Pasco Processing 383 354 $1,167,618 48.46% Twin City Foods 220 252 709,896 29.46% CRF (f.k.a.Bybee) 204 40 219,907 9.13% Reser's Fine Foods 115 91 312,065 12.95% Total 922 739 $2,409,486 100.00% __________________ (1) Million gallons per year. Page 72 of 140 16 Rates and Charges. Food processing users are subject to rates and charges established by the City in Ordinance No. 3291 passed on April 6, 1998. This ordinance requires the industrial users connecting to the Facility to pay the following rates and charges, which are subject to annual adjustments. In addition, the City may negotiate a special operation and maintenance or contract rate with individual customers or industrial users of the Facility. Base Operation and Maintenance Charges - Actual costs of operating and maintaining the Facility are shared proportionally among all users based on estimated annual flows of each user. The minimum charge for each user is $12,000 per year. Customized Operation and Maintenance Charges - The actual costs of operation and maintenance associated with any specifically constructed or customized facility are charged directly to the user(s) based upon actual monthly flows of each during the period. Capital Charges - All capital charges related to all outstanding debt of the Facility are allocated to the users, based on their proportionate share of the total permitted combined annual flows, as determined in each user’s discharge permit. The minimum capital charge for any user is $12,000 per year. Customized Specific Capital Charges - In addition to the capital charges described above, any capital projects which benefit a single user are directly charged to and paid by such user. For any new customer, a rate will be established which is considered reimbursement of any non-capital charges made by the City for establishment and reservation of excess capacity. The Stormwater System The Stormwater System was established by the City in 1999 pursuant to chapter 35.67 RCW and RCW 35A.80.010. Its purpose is to promote public health, safety and welfare by promoting an approach to the management of surface and stormwater runoff created on City streets and delivery to City-owned stormwater facilities. The City’s Stormwater System is managed using a ground infiltration process which, after treatment, meets Ecology’s National Pollutant Discharge Elimination System (“NPDES”) requirements. The infiltration process applies to approximately 75% of the City. The water runoff from streets for the balance of the City is discharged to the Columbia River. The City has an annual program that provides for routine upgrades and catch basin additions as needed. Citywide street sweeping averages eight times per year. The City and cleans catch basins regularly, in compliance with NPDES permits. The City completes annual reports to Ecology on the Stormwater System. The City adopted a comprehensive Stormwater Management plan in 2017 which includes: Public Education and Outreach; Public Involvement and Participation; Illicit Discharge Detection and Elimination; Construction Site Stormwater Runoff Control; Post-Construction Stormwater Management for New Development and Redevelopment; and Municipal Operations and Maintenance. Stormwater Rates & Charges. The following monthly rates for the Stormwater System are currently billed to property owners throughout the City using the following general classifications. Between 2002 and 2010 rates were not adjusted. In 2012 rates increased 33% and then increased another 13% in 2014. The most recent increase of 12% took effect in January 2015. STORMWATER RATES Customer Class Rate per Month Single-Family Residential $4.90 Apartments (per unit for 5 or more) 2.45 Multi-Family Residential (per unit for 1-4 units) 4.40 Undeveloped Parcels 0.00 Vacant Buildings 4.40 Industrial/Commercial Parking for 0-5 vehicles $4.40 Parking for 6-10 vehicles 8.80 Parking for 11-15 vehicles 13.20 Parking for 16-20 vehicles 17.60 Parking for 21 plus vehicles 22.00 Additional Charges Property runoff to City systems ($1.25 min.) $86.71/acre State Highway right-of-way 21.71/acre Page 73 of 140 17 The Irrigation System The Irrigation System was purchased by the City in 2002 from a private utility. At the time of purchase the system serviced approximately 900 customers in an area where new homes were being built. Since the purchase and through expansion of the system, it now services approximately 7,313 residential customers. At the time of purchase, customers were being charged $32 per month for seven months during the irrigation season, April through October. In 2004, after evaluating the increase in customer base and projected annual expenditures, the monthly fee was reduced to $24 per month. Effective January 1, 2011, the base fee was increased to $26 per month. No other rate changes occurred until the first billing in 2017, when the monthly rate increased to $27.30. Irrigation customers continue to be charged solely during the irrigation months of April through October. Capital Improvement Plan The City annually adopts a six-year Capital Improvement Plan (“CIP”), which includes a water and sewer system component. Projects for the Water System are generally for the supply, treatment, distribution and storage of water. Projects for the Sewer System include collection and treatment. On September 5, 2017, the City Council approved the current CIP, which includes the following projects to be funded by a combination of rates, grants, bond proceeds, and utility cash flow. The City Council approved the CIP on September 5, 2017. (Amounts Expressed in Thousands) Project Type 2017 2018 2019 2020 2021 2022 2023 Irrigation $ - $ 270 $ 201 $ 150 $ 150 $ 150 $ 430 PWRF 130 1,010 7,580 0 0 0 0 Sewer 3,885 5,053 7,005 5,884 6,288 5,715 4,700 Stormwater 150 100 220 210 100 440 339 Water 6,455 4,785 4,217 4,777 3,353 5,487 6,118 Grand Total $ 10,620 $ 11,218 $ 19,223 $ 11,021 $ 9,891 $ 11,792 $ 11,587 The CIP is a plan. The figures listed above in the 2017 column are the budgeted amounts for capital in 2017. Endangered Species Act In planning future projects, the City evaluates the construction and operation of the facilities to determine if there will be any impact on endangered species through the use of site evaluations, special environmental studies, and preparation of State Environmental Policy Act (“SEPA”) checklists or environmental impact statements, as appropriate. Alternatives are developed to minimize or avoid impacts on endangered species. Where federal permits or funding are involved, the City also complies with the Endangered Species Act’s “consultation” requirement, which serves to evaluate and address any potential effect on endangered species. Best management practices are employed during routine operation and maintenance activities to minimize impacts on the environment. Historical Operating Results The following table presents the 2012 through 2016 audited revenues and expenditures of the City's Waterworks Utility. This table has been compiled by the City based on the definitions of Gross Revenue and Operating and Maintenance Expenses contained in the Bond Ordinance and reflected in APPENDIX A – CERTAIN DEFINITIONS. These definitions are required by the Bond Ordinance to be used to calculate Debt Service Coverage, emphasize cash flows in the Waterworks Utility, and differ in certain respects from the full accrual definitions of revenue and expenses under Generally Accepted Accounting Principles (“GAAP”) that are used to report the results of operations of the Waterworks Utility in the City’s Audit. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) Page 74 of 140 18 WATERWORKS UTILITY HISTORICAL OPERATING RESULTS (Audited, As of December 31) 2012 2013 2014 2015 2016 Operating Revenues Water Sales(1) $ 6,989,958 $ 7,087,462 $ 7,594,091 $7,971,096 $ 8,293,323 Irrigation Sales(1) 917,076 954,204 1,105,076 1,188,855 1,180,488 Sewer Sales(1) 5,705,414 5,813,572 5,914,671 6,197,706 7,030,704 Stormwater Sales(1) 883,305 972,375 1,054,682 1,305,138 1,386,325 Process Water Reuse Sales(1) 1,942,683 1,453,597 1,997,655 2,053,639 3,063,064 Other Utility Charges(2) 1,711,031 1,935,286 2,347,236 2,072,899 2,541,924 Total Operating Revenues 18,149,467 18,216,496 20,013,411 20,789,333 23,495,828 Operating & Maintenance Expenses Salaries & Wages 2,461,588 2,599,431 2,830,832 3,016,535 3,097,784 Personnel Benefits(3) 952,672 1,114,349 1,330,549 1,403,036 2,255,786 Supplies 855,626 1,121,916 1,492,845 1,633,374 1,556,387 Services(1) 5,293,094 5,749,161 5,890,538 7,010,663 7,445,805 Total Operating Expenses 9,562,980 10,584,857 11,544,764 13,063,608 14,355,762 Operating Income 8,586,487 7,631,639 8,468,647 7,725,725 9,140,066 Non-Operating Revenue Interest Income 39,607 41,009 15,685 28,310 48,536 Total Non-Operating Revenues(4) 39,607 41,009 15,685 28,310 48,536 Net Revenues 8,626,094 7,672,648 8,484,332 7,754,035 9,188,602 Other Sources of Funds Special Assessment Repayments 225,507 257,366 123,404 94,284 52,673 Total Other Sources 225,507 257,366 123,404 94,284 52,673 Max Annual Assessment Debt Service 199,582 203,764 202,852 202,852 94,074 Net Revenue Available for Non-Assessment Debt Service 8,652,019 7,726,250 8,404,884 7,645,467 9,147,201 Non-Assessment Bond Debt Service(5) 2,905,851 2,771,990 3,348,068 2,498,043 3,078,188 Non-Assessment Bond Debt Service Coverage(6) 2.98 2.79 2.51 3.06 2.97 Balance Available for Other Purposes $ 5,746,168 $ 4,954,260 $ 5,056,816 $ 3,170,206 $ 6,069,013 __________________ Note: The above table does not include debt service on junior lien bonds. (1) Excludes revenue raised and used to pay interfund City utility taxes. Increase between 2014-2015 is the result of right-sizing the cost of managing utility infrastructure of the City given its recent rapid population growth. (2) Includes one-time sources such as connection, meter, capital facility, penalty, etc. fees. (3) Increase between 2015-2016 is due to a change in accounting. The City implemented Government Accounting Standards Board Rule No. 68, which had the effect of an increase in the pension expense. (4) Excludes non-cash capital contributions, gains/losses, capital grants, etc. (5) Excludes debt for prepaid maturities. (6) Bond covenant requires coverage ratio of 1.25 times Maximum Annual Debt Service. Source: City of Pasco Operations for 2017 have progressed primarily as planned. The City is currently in process of conducting a Waste Water Treatment Plant (“WWTP”) facility plan. This will help us the City continue compliance of WWTP NPDES Permit (National Pollution Discharge Elimination System Permit) and meet future capacity needs. Facility Plan will identify the required projects, which are expected to cost a total of $25,000,000 over six years. The Facility Planning will align with the City’s future NPDES permit to fulfill future capacities. Page 75 of 140 19 Comparative Statement of Net Position ASSETS: 2012 2013 2014 2015 2016 Current assets:    Cash and cash equivalents $ 5,726,048 $3,399,384 $ 1,511,272 $ 3,838,859 $12,768,035 Restricted cash and cash equivalents:(1) - - 10,840,855 - - Customer deposits 561,657 561,096 - 372,727 426,573 Unspent bond proceeds 1,005,365 5,614,545 - 13,386,417 4,117,289 Revenue bond covenants 3,316,293 2,986,517 - 1,911,591 884,035 Investments 2,000,000 2,000,000 4,525,411 3,356,308 1,348,423 Receivables (net of allowances): - Customers 881,264 787,050 883,214 918,221 2,047,059 Grants 40,418 402,186 81,943 - 10,937 Special assessments - current portion - - 299,749 - - Inventory 317,348 234,694 293,801 196,767 196,767 Total current assets 13,848,393 15,985,472 18,436,245 23,980,890 21,799,118 Noncurrent assets: Restricted cash equivalents 410,000 3,188,801 1,763,032 5,525,415 2,900,239 Special assessments 608,241 397,549 - 224,395 180,627 Land 2,494,425 2,520,925 2,520,925 2,532,743 2,725,435 Construction work in progress 15,512,175 7,409,247 5,738,643 3,937,728 9,086,415 Capital assets net of accumulated depreciation: Building and structures 31,975,044 37,434,680 35,963,444 36,838,047 34,306,159 Machinery and equipment 1,040,048 7,340,854 6,690,748 6,010,451 5,402,959 Infrastructure 14,357,869 14,456,107 17,088,203 120,064,064 124,524,643 Total noncurrent assets 166,397,802 172,748,163 169,764,995 175,132,843 179,126,477 TOTAL ASSETS 180,246,195 188,733,635 186,438,208 199,113,733 200,925,595 . Deferred Outflows: Pension(2) 428,493 572,519 LIABILITIES: Current liabilities: Accounts payable 618,386 1,111,284 299,577 895,550 750,949 Due to other governments 3,173 - 43,077 - - Other liabilities - - 147,505 - - Customer deposits payable 561,657 561,096 447,169 372,727 426,573 Accrued interest payable 639,468 722,505 275,099 244,824 173,974 Compensated absences - current portion 55,378 360,641 162,830 105,790 - Loans due to other governments - current portion 1,621,743 1,669,767 1,719,487 1,620,576 114,689 Revenue bonds - current portion 2,035,000 1,905,000 2,045,000 1,698,821 2,772,418 Total current liabilities 5,534,805 6,330,293 5,139,744 4,938,288 4,238,603 Noncurrent liabilities: Compensated absences 384,639 134,203 69,784 105,790 234,011 Loans due to other governments 10,333,849 8,664,104 6,944,624 5,324,047 393,753 Revenue bonds payable 22,225,000 28,450,000 25,985,000 36,586,708 37,154,731 Net Pension Obligation - - - 1,812,873 2,937,825 Total noncurrent liabilities 32,943,488 37,248,307 32,999,408 43,829,418 40,720,320 TOTAL LIABILITIES 38,478,293 43,578,600 38,139,152 48,767,706 44,958,923 Deferred Inflows: Pension(2) - - - 274,929 78,774 NET POSITION Net investment in capital assets 129,163,969 128,472,942 135,483,147 137,539,298 139,727,309 Restricted - - 10,840,855 - - Unrestricted 12,603,933 16,682,093 1,975,054 12,960,293 16,733,108 Total Net Position 141,767,902 145,155,035 148,299,056 150,499,591 156,460,417 Adjustment to reflect the consolidation of internal service fund activity related to proprietary funds 3,271,829 3,623,894 3,904,347 4,402,421 4,870,307 TOTAL NET POSITION $145,039,731 $148,778,929 $152,203,403 $154,902,012 $161,330,724 __________________ (1) In the 2014 financial statements, customer deposits, unspent bond proceeds, and revenue bond covenants were combined and shown as “Restricted Investments.” (2) In 2015, the City implemented GASB 68, which mandated changes in pension accounting to show deferred inflows and outflows, Source: The City of Pasco Page 76 of 140 20 CITY PROFILE The City, located in southeastern Washington, encompasses approximately 33.6 square miles and has a 2016 estimated population of 70,650. The City and the adjacent cities of Richland and Kennewick make up what is known as the Tri-Cities. The City serves as the Franklin County seat and is the largest city in the County. The City was incorporated in 1891. The City has a Council-Manager form of government. The City Manager is appointed by the City Council and is responsible for the administration of all aspects of City operations. Council members are part-time officials, elected every four years through city-wide elections. The Council is comprised of seven members, one of whom is selected by the members to serve as Mayor for a two-year term. The City provides a full range of services normally associated with a municipality. These services include police and fire protection, ambulance service, parks and recreational activities, street maintenance and construction, planning and zoning and general administrative services. The City owns and operates water, sewer and stormwater utility and a cemetery. The City owns and operates a golf course. City Council Historically, the City Council was made up of five council seats decided by district in the primary election, but “at-large” in the general election, and two “at-large” seats, which were voted on in a City-wide vote in both the primary and general election. Due to rapid population growth, the voting district boundaries have been changed several times. The City’s demographic characteristics have also changed. In 2015, the City Council pursued a change from district-based election system in both primary and general elections; however, the State legislature has not yet passed a bill allowing such a change to occur. In the interim, the American Civil Liberties Union (“ACLU”) filed a complaint for an alleged violation to the federal Voting Rights Act. The City and the ACLU jointly proposed a remedy. On January 27, 2017, a federal judge agreed that the City’s proposed plan of six voting districts with one “at large” position met the requirements of the federal Voting Rights Act, and required that all seats be up for election in 2017. Below is a list of current Council members: Members Position Term Expires Matt Watkins Mayor December 31, 2017 Rebecca Francik Mayor Pro-Tem December 31, 2017 Robert Hoffmann Council Member December 31, 2017 Chi Flores Council Member December 31, 2017 Saul Martinez Council Member December 31, 2017 Tom Larsen Council Member December 31, 2017 Al Yenney Council Member December 31, 2017 Key Administrative Staff Dave Zabell, City Manager, assumed his position with the City in August 2014. Mr. Zabell has been in local government for over 33 years, and was formerly the City Manager for the City of Fife, Washington, a position he held since 2011. Prior to that he was Assistant City Manager for Yakima, Washington, from 2005-2011 and Public Works Director for the City of Bothell, Washington, from 2000-2005. Mr. Zabell also worked for the City of Marysville, Washington, from 1985-2000, serving in positions including Engineer, Public Works Director and City Administrator for the last seven years. Mr. Zabell has a Master of Public Administration degree from the University of Washington and a Bachelor of Science degree in Public Administration from Upper Iowa University. Rick Terway, Public Works Director, began serving as the Public Works Director in 2016; prior to that, he served as the City’s Director of Administration and Community Services Department since July 2009. Prior to joining the City, Mr. Terway served as Parks, Recreation and Forestry Manager for the City of Fergus Falls, Minnesota for three years and as a Public Service Director for the City of Vadnais Heights, Minnesota. His experience also includes more than 12 years working for Washington State Parks. Mr. Terway holds a Bachelor of Science in Applied Management from National American University and an Associate of Applied Science in Natural Resources from the University of Minnesota. Richa Sigdel, Finance Director, joined the City in July 2016. Ms. Sigdel worked for Pacific Northwest National Laboratory from 2007 to 2016 as the Accounts Receivable Manager, Cost Accountant, and Finance Analyst. Ms. Sigdel graduated from Washington State University with a Bachelor’s degree in Accounting in 2007 and a Master’s degree in Business Administration in 2011. Page 77 of 140 21 Labor Relations The City currently (as of June 1, 2017) employs 438 employees (339 full time equivalents, not including 99 seasonal employees), including part-time workers. There are 231 employees represented by four bargaining units, as follows: No. of Current Contract Bargaining Unit Employees Expiration Date International Union of Operating Engineers, Local No. 280 75 December 31, 2019 International Association of Firefighters 68 December 31, 2017 Pasco Police Officers Assoc. “Uniformed” Employee 80 December 31, 2018 Pasco Police Officers Assoc. “Non-uniformed” Employee 7 December 31, 2016 230 The City considers labor relations with its bargaining units to be good. There have been no recent strikes or major labor relations problems. Negotiations are currently underway with one union with an expired contract. It is expected to be settled soon. Only one contract will expire in 2017. As of August 2017, the City anticipates this contract’s negotiations to be completed prior to its expiration. Pensions Substantially all of the City employees are enrolled in the State Public Employees Retirement System (“PERS”) or the Law Enforcement Officers and Fire Fighters Retirement System (“LEOFF”). These plans are administered by the State. The Washington State Investment Board, a 15-member board created by the Legislature in 1981, invests the funds in the plans. PERS Plan 1 and Plan 2 are defined benefit plans. PERS Plan 3 is both a defined benefit plan (employer share) and defined contribution plan (employee share). Contributions by both employees and employers are based on gross wages. PERS participants who joined the system by September 30, 1977 are Plan 1 members. Those PERS participants who joined on or after October 1, 1977 are Plan 2 members, unless they exercise an option to transfer to Plan 3. PERS participants joining on or after September 1, 2002 have the irrevocable option of choosing membership in PERS Plan 2 or PERS Plan 3. LEOFF participants who joined on or after October 1, 1977 are Plan 2 members. State law requires systematic actuarial based funding to finance the retirement plans. Actuarial calculations to determine employer and employee contributions are prepared by the Office of the State Actuary (“OSA”), a nonpartisan legislative agency charged with advising the Legislature and Governor on pension benefits and funding policy. To calculate employer and employee contribution rates necessary to pre-fund the plans’ benefits, OSA uses actuarial cost and asset valuation methods selected by the Legislature as well as economic and demographic assumptions. The Legislature adopted the following economic assumptions for contribution rates beginning July 1, 2017: (1) 7.7% rate of investment return (7.5% for LEOFF Plan 2); (2) general salary increases of 3.75%; (3) 3.0% rate of Consumer Price Index increase; and (4) 0.95% growth in membership (1.25 percent for LEOFF). The long-term investment return assumption is used as the discount rate for determining the liabilities for a plan. The 10-year annualized return on the investment returns as of June 30, 2017 on the retirement funds was 5.47%. All State-administered retirement plans are funded by a combination of funding sources: (1) contributions from the State; (2) contributions from employers (including the State as employer and the City and other governmental employers); (3) contributions from employees; and (4) investment returns. Under State statute, contribution rates are adopted by the Pension Funding Council (“PFC”) (and, for LEOFF 2, by the LEOFF 2 Board) in even-numbered years for the next ensuing State biennium. The rate-setting process begins with an actuarial valuation by the OSA, which makes non-binding recommendations to the Select Committee on Pension Policy, which then recommends contribution rates to the PFC and the LEOFF 2 Board. No later than the end of July in even-numbered years, the PFC and the LEOFF 2 Board adopts contribution rates, which are subject to revision by the Legislature. The following table outlines the current contribution rates of employers and employees. Page 78 of 140 22 Contribution Rates for the 2017-19 Biennium Expressed as a Percentage of Covered Payroll Employer(1) Employee PERS Plan 1 12.70% 6.00% PERS Plan 2 12.70 7.38 PERS Plan 3 12.70 Variable(2) LEOFF Plan 1 0.18 0.00 LEOFF Plan 2 8.93 8.75 ____________ (1) Includes a 0.18% State Department of Retirement Systems administration expense fee. (2) Rates vary from 5.0% minimum to 15.0% maximum based on the rate selected by the PERS 3 member. Source: Department of Retirement Systems The City’s total contribution for the year ended December 31, 2016, was $1,955,898, representing 7.9 percent of covered payroll. The City contributed $1,156,682 in 2015 and $996,260 in 2014 to PERS, and $636,061 in 2015 and $549,792 in 2014 to LEOFF for all of the City’s employees that are covered under PERS and LEOFF. Plan Funding Status and Unfunded Actuarial Liability. While the City’s contributions represent its full current liability under the retirement systems, any unfunded pension benefit obligations could be reflected in future years as higher contribution rates. It is expected that the contribution rates for employees and employers in the PERS Plans 2 and 3 will increase in the coming years. The OSA website includes information regarding the values, funding levels and investments of these retirement plans. Historically, OSA used the Projected Unit Credit (“PUC”) cost method and the Actuarial Value of Assets (“AVA”) to report a plan’s funded status. PUC was one of several acceptable measures of a plan’s funded status under current GASB rules. The PUC cost method projects future benefits under the plan, using salary growth and other assumptions and applies the service that has been earned as of the valuation date to determine accrued liabilities. The AVA is calculated using a methodology which smoothes the effect of short-term volatility in the Market Value of Assets (“MVA”) by deferring a portion of annual investment gains or losses over a period of up to eight years. In September 2015, OSA adopted the Entry Age Normal (“EAN”) cost method to estimate accrued pension liabilities for the purposes of reporting funded status. The EAN method represents each plan member’s benefits as a constant share of payroll throughout the member’s career. This liability estimate incorporates the statutorily set discount rate and fully reflects the demographic assumptions revised in the June 30, 2013 valuation, which included projected improvements in mortality rates. During the years 2001 through 2010 the rates adopted by the Legislature were lower than those that would have been required to produce actuarially required contributions to PERS Plan 1, a closed plan with a large proportion of the retirees. The State Actuary’s actuarial valuation for PERS Plan 1 as of June 20, 2013 showed a 63% funded ratio (unfunded liability of $4.831 billion) while PERS Plans 2 and 3 and LEOFF Plans 1 and 2 had valuation assets that exceed their accrued liability by $537 million (a 102% funded ratio), $1.1 billion (a 125% funded ratio) and $1.0 billion (a 115% funded ratio), respectively. The State Actuary’s actuarial valuation for PERS Plan 1 as of June 30, 2014, showed a 61% funded ratio (unfunded liability of $4.965 billion) while PERS Plans 2 and 3 and LEOFF Plans 1 and 2 had valuation assets that exceed their accrued liability by $214 million (a 101% funded ratio), $1.2 billion (a 127% funded ratio) and $1.0 billion (a 113% funded ratio), respectively. The decrease in the funded status and increase in the unfunded accrued actuarial liability primarily reflect changed demographic assumptions, including projected improvements in mortality rates, and the statutory requirement that the assumed rate of return be reduced to 7.8% from 7.9% (7.5% for LEOFF Plan 2). Using the EAN cost method, the State Actuary’s actuarial valuation for PERS Plan 1 and PERS Plans 2 and 3 as of June 30, 2016, showed a 56% funded ratio (unfunded liability of $5.365 billion) and a 87% funded ratio (unfunded liability of $4.497 billion), respectively, while LEOFF Plans 1 and 2 had valuation assets that exceed their accrued liability by $1.078 billion (a 126% funded ratio) and $450 million (a 105% funded ratio), respectively. Using the EAN cost method, the State Actuary’s actuarial valuation for PERS Plan 1 and PERS Plans 2 and 3 as of June 30, 2015, showed a 58% and 88% funded ratio, respectively, while LEOFF Plans 1 and 2 and PSERS had a 125% and 105% funded ratio, respectively. In comparing the funded status as of June 30, 2015 to June 30, 2016, there was a decline from 86% to 84%, largely due to lower than expected investment returns. PERS Plans 2 and 3 are accounted for in the same pension trust fund and may legally be used to pay the defined benefits of any PERS Plan 2 and 3 member. Assets for one plan may not be used to fund benefits for another plan: however, all employers in PERS are required to make contributions at a rate (percentage of payroll) determined by the OSA every two years for the sole purpose of amortizing the PERS 1 unfunded actuarial accrued liability within a rolling 10-year period. The Legislature Page 79 of 140 23 established maximum contribution rates that began in 2009 to 2015 and certain minimum contribution rates that became effective in 2015 and remain in effect until the actuarial value of assets in PERS Plan 1 equals 100% of the actuarial accrued liability of PERS Plan 1. These rates are subject to change by future legislation enacted by the State Legislature to address future changes in actuarial and economic assumptions and investment performance. The information in this section has been obtained from the City’s financial statements and information on the OSA and DRS websites. New GASB Reporting Rules. The Government Accounting Standard Board (“GASB”) has implemented new pension regulations that require employers, including the City, to report their pension liabilities on a GAAP basis rather than a funding basis. Beginning with its 2015 financial statements, the City reported its proportionate share of the net plan asset or liability for each pension plan in which City employees participate. The liability is based on the actuarial present value of projected benefit payments to periods of employee service, a discount rate that considers the availability of plan assets and recognition of projected investment earnings. The DRS determines each participating employer’s proportionate share of the plan liability and OSA determines each plan’s accounting valuation. The GASB rules impact accounting for pensions and not the funding status of the plans calculated by OSA or pension contribution rates that are set based on statutory assumptions. DRS has calculated the collective net pension liability for the various retirement plans based on the new GASB reporting requirements as well as the City’s share of such liability. Net pension liability equals the total pension liability (a measure of the total cost of future pension benefit payments already earned, stated in current dollars) minus the value of the assets in the pension trust that can be used to make benefit payments. Contributions from plan members and employers are assumed to continue to be made at contractually required rates, the assumed long-term rate of investment return is 7.50%, the assumed economic inflation is 3.0%, and the assumed salary inflation is 3.75%. The following table shows the City’s share of the net pension liability for the plans it participates in for the State fiscal year ended December 31, 2016 based on its share of contributions for the year. City’s Share of Pension Liabilities/(Assets) For Year Ended June 30, 2016 Net Liability/(Assets) City Percent City’s Share of Net Liability/(Assets) PERS 1(1) $5,370,471,000 0.098322 $5,280,354 PERS 2/3 5,034,921,000 0.122675 6,176,589 LEOFF 1 (1,030,286,000) 0.066826 (688,499) LEOFF 2 (581,630,000) 0.400187 (2,327,608) (1) Includes 0.095696% for PERS 1 UAAL. Source: DRS CAFR for Fiscal Year Ended June 30, 2016. Other Retirement Systems–Firemen’s Pension Fund. The City is the administrator of a single employer defined benefit pension plan, the Firemen’s Pension Fund (the “Firemen’s Pension Fund Plan”). The Firemen’s Pension Fund Plan is limited to firefighters and beneficiaries employed before March 1, 1970, and as of March 1, 1970, was closed to new entrants. Firefighters hired before March 1, 1970, at retirement receive the greater of the pension benefit provided under the Firemen’s Pension Fund Plan or under LEOFF. Any excess benefit over the LEOFF benefit is provided by the Firemen’s Pension Fund Plan. As of December 31, 2016, there were a total of 11 individuals covered by the Firemen’s Pension Fund Plan, and five of the 11 are widows. All future obligations of the Firemen’s Pension Fund Plan were assumed by LEOFF. For additional information, see Appendix B—“2016 AUDITED FINANCIAL STATEMENTS—Note 8: Employee Retirement Systems and Pension Plans.” The information in this section has been obtained from the City’s financial statements and information on the State Actuary’s and State Department of Retirement System’s websites. Other Post-Employment Benefits LEOFF 1. In accordance with chapter 41.26 RCW, the City provides continuation of medical insurance coverage to employees that retire under the LEOFF retirement system, which includes all police officers and fire fighters who were hired prior to October 1, 1977. Medical coverage continues for the life of the retiree. The plan is a closed, single employer defined benefit healthcare plan administered by the City. As of December 31, 2016, there were 31 retirees and two active employees in this plan. The City’s annual other postemployment benefit (“OPEB”) cost is calculated based on the annual required contribution (“ARC”), an amount actuarially determined in accordance with the parameters of GASB Statement 45. Page 80 of 140 24 The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and to amortize any unfunded actuarial liabilities over a period not to exceed 30 years. The tables in Note 13 of Appendix B show the components of the City’s annual OPEB cost for 2016, the amount actually contributed to the plan and changes in the City’s net OPEB obligation. The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the years 2013 through 2016 were as follows: Fiscal Year Annual % of Annual Net Ended Cost OPEB Contributed OPEB Obligation 12/31/2016 $1,309,707 55% $4,086,203 12/31/2015 1,446,611 64 3,331,084 12/31/2014 1,091,159 55 2,523,460 12/31/2013 800,733 64 1,981,585 The City currently funds post-employment healthcare benefits on a pay-as-you-go basis. The City finances the plan by purchasing medical insurance and self-funding vision and medical benefits not covered by the insurance. Firemen’s Pension. As required by chapter 41.26 RCW, the City provides lifetime medical care for members of the LEOFF retirement system hired before October 1, 1977 under a single employer, defined benefit healthcare plan administered by the City. The members’ necessary hospital, medical, and nursing care expenses not payable by worker’s compensation, social security, insurance provided by another employer, or other pension plan, or any other similar source are covered. Most medical coverage for eligible retirees is provided by the City’s employee medical insurance program. Under authorization of the LEOFF Disability Board, direct payment is made for other retiree medical expenses not covered by standard medical plan benefit provisions. Members of the Fire Pension plan purchase medical insurance through the City’s medical insurance program. Funding for LEOFF retiree healthcare costs is provided entirely by the City as required by the RCW. The City’s funding policy is based upon pay-as-you-go financing requirements for any requirements in excess of amounts previously set aside in the Fire Pension OPEB Trust Fund. The City of Pasco has a total of six LEOFF plan 1 members that are also members of the Old Firemen’s Pension Plan and are fully funded through the Old Fire Pension Fund. All are retired. Based on the 2016 actuarial study, the Actuarial Accrued Liability for the Fire Pension OPEB Trust Fund is $1,471,148. As of December 31, 2016, the fund had assets of $2,664,405. Risk Management The City is a member of the Washington Cities Insurance Authority (WCIA). Utilizing Chapter 48.62 RCW (self-insurance regulation) and Chapter 39.34 RCW (Interlocal Cooperation Act), nine cities originally formed WCIA on January 1,1981. WCIA as created for the purpose of providing a pooling mechanism for jointly purchasing insurance, jointly self-insuring, and/or jointly contracting for risk management services. WCIA has a total of 168 Members. New members initially contract for a three-year term, and thereafter automatically renew on an annual basis. A one-year withdrawal notice is required before membership can be terminated. Termination does not relieve a former member from its unresolved loss history incurred during membership. Liability coverage is written on an occurrence basis, without deductibles. Coverage includes general, automobile, police, errors or omissions, stop gap, employment practices and employee benefits liability. Limits are $4 million per occurrence in the self- insured layer, and $16 million in limits above the self-insured layer is provided by reinsurance. Total limits are $20 million per occurrence subject to aggregates and sublimits. The Board of Directors determines the limits and terms of coverage annually. In-house services include risk management consultation, loss control field services, and claims and litigation administration. WCIA contracts for certain claims investigations, consultants for personnel and land use issues, insurance brokerage, actuarial, and lobbyist services. WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as determined by and outside, independent actuary. The assessment covers loss, loss adjustment, and administrative expenses. As outlined in the interlocal, WCIA retains the right to additionally assess the membership for any funding shortfall. An investment committee, using investment brokers, produces additional revenue by investment of WCIA’s assets in financial instruments which comply with all State guidelines. Page 81 of 140 25 A Board of Directors governs WCIA, which is comprised of one designated representative from each member. The Board elects an Executive Committee and appoints a Treasurer to provide general policy direction for the organization. The WCIA Executive Director reports to the Executive Committee and is responsible for conducting the day to day operations of WCIA. Accounting and Budgeting Process Basis of Accounting: The accounting and reporting policies of the City conform to the Budgeting, Accounting and Reporting System (“BARS”) as prescribed by the State Auditor. The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. Each fund is accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures, as appropriate. The City's resources are allocated to and accounted for in individual funds depending on their intended purpose. The Budget Process: Washington law, chapter 35A.33 RCW, prescribes the method and schedule for annual budgeting for the City. Annual appropriated budgets are adopted at the fund level. Local improvement district debt service and certain custodial agency funds, however, are not budgeted. A budget increase or decrease to a fund must be authorized by the City Council, while appropriation transfers within a fund may be authorized by the City Manager. All budgets are controlled on an organizational basis. The budgets constitute the legal authority for expenditures at that level. Annual appropriations for all funds lapse at the fiscal period end. Auditing of City Finances The City’s financial statements are prepared in conformity with GAAP as applied to governmental units, and are regulated by the Washington State Auditor’s Office, division of Audit. The GASB is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Accounting systems and budgetary controls are prescribed by the Office of the State Auditor (“SAO”) in accordance with RCW 43.09.200, RCW 43.09.230 and GAAP. State statutes require audits for cities to be conducted by the SAO. The City complies with the systems and controls prescribed by the SAO and establishes procedures and records which reasonably assure safeguarding of assets and the reliability of financial reporting. The SAO is required to examine the affairs of cities. The City is audited annually. The examination must include, among other things, the financial condition and resources of the City, whether the laws and constitution of the State are being complied with, and the methods and accuracy of the accounts and reports of the City. The SAO reviewed the City’s financial statements and accounting practices for fiscal year 2016, and issued an unqualified opinion on the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information. The City’s audited financial statements for the year ended December 31, 2016 are attached herein as Appendix B. Authorized Investments Chapter 35.39 RCW limits the investment by cities and towns of its inactive funds or other funds in excess of current needs to the following authorized investments: United States bonds; United States certificates of indebtedness; bonds or warrants of the State and any local government in the State; its own bonds or warrants of a local improvement district which are within the protection of the local improvement guaranty fund law; and any other investment authorized by law for any other taxing district or the State Treasurer. Under chapter 43.84 RCW, the State Treasurer may invest in non-negotiable certificates of deposit in designated qualified public depositories; in obligations of the U.S. government, its agencies and wholly owned corporations; in bankers’ acceptances; in commercial paper; in the obligations of the federal home loan bank, federal national mortgage association and other government corporations subject to statutory provisions and may enter into repurchase agreements. Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW 35.39.030). Money available for investment may be invested on an individual fund basis or may, unless otherwise restricted by law, be commingled within one common investment portfolio. All income derived from such investment may be either apportioned to and used by the various participating funds or for the benefit of the general government in accordance with city ordinances or resolutions. Funds derived from the sale of bonds or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances, resolutions or bond covenants may lawfully prescribe. Local Government Investment Pool. The State Treasurer’s Office administers the Washington State Local Government Investment Pool (the “LGIP”), which invests money on behalf of more than 453 local governments. In its management of LGIP, the State Treasurer is required to adhere, at all times, to the principles appropriate for the prudent investment of public funds. These are, in priority order, (i) the safety of principal; (ii) the assurance of sufficient liquidity to meet cash flow demands; Page 82 of 140 26 and (iii) to attain the highest possible yield within the constraints of the first two goals. Historically, the LGIP has had sufficient liquidity to meet all cash flow demands. The LGIP, authorized by chapter 43.250 RCW, is a voluntary pool which provides its participants the opportunity to benefit from the economies of scale inherent in pooling. It is also intended to offer participants increased safety of principal and the ability to achieve a higher investment yield than would otherwise be available to them. The pool is restricted to investments with maturities of one year or less, and the average life typically is less than 90 days. Investments permitted under the pool’s guidelines include U.S. government and agency securities, bankers’ acceptances, high quality commercial paper, repurchase and reverse repurchase agreements, motor vehicle fund warrants, and certificates of deposit issued by qualified Washington State depositories. The City may withdraw its funds in whole or in part on less than 24 hours notice. Authorized Investments for Bond Proceeds. In addition to the eligible investments discussed above, bond proceeds may also be invested in mutual funds with portfolios consisting of U.S. government and guaranteed agency securities with average maturities of less than four years; municipal securities rated in one of the four highest categories; and money market funds consisting of the same, so long as municipal securities held in the fund(s) are in one of the two highest rating categories of a nationally recognized rating agency. Bond proceeds may also be invested in shares of money market funds with portfolios of securities otherwise authorized by law for investment by local governments (RCW 39.59.030). City Investments. As of September 30, 2017, the City’s investments at market value totaled $53,934,360. The concentration of credit risk as a percentage of total investments is as follows: Issuer % of Total Fair Value U.S. Government Securities 27.30% $14,724,314 Local Gov't. Investment Pool 72.70% 39,210,046 100.00% $53,934,360 GENERAL AND ECONOMIC INFORMATION The City is located in southeastern Washington in Franklin County at the confluence of the Columbia and the Yakima rivers, approximately 200 miles southeast of Seattle, 150 miles southwest of Spokane and 200 miles northeast of Portland, Oregon. Pasco is one of three cities which make up the urban area known as the Tri-Cities, the others being Kennewick and Richland in neighboring Benton County. Population With a 2016 estimated population of 70,560, the City is the largest of four incorporated communities in Franklin County. Historical populations for the City and Franklin County are as follows: Year City of Pasco Franklin County 2016 70,560 88,670 2015 68,240 87,150 2014 67,700 86,600 2013 65,600 84,800 2012 62,670 82,500 __________________ Source: Washington State Office of Financial Management Largest Employers The table below shows a list of the top ten employers in the Tri-Cities area ranked by number of employees. TRI-CITIES AREA MAJOR EMPLOYERS Employer Service/Product Employees Battelle/PNNL Research and Development 4,365 Kadlec Medical Center Health Services 3,304 Bechtel National Engineering & Construction 2,898 ConAgra (Lamb Weston) Agriculture Products 2,727 Kennewick School District Education 2,130 Washington River Protection Environmental Remediation 2,077 Page 83 of 140 27 Pasco School District Education 2,015 Mission Support Alliance Government 1,928 Richland School District Education 1,500 CH2M Hill Environmental Remediation 1,400 Tyson Foods Agriculture Products 1,300 __________________ Source: Tri-City Development Council website as of September 1, 2017. Economic Data Following are additional economic indicators for the City and County. RESIDENT CIVILIAN LABOR FORCE/EMPLOYMENT AND NON-AGRICULTURE WAGE/SALARY EMPLOYMENT(1) Annual Average 2017(2) 2016 2015 2014 2013 Kennewick-Richland-Pasco MSA Labor Force 134,346 134,423 130,673 127,761 128,467 Total Employment 127,262 125,182 121,530 117,881 116,741 Total Unemployment 7,084 9,241 9,143 9,880 11,726 Unemployment Rate 5.3% 6.9% 7.0% 7.7% 9.1% Franklin County Labor Force 39,149 39,969 38,958 38,266 38,256 Total Employment 36,117 36,913 35,982 34,997 34,623 Total Unemployment 3,032 3,056 2,976 3,269 3,633 Unemployment Rate 7.7% 7.6% 7.6% 8.5% 9.5% NAICS INDUSTRY(3) Kennewick-Richland-Pasco MSA Total Nonfarm 109,800 110,200 107,400 102,900 101,700 Total Private 90,000 90,600 89,200 84,300 83,400 Goods Producing 14,800 15,300 15,800 14,000 13,600 Mining, Logging & Construction 7,700 7,400 7,000 6,300 6,200 Manufacturing 7,100 7,900 8,800 7,800 7,400 Service Providing 95,000 94,900 91,600 88,800 88,100 Trade, Transportation & Utilities 18,900 19,300 19,100 18,100 17,500 Financial Activities 3,800 3,900 3,700 4,200 4,200 Professional & Business Services 21,600 21,700 20,700 20,700 20,800 Educational & Health Services 15,400 15,000 15,000 14,400 13,700 Leisure & Hospitality 11,200 11,100 10,500 9,800 9,600 Government 19,800 18,200 18,200 18,600 18,300 Workers in Labor/Management Disputes 0 0 0 0 0 ______________________ (1) Detail may not add to indicated totals due to rounding. Excludes proprietors, agriculture, self-employed, unpaid family, domestic workers and military. Includes all full-and part-time wage and salary workers receiving pay during the pay period including the 12th of the month by place of work. (2) Preliminary report as of May 2017. (3) North American Industry Classification System. Source: Washington State Employment Security Department. Page 84 of 140 28 CITY OF PASCO AND FRANKLIN COUNTY: NEW CONSTRUCTION BUILDING PERMITS Single-Family Multi-Family Single-Family Multi-Family Year Units Value(1) Units Value(1) Units Value(1) Units Value(1) 2016 387 $94,845 34 $5,742 496 $124,509 34 $5,743 2015 305 73,337 0 0 396 104,4804 0 0 2014 219 53,888 42 4,427 280 75,578 42 124,736 2013 205 50,098 130 13,176 245 64,137 130 141,991 2012 314 72,530 150 17,812 374 91,253 157 133,430 __________________ (1) Expressed in thousands. Source: United States Census Bureau INCOME INDICATORS: FRANKLIN COUNTY AND WASHINGTON STATE Median Household Income Per Capita Income Year Franklin County Washington State Franklin County Washington State 2016 $58,854 $65,500 not available $53,493 2015 57,664 63,439 31,327 51,971 2014 58,538 60,153 31,009 50,421 2013 56,105 57,284 32,122 47,814 2012 56,221 56,444 33,955 47,338 __________________ Source: Bureau of Economic Analysis; Washington State Department of Revenue as of July 1, 2017. TAXABLE RETAIL SALES Year City of Pasco Franklin County 2016 $1,250,472,836 $1,428,477,621 2015 1,016,794,531 1,315,962,291 2014 933,301,675 1,196,017,085 2013 861,063,279 1,110,256,894 2012 839,174,157 1,037,096,265 __________________ Source: Washington State Department of Revenue TAX MATTERS Tax Exemption Exclusion From Gross Income. In the opinion of Bond Counsel, under existing federal law and assuming compliance by the City with applicable requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issue date of the Bonds, interest on the Bonds will be excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals. Continuing Requirements. The City is required to comply with certain requirements of the Code after the date of issuance of the Bonds in order to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes, including, without limitation, requirements concerning the qualified use of Bond proceeds and the facilities financed or refinanced with Bond proceeds, limitations on investing gross proceeds of the Bonds in higher yielding investments in certain circumstances, and the requirement to comply with the arbitrage rebate requirement to the extent applicable to the Bonds. The City has covenanted in the Bond Ordinance to comply with those requirements, but if the City fails to comply with those requirements, interest on the Bonds could become taxable retroactive to the date of issuance of the Bonds. Bond Counsel has not undertaken and does not undertake to monitor the City’s compliance with such requirements. Corporate Alternative Minimum Tax. While interest on the Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, under Section 55 of the Code, tax exempt interest, including interest on the Bonds, received by corporations is taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations (as defined for federal income tax purposes). Under the Code, alternative minimum taxable income of a corporation will be increased by 75% of the excess of the corporation's adjusted current earnings Page 85 of 140 29 (including any tax-exempt interest) over the corporation's alternative minimum taxable income determined without regard to such increase. A corporation's alternative minimum taxable income, so computed, that is in excess of an exemption of $40,000, which exemption will be reduced (but not below zero) by 25% of the amount by which the corporation's alternative minimum taxable income exceeds $150,000, is then subject to a 20% minimum tax. A small business corporation is exempt from the corporate alternative minimum tax for any taxable year beginning after December 31, 1997, if its average annual gross receipts during the three-taxable-year period beginning after December 31, 1993, did not exceed $5,000,000, and its average annual gross receipts during each successive three-taxable-year period thereafter ending before the relevant taxable year did not exceed $7,500,000. Tax on Certain Passive Investment Income of S Corporations. Under Section 1375 of the Code, certain excess net passive investment income, including interest on the Bonds, received by an S corporation (a corporation treated as a partnership for most federal tax purposes) that has Subchapter C earnings and profits at the close of the taxable year may be subject to federal income taxation at the highest rate applicable to corporations if more than 25% of the gross receipts of such S corporation is passive investment income. Foreign Branch Profits Tax. Interest on the Bonds may be subject to the foreign branch profits tax imposed by Section 884 of the Code when the Bonds are owned by, and effectively connected with a trade or business of, a United States branch of a foreign corporation. Possible Consequences of Tax Compliance Audit. The Internal Revenue Service (the “IRS”) has established a general audit program to determine whether issuers of tax-exempt obligations, such as the Bonds, are in compliance with requirements of the Code that must be satisfied in order for interest on those obligations to be, and continue to be, excluded from gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS would commence an audit of the Bonds. Depending on all the facts and circumstances and the type of audit involved, it is possible that commencement of an audit of the Bonds could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of its ultimate outcome. Certain Other Federal Tax Consequences Bonds “Qualified Tax-Exempt Obligations” for Financial Institutions. Section 265 of the Code provides that 100% of any interest expense incurred by banks and other financial institutions for interest is allocable to tax-exempt obligations acquired after August 7, 1986, will be disallowed as a tax deduction. However, if the tax-exempt obligations are obligations other than private activity bonds, are issued by a governmental unit that, together with all entities subordinate to it, does not reasonably anticipate issuing more than $10,000,000 of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) in the current calendar year, and are designated by the governmental unit as “qualified tax-exempt obligations,” only 20% of any interest expense deduction allocable to those obligations will be disallowed. The City is a governmental unit that, together with all subordinate entities, reasonably anticipates issuing less than $10,000,000 of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) during the current calendar year and has designated the Bonds as “qualified tax-exempt obligations” for purposes of the 80% financial institution interest expense deduction. Therefore, only 20% of the interest expense deduction of a financial institution allocable to the Bonds will be disallowed for federal income tax purposes. Reduction of Loss Reserve Deductions for Property and Casualty Insurance Companies. Under Section 832 of the Code, interest on the Bonds received by property and casualty insurance companies will reduce tax deductions for loss reserves otherwise available to such companies by an amount equal to 15 percent of tax exempt interest received during the taxable year. Effect on Certain Social Security and Retirement Benefits. Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take receipts or accruals of interest on the Bonds into account in determining gross income. Other Possible Federal Tax Consequences. Receipt of interest on the Bonds may have other federal tax consequences as to which prospective purchasers of the Bonds may wish to consult their own tax advisors. Potential Future Federal Tax Law Changes. From time to time, there are legislative proposals in Congress which, if enacted, could adversely affect the tax treatment market value or marketability of the Bonds. It cannot be predicted whether future legislation may be proposed or enacted that would affect the federal tax treatment of interest received on the Bonds. Prospective Page 86 of 140 30 purchasers of the Bonds should consult with their own tax advisors regarding any proposed or pending legislation that would change the federal tax treatment of interest on the Bonds. Preservation of Tax Exemption The City has covenanted in the Bond Ordinance that it will take all actions necessary to prevent interest on the Bonds from being included in gross income for federal income tax purposes, and it will neither take any action nor make or permit any use of proceeds of the Bonds or other funds of the City treated as proceeds of the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross income for federal income tax purposes. RATING S&P Global has assigned a rating of “___” to the Bonds. The rating was applied for by the City and certain information was supplied by the City to the rating agency to be considered in evaluating the Bonds. The rating reflects only the view of the rating agency and an explanation of the significance of the rating may be obtained from the rating agency. There is no assurance that the rating will be retained for any given period of time or that the rating will not be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of the rating would be likely to have an adverse effect on the market price of the Bonds. CONTINUING DISCLOSURE Basic Undertaking to Provide Annual Financial Information and Notice of Listed Events. To meet the requirements of the United States Securities and Exchange Commission (“SEC”) Rule 15c2-12(b)(5) (the “Rule”), as applicable to a participating underwriter for the Bonds, the City will undertake (the “Undertaking”) for the benefit of holders of the Bonds to provide or cause to be provided, either directly or through a designated agent, to the Municipal Securities Rulemaking Board (“MSRB”), in an electronic format as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB: (a) annual financial information and operating data of the type included in this Official Statement as generally described below (“annual financial information”) and (b) timely notice (not in excess of 10 business days after the occurrence of the event) of the occurrence of any of the following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notice of Proposed Issue (IRS Form 5701 – TEB) or other material notices or determinations with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) Bond calls (other than scheduled mandatory redemptions of Term Bonds), if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the City, as such “Bankruptcy Events” are defined in Rule 15c2-12; (13) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material. The City will also provide to the MSRB timely notice of a failure by the City to provide required annual financial information on or before the date specified below. Type of Annual Financial Information Undertaken to be Provided. The annual financial information that the City undertakes to provide will consist of: (1) the City’s annual financial statements prepared (except as noted in the financial statements) in accordance with generally accepted accounting principles applicable to Washington local governmental units such as the City; (2) a statement of authorized, issued and outstanding bonded debt secured by the Net Revenue of the Waterworks Utility; (3) debt service coverage ratios; and (4) general customer statistics for the Waterworks Utility. The annual financial information that the City undertakes to provide will be provided to the MSRB not later than the last day of the ninth month after the end of each fiscal year of the City (currently, a fiscal year ending December 31), as such fiscal year may be changed as permitted or required by State law, commencing with the City’s fiscal year ending December 31, 2017. The annual financial information may be provided in a single or in multiple documents and may be incorporated by reference to other documents available to the public on the Internet website of the MSRB or filed with the SEC. If not submitted as part of the annual financial information described above, the City will provide or cause to be provided to the MSRB audited financial statements, when and if available. Amendment of Undertaking. The Undertaking is subject to amendment after the primary offering of the Bonds without the consent of any holder of any Bond, or of any broker, dealer, municipal securities dealer, participating underwriter, rating agency Page 87 of 140 31 or the MSRB, under the circumstances and in the manner permitted by the Rule. The City will give notice to the MSRB of the substance (or provide a copy) of any amendment to the Undertaking and a brief statement of the reasons for the amendment. If the amendment changes the type of annual financial information to be provided, the annual financial information containing the amended financial information will include a narrative explanation of the effect of that change on the type of information to be provided. Termination of Undertaking. The City’s obligations under the Undertaking will terminate upon the legal defeasance of all of the Bonds. In addition, the City’s obligations under the Undertaking will terminate if those provisions of the Rule which require the City to comply with the Undertaking become legally inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of nationally recognized bond counsel or other counsel familiar with federal securities laws delivered to the City, and the City provides timely notice of such termination to the MSRB. Remedy for Failure to Comply with Undertaking. As soon as practicable after the City learns of any failure to comply with the Undertaking, the City will proceed with due diligence to cause such noncompliance to be corrected. No failure by the City or other obligated person to comply with the Undertaking shall constitute a default in respect of the Bonds. The sole remedy of any holder of a Bond shall be to take such actions as that holder deems necessary, including seeking an order of specific performance from an appropriate court, to compel the City or other obligated person to comply with the Undertaking. Prior Compliance with Continuing Disclosure Undertakings. The City previously entered into undertakings under the Rule with respect to certain of its outstanding bonds. In October of 2013, the City discovered that it failed to (1) submit event notices with respect to certain downgrades or upgrades to the insured ratings on its Unlimited Tax General Obligation Bonds, 1999, Unlimited Tax General Obligation Refunding Bonds, 2002, Water and Sewer Revenue Bonds, 2005 and Water and Sewer Revenue Bonds, 2009, and (2) timely file certain financial information as required by undertakings entered into in connection with certain outstanding bonds. The City filed with EMMA event notices with respect to these items on October 30, 2013 and November __, 2017. The City has otherwise complied in all material respects with the provisions of its various continuing disclosure undertakings, and has taken affirmative action to ensure full compliance with the undertakings by assigning appropriate staff to the tasks and enrolling in the MSRB’s e-mail reminder system. [TO BE UPDATED] CERTAIN INVESTMENT CONSIDERATIONS Limitations on Remedies. Any remedies available to the owners of the Bonds are in many respects dependent upon judicial actions, which are in turn often subject to discretion and delay and could be both expensive and time consuming to obtain. If the City fails to comply with its covenants under the Bond Ordinance or to pay principal of or interest on the Bonds, there can be no assurance that available remedies will be adequate to fully protect the interests of the owners of the Bonds. In addition to the limitations on remedies contained in State law, the rights and obligations under the Bonds and the Bond Ordinance may be limited by and are subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, and other laws relating to or affecting creditors’ rights, to the application of equitable principles, and to the exercise of judicial discretion in appropriate cases. The legal opinion of Bond Counsel regarding the validity of the Bonds will be qualified by reference to bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium and other similar laws affecting the rights of creditors generally, and by general principles of equity. Bankruptcy. A municipality, such as the City, must be specifically authorized under State law in order to seek relief under Chapter 9 of the U.S. Bankruptcy Code (the “Bankruptcy Code”). Chapter 39.64 RCW, entitled the “Taxing Relief Bankruptcy Act,” appears to permit any “taxing district” (defined to include any municipality or political subdivision, including cities) to voluntarily petition for relief under the Bankruptcy Code. A creditor cannot bring an involuntarily bankruptcy proceeding against a municipality, including cities. Under Chapter 9, a federal bankruptcy court may not appoint a receiver for a municipality or order the dissolution or liquidation of the municipality. If a municipality filed for bankruptcy, the bankruptcy court would have some discretion with respect to how to treat past and future obligations of such municipality regarding priority of payment to creditors under a plan for adjustment of debt under Chapter 9 of the Bankruptcy Code. INITIATIVE AND REFERENDUM General. Under the State constitution, the voters of the State have the ability to initiate legislation and to modify existing statutes through the powers of initiative and referendum. Initiatives and referenda are submitted to the voters upon receipt of a petition signed by at least eight percent (initiatives) and four percent (referenda) of the number of voters registered and voting for the office of Governor at the preceding regular gubernatorial election. Any law approved through the power of initiative by a majority of the voters may not be amended or repealed by the Legislature within a period of two years following enactment, Page 88 of 140 32 except by a vote of two-thirds of all the members elected to each house of the Legislature, but thereafter is subject to amendment or repeal by the Legislature in the same manner as other laws. Future Initiatives. Initiative petitions affecting tax collections and levy rates (not including the taxes pledged to the repayment of the Bonds) and other matters may be filed in the future. The City cannot predict whether any such initiatives will qualify to be submitted to the voters or, if submitted, will be approved. Likewise, the City cannot predict what actions the Legislature might take, if any, regarding future initiatives approved by voters. LEGAL AND UNDERWRITING Approval of Counsel Legal matters incident to the authorization, issuance and sale of the Bonds by the City are subject to the approving legal opinion of Bond Counsel. The form of the opinion of Bond Counsel with respect to the Bonds is attached as Appendix C. The opinion of Bond Counsel is given based on factual representations made to Bond Counsel, and under existing law, as of the date of initial delivery of the Bonds, and Bond Counsel assumes no obligation to revise or supplement its opinion to reflect any facts or circumstances that may thereafter come to its attention, or any changes in law that may thereafter occur. The opinion of Bond Counsel is an expression of its professional judgment on the matters expressly addressed in its opinion and does not constitute a guarantee of result. Bond Counsel will be compensated only upon the issuance and sale of the Bonds. Financial Advisor Northwest Municipal Advisors, Bellevue, Washington, serves as financial advisor to the City in conjunction with the issuance of the Bonds (the “Financial Advisor”). The Financial Advisor has not audited, authenticated or otherwise verified the information set forth in this Official Statement or any other related information available to the City with respect to the accuracy and completeness of disclosure of such information, and no guaranty, warranty or other representation is made by the Financial Advisor respecting the accuracy and completeness of this Official Statement or any other matter related to this Official Statement. The Financial Advisor is an independent financial advisory firm and is not engaged in the business of underwriting, marketing, trading or distributing municipal securities. Litigation There is no litigation pending or threatened questioning the validity of the Bonds nor the power and authority of the City to issue the Bonds. The City cannot predict whether future claims may be asserted against the City or the outcome of any future settlement negotiations or judicial proceedings to resolve any such claims. However, the City does not anticipate that any such proceedings would materially affect the City’s ability to meet debt service requirements on the Bonds. Conflicts of Interest All or a portion of the fees of the Underwriter, Underwriter’s Counsel, Financial Advisor and Bond Counsel are contingent upon the issuance and sale of the Bonds. In addition, Bond Counsel from time to time serves as counsel to the Underwriter with respect to bonds issued by issuers other than the City. None of the Council members or other officers of the City have any conflict of interest in the issuance of the Bonds that is prohibited by applicable law. Underwriting The Bonds are being purchased by the Underwriter. The purchase contract provides that the Underwriter will purchase all of the Bonds, if any are purchased, at a price of __________ percent of the par value of the Bonds. The Bonds will be reoffered at an average price of __________ percent of the par value of the Bonds. After the initial public offering, the public offering prices may be varied from time to time. CONCLUDING STATEMENT So far as any statement herein includes matters of opinion, or estimates of future expenses and income, whether or not expressly so stated, they are intended merely as such and not as representations of fact. The information contained herein should not be construed as representing all conditions affecting the City or the Bonds. Additional information may be obtained from the City. The statements relating to the Ordinance are in summarized form, and in all respects are subject to and qualified in their entirety by express reference to the provisions of such document in its complete form. The agreements of the City are set forth in such documents, and the information assembled herein is not to be construed as a contract with Owners of the Bonds. The preparation and distribution of this Official Statement have been authorized by the City. Page 89 of 140 APPENDIX A CERTAIN DEFINITIONS Page 90 of 140 THIS PAGE INTENTIONALLY LEFT BLANK. Page 91 of 140 A-1 Certain terms used in this Official Statement that are not specifically defined herein have the meanings as set forth in the Bond Ordinance. The following terms shall have the following meanings in this Official Statement as defined in the Bond Ordinance: “2009 Bonds” means the outstanding Water and Sewer Revenue Bonds, 2009, of the City issued pursuant to Ordinance No. 3915. “2010A Bonds” means the outstanding Water and Sewer Improvement and Refunding Revenue Bonds, 2010A, of the City issued pursuant to Ordinance No. 3962. “2010T Bonds” means the outstanding Water and Sewer Refunding Revenue Bonds, 2010T (Taxable), of the City issued pursuant to Ordinance No. 3962. “2013A Bonds” means the outstanding Water and Sewer Revenue Bonds, 2013A, of the City issued pursuant to Ordinance No. 4126. “2013T Bonds” means the outstanding Water and Sewer Revenue Bonds, 2013T (Taxable), of the City issued pursuant to Ordinance No. 4126. “2015 Bonds” means the outstanding Water and Sewer Improvement and Refunding Revenue Bonds, 2015, of the City issued pursuant to Ordinance No. 4254. “Acquired Obligations” means the United States Treasury Certificates of Indebtedness, Notes, and Bonds-State and Local Government Series and/or other Government Obligations, as identified in the Refunding Trust Agreement, purchased to carry out the Refunding Plan. “Alternate Security” means any bond insurance, collateral, security, letter of credit, guaranty, surety bond or similar credit enhancement device providing for or securing the payment of all or part of the principal of and interest on any specified Parity Bonds, issued by an institution which has been assigned a credit rating at the time of issuance of the applicable Parity Bonds, respectively, secured by such Alternate Security in the highest rating categories by both Moody’s Investors Service, Inc., and S&P Global. “Annual Debt Service” for any or all Parity Bonds for any year means all the interest, plus all principal which will mature or come due in such year, less all bond interest payable from the proceeds of any such bonds in that year. “Assessment Bonds” means, at the time of determination, Parity Bonds then outstanding equal to the sum of the nondelinquent unpaid principal amount of ULID Assessments then outstanding plus any ULID Assessment payments then on deposit in the Principal and Interest Account of the Bond Fund. Assessment Bonds shall be allocated to each remaining maturity of Parity Bonds in the same proportion as the total of the Assessment Bonds relates to the total of the Parity Bonds then outstanding. “Authorized Denomination” means $5,000.00 or any integral multiple thereof within a maturity. “Average Annual Debt Service” means, at the time of its calculation, the sum of the Annual Debt Service for the remaining years to the last scheduled maturity of the applicable Parity Bonds divided by the number of those years. “Beneficial Owner” means, with respect to a Bond, the owner of any beneficial interest in that Bond. “Bond” means each bond issued pursuant to and for the purposes provided in the Bond Ordinance. “Bond Counsel” means the firm of Foster Pepper PLLC, its successor, or any other attorney or firm of attorneys selected by the City with a nationally recognized standing as bond counsel in the field of municipal finance. “Bond Fund” means the Water and Sewer Revenue and Refunding Bond Redemption Fund, 1991, of the City created and established by Ordinance No. 2846 for the payment of the principal of and interest on the Parity Bonds. “Bond Purchase Agreement” means an offer to purchase the Bonds, or a Series of Bonds, setting forth certain terms and conditions of the issuance, sale and delivery of those Bonds, which offer is authorized to be accepted by the Designated Representative on behalf of the City, if consistent with the Bond Ordinance. “Bond Register” means the books or records maintained by the Bond Registrar for the purpose of identifying ownership of each Bond. “Bond Registrar” means the Fiscal Agent, or any successor bond registrar selected by the City. Page 92 of 140 A-2 “City” means the City of Pasco, Washington, a municipal corporation duly organized and existing under the laws of the State. “City Clerk” means the City Clerk of the City or the successor to the functions of that officer. “City Contribution” means legally available money of the City, in addition to proceeds of the Bonds, necessary or advisable to carry out the Refunding Plan, as determined by the Designated Representative. “City Council” means the legislative authority of the City, as duly and regularly constituted from time to time. “Code” means the United States Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. “Construction Accounts” means such accounts created in the Water/Sewer Fund as the Finance Director shall designate for the purpose of paying the costs of the Plan of Additions and the costs of issuance of the Bonds. “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, or its nominee. “Designated Representative” means an officer of the City appointed in Error! Reference source not found. of the Bond Ordinance to serve as the City’s designated representative in accordance with RCW 39.46.040(2). “Final Terms” means the terms and conditions for the sale of a Series of Bonds including, but not limited to the amount, date or dates, denominations, interest rate or rates (or mechanism for determining interest rate or rates), payment dates, final maturity, redemption rights, price, and other terms or covenants, including minimum savings for refunding bonds (if the refunding bonds are issued for savings purposes). “Finance Director” means the City’s Finance Director or such other officer of the City who succeeds to substantially all of the responsibilities of that office. “Fiscal Agent” means the fiscal agent of the State, as the same may be designated by the State from time to time. “Future Parity Bonds” means any and all water and sewer revenue bonds or other obligations of the City issued or incurred after the date of the issuance of the Bonds pursuant to the provisions of the Parity Bond Ordinances, the payment of the principal of and interest on which constitutes a lien and charge upon the Net Revenue of the Waterworks Utility and ULID Assessments on a parity with the lien and charge upon such Net Revenue and ULID Assessments for the Outstanding Parity Bonds and the Bonds, but shall not include variable rate obligations. “Government Obligations” has the meaning given in RCW 39.53.010, as now in effect or as may hereafter be amended. “Gross Revenue of the Waterworks Utility” or “Gross Revenue” means all of the earnings and revenues received by the City from the maintenance and operation of the Waterworks Utility and all earnings from the investment of money on deposit in the Bond Fund, except ULID Assessments, government grants, proceeds from the sale of Waterworks Utility property, City taxes collected by or through the Waterworks Utility, principal proceeds of bonds and earnings or proceeds from any investments in a trust, defeasance or escrow fund created to defease or refund Waterworks Utility obligations (until commingled with other earnings and revenues of the Waterworks Utility) or held in a special account for the purpose of paying a rebate to the United States Government under the Code. “Issue Date” means, with respect to a Bond, the date of initial issuance and delivery of that Bond to the Purchaser in exchange for the purchase price of that Bond. “Letter of Representations” means the Blanket Issuer Letter of Representations between the City and DTC dated August 31, 1998. “Maximum Annual Debt Service” means, at the time of calculation, the maximum amount of Annual Debt Service that will mature or come due in the current year or any future year on the outstanding Parity Bonds. “Mayor” means the Mayor of the City or the successor to the functions of that office. “MSRB” means the Municipal Securities Rulemaking Board. Page 93 of 140 A-3 “Net Revenue of the Waterworks Utility” or “Net Revenue” means the Gross Revenue less Operating and Maintenance Expenses. “Official Statement” means an offering document, disclosure document, private placement memorandum or substantially similar disclosure document provided to purchasers and potential purchasers in connection with the initial offering of the Bonds in conformance with Rule 15c2-12 or other applicable regulations of the SEC. “Operating and Maintenance Expenses” means all reasonable expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair, working order and condition, including payments made to any other municipal corporation or private entity for water service and for sewage treatment and disposal service or other utility service in the event the City combines such service in the Waterworks Utility and enters into a contract for such service, but not including any depreciation or taxes levied or imposed by the City or payments to the City in lieu of taxes, or capital additions or capital replacements to the Waterworks Utility. “Outstanding Parity Bonds” means the outstanding 2009 Bonds, 2010A Bonds, 2010T Bonds, 2013A Bonds, 2013T Bonds, and 2015 Bonds. Outstanding Parity Bonds do not include any Refunded Bonds. “Owner” means, without distinction, the Registered Owner and the Beneficial Owner. “Parity Bonds” means the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds. “Parity Bond Ordinances” means Ordinance No. 3915, Ordinance No. 3962, Ordinance No. 4126, Ordinance No. 4254 and the Bond Ordinance. “Parity Conditions” means the conditions for issuing Future Parity Bonds set forth in Exhibit B to the Bond Ordinance, which is incorporated herein by this reference. “Plan of Additions” means the system or plan of additions to and betterments and extensions of the Waterworks Utility specified, adopted and ordered to be carried out by the Bond Ordinance. “Principal and Interest Account” means the account of that name created in the Bond Fund for the payment of the principal of and interest on all Parity Bonds. “Project Bonds” means those Bonds allocated to carrying out the Plan of Additions, including providing for the Reserve Requirement with respect to the Project Bonds. “Purchaser” means D.A. Davidson & Co. of Seattle, Washington, or such other purchaser of the Bonds whose offer is accepted by the Designated Representative in accordance with the Bond Ordinance. “Rating Agency” means any nationally recognized rating agency then maintaining a rating on the Bonds at the request of the City. “Record Date” means the Bond Registrar’s close of business on the 15th day of the month preceding an interest payment date. With respect to redemption of a Bond prior to its maturity, the Record Date shall mean the Bond Registrar’s close of business on the date on which the Bond Registrar sends the notice of redemption in accordance with Error! Reference source not found.. “Redemption Date” means, with respect to each series of the Refunded Bonds, a date or dates selected by the Designated Representative. “Refunded Bonds” means the Refunding Candidates selected by the Designated Representative and identified in the Refunding Plan. “Refunding Bonds” means those Bonds allocated to carrying out the Refunding Plan, including providing for the Reserve Requirement with respect to the Refunding Bonds. “Refunding Plan” means (as further described in the Refunding Trust Agreement): the deposit with the Refunding Trustee of proceeds of the Bonds in an amount, together with the City Contribution (if any), sufficient to acquire the Acquired Obligations and establish a beginning cash balance; the receipt by the Refunding Trustee of the maturing principal of and interest on the Acquired Obligations, and the application of such amounts (together with any other cash held by it) to pay principal of and interest on the Refunded Bonds when due up to and including the applicable Redemption Dates, and the call, payment and redemption of the Refunded Bonds on the applicable Redemption Dates at a price equal to the principal amount to be redeemed; and Page 94 of 140 A-4 payment of the costs of issuing the Bonds and the costs of carrying out the foregoing elements of the Refunding Plan, if payment of such costs is so specified in the Refunding Trust Agreement. “Refunding Trust Agreement” means the refunding trust agreement between the City and the Refunding Trustee, providing for the carrying out of the Refunding Plan. “Refunding Trustee” means the trustee, or any successor trustee, designated by the Designated Representative to serve as refunding trustee to carry out the Refunding Plan. “Registered Owner” means, with respect to a Bond, the person in whose name that Bond is registered on the Bond Register. For so long as the City utilizes the book-entry only system for the Bonds under the Letter of Representations, Registered Owner shall mean the Securities Depository. “Reserve Account” means the account of that name created in the Bond Fund for the purpose of securing the payment of the principal of and interest on the Parity Bonds. “Reserve Insurance” means, in lieu of cash and investments, insurance obtained by the City to fund all or a portion of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained; and for the Outstanding Parity Bonds and the Bonds means the Surety Bond provided by the Reserve Insurer. “Reserve Insurer” means Ambac Assurance Corporation for the Outstanding Parity Bonds and the Bonds. “Reserve Requirement” means: For the Outstanding Parity Bonds and the Bonds, an amount equal to the least of (a) 10% of the issue price of the then- outstanding Parity Bonds, (b) Maximum Annual Debt Service on the then-outstanding Parity Bonds and (c) 1.25 times Average Annual Debt Service on the then-outstanding Parity Bonds. For the purposes of determining Maximum Annual Debt Service and Average Annual Debt Service for calculating the Reserve Requirement, all bonds payable or proposed to be paid from the Bond Fund shall be treated as a single issue and the number of years to the last scheduled maturity for any of those issues shall be used as the denominator. For any Future Parity Bonds secured by the Reserve Account, an amount equal to the difference between the Reserve Requirement for the then-outstanding Parity Bonds secured by the Reserve Account and the least of (a) 10% of the issue price of the then-outstanding Parity Bonds secured by the Reserve Account and the Future Parity Bonds proposed to be issued, (b) Maximum Annual Debt Service on the then-outstanding Parity Bonds secured by the Reserve Account and the Future Parity Bonds proposed to be issued and (c) 1.25 times Average Annual Debt Service on the then- outstanding Parity Bonds secured by the Reserve Account and the Future Parity Bonds proposed to be issued, but in no event to exceed an amount equal to the least of 10% of the issue price of the proposed Future Parity Bonds, Maximum Annual Debt Service on those bonds and 1.25 times Average Annual Debt Service on the proposed bonds. For the purposes of determining Maximum Annual Debt Service and Average Annual Debt Service for calculating the Reserve Requirement, all bonds payable or proposed to be paid from the Bond Fund secured by the Reserve Account shall be treated as a single issue and the number of years to the last scheduled maturity for any of those issues shall be used as the denominator. “Rule 15c2-12” means Rule 15c2-12 promulgated by the SEC under the Securities Exchange Act of 1934, as amended. “SEC” means the United States Securities and Exchange Commission. “Series of the Bonds” or “Series” means a series of the Bonds issued pursuant to the Bond Ordinance. “State” means the State of Washington. “Surety Bond” means the surety bond issued by the Reserve Insurer guaranteeing certain payments into the Reserve Account with respect to the Outstanding Parity Bonds and the Bonds as provided in and subject to the limitations set forth in that surety bond. “Term Bonds” means each Bond designated as a Term Bond and subject to mandatory redemption in the years and amounts set forth in the Bond Purchase Agreement. For any Outstanding Parity Bonds or Future Parity Bonds, “Term Bonds” means those bonds of any single issue or series designated as Term Bonds pursuant to the ordinance authorizing their issuance or sale and which are subject to mandatory prior redemption or for which mandatory sinking fund installments are provided. “ULID” means utility local improvement district. Page 95 of 140 A-5 “ULID Assessments” means all ULID assessments and installments thereof, plus interest and penalties thereon, in any ULID created to secure the payment of any Parity Bonds and pledged to be paid into the Bond Fund. “Undertaking” means the undertaking to provide continuing disclosure entered into pursuant to Error! Reference source not found. of the Bond Ordinance. “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. Page 96 of 140 THIS PAGE INTENTIONALLY LEFT BLANK. Page 97 of 140 APPENDIX B 2016 AUDITED FINANCIAL STATEMENTS Page 98 of 140 THIS PAGE INTENTIONALLY LEFT BLANK. Page 99 of 140 APPENDIX C FORM OF LEGAL OPINION Page 100 of 140 THIS PAGE INTENTIONALLY LEFT BLANK. Page 101 of 140 APPENDIX D BOOK-ENTRY SYSTEM Page 102 of 140 THIS PAGE INTENTIONALLY LEFT BLANK. Page 103 of 140 D-1 The following information has been provided by DTC. The City takes no responsibility for the accuracy or completeness thereof, or for the absence of material changes in such information subsequent to the date hereof. Beneficial Owners should confirm the following with DTC or the Participants (as hereinafter defined). The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount represented by such Bonds, and will be deposited with DTC. DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post- trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of Bond certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a rating of AA+ from S&P Global. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com (which website is not incorporated herein by reference). Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are expected, however, to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are to be registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. When notices are given, they shall be sent by the Fiscal Agent to DTC only. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Bonds of a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to Page 104 of 140 D-2 those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments on the Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or the Bond Registrar, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and are the responsibility of such Participant and not of DTC, the Bond Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments to Cede & Co. (or any other nominee as may be requested by an authorized representative of DTC) are the responsibility of the City or the Bond Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the City or the Bond Registrar. Under such circumstances, in the event that a successor depository is not obtained, Bonds are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC. The information in this appendix concerning DTC and DTC’s book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. Page 105 of 140 Projects2017  Reimbursement201820192020Capital Avenue Lift Station CP7SE1A1603 448,000 0 0 0Pearl Street Lift Station Replacement CP7SE1A1541 75,000 223,000 510,000 580,0009th & Washington Lift Station CP7SE2R1603 50,000 830,000 0 0Road 36 Lift Station Upgrades CP7SE2R1602 50,000 0 0 030" Sanitary Sewer Main (NW Area) CP7SE2A1402 360,000 2,500,000 0 0The Maitland Lift Station CP7SE1A1543 68,108 0 0 016001 Kahlotus Lift Station CP7SE1A1601 10,000 0 0 017013 Sewer Immediate Needs CP9SE1A1701 475,000 0 0 013001 WWTP Primary Clarifier 3 CP7SE2A1302 70,000 0 0 014002 West Pasco Trunk Sewer Relining (Transmission Main Rehabilitation ‐ Rd 60 to 100)0 50,000 1,295,000 000060 WWTP Facility Plan Capital Improvement Projects 0 500,000 5,000,000 5,000,00000059 Wastewater Treatment Plant PLCs and Controls Updgrade 0 750,000 0 01,606,108 4,853,000 6,805,000 5,580,000 Page 106 of 140 AGENDA REPORT FOR: City Council October 31, 2017 TO: Dave Zabell, City Manager Rick Terway, Interim Public Works Director Workshop Meeting: 11/13/17 FROM: Dan Ford, City Engineer Public Works SUBJECT: Bid Award: Oregon Avenue (SR 397) Corridor Improvements, Phase 1 I. REFERENCE(S): Vicinity Map Bid Tabulation II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: Discussion III. FISCAL IMPACT: Transportation Improvement Board (TIB) Grant $4,864,500 Highway Safety Improvement Program Grant $875,900 Surface Transportation Program Grant $903,550 City of Pasco - Arterial and Overlay Funds $1,399,378 Total Project Cost (Past and Future*) $8,043,328 *Previously spent and anticipated costs. IV. HISTORY AND FACTS BRIEF: This is a street improvement project of Oregon Avenue (SR 397) from the US12/I-182 Interchange to 'A' Street that focuses on safety enhancements of this route. Improvements include installation of sidewalks, curb and gutter, paving, storm drainage, striping, widening, turn lane channelization, and installation of a new traffic signal at the Idaho intersection. The project also includes an emergency signal at th e fire station, and illumination along the length of the project. Page 107 of 140 V. DISCUSSION: On October 25, 2017, the City received seven (7) bids for construction of the project. The low bid was from Culbert Construction, Inc. in the amount of $6,622,707.52. The Engineer's construction estimate was $6,607,066.00. Constructions costs, plus the cost of design, project management and inspection for the duration of the total $8,043,328. This project is included in the City's 2018-2023 Capital Improvement Plan. After award of the project, the starting date of construction will be coordinated with the contractor, with the majority of construction completed in 2018. Staff reviewed the bid submittal and found no exceptions or irregularities and, therefore, recommends award of the contract to Culbert Construction, Inc. of Pasco, Washington. Page 108 of 140 OREGON AVE (SR 397) CORRIDOR IMPROVEMENTS - PHASE I VICINITY MAP References Project Phase 1 Project Phase 2 (Future) Proposed new Traffic Signal Upgrade to existing Traffic Signal Port of Pasco Schools EMS/Fire Station Commercial/Industrial Area Lewis St. Overpass N “A” Street Lewis Street `` Broadway Street Page 109 of 140 Page 110 of 140 FILE: BID DATE: OCTOBER 25, 2017 Oregon Ave (SR397) Bid Summary.pub SHEET of 2 6 Contract No.: CP5-ST-3A-12-57 Fed. Aid No.: STPUS-0397(008) Continued from Previous Sheet CITY OF PASCO Oregon Ave (SR 397) Corridor Improvements, Phase 1 Project No. 12002 BID SUMMARY Oregon Ave (SR 397) Improvements, Phase I Selland Construction, Inc. Inland Asphalt Co. Tapani, Inc. Granite Construction Co. PROJECT NUMBER: 12002, CP5-ST-3A-12-57 Wenatchee, WA Richland, WA Battle Ground, WA Pasco, WA Fed. Aid No. : STPUS-0397(008) Item Bid Security Bid Bond Bid Bond Bid Bond Bid Bond No. Description Quantity Unit Unit Price Amount Unit Price Amount Unit Price Amount Unit Price Amount 1 Mobilization 1 LS 449,209.50 449,209.50 450,000.00 450,000.00 722,000.00 722,000.00 1,221,473.00 1,221,473.00 2 Clearing and Grubbing 6.00 ACRE 5,000.00 30,000.00 2,000.00 12,000.00 8,500.00 51,000.00 17,500.00 105,000.00 3 Removal of Structures and Obstructions 1 LS 213,000.00 213,000.00 425,000.00 425,000.00 350,000.00 350,000.00 100,000.00 100,000.00 4 Roadway Excavation Incl. Haul 8400 CY 50.00 420,000.00 34.00 285,600.00 19.00 159,600.00 80.00 672,000.00 5 Common Borrow Incl. Haul 2700 CY 12.00 32,400.00 12.00 32,400.00 17.00 45,900.00 34.00 91,800.00 6 Modify Catch Basin 1 EACH 1,000.00 1,000.00 1,500.00 1,500.00 1,300.00 1,300.00 1,486.00 1,486.00 7 Catch Basin Type 1 (COP) 79 EACH 1,400.00 110,600.00 715.00 56,485.00 1,500.00 118,500.00 2,935.00 231,865.00 8 Adjust Catch Basin 6 EACH 300.00 1,800.00 270.00 1,620.00 300.00 1,800.00 790.00 4,740.00 9 Catch Basin Type 2 48 In. Diam. 4 EACH 2,500.00 10,000.00 2,268.00 9,072.00 5,000.00 20,000.00 5,164.00 20,656.00 10 48 In. Diam. Storm Drain Manhole 32 EACH 2,500.00 80,000.00 1,944.00 62,208.00 5,000.00 160,000.00 6,800.00 217,600.00 11 Infiltration Trench, Complete 470 LF 300.00 141,000.00 325.00 152,750.00 400.00 188,000.00 710.00 333,700.00 12 Catch Basin Type 1 (WSDOT) 2 EACH 1,400.00 2,800.00 875.00 1,750.00 1,500.00 3,000.00 2,534.00 5,068.00 13 Solid Wall PVC Storm Sewer Pipe 10 In. Diam. 3900 LF 105.00 409,500.00 48.00 187,200.00 73.00 284,700.00 70.00 273,000.00 14 Solid Wall PVC Storm Sewer Pipe 12 In. Diam. 4000 LF 65.00 260,000.00 45.00 180,000.00 65.00 260,000.00 75.00 300,000.00 15 Moving Existing Hydrant 8 EACH 5,400.00 43,200.00 3,900.00 31,200.00 11,000.00 88,000.00 7,140.00 57,120.00 16 Adjust Water Meter Box 26 EACH 300.00 7,800.00 1,050.00 27,300.00 150.00 3,900.00 500.00 13,000.00 17 Relocate Water Meter Box 3 EACH 1,300.00 3,900.00 525.00 1,575.00 400.00 1,200.00 1,400.00 4,200.00 18 Pedestrian Railing 82 LF 200.00 16,400.00 200.00 16,400.00 90.00 7,380.00 250.00 20,500.00 19 Crushed Surfacing Base Course 6000 TON 25.00 150,000.00 38.00 228,000.00 30.00 180,000.00 67.00 402,000.00 20 Crushed Surfacing Top Course 300 TON 45.00 13,500.00 45.00 13,500.00 50.00 15,000.00 122.00 36,600.00 21 HMA CL. 1/2 In. PG 64-28 7800 TON 103.00 803,400.00 105.90 826,020.00 100.00 780,000.00 200.00 1,560,000.00 22 Adjust Valve Box 9 EACH 350.00 3,150.00 1,100.00 9,900.00 75.00 675.00 800.00 7,200.00 23 Silt Fence 1800 LF 4.00 7,200.00 3.00 5,400.00 5.00 9,000.00 7.00 12,600.00 24 ESC Lead 240 DAY 25.00 6,000.00 150.00 36,000.00 47.00 11,280.00 1.00 240.00 25 Topsoil Type A 1340 CY 45.00 60,300.00 28.00 37,520.00 25.00 33,500.00 23.00 30,820.00 26 Stabilized Construction Entrance 216 SY 12.00 2,592.00 60.00 12,960.00 20.00 4,320.00 22.00 4,752.00 27 Inlet Protection 99 EACH 100.00 9,900.00 80.00 7,920.00 45.00 4,455.00 75.00 7,425.00 28 Soil Amendments 340 CY 83.00 28,220.00 85.00 28,900.00 95.00 32,300.00 87.00 29,580.00 29 Dry River Bed Rock 4500 SF 0.95 4,275.00 1.00 4,500.00 1.00 4,500.00 1.00 4,500.00 30 Landscape Boulders 44 EACH 85.00 3,740.00 89.00 3,916.00 100.00 4,400.00 85.00 3,740.00 31 Landscape Repair 1 LS 5,000.00 5,000.00 6,875.00 6,875.00 12,000.00 12,000.00 600.00 600.00 32 Irrigation System 1 LS 235,000.00 235,000.00 240,000.00 240,000.00 175,000.00 175,000.00 280,000.00 280,000.00 33 PSIPE Large Trees 92 EACH 340.00 31,280.00 370.00 34,040.00 275.00 25,300.00 360.00 33,120.00 Page 111 of 140 FILE: BID DATE: OCTOBER 25, 2017 Oregon Ave (SR397) Bid Summary.pub SHEET of 3 6 Contract No.: CP5-ST-3A-12-57 Fed. Aid No.: STPUS-0397(008) Continued from Previous Sheet CITY OF PASCO Oregon Ave (SR 397) Corridor Improvements, Phase 1 Project No. 12002 BID SUMMARY Oregon Ave (SR 397) Improvements, Phase I Engineer's Estimate Culbert Construction, Inc. Total Site Services, LLC Apollo, Inc. PROJECT NUMBER: 12002, CP5-ST-3A-12-57 Pasco, WA Richland, WA Kennewick, WA Fed. Aid No. : STPUS-0397(008) Item Bid Security Bid Bond Bid Bond Bid Bond No. Description Quantity Unit Unit Price Amount Unit Price Amount Unit Price Amount Unit Price Amount 34 PSIPE Evergreen Trees 9 EACH 350.00 3,150.00 195.75 1,761.75 0.00 2,843.24 286.00 2,574.00 35 PSIPE Shrubs and Groundcover 27800 SF 3.00 83,400.00 0.37 10,286.00 0.00 20,677.40 1.25 34,750.00 36 Seeded lawn Installation 7900 SY 0.90 7,110.00 2.66 21,014.00 0.00 5,660.28 3.00 23,700.00 37 Dual-Faced Cement Conc. Traffic Curb 600 LF 25.00 15,000.00 59.12 35,472.00 0.00 24,117.42 57.00 34,200.00 38 Cement Conc. Type A Curb and Gutter 15710 LF 25.00 392,750.00 22.34 350,961.40 0.00 471,831.94 26.00 408,460.00 39 Extruded Cement Concrete Mow Strip 1200 LF 6.00 7,200.00 10.41 12,492.00 0.00 4,708.36 5.50 6,600.00 40 Cement Conc. Pedestrian Curb 75 LF 20.00 1,500.00 59.44 4,458.00 0.00 1,796.06 69.00 5,175.00 41 10" Cement Conc. Pedestrian Curb 130 LF 30.00 3,900.00 59.44 7,727.20 24.15 3,139.50 70.00 9,100.00 42 Plastic Line 29250 LF 1.30 38,025.00 0.82 23,985.00 0.90 26,325.00 0.90 26,325.00 43 Plastic Wide Lane Line 3950 LF 2.50 9,875.00 2.20 8,690.00 2.45 9,677.50 2.35 9,282.50 44 Plastic Crosswalk Line 4920 SF 6.80 33,456.00 8.46 41,623.20 9.39 46,198.80 9.00 44,280.00 45 Plastic Stop Line 930 LF 7.00 6,510.00 12.81 11,913.30 14.21 13,215.30 13.00 12,090.00 46 Plastic Traffic Arrow 78 EACH 200.00 15,600.00 256.22 19,985.16 284.32 22,176.96 275.00 21,450.00 47 Permanent Signing 1 LS 25,000.00 25,000.00 32,796.15 32,796.15 36,393.18 36,393.18 35,000.00 35,000.00 48 Illumination System, Complete 1 LS 940,000.00 958,000.00 798,445.74 798,445.74 886,618.18 886,618.18 852,000.00 852,000.00 49 Traffic Signal, Complete (Oregon Ave/East 'A' Street) 1 LS 140,000.00 158,000.00 206,867.82 206,867.82 226,495.21 226,495.21 218,000.00 218,000.00 50 Traffic Signal, Complete (Oregon Ave/Lewis St) 1 LS 240,000.00 258,000.00 278,972.19 278,972.19 306,457.90 306,457.90 295,000.00 295,000.00 51 Traffic Signal (Oregon Ave/Broadway St) 1 LS 30,000.00 48,000.00 57,840.08 57,840.08 61,072.31 61,072.31 59,000.00 59,000.00 52 Traffic Signal, Complete (Oregon Ave/Salt Lake St) 1 LS 160,000.00 178,000.00 248,775.14 248,775.14 272,948.90 272,948.90 263,000.00 263,000.00 53 Traffic Signal (Oregon Ave/Idaho St) 1 LS 45,000.00 63,000.00 69,669.24 69,669.24 74,198.88 74,198.88 71,000.00 71,000.00 54 Traffic Signal, Complete (Oregon Ave/Fire Station 81) 1 LS 100000.00 100000.00 119076.64 119076.64 129025.21 129025.21 125000.00 125000.00 55 ITS (Interconnect Conduit) 1 LS 200,000.00 218,000.00 125,824.46 125,824.46 139,624.72 139,624.72 135,000.00 135,000.00 56 Project Temporary Traffic Control 1 LS 85,000.00 85,000.00 211,125.19 211,125.19 324,809.16 324,809.16 400,000.00 400,000.00 57 Roadway Surveying 1 LS 50,000.00 50,000.00 53,276.07 53,276.07 16,490.66 16,490.66 16,000.00 16,000.00 58 Cement Conc. Sidewalk 8200 SY 35.00 287,000.00 54.89 450,098.00 46.49 381,218.00 59.60 488,720.00 59 Cement Conc. Curb Ramp Type Single Direction C 24 EACH 3,000.00 72,000.00 2,038.70 48,928.80 1,707.03 40,968.72 2,500.00 60,000.00 60 Cement Conc. Curb Ramp Type Single Direction B 2 EACH 3,000.00 6,000.00 2,044.87 4,089.74 1,484.96 2,969.92 2,500.00 5,000.00 61 Cement Conc. Curb Ramp Type Parallel A 25 EACH 3,000.00 75,000.00 2,037.84 50,946.00 1,264.50 31,612.50 2,500.00 62,500.00 62 Cement Conc. Curb Ramp Type Perpendicular A 4 EACH 3,000.00 12,000.00 2,044.82 8,179.28 1,468.41 5,873.64 2,500.00 10,000.00 63 Cement Conc. Curb Ramp 4 EACH 3,000.00 12,000.00 2,044.82 8,179.28 2,166.08 8,664.32 2,500.00 10,000.00 64 Cement Conc. Driveway Entrance 4589 SY 70.00 321,230.00 77.24 354,454.36 54.01 247,851.89 74.60 342,339.40 65 Cement Conc. Driveway Entrance Type 4 132 SY 70.00 9,240.00 86.90 11,470.80 55.50 7,326.00 83.50 11,022.00 Page 112 of 140 FILE: BID DATE: OCTOBER 25, 2017 Oregon Ave (SR397) Bid Summary.pub SHEET of 4 6 Contract No.: CP5-ST-3A-12-57 Fed. Aid No.: STPUS-0397(008) Continued from Previous Sheet CITY OF PASCO Oregon Ave (SR 397) Corridor Improvements, Phase 1 Project No. 12002 BID SUMMARY Oregon Ave (SR 397) Improvements, Phase I Selland Construction, Inc. Inland Asphalt Co. Tapani, Inc. Granite Construction Co. PROJECT NUMBER: 12002, CP5-ST-3A-12-57 Wenatchee, WA Richland, WA Battle Ground, WA Pasco, WA Fed. Aid No. : STPUS-0397(008) Item Bid Security Bid Bond Bid Bond Bid Bond Bid Bond No. Description Quantity Unit Unit Price Amount Unit Price Amount Unit Price Amount Unit Price Amount 34 PSIPE Evergreen Trees 9 EACH 200.00 1,800.00 210.00 1,890.00 250.00 2,250.00 200.00 1,800.00 35 PSIPE Shrubs and Groundcover 27800 SF 0.40 11,120.00 0.40 11,120.00 1.00 27,800.00 0.40 11,120.00 36 Seeded lawn Installation 7900 SY 3.15 24,885.00 3.00 23,700.00 3.00 23,700.00 3.00 23,700.00 37 Dual-Faced Cement Conc. Traffic Curb 600 LF 33.00 19,800.00 33.00 19,800.00 55.00 33,000.00 43.00 25,800.00 38 Cement Conc. Type A Curb and Gutter 15710 LF 20.00 314,200.00 25.00 392,750.00 22.00 345,620.00 31.00 487,010.00 39 Extruded Cement Concrete Mow Strip 1200 LF 10.00 12,000.00 7.50 9,000.00 24.00 28,800.00 9.00 10,800.00 40 Cement Conc. Pedestrian Curb 75 LF 24.00 1,800.00 22.00 1,650.00 65.00 4,875.00 36.00 2,700.00 41 10" Cement Conc. Pedestrian Curb 130 LF 48.00 6,240.00 20.00 2,600.00 25.00 3,250.00 41.00 5,330.00 42 Plastic Line 29250 LF 0.80 23,400.00 0.85 24,862.50 2.00 58,500.00 1.88 54,990.00 43 Plastic Wide Lane Line 3950 LF 2.15 8,492.50 2.25 8,887.50 3.00 11,850.00 2.00 7,900.00 44 Plastic Crosswalk Line 4920 SF 8.25 40,590.00 8.75 43,050.00 5.00 24,600.00 9.10 44,772.00 45 Plastic Stop Line 930 LF 12.50 11,625.00 13.00 12,090.00 13.00 12,090.00 10.00 9,300.00 46 Plastic Traffic Arrow 78 EACH 250.00 19,500.00 275.00 21,450.00 175.00 13,650.00 157.00 12,246.00 47 Permanent Signing 1 LS 32,000.00 32,000.00 35,000.00 35,000.00 25,000.00 25,000.00 29,000.00 29,000.00 48 Illumination System, Complete 1 LS 820,000.00 820,000.00 785,000.00 785,000.00 900,000.00 900,000.00 780,000.00 780,000.00 49 Traffic Signal, Complete (Oregon Ave/East 'A' Street) 1 LS 205,000.00 205,000.00 200,000.00 200,000.00 210,000.00 210,000.00 200,000.00 200,000.00 50 Traffic Signal, Complete (Oregon Ave/Lewis St) 1 LS 270,000.00 270,000.00 275,000.00 275,000.00 300,000.00 300,000.00 270,000.00 270,000.00 51 Traffic Signal (Oregon Ave/Broadway St) 1 LS 55,000.00 55,000.00 60,000.00 60,000.00 75,000.00 75,000.00 54,000.00 54,000.00 52 Traffic Signal, Complete (Oregon Ave/Salt Lake St) 1 LS 250,000.00 250,000.00 245,000.00 245,000.00 275,000.00 275,000.00 240,000.00 240,000.00 53 Traffic Signal (Oregon Ave/Idaho St) 1 LS 70,000.00 70,000.00 68,000.00 68,000.00 125,000.00 125,000.00 66,000.00 66,000.00 54 Traffic Signal, Complete (Oregon Ave/Fire Station 81) 1 LS 115000.00 115000.00 120000.00 120000.00 175000.00 175000.00 114000.00 114000.00 55 ITS (Interconnect Conduit) 1 LS 130,000.00 130,000.00 125,000.00 125,000.00 100,000.00 100,000.00 123,000.00 123,000.00 56 Project Temporary Traffic Control 1 LS 330,000.00 330,000.00 835,000.00 835,000.00 275,000.00 275,000.00 500,000.00 500,000.00 57 Roadway Surveying 1 LS 24,000.00 24,000.00 78,000.00 78,000.00 35,000.00 35,000.00 45,000.00 45,000.00 58 Cement Conc. Sidewalk 8200 SY 55.00 451,000.00 41.00 336,200.00 65.00 533,000.00 52.00 426,400.00 59 Cement Conc. Curb Ramp Type Single Direction C 24 EACH 2,900.00 69,600.00 2,150.00 51,600.00 2,800.00 67,200.00 2,500.00 60,000.00 60 Cement Conc. Curb Ramp Type Single Direction B 2 EACH 1,900.00 3,800.00 2,100.00 4,200.00 3,400.00 6,800.00 2,560.00 5,120.00 61 Cement Conc. Curb Ramp Type Parallel A 25 EACH 2,400.00 60,000.00 2,100.00 52,500.00 2,800.00 70,000.00 2,500.00 62,500.00 62 Cement Conc. Curb Ramp Type Perpendicular A 4 EACH 1,500.00 6,000.00 1,950.00 7,800.00 2,800.00 11,200.00 2,500.00 10,000.00 63 Cement Conc. Curb Ramp 4 EACH 2,600.00 10,400.00 1,500.00 6,000.00 3,500.00 14,000.00 3,000.00 12,000.00 64 Cement Conc. Driveway Entrance 4589 SY 52.00 238,628.00 48.00 220,272.00 84.00 385,476.00 114.00 523,146.00 65 Cement Conc. Driveway Entrance Type 4 132 SY 65.00 8,580.00 62.00 8,184.00 90.00 11,880.00 114.00 15,048.00 Page 113 of 140 FILE: BID DATE: OCTOBER 25, 2017 Oregon Ave (SR397) Bid Summary.pub SHEET of 5 6 Contract No.: CP5-ST-3A-12-57 Fed. Aid No.: STPUS-0397(008) Continued from Previous Sheet CITY OF PASCO Oregon Ave (SR 397) Corridor Improvements, Phase 1 Project No. 12002 BID SUMMARY Oregon Ave (SR 397) Improvements, Phase I Engineer's Estimate Culbert Construction, Inc. Total Site Services, LLC Apollo, Inc. PROJECT NUMBER: 12002, CP5-ST-3A-12-57 Pasco, WA Richland, WA Kennewick, WA Fed. Aid No. : STPUS-0397(008) Item Bid Security Bid Bond Bid Bond Bid Bond No. Description Quantity Unit Unit Price Amount Unit Price Amount Unit Price Amount Unit Price Amount 66 Chain Link Fence Type 3 3630 LF 20.00 72,600.00 13.27 48,170.10 12.99 47,153.70 12.50 45,375.00 67 Chain Link Fence Type 5 450 LF 22.00 9,900.00 30.75 13,837.50 46.75 21,037.50 33.00 14,850.00 68 Glare Screen 150 LF 22.00 3,300.00 15.37 2,305.50 17.06 2,559.00 17.00 2,550.00 69 Cast-In-Place Gravity Wall 1275 SF 50.00 63,750.00 95.59 121,877.25 41.44 52,836.00 53.00 67,575.00 70 Modular Block Wall 30 SF 100.00 3,000.00 68.06 2,041.80 17.06 511.80 48.00 1,440.00 71 Mailbox Support Type 1 22 EACH 600.00 13,200.00 476.57 10,484.54 528.84 11,634.48 350.00 7,700.00 72 SPCC Plan 1 LS 2,000.00 2,000.00 231.19 231.19 636.88 636.88 1,000.00 1,000.00 73 Record Drawings 1 LS 25,000.00 25,000.00 462.38 462.38 4,549.14 4,549.14 4,400.00 4,400.00 Total: 6,607,066.00 6,622,707.52 6,968,068.59 7,220,930.90 Page 114 of 140 FILE: BID DATE: OCTOBER 25, 2017 Oregon Ave (SR397) Bid Summary.pub SHEET of 6 6 Contract No.: CP5-ST-3A-12-57 Fed. Aid No.: STPUS-0397(008) Continued from Previous Sheet CITY OF PASCO Oregon Ave (SR 397) Corridor Improvements, Phase 1 Project No. 12002 BID SUMMARY Oregon Ave (SR 397) Improvements, Phase I Selland Construction, Inc. Inland Asphalt Co. Tapani, Inc. Granite Construction Co. PROJECT NUMBER: 12002, CP5-ST-3A-12-57 Wenatchee, WA Richland, WA Battle Ground, WA Pasco, WA Fed. Aid No. : STPUS-0397(008) Item Bid Security Bid Bond Bid Bond Bid Bond Bid Bond No. Description Quantity Unit Unit Price Amount Unit Price Amount Unit Price Amount Unit Price Amount 66 Chain Link Fence Type 3 3630 LF 15.00 54,450.00 60.00 217,800.00 15.00 54,450.00 13.00 47,190.00 67 Chain Link Fence Type 5 450 LF 35.00 15,750.00 71.50 32,175.00 35.00 15,750.00 33.00 14,850.00 68 Glare Screen 150 LF 15.00 2,250.00 70.00 10,500.00 18.00 2,700.00 17.00 2,550.00 69 Cast-In-Place Gravity Wall 1275 SF 40.00 51,000.00 40.00 51,000.00 95.00 121,125.00 28.00 35,700.00 70 Modular Block Wall 30 SF 45.00 1,350.00 22.00 660.00 100.00 3,000.00 20.00 600.00 71 Mailbox Support Type 1 22 EACH 475.00 10,450.00 500.00 11,000.00 500.00 11,000.00 410.00 9,020.00 72 SPCC Plan 1 LS 1,000.00 1,000.00 1,750.00 1,750.00 500.00 500.00 500.00 500.00 73 Record Drawings 1 LS 500.00 500.00 10,000.00 10,000.00 2,000.00 2,000.00 500.00 500.00 Total: 7,377,377.00 7,850,002.00 8,153,076.00 10,429,977.00 Page 115 of 140 AGENDA REPORT FOR: City Council November 7, 2017 TO: Dave Zabell, City Manager Rick White, Director Community & Economic Development Workshop Meeting: 11/13/17 FROM: Darcy Bourcier, Planner I Community & Economic Development SUBJECT: Code Amendment: Amending PMC 26.28 to Allow Administrative Approval of Final Plats (MF# CA 2017-007) I. REFERENCE(S): Proposed Ordinance Planning Commission Memo Planning Commission Minutes Dated: 9/21/17 and 10/19/17 II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: Discussion III. FISCAL IMPACT: None IV. HISTORY AND FACTS BRIEF: Earlier this year in July a revision to State law became effective in amending RCW 58.17.100, 58.17.170, and 58.17.190 which addresses the approval of final plats. The bill authorizes the legislative body of a city to delegate final plat approval to a planning commission or other authorized administrative personnel. Currently, the City of Pasco’s review process of the subdivision of land includes preliminary and final plat approval by the City Council. According to the current code, the Planning Commission holds a hearing to review a preliminary plat and ensure that the plat conforms to all planning standards as established in the PMC. The Planning Commission subsequently makes a recommendation to City Council which the Council may adopt or reject. At the time of final plat approval, all issues related to zoning, environmental impact, and building have been resolved. Page 116 of 140 On September 21, 2017 the Planning Commission held a workshop to consider amending PMC 26.28 to allow administrative approval of final plats as specified in the attached proposed Code Amendment Ordinance. The Planning Commission then held a hearing on October 19, 2017 to take public input regarding this code amendment and to form a recommendation to City Council. Following the conduct of a public hearing, the Planning Commission reasoned it would be appropriate to recommend an ordinance amending PMC 26.28 (see attached Ordinance). V. DISCUSSION: The City of Pasco’s review process of the subdivision of land includes preliminary and final plat approval by the City Council. However, at the time of final plat approval, all issues related to zoning, environmental impact, and building have been resolved. Staff believes that delegating final plat approval to the Planning Director or City Manager would benefit both the City and applicants who submit subdivision proposals by decreasing the review process by nearly two weeks and eliminating a formality th at has the potential to cause liability. Council discussion of this code amendment is requested. Page 117 of 140 Ordinance – Amending PMC 26.28 - 1 ORDINANCE NO._____ AN ORDINANCE AMENDING PMC CHAPTER 26.28 ALLOWING ADMINISTRATIVE APPROVAL OF FINAL PLATS. WHEREAS, the development and approval of plats within the State of Washington are governed by RCW 58.17; and, WHEREAS, local subdivision regulations including the City of Pasco subdivision regulations within Title 26 of the Pasco Municipal must conform to RCW 58.17; and, WHEREAS, the State Legislature recently amended RCW 58.17 grant cities the option of administratively approving final plat without City Council action; and, WHEREAS, PMC Title 26 currently contains provisions for administrative approval of short plat; and, WHEREAS, to provide for timely approvals of final plats the City Council hereby exercises the option to authorize administrative approvals of final plats as authorized by RCW 58.17.100; NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF PASCO, WASHINGTON, DOES ORDAIN AS FOLLOWS: Section 1. That section 26.28.010 of the Pasco Municipal Code shall be and hereby is amended and shall read as follows: 26.28.010 APPLICATION. (1) Except as provided in subsection (2) below, a final plat meeting all of the requirements of this Chapter shall be submitted to the City Council City Planner for approval within seven (7) years of the date of the preliminary plat approval if the date of the preliminary plat approval is was on or after January 1, 2008 but before December 31, 2014, and within five (5) years of the date of preliminary plat approval, if the date of preliminary plat approval is was on or after January 1, 2015. (2) A final plat meeting all requirements of this Chapter shall be submitted to the City Council City Planner for approval within ten (10) years of the date or preliminary plat approval if the project is within the City limits, not subject to the requirements adopted under Chapter 90.48 RCW (Shoreline Management Plan), and the date of the preliminary plat approval is was on or before December 31, 2007. (3) The proposed final plat shall be submitted for recording purposes, together with such supplementary information, certificates and bonds as may be required, to the City Planner at least fifteen (15) days before the City Council meeting at which approval is sought. (4) A complete application shall consist of the original signed, dated and stamped mylar drawing of the subdivision with ten copies, a title certificate, applicable Page 118 of 140 Ordinance – Amending PMC 26.28 - 2 instrument identified in 26.28.050 to cover the cost of outstanding improvements, and digital copy of the final plat in a format specified by the City Engineer. (3) A complete application for final plat approval shall consist of ten full sized, four 11x17 paper copies and an electronic copy of the plat. The paper copies together with such supplementary information and certificates which may be required shall be submitted to the City Planner at least twenty days prior to the date sought for final plat approval. Following written notification of corrections or modifications necessary for the final plat, if any, the applicant shall submit a signed, dated and stamped mylar drawing of the subdivision with an updated electronic copy and the applicable bonding instrument as identified in 26.28.050. A bond will only be needed if there are outstanding improvements to complete. Section 2. That section 26.28.030 (14) of the Pasco Municipal Code shall be and hereby is amended and shall read as follows: (14) Spaces for certificates or approvals of the following officials or agencies: a) Mayor City Manager or Designee b) Chairman, City Planning Commission. City Planner c) City Engineer d) County Engineer (where applicable) e) Franklin County P.U.D. or applicable utility provider f) Franklin County Irrigation District #1 (where applicable) g) Benton Franklin Health District (where applicable) h) County Assessor i) County Treasurer j) County Auditor Section 3. That section 26.28.060 of the Pasco Municipal Code shall be and hereby is amended and shall read as follows: 26.28.060 CITY COUNCIL ADMINISTRATIVE APPROVAL. The final approval of a plat is an administrative function not requiring action by the City Council. City Council shall have sole authority to approve final plats. Such approval shall occur by majority affirmative vote of the City Council during a regular City Council meeting. A final plat shall only be approved if the City Council administrative review process finds the subdivision proposed for final plat approval conforms to all terms of the preliminary plat approval, and the said subdivision meets the requirements of Chapter 58.17 RCW, other applicable state laws and this title which requirements were in effect on the date of submission of a fully completed preliminary plat application. Section 4. That section 26.28.070 of the Pasco Municipal Code shall be and hereby is amended and shall read as follows: Page 119 of 140 Ordinance – Amending PMC 26.28 - 3 26.28.070 TERMS OF APPROVAL. (1) A subdivision shall be governed by the terms of approval of the final plat, and the statutes, zoning ordinances and regulations in effect on the date of preliminary plat approval for a period of seven (7) years after final plat approval if the date of the final plat approval is on or before December 31, 2014; and for a period of five (5) years after the final plat approval if the date of final plat approval is on or after January 1, 2015, unless the City Council finds through the administrative approval process it is found that a change in conditions creates a serious threat to the public health or safety in the subdivision. If a serious threat to public health and safety is found the plat must be reviewed by the City Council. (2) A subdivision shall be governed by the terms of approval of the final plat, and the statutes, zoning ordinances and regulations in effect at the time of approval of the preliminary plat for a period of ten (10) years after final plat approval if the project is located within the City limits, not subject to the requirements adopted under Chapter 90.58 RCW (Shoreline Management Plan), and the date of the final plat approval is on before December 31, 2007, unless the City Council finds through the administrative approval process it is found that a change in conditions creates a serious threat to the public health or safety in the subdivision. If a serious threat to public health and safety is found the plat must be reviewed by the City Council. Section 5. This ordinance shall be in full force and effect five days after passage and publication as required by law. PASSED by the City Council of the City of Pasco, Washington, and approved as provided by law this ____ day of _________________, 2017. ______________________________ Matt Watkins Mayor ATTEST: APPROVED AS TO FORM: _____________________________ ____________________________ Daniela Erickson Leland B. Kerr City Clerk City Attorney Page 120 of 140 1 M E M O R A N D U M DATE: October 19, 2017 TO: Planning Commission FROM: Darcy Bourcier, Planner I SUBJECT: Ordinance Amending PMC Chapter 26.28 Allowing Administrative Approval of Final Plats (MF# CA2017-007) Earlier this year in July the Senate passed a bill amending RCW 58.17.100, 58.17.170, and 58.17.190 which addresses the approval of final plats. The bill authorizes the legislative body of a city to delegate final plat approval to a planning commission or other authorized administrative personnel. Currently, the City of Pasco’s review process of the subdivision of land includes preliminary and final plat approval by the City Council. According to the current code, the Planning Commission holds a hearing to review a preliminary plat and ensure that the plat conforms to all planning standards as established in the PMC. The Planning Commission subsequently makes a recommendation to City Council which the Council may adopt or reject. At the time of final plat approval, all issues related to zoning, environmental impact, and building have been resolved. Thus, staff believes that delegating final plat approval to the Planning Director or City Manager would benefit both the City and applicants who submit subdivision proposals by decreasing the review process by nearly two weeks and eliminating a formality that has the potential to cause liability. Staff has scheduled a public hearing for the Planning Commission meeting of October 19, 2017. Page 121 of 140 PLANNING COMMISSION MINUTES 9/21/17 WORKSHOP: A. Code Amendment Ordinance Amending PMC Chapter 26.28 Allowing Administrative Approval of Final Plats (MF# CA 2017-007) Chairwoman Roach read the master file number and asked for comments from staff. Rick White, Community & Economic Development Director, discussed the ordinance amending PMC Chapter 26.28, allowing administrative approval of final plats. Currently, preliminary plats come to the Planning Commission for public hearing, then come back for deliberations and are then sent on to City Council for a recommendation to approve or deny a preliminary plat with a number of conditions. The applicant will have 5 years to fulfill those conditions based on the preliminary plat approval. When it is complete, and they are often done in phases, the phases go to City Council for approval. It is a pro-forma approval because at that stage everything is complete. The improvements are constructed, conditions complied with and if the improvements aren’t constructed, a bond is posted in case the developer walks from the project the City can complete the public improvements, such as a road or park. Up until July of 2017, State Law requires that final plat process to go through City Council for approval but that has been changed to allow administrative approval of the final plat. Staff has developed an ordinance that appears to change a lot in our existing subdivision code but it actually changes very little. It clarifies some items and allows administrative approval instead of City Council approval. The process the Planning Commission is involved with won’t change at all and the City Council will still be hearing the Commission’s recommendations on preliminary plats just as they do now. But in 5 years from now when the plat is completed, City Council won’t be involved should this code amendment be processed and approved. Chairwoman Roach asked if this ordinance would take 5 years to be put into effect. Mr. White replied that if it is approved it will go into effect when it is adopted by City Council but it is an amendment to the subdivision code. The Planning Commission should weigh in on what Council should do. Chairwoman Roach said she would support the process to move more expediently as there has been such requests from the public and applicants. This may help move things along. Mr. White added that once the preliminary plat is approved by Council they may not see plat again and neither does the Planning Commission. When it does come back to Council for final approval it’s on the consent agenda, it’s not even a hearing or discussed. It would save 2-4 weeks of time at the end of the process when everything is complete and the developer just needs approval which is what the state law was Page 122 of 140 getting at. Commissioner Portugal added that there needs to be a balance between expedience and the process to make sure nothing backfires. While he understands there are deadlines, he does want us to use caution to ensure the well-being of the residents. Commissioner Greenaway said she agreed with Commissioner Portugal but the problem is 5 years down the road when the project is complete that step in the process should be quick. Commissioner Bykonen reminded the Commission that once the plat is ready for final approval by Council, it is put on the consent agenda and Council doesn’t even discuss it and that has been her experience regardless of the jurisdiction. Commissioner Alvarado asked if staff saw any drawbacks to the ordinance amending the PMC. Mr. White said no. Commissioner Portugal discussed the process of cell towers and how it is decided for the companies to disguise them, such as the pine tree cell tower on Road 68 and Court Street or not disguise them as some other towers in the community. He asked if it was possible to have a requirement for cell towers or to make older cell towers to look more aesthetic. Mr. White responded that as Commissioner Cruz once pointed out, that sometimes it is site specific and a tower disguised as a tree may look good in one location but out of place and worse in another location. At the same meeting where the cell tower disguised as a pine tree was approved there was also a cell tower approved disguised as a church steeple on top of a church. It is more of a location basis but the Planning Commission weighs in on the decision. Commissioner Alvarado asked if the item they were discussing the ordinance amendment was for development of plats. Mr. White replied yes and with the code amendment the Planning Commission typically looks at it first at a workshop and then staff takes direction and makes any necessary changes based on feedback and then schedule a hearing to come back to the Planning Commission with a draft ordinance for a recommendation. There were no further questions or comments. Page 123 of 140 PLANNING COMMISSION MINUTES 10/19/17 PUBLIC HEARINGS: G. Code Amendment Ordinance Amending PMC Chapter 26.28 Allowing Administrative Approval of Final Plats (MF# CA 2017-007) Chairman Cruz read the master file number and asked for comments from staff. Rick White, Community & Economic Development Director, discussed the proposed code amendment to PMC Chapter 26.28 which would allow administrative approval of final plats. Mr. White explained that State law changed this past legislative session to allow cities to delegate the authority to approve final plats to an administrative staff. It was discussed at the September 21, 2017 Planning Commission meeting that when an item finally proceeds to City Council for final plat approval, everything has been fulfilled beforehand—the conditions have been developed, approved, and recorded. The implementation of the approval is completed through the final plat process; a final plat does not proceed to Council until it is done. Mr. White pointed out that staff sees it as not only a way to decrease liability on behalf of the City, but also a way to increase efficiency. This code amendment, he said, will eliminate a two to three week process of getting a final plat to City Council for approval. Mr. White proposed the Commission conduct the public hearing and recommend approval to City Council. Chairman Cruz asked for discussion, comments, or questions from the Commission members. There were none. Chairman Cruz opened the item for public hearing. There were no comments from the audience, so Chairman Cruz closed the public hearing. Commissioner Portugal moved, seconded by Commissioner Mendez, to close the public hearing and recommend the City Council amend PMC 26.28 to allow administrative approval of final plats. The motion passed unanimously. Page 124 of 140 AGENDA REPORT FOR: City Council November 6, 2017 TO: Dave Zabell, City Manager Workshop Meeting: 11/13/17 FROM: Stan Strebel, Deputy City Manager Executive SUBJECT: Property Purchase I. REFERENCE(S): Vicinity Map Real Estate Purchase and Sale Agreement II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: Discussion III. FISCAL IMPACT: Purchase Price $893,920 (REET 1, Park Development) IV. HISTORY AND FACTS BRIEF: Previously the City entered into an agreement to purchase property (20.32 acres) from the Pasco School District located north of Court Street and between Roads 48-52. While most of the property is currently undeveloped, a portion of the property has been used for playfields for several years. Staff considers the property suitable for the eventual relocation of Fire Station 84 and for development as a community park pursuant to the Park Master Plan. V. DISCUSSION: The City has reviewed the property for possible environmental and/or title encumbrances and has identified none. As such, staff recommends the Council approve the purchase in the total amount of $883,920 (REET1, Park Development fund) and, further, authorize the City Manager to complete the purchase. Page 125 of 140 COURT PEARL ROAD 48ROAD 52PEARL VICINITY MAPPROPOSED PAR K and FIRE STATION 84 Page 126 of 140 • TIPP~JJ --a;-..; ... w~;..-c..;· Tippett Company LLC 2815 Saint Andrews Lp I PO Box 3027, Suite F Pasco, WA 99302 Phone: (509) 545-3355 Fax: (509) 545-1689 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT c Commercial Brokers ~ Associallon 201 1 All RIGHTS RESERVED CBA Form PS-1A P11cllase & Sale Agaoment Rev. 11201 1 Page t of 13 This has btum prepared for submission to your attorney for review and approval prior to signing. No representation Is mads by licensee as tofts s uff'teiency or tax consequences Reference Date: September 22, 2017 City of Pasco. a Washington Municipal Corporation ("Buyer") agrees to buy and Pasco School District No_. 1 ("Seller") a gree's to sell , on the following terms, the commercial real estate and all improvements thereon (collectively, the "Property") commonly known as Franklin County Tax Parcel Nos. 119·1 1 1-050. 119·111-069 and 119-112-031. consisting of±/-20.32 acres in the City of Pasco, Franklin County, Washington, legally desc.ribed on attached Exhib it A. The Reference Date above is intended to be used to reference this Agreement and is not the date of "Mutual Acceptance," which is defined in Section 23. 1. PURCHASE PRICE. The purchase price is Eight Hundred Eighty Three Thousand Nine Hundred Twenty Dollars ($883.920.00) payable as follows (check only one): 1:8:1 All cash at closing with no financing contingency. 0 All cash at closing contingent on new financing in accordance w ith the Financing Addendum (attach CBA Form PS_FIN). D $ __ OR __ % of the purchase price in cash at closing with the balance of the purchase price paid as follows (check one or both, as applicable): D Buyer's assumption of the outstanding principal balance as of the Closing Date of a first lien note and deed of trust (or mortgage), or real estate contract, in accordance w ith the Financing Addendum (attach CBA Form PS_FIN); 0 Buyer's delivery at closing of a promissory note for the balance of the purchase price, secured by a deed of trust encumbering the Property, in accordance with the Financing Addendum (attach CBA Form PS_FIN ). D Other: __ . 2. EARNEST MONEY. The earnest money in the amount of $40.000.00 shall be in the form of D Cash 1:8:1 Personal check D Promissory note (attached CBA Form EMN) D Other: __ The earnest money shall be held by 0 Selling Firm 181 Closing Agent. Selling Broker may, however, transfer the earnest money to Closing Agent. Buyer shall deliver the earnest money no later than: 1:8:1 five (5) days after Mutual Acceptance. D On the last day of the Feasibility Period defined in Section 5 below. D Other: If the earnest money is to be held by Selling Firm and is over $10,000, it shall be deposited to: D Selling Firm 's pooled trust account (with interest paid to the State Treasurer) D A separate interest bearing trust account in Selling Firm's name. The interest, if any, shall be credited at closing to Buyer. If this sale fails to close, whoever is entitled to the earnest money is entitled to interest. Selling Rrm shall deposit any check to be held by Selling Rrm within 3 days after rece ipt or Mutual Acceptance, whichever occurs later. Buyer agrees to pay financing and purchase costs incurred by Buyer. Unless otherwise provided in this Agreement, the earnest money shall be applicable to the purchase price. 3 . EXHIBITS AND ADDENDA. The following Exhibits and Addenda are made a part of th is Agreement: 1:8:1 Exhibit A~ Legal Description INITIALS : Buyer a~ Date qJ~/11 7 Seller r;zjwot~~ Buyer -------Date ________ .Seller _____ ...:;v;___Date -------- Page 127 of 140 TIPP~I.T ··:~~'!·::~~-~~~- Tippett Company LLC 2815 Sa int Andrews Lp I PO Box 3027, Suite F Pasco, WA 99302 Phone: (509) 545 -3355 Fax: (509) 545-1689 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT (CONTINUED) 0 Earnest Money Promissory Note, CBA Form EMN 0 Promissory Note, LPB Form No. 28A 0 Short Form Deed of Trust, LPB Form No. 20 0 Deed ofTrust Rider, CBA Form DTR 0 Utility Charges Addendum, CBA Form UA 0 FIRPTA Certification, CBA Form 22E 0 Assignment and Assumption, CBA Form PS-AS [8J Addendum/Amendment, CBA Form PSA 0 Back-Up Addendum, CBA Form BU-A 0 Vacant Land Addendum, CBA Form VLA 0 Financing Addendum, CBA Form PS_FIN 0 Tenant Estoppel Certificate, CBA Form PS_TEC 0 Defeasance Addendum, CBA Form PS_D 0 Other Cl Commercial Broken! CD(" Association 201 1 All RIGHTS RES ERVED CBA Foon PS-1A Pl.n:h .. e & Sale Agreement Rev. 112011 Page2of 13 4. SELLER'S UNDERLYING FINANCING. Unless Buyer is assuming Seller's underlying financing , Seller shall be responsible for confirming the existing underlying financing is not subject to any "lock out• or simi lar covenant which would prevent the lender's lien from being released at closing. In addition, Seller shall provide Buyer notice prior to the end of the Feasibility Period if Seller is required to substitute securities for the Property as collateral for the underlying financing (known as "defeasance"}. If Seller provides this notice of defeasance to Buyer, then the parties shall close the transaction in accordance with the process described in CBA Form PS_D or any different process identified in Seller's defeasance notice to Buyer. · 5 . FEASI BILITY CONTINGENCY. Buyer's obligations under this Agreement are conditioned upon Buyer's satisfaction in Buyer's sole discretion, concerning all aspects of the Property, including its physical condition ; the presence of or absence of any hazardous substances ; the contracts and leases affecting the property; the potential financial performance of the Property; the availability of government permits and approvals; and the f easibility of the Property for Buyer's intended purpose. This Agreement shall terminate and Buyer shall receive a refund of the earnest money unless Buyer gives written notice to Seller within 60 days (30 days if not filled in} (the "Feas ibility Period") of Mutual Acceptance stating that this condition is satisfied . If such notice is timely given , the feas ibi lity contingency stated in this Section 5 shall be deemed to be satisfied. a. Books, Records, Leases, Agreements. Seller shall make available for inspection by Buyer and its agents w ithin __ days (2 days if not f illed in} after Mutual Acceptance all documents in Seller's possession or control relating to the ownership, operation, renovation or development of the Property, excluding appraisals or othe r statements of value , and including: statements for real estate taxes , assessments, and utilities for the last three years and year to date; property management agreements and any other agreements with professionals or consultants ; leases or other agreements re lating to occupancy of all or a portion of the Property and a su ite-by- suite schedule of tenants , rents, prepaid rents, deposits and fees; plans, spec ifications , permits, applications , drawings, surveys, and studies; maintenance records, acco unting records and audit reports for the last three years and year to date; and "Vendor Contracts" which shall include maintenance or service contracts , and installments purchase contracts o r leases of personal property or fixtures used in connection with the Property. Buyer shall determine within the Feas ibility Period: (i} whether Seller will agree to terminate any objectionable Vendor Contr acts; and (ii) whether Seller will agree to pay any damages or penalties resulting from the termination of objectionable Vendor Contracts. Buyer's waiver of the Feasibility Contingency shall be deemed Buyer's acceptance of all Vendor Contracts which Seller has not agreed in w rit ing to terminate. Buyer shall be solely responsible for obtain ing any required consents to such assumption and the payment of any assumption fees . Selle r shall cooperate w ith Buyer's efforts to receive any such consents but shall not be required to incur IN ITIALS: Buyer ~ o:::: Date q / ,;J.(p /I 7 .. :. · . 'Se iJer .. ·. 9-~/l--Date "i /i 1/ l ( Buyer _______ Date ________ Seller _______ Date ----- Page 128 of 140 • TIPPETT ........ L..it:;;A.~~~·.:, Tippett Company LLC 2815 Saint Andrews Lp I PO Box 3027, Suite F Pasco, WA 99302 Phone: (509) 545-3355 Fax: (509) 545-1689 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT (CONTINUED) ~ Commercial Bro kers CB(' Association 2011 ALL RIGHTS RESERVED CBA FotrnPS-1A PUfChase & Sale Agre~ment Rev. 1/2011 Page 3 of 13 any out-of-pocket expenses or liability in doing so. Seller shall transfer the Vendor Con tracts as provided in Section 17. b. Access. Seller shall permit Buyer and its agents , at Buyer's sole expense and risk to enter the Property at reasonable times subject to the rights of and after legal notice to tenants, to conduct inspections concerning the Property and improvements, including without limitation, the structural condition of improvements, hazardous materials, pest infestation, soils conditions, sensitive areas, wetlands, or other matters affecting the feasibility of the Property for Buyer's intended use. Buyer shall schedule any entry onto the Property with Seller in advance and shall comply with Seller's reasonable requirements including those relating to security, confidentiality, and disruption of Seller's tenants. Buyer shall not perform any invasive testing including environmental inspection$ beyond a phase I assessment or contact the tenants or property management personnel without obtaining the Seller's prior written consent, which shall not be unreasonably withheld . Buyer shall restore the Property and improvements to the same condition they were in prior to inspection. Buyer shall be solely responsible for all costs of its inspections and feasibility analysis and has no autho ri ty to bind the Property for purposes of statutory liens. Buyer agrees to indemnify and defend Seller from all liens, costs, claims, and expenses, including attorneys' and experts' fees, arising from or relating to entry onto or inspection of the Property by Buyer and its agents. This agreement to indemnify and defend Seller shall survive closing. Buyer may continue to enter the Property in accordance with the foregoing terms and conditions after removal or satisfaction of the feasibil ity contingency only for the purpose of teasing or to satisfy conditions of financing. c. Buyer waives the right to receive a seller disclosure statement ("Form 17 -Commercial") if required by RCW 64.06. However, if Seller would otherwise be required to provide Buyer with a Form 17-Commerciat, and if the answer to any of the questions in the section of the Form 17-Commercial entitled "Environmental" would be "yes," then Buyer does not waive the receipt of the "Environmental" section of the Form 17-Commercial which shall be provided by Seller. 6. TITLE INSURANCE. a. Title Report. Seller authorizes Buyer, its Lender, Usting Broker, Selling Broker or Closing Agent, at Seller's expense, to apply for and deliver to Buyer a ~ standard 0 extended (standard, if not completed) coverage owner's pol icy of title insurance. Buyer shall pay the increased costs associated with an extended policy including the excess premium over that charged for a standard coverage policy, and the cost of any survey requ ired by the title insurer. The title report shall be issued by Chicaao Title Insurance Company (a title company of Seller's choice, if not completed}. If Seller previously received a prel iminary comm itment from a t itle insurer that Buyer declines to use, Buyer shall pay any cancellation fee owing to the original title insurer. Otherwise, the party applying for title insurance shall pay any title cancellation fee, in the event such a fee is assessed. b. Permitted Exceptions. Buyer shall notify Seller of any objectionable matters in the t itle report or any supplemental report within the earlier of: (1} twenty (20) days after Mutual Acceptance of this Agreement; or (2) the expiration of the Feasibility Period . This Agreement shall terminate and Buyer shall receive a refund of the earnest money, less any costs advanced or committed for Buyer, unless within five (5) days of Buyer's notice of such objections (1} Seller agrees, in writing, to remove all objectionable provisions or (2} Buyer notifies Seller that Buyer waives any objections which Seller does not agree to remove. If any new title matters are disclosed in a supplemental title report, then the preceding termination, objection and waiver provisions shall apply to the new title matters except that Buyer's notice· of objections must be delivered within five (5} days of delivery of the supplemental report and Seller's response or Buyer's waiver must be delivered within two (2) days of Buyer's notice of objections. The closing date shall be extended to the extent necessary to permit time for these notice s. Buyer shall not be required to o bject to any mortgage or deed of trust liens, or the statutory lien for real property taxes, and the same shall not be deemed to be Permitted Exceptions ; provided, however, that the lien securing any financing which Buyer has agreed to assume shall be a Permitted Exception. Except for the fo rego ing, those INITIALS: Buyer ~J-Moate q /;;)..&>(t] SeHer ;J..fL.. Date ~ /-z.1/t-:t Buyer Date Seller Date ----- Page 129 of 140 Tippett Company LLC 2815 Saint Andrews Lp I PO Box 3027, Suite F Pasco, WA 99302 Phone: (509) 545-3355 Fax: (509) 545-1689 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT (CONTINUED) C) COIIVT>ercl al Brokers CD(' Assodtl101'1 2011 ALL RIGHTS RESERVED CBA Fonn PS-1A Purchase & Sale Agreement Rev.1/2011 Page 4of 13 provisions not objected to or for which Buyer waived its objections shall be referred to collectively as the "Permitted Exceptions." Seller shall cooperate with Buyer and the title company to clear objectionable title matters but shall not be required to incur any out-of-pocket expenses or liability other than payment of monetary encumbrances not assumed by Buyer and proration of real property taxes, and Seller shall provide an owner's affidavit containing the information and reasonable covenants requested by the title company. The title policy shall contain no exceptions other than the General Exclusions and Exceptions common to such form of policy and the Permitted Exceptions. · 7. CLOSING OF SALE. The sale shall be closed ~no later than 30 days from the date the Feasibility Contingency is satisfied, ("Closing") by Bonnie Thompson -Chicago Title Insurance Company ("Closing Agenr) (Seller shall select the Closing Agent, if not completed). Buyer and Seller shall deposit with Closing Agent by 12:00 p .m. on the scheduled Closing date all instruments and monies required to complete the purchase in accordance with this Agreement. "Closing" shall be deemed to have occurred when the deed is recorded and the sale proceeds are available to Seller. Time is of the essence in the performance of this Agreement. Sale proceeds shall be considered available to Seller, even though they cannot be disbursed to Seller until the nex1 business day after Closing . Notwithstanding the foregoing, if Seller informed Buyer during the Feasibility Period that Seller's underlying financing requires that it be defeased and may not be paid off, then Closing shall be conducted in accordance with the three-day closing process described in CBA Form PS_D. This Agreement is intended to constitute escrow instructions to Closing Agent. Buyer and Seller will provide any supplemental instructions requested by Closing Agent provided the same are consistent with th is Agreement. 8. CLOSING COSTS AND PRORATIONS. Seller shall deliver an updated rent roll to Closing Agent not later than two (2) days before the scheduled Closing date in the form required by Section 5(a) and any other information reasonably requested by Closing Agent to allow Closing Agent to prepare a settlement statement for Closing. Seller certifies that the information contained in the rent roll is correct as of the date submitted. Seller shall pay the premium for the owner's standard coverage title policy. Buyer shall pay the excess premium attribu1able to any extended coverage or endorsements requested by Buyer, and the cost of any survey required in connection with the same. Seller and Buyer shall each pay one-half of the escrow fees . Any real estate excise taxes shall be paid by the party who bears primary responsibility for payment under the applicable statute or code. Real and personal property taxes and assessments payable in the year of closing ; collected rents on any existing tenancies; interest; utilities; and other operating expenses shall be pro-rated as of Closing . If tenants pay any of the foregoing expenses directly, then Closing Agent shall only pro rate those expenses paid by Seller. Buyer shall pay to Seller at Closing an additional sum equal to any utility deposits or mortgage reserves for assumed financing for which Buyer receives the benefit after Closing. Buyer shall pay all costs of financing including the premium for the lender's title policy. If the Property was taxed under a deferred classification prior to Closing, then Seller shall pay all taxes, interest, penalties, deferred taxes or similar items which result from removal of the Property from the deferred classification. At Closing, all refundable deposits on tenancies shall be credited to Buyer or delivered to Buyer for deposit in a trust account if required by state or local law. Buyer shall pay any sales or use tax applicable to the transfer of personal property included in the sale. a. Unpaid Utility Charges. Buyer and Seller D WAIVE [81 DO NOT WAIVE (do not waive if neither box checked) the right to have the Closing Agent disburse closing funds necessary to satisfy unpaid utility charges affect ing the Property pursuant to RCW 60.80. If "do not waive" is checked, then attach CBA Form UA ("Utility Charges" Addendum) to this Agreement. 9. POST-CLOSING ADJUSTMENTS, COLLECTIONS, AND PAYMENTS. After Closing, Buyer and Seller shall reconcile the actual amount of revenues or liabilities upon receipt or payment thereof to the ex1ent those items were prorated or credited at Closing based upon estimates. Any bills or invoices received by Buyer after Closing which relate to services rendered or goods delivered to the Seller or the Property prior to Closing shall be paid by INITIALS: Buyer ~ Date _<q__,/_~ __ ·1_1_1 '-----'Seller _--=..fiL-...;__ ____ Date Buyer _______ Date _______ __:Seller _______ oate ----- Page 130 of 140 Tippett Company LLC 2815 Saint And rews Lp I PO Box 3027, Su ite F Pasco , WA 99302 Phone: (509) 545 -3355 Fax : (509) 545-1689 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT (CONTINUED) e Cornmo rciai Biokers ~ Assoc•aUon 201 1 Al l R IG HTS R ESERVED CBA F onn PS -1A Purchase & Sal e Agroe.ment Rev. 11201 1 Page 5 of 13 Seller upon presentation of such bill or invoice. At Buyer's option, Buyer may pay such bill or invoice and be reimbursed the amount paid plus interest at the rate of 12o/o per annum beginning fifteen (15) days f rom the date of Buyer's written demand to Seller for reimbursement until such reimbursement is made . Notwithstanding the foregoing, if tenants pay certain expenses based on est imates subject to a post-closing reconciliation to the actual amount of those e xpenses, then Buyer shall be entitled to any surplus and shall be liable for any credit result ing from the reconciliation. Rents collected from each tenant after Closing shall be applied first to rentals due most recently from such tenant for the period after closing , and the balance shall be applied for the benefit of Seller for delinquent rentals owed for a period prior to closing. The amounts applied for the benefit of Seller shall be turned over by Buyer to Seller promptly after receipt. Seller shall be entitled to pursue any lawful methods of collec tion of delinquent rents but shall have no right to evict tenants after Clos ing. 10. OPERATIONS PRIOR TO CLOSING. Prior to Closing, Seller shall continue to operate the Property in the ordinary course of its business and maintain the Property in the same or better condition than as existing on the date of Mutual Acceptance but shall not be required to repair material damage from casualty except as otherwise provided in th is Agreement. After the Feasibility Period , Seller shall not enter into or modify e xi sting rental agreements or leases (except that Seller may enter into, modify, extend, renew or terminate residential rental agreements or residential leases in the ordinary course of its business), service contracts, or other agreements affecting the Property which have terms extending beyond Closing without first obta ining Buye r's consent, which shall not be unreasonably withheld. 11. POSSESSION. Buyer shall be entitled to possession~ on closing D __ (on clos ing , if not completed). Buyer shall accept possession subject to all tenancies d isclosed to Buyer during the Feasibility Period . 12. SELLER'S REPRESENTATIONS. Except as disclosed to or known by Buyer prior to the satisfaction or waiver of the feasibil ity contingency stated in Section 5 above, including in the book s, records and documents made available to Buyer, or in the title report or any supplemental report or documents referenced therein , Seller represents to Buyer that, to the best of Seller's actual knowledge, each of the following is true as of th e date hereof: (a) Seller is authorized to enter into the Agreement, to sell the Property, and to perform its o bligation s under the Agreement; (b) Th e books, record s, leases, agreements and other items delivered to Buyer pursuant to this Agreement comprise all material documents in Seller's possession or control regarding the operation and condition of the Property; (c) Seller has not received any written notices that the Property or the bu sin e ss conducted thereon violate any applicable laws, regulations , codes and ordinances; (d) Seller has all certifi cates of occupancy, permits , and other governmental consents necessary to own and operate the Property for it s current use; (e) There is no pending or threatened litigation which would adversely affect the Property or Buye r's ownership thereof after Closing ; (f) There is no pending or threatened condemnation or similar proceedings affecting the Property, and the Property is not within the boundaries of any planned or authorized local improvement district; (g) Seller has paid (except to the extent prorated at Closing) all local, state and federa l taxes (other than real and personal property taxes and assessments described in Section 8 above) attributable to the period prior to closing which , if not paid, could constitute a lien on Property (includ ing any personal property), or for which Buyer may be held liable after Closing ; (h) Seller is not aware of any concealed material defects in th e Property except as disclosed to Buyer in writing during the Feasib ility Period; (i) The re are no Ha zardou s Substances (as defined below) currently located in, on, or under the Property in a manner or quantity that presently violates any Environmental Law (as defined below); there are no underground storage tanks loc ated on the Property; and there is no pending or threatened investigation or remedial action by any governmental agen cy regarding the release of Hazardous Substances or the vio lation of Environmental Law at the Property . As used herein, the term "Hazardous Substances" shall mean any substance or material now or hereafter defin ed or regulated as a hazardous substance, hazardous waste , toxic substan ce , pollutant, or contaminant und er any federal , state, or local law, regulation, or ordinance governing any substance that could cause actual or susp ected INITIALS' """"~Dale q {;;>{.,> )/7 S.Ue•_· __ fu=....-.=:.-:;....-__ Date o/v1/l7 Buyer Date ________ .Seller _______ Dale ____ _ Page 131 of 140 • TIPP~.!.! ...... ltt-:i'~~.~--...... , ·' .......... ~ Tippett Company LLC 2815 Saint Andrews Lp I PO Box 3027 , Suite F Pasco, WA 99302 Phone: (509 ) 545-3355 Fax : (509) 545-1689 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT (CONTINUED) o Commercial Brokers CD(' Association 20 11 ALL RIGHTS RESERVED CBA Folm PS-1 A f'l.n:hase & Sale Agreement Rev. 112011 Pages of 13 harm to human health or the environment ("Environmental Law"). The term "Hazardous Substances • spec ifically includes, but is not limited to, petroleum, petroleum by-products, and asbestos. If prior to Closing Seller or Buyer discovers any information which would cause any of the representations above to be fa lse if the same we re deemed made as of the date of such discovery, then the party discovering the same shall promptly notify the other party in writing. If the newly-discovered information will result in costs or liability to Buyer in excess of the lesser of $100,000 or five percent (5%) of the purchase price stated in this Agreement, or will materially adversely affect Buyer's intended use of the Property, then Buyer shall have the right to terminate the Agreement and rece ive a refund of its earnest money. Buyer shall give notice of termination within five (5) days of discovering or receiving written notice of the new information. Noth ing in this paragraph shall prevent Buyer from pursuing its remedies against Seller if Seller had actual knowledge of the newly-discovered information such that a representation provided for above was fa lse. 13. AS-IS. Except for those representations and warranties specifically included in this Agreement: (i) Seller makes no representations or warranties regarding the Property; (ii) Seller hereby disclaims, and Buyer hereby waives , any and all representations or warranties of any kind, express or implied , concerning the Property or any po rti on thereof, as to its condi ti on, va lue, compliance with laws , status of perm its or approvals , existence or absence of hazardous material on site , occupancy rate or any other matter of sim ilar or d iss imilar nature relating in a ny way to the Property, including the warranties of fitness for a particular purpose, tenantability, habitability and use; (iii) Buyer otherwise takes the Property "AS IS ;" and (iv) Buyer represents and warrants to Seller that Buyer has sufficient experience and expertise such that it is reasonable for Buyer to rely on its own pre-closing inspections and investigations. 14. PERSONAL PROPERTY. a. This sale includes all right, title and interest of Seller to the following tangible personal property: cgj None 0 That portion of the personal property located on and used in connection with the Property, which Seller will itemize in an Exhibit to be attached to th is Agreement within ten (1 0) days of Mutual Acceptance (None, if not completed). The value assigned to the personal property shall be $ __ (if not completed , the County-assessed value if available , and if not available, the fair market value determined by an appraiser selected by the Listing Broker and Selling Broker). Seller warrants title to, but not the condition of, the personal property and shall convey it by bill of sale. b. In addition to the leases and Vendor Contracts assumed by Buyer pursuant to Section 5(a) above, this sale includes all right , title and interest of Seller to the following i.ntangible property now or hereafter existing w ith respect to the Property including without limitat ion : all rights-of-way, rights of ingress or egress or other interests in , on, or to, any land, highway, street, road, o r avenue, open or proposed, in, on, or across , in front of, abutting or adjoining the Property; all rights to uti lit ies serving the Property; all drawings, p lans, spec ifications and other architectural or engineering work product; all governmental permits, certificates, licenses, authorizations and approvals ; all rights, claims , causes of action , and warranties under contracts with contractors, engineers , architects , consultants or other parties associated with the Property; all utility, security and other deposits and reserve accounts made as security for the fu lfillment of any of Seller's obli gations ; any name of or telephone numbers for the Property and related trademarks, service marks or trade dress ; and guaranties, warranties or other assurances of performance received . 15. CONDEMNATION AND CASUALTY. ·Seller bears all risk of loss until Closing, and thereafter Buyer shall bear the risk of loss. Buyer may terminate this Agreement and obtain a refund of the earnest money if improvements on the Property are destroyed or materially damaged by casualty before Closing, or if condemnation proceedings are commenced against all or a portion of the Property before Closing. Damage will be considered material if the cost of repair exceeds the lesser of $100,000 or five percent (5%) of the purchase price stated in this Agreement. Alternatively , Buyer may elect to proceed with closing, in which case , at Closing, Seller shall assign to Buyer all INITI ALS: Buyer ~ Date q \~) (p l\1 Seller . =\'VI c Date tt)1c1 ,,_ Buyer Da te Seller Date ----- Page 132 of 140 • TIPPETT .~ ~.il:'* ~.~ .~ Tippett Company LLC 2815 Saint Andrews Lp I PO Box 3027, Suite F Pasco, WA 99302 Phone: (509) 545-3355 Fax: (509) 545-1689 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT (CONTINUED) o Commerci al BrokoNI CIW Assoeialion 2011 All RIGHTS RESERVED CBA Form PS-1A Pura-& Sale Agr'"!men l Rev.1/201 1 Page 7 ol 13 claims and right to proceeds under any property insurance policy and shall credit to Buyer at Closing the amount of any deductible provided for in the policy. 16. FIRPTA-TAX WITHHOLDING AT CLOSING. Closing Agent is instructed to prepare a certification (CBA or NWMLS Form 22E, or equivalent) that Seller is not a "foreign person" w ithin the meaning of the Foreign Investment in Real Property Tax Act, and Seller shall sign it on or before Closing . If Seller is a foreign person , and this transaction is not otherwise exempt from FIRPT A, Closing Agent is instructed to withhold and pay the required amount to the Internal Revenue Service. 17. CONVEYANCE. Title shall be conveyed by a Statutory Warranty Deed subject only to the Permitted Exceptions . If this Agreement is for conveyance of Seller's vendee's interest in a Real Estate Contract, the Statutory Warranty Deed shall include a contract vendee's assignment sufficient to convey after acquired title . At C losing, Se ll er and Buyer shall execute and deliver to Closing Agent CBA Form No. PS-AS Assignment and Assumption Agreement transferring all leases and Vendor Contracts assumed by Buyer pursuant to Section 5(a) and all intangible property transferred pursuant to Section 14(b). 18. NOTICES AND COMPUTATION OF TIME. Unless otherwise specified , any notice required or permitted in , or related to, this Agreement (including revocations of offers and counteroffers) must be in writing. Notices to Seller must be signed by at least one Buyer and must be delivered to Seller and Listing Broker w ith a courtesy copy to any other party identified as a recipient of notices in Section 28. A notice to Seller shall be deemed delivered only when received by Seller, Listing Broker, or the licensed office of Listing Broker. Notices to Buyer must be signed by at least one Seller and must be delivered to Buyer, with a copy to Se lling Broker and with a courtesy copy to any other party identified as a recipient of notices in Section 28. A notice to Buyer shall be deemed delivered only when received by Buyer, Selling Broker, or the licensed office of Selling Broker. Selling Broker and Li sting Broker have no responsibility to advise of receipt of a notice beyond either phoning the represented party or causi ng a copy of the notice to be delive red to the party's address provided in this Agreement. Buyer and Seller shall ke ep Selling Broker and Listing Broker advised of their whereabouts in order to receive prompt notification of receipt of a notice. If any party is not represented by a licensee, then notices must be delivered to and shall be effective when received by that party at the address, fax number, or email indicated in Section 28. Unless otherwise specified in this Agreement, any period of time in this Agreement shall mean Pacific Time and shall begin the day after the event starting the period and shall exp ire at 5 :00 p.m . of the last calendar day of the specified period of time, unless the last day is a Saturday, Sunday or legal holiday as defined in RCW 1.16.050, in which case the specified period of time shall expire on the next day that is not a Saturday, Sunday or le gal holiday. Any specified period of f ive (5) days or less shall not include Saturdays, Sundays or legal holidays. Notwithstanding the foregoing, references to specific dates or times or number of hours shall mean those dates, times or number of hours; provided, however, that if the Closing Date falls on a Saturday, Sunday, or legal holiday as de fined in RCW 1.16.050, or a date when the county record ing office is closed , then the Closing Date sh all be the next regu lar business day. 19. AGENCY DISCLOSURE. At the signing of this Agreement, Selling 8FekeF ~ represented itself and the Listing Broker Kirt R. Shaffer -Tippett Company of Wash ington. LLC repres ented Selle r. Selling Firm , Selling Firm's Designated Broker, Selling Broke r's Branch Manager (if any) and Selling Broker's Managing Broker (if any) represent the same party that Sell ing Broker re presents. Li sting Firm, Li sting Firm 's IN ITIALS: Buyer~Date <:?:f I ,0{11 11 / Seller ('h:{/ Date tf/7: "b 7 Buyer Date Seller Date ____ _ Page 133 of 140 TIPP~!.T .; .. il..t..-·r~h~ .. ~ . ' Tippett Company LLC 2815 Saint Andrews Lp I PO Box 3027, Su ite F Pasco , WA 99302 Phone: (509) 545-3355 Fax: (509) 545-1689 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT (CONTINUED) e> Commercial Brokers cor" Association 2011 AU RIGHT S RESERVED CBA Form PS-1A P<.fl:hase & Sale Agr_,ent Rev. 1120 11 Page 8 of 13 Designated Broker, Listing Broker's Branch Manager (if any), and Listing Broker's Managing Broker (if any) represent the same party that the Listing Broker represents. If Selling Broker and Listing Broker are different persons affil iated with the same Firm , then both Buyer and Seller confirm their consent to the Brokers' Designated Broker, Branch Manager (if any), and Managing Broker (if any) representing both parties as a dual agent. If Selling Broker and Listing Broker are the same person representing both parties, then both Buyer and Seller confirm their consent to that person and his/her Designated Broker, Branch Manager (if any), and Managing Broker (if any) representing both parties as dual agents. All parties acknowledge receipt of the pamphlet entitled ''The Law of Real Estate Agency." 20. ASSIGNMENT. Buyer [gl may D may not (may not, if not completed) assign this Agreement , or Buyer's rights hereunder, without Seller's p rior written consent, unless provided otherwise herein. If the "may not" option is selected and the words "and/or assigns" or simila r words are used to identify the Buyer, then this Agreement may be assigned with notice to Seller but without Seller's consent only to an entity which is controlled by or under common control with the Buyer identified in this Agreement. Any other assignment requires Seller's consent. The party identified as the initial Buyer shall remain responsible for those obligations of Buyer stated in this Agreement notwithstanding any assignment and, if this Agreement provides for Seller to finance a portion of the purchase price, then the party identified as the initial Buyer shall guarantee payment of the Seller financing . 21. DEFAULT AND ATTORNEY'S FEE. a. Buyer's default. In the event Buyer fails , without legal excuse, to complete the purchase of the Property, then (check one): [gl S ell er may terminate this Agreement and keep the earnest money as liquidated damages as the sole and e xclusive remedy available to Seller for such fa ilure ; or D Seller may, at. its option, (a) terminate this Agreement and keep as liquidated damages the earnest money as the sole and exclusive rem edy available to Seller for such fa ilure, (b) bring su it against Buyer for Seller's actual da mages, (c) bring suit to specifically enforce this Agreement and recover any incidental damage s, or (d) pursue any oth er rights or remedies available at law or equity. b. Seller's default. In the event Seller fails, without legal excuse, to complete the sale of the Property , then (check one): ~ As Buyer's sole remedy, Buyer may either (a) terminate th is Agreement and recover all earnest money or fees paid by Buyer whethe r or not the same are identified as refundable or applicable to the purchase price; or (b) bring suit to specifically enforce this Agree ment and recover Incidental damages, provided, however, Buyer must fil e suit within sixty (60) days from the scheduled date of closing or from th e date Seller has informed Buyer in w riting that Seller w ill not proc eed with closing, whichever is earlier; or D Buyer may , at its option, (a) bring suit against Seller for Buyer's actual damages, (b) bring suit to specifically enforce this Agreement and recover any inc idental damages, or (c) pursue any other rights or remedies available at law or equity. Neither Buy er nor S eller may recover consequentia l dam ages such as lost profits . If Buyer or Seller institutes suit against the other concern ing this Agreement, the prevailing party is entitled to reasonable attorneys' fees and e xpenses. In the event of trial, the amqunt of the attorney's fee shall be fixed by the court. The venue of any su it shall be th e c ounty in which the Property is located, and this Agreement shall be governed by th e laws of the state where th e Property is located. 22. MISCELLANEOUS PROVISIONS. INITIALS: Buyer __ ~"'-=''?""-+----Date _q......:.....:../.;_;;t.___;;~;,;{.;_\_]L.__Seller __ _,__;__ ___ Date 'if-).. 1 /z, 1 Buyer _______ Date ________ Seller _______ Date ----- Page 134 of 140 • TIPP~J.'f ~Atr..-,.,.,s,;;:~·· .... -. -·. ~-.. ~ Tippett Company LLC 2815 Saint Andrews Lp I PO Box 3027, Su ite F Pasco, WA 99302 Phone: (509) 545-3355 Fax: (509) 545-1689 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT (CONTINUED) c Commercial Broken ~ Assoclallon 2011 ALL RIGHTS RESERVED CBA Form PS-1A P.n:ha sa & Sal e Agreement R ev.1/2011 Page9 ot 13 a. Complete Agreement. This Agreement and any addenda and exhibits thereto state the entire understanding of Buyer and Seller regarding the sale of the Property. There are no verbal or other written agreements which modify or affect the Agreement. b. Counterpart Signatures. This Ag reement may be signed In counterpart, each signed counterpart shall be deemed an original, and al l counterparts together shall constitute one and the same agreement c. Electronic Delivery. Electronic delivery of documents (e.g ., transm ission by facsimile or email) including signed offers o r counteroffers and notices shall be legally sufficient to bind the party the same as delivery of an original . At the request of either party, or the Closing Agent, the parties will replace e lectronically delivered offers or counteroffers with original documents. d. Section 1031 Like-Kind Exchange. If either Buyer or Seller intends for this transaction to be a part of a Section 1031 like-kind exchange, then the other party agrees to cooperate in the completion of the like-kind exchange so long as the cooperating party incurs no additional liability in doing so , and so long as any expenses (including attorneys fees and costs) incurred by the cooperating party that are related only to the exchange a re paid or reimbursed to the cooperating party at or prior to Closing. Notwithstanding Section 20 above, any party completing a Section 1031 like-kind exchange may assign this Agreement to its qualified intermediary or any entity set up for the purposes of completing a reverse exchange. 23. ACCEPTANCE; COUNTEROFFERS. Seller has until midnight of September 26, 201Z (if not filled in, the third business day) following the day Buyer delivers the offe r to accept this offe r, unless sooner withdrawn. If th is offe r is not timely accepted, it shall lapse and the earnest money shall be refunded to Buyer. If either party makes a futu re counteroffer, the other party shall have until 5:00p.m. on the fifth (5 1h ) business day (if not filled in , the second business day) following receipt to accept the counteroffer, unless sooner withdrawn . If the counteroffer is not timely accepted o r countered, this Agreement shall lapse and the earnest money shall be refunded to the Buyer. No acceptance, offer or counteroffer from the Buyer is effective until a s igned copy is received by the Seller, the Listing Broker or the licensed office of the Listing Broker. No acceptance, offer or counte roffer f rom the Seller is effective until a signed copy is received by the Buyer, t he Selling Broker or the licensed office of the Selling Broker. "Mutual Acceptance" shall occur when the last counteroffer is signed by the offeree, and the fully- signed counteroffer has been received by the offeror, his or her broker , or the licensed office of the broker. If any party is not represented by a broker, then notices must be delivered to and shall be effective when received by that party. 24. INFORMAT10N TRANSFER. In t he event this Agreement is terminated , Buyer agrees to deliver to Seller within ten (10) days of Seller's written request copies of all materials received from Seller and any non-privileged plans, studies, reports , inspections, appraisals, surveys, drawings, permits, applications or other development work product relating to the Property in Buyer's possession or control as of the date this Agreement is terminated. 25. CONFIDENTIALITY. Until and unless closing has been consummated , Buyer and Seller shall follow reasonable measures to p revent unnecessary disclosure of information obtained in connection w ith the negotiation and performance of this Agreement. Neither party shall use or knowingly permit the use of any such i nformation in any manner detrimental to th e other party. ExCEPT AS BUYER MAY BE REQUIRED TO DISCLOSE INFORMA TION ASSOCIATED WITH THIS PURCHA SE AND SALE AGREEMENT AS REQUIRED BY LAW, INCLUDING THE REQUIREMENTS OF THE WASHINGTON PUBUC RECORDS A CT. 26. SELLER'S ACCEPTANCE AND BROKERAGE AGRE EMENT. Seller agrees to sell the Property on the term s and conditions herein, and further agrees to pay a commission in a total amount computed in acc ordance with the listing or commission agreement. If there is no written listing or commission agreement, Seller agrees to pay a commission of __ % of the sales price or $ __ . The commission shall be apportio ned betwee n Listing Firm and Selling Firm as specified in the listing or any co-brokerage agreement. If there is no listing or written c o- INITI ALS : B uye~~ Date q ( d-01 ( l Sell er ~ Date t\{t:-'1{tJ Buye r _______ Date ________ .Seller _______ Date ----- Page 135 of 140 Tippett Company LLC 2815 Saint Andrews Lp I PO Box 3027 , Suite F Pasco, WA 99302 Phone: (509) 545-3355 Fax : (509) 545-1689 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT (CONTINUED) c Commercial Bmkllno cor' Assodatlon 2011 ALL RIG HTS RESERVED CBAFonnPS-1A Purdlase & Sale Agreement Rev. 1120 11 Page 10of 13 brokerage agreement, then Listing Firm shall pay to Selling Firm a commission of __ o/o of the sa les price or $ __ . Seller assigns to Listing Firm and Sell ing Firm a portion of the sales proceeds equal to the commission. If the earnest money is retained as liquidated damages, any costs advanced or committed by Listing Firm or Selling Firm for Buyer or Seller shall be reimbursed or paid therefrom, and the balance shall be paid one-half to Seller and one-half to Listing Firm and Selling Firm according to the listing agreement and any co-brokerage agreement. i n any action by Listing Firm or Selling Firm to enforce th is Section , the prevail ing party is en titled to reasonable attorneys ' fees and expenses. Neither Listing Rrm nor Selling Firm are receiving compensation from more than one party to this transaction unless disclosed on an attached addendum, In wh ich case Buyer and Seller consent to such compensation . The Property described in attached Exhibit A is commercial real estate. Notwithstanding Section 25 above, the pages containing this Section, the parties' signatures and an attachment describing the Property may be recorded . 27. LISTING BROKER AND SELLING BROKER DISCLOSURE. EXCEPT AS OTHERWISE DISCLOSED IN WRITING TO BUYER OR SELLER, THE SELLING BROKER, LISTING BROKER, AND FIRMS HAVE NOT MADE ANY REPRESENTATIONS OR WARRANTIES OR CONDUCTED ANY INDEPENDENT INVESTIGATION CONCERNING THE LEGAL EFFECT OF THIS AGREEMENT, BUYER'S OR SELLER'S FINANCIAL STRENGTH , BOOKS , RECORDS, REPORTS, STUDIES , OR OPERATING STATEMENTS; THE CONDITION OF THE PROPERTY OR ITS IMPROVEMENTS; THE FITNESS OF THE PROPERTY FOR BUYER'S INTENDED USE; OR OTHER MAITERS RELATING TO THE PROPERTY, INCLUDING WITHOUT LIMITATION, THE PROPERTY'S ZONING , BOUNDARIES, AREA, COMPLIANCE WITH APPLICABLE LAWS (INCLUDING LAWS REGARDING ACCESSIBILITY FOR DISABLED PERSONS), OR HAZARDOUS OR TOXIC MATERIALS INCLUDING MOLD OR OTHER ALLERGENS . SELLER AND BU YER ARE EACH ADVISED TO ENGAGE QUALIFIED EXPERTS TO ASSIST WITH THESE DUE DILIGENCE AND FEASIBILITY MATIERS, AND ARE FURTHER ADVISED TO SEEK INDEPENDENT LEGAL AND TAX ADVICE RELATED TO THIS AGREEMENT. INITIALS: Buyer ~ Date c!:J {::2v f II Date 7/z1/ t{ Buyer _______ Date _______ .Seller _______ Date ____ _ Page 136 of 140 Tippett Company LLC 2815 Saint Andrews Lp I PO Box 3027, Suite F Pasco, WA 99302 e Commercial Btokera ~ Association 201 1 All RIGHTS RESERVED C8A Form PS-1A Purchase & Sale Agreement Rev. 112011 P-12of13 Phone: (509) 545-3355 Fax : (509) 545-1689 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT (CONTINUED) Courtesy Copy of Notices to Buyer to: Courtesy Copy of Notices to Seller to: Name: Name: Address: Address: Business Phone: Business Phone: Fax: Fax: Mobile Phone: Mobile Phone: Email: Email: IN WITNESS WHEREOF, the parties have signed this Agreement intending to be bound. Buyer CITY OF PASCO, A WASHINGTON MUNICIPAL CORPORATION Printed name and type of entity /1 \ /-f~ .... ;f Buyer __ 'fA.-:!l::::::bc::..::,;:;.---::::::~..:..·<'~-hr~....,.,/.-7 =-===/~~/~.:AA..::A./L:....:=:_:::=----- 1S ignatu[e-=and title Date signed __ ~9_-_Z6 __ ·_1_....1 ______ _ Seller PASCO SCHOOL DISTRICT NO. 1 ---- Printed name and type of entity Buyer Printed name and type of entity Buyer __________ ~--------~------------- Signature and title Date signed ----------------------------- Seller Printed name and type of entity I)/ ~ )\ r Se!ler --::-=--------=-:---------:-:------------ Seller ~1(./tf ( P.:.:Pt.AJ )ffa t; /J'>'edvr rrua{J ~v·t:U Signature and title Sign(atufe"and title Date signed ----------------------------- Date signed j ( ~1jr1 INITIALS: Date _q~(,_>__:_i4"_1_t_l...:..__ Seller __ ___:.9..!._Y...:...7 __;L_="--Date Buyer _______ Date-------Seller ________ Date --------- Page 137 of 140 Tippett Company LLC 2815 Saint Andrews Lp I PO Box 3027, Suite F Pasco , WA 99302 Phone: (509) 545-3355 Fax : (509) 545-1689 " Comm ercial BrokOt$ Associ a~on 201 1 ALL RI GHTS RESERVED CBA Form PS-1A Purchase & Sale Agreemenl Rev. 112011 Page 1 1 o1 13 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT (CONTINUED) 28. IDENTIFICATION OF THE PARTIES. The following is the contact information for the parties Involved in this Agreement: Contact: Citv of Pasco Contact: Pasco School Dist rict No. 1 ____ _ Address: PO Box 293!525 North 3rc1 Avenue) Pasco WA Address: 1215 West Lewis Street. Pasco WA 99301 99301 Business Phone: Business Phone: 509-545-3404 Mobile Phone: Mobile Phone: Fax: 509-545-3403 ----------- Email: Selling Firm Name: Assumed Name (if applicable) : _____ _ Selling Broker: ___________ _ Address: Business Phone: Mobile Phone: Email: Fax: CBA Office No.: Licensed Office of the Selling Broker Address: Business Phone:--------~--­ Email: Fax: CBA Office No.: INITIALSo _, ~D•Ie 1/ ;;)_(., /J/ Fax: Email: Listing Firm Name : Tippett Company of Wash ington. LLC __ _ Assumed Name (If applicable) : N/A ____ _ Listing Broker: Kirt A. Shaffer ______ _ Address: 2815 St. Andrews Loop. Suite F. Pasco WA 99301 Business Phone: ~50~9!...·5~4:!.>5~-3~3~5~5. ______ _ Mobile Phone: 509-521-9183 ______ _ Email: kirt@tippettcompany .com ______ _ Fax: 509-545-3355 CBA Office No.: Licensed Office of the Listing Broker Address: Business Phone: Email: Fax: CBA Office No.: Seller ~ Date Buyer _______ Date _______ Seller _______ Dale ____ _ Page 138 of 140 Tippett Company LLC 2815 Saint Andrews Lp I PO Box 3027. Su ite F Pasco , WA 99302 Phone: (509) 545-3355 Fax: (509) 545-1689 COMMERCIAL & INVESTMENT REAL ESTATE PURCHASE & SALE AGREEMENT (CONTINUED) EXHIBIT A * [Legal Description] e Commerelal Brokers ~ Assodalion 201 1 All R IGHTS RESERv.ED CBA Form PS-1A Pureh ase & Sale Agreement Rev. 112011 Page 13of 13 Franklin County Tax Parcel No. 119-111-050: The Northwest quarter of the Southwest quarter of the Southwest quarter of Section 23, Township 9 North, Range 29 East, W.M. Franklin County, Washington EXCEPT the North 150 feet of the West 150 feet thereof. Franklin County Tax Parcel No. 119-111 -069: The Northeast quarter of the Southwest quarter of the Southwest quarter of Section 23, Township 9 North, Range 29 East, W.M. Franklin County, Washington EXCEPT the South 132 feet thereof. Franklin County Tax Parcel No. 119-112-031: * The Southeast quarter of the Southwest quarter of the Southwest quarter of Section 23, Township 9 North, Range 29 East, W.M. Franklin County, Washington EXCEPT the South 344 feet and except County Roads. To ensure accuracy in the legal description, consider substituting the legal description contained in the preliminary commitment for title insurance or a copy of the Property's last vesting deed for this page. Do not neglect to label the substitution "E x hibit A ." You should avoid transcrib ing the legal description because any error in transc ription may render the legal description inaccurate and this Agreement unenforceable. INITIALS: Selle r ---1-ft--Date 1{1 --1 /r1 Buyer _______ Date _______ Selle r _______ Date ____ _ Page 139 of 140 • TIPP~JJ . i;~i;i.,k-~i.w· . Tippett Company LLC 2815 Saint Andrews Lp I PO Box 3027 , Suite F Pasco, WA 99302 Phone : (509) 545-3355 Fax: (509) 545-1689 ADDENDUNVAMENDMENTTO PURCHASE AND SALE AGREEMENT CBA Text Discla imer: Text deleted by licensee Indicated by strike . New text inserted by Hcensee indicated by small capital letters. C Commercial Brokers ,...... • / Association 2011 lJ:SI{ ALL RIGHTS RESERVED CBAForm PSA Addendum/Amendm ent to PSA Rev. 1/2011 Page 1 of 1 The following is part of the Purchase and Sale Agreement dated September 22, 2017 (the "Agreement") between City of Pasco. a Washington Municipal Corooration ("Buyer") and Pasco School District No. 1 ("Seller") regarding the sale of the property k nown as Franklin County Tax Parcel Nos. 119-111-050. 119-111-069 and 119-112-031, consisting of +/-20.32 acres. Pasco, WA 99301 (the "Property"). IT IS AGREED BETWEEN THE BUYER AND SELLER AS FOLLOWS: ADDENDUM NO .1 1. 60 days from date of Mutual Acceptance of this Agreement. Seller shall . at Seller's expense. have the Property surveyed and the boundaries staked by a survey company qualified to perform such services. 2. Prior to Closing, Seller shall provide a copy of a survey of Subject Property to Buyer. If such survey indicates that subject property is more or less than 20.32 acres. the amount of land more or less than 20.32 acres shall be multipli ed by $43.500/acre and the purchase price shall be adjusted accordingly. :::.ER:~th~.:~·~m\: ;~~Sd~ --c:~~=-----Date -...;.,~~~~~7/'--1'-7 __ _ Buyer -------Date ________ Sell er _______ Date _______ _ Page 140 of 140