Loading...
ORD 87-01 WATERWORKS UTILITYCITY OF WINSLOW, WASHINGTON ORDINANCE AN ORDINANCE relating to the waterworks utility of the City, including the system of sewerage as a part thereof; providing for the issuance of Water and Sewer Revenue Refunding Bonds, 1987, in the amount of $1,485,000 to obtain a part of the funds with which to pay the cost of refunding, paying and retiring the outstanding Water and Sewer Revenue Bonds, 1980, of the City; fixing the date, interest rates, form, maturities, terms, covenants and uses of the proceeds of such bonds; creating a special bond redemption fund; providing for and authorizing the purchase of certain obligations out of the proceeds of the sale of the bonds herein authorized and for the use and application of the money derived from such invest- ment; authorizing the execution of an agreement with a Refunding Trustee; providing for the payment and redemption of the outstanding bonds to be refunded; and providing for the sale and delivery of such bonds to Harper, McLean & Company of Seattle, Washington. WHEREAS, the City (formerly Town) of Winslow, Washington (the "City") heretofore has issued its Water Revenue Bonds, 1962, pursuant to Ordinance No. 115, of which there are now outstanding $28,000 of such bonds, its Water Revenue Bonds, 1967, pursuant to Ordinance No. 67-5, of which there are now outstanding $57,000 of such bonds, and its Water Revenue Bonds, 1972, pursuant to Ordinance No. 72-12, of which there are now outstanding $140,000 of such bonds, all such bonds having been issued to pay the costs of constructing certain additions and improvements to the water system of the City or to refund obligations of such system; and WHEREAS, the City heretofore has issued its Sewer Revenue Bonds, 1959, pursuant to Ordinance No. 79, of which there are now outstanding $14,000 of such bonds, such bonds having been issued to provide funds with which to carry out a system or plan for a sanitary sewage disposal system for the then Town or to carry out the system or plan of additions and betterments to that sanitary sewage disposal system; and WHEREAS, the City heretofore has created by Ordinance No. 22 a Water Revenue Fund into which it has pledged to pay sufficient amounts to meet the debt service requirements on the outstanding water revenue bonds of the City and the City by Ordinance No. 24 has created a Sewer Revenue Fund into which it has pledged to pay sufficient amounts to meet the debt service requirements on the outstanding sewer revenue bonds of the City; and WHEREAS, by Ordinance No. 74-2 the City created a Utilities and Enterprise Fund, cancelled the Sewer Revenue Fund and Water Revenue Fund and directed that all money budgeted to the Sewer Revenue Fund and Water Revenue Fund for the fiscal year 1974 be transferred to the Utilities and Enterprise Fund; and WHEREAS, the City by Ordinance No. 80-14 combined the water system and sanitary sewage disposal system of the City into a waterworks utility (such combined systems being hereinafter referred to as the Waterworks Utility); and WHEREAS, the City pursuant to Ordinance No. 80-14 hereto- fore issued its Water and Sewer Revenue Bonds, 1980 (the "1980 Bonds") in the original face amount of $2,818,000, numbered from 1 to 564, inclusive, bearing interest at the rate of 9.875% per annum, and maturing on January 1, 2010, $1,550,000 of which 1980 Bonds are presently outstanding; and WHEREAS, the City pursuant to Ordinance No. 80-14 reserved the right and option to redeem 1980 Bonds Nos. 1 to 354, inclusive, on January 1, 1987, or on any interest payment date thereafter at a price of par plus accrued interest, and the City has redeemed 1980 Bonds No. 1 to 254, inclusive, and the City further reserved the right to redeem 1980 Bonds Nos. 355 to 564, inclusive, on January 1, 1990, at a price of 103% of par; and WHEREAS, the City Council finds that it is in the City's best interest to refund the outstanding 1980 Bonds by the - 2 - issuance and sale of the bonds authorized herein (the "Bonds") for the purpose of modifying certain covenants with respect to the City's bonds and for realizing a savings for the Waterworks Utility and its ratepayers, which refunding will be effected by: and (a) the issuance of the Bonds; (b) the call for prior redemption and payment of the principal of and interest on 1980 Bonds Nos. 255 to 354, inclusive, on July 1, 1987, at par; and (c) the payment of the interest on 1980 Bonds Nos. 355 to 564, inclusive, as the same shall become due up to and including January 1, 1990, and, on January 1, 1990, the call, payment and redemption of the remaining 1980 Bonds at 103% of par; WHEREAS, in order to effect such refunding in the manner that will be most advantageous to the City, it is found neces- sary and advisable that Acquired Obligations hereinafter defined, bearing interest and maturing at such time or times as necessary to accomplish the refunding as aforesaid, be purchased out of the proceeds of the sale of the bonds authorized herein and other money of the City legally available therefor; and WHEREAS, Harper, McLean & Company, Seattle, Washington, has offered to purchase such bonds under the terms and conditions hereinafter set forth; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF WINSLOW, WASHINGTON, DO ORDAIN, as follows: Section 1. As used in this ordinance the following words shall have the following meanings: "Annual Debt Service" for the applicable series of the Prior Lien Bonds, Bonds and Future Parity Bonds for any year shall mean all the interest, plus all principal (except princi- pal of Term Bonds due in any Term Bond Maturity Year), and plus all mandatory redemption installments and Sinking Fund - 3 - Installments for that year, less all bond interest payable from the proceeds of any such bonds in that year. "Average Annual Debt Service" shall mean the sum of the Annual Debt Service for the remaining years to the last scheduled maturity of the applicable series of bonds divided by the number of those years, except that for purposes of computing the Reserve Requirement the estimated amount of Bonds to be redeemed prior to maturity may be taken into account if required under arbitrage regulations. "Bond Fund" shall mean that special fund of the City known as the Water and Sewer Revenue Refunding Bond Fund, 1987, created by this ordinance for the payment of the principal of and interest on the Bonds and Future Parity Bonds. "Bond Register" shall mean the registration books of the Bond Registrar on which is recorded the names of the owners of the Bonds. "Bond Registrar" shall mean the Fiscal Agency. "Bonds" shall mean the Water and Sewer Revenue Refunding Bonds, 1987, authorized to be issued by this ordinance. "1980 Bonds" shall mean the Water and Sewer Revenue Bonds, 1980, of the City issued under date of May 1, 1980, pursuant to Ordinance No. 80-14, of which $1,550,000 principal amount is outstanding. "City" shall mean the City of Winslow, Washington. "Fiscal Agency" shall mean either of the fiscal agencies of the State of Washington located in Seattle, Washington, and New York, New York, as the same may be designated from time to time. "Future Parity Bonds" shall mean any and all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds, the payment of the principal of and interest on which constitutes a charge or lien on the Gross Revenue of the Waterworks Utility and ULID Assessments equal in - 4 - rank with the charge and lien upon such revenue and assessments required to be paid into the Bond Fund to pay and secure the payment of the principal of and interest on the Bonds. "Government Obligations" shall mean direct obligations of the United States of America. "Gross Revenue of the Waterworks Utility" or "Gross Revenue" shall mean 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, City taxes, 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 Internal Revenue Code of 1986. "Maintenance and Operation Expense" shall mean all reason- able expenses incurred by the City in causing the Waterworks Utility of the City to be operated and maintained in good repair, working order and condition, but shall not include any depreciation or taxes levied or imposed by the City or payments to the City in lieu of taxes, but shall include payments made to any other municipal corporation for water or water service or for sewage treatment and disposal service in the event the City enters into a contract for such services. "Maximum Annual Debt Service" shall mean the maximum amount of Annual Debt Service which will mature or come due in the current year or any future year. "Net Revenue of the Waterworks Utility" or "Net Revenue" shall mean the Gross Revenue less Maintenance and Operation Expense. - 5 - "Principal and Interest Account" shall mean the account of that name created in the Bond Fund for the payment of the principal of and interest on the Bonds and Future Parity Bonds. "Prior Lien Bonds" shall mean the outstanding Water Revenue Bonds, 1962, Water Revenue Bonds, 1967, Water Revenue Bonds, 1972, and Sewer Revenue Bonds, 1959, of the City. "Refunding Plan" shall mean (1) The call for prior redemption and payment of the principal of and interest on 1980 Bonds Nos. 255 to 354, inclusive, on July 1, 1987, at par; and (2) Payment of the interest on 1980 Bonds Nos. 355 to 564, inclusive, as the same shall become due up to and including January 1, 1990, and, on January 1, 1990, the call, payment and redemption of the remaining 1980 Bonds at 103% of par. "Refunding Trust Agreement" shall mean a Refunding Trust Agreement between the City and the Refunding Trustee substan- tially in the form of that which is on file with the City Clerk-Treasurer. "Refunding Trustee" shall mean Rainier National Bank of Seattle, Washington, or any successor trustee. "Reserve Account" shall mean 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 Bonds and Future Parity Bonds. "Reserve Requirement" shall mean: (1) For the Bonds, the initial deposit of $211,287.66 from the funds on hand in the reserve account pledged to the 1980 Bonds and maintained at that amount. (2) For any issue of Future Parity Bonds at a given time, the difference between (i) the lesser of the Maximum Annual Debt Service or 1.25 times Average Annual Debt Service on the then outstanding Bonds and any Future Parity Bonds theretofore issued and outstanding, if any, and such issue of Future Parity Bonds, and (ii) the lesser of the Maximum Annual Debt Service on the then outstanding Bonds and any Future Parity Bonds theretofore issued and oustanding, if any. Such amount shall be accumulated within five - 6 - years of the date of issuance of the proposed Future Parity Bonds and, to the extent it is not capitalized as a part of such Future Parity Bonds, shall be deposited from ULID Assessments first collected and, to the extent of any deficiency, in approximately equal annual payments commencing one year after the date of issuance of such Future Parity Bonds. "Sinking Fund Installment" or "Sinking Fund Installments" shall mean, in any one year, the principal of the Bonds or Future Parity Bonds designated in the ordinances authorizing their respective issuance and sale as Sinking Fund Installments for that year. "Term Bond Maturity Year" shall mean any calendar year in which the bonds of any one issue or series now or hereafter scheduled to mature (regardless of any reservation of prior redemption rights) is more than 1.35 times the average annual principal maturity of the bonds of such issue or series for the three years immediately preceding such year. "Term Bonds" for the Bonds shall mean those Bonds maturing in the year 2002 and for Future Parity Bonds shall mean those outstanding bonds of any single issue or series scheduled to mature in any Term Bond Maturity Year. "ULID" shall mean Utility Local Improvement District. "ULID Assessments" shall mean all assessments levied and collected in any ULID of the City created for the acquisition or construction of additions to and extensions and betterments of the Waterworks Utility, if such assessments are pledged to be paid into the Bond Fund (less any prepaid assessments permitted by law to be paid into a construction fund or account). ULID ASsessments shall include installments thereof and any interest or penalties which may be due thereon. "Utilities and Enterprise Fund" shall mean that fund created by Ordinance No. 74-2 of the City. "Waterworks Utility" of the City shall mean the combined water system of the City and sanitary sewage disposal system of - 7 - the City and all additions thereto and betterments and exten- sions thereof at any time made and shall include any storm and surface water systems hereafter combined with the Waterworks Utility. Section 2. The City Council finds and determines that it is in the best interest of the City and the users of the Waterworks Utility that the City carry out the Refunding Plan provided in this ordinance and issue the Bonds for the purpose of providing part of the funds to carry out the Refunding Plan to effect a savings and to modify certain covenants with respect to the City's Waterworks Utility bonds. The City Council further finds and determines that the cash and Acquired Obligations to be deposited with the Refunding Trustee for the Refunded Bonds in accordance with this ordinance are, together with known earned income from the investments thereof, sufficient to carry out the Refunding Plan and will discharge and satisfy the obligations of the City under Ordi- nance No. 80-14 authorizing the issuance of the 1980 Bonds and the 1980 Bonds no longer shall be deemed to be outstanding under that ordinance immediately upon the deposit of such money and Acquired Obligations with the Refunding Trustee. Section 3. The City Council finds and determines that the Gross Revenue and benefits to be derived from the operation and maintenance of the Waterworks Utility of the City at the rates to be charged for water and sanitary sewage disposal service from the entire Utility will be more than sufficient to meet all Maintenance and Operation Expense and the debt service require- ments of the Prior Lien Bonds and to permit the setting aside into the Bond Fund out of the Gross Revenue of the Waterworks Utility of sufficient amounts to pay the principal of and interest on the Bonds as the same become due. - 8 - The City Council finds and determines it has exercised due regard for Maintenance and Operation Expense and the debt service requirements of the Prior Lien Bonds and that it has not obligated the City to set aside and pay into the Bond Fund a greater amount of the Gross Revenue of the Waterworks Utility than in its judgment will be available over and above such Maintenance and Operation Expense and the debt service require- ments of the Prior Lien Bonds. Section 4. For the purpose of providing a part of the money required to carry out the Refunding Plan and to pay the costs of issuing the Bonds, the City shall issue the Bonds in the aggregate principal amount of $1,485,000. The Bonds shall be designated Water and Sewer Revenue Refunding Bonds, 1987; shall be dated February 1, 1987; shall be in the denomination of $5,000 each; shall be numbered from 1 to 297, inclusive, in the manner and with any additional designation as the Bond Registrar deems necessary for purpose of identification; and shall bear interest at the rates set forth below (computed on the basis of a 360-day year of twelve 30-day months), payable on July 1, 1987, and semiannually thereafter on each succeeding January 1 and July 1. The Bonds shall bear interest at the rates and mature on January 1 in years and amounts as follows: Bond Numbers Interest Maturity (Inclusive) Amounts Rates Years 1 to 22 23 to 44 45 to 66 67 to 89 90 to 113 114 to 134 135 to 168 169 to 201 202 to 233 234 to 265 266 to 297 $110,000 110 000 110 000 115 000 120 000 105 000 170 000 165 000 160000 160 000 160000 6.20% 6 40% 6 60% 6 75% 6 90% 7 00% 4 90% 5 30% 5 60% 5 80% 6.10% 1993 1994 1995 1996 1997 1998 2002 2002 2002 2002 2002 If any Bond is not redeemed upon proper presentment at its maturity or call date, the City shall be obligated to pay - 9 - interest at the rate borne by such Bond from and after its maturity or call date until such Bond, both principal and interest, is paid in full or until sufficient money for such payment in full is on deposit in the Bond Fund and such Bond has been called for payment. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. Interest on the Bonds shall be paid by check or draft mailed to the registered owners of the Bonds at the addresses for such owners appearing on the Bond Register on the fifteenth day of the month preceding the interest payment date. Principal of the Bonds shall be payable upon presentation and surrender of the Bonds by the registered owners at either office of the Bond Registrar at the option of such owners. The Bonds shall be payable solely out of the Bond Fund and shall not be general obligations of the City. The Bonds shall be issued only in registered form as to both principal and interest and recorded in the Bond Register. The Bond Register shall contain the name and mailing address of the owner of each Bond and the principal amounts and numbers of Bonds held by each such owner. Bonds may be transferred only if endorsed in the manner provided thereon and surrendered to the Bond Registrar. Such transfer shall be without cost to the owner or transferee. The Bond Registrar shall not be required to transfer any Bond during the fifteen days preceding any principal payment or redemption date. The Bonds shall be negotiable instruments to the extent provided by RCW 62A.8-102 and 62A.8-105. Section 5. The City reserves the right and option to redeem Bonds Nos. 135 to 297, inclusive, maturing on January 1, 2002, prior to their maturity date on January 1, 1988, and on any interest payment date thereafter, in numerical order, lowest - 10 - numbers first, at par plus accrued interest to the date fixed for redemption, and shall redeem such Bonds on those dates whenever there shall be sufficient money in the Principal and Interest Account (at the time when the call for such redemption can be made) to pay the Bonds so called and all earlier numbered Bonds over and above the amount required for the payment of the interest on all unpaid Bonds. After the payment and redemption of Bonds Nos. 135 to 297, inclusive, the City reserves the right and option to redeem Bonds Nos. 1 to 134, inclusive, maturing in the years 1993 to 1998, inclusive, prior to their stated maturity dates on January 1, 1992, and on any interest payment date thereafter, in numerical order, lowest numbers first, at par plus accrued interest to the date fixed for redemption. Notice of any such intended redemption shall be given not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the registered owner of any Bond to be redeemed at the address appearing on the Bond Register. The requirements of this section shall be deemed to be complied with when notice is mailed as herein provided, whether or not it is actually received by the owner of any Bond. Interest on the Bonds so called for redemption shall cease to accrue on the date fixed for redemption unless such Bond or Bonds so called are not redeemed upon presentation made pursuant to such call. In addition, such redemption notice shall be mailed within the same period, postage prepaid, to Moody's Investors Service, Inc., and Standard & Poor's Corporation at their offices in New York, New York, or their successors, and to Harper, McLean & Company at its office in Seattle, Washington, or its successor, but such mailings shall not be a condition precedent to the redemption of such Bonds. - 11 - The City further reserves the right and option to purchase any or all of the Bonds in the open market at any time at a price of not in excess of par plus accrued interest to the date of such purchase. Bonds so purchased shall be retired and cancelled. Section 7. The Bonds shall be printed or lithographed on good bond paper in a form consistent with the provisions of this ordinance and State law, shall be signed by the Mayor and City Clerk-Treasurer, both of whose signatures shall be in facsimile, and a facsimile reproduction of the seal of the City shall be printed thereon. Only such Bonds as shall bear thereon a Certificate of Authentication in the following form, manually executed 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 Winslow, Washington, Water and Sewer Revenue Refunding Bonds, 1987, described in the Bond Ordinance. WASHINGTON STATE FISCAL AGENCY Bond Registrar By Authorized Officer Such Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this ordinance. In case either or both of the officers who shall have executed the Bonds shall cease to be such officer or officers of the City before the Bonds so signed shall have been authenti- cated or delivered by the Bond Registrar or issued by the City, such Bonds nevertheless may be authenticated, delivered and issued and upon such authentication, delivery and issue, shall - 12 - be as binding upon the City as though those whose facsimile signatures appear on the Bonds had continued to be such officers of the City. Any Bond also may be signed on behalf of the City by such persons as at the actual date of execution of such Bond shall be proper officers of the City authorized to execute Bonds although on the original date of such Bond such persons were not such officers of the City. The Bond Registrar shall keep, or cause to be kept, at its principal corporate trust office, sufficient books for the registration and transfer of the Bonds which shall at all times be open to inspection by the City. The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transferred 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. The Bond Registrar shall be responsible for its represen- tations contained in the Bond Registrar's Certificate of Authentication on the Bonds. The Bond Registrar may become the owner of Bonds with the same rights it would have if it were not the Bond Registrar and, to the extent permitted by law, may act as depositary for and permit any of its officers or directors to act as members of, or in any other capacity with respect to, any committee formed to protect the rights of Bond owners. Section 8. There is created in the office of the City Clerk-Treasurer a special fund to be known as the Water and Sewer Revenue Refunding Bond Fund, 1987 (herein defined as the "Bond Fund"), which fund is divided into two accounts, namely, the Principal and Interest Account and the Reserve Account. So long as any Bonds or Future Parity Bonds are outstanding against the Bond Fund, the City shall set aside and pay into the Bona Fund all ULID Assessments upon their collection and, out of the - 13 - Net Revenue of the Waterworks Utility, certain fixed amounts without regard to any fixed proportion, namely: (a) Into the Principal and Interest Account prior to each interest or principal and interest payment date an amount, together with other money on deposit therein, sufficient to pay the interest or principal and interest next coming due, and, on or before January 1, 2002, an amount, together with other money on deposit therein sufficient to redeem all of the remaining outstanding Bonds. (b) Into the Reserve Account, the Reserve Requirement for the Bonds. Upon retirement of all Prior Lien Bonds, the City will transfer any and all funds in the reserve account for the Prior Lien Bonds to the Reserve Account to the extent necessary to fund fully the Reserve Requirement for all outstanding Bonds and any then outstanding Future Parity Bonds. Any remaining funds in the reserve account for the Prior Lien Bonds may be expended for any lawful Waterworks Utility purpose. Except for withdrawals therefrom as authorized herein, the Reserve Account shall be maintained at such total Reserve Requirement amount for all bonds payable from the Bond Fund, at all times so long as any of such bonds are outstanding. When the total amount in the Bond Fund shall equal the total amount of principal and interest for all outstanding bonds payable out of the Bond Fund to the last maturity thereof, no further payment need be made into the Bond Fund. In the event that there shall be a deficiency in the Principal and Interest Account in the Bond Fund to meet maturing installments of either principal or interest, as the case may be, such deficiency shall be made up from the Reserve Account by the withdrawal of cash therefrom for that purpose. Any defi- ciency created in the Reserve Account by reason of any such withdrawals 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 - 14 - Interest Account. The money in the Reserve Account shall otherwise be held intact and may be applied against the last outstanding bonds payable out of the Bond Fund, except that if the Reserve Account is fully funded, any money in excess of the Reserve Requirement may be withdrawn and expended for the purpose of retiring bonds payable from the Bond Fund or for any other lawful Waterworks Utility purpose. The City may provide for the purchase, redemption or defeasance of bonds payable from the Bond Fund by the use of money on deposit in any account in the Bond Fund as long as the money remaining in those accounts is sufficient to satisfy the required deposits in those accounts for the remaining bonds outstanding payable from the Bond Fund. All money in the Bond Fund may be kept in cash or invested in legal investments maturing not later than the date when the funds are required for the payment of principal of or interest on the outstanding bonds payable from the Bond Fund (for investments in the Principal and Interest Account) or having a guaranteed redemption price prior to maturity and, in no event, maturing later than the last maturity of any remaining outstand- ing bonds payable from the Bond Fund (for investments in the Reserve Account). Earnings from investments in the Principal and Interest Account shall be deposited in that account. Income from investments in the Reserve Account shall be deposited in that account until the amount therein is equal to the Reserve Requirement of all bonds payable from the Bond Fund, and thereafter shall be deposited in the Principal and Interest Account. Notwithstanding the provisions for the deposit of earnings, 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. - 15 - In no event shall any money in the Bond Fund or any other money reasonably expected to be used to pay principal of or interest on the Bonds be invested at a yield which would cause the Bonds to be arbitrage bonds within the meaning of Section 148 of the United States Internal Revenue Code of 1986 and applicable regulations thereunder. The City may create sinking fund accounts or other accounts in the Bond Fund for the payment or securing the payment of bonds payable from the Bond Fund as long as the maintenance of such accounts does not conflict with the rights of the owners of bonds payable from the Bond Fund. If the City fails to set aside and pay into the Bond Fund the amounts set forth above, the owner of any of the outstanding bonds payable out of the Bond Fund may bring action against the City and compel such setting aside and payment. Section 9. The Gross Revenue of the Waterworks Utility and ULID Assessments are pledged to the payment of the Bonds and any Future Parity Bonds, and the Bonds and such Future Parity Bonds, if any, shall constitute a lien and charge upon such Gross Revenue and ULID Assessments prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense, except that the lien and charge on the Gross Revenue for the Bonds and Future Parity Bonds, if any, shall be junior and subordinate to the lien and charge upon the revenue of the water system of the Water Revenue Bonds, 1962, Water Revenue Bonds, 1967, and Water Revenue Bonds, 1972, and the revenue of the sewer system of the Sewer Revenue Bonds, 1959. The City covenants that it will not issue any additional bonds on a parity of lien with any of the outstanding Prior Lien Bonds. Section 10. The proceeds of the sale of the Bonds, exclusive of the accrued interest and premium, if any, thereon paid into the Bond Fund, together with the amount of - 16 - approximately $269,000 (which amount may be increased or decreased as required when the exact price of the Acquired Obligations as hereinafter defined is ascertained) transferred from the 1980 Bonds reserve account, shall be deposited immediately upon the receipt thereof with the Refunding Trustee to discharge the obligations of the City relating to the 1980 Bonds under Ordinance No. 80-14 authorizing such 1980 Bonds by providing for the payment of the amounts required to be paid by the Refunding Plan and to pay the costs of issuance and sale of the Bonds. To the extent practicable, such obligations shall be discharged fully by the Refunding Trustee's simultaneous purchase of United States Treasury Certificates of Indebtedness, Notes and/or Bonds - State and Local Government Series and/or other Government Obligations authorized to be acquired with proceeds of refunding bonds under the Refunding Bond Act of the State of Washington, Chapter 39.53 RCW (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 the beginning cash balance, if any (which may be increased or decreased), for the payment of the amounts required to be made by the Refunding Plan. The Acquired Obligations are more particularly described and are set forth in Schedule A attached to the Refunding Trust Agreement hereinafter referred to, but are subgect to substitu- tion as set forth below. Prior to the purchase of any such Acquired Obligations, the City reserves the right to substitute other Government Obligations for any of the Acquired Obligations and to use any Savings created thereby for any lawful City purpose if, in the opinion of Roberrs & Shefelman, the City's bond counsel, (a) the Bonds will remain exempt from federal income taxation under Sections 103, 148, and 149(d) of the United States Internal - 17- Revenue Code of 1986, and applicable regulations thereunder, and (b) such substitution shall not impair the timely payment of the amounts required to be paid by the Refunding Plan. After the purchase of the Acquired Obligations by the Refunding Trustee, the City reserves the right to substitute therefor money or other Government Obligations, subject to the conditions that such money and Government Obligations held by the Refunding Trustee shall be sufficient to carry out the Refunding Plan, making all required payments when due, that such substitution will not cause the Bonds to be arbitrage bonds within the meaning of the Internal Revenue Code of 1986, and regulations thereunder in effect on the date of such substitu- tion and applicable to obligations issued on the issue date of the Bonds, and that the City obtains, at its expense, the following: (1) an independent verification by a nationally recognized independent certified public accounting firm accept- able to the Refunding Trustee concerning the adequacy of such substituted Government Obligations with respect to the principal thereof and the interest thereon and any other money or Govern- ment Obligations held for such purpose to carry out the Refunding Plan, making all required payments at the times provided; and (2) an opinion from Roberts & Shefelman, bond counsel to the City, its successor, or other nationally recog- nized bond counsel, to the effect that the disposition and substitution or purchase of such Government Obligations will not, under the statutes, rules and regulations then in force and applicable to the Bonds, cause the interest on the Bonds not to be exempt from federal income taxation and that such disposition and substitution or purchase is in compliance with the statutes and regulations applicable to the Bonds. Any surplus money resulting from the sale, transfer, other disposition or redemp- tion of the Acquired Obligations and the substitutions therefor shall be released from the trust estate and transferred to the City to be used for any lawful City purpose. Any money remaining in the 1980 Bonds reserve account after the transfers to the Refunding Trustee, as provided in this section, and the Reserve Account, as provided in Section 1, shall be deposited in the appropriate account in the Waterworks Utility to be used to pay the costs of a study to be authorized for utility purposes, and, if not so used, to be deposited in the Principal and Interest Account. Section 11. The Refunding Trustee is authorized and directed to purchase the Acquired Obligations and to make the payments required to be made by the Refunding Plan from the Acquired Obligations and money deposited with the Refunding Trustee pursuant to Section 10 of this ordinance. All Acquired Obligations and the money deposited with the Refunding Trustee and any income therefrom shall be held, invested and applied in accordance with the provisions of Ordinance No. 80-14, this ordinance, Chapter 39.53 RCW and other applicable statutes of the State of Washington. All necessary and proper fees, compensation and expenses of the Refunding Trustee for the Bonds and all other costs inci- dental to the setting up of the escrow to accomplish the refunding of the 1980 Bonds and costs relating to the issuance and delivery of the Bonds, including bond printing, rating service fees, escrow verification and computation fees, bond counsel's fees and other related expenses shall be paid out of the proceeds of the Bonds. In order to carry out the purposes of this ordinance, the Mayor and City Clerk-Treasurer are authorized and directed to execute a Refunding Trust Agreement substantially in the form on file with the City Clerk-Treasurer and by this reference made a - 19 - part hereof, setting forth the duties, obligations and responsi- bilities of the Refunding Trustee in connection with the payment, redemption and retirement of the 1980 Bonds as provided herein and stating that such provisions for the payment of the fees, compensation and expenses of such Refunding Trustee are satisfactory to it. Prior to executing the Refunding Trust Agreement, the Mayor and City Clerk-Treasurer are authorized to make such changes therein which do not change the substance and purpose thereof or which assure that the escrow provided therein and the Bonds are in compliance with the requirements of federal law governing the exemption of the interest on the Bonds from federal income taxation. Section 12. The City calls for redemption on July 1, 1987, 1980 Bonds Nos. 255 to 354, inclusive, at par plus accrued interest to the date of such redemption and the City calls for redemption on January 1, 1990, 1980 Bonds Nos. 355 to 564, inclusive, at 103% of par plus accrued interest to the date of such redemption. Such calls for redemption shall be irrevocable after the delivery of the Bonds to the initial purchaser thereof. The dates on which the 1980 Bonds are herein called for redemption are the first dates on which the 1980 Bonds may be called at a premium of 3 percent or less. The proper City officials are authorized and directed to give such notice as required, at the time and in the manner required, pursuant to Ordinance No. 80-14, in order to effect the redemption prior to their maturity of the 1980 Bonds. Section 13. The City covenants and agrees with the owner of each Bond and Future Parity Bond at any time outstanding, as follows: (a) It will establish, maintain and collect such rates and charges for water and sanitary sewage disposal service so long as any of the Bonds and any - 20 - Future Parity Bonds are outstanding which will make available for the payment of the principal of and interest on such bonds as the same accrue, together with the collection of other Gross Revenue and of ULID Assessments, an amount equal to at least 1.35 times the Maximum Annual Debt Service in any current year on the Prior Lien Bonds, the Bonds and any Future Parity Bonds outstanding, after deducting Maintenance and Operation Expense from the Gross Revenue of the Waterworks Utility. (b) It will at all times maintain and keep the Waterworks Utility in good repair, working order and condition, and also will at all times operate that Utility and the business in connection therewith in an efficient manner and at a reasonable cost. (c) It will not sell, lease, mortgage, or in any manner encumber or dispose of all of the property of the Waterworks Utility unless provision is made, in addition to what is required for the Prior Lien Bonds, for the payment into the Bond Fund of an amount sufficient to pay the principal of and interest on the Bonds and any Future Parity Bonds then outstanding and that it will not sell, lease, mortgage, or in any manner encumber or dispose of any part of the property of the Waterworks Utility that is used, useful and material to the operation thereof, unless provision is made, in addition to what is required for Prior Lien Bonds, for replacement thereof, or for payment into the Bond Fund of the total amount of Gross Revenue received which shall not be less than an amount which shall bear the same ratio to the amount of the Bonds and any Future Parity Bonds then outstanding as the Gross Revenue available for debt service for such outstanding bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the Utility sold, leased, encumbered or disposed of bears to the Gross Revenue available for debt service for the outstanding Bonds and Future Parity Bonds from the entire Waterworks Utility for the same period. Any such money so paid into the Bond Fund shall be used to retire such Bonds and/or Future Parity Bonds at the earliest possible date. (d) While any of the Bonds remain outstanding, it will keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to the Waterworks Utility, and it will furnish the original purchaser or purchasers of the Bonds or any subsequent owner or owners thereof, at the written request of such owner or owners, complete operating and income statements of the Waterworks Utility in reasonable detail covering any calendar year not more than 90 days after the close of such calendar year and it will grant any owner or owners of at least 25% of the outstanding Bonds the right at all reasonable times to inspect the entire Waterworks Utility and all records, accounts and data of the City relating thereto. Upon request of any owner of any of the Bonds, it also will furnish to such owner a copy of -21 - the most recently completed audit of the City's accounts by the State Auditor of Washington, or such other audit as is authorized by law in lieu thereof. (e) It will not furnish water or sanitary sewage disposal service to any customer whatsoever free of charge and will promptly take legal action to enforce collection of all delinquent accounts. (f) It will carry the type of insurance on its Waterworks Utility property in the amounts normally carried by private water and sewer utility companies engaged in the operation of water and sewerage systems, and the cost of such insurance shall be considered part of the operating and maintaining of such Utility or, in lieu thereof, may self-insure or participate in a joint intergovernmental insurance assuring the same coverage as is carried by such private water and sewerage companies. If, as, and when the United States of America or some agency thereof shall provide for war risk insurance, the City further agrees to take out and maintain such insurance on all or such portion of the Utility on which such war risk insurance may be written in an amount or amounts to cover adequately the value thereof. (g) It will pay all Maintenance and Operation Expense and the debt service requirements of the Prior Lien Bonds, the Bonds and any Future Parity Bonds and otherwise meet the obligations of the City as set forth in this ordinance. (h) It will neither make nor permit any use of proceeds of the Bonds or other funds of the City at any time during the term of the Bonds which will cause the Bonds to be arbitrage bonds within the meaning of Section 148 of the United States Internal Revenue Code of 1986 and applicable regulations promulgated thereunder. Further, if all proceeds of the Bonds have not been spent within six months from the date of issuance of the Bonds, the City will calculate, or cause to be calculated, and rebate to the United States all earnings from the investment of Bond proceeds that are in excess of the amount that would have been earned had the yield on such invest- ments been equal to the yield on the Bonds, plus all income derived from such excess earnings, to the extent and in the manner required by Section 148 of such Code and such applicable regulations. In the event the City shall fail to meet the rebate require- ments applicable to the Bonds under Section 148 of such Code, to the extent permitted by that Section, it shall pay the penalty provided in Subsection 148(f)(7)(C) if required to prevent a loss of the tax exemption for interest on the Bonds. The City has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is - 22 - a bond issuer whose arbitrage certifications may not be relied upon. Section 14. All ULID Assessments shall be paid into the Bond Fund as provided by Section 8. The Gross Revenue of the Waterworks Utility, except for earnings in the Bond Fund and funds other than the Utilities and Enterprise Fund, shall be credited to the Utilities and Enterprise Fund of the City as it is collected. The Utilities and Enterprise Fund shall be held separate and apart from other funds and accounts of the City. Money in the Utilities and Enterprise Fund shall be used for the following purposes only and shall be applied in the following order of priority: (a) To pay the Maintenance and Operation Expense; (b) To pay the interest on Prior Lien Bonds; (c) To pay the principal of Prior Lien Bonds; (d) To pay the interest on the Bonds and any Future Parity Bonds; (e) To pay the principal of the Bonds and any Future Parity Bonds; (f) To make all payments required to be made into any sinking fund account created to provide for the payment of the principal of Term Bonds; (g) To make all payments required to be made into the Reserve Account; (h) To make all payments required to be made into any revenue bond redemption fund or warrant redemption fund and debt service account or reserve account created to pay the secure the payment of the principal of and interest on any revenue bonds, or revenue warrants or other revenue obligations of the City having a lien upon the revenue of the Waterworks Utility junior and inferior to the lien thereon for the payment of the principal of and interest on the Bonds and any Future Parity Bonds; and (i) To retire by redemption or purchase in the open market any outstanding revenue bonds or other revenue obligations of the Waterworks Utility, to make necessary additional betterments, improvements and repairs to or extensions and replacements of the Waterworks Utility, or for any other lawful City purposes. - 23 - The City may transfer from any funds or accounts of the Waterworks Utility legally available therefor, except bond redemption funds, refunding escrow funds or defeasance funds, any money therein to meet the required payments to be made into the Bond Fund. Section 15. The City reserves the right to issue Future Parity Bonds if the following conditions are met and complied with at the time of the issuance of such Future Parity Bonds: (a) No default exists in the payment of the principal of or interest on any outstanding water and sewer revenue bonds of the City, and the amounts required to have been paid into the Bond Fund shall have been paid and maintained as required therein. (b) The ordinance providing for the issuance of Future Parity Bonds shall provide for the payment of the principal of and interest on such Future Parity Bonds out of the Principal and Interest Account and shall further provide for the funding of the Reserve Requirement for those Future Parity Bonds by the payment of ULID Assessments first collected into the Reserve Account and, if any deficiency exists, the payment of Net Revenue of the Waterworks Utility into the Reserve Account by five equal annual installments after any initial payment therein from the proceeds of those Future Parity Bonds so that on the fifth anniversary date of the date of issuance of such bonds the full Reserve Requirement therefor is deposited in the Reserve Account, except in the case of refunding Future Parity Bonds, the ordinance authorizing the issuance of such bonds shall provide that the money in the Reserve Account for the bonds to be refunded shall be retained in the Reserve Account as a reserve for the refunding bonds, or the money in any other reserve account or fund for the bonds being refunded shall be transferred to the Reserve Account in the Bond Fund, but if such amount does not equal the Reserve Requirement for those refunding bonds, the Reserve Requirement therefor shall be accumulated in the same manner and within the same time as provided for other Future Parity Bonds. (C) The ordinance authorizing the issuance of such Future Parity Bonds may provide for the creation of a sinking fund account in the Bond Fund for any Term Bonds to be issued and for regular payments to be made into such account for the payment of the principal of such Term Bonds on or before their maturity, or, as an alternative, the mandatory redemption of such Term Bonds prior to their maturity date from money in the Principal and Interest Account. (d) There shall be on file with the City a certificate of either an independent certified public - 24 - accountant or a professional engineer experienced in municipal utilities and licensed to practice in the State of Washington to the effect that the Net Revenue of the Waterworks Utility for any twelve consecutive calendar months out of the immediately preceding 24 consecutive calendar months, plus the additional revenue anticipated to be received from the proposed improvement in connection with which such Future Parity Bonds are to be issued, together with the annual assessments reasonably anticipated to be collected in any ULID created to pay, in whole or in part, such Future Parity Bonds so proposed to be issued, together with the increase in revenues reasonably anticipated to result from any change in the schedule of water and sewer rates to be put into effect prior to the issuance of such Future Parity Bonds, and after giving effect to any probable future increase or decrease in costs of Maintenance and Operation Expense and to any probable future increase or decrease in revenues resulting from growth or shrinkage in the number of water and sewer users within 24 months after the date of issuance of such Future Parity Bonds, are deemed sufficient to equal at least 1.35 times the Maximum Annual Debt Service of all water and sewer revenue bonds of the City payable out of the Bond Fund at any time outstanding, including the Future Parity Bonds proposed to be so issued. If Future Parity Bonds proposed to be so issued are for the sole purpose of refunding out- standing water and sewer revenue bonds, such certi- fication 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 required for the bonds to be refunded thereby and the maturities of such refunding bonds are not extended beyond the matur- ities of the bonds to be refunded thereby. Nothing herein contained shall prevent the City from issuing water and sewer revenue bonds which are a charge upon the Gross Revenue of the Waterworks Utility of the City junior or inferior to the payments required to be made therefrom into the Bond Fund for the payment of the Bonds and any Future Parity Bonds. The right of the City to issue additional Prior Lien Bonds as herein defined is cancelled and terminated. Section 16. The City may issue advance refunding bonds pursuant to the laws of the State of Washington and use money available from any other lawful source to pay the principal of and interest on the Bonds, or such portion thereof included in a refunding or defeasance plan, as the same become due and payable - 25 - and to redeem and retire, release or refund all such then- outstanding Bonds (hereinafter collectively called the "defeased Bonds") and to pay the costs of such refunding or defeasance. In the event that money and/or Government Obligations sufficient in amount, together with known earned income from the invest- ments thereof, to redeem and retire, release or refund the defeased Bonds in accordance with their terms, are set aside irrevocably in a special fund for and pledged irrevocably to such redemption and retirement (hereinafter called the "trust account"), then all right and interest of the owners of the defeased Bonds in the covenants of this ordinance and, except as hereinafter provided, in the Gross Revenue of the Waterworks Utility, ULID Assessments, funds and accounts obligated to the payment of such defeased Bonds, other than the right to receive the funds so set aside and pledged, thereafter shall cease and become void. Such owners thereafter shall have the right to receive payment of the principal of and interest on the defeased Bonds from the trust account and, in the event the funds in the trust account are not available for such payment, shall have the residual right to receive payment of the principal of and interest on the clefeased Bonds from the Gross Revenue of the Waterworks Utility and ULID Assessments without any priority of lien or charge against that revenue or those assessments or covenants with respect thereto except to be paid therefrom. After the establishing and full funding of such trust account, the City then may apply any money in any other fund or account established for the payment or redemption of the defeased Bonds to any lawful purposes as it shall determine, subject only to the rights of the owners of any other Bonds or bonds then outstanding. In the event that the refunding plan provides that the defeased Bonds or the refunding bonds to be issued be secured by - 26 - 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 computa- tion of coverage for determining compliance with the rate covenants. Section 17. The City finds and declares that (a) it is a duly organized and existing governmental unit of the State of Washington and has general taxing power; (b) no Bond which is part of this issue of Bonds is a "private activity bond" within the meaning of Section 141 of the Internal Revenue Code of 1986 (the "1986 Code"); (c) at least 95 percent of the net proceeds of the Bonds will be used for local governmental activities of the City (or of a governmental unit the jurisdiction of which is entirely within the jurisdiction of the City); (d) the aggregate face amount of all tax-exempt obligations (other than private activity bonds) issued by the City and all entities subordinate to the City (including any entity which the City controls or which derives its authority to issue tax-exempt obligations from the City) during the current calendar year is not reasonably expected to exceed $5,000,000; and (e) the amount of tax-exempt obligations, including the Bonds, designated as "qualified tax-exempt obligations" for the purposes of Section 265(b)(3) of the 1986 Code or any predecessor provision of federal law by the City during the calendar year in which the Bonds are issued does not exceed $10,000,000. The City therefore certifies that it is an issuer which qualifies for the small governmental issuer - 27 - arbitrage rebate exemption under Section 148(f)(4)(C) of the 1986 Code and designates the Bonds as "qualified tax-exempt obligations" for the purposes of Section 265(b)(3) of the 1986 Code. Section 18. Harper, McLean & Company of Seattle, Washington, has presented a bond purchase agreement (the "Purchase Contract") to the City by which Harper, McLean & Company has offered to purchase the Bonds under the terms and conditions provided in the Purchase Contract and to order on behalf of the City the Acquired Obligations specified in Schedule A of the Refunding Trust Agreement (subject to substi- tution), which written Purchase Contract is on file with the City Clerk and is incorporated herein by this reference. The City Council finds that entering into the Purchase Contract is in the City's best interest and, therefore, accepts the offer contained in the Purchase Contract and authorizes the execution of the Purchase Contract by City officials. The Bonds will be printed at City expense and will be delivered to the purchaser in accordance with the terms of the Purchase Contract with the approving legal opinion of Roberts & Shefelman, municipal bond counsel of Seattle, Washington, relative to the issuance of the Bonds, printed on each Bond. Bond counsel has not been retained to and shall not be required to review or express any opinion concerning the completeness or accuracy of any official statement, offering circular or other sales material issued or used in connection with the Bonds except with respect to any description of the Bonds, and bond counsel's opinion shall so state. The proper City officials are authorized and directed to do everything necessary for the prompt execution and delivery of the Bonds to the purchaser, including the execution of the - 28 - Official Statement on behalf of the City, and for the proper application and use of the proceeds of the sale thereof. Section 19. Pending the printing, execution and delivery to the purchaser of the definitive Bonds, the City may cause to be executed and delivered to such purchaser a single temporary Bond in the total principal amount of the Bonds. Such temporary Bond shall bear the same date of issuance, interest rates, principal payment dates and terms and covenants as the defini- tive Bonds, shall be issued as a fully registered Bond in the name of such purchaser, and shall be in such form as acceptable to such purchaser. Such temporary Bond shall be exchanged for the definitive Bonds as soon as the same are printed, executed and available for delivery. If the Acquired Obligations are not acquired by the Refunding Trustee and the definitive Bonds are not ready for exchange and delivery within 45 days from the date of delivery of the temporary Bond, such temporary Bond shall be immediately retired at the original purchase price therefor plus accrued interest from money deposited with the Refunding Trustee. Section 20. This ordinance shall take effect from and after its passage and five days following the date of its publication in the official newspaper of the City. PASSED by the City Council and APPROVED by the Mayor of the City of Winslow, Washington, at a regular open public meeting thereof, this ~' ATTEST l" [ . ~- Ci~,~.-~lerk_Treas~ day of January, 1987. CITY OF WINSLOW, WASHINGTON Mayor ~ ' - 29 - City Attor 2088w