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ORD 80-14 WATERWORKS UTILITYCITY OF WINSLOW, WASHINGTON ORDINANCE NO. 80-14 AN ORDINANCE Of the City of Winslow, Washing- ton, relating to its utilities; providing for the combining of its water and sewer utilities into the waterworks utility of the City; pro- viding for the issuance of $2,818,000 par value of water and sewer revenue bonds of the City to pay part of the costs of carrying out the system or plan of additions to and betterments and ex- tensions of the waterworks utility of the City specified and adopted in Ordinance No. 77-2; fixing the date, denominations, interest rates, terms, maturities and form of those bonds; creating certain special funds and accounts; amending Ordinance No. 77-2; and providing for the sale and delivery of such bonds to Wm. P. Harper & Son & Company, a Division of Harper, McLean & Company, Seattle, Washington. WHEREAS, the City ( formerly Town ) of Winslow, Washington ( the "C i ty" ), has heretofore issued its "Water Revenue Bonds, 1962," pursuant to Ordinance No. 115, of which there are now out- standing $52,000 of such bonds; its "Water Revenue Bonds, 1967," pursuant to Ordinance No. 67-5, of which there are now outstanding $69,000 of such bonds, and its "Water Revenue Bonds, 1972," pursu- ant to Ordinance No. 7 2-12, of which there are now outstanding $175,000 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 has heretofore issued its "Sewer "pursuant to Ordinance No 24, of which there Revenue Bonds, 19 53, . are now outstanding $21,000 of such bonds, and its "Sewer Revenue Bonds, 1959, pursuant to Ordinance No. 79, of which there are now outstanding $29,000 of such bonds, all 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 sani- tary sewage disposal system; and WHEREAS, the City has heretofore 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 Utili- ties and Enterprise Fund, cancelled the "Sewer Revenue Fund" and "Water Revenue Fund" and directed that all monies 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 has intended to combine formally 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 of the City"), and intends to provide for a flow of revenue from such utility to assure the payment of the outstanding water revenue bonds and sewer revenue bonds; and WHEREAS, the City heretofore passed Ordinance No. 77-2 specifying and adopting a system or plan of additions to and betterments and extensions of the Waterworks Utility of the City and authorizing the issuance and sale of water and sewer revenue bonds in the principal amount of approximately $1,600,000 par value to be paid by revenues of the combined utility and by assessments to be levied in one or more utility local improvement districts - 2 - authorized to be created thereafter, creating a "Water and Sewer Construction Fund, 1977," and authorizing the issuance of interest- bearing warrants from that construction fund pending the sale of such bonds; and WHEREAS, by Ordinance No. 77-10, as amended, the City duly created, after proper notice and hearing, Utility Local Improvement District No. 3 for the purpose of constructing and installing a sanitary sewage disposal system both within and out- side the City and by Ordinance No. 77-11 the City duly created, after proper notice and hearing, Utility Local Improvement District No. 4 for the purpose of constructing and installing a sanitary sewage disposal system outside the corporate limits of the City; and WHEREAS, by Ordinance No. 80-09, as amended by Ordinance No. 80-11, the City approved and confirmed the final assessments and assessment roll for Utility Local Improvement District No. 3 in the amount of $1,240,148.99, and by Ordinance No. 80-10, as amended by Ordinance No. 80-11, the City approved and confirmed the final assessments and assessment roll for Utility Local Improvement District No. 4 in the amount of $414,893.15; 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: (a) "Bond Fund" shall mean that special fund of the City known as the "Water and Sewer Revenue Bond Fund, 1980," created by this ordinance for the payment of the principal of and interest on the Bonds and Future Parity Bonds. (b) "Bonds" shall mean the "Water and Sewer Revenue Bonds, 1980," authorized to be issued by this ordinance. - 3 - (c) "City" shall mean the City of Winslow, Washington. (d) "Construction Fund" shall mean the "Water and Sewer Construction Fund, 1977," created by Ordinance No. 77-2. (e) "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 revenue of the Water- works Utility of the City and ULID Assessments equal in 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. (f) "Maintenance and Operation Expenses" shall mean all reasonable 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. (g) "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. (h) "Prior Lien Bonds" shall mean the outstanding "Water Revenue Bonds, 1962," "Water Revenue Bonds, 1967," "Water Revenue Bonds, 1972," "Sewer Revenue Bonds, 1953," and "Sewer Revenue Bonds, 1959 ," of the City. ( i ) "Reserve Account" shall mean the account of that name created in the Bond Fund for the purpose of securing the pay- ment of the principal of and interest on the Bonds and Future Parity Bonds. (j) "Revenue of the Waterworks Utility of the City" shall mean all of the earnings and revenue received by the Water- works Utility of the City from any source whatsoever, except - 4 - general taxes, ULID Assessments, grants, proceeds from the sale of City property and bond proceeds. (k) "Sinking Account" shall mean the account of that name created in the Bond Fund for the purpose set forth in this ordinance. (1) "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 redemp- tion rights) is more than 1.25 times the average annual principal maturity of the bonds of such issue or series for the three matur- ity years immediately preceding such year. (m) "Term Bonds" shall mean those outstanding bonds of any single issue or series scheduled to mature in any Term Bond Maturity Year. (n) "ULID" shall mean Utility Local Improvement District. (o) "ULID Assessments" shall mean the assessments levied in such ULIDs of the City pledged to be paid into the Bond Fund and shall include installments thereof and interest and any penalties thereon. (p) "Utilities and Enterprise Fund" shall mean that fund created by Ordinance No. 74-2 of the City. (q) "Waterworks Utility of the City" shall mean the combined water system of the City and sanitary and sewage disposal system of the City and all additions thereto and betterments and extensions thereof at any time made. Section 2. The water system or utility of the City and the sewerage or sanitary sewage disposal system or utility of the City are hereby combined into the Waterworks Utility of the City. All revenue from the operation of those heretofore separate utili- ties shall be paid into the Utilities and Enterprise Fund and shall - 5 - be used in order of priority as specified in Section 12 of this ordinance. All actions heretofore taken by the City or its officers and employees thereof consistent with the operation of the combined Waterworks Utility of the City are hereby ratified and confirmed. Section 3. Section 3 of Ordinance No. 77-2 is amended to read as follows: Section 3. The estimated cost of the acquisition, construction and installation of the above-described additions to and betterments and extensions of the Waterworks Utility of the City is hereby declared to be, as nearly as may be, $4,728,092, such estimated cost (in addition to the funding of the Revenue Account) to be met and defrayed from the proceeds received from federal and state grants and the issuance and sale of approximately water and sewer Revenue Bonds $2,818,000,/the issuance of which is hereby authorized. The bonds shall be issued at such times and in such amounts or series as the City Council shall hereafter determine and shall contain such covenants and interest rates as the City Council shall hereafter approve. The bonds shall be payable from the gross revenues received from water furnished and sanitary sewage disposal service and from the receipt of assessments levied and assessed against properties specially benefited by the improvements included in one or more utility local improvement districts hereby author- ized to be created. Such assessments shall be for the sole purpose of payment into a special revenue bond redemption fund hereafter to be created in the office of the City Clerk-Treasurer for the pay- ment of the revenue bonds herein authorized to be issued. Section 4. Section 4 of Ordinance No. 77-2 is amended to read as follows: Section 4. The entire cost and expense of the _ improvements, less the proceeds of grants received by the City for - 6 - such purpose, shall be borne by and assessed against the proper- ties specially benefited by the improvements to be included in the utility local improvement districts to be established embracing, as near as may be, all the properties specially benefited by the improvements described with respect to such districts, except that the City Council may provide for assessment rolls which may be less than such entire cost of the improvements if provision is made for the payment of the balance of such costs through the revenue of the Waterworks Utility of the City. In accordance with the provisions of RCW 35.44.047, the City may use any method or combination of methods to compute assessments which may be determined to reflect fairly the special benefits to the properties being assessed. Section 5. For the purpose of providing part of the funds with which to carry out the improvements specified in Ordinance No. 77-2, as amended, and to fund the Reserve Account for the Bonds there shall be issued and sold the Bonds, heretofore designated as the "Water and Sewer Revenue Bonds, 1980," which shall be dated May 1, 1980, shal 1 mature on January 1, 2010, shall be numbered from 1 to 564, inclusive, shall be in denominations of $5,000 each except that Bond No. 1 shall be in the denomination of $3,000, and shall bear interest at the rate of 9.875% per year, payable on January 1, 1981, and semiannually thereafter on each succeeding July 1 and January 1, interest to maturity to be evidenced by coupons to be attached to the Bonds. If any Bonds are not redeemed upon proper presentation by their maturity date, the City shall pay interest at the Bond rate from and after their maturity date until such Bonds with interest are paid in full or sufficient money for such payment is on deposit in the Bond Fund and such Bonds have been called for redemption. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America at the office of the City Clerk-Treasurer or, at the option of the holder, - 7 - at either fiscal agency of the State of Washington in Seattle, Wash- ington, or New York, New York. The Bonds shall be payable solely from the Bond Fund. The Bonds shall be a valid claim of the holder thereof only as against the Bond Fund and the fixed amount of the Revenue of the Waterworks Utility of the City and ULID Assessments pledged to the Bond Fund and shall not be a general obligation of the City. Section 6. The City reserves the right to redeem Bonds Nos. 1 to 354, inclusive, maturing in the year 2010 as a whole, or in part in numerical order, on January 1, 1987, or any interest payment date thereafter at par plus accrued interest to the date of redemption. The City further reserves the right to redeem Bonds Nos. 355 through 564, inclusive, maturing in the year 2010 as a whole, or in part in numerical order, on the following dates at the following redemption prices, based on the par value of such Bonds plus accrued interest to the date of redemption: On January 1, 1990, or July 1, 1990, at 103% of par; On January 1, 1991, or July 1, 1991, at 102% of par; On January 1, 1992, or July 1, 1992, at 101% of par; and On January 1, 1993, or any interest payment date thereafter at par. Notice of any call for redemption of any of the Bonds prior to their maturity date shall be published once in the offi- cial newspaper of the City, or if there is no such newspaper in the official newspaper of Kitsap County, not less than 30 nor more than 45 days prior to the interest coupon due date on which the Bonds would be redeemed. Notice of such call for redemption shall also be mailed to Wm. P. Harper & Son & Company, a Division of Harper, McLean & Company, at its principal place of business in Seattle, Washington, or its successors, not less than 30 nor more than 45 - 8 - days prior to the interest coupon due date on which the Bonds would be redeemed. In addition, such redemption notice shall also be sent to Moody ' s Investors Service, Inc., and Standard & Poor ' s Corporation at their offices in New York, New York, but the mailing of such notice to such New York firms shall not be a condition precedent to the redemption of such Bonds. Interest on any Bonds so called for redemption shall cease on such call date upon payment of the redemption price into the Bond Fund. The City also reserves the right to purchase any or all of the Bonds on the open market at any time at a price not in ex- cess of par, with respect to Bonds Nos. 1 to 354, inclusive, and, with respect to Bonds Nos. 355 to 564, inclusive, 103% of par until July 1, 1990, 102% of par until July 1, 1991, 101% of par until July 1, 1992, and par thereafter, plus accrued interest to the date of such purchase. Section 7. The Bond Fund, herein designated the "Water and Sewer Revenue Bond Fund, 1980," is created in the office of the City Clerk-Treasurer. The Bond Fund is divided into the Principal and Interest Account, the Reserve Account and the Sinking Account. As long as any bonds are outstanding against the Bond Fund, the Clerk-Treasurer of the City shall set aside and pay into the Bond Fund all ULID Assessments paid in ULIDs Nos. 3 and 4 and all other ULID Assessments and out of the Revenue of the Waterworks Utility of the City, after the payment of Maintenance and Operation Ex- penses and setting aside the then current principal and interest requirements for the Prior Lien Bonds, certain fixed amounts without regard to any fixed proportion, namely: (a) Into the Principal and Interest Account there shall be paid the accrued interest received upon the delivery of the Bonds and, on or before the 20th day of each month commencing as of the month of July 1980, and continuing thereafter 1/6th of the next ensuing six months' interest - 9 - requirements for the Bonds and on or before January 1, 2010, sufficient money to redeem all of the remaining outstanding Bonds. Any amount so accumulated in the Principal and Interest Account may be invested in any legal investments pending the required payment of interest or principal. Earnings on the investments in the Principal and Interest Account shall be retained in that account for the purposes thereof. On and after January 1, 1987, money deposited in the Principal and Interest Account not needed to pay principal and interest installments maturing within the next 12 months on all bonds payable from the Bond Fund shall be used to redeem the Bonds on their first par call date pursuant to Section 6 of this ordinance and, if there are no such Bonds callable within the next 12 months, may be used to redeem or purchase prior to their maturity any bonds payable from the Bond Fund. (b) Into the Reserve Account there shall be paid out of the principal proceeds received from the issuance and sale of the Bonds the sum of $409,000, which shall constitute the required reserve amount for the Bonds. The City covenants that the required reserve shall at all times be maintained in the Reserve Account until there is sufficient amount in the Principal and Interest Account, Sinking Account and Reserve Account to pay the principal of, premium, if any, and inter- est on all outstanding bonds payable out of the Bond Fund, at which time the money in the Reserve Account may be used to pay such principal, premium, if any, and interest. In the event that there shall be a de- ficiency in the Principal and Interest Account to meet maturing installments of either interest on or principal of and interest on any of the Bonds or Future Parity Bonds then outstanding, such deficiency shall be made up from the Reserve Account by the withdrawal of cash therefrom. Any deficiency in the required reserve in the Reserve Account by reason of such withdrawal shall then be made up from the Revenue of the Waterworks Utility of the City and ULID Assessments paid into the Bond Fund which shall be first available a~r making necessary provls~ons £or the re- quired current payments into the Principal and Interest Account and Sinking Account. Money in the Reserve Account shall be invested in any legal investment permitted to the City maturing not later than the last matur- ity on any outstanding bonds payable from the Bond Fund and any earnings on such investments shall first be used to establish the required reserve in the Reserve Account and then shall be paid into the Principal and Interest Account for the purposes thereof. -10- (c) Into the Sinking Account there shall be paid not less than the following amounts for the following years to be paid by December 31 of such respect i ve years: Year Amount 1980 $157,000 1981 105,000 1982 100,000 1983 105,000 1984 110,000 1985 100,000 1986 110,000 Money in the Sinking Account shall be invested in any legal investment permitted to the City and the earnings on such investment shall be paid into the Principal and Interest Account for the purposes thereof, but no investment in the Sinking Account shall be made in any obligations maturing after January 1, 1987. All money in the Sinking Account shall be transferred on January 1, 1987, to the Principal and Interest Account for the purpose of redeeming Bonds. It is declared that in creating the Bond Fund and in fixing the amounts to be paid into it, the City Council has had due regard to the Maintenance and Operation Expenses and debt service requirements for the outstanding Prior Lien Bonds and declares that it is not setting aside into the Bond Fund a greater amount than in its judgment will be available over and above such Maintenance and Operation Expenses and prior debt service requirements. If the City fails to set aside and pay into the Bond Fund the amounts above set forth, the holder of any of the outstanding bonds that will be payable out of the Bond Fund may bring action against the City and compel such setting aside and payment. Section 8. The Revenue of the Waterworks Utility of the City and all ULID Assessments levied in ULIDs Nos. 3 and 4 and all other ULID Assessments have been and are hereby pledged for the payment of the Bonds and Future Parity Bonds and this pledge shall constitute a lien or charge upon such Revenue of the Waterworks Utility of the City and ULID Assessments subject only to Mainten- ance and Operation Expenses and the prior lien or charge on revenue from the water system of the Waterworks Utility of the City for the - 11 - payment of those Prior Lien Bonds consisting of water revenue bonds and the revenue from the sanitary sewage disposal system of the Waterworks Utility of the City for the payment of those Prior Lien Bonds consisting of sewer revenue bonds. Section 9. The Bonds shall be in substantially the following form: $5,000 ($3,000 on Bond No. 1 ) UNITED STATES OF AMERICA STATE OF WASHINGTON CITY OF WINSLOW WATER AND SEWER REVENUE BOND, 1980 9,875% The Ci t_V of Winslow, Washington ( the "City" ) , for value received hereby promises to pay to the bearer on the FIRST DAY OF JANUARY, 2010, the principal sum of FIVE THOUSAND DOLLARS ($3,000 on Bond No. 1) together with interest thereon at the rate of 9,875% per annum, payable on January 1, 1981, and semiannually thereafter on each succeeding July 1 and January 1, upon the presentation and sur- render of the attached interest coupons as they severally mature up to the bond maturity date. If this bond is not redeemed upon proper present- ation by its maturity date, the City shall pay interest at the bond rate from and after the bond maturity date until this bond with interest is paid in full or sufficient money for such payment is on deposit in the "Water and Sewer Revenue Bond Fund, 1980" (the "Bond Fund"), of the City created by Ordinance No. (the "Bond Ordin- ance"), and this bond has been duly called for redemption. Both principal of and interest on this bond are payable in lawful money of the United States of America at the office of the City Clerk-Treasurer or, at the option of the holder, at either fiscal agency of the State of Washington in Seattle, Washington, or New York, New York, solely out of the Bond Fund, into which fund the City hereby irrevocably binds itself to pay all ULID Assessments (as that term is defined in the Bond Ordinance) in Utility Local Improve- ment Districts Nos. 3 and 4 and all other ULID - 12- Assessments and certain fixed amounts out of the Revenue of the Waterworks Utility of the City (as that term is defined in the Bond Ordinance) without regard to any fixed proportion, namely, amounts, together with such assessments, suffi- cient to pay the principal of and interest on the bonds of this issue as they respectively become due, and to create a reserve, all at the times and in the manner set forth in the Bond Ordinance. The bonds of this issue are not a general obliga- tion of the City. This bond is one of a total issue of $2,818,000 par value of bonds ( the "Bonds" ) , all of like date, tenor and effect, except for denominations, numbers and options of redemption, all payable from the Bond Fund, and all issued by the City under and pursuant to the laws of the State of Washington and Ordinance No. 77-2 and the Bond Ordinance of the City for the purpose of obtain- ing the funds to pay part of the cost of carrying out the system or plan of additions to and better- ments and extensions of the Waterworks Utility of the City as specified and adopted in Ordinance No. 77-2 and applicable to Utility Local Improve- ment Districts Nos. 3 and 4. Reference is made to the Bond Ordinance as more fully describing the covenants with and rights of holders of this issue. The City reserves the right to redeem Bonds Nos. 1 to 354, inclusive, maturing in the year 2010 as a whole, or in part in numerical order, on January 1, 1987, or any interest payment date thereafter at par plus accrued interest to the date of redemption. The City further reserves the right to redeem Bonds Nos. 355 through 564, inclusive, maturing in the year 2010 as a whole, or in part in numerical order, on or after the dates set forth below on any interest payment date thereafter at par plus accrued interest to the date of redemp- tion at the following redemption prices on the following dates at the redemption price, based on the par value of such Bonds: On January 1, 1990, or July 1, 1990, at 103% o£ par; On January 1, 1991, or July 1, 1991, at 102% of par; On January 1, 1992, or July 1, 1992, at 101% of par; and On January 1, 1993, or thereafter at par. Notice of any call for redemption of any of the Bonds prior to their maturity date shall be published once in the official newspaper of the City, or if there is no such newspaper in the official newspaper of Kitsap County, not less than 30 nor more than 45 days prior to the -13- interest coupon due date on which the Bonds would be redeemed. Notice of such call for redemption shall also be mailed to Wm. P. Harper & Son & Company, a Division of Harper, MCLean & Company, at its principal place of business in Seattle, Washington, or its successors, not less than 30 nor more than 45 days prior to the interest cou- pon due date on which the Bonds would be redeemed. In addition, such redemption notice shall also be mailed to Moody's Investors Service, Inc., and Standard & Poor's Corporation at their offices in New York, New York, but the mailing of such notice to such New York firms shall not be a condition precedent to such redemption. Interest on any Bonds so called for redemption shall cease on such call date upon payment of the redemption price into the Bond Fund. The City also reserves the right to purchase any or all of the Bonds on the open market at any time at a price not in excess of par, with re- spect to Bonds Nos. 1 to 354, inclusive, and, with respect to Bonds Nos. 355 to 564, inclusive, 103% of par until July 1, 1990, 102% of par until July 1, 1991, 101% of par until July 1, 1992, and par thereafter, plus accrued interest to the date of such purchase. The Revenue of the Waterworks Utility of the City and all ULID Assessments levied in Utility Local Improvement Districts Nos. 3 and 4 and all other ULID Assessments are hereby pledged for the payment of the Bonds and any additional bonds hereafter issued on a parity of lien with the Bonds ("Future Parity Bonds") in accordance with the provisions of Section 14 of the Bond Ordin- ance, at any time outstanding, both principal and interest, and such payment and pledge shall con- stitute a lien or charge upon such Revenue of the Waterworks Utility of the City and ULID Assess- ments subject only to charges for maintenance and operation of such utility payable out of such revenue and the prior lien or charge on revenue from the water system of the Waterworks Utility of the City for the payment of those Prior Lien Bonds (as that term is defined in the Bond Ordinance) consisting of water revenue bonds and the revenue from the sanitary sewage disposal system of the Waterworks Utility of the City for the payment of those Prior Lien Bonds consisting of sewer revenue bonds. The City hereby covenants and agrees with the holder of this bond that it will keep and perform all covenants of this bond and of the Bond Or- dinance to be by it kept and performed, and it further covenants and agrees to maintain in good condition and to operate the Waterworks Utility of the City, and to establish, maintain and collect such rates and charges in connection therewith as will produce the revenue necessary -14- to meet the obligations of the City as herein set forth and as set forth in the Bond Ordinance. It is hereby certified and declared that the Bonds are issued pursuant to and in strict com- pliance with the Constitution and the laws of the State of Washington and the ordinances of the City, and that all acts, conditions and things required to be done precedent to and in the issuance of this bond have happened, been done and been performed as required by law. IN WITNESS WHEREOF, the City has caused this bond to be signed by the facsimile signature of its Mayor and attested by the manual signature of its City Clerk-Treasurer and a facsimile repro- duction of the seal of the City to be imprinted hereon, and the interest coupons attached to be signed with the facsimile signatures of such officials this first day of May, 1980. CITY OF WINSLOW, WASHINGTON ATTEST: By ( facsimile signature ) Mayor follows: City Clerk-Treasurer The form of the interest coupon shall be substantially as Coupon No. $ (Unless the bond referred to below has been pre- viously redeemed ) On the FIRST DAY OF (JANUARY) ( JULY ) , 2010, the CITY OF WINSLOW, WASHINGTON, upon presentation and surrender of this coupon, will pay to the bearer at the office of the City Clerk-Treasurer or, at the option of the holder, at either fiscal agency of the State of Washing- ton in Seattle, Washington, or New York, New York, the amount shown hereon in lawful money of the United States of America, that sum being the interest due that date on its "Water and Sewer Revenue Bond, 1980," dated May 1, 1980, and numbered . CITY OF WINSLOW, WASHINGTON ATTEST: By ( facsimile signature ) Mayor ( facsimile signature ) City Clerk-Treasurer Section 10. The Bonds shall be printed or lithographed on good bond paper and shall be signed by the facsimile signature - 15- of the Mayor and attested by the manual signature of the City Clerk-Treasurer, and shall have a facsimile reproduction of the seal of the City imprinted thereon, and the interest coupons attached thereto shall bear the facsimile signatures of the Mayor and the City Clerk-Treasurer. Section 11. The City hereby covenants and agrees with the owner and holder of each of the Bonds as follows: (a) All ULID Assessments levied in ULIDs Nos. 3 and 4 and all other ULID Assessments shall be paid into the Bond Fund and may be used to pay the principal of and interest on the Bonds and/ or any Future Parity Bonds, without those ULID Assessments being particularly allocated to the payment of the principal and interest of any particular issue of bonds. It is hereby further provided, however, that nothing in this ordin- ance or this section shall be construed to pro- hibit the City from issuing water and sewer revenue bonds junior in lien to the Bonds and pledging as security for their payment assess- ments levied in any ULIDs which may have been specifically created to pay part of the cost of improvements to the Waterworks Utility of the City for which those junior lien bonds were specifically issued. (b) It will establish, maintain and collect such rates and charges for water and sewer service which, together with the collection of ULID Assessments in ULIDs Nos. 3 and 4 and all other ULID Assessments, will make available for the payment of the principal and interest as the same shall become due on the Bonds and on any Future Parity Bonds an amount which shall, after deducting Maintenance and Operation Expenses but before depreciation, be equal to at least 1.35 times the maximum annual principal and interest requirements of all water and sewer revenue bonds payable out of the Bond Fund at any time outstanding, but excluding the principal amount required to be paid on any Term Bonds, less the earnings on investments in the Bond Fund. ( c ) It will at all times maintain the Water- works Utility of the City in good repair, working order and condition, and will at all times operate the utility and the business in connec- tion therewith in an efficient manner and at a reasonable cost. (d) It will not sell or voluntarily dispose of all of the properties of the Waterworks Utility -16- of the City unless provision is made for payment into the Bond Fund of a sum sufficient to pay the principal of, premium, if any, and interest on all of the Bonds outstanding in accordance with the terms thereof, nor will it sell or voluntarily dispose of any part or all of the properties of the Waterworks Utility of the City (unless the same are no longer used, useful or necessary in the operation of such utility) unless provision is made for payment into the Bond Fund of an amount which will be in at least the same propor- tion to the amount of the Bonds outstanding that the revenue from the portion of the properties of the Waterworks Utility of the City sold or disposed of which is available for debt service on the Bonds outstanding for the twelve months preceding such sale or disposition bears to the revenue available for such debt service from the Waterworks Utility of the City for the same period. Any such money so paid into the Bond Fund shall be used to redeem and retire the Bonds outstanding at the earliest possible date. (e) It will, while any bonds payable out of the Bond Fund remain outstanding, keep proper and separate accounts and records in which complete and separate entries shall be made of all trans- actions relating to its Waterworks Utility of the City, and it will furnish Wm. P. Harper & Son & Company, a Division of Harper, McLean & Company, of Seattle, Washington, or its successor, not more than 60 days after the close of each fiscal year, a complete operating and income statement of the Waterworks Utility in reasonable detail, and it will similarly furnish such statements to any subsequent holder or holders of such bonds at the written request of such holder or holders thereof, and it will grant any holder or holders of at least twenty-five percent of the outstanding bonds the right at all reasonable times to inspect the Waterworks Utility of the City and all records, accounts and data of the City relating thereto. In lieu of such operating and income statement, the City may furnish copies of the audit made by the Auditor of the State of Washington, as required by law, or the audit made by an independent auditing firm or auditor retained by the City for such purpose. (f) It will at all times carry fire and extended coverage and such other forms of insur- ance on such of the buildings, equipment, facili- ties and properties of the City as under good practice are ordinarily carried on such buildings, equipment, facilities and properties by privately owned utilities engaged in the operation of water and sewer systems to the full insurable value thereof, and will also carry adequate public liability insurance at all times, and war risk -17- insurance on all of such properties if the same should become available. The premiums on such insurance policies are hereby declared to be a normal Maintenance and Operation Expense. (g) It will not furnish water or sewer service to any customer whatsoever free of charge, and it shall no 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 that if on the first day of January in any year two installments of ULID Assessments have been delinquent for more than one year, the City shall proceed with the foreclosure of the delinquent assessments or delinquent in- stallments thereof in the manner required by law on or before March 1 immediately following such month of January. (h) It will make no use of the proceeds of the Bonds or other funds of the City at any time during the term of the Bonds which, if such use had been reasonably expected at the date that the Bonds are issued, would have caused such Bonds to be arbitrage bonds within the meaning of Section 103(c) of the United States Internal Revenue Code of 1954, as now amended, and applicable regula- tions thereunder. Section 12. The Revenue of the Waterworks Utility of the City (except for earnings from investments in the Bond Fund which shall be used as provided in Section 7) shall be used only for the following purposes and in the following order of priority: (a) To pay Maintenance and Operation Expenses; (b) To make all payments as required to be made into the respective bond redemption funds in amounts sufficient to pay the principal of and interest on the Prior Lien Bonds as the same shal 1 become due; (c) To make all payments as required to be made into the Principal and Interest Account and Sinking Account in the Bond Fund; (d) To make all payments as required to be made into the Reserve Account; and ( e ) To retire by redemption or purchase reve- nue bonds of the City outstanding as authorized in various bond ordinances of the City or to make necessary additions, betterments and improvements and repairs to or extensions and replacements of the Waterworks Utility of the City or for any other proper purposes connected with the Water- works Utility of the City for which such money may be lawful 1 y used. -18- Section 13. In the event the City shall issue advance refunding bonds pursuant to the laws of the State of Washington, or have money available from any other lawful source, to pay the prin- cipal of and interest on the Bonds or such portion thereof included in the refunding plan as the same become due and payable and to refund all such then outstanding Bonds and to pay the costs of re- funding, and shall have irrevocably set aside for and pledged to such payment and refunding, money and/or direct obligations of the United States of America or other legal investments sufficient in amount, together with known earned income from the investments thereof, to make such payments and to accomplish the refunding as scheduled (hereinafter called the "trust account"), and shall irrev- ocably make provisions for redemption of such Bonds, then in that case all right and interest of the owners or holders of the Bonds to be so retired or refunded and the appurtenant coupons (herein- after collectively called the "defeased Bonds") in the covenants of this ordinance, in the Revenue of the Waterworks Utility of the City, any ULID Assessments, and funds and accounts obligated to the payment of such bonds shall thereafter cease and become void, except such owners and holders 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 defeased Bonds from the Revenue of the Waterworks Utility of the City without any priority of lien or charge against those revenues or covenants with respect thereto except to be paid therefrom. After the establishing and full funding of such trust account, the City may then apply any money in any other funds or accounts established for the payment or redemption of the defeased Bonds to any lawful -19- purposes as it shall determine, subject only to the rights of the holders of any other bonds then outstanding. In the event that the refunding plan provides that the Bonds being refunded or the refunding bonds to be issued be secured by cash and/or direct obligations of the United States of America or other legal investments pending the prior redemption of those Bonds being refunded and if such refunding plan also provides that certain cash and/or direct obligations of the United States of America or other legal investments are irrevocably pledged for the prior redemption of those Bonds included in the 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 coverage for the issuance of Future Parity Bonds and the annual computation of coverage for determining compliance with the rate covenants. Section 14. The City covenants that it will not create any special fund or funds for the payment of other revenue bonds, warrants or obligations, or authorize or issue any other revenue bonds, warrants or obligations which would rank on a parity with or have any priority over the payments into or the money in the Bond Fund except that it reserves the right for: ( a ) The purpose of acquiring, constructing and installing additions and improvements to and extensions and betterments of, acquiring necessary equipment for or making necessary replacements of equipment or capital improve- ments to the Waterworks Utility of the City; or (b) The purpose of exchanging or purchasing and retiring prior to or at their maturity any outstanding water and sewer revenue bonds of the C i ty; to issue additional and/or refunding water and sewer revenue bonds (herein defined as "Future Parity Bonds") and to make payments into - 20- the Bond Fund for the payment of such Future Parity Bonds from the Revenue of the Waterworks Utility of the City, together with ULID Assessments collected in any ULID hereafter created in connection with the issuance of such Future Parity Bonds sufficient to pay the principal of and interest on such Future Parity Bonds, which such payments may rank equally out of such Revenue of the Waterworks Utility of the City and ULID Assessments collected in ULIDs Nos. 3 and 4 if the City complies with the following conditions: (a) There shall be no deficiency in the Bond Fund; (b) The ordinance providing for the issuance of such Future Parity Bonds shall require that any and all ULID Assessments and interest there- on shall be paid directly into the Bond Fund; ( c ) The Reserve Account shall be increased to an amount at least equal to the maximum debt service requirements in any one year over the life of the then outstanding water and sewer revenue bonds and such Future Parity Bonds being issued, including interest on, but excluding the principal of a Term Bond Maturity Year. This increase will be paid from assessments levied and first collected or in the event no assess- ments are levied such amount shall be paid from revenue within five years from the date of issuance of such bonds or may be paid from part of the proceeds of such Future Parity Bonds. (d) There shall be on file with the City a certificate of either an independent certified public accountant or a professional engineer experienced in municipal utilities and licensed to practice in the State of Washington to the effect that the Revenue of the Waterworks Util- ity of the City for any 12 consecutive calendar months out of the immediately preceding 24 con- secutive 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 additional revenues reasonably anticipated to be collected in any ULID created to pay, in whole or in part, such Future Parity Bonds, 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 the Future Parity Bonds, and after giving effect to any probable future increase or decrease in - 21 - Maintenance and Operation Expenses and to any probable future increase or decrease in revenues resulting from growth or shrinkage in the number of water and sewer users, are deemed sufficient, after the payment of Maintenance and Operation Expenses, but before depreciation, to equal at least 1.35 times the maximum annual principal and interest requirement, excluding Term Bond principal and less interest earnings on investments in the Bond Fund, of all bonds payable out of the Bond Fund at any time out- standing, including the Future Parity Bonds to be so issued, except that if the Future Parity Bonds to be so issued are for the sole purpose of refunding outstanding water and sewer revenue bonds, such certification of coverage shall not be required if the amount required for the pay- ment 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 maturities of the bonds to be refunded thereby. Section 15. Wm. P. Harper & Son & Company, a Division of Harper, McLean & Company, of Seattle, Washington, has submitted an offer to purchase the Bonds under the terms and conditions set forth therein, which offer is on file with the City Clerk-Treasurer and is by this reference incorporated herein. The City Council deems it to be in the best interests of the City that such offer be accepted and, therefore, hereby accepts the same. The Bonds shall, therefore, immediately upon their execution be delivered to the pur- chasers upon payment for the Bonds in accordance with such offer. Upon the delivery of the Bonds the City shall furnish the purchaser the opinion of Roberts, Shefelman, Lawrence, Gay & Moch, municipal bond counsel of Seattle, Washington, approving the legality of the issuance thereof. Bond counsel shall not be required to review and shall express no opinion concerning the completeness or accuracy of any official statement, offering circular or other sales material issued or used in connection with the Bonds. The accrued interest, if any, shall be deposited in the Principal and Interest Account in the Bond, and the principal proceeds received shall be deposited in - 22- the Construction Fund after payment into the Reserve Account of the amount specified in Section 7 of this ordinance. The Mayor and/or City Clerk-Treasurer are authorized and directed to execute on behalf of the City all closing documents required to be furnished at the time of the delivery of the Bonds to the purchaser thereof. Section 16. This ordinance shall take effect from and after its passage and five (5) days following its publication as required by law. PASSED by the City Council and APPROVED by the Mayor of the City of Winslow, Washington, at a special open public meeting thereof, this 28th day of April, 1980, of which notice as required by law has been given. Mayor ATTEST: - 23-