HomeMy WebLinkAboutR-1998-132 Water/Revenue BondsCITY OF YAKIMA, WASHINGTON
RESOLUTION NO. R-98-132
A RESOLUTION authorizing the execution and delivery of a contract
for purchase of the City's water and sewer revenue and refunding
bonds, 1998, in the aggregate principal amount of $7,910,000,
fixing certain tenus of the bonds, providing for the refunding of
certain outstanding revenue bonds, approving the form of the
official statement therefor and the distribution thereof, and
ratifying certain acts and proceedings.
WHEREAS, the City of Yakima, Washington (the "City"), by Ordinance No. 98-31
passed August 4, 1998, authorized the issuance of the City's Water and Sewer Revenue and
Refunding Bonds, 1998 (the "Bonds"); and
WHEREAS, certain terms of the Bonds were to be determined by subsequent resolution
of the Council; and
WHEREAS, the Director of Finance and Budget of the City has, with the approval of the
Council, entered into negotiations for the sale of $7,910,000 aggregate principal amount of the
Bonds; and
WHEREAS, such negotiations have been completed and the Director of Finance and
Budget recommends that the City accept the offer to purchase the Bonds made by Seattle
Northwest Securities Corporation (the "Purchaser") which offer is set forth in the Purchase
Contract for the Bonds dated September 15, 1998 (the "Purchase Contract"), a copy of which has
been presented at this meeting and is on file with the City Clerk;
NOW, THEREFORE, BE IT RESOLVED by the City of Yakima, Washington, as
follows:
Section 1. Definitions. Capitalized terms used herein and not otherwise defined shall
have the same meanings, respectively, in this resolution as such terms are given in Section 1.1 of
Ordinance No. 98-31.
Section 2. Acceptance of Offer. The Council hereby finds and determines that the
Purchase Contract is fair and reasonable and in the best interest of the City and that the Bonds
shall be sold upon the terms and conditions set forth in the Purchase Contact and upon the basis
of the representations therein set forth.
The Council further finds and determines that all conditions precedent to or concurrent
with the acceptance of the Purchase Contract by the Council have been met.
The Council hereby accepts the Purchase Contract and hereby authorizes and directs the
Director of Finance and Budget to execute the Purchase Contract and deliver it to the Purchaser.
The Bonds shall be issued and delivered to the Purchaser upon payment of the purchase
price specified in the Purchase Contract, plus accrued interest from their date to the date of their
delivery.
Section 3. Schedule of Maturities and Interest Rates. The Bonds shall be dated
October 1, 1998 and shall mature on September 1 of the following years in the following
amounts and shall bear interest as follows:
Maturity Year Amount Rate
1999 $195,000 4.00%
2000 175,000 4.00
2001 180,000 4.00
2002 595,000 4.00
2003 505,000 4.00
2004 520,000 4.00
2005 545,000 4.00
2006 570,000 4.10
2007 585,000 4.10
2008 610,000 5.00
2009 640,000 4.20
2010 665,000 4.25
2011 695,000 4.30
2013 365,000 4.45
2014 200,000 4.45
2015 205,000 4.50
2018 660,000 4.60
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Section 4. Optional and Mandatory Redemption. The Bonds maturing in the years 1998
through 2008 shall not be subject to redemption prior to their stated maturity dates. The Bonds
maturing on or after September 1, 2009, shall be subject to redemption prior to their stated
maturities at the option of the City on and after September 1, 2008, in whole or in part at any
time (maturities to be selected by the City and by lot within a maturity), at 100% of the principal
amount thereof plus accrued interest, if any, to the date of redemption.
Bonds maturing in 2013 and 2018 (Term Bonds) shall be redeemed prior to maturity by
lot (or paid at maturity) on September 1 in years and amounts as follows:
Term Bonds Due 2013
2012
2013
$180,000
185,000
$365,000
Term Bonds Due 2018
2016 $210,000
2017 220,000
2018 230,000
$660,000
Section 5. Execution and Delivery of the Bonds. The proper officers of the Council and
the Director of Finance and Budget of the City are hereby authorized and directed to do all things
necessary or proper for the printing, execution and delivery of the Bonds to the Purchaser in
accordance with the terms of the Purchase Contract and Ordinance No. 98-31, as well as this
resolution, and for the proper application and use of the proceeds of such sale.
Section 6. Official Statement; Use of Documents. The Director of Finance and Budget is
authorized and directed to execute and deliver to the Purchaser copies of an Official Statement in
substantially the form of the Preliminary Official Statement dated September 4, 1998; provided,
however, that the Director of Finance and Budget is authorized to supplement or amend the
Official Statement as the Director of Finance and Budget, with the approval of bond counsel to
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the City, deems necessary or appropriate. The Council represents and warrants to the Purchaser
that the Preliminary Office Statement is "deemed final" by the City as of the date hereof within
the meaning of paragraph 17 C.F.R. § 240.15c2-12 promulgated by the Securities and Exchange
Commission ("Rule 15c2-12"), except for the omission of such information as may be permitted
by Rule 15c2-12.
The Council approves and authorizes the use of such Official Statement (including any
such supplements and amendments thereto) in connection with the public offering and sale of the
Bonds by the Purchaser.
Section 7. Refunding Account. There is hereby authorized and established a special
account of the City to be maintained with the Refunding Agent to be known as the "City of
Yakima 1998 Refunding Account" (the "Refunding Account"), which account shall be drawn
upon for the sole purpose of paying the principal of and interest on the Refunded Bonds maturing
after 1998 and of paying costs related to issuance of the Bonds and refunding such Refunded
Bonds.
Money in the Refunding Account shall be used immediately upon receipt thereof to
defease such Refunded Bonds and discharge the other obligations of the City relating thereto
under Ordinance No. 3380 of the City, by providing for the payment of the principal of and
interest on the Refunded Bonds maturing after 2001 as set forth below. The City shall defease
such bonds and discharge such obligations by the use of money in the Refunding Account to
purchase certain "Government Obligations," as such obligations are defined in Chapter 39.53
RCW as now or hereafter amended (which obligations so purchased, are herein called "Acquired
Obligations"), bearing such interest and maturing as to principal and interest in such amounts and
at such times which, together with any necessary beginning cash balance, will provide for the
payment of:
(a) the interest on the Refunded Bonds maturing after March 1, 2001 due and payable
on or prior to March 1, 2001;
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(b) the redemption price (100% of the principal amount) payable on March 1, 2001
for the Refunded Bonds maturing after 2001.
Such Acquired Obligations shall be purchased at a yield not greater than the yield
permitted by the Code and regulations relating to acquired obligations in connection with
refunding bond issues.
In order to carry out the refunding and defeasance of the Refunded Bonds, the Director of
Finance and Budget is hereby authorized to appoint as escrow agent a bank or trust company
qualified by law to perform the duties described herein (the "Refunding Agent"). Any beginning
cash balance and the Acquired Obligations shall be irrevocably deposited with the Refunding
Agent in an amount sufficient to defease and redeem the Refunded Bonds maturing after 1998 in
accordance with this resolution. Any amounts described in subparagraphs (a) through (b) of this
section that are not provided for in full by such beginning cash balance and the purchase and
deposit of the Acquired Obligations described in this section shall be provided for by the
irrevocable deposit of the necessary amount out of the proceeds of sale of the Bonds or any other
money of the City legally available therefor with the Refunding Agent. The proceeds of the
Bonds remaining in the Refunding Account after acquisition of the Acquired Obligations and
provision for the necessary beginning cash balance shall be utilized to pay expenses of the
acquisition and safekeeping of the Acquired Obligations and the costs of issuing the Bonds. The
City may, from time to time, transfer, or cause to be transferred, from the Refunding Account
any money not thereafter required for the purposes set forth in subparagraphs (a) through (b)
above, subject to verification in writing by an independent certified public accountant that such
transfer will not result in inadequate funds being available to make the required payments
therefrom.
Section 8. Redemption of Refunded Bonds. The City hereby irrevocably sets aside
sufficient funds through the purchase of Acquired Obligations and an initial cash deposit to make
the payments specified in subparagraphs (a) through (b) of Section 7 above.
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The City hereby irrevocably calls for redemption on March 1, 2001, the Refunded Bonds
maturing on and after 2002 in accordance with the provisions of Ordinance No. 3380.
Said defeasance and call for redemption of such Refunded Bonds shall be irrevocable
after the final establishment of the Refunding Account and delivery of the Acquired Obligations
and the requisite cash deposit, if any, to the Refunding Agent.
The Refunding Agent is hereby authorized and directed to notify the fiscal agent to give
notice of the redemption of such Refunded Bonds in accordance with the applicable provisions of
Ordinance No. 3380. The Director of Finance and Budget is authorized and requested to provide
whatever assistance is necessary to accomplish such redemption and the giving of notice
therefor. The costs of publication of such notice shall be an expense of the City.
The Refunding Agent is hereby authorized and directed to pay to the fiscal agency or
agencies of the State of Washington, sum sufficient to pay, when due, the payments specified in
subparagraphs (a) through (b) of Section 7 above. All such sums shall be paid from the money
and Acquired Obligations deposited with said Refunding Agent pursuant to Sections 7 and 8 of
this resolution, and the income therefrom and proceeds thereof. All such sums so paid shall be
credited to the Refunding Account. All money and Acquired Obligations deposited with said
bank and any income therefrom shall be held, invested and applied in accordance with the
provisions of this resolution and with the laws of the State of Washington for the benefit of the
City and owners of such Refunded Bonds.
The City will take such actions as are found necessary to see that all necessary and proper
fees, compensation and expenses of the Refunding Agent shall be paid when due. The proper
officers and agents of the City are directed to obtain from the Refunding Agent an agreement
setting forth the duties, obligations and responsibilities of the Refunding Agent in connection
with the redemption and retirement of such Refunded Bonds as provided herein and making
provision for payment of the fees, compensation and expenses of such Refunding Agent as may
be satisfactory to it. Such agreement shall be in substantially the form set forth in Exhibit A
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attached to this resolution and incorporated herein by this reference. The Director of Finance and
Budget is authorized to execute and deliver such agreement on behalf of the City.
Section 9. Findings of Savings and Defeasance. The Council hereby finds and
determines that the issuance and sale of the Bonds at this time will effect a savings to the City
and its taxpayers. In making such finding and determination, the Council has given
consideration to the interest on and the fixed maturities of the Bonds and such Refunded Bonds,
the costs of issuance of the Bonds and the known earned income from the investment of the
proceeds of sale of the Bonds pending redemption and payment of such Refunded Bonds.
The Council hereby also finds and determines that the Acquired Obligations to be
deposited with the Refunding Agent and the income therefrom, together with any necessary
beginning cash balance, are sufficient to redeem such Refunded Bonds and will discharge and
satisfy the obligations of the City under the ordinance authorizing the issuance of such Refunded
Bonds and the pledges of the City therein. Immediately upon the delivery of such Acquired
Obligations to the Refunding Agent and the deposit of any necessary beginning cash balance,
such Refunded Bonds shall be deemed not to be outstanding under Ordinance No. 3380 of the
City and shall cease to be entitled to any lien, benefit or security under such ordinance except the
right to receive payment from the Acquired Obligations and beginning cash balance so set aside
and pledged.
Section 10. Ratification of Past Acts. All actions and proceedings heretofore taken by
the officers, agents, attorneys and employees of the City in connection with the issuance and sale
of the Bonds are hereby ratified, approved and confirmed.
Section 11. Bond Insurance. The provisions of Exhibit B, relating to bond insurance, are
incorporated by reference herein.
Section 12. Effective Date. This resolution shall be in effect from and after its adoption
in accordance with law.
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ADOPTED at a regular meeting of the City Council of the City of Yakima this 15`h day of
September, 1998.
CITY OF YAKIMA, WASHINGTON
B
ATTEST:
/ c.171
City Clerk
APPROVED AS TO FORM:
EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, made and entered into as of the 15`h day of September,
1998, by and among the City of Yakima, Washington (the "City") and Chase Manhattan Bank,
Seattle, Washington (the "Refunding Agent");
WITNESSETH:
Section 1. Recitals. The City has heretofore issued and sold its Water and Sewer
Revenue Bonds, 1991 (the "1991 Bonds"), its State Revolving Fund Loan, 1992 (the "1992
Loan"), and its Water and Sewer Revenue and Refunding Bonds, 1996 (the "1996 Bonds")
pursuant to Ordinance No. 3380, Ordinance No. 3454 and Ordinance No. 96-40, respectively.
The City by Ordinance No. 98-31, passed on August 4, 1998, and Resolution No.
passed on September 15, 1998 (together the "Ordinance"), has determined to pay and redeem on
March 1, 2001, the 1991 Bonds maturing on and after March 1, 2002, (the "Refunded Bonds") by
the issuance of refunding bonds in the aggregate principal amount of $7,910,000 to be issued
under date of October 1, 1998 (the "Bonds"). Reference is made to the Ordinance for a detailed
description of the plan of refunding.
Section 2. Provisions for Refunding the Refunded Bonds. To accomplish the refunding
of the Refunded Bonds in the manner set forth in the Ordinance, the City hereby agrees that,
simultaneously with the issuance and delivery of the Bonds, it will irrevocably deposit with the
Refunding Agent, in trust for the security and benefit of the owners of the Refunded Bonds,
obligations or evidence thereof or subscription rights thereto ("Acquired Obligations") as
described in Annex A attached hereto, and a beginning cash balance of $ , sufficient to
provide for the payment of:
(a) the interest on the Refunded Bonds due and payable on or prior to March 1, 2001;
and
(b) the redemption price (100% of the principal amount) payable on March 1, 2001,
for the Refunded Bonds maturing after March 1, 2001.
Such Acquired Obligations shall be paid for out of the proceeds of sale of the Bonds and
out of other moneys of the City now on hand and available.
On or before the delivery of the Bonds to the initial purchaser thereof, the City agrees that
it will cause to be delivered to the Refunding Agent statements setting forth the maturity
schedule of the Refunded Bonds by CUSIP number, amount, date of maturity and interest rates,
the amount of interest to be paid on each semiannual interest payment date, and the amount of
the principal to be paid on the date that the Refunded Bonds are to be redeemed.
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The City by the Ordinance has directed to be set aside sufficient money to purchase
Acquired Obligations that will be used to pay interest on the Refunded Bonds as the same falls
due. The City by the Ordinance has irrevocably called the Refunded Bonds for redemption and
prepayment on their respective call dates. Said provisions for defeasance, payment, redemption
and prepayment of the Refunded Bonds shall be irrevocable upon the final establishment of the
escrow account and delivery of the Acquired Obligations to the Refunding Agent. The
Refunding Agent, in concert with the Director of Finance and Budget of the City, shall provide
for publication and mailing of the proper notices of such redemption and prepayment in
accordance with the provisions of the Ordinance. The cost of such publication and mailing shall
be paid by the City.
Section 3. Investments and Disbursements. The City reserves the right at or prior to
delivery of the Bonds to substitute for a temporary period until receipt of Acquired Obligations
on Annex A other direct United States obligations or cash for any of the Acquired Obligations if
(a) in the opinion of Preston Gates & Ellis LLP, bond counsel for the City, the Bonds will remain
exempt from federal income taxation under Section 103 of the Internal Revenue Code of 1986, as
amended, and (b) such substitution shall not impair the timely payment of the amounts required
to be paid under the plan of refunding specified in Section 2 hereof. Acquired Obligations
substituting for securities held, when received, will be received free with income accrued from
the date of closing and delivery of the Bonds. Upon that event, the substituted securities will be
returned to the supplier with accrued interest or any interest received. The Refunding Agent
shall present for payment on the due dates thereof any Acquired Obligations so deposited with it
and shall apply the proceeds derived therefrom and the interest paid thereon in accordance with
the provisions of the Ordinance and this agreement. Money shall be transferred, in a timely
manner, by the Refunding Agent to the fiscal agency or agencies of the State of Washington, as
paying agent and registrar of the Refunded Bonds (the "Bond Registrar"), in amounts sufficient
for the payments specified in subparagraphs (a) and (b) of Section 2 of this agreement.
Section 4. Custody and Safekeeping of Obligations and Notice of Insufficiency. On or
before each April 20 and October 20, the Refunding Agent shall render a statement as of the last
day of the prior month to the Bond Registrar and City, which statement shall set forth the cash
and Acquired Obligations held by the Refunding Agent, any of such Acquired Obligations that
have matured and the amounts received by the Refunding Agent by reason of such maturity, the
interest earned on any of such Acquired Obligations, a list of any investments or reinvestments
made by the Refunding Agent in other obligations and the interest and/or principal derived
therefrom, the amounts of cash delivered to the Bond Registrar and the dates of the use thereof
for the payment of the principal of and interest on the Refunded Bonds as the same shall become
due and payable, and any other transactions of the Refunding Agent pertaining to its duties and
obligations as set forth herein.
All Acquired Obligations, money and investment income deposited with or received by
the Refunding Agent pursuant to this agreement shall be trust funds for the specific purposes set
forth herein and may not be used for any other purpose. The Refunding Agent shall be liable for
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the preservation and safekeeping thereof; provided, however, it shall not be responsible for any
depreciation in value of any of the Acquired Obligations.
In the event the maturing principal of and interest on the Acquired Obligations and other
money held by the Refunding Agent pursuant to this agreement shall be insufficient or shall be
projected to become insufficient at any time in the future to make a payment described in Section
2, the Refunding Agent shall give the City prompt notice of such insufficiency or projected
insufficiency.
Section 5. Duties and Obligations of the Refunding Agent. The duties and obligations of
the Refunding Agent shall be as prescribed by the provisions of this agreement and the
Ordinance, and the Refunding Agent shall not be liable except for the performance of its duties
and obligations as so specifically set forth and to act in good faith in the performance thereof,
and no implied duties or obligations shall be incurred by the Refunding Agent other than those
specified herein.
The Refunding Agent may consult with counsel of its choice, and the opinion of such
counsel shall be full and complete authorization and protection in respect of any action taken or
not taken or suffered by it hereunder in good faith and in accordance with the opinion of such
counsel.
If any controversy arises between the parties hereto, the Refunding Agent shall not be
required to determine the same, but it may, in its discretion, institute such interpleader or other
proceedings in connection therewith as it may deem proper, and in following either course, it
shall not be liable, except as provided above. Nothing in this paragraph is intended to create or
expand upon any right that the Refunding Agent would otherwise have available to it under
applicable law to commence an interpleader action or to alter the obligations of the Refunding
Agent under this Escrow Agreement.
Section 6. Compensation of Refunding Agent. The arrangements heretofore made for
the payment to the Refunding Agent of the sum of $1,500 for services rendered by it (except for
costs of publication of redemption notices) pursuant to the provisions of this agreement are
satisfactory to it, and such payment is inclusive of all fees, compensation and expenses of the
Refunding Agent. Such arrangement for compensation and expenses is intended as
compensation for the ordinary services as contemplated by this agreement, and in the event that
the Refunding Agent renders any service hereunder not provided for in this agreement, or the
Refunding Agent is made a party to or intervenes in any litigation pertaining to this agreement or
institutes interpleader proceedings relative hereto, the Refunding Agent shall be compensated
reasonably by the City for such extraordinary services and reimbursed for all fees, costs, liability
and expenses (including reasonable attorneys' fees) occasioned thereby. In no event shall the
Refunding Agent be entitled to payment of any fee or cost out of, or ever assert any lien against,
the money or securities held by it in trust hereunder.
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Section 7. Surplus Money in Escrow. If at any time during the term of the escrow
created pursuant to this agreement, there are Acquired Obligations, Substitute Obligations and/or
money held by the Refunding Agent in excess of that required to make all of the payments
described in Section 2 in accordance with the initial verification or any subsequent verification
furnished to the Refunding Agent, when due, considering the earnings to be realized on the
investment of such obligations, and the City requests that such surplus obligations or the
proceeds thereof or such surplus money be returned by the Refunding Agent to the City or
requests that such surplus be applied to any fees of the Refunding Agent, then the Refunding
Agent shall do so at the times requested by the City. Before the return of any surplus to the City,
the Refunding Agent may require the City to furnish the Refunding Agent a verification or
opinion of the amount of such surplus satisfactory to the Refunding Agent.
Section 8. Limitation of Refunding Agent Duties. None of the provisions contained in
this agreement shall require the Refunding Agent to use or advance its own funds in the
performance of any of its duties or the exercise of any of its rights or powers hereunder. The
Refunding Agent shall be under no liability for the payment of interest on any funds or other
property received by it hereunder except to the extent the Refunding Agent is required by the
express terms of this agreement to invest such funds.
The Refunding Agent's liabilities and obligations in connection with this agreement are
confined to those specifically described herein. The Refunding Agent is authorized and directed
to comply with the provisions of this agreement and is relieved from all liability for so doing
notwithstanding any demand or notice to the contrary by any party hereto. The Refunding Agent
shall not be responsible or liable for the sufficiency, correctness, genuineness or validity of the
Acquired Obligations deposited with it; the performance or compliance by any party other than
the Refunding Agent with the terms or conditions of any such instruments; or any loss which
may occur by reason of forgeries, false representations or the exercise of the Refunding Agent's
discretion in any particular manner unless such exercise is negligent or constitutes willful
misconduct.
Section 9. Remission of Funds When Refunded Bonds are Paid in Full. At such time as
the Refunding Agent shall have completed all of the payments described in Section 2, the
Refunding Agent shall remit to the City any remaining Acquired Obligations, any Substitute
Obligations and money held pursuant to this agreement.
Section 10. Trust Fund. The Refunding Agent shall at all times hold the escrow account,
the Acquired Obligations and all other assets of the escrow account wholly segregated from all
other funds and securities on deposit with the Refunding Agent; it shall never allow the Acquired
Obligations or any other assets of the escrow account to be commingled with any other funds or
securities of the Refunding Agent and it shall hold and dispose of the assets of the escrow
account only as set forth herein. The Acquired Obligations and other assets of the escrow
account shall always be maintained by the Refunding Agent as trust funds for the benefit of the
owners of the Refunded Bonds; and a special account thereof shall at all times be maintained on
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the books of the Refunding Agent. The owners of the Refunded Bonds shall be entitled to the
same preferred claim and first lien upon the escrowed securities, the proceeds thereof, and all
other assets of the escrow account to which they are entitled as owners of the Refunded Bonds.
The amounts received by the Refunding Agent under this agreement shall not be considered as a
banking deposit by the City, and the Refunding Agent shall have no right to any lien or title with
respect thereto except as a trustee and agent under the terms of this agreement. The amounts
received by the Refunding Agent under this agreement shall not be subject to warrants, drafts or
checks drawn by the City or, except to the extent expressly herein provided, by the Bond
Registrar.
Section 11. Notices. All notices, requests or reports required or permitted to be given
hereunder shall, until further notice in writing, be given in writing at the following addresses:
To the City:
To the Refunding Agent:
City of Yakima
129 No. 2nd Street
Yakima, Washington 98901
Attention: Director of Finance and Budget
Attention:
Section 12. Miscellaneous. This agreement is governed by Washington law and may not
be modified except in writing signed by the parties. In the event any one or more of the
provisions contained in this agreement shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this agreement, but this agreement shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein.
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IN WITNESS WHEREOF, the parties have executed and delivered this agreement
pursuant to due and proper authorization, all as of the date and year first above written.
CITY OF YAKIMA, WASHINGTON
By
Director of Finance and Budget
By
Title:
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EXHIBIT B
Bond Insurance. As used herein, the term "Bond Insurance Policy" means the municipal
bond insurance policy issued by the Bond Insurer guaranteeing the scheduled payment of
principal of and interest on the Bonds. The term "Bond Insurer" means Financial Security
Assurance Inc., a New York stock insurance company, or any successor thereto. The Bond
Insurer shall be deemed to be the sold holder of the Bonds insured by it for the purpose of
exercising any voting right or privilege or giving any consent or direction or taking any other
action that the holders of the Bonds insured by it are entitled to take pursuant to Articles VIII
through X of Ordinance No. 98-31 (the "Ordinance"). No amendment or supplement to the
Ordinance or this resolution may become effective except upon obtaining the prior written
consent of the Bond Insurer. Copies of any modification or amendment to the Ordinance or this
Resolution shall be sent to Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., and Moody's Investors Service, Inc., at least 10 days prior to the effective date
thereof.
The rights of the Bond Insurer to direct or consent to City or Bondholder actions under
the Ordinance shall be suspended during any period in which the Bond Insurer is in default in its
payment obligations under the Bond Insurance Policy (except to the extent of amounts
previously paid by the Bond Insurer and due and owing to the Bond Insurer) and shall be of no
force or effect in the event the Bond Insurance Policy is no longer in effect or the Bond Insurer
asserts that the Bond Insurance Policy is not in effect or the Bond Insurer shall have provided
written notice that it waives such rights. The rights granted to the Bond Insurer under the
Ordinance to request, consent to or direct any action are rights granted to the Bond Insurer in
consideration of its issuance of the Bond Insurance Policy. Any exercise by the Bond Insurer of
such rights is merely an exercise of the Bond Insurer's contractual rights and shall not be
construed or deemed to be taken for the benefit or on behalf of the Bondholders nor does such
action evidence any position of the Bond Insurer, positive or negative, as to whether Bondholder
consent is required in addition to consent of the Bond Insurer. Amounts paid by the Bond
Insurer under the Bond Insurance Policy shall not be deemed paid for purposes of the Ordinance
and shall remain Outstanding and continue to be due and owing until paid by the City in
accordance with the Ordinance. The Ordinance shall not be discharged unless all amounts due or
to become due to the Bond Insurer have been paid in full.
Claims Upon the Bond Insurance Policy and payments by and to the Bond Insurer shall
be made as follows: If, on the third business day prior to the related scheduled interest payment
date or principal payment date ("Payment Date") there is not on deposit in the Bond Fund with
the paying agent, after making all transfers and deposits required under the Ordinance; moneys
sufficient to pay the principal of and interest on the Bonds due on such payment date, the City
shall give notice to the paying agent, to the Bond Insurer and to its designated agent (if any) (the
"Insurer's Fiscal Agent') by telephone or telecopy of the amount of such deficiency by 12:00
noon, New York City time, on such business day. If, on the second business day prior to the
related payment date, there is a deficiency in the amount available to pay the principal of and
interest on the Bonds due on such payment date, the paying agent shall make a claim under the
Bond Insurance Policy and give notice to the Bond Insurer and the Insurer's Fiscal Agent (if any)
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by telephone of the amount of such deficiency, and the allocation of such deficiency between the
amount required to pay interest on the Bonds and the amount required to pay principal of the
Bonds, confirmed in writing to the Bond Insurer and the Insurer's Fiscal Agent by 12:00 noon,
New York City time, on such second Business Day by filling in the form of notice of claim and
certificate delivered with the Bond Insurance Policy.
The paying agent shall keep a complete and accurate record of all funds deposited by the
Bond Insurer into a policy payment account and the allocation of such funds to payment of
interest on and principal paid in respect of any Bond. The Bond Insurer shall have the right to
inspect such records at reasonable times upon reasonable notice to the paying agent. Upon
payment of a claim under the Bond Insurance Policy the paying agent shall establish a separate
special purpose trust account for the benefit of Bondholders referred to herein as the "Policy
Payments Account" and over which the paying agent shall have exclusive control and sole right
of withdrawal. The paying agent shall receive any amount paid under the Bond Insurance Policy
in trust on behalf of Bondholders and shall deposit any such amount in the Policy Payments
Account and distribute such amount only for purposes of making the payments for which a claim
was made. Such amounts shall be disbursed by the paying agent to Bondholders in the same
manner as principal and interest payments are to be made with respect to the Bonds under the
Sections hereof regarding payment of Bonds. It shall not be necessary for such payments to be
made by checks or wire transfers separate from the check or wire transfer used to pay debt
service with other funds available to make such payments. Funds held in the Policy Payments
Account shall not be invested. Any funds remaining in the Policy Payments Account following a
Bond payment date shall promptly be remitted to the Bond Insurer.
The Bond Insurer shall, to the extent it makes any payment of principal of or interest on
the Bonds, become subrogated to the rights of the recipients of such payments in accordance with
the terms of the Bond Insurance Policy. The Bond Insurer shall be entitled to pay principal or
interest on the Bonds that shall become due for payment but shall be unpaid by reason of
nonpayment by the City (as such terms as defined in the Bond Insurance Policy) and any
amounts due on the Bonds as a result of acceleration of the maturity thereof in accordance with
this Bond Ordinance, whether or not the Bond Insurer has received a Notice (as defined in the
Bond Insurance Policy) of nonpayment or a claim upon the Bond Insurance Policy. The notice
address of the Bond Insurer is: Financial Security Assurance, Inc., 350 Park Avenue, New York,
New York 10022-6022, Attention: Managing Director -- Surveillance -- Re: Policy No.
; Telephone: (212) 826-0100; Telecopier: (212) 339-3529. In each case in which
notice or other communication shall be deemed to constitute consent or acceptance, then a copy
of such notice or other communication shall also be sent to the attention of General Counsel and
shall be marked to indicate "Urgent Material Enclosed."
The Bond Insurer shall be provided with the following information:
B-2
(a) Annual audited financial statements within 280 days after the end of the City's
fiscal year and the City's annual budget within 180 days after the approval thereof or sooner if
available;
(b) Notice of any draw upon the Reserve Account within two business days after
knowledge thereof other than (i) withdrawals of amounts in excess of the debt service reserve
requirement and (ii) withdrawals in connection with a refunding of Bonds;
(c) Notice of any default known to the paying agent within five business days after
knowledge thereof;
(d) Prior notice of the advance refunding or redemption of any of the Bonds,
including the principal amount, maturities and CUSIP numbers thereof;
(e) Notice of the resignation or removal of the paying agent or bond registrar and the
appointment of, and acceptance of duties by, any successor thereto;
(f) the commencement of any proceeding by or against the City commenced under
the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (an "Insolvency Proceeding");
(g) the making of any claim in connection with any Insolvency Proceeding seeking
the avoidance as a preferential transfer of any payment of principal of, or interest on, the Bonds;
(h) A full original transcript of all proceedings relating to the execution of any
amendment or supplement to the Ordinance; and
(i) All reports, notices and correspondence to be delivered under the terms of the
Ordinance.
Notwithstanding satisfaction of other conditions to the issuance of additional bonds contained in
the Ordinance, no such issuance may occur should any Event of Default (or any event which,
once all notice or grace periods have passed, would constitute an Event of Default) have occurred
and be continuing unless such default shall be cured upon such issuance.
B-3
CERTIFICATE
I, the undersigned, Clerk of the City of Yakima, Washington (the "City"), and keeper of
the records of the City Council (herein called the "Council"), DO HEREBY CERTIFY:
1. That the attached Resolution No. is a true and correct copy of a resolution of
the City Council, as finally adopted at a regular meeting of the Council held on the 15`h day of
September, 1998, and duly recorded in my office.
2. That said meeting was duly convened and held in all respects in accordance with
law, and to the extent required by law, due and proper notice of such meeting was given; that a
legal quorum was present throughout the meeting and a legally sufficient number of members of
the Council voted in the proper manner for the passage of said Resolution; that all other
requirements and proceedings incident to the proper adoption of said Resolution have been fully
fulfilled, carried out and otherwise observed; and that I am authorized to execute this certificate.
IN WITNESS WHEREOF, I have hereunto set my hand this 15`h day of September, 1998.
City Clerk
(SEAL)
SEATTLE -NORTHWEST
SECURITIES CORPORATION
September 15, 1998
1 420 Fifth Avenue
Suite 4300
Seattle, Washington 98101
(206)628-2882
Honorable Mayor and City Council
City of Yakima
129 North Second Street
Yakima, Washington 98901
Re: City of Yakima, Washington
$7,910,000 Second Lien Water and Sewer Revenue and Refunding Bonds, 1998
Dated: October 1, 1998
Honorable Mayor and City Council:
Seattle -Northwest Securities Corporation ("Purchaser") offers to purchase from the City of
Yakima, Washington ("Seller"), all the above-described bonds (the "1998 Bonds") on the terms
and based upon the covenants, representations and warranties set forth below. Appendix A,
which is incorporated into this Bond Purchase Agreement (the "Agreement") by reference,
contains a brief description of the 1998 Bonds, including principal amounts, maturities, interest
rates, purchase price, and the proposed date and place of delivery and payment (the "Closing").
Other provisions of this Agreement are as follows:
1. Prior to the Closing, Seller will approve a Preliminary Official Statement, and will adopt a
resolution providing for the sale of the 1998 Bonds (referred to herein, together with
Ordinance No. 98-31, as the "Bond Resolution") with such changes as are requested by the
Seller and its counsel. The Purchaser is authorized by Seller to use these documents and the
information contained in them in connection with the public offering of the 1998 Bonds
and the Final Official Statement in connection with the sale and delivery of the 1998 Bonds.
2. Seller, to the best of its knowledge, represents and covenants to the Purchaser that:
(a) it has and will have at the Closing the power and authority to enter into and perform
this Agreement, to pass the Bond Resolution and to deliver and sell the 1998 Bonds to
the Purchaser;
(b) this Agreement and the 1998 Bonds do not and will not conflict with, or constitute or
create a breach or default under, any existing law, regulation, order or agreement to
which Seller is subject;
(c) no governmental approval or authorization other than the Bond Resolution which has
not been obtained, or will not be obtained prior to Closing, is required in connection
with the sale of the 1998 Bonds to the Purchaser;
(d) the Preliminary Official Statement with corrections, if any, noted by the Seller and its
counsel, as of its date and (except as to matters corrected or added in the Final Official
Statement) as of the Closing, is accurate and complete in all material respects as of its
date to the knowledge and belief of the officers and employees of the Seller, after due
review;
the Seller has previously provided the Purchaser with a copy of its Preliminary Official
Statement dated September 4, 1998. As of its date, the Preliminary Official Statement
has been "deemed final" by the Seller for purposes of Securities and Exchange
Commission ("S.E.C.") Rule 15c2 -12(b)(1);
(e)
Honorable Mayor and City Council
City of Yakima
September 15, 1998
Page 2
(f)
(g)
the Seller agrees to cooperate with the Purchaser to permit the Purchaser to deliver or
cause to be delivered, within seven business days after any final agreement to purchase,
offer, or sell the securities and in sufficient time to accompany any confirmation that
requests payment from any customer of the Purchaser, copies of a final Official
Statement in sufficient quantity to comply with paragraph (b)(4) of the S.E.C.
Rule 15c2-12 and the rules of the Municipal Securities Rulemaking Board ("MSRB").
The Purchaser agrees to deliver the required number of copies of the final Official
Statement to the MSRB and to all nationally recognized municipal securities
information repositories on the business day on which the final Official Statement is
available, and in any event no later than ten business days after the date hereof;
the Seller agrees to enter into a written agreement or contract, constituting an
undertaking (the "Undertaking") to provide ongoing disclosure about the City of
Yakima, Washington, for the benefit of the owners of the 1998 Bonds on or before the
Closing as required by Section (b)(5)(i) of S.E.C. Rule 15c2-12 (the "Rule"), and in
the form as summarized by the Preliminary Official Statement, with such changes as
may be agreed to in writing by the Purchaser;
(h) if, at any time prior to the Closing, any event occurs as a result of which the
Preliminary Official Statement might include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the Seller shall promptly
notify the Purchaser thereof.
3. The Purchaser shall have the right to cancel this Agreement to purchase the 1998 Bonds by
notifying the Seller of its election to do so if, after the execution of this Agreement and prior
to the Closing:
(a) a decision by a court of the United States or the United States Tax Court shall be
rendered, or a ruling or a regulation (final, temporary, or proposed) by or on behalf of
the Treasury Department of the United States, the Internal Revenue Service or other
governmental agency shall be issued and in the case of any such regulation, published in
the Federal Register, or legislation shall have been introduced in, enacted by or
favorably reported to either the House of Representatives or the Senate of the United
States, with respect to Federal taxation upon interest received on bonds of the type and
character of any of the 1998 Bonds which, in the reasonable judgment of the Purchaser,
materially adversely affects the marketability of the 1998 Bonds or their sale by the
Purchaser, at the contemplated public offering prices; or
(b) the United States shall have become engaged in hostilities which have resulted in
declaration of war or national emergency, or other national or international calamity or
other event shall have occurred or accelerated to such an extent as, in the reasonable
opinion of the Purchaser, to have a materially adverse effect on the marketability of the
1998 Bonds; or
(c) there shall have occurred a general suspension of trading on the New York Stock
Exchange; or
(d) a general banking moratorium shall have been declared by United States, New York
State or Washington State authorities; or
legislation shall hereafter be enacted, or actively considered for enactment, with an
effective date prior to the date of the delivery of the 1998 Bonds, or a decision by a
court of the United States shall hereafter be rendered, or a ruling or regulation by the
S.E.C. or other governmental agency having jurisdiction of the subject matter shall
hereafter be made, the effect of which is that
(e)
Honorable Mayor and City Council
City of Yakima
September 15, 1998
Page 3
(f)
(1) the 1998 Bonds are not exempt from the registration, qualification or other
requirements of the Securities Act of 1933, as amended and as then in effect, or
the Securities Exchange Act of 1934, as amended and then in effect, or
(2) the Bond Resolution is not exempt from the registration, qualification or other
requirements of the Trust Indenture Act of 1939, as amended and as then in
effect, or
a stop order, ruling or regulation by the S.E.C. shall hereafter be issued or made, the
effect of which is that the issuance, offering or sale of the 1998 Bonds, as contemplated
herein or in the Final Official Statement, is in violation of any provision of the
Securities Act of 1933, as amended and as then in effect, the Securities Exchange Act of
1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as
amended and as then in effect, and which, in its reasonable judgment, adversely affects
the marketability of the 1998 Bonds or the market price thereof.
4. The Purchaser's obligations hereunder are also subject to the condition that at or prior to the
Closing Seller will deliver to the Purchaser all of the following:
(a) the 1998 Bonds, fully registered in book -entry form only in the name of Cede & Co.,
as bond owner and nominee for The Depository Trust Company;
(b) the approving opinion of Bond Counsel dated the Closing date;
(c) issuance of a municipal bond insurance policy by Financial Security Assurance
Company and assignment to the Bonds of a rating of Aaa by Moody's Investors Service
and AAA by Standard & Poor's Ratings Services;
(d) the following documents executed by authorized officers of the Seller: a certificate
setting forth the facts, estimates and circumstances in existence on the date of Closing
which establish that it is not expected that the proceeds of the 1998 Bonds will be used
in a manner that could cause the 1998 Bonds to be "arbitrage bonds" within the
meaning of Section 148 of the Internal Revenue Code of 1986, as amended, and any
applicable regulations thereunder;
(e) a certified copy of the Bond Resolution; and
(f) such additional certificates, instruments or opinions or other evidence as the Purchaser
may deem reasonably necessary or desirable to evidence the due authorization,
execution, authentication and delivery of the 1998 Bonds, the truth and accuracy as of
the time of the Closing of the Seller's representations and warranties, and the
conformity of the 1998 Bonds and Bond Resolution with the terms thereof as
summarized in the Official Statement, and to cover such other matters as it reasonably
requests.
5. Seller will pay the cost of preparing, printing and executing the 1998 Bonds, the fees and
disbursements of Bond Counsel, bond registration and rating fees and expenses, bond
insurance, escrow trustee, escrow verification, the cost of printing and distributing the
Preliminary and Final Official Statements, travel and lodging expenses of Seller's employees
and representatives, and other expenses of Seller.
Purchaser will pay fees and disbursements of Purchaser's counsel, if any, the cost of
preparation and filing of blue sky and legal investment surveys where necessary, Purchaser's
travel expenses, and other expenses of Purchaser. As a convenience to Seller, Purchaser may
from time to time, as Seller's agent, make arrangements for certain items for which Seller is
responsible hereunder, such as printing of the Official Statement and travel or lodging
arrangements for Seller's representatives.
Honorable Mayor and City Council
City of Yakima
September 15, 1998
Page 4
Purchaser also may advance for Seller's account when appropriate the cost of the items for
which Seller is responsible by making payments to third -party vendors. In such cases, Seller
shall pay such costs or expenses directly, upon submission of appropriate invoices by
Purchaser, or promptly reimburse Purchaser in the event Purchaser has advanced such costs
or expenses for Seller's account. It is understood that Seller shall be primarily responsible for
payment of all such items and that Purchaser may agree to advance the cost of such items
from time to time solely as an accommodation to Seller and on the condition that it shall be
reimbursed in full by Seller.
6. This Agreement is intended to benefit only the parties hereto, and Seller's representations
and warranties shall survive any investigation made by or for the purchase, delivery and
payment for the 1998 Bonds, and the termination of this Agreement. Should the Seller fail
to satisfy any of the foregoing conditions or covenants, or if the Purchaser's obligations are
terminaed for any reasons permitted under this Agreement, then neither the Purchaser nor
the Seller shall have any further obligations under this Agreement, except that any expenses
incurred shall be borne in accordance with Section 5.
7. The Seller further agrees that: (1) the Closing will take place October 1, 1998, (2) the Seller
will deposit bond proceeds with Chase Manhattan Trust Company, N.A. ("Refunding
Trustee") on October 1, 1998 to purchase obligations (as shown on the attached Appendix
B). The proceeds from the sale of the refunding portion of the 1998 Bonds will be used to
refund $4,370,000 of the City's Water and Sewer Revenue Bonds, 1991, dated August 1,
1991, maturing on March 1 in years 2002 through 2006 and the Term Bonds due on
March 12011.
8. This Agreement may be modified or amended by an instrument in writing executed by the
parties hereto.
9. This offer expires on the date, and at the time, set forth on Appendix A.
Respectfully submitted,
Seattle -Northwest Securities Corporation
By:
Alan . ranberg, Vice President
Accepted September 15, 1998
City of Yak ma'
Contract No. 98-100
Resolution No. R-98-132
APPENDIX A
Description of Bonds
(a) Purchase Price: $99.244487 ($7,850,238.90 per $100), plus accrued interest from the dated date
of October 1, 1998 to date of Closing.
(b) Denominations: $5,000, or integral multiples thereof.
(c) Form: Fully registered in book -entry form only in the name of Cede & Co., as bond owner and
nominee for The Depository Trust Company.
(d) Interest Payment Dates: March 1 and September 1, commencing March 1, 1999.
(e) Maturity Schedule: Bonds shall mature and bear interest as follows:
Due Interest Due Interest
Sept. 1 Amounts Rates Sept. 1 Amounts Rates
1999 $ 195,000 4.00% 2007 $ 585,000 4.10%
2000 175,000 4.00 2008 610,000 5.00
2001 180,000 4.00 2009 640,000 4.20
2002 595,000 4.00 2010 665,000 4.25
2003 505,000 4.00 2011 695,000 4.30
2004 520,000 4.00
2005 545,000 4.00 2014 200,000 4.45
2006 570,000 4.10 2015 205,000 4.50
$365,000 4.45% Term Bonds due September 1, 2013
$660,000 4.60% Term Bonds due September 1, 2018
(f) Optional Redemption: The 1998 Bonds maturing in years 1999 through 2008, inclusive, are not
subject to redemption prior to maturity. The 1998 Bonds maturing on and after September 1,
2009, are subject to redemption at the option of the City on and after September 1, 2008, in whole
or in part at any time (maturities to be selected by the City and by lot within a maturity) at a price
of par plus accrued interest, if any, to the date of redemption. For so long as the 1998 Bonds are in
book -entry form, the selection of 1998 Bonds within a maturity to be redeemed and the manner of
providing notice of redemption to Beneficial Owners shall be governed by the operational
arrangements of DTC, as then in effect.
Mandatory Redemption: If not previously redeemed as described above, the Term Bonds due on
September 1, 2013 and 2018 will be called for redemption by lot (in such manner as the Bond
Registrar and DTC will determine) at par plus accrued interest on September 1 in years and
amounts as follows:
2013 Term Bonds 2018 Term Bonds
Years Amounts Years Amounts
2012 $180,000 2016 $210;000
2013 185,000 2017 220,000
2018 230,000
(g)
Closing Date: With definitive Bonds or a temporary Bond on or about October 1, 1998.
Offer Expires: 11:00 p.m., September 15, 1998.
Bond Counsel: Preston Gates & Ellis LLP.
For Information Purposes Only:
Net Interest Cost:
Net Present Value Savings:
Net Present Value Savings as a
percent of Refunded Bonds:
4.418154%
$479,467.79
10.971803%
APPENDIX B
ESCROW DESCRIPTIONS
City of Yakima, Washington
Second Lien Water & Sewer Revenue & Ref. Bonds, 98
Purchase Type of Type of Maturity First Int Par Max Total
Date Security SLGS Date Pmt Date Amount Rate Rate Cost
Oct 1, 1998:
SLG Certificate 3/01/1999 3/01/1999 66,389 4.566% 4.830% 66,389.00
SLG Certificate 9/01/1999 9/01/1999 49,250 4.434% 4.690% 49,250.00
SLG Note 3/01/2000 3/01/1999 51,254 4.415% 4.670% 51,254.00
SLG Note 9/01/2000 3/01/1999 52,385 4.396% 4.650% 52,385.00
SLG Note 3/01/2001 3/01/1999 4,423,537 4.367% 4.620% 4,423;537.00
4,642,815.00
14 -Sep -98 10:49 am Prepared by Seattle -NW Securities (Finance 3.100 YAKIMA:1998) Page 19
BOND DEBT SERVICE
City of Yakima, Washington
Second Lien Water & Sewer Revenue & Ref. Bonds, 98
Dated Date 10/01/1998
Delivery Date 10/01/1998
Period Annual
Ending Principal Coupon Interest Debt Service Debt Service
Oct 1, 1998
Mar 1, 1999
Sep 1, 1999
Mar 1, 2000
Sep 1, 2000
Mar 1, 2001
Sep 1, 2001
Mar 1, 2002
Sep 1, 2002
Mar 1, 2003
Sep 1, 2003
Mar 1, 2004
Sep 1, 2004
Mar 1, 2005
Sep 1, 2005
Mar 1, 2006
Sep 1, 2006
Mar 1, 2007
Sep 1, 2007
Mar 1, 2008
Sep 1, 2008
Mar 1, 2009
Sep 1, 2009
Mar 1, 2010
Sep 1, 2010
Mar 1, 2011
Sep 1, 2011
Mar 1, 2012
Sep 1, 2012
Mar 1, 2013
Sep 1, 2013
Mar 1, 2014
Sep 1, 2014
Mar 1, 2015
Sep 1, 2015
Mar 1, 2016
Sep 1, 2016
Mar 1, 2017
Sep 1, 2017
Mar 1, 2018
Sep 1, 2018
195,000.00
175,000.00
180,000.00
595,000.00
505,000.00
520,000.00
545,000.00
570,000.00
585,000.00
610,000.00
640,000.00
665,000.00
695,000.00
180,000.00
185,000.00
200,000.00
205,000.00
210,000.00
220,000.00
230,000.00
4.000%
4.000%
4.000%
4.000%
4.000%
4.000%
4.000%
4.100%
4.100%
5.000%
4.200%
4.250%
4.300%
4.450%
4.450%
4.450%
4.500%
4.600%
4.600%
4.600%
140,087.50
168,105.00
164,205.00
164,205.00
160,705.00
160,705.00
157,105.00
157,105.00
145,205.00
145,205.00
135,105.00
135,105.00
124,705.00
124,705.00
113,805.00
113,805.00
102,120.00
102,120.00
90,127.50
90,127.50
74,877.50
74,877.50
61,437.50
61,437.50
47,306.25
47,306.25
32,363.75
32,363.75
28,358.75
28,358.75
24,242.50
24,242.50
19,792.50
19,792.50
15,180.00
15,180.00
10,350.00
10,350.00
5,290.00
5,290.00
140,087.50
363,105.00
164,205.00
339,205.00
160,705.00
340,705.00
157,105.00
752,105.00
145,205.00
650,205.00
135,105.00
655,105.00
124,705.00
669,705.00
113,805.00
683,805.00
102,120.00
687,120.00
90,127.50
700,127.50
74,877.50
714,877.50
61,437.50
726,437.50
47,306.25
742,306.25
32,363.75
212,363.75
28,358.75
213,358.75
24,242.50
224,242.50
19,792.50
224,792.50
15,180.00
225,180.00
10,350.00
230,350.00
5,290.00
235,290.00
503,192.50
503,410.00
501,410.00
909,210.00
795,410.00
790,210.00
794,410.00
797,610.00
789,240.00
790,255.00
789,755.00
787,875.00
789,612.50
244,727.50
241,717.50
248,485.00
244,585.00
240,360.00
240,700.00
240,580.00
7,910,000.00 3,332,755.00 11,242,755.00 11,242,755.00
14 -Sep -98 4:00 pm Prepared by Seattle -NW Securities (Finance 3.100 YAKIMA:1998) Page 1
BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No. 9
For Meeting Of 9/15/98
ITEM TITLE: Resolution of the City Council of Yakima, Washington and a proposal from the
City's underwriters, Seattle Northwest Securities, for the purchase of Water/Sewer Revenue
and Refunding Bonds of the City of Yakima, in a principal amount of $7,910,000, and fixing
the interest rate of such bonds.
SUBMITTED BY: Department of Finance & Budget
CONTACT PERSON/TELEPHONE: Johr,H nson Director of Finance & Budget 575-6070
Tim y n, Accountant 576-6639
SUMMARY EXPLANATION:
This is a replacement agenda statement for item no. 9. See Attached Memorandum,
Resolution and Purchase Offer.
Resolution X Ordinance Contract X Other (Specify) Purchase offer from Seattle
Northwest Securities
Funding Source N/A
APPROVED FOR SUBMITTAL:
City Manager
STAFF RECOMMENDATION: Adopt Resolution, Approve Purchase Offer
BOARD/COMMISSION RECOMMENDATION:
COUNCIL ACTION:
DEPARTMENT OF FINANCE & BUDGET
129 North Second Street
Yakima, Washington 98901
MEMORANDUM
DATE: September 15, 1998
TO: Hon. Mayor and City Council Members
FROM: John Hanson, Dir of Finance & Budget
Cindy Epperson, Accounting Manage_
Tim Jens -Accountant
RE: Purchase offer --1998 Revenue and Refunding Bonds
The agenda item no. 9 of today's packet includes a resolution and
purchase offer regarding the issuance of revenue and refunding bonds. These
documents are incomplete as to amounts, due to the fact that the actual sale
of bonds occurred yesterday, September 14. Attached are completed
documents for your inspection and approval.
Market conditions were extremely favorable. This allowed more
flexibility in structuring the debt, therefore allowing for less principal. The
attached resolution is for $7.910 million, which is $35,000 less than the
resolution we presented last week. In addition, this is $355,000 less than the
original bond ordinance 98-31 passed on August 4.
This amount includes refunding bonds which replaced $4.37 million of
our 1991 revenue bond issue. The savings on this refunding are
approximately $477,000 at present value which is almost 11% of the refunded
bonds. The target rate of savings is around 5 %.
The total interest cost (including underwriting expenses) on the new
money portion is one of the lowest on record for the City of Yakima at 4.55%.
Overall, this was an extremely good sale, and we recommend acceptance of
the purchase offer and adoption of the resolution.
1
Customer Service (509) 575-6080 • Finance (509) 575-6070 • Information Systems (509) 575-6098
Yakima
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L o Due Interest Yield or Due Interest Yield or
R a Sept. 1 Amounts* Rates Price Sept. 1 Amounts* Rates Price
s 1999 $190,000 2009 $645,000
Z.g 2000 165,000 2010 670,000
i3 P 2001 170,000 2011 710,000
I- 2002 585,000 2012 180,000
a 5 2003 495,000 2013 190,000
coo 2004 520,000 2014 200,000
c of 2005 545,000 2015 210,000
a c 2006 570,000 2016 220,000
R m° 2007590,000 2017 230,000
o so 2008 615,000 2018 245,000
°o
i d (Plus accrued interest from October 1, 1998)
oA
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B s The 1998 Bonds maturing on and after September 1, 2009, will be subject to redemption at the option of the City on and after
a 41•••
• September 1, 2008, as further described herein.
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PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER 4, 1998
New Issue Moody's Rating: _
Book -Entry Only (See the caption "Rating" herein)
In the opinion of Bond Counsel, interest on the 1998 Bonds is excluded from gross income subject to federal income taxationursuant to
the Internal Revenue Code of 1986, as amended, subject to certain conditions and assumptions described herein under "Tax Exemption."
The 1998 Bonds are not private activity bonds. Interest on the 1998 Bonds es included in the computation of certain federal taxes on
corporations.
$7,945,000*
City of Yakima, Washington
Second Lien Water and Sewer Revenue and Refunding Bonds, 1998
DATED: October 1, 1998 DUE: September 1, as shown below
The 1998 Bonds will be issued as registered bonds in denominations of $5,000, or integral multiples thereof, and will be
registered in the name of Cede & Co., as bond owner and nominee for DTC. DTC will act as securities depository for the 1998
Bonds. Purchasers will not receive certificates representing their interest in the 1998 Bonds purchased. Interest on the 1998
Bonds will be paid on March 1, 1999 and semiannually thereafter on September 1 and March 1 of each year. Principal of and
interest on the 1998 Bonds will be payable by either fiscal agency of the State of Washington in New York, New York, or
Seattle, Washington, currently The Bank of New York and Wells Fargo Bank, National Association, and as further described
herein. For so long as the 1998 Bonds remain in a "book -entry only" transfer system, the fiscal agent will make such payments
only to DTC, which will in turn remit such principal and interest to its Participants for subsequent disbursement to Beneficial
Owners of the 1998 Bonds as further described herein under the caption `Book -Entry Only System."
The City has designated the 1998 Bonds as "Qualified Tax -Exempt Obligations" for banks, thrift institutions and other
financial institutions. See the caption "Tax Exemption" herein for a discussion of this designation.
The 1998 Bonds are issued junior to the City's $1,445,000 Outstanding First Lien Water and Sewer Revenue Bonds and are
payable solely from and secured by the Revenue of the System after all required payments for the Costs of Maintenance and
Operation and the First Lien Parity Bonds have been made or duly provided for. The 1998 Bonds are issued on a parity with the
City's $4,625,000 Outstanding Second Lien Water and Sewer Revenue Bonds and $1,623,956 State Revolving Trust Fund
Loan. For so long as the 1998 Bonds are outstanding, no bonds may be issued subsequent to the issuance of the 1998 Bonds
with a lien and charge on the Gross Revenues superior to the lien and charge of the 1998 Bonds. Future Parity Bonds may be
issued on a parity of lien with the 1998 Bonds, subject to certain conditions described herein.
The 1998 Bonds are offered by the Underwriter when, as and if issued, subject to the approving legal opinion of Preston Gates
& Ellis LLP, Seattle, Washington, Bond Counsel. It is expected that the 1998 Bonds in definitive book -entry form will be ready
for delivery at the facilities of DTC in New York, New York, on or about ,1998.
This corer page contains certain information for quick reference only It is not a summary of this issue. Investors must read the entire official statement to
obtain information essential to the making of an informed investment decision.
* Preliminary, subject to change
Dated:
Seattle -Northwest Securities Corporation
City of Yakima
129 North Second Street
Yakima, Washington 98901
(509) 575-6000
City Councilmembers
John Puccinelli, Mayor
Mary Place, Assistant Mayor
Clarence C. Barnett
Henry C. Beauchamp
Lynn K. Buchanan
John Klingele
Bernard J. Sims
Richard A. Zais, Jr.
Glenn K. Rice
John R. Hanson, CMFA
Administrative Officials
Bond Counsel
Term Expires
December 1999
December 2001
December 1999
December 2001
December 1999
December 1999
December 2001
City Manager
Assistant City Manager
Director of Finance/Budget
Preston Gates & Ellis LLP
Seattle, Washington
The information set forth herein is not guaranteed as to accuracy or completeness and is not to be construed as a
representation by the Underwriter. The information herein is subject to change without notice and neither the
delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication
that there has been no change in the affairs of the City since the date hereof.
i
Table of Contents
Page
Description of the 1998 Bonds 1
Principal Amount, Date, Interest Rates and Maturities 1
Form, Denomination and Registration 1
Paying Agent 2
Optional Redemption 2
Open Market Purchase 2
Book -Entry Bonds 2
Procedure in the Event of Revisions of Book -Entry Transfer System 2
Authorization for Issuance 2
Use of Proceeds 2
Refunding Plan 3
Procedure 3
Verification of Calculations 3
Sources and Uses of Funds 3
Debt Service Requirements of the 1998 Bonds 4
Security for the 1998 Bonds 4
Pledge of Revenues 4
Bond Fund 4
Flow of Funds Under the Bond Ordinance 5
Rate Covenant 5
Certain Other Bond Covenants 6
Additional Bonds 6
Debt Payment Record 7
Future Financings 7
Authorized Investments 7
Local Government Investment Pool 7
Authorized Investments for Bond Proceeds 8
The Water System 8
Customers 8
Water Service Charges 8
Outstanding Obligations 10
The Sewerage System 10
Sewer Service Charges 11
Rate Comparison of Neighboring Cities 13
Outstanding Obligations 13
Combined Income Statement 14
Combined Balance Sheet 15
Debt Service Requirements and Projected Coverage 16
The City 17
Accounting Policies 17
Budgetary Process 17
Cash and Investments 18
Auditing of City Finances 18
Risk Management 19
Labor Relations 20
Pension System 20
Demographic Information 21
Litigation Z7
Approval of Counsel 27
Tax Exemption 27
General 27
Continuing Requirements 28
Certain Federal Income Tax Consequences 28
Rating 29
Underwriting 29
Miscellaneous 29
Continuing Disclosure 29
Book -Entry Only System 30
Official Statement 32
Definitions Appendix A
ii
OFFICIAL STATEMENT
City of Yakima, Washington
$7,945,000*
Second Lien Water and Sewer Revenue and Refunding Bonds, 1998
The City of Yakima, Washington (the "City"), a first-class charter city duly organized and existing under and
by virtue of the laws of the State of Washington (the "State") furnishes this Official Statement in connection
with the offering of $7,945,000* aggregate principal amount of Second Lien Water and Sewer Revenue and
Refunding Bonds, 1998, dated October 1, 1998 (the "1998 Bonds"). This Official Statement provides
information concerning the City and the 1998 Bonds.
The 1998 Bonds are issued pursuant to Ordinance No. 98-31 of the City passed by the City Council on
August 4, 1998 (the "Ordinance"). This Official Statement provides information concerning the City, the
1998 Bonds and the City's combined water and sewerage system (the "Water System" and the "Sewerage
System").
The 1998 Bonds are issued junior to $1,445,000 principal amount of the City's Water and Sewer Revenue
Bonds, 1968 (the "First Lien Parity Bonds").
The 1998 Bonds are issued on a parity with the City's $1,580,000 Second Lien Water and Sewer Revenue
Bonds, 1991 (the "1991 Bonds"), $1,623,956 State Revolving Fund Loan, 1992 (the "1992 Loan"), and
$3,045,000 Second Lien Water and Sewer Revenue Refunding Bonds, 1996 (the "1996 Bonds"). The City
has reserved the right to issue additional bonds on a panty of lien on the Revenue of the System with the
1991 Bonds, the 1992 Loan, the 1996 Bonds, and the 1998 Bonds.
Certain of the capitalized words and phrases used in this Official Statement have the meanings as defined in
the Bond Ordinance or other contractual documents, unless the context shall clearly indicate that another
meaning is intended. Certain of these capitalized items are defined in Appendix A herein.
Description of the 1998 Bonds
Principal Amount, Date, Interest Rates and Maturities
The 1998 Bonds will be issued in the aggregate principal amount of $7,945,000* and will be dated and bear
interest from October 1, 1998. The 1998 Bonds will mature on the dates and in the principal amounts and
will bear interest (payable semiannually on March 1 and September 1, commencing March 1, 1999) at the
rates set forth on the cover of this Official Statement. Interest on the 1998 Bonds will be computed on the
basis of a 360 -day year consisting of twelve 30 -day months.
Form, Denomination and Registration
The 1998 Bonds will be issued in fully registered form in the denomination of $5,000, or any integral
multiple thereof within a single maturity. Individual purchases may be made in book -entry form only.
Purchasers will not receive certificates representing their interest in the 1998 Bonds purchased. The 1998
Bonds, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of The
Depository Trust Company, New York, New York ("DTC").
So long as Cede & Co. is the registered owner of the 1998 Bonds, references herein to the registered owners
or bond owners will mean Cede & Co. and will not mean the `Beneficial Owners" of the 1998 Bonds. In
this Official Statement, the term `Beneficial Owner" means the person for whom a DTC participant
acquires an interest in the 1998 Bonds.
* Preliminary, subject to change
1
Paying Agent
Principal of and interest on the 1998 Bonds will be payable by either State fiscal agent in New York, New
York, or Seattle, Washington, currently The Bank of New York and Wells Fargo Bank, National
Association. So long as Cede & Co. is the registered owner of the 1998 Bonds, principal of and interest on
r f .1 States � C___1 which,
obligated the 1998 Bonds are payable by wire transfer by the States fscai agents to DTC, which, in turn, is obligated
to remit such principal and interest to its participants for subsequent disbursement to the Beneficial Owners
of the 1998 Bonds, as further described herein under the caption "Book -Entry Only System."
Optional Redemption
The 1998 Bonds maturing in years 1999 through 2008, inclusive, are not subject to redemption prior to
maturity. The 1998 Bonds maturing on and after September 1, 2009, are subject to redemption at the
option of the City on and after September 1, 2008, in whole or in part at any time (maturities to be selected
by the City and by lot within a maturity) at a price of par plus accrued interest, if any, to the date of
redemption. For so long as the 1998 Bonds are in book -entry form, the selection of 1998 Bonds within a
maturity to be redeemed and the manner of providing notice of redemption to Beneficial Owners shall be
governed by the operational arrangements of DTC, as then in effect. See "Book -Entry Only System."
Open Market Purchase
The City reserves the right and option to use any surplus Revenue of the System to purchase any or all of
the 1998 Bonds in the open market at any time at any price. Ali 1998 Bonds so purchased shah be canceled.
Book -Entry Bonds
DTC will act as securities depository for the 1998 Bonds. The ownership of one fully registered 1998 Bond
for each maturity of the 1998 Bonds, as set forth on the cover of this Official Statement, each in the
aggregate principal amount of such maturity, will be registered in the name of Cede & Co., as nominee for
DTC. See `Book -Entry Only System" herein for additional information.
Procedure in the Event of Revisions of Book -Entry Transfer System
If the City is unable to retain a qualified successor to DTC, or the City has determined that it is in the best
interest of the City not to continue the book -entry system of transfer or that interests of the Beneficial
Owners of the 1998 Bonds might be adversely affected if the book -entry system of transfer is continued, the
City will execute, authenticate and deliver at no cost to the Beneficial Owners of the 1998 Bonds or their
nominees, 1998 Bonds in fully registered form, in the denomination of $5,000 or any integral multiple
thereof within a maturity. Thereafter, the principal of the 1998 Bonds will be payable upon due
presentment and surrender thereof at the principal office of the Bond Registrar; interest on the 1998 Bonds
will be payable by check or draft mailed or by wire transfer (wire transfer will be made only if so requested
i
in writing by the Registered Owner of at least $1,000,000 principal arnotu-it of 1998 Bonds) to the persons
in whose names such 1998 Bonds are registered, at the address appearing upon the registration books on
the 15th day of the month preceding an interest payment date, and the 1998 Bonds will be transferable as
provided in the Bond Ordinance.
Authorization for Issuance
The 1998 Bonds are issued pursuant to the authority of RCW chapter 35.92 and the Ordinance.
Use of Proceeds
The proceeds from the sale of the new money portion of the 1998 Bonds will be used to construct various
capital improvements to the Water System, including the relocation and design of one well.
2
The proceeds from the sale of the refunding portion of the 1998 Bonds will be used to refund $4,750,000 of
the City's Water and Sewer Revenue Bonds, 1991, dated July 1, 1991, maturing on March 1 in years 2002
through 2011 (the "Refunded Bonds"). The Refunded Bonds will be escrowed to their call date of
March 1, 2001, at which time they will be called at par. The refunding portion of the 1998 Bonds is being
issued for the purpose of realizing debt service savings.
Refunding Plan
Procedure
From the proceeds of the refunding portion of the 1998 Bonds, the City will purchase certain direct United
States government obligations, including obligations of the State and Local Government Series
("Government Obligations"). These Government Obligations will be deposited in the custody of
or such other duly appointed successor(s) ("Refunding Trustee"). The maturing principal
of the Government Obligations, interest earned thereon, and necessary cash balance, if any, will provide
payment of:
(a) Interest on the Refunded Bonds to and including March 1, 2001;
(b) On March 1, 2001, the principal of the Refunded Bonds.
The Government Obligations, interest earned thereon, and necessary cash balance, if any, will irrevocably be
pledged to and held in trust for the benefit of the owners of the Refunded Bonds by the Refunding Trustee,
pursuant to an escrow deposit agreement to be executed by the City and the Refunding Trustee.
Verification of Calculations
The accuracy of (a) the computations of the adequacy of the maturing principal amounts of and interest on
the Government Obligations to be held by the Refunding Trustee to pay principal and interest and the
redemption premium, if any, on the Refunded Bonds as described above, and (b) the computations
supporting the conclusion of Bond Counsel that the 1998 Bonds are not "arbitrage bonds" under Section
148 of the Internal Revenue Code of 1986, as amended, will be verified by , independent
certified public accountants.
Sources and Uses of Funds
The proceeds of the 1998 Bonds (less accrued interest) are estimated to be applied as follows:
Sources of Funds*
Par Amount of 1998 Bonds $ 7,945,000
Other Sources of Funds 1,022,774
Total Sources of Funds $ 8,967,774
Uses of Funds*
Cost of Escrow $ 4,584,612
Water System Improvements 3,300,000
Reserve Fund Deposit 930,910
Issuance Expenses, Underwriter's Discount and Contingency 152 252
Total Uses of Funds $ 8,967,774
*Preliminary, subject to change
3
Debt Service Requirements of the 1998 Bonds
The 1998 Bonds*
Years Principal Interest Total
1998 $ 0 $ 0 $ 0
1999 190,000 339,478 529,478
2000 165,000 362,550 527,550
2001 170,000 355,620 525,620
2002 585,000 348,310 933,310
2003 495,000 322,863 817,863
2004 520,000 301,083 821,083
2005 545,000 277,943 822,943
2006 570,000 253,418 823,418
2007 590,000 227,483 817,483
2008 615,000 200,343 815,343
2009 645,000 171,745 816,745
2010 670,000 141,108 811,108
2011 710,000 108,948 818,948
2012 180,000 74,c 13 ?54,C13
2013 190,000 65,693 255,693
2014 200,000 56,288 256,288
2015 210,000 46,288 256,288
2016 220,000 35,683 255,683
2017 230,000 24,463 254,463
2018 245,000 12,618 257,618
Totals $ 7,945,000 $ 3,726,431 $ 11,671,431
*Preliminary, subject to change; assumed interest rates range from 4.1% to 5.15%.
Security for the 1998 Bonds
Pledge of Revenues
The principal of and interest on the 1998 Bonds are secured by a pledge of Gross Revenues of the System
equal to the pledge of the Outstanding Second Lien Parity Bonds, subject only to the payment of the Costs
of Maintenance and Operation of the System and the required payments into the Prior Lien Revenue Bond
Fund. The City has covenanted that, so long as the 1998 Bonds are outstanding, no bonds may be issued
subsequent to the issuance of the 1998 Bonds with a lien and charge on the Gross Revenues superior to the
lien and charge of the 1998 Bonds.
The 1998 Bonds are not general obligations of the City, and the full faith and credit of the City is not
pledged for the payment thereof.
Bond Fund
The "Second Lien Water and Sewer Revenue Bond Fund" (the "Bond Fund") will be used solely for the
purpose of paying the principal of, premium, if any, and interest on the Second Lien Parity Bonds, of
retiring the Second Lien Parity Bonds prior to maturity as specified in the Bond Ordinance and of paying
any reimbursement obligation with respect to any credit enhancement device providing additional security
for any Variable Rate Bonds. The Bond Fund includes an Interest Account, Serial Bond Principal Account,
and a Reserve Account.
Interest Account. An Interest Account has been created in the Bond Fund for the purpose of paying the
interest on the Second Lien Parity Bonds. As long as any Second Lien Parity Bonds remain outstanding, the
4
City has irrevocably obligated, pledged and bound itself to set aside and pay from the Net Revenue of the
System into the Interest Account, those amounts necessary, together with such other funds as are on hand
and available in the Interest Account, to pay installments of interest next coming due on the Second Lien
Parity Bonds.
Serial Bond Principal Account. A Serial Bond Principal Account has been created in the Bond Fund for the
purpose of paying the principal of Serial Bonds as the same will mature and come due. As long as any
Second Lien Parity Bonds remain outstanding, the City has covenanted to transfer to the Serial Bond
Principal Account amounts sufficient to equal the installment of principal next falling due on the Serial
Bonds.
Reserve Account. A Reserve Account has been created in the Bond Fund for the purpose of securing the
payment of the principal of and interest on the Second Lien Parity Bonds. The City will deposit an amount
into the Reserve Account simultaneously with the issuance and delivery of the 1998 Bonds which will fully
fund the Reserve Account Requirement. The balance in the Second Lien Revenue Bond Fund Reserve
Account as of June 10, 1998 was $1,081,675.
The balance in the First Lien Revenue Bond Fund Reserve Account as of June 10, 1998 was $313,011.
Flow of Funds Under the Bond Ordinance
The City has obligated and bound itself to pay into the Revenue Fund the Gross Revenues of the System.
Revenues deposited therein will be used only for the following purposes and in the following order of
priority:
First, to pay the Costs of Maintenance and Operation of the System;
Second, to make all required payments into the First Lien Revenue Bond Fund;
Third, to pay the interest on the Second Lien Parity Bonds;
Fourth, to pay the principal of the Second Lien Parity Bonds;
Fifth, to make all payments required to be made into any Reserve Account created to secure the payment of
the Second Lien Parity Bonds;
Sixth, to make all payments required to be made into any other revenue bond redemption fund or debt
service account or reserve account created to pay and secure the payment of the principal of and interest on
any revenue bonds of the City having a lien upon the Gross Revenues of the System junior and inferior to
the lien thereon for the payment of the principal of and interest on the Second Lien Parity Bonds;
Seventh, to retire by redemption or purchase in the open market any outstanding revenue bonds of the City,
to make necessary additions, improvements and repairs to or extensions and replacements of the System, or
for any other lawful City purposes.
Rate Covenant
The City has covenanted in the Bond Ordinance to establish, maintain and collect rates and charges for the
use of the services and facilities and all commodities sold, furnished or supplied by the System which will be
fair and nondiscriminatory and will adjust such rates and charges from time to time so that (i) the Gross
Revenues collected (together with Assessments collected) will at all times be sufficient (a) to pay Costs of
Maintenance and Operation of the System, (b) to pay the principal of, premium, if any, and interest on the
First Lien Parity Bonds and the Second Lien Parity Bonds, as and when the same will become due and
payable, (c) to make adequate provision for the payment of any Term Bonds, (d) to make when due all
payments which the City is obhgated to make into the Reserve Account and all other payments which the
City is obligated to make pursuant to the Bond Ordinance, and (e) to pay all taxes, assessments or other
governmental charges lawfully imposed on the System or the revenue therefrom or payments in lieu thereof
5
and any and all other amounts which the City may now or hereafter become obligated to pay from the
Gross Revenues by law or contract; and (ii) the Net Revenues in each Fiscal Year, after payment of debt
service on all Outstanding First Lien Parity Bonds, will be at least equal to the Coverage Requirement
calculated as of December 31 of the preceding calendar year.
Certain Other Bond Covenants
Certain other covenants in the Bond Ordinance include:
Maintenance of System. The City will at all times maintain, preserve and keep the properties of the System
in good repair, working order and condition and will from time to time make all necessary and proper
repairs, renewals, replacements, extensions and betterments thereto, so that at all times the business carried
on in connection therewith will be properly and advantageously conducted and the City will at all times
operate or cause to be operated said properties of the System and the business in connection therewith in an
efficient manner and at a reasonable cost.
Disposition of System. The City will not sell or otherwise dispose of the System in its entirety unless,
simultaneously with such sale or other disposition, provision is made for payment into the Bond Fund of
cash or Government Obligations sufficient to pay the principal of and interest on all then Outstanding
Second Lien Parity Bonds, nor will it sell or otherwise dispose of any part of the useful operating properties
of the System unless such facilities are replaced or provision is made for payment into the Bond Fund of the
ahiho viii set•
t forth h in the Bond Ordinance_
+
Priority ofL en. Except for the lien and charge of the First Lien Parity Bonds, the City will not at any time
create or permit to accrue or to exist any lien or other encumbrance or indebtedness upon the System or the
Revenues or any part thereof, prior to superior to the lien thereon for the payment of the Second Lien
Parity Bonds, and will pay and discharge, or cause to be paid and discharged, any and all lawful claims for
labor, materials or supplies which, if unpaid, might become a lien or charge upon the Revenues of the
System, or any part thereof, or upon any funds in the hands of the City, prior to or superior to the lien of
the Second Lien Parity Bonds, or which might impair the security of the Second Lien Parity Bonds.
Books d Accounts. The City will keepbooks of account which will be kept in accordance with any
and L1LL1�[Zl6LJ . The City proper
applicable rules and regulations prescribed by the State of Washington.
Additions and Improvements. The City will not expend any of the revenues derived by it from the operation
of the System or the proceeds of any indebtedness payable from the Revenues of the system for any
extensions, betterments or improvements to the System which are not legally required or economically
sound, and which will not properly and advantageously contribute to the conduct of the business of the
system in an efficient manner; provided, that to the extent permitted by law, the City may provide
commodities, services or facilities free of charge or at a reduced charge in order to carry out a plan adopted
by the Council for conservation of water or to benefit elderly, handicapped or poor persons.
Additional Bonds
The City may issue Additional Bonds upon compliance with the following conditions:
1. At the time of the issuance of such Additional Bonds, there will be no deficiency in the Bond Fund.
2. In each ordinance authorizing such Additional Bonds, provision will be made for payments into the
Reserve Account in accordance with the Bond Ordinance.
3. At the time of the issuance of such Additional Bonds, the City will have on file a certificate from the
Professional Utility Consultant, not then employed by the City except for the purpose of giving such
certificate, showing that the Net Revenue received during any consecutive 12 -month period for which
financial statements are available within the 24 months preceding the date of delivery of such
Additional Bonds equals the Coverage Requirement in each calendar year or Fiscal Year thereafter on
the then Outstanding Second Lien Parity Bonds, and the Additional Bonds to be issued, after payment
of debt service on all Outstanding First Lien Parity Bonds, and that the Adjusted Net Revenues to be
received each calendar year or Fiscal Year thereafter, will equal at least 1.40 times the Average Annual
Debt Service each such calendar year or Fiscal Year, on the Outstanding Second Lien Parity Bonds and
6
the Additional Bonds to be issued, after payment of debt service on all Outstanding First Lien Parity
Bonds.
The Adjusted Net Revenues will be the Net Revenues for a period of any 12 consecutive months out
of the 24 months immediately preceding the date of delivery of such proposed additional bonds, as
adjusted to take into consideration changes in Net Revenues estimated to occur under certain
conditions designated in the Bond Ordinance for each year after such delivery for so long as any 1998
Bonds, including the additional bonds proposed to be issued, will be outstanding.
Debt Payment Record
The City has promptly met all debt service payments on outstanding obligations. No refunding bonds have
been issued to avoid an impending default.
Future Financings
The City has no authorized but unissued bonds outstanding, nor does it anticipate issuing additional long-
term
onbterm debt within the next 12 months.
Authorized Investments
Chapter 35.39 RCW limits the investment by cities and towns of its inactive funds or other funds in excess
of current needs to the following authorized investments: U.S. bonds; United States certificates of
indebtedness; bonds or warrants of the State and any local government in the State; its own bonds or
warrants of a local improvement district which are within the protection of the local improvement guaranty
fund law; and any other investment authorized by law for any other taxing district or the State Treasurer.
Under chapter 43.84 RCW, the State Treasurer may invest in non-negotiable certificates of deposit in
designated qualified public depositories; in obligations of the U.S. government, its agencies and wholly
owned corporations; in bankers' acceptances; in commercial paper; in the obligations of the federal home
loan bank, federal national mortgage association and other government corporations subject to statutory
provisions and may enter into repurchase agreements. Utility revenue bonds and warrants of any city and
bonds or warrants of a local improvement district are also eligible investments (RCW 35.39.030).
Moneys available for investment may be invested on an individual fund basis or may, unless otherwise
restricted by law, be commingled within one common investment portfolio. All income derived from such
investment may be either apportioned to and used by the various participating funds or for the benefit of the
general government in accordance with city ordinances or resolutions. Funds derived from the sale of bonds
or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances,
resolutions or bond covenants may lawfully prescribe.
Local Government Investment Pool
The State Treasurer's Office administers the Washington State Local Government Investment Pool (the
"LGIP"), a $2.2 billion dollar fund that invests money on behalf of more than 350 cities, counties and
special taxing districts. In its management of LGIP, the State Treasurer is required to adhere, at all times,
to the principles appropriate for the prudent investment of public finds. These are, in priority order, (i) the
safety of principal; (ii) the assurance of sufficient liquidity to meet cash flow demands; and (iii) the
attainment of the highest possible yield within the constraints of the first two goals. Historically, the LGIP
has had sufficient liquidity to meet all cash flow demands.
The LGIP, authorized by chapter 43.250 RCW, is a voluntary pool which provides its participants the
opportunity to benefit from the economies of scale inherent in pooling. It is also intended to offer
participants increased safety of principal and the ability to achieve a higher investment yield than would
otherwise be available to them. The pool is restricted to investments with maturities of one year or less, and
the average life typically is less than 90 days. Investments permitted under the pool's guidelines include U.S.
7
government and agency securities, bankers' acceptances, high quality commercial paper, repurchase and
reverse repurchase agreements, motor vehicle fund warrants, and certificates of deposit issued by qualified
Washington State depositories.
Author;.,ani I vestments for Bond Prnree[dc
In addition to the eligible investments discussed above, bond proceeds may also be invested in mutual funds
with portfolios consisting of U.S. government and guaranteed agency securities with average maturities of
less than four years; municipal securities rated in one of the four highest categories; and money market
funds consisting of the same, so long as municipal securities held in the fund(s) are in one of the two highest
rating categories of a nationally recognized rating agency. Bond proceeds may also be invested in shares of
money market funds with portfolios of securities otherwise authorized by law for investment by local
governments (RCW 39.59.030). The bond proceeds from the refunding portion of this bond issue will be
invested in direct United States government obligations, as further described herein.
The Water System
The City supplies water to the city and the surrounding urbanized area. The City's water supply is from the
Naches River. Water is treated prior to delivery at the water treatment plant. The City has four high
production wells to back up its gravity surface supply system. The Nob Hill Water Association serves a
portion of the western part of the urban area. A number of the commercial and industrial facilities in
Yakima take their source of cooling water supply directly from shallow wells. Both the Town of Union Gap
and the area within the Terrace Heights Sewer District utilize groundwater as their source of water supply.
Customers
Residential. The residential customer class includes both single-family and multi -family. This class uses 50
percent of the total water produced. Within the City, approximately 85 percent of all residential customers
have irrigation water supplied from a separate irrigation system. Only five percent of potable residential
water use is for irrigation.
Commercial. The commercial customer class uses approximately 30 percent of the water produced.
Commercial users are shopping centers, banks, office complexes, motels, and other businesses. The
commercial monthly demand is generally uniform throughout the year.
Industrial. Industrial customers account for nine percent of total water produced. Industrial customers are
primarily the fruit and vegetable processing industries with summer use generally being twice the monthly
average.
Governmental. The governmental group of users includes the state, federal and county facilities. Water use
by this group accounted for three percent of the total water produced.
City (All Departments). This group, which includes schools and all City departments, uses approximately
eight percent of all water consumed. Nearly 90 percent of this group's total use is for irrigation during the
summer.
Water Service Charges
Effective April 1998, the foliowing charges became effective for water service. This schedule includes an
overall ten percent increase in charges over the prior schedule effective April 1997.
8
Residential. The charge for domestic water supplied consists of a ready -to -serve charge and a charge for
water consumed as follows:
One-month Two-month
Ready -to -serve charges: Period Period
Meter Size
3/4' and smaller $ 2.03 $ 2.03
1" 3.08 4.08
11/2" 6.09 10.15
2" 12.16 22.31
3" 30.37 58.71
4" 48.58 95.15
6" 109.28 216.55
8" 194.26 384.50
10" 303.52 603.00
12" 437.07 870.62
Charges for water consumed per one thousand cubic feet ("UOC"):
UOC Rate per UOC
0-12 $ 1.11
13-20 0.98
21-250 0.86
Over 250 0.60
The minimum charges for domestic water supplied are as follows:
One-month Two-month
Period Period
Meter Size
3/4' and smaller $ 5.62 $ 8.95
1" 6.81 11.27
11/2" 10.22 18.13
2" 17.07 31.87
3" 37.65 73.00
4" 58.22 114.18
6" 126.82 251.36
8" 222.85 111.14
10" 346.31 688.05
12" 497.22 989.89
Bulk Rate for Municipal Purposes. Charges for the City's water used for filling swimming pools in City
parks, and for irrigation purposes are:
First 5,000 cu. ft. 27¢ per 100 cu. ft.
Over 5,000 cu. ft. 140 per 100 cu. ft.
Irrigation Rate on Domestic Water. Domestic water may be delivered to consumers during the irrigation
season at a special irrigation rate, computed as follows:
An amount equal to the maximum water meter reading taken during the previous non -irrigation
season shall be charged under the regular domestic water rates. All water used on premises inside the
City limits in excess of such maximum usage during the previous non -irrigation season shall be
charged during the irrigation season at the below -given A rate, and all water used on premises outside
the City limits in excess of such maximum usage during the previous non -irrigation season shall be
charged during the irrigation season at the below -given B rate.
A rate: Effective April 1, 1998, $0.65 per UOC.
9
B rate: Effective April 1, 1998, $0.97 per UOC.
For the purpose of this section, the irrigation rate will commence at the regular water meter reading
during the months of February or March, as the case may be for any particular consumer; and will
terminate at the regular water meter reading during the months of October or November, as the case
may be for any particular consumer. In the event an application is made during the irrigation season
for the irrigation rate, the irrigation rate will commence at the next regular meter reading after the
time of such application.
Fire Service. Effective April 1, 1998, fire service charges for each active fire service area are as follows:
Inside Outside
Size of Service City City
2" $ 5.72 $ 12.44
3" 7.60 15.20
4' including hydrant only 11.41 22.88
6" including hydrant only 15.24 30.48
8" 22.86 45.72
10" 30.46 60.92
Outstanding Obligations
In addition to the Outstanding First and Second Lien Parity Bonds, the Water System has a Public Works
Trust Fund Loan in the outstanding amount of $272,740. This loan, which bears interest at three percent,
will mature on July 1, 2009. Annual payments consisting of 1/19th of the original principal amount plus
interest are made on July 1 of each year. These payments have a claim on Net Revenues subordinate to that
of those Outstanding First and Second Lien Parity Bonds.
The Sewerage System
Yakima treats wastewater for the City and the surrounding urbanized area, currently serving a population of
about 80,000.
Yakima has two sewage collection and treatment systems, one for wastewater from food processing
industries and one for other wastewater. The wastewater from food processing industries is collected and
sprayed on 96 acres of land. All other wastewater is treated at the Regional Wastewater Treatment Plant.
The City operates a progressive sewer utility serving the health, welfare, and safety needs of the community
and treatment to prevent stream pollution In 1936, the constructed a primary treatment
providing u a«��.,.��City p-- ,
plant. Improved control of water pollution was accomplished by separation of industrial and domestic
sewage in 1955. Sewage treatment was further enhanced in 1965 by the addition of trickling filter
biological treatment.
During the period of 1974 through 1982, the City accepted regional responsibility for protecting the
environment by agreeing to provide regional wastewater treatment. A program costing more than $33
million in federal, state, and local funds, was completed that collects sewage from outlying areas and
expanded the treatment plant. The investment made in Yakima's wastewater collection facilities and
treatment exceeds $100 million.
10
Sewer Service Charges
Effective January 23, 1998, the following charges became effective for sewer service. This schedule includes
an overall three percent increase over the prior schedule effective through March 24, 1997.
The domestic sewer service charge consists of a ready -to -serve charge and a volume charge based on
domestic water consumption as follows:
Water
Meter Size Monthly Charge Bimonthly Charge
3/4' $ 7.78 $ 15.56
1" 9.88 19.76
11/2" 12.76 25.52
2" 20.54 41.08
3" 77.80 155.60
4" 99.04 198.08
6" 148.06 297.20
8" 205.08 410.16
10" 410.16 820.32
Multiple -unit Residential Customers. The monthly ready -to -serve charge is $4.05 per account plus $3.73 per
dwelling unit.
Volume Charge. For all customers, the volume charge is $1.39 per hundred cubic feet of water
consumption.
Rate to Property Outside City. For customers located outside the City, a sewer service charge is composed of
a ready -to -serve charge and a volume charge based on domestic water consumption.
The sewer service charge is calculated and charged according to the following schedules:
Ready -to -Serve Charge. For all customers other than multiple -family residential customers:
Water
Meter Size Monthly Charge Bimonthly Charge
3/4' $ 15.31 $ 30.62
1" 19.44 38.88
11/2" 25.11 50.22
2" 40.42 80.84
3" 153.10 306.20
4" 194.90 309.80
6" 292.42 584.84
8" 403.57 807.14
10" 807.14 1,614.28
For multiple -unit residential customers, the monthly ready -to -serve charge will be $7.96 per account plus
$7.35 per dwelling unit.
Volume Charge. For all customers, the volume charge will be $2.73 per one hundred cubic feet of water
consumption.
Strong Waste Surcharge. For commercial and industrial customers discharging wastewater which contains
more than three hundred parts per million of biochemical oxygen demand ("BOD") and/or suspended solids
("SS") there will be a surcharge, in addition to the ready -to -serve charge and the volume charge, which will
be calculated utilizing the national average values of BOD and SS concentrations typical to each
classification under the Standard Industrial Code or by actual concentrations verified by the City. If the
commercial industrial customer chooses at its expense to install a sampling station, the strong waste charge
11
is calculated based upon actual concentrations. The following formula is utilized to calculate the strong
waste charge:
Monthly Surcharge = (Unit costs per pound of BOD or SS) times (weight of one gallon of water)
times (customer's flow in one hundred cubic feet divided by one thousand
three hundred thirty-seven per month) times (customer's concentration of
BOD or SS in parts per million minus three hundred per the national
average values or verified concentrations)
In the foregoing formula:
Unit cost per pound for BOD
Unit cost per pound for
Weight of one gallon of water
= $ 0.214 pound
= 0.140 pound
= 8.34 pounds.
J (i7/j.agt Charge. £ charge 01 $0.26) per g,LU1L11 J. paid for septic tank waste dumped at Ltd\, -Wastewater
treatment plant.
Year
1997
1996
1995
1994
1993
Year
1997
1996
1995
1994
1993
Commercial/
Residential
18,939
18,868
18,419
17,888
17,352
Commercial/
Residential
21,560
21,459
21,200
20,601
20,071
Customer
Boise Cascade (3)
Crystal Linen
DoubleTree inn, Yakima
Cavanaugh
Treatment Plant
Del Monte Corp.
Number of Water Customers
Industrial
48
40
52
52
47
Government
352
344
200
195
189
Number of Sewer Customers
Industrial
23
23
23
23
21
Major Water Customers
1995
Amount 100
Billed (1)
$83,688
64,199
35,342
33,454
31,964
17,207
Cu. Ft. (2)
252,295
47,615
12,160
18,598
85,883
35,005
1 Combined water and sewer bill.
2 Water usage only
3 Boise Cascade will be downsizing as discussed herein.
approximately 0.9% of the System's operating revenues.
12
Government
141
130
141
128
122
1996
Amount 100
Billed (1) Cu. Ft. (2)
$82,867
81,502
46,035
38,001
37,952
16,953
245,913
42,397
13,610
19,386
105,740
35,484
The amount billed to the
Total
19,339
19,252
18,671
18,135
17,588
Total
21,724
21,612
21,364
20,752
20,214
1997
Amount 100
Billed (1) Cu. Ft. (2)
$108,829 269,168
76,683 46,111
39,888 11,472
30,885 21,004
54,052 106,847
16,839 24,827
Company in 1997 represented
Rate Comparison of Neighboring Cities
Water and Sewer Rate Comparison
Single Family Monthly Rates (Based on 1,000 cu. ft.)
Water Rate Sewer Rate
civ Inside Outside Inside Outside
Harrah $13.80 $ - $25.00 $ -
Mabton 19.04 28.56 17.44 17.44
Moxee 17.79 26.28 17.00 25.50
Naches 18.40 27.62 21.73 32.60
Richland 13.90 20.85 25.16
Selah 11.97 17.87 21.00 31.50
Toppenish 14.12 17.65 20.35 25.44
Wapato 25.13 25.13 14.75 14.75
Yakima 13.03 19.55 21.05 40.24
Source: Associatwn of Washington Cities
Outstanding Obligations
In addition to the Outstanding First and Second Lien Parity Bonds, the Sewerage System has outstanding
six Public Works Trust Fund Loans totaling $4,803,230. These loans, all of which bear interest at one
percent, will mature on July 1 in various years. The first will mature in 2008, the last in 2015. Annual
payments consisting of 1/19th of the original principal amount plus interest are made on July 1 of each year.
These payments have a claim on Net Revenues subordinate to those of the Outstanding First and Second
Lien Parity Bonds.
13
Operating Revenues
Operating Expenses:
Operating Expense
Depreciation Expense
Taxes
Total Operating Expenses
Net Operating Income
Other Income:
Gain (Loss) on Sale of Assets
Interest Income
Non-utility Income
Miscellaneous
Total Other Income
Total Income
Available for Debt Service
on First Lien Bonds (1)
First Lien Debt Service
Coverage
Available for Debt Service
on Second Lien Bonds (2)
Second Lien Debt Service
Coverage
Combined Income Statement
(Years Ended December 31)
Audited
1993
$ 9,312,526
1994
$ 10,609,731
1995
1996
$ 10,572,110 $ 11,802,419
Unaudited
1997
$ 12,034,863
$ 6,419,994 $ 5,942,711 $ 6,582,054 $ 6,728,963 $ 7,181,334
2,853,204 2,876,861 1,971,349 3,395,296 3,440,294
1,830,559 1,995,723 3,773,986 2,030,702 2,163,344
$ 11,103,757 $ 10,815,295 $ 12,327,389 $ 12,154,961 $ 12,784,972
$ (1,791,231) $ (205,564) $ (1,755,279) $ (352,542) $ (750,109)
$ 16,465
264,437
153,113
0
$ 434,015
$ (1,357,216)
$ 3,310,082
$ 773,826
4.28
$ 2,536,256
$ 759,600
3.34
(1) Net Revenues as defined in the Bond Ordinance.
(2) Net Revenues less First Lien debt service.
Source: City of Yakima
$ 0 $ 3,384 $ 26,094 $ 3,845
469,573 526,669 586,709 393,141)
153,851 0 0 0
0 295,383 295,209 545,413
$ 623,424 $ 825,436 $ 908,012 $ 942,393
$ 417,860 $ (929,843) $ 555,470 $ 192,289
$ 5,290,444 $ 4,812,108 $ 5.,955,374 $ 5,792,082
$ 600,026 $ 659,526
8.82 7 30
$ 616,351 $ 281,985
9.66 20.54
$ 4,690,418 $ 4,152,582 $ 5,339,023 $ 5,510,097
$ 909,329 $ 970,920 $ 1,245,412 $ 1,513,540
5.16 4.28 4.29 3.64
Combined Balance Sheet
(Years Ended December 31)
Unaudited Audited
1995 1996 1997
Assets
Cash and investments $ 15,684,338 $ 12,000,791 $ 8,242,100
Receivables 2,468,607 2,317,134 2,365,101
Due from other government units 145,986 0 37,404
Inventories 174,527 177,852 215,300
Restricted assets 1,865,823 2,045,814 2,139,446
Property, plant and equipment, net 69,793,538 72,516,902 74,628,430
Intangibles 221,830 221,830 221,830
Total Assets $ 90,354,649 $ 89,280,323 $ 87,849,611
Liabilities
Payables $ 2,260,767 $ 2,853,978 $ 2,097,770
Long-term debt, current portion 500,009 633,134 646,929
Restricted payables 703,540 775,671 804,137
Bonds payable 11,120,000 10,450,001 9,650,001
Unamortized bond discount (83,044) (120,293) (109,044)
Deferred Amount On Debt Refunding 0 (106,720) (97,827)
Loans payable 10,464,907 9,710,971 9,093,019
Total Liabilities $ 24,966,179 $ 24,196,742 $ 22,084,985
Fund Equity
Contributed capital $ 62,181,976 $ 62,309,352 $ 63,763,677
Retained eamings 3,206,494 2,774,229 2,000,949
Total Fund Equity $ 65,388,470 $ 65,083,581 $ 65,764,626
Total Liabilities and Fund Equity
$ 90,354,649 $ 89,280,323 $ 87,849,611
15
Available for
First Lien
Years Debt Service (1)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Totals
$ 5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
First Lien
Debt
Service
$ 281,485
280,372
278,643
276,402
273,653
276,075
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$ 1,666,630
(1) Based on 1997 financial results carried forward.
(2) Net Revenues less First Lien debt service.
(3) Excludes the Refunded Bonds.
Debt Service Requirements and Projected Coverage
(Years ending December 31)
First
Lien Debt:
Service
Coverage
20.58
20.66
20.79
20.96
21.17
20.98
Available for
Second Lien
Debt Service )
$ 5,510,597
5,511,710
5,513,439
5,515,680
5,518,429
5,516,007
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
5,792,082
Second
Total Lien Debt Available for
Outstanding 1998 Second Lien Service Subordinate Other
Debt (3) Bonds Debt Service Coverage Obligations Purposes
$ 1,198,666 $ 0 $ 1,198,666 4.60 $ 594,079 3,717,853
1,186,439 529,478 1,715,917 3.21 588,457 3,207,336
1,180,989 527,550 1,708,539 3.23 582,836 3,222,064
1,167,428 525,620 1,693,048 3.26 577,214 3,245,47.8
710,400 933,310 1,643,710 3.36 571,593 3,303,126
696,196 817,863 1,514,059 3.64 565,971 3,435,977
369,360 821,083 1,190,443 4.87 560,350 4,041,290
365,585 822,943 1,188,528 4.87 554,728 4,048,826
366,035 823,418 1,189,453 4.87 549,107 4,053,523
370,285 817,483 1,187,768 4.88 543,485 4,060,829
368,200 815,343 1,183,543 4.89 537,864 4,070,675
0 816,745 816,745 7.09 476,664 4,498,673
0 811,108 811,108 7.14 444,324 4,536,651
0 818,948 818,948 7.07 440,076 4,533,058
0 254,513 254,513 22.76 435,829 5,101,740
0 255,693 255,693 22.65 369,844 5,166,54.6
0 256,288 256,288 22.60 195,713 5,340,082
0 256,288 256,288 22.60 129,531 5,406,263
0 255,683 255,683 22.65 0 5,536,400
0 254,463 254,463 22.76 0 5,537,620
0 257,618 257,618 22.48 0 5,534,465
$ 7,979 583 $ 11,671,431 $ 19,651,014 $ 8,717,665
The City
The City of Yakima was incorporated in 1886. It is the seventh largest city in the State, and encompasses
approximately 17 square miles. The City provides the full range of municipal services contemplated by
charter or statute. These include public safety (police, fire, building), public improvements (streets, traffic
signals, storm sewer), sanitation (solid waste disposal, sanitary sewer utility), water utility, community
development, parks and recreation, and general administrative services.
The City operates under a council/manager form of government with a full-time city manager. The City
Council consists of seven council members. Four members are elected from individual districts and three
are elected at large. The mayor is chosen by the council from within its own membership every two years.
Elected Officials
City Council
John Puccinelli, Mayor
Clarence C. Barnett
Henry C. Beauchamp
Lynn K. Buchanan
John Klingele
Mary Place
Bernard J. Sims
Term Expires
December 1999
December 1999
December 2001
December 1999
December 1999
December 2001
December 2001
Accounting Policies
Accounting records for the City are maintained in accordance with methods prescribed by the State Auditor
under the authority of Washington State law. The City financially reports on the calendar year basis and
employs a double -entry modified accrual system for all fund categories with the exception of proprietary,
nonexpendable and pension trust funds which require full accrual reporting. The modified accrual basis
differs from the accrual basis in the following ways: (i) purchases of capital assets are considered
expenditures; (ii) redemption of long-term debt is considered an expenditure when due; (iii) revenues are
recognized only when they become both measurable and available to finance expenditures of the current
period, revenues that are measurable but not available are recorded as receivable and offset by deferred
revenues; (iv) inventories and prepaid items are reported as expenditures when purchased; (v) interest on
long-term debt is not accrued but is recorded as an expenditure when due; and (vi) accumulated unpaid
vacation and sick pay are considered expenditures when paid.
Fund Accounting. The accounts of the City are organized on the basis of funds and account groups; each of
which is considered a separate accounting entity. The City uses governmental, proprietary and fiduciary
funds. Each governmental fund and expendable trust or agency fund is accounted for with a separate set of
self -balancing accounts that comprise its assets, liabilities, fund balances, revenues and expenditures.
Proprietary and similar trust funds use the revenue, expense and equity accounts of similar businesses in the
private sector. The City's resources are allocated to and accounted for in individual funds depending on
what they are to be spent for and how they are controlled.
Governmental Funds. All governmental funds are accounted for on a spending or "financial flow"
measurement focus. This means that only current assets and current liabilities are generally included on
their balance sheets. Their reported fund balance (net current assets) is considered a measure of "available
expendable resources." Governmental fund operating statements focus on measuring changes in financial
position, rather than net income; they present increases (revenues and other financing sources) and
decreases (expenditures and other financing uses) in net current assets.
Budgetary Process
The City Council annually approves the City's operating budget. The operating budget is designed to
allocate annually available resources among the City's services and programs and to provide for associated
financing decisions.
17
Annual appropriated budgets are adopted on the modified accrual basis of accounting. For governmental
funds, there are no differences between budgetary basis and generally accepted accounting principles.
Budgetary accounts are integrated in fund ledgers for all budgeted funds, but the financial statements include
budgetary comparisons for the General Fund and Special Revenue Funds only. Budgets for debt service and
capital projects are adopted at the level of the individual debt issue or project and for fiscal periods that
correspond to the linesofdebt issues or projects. Annual appropriated budgets are adopted at the fund
level. Subsidiary revenue and expenditure ledgers are used to compare the budgeted amounts with actual
revenues and expenditures. As a management control device, the subsidiary ledgers monitor expenditures
for individual functions and activities by object class. Appropriations for general and special revenue funds
lapse at year-end.
The City Manager is authorized to transfer budgeted appropriations between departments within any fund;
however, any revisions that alter the total expenditures of a fund, or that affect the number of permanently
authorized employee positions, salary ranges, or other conditions of employment must be approved by the
City Council_
Cash and Investments
Cash and investments are managed under the guidance of the City's Investment Policy adopted by a
resolution of the City Council. The policy was based on the Model Investment Policy prepared by the
Municipal Treasurers' Association of the United States and Canada and applies to all financial assets of the
City.
Investments are made using the "prudent person" standard with primary objectives being safety of principal,
liquidity enabling the City to meet all operating requirements and a return on the investment objective of
attaining a market rate of return through budgetary and economic cycles. City policies require the City to
minimize counterparty risks by safekeeping all purchased securities and conducting all trades on a delivery
versus payment basis. A report on the performance of the Treasury Division is prepared quarterly for
review by the City Council and City Manager.
Investments of City funds except those of the Firemen's Relief and Pension Fund are limited to:
(i) investment deposits, including certificates of deposit with qualified public depositories as defined in
chapter 39.58 RCW; (ii) certificates, notes or bonds of the United States, or other obligations of the United
States, or its agencies, or of any corporation wholly owned by the government of the United States; (iii)
obligations of government-sponsored corporations which are eligible as collateral for advances to member
banks as determined by the Board of Governors of the Federal Reserve System; (iv) banker's acceptances
sold on the secondary market; and (v) the LGIP.
The market value of investments held in the combined portfolios under the control of the Department of
Finance and Budget as of December 31, 1997 was $35.4 million versus an amortized cost of $35.5 million.
Of that amount, 38.6 percent was in agency securities, 28.5 percent was in the LGIP, 21.2 percent was
invested in U.S. Treasuries, and 11.7 percent was invested in municipal securities. At December 31, 1997,
the City was holding $205,000 in floating-rate and/or mortgage-backed securities. These holdings represent
only minimal market rate risk and are not expected to adversely effect the liquidity or performance of the
portfolio as a whole. The City is not involved in any other floating-rate, derivative, or swap transactions
which have not been disclosed as of December 31, 1997. Earnings on these investments during 1997
totaled $2.4 million. The market value of the Deferred Compensation Plan investments administered by
ICMA was $11.4 million at the end of 1997.
Auditing of City Finances
The State Auditor is required to examine the affairs of cities with a population of greater than 10,000
annually. The examination must include, among other things, the financial condition and resources of the
City, whether the laws and constitution of the State are being complied with, and the methods and accuracy
of the accounts and reports of the City. Reports of the auditor's examinations are required to be filed in the
office of the State Auditor and in the auditing department of the City.
18
Risk Management
The City maintains Reserve Funds to provide for self-insurance coverage in the areas of Unemployment
Compensation, Medical/Dental coverage, and Workers' Compensation. In addition, the City maintains a
Risk Management Fund to provide for property, liability, and other coverages.
Unemployment Compensation. In 1978, the City established an Unemployment Compensation Reserve
Fund to provide unemployment compensation coverage for its employees, and thereby elected to participate
with the State in a cost -reimbursement instead of monthly premium program. In doing so, the City
retained its right to appeal awards and determinations made by the State Department of Employment
Security.
Self-insured Medical/Dental Program. The City, in August 1979, self-insured its medical and dental
programs for all employees other than temporary employees and employees hired to work less than half-
time. The City's Personnel Office administers the self-insured program and claims payment services are
provided by Direct Administrators, a division of Beard, Bench and Mendenhall, Inc., a Yakima -based firm.
Each operating fund is charged an accrual amount per covered employee which would otherwise have been
paid to an insurance carrier. Interfund premiums to the Employee Health Benefit Reserve Fund for 1997
were $3,346,778. Incurred but not reported claims of $55,595 were accrued as a liability in 1996. The
City expects 1997 claims to be less than 1996 claims.
In order to avoid catastrophic losses, the City "reinsures" the program by purchasing insurance known as
"stop -loss insurance." Two types of "stop -loss" insurance are purchased: (i) individual stop -loss, and
(ii) aggregate stop -loss, with both provided through Safeco Insurance Company. Under the individual stop-
loss insurance, the City pays the first $115,000 of claims for an individual employee or dependent. Any
charges accrued by an individual in excess of $115,000 in a calendar year are thereafter reimbursed by
Safeco. The aggregate stop -loss is designed to protect the City from multiple large claims which may not
reach the individual stop -loss attachment point of $115,000. The aggregate stop -loss attachment point is
calculated by determining the projected amount of claims for the year and adding an additional 25 percent
of that amount (125 percent of projected claims).
Workers' Compensation Program. The City self-insured its workers' compensation program for all employees
except those covered by the LEOFF I Retirement System in July 1984. is workers' compensation
program provides coverage identical to the state administered workers' compensation program; however,
the City pays only the direct injury -related costs and certain administrative fees. The program is
administered by the City's Personnel Office with claims administration and safety services provided by Scott
Wetzel Services, Inc.
Each operating fund is charged an appropriate accrual amount, per employee, based on rate requirements
prescribed by the State. Each year the Reserve Fund is reviewed to determine a contribution rate which
provides for an appropriate reserve. Interfund premiums to the Workers' Compensation Fund for 1997
were $514,232. Based on the claims manager's estimate, the City has accrued incurred but not reported
claims of $43,148 at December 31, 1996 and does not expect that number to be higher in 1997.
In order to avoid catastrophic losses, the City "reinsures" the program bay purchasing insurance known as
"stop -loss insurance." This insurance is provided through Sedgwick James of Washington under a policy
purchased from Employers Reassurance. Under the individual stop -loss portion of the insurance, the City is
hable for the first $350,000 of claims resulting from a specific accident. Charges beyond that $350,000 are
covered by the stop -loss insurance.
Risk Management Program. The Risk Management Reserve Fund was established in 1986 when the City
elected to self -insure the liability exposure portion of its insurance program. Resources accrue to the fund
through interfund premiums to Operating Funds for appropriate insurance coverage and the replenishment
and building of reserves for potential liability claims. City contributions to the Risk Management Reserve
Fund for 1997 were $507,330. The Fund provides for administration, legal services, claims adjustment, and
for the purchase of property and other insurance coverages. Based on the claims manager's estimate, the
19
City has incurred but not reported claims of $241,219 at December 31, 1996. The City does not expect this
number to be higher in 1997.
Labor Relations
The City employs 841 people including parr -Time employees. A majority of the Ly a cmmmpioyccs are
represented by bargaining units as follows:
Number
Bargaining Unit of Employees Contract Expiration Date
AFSCME Municipal 333 December 31, 1998
YPPA 108 December 31, 2000
Fire Suppression 67 December 31, 1998
AFSCME Transit 42 December 31, 1999
Fire Communications 13 December 31, 1998
Fire PERS 4 December 31, 1998
The City has a good relationship with its bargaining units and has no history of labor disputes or strikes.
Pension System
Substantially all full-time and qualifying part-time employees participate in one of the following statewide
local government retirement systems administered by the Department of Retirement Systems, under cost-
shanng, multiple -employer public employee retirement systems. Actuarial information is on a system -wide
basis and is not considered pertinent to the City's financial statements. Contributions to the systems by
both employee and employer are based upon gross wages covered by plan benefits.
Both LEOFF and PERS include two plans. Participants who joined the system by September 30, 1977 are
Plan I members. Those who joined thereafter are enrolled in Plan II. Retirement benefits are financed from
both employee and employer contributions and investment earnings. Retirement benefits under both plans
are vested after completion of five years of eligible service.
PERS. The City's contribution, 7.42 percent of covered payroll, for the year ending December 31, 1996,
of $1,157,505 represents its full liabihty under the system, except that future rate may be adjusted to meet
the system need.
!TOFF. The City's contribution, 6.00 percent (LEOFF I) and 5.06 percent (LEOFF II) of covered
payroll, for the year ending December 31, 1996, of $486,440 represents its full liability under the system,
except that future rates may be adjusted to meet the system needs.
TTn untied Pension Liabilities. The City maintains two single employer defined benefit pension plans,
Firemen's Pension and Police Pension, which are closed systems covering Firemen and Police Officers hired
prior to March 1, 1970. Both plans had their first annual actuarial valuation as of March 31, 1989, and the
required contributions identified in that valuation have been the basis for recording the unfunded pension
liability since 1989.
The Police Pension is a department in the General Fund, and is operating on a pay-as-you-go basis. The
unfunded pension liability will be adjusted annually by comparing actual expenditures for pension benefits to
the actuarially determined contribution. The City intends to maintain this plan on a pay-as-you-go basis.
The Firemen's Pension is a trust fund, and has as its funding sources a portion of local property taxes, a state
tax on fire insurance premiums and interest income. This fund had an unfunded pension liability of
$12,886,000 at December 31, 1996.
20
Demographic Information
The City lies in central Washington State in Yakima County (the "County") about 142 miles southwest of
Seattle and 188 miles northeast of Portland, Oregon. Yakima County ranks second in the State in terms of
square miles and seventh in terms of population. The City is the County seat and the largest incorporated
community in the County.
Year
1998
1997
1996
1995
1994
1990*
Population
Yakima
County
210,500
208,700
207,600
204,100
202,100
188,823
*Source: U.S. Census
Source: Washington State Office of Financial Management
City of
Yakima
64,290
63,510
62,670
60,850
59,740
54,843
Yakima County Major Employers
The City lies within the fertile Yakima River Valley, which is known as the "Fruit Bowl of the Nation" due
to its large fruit harvest. The economy of Yakima County is based primarily on fruit processing and other
agribusiness. Local agriculture -related businesses include fruit growers, packers and processors. The largest
employers in the Yakima area include the following:
Yakima Area Largest Employers
Employer Product or Service
Snokist Growers
Yakima School District No. 7
Yakima County
Providence Medical Center
Yakima Valley Memorial Hospital
Tree Top
City of Yakima
Washington Beef
Shields Bag and Printing
Sunnyside School District
Del Monte Corporation
Yakima Valley Community College
Yakima Training Center
Selah School District
Fruit growers, packers Sc processors
Education
Government
Health care
Health care
Apple juice
Government
Beef
Polyethylene bags/printing
Education
Fruit processing
Education
Government
Education
Source: Greater Yakama Chamber of Commerce, 1997
Number of
FTE Employees
1,735
1,500
947
914
900
800
731
635
478
440
438
432
415
409
Agriculture -Related Businesses
Irrigation in the Yakima Valley is made possible from water from the U.S. Bureau of Reclamation's Yakima
Project. Apples, cherries, peaches, pears, grapes, and other fruits plus a wide variety of vegetables, seeds,
field crops and cereal grains make the Yakima Valley one of the top agricultural producing areas of the
nation. The County also ranked number one in the State for cattle and calf inventory, with 237,000 in
1996. The top five agricultural products for 1996 in Yakima County are shown below.
21
Top Five Agricultural Products
Yakima County, 1996
Crop Total Value
Apples $291,175,012
Wattle 184,000,000
Dairy 82,559,000
Hops 78,775,210
Grapes 41,708,486
Source: Yakima County Development Association
Tree Top is a farmer -owned cooperative engaged in the processing of apple juice, apple cider, fruit juice
blends, and dehydration of apples. Employing 800 full-time equivalent employees throughout the County
during the ten-month processing season, Tree Top is the nation's largest producer of apple juice. The
company's primary facilities are in Seiah. Graham Company, a manufacturer of plastic bottles, opened a
:r, 1 QQF, n,,,-) ernrdevc ar,rirnvimarehr 2(1 rirnrje TbP rnmpapdc rtrimary rncrnmer is Tree
Top.
Del Monte has facilities in Yakima and a fruit processing plant in Toppenish in the lower Yakima Valley.
The company employs 438 full-time employees in the County. Del Monte recently added 15,000 square
feet to its Toppenish plant and has begun processing corn, squash, asparagus and other vegetables at that
facility. The company, in a partnership with Silgan, a manufacturer of canned food containers, completed a
new 274,000 square -foot $6 million dry goods warehouse with associated railroad and truck loading
facilities at its Toppenish site in 1996. Silgan purchased a can factory from Del Monte in 1993, and has
recently added two production lines at a cost of $6.5 million, which doubled its production and expanded its
operation to 125 employees.
John I. Haas primarily grows hops, as well as asparagus and concord grapes in the Yakima Valley. The
company is the largest hops grower in the world, and Yakima County is the largest hops growing area in the
world. The company's two hops extract plants (including a new, state-of-the-art CO2 extract facility) in
Yakima together employ about 70 people. The company has facilities throughout the world, a_nra }las been
in business for over 30 years. The Haas harvest and process facility in nearby Toppenish employs between
15 and 230 people, depending on the season. Haas Fruit is a subsidiary of the company, and has several
orchards located in the Yakima area.
Snokist Growers processes and packs apples and other soft fruits within Yakima. The company recently
completed an $8 million expansion of its cannery facilities and equipment to facilitate an increase in
production to a projected 120,000 tons annually. The company expanded to 1,735 full-time employees.
� full-
timeOther large fruit processors and packers in the Yakima area include Zirkie Fruit, which employs 475 run-
time and 1,000 seasonal employees, and Evans Fruit, which employs 300 year-round full-time employees.
In early 1996 Pace International relocated its processing plant into the former Seneca Foods Corporation
warehouse in Wapato. Pace manufactures post-harvest treatment products, such as apple wax, hand cleaners
and other chemical products. The Company purchased the factory for $1.09 million and currently employs
approximately 45 people.
Macro Plastics, the leading manufacturer of plastic bins for fruits and vegetables in the North American
business industry, opened a $3 million, 30,000 square foot manufacturing facility in Union Gap in early
agribusiness �..,.. >
1997. The company currently employs approximately 25 people and is considering expansion of its
production line.
R & R Beverage, beer and wine distributors, has nearly completed a new 125,000 square foot warehouse.
A & D Plastics has recently begun construction on a new facility.
22
Nonagricultural Manufacturing
Two of Yakima's largest nonfood products manufacturing employers are Boise Cascade and Shields Bag and
Printing. Boise Cascade operates a sawmill, a plywood mill, and a planing and finishing facility, providing
employment to about 406 people. The company has been in Yakima since 1903. The company has a
diverse timber resource base, including its own lands, other privately owned lands, the Wenatchee National
Forest and the Yakima Indian Reservation. Boise Cascade Corporation announced in July 1998 that it will
close its Yakima plywood plant by the end of the year, laying off 220 workers, due to the plant's
inefficiencies, reduction in the logging on federal land, and the emergence of a strong competitor to
plywood. The company will leave intact its Yakima sawmill which has 155 employees. The Shields Bag and
Printing manufactures polyethylene bags and also does conventional printing, employing 478 full-time
equivalent employees.
Another timber -related concern is the Longview Fibre Company, a manufacturer of paperboard. The
company has been located in the Yakima area for over twenty years and employs 140 employees. Longview
Fibre recently completed a $15 million expansion project. The project included a 52,500 square -foot
expansion of its warehouse for manufacturing use, a new shipping and receiving facility, and the addition of
a corrugation and finishing machine.
Western Recreational Vehicles is a manufacturer of trailer and recreational vehicles in Yakima which
supplies dealers in 14 states. The company has about 400 FTE employees. Several years ago the firm
expanded its operation to include a new $2.5 million, 120,000 square -foot building, which has doubled the
firm's space. This company is currently developing a new production line.
Another large manufacturing company in the Yakima area is Dowty Aerospace, which produces aircraft
hydraulic equipment and mechanical assemblies. The company was recently contracted to supply the
hydraulic system for the military's new training aircraft. As the new program progresses, additional
machinists will be hired. Dowty is the primary manufacturer of hydraulic equipment for the aerospace
industry and currently employs 230 people.
Nonmanufacturing
The Yakima area's largest nonmanufacturing employers are the Yakima School District with 1,500 FTE
employees; Providence Yakima Medical Center, formerly St. Elizabeth Hospital, with 857 employees;
Yakima County with 947 employees; the City of Yakima with 687 employees; and Yakima Valley Memorial
Hospital with 900 employees. The Yakima Valley Memorial Hospital recently completed the expansion of
its emergency room and energy plant, adding 7,000 square feet at a cost of $3 million, as well as a 43,000
square -foot $6.5 million addition to its psychiatry and surgery centers. The hospital also recently added
three stories to an existing wing, as well as renovated the third floor. Providence recently completed a
tower, which added three stones to an existing hospital wing, as well as a 20,000 square -foot, two-story
medical office building, and is currently remodeling the fourth floor of the Centennial Tower for use by
heart patients. The total cost of the projects at Providence is nearly $10 million.
Ace Hardware Corporation operates a wholesale distribution center serving the northwestern United States
including Alaska and western Canada. Built in 1983, the facility was recently expanded by 175,000 square
feet bringing it up to 550,000 square feet. Over 210 workers are employed at the Yakima facility.
Transportation
Transportation is an important aspect of Yakima's economy. Located on State Highway 82, Yakima is
served by seven scheduled motor freight lines, Greyhound Bus, and the Union Pacific railroads. Burlington -
Northern purchased Yakima -based Washington Central Railroad for $40 million in 1996. This was the
final acquisition to complete Burlington-Northern's plans to reopen Stampede Pass and begin operating
empress freight trains through the Yakima Valley to the Puget Sound region in late 1997. Commercial
airline service is provided by United Express and Horizon Airlines through the Yakima Airport.
23
Education
There are several higher education institutions serving the Yakima area. Heritage College is located just
west of Toppenish, and is an accredited four-year liberal arts college. Heritage College offers several
degrees, with 683 students enrolled at its Toppenish campus. Yakima Valley Community College in
v_,_ which offers 50 de The .G 1 55 .ie 11e.7 «4.e
1 QRilila is a Two-year institution wiutil v11l.rJ over �1v ul.g�i ii.�. There ark. v,1UU �iuu�.iaw enrolled at the
college, and 414 full-time employees. The Perry Technical Institute is a private, non-profit technical school,
which offers programs in a number of technical areas such as telecommunications, instrumentation,
refrigeration, and graphic arts. The institute, which employs about 50 people and includes 360 students,
has a cooperative agreement with Yakima Valley Community College to help students achieve AA degree
requirements.
Tourism
Yakima is a popular location for conventions due to its dry climate and central location in the State. In
1997, a total of 202 conventions, hosting 117,780 delegates were held in Yakima, generating approximately
$21.2 million for the area economy. A $6 million expansion of the City's convention facility, opened in late
1997.
Construction of a multipurpose trade and convention center, the Sun Dome, was completed in 1990. The
Sun Dome holds 8,000 people and has generated 500 direct and indirect jobs. The Sun Dome was
constructed at a cost of $8.5 million and is the State's third domed center. It hosts concerts, athletic events,
1, i , , le
rallies and will be used during the Central Washington State Fair each year. Yakima now has a rrtirior league
baseball team as well as a Continental Basketball Association professional basketball team.
Military
The Yakima Training Center, a military reservation used for troop maneuvers, field training and artillery
practice, lies northeast of the City of Yakima. One of the largest military installations in the United States
encompassing 263,311 acres, the training center trains over 10,000 National Guard and Army Reserve
personnel annually. This facility has approximately 415 permanent military and civilian employees and
generates local spending of more than $10 million annually. A $2.4 million armory which includes space for
administration, a classroom, kitchen and dining area for the 951st Heavy Equipment Maintenance Company
was completed in late 1993. Another 63,000 acres are currently being added to the training area. Recent
and pending military base closures on the west coast are expected to result in more units coming to Yakima
for training.
Retail
The Yakima Mall, located in downtown Yakima, is the largest local retail area. The mall has of a total of 80
stores, including The Bon Marche, Mervyn's and JC Penney, with Nordstrom located across the street. The
n ii ,• A of the mall,
mail underwent a �i muton revitalization project in 1996. 30,000 square -foot expansion
which will add approximately 15 stores, is planned, although the timing of the expansion is not known. An
estimated 350 to 400 people are currently employed at the mall.
Over the past several years, several new retail stores have been completed in the Yakima area. A $1.1
million Safeway Superstore opened, which employs about 200 full and part-time people. A 150,000 square -
foot PriceCostco store opened in the City of Union Gap, which employs about 100 people. Top Foods
opened a $3.2 million store which also employs approximately 200 people. A 160,000 square -foot Fred
Meyer retail store recently opened in Yakima.
New Construction
Among the recent projects completed, under construction or proposed for development in the Yakima area
are the following:
• The 360 -acre Hull Ranch Project, commonly referred to as the Apple Tree Development, located
west of the City of Yakima, would include single-family, multi -family and commercial space. An 18 -
hole golf course (Apple Tree), a club house and restaurant, which were recently completed,
constituted Phase I of this potential planned mixed-use development. Continued development of the
24
project is currently on hold pending the establishment of additional water and sewer service, and
therefore, the timing of the remaining phases is unknown at this time.
• A $13 million facility for the Yakima Agriculture Research Laboratory for the U.S. Department of
Agriculture was completed in early 1996 in Yakima. The facility includes six different types of labs as
well as 13 environmental rooms and 13 greenhouses. The lab's 40-member staff focuses primarily on
research of insects which impact fruit production in the area.
• A 129,000 square-foot Wal-Mart Superstore on 21 acres in the City was recently completed. The
store is one of the largest Wal-Marts in the country and currently employs about 250 people. A
65,000 square-foot supermarket was developed at the site as well.
• Phase I of a 225,000 square-foot retail center on 19 acres called Yakima Gateway Center was recently
completed, and Phase II recently began within the City. A 96,000 square-foot Target retail store, as
well as a supermarket and ten other stores located adjacent to the center, have been built. An
estimated 500 new jobs have been created by the new shopping center.
• A 24,000-square foot, $4.1 million Children's Village Medical Clinic opened in October 1997 in
west Yakima. The facility, which was funded largely by private contributions and features a child
friendly "frontier village" design. The Village will consolidate pediatric offices which include sibling
child care services, a hearing and speech center, dental clinics, and a therapeutic swimming pool
creating the nation's most comprehensive one-stop medical center for children with disabilities and
special health care needs.
• A 94-acre sports complex in east Yakima was recently proposed and is currently seeking private
investors to form a public-private partnership. The $20 million complex includes 14 softball and
baseball fields, eight basketball courts, eight soccer fields, two in-line hockey rinks, skateboard park,
swimming pool and water slide area, volleyball courts, offices, and concession stands.
• An 850,000 square-foot regional mall, the Riverside Mall, has been proposed by Mercy Enterprises
to be built in Yakima. The developers have requested to rezone 89 acres from light industrial to large
convenience center, to build potentially the largest mall in the Yakima Valley. The site plan includes
space for five department stores, and an additional 215,000 square feet set aside for retail shops and
another 150,000 square feet for future expansion.
• A proposal by Southerland Business Park to build a 60-acre industrial park in the City of Union Gap
was approved by the City in fall 1997. Phase I, which has begun construction, consists of two
buildings, 34,000 and 42,000 square feet, respectively, on 8.8 acres for Western Recreational
Vehicles for the manufacture of travel trailers and eventually motor homes. Western plans to
construct a total of eight buildings.
• Tenneco Building Products is undergoing a $3.6 million expansion of its Yakima plant to
manufacture a foam insulation product for West Coast markets. The new manufacturing line will
add about 30 jobs when full operation is reached in year 2000. The plant currently manufactures
polystyrene packaging trays used in packaging meat for retail sale and employs 64 people.
• The first phase of a 701-unit housing development in the Terrace Heights area near the City of
Yakima called The Highlands at Yakima Ridge, was recently approved by the County. The County
authorized the construction of 402 units of mixed single- and multi-family housing, representing
more than half of a $100 million project.
25
Additional economic indicators for the City and Yakima County are as follows:
Yakima County
Personal and Per Capital Income*
Year
1996
1995
1994
1993
1992
* Presented in 1996 dollars
Source: U.S. Bureau of EconomicAnalysis
Year
1997
1996
1995
1994
1993
Personal
Income (000)
$4,204,252
RRK ZK7
3,717,975
3,596,755
3,432,879
Building Permits
Yakima
No. of
Permits
2,062
1,591
1,648
1,784
1,820
Sources: Yakima County Building Department
1997
1996
1995
1994
1993
County
Valuation
$ 96,302,552
88,580,039
96,910,948
110,724,459
96,041,326
Yakima County
Taxable Retail Saks
Source: Washington State Department of Rennue
Per Capita
Income
$19,454
18216
17,751
17,576
17,229
City of Yakima
No. of
Permits
1,339
804
941
722
Valuation
$72,922,547
64,851,286
69,279,317
45,893,626
942 43,190,868
$ 2,112,094,198
1,935,198,088
1,870,109,691
1,874,989,559
1,725,606,355
Yakima County
Nonagricultural Wage & Salary Workers
and Labor Force and Employment Data
Annual Average
1997* 1996 1995 1994
Civilian Labor Force 115,200 115,300 113,400 110,900
Employment 103,700 99,800 99,100 98,000
Unemployment 11,500 15,500 14,300 12,900
Percent of labor force 10.0% 13.4% 12.6% 11.6%
Total Nonagricultural Wage and Salary Earners 74,800 73,500 73,000 71,900
Manufacturing 11,100 10,700 10,600 10,700
Construction and mining 3,500 3,000 3,100 3,300
Transportation and public utilities 2,800 3,100 3,000 2,900
Wholesale trade 8,300 8,100 8,700 8,300
Retail trade 13,800 14,000 13,700 13,400
Finance, insurance and real estate 2,400 2,300 2,200 2,200
Services and miscellaneous 19,300 19,100 18,500 18,100
Government 13,600 13,200 13,100 13,000
* Preliminary
Source: Washington State Employment Security Department
Litigation
There is no litigation pending questioning the validity of the 1998 Bonds or the power and authority of the
City to issue the 1998 Bonds.
Approval of Counsel
Legal matters incident to the authorization, issuance and sale of 1998 Bonds by the City are subject to the
unqualified approving legal opinion of Preston Gates & Ellis LLP, Seattle, Washington, Bond Counsel. A
copy of the opinion of Bond Counsel will be attached to the final Official Statement. Bond Counsel has
reviewed this document only to confirm that the portions of it describing the 1998 Bonds and the authority
to issue them, conform to the 1998 Bonds and the applicable laws under which they are issued.
Tax Exemption
General
In the opinion of Preston Gates & Ellis LLP, Seattle, Washington, Bond Counsel, interest on the 1998
Bonds is excluded from gross income subject to federal income taxation pursuant to Section 103 of the
Internal Revenue Code of 1986, as amended and any Treasury Regulations promulgated thereunder
(collectively the "Code"), provided the arbitrage requirements of Section 148 of the Code described in this
section under the heading "Continuing Requirements" are complied with.
The 1998 Bonds are not private activity bonds, and interest on the 1998 Bonds is not an item of tax
preference for purposes of determining alternative minimum taxable income for individuals or corporations
under the Code. However, interest on the 1998 Bonds is taken into account in the computation of adjusted
current earnings for purposes of the corporate alternative minimum tax under Section 55 of the Code as
more fully described in this section under the heading "Certain Federal Income Tax Consequences."
Except as described herein, Bond Counsel expresses no opimon on any federal, state or local tax consequence
arising with respect to ownership of the 1998 Bonds.
27
Continuing Requirements
Section 148 of the Code has continuing arbitrage requirements that must be met subsequent to the issuance
of the 1998 Bonds for the interest on the 1998 Bonds to be, and remain, exempt from regular federal
income taxation. These requirements include provisions that prescribe investment yield limitations for the
proceeds of the 1998 Bonds and that certain investment earnings be paid on a periodic basis to the federal
government. The Bond Ordinance contains covenants of the City to comply with these continuing arbitrage
requirements. Bond Counsel has not undertaken to determine (or to inform any person) whether any action
taken (or not taken) or events occurring (or not occurring) after the date of issuance of the 1998 Bonds may
affect the tax status of the interest on the 1998 Bonds.
Certain Federal Income Tax Consequences
The following is a discussion of certain federal tax matters under the Code. This discussion does not
purport to deal with all aspects of federal taxation that may be relevant to particular bondowners.
Prospective bondowners, particularly those who may be subject to special rules, are advised to consult their
own tax advisors regarding the federal tax consequences of owning and disposing of the 1998 Bonds, as well
as any tax consequences arising under the laws of any state or other taxing jurisdiction.
Alternative Minimum Tax on Corporations. Section 55 of the Code imposes an alternative minimum tax on
corporations equal to the excess of the tentative minimum tax for the taxable year over the regular tax for
such year. The tentative minimum tax is based upon alternative minimum taxable income which is regular
taxable income with certain adjustments and increased by the amount of certain items of tax preference.
One of the adjustments is a portion (75 percent for any taxable year beginning after 1989) of the amount by
which a corporation's adjusted current earnings exceeds the corporation's alternative minimum taxable
income (determined without regard to such adjustment and the alternative tax net operating loss deduction).
Interest on tax-exempt obligations, such as the 1998 Bonds, is included in a corporation's adjusted current
earnings.
For taxable years beginning after December 31, 1997, the corporate alternative minimum tax is repealed for
small business corporations that had average gross receipts of less than $5 million for the three-year period
beginning after December 31, 1994, and such small business corporations will continue to be exempt from
the corporate alternative minimum tax so long as their average gross receipts do not exceed $7.5 million.
Oual fed Tax -Exempt Obligations. The City has designated the 1998 Bonds as Qualified Tax -Exempt
Obligations for banks, thrift institutions and other financial institutions so that such financial institutions
will not be denied a deduction of 100 percent of their interest expenses allocable to the 1998 Bonds.
However, corporate tax preference rules reduce by 20 percent the amount that may be deducted by such
financial institutions for interest on funds allocable to tax-exempt obligations such as the 1998 Bonds.
Borrowed Funds. The Code provides that interest paid on funds borrowed to purchase or carry tax-exempt
obligations during a tax year is not deductible. In addition, under rules used by the Internal Revenue
Service for determining when borrowed funds are considered used for the purpose of purchasing or when
carrying particular assets, the purchase of obligations may be considered to have been made with borrowed
funds even though the borrowed funds are not directly traceable to the purchase of such obligations.
Property and Casualty Insurance Companies. The deduction for loss reserves for property and casualty
insurance companies is reduced by 15 percent of the sum of certain items, including the interest received on
tax-exempt obligations, such as the 1998 Bonds.
Social Security and Railroad Retirement Benefits. The Code also requires recipients of certain Social Security
or Railroad Retirement benefits to take into account, in determining gross income, receipts or accruals of
interest that is exempt from federal income tax.
Branch Profits Tax. Certain foreign corporations doing business in the United States may be subject to a
branch profits tax on their effectively connected earnings and profits, including tax-exempt interest on
obligations such as the 1998 Bonds.
28
S Corporations. Certain S corporations that have subchapter C earnings and profits at the close of a taxable
year and gross receipts more than 25 percent of which are passive investment income, which includes
interest on tax-exempt obligations, such as the 1998 Bonds, may be subject to a tax on excess net passive
income.
Rating
As noted on the cover page of this Official Statement, the City has apphed for a rating for the 1998 Bonds
from Moody's Investors Service. The rating reflects only the view of the rating agency and an explanation of
the significance of the rating may be obtained from the rating agency. There is no assurance that the rating
will be retained for any given period of time or that the rating will not be revised downward or withdrawn
entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward revision or
withdrawal of the rating will be likely to have an adverse effect on the market price of the 1998 Bonds.
Underwriting
The 1998 Bonds are being purchased by Seattle -Northwest Securities Corporation acting as the
Underwriter. The purchase contract provides that the Underwriter will purchase all of the 1998 Bonds, if
any are purchased, at a price of percent of the par value of the 1998 Bonds, plus accrued interest.
The 1998 Bonds will be reoffered at an average price of percent of the par value of the 1998 Bonds.
After the initial public offering, the public offering prices may be varied from time to time.
Miscellaneous
All forecasts, estimates and other statements in this Official Statement involving matters of opinion, whether
or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is
not intended to be construed as a contract or agreement between the City and the purchasers or holders of
any of the 1998 Bonds. The information contained in this Official Statement is presented for the guidance
of prospective purchasers of the 1998 Bonds described therein. The information has been compiled from
official sources and, while not guaranteed by the City, is believed to be correct.
Continuing Disclosure
In accordance with Section (b)(5) of Securities and Exchange Commission Ruk 15c2-12 under the
Securities Exchange Act of 1934, as the same may be amended from time to time (the "Rule"), the City has
agreed in the Ordinance for the benefit of the owners of the Bonds to provide or cause to be provided to
each nationally recognized municipal securities information repository ("NRMSIR") and to the state
information depository for the State of Washington (if one is created) ("SID"), in each case as designated by
the Securities and Exchange Commission (the "Commission") in accordance with the Rule, the following
annual financial information and operating data for the prior fiscal year (commencing in 1999 for the fiscal
year ending December 31, 1998): (i) annual financial statements, which statements may or may not be
audited, prepared in accordance with the Budget Accounting and Reporting System ("BARS") prescribed
by the State Auditor pursuant to RCW 43.09.200 (or any successor statute) and generally of the type
included in the official statement under the headings, "Combined Income Statement" and "Combined
Balance Sheet;" (ii) principal amount of First Lien Parity Bonds and Second Lien Parity Bonds; (iii) debt
service coverage for Second Lien Parity Bonds; (iv) rates for the System; and (v) number of customers of
the System.
Such annual information and operating data described above will be so provided on or before the end of
nine months after the end of the City's fiscal year. The City's current fiscal year ends on December 31. In
lieu of providing such annual financial information and operating data, the City may cross-reference to other
documents provided to the NRMSIR, the SID or to the Commission, and, if such document is a final
29
official statement within the meaning of the Rule, such document will be available from the Municipal
Securities Rulemaking Board ("MSRB").
If not provided as part of the annual financial information discussed above, the City will provide the City's
audited annual financial statement prepared in accordance with BARS prescribed by the Washington State
Auditor pursuant to the statute cited above (or any successor statutes) when and if available to each then
existing NRMSIR and the SID.
The City further agrees to provide or cause to be provided, in a timely manner, to each NRMSIR or to the
SID and to the MSRB, notice of the occurrence of any of the following events with respect to the Bonds, if
material: (i) principal and interest payment delinquencies; (ii) non-payment related defaults;
(iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on
credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their
failure to perform; (vi) adverse tax opinions or events affecting the tax-exempt status of the Bonds;
(vii) modifications to the rights of Bond holders; (vii) Bond calls (optional redemption of the Bonds prior
to their maturity); (ix) defeasances; (x) release, substitution or sale of property securing repayment of the
Bonds; and (xi) rating changes.
The City's obligations to provide annual financial information and notices of material events will terminate
upon the legal defeasance, prior redemption or payment in full of all of the Bonds. This section, ]or any
'11 be null and if the City (i) obtains an opinion of nationally recoa ized bond
provision hereof, will void
counsel to the effect that those portions of the Rule which require this section, or any such provision, are
invalid, have been repealed retroactively or otherwise do not apply to the Bonds; and (ii) notifies each then
existing NRMSIR and the SID of such opinion and the cancellation of this section. Notwithstanding any
other provision of the undertaking, the City may amend the provisions described in this section and any
provision of this section may be waived, with an approving opinion of nationally recognized bond counsel
and in accordance with the Rule.
In the event of any amendment of or waiver of a provision of this section, the City will describe such
amendment in the next annual report, and will include, as applicable, a narrative explanation of the reason
for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles,
on the presentation) of financial information or operating data being presented by the City. In addition, if
the amendment relates to the accounting principles to be followed in preparing financial statements,
(i) notice of such change will be given in the same manner as for a material event, and (ii) the annual report
for the year in which the change is made will present a comparison (in narrative form and also, if feasible, in
quantitative form) between the financial statements as prepared on the basis of the new accounting
principles and those prepared on the basis of the former accounting principles.
r 1 O_ '_ ht f rce the of the Cite undertaking described in
A Bond Owner's or Beneficial vWncr � right to er11�,...� provisions City's ir.= alc: g
this section will be limited to a right to obtain specific enforcement of the City's obligations, and any failure
by the City to comply with the provisions of this undertaking will not be an event of default with respect to
the Bonds. For purposes of this section, "Beneficial Owner" means any person who has the power, directly
or indirectly,, to vote or consent with respect to, or to dispose of ownership of, any bonds, including persons
holding bonds through nominees or depositories.
Other Continuing Disclosure Undertakings of the City. The City has entered into undertakings to provide
annual information and the notice of the occurrence of certain events with respect to all bonds issued by the
City on and after July 3, 1995 subject to the Rule. The City is in compliance with all such undertakings.
Book -Entry Only System
The following information has been provided by DTC. The City makes no representation as to the accuracy or
completeness thereof Beneficial Owners should confirm the following with DTC or the Participants (as hereinafter
defined).
30
DTC will act as securities depository for the 1998 Bonds. The 1998 Bonds will be issued as fully registered
1998 Bonds, registered in the name of Cede & Co. (DTC's partnership nominee). One fully -registered
security certificate will be issued for the 1998 Bonds, in the aggregate principal amount of such issue, and
will be deposited with DTC.
DTC is a limited -purpose trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC
holds securities that its participants (the "Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book -entry changes in Participants' accounts, thereby eliminating the need
of physical movement of securities certificates. Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc.
and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
Purchases of 1998 Bonds under the DTC system must be made by or through Direct Participants, which
will receive a credit for the 1998 Bonds on DTC's records. The ownership interest of each actual purchaser
of each 1998 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but
Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well
as periodic statements of their holdings, from the Direct or Indirect Participant through which the
Beneficial Owner entered into the transaction. Transfers of ownership interests in the 1998 Bonds are to be
accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in the 1998 Bonds, except in the
event that use of the book -entry system for the 1998 Bonds is discontinued.
To facilitate subsequent transfers, all 1998 Bonds deposited by Participants with DTC are registered in the
name of DTC's partnership nominee, Cede & Co. The deposit of 1998 Bonds with DTC and their
registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the 1998 Bonds; DTC's records reflect only the identity of the Direct
Participants to whose accounts such 1998 Bonds are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to
Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the 1998 Bonds within an issue are being
redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in
1998 Bonds to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to 1998 Bonds. Under its usual procedures,
DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the 1998
Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the 1998 Bonds will be made to DTC. DTC's practice is to credit Direct
Participant's accounts on a payable date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on payable date. Payments by
31
Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC, the Fiscal Agent, or the City, subject to any
statutory or regulatory requirements as may be in effect from time to time. Payment of principal and
interest t`. DTr is the recnnncihility of the City nr the 'Picea] Agent dichnrcement of Ruch navmentc to
Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial
Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the 1998 Bonds at any
time by giving reasonable notice to the City or the Fiscal Agent. Under such circumstances, in the event
that a successor securities depository is not obtained, 1998 Bond certificates are required to be printed and
delivered.
The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor
;res depository) Tn that event 199R Rnnd certificates will he printed and delivered.
Semi:........, .....i....,...._� i --- 4. � r
The information in this section concerning DTC and DTC's book -entry system has been obtained from
sources the City believes to be reliable, but the City takes no responsibility for the accuracy thereof.
Official Statement
The City expects to take action, pursuant to the Bond Ordinance, to deem "final" this Preliminary Official
Statement as of its date, except for the omission of information dependent on the pricing of this issue and
completion of the underwriting agreement, for the purpose of compliance with Securities and Exchange
Commission Rule 15c2-12.
32
Appendix A
Certain Definitions from the Ordinance
As used in this Official Statement, the following words have the following meanings:
"Accreted Value" means with respect to any Capital Appreciation Bonds (A) as of any Valuation Date, the amount set
forth for such date in any ordinance authorizing such Capital Appreciation Bonds and (B) as of any date other than a
Valuation Date, the sum of (1) the Accreted Value on the preceding Valuation Date and (2) the product of (a) a
fraction, the numerator of which is the number of days having elapsed from the preceding Valuation Date and the
denominator of which is the number of days from such preceding Valuation Date to the next succeeding Valuation Date,
calculated based on the assumption that Accreted Value accrues during any semiannual period m equal daily amounts on
the basis of a year of 12 30 -day months, times (b) the difference between the Accreted Values for such Valuation Dates.
"Acquired Obligations" means the investments now or hereafter acquired by the City to effect the refunding of the
Refunded Bonds.
"Additional Bonds" means any revenue bonds, revenue warrants or other revenue obligations which may be issued in
the future on a parity of lien with the Second Lien Parity Bonds.
"Annual Debt Service" means for any specified Fiscal Year.
(1)
with respect to any Outstanding Second Lien Parity Bonds, the amounts required to be deposited during that
period in the Bond Fund (excluding the Reserve Account therein);
(2) with respect to any Outstanding Capital Appreciation Bonds, the principal amount thereof shall be equal to the
Accreted Value thereof maturing or scheduled for payment in such period, and no other interest shall be
included;
with respect to any Outstanding Fixed Rate Bonds, an amount equal to (A) the principal amount of such Fixed
Rate Bonds due or subject to mandatory redemption during such period and for which no sinking fund
installments have been established, (B) the amount of any payments required to be made during such period
into any sinking fund established for the payment of any such Fixed Rate Bonds, plus (C) all interest payable
during such period on any such Fixed Rate Bonds Outstanding and with respect to Fixed Rate Bonds with
mandatory sinking fund requirements, calculated on the assumption that mandatory sinking fund installments
will be applied to the redemption or retirement of such Fixed Rate Bonds on the date specified in the ordinance
authorizing such Fixed Rate Bonds; and
(4) with respect to Outstanding Variable Rate Bonds, the principal for any period and interest on such Variable
Rate Bonds during such period computed on the assumption that the amount of Variable Rate Bonds
Outstanding as of the date of such computation would be amortized (i) in accordance with the mandatory
redemption provisions, if any, set forth in the ordinance authorizing the issuance of such Variable Rate Bonds,
or if mandatory redemption provisions are not provided, during a period commencing on the date of
computation and ending on the date 30 years after the date of issuance (ii) at an interest rate equal to the yield
to maturity set forth in the Revenue Bond Index (40 -year Bond) published in the edition of The Bond Buyer
(or comparable publication or such other similar index selected by the City in good faith) selected by the City
and published within ten days prior to the date of calculation or (iii) to provide for essentially level annual debt
service of principal and interest over such period; and, for the purpose of calculating the principal and interest
on Variable Rate Bonds in any Fiscal Year, such Variable Rate Bonds shall be assumed to mature on the stated
maturity date or mandatory redemption date thereof.
"Assessment Income" means the principal of and interest on special assessments levied in any local improvement district
or utility local improvement district which are pledged to be paid into the Bond Fund. In the case of assessments payable
in installments, Assessment Income shall be allocated to the years in which it would be received if the unpaid balance of
each assessment roll were paid in the remaining number of installments with interest on the declining balance at the times
and at the rate provided in the ordinance confirming the assessment roll.
"Assessments" means any special assessments which may be levied in any local improvement district or utility local
improvement district of the City created for the acquisition, construction or installation of additions and improvements
to or extensions of the System, including any installment of assessments and any interest or penalties which may be due
thereon, if such assessments are pledged to be paid into the Bond Fund. The word "Assessments" shall include any
installments of assessments and any interest or penalties which may be due thereon.
(3)
"Average Annual Debt Service" means the amount determined by dividing (a) the sum of all interest and principal to
be paid on outstanding Bonds from the date of determination to the last maturity date of such Bonds, by (b) the number
1
of Fiscal Years or calendar years from and including the Fiscal Year or calendar year in which the determination is made
to the last Fiscal Year or calendar year in which the sum of (i) the principal amount of Serial Bonds maturing in such
Fiscal Year plus, once the 1991 Bonds and the 1996 Bonds are no longer Outstanding (ii) the payments for the
amortization of Outstanding Second Lien Parity Bonds that are Term Bonds.
"BonA F,,.,A" means the Se,-r,,,r� Tin., Water and Sewer R evenuue Bond Fend created by Orriinanre Nn 33RO
"Bond Registrar" means the fiscal agency of the State of Washington in either Seattle, Washington, or New York, New
York, for the purposes of registering and authenticating the Bonds, maintaining the Bond Register, effecting transfer of
ownership of the Bonds and paying interest on and principal of the Bonds.
"Capital Appreciation Bonds" means any Second Lien Parity Bonds hereafter issued as to which interest is payable only
at the maturity or prior redemption of such Bonds. For the purposes of
(i)
receiving payment of the redemption price, if any, of a Capital Appreciation Bond that is redeemed prior to
maturity, or
computing the principal amount of Second Lien Parity Bonds held by the owner of a Capital Appreciation
Bond in giving to the City or the Paying Agent any notice, consent, request, or demand for any purpose
whatsoever, the principal amount of a Capital Appreciation Bond shall be deemed to be its Accreted Value.
"City" means the City of Yakima, Washington, a municipal corporation duly organized and existing under and by virtue
of the laws of the State of Washington.
"Code" means the Internal Revenue Code of 1986, as amended, as the same may be amended from time to time, and
the regulations promulgated thereunder.
"Commission" means the Securities and Exchange Commission.
"Costs of Maintenance and Operation" means all normal operating expenses, current maintenance expenses, expenses
of reasonable upkeep and repairs, insurance and administrative expenses and reasonable pro -rata budget charges for
services provided to the System by City departments, but excluding depreciation, payments for debt service or into
reserve accounts, costs of capital additions to or replacements of the System, municipal taxes, or payments to the City in
heu of taxes.
"Council" means the legislative body of the City as the same shall be duly and regularly constituted from time to time.
"Coverage Requirement" means (a) for any period during which Assessments may be paid without becoming
delinquent, the sum of (i) the product of Average Annual Debt Service on all Second Lien Parity Bonds then outstanding
times a fraction, the numerator of which is the aggregate principal amount of nondelinquent Assessments which remain
to be paid into the Bond Fund plus the principal amount of Assessments previously paid into and then on hand in the
Bond Fund, and the denominator of which is the aggregate principal amount of Second Lien Parity Bonds then
Outstanding, plus (ii) 1.40 times (1.25 times when no 1991 Bonds are Outstanding) the product of Average Annual
Debt Service on all Second Lien Parity Bonds then Outstanding times the difference of one minus the fraction calculated
pursuant to (i) above; or (b) for any other period, the product of 1.40 times (1.25 times when no 1991 Bonds are
Outstanding)AverageAnnual Debt Service on all Second Lien Parity Bonds then Outstandino
uxu �. -----b•
"DTC" means The Depository Trust Company, New York, New York.
"Escrow Agreement" means the Escrow Agreement to be entered into between the City and the Refunding Agent.
"First Lien Parity Bonds" means the following Outstanding Bonds:
Series or Issues
Water and Sewer Revenue Bonds, 1968, Series B
Amount Authorizing
Date of Issue Outstanding Ordinance
December 1, 1968 $1,845,000 1071
"Fiscal Year" means the Fiscal Year used by the City at any time. At the time of the adoption of this ordinance, the
Fiscal Year is the twelve-month period beginning January 1 of each year.
"Fixed Rate Bonds" means those Second Lien Parity Bonds other than Capital Appreciation Bonds issued under an
ordinance in which the rate of interest on such Fixed Rate Bonds is fixed and determinable through their final maturity
or for a specified period of time. If so provided in the ordinance authorizing their issuance, Fixed Rate Bonds may bear a
fixed and determinable interest rate for only a portion of their term.
"Government Obligations" means direct obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States Government.
2
"Gross Revenues" means all earnings, revenue, moneys, and general facilities charges including but not lunited to
connection charges, received by the City from or on account of the operations of the System from any source
whatsoever.
"Interest Commencement Date" means, with respect to any Capital Appreciation Bonds, the date specified in any
ordinance authorizing such Capital Appreciation Bonds (which date must be prior to the maturity date for such Capital
Appreciation Bonds) after which interest accruing on such Capital Appreciation Bonds shall be payable semiannually,
with the first such payment date being the applicable interest payment date immediately succeeding such Interest
Commencement Date.
"Letter of Representation" means the agreement between the City and DTC.
"Maximum Interest Rate" means, with respect to any particular Variable Rate Bond, a numerical rate of interest, which
shall be set forth in any ordinance authorizing such Bond, that shall be the maximum rate of interest such Bond may at
any time bear.
"MSRB" means the Municipal Securities Rulemaking Board or any successors to its functions.
"Net Revenues" means the Gross Revenues of the System less the Costs of Maintenance and Operation.
"NRMSIR" means a nationally recognized municipal securities information repository.
"1991 Bonds" means the City of Yakima Second Lien Water and Sewer Revenue Bonds, 1991, issued pursuant to
Ordinance No. 3380 and Outstanding in the principal amount of $5,590,000.
"1992 Loan" means the City of Yakima State Revolving Fund Loan, 1992, issued pursuant to Ordinance No. 3454 and
Outstanding in the principal amount of $1,589,341.30.
"1996 Bonds" means the City of Yakima Second Lien Water and Sewer Revenue Refunding Bonds, 1996, issued
pursuant to Ordinance No. 96-40 and Outstanding in the principal amount of $3,045,000.
"1998 Bonds" means the City of Yakima Second Lien Water and Sewer Revenue and Refunding Bonds, 1998, in the
aggregate principal amount of not to exceed $8,300,000 authorized by the Ordinance.
"Outstanding" means, in connection with any of the Second Lien Panty Bonds, as of the time in question, all Second
Lien Parity Bonds issued except Second Lien Parity Bonds theretofore paid and cancelled or having matured or been
called for redemption, payment has been provided therefor, or Second Lien Parity Bonds which have been defeased in
accordance with their authorizing ordinance and state law.
"Paying Agent" means the designated fiscal agencies of the State of Washington or any bank or banks designated a
paying agent by the City.
"Permitted Investments" means any legal investments for funds of the City.
"Professional Utility Consultant" means the independent person(s) or firm(s) selected by the City having a favorable
reputation for skill and experience with facilities of comparable size and character to the System in such of the following
as are relevant to the purposes for which they are retained: (a) engineering and operations, and (b) the design of rates.
"Project" means the improvements to the System, together with all costs incurred in the issuance of the Bonds, and all
other costs incurred in connection with the Project.
"Qualified Insurance" means any noncancellable municipal bond insurance policy or surety bond issued by any
insurance company licensed to conduct an insurance business in any state of the United States (or by a service
corporation acting on behalf of one or more such insurance companies) which insurance company or companies, as of the
time of issuance of such policy or surety bond, are currently rated in the highest rating category by Moody's Investors
Service, Inc. or Standard & Poor's Ratings Service, a Division of The McGraw-Hill Companies, Inc., or their comparably
recognized business successors, or both Rating Agencies if both Rating Agencies maintain ratings on the 1998 Bonds.
"Rate Stabilization Account" means the account of that name created pursuant to Sections 5.1 and 6 1 of the
Ordinance.
"Rating Agency" means, as of any date, Standard & Poor's Ratings Service, a Division of The McGraw-Hill Companies,
Inc.
"Refunded Bonds" means the 1991 Bonds maturing on or after March 1, 2001.
"Refunding Agent" means the agent designated by the City pursuant to the Escrow Agreement.
3
"Reserve Account" means the Reserve Account created in the Bond Fund.
"Reserve Account Requirement" means (1) so long as any 1991 Bonds are Outstanding, the Average Annual Debt
Service on all Second Lien Parity Bonds Outstanding and (2) once no 1991 Bonds are Outstanding, the lesser of (i) the
maximum Annual Debt Service during any Fiscal Year on a series of Second Lien Parity Bonds; (ii) 125% of the Average
Annual Debt Service on all Outstanding Second Lien Parity Bonds of such series; ^r (iii) _O o..f the stated n-r—inr--ipa—
d
amount
of such series of Bonds. In the case of Variable Rate Bonds, the interest rate thereon shall be calculated on the
assumption that such Variable Rate Bonds will bear interest at a rate equal to the higher of (a) the rate most recently
reported by The Bond Buyer as The Bond Buyer's Index for long-term revenue bonds or (b) a rate equal to x+y where x
represents the average rate of interest borne by such Variable Rate Bonds in the twelve months preceding the date of
of iVariable RateBondsthe initial rate of interest borne by such Bonds and y
calculation or in tae case newly issued i�a�C '
represents one-half the difference between the Maximum Interest Rate apphcable to such Variable Rate Bonds and x;
provided that in no event shall such assumed Variable Rate exceed the Maximum Interest Rate and provided further that
if on such date of calculation the interest rate on such Bonds shall then be fixed to maturity, the interest rate used for
such specified period for the purpose of the foregoing calculation shall be such actual interest rate.
"Revenue Fund" means rhe Water an`i Sewer Operating Funds of the City heretofore established.
"Rule" means the Commission's Rule 15c2-12 under the Securities Exchange Act of 1934, as the same may be amended
from time to time.
"Second Lien Parity Bonds" means any Outstanding revenue bonds, revenue warrants or other revenue obligations
issued by the City which have a lien upon the Gross Revenues of the System to pay and secure the payment of the
principal thereof and interest thereon equal to the lieri created upon the Gross Revenues of the System to pay and secure
payment of the principal of and interest on the 1998 Bonds. "Second Lien Parity Bonds" includes the 1991 Bonds, the
1992 Loan, the 1996 Bonds, the 1998 Bonds and any Additional Bonds.
"Serial Bonds" means Second Lien Parity Bonds other than Term Bonds.
"SID" IT'ieaii7S a state information �ation depository for the State of Washington (if one is created).
"Sinking Fund Requirement" means, for any Fiscal Year, the principal amount and premium, if any, of Term Bonds
required to be purchased, redeemed or paid at maturity for such Fiscal Year as estabhshed by the ordinance authorizing
the issuance of such Term Bonds.
"System" means the combined water and sewerage system of the City as it now exists, and as it may be later added to,
extended and improved for as long as any First Lien Parity Bonds or any Second Lien Parity Bonds remain Outstanding.
"Term Bonds" means Second Lien Parity Bonds of any principal maturity that are subject to mandatory redemption or
for which mandatory sinking fund payments are required.
"Valuation Date" means with respect to any Capital Appreciation Bonds the date or dates set forth in any ordinance
authorizing such Capital Appreciation Bonds on which specific Accreted Values are assigned to the Capital Appreciation
Bonds.
"Variable Interest Rate" means a variable interest rate or rates to be borne by Second Lien Parity Bonds or any one or
more maturities within an issue of Second Lien Parity Bonds. The method of computing such variable interest rate shall
be specified in the ordinance authorizing such Second Lien Parity Bonds. Such variable interest rate shall be subject to a
Maximum Interest Rate and there may be an initial rate specified, in each case as provided in such ordinance, or a stated
interest rate that may be changed from time to time as provided in such ordinance. Such ordinance shall also specify
either (i) the particular period or periods of time or manner of determining such period or periods of time for which each
value of such Variable Interest Rate shall remain in effect or (ii) the time or times upon which any change in such
Variable Interest Rate shall become effective.
"Variable Rate Bonds" for any period of time means Second Lien Parity Bonds which during such period bear a
Variable Interest Rate; provided that Second Lien Parity Bonds the interest rate on which shall have been fixed for the
remainder of the term thereof shall no longer be Variable Rate Bonds.
4