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HomeMy WebLinkAbout1992-3454 State of Washington Department of Ecology (loan from) • 34 54 ORDINANCE NO. AN ORDINANCE of the City of Yakima, Washington, authorizing the execution and delivery of a contract for a loan from the State of Washington Department of Ecology in the aggregate principal amount of not to exceed $ 2,709,000 for the purpose of providing funds to pay the cost of wastewater treatment improvements to the City's combined system of water and sewerage, providing for the disposition of the proceeds thereof; providing for the repayment of the contract from revenues of said system; and establishing certain funds and accounts. WHEREAS, the City of Yakima, Washington (the "City ") now owns, operates and maintains a water supply and distribution system and a sewerage collection and disposal system, and said water and sewerage systems have been combined in the manner provided by law; • and WHEREAS, the City has heretofore issued its water and sewer revenue bonds that remain outstanding as follows. Principal Date of Authorizing Outstanding Series Issuance Ordinance (as of 5/31/92) Water and Sewer 1/1/64 475 $285,000 Revenue Bonds, 1964 Water and Sewer 1/1/68 1071 $2,535,000 Revenue Bonds, 1968 Series B Water and Sewer 12/1/78 2231 $3,500,000 Revenue Bonds, 1978 Water and Sewer 3/1/83 2677 $315,000 Revenue Bonds, • 1983 - 1 - CMW1057 92/05/08 (the "Senior Lien Bonds "), and WHEREAS, pursuant to Ordinance No 3380, the City issued its Second Lien Water and Sewer Revenue Bonds, 1991, dated as of August 1, 1991 in the initial ,aggregate principal amount of $7,675,000, of which $7,500,000 remain outstanding (the "Second Lien Bonds "); and WHEREAS, it has been found necessary and advisable that the City make certain additions and betterments to its water and sewer system (the "Project ") and the State of Washington Department of Ecology ( "DOE ") has offered to lend money from its Wastewater Revolving Funds for the Project; and WHEREAS, it was provided in Ordinance No 3380 authorizing the issuance of the Second Lien Bonds that additional water and • sewer revenue obligations ( "Second Lien Parity Bonds ") may be issued by the City with a lien and charge in the Gross Revenues of the System equal to the payments required to be made on the Second Lien Parity Bonds payable; and WHEREAS, in order to provide the funds necessary to pay the cost of the Project, it is deemed necessary and advisable that the City enter into a loan agreement with DOE for a loan in the aggregate principal amount of not to exceed $ 2,709,000 (the "1992 Loan "), such 1992 Loan to be payable from Gross Revenues of the System, after all required payments for Costs of Maintenance and Operation and the First Lien Bonds have been made or duly provided 0 -2- cnwl05T 92/05/08 • for and on a parity with all obligations issued as •Second Lien Parity Bonds" under Ordinance No 3380, NOW, THEREFORE, BE IT ORDAINED BY THE CITY OF YAKIMA, WASHINGTON, as follows: Section 1. Definitions. Capitalized terms used in this ordinance have the meaning given such terms in Ordinance No. 3380. In addition, the following terms shall have the following meanings. "Arbitrage Rebate and Investment Accounting Certificate" means the certificate executed by the Director of Finance and Budget of the City setting forth the methodology for computation of Rebatable Arbitrage with respect to the 1992 Loan • "Capital Fund" means the heretofore created Wastewater Facility Capital Fund of the City. "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. "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 -3- CMw1057 92/05/08 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 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 Average Annual Debt Service on all Second Lien Parity Bonds then Outstanding "DOE" means the State of Washington Department of Ecology. "First Lien Bonds" means the water and sewer revenue bonds r - identified in the recitals to this ordinance as "First Lien Bonds." "Gross Revenues" means all earnings, revenue and moneys received by the City from or on account of the operations of the System, from any source whatsoever. "Net Revenues" means the Gross Revenues of the System less the Costs of Maintenance and Operation. "Plan Resolution" means Resolution No. D -5529 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 -4- CMW1057 92/05/08 V • relevant to the purposes for which they are retained: (a) engineering and operations, and (b) the design of rates. "Project" means the planned additions and improvements of the wastewater collection, treatment System of the City described in the Plan Resolution. "Reserve Account Requirement" means the Average Annual Debt Service of all Second Lien Parity Bonds Outstanding. 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 calculation or in the case of newly issued Variable Rate Bonds the initial rate of interest borne by such Bonds and y represents one -half the difference between the Maximum Interest Rate applicable 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 the Water and Sewer - Operating Funds of the City heretofore established. -5- a w1057 92/05/08 Second Lien Pa rit y 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 lien created upon the Gross Revenues of the System to pay and secure payment of the principal of and interest on the 1991 Bonds "Second Lien Parity Bonds" includes the 1991 Bonds, the 1992 Loan and any Additional Bonds. "System" means the combined water and sewerage system of the City as it now exists, as it shall be added to and improved and extended with the proceeds of the 1992 Loan, and as it may be later added to, extended and improved for as long as an First Lien Bonds or any Second Lien Parity Bonds remain outstanding. o Section 2 Plan of Additions. Improvements to and Extension of the System The plan of additions and improvements to and extensions of the System set forth in the Plan Resolution is hereby ratified and confirmed. Such additions and betterments are hereinafter referred to collectively as the "Project." The City shall acquire, construct and install the various parts of the Project in such order and at such time or times as found to be necessary and advisable and shall provide all equipment and appurtenances necessary to complete said additions and betterments and integrate same into the existing facilities of the System as required to provide a fully operational system. • -6- CMW1057 92/05/08 • The City may make such changes in the facilities or equipment of the Project or in the construction or design of other facilities of the System as may be found necessary or desirable, either prior to or during the course of acquisition and construction of the Project. The City shall acquire by purchase, lease or condemnation, all property, both real and personal, or any interest therein, or rights -of -way and easements which may be found necessary to acquire, construct and install the above - described improvements. The list of improvements may be modified in the judgment of the City, and implementation or completion of any specified project shall not be required if the City determines that, due to • substantially changed circumstances, it has become inadvisable or impractical Nothing herein shall prevent the City from utilizing any remaining proceeds of the 1992 Loan or earnings from the investment thereof for other capital improvements to the System after all of the costs and expenses of the aforesaid improvements have been paid or duly provided for. The estimated cost of the Project and the costs of issuance of the 1992 Loan is hereby declared to be as near as may be determined the sum of approximately $ 14,681,371 , of which approximately $ 2,709,000 shall be provided out of the proceeds of the 1992 Loan. It is hereby found and declared that the Project is necessary for the proper, efficient and economical • operation of the System. -7- CMW1057 92/05/08 Section 3 1992 Loan The City shall borrow the sum of $ 2,709,000 from DOE for the purpose of providing the funds necessary to carry out part of the Project (the "1992 Loan ") under the terms of a Loan Agreement, substantially in the form attached hereto as Exhibit A (the "1992 Loan Agreement "). DOE shall advance funds under the 1992 Loan Agreement from time to time upon receipt of draw -down requests from the Engineering Division of the City's Water and Wastewater Utility. The unpaid principal balance of the 1992 Loan shall bear interest at a rate of 41 per annum, payable in installments as shown on Exhibit B, attached hereto and incorporated by this reference herein, and the repayment by the City of the 1992 Loan shall be made in accordance with the terms of the 1992 Loan Agreement and this ordinance. The 1992 Loan shall A ii k Ilr be an obligation only of the Bond Fund and s hall not be a g eneral obligation of the City. The City Manager is hereby authorized to execute and deliver the 1992 Loan Agreement substantially in the form attached hereto with only such changes as may be approved by him and by the City Attorney and bond counsel to the City, which approval shall be conclusively presumed by the execution of the 1992 Loan Agreement by the City Manager. The City's Director of Finance and Budget shall be the "Paying Agent" and "Registrar" for the 1992 Loan Agreement and the payments to be made thereunder. Section 4. Revenue Fund: Priority of Payments. The City hereby obligates and binds itself to set aside and pay into the -8- CMW1057 92/05/08 f heretofore created Water and Sewer Operating Funds (the "Revenue Fund "), as collected, the Gross Revenues of the System. The Gross Revenues of the System shall be held in the Revenue Fund separate and apart from all other funds and accounts of the City and 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 -9- cM141057 92/05/08 • additions, improvements and repairs to or extensions and replacements of the System, or for any other lawful City purposes. Nothing contained in this Section 4 shall be construed to require the deposit into the Revenue Fund of any of the revenues, income, receipts or other moneys of the City derived through the ownership or operation of any separate utility system hereafter created or established from funds other than the proceeds of the 1992 Loan Section 5 Bond Fund (a) There has heretofore been created and established a special fund of the City designated as the Second Lien Water and Sewer Revenue Bond Fund (the "Bond Fund ") which is used solely for r _ the purpose of paying the principal, premium, if any, and interest on Second Lien Parity Bonds, of retiring the Second Lien Parity Bonds prior to maturity in the manner herein provided and of paying any reimbursement obligation with respect to a letter of credit or other credit enhancement device providing additional security for any Variable Rate Bonds Each month, after applying amounts as required in Section 4 of this ordinance, the City shall withdraw from the Revenue Fund and (to the extent not otherwise provided) transfer to the Bond Fund, amounts as follows and in the following order of priority: first, into the Interest Account; second, into the Serial Bond Principal Account and Term Bond Principal Account; and third, into the Reserve Account. • -10- CMU1057 92/05/08 • (i) Interest Account. The City has created and establish a separate account in the Bond Fund, to be known as the "Interest Account" in order to provide for the payment of interest Second Lien Parity Bonds as the same becomes due and payable In the case of Second Lien Parity Bonds, the City shall transfer to the Interest Account amounts sufficient to pay when due the installment of interest next falling due on all Second Lien Parity Bonds, including the 1992 Loan. ,(ii) Serial Bond Principal Account. The City has created and established a separate account in the Bond Fund known as the "Serial Bond Principal Account" in order to provide for • the payment of the principal of the Second Lien Parity Bonds as the same shall mature and become due and payable. The City shall transfer to the Serial Bond Principal Account amounts sufficient to pay when due the installment of principal next falling due on Second Lien Parity Bonds, including the 1992 Loan. (iv) Reserve Account. (A) The City has created and established a separate account in the Bond Fund to be known as the "Reserve Account" in order to provide a reserve for the payment of the principal, premium, if any, and interest on Second Lien Parity Bonds. The City further covenants and agrees that it will make equal annual payments into the Reserve • -11- CMY1057 92/05/08 • Account from money available in the Reven ue Fund and/or out of other moneys it may have on hand from time to time and legally available for such payments amounts so that within five years of the date of closing of the 1992 Loan the moneys in the Reserve Account will be equal to the Average Annual Debt Service for all Outstanding Second Lien Parity Bonds. Each ordinance providing for the issuance of Additional Bonds shall provide for payments into the Bond Fund for credit to the Reserve Account from any other moneys lawfully available therefor (in which event, in providing for deposits and credits required by the foregoing provisions of this paragraph (A), allowance shall be made for any such amounts so paid into such Account) in amounts which within not less than five years of equal monthly payments will provide for deposit of the Reserve Account Requirement or may provide for the City to obtain Qualified Insurance or a Qualified Letter of Credit for specific amounts required pursuant to this Section to be paid into the Reserve Account, such amounts so covered by Qualified Insurance or a Qualified Letter of Credit shall be credited against the amounts required to be maintained in the Reserve Account by this Section to the extent that such payments and credits to be made are insured by an insurance company, or guaranteed by a letter of credit from a bank. Such Qualified Letter of -12- CMW1057 92/05/08 Credit or Qualified Insurance shall not be cancelable on less than five years' notice. In the event of any cancellation, the Reserve Account shall be funded in accordance with the first three paragraphs of this subsection, as if the Second Lien Parity Bonds which remain Outstanding had been issued on the date of such notice of cancellation. (B) Money in the Bond Fund may, at the option of the City, be invested and reinvested as permitted by law in Permitted Investments maturing, or which are retirable at the option of the owner, prior to the date needed or prior to the maturity date of the final installment of principal of the Second Lien Parity Bonds payable out of the Bond Fund Earnings on investments in the Bond Fund shall be transferred to the Revenue Fund, except that earnings on investments in the Reserve Account shall first be applied to remedy any deficiency in such account (C) For the -purpose of determining the amount credited to the Reserve Account, obligations in which moneys in the Reserve Account shall have been invested shall be valued at, the market value thereof. The term "market value" shall mean, in the case of securities that are not then currently redeemable at the option of the owner, the current bid quotation for such securities, as • \-, -13- C lw1057 92/05/08 reported in any nationally circulated financial journal, • and the current redemption value in the case of securities that are then redeemable at the option of the owner For obligations that mature within six months, the market value shall be the par value thereof. The valuation shall include accrued interest thereon. The valuation of the amount in the Reserve Account shall be made by the City as of the close of business on each December 31 (or on the next preceding business day if December 31 does not fall on a business day) and after any withdrawal pursuant and may be made on each June 30 (or on the next preceding business day if June 30 does not fall on a business day). T (D) If the amount in the Reserve Account shall be less than the Reserve Account Requirement, the City shall transfer from the Revenue Fund, for credit to the Reserve Account no later than the 25th day of the sixth succeeding calendar month the amount necessary to restore the Reserve Account to the Reserve Account Requirement. Prior to such time, such transfer shall come from moneys in the Revenue Fund first available after making the current specified payments into the Interest Account and Principal Account. If the amount in the Reserve Account shall be greater than the Reserve Account Requirement, then and only then may the City withdraw at any time -14- CMW1057 92/05/08 .L 'late t , T 114 prior to the next date of valuation from the Reserve Account the difference between the amount in the Reserve Account and the Reserve Account Requirement and deposit such difference in the Revenue Fund. (b) Money in the Interest Account, the Serial Bond Principal Account and the Term Bond Principal Account shall be transmitted to the Paying Agent in amounts sufficient to meet the next maturing installments of principal, interest and premium, if any, at or prior to the time upon which any interest, principal or premium, if any, is to become due. In the event there shall be a deficiency in the Interest Account, the Serial Bond Principal or the Term Bond Principal Account for such purpose, the City shall make up any such deficiency from the Reserve Account by the withdrawal of cash therefrom for that purpose, and, if necessary, by sale or redemption of any authorized investments in such amount as will proviae cash in said Reserve Account sufficient to make up any such deficiency. If a deficiency still exists immediately prior to an interest payment date and after the withdrawal of cash, the City shall then draw from any Qualified Letter of Credit or Qualified Insurance. Such draw shall be made at such times and under such conditions as the agreement for such Reserve Account Credit Facility shall provide. _ (c) Whenever and so long as amounts on deposit in the Bond Fund, including the Reserve Account, are sufficient to provide • money to pay the Second Lien Parity Bonds then Outstanding, -15- CMN1057 92/05/08 including such interest as may thereafter become due thereon and • any premiums upon redemption, no payments need be made into the Bond Fund pursuant to this ordinance. (d) Money transferred from the Bond Fund to the Paying Agent for the Second Lien Parity Bonds, including the 1992 Loan, and the interest thereon shall be held in trust for the owners of such Second Lien Parity Bonds and DOE, as the case may be. Until so set aside for the retirement of principal, payment of sinking fund installments, payment of interest and premium, if any, as aforesaid, moneys in the Bond Fund shall be held in trust for the benefit of the owners of the Second Lien Parity Bonds, including DOE with respect to the 1992 Loan, then outstanding and payable equally and ratably and without preference or distinction as • between different installments or maturities (e) The amounts so pledged to be paid into the Bond Fund and the Reserve Account therein are hereby declared to be a prior lien and charge upon the Gross Revenues of the System superior to all other charges of any kind or nature whatsoever (including any transfer of money to other funds of the City and taxes or payments in lieu of taxes) except the Costs of Maintenance and Operation and required payments on First Lien Parity Bonds, and is equal in priority to the lien and charge which may hereafter be made to pay and secure the payment of the principal of and interest on any Additional Bonds. -16- CMU1057 92/05/08 • (f) The Council hereby finds and declares that in fixing the amounts to be paid into the Bond Fund and the Reserve Account therein out of the Gross Revenues of the System, it has exercised due regard for the Costs of Maintenance and Operation and for the amounts required to pay and secure the payment of the principal of and interest on the First Lien Bonds and the Second Lien Parity Bonds, including the 1992 Loan, and has not obligated the City to set aside and pay into such Fund and Account a greater amount of such Gross Revenues than in its judgment will be available over and above the Costs of Maintenance and Operation and the principal of and interest on the First Lien Bonds and the Second Lien Parity Bonds, including the 1992 Loan. • Section 6 No Defeasance. The 1992 Loan Agreement does not permit any defeasance of the 1992 Loan; however, the City may prepay the 1992 Loan at any time without penalty Section 7 Use of Bond Proceeds. There has heretofore been created a special fund of the City known as the Wastewater Facility Capital Fund (the "Capital Fund "). All proceeds of the 1992 Loan received by the City shall be deposited into the Capital Fund and shall be used to pay the costs of the Project. Money on - deposit in the Capital Fund may be invested in any legal investment for City funds. Section 8. Rate Covenant. The City shall establish, maintain and collect rates and charges for the use of the services • and facilities of and all commodities sold, furnished or supplied \ -17- CMU1057 92/05/08 by the System, which shall be fair and nondiscriminatory and shall adjust such rates and charges from time to time so that: (a) The Gross Revenues collected (together with Assessments collected) will at all times be sufficient (1) to pay the Costs of Maintenance and Operation of the System, (2) to pay the principal of, premium, if any, and interest on the First Lien Bonds and the Second Lien Parity Bonds, as and when the same shall become due and payable, (3) to make adequate provision for the payment of any Term Bonds, (4) to make when due all payments which the City is ' obligated to make into the Reserve Account and all other payments which the City is obligated to make pursuant to this ordinance, and (5) to pay all taxes, assessments or other governmental charges lawfully imposed on the System or the revenue therefrom or payments in lieu thereof and any and all other amounts which the City may now or hereafter become obligated to pay from the Gross Revenues by laN or contract; and (b) 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. Section 9. Maintenance and Operation. The City shall 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 -18- CMW1057 92/05/08 • 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. Section 10 Sale or Disposition of the 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 the payment into the Bond Fund of cash or "Government Obligations," as now or hereafter defined in RCW Chapter 39.53, as amended, or its successor statute, if any, sufficient together with interest to be earned thereon to pay the principal of and interest • on the 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 greater of: (a) An amount which will be in the same proportion to the net amount of Second Lien Parity Bonds then Outstanding (defined as the total amount of the Second Lien Parity Bonds less the amount of cash and investments in the Bond Fund and accounts therein) that the Net Revenues from the portion of the System sold or disposed of for the preceding year bears to the total Net Revenues for such period; or (b) An amount which will be in the same proportion to the net • principal amount of Second Lien Parity Bonds then Outstanding that -19- CMW1057 92/05/08 the book value of the part of the System sold or disposed of bears to the book value of the entire System immediately prior to such sale or disposition. The proceeds of any such sale or disposition of a portion of the properties of the System (to the extent required above) shall be paid into the Bond Fund. Notwithstanding any other provision of this section, the City may sell or otherwise dispose of any of the works, plant, properties and facilities of the System or any real or personal property comprising a part of the same which shall have become unserviceable, inadequate, obsolete or unfit to be used in the operation of the System, or no longer necessary, material to or useful in such operation, without making any deposit into the Bond • Fund Section 11 Liens or Encumbrances Except for the lien and charge of the First Lien 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 Gross Revenues or any part thereof, prior or 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 Gross Revenues of the System, or any part thereof, or upon any funds in the hands of the City, prior • -20- 0611057 92/05/08 } • to or superior to the lien of the Second Lien Parity Bonds, or which might impair the security of the Second Lien Parity Bonds. Section 12. Insurance. The City shall, to the extent insurance coverage is available at reasonable cost with responsible insurers, keep, or cause to be kept, the System and the operation thereof insured, with policies payable to the City, against the risks of direct physical loss, damage to or destruction of the System, or any part thereof, and against accidents, casualties or negligence, including liability insurance and employer's liability, at least to the extent that similar insurance is usually carried by utilities operating like properties as determined by the City Manager A program of self insurance against certain risks or as to part of the potential liability for certain risks may be included as part of the City's insurance coverage plan. In the event of any loss or damage to the properties of the System covered by insurance, the City will (a) with respect to each such loss, promptly repair and reconstruct to the extent necessary to the proper conduct of the operations of the System the lost or damage portion thereof and shall apply the proceeds of any insurance policy or policies covering such loss or damage for that purpose to the extent required therefor, unless in the case of loss or damage involving an amount less than or equal to 21 of the value of net utility plant of the System or more, 'such repair and reconstruction shall not be recommended by the City Manager, and (b) if the City shall not use the entire proceeds of such insurance -21- CIS wio57 92/05/08 to repair or reconstruct such lost or damaged property, such insurance proceeds thereof not so used shall be paid into the Revenue Fund, and if greater than 2% of the value of the net utility plant of the System for any one loss or damage, shall be used to purchase or redeem bonds or to acquire or construct extensions, betterments and improvements to the System. Section 13 Books and Accounts. The City shall keep proper books of account in accordance with any applicable rules and regulations prescribed by the State of Washington. The City shall prepare, and any owner or holder of Second Lien Parity Bonds may, upon written request, obtain copies of, balance sheets and profit and loss statements showing in reasonable detail the financial condition of the System as of the close of each year, and the income and expenses of such year, including the amounts paid into the Revenue Fund, the Bond Fund, and into any and all special funds or accounts created pursuant to the provisions of this ordinance, and the amounts expended for maintenance, renewals, replacements, and capital additions to the System Section 14. Additions and Improvements. The City will not expend any of the Gross Revenues derived by it from the operation of the System or the proceeds of any indebtedness payable from the Gross 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 11" -22- CMW1057 92/05/08 4 - • 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 Section 15. Tax Covenants The City hereby covenants that it will not make any use of the proceeds of sale of the 1992 Loan or any other funds of the City that may be deemed to be proceeds of such 1992 Loan pursuant to Section 148 of the Code that will cause the 1992 Loan to be an "arbitrage bond" within the meaning of said section The City will comply with the applicable arbitrage requirements of Section 148 of the Code (or any successor • provision. thereof applicable to the 1992'Loan) throughout the term of the 1992 Loan The City further covenants that it will not take any action or permit any action to be taken that would cause the 1992 Loan to constitute a "private activity bond ", under Section 141 of the Code. The City hereby designates the 1992 Loan as a "qualified tax - exempt obligation" under Section 265(b) of the Code for investment by financial institutions. The City does not anticipate that it will issue more than $10,000,000 in "qualified tax- exempt obligations" during 1992. -23- CMW1057 92/05/08 r Section 16 Arbitrage Rebate. The City will pay to the United States of America Rebatable Arbitrage with respect to the 1992 Loan in accordance with the Tax Exemption and Rebate Accounting Certificate. Section 17 Additional Bonds. Second Lien Parity Bonds may be issued payable from the Bond Fund on a parity with the 1992 Loan and other outstanding Second Lien Parity Bonds, and secured by an equal charge and lien on the Gross Revenues pledged to said Bond Fund First, for the purpose of acquiring, constructing and installing additions and improvements to and extensions of, acquiring necessary equipment for or making necessary repairs, replacements or other capital improvements to the System, or Second, for the purpose of refunding, or purchasing and retiring prior to their maturity, any outstanding Bonds or other revenue obligations of the System. (a) The City may issue Second Lien Parity Bonds upon compliance with the following conditions: 1. At the time of the issuance of such Parity Bonds, there shall be no deficiency in the Bond Fund or in the bond fund(s) securing the First Lien Bonds. 2. In each ordinance authorizing such Second Lien Parity Bonds, provision shall be made for payments into the Reserve Account in accordance with this ordinance. 0 -24- awio57 92/05/08 P 1,„0„.11, • 3 At the time of the issuance of such Second Lien Parity Bonds, the City shall 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 Second Lien Parity 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 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 the Additional Bonds to be issued, after payment of debt service on all Outstanding First Lien Bonds. The Adjusted Net Revenues shall 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 one or more of the following conditions for each year after such delivery for so long as any Bonds, including the Additional Bonds proposed to be issued, shall be outstanding: • -25- CMW1057 92/05/08 (A) Any increase or decrease in Net Revenues which • would result if any change in rates and charges adopted by the Council prior to the date of such certificate and subsequent to the beginning of such 12 -month period, had been in force during the full 12 -month period; (B) The additional Net Revenues from any rate increases which have been approved by ordinance of the Council but which are not then in effect; (C) Any increase or decrease in Net Revenues estimated by such Professional Utility Consultant to result from any additions, betterments and improvements to and extensions of any facilities of the System which (i) became fully operational during such 12 -month period, (ii) were under construction at the time of such certificate, or (iii) will be constructed from the proceeds of the Additional Bonds to be issued; (D) The additional Net Revenues which would have been received if any customers added to the System during such 12 -month period were customers for the entire period. (E) The additional Net Revenues that may be derived by the City from any users of the System with whom the City has entered into a contract for utility services to be furnished, which revenues have not otherwise been included in Net Revenues. • -26- cNY1057 92/05/08 • Such Professional Utility Consultant shall base his certification upon, and his certificate shall have attached thereto, financial statements of the System audited by the State Examiner (unless such an audit is not available for a 12 -month period within the preceding 24 months) and certified by the chief financial officer of the City, showing income and expenses for the period upon which the same is based. The certificate of such Professional Utility Consultant shall be conclusive and the only evidence required to show compliance with the provisions and requirements of this subsection Notwithstanding the foregoing, if Additional Bonds are to be 1111 issued for the purpose of refunding at or prior to their maturity any part or all of the then Outstanding Bonds and the issuance of such refunding Additional Bonds results in a debt service savings and does not require an increase of more than $5,000 in any year for principal and interest on such refunding Additional Bonds, the certificate required by subsection (a)(3) of this section need not be obtained. (b) Nothing herein contained shall prevent the City from issuing revenue bonds or other obligations which are a charge upon the Gross Revenues of the System junior or inferior to the payments required by this ordinance to be made out of such Gross Revenues into the Bond Fund and accounts therein to pay and secure the payment of any Outstanding Second Lien Parity Bonds. -27- CMW1057 92/05/08 (c) Nothing herein contained shall prevent the City from • issuing revenue bonds to refund maturing Bonds for the payment of which moneys are not otherwise available. Section 18. Pledge Effected by Ordinance. (a) The 1992 Loan is a special, limited obligation of the City payable from and secured solely by Gross Revenues, subject to the prior payment of Costs of Maintenance and Operation of the System and, for so long as any First Lien Bonds are Outstanding, the prior payment of all amounts due on such First Lien Bonds, and other moneys and assets specifically pledged hereunder for the payment thereof There are hereby pledged as security for the payment of the principal, premium, if any, and interest on the 1992 Loan in accordance with its terms and the provisions of this • ordinance, subject only to the provisions of this ordinance restricting or permitting the application thereof for the purposes and on the terms and conditions set forth in this ordinance, (i) the Gross Revenues and (ii) the moneys and assets, if any, credited to the Revenue Fund and the Bond Fund, and the income therefrom. The Gross Revenues and other moneys and assets hereby pledged shall immediately be subject to the lien of this pledge without any physical delivery thereof or further act, and the lien of this pledge shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the City regardless of whether such parties have notice thereof. . -28- cMW1057 92/05/08 • t, (b) The Second Lien Parity Bonds shall be equally and ratably payable and secured hereunder without priority by reason of date of passage of the 'ordinances providing for their issuance or by reason of their series, number of date of sale, issuance, execution or delivery, and by the liens, pledges, charges, trusts, assignments and covenants made herein, except as otherwise expressly provided or permitted in this ordinance and except as to insurance that may be obtained by the City to insure the repayment of one or more series or maturities within a series. (c) The Second Lien Parity Bonds shall not in any manner or to any extent constitute general obligations of the City or of the State of Washington, or of any political subdivision of the State • of Washington, or a charge upon any general fund or upon any moneys or other property of the City or of the State of Washington, or of any political subdivision of the State of Washington, not spec pledged thereto by this ordinance, nor shall the full faith and credit of the City or of the State of Washington, or of any political subdivision of the State of Washington, be pledged to the payment of principal, premium, if any, or interest thereon. Section 19. amendments; Events of Default. This ordinance ^ may be amended or supplemented under the terms and conditions set forth in Ordinance No. 3380 which terms and conditions are incorporated by reference herein. Upon the occurrence of any default hereunder or under the 1992 • Loan Agreement, DOE shall have available to it all of the remedies -29- CMH1057 92/05/08 set forth in Ordinance No 3380 with respect to Events of Default 411) thereunder, which remedies are incorporated by this reference herein Section 20,. Compliance with Parity Conditions. The Council hereby finds and determines as required by Ordinance No. 3380, as follows First, the 1992 Loan is being incurred for the purpose of acquiring, constructing and installing additions and improvements to and extensions of, acquiring necessary equipment for or making necessary repairs, replacements or other capital improvements to the System Second, at the time of the execution and delivery of the 1992 Loan Agreement, there shall be no deficiency in the Bond Fund or in the bond fund(s) securing the First Lien Bonds • Third, in this ordinance, provision has been made for payments into the Reserve Account in accordance with the limitations set forth in Ordinance No 3380. Fourth, at the time of execution and deliver of the 1992 Loan Agreement, the City shall have on file a certificate from a 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 execution and delivery of the 1992 Loan Agreement equals the Coverage Requirement in each calendar year or -30- a1W1057 92/05/08 • Fiscal Year thereafter on the then Outstanding Second Lien Parity Bonds, including the 1992 Loan, after payment of debt service on all Outstanding First Lien Bonds, and that the Adjusted Net Revenues to be received each calendar year or Fiscal Year hereafter, 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, including the 1992 Loan, after payment of debt service on all Outstanding First Lien Bonds. The limitations contained in the conditions provided in Ordinance No 3380 having been complied with or assured, the payments required herein to be made out of the Gross Revenues of the System to pay and secure the payment of the principal of and • interest on the 1992 Loan shall constitute a lien and charge .upon such Gross Revenues equal in rank to the lien and charge thereon of the payments to be made into the Bond Fund to pay and secure the payni t of the principal of and interest on the Outstanding Second Lien Parity Bonds. Section 21. Severability. If any one or more of the covenants or agreements provided in this ordinance to be performed on the part of the City shall be declared by any court of competent jurisdiction to be contrary to law, then such covenant or covenants, agreement or agreements, shall be null and void and shall be deemed separable from the remaining covenants and agreements in this ordinance and shall in no way affect the -31- CMW1o57 92/05/08 validity of the other provisions of this ordinance or of any Second • Lien Parity Bonds Section 22. General Authorization The Mayor and Director of Finance and Budget, and each of the other appropriate officers, agents and representatives of the City are each hereby authorized and directed to take such steps, to do such other acts and things, and to execute such letters, certificates, agreements, papers, financing statements, assignments or instruments as in their judgment may be necessary, appropriate or desirable in order to carry out the terms and provisions of, and complete the transactions contemplated by this ordinance. Section 23 Effective Date. This ordinance shall be effective 30 days after its passage, approval and publication as provided by law ADOPTED by the Council of the City of Yakima at a regular meeting thereof, held this Oday of May, 1992. CITY OF YAKIMA, WASHINGTON By gib L -Mr:V Cl/ ._ Mayor ATTEST- City Clerk APPROVED AS TO FORM: it Attorney Y -32- OW 057 92/05/08 • CLERK'S CERTIFICATE I, the undersigned, the duly chosen, qualified and acting Clerk of the City of Yakima, Washington (the "City "), and keeper of the records of the Council of the City (herein called the "Council "), DO HEREBY CERTIFY: 1 That the attached Ordinance No. (the "Ordinance ") is a true and correct copy of an ordinance of the City, as finally passed at a regular meeting of the Council held on the day of May, 1992, 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 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 Ordinance, that all other requirements and proceedings incia= to the proper passage of the Ordinance have been duly fulfilled, carried out and otherwise observed, and that I am authorized to execute this certificate. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City this day of May, 1992. City Clerk City of Yakima, Washington (S E A L)