HomeMy WebLinkAbout05/06/2008 11 Water/Wastewater Revenue and Refunding Bonds Contract BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
• AGENDA STATEMENT
/ /
S Item No.
F or Meeting of: May 6, 2008
ITEM TITLE: A Resolution authorizing the execution and delivery of a contract for sale and purchase of
the City's Water/Wastewater Revenue and Refunding Bonds (The Bonds) in the aggregate amount of not
to exceed $9,750,000 and fixing the terms of The Bonds, approving the form of the Preliminary Official
Statement and ratifying certain acts and proceedings.
SUBMITTED BY: Finance Department
CONTACT PERSON I TELEPHONE: Rita DeBord, Finance Director, #575- 60700{M -�
Tim Jensen, Treasury Services Officer; # 575 -60
SUMMARY EXPLANATION: On March 18,2008, City Council passed Ordinance #2008 -19 authorizing the
issuance of up to $9.75 million of Water/Wastewater Revenue and Refunding Bonds of the City for the
purpose of providing funds for certain new capital projects and a current refunding certain outstanding
bonds and directing staff to take all appropriate actions and perform all proceedings and tasks necessary to
accomplish this transaction.
Subsequently, staff worked with bond counsel (K & L Preston Gates Ellis LLP) and the bond underwriters
(Seattle Northwest Securities) to structure the bond issue, prepare the Preliminary Official Statement
(POS) and other necessary legal documents and we continued to assess market conditions. The POS is a
legal document utilized by potential investors; it describes the City of Yakima and our local economy,
provides information regarding the water and wastewater utilities and the specific use of the bond
40 proceeds, as well as significant legal and financial information relative to the fiscal condition of the City, the
ability of the utilities to repay the bonds and the terms and conditions of the bond repayment.
Based on the latest assessment of the bond market, bond insurance and issuance costs, we anticipate
issuing bonds in the aggregate amount of approximately $9,195,000; approximately $5.6 million will be
utilized for wastewater facility improvements with the balance utilized to refund the 1998 water /sewer
bonds.
Staff has engaged in a credit rating interview with Standard and Poor's on April 30th and completed the
Preliminary Official Statement, dated April 30, 2008. Staff anticipates receiving Standard and Poor's rating
on Friday, May 2nd and has a bond - pricing meeting scheduled with the Bond Underwriters, Monday, May
5th. (Note: due to market fluctuations, the projected savings from the refinancing of the 1998
Water/Wastewater Revenue Bonds may change prior to the pre - pricing call. Staff is closely monitoring the
bond market and, during our pricing call on Monday, May 5th, we will make a final determination regarding
whether to move forward with refunding of these bonds or pulling them from the overall bond issue and
waiting for more favorable market conditions before proceeding with the refunding. At this point in time, we
do not anticipate any problems in the issuance of the "new money" portion of this bond issue, which is
expected to be approximately $5.6 million.)
Continued....
Resolution X Ordinance Other (Specify) Final POS, Bond Purchase Offer
Contract Mail to (name and address): Phone:
Funding Source
APPROVED FOR SUBMITTAL:��\ City Manager
• STAFF RECOMMENDATION: Approve Final Resolution, POS and Bond Purchase Offer
BOARD /COMMISSION RECOMMENDATION: N/A
COUNCIL ACTION:
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The actual pricing of the Bonds (at which time the bonds are officially offered for sale and the Underwriters
make a purchase offer) is scheduled for Tuesday, May 6 2008. Once the pricing is complete, all of the
final terms and conditions of The Bond purchase offer will be known, including the interest rates,
discounts /premiums if any, the final amortization schedule, etc. Assuming a reasonable offer has been
made; staff will submit this offer to Council for your consideration at your regular business meeting on
Tuesday, May 6 Subject to Council's acceptance and authorization of the bond purchase offer, the
transaction will be executed and scheduled to close within 30 days after Council authorization; the City will
receive the bond proceeds at closing. .
After pricing is complete, Council will need to approve; (1) Final Preliminary Official Statement (POS),
• • attached, (2) the purchase offer and (3) The Bond Sale Resolution.
Enclosed, you will find a draft version of the Bond Sale Resolution for your review. (A draft Purchase Offer
is not available at this time.) Final documents will be provided to Council on Tuesday's meeting.
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PRELIMINARY OFFICIAL STATEMENT DATED APRIL 30, 2008
$9,195,000*
0 City of Yakima, Washington .
Y g
. Water and Sewer Revenue and Refunding Bonds, 2008
E • E DATED: Date of Delivery DUE: November 1, as shown on the inside cover
3 N STANDARD AND POOR'S RATING — Applied for (see "Rating" herein). •
u)
T a BANK QUALIFIED — The City has designated the Bonds as "qualified tax - exempt obligations" for purposes of
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I D • Section 265(b)(3)(B) of the Code. See "Tax Matters."
`° BOOK -ENTRY ONLY — The Bonds will be issued as fully registered bonds in denominations of $5,000, or integral multiples
,, m thereof, and will be registered in the name of Cede & Co., as bond owner and nominee for The Depository Trust
7) Company ( "DTC "), New York, New York. DTC will act as securities depository for the Bonds. Purchasers will not .
• receive certificates representing their interest in the Bonds purchased.
a a ▪ c i PRINCIPAL AND INTEREST PAYMENTS — Interest on the Bonds will be payable on November 1, 2008 and semiannually
Y E thereafter on November 1 and May 1 of each year to their maturity or earlier redemption of the Bonds. Principal of
o }s and interest on the Bonds will be payable by the fiscal agency of the State of Washington in New York, New York,
c N currently The Bank of New York, (the "Bond Registrar "), as further described herein. For so long as the Bonds remain
° - A in a "book -entry only" transfer system, the fiscal agent will make such payments only to DTC, which in turn is
4 obligated to remit such principal and interest to its Participants for subsequent disbursement to Beneficial Owners of .
I) c the Bonds as further described herein in Appendix C. .
a m
m MATURITY SCHEDULE —
> Due Interest Prices or Due Interest Prices or
a _o Nov. 1 Amounts* Rates Yields CUSIP Nov. 1 Amounts* Rates Yields CUSIP
•-- 2008 $ 115,000 % % 2018 $ 505,000 % % .
r as 2009 900,000 2019 290,000
• 0 2010 915,000 2020 300,000
m y
CO a 2011 940,000 2021 315,000
s o 2012 420,000 2022 330,000
4 u 2013 425,000 2023 340,000
2014 450,000 2024 355,000 •
2015 460,000 2025 375,000
d u 2016 470,000 2026 390,000
c s 2017 490,000 2027 410,000
ta
E.) PURPOSE — The proceeds of the Bonds will be used to finance various improvements, repairs and replacements to the
c c system; refund a portion of the City's outstanding 1998 Bonds; and to pay the cost of issuance.
mm
c c REDEMPTION — The Bonds are subject to redemption prior to their stated maturities as further described herein. See
o - "Description of the Bonds - Redemption Provisions."
E. a • ° , SECURITY — The principal of and interest on the Bonds are payable solely from and secured by the Gross Revenue of the
8 o Water and Sewer System after all required payments for the Costs of Maintenance and Operation have been made or
o w duly provided for. The Bonds are issued on a parity of lien with. the City's Water and Sewer Revenue Refunding
u Bonds, 1996 currently outstanding in the amount of $350,000; its Water and Sewer Revenue and Refunding Bonds, 1998
s a outstanding in the amount of $4,040,000; its Water and Sewer Revenue Bonds, 2003 Series A currently outstanding in
y m the amount of $4,700,000; and its Water and Sewer Revenue Bonds, 2003 Series B currently outstanding in the amount
c ;n of $10,155,000. For so long as the Bonds are outstanding, no bonds may be issued with a lien and charge on the Gross
E Y Revenues superior to the lien and charge of the Bonds. Additional bonds may be issued on a parity of lien with the
d o Bonds and the Parity Bonds, subject to certain conditions described herein. The Bonds are special obligations of the
• City payable only from the Bond Fund. The Bonds are not general obligations of the City, the State of Washington, or
a any other municipal corporation or political subdivision thereof. See "Security for the Bonds."
Ta' c' TAX EXEMPTION — In the opinion of K &L Preston Gates Ellis LLP of Seattle, Washington ( "Bond Counsel "), assuming compliance
O .2c with certain covenants of the City, interest on the Bonds is excludable from gross income for federal income tax purposes under
• L existing law. Interest on the Bonds is not an item of tax preference for purposes of either individual or corporate alternative
C a minimum tax. Interest on the. Bonds may be indirectly subject to corporate alternative minimum tax and certain other taxes
E > imposed on certain corporations. See "Tax Matters" herein for a discussion of the opinion of Bond Counsel.
a (Dc'
D ELIVERY — The Bonds are offered by the Underwriter when, as and if issued, subject to the approving legal opinion of
N o Bond Counsel. It is expected that the Bonds will be,ready for delivery to the Bond Registrar through the facilities of
1r, o The Depository Trust Company by Fast Automated Securities Transfer, on or about June 5, 2008.
H * Preliminary, subject to change.
This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to
. obtain information essential to the making of an informed investment decision.
in SNW
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City of Yakima, Washington
129 North Second Street
Yakima, Washington 98901
Phone: (509) 575 -6000
Fax: (509) 576 -6614
www.ci.yakima.wa.us*
Mayor and City Council
David EdJer Mayor
Micah Cawley Assistant Mayor
Kathy Coffey Council Member
Rick Ensey Council Member
Norm Johnson Council Member
Bill Lover Council Member
Neil McClure Council Member
Administrative Officials
Richard A. Zais, Jr. City Manager
Dave Zabell Assistant City Manager
Rita M. DeBord, CPA Finance Director
Ray Paolella City Attorney
Cindy Epperson Deputy Director, Budget and Accounting
Timothy Jensen Treasury Services Officer
Bond Counsel
K &L Preston Gates Ellis LLP
Seattle, Washington
206- 623 -7580
Bond Registrar
The Bank of New York, Mellon
New York, New York
1- 800 - 438 -5473
* The City's website is not part of this Official Statement, and investors should not rely on information presented in the
City's website in determining whether to purchase the Bonds. This inactive textual reference to the City's website is
not a hyperlink and does not incorporate the City's website by reference.
This Official Statement does not constitute an offer to sell the Bonds in any jurisdiction in which or to a person to whom it is unlawful
to make such an offer. No dealer, salesperson or other person has been authorized by the City or the Underwriter to give any information
or to make any representations, other than those contained herein, in connection with the offering of the Bonds and, if given or made,
such information or representations must not be relied upon. The information and expressions of opinion herein are subject to change
without notice, and neither the delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create an
implication that there has been no change in the affairs of the City since the date hereof
The Underwriter has provided the following sentence for inclusion in this Official Statement. The .Underwriter has reviewed the
information in this Official Statement in accordance with, and as part of, its responsibility to investors under the federal securities laws
as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of
such information.
The City will "deem final ", for the sole purpose of the Underwriter's compliance with Securities and Exchange Commission ( "SEC ")
Rule 15c2- 12(b)(1), this Preliminary Official Statement as of its date, except for the omission of information as to offering prices, interest
rates, selling compensation, aggregate principal amount, principal amount per maturity, maturity dates, options of redemption, delivery
dates, and other terms of the Bonds dependent on such matters.
In connection with this offering, the Underwriter may over -allot or effect transactions that stabilize or maintain the market price of the
Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at
any time.
The CUSIP numbers are included on the front cover of this Official Statement for convenience of the holders and potential holders of the
Bonds. No assurance can be given that the CUSIP numbers for the Bonds will remain the same after the date of issuance and delivery of
the Bonds.
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Table of Contents
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Description of the Bonds 1
Authorization for Issuance 1
Principal Amount, Date, Interest Rates and Maturities 1
Redemption Provisions • 1
Purchase 2
Bond Registrar and Registration Features 2
Book-Entry Bonds 2
Purpose and Use of Proceeds 3
Purpose 3
Plan of Refunding 3
Sources and Uses of Funds 4
Security for the Bonds 4
Bond Fund 4
Revenue Fund /Priority of Payments 6
Rate Covenant • 6
Certain Other Covenants 7
Additional Bonds 8
Defeasance of the Bonds 9
Events of Default 10
City Indebtedness of the System • 12
Outstanding Long-Term Borrowings 12
Water and Sewer Revenue Bonds — Debt Service Requirements 13
Debt Payment Record 13
Future Financings 13
The Water System 13
Description 13
Water Customers 14
Major Accounts of the Water System 15
• Water Service Charges within City limits 15
Historical Residential Bi- Monthly Water Base Rates 15
Water System Capital Improvement Plan 16 .
The Sewerage (Wastewater) System 17
Description 17
Sewer Customers 18
Major Accounts of the Sewer System 18
Sewer Service Charges 19 .
Wastewater Treatment Plant Capital Improvement Plan 20
0 Billing and Collection Policy 21
Endangered Species Act 21
Financial Results 21
Statement of Net Assets 22
Historical Coverage Table 23
The City 24
The City 24
Elected Officials 24
Key Administrative Staff 24
Labor Relations 25
Pension System 25
Other Post Employment Benefits 27
Risk Management 27
Accounting _Policies 29
Budgetary Process • 29
Cash and Investments 30
Auditing of City Finances 30
Demographic Information 31
Major Employers 31
Total Personal and Per Capita Income 32
Taxable Retail Sales 32
Residential Building Permits 32
Nonagricultural Wade & Salary Workers 33
and Labor Force anc Employment Data 33
Initiative and Referendum 33
State Initiatives 33
Tax Matters 34
Qualified Tax - Exempt Obligations 35
Rating 35
Continuing Disclosure 35
Legal and Underwriting 36
Approval of Counsel 36
Litigation 36
Official Statement 37
Underwriting 37
Concluding Statement 37
Bond Ordinance Appendix A
Form of Opinion of Bond Counsel Appendix B
0 Book -Entry Transfer System Appendix C
2006 Annual Financial Statements Appendix D
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• OFFICIAL STATEMENT
City of Yakima, Washington
. $9,195,000*
Water and Sewer Revenue and Refunding Bonds, 2008
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The City of Yakima, Washington (the "City "), a municipal corporation duly organized and existing under and by
virtue of the laws of the State of Washington (the "State ") furnishes this Official Statement in connection with the
offering of $9,195,000* aggregate principal amount of Water and Sewer Revenue and Refunding Bonds, 2008 (the
"Bonds"). This Official Statement provides information concerning the City, the Bonds and the City's combined
water and sewerage system (the "Water System" and the "Sewerage System" and together, the "System "). The
Bonds are issued on a parity of lien with the City's Water and Sewer Revenue Refunding Bonds, 1996 (the "1996
Bonds "); its Water and Sewer Revenue and Refunding Bonds, 1998 (the "1998 Bonds "); its Water and Sewer
Revenue Bonds, 2003 Series A (the "2003A Bonds "); and its Water and Sewer Revenue Bonds, 2003 Series B (the
"2003B Bonds ") (collectively, the "Outstanding Parity Bonds "). The City has reserved the right in the Bond
Ordinance (as defined herein) to issue additional bonds on a parity of lien with the Outstanding Parity Bonds and
the Bonds, subject to certain conditions described herein (the "Additional Bonds "). The Outstanding Parity Bonds,
the Bonds and any Additional Bonds are referred to herein as "Parity Bonds." The Bonds are special obligations of
the City payable only from the Bond Fund. The Bonds are not general obligations of the City, the State of •
Washington, or any other municipal corporation or political subdivision thereof.
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Certain capitalized words and phrases used in this Official Statement have the meanings as defined in the Bond
Ordinance attached hereto in Appendix A.
Description of the Bonds
Authorization for Issuance
The Bonds are issued pursuant to Ordinance No. 2008 -19 passed by the City Council (the "Council ") on March 18,
2008 (the "Bond Ordinance "), Sale Resolution No. _ adopted on , 2008 (the "Resolution ") and
under and in accordance with the laws and provisions of the State, including chapters 35.92, 39.46 and 39.53 of the
Revised Code of Washington ( "RCW ").
Principal Amount, Date, Interest Rates and Maturities
The Bonds will be issued in the aggregate principal amount of, not to exceed, $9,195,000* and will be dated and bear
interest from the date of initial issuance and delivery. The Bonds will mature on the dates and in the principal
amounts and will bear interest payable semiannually thereafter on November 1 and May 1 of each year beginning
November 1, 2008 at the respective rates as set forth on the cover of this Official Statement. Interest on the Bonds
will'be computed on the basis of a 360 -day year consisting of twelve 30 -day months.
Redemption Provisions
Optional Redemption. The Bonds maturing on or prior to November 1, 2017 are not subject to redemption prior to
their scheduled maturity. The Bonds maturing on or after November 1, 2018 are subject to redemption at the option
of the City on and after May 1, 2018, in whole or in part (within one or more maturities to be selected by the City)
on any date, at a price of par plus accrued interest, if any, to the date of redemption.
For as long as the Bonds are in book -entry only form, if fewer than all of the Bonds of a maturity are called for
redemption, the selection of Bonds within a maturity to be redeemed shall be made by DTC in accordance with its
operational procedures then in effect. See Appendix C attached hereto. If the Bonds are no longer held in book-
entry only form, then the Bond Registrar would select Bonds for redemption using a random selection method.
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* Preliminary, subject to change.
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Notice of Redemption (DTC). For so long as the Bonds are held in book -entry only form, notice of redemption shall be
given in accordance with the operational arrangements of DTC as then in effect, and neither the City nor the Bond
Registrar will provide any notice of redemption to any Beneficial Owners. It is the sole responsibility of the DTC
Participants to provide notice of redemption to individual Beneficial Owners of the Bonds. If the Bonds are no
longer held in book -entry form, notice of redemption shall be given by or on behalf of the City not less than 30 nor
more than 60 days prior to the date fixed for redemption by first -class mail, postage prepaid, to the Owner of any
Bond to be redeemed at the address appearing on the Bond Register on the day notice is mailed, and the
requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided,
whether or not it is actually received by the Owner of any Bond.
Purchase
The City has reserved the right in the Bond Ordinance to use at any time any surplus Gross Revenue of the System
available after providing for maintenance and operation, debt service, bond redemption and capital improvements
or other available funds, to purchase any of the Bonds at any price deemed reasonable by the City.
Bond Registrar and Registration Features
The Bonds will be issued as fully registered bonds and, when issued, will be registered in the name of Cede & Co.
as Bond Owner and as nominee for The Depository Trust Company ( "DTC "), New York, New York. DTC will act
as securities depository for the Bonds. Individual purchases and sales of the Bonds may be made in book -entry
form only in minimum denominations of $5,000 within a single maturity and integral multiples thereof. Purchasers
( "Beneficial Owners ") will not receive certificates representing their interest in the Bonds.
Principal of and interest on the Bonds will be payable by the State fiscal agent, currently The Bank of New York,
(the "Bond Registrar "). So long as Cede & Co. is the registered owner of the Bonds, principal of and interest on the
Bonds are payable by wire transfer by the Bond Registrar 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 Bonds, as
further described herein in Appendix C.
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Book -Entry Bonds
DTC will act as securities depository for the Bonds. The ownership of one fully registered Bond for each maturity
of the 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 Appendix C attached hereto for
additional information.
Procedure in the Event of Revisions of Book -Entry Transfer System. If DTC resigns as the securities depository and 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 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 Bonds or their nominees, Bonds in fully registered form, in the
denomination of $5,000 or any integral multiple thereof within a maturity. In the event the Bonds are transferred
by the City to fully registered form, the payments of principal and interest on the Bonds will be made by the Bond
Registrar. Principal of the Bonds will be payable upon due presentment and surrender thereof at the office
designated by the Bond Registrar. Under the State's current fiscal agency agreement, the Bonds also may be
presented for payment in the State of Washington at any office of Wells Fargo Bank, National Association. Interest
on the Bonds will be payable by check or draft mailed to the owners of the Bonds at the address appearing on the
Bond Register on the 15th day of the month preceding an interest payment date, and the Bonds will be transferable
as provided in the Bond Ordinance.
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• Purpose and Use of Proceeds
Purpose
A portion of the proceeds of the Bonds will be used to finance (i) the completion and final modernization of the
System's Supervisory Communication and Data Administration (SCADA) system used to monitor and control the
facility process; (ii) the repair of the System's dissolved air flotation tank ( "DAFT "); and (iii) the replacement of
centrate lagoon tanks with a million gallon tank, or other legal purposes the Council may deem necessary.
A portion of the proceeds of the Bonds may also be used to refund a portion of the City's outstanding 1998 Bonds to
obtain the benefit of savings in annual and total debt service requirements, and to pay costs of issuance of the
Bonds.
Plan of Refunding
Depending on market conditions on the day of pricing, a portion of the proceeds from the sale of the Bonds may be
used to refund $3,430,000 of the City's 1998 Bonds maturing on September 1 in the years 2009 through 2011, 2013, •
2014, 2015 and 2018 (as selected on the day of pricing, the "Refunded Bonds "). The proceeds of the Bonds allocated
to the refunding of the Refunded Bonds will be escrowed to the call date for the Refunded Bonds (September 1,
2008) at which time they will be called at a price of par plus accrued interest to the date of redemption.
From a portion of the proceeds of the Bonds, the City will purchase certain direct non - callable 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 U.S. Bank National Association
(the "Refunding Agent "). The maturing principal of the Government Obligations, interest earned thereon, and
necessary cash balance, if any, will provide payment of:
Interest on the Refunded Bonds when due up to and including September 1, 2008; and
• (a)
(b) On September 1, 2008, the redemption price (par) 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 Agent, pursuant
to an escrow deposit agreement to be executed by the City and the Refunding Agent.
Information on the Refunded Bonds is as follows:
Refunded Bonds
Maturity Years Principal Interest CUSIP
(September 1) Amounts Rates Numbers
2009 $ 640,000 4.20% 984538GB8
2010 665,000 4.25 984538GC6 -
2011 695,000 4.30 984538GD4
2013* 365,000 4.45 984538GF9
2014 200,000 4.45 984538GG7
2015 205,000 4.50 984538GH5
2018* 660,000 4.60 984538GL6
* Term Bond.
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Sources and Uses of Funds
The proceeds from the Bonds will be applied as follows:
Sources of Funds
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Par Amount of Bonds ( $ 9,195,000
Net Premium /(Discount)
Total Sources of Funds $
Use of Funds
Project Costs $
Refunding Escrow Requirements
Issuance Costs (
Additional Proceeds
Total Use of Funds $
(1) Preliminary, subject to change.
(2) Includes Bond Counsel fees, rating fee, underwriter's discount, and other costs associated with the issuance of the Bonds.
Security for the Bonds
The principal of and interest on the Bonds are secured by a pledge of Gross Revenues of the System equal to the
pledge for the Parity Bonds, subject only to the payment of the Costs of Maintenance and Operation of the System
and the required payments into the. Water and Sewer Revenue Bond Fund (the "Bond Fund "). The City has
covenanted that, so long as the Bonds are outstanding, no bonds may be issued subsequent to the issuance of the
Bonds with a lien and charge on the Gross Revenues superior to the lien and charge of the Bonds.
The Bonds are a special limited obligation of the City payable only from the Bond Fund. The Bond Fund will at all
times be completely segregated and set apart from all other funds and accounts of the City for the security and the
payment of the principal of and interest on the Parity Bonds, as they become due.
The Bonds are not general obligations of the City, the State or any political subdivision thereof.
Bond Fund
The Bond Fund will be used solely for the purpose of paying the principal of, premium, if any, and interest on the
Parity Bonds, of retiring the 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 has been divided into three subaccounts: the Interest Account, the Serial
Bond Principal Account and the Term Bond Principal Account (see "Bond Fund" herein). In addition, the City
maintains a Reserve Fund.
Interest Account. An Interest Account has been created in the Bond Fund for the purpose of paying the interest on
the Parity Bonds. Upon the issuance of the Bonds, all accrued interest on the Bonds will be paid into the Interest
Account.
In the case of all Parity Bonds other than Variable Rate Bonds, the City will transfer to the Interest Account amounts
sufficient to pay when due the installment of interest next falling due on all Parity Bonds. In the case of Variable
Rate Bonds, not later than on the last day of the month immediately succeeding the month of closing of such bonds
and on or before the last day of each succeeding month, the City will transfer to the Interest Account an amount
equal to the interest on such Variable Rate Bonds estimated to become due and payable on the due date. If on any
date on which an installment of interest on Variable Rate Bonds falls due there are insufficient amounts in the
Interest Account to make such interest payment, the City will withdraw from the Revenue Fund and transfer to the
Interest Account an amount that when added to other money therein will equal the amount of interest falling due
and payable on such interest payment date. Any amounts credited to the Interest Account representing accrued
interest received on the sale of the Bonds or other Parity Bonds, interest capitalized from the proceeds of any Parity
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• Bonds and any other transfers and credits otherwise made or required to be made to the Interest Account will be
taken into consideration and allowance made with respect to the full amount of such transfers and credits.
Serial Bond Principal. Account. The City has created a separate account in the Bond Fund known as the "Serial Bond
Principal Account" to provide for the payment of the principal of Serial Bonds as the same shall mature and become
due and payable. The City will transfer to the Serial Bond Principal Account amounts sufficient to pay when due
the installment of principal next falling due on the Serial Bonds.
Term Bond Principal Account. The City will create and establish a separate account in the Bond Fund to be known as
the "Term Bond Principal Account" in order to meet the specified Sinking Fund Requirements of Term Bonds and
to otherwise retire the Bonds, if any, and other Parity Bonds prior to maturity. The City will transfer to the Term
Bond Principal Account amounts sufficient to pay when due the Sinking Fund Requirement next falling due on all
Term Bonds.
Additionally, the City will apply the money paid into the Bond Fund for credit to the Term Bond Principal Account
to the redemption of Term Bonds on the next ensuing Sinking Fund Requirement due date (or may so apply such
money prior to such Sinking Fund Requirement due date). The City may also apply the money paid into the Bond
Fund for credit to the Term Bond Principal Account for the purpose of retiring Term Bonds by the purchase of such
Term Bonds at a purchase price (including any brokerage charge) not in excess of the principal amount thereof.
The City will apply such money to the redemption or purchase of Term Bonds in an amount such that the aggregate
principal amount of Term Bonds so purchased or redeemed is at least equal to such next ensuing Sinking Fund
Requirement. Any such purchase of Term Bonds by the City may be made with or without tenders of Term Bonds
in such manner as the City will, in its discretion, deem to be in its best interest.
el Reserve Fund. The City has created the "Reserve Fund" to provide a reserve for the payment of the principal,
premium, if any, and interest on the Parity Bonds. The City has covenanted and agreed that on the date of issuance
of the Bonds the City will have on deposit in the Reserve Fund an amount equal to the lesser of (i) the maximum
Annual Debt Service during any Fiscal Year on a series of Parity Bonds; (ii) 125 percent of the Average Annual Debt
Service on all Outstanding Parity Bonds of such series; or (iii) 10 percent of the stated principal amount of such
series of Parity Bonds (the "Reserve Fund Requirement "). Each ordinance providing for the issuance of Additional
Bonds will provide for payments into the Reserve Fund from any other money lawfully available therefore in
amounts that within not less than five years of equal monthly payments, will provide for deposit of the Reserve
Fund Requirement or may provide for the City to obtain Qualified Insurance or a Qualified Letter of Credit for
specific amounts required to be paid into the Reserve Fund. Such Qualified Letter of Credit or Qualified Insurance
will not be cancelable on less than five years notice. In the event of any cancellation, the Reserve Fund will be
funded as if the Parity Bonds which remain Outstanding had been issued on the date of such notice of cancellation.
Money in the Bond Fund and Reserve 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 Parity Bonds payable out of the Bond
Fund and Reserve Fund. Earnings on investments in the Bond Fund and Reserve Fund will be transferred to the
Revenue Fund, except that earnings on investments in the Reserve Fund will first be applied to remedy any
deficiency in such account.
For the purpose of determining the amount credited to the Reserve Fund, obligations in which money in the
Reserve Fund have been invested will 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 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 will include accrued interest thereon. The
valuation of the amount in the Reserve Fund will be made by the City as of the close of business on each December
0 31 (or on the next preceding business day if December 31 does not fall on a business day) and after any withdrawal
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).
5
If the amount in the Reserve Fund is less than the Reserve Fund Requirement, the City will transfer from the
Revenue Fund, for credit to the Reserve Fund, no later than the 25th day of the sixth succeeding calendar month the
amount necessary to restore the Reserve Fund to the Reserve Fund Requirement. Prior to such time, such transfer
will come from money 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 Fund is greater than the Reserve Fund
Requirement, then may the City withdraw at any time prior to the next date of valuation from the Reserve Fund the
difference between the amount in the Reserve Fund and the Reserve Fund Requirement and deposit such difference
in the Revenue Fund.
Money in the Interest Account, the Serial Bond Principal Account and the Term Bond Principal Account will be
transmitted to the Bond Registrar 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 Account or the Term
Bond Principal Account for such purpose, the City shall make up any such deficiency from the Reserve Fund 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 provide cash in the Reserve Fund 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 will
then draw from any Qualified Letter of Credit or Qualified Insurance. Such draw will be made at such times and
under such conditions as the agreement for such Reserve Fund credit facility will provide.
•
The balance in the Reserve Fund as of February 25, 2008 was $2,390,984.
Revenue Fund /Priority of Payments
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;
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Second, to make all required payments into the Bond Fund; •
Third, to pay the interest on the Parity Bonds;
Fourth, to pay the principal of and any sinking fund payments for the Parity Bonds;
Fifth, to make all payments required to be made into the Reserve Fund;
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 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.
The City may create a Rate Stabilization Account in the Revenue Fund. To the extent that surplus Gross Revenues
remain after the payments so required to be made out of the Revenue Fund, the City may credit up to the full
amount of such surplus to the Rate Stabilization Account.
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 Parity Bonds, as and when the same
6
0 .
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 obligated to make into the Reserve Fund 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 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 will be at least equal to (a) 1.25 times Annual Debt
Service on all Parity Bonds then Outstanding minus the aggregate principal amount of nondelinquent Assessments
paid or to be paid into the Bond Fund in such year for any period during which Assessments may be paid without
becoming delinquent; or (b) for any other period, 1.25 times Annual Debt Service on all Parity Bonds then
Outstanding (the "Coverage Requirement ").
Certain Other 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 the 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 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 amount set forth in the Bond Ordinance.
III 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 chapter 39.53 RCW, 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 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:
An amount which will be in the same proportion to the net amount of Parity Bonds then Outstanding (defined as
the total amount of the 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
An amount which will be in the same proportion to the net principal amount of Parity Bonds then Outstanding that
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.
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.
III
7
Liens or Encumbrances. The City will not at any time create or permit to accrue or to exist any lien or other
0
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 Parity Bonds, and will pay and discharge, or cause to be paid and discharged,
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
Parity Bonds, or which might impair the security of the Parity Bonds.
Insurance. The City will, 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.
Books and Accounts. The City will keep proper books of account which will be kept in accordance with any
applicable rules and regulations prescribed by the State. The City will prepare, and any owner or holder of 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 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.
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.
Tax Covenants. The City has covenanted to undertake all actions required to maintain the tax - exempt status of
interest on the Bonds as set forth in the Bond Ordinance.
Additional Bonds
The City may issue Additional Bonds (i) 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 and other lawful purposes related to the System, or (ii) for the purpose
of refunding, or purchasing and retiring prior to their maturity, any outstanding Bonds or other revenue
obligations of the System. The City may issue such 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
Fund 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 a Professional
Utility Consultant, 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 Parity Bonds and the Additional Bonds to be issued, and that the Adjusted Net Revenues to be
received each calendar year or Fiscal Year thereafter, will equal at least 1.25 times the Average Annual Debt
Service each such calendar year or Fiscal Year, on the Outstanding Parity Bonds and the Additional Bonds to
be issued.
0
8
0 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 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, will be
outstanding:
(a) Any increase or decrease in Net Revenues that 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 that have been approved by ordinance of the
Council but that 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 that (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 that would have been received if any customers added to the System
during such 12 -month period were customers for the entire period; and
(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.
Such Professional Utility Consultant will base his certification upon 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.
Notwithstanding the foregoing, if Additional Bonds are to be 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 need not be obtained. •
Once the 1996 and 1998 Bonds are no longer Outstanding, in lieu of a certificate from a Professional Utility
Consultant, the Director of Finance and Budget or other financial officer of the City may certify that the Net
Revenues of the System for any 12 consecutive months of the 24 months prior to the date of issuance of such
Additional Bonds are at least 125 percent of the Average Annual Debt Service due in any fiscal or calendar year
thereafter, including in such calculation debt service on such Additional Bonds.
The City may issue revenue bonds or other obligations which are a charge upon the Gross Revenues of the System
junior or inferior to the payments required by the Bond 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 Bonds. Furthermore, nothing
in the Bond Ordinance prohibits the City from issuing revenue bonds to refund maturing Bonds for the payment of
which money is not otherwise available. .
For so long as the 2008 Bonds are Outstanding, no bonds may be issued subsequent to the issuance of the 2008
Bonds with a lien and charge on the Gross Revenues superior to the lien and charge of the 2008 Bonds.
Defeasance of the Bonds
In the event that money and /or Governmental Obligations (see below for definition) in amounts sufficient to
redeem and retire any Parity Bonds are irrevocably set aside to effect such redemption and retirement, then no
further payments need be made into the Bond Fund for payments on such bonds and the owner of such bonds will
411) cease to be entitled to any lien, benefit or security of the Bond Ordinance except the right to receive the funds so set
aside and pledged, and such Bonds will be deemed not to be outstanding.
9
•
Governmental Obligations. As currently defined in chapter 39.53 RCW, "Government Obligations" mean (a) direct
0
obligations of or obligations, the principal and interest on which are unconditionally guaranteed by the United
States of America and bank certificates of deposit secured by such obligations; (b) bonds, debentures, notes,
participation certificates or other obligations issued by the Banks for Cooperatives, the Federal Intermediate Credit
Bank, the Federal Home Loan Bank System, the Export- import Bank of the United States, federal land banks or the
Federal National Mortgage Association; (c) public housing bonds and project notes fully secured by contracts with
the United States; and (d) obligations of financial institutions insured by the Federal Deposit Insurance Corporation
to the extent insured or guaranteed as permitted under any other provision of State law.
Events of Default
The City has covenanted and agreed with the purchasers and owners from time to time of any Parity Bonds, in
order to protect and safeguard the covenants and obligations undertaken by the City securing any Parity Bonds,
that the following will constitute "Events of Default ":
(a) If the City defaults in the performance of any obligation with respect to payments into the Bond
Fund and such default is not remedied within a period of 30 days;
(b) If default is made in the due and punctual payments of the principal of and premium, if any, on
any of the Parity Bonds when the same becomes due and payable, either at maturity or by
proceedings for redemption or otherwise;
(c) If default is made in the due and punctual payment of any installment of interest on any Parity
Bonds;
(d) If the City defaults in the observance and performance of any other of the covenants, conditions
and agreements on the part of the City contained in the Bond Ordinance and such default or
defaults have continued for a period of 90 days after the City has received from the Bondowners
Committee or from the owners of not less than 20 percent in principal amount of the Parity Bonds
outstanding, a written notice specifying, and demanding the cure of, such default;
(e) If the City sells, transfers, assigns or conveys any properties constituting the System or interests
therein, or any part or parts thereof, or makes any agreement for such sale or transfer (except as
expressly authorized by the Bond Ordinance and summarized herein under "Security for the Bonds
— Certain other Covenants — Disposition of the System.");
(f) If an order, judgment or decree is entered by a court of competent jurisdiction (i) appointing a
receiver, trustee or liquidator for the whole or any substantial part of the System, (ii) approving a
petition filed against the City seeking the bankruptcy, arrangement or reorganization of the City
under any applicable law of the United States or the State, or (iii) assuming custody or control of
the whole or any substantial part of the System under the provisions of any other law for the relief
or aid of debtors and such order, judgment or decree will not be vacated or set aside or stayed (or,
in case custody or control is assumed by such order, such custody or control will not be otherwise
terminated), within 60 days from the date of entry of such order, judgment or decree; and
(g) If the City (i) admits in writing its inability to pay the debts of the System generally as they become
due, (ii) files a petition in bankruptcy or seeking a composition of indebtedness under any state or
federal bankruptcy or insolvency law, (iii) makes an assignment for the benefit of its creditors, (iv)
consents to the appointment of a receiver of the whole or any substantial part of the System, or (v)
consents to the assumption by any court of competent jurisdiction under the provisions of any
other law for the relief or aid of debtors of custody or control of the whole or any substantial part of
the System.
During the continuance of an Event of Default, the owners of Parity Bonds representing 20% in principal amount of
the Parity Bonds then Outstanding may call a bondholders meeting for the purpose of electing a committee (the
"Bondowners Committee ") to act on behalf of all Parity Bondowners (the `Bondowners "). Such meeting shall be
401 called and the proceedings thereof shall be conducted in the manner provided in Article IX of the Bond Ordinance.
10
• At such meeting the Bondowners present in person or by proxy may, by a majority of the votes cast, elect one or
more persons, who may or may not be Bondowners, to the Bondowners Committee, which shall act as trustee for
all registered owners of Parity Bonds outstanding, and the Bondowners Committee as such trustee may have and
exercise all the rights and powers provided for in the Bond Ordinance to be exercised by the Bondowners
Committee. The Bondowners present in person or by proxy at said meeting, or at any adjourned meeting thereof,
shall prescribe the manner in which the successors of the persons elected to the Bondowners Committee at such
Bondowners meeting shall be elected or appointed, and may prescribe rules and regulations governing the exercise
by the Bondowners Committee of the powers conferred upon it herein, and may provide for the termination of the
existence of the Bondowners Committee. The members of the Bondowners Committee elected by the Bondowners
in the manner herein provided, and their successors, as a committee are hereby declared to be trustees for the
owners of all the Parity Bonds then Outstanding, and are empowered to exercise in the name of the Bondowners .
Committee as trustee, all the rights and powers hereinafter conferred on the Bondowners Committee.
No owner of any one or more of the Parity Bonds shall have any right to institute any action, suit or proceeding at
law or in equity for the enforcement of any provision of the Bond Ordinance or the execution of any trust under the
Bond Ordinance or for any remedy under the Bond Ordinance, unless an Event of Default shall have happened and
be continuing, and unless no Bondowners Committee has been created as herein provided, but any remedy herein
authorized to be exercised by the Bondowners Committee, may be exercised individually by any Bondowner, in his
own name and on his own behalf or for the benefit of all Bondowners, in the event no Bondowners Committee has
been created, or with the consent of the Bondowners Committee, if such Bondowners Committee has been created;
provided, however, that nothing in the Bond Ordinance or in the Parity Bonds shall affect or impair the obligation
of the City, which is absolute and unconditional, to pay at the respective dates of maturity and places therein
expressed the principal of and premium, if any, and interest on the Parity Bonds to the respective owners thereof, or
affect or impair the ,rights of action, which are also absolute and unconditional, of any owner to enforce the
payment of his Parity Bonds, or to reduce to judgment his claim against the City for the payment of the principal
0 and interest on his Parity Bonds, without reference to, or consent of, the Bondowners Committee or any other
owner of the Parity Bonds.
•
•
•
11
•
City Indebtedness of the System •
40
The City may issue revenue bonds "...if it deems it advisable to purchase, lease, condemn, or otherwise acquire,
construct, develop, improve, extend or operate any land, building, facility, or utility and adopts an ordinance which
has been ratified by the voters of the city or town in those instances where it is required to be ratified by the
voters...such city or town my issue revenue bonds against the special fund or funds created solely from revenues..."
pursuant to chapter 35.41 RCW (the Municipal Revenue Bond Act).
Outstanding Long -Term Borrowings
• (As of June 5, 2008)
The City's outstanding long term debt of the System is composed of the following bond issues. The Public Works
Trust Fund loans and the AppleTree Project Bonds are subordinate in lien to the Parity Bonds:
• Date of Date of Amount of Outstanding
Class and Series of Obligation Issue Maturity Original Issue as of 6/05/08
Water and Sewer Revenue Bonds (Parity Bonds)
1996 Bonds 10/01/96 12/01/08 $ 3,320,000 $ 350,000
1998 Bonds • 10/01/98 09/01/08 ( 7,910,000 610,000
2003 Bonds, Series A 12/15/03 11/01/15 7,390,000 4,700,000
2003 Bonds, Series B 12/15/03 11/01/23 10,155,000 10,155,000
The Bonds 06/05/08 11/01/27 9,195,000 ( 9,195,000 (
Total Revenue Bonds Outstanding $ 37,970,000 $ 25,010,000
Public Works Trust Fund ( "PWTF ") Loans (Subordinate Lien Debt) (
Sewer Treatment Plant Rehabilitation 06/19/88 07/01/08 $ 945,000 $ 55,579
Domestic Well & Pumphouse 06/12/89 07/01/09 495,000 54,548
Sewer Collection System Improvements 09/03/92 07/01/12 1,120,000 308,655
Wastewater Facility Rehabilitation 06/01/93 07/01/13 3,221,708 1,023,034
Sewer Collection System Improvements 05/16/94 07/01/14 1,220,900 286,293
Headworks /Digester Rehabilitation 08/07/95 07/01/15 3,030,558 1,306,996
Sewer Improvements King Street 06/14/95 07/01/15 209,367 93,481
Fruitvale Neighborhood 06/01/01 07/01/21 1,466,250 1,086,750
Water Treatment Filter Rehabilitation 07/01/05 10/01/25 9,666,772 837,735
River Road Sewer Project 12/30/05 07/01/25 1,614,900 1,529,905
Water Treatment Plant Improvements 09/04/03 07/01/23 2,559,775 2,155,600
Wastewater Ultraviolet Disinfection 07/01/07 07/01/27 2,300,000 460,000
Total Revenue PWTF Loans Outstanding $ 27,850,230 $ 9,198,576
Junior Lien Bond (Subordinate Debt) (4)
AppleTree Project Bonds 02/27/01 02/27/31 $ 600,000 $ 492,508
(1) The Date of Maturity reflects the redemption of the Refunded Bonds. The September 1, 2008 principal payment remains
after this refunding.
(2) Preliminary, subject to change.
(3) As of April 15, 2008.
(4) The AppleTree Project Bonds are subordinated six percent debentures for the AppleTree Project, privately placed bonds to
finance Wastewater infrastructure to a newly annexed portion of the City. The AppleTree Project Bonds have a lien only on
connection charges collected from within the Project boundaries. If there are not sufficient connection charge revenues
collected to pay principal and interest on the bonds, neither the System nor the City has any obligation to pay.
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0 Water and Sewer Revenue Bonds - Debt Service Requirements
(As of June 5, 2008)
Cal. Outstanding Parity Bonds (t) Series 2008 Bonds (2) Total
Years Principal Interest Principal Interest (3) Debt Service
2008 $ 1,645,000 $ 355,166 $ 115,000 $ 130,370 $ 2,245,536
2009 705,000. 642,794 900,000 318,930 2,566,724
2010 725,000 621,644 915,000 298,680 2,560,324
2011 750,000 598,706 940,000 276,720 2,565,426
2012 775,000 572,456 420,000 251,810 2,019,266
2013 805,000 543,394 425,000 239,630 2,013,024
2014 835,000 511,194 450,000 226,455 2,022,649
2015 870,000 478,750 460,000 211,830 2,020,580
2016 910,000 435,250 470,000 195,960 2,011,210
• 2017 955,000 389,750 490,000 179,040 2,013,790
2018 1,005,000 342,000 505,000 160,665 2,012,665
2019 1,055,000 291,750 290,000 140,970 1,777,720
2020 1,110,000 239,000 300,000 129,225 1,778,225
2021 1,165,000 183,500 315,000 116,625 1,780,125
2022 1,220,000 125,250 330,000 103,080 1,778,330
2023 1,285,000 64,250 340,000 88,395 1,777,645
2024 0 0 355,000 72,925 427,925
ill 2025 0 0 375,000 56,418 431,418
2026 0 0 390,000 38,605 428,605
2027 0 0 410,000 19,885 429,885
Total $ 15,815,000 $ 6,394,854 $ 9,195,000 $ 3,256,218 $ 34,661,072
,(1) Excludes the Refunded Bonds. .
(2) Preliminary, subject to change.
(3) Assumed interest rates range from 2.20% to 4.85 %.
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
Other than the Bonds and the Outstanding Parity Bonds, the City does not anticipate issuing additional long -term
parity debt within the next twelve months.
The Water System .
•
Description .
The City supplies water to the City and a small portion of the Gleed area. The City's water supply comes from the
Naches River. Water is treated at the water treatment plant prior to delivery. The City has three high production
• wells to back up its gravity surface supply system. The Nob Hill Water Association (a private utility) serves a
portion of the western part of the urban area, a portion of which is within the City's boundaries.
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The City's total water system capacity is 25 million gallons per day ( "MGD ") plus three emergency wells which
0
provide an additional 11.4 MGD. The City's historic water demands are shown in the following table:
Water System Demand
2007 2006 2005 2004 2003
Peak Flows (MGD) 21.2 20.2 19.1 20.5 20.6
Annual Average Flows (MGD) 13.1 13.0 12.3 11.3 12.1
Source: City of Yakima.
•
Water Customers
Residential. The residential customer class includes both single - family and multi - family. This class represents
84 percent of all water customers. Within the City, approximately 63 percent of all residential customers have
irrigation water supplied from a separate irrigation system of the City. Only five percent of potable residential
water use is for irrigation.
Commercial and Industrial. Commercial users include shopping centers, banks, office compiexes, motels, and other
businesses. The commercial monthly demand is generally uniform throughout the year. Industrial customers are
primarily. manufacturing facilities and the fruit and vegetable processing industries with summer use generally
being twice the monthly average.
Governmental. The governmental group of users includes state, federal, county and City facilities.
Number of Water Customers
2007* 2006 2005 2004 2003
Residential 16,561 16,596 16,573 16,536 16,507
Commercial 2,878 2,859 3,021 2,766 2,820 0
Industrial 105 108 108 110 109
Government 134 117 106 101 108
Total 19,678 19,680 19,808 19,513 19,544
* Preliminary.
Source: City of Yakima.
Water Billing
2007* 2006 2005 2004 2003
Residential $3,722,905 $3,619,220 $3,213,246 $3,083,426 $3,023,658
Commercial /Industrial 2,262,709 2,198,826 1,924,043 1,890,792 1,810,525
Government /Other 236,441 218,716 173,841 159,585 141,025
Total $6,222,055 $6,036,762 $5,311,130 $5,133,803 $4,975,208
* Preliminary.
Source: City of Yakima.
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14
Major Accounts of the Water System
The following table shows the City's major water customers by amount billed.
Major 2007 Water System Customers*
Total Amount - Percent of
Customer Billed Water Revenues
Cintas Commercial Laundry $56,927 0.86%
Yakima Housing Authority 54,869 0.83
Jewell Apple 46,772 0.71
Yakima Valley Community College 41,687 0.63
Seneca Foods 37,202 0.56
Yakima Regional Hospital 34,048 0.51 •
Kiwanis Park 31,613 0.48
Broadmoor Mobile Home Park 29,046 0.44
Golden Villa Mobile Home Park 28,833 0.44
Riverview Manor Mobile Home Park 25,680 0.39
Total $ 386,677 5.85%
* 2007 numbers are preliminary.
•
Source: City of Yakima.
Water Service Charges within City limits
The Council has approved rate adjustments, effective February 1, 2008, which are estimated to increase total water
revenue by an amount of 5.5 percent per year through 2012. The rate increases vary between different classes of
customers. The historical residential bi- monthly water base rates are as follows:
Mr Historical Residential Bi- Monthly Water Base Rates
(By Meter Size)
Meter Size 2008* 2007 2006 2005 2004
3/4" $ 9.18 $ 9.00 $ 9.00 -$ 8.25 $ 3.65
1" 12.67 12.60 12.60 12.04 5.65
1 /2" 22.26 21.58 21.58 20.57 12.80
2" 33.30 32.35 32.35 30.81 26.00
3" 59.06 57.49 57.49 54.69 67.00
4" 95.83 93.40 93.40 88.81 107.00
6" 187.74 183.17 183.17 174.10 . 190.00
8" 371.62 362.71 362.71 344.70 310.00
10" 555.46 542.26 542.25 515.29 700.00
* Effective February 2008. •
Source: City of Yakima.
Charges for water consumed per one hundred cubic feet ( "UOC ") are as follows:
UOC Rate per UOC
' 0 -250 $1.26
Over 250 1.18
Source: City of Yakima
•
• 15
•
•
Rate Comparison of Comparable Water Systems. Shown below are comparative water rate charges of the City and other II
water utilities in the State:
2008 Single Family Monthly Water Rate Comparison
Water System Monthly Rate (1)
City of Chehalis $35.00
City of Centralia 33.50
City of Richland 30.20
City of Kelso 28.10
City of Longview 23.87
City of Yakima 21.78
City of Olympia 20.54
City of Ellensburg 20.07
City of Vancouver 19.85
(1) Rate per 1,000 cubic feet.
Source: Websites of individual municipalities. •
Water System Capital Improvement Plan
The improvements identified in the City's water system plan are described in the following functional component
categories: (i) Source of Supply; (ii) Water Treatment; (iii) Storage; and (iv) Distribution. The following are
descriptions of projects anticipated to be completed. However, the plan may change based on available funds and
perceived needs. Funding sources expected include Parity Bonds of approximately $3 million in 2009, reserves,
grants, balances and Public Works Trust Fund loans. A cost of service and rate study was completed in 2007. The
City plans to spend approximately $7.5mil for its water system capital improvement projects over the next two or
three years, depending on construction schedules.
ID
Source of Supply. The current source of supply is the Naches River Water Treatment Plant with a nominal capacity
of 25 MGD. This supply is adequate to meet the projected maximum day demand ( "MDD ") in 2008. In 2009
service will begin from the well located in Gardner Park. The City expects to begin service from two additional
Aquifer and Storage and recovery wells in 2011 and 2012. With the new additions the City expects to have
adequate capacity until 2025. The three active wells (Kiwanis, Airport and Kissel Park) are designated as
emergency use sources.
Since 1977, the surface water rights that are the primary supply for the City's municipal water treatment and
delivery system have been under review in the Yakima River general stream adjudication (Ecology v. Acquavella).
In 2002, the City. reached a settlement with the State and the United States in the adjudication. Under the
settlement, adequate water quantities are provided to meet expected current and future demand. On November 21,
2002, the Court issued a Conditional Final Order confirming the terms of the settlement. No appeals to the
Conditional Final Order were filed by any party. The Conditional Final Order finally resolves all issues regarding
the rights under review in the adjudication. The final order is expected to be issued in 2009.
A proposed 3,000 gallons per minute ( "gpm ") deep well located in Gardner Park is in the design process and is
expected to enable the City to beneficially use the balance of the Ranney Well water right, and provide the
additional year -round source which is needed to meet projected MDD after 2008. The estimated cost of a new well
including well pump, well house and engineering and administrative costs is $2,500,000: The City has financed the
well through a PWTF loan.
Aquifer storage and recovery ( "ASR ") is a possible source of additional supply during peak use periods or under
emergency conditions. Two ASR wells have been proposed which would initially be emergency -only supply
sources. If the projected maximum day demands are realized by the year 2015, one of the proposed ASR wells
would be converted from an emergency source of supply status to a normal supply source. The first ASR well is
expected to be installed in 2011. The second ASR well is expected to be installed in 2012. The estimated cost for
each of the ASR wells is expected to be the same as the Gardner Park Well, or approximately $2,500,000.
Water Treatment. The recommended improvements in the water treatment facilities are described below.
16 •
Residuals Handling. Construction of two concrete lined lagoons with a recycle pump station is recommended to
'replace the existing residuals handling process. The recommended improvements to the residuals handling
facilities are scheduled for installation in 2010.
Distribution. Various distribution projects, while not needed to correct any existing deficiencies, are included in the
capital improvement program as part of the City's on -going efforts to maintain and upgrade the quality of the
system to meet current and future needs. All distribution projects are in the planning stages and immediate
timelines and projected costs have yet to be determined.
The City is upgrading to a new customer services system in 2008 and 2009.
The Sewerage (Wastewater) System
Description
The City treats wastewater for City residents and the surrounding urbanized area. The City has two collection
systems, one for wastewater from food processing industries and one for other wastewater. All wastewater is
treated at the Regional Wastewater Treatment Plant, which is owned by the City.
In 1974, the City accepted regional responsibility for protecting the environment by agreeing to provide regional
wastewater treatment. The'investments made to date in the City's wastewater collection treatment and facilities
exceed $100 million. The City has contracts with the City of Union Gap and the Terrace Heights Wastewater
District in which the City provides wholesale wastewater treatment and disposal services.
The City's historic wastewater demands are shown in the following table:
• Wastewater Treatment Plant Demand
2007 2006 2005 2004 2003
Plant Permitted Capacity (MGD) 21.5 21.5 21.5 21.5 22.3
Peak Day (MGD) 13.3 14.7 14.2 15.0 14.8
Annual Average Flows (MGD) 10.7 10.8 10.0 11.0 10.9
Source: City of Yakima
•
•
17
0
Sewer Customers
The City provides wastewater service to approximately 24,000 accounts, 91 percent of which are residential.
Approximately 99.8 percent of all residential and commercial customers of the System are within the City.
Customer data and usage by class for the last five years is presented below.
Number of Sewer Customers
2007* 2006 2005 2004 2003
Residential 21,993 21,896 21,634 21,114 20,621
Commercial /Industrial 2,023 2,026 1,998 1,964 1,912
Government /Other 129 128 126 128 127
Wholesale ** 2 2 2 2 2
Total 24,147 24,052 23,760 23,208 22,662
* Preliminary.
** Includes The City of Union Gap and Terrace Heights Sewer District.
Source: City of Yakima
Sewer Billing
2007* 2006 2005 2004 2003
Residential $8,821,923 $9,002,893 $8,788,519 $8,752,767 $7,597,273
Commercial /Industrial 4,662,428 4,630,095 4,342,962 4,415,202 3,445,284
Government /Other 414,506 439,901 459,642 455,576 382,644
Wholesale ** 369,883 475,689 393,322 421,582 441,492
Total $14,268,740 $14,548,578 $13,984,445 $14,045,127 $11,866,693
* Preliminary.
** Includes charges to the City of Union Gap and Terrace Heights Sewer District; the two customers contribute approximately
three percent of the total system billing.
Source: City of Yakima.
•
•
Major Accounts of the Sewer System
The following table shows the City's major sewer customers by amount billed.
Major 2007 Sewer System Accounts*
Total Amount Percentage of
Customer Billed Sewer Revenues
Del Monte Corporation $ 382,270 2.68%
City of Union Gap 242,499 1.70.
Jewell Apple 223,681 1.57
Seneca Foods 152,011 1.07
Terrace Heights Sewer District 137,283 0.96
Cintas Commercial Laundry 105,097 0.74
Yakima Housing Authority 96,713 0.68
Yakima Regional Hospital 77,190 0.54
Broadmoor Mobile Home Park 70,801 0.50
Yakima Valley Community College 64,665 0.45
Total $1,552,210 10.89%
* 2007 numbers are preliminary.
Source: City of Yakima.
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18
• Sewer Service Charges
The Council has approved wastewater rate increases in total of approximately 3.5 percent per year through 2010.
The rate increases vary for different customer classes.
Rates To Properties Within City Limits. The domestic wastewater service charge consists of a ready -to -serve charge
and a volume charge based on domestic water consumption. The volume charge is $2.42 per one hundred cubic
feet of water consumption, or if metered, quantity discharged. Ready -to -serve charges for the wastewater system
are based on water meter size. The historical residential bi- monthly sewer base rates are as follows:
Historical Residential Bi- Monthly Sewer Ready -to -Serve Charges (Inside City Limits)
(By Meter Size)
Meter Size 2008* 2007 2006 2005 2004
3/4" $ 27.62 $ 26.68 $ 26.68 $ 26.68 $ 26.02
1" 35.08 33.88 33.88 33.88 33.04
1 1/2" 45.30 43.76 43.76 43.76 42.68
2" 72.92 70.49 70.49 70.49 68.70
3" 276.20 266.80 266.80 266.80 260.20
4" 351.60 339.64 339.64 339.64 331.24
6" 527.54 509.58 509.58 509.58 496.98
8" 728.06 703.28 703.28 703.28 685.88
10" 1,506.74 1,406.56 1,406.56 1,406.56 1371.78
Volume charge 2.42 2.34 2.34 2.34 2.28
* Effective February 2008.
Source: City of Yakima.
• For multiple -unit residential customers within City limits, the monthly ready -to -serve charge is $7.18 per account
plus $6.63 per dwelling unit.
Rates to Properties Outside City Limits. For customers located outside the City limits, a wastewater service charge is
composed of a ready -to -serve charge and a volume charge based on domestic water consumption. The volume
charge is $3.54 per one hundred cubic feet of water consumption. The average difference between charges inside
and outside the City is 43.8 percent. The wastewater service ready -to -serve charge for all customers outside City
limits other than multiple- family residential customers is calculated and charged according to the following
schedules:
Residential Sewer Ready -to -Serve Charges (Outside City Limits)
Meter Size Monthly Charge* Bi- monthly Charge*
3 /4" $ 19.86 $ 39.72
1" 25.22 50.44
11/2" 32.57 65.14
2" 52.43 104.86
3" 198.60 397.20 •
4" 252.82 505.64
6" 379.33 758.66
8" 523.51 1,047.02
10" 1,047.02 2,094.04
* The "one -month period" is defined as any period of time from one day up to and including one month and fourteen days, and
the "two -month period" is defined as any period of time from one month and fifteen days to two month and fourteen days.
Rates were effective January 2008.
For multiple -unit residential customers outside City limits, the monthly ready -to -serve charge is $10.33 per account
• plus $9.53 per dwelling unit.
•
19
Rate Comparison of Comparable Sewer Systems. Shown below are comparative sewer rate charges of other sewer
0
utilities in the State:
2008 Single Family Monthly Sewer Rate Comparison
Sewer System Monthly Rate (
City of Chehalis $79.13
City of Centralia 62.29
City of Kelso 45.51
City of Longview 43.60
City of Olympia 42.02
City of Yakima 38.01
City of Vancouver 33.16
City of Richland 24.13
City of Ellensburg 22.04
(1) Rate per 1,000 cubic feet.
Source: Websites of individual municipalities.
Strong Waste Surcharge. For all commercial and industrial customers discharging wastewater which contains more
than 300 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 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
ID
(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 above formula: Inside City Outside City
Unit cost per pound for BOD = $ 0.355/lb. $ 0.470/lb.
Unit cost per pound for SS = 0.363/lb. 0.476/lb.
Weight of one gallon of water = 8.34 lbs. 8.34 lbs.
Septage Charge. A charge of $0.381 per gallon is paid for septic tank waste dumped at the wastewater treatment
plant.
Wastewater Treatment Plant Capital Improvement Plan
The City's approved wastewater facilities plan has identified several priorities to be implemented at the
Wastewater Treatment Plant to comply with new and existing environmental rules and regulations. Compliance is
required to meet the Washington Department of Ecology ( "WDOE ") criteria to provide adequate capacity and
backup operations to major processes of the plant as identified in the City's National Pollutant Discharge
Elimination System ( "NPDES ") Permit and associated rules and regulations.
The following projects are currently in progress. Funding for these projects is expected from sources such as; these
Bond proceeds, Future Parity Bond proceeds, rates, available cash balances and Public Works Trust Fund loans. The
City plans to spend approximately $9.7mil for its sewer system capital improvement projects over the next two or
three years.
(i) One of two centrifuges is currently functional for dewatering bio- solids and requires extensive maintenance to
continue operating. Contracts to purchase a new centrifuge and build a new solids handling building were let
in 2006 for an alternate source of dewatering bio- solids. This is required to maintain compliance when the
20
•
III older centrifuge is out of service. The project is 85 percent completed and will cost approximately $6,000,000 at
completion.
(ii) There is currently one DAFT to thicken secondary sludge. A second thickening unit is needed to meet
Department of Ecology criteria. The existing centrifuge will be used for regulatory redundancy for both
dewatering and thickening. This retrofit is currently contracted and will cost. approximately $120,000 to
complete.
(iii) New Blower Building and Emergency Power - The older 400 horsepower blowers and variable frequency
drives (VFDs) that operate them were worn out and parts to fix the VFDs were not available: A contract was let
in 2006 to replace the blowers and build a new blower building. Additional emergency power was also added
in the blower building to assure minimum wastewater treatment is provided under utility power failures. This
project is 95 percent complete and will have a total cost of approximately $5,000,000.
(iv) Wastewater Disinfection - Construction to replace the existing chlorine gas disinfection process with an
Ultraviolet Disinfection system is just starting and is expected to cost $3,200,000.
The following areas have been identified and prioritized as the Yakima Wastewater Treatment Plant's most
important improvements to be implemented next and will be funded by the Bonds:
(i) Process Communications - Replacing the remaining Supervisory Communication and Data Administration
(SCADA) system with updated hardware and programs will be designed and contracted in 2008 and 2009 and
is estimated to cost $1,500,000.
(ii) Solids thickening - The waste activated sludge (WAS) thickening process reduces the volume of solids sent to
• the dewatering processes. The repair of the DAFT, that thickens the sludge, will include replacing all
mechanical components and resurfacing the concrete launders and tank walls. This will be performed in 2008
and 2009 and is expected to cost $750,000.
(iii) Centrate Storage - Replacement of the last centrate lagoon with two one million gallon centrate tanks will be
designed in 2008 and constructed in 2009. The estimated cost for this is $3,250,000.
Billing and Collection Policy
The City bills on a bi- monthly basis. Bills are due 14 days after they are sent and if the bills are not paid by that
date, a reminder notice is sent requesting payment within 14 days. If the bill is not paid by the end of the 14 day
period, a suspension notice is sent to the customer stating that if the bill is not paid in 7 days, service will be
suspended and the account will be turned over to collection. If the bill is not paid by the suspension date, water
service is suspended. If the bill is not paid 90 days after the original billing date, it is sent to a collection agency.
Endangered Species Act
In planning future projects, the City evaluates the construction and operation of the facilities to determine if there
will be any impact on endangered species through the use of site evaluations, special environmental studies, and
preparation of State Environmental Policy Act ( "SEPA ") checklists or environmental impact statements, as
appropriate. Alternatives are developed to minimize or avoid impacts on endangered species. Where federal
permits or funding are involved, the City also complies with the Endangered Species Act's "consultation"
requirement, which serves to evaluate and address any potential effect on endangered species. Best management
practices are employed during routine operation and maintenance activities to minimize impacts on the
environment.
Financial Results
The following tables provide a comparative combined balance sheet and historical combined statement of revenues
• and expenses for the City's Water and Sewer Enterprise Funds.
21
•
Water and Sewer Enterprise Funds
0
Statement of Net Assets
(Years Ending December 31)
Audited
2006 2005 2004 2003 2002
Assets
Cash and Equity (1) $ 7,731,493 $ 6,609,493 $ 7,285,290 $ 13,709,947 $ 4,515,506
Receivables:
' Accounts 1,615,155 1,295,029 1,617,843 1,281,659 3,105,330
Notes /Contracts 5,374 5,374 5,374 5,374 12,203
Interest/Penalti es 57,681 22,515 44,329 36,902 63,675
Other Receivables 9,750 9,750 15,000 16,950 25,050
Due from other Governments 25,000 0 0 38,852 0
Inventories 250,638 222,287 190,102 2 00,48 2 189,270
Investments, at amortized cost (2) 6,010,914 11,515,784 12,220,975 5,685,846 5,448,735
Restricted Assets:
Cash 2,669,690 965,165 2,665,164 2,609,505 2,085,783
Investments, at amortized cost 0 1,700,000 0 0 0
Land 775,026 775,027 780,211 780,211 780,211
Buildings 59,000,841 58,392,418 58,243,221 56,468,565 56,468,565
Other Improvements 83,182,412 70,471,669 69,027,695 63,874,649 61,708,099
Machinery & Equipment 8,958,012 8,918,893 7,130,213 6,845,676 6,802,453
Accumulated Depreciation (72,502,488) (68,800,295) (65,223,714) (61,609,967) (57,907,135)
Construction in Progress 13,113,027 15,748,025 10,747,175 10,508,526 10,296,049
Completed Construction 0 2,232,245 2,232,245 2232,245 2,232,245
Intangibles 221,830 221,830 221,830 221,830 221,830 O.
Unamortized Debt Issue Costs 102,277 1 11,5 04 120,729 1 29,95 5 3 7,55 3
Total Assets 111,226,632 110,416,713 107,323,682 103,037,207 96,085,422
Liabilities
Warrants /Accounts Payable 929,162 1,311,917 1,140,375 552,489 1,355,300
Wages/Benefits Payable 574,199 545,830 509,504 485,692 448,811
Compensated Absences Payable 711,137 636,225 631,303 5 49,15 6 545,415
Accrued Payables 216,853 236,096 242,245 1 45,90 2 192,438
Deposits Payable 225,404 261,374 224,910 2 23,11 5 200,676
Current Portion - Long -term Debt 748,213 747,854 746,177 • 604,361 690,259
Restricted Payables 1,590,000 1,540,000 1,485,000 1,535,000 1,045,000
Bonds Payable 19,845,000 21,435,000 22,975,001 24,460,000 8,450,000
Unamortized Bond Discount 290,865 303565 316,266 328,966 (61,843)
Deferred Amount on Debt Refunding (150,081) (185,432) (220,784) (256,136) (291,489)
Loans Payable - Long Term 7,787,536 8,306,447 7,781,639 6,506,941 6,892,715
Total Liabilities 32,768,288 35,138,876 35,831,636 35,135,486 19,467,282
Net Assets
Invested Capital Assets 69,081,452 68,430,364 65,774,061 63,671,656 68,389,116
Retained Earnings
Restricted for Debt Service 2,669,690 2,665,165 2,665,164 2,609,505 2,085,358
Unrestricted 6,707,202 4,182,308 3,052,821 1,620,560 6,143,666
Total Net Assets 78,458,344 75,277,837 71,492,046 67,901,721 76,618,140
Total Liabilities and Fund Equity $ 111,226,632 $ 110,416,713 $ 107,323,682 $ 103,037,207 $ 96,085,422
(1) The cash balance in 2003 includes the 2003 bond issue.
0
(2) Reduction of investments in 2005 and 2006 is result of spending remaining bond proceeds on projects.
Source City of Yakima
22
. .
• Water and Sewer Operating Statement
Combining Statement of Revenues and Expenses
Historical Coverage Table
(Years Ending December 31) ,
Audited
2006 2005 2004 2003 2002
Operating Revenues: .
Charges for Services $ 20,756,282 $ 19,501,459 $ 19,881,046 $ 17,072,071 $ 16,108,123
Other Operating Revenues 15,404 4,398 17,970 2,801 1,130
Total Operating Revenues 20,771,686 19,505,857 19,899,016 17,074,872 16,109,253
Operating Expenses:
Operations and Maintenance 11,173,761 10,648;292 10,730,670 9,409,255 8,803,501
Taxes 1,033,203 996,298 • 1,145,372 983,420 922,865 .
In -lieu Taxes 2,738,199 2,601,323 2,432,000 2,273,948 2,017,603
Depreciation Expense 3,702,193 3,576,581 3,677,522 3,702,832 3,425,246
Total Operating Expenses 18,647,356 17,822,494 17,985,564 16,369,455 15,169,215
Net Operating Income 2,124,330 1,683,363 1,913,452 705,417 940,038
Other Income (Expenses):
Interest Income 456,886 368,669 214,029 101,290 302,667
Gain (Loss) on Sale of Assets 86,247 88,566 0 0 0
Other Non - Operating Revenues 827,162 384,931 460,835 279,183 15,625
Interest Expenses (964,545) (888,880) (883,214) (468,684) (541,993)
Amortization of Bond Payment Discount (31,878) (31,878) (31,878) . (46,253) (48,290)
Total Other Income 373,872 (78,592) (240,228) (134,464) (271,991)
• Total Income 2,498,202 1,604,771 1,673,224 • 570,953 668,047
Capital Contributions 1,912,037 2,386,711 2,015,279 4,084,862 1,968,357
Transfers In 32,939 32,939 32,939 32,000 0
Transfers (Out) (1) (199,068) (238,630) (131,117) (8,930,771) (94,928)
Change in Net Assets $ 4,244,110 $ 3,785,791 $ 3,590,325' $ (4,242,956) $ 2,541,476
Total Net Assets Dec 31 (2) $ 78,458,344 $ 75,277,837 $ 71,492,046 $ 67,901,721 $ 76,618,140
Available for Debt Service
on First Lien Bonds (3) $ 9,848,770 $ 8,614,867 $ 8,697,838 $ 7,062,670 $ 6,701,179
First Lien Debt Service $ 0 $ 0 $ 0 $ 276,075 . $ 273,653
Coverage N/A N/A N/A 25.58 24.49
Available for Debt Service
on Second Lien Bonds (4) $ 9,848,770 $ 8,614,867 $ 8,697,838 $ 6,786,595 $ 6,427,526
•
Parity Bond Debt Service .
1992 Loan $ 0 $ 0 $ 0 $ 324,791 $ 324,791 .
1996 Bonds 366,035 365,585 369,360 361,915 363,875
1998 Bonds 797,610 794,380 790,210 795,410 909,210
2003A Bonds 847,806 845,606 918,204 0 0
2003B Bonds • ' 501,950 501,950 440,601 0 0
Second Lien Parity Bonds Debt Service $ 2,513,401 $ 2,507,521 $ 2,518,375 $ 1,482,116 $ 1,597,876
Debt Service - Coverage 3.92 3.44 3.45 4.58 4.02
(1) 2003 Transfers (Out) includes an extrodinary item of $8,332,443 paid toward settlement of litigation and litigation expenses.. The majority of this
item was funded through the 2003 Bonds.
•
(2) The 2005 net assests were restated in the 2006 financial statements, to correct an overstatment of $1,063,603 in the construction in progress
account of the water fund. The 2002 net assets were restated in 2003 financial statements during the implementation of GASB 34.
(3) Net Revenues as defined in the Bond Ordinance which excludes depreciation, municipal taxes and costs of capital additions to or replacements
of the System. The First Lien Bonds are the City's 1968 Water and Sewer Revenue Bonds which matured on March 1, 2003.
(4) Net Revenues.less First Lien debt service. For as long as the First Lien Bonds remained outstanding, the Second Lien Bonds included the City's
1992 State Revolving Fund Loan, 1996 Bonds and 1998 Bonds.
Source: City of Yakima
23
•
The City 0
The City of Yakima was incorporated in 1886. It is the ninth largest city in the State in terms of square miles,
encompassing approximately 23 square miles. The City provides the full range of municipal services including
public safety (police, fire, building), public improvements (streets, traffic signals, storm sewer, irrigation utility),
sanitation (solid waste disposal, wastewater 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 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 Term Expires
David Edler, Mayor December 31, 2011
Micah Cawley, Asst. Mayor December 31, 2009
Kathy Coffey December 31, 2011
Rick Ensey December 31, 2011
Norm Johnson December 31, 2009
Bill Lover December 31, 2009
Neil McClure December 31, 2011
Key Administrative Staff
Richard A. Zais, Jr., City Manager. Mr. Zais joined the City in 1973 as the Administrative Assistant to the City
Manager and was appointed to the position of City Manager in 1979. Mr. Zais is responsible for the supervision
and direction of a full- service city with seven operating departments. Mr. Zais administers the $164 million annual
City budget with a $55 million annual payroll for over 600 full -time employees. Mr. Zais serves as the Council's
chief advisor, appoints all administrative officers and employees and executes Council policy and programs. Mr.
Zais' educational background is in public administration with a B.A. and M.P.A. from the University of
Washington.
Rita M. DeBord, Director of Finance & Budget. Ms. DeBord joined the City in 1999 as the Finance Director, coming
from Puget Sound Energy Corporation. Ms. DeBord is responsible for all financial and treasury services, budgeting
and accounting, utility customer services and information systems for the City. During her 21 years with Puget
Sound Energy, Ms. DeBord served in many capacities including the following key management positions: Manager
of District Operations; Manager of Corporate Budgets; and Manager of Information Systems Project. Ms. DeBord
has a degree in Accounting from Central Washington University, is a Certified Public Accountant ( "CPA ") and is a
member of the American Institute of Certified Public Accountants and the Washington Society of Certified Public
Accountants.
Cindy J. Epperson, Deputy Director, Budget and Accounting. Ms. Epperson joined the City in 1990 as an accountant,
previously working in the agricultural industry as an accounting manager and as a Senior Auditor for an
international accounting firm. Ms. Epperson was promoted to Deputy Director over Budget and Accounting in
2007, where she has the responsibility for the City's accounting systems and processes including financial statement
preparation and annual Budget preparation. Ms. Epperson is a key strategic participator in the deyelopment of the
City's budget, in maintaining the City's fiscal stability, and in generating and /or analyzing complex financial
proposals to further the City's critical goals and objectives. Ms. Epperson obtained a Bachelor of Science degree in
Accounting from the University of Arkansas in Little Rock and passed the CPA exam,
Timothy M. Jensen, Treasury Services Officer. Mr. Jensen joined the City in 1990 as an accountant, coming from a
national public accounting firm where his primary duties were as a senior auditor. Mr. Jensen was appointed the
City's Treasury Services Officer in 2001 where he oversees the security of the City's investments, cash management,
and debt administration and performs high -level financial analysis. Mr. Jensen obtained a Bachelor of Science in
Accounting from Central Washington University in 1986, passed the CPA exam, and practiced as a CPA for six
years. Mr. Jensen also studied Economics at the University of California, Berkeley and the University of Nevada,
24
•
• Re+lo from 1974 through 1977. Mr. Jensen is currently President of the Washington Finance Officers Association
("WFOA"). He has served on the Board of Directors of WFOA since 1998. Mr. Jensen is a past member of the
Washington State Local Government Investment Pool Advisory Committee. He is also currently serving on the
Washington State Auditor's Local Government Advisory Committee and has served two different State Treasurers
on select issue committees. ,
Labor Relations
The City currently employs approximately 675 full -time and 97 part -time and temporary employees - some of
which belong to a union. A majority of the City's employees are represented by bargaining units as follows:
Number
Bargaining Unit of Employees Contract Expiration Date
American Federation of State, County and
Municipal Employees - Municipal 280 December 31, 2009
Yakima Police Patrolman's Association 124 December 31, 2008
Fire Suppression 78 December 31, 2009
AFSCME - Transit 51 December 31, 2009
Fire Communications 16 December 31, 2009
Fire PERS • 19 December 31, 2009
Confidential /Management 145 *
* N/A — no contract
Pension System
Public Employees' Retirement System ( "PERS "). Substantially all of the City's full -time and qualifying part -time
0 employees, other than those covered under union plans, participate in PERS. This is a statewide local government
retirement system administered by the Washington State Department of Retirement Systems, under cost - sharing,
multiple - employer defined benefit public employee retirement plans. The PERS system includes three plans.
Participants who joined the system by September 30, 1977, are PERS Plan I members. Those joining thereafter are
enrolled in PERS Plan II. A third plan, entitled PERS Plan III, provides members with a defined benefit plan similar ,
to PERS Plan II and the opportunity to invest their retirement contributions in a defined contribution plan.
PERS Plan I members are eligible for retirement at any age after 30 years of service, at age 60 with five years of
service, or at age 55 with 25 years of service. The annual pension is two percent of the average final compensation
per year of service, capped at 60 percent. The average final compensation is based on the greatest compensation
earned during any 24 eligible consecutive compensation months.
PERS Plan II members may retire at age 65 with five years of service or at 55 with 20 years of service. The annual
pension is two percent of the average final compensation per year of service. PERS Plan II retirements prior to 65
are actuarially reduced. On July 1 of each year following the first full year of retirement service, the benefit will be
adjusted by the percentage change in the Consumer Price Index ( "CPI ") of Seattle, capped at three percent annually.
PERS Plan III is structured as a dual benefit program that will provide members with the following benefits:
• A defined benefit allowance similar to PERS Plan II calculated as one percent of the average final
compensation per year of service (versus a two percent formula) and funded entirely by employer
contributions.
• A defined contribution account consisting of member contributions plus the full investment return on
those contributions.
Each biennium, the State Pension Funding Council adopts PERS Plan I employer contribution rates and PERS
® Plan II employer and employee contribution rates. Employee contribution rates for PERS Plan I are established by
statute at six percent and do not vary from year to year. The employer and employee contribution rates for PERS
Plan II are set by the director of the Department of Retirement Systems, based on recommendations by the Office of
the State Actuary, to continue to fully fund PERS Plan II. Unlike PERS Plan II, which has a single contribution rate
25
(which is currently 4.15 percent), with PERS Plan III, the employee chooses how much to contribute from one to six 40
contribution rate options. Once an option has been selected, the contribution rate choice is irrevocable unless the
employee changes employers.
All employers are required to contribute at the level established by State law. The methods used to determine the
contribution requirements are established under State statute in accordance with chapters 41.40 and 41.26 RCW.
For the year ending December 31, 2007, the City's total contribution to all systems of $2,228,929, or 8.97 percent of
all covered payrolls, represents its full liability under the system, except that future rates may be adjusted to meet
the system needs.
Law Enforcement Officers' and Fire Fighters' Retirement System ( "LEOFF "). LEOFF is a cost - sharing multiple- employer
defined benefit pension plan. Membership in the plan 'includes all full -time, fully compensated local law
. enforcement officers, and fire fighters. The LEOFF system includes two plans.
Participants who joined the system by September 30, 1977, are LEOFF Plan I members. Those joining thereafter are
enrolled in LEOFF Plan II. Retirement benefits are financed from employee and employer contributions,
investment earnings, and State contributions. Retirement benefits in both LEOFF Plan I and LEOFF Plan II are
vested after completion of five years of eligible service.
LEOFF Plan I members are eligible to retire with five years of service at age 50. The service retirement benefit is
dependent upon the final average salary and service credit years at retirement. On April 1 of each year following
the first full year of retirement service, the benefit will be adjusted by the percentage change in the CPI of Seattle.
Term of Service Percent of Final Average
5 -9 Years 1.0% I
10 -19 Years 1.5
20 or more years 2.0
LEOFF Plan II members are eligible to retire at the age of 50 with 20 years of service or at 53 with five years of
service. Retirement benefits prior to age 53 are actuarially reduced at a rate of three percent per year. The benefit is
two percent of the . final average salary per year of service. The final average salary is determined as the 60 highest
paid consecutive service months. There is no limit on the number of service credit years, which may be included in
the benefit calculation. On July 1 of each year following the first full year of retirement service, the benefit will be
adjusted by the percentage change in the CPI of Seattle, capped at three percent annually.
LEOFF Plan I employer and employee contribution rates are established by statute, and the State is responsible for
the balance of the funding at rates set by the Pension Funding Council to fully amortize the total costs of the plan.
Employer and employee rates for LEOFF Plan II are set by the director of the Department of Retirement Systems,
based on recommendations by the Office of the State Actuary, to continue to fully fund the plan. LEOFF Plan II
employers and employees are required to contribute at the level required by State law. The methods used to
determine the contribution rates are established under State statute in accordance with Chapters 41.26
and 41.45 RCW.
For the year ending December 31, 2007, the City's contribution to LEOFF I (for participants who joined the system
by September 30, 1977) of 0.0005 percent and to LEOFF II (participants who joined after September 30, 1977) of
4.9 percent of covered payroll totaled $783,921, representing its full liability under the system, except that future
rates may be adjusted to meet the system needs.
Pension Contribution Rates - Employers
System: 1/01/07 — 6/30/07 7/01/07 — 6/30/08 7/01/08 — 6/30/09
PERS 1,2, & 3 5.46 % 6.15% 8.33%
PSERS 8.53% 8.57% 9.45%
LEOFF 1 0.18% 0.18% 0.18%
LEOFF 2 4.92% 5.37% 5.48%
Source: Association of Washington Cities.
26
0 Historical trend information regarding all of these plans is presented in Washington State's Department of
Retirement Systems' annual financial report. A copy of this report may be obtained at:
. Department of Retirement Systems
•
Point Plaza West
1025 East Union Street
P.O. Box 48380
Olympia, WA 98504 -8380
Internet Address: www.drs.wa.gov* •
•
* This inactive textual reference to the Department of Retirement System's website is not a hyperlink and does not incorporate
the website by reference.
Unfunded 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 actuarial studies are performed
every five years with the most recent update•completed January 1, 2003. The required contributions identified in
these valuations have been the basis for recording the unfunded pension liability since 1989. The next actuarial
study scheduled is for September 2008.
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. This fund had an
unfunded pension liability of $4,800,754 at December 31, 2007. .
The Firemen's Relief and Pension Fund 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
•
$1,453,254 at December 31, 2007. An actuarial study was completed January 1, 2003.
Other Post Employment Benefits .
The Government Accounting Standards Board ( "GASB ") has issued a new standard concerning Accounting and
Financial Reporting by Employers for Post Employment Benefits Other than Pensions ( "GASB 45 "). In addition to
pensions, many state and local governmental employers provide other post employment benefits ( "OPEB ") as a
part of total compensation to attract and retain the services of qualified employees. OPEB includes post
employment healthcare, as well as other forms of post employment benefits when provided separately from a
pension plan. The new standard provides for the measurement, recognition and display of OPEB
expenses /expenditures, related liabilities (assets), note disclosures, and if applicable, required supplementary
information in the financial reports. This pronouncement is effective for the City for the fiscal year beginning after
December 15, 2007.
To date the City has not had an actuarial study performed to comply with GASB 45. The City plans to have an
actuarial study performed by September 30, 2008 for the fiscal year ending December 31, 2008.
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 coverage.
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
40 awards and determinations made by the State Department of Employment Security.
•
27 •
Self - insured Medical /Dental Program. The City, in 1979, self - insured its medical and dental programs for all eligible
employees (temporary employees and employees hired to work less than half -time are not eligible under the plan).
The City's Human Resources Office administers the self- insured program and claims payment services are
provided by Health Care Management Administrators, Inc.
Each operating fund is charged an amount per covered employee which would otherwise have been paid to an
insurance carrier. Interfund premiums to the Employee Health Benefit Reserve Fund for 2007 were $6,712,843.
Incurred but not reported claims of $1,161,993 were accrued as a liability.
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 Sun Life Insurance Company. Under the individual stop -loss insurance, the City
pays the first $150,000 of claims for an individual employee or dependent. Any charges accrued by an individual in
excess of $150,000 in a calendar year are thereafter reimbursed by Sun Life up to $1 million per person. 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 $150,000. 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 Law Enforcement Officers' and Fire Fighters' ( "LEOFF ") I Retirement System in 1984. This
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 Human Resources Office with claims administration and safety services provided by
NovaPro Risk Solutions (formerly Ward North America).
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 2007 were $982,990.
Based on the claim manager's estimate, the City has accrued incurred but not reported claims of $792,000 at
December 31, 2007.
In order to avoid catastrophic losses, the City "reinsures" the program by purchasing insurance known as "stop -
loss insurance." This insurance is provided through Wells Fargo Insurance Company under a policy purchased
from Employers Reinsurance Corporation. Under the individual stop -loss portion of the insurance, the City pays
the first $500,000 of a claim and the insurance company pays (a) the balance up to $1 million for an individual claim
or (b) the balance up to a maximum of $25 million for multiple claims arising from a single incident.
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 2007 were $1,941,659.
The Fund provides for administration, legal services, claims adjustment, and for the purchase of property, excess
liability and other insurance coverage.
Liabilities of the fund are reported when it is probable that a loss has occurred and the amount of the loss can be
reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. The result
of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as
inflation, changes in legal doctrines and damage awards. Accordingly, claims are reevaluated periodically to
consider recent claim settlement trends, inflation and other economic and social factors. The estimate of the claims
liability also includes amounts for incremental claims adjustment expenses related to specific claims. Based on
these factors, the claims manager's estimate of claims liability was $1,100,000 as of December 31, 2007. In late 2005,
the City joined an insurance pool and now maintains general liability coverage of $15 million, insured by St. Paul
Fire and Marine Insurance Company with a $100,000 deductible. The City also joined the Washington State Transit
28
0 ,
Insurance Pool (WSTIP) in September 2005. The deductible for the Transit Division for this program is $5,000 with
$12 million in general liability coverage.
Accounting Policies
1'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. In accordance with GASB 34,
the City has implemented this accounting standard in its December 31, 2003 financial statement with the exception
of the infrastructure component which will be complete as prescribed by GASB in the 2007 Financial Statements.
Fund Accounting. The accounts of the City are organized on the basis of funds 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
0 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 Council annually approves the City's operating budget. The operating budget is designed to allocate available
resources among the City's services and programs and to provide for associated financing decisions.
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 lines of
debt 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 Council.
el
29
Cash and Investments
Cash and investments are managed under the guidance of the City's Investment Policy adopted by a resolution of
the 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 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 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 39.59 and 35.39
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) Bonds of the State of Washington or any local government within
the State of Washington, which have at the time of investment one of the three highest credit ratings of a nationally
recognized rating agency; (v) General obligation bonds of a state other than the state of Washington and general
obligation bonds of a local government of a state other than the state of Washington which have at the time of
investment one of the three highest credit ratings of a nationally recognized rating agency; (vi) banker's
acceptances sold on the secondary market; (vii) the Local Government Investment Pool ( "LGIP "); and (viii) high
quality commercial paper.
The market value of investments held in the combined portfolios under the control of the Department of Finance
and Budget as of December 31, 2007 was $55,541,472. Of that amount, 52 percent was in agency securities,
45 percent was in the LGIP, and 2 percent was invested in U.S. Treasuries and 2 percent was in high grade taxable
municipal securities.
Auditing of City Finances
Accounting systems and budgetary controls are prescribed by the Office of the State Auditor in accordance with
RCW 43.09.200 and RCW 43.09.230. The City complies with the systems and controls prescribed by the Office of the
State Auditor and establishes procedures and records which reasonably assure safeguarding of assets and the
reliability of financial reporting (see "Authorized Investments" herein).
The State Auditor is required to examine the affairs of cities at least once every two years. The City is audited
annually. The examination must include, among other things, the financial condition and resources of the City,
whether the laws and constitution of the State are being complied with, and the methods and accuracy of the
accounts and reports of the City. Reports of the auditor's examinations are required to be filed in the office of the
State Auditor and in the City Clerk's Office.
The audited financial statements of the City for the year ended December 31, 2006, attached as Appendix D, are
incorporated by reference to this Official Statement and have been filed with the current nationally recognized
municipal securities information repositories ( "NRMSIR ").
40 ,
30
•
• Demographic Information
The City lies in central Washington State in the County approximately 142 miles southeast \
of Seattle and 188 miles northeast of Portland, Oregon. The County ranks second in the
State in terms of square miles and eighth in terms of population. The City is the County [1,-• i
seat and the largest incorporated community in the County encompassing 23 square C':-
miles. Population history for both the City and County in recent years is shown in the 4 .r'
following table:
• Yakima County
Population Washington
• Yakima County and City of Yakima
Yakima City of •
April 1 County Yakima
2007 234,200 82,940
2006 231,800 81,710
2005 229,300 81,470
2004 227,500 79,480
2003 226,000 79,220
Source: Washington State Office of Financial Management, March 2008. .
Economic Indicators
Major Employers. The economy of the City is based on government - related jobs and agriculture that produces and
processes tree fruits, hops, mint, vegetables, livestock, dairy and grapes for wine. The City is the center of the
County's economic activity.
Yakima County
Major Employers
Number of
Employer Type of Business Employees
Yakima Valley Memorial Hospital Healthcare 1,500
•
Washington Dept of Social and Services Social Services 1,034
Yakima School District No. 7 Education 1,001
Yakima County Government 1,000
Yakima Regional Hospital Healthcare 941
Sno -kist Growers • Food Processing 851
Wal -Mart Retail 825
Washington Beef Inc/ AB Foods, Inc, Food Processing 725
City of Yakima Government 623
Yakima Valley Community College Education 590
Yakama Nation Legends Casino Entertainment 573
Shields Bag & Printing Company Printing 525
Tree Top, Inc. Fruit Processing 475
Yakima Training Center Military 415
Quality Transportation Trucking /Shipping 410
West Valley School District • Education 408
Source: Yakima County Development Association, March 2008.
31 •
Income. Historic personal income and per capita income levels for the County and the State are shown below:
Yakima County and State of Washington
Total Personal and Per Capita Income
•
Yakima County State of Washington
Total Personal Per Capita Total Personal Per Capita
Year Income (in millions) Income Income (in millions) Income
2006 N/A N/A $243,471,226 $38,067
2005 $5,850,933 $25,336 224,807,529 35,730
2004 5,647,222 24,637 218,366,056 35,189
2003 5,457,861 24,154 202,942,123 33,105
2002 5,179,243 23,058 197,451,578 32,528
2001 5,151, 726 23,055 193,498,304 32,274
Source: U.S. Department of Commerce, Bureau of Economic Analysis, March 2008.
Taxable Retail Sales. Taxable retail sales reflect only those sales subject to retail sales tax. Historic taxable retail sales
for the City and the County are shown below:
City of Yakima and Yakima County
Taxable Retail Sales
City of Yakima
•
Year Yakima County
2007* $1,114,147,123 $2,073,164,799
2006 1,427,555,564 2,653,521,999
2005 1,350,618,320 2,503,736,875
2004 1,307,845,725 2,411,522,348
4 110
2003 1,246,026,347 2,294,202,221
2002 1,205,189,471 2,178, 920, 758
2001 1,176,022,552 2,122,049,462
*Data through third quarter only.
Source: Washington State Department of Revenue, March 2008. .
Building Permits. Residential building permits are an indicator of growth within a region. The number and
valuation of new single- family and multi - family residential building permits in the County are listed below:
City of Yakima
Residential Building Permits
New Single Family Units New Multi Family Units Total
Year Number Valuation Number Valuation Valuation
2007 199 $40,714,849 67 $20,594,452 $61,309,301
• 2006 128 24,931,847 36 9,494,499 34,426,346
2005 79 13,242,711 27 8,959,367 22,202,078
2004 63 8,617,810 45 6,729,124 15,346,934
2003 71 9,367,964 19 3,992,851 13,360,815
2002 35 3,753,917 12 1,874,833 5,628,750
Source: City of Yakima, April 2008.
'32
• Employment. Employment within the County is described in the following tables. Civilian Labor Force data is
based on household surveys of residents. North American Industry Classification System ( "NAICS ") data are
estimates based on surveys of employers and benchmarked based on covered employment as reported by all
employers.
Yakima MSA
Nonagricultural Wage & Salary Workers.
and Labor Force and Employment Data
Annual Average
2007 2006 2005 2004 2003
Civilian Labor Force 119,670 118,730 117,910 116,470 114,570
Total Employment 112,180 110,500 109,150 106,550 103,580
Total Unemployment 7,490 8,230 8,750 9,910 10,980
Percent of Labor Force 6.3 6.9 7.4 8.5 9.6
NAICS INDUSTRY 2007 2006 2005 2004 2003
TOTAL NONFARM 80,000 78,400 75,900 75,100 74,900
TOTAL PRIVATE 62,400 61,200 59,000 58,400 58,300
GOODS PRODUCING 13,200 13,000 12,700 12,700 12,900
NAT. RESOURCES, MINING, and CONSTR. 4,000 4,100 3,600 3,400 3,200
MANUFACTURING 9,200 8,900 9,100 9,300 9,800
Non- Durable Goods 5,500 5,400 5,000 5,000 5,500
SERVICES PROVIDING 66,800 65,400 63,200 62,300 62,000
• PRIVATE SERVICES PROVIDING 49,200 48,200 46,300 45,600 45,400
TRADE, TRANSPORTATION, & WAREHSG. 17,700 17,200 16,300 16,300 15,700
Wholesale Trade 4,700 4,600 4,200 4,000 3,800
Retail Trade 9,800 9,600 9,500 9,400 9,500
Transportation, Warehousing, and Utilities 3,200 3,000 2,700 2,900 2,400
PROFESSIONAL and BUSINESS SERVICES 4,300 4,500 4,200 4,200 4,500
EDUCATIONAL and HEALTH SERVICES 13,800 13,300 12,600 12,200 11,800
Health Services 12,700 12,200 11,500 11,100 10,800
LEISURE and HOSPITALITY 7,000 6,900 6,700 , 6,400 6,400
Food Services 4,700 4,800 4,800 4,600 4,600
GOVERNMENT 17,600 17,200 17,000 16,700 16,600
Federal Government 1,300 1,300 1,300 1,300 1,400
State Government 3,100. 3,000 3,000 3,000 2,900
Local Government 13,200 12,900 12,700 12,400 12,300
Source: Washington State Employment Security Department, March 2008.
Initiative and Referendum
State Initiatives
Under the State Constitution, the voters of the State have the ability to initiate legislation and require the Legislature to
refer legislation to the voters through the powers of initiative and referendum, respectively. The initiative power in
Washington may not be used to amend the State Constitution. Initiatives and referenda are submitted to the voters
upon receipt of a petition signed . by at least eight percent (initiative) and four percent (referenda) of the number of
• voters registered and voting for the office of Governor at the preceding regular gubernatorial election. Any law
approved in this manner by a majority of the voters may not be amended or repealed by the Legislature within a
period of two years following enactment, except by a vote of two - thirds of all the members elected to each house of
33
the Legislature. After two years, the law is subject to amendment or repeal by the Legislature in the same manner III
as other laws.
Current and Future Initiative Legislation. Tax and fee initiative measures have been and may be filed from time to
time. It cannot be predicted whether any such initiatives might gain sufficient signatures to qualify for submission
to the Legislature and /or the voters or, if submitted, whether they ultimately would be approved.
Tax Matters
In the opinion of Bond Counsel, interest on the Bonds is excludable from gross income for federal income tax
purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on
individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current
earnings for the purpose of computing the alternative minimum tax imposed on certain corporations.
Federal income tax law contains a number of requirements that apply to the Bonds, including investment
restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the use of proceeds
of the Bonds and the facilities financed or refinanced with proceeds of the Bonds and certain other matters. The
City has covenanted to comply with all applicable requirements.
Bond Counsel's opinion is subject to the condition that the City comply with the above - referenced covenants and, in
addition, will rely on representations by the City and its advisors with respect to matters solely within the
knowledge of the City and its advisors, respectively, which Bond Counsel has not independently verified. If the
City fails to comply with such covenants or if the foregoing representations are determined to be inaccurate or
incomplete, interest on the Bonds could be included in gross income for federal income tax purposes retroactively
to the date of issuance of the Bonds, regardless of the date on which the event causing taxability occurs. In
rendering its opinion, Bond Counsel has relied on the report of Grant Thornton LLP with respect to the accuracy of
certain mathematical calculations.
Except as expressly stated above, Bond Counsel expresses no opinion regarding any other federal or state income
tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult
their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may
include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation
upon sale, redemption or other disposition, and various withholding requirements.
Prospective purchasers of the Bonds should be aware that ownership of the Bonds may result in collateral federal
income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and
casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S
corporations with "excess net passive income," foreign corporations subject to the branch profits tax, life insurance
companies and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or
have paid or incurred certain expenses allocable to the Bonds. Bond Counsel expresses no opinion regarding any
collateral tax consequences. Prospective purchasers of the Bonds should consult their tax advisors regarding
collateral federal income tax consequences.
Payments of interest on tax - exempt obligations such as the Bonds, are in many cases required to be reported to the
Internal Revenue Service (the "IRS "). Additionally, backup withholding may apply to any such payments made
after March 31, 2007 to any owner who is not an "exempt recipient" and who fails to provide certain identifying
information. Individuals generally are not exempt recipients, whereas corporations and certain other entities
generally are exempt recipients.
Bond Counsel's opinion is not a guarantee of result and is not binding on the IRS; rather, the opinion represents
Bond Counsel's legal judgment based on its review of existing law and in reliance on the representations made to
Bond Counsel and the City's compliance with its covenants. The IRS has established an ongoing program to audit
tax - exempt obligations to determine whether interest on such obligations is includable in gross income for federal
income tax purposes. Bond Counsel cannot predict whether the IRS will commence an audit of the Bonds. Owners
of the Bonds are advised that, if the IRS does audit the Bonds, under current IRS procedures, at least during the
34
•
• early stages of an audit, the IRS will treat the City as the taxpayer, and the owners of the Bonds may have limited
rights to participate in the audit. The commencement of an audit could adversely affect the market value and
liquidity of the Bonds until the audit is concluded, regardless of the ultimate outcome.
Qualified Tax - Exempt Obligations
The City has designated the Bonds as "qualified tax - exempt obligations" within the meaning of Section 265(b)(3)(B)
of the Code.
Rating
As noted on the cover page of this Official Statement, the City will apply for a rating for the Bonds from Standard &
Poor's Ratings Services. When and if obtained, the rating will reflect only the views 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, once obtained, 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 Bonds. •
Continuing Disclosure
In accordance with Section (b)(5) of Securities and Exchange Commission Rule 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 Bond
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
0 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 2009 for the fiscal year ended December 31, 2008): (i) annual
financial statements showing retained earnings for the System 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 (ii) financial and operating data for the System, generally of the type included herein under the
headings: (a) City Indebtedness of the System; (b) Water and Sewer Operating Statement — Combining Statement of
Revenues and Expenses - Historical Coverage Table; (c) Water Service Charges Within City Limits and Sewer
Services Charges; and (d) Number of Water Customers and Number of Sewer Customers.
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, if any or to the Commission, and, if such document is a final 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 Wash ington State Auditor
pursuant to the statute cited above (or any successor statutes) when and if available to each then existing NRMSIR
and the SID, if any.
The City further agrees to provide or cause to be provided, in a timely manner, to each NRMSIR or to the SID, if
any, 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
40 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.
•
35
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 provision hereof,
will be null and void if the City (i) obtains an opinion of nationally recognized bond 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, if any, 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.
A Bond Owner's or Beneficial Owner's right to enforce the provisions of the City's undertaking described in 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 and is in
compliance with all such undertakings.
Legal and Underwriting
Approval of Counsel
Legal matters incident to the authorization, issuance and sale of the Bonds by the City are subject to the approving
legal opinion of Bond Counsel attached hereto in Appendix B. A specimen of the opinion of Bond Counsel is
attached hereto. Bond Counsel will be compensated only upon the issuance and sale of the Bonds. Bond Counsel
has not been retained to review and has not reviewed this Official Statement for completeness or accuracy and will
not offer an opinion concerning this Official Statement.
Litigation
•
There is no litigation pending or threatened questioning the validity of the Bonds nor the power and authority of
the City to issue the Bonds. There is no litigation pending or threatened which would materially affect the City's
ability to meet debt service requirements on the Bonds.
Because of its activities, the City is subject to certain pending legal actions which arise in the ordinary course of
business. The City believes, based on the information presently known, that the ultimate liability that any such
legal actions will not be material to the financial position of the City.
On February 15th, 2005 Congdon Orchards, Inc. and Congdon Development Company LLC (Congdon) filed a
damage claim with the City alleging Congdon has been wrongfully damaged by Yakima's breaches of contract,
negligence, tortious conduct, breaches of duties, errors and omissions, and other wrongful conduct. Congdon
alleged its damages exceeded $21 million and continue. The City entered into letter agreements extending a 2005
tolling agreement, and the tolling agreement will now expire on October 1, 2009. Congdon has not filed a lawsuit,
and it is not known whether it will do so. The City believes the chances of recovery are low.
36
•
• Official Statement
In the Resolution the City will deem final this Preliminary Official Statement as of its date for the purpose of
Securities and Exchange Commission Rule 15c2 -12.
Underwriting
The Bonds are being purchased by Seattle- Northwest Securities Corporation, the Underwriter. The purchase
contract provides that the Underwriter will purchase all of the Bonds, if any are purchased, at a price of
percent of the par value of the Bonds, plus accrued interest. The Bonds will be reoffered at an average price of
percent of the par value of the Bonds. After the initial public offering, the public offering prices may be
varied from time to time.
Concluding Statement .
All estimates, assumptions, statistical information and other statements contained herein, while taken from sources
considered reliable, are not guaranteed by the Underwriter or the City. So far as any statement herein includes
matters of opinion, or estimates of future expenses and income, whether or not expressly so stated, they are
intended merely as such and not as representations of fact.
The information contained herein should not be construed as representing all conditions affecting the City or the
Bonds. Additional information may be obtained from the City. The statements relating to the Bond Ordinance are
in summarized form, and in all respects are subject to and qualified in their entirety by express reference to the
provisions of such document in its complete form.
The agreements of the City are set forth in such documents, and the information assembled herein is not to be
construed as a contract with the Owners of the Bonds. Information with respect to the City set forth in this Official
Statement has been supplied by the. City, and the Underwriter has relied on the City with respect to the accuracy
III and sufficiency of such information.
•
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•
•
37
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38
•
Appendix A
Bond Ordinance
Passed by Council on March 18, 2008
(Copy available upon request from the City Clerk's office)
S
0
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S
Appendix B
Form of Opinion of Bond Counsel
S
•
•
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•
K& L GAIT ES K &I. Preston Gates Ellis LIP
• 925 Fourth Avenue
Suite 2900
Seattle, WA 98104 -1158
r 206.623,7580 www,klgates,com
June 5, 2008
City of Yakima
Yakima, Washington
Seattle - Northwest Securities Corporation
Seattle, Washington
Re: City of Yakima, Washington
Water and Sewer Revenue and Refunding Bonds, 2008 $
Ladies and Gentlemen:
We have acted as bond counsel to the City of Yakima, Washington (the "City ") and
have examined a certified transcript of the proceedings taken in the matter of the issuance by
the City of its Water and Sewer Revenue and Refunding Bonds, 2008, dated as of the date of
their delivery, in the aggregate principal amount of $ (the "Bonds "), issued pursuant
to Ordinance No. 2008-19 of the City passed on March 18, 2008 and Resolution
No. R -2008- adopted on , 2008 (together, the "Bond Ordinance "), for the
purpose of financing capital improvements to the City's water and sewer system and to
refund certain outstanding water and sewer revenue bonds of the City. Capitalized terms not
otherwise defined herein shall have the meanings given such terms in the Bond Ordinance.
The Bonds are subject to redemption prior to their stated maturities as provided in the
Bond Ordinance.
We have not been engaged nor have we undertaken to review the accuracy,
completeness or sufficiency of the official statement or other offering material related to the
Bonds (except to the extent, if any, stated in the official statement), and we express no
opinion relating thereto, or relating to the undertaking by the City to provide ongoing
disclosure pursuant to Securities and Exchange Commission Rule 15c2 -12.
Regarding questions of fact material to our opinion, we have relied on representations
of the City in the Bond Ordinance and in the certified proceedings and on other certifications
of public officials and others furnished to us without undertaking to verify the same by
independent investigation.
Based on the foregoing, we are of the opinion that, under existing law:
1. The Bonds have been legally issued and constitute valid and binding special
obligations of the City, both principal thereof and interest thereon being payable solely out of
City of Yakima
Seattle - Northwest Securities Corporation
June 5, 2008
Page 2
a special fund of the City known as the "Water and Sewer Revenue Bond Fund" (the "Bond
Fund "), except to the extent that the enforcement of the rights and remedies of owners of the
Bonds may be limited by laws relating to bankruptcy, reorganization, insolvency,
moratorium or other similar laws of general application affecting the rights of creditors, by
the application of equitable principles and the exercise of judicial discretion.
2. The Bond Ordinance is a legal, valid and binding obligation of the City, has
been duly authorized, executed and delivered and is enforceable in accordance with its terms,
except to the extent that enforcement may be limited by laws relating to bankruptcy,
insolvency, moratorium, reorganization or other similar laws of general application affecting
the rights of creditors, by the application of equitable principles and the exercise of judicial
discretion.
3. The City has irrevocably bound itself to set aside from the Revenue Fund and
pay into the Bond Fund out of the earnings and Gross Revenues of the System (as such terms
are defined in the Bond Ordinance) and out of all utility local improvement district
assessments required by law and ordinances of the City to be paid into the Bond Fund,
certain fixed amounts necessary to pay and secure the payment of the principal of and
interest on the Bonds as the same become due.
4. The City has pledged that the payments to be made into the Bond Fund and
the Reserve Fund out of the Gross Revenues of the System shall be a lien and charge thereon
equal in rank_ to the lien and charge upon the revenue of the amounts required to pay and
secure the payment of any water and sewer revenue bonds of the City heretofore or hereafter
issued on a parity with the Bond and superior to all other liens and charges, except the Costs
of Maintenance and Operation of the System. The City has reserved the right to issue future
parity bonds on the terms set forth in the Bond Ordinance.
5. Interest on the Bonds is excludable from gross income for federal income tax
purposes and is not an item of tax preference for purposes of the federal alternative minimum
tax imposed on individuals and corporations; however, interest on the Bonds is taken into
account in determining adjusted current earnings for the purpose of computing the alternative
minimum tax imposed on certain corporations. The opinion set forth in the preceding
sentence is subject to the condition that the City comply with all requirements of the Internal
Revenue Code of 1986, as amended (the "Code "), that must be satisfied subsequent to the
issuance of the Bonds in order that the interest thereon be, and continue to be, excludable
from gross income for federal income tax purposes. The City has covenanted to comply with
all applicable requirements. Failure to comply with certain of such covenants may cause
interest on the Bonds to be included in gross income for federal income tax purposes
retroactively to the date of issuance of the Bonds.
The City has designated the Bonds as "qualified tax - exempt obligations within the
meaning of Section 265(b)(3) of the Code. 0
City of Yakima
Seattle- Northwest Securities Corporation
• June 5, 2008
Page 3
Except as expressly stated above, we express no opinion regarding any other federal
or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds.
Owners of the Bonds should consult their tax advisors regarding the applicability of any
collateral tax consequences of owning the Bonds, which may include original issue discount,
original issue premium, purchase at a market discount or at a premium, taxation upon sale,
redemption or other disposition, and various withholding requirements.
This opinion is given as of the date hereof, and we assume no obligation to update,
revise or supplement this opinion to reflect any facts or circumstances that may hereafter
come to our attention or any changes in law that may hereafter occur.
Very truly yours,
K &L PRESTON GATES & ELLIS LLP
•
K: 1 2025739 0008112 09 7 8 NMM20978L21 YJ
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0
Appendix C
Book -Entry Transfer System
•
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•
T.H E D E P O S,I .T..O R Y ? RIX TRUST C O M P A N,Y
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK - ENTRY -ONLY ISSUANCE
(Prepared by DTC -- bracketed material may apply only to certain issues)
• 1. The Depository Trust Company ( "DTC "), New York, NY, will act as securities depository
for the securities (the "Securities "). The Securities will be issued as fully- registered securities registered in
the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an
• authorized representative of DTC. One fully- registered Security certificate will be issued for [each issue
of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC.
[If, however, the aggregate principal amount of [any] issue exceeds $500 million, one certificate will be
issued with respect to each $500 million of principal amount, and an additional certificate will be issued
with respect to any remaining principal amount of such issue.]
2. DTC, the world's largest securities depository, is a lirnited- purpose trust company
organized under the New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing
for over 3.5 million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and
money market instruments (from over 100 countries) that DTC's participants ( "Direct Participants ")
deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and
other securities transactions in deposited securities, through electronic computerized book -entry transfers
and pledges between Direct Participants' accounts. This eliminates the need for physical movement of
securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned
subsidiary of The Depository Trust & Clearing Corporation ( "DTCC "). DTCC is the holding company for
DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are
registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC
system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks,
trust companies, and clearing corporations that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ( "Indirect Participants "): DTC has Standard & Poor's
highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and
Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
3. Purchases of Securities under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of
each actual purchaser of each Security ( "Beneficial Owner ") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their
purchase. Beneficial Owners are, however, 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
Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting
on behalf of Beneficial Owners: Beneficial Owners will not receive certificates representing their
ownership interests in Securities, except in the event that use of the book -entry system for the Securities is
discontinued,
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC
are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be
requested by an authorized representative of DTC. The deposit of Securities with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect
only the identity of the Direct Participants to whose accounts such Securities are credited, which may or
may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
5. 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. [Beneficial Owners of Securities may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the
Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents.
For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the
Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the
alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and
request that copies of notices be provided directly to them.]
[6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are
being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.]
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
•
respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures.
Under its usual procedures, DTC mails an Omnibus Proxy to Issuer 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 Securities are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities will be made
to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC.
DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding
detail information from Issuer or Agent, on payable date in accordance with their respective holdings
shown on DTC's records. Payments by Participants to Beneficial Owners will be govemed 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, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time
to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such
other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer
or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect
Participants.
[9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered,
through its Participant, to [Tender /Remarketing] Agent, and shall effect delivery of such Securities by
causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to
[Tender /Remarketing] Agent. The requirement for physical delivery of Securities in connection with an
optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the
Securities are transferred by Direct Participants on DTC's records and followed by a book -entry credit of
tendered Securities to [Tender /Remarketing] Agent's DTC account.]
10. DTC may discontinue providing its services as depository with respect to the Securities at
any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a
successor depository is not obtained, Security certificates are required to be printed and delivered.
11. Issuer may decide to discontinue use of the system of book - entry -only transfers through
DTC (or a successor securities depository). In that event, Security certificates will be printed and
delivered to DTC
12. The information in this section concerning DTC and DTC's book -entry system has been
obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the
accuracy thereof.
[03/08]
•
Appendix D
2006 Annual Financial Statements
(Copy available from the Finance Department, upon request)
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7))0a6e
• CITY OF YAKIMA, WASHINGTON
RESOLUTION NO.,
A RESOLUTION authorizing the execution and delivery of a contract
for purchase of the City's Water and Sewer Revenue and
Refunding Bonds, 2008, in the amount of $ , fixing
certain terms of the bonds, approving the form of the official
statement [and insurance], and ratifying certain acts and
proceedings.
WHEREAS, the City of Yakima, Washington (the "City "), by Ordinance No. 2008 -19
passed on March 18, 2008 (the "Bond Ordinance "), authorized the issuance of the City's Water
and Sewer Revenue and Refunding Bonds, 2008, in one or more series in an amount not to
exceed $9,750,000; and
WHEREAS, certain terms of the Bonds were to be determined by subsequent resolution
of the Council; and
WHEREAS, the City finds that it is in the best interest of the City to issue the Bonds in
the amount of $ ; and
WHEREAS, the Director of Finance and Budget of the City, as authorized by the Bond
Ordinance, has negotiated the sale of the City's Water and Sewer Revenue and Refunding
Bonds, 2008 in the amount of $ (the "Bonds "); and
WHEREAS, 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 May 6, 2008 (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:
P:\20978 NMN120978 33J 5/1/2008
"Doerae
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
the Bond Ordinance.
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 to the Purchaser 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 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.
Section 3. Terms, Schedule of Maturities and Interest Rates. The Bonds shall be
designated the "City of Yakima Water and Sewer Revenue and Refunding Bonds, 2008 ".
The Bonds shall be dated as of the date of their initial delivery, currently scheduled for
June 5, 2008, shall be fully registered as to both principal and interest, shall be in the
denomination of $5,000 each or any integral multiple thereof, provided that no Bond shall
represent more than one maturity, shall be numbered separately in such manner and with any
additional designation as the Bond Registrar deems necessary for purposes of identification and
control, and shall bear interest payable on November 1, 2008, and semiannually thereafter on the
first days of May and November.
Ata
• The Bonds shall mature on November 1 of the following years in the following amounts
and shall bear interest as follows:
Maturity Date Amount Rate
2008 $
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Section 4. Redemption.
(a) Optional Redemption. The Bonds maturing on or prior to November 1, 2017 are
not subject to redemption prior to their stated maturity dates. The Bonds maturing on or after
November 1, 2018 are subject to redemption at the option of the City on and after May 1, 2018,
in whole or in part (within one or more maturities to be selected by the City) on any date, at a
price of par plus accrued interest, if any, to the date of redemption.
(b) Mandatory Redemption. The Bonds maturing on November 1, 20 (which
shall be deemed to be Term Bonds), shall be redeemed prior to maturity randomly (or paid at
maturity), not later than November 1 in the years set forth below (to the extent such Bonds have
Ki _
4`;,IW V e
0 not been previously redeemed or purchased) and in the principal amounts set forth below,
without premium, together with the interest accrued to the date fixed for redemption.
Year Amount
$
*
* Final Maturity.]
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 the Bond Ordinance, 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
410 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 April 30, 2008;
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 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.
ID
e: '3,6,a e
® Section 7. Disposition of Bond Proceeds; Refunding Plan.
(a) Refunding Plan. For the purpose of realizing a debt service savings, the City
Council proposes to apply the proceeds of the Bonds for the purpose of providing for the
payment of the principal of and interest on all of the outstanding $[ ] of the 1998
Bonds maturing in the years 2009 through 2018 (the "Refunded Bonds "). The Refunded Bonds
shall be called for redemption at a price of 100% on September 1, 2008.
(b) Refunding Account. There is hereby authorized to be created in the Debt Service
Fund an account known as the "Refunding Account," which account is to be drawn upon for the
sole purpose of paying the principal of and interest on the Refunded Bonds until their respective
dates of redemption and of paying costs related to the refunding of the Refunded Bonds.
The proceeds of sale of the Bonds shall be credited to the Refunding Account. Money in
0 the Refunding Account shall be used immediately upon receipt to defease the Refunded Bonds as
authorized by the Ordinance and to pay costs of issuance. The City shall defease the Refunded
Bonds and discharge such obligations by the use of money in the Refunding Account to purchase
certain Government Obligations (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:
(1) interest on the Refunded Bonds due and payable through and including
September 1, 2008; and
(2) the redemption price of the Refunded Bonds (100% of the principal
amount thereof) on September 1, 2008.
III
roAa. e
r.,..,
Such Acquired Obligations shall be purchased for the Refunded Bonds at a yield not 0
greater than the yield permitted by the Code and regulations relating to acquired obligations in
connection with refunding bond issues.
(c) Escrow Agent /Escrow Agreements. 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 "Escrow Agent "). A beginning cash balance, if any, and Acquired Obligations shall be
deposited irrevocably with the Escrow Agent on the date of issuance of the Bonds in an amount
sufficient to defease the Refunded Bonds. 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 expenses of the issuance of the Bonds. Aik
IP
In order to carry out the purposes of this section, the Director of Finance and Budget is
authorized and directed to execute and deliver to the Escrow Agent, an Escrow Deposit
Agreement for the Bonds.
(d) Implementation of Refunding Plan. The City will irrevocably set aside sufficient
funds out of the purchase of Acquired Obligations from proceeds of the Bonds to make the
payments described in subsections (a) and (b) of this section.
The City hereby irrevocably calls the Refunded Bonds for redemption on September 1,
2008 in accordance with the provisions of Ordinance No. 98 -31, authorizing the redemption and
retirement of the Refunded Bonds prior to their fixed maturities. Said defeasance and call for
redemption of the Refunded Bonds shall be irrevocable after the final establishment of the
applicable escrow account and delivery of the applicable Acquired Obligations to the Escrow 0
"Dveate
0 Agent. The Escrow Agent is hereby authorized and directed to provide for the giving of notice
of the redemption of the Refunded Bonds in accordance with the applicable provisions of
Ordinance No. 98 -31.
[Section 8. Insurance.
(a) Acceptance of Insurance. In accordance with the offer of the Purchaser to
purchase the Bonds, the Council hereby approves the commitment of
(the "Insurer ") to provide a bond insurance policy guaranteeing
the payment when due of principal of and interest on the Bonds (the "Bond Insurance Policy ").
The Council further authorizes and directs all proper officers, agents, attorneys and employees of
the City to cooperate with the Insurer in preparing such additional agreements, certificates, and
other documentation on behalf of the City as shall be necessary or advisable in providing for the
0 Bond Insurance Policy.
(b) Payments Under the Bond Insurance Policy and Rights of the Insurer. To come
upon acceptance of insurance.
Section 9. 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.
III
"7)0,a6e
Section 10. Effective Date. This resolution shall be in effect from and after its
adoption in accordance with law.
ADOPTED at a regular meeting of the City Council of the City of Yakima, Washington,
this 6th day of May, 2008.
CITY OF YAKIMA, WASHINGTON
David Edler, Mayor
ATTEST
Deborah J. Moore, City Clerk
APPROVED AS TO FORM:
City Attorney
ib ode? e
CERTIFICATE
I, the undersigned, Clerk of the City of Yakima, Washington (the "City "), and keeper of
the records of the City Council (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 6 day of
May, 2008, 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
ill 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 6 day of May, 2008.
City Clerk
(SEAL)
110
P :\20978 NMN120978 33J 5/1/2008
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