HomeMy WebLinkAboutITEM IV-AcIT~ of Finance De artment p
~nteraffce ~iemarandum
WASHfNGTGN
To: Finance Committee
From: Shelley Coleman, Finance Director
CG: Pete Lewis, Mayor
Date: April 19, 2010
Re: May Band Issue
Attachment 1 is an SUE Schedule of Events} update for the upcoming bond
issuance. Finance has completed and finalized the official statement and bond
ordinances and contemplate per the SUE to price sell} bonds on the 3`d of May and close on the 13~~ of May, at which time the proceeds will be made available for certain
uses and projects.
To recap the issues, there are 5 issues attachment 2} to provide funding for:
1}Provide funding to purchase the annex space current) bein
y g leased by the City in the amount of $22,500,000;
2} Provide funding the Local Revitalization Funding component of
the Promenade and open plaza'slspaces in the amount of
$7,200,000; and
3} Refund the 1998 GU bonds issued for the library in the amount
of $2,285,000.
The refunding issue, under current market conditions, will save the city approximately
$120,000 NPV, the cash flow savings over the remaining 9 payments is $131,350.
The annual average debt payment will be reduced from an average of $3x4,115 to
$258,900. This is an annual savings of approximately $15,215 to the General Fund.
Page ~ of 2
AUBURN MC~R~ THAN YQU II~AGIN~D
The five bonds issues consist of LTGG's Limited General Gbligation} and BAB's
Build America Bands}. The refunding is straight LTGG financing and the Annex and
the Promenade project are a mixture of LTG4's and BAB's.
As of April 15, the blended all inclusive interest cost for these issues is 4.015509°/0.
This is assuming an AA rating from Standard and Poor and no bond insurance.
Attached are the net debt schedules attachment 3}. The annual net debt payment
for the Annex and the Promenade is approximately $1.323 million and $465,400
respectively. These are preliminary numbers and are subject to change with market
conditions until bonds are priced May 3}and settled May 13}.
Page 2 of 2
AUBURN ~ MORE THAN YOU IMAGINED
9
® ® 1420 FifthAvenue
Suite 4300
Sei~ttle, V~'ashi~~gtozl 9$101
fit f A rn ~ hin n , . o u u as to r
Limited Tax General Gbligativn & Refunding Bonds, 2010A
Limited Tax General Gbligativn Bonds, 241oB Taxable Build America Bonds
Limited Tax General Gbligativn Bonds, Z01oC
Limited Tax General Gbligativn Bonds, 201oD Taxable Build America Bonds
Schedule of Evens
BAs of April 13, ~U1o}
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Staff: City Staff
Council; City Council ~Me~~s Z~r ar~d 3rd IVfonda~ at 7:3n PMT
SNW: Seattle-Northwest Securities Corporation Underwriter}
BC: Foster Pepper PLLC Bond Counsel}
Date Event Partici ants
Completed Furst review of rating presentation Staff, SNW
Completed Distribute second draft PGS SNW
Completed Comments due on second draf t PQS Staff, SNW, BC
Completed Second review of rating presentation Staff, SNW
Completed Mail information to S&P and AGCIFSA SNW
Completed Distribute third draft PQS SNW
Completed Comments due on third draft PAS Staff, SNW, BC
Completed Distribute final draft PAS SNW
April ~5 Comments due on final draft POS Staff, SNW, BC
April 1b Rating presentation in SF Staff, SNW
April 19 Signed "deemed final letter" due Staff
April 19 Mail PQS to potential investors SNW
April 27 Rating and insurance bid due
April 30 Review market conditions Staff, SNW
May 3 Bond Pricing Staff, SNW
May 3 Pass Bond Ordinance regular meeting} Council, Staff,
SNW, BC
May 13 Bond Closing and delivery of bond proceeds Staff, SNW, BC
SOURCES AND USES OF FUNDS
City of Auburn
LTGO & Ref. Bands, ZOI OAILTGO Bonds, 20I OB ~BABs)ILTGO Bonds, 20I OCILTGO Bands, 20IOD ~BABs)
PRELIMINARY NUMBERS
Dated Date 0511 3120 1 0
Delivery Date 05/13/2010
LTGO Bands, LTGO Bonds, 20I OA LTGO Bonds, 20100 LTGO Bonds, LTGO Refunding
(Tax-Exemptl 20I OB (Tax-Exemptl 2010D Bonds, 2010A
Sources: Annex} (BABslAnnex} LRF} (BABsILRF} (Ref. 98} Total
Band Proceeds: Par Amaunt 2,660,000.00 19,945,000.00 1, 145,000.00 6,080,000.00 2,215,000.00 32,045,000.00
Preiuium I06,394.70 - 45,829.45 - 92,252.55 244,475.70
2,766,394.70 19,945,000.00 1,190,829.45 6,080,000.00 2,307,252.55 32,289,476.70
. LTGO Bonds, LTGO Bonds,
2010A LTGO Bonds, 20100 LTGO Bonds, LTGO Refunding
x (Tax-Exemptl 2010B (Tax-Exemptl 2010D Bonds, 2010A Uses: Annex) (BABsIAnnex) LRF} (BABsILRF) (Ref 9$} Total
Project Fund Deposits:
Project Fund - (Annex} 2,744,879.38 19,755,120.62 - - - 22,500,000.00
Project Fund - (LRF) - - I, 181,568.16 6,018,431.84 - 7,200,000.00 2,744,879.38 19,755,120.62 1,181,56$.16 6,018,431.84 - 29,700,000.00
Refunding Escrow Deposits: Cash Deposit _ _ - 1.7$ 1.78
SLGS Purchases - - _ - 2,285,228.00 2,285,228.00
- - - - 2,285,229.78 2,285,229.78
Delivery Date Expenses: Cost of Issuance 4,677.52 35,072.57 2,013.44 10,691.47 4,245.00 56,700.00
Underwriter's Discount 16,837.80 151,1$3.10 7,247.85 46,086.40 14,020.95 235,375.10
21,515.32 186,255.67 9,261.29 56,777.87 18,265.95 292,076.10
Other Uses of Funds:
Additional Proceeds - 3,623.71 - 4,790.29 3,75b.82 12,170.82
2,766,394.70 19,945,000.00 1,190,829.45 6,080,000.00 2,307,252,55 32,289,475.70
r
Apr I3, 2010 I I:SI am Prepared by Seattle-Northwest Securities Corp. ~k:IanalysisldbclcitylAuburn:2010LTG0) Page I
M /
NET DEBT SERVICE
City of Auburn
LTGO & Ref. Bonds, 2010AILTGO Bonds, 2010B ~BABs}1LTG0 Bonds, 201 oC1LTG0 Bonds, 2010D ~BABs}
PRELIMINARY NUMBERS
Period Total Net Ending Debt Service 35% Subsidy Debt Service Annex LRF Refunding
12/112010 1,582,109.10 X303,805.81} 1,278,303.29 726,778.22 254,230.07 297,295.00
12/1/2011 2, 628,412.00 X552, 374.20} 2, 075, 037.80 1, 323, 610.40 463,177.40 289, 250.00
12/1/2012 2,632, 312.00 X552, 374.20} 2, 079, 937.80 1, 324, 960.40 462, 327.40 292, 650.00
12/112013 Z, 630, 312, 00 ~ 552, 374.20} 2, 077, 937.80 1, 325, 860.40 466, 327.40 285, 750.00
121112014 2, 622, 562.00 X552, 374.20} 2, 070,187.80 1, 321, 310.40 465, 027.40 283, $50.00 12/112015 2,624,212.00 ~552,374.2D} 2,071,837.80 1,321,460.40 463,577.40 286,$00.00
12/1/2016 2, 635, 212. DD X552, 374.20} 2, 082, 837.80 1, 326, 060.40 454,777.40 292, aoo. Do
12/112017 2,611, 840.50 X540, 834.18} 2, 071, 006.32 1, 321, 072.38 463, 333.94 286,600.00
12/112418 2,606,920.50 X528,822.18} 2,078,098.32 1,325,485.38 466,612.94 286,D00.00
121112019 2,302,688.50 X515,440.98} 1,7$7,247.52 1,323,151.18 464,096.34
12/112020 2, 292, 267.50 X501,293.62} 1, 790, 973.88 1, 324, 791.28 466,182.60
12/112021 2,273,235.50 X485,882.42} 1,787,353.08 1,324,823.28 462,529.80
121112022 2, 251, 286. DD X467, 700.10} 1, 783, 585.90 1, 321,167.18 462,418.72
1211/2023 2, 232, 575.50 X448, 901.42} 1, 783, 674.08 1, 321, 747.98 461, 926.10 1211/2024 2,216, 810.50 X429, 383.68} 1, 787,426.82 1, 321, 374.90 466, 051.92
121112025 2,198,697.50 X409, 044.14} 1, 789, 653.36 1, 325, 047.94 464, 605.42
121112026 2,173, 236.50 X387, 882.78} 1, 785, 353.72 1, 322, 576.34 462, 777.38
12/1/2027 2,150, 715.50 X364, 250.42 } 1, 786, 465.08 1, 321, 874, 90 464, 590.18
12/112028 2,13D, 341.50 X339, 619.54 } 1, 790, 721.96 1, 324, 937.14 465, 784.82
12/1/2029 2,101, 797.50 X313, 579.14} 1, 787, 918.36 1, 321, 557.04 466, 361.32
121112030 2, 075,400.50 X287,140.18} 1, 788, 260.32 1, 321, 940.64 466, 319.68
121112031 2,045,833.50 X259,291.72} 1,786,541.78 1,320,881.9D 465,659.88 121112032 2,016,139.00 X229,548.66} 1,786,490.34 1,322,493.54 463,996.80
12/112033 1, 982, 875.00 ~ 198, 756.26} 1, 784,118.74 1, 322,417. SD 461, 700.94
121112034 1, 956, 041.50 ~ 166, 614.54 } ~ 1, 789, 426.96 1, 325,654.64 463, 772.32
1211/2035 1,454, 988.50 ~ 132, 996.32 } 1, 321, 993.18 1, 321, 993.18
1211/2036 1,430,222,00 X108,577.70} 1,321,644.30 1,321,644.30
12/1/2037 1,407, 534.00 X83,136.90} 1, 324, 397.10 1, 324, 397.10
121112038 1,381,601.00 X56,560.35} 1,325,040.64 1,325,040.64
12/112039 1, 352,423.00 X28, 848.06} 1, 323, 574.94 1, 323, 574.94
64, 000, 603.10 ~ 10, 902, 556.31 } 53, 098, 046.79 39, 099, 686.22 11, 398,165.57 2, 600,195.00
Cit of Auburn, Washin ton Y g
$4,380,000' $20,440,000'
Limited Tax General Obligation and Limited Tax General Obligation Bonds, 2010B
Refunding Bonds, 2010A (Taxable Build America Bonds -Direct Payment)
$945,000 $6,285,000'
Limited Tax General Obligation Bonds, 2010C Limited Tax General Obligation Bonds, 2010D
(Taxable Build America Bonds -Direct Payment)
DATED: Date of Delivery (estimated to be May 13, 2010) DUE: December 1, as shown on inside cover
w RATING-Applied for (see "Rating" herein).
BOOK-ENTRY ONLY-The above-referenced bonds (collectively, the "Bonds") will be issued as fully registered bonds in
denominations of $5,000, or integral multiples thereof within a single series and maturity, and will be registered in the
name of Cede ~ Co., as bond owner and nominee for The Depository Trust Company ("DTC"). DTC will act as securities depository for the Bonds. Purchasers will not receive certificates
representing their interest in the Bonds
purchased.
2010A AND 2010C BONDS BANK QUALIFIED-The City of Auburn, Washington (the "City") has designated the Limited
Tax General Obligation and Refunding Bonds, 2010A (the " 2010A Bonds") and the Limited Tax General Obligation Bonds, 2010C (the " 2010C Bonds" and together with the 2010A Bonds, the
"Tax-Exempt Bonds") as "qualified tax-
exempt obligations" under Section 265(b)(3)(B) of the Internal Revenue Code of 1986 (the "Code") for banks, thrift
institutions and other financial institutions.
PRINCIPAL AND INTEREST PAYMENTS-Interest on the Bonds will be payable semiannually on each June 1 and
December 1, commencing on December 1, 2010, to maturity or earlier redemption. Principal of and interest on the Bonds will be payable by the fiscal agency of the State of Washington
in New York, New York, currently The Bank of
New York Mellon (the "Bond Registrar"), as further described herein. For so long as the Bonds remain in a "book-entry
only" transfer system, the fiscal agent will make such payments only to DTC, which in turn is obligated to remit such principal and interest to its Participants for subsequent disbursement
to Beneficial Owners of the Bonds as further
described herein in Appendix C-Book-Entry Transfer System.
MATURITY SCHEDULE LOCATED ON INSIDE COVER
OPTIONAL REDEMPTION-The Limited Tax General Obligation Bonds, 2010B (Taxable Build America Bonds -Direct Payment) (the " 2010B Bonds") and the Limited Tax General Obligation Bonds, 2010D
(Taxable Build America Bonds -
Direct Payment) (the " 2010D Bonds" and together with the 2010B Bonds, the "Build America Bonds") are subject to
redemption prior to their stated maturities as further described herein. See "Description of the Bonds -Redemption Provisions." The Tax-Exempt Bonds are not subject to redemption prior
to their stated maturities.
SECURITY-The Bonds are limited tax general obligations of the City. The City has irrevocably covenanted and agreed that
it will include in its annual budget and levy ad valorem taxes annually, within the constitutional and statutory tax
limitations provided by law without a vote of the electors of the City, upon all the taxable property within the City in amounts sufficient, together with all other money of the City
legally available for such purposes, to pay the principal of
and interest on the Bonds as the same shall become due. The full faith, credit and resources of the City have been
pledged irrevocably for the annual levy and collection of such taxes and the prompt payment of such principal and
interest. Certain limitations are applicable to property tax levies by cities in Washington. See "Taxing Authority" herein. The City has additionally pledged certain sales and use tax
revenues toward the payment of principal of and
interest on the 2010C Bonds and the 2010D Bonds, and has additionally pledged certain real estate excise tax revenues
toward the payment of principal of and interest on the ~ Bonds. The Bonds do not constitute a debtor indebtedness of the State of Washington or any political subdivision thereof other
than the City. See "Security
I for the Bonds" and "Taxing Authority" herein. e
TAX MATTERS-In the opinion of Foster Pepper PLLC, Seattle, Washington ("Bond Counsel"), under existing federal law and
assuming compliance by the City with applicable requirements of the Code, that must be satisfied subsequent to the issue date of the
Bonds, interest on the Tax-Exempt Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax
applicable to individuals. However, while interest on the 2010A Bonds also
is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, interest on the 2010A Bonds
received by corporations is taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations. Moreover, interest
on the Tax-Exempt Bonds received by certain S corporations may be
subject to tax, and interest on the Tax-Exempt Bonds received by foreign corporations with United States branches may be subject to
a foreign branch profits tax. Receipt of interest on the Tax-Exempt Bonds may have other federal tax consequences for certain
taxpayers. In the opinion of Bond Counsel, interest on the Build America Bonds is not excludable from gross income under section 103 o f the Code. See "Tax Matters" herein.
DELIVERY-The Bonds are offered for sale when, as and if issued, subject to the final approving legal opinions of Bond
Counsel. It is expected that the Bonds will be available for delivery to the Bond Registrar on behalf of DTC by Fast
Automated Securities Transfer, on or about
Preliminary, subject to change.
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.
Cit of Auburn, Washin ton Y g
$4,380,000 $20,440,000
Limited Tax General Obligation and Limited Tax General Obligation Bonds, 2010B
Refunding Bonds, 2010A (Taxable Build America Bonds -Direct Payment)
$945,000 $6,285,000'
Limited Tax General Obligation Bonds, 2010C Limited Tax General Obligation Bonds, 2010D
(Taxable Build America Bonds -Direct Payment)
MATURITY SCHEDULE
$4,380,000'
Limited Tax General Obligation and Refunding Bonds, 2010A
Due Interest Prices or Due Interest Prices or
Dec.1 Amounts Rates Yields CUSIP Dec.1 Amounts Rates Yields CUSIP
2010 $ 500,000 % % 2015 $ 240,000
2011 685,000 201b 255,000 2012 700,000 2017 265,000
2013 720,000 2018 275,000
2014 740,000
$20,440,000
Limited Tax General Obligation Bonds, 2010B
(Taxable Build America Bonds -Direct Payment)
Due Interest Prices or Due Interest Prices or
Dec.1 Amounts Rates Yields CUSIP Dec.1 Amounts Rates Yields CUSIP
2015 $ 520,000 % % 2028 $ 810,000
2016 535,000 2029 845,000
2017 545,000 2030 880,000
2018 560,000 2031 915,000 2019 580,000 2032 950,000
2020 595,000 2033 990,000
2021 615,000 2034 1,030,000
2022 640,000 2035 1,075,000
2023 665,000 203b 1,115,000
2024 690,000 2037 1,165,000
2025 720,000 2038 1,210,000 2026 750,000 2039 1,260,000
2027 780,000
Preliminary, subject to change.
11
MATURITY SCHEDULE
$945,000
Limited Tax General Obligation Bonds, 2010C
Due Interest Prices or Due Interest Prices or
Dec.1 Amounts Rates Yields CUSIP Dec.1 Amounts Rates Yields CUSIP
2010 $110,000 % % 2015 $ 210,000
2011 200,000 201b 220,000
2012 205,000
$6,285,000'
Limited Tax General Obligation Bonds, 2010D
(Taxable Build America Bonds -Direct Payment)
Due Interest Prices or Due Interest Prices or
Dec.1 Amounts Rates Yields CUSIP Dec.1 Amounts Rates Yields CUSIP
2015 $ 225,000 % % 2025 $ 310,000
2016 230,000 202b 320,000
2017 235,000 2027 335,000
2018 240,000 2028 350,000 2019 250,000 2029 365,000
2020 255,000 2030 375,000
2021 265,000 2031 390,000
2022 275,000 2032 410,000
2023 285,000 2033 425,000
2024 300,000 2034 445,000
Preliminary, subject to change.
111
City of Auburn, Washington
25 West Main Street Auburn, Washington 98001-4998
Phone: (253) 931-3000
Fax: (253) 288-3132
www.auburnwa.gov c1~
Mayor and City Council
Peter B. Lewis, Mayor December 31, 2013 Sue Singer, Deputy Mayor December 31, 2011
Nancy Backus, Councilmember December 31, 2013
Virginia Haugen, Councilmember December 31, 2011
John Partridge, Councilmember December 31, 2013
Lynn Norman, Councilmember December 31, 2011 Bill Peloza, Councilmember December 31, 2011
Rich Wagner, Councilmember December 31, 2013
Appointed Officials
Shelley Coleman Finance Director Danielle Daskam City Clerk
Daniel B. Heid City Attorney
Dennis Dowdy Public Works Director
Bond Counsel
Foster Pepper PLLC
Seattle, Washington
(206) 447-4400
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.
This Preliminary Official Statement will be "deemed final" by the City, pursuant to Rule 15c2-12 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended, except for information which is permitted to
be excluded from this Preliminary Official Statement under Rule 15c2-12. 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 inside 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
P~ Description of the Bonds ...............................................................................................................................................................1
Authorization for Issuance ..................................................................................................................................................1
Designation of Build America Bonds as "Build America Bonds" ..................................................................................1
Principal Amount, Date, Interest Rates and Maturities 2 Redemption Provisions 2
Open Market Purchase 3
Bond Registrar and Registration Features 3 Book-Entry Bonds 3
Defeasance of the Bonds 4
Purpose and Use of Proceeds 4 Purpose 4
Refunding Procedure 4
Estimated Sources and Uses of Funds 5 Verification of Mathematical Calculations Error! Bookmark not defined.
Security for the Bonds 6
General 6 Bonded Indebtedness 7
Summary of Limited Tax General Obligation Bond Debt Service Requirements ......................................................10
Net Direct and Overlapping Debt .....................................................................................................................................11
Debt Payment Record .........................................................................................................................................................11 Future
General Obligation Bond Financings ...................................................................................................................11
Taxing Authority ..........................................................................................................................................................................12
Authorized Property Tax Levies .......................................................................................................................................12 Overlapping Taxing
Districts ............................................................................................................................................12
General Property Taxes ......................................................................................................................................................13
Regular Property Tax Limitations .....................................................................................................................................14 Assessed Value
....................................................................................................................................................................15
Tax Collection Procedure ...................................................................................................................................................15
Tax Collection Record .........................................................................................................................................................16 Major
Property Taxpayers .................................................................................................................................................16
Collection of Other Taxes ...................................................................................................................................................16
Authorized Investments .............................................................................................................................................................19
Local Government Investment Pool .................................................................................................................................19
Authorized Investments for Bond Proceeds ....................................................................................................................19
Comparative General Fund Balance Sheet 20 Comparative General Fund Statement of Revenues, Expenditures and Changes in Fund Balance 21
2009-10 Biennial Budget -General Fund 22
The City 23
City Staff 23 Labor Relations 23
Pension Funding 24
Other Post-Employment Benefits 25 Basis of Accounting 25
Budgetary Process 26
Investment Practices 26 Risk Management 26
Auditing of City Finances 27
Demographic Information 28 Initiative and Referendum 31
State Initiatives 31
Future Initiatives and Referenda 31 Tax Matters 32
Tax-Exempt Bonds 32
Tax-Exempt Bonds "Qualified Tax-Exempt Obligations" for Financial Institutions 33 Build America Bonds Error! Bookmark not defined.
Rating 35
Continuing Disclosure 35
Legal and Underwriting 36 Approval of Counsel 36
Litigation 36
Official Statement 36 Underwriting 37
Conflicts of Interest 37
Concluding Statement 37 Local Revitalization Financing 3
Introduction 3
Local Revitalization Financing Appendix A Forms of Opinions of Bond Counsel Appendix B
Book-Entry Transfer System Appendix C
2008 Comprehensive Annual Financial Report Appendix D
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OFFICIAL STATEMENT
City of Auburn, Washington
$4,380,000 $20,440,000
Limited Tax General Obligation and Limited Tax General Obligation Bonds, 2010B
Refunding Bonds, 2010A (Taxable Build America Bonds -Direct Payment)
$945,000 $6,285,000'
Limited Tax General Obligation Bonds, 2010C Limited Tax General Obligation Bonds, 2010D
(Taxable Build America Bonds -Direct Payment)
The City of Auburn, 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:
$4,380,000 Limited Tax General Obligation and Refunding Bonds, 2010A (the " 2010A Bonds");
$20,440,000 Limited Tax General Obligation Bonds, 2010B (Taxable Build America Bonds-Direct
Payment) (the " 2010B Bonds");
$945,000 Limited Tax General Obligation Bonds, 2010C (the " 2010C Bonds"); and
$6,285,000 Limited Tax General Obligation Bonds, 2010D (Taxable Build America Bonds-Direct Payment) (the " 2010D Bonds").
The 2010A Bonds and the 2010C Bonds are referred to herein as the "Tax-Exempt Bonds," and the 2010B
Bonds and the 2010D Bonds are referred to herein as the "Build America Bonds." Together, the Tax-Exempt
Bonds and the Build America Bonds are referred to herein as the "Bonds." This Official Statement provides
information concerning the City and the Bonds.
Description of the Bonds
Authorization for Issuance
Under and in accordance with State laws, the Bonds are issued pursuant to Ordinance No. (the
"Ordinance") passed by the City Council (the "Council") on , 2010, and the authority of chapters
35A.40, 39.36 39.46 and 39.53 of the Revised Code of Washington ("RCW"). The Bonds do not require voter
approval.
Designation of 2010B Bonds and 2010D Bonds as "Build America Bonds"
The City has made irrevocable elections to have section 54AA of the Internal Revenue Code of 1986, as amended (the "Code") apply to the the 2010B and 2010D Bonds (or the "Build America
Bonds") so that those
bonds are designated " uild America onds," and furthermore to have subsection 54AA(g) of the Code
apply to the Build America Bonds so that they are treated as "qualified bonds" with respect to which the City
will be allowed a credit payable by the United States Treasury to the City pursuant to section 6431 of the Code
in an amount equal to 35% of the interest payable on the Build America Bonds on each interest payment date.
As a result of these elections, interest on the Build America Bonds is not excludable from gross income of
owners of the Build America Bonds under section 103 of the Code, and owners of the Build America Bonds will not be allowed any federal tax credits as a result of ownership of or receipt
of interest payments on the
Build America Bonds. See "Tax Matters" herein. The obligation of the United States Treasury under section
6431 of the Code to make direct payments to the City in respect of interest payments on the Build America
Bonds does not constitute a full faith and credit guarantee of the Build America Bonds by the United States of
America.
Preliminary, subject to change.
1
The Code establishes certain ongoing requirements that must be met subsequent to the delivery of the Bonds in order for the City to continue to receive federal credit payments. Many
of these requirements are identical
to those applicable to tax-exempt bonds, such as requirements relating to the use and expenditure of the
available project proceeds of the Build America Bonds, yield and other restrictions on investments of available
project proceeds and compliance with the arbitrage rebate requirement to the extent applicable to the Build
America Bonds. The Internal Revenue Service has advised that, in general, the federal credit payments made
in respect of build America bonds such as the 2010B and 2010D Bonds are payments that are treated as
overpayment of tax. Accordingly, rules relating to overpayments of tax, such as credits against liabilities in respect of an internal revenue tax and offsets, interest on overpayments
of tax and limitations on credits or
refunds of overpayments of tax also apply to the federal credit payments made in respect of build America
bonds. Noncompliance by the City with any of the provisions required to claim the federal credit payments,
or an internal revenue tax liability of the City (such as a f ederal payroll tax liability) against which federal
credit payments maybe offset could result in the City not receiving expected federal credit payments.
The City has authorized its appropriate officers to take such actions as are necessary or appropriate for the City to receive from the United States Treasury the applicable federal credit
payments in respect of the Build
America Bonds, such as the timely filing with the Internal Revenue Service of Form 8038-CP - "Return for
Credit Payments to Issuers of Qualified Bonds" in the manner prescribed by Internal Revenue Service Notice
2009-26. The City also has covenanted in the Bond Ordinance that it will comply with the provisions of the
Code compliance with which would result in the interest on such bonds being excluded from gross income for
federal income tax purposes but for an irrevocable election to have section 54AA of the Code apply to such
bonds, including the Build America Bonds.
Principal Amount, Date, Interest Rates and Maturities
The Bonds will be issued in the aggregate principal amount of ~ and will be dated and bear interest from the date of initial delivery to the Underwriter. The Bonds will mature on the
dates and
in the principal amounts and will bear interest (payable semiannually on each June 1 and December 1,
commencing December 1, 2010) until the maturity or earlier redemption of the Bonds at the rates set forth on
the inside 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. Principal of and interest on the Bonds will be payable by the fiscal
agency of the State of Washington in New York, New York, currently The Bank of New York Mellon (the
"Bond Registrar").
Redemption Provisions
No Optional Redemption of the 2010A Bonds and 2010C Bonds. The Tax-Exempt Bonds are not subject to redemption prior to maturity.
Optional Redemption of the 2010B Bonds and 2010D Bonds. The Build America Bonds are subject to redemption at
the option of the City prior to their stated maturity dates at any time on or after December 1, 2019 at the price
of par, plus accrued interest, if any, to the date of redemption.
Extraordinary Optional Redemption. The City additionally reserves the right and option to redeem the Build America Bonds prior to their stated maturity dates at any time prior to December
1, 2019, as a whole or in part,
upon the occurrence of an Extraordinary Event, at the Extraordinary Optional Redemption Price.
An "Extraordinary Event" will have occurred if the City determines that a material adverse change has
occurred to section 54AA or section 6431 of the Code or there is any guidance published by the Internal
Revenue Service or the United States Treasury with respect to such sections or any other determination by the
Internal Revenue Service or the United States Treasury, which determination is not the result of any act or omission by the City to satisfy the requirements to qualify to receive the
35% cash subsidy payment from the
United States Treasury, pursuant to which the City`s 35% cash subsidy payment from the United States
Treasury is reduced or eliminated.
2
"Extraordinary Optional Redemption Price" means the greater of (1)100% of the principal amount of the Build
America Bonds to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest to the earlier of (A) the stated maturity date on
the Build America Bonds to be
redeemed or (B) the next available date on which the Build America Bonds may be optionally redeemed at a
price of par (plus accrued interest, if any), discounted (on a semiannual basis, assuming a 360-day year
consisting of twelve 30-day months) to the date on which such Bonds are to be redeemed, at the Treasury Rate
plus 100 basis points, plus, in each case, accrued interest on the Build America Bonds to be redeemed to the
date f fixed for redemption.
"Treasury Rate" means, with respect to any date fixed for redemption for a particular Bond, the yield to
maturity as of such date of United States Treasury securities with a constant maturity (excluding inflation
indexed securities, and as compiled and published in the most recent Federal Reserve Statistical Release H.15
(519) that has become publicly available as of the first Business Day that is at least thirty-five days prior to such
scheduled redemption date or, if such Statistical Release is no longer published, any publicly available source
of similar market data) most nearly equal to the period from such date to the stated maturity date of such
Bond.
At the request of the Bond Registrar, the Extraordinary Optional Redemption Price shall be determined by an
independent accounting firm, investment banking firm or financial advisor retained by the City at the City's
expense. Absent manifest error, such determination shall be conclusive and binding on the City, the Bond
Registrar and the Registered Owners, and neither the City nor the Bond Registrar shall be liable for relying on
such determination.
Notice of Redemption. For as long as the Build America Bonds are held in book-entry only form, the Bond
Registrar will provide notice to DTC only, and it will be the responsibility of DTC to disseminate notices to
DTC participants. The City will not provide any notice of redemption to beneficial owners of Build America
Bonds.
If the Build America Bonds are no longer kept in book-entry only form, notice of redemption will be given not
fewer than 30 days nor more than 60 days prior to the redemption date by first-class mail, postage prepaid, to the registered owner of any Build America Bond to be redeemed at the address
appearing on the bond
registration books maintained by the Bond Registrar. Interest on the Build America Bonds called for
redemption shall cease to accrue on the date fixed for redemption unless the bonds called are not redeemed
when presented pursuant to the call.
Open Market Purchase
The City reserves the right and option to purchase any or all of the Bonds in the open market at any time at
any price acceptable to the City. All Bonds so purchased shall be canceled.
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 DTC. 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 series and 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 Bond Registrar (or such other fiscal agency or
agencies as the State may from time to time designate). 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.
Book-Entry Bonds
DTC will act as securities depository for the Bonds. The ownership of one fully registered Bond for each series
and maturity of the Bonds, as set forth on the inside cover of this Official Statement, each in the aggregate
3
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 o fRevisions o fBook-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 affected adversely 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 series and maturity. In the event the Bonds are transferred by the City to fully registered
form, the Bonds may be
payable by the Bond Registrar or the State's co-fiscal agent, which is currently Wells Fargo Bank, National
Association, in Seattle, Washington. Thereafter, the principal of the Bonds will be payable upon due
presentment and surrender thereof at the principal office of the Bond Registrar; interest on the Bonds will be
payable by check or draft mailed on the interest payment date to the owners of the Bonds at the address
appearing on the Bond Register on the 15th day of the month next preceding the interest payment date, and the
Bonds will be transferable as provided in the Ordinance.
Defeasance of the Bonds
In the event that money and/or "government obligations" as such term is defined in chapter 39.53 RCW, as now or hereafter amended, maturing at such time or times and bearing interest
in amounts (together with
money, if necessary) sufficient to redeem and retire part or all of the Bonds in accordance with their terms, are
set aside in a special trust fund or escrow account to effect such redemption, retirement or defeasance, and
such moneys and the principal of and interest on such obligations are irrevocably set aside and pledged for
such purpose, then no further payments need be made into the bond redemption fund of the City for the
payment of the principal of and interest on the Bonds so provided for, and such Bonds shall cease to be
entitled to any lien, benefit or security of the Bond Legislation except the right to receive the moneys so set aside and pledged, and such Bonds shall be deemed not to be outstanding.
Purpose and Use of Proceeds
Purpose
2010 A Bonds (Refunding Portion). The refunding portion of the proceeds from the sale of the 2010A Bonds will
be used to refund t the City's outstanding Limited Tax General Obligation Bonds, 1998, to obtain
the benefit of savings in annual and total debt service requirements
2010A Bonds (New Money Portion) and 2010B Bonds (City Hall Annex). The proceeds from the sale of the 2010B
Bonds and the new money portion of the 2010A Bonds will be used to pay for a portion of the cost of (i) the
acquisition of certain office condominium units to provide additional city office space near City Hall,
including acquisition of associated property interests, equipment and appurtenances; and (ii) the costs of
issuance associated with the 2010A Bonds and 2010B Bonds.
2010C Bonds and 2010D Bonds -Downtown Infrastructure Improvements. The proceeds from the sale of the 2010C
Bonds and 2010D Bonds will be used to pay for (i) infrastructure improvements which includes utility
relocation and upsizing, a promenade with open plazas, and a new street surface (the "Downtown
Infrastructure Improvements"); and (ii) the costs of issuance associated with the 2010C Bonds and 2010D
Bonds. The 2010C and 2010D Bonds are also issued under authority of the State's Local Revitalization
Financing program (see Appendix A-Local Revitalization Financing).
Refunding Procedure (Refunding Portion of 2010A Bonds)
The refunding portion of the proceeds from the sale of the 2010A Bonds will be used to refund all of the City's
outstanding $2,235,000 Limited Tax General Obligation Bonds, 1998, maturing on December 1 in years 2010 through 2018 (the "Refunded Bonds"). The proceeds of the 2010A Bonds allocated
to the refunding of the
Refunded Bonds will be escrowed to the call date for the Refunded Bonds ( , 2010) at which
time they will be redeemed at a price of par plus accrued interest.
4
From the portion proceeds of the 2010A Bonds allocated to the refunding of the Refunded Bonds, the City will purchase certain direct non-callable United States Government Obligations
("Government Obligations").
These Government Obligations will be deposited in the custody of U.S. Bank National Association, or such
other duly appointed successor(s) ("Refunding Trustee"). The maturing principal of the Government
Obligations, interest earned thereon, and cash balance, if necessary, will provide payment of:
(a) Interest on the Refunded Bonds up to and including 2010; and
(b) On , 2010, the redemption price (par) of the Refunded Bonds and the administrative costs of carrying out the foregoing.
The Government Obligations, interest earned thereon, and 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 Escrow Agent, pursuant to an escrow deposit agreement to be executed by the City and the Escrow Agent.
Information on the Refunded Bonds is as follows:
Refunded Bonds
Maturity Years Principal Interest CUSIP
Dec.1 Amounts Rates Numbers
2010 $210,000 4.00% 050609FL5
2011 220,000 4.10 050609FM3
2012 230,000 4.10 050609FN1 2013 235,000 4.20 050609FP6
2014 245,000 4.20 050609FQ4
2015 255,000 4.30 050609FR2
2016 270,000 4.30 050609FS0
2017 280,000 4.30 050609FT8
2018 290,000 4.35 050609FU5
Verification of Mathematical Calculations in Refunding Escrow
Seattle-Northwest Securities Corporation, Seattle, Washington, will certify the accuracy of the mathematical
computations concerning the adequacy of the maturing principal amounts of and interest earned on the government obligations, to be placed together with other escrowed moneys in the escrow
account to pay when
due, pursuant the call for redemption, the principal of, premium, if any, and interest on the Refunded Bonds.
5
Estimated Sources and Uses of Funds
The proceeds from the Bonds will be applied as follows:
Sources of Funds ~
2010A Bonds Par Amount $ ~ $
Net Premium/(Discount)
2010B Bonds Par Amount ~1>
Net Premium/(Discount)
2010C Bonds Par Amount
Net Premium/(Discount) 2010D Bonds Par Amount
Net Premium/(Discount)
Total Sources of Funds $ $
Uses of Funds
Project Requirements (2010A Bonds 8~ 2010B Bonds) $
Project Requirements (2010C Bonds & 2010D Bonds)
Escrow Requirements (2010A Bonds) Costs of Issuance ~2>
Total Uses of Funds $ $
(1) Preliminary, subject to change.
(2) Includes bond counsel fee, rating fee, [bond insurance premium,] underwriter's discount, and other costs associated with the issuance of the Bonds.
Security for the Bonds
General Obligation Pledge
The Bonds are limited tax general obligation bonds of the City. The City, as authorized by law and the
Ordinance, has irrevocably pledged that, unless the principal of and interest on the Bonds are paid from other
sources, it will make annual levies of ~ ~ ,taxes, within the constitutional and statutory tax limitations provided by law without a vote of the electors of the City, upon all of the
property in the City
subject to taxation in amounts, together with all other revenues and money of the City legally available for
such purposes, sufficient to pay such principal and interest as the same shall become due. See "Bonded
Indebtedness" and "Taxing Authority."
The City may, subject to applicable laws, apply other funds available to make payments with respect to the
Bonds and thereby reduce the amount of future tax levies for such purpose.
The Bonds do not constitute a debt or indebtedness of the State or any political subdivision thereof other than
the City.
3418.
L
6
6301
4871
Bonded Indebtedness
The State Constitution and State statutes set forth certain limitations on the voted and nonvoted bonded
indebtedness that Washington cities may incur. As prescribed by State statutes, the voter-approved unlimited
tax general obligation indebtedness permitted for cities, subject to a 60 percent majority vote of registered voters, is
limited to 2.5 percent of assessed value for general purposes, 2.5 percent for utilities and 2.5 percent f or open
space/park facilities. Within the 2.5 percent of assessed value for general purposes, the City may, without a vote
o f the electors, incur general obligation indebtedness in an amount not to exceed 1.5 percent of assessed value. Additionally, within the 2.5 percent of assessed value for general purposes,
the City may, also without a vote
of the electors, enter into leases if the total principal component of the lease payments, together with the other
nonvoted general obligation indebtedness of the City, does not exceed 1.5 percent of assessed value. The
combination of unlimited tax and limited tax general obligation debt for general purposes, including leases,
cannot exceed 2.5 percent of assessed value and for all purposes cannot exceed 7.5 percent of assessed value.
The Bonds are issued without a vote of the electors and are subject to the 1.5 percent limitation described
above. The City may, without a vote o f the electorate, issue debt as follows:
(1) Pursuant to an ordinance specifying the amount and object of the expenditure of the proceeds,
the City Council may borrow money for corporate purposes and issue bonds and notes within the constitutional and statutory limitations on indebtedness.
(2) The City may execute conditional sales contracts for the purchase of real or personal property.
(3) The City may execute leases with or without an option to purchase.
7
Computation of Debt Capacity (As of May 13, 2010)
2010 Collection Year Regular Assessed Value $ 7,809,499,809
Nonvoted Debt Capacity
1.5% of Assessed Value $ 117,142,497
Less: Outstanding Nonvoted Debt ~1> (35,881,485)
Less: The 2010A Bonds (4,380,000) Less: The 2010B Bonds (20,440,000)
Less: The 2010C Bonds (945,000)
Less: The 2010D Bonds X6,285,000)
Remaining Nonvoted Debt Capacity $ 49,211,012
Voted and Nonvoted Debt Capacity
2.5% of Assessed Value $ 195,237,495
Less: Outstanding Nonvoted Debt ~1> (35,881,485)
Less: The 2010A Bonds (4,380,000)
Less: The 2010B Bonds (20,440,000)
Less: The 2010C Bonds (945,000)
Less: The 2010D Bonds (6,285,000) Less: Outstanding Voted Debt 0
Total Remaining Voted and Nonvoted Debt Capacity $ 127,306,010
Voted Utility Debt Capacity
2.5% of Assessed Value $ 195,237,495
Less: Outstanding Utility Obligations 0
Total Remaining Utility Debt Capacity $ 195,237,495
Voted Open Space/Park Debt Capacity
2.5% of Assessed Value $ 195,237,495
Less: Outstanding Open Space/Park Obligations 0
Total Remaining Open Space/Park Debt Capacity $ 195,237,495
(1) Includes limited tax general obligation debt and other nonvoted debt; excludes the Refunded Bonds.
(2) Preliminary, subject to change.
Source: City of Auburn.
8
Outstanding Debt
(As of May 13, 2010)
Long Term Borrowing
General Obligations: Non-voted
Date of Date of Amount Amount Citu Limited Tax General Obligation Bonds ~1> Issue Maturity Issued Outstanding
2005 LTGO Ref. Bonds 09/01/05 12/01/19 $ 1,375,000 $ 1,345,000
2006A LTGO Bonds 08/15/06 12/01/25 3,275,000 3,275,000
2006T LTGO Bonds 08/15/06 12/01/16 1,885,000 1,320,000
The 2010A Bonds 05/13/10 12/01/18 4,380,000 4,380,000
The 2010B Bonds 05/13/10 12/01/39 20,440,000 20,440,000
The 2010C Bonds 05/13/10 12/01/14 945,000 945,000
The 2010D Bonds 05/13/10 12/01/34 6,285,000 6,285,000
LTGO Bond Total $ 38,585,000 37 990 000
(1) Excludes the Refunded Bonds.
(2) Preliminary, subject to change.
Other Nonvoted General Obligation Debt ~1~
2000 Valley Com Bonds ~2> 09/15/00 12/01/10 $ 2,551,600 $ 184,000 PWTF Loan 07/01/06 07/01/10 163,713 55,217
Capital Lease -Theater 01/01/07 12/31/21 682,677 644,418
PTWF Loan ~3~ 07/01/08 07/01/28 1,800,000 1,260,000
2009 SCORE Bonds ~4~ 11/04/09 01/01/39 26,732,850 26,732,850
2010 Valley Com Ref. Bonds ~2> 04/05/10 12/01/15 1,065,000 1,065,000
Total Other Nonvoted General Obligation Debt 32,995,840 29,941,485
Total Non-voted General Obligations $ 71,580,840 67 931485
(1) Excludes capital lease for City Hall Annex which will terminate upon issuance of the Bonds and purchase of the City
Hall Annex condominium units with a portion of the proceeds of the new money portion of the 2010A Bonds, proceeds
of the the 2010B Bonds and other money of the City. (2) The Valley Communications Center Development Authority issued special obligation bonds in 2000 for a new dispatch
facility (the "2000 Valley Com Bonds"). Pursuant to an interlocal agreement, the City is obligated to pay 20 percent of
the debt service. The callable 2000 Valley Com Bonds were refunded by "2010 Valley Com Refunding Bonds" issued
on April 5, 2010. The amount of 2000 Valley Com Bonds shown in this table reflects the portion of the remaining outstanding 2000 Valley Com Bonds (December 1, 2010 principal payment)
allocable to the City's obligation after the
refunding. The City's contractual obligation to Valley Com is a non-voted limited tax general obligation, payable from
the City's General Fund. (3) The § Public Works Trust Fund ("PWTF") loan is $1,800,000 of which
$1,2b0,000 was drawn down on October 28, 2009. The remaining balance drawn by July 1, 2010,
which is the first principal payment date.
(4) The South Correctional Entity ("SCORE") Facility Public Development Authority issued special obligation bonds in 2009 for a new correctional facility (the "SCORE Bonds"). The par
amount of the SCORE Bonds was $86,235,000 and
pursuant to an interlocal agreement, the City is obligated to pay 31 percent of the debt service on the SCORE Bonds.
The amounts shown in the chart above represents the portion of the outstanding principal amount that is allocable to the City's obligation. The City's contractual obligation to SCORE
is a non-voted limited tax general obligation debt,
payable from the City's General Fund.
9
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Summary of Overlapping Debt (As of February 1, 2010)
Estimated
2010 Assessed Percent Outstanding Overlapping
Overlappin T~ District Value Overla GO Debt Debt
School District No. 408 $ 8,278,674,339 81.59% $ 96,765,000 $ 78,948,087
School District No. 210 12,224,733,907 57.48 166,090,000 95,464,515 Rural Library District 205,993,638,391 3.41 129,925,000 4,431,766
King County 341,971,517,465 2.05 1,051,394,000 21,602,970
Port of Seattle 341,971,517,465 2.05 357,315,000 7,341,744
School District No. 415 18,187,738,178 1.84 233,140,534 4,288,009
Hospital District No.1 36,539,967,796 1.38 39,455,000 543,143
Port of Tacoma 88,468,117,832 0.93 207,675,000 1,925,026
Pierce County 88,468,117,832 0.93 137,216,067 1,271,913
Total 215 817173
Source: King County Assessor and Treasurer and individual taxing districts.
Net Direct and Overlapping Debt
The following tables present information regarding the City's direct debt (including the Bonds} and the
estimated portion of the debt of overlapping taxing districts allocated to the City's residents.
Regular Assessed Value (2010 Collection Year) $ 7,809,499,809
Estimated 2009 Population ~1> 67,485
Debt Information
Net Direct Debt ~2~ $ 67,931,485
Estimated Net Overlapping Debt (as previously detailed herein) 215,817,173
Total Net Direct and Overlapping Debt ~2~ $ 283,748,658
(1) Estimate derived from the State of Washington, Office of Financial Management, Forecasting Division.
(2) Preliminary, subject to change; includes the Bonds plus limited tax general obligation debt and other nonvoted debt.
Bonded Debt Ratios
Net Direct Debt to Assessed Value 0.87%
Net Direct and Overlapping Debt
to Assessed Value 3.63%
Per Capita Assessed Value $ 115,722
Per Capita Net Direct Debt $ 1,007
Per Capita Total Net Direct and Net Overlapping Debt $ 4,205
Debt Payment Record
The City has promptly met all debt service payments on outstanding obligations. No refunding bonds have
been issued to prevent an impending default.
Future General Obligation Bond Financings
Other than the Bonds, the City has no authorized but unissued general obligation bonds outstanding, nor does
it anticipate issuing additional long-term debt within the next 12 months.
11
Taxing Authority
Authorized Property Tax Levies
The City is also authorized to impose excess voter-approved levies (unlimited as to rate or amount). Excess
levies are imposed, upon voter approval, to pay debt service on unlimited tax general obligation bonds. An
excess levy also maybe imposed without a vote to prevent the impairment of a contract (RCW 84.52.052).
Overlapping Taxing Districts
The overlapping taxing districts within the City have the statutory power to levy regular property taxes at the
following rates, subject to the limitations provided by chapter 84.55 RCW, and levy excess voter approved
property taxes. For purposes of demonstration, representative levy rates for "levy code 120," the largest levy
code within the City, as well as the statutory levy authority of each type of potential overlapping district, are
listed below.
12
Representative Levy Rates Statutory Levy Authority Per $1,000 of Per $1,000 of
Assessed Value Assessed Value
King County $ 1.28499 $1.80 ~ a
Rural Library District 0.46088 0.50
Port of Seattle 0.21597 0.45
Valley Regional Fire Authority 1.17910 1.50
The City 1.82336 3.60 ~ a~ a Hospital District ~1> n/a ~ > 0.75
State Schools 2.22253 3.60 ~ a
School District No. 408 5.09382 ~ ~
Emergency Medical Services 0.30000 0.50
King County Flood Zone 0.10514 0.50
Ferry District 0.00348 0.075
Total rate f or King County levy code 120: $12.68927
(1) B B ~ ~ ~a m
Levy code area 120 is not within the boundaries of any hospital district, though some portions of the City are located within Hospital District No.1, which currently levies at the rate
of $0.5329 per $1,000 of assessed value.
(2) Pursuant to RCW 84.52.043(1), a county may increase its levy from $1.80 per $1,000 of assessed value to a rate not to
exceed $2.475 per $1,000 of assessed value for general county purposes if (i) the total levies for both the county and
any road levy imposed within the county do not exceed $4.05 per $1,000 of assessed value and (ii) no other taxing district has its levy reduced as a result of the increased county levy.
Road levies are collected only within the
unincorporated portions of a county and therefore do not apply to any territory within the City. King County imposes
a road levy at a rate of $1.9357 per $1,000 assessed value. Portions of the City are located in Pierce County, which currently levies at an aggregate rate of $1.1181 per $1,000; it applies
a road levy to unincorporated portions of its
territory at a rate of $1.5369 per $1,000 of assessed value.
(3) Pursuant to RCW 41.1b.060, $0.225 of the total $3.60 must be used for fire pension funding purposes, if required;
otherwise this tax maybe levied and used for any other municipal purpose. (4) The City's levy authority of $3.b0 per $1,000 of assessed value is reduced by the actual rate levied by
the King County
Rural Library District (which has the authority to levy up to $0.50 per $1,000 of assessed value), and by the actual rate
levied by the Valley Regional Fire Authority (which has the authority to levy up to $1.00 per $1,000 of assessed value, which may increase to a maximum of $1.50 per $1,000 upon expiration
of its voter-approved six-year fire benefit
charge in 2013 if such charge is not reapproved).
(5) RCW 84.52.043(1). The levy by the State may not exceed $3.60 per $1,000 of assessed value adjusted to the State
equalized value in accordance with the indicated ratio fixed by the State Department of Revenue, which levy is to be used exclusively for the support of the common schools.
(6) Washington school districts do not have nonvoted regular levy authority.
Source: King County Assessor for Levy Code 120.
General Property Taxes
The following provides a general description of the City's taxing authority and limitations thereon, the method
of determining the assessed value of real and personal property, tax collection procedures, and tax collection
information.
Authorized Property Taxes. The City is authorized to levy both "regular" property taxes and "excess" property
taxes.
(1) Regular Property Taxes. Regular property taxes are subject to constitutional and statutory limitations
as to rates and amounts and commonly are imposed by taxing districts for general municipal
purposes, including the payment of debt service on limited tax general obligation indebtedness, such
as the Bonds. Regular property taxes do not require voter approval except as described below.
(2) Excess Property Taxes. Excess property taxes are not subject to limitation as to rates or amounts but
must be authorized by a 60 percent approving popular vote, as provided in Article VII, Section 2, of
the State Constitution and RCW 84.52.052. To be valid, such popular vote must have a minimum
voter turnout of 40 percent of the number who voted at the last City general election, except that one-
year excess tax levies also are valid if the turnout is less than 40 percent and the measure receives a
number of affirmative votes equal to or greater than 24 percent of the number who voted at the last City general election. Excess levies may be imposed without a popular vote when necessary
to
prevent impairment of the obligations of contracts.
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Regular Property Tax Limitations
The authority of a city to levy taxes without a vote of the people for general city purposes, including the
payment of debt service on limited tax general obligation indebtedness, such as the Bonds, is subject to the
limitations described below. Information relating to regular property tax limitations is based on existing statutes and constitutional provisions. Changes in such laws could alter the
impact of other interrelated tax
limitations on the City.
Regular property tax levies are subject to rate limitations and amount limitations and to the uniformity
requirement of Article VII, Section 1 of the State Constitution, which specifies that a taxing district must levy
the same rate on similarly classified property throughout the district. The State Constitution requires that all
real property constitutes a single class of property. Aggregate property taxes vary within the county because of its different overlapping taxing districts. In the event that the maximum
permissible levy varies within the
City, the lowest permissible rate for any part of the City would be applied to the entire City.
Maximum Rate Limitation. Title 84 RCW authorizes the imposition of regular tax levies up to various statutory
maximum rates (see "Overlapping Taxing Districts" herein).
The One Percent Aggregate Regular Levy Limitation. Article VII, Section 2 of the Washington Constitution, as amended in 1973, limits aggregate regular property tax levies by the State
and all taxing districts, except port
districts and public utility districts, to one percent of the true and fair value of property. RCW 84.52.050
provides the same limitation by statute.
$5.90/$1,000 Aggregate Regular Levy Limitation. Within the one percent limitation described above,
RCW 84.52.043(2) imposes an aggregate limitation on regular tax levies by all taxing districts, other than the
State, of $5.90/$1,000 of assessed value, except levies for any port or public utility district; excess levies authorized in Article VII, Section 2 of the State Constitution; certain
levies for acquiring conservation futures,
for emergency medical services or care, to finance affordable housing, for criminal justice purposes, and for
transit purposes; portions of certain levies by metropolitan park districts and by fire protection districts; and
levies imposed by ferry districts.
Uniformity Requirement. Article VII, Section 1 of the Washington Constitution requires that property taxes be
levied at a unif orm rate upon the same class of property within the territorial limits of a taxing district levying such taxes. The Constitution provides that all real property constitutes
a single class. It is possible, because of
different overlapping taxing districts in different areas of the City, that the maximum permissible City levy
might vary within the City. In that event, to comply with the constitutional requirement for uniformity of
taxation, the lowest permissible City levy rate applicable to any part of the City would be applied to the entire
City.
Prioritization of Levies. RCW 84.52.010 provides that if aggregate levies certified by all taxing districts exceed the aggregate levy limitations described above, levies certified by
junior taxing districts are reduced or
eliminated in order to bring the aggregate levy into compliance with the statutory maximum prescribed by
RCW 84.52.050 and 84.52.043. RCW 84.52.043 defines "junior taxing districts" as all taxing districts other than
the state, counties, road districts, cities, towns, port districts, and public utility districts.
The Levy Amount Increase Limitation. The regular property tax amount increase limitation (chapter 84.55 RCW)
limits the total dollar amount of regular property taxes levied by an individual local taxing district, such as the City, to the amount of such taxes levied in the highest of the three
most recent years multiplied by a limit
factor, plus an adjustment to account for taxes on new construction, annexations, improvements and State-
assessed property at the previous year's rate. The limit factor is the lesser of 101 percent of the highest levy in
the three previous years (excluding new construction, improvements, and State-assessed property) or 100
percent plus inflation, unless a greater amount is approved by a simple majority of the voters. If inflation is
less than 1%, the limit factor maybe seta 101 percent with a supermajority vote of the Council.
RCW 84.55.092 allows the property tax levy to be set at the amount that would be allowed if the tax levy f or
taxes due in each year since 1986 had been set at the full amount allowed under Chapter 84.55 RCW. This is
sometimes referred to as "banked" levy capacity. The City has $5,724,309 in banked levy capacity.
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With a majority vote of its electors, a taxing district may levy, within the rate limitations described above, more than what otherwise would be allowed by the tax increase limitation,
either indefinitely or for a limited
period or to satisfy a limited purpose, as allowed by RCW 84.55.050. This is known as a "levy lid lift." A
newly created taxing district can initiate its levy at the maximum permitted statutory levy rate, unless that rate
would exceed any of the limitations described above.
Since the regular property tax increase limitation applies to the total dollar amount levied rather than to levy
rates, increases in the assessed value of all property in the taxing district (excluding new construction, improvements and State-assessed property) which exceed the rate of growth in
taxes allowed by the limit
factor result in decreased regular tax levy rates, unless voters authorize a higher levy or the taxing district uses
banked levy capacity. Decreases in the assessed value of all property in the taxing district (including new
construction, improvements and State-assessed property) or increases in such assessed value that are less than
the rate of growth in taxes imposed, among other events, may result in increased regular tax levy rates.
Assessed Value
The ,County Assessor, or equivalent thereof
determines the value of all real and personal property
throughout King County (the "County") that is subject to ad valorem taxation, except certain utility properties which are valued by the State Department of Revenue. The Assessor is an
elected official whose duties and
methods of determining value are prescribed and controlled by statute and by detailed regulations
promulgated by the State Department of Revenue. The Assessor determines the assessed
valuations for the portions of _City located in the County, and the Pierce County Assessor-Treasurer
determines the assessed valuations for the portions of the City located in Pierce County.
For tax purposes, the assessed value of property is 100 percent of its market value. Three approaches may be used to determine real property value: market data, replacement cost and
income generating capacity. In
ount ,all property is subject to an annual property valuation non-site
revaluation at least once every four years and ~ ~ ~ at least once every six
years ~ .The property is listed by the Assessor on a roll at its current assessed value and the
roll is filed in the Assessor's office. The Assessor's determinations are subject to revisions by the County Board
of Equalization and, for certain property, subject to further revisions by the State Board of Tax Appeals.
Tax Collection Procedure
Property taxes are levied in specific amounts and the rate for all taxes levied for all taxing districts in the
County is determined, calculated and fixed by the Assessor based upon the assessed value of the property within the various taxing districts. The Assessor extends the taxes to be levied
within each taxing district on a
tax roll that contains the total amount of taxes to be so levied and collected. By January 15 of each year, the tax
roll is delivered to the County Treasurer, or equivalent thereof, who creates a tax account for each taxpayer
and is responsible for the collection of taxes due to each account. All such taxes are due and payable on April
30 of each year, but if the amount due from a taxpayer exceeds $50, one-half maybe paid then and the balance
no later than October 31 of that year. Delinquent taxes are subject to interest at the rate of 12 percent per year
computed on a monthly basis from the date of delinquency until paid. In addition, a penalty of three percent is assessed on June 1st of the year in which the tax was due and eight percent
on December 1st of the year due.
All collections of interest on delinquent taxes are credited to the County`s current expense fund.
The method of giving notice of payment of taxes due, the accounting for the money collected, the division of
the taxes among the various taxing districts, notices of delinquency, and collection procedures are all covered
by detailed statutes. The lien on property taxes is prior to all other liens or encumbrances of any kind on real
or personal property subject to taxation. By law the Treasurer may not commence foreclosure of a tax lien on real property until three years have passed since the first delinquency.
The State's courts have not decided
whether the Homestead Law (chapter 6.13 RCW) may give the occupying homeowner a right to retain the first
$125,000 (effective July 22, 2007) of proceeds of the forced sale of the family residence or other "homestead"
property for delinquent general property taxes. (See Algona v. Sharp, 30 Wn. App. 837, 638 P.2d 627 (1982),
holding the homestead right superior to the improvement district assessments). The United States Bankruptcy
Court for the Western District of Washington has held that the homestead exemption applies to the lien for
property taxes, while the State Attorney General has taken the position that it does not.
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Tax Collection Record
Regular Tax Collection
Collection Assessed Ad Valorem Ad Valorem Year As of
Year Valuation~1~ Lev Rate Tax Levy~2~ of Levy~ 12/31/09~Z~
2010 $7,809,499,809 $1.82336 $12,744,279 ~3> ~3> 2009 8,719,780,134 1.48678 11,660,279 97.7% 97.7%
2008~> 6,526,967,110 1.48385 9,554,019 98.5 99.4
2007 5,759,580,321 2.73076 13,855,330 98.2 99.8
2006 5,099,794,532 2.86520 13,403,260 98.2 99.9
2005 4,676,989,420 2.88000 12,645,835 98.0 99.9
(1) Assessed valuation is based upon 100 percent of actual valuation.
(2) King County portion only; excludes Pierce County levy amounts and collections. Of the City's total assessed value, 89.5 percent is located in King County and the remainder in Pierce
County.
(3) In process of collection.
O The City property tax levy was reduced as a result of the formation of the Valley Regional Fire Authority, which took
over responsibility for providing fire protection and emergency medical services within the City as of January 1, 2007
and began collecting its own property tax levy in 2008.
NOTE: Taxes are due and payable on April 30 of each year of the levy. The entire tax or first half must be paid on or before April 30, otherwise the total amount becomes delinquent on
May 1. The second half of the tax is payable
on or before October 31, becoming delinquent November 1.
Source: City of Auburn and King County Assessor's Office.
Major Property Taxpayers
Percent of
2010 Collection Year City's
Taxpayer Type of Business Assessed Valuation Total A.V.
Boeing Company Aircraft manufacturing $ 491,218,466 6.29%
Glimcher Supermall Venture Shopping center 119,546,742 1.53 Safeway Grocery retail 106,729,941 1.37
EProperty Tax Inc. Warehouse/Storage 73,718,900 0.94
Universal Health Medical center 59,912,292 0.77
Puget Sound Energy Utility 59,115,114 0.76
Muckleshoot Indian Tribe Racetrack/land 50,197,600 0.64
UPS Supply Chain Solutions Manufacturer 36,083,797 0.46
Wal-Mart Real Estate Business Retail 25,257,711 0.32 Qwest Corporation Telecommunications 24,401,170 0.31
Subtotal -Ten of the City's Largest Taxpayers 1,046,181,733 13.40
All Other City Taxpayers 6,763,318,076 86.60
Total City Taxpayers $ 7,809,499,809 100.00°°
Collection of Other Taxes
In addition to regular property tax levies, the City is also authorized to impose various other taxes, including
those described below. Neither the State nor any municipal corporation of the State is authorized under the Constitution to impose a tax on net income.
Sales and Use Tax. The State first levied a retail sales tax and a corresponding use tax on taxable retail sales and
uses of personal property in 1935. Sales taxes currently are imposed on the purchase by consumers (including
businesses and governmental entities) of a broad base of tangible personal property and selected services,
including construction (labor and materials), machinery and supplies, services and repair of real and personal
property and many other transactions not taxed in other states. The use tax supplements the sales tax by taxing the use of certain services and by taxing personal property on which a
sales tax has not been paid (such
as items purchased in a state that imposes no sales tax). The State Legislature, and the voters through the
initiative process, have changed the base of the sales and use tax on occasion. Among the various items not
16
currently subject to sales and use taxes are most personal services, motor vehicle fuel, most food for off-
premises consumption, trade-ins and purchases for resale.
Sales taxes upon applicable retail sales are collected by the seller from the consumer. Use taxes are payable by
the consumer upon applicable rendering of services or uses of personal property. Each seller is required to
hold taxes collected in trust until remitted to the State Department of Revenue, which usually occurs on a
monthly basis. The City's sales and use tax is collected by the State Department of Revenue and remitted on a
monthly basis under a contract that provides for a deduction of one percent of the tax collected for
administration costs. Distribution to the City lags approximately two months behind collection.
The State currently imposes a sales and use tax of 6.5 percent. Cities, counties and certain other municipal
corporations are authorized to levy incremental local sales and use taxes for general governmental purposes.
The City is authorized to impose a local sales and use tax of one percent, of which 0.15 percent is required to
be remitted to King County (the "County"). The County also imposes various local sales and use taxes,
including 0.1 percent to support criminal justice purposes. The first 10 percent of the revenues generated by
the 0.1 percent criminal justice tax is allocated to the County. The remaining 90 percent of the criminal justice tax revenues is allocated to the County and cities within the County
based on population. The proceeds of the
0.1 percent criminal justice tax may not be used to replace pre-existing funding. Sales and use taxes currently
are imposed in the County at aggregate rates ranging from 8.6 to 9.5 percent. The County imposes additional
sales and use taxes on car rentals and the sale of food and beverages at restaurants, taverns and bars.
The City is authorized to levy an additional local sales and use tax under the Local Revitalization Financing
program (the "LRF Tax") that is credited against the State sales and use tax. The City has pledged its receipts from this LRF Tax to the repayment of the 2010 and 2010 'Bonds. The LRF
Tax and the City's eligibility
to receive receipts from this LRF Tax are subject to certain limitations further described in "Appendix A -
Local Revitalization Financing."
Sales ~ Use Tax Streamlining. In 2003, the State Legislature approved legislation authorizing the State's
membership in the national Streamlined Sales and Use Tax Agreement (the "SSUTA"), in an effort to make
sales and use taxes in the State more uniform with other states. Congress has required that state sales taxes be more uniform before Congress will permit taxation of interstate catalog
and Internet sales. In 2007, the State
Legislature adopted legislation fully conforming to the SSUTA. Effective July 1, 2008, the sales tax system
changed in the State from an origin-based system to a destination-based system. Under destination sourcing,
sales taxes are credited to the taxing jurisdiction where the purchaser takes delivery of the goods (which may
differ from the point of sale with respect to goods delivered to the purchaser). The rate of the tax is now
determined by the local rate in the destination taxing jurisdiction.
The State Legislature enacted certain provisions to mitigate net losses in sales and use tax collections of local
taxing jurisdictions resulting from the change to a destination-based system. To qualify, the local taxing
jurisdiction must be negatively impacted by the legislation and the local sales tax must be in effect before
July 1, 2008, among other requirements. The State legislation requires the Department of Revenue to
determine each local jurisdiction`s annual losses, and distributions are required to be made quarterly
representing one-fourth of a jurisdiction's annual loss less voluntary compliance revenue from the previous
quarter. Losses in sales tax revenues are based on a business by business comparison of sales patterns in each jurisdiction before and after the change to destination-based sales tax.
Mitigation payments are distributed at
the end of each quarter for the net loss experienced in the second preceding quarter. For example, the first
payments were made on December 31, 2008 for July through September (third quarter) 2008.
The City received $596,462.91 on December 31, 2008 and in 2009 received a total of $2,041,699.40 in mitigation
payments (covering losses through second quarter 2009). Money for mitigation is subject to appropriation by
the State Legislature.
When a jurisdiction's "voluntary compliance revenue" exceeds its loss of local sales tax revenue, the
jurisdiction will cease receiving mitigation payments. "Voluntary compliance revenue" is the local sales tax
revenue gain to each local taxing jurisdiction reported to the Department by sellers in other states voluntarily
registered through the SSUTA.
17
Lodging Tax. The City is authorized to impose a local option tax of one percent on sales of lodging. This tax is
credited against the State`s 6.5 percent retail sales tax and results in no net increase to the taxpayer. The uses of lodging tax proceeds are restricted by State law.
Real Estate Excise Tax. The City is authorized to impose a real estate excise tax on each sale of real property at
the rate of 0.50 percent of the selling price. (This is in addition to the real estate excise tax imposed by the State
at the rate of 1.28 percent.)
The first 0.25 percent tax ("BEET 1 is imposed pursuant to RCW 82.46.010 and may be used solely for financing certain "capital projects" specified in a capital facilities plan element
of the City's a comprehensive
plan. Eligible "capital projects" for BEET 1 include: streets, roads, highways, sidewalks, street and road
lighting systems, traffic signals, bridges, domestic water systems, storm and sanitary sewer systems, parks,
recreational facilities, law enforcement facilities, fire protection facilities, trails, libraries, administrative and
judicial facilities.
The second 0.25 percent tax ("BEET 2") is imposed pursuant to RCW 82.46.035(2) and may be used solely for the following capital projects specified in a capital facilities plan element
of the City's a comprehensive plan.
Eligible "capital projects" for BEET 2 include: streets, roads, highways, sidewalks, street and road lighting
systems, traffic signals, bridges, domestic water systems, storm and sanitary sewer systems, and planning,
construction, reconstruction, repair, rehabilitation, or improvement of parks. BEET 2 excludes the use of funds
to acquire land for parks.
The City must deposit and account for real estate excise tax proceeds in a separate capital projects fund or account. BEET 1 and BEET 2 revenues must be tracked separately because the
uses to which they may be put
are different. RCW 82.46.030(2) and RCW 82.46.035(4). Real estate excise taxes are collected by the County
Treasurer of the county within which the property is located and distributed to the City periodically.
Distributions may be suspended if the City is in noncompliance under RCW 36.70A.340 (relating to growth
management planning). The City currently believes it is in compliance with this statute.
Business and Occupation Tax. The City is authorized to impose a tax for the act or privilege of engaging in business activities. The rates imposed may vary depending on the class of
business and may be based on the
value of products, gross proceeds of sales or gross income of the business. Certain businesses may be
exempted, and deductions and credits are allowed. The maximum rate at which the City may levy the
business and occupation tax (other than on utilities, which are discussed below} is 0.2 percent, in addition to
business and occupation taxes imposed by the State.
Utility Tax. The City is authorized to impose a utility business and occupation tax on the gross receipts of utilities providing service within the City, including investor-owned utilities
and utilities owned by the City.
The maximum rate at which the City may levy the utility business and occupation tax without a vote of the
electorate varies by the type of utility.
The following table shows the historical General Fund revenues from various taxes imposed by the City.
Historical General Fund Revenue Sources
Fiscal Year Ended December 31, 2009~1~ 2008 2007 2006 2005
Regular property taxes $ $ 9,757,999 $15,166,016 $13,946,323 $13,131,388
Sales and use taxes'`"` 17,620,6b1 18,958,484 17,784,374 16,333,1b9
,taxes 1,160,700 1,008,066 1,060,275 1,074,465 Utility taxes 9,812,448 8,169,330 7,876,693 7,141,849
Total Tax Revenues $ $38,351,808 $43,301,896 $40,b67,665 $37,b80,871
(1) Unaudited; the City collected approximately $14.2 million in regular property taxes in 2009, nearly $1.5 million of
which was deposited into the City's Local Street Fund.
Source: City o f Auburn.
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Authorized Investments
Chapter 35.39 RCW limits the investment by cities and towns of its inactive funds or other funds in excess of
current needs to the following authorized investments: United States bonds; United States certificates of
indebtedness; bonds or warrants of the State and any local government in the State; its own bonds or warrants
of a local improvement district which are within the protection of the local improvement guaranty fund law;
and any other investment authorized by law for any other taxing district or the State Treasurer. Under chapter 43.84 RCW, the State Treasurer may invest in non-negotiable certificates
of deposit in designated qualified
public depositories; in obligations of the US government, its agencies and wholly owned corporations; in
bankers' acceptances; in commercial paper; in the obligations of the federal home loan bank, federal national
mortgage association and other government corporations subject to statutory provisions and may enter into
repurchase agreements. Utility revenue bonds and warrants of any city and bonds or warrants of a local
improvement district are also eligible investments (RCW 35.39.030).
Money available for investment may be invested on an individual fund basis or may, unless otherwise restricted by law, be commingled within one common investment portfolio. All income
derived from such
investment may be either apportioned to and used by the various participating funds or for the benefit of the
general government in accordance with city ordinances or resolutions. Funds derived from the sale of bonds
or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances,
resolutions or bond covenants may lawfully prescribe.
Local Government Investment Pool
The State Treasurer's Office administers the Washington State Local Government Investment Pool (the
"LGIP"), which invests money on behalf of more than 450 cities, counties and special taxing districts. In its management of LGIP, the State Treasurer is required to adhere, at all times,
to the principles appropriate for
the prudent investment of public funds. These are, in priority order, (i) the safety of principal; (11) the
assurance of sufficient liquidity to meet cash flow demands; and (iii} to attain the highest possible yield within
the constraints of the first two goals. Historically, the LGIP has had sufficient liquidity to meet all cash flow
demands.
The LGIP, authorized by chapter 43.250 RCW, is a voluntary pool which provides its participants the opportunity to benefit from the economies of scale inherent in pooling. It is also
intended to offer participants
increased safety of principal and the ability to achieve a higher investment yield than would otherwise be
available to them. The pool is restricted to investments with maturities of one year or less, and the average life
typically is less than 90 days. Investments permitted under the pool's guidelines include U.S. government and
agency securities, bankers' acceptances, high quality commercial paper, repurchase and reverse repurchase
agreements, motor vehicle fund warrants, and certificates of deposit issued by qualified Washington State
depositories.
As of December 31, 2009, the City's investments at market value totaled $73,933,234, all of which was invested
in the LGIP.
Authorized Investments for Bond Proceeds
In addition to the eligible investments discussed above, bond proceeds may also be invested in mutual funds
with portfolios consisting of U.S. government and guaranteed agency securities with average maturities of less
than four years; municipal securities rated in one of the four highest categories; and money market funds
consisting of the same, so long as municipal securities held in the fund(s) are in one of the two highest rating
categories of a nationally recognized rating agency. Bond proceeds may also be invested in shares of money market funds with portfolios of securities otherwise authorized by law for
investment by local governments
(RCW 39.59.030).
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Comparative General Fund Balance Sheet
(Fiscal Years Ended December 31)
Unaudited Audited
2009 2008 2007 2006 2005
Assets
Cash & Cash Equivalents $ 9,047,865 $ 8,839,983 $ 10,830,782 $ 9,098,126 $ 9,793,058 Investments 2,990,938 1,999,580 2,997,813 4,457,770 5,424,604
Receivables 5,510,856 3,041,643 3,219,690 2,742,517 2,324,071
Due from Other Governments 1,217,764 2,481,381 1,857,841 2,024,318 1,741,713
Total Assets $ 18,767,423 $ 16,362,587 $ 18,906,126 $ 18,322,731 $ 19,283,446
Liabilities and Fund Balances
Current Payables $ 2,500,995 $ 2,724,414 $ 2,613,365 $ 2,575,616 $ 2,623,287 Customer Deposits 226,679 227,062 235,470 211,345 237,478
Other Liabilities Payable 359 242 69 244 141
Deferred Revenue 2,801,538 339,778 1,594,502 1,087,198 483,715
Total Liabilities 5,529,571 3,291,496 4,443,406 3,874,403 3,344,621
Fund Balances Reserved 10,125 0 10,125 10,125 10,125
Unreserved 13,227,727 13,071,091 14,452,595 14,438,203 15,928,700
Total Liabilities and Fund Balances $ 18,767,423 $ 16,362,587 $ 18,906,126 $ 18,322,731 $ 19,283,446
Source: City o f Auburn.
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Comparative General Fund Statement
of Revenues, Expenditures and Changes in Fund Balance
(Fiscal Years Ended December 31)
Unaudited Audited
2009 2008 2007 2006 2005
Revenues
Taxes $ 36,990,248 $ 38,351,808 $ 43,301,896 $ 40,667,665 $ 37,680,871
Licenses & Permits 1,326,875 1,110,722 1,606,950 1,683,320 2,227,963 Intergovernmental 7,670,754 (i) 5,788,294 (i) 3,451,594 3,645,992 2,667,764
Charges for Services 1,721,141 2,397,025 2,663,788 2,620,942 2,379,987
Fines & Forfeitures 1,911,034 2,059,771 1,930,389 1,054,201 777,241
Investment Earnings 169,445 521,647 848,061 753,930 435,984 Miscellaneous 597,767 849,839 786,146 553,399 538,872
Total Revenues 50,387,264 51,079,106 54,588,824 50,979,449 46,708,682
Expenditures
General Government 7,864,410 7,010,742 6,834,084 6,062,037 5,308,663 Security of Persons & Property 25,356,285 26,157,394 32,798,206 28,884,978 27,051,721
Physical Environment 3,192,090 3,490,636 3,352,466 2,370,300 2,191,796
Transportation 2,761,113 2,784,963 2,096,049 2,041,035 2,006,356
Economic Environment 2,341,297 2,018,159 1,872,312 1,605,676 1,556,678 Health and Human Services 527,030 776,224 416,456 538,783 511,375
Culture & Recreation 6,622,546 6,296,743 6,541,980 4,990,128 4,784,714
Debt Service 372,497 318,242 225,141 199,681 126,930
Capital Outlay 0 0 0 124,719 222,668
Total Expenditures 49,037,266 48,853,103 54,136,694 46,817,337 43,760,901
Excess Revenues
over (under) Expenditures 1,349,998 2,226,003 452,130 4,162,112 2,947,781
Other Financing Sources (Uses):
Proceeds from Capital Lease 35,878 17,728 695,504 4,163 0
Sale of Fixed Assets 100,754 0 0 0 3,595
Operating Transfers In 1,773,957 643,132 1,047,733 60,000 1,049,709 Operating Transfers Out (3,093,826) (4,278,492) (2,180,975) (5,716,772) (8,764,510)
Total Other Sources (Uses) (1,183,237) (3,617,632) (437,738) (5,652,609) (7,711,206)
Excess Revenues
over (under) Expenditures 166,761 (1,391,629) 14,392 (1,490,497) (4,763,425)
Beginning Fund Balance 13,071,091 14,462,720 14,448,328 15,938,825 20,702,250
Ending Fund Balance $ 13,237,852 $ 13,071,091 ~ 14,462,720 $ 14,448,328 $ 15,938,825
( m) Part of the "Operating Transfers Out" was used to partially fund the purchase of the Auburn Regional Justice Center
which houses the police department and court.
Source: City of Auburn.
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2009-10 Biennial Budget -General Fund
(Fiscal Years Ended December 31)
As Amended at 12/31/09 Adopted
2010 2009
Revenues
Taxes $ 39,405,909 $ 37,718,945
Licenses & Permits 1,088,000 1,126,150
Intergovernmental 4,241,990 6,116,550
Charges for Services 2,061,000 1,784,220
Fines & Forfeitures 1,870,700 2,072,400
Investment Earnings 170,000 300,000
Miscellaneous 251,200 431,170
Total Revenues 49,088,799 49,549,435
Expenditures
General Government 9,040,240 8,407,255
Security of Persons & Property 26,453,b00 26,825,195
Physical Environment 3,180,010 3,3b8,795
Transportation 3,176,700 3,127,870
Economic Environment 2,567,035 2,709,395
Health and Human Services 632,800 590,600
Culture ~ Recreation 6,819,b00 6,628,740
Debt Service 641,300 486,600 Capital Outlay 0 311,100
Total Expenditures 52,511,285 52,455,550
Excess Revenues
over (under) Expenditures (3,422,48b) (2,906,115)
Other Financing Sources (Uses):
Operating Transfers In 17,000 3,029,500
Operating Transfers Out (1,494,400) (3,8b7,900)
Total Other Sources (Uses) (1,477,400) (838,400)
Excess Revenues
over (under) Expenditures (4,899,88b) (3,744,515)
Beginning Fund Balance 11,042,107 13,071,091
Ending Fund Balance $ 6,142,221 $ 9,326,576
Source: City of Auburn.
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The City
The City was incorporated in 1891, and operates under State laws applicable to anon-charter code city with a mayor-council form of government. The City is administered by a full-time
mayor (the "Mayor") and seven
part-time council members (the "City Council"), all elected at-large to four-year terms. The City provides a
range of municipal services authorized by State law, including water, sanitary sewer, solid waste, storm
drainage, a general aviation airport, a municipal cemetery, a municipal golf course, and maintenance and
construction of streets and roadways.
The current Mayor and other Council members and their terms of office are as follows:
Member Position Term Expires
Peter B. Lewis Mayor December 31, 2013
Sue Singer Deputy Mayor December 31, 2011
Nancy Backus Councilmember December 31, 2013
Virginia Haugen Councilmember December 31, 2011
John Partridge Councilmember December 31, 2013
Lynn Norman Councilmember December 31, 2011 Bill Peloza Councilmember December 31, 2011
Rich Wagner Councilmember December 31, 2013
City Staff
Peter B. Lewis, Mayor. Mayor Lewis served as a member of the Auburn City Council for four years before
becoming Mayor on January 1, 2002. As a City Councilmember, he served as Vice Chair of the Council
Finance Committee, Vice Chair of the Public Works Committee and was a member of the Planning and
Community Development Committee and the LEOFF Board. Mayor Lewis has also served on numerous other
boards, commissions and committees, including the Auburn Food Bank, the Metro South King County
Reorganization, the Auburn Downtown Committee, the Parking Committee, the Economic Development Committee, the Pierce County Regional Council, and the King County Growth Management Committee.
Currently he is the Chair of the Suburban Cities Association Public Issues Committee, Director of the Valley
Communications Center Administration Board, Chair of the South King County Human Services Forum,
serves on the South County Area Transportation Board, Vice Chair of the Green River Flood Control Zone
District and is a member of the Puget Sound Regional Council Economic Development District Board, the
Puget Sound Regional Policy Committee and the Jail Assembly Executive Board.
Shelley Coleman, Finance Director. Ms. Coleman has been with the City since 1996. From January 1997 through
March 2001, she held the position of Assistant Finance Director and was appointed Finance Director in August
2001 after a brief period serving as the interim director. In her current position, Ms. Coleman oversees a 21-
person staff and is responsible for managing utility billing, financial reporting, budgeting, the Capital Facilities
Plan, cash management, solid waste services, and the Auburn Municipal Airport. Ms. Coleman has been
working with state and local governments for over years. Prior to working at the City of Auburn she was with the City of Bonney Lake, as Accounting Manager, and an auditor with the State
Auditor's Office.
Ms. Coleman graduated from Central Washington University in 1988 with Bachelor of Science degree in
business administration, majoring in Accounting. In 1989, she obtained her Certified Public Accounting (CPA)
license and is licensed to practice in the State. In addition to participating in numerous continuing education
classes to maintain her CPA license, she is a recent graduate of the South Puget Sound Leadership Institute.
Over the years she has served as President of the Puget Sound Finance Officers Association; served on the executive board and served as treasurer for the Auburn Area Chamber of Commerce;
and is currently serving
the first of a three-year term on the Supervisory Committee for Sound Credit Union.
Labor Relations
The City currently has 408 authorized full and positions. The majority of City
employees who are eligible under State law to be represented by a labor organization are employed under
provisions of negotiated contracts with the bargaining units listed below. The City strives to complete
23
agreements with all groups in a timely manner, consistent with all applicable State law and to promote labor
relation policies mutually beneficial to management and employees. In 2007, the City joined with the cities of Algona and Pacific to form a regional fire authority. The Valley Regional
Fire Authority is now its own taxing
district and is no longer funded by the City. The bargaining units are now under the Valley Regional Fire
Authority.
No. of
Bar a~~ Unit Employees Expiration Date
Auburn Police Officer Guild 91 December 31, 2010
Auburn Police Management Unit 5 December 31, 2010
International Association of Machinists and
Aerospace Workers District Lodge #160 26 December 31, 2010
Teamsters Local No. 117,
Outside Unit 76 December 31, 2010
Teamsters Local No. 117, Courthouse Clerical 8~ Custodian Unit 16 December 31, 2010
Pension Funding
Substantially all of these employees are enrolled in the State of Washington Public Employees Retirement
System ("PERS") or the Law Enforcement Officers and Fire Fighters Retirement System ("LEOFF").
Contributions by both employees and employers are based on gross wages. PERS and LEOFF participants
who joined the system by September 30,1977 are Plan 1 members. Those PERS participants who joined on or
after October 1,1977 and by August 31, 2002 are Plan 2 members, unless they exercise an option to transfer to
Plan 3. PERS participants joining on or after September 1, 2002 have the irrevocable option of choosing membership in PERS Plan 2 or PERS Plan 3. LEOFF participants who joined on or
after October 1, 1977 are
Plan 2 members. The City contributed $1,508,500 to PERS and $470,686 to LEOFF in 2009 for all of the City's
employees that are covered under PERS and LEOFF.
The following tables outline the contribution rates of employees and employers under PERS and LEOFF.
PERS Contribution Rates as of September 1, 2009
Plan 1 Plan 2 Plan 3
Employee 6.00% 3.90% Variable ~1~
Employer ~2~ 5.31 % 5.31 % 5.31
(1) Rates vary from 5.0% minimum to 15.0% maximum based on rate selected by the PERS 3 member.
(2) Includes a 0.16% administration fee.
LEOFF Contribution Rates as of September 1, 2009
Plan 1 Plan 2
Employee 0.00% 8.46% Employer ~1> 0.16% 5.24%
(1) Includes a 0.16% administration fee.
According to information provided by the Office of the State Actuary, based upon revised demographic and
economic assumptions, the total unfunded actuarial accrued liability of Plan I of the PERS System currently is
$3.99 billion, of which the State share is $1.596 billion and the local government share is $2.394 billion. In 2005
and 2006, the State Legislature enacted and authorized the State Pension Funding Council to adopt changes in
contribution rates to PERS intended to amortize the PERS I unfunded actuarial liability by 2024. According to
information provided by the Office of the State Actuary, Plan II and III of PERS currently have no unfunded actuarial accrued liability. Shown below are historical employer contribution
rates for Plan I, II and III of
PERS. The contribution rates effective July 1, 2008 and July 1, 2009, include a component of 2.70% and 1.13%,
respectively, dedicated to amortizing the local government share of the PERS I unfunded actuarial liability,
and a component of 0.16% for administrative expenses. These rates are subject to change by future legislation
enacted by the State Legislature to address future changes in actuarial and economic assumptions.
24
While the City's contributions in 2008 represent its full current liability under the systems, any unfunded
pension benefit obligations could be reflected in future years as higher contribution rates. It is expected that the contribution rates for employees and employers in the PERS II and
III will increase.
Information regarding all of these plans is presented in Washington State`s Department of Retirement
Systems' annual financial report. A copy of this report maybe 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 (which is not incorporated herein by reference)
Other Post-Employment Benefits
The Governmental 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 health care 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.
The City's annual OPEB cost (expense) is calculated based on the annual required contribution of the employer
("ARC"), an amount actuarially determined in accordance with the parameters of GASB 45. The ARC
represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year
and to amortize any unfunded actuarial liabilities over a period of 21 years. The following table shows the
components of the City's annual OPEB cost for 2008, the amount actually contributed to the plan and changes
in the City`s net OPEB for LEOFF:
Annual Normal Costs -Beginning of Year $ 90,257
Amortization of UAAL - Beginning of Year 1,540,432
Interest to End of Year 81,534
Annual OPEB cost 1,712,223
Employer Contributions X919
Change in net OPEB Obligation 793,204 Net OPEB Obligation - Beginning of Year 0
Net OPEB Obligation -End of Year 793 204
The City`s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB
obligation for 2008 were as follows:
Fiscal Contribution as a
Year Annual Percentage of OPEB Ended OPEB Cost Annual OPEB Cost Obligation
2008 $1,712,223 54% $793,204
Basis of Accounting
The financial statements of the City have been prepared in conformity with generally accepted accounting
principles for governments, and are regulated by the Washington State Auditor`s Office, Division of Audit.
GASB is the accepted standard setting body for establishing governmental accounting and financial reporting
principles.
Government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary and pension trust fund financial
statements. Interfund
services provided and used are not eliminated in the process of consolidation. Governmental fund financial
25
statements are reported using the current financial resources measurement focus and the modified accrual
basis of accounting.
The modified accrual basis of accounting is followed in all governmental and permanent funds of the City.
Under the modified accrual basis of accounting, revenues are recognized when measurable and available.
Revenues are generally considered available if they are collected within the current period or soon thereafter
(30 days) to pay current liabilities. For derived tax revenues, such as sales tax and utility business and
occupation taxes, revenes are recognized in the period when the underying exchange has occurred. For
imposed non-exchange taxes, such as property taxes, revenues are recognized in the period in which the expenditure occurs and the eligibility requirements have been met. Non-exchange
transactions, such as
contributions, are recognized when the donation eleibility requirements have been satisfied.
Budgetary Process
The City follows the budget procedures set forth in RCW 35A.33 and annual appropriated budgets are legally
adopted for the general and special revenue funds. For governmental funds, there are no substantial
differences between the 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 biannually budgeted governmental funds only. Budgets established for proprietary and trust
funds are "management budgets" and are not legally required to be reported and, as such, are not reported in the Comprehensive Annual Financial Report.
Risk Management
The City is a member of the Washington Cities Insurance Authority (WCIA). Utilizing Chapter 48.62 RCW
(self-insurance regulation) and Chapter 39.34 RCW (Interlocal Cooperation Act), nine cities originally formed
WCIA on January 1, 1981. WCIA was created for the purpose of providing a pooling mechanism for jointly
purchasing insurance, jointly self-insuring, and/or jointly contracting for risk management services. WCIA has
a total of 129 members.
New members initially contract for athree-year term, and thereafter automatically renew on an annual basis.
A one-year withdrawal notice is required bef ore membership can be terminated. Termination does not relieve
a former member from its unresolved loss history incurred during membership.
Liability coverage is written on an occurrence basis, without deductibles. Coverage includes general,
automobile, police, public officials' errors or omissions, stop gap, and employee benefits liability. Limits are $4 million per occurrence self insured layer, and $16 million per occurrence
in the re-insured excess layer. The
excess layer is insured by the purchase of reinsurance and insurance. Total limits are $20 million per
occurrence subject to aggregate sublimits in the excess layers. The WCIA Board of Directors determines the
limits and terms of coverage annually.
Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and
machinery are purchased on a group basis. Various deductibles apply by type of coverage. Property insurance and auto physical damage are self-funded from the members' deductible to $500,000,
for all perils other than
flood and earthquake, and insured above that amount by the purchase of reinsurance.
26
In-house services include risk management consultation, loss control field services, claims and litigation
administration, and loss analyses. WCIA contracts for the claims investigation consultants for personnel issues and land use problems, insurance brokerage, and lobbyist services.
WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as
determined by an outside, independent actuary. The assessment covers loss, loss adjustment, and
administrative expenses. As outlined in the Interlocal Cooperation Act, WCIA retains the right to additionally
assess the membership for any funding shortfall.
An investment committee, using investment brokers, produces additional revenue by investment of WCIA's
assets in financial instruments which comply with all State guidelines. These revenues directly offset portions
of the membership's annual assessment.
A Board of Directors governs WCIA, which is comprised of one designated representative from each member.
The Board elects an Executive Committee and appoints a Treasurer to provide general policy direction for the
organization. The WCIA Executive Director reports to the Executive Committee and is responsible for conducting the day to day operations of WCIA.
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, 2008, attached as Appendix D,
are incorporated by reference to this Official Statement and have been filed with the Municipal Securities
Rulemaking Board ("MSRB"}. All information provided pursuant to the City's ongoing disclosure undertaking shall be submitted to the MSRB as the sole nationally recognized municipal securities
information
repository in accordance with the Securities and Exchange Commission's amendments to Rule 15c2-1.
27
Demographic Information
The City is located within the Green River Valley (the "Valley") with approximately
90 percent of the City's population in County and the remainder in Pierce
County. The Valley has historically been a prime agricultural area of the State and is -
now primarily converted to an industrial and distribution center f or the region. The
City serves as an employment center in south King County, as well as a residential area for people who work in the City of Seattle and King and Pierce Counties.
Historical population of the City and the County are shown below. King County
Washington
Population
The following table shows the historical population for the County and the City:
Population
King County and the City of Auburn
Year King County City of Auburn
2009 1,909,300 67,485
2008 1,884,200 67,005
2007 1,861,300 50,470
2006 1,835,300 48,955
2005 1,808,300 47,470
Source: Washington State Office of Financial Management, March 2010.
Risk of Volcanic Debris Flows
Portions of the City lies in the Green and White River valleys, several of the large valleys that drain Mount Rainier. According to the U.S. Geological Survey (the "USGS"), over the
past 10,000 years Mount Rainier has
been the source of numerous lahars (volcanic debris flow) that buried now densely populated areas as far as
100 km from the volcano. The most recent lahar to rush down this valley occurred about 500 years ago when
part of Mount Rainier's west flank collapsed. It is not possible to predict whether, and when, another lahar
might occur. The USGS and local governments have cooperated in the installation of an automated system to
detect the occurenece of a lahar in the_ Puyallup River valley. Upon detection of a lahar,
the system is intended to issue an automatic notice to ~ County emergency-management officials that would trigger immediate, preplannedernergency-response actions.
Flood Management
In January 2009, record rainfall in southern King County caused rivers to swell and flooding to occur even
with dams and levee systems in place in many areas. In addition to the heavy rainfall, warmer temperatures
added snowmelt to the run-off and tributary stream flooding. The Howard Hanson Dam on the Green River,
which runs through southern King County, received record peak inflows and the reservoir at the dam reached
a record level. As a result, the dam appears to have been damaged. Engineers for the Army Corps of
Engineers (the "Corps"), which built and maintains the dam, are assessing a depression in one of the dam's abutments to determine the extent and cause of the damage. Although the Corps
has assured that there is no
risk of the dam failing, the Corps has announced that it will store less water behind the dam as a safety
precaution until the issue is resolved. As a result, the Corps may release rainwater from storms into the lower
Green River earlier and more often than in the past, which could potentially overwhelm levees that protect
low-lying parts of the City. It cannot be predicted whether a flood or other natural disaster will occur or if
such event did occur, what the impact would be on the City.,
King County
The County is located on Puget Sound in Washington and covers more than 2,200 square miles. The County is
the largest metropolitan county in the State in terms of number of cities and employment and includes more than one quarter of the State's population. The tables in the following section
include the most recent
28
information available. Similar to other municipalities nationwide, the City, the County and the State have
experienced and may continue to experience negative impacts due to current economic conditions.
Income. Historical personal income and per capita income levels for the County and the State are shown
below:
King County and State of Washington
Total Personal and Per Capita Income
King County State of Washington
Total Personal Per Capita Total Personal Per Capita
Year Income (in thousands) Income Income (in thousands) Income
2008 N/A N/A $280,677,561 $42,857
2007 $106,805,239 $57,710 265,738,395 41,203
2006 97,750,314 53,488 245,764,517 38,639
2005 89,032,307 49,488 226,585,245 36,227
2004 88,407,884 49,670 218,431,726 35,347
2003 79,199,166 44,800 202,942,123 33,214
Source: U.S. Department of Commerce, Bureau of Economic Analysis, March 2010.
Taxable Retail Sales. Taxable retail sales reflect only those sales subject to retail sales tax. Historical taxable retail sales for the City and the County are shown below:
Taxable Retail Sales
Kin Cry City of Auburn 2009~1~ $ 19,102,154,079 $ 638,514,509
2008 45,711,920,389 1,625,283,631
2007 47,766,338,768 1,947,746,755
2006 43,993,478,514 1,853,983,373
2005 40,463,996,808 1,741,803,095
2004 37,253,103,540 1,657,264,104
(1) Through second quarter only; through second quarter 2008 for the County was $22,761,952,403, for the City was
$880,53b,61b.
Source: Washington State Department of Revenue, March 2010.
Building Permits. The number and valuation of new single-family and multi-family residential building
permits in the County are listed below:
King County
Residential Building Permits
New Single Family Units New Multi Family Units Total
Year Number Construction Cost Number Construction Cost Construction Cost
2009~1~ 1,992 $ 535,129,117 936 $ 142,237,552 $ 677,366,669
2008 3,029 866,565,304 7,427 1,009,669,531 1,876,234,835
2007 5,206 1,506,180,957 10,212 1,246,804,898 2,752,985,855
2006 5,770 1,622,174,594 8,305 1,023,922,267 2,646,096,861
2005 6,331 1,741,241,527 5,703 556,297,096 2,297,538,623
(1) Through December 2009.
Source: U.S. Bureau of the Census, March 2010.
29
Employment. State-wide employment figures (rounded) for major employers located primarily within the
central Puget Sound region (King, Pierce and Snohomish Counties} and employment figures for the City are shown in the f ollowing tables:
Major Employers~1~
Number of
Employer Employees
The Boeing Company 74,277~2~
U.S. Army Fort Lewis 40,091
Microsoft 36,405
University of Washington 20,605
Providence Health 14,090
King County Government 12,586
City of Seattle 9,946 Group Health Cooperative 9,135
MultiCare Health System 8,552
Costco 7,475
Weyerhaeuser 6,770
Alaska Air Group, Inc. 6,565
Washington Mutual Inc. ~3> 6,200
Starbucks Corp. 4,884 Safeway 4,673
Nordstrom Inc. 4,421
Swedish Medical Center 3,860
Qwest 3,639
(1) Does not include part-time or seasonal employment figures.
(2) From entity, as of April 30, 2009.
(3) As of September 25, 2008, Washington Mutual Bank merged with financial assistance into JPMorgan Chase Bank, National Association.
Source: Puget Sound Business Journal, Book of Lists, 2009.
City of Auburn
2008 Major Employers
Number of Employer TXpe of Business Employe~es
The Boeing Company Aerospace 5,000
Muckelshoot Tribal Enterprises Gaming 2,200
Auburn School District Education 1,800
Super Mall Retail 1,700
Green River Community College Education 1,067
Safeway Grocery retail/distribution 900 Auburn Regional Medical Center Hospital 805
Emerald Downs Racetrack Horse racing 678
Social Security Administration Government 600
Zones, Inc. Technology reseller 500
Source: City of Auburn.
30
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.
King County
Nonagricultural Wage 8~ Salary Workers and Labor Force and Employment Data
Annual Average
2009~1~ 2008 2007 2006 2005
Civilian Labor Force 1,112,490 1,088,440 1,068,490 1,047,740 1,012,940
Total Employment 1,023,040 1,041,450 1,028,850 1,005,240 965,940
Total Unemployment 89,450 47,000 39,650 42,500 47,000
Percentage of Labor Force 8.0 4.3 3.7 4.1 4.6
NAICS Industry 2009 ~1~ 2008 2007 2006 2005
Total Nonfarm 1,156,742 1,216,442 1,200,583 1,176,575 1,141,950 Total Private 990,050 1,050,208 1,037,408 1,014,558 980,600
Goods Producing 161,767 186,358 188,533 182,975 170,367
Natural Resources and Mining 542 583 667 675 692
Construction 57,950 73,792 74,867 69,933 63,008
Manufacturing 103,300 111,967 112,992 112,400 106,658
Services Providing 994,967 1,030,075 1,012,067 993,575 971,575
Trade, Transportation, and 211,733 224,733 224,117 224,233 222,092 Utilities
Financial Activities 70,800 75,883 77,100 77,600 76,183
Professional and Business Services 177,050 194,217 190,650 182,250 172,533
Educational and Health Services 140,158 133,508 127,858 124,758 122,400
Leisure and Hospitality 107,508 113,375 111,833 108,633 105,925
Other Services 41,533 42,442 41,567 41,608 41,100
Government 166,683 166,233 163,200 162,025 161,325 Workers in Labor/Management 0 958 0 8 850
Disputes
(1) Through December 2009.
Source: State Employment Security Department.
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 oftwo-thirds of all the members elected to each house of the Legislature. After two years,
the law is subject to amendment or
repeal by the Legislature in the same manner as other laws.
Future Initiatives and Referenda
In recent years there has been an increase in the number of initiatives and referenda filed in Washington,
including state initiatives targeting property taxes imposed by local jurisdictions. The City cannot predict
whether this trend will continue, whether any filed initiatives will receive the requisite signatures to be
certified to the ballot, and whether such initiatives will be approved by the voters and, if challenged, upheld
by the courts.
31
Tax Matters
Tax-Exempt Bonds
Exclusion From Gross Income. In the opinion of Bond Counsel, under existing federal law and assuming
compliance with applicable requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that
must be satisfied subsequent to the issue date of the Tax-Exempt Bonds, interest on the Tax-Exempt Bonds is
excluded from gross income for federal income tax purposes.
Continuing Requirements. The City is required to comply with certain requirements of the Code after the date
of issuance of the Tax-Exempt Bonds in order to maintain the exclusion of the interest on the Tax-Exempt Bonds from gross income for federal income tax purposes, including, without limitation,
requirements
concerning the qualified use of Tax-Exempt Bond proceeds and the facilities financed or refinanced with Tax-
Exempt Bond proceeds, limitations on investing gross proceeds of the Tax-Exempt Bonds in higher yielding
investments in certain circumstances, and the requirement to comply with the arbitrage rebate requirement to
the extent applicable to the Tax-Exempt Bonds. The City has covenanted in the Bond Resolution to comply
with those requirements, but if the City fails to comply with those requirements, interest on the Tax-Exempt Bonds could become taxable retroactive to the date of issuance of the Tax-Exempt
Bonds. Bond Counsel has
not undertaken and does not undertake to monitor the City's compliance with such requirements.
Corporate Alternative Miriirnurn Tax - 2010A Bortds. While interest on the 2010A Bonds also is not an item of tax
preference for purposes of the alternative minimum tax applicable to corporations, under Section 55 of the
Code, tax exempt interest, including interest on the 2010A Bonds, received by corporations is taken into
account in the computation of adjusted current earnings for purposes of the alternative minimum tax
applicable to corporations (as defined for federal income tax purposes). Under the Code, alternative minimum taxable income of a corporation will be increased by 75 % of the excess of
the corporation's adjusted current
earnings (including any tax exempt interest) over the corporation's alternative minimum taxable income
determined without regard to such increase. A corporation's alternative minimum taxable income, so
computed, that is in excess of an exemption of $40,000, which exemption will be reduced (but not below zero)
by 25 % of the amount by which the corporation's alternative minimum taxable income exceeds $150,000, is
then subject to a 20 % minimum tax.
A small business corporation is exempt from the corporate alternative minimum tax for any taxable year
beginning after December 31,1997, if its average annual gross receipts during the three-taxable-year period
beginning after December 31, 1993, did not exceed $5,000,000, and its average annual gross receipts during
each successive three-taxable-year period thereafter ending before the relevant taxable year did not exceed
$7,500,000.
Alternative Minimum Tax - 2010C Bonds. Under existing federal law, interest on the 2010C Bonds received by
individuals and corporations is not treated as an item of tax preference for purposes of the federal alternative
minimum tax, and interest on the 2010C Bonds received by corporations is not taken into account in
determining adjusted current earnings of corporations for purposes of the federal alternative minimum tax.
Tax on Certain Passive Investment Income of S Corporations. Under Section 1375 of the Code, certain excess net
passive investment income, including interest on the Tax-Exempt Bonds, received by an S corporation (a
corporation treated as a partnership f or most federal tax purposes) that has Subchapter C earnings and profits at the close of the taxable year may be subject to federal income taxation
at the highest rate applicable to
corporations if more than 25% of the gross receipts of such S corporation is passive investment income.
Foreign Branch Profits Tax. Interest on the Tax-Exempt Bonds may be subject to the foreign branch profits tax
imposed by Section 884 of the Code when the Tax-Exempt Bonds are owned by, and effectively connected
with a trade or business of, a United States branch of a foreign corporation.
Possible Consequences of Tax Compliance Audit. The Internal Revenue Service (the "IRS") has established a
general audit program to determine whether issuers of tax-exempt obligations, such as the Tax-Exempt Bonds,
are in compliance with requirements of the Code that must be satisfied in order for interest on those
32
obligations to be, and continue to be, excluded from gross income for federal income tax purposes. Bond
Counsel cannot predict whether the IRS would commence an audit of the Tax-Exempt Bonds. Depending on all the f acts and circumstances and the type of audit involved, it is possible that
commencement of an audit of
the Tax-Exempt Bonds could adversely affect the market value and liquidity of the Tax-Exempt Bonds until
the audit is concluded, regardless of its ultimate outcome.
Tax-Exempt Bonds "Qualified Tax-Exempt Obligations" for Financial Institutions
Section 265 of the Code generally provides that 100% of any interest expense incurred by banks and other
financial institutions that is allocable to tax-exempt obligations acquired after August 1986, will be
disallowed as a tax deduction. However, if the tax-exempt obligations are obligations other than certain
private activity bonds, are issued by a governmental unit that, together with all entities subordinate to it, does
not reasonably anticipate issuing more than $30,000,000 of taxexempt obligations (other than certain private activity bonds and other obligations not required to be included in such
calculation) in the current calendar
year, and are designated by the governmental unit as "qualified tax-exempt obligations," only 20% of any
interest expense deduction allocable to those obligations will be disallowed.
The City is a governmental unit that, together with all subordinate entities, reasonably anticipates issuing less
than $30,000,000 of tax-exempt obligations (other than certain private activity bonds and other obligations not
required to be included in such calculation) during the current calendar year, and has designated the Tax- Exempt Bonds as "qualified tax-exempt obligations" for purposes of Section
265(b)(3) of the Code. Therefore,
only 20% of the interest expense deduction of a financial institution allocable to the Tax-Exempt Bonds will be
disallowed for federal income tax purposes.
Reduction o f Loss Reserve Deductions for Property and Casualty Insurance Companies. Under Section 832 of the
Code, interest on the Tax-Exempt Bonds received by property and casualty insurance companies will reduce
tax deductions for loss reserves otherwise available to such companies by an amount equal to 15% of tax exempt interest received during the taxable year.
Effect on Certain Social Security and Retirement Benefits. Section 86 of the Code requires recipients of certain
Social Security and certain Railroad Retirement benefits to take receipts or accruals of interest on the Tax-
ExemptBonds into account in determining gross income.
Other Possible Federal Tax Consequences. Receipt of interest on the Tax-Exempt Bonds may have other federal tax consequences as to which prospective purchasers of the Tax-Exempt Bonds
may wish to consult their own
tax advisors.
Build America Bonds
This advice was written to support the promotion or marketing of the Build America Bonds. This advice is
not intended or written to be used, and may not be used, by any person or entity for the purpose of
avoiding any penalties that may be imposed on any person or entity under the Code. Prospective
purchasers of the Build America Bonds should seek advice based on their particular circumstances from an
independent tax advisor.
The following discussion generally describes certain aspects of the principal U.S. federal tax treatment of U.S.
persons that are beneficial owners ("Owners") of the Build America Bonds who have purchased the Build
America Bonds in the initial offering and who hold the Build America Bonds as capital assets within the
meaning of Section 1221 of the Code. For purposes of this discussion, a "U.S. person" means an individual
who, for U.S. federal income tax purposes, is (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the United States or any political
subdivision thereof, (111) an estate, the income of which is subject to U.S. federal income taxation regardless of its source of income, or (iv) a trust, if either: (A) a United States
court is able to exercise primary supervision
over the administration of the trust, and one or more United States persons have the authority to control all
substantial decisions of the trust or (B) a trust has a valid election in effect to be treated as a United States
person under the applicable treasury regulations.
This summary is based on the Code, published revenue rulings, administrative and judicial decisions, and
existing and proposed Treasury regulations (all as of the date hereof and all of which are subject to change,
33
possibly with retroactive effect). This summary does not discuss all of the tax consequences that may be
relevant to an Owner in light of its particular circumstances, such as an Owner who may purchase the Build America Bonds in the secondary market, or to Owners subject to special rules,
such as certain financial
institutions, insurance companies, tax-exempt organizations, non-U.S. persons, taxpayers who may be subject
to the alternative minimum tax or personal holding company provisions of the Code, or dealers in securities.
Accordingly, before deciding whether to purchase any Build America Bonds, prospective purchasers
should consult their own tax advisors regarding the United States federal income tax consequences, as well
as tax consequences under the laws of any state, local or foreign taxing jurisdiction or under any applicable
tax treaty, of purchasing, holding, owing and disposing of the Build America Bonds.
In General. As described herein under the heading "THE BONDS-Designation of the Bonds as 'Build
America Bonds,"' the City has made irrevocable elections to have the 2010B and 2010D Bonds treated as
"Build America Bonds" within the meaning of Section 54AA(d) of the of the Code that are "qualified bonds"
within the meaning of Section 54AA(g) of the Code. As a result of these elections, interest on the Build
America Bonds is not excludable from the gross income of the Owners under section 103 of the Code, and
Owners of the Build America Bonds will not be allowed any federal tax credits as a result of ownership of or receipt of interest payments on the Build America Bonds.
Payments of Interest. Interest paid on the Build America Bonds will generally be taxable to Owners as ordinary
interest income at the time it accrues or is received, in accordance with the Owner's method of accounting f or
U.S. federal income tax purposes. Owners who are cash-method taxpayers will be required to include interest
in income upon receipt of such interest payment; Owners who are accrual-method taxpayers will be required
to include interest as it accrues, without regard to when interest payments are actually received.
Disposition or Retirement of Build America Bonds. Upon the sale, exchange or other disposition of a Build
America Bond, or upon the retirement of a Build America Bond (including by redemption), an Owner will
recognize capital gain or loss equal to the difference, if any, between the amount realized upon the disposition
or retirement (excluding any amounts attributable to accrued but unpaid interest, which will be taxable as
such) and the Owner's adjusted tax basis in the Build America Bond. Any such gain or loss will be United
States source gain or loss for foreign tax credit purposes.
Defeasance of Build America Bonds. If the City defeases any Build America Bonds, such bonds maybe deemed to
be retired and "reissued" for federal income tax purposes as a result of the defeasance. In such event, the
Owner of a Build America Bond would recognize a gain or loss on the Build America Bond at the time of
defeasance.
Backup Withholding. An Owner may, under certain circumstances, be subject to "backup withholding" (currently the rate of this withholding tax is 28%, but may change in the future) with
respect to interest on the
Build America Bonds. This withholding generally applies if the Owner of a Build America Bonds (a) fails to
furnish the Bond Registrar or other payor with its taxpayer identification number; (b) furnishes the Bond
Registrar or other payor an incorrect taxpayer identification number; (c) fails to report properly interest,
dividends or other "reportable payments" as defined in the Code; or (d) under certain circumstances, fails to
provide the Bond Registrar or other payor with a certified statement, signed under penalty of perjury, that the
taxpayer identification number provided is its correct number and that the Owner is not subject to backup withholding. Any amount withheld may be creditable against the Owner's U.S.
federal income tax liability
and be refundable to the extent it exceeds the Owner's U.S. federal income tax liability. The amount of
"reportable payments" for each calendar year and the amount of tax withheld, if any, with respect to
payments on the Build America Bonds will be reported to the Owners and to the Internal Revenue Service.
Reporting of Interest Payments. Subject to certain exceptions, interest payments made to beneficial owners with
respect to the Bonds will be reported to the IRS. Such information will be filed each year with the IRS on Form 1099, which will reflect the name, address and Taxpayer Identification
Number of the beneficial owner. A
copy of Form 1099 is required to be sent to each beneficial owner of a Bond.
34
Rating
As noted on the cover page of this Official Statement, the City will apply for a rating for the Bonds from
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
To meet the requirements of United States Securities and Exchange Commission ("SEC") Rule 15c2-12(b)(5)
(the "Rule"), as applicable to a participating underwriter for the Bonds, the City will undertake (the "Undertaking") for the benefit of holders of the Bonds to provide or cause to be
provided, either directly or
through a designated agent, to the Municipal Securities Rulemaking Board ("MSRB"), in an electronic format
as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB: (a) annual
financial information and operating data of the type included in this Official Statement as generally described
below ("annual financial information") and (b) to the MSRB timely 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; (111) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial
difficulties; (v) substitution of
credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions or events affecting the tax-
exempt status of the Bonds; (vll) modifications to rights of holders of the Bonds; (vlll) Bond calls (other than
scheduled mandatory redemption of Term Bonds); (ix) defeasances; (x) release, substitution, or sale of
property securing repayment of the Bonds; and (xi) rating changes. The City will also provide to the MSRB
timely notice of a f allure by the City to provide required annual financial information on or before the date
specified below.
Type of Annual Financial Information Undertaken to be Provided. The annual financial information that the City
undertakes to provide will consist of: (1) annual financial statements prepared (except as noted in the financial
statements) in accordance with applicable generally accepted accounting principles promulgated by the
Government Accounting Standards Board ("GASB")and made applicable to Washington state local governmental
units such as the City, as such principles may be changed from time to time, which statements shall not be
audited, except, however, that if and when audited f financial statements are otherwise prepared and available to the City they will be provided; (2) a statement of authorized, issued
and outstanding balance of general
obligation debt; (3) the assessed value of property within the City subject to ad valorem taxation; and (4) ad
valorem tax levy rates and amounts and percentage of taxes collected. The annual financial information that
the City undertakes to provide will be provided to the MSRB not later than the last day of the ninth month
after the end of each fiscal year of the City (currently, a fiscal year ending December 31), as such fiscal year
may be changed as permitted or required by State law, commencing with the City's fiscal year ending
December 31, 2009.
The annual financial information maybe provided in a single or multiple documents and maybe incorporated
by specific reference to documents available to the public on the Internet website of the MSRB or filed with the
SEC.
Amendment of Undertaking. The Undertaking is subject to amendment after the primary offering of the Bonds
without the consent of any holder of any Bond, or of any broker, dealer, municipal securities dealer, participating underwriter, rating agency or the MSRB, under the circumstances and
in the manner permitted
by the Rule.
The City will give notice to the MSRB of the substance (or provide a copy) of any amendment to the
Undertaking and a brief statement of the reasons for the amendment. If the amendment changes the type of
annual financial information to be provided, the notice also will include a narrative explanation of the effect of
that change in the type of information to be provided.
35
Termination of Undertaking. The City`s obligations under the Undertaking shall terminate upon the legal
defeasance of all of the Bonds. In addition, the City's obligations under the Undertaking shall terminate if those provisions of the Rule which require the City to comply with the Undertaking
become legally
inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of nationally recognized bond
counsel or other counsel familiar with federal securities laws delivered to the City, and the City provides
timely notice of such termination to the MSRB.
Remedy for Failure to Comply with Undertaking. If the City or any other obligated person fails to comply with the
Undertaking, the City will proceed with due diligence to cause such noncompliance to be corrected as soon as practicable after the City learns of that failure. No failure by the City
or other obligated person to comply with
the Undertaking will constitute a def ault in respect of the Bonds. The sole remedy of any holder of a Bond will
be to take such actions as that holder deems necessary, including seeking an order of specific performance
from an appropriate court, to compel the City or other obligated person to comply with the Undertaking.
Prior Compliance. The City is in compliance with its previous undertakings to provide continuing disclosure
under the Rule.
Legal and Underwriting
Approval of Counsel
Legal matters incident to the authorization, issuance and sale of Bonds by the City are subject to the approving legal opinions of Foster Pepper PLLC, Bond Counsel, Seattle, Washington.
Forms of Opinions of Bond
Counsel are attached hereto as Appendix B. The opinions of Bond Counsel are given based on factual
representations made to Bond Counsel, and under existing law, as of the date of initial delivery of the Bonds,
and Bond Counsel assumes no obligation to revise or supplement its opinions to reflect any facts or
circumstances that may thereafter come to its attention, or any changes in law that may thereafter occur. The
opinions of Bond Counsel is an expression of its professional judgment on the matters expressly addressed in
its opinions and does not constitute a guarantee of result. Bond Counsel will be compensated only upon the issuance and sale of the Bonds.
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 the nature of its activities, the City is subject to certain pending legal actions which arise in the
ordinary course of business. Based on the information presently known, the City believes that the ultimate
liability for any of such legal actions will not be material to the financial position of the City.
Official Statement
The City will deem final this Preliminary Official Statement as of its date for the purpose of Securities and Exchange Commission Rule 15c2-12.
36
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 the following
prices:
Series Purchase Price
2010A
2010B
2010C
2010D
The Bonds will be reoffered at the following average reoffering prices:
Series Reoffering Price
2010A
2010B
2010C
2010D
. After the initial public offering, the public offering prices maybe varied from time to time.
Conflicts of Interest
Some or all of the fees of the Underwriter and Bond Counsel are contingent upon the issuance and sale of the Bonds. Furthermore, Bond Counsel from time to time serves as counsel to the
Underwriter with respect to
issuers other than the City and transactions other than the issuance of the Bonds. None of the Council
members or other officers of the City have interests in the issuance of the Bonds that are prohibited by
applicable law.
Concluding Statement
All estimates, assumptions, statistical information and other statements contained herein, while taken from
sources considered reliable, are not guaranteed by the City or the Underwriter. 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 f act.
The information contained herein should not be construed as representing all conditions affecting the City or
the Bonds. Additional information maybe obtained directly from the City or the Underwriter.
The foregoing statements relating to the Bond Ordinance and other documents are in all respects subject to
and qualified in their entirety by provisions of such documents.
This Official Statement, starting with the cover page and all subsequent pages, including any appendices,
comprise the entire Official Statement, which has been approved by the City. The City has represented to the
Underwriter that the portions of this Official Statement directly pertaining to the City neither contain any
misrepresentation of material fact nor omit any material fact necessary to understand the financial, economic
or legal nature of the City or any information presented herein.
37
Appendix A
Local Revitalization Financing
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Local Revitalization Financing
Introduction
Local revitalization financing ("LRF") is a form of tax increment financing based on both property tax and
sales tax increments, authorized pursuant to chapter 39.104 RCW and other state statutes (the "LRF
Statutes"). The LRF Statutes were enacted by the Washington State Legislature in 2009 for use by seven
"demonstration projects" and a limited number of additional jurisdictions selected on a "first come" basis
after submitting competitive applications to the Washington State Department of Revenue ("DOR"). The City is authorized to use LRF as a demonstration project.
The LRF Statutes allow a sponsoring local government to use revenues from three sources to finance
certain Public Improvements within a designated Revitalization Area:
• a contribution from the State (the "State Contribution"), which is generated by an additional local
sales and use tax (the "LRF Tax") that is offset against the State sales and use tax;
• contributions of Local Property Tax Allocation Revenues from certain participating local taxing
districts; and
• contributions of Local Sales and Use Tax Increment from certain participating local governments.
See "State LRF Funding Sources" and "Local LRF Funding Sources," below. The revenues from these local
increments and the State Contribution must be used to finance Public Improvements within a designated
Revitalization Area. Certain capitalized terms used but not defined in this section have the meanings given in RCW 39.104.020 and certain other LRF Statutes.
Approval to Use LRF
State law requires that a sponsoring local government must be approved by DOR before it may use LRF.
To receive DOR approval, the jurisdiction must create a Revitalization Area (including complying with
certain notice and public hearing requirements) and submit an application to DOR. RCW 39.104.040 and
.050 describe certain limitations and requirements that apply to the creation of a Revitalization Area.
RCW 39.104.100 and 82.14.505 set forth the application requirements applicable to jurisdictions with
"competitive" applications and to those with demonstration projects, respectively.
In accordance with these provisions, the City created its ~ ~ Revitalization Area" by
Resolution No. 4502 (the "LRF passed by the City Council on August 3, 2009, and
identified the Public Improvements to be financed as follows:
(collectively, the
"LRF Improvements"). The City submitted its application to DOR on August 11, 2009 and, on September
16, 2009 received a Project Award in the amount of $250,000. The Project Award sets a limitation on the maximum State Contribution amount available to the City in each State fiscal year
(July 1 through
June 30).
State LRF Funding
The State Contribution and the LRF Tax.
The State Contribution is provided through an additional local sales and use tax (the "LRF Tax") that is
imposed by the sponsoring local government throughout its boundaries (not just within the
Revitalization Area). This additional tax is credited against the State-imposed sales and use tax, resulting
in no net increase to the taxpayer. This results in effectively shifting revenues that would otherwise have been paid into the State general fund directly to the sponsoring local government.
In accordance with
RCW 82.14.510, the LRF tax expires the earlier of the date that bonds to which LRF revenues are pledged
("LRF Bonds")are retired or 25 years after date the LRF tax is first imposed.
Once imposed, the LRF Tax is collected by DOR, at no cost to the sponsoring local government, in the
same manner and upon the same taxable events as other Local Sales and Use Tax is collected. Tax
receipts are distributed by the State Treasurer to each sponsoring local government on a monthly basis, with receipt by the sponsoring local government lagging two months behind collection.
The distribution
of the LRF Tax receipts by the State is not subject to appropriation.
LRF Tax revenues received by the sponsoring local government may be used only for the purpose of
paying debt service on LRF Bonds. The City is issuing the Bonds pursuant to such statute. The City is
further authorized by the local revitalization statutes to pledge receipts from the LRF Tax for the payment
of the Bonds. The City has done so in the Bond Ordinance . Although the City's receipts f rom the LRF
Tax have been pledged to the payment of the principal of and interest on the Bonds,
the _Bonds do not constitute an obligation of the State of Washington, either general
or special.
The LRF Statutes set forth certain preconditions for imposing the LRF Tax and prescribe certain
limitations on the State Contribution, which caps the amount of revenues that a sponsoring local government may receive from the LRF Tax in any State fiscal year, regardless of the amount
of actual
receipts generated by the LRF Tax.
Co7lditiorls to Imposing the LRF Tax. In order to obtain a State Contribution, a sponsoring local government
that has received DOR approval to use LRF must meet the following conditions prior to imposing the
LRF Tax. For demonstration projects, such as the City's, the sponsoring local government may begin
imposing the tax on any July 1, beginning July 1, 2010, after it has issued LRF Bonds. Authority to impose a LRF Tax expires on the date that is 25 years after the LRF Tax is first imposed
or, if earlier, the
date that the LRF Bonds are retired. The City is a demonstration project and adopted Ordinance No.
to begin imposing the LRF Tax as of July 1, 2010.
Lirnitatiorls orl LRF Tax Revenues. Once the LRF Tax has been imposed, state law limits the amount of LRF
Tax revenues that a sponsoring local government is eligible to receive, regardless of the amount of
revenue actually produced by the tax rate, by the annual State Contribution amount. For each State fiscal year (July 1 through June 30), DOR will approve a State Contribution amount
for each approved LRF
project, which caps the amount of LRF Tax revenues that will be remitted to that sponsoring local
government during that State fiscal year. In any State fiscal year, all LRF Tax revenues collected in excess
of the State Contribution amount become property of the State.
The State Contribution amount is equal to the lesser of (a) the Project Award amount, or (b) the total
amount of Revenues From Local Public Sources dedicated in the preceding calendar year to the payment of LRF Bonds and to paying the costs of LRF Improvements on apay-as-you-go basis,
as reported by the
City to the DOR (the "Local Match"). In determining the amount of Local Match, the sponsoring local
government may "carry forward" amounts of Revenues From Local Public Sources that were not
necessary to meet the Local Match requirement in prior years. The DOR's determination of the State
Contribution amount is not appealable.
Limitations on the rate at which the LRF Tax is imposed. The rate of LRF Tax imposed by any sponsoring local government may not exceed the anticipated rate contained in its application
approved by DOR.
This maximum rate was determined by the applicant, with technical assistance from DOR, based on the
projected rate reasonably necessary to produce revenues equal to the project award over a period of ten
months.
In addition, the LRF Tax rate(s) imposed on any particular taxable event may not exceed the rate of the
State sales and use tax (currently 6.5%) less (a) the aggregate rates of all other local sales and use taxes that are credited against the state sales and use tax, including all taxes
imposed, or authorized but not yet
imposed, under other tax increment financing programs and other programs, and less (b) the amount
required to be dedicated to the state "performance audits of government account" under RCW
82.08.020(b) (currently 0.16% of all revenues from State-imposed sales and use taxes).
The City's rate may not exceed which is the anticipated rate of the LRF Tax that was
contained in the City's approved application. Commencing on July 1, the City
expects to impose the LRF Tax at a rate of
Additional Considerations Regarding the State Contribution and LRF Tax
Local Match Requirement. The State Contribution amount is limited by the amount of Local Match reported by the sponsoring local government to DOR in an annual report filed no later than
March 1 of
each year. See "Annual Reporting Requirement" below. This means that in order to be eligible to receive its
full Project Award amount in any given calendar year, a sponsoring local government must make
expenditures in each calendar year of local funds (which may include federal funds, Local Property Tax
Allocation Revenues (described below), Local Sales and Use Tax Increment (described below), or funds
from any source other than State) at least equal to the amount of the Project Award (the "Local Match
requirement"). Amounts not needed in one year to meet the Local Match requirement may be carried forward into future years. However, if a sponsoring local government fails to meet the
Local Match
Requirement in any calendar year, the State Contribution amount for the subsequent State fiscal year is
not permitted to exceed the Local Match, resulting in a State Contribution amount that is less than the full
Project Award amount.
No Guarantee of LRF Tax Distributions. There is no guarantee that the full State Contribution amount will
be distributed to a sponsoring local government in any State fiscal year. LRF Tax revenues will cease being distributed to a sponsoring local government for the remainder of the State
fiscal year when the
State Contribution amount is met. Distributions will also cease if the aggregate amount of receipts in that
State fiscal year from LRF Taxes imposed by all jurisdictions equals the aggregate Annual State
Contribution Limit. If distributions were to cease in any State fiscal year for any of these reasons, the LRF
Tax would be distributed again at the beginning of the next State fiscal year. Moreover, if retail sales (and
other taxable events) are less than the City and the DOR projected when determining the rate approved
in the City's application, gross LRF Tax revenues could fail to generate the full State Contribution amount that the City would otherwise expect to receive. There are also certain events
that permit the State to
withhold a portion of the State Contribution. See "Annual Reporting Requirement" below.
Annual Reporting Requirement. Under RCW 82.32.765, a sponsoring local government must file an annual
report with DOR by each March 1, containing (a) certain information about tax revenues in the
Revitalization Area, businesses locating in the Revitalization Area, and job creation and wage data, (b)
information regarding Local Match, and (c) a certification that the City is in compliance with the conditions set forth in RCW 39.104.030, including, for example, that the development
within the
Revitalization Area is consistent with certain state laws pertaining to for growth management (chapter
36.70A RCW). If the sponsoring local government fails to comply with this annual reporting
requirement, it will not receive any LRF Tax revenues in the subsequent f fiscal year until such failure is
cured and DOR calculates a State Contribution amount for that fiscal year. The City filed its initial
annual report on February 2010, and it believes that it is currently in compliance with the
conditions stated in RCW 39.104.030, including but not limited to compliance with chapter 36.70A RCW.
A~regate Limit on State Contributions. State law currently provides that when the aggregate recce of all
LRF Taxes imposed across the State equal the "annual state contribution limit" DOR must cease making
distributions to any local government. The "annual state contribution limit" is currently set by statute at
an amount that is equal to the total of all Project Awards made by DOR to date and RCW 39.104.100(3)(b)
provides that the total of all Project Awards may not exceed the "annual contribution limit."
Nonetheless, it is possible that the amount of revenue enerated by all LRF Taxes imposed throughout the State could exceed the "annual state contribution limit" before the City has received
its full State
Contribution amount. This could occur, for instance, if one or more of the other sponsoring local
governments encounter unexpected growth in the number of taxable events and revenues from LRF
Taxes, generating more revenues than expected (even though these revenues may accrue to the State, to
the extent that they exceed an individual sponsoring local government's State Contribution).
Local LRF Funding Sources
Local Property Tax Allocation Revenues
The LRF Statutes permit a sponsoring local government to capture a portion of the incremental increase
in revenues from "regular property taxes" (as defined in the LRF Statutes) that are imposed by certain
overlapping local taxing districts on property located within the Revitalization Area. Local Property Tax Allocation Revenues that are spent on to repay LRF Bonds or to pay costs of
LRF Improvements count
toward the Local Match requirement for purposes of the State Contribution described above.
Local Property Tax Allocation Revenues result from applying the taxing district's otherwise applicable
"regular property tax" rate to the Property Tax Allocation Revenue Value within the Revitalization Area.
For purposes of the LRF Statutes, "regular property taxes" means taxes that are subject to certain
statutory and constitutional limitations, and taxes imposed by port districts and public utility districts. The definition excludes voter-approved "excess" property taxes, property taxes
levied by public utility
districts to repay general indebtedness, the State property tax, and revenues resulting from voter-
approved increases to regular property taxes under chapter 84.55 RCw (known as "levy lid lifts")that are
limited to a specific purpose. For additional description of property taxing authority, see "Taxing
Authority -Overlapping Taxing Districts" and " -Regular Property Tax Limitations," herein.
No overlapping taxing districts have opted to become participating taxing districts with respect to the City's LRF project. Therefore, the City does not expect to collect any Local Property
Tax Allocation
Revenues from participating taxing districts.
Local Sales and Use Tax Increment
The LRF Statutes permit a sponsoring local government to capture a portion of the incremental increase
in local sales and use tax revenues ("Local Sales Tax Increment") derived from sales and use taxes
imposed by participating local governments under authority of RCW 82.14.030. "Local Sales and Use Tax
Increment" includes the local government's estimate of the annual increase in sales and use tax resulting
from taxable activity within a Revitalization Area. Local Sales and Use Tax Increment that is spent on to
repay LRF Bonds or to pay costs of LRF Improvements count toward the Local Match requirement for purposes of the State Contribution described above.
No overlapping local governments have opted to become participating local governments with respect to
the City's LRF project. Therefore, the City does not expect to collect any Local Sales and Use Tax
Increment from any participating local governments.
Appendix B
Forms of Opinions of Bond Counsel
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Appendix C
Book-Entry Transfer System
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THE DEPOSITORY TRUST COMPANY
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 8~ 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 alimited-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.]
Neither DTC nor Cede 8~ 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 governed by standing
instructions and customary practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of such Participant and not of
DTC, 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 maybe 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
2008 Comprehensive Annual Financial Report
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Draft dated 4/14/2010 (2)
CITY OF AUBURN, WASHINGTON
ORDINANCE N0.
AN ORDINANCE of the city of Auburn, Washington, relating to
contracting indebtedness; providing for the issuance of four series of limited tax
general obligation bonds of the City in the aggregate principal amount of
$ ,for general City purposes to provide funds with which to (i) pay a
portion of the costs to purchase additional office space near City Hall, to be
known as the City Hall Annex, and associated property interests, equipment and
appurtenances, (ii) carry out a current refunding of all of the City's outstanding
Limited Tax General Obligation Bonds, 1998, and to pay the administrative costs
of such refunding, (iii) pay for certain downtown infrastructure improvements in
the City's revitalization area, and (iv) pay costs of issuance of the bonds; fixing
the date, form, maturities, interest rates, terms and covenants of the bonds;
establishing a bond redemption fund, a project fund and a project account; and
approving the sale and providing for the delivery of the bonds to Seattle-
NorthwestSecurities Corporation of Seattle, Washington.
Passed May 3, 2010
This document prepared by:
Foster Pepper PLLC
1111 Third Avenue, Suite 3400
Seattle, Washington 98101
(206) 447-4400
51051353.3
TABLE OF CONTENTS
P~
Section 1. Definitions 2
Section 2. Debt Capacity 4
Section 3 . Authorization of Bonds 4
Section 4. Description of 2010A Bonds 4
Section 5. Description of 2010B Bonds 5
Section 6. Description of 2010C Bonds 6
Section Description of 2010D Bonds 6
Section 8. Registration and Transfer of Bonds 7
Section 9. Payment of Bonds 8
Section 10. Redemption Provisions and Open Market Purchase of Bonds 8
Section 11. Notice of Redemption ...........................................................................................12
Section 12. Failure To Redeem Bonds ....................................................................................12
Section 13. Pledge of Full Faith and Credit; Additional Pledges of Taxes .............................12
Section 14. Form and Execution of Bonds ..............................................................................13
Section 15. Duties of Bond Registrar ......................................................................................14
Section 16. Preservation of Tax Exemption for Interest on Tax-Exempt Bonds l4
Section 17. Designation of Tax-Exempt Bonds as "Qualified Tax-Exempt
Obligations." .........................................................................................................14
Section 18. Election to Treat Build America Bonds as "Build America Bonds"; Tax
Covenants ..............................................................................................................15
Section 19. Refunding or Defeasance of the Bonds ................................................................15
Section 20. Bond Fund; Project [Fund/Account]; and Deposit of Bond Proceeds l5
Section 21. Refunding of the Refunded Bonds ........................................................................16
Section 22. Call for Redemption of the Refunded Bonds ........................................................17
Section 23 . City Findings with Respect to Refunding .............................................................17
Section 24. Approval of Bond Purchase Contract ...................................................................18
Section 25. Preliminary Official Statement Deemed Final ......................................................18
Section 26. Undertaking to Provide Continuing Disclosure ....................................................18
Section 27. Ratification 20
Section 28. Effective Date of Ordinance 21
-1- 51051353.3
CITY OF AUBURN, WASHINGTON
ORDINANCE N0.
AN ORDINANCE of the city of Auburn, Washington, relating to
contracting indebtedness; providing for the issuance of four series of limited tax
general obligation bonds of the City in the aggregate principal amount of
$ ,for general City purposes to provide funds with which to (i) pay a
portion of the costs to purchase additional office space near City Hall, to be
known as the City Hall Annex, and associated property interests, equipment and
appurtenances, (ii) carry out a current refunding of all of the City's outstanding
Limited Tax General Obligation Bonds, 1998, and to pay the administrative costs
of such refunding, (iii) pay for certain downtown infrastructure improvements in
the City's revitalization area, and (iv) pay costs of issuance of the bonds; fixing
the date, form, maturities, interest rates, terms and covenants of the bonds;
establishing a bond redemption fund, a project fund and a project account; and
approving the sale and providing for the delivery of the bonds to Seattle-
NorthwestSecurities Corporation of Seattle, Washington.
WHEREAS, the City of Auburn, Washington (the "city"), is in need of funds with which
to finance the City Hall Annex Project (defined in Section 1, below), the estimated cost of which
is $24,500,000, and the LRF Projects (defined in Section 1, below), the estimated cost of which
is $8,000,000, and the City does not have available sufficient funds to pay the cost; and
WHEREAS, pursuant to Ordinance No. 5160, the City issued its $4,000,000 par value
Limited Tax General Obligation Bonds, 1998 (the "1998 Bonds"), for the purpose of providing
funds to pay the costs of constructing a library to be owned and operated by the King County
Rural Library District and related improvements, and by that ordinance reserved the right to
redeem the 1998 Bonds prior to their maturity at any time on or after December 1, 2008, at a
price of par plus accrued interest to the date fixed for redemption; and
WHEREAS, there are presently outstanding $2,235,000 par value of 1998 Bonds
maturing on December 1, of each of the years 2010 through 2018, inclusive, and bearing various
interest rates from 4.00% to 4.35% (the "Refunded Bonds");
WHEREAS, after due consideration, it appears to the City Council that the Refunded
Bonds may be refunded by the issuance and sale of a series of limited tax general obligation
bonds (the " 2010A Bonds") so that a substantial savings will be effected by the difference
between the principal and interest cost over the life of the 2010A Bonds allocable to the Refunding Plan (defined in Section 1, below) and the principal and interest cost over the life
of
the Refunded Bonds but for such refunding, which refunding will be effected by carrying out the
Refunding Plan; and
WHEREAS, to effect that refunding in the manner that will be most advantageous to the
City, the City Council finds it necessary and advisable that certain Acquired Obligations (defined
in Section 1, below), bearing interest and maturing at such time or times as necessary to
-1- 51051353.3
accomplish the Refunding Plan, be purchased out of a portion of the proceeds of the 2010A
Bonds; and
WHEREAS, the City Council deems it to be in the best interest of the City to borrow
money by the issuance of four series of limited tax general obligation bonds (the "Bonds") for
general city purposes to provide funds to finance the City Hall Annex Project and the LRF
Projects, to carry out the Refunding Plan and to pay the costs of issuance of the Bonds; and
WHEREAS, Seattle-Northwest Securities Corporation has offered to purchase the Bonds
authorized herein under the terms and conditions set forth in this ordinance in the form of a bond
purchase contract; NOW, THEREFORE,
THE CITY COUNCIL OF THE CITY OF AUBURN, WASHINGTON, DOES
ORDAIN AS FOLLOWS:
Section 1. Definitions. As used in this ordinance the following words shall have the
following meanings:
(a) " 2010A Bonds" means the $ par value Limited Tax General Obligation Improvement and Refunding Bonds, 2010A, of the City issued pursuant to and for the
purposes provided in this ordinance.
(b) " 2010B Bonds" means the $ par value Limited Tax General
Obligation Bonds, 2010B (Taxable Build America Bonds -Direct Payment), of the City issued
pursuant to and for the purposes provided in this ordinance.
(c) " 2010C Bonds" means $ par value Limited Tax General Obligation
Bonds, 2010C, of the City issued pursuant to and for the purposes provided in this ordinance.
(d) " 2010D Bonds" means the $ par value Limited Tax General
Obligation Bonds, 2010D (Taxable Build America Bonds -Direct Payment), of the City issued
pursuant to and for the purposes provided in this ordinance.
(e) "Acquired Obligations" means those United States Treasury Certificates of
Indebtedness, Notes, and Bonds--State and Local Government Series and other direct,
noncallable obligations of the United States of America purchased to accomplish the refunding
of the Refunded Bonds as authorized by this ordinance.
"Bond Fund" means the Limited Tax General Obligation Bond Fund, 2010,
created by this ordinance for the payment of the Bonds.
(g) "Bond Register" means the books or records maintained by the Bond Registrar
containing the name and mailing address of the owner of each Bond and the principal amount
and number of Bonds held by each owner.
(h) "Bond Registrar" means the Fiscal Agent.
-2- 51051353.3
(i) "Bonds" means, collectively, the 2010A Bonds, the 2010B Bonds, the 2010C
Bonds and the 2010D Bonds.
(j) "Build America Bonds" means, collectively, the 2010B Bonds and the 2010D
Bonds.
(k) "City" means the City of Auburn, Washington, a municipal corporation duly
organized and existing under and by virtue of the laws of the state of Washington.
(1) "City Hall Annex Project" means the acquisition of additional office space near
City Hall, including associated property interests, equipment and appurtenances, to be known as
the City Hall Annex, which acquisition shall not include Condominium Unit 390.
(m) "City Hall Annex Project Account" means the account created within the City's
Capital Projects Fund by this ordinance for the purpose of funding the City Hall Annex Project.
(n) "Code" means the United States Internal Revenue Code of 1986, as amended, and
applicable rules and regulations promulgated thereunder.
(o) "DTC" means The Depository Trust Company, New York, New York.
(p) "Finance Director" means the Finance Director of the City.
(q) "Fiscal Agent" means the fiscal agent of the State of Washington, as the same
may be designated by the State from time to time.
(r) "Letter of Representations" means the Blanket Issuer Letter of Representations
dated February 18,1997, between the City and DTC, as it may be amended from time to time.
(s) "LRF Projects" mean the construction or reconstruction of the downtown
improvements described in Ordinance No. ,including, but not limited to, improvements to
sidewalks, crosswalks, pedestrian street lighting, utility upgrades and other street improvements
within the City's Revitalization Area.
(t) "MSRB" means the Municipal Securities Rulemaking Board.
(u) "Promenade Project Fund" means the fund created by this ordinance for the
purpose of funding the LRF Projects.
(v) "Rating Agency" means the nationally recognized rating agency or agencies, if
any, at the time rating the Bonds at the request of the City.
(w) "Refunded Bonds" means the outstanding Limited Tax General Obligation Bonds,
1998, of the City maturing in the years 2010 through 2018, inclusive, issued pursuant to
Ordinance No. 5160, the refunding of which has been provided for by this ordinance.
-3- 51051353.3
(x) "Refunding Plan" means:
(i) the deposit with the Refunding Trustee of an amount of proceeds of the Bonds
that (together with other money of the City, if necessary) will be sufficient to acquire the
Acquired Obligations to beheld, with cash, if necessary, by the Refunding Trustee;
(ii) the call, payment and redemption on June 14, 2010, of all of the outstanding
Refunded Bonds at a price of par plus accrued interest; and
(iii) the payment of the costs of carrying out the foregoing elements of the
Refunding Plan.
(y) "Refunding Trust Agreement" means a Refunding Trust Agreement between the
City and the Refunding Trustee substantially in the form of that which is on file with the Finance
Director and by this reference incorporated herein.
(z) "Refunding Trustee" means U.S. Bank National Association of Seattle,
Washington, serving as trustee or escrow agent or any successor trustee or escrow agent.
(aa) "SEC" means the United States Securities and Exchange Commission.
(bb) "Tax-Exempt Bonds" means, collectively, the 2010A Bonds and the 2010C
Bonds.
(cc) "Term Bonds" means those Build America Bonds maturing in the years 20_ and
20_ which are subj ect to mandatory redemption prior to maturity.
Section 2. Debt CapacitX. The assessed valuation of the taxable property within the
City as ascertained by the last preceding assessment for City purposes for the calendar year 2010
is $7,809,499,809, and the City has outstanding general indebtedness evidenced by limited tax
general obligation bonds, notes, leases and conditional sales contracts (excluding the Refunded
Bonds to be refunded by this ordinance) in the principal amount of $35,881,485 incurred within
the limit of up to 11/2% of the value of the taxable property within the City permitted for general
municipal purposes without a vote of the qualified voters therein, and has no outstanding
unlimited tax general obligation bonds. The aggregate amount of indebtedness authorized to be
issued by this ordinance is $
Section 3. Authorization of Bonds. The City shall borrow money on the credit of the
City and issue four series of negotiable limited tax general obligation bonds evidencing that
indebtedness in the aggregate amount of $ for general City purposes as further
described below. The general indebtedness to be incurred shall be within the limit of up to 11/2%
of the value of the taxable property within the City permitted for general municipal purposes
without a vote of the qualified voters therein.
Section 4. Description of 2010A Bonds. The 2010A Bonds shall be called Limited
Tax General Obligation Improvement and Refunding Bonds, 2010A, of the City, issued to
provide funds with which to (i) pay a portion of the costs of the City Hall Annex Project, (11)
carry out the Refunding Plan, and (iii) pay the costs of issuance and sale of the 2010A Bonds.
-4- 51051353.3
The 2010A Bonds shall be in the aggregate principal amount of $ ;shall be dated
their date of delivery to the initial purchasers thereof; shall be in the denomination of $5,000 or
any integral multiple thereof within a single maturity; shall be numbered separately in the
manner and with any additional designation as the Bond Registrar deems necessary for purposes
of identification; shall bear interest (computed on the basis of a 360-day year of twelve 30-day
months) payable semiannually on each June 1 and December 1, commencing December 1, 2010,
to the maturity of the 2010A Bonds; and shall mature on December 1 in the years and amounts
and bear interest at the rates per annum as follows:
Maturity Interest
Years Amounts Rates
The life of the capital facilities financed or refinanced with proceeds of the 2010A Bonds
exceeds the term of the 2010A Bonds.
Section 5. Description of 2010B Bonds. The 2010B Bonds shall be called Limited
Tax General Obligation Bonds, 2010B (Taxable Build America Bonds -Direct Payment), of the
City, issued to provide funds with which to pay a portion of the costs of the City Hall Annex
Project and the costs of issuance and sale of the 2010B Bonds. The 2010B Bonds shall be in the
aggregate principal amount of $ ; shall be dated their date of delivery to the initial
purchasers thereof; shall be in the denomination of $5,000 or any integral multiple thereof within
a single maturity; shall be numbered separately in the manner and with any additional
designation as the Bond Registrar deems necessary for purposes of identification; shall bear
interest (computed on the basis of a 360-day year of twelve 30-day months) payable
semiannually on each June 1 and December 1, commencing December 1, 2010, to the maturity
or earlier redemption of the 2010B Bonds; and shall mature on December 1 in the years and
amounts and bear interest at the rates per annum as follows:
-5- 51051353.3
Maturity Interest Years Amounts Rates
The life of the capital facilities financed with proceeds of the 2010B Bonds exceeds the
term of the 2010B Bonds.
Section 6. Description of 2010C Bonds. The 2010C Bonds shall be called Limited
Tax General Obligation Bonds, 2010C, of the City, issued to provide funds with which to pay a
portion of the costs of the LRF Projects and to pay the costs of issuance and sale of the 2010C
Bonds. The 2010C Bonds shall be in the aggregate principal amount of $ ;shall be
dated their date of delivery to the initial purchasers thereof; shall be in the denomination of
$5,000 or any integral multiple thereof within a single maturity; shall be numbered separately in
the manner and with any additional designation as the Bond Registrar deems necessary for
purposes of identification; shall bear interest (computed on the basis of a 360-day year of twelve
30-day months) payable semiannually on each June 1 and December 1, commencing
December 1, 2010, to the maturity of the 2010C Bonds; and shall mature on December 1 in the
years and amounts and bear interest at the rates per annum as follows:
Maturity Interest
Years Amounts Rates
The life of the capital facilities financed or refinanced with proceeds of the 2010C Bonds
exceeds the term of the 2010C Bonds.
Section Description of 2010D Bonds. The 2010D Bonds shall be called Limited
Tax General Obligation Bonds, 2010D (Taxable Build America Bonds -Direct Payment), of the
City, issued to provide funds with which to pay a portion of the costs of the LRF Projects and the
-6- 51051353.3
costs of issuance and sale of the 2010D Bonds. The 2010D Bonds shall be in the aggregate
principal amount of $ ;shall be dated their date of delivery to the initial
purchasers thereof; shall be in the denomination of $5,000 or any integral multiple thereof within
a single maturity; shall be numbered separately in the manner and with any additional
designation as the Bond Registrar deems necessary for purposes of identification; shall bear
interest (computed on the basis of a 360-day year of twelve 30-day months) payable
semiannually on each June 1 and December 1, commencing December 1, 2010, to the maturity
or earlier redemption of the 2010D Bonds; and shall mature on December 1 in the years and
amounts and bear interest at the rates per annum as follows:
Maturity Interest
Years Amounts Rates
The life of the capital facilities financed with proceeds of the 2010D Bonds exceeds the
term of the 2010D Bonds.
Section 8. Registration and Transfer of Bonds. The Bonds shall be issued only in
registered form as to both principal and interest and shall be recorded on the Bond Register. The
Bond Register shall contain the name and mailing address of the owner of each Bond and the
principal amount and number of each of the Bonds held by each owner.
Bonds surrendered to the Bond Registrar may be exchanged for Bonds in any authorized
denomination of an equal aggregate principal amount and of the same series, interest rate and
maturity. Bonds may be transferred only if endorsed in the manner provided thereon and
surrendered to the Bond Registrar. Any exchange or transfer shall be without cost to the owner
or transferee. The Bond Registrar shall not be obligated to exchange or transfer any Bond during
the 15 days preceding any principal payment or redemption date.
The Bonds initially shall be registered in the name of Cede & Co., as the nominee of
DTC. The Bonds so registered shall be held in fully immobilized form by DTC as depository in
accordance with the provisions of the Letter of Representations. Neither the City nor the Bond
Registrar shall have any responsibility or obligation to DTC participants or the persons for whom
they act as nominees with respect to the Bonds regarding accuracy of any records maintained by
DTC or DTC participants of any amount in respect of principal of or interest on the Bonds, or
any notice which is permitted or required to be given to registered owners hereunder (except
such notice as is required to be given by the Bond Registrar to DTC).
51051353.3
For as long as any Bonds are held in fully immobilized form, DTC, its nominee or its
successor depository shall be deemed to be the registered owner for all purposes hereunder and
all references to registered owners, bondowners, bondholders or the like shall mean DTC or its
nominee and shall not mean the owners of any beneficial interests in the Bonds. Registered
ownership of such Bonds, or any portions thereof, may not thereafter be transferred except: (i) to
any successor of DTC or its nominee, if that successor shall be qualified under any applicable
laws to provide the services proposed to be provided by it; (ii) to any substitute depository
appointed by the City or such substitute depository's successor; or (iii) to any person if the
Bonds are no longer held in immobilized form.
Upon the resignation of DTC or its successor (or any substitute depository or its
successor) from its functions as depository, or a determination by the City that it no longer
wishes to continue the system of book entry transfers through DTC or its successor (or any
substitute depository or its successor), the City may appoint a substitute depository. Any such
substitute depository shall be qualified under any applicable laws to provide the services
proposed to be provided by it.
If (i) DTC or its successor (or substitute depository or its successor) resigns from its
functions as depository, and no substitute depository can be obtained, or (ii) the City determines
that the Bonds are to be in certificated form, the ownership of Bonds may be transferred to any
personas provided herein and the Bonds no longer shall be held in fully immobilized form.
Section 9. Payment of Bonds. Both principal of and interest on the Bonds shall be
payable in lawful money of the United States of America. Interest on the Bonds shall be paid by
checks or drafts of the Bond Registrar mailed on the interest payment date to the registered
owners at the addresses appearing on the Bond Register on the 15th day of the month preceding
the interest payment date or, if requested in writing by a registered owner of $1,000,000 or more
in principal amount of Bonds of a series prior to the applicable record date, by wire transfer on
the interest payment date. Principal of the Bonds shall be payable upon presentation and
surrender of the Bonds by the registered owners to the Bond Registrar. Notwithstanding the
foregoing, for as long as the Bonds are registered in the name of DTC or its nominee, payment of
principal of and interest on the Bonds shall be made in the manner set forth in the Letter of
Representations.
Section 10. Redemption Provisions and Open Market Purchase of Bonds.
(a) Optional Redemption of Tax-Exempt Bonds. The Tax-Exempt Bonds shall be
issued without the right or option of the City to redeem the Tax-Exempt Bonds prior to their
stated maturity dates.
(b) Optional Redemption of Build America Bonds. The City reserves the right and
option to redeem the Build America Bonds prior to their stated maturity dates at any time on or
after December 1, 2019, as a whole or in part, at a price equal to the principal amount to be
redeemed, without premium, plus accrued interest to the date fixed for of redemption.
(c) Extraordinary Optional Redemption. The City additionally reserves the right and
option to redeem the Build America Bonds prior to their stated maturity dates at any time prior to
-8- 51051353.3
December 1, 2019, as a whole or in part, upon the occurrence of an Extraordinary Event, at the
Extraordinary Optional Redemption Price.
An "Extraordinary Event" will have occurred if the City determines that a
material adverse change has occurred to Section 54AA or Section 6431 of the Code or
there is any guidance published by the Internal Revenue Service or the United States
Treasury with respect to such Sections or any other determination by the Internal
Revenue Service or the United States Treasury, which determination is not the result of
any act or omission by the City to satisfy the requirements to qualify to receive the 35%
cash subsidy payment from the United States Treasury, pursuant to which the City's 35%
cash subsidy payment from the United States Treasury is reduced or eliminated.
"Extraordinary Optional Redemption Price" means the greater of (i) 100%
of the principal amount of the Build America Bonds to be redeemed or (ii) the sum of the
present values of the remaining scheduled payments of principal of and interest to the
earlier of (A) the stated maturity date on the Build America Bonds to be redeemed or (B)
the next available date on which the Build America Bonds maybe optionally redeemed at
a price of par (plus accrued interest, if any), discounted (on asemi-annual basis,
assuming a 360-day year consisting of twelve 30-day months) to the date on which such
Build America Bonds are to be redeemed at the Treasury Rate plus 100 basis points, plus,
in each case, accrued interest on the Build America Bonds to be redeemed to the date
fixed for redemption.
"Treasury Rate" means, with respect to any date fixed for redemption for a
particular Build America Bond, the yield to maturity as of such date of United States
Treasury securities with a constant maturity (excluding inflation indexed securities, and
as compiled and published in the most recent Federal Reserve Statistical Release H.15
(519) that has become publicly available as of the first Business Day that is at least
thirty-five days prior to such scheduled redemption date or, if such Statistical Release is
no longer published, any publicly available source of similar market data) most nearly
equal to the period from such date to the stated maturity date of such Build America
Bond.
At the request of the Bond Registrar, the Extraordinary Optional
Redemption Price shall be determined by an independent accounting firm, investment
banking firm or financial advisor retained by the City at the City's expense. Absent
manifest error, such determination shall be conclusive and binding on the City, the Bond
Registrar and the Registered Owners, and neither the City nor the Bond Registrar shall be
liable for relying on such determination.
(d) Mandatory Redemption of Term Bonds.
(i) 2010B Bonds. The 2010B Bonds maturing in 20_ and 20_ are
Term Bonds and, if not redeemed under the optional or extraordinary optional
redemption provisions set forth above or purchased in the open market under the
provisions set forth below, shall be called for redemption pro rata at a price equal to the
-9- 51051353.3
principal amount to be redeemed, without premium, plus accrued interest to the date
fixed for redemption, on December 1 in years and amounts as follows:
2010B Term Bonds Maturing in 20_
Mandatory Mandatory Mandatory Mandatory
Redemption Redemption Redemption Redemption Years Amounts Years Amounts
2010B Term Bonds Maturing in 20_
Mandatory Mandatory Mandatory Mandatory
Redemption Redemption Redemption Redemption
Years Amounts Years Amounts
~11~ 2010D Bonds. The 2010D Bonds maturing in 20_ and 20_ are
Term Bonds and, if not redeemed under the optional or extraordinary optional
redemption provisions set forth above or purchased in the open market under the
provisions set forth below, shall be called for redemption pro rata at a price equal to the
principal amount to be redeemed, without premium, plus accrued interest to the date
fixed for redemption, on December 1 in years and amounts as follows:
2010D Term Bonds Maturing in 20_
Mandatory Mandatory Mandatory Mandatory
Redemption Redemption Redemption Redemption
Years Amounts Years Amounts
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2010D Term Bonds Maturing in 20_
Mandatory Mandatory Mandatory Mandatory
Redemption Redemption Redemption Redemption
Years Amounts Years Amounts
(111) Credit for Mandatory Redemption Amounts. If the City redeems
under Section 10(a) or (b), purchases in the open market or defeases Term Bonds, the par
amount of the Term Bonds so redeemed, purchased or defeased (irrespective of their
actual redemption or purchase prices) shall be credited against one or more scheduled
mandatory redemption amounts for those Term Bonds. The City shall determine the
manner in which the credit is to be allocated and shall notify the Bond Registrar in
writing of its allocation at least 60 days prior to the earliest mandatory redemption date
for that maturity of Term Bonds for which notice of redemption has not already been
given.
(e) Partial Redembtion of Bonds. Portions of the principal amount of any Bond, in
installments of $5,000 or any integral multiple thereof, may be redeemed. If less than all of the
principal amount of any Bond is redeemed, upon surrender of such Bond to the Bond Registrar,
there shall be issued to the registered owner, without charge therefor, a new Bond (or Bonds, at
the option of the registered owner) of like series, maturity and interest rate in any of the
denominations authorized by this ordinance in the aggregate total amount remaining
unredeemed.
Open Market Purchase. The City further reserves the right and option to purchase
any or all of the Bonds in the open market at any time at any price acceptable to the City plus
accrued interest to the date of purchase.
(g) Selection of Bonds for Redemption. If fewer than all of the outstanding Bonds of
a series are to be redeemed prior to maturity, then (a) if the Bonds are in book-entry form at the
time of such redemption, the Bond Registrar shall instruct DTC to instruct the DTC Participants
to select the specific Bonds for redemption pro rata, and neither the City nor the Bond Registrar
shall have any responsibility to ensure that DTC or the DTC Participants properly select such
Bonds for redemption, and (b) if the Bonds are not then in book-entry form at the time of such
redemption, on each date fixed for redemption, the Bond Registrar shall select the specific Bonds
for redemption pro rata. The portion of any Bonds of a denomination more than $5,000 to be
redeemed shall be in the principal amount of $5,000 or any integral multiple thereof. The Bond
Registrar shall select such portions of Bonds to be redeemed in such manner as the Bond
Registrar in its discretion may deem to be fair and appropriate. Notwithstanding the foregoing,
for as long as the Bonds are registered in the name of DTC or its nominee, selection of Bonds for
redemption shall be in accordance with the Letter of Representations.
-11- 51051353.3
(h) Cancellation of Bonds. All Bonds purchased or redeemed under this section shall
be canceled.
Section 11. Notice of Redemption. While the Bonds are held by DTC in book-entry
only form, any notice of redemption shall be given at the time, to the entity and in the manner
required by DTC in accordance with the Letter of Representations, and the Bond Registrar shall
not be required to give any other notice of redemption. If the Bonds cease to be in book-entry
only form, the City shall cause notice of any intended redemption of Bonds to be given by the
Bond Registrar not less than 20 nor more than 60 days prior to the date fixed for redemption by
first-class mail, postage prepaid, to the registered owner of any Bond to be redeemed at the
address appearing on the Bond Register at the time the Bond Registrar prepares the notice, 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.
In the case of an optional redemption, the notice may state that the City retains the right
to rescind the redemption notice and the related optional redemption of Bonds by giving a notice
of rescission to the affected registered owners at any time prior to the scheduled optional
redemption date. Any notice of optional redemption that is so rescinded shall be of no effect,
and the Bonds for which the notice of optional redemption has been rescinded shall remain
outstanding.
Interest on Bonds called for redemption shall cease to accrue on the date fixed for
redemption unless the Bond or Bonds called are not redeemed when presented pursuant to the
call. In addition, the redemption notice shall be mailed within the same period, postage prepaid,
to the Rating Agency at its principal offices in New York, New York, or its successor, to the
MSRB and to such other persons and with such additional information as the City shall
determine, but these additional mailings shall not be a condition precedent to the redemption of
Bonds.
Section 12. Failure To Redeem Bonds. If any Bond is not redeemed when properly
presented at its maturity or call date, the City shall be obligated to pay interest on that Bond at
the same rate provided in the Bond from and after its maturity or call date until that Bond, both
principal and interest, is paid in full or until sufficient money for its payment in full is on deposit
in the Bond Fund and the Bond has been called for payment by giving notice of that call to the
registered owner thereof.
Section 13. Pledge of Full Faith and Credit; Additional Pledges of Taxes.
(a) The Bonds. For as long as any of the Bonds are outstanding, the City irrevocably
pledges to include in its budget and levy taxes annually within the constitutional and statutory
tax limitations provided by law without a vote of the electors of the City on all of the taxable
property within the City in an amount sufficient, together with other money legally available and
to be used therefor, to pay when due the principal of and interest on the Bonds, and the full faith,
credit and resources of the City are pledged irrevocably for the annual levy and collection of
those taxes and the prompt payment of that principal and interest.
-12- 51051353.3
(b) The 2010A Bonds and 2010B Bonds -REST 1. The proceeds of real estate
excise tax authorized under RCW 82.46.010(2) ("REET 1 which is imposed, collected and
allocated to expenditures for capital projects by Ordinance No. 3418 of the City, are pledged, as
necessary, to the payment of the 2010A Bonds and the 2010B Bonds.
(c) The 2010C Bonds and 2010D Bonds - LRF Tax and REST 2. The proceeds
received by the City of the sales and use tax authorized under RCW 82.14.505 and .510, which is
imposed, collected and allocated by Ordinance No. 6031 of the City, are pledged, as necessary,
to the payment of the 2010C Bonds and the 2010D Bonds.
The proceeds of real estate excise tax authorized under RCW 82.46.035(2) ("REET 2"),
which is imposed, collected and allocated to expenditures for capital projects by Ordinance No.
4871 of the City, are pledged, as necessary, to the payment of the 2010C Bonds and the 2010D
Bonds.
Section 14. Form and Execution of Bonds. Each series of Bonds shall be prepared in
a form consistent with the provisions of this ordinance and state law and shall be signed by the
Mayor and City Clerk, either or both of whose signatures maybe manual or in facsimile, and the
seal of the City or a facsimile reproduction thereof shall be impressed or printed thereon.
Only Bonds bearing a Certificate of Authentication in the following form, manually
signed by the Bond Registrar, shall be valid or obligatory for any purpose or entitled to the
benefits of this ordinance:
CERTIFICATE OF AUTHENTICATION
This Bond is one of the fully registered City of Auburn, Washington,
Limited Tax General Obligation [Improvement and Refunding] Bonds,
[2010A/2010C] [2010B/2010D (Taxable Build America Bonds -Direct
Payment)], described in the Bond Ordinance.
WASHINGTON STATE FISCAL AGENT
Bond Registrar
B y (SPECIMEN]
Authorized Signer
The authorized signing of a Certificate of Authentication shall be conclusive evidence that the
Bond so authenticated has been duly executed, authenticated and delivered and is entitled to the
benefits of this ordinance.
If any officer whose facsimile signature appears on the Bonds ceases to be an officer of
the City authorized to sign bonds before the Bonds bearing his or her facsimile signature are
authenticated or delivered by the Bond Registrar or issued by the City, those Bonds nevertheless
may be authenticated, issued and delivered and, when authenticated, issued and delivered, shall
be as binding on the City as though that person had continued to be an officer of the City
authorized to sign bonds. Any Bond also may be signed on behalf of the City by any person
-13- 51051353.3
who, on the actual date of signing of the Bond, is an officer of the City authorized to sign bonds,
although he or she did not hold the required office on the date of issuance of the Bonds.
Section 15. Duties of Bond Re is,~ trar. The Bond Registrar shall keep, or cause to be
kept, sufficient books for the registration and transfer of the Bonds, which shall be open to
inspection by the City at all times. The Bond Registrar is authorized, on behalf of the City, to
authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of the
Bonds and this ordinance, to serve as the City's paying agent for the Bonds and to carry out all of
the Bond Registrar's powers and duties under this ordinance and City Ordinance No. 3905
establishing a system of registration for the City's bonds and obligations.
The Bond Registrar shall be responsible for its representations contained in the Bond
Registrar's Certificate of Authentication on the Bonds. The Bond Registrar may become the
owner of Bonds with the same rights it would have if it were not the Bond Registrar and, to the
extent permitted by law, may act as depository for and permit any of its officers or directors to
act as members of, or in any other capacity with respect to, any committee formed to protect the
rights of Bond owners.
Section 16. Preservation of Tax Exemption for Interest on Tax-Exempt Bonds. The
City covenants that it will take all actions necessary to prevent interest on the Tax-Exempt Bonds
from being included in gross income for federal income tax purposes, and it will neither take any
action nor make or permit any use of proceeds of the Tax-Exempt Bonds or other funds of the
City treated as proceeds of the Tax-Exempt Bonds at any time during the term of the
Tax-Exempt Bonds which would cause interest on the Tax-Exempt Bonds to be included in gross
income for federal income tax purposes. The City also covenants that it will, to the extent the
arbitrage rebate requirement of Section 148 of the Code is applicable to the Tax-Exempt Bonds,
take all actions necessary to comply (or to be treated as having complied) with that requirement
in connection with the Tax-Exempt Bonds, including the calculation and payment of any
penalties that the City has elected to pay as an alternative to calculating rebatable arbitrage, and
the payment of any other penalties if required under Section 148 of the Code to prevent interest
on the Tax-Exempt Bonds from being included in gross income for federal income tax purposes.
Section 17. Designation of Tax-Exempt Bonds as "Qualified Tax-Exempt
Obli at.~ ions." The City has determined and certifies that (a) the Tax-Exempt Bonds are not
"private activity bonds" within the meaning of Section 141 of the Code; (b) the reasonably
anticipated amount of tax-exempt obligations (other than private activity bonds and other
obligations not required to be included in such calculation) which the City and any entity
subordinate to the City (including any entity that the City controls, that derives its authority to
issue tax-exempt obligations from the City, or that issues tax-exempt obligations on behalf of the
City) will issue during the calendar year in which the Tax-Exempt Bonds are issued will not
exceed $30,000,000; and (c) the amount of tax-exempt obligations, including the Tax-Exempt
Bonds, designated by the City as "qualified tax-exempt obligations" for the purposes of Section
265(b)(3) of the Code during the calendar year in which the Tax-Exempt Bonds are issued does
not exceed $30,000,000. The City designates the Tax-Exempt Bonds as "qualified tax-exempt
obligations" for the purposes of Section 265(b)(3) of the Code
-14- 51051353.3
Section 18. Election to Treat Build America Bonds as "Build America Bonds". The
City hereby irrevocably elects to have Section 54AA of the Code apply to the Build America
Bonds so that the Build America Bonds are treated as "build America bonds," and further to
have Subsection 54AA(g) of the Code apply to the Build America Bonds so that the Build
America Bonds are treated as "qualified bonds" with respect to which the City will be allowed a
credit payable by the United States Treasury to or to the order of the City pursuant to Section
6431 of the Code in an amount equal to 35% of the interest payable on the Build America Bonds
on each interest payment date. The City hereby authorizes and directs the Finance Director (or
his or her designee) to take such actions and enter into such agreements as are necessary or
appropriate for the City to receive or cause to be received from the United States Treasury the
applicable federal credit payments in respect of the Build America Bonds, including, but not
limited to, the timely filing with the Internal Revenue Service of Form 8038-CP-"Return for
Credit Payments to Issuers of Qualified Bonds" in the manner prescribed by Internal Revenue
Service Notice 2009-26. The City covenants that it will comply with the provisions of the Code,
compliance with which would result in the interest on the Build America Bonds being excluded
from gross income for federal tax purposes but for the City's irrevocable election to have Section
54AA of the Code apply to the Build America Bonds.
Section 19. Refunding or Defeasance of the Bonds. The City may issue refunding
bonds pursuant to the laws of the State of Washington or use money available from any other
lawful source to pay when due the principal of and interest on the Bonds, or any portion thereof
included in a refunding or defeasance plan, and to redeem and retire, refund or defease all such
then-outstanding Bonds (hereinafter collectively called the "defeased Bonds") and to pay the
costs of the refunding or defeasance. If money and/or "government obligations" (as defined in
chapter 39.53 RCW, as now or hereafter amended) maturing at a time or times and bearing
interest in amounts (together with money, if necessary) sufficient to redeem and retire, refund or
defease the defeased Bonds in accordance with their terms are set aside in a special trust fund or
escrow account irrevocably pledged to that redemption, retirement or defeasance of defeased
Bonds (hereinafter called the "trust account"), then all right and interest of the owners of the
defeased Bonds in the covenants of this ordinance and in the funds and accounts obligated to the
payment of the defeased Bonds shall cease and become void. The owners of defeased Bonds
shall have the right to receive payment of the principal of and interest on the defeased Bonds
from the trust account. The City shall include in the refunding or defeasance plan such
provisions as the City deems necessary for the random selection of any defeased Bonds that
constitute less than all of a particular maturity of the Bonds, for notice of the defeasance to be
given to the owners of the defeased Bonds and to such other persons as the City shall determine,
and for any required replacement of Bond certificates for defeased Bonds. The defeased Bonds
shall be deemed no longer outstanding, and the City may apply any money in any other fund or
account established for the payment or redemption of the defeased Bonds to any lawful purposes
as it shall determine.
If the Bonds are registered in the name of DTC or its nominee, notice of any defeasance
of Bonds shall be given to DTC in the manner prescribed in the Letter of Representations for
notices of redemption of Bonds.
Section 20. Bond Fund; Project Fund and Account; and Deposit of Bond Proceeds.
The Bond Fund is hereby created and established in the office of the City Finance Director as a
-15- 51051353.3
special fund designated as the Limited Tax General Obligation Bond Fund, 2010, for the purpose
of paying principal of and interest on the Bonds. All taxes collected for and allocated to the
payment of the principal of and interest on the Bonds shall be deposited in the Bond Fund.
A portion of the principal proceeds and premium, if any, received from the sale and
delivery of the 2010A Bonds sufficient to carry out the Refunding Plan shall be deposited with
the Refunding Trustee and used in accordance with the provisions of Section 21.
There is also created and established in the office of the City Finance Director a special
fund designated as the Promenade Project Fund. The principal proceeds and premium, if any,
received from the sale and delivery of the 2010C Bonds and the 2010D Bonds shall be paid into
the Promenade Project Fund and used to pay the costs of the LRF Project and the costs of
issuance of the 2010C Bonds and 2010D Bonds. Until needed to pay such costs, the City may
invest principal proceeds temporarily in any legal investment, and the investment earnings may
be retained in the Promenade Project Fund and be spent for the purposes of that fund.
There is also created and established in the office of the City Finance Director a special
account in the City's Capital Projects Fund designated as the City Hall Annex Project Account.
The principal proceeds and premium, if any, received from the sale and delivery of the 2010A
Bonds and 201 OB Bonds shall be paid into the City Hall Annex Project Account and used to pay
the costs of the Project and the costs of issuance of the 2010A Bonds and 2010B Bonds. Until
needed to pay such costs, the City may invest principal proceeds temporarily in any legal
investment, and the investment earnings may be retained in the City Hall Annex Project Account
and be spent for the purposes of that account.
Section 21. Refunding of the Refunded Bonds.
(a) Apbointment of Refundin Trustee. U.S. Bank National Association of Seattle,
Washington, is appointed Refunding Trustee.
(b) Use of 2010A Bond Proceeds; Acquisition of Acquired Obli at.~ ions. A sufficient
amount of the proceeds of the sale of the 2010A Bonds shall be deposited immediately upon the
receipt thereof with the Refunding Trustee and used to discharge the obligations of the City
relating to the Refunded Bonds under Ordinance No. 5160 by providing for the payment of the
amounts required to be paid by the Refunding Plan. To the extent practicable, such obligations
shall be discharged fully by the Refunding Trustee's simultaneous purchase of the Acquired
Obligations, bearing such interest and maturing as to principal and interest in such amounts and
at such times so as to provide, together with a beginning cash balance, if necessary, for the
payment of the amount required to be paid by the Refunding Plan. The Acquired Obligations are
listed and more particularly described in Exhibit A attached to the Refunding Trust Agreement
between the City and the Refunding Trustee. Any 2010A Bond proceeds or other money
deposited with the Refunding Trustee not needed to purchase the Acquired Obligations and
provide a beginning cash balance, if any, shall be returned to the City at the time of delivery of
the Bonds to the initial purchaser thereof and deposited in the [Bond Fund to pay interest on the
2010A Bonds on the first interest payment date] [City Hall Annex Project Account to pay costs
of the City Hall Annex Project].
-16- 51051353.3
(c) Administration of Refundin,~. The Refunding Trustee is authorized and
directed to purchase the Acquired Obligations and to make the payments required to be made by
the Refunding Plan from the Acquired Obligations and money deposited with the Refunding
Trustee pursuant to this ordinance. All Acquired Obligations and the money deposited with the
Refunding Trustee and any income therefrom shall be held irrevocably, invested and applied in
accordance with the provisions of Ordinance No. 5160, this ordinance, chapter 39.53 RCW and
other applicable statutes of the State of Washington and the Refunding Trust Agreement. All
necessary and proper fees, compensation, and expenses of the Refunding Trustee for the 2010A
Bonds and all other costs incidental to the setting up of the escrow to accomplish the refunding
of the Refunded Bonds shall be paid out of the proceeds of the 2010A Bonds.
(d) Authorization for Refundin Trust A reement. To carry out the Refunding Plan
provided for by this ordinance, the Mayor or the Finance Director of the City is authorized and
directed to execute and deliver to the Refunding Trustee a Refunding Trust Agreement
substantially in the form on file with the City Clerk and by this reference made a part hereof
setting forth the duties, obligations and responsibilities of the Refunding Trustee in connection
with the payment, redemption, and retirement of the Refunded Bonds as provided herein and
stating that the provisions for payment of the fees, compensation, and expenses of such
Refunding Trustee set forth therein are satisfactory to it. Prior to executing the Refunding Trust
Agreement, the Mayor or the Finance Director of the City is authorized to make such changes
therein that do not change the substance and purpose thereof or that assure that the escrow
provided therein and the 2010A Bonds are in compliance with the requirements of federal law
governing the exclusion of interest on the 2010A Bonds from gross income for federal income
tax purposes.
Section 22. Call for Redembtion of the Refunded Bonds. The City calls for
redemption on June 14, 2010, all of the Refunded Bonds at par plus accrued interest. Such call
for redemption shall be irrevocable after the delivery of the 2010A Bonds to the initial purchaser
thereof. The proper City officials are authorized and directed to give or cause to be given such
notices as required, at the times and in the manner required, pursuant to Ordinance No. 5160 in
order to effect the redemption prior to their maturity of the Refunded Bonds.
Section 23. Cit. Findings with Resbect to Refunding. The City Council of the City
finds and determines that the issuance and sale at this time of the 2010A Bonds allocable to the
Refunding Plan will effect a savings to the City and is in the best interest of the City and its
taxpayers and in the public interest. In making such finding and determination, the City Council
has given consideration to the fixed maturities of the 2010A Bonds and the Refunded Bonds, the
costs of issuance of the 2010A Bonds and the known earned income from the investment of the proceeds of the issuance and sale of the 2010A Bonds [and other money of the City] used in
the
Refunding Plan pending payment and redemption of the Refunded Bonds.
The City Council further finds and determines that the money to be deposited with the
Refunding Trustee for the Refunded Bonds in accordance with Section 21 of this ordinance will
discharge and satisfy the obligations of the City under Ordinance No. 5160 with respect to the
Refunded Bonds, and the pledges, charges, trusts, covenants, and agreements of the City therein
made or provided for as to the Refunded Bonds, and that the Refunded Bonds shall no longer be
-17- 51051353.3
deemed to be outstanding under such ordinance immediately upon the deposit of such money
with the Refunding Trustee.
Section 24. Apbroval of Bond Purchase Contract. Seattle-Northwest Securities
Corporation of Seattle, Washington, has presented a purchase contract (the "Bond Purchase
Contract") to the City offering to purchase the Bonds under the terms and conditions provided in
the Bond Purchase Contract, which written Bond Purchase Contract is on file with the City Clerk
and is incorporated herein by this reference. The City Council finds that entering into the Bond
Purchase Contract is in the City's best interest and therefore accepts the offer contained therein
and authorizes its execution by City officials.
The Bonds will be printed at City expense and will be delivered to the purchaser in
accordance with the Bond Purchase Contract, with the approving legal opinion of Foster Pepper
PLLC, municipal bond counsel of Seattle, Washington, regarding the Bonds.
The proper City officials are authorized and directed to do everything necessary for the
prompt delivery of the Bonds to the purchaser and for the proper application and use of the
proceeds of the sale thereof.
Section 25. Preliminary Official Statement Deemed Final. The City Council has been
provided with copies of a preliminary official statement dated 2010 (the
"Preliminary Official Statement"), prepared in connection with the sale of the Bonds. For the
sole purpose of the Bond purchaser's compliance with SEC Rule 15c2-12(b)(1), the City "deems
final" that Preliminary Official Statement as of its date, except for the omission of information as
to offering prices, interest rates, selling compensation, aggregate principal amount per series,
principal amount per maturity, maturity dates, options of redemption, delivery dates, ratings and
other terms of the Bonds dependent on such matters.
Section 26. Undertaking to Provide Continuing Disclosure. To meet the requirements
of SEC Rule 15c2-12(b)(5) (the "Rule"), as applicable to a participating underwriter for the
Bonds, the City makes the following written undertaking (the "Undertaking") for the benefit of
holders of the Bonds:
(a) Undertaking to Provide Annual Financial Information and Notice of Material
Events. The City undertakes to provide or cause to be provided, either directly or through a
designated agent, to the MSRB, in electronic format as prescribed by the MSRB, accompanied
by identifying information as prescribed by the MSRB:
(i) Annual financial information and operating data of the type included in the
final official statement for the Bonds and described in subsection (b) of this section
("annual financial information");
(ii) Timely notice of the occurrence of any of the following events with respect to
the Bonds, if material: (1) principal and interest payment delinquencies; (2) non-payment
related defaults; (3) unscheduled draws on debt service reserves reflecting financial
difficulties; (4) unscheduled draws on credit enhancements reflecting financial
difficulties; (5) substitution of credit or liquidity providers, or their failure to perform;
(6) adverse tax opinions or events affecting the tax-exempt status of the Bonds;
-18- 51051353.3
modifications to rights of holders of the Bonds; (8) Bond calls (other than scheduled
mandatory redemptions of Term Bonds); (9) defeasances; (10) release, substitution, or
sale of property securing repayment of the Bonds; and (11) rating changes; and
(111) Timely notice of a failure by the City to provide required annual financial
information on or before the date specified in subsection (b) of this section.
(b) Type of Annual Financial Information Undertaken to be Provided. The annual
financial information that the City undertakes to provide in subsection (a) of this section:
(i) Shall consist of (1) annual financial statements prepared (except as noted in the
financial statements) in accordance with applicable generally accepted accounting principles
promulgated by the Government Accounting Standards Board ("GASB") and made
applicable to Washington state local governmental units such as the City, as such principles
may be changed from time to time, which statements shall not be audited, except, however,
that if and when audited financial statements are otherwise prepared and available to the
City they will be provided; (2) a statement of authorized, issued and outstanding balance of
general obligation debt; (3) the assessed value of property within the City subject to ad
valorem taxation; and (4) ad valorem tax levy rates and amounts and percentage of taxes
collected;
(ii) Shall be provided not later than the last day of the ninth month after the end of
each fiscal year of the City (currently, a fiscal year ending December 31), as such fiscal
year may be changed as required or permitted by State law, commencing with the City's
fiscal year ending December 31, 2009; and
(111) May be provided in a single or multiple documents, and maybe incorporated
by specific reference to documents available to the public on the Internet sebsite of the
MSRB or filed with the SEC.
(c) Amendment of Undertaking. The Undertaking is subject to amendment after the
primary offering of the Bonds without the consent of any holder of any Bond, or of any broker,
dealer, municipal securities dealer, participating underwriter, rating agency or the MSRB, under
the circumstances and in the manner permitted by the Rule. The City will give notice to the
MSRB of the substance (or provide a copy) of any amendment to the Undertaking and a brief
statement of the reasons for the amendment. If the amendment changes the type of annual
financial information to be provided, the annual financial information containing the amended
financial information will include a narrative explanation of the effect of that change on the type
of information to be provided.
(d) Beneficiaries. The Undertaking evidenced by this section shall inure to the
benefit of the City and any holder of Bonds, and shall not inure to the benefit of or create any
rights in any other person.
(e) Termination of Undertaking. The City's obligations under this Undertaking shall
terminate upon the legal defeasance of all of the Bonds. In addition, the City's obligations under
this Undertaking shall terminate if those provisions of the Rule which require the City to comply
with this Undertaking become legally inapplicable in respect of the Bonds for any reason, as
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confirmed by an opinion of nationally recognized bond counsel or other counsel familiar with
federal securities laws delivered to the City, and the City provides timely notice of such
termination to the MSRB.
Remedy for Failure to Comply with Undertaking. As soon as practicable after the
City learns of any failure to comply with the Undertaking, the City will proceed with due
diligence to cause such noncompliance to be corrected. No failure by the City or other obligated
person to comply with the Undertaking shall constitute a default in respect of the Bonds. The
sole remedy of any holder of a Bond shall be to take such actions as that holder deems necessary,
including seeking an order of specific performance from an appropriate court, to compel the City
or other obligated person to comply with the Undertaking.
(g) Designation of Official Responsible to Administer Undertaking. The Finance
Director of the City (or such other officer of the City who may in the future perform the duties of
that office) or his or her designee is authorized and directed in his or her discretion to take such
further actions as may be necessary, appropriate or convenient to carry out the Undertaking of
the City in respect of the Bonds set forth in this section and in accordance with the Rule,
including, without limitation, the following actions:
(i) Preparing and filing the annual financial information undertaken to be
provided;
(ii) Determining whether any event specified in subsection (a) has occurred,
assessing its materiality with respect to the Bonds, and, if material, preparing and
disseminating notice of its occurrence;
(111) Determining whether any person other than the City is an "obligated person"
within the meaning of the Rule with respect to the Bonds, and obtaining from such person
an undertaking to provide any annual financial information and notice of material events
for that person in accordance with the Rule;
(iv) Selecting, engaging and compensating designated agents and consultants,
including but not limited to financial advisors and legal counsel, to assist and advise the
City in carrying out the Undertaking; and
(v) Effecting any necessary amendment of the Undertaking.
Section 27. Ratification. All actions previously taken in accordance with this
ordinance are hereby ratified and confirmed.
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Section 28. Effective Date of Ordinance. This ordinance shall take effect and be in
force from and after its passage and five days following its publication as required by law.
PASSED by the City Council and APPROVED by the Mayor of the City of Auburn,
Washington, at a regular open public meeting thereof, this 3rd day of May, 2010.
Mayor
ATTEST:
City Clerk
APPROVED AS TO FORM:
Bond Counsel
PUBLISHED:
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CERTIFICATION
I, the undersigned, City Clerk of the City of Auburn, Washington (the "City"), hereby
certify as follows:
1. The attached copy of Ordinance No. (the "Ordinance") is a full, true and
correct copy of an ordinance duly passed at a regular meeting of the City Council of the City
held at the regular meeting place thereof on May 3, 2010, as that ordinance appears on the
minute book of the City; and the Ordinance will be in full force and effect five days after
publication in the City's official newspaper.
2. A quorum of the members of the City Council was present throughout the
meeting and a majority of those members present voted in the proper manner for the passage of
the Ordinance.
IN WITNESS WHEREOF, I have hereunto set my hand this day of May, 2010.
CITY OF AUBURN, WASHINGTON
City Clerk
51051353.3