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HomeMy WebLinkAbout6335 ~ CITY OF AUBURN, WASHINGTON , ORDINANCE NO. 6335 AN ORDINANCE of the City of Auburn, Washington, relating to the combined water supply_ and distribution system, the sanitary sewage system and the storm dra.inage system; providing for the issuance of two series of utility system revenue bonds in the aggregate principal amount of $21,295,000 of the City (1) to pay a portion of the cost of certain imp"rovements described herein, (2) to fund the reserve requirement, and (3) to pay the costs of issuance.and sale _ of the bonds; fixing the date, form, maturities, interest rates, terms and covenants , ofthe bbnds; 'and approving the sale and providing for the.delivery of the bonds to Seattle-Northwest Securities Corporation of Seattle, Washington. . PASSED NOVEMBER 29, 2010 . Prepared by Foster Pepper PLLC 1"111.Tliird Avenue, Suite 3400 Seattle, Washington 98104 (206) 447-4400 s►ovsna.s , , TABLE OF CONTENTS $ection 1. Recitals and Findings 1 Section 2. Definitions 2 ' Section 3. Authorization and Description of the Bonds 7 Section 4. Registration and Transfer of Bonds 8 Section 5. Payment of Bonds 9 Section 6. Redemption Provisions and Open Market Purchase of Bonds 9 Section 7. Notice of Redemption 11 Section 8. Failure to Redeem Bonds 12 Sechon 9. The Bond Func1; Pa ents into Bond Fund _ ym 12 Section 10. Rate Stabilization Fund...........................................................................................: 13 Section ll. Pledge of Revenue and Lien Position 141 Section 12. Deposit of_Bond Proceeds I 14 Section 13. Covenants 14 Section 14. Flow of Funds . 17 Section 15. Provisions for Future Parity Bonds 18 Section.16. Separate Utility Systems 18 Section 17. Contract Resource Obligations 18 Section 18. Form and Execution of Bonds 19 Section 19. Bond Registrar 20 Section 20. Preservation of Tax Exemption for Interest on 2010A Bonds 20 Section 21: Designation of 201 OA Bonds as "Qualified Tax-Exempt Obligations.................... Section 22. Election to Treat 2010B as "Build America Bonds" 20 Section 21 Refunding or Defeasance of the Bonds 21 Section 24. Approval of Bond Purchase Contract 22 $ection 25. : Preliminary Official Statement Deemed Final . 22 Section 26. Undertaking to Provide Continuing Disclosure 22 Section 27. Supplemental or Amendatory Ordinances 25 Section 28. Defaults and Remedies . 28 Section 29. Ratification 32 Section 30. Effective Date of Ordiriance 32 Exhibit A- Description of the Improverrients Exhibit B - Parity Conditions -i- IN . ~ CITY OF AUBURN, WASHINGTON ORDINANCE NO. 6335 AN ORDINANCE of the City of Auburn, Washington, relating to the combined water supply and distribution system, the sanitary sewage system and the storm draina.ge system; providing for the issuance of two series of utility system revenue bonds in the aggregate principal amount of $21,295,000 of the City (1) to pay a portion of the cost of certain improvements described herein, (2) to fund the reserve requirement, and (3) to pay the costs of issuance and sale of the bonds; fixing the date, form, maturities, interest rates, terms and covenants of the bonds; and approving the sale and providing for the delivery of the bonds to Seattle-Northwest Securities Corporation of Seattle, Washington. THE CITY COUNCIL OF THE CITY OF AUBURN, WASHINGTON, DO ORDAIN as follows: - Section l. Recitals and Findings. The City Council ofthe City of Auburn, Washington (the "City") makes the following findings and determinations: (a) Background. The City now owns, operates and maintains a water supply and distribution system and a sanitary sewage system, which systems were combined pursuant to RCW 35.67.320 by Ordinance No. 961, passed and approved March 7, 1950, and further eombined with the storm drainage system by Ordinance Na 4945, passed February 18, 1997. The combined systems; including all additions, betterments and extensions at any time made, are collectively referred to as "Combined Utility System of the City" or the "System." (b) Plan of Additions. The City has adopted the Plan of Additions and is now in need of funds with which to finance the Improvements (defined below), which comprise a portion of the Plan of Additions, the estimated cost of which is more than $20,000,000, and the City does not have available sufficient funds to pay the costs. (c) Outstanding Pariry Bonds. Pursuant to Ordinance No. 5930, the City issued its $2,765,000 par value UtilitySystem Revenue Refunding Bonds, 2005 (the "2005 Bonds"), and reserved the right to issue additional utility system,revenue bonds which would constitute a lien " and charge upon the gross revenues of the Combined Utility System on a parity with those bonds if the conditions set forth in Section 17 of Ordinance No. 5930 (the "Parity Conditions") are met. (d) Parity Conditions Met. The City Council finds and declares that the amounts required to have been paid into the Bond Fund for the Outstanding Parity Bonds have been paid and maintained as required therein, and that all other Parity Conditions for the issuance of the Bonds as Future Parity Bonds will have been met and satisfied before the Bonds are delivered to the original purchaser thereof. (e) Suff ciency of Gross Revenue. T'he City Council finds and determines that the Gross Revenue and benefits to be derived from the operation and maintenance of the System af the rates to be charged for services from the System will be more than sufficient to meet all Maintenance and Operation Expense and to pernut the setting aside into the Bond Fund out of ` the Gross Revenue of amounts sufficient to pay the principal of and interest on the Outstanding Parity Bonds and the Bonds when due. The City Council declares that in fixing the amounts to be paid into the Bond Fund under this ordinance it has exercised due regard for 1Vlaintenance and Operation Expense and has not obligated tlie City to set aside and pay into the Bond Fund a. greater amount of Gross Revenue of the System than in its judgment will be available over above such Maintenance and Operation Expense. . (f) Purchase Offer. Seattle-Northwest Securities Corpora.tion has presented a Bond Purchase Agreement offering to purchase the Bonds urider the terms and conditions as set forth in this ardinance. (g) Issuance of Bonds. Based on the foregoing, the City Council therefore determines that it is in the best interest of the City to borrow money by the issuance of two series of utility system revenue bonds (the "Bonds") (a) to pay a portion of the costs of the Improvements, (b) to fund the Reserve Requirement and (c) to pay the costs of issuance and sale of such bonds. Section 2. Definitions. As used in this ordinance, the following words shall have the following meanings: (a) "2010A Bonds" means the $6,790,000 par value Utility System Revenue Bonds, 20 10A, of the City issued pursuant to and for the purposes provided in this ordinance. (b) "2014B Bonds" means the $14,505,000 paz value Utility System Revenue Bonds, . 2010B (Taxable Build America Bonds - Direct Payment), of the City issued pursuant to and for the purposes provided in .this ordinance. l (c) "2005 Bonds" means the outstanding Utility System Revenue Refunding Bonds, 2005, of the City issued pursuant to Ordinance No. 5930. (d) "Alternate Security" means any bond insurance, reserve insurance, collateral, security, letter of credit, guaranty, surety bond or similar credit enhancement device providing for or securing the payment of all or part of the principal of and interest on Parity Bonds, which: (i) is non-cancelable, and (ii) is issued by an institution which has been assigned, at the time of issuance of the particular issue of Parity Bonds in connection with which the Alternate Security is acquired, a credit rating equal to or better than the highest two rating categories by both Moody's Investors Service, Inc., and Standard & Poor's (without regazd to gradations with in those categories). Alternate Security includes, in lieu of cash and investrnents, such a security obtained by the City for the purpose of satisfying part or all of the Reserve Requirement for the Parity Bonds then outstanding. (e) "Annual Debt Service" means for any calendar year for the Parity Bonds (or for , any series thereof, as applicable), all the interest, plus all principal (except principal of Term Bonds due in any Term Bond Maturity Year), plus all mandatory redemption and sinking fund ' -2- installments for that year, less all bond interest payable from the proceeds of any such Parity Bonds in that year. (f) "Assessment Bonds" shall mean the original principal amount of any issue of Parity Bonds equal to the total principal amount (or, if refunding bonds, the remaining unpaid principal amount) of ULID Assessments on any final assessment roll or rolls of one or more - ULIDs formed in connection with the improvements being financed by such issue of bonds..(or bonds being refunded). The original principal amount of such issue of bonds in excess of Assessment Bonds shall be referred to as "bonds (or Bonds) that are not Assessment Bonds." ' Assessment Bonds shall be allocated to each $5,000 of bonds in proportion to their percentage of the entire issue of bonds. When a bond of any issue of bonds containing Assessment Bonds is redeemed or purchased, and retired, the same percentage of that bond as the percentage of Assessment Bonds is to the total issue of those bonds shall be treated as Assessment Bonds being redeemed or purchased and retired. (g) "Average Annual Debt Service" means, as of its date of calculation, the sum of the Annual Debt Service for the remaining calendar years to the last scheduled maturity of the applicable issue or issues of bonds divided by the number of those yeazs. For purposes of computing the Reserve Requirement the estimated amount of bonds to be redeemed prior to maturity may be taken into account if required under federal arbitrage regulations. (h) "Bond Fund" means that special fund of the City known as the Utility System Revenue -Bond Fund created by Section 10 of Ordinance No. 4945 for the payment of the principal of and interest on the Parity Bonds. (i) "Bond Register" means the registration books of the Bond Registrar on which are ~ recorded the names of the owners of the Bonds. "Bond Registrar" means the fiscal agent for the State of Washington (as the same may be designated by the State of Washington from time to time). (k) "Bonds" means, collectively, the 2010A Bonds and the 2010B Bonds. (1) "City" means the City' of Auburn, Washington. (m) "Code" means the.Internal Revenue Code of 1986, as amended from time to time. (n) "Construction Accounts" means such accounts created in such System Funds as the Finance Director shall designate for the purpose of paying the costs of the Improvements and the costs of issuance of the Bonds. (o) "Contract Resource Obligation" means an obligation ofthe City, designated as a Contract Resource Obligation and entered into pursuant to Section 16 of this ordinance, to make payments for water supply, sewer seivice, water, sewage or stormwater transmission or otlier commodity or service to another person or entity (including without limitation a separate utility system created pursuant to Section 15 of this ordinance and Section 18 of Ordinance No. 4945). r -3- (p) "Coverage RequiremenP' in any calendar year means an amount of Net Revenue at least equal to 1.25 times the Annual Debt Service in that yeaz on a11 Parity Bonds that are not Assessment Bonds. Upon redemption or defeasance oJ all Outstanding Parity Bonds, the following - sentence shall be added: If any Assessment Bonds are outstanding, the Coverage Requirement shall _ also mean, in any calendar year, an amount of ULID Assessments at least equal to 1.0 times the Annual Debt Service in that year on al! Parity Bonds that are Assessment Bonds (q). "DTC" means The Depository Trust Company, New York, New York. (r) "Finance Director" means the City Finance Director or the officer that is the successor to substantially the functions and duties of the Finance Director. (s) "Future Parity Bonds" means any and a11 utility system revenue bonds of the City issued after the date of the issuance of the Bonds, the payment of the principal of and interest on which constitutes a charge or lien on the Net Revenue and ULID Assessments equal in rank with the charge and lien upon such revenue and assessments required to be paid irito the ~ Bond Fund to pay and secure the payment of the principal of and interest ori the Outstanding Parity Bonds and the Bonds. \ (t) "Government Obligations" means those obligations described under the definition of government obligations in RCW 39.53.010(4), as it now reads or hereafter may be - amended, and which are otherwise lawful investments for the City at the time of such investment. (u) "Gross Revenue of the System" or "Gross Revenue" means all of the earnings and revenues received by the City from the maintenance and operation of the System and all earnings from the investment of money in the Bond Fund which earnings are deposited in the Principal and Interest Account, and connection and capital improvement charges collected for the purpose of defraying the costs of capital facilities of the System. , Gross Revenue includes any Tax Credit Subsidy Payments received by the City in respect of any Parity Bonds. Gross Revenue shall not include: ULID Assessments, government grants, proceeds from the sale of System property, City taxes collected by or through the System, principal proceeds of bonds or other obligations and earnings or proceeds from any investments in a trust, defeasance or escrow fund created to defease or refund System obligations (until commingled with other earnings and revenues of the System) or held in a special account for the purpose of paying a rebate to the • United States Government under the Code, on earnings of a separate utility system that may be created under Section 15 of this ordinance. (v) "Improvements" means those improvements in the City's Plan of Additions that are described in Exhibit A to this ordinance, which is incorporated by reference. (w) "Independent Utility Consultant" means either (1) an independent licensed professional engineer experienced in the design, construction or operation of municipal utilities of comparable size and character to the System, or (2) an independent certified public accountant or other professional consultant experienced in the development of rates and chazges for municipal utilities of comparable size and character to the System. -4- (x) "Letter of Representations" means the Blanket Issuer Letter of Representafions . dated February 18, 1997, between the City and DTC, as it may be. amended from time to time. (y) "MSRB" means the Municipal Securities Rulemaking Board. (z) "Maintenance and Operation Expense" means all reasonable expenses incurred by the City in causing the System to be operated and maintained in good repair, workirig" order and condition, including without limitation payments made to any other municipal corporation or private entity as Contract Resource Obligations, and payments with respect to a.ny other expenses of the System that are properly treated as maintenance and opera.tion expenses under generally : aceepted accounting principles applicable to municipal corporations. The term Maintenance and : Operation Expense does not include any depreciation or capital additions or capital replacements to the System. _ (aa) "Maximum Annual Debt Service" means at the time of calculation, the maximum amount of Annual Debt Service that will mature or come due in the current calendar year or any future year on the outstanding Parity Bonds. ~ (bb) "Nef Revenue of the System" or "Net Revenue" means the Gross Revenue: (a) less (1) Maintenance and Opera.tion Expense, (2) deposits into the Rate Stabilization Fund, and (3) proceeds from the sale of the property of the System; and (b) plus withdrawals from the Rate ; Stabilizafion Fund. (cc) "Outstanding Parity Bonds" means the 2005 Bonds. (dd) "Parity Bonds" means the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds. (ee) -"Parity Conditions" means those conditions ;for the issuance of Future Parity B. onds, which were originally set forth in Section 17 of Ordinance No. 5930, as such conditions .'are now set forth in Exhibit B, attached to this ordinance and incorporated by this reference. (ff) "Plan ofAdditions" means the system or plan of additions and betterments to and extensions of the Combined Utility specified, adopted and ordered to be carried out by the water system, sewer system, and storm drainage system Capital Facilities Plans of the City adopted and updated in connection with to the City's_Comprehensive Plan for each system, as most recently amended and updated by Ordinance No. 6280, adopted ori December 7, 2009. (gg) "Principal and Interest Account" means the aceount of that name created in the Bond Fund for the payment of the principal of and interest on the Parity Bonds. ' (hh) "Rate Stabilization Fund" means the Utility System Rate Stabilization Fund created 'in Section 11 of Ordinance No. 4945. (ii) "Rating Agency" means any nationally recognized rating agency then maintaining a rating for the Bonds at the request of the City. -5- (jj) "Reserve AccounP' means the account of that name created in the Bond Fund for the purpose of securing the payment of the principal of and interest on the Parity Bonds. (kk) "Reserve Requiremenf' means, for all Parity Bonds, the lesser of (i) Maximum Annual Debt Service on those bonds or (ii) 125% of Avera:ge Annual Debt Service on those bonds, but at no time shall the Reserve Requirement exceed 10% of the proceeds of those bonds. , Variable Interest Ra.te Bonds sha11 be assumed to bear interest at a fixed rate equal to the higher of (1) the highest variable rate borne during the preceding 24 months by any outstanding variable rate revenue bonds of the System or, (2) if no such Variable Interest Raie Bonds are outstanding at the time of calculation, the rate borne by other variable rate debt the interest rate for which is determined by reference to an index comparable to the index to be used to determine the interest rate on the Future Parity Bonds proposed to be issued. Notwithstanding the above, the deposit to be ma.de in the Reserve Account shall be decreased for any issue of Parity Bonds when and to the ` extent that the City provides for an Alternate Security to be deposited into the Reserve Account to secure the payment of the principal of and interest on that issue of bonds. The amount payable under any Alternate Security shall be credited against the amount otherwise required to be made into the Reserve Account to meet the Reserve Re.quirement for that issue of bonds. Whem calculating the Reserve Requirement with reference to any year in which Tax Credit Subsidy Bonds are outstanding, the City shall exclude the amount of Tax Credit Subsidy Payment that the City is then eligible to receive from Annual Debt Service. The preceding sentence shall apply to calculations with respect to calendar years occurring after the scheduled redemption of all Outstanding Parity Bonds and may take effect as to all calendar years upon the redemption or defeasance of such Outstanding Parity Bonds, or if the City obtains consent to such amendment from the requisite number of bond owners; all purchasers of the Bonds, ,by taking and holding the same, shalT be deemed to have consented to such provision. (11) "SEC" means the Securities and Exchange Commission. (mm) "System" or "Utility System" means the City's existing combined water supply and distribution system, sanitary sewage system, storm and surface water utility, together with all . additions ttiereto and betterments and extensions thereof at any time made or conshucted, and sha11 include any utilify systems hereafter combined with the System. The System shall not include any additional systems for water supply, sewer service, water, sewage or stormwater transmission, treatment or other commodity or service that may be created, acquired or constructed by the City as a separate. utility system as provided in Section 11 of Ordinance No. 4945 and Section 16 of this ordinance. (nn) "System Funds" rrieans, collectively, the Water Fund, Sewer Fund and Storm Drainage Fund including without .limitation any Construction Accounts or other accounts or subaccount created thereon. (oo) "Tax Credit Subsidy Bond" means any bond that is designated by the City as a_ "build America bond" or other tax credit bond, pursuant to the Code, and which is further, designated as a"qualified bond" under Section 6431 of the Code, and with respect to which the City is eligible to receive a Tax Credit Subsidy Payment. - -6- (pp) "Tax Credit Subsidy Payment" means the amounts which the City is entitled to receive as a tax credit payable by the United States Treasury to the City under Section 6431 of the Code, in respect of any bonds issued as Tax Credit Subsidy Bonds. (qq) "Term Bond Maturity Year" means any calendar yeaz in which Term Bonds aze scheduled to mature. (rr) "Term Bonds" means the bonds of any single issue or series of Parity Bonds designated as such in the ordinance authorizing their issuance or, sale. (ss) "ULID" means Utility Local Improvement District. (tt) "ULID Assessments" means a11 assessments levied and collected in any ULID of the City ereated for the acquisition or construction of additions to and extensions and betterments of the System if such assessments are pledged to be paid into the Bond Fund (less any prepaid assessments paid or to be paid into a construction fund or account). ULID Assessments shall include installments thereof and any interest or penalties that may be due thereon. (uu) "Variable Interest Rate" means a variable interest rate or rates to be borne by a series of Future Parity Bonds or any one or more maturities within a series of Future Parity ~ Bonds. The method of computing such a variable interest rate shall be specified in the ordinance , authorizing such Future Parity Bonds; which ordinance also shall specify either (i) the particular period or periods of time or manner of determining such period or periods of time for which each value of such variable interest rate shall remain in effect ar(ii) the time or times upon which any change in such variable interest rate shall become effective. (w) "Variable Interest Rate Bonds" means, for any period of time, Future Parity Bonds which bear a Variable Interest Rate during that period, except that Future Parity Bonds the interest rate or rates on which shall have been fixed for the remainder of the term thereof no longer shall be deemed to be Variable Interest Rate Bonds. Section 3. Authorization and Description of the Bonds. For the purpose of providing the funds necessary (a) to pay a portion of the costs of the Improvements, (b) to fund the Reserve ` Requirement and (c) to pay the cost of issuance and sale of the Bonds, the City shall issue utility system revenue bonds in the aggregate principal amount of $21,295,000. The Bonds shall be issued in two series, individually defined as the "2010A Bonds" and the "2010B Bonds," and, collectively, as the "Bonds." The 2010A Bonds shall be called the Utility System Revenue Bonds, 2010A, of the City and shall be issued in the aggregate principal amount of $6,790,000. ' The 2010B Bonds sha11 be called the Utility System Revenue Bonds, 2010B (Taxable Build America Bonds - Direct Payment), of the City and shall be issued in the aggregate principal amount of $14,505,000. The Bonds shall be dated their initial date of delivery; sha11 be in the denomination of $5,000 or any integral rriultiple 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 June l,, 2011, to thd maturity or earlier redemption of the Bonds, -7- The 2010A Bonds sha11 mature on December 1 in the years and amounts and bear interest. at the rates per annum as follows: ~ Principal Principal Maturities Amounts Interest Rates Maturities Amounts Interest Rates 2013 $575,000 3.000/o 2017 $1,030,000 4.060% 2014* 55,000 1.55 2018 1,070,000 4.50 2014* 535,000 3.00 2019 1,120,000 4.50 2015 605,000 4.00 2020 1,170,000 4.50 2016 630,000 4.00 *Bifurcated maturity. - The 2010B Bonds shall mature on December 1 in the years and amounts and bear interest at the rates per annum as follows: Principal Maturities Amounts Interest Rates 2025 $6,565,000 5.661% r* 2030 7,940,000 6.396 Section 4. 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 tlie same series, interest rate and maturity. Bonds may be transferred only if endorsed in the manner provided thereon and suirendered 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 sha11 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 sha11 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 wfiich 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). For so 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 nominees and sha11 not mean the owners of any benef cial 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 -8- 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 successar (or substitute depository or its successor) resigns from 'its functions as depository, and no substitute depository can be obtained, or (ii) the City deterrnines that the Bonds are to be in certificated form, the ownership of Bonds may be transferred to any person as provided herein and the Bonds no longer sha11 be held in fully immobilized form. Section 5. Pavment of Bonds. Both principal of and interest on the Bonds sha11 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 pahyment date to the registered owners at the addresses appearing on the Bond Register on the 15` 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 prior to the applicable record date, by wire transfer on the interest payment date. Principal of the Bonds sha11 be payable upon presentation and surrender of the Bonds by the registered owners to the Bond Registrar. Notwithstanding the foregoing, 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 6. Redemption Provisions and Open Market Purchase of Bonds. (a) Optional Redemption of the 2010A Bonds. The 2010A Bonds shall be issued without the right or option of the City to redeem those 2010A Bonds prior to their stated maturity dates. (b) . Optional Redemption of the 2010B Bonds. The City reserves the right and option to redeem the 2010B Bonds prior to their stated maturity dates at any time on or after December 1, 2020, as a whole or in part, at par plus accrued interest to the date fixed for redemption. (c) Extraordinary Optional Redemption of 2010B Bonds. The City additionally reserves the right and option to redeem the 2010B Bonds prior to their stated maturity dates at any time prior to December 1, 2020, 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 (a) Section 54AA or 6431 of the 1986 Code (as such Sections were added by Section 1531 of the ARRA, pertaining to "Build America Bonds") is modified or amended in a manner pursuant to which the City's 35% cash subsidy payment from the United States:Treasury Department is reduced or eliminated, or (b) guidance is published by the IRS or U.S. Treasury Department with, respect to such Sections that places one -9- or more substantive new conditions on the receipt by the City of such 35% cash subsidy payment"s and such condition(s) are unacceptable to the City. "Treasury Rate" means, with respect to any date f xed for redemption for a particular 201013 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 2010B Bond. "Extraordinary Optional Redemption Price" means the greater of (i) 100% of the , principal amount of the 2010B 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 2010B Bonds to be redeemed or (B) the next available date on which the 201013 Bonds may be optionally redeemed at a price of par (plus accrued interest, if any), discounted (on a semi-annual basis, assuming a 360-day year consisting of twelve 30=day months) to the date on which such 2010B Bonds are to be redeemed at the Treasury Rate plus 100 basis points, plus, in each case, accrued interest on the 2010B Bonds to be redeemed to the date fixed for redemption. 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 2010B Term Bonds. The 2010B Bonds maturing in 2025 and 2030 are Term Bonds and, if not redeemed under the 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: 2010B Term Bonds. 2010B Term Bonds Maturing in 2025 Maturing in 2030 Mandatory Mandatory Mandatory Redemption Mandatory Redemption Redemption Years Amounts Redemption Years Amounts 2021 $1,220,000 2026 $1,460,000 2022 1,265,000 2027 1,525,000 2023 1;310,000 2028 1,585,000 2024 1,360;000 2029 1,650,000 2025* 1,4109000 2030* 1,720,000 - *Maturity *Maturiry (i) Credit for Opfional and Mandatory Redemption Amounts. If the City redeems under Section 6(b), purchases in the open market or defeases Term Bonds, the paz amount of the Term Bonds so redeemed, purchased or defeased (irrespective of their actual redemption or purchase prices) shall be credited -10- 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 sha11 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 Redemption 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 Registraz, there shall be issued to the registered owner, without charge therefor, a new Bond (or Bonds, at tlie 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. ( fl Open Market Purchase. The City further reserves the right and option to purehase 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. (e) Selection of 2010B Bonds for Redemption. If fewer than all of the outstanding 2010B Bonds are to be redeemed prior to maturity, then (a) if the 2010B 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 2010B 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 2010B Bonds for redemption, and (b) if the 2010B 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 2010B Bonds for redemption pro rata. The portion of any 2010B Bonds of a denomination mare 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 2010B 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 2010B Bonds are registered in the name of DTC or its nominee, selection of 2010B Bonds for redemption shall be in accordance with the Letter of Representations. (f) Cancellation of Bonds. All Bonds purchased or redeemed under this section shall be cariceled. Section 7. Notice of Redemption. While the Bonds are held by DTC in book-entry only form, any notice of redemption sfiall be given at tlie 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 Registraz 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. -11- 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 thaf 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 sha11 cease to accrue on the date fixed for redemption unless the Bond or Bonds called aze not redeemed when presented pursuant to the ca11. In addition; the redemption notice shall be mailed within the same period; postage prepaid, to the MSRB, to any nationally recognized rating agency which at the time maintains a rating on the Bonds at the request of the City, and to such otlier persons and with such additional information as the City Finance Director shall determine, but`these additional mailings sha11 not be a condition precedent to the redemption of Bonds. Section 8. Failure to Redeem Bonds. If any Bond is not redeemed when properly presented at its maturity date, the City shall be obligated to pay interest on that Bond at the same rate provided in the Bond from and a.fter its maturity 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 of each of those unpaid Bonds. Section 9. The Bond Fund; Pavments into Bond Fund. (a) Payments Into the Bond Fund. The Bond Fund has previously been created in the office of the Finance Directar and is divided into two accounts: the Principal and ;Interest Account and the Reserve Account. So long as any Bonds are outstanding, the City shall set aside and pay into the Bond Pund all ULID Assessments on their collection and, out of the Net Revenue of the System, certain fixed amounts without regard to any fixed proportion, namely: (1) Into the Principal and Interest Account on or before each interest and principal and interest payment date, an amount, together with other money on deposit therein, sufficient to pay the next ensuing interest or principal and interest payments on the Bonds; and (2) Into the Reserve Account an amount necessary to provide for the Reserve Requirement as required under the Parity Conditions. If the City fails to set aside and pay into the Bond Fund the amounts set forth above, the _ owner of any of the outstanding Parity Bonds may bring action against the City and compel such setting aside and payment. When the total amount in the Bond Fund equals the total amount of principal and interest due with respect to.all outstanding Parity Bonds to the last maturity thereof, no further payment need be made into the Bond Fund. (b) Application and Investment of Funds. The City may create sinking fund accounts or other accounts or subaccounts in the Bond Fund for the payment or securing the payment of Parity Bonds as long as the maintenance of such accounts does not conflict with the rights of the owners of the outstanding Parity Bonds. The City may provide for the purchase, redemption or -12- defeasance of Parity Bonds by the use of money on deposit in any account in the Bond Fund as long as the, money remaining in those accounts is sufficient to satisfy the required deposits in those accourits for the remaining Parity Bonds. All money in the Bond Fund may be kept in cash or invested in legal investments maturing not later than the date when the funds are required for the payment of principal of or ' interest on the outstanding Parity Bonds (for investments in the Principal and Interest Account) or having a guaranteed redemption price prior to maturity and, in no event, maturing later than the last maturity of any remaining outstanding Parity Bonds (for investments in the Reserve ' Account). Earnings from investments in the Principal and Interest Account shall be deposited in that account. Earnings from investrnents in the Reserve Account sha11 be deposited in that account. (c) The Reserve Account. The Reserve Account may be divided into subaccounts for each issue of Parity Bonds outstanding. Except for withdrawals as authorized below, the amount on deposit in the Reserve Account (including any subaccounts) shall meet the Reserve Requirement at a11 times so long as any of the Parity Bonds are outstanding. The amount required'to be deposited in the Reserve Account (or any subaccount) shall be decreased when . and to the extent the City has provided for the Reserve Requirement by means of Alternate Security. If there is a deficiency in the Principal and Interest Account to meet maturing installments of either principal or interest, as the case may be, that deficiency shall be made up ratably from the Reserve Account and its subaccounts based on the amount of the total Reserve Requirement to be paid into each subaccount (except when Alternative Security requires a11 cash and investments in the Reserve Account be withdrawn before draws on the Alternate Security) by the withdrawal of cash for that purpose. Any deficiency created in the Reserve Account (and its subaccounts) by reason of any such withdrawal shall then be made up from ULID Assessment payments and the Net Revenue of the System first available after making necessary provisions for the required payments into the Principal and Interest Account. Except for withdrawals described above, the money in the Reserve Account and its subaccounts otherwise shall be held intact and may be applied against the last outstanding bonds payable out of the Bond Fund. However, if at any time the Reserve Account or any subaccount is fully funded, money in excess of the Reserve Requirement shall be withdrawn and deposited, first, in any other subaccount having a deficiency in its Reserve Requirement, and second, at the option of the Finance Director, either in the Principal and Interest Account and spent for the purpose of retiring Parity Bonds or in any of the System Funds and spent for other lawful System PuiPoses. Section 10. Rate Stabilization Fund. The Ufility System Rate Stabilization Fund has been previously established by Qidinance No. 4945. The City may at any time, as determined by the City and as consistent with Section 13 of this ordinance, deposit in the Rate Stabilization Fund Gross Revenue and any other money received by the System and available to be so deposited, excluding principal proceeds of any Future Parity Bonds or other borrowing. No deposit of Gross Revenue shall be made into the Rate Stabilization Fund to the extent that such -13- deposit would prevent the City from meeting the Coverage Requirement in the relevant fiscal yeaz. T'he City may, upon authorization by ordinance, at any time withdraw money from the Rate Stabilization Fund for inclusion in the Net Revenue for the then-current fiscal year, of the System, except that the total amount withdrawn from the Rate Sta.bilization Fund in any fiscal yeaz of the System may not exceed the total debt service of the System in that year. Such deposits or withdrawals may be made up to and including the date 90 days after the end of the fiscal year for which the deposit or withdrawal will be included as Net Revenue for that fiscal year. Earnings from investments in the Rate Stabilization Fund shall be deposited in that fund and sha11 not be included as Net Revenue of the System unless and until withdrawn from that fund as provided herein. The City may also deposit earnings from investments in the Rate ' Stabilization Fund into any System fund as authorized by ordinance, and such deposits shall be included as Net Revenue in the year of deposit. Section 11. Pledge of Revenue and Lien Position. The Net Redenue of the System and ULID Assessments aze pledged to the payment of the Parity Bonds, and the this pledge with respect to, the Parity Bonds shall constitute a lien and charge upon such Net Revenue and ULID Assessments prior and superior to any other charges whatsoever. Section 12. Deposit of Bond Proceeds. . One or more special accounts within the System Funds, designated as the Construction Accounts, have previously been established in the . offiee of the Finance Director. The principal proceeds and premium, if any, received from the sale and delivery of the Bonds remaining after satisfactiori of the Reserve Requirement shall be paid into the Construction Accourits and used to pay the costs of the Improvements and the cost of issuing of the 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 Construcfion Accounts and be spent for the purposes of those accounts. Section 13. Covenants. The City covenants and agrees with the owner of each Bond at any time outstanding, as follows: (a) ULID Assessments. All ULID Assessments sha11 be paid into the Bond Fund and may be used to build up the required reserves in the Reserve Account and to pay the principal of and interest on the Parity Bonds, without those ULID Assessments' being particularly allocated to the payment of the principal of and interest on any particular issue of bonds. (b) Maintenance and Operation. The City will at all times maintain, preserve and keep the properties of the System in good repair, working order and condition, will make all necessary and proper additions,. betterments, renewals and repairs thereto, and improvements, replacements and extensions thereof, and will at all fimes operate or cause to be operated the properties of the System and the business in connection therewith in an efficient rnanner and at a reasonable cost. (c) Establishment and Collection of Rates and Charges. The City will establisli, maintain and collect rates and charges for all services and facilities provided by the System -14- ' which will be fair and nondiscriminatory. To the extent allowable by law, those to which "service of the System is available will be charged for that service at the prevailing rate within 30 days of the availability of that service. Furthermore, the City will adjust those rates and charges from time to time so that: ' (i) The Gross Revenue of the System will at all times be sufficient to (A) pay a11 Maintenance and Operation Expense on a current basis, (B) pay when due all amounts that the City is obligated to pay into the Bond Fund and the _ accounts therein, (C) pay all taxes, assessments or other governmental charges lawfully imposed on the System or the revenue therefrom or payments in lieu : thereof and any and all otlier amounts which the City may now or hereafter become obligated to pay from the Gross Revenue of the System by law or ' contract; and (ii) The Net Revenue of the System and ULID Assessments in eacfi calendar year will be at least equal to the Coverage Requirement. (d) Sale or Disposition of the System. The City will not sell or otherwise dispose of tlie System in its entirety unless, simultaneously with such sale or other disposition, a11 Parity Bonds are redeemed and retired, or defeased pursuant to the provisions of this ordinance. Furthermore, it will not sell, lease, mortgage or in any manner encumber or otherwise dispose of any part of the System, including a11 additions and improyements thereto and extensions tfiereof at any time made, that is used, useful or material in the operation of the System (each, as used in this subparagraph, a"transfer"), unless provision is made for the replacement thereof or for payment into the Bond Fund of the greatest of the following: (i) An amount which will be in the same proportion to the net amount - of Parity Bonds then outstanding (defined as the total amount of those bonds less . the amount of cash and investments in the Bond Fund and accounts therein) that . the Gross Revenue of the System from the portion of the System sold or disposed of for the preceding year bears to the total Gross Revenue of the System for that period; or (ii) An amount which will be in the same proportion to the net amount of Parity Bonds then outstanding (as defined above) that the Net Revenue from the portion of the System sold or disposed of for the preceding year bears to the total Net Revenue of the System for such period; or (iii) An amount which will be in the same proportion to the net amount of Parity Bonds then outstanding (as defined above) that the cost of the assets sold or disposed of (less depreciation) bears to the cost of the assets of the entire System (less depreciation) immediately prior to such sale or disposition; or (iv) An amount which will be in the same proportion to the net amount of Parity Bonds then outstanding (as defined above) that the number of customers ' served by the portion of the System sold or disposed bears to the number of customers served by the entire System prior to such sale or disposition. -15- Before any such transfer under this subsection (d) with respect to greater than 5% of the total assets of the System (measured by cost of the assets less depreciation), the City must obtain a certificate of an Independent Utility Consultant to the effect that in his or her professional opinion, upon such transfer of assets, the remaining System will retain its opera.tional integrity and the Net Revenue of the System will be at least equal fo the Coverage Requirement during the 5 fiscal years following the fiscal year in which the transfer is to occur, taking into account (1) the reduction in revenue resulting from the transfer, (2) the use of any proceeds of the transfer for the redemption of Parity Bonds, and (3) the Independent Utility Consultant's estimate of revenue from customers anticipated to be served by any additions to and betterments and extensions of the System financed in part by the proposed portion of the proceeds of the transfer. Notwithstanding any other provision of this subsection (d), (1) the City in its discretion , may sell or otherwise dispose of any of the works, plant, properties or facilities of the System or any real or personal property comprising a part of the same which shall have become unserviceable, inadequate, obsolete or unfit to be used in the operation of the System, or no longer necessary, material to or useful to the operation of the System, without making any deposit into the Bond Fund, (2) the City may transfer the System to another municipal cotporation so long as ULID Assessments and Net Revenue with respect to the portion of the System so transferred are used for payment of debt service on Parity Bonds prior to any other purpose, or (3) the City in its discretion may carry out such a transfer if the aggregate cost of the facilities, property or other assets (less depreciation) being transferred under this subparagraph comprises no more than 5% of the costs of all of the assets of the System (less depreciation). (e) Liens Upon the System. The City will not at any time create or permit to accrue or to exist any lien or other encumbrance or indebtedness upon the Gross Revenue of the System, or any part thereof, prior or superior to the lien thereon for the payment of Parity Bonds, and will pay and discharge, or cause to be paid and discharged, any and a11 lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Gross Revenue of the System, or any part thereof, prior to or superior to the lien of the Parity Bonds, or which might impair the security of the Parity Bonds. ( fl Books and Accounts: The City will keep proper books, records and accounts with respect to the operations, income and expenditures of the System in accordance with proper accounting procedures and any applicable rules and regulations prescribed by the State of Washington. It will prepare annual financial and operating statements within 270 days of the close of each fiscal year showing in reasonable detail the financial condition of the System as of the close of the previous year, and the income and expenses for such year, including the amounts paid into the Bond Fund and into any and all special funds or accounts created pursuant to the provisions of this ordinance, the status of all funds and accounts as of the end of such year, and the amounts expended for maintenance, renewals, replacements and capital additions to the System. Such statements shall be sent-to the owner of any Parity Bonds upon written request. therefor being made to the City. (g) No Free Service. Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish or supply or permit the furnishing or supplying of any service or facility in connection with the -16- ' operation of the System free of charge to any person, firm or corporation, public or private, other than the City, so long as any Parity Bonds are outstanding. " (h) Collection of Delinquent Accounts. On at least an annual basis, it will determine all accounts that aze delinquent and will take a11 necessary action to enforce payment of such accounts against those property owners whose accounts are delinquent. (i) Fire and Eztended Coverage Insurance. It will carry the types of insurance on its System properties in the amounts normally carried by private water, sewer and storm drai.nage utility companies engaged in the operation of water, sewer and storm drainage systems, and the , cost of such insurance shall be considered a part of Maintenance and operation Expense, or it will implement and maintain a self-insurance program or an insurance pool program with reserves adequate, in the reasonable judgment of the City, to protect the owners of the Parity Bonds against loss. (j) Condemnation Awards..Any condemnation awards received by the City in excess - of 1% of cost of the assets ofthe System (less depreciation) shall be applied to one or more of the following: (1) to the damaged property, (2) to retiring bonds, and (3) to improvements of the System. Section 14. Flow of Funds. (a) The Gross Revenue of the System shall be deposited in the System Funds and used for the following purposes only in the following order of priority: (i) To pay Maintenance and Operation Expense; (ii) To pay, together with ULID Assessments, first, the interest on and, second, the principal of the Parity Bonds when due or as the principal is required , to be paid and to make all payments required to be made into any mandatory redempfion or sinking fund account created to provide for the payment of the principal of Term Bonds; (iii) To make, together with ULID Assessments, all payments required to be made into the Reserve Account or its subaccounts and to make all payments required to be made pursuant to a reimbursement agreement in connection with an Alternate Security, exeept that if there is not sufficient money to make all payments under reimbursement agreements, the payments will be made on a pro rata basis; (iv) To make a11 payments required to be made into any revenue bond, note, warrant or other revenue obligation redemption fund, debt service account or reserve account created to pay or secure the payment of the principal of and interest on any revenue bonds, notes, warrants or other obligations of the City having a lien upon the revenue of the System subordinate to the lien thereon for the payment of the principal of.and interest on any Parity Bonds; -17- (v) To make necessary additions, betterments and improvements and repairs to or extensions and replacements of the System, to retire by redemption or purchase in the open mazket any outstanding revenue obligations or other obligations of the System, to make deposits into the Ra.te Stabilization Fund, ar to . provide for any other lawful City purpose. (b) To meet the required payments to be, made into the Bond Fund, the City may transfer any money from any funds or accounts of the System legally available therefor, except bond redemption funds, refunding escrow funds, defeasance or other trust funds. Section 15. Provisions for Future Paritv Bonds. The City reserves the right to issue ' Future Parity Bonds if the Parity Conditions are met and complied with at the fime of.the issuanee of those Future Parity Bonds. Notwithstanding the foregoing, nothing in this ordinance ' sha11 prevent the City from issuing Future Parity Bonds to refund maturing Parity Bonds then outstanding, money for the payment of which is not otherwise available. Furthermore, nothing contauied in this ordinance shall prevent the City from issuing revenue bonds or other obligations that aze a charge upon the Gross Revenue of the System subordinate to the payments required to be made into the Bond Fund for the payment of any Parity Bonds, or from pledging the payment of ULID assessments into a bond redemption fund created for the payment of the principal of and interest on those subordinate bonds or obligations if such ULID assessments are levied for improvements constructed from the proceeds of those subordinate bonds. Section 16. Separate Utilitv Svstems. The City may create, acquire, construct, finance, own and operate one or more additional systems for water supply, sewer service, water, sewage or stormwater transmission, treatment or other commodity or service. The revenue of that separate utility system shall not be included in the Gross Revenue of the System and may be pledged to the payment of revenue obligations issued to purchase, construct, condemn or otlierwise acquire or expand the separate utility system. Neither the Gross Revenue nor the Net Revenue of the System shall be pledged by the City to the payment of any obligations of a separate utility system except (1) as a Contract Resource Obligation upon compliance with Seetion 16 hereof and/or (2), with respect to the Net Revenue, on a basis subordinate to the lien of the Parity Bonds on that Net Revenue. Section 17. Contract Resource Obligations. (a) The City may at any time enter into one or more contracts or other obligations for the acquisition (from facilities yet to be constructed) of water supply, sewer service, water sewer or stormwater transmission, treatment or other commodity or service relating to the System. The City may determine that such contract or other obligation is a Contract Resource Obligation, and may provide that all payments under that Contract Resource Obligation (including payments prior to the time that water supply, transmission, treatment or other commodity or service is being provided, or, during a suspension or after termination of supply or service) shall be Maintenance and Operation Expense if the following requirements are met at the time such Contract Resource Obligation is entered into: (i) No Event of Default as defined in Section 27 of this ordinance has occurred and is continuing. -18- (ii) There is on file a certificate of an Independent Utility Consultant stating that (A) the payments to be made by the City in connection with the Contract Resource Obligation are reasonable for the supply, transmission, treatment or other service rendered; (B) the source of any new supply, and any facilities to be constructed to provide the supply, transmission, treatment or other service, aze sound from a water, sewerage, or other commodity supply ar transmission planning standpoint, are technically and economically feasible in accordance with prudent utility pra.ctice, and are likely to provide supply or transmission or other service no later than a date set forth in the Independent utility Consultant's certification; and (C) the Net Revenue (further adjusted by the Ind'ependent utility Consultant's estimate of the payments to be made in accordance with the Contract Resource Obligation) for the five fiscal yeazs following the year in which the Contract Resource Obligation is incurred, as such Net Revenue is estimated by the Independent Utility Consultant (with such estimate based on such factors as he or she considers reasonable), will be at least equal to the Coverage Requirement. (b) Payments required to be made under Contract Resource Obligations shall not be subject to acceleration. , (c) Nothing in this Section 16 sha11 be deemed to preyent the City from entering into other agreements for the acquisition of water supply, sewer service, water, sewage or stormwater transmission, treatment or other commodity or service from existing facilities and from treating those payments as Maintenance and Operation Expense. Nothing in this Section 16 shall be deemed to prevent the City from entering into other agreements for the acquisition of water supply, transmission, treatment or other commodity or service from facilities to be constructed and from agreeing to make payments with respect thereto, such payments constituting a lien and charge on Net Revenue subordinate to that of the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds. Section 18. Form and Ezecution of Bonds. The Bonds sha11 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 may be 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 Registraz, shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance: "This Bond is one of the fully registered City of Auburn, Washington, Utility System Revenue Bonds, [2010A/2010B (Taxable Build America Bonds - Direct Payment)], described in the Borid Ordinance." 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 -19- 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 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 19. Bond Resistrar. 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. T'he Bond Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transfened 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 20. Preservation of Tax Exemntion for Interest on 2010A Bonds. The City covenants that it will take all actions necessary to prevent interest on the 2010A 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 2010A Bonds or other funds of the City t"reated as proceeds of the 2010A Bonds at any time during the term of the 2010A Bonds which will cause interest on the 2010A Bonds to be included in gross income for federal income tax purposes. The City certifies that it has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose azbitrage certifications may not be relied upon. Section 21. Designation of 2010A Bonds as "Qualified Tax-Exempt Obligations." The City has determined and certifies that (a) the 2010A 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 Bonds are issued will not exceed $30,000,000; and (c) the amount of tax-exempt obligations, including the 2010A 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 2010A Bonds are issued does not exceed $30,000,000. The City designates the 2010A Bonds as "qualified tax-exempt obligations" for the purposes of Section 265(b)(3) of the Code. Section 22. Election to Treat 2010B as `Build America Bonds". The City hereby inevocably elects to have Section 54AA of the Code apply to the 2010B Bonds so that the 2010B Bonds are treated as "build America bonds," and further to have Subsection 54AA(g) of -20- the Code apply to the 2010B Bonds so that the 2010B Bonds are treated as "qualified bonds" witli 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 2010B Bonds on each interest payment date. The City hereby authorizes and directs the Finance Director (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 2010B 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 Intemal Revenue Service Notice 2009-26. The City covenants that it will comply with the provisions of the Code, compliance with which would result iri the interest on the 2010B 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 2010B Bonds. Section 23. 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 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 paymerit 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, subject only to the rights of the registered owners of any other Parity Bonds then outstanding. If tfie refunding plan provides that the defeased Bonds or the refunding bonds to be issued be secured by cash and/or Government Obligations pending the prior redemption of those Bonds being refunded and if such refunding plan also provides that certain cash and/or Government Obligations are irrevocably pledged for the prior redemption of the defeased Bonds, then only the debt service on the Bonds which are not defeased Bonds and tlie refunding bonds, the payment of which is not so secured by the refunding plan, shall be included in the computation of the Coverage Requirement for the issuance of Future Parity Bonds and the annual computation of coverage for determining compliance with the rate covenants. -21- 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 24. Annroval 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 appioving' 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. Preliminarv Official Statement Deemed Final. The City Council has been provided with copies of a preliminary official statement dated November 17, 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, 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 Continuins 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 (not in excess of ten business days after the occurrence of the event) of the occurrence of any of the following events with respect to the Bonds: ` - (1) principal and interest payment delinquencies; (2) non-payment-related defaults, if material; -22- (3) unscheduled dra.ws on debt service reserves reflecting financial difficulties; (4) unscheduled dra.ws on credit enha.ncements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to ~ perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notice of Proposed Issue (IRS Form 5701 - TEB) or other material notices or determinations with respect to the taae status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) Bond ca11s (other than scheduled mandatory redemptions of Term Bonds), if material, and tender offers; - (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; . (11) rating changes; (12) Bankruptcy, insolvency, receivership or similar event of the City (a "Bankruptcy Event"), which is considered to occur when any of the following occur: (A) the appointment of a receiver, fiscal agent or similar officer for the City. in a proceeding under the U.S. Bankruptcy Code or (i) in any other proceeding under state or , federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or (ii) if such jurisdiction has been assumed by leaving _ the existing governing body and officials ar officers in possession but subject to the supervision and orders of a court or governmental authority, or (B) the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person; (13) The consummation of a merger, consolidation, or acquisition involying the City or the sale of a11 or substantially all of the assets of the City, other than in the ordinary course of business; the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) Appointment of a successor or additional trustee or the change of name ofa trustee, if material. -23- (iii) Timely notice of a failure by the City to provide required annual fmancial information on `or before the date specified in subsection (b) of this section. (b) Type of Annual Financial In. formation 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 accouriting principles promulgated by the Government Accounting Standards Board ("GASB") and made applicable to Washington sta.te 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 bonded debt secured by Net Revenue of the System and ULID Assessments; (3) debt service coverage ratios; and (4) general customer statistics for the System; _ (ii) Shall be provided not later than the last da.y 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, 2010; and . (iii) May be provided in a single or multiple documents, and may be incorporated by specif c reference to documents available to the public on the Internet website 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 undervvriter, 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 tYie 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 sha11 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 confirmed by an opinion of nationally recognized bond counsel, or other counsel familiaz with -24- federal securities laws, delivered to the City, and the City provides timely notice of such termination to the MSRB. ( fl 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 faiiure 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 o.f' 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, where necessary, with respect to the Bonds, and, if material, preparing and disseminating any required notice of its occurrence; (iii) 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 listed 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 ariy necessary amendment of the Undertaking. Section 27. Sunplemental or Amendatorv Ordinances. This ordinance shall not be modified or amended in any respect subsequent to the init'ial issuance of the Bonds, except as provided in and in accordance with and subject to the provisions of this section. For purposes of this provision, the adoption of an ordinance authorizing the issuance of Future Parity Bonds shall not be considered a supplemental ordinance. (a) Certain Supplemental or Amendatory Ordinances Permitted Without Bond Owner Consent. The City, from fime to time, and at any time, without the consent of or notice to the registered owners of the Bonds or the Parity Bonds, may pass supplemental or amendatory ordinances as set forth in this subsection (a). Before the City shall pass any such supplemental -25- . or, amendatory ordinance pursuant to this subsection, there sha11 have been delivered to the City and the Bond Registraz an opinion of Bond Counsel, stating that such ordinance is authorized or permitted by this ordinance. and, upon the execution ancl delivery thereof, will be valid and binding upon the City in accordance with its terms and will not adversely affect the exclusion from gross income for federal income tax purposes of interest on any tax-exempt Parity Bonds then outstanding. The permitted putposes under this subsection (a) are: (i) To cure any formal defect, omission, inconsistency or ambiguity in this ordinance in a manner not adverse to the owner of any Parity Bond; _ (ii) To impose upon the Bond Registrar (with its consent) for the ' benefit of the registered owners of the Bonds any additional rights, remedies, powers, authority, security, liabilities or duties which may lawfully be granted, conferred or imposed and which are not contrary to or inconsistent with this ordinance as theretofore in effect; J (iii) To add to the covenants and agreements of, and limitations and restrictions upon, the City in this ordinance, other covenants, agreements, limitations and restrictions to be observed by the City which aze not contrary or inconsistent with this ordinance as theretofore in effect; (iv) To confirm, as further assurance; any pledge under, and the subjection to any claim, lien or pledge created or to be created by this ordinance . of any other money, securities or funds; (v) To authorize different denominations of the Bonds and to make correlative amendments and modifications to this ordinance regarding exchangeability of Bonds of different authorized denominations, redemptions of portions of Bonds of particular authorized denominations and similar amendments and modifications of a technical nature; (vi) To modify, alter, amend or supplement this ordinance in any other respect which is not materially adverse to the registered owners of Parity Bonds and which does not involve a change described in subsections (b) or (c) of this section; (vii) Because of change in federal law or rulings, to maintain the exclusion from gross income of the interest on the 2010A Bonds from federal income taxation or the receipt of Tax Credit Subsidy Payments with respect to the 2010B Bonds; and (viii) To add to the covenants and agreements of, and limita.tions and restrictions upon, the City in this ordinance, other covenants, agreements, . limitations and restrictions to be observed by the City which are requested by the Bond Insurer (if any) or provider of an Alternate Security and which changes are ` not materially adverse to the registered owners of Parity Bonds. -26- (b) Supplemental or Amendatory Ordinances Requiring Consent of All Registered Owners. Unless approved in writing by the registered owners of all Parity Bonds then outstanding, nothing contained in this section sha11 permit, or be construed as permitting: (1) a change in the times, amounts or currency of payment of the principal of or interest on any ' outstanding Parity Bond or a reduction in the principal amount or redemption price of any outstanding Parity Bond or a change in the redemption price of any outstanding Parity Bond or a change in the method of deternuning ttie rate of interest thereon; (2) a preference of priority of any Parity Bonds or any other bond or bonds, or (3) a reduction in the aggregate principal amount of any Parity Bond. (c) Supplemental or Amendatory Ordinances Requiring Consent of Registered Owners of 60% of Parity Bonds Outstanding. In addition to any ordinance permitted pursuant to paragraph (a) and subject to the terms and conditioris contained in subsection (d) and not otherwise, registered owners of not less than 60% in aggregate principal amount of the Parity Bonds then outstanding sha11 have the right from time to time to consent to and approve the adoption by the City of any supplemental or amendaxory ordinance deemed necessary or desirable by the City for the purpose of modifying, altering, amending, supplementing or rescinding, in any particular, any of the terms or provisions contained in this ordinance, as follows: (i) If at any time the City shall propose any supplemental , or amendatory ordinance under this subsection (c), the City sha11 cause the Bond - Register to give notice of the proposed supplemental or amendatory ordinance by ` first-class United States mail to all registered owners of any then outstanding Parity Bonds, to the Bond Insurer (if any), and to.the Rating Agency. Such notice shall briefly set forth the nature of the proposed supplemental or amendatory ordinance and shall state that a copy thereof is on file at the office of the Bond Registrar for inspection by all registered owners of the outstanding Parity Bonds. (ii) At any time within two years after the date of the mailing of such notice, the City may pass such supplemental or amendatory ordinance in substantially the form described in such notice, but only if there shall have first been delivered to the Bond Registrar (1) the required consents, in writing, of the registered owners of the Parity Bonds, and (2) an opinion of Bond Counsel stating ' that such ordinance is authorized or permitted by this ordinance and, upon the execution and delivery thereof, will be valid and binding upon the City in accordance with its terms and will not adversely affect the exclusion from gross income for federal income tax purposes of interest on any tax-exempt Parity Bonds then outstanding. (iii) If registered owners of not less than the percentage, of then outstanding Parity Bonds required by this subsection (c) shall have consented to and approved the proposed ordinance, no owner of outstanding Parity Bonds shall have any right (1) to object to the passage of such ordinance, (2) to object to any of the terms and provisions eontained therein or the operafion thereof, (3) in any manner to question the propriety of the passage thereof, or (4) to enjoin or restrain -27- the City or the Bond Registrar from adopting the same or taking any action pursuant thereto. Upon the adoption of the supplemental or amendatory ordinance pursuant to the provisions of this section, this ordinance shall be, and sha11 be deemed to be, supplemented and amended accordingly. The respective rights, duties and obligations under this ordinance of the City, tlie Bond Registrar and all registered owners of Parity Bonds, sha11 thereafter be determined, exercised and enforced under this ordinance subject in all respects to such supplements and amendments. Section 28. Defaults and Remedies. (a) Events of Default. The following shall constitute "Events of Default" with respect , to the Bonds: (i) If a default is made in the payment ofthe principal of or interest on any of the Bonds when the same sha11 become due and payable; or (ii) If the City defaults in the observance and performance of any other of the covenants, conditions and agreements on the part of the City set forth in this ordinance or any covenants, conditions or agreements on the part of the City contained in any Parity Bond authorizing ordinance and such default or defaults have continued for a period of six months after they have received from the Bondowners' Trustee (as defined below) or from the registered owners of not less than 25% in principal amount of the Parity Bonds, a written notice specifying and demanding the cure of such default. However, if the default in the observance and performance of any other of the covenants, conditions and 'agreements is one which cannot be completely remedied within the six months after written notice has been given, it shall not be an Event of Default with respect to the Bonds as long as the City has taken active steps within 90 days after written notice has been given to remedy the default and is diligently pursuing such remedy. (iii) If the City files a petition in bankruptcy or is placed in receivership under any state or federal bankruptcy or insolvency law. (b) Bondowners' Trustee. So long as such Event of Default has not been remedied, a bondowners' trustee (the "Bondowners'- Trustee") may be appointed by the registered owners of 25% in principal amount of the Parity Bonds then outstanding, by an instrument or concurrent instnunents in writing signed and acknowledged by such registered owners of the Parity Bonds or by their attorneys-in-fact duly autfiorized and delivered to such Bondowners' Trustee, notification thereof being given to the City. That appointment shall become effective immediately upon acceptance thereof by the Bondowners' Trustee. Any Bondowners' Trustee appointed under the provisions of this Subsection 27(b) shall be a bank or trust company organized under the laws of the State of Washington or the Sta.te of New York or a national , banking association. The bank or trust company acting as Bondowners' Trustee may be removed at any time, and a successor Bondowners' Trustee may be appointed, by the registered owriers of a majority in principal amount of the Parity Bonds, by an instrument or concurrent instruments in writing signed and acknowledged by such registered owners of the Bonds or by -28- their attorneys-in-fact duly authorized. The Bondowners' Trustee may require such security and indemnity as may be reasonable aga.inst the costs, expenses and liabilities that may be incurred in . the performance of its duties. If any Event of Default is, in the sole judgment of the Bondowners' Trustee, cured and the Bondowners' Trustee furnishes to the City a certificate so stating, that Event of Default sha11 be conclusively deemed to be cured and the City, the Bondowners' Trustee and the registered owners of the Parity Bonds shall be restored to the same rights and position which they would have held if no Event of Default had occurred. The Bondowners' Trustee appointed in the manner herein provided, and each successor thereto, is ~ declared to be a trustee for the registered owners of all the Parity Bonds and is empowered to exercise all the rights and powers herein conferred on the Bondowners' Trustee. (c) Suits at Law or in Equity. Upon the happening of an Event of Default and during the continuance thereof, the Bondowners' Trustee may (and, upon the written request of the registered owners of not less than 25% in principal amount of the Parity Bonds outstanding, must) take such steps and institute such suits, actions or other proceedings, all as it may deem appropriate for the protection and enforcement of the rights of the registered owners of the Parity Bonds, to collect any amounts due and owing to or from the City, or to obtain other appropriate relief, and may enforce the specific performance of any cov,enant, agreement or condition contained in this ordinance or in any of the Parity Bonds. Nothing contained in this Section 27 shall, in any event or under any circumstance, be deemed to authorize the acceleration of maturity of principal on the Parity Bonds, and the remedy of acceleration is expressly denied to the registered owners of the Parity Bonds under any circumstances including, without limitation, upon the occurrence and continuance of an Event of Default. Any action, suit or other proceedings instituted by the Bondowners' Trustee hereunder shall be brought in its name as trustee for the Bondowners and all such rights of action upon or urider any of the Parity Bonds or the provisions of this ordinance may be enforced by the Bondowners' Trustee without the possession of any of those Parity Bonds and without the production of the same at any trial or proceedings relative thereto except where otherwise required by law. Any such suit, action or proceeding instituted by the Bondowners' Trustee shall. be brought for the ra.table benefit of all of the registered owners of those Parity Bonds, subject to the provisions of this ordinance. The respective registered owners of the Parity Bonds, by taking and holding the same, shall be conclusively deemed irrevocably to appoint the Bondowners' Trustee the true and lawful trustee of the respective registered owners of those Parity Bonds, with authority to institute any such action, suit or proceeding; to receive as trustee and deposit in trust any sums becoming distributa.ble on account of those Parity Bonds; to execute any paper or documents for the receipt of money; and to do all acts with respect thereto that the registered owner himself or herself might have done in person. Nothing herein shall be deemed to authorize or empower the Bondowners' Trustee to consent to aecept or adopt, on behalf of any registered owner of the Parity Bonds, any plari of reorganization or adjustment affecting the Parity Bonds or any right of any registered owner thereof, or to authorize or empower the Bondowners' Trustee to vote the claims of the registered owners thereof in any receivership, insolvency, liquidation, bankruptcy, reorganization or other proceeding to which the City is a party. -29- . (d) Application of Money Collected by Bondowners' Trustee. Any money collected by the Bondowners' Trustee at any time pursuant to this Section 27 shall be applied in the folTowing order of priority: (i) First, to the payment of the chazges, expenses, advances and compensation of the Bondo.wners' Trustee and_ the charges, expenses; counsel fees, disbursements and compensation of its agents and attorneys. (ii) Second, to the payment to the persons entitled thereto of all installments of interest then due on the Parity Bonds in the order of maturity of such installments and, if the amourit available shall not be sufficient to pay in full - any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon to the persons entitled thereto, without any discrimination or preference. (iii) Third, to the payment to the persons entitled thereto of the unpaid principal amounts of any Parity Bonds which sha11 have become due (other than Parity Bonds previously called for redemption for the payment of which money is held pursuant to the provisions hereto), whether at maturity or by proceedings for redemption or otherwise, in the order of their due dates and, if the amount available shall not be sufficient to pay in full the principal amounts due on the same date, then to the payment thereof ratably, according to the principal amounts due thereon to the persons entitled thereto, without any discrimination or preference. . (e) Duties and Obligations o.f Bondowners' Trustee. The Bondowners' Trustee shall not be' liable except for the performance of such duties as are specifically set forth herein. During an Event of Default, the Bondowners' Trustee shall exercise such of the rights and powers vested in it hereby, and shall use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. The Bondowners' Trustee sha11 have no liability for any act or omission to act hereunder except for the Bondowners' Trustee's own negligent action, its own negligent failure to act or its own willful misconduct. The duties and obligations of the Bondowners' Trustee shall be determined solely by the express provisions of this ordinance, and no implied powers, duties or obligations of the Bondowners' Trustee shall be read into this ordinance. The Bondowners' Trustee shall not be required to expend or risk its own funds or otherwise incur individual iiability in the performance of any of its duties or in the exercise of any of its rights or powers as the Bondowners' Trustee, except as may result from its own negligent action, its own negligent failure to act or its own willful misconduct. The Bondowners' Trustee shall not be bound to recognize any person as a registered owner of any Bond unfil his or her title thereto, if disputed, has been esta.blished to its reasonable satisfaction. The Bondowners' Trustee may consult with counsel and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. The Bondowners' Trustee shall not be answerable for any neglect or default of any person, firm or corporation employed and selected by it with reasonable care. -30- (f) Suits by Individual Bondowners Restricted. Neither the registered owner nor the beneficial owner of any one or more of Parity Bonds shall have any right to institute any action, suit or proceeding at law or in equity for the enforcement of same unless: (i) ari Event of Default has happened and is continuing; and (ii) a Bondowners' Trustee has been appointed; and (iii) such owner previously shall have given to the Bondowners' Trustee written notice of the Event of Default on account of which such suit, action or proceeding is to be instituted; and (iv) the registered owners of 25% in principal amount of the then outstanding Parity Bonds have made, after the occurrence of such Event of Default, written request of the Bondowners' Trustee and have afforded the. Bondowners' Trustee a reasonable opportunity to institute such suit, action or proceeding;and (v) there have been offered to the Bondowners' Trustee security and indemnity satisfactory to it against the costs, expenses and liabilities to be - incurred therein or thereby; and (vi) the Bondowners' Trustee has refused or neglected to comply with such request within a reasonable time. No registered owner or beneficial owner of any Parity Bond shall have any right in any : manner whatever by his or her action to affect or impair the obligation of the City to pay from the Net Revenue the principal of and interest on such Parity Bonds to the respective owners thereof when due. ' -31- Section 29. Ratification. All actions previously taken in aceordance with this ordinance are hereby raxified and confirmed. Section 30. Effective Date of Ordinance. This ordinance shall take effect and be in force from and after its passage and f ve 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 's 29th of November, 2010. , Peter B. Lewis, Mayor - A ST: ~ , . _ Danielle "skam, City Clerk APPROVED AS TO FORM: Foster Pepper PLLC, Bond Counsel PLTBLISHED:~c~AH✓ 2-, 2el0 -32- j Section 29. Ratification. All actions previously taken in accordance with this ordinance are hereby ratified and confirmed: Section 30. Effective Date of Ordinance. This ordinance shall take effect and be in force from a.nd after its passage and five da.ys 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 is 29th of November, 2010. , \ Peter B. Lewis,lVlayor ATTEST' ~ f Danielle 6 kam,. City Clerk , ~ APPROVED AS TO FO • Foster Pepper PLL , B unsel -PUBLISHED: -32- EXHIBIT A- Descrintion of the Imnrovements The following Improvements are expected to be funded with proceeds of the Bonds. The estimates are only estimates at this time. The Improvements sha11 be carried out in accordance with the plans a.rid specifications prepared by the City's engineers and consulting engineers. The City Council may modify the details of the Improvements where, in its judgment, it appears advisable if such modifications do not substantially alter the purposes of that system or plan. Water Svstem (Estimated Projeets Total - $10,982,000) Location # Project Name Cost Estimate 1 Lakeland Hills Booster Pump Station $2,832,000 2 AC Main Replacement $1,000,000 3 Lakeland Hills Reservoir 6$2,500,000 4 Academy Booster Pump Station $500,000 NA SCADA $1,150,000 NA Water Supply Chazges $3,000,000 Sewer Svstem J (Estimated Projects Total - $4,910,000) Location Project Name Cost Estimate 5 Ellingson Pump Station $2,568,000 6 2009/10 Repair & Replacement $762,000 8 Pump Station Decommissioning $390,000 NA SCADA $1,190,000 Storm Drainage Svstem (Estimated Projects Total - $4,108;000) Location Project Name Cost Estimate 9 White River Pump Station $2,650,000 13 West Valley Highway $800,000 NA SCADA $658,000 EXHIBIT B - Paritv Conditions As set forth in Section 14 of this Ordinance, the City may issue Future Parity Bonds on a parity with the Bonds and the Outstanding Parity Bonds if and only if the following conditions are met and complied with at the time of issuance of those proposed Future Parity Bonds: (a) There shall be no deficiency in the Bond Fund. (b) The ordinance proyiding for the issuance of the Future Parity Bonds shall provide that all assessments and interest thereon that may be levied in any ULID created for the purpose , of paying, in whole or in part, the principal of and interest on those Future Parity Bonds, shall be paid directly into the Bond Fund, except for any prepaid assessments permitted by law to be paid into a construction fund or account. (c) The ordinance providing for the issuance of those Future Parity Bonds shall provide for the payment of the principal thereof and interest thereon out of the Bond Fund. _(d) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the deposit into the Reserve Account or a subaccount therein of (i) an amount equal to the Reserve Requirement for those Future Parity Bonds from the Future Parity Bond proceeds - or other money legally available, or (ii) an Alternate Security (or an amount of cash plus Alternate Security) equal to the Reserve Requirement for those Future Parity Bonds, or (iii) to the extent that the Reserve Requirement is not funded from Future Parity Bond proceeds, other legally available money or Alternate Security at the time of issuance of those Future Parity Bonds, within five years from the date of issue of the Future Parity Bonds from ULID Assessments, if any, levied and first collected for the payment of the principal of and interest on those Euture Parity Bonds and, to the extent that ULID Assessments are insufficient, then from the Net Revenue of the System in five approximately equal annual payments. (e) The ordinance authorizing the issuance of such Future Parity Bonds shall provide , for the payment of mandatory redemption or sinking fund requirements into the Bond Fund for any Term Bonds to be issued'and for regular payments to be made for the payment of the principal of such Term Bonds on or before their maturity, or, as an alternative, the mandatory redemption of those Term Bonds prior and up to their maturity date from money in the Principal and Interest Account. ( fl There shall be on file with the City either: (i) A certificate from an Independent Utility Consultant showing that in his or her professional opinion, based on any 12 consecutive calendar months out of the immediately preceding 24 calendar months, the Net Revenue of the System (together with any ULID Assessment collections) shall be equal to the - Coverage Requirement for each year thereafter. The certificate, in estimating the Net Revenue of the System available for debt service, may adjust Net Revenue of the System to reflect: (1) Any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; B-1 (2) Income derived from customers of the System who have become customers during the 12 consecutive month period or thereafter adjusted to reflect one year's net revenue from those customers; (3) Income from any customers to be connected to the System who have paid the required connection charges; (4) The Independent Utility Consultant's estimate of the Net Revenue of the System to be derived from customers anticipated to connect far whom new building permits have been issued; (5) The Independent Utility Consultant's estimate of the Net Revenue . of the System to be derived from customers with existing homes ar buildings which will be required to connect to any additions to and improvements and extensions of the System constructed and to be paid for out of the proceeds of the sale of the additional Future ` Parity Bonds or other additions to and improvements and extensions of the System then under construction and not fully , connected to the facilities of the System when such additions, improvements and extensions aze completed; . (6) Income received or to be received which is derived from any person, firm, corporation or municipal corpora.tion under any executed contract for utility service, which revenue was not . included in the historical Net Revenue of the System; and . (7) Any increases or decreases in Net Revenue as a result of any actual or reasonably anticipated changes in Maintenance and Operation Expense subsequent to the 12-month period. (ii) In lieu of the certificate of an Independent Utility Consultant as ' described in paragraph (f)(i), there may be on file from the City Finance Director, ' a cerfificate showing that in his or her professional opinion, based on any 12 consecutive calendar months out of the immediately preceding 24 calendar months, and without the adjustments described in subparagraphs (1) through (7), above, the Net Revenue of the System shall be equal to the Coverage Requirement for each year thereafter. No certificate provided for in this paragraph (f) shall. be required in connection, with the issuance of a bond issue if the amount of bonds proposed to be issued does not exceed the ULID Assessments levied in support of such bond issue by more than $5,000 plus any amount of the proceeds of such bonds deposited in the Reserve Account as capitalized reserve. Furthermore, if the Future Parity Bonds proposed to be so issued are for the sole purpose of refunding outstanding Parity Bonds,:no such certification of coverage shall be required if the Annual Debt Service in each year for the refunding bonds is not increased by $5,000 over the amount required for the bonds to be refunded thereby and the maturities of those refunding bonds are not extended beyond the maturities of the bonds to be refunded thereby. B-2 CERTIFICATION I, the undersigned, City Clerk of the City of Auburn, Washington (the "City"), hereby , certify as follows: l. The atta.ched copy of Ordinance No. 6335 (the "Ordinance") is a full; true and correct , copy of an ordinance duly passed at a regulaz meeting of the City Council of the City held at the. regular meeting place thereof on November 29, 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; and 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 29th day of November, 2010. CITY OF AUBURN, WASHINGTON ~ Danielle as am, City Clerk