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HomeMy WebLinkAbout1798 Issuance and Sale of Water and Sewer Revenue BondsORDINANCE NO..~Uqq~ AN ORDINANCE of the City of Port Townsend, Washington, providing for the issuance and sale of water and sewer revenue bonds of the city in the principal amount of $.395,000, to pay part of the cost of acquiring, constructing and installing certain additions and improvements to and extensions of the existing water and sewer system of the city as authorized by Ordinance No. ~7; providing and adopting certain covenants and protective features safeguarding the payment of the principal thereof and interest thereon; creating a bond redemption fund and confirming the sale of such bonds. WHEREAS, Ordinance No. !~ of the City of Port Townsend, Washington (hereinafter called the "City"), passed ~m~j~f ~7 , 1978, authorized the acquisition, construction and installation of certain additions and improvements to and extensions of the existing water and sewer system of the City, and further provided that a portion of the cost thereof would be provided by the issuance and sale of water and sewer revenue bonds of the City in the principal amount of not to exceed $1,245,000; and WHEREAS, it is deemed necessary and advisable that the City proceed with the acquisition, construction and installation of said additions, improvements and extensions, and to pay part of the cost thereof that it now issue and sell its water and sewer revenue bonds in the total principal amount of $395,000; and WHEREAS, the City has heretofore entered into an agreement with the United States Department of Commerce acting through its Economic Development Administration whereby the United States Department of Commerce has agreed to purchase such water and sewer revenue bonds to be issued; NOW, THEREFORE, BE IT ORDAINED by the Council of the City of Port Townsend, Washington, as follows: Section 1. Definitions. As used in this ordinance the following words shall have the following meanings: a. The wOrd "Assessments" means assessments (including interest and penalties~ levied in any utility local improvement district of the City which are payable into a bond fund securing the payment of any water and sewer revenue bonds of the City. b. The word "Bonds" means the $395,000 principal amount of water and sewer revenue bonds of the City issued pursuant to this Ordinance. c. The words "Bond Fund" mean the 1978 Water Revenue Bond Fund created by Section 12 of this Ordinance. d. The word "City" means the City of Port Townsend, a municipal corporation duly organized and existing under the laws of the State of Washington. e. The words "Construction Fund" mean the special fund of the City known as the "1978 Water Construction Fund" created by Ordinance No. ~l~ of the City and described in Section 12 of this Ordinance. f. The words "CostS of Maintenance and Operation" mean all necessary operating expenses, current maintenance expenses, expenses of reasonable upkeep and repairs, and insurance and administrative expense, but excludes depreciation, payments for debt service or into reserve accounts, costs of capital additions to or replacements of the System, municipal taxes, or payments to the City in lieu of taxes. g. The word "Government" means the Economic Development Administration of the United States Department of Commerce. h. The words "Gross Revenue" mean all earnings, revenue and moneys, except assessments, received by the City from or on account of the operation of the System, including the income from -2- investments of money in the Revenue Fund and any bond fund or from any other investment thereof except the income from invest- ments irrevocably pledged to the payment of revenue bonds pursuant to a plan of retirement or refunding. The words ',Gross Revenue" shall also include federal or state reimbursements of operating expenses to the extent such expenses are included as "CostS of Maintenance and Operation." i. The words "Net Revenue" mean the Gross Revenue less the Costs of Maintenance and Operation. j. The words "Outstanding Bonds" mean the outstanding water and sewer revenue bonds of the City issued under date of December 1, 1959, pursuant to Ordinance No. 1379 of the City and issued under date of January 1, 1967, pursuant to Ordinance No. 1506 of the City, and any water and sewer bonds of the City hereafter issued. k. The words "Revenue Fund" mean the special fund of the City designated the "Olympic Gravity Water Fund". 1. The word "System" means the existing water and sewer system of the City, as such system may be added to, improved and extended for as long as any of the Bonds are outstanding. It is hereby provided, however, that the System shall not include that part of the water supply and distribution system of the City leased to Crown-Zellerbach Corporation under date of March 15, 1956. Section 2. Authorization of Bonds. For the purpose of providing part of the money required to acquire, construct and install those certain additions and improve- ments to and extensions of the System as provided in Ordinance No. ~, the City hereby authorizes the issuance of the Bonds in the total principal amount of $395,000. -3- Section 3. Description of Bonds. The Bonds shall be designated the "City of Port Townsend Water and Sewer Revenue Bonds, 1978," shall be dated as of the date of delivery thereof to the purchaser, shall be in coupon form in the denomination of $5,000 each, shall bear interest at the rate of 5% per annum payable on the first anniversary of the da. te of delivery, and annually thereafter on each succeeding anniversary of the date of delivery, and shall be numbered and mature in the order of their number on said anniversary date of each year as follOws: Bond Nos. Years Amounts Bond Nos. Years Amounts 1 1979 $ 5,000 23-24 1999 $ 10,000 2 1980 5,000 25-26 2000 10,000 3 1981 5,000 27-28 2001 10,000 4 1982 5,000 29-30 2002 10,000 5 1983 5,000 31-32 2003 10,000 6 1984 5,000 33-34 2004 10,000 7 1985 5,000 35-36 2005 10,000 8 1986 5,000 37-38 2006 10,000 9 1987 5,000 39-41 2007 15,000 10 1988 5,000 42-44 2008 15,000 11 1989 5,000 45-47 2009 15,000 12 1990 5,000 48-50 2010 15,000 13 1991 5,000 51-53 2011 15,000 14 1992 5,000 54-56 2012 15,000 15 1993 5,000 57-59 2013 15,000 16 1994 5,000 60-63 2014 20,000 17 1995 5,000 64-67 2015 20,000 18 1996 5,000 68-71 2016 20,000 19-20 1997 10,000 72-75 2017 20,000 21-22 1998 10,000 76-79 2018 20,000 It is hereby found and declared that the final maturity of the Bonds does not extend beyond the reasonable life expectancy of the System. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America by the City Treasurer at his office or at the option of the holder at either of the fiscal agencies of the State of Washington in the cities of Seattle, Washington, and New York, New York, or, in the case of a fully registered Bond, to the owner or owners thereof at their address or addresses appearing on the registration books of the City. The Bonds shall be obligations only of the Bond Fund and shall be payable and secured as provided herein. The Bonds are not general obligations of the City. Section 4. Execution of Bonds. The Bonds shall be signed on behalf of the City with the facsimile or manual signature of the Mayor and shall be attested by the City Clerk. Each of the Bonds shall have the seal of the City impressed thereon. Interest coupons shall be executed with the facsimile signatures of said officials. Section 5. Redemption Privileges. The City hereby reserves the right, so long as the Government is the owner of any or all of the outstanding Bonds, to redeem such outstanding Bonds in whole, or in part in inverse numerical order, at any time, at par plus accrued interest to the date of redemption. If any or all of the outstanding Bonds are hereafter owned by investors other than the Government, the City hereby reserves the right to redeem such outstanding Bonds in whole, or in part in inverse numerical order, on any interest payment date on or after ten years from the date of issue. Interest on any Bonds so called for redemption shall cease on such redemption date unless the same shall not be redeemed upon presentation made pursuant to such call. The City may purchase outstanding Bonds in the open market for retirement only. Section 6. Redemption Notice. Written notice of any such intended redemption shall be given by registered mail sent to the Government at least ten (10) days prior to the redemption date. In the event that any outstand- ing Bonds are not held by the Government, such notice shall be published once in the official newspaper of the City not more than forty (40) nor less than thirty (30) days prior to said -5- redemption date. In addition to such publication and mailing, notice shall also be mailed to Standard & Poor's Corporation and to Moody's Investors Service, Inc. or to their successors, if any. The mailing of such notice shall not, however, be a condi- tion precedent to Such redemption. Section 7. Form of Bonds. The Bonds shall be in substantially the following form: UNITED STATES OF AMERICA NO. $5,000 STATE OF WASHINGTON CITY OF PORT TOWNSEND WATER AND SEWER REVENUE BOND, 1978 The City of Port Townsend, a municipal corporation organized and existing under and by virtue of the laws of the State of Washington (herein called the "City"), hereby acknowledges itself indebted and for value received promises to pay to bearer, solely from the sources herein referred to, the principal sum of FIVE THOUSAND DOLLARS on the day of , 19 , unless redeemed prior thereto as herein provided, with interest thereon from the date hereof at the rate of 5.00% per annum until such principal sum is paid or payment has been duly provided for, payable , 1979, and annually thereafter on the day of of each year. Payment of the interest due on or before the maturity of this bond shall be made only upon presentation and surrender of the coupons representing such interest as the same respectively become due. Both principal of and interst on this bond are payable in lawful money of the United States of America, at the office of the Treasurer of the City, in Port Townsend, Washington, or, at the option of the holder, at either of the fiscal agencies of the State of Washington in the cities of Seattle, Washington, and New York, New York. So long as the Economic Development Administration is the owner of any or all of the outstanding Bonds, the City has reserved the right to redeem the outstanding Bonds in whole, or in part in inverse numerical order, at any time, at par plus accrued interest to the date of redemption. In the event that any outstanding Bonds are not held by the Economic Development Administration, the City has reserved the right to redeem such outstanding Bonds in whole, or in part in inverse numerical order, on any interest payment date on or after ten years from the date of issue. -6- Interest on any revenue Bonds SO called for redemption shall cease on such redemption date unless the same shall not be redeemed upon presentation made pursuant to such call. Written notice of any such redemption shall be given by registered mail sent to the Economic Development Adminis- tration at least ten days prior to the redemption date. In the event any outstanding Bonds are not held by the Economic Development Administration, notice of any redemption of such outstanding Bonds shall be given by one publication thereof in the official City newspaper not more than forty nor less than thirty days prior to said redemption date, and by mailing a like notice at the same time to Standard & Poor's Corporation and to Moody's Investors Service, Inc., or to their successors, if any. This bond is one of an issue of seventy-nine bonds of the City of like amount, date and tenor except as to number and date of maturity in the aggregate principal amount of $395,000. This issue of bonds is authorized by Ordinance No. ~q~of the City (herein called the "Bond Ordinance") for the purpose of providing money to pay part of the cost of certain improvements to the water and sewer system of the City, all in conformity with the laws of the State of Washington. This bond and the bonds of this issue are payable solely from the special fund of the City known as the "1978 Water Revenue Bond Fund" (herein called the "Bond Fund") created in the office of the Treasurer of the City. The City has irrevocably obligated and bound itself to pay into the Bond Fund out of the Net Revenue of the System (as defined in the Bond Ordinance) or from such other moneys as may be provided therefor, certain amounts necessary to pay and secure the payment of the princiPal of and interest on such bonds. The bonds of this issue are not general obligations of the City. The City hereby covenants and agrees with the owner and holder of this bond that it will keep and perform all the covenants of this bond and of the Bond Ordinance to be by it kept and performed. The City does hereby pledge and bind itself to set aside from the Revenue Fund out of the Net Revenue of the System (said terms being defined in the Bond Ordinance) into said Bond Fund the various amounts required by the Bond Ordinance to be paid into and maintained in said Fund, all within the times provided by said Ordinance. To the extent more particularly provided by the Bond Ordinance the amounts so pledged to be paid out of the Revenue of the System into said Bond Fund shall be a lien and charge upon the Net Revenue of the System junior in rank to the lien and charges of the revenue bonds of the City issued under date of December 1, 1959, pursuant to Ordinance No. 1379 of the City and issued under date of January 1, 1967, pursuant to Ordinance No. 1506 of the City, and any water and sewer bonds hereafter issued by the City and superior to all other charges of any kind or nature whatsoever. -7- The City has further bound itself to maintain the System in good repair, working order and condition, to operate the same in an efficient manner and at a reasonable cost, and to fix, maintain and collect rates and charges for as long as any of the bonds of this issue are outstanding that will make available, for the payment of the principal thereof and interest thereon as the same shall become due, Net Revenue and Assessment ds defined in the Bond Ordinance), in an amount which will be equal to at, least 1.10 times the maximum amount required to be paid out of the Bond Fund in any year hereafter to pay the principal of and interest on all of such bonds after payment of the principal of and interest on all December 1, 1959, and January 1, 1967, bonds, and any future water and sewer bonds issued by the City, then outstanding. The pledge of Net Revenue of the System and other obligations of the City under the Bond Ordinance may be discharged at or prior to the maturity or redemption of the bonds of this issue upon the making of provisions for the payment thereof on the terms and conditions set forth in the Bond Ordinance. Reference to the Bond Ordinance and any and all modi- fications and amendments theeof is made for a description of the nature and extent of the security for the bonds of this issue, the funds or revenues pledged, and the terms and conditions upon which such bonds are issued. It is hereby certified and declared that this bond and the bonds of this issue are issued pursuant to and in strict compliance with the Constitution and laws of the State of Washington and ordinances of the City, and that all acts, conditions and things required to be done precedent to and in the issuance of this bond have happened, been done and performed. IN WITNESS WHEREOF, the City has caused this bond to be executed in its name with the facsimile (manual) signature of the Mayor, to be attested by the manual signature of the City Clerk, the corporate seal of the City to be impressed hereon, and the interest coupons attached hereto to be signed with the facsimile signatures of said officials, this day of , 1978. CITY OF PORT TOWNSEND, WASHINGTON By ATTEST: The interest coupons attached to the Bonds shall be in substantially the following form: -8- NO. $ On the first day of , 19__, unless the bond to which this coupon is appurtenant shall have been duly called for prior redemption and the redemption price shall have been paid or duly provided for, the City of Port Townsend (the "City") will pay to bearer at the office of the City Treasurer, in Port Townsend, Washington, or, at the option of the holder, at either of the fiscal agencies of the State of Washington, in the cities of Seattle, Washington, and New York, New York, the amount shown hereon in lawful money of the United States of America, solely out of the sources referred to in said bond and Ordinance No. )Uq~ of the City, being the special fund of the City entitled "1978 Water Revenue Bond Fund," said amount being the annual interest due that day on its Water Revenue Bond, 1978 dated , 1978, and numbered . CITY OF PORT TOWNSEND, WASHINGTON Mayor ATTEST: ~ ' - -~City'Clerk Section 8. Single Fully Registered Bonds. The purchaser of the Bonds may elect to accept a nonnegotiable bond registered as to both principal and interest with a face value in the amount of the Bonds, in lieu of individual bonds. Any such fully registered bond shall be executed in the manner provided for the Bonds and shall be of type composition and on paper of sufficient weight and strength to prevent deterioration throughout the life of the loan represented by such fully registered bond. Such fully registered bond shall be dated as of the date of delivery thereof to the purchaser, .shall bear interest at the rate specified for .the Bonds, shall mature in installments in the years and amounts set forth in Section 3 of this ordinance, and shall be in substantially the the following form, with such variations, omissions and insertions as may be necessary under the circumstances: -9- UNITED STATES OF AMERICA NO. R-1 $395,000 STATE OF WASHINGTON CITY OF PORT TOWNSEND WATER AND SEWER REVENUE BOND, 1978 The City of Port Townsend, Washington (hereinafter called the "City"), acknowledges itself indebted and for value received promises to pay to the Economic Development Administration, United States Department of Commerce, or its successor (herein sometimes called the "Payee"), or its registered assigns (herein sometimes called the "Alternate Payee"), the principal sum of THREE HUNDRED NINETY-FIVE THOUSAND DOLLARS in the following installments on of the following years: of each Years Amounts Years Amounts 1979 $ 5,000 1999 $ 10,000 1980 5,000 2000 10,000 1981 5,000 2001 10,000 1982 5,000 2002 10,000 1983 5,000 2003 10,000 1984 5,000 2004 10,000 1985 5,000 2005 10,000 1986 5,000 2006 10,000 1987 5,000 2007 15,000 1988 5,000 2008 15,000 1989 5,000 2009 15,000 1990 5,000 2010 15,000 1991 5,000 2011 15,000 1992 5,000 2012 15,000 1993 5,000 2013 15,000 1994 5,000 2014 20,000 1995 5,000 2015 20,000 1996 5,000 2016 20,000 1997 10,000 2017 20,000 1998 10,000 2018 20,000 in any coin or currency which is legally acceptable on the respective dates of payments for debts due the United States of km~rica and to pay interest on the balance of said prin- cipal from time to time remaining unpaid in like coin or currency at the rate of 5% per annum payable annually on the day of of each year from date hereof until the principal amount hereof has been paid or such payment has been duly provided for. Payments of principal and interest shall be made by the City Treasurer directly to the registered owner hereof at the address last provided by it to the City for such purpose. Upon final payment of the principal and interest, this bond shall be submitted to the City for cancellation and surrender. -10- Both principal of and interest on this bond are payable solely out of the special account of the City known as the 1978 Water Revenue Bond Fund (the "Bond Fund"l, created by Ordinance No. tqq~ of the City ~herein called the "Ordinance"). In addition to the installments of principal required to be paid by the City as hereinabove set forth, the City, at its option so long as the Payee is the registered owner of this bond, shall have the right to prepay any or all unpaid installments, at any time, in multiples of $5,000, in the inverse chronological order of such installments, at the principal amount thereof plus accrued interest to the date of prepayment. If an Alternate Payee is the registered owner of this bond, the City, at its option, shall have the right to prepay any or all unpaid installments, on any interest payment date on or after ten years from the date of issue, in multiples of $5,000, in the inverse chronological order of such installments, at the principal amount thereof plus accrued interest to the date of prepayment. Notice of any such optional prepayment shall be given at least ten days prior to the prepayment date by mailing to the registered owner of this bond a notice fixing such prepayment date, and the amount of the principal to be prepaid. As provided in the Ordinance, this bond is exchangeable, at the sole expense of the City, at any time upon ninety days' notice at the request of the registered owner hereof, and upon surrender of this bond to the City, for definitive coupon bonds payable to bearer, of the denomination of $5,000 each, bearing interest at the same rate as this bond, with the same rights of redemption as provided for definitive bonds in Section 5 of the Ordinance, in an aggregate princi- pal amount equal to the unpaid principal amount of this bond and in the form of such coupon bonds as provided for in Section 7 of the Ordinance. This bond is issued for the purpose of providing funds to pay part of the cost of acquiring, constructing and installing certain additions and improvements to and exten- sions of the water and sewer system of the City, is payable solely out of the Net Revenue of such System (as defined in the Ordinance) and all additions and improvements thereto and extensions thereof, and does not constitute a general indebtedness of the City. The City hereby covenants and agrees with the owner and holder of this bond that it will keep and perform all the covenants of this bond and of the Ordinance to be by it kept and performed. The City has pledged and bound itself to set aside from the Net Revenue of its water and sewer system and all addi- tions and improvements thereto and extensions thereof, and pay into the Bond Fund the various amounts required by the Ordinance to be paid into and maintained in the Bond Fund all within the times provided in said Ordinance. -11- Said amounts so pledged to be paid into said Bond Fund are hereby declared to be a lien and charge upon such Net Revenue junior to the lien and charge thereon to pay and secure the outstanding water and sewer revenue bonds of the City issued under date of December 1, 1959, pursuant to Ordinance No. 1379 of the City and issued under date of January 1, 1967, pursuant to Ordinance No. 1506 of the City, and any water and sewer bonds hereafter issued by the City, and superior to all other charges of any kind or nature. The City has further bound itself to maintain said System in good condition and repair, to operate the same in an efficient manner and at a reasonable cost, and to estab- lish, maintain and collect rates and charges for water and sewer service furnished for as long as any of the bonds of this issue are outstanding that will provide Net Revenue and Assessments (as defined in the Ordinance), at least equal to 1.10 times the maximum amount required each calendar year hereafter to pay and secure the payment of the principal of and interest on the bonds of this issue after the principal of and interest on the outstanding water and sewer revenue bonds of the City issued under date of December 1, 1959, and issued under date of January 1, 1967, and any outstanding water and sewer bonds hereafter issued by the City, have been paid. This bond may be assigned, and upon such assignment the assignor shall promptly notify the City Treasurer by regis- tered mail. It is hereby certified that all acts, conditions and things required to be done precedent to and in the issuance of this bond have happened, been done and performed, and that the total indebtedness of the City including this bond does not exceed any constitutional, statutory or charter limitation. IN WITNESS WHEREOF, the City of Port Townsend, Washington, has caused this bond to be executed on behalf of the City with the facsimile (manual) signature of its Mayor, to be attested by the City Clerk, and the seal of the City to be impressed hereon, as of the __ day of , 1978. ATTEST: CITY~ORT TOWNSEND, WASHINGTON ~/ Mayor A fully registered bond shall have endorsed thereon the following form of assignment: -12- ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered owner thereof hereby sells, assigns and transfers the within bond unto . DATED In the presence of: (Repeat this form of assignment) As provided in the within bond, notice of any assign- ment thereof shall be given by the assignor by registered mail to the City Treasurer, Port Townsend, Washington, and upon the receipt of such notice the bond shall be registered as to both principal and interest on the registration books of the City in the name of the assignee named above. Section 9. Any fully registered bond shall be redeemable, in whole or in part, to the extent, at the time, in the manner and at the prices set forth in Sections 5 and 6 hereof, except that the only notice required shall be notice sent to the regis- tered owner by registered mail at least ten (10) days prior to the redemption date. Any fully registered bond may also be transferred by the registered owner thereof, provided that such transfer relates to the entire principal amount of the fully registered bond trans- ferred, and any such transfer shall be noted on the bond registra- tion book of the City. Upon ninety days' written notice by the holder of any fully registered bond, the City shall cause to be prepared and shall deliver to such holder, at the City's sole cost and expense, definitive coupon bonds of type composition and on bond paper of weight and strength that is customarily used for serial bonds of an issue comparable to this issue of Bonds. Such definitive bonds shall be in the denomination of $5,000 each, shall be in the total principal sum of the unpaid balance -13- due on such fully registered bond, shall be numbered and mature as provided in Section 3 hereof on those dates of maturity which have not yet occurred on the date of such exchange, except that if any prepayment authorized herein shall have been effected, such prepayment shall be deemed to have redeemed such definitive bonds in inverse numerical order. Such definitive bonds shall be executed as herein provided for the Bonds. Section 10. Pledge of Revenues. The Bonds, together with the interest thereon, shall be payable from the Net Revenue of the System and that portion of said Net Revenue which is suf- ficient and necessary to pay the principal of and interest on the Bonds as the same shall become due is hereby pledged and set aside out of the Revenue Fund into the Bond Fund. Said amounts so pledged are hereby declared to be a lien and charge upon such Net Revenue and the money in the Revenue Fund junior to the lien and charge thereon to secure and pay the principal of and interest on the Outstanding Bonds of the City and superior to all other charges of any kind or nature. Section 11. Investment of Moneys. All money in the Bond Fund may be kept in cash or invested in any legal investment maturing not later than 20 years from date of purchase, and in no event maturing later than the last maturity of the Bonds outstand- ing at the time of such purchase.~ Interest earned on or profits made from the sale of such investments shall be deposited in and become a part of the Bond Fund. Section 12. Protection and Disposition of Funds. The "1978 Water Construction Fund" (hereinbefore defined as the "Construc- tion Fund") has been heretofore established in accordance with Ordinance No. of the City. The proceeds of sale of the Bonds (except for accrued interest, if any, which shall be paid into the Bond Fund) and all moneys received from the federal -14- government and the State of Washington to pay part of the cost of the improvements authorized by Ordinance No. i~qTshall be deposited in the Construction Fund. Interest earned on Construc- tion Fund moneys shall be deposited in the Construction Fund. The City's share of any unliquidated damages and any moneys paid by defaulting contractors or their sureties shall be deposited in the Construction Fund to assure completion of all of the additions and improvements to and extensions of the System to be made. The following funds and accounts shall be continually main- tained, except as otherwise provided, for as long as any of the Bonds remain outstanding: A. Revenue Fund. The Gross Revenue shall be set aside into the Revenue Fund. B. Bond Fund. There is hereby created a "1978 Water Revenue Bond FUnd" (hereinbefore defined as the "Bond Fund") for the purpose of paying and securing the payment of the principal of and interest on the Bonds. The City shall set aside and transfer therein from the Revenue FUnd on or before the 20th day of each month, commencing with the month of March, 1978, and continuing each month for as long as any of the Bonds are outstand- ing, an amount equal to at least one-twelfth (or such larger amount as may be necessary) of the annual installments of princi- pal and interest coming due on the Bonds on the next succeeding anniversary of the date of issue of the Bonds. If the City for any reason shall fail to make such monthly transfers, then an amount equal to the deficiency shall be set apart and deposited in the Bond Fund out of the Revenue Fund in the ensuing month or months, which amount shall be in addition to the regular monthly deposit required during such succeeding month or months. -15- If there ever shall be accumulated in the Bond Fund amounts in excess of the requirements thereof during the next 12 months for payment of the principal of and interest on the Bonds outstand- ing, such excess may be used by the City to call Bonds for redemp- tion prior to their fixed maturities as authorized herein, or may be invested as provided in Section 1I hereof. Section 13. Other Covenants and Agreements. The City hereby covenants and agrees with the owners and holders of the Bonds for as long as any of the same remain unpaid as follows: a. It will acquire all necessary property, both real and personal, easements, and rights-of-way necessary for the acquis- ition, construction and installation of the additions, improve- ments and extensions to the System authorized by Ordinance No. b. It will at all times keep and maintain the System in good repair, working order and condition, will at all times operate the System and the business in connection therewith in an efficient manner and at a reasonable cost, and will comply with all applicable laws of the State of Washington. c. It will impose and collect rates and charges for service rendered by the System which are reasonable and such that Gross Revenue paid into the Revenue Fund will be sufficient at all times to provide for the payment of the Costs of the Maintenance and Operation and the installments of principal and interest on the Outstanding Bonds and on the Bonds, that all service rendered by the System shall be subject to the full rates prescribed by the rules and regulations of the City, and that no free service by the System will be permitted. d. It will maintain complete books and records relating to the operation of the System and its financial affairs, and will cause such books and records to be audited annually at the end of -16- each fiscal year, and will furnish the Government, without request, a copy of each annual audit report. At all reasonable times the Government shall have the right to inspect the System and the records, accounts and data of the City relating thereto. e. It will carry fire and extended coverage insurance on the System as is ordinarily carried on the property of similar public utilities by private companies engaged in the operation of the same, to the full insurable value thereof, and will also carry adequate public liability insurance, war risk insurance, if it becomes available, and other kinds of insurance as under good practices are ordinarily carried on the properties of similar public utilities by private companies engaged in the operation of the same. The premiums paid for all such insurance shall be regarded and paid asa Cost of Maintenance and Operation of the System. Section 14. Adequacy of Revenues. The corporate authorities of the City hereby declare in fixing the amounts to be paid into the Bond Fund as hereinbefore provided that they have exercised due regard for the Costs of Maintenance and Operation of the System, and have not obligated the City to set aside and pay into the Bond Fund a greater amount of money in the Revenue Fund than in their judgment will be available over and above such Costs of Maintenance and Operation, and the cost of debt service on the Outstanding Bonds now outstanding. Section 15. Defeasance. In the event that money and/or "Government Obligations," as such obligations are now or hereafter defined in Chapter 39.53 R.C.W., maturing or having guaranteed redemption prices at the option of the holder at such time or times and bearing interest to be earned thereon in amounts (together with such money, if any) sufficient to pay at maturity or redeem and retire part or all of the Bonds in accordance with -17- their terms, are hereafter irrevocably set aside in a special account and pledged to effect such payment, redemption and retire- ment, then no further payments need be made into the Bond Fund or any account therein for the payment of the principal of and interest on the Bonds so provided for and such Bonds and appurte- nant coupons shall then cease to be entitled to any lien, benefit or security of this ordinance, except the right to receive the funds so set aside and pledged, and such Bonds and appurtenant coupons shall no longer be deemed to be outstanding hereunder, or under any ordinance authorizing the issuance of bonds, warrants or other indebtedness of the City. Section 16. Issuance of Bonds Senior to Bonds of this Issue.. The City reserves the right to hereafter issue water and sewer bonds which shall be a lien and charge upon the Net Revenue (plus Assessments, if applicable) of the System senior to the lien and charge thereon to secure and pay the principal of and interest on the then outstanding Bonds of this issue, but only upon compliance with the following conditions: a. That at the time of issuance of such water and sewer bonds, the City is in compliance with the requirements of Section 12 of this ordinance and is not in default in meeting payments required into any bond fund or reserve account securing any Outstanding Bonds. b. That the City Engineer shall certify that the Net Revenue (plus Assessments, if applicable) (1) for any 12-month period of the 24 months preceding the date of delivery of such water and sewer bonds to be issued or (2) projected by him to be received annually following the date of delivery of the water and sewer bonds to be issued, is not less than 1.1 times the amount required in any future year to pay the principal of and interest on the Bonds after payment of debt service on the Outstanding -18- Bonds then outstanding and to be issued, and payments into any reserve account required by the ordinance authorizing the issuance of any such Outstanding Bonds. If the Government is notified of the intention of the City to hereafter issue any such water and sewer bonds and such notice is accompanied by the above described certification of the City Engineer, the failure of the Government to make written objection to the issuance of such water and sewer bonds within thirty calendar days of receipt of such notification shall be deemed to constitute a finding by the Government that the above conditions to the issuance of such water and sewer bonds have been met and the Government may not thereafter challenge the issuance of such water and sewer bonds. Section 17. Ordinance a Contract. The provisions of this ordinance shall constitute a contract between the City and the Government so long as any of the Bonds remain unpaid. Section 18. Sale of Bonds. The Bonds shall be sold to the Government in accordance with its Offer of Loan and Grant, dated September 21, 1977, and the City's Acceptance of Offer of Loan and Grant dated September 22, 1977. The acceptance by the City of said Offer of Loan and Grant is hereby ratified and confirmed. The proper officials of the City are hereby authorized and directed to do all things necessary for the prompt execution and delivery of the Bonds and for the proper use and application of the proceeds of sale thereof. Section 19. Supplements and Amendments. a. The City Council from time to time and at any time may adopt an ordinance or ordinances supplemental hereof, which ordinance or ordinances thereafter shall become a part of this ordinance, for any one or more or all of the following purposes: -19- (1) To add to the covenants and agreements of the City in this ordinance contained other covenants and agreements thereafter to be observed, which shall not adversely affect the interests of the holders of any Bonds, or to surrender any right or power herein reserved to or conferred upon the City. (2) To make such provisions for the purpose of curing any ambiguities or of curing, correcting or supplementing any defec- tive provision contained in this ordinance in regard to such matters or questions as the Commission may deem necessary or desirable and not inconsistent with this ordinance and which shall not adversely affect the interest of the holders of Bonds. Any such supplemental ordinance of the Council may be adopted without the consent of the holders of any Bonds at any time outstanding, notwithstanding any of the provisions of subsec- tion b of this section. b. With the consent of the holders of not less than 65%. in aggregate principal amount of the Bonds at the time outstanding, the City Council may adopt an ordinance or ordinances supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this ordinance or of any supplemental ordinance; provided, however, that no such supplemental ordinance shall: (1) Extend the fixed maturity of any Bonds, or reduce the rate of interest thereon, or extend the time of payments of interest from their due date, or reduce the amount of the princi- pal thereof, or reduce any premium payable on the redemption ~ thereof, without the consent of the holder of each bond so affected; or (2) Reduce the aforesaid percentage of bondholders required to approve any such supplemental ordinance, without the consent of the holders of all of the Bonds then outstanding. -20- It shall not be necessary for the consent of bondholders under this subsection b to approve the particular form of any proposed supplemental ordinance, but it shall be sufficient if such consent shall approve the substance thereof. c. Upon the adoption of any supplemental ordinance pursuant to the provisions of this section, this ordinance shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations of the City under this ordinance and all holders of Bonds outstanding hereunder shall thereafter be determined, exercised and enforced thereunder, subject in all respects to such modification and amendments, and all the terms and conditions of any such supplemental ordinance shall be deemed to be part of the terms and conditions of this ordinance for any and all purposes. Section 20. Severability. If any one or more of the covenants and agreements provided in this ordinance to be performed on the part of the City shall be declared by any court of competent jurisdiction to be contrary to law, then such covenant or covenants, agreement or agreements, shall be null and void and shall be deemed separable from the remaining covenants and agreements in this ordinance and shall in no way affect the validity of the other provisions of this ordinance or of any Bonds. Section 21. Effective Date. This ordinance shall become effective five days from and after its passage, approval and publication. PASSED by the Council of the City of Port Townsend, Washington, -21- at a meeting of said Council held this 7z~ day of F~q~ , 1978, and approved by the Mayor on said date. CITY OF PORT TOWNSEND, WASHINGTON Mayor Attest: By .... ty ~C1 C1 erk Approved as to Form: By City Attorney Published -22- I, , do hereby certify that I am the duly chosen, qualified and acting Clerk of the City of Port Townsend, Washington, and the custodian of its records, that the attached and foregoing is a full, true and correct coyp of Ordinance No. , and that said ordinance was adopted by the affirmative vote of the Port Townsend City Council at a meeting of , 1978, at which a quorum of the Council was present; that said Ordinance has not been altered or amended, and the same is in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand this day of , 1978. City Clerk