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HomeMy WebLinkAboutWater & Sewer Revenue Bonds - 2002 _ I I 1 (Transcript of Proceedings Relating to the Authorization, Sale, Issuance and Delivery of the $11,980,000 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Date of Delivery(Issuance): July 12, 2002 I Bond Counsel 1 ' GOTTLIEB, FISHER&ANDREWS, PLLC 1325 Fourth Avenue, Suite 1200 S6,attle, Washington 98101-2531 Phone (206) 654-1999 Fax (206) 654-8725 I I ' I- TABLE OF CONTENTS $11,980,000 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 DOCUMENT TAB NO. Certificate as to Transcript 1 Ordinance No. 1450 authorizing the sale and issuance of the 1953 Bonds ' 2 Ordinance No. 3188 authorizing the sale and issuance of the 1977 Bonds; 3 Ordinance No. 3720 authorizing the sale and issuance of the 1983 Bonds! 4 Ordinance Nos. 4410, 4480 and 4709 authorizing the sale and issuance of the 1993, 1994 land 1998 Bonds, respectively 5 Ordinance No. 4976 authorizing:,the sale and issuance of the Bonds 6 Minutes of City Council Meetings re Ordinance No. 4976 7 Affidavit of Publication of Ordinance No. 4976 8 Letter of Representations 9 Bond Purchase Agreement 10 Preliminary Official Statement 11 Official Statement 12 Rating Letters 13 Commitment Letter 14 ( i! Disclosure Certificate 15 Disclosure,No Default and Tax Certificate of Bond Insurer 16 t ' T f:\renton\water sewer 02 1 F 1 Parity Debt Certificate 17 Tax Exemption and Nonarbitrage Certificate 18 Underwriter's Certificate 19 it I . Signature, Incumbency and No Litigation Certificate 20 Certificate Re Authentication and!Registration of the Bonds 21 Specimen Bond 22 Specimen Insurance Policy j' 23 Certificate of Delivery and Payment 24 Underwriter's Receipt 25 IRS Form 8038-G I 26 Bond Report Form 101 27 I Approving Opinion of Bond Counsel 28 Opinion of Counsel to Bond Insurer 29 Closing Memorandum 30 f:\renton\water sewer 02 ii I � CERTIFICATE AS TO TRANSCRIPT I, VICTORIA A. RUNKLE, the duly appointed, qualified and acting Finance and Information Services Administrator of the City of Renton, Washington, DO HEREBY CERTIFY that the attached transcript contains a true and correct copy of all documents relating to the authorization, sale, issuance and delivery of the $11,980,000 CITY OF RENTON, WASHINGTON,WATER AND SEWER REVENUE BONDS, 2002. IN WITNESS WHEREOF, I/have hereunto subscribed my official signature as of the 12th day of July,2002. v4a. i VICTORIA A. RUNKLE Finance and Information Services Administrator City of Renton, Washington I 1 j f\renton\water sewer 02 • • CITY OF RENTON, WASHINGTON ORDINANCE NO. 1450. AN ORDINANCE specifying and adopting a system or plan of additions to and betterments and exten- sions of both the waterworks system of the City of • Renton and the sewerage system of the City, which has become and is considered a part of the water- works system of the City; declaring the estimated cost thereof, as nearly as may be; providing for • the paying and refunding of $24,000.00 of outstanding "City of Renton Water Revenue Refunding Bonds, 1948"; providing for the issuance of $315,000.00 par value of mCity of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1953' to obtain the funds with which to refund the aforesaid $24,000.00 of bonds and to pay the costs of said system or plan; • fixing the date, form, denomination, maturities, terms and covenants of said bonds; creating a special fund to provide for the payment of said bonds; and providing for the calling of bids for o-( the sale thereof. WHEREAS, the City of Renton heretofore issued, under date of March 1, 1943, $125,000.00 of 3% "City of Renton Municipal Water S � Revenue Bonds, 1953, Series A", pursuant to Ordinance No. 1156 of the City Council, as amended by Ordinances Nos. 1157 and 1173, said,bonds having been issued for the purpose of acquiring, construct- : ing and making certain additions to and betterments and extensions of the sewerage system of the City, all of said bonds outstanding on March 1, 1948, having been refunded on March 1, 1948, pursuant to Ordinance No, 1299, by the issuance and sale of $74,000.00 of "City of Renton Water Revenue Refunding Bonds, 1948", of which $30,000.00 par value of said refunding bonds bearing interest at the rate of 2-% per annum are presently outstanding of which amount $6,000.00 par value will mature March 1, 1953, leaving $24,000.00 par value of said { bonds unmatured on that date; and WHEREAS, said Ordinance No. 1173 authorized the issuance of $75,000.00 of "City of Renton Municipal Water Revenue Bonds, 1943, I , Series B" for the purpose of acquiring, constructing and making certain additions to and betterments and extensions of the water- { works system of the City as authorized in said Ordinance, said Series B bonds being on a parity with said Series A bonds, but said improvement has not been carried out and said Series B bonds have not been issued; and 'WHEREAS, said Ordinance No. 1156, as amended by Ordinances Nosl. 1157 and 1173, provided that the sewerage system of the City should become and be considered a part of the waterworks system 1 of the City; and WHEREAS, the City of Renton has heretofore issued under datle•of April 1, 1946, $100,000.00 of l "Municipal Mater Revenue Bonds, 1946", said bonds having been issued for the purpose of making certain additions to the present water distribution system of the City by purchasing the assets formerly owned by the Northwest Mater Co., of which $28,000.00 par value of said bonds are presently out- standing, $14,000.00 par value maturing April 1, 1953, and the re- maihing $14,000.00 par value maturing April 1, 1954; and WHEREAS, it is deemed desirable that the said $24,000.00 of outstanding "City of Renton Mater Revenue Refunding Bonds, 1948" be refunded by bonds bearing a rate or rates of interest not to exceed the rate of interest on said outstanding bonds to be refunded, and that one issue of bonds be sold which will constitute a lien and charge against the gross revenues of the municipal waterworks system of the City, including the sewerage system, subject only to the lien and charge against the same for the outstanding 428,000.00 of • "Municipal Water Revenue Bonds, 1946", both for such refunding pur- 41) pose and to acquire the funds necessary to make certain additions to and betterments and extensions of the waterworks system of the City, • • • -2- including additions to and betterments and extensions of the sewer-, age system as a part of and belonging to said waterworks system; now, therefore, BE IT ORDAINED BY THE MAYOR AND CITY COUNCIL OF THE CITY 0 RENTON, WASHINGTON, AS FOLLOWS: Section 1. The City of Renton hereby specifies and adopts a!system or plan for making additions to and extensions and better- ments of the sewerage'system of the City, which has become and is considered a part of the waterworks system, and for making additions to and betterments and extensions of said waterworks system, to con- I sist of the following: SEWERAGE SYSTEM 1. The present sewage treatment plant of the City shall be' enlarged by constructing a primary sewage digestor tank of reinforced concrete design with a steel floating dome gas holding top together with a mechanical scum mixer, heat exchanger and miscellaneous small items necessary for the digestor operation. 2; Degritor equipment shall be installed for the removal of sand and gravel from sewage influent. 3 A new additional sewage pump shall be installed to handle increased flow through the plant. 4. The main sludge pump and auxiliary sludge pump shall be replaced, WATERMORKS SYSTEM la For the purpose of augmenting the water supply, a deep well shall be drilled in the Kennydale area on the site located at the northwest corner of S.E. 100th Street and 108th Ave. S.(P., and an electric deep well pump shall be installed to produce a minimum water flow of 1500 gallons per minute, and there also shall be included the acquisition of the site, electric transmission line and transformer, clearing and,grading site, constructing pump house and fencing the site. 2. There shall be installed water mains from the Kennydale well to the existing water system as folbws: 15001 of 10" pipe from the well easterly along S.E. 100th Street --4- { • • � ' to 112th Ave. S.E.; thence 10001 of 8" pipe from S.E. 100th Street northerly along 112th. Avenue S.E. to connect to the existing 80 line on S.E. 97th Street; 3700' of 6" pipe from the end of the new 100 line at 112th Avenue S.E. southerly along 112th Avenue S.E. to S.E. 112th Street; thence 14001 of 8" pipe easterly along S.E. 112th Street to 116th Avenue S.E.; thence 7001 of 12" pipe along S.E. 112th Street to "H" Street in the City of Renton; thence 3001 of 12" pipe southerly along "H" Street to connect to the existing water system at 11th Ave. North. • 3. There shall also be installed 12,8001 of 4" pipe in Kennydale proper west of 104th Avenue S.E. as follows: 12501 on S.E. 88th Street; 12501 on S.E. 89th Street; 12501 on S.E. 91st Street; 17501 on S.E. 91St Street Place; 18501 on S.E. 92nd Street; 18501 on S.E. 93rd Street; 6001 on S.E. 94th Street; 12501 on S.E. 95th Street. Connecting 4" lines for the above shall be in- stalled as follows: 5001 of 4" pipe on 104th Avenue S.E.; 10001 of 40 pipe on 100th Avenue S.E,; 6001 of , 4" pipe on Lake 'Washington Boulevard. There shall also be installed 38001 of 6" pipe in Kennydale proper west of 104th Avenue S.E. as follows: 12501 on S.E. 90th Street; 12501 on S.E. 94th Street. Connecting 6" lines for the above shall be installed as follows: 13001 of • 6" pipe on 100th Avenue S.E. Install 17001 of 4" pipe along 112th.Avenue S.E. from S.E. 112th Street southerly to connect to existing 6" line on Sunset Boulevard. The service connections from old water mains shall be changed to new water mains. 4. The section of the existing 20" steel water main, which is 11,5001 in length and extends from the Springbrook Springs holding reservoir along the private City access road to the intersection with the Talbot Road, thence northerly along the Talbot Road to make connection with the existing 20" asbestos cement main at the intersection of the Talbot Road with the Carr Road (S. 180th Street), shall be rehabilitated by lining the main with cement mortar. 51. Gas chlorinating equipment shall be installed at the Springbrook supply to meet State Department of Health requirements. There shall be included in the foregoing the acquisition and installation of all necessary valves, fittings, couplings, connections, equipment and appurtenances and the acquisition of any easements and rights-of-way and lands and water rights that may be required; and there shall also be included the performance of such work as may be incidental and necessary to the foregoing construction and installation. { -4- • • In lieu of the material heretofore specified, such other suitable material may be used as may be deemed desirable and necessary by the City Council. • The City Council may modify the details of the foregoing • system or plan where in its judgment it appears advisable, provided such modifications do not substantially alter the purposes herein- before set forth. • Section 2. The estimated cost, as near as may be, of the I aforesaid plan or system of additions, extensions and betterments 1 is declared to be $291,000.00. Section 2. The cost of acquiring, constructing and complet- ing the foregoing plan or system of additions, extensions and better- ments and of paying, refunding and redeeming the $24,000.00 of out- standing "City of Renton Water Revenue Refunding Bonds, 1948" shall be paid by the iss»Ance and sale of "City of Renton 'Water and Sewer - I Refunding and Improvement Revenue Bonds, 1953" in the amount of • 015,000.00 par value. The bonds shall be entitled "City of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1953", shall be in denominations of $1,000.00 each, shall be numbered from 1 to 315, both inclusive, shall be dated March 1, 1953, and shall bear interest at a rate or rates not to exceed 4% per annum to be hereafter I fixed by Ordinance, payable semiannually on March 1st and September 1st of each year, interest to maturity to be evidenced by coupons to be attached to said bonds with full obligation on the part of the City to pay interest at the same rate or rates after the bond maturity or funds are available for payment in full. dates until said bonds with interest are paid in full/. Both principal of and interest on said bonds shall be payable in lawful money of the United States at the office of the City Treasurer of the City of Renton, Washington. Said bonds shall be payable solely out of the special fund hereinafter created, shall be a valid claim of the holder • • -5- thereof only as against said fund and the fixed amount of the revenues of the waterworks utility, including the sewerage system I ' ab a part thereof, pledged to such fund, and shall not be a gen- eral obligation of the City of Renton. Said bonds shall mature serially, annually, over a period of from one to twenty years from the date of their issue in accordance with the following schedule, to-wit: Band Numbers Amount Maturities 11 to 5, Inclusive $5,000 March 1, 1954 16 to 24, " $19,000 March 1, 1955 25 to 37, a $13,000 March 1, 1956 38 to 50, ua $13,000 March 1, 1957 51 to 64, .n $14,000 March 1, 1958 65 to 78 $14,000 March 1, 1959 79 to 92, ' $14,000 March 1, 1960 93 to 106, ei $14,000 March 1, 1961 107 to 121, a $15,000 March 1, 1962 122 to 136, 't $15,000 March 1, 1963 137 to 152, to $16,000 March 1, 1964 153 to 168, $16,000 March 1, 1965 169 to 184, - ". $16,000 March 1, 1966 185 to 201, " $17,000 March 1, 1967 202 to 218, " $17,000 March 1, 1968 219 to 236, mi $18,000 March 1, 1969 237 to 255, "' $19,000 March 1, 1970 256 to 274, " $19,000 March 1, 1971 275 to 294, as $20,000 March 1, 1972 295 to 315, " $21,000 March 1, 1973 Section 4. The City of Renton reserves the right to redeem shy or all of the outstanding bonds of said issue at par, plus accrued interest, on any semiannual interest payment date, on or after ten years from the date of issue, in inverse numerical order, highest numbers first, by giving at least thirty-days notice of such intended redemption by publication thereof in the official newspaper of said City, which notice is to be published once not less than thirty nor more than forty-five days prior to the call date. Interest on any bonds so called for redemption shall cease on the date fixed for such redemption. Section 5. The funds with which to pay, refund and retire -6- the aforesaid $24,000.00 of "City of Renton Water Revenue Refunding Bonds, 1948" outstanding shall be obtained by the issuance and sale of the first numbered $24,000.00 of said "City of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1953". •Said first limbered $p24,000.00 of bonds shall all bear interest at a rate or rates not to exceed 2 per annum. Section 6. , There shall be and hereby is created and estab- lished a special fund to be known as "Renton 1953 dater and Sewer Refunding and Improvement Revenue Bond Redemption Fund", which fund is to be drawn upon for the sole purpose of paying the principal of and interest upon said bonds from and after the date thereof. Said fund is hereby divided into a "Principal and Interest Account" and a "Reserve Account"; and so long thereafter as bonds are outstanding against such fund the City Treasurer of the City of Renton shall set aside and pay into said fund out of the gross revenues of the water- ' . Works system now belonging to or which may hereafter belong to the City, including all additions, betterments and extensions thereof now or hereafter made, and including the sewerage system as a part thereof, a fixed amount, without regard to any fixed proportion, namely, (a) Into the "Principal and Interest Account", monthly, beginning on Mara}i 75, 1953, one-twelfth of the next ensuing twelve monthst requirements of both principal and interest; and (b) Into the "Reserve Account", an amount not less than the average annual debt service requirements, both principal and interest, of said bonds, which amount is to be accumulated by no later than March 1, 1958. Said "Reserve Account" may be accumulated from any other moneys which the City of Renton may have available for such purpose -7- 1 •I f in addition to using said revenues therefor. Said "Reserve Account" sIhall be maintained in such amount at all times so long as any of said bonds are outstanding: PROVIDED, that when the total amount in said special fund shall equal the total amount of principal and interest on all outstanding bonds of said issue to the last maturity date thereof, no further payments need be made into said special fund., In the event that there shall be a deficiency in the "Princi— pal and Interest Account* in said special fund to meet maturing installments of either principal or interest, as the case may be, such deficiency shall be made up from the "Reserve Account" by the withdr&teal of cash therefrom for that purpose. Any deficiency created I ' in the "Reserve Account" by reason of any such withdrawal shall then be made up from the moneys from the revenues of said waterworks system, including the sewerage system, first available after making necessary Provision for the required payments into the "Principal and Interest Account". The money in the "Reserve Account" shall otherwise be held intact and may be applied against the last outstanding bonds of this 1 issue. All money in the "Reserve Account" above provided for may be kept on deposit In the official bank depository of the City of Renton or in any national bank, or may be invested in United States Govern— Ment obligations maturing not later than twelve years from date of issue. Interest on any such investment or on such bank account shall -- be deposited in and become a part of the "Reserve Account" until there shall be an amount therein not less than the average annual debt service requirements, both principal and interest, of said bonds. Section 7. The gross revenues from the combined water and sewer systems, including all revenues derived from all charges for water and sewer service and all revenues derived from the water and I —8— • sewer service furnished the United States Government or any branch of the Federal Housing Authority for anyunite of any Federal Housing Authority, are hereby pledged to such payment and the bonds herein authorized shall constitute a lien and charge upon 'such revenues prior and superior to any other charges whatever, excluding charges for maintenance and operation, except as provided in Section 15 hereof, and except that the lien and charge of the bonds herein authorized to be issued upon such revenues shall be junior and inferior to the lien and charge upon such revenues for the $28,000.00 par value of Municipal water Revenue Bonds, 194641 of the City presently outstanding. Section 8. In the judgment of the. City Council, the gross revenues and benefits to be derived from the operation and maintenance of the waterworks system of the City, including the sewerage system as a part thereof, and the additions, extensions and betterments • thereto herein provided for, at the rates to be charged for water and sewerage service on the entire systems will be more than sufficient to meet all expenses of operation and maininance thereof and the debt service requirements of the $28,000.00 par value "Municipal Water Revenue Bonds, 1946" of the City presently outstanding, and to permit the setting aside in said special fund, out of the gross revenues of the entire systems, of amounts sufficient to pay the interest on the revenue bonds herein authorized to be issued as such interest becomes • payable and to pay and redeem all of said bonds at maturity. The City Council and corporate authorities of the City of Renton further hereby declare that in creating the said special fund and in fixing the amounts to be paid into the same as aforesaid, they have exercised due regard for the cost of operation and maintenance of the waterworks system, including the sewerage system, and the debt service requirements 1 of the $28,000.00 par value "Municipal Water Revenue Bonds, 1946" Of the City presently outstanding, and the City has not bound and Obligated itself to set aside and pay into said special fund a greater amount or proportion of the revenues of the said systems than in the judgment of the City Council will be available over and above such cost of maintenance and operation, and debt service requirements of said outstanding bonds, and that no portion of the revenues of said waterworks system, including said sewerage system, has been previously pledged for any other indebtedness, except for the payment of the "City of Renton Water Revenue Refunding Bonds, 1948", which bonds are to be paid, retired and refunded as herein- before stated, and for the payment of said "Municipal Water Revenue I ' Bonds, 1946", Section 9. The City of Benton shall establish, maintain and collect such rates and charges for water and sewerage service, so long as any bonds of this issue are outstanding, as will make available for the payment of the principal of and interest on all of such bonds as the same shall accrue an amount equivalent to at least 115 times the average annual debt service requirement, both princi- pal and interest, of this bond issue and said 1946 issue of bonds, after deducting costs of maintenance and operation from the gross revenues of the waterworks system, including the sewerage system as a part thereof. Section 10, The City of Renton hereby binds itself irrevo- cably not to mortgage, sell, lease or in any manner dispose of the waterworks system, including the sewerage system, now belonging to or which may hereafter belong to it, including all additions, exten- sions and betterments thereof at any time made, until all of the bonds hereby authorized and hereafter issued with interest thereon I -10- • i • II shall have been fully paid, and the said City hereby covenants and agrees to maintain in good condition and to operate said systems and to establish, maintain and collect such rates as will produce gross revenues from the said waterworks system, including the sewer- age system, sufficient to permit payment into said special fund of the amounts required for the payment of the principal of and interest on the bonds herein authorized as they become due and the amounts e i tliz1,t are required to be paid into said "Reserve .ilccount", and, in addition thereto, to pay all costs of maintenance and operation and 1 taxes, and to meet the debt service requirements of said $28,000.00 par value of "Municipal Water Revenue Bonds, 194601 of the City pre- sently outstanding and otherwise to meet the obligations of the said City as herein set forth. Section 11 The City of Renton will, while any of the bonds herein authorized remain outstanding, keep proper books of accounts anld records (separate and apart from other accounts and records) in • which complete and correct entries will be made of all transactions relating to the said waterworks system, including the sewerage system, 1 and it will furnish the original purchaser of said bonds and any subse- quent holder or holders thereof, at the written request of such holder or holders, a complete operating and income statement of the said systems in reasonable detail covering any fiscal year, not more than thirty days after the close of said fiscal year, and it will grant any holder or holders of at least 25% of the outstanding bonds herein authorized the right at all reasonable times to inspect the said sys- • tens and all records, accounts and data of the City relating thereto. Section 12. The proceeds of the sale of the first numbered x;24,000.00 par value of said bonds shall be used for the sole purpose of refunding, retiring and paying the $24,000.00 par value of outstand- ing "City of Renton Water Revenue Refunding Bonds, 1948", herein 1 it -11- authorized to be refunded; and the proceeds of the sale of the remaining $291,000.00 par value of said bonds shall be used for the sole purpose of acquiring and constructing the plan or system of additions to and extensions and betterments of the sewerage System of the City and the waterworks system of the City as above described and of paying the costs and expenses connected therewith, and the City of Renton, through its proper officers and agents, shall proceed forthwith with the calling for redemption said - i $24,000.00 par value of outstanding "City of Renton Water Revenue Refunding Bonds, 1945" and with the making of the improvements herein authorized. Section 13. Said "City of Renton Eater and Sewer Refunding and Improvement Revenue Bonds, 1953" shall be in substantially the following form: No. ,000.00 UNITED STATES OF AMERICA STATE OF WASHINGTON CITY OF RENTON I ' EATER AND SEINER REFUNDING AND IMPROVEMENT REVENUE BOND, 1953 KNOW ALL MEN BY THESE PRESENTS: That the City of Renton, State of Washington, acknowledges itself to owe, and for value received, hereby promises to pay to bearer on the 1st day of March, 1963, the principal sum of ONE THOUSAND DOLLARS together with interest thereon at the rate of �% per annum, payable semiannually on the 1st day of March and September of each year, upon presentation and surrender of the attached interest coupons as they severally mature up to the bond-maturity date, and with full obligation on the part of the Oity to pay interest at the same rate from and after the • -12- or funds are available for payment in full. maturity/date until this bond with interest is paid in full/ Both principal and interest are payable f , in lawful money of the United States at the office of the City Treasurer of Renton, Washington, solely out of the special fund created by Ordinance No„ known as "Renton 1953 Water and Sewer Refunding and Improvement Revenue Bond. Redemption Fund", into which fund the City of Renton hereby irrevocably binds • itself to pay certain fixed amounts out of the gross revenues of the municipal waterworks system, including the sewerage system, now belonging to or which may hereafter belong to said City, including all additions, extensions and betterments thereof now or at any time made or constructed, without regard to any fixed propor- tion, namely, an amount sufficient to pay the princi- pal of and interest on this issue of bonds as they respectively become due and to accumulate a reserve in an amount not less than the average annual debt service requirement, both principal and interest, of this issue of bonds, all at the times and in the manner set forth in Ordinance No, The gross revenues of said waterworks system, including the sewerage system and all additions, extensions and betterments thereof at any time made, are hereby pledged to such payments, and said "City of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1953", constitute a lien and "' charge upon such revenues prior and superior to any other charges whatsoever, excluding charges for mainten- • ance and operation, except that said lien and charge upon said revenues is junior and inferior to the lien and charge upon such revenues for the $28,000.00 par value of "Municipal 'dater Revenue Bonds, 1946" of the City presently outstanding, and except the said lien and charge upon such revenues for this issue of bonds shall be on a parity with. the lien and charge upon the same which may hereafter be made for the payment of any addi- tional water revenue bonds or water and sewer revenue { bonds that may be issued pursuant to and in accordance with the provisions of Section 15 of Ordinance No. The City of Renton shall establish, maintain and collect such rates and charges for water and sewerage service, so long as any bonds of this issue are outstand- • ing, as will make available for the payment of the princi- pal of and interest on all of.such bonds as the same shall accrue an amount equivalent to at least 1.5 times the average annual debt service requirement, both principal and interest, of, this bond issue and of said 1946 issue of bonds, after deducting costs of maintenance and opera- tion from the gross revenues of the waterworks system, including the sewerage system as a part thereof. This bond is one of an authorized issue of $315,000.00 of bonds, all of like date, tenor and effect, except as to interest rates, maturites and redemption rights; all -13- payable from the said "Renton 19.53 Water and Sewer Refunding and Improvement Revenue Bond Redemption Fund"; and all issued by said City under and in pur- suance of the laws of the State of Washington and Ordinance No, of the City of Renton, for the purpose of providing funds to refund, retire, and pay $24,000.00 par value of outstanding "City of Renton Water Revenue Refunding Bonds, 1948" and to pay the cost of mal5ing certain additions, extensions and betterments to the waterworks system of the City, including•the sewerage system as a part thereof. Reference is made to said Ordinance as more fully des- cribing the covenants with and rights of holders of bonds of'this issue. The City reserves the right to pay and retire the bonds of this issue at par, plus accrued interest, on any interest payment date, from and after March 1, 1963, in inverse numerical order, highest numbers first, by publishing notice thereof once in the official news- paper of the City of Renton, not less than thirty nor more than forty-five days prior to the call date. Interest on any bonds so called for redemption shall cease on the date fixed for redemption. The City of Renton hereby binds itself irrevo- cably not to mortgage, sell, lease or in any manner encumber-and dispose of said municipal waterworks system, including the sewerage system, now belonging • to it or which may hereafter belong to it, including any additions, replacements, betterments and extensions thereof, until all of the bonds of this issue with interest thereon shall have been fully paid; and the said City hereby covenants, agrees to and with the holders of each and every of said bonds to maintain in good condition and to operate said waterworks system, including the sewerage system, and all additions, extensions, replacements and betterments thereof, and to maintain and collect such rates and charges in connection therewith as will produce gross revenues sufficient to meet the oblige- . tions of said City as herein set forth. It is hereby certified and declared that said bonds are L:ssued pursuant to and in strict compliance with the Constitution and Laws of the State of Washington and the ordinances of the City of Renton, 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 as required by law. IN WITNESS WHEREOF, the City of Renton, Washington, has caused this bond to be signed by its Mayor and • attested by its City Clerk and its corporate seal to be hereto affixed and the interest coupons attached to be signed with the facsimile signatures of said officials this 1st day of March, 1953. CITY OF RENTON, WASHINGTON BY • Attest: Mayor City Clerk -14- i I • I • I , The interest coupkhns attached to said bonds shall be in substantially the following form: No• - I On (March)September) 1, 19 , THE CITY OF RENTON, 'WASHINGTON, upon presentation and surrender of this coupon, will pay to bearer at the office of the City Treasurer the sum of Dollars ($ ) in lawful money of the United States of America from the special fund of said City, known as the "Renton 1953 Aster and Sewer Refunding and Improvement Revenue Bond Redemption Fund", said sum being six month& interest then due on its "City of Renton 'Water and Sewer Refund- ing and Improvement Revenue Bond, 1953", dated March 1, 1953, and numbered CITY OF RENTON, WASHINGTON BY Mayor Attest: City Clerk Section 14. Said bonds shall be printed on lithographed 'forms, shall be signed by the Mayor and attested by the Clerk, and shall have the seal of the City of Renton affixed thereto, and the coupons shall bear the facsimile signatures of the Mayor and the Clerk. Section 15. The City of Renton may issue additional water ,revenue bonds, or water and sewer revenue bonds, which shall con- ; stitute a charge and lien upon the revenues of the waterworks system, including the sewerage system, on a parity with the bonds of this issue, provided the following conditions shall be met and complied with at the time of the issuance of such additional bonds; (a) All payments required by this ordinance to be paid into the "Renton 1953 Water and Sewer Refunding and. • Improvement Revenue Bond Fund";sba3 l.have been made; and -15- • 1 ' 1 (b) The revenues of said waterworks system, includ- ing the sewerage system, shall be and be deemed sufficient, after the payment of operation and mainten- ance costs and taxes, based upon the historical experience of said systems or the pro forma revenues under then existing rates over a period of any twenty- four consecutive months out of the thirty-six months immediately preceding the time of the issuance of such additional bonds, to equal at least 1.5 times the average annual principal and interest requirement of the bonds of this issue then outstanding and of the revenue bonds proposed to be so issued. Such deter- urination of the sufficiency of the revenues shall be made and certified to by an engineer experienced in municipal utilities; and (c) The ordinance authorizing the issuance of such additional revenue bonds shall provide for the setting aside into a reserve fund or account of an amount not less than the average annual debt service requirement, both principal and interest of the additional revenue bonds proposed to be so issued, which reserve fund or account shall be maintained in such amount so long as any of said bonds are outstanding to the last maturity thereof, I ; Section 16, TJe authority of the City to proceed with the water improvements and to issue •975,000.00 of Series B "City of Renton • Municipal Water Revenue Bonds, 1943", as set forth in Ordinance No, 1173 of the City Council, is hereby terminated and cancelled, and the City officers shall have no further power to proceed with any of said acts, Section 17. The Treasurer of the City of Renton is hereby directed to publish in'the official newspaper of the City and in the I I Seattle Daily Journal of Commerce a Notice of Sale of said bonds calling for bids for the purchase thereof at the City Hall, Renton, Washington, said notice to be published once in each newspaper not later than February 5, 1953 .Bidders are required to submit a bid specifying the lowest rate or rates of interest at which said bidders will purchase said bonds at a price not less than 99% of par. The first $24,000.00 of said bonds shall all bear interest at a rate or rates not to exceed 2z-% per annum and the remaining $291,000.00 par value of said bonds shall not bear a rate or rates of interest in excess of 4% per annum. Each bid shall also state the total interest cost and effective rate of interest of each such t • bid, I • -16- • 111 bids shall be sealed and shall be accompanied by a deposit of 5% of the amount of the bid, either in cash or by certi- fied check, which shall be returned if the bid is not accepted. If the successful bidder shall fail and neglect to complete the purchase of said bonds within thirty days following the acceptance of his bid the amount of his deposit shall be forfeited to the City. J I The City reserves the right to reject any or all bids sub- mitted or to waive any informality in the bidding and, if all bids be rejected, said bonds may be readvertised for sale by the City Council in the manner herein provided. Said bonds shall be furnished by the City and shall be sold with the opinion of Weter, Roberts & Shefelman, bond counsel of Seattle, Washington, approving the legality of the same, all at the expense of the City. The bids shall be received.by the City Treasurer of the City ofRenton at the City Hall at Renton, Washington, until 8:00 o'clock p.m. on the evening of February 24th, 1953, at which time all bids will be publicly opened by the said Treasurer at the meeting of the City Council of the City of Renton then held in said City Hall. PASSED by the City Council and APPROVED by the Mayor this 27th day of January, 1953. Mayor Attest: (�,z c • Cit lerk Date of publication: February 5, 1950. i I -17- I I, WILEY CROCK , Clerk of the City of Renton, Washington, do hereby certify that the attached Ordinance, being Ordinance No. 1+50 , is a full true, complete and correct • copy of the original Ordinance passed on January 27 1953, as said Ordinance appears on the Minute Book of the City. DATED this 2$thday of January, 1953. Clerk of the Ci6k of Renton, Washington • ! I . • • I I • . CITY OF RENTON, WASHINGTON ORDINANCE NO. 3188 • AN ORDINANCE providing for the issuance of $3,045,000 par value of "City of Renton Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 3," • for the purpose of obtaining a part of the funds with which:to refund, pay and retire the outstanding "City of Renton Water and Sewer Revenue- Bonds, 1977," of the City; .fixing the date; form, denomination, maturities; interest rates, terms and covenants of such refunding bonds; creating a special account . in the bond redemption fund of the bonds being refunded to provide for the refunding operation; creating a special bond redemption fund to provide for the payment of the refunding bonds; providing for and authorizing the purchase of certain obligations out of the proceeds•of the sale of such refunding bonds and other money of the City and for the use and application of the money to be derived from such investment; providing for the payment and redemption of the outstanding bonds to :be refunded; and confirming the sale and providing for the delivery of the refunding bonds to Seattle-Northwest Securities Corporation of Seattle, ;Washington. WHEREAS,iby Ordinance No. 1156, as amended by Ordinances Nos. 1157 and 1173, the. sewerage system of the City of Renton I (hereinafter called the "City") has become and is considered a part of the waterworkslutility of the City; and WHEREAS', the City heretofore issued under date. of March 1, 1953, $35,000 pari value of "City of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1953," pursuant to Ordinances Nos. 1450 and 1452; and WHEREAS, by Section 15 of said Ordinance No. 1450, the • City reserved the right to issue additional water and sewer revenue bonds, which would constitute a charge and lien upon the revenues of the waterworks utility, including the sewerage system as a part thereof, on a parity with the then outstanding "City of Renton • Water• and Sewer Refunding and Improvement Revenue Bonds, 1953," on compliance with the following conditions at the time of the issuance of such additional bonds: i \ -\ C'. ,'-, 1--) . , • • " (A) All payments required by this ordinance to bepaid into the 'Renton 1953 Water and Sewer Refunding and Improvement Revenue Bond Fund' shall have been made; and " (B) The revenues of said waterworks system, including the; sewerage system, shall be and be deemed sufficient, after the payment of operation and maintenance costs and taxes, based upon the historical experience of said systems or the pro forma revenues under then existing rates over a period of any twenty-four consecutive months out of the thirty-six months immediately preceding the time of the issuance of such additional bonds, to equal at least 1.5 times •the average annual principal and interest-requirements of the bonds of this issue then outstanding and of the revenue bonds proposed,to be so issued. Such determination of the sufficiency of the revenues shall be made and . certified to by an engineer experienced in municipal utilities; and " (C) The' Ordinance authorizing the issuance of such additional revenue bonds shall provide for the setting aside into a reserve fund or account of an amount not less than the average annual debt service requirement, both principal and interest of the additionalirevenue bonds proposed to be so issued, which reserve fund or account shall be maintained in such amount so long as any of said bonds are outstanding to the last maturity thereof"; and _. WHEREAS, the City •thereafter issued under date of September 1, 1954, $325,000 par value of "City of Renton Water and Sewer Revenue Bonds, 1954," pursuant to Ordinance No. 1489, and, under date of July 1, 1959, $750,000 par value of "City of Renton Water and Sewer Revenue Bonds, 1959," pursuant to Ordinance No. 1766, and, under date of May 1, 1965, $500,000 par value of "City of Renton Water and Sewer Revenue Bonds, 1965," pursuant to Ordinance No. 2151, and, under date of December 15, 1965, $545,000 par value of "City of Renton Water and Sewer Revenue Refunding Bonds, 1965," pursuant to Ordinance No. 2195, for the purpose of refunding, redeeming and retiring on July 1, 1974, all of the then outstanding "City of Renton Water and Sewer Revenue Bonds, 1959," and under date of July 1, 1975, $3,000,000 par value of "City of Renton Water and Sewer Revenue Bonds, 1975," pursuant to Ordinance No. 2930, and under date of February 1, 1976, $2,950,000 par value of "City of Renton Water and -2- Sewer Revenue Refunding Bonds, 1976," pursuant to Ordinance No. 3007, for the purpose of refunding, redeeming and retiring on January 1, 1989, and July 1, 1989, all of the then outstanding • "City of Renton Water and Sewer Revenue Bonds, 1975," and under date of June 1, 1977, $3,095,000 par value of "City of Renton Water and Sewer Revenue Refunding Bonds, 1977" (hereinafter called the . "1977 Bonds") , pursuant to Ordinance No. 3141, as amended by Ordinance No. 3145, for the purpose of providing a part of the money required to pay :the principal of and interest on the "City of Renton Water and Sewer Revenue Refunding Bonds, 1976," coming due to and including July: 1, 1989, and to redeem and retire on July 1, 1989, the outstanding.' "City of Renton Water and Sewer Revenue Refunding Bonds, 1976," numbered 96 to 590, .inclusive, maturing from July 1, 1990, .to July 1, 2000, inclusive, and under date of November 1, 1977, $800,000 par value of "City of Renton Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 2" (hereinafter called the "1977 Bonds, Issue No. 2") , pursuant to Ordinance No. 3169, for the purpose of obtaining a part of the funds with which to refund, pay and retire the outstanding "City of Renton Water and Sewer Revenue Bonds, 1954," "City of Renton Water and Sewer Revenue Bonds, 19651," and "City of Renton Water and Sewer Revenue Refunding Bonds, 1965," all of which bonds were at the time of their issuance issued on a parity of lien with said then outstanding . "City of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1953," and with each ot+,her pursuant to the provisions of Section 15 of said Ordinance No. 1450, said parity issues of bonds being a first lien and charge upon the gross revenues from the combined water and sewerage systems of the City, excluding charges for maintenance and operation, except that all of said "City of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1953," have now. been paid and retired, and except the conditions , of subparagraph (B) of said Section 15 were modified by Section 12 -3- • of Ordinance No. 2930 pertaining to the outstanding "City of Renton Water and Sewer Revenue Bonds, 1975," and by Section 13 of Ordinance No. 3169 pertaining to the outstanding 1977 Bonds, Issue No. 2, as to any,, parity bonds.issued in the future, and the City by Section 14 of 'Ordinance No. 3169 reserved the right to issue Future Parity Bonds (as therein defined) which will constitute a lien and charge upon the gross revenues of the Waterworks Utility of the City (as therein defined) on a parity with the 1977 Bonds and the 1977 Bonds, Issue No. 2, provided the conditions set forth in Section 15 of Ordinance No. 1450, as modified, are met and complied with at the time of the issuance of such Future Parity Bonds, which section was by such reference incorporated in Ordinance No. 3169 and made a part thereof and shall continue to be applicable even though the "City of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1953," have been paid and retired; and WHEREAS, there are presently outstanding $3,095,000 • principal amount.of 1977 Bonds maturing serially on July 1 of each of the years 1981 through 1999, which bonds bear interest at various rates from 5.75% per annum to 6.10% per annum; and i WHEREAS; as provided in Ordinance No. 3141 and in the 1977 Bonds, the City reserved the right to redeem such 1977 Bonds • as a whole, or in: part in inverse numerical order, from money derived from any isource at the following percentages of par,. if • redeemed at the following times, plus accrued interest to date of redemption in each case: Call Date Call Price July 1, 1987, and January 1, 1988 • 101-1/2% July 1, 1988, and January 1, 1989 101% July 1, 1989, and January 1, 1990 • 100-1/2% July 1, 1990, or any semiannual interest 100% (Par) payment date thereafter and • -4- • WHEREAS, after due consideration it appears to the City Council that all of the outstanding 1977 Bonds may be refunded by providing funds for the payment of the principal of and interest on such outstanding bonds as •the same respectively become due up to and including January 1, 1997, and the call, payment and retirement on January'l, 1997, of all then remaining outstanding 1977 Bonds by the issuance and sale of refunding bonds so that a substantial saving will be effected by the difference between the principal and interest cos-Cover the life of the refunding bonds (there being alsubstantial reduction in principal) and the principal and interest cost over the life of such outstanding • 1977 Bonds and also for the governmental purposeof modifying certain restrictive ;covenants of the 1977 Bonds; and WHEREAS, in order to effect such refunding in the manner 1 that will be most advantageous :to the City and .its taxpayers, it is hereby found necessary and advisable that certain "Acquired Obligations" (hereinafter identified) bearing interest and maturing at such time or times as necessary to pay the principal of and interest on the 1977 Bonds as -the same shall become due and to 1 redeem the 1977 Bonds as aforesaid be purchased out of the proceeds of the sale of the refunding bonds herein authorized (hereinafter called the "Refunding Bonds") and other money of the City legally available therefor; and WHEREAS;, the City Council hereby finds that all payments required by Ordinance No. 31g9. for the outstanding 1977 Bonds, Issue No. 2, have been made into the bond redemption fund for such outstanding 1977' Bonds, Issue No. 2; that provision is hereinafter • made for the accumulation of the additional amounts required in the "Reserve Account" in the bond fund for the Refunding Bonds; and that Mortimer H. Thomas of Gardner Engineers Inc. , an engineer experienced in municipal utilities, will certify, after taking into consideration the fact that after the issuance of the Refunding -5- . Bonds no debt service on the 1977 Bonds will be paid from the revenues of the combined water and sewerage systems of the City, that said revenues are sufficient to meet the 1.3 coverage requirement and prior to the issuance and delivery of such Refunding Bonds his certificate to such effect must be on file with the City Clerk; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON, DO ORDAIN, as follows: Section 1. As used in this ordinance the following words shall have the following meanings: • (a) "Bond Fund" shall mean that special fund of the City known as the "Renton 1977 Water and Sewer Revenue Refunding created Bond Redemption Fund INo. 3," by this ordinance for the payment of the principal of and interest on the Refunding Bonds. (b) "1977 Bond Fund" shall mean, that special fund of the City known as th!e "Renton 1977 Water and Sewer Revenue Refunding Bond Redemption Fund" created by Ordinance No. 3141 for the payment of the principal of and interest on the 1977 Bonds. (c) "1977 Bonds" shall mean the $3,095,000 par value of "City of RentonjWater and Sewer Revenue Refunding Bonds, 1977," issued under date of June 1, 1977, pursuant to Ordinance No. 3141. (d) "1977 Bonds, Issue No. 2," shall mean the $800,000 par value of "Cit of Renton Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 2," issued under date of November 1, 1977, • pursuant to Ordinance No. 3169. (e) "City" shall mean the City of Renton, Washington, a duly organized and existing noncharter code city under the laws of the State of Washington. (f) "Future Parity Bonds" shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Refunding Bonds and having a lien and charge upon the Revenue -6- • of the Waterworks Utility of the City on a parity with the lien and charge upon such gross revenues for the 1977 Bonds, Issue No. 2, and the Refunding Bonds for the payment of the principal thereof and interest thereon. (g) "Principal and Interest Account" shall mean the account of that name created in the Bond Fund by this ordinance for the payment of the principal of and interest on the Refunding Bonds. (h) "Refunding Bonds" shall mean the "City of Renton Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 3," authorized to be issueda by this ordinance. (i) "1977 ;Refunding Account" shall mean the account of • that name created by;this ordinance in the 1977 Bond Fund, the bond redemption fund for the 1977 Bonds, to provide for the refunding operation. (j) "Reserve Account" shall mean the account of that name created in the Bond;Fund by this ordinance for the purpose of securing the payment of the principal of and interest on the Refunding Bonds. (k) "Revenue of the Waterworks Utility of the City" shall mean all the earnings and. revenue received by the Waterworks Utility of the City from any source whatsoever, including payments received under contract with other municipal corporations for water service, except general taxes, charges in lieu of taxes, assessments in any • utility local improvement district hereafter created, proceeds from the sale of City property, and bond proceeds. (1) "Waterworks Utility of the City" shall mean the combined water and sewerage systems of the City as the same may be • added to, improved and extended for as long as any of the 1977 Bonds, Issue No. 2, the Refunding Bonds and any Future Parity Bonds are outstanding. Section 2. For the purpose of providing a part of the money required to pay the principal of and interest on the 1977 • Bonds coming due to and including January 1, 1997, and to redeem -7- and retire on January 1, 1997, the outstanding 1977 Bonds numbered 445 to 619, inclusive, maturing from July 1, 1997, to July 1, 1999, inclusive, the City shall issue the Refunding Bonds in the aggregate principal amount of $3,045,000. The Refunding Bonds shall be designated "City of Renton Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 3" (herein defined as the "Refunding Bonds") ; shall be dated December 1, 1977; shall be in denominations• of $5,000 each; shall bear interest at the rates hereinafter set forth; payable on July 1, 1978, and • --I semiannually thereafter.on the first days of each succeeding January 1 and July 1, interest to maturity being evidenced by . coupons to be attached to the Refunding Bonds with full obligation on the part of the City to pay interest at the bond rate from and after the bond maturity dates until the Refunding Bonds with i interest are paid in full or funds sufficient to pay such Refunding • • - Bonds with interest in full are on deposit in the Bond Fund I hereinafter referred to and the Refunding Bonds have been duly called for redemption. The Refunding Bonds shall be numbered, shall bear interest and shall mature on July 1 of each year as . follows: 1 i Bond Nurnbers Interest (Inclusive) Amounts Rates Years 1 to ; 2 $ 10,000 5.90% 1981 3 to 12 50,000 5.90% 1982 13 to 24 60,000 5.90% 1983 1984 25 to ! 35 55,000 5.90% 36 to ! 46 55,000 5.90% 1985 47 to 58 60,000 5.90% 1986 59 to. 71 65,000 5.90% 1987 72 to 84 65,000 .5.90% 1988 85 to 115 155,000 5.90% 1989 116 to' 153 190,000 5.90% 1990 154 to 194 205,000 5.90% 1991 195 to 237 215,000 5.90% 1992 . 238 to 282 225,000 5.90% 1993 1 283 to 330 240,000 6.00% 1994 331 to 381 255,000 6.00% 1995 382 to 436 275,000 6.00% 1996 437 to 494 290,000 6.00% 1997 495 to 557 315,000 6.00% 1998 558 to 609 260,000 6.00% 1999 -8- 1 Both principal of and interest on the Refunding Bonds shall be payable in lawful money of the United States of America at the office of the Director of Finance of the City, or, at the option of the holder, at either fiscal agency of the State of Washington in the Cities of Seattle, Washington, or New York, New York, solely out of the Bond Fund, and shall be a valid claim of the holder thereof only as against such BondlFund and the amount of the Revenue of the Waterworks Utility of the City pledged to. such' fund, and shall not • be a general obligation of the City. i Section 3.' The City reserves the right to redeem the Refunding Bonds as a whole, or in part in inverse numerical order, from money derived from any source at the following percentages of • par, if redeemed ati the following times, .plus accrued interest to date of redemptioniin each case: Call Date Call Price July 1, 1987, and January 1, 1988 101-1/2% July 1, 1988, and January 1, 1989 101% July 1, 1989, and January 1, 1990 100-1/2% July 1, 1990, or any-semiannual interest ' payment date thereafter 100% (Par) Notice of such intended redemption shall be given by publication thereof in the official newspaper of the City at least once not less than 30 nor more than 45 days prior to the call date. Written notice shall also be given to Seattle-Northwest Securities Corporation, or its successor, at its principal office in Seattle, Washington, within the same period. In addition, such redemption notice shall also be sent to!Moody's Investors Service, Inc. , and Standard & Poor's Corporation, at their offices in New York, New York, but the mailing of such notice to such corporations shall not be a condition precedent to the redemption of such Refunding Bonds. Interest on any Refunding Bonds so called for redemption shall cease on the date fixed for such redemption upon payment of the redemption price into the Bond Fund. -9- The City reserves the right to purchase any or all of the Refunding Bonds in the open market at any time at a price not in excess of 101-1/2% of the par value if purchased prior to July 1, 1988, and thereafter not in excess of the call price applicable at the time of such purchase. Section 4. There is hereby created and established in the office of the Director of Finance of the City a special fund to be known and designated as the "Renton 1977 Water and Sewer Revenue Refunding Bond Redemption Fund No. 3" (herein defined as the "Bond Fund") , which fund is to be drawn upon for the sole purpose of paying the principal of and interest on the Refunding • Bonds from and after the date thereof. Such fund is hereby divided into two accounts, namely, a Principal and Interest Account and a Reserve Account. There is hereby also created and established in the 1977 Bond Fund an additional account to be known and designated as the "1977 Refunding Account." Immediately upon receipt of payment in full for the Refunding Bonds, the accrued interest received, if any, shall be deposited in the Principal and Interest Account in the Bond Fund. The principal proceeds received shall be' deposited in the 1977 Refunding Account in the 11977 Bond Fund and an amount equal to the accrued interest on the 1977 Bonds from the last interest payment date of such 1977 Bonds to the date of delivery of the Refunding Bonds to the purchaser thereof and principal on such 1977 Bonds in the total • amount of $107,0'00.00 shall be. transferred from the Principal and Interest Account in the 1977 Bond Fund to the 1977 Refunding Account in the 1977 Bond Fund. Similarly, $28,000.00 of money in the Reserve Account in the 1977 Bond Fund shall be transferred to the 1977 Refunding Account. Any remaining money in the 1977 Bond Fund (other than in the 1977 Refunding Account) after making such transfers shall be transferred to and deposited in the -10- Principal and Interest Account in the Bond Fund. The money in the 1977 Refunding Account shall be used immediately upon the receipt thereof to discharge the obligations of the City under Ordinance No. 3141 passed and approved June 13, 1977, authorizing the issuance of the 1977 Bonds by providing for the payment as hereinafter set forth in this section of the principal of and interest on the 1977 ,Bonds. To the extent practicable the City shall discharge suchilobligations by the purchase of Federal Land Bank Bonds and United States Treasury Certificates of Indebtedness, Notes and Bonds -- sltate and local government series (commonly called "book entry" obligations [BB]) ("Acquired Obligations") bearing such interest and maturing as to principal and interest in such amounts aiidiat such times so as to provide for the payment of the principal of and interest on the 1977 Bonds which will become due and payable on or before January 1, 1997, and the redemption price payable on January 1, 1997, for the principal of the 1977 Bonds numbered 445 to 619, inclusive. Such "Acquired Obligations" and the prices to be paid for the same are more particularly described in the proposal of Seattle-Northwest Securities Corporation hereinafter referred to. Such "Acquired Obligations" and a beginning cash balance of $106,256.82 shall be irrevocably deposited with Peoples National Bank of Washington, Seattle, Washington (hereinafter called the "Refunding Trustee") . Any amounts described in this section which are not provided for in full by the purchase and deposit of the "Acquired Obligations" described in this section shall be provided for by the irrevocable deposit of a portion of the proceeds . of sale of the Refunding Bonds or other money of the City with the aforesaid Refunding Trustee. The beginning cash balance deposited with the' Refunding Trustee and all. the money-received as principal of and interest on such "Acquired Obligations" shall be held by the Refunding -11- Trustee for the credit. of the City for the 1977 Refunding Account in the 1977 Bond Fund, and shall be held in trust and shall be used for the sole purpose of paying the principal of and interest becoming due on the 1977 Bonds up to and including January 1, 1997, and to pay and retire the aforesaid numbered 1977 Bonds on January 1, 1997, as herein provided. Any money remaining in the 1977 Refunding Account in the 1977 Bond Fund atter the payment and retirement in full of the outstanding 1977; Bonds as aforesaid shall be transferred and paid into the principal and Interest Account in the Bond Fund. All of such "Acquired Obligations" purchased as a part of the refunding plan are irrevocably dedicated to the purpose set forth in this ordinance, and such investments or the earnings or the proceeds therefrom may be used for no other purpose, nor may any of such investments be liquidated prior to maturity. • Section 5. The City hereby irrevocably calls for redemption on January 1, 1997, the outstanding 1977 Bonds numbered 445 to 619, inclusive, at the par value thereof plus accrued interest- to such date of redemption. Such call for redemption shall be irrevocable after the delivery of the Refunding Bonds to the initial purchaser thereof. The Director of Finance is hereby authorized and directed to give notice of the redemption of such 1977 Bonds in accordance with the provisions of Ordinance No. 3141 pertaining to the •1977 Bonds. • Section 6. The Retgnding Trustee is hereby authorized and directed to pay the principal of and interest on the 1977 Bonds when due from the "Acquired Obligations" and money deposited with the Refunding Trustee pursuant to Section 4 of this ordinance. All "Acquired Obligations" and the money deposited with the Refunding .Trustee and any income therefrom shall be held and applied in accordance with the provisions of Ordinance No. 3141 pertaining to the 1977 Bonds and this ordinance and with the statutes of the State of Washington. _12- All necessary and proper fees, compensation and expenses of the Refunding Trustee for the Refunding Bonds and all other costs incidental to the setting up of the escrow to accomplish the refunding of the 1977 Bonds, including but not limited to an allocable portion of bond counsel's fees chargeable to such escrow (60%) (except an escrow computation fee which shall be paid to Seattle-Northwest Securities Corporation of $19,949.00 from the principal proceeds of the Refunding Bonds) shall be paid by Seattle-Northwest ;Securities Corporation as purchaser of the Refunding Bonds. The costs relating to the issuance and delivery of the Refunding Bonds, including bond printing and an allocable portion of bond counsel's fees chargeable to the preparation of the legal proceedings and furnishing an approving legal opinion covering the Refunding Bonds (40%) , shall also be paid by Seattle- Northwest Securities Corporation as purchaser of the Refunding Bonds. The proper officers and agents of the City are directed to obtain from the Refunding Trustee an agreement setting forth the duties, obligations and responsibilities of the Refunding Trustee in connection with the redemption and retirement of the 1977 Bonds as provided. herein and stating that such provisions for the payment of the' fees, compensation and expenses of such Refunding Trustee :are satisfactory to it. In order to carry out the purposes of this ordinance, the Mayor and City Clerk of the City are authorized and directed to execute and deliver to Peoples National Bank of Washington, Seattle, Washington, an agreement substantially in the form attached hereto marked Exhibit "A" and by this reference thereto made a part of this ordinance. Section 7. So long as Refunding Bonds are outstanding against the Bond Fund, the Director of Finance of the City shall (a) set aside and pay into the Principal and Interest Account in -13- • such fund out of the Revenue of the Waterworks Utility of the City a fixed amount, without regard to any fixed proportion, namely, monthly, on or before the first day of each month beginning with the month of January, 1978, an amount, toe.: :ther with the accrued interest received, equal to 1/7th of the amount of interest payable on the Refunding Bonds on July 1, 1978, and thereafter 1/6th of the next ensuing six months' requirements for interest and beginning with the month of August, 1980, 1/12th of the next ensuing twelve months' requirements for principal on the Refunding Bonds and -continuing thereafter until the Refunding Bonds, both principal and interest, are paid in full, and (b) set aside and pay into the Reserve Account in the Bond Fund out of the Revenue of the Waterworks Utility of the City in substantially equal monthly payments such amounts so that by no later than • December 1, 1980, there shall have been accumulated in the Reserve Account in the Bond Fund for the •Refunding Bonds an amount not less than the average annual principal and interest requirements for the Refunding Bonds. The Reserve Account in the Bond Fund may be accumulated from any other money which the City may have available for such purpose in addition to using such Revenue therefor. The City further agrees -that when said required amounts have been paid into the Reserve Account in the Bond Fund, it will at all times, except for withdrawals therefrom as authorized herein, maintain those amounts therein until there is a sufficient amount in the Bond .Fund, including the Reserve Account therein, to pay the principal of and interest on all outstanding Refunding Bonds to the final maturity thereof at which time the money in the Bond Fund, including the Reserve Account therein, may be • used to pay such principal and interest. In the event there shall be a deficiency in the Bond Fund to meet maturing installments of either principal or interest, as -14- the case may be, on the Refunding Bonds, such deficiency shall be made up from the Reserve Account by the withdrawal of cash therefrom for that purpose. Any deficiency created in the Reserve Account by reason of any such withdrawal shall then be made up from the money from the Revenue of the Waterworks Utility of the City first available after making necessary provisions for the required j payments into the Bond Fund. All money i'n the Reserve Account above provided for may be kept on deposit in the official bank depository of the City, or deposited in institutions permitted by law in an amount in each instance not greaterthan the amount insured by any department or agency of .the United! States Government or may be invested in United States Government obligations having a guaranteed market, or in United States obligations maturing not later than June 1, 1999. Interest on any such investment or on such bank account shall be deposited in and become a part of the Reserve Account until the total required reserve sum shall have been accumulated therein, after which time such interest shall be deposited in the Principal and Interest Account. I_f the City shall fail to set aside and pay into the Bond Fund the amounts which it has obligated itself by this section to set aside and pay therein, the holder of any Refunding Bonds may bring suit against the City to compel it to do so. Section ;B. The Revenue of the Waterworks Utility of the City is hereby pledged to such payments, and the Refunding Bonds shall constitute a lien and charge upon such Revenue prior and superior to any other charges whatsoever, excluding charges for maintenance and operation of such Waterworks Utility of the City, except that the lien and charge upon such Revenue for the Refunding Bonds shall be on a parity with the lien and charge thereon for the outstanding 1977 Bonds, Issue No. 2, and any • -15- Future Parity Bonds hereafter issued, the lien and charge upon such Revenue for the 1977 Bonds being defeased pursuant to Section 13 of Ordinance No. 3141 immediately upon deposit with the Refunding Trustee of the money and "Acquired Obligations" as herein provided. Section 9. In the judgment of the City Council, the Revenue and benefits to be derived from the operation and maintenance of the Waterworks Utility of the City, at the rates to be charged . for water and sanitary sewage disposal service on the entire Utility, will be more than sufficient to'rneet all expenses of operation and maintenance thereof and'the debt service requirements of the outstanding 1977 Bonds, Issue No. 2, and to permit the setting aside in the Bond Fund, out of the Revenue of the entire Utility, of amounts sufficient to pay the interest on the Refunding Bonds as such interest becomes payable and to pay and redeem all of the • Refunding Bonds at maturity. The City Council and corporate authorities of the City further hereby declare that in creating the Bond Fund and in fixing the amounts to be paid into 'the same, as aforesaid, they 'have exercised due regard for the cost of operation and maintenance of the Waterworks Utility of the City and the debt service requirements of the presently outstanding 1977 Bonds, Issue No. 2, and the City has not bound and obligated I itself to set aside and pay into the Bond Fund a greater amount or proportion of the Revenue of the said Utility than in the judgment of the City Council will be available over and above such cost of maintenance and operation and debt service requirements of said outstanding 1977 Bond's, Issue No. 2, and. that no portion of the Revenue of the Waterworks Utility of the City has been previously pledged for any other unrefunded indebtedness, except for the payment of the presently outstanding 1977 Bonds, Issue No. 2. Section 10. The City hereby covenants and agrees with the owner and holder of each Refunding Bond at any time outstanding as follows: -16- (a) It will establish, maintain and collect such rates and charges for water and sanitary sewage disposal service so long as any 1977 Bonds, Issue No. 2, and any Refunding Bonds are outstanding as will make available for the payment of the principal of and interest on such bonds an amount equivalent to at least 1.3 times the average annual debt service requirements, both principal and interest, on the 1977 Bonds, Issue No,. 2, and the Refunding Bonds after deducting costs of maintenance and operation from the Revenue of the Waterworks Utility of the City. "Average annual debt service requirements" shall mean :the aggregate amount of principal and interest payable in each year over the life of such 1977 Bonds, Issue'No. 2, and Refunding Bonds divided by the number of maturity years remaining to the last maturity of the longest maturing issue, being the year 1999.; • (b) It will at all times maintain and keep the • Waterworks Utility of the City in good repair, working order and condition and also will at all times operate such Utility and the business in connection therewith in an efficient manner and at a reasonah].e cost. i • (c) It' will not sell, lease, mortgage or in any manner encumber or dispose of all the property of the Waterworks Utility of the City unless provision is made for payment into the Bond Fund of a sum sufficient to pay the principal of and interest on all 1977,Bonds, Issue No. 2, and Refunding Bonds at any timeioutstanding, and that it will not sell, lease, mortgage, or in any manner encumber or dispose of any part of the property of said Waterworks Utility • of the City that is used, useful and material to the operation thereof, unless provision is made for replacement thereof, or for payment into the Bond Fund of :the total amount of Revenue received which shall not be less than an amount which shall bear the same ratio to the amount of the outstanding 1977 Bonds, Issue No. 2, and Refunding Bonds as the Revenue available for debt service for such outstanding bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the• Utility sold, leased, encumbered or disposed of bears to the Revenue available for debt service for such bonds from the entire Utility for the same period. Any such money so paid into'the Bond Fund shall be used to retire such outstanding bonds at the earliest possible date. (d) . It will while any of the Refunding Bonds remain outstanding keep proper and separate accounts • and records in which complete and separate entries shall'be made of all transactions relating to the Waterworks Utility of the City, and it will furnish the original purchaser or purchasers of the Refunding Bonds. or any subsequent holder or holders thereof at the written request of such holder or holders complete operating and income statements of said Utility in reasonable detail covering any calendar year not more than ninety days after the close of such calendar year and it will grant any holder or holders of at least • -17- twenty-five percent of the outstanding Refunding Bonds the right at all reasonable times to inspect the entire Waterworks Utility of the City and all records, accounts and data of the City relating thereto. Upon request of any holder of any of said Refunding Bonds, it will also furnish to such holder a copy of the most recently completed audit of the City's accounts by the State • Auditor of Washington. (e) It will not furnish water or sanitary sewage • disposal service to any customer whatsoever free of charge and will promptly take •legal action to enforce collection' of all delinquent accounts. (f) It will carry the types of insurance on the Waterworks Utility of-the City properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and • sewerage systems, and the cost of such insurance shall be considered a part of operating and maintaining said Utility. If, as, and when, the United States of • America or some agency thereof shall provide for War Risk Insurance, the City further agrees to take out and maintain such insurance on all or such portions of said system on which such War Risk Insurance may • be written in an amount or amounts to cover adequately the value thereof. (g) It will pay all costs of maintenance and operation of the Waterworks Utility of the City and • the debt; service requirements for the outstanding 1977 Bonds, Issue No. 2, and the Refunding Bonds, and otherwise meet the obligations of the City as herein set forth. (h) It will make no use of the proceeds of the Refunding Bonds or other funds of the City at any time during the term of the Refunding Bonds which, if suchiuse had been reasonably expected at the date that t1-e Refunding Bonds are issued, would have caused such Refunding Bonds to be arbitrage bonds within the meaning of Section 103(c) (2) of the United States Internal Revenue Code of 1954, as amended, and the applicable regulations proposed or promulgated thereunder as of the date of issuance of the Refunding Bonds.; Section 11. The Refunding Bonds shall be substantially in the following form: No. • $5,000 UNITED STATES OF 2U4ERICA • • STATE OF WASHINGTON CITY OF RENTON WATER AND SEWER REVENUE REFUNDING BOND, 1977 ISSUE NO. 3 -lki- • The City of Renton, State of Washington (hereinafter called the "City") , for value received promises to pay to bearer on the FIRST DAY OF JULY, 19_, the principal sum of FIVE THOUSAND DOLLARS together with interest thereon at the rate of % per annum, payable on July 1, 1978, and semiannually thereafter on the first day of January and July of each year, upon presentation and surrender of the • attached interest coupons as they severally mature up to the bond maturity date and with full obligation on the part of the City to pay interest at the same rate from and after the bond maturity date until this bond with interest is paid in full, or funds are available in the "Renton 1977 Water and Sewer Revenue Refunding Bond Redemption Fund No. 3" (hereinafter called the' "Bend Fund") for payment in full. Both principal of and interest on this bond are payable in lawful money of the United States of America at the office of the Director of Finance of the City, or, at the option of. the holder, at either fiscal agency of :the State of Washington in the Cities of Seattle, Washington, or New York, New York, solely out of the special fund created by Ordinance No. , and referred to herein as the "Bond Fund," into which fund the City hereby irrevocably binds itself to; pay certain fixed amounts out of the gross revenues of the waterworks utility, including the sewerage system as a part thereof, now belonging to or which may hereafter belong to the City, including all additions, extensions and betterments thereof now or at any time made or constructed, - without regard to any fixed proportion, namely, amounts sufficient to pay the principal of and interest on this issue of/bonds as•they respectively become due and to accumulate a reserve, all at the times and in the manner set forth in Ordinance No.' • (hereinafter called the "Bond Ordinance") . The gross revenues from•the combined water and sewerage systems, comprising the waterworks utility of the City, are hereby pledged to such payment• and the bonds of this issue constitute a lien and charge • upon such revenues prior and superior to any other charges,whatsoever, excluding charges for maintenance and operation, except that the lien and charge upon said revenues for this issue of bonds shall be on a • parity with the lien and charge upon such revenues for the outstanding "City of Renton Water and Sewer Revenue 'Refunding Bonds, 1977, Issue No. 2," dated November 1, 1977, and any other additional water and sewer revenue bonds hereafter issued on a parity with such bonds, in accordance with the provisions of Section 13 of Ordinance No. 3169 and Section 13 of the Bond Ordinance. This bond is one of a total issue of $3,045,000 par value of bonds, all of like date, tenor and effect, ' except as to maturities, interest rates and option of redemption,. all payable from the Bond Fund and all issued by the City under and in pursuance of the laws of the State of Washington, particularly Chapter 138, Laws of 1965, 1st Ex. Sess. , as amended, known as the • • -19- 1 I ' "Refunding Bond Act" (RCW Chapter 39.53) , for the purpose of providing a part of the funds to refund, pay and retire all of its outstanding "City of Renton Water and Sewer Revenue Bonds, 1977," dated June 1, 1977, alias provided in the Bond Ordinance, and is issued in full compliance with the ordinances of the City and the Constitution and laws of the State of Washington.; Reference is made to the Bond Ordinance as more fully describing the covenants with and rights of holders of bonds of this issue. The City ireserves the right to redeem the bonds of this issue as a whole, or in part in inverse numerical order, from money derived from any source at the following percentages of par, ,if redeemed at the following times, plus.accrued interest to date of redemption in each case: Call Date ' Call Price July 1, '1987, and January 1, 1988 101-1/2% July 1, 1988, and January 1, 1989 101% July 1, ;1989, and January 1, 1990 100-1/2% July 1., 1990, or any semiannual interest payment date thereafter 100% (Par) Notice of such intended redemption shall be given by . .publication thereof in the official newspaper of the City at least once not less than 30 nor more than 45 days prior to the call date. Written notice shall also be given to the principal office of Seattle-Northwest Securities Corporation in Seattle, Washington, or its • successor, within the same period. In addition, such redemption notice shall also be sent to Moody's Investors Service,, Inc. , and Standard & Poor's Corporation, at their offices in New York, New York, but the mailing of such notice to such corporations shall not be a condition precedent to the redemption of such bonds. Interest on any bonds so called for redemption shall cease on the date fixed for such redemption upon payment ,of the redemption price into the Bond Fund. • The City reserves the right to purchase any or all of the bonds in the open market at any time at a price not in excess of 101-1/2% of the par value if purchased prior to July 1, 1988, 'and thereafter not in excess of the call price applicable at the time of such purchase. The City hereby covenants and agrees with the holders of each and every one.of the bonds of this issue to fully carry out all covenants and meet all obligations of the City as set forth in the Bond Ordinance. It is hereby certified and declared that the bonds of this issue are issued pursuant to and in strict compliance with the Constitution and laws of the State of Washington and the 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, have been done and have been performed as required by law. -20- • •IN WITNESS WHEREOF, the City has caused this bond to be signed by the facsimile signature of its Mayor and attested by the manual signature of its Clerk and its printed facsimile seal to be reproduced heron and the interest coupons •attached to be signed with the facsimile signatures of said officials this first • day of December, 1977. CITY OF RENTON, WASHINGTON By (facsimile signature) .Mayor ATTEST: • • . Clerk The interest coupons attached to the Refunding Bonds shall be substantially in the following form: • • Coupon No.• _ • $ . . (Unless 'the bond referred to below shall have been ' previously redeemed) On the FIRST DAY OF (JANUARY) (JULY) , 19 , the CITY OF RENTON, WASHINGTON, upon presentation and surrender of this coupon will pay to bearer at the office of the • Director'1of Finance of the City, or, ,at the option of the holder, at either fiscal agency of the State of Washington in the Cities of Seattle, Washington, or New York; New York, the sum shown hereon in lawful money ofjthe United States of America from the special fund of the City known as the "Renton 1977 Water and Sewer Revenue Refunding Bond Redemption Fund No. 3," said sum: being the interest then due on its "City of • Renton Water and Sewer Revenue Refunding Bond, 1977, Issue No. 3," dated December 1, 1977, and. numbered • CITY OF RENTON, WASHINGTON • • By (facsimile signature) Mayor ATTEST: (facsimile signature) Clerk The Refunding Bonds shall be printed on lithographed • forms, shall be signed by the facsimile signature of the Mayor and attested by the manual signature of the Clerk and pursuant to RCW 39.6.2.030 shall have the printed facsimile seal of the City reproduced thereon, and the interest coupons shall bear the facsimile signatures of the Mayor and the Clerk. -21- Section 12. In the event the City shall issue advance refunding bonds pursuant to the laws of the State of Washington, or have money available from any other lawful source, to pay the principal of and interest on •the Refunding Bonds or such portion thereof included in the refunding plan as the same become due and payable and to refund all such then outstanding Refunding Bonds and to pay the costs of refunding, and shall have irrevocably set aside for and pledged ito such payment and refunding, money and/or . direct obligations of ;the United States of America or other legal investments sufficient in amount, together with known earned income from the investments thereof, to make such payments and to accomplish the refunding as scheduled (hereinafter called the "trust account") and shall irrevocably make provisions for redemption of such • Refunding Bonds, then in that case all right and interest of the owners or holders of the Refunding Bonds to be so retired or refunded and the appurtenant coupons (hereinafter collectively called the "defeased Refunding Bonds") in the covenants of this ordinance, in the Revenue of the Waterworks .Utility of the City and funds and accounts obligated to the payment of such Refunding Bonds shall thereafter cease and become void, except such owners and holders shall have the right to receive payment of the principal of and interest on the defeased Refunding Bonds from the trust account and, in the event the funds in the trust account are not available for such payment, shall have the residual right -to receive payment of the principal of and interest on the defeased Refunding Bonds from the Revenue of the Waterworks Utility of the City without any priority of lien or charge against such Revenue or covenants with respect thereto except to be paid therefrom. After the establishing and full funding of such trust account, the City may then apply any money in any other fund or account established for .the payment or redemption of the defeased Refunding Bonds to any lawful purposes as it shall determine, subject only to the rights of holders of any other bonds then outstanding. -22- - I � In the event that the refunding plan provides that the Refunding Bonds being refunded or the refunding bonds to be issued be secured by cash and/or direct obligations of the United States of America or other legal investments pending the prior redemption of those Refunding Bonds being refunded and if such refunding plan also provides that certain cash and/or direct obligations of the United States of America or other legal investments are irrevocably pledged for the prior redemption of those Refunding Bonds included in the refunding plan, then only the debt service on the Refunding Bonds which are not defeased Refunding Bonds and the refunding bonds, the payment of which' is not so secured by the refunding plan, shall 1 be included in the computation of coverage for.issuance of Future Parity Bonds and the annual computation of coverage for determining compliance with the :rate covenants. Section 13. The City reserves the right to issue Future Parity Bonds which will constitute a lien and charge upon the Revenue of the Waterworks Utility of the City on a parity with the 1977 Bonds, Issue No. 2,; and the Refunding Bonds, provided, the conUi tions set forth in Section 15 of Ordinance No. 1450, as modified by the provisions set forth in Section 13 of Ordinance No. 3169, are met and complied with at the time of the issuance of such Future Parity Bonds, which sections are by .this reference incorporated herein and made a part hereof and shall continue to be applicable even though the "City of Renton Water and Sewer Refunding and Improvement Bonds, 1953," have been paid 'and retired. Section 14. Seattle-Northwest Securities Corporation of Seattle, Washington, heretofore offered to purchase the Refunding Bonds at a price of $99.535336 per each $100.00 par value plus accrued interest to the date of delivery of the Refunding Bonds, the City to furnish the printed Refunding Bonds and the unqualified - approving legal opinion of Messrs. Roberts, Shefelman, Lawrence, Gay & Moch, municipal bond counsel of Seatttle, 'Washington, and the -23- I • purchaser to pay the cost of printing such Refunding Bonds and the other costs as set .forth in Section b above and the purchaser to provide the "Acquired Obligations" above referred to as set forth in such offer. Bond counsel's opinion shall state that bond counsel has not reviewed, and thus expresses no opinion concerning, the. completeness or accuracy of any official statement, offering circular or other sales material relating to the issuance of the Refunding Bonds or otherwise used in connection with the Refunding Bonds. The City Council, being of the opinion thatit is in the . best interests of the City to accept such offer, hereby accepts the same. The Refunding Bonds shall, therefore, immediately upon their execution be.delivered to the purchaser .upon p payment for the Refunding BondsHin accordance with such offer. Section 15. Pending the printing, execution and delivery to the purchaser of the definitive Refunding Bonds, the City may cause to be executed and delivered to such purchaser a single temporary Refunding Bond in the principal amount of $3,045,000. Such temporary Refunding Bond shall bear the same date of issuance, interest rates, principal payment dates and terms and covenants as the definitive Refunding Bonds, and shall be issued as a fully registered bond in the name of such purchaser, and shall be in such form as acceptable to such purchaser. Such temporary'Refunding IBond shall be exchanged for the definitive Refunding Bonds as soon • as the same are printed, executed and available for delivery by the Director of Finance of the City. • -24- w,emd�e 1_ b n 0 Kid CITY OF RENTON, WASHINGTON ORDINANCE NO. 3720 AN ORDINANCE providing for the issuance of it $1, 500,000 par value of "Water and Sewer Revenue Bonds, 1983. " of the City for the purpose of obtain- ing a part of the funds with which to pay the cost of carrying out the system or plan of additions to and betterments and extensions of the waterworks utility ( of the City, including the sewerage system as a part thereof, and providing an amount for the arts; fixing the date, form, denomination, maturities, interest rates, terms andlcovenants of such bonds; creating a special bond redemption fund to provide for the pay- ment of the bonds; and providing for the sale of such bonds . WHEREAS, by Ordinance No. 1156, as amended by Ordinance Nos . 1157 and 1173 , the sewerage system of the City of Renton (the "City" ) has become and is considered a part of the water- works utility of the City (defined below as the "Waterworks 1I Utility of the City" ) ; and WHEREAS, the City previously has issued under date of March 1, 19534315.000 par value of "City of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1953, " pursuant to Ordinances Nos . 1450 and 1452; and WHEREAS, by Section 15 of such Ordinance No. 1450, the City reserved the right to issue additional water and sewer revenue bonds which would constitute a charge and lien upon the revenue of the Waterworks Utility of the City on a parity with the then outstanding "City of Renton Water and Sewer Refunding and Improvement Revenue Bonds. 1953, " on compliance with the follow- ing conditions at the time of the issuance of such additional bonds : " (A) All payments required by this ordinance to be paid into the 'Renton 1953 Water and Sewer Refund- ing and Improvment Revenue Bond Fund ' shall have been made; and " (B) The revenues of said waterworks system, including the sewerage system, shall be and be deemed sufficient, after the payment of operation and main- tenance costs and taxes, based upon the historical experience of said systems or the pro forma revenues under then existing rates over a period of any twenty-four consecutive months out of the thirty-six months immediately preceding the time of the issuance of such additional bonds, to equal at least 1.5 times the average annual principal and interest require- ments of the bonds of this issue then outstanding and of the revenue bonds proposed to be so issued. Such determination of the sufficiency of the revenues shall be made and certified to by an engineer experi- enced in municipal utilities; and " (C) The Ordinance authorizing the issuance of such additional revenue bonds shall provide for the setting aside into a reserve fund or account of an amount not less than the average annual debt service requirement, both principal and interest of the addi- tional revenue bonds proposed to be so issued, which reserve fund or account shall be maintained in such amount so long as any of said bonds are outstanding to the last maturity thereof" ; and WHEREAS, the City thereafter issued under date of September 1, 1954 , $325,000 par value of "City of Renton Water and Sewer Revenue Bonds, 1954 , " pursuant to Ordinance No. 1489; under date of July 1. 1959, $750,000 par value of "City of Renton Water and Sewer Revenue Bonds, 1959. " pursuant to Ordinance No . 1766; - 2 - • under date of May 1, 1965, $500,000 par value of "City of Renton Water and Sewer Revenue Bonds, 1965, " pursuant to Ordinance No . 2151; under date of December 15, 1965, $545,000 par value of "City of Renton Water and Sewer Revenue Refunding Bonds, 1965, " pursuant to Ordinance No. 2195, for the purpose of refunding, redeeming and retiring on July 1, 1974 , all of the then out- standing "City of Renton Water and Sewer Revenue Bonds, 1959" ; under date of July 1,1 1975, $3,000,000 par value of "City of Renton Water and Sewer Revenue Bonds, 1975, " pursuant to Ordi- nance No. 2930; under date of February 1, 1976, $2, 950,000 par value of "City of Renton Water and Sewer Revenue Refunding Bonds, 1976, " pursua t to Ordinance No. 3007, for the purpose of refunding, redeeming and retiring on January 1, 1989, and July 1, 1989, all of the then outstanding "City of Renton Water and Sewer Revenue Bonds, 1975" ; under date of June 1, 1977 , $3,095,000 par valueiof "City of Renton Water and Sewer Revenue Refunding Bonds, 1977" (the "1977 Bonds" ) , pursuant to Ordinance No. 3141, as amended by Ordinance No. 3145, for the purpose of providing a part of the money required to pay the principal of and interest on the "City of Renton Water and Sewer Revenue i_ Refunding Bonds, 1976, " coming due to and including July 1. 1989, and to redeem and retire on July 1, 1989, the outstanding "City of Renton Water and Sewer Revenue Refunding Bonds, 1976 , " numbered 96 to 590, inclusive, maturing from July 1, 1990, to July 1, 2000, inclusive and under date of November 1. 1977, - 3 i j $800, 000 par value of "City of Renton Water and Sewer Revenue Refunding Bonds, 1977 , Issue No . 2" (the "1977 Bonds, Issue No.. 2 " ) , pursuant to Ordinance No. 3169, for the purpose of obtain- ing a part of the funds with which to refund, pay and retire the outstanding "City of Renton Water and Sewer Revenue Bonds, 1954 , " "City of Renton Water and Sewer Revenue Bonds, 1965, " and "City of Renton Water and Sewer Revenue Refunding Bonds, 1965, " all of which bonds were at the time of their issuance issued on a parity of lien with the then outstanding "City of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1953, " and with each other pursuant to the provisions of Section 15 of Ordinance No. 1450, such parity issues of bonds being a first gross upon g and charge the revenue of the Waterworks Utility of the City, excluding charges for maintenance and operation, except that all of the "City of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1953, " have now been paid and retired, and except the conditions of subparagraph (B) of Section 15 of Ordinance No. 1450 were modified by Section 12 of Ordinance No. 2930 pertaining to the "City of Renton Water and Sewer Revenue Bonds, 1975, " and by Section 13 of Ordinance No . 3169 pertaining to the outstanding 1977 Bonds, Issue No. 2 , as to any parity bonds issued in the future, and the City, by such Section 13 of Ordinance No. 3169, reserved the right to issue Future Parity Bonds (as therein defined) which will constitute a lien and charge upon the gross revenue of the Waterworks Utility - 4 - of the City on a parity with the 1977 Bonds, Issue No . 2, pro- vided the conditions set forth in Section 15 of Ordinance No . 1450, as modified, are met and complied with at the time of the issuance of such Future Parity Bcnds, which section was incor- porated by reference in Ordinance No. 3169 and made a part thereof and shall continue to be applicable even though the "City of Renton Water' and Sewer Refunding and Improvement Revenue Bonds, 1953 , " have been paid and retired; and WHEREAS, under date of December 1, 1977, the City issued $3,045,000 par value Of "City of Renton Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 3" (the "1977 Bonds, Issue No . i 3" ) , pursuant to Ordinance No . 3188, for the purpose of obtain- ing a part of the funds with which to refund, pay and retire all of the then outstanding 1977 Bonds, which 1977 Bonds, Issue No. 3, were issued on a parity of lien with the outstanding 1977 Bonds, Issue No. 2, pursuant to the provisions of Section 15 of Ordinance No . 1450, as modified by Section 13 of Ordinance No . i 3169; and WHEREAS, the 1977 Bonds, Issue No. 2 , and the 1977 Bonds, Issue No. 3, are the only bonds presently outstanding payable out of the revenue of, the Waterworks Utility of the City; and r ' it WHEREAS, the parity provisions of Section 15 of Ordinance No . 1450, as modified,, provide that the City may issue addi- tional water and sewer revenue bonds which would constitute a charge and lien upon the revenue of the Waterworks Utility of - 5 - the City on a parity with the 1977 Bonds, Issue No . 2 , and the 1977 Bonds, Issue No. 3, and any bonds issued thereafter and having a charge and lien upon the revenue of the Waterworks Utility of the City on a parity with such bonds on compliance with the following conditions at the time of the issuance of such additional bonds : " (A) All payments required by this ordinance to be paid into the 'Renton 1953 Water and Sewer Refund- ing and Improvment Revenue Bond Fund ' shall have been made; [Ordinance No . 1450] and " (B) The revenues of said waterworks system, including the sewerage system, shall be and be deemed sufficient, after the payment of operation and main- tenance costs and taxes, based upon the historical experience of said systems or the pro forma revenues under then existing rates over a period of any twenty- four consecutive months out of the thirty-six months immediately preceding the time of the issuance of such additional bonds, to equal at least 1.3 times the average annual principal and interest require- ments of the bonds of this issue then outstanding and of the revenue bonds proposed to be so issued. Such determination of the sufficiency of the revenues shall be made and certified to by an engineer experi- enced in municipal utilities; and [Ordinance 1450 as modified by Ordinance No. 3169] " (C) The Ordinance authorizing the issuance of such additional revenue bonds shall provide for the setting aside into a reserve fund or account of an amount not less than the average annual debt service requirement, both principal and interest of the addi- tional revenue bonds proposed to be so issued, which reserve fund or account shall be maintained in such amount so long as any of said bonds are outstanding to the last maturity thereof" ; [Ordiance No. 1450] WHEREAS, the City Council has determined that it is neces- sary and in the best interests of the City that certain addi- tional improvements be made and there be adopted a system or - 6 - plan of additions to and betterments and extensions of the Waterworks Utility of the City; and WHEREAS, the City Council has determined that it is neces- sary to issue and sell $1, 500,000 par value of water and sewer revenue bonds to provide a part of the funds necessary to carry out such system or plan providing for additions to and better- , - ments and extensions of the Waterworks Utility of the City, to provide an amount for the arts as required by City Ordinance No. 2969 and to pay the costs of issuance and sale of the water and sewer revenue bonds provided for herein; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON, DO ORDAIN, as follows : Section 1. As used in this ordinance, the following words shall have the following meanings : a . "Annual Debt Service" for the Bonds shall mean all the I interest plus all principal which will mature or come due in any year . b. "Average Annual Debt Service" shall mean the sum of i the Annual Debt Service for the remaining years to the last _ F scheduled maturity of the Bonds divided by the number of those years . I , c . "Bond Fund" shall mean that special fund of the City known as the "Renton 1983 Water and Sewer Revenue Bond Redemp- tion Fund" created by this ordinance for the payment of the principal of and interest on the Bonds . - 7 - i d. "Bonds" shall mean the $1, 500,000 "City of Renton Water and Sewer Revenue Bonds, 1983 , " authorized to be issued by this ordinance . e. "City" shall mean the City of Renton, Washington, a duly organized and existing noncharter code city under the laws of the State of Washington. f . "Future Parity Bonds" shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge upon the Revenue of the Waterworks Utility of the City on a parity with the lien and charge upon such revenue for the Outstanding Parity Bonds and the Bonds for the payment of the principal thereof and interest thereon . g. "Maintenance and Operation Expense" shall mean all expenses incurred by the City in causing the Waterworks Utility of the City to be operated and maintained in good repair, work- ing order and condition, which shall not include any deprecia- tion expenses or taxes or charges in lieu of taxes levied or imposed by the City. h. "Outstanding Parity Bonds" shall mean the $800,000 par value of "City of Renton Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 2 , " issued under date of November 1, 1977, pursuant to Ordinance No. 3169, and the $3 ,045,000 par value of "City of Renton Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 3 , " issued under date of December 1, 1977 , pursuant to Ordinance No . 3188 . - 8 - I i . "Principal • and Interest Account" shall mean the al account of that name created in the Bond Fund by this ordinance for the payment of the principal of and interest on the Bonds . "Reserve Account" shall mean the account of that name 11 created in the Bond Fund by this ordinance for the purpose of securing the paymentlofthe principal of and interest • on the Bonds . k. "Revenue of the Waterworks Utility of the City" shall mean -all the earnings and revenue received by the Waterworks Utility of the City from any source whatsoever, including pay- ments received under !contract with other municipal corporations i ', for water service, except general taxes, charges in lieu of taxes, assessments in! any utility local improvement district 1 1 hereafter created, prIpceeds from the sale of City property and 1 bond proceeds . 1 1 . "Term Bonds" shall mean any Outstanding Parity Bonds, 1 i , Bonds and/or Future Parity Bonds identified as such in the ordi- nance authorizing the! issuance thereof, the payment of .which is 1 provided for by a requirement for mandatory deposits of money j into the principal and interest account of the bond redemption fund created for the payment of such issue of bonds in accord- ance with a mandatory, sinking fund requirement . m. "Waterworks : Utility Fund of the City" shall mean that special fund of the City into which all of the Revenue of the Waterworks Utility of the City shall be deposited. - 9 - 1 , 1 1 n. "Waterworks Utility of the City" shall mean the com- bined water and sewerage systems of the City as the same may be added to, improved and extended for as long as any of the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds are outstanding . Section 2 . The City specifies, adopts and orders the carrying out of a system or plan of additions to and betterments and extensions of the Waterworks Utility of the City consisting of the construction and installation of a major water distribu- tion system on the City' s West Hill jointly with Water District No. 63, King County, Washington, including a new 3500 gpm well facility, 1,700 gpm booster pump station, 2 .5 mile-long trans- mission main, 1.3 million gallon reservoir facility and distri- bution mains, as well as various replacements, extensions and improvements to the existing water-sewer system, the making of improvements to the water distribution and sewage collection systems and the telemetry control systems for each, and the acquisition of future reservoir and watershed sites . There shall be included in the foregoing system or plan the acquisition and installation of all necessary valves, pumps, fittings, couplings, connections, equipment and appurtenances, the acquisition of any easements, rights-of-way and land that may be required and the performance of such work as may be inci- dental and necessary. All of the foregoing shall be in accordance with the plans and specifications therefor prepared by the consulting engineers of the City. - 10 - 1 j-i The City Council may modify the details of the foregoing ' i' system or plan where„ in its judgment, it appears advisable if such modifications do not substantially alter the purposes of that system or plan. i ,' The life of the improvements comprising the foregoing system or plan of additions to and betterments and extensions of the Waterworks Utility of the City is declared to be at least twenty years . The estimated cost of the acquisition, construc- t , tion, installation an'd financing of the . above-described improve- ments, including the Ilosts of issuance and sale of the Bonds is declared to be approximately $2, 188,000. Such cost shall be paid from the proceeds of the Bonds authorized in this ordi- nance, proceeds of a Referendum 38 grant anticipated to be ' received from the State of Washington, Department of Social and Health Services, and other money of the City made available therefor . 1 Section 3 . The City council finds that all payments required by Ordinances Nos. 3169 and 3188 for the Outstanding Parity Bonds have been made into the respective bond redemption funds for such Outstanding Parity Bonds, that provision is here- inafter made for the accumulation of the amounts required in the Reserve Account of the Bond Fund, and that there were will on file prior to the issuance and delivery of the Bonds a certifi- 1 cate of Richard H. Harbert of RH2 Engineering, P.S. , an engi- neer experienced in municipal utilities, that the Revenue of the Waterworks Utility is !sufficient to meet the 1.3 coverage l requirement . - 11 - Section 4 . For the purpose of providing a part of the money required to carry out the system or plan of additions to and betterments and extensions of the Waterworks Utility of the City, including the cost of issuance and sale of the Bonds , as herein specified, adopted and ordered to be carried out and to provide an amount for the arts as required by City Ordinance No . 2969, as amended by Ordinance No . 3563 , the City shall issue the Bonds in the aggregate principal amount of $1, 500,000. The Bonds shall be Y designated "Cit of Renton Water and Sewer Bonds, 1983" (defined above as the "Bonds" ) ; shall be dated May 1, 1983; shall be in denominations of $5,000 each; shall bear interest at the rates hereinafter set forth, payable on November 1, 1983, and semiannually thereafter on each succeeding May 1 and November 1 as evidenced by coupons to be attached to the Bonds representing interest to maturity. If any Bond is not redeemed upon proper presentment at its maturity or call date thereof, the City shall be obligated to pay interest at the coupon rate for each such Bond from and after the maturity or call date until such Bond, both principal and interest, shall have been paid in full or until sufficient money for such payment in full is on deposit in the Bond Fund and such Bond has been duly called for payment by the City Director of Finance ' s publishing notice of such call once at least ten days prior to the call date in the official newspaper of the City or, if there is no official newspaper, in a newspaper of general circulation in the City. The Bonds shall be numbered and mature on May 1 of each year as follows : - 12 - I , I , i Bond Numbers Interest Maturity (Inclusive) Amounts Rates Years 1 to 10 $ 50,000 1984 11 to 19 i 45, 000 1985 20 to 29 50, 000 1986 30 to 41 j 60,000 1987 42 to 55 70,000 1988 56 to 74 I 95,000 1989 ji 75 to 89 I 75,000 1990 90 to 105 80,000 1991 106 to 122 85,000 1992 123 to 141 95,000 1993 142 to 162 I 105,000 1994 163 to 185 115,000 1995 186 to 208 115, 000 1996 209 to 234 130,000 1997 235 to 261 135,000 1998 262 to 300 195,000 1999 I j Both principal of and interest on the Bonds shall be pay- % ; able in lawful money of the United States of America at the office of the Director of Finance of the City, or, at the option of the holder, at either fiscal agency of the State of, Washington in Seattle, Washington. or New York, New York, solely out of the Bond Fund,' and shall be a valid claim of the holder thereof only as against such Bond Fund and the amount of the Revenue of the Waterworks Utility of the City pledged to such fund, and shall not be a general obligation of the City. Section 5 . The City reserves the right to redeem the Bonds as a whole, or in part in inverse numerical order, from money derived from any source at the following percentages of par if redeemed at the following times, plus accrued interst to date of redemption in each case: II , - 13 - I Call Date Call Price May 1, 1993, and November 1, 1993 102% May 1, 1994, and November 1, 1994 101-1/2% May 1, 1995, and November 1, 1995 101% May 1, 1996, and November 1, 1996 100-1/2% May 1, 1997, or any semiannual interest payment date thereafter 100% (Par) Notice of such intended redemption shall be published in the official newspaper of the City or, if there is no official newspaper, in a newspaper of general circulation in the City, at least once not less than 30 nor more than 45 days prior to the call date, and a copy of such notice shall be mailed within the same period by registered or certified mail to the main office of the principal underwriter or account manager for the success- ful bidder for the Bonds, or its successors . In addition, such redemption notice shall be sent to Moody' s Investors Service, Inc. , and Standard & Poor ' s Corporation, at their offices in New York, New York, but the mailing of such notice to such New York firms shall not be a condition precedent to the redemption of such Bonds . Interest on any Bonds so called for redemption shall cease on such call date upon payment of the redemption price into the Bond Fund . The City reserves the right to purchase any or all of the Bonds in the open market at any time at a price not in excess of 102% of the par value if purchased prior to May 1, 1993 , and thereafter not in excess of the call price applicable at the time of such purchase . - 14 - i I 1 ' Section 6 . There is created and established in the office of the Director of Finance of the City a special fund to be known and designated' as the "Renton 1983 Water and Sewer Revenue Bond Redemption Fund. " Such fund is divided into two accounts, namely, a Principal and Interest Account and a Reserve Account . So long as Bonds are outstanding against the Bond Fund, the Director of Finance of the City shall (a) set aside and pay into the Principal and Interest Account in such fund out of the Revenue of the Waterworks Utility of the City a fixed amount, without regard to any fixed proportion, namely, monthly, on or before the first dayjof each month beginning with the month of June, 1983 , an amount, together with the accrued interest received, equal to 1/6th of the amount of interest payable on the Bonds on November 1, 1983, and thereafter 1/6th of the next ensuing six months ' requirements for interest, and beginning with the month of June, 1983, 1/12th of the next ensuing twelve months ' requirements ''for principal on the Bonds and continuing thereafter until the !Bonds, both principal and interest, are paid in full, and (b)' set aside and pay into the Reserve Account in the Bond Fund out !of the Revenue of the Waterworks Utility of the City in substantially equal monthly payments such amounts so • that by no later than May 1, 1988, there shall have been accumu- lated in the Reserve Account in the Bond Fund for the Bonds an amount not less than the Average Annual Debt Service for the Bonds . - 15 - I �, I The Reserve Account in the Bond Fund may be accumulated from any other money which the City may have available for such purpose in addition to using such revenue therefor . The City further agrees that when such required amounts have been paid into the Reserve Account in the Bond Fund, the City will at all times, except for withdrawals therefrom as authorized herein, maintain those amounts therein until there is a sufficient amount in the Bond Fund, including the Reserve Account therein, to pay the principal of and interest to matur- ity on all outstanding Bonds, at which time no further payments need be made into the Bond Fund and the money in the Bond Fund, including the Reserve Account, may be used to pay such principal and interest. In the event there shall be a deficiency in the Bond Fund to meet maturing installments of either principal or interest, as the case may be, on the Bonds, such deficiency shall be made up from the Reserve Account by the withdrawal of cash therefrom for that purpose . Any deficiency created in the Reserve Account by reason of any such withdrawal shall then be made up from the money from the Revenue of the Waterworks Utility of the City first avaiable after making necessary provisions for the required payments into the Bond Fund. All money in the Reserve Account above provided for not needed to meet the payments of principal and interest when due may be kept on deposit in the official bank depository of the - 16 - ;l City or in any national bank or may be invested in any legal investment for City funds maturing not later than the interest __I or principal and interest payment date when such money will be needed. Interest on ;any such investment or on such bank account jl shall be deposited in and become a part of the Reserve Account until the total requilred reserve amount shall have been accumu- lated therein, after which such interest shall be deposited in the Principal and Interest Account . Funds in the Waterworks Utility Fund of the City shall be used' in the following order of priority: (1) To pay Maintenance and Operation Expense; (2) To pay the interest on the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds; (3) To pay the principal of the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds; (4) To make all payments required to be made into I any sinkinglfund or bond redemption fund here- after created for the payment of Future Parity Bonds which are Term Bonds; (5) To make ally, payments required to be made into the Reservei, Accounts created to secure the pay- ment of theOutstanding Parity Bonds, the Bonds and any Future Parity Bonds; (6) To make alllpayments required to be made into any revenue; bond redemption fund or warrant redemption fund and debt service account or reserve account created to pay and secure the payment of the principal of and interest on any revenue bonds or revenue warrants of the City having a lien, upon the Revenue of the Waterworks Utility junior and inferior to the lien thereon for the payment of the principal of and interest on the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds; - 17 - (7) To retire by redemption or purchase in the open market any outstanding revenue bonds or revenue warrants of the City, to make necessary addi- tions, betterments, improvements and repairs to or extensions and replacements of the Waterworks Utility of the City, or for any other lawful City purposes . If the City shall fail to set aside and pay into the Bond Fund the amounts set forth above, the holder of any of the out- standing Bonds may bring an action against the City to compel such setting aside and payment . Section 7 . The Revenue of the Waterworks Utility of the City is pledged to such payments, and the Bonds shall constitute a lien and charge upon such revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense, except that the lien and charge upon such revenue for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds and any Future Parity Bonds hereafter issued . Section 8 . In the judgment of the City Council, the Reve- nue and benefits to be derived from the operation and mainte- nance of the Waterworks Utility of the City, at the rates to be charged for water and sanitary sewage disposal service on the entire utility, will be more than sufficient to meet all Mainte- nance and Operation Expense and the debt service requirements of the Outstanding Parity Bonds and to permit the setting aside in the Bond Fund, out of the revenue of the entire utility, of amounts sufficient to pay the interest on the Bonds as such - 18 - , interest become payable and to pay and redeem all of the Bonds ' at maturity. The City Council further declares that in creating ' , the Bond Fund and infixing the amounts to be paid into the same, as aforesaid, it has exercised due regard for the Mainte- I nance and Operation Expense and the debt service requirements of the presently Outstanding Parity Bonds and the City has not bound and obligated iJtself to set aside and pay into the Bond Fund a greater amount or proportion of the revenue of such util- ity than in the judgment of the City Council will be available over and above such Maintenance and Operation Expense and debt service requirements iof the Outstanding Parity Bonds and that no , ! portion of the Revenue of the Waterworks Utility of the City has been previously pledgled for any other unrefunded indebtedness, except for the payment of the presently Outstanding Parity Bonds : , Section 9 . The City covenants and agrees with the owner and holder of each Bond at any time outstanding as follows: (a) It will establish, maintain and collect such rates and charges for water and sanitary sewage dis- posal service sollong as any Outstanding Parity Bonds and Bonds are outstanding as will make available for the payment of the principal of and interest on such bonds an amount equivalent to at least 1.3 times the average annual debt service requirements, both prin- cipal and interest, on the Outstanding Parity Bonds and the Bonds after deducting costs of maintenance and operation from the Revenue of the Waterworks Utility of the City. "Average annual debt service require- ments" shall mean _the aggregate amount of principal and interest payable in each year over the remaining life of such Outstanding Parity Bonds and Bonds divided by the number of maturity years remaining to the last maturity of the longest maturing issue, being the year 1999 . - 19 - • (b) It will at all times maintain and keep the Waterworks Utility of the City in good repair, working order and condition and also will at all times operate such Utility and the business in connection therewith in an efficient manner and at a reasonable cost . (c) It will not sell, lease, mortgage or in any manner encumber or dispose of all the property of the Waterworks Utility of the City unless provision is made for payment into each of the Renton 1977 Water and Sewer Revenue Refunding Bond Redemption Fund, No . 2 (the "1977 Bonds, Issue No. 2 Bond Fund" ) , the Renton 1977 Water and Sewer Revenue Refunding Bond Redemption Fund, No. 3 (the "1977 Bonds, Issue No. 3 Bond Fund" ) , and the Bond Fund, of sums sufficient to pay, respectively, the principal of and interest on all 1977 Bonds, Issue No. 2 , 1977 Bonds, Issue No. 3 , and Bonds at any time outstanding, and that it will not sell, lease, mortgage, or in any manner encumber or dispose of any part of the property of the Water- works Utility of the City that is used, useful and material to the operation thereof, unless provision is made for replacement thereof, or for payment into the 1977 Bonds, Issue No. 2 Bond Fund, the 1977 Bonds, Issue No . 3 Bond Fund, and the Bond Fund of the total amount of revenue received which shall not be less than an amount which shall bear the same ratio to the amount of the outstanding 1977 Bonds, Issue No. 2, 1977 Bonds, Issue No. 3, and Bonds, respectively, as the revenue available for debt service for such out- standing bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the utility sold, leased, encumbered or disposed of bears to the revenue available for debt service for such bonds from the entire utility for the same period. Any such money so paid into such funds shall be used to retire such outstanding bonds at the earliest possible date. (d) It will while any of the Bonds remains out- standing keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to the Waterworks Utility of the City, and it will furnish the original pur- chaser or purchasers of the Bonds or any subsequent holder or holders thereof at the written request of such holder or holders complete operating and income statements of such utility in reasonable detail occur- ing any calendar year not more than ninety days after - 20 - the close of suet' calendar year, and it will grant any holder or holders of at least twenty-five percent of the outstanding , Bonds the right at all reasonable times to inspect the entire Waterworks Utility of the City and all records, accounts and data of the City relating thereto. Upon request of any holder of any { of the Bonds, it also will furnish to such holder a copy of the most recently completed audit of the City' s accounts by the State Auditor of Washington. (e) It will not furnish water or sanitary sewage disposal service to any customer whatsoever free of charge and promptly will take legal action to enforce collection of all delinquent accounts . (f) It will carry the types of insurance on the Waterworks Utility of the City properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewer- age systems, and the cost of such insurance shall be considered a part of operating and maintaining such utility. If , as,, and when, the United States of America or some !agency thereof shall provide for War Risk Insurance, the City further agrees to take out and maintain such insurance on all or such portions of system on which Iisuch War Risk Insurance may be written in an amount or amounts to cover adequately the value thereof . (g) It will pay all costs of Maintenance and Operation Expense and the debt service requirements for the Outstanding Parity Bonds and the outstanding Bonds, and otherwise meet the obligations of the City . as herein set forth. (h) It will spend the proceeds of the Bonds with due diligence tolecompletion of the purposes specified herein and will make no use of the proceeds of the Bonds or other funds of the City at any time during the term of the Bonds which will cause such Bonds to be arbitrage bonds within the meaning of Section 103(c) of the United States Internal Revenue Code of 1954 , as amended; and applicable regulations thereunder . Section 10. The Bonds shall be printed on lithographed or good bond paper in a form consistent with the provisions of this - 21 - ordinance, shall be signed bythe facsimile signature of the g g Mayor, attested by the manual signature of the City Clerk and shall have a facsimile reproduction of the City seal printed thereon, and the interest coupons shall bear the facsimile sig- natures of the Mayor and the City Clerk . Section 11 . In the event the City shall issue advance refunding bonds pursuant to the laws of the State of Washington to pay the principal of and interest on the Bonds or such por- tion thereof included in the refunding plan as the same become due and payable and to refund all such then outstanding Bonds and to pay the costs of refunding, and shall have irrevocably set aside for and pledged to such payment and refunding, money and/or direct obligations of the United States of America or other legal investments sufficient in amount, together with known earned income from the investment thereof, to make such payments and to accomplish the refunding as scheduled, and shall irrevocably make provisions for redemption of such Bonds, then in that case all right and interest of the owners or holders of the Bonds to be so retired or refunded and the appurtenant coupons in the covenants of this ordinance and in the Revenue of the Waterworks Utility of the City, funds and accounts obligated to the payment of such refunding bonds, except that right to receive the funds so set aside and pledged, shall thereupon cease and become void and the City may then apply any moneys in any fund of account established for the payment or redemption of - 22 - such Bonds or coupons to any lawful purposes as it shall - determine . In the event the refunding plan provides that the refunding bonds be secured by cash and/or direct obligations of the United j States of America orllother legal investments pending the prior 1 redemption of those Bonds being refunded and if such refunding plan also provides that certain cash and/or direct obligations of the United States of America or other legal investments are irrevocably pledged for the prior redemption of those Bonds included in the refunding plan, then only the debt service on the Bonds and the refunding bonds payable from the Revenue of the Waterworks Utility of the City shall be included in the computation of coverage for issuance of Parity Bonds and the annual computation of coverage for determining compliance with the rate covenants . Section 12 . The City reserves the right to issue Future Parity Bonds which will constitute a lien and charge upon the Revenue of the Waterworks Utility of the City on a parity with the Outstanding Parity Bonds, and the Bonds, provided the condi- tions set forth in Section 15 of Ordinance No. 1450, as modified 1 I by the provisions set, forth in Section 13 or Ordinance No . 3169, are met and complied with at the time of the issuance of such Future Parity Bonds, which sections are by this reference incor- I porated herein and made a part hereof and shall continue to be applicable even though the "City of Renton Water and Sewer 1 ' - 23 - 1 Refunding and Improvement Bonds, 1953 , " have been paid and retired, provided, however, that with respect to the issuance of any Future Parity Bonds, Subsection A of Section 15 of Ordinance No . 1450 is modified to read as follows : (A) All payments required by any ordinance of the City to be paid into any bond redemption funds and accounts thereof created to secure the payment of bonds issued on a parity of lien herewith shall have been made into the respective bond redemption funds and accounts thereof for the payment of such bonds and no deficiency exists therein. Section 13 . The Bonds shall be sold for cash at public sale for not more than a 2% discount plus accrued interest to the date of delivery of and payment for the Bonds . The City Clerk is authorized to give notice calling for bids to purchase the Bonds by publishing such notice once a week for two consecutive weeks in the official newspaper of the City, or, if there be no official newspaper of the City, in a • newspaper of general circulation in King County, Washington, the first publication date thereof to be no later than April 22 , 1983 , and by publishing no later than April 22, 1983 a short abbreviated form of such notice once in The Seattle Daily Journal of Commerce and Northwest Construction Record of Seattle, Washington, and in the Daily Bond Buyer of New York, New York. Such notice shall specify that sealed bids for the purchase of the Bonds shall be received by the City Clerk in her office in the City Hall on May 2, 1983, up to 11:00 a.m. , local time, at which time all bids will be publicly opened and read and an award made by the City Council at its regular meeting to - 24 - be held in the City Council Chambers commencing at 8 :00 p.m. , local time, on the same date . Bids shall be invited for the purchase of the Bonds with - fixed maturities in accordance with the schedule specified in 1 Section 4 hereof . 1 The notice shall specify the maximum effective rate of interest the Bonds shall bear, namely, 12% per annum, and shall I require bidders to submit a bid specifying: (a) The lowest rate or rates of interest and discount below par at which the bidder will purchase the Bonds; or (b) The lowest rate or rates of interest at which the bidder will purchase the Bonds at par . No bid offeringlto purchase the Bonds at a discount of more than 2% plus accrued ' interest or offering to purchase less than the entire issue will be considered. The purchaser must pay I accrued interest to date of delivery of the bonds . • Coupon rates shall be in multiples of 1/8 or 1/20 of 1%, or both. No more than one rate of interest may be fixed for any one maturity. Only one coupon will be attached to each of the Bonds for each installment of interest thereon, and bids provid- ing for additional or supplemental coupons will be rejected. The maximum differential between the lowest and highest coupon rates named in any bid shall not exceed 2% . For the purpose of comparing the bids only, the coupon rates bid being controlling, each bid shall state the total interest cost over the life of the Bonds and the net effective - 25 - interest rate of the bid, taking into account the discount, if any, bid . The Bonds shall be sold to the bidder making the best bid, subject to the right of the City Council to reject any and all bids and to readvertise the Bonds for sale in the manner pro- vided by law, and no bid for less than all of the Bonds shall be considered . The City further reserves the right to waive any irregularity in any bid or in the bidding process . All bids shall be sealed and, except the bid of the State of Washington, if one is received, shall be accompanied by a deposit of $30,000. The deposit shall be either by certified or cashier ' s check made payable to the City Director of Finance and shall be returned promptlyif the bid is not accepted. The P City reserves the right to invest the good faith deposit of the pur- chaser pending the payment for the Bonds . The purchaser shall not be credited for such earnings . If the Bonds are ready for delivery and the successful bidder shall fail or neglect to complete the purchase of the Bonds within forty days following the acceptance of its bid, the amount of its deposit shall be forfeited to the City and in that event the City may accept the bid of the one making the next best bid . If there be two or more equal bids and such bids are the best bids received, the City Council shall determine by lot which bid shall be accepted . The Bonds will be delivered to the successful bidder upon pay- ment of the purchase price plus accrued interest to the date of delivery, less the amount of the good faith deposit, at the - 26 - office of the City Clerk or in Seattle, Washington, at the City' s expense, or at such other place upon which the City Clerk and the successful bidder may mutually agree at the purchaser ' s expense. Settlement shall be made in federal funds immediately 1 available at the time of delivery of the Bonds . A no-litigation certificate in the usual form will be included in the closing papers . CUSIP numbers will be printed on the Bonds, if requested in the bid of the successful bidder, but neither failure to print n such numbers on any bond nor error with respect thereto shall constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for the Bonds in accord- ance with the terms of the purchase contract . All expenses in relation to the printing of CUSIP numbers on the Bonds shall be paid by the City, but the fee of the CUSIP Service Bureau for the assignment of those numbers shall be the responsibility of and shall be paid by ,the purchaser . Any bid presented after the time specified for the receipt of bids will not be received, and any bid not accompanied by the Imo, required bid deposit at the time of opening will not be read or I considered. If, prior to the delivery of the Bonds, the interest receivable by the holders thereof shall become taxable, directly or indirectly, by the terms of any federal income tax law, the successful bidder may at its option be relieved of its - 27 - I obligation to purchase the Bonds, and in such case the deposit accompanying its bid will be returned, without interest . The notice of bond sale shall provide that the City will cause the Bonds to be printed or lithographed and signed and will furnish the approving legal opinion of Messrs . Roberts & Shefelman, bond counsel of Seattle, Washington, covering the Bonds without cost to the purchaser, the opinion also being printed on each bond . Bond counsel shall not be required to review or express any opinion concerning the completeness or accuracy of any official statement, offering circular or other sales material issued or used in connection with the Bonds, and bond counsel ' s opinion shall so state. Such notice also shall provide that further information regarding the details of the Bonds may be received upon request made to the City Clerk or to Seattle-Northwest Securities Corporation, 3700 Seafirst Fifth Avenue Plaza, Seattle, Washington, the City' s financial consultant . Section 14 . There is created in the office of the City Treasurer a special fund of the City to be known and designated as the "Water and Sewer Construction Fund, 1983 . " The principal proceeds received from the issuance and sale of the Bonds shall be deposited in the "Water and Sewer Construction Fund, 1983 , " and shall be used to pay the costs of carrying out the system or plan of additions to and betterments and extensions of the Waterworks Utility of the City specified, adopted and ordered to be carried out herein and the expenses incurred in the issuance - 28 - I of the Bonds . Pending the expenditure of such principal pro- ceeds out of the Water and Sewer Construction Fund, 1983 , the money in such fund may be invested in any legal investment and the investment income may be retained in such fund and used for the purposes of such fund. The accrued interest received, if any, shall be deposited in the Bond Fund. PASSED BY THE CITY COUNCIL. this 11th day of April. 1983 . XINE MOTOR, City Clerk APPROVED BY THE MAYOR, this 11th day of April, 1983 . a+ • Skuvock. BARBARA Y. SHTNPO'CF, Mayor Approved as to Form: • G`-��►v City Attorney Date of Publication: i April 15, 1983 0230r - 29 - i Amends ORD. #: 3896, 3970, 4068, 4157, 4211, 4232, 4294, 4354 CITY OF RENTON, WASHINGTON ORDINANCE NO. 4410 AN ORDINANCE ;relating to the waterworks utility of the City, including the sewerage system as a part thereof; specifying and adopting a system or plan of additions to and betterments and extensions of the waterworks utility; providing for the issuance of $14,145, 000 par value Water and Sewer Refunding and Improvement. Revenue Bonds, 1993,. of the City for the purpose of obtaining a part of the funds with which to pay part of the cost of carrying out that system or plan and advance refund all or a part of the City's outstanding Water; and Sewer Revenue Bonds, 1988, Water and Sewer Revenue Bonds, 1989, Water and Sewer Revenue Refunding Bonds., 1989, and Water and Sewer Revenue Bonds, 1990; fixing the date, form, denominations, maturities, interest rates, terms and covenants of those bonds; creating a special bond redemption account to provide for the payment of the bonds; providing for and authorizing the purchase of certain obligations out of a portion of the proceeds of the sale of the bonds authorized herein and for the use and application of the money derived from those obligations.; authorizing the execution of a contract with Key Bank of Washington . of Tacoma, Washington, as refunding trustee; and approving the sale and providing for the delivery of the bonds to Seattle-Northwest Securities Corporation of Seattle, Washington. WHEREAS, by Ordinance No. 1156, as amended by Ordinances Nos. 1157 and 1173., the sewerage system of the City of Renton (the "City") has become and is considered a part of the waterworks utility of the City (defined below as the "Waterworks Utility") ; and WHEREAS, by Ordinance No. 2020 the system of storm or surface it water sewers was determined to consist as a part of the sewerage system and, together with the sewerage system, combined with the � I Waterworks Utility; and 0089189.01 -1- �, I ORDINANCE NO. 4410 Page No. SECTION XIX. Bond Registrar 34 SECTION XX. Bonds Negotiable 35 SECTION XXI. Refunding or Defeasance of Bonds 35 SECTION XXII. Provision for Future Parity Bonds 37 SECTION XXIII. Deposit of Bond Proceeds 37 SECTION XXIV. Approval of Bond Purchase Contract 38 SECTION XXV. Preliminary Official Statement Deemed "Final" 39 SECTION XXVI. Temporary Bond 39 SECTION XXVII. Effective Date of Ordinance 40 Signatures 40 0089189.01 -ii- ORDINANCE NO. 4410 ji WHEREAS, by Ordinance No. 1450, the City provided for the issuance of its Water 'and Sewer Refunding and Improvement Revenue Bonds, 1953 (the "1953 Bonds") , and, by Section 15 of that ordinance, established certain conditions for the issuance of additional water and sewer revenue bonds on a parity of lien with jl the 1953 Bonds; and WHEREAS, all of the water and sewer revenue bonds of the City issued on a parity of lien with the 1953 Bonds pursuant to the original provisions of Section 15 of Ordinance No. 1450 have been paid and redeemed, or irrevocable provision for their payment and redemption has been made; and WHEREAS, by Ordinance No. 3169, the City authorized the issuance of its Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 2 (the "1977 Bonds, Issue No. 2") , and by Section 13 of that ordinance incorporated and amended Section 15 of Ordinance No. 1450, all of which bonds have been paid and redeemed; and WHEREAS, byOrdinance No. 3188, the Cityauthorized the issuance of its Water and Sewer Revenue Refunding Bonds, Issue No. 3 (the "1977 Bonds, Issue No. 3") , and by Section 13 of that 1 ordinance incorporated Section 15 of Ordinance No. 1450, as modified by Section 13 of Ordinance No. 3169; and WHEREAS, by Ordinance No. 3720, the City authorized the issuance of its Water and Sewer Revenue Bonds, 1983 (the "1983 Bonds") , all of which 1983 Bonds have been paid and redeemed, and w_I by Section 12 of that ordinance further modified and strengthened 0089189.01 -2- ' ORDINANCE NO. 4410 the provisions of Section 15 of Ordinance No. 1450, as modified by H Section 13 of Ordinance No. 3169; and WHEREAS, the City presently has outstanding, in addition to the 1977 Bonds, Issue No. 3, its Water and Sewer Revenue Bonds, 1985 (the "1985 Bonds") , issued pursuant to Ordinance No. 3896, Water and Sewer Revenue Bonds, 1986 (the "1986 Bonds") , issued pursuant to Ordinance No. 3970, Water and Sewer Revenue Bonds, 1987 (the "1987 Bonds") , issued pursuant to Ordinance No. 4068, Water and Sewer Revenue Bonds, 1988 (the "1988 Bonds") , issued pursuant to Ordinance No. 4157, Water and Sewer Revenue Bonds, 1989 (the "1989 Bonds") , issued pursuant to Ordinance No. 4211, Water and Sewer Revenue Refunding Bonds, 1989 (the "1989 Refunding Bonds") issued pursuant to Ordinance No. 4232, Water and Sewer Revenue Bonds, 1990 (the "1990 Bonds") , issued pursuant to Ordinance No. 4294, and Water and Sewer Refunding and Improvement Bonds, 1992 (the "1992 Refunding Bonds") issued pursuant to Ordinance No. 4354, all of which bonds were issued on a parity of lien with the 1977 Bonds, Issue No. 3; and WHEREAS, the parity provisions of Section 13 of Ordinance No. 3188, which incorporated therein Section 15 of Ordinance. No. 1450, as modified by Section 13 of Ordinance No. 3169, and as further modified and strengthened by Section 12 of Ordinance No. 3720, provide that the City may issue additional water and sewer revenue bonds which will constitute a charge and lien upon the revenue of the Waterworks Utility of the City on a parity with the 1977 Bonds, Issue No. 3 , the 1985 Bonds, the 1986 Bonds, the 1987 Bonds, the 0089189.01 -3- I i ORDINANCE NO. 4410 1988 Bonds, the 1989 ,Bonds, the 1989 Refunding Bonds, the 1990 Bonds, the 1992 Refunding Bonds and any bonds issued thereafter and having a charge and lien upon the revenue of the Waterworks Utility on a parity with those bonds on compliance at the time of the issuance of such additional bonds with the following conditions: " (a) All payments required by any ordinance to be paid into any bond redemption funds and accounts thereof created to secure the payment of bonds issued on a parity of lien herewith shall have been made into the respective bond redemption funds and accounts thereof for the payment of such bonds and no deficiency exists therein; and " (b) The revenues of said waterworks system, including the sewerage sysem, shall be and be deemed sufficient, after the payment of operation and maintenance costs and taxes, based upon the historical experience of said systems or the pro forma revenues under then existing rates over a period of any twenty-four consecutive months out of the thirty-six months immediately preceding the time of the issuance of such additional bonds, to equal at least 1.3 times the average annual principal and interest requirements of the bonds of this issue then outstanding and !of the revenue bonds proposed to be so issued. Such determination of the sufficiency of the revenues shall be made and certified to by an engineer experienced in municipal utilities; and " (c) The ordinance authorizing ( ) the issuance of such additional revenue bonds shall provide for the setting aside into a reserve fund or account of an amount not less than the average annual debt service requirement, both principal and interest of the additional revenue bonds proposed to be so issued, which reserve fund or account shall be maintained in such amount so long as any H of said bonds are outstanding to the last maturity I,_ ! thereof"; and WHEREAS, by Ordinance No. 4157 the City reserved the right to redeem the 1988 Bonds maturing on or after June 1, 1999, at par plus accrued interest on June 1, 1998, and on any interest payment 0089189.01 -4- ORDINANCE NO. 4410 date thereafter, and there are presently outstanding $2,320, 000 principal amount of 1988 Bonds maturing on June 1 of the years 1999 through 2003 , inclusive, and 2008 (the "1988 Refunded Bonds") , bearing various interest rates from 7. 15% to 7.85%; and WHEREAS, by Ordinance No. 4211 the City reserved the right to redeem the 1989 Bonds maturing on or after May 1, 2000, at par plus accrued interest on May 1, 1999, and on any interest payment date thereafter, and there are presently outstanding $1, 165, 000 principal amount of 1989 Bonds maturing on May 1 of the years 2000 through 2009, inclusive (the "1989 Refunded Bonds") , bearing interest at various rates from 7.25% to 7 .50%; and WHEREAS, by Ordinance No. 4232 the City reserved the right to redeem the 1989 Refunding Bonds maturing on or after April 1, 1999, at par plus accrued interest on or after April 1, 1998, as a whole at any time and in part on any interest payment date, and there are presently outstanding $1,440, 000 principal amount of those bonds maturing on April 1 of the years 1999 through 2005, inclusive (the "Refunded 1989 Refunding Bonds") , bearing interest at various rates from 6.8% to 7. 1%; and WHEREAS, by Ordinance No. 4294 City reserved the right to redeem the 1990 Bonds maturing on or after October 1, 2001, at par plus accrued interest on or after October 1, 2000, as a whole at any time and in part on any interest payment date, and there are presently outstanding $2,715, 000 principal amount of those bonds maturing on October 1 of the years 2001 through 2010, inclusive 0089189.01 -5- ORDINANCE NO. 4410 (the "1990 Refunded Bonds") , bearing interest at various rates from 7.0% to 7.375%; and WHEREAS, the City Council has determined that the 1988 Refunded Bonds, the 1989 Refunded Bonds, the Refunded 1989 Refunding Bonds and the 1990 Refunded Bonds (collectively, the ' "Refunded Bonds") may be refunded by the issuance and sale of the water and sewer revenue bonds authorized herein (the "Bonds") so that a substantial savings will be effected by the difference between the principal and interest cost over the life of the portion of the Bonds allocated to the refunding and the principal and interest cost over, the life of the Refunded Bonds but for such - i refunding, which refunding will be effected by II (a) The issuance of the Bonds and the payment of the costs of issuance of the Bonds and the costs of the refunding; (b) The payment of the interest on the 1988 Refunded Bonds whenidue up to and including June 1, 1998, and, on June 1, 1998, the call, payment and redemption of all of the outstanding 1988 Refunded Bonds at par; - j (c) The payment of the interest on the 1989 Refunded Bonds when due up to and including May 1, 1999, and, on May 1, 1999, the call, payment and j redemption of all of the outstanding 1989 Refunded Bonds at par; (d) The payment of the interest on the Refunded 1989 Refunding Bonds when due up to and including April 1, 1998, and, on April 1, 1998, the call, payment and redemption of all of the outstanding Refunded 1989 Refunding Bonds at par; and (e) The payment of the interest on the 1990 Refunded Bonds when due up to and including October 1, 2000, and, on October 1, 2000, the call, payment and redemption of all of the outstanding 1990 Refunded Bonds at par; 0089189.01 -6- ORDINANCE NO. 4410 and WHEREAS, in order to effect the refunding in the manner that will be most advantageous to the City and its ratepayers, the City Council finds it necessary and advisable that certain Acquired Obligations (hereinafter defined) bearing interest and maturing at the time or times necessary to accomplish the refunding as aforesaid be purchased out of a portion of the proceeds of the sale of the Bonds; and WHEREAS, on June 11, 1984, the City Council passed and the Mayor approved Resolutions Nos. 2546 and 2547 adopting the 1983 Comprehensive Sanitary Sewer Plan and 1983 Comprehensive Water System Plan, respectively, for the City, and for the purpose of financing facilities in those plans it is necessary to specify and adopt them by ordinance; and WHEREAS, the City Council has determined that it is necessary and in the best interests of the City that certain additional improvements described in the 1983 Comprehensive Water System Plan and the 1983 Comprehensive Sanitary Sewer Plan be made and there be adopted a system or plan of additions to and betterments and extensions of the Waterworks Utility; and WHEREAS, the City Council has determined that it is necessary to issue and sell $14,145, 000 par value of Bonds to provide a part of the funds necessary to carry out the system or planproviding for additions to and betterments and extensions of the Waterworks Utility, to advance refund the Refunded Bonds and to pay the costs of issuance and sale of the Bonds; and 0089189.01 -7- ORDINANCE NO. 4410 WHEREAS, Seattle-Northwest Securities Corporation of Seattle, Washington, has offered to purchase the Bonds under the terms and conditions hereinafter set forth; NOW, THEREFORE, THE CITY COUNCIL 'OF THE CITY OF RENTON, WASHINGTON, DO ORDAIN as follows: SECTION I. Definitions. As used in this ordinance, the following words shalllhave the following meanings: li "Acquired Obligations" shall mean those United States Treasury Certificates of Indebtedness, Notes and Bonds--State and Local Government Series and other direct, noncallable obligations of the , United States of America purchased to accomplish the refunding of the Refunded Bonds asl authorized by this ordinance. "Annual Debt Service" for the Bonds shall mean all the interest plus all principal which will mature or come due in any year. "Average Annual Debt Service" shall mean the sum of the Annual Debt Service for the remaining years to the last scheduled maturity iI of the applicable bond issue or issues divided by the number of those years. "Bond Fund" shall mean that special fund of the City known as i the 1993 Water and Sewer Revenue Bond Redemption Account created by this ordinance as a separate account in the Water and Sewer Revenue Parity Bond Fund for the payment of the principal of and interest on the Bonds. 0089189.01 -8- ORDINANCE NO. 4410 "Bond Registrar" shall mean the fiscal agencies of the State of Washington in Seattle, Washington, and New York, New York, as the same shall be designated from time to time. "Bonds" shall mean the $14, 145, 000 par value City of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1993, authorized to be issued by this ordinance. "1977 Bonds, Issue No. 3" shall mean the outstanding Water and Sewer Revenue Refunding Bonds, Issue No. 3. "1985 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1985, maturing up to and including April 1, 1995. "1986 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1986, maturing up to and including February 1, 1996. "1987 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1987, maturing up to and including June 1, 1997. "1988 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 19.88, maturing up to and including June 1, 1998. "1989 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1989, maturing up to and including May 1, 1999. "1989 Refunding Bonds" shall mean the outstanding Water and Sewer Revenue Refunding Bonds,, 1989, maturing up to and including April 1, 1998. "1990 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1990, maturing up to and including October 1, 2000. "1992 Refunding Bonds" shall mean the outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1992 . 0089189.01 -9- I ' ORDINANCE NO. 4410 "City" shall mean the City of Renton, Washington, a duly organized and legally existing noncharter code city under the laws of the State of Washington. "Code" shall mean the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. "Future Parity Bonds" shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on the Revenue of the Waterworks Utility on a parity with the lien and charge on such Revenue for the payment of the principal of and interest on the Outstanding Parity Bonds and the Bonds. "Maintenance and; Operation Expense" shall mean all expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair, working order and condition, which shall not include any depreciation expenses or taxes or charges in lieu of taxes levied or imposed by the City. "Outstanding Parity Bonds" shall mean the 1977 Bonds, Issue No. 3, the 1985 Bonds, the 1986 Bonds, the 1987 Bonds, the 1988 Bonds, the 1989 Bonds, the 1989 Refunding Bonds, the 1990 Bonds and the 1992 Bonds. "Principal and Interest Account" shall mean the subaccount of that name created in the Bond Fund by this ordinance for the payment of the principal of and interest on the Bonds. F , I 0089189.01 -10- ORDINANCE NO. 4410 "Refunded Bonds" shall mean, collectively, the 1988 Refunded Bonds, the 1989 Refunded Bonds, the Refunded 1989 Refunding Bonds and the 1990 Refunded Bonds. "1988 Refunded Bonds" shall mean the Water and Sewer Revenue Bonds, 1988, maturing in the years 1999 through 2003, inclusive, and in the year 2008, irrevocable provision for the payment and redemption of which is made herein. "1989 Refunded Bonds" shall mean the Water and Sewer Revenue Bonds, 1989, maturing in the years 2000 through 2009, inclusive, irrevocable provision for the payment and redemption of which is made herein. "Refunded 1989 Refunding Bonds" shall mean the Water and Sewer Revenue Refunding Bonds, 1989, maturing in the years 1999 through 2005, inclusive, irrevocable provision for the payment and redemption of which is made herein. "1990 Refunded Bonds" shall mean the Water and Sewer Revenue Bonds, 1990, maturing in the years 2001 through 2010, inclusive, irrevocable provision for the payment and redemption of which is ' I made herein. "Refunding Plan" shall mean: (a) the placement of sufficient proceeds of the Bonds which, with other money of the City if necessary, will acquire the Acquired Obligations to be deposited, with cash, if necessary, with the Refunding Trustee; (b) the payment of the interest on the 1988 Refunded Bonds when due up to and including June 1, 1998, and, on June 1, 1998, the call, payment and redemption of all of the outstanding 1988 Refunded Bonds at par; 0089189.01 -11- ORDINANCE NO. 4410 (c) the payment of the interest on the 1989 Refunded Bonds when due up to and including May 1, 1999, and, on May 1, 1999, the call, payment and redemption of all of the outstanding 1989 Refunded Bonds at par; (d) the payment! of the interest on the Refunded 1989 Refunding Bonds when due up to and including April 1, 1998, and, on April 1, 1998, the call, payment andl redemption of all of the outstanding Refunded 1989 Refunding Bonds at par; (e) the payment' of the interest on the 1990 Refunded Bonds when due up to and including October 1, 2000, and, on October 1, 2000, the call, payment and redemption of all of the outstanding 1990 Refunded Bonds at par. and P � � (f) the payment; of the costsof issuance of the Bonds and the costs of carrying out the foregoing elements of! the Refunding Plan. "Refunding Trust Agreement" shall mean a Refunding Trust ji Agreement or Refunding Escrow Agreement between the City and the Refunding Trustee substantially in the form of that which is on file with the City Clerk and by this reference incorporated herein. "Refunding Trustee" shall mean Key Bank of Washington of Tacoma, Washington, serving as trustee or escrow agent or any successor trustee or escrow agent. "Reserve Account" shall mean the subaccount of that name created in the Bond Fund by this ordinance for the purpose of securing the payment 'of therinci al of and interest on the Bonds. P P "Revenue of the Waterworks Utility" shall mean all the earnings and revenue received by the Waterworks Utility from any source whatsoever, including payments received under contract with other municipal corporations for water service, except general taxes, charges in lieu of taxes, assessments in any utility local 0089189.01 !-- -12- � I ORDINANCE NO. 4410 improvement district hereafter created, proceeds from the sale of City property, bond proceeds and earnings subject to a federal tax or rebate requirement. "Term Bonds" shall mean Bonds scheduled to mature in 2013 and any Outstanding Parity Bonds and/or Future Parity Bonds identified as such in the ordinance authorizing the issuance thereof, the payment of which is provided for by a requirement for mandatory deposits of money into the principal and interest account of the bond redemption fund created for the payment of such issue of bonds in accordance with a mandatory sinking fund requirement. "Water and Sewer Revenue Parity Bond Fund" shall mean the fund of that name created by Ordinance No. 3896. "Waterworks Utility Fund" shall mean that special fund of the City into which all of the Revenue of the Waterworks Utility (except for earnings in any special fund for the redemption of revenue obligations of the Waterworks Utility) shall be deposited. "Waterworks Utility" shall mean the combined water and sewerage systems, including the storm and surface water sewers, of the City as the same may be added to, improved and extended for as long as any of the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds are outstanding. SECTION II. Adoption of Plan of Additions and Betterments. The City specifies, adopts and orders the carrying out of a system or plan of additions to and betterments and extensions of the Waterworks Utility consisting of the improvements, acquisitions and 0089189.01 -13- ORDINANCE NO. 4410 ' work described in Exhibit A attached hereto and by this reference made a part hereof. 1 There shall be included in the foregoing system or plan the acquisition and installation of all necessary valves, pumps, fittings, couplings, connections, equipment and appurtenances, the acquisition of any easements, rights-of-way and land that may be required and the performance of such work as may be incidental thereto and necessary. All of the foregoing shall be in accordance with the plans and II specifications therefor prepared by the City's engineers and consulting engineers. The City Council may modify the details of the foregoing system or plan where, in its judgment, it appears advisable if such modifications do not substantially alter the purposes of that system or plan. The life of thelimprovements comprising the foregoing system or plan of additions to and betterments and extensions of the it Waterworks Utility is declared to be at least 20 years. The estimated cost of the acquisition, construction, installation and financing of the above-described improvements is declared to be approximately $9,946, 000. That cost shall be paid from the proceeds of the Bonds authorized in this ordinance, proceeds of grants and loans anticipated to be received by the City and other money of or received. by the City which is made available therefor. SECTION III. Findings Regarding Parity Provisions. The City I ,f Council finds that all payments required by Ordinances Nos. 3188, 0089189.01 -14- � I s ` r i ORDINANCE NO. 4410 3896, 3970, 4068, 4157, 4211, 4232, 4294 and 4354 for the Outstanding Parity Bonds have been made into the respective bond redemption funds and accounts therein for the Outstanding Parity Bonds, that provision hereinafter is made for the accumulation of the amounts required in the Reserve Account of the Bond Fund, and that there will be on file prior to the issuance and delivery of the Bonds a certificate of an engineer experienced in municipal utilities, that the Revenue of the Waterworks Utility is sufficient to meet the 1.3 coverage requirement of those ordinances. SECTION IV. Authorization and Description of Bonds. For the purpose of providing a part of the money required to carry out the system or plan of additions to and betterments and extensions of the Waterworks Utility as herein specified, adopted and ordered to be carried out and to carry out the Refunding Plan, including the payment of the costs of issuance and sale of the Bonds, the City shall issue the Bonds in the aggregate principal amount of H , $14,145, 000. The Bonds shall be designated City of Renton Water and Sewer Refunding and Improvement Revenue Bonds, 1993; shall be dated August 1, 1993; shall be in the denomination of $5,000 or any integral multiple thereof within a single maturity; shall be numbered separately, in the manner and with any additional H designation as the Bond Registrar deems necessary for the purpose of identification; shall bear interest (computed on the basis of a 360-day year of twelve 30-day months) , payable on October 1, 1993, and semiannually thereafter on each succeeding April 1 and October 1 to the maturity or earlier redemption of the Bonds; and 0089189.01 -15- y-- ORDINANCE NO. 4410 shall mature on October 1, 1993 , and on April { 1 in the years and amounts and bear interest at the rates per annum as follows: Maturity i Interest Dates Amounts Rates October 1, 1993 $ 180, 000 3 . 000% April 1, 1994 255, 000 3. 000 April 1, 1995 265, 000 3 .500 April 1, 1996 280,000 3.900 April 1, 1997 285, 000 4.000 April 1, 1998 300, 000 4.200 April 1, 1999 690, 000 4.400 April 1, 2900 735, 000 4.600 April 1, 2001 970, 000 4.700 April 1, 2002 1,005, 000 4.800 April 1, 2003 1,070,000 4.900 April 1, 2004 1, 125, 000 5. 000 April 1, 2005 1, 175, 000 5. 100 April 1, 2006 985, 000 5.200 April 1, 2007 1, 040, 000 5.300 April 1, 2008 . 1,100,000 5.400 ** ** ** April 1, 2013 2,685,000 5.375 The above maturity amounts are allocated to paying the costs of the system or plan of additions to and betterments and extensions of the Waterworks Utility and the carrying out of the Refunding Plan related to the Refunded Bonds in accordance with the applicable schedule ; attached to the Bond Purchase Contract incorporated pursuant to Section XXIII. SECTION V. Registration and Transfer of Bonds. The Bonds shall be issued only in registered form as to both principal and interest and recorded on books or records maintained by the Bond Registrar (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. 0089189.01 -16- ORDINANCE NO. 4410 Bonds surrendered to the Bond Registrar may be exchanged for Bonds in any authorized denomination of an equal aggregate principal amount and of the same interest rate and maturity. Bonds may be transferred only if endorsed in the manner provided thereon and surrendered to the Bond Registrar. Any exchange or transfer shall be without cost to the owner or transferee. The Bond Registrar shall not be obligated to exchange or transfer any Bond during the 15 days preceding any principal payment or redemption date. SECTION VI. Payment of Bonds. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. Interest on the Bonds shall be paid by checks or drafts mailed by the Bond Registrar on the interest payment date to the registered owners at the addresses appearing on the Bond Register on the 15th day of the month preceding the interest payment date. Principal of the Bonds shall be payable upon presentation and surrender of the Bonds by the registered owners at either of the principal offices of the Bond Registrar at the option of the owners. The Bonds shall be payable solely out of the Bond Fund and shall be a valid claim of the owners thereof only as against the Bond Fund and the amount of the Revenue of the Waterworks Utility pledged to that fund and shall not be general obligations of the City. SECTION VII. Optional Redemption, Mandatory Redemption and Open Market Purchase of Bonds. Bonds maturing in the years 1993 through 2003 , inclusive, shall be issued without the right or 0089189.01 -17- ORDINANCE NO. 4410 option of the City to redeem those Bonds prior to their stated maturity dates. The City reserves the right and option to redeem Bonds maturing on or after April 1, 2004, prior to their stated maturity dates from funds from any source on or after April 1, 2003, as a whole at any time or in part on any interest payment date within one or more maturities selected by the City (and by lot within a maturity in such manner as the Bond Registrar shall determine) at the prices, expressed as a percentage of par, set forth in the following schedule, plus accrued interest to the date fixed for redemption:: Redemption Date Redemption Price April 1, 2003, through March 31, 2004 101% April 1, 2004, and thereafter 100% Bonds maturing in 2013 are Term Bonds and, if not redeemed under the optional !redemption provisions set forth above or purchased in the open market as set forth below, shall be called for redemption by lot (in such manner as the. Bond Registrar shall 1 determine) at par plus accrued interest on April 1 in the years and amounts as follows: Mandatory Mandatory Redemption Redemption Years Amounts 2009 $815, 000 2010 695,000 2011 370, 000 2012 390, 000 2013 (maturity) 415, 000 If the City redeems Term Bonds under the optional redemption provisions or purchases Term Bonds in the open market, the Term 0089189.01 -18- ORDINANCE NO. 4410 Bonds so redeemed or purchased (irrespective of their redemption or purchase price) shall be credited at the par amount thereof against such mandatory redemption year and amount as the City shall elect. 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 that Bond at either of the principal offices of the Bond Registrar, there shall be issued to the registered owner, without charge therefor, a new Bond (or Bonds, at the option of the registered owner) of the same maturity and interest rate in any of the denominations authorized by this ordinance in the aggregate total principal amount remaining unredeemed. The City further reserves the right and option to purchase any or all of the Bonds in the open market at any time at a price not in excess of par plus accrued interest to the date of purchase. All Bonds purchased or redeemed under this section shall be cancelled. SECTION VIII. Notice of Redemption. The City shall cause notice of any intended redemption of Bonds to be given not less than 30 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. Interest on 0089189.01 -19- ORDINANCE NO. 4410 Bonds called for redemption shall cease to accrue on the date fixed for redemption unless the Bond or Bonds called are not redeemed when presented pursuant to the call. in addition, the redemption notice shall be mailed within the same period, postage prepaid, to Moody's Investors Service, Inc. , and Standard & Poor's Corporation at their offices in New York, New York, or their successors, to Seattle-Northwest Securities Corporation, at its principal office in Seattle, Washington, or its successor, and to such other persons and with such additional information as the City Administrative II ' Services Administrator shall determine, but these additional - mailings shall not be' a condition precedent to the redemption of Bonds. 1 , il i SECTION IX. Failure to Redeem Bonds. If any Bond is not redeemed when properly presented at its maturity or call date, the City shall be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or call date until that Bond, both principal and interest, is paid in full or I 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 X. Creation of Account and Subaccounts; Deposits into Accounts. There is created the 1993 Water and Sewer Refunding and Improvement Revenue Bond Redemption Account (heretofore defined as the Bond Fund) , which shall be a separate bond redemption account ii within the Water and Sewer Revenue Parity Bond Fund. The Bond Fund is- divided into two subaccounts, the Principal and Interest Account 0089189.01 -20- ORDINANCE NO. 4410 and the Reserve Account. So long as Bonds are outstanding against the Bond Fund, the Finance Director of the City shall: (a) Set aside and pay into the Principal and Interest Account out of the Revenue of the Waterworks Utility a fixed amount, without regard to any fixed proportion, namely, monthly, on or before the first day of each month, amounts, together with the accrued interest received on the delivery of the Bonds to the initial purchaser thereof or other money on deposit therein, as follows: Beginning with the month of September 1993, the requirement for the principal of and interest on the Bonds due October 1, 1993; Beginning with the month of October 1993 and continuing thereafter until the Bonds, both principal and interest, are paid, 1/6 of the next ensuing six months' requirements for interest on the Bonds; and Beginning with the month of October 1993, and continuing thereafter through March 1994, 1/6 of the requirement for principal on the Bonds due April 1, 1994, and beginning with the month of April 1994 and continuing thereafter until the Bonds, both principal and interest, are paid, 1/12 of the amount of principal of the Bonds payable on the next ensuing principal payment date. (b) Set aside and pay into the Reserve Account out of the Revenue of the Waterworks Utility in substantially equal monthly payments such amounts so that by no later than August 1, 1998, there shall have been accumulated in the Reserve Account for the Bonds an amount not less than the Average Annual Debt Service for the Bonds. The Reserve Account in the Bond Fund may be accumulated from any other money which the City may have available for that purpose in addition to or in lieu of using revenue therefor. The City further agrees that when the required amounts have been paid into the Reserve Account in the Bond Fund, the City will maintain those amounts therein at all times, except for withdrawals 0089189.01 -21- ORDINANCE NO. 4410 therefrom as authorized herein, until there is sufficient money in the Bond Fund, including the Reserve Account therein, to pay the principal of and interest to maturity on all outstanding Bonds, at which time no further payments need be made into the Bond Fund, and the money in the Bondi Fund, including the Reserve Account, may be used to pay that principal and interest. If there shall be a deficiency in the Principal and Interest Account to meet maturing installments of either principal or interest, as the case ,imay be, on the Bonds, the deficiency shall be made up from the Reserve Account by the withdrawal of cash therefrom for that purpose. Any deficiency created in the Reserve Account by reason of anywithdrawal shall then be made up from the Revenue of the Waterworks Utility first available after making necessary provisionsifor the required payments into the Principal j and Interest Account. All money in the Reserve Account not needed to meet the payments of principal and interest when due may be kept on deposit in the official bank depository of the City or in any national bank or may be invested in any legal investment for City funds maturing not later than the interest or principal and interest payment date when the money will be needed. Interest on any of those investments or on that bank account shall be deposited in and become a part of the Reserve Account until the total required reserve amount shall have been accumulated therein, after which time the interest shall be deposited in the Principal and Interest Account. 1 ' 0089189.01 -22- , � I I ORDINANCE NO. 4410 Notwithstanding the provisions for the deposit or maintenance of earnings in accounts of the Bond Fund, any earnings which are ; I subject to a federal tax or rebate requirement may be withdrawn from the Bond Fund for deposit into a separate fund or account for that purpose. If the City shall fail to set aside and pay into the Bond Fund the amounts set forth above, the owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. SECTION XI. Flow of Funds. Funds in the Waterworks Utility Fund (other than in any bond redemption or federal rebate account) shall be used in the following order of priority: (a) To pay Maintenance and Operation Expense; (b) To pay the interest on the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds; (c) To pay the principal of the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds; (d) To make all payments required to be made into any sinking fund or bond redemption fund hereafter created for the payment of Future Parity Bonds which are Term Bonds; (e) To make all payments required to be made into the reserve accounts created to secure the payment of the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds; (f) To make all payments required to be made into any revenue bond redemption fund or warrant redemption fund and debt service account or reserve account created to pay and secure the payment of the principal of and interest on any revenue bonds or revenue warrants of the City having a lien upon the Revenue of the Waterworks Utility junior and inferior to the lien thereon for the payment of the principal 0089189.01 -23- ORDINANCE NO. 4410 of and interest on the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds; and (g) To retire by optional redemption or purchase in the open market any outstanding revenue bonds or revenue warrants of the City, to make necessary additions, betterments, improvements and repairs ito or extensions and replacements of the Waterworks Utility or for any other lawful City purpose.. SECTION XII. Pledge of Revenue and Lien Position. The Revenue of the Waterworks Utility is pledged to the payments set forth in Section X, and the Bonds shall constitute a lien and charge on that revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense, except that the lien and charge on such revenue for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds and any Future Parity Bonds. SECTION XIII. Findings Regarding Sufficiency of Revenue. In { ; the judgment of the City Council, the Revenue of the Waterworks Utility and benefits to be derived from the operation and maintenance of the Waterworks Utility, at the rates to be charged for water, sanitary sewage disposal service and storm and surface water drainage service in the entire utility, will be more than sufficient to meet all Maintenance and Operation Expense (and cost of maintenance and operation of the Waterworks Utility as that term is used in RCW 35.92. 100) and the debt service requirements of the Outstanding Parity Bonds and to permit the setting aside in the Bond Fund, out of the revenue of the entire utility, of amounts sufficient to pay the interest on the Bonds as that interest 00891 89.01 -24- ORDINANCE NO. 4410 becomes payable and to pay and redeem all of the Bonds at maturity. The City Council further declares that in creating the Bond Fund and in fixing the amounts to be paid into the same, as aforesaid, it has exercised due regard for the Maintenance and Operation Expense (and costs of maintenance and operation as used in RCW 35.92 . 100) and the debt service requirements of the presently outstanding Outstanding Parity Bonds, and the City has not bound and obligated itself to set aside and pay into the Bond Fund a greater amount or proportion of the revenue of that utility than in the judgment of the City Council will be available over and above Maintenance and Operation Expense (and such costs of maintenance and operation) and debt service requirements of the Outstanding Parity Bonds and that no portion of the Revenue of the Waterworks Utility has been previously pledged for any unrefunded indebtedness other than the payment of the presently outstanding Outstanding Parity Bonds. SECTION XIV. Covenants. The City covenants and agrees with the owner of each Bond at any time outstanding as follows: (a) It will establish, maintain and collect such rates and charges for water, sanitary sewage disposal service and storm and surface water drainage service so long as any Outstanding Parity Bonds and Bonds are outstanding as will make available for the payment of the principal of and interest on such bonds an amount equal to at least 1.3 times the average annual debt service requirements, both principal and interest, on the Outstanding Parity Bonds and the Bonds after deducting Maintenance and Operation Expense from the Revenue of the Waterworks Utility. (b) It will at all times maintain and keep the Waterworks Utility in good repair, working order and condition and also will at all times operate such Utility 0089189.01 -25- l v ORDINANCE NO. 4410 and the business in connection therewith in an efficient manner and at a reasonable cost. (c) It will not sell, lease, mortgage or in any 1- ' manner encumber or dispose of all the property of the Waterworks Utility unless provision is made for payment into each of the respective bond redemption funds or accounts for the! Outstanding Parity Bonds and the Bond Fund of sums sufficient to pay, respectively, the principal of and interest on all Outstanding Parity Bonds and the Bonds at any time outstanding, and that it will not sell, lease, ;mortgage, or in any manner encumber or dispose of any part of the property of the Waterworks Utility that is used, useful and material to the operation thereof, unless provision is made for replacement thereof, or for payment into the respective bond redemption 'funds or accounts for the Outstanding Parity Bonds and the Bond Fund of the total amount of revenue received which shall not be less than an amount which shall bear the same ratio to the amount of the Outstanding Parity Bonds and Bonds, respectively, as the revenue available for debt service for such outstanding bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the utility if sold, leased, encumbered or disposed of bears to the revenue available for debt service for such bonds from the entire utility for the same period. Any such money so paid into such funds shall be used to retire such outstanding bonds at the earliest possible date. f ' (d) It will while any of the Bonds remain outstanding keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to the Waterworks Utility, and it will furnish the original purchaser or purchasers of the Bonds or any subsequent owner or owners thereof at the written request of such owner or owners complete operating and income statements of such utility in reasonable detail issued in any calendar year not more than ninety days after the close of such calendar year, and it will grant any owner orowners of at least twenty-five percent of the outstanding Bonds the right at all reasonable times to inspect the entire Waterworks Utility and all records, accounts and data of the City relating thereto. Upon request of any owner of any of `- , the Bonds, it also will furnish to such owner a copy of the most recently completed audit of the City's accounts by the State Auditor of Washington. (e) It will not furnish water, sanitary sewage disposal service or storm and surface water drainage 0089189.01 -26- r ORDINANCE NO. 4410 service to any customer whatsoever free of charge and promptly will take legal action to enforce collection of all delinquent accounts. (f) It. will carry the types of insurance on the Waterworks Utility properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems, and the cost of such insurance shall be considered a part of operating and maintaining such utility. If, as, and when the United States of America or some agency thereof shall provide for war risk insurance, the City further agrees to take out and maintain such insurance on all or such portions of such utility on which such war risk insurance may be written in an amount or amounts to cover adequately the value thereof. (g) It will pay all Maintenance and Operation Expense and the debt service requirements for the Outstanding Parity Bonds and the outstanding Bonds, and otherwise meet the obligations of the City as herein set forth. (h) It will take all actions necessary to prevent interest on the 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 Bonds or other funds of the City treated as proceeds of ' , the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross income for federal income tax purposes. It will, to the extent arbitrage rebate requirements of Section 148 of the Code are applicable to the Bonds, take all action necessary to comply '(or to be treated as having complied) with those requirements in connection with the Bonds, including the calculation and payment of any penalties that the City has elected to pay as an alternative to calculating rebatable arbitrage, and the payment of any other penalties if required under Section 148 of the Code to prevent interest on the Bonds from being 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 arbitrage certifications may not be relied upon. 0089189.01 -27- ORDINANCE NO. 4410 SECTION XV. Refunding of the Refunded Bonds. (a) Appointment of Refunding Trustee. Key Bank of ' Washington, of Tacoma, 'Washington, is appointed Refunding Trustee. (b) Acquisition and Substitution of Acquired Obligations. A sufficient amount of, the proceeds of the sale of the Bonds shall be deposited immediately upon the receipt thereof with the Refunding Trustee to discharge the obligationof the City to carry out the Refunding Plan by providing for the payment of the amounts required to be paid by the Refunding Plan. To the extent practicable, such obligations shall be discharged fully by the Refunding Trustee's simultaneous purchase of Acquired Obligations bearing such interest rates and maturing as to principal and interest in such amounts and at such times so as to provide, together with a beginning cash balance, if necessary, for the payment of the amounts required to be paid by the Refunding Plan. i ", The Acquired Obligations are listed and more particularly described I ' in Schedule A attached to the Refunding Trust Agreement, but are subject to substitution as set forth below. (c) Substitution of Acquired Obligations. Prior to the purchase of any such Acquired Obligations, the City reserves the right to substitute other direct, noncallable obligations of the , I United States of America ("Government Obligations") for any of the Acquired Obligations and to use any savings created thereby for any lawful City purpose if, (a) in the opinion of Foster Pepper & Shefelman, the City's bond counsel, the interest on the Bonds will + remain excluded from gross income for federal income tax purposes 0089189.01 -28- ORDINANCE NO. 4410 under Sections 103, 148 and 149 (d) of the Code, and (b) such 1 substitution shall not impair the timely payment of the amounts required to be paid by the Refunding Plan, so verified by an independent nationally recognized firm of certified public accountants. After the purchase of the Acquired Obligations by the Refunding Trustee, the City reserves the right to substitute therefor cash or Government Obligations subject to the conditions that such money or securities held by the Refunding Trustee shall be sufficient to carry out the Refunding Plan, that such substitution will not cause the Bonds to be arbitrage bonds within the meaning of Section 148 of the Code and regulations thereunder in effect on the date of such substitution and applicable to obligations issued on the issue date of the Bonds, and that the City obtain, at its expense: (1) verification by an independent nationally recognized firm of certified public accountants acceptable to the Refunding Trustee confirming that the payments of principal of and interest on the substitute Acquired Obligations, if paid when due, and any other money held by the Refunding Trustee will be sufficient to carry out the Refunding Plan; and (2) an opinion from Foster Pepper & Shefelman, bond counsel to the City, its successor, or other nationally recognized bond counsel to the City, to the effect that the disposition and substitution or purchase of such securities, under the statutes, rules and regulations then in force and applicable to the Bonds, will not cause the interest on the Bonds or the Refunded Bonds to be 0089189.01 -29- ORDINANCE NO. 4410 included in gross income for federal income tax purposes and that such disposition and substitution or purchase is in compliance with the statutes and regulations applicable to the Bonds. Any surplus money resulting from the sale, transfer, other disposition or redemption of the Acquired Obligations and the substitutions therefor shall be released from the trust estate and transferred to the City to be used for any lawful Waterworks Utility purpose. (d) Administration of Refunding Plan. The Refunding Trustee is authorized and directed to purchase the Acquired Obligations (or substitute obligations) and to make the payments required to be made by the Refunding Plan from the Acquired Obligations (or substitute obligations) and money deposited with the Refunding Trustee pursuant to this ordinance. All Acquired Obligations (or substitute obligations.) and the money deposited with the Refunding Trustee and any income, therefrom shall be held irrevocably, invested and applied in accordance with the provisions of Ordinances Nos. 4157 and 4211, this ordinance, Chapter 39.53 RCW and other applicable statutes of the State of Washington, and the Refunding Trust Agreement. All necessary and proper fees, compensation and expenses of the Refunding Trustee for the Bonds and all other costs incidental to establishing the escrow to accomplish the refunding of the Refunded Bonds and costs related to the issuance and delivery of the Bonds, including bond printing, rating service fees, verification fees, bond counsel's fees and other related expenses, shall be paid out of the proceeds of the Bonds. 0089189.01 -30- J I I ORDINANCE NO. 4410 (e) Authorization for Refunding Trust Agreement. To carry � out the Refunding Plan provided for by this ordinance, the Mayor or City Administrative Services Administrator is authorized and directed to execute and deliver to the Refunding Trustee a Refunding Trust Agreement setting forth the duties, obligations and responsibilities of the Refunding Trustee in connection with the payment, redemption and retirement of the outstanding Refunded Bonds as provided herein and stating that the provisions for payment of the fees, compensation and expenses of the Refunding Trustee set forth therein are satisfactory to it. Prior to executing the Refunding Trust Agreement, the Mayor or City Administrative Services Administrator is authorized to make such changes therein which do not change the substance and purpose thereof or which assure that the escrow provided therein and the Bonds are in compliance with the requirements of federal law governing the exclusion of interest on the Bonds from gross income for federal income tax purposes. SECTION XVI. Calls for Redemption of the Refunded Bonds. The City calls for redemption on June 1, 1998, all of the 1988 Refunded Bonds at par plus accrued interest. The City calls for redemption on May 1, 1999, all of the outstanding 1989 Refunded Bonds at par plus accrued interest. The City calls for redemption on April 1, 1998, all of the Refunded 1989 Refunding Bonds at par plus accrued interest. The City calls for redemption on October 1, 2000, all of the 1990 Refunded Bonds at par plus accrued interest. 0089189.01 -31- ORDINANCE NO. 4410 Such calls for redemption shall be irrevocable after the delivery of the Bonds to the initial purchaser thereof. The dates on which the Refunded Bonds are called for redemption are the earliest dates, respectively, on which those Refunded Bonds may be called for redemption. The proper City officials are authorized and directed to cause the fiscal agencies to give such notices as required, at the times and in the manner required by Ordinances Nos. 4157, 4211, 4232 and 4294 in order to effect the redemption prior to their maturity of the'Refunded Bonds. SECTION XVII. City Findings with Respect to Refunding. The City Council finds and determines that the issuance and sale of the Bonds at this timewill effect a saving to the City and its ratepayers and is in the best interest of the City and in the public interest. In. making such finding and determination, the City Council has given consideration to the fixed maturities of the Bonds and the Refunded Bonds, the costs of issuance of the Bonds and the known earned income from the investment of the proceeds of the issuance and sale of the Bonds and other money of the City used in the Refunding Plan pending payment and redemption of the Refunded Bonds. The City Council further finds and determines that the money to be deposited with the Refunding Trustee for the Refunded Bonds in accordance with Section XV of this ordinance, together with known earned income from 'bhp , investments thereof, will be Sufficient to carry out the efunding Plan and discharge and 0089189.01 -32- ORDINANCE NO. 4410 satisfy the obligations of the City under Ordinances Nos. 4157 and 4211 with respect to the Refunded Bonds and the pledges, charges, trusts, covenants and agreements of the City therein made or provided for as to the Refunded Bonds and that the Refunded Bonds shall no longer be deemed to be outstanding under such ordinances immediately upon the deposit of such money with the Refunding Trustee. SECTION XVIII. Form and Execution of Bonds. The Bonds shall be printed or lithographed on good bond paper in a form consistent with the provisions of this ordinance and state law, 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 Registrar, shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance: CERTIFICATE OF AUTHENTICATION This bond is one of the fully registered City of Renton, Washington, Water and Sewer Refunding and Improvement Revenue Bonds, 1993, described in the Bond Ordinance. WASHINGTON STATE FISCAL AGENCY Bond Registrar By Authorized Signer 0089189.01 -33- ORDINANCE NO. 4410 The authorized signing of a Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered and are entitled to the benefits of this ordinance. If any officer whose facsimile signature appears on the Bonds - I 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 BondRegistrar or issued by the City, those Bonds nevertheless may be authenticated, delivered and issued and, when, authenticated, issued and delivered, shall be . as binding on I ; 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 II 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 XIX. Bond Registrar. The Bond Registrar shall keep, or cause to be kept, at its principal corporate trust office, sufficient books for the registration and transfer of the Bonds which shall be open to inspection by the City at all times. The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of the Bonds and this ordinance, to serve as the City's paying agent for the Bonds and to carry out all of the Bond Registrar's powers and duties under this ordinance and 0089189.01 -34- II ORDINANCE NO. 4410 City Ordinance No. 3755 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 XX. Bonds Negotiable. The Bonds shall be negotiable instruments to the extent provided by RCW 62A.8-102 and 62A.8-105. SECTION XXI. Refunding or Defeasance of Bonds. The City may issue advance 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, release, refund or defease all such then- outstanding Bonds (hereinafter collectively called the "defeased Bonds") and to pay the costs of such refunding or defeasance. In the event that money and/or direct obligations of the United States of America sufficient in amount, together with known earned income from the investment thereof, to redeem and retire, release, refund or defease the defeased Bonds in accordance with their terms are set aside irrevocably in a special fund for and pledged to such redemption, retirement or defeasance (hereinafter called the "trust 0089189.01 -35- ORDINANCE NO. 4410 account") , all right and interest of the owners of the defeased Bonds in the covenants of this ordinance, in the Revenue of the Waterworks Utility and in funds and accounts obligated to the payment of such defeased Bonds, other than the right. to receive the funds so set aside and pledged, shall cease and become void. Such ( owners shall have the right to receive payment of the principal of and interest on the defeased Bonds from the trust account and, in the event the funds in the trust account are not available for such payment, shall have the residual right to receive payment of the principal, of and interest on the defeased Bonds from the Revenue of the Waterworks Utility without any priority of lien or •charge against such revenue or covenants with respect thereto• except to be paid therefrom. After the establishing and full funding of the trust account, the City may then apply any money in. any other fund oraccount 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 owners of any other bonds then outstanding. In the event the refunding plan provides that the defeased Bonds or the refunding bonds to be issued be secured by cash and/or direct obligations of the United States of America or other legal ,I investments pending the prior redemption of the defeased Bonds and if such refunding plan also provides that certain cash and/or direct obligations of the United States of America or other legal Ir '! investments are pledged irrevocably for the prior redemption of the defeased Bonds included in that refunding plan, then only the debt 0089189.01 -36- ORDINANCE NO. 4410 service on the Bonds which are not defeased Bonds and the refunding bonds, the payment of which is not so secured by the refunding plan, shall be included in the computation of coverage for issuance of Future Parity Bonds and the annual computation of coverage for determining compliance with the rate covenants. SECTION XXII. Provision for Future Parity Bonds. The City reserves the right to issue Future Parity Bonds which will constitute a lien and charge on the Revenue of the Waterworks Utility on a parity with the Outstanding Parity Bonds and the Bonds if the conditions set forth in Section 13 of Ordinance No. 3188, as modified and strengthened by Section 12 of Ordinance No. 3720, are met and complied with at the time of the issuance of those Future Parity Bonds, which sections are by this reference incorporated herein and made apart hereof and shall continue to be applicable P PP even though the 1953 Bonds have been paid and retired. SECTION XXIII. Deposit of Bond Proceeds. There has been created in the office of the City Administrative Services Administrator a special fund of the City known and designated as the Water and Sewer Construction Fund, 1983 (the "Construction Fund") . The principal proceeds received from the issuance and sale of the Bonds remaining after the deposits required by Section XV, shall be deposited in the Construction Fund and shall be used to pay the costs of carrying out the system or plan of additions to and betterments and extensions of the Waterworks Utility specified, adopted and ordered to be carried out by this ordinance. Pending the expenditure of the principal proceeds out of the Construction 0089189.01 -37- • { ORDINANCE NO. 4410 Fund, the money in that fund may be invested in any legal investment and the investment income may be retained in that fund and used for the purposes 'of the fund. The accrued interest on the Bonds, if any, received at the time the Bonds are delivered to the initial purchaser shall be deposited in the Principal and Interest Account of the Bond Fund., SECTION XXIV. Approval of Bond Purchase Contract. Seattle- ' Northwest Securities Corporation of Seattle, Washington, has presented- a purchase contract dated July 19, 1993 (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 I the City's best interestland therefore accepts the offer contained therein and authorizes its execution by City officials. The Bonds will be printed at City expense and will be delivered to the purchaser in accordance with the Bond Purchase Contract, with the approving legal opinion of Foster Pepper & Shefelman, municipal bond counsel of Seattle, Washington, regarding the Bonds printed on each Bond. Bond counsel shall not be required to review and shall express no opinion concerning the completeness or accuracy of any official statement, offering circular or other sales material issued or used in connection with the Bonds, and 1 bond counsel's opinion shall so state. 0089189.01 -38- ORDINANCE NO. 4410 The proper City officials are authorized and directed to do 1 everything necessary for the prompt execution and delivery of the Bonds to the purchaser, including reviewing and executing the final official statement on behalf of the City, and for the proper application and use of the proceeds thereof. SECTION XXV. Preliminary Official Statement Deemed "Final". The City Council has been provided with copies of a preliminary official statement dated July 8, 1993 (the "Preliminary Official Statement") , prepared in connection with the sale of the Bonds. For the sole purpose of the purchaser's compliance with Securities and Exchange Commission 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 XXVI. Temporary Bond. Pending the printing, execution and delivery to the purchaser of definitive Bonds, the City may cause to be executed and delivered to the purchaser a single temporary Bond in the total principal amount of the Bonds. The temporary Bond shall bear the same date of issuance, interest rates, principal payment dates and terms and covenants as the definitive Bonds, shall be issued as a fully registered Bond in the name of the purchaser, and otherwise shall be in a form acceptable 1 ' to the purchaser. The temporary Bond shall be exchanged for 0089189.01 -39- { a i ORDINANCE NO. 4410 f-- definitive Bonds as soon as they are printed, authenticated and available for delivery. SECTION XXVII. Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval and five days after publication PASSED by the City Council this 19th day of July, 1993 . I l kt Marilyn yip ersen, City Clerk APPROVED BY THE MAYOR thi -**,. h day of July, 1993. Ea Clymer, ay9 App • ed as to Form: # t Date of Pu•lication: July 23, 1993 ; , 1 0089189.01 -40- { I I ORDINANCE NO. 4410 EXHIBIT A Maplewood Wells Construction Panther Creek P-9 Storm Extension Sewer Line and Interceptor Replacements . Water Line Replacements Water Quality and Resource Planning Various Projects listed on pages 48 and 49, City of Renton 1993 - Budget (under Table 10, Capital Improvement Plan) 0089189.01 I, MARILYN J. PETERSEN, City Clerk of the City of Renton, Washington, certify that the attached copy of Ordinance No. 4410 is a true and correct copy of the original ordinance passed on the 19th day of July, 1993, as such ordinance appears on the Minute Book of the City. DATED this 19 day of July, 1993 . i_ c id)"-- / MARILYN � .• ERSEN, City Clerk J � 1 ! 0089189.01 r � I CITY OF RENTON, WASHINGTON ORDINANCE NO. 4480 AN ORDINANCE 'relating to the waterworks utility of the City, including the sewerage system as a part thereof; specifying and adopting a system or plan of additions to andi betterments and extensions of the waterworks utility; providing for the issuance of 1 $3,570,000 par value Water and Sewer Revenue Bonds, 1994, of the City for the purpose of obtaining a part of the funds with which to pay part of the cost of carrying out it that system or plan; fixing the date, form, denominations, maturities, interest rates, terms and covenants of those bonds; creating a special bond redemption account to provide for the payment of the bonds; and approving the sale and providing for the delivery of the bonds to Piper Jaffray Inc. of Seattle, Washington. jj Prepared By: FOSTER PEPPER & SHEFELMAN 1111 Third Avenue Seattle, Washington 98101 0147650.02 TABLE OF CONTENTS Page No. Recitals i SECTION I. Definitions 5 SECTION II. Adoption of Plan of Additions and Betterments 9 SECTION III. Findings Regarding Parity Provisions 10 SECTION IV. Authorization and Description of Bonds . . . 10 SECTION V. Registration and Transfer of Bonds 11 SECTION VI. Payment of Bonds 12 SECTION VII. Optional Redemption, Mandatory Redemption and Open Market Purchase of Bonds 13 SECTION VIII. Notice of Redemption 14 SECTION IX. Failure to Redeem Bonds 15 SECTION X. Creation of Account and Subaccounts; Deposits into Accounts 15 SECTION XI. Flow of Funds 18 SECTION XII. Pledge of Revenue and Lien Position 19 SECTION XIII. Findings Regarding Sufficiency of Revenue . 19 SECTION XIV. Covenants 20 SECTION XV. Form and Execution of Bonds 22 li SECTION XVI. Bond Registrar 24 SECTION XVII. Designation of Bonds as "Qualified Tax-Exempt Obligations 24 SECTION XVIII. Bonds Negotiable 25 SECTION XIX. Refunding or Defeasance of Bonds 25 SECTION XX. Provision for Future Parity Bonds 27 SECTION XXI. Deposit of Bond Proceeds 27 -i- ORDINANCE NO. 4480 ' 1 Page No. SECTION XXII. Approval of Bond Purchase Contract 28 SECTION XXIII. Preliminary Official Statement Deemed "Final" 29 SECTION XXIV. Temporary Bond 29 SECTION XXV. Effective Date of Ordinance 30 Signatures 30 Exhibit A - Plan of Additions 0147650.02 -ii- CITY OF RENTON, WASHINGTON ORDINANCE NO. 4480 AN ORDINANCE relating to the waterworks utility of the City, including the sewerage system as .a part thereof; specifying and adopting a system or plan of additions to and betterments and -extensions of the waterworks utility; providing for the issuance of $3,570, 000 par value Water and Sewer Revenue Bonds, 1994, of the City for the purpose of obtaining a part of the funds with which to pay part of the cost of carrying out that system or plan; fixing the date, form, denominations, maturities, interest rates, terms and covenants of those bonds; creating a special bond redemption account to provide for the payment of the bonds; and approving the sale and providing for the delivery of the bonds to Piper Jaffray Inc. of Seattle, Washington. WHEREAS, by Ordinance No. 1156, as amended by Ordinances Nos. 1157 and 1173 , the sewerage system of the City of Renton (the "City") has become and is considered a part of the waterworks utility of the City (defined below as the "Waterworks Utility") ; and WHEREAS, by Ordinance No. 2020 the system of storm or surface water sewers was determined to consist as a part of the sewerage system and, together with the sewerage system, combined with the Waterworks Utility; and WHEREAS, by Ordinance No. 1450, the City provided for the issuance of its Water and Sewer Refunding and Improvement Revenue Bonds, 1953 (the "1953 Bonds") , and, by Section 15 of that ordinance, established certain conditions for the issuance of additional water and sewer revenue bonds on a parity of lien with the 1953 Bonds; and 0147650.02 ORDINANCE NO. 4480 WHEREAS, all of the water and sewer revenue bonds of the City issued on a parity of lien with the 1953 Bonds pursuant to the original provisions of Section 15 of Ordinance No. 1450 have been paid and redeemed, or irrevocable provision for their payment and redemption has been made; and WHEREAS, by Ordinance No. 3169, the City authorized the issuance of its Water : and Sewer Revenue Refunding Bonds, 1977, Issue No. 2 (the "1977 ,Bonds, Issue No. 2") , and by Section 13 of that ordinance incorporated and amended Section 15 of Ordinance No. 1450, all of which bonds have been paid and redeemed; and WHEREAS, by Ordinance No. 3188, the City authorized the issuance of its Water and Sewer Revenue Refunding Bonds, Issue No. 3 (the "1977 Bonds:, Issue No. 3") , and by Section 13 of that ordinance incorporated Section 15 of Ordinance No. 1450, as modified by Section 13; of Ordinance No. 3169; and WHEREAS, by Ordinance No. 3720, the City authorized the issuance of its Water and Sewer Revenue Bonds, 1983 (the "1983 Bonds") , all of which 1983 Bonds have been paid and redeemed, and by. Section 12 of that ordinance further modified and strengthened the provisions of Section 15 of Ordinance No. 1450, as modified by Section 13 of Ordinance No. 3169; and WHEREAS, the City presently has outstanding, in addition to the 1977 Bonds, Issue' No. 3 , its Water and Sewer Revenue Bonds, 1985 (the "1985 Bonds") , issued pursuant to Ordinance No. 3896, 1 Water and Sewer Revenue Bonds, 1986 (the "1986 Bonds") , issued pursuant to Ordinance No. 3970, Water and Sewer Revenue Bonds, 1987 0147650.02 -2- 1 ORDINANCE NO. 4480 (the "1987 Bonds") , issued pursuant to Ordinance No. 4068, Water and Sewer Revenue Bonds, 1988 (the "1988 Bonds") , issued pursuant to Ordinance No. 4157, Water and Sewer Revenue Bonds, 1989 (the "1989 Bonds") , issued pursuant to Ordinance No. 4211, Water and Sewer Revenue Refunding Bonds, 1989 (the "1989 Refunding Bonds") issued pursuant to Ordinance No. 4232, Water and Sewer Revenue Bonds, 1990 (the "1990 Bonds") , issued pursuant to Ordinance No. 4294, Water and Sewer Refunding and Improvement Bonds, 1992 (the "1992 Refunding Bonds") , issued pursuant to Ordinance No. 4354, and Water and Sewer Refunding and Improvement Revenue Bonds, 1993 (the "1993 Refunding Bonds") , issued pursuant to Ordinance No. 4410, all of which bonds were issued on a parity of lien with the 1977 Bonds, Issue No. 3; and WHEREAS, the parity provisions of Section 13 of Ordinance No. 3188, which incorporated therein Section 15 of Ordinance No. 1450, as modified by Section 13 of Ordinance No. 3169, and as further modified and strengthened by Section 12 of Ordinance No. 3720, provide that the City may issue additional water and sewer revenue bonds which will constitute a charge and lien upon the revenue of the Waterworks Utility of the City on a parity with the 1977 Bonds, Issue No. 3 , the 1985 Bonds, the 1986 Bonds, the 1987 Bonds, the 1988 Bonds, the 1989 Bonds, the 1989 Refunding Bonds, the 1990 Bonds, the 1992 Refunding Bonds, the 1993 Refunding Bonds and any bonds issued thereafter and having a charge and lien upon the revenue of the Waterworks Utility on a parity with those bonds on 0147650.02 -3- ORDINANCE NO. 4480 compliance at the time of the issuance of such additional bonds with the following conditions: " (a) All payments required by any ordinance to be paid into any bond redemption funds and accounts thereof created to secure the payment of bonds issued on a parity of lien herewith shall have been made into the respective bondredemption funds and accounts thereof for the payment of such bonds and no deficiency exists therein; and " (b) The revenues of said waterworks system, including the sewerage system, shall be and be deemed sufficient, after the payment !of operation and maintenance costs and taxes, based upon the historical experience of said systems or the pro forma revenues under then existing rates over a period of any twenty-four consecutive months out of the thirty-six months immediately preceding the time of the issuance of such additional bonds, to equal at least 1. 3 times the average annual principal and interest requirements of the bonds of this issue then outstanding and of the revenue bonds proposed to be so issued. Such determination of the sufficiency of the revenues shall be made and certified to by an engineer experienced in municipal utilities; and " (c) The ordinance authorizing the issuance of such additional revenue bonds shall provide for the setting aside into a reserve fund or account of an amount not less than the average annual debt service requirement, both principal and interest of the additional revenue bonds proposed to be so issued, which reserve fund or account shall be maintained in such amount so long as any of said bonds are outstanding to the last maturity thereof"; j and WHEREAS, on June 11, 1984, the City Council passed and the Mayor approved Resolutions Nos. 2546 and 2547 adopting the 1983 Comprehensive Sanitary Sewer Plan and 1983 Comprehensive Water System Plan, respectively, for the City, and for the purpose of financing facilities in those plans it is necessary to specify and adopt them by ordinance; and 0147650.02 -4- li ORDINANCE NO. 4480 WHEREAS, the City Council has determined that it is necessary and in the best interests of the City that certain additional improvements described in the amended 1983 Comprehensive Water System Plan and the amended 1983 Comprehensive Sanitary Sewer Plan be made and there be adopted a system or plan of additions to and betterments and extensions of the Waterworks Utility and other improvements; and WHEREAS, the City Council has determined that it is necessary to issue and sell $3,570, 000 par value of water and sewer revenue bonds to provide a part of the funds necessary to carry out the system or plan providing for additions to and betterments and extensions of the Waterworks Utility and to pay the costs of issuance and sale of those bonds; and WHEREAS, Piper Jaffray Inc. of Seattle, Washington, has offered to purchase those bonds under the terms and conditions hereinafter set forth; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON, DO ORDAIN as follows: SECTION I. Definitions. As used in this ordinance, the following words shall have the following meanings: "Annual Debt Service" for the Bonds shall mean all the interest plus all principal which will mature or come due in any year. "Average Annual Debt Service" shall mean the sum of the Annual Debt Service for the remaining years to the last scheduled maturity m47650.02 -5- { ORDINANCE NO. 4480 of the applicable bond issue or issues divided by the number of those years. "Bond Fund" shall mean that special fund of the City known as the 1994 Water and Sewer Revenue Bond Redemption Account created by this ordinance as a separate account in the Water and Sewer Revenue Parity Bond Fund for the payment of the principal of and interest on the Bonds. Ir "Bond Registrar" shall mean the fiscal agencies of the State of Washington in Seattle, Washington, and New York, New York, as the same shall be designated from time to time. "Bonds" shall mean the $3 ,570, 000 par value City of Renton Water and Sewer Revenue Bonds, 1994, authorized to be issued by this ordinance. "1977 Bonds, Issue No. 3" shall mean the outstanding Water and Sewer Revenue Refunding Bonds, Issue No. 3 . "1985 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1985, maturing up to and including April 1, 1995. "1986 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1986, maturing up to and including February 1, 1996. "1987 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1987, maturing up to and including June 1, 1997. "1988 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1988, maturing up to and including June 1, 1998. "1989 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1989, maturing up to and including May 1, 1999. 0147650.02 -6 ORDINANCE NO. 4480 "1989 Refunding Bonds" shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 1989, maturing up to and including April 1, 1998. "1990 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1990, maturing up to and including October 1, 2000. "1992 Refunding Bonds" shall mean the outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1992 . "1993 Refunding Bonds" shall mean the outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1993 . "City" shall mean the City of Renton, Washington, a duly organized and legally existing noncharter code city under the laws of the State of Washington. "Code" shall mean the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. "Future Parity Bonds" shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on the Revenue of the Waterworks Utility on a parity with the lien and charge on such Revenue for the payment of the principal of and interest on the Outstanding Parity Bonds and the Bonds. "Maintenance and Operation Expense" shall mean all expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair, working order and condition, which shall not include any depreciation expenses or taxes or charges in lieu of taxes levied or imposed by the City. 0147650.02 -7- ORDINANCE NO. 4480 "Outstanding Parity Bonds" shall mean the 1977 Bonds, Issue No. 3, the 1985 Bonds, the 1986 Bonds, the 1987 Bonds, the 1988 Bonds, the 1989 Bonds, the 1989 Refunding Bonds, the 1990 Bonds, the 1992 Refunding Bonds and the 1993 Refunding Bonds. "Principal and Interest Account" shall mean the subaccount of that name created in the Bond Fund by this ordinance for the payment of the principal of and interest on the Bonds. "Reserve Account" shall mean the subaccount of that name _ I li created in the Bond Fund by this ordinance for the purpose of � I securing the payment of the principal of and interest on the Bonds. "Revenue of the Waterworks Utility" shall mean all the earnings and revenue received by the Waterworks Utility from any source whatsoever, including payments received under contract with other municipal corpgrations for water service, except general taxes, charges in lieu of taxes, assessments in any utility local improvement district hereafter created, proceeds from the sale of I • City property, bond proceeds and earnings subject to a federal tax or rebate requirement. "Term Bonds" shall mean Bonds scheduled to mature in 2013 and any Outstanding Parity Bonds and/or Future Parity Bonds identified as such in the ordinance authorizing the issuance thereof, the payment of which is provided for by a requirement for mandatory deposits of money into the principal and interest account of the bond redemption fund created for the payment of such issue of bonds in accordance with a mandatory sinking fund requirement. 0147650.02 -8- ORDINANCE NO. 4480 "Water and Sewer Revenue Parity Bond Fund" shall mean the fund of that name created by Ordinance No. 3896. "Waterworks Utility Fund" shall mean that special fund of the City into which all of the Revenue of the Waterworks Utility (except for earnings in any special fund for the redemption of revenue obligations of the Waterworks Utility) shall be deposited. "Waterworks Utility" shall mean the combined water and sewerage systems, including the storm and surface water sewers, of the City as the same may be added to, improved and extended for as long as any of the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds are outstanding. SECTION II. Adoption of Plan of Additions and Betterments. The City specifies, adopts and orders the carrying out of a system or plan of additions to and betterments and extensions of the Waterworks Utility consisting of the improvements, acquisitions and work described in Exhibit A attached hereto and by this reference made a part hereof. There shall be included in the foregoing system or plan the acquisition and installation of all necessary valves, pumps, fittings, couplings, connections, equipment and appurtenances, the acquisition of any easements, rights-of-way and land that may be required and the performance of such work as may be incidental thereto and necessary. All of the foregoing shall be in accordance with the plans and specifications therefor prepared by the City's engineers and consulting engineers. 0147650.02 -9- � f ORDINANCE NO. 4480 I ` The City Council may modify the details of the foregoing system or plan where, in its judgment, it appears advisable if such modifications do not ;substantially alter the purposes of that system or plan. it The life of the improvements comprising the foregoing system or plan of additions to and betterments and extensions of the Waterworks Utility is, declared to be at least 20 years. The estimated cost of the acquisition, construction, installation and financing of the above-described improvements is declared to be approximately $7,499,725. That cost shall be paid from the proceeds of the Bonds authorized in this ordinance, proceeds of grants and loans anticipated to be received by the City and other money of or received by the City which is made available therefor. SECTION III. Findings Regarding Parity Provisions. The City Council finds that all payments required by Ordinances Nos. 3188, 3896, 3970, 4068, 4157, 4211, 4232, 4294, 4354 and 4410 - for the Outstanding Parity Bonds have been made into the respective bond redemption funds and accounts therein for the Outstanding Parity Bonds, that provision hereinafter is made for the accumulation of the amounts required in the Reserve Account of the Bond Fund, and that there will be on file prior to the issuance and delivery of the Bonds a certificate of an engineer experienced in municipal utilities that the Revenue of the Waterworks Utility is sufficient to meet the 1. 3 coverage requirement of those ordinances. SECTION IV. Authorization and Description of Bonds. For the purpose of providing a part of the money required to carry out the 0147650.02 -10- ORDINANCE NO. 4480 system or plan of additions to and betterments and extensions of the Waterworks Utility as herein specified, adopted and ordered to ' be carried out, including the payment of the costs of issuance and sale of the Bonds, the City shall issue the Bonds in the aggregate fl principal amount of $3,570, 000. The Bonds shall be designated City of Renton Water and Sewer Revenue Bonds, 1994; shall be dated r November 1, 1994; shall be in the denomination of $5,000 or any integral multiple thereof within a single maturity; shall be numbered separately, in the manner and with any additional I , designation as the Bond Registrar deems necessary for the purpose of identification; shall bear interest (computed on the basis of a 360-day year of twelve 30-day months) , payable semiannually on each succeeding May 1 and November 1 to the maturity or earlier redemption of the Bonds; and shall mature on November 1 in the years and amounts and . bear interest at the rates per annum as follows: , Maturity Interest Years Amounts Rates 2000 $175, 000 5.45% 2001 180,000 5. 65 2002 190, 000 5.75 2003 205, 000 5.85 2004 215, 000 6. 00 2005 225, 000 6. 05 2006 240, 000 6. 10 2007 255,000 6. 25 2008 270, 000 6. 35 ** ** ** 2013 1, 615, 000 6.55 SECTION V. Registration and Transfer of Bonds. The Bonds shall be issued only in registered form as to both principal and 0147650.02 -11- I ORDINANCE NO. 4480 interest and recorded on books or records maintained by the Bond Registrar (the "Bond Register") . The Bond Register shall contain the name and mailing address of the owner of each Bond and the principal amount and number of each of the Bonds held by each owner. Bonds surrendered' to the Bond Registrar may be exchanged for Bonds in any authorized denomination of an equal aggregate principal amount and of the same interest rate and maturity. Bonds may be transferred only if endorsed in the manner provided thereon ii and surrendered to the Bond Registrar. Any exchange or transfer shall be without cost to the owner or transferee. The Bond Registrar shall not be obligated to exchange or transfer any Bond during the 15 days preceding any principal payment or redemption date. SECTION VI. Payment of Bonds. Both principal of and interest on the Bonds shall be: payable in lawful money of the United States of America. Interest on the Bonds shall be paid by checks or drafts mailed by the Bond Registrar on the interest payment date to the registered owners at the addresses appearing on the Bond Register on the 15th day of the month preceding the interest payment date. Principal of the Bonds shall be payable upon presentation and surrender of the Bonds by the registered owners at either of the principal offices of the Bond Registrar at the option of the owners. The Bonds shall be payable solely out of the Bond Fund and shall be a valid claim of the owners thereof only as against the Bond Fund and the amount of the Revenue of the II 0147650.02 -12- 1 ORDINANCE NO. 4480 Waterworks Utility pledged to that fund and shall not be general obligations of the City. SECTION VII. Optional Redemption, Mandatory Redemption and Open Market Purchase of Bonds. Bonds maturing in the years 2000 through 2004, inclusive, shall be issued without the right or option of the City to redeem those Bonds prior to their stated maturity dates. The City reserves the right and option to redeem Bonds maturing on or after November 1, 2005, prior to their stated maturity dates from funds from any source at any time on or after November 1, 2004, as a whole or in part within one or more maturities selected by the City (and by lot within a maturity in such manner as the Bond Registrar shall determine) at a price of par plus accrued interest to the date fixed for redemption. Bonds maturing in 2013 are Term Bonds and, if not redeemed under the optional redemption provisions set forth above or purchased in the open market as set forth below, shall be called for redemption by lot (in such manner as the Bond Registrar shall determine) at par plus accrued interest on November 1 in the years and amounts as follows: Mandatory Mandatory Redemption Redemption Years Amounts 2009 $285, 000 2010 305, 000 2011 320, 000 2012 340, 000 2013 (maturity) 365, 000 If the City redeems Term Bonds under the optional redemption provisions or purchases Term Bonds in the open market, the Term 0147650.02 -13- ORDINANCE NO. 4480 Bonds so redeemed or purchased (irrespective of their redemption or purchase price) shall be credited at the par amount thereof against such mandatory redemption year and amount as the City shall elect. 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 that Bond at either of the principal offices of the Bond Registrar, there shall be issued to the registered owner, without charge therefor, a new Bond (or Bonds, at the option of the registered owner) of the same maturity and interest rate in any of the denominations authorized by this ordinance in the aggregate total principal amount remaining unredeemed. The City further reserves the right and option to purchase any or all of the Bonds in the open market at any time at a price not in excess of par plus accrued interest to the date of purchase. All Bonds purchased or redeemed under this section shall be cancelled. SECTION VIII. Notice of Redemption. The City shall cause notice of any intended redemption of Bonds to be given not less than 30 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. Interest on 0147650.02 -14- . ORDINANCE NO. 4480 Bonds called for redemption shall cease to accrue on the date fixed for redemption unless the Bond or Bonds called are not redeemed when presented pursuant to the call. In addition, the redemption notice shall be mailed within the same period, postage prepaid, to Moody's Investors Service, Inc. , and Standard & Poor's Ratings Group at their offices in New York, New York, or their successors, to Piper Jaffray Inc. at its principal office in Seattle, Washington, or its successor, and to such other persons and with such additional information as the City Administrative Services Administrator shall determine, but these additional mailings shall not be a condition precedent to the redemption of Bonds. SECTION IX. Failure to Redeem Bonds. If any Bond is not redeemed when properly presented at its maturity or call date, the City shall be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or call date until that Bond, both principal and interest, is paid in full or until sufficient money for its payment in full is on deposit in the Bond Fund and the Bond has been called for payment by giving notice of that call to the registered owner of each of those unpaid Bonds. SECTION X. Creation of Account and Subaccounts; Deposits into Accounts. There is created the 1994 Water and Sewer Revenue Bond Redemption Account (heretofore defined as the Bond Fund) , which shall be a separate bond redemption account within the Water and Sewer Revenue Parity Bond Fund. The Bond Fund is divided into two subaccounts, the Principal and Interest Account and the Reserve 0147650.02 -15- l it ORDINANCE NO. 4480 Account. So long as Bonds are outstanding against the Bond Fund, the City Administrative Services Administrator shall: (a) Set aside and pay into the Principal and Interest Account out of the Revenue of the Waterworks , Utility a fixed amount, without regard to any fixed proportion, namely, monthly, on or before- the first day of each month, amounts, together with the accrued interest received on the delivery of the Bonds to the I initial purchaser thereof or other money on deposit therein, as follows: Beginning with the month of December 1994 and continuing thereafter through April 1995, 1/5 of the requirement for interest on the Bonds due May 1, 1995, and beginning with the month of May 1995 and continuing thereafter until the Bonds, both principal and interest, r are paid, 1/6 of the next ensuing six months' requirements for interest on the Bonds; and Beginning with the month of November 1999, and continuing thereafter until the Bonds, both principal and interest, are paid, 1/12 of the amount of principal of the Bonds payable on the next ensuing principal payment date. (b) Set aside and pay into the Reserve Account out of the Revenue of the Waterworks Utility in substantially i equal monthly payments such amounts so that by no later than November 1; 1999, there shall have been accumulated in the Reserve Account for the Bonds an amount not less than the Average Annual Debt Service for the Bonds. The Reserve Account in the Bond Fund may be accumulated from any other money which the City may have available for that purpose in addition to or in lieu of using revenue therefor. The City further agrees that when the required amounts have been paid into the Reserve Account in the Bond Fund, the City will maintain those amounts therein at all times, except for withdrawals therefrom as authorized herein, until there is sufficient money in the Bond Fund, including the Reserve Account therein, to pay the 0147650.02 -16- ORDINANCE NO. 4480 principal of and interest to maturity on all outstanding Bonds, at which time no further payments need be made into the Bond Fund, and the money in the Bond Fund, including the Reserve Account,, may be used to pay that principal and interest. If there shall be a deficiency in the Principal and Interest Account to meet maturing installments of either principal or interest, as the case may be, on the Bonds, the deficiency shall be made up from the Reserve Account by the withdrawal of cash therefrom for that purpose. Any deficiency created in the Reserve Account by reason of any withdrawal shall then be made up from the Revenue of the Waterworks Utility first available after making necessary provisions for the required payments into the Principal and Interest Account. All money in the Reserve Account not needed to meet the payments of principal and interest when due may be kept on deposit in the official bank depository of the City or in any national bank or may be invested in any legal investment for City funds maturing not later than the interest or principal and interest payment date when the money will be needed. Interest on any of those investments or on that bank account shall be deposited in and become a part of the Reserve Account until the total required reserve amount shall have been accumulated therein, after which time the interest shall be deposited in the Principal and Interest Account. Notwithstanding the provisions for the deposit or maintenance of earnings in accounts of the Bond Fund, any earnings which are 0147650.02 -17- ORDINANCE NO. 4480 subject to a federal tax or rebate requirement may be withdrawn from the Bond Fund for 'deposit into a separate fund or account for that purpose. If the City shall 'fail to set aside and pay into the Bond Fund the amounts set forth ;above, the owner. of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. SECTION XI. Flow of Funds. Funds in the Waterworks Utility Fund (other than in any bond redemption or federal rebate account) shall be used in the following order of priority: (a) To pay Maintenance and Operation Expense; (b) To pay the interest on the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds; (c) To pay the principal of the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds; (d) To make all payments required to be made into any sinking fund or bond redemption fund hereafter created for the payment- of Future Parity Bonds which are Term Bonds; (e) To make all payments required to be made into the reserve accounts created to secure the payment of the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds; (f) To make all payments required to be made into any revenue bond redemption fund or warrant redemptionfund and debt service account or reserve account created to pay and secure the payment of the principal of and interest on any revenue bonds or revenue warrants of the City having a lien upon the Revenue of. the Waterworks Utility junior and inferior to the lien thereon for the payment of the principal of and interest on the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds; and ola76so.02 -18- ORDINANCE NO. 4480 (g) To retire by optional redemption or purchase in the open market any outstanding revenue bonds or revenue warrants of the City, to make necessary additions, betterments, improvements and repairs to or extensions and replacements of the Waterworks Utility or for any other lawful City purpose. SECTION XII. Pledge of Revenue and Lien Position. The Revenue of the Waterworks Utility is pledged to the payments set forth in Section X, and the Bonds shall constitute a lien and charge on that revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense, except that the lien and charge on such revenue for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds and any Future Parity Bonds. SECTION XIII. Findings Regarding Sufficiency of Revenue. In the judgment of the City Council, the Revenue of the Waterworks Utility and benefits to be derived from the operation and maintenance of the Waterworks Utility, at the rates to be charged for water, sanitary sewage disposal service and storm and surface water drainage service in the entire utility, will be more than sufficient to meet all Maintenance and Operation Expense (and cost of maintenance and operation of the Waterworks Utility as that term is used in RCW 35. 92 . 100) and the debt service requirements of the Outstanding Parity Bonds and to permit the setting aside in the Bond Fund, out of the revenue of the entire utility, of amounts sufficient to pay the interest on the Bonds as that interest becomes payable and to pay and redeem all of the Bonds at maturity. The City Council further declares that in creating the Bond Fund 0147650.02 -19- i , . lr ORDINANCE NO. 4480 and in fixing the amounts to be paid into the same, as aforesaid, it has exercised due regard for the Maintenance and Operation Expense (and costs of maintenance and operation as used in RCW 35.92. 100) and the debt service requirements of the presently outstanding Outstanding Parity Bonds, and the City has not bound and obligated itself to set aside and pay into the Bond Fund a greater amount or proportion of the revenue of that utility than in the judgment of the City Council will be available over and above Maintenance and Operation Expense (and such costs of maintenance and operation) and debt service requirements of the Outstanding Parity Bonds and that no portion of the Revenue of the Waterworks Utility has been previously pledged for any unrefunded indebtedness other than the payment of the presently outstanding Outstanding Parity Bonds. SECTION XIV. Covenants. The City covenants and agrees with the owner of each Bond at any time outstanding as follows: (a) It will establish, maintain and collect such rates and charges for water, sanitary sewage disposal service and storm and surface water drainage service so long as any Outstanding Parity Bonds and Bonds are outstanding as will make available for the payment of the principal of and interest on such bonds an amount equal to at least 1.3 times the average annual debt service requirements, both principal and interest, on the Outstanding Parity Bonds and the Bonds after deducting Maintenance and Operation Expense from the Revenue of the Waterworks Utility. (b) It will at all times maintain andkeep the Waterworks Utility in good repair, working order and condition and also will at all times operate such Utility and the business in connection therewith in an efficient manner and at a reasonable cost. 0147650.02 -20- ORDINANCE NO. 4480 (c) It will not sell, lease, mortgage or in any manner encumber or dispose of all the property of the Waterworks Utility unless provision is made for payment into each of the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the Bond Fund of sums sufficient to pay, respectively, the principal of and interest on all Outstanding Parity Bonds and the Bonds at any time outstanding, and that it will not sell, lease, mortgage, or in any manner encumber or dispose of any part of the property of the Waterworks Utility that is used, useful and material to the operation thereof, unless provision is made for replacement thereof, or for payment into the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the Bond Fund of the total amount of revenue received which shall not be less than an amount which shall bear the same ratio to the amount of the Outstanding Parity Bonds and Bonds, respectively, as the revenue available for debt service for such outstanding bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the utility sold, leased, encumbered or disposed of bears to the revenue available for debt service for such bonds from the entire utility for the same period. Any such money so paid into such funds shall be used to retire such outstanding bonds at the earliest possible date. (d) It will while any of the Bonds remain outstanding keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to the Waterworks Utility, and it will furnish the original purchaser or purchasers of the Bonds or any subsequent owner or owners thereof at the written request of such owner or owners complete operatingand income statements of such utility in reasonable detail issued in any calendar year not more than ninety days after the close of such calendar year, and it will grant any owner or owners of at least twenty-five percent of the outstanding Bonds the right at all reasonable times to inspect the entire Waterworks Utility and all records, accounts and data of the City relating thereto. Upon request of any owner of any of the Bonds, it also will furnish to such owner a copy of the most recently completed audit of the City's accounts by the State Auditor of Washington. (e) It will not furnish water, sanitary sewage disposal service or storm and surface water drainage service to any customer whatsoever free of charge and promptly will take legal action to enforce collection of all delinquent accounts. 0147650.02 • -21- 1 . ORDINANCE NO. 4480 (f) It will carry the types of insurance on the Waterworks Utility properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems, and the cost of such insurance shall be considered a part of operating and maintaining such utility. If, as, and when the United States of America or some agency thereof shall provide for war risk insurance, the City further agrees to take out and maintain such insurance on all or such portions of such utility on which such war risk insurance may be written in an amount or amounts to cover adequately the value thereof. (g) It will pay all Maintenance and Operation Expense and the ' debt service requirements for the Outstanding Parity Bonds and the outstanding Bonds, and otherwise meet the obligations of the City as herein set forth. (h) It will, take all actions necessary to prevent interest on the 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 Bonds or other funds of the City treated as proceeds of the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross income for federal income tax purposes. It will, to the extent arbitrage rebate requirements of Section 148 of the Code are applicable to the Bonds, take all action necessary to comply (or to be treated as having complied) with those requirements in connection with the Bonds, including the calculation and payment of any penalties that the City has elected to pay as an alternative to calculating rebatable arbitrage, and the payment of any other penalties if required under Section 148 of the Code to prevent interest on the Bonds from being 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 arbitrage certifications may not be relied upon. SECTION XV. Form and Execution of Bonds. The Bonds shall be printed or lithographed on good bond paper in a form consistent with the provisions of this ordinance and state law, shall be 0147650.02 -22- ORDINANCE NO. 4480 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 bpimpressedor printed thereon. • Only Bonds bearing a Certificate of Authentication in the following form, manually signed by the Bond Registrar, shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance: t � CERTIFICATE OF AUTHENTICATION This bond is one of the fully registered City of Renton, Washington, Water and Sewer Revenue Bonds, 1994, described in the Bond Ordinance. WASHINGTON STATE FISCAL AGENCY Bond Registrar By Authorized Signer The authorized signing of a Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered and are 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, delivered and issued and, when authenticated, issued and delivered, shall be as binding on the City as though that person had continued to be an officer of 0147650.02 -23- ORDINANCE NO. 4480 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 XVI. Bond Registrar. The Bond Registrar shall keep, or cause to be kept, at its principal corporate trust office, sufficient books for the registration and transfer of the Bonds which shall be open to inspection by the City at all times. The Bond Registrar is authorized, on behalf of the City, to , , authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of the Bonds and this ordinance, to serve as the City's paying agent for the Bonds and to carry out all of the Bond Registrar's powers and duties under this ordinance and City Ordinance No. 3755 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 XVII. Designation of Bonds as "Qualified Tax-Exempt Obligations. " The City has determined and certifies that (a) the 0147650.02 -24- • ORDINANCE NO. 4480 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) which the City and any entity subordinate to the City (including any entity which the City controls, which derives its authority to issue tax-exempt obligations from the City or which issues tax- exempt obligations on behalf of the City) will issue during the calendar year in which the Bonds are issued will not exceed $10, 000, 000; and (c) the amount of tax-exempt obligations, including the 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 Bonds are issued does not exceed $10, 000, 000. The City designates the Bonds as "qualified tax-exempt obligations" for the purposes of Section 265 (b) (3) of the Code. SECTION XVIII. Bonds Negotiable. The Bonds shall be negotiable instruments to the extent provided by RCW 62A.8-102 and 62A. 8-105. SECTION XIX. Refunding or Defeasance of Bonds. The City may issue advance 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, release, refund or defease all such then- outstanding Bonds (hereinafter collectively called the "defeased Bonds") and to pay the costs of such refunding or defeasance. If 0147650.02 -25- • I I , ORDINANCE NO. 4480 li money and/or direct obligations of the United States of America sufficient in amount, together with known earned income from the investment thereof, to redeem and retire, release, refund or defease the defeased Bonds in accordance with their terms are set aside irrevocably in ;a special fund for and pledged to such redemption, retirement or defeasance (hereinafter called the "trust account") , all right and interest of the owners of the defeased Bonds in the covenants of this ordinance, in the Revenue of the Waterworks Utility and in funds and accounts obligated to the it payment of such defeased Bonds, other than the right to receive the funds so set aside and pledged, shall cease and become void. Such owners shall have the right to receive payment of the principal of and interest on the defeased Bonds from the trust account and, if the funds in the trust account are not available for such payment, shall have the residual right to receive payment of the principal of and interest on the defeased Bonds from the Revenue of the Waterworks Utility without any priority of lien or charge against such revenue or covenants with respect thereto except to be paid therefrom. After the establishing and full funding of the trust account, the City may then 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 owners of any other bonds then outstanding. If the refunding plan provides that the defeased Bonds or the refunding bonds to be issued be secured by cash and/or direct 0147650.02 -26- 1 • ORDINANCE NO. 4480 obligations of the United States of America or other legal investments pending the prior redemption of the defeased Bonds and if such refunding plan also provides that certain cash and/or direct obligations of the United States of America or other legal investments are pledged irrevocably for the prior redemption of the defeased Bonds included in that refunding plan, then only the debt service on the Bonds which are not defeased Bonds and the refunding bonds, the payment of which is not so secured by the refunding plan, shall be included in the computation of coverage for issuance of Future Parity Bonds and the annual computation of coverage for determining compliance with the rate covenants. SECTION XX. Provision for Future Parity Bonds. The City reserves the right to issue Future Parity Bonds which will constitute a lien and charge on the Revenue of the Waterworks Utility on a parity with the Outstanding Parity Bonds and the Bonds if the conditions set forth in Section 13 of Ordinance No. 3188, as modified and strengthened by Section 12 of Ordinance No. 3720, are met and complied with at the time of the issuance of those Future Parity Bonds, which sections are by this reference incorporated herein and made a part hereof and shall continue to be applicable even though the 1953 Bonds have been paid and retired. SECTION XXI. Deposit of Bond Proceeds. There has been created in the office of the City Administrative Services Administrator a special fund of the City known and designated as the Water and Sewer Construction Fund, 1983 (the "Construction Fund") . The principal proceeds received from the issuance and sale 0147650.02 -27- ORDINANCE NO. 4480 of the Bonds shall be deposited in the Construction Fund and shall be used to pay the costs of carrying out the system or plan of additions to and betterments and extensions of the Waterworks Utility specified, adopted and ordered to be carried out by this ordinance. Pending the; expenditure of the principal proceeds out 1 of the Construction Fund, the money in that fund may be invested in any legal investment and the investment income may be retained in that fund and used for the purposes of the fund. The accrued interest on the Bonds, if any, received at the time the Bonds are ii delivered` to the initial purchaser shall be deposited in the Principal and Interest Account of the Bond Fund. SECTION XXII. Approval of Bond Purchase Contract. Piper Jaffray Inc. of Seattle, Washington, has presented a purchase contract dated October 24, 1994 (the "Bond Purchase Contract") , to the City offering to purchase the Bonds under the terms and conditions provided in the Bond Purchase Contract, which written Bond Purchase Contract is on file with the City Clerk and is incorporated herein by this reference. The City Council finds that entering into the Bond Purchase Contract is in the City's best interest and therefore accepts the offer contained therein and authorizes its execution by City officials. The Bonds will be printed at City expense and will be delivered to the purchaser in accordance with the. Bond Purchase Contract, with the approving legal opinion of Foster Pepper & Shefelman, municipal bond counsel of Seattle, Washington, regarding the Bonds printed on each Bond. Bond counsel shall not be required 0147650.02 -28- ORDINANCE NO. 4480 to review and shall express no opinion concerning the completeness or accuracy of any official statement, offering circular or other sales material issued or used in connection with the Bonds, and bond counsel's opinion shall so state. The proper City officials are authorized and directed to do everything necessary for the prompt execution and delivery of the Bonds to the purchaser, including reviewing and executing the final official statement on behalf of the City, and for the proper application and use of the proceeds thereof. SECTION XXIII. Preliminary Official Statement Deemed "Final" . The City Council has been provided with copies of a preliminary official statement dated October 14, 1994 (the "Preliminary Official Statement") , prepared in connection with the sale of the Bonds. For the sole purpose of the purchaser's compliance with Securities and Exchange Commission 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 XXIV. Temporary Bond. Pending the printing, execution and delivery to the purchaser of definitive Bonds, the City may cause to be executed and delivered to the purchaser a single temporary Bond in the total principal amount of the Bonds. The temporary Bond shall bear . the same date of issuance, interest 0147650.02 -29- 'ORDINANCE NO. 4480 rates, principal payment dates and terms and covenants as the definitive Bonds, shall be issued as a fully registered istered Bond in the name of the purchaser, and otherwise shall be in a form acceptable to the purchaser. The temporary Bond shall be exchanged for definitive Bonds as soon as they are printed, authenticated and available for delivery. SECTION XXV. Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval and five days after publication. PASSED by the City, Council this 24th day of October, 1994. 460-di -Marilyn J. ctcrscn, City Clcrk Brenda Fritsvold, Deputy City Clerk APPROVED BY THE MAYOR this 24th day of October, 1994. & ;)ker: Mayor \ Approved as to Form: • r / Bond Coy nsel Date of Publication: October 28, 1994 (Title Only) 0147650.02 i -30- ORDINANCE NO. 4480 EXHIBIT A CITY OF RENTON 1994 System or Plan of Additions to and Betterments and Extensions of the Waterworks Utility Adopt as an amendment to the 1983 Comprehensive Sanitary Sewer Plan of the City the Projects listed under the category "Wastewater Utility" in the attached City of Renton 1994 Budget, Table 10: 1994 Capital Improvement Plan; and Adopt as an amendment to the 1983 Comprehensive Water System Plan of the City the Projects listed under the category "Water Utility" in the attached City of Renton 1994 Budget, Table 10: 1994 Capital Improvement Plan; and Adopt the draft Storm Water Utility Comprehensive Plan of the City, and, as an addition to such Storm and Surface Water Utility Plan, the Projects listed under the category "Surface Water Utility" in the attached City of Renton 1994 Budget, Table 10: 1994 Capital Improvement Plan. Attachment - 1 0147650.02 I I s, • CITY OF RENTON, WASHINGTON ORDINANCE NO . 4709 AN ORDINANCE relating to the waterworks utility of the City, including the sewerage system as a part thereof; providing for the issuance of $6, 120 , 000 par value of Water and Sewer Revenue Refunding Bonds, 1998 , of the City for the purpose of obtaining the funds with which to pay the cost of refunding certain of the City' s outstanding Water and Sewer Revenue Refunding Bonds, 1977 , Issue No. 3 , Water and Sewer Refunding and Improvement Revenue Bonds; 1992 , and Water and Sewer Revenue Bonds, 1994; authorizing the execution of an agreement with First Trust National Association as refunding trustee; fixing the date, form, denominations, maturities, interest rates , terms and covenants of those bonds; renaming a fund; creating a special bond redemption account and a bond redemption fund to provide for the payment of the bonds ; creating a reserve fund; creating a rate stabilization fund; providing for nd insurance; and approving the sale and providing for the delivery .of the bonds to Piper Jaffray Inc . of Seattle, Washington. 40271685.4 V ) TABLE OF CONTENTS PAGE Section I . Definitions 7 Section II . Findings Regarding Parity Provisions 16 Section III . Authorization and Description of Bonds . . . 16 Section IV. Registration and Transfer of Bonds 17 Section V. Payment of Bonds 19 � I Section VI . Optional Redemption and Open Market Purchase of Bonds 20 Section VII . Notice of Redemption 21 Section VIII . Failure to Redeem Bonds 22 Section IX. Renaming of Fund; Creation of Account; Creation of Fund 23 Section X. Deposits into Funds and Accounts 23 Section XI . Rate Stabilization Fund 28 Section XII . Flow of Funds 28 Section XIII . Pledge of Revenue and Lien Position 29 Section XIV. Findings Regarding Sufficiency of Revenue . . 30 Section XV. Refunding of the Refunded Bonds 31 Section XVI . Calls for Redemption of the Outstanding Refunded Bonds 35 Section XVII . Covenants 36 t 'I Section XVIII . Form and Execution of Bonds 41 Section XIX. Bond Registrar 42 Section XX. Designation of Bonds as "Qualified Tax-Exempt Obligations" 43 Section XXI . Bonds Negotiable 44 Section XXII . Refunding or Defeasance of the Bonds 44 Section XXIII . Provision for Future Parity Bonds 46 40271685.4 -1- ORDINANCE NO. 4709 Section XXIV. Approval of Bond Purchase Contract 49 Section XXV. Bond Insurance 50 Section XXVI . Undertaking to Provide Continuing Disclosure 50 Section XXVII . Preliminary Official Statement Deemed Final 54 Section XXVIII . Effective Date of Ordinance 54 • 40271685.4 CITY OF RENTON, WASHINGTON ORDINANCE NO. 4709 AN ORDINANCE relating to the waterworks utility of the City, including the sewerage system as a part thereof; providing for the issuance of $6, 120, 000 par value of Water and Sewer Revenue Refunding Bonds, 1998 , of the City for the purpose of obtaining the funds with which to pay the cost of refunding certain of the City' s • outstanding Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 3 , Water and Sewer Refunding and Improvement Revenue Bonds, 1992, and Water and Sewer Revenue Bonds, 1994 ; authorizing the execution of an agreement with First Trust National Association as refunding trustee; fixing the date, form, denominations, maturities, interest rates, terms and covenants of those bonds; renaming a fund; creating a special bond redemption account and a bond redemption fund to provide - for the payment of the bonds; creating a reserve fund; creating a rate stabilization fund; providing for bond insurance; and approving the sale and providing for the delivery of the bonds to Piper Jaffray Inc . of Seattle, Washington. WHEREAS, the City of Renton (the "City") has heretofore created and operated a waterworks utility of the City, including the sewerage system of the City and within that system a system of storm and surface water sewers (defined herein as the "Waterworks Utility" ) ; and WHEREAS, by Ordinance No . 1450, the City provided for the issuance of its Water and Sewer Refunding and Improvement Revenue Bonds, 1953 (the "1953 Bonds") , and, by Section 15 of that ordinance, established certain conditions for the issuance of additional water and sewer revenue bonds on a parity of lien with the 1953 Bonds; and 40271685.4 -1- • ORDINANCE NO. 4709 WHEREAS, all of the water and sewer revenue bonds of the City issued on a parity of lien with the 1953 Bonds pursuant to the original provisions of Section 15 of Ordinance No. 1450 have been paid and redeemed, or irrevocable provision for their payment and redemption has been made; 'and WHEREAS, by Ordinance No. 3188, the City authorized the issuance of its Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 3 (the "1977 Bonds" ) , and by Section 13 of that ordinance incorporated Section 15 of Ordinance No. 1450, as modified by Section 13 of Ordinance No. 3169 ; and WHEREAS, by Ordinance No. 3720, the City authorized the issuance of its Water and Sewer Revenue Bonds, 1983 (the "1983 Bonds" ) , all of which 1983 Bonds have been paid and redeemed, and by Section 12 of that ordinance further modified and strengthened the provisions of Section 15 of Ordinance No. 1450 , as modified by Section 13 of Ordinance No . 3169; and WHEREAS, the City at present has outstanding, in addition to the 1977 Bonds, Water and Sewer Revenue Bonds, 1988" (the "1988 Bonds" ) , issued pursuant to Ordinance No . 4157, Water and Sewer Revenue Bonds, 1989 (the "1989 Bonds" ) , issued pursuant to Ordinance No. 4211, Water and Sewer Revenue Refunding Bonds, 1989 (the "1989 Refunding Bonds" ) , issued pursuant to Ordinance No . 4232, Water and Sewer Revenue Bonds, 1990 (the "1990 Bonds" ) , issued pursuant to Ordinance No. 4294, Water and Sewer Refunding and Improvement Revenue Bonds, 1992 (the "1992 Refunding Bonds" ) , issued pursuant to Ordinance No. 4354, Water and Sewer Refunding 40271685.4 -2- ORDINANCE NO. 4709 and Improvement Revenue Bonds, 1993 (the "1993 Refunding Bonds" ) , I issued pursuant to Ordinance No. 4410, and Water and Sewer Revenue Bonds, 1994 (the "1994 Bonds" ) , issued pursuant to Ordinance No . 4480 , all of which bonds were issued on a parity of lien with the 1977 Bonds; and WHEREAS, the parity provisions of Section 13 of Ordinance No. 3188 , which incorporated therein Section 15 of Ordinance No . 1450 as modified by Section 13 of Ordinance No. 3169, and as further modified and strengthened by Section 12 of Ordinance No. 3720 , provide that the City may issue additional water and sewer revenue bonds which will constitute a charge and lien upon the revenue of the Waterworks Utility of the City on a parity with the 1977 Bonds, the 1988 Bonds, the 1989 Bonds, the 1989 Refunding Bonds, the 1990 Bonds, the 1992 Refunding Bonds, the 1993 Refunding Bonds, the 1994 Bonds and any bonds issued thereafter and having a charge and lien upon the revenue of the Waterworks Utility on a parity with those bonds on compliance at the time of the issuance of such additional bonds with the following conditions : " (a) All payments required by any ordinance to be paid into any bond redemption funds and accounts thereof created to secure the payment of bonds issued on a parity of lien herewith shall have been made into the respective bond redemption funds and accounts thereof for the payment of such bonds and no deficiency exists therein; and " (b) The revenues of said waterworks system, including the sewerage system, shall be and be deemed sufficient, after the payment of operation and maintenance costs and taxes, based upon the historical experience of said E systems or the pro forma revenues under then existing rates over a period of any twenty-four consecutive months out of the thirty-six months immediately preceding the time of the issuance of such additional bonds, to equal 40271685.4 -3- ORDINANCE N0. 4709 at least 1 . 3 times the average annual principal and interest requirements of the bonds of this issue then outstanding and of the revenue bonds proposed to be so issued. Such determination of the sufficiency of the revenues shall be made and certified to by an engineer experienced in municipal utilities; and " (c) The ordinance authorizing the issuance of such additional revenue bonds shall provide for the setting aside into a reserve fund or account of an amount not less than the average annual debt service requirement , both principal and ; interest of the additional revenue bonds proposed to be so issued, which reserve fund or account shall be maintained in such amount so long as any of said bonds are outstanding to the last maturity thereof" ; and WHEREAS, by Ordinance No . 3188 , the City reserved the right to redeem the 1977 Bonds, prior to their maturity as a whole or in part in inverse numerical order at a price of 101-1/2% of par on July 1, 1987 and January, 1, 1988 , at a price of 101% of par on July 1, 1988 and January 1, 1989, at a price of 100-1/2% of par on July 1 , 1989 and January 1, 1990, and at a price of par on July 1, 1990 or any semiannual interest payment date thereafter, plus accrued interest to the date fixed for redemption; and WHEREAS, .there are at present outstanding $260, 000 par value of 1977 Bonds maturing on July 1, 1999 , and bearing interest at 6 . 00% per annum; and WHEREAS, by Ordinance No. 4354, the City reserved the right to redeem the 1992 Refunding Bonds prior to their maturity on or after June 1, 2002 , as a whole at any time or in part on any interest payment date within one or more maturities selected by the City (and by lot within a maturity in such manner as the bond registrar shall determine) at a price of 101% of par on June 1, 2002 , through 40271685.4 -4- 4� ORDINANCE NO. 4709 May 31, 2003 , at a price of 100-1/2% of par on June 1, 2003 , through May 31, 2004, and at a price of par on June 1, 2004 and thereafter, plus accrued interest to the date fixed for redemption; and WHEREAS, there are at present outstanding $7, 220, 000 par value of 1992 Refunding Bonds, maturing on June 1 of each of the years 1998 through 2007, inclusive, and of the year 2012 , and bearing interest at various rates ranging from 5 .40% to 6 . 50% per annum; and WHEREAS, by Ordinance No. 4480 , the City reserved the right to redeem the 1994 Bonds prior to their maturity at any time on or after November 1, 2004 , as a whole or in part within one or more maturities selected by the City (and by lot within a maturity in such manner as the bond registrar shall determine) at a price of par plus accrued interest to the date fixed for redemption; and WHEREAS, there are at present outstanding $3 , 570, 000 par value I , of 1994 Bonds, maturing on November 1 of each of the years 2000 through 2008 , inclusive, and of the year 2013 , and bearing interest at various rates ranging from 5 .45% to 6 . 55% per annum; and WHEREAS, the City Council has determined that the 1977 Bonds maturing on July 1, 1999 (the "1977 Refunded Bonds") , certain of the 1992 Refunding Bonds maturing on or after June 1, 2003 (defined herein as the "1992 Refunded Bonds") and the 1994 Bonds maturing on or after November 1, 2005 (the "1994 Refunded Bonds" and, together with the 1977 Refunded Bonds and the 1992 Refunded Bonds, the "Refunded Bonds") may be refunded by the issuance and sale of the I ' 40271685.4 -5- ORDINANCE NO. 4709 water and sewer revenue bonds authorized herein (the "Bonds" ) so that a substantial savings will be effected by the difference between the principal and interest costs over the life of the Bonds and the principal and interest costs over the life of the Refunded Bonds but for such refunding, which refunding will be effected by: (a) The issuance of the Bonds; (b) The call, payment and redemption on July 1, 1998 , of the 1977 Refunded Bonds at a price of par; (c) The payment of' the interest on the 1992 Refunded Bonds when due up to and including June 1, 2002 , and, on June 1, 2002 , the call, payment and redemption of all of the 1992 Refunded Bonds at a price of 101% of par; and (d) The payment of the interest on the 1994 Refunded Bonds when due up to and including November 1, 2004 , and, on November 1, 2004 , the call, payment and redemption of all of the 1994 Refunded Bonds at a price of par; and WHEREAS, in order to effect the refunding in the manner that will be most advantageous to the City and its ratepayers, the City Council finds it necessary and advisable that certain Acquired Obligations (defined herein) bearing interest and maturing at the time or times necessary to accomplish the refunding as aforesaid be purchased out of a portion of the proceeds of the sale of the Bonds ; and • WHEREAS, Financial Security Assurance Inc . of New York, New York, has made a commitment to issue an insurance policy insuring the payment when due of the principal of and interest on the Bonds as provided therein, and the City Council deems that the purchase of such policy is in the best interest of the City; and -6- 40271685.4 ORDINANCE NO. 4709 WHEREAS, Piper Jaffray Inc . of Seattle, Washington, has offered to purchase the Bonds under the terms and conditions hereinafter set forth; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON, DO ORDAIN as follows : Section I . Definitions . As used in this ordinance, the following words shall have the following meanings : "Acquired Obligations" shall mean United States Treasury Certificates and Notes—State and Local Government Series . After the New Covenant Date, "Alternate Security" shall mean any bond 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 the Parity Bonds, issued by an institution that has been assigned a credit rating at the time of issuance of such Parity Bonds secured by such Alternate Security equal to or better than the highest then-existing rating for any of . 1 the Parity Bonds. "Annual Debt Service" for the Bonds shall mean all the interest plus all principal which will mature or come due in any year. I After the New Covenant Date, "Annual Debt Service" for any year shall mean all the interest on plus all principal (except principal of Term Bonds due in any Term Bond Maturity Year) of Parity Bonds, plus all mandatory redemption and sinking fund 40271685.4 -7- 7 r I_ ORDINANCE NO. 4709 installments, less all bond interest payable from the proceeds of r- any such bonds, which will mature or come due in that year. "Average Annual Debt Service" 'shall mean the sum of the Annual Debt Service for the remaining years to the last scheduled maturity of the applicable bond issue or issues divided by the number of those years . "Bond Fund" shall mean that special fund of the City known as the 1998 Waterworks Revenue Refunding Bond Account created by this • ordinance as a separate. account . in the Waterworks Revenue Parity Bond Fund for the payment of the principal of and interest on the Bonds . - i After the New Covenant Date, "Bond Fund" shall mean that special fund of the City known as the 1998 Waterworks Revenue Refunding Bond Fund created by this ordinance for the payment of the principal of and interest on the Bonds. "Bond Insurer" shall mean Financial Security Assurance Inc . of New York, New York. "Bond Registrar" shall mean the fiscal agencies of the State of Washington in Seattle, Washington, and New York, New York, as the same shall be designated from time to time. "Bonds" shall mean the $6, 120, 000 par value City of Renton Water and Sewer Revenue Refunding Bonds, 1998, authorized to be issued by this ordinance. "1977 Bonds" shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 3 . 40271685.4 -8 ORDINANCE NO. 4709 ) "1977 Refunded Bonds" shall mean the 1977 Bonds maturing on , July 1, 1999 . "1988 Bonds" shall mean the outstanding Water and Sewer ! Revenue Bonds, 1988, maturing up to and including June 1, 1998 . "1989 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1989, maturing up to and including May 1, 1999 . "1989 Refunding Bonds" shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 1989, maturing up to and including April 1, 1998 . "1990 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1990, maturing up to and including October 1, 2000 . "1992 Refunded Bonds" shall mean the following 1992 Refunding Bonds : Maturity Interest Years Amounts Rates 2003 $ 190, 000 6 . 00% 2004 205, 000 6 . 15 2005 215, 000 6 . 25 2006 230 , 000 6 . 35 2007 245, 000 6 . 50 2008 260, 000 6 . 50 ' - 2009 280, 000 6 .50 2010 300, 000 6 . 50 2011 320, 000 6 . 50 2012 340, 000 6 . 50 "1992 Refunding Bonds" shall mean the outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1992 . "1993 Refunding Bonds" shall mean the outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1993 . "1994 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1994 . 40271685.4 -9- ORDINANCE NO. 4709 j "1994 Refunded Bonds" shall mean the 1994 Bonds maturing on or after November 1, 2005 . "City" shall mean the City of Renton, Washington, a duly organized and legally existing noncharter code city under the laws of the State of Washington. "Code" shall mean the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. After the New Covenant Date, "Coverage Requirement" shall mean in any calendar year 1.25 times the Maximum Annual Debt Service. "Future Parity Bonds" shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on Gross Revenue on a parity with the lien and charge on such Revenue for the payment of the principal of and interest on the Outstanding Parity Bonds and the Bonds . After the New Covenant Date, "Future Parity Bonds" shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on Net Revenue on a parity with the lien and charge on Net Revenue for the payment of the principal of and interest on the Bonds. "Gross Revenue" shall mean Revenue of the Waterworks Utility. "Maintenance and Operation Expense" shall mean all expenses incurred by the City in causing the Waterworks Utility to be '_ operated and maintained in good repair, working order and 40271685.4 -10- ORDINANCE NO. 4709 Ij condition, which shall not include any depreciation expenses or taxes or charges in lieu of taxes levied or imposed by the City. After the New Covenant Date, "Maintenance and Operation Expense" shall mean all reasonable expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair, working order and condition, including payments made to any other municipal corporation or private entity for water service and for sewage treatment and disposal service or other utility service in the event the City combines such service in the Waterworks Utility and enters into a contract for such service, and including pro-rata budget charges for the City's administration expenses where those represent a reasonable distribution and share of actual costs, but not including any depreciation or taxes levied ,or imposed by the City or payments to the City in lieu of taxes, or i capital additions or capital replacements to the Waterworks Utility. After the New Covenant Date, "Maximum Annual Debt Service" shall mean, 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 calendar year on the outstanding Parity Bonds. "Municipal Bond Insurance Policy" shall mean the municipal bond insurance policy issued by the Bond Insurer insuring the payment when due of the principal of and interest on the Bonds as provided herein. 40271685.4 -11- ORDINANCE NO. 4709 "Net Revenue" shall mean Gross Revenue less Maintenance and Operation Expense. "New Covenant Date" shall mean the date on which all 1977 Bonds (other than the 1977 Refunded Bonds) , 1988 Bonds, 1989 Bonds, 1989 Refunding Bonds, ' 1990 Bonds, 1992 Refunding Bonds . (other than the 1992 Refunded Bonds) , 1993 Refunding Bonds and 1994 Bonds (other than the 1994 .Refunded Bonds) are fully redeemed, refunded or defeased. "Outstanding Parity Bonds" shall mean the 1977 Bonds, the 1988 Bonds, the 1989 Bonds, the 1989 Refunding Bonds, the 1990 Bonds, the 1992 'Refunding Bonds, the 1993 Refunding Bonds and the 1994 I -- • Bonds . "Parity Bonds" shall mean the Bonds and any Future Parity Bonds . After the New Covenant Date, "Parity- Bond Fund" shall mean any fund created for the payment and redemption of Parity Bonds. "Principal and Interest Account" shall mean the subaccount of that name created in the Bond Fund by this ordinance for the payment of the principal of and interest on the Bonds . After the New Covenant Date, "Professional Utility Consultant" shall mean an independent licensed professional engineer, certified public accountant or other independent person _or firm selected by the City having a favorable reputation- for skill and experience with municipal utilities of comparable size and character to the Waterworks Utility in such areas as are relevant to the purposes for which such consultant is retained. 40271685.4 -12- • • i f ORDINANCE NO. 4709 "Rate Stabilization Fund" shall mean the fund of that name created for the purposes described in this. ordinance. "Refunded Bonds" shall mean the 1977 Refunded Bonds, the 1992 Refunded Bonds and the 1994 Refunded Bonds . "Refunding Plan" shall mean: (a) the placement of sufficient proceeds of the Bonds which, with other money of the City, will acquire the Acquired ' Obligations to be deposited with cash with the Refunding Trustee; (b) the call, payment and redemption on July 1, 1998, of the 1977 Refunded Bonds at a price of par; (c) the payment of the interest on the 1992 Refunded Bonds when due up to and including June 1, 2002 , and, on June 1, 2002, the call, payment and redemption of all of the 1992 Refunded Bonds at a price of 101% of par; and (d) the payment of the interest on the 1994 Refunded Bonds when due up to and including November 1, 2004 , and, on November 1, 2004, the call, payment and redemption of all of the 1994 Refunded Bonds at a price of par. "Refunding Trust Agreement" shall mean that agreement between the City and the Refunding Trustee providing for carrying out the Refunding Plan. "Refunding Trustee" shall mean First Trust National Association or its successor. "Reserve Account" shall mean the subaccount of that name created in the Bond Fund by this ordinance for the purpose of securing the payment of the principal of and interest on the Bonds . After the New Covenant Date, "Reserve Fund" shall mean that. special fund of the City known as the Waterworks Revenue Bond Reserve Fund created by this ordinance for purpose of securing the 40271685.4 -13- • ORDINANCE NO. 4709 payment of the principal of and interest on all bonds to which Net Revenue is pledged. After the New Covenant Date, "Reserve Insurance" shall mean, 1 in lieu of cash and investments, insurance obtained by the City equal to part or all i of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained, issued - I by an institution that has been assigned a credit rating equal to or better than the highest then-existing rating for any of the Parity Bonds. After the New Covenant Date, "Reserve Requirement" shall mean the Maximum Annual Debt Service. "Revenue of the Waterworks Utility" shall mean all the earnings and revenue: received by the Waterworks Utility from any source whatsoever, including payments received under contract with other municipal corporations for water service, except general taxes, charges in lieu of taxes, assessments in any utility local improvement district hereafter created, proceeds from the sale of City property, bond proceeds and earnings subject to a federal tax or rebate requirement . After the New Covenant Date, "Revenue of the Waterworks Utility" shall mean all of the earnings and revenues received by the City from the maintenance and operation of the Waterworks Utility and all earnings from the investment of money in the Reserve Fund or any Parity Bond Fund, and connection and capital improvement charges collected for the purpose of defraying the cost of capital facilities of the Waterworks Utility, except government 40271685.4 -14- } • ORDINANCE NO. 4709 . grants, proceeds from the sale of Waterworks Utility property (other than timber) , City taxes collected by or through the Waterworks Utility, principal proceeds of bonds and earnings or proceeds from any investments in a trust, defeasance or escrow fund created to defease or refund Waterworks Utility obligations (until commingled with other earnings and revenues of the Waterworks Utility) or held in a special account for the purpose of paying a rebate to the United States Government under the Code. i "Term Bonds" shall mean any Outstanding Parity Bonds and/or Parity Bonds identified as such in the ordinance authorizing the issuance thereof, the payment of which is provided for by a requirement for mandatory deposits of money into the principal and interest account of the bond redemption fund created for the ! i payment of such issue of bonds . in accordance with a mandatory ' sinking fund requirement . "Term Bond Maturity Year" shall mean any calendar year in which Term Bonds are scheduled to mature. "Water and Sewer Revenue Parity Bond Fund" shall mean the fund of that name created by Ordinance No. 3896 . "Waterworks Revenue Parity Bond Fund" shall mean the Water and Sewer Revenue Parity Bond Fund, as renamed by this ordinance . {� , I "Waterworks Utility" shall mean the combined water and sewerage systems, including the storm and surface water sewers, of Sli the City as the same may be added to, improved and extended for as long as any of the Outstanding Parity Bonds . or Parity Bonds are outstanding. 40271685.4 -15- i ORDINANCE NO. 4709 °Waterworks Utility Fund" shall mean that special fund of the City into which all , Gross Revenue (except for earnings in any special fund for the redemption of revenue obligations of the Waterworks Utility) shall be deposited. Section II . Findings Regarding Parity Provisions . The City Council finds that all payments required by Ordinances Nos . 3188 , 4157 , 4211, 4232 , 4294 , 4354 , 4410 and 4480 for the Outstanding Parity Bonds have been made into the respective bond redemption funds and accounts therein for the Outstanding Parity Bonds, that provision hereinafter is made for the accumulation of the amounts required in the Reserve Account of the Bond Fund, and that there will be on file prior to the issuance and delivery of the Bonds a certificate of an engineer experienced in municipal utilities that Gross Revenue is sufficient to meet the 1 . 3 coverage requirement of those ordinances . • Section III . Authorization and Description of Bonds . For the purpose of obtaining the funds with which to pay the cost of refunding the Refunded Bonds, the City shall issue the Bonds in the aggregate principal amount of $6, 120, 000 . The bonds shall be designated City of Renton Water and Sewer Revenue Refunding Bonds, 1998 ; shall be dated March 1, 1998 ; shall be in the denomination of $5, 000 or any integral multiple thereof within a single maturity; shall be numbered separately, in the manner and with any additional designationas the Bond Registrar deems necessary for purpose of identification; shall bear interest (computed on the basis of a 360-day year of twelve 30-day months) , payable semiannually on each 40271685.4 -16- ORDINANCE NO. 4709 June 1 and December 1, commencing June 1, 1998, to the maturity or earlier redemption of the Bonds; and shall mature on June 1 in the years and amounts and bear interest at the rates per annum as follows : Maturity Interest Years Amounts Rates - 1998 $ 110, 000 3 . 70% 1999 315, 000 3 . 85 2000 50, 000 4 . 00 2001 50, 000 4 . 15 2002 50, 000 4 . 25 2003 245, 000 4 . 30 2004 255, 000 4 .40 2005 495, 000 4 . 45 2006 520 , 000 4 . 50 2007 545, 000 4 . 55 2008 570, 000 4 . 65 2009 595, 000 4 . 70 2010 625, 000 4 . 80 2011 650 , 000 4 . 90 2012 685, 000 5 . 00 2013 360, 000 5 . 10 The above maturity amounts are allocated to the carrying out of the Refunding Plan related to the 1977 Refunded Bonds, the 1992 Refunded Bonds and the 1994 Refunded Bonds in accordance with the applicable schedule attached to the Bond Purchase Contract incorporated pursuant to Section XXIV. Section IV. Registration and Transfer of Bonds . The Bonds shall be issued only in registered form as to both principal and interest and recorded on books or records maintained by the Bond Registrar (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. 40271685.4 -17- i ORDINANCE NO. 4709 Bonds surrendered to the Bond Registrar may be exchanged for Bonds in any authorized denomination of an equal aggregate principal amount and of the same interest rate and maturity. Bonds may be transferred only if endorsed in the manner provided thereon and surrendered to the Bond Registrar. Any exchange or transfer shall be without cost to the owner or transferee. The Bond Registrar shall not be obligated to exchange or transfer any Bond during the 15 days preceding any principal payment or redemption date. The Bonds initially shall be registered in the name of Cede & Co. , as the nominee of The Depository Trust Company, New York, New York ( "DTC" ) . The Bonds so registered shall be held in fully immobilized form by DTC asdepository in accordance with . the provisions of a Blanket Issuer Letter of Representations from the City to DTC dated April 15, 1997 (as it may be amended from time to time, the "Letter of Representations" ) . Neither the City nor the Bond Registrar shall have any responsibility or obligation to DTC participants or the persons for whom they act as nominees with respect to the Bonds regarding accuracy of any records maintained by DTC or DTC participants of any amount in respect of principal of or interest on the Bonds, or any notice which is permitted or required to be given to registered owners hereunder (except such notice as is required to be given by the Bond Registrar to DTC) . For so long as any Bonds are held in fully immobilized form, DTC or its successor depository shall be deemed to be the registered owner for all purposes hereunder and all references to 40271685.4 -18- ORDINANCE NO. 4709 registered owners, bondowners, bondholders or the like shall mean DTC or its nominees and shall not mean the owners of any beneficial interests in the Bonds . Registered ownership of such Bonds, or any portions thereof, may not thereafter be transferred except : (i) to any successor of DTC or its nominee, if that successor shall be qualified under any applicable laws to provide the services proposed to be provided by it; (ii) to any substitute depository appointed by the City or such substitute depository' s successor; or (iii) to any person if the Bonds are no longer held in immobilized form. Upon the resignation of DTC or its successor (or any substitute depository or its successor) from its functions as depository, or a determination by the City that it no longer wishes to continue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor) , the City may appoint a substitute depository. Any such substitute depository shall be qualified under any applicable laws to provide the services proposed to be provided by it . If (i) DTC or its successor (or substitute depository or its successor) resigns from its functions as depository, and no substitute depository can be obtained, or (ii) the City determines that the Bonds are to be in certificated form, the ownership of Bonds may be transferred to any person as provided herein and the Bonds no longer shall be held in fully immobilized form. Section V. Payment of Bonds . Both principal of and interest on the Bonds shall be payable in lawful money of the United States 40271685.4 -19- 1 ORDINANCE NO. 4709 of America. Interest on the Bonds shall be paid by checks or drafts mailed by the Bond Registrar on the interest payment date to the registered owners at the addresses appearing on the Bond Register on the 15th day of the month preceding the interest payment date. Principal of the Bonds shall be payable upon presentation and surrender of the Bonds by the registered owners at either of the principal offices of the Bond Registrar at the option of the owners . 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 . The Bonds shall; be payable solely out of the Bond Fund and shall be a valid claim of the registered owners thereof only as against the Bond Fund and the amount of Gross Revenue pledged to that fund and shall not be general obligations of the City. After the New Covenant Date, the Bonds shall be payable solely out of the Bond Fund and the Reserve Fund and shall be a valid claim of the registered owners thereof only as against the Bond Fund, Reserve Fund and the amount of Net Revenue pledged to those funds and shall not be general obligations of the City. Section VI . Optional Redemption and Open Market Purchase of Bonds . Bonds maturing in the years 1998 through 2008, inclusive, shall be issued without the right or option of the City to redeem those Bonds prior to their stated maturity dates . The City reserves the right and option to redeem the Bonds maturing on or after June 1, 2009, prior to their stated maturity dates, from 40271685.4 -20- ORDINANCE NO. 4709 funds from any source, at any time on or after June 1, 2008 , as a whole or in part within one or more maturities selected by the City (and by lot within a maturity in such manner as the Bond Registrar shall determine) at a price of par plus accrued interest to the date fixed for redemption. 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 that Bond at either of the principal offices of the Bond Registrar, there shall be issued to the registered owner, without charge therefor, a new Bond (or Bonds, at the option of the registered owner) of the same maturity and interest rate in any of the denominations authorized by this ordinance in the aggregate principal amount remaining unredeemed. The City further reserves the right and option to purchase any or all of the Bonds in the open market at any time at a price not in excess of par plus accrued interest to the date of purchase . All Bonds purchased or redeemed under this Section shall be canceled. Notwithstanding the foregoing, for so long as the Bonds are registered in the name DTC or its nominee, selection of Bonds for redemption shall be in accordance with the Letter of Representations . Section VII . Notice of Redemption. The City shall cause notice of any intended redemption of Bonds to be given not less than 30 nor more than 60 days prior to the date fixed for 40271685.4 -21- ORDINANCE NO. 4709 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. Interest on Bonds called for redemption shall cease to accrue on the date fixed for redemption unless the Bond or Bonds called are not redeemed when presented pursuant to the call . In addition, the redemption notice shall be mailed within the same period, postage prepaid, to Standard & Poor' s Ratings Services and Fitch IBCA at their offices in New York, New York, or their successors, to Piper Jaffray Inc . at its principal office in Minneapolis, Minnesota, or its successor, and to such other persons and with such additional information as the City Finance and Information Services Administrator shall determine, but these additional mailings shall not be a condition precedent to the redemption of Bonds . Notwithstanding the foregoing, for so long as the Bonds are registered in the name of DTC or its nominee, notice of redemption shall be given in accordance with the Letter of Representations . Section VIII . Failure to Redeem Bonds. If any Bond is not redeemed when properly presented at its maturity or call date, the City shall be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or call date until that Bond, both principal and interest, is paid in full or until sufficient money for its payment in full is on deposit in the 40271685.4 -22- ORDINANCE NO. 4709 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 IX. Renaming of Fund; Creation of Account ; Creation of Fund. The Water and Sewer Revenue Parity Bond Fund is hereby renamed the Waterworks Revenue Parity Bond Fund. There is hereby created the 1998 Waterworks Revenue Refunding Bond Account (heretofore defined, until the New Covenant Date, as the Bond Fund) , which shall be a separate bond redemption account within the Waterworks Revenue Parity Bond Fund. The Bond Fund is divided into two subaccounts, the Principal and Interest Account and the Reserve Account . There is hereby created in the City treasury the 1998 Waterworks Revenue Refunding Bond Fund (heretofore defined, after the New Covenant Date, as the Bond Fund) . Section X. Deposits into Funds and Accounts . So long as Bonds are outstanding against the Bond Fund, the City shall : (a) Set aside and pay into the Principal and Interest Account out of Gross Revenue a fixed amount, without regard to any fixed proportion, namely, monthly, on or before the first day of each month, amounts, together with the accrued interest received on the delivery of the Bonds to the initial purchaser thereof or other money on deposit therein, as follows : Beginning with the month of March 1998 and continuing thereafter through May 1998, 1/3 of the requirement for interest on the Bonds due June 1, 1998, and beginning with the month of June 1998 and continuing thereafter until the Bonds, both principal. and interest, are paid, 1/6 of the next ensuing six months' requirements for interest on the Bonds; and Beginning with the month of March 1998 and continuing thereafter through May 1998, 1/3 of the amount of principal of the Bonds payable on June 1, 40271685.4 -23- ORDINANCE NO. 4709 1998 , and beginning with the month of June 1998, and continuing thereafter until the Bonds, both principal and interest, are paid, 1/12 of the amount of principal of the Bonds payable on the • next ensuing principal payment date; and (b) Set aside and pay into the Reserve Account out of Gross Revenue in substantially equal monthly payments such amounts so that by no later than March 1, 2001, there shall have been accumulated in the Reserve Account for the Bonds an amount not less than the Average Annual Debt Service for theBonds . • The Reserve Account in the Bond Fund may be accumulated from any other money which the 'City may have available for that purpose in addition to or in lieu of using revenue therefor. The City further agrees that when the required amounts have been paid into the Reserve Account in the Bond Fund, the City will maintain those amounts therein at all times, except for withdrawals therefrom as authorized herein, until there is sufficient money in the Bond Fund, including the Reserve Account therein, to pay the principal of and interest to maturity on all outstanding Bonds, at which time no further payments need be made into the Bond Fund, and the money in the Bond Fund, including the Reserve Account, may be used to pay that principal and interest . If there shall be a deficiency in the Principal and Interest Account to meet maturing installments of either principal or interest, as the case may be, on the Bonds, the deficiency shall be made up from the Reserve Account by the withdrawal of cash therefrom for that purpose . Any deficiency created in the Reserve Account by reason of any withdrawal shall then be made up from Gross Revenue first available after making necessary provisions for the required payments into the Principal and Interest Account . 40271685.4 -24- , 24- ORDINANCE NO. 4709 All money in the Reserve Account not needed to meet the payments of principal and interest when due may be kept on deposit in the official bank depository of the City or in any national bank or may be invested in any legal investment for City funds . Interest on any of those investments or on that bank account shall be deposited in and become a part of the Reserve Account until the total required reserve amount shall have been accumulated therein, after which time the interest shall be deposited in the Principal and Interest Account . Notwithstanding the provisions for the deposit or maintenance of earnings in accounts of the Bond Fund, any earnings which are � I subject to a federal tax or rebate requirement may be withdrawn from the Bond Fund for deposit into a separate fund or account for that purpose . If the City shall fail to set aside and pay into the Bond Fund the amounts set forth above, the owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment . After the New Covenant Date, this Section shall be amended to read as follows: All money in the Principal and Interest Account of the 1998 Waterworks Revenue Refunding Bond Account shall be transferred into the 1998 Waterworks Revenue Refunding Bond Fund (heretofore defined as the Bond Fund) . All money in the Reserve Account of the 1998 Waterworks Revenue Refunding Bond Account shall be transferred into the Waterworks Revenue Bond Reserve Fund 40271685.4 -25- • • ORDINANCE NO. 4709 i (heretofore defined as the Reserve Fund) . So long as Bonds are outstanding against the Bond Fund, the City shall: (a) Set aside and pay into the Bond Fund out of Net Revenue a fixed amount, without regard to any fixed proportion, namely,' one day before each interest or principal and interest payment date, an amount which, together with othermoney then on deposit therein, shall be sufficient to meet the debt service on the Bonds required on the next interest or principal and interest payment date; and (b) Set asideiand pay into the Reserve Fund out of the Net Revenue, in three annual approximately equal deposits, any additional money necessary to bring the amount deposited inithe Reserve Fund attributable to the Bonds up to the amount equal to the increase in the Reserve Requirement' attributable to the Bonds. The Reserve Fund may be accumulated from any other money which the City may have available for that purpose in addition to or in lieu of using Net Revenue therefor. • Except for withdrawals therefrom as authorized herein, the Reserve Fund shall be maintained at the Reserve Requirement at all j I times so long as any Parity Bonds are outstanding. When the total jr amount in the Bond Fund shall equal the total amount of principal and interest for all outstanding Bonds, no further payment need be Made into the Bond Fund. Notwithstanding the first sentence of ! I this paragraph, the Reserve Requirement may be decreased for any issue of Parity Bonds when and to theextent the City has provided for an Alternate Security or Reserve Insurance. If there shall be a deficiency in the Bond Fund to meet maturinginstallments of either principal or interest, as the case may be, on the Bonds,. that deficiency shall be made up from the 40271685.4 -26- , 1 • ORDINANCE NO. 4709 _ I Reserve Fund by the withdrawal of cash therefrom for that purpose. Any deficiency created in the Reserve Fund by reason of any such withdrawal shall then be made up from Net Revenue first available l after making necessary provisions for the required payments into the Bond Fund. Any money in the Reserve Fund in excess of the Reserve Requirement may be withdrawn and deposited in any Parity i Bond Fund and spent for the purpose of retiring Parity Bonds or may be deposited in any other fund and spent for any other lawful Waterworks Utility purpose. The City may provide for the purchase, redemption or defeasance of Parity Bonds by the use of money on deposit in the Bond Fund or the Reserve Fund as long as the money remaining in those funds is sufficient to satisfy the required deposits in those funds for the remaining Parity Bonds. All money in the Bond Fund or Reserve Fund may be kept in cash or on deposit in the official bank depository of the City or in any national bank or may be invested in any legal investment for City funds. Interest on any of those investments or on that bank j account shall be deposited in the Reserve Fund until the total Reserve Requirement shall have been accumulated therein, after which time the interest shall be deposited in any Parity Bond Fund. Notwithstanding the provisions for the deposit or maintenance of earnings in the Bond Fund or the Reserve Fund, any earnings which are subject to a federal tax or rebate requirement may be _ withdrawn from the Bond Fund or the Reserve Fund for deposit into a separate fund or account for that purpose. 40271685.4 s -27 j I l I ORDINANCE NO. 4709 If the City fails to set aside and pay into the Bond Fund or the Reserve Fund the amounts set forth above, the owner of any of the outstanding Bonds 'may bring an action against the City to compel that setting aside and payment. Section XI . Rate Stabilization Fund. There is hereby created in the City treasury a, Waterworks Rate Stabilization Fund. After the New Covenant Date, , the City may at any time, as determined by the City and as consistent with Section XII of this ordinance, deposit Gross Revenue in the Rate Stabilization Fund, excluding principal proceeds of ; Parity Bonds or other borrowing. The City may withdraw any or all of the money from the Rate Stabilization Fund for inclusion iri Gross Revenue for any fiscal year of the City, except that the total amount withdrawn from the Rate Stabilization Fund in any fiscal year may not exceed the Annual Debt Service 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 in Gross Revenue. No deposit of 'Gross Revenue shall be made into the Rate Stabilization Fund to the extent that such deposit would prevent the City from meeting the Coverage Requirement in the relevant fiscal year. Section XII . Flow of Funds . Funds in the Waterworks Utility Fund (other than in any bond redemption or federal rebate account) shall be used in the following order of priority: (a) To pay Maintenance and Operation Expense; 40271685.4 -28- ORDINANCE NO. 4709 (b) To pay the interest on the Outstanding Parity Bonds and Parity Bonds; (c) To pay the principal of the Outstanding Parity Bonds and Parity Bonds; (d) To make all payments required to be made into any sinking fund or bond redemption fund hereafter created for the payment of Future Parity Bonds which are Term Bonds; (e) To make all payments required to be made into the reserve accounts created to secure the payment of the Outstanding Parity Bonds and Parity Bonds; After the New Covenant Date, subsection (e) of this Section shall be ' amended to read as follows: To make all payments required to be made into the Reserve Fund; (f) To make all payments required to be made into any revenue bond redemption fund orwarrant redemption fund and debt service account or reserve account created to pay and secure the payment of the principal of and interest on any revenue, bonds or revenue warrants of the City having a lien upon Gross Revenue junior and inferior to the lien thereon for the payment of the principal of and interest on the Outstanding Parity and Parity Bonds; and (g) To retire by optional redemption or purchase in the open market any outstanding revenue bonds or revenue warrants of the City, to make necessary additions, betterments, improvements and repairs to or extensions and replacements of the Waterworks . Utility, after the New Covenant Date, to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. Section XIII . Pledge of Revenue and Lien Position. The Gross Revenue is pledged to the payments set forth in Section X, and the Bonds shall constitute a lien and charge on that revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense, except that the lien and charge on such revenue 40271685.4 -29- ORDINANCE NO. 4709 for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds and any Future Parity Bonds . J � After the New Covenant Date, this Section shall be amended to read as follows: The Net Revenue is pledged to the payment of the Parity Bonds, and the Parity Bonds shall constitute a lien and charge upon such Net Revenue prior and superior to any other charge whatsoever. Section XIV. Findings Regarding Sufficiency of Revenue . In the judgment of the City Council, Gross Revenue and benefits to be derived from the operation and maintenance of the Waterworks Utility, at the rates to be charged for water, sanitary sewage disposal service andIstorm and surface water drainage service in the entire utility, will be more than sufficient to meet all Maintenance. and Operation Expense (and cost of maintenance and operation of the Waterworks Utility as that term is used in RCW 35 . 92 . 100) and the debt service requirements of the Outstanding Parity Bonds and to permit the setting aside in the Bond Fund, and after the New Covenant Date, the Bond Fund and the Reserve Fund, out of the revenue If the entire utility, of amounts sufficient to pay the interest on .the Bonds as that interest becomes payable and to pay and redeem all of the Bonds at maturity. The City Council further declares that in creating the Bond Fund and in fixing the amounts to be paid into the Bond Fund, and after the New Covenant Date, the Bond Fund and the Reserve Fund, as aforesaid, it has exercised due regard for the Maintenance and Operation Expense (and costs of maintenance and operation as used in RCW 35 . 92 . 100) and 40271685.4 -30-30- 1 1 1 ORDINANCE NO. 4709 the debt service requirements of the currently outstanding Outstanding Parity Bonds, and the City has not bound and obligated I ` itself to set aside and pay into the Bond Fund, and after the New Covenant Date, the Bond Fund and the Reserve Fund, a greater amount or proportion of the revenue of that utility than in the judgment of the City Council will be available over and above Maintenance { and Operation Expense (and such costs of maintenance and operation) and debt service requirements of the Outstanding Parity Bonds and that no portion of the Gross Revenue has been previously pledged f for any unrefunded indebtedness other than the payment of the currently outstanding Outstanding Parity Bonds . Section XV. Refunding of the Refunded Bonds . (a) Acquisition and Substitution of Acquired Obligations . A sufficient amount of the proceeds of the sale of the Bonds shall be deposited immediately upon the receipt thereof with the Refunding Trustee to discharge the obligation of the City to carry out the Refunding Plan by providing for the payment of the amounts required to be paid by the Refunding Plan. To theextent practicable, such obligations shall be discharged fully by the Refunding Trustee' s simultaneous purchase of Acquired Obligations "-' bearing such interest rates and maturing as to principal and interest in such amounts and at such times so as to provide for the payment of the amounts required to be paid by the Refunding Plan. The Acquired Obligations are listed and more particularly described in Schedule A attached to the Refunding Trust Agreement, but are subject to substitution as set forth below. 40271685.4 -31- ORDINANCE NO. 4709 Prior to the purchase of any such Acquired Obligations, the City reserves the right to substitute other direct, non-callable obligations of the United States of America ( "Substitute Obligations" ) for any ; of the Acquired Obligations and to use any savings created thereby for any lawful City purpose if, (a) in the opinion of Foster Pepper & Shefelman PLLC, the City' s bond counsel , the interest on the Bonds will remain excluded from gross income for federal income tax purposes under Sections 103 , 148 and 149 (d) of the Code, and (b) such substitution shall not impair the timely payment of the amounts required to be paid by the Refunding Plan as so verified by an independent nationally recognized firm of certified public accountants . After the purchase of the Acquired Obligations by the Refunding Trustee, the City reserves the right to substitute therefor cash or Government Obligations subject to the conditions that such money or securities held by the Refunding Trustee shall be sufficient to carry out the Refunding Plan, that such substitution will not cause the Bonds to be arbitrage bonds within the meaning of Section 148 of the Code and regulations thereunder in effect on the date of such substitution and applicable to obligations issued on the issue date of the Bonds, and that the City obtain, at its expense : (1) verification by an independent nationally recognized firm of certified public accountants acceptable to the Refunding Trustee confirming that the payments of principal of and interest on the substitute Acquired Obligations, if paid when due, and any other money held by the Refunding Trustee 40271685.4 -32- , 32 ORDINANCE NO. 4709 will be sufficient to carry out the Refunding Plan; and (2) an opinion from Foster Pepper & Shefelman PLLC, bond counsel to the City, its successor, or other nationally recognized bond counsel to the City, to the effect that the disposition and substitution or purchase of such securities, under the statutes, rules and regulations then in force and applicable to the Bonds, will not cause the interest on the Bonds or the Refunded Bonds to be included in gross income for federal income tax purposes and that such disposition and substitution or purchase is in compliance with the statutes and regulations applicable to the Bonds . Any surplus money resulting from the sale, transfer, other disposition or redemption of the Acquired Obligations and the substitutions therefor shall be released from the trust estate and transferred to the City to be used for any lawful Waterworks Utility purpose. (b) Administration of Refunding Plan. The Refunding Trustee is authorized and directed to purchase the Acquired Obligations (or substitute obligations) and to make the payments required to be made by the Refunding Plan from the Acquired Obligations (or substitute obligations) and money deposited with the Refunding Trustee pursuant to this ordinance . All Acquired Obligations (or substitute obligations) and the money deposited with the Refunding Trustee and any income therefrom shall be held irrevocably, invested and applied in accordance with the provisions of Ordinances Nos. 3188, 4294 and 4410, this ordinance, Chapter 39 . 53 RCW and other applicable statutes of the State of Washington, and the Refunding Trust Agreement . All necessary and proper fees, 40271685.4 -33- ORDINANCE NO. 4709 compensation and expenses of the Refunding Trustee for the Bonds and all other costs incidental to establishing the escrow to i accomplish the refunding of the outstanding Refunded Bonds and costs related to the issuance and delivery of the Bonds, including bond printing, rating service fees, insurance premiums, verification fees, bond counsel' s fees and other related expenses, shall be paid out of the proceeds of the Bonds . (c) Authorization for Refunding Trust Agreement . In order to carry out the Refunding Plan provided for by this ordinance, the Mayor or City Finance and Information Services Administrator is authorized and directed to execute and deliver to the Refunding Trustee a Refunding 'Trust Agreement substantially in the form on file with the CityClerk and bythis reference made a part hereof, setting forth the duties, obligations and responsibilities of the Refunding Trustee in connection with the payment, redemption and retirement of the outstanding Refunded Bonds as provided herein and stating that the provisions for payment of the fees, compensation and expenses of the Refunding Trustee set forth therein are satisfactory to it. Prior to executing the Refunding Trust Agreement, the Mayor or City Finance and Information Services Administrator is authorized to make such changes therein which do not change the substance and purpose thereof or which assure that the escrow provided therein and the Bonds are in compliance with the requirements of federal law governing the exclusion of interest on the Bonds from gross income for federal income tax purposes . 40271685.4 -34- ORDINANCE NO. 4709 (d) City Findings With Respect to Refunding: The City Council finds and determines that the issuance and sale of the Bonds at this time will effect a savings to the City and is in the best interest of the City and its ratepayers and in the public interest . In making such finding and determination, the City Council has given consideration to the fixed maturities of the Bonds allocated to the Refunding Plan and the Refunded Bonds, the costs of issuance of the Bonds allocated to the Refunding Plan and the known earned income from the investment of the proceeds of the issuance and sale of those Bonds pending payment and redemption of the Refunded Bonds . The City Council further finds and determines that the money to be deposited with the Refunding Trustee for the Refunded Bonds • in accordance with this Section will discharge and satisfy the obligations of the City under Ordinance Nos . 3188 , 4354 and 4480 with respect to the Refunded Bonds, and the pledges, charges, trusts, covenants and agreements of the City therein made or providedfor as to the Refunded Bonds, and that the Refunded Bonds shall no longer be deemed to be outstanding under such ordinances immediately upon the deposit of such money with the Refunding Trustee. Section XVI . Calls for Redemption of the Outstanding Refunded Bonds . The City calls for redemption on July 1, 1998, all of the 1977 Refunded Bonds at par plus accrued interest . The City calls for redemption on June 1, 2002, all of the 1992 Refunded Bonds at 101% of par plus accrued interest . 40271685.4 -35- ORDINANCE NO. 4709 The City calls for redemption on November 1, 2004 , all of the 1994 Refunded Bonds at par plus accrued interest . Such calls for 'redemption shall be irrevocable after the delivery of the Bondslto the initial purchaser thereof . The dates on which the Refunded ,Bonds are called for redemption are the next dates on which those : bonds may be called at a premium of 3% or less . The proper City officials are authorized and directed to cause the fiscal agencies to give such notices as required, at the times and in the manner required by Ordinances Nos . 3188, 4294 and 4410 in order to effect the redemption p prior to their maturity of the 1977 Refunded Bonds, the 1992 Refunded Bonds and the 1994 Refunded Bonds, respectively. Section XVII . Covenants . The City covenants and agrees with the owner of each Bond at any time outstanding as follows : (a) It will establish, maintain and collect such rates and charges for water, sanitary sewage disposal service and storm and surface water drainage service so long as any Outstanding Parity Bonds and Bonds are outstanding as will make available for the payment of the principal- of and interest on such bonds an amount equal • to at least 1 . 3 times the average annual debt service requirements, both principal and interest, on the Outstanding Parity Bonds and the Bonds after deducting Maintenance and Operation Expense from Gross Revenue . After the New Covenant Date, subsection (a) of this Section shall be amended to read as follows: It will establish, maintain and collect rates and charges for all services and facilities provided by the Waterworks Utility which will be fair and nondiscriminatory, and will adjust those rates and charges from time to time so that: (1) Gross Revenue will at all times be sufficient to (A) pay all Maintenance and Operation Expense on a current basis, (B) pay 40271685.4 -36- ORDINANCE NO. 4709 when due all amounts that the City is obligated to pay into the Reserve Fund and any Parity Bond Funds and (C) pay all taxes, assessments or other governmental charges lawfully imposed upon the Waterworks Utility or other revenue therefrom or payments in lieu thereof and any and all other amounts which the City may now or hereafter become obligated to pay from Gross Revenue by law or contract; and (2) Net Revenue in each calendar year will be at least equal to the Coverage Requirement. (b) It will at all times maintain and keep the Waterworks Utility in good repair, working order and condition and also will at all times operate such Utility and the business in connection therewith in an efficient manner and at a reasonable cost . (c) It will not sell, lease, mortgage or in any manner encumber or dispose of all the property of the Waterworks Utility unless provision is made for payment into each of the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the Bond Fund of sums sufficient to pay, respectively, the principal of and interest on all Outstanding Parity Bonds and the Bonds at any time outstanding, and that it will not sell, lease, mortgage, or in any manner encumber or dispose of any part of the property of the Waterworks Utility that is used, useful and material to the operation thereof, unless provision is made for replacement thereof, or for payment into the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the Bond Fund of the total amount of revenue received which shall not be less than an amount which shall bear the same ratio to the amount . of the Outstanding Parity Bonds and Bonds, respectively, as the revenue available for debt service for such outstanding bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the utility sold, leased, encumbered or disposed of bears to the revenue available for debt service for such bonds from the entire utility for the same period. Any such money so paid into such funds shall be used to retire such outstanding bonds at the earliest possible date . After the New Covenant Date, subsection (c) of this Section shall be amended to read as follows: It will not sell or otherwise dispose of the Waterworks Utility in its entirety unless, simultaneously with such sale or 40271685.4 -37- ORDINANCE NO. 4709 other disposition, all Parity Bonds are defeased pursuant to the provisions of this ordinance. It will notIsell, lease, mortgage or in any manner encumber or otherwise dispose of any part of the Waterworks Utility (other than timber) , including all additions and improvements thereto and extensions thereof at any time made, that are used, useful or material in the operation of !the Waterworks Utility, unless provision is made for the replacement thereof or for payment into the Bond Fund of; the greatest of the following: (1) An amount which will be in the same proportion to the net amount of any Parity . Bonds i then outstanding (defined as the total amount of those bonds less the amount of cash and investments in the Reserve Fund and any Parity Bond Funds) that Gross Revenue from the portion of the Waterworks Utility so1ld or disposed of for the preceding year bears to the total Gross Revenue for that period; 1 (2) An amount which will be in the same proportion ; to the net amount of any Parity Bonds then outstanding (as defined above) that the Net Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Net Revenue for that period; or (3) An amount which will be in the same proportion) to the net amount of any Parity Bonds then outstanding (as defined above) that the depreciated cost value of the facilities sold or disposed of bears to the depreciated cost value of the entire Waterworks Utility immediately prior to such sale or disposition. Notwithstanding any other provision of this subsection, (1) the City in its discretion may sell or otherwise dispose of any of the works, plant, properties or facilities of the Waterworks Utility 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 Waterworks Utility, or no longer necessary, material to or useful to the operation of the Waterworks Utility, without making any deposit into the Bond Fund, and (2) the City may transfer the Waterworks Utility to another municipal corporation so long as Net Revenue of the portion of the Waterworks Utility so transferred is used for payment of debt service an the Parity Bonds prior to any other !^ purpose. In no event shall such proceeds be treated as Gross Revenue for purposes of this ordinance. •i I I 40271685.4 -3 8 ORDINANCE NO. 4709 (d) It will while any of the Bonds remain outstanding keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to the Waterworks Utility, and it will furnish the original purchaser or purchasers of the Bonds or any subsequent owner or owners thereof at the written request of such owner or owners complete operating and income statements of such utility in reasonable detail issued in any calendar year not more than ninety days after the close of such calendar year, and it will grant any owner or owners of at least twenty-five percent of the outstanding Bonds the right at all reasonable times to inspect the entire Waterworks Utility and all records, accounts and data of the City relating thereto. Upon request of any owner of any of the Bonds, it also will furnish to such owner a copy of the most recently completed audit of the City' s accounts by the State Auditor of Washington. After the New Covenant Date, subsection (d) of this Section shall be amended to read as follows: It will keep proper books, records and accounts with respect to the operations, income and expenditures of the Waterworks Utility 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 Waterworks Utility 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 Reserve Fund and into' any and all special funds or accounts created pursuant to 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 Waterworks Utility. Such statements shall be sent to the owner of any Parity Bonds upon written request therefor being made to the City. (e) It will not furnish water, sanitary sewage disposal service or storm and surface water drainage service to any customer whatsoever free of charge and promptly will take legal action to enforce collection of all delinquent accounts . After the New .Covenant Date, subsection (e) of this Section shall be amended to read as follows: 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 40271685.4 -39- , , 1 1 . • ORDINANCE NO. 4709 i facility in connection with the operation of the Waterworks Utility free of charge to any person, firm or corporation, public or private, other than the City, _ so long as any Parity Bonds are outstanding. On at least an annual basis, it will determine all accounts . that are delinquent and will take all necessary action to enforce payment of such accounts against those property owners ,- whose accounts are delinquent. • I (f) It will carry the types of insurance on the Waterworks Utility properties in the amounts normally , carried by private water and sewer companies engaged in • the operation of water and sewerage systems, and the cost of such insurance shall be considered a part of operating , and maintaining such utility. . If, as, and when the - United States of America or some . agency thereof shall provide for war risk insurance, the City further agrees to take out and maintain such insurance on all or such i__' portions of such futility on which such war risk insurance may be written in an amount or amounts to cover adequately the value thereof . After the New Covenant Date, subsection (f) of this Section shall be amended to read as follows: It at all times will carry fire and extended coverage and such other forms of insurance, including public liability and property damage insurance, with responsible insurers and with policies payable to or on behalf of the City and any additional insureds on such of the buildings., equipment, works, plants, I facilities and properties of the Waterworks Utility, and against such claims for damages, as are ordinarily carried by municipal or privately owned utilities engaged in the operation of like systems, or will implement and maintain a self-insurance or an insurance pool program with reserves adequate, in the reasonable judgment of the City, to protect the Waterworks Utility and the owners of the Parity Bonds against loss. (g) It will pay all Maintenance and ,Operation --, Expense and the debt service requirements for the Outstanding Parity Bonds and the outstanding Bonds, and otherwise meet the obligations of the City as herein set forth. H (h) It will take all actions necessary to prevent interest on the 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 Bonds or other funds of the City treated as proceeds of the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross 40271685.4 -40- 1 40- 1 ORDINANCE NO. 4709 income for federal income tax purposes . It will, to the extent arbitrage rebate requirements of Section 148 of the Code are applicable to the Bonds, take all action necessary to comply (or to be treated as having complied) with those requirements in connection with the Bonds, including the calculation and payment of any penalties that the City has elected to pay as an alternative to calculating rebatable arbitrage, and the payment of any other penalties if required the Bonds fromSection being included Code n to prevent .interest o 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 arbitrage certifications may not be relied upon. Section XVIII . Form and Execution of Bonds . The Bonds shall be printed or lithographed on good bond paper in a form consistent with the provisions of this ordinance and state law, 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 Registrar, shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance: 40271685.4 -41- ' ORDINANCE NO. 4709 CERTIFICATE OF AUTHENTICATION This Bond is one of the fully registered City of Renton, Washington, Water and Sewer Revenue Refunding Bonds, 1998, described in the Bond Ordinance. WASHINGTON STATE FISCAL AGENCY Bond Registrar By Authorized Signer The authorized signing g ing of a Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered and are entitled to the benefits of this ordinance . If any officer whose facsimile signature appears on the Bonds ceases to be an officer of the City authorized to sign bonds before the Bonds bearing his or her facsimile signature are authenticated or delivered by the . Bond Registrar or' issued by the City, those Bonds nevertheless may be authenticated, issued and delivered and, when authenticated, issued and delivered, shall be as binding on the City as though that person had continued to be an officer of the City authorized to sign bonds . Any Bond also may be signed on behalf of the City by any person 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 XIX. Bond Registrar. The Bond Registrar shall keep, or cause to be kept, at its principal corporate trust office, sufficient books for the registration and transfer of the Bonds, which shall be open to inspection by the City at all times . The 40271685.4 -42- ORDINANCE NO. 4709 Bond Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of the Bonds and this ordinance, to s the City' s paying agent for the Bonds and to carry out all serve a � � and duties under this ordinance and of the Bond Registrar' s powers City Ordinance No. 3755 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 XX. Desi•nation of Bonds as ".ualified Tax-Exem•t Obligations". The City has determined and certifies that (a) the Bonds are not expected to be "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 H _ anyentitywhich the Citycontrols, which derives its (including authority to issue tax-exempt obligations from the City or which issues tax-exempt obligations on behalf of the City) will issue during the calendar year in which the Bonds are issued will not _ I -43- - 40271685.4 • ORDINANCE NO. 4709 exceed $10, 000, 000 and (c) the amount of including tax-exempt obligations, g the Bonds, designated by the 'City as „ exempt obligations" qualified tax- for the purposes of Section 265 (b) (3 Code during the calendar year in ) of the which the Bonds are issued does not exceed $10, 000, 000 . The City designates "qualified tax-exempt the Bonds as P the for the purposes of Section 265 (b) (3) of the Code . Section XXI. Bonds Ne otiable. The Bonds shall be negotiable instruments to the extent provided by RCW 62A. 8-102 and 62A. g_ � Section XXII. I 105 . Refundin or Defeasance of the Bonds . may issue refundin I The City refunding, bonds pursuant to Washington the laws of the or use money availableState of • from any other lawful J of and interest when due the principalsource to on the' Bonds, or any .portion thereof included or in a refunding redeem and defeasance plan, and to retire, lefund or defease all such Bonds (hereinafter collective) then-outstanding y called the "defeased Bonds") and to Pay the costs of the refunding or defeasance. If money and/or direct obligations of the United States of. America _'� interest or times and bearingmaturing at a in amounts (together with money, I if necessary) sufficient to redeem and retire, refund or defease the defeased Bonds in accordance with their a specialterms are set aside in trust fund or escrow account irrevocably pledged to that redemption, retirement or defeasance of defeased Bonds called the "trust account" (hereinafter ) , then all rightj and interest of the owners of the defeased Bonds in the covenants of this ordinance, in 4 Gross Revenue and in funds and accounts obli1 to the payment of i 40271685.4 3 -- -44- 1 ORDINANCE NO. 4709 _ l than the right to receive the funds so _ the defeased Bonds, other I � shall cease and become void. The owners of ledged, the set aside and p of Bonds shall have the right to receive payment defeased trust principal of and interest on the defeased Bonds from the le are not available and, if the funds in the trust account receive payment account right to payment, shall have the residual � for such paYm principals of and interest on the defeased Bonds from Grose of the against such revenue priority of lien or charge Revenue without any P t to be paid, therefrom- After the establishing with respect thereto except or covenants of the trust account, and full funding other fund or-account the City may then apply any money in any tion of the defeased Bonds to established for the payment or redemp to the lawful purposes as it shall determine, subject only any owners of any other bonds then outstanding. rights of the plan provides that the defeased Bonds or the If the refunding cash an/or direct to be issued be secured by refunding bonds or other legal • obligations of the United States of America investments pending the prior redemption of the defeased Bonds and cash and/or refunding plan also provides that certain if such other legal Untied States of America or direct obligations of the f or the prior redemption of the investments are pledged irrevocably the debt �� plan, then only Bonds included in that refunding P the refunding defeased • service on the Bonds which are not defeased Bonds and refunding payment of which is not so secured by the for bonds, the p of coverage plan, shall be included in the computation determining compliance with the rate covenants . } -45- 40271685.4 1 ORDINANCE NO. 4709 Section XXIII . Provision for Future Parity Bonds . The City reserves the right to issue. Future Parity Bonds which will constitute a lien and charge on Gross Revenue on a parity with the Outstanding Parity Bonds and the Bonds if the conditions set forth in Section 13 of Ordinance No. 3188, as modified and strengthened by Section 12 of Ordinance No. 3720, are met and complied with at 1 the time of the issuance of those Future Parity Bonds, which sections are by this reference incorporated herein and made a part hereof and shall continue to be applicable even though the 1953 Bonds have been paid and retired. After the New Covenant Date, this Section shall be amended to read as follows: The right of the City to issue bonds on a parity of lien with the 19177 Bonds, the 1988 Bonds, the 1989 Bonds, the 1989 Refunding Bonds, the 1990 Bonds, the 1992 Refunding Bonds, the 1993 Refunding Bonds and the 1994 Bonds is permanently revoked. The City reserves the right to issue Future Parity Bonds if the 1 following conditions are met and complied with at the time of issuance of those additional bonds: (a) There shall be no deficiency in any Parity Bond Fund. (b) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the payment of the principal thereof and interest thereon out of a Parity Bond Fund. (c) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds .of (1) an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or (2) Reserve Insurance or Alternate Security or an amount plus Reserve Insurance or Alternate Security equal to the increase in the Reserve Requirement 40271685.4 -46- I 1 ORDINANCE NO. 4709 attributable to those Future Parity Bonds. For federal income tax purposes, at the discretion of the City, to the extent that the Reserve Requirement cannot be funded from Future Parity Bond proceeds, the City shall provide ' for the deposit into the Reserve Fund other legally available money or Reserve Snsurece or Alternate Security from Net Revenue within three years from the date of issuance of the' Future Parity Bonds in three 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 applicable Parity Scud 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 to their maturity date from money in the applicable parity Bond Fund. (f) There shall be en' file With the City either: (2) a certificate of the Finance ' and Information Services Administrator, or the.' successor to such officer, demonstrating. that ' during' any 12 consecutive calendar months out of the .immediately preceding 36 calendar months Net • . Revenue, 'without regard • to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least the Coverage Requirement for all • Parity. Bonds plus the Future Parity Bonds proposed • to be ,issued; or (2) .a certificate of a Professional Utility. Consultant that in such consultant's opinion Net •Revenue ,for•any 12 Consecutive calendar months out of the immediately preceding 36 calendar months, • without regard to deposits into or withdrawals from . the Rate Stabilization Fund, shall be equal to the Coverage Requirement for each year thereafter. The certificate, in estimating Net Revenue available for debt service, may adjust Net Revenue to ' reflect: (A) Aay changes is rates in effect and being charged ':or expressly committed by . ordinance to .be made in the future; (S) Income derived from customers of the 'Waterworks Utility who have become customers . during the 12 consecutive .month period or -47= • I • I • a • ORDINANCE NO. 4709 • • thereafter adjusted to -refjeet one year's Net Revenue from those customers; ., (C) Income from any Customers to be connected to the Waterworks Utility who• • • have paid the reguired connection charges; ' • • (D) The Professional Utility Consultant's tante of the Net Revenue to be derived from customers anticipated to connect far whom building permits have • bee= issued; • (B) income received or to be received • which 4s derived from any person, firm, corporation or municipal• corporation under any executed contract for crater, sewage disposal_ oz- 'other utility service, which revenue was not included in the historical Net Revenue; • (F) The Professional Utility Consultant's estimate of the Net Revenue to be derived from custot<ere with existing homes or buildings which will be required to connect to any additions to and improvements and extensions of the Waterworks Utility constructed •and to be paid forout of the ' proceeds of the sale of•the additional Future • • Parity Bonds. or other addi tions to and improvements and extensions of the Waterworks Utility thea under construction and mot fully . connected to the facilities of the Waterworks . Utility when such additions, improvements and extensions are completed; and. • (G) Any increases or ' decrease • in ,Net Revenue as a result of any actual or reasonably anticipated changes in . Maintenance and Operation Expense subsequent to the 12-month period. • 1t Future Parity Bonds proposed to be ,so issued are for the sole purpose of refunding outstanding bonds payable from any Perit' Bond Fund, such' certification of coverage shall not be required it the amount required for the.payment of the principal and interest. in each year for the refunding bonds is.not increased more than. $5, 000 over the amount for that same year required' for the bonds or the portion of that bond'issue to be refunded thereby and if the maturities of such refunding:bonds are not . • • -48- • • • • ORDINANCE NO. 4709 extended beyond the maturities of the bonds to be refunded thereby- • Nothing contained herein shall prevent the City from issuing Future Parity Bonds to refund maturing Bonds or Future Parity, Bonds then outstanding,, money for ,the payment of which 4s*not otherwise available. • • • • Nothing contained herein .eb i1 prevent the City from issuing revenue bonds shat are a charge upon Gross Revenue subordinate• to the payments required to be made therefrom into any Parity Bond Fund. Section XXIv.• Approval. of Bored Purchase Cotitrae . Piper • Jaf fray Inc. of Seattle, Washington, ;has . presented a purchase contract dated March 9, 1998 (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; along with the approving legal opinion of Foster Pepper & Shefelman PLIC, municipal •bond counsel of Seattle,. Washington, regarding the Bonds. Bond counsel shall not ,be required to review • and shall express no opinion concerning the completeness or accuracy of any official statement, offering circular or other : 4O2716es.4 -49 • ' • b • ORDINANCE NO. 4709 sales or disclosure material issued or used in connection with the Bonds, and bond counsel' s opinion shall so state. 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 XXV. Bond Insurance. The City is authorized to purchase from the Bond Insurer the Municipal•Bond Insurance Policy insuring the prompt payment of the principal of and interest on the Bonds and agrees to the conditions for obtaining that policy, including, the•payment, of the premium therefor. Any notice required to be given to the Band Insurer shall be sent by certified or • registered mail to Financial Security Assurance Inc. , .350' -Park Avenue, New York, kew York 10022 . Section RXVI., ?mdertakino to Provide Colai:nuing Disclosure. To meet the requirements of United States Securities and Exchange Commission ("SEC") Rule 15c2..12 (the "Rule") , as applicable to a • participating underwriter for ,the Bonds, the City makes thi following written' undertaking (the "Undertaking") for the benefit of holders of the Bonds: • . i (a) Undertakjnc 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: r (1) To each nationally recognized municipal. securities information repository designated by the SEC in accordance with the Rule ("NRMSIR") and to a state information depositoxy,• if any, established in the State of Washington (the "SID") annual financial information and operating data of the type included in the final official statement for - 4Da11 l5.4 - • -50-• • • • • ORDINANCE NO. 4709 . the Bonds and described in subsection (b) of this Section ("annual financial information") ; (2) To each , NRMSIR or •theMunicipal Securities Rulemaking Board ("MSRB") , and to the ' SID, timely notice of the occurrence of any of• the following events with respect to the Bonds, if material: (A) principal and interest payment delinquencies; (B) non-payment related defaults; (C,) unscheduled draws on debt service reserves reflecting financial difficulties; (D) unscheduled draws on credit enhancements reflecting financial . difficulties; (E) substitution of credit oY• liquidity providers, or their failure to perform; (F) adverse tax opinions or events affecting the .tax-exempt status of the Bonds; (G) modifications _ . to rights df holders of the Bonds; (H) Bond calls (other than scheduled mandatory redemptions of Term Bonds) ; (I) defeasances; (J) release, substitution, or sale of • property securing repayment of the . Bonds; and (K) rating changes; and r (3) To each NRMSIR or to the 'MSRB, and to the ' . ' SID, timely notice of a failure by the City to provide required annual financial information on or before the date specified in subsection (b) of this Section. (b) Type ofAnnual F acial Information Undertaken to be Provided. . The, annual financial information. that - the City undertakes to provide in• subsection (a) of this • - Section: (1) Shall Consist of (A) an annual • cal statement, (B) a statement of authorized, f irlan �. • issued and outstanding bonded debt secured by Gross . Revenue or Net. Revenue and (C) general -customer statistics for the Waterworks Utility; • (2) • Shall be prepared (except as noted in the financial statements) in accordance with applicable generally accepted accounting principles promulgated by the Government Accounting Standards • • Board ("GASB") , as such principles may, be changed ' from time to time by GASB or its successor; (3). 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; . • -51-. . I • ORDINANCE NO. •4709 (4) shall be provided to each NRMSIR and the SID, not later than the last -day of the ninth month after the end of each fiscal year of the City, as such fiscal year may be changed as required or ! permitted by :State law, commencing with the City' s fiscal year ending December 31, 1998; and ( Y May, be provided in a single or multiple documents, and may be incorporated by reference to. other documents that have been filed with. each NRMSIR and the SID, or, if the document I incorporated , by reference is a final official statement" with respect to other. obligations of the City, that has been filed, with the. MSRB. (c) Amendment of Undertakinc_ The Undertaking is subject to amendment after the primary offering of the Bonds without the' consent of any holder of any Bond, or of any broker, dealer, municipal securities dealer, participating underwriter, rating agency, NRMSIR, the SID or the MSRB, under, the circumstances and in the manner permitted by the Rule. . The City will give notice to each NRMSIR or the MSRB,• and the SID, 'of the substance (or provide a copy) of any amendment to the Undertaking and a brief.statement- of the reasons for the amendment_ If the amendment changes the type of annual financial information to be provided, the annual financial information containing the amended financial information will include a narrative explanation of the effect of that change on the type of information to be provided. (d) Beneficiaries. The Undertaking evidenced by this •Section shall inure to the benefit of the City and any holder of Bonds, and shall not inure to the benefit of or create any rights in' any other person. (e) Termination of Undertakinc. , 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 familiar with federal Securities laws delivered to the City, and the City provides timely notice of such termination to each NRMSIR or the MSRB and - the SID.. • • • • -:92- • • . 4709 ORDINANCE NO. f with Undertaken- . _ to Com.1 learns of any for Failure the City the City will (f) Rimed after as practicable Undertaking, the at seed comply with e to cause such obligated As enCe or other failure ct diligence the City constitute a proceed with due failure by shall of any Undertaking sole remedy that be corrected• with the Bonds . actions as of person to comply of be to take such , an order default f respect shallseeking compel a Bond including court, to holder of necessary, an appropriate with the deems from comply holder performance obligated person to specific P other City or to the Res.onsible Undertaking . Official and Information •nation of Finance officer (g) Desi The such other Undertaken • the City (or his or her of t Administer City in the future perform directed Administrator of Servicesauthorizedas the who mayr designee is ucuzeder andaactions out may of take to t is or duties) or h discretion to convenient Bonds set in his n her appropriate o respect of Rule, necessary` the City in Bancwthe on be and accordance actions : i Undertaking this Sec eon in fell the forth inlimitation, the annual including, without and filing inclprovided; Preparing undertaken to be (1) specified financial information event whether any has occurred, (2) Determining Section u the (a) of this and materiality with preparing Bsubsection material, assessing and i£ °£ its occurrence; i disseminating notice other than disseminating any person the Determining"obligated person and (3) is Rulen obliq reSpect to the Bonds : to Citywith undertaking the of person an and o thetion meaning from such ial information accordance obtaining annual f inan person in provide any events for that with material compensating the Rule; and but des engaging including legal • (4) Selecting,nd consultants, onsul ncial advisors and Hated agentstocarrying counsel, assist and advise the City in not limi�od counsel, and ' amendment of the out the Undertaking; necessary(5) Effecting any Undertaking.Underta -53- 4021685•'► j • • ORDINANCE NO 4709 Section XXVII . Preliminar Official Statement has been t Deemed Final . The City Council official provided with c° statement dated Pies of March 4 "Preliminary � r a Preliminary Statement") , , 1998 (the prepared Prelimina in connection Y Official For the sole Bond with the purpose of the sale of the Bonds. Paragraph (b) (1) ' of the nd purchaser's compliance P Rule, thewith Preliminary Official City "deems Statement final " that PSt as of its date, except omission of information as to offering for the selling compensation, g prices, interest rates, aggre gate Principal amount amount Y, maturity dates of redemption, options dates, ratings andn delivery other terms of matters . the Bonds dependent on such Section XXVIII .' Effective Date °f Ordinance. upon its This ordinance shall be effective passage, approval and five days after publication. PASSED by the City Council � i this 9th day of March, 1998 . ;'�Or ` �. • 90 Marilyn 0_te APPROVED BY THE rsen, City Clerk MAYOR this 9th day of March, 1998 Approved as to Form: Jes Tanner, Mayor 11 L rr& . 'Ord Counsel ` Date of Publication: 3/13/98 (Summary) 40271685.4 .-54- CERTIFICATE I, the undersigned City Clerk of the City of Renton,Washington, certify , that this is a true and correct copy of 61,.G>!otet..x.ec 469 . Subscribed and sealed thistday of pi - ,20 D. City Clerk CITY OF RENTON, WASHINGTON ORDINANCE NO. 4 9 7 6 AN ORDINANCE relating to the waterworks utility of the City, including the sewerage system as a part thereof; providing for the issuance of$11,980,000 aggregate principal amount of Water and Sewer Revenue Bonds, 2002, of the City for the purpose of obtaining the funds with which to pay the costs of carrying out certain capital improvements of the waterworks utility; fixing the date,form, denominations,maturities, interest rates,terms and covenants of the bonds; providing for bond insurance; and approving the sale and providing for the delivery of the bonds to D.A. Davidson& Co., Seattle, Washington. la`a ORDINANCE NO. 4 9 7 6 Section 1. Definitions 3 Section 2. Findings Regarding Parity Provisions 12 Section 3. Authorization and Description of Bonds 12 Section 4. Registration of Bonds andBo'ok-Entry System 14 Section 5. Payment of Bonds 16 Section 6. Optional Redemption and Open Market Purchase of Bonds 17 Section 7. Notice of Redemption 17 Section.8c Failure to Redeem Bonds 18 Section 9. Form of Bonds 19 • Section 10: Execution of Bonds 19 Section 11. Authentication and Delivery of Bonds by Bond Registrar 19 Section 12. Registration, Transfer and Exchange 20 Section 13. Lost, Stolen or Destroyed Bonds 22 - Section 14. Creation of Account 22 Section 15. Deposits into Funds and Accounts 23 Section 16. Flow of Funds 27 Section 17. Pledge of Revenue and Lien Position 27 Section 18. Findings Regarding Sufficiency of Revenue 28 Section 19. Covenants 29 Section 20. No Private Activity Bonds 33 Section 21. Defeasance of the Bonds 33 Section 22. Provision for Future Parity Bonds 34 Section 23. Approval of Purchase Agreement 37 Section 24. Bond Insurance 38 fS Q ORDINANCE NO. 4976 Section 25. Delivery of Bonds; Temporary Bonds 38 Section 26. Application of Bond Proceeds 39 Section 27. Undertaking to Provide Continuing Disclosure 40 Section 28. Preliminary Official Statement Deemed Final 43 Section 29. Effective Date of Ordinance 44 _ I I ii °f� I ORDINANCE NO. 4 9 7 6 AN ORDINANCE relating to the waterworks utility of the City, including the sewerage system as a part thereof; providing for the issuance of $11,980,000 aggregate principal amount of Water and Sewer Revenue Bonds, 2002, of the City for the purpose of obtaining the funds with which to pay the costs of carrying out certain capital improvements of the waterworks utility; fixing the date, form, denominations, maturities, interest rates,terms and covenants of the bonds; providing for bond insurance; and approving the sale and providing for the delivery of the bonds to D.A. Davidson& Co., Seattle, Washington. WHEREAS, the City of Renton (the"City") has heretofore created and operated a waterworks utility of the City, including the sewerage system of the City and within that system a system of storm and surface water sewers (defined herein as the"Waterworks Utility"); and WHEREAS,by Ordinance No. 1450, the City provided for the issuance of its Water and Sewer Refunding and Improvement Revenue Bonds, 1953 (the"1953 Bonds"), and, by Section 15 of that ordinance, established certain conditions for the issuance of additional water and sewer revenue bonds on a parity of lien with the 1953 Bonds; and WHEREAS, all of the water and sewer revenue bonds of the City issued on a parity of lien with the 1953 Bonds pursuant to the original provisions of Section 15 of Ordinance No. 1450 have been paid and redeemed, or irrevocable provision for their payment and redemption has been made; and WHEREAS, by Ordinance No. 3188, the City authorized the issuance of its Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 3 (the "1977 Bonds"), all of which 1977 Bonds have been paid and redeemed, and by Section 13 of that ordinance incorporated Section 15 of Ordinance No. 1450, as modified by Section 13 of Ordinance No. 3169; and WHEREAS, by Ordinance No. 3720, the City authorized the issuance of its Water and Sewer Revenue Bonds, 1983 (the"1983 Bonds"), all of which 1983 Bonds have been paid and 1 II ORDINANCE NO. 4976 redeemed, and by Section 12 of that ordinance further modified and strengthened the provisions of Section 15 of Ordinance No. 1450, as modified by Section 13 of Ordinance No. 3169; and WHEREAS,the City currently has outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1993 (the"1993 Refunding Bonds"), issued pursuant to Ordinance No. 4410; Water and Sewer Revenue Bonds, 1994 (the"1994 Bonds"), issued pursuant to Ordinance No. 4480;'and Water and Sewer Revenue Refunding Bonds, 1998 (the "1998 Bonds"),issued pursuant to Ordinance No. 4709, all of which bonds were issued on a parity of lien with the 1977 Bonds; and WHEREAS,the parity provisions of Section XXIII of Ordinance No. 4709, which incorporated therein Section 13 of Ordinance No. 3188 as modified and strengthened by Section 12 of Ordinance No. 3720, provide that the City may issue additional water and sewer revenue bonds which will constitute a charge and lien upon the revenue of the Waterworks Utility of the City on a parity with the 1993 Refunding Bonds,the 1994 Bonds,the 1998 Bonds and any bonds issued thereafter if such additional bonds are issued in compliance with the conditions set forth therein: WHEREAS, By Resolution No. 2897,passed in 1992,the City adopted its Comprehensive Water Plan and by Resolution No. 3417,passed in 1998,the City adopted the Long Range Wastewater Plan; and WHEREAS, the City Council has determined that it is necessary and in the best interests of the City that certain additional improvements described in the Comprehensive Water Plan and the Long Range Wastewater Plan be made and there be adopted a system or plan of additions to and betterments and extensions'of the Waterworks Utility; and 2 ORDINANCE NO. 4 9 7 6 - WHEREAS, pursuant to Chapter 35.92 RCW,the City is authorized to sell and issue, without an election,revenue bonds of the City to make additions,betterments or extensions to the Waterworks Utility; and WHEREAS, the City Council has determined that it is necessary to issue and sell $11,980,000 of Water and Sewer Revenue Bonds,2002 (the "Bonds")to provide part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility and to pay the costs of issuance and sale of the Bonds; and WHEREAS, Financial Security Assurance Inc., of New York,New York, has made a commitment to issue an insurance policy insuring the payment when due of the principal of and interest on the Bonds as provided therein, and the City Council deems that the purchase of such policy is in the best interest of the City; and P Y Y WHEREAS, D.A. Davidson& Co., Seattle, Washington,has offered to purchase the Bonds under the terms and conditions hereinafter set forth;NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON, DO ORDAIN as follows: Section 1. Definitions. As used in this ordinance,the following words shall have the following meanings: After the New Covenant Date, "Alternate Security"shall mean any bond 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 the Parity Bonds, issued by an institution that has been assigned a credit rating at the time of issuance of 3 y.e ORDINANCE NO. 4976 such Parity Bonds secured by such Alternate Security equal to or better than the highest then- .1 hen- existing rating for any of the Parity Bonds. "Annual Debt Service" for the Bonds shall mean all the interest plus all principal which will mature or come due in any year. After the New Covenant Date, "Annual Debt Service"for any year shall mean all the interest on plus all principal (except principal of Term Bonds due in any Term Bond Maturity Year) of Parity Bonds,plus all mandatory redemption and sinking fund installments, less all bond interest payable from the proceeds of any such bonds, which will mature or come due in that year. "Average Annual Debt Service" shall mean the sum of the Annual Debt Service for the _ I remaining years to the last scheduled maturity of the applicable bond issue or issues divided by the number of those years. "Beneficial Owner" shall mean, with respect to any Bond,the Person named on the records of the Custodian as having the right,without a physical certificate evidencing such right, to transfer, to hypothecate and toI�receive the payment of the principal of,premium, if any, and interest on such Bond as the same) becomes due and payable. _ I "Bond Fund" shall meanthat special fund of the City known as the 2002 Waterworks Revenue Bond Account created by this ordinance as a separate account in the Waterworks Revenue Parity Bond Fund for the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Bond Fund" shall mean that special fund of the City known as the 2002 Waterworks Revenue Bond Fund created by this ordinance for the payment of the principal of and interest on the Bonds. 4 ORDINANCE NO. 4 9 7 6 "Bond Insurer" shall mean Financial Security Assurance Inc.,New York,New York. "Bond Insurance Policy" shall mean the municipal bond insurance policy issued by the Bond Insurer insuring the payment when due of the principal of and interest on the Bonds as provided herein. "Bond Register" shall mean the registration books on which are maintained the names and addresses of the Owners of the Bonds. "Bond Registrar" shall mean the fiscal agencies of the State in Seattle, Washington, and New York, New York, as the same shall be designated from time to time. "Bonds" shall mean the $11,980,000 City of Renton Water and Sewer Revenue Bonds, 2002, authorized to be issued by this ordinance. "1977 Bonds" shall mean the Water and Sewer Revenue Refunding Bonds, 1977, Issue. No. 3. "1988 Bonds" shall mean the Water and Sewer Revenue Bonds, 1988. "1989 Bonds" shall mean the Water and Sewer Revenue Bonds, 1989. "1989 Refunding Bonds" shall mean the Water and Sewer Revenue Refunding Bonds, 1989. "1992 Bonds" shall mean the Water and Sewer Refunding and Improvement Revenue Bonds, 1992. "1993 Refunding Bonds" shall mean the outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1993. "1994 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1994. 5 f. 1 ' ORDINANCE NO. 4 9 7 6 "1998 Bonds" shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 1998. "Book-Entry Termination Date" shall mean the fifth business day following the date of receipt by the Bond Registrar of the City's request to terminate the book-entry system of registering the beneficial ownership of the Bonds. "City" shall mean the City of Renton, Washington, a duly organized and legally existing noncharter code city under the laws of the State. "City Finance Director" shall mean the City's Finance and Information Services Administrator or the successor to such officer. "Closing" shall mean the date of the delivery of the Bonds by the City to the Purchaser and the payment therefor by the Purchaser. "Code" shall mean the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. After the New.Covenant Date, "Coverage Requirement"shall mean in any calendar year 1.25 times the Maximum Annual Debt Service. "Custodian" shall mean (a) The Depository Trust Company,New York,New York, or (b) any successor thereto engaged by the City to operate a book-entry system for recording, through electronic or manual means,the beneficial ownership of the Bonds,in which system no physical certificates are issued toi the Beneficial Owners of the Bonds,but in which a limited number of physical certificates are issued to and registered in the name of the Custodian or its nominee, and delivered to the Custodian; provided,that such book-entry system operated by the I ' Custodian may include the use of subsystems of recording the beneficial ownership of Bonds 6 ORDINANCE NO. 4976 which are operated by parties other than the Custodian and the use of a nominee for the Custodian; and the term"Custodian," as used herein, includes any party operating any such subsystem. "Future Parity Bonds" shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on Gross Revenue on a parity with the lien and charge on such Revenue for the payment of the principal of and interest on the Outstanding Parity Bonds and the Bonds. After the New Covenant Date, "Future Parity Bonds"shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on Net Revenue on a parity with the lien and charge on Net Revenue for the payment of the principal of and interest on the Bonds. "Gross Revenue" shall mean Revenue of the Waterworks Utility. "Letter of Representations" shall mean the Blanket Issuer Letter of Representations from the City and the Bond Registrar to the Custodian dated April 15, 1997,pertaining to the payment of the Bonds and the "book-entry" system for evidencing the beneficial ownership of the Bonds prior to the Book-Entry Termination Date(as it may be amended from time to time). "Maintenance and Operation Expense" shall mean all expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair, working order and condition, which shall not include any depreciation expenses or taxes or charges in lieu of taxes levied or imposed by the City. After the New Covenant Date, "Maintenance and Operation Expense"shall mean all reasonable expenses incurred by the City in causing the Waterworks Utility to be operated and 7 f ORDINANCE NO. 4976 maintained in good repair, working order and condition, including payments made to any other municipal corporation or private ientity for water service and for sewage treatment and disposal service or other utility service in the event the City combines such service in the Waterworks Utility and enters into a contract for such service, and including pro-rata budget charges for the City's administration expenses where those represent a reasonable distribution and share of actual costs, but not including any depreciation or taxes levied or imposed by the City or payments to the City in lieu of taxes, or capital additions or capital replacements to the Waterworks Utility. After the New Covenant Date, "Maximum Annual Debt Service"shall mean, 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 calendar year on the outstanding Parity Bonds. "MSRB" shall mean the Municipal Securities Rulemaking Board. "Net Revenue" shall mean Gross Revenue less Maintenance and Operation Expense. "New Covenant Date" shall mean the date on which all 1977 Bonds (other than the 1977 ti I Refunded Bonds), 1988 Bonds, 1989 Bonds, 1989 Refunding Bonds, 1990 Bonds, 1992 Bonds , 1993 Refunding Bonds and 1994 Bonds (other than the 1994 Refunded Bonds) are fully redeemed,refunded or defeased. "NRMSIR" shall mean a nationally recognized municipal securities information repository designated by the SEC. "Outstanding Parity Bonds" shall mean the 1993 Refunding Bonds and the 1994 Bonds. • 8 ORDINANCE NO. 4 9 7 6 "Owner" shall mean the person named as the registered owner of a Bond on the Bond Register. "Parity Bonds" shall mean the 1998 Bonds,the Bonds and any Future Parity Bonds. After the New Covenant Date, "Parity Bond Fund"shall mean any fund created for the payment and redemption of Parity Bonds. "Principal and Interest Account" shall mean the subaccount of that name created in the Bond Fund for the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Professional Utility Consultant"shall mean an independent licensed professional engineer, certified public accountant or other independent person or firm selected by the City having a favorable reputation for skill and experience with municipal utilities of comparable size and character to the Waterworks Utility in such areas as are relevant to the purposes for which such consultant is retained. "Project" shall mean the following project to be financed,in whole or in part, with proceeds of the Bonds: (1)the undertaking of the additions, betterments or extensions to the Waterworks Utility described in the 2002 Comprehensive Water System Plan or the 2002 Comprehensive Sanitary Sewer Plan, including,but not limited to,the capital improvements described in Exhibit A to this ordinance, (2)making a deposit to the Reserve Account, and (3)paying the incidental costs and costs of issuing the Bonds. "Project Fund" shall mean the Waterworks Utility Construction Fund. "Purchase Agreement" shall mean the Bond Purchase Agreement for the Bonds, dated July 1, 2002,by and between the City and the Purchaser. "Purchaser" shall mean D.A. Davidson& Co., Seattle, Washington. 9 ORDINANCE NO. 4 9 7 6 "Rate Stabilization Fund" shall mean the fund of that name created for the purposes described in Ordinance No. 4709. "Reserve Account" shall mean the subaccount of that name created in the Bond Fund by Ordinance No. 4709 for the purpose of securing the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Reserve Fund"shall mean that special fund of the City known as the Waterworks Revenue Bond Reserve Fund created by Ordinance No. 4709 for purpose of securing the payment of the principal of and interest on all bonds to which Net Revenue is pledged I ' After the New Covenant Date, "Reserve Insurance"shall mean, in lieu of cash and investments, insurance obtained by the City equal to part or all of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained, issued by an institution that has been assigned a credit rating equal to or better than the highest then-existing rating for any of the Parity Bonds. After the New Covenant Date, "Reserve Requirement"shall mean the Maximum Annual Debt Service. "Revenue of the Waterworks Utility" shall mean all the earnings and revenue received by the Waterworks Utility from any source whatsoever, including payments received under contract with other municipal corporations for water service, except general taxes, charges in lieu of taxes, assessments in any utility local improvement district hereafter created, proceeds from the sale of City property, bond proceeds and earnings subject to a federal tax or rebate requirement. 10 ORDINANCE Na 4 9 7 6 After the New Covenant Date, "Revenue of the Waterworks Utility"shall mean all of the earnings and revenues received by the City from the maintenance and operation of the Waterworks Utility and all earnings from the investment of money in the Reserve Fund or any Parity Bond Fund, and connection and capital improvement charges collected for the purpose of defraying the cost of capital facilities of the Waterworks Utility, except government grants, proceeds from the sale of Waterworks Utility property (other than timber), City taxes collected by or through the Waterworks Utility,principal proceeds of bonds and earnings or proceeds from any investments in a trust, defeasance or escrow fund created to defease or refund Waterworks Utility obligations (until commingled with other earnings and revenues of the Waterworks Utility) or held in a special account for the purpose of paying a rebate to the United States Government under the Code. "Rule" shall mean SEC Rule 15c2-12. "SEC" shall mean the United States Securities and Exchange Commission. "SID" shall mean a state information depository. "State" shall mean the State of Washington. "Term Bonds" shall mean any Outstanding Parity Bonds and/or Parity Bonds identified as such in the ordinance authorizing the issuance thereof, the payment of which is provided for by a requirement for mandatory deposits of money into the principal and interest account of the bond redemption fund created for the payment of such issue of bonds in accordance with a mandatory sinking fund requirement. "Term Bond Maturity Year" shall mean any calendar year in which Term Bonds are scheduled to mature. 11 • ORDINANCE NO. 4976 "Water and Sewer Revenue Parity Bond Fund" shall mean the fund of that name created by Ordinance No. 3896. "Waterworks Revenue Parity Bond Fund" shall mean the Water and Sewer Revenue Parity Bond Fund, as renamed by Ordinance No. 4709. "Waterworks Utility" shall mean the combined water and sewerage systems, including the storm and surface water sewers, of the City as the same may be added to, improved and extended for as long as any of the Outstanding Parity Bonds or Parity Bonds are outstanding. "Waterworks Utility Fund" shall mean that special fund of the City into which all Gross Revenue (except for earnings in!any special fund for the redemption of revenue obligations of the Waterworks Utility) shall be deposited. Section 2. Findings Regarding Parity Provisions The City Council finds that all payments required by Ordinance Nos. 4410, 4480 and 4709 for the Outstanding Parity Bonds - have been made into the respective bond redemption funds and accounts therein for the Outstanding Parity Bonds,that provision hereinafter is made for the accumulation of the amounts required in the Reserve Account of the Bond Fund, and that there will be on file prior to the issuance and delivery of the Bonds a certificate of an engineer experienced in municipal utilities that Gross Revenue is sufficient to meet the 1.3 coverage requirement of such ordinances. Therefore,the Bonds shall be issued on a parity of lien with the Outstanding Parity Bonds and the 1998 Bonds. Section 3. Authorization and Description of Bonds. For the purpose of obtaining part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility and to pay the costs of issuance and sale of the Bonds,the 12 • I ORDINANCE NO. 4976 City shall issue the Bonds in the aggregate principal amount of$11,980,000. The Bonds shall be designated City of Renton, Washington Water and Sewer Revenue Bonds, 2002; shall be dated July 1, 2002; shall be in the denomination of$5,000 or any integral multiple thereof within a single maturity; shall be numbered separately, in the manner and with any additional designation as the Bond Registrar deems necessary for purpose of identification; shall bear interest (computed on the basis of a 360-day year of twelve 30-day months),payable semiannually on each June 1 and December 1, commencing December 1,2002,to the maturity or earlier redemption of the Bonds; and shall mature on December 1 in the years and amounts and bear interest at the rates per annum as follows: Maturity Years Interest (December 1) Amounts Rates 2003 $ 115,000 2.50% 2004 120,000 2.50 2005 135,000 2.75 2006 110,000 3.25 2007 110,000 3.50 2008 110,000 3.50 2009 455,000 3.70 2010 630,000 3.90 2011 1,010,000 4.00 2012 1,025,000 4.10 2014 710,000 4.30 2015 735,000 4.40 2016 765,000 4.50 2017 805,000 4.60 2018 1,000,000 5.25 2019 1,000,000 5.25 2020 1,000,000 5.25 2021 1,045,000 5.25 2022 1,100,000 5.25 13 ORDINANCE NO. 4976 If any Bond is duly presented for payment upon maturity or earlier redemption and is not paid, then interest thereon shall continue to accrue thereafter at the rate stated therein until such Bond is paid. The Bonds shall be negotiable instruments to the extent provided by RCW 62A.8-105. Section 4. Registration of Bonds and Book-Entry System. The Bonds shall be issued only in registered form as to both principal and interest and 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 ofd each of the Bonds held by each Owner. On the date of issue of the Bonds, all Bonds maturing in the same maturity year shall be issued in the form of a single certificate, which certificate shall be registered in the name of the Custodian or its nominee, and delivered to the Custodian. The Custodian shall hold each such Bond certificatein fully immobilized form for the benefit of the Beneficial Owners pursuant to the Letter of Representations until the earliest to occur of either(1)the date of maturity of the Bonds evidenced by such certificate, at which time the Custodian shall surrender such certificate to the Bond Registrar for payment of the principal of and interest on such Bonds coming due on such date, and the cancellation thereof; (2)the Book-Entry Termination Date; or(3)the date the City determines to utilize a new Custodian for the Bonds, at which time the old Custodian shall (provided the City is not then in default of any payment then due on the outstanding Bonds) surrender the immobilized certificates to the Bond Registrar for transfer to the new Custodian and cancellation as herein provided. For so long as any outstanding Bonds are registered in the name of the Custodian or its nominee and held by the Custodian in fully immobilized form as described in this Section 4,the 14 ORDINANCE NO. 4 9 7 6 rights of the Beneficial Owners shall be evidenced solely by an electronic and/or manual entry made from time to time on the records established and maintained by the Custodian in accordance with the Letter of Representations, and no certificates evidencing such Bonds shall be issued and registered in the name of any Beneficial Owner or such Beneficial Owner's nominee. I -, The City may terminate the "book-entry" system of registering ownership of the Bonds at any time (provided the City is not then in default of any payment then due on the outstanding Bonds) by delivering to the Bond Registrar: (a) a written request that it issue and deliver Bond certificates to each Beneficial Owner or such Beneficial Owner's nominee on the Book-Entry Termination Date; (b) a list identifying the Beneficial Owners as to both name and address; and (c) a supply of Bond certificates, if necessary for such purpose. Upon surrender to the Bond Registrar of the immobilized certificates evidencing all of the then outstanding Bonds, the Bond Registrar shall issue and deliver new certificates to each Beneficial Owner or such Beneficial Owner's duly appointed agent,naming such Beneficial Owner or such Beneficial Owner's nominee as the Owner thereof. Such certificates may be in any integral multiple of$5,000 within a single maturity. Following such issuance, the Owners of such Bonds may transfer and exchange such Bonds in accordance with Section 12 hereof. Neither the City nor the Bond Registrar shall have at any time any responsibility or liability to any Beneficial Owner of Bonds or to any other person for any error, omission, action or failure to act on the part of the Custodian with respect to payment,when due,to the Beneficial Owner of the principal and interest on the Bonds,proper recording of beneficial ownership of 15 ORDINANCE NO. 4 9 7 6 Bonds,proper transfers of such beneficial ownership, or any notices to Beneficial Owners or any other matter pertaining to the Bonds. Section 5. Payment of Bonds. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date,the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof; for the benefit of the Beneficial Owners thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the Bond Register, or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire - i _' transfer on the interest payment date to an account within the United States. From and after the Book-Entry Termination Date,principal of the Bonds shall be payable upon presentation and surrender of the Bonds by the Owners at the principal corporate trust office of the Bond Registrar. The Bonds shall be payable solely out of the Bond Fund and shall be a valid claim of the registered owners thereof only as against the Bond Fund and the amount of Gross Revenue pledged to that fund and shall not be general obligations of the City. After the New Covenant Date, the Bonds shall be payable solely out of the Bond Fund and the Reserve Fund and shall be a valid claim of the Owners thereof only as against the Bond 16 ORDINANCE NO. 49 7 6 Fund, Reserve Fund and the amount of Net Revenue pledged to those funds and shall not be general obligations of the City. Section 6. Optional Redemption and Open Market Purchase of Bonds. Bonds maturing in the years 2003 through 2012, inclusive, are not subject to redemption prior to their stated maturity dates. Bonds maturing on or after December 1, 2014, are subject to redemption at the option of the City prior to their stated maturity dates, from funds from any source, at any time, in whole or in part on or after December 1, 2012,within one or more maturities selected by the City (and by lot within a maturity in the manner determined by the Bond Registrar or the Custodian) at a price of par plus accrued interest to the date of redemption. Any Bond in the principal amount of greater than $5,000 may be partially redeemed in any integral multiple of$5,000. Prior to the Book-Entry Termination Date, Bonds shall be partially redeemed in accordance with the Letter of Representations. From and after the Book- Entry Termination Date, in the event of a partial redemption of a Bond,upon surrender of such Bond at the principal corporate trust office of the Bond Registrar, a new Bond or Bonds (at the option of the Owner) of the same maturity and interest rate and in the aggregate principal amount remaining unredeemed shall be authenticated and delivered to the Owner, without charge to the Owner therefor, in any denomination authorized by this ordinance and selected by the Owner. The City reserves the right to purchase any or all of the Bonds on the open market at any time and at any price. All Bonds purchased or redeemed under this Section shall be canceled. Section 7. Notice of Redemption. The City shall cause notice of any intended redemption of Bonds to be given not less than 30 nor more than 60 days prior to the date fixed 17 ORDINANCE NO. 4 9 7 6 for redemption by first-class mail, postage prepaid,to the Owner of any Bond to be redeemed at the address appearing on the Bond Register on the day notice is mailed, and the requirements of this sentence shall be deemed toy have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the Owner of any Bond. If such notice to the Owners shall have been given and the City shall have set aside, on the date fixed for redemption, sufficient money for the payment of all Bonds called for redemption,the Bonds so called shall cease to accrue interest after such redemption date, and all such Bonds shall be deemed not to be outstanding under this ordinance for any purposes, except that the Owners thereof shall be entitled to receive payment of the redemption price and accrued interest to the redemption date from the money set aside for such purpose. In addition,the redemption notice shall be mailed within the same period, postage prepaid,to Standard &Poor's Ratings Services and Fitch IBCA at their offices in New York,New York, or their successors,to the Purchaser at its principal office in Seattle, Washington, or its successor, and to such other persons and with such additional information as the City Finance Director shall determine, but these additional mailings shall not be a condition precedent to the redemption of Bonds. Notwithstanding the foregoing, prior to the Book-Entry Termination Date, notice of redemption shall be given in accordance with the Letter of Representations. Section 8. Failure to Redeem Bonds. If any Bond is not redeemed when properly presented at its maturity or redemption date,the City shall be obligated to pay interest on such Bond at the same rate provided in the Bond from and after its maturity or redemption date until such Bond, both principal and interest, is paid in full or until sufficient money for its payment in 18 r ? t • ORDINANCE NO. 4 9 7 6 full is on deposit in the Bond Fund, and the Bond has been called for redemption by giving notice of that redemption to the Owner of each of such unpaid Bonds. Section 9. Form of Bonds. The Bonds shall be typewritten, word processed,printed, lithographed or multicopied on good bond paper in a form consistent with this ordinance and Washington law. Section 10. Execution of Bonds. The Bonds shall be executed on behalf of the City by the facsimile or manual signatures of the Mayor and the City Clerk and shall have the seal of the City impressed or a facsimile thereof imprinted thereon. In the event any officer who shall have signed or whose facsimile signatures appear on any of the Bonds shall cease to be such officer of the City before said Bonds shall have been authenticated or delivered by the Bond Registrar or issued by the City, such Bonds may nevertheless be authenticated, delivered and issued and,upon such authentication, delivery and issuance, shall be as binding upon the City as though said person had not ceased to be such officer. Any Bond may be signed and attested on behalf of the City by such persons who, at the actual date of execution of such Bond shall be the proper officer of the City, although at the original date of such Bond such persons were not such officers of the City. Section 11. Authentication and Delivery of Bonds by Bond Registrar. The Bond Registrar is authorized and directed, on behalf of the City, to authenticate and deliver Bonds initially issued or transferred or exchanged in accordance with the provisions of such Bonds and this ordinance. Only such Bonds as shall bear thereon a "Certificate of Authentication" manually executed by an authorized representative of the Bond Registrar shall be valid or obligatory for 19 ORDINANCE NO. 4 9 7 6 any purpose or entitled to the benefits of this ordinance. Such Certificate of Authentication shall evidence that the Bonds so authenticated have been dulyexecuted,conclusive authenticated and delivered hereunder and are entitled to the benefits of this ordinance. The Bond Registrar shall be responsible for its representations contained in the Certificate of Authentication on the Bonds. Section 12. Registration, Transfer and Exchange. The Bond Registrar shall keep, or cause to be kept, at its principal;corporate trust office, the Bond Register. The Bond Registrar is authorized, on behalf of the City,to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions'of the Bonds and this ordinance,to serve as the City's paying agent for the Bonds and to carry out all of the Bond Registrar's powers and duties under this ordinance and City Ordinance No. 3755 establishing a system of registration for the City's bonds and obligations. The City and the Bond Registrar, in its discretion, may deem and treat the Owner of each Bond as the absolute owner thereof for all purposes, and neither the City nor the Bond Registrar shall be affected by any notice to the contrary. Payment of any such Bond shall be made only as described in Section 5 hereof,but such registration may be transferred as herein provided. All such payments made as described in Section 5 hereof shall be valid and effectual to satisfy and discharge the liability of the City upon such Bond to the extent of the amount or amounts so paid. The registered ownership of the Bonds may be transferred. Prior to the Book-Entry Termination Date,the beneficial ownership of the Bonds may only be transferred on the records established and maintained by the Custodian. On and after the Book-Entry Termination Date, 20 ORDINANCE NO. 4976 transfer of any Bond shall be valid only if it is surrendered at the principal corporate trust office of either Bond Registrar, with the assignment form appearing on such Bond duly executed by, or accompanied by a written instrument of transfer in form satisfactory to such Bond Registrar duly executed by,the Owner or such Owner's duly authorized agent, in a manner satisfactory to such Bond Registrar. Upon such surrender, the Bond Registrar shall cancel the surrendered Bond and shall authenticate and deliver, without charge to the Owner or transferee therefor (other than any governmental fees or taxes payable on account of such transfer), a new Bond or Bonds (at the option of the new Owner), naming as Owner the person or persons listed as the assignee on the assignment form appearing on the surrendered Bond, of the same maturity and interest rate, for the same aggregate principal amount, and in any authorized denomination selected by the new Owners, in exchange for such surrendered and cancelled Bond. On and after the Book-Entry Termination Date, any Bond may be surrendered at the principal corporate trust office of the Bond Registrar and exchanged, without charge, for an equal aggregate principal amount of Bonds of the same maturity and interest rate,in any authorized denomination as selected by the Owner. The Bond Registrar shall not be obligated to transfer or exchange any Bond during the fifteen days preceding any principal or interest payment or redemption date. The Bond Registrar may become the Owner of any Bond 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 a member of, or in any other capacity with respect to, any committee formed to protect the rights of the Owners of the Bonds. 21 • ORDINANCE NO. 4976 The City covenants that, until all Bonds shall have been surrendered and cancelled, it shall maintain a system of recording the ownership of each Bond that complies with the provisions of the Code. Section 13. Lost, Stolen or Destroyed Bonds. If any Bond becomes mutilated, lost, stolen or destroyed, the Bond Registrar may authenticate and deliver a new Bond of the same interest rate and maturity and of like tenor and effect in substitution therefor, all in accordance with applicable law. If such mutilated, lost, stolen or destroyed Bond has matured, the City may, at its option,pay the same without the surrender thereof. However,no such substitution or payment shall be made unless and until the applicant shall furnish (a) evidence satisfactory to the Bond Registrar of the destruction or loss of the original Bond and of the ownership thereof, and (b) such additional security, indemnity or evidence as may be required by or on behalf of the City. No substitute Bond shall be furnished unless the applicant shall reimburse the City and the Bond Registrar for their respective expenses in the furnishing thereof Any such substitute Bond so furnished shall be equally and proportionately entitled to the security of this ordinance with all other Bonds issued hereunder. Section 14. Creation of Account. There is hereby created the 2002 Waterworks Revenue Bond Account (heretofore defined, until the New Covenant Date, as the Bond Fund),which shall be a separate bond redemption account within the Waterworks Revenue Parity Bond Fund. The Bond Fund is divided into two subaccounts,the Principal and Interest Account and the Reserve Account. There is hereby created in the City Treasury the 2002 Waterworks Revenue Bond Fund (heretofore defined, after the New Covenant Date, as the Bond Fund). 22 ORDINANCE NO. 4 9 7 6 Section 15. Deposits into Funds and Accounts. So long as Bonds are outstanding against the Bond Fund,the City shall: (a) Set aside and pay into the Principal and Interest Account out of Gross Revenue a fixed amount, without regard to any fixed proportion,namely, monthly, on or before the first day of each month, amounts,together with the accrued interest received on the delivery of the Bonds to the initial purchaser thereof or other money on deposit therein, as follows: Beginning with the month of August 2002 and continuing thereafter until November, 2002, 1/4 of the next ensuing four months' requirements for interest on the Bonds; and beginning with the month of December, 2002 and continuing thereafter until the Bonds,both principal and interest, are paid, 1/6 of the next ensuing six months' requirements for interest on the Bonds; and Beginning with the month of August 2002 and continuing thereafter until November, 2003, 1/16 of the next ensuing 16 months' requirements for principal on the Bonds; and beginning with the month of December, 2003 and continuing thereafter until the Bonds, both principal and interest, are paid, 1/12 of the amount of principal of the Bonds payable on the next ensuing principal payment date; and (b) Set aside and pay into the Reserve Account out of Gross Revenue in substantially equal monthly payments such amounts so that by no later than July 1, 2005, there shall have been accumulated in the Reserve Account for the Bonds an amount not less than the Average Annual Debt Service for the Bonds. The Reserve Account in the Bond Fund may be accumulated from any other money which the City may have available for that purpose in addition to or in lieu of using revenue therefor. The City further agrees that when the required amounts have been paid into the Reserve Account in the Bond Fund, the City will maintain those amounts therein at all times, except for withdrawals therefrom as authorized herein,until there is sufficient money in the Bond Fund, including the Reserve Account therein, to pay the principal of and interest to maturity on all outstanding Bonds, at which time no further payments need be made into the Bond Fund, and the 23 ORDINANCE NO. 4 9 7 6 money in the Bond Fund, including the Reserve Account, may be used to pay that principal and interest. If there shall be a deficiency in the Principal and Interest Account to meet maturing installments of either principal or interest, as the case may be, on the Bonds,the deficiency shall be made up from the Reserve Account by the withdrawal of cash therefrom for that purpose. Any deficiency created in the Reserve Account by reason of any withdrawal shall then be made up from Gross Revenue first available after making necessary provisions for the required payments into the Principal and Interest Account. r All money in the Reserve Account not needed to meet the payments of principal and interest when due may be kept on,deposit in the official bank depository of the City or in any -- national bank or may be invested in any legal investment for City funds. Interest on any of those investments or on that bank account shall be deposited in and become a part of the Reserve Account until the total required reserve amount shall have been accumulated therein, after which time the interest shall be deposited in the Principal and Interest Account. Notwithstanding the provisions for the deposit or maintenance of earnings in accounts of the Bond Fund, any earnings which are subject to a federal tax or rebate requirement may be withdrawn from the Bond Fund for deposit into a separate fund or account for that purpose. If the City shall fail to set aside and pay into the Bond Fund the amounts set forth above, the Owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. After the New Covenant Date, this Section shall be amended to read as follows: All money in the Principal and Interest Account of the 2002 Waterworks Revenue Bond Account 24 I ORDINANCE NO. , 4 9 7 6 shall be transferred into the 2002 Waterworks Revenue Bond Fund (heretofore defined as the Bond Fund). All money in the Reserve Account of the 2002 Waterworks Revenue Bond Account shall be transferred into the Waterworks Revenue Bond Reserve Fund(heretofore defined as the Reserve Fund). So long as Bonds are outstanding against the Bond Fund,the City shall: (a) Set aside and pay into the Bond Fund out of Net Revenue a fixed amount, without regard to any fixed proportion, namely, one day before each interest or principal and interest payment date, an amount which, together with other money then on deposit therein, shall be sufficient to meet the debt service on the Bonds required on the next interest or principal and interest payment date; and (b) Set aside and pay into the Reserve Fund out of the Net Revenue, in three annual approximately equal deposits, any additional money necessary to bring the amount deposited in the Reserve Fund attributable to the Bonds up to the amount equal to the increase in the Reserve Requirement attributable to the Bonds. The Reserve Fund may be accumulated from any other money which the City may have available for that purpose in addition to or in lieu of using Net Revenue therefor. Except for withdrawals therefrom as authorized herein,the Reserve Fund shall be maintained at the Reserve Requirement at all times so long as any Parity Bonds are outstanding. When the total amount in the Bond Fund shall equal the total amount of principal and interest for all outstanding Bonds, no further payment need be made into the Bond Fund. Notwithstanding the first sentence of this paragraph,the Reserve Requirement may be decreased for any issue of Parity Bonds when and to the extent the City has provided for an Alternate Security or Reserve Insurance. If there shall be a deficiency in the Bond Fund to meet maturing installments of either principal or interest, as the case may be, on the Bonds, that deficiency shall be made up from the Reserve Fund by the withdrawal of cash therefrom for that purpose. Any deficiency created in 25 • ORDINANCE NO. 4976 the Reserve Fund by reason of any such withdrawal shall then be made up from Net Revenue first available after making necessary provisions for the required payments into the Bond Fund. Any money in the Reserve Fund in excess of the Reserve Requirement may be withdrawn and deposited in any Parity Bond Fund and spent for the purpose of retiring Parity Bonds or may be deposited in any other fund and spent for any other lawful Waterworks Utility purpose. The City may provide for the purchase,redemption or defeasance of Parity Bonds by the use of money on deposit in the Bond Fund or the Reserve Fund as long as the money remaining in those.funds is sufficient to satisfy the required deposits in those funds for the remaining Parity Bonds. All money in the Bond Fund or Reserve Fund may be kept in cash or on deposit in the official bank depository of the City or in any national bank or may be invested in any legal investment for City funds. Interest on any of those investments or on that bank account shall be deposited in the Reserve Fund until the total Reserve Requirement shall have been accumulated therein, after which time the interest shall be deposited in any Parity Bond Fund. Notwithstanding the provisions for the deposit or maintenance of earnings in the Bond Fund or the Reserve Fund, any earnings which are subject to a federal tax or rebate requirement may be withdrawn from the Bond Fund or the Reserve Fund for deposit into a separate fund or account for that purpose. If the City fails to set aside and pay into the Bond Fund or the Reserve Fund the amounts set forth above,the Owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. 26 ORDINANCE NO. 4 9 7 6 Section 16. Flow of Funds. Funds in the Waterworks Utility Fund (other than in any bond redemption or federal rebate account) shall be used in the following order of priority: (a) To pay Maintenance and Operation Expense; • (b) To pay the interest on the Outstanding Parity Bonds and Parity Bonds; (c) To pay the principal of the Outstanding Parity Bonds and Parity Bonds; (d) To make all payments required to be made into any sinking fund or bond redemption fund hereafter created for the payment of Future Parity Bonds which are Term Bonds; (e) To make all payments required to be made into the reserve accounts created to secure the payment of the Outstanding Parity Bonds and Parity Bonds; After the New Covenant Date, subsection(e) of this Section shall be amended to read as follows: To make all payments required to be made into the Reserve Fund; (f) To make all payments required to be made into any revenue bond redemption fund or warrant redemption fund and debt service account or reserve account created to pay and secure the payment of the principal of and interest on any revenue bonds or revenue warrants of the City having a lien upon Gross Revenue junior and inferior to the lien thereon for the payment of the principal of and interest on the Outstanding Parity Bonds and Parity Bonds; and (g) To retire by optional redemption or purchase in the open market any outstanding revenue bonds or revenue warrants of the City,to make necessary additions, betterments, improvements and repairs to or extensions and replacements of the Waterworks Utility, after the New Covenant Date,to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. Section 17. Pledge of Revenue and Lien Position. The Gross Revenue is pledged to the payments set forth in Section 15, and the Bonds shall constitute a lien and charge on that revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense, except that the lien and charge on such revenue for the Bonds shall be on a parity with 27 � �F ORDINANCE NO. 4 9 7 6 the lien and charge thereon for the Outstanding Parity Bonds, the 1998 Bonds and any Future Parity Bonds. After the New Covenant Date,this Section shall be amended to read as follows: The Net Revenue is pledged to the payment of the Parity Bonds, and the Parity Bonds shall constitute a lien and charge upon such Net Revenue prior and superior to any other charge whatsoever. Section 18. Findings Regarding Sufficiency of Revenue. In the judgment of the City Council, Gross Revenue and benefits to be derived from the operation and maintenance of the Waterworks Utility, at the rates to be charged for water, sanitary sewage disposal service and storm and surface water drainage service in the entire utility,will be more than sufficient to meet all Maintenance and Operation Expense (and cost of maintenance and operation of the Waterworks Utility as that term is used in RCW 35.92.100) and the debt service requirements of the Outstanding Parity Bonds and the 1998 Bonds and to permit the setting aside in the Bond - Fund, and after the New Covenant Date, the Bond Fund and the Reserve Fund, out of the 1 revenue of the entire utility, of amounts sufficient to pay the interest on the Bonds as that interest becomes payable and to pay and redeem all of the Bonds at maturity. The City Council further declares that in creating the Bond Fund and in fixing the amounts to be paid into the Bond Fund, and after the New Covenant Date,the Bond Fund and the Reserve Fund, as aforesaid, it has exercised due regard for the Maintenance and Operation Expense (and costs of maintenance and operation as used in RCW 35.92.100) and the debt service requirements of the currently outstanding Outstanding Parity Bonds and 1998 Bonds, and the City has not bound and obligated itself to set aside and pay into the Bond Fund, and after the New Covenant Date, the Bond Fund and the Reserve Fund, a greater amount or proportion of the revenue of that utility than in the 28 1 ORDINANCE NO. 4 9 7 6 judgment of the City Council will be available over and above Maintenance and Operation Expense (and such costs of maintenance and operation of the Waterworks Utility as that term is used in RCW 35.92.100) and debt service requirements of the Outstanding Parity Bonds and the 1998 Bonds and that no portion of the Gross Revenue has been previously pledged for any unrefunded indebtedness other than the payment of the currently outstanding Outstanding Parity Bonds and 1998 Bonds. Section 19. Covenants. The City covenants and agrees with the Owner of each Bond at any time outstanding as follows: (a) It will establish,maintain and collect such rates and charges for water, sanitary sewage disposal service and storm and surface water drainage service so long as any Outstanding Parity Bonds, 1998 Bonds and Bonds are outstanding as will make available for the payment of the principal of and interest on such bonds an amount equal to at least 1.3 times the average annual debt service requirements, both principal and interest, on the Outstanding Parity Bonds,the 1998 Bonds and the Bonds after deducting Maintenance and Operation Expense from Gross Revenue. After the New Covenant Date, subsection(a) of this Section shall be amended to read as follows: It will establish, maintain and collect rates and charges for all services and facilities provided by the Waterworks Utility which will be fair and nondiscriminatory, and will adjust those rates and charges from time to time so that: (1) Gross Revenue will at all times be sufficient to (A)pay all Maintenance and Operation Expense on a current basis, (B)pay when due all . amounts that the City is obligated to pay into the Reserve Fund and any Parity Bond Funds and (C)pay all taxes, assessments or other governmental charges lawfully imposed upon the Waterworks Utility or other revenue therefrom or { I payments in lieu thereof and any and all other amounts which the City may now or hereafter become obligated to pay from Gross Revenue by law or contract; and (2) Net Revenue in each calendar year will be at least equal to the Coverage Requirement. (b) It will at all times maintain and keep the Waterworks Utility in good repair, working order and condition and also will at all times operate such Utility and the business in connection therewith in an efficient manner and at a reasonable cost. l 29 ORDINANCE NO. 4 9 7 6 (c) It will not sell, lease, mortgage or in any manner encumber or dispose of all the property of the Waterworks Utility unless provision is made for payment into each of the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the 1998 Bonds and the Bond Fund of sums sufficient to pay, respectively,the principal of and interest on all Outstanding Parity Bonds, 1998 Bonds and the Bonds at any time outstanding, and that it will not sell, lease, mortgage, or in any manner encumber or dispose of anylpart of the property of the Waterworks Utility that is used, useful and material to the operation thereof, unless provision is made for replacement thereof, or for payment into the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the 1998 Bonds and the Bond Fund of the total amount of revenue received which shall not be less than an amount which shall bear the same ratio to the amount of the Outstanding Parity Bonds, 1998 Bonds and Bonds,respectively, as the revenue available for debt service for such outstanding bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the utilitysold, leased, encumbered or disposed of bears to the revenue available for debt service for such bonds from the entire utility for the same period. Any such money so paid into such funds shall be used to retire(such outstanding bonds at the earliest possible date. After the New Covenant Date, subsection (c) of this Section shall be amended to read as follows: It will not sell or otherwise dispose of the Waterworks Utility in its entirety unless, simultaneously with such sale or other disposition, all Parity Bonds are defeased pursuant to the provisions of this ordinance. It will not sell, lease, mortgage or in any manner encumber or otherwise dispose of any part of the Waterworks Utility(other than timber), including all additions and improvements thereto and extensions thereof at any time made,that are used, useful or material in the operation of the Waterworks Utility, unless provision is made for the replacement thereof or for payment into the Bond Fund of the greatest of the following: 1 (1) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (defined as the total amount of those bonds less the amount of cash and investments in the Reserve Fund and any Parity Bond Funds)that Gross Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Gross Revenue for that period; (2) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (as defined above)that the Net Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Net Revenue for that period; or (3) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (as defined above)that the depreciated cost 30 it 1 ' ORDINANCE NO. 4976 value of the facilities sold or disposed of bears to the depreciated cost value of the entire Waterworks Utility immediately prior to such sale or disposition. Notwithstanding any other provision of this subsection, (1)the City in its discretion may sell or otherwise dispose of any of the works,plant, properties or facilities of the Waterworks Utility 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 Waterworks Utility, or no longer necessary,material to or useful to the operation of the Waterworks Utility, without making any deposit into the Bond Fund, and (2)the City may transfer the Waterworks Utility to another municipal corporation so long as Net Revenue of the portion of the Waterworks Utility so transferred is used for payment of debt service on the Parity Bonds prior to any other purpose. In no event shall such proceeds be treated as Gross Revenue for purposes of this ordinance. (d) It will,while any of the Bonds remain outstanding, keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to the Waterworks Utility, and it will furnish the original purchaser -- or purchasers of the Bonds or any subsequent owner or owners thereof at the written request of such owner or owners complete operating and income statements of such utility in reasonable detail issued in any calendar year not more than ninety days after the close of such calendar year, and it will grant any Owner or Owners of at least twenty-five percent of the outstanding Bonds the right at all reasonable times to inspect the entire Waterworks Utility and all records, accounts and data of the City relating thereto. Upon request of any Owner of any of the Bonds, it also will furnish to such Owner a copy of the most recently completed audit of the City's accounts by the State Auditor of Washington. After the New Covenant Date, subsection(d) of this Section shall be amended to read as follows: It will keep proper books, records and accounts with respect to the operations, income and expenditures of the Waterworks Utility in accordance with proper accounting procedures and any applicable rules and regulations prescribed by the State. 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 Waterworks Utility 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 Reserve Fund and into any and all special funds or accounts created pursuant to 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 Waterworks Utility. Such statements shall be sent to the Owner of any Parity Bonds upon written request therefor being made to the City. (e) It will not furnish water, sanitary sewage disposal service or storm and surface water drainage service to any customer whatsoever free of charge and promptly will take legal action to enforce collection of all delinquent accounts. 31 ORDINANCE NO. 4 9 7 6 After the New Covenant Date, subsection (e) of this Section shall be amended to read as follows: 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 operation of the Waterworks Utility free of charge to any person, firm or corporation, public or private, other than the City, so long as any Parity Bonds are outstanding. On at least an annual basis, it will determine all accounts that are delinquent and will take all necessary action to enforce payment of such accounts against those property owners whose accounts are delinquent. (f) It will carry the types of insurance on the Waterworks Utility properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems, and the cost of such insurance shall be considered a part of operating and maintaining such utility. If, as, and when the United States of America or some agency thereof shall provide for war risk insurance,the City further agrees to take out and maintain such insurance on all or such portions of such utility on which such war risk insurance may be written in an amount or amounts to cover adequately the value thereof After the New Covenant Date, subsection(f) of this Section shall be amended to read as follows: It at all times will carry fire and extended coverage and such other forms of insurance, including public liability and property damage insurance, with responsible insurers and with policies payable to or on behalf of the City and any additional insureds on such of the buildings, equipment, works, plants,facilities and properties of the Waterworks Utility, and against such claims for damages, as are ordinarily carried by municipal or privately owned utilities engaged in the operation of like systems, or will implement and maintain a self-insurance or an insurance pool program with reserves adequate, in the reasonable judgment of the City,to protect the Waterworks Utility and the Owners of the Parity Bonds against loss. (g) It will pay all Maintenance and Operation Expense and the debt service requirements for the Outstanding Parity Bonds, the outstanding 1998 Bonds and the outstanding Bonds, and otherwise meet the obligations of the City as herein set forth. (h) It will take all actions necessary to prevent interest on the 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 Bonds or other funds of the City treated as proceeds of the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross income for federal income tax purposes. It will,to the extent arbitrage rebate requirements of Section 148 of the Code are applicable to the Bonds,take all action necessary to comply (or to be treated as having complied) with those requirements in connection with the Bonds, including the calculation and payment of any penalties that the City has elected to pay as an alternative 32 ORDINANCE NO. 4 9 7 6 to calculating rebatable arbitrage, and the payment of any other penalties if required under Section 148 of the Code to prevent interest on the Bonds from being 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 arbitrage certifications may not be relied upon. Section 20. No Private Activity Bonds. The City covenants that it will take no actions and will make no use of the proceeds of the Bonds or any other funds held under this ordinance which would cause any Bond to be treated as a"private activity bond" (as defined in Section 141(b) of the Code) subject to treatment under said Section 141(b) as an obligation not described in Section 103(a) of the Code,unless the tax exemption thereof is not affected. Section 21. Defeasance of the Bonds. The City may issue refunding bonds pursuant to State law 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 direct obligations of the United States of America maturing at a time or times and bearing interest in amounts (together with money, if necessary) sufficient to redeem and retire, refund or decrease 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, in Gross Revenue and in funds and accounts obligated to the payment of the defeased Bonds, other than the right to receive the funds so set 33 1 I ORDINANCE NO. 4 9 7 6 aside and pledged, 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 and, if the funds in the trust account are not available for such payment, shall have the residual right to receive payment of the principal of and interest on the defeased Bonds from Gross Revenue without any priority of lien or charge against such revenue or covenants with respect thereto except to be paid therefrom. After the establishing and full funding of the trust account,the City may then 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 owners of any other bonds then outstanding. If the refunding plan provides that the defeased Bonds or the refunding bonds to be � I issued be secured by cash and/or direct obligations of the United States of America or other legal investments.pending the prior redemption of the defeased Bonds and if such refunding plan also provides that certain cash and/or direct obligations of the Untied States of America or other legal investments are pledged irrevocably for the prior redemption of the defeased Bonds included in that refunding plan,then only the debt service on the Bonds which are not defeased Bonds and the refunding bonds,the payment of which is not so secured by the refunding plan, shall be included in the computation of coverage for determining compliance with the rate covenants. Section 22. Provision for Future Parity Bonds. The City reserves the right to issue Future Parity Bonds which will constitute a lien and charge on Gross Revenue on a parity with the Outstanding Parity Bonds,the 1998 Bonds and the Bonds if the conditions set forth in Section 13 of Ordinance No. 3188, as modified and strengthened by Section 12 of Ordinance 34 ORDINANCE NO. 4 9 7 6 No. 3720, are met and complied with at the time of the issuance of those Future Parity Bonds, which sections are by this reference incorporated herein and made a part hereof and shall continue to be applicable even though the 1953 Bonds have been paid and retired. After the New Covenant Date, this Section shall be amended to read as follows: The right of the City to issue bonds on a parity of lien with the 1977 Bonds, the 1988 Bonds,the 1989 Bonds,the 1989 Refunding Bonds,the 1990 Bonds,the 1992 Bonds,the 1993 Refunding Bonds and the 1994 Bonds is permanently revoked. The City reserves the right to issue Future Parity following conditions are met and complied with at the time of issuance of those Bonds if the p g additional bonds: (a) There shall be no deficiency in any Parity Bond Fund. (b) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the payment of the principal thereof and interest thereon out of a Parity Bond Fund. (c) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds of(1) an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or(2)Reserve Insurance or Alternate Security or an amount plus Reserve Insurance or Alternate Security equal to the increase in the Reserve Requirement attributable to those Future Parity Bonds. For federal income tax purposes, at the discretion of the City,to the extent that the Reserve Requirement cannot be funded from Future Parity Bond proceeds, the City shall provide for deposit into the Reserve Fund other legally available money from Net Revenue or Reserve Insurance or Alternate Security within three years from the date of issuance of the Future Parity Bonds in three 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 applicable Parity 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 to their maturity date from money in the applicable Parity Bond Fund. (f) There shall be on file the City either: 35 { ORDINANCE NO. 4 9 7 6 (1) a certificate of the City Finance Director demonstrating that during any 12 consecutive calendar months out of the immediately preceding 36 calendar months Net Revenue, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least the Coverage Requirement for all Parity Bonds plus the Future Parity Bonds proposed to be issued; or (2) a certificate of a Professional Utility Consultant that in such consultant's opinion Revenue for any 12 consecutive calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to the Coverage Requirement for each year thereafter. The certificate, in i estimating Net Revenue available for debt services, may adjust Net Revenue to reflect: (A) Any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; (B) Income derived from customers of the Waterworks Utility who have become customers during the 12 consecutive month period or thereafter adjusted to reflect one year's Net Revenue from those customers; ! - j (C) Income from any customers to be connected to the Waterworks Utility who have paid the required connection charges; (D) The Professional Utility Consultant's estimate of the Net Revenue to be derived from customers anticipated to connect for whom building permits have been issued; (E) Income received or to be received which is derived from any person, firm corporation or municipal corporation under any executed contract for water, sewage disposal or other utility service, which revenue was not included in the historical Net Revenue; (F) I The Professional Utility Consultant's estimate of the Net Revenue to be derived from customers with existing homes or buildings which will be required to connect to any additions to and improvements and extensions of the Waterworks Utility 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 Waterworks Utility when such additions, improvements and extensions are not completed; and I 36 ORDINANCE NO. 4 9 7 6 (G) Any increases or decrease in Net Revenue as a result of any actual or reasonably anticipated changes in Maintenance and Operation Expense subsequent to the 12-month period. If Future Parity Bonds proposed to be so issued are for the sole purpose of refunding outstanding bonds payable from any Parity Bond Fund, such certification of coverage shall not be required if the amount required for the payment of the principal and interest in each year for therefunding bonds is not increased more than$5,000 over the amount for that same year required for the bonds or the portion of that bond issue to be refunded thereby and if the maturities of such refunding bonds are not extended beyond the maturities of the bonds to be refunded thereby. Nothing contained herein shall prevent the City from issuing Future Parity Bonds to refund maturing Bonds or Future Parity Bonds then outstanding,money for the payment of which is not otherwise available. Nothing contained herein shall prevent the City from issuing revenue bonds that are a charge upon Gross Revenue subordinate to the payments required to be made therefrom into any Parity Bond Fund. Section 23. Approval of Purchase Agreement. The Purchaser has presented the Purchase Agreement to the City pursuant to which the Purchaser has offered to purchase the Bonds. The City Council finds that entering into the Purchase Agreement is in the best interests of the City, and therefore accepts the offer contained in the Purchase Agreement and authorizes and directs the execution of the Purchase Agreement on behalf of the City by City officials, and delivery of the same to the Purchaser. The Bonds will be delivered to the Purchaser in accordance with the Purchase Agreement with a copy of the approving legal opinion of Gottlieb,Fisher &Andrews, PLLC, bond counsel, Seattle, Washington,relative to the issuance of the Bonds, attached to each Bond. Bond counsel has not been engaged to review or express any opinion concerning the completeness or accuracy 37 ORDINANCE NO. 4 9 7 6 of the official statement or other disclosure documentation used in connection with the offer or sale of the Bonds by any person, and bond counsel's opinion shall so state. Bond counsel has not been retained to monitor, and shall not be responsible for monitoring, the City's compliance with any federal law or regulations to maintain the tax-exempt status of the interest on the Bonds. Section 24. Bond Insurance. The City is authorized to purchase from the Bond Insurer the Bond Insurance Policy insuring the prompt payment of the principal of and interest on the Bonds and agrees to the conditions for obtaining that policy, including the payment of the T I premium therefor. Any notice required to be given to the Bond Insurer shall be sent by certified or registered mail to Financial Security Assurance Inc., One Market, 1550 Spear Tower, San Francisco, California 94105. Section 25. Delivery of Bonds; Temporary Bonds. The proper City officials, including, but not limited to,the City Finance Director, are authorized and directed (a)to execute all . documents necessary to complete.the issuance and delivery of the Bonds to the Purchaser, including, but not limited to,the final official statement pertaining to the Bonds; and (b)to do everything necessary for (1)the preparation and delivery of a transcript of proceedings pertaining to the Bonds, and (2)the preparation, execution and delivery of definitive Bonds to the Purchaser, each without unreasonable delay. If definitive Bonds are not ready for delivery by the date of Closing agreed to by the City and the Purchaser, the City; upon the approval of the Purchaser,may cause to be issued and delivered to the Purchaser one or more temporary Bonds with appropriate omissions, changes and additions. Any temporary Bonds shall be entitled and subject to the same benefits and provisions of this ordinance with respect to the payment, security and obligation thereof as 38 ORDINANCE NO. 4 9 7 6 definitive Bonds authorized hereby. Such temporary Bond or Bonds shall be exchangeable without cost to the Owner thereof for definitive Bonds when the latter are ready for delivery. Section 26. Application of Bond Proceeds. The accrued interest received by the City at Closing shall be deposited into the Principal and Interest Account and shall be applied to the payment of interest first coming due on the Bonds. The remaining proceeds of the sale of the Bonds, less the underwriter's discount and the bond insurance premium to be paid by the Purchaser on behalf of the City,plus the net original issue premium, in the amount of$11,850,322.87 shall be deposited,upon receipt,to the "Waterworks Utility Construction Fund" (the "Project Fund"), established in the office of the • City Finance Director,to pay part of the costs of the Project. Except as provided by the Code and Section 18(h) of this ordinance,the interest and profits derived from the investment of Bond proceeds shall be deposited in the Project Fund and applied as described in the preceding paragraph. Except as provided by the Code and Section 18(h) of this Ordinance, if any money allocable to the Bond proceeds remains in the Project Fund after payment of all the costs of the Project or after termination of the Project by the City, such money shall be transferred to the Bond Fund and applied to the payment of the principal of and interest on the Bonds. - Pending application as described in this Section 30 and subject to the requirements of the Code and Section 18(h) of this ordinance, money allocable to the Bond proceeds in the Project Fund may be temporarily deposited in such institutions or invested in such investments as may be lawful for the investment of City funds. 39 ORDINANCE NO. 4 9 7 6 Section 27. Undertaking to Provide Continuing Disclosure. This section constitutes the City's written undertaking for the benefit of the Owners and Beneficial Owners of the Bonds required by subsection (b)(5)(i) of the Rule. The City hereby agrees to provide or cause to be provided to each then existing NRMSIR and to the SID, if one is created,the following annual financial information and operating data (collectively,the "Annual Financial Information") for each prior fiscal year, commencing with the calendar year ending December 31, 2002, on or before the last day of the seventh month following the end of such prior fiscal year: (a) • Annual financial statements prepared in accordance with the generally accepted accounting principles applicable to governmental units, as such principles may be changed from time to time and as permitted by State law; which statements will not be audited, except that if and when audited financial statements are otherwise prepared and available to the City, they will • be provided (the "Annual Financial Statements"); (b) A statement of authorized, issued and outstanding bonded debt secured by the Gross Revenue or Net Revenue; (c) Debt service coverage ratios; (d) General customer statistics for the Waterworks Utility; and (e) A narrative explanation of the reasons for any amendments to this Section 27 made during the previous fiscal year and the impact of such amendments on the Annual Financial Information being provided. In its provision of such financial information and operating data,the City may cross- reference to any"final official statement" (as defined in the Rule) available from the MSRB or 40 ORDINANCE NO. 4 9 7 6 any other documents theretofore provided to each then existing NRMSIR or the SID, if one is created. If not submitted as part of the Annual Financial Information,then when and if available, the City shall provide its Annual Financial Statements, which shall have been audited by such auditor as shall be then required or permitted by the State law, to each then existing NRMSIR and to the SID, if one is created. The City further agrees to provide or cause to be provided, in a timely manner,to the SID, if one is created, and to either the MSRB or each then existing NRMSIR,notice of any of the following events with respect to the Bonds, if material: 1. Principal and interest payment delinquencies; 2. Non-payment related defaults; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions or events affecting the tax-exempt status of the Bonds; - 7. Modifications to rights of the Owners of the Bonds; 8. Optional redemptions of the Bonds; 9. Defeasances of the Bonds; 10. Release, substitution or sale of property securing repayment of the Bonds; and 11. Rating changes. The City also agrees to provide or cause to be provided, in a timely manner,to the SID, if one is created, and to either the MSRB or each then existing NRMSIR, notice of its failure to 41 • ORDINANCE NO. 4 9 7 6 provide the Annual Financial Information for the prior fiscal year on or before the last day of the seventh month following the end of such prior fiscal year. After the issuance of the Bonds, so long as the interests of the Owners or Beneficial Owners of the Bonds will not be materially impaired thereby, as determined by a party unaffiliated with the City(including, without limitation, a trustee for the Owners,nationally recognized bond counsel or other counsel familiar with the federal securities law), or pursuant to a favorable"no-action letter" issued by the SEC,this Section 27 may only be amended in connection with any change in legal requirements, change in law, or change in the identity, nature or status of the obligated person, or type of business conducted, and only in such a manner that the undertaking of the City,as so amended, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. The City's obligations to provide Annual Financial Information and notices of certain events shall terminate without amendment upon the defeasance,prior redemption or payment in full of all of the then outstanding Bonds. This Section 27 or any provision hereof, shall be null and void if the City(i) obtains an opinion of nationally recognized bond counsel or other counsel familiar with the federal securities laws to the effect that those portions of the Rule which require this Section 27 or any such provision are invalid, have been repealed retroactively or otherwise do not apply to the Bonds; and (ii)notifies and provides the SID, if any, and either the MSRB or each then existing NRMSIR with copies of such opinion. The right of each Owner or Beneficial Owner of Bonds to enforce the provisions of this Section 27 shall be limited to the right to obtain specific enforcement of the City's obligations 42 ORDINANCE NO. 4 9 7 6 under this Section 27, and any failure by the City to comply with the provisions of this undertaking shall not be a default with respect to the Bonds under this ordinance. The City Finance Director is authorized and directed to take such further action on behalf of the City as may be necessary, appropriate or convenient to carry out the requirements of this Section 27. Section 28. Preliminary Official Statement Deemed Final. The City Council has been provided with copies of a preliminary official statement dated June 20, 2002 (the"Preliminary Official Statement"),prepared in connection with the sale of the Bonds. For the sole purpose of the Bond purchaser's compliance with paragraph (b) (1) of the Rule, 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. 43 • ORDINANCE NO. 4 9 7 6 Section 29. Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval and five days after publication. PASSED by the City Council this 1st day of July, 2002. .VJ. G /G1,tierk- Bonnie Walton, City Clerk APPROVED BY THE MAYOR this 1st day of July, 2002. Jel anner, Mayor Approved as to Form: 411CNpBond Co sel Date of Publication: 7/5/0 2 (Summary) 44 RENTON CITY COUNCIL Regular Meeting July 1, 2002 Council Chambers Monday,7:30 p.m. MINUTES Renton City Hall CALL TO ORDER Mayor Jesse Tanner led the Pledge of Allegiance to the flag and called the meeting of the Renton City Council to order. ROLL CALL OF TONI NELSON, Council President;DAN CLAWSON; KATHY KEOLKER- COUNCILMEMBERS WHEELER;TERRI BRIERE;KING PARKER;DON PERSSON;RANDY CORMAN. CITY STAFF IN JESSE TANNER,Mayor;JAY COVINGTON,Chief Administrative Officer; ATTENDANCE LAWRENCE J.WARREN,City Attorney;BONNIE WALTON, City Clerk; JIM SHEPHERD,Community Services Administrator; SANDRA MEYER, Transportation Systems Director;NICK AFZALI,Transportation Planning& Programming Supervisor;VICTORIA RUNKLE,Finance&Information Services Administrator;JILL MASUNAGA,Finance Analyst;DAWNA TRUMAN,Accounting Assistant;DEREK TODD,Assistant to the CAO; CHIEF GARRY ANDERSON,COMMANDER ROBERT SEELYE, COMMANDER KATHLEEN MCCLINCY and OFFICER ALAN EZFKIEL, Police Department. " • PUBLIC HEARING This being the date set and proper notices having been posted and published in Transportation: Six-Year TIP accordance with local and State laws,Mayor Tanner opened the public hearing (2003-2008) to consider the annual update of the Six-Year Transportation Improvement Program(TIP), 2003 -2008. Transportation Systems Director Sandra Meyer stated that one of the City's biggest successes has been to serve on the Washington State Department of Transportation(WSDOT)I-405 Corridor Program Steering Committee,and she announced that the Preferred Alternative has been identified for the project. She reported that the Final Environmental Impact Statement was released today,and that the majority of the funding for the project proposed under Referendum 51 is for the I-405/SR-167 interchange. Nick Afzali,Transportation Planning&Programming Supervisor, explained the purpose of the TIP and reviewed the City's transportation goals which include developing a balanced multi-modal transportation system,maximizing the use of transit,improving freight mobility,obtaining project and program funding, and protecting the environment. He stated that transportation projects are placed in five categories within the TIP,and he detailed the transportation challenges and opportunities the City faces which include: SW 27th St./Strander Blvd.Extension,NE 3rd and 4th Streets Corridor Study, SR-169 (Maple Valley Hwy.)HOV and Queue Jump Improvements, and Duvall Ave. NE Improvements. Continuing,Mr. Afzali described the various funding sources for the transportation projects, saying that the total expenditure plan over the next six years is $102,104,799 of which$76,104,439 is unfunded and$26,000,360 is funded. He detailed the six new projects added to the TIP which are as follows: Sunset Blvd./I-405 Interchange, Grady Way Approach at Rainier Ave.,Houser Way S.—Main Ave. S. to Burnett Ave. S.,Trans Valley ITS (Intelligent Transportation System),NE 4th St./Hoquiam Ave., and Transit Center Public Safety(install video surveillance). In conclusion,Mr. Afzali reviewed the July 1,2002 Renton City Council Minutes Page 258 projects that were or will be completed this year, which are: Oakesdale Ave. SW Phase II, Strander Blvd. Project Definition, Transit Center,Benson Rd. S. Improvements,Transit Needs Assessment,East Valley Rd. &SW 43rd St., Walkway&Curb Ramps, and NE 44th St. Interchange 30% Design. Audience comment was invited. There being none, it was MOVED BY PARKER, SECONDED BY NELSON, COUNCIL CLOSE THE PUBLIC HEARING. CARRIED. (See page 263 for Transportation Committee report.) ADMINISTRATIVE Chief Administrative Officer Jay Covington reviewed a written administrative REPORT report summarizing the City's recent progress towards goals and work programs adopted as part of its business plan for 2002 and beyond. Items noted included: * Picnic Pizzazz, a creative kids entertainment series,provides free entertainment at local parks. First in the series is Rhinestone Roper, which will be held in Liberty Park at noon on Thursday,July 11th. * Seattle Public Utilities has informed the City that they are moving forward with the pre-design of electrically-operated water isolation valves to be installed at the west end of Renton(such valves could be closed in case of a pipeline failure and help prevent water damage in Renton). The project will take two years, and the valves are scheduled to be installed by December 2004. However, this assumes that Seattle City Council will pass the proposed water rate increase—if not, all Seattle Capital Improvement projects will be re-evaluated,including this one. AUDIENCE COMMENT The following people spoke in support of the Whitworth Ave. S. street vacation Citizen Comment: Various— request by St. Anthony Parish(VAC-00-003): Mike Borte, 11254 SE 190th Whitworth Ave S Vacation, St. Ct.,Renton, 98055; Nick Frisch, 15749 142nd Pl. SE, Renton, 98058;Lee Anthony Church(VAC-00- Kranz, 10367 SE 187th P1.,Renton, 98055; Dwight Newell, 18816 SE 174th 003) Way,Renton, 98058; Richard Buyce, 274 Thomas Ave. SW,Renton, 98055; and Arlen "Buzz" Johnson, 334 Wells Ave. S.,#221,Renton, 98055. Speakers comments included: the street vacation and parish improvements is a good plan and compliments the downtown Renton improvements; the parish draws people to Renton and they patronize local businesses; and the vacation will create a safe environment for children and others who use St. Anthony's facilities. Additional comments indicated that the vacation will create.a unified campus in downtown Renton which is beneficial to the City, will improve the neighborhood parking problems by removing cars from the streets,would not impact the entry and exit from the neighborhood, and would increase children's safety. Speakers also requested that Council make a decision on the matter as soon as possible. Responding to Councilman Corman's inquiry regarding the project status, Councilwoman Keolker-Wheeler explained that the Planning&Development Committee is waiting for a report from staff and then will determine if the issue will remain in Planning&Development Committee or be referred to Committee of the Whole. CONSENT AGENDA Items on the consent agenda are adopted by one motion which follows the listing. Council Meeting Minutes of Approval of Council meeting minutes of June 24,2002. Council concur. June 24,2002 July 1,2002 Renton City Council Minutes Page 259 CAG: 02-096, Sunnydale City Clerk reported bid opening on 6/25/2002 for CAG-02-096, Sunnydale Downstream Storm System Downstream Storm System Replacement Project; six bids; engineer's estimate Replacement,Harborside Inc $144,986.88;and submitted staff recommendation to award the contract to the low bidder,Harborside,Inc., in the amount of$116,416. Council concur. Plat: McTighe(Honeybrooke), Development Services Division recommended approval, with conditions, of the NE 4th PI &Ilwaco Ave NE McTighe Final Plat(also known as Honeybrooke); 25 single-family lots on 4.67 (FP-02-016) acres located in the vicinity of NE 4th Pl. and Ilwaco Ave. NE(FP-02-016). Council concur. (See page 264 for resolution.) MOVED BY NELSON,SECONDED BY CLAWSON, COUNCIL APPROVE THE CONSENT AGENDA AS PRESENTED. CARRIED. Removal of Item Laid on MOVED BY CORMAN, SECONDED BY PARKER, COUNCIL SUSPEND Table at Council Meeting of THE RULES AND TAKE FROM THE TABLE RECONSIDERATION OF June 24, 2002 THE ORDINANCE ADDING THE POSITIONS OF CRIME ANALYST, EVIDENCE TECHNICIAN AND A COMMISSIONED OFFICER TO THE POLICE DEPARTMENT,AND A SECRETARY 1 TO THE FIRE • DEPARTMENT(LAID ON THE TABLE AT THE JUNE 24, 2002, COUNCIL MEETING). CARRIED. Budget: 2002 Amendment, Councilman Parker conducted a presentation,prepared with the assistance of Additional Police&Fire City staff and Councilman Corman, in support of the Public Safety Committee Department Positions minority report presented at the June 10th Council meeting,recommending that Council authorize the addition of the crime analyst and evidence technician positions to the Police Department. He explained that this issue is being discussed tonight due to the Mayor's veto of the above stated ordinance submitted at the June 24th Council meeting. Stating that five positions have been added in 2002: two police officers, two school resource officers and an animal control officer,Mr. Parker detailed the staffing history of the Police Department as well as commissioned officer growth since 1998. Mr. Parker reviewed the duties and responsibilities of the Police Chief. He stated that the remaining 2002 staffing priorities are the addition of the evidence technician and crime analyst positions, and explained why these positions are important and how they will benefit the Police Department. Mr. Parker discussed the response times for calls for police service, class one crimes, the number of officers per 1,000 of population, minimum and maximum patrol staffing,and how Renton compares with other jurisdictions in these categories. In addition,he listed the types of calls that merit an emergency or priority-one response,pointing out that emergency response calls, which are a part of priority-one calls, are responded to in less than one minute. Continuing,Mr. Parker reviewed Renton's financial situation, and noted that it is not a good time to add more positions in addition to the analyst and technician positions,due to the slowing economy and declining revenues. Stating that public safety is important, he pointed out that facilities and amenities such as the Farmers Market,Performing Arts Center, Skate Park and swimming pool all contribute towards public safety. In addition,Mr. Parker indicated that the City's budget policies which state that: ongoing operations shall be funded from ongoing revenue, operating revenue and expenditures shall be monitored and adjusted if necessary to ensure expenditures do not exceed revenues over time, and revenue shall be conservatively projected, are a guideline that the City should adhere to. July 1,2002 Renton City Council Minutes Page 260 J Mr. Parker stated that everyone agrees that public safety is the number one ongoing priority, and-he reiterated that public safety is more than police on the streets; it includes developing an infrastructure than enables them to do their work. Public safety also includes code enforcement, nuisance abatement, zoning, police support staff, tools, training and technology. He commented that in this economy the City must remain true to its priorities and budget policies, and the additional police positions will strengthen the support system for the officers to help them become even more efficient and effective. In conclusion, Mr. Parker urged Council to strengthen the Police Department at its foundation and follow the recommendation of the Police Chief by adding the evidence technician and crime analyst positions. Councilman Corman emphasized that a holistic approach to public safety is important. Responding to Councilwoman Keolker-Wheeler's question regarding the electronic home detention program,Finance&Information Systems Administrator Victoria Runkle stated that revenue generated by the program is approximately$150,000 per year and the cost of the electronic home detention coordinator is$65,000 to$70,000 annually. Responding to Councilwoman Keolker-Wheeler's questions regarding the patrol officers and school resource officers,Police Chief Garry Anderson stated that eight commissioned officers had been added to the Police Department since 1998,not all of them to the patrol division. He discussed the staffing level figures and determined that there are currently 53 patrol officers assigned to the patrol operation division. Chief Anderson noted that school resource officers are assigned to administrative services and not to patrol operations.' Chief Anderson explained that of the Police Department's four school resource officers, two are employed by the City of Renton and two are funded by a three- year grant from the Department of Justice(75%)and from the Renton School District(25%). Stating that the school resource officers are not restricted from responding to non-school related calls,he described the types of calls they respond to. Chief Anderson indicated that they serve a school population of approximately 13,000 students and play an important role in crime prevention. He noted that the school resource officer's calls for service are included along with patrol officer's calls for service in the International City Managers Association(ICMA)calls for service formula. In regards to Councilwoman Keolker-Wheeler's inquiries about crime statistics and how Renton compares with other cities,Police Chief Anderson reviewed the statistics and explained that if a crime analyst were hired, that person would analyze the crime statistics to determine how present resources can be used in the most effective way possible. He said that the City would be proactive, instead of reactive, and use the information already gathered to better patrol the streets of Renton. Chief Anderson agreed that more patrol officers are needed, as well as other City positions, and stated that there is a plan in place that prioritizes the needs of the Police Department with current priority being the hiring of the evidence technician and crime analyst. Responding to Councilman Clawson's inquiry regarding the cost of a Fire Department Secretary 1 position,Ms. Runkle stated that it would cost approximately$43,000 annually, and pointed out that the cost could be July 1,2002 Renton City Council Minutes Page 261 absorbed in 2002 through department savings; however, the position would probably need to be funded by new money in 2003. Responding to Councilman Clawson's question regarding the budget surplus forecast, Chief Administrative Officer Jay Covington stated that a surplus was predicted for 2003, and budget deficits predicted for 2004,2005 and 2006. Councilman Clawson commented that more discussion is needed regarding one- time money and why it cannot be used for essential services. Councilman Parker said that investing one-time money into capital projects does return the money to the community in some form of services. Discussion ensued regarding one-time revenues, the use of five-year averages in budget planning, and Council budget policies. Councilwoman Keolker-Wheeler brought up the subject of the proposed fund balance recommendations made in March and the proposal that money be borrowed to finance the Pavilion Building,Parks Maintenance Facility, Veterans Memorial Park and swimming pool resulting in debt service over a period of twenty years. She questioned why money was available to pay for debt service at that time, and now is unavailable to fund the requested positions. Council discussion ensued concerning the debt service, operational costs for the facilities,the need for a Parks Maintenance Facility, and additional funding options available to fund the requested positions. Moved by Corman, seconded by Nelson, Council call for the question on the motion to reconsider adoption of the ordinance adding the positions of Crime Analyst,Evidence Technician and a Commissioned Officer to the Police Department and a Secretary 1 to the Fire Department.* Councilwoman Keolker-Wheeler suggested waiting to see if there are comments from citizens regarding staffing at the upcoming 2003 Budget public hearing scheduled for July 8th. Stating that Committee of the Whole will be presented with revenue figures for the first half of 2002 at its July 22nd meeting,Ms. Keolker-Wheeler indicated that she would also like to know how many non-school related calls the school resource officers respond to, and the costs of the four proposed positions. She recommended delaying a decision on this item until more information is provided. Council President Nelson stated that the call for the question should be enforced, and the matter should be discussed again during budget deliberations. *Motion and second withdrawn. RECESS MOVED BY CORMAN, SECONDED BY KEOLKER-WHEELER, COUNCIL RECESS FOR FIVE MINUTES FOR LEGAL RESEARCH. CARRIED. Time: 10:00 p.m. The meeting was reconvened at 10:10 p.m.; roll was called; all Councilmembers present. Budget: 2002 Amendment, Moved by Clawson, seconded by Persson, Council amend the motion to Additional Police&Fire approve the ordinance by amending the ordinance to state Evidence Technician Department Positions and Fire Department Secretary 1 positions.* (continued) *Motion determined to be out of order by City Attorney Larry Warren, and the motion and second were withdrawn. July 1,2002 Renton City Council Minutes Page 262 MOVED BY PERSSON, SECONDED BY CORMAN, COUNCIL CALL FOR THE QUESTION ON THE MOTION TO RECONSIDER ADOPTION OF THE ORDINANCE ADDING THE POSITIONS OF CRIME ANALYST, EVIDENCE TECHNICIAN AND A COMMISSIONED OFFICER TO THE POLICE DEPARTMENT, AND A SECRETARY 1 TO THE FIRE DEPARTMENT. CARRIED. Roll call vote requested: four ayes: Clawson, Keolker-Wheeler, Briere, Persson; three nays: Nelson,Parker, Corman. Mayor Tanner stated that his veto submitted at the June 24th Council meeting was sustained. Moved by Parker, seconded by Corman, Council suspend the rules and proceed to the reading of the Public Safety Committee minority report regarding the addition of the crime analyst and evidence technician positions. Motion failed. CORRESPONDENCE The following correspondence was entered into the record in support of the Citizen Comment: Various— Whitworth Ave. S. street vacation request by St. Anthony Parish(VAC-00- Whitworth Ave S Vacation, St. 003): Diane A. Timmons, 14404 157th Pl. SE,Renton, 98059;Pat&Valeria Anthony Church(VAC-00- Hurlocker, 1622 Davis Ave. S.,Renton, 98055; Grace Magbaleta,4603 NE 003) 22nd P1.,Renton, 98059;Mary Ann Smith, 107 Main Ave. S.,#405,Renton, 98055; Nick&Marsha Frisch, 15749 142nd Pl. SE,Renton, 98058;Rich&Pat Buyce, 274 Thomas Ave. SW,Renton, 98055; Connie M. Thilmony,4440 NE 23rd Ct.,Renton, 98059;Harry Duex,4627 NE 7th Pl.,Renton, 98059;Linda DeCample, 111 Capri Ave. NE,Renton, 98056; Patty Merrill Struck, 2312 SE 21st St.,Renton, 98055; two letters from Fred Struck, 2312 SE 21st St.,Renton, 98055; Kevin Masterson, 18800 SE 134th St.,Renton, 98059; Eva M.Poland, 3306 NE 7th Pl.,Renton,98056;Louis Borges and Family, 4123 NE 19th St., Renton, 98059; Jerry&Barbara Heaton, 2223 Benson Rd. S.,#11203,Renton, 98055; Steve&Lydia Delmore, 823 S. 28th Ct.,Renton, 98055; Pat Dickinson, 4522 NE 24th St., Renton, 98059;Mary Jo&Paul Foseid,4319 NE 9th Pl., Renton,98059; Karen Kranz, 10367 SE 187th Pl.,Renton, 98055; Arland "Buzz" Johnson, 334 Wells Ave. S.,#221,Renton, 98055; and 13 form letters received from parents of students at St. Anthony School and parishioners at St. Anthony Parish. Added At the request of Councilman Corman, a letter was read from Janice E.Fluter, Citizen Comment: 1005 Shelton Ave. SE,Renton, 98058, and Marilyn Whitley, 969 Shelton Ave. Fluter/Whitley-Cedar River SE,Renton, 98058, regarding construction of the Cedar River spawning Spawning Channel channel at the Rolling Hills A site. The correspondents listed the additions to Replacement Site the proposal as agreed upon by the City and the neighboring community,and requested that the following considerations pertaining to construction also be included in the proposal: • Construction will not begin before 7:00 a.m. and will end by 5:00 p.m. each day. • Construction equipment will be parked 200 feet away from the river, providing safety for the river and protecting neighbors from unsightly equipment. • If construction requires security personnel, any trailers would also be placed away from the river,and fires and parties would be prohibited. July 1,2002 Renton City Council Minutes Page 263 • If construction must be interrupted due to spawning requirements, construction equipment will not be left on the site for longs periods,such as from one year to the next. Praising Ms.Fluter and Ms.Whitley for accurately capturing the agreement reached by staff and Council and adding the additional considerations,it was MOVED BY CORMAN, SECONDED BY BRIERE, COUNCIL REFER THIS LETTER TO THE ADMINISTRATION. CARRIED. OLD BUSINESS At the request of Councilman Clawson,his letter to Mayor Tanner was read Citizen Comment: Clawson.— regarding his request that members of the Renton Police Officers'Guild not be Renton Police Officers'Guild, subject to retaliation for coming forward to state their positions on adding staff Retaliation Against Members to the Police Department. In his letter he clarified his reasons for this request, discussed grievances and complaints filed by members of the Guild, and expressed concern about retaliation towards Guild members for expressing opinions than may be different than that of the Police Chief. Citizen Comment: Tanner— At the request of Mayor Tanner,his response to Councilman Clawson's letter Renton Police Officers'Guild, was read stating that the City has policies and procedures in place that prohibit Retaliation Against Members retaliation and harassment, and retaliation for differing,opinions will not be tolerated by him or the Police Chief. In his letter,Mayor Tanner discussed the grievances and complaints filed by members of the Renton Police Officers' Guild, and expressed concern that Mr. Clawson's insinuations are an attempt to drive a wedge between the Guild members and the Police Chief. Councilman Clawson thanked Mayor Tanner for his strong response to his letter. Finance Committee Finance Committee Chair Parker presented a report recommending approval of Finance: Vouchers Claim Vouchers 205300-205689 and two wire transfers totaling $1,462,767.84; and approval of Payroll Vouchers 38505 -38796, one wire transfer and 557 direct deposits totaling$1,701,012.87. MOVED BY PARKER,SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Transportation(Aviation) Transportation(Aviation)Committee Chair Persson presented a report Committee regarding the annual update of the Six-Year Transportation Improvement Transportation: Six-Year TIP Program(TIP). The Committee has reviewed the proposed 2003—2008 Six- (2003-2008) Year TIP and Arterial Street Plan and recommended adoption of the resolution, Arterial Street Plan and the TIP upon completion of the public hearing on July 1,2002. MOVED BY PERSSON, SECONDED BY KEOLKER-WHEELER, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See page 264 for resolution.) Community Services Community Services Committee Chair Corman presented a report concurring Committee with the recommendation of the Municipal Arts Commission to purchase hand- Community Services: 1%for painted mosaic tiles depicting themes from Renton for display at the new Art Program,Mosaic Tiles & Downtown Parking Garage. The tiles will be purchased with funds from the Two Statues 1%for Art Fund(Fund 125)and the total price will not exceed$3,000 plus tax. The Committee further concurred with the recommendation of the Municipal Arts Commission, the Board of Park Commissioners and the Library Board to purchase two statues entitled "Summer Breeze" and "Homework Comes First" to be placed in appropriate City parks. The statues will be purchased with funds from the 1%for Art Fund(Fund 125)and the total price of the two statues will not exceed$29,000 plus tax. MOVED BY CORMAN, July 1,2002 Renton City Council Minutes Page 264 SECONDED BY CLAWSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Councilwoman Keolker-Wheeler requested that pictures of the art be displayed at the July 8th Council meeting. ORDINANCES AND The following resolutions were presented for reading and adoption: RESOLUTIONS Resolution#3577 A resolution was read approving the McTighe(also known as Honeybrooke) Plat: McTighe(Honeybrooke), Final Plat consisting of approximately 4.67 acres located in the vicinity of NE NE 4th PI &Ilwaco Ave NE 4th Pl. and Ilwaco Ave. NE(FP-02-016). MOVED BY KEOLKER- (FP-02-016) WHEELER, SECONDED BY CORMAN, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. Resolution#3578 A resolution was read updating the City's Six-Year Transportation Transportation: Six-Year TIP Improvement Program(TIP),2003—2008. MOVED BY PERSSON, (2003-2008) SECONDED BY CORMAN, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. Resolution#3579 A resolution was read rescinding a development agreement dated January 4, Development Services: Boeing 2001,between The Boeing Company and the City of Renton, and authorizing Longacres Office Park the Mayor and City Clerk to execute an updated development agreement with Development Agreement The Boeing Company for future development of Longacres Office Park. MOVED BY KEOLKER-WHEELER, SECONDED BY BRIERE,COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. The following ordinances were presented for second and final reading and adoption: Ordinance#4975 An ordinance was read amending Chapters 4-8 and 4-9 of Title IV . Planning: Title IV (Development Regulations) of City Code to implement RCW(Revised Code of Development Regulation Washington) 36.70A.470 governing development regulation amendment cycles. Revision Process MOVED BY KEOLKER-WHEELER, SECONDED BY BRIERE, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. )1(.. Ordinance#4976 An ordinance was read relating to the waterworks utility of the City, including Finance: Bond Issuance,Water the sewerage system as a part thereof;providing for the issuance of &Sewer Projects $11,980,000 aggregate principal amount of Water and Sewer Revenue Bonds, 2002, of the City for the purpose of obtaining the funds with which to pay the costs of carrying out certain capital improvements of the waterworks utility; fixing the date, form,denominations, maturities, interest rates,terms and covenants of the bonds; providing for bond insurance; and approving the sale and providing for the delivery of the bonds to D.A. Davidson&Co., Seattle, Washington. MOVED BY CLAWSON, SECONDED BY PERSSON, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. NEW BUSINESS MOVED BY CLAWSON, SECONDED BY KEOLKER-WHEELER, Budget: 2002 Amendment, COUNCIL INSTRUCT ADMINISTRATION TO PREPARE AN Additional Police&Fire ORDINANCE FOR FIRST READING AT THE JULY 8, 2002, COUNCIL Department Positions MEETING ADDING TWO STAFF POSITIONS: AN EVIDENCE TECHNICIAN TO THE POLICE DEPARTMENT AND A SECRETARY 1 TO THE FIRE DEPARTMENT.* Councilman Parker expressed his preference for adding the evidence technician and crime analyst positions as those positions are part of the long-range forecast July 1,2002 Renton City Council Minutes Page 265 for the Police Department. He commented that the Fire Department Secretary 1 position, although needed, should not replace the crime analyst position. Mr. Parker requested that the Secretary 1 position be reviewed during budget deliberations. Councilman Corman agreed that the crime analyst position should also be added. *MOTION CARRIED. MOVED BY CORMAN, SECONDED BY NELSON, COUNCIL ALSO ADD THE CRIME ANALYST POSITION TO THE ORDINANCE. CARRIED. Budget: Public Hearing MOVED BY PERSSON, SECONDED BY KEOLKER-WHEELER, COUNCIL HOLD A PUBLIC HEARING ON AUGUST 19, 2002, ON THE PROPOSED 2003 BUDGET. CARRIED. WSDOT: I-405 Corridor Councilman Persson announced that a briefing will be held on the I-405 Program Corridor Program on July 9, 2002, from 11:30 to 1:00 in the Council Conference Room, and he encouraged all Councilmembers to attend. ADJOURNMENT MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL ADJOURN. CARRIED. Time: 10:53 p.m. )63.&704A ‘51 tom/d .f4) ) BONNIE I. WALTON, City Clerk Recorder: Michele Neumann July 1,2002 CITY COUNCIL COMMITTEE MEETING CALENDAR Office of the City Clerk COUNCIL COMMITTEE MEETINGS SCHEDULED AT CITY COUNCIL MEETING July 1, 2002 COMMITTEE/CHAIRMAN DATE/TIME AGENDA COMMITTEE OF THE WHOLE MON., 7/08 CANCELLED (Nelson) COMMUNITY SERVICES (Corman) • FINANCE MON., 7/08 2003 Budget Public Process (Parker) 6:00 p.m. PLANNING&DEVELOPMENT (Keolker-Wheeler) PUBLIC SAFETY MON., 7/08 King County Regional Disaster Plan; (Clawson) 6:30 p.m. Drag Racing (briefing only) TRANSPORTATION (AVIATION) (Persson) UTILITIES (Briere) NOTE: Committee of the Whole meetings are held in the Council Chambers. All other committee meetings are held in the Council Conference Room unless otherwise noted. • �f.. .i190TICEiOF04011 ANCES: ;••:' AFFIDAVIT OF PUBLICATION ...,c aooiTEasYRENTON,::.g,t<i,! F'-:s t.,93 CQpr c1L,,°�:,r.j,�;:., oaf :Fo ici rig=7,is; 'ax-reu-)iri -;pf.,. Barbara Alther,first duly sworn on oath states that he/she is the Legal Clerk of the tordhances'adlpted'by,..4iie,Reriton`;otr, RCounctl oeitaili, b02.1J;v,'..:i?i9i -�..,...1 SOUTH COUNTY JOURNAL •'s'`.OROINANCENtIi4 75r _}:,- . An".ordinance Mt em;,City}of;:Renton"„ 600 S.Washington Avenue,Kent,Washington 98032 Wa'sh'ington amending'Chapters`�s4r 8'; and.,;4 9,;,of5.Tither;-1 e(pgveloprriefit. Regulations),-"of r,clinance:,:N4.,42fi0, a daily newspaper published seven(7)times a week. Said newspaper is a legal newspaper of entitled. Code lof<Gerferal'Oi'd'ifiartces- general publication and is now and has been for more than six months prior to the date of 'of•t*bityl'of Rentori;-Washitidton7,4.0, publication,referred to,printed and published in the English language continually as a daily implementfRCW,36i70A;470.:,,,t�•x : ,:7y:, newspaper in Kent, King County,Washington. The South County Journal has been approved as a .govrning6:.D;;velIopr9Zen4 3,�Regulation, ,,am,endinent oyptes I:i€ %;,.,,,d11.,,i,., .�', legal newspaper by order of the Superior Court of the State of Washington for King County. :Effecfive:�'8`/4/,2tlo6-2- The notice in the exact form attached,was published in the South County Journal(and "''I�:`''`"ORDINALCticki 4976;1;IP--cc,; not in supplemental form)which was regularly distributed to the subscribers during the below - An or dinanceEetith6;Qitye:'ofrOenten,r. Washington,relating,to,the;waterworks stated period. The annexed notice,a utility. of,,the..City' ,;including:- tire. jee.werdage'(st m a as uanceereof' Ord 4975&4976 p 9 ._$1ity980:0o0:ugaggreg4te',';. principal% as published on: 7/5/02 arn__ourit of\U ate'pandjSeweri=Revenile, .B„onds,,i2002;.,741: Fie.City.';jfor;;;the,: The full amount of the fee charged for said foregoing publication is the sum of$87.00,charged to ,gurpose of;,etifaint11,41tie,funds wi. ;• 9 9 g 9 which.to:pay#hercost$'of carrying:out Acct. No.8050640. certh'in_ capitattaimproQemerits' 0 the• :.waterwotissiUtility;.=fixsr Atie.:datepterm The cost above includes a$6.00 fee for the printing of the affidavits. ,`deomtnatgsf? rteninterei i • rateeaerrns;,ard;..cove.nants.of;the 'bon"ds•;prod 'fotiondnsurancru Legal Number 10554 � arid"approvirigthe le;�arid?providing / ' o'tho-?deliieryofttieo'ondsto1DiA.• U' /4� / Daidson$'Co eatleiWashi9ton% . Legal Clerk, South County Journal yEffective;,7(;072002;,f.i:_y,•,;;z ,._'T;,-i, ..;5 Vit'f" 0IiF;ordsTI,%9 f 0 ,ogrripl to tai o flee r. ,,,, a,M,.,w „ 55 "So'aYufKGied" RI aN.00.010 t fries Subscribed and sworn before me on thil:k thin : day t.s.-i ,2002 Renton•rFubile:v:Lsbrarses;-` MiII': )Avenue xS.outhis.p id�,r29.02 ;NE.;12th= .Street;;;_ :Upori�.request4to.;ithe;:-City,. \�‘‘,\�`�1 A L' C 4 A''''i / will a so ffice ed fo a ee510;'a`cop'y .� s10N '% Notary Pu lic of the State of Washington : ;f.:::. ;f; ;,:• :� '"+w Fa'74 % residing in Renton Bonnie;I::INafton : r v, �� gcity+CierklCable^Manager+'`: ' sa; �OTAfpy _ KingCounty,Washington -r Pub1isl edAeithe i:Sou h ,County, t. M Journal Jul 5•200 1x05 p4°:; .t •$, e©e — r c�1 i Book-Entry-Only Municipal Bonds Letter of Representations [To be Completed by Issuer and Agent] City of Renton,Washington [Name of Issuer] Fiscal Agency of the State of Washington,currently The Bank of New York [Name of Agent] July 12,2002 [Date] Attention: Underwriting Department The Depository Trust Company 55 Water Street 19th Floor New York,NY 10041-0099 Re: $11,980,000 The City of Renton,Washington,Water and Sewer Revenue Bonds,2002 [Issue description(the"Securities")] Ladies and Gentlemen: This letter sets forth our understanding with respect to certain matters relating to the Securities. Agent shall act as trustee,paying agent,fiscal agent,or other agent of Issuer with respect to the Securities. The Securities have been issued pursuant to a trust indenture,bond resolution, or other such document authorizing the issuance of the Securities dated July 1,2002 (the"Document"). D.A.Davidson&Co. is distributing the Securities ["Underwriter"] through The Depository Trust Company("DTC"). To induce DTC to accept the Securities as eligible for deposit at DTC, and to act in accordance with its Rules with respect to the Securities,Issuer and Agent,if any,make the following • mbnd1319-7/99 I � representations to DTC: 1. Prior to closing on the Securities on July 12,2002 ,there shall be deposited with DTC one or more Security certificates registered in the name of DTC's nominee, Cede & Co., for each stated maturity of the Securities in the face amounts set forth on Schedule A hereto,the total of which represents 100% of the principal amount of such Securities. If, however,the aggregate principal amount of any maturity exceeds $400 million, one certificate shall be issued with respect to each$400 million of principal amount and an additional certificate shall be issued with respect to any, remaining principal amount. Each Security certificate shall bear the following legend: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation("DTC"),to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC(and any payment is made to Cede&Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede&Co.,has an interest herein. Issuer represents: [Note: Issuer must represent one of the following, and shall cross out the other.] [The Security certificate(s) shall remain in Agent's custody as a"Balance Certificate"subject to the provisions of the Balance,Certificate Agreement between Agent and DTC currently in effect. On each day on which Agent is open for business and on which it receives an instruction originated by a DTC participant ("Participant") through DTC's Deposit/Withdrawal at Custodian ("DWAC") system to increase the Participant's account by a specified number of Securities (a "Deposit Instruction"),Agent shall,no later than 6:30 p.m. (Eastern Time)that day, either approve or cancel the Deposit Instruction through the DWAC system. On each day on which Agent is open for business and on which it receives an instruction originated by a Participant through the DWAC system to decrease the Participant's account by a specified number of Securities (a"Withdrawal Instruction"), Agent shall, no later than 6:30 p.m. (Eastern Time) that day, either approve or cancel the Withdrawal Instruction through the DWAC system. Agent agrees that its approval of a Deposit or Withdrawal Instruction shall be deemed to be the receipt by DTC of a new reissued or reregistered certificated Security on registration of transfer to the name of Cede&Co. for the quantity of Securities evidenced by the Balance Certificate after the Deposit or Withdrawal Instruction is effected.] --, (+fru 0NNArity DTC.] 2. Issuer: (a)understands that DTC has no obligation to, and will not, communicate to its Participants or to any person having an interest in the Securities any information contained in the Security certificate(s); and(b)acknowledges that neither DTC's Participants nor any person having -2- mbnd1319-7/99 an interest in the Securities shall be deemed to have notice of the provisions of the Security certificate(s)by virtue of submission of such certificate(s)to DTC. 3. In the event of any solicitation of consents from or voting by holders of the Securities, Issuer or Agent shall establish a record date for such purposes (with no provision for revocation of consents or votes by subsequent holders)and shall send notice of such record date to DTC no fewer than 15 calendar days in advance of such record date. Notices to DTC pursuant to this Paragraph by telecopy shall be directed to DTC's Reorganization Department, Proxy Unit at (212) 855-5181 or(212) 855-5182. If the party sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone (212) 855-5187.Notices pursuant to this Paragraph,by mail or by any other means, shall be sent to: Supervisor,Proxy Unit Reorganization Depaitment The Depository Trust Company 55 Water Street 50th Floor New York,NY 10041-0099 4. In the event of a full or partial redemption or an advance refunding of part of the outstanding Securities,Issuer or Agent shall send a notice to DTC specifying: (a)the amount of the redemption or refunding; (b) in the case of a refunding,the maturity date(s) established under the refunding; and (c) the date such notice is to be mailed to beneficial owners or published (the "Publication Date"). Such notice shall be sent to DTC by a secure means (e.g., legible telecopy, registered or certified mail, overnight delivery)and in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before or, if possible,two business days before the Publication Date. Issuer or Agent shall forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission for multiple CUSIP numbers (if applicable)which includes a manifest or list of each CUSIP submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.)The Publication Date shall be no fewer than 30 days nor more than 60 days prior to the redemption date or,in the case of an advance refunding, the date that the proceeds are deposited in escrow. Notices to DTC pursuant to this Paragraph by telecopy shall be directed to DTC's Call Notification Department at(516)227-4164 or(516)227- 4190. If the party sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone(516)227-4070. Notices to DTC pursuant to this Paragraph,by mail or by any other means, shall be sent to: Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City,NY 11530-4719 5. In the event of an invitation to tender the Securities, notice by Issuer or Agent to Security holders specifying the terms of the tender and the Publication Date of such notice shall be sent to DTC by a secure means (e.g., legible telecopy,registered or certified mail,overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on,the business day before or,if possible,two business days before the Publication Date. Issuer or Agent shall forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission for multiple CUSIP numbers (if applicable) which includes a -3- mbnd1319-7/99 l manifest or list of each CUSIP number submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use and timeliness of such notice.)Notices to DTC pursuant to this Paragraph and notices of other actions (including mandatory tenders, exchanges,and capital changes)by telecopy shall be directed to DTC's Reorganization Department at (212) 855-5488. If the party sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone (212) 855-5135. Notices to DTC pursuant to this Paragraph,by mail or by any other means, shall be sent to: Manager,Reorganization Department Reorganization Window The Depository Trust Company 55,Water Street 50th Floor New York,NY 10041-0099 6. All notices and payment advices sent to DTC shall contain the CUSIP number of the Securities. 7. In the event of a change in the interest rate,Agent shall send notice to DTC of such change and Agent shall indicate the stated coupon rate. Such notice, which shall include Agent contact's name and telephone number,by telecopy shall be directed to DTC's Dividend Department at (212) 855-4555. If the party,sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone (212) 855-4550. Notices to DTC pursuant to this Paragraph,by mail or by any other means, shall be sent to: Manager,Announcements Dividend Department The Depository Trust Company 55 Water Street 25th Floor New York,NY 10041-0099 8. Issuer or Agent shall provide a written notice of interest payment information, including stated coupon rate information,to DTC as soon as the information is available. Issuer or Agent shall provide this information directly to DTC electronically, as previously arranged by Issuer or Agent and DTC. If electronic transmission has not been arranged,absent any other arrangements between Issuer or Agent and DTC, such information shall be sent by telecopy to DTC's Dividend Department at(212) 855-4555 or(212) 855-4556. If the party sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone - (212) 855-4550. Notices to DTC pursuant to this Paragraph,by mail or by any other means, shall be sent to: Manager,Announcements Dividend Department The Depository Trust Company 55 Water Street 25th Floor New York,NY 10041-0099 9. Interest payments and principal payments that are part of periodic principal-and- interest payments shall be received by Cede&Co., as nominee of DTC, or its registered assigns in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by -4- mbnd1319-7/99 1:00 p.m. (Eastern Time)on the payment date all such interest payments due Agent,or at such earlier time as required by Agent to guarantee that DTC shall receive payment in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Absent any other arrangements between Issuer or Agent and DTC, such funds shall be wired to the Dividend Deposit Account number that will be stamped on the signature page hereof at the time DTC executes this Letter of Representations. 10. Agent shall provide DTC's Dividend Department,no later than 12:00 noon(Eastern Time)on the payment date, automated notification of CUSIP-level detail. If circumstances prevent the funds paid to Cede&Co., as nominee of DTC,by 2:30 p.m. (Eastern Time)from equaling the dollar amount associated with the detail payments by 12:00 noon(Eastern Time), Issuer or Agent must provide CUSIP-level reconciliation to DTC no later than 2:30 p.m. (Eastern Time). Reconciliation must be provided by either automated means or written format. Such reconciliation notice, if sent by telecopy, shall be directed to DTC's Dividend Department at(212) 855-4633, and receipt of such reconciliation notice shall be confirmed by telephoning(212) 855-4430. 11. Maturity and redemption payments shall be received by Cede&Co., as nominee of DTC, or its registered assigns, in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m. (Eastern Time)on the payment date, all maturity and redemption payments due Agent, or at such earlier time as required by Agent to guarantee that DTC shall receive payment in same-day funds no later than 2:30 p.m. (Eastern Time)on the payment date. Absent any other arrangements between Issuer or Agent and DTC, such funds shall be wired to the Redemption Deposit Account number that will be stamped on the signature page hereof at the time DTC executes this Letter of Representations. 12. Principal payments (plus accrued interest, if any) as a result of optional tenders for purchase effected by means of DTC's Repayment Option Procedures shall be received by Cede & Co.,as nominee of DTC,or its registered assigns,in same-day funds no later than 2:30 p.m. (Eastern Time)on the payment date. Issuer shall remit by 1:00 p.m. (Eastern Time) on the payment date all such reorganization payments due Agent, or at such earlier time as required by Agent to guarantee that DTC shall receive payment in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Absent any other arrangements between Issuer or Agent and DTC, such funds shall be wired to the Reorganization Deposit Account number that will be stamped on the signature page hereof at the time DTC executes this Letter of Representations. 13. DTC may direct Issuer or Agent to use any other telephone number or address as the number or address to which notices or payments may be sent. 14. In the event of a redemption, acceleration, or any other similar transaction (e.g., tender made and accepted in response to Issuer's or Agent's invitation)necessitating a reduction in the aggregate principal amount of Securities outstanding or an advance refunding of part of the Securities outstanding, DTC, in its discretion: (a) may request Issuer or Agent to issue and authenticate a new Bond certificate, or(L)may .i.ak‘,at.app.-5151;M,,i.etatieri e1.the De..1. indi,atin ilaL and auiuulIt of JUA,li is Flu.liv..ui yiui�ipal except in the case of fmal maturity, in • which case the certificate will be presented to Issuer or Agent prior to payment if required. 15. In the event that Issuer determines that beneficial owners of Securities shall be able to obtain certificated Securities, Issuer or Agent shall notify DTC of the availability of Security certificates. In such event,Issuer or Agent shall issue,transfer, and exchange Security certificates in appropriate amounts, as required by DTC and others. -5- mbnd1319-7/99 i 16. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent(at which time DTC will confirm with Issuer or Agent the aggregate principal amount of Securities outstanding). Under such circumstances, at DTC's request, Issuer and Agent shall cooperate fully with DTC by taking appropriate action to make available one or more separate certificates evidencing Securities to any Participant having Securities credited to its DTC accounts. 17. Nothing herein shall be deemed to require Agent to advance funds on behalf of Issuer. 18. This Letter of Representations may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original,but all such counterparts together shall constitute but one and the same instrument. 19. This Letter of Representations shall be governed by, and construed in accordance with,the laws of the State of New York, without giving effect to principles of conflicts of law. 20. The sender of each notice delivered to DTC pursuant to this Letter of Representations is responsible for confirming that such notice was properly received by DTC. 21. Issuer recognizes that DTC does not in any way undertake to, and shall not have any responsibility to,monitor or ascertain the compliance of any transactions in the Securities with the following, as amended from time to time: (a)any exemptions from registration under the Securities Act of 1933; (b) the Investment Company Act of 1940; (c) the Employee Retirement Income Security Act of 1974; (d) the Internal Revenue Code of 1986; (e) any rules of any self-regulatory organizations (as defined under the Securities Exchange Act of 1934); or(f) any other local, state, or federal laws or regulations thereunder. 22. Issuer hereby authorizes DTC to provide to Agent listings of Participants' holdings, known as Security Position Listings ("SPLs")with respect to the Securities from time to time at the request of the Agent. DTC charges a fee for such SPLs. This authorization, unless revoked by Issuer, shall continue with respect to the Securities while any Securities are on deposit at DTC,until and unless Agent shall no longer be acting. In such event, Issuer shall provide DTC with similar evidence, satisfactory to DTC, of the authorization of any successor thereto so to act. Requests for SPLs shall be sent by telecopy to the Proxy Unit of DTC's Reorganization Department at(212) 855- 5181 or (212) 855-5182. Receipt of such requests shall be confirmed by telephoning (212) 855- 5202. Requests for SPLs sent by mail or by any other means shall be directed to the address indicated in Paragraph 3. 23. Issuer and Agent shall comply with the applicable requirements stated in DTC's Operational Arrangements, as they may be amended from time to time. DTC's Operational Arrangements are posted on DTC's website at"www.DTC.org." -6- mbnd1319-7/99 24. The following riders, attached hereto, are hereby incorporated into this Letter of Representations: RIDER 1 -7- mbnd1319-7/99 Notes: A. If there is an Agent(as defined in this Letter of Representations),Agent,as well as Issuer,must sign this Letter. If there is no Agent,in signing this Letter Issuer itself undertakes to perform all of the obligations set forth herein. B. Under the Rules of the Municipal Securities Rulemaking Board relating to "good delivery", a municipal securities dealer must be able to determine the date that a notice of a partial call or of an advance refunding of a part of an issue is distributed or published (the "Publication Date"). The establishment of such a Publication Date is addressed in Paragraph 3 of the Letter. C. Schedule B contains statements that DTC believes accurately describe DTC, the method of effecting book-entry transfers , of securities distributed through DTC, and certain related matters. Very truly yours, City of Renton,Washington [Issuer] By: pL : € [Authorized Officer's Signature] Fiscal Agency of the State of Washington,currently the Bank of New York [Agent] By: [Authorized Officer's Signature] Received and Accepted: THE DEPOSITORY TRUST COMPANY 1J _Funds should be wired to: The Chase Manhattan Bank =-= ABA#021 000 021 For credit to a/c Cede&Co. • c/o The Depository Trust Company : [Select Appropriate Account] Dividend Deposit Account#066-026776 • I':k,:dernption Deposit Account#066-027306 • cc:Reoregra itetposit Account#066-027608 .- Underwriter's Counsel i - -8- II mbnd1319-7/99 1 RIDER 1 1. Notwithstanding the provisions of paragraph 14 to the contrary, in the event of a redemption of part of the principal amount of the Securities of a maturity represented by a Security certificate,DTC shall surrender such Security certificate to the Agent for cancellation and reissuance and authentication of a new Security certificate in the principal amount outstanding following such redemption. 2. DTC acknowledges that it holds in accordance with its Rules and Regulations the Bonds and any payments made in respect of the Bonds in custody for its Participants in accordance with their respective holdings, as shown on the records of DTC. -Rider l - mbnd1319-7/99 , i t SCHEDULE A $11,980,000 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Maturity Date CUSIP Principal Amount (December 1) Interest Rate ! I 760167 RC 2 $ 115,000 2003 2.50% 760167 RD 0 120,000 2004 2.50 760167 RE 8 135,000 2005 2.75 760167 RF 5 :110,000 2006 3.25 760167 RG 3 110,000 2007 3.50 760167 RH 1 110,000 2008 3.50 760167 RJ 7 455,000 2009 3.70 760167 RK 4 '630,000 2010 3.90 760167 RL 2 1,010,000 2011 4.00 760167 RM 0 1,025,000, 2012 4.10 760167 RP 3 710,000 2014 4.30 760167 RQ 1 ; 735,000 2015 4.40 760167 RR 9 765,000 2016 4.50 760167 RS 7 1 805,000 2017 4.60 760167 RT 5 1,000,000 2018 5.25 760167 RU 2 1,000,000 2019 5.25 760167 RV 0 1,000,000 2020 5.25 760167 RW 8 1,045,000 2021 5.25 760167 RX 6 .1,100,000 2022 5.25 i - I� ' 1. 1 ; -9 - ; mbnd1319-7/99 SCHEDULE B SAMPLE OFFICIAL STATEMENT LANGUAGE DESCRIBING BOOK-ENTRY-ONLY ISSUANCE (Prepared by DTC--bracketed material may be applicable only to certain issues) 1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the securities (the "Securities"). The Securities will be issued as fully-registered securities registered in the name of Cede& Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for[each issue of] the Securities, [each] in the aggregate principal amount of such issue,and will be deposited with DTC. [If,however,the aggregate principal amount of[any] issue exceeds $400 million, one certificate will be issued with respect to each $400 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.] 2. DTC is a limited-purpose trust company organized under the New York Banking Law,a"banking organization"within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a"clearing agency"registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also facilitates the settlement among Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Direct Participants' accounts,thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Direct and • Indirect Participants are on file with the Securities and Exchange Commission. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants,which will.receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security("Beneficial Owner")is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction,as well as periodic statements of their holdings,from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. -10- mbnd1319-7/99 4. To facilitate subsequent transfers,all Securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede &Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited,which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants,by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [Beneficial Owners of Securities may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the security documents. Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners, or in the alternative,Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.] [6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed,DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.] 7. Neither DTC nor Cede& Co. (nor such other DTC nominee) will consent or vote with respect to the Securities. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede&Co.'s consenting or voting rights to those Direct Participants to whose accounts the Securities are credited on the record date(identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede&Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from Issuer or Agent on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in"street name," and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividends to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. -11- mbnd1319-7/99 [9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered,through its Participant,to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records,to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Securities to [Tender/Remarketing] Agent's DTC account.] 10. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Security certificates are required to be printed and delivered. 11. Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. 12. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable,but Issuer takes no responsibility for the accuracy thereof. -12- mbnd1319-7/99 e _ DAVIDSON V SO COMPANIES D.A.' Davidson & Co. member SIPC • $11,980,000 CITY OF RENTON,WASHINGTON Water and Sewer Revenue Bonds,2002 BOND PURCHASE AGREEMENT July 1,2002 City of Renton,Washington 1055 South Grady Way Renton,WA 98055 On the date hereof, the City Council (the"Council") of the City of Renton, Washington (the"City") adopted an ordinance (the "Ordinance") authorizing the sale, issuance and delivery of the City's Water and Sewer Revenue Bonds, 2002 (the"Bonds"), and the City's execution and delivery of this Bond Purchase Agreement (the"Agreement"). In light of such authority, D. A. Davidson & Co. (the "Underwriter")hereby offers to enter into this Agreement with the City. Upon your acceptance, this Agreement shall be in full force and effect in accordance with its terms and shall be binding upon the City and the Underwriter. 1) Upon the terms and conditions and in reliance upon the representations set forth herein, the Underwriter hereby agrees to purchase from the City and the City hereby agrees to sell to the Underwriter all (but not less than all) of the Bonds in the aggregate principal amount of $11,980,000, at an aggregate purchase price of$11,904,546.40, which accounts for the (i) underwriter's discount of$119,800.00 ($10.00/$1,000 of the par value of the Bonds) and (ii) ' original issue premium of$44,346.40, together with accrued interest on the Bonds from July 1,2002 to the Closing Date defined herein. The Bonds shall be issued and secured under and pursuant the Ordinance dated July 1, 2002 and shall mature, bear interest and be subject to redemption as set forth in Exhibit A hereto. The Underwriter agrees tp make a public offering of the Bonds at the initial offering prices set forth in the Official Statement referred to in Section 2 herein, which prices may be changed from time to time by the'Underwriter. Public Finance D.A.Davidson&Co. Old City Hall/Suite 400/221 N.Wall Street/Spokane,WA 99201 Telephone Local 456-8323/Outside Spokane(800)676-8323/Telefax(509)456-6692 Other Washington Offices in Spokane Valley,Spokane South Hill,Pullman,Colville,Kennewick,Wenatchee,Redmond,Friday Harbor,Everett, AhA*AAAn arid Co.trlA 2) The City shall deliver or cause to be delivered to the Underwriter, promptly after acceptance hereof, five copies of the Official Statement, substantially in the form of the Preliminary Official Statement dated June 20, 2002 (the "Preliminary Official Statement") with only such changes therein as shall have been accepted by us (such Preliminary Official Statement with such changes, if any, and including the cover page and all appendices, exhibits and statements included therein or attached thereto being called the "Official Statement"). The Official Statement is to be dated July 1, 2002. The City hereby authorizes the distribution by the Underwriter of the Preliminary Official Statement in offering the Bonds for sale to prospective purchasers of the Bonds. 3) On July 12,2002, or at such other-time,or on such earlier or later date as the Underwriter and the City may mutually agree(the"Closing Date"),the.Underwriter will accept delivery of the Bonds - and pay the purchase price thereof as set forth in Section 1 herein by Federal Reserve System wire transfer in immediately available Federal funds or by any other form of immediately available Federal funds. The Bonds shall be delivered through The Depository Trust Company, New York, New York ("DTC") in definitive form, bearing CUSIP numbers and issued under a book-entry system. 4) The City makes the following representations and warranties: a) The City is a municipal corporation organized and existing under the laws of the State of Washington and is authorized to issue the Bonds, to enter into this Agreement and all other agreements contemplated hereby and to adopt the Ordinance. b) The City has complied to date with all applicable provisions of the laws of the State of Washington in connection with the execution and issuance of the Bonds. c) The Ordinance and this Agreement have been, duly and validly authorized and executed by the City. d) The City has authorized all necessary action to be taken by it for(i)the issuance and sale of the Bonds upon the terms set forth herein, in the Official Statement and in the Ordinance; (ii) the execution, delivery, receipt and due performance of this Agreement, the Bonds and the Ordinance and all other agreements contemplated hereby or required in order to carry out, give effect to and consummate the transactions contemplated hereby; and(iii) carrying out, giving effect to and consummation of the transactions contemplated hereby. e) The Bonds when issued, delivered and paid for as provided for herein and in the Ordinance, will have been duly and validly authorized and issued and will constitute special obligations of the City secured as provided in the Ordinance and as described in the Official Statement. f) To the best knowledge of the City, there are no legal or governmental proceedings pending or threatened, or any basis therefore, wherein an unfavorable decision, ruling or finding would have a material adverse effect on the validity or security of the Bonds, the Ordinance, this Agreement or the transactions contemplated thereby or the power of the City to execute and deliver the Bonds or this Agreement,or adopt the Ordinance. g) As of the date hereof, the Preliminary Official Statement does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made,not misleading. h) The Preliminary Official; Statement is deemed "final" in accordance with Rule 15c2- 12(b)(1)under the Securities Exchange Act of 1934. 5) The Underwriter enters into this Agreement in reliance upon the representations and warranties of the City contained herein and in the Ordinance and in reliance upon the representations and warranties to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the City and its obligations hereunder both on and as of the date hereof and as of the Closing Date. Accordingly, the Underwriter's obligation under this Agreement to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the City of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions: a) the representations and warranties of the City contained herein shall be true and correct on the date hereof and of the Closing, as if made on and at the Closing; b) at or prior to the Closing,the Underwriter shall receive the following documents: i) certified copies of the Ordinance; ii) the opinion of Gottlieb, Fisher & Andrews, PLLC, as Bond Counsel, dated the Closing Date,substantially in the form of Appendix E to the Official Statement; iii) evidence of the insurance policy issued by Financial Security Assurance Inc. (FSA); iv) evidence satisfactory to the Underwriter that Standard and Poor's Corporation and Fitch, Inc. have issued ratings for the Bonds not lower than 'AAA' (underlying `A+) and 'AAA' (underlying `AA-'), respectively, and that such ratings have not been withdrawn; and - v) such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter or Bond Counsel may reasonably request. If the conditions to the Underwriter's obligations contained in this Agreement are not satisfied (unless otherwise waived in writing by the Underwriter) or if the Underwriter's obligations shall be terminated for any reason permitted herein, this Agreement shall terminate and neither the Underwriter nor the City shall have any further obligation hereunder except to reimburse the Underwriter for expenses related to the preparation, printing and mailing of the preliminary and final official statements. 6) During the initial public offering of the Bonds (a period of concluding the final date the Underwriter is charged with furnishing a copy of the Official Statement to a potential customer under SEC Rule 15c2-12 but no later than six months after the Closing Date),the City will(a)not consent to the distribution of any amendment of or supplement to the Official Statement to which, after having been furnished with a copy, the Underwriter shall object in writing or which shall be disapproved by counsel for the Underwriter and(b)if any event shall occur as a result of which it is necessary, in the opinion of the Underwriter, to amend or supplement the Official Statement in order to make the Official.Statement not misleading in light of the circumstances existing at the 1 . I i , time it is delivered to a purchaser, consent to the distribution of an amendment of or supplement to the Official Statement,prepared without expense to the City(in form and substance satisfactory to the Underwriter)in a reasonable number of copies which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser,not misleading. 7) The Underwriter shall have the right to cancel its obligation to purchase the Bonds if between the date hereof and the Closing, (i)legislation shall have been enacted by the Congress of the United States or the legislature of the State of Washington or legislation shall have been reported out of committee of either body or bepending.in-committee-ofeither body, or a decision-shall-have been rendered by a court of the United States or of the State of Washington or the Tax Court of the United States, or a ruling shall have been made or a regulation or temporary regulation shall have been proposed or made or any other release or announcement shall have been made by the i` Treasury Department of the United States or the Internal Revenue Service, with respect to federal taxation upon revenues or other income of the general character of the Bonds which, in the reasonable judgment of the of the Underwriter, materially adversely affects the market for the Bonds, or (ii) there shall exist,any event which, in the reasonable judgment of the Underwriter, either (a) makes untrue or incorrect in any material aspect as of such time any statement or information contained in.the Official Statement or(b)is not reflected in the Official Statement but should be reflected therein in order to make the statements and information contained therein not misleading in any material respect, or(iii)there shall have occurred any outbreak of hostilities or any other national or international calamity or crisis, the effect of which outbreak, calamity or crisis on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would make it impracticable for the Underwriter to market or enforce contracts for the sale of the Bonds, or (iv),there shall be in force a general suspension of trading on the New York Stock Exchange or minimum or maximum prices for trading shall have been fixed and in force, or maximum ranges for prices for securities shall have been required and be in force on the New York Stock Exchange, whether by virtue of a determination by that Exchange or by order of the Securities and Exchange Commission or any other governmental authority having jurisdiction, or (v) a general banking moratorium shall have been declared by either Federal, State of Washington or New York authorities having jurisdiction and be in force, or (vi) there shall be established any new restriction on transactions in securities materially affecting the free market for securities (including the imposition of any limitation on interest rates) or extension of credit by, or charge to the net capital requirements of, Underwriter established by the New York Stock Exchange, the Securities and Exchange Commission, any other federal or state agency or the Congress of the United States,or by Executive Order. 8) All fees, expenses and costs incident to the execution and performance of this Agreement and to the authorization, issuance and sale of the Bonds to the Underwriter, including,but not limited to, the cost of printing the Bonds, if any(and full execution thereof),the fees and charges of Standard & Poor's, the fees and charges of Fitch, the municipal insurance policy premium of FSA, the preparation, printing and distribution of the Preliminary Official Statement and the Official Statement, and the fees and expenses of Bond Counsel shall be paid by the City. All expenses to be paid by the City pursuant to this Agreement may be paid from Bond proceeds to the extent permitted by the Ordinance. The obligation of the City under this Section 8 shall survive the payment of the Bonds. 9) Any notice or other communication to be given to the City under this Agreement may be given by delivering the same in writing at the address set forth above and any such notice or other communications to be given to the Underwriter may be given by delivering the same in writing to D.A. Davidson & Co., 701 Fifth Avenue, Suite 3100, Seattle, Washington 98194, Attention: Public Finance. The approval of the Underwriter when required hereunder or the determination of its satisfaction as to any document referred to herein shall be in writing signed by the Underwriter and delivered to you. 10) This Agreement is made solely for the benefit of the City and the Underwriter (including successors or assigns of the Underwriter, but excluding any purchaser, as such purchaser, of Bonds from the Underwriter) and,to the extent expressed herein, controlling persons thereof, and no other persons, partnership, association or corporation shall acquire to have any right hereunder or by virtue hereof. All representations-and agreements.of-the.parties:to::this_Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf • of the Underwriter and shall survive the delivery of and payment for the Bonds. Time shall be of the essence of this Agreement. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Washington. This Agreement may be executed in any number of counterparts each of which shall be an original but all of which together will constitute one and the same instrument. Very truly yours, D.A. DAVIDSON&CO. By . i1 Fred R.Eoff I Managing Director Accepted and Agreed to: CITY OF RENTON,WASHINGTON, acting by and through its City Council By: ClOWKAoter Je-glr anner Mayor I -Bonnie I.Walton,City Clerk 7—/—d� rl • • • } { EXHIBIT A TERMS OF THE BONDS Purchase Price: , Par Amount of Bonds: $11,980,000.00 Plus:Reoffering Premium: 44,346.40 Less:Underwriter's Discount: (119,800.00) i -; Purchase Price: $11,904,546.40 Dated Date: July 1,2002 Delivery Date: July 12,2002 • Denominations: $5,000 each or integral multiples thereof Form: The Bonds will be fully registered in Book-Entry only through the facilities of The Depository Trust Company("DTC")in New York,New York. Interest Payable: Interest on the Bonds from their dated date will be payable semi-annually on June 1 and December 1,commencing December 1,2002 to their maturity or prior redemption. Maturity Schedule: The Bonds mature on December 1, in each of the years and amounts set forth below, I subject to optional redemption as hereinafter described, and will bear interest from July 1, 2002 to their respective maturities or dates of prior redemption, whichever occurs first,at the rates as shown below: - t Interest Yield to Price Interest Yield to Price Year Amount Rate Maturity (%of Par) Year Amount Rate Maturity (%of Par) 2003 $115,000 2.50% 1.75% 101.021% 2013 { 2004 120,000 2.50 2.13 100.855 2014 $710,000 4.30% 4.42% 98.860% 2005 135,000 2.75 2.62 100.417 2015 735,000 4.40 4.53 98.701 2006 110,000 3.25 2.93 101.306 2016 765,000 4.50 4.64 98.537 2007 110,000 3.50 3.22 101.372 2017 805,000 4.60 4.74 98.478 2008 110,000 3.50 3.53 99.827 2018 1,000,000 5.25 4.86 103.145 - 2009 455,000 3.70 3.73 99.804 2019 1,000,000 5.25 4.95 102.407 2010 630,000 3.90 3.92 99.854 2020 1,000,000 5.25 5.05 101.595 2011 1,010,000 4.00 4.05 99.609 2021 1,045,000 5.25 5.11 101.111 2012 1,025,000 4.10 4.15 99.577 2022 1,100,000 5.25 5.17 100.630 True Interest Cost: 4.82203% Optional Redemption: Bonds maturing in the years 2003 through 2012, inclusive, are not subject to redemption prior to their stated maturity dates. Bonds maturing on or after December 1, 2014 are subject to redemption at the option of the City prior to their stated maturity dates, from funds from any source, at any time, in whole or in part on or after December 1, 2012 within one or more maturities selected by the City(by lot within a maturity in the manner determined by the Registrar or DTC) at the price of par plus interest accrued to the date of redemption. Bond Counsel: Gottlieb Fisher&Andrews,PLLC,Seattle,Washington Registrar: The Bank of New York,New York,New York Offer Expires: July 1,2002 at 11:59 PM Pacific Time —I _. a PRELIMINARY OFFICIAL STATEMENT dated June 20,2002 - y NEW ISSUE INSURANCE: Applied For O.; BOOK-ENTRY RATINGS: Standard&Poor's: A+(underlying) C°1 Fitch IBCA: AA-(underlying) Qo d = • r (See"Ratings"herein) .o In the opinion of Bond Counsel,as of the Date of Issue,and assuming the City fulfills its covenant to comply with certain requirements of the cZ y Internal Revenue Code of 1986,as amended,that must be met subsequent to the issuance of the Bonds:interest on the Bonds,including any properly v ,k. allocable original issue discount,is excluded from gross income for purposes offederal income tax purposes and is not an item of tax preference for y e purposes of determining the alternative minimum tax on individuals and corporations. However,such interest on the Bonds is included in the c el` computation of other taxes on corporations,including,without limitation the alternative minimum tax,and may be subject to other collateral tax e o consequences. See"Tax Exemption"and"Other Tax Consequences herein. L. 3 ° $12,150,000* h o CITY OF RENTON, WASHINGTON Z = y WATER AND SEWER REVENUE BONDS, 2002 . o � r" DUE: December 1,as shown below L., y DATED: July 1,2002 a The City of Renton,Washington(the"City")provides this Official Statement in connection with the issuance of its Water and v o o Sewer Revenue Bonds,Series 2002(the"Bonds"). The Bonds mature on December 1,in each of the years and amounts set forth I, n i; below, subject to optional redemption as hereinafter described, and will bear interest from July 1, 2002 to their respective ematurities or dates of prior redemption,whichever occurs first,at the rates per annum as shown below. o in c Interest Yield to Price Interest Yield to Price ` e Year Amount* Rate Maturity (%of Par) Year Amount* Rate Maturity (%of Par) 0 `o a .y 2003 $115,000 % % % 2013 $0 . % % % 2004 115,000 2014 760,000 c 2005 135,000 2015 795,000 3 2006 110,000 2016 835,000 v p e 2007 110,000 2017 870,000 " t 2008 110,000 2018 915,000 o _ . 2009 450,000 2019 955,000 o ` - 2010 630,000 2020 1,005,000 P-•a -0 2011 1,015,000 2021 1,055,000 o r. 0 2012 1,060,000 2022 1,110,000 01) r, ; ;oma v y The Bonds will be issued under a book-entry system, initially registered to Cede&Co.,as nominee of The Depository Trust v C o Company("DTC"),New York,New York,which will act as securities depository for the Bonds. Individual purchases of Bonds t. 6 will be made in the principal amount of$5,000,or integral multiples thereof within a single maturity. The purchasers will not :: L receive certificates representing their,interest in the Bonds. (See"The Bonds-Book-Entry System"). Interest will be payable -- o h semi-annually on June 1 and December 1,commencing December 1,2002 to their maturity or prior redemption. The fiscal agent t v of the State of Washington,currently The Bank of New York,New York,New York,will serve as registrar,paying agent and o transfer agent(the"Registrar")for the Bonds. For so long as the Bonds are held by DTC in book-entry format,principal and - interest payments will be made as described herein,see"The Bonds-Book-Entry System". o G " ' r�o The Bonds are special obligations of the City payable solely from the Gross Revenue of the City's combined water and sewerage 0 0 systems, including the storm and surface water sewers (the "Waterworks Utility") excluding Maintenance and Operations e s Expense. The Bonds are being issued in accordance with the provisions of the Constitution and laws of the State of Washington. o z The proceeds of the Bonds will be used to undertake certain capital improvements to the Waterworks Utility and to pay costs rki .12 related to the issuance and sale of the Bonds(the"Project"). The Bonds maturing in the years 2003 through 2012 are not subject Q h v 's to redemption. Bonds maturing on or after December 1,2014 are subject to optional redemption on or after December 1,2012 at a price of par plus accrued interest to the date of redemption. (See"The Bonds-"Authorization,""Security,""Purpose and a Source and Application of Funds,"and"Redemption"herein.) col r Z. - ` •y The Bonds are offered by the Underwriter when, as and if issued by the City, subject to the opinion as to legality and tax- 'u oe '4 exemption of the Bonds by Gottlieb,Fisher&Andrews,PLLC,Bond Counsel,Seattle,Washington. The fees of Bond Counsel k, y are contingent on the issuance of the Bonds. The Bonds,in book-entry form,are expected to be available through the facilities of ti= DTC for delivery by Fast Automated Securities Transfer on or about July 12,2002.. ,r y e a` z h This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the y > entire official statement to obtain information essential to making an informed investment decision. *Preliminary;subject to change. _ D.A. DAVIDSON & CO. [This Page Intentionally Left Blank] CITY OF RENTON 1055 South Grady Way Renton,Washington 98055 (425) 430-6858 www.ci.renton.wa.us Members of the City Council: Mayor Jesse Tanner Council Members Dan Clawson,President Tern Briere Randall Corman Kathy Keolker-Wheeler Toni Nelson King Parker Donald Persson • Certain Appointed City Officials: Chief Administrative Officer Jay Covington Finance and Information Services Administrator Victoria Runkle City Attorney Lawrence Warren SII City Clerk Bonnie Walton Underwriter D. A. DAVIDSON &CO. Columbia SeaFirst Center 701 5th Avenue, Suite 3100 Seattle,Washington 98104 888-389-8001 Bond Counsel Gottlieb, Fisher&Andrews, PLLC 1325 4th Avenue, Suite 1200 Seattle,Washington 98101 NO DEALER,BROKER,SALESPERSON OR OTHER PERSON HAS BEEN AUTHORJ7FD BY THE CITY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS OFFICIAL STATEMENT,AND IF GIVEN OR MADE,SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CITY. THE INFORMATION IN THIS OFFICIAL STATEMENT WAS OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE,BUT IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS. THE INFORMATION AND EXPRESSIONS OF OPINION HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE AND NEITHER THE DELIVERY OF THE OFFICIAL STATEMENT NOR ANY SALE MADE HEREBY SHALL,UNDER ANY CIRCUMSTANCES,CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CITY SINCE THE DATE THEREOF. TABLE OF CONTENTS SUMMARY STATEMENT 1 THE BONDS 2 Description of the Bonds 2 Redemption 2 Open Market Purchase of the Bonds 3 Book-Entry System 3 Transfer and Exchange of Bonds Upon Discontinuance of Book Entry System 5 Authorization 5 New Covenant Date 5 Security 6 Purpose and Source and Application of Funds 9 THE WATERWORKS UTILITY 10 General Information 10 Waterworks Utility Major Customers 10 Delinquent Accounts 10 Historical Net Income and Revenue Available for Debt Service 11 Schedule of Waterworks Utility Debt Service 12 Debt Repayment Record 12 Outstanding Bonds and Debt Service Requirements 13 Expected Future Improvements and Borrowings 13 The Water Utility 13 Water Utility Customer Accounts 14 Water Utility Rates 14 The Wastewater Sewer Utility 14 Wastewater Utility Customer Accounts 15 Wastewater Utility Rates 15 Storm Drainage Utility 15 Strom Drainage Utility Rates 16 THE CITY OF RENTON 16 General Information 16 Form of Local Government 16 Principal City Officials 17 City Employment and Primary Services 17 Employee Relations 17 Pension Plans 18 The Budgetary Process 18 Auditing of City Finances 18 Risk Management 19 Authorized Investments 19 APPROVAL OF BOND COUNSEL 20 TAX EXEMPTION 20 OTHER TAX CONSEQUENCES 21 NO LITIGATION CONCERNING THE BONDS 22 UNDERWRITING 22 RATINGS 22 ENFORCEABILITY 23 COMMITMENT TO PROVIDE CONTINUING DISCLOSURE 23 ADDITIONAL INFORMATION AND MISCELLANEOUS 23 DISCLOSURE STATEMENT 24 APPROVAL OF OFFICIAL STATEMENT 24 APPENDIX A: CERTAIN PROVISIONS OF THE ORDINANCE A-1 Definitions A-2 New Covenant Date A-5 Pledge of Revenue A-6 Bond Fund A-6 Reserve Fund A-6 Rate Stabilization Fund A-6 Rate Covenant A-6 Flow of Funds A-7 Additional Covenants A-7 Future Parity Bonds A-9 APPENDIX B: 2001 AUDITED FINANCIAL STATEMENTS OF THE WATERWORKS UTILITY B-1 APPENDIX C: KING COUNTY ECONOMIC AND DEMOGRAPHIC INFORMATION C-1 Local Economic Overview C-2 Aircraft Manufacturing-The Boeing Company C-2 Technology C-3 Transportation C-4 Fishing,Agriculture and Forest Products C-4 Higher Education C-5 Services,Tourism,Recreation and Conventions C-5 Population Trends C-6 Trends in Building Permits C-7 Historical Taxable Retail Sales C-7 Major Employers—City of Renton C-7 Major Employers—Central Puget Sound Region C-8 { Employment By Major Industry C-9 _ Labor Force and Unemployment C-10 Personal Income Trends C-10 Earnings By Industry C-11 APPENDIX D: CONTINUING DISCLOSURE D-1 Contract/Undertaking D-2 Financial Statements/Operating Data D-2 Material Events D-2 APPENDIX E-FORM OF LEGAL OPINION E-1 $12,150,000* City of Renton, Washington Water and Sewer Revenue Bonds, 2002 SUMMARY STATEMENT The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Official Statement. No person is authorized to detach this Summary Statement from this Official Statement or to otherwise use it without this entire Official Statement. ISSUER The City of Renton(the"City")is located approximately 20 miles southeast of the City of Seattle and approximately 60 miles northeast of the City of Olympia,the State's capital. The City had a population of 51,140 as estimated in 2001 by the State of Washington (the "State") Office of Financial Management. (See"The City of Renton"herein.) INTEREST AND REDEMPTION Interest on the Bonds is payable semi-annually on each June 1 and December 1,commencing December 1,2002 to their maturity or prior redemption. (See "The Bonds - Description of the Bonds" herein.) The Bonds are subject to optional redemption. (See"The Bonds-Redemption"herein.) AUTHORITY FOR ISSUANCE The Bonds will be issued in accordance with the provisions of the Constitution and the laws of the State,particularly chapters 35.41,35.67 and 39.46 Revised Code of Washington("RCW"),and pursuant to Ordinance of the City, adopted on July 1,2002(the"Ordinance"). (See"The Bonds_Authorization" herein.) SOURCE OF REPAYMENT The Bonds are special fund revenue obligations of the City. The Gross Revenue of the City's combined water and sewerage systems, including the storm and surface water sewers (the"Waterworks Utility")is pledged to the payment into the 2002 Waterworks Revenue Bond Account(the"Bond Fund") of amounts necessary to pay the principal of and interest on the Bonds. The Bonds constitute a lien and charge on the Gross Revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operations Expense, except that the lien and charge on such revenue for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds (hereinafter defined), the outstanding Water and Sewer Revenue Refunding Bonds, 1998 and any Future Parity Bonds. The City will maintain a Reserve Account for the sole purpose of providing additional security for the Bonds if Revenue is not sufficient to pay debt service when due. (See"The Bonds- Security"herein.) USE OF PROCEEDS The proceeds of the Bonds will be used to undertake certain capital improvements to the Waterworks Utility and to pay costs related to the issuance and sale of the Bonds(the"Project"). (See"The Bonds-Purpose and Use of Proceeds"herein.) * Preliminary;subject to change. 1 THE BONDS Description of the Bonds The Bonds will be issued in the aggregate amount of$12,150,000* in fully registered form, will be in the denomination of$5,000 each or any integral multiples thereof within a single maturity and will be dated July 1, 2002. The Bonds shall mature on December 1, in the years and amounts set forth on the cover hereof. The fiscal agent of the State,currently The Bank of New York,New York,New York,will serve as registrar, paying agent and transfer agent(the"Registrar") for the Bonds. The Bonds will bear interest from July 1,2002,or the most recent interest payment date to which interest has been paid or duly provided for, whichever is later, at the rates per annum set forth on the cover hereof. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months, and will be payable semi-annually on June 1 and December 1,commencing December 1,2002,until the date ofmaturity or the date of prior redemption of such Bond,whichever occurs first. For so long as the Bonds are held by DTC in book-entry form,principal and interest payments will be made as described herein under the heading "The Bonds -Book-Entry System". Redemption Optional Redemption: Bonds maturing in the years 2003 through 2012, inclusive, are not subject to redemption prior to their stated maturity dates. Bonds maturing on or after December 1,2014 are subject to redemption at the option of the City prior to their stated maturity dates, from funds from any source,at any time,in whole or in part on or after December 1,2012 within one or more maturities selected by the City(by lot in the manner determined by the Registrar or DTC)at the price of par plus interest accrued to the date of redemption. Bonds in the principal amount of greater than $5,000 may be partially redeemed in part in any integral multiple of$5,000. The Registered Owner of any Bond redeemed in part shall receive,upon surrender of such Bond to the Registrar,one or more new Bonds in authorized denominations equal in principal amount to the unredeemed portion of the Bond so surrendered. Notice of Redemption (DTC). So long as the Bonds are in book-entry only form,the Registrar shall notify DTC of an early redemption in accordance with, and shall provide such information as required by, the blanket issuer letter of representations from the City and the Registrar to DTC. See "The Bonds -Book- Entry System"below for a discussion of how redemption notices will be given by DTC to the beneficial owners of the Bonds. The City cannot and does not give any assurances that DTC,its direct participants or others will distribute any redemption notices to the beneficial owners or that they will do so on a timely basis. From and after the date that the Bonds are no longer held in book-entry form,notice of redemption must be given by or on behalf of the City not less than 30 nor more than 60 days prior to the date of redemption in accordance with the Ordinance. Pursuant to the City's continuing disclosure undertaking, the City is required to provide timely notice of redemption of the Bonds to each NRMSIR (or MSRB) and to any SID. See "Commitment to Provide Continuing Disclosure" herein for definitions of the terms "NRMSIR," "MSRB" and "SID" and a description of the City's undertaking to provide certain notices. + Preliminary;subject to change. 2 Failure to Redeem Bonds. When so called for redemption,such Bonds shall cease to accrue interest on the specified redemption date provided funds for redemption are on deposit at either of the principal corporate trust offices of the Registrar at that time. Bonds called for redemption shall not be deemed to be outstanding as of such redemption date provided funds for redemption are on deposit with the Registrar at such time. Open Market Purchase of the Bonds The City has reserved the right to purchase any of the Bonds in the open market at any time and at any price. Book-Entry Form When the Bonds are issued, ownership interest will be available to purchasers only through a book-entry system(the"Book-Entry System")maintained by DTC or such other depository institution designated by the City pursuant to the Ordinance. If the Bonds are removed from the Book-Entry System and delivered to the - ` persons named as the registered owners of the Bonds on the registration records maintained by the Registrar (the"Registered Owners")in physical form, as described below, the discussion herein of the Book-Entry System will not apply. The following information has been provided by DTC, and the City makes no representation as to the accuracy or completeness thereof. 1. The Depository Trust Company("DTC"),New York,NY,will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede&Co. (DTC's partnership nominee) or such other name as may be.requested by an authorized representative of DTC. One fully registered bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. 2. DTC,the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law,a"banking organization"within the meaning of the New York Banking Law,a member of the Federal Reserve System, a"clearing corporation"within the meaning of the New York Uniform Commercial Code, and a"clearing agency"registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC's participants("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. "Direct Participants"include both U.S.and non-U.S. securities brokers and dealers,banks,trust companies,clearing corporations,and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust& Clearing Corporations ("DTCC"). DTCC,in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC,MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange,Inc.,the American Stock Exchange,Inc., and the National Association of Securities Dealers,Inc. Access to the DTC system is also available to others,such as U.S.and non-U.S.securities brokers and dealers,banks,and trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard and 3 Poor's highest rating: AAA. The DTC rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. 3. Purchases of Bonds under the DTC system must be made by or through Direct Participants,which > will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners are, however, expected to receive written confirmation from DTC of their purchase,but Beneficial Owners are expected to receive written confirmations providing details of the transaction,as well as periodic statements of their holdings,from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct or Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds,except in the event that use of the book- entry system for the Bonds is discontinued. 4. To facilitate subsequent transfers,all Bonds deposited by Participants with DTC are registered in the • name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede&Co.,or such other DTC nominee,do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited,which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyances of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants,and by Direct Participants and Indirect Participants to Beneficial !, Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. 6. Redemption notices, if any, shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor such other DTC nominee),will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its - usual procedures,DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede&Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede& Co., or such other nominee as may be requested,by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts,upon DTC's receipt of funds and corresponding detail information from the City on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices,as is the case with securities held for the accounts of customers in bearer form or registered in"street name,"and will be the responsibility of such Participant and 4 not of DTC or the City,subject to any statutory or regulatory requirements as maybe in effect from time to time.Payment of redemption proceeds,distributions,and dividend payments to Cede&Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to Beneficial Owners shall be the responsibility of Direct and Indirect Participants. 9. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the City. Under such circumstances,in the event that a successor securities depository is not obtained,Bond certificates are required to be printed and delivered. 10. The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event,Bond certificates will be printed and delivered. 11. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the City believes to be reliable,but the City takes no responsibility for the accuracy thereof. Transfer and Exchange of Bonds Upon Discontinuance of Book-Entry System So long as the Bonds are in book-entry only form, the beneficial ownership of the Bonds may only be transferred in the records established and maintained by DTC. Upon discontinuance of the book-entry system,the Bonds may be transferred by Registered Owners upon completion of the assignment form on the Bond(s)in form and substance satisfactory to the Registrar and delivery of the Bond(s)to be transferred to the principal corporate trust office of the Registrar for cancellation and re-issuance. Upon such surrender, the Registrar will cancel the surrendered Bonds and deliver to the new Registered Owner a new Bond or Bonds of the same maturity and interest rate and for the same aggregate principal amount. Upon discontinuance of the book-entry system,any Bond may be surrendered at the principal corporate trust office of the Registrar and exchanged,without charge, for an equal aggregate principal amount of Bonds, in any authorized denomination. The Registrar is not required to transfer or exchange Bonds during the 15 days preceding any principal or interest payment or optional redemption date. •Authorization The Bonds are special obligations of the City issued pursuant to the provisions of the Constitution and laws of the State of Washington,particularly chapters 35.41,35.67 and 39.46 RCW and to Ordinance No. to be adopted by the City Council on July 1,2002(the"Ordinance")authorizing the issuance and sale of the Bonds. New Covenant Date The City currently has outstanding$10,185,000 Water and Sewer Refunding Improvement Revenue Bonds, 1993 (the "1993 Refunding Bonds") and $610,000 Water and Sewer Revenue Bonds, 1994 (the "1994 Bonds")(collectively,the Outstanding Parity Bonds"). The City also has outstanding$5,545,000 Water and Sewer Revenue Refunding Bonds, 1998 (the"1998 Bonds"),which were issued on a parity of lien with the 5 Outstanding Parity Bonds. Upon the date of the full redemption,refunding or defeasance of the Outstanding Parity Bonds (the"New Covenant Date"), certain new covenants will take effect with respect to the 1998 Bonds,the Bonds and any Future Parity Bonds(the 1998 Bonds,the Bonds and the Future Parity Bonds are collectively referred to as the"Parity Bonds")issued prior to the New Covenant Date. The forepart of this Official Statement presents the covenants as they currently exist. Appendix A,attached hereto, presents the covenants as they will exist after the New Covenant Date. Reference is made to the Ordinance for a complete presentation of covenants prior to and after the New Covenant Date. All capitalized terms used in this Official Statement and not otherwise defined herein have the same meanings as in the Ordinance. See Appendix A for certain definitions. Security Revenue Pledge. In the Ordinance,the Revenue of the Waterworks Utility is pledged to the payment into the 2002 Waterworks Revenue Bond Account(the"Bond Fund")in amounts necessary to pay the principal of and interest on the Bonds. The Bonds are payable solely out of the Bond Fund. The Bonds constitute a lien and charge on the Gross Revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operations Expense,except that the lien and charge on such revenue for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds, the 1998 Bonds and any Future Parity Bonds. See"The Waterworks Utility-Schedule of Waterworks Utility Debt Service"). As of the date of issuance of the Bonds, the City did not have any outstanding subordinate or junior lien obligations. As used herein, "Revenue of the Waterworks Utility"means all the earnings and revenue received by the Waterworks Utility from any source whatsoever, including payments received under contract with other municipal corporations for water service,except general taxes,charges in lieu of taxes, assessments in any utility local improvement district hereafter created,proceeds from the sale of City property,bond proceeds and earnings subject to a federal tax or rebate requirement. As used herein,"Maintenance and Operation Expense"means all expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair,working order and condition,which shall not include any depreciation expenses or taxes or charges in lieu of taxes levied or imposed by the City. The Bonds are not general obligations of the City,and the full faith,credit and resources of the City are not pledged for the payment thereof. See Appendix A hereto for a description of the revenue pledge for the Bonds after the New Covenant Date. Rate Covenant. The City has covenanted in the Ordinance that it will establish,maintain and collect such rates and charges for water,sanitary sewage disposal service and storm and surface water drainage service so long as any Outstanding Parity Bonds, 1998 Bonds and Bonds are outstanding as will make available for the payment of the principal of and interest on such bonds an amount equal to at least 1.3 times the average annual debt service requirements, both principal and interest, on the Outstanding Parity Bonds, the 1998 Bonds and the Bonds after deducting Maintenance and Operation Expense from Gross Revenue. See Appendix A hereto under the caption"Summary of Certain Provisions of the Ordinance"for a description of the rate covenant for the Bonds after the New Covenant Date.- 6 Flow of Funds. A special fund of the City(the"Waterworks Utility Fund"),has previously been created pursuant to Ordinance No. 250. All Revenue of the Waterworks Utility shall be deposited into the Waterworks Utility Fund as collected,and shall be held separate and apart from all other funds and accounts of the City. Funds in the Waterworks Utility Fund (other than in any bond redemption or federal rebate account will be used in the following order of priority: (1) to pay Maintenance and Operation Expense; (2) to pay interest on the Outstanding Parity Bonds and Parity Bonds; (3) to pay the principal of the Outstanding Parity Bonds and Parity Bonds: (4) to make all payments required to be made into any sinking fund or bond redemption fund created for the payment of Future Parity Bonds which are Term Bonds: (5) to make all payments required to be made into the reserve accounts created to secure the payment of the Outstanding Parity Bonds and Parity Bonds; (6) to make all payments required to be made into any revenue bond redemption fund, revenue warrant redemption fund,debt service account or reserve account created to pay and secure the payment of the principal of and interest on any other revenue bonds or revenue warrants having a lien upon the Revenue of the Waterworks Utility junior and inferior to the lien thereon for the payment of the principal of and interest on the Outstanding Parity Bonds and Parity Bonds; (7) to retire by optional redemption or purchase in the open market any outstanding revenue bonds or revenue warrants of the City, to make necessary additions, betterments, improvements and repairs to or extensions and replacements of the Waterworks Utility, or for any other lawful City purpose. See Appendix A hereto under the caption "Summary of Certain Provisions of the Ordinance" for a description of the"Flow of Funds" after the New Covenant Date. The Bond Fund and Accounts. A special fund of the City known as the 2002 Waterworks Revenue Bond Account (the "Bond Fund") has been created by the Ordinance as a separate account in the Waterworks Revenue Parity Bond Fund for the payment of the principal of and interest on the Bonds. The Principal and Interest Account is the subaccount created by the Ordinance in the Bond Fund for payment of the principal and interest on the Bonds. So long as the Bonds are outstanding against the Bond Fund, on or before the first day of each month, the City will pay into the Principal and Interest Account out of Gross Revenue a fixed amount equal to 1/6 of the next ensuing six months' requirements for interest on the Bonds and an amount equal to 1/12 of the amount of principal of the Bonds payable on the next ensuing principal payment date. These allocations will be adjusted for the first payment dates to account for fewer months until the due date. See Appendix A hereto under the caption"Summary of Certain Provisions of the Ordinance" for a description of the Bond Fund after the New Covenant Date. The Reserve Account and the Reserve Account Requirement. The Ordinance provides for the funding and maintenance of a Reserve Account within the Bond Fund in an amount equal to Average Annual Debt Service of the Bonds. As used herein, "Average Annual Debt Service"is equal to the sum of the Annual 7 Debt Service for the remaining years to the last scheduled maturity of the applicable bond issue or issues divided by the number of those remaining years. In the Ordinance,the City agrees that when the required amounts have been paid into the Reserve Account in the Bond Fund,the City will maintain those amounts therein at all times, except for withdrawals therefrom as authorized in the Ordinance, until there is sufficient money in the Bond Fund, including the Reserve Account therein,to pay the principal of and interest to maturity on all outstanding Bonds,at which time no further payments need be made into the Bond Fund,and the money in the Bond Fund,including the Reserve Account,may be used to pay that principal and interest. If there is a deficiency in the Principal and Interest Account for the payment of the principal and interest on the Bonds,the deficiency will be made up from amounts available in the Reserve Account. Any deficiency created in the Reserve Account will be made up from Gross Revenue first available after making necessary provisions for the required payments into the Principal and Interest Account. The Reserve Account will be funded from an initial deposit of approximately$542,300 from the balance in the reserve account created for the City's Water and Sewer Refunding and Improvement Revenue Bonds, 1992 that was fully retired as of June 1,2002 with the remaining balance accumulated from Gross Revenue in substantially equal monthly payments so that by no later than July 2005, there will be an amount on deposit in the Reserve Account not less than Average Annual Debt Service for the Bonds. Additionally, the respective bond funds for Outstanding Parity Bonds and the 1998 Bonds are required to maintain reserve accounts equal to Average Annual Debt Service of each issue of Outstanding Parity Bonds and the 1998 Bonds. The reserve accounts for Outstanding Parity Bonds and the 1998 Bonds are currently fully funded in amounts at least equal to Average Annual Debt Service. For a description of the Reserve Fund for Parity Bonds and the Reserve Requirement after the New Covenant Date, see Appendix A—"Summary of Certain Provisions of the Ordinance"hereto. Other Covenants. In the Ordinance,the City makes certain other covenants,including covenants regarding maintenance of the Waterworks Utility, the sale or other disposition of the property of the Waterworks Utility, the payment of Maintenance and Operation Expense,maintenance of tax exemption on the Bonds and the maintenance of insurance on the Waterworks Utility properties. For a description of the covenants on the Bonds after the New Covenant Date,see Appendix A hereto under the caption"Summary of Certain Provisions of the Ordinance." Future Parity Bonds. The City reserves the right to issue Future Parity Bonds which will constitute a lien and charge on the Revenue of the Waterworks Utility on a parity with the Outstanding Parity Bonds, the 1998 Bonds and the Bonds,if the following conditions are met and complied with at the time of issuance of the Future Parity Bonds: (1) All payments required by any ordinance to be paid into any bond redemption funds and accounts thereof created to secure the payment of Outstanding Parity Bonds shall have been made and no deficiency therein exists; (2) An opinion of a professional engineer experienced in municipal utilities shall be delivered certifying that the revenues of the Waterworks Utility shall be sufficient, after the payment of operation and maintenance costs and taxes, based upon the 8 historical experience of the Waterworks Utility or the pro forma revenues under then { existing rates over a period of any twenty-four consecutive months out of the thirty- six months immediately preceding the issuance of additional bonds,to equal at least 1.30 times the average annual debt service of all Outstanding Parity Bonds and the Future Parity Bonds; and (3) The ordinance authorizing the issuance of Future Parity Bonds will provide that an amount equal to the average annual debt service on such additional Future Parity Bonds shall be accumulated as a reserve in the bond redemption fund. For a description of the terms of issuance of Future Parity Bonds after the New Covenant Dare, see Appendix A under the caption"Summary of Certain Provisions of the Ordinance." Purpose and Source and Application of Funds The proceeds from the sale of the Bonds will be used to undertake certain capital improvements to the Waterworks Utility and to pay costs related to the issuance and sale of the Bonds (the"Project"). The proceeds of the Bonds will be used by the City for the purpose of financing a portion of the cost of the capital improvement plan of the Waterworks Utility for calendar year 2002 and 2003. Major capital projects identified in the current capital improvement plan are summarized below: Water Utility Improvements: Maplewood Water Treatment Facility $1,000,000 Disinfection Piping for Downtown Wells 1,200,000 Seismic upgrade of reservoirs 950,000 Water main improvements 1,495,000 Water pumpstation and well-house improvements 600,000 Water system telemetry upgrades 200,000 Surface Water Utility Improvements 2,200,000 Wastewater Utility Improvements 2,585,000 The estimated sources and application of proceeds of the Bonds are shown in the table as follows: Sources of Funds:' Proceeds from the Sale of the Bonds $12,150,000.00 Total Sources of Funds $12,150,000.00 Application of Funds:' Deposit to the Waterworks Utility Construction Fund $ Original Issue Discount Costs of Issuance of the Bonds' Total Application of Funds $12,150,000.00 1 Preliminary;subject to change. 2 Includes the Underwriter's discount,Bond Counsel fees, the insurance premium, and rating agency costs,Preliminary and Official Statement printing and mailing expenses,registration costs and any miscellaneous costs. 9 THE WATERWORKS UTILITY General Information The Waterworks Utility of the City is comprised of three divisions:the Water Utility,the Wastewater Utility and the Storm Drainage Utility. The City maintains separate fund accounting for the three divisions to facilitate financial management,but has combined the divisions for financing purposes into the Waterworks Utility. See "The Water Utility," "The Wastewater Utility" and "The Storm Drainage Utility"herein for descriptions of the three divisions of the City's Waterworks Utility. Waterworks Utility Major Customers The Boeing Company ("Boeing") has been the largest single customer of the Waterworks Utility for a number of years. For the year ending December 31, 2001, Boeing represented approximately 11.34% percent of the operating revenue of the Waterworks Utility. See"Appendix C—King County Economic and Demographic Information—Manufacturing—The Boeing Company"herein The largest customers of the Waterworks Utility for the year ended December 31,2001 are summarized in the table below: Water Utility Wastewater Utility Storm Drainage Utility %of Storm %of Water %of Wastewater Drainage Customer Utility Rev Customer Utility Rev Customer Utility Rev Boeing 3.08% Boeing 3.11% City of Renton 6.18% King County 2.27 Public Hospital District No. 1 1.53 Boeing 5.15 City of Kent 1.18 Service Linen Supply 1.48 King County 1.95 Bryn Mawr Water 1.11 Virtue Empire Associates 0.70 Kenworth Truck Co. 1.15 Service Linen Supply 1.01 Draper Valley Farms 0.64 State of Washington 1.03 Public Hospital District No. 1 0.95 Sunset Terrace 0.62 Leisure Estates 0.66 Draper Valley Farms 0.40 G&K Services 0.48 Burlington Northern 0.61 Sunset Terrace 0.39 Orca Bay Seafoods 0.38 Valley Medical Center 0.52 G&K Services 0.30 Suntone Hotel Properties 0.37 GE Capital Investors 0.51 Stoneway Rock&Recycling 0.25 Evergreen Healthcare • 0.32 Sunnydale Trailer Park 0.47 Total 10.94% Total 9.63% Total 18.23% , Source: The City of Renton Delinquent Accounts After notice of delinquency of a water and/or sewer bill has been provided and the bill remains unpaid for a period of 60 days,the Finance and Information Services Administrator is directed to cut off water service to the premises and enforce a lien upon the property. Such lien is superior to all other liens or encumbrances, except those for general taxes and special assessments. 10 Historical Net Income and Revenue Available for Debt Service The following table shows the audited revenues, expenses, net income and revenues available for debt , service for the fiscal year ended December 31, 1998 through 2001. See "Appendix B - 2001 Audited Financial Statements of the Waterworks Utility"herein. Audited Audited Audited Audited 1998 1999 2000 2001 Operating Revenue Charges for Services $19,889,136 $20,176,839 $21,724,688 $20,495,611 Other Operating Revenue 1,147,838 1,303,559 1,411,401 1,203,480 Total Operating Revenues $21,036,974 $21,480,398 $23,136,089 $21,699,091 Operating Expenses Operations and Maintenance $11,513,665 $12,923,365 $12,020,228 $12,463,725 Administrative and General 1,637,679 1,756,727 1,826,630 1,853,671 Taxes 1,726,091 1,727;350 1,806,916 1,734,324 Depreciation 2,725,007 2,998,977 3,217,984 3,661,458 Total Operating Expenses $17,602,442 $ 19,406,419 $18,871,758 $19,713,178 Operating Income(Loss) $3,434,532 $2,073,979 $4,264,331 $1,985,913 ' Non-Operating Revenue(Expenses) Interest Revenue $560,126 $303,912 $546,422 $295,154 Other Non-Operating Revenue 14,053 58,726 79,599 88,573 Interest Expense (1,278,481) (1,313,469) (1,244,246) (1,093,550) Amortization Expense (90,569) (87,839) (80,472) (77,166) Operating Transfers 50,949 (82,080) 15,248 (77,650) Total Non-Operating $(743,922) $(1,120,750) $(683,449) $(864,639) Revenues/Expenses Net Income $2,690,610 $953,229 $3,580,882 $1,121,274 Adjustments to Net Income City Utility Tax $1,170,276 $1,197,276 $1,271,201 $1,205,729 Amortization Expense 90,569 87,839 80,472 77,166 Depreciation Expense 2,725,007 2,998,977 3,217,984 3,661,458 Bond Interest Expense 1,278,481 1,313,469 1,244,246 1,093,550 Connection/System Development'Charges 1;515,221 2,018,123 1,779,699 1,426,008 Total Adjustments $6,779,554 $7,615,684 $7,593,602 $7,463,911 Net Revenue Available for Debt Service $9,470,164 $8,568,913 $11,174,484 $8,585,185 Debt Service $3,155,670 $3,114,399 $2,743,138 $2,749,921 Debt Service Coverage 3.00x 2.75x 4.07x 3.12x Source: The City of Renton 11 Schedule of Waterworks Utility Debt Service Set forth in the following table is the debt service schedule for the Outstanding Parity Bonds,the 1998 Bonds and the Bonds. Some of the interest figures have been rounded. Outstanding Bonds' The Bonds' Total Debt Year Principal' Interest' Principal2 Interest2 Service2 2002 $1,245,000 $800,572 $0 $232,424 $2,277,996 2003 1,520,000 732,984 115,000 557,817 2,925,801 2004 1,595,000 655,774 115,000 554,368 2,920,142 2005 1,670,000 568,163 135,000 550,917 2,924,080 2006 1,505,000 489,876 110,000 546,868 2,651,744 2007 1,585,000 412,608 110,000 543,292 2,650,900 2008 1,670,000 329,696 110,000 539,443 2,649,139 2009 1,410,000 250,858 450,000 535,317 2,646,175 2010 1,320,000 181,294 630,000 517,318 2,648,612 2011 1,020,000 121,748 • 1,015,000 491,487 2,648,235 2012 1,075,000 68,273 1,060,000 448,858 2,652,131 2013 775,000 20,333 0 403,277 1,198,610 2014 760,000 403,278 1,163,278 2015 795,000 369,077 1,164,077 2016 835,000 332,508 1,167,508 2017 870,000 292,845 1,162,845 2018 915,000 251,085 1,166,085 _ 2019 955,000 206,250 1,161,250 i 2020 1,005,000 158,500 1,163,500 2021 1,055,000 108,250 1,163,250 2022 • 1,110,000 55,500 1,165,500 Total $16,390,000 $4,632,179 $12,150,000 $8,098,679 $41,270,858 ' Based on fiscal year ending December 31 and includes all payments made and to be made in 2002. 2 Preliminary;subject to change. Based on the Bonds bearing interest at an average rate of 4.74%per annum. Source: The City of Renton Debt Repayment Record The City has always met principal and interest payments on all of its bonds when due. . 12 Outstanding Bonds and Debt Service Requirements Giving effect to the issuance of the Bonds,the City will have a total of$28,540,000 in principal of Bonds, the 1998 Bonds and Outstanding Parity Bonds. The estimated Annual Debt Service during fiscal year 2002 on the Bonds,the 1998 Bonds and Outstanding Parity Bonds is$2,910,262. The initial Net Revenue(Gross Revenue less Maintenance and Operation Expense)requirement of the Waterworks Utility based on a Net Revenue coverage of 1.30 times the estimated Annual Debt Service,therefore,will be$3,783,341 in fiscal year 2002. Based on the actual Net Revenue figure for fiscal year 2001 of$8,585,185,debt service coverage is anticipated to be 2.94 times. The City may,however,issue Future Parity Bonds to finance capital needs of the Waterworks Utility as described below that would reduce the debt service coverage below such level. (See Appendix A-"Covenants of the Ordinance- Security"herein.) Expected Future Improvements and Borrowings The City's current Capital Improvement Plan("CIP")identifies system development and major maintenance capital expenditures of$21,415,000 planned for the 2003 and 2004 fiscal years. The amount of Waterworks Utility debt to be issued in support of these CIP elements has not yet been finalized,although the City does expect the issuance of additional Utility debt prior to 2004. The Water Utility The Water Utility system consists of nine wells,one artesian spring,eleven water booster pump stations,and 281.5 miles of water lines. Renton has three sources of water:the Cedar River Aquifer,Springbrook Springs and the Seattle Water Shed. Ninety-five percent of the water is currently from the Cedar River Aquifer, three percent from Seattle, and two percent is from Springbrook Springs. The five wells located in the Cedar River Aquifer are capable of producing 16.3 million gallons per day ("MGD"). The three wells located in the Maplewood Aquifer are capable of producing 7.9 MGD,Well 5A can pump 2.0 MGD and the Springbrook Springs artesian spring can produce approximately 1.4 MGD. In 2001, the maximum demand for water was 11.96 MGD, and the average day demand was 7.1 MGD. In total, the City's combined water sources can produce 27.6 MGD. It is estimated that this supply will accommodate growth at least until the year 2015. 13 i Water Utility Customer Accounts Renton's Water Utility currently serves 14,538 customers. The type and number of accounts are shown in the table below. 1997 1998 1999 2000 2001 Residential' 10,180 10,475 10,633 11,204 11,060 Multi-Familyz 1,264 1,339 1,394 1,364 1,539 Commercial 1,176 1,194 1,229 1,020 1,259 Industrial 102 103 110 81 87 Other' 478 481 527 555 593 13,200 13,592 13,893 14,224 14,538 ' Single Family Residence 2 Apartment houses,etc. 3 Schools,City Departments,Fire Protection Source: The City of Renton Water Utility Rates Water rates for metered services inside the City are established in order to charge service accounts for the amount of water used plus a monthly service charge determined by the size of the waterline serving the premises. The following rates and charges were established by Ordinance No. 4567 effective January 1, 1996: Base Rate: Size of Service Base Charge Size of Service Base Charge %inch $10.50 4 inch $126.05 1 inch 13.15 6 inch 189.10 1-1/2 inch 16.85 8 inch 262.65 2 inch 29.45 10 inch 378.20 3 inch 87.20 12 inch 525.30 Commodity Charge: $1.76/100 cubic feet ("cf') ($1.88/100 cf in excess of 1000 cf for residential only). Water rates for metered service outside the City are 1.5 times the rate fixed for metered service within the City. Water rates for fire protection service are$3.40 per month per inch of fire meter size. ? The Wastewater Sewer Utility The Wastewater Utility system collects wastewater from residential and commercial customers and delivers it to King County(the"County")for treatment. The existing system consists of 168.1 miles of wastewater pipelines, 23 lift stations and an additional seven lift stations which are privately owned and maintained. Wastewater is discharged into facilities within the City, from which it is conveyed to and treated by the County's Renton Treatment Plant. Approximately 80 percent of the City area is served by the system. The remaining area within the City is served by septic tanks or is undeveloped. 14 Wastewater Utility Customer Accounts Renton's Wastewater Utility currently serves 12,572 customers. The type and number of accounts are shown in the table below. 1997 1998 1999 2000 2001 Residential' 8,903 9,234 9,406 9,766 10,089 Multi-Family2 1,173 1,231 1,267 1,323 1,346 Commercial 923 929 952 966 983 Industrial 69 71 74 86 76 Other3 83 79 76 243 78 11,151 11,544 11,775 12,384 12,572 Single Family Residence 2 Apartment houses,etc. 3 Schools,City Departments,Fire Protection Source: The City of Renton Wastewater Utility Rates Monthly rates for sewer service within and outside of the City established by Ordinance No.4567 effective January 1, 1996 are as follows: Customer Type Rate Single family residence $12.29/month All other users $1.87 base charge,plus$1.39 per each 100 cf of water used In addition to the above monthly rates,a charge of$19.10 per month is payable to the County for each single family residence,or$19.10 for each multiple of 750 cf of water used by all other classes of customers. This charge is paid to the County for the collection and treatment of sewage. Storm Drainage Utility The Storm Drainage Utility system covers a service area within the existing City corporate boundaries of approximately 16 square miles. The area includes rivers, streams, ditches, lakes,wetlands, and manmade facilities. The Storm Drainage Utility owns,maintains and operates all storm and surface water management facilities located within public right-of-ways and easements dedicated for storm and surface water management purposes. The Storm Drainage Utility system consists of 183.7 miles of storm system pipe, includes 5,537 catch basins,2,547 access manholes, 13 storm water retention/detention facilities and 37.7 miles of ditch systems and channels. The City's Storm Drainage Utility currently serves 12,849 customers. 15 Storm Drainage Utility Rates Monthly rates for storm drainage service within the City are as follows: Type Monthly Rate Single-family dwelling $5.39 Low intensity 26.70/acre Medium intensity 38.61/acre High intensity 49.80/acre Gravel pits 52.13/acre - City streets 13.00/acre THE CITY OF RENTON General Information The City surrounds the southern end of Lake Washington,southeast of Seattle on Interstate 405. The City is located approximately 20 miles southeast of the City of Seattle and approximately 60 miles northeast of the City of Olympia, the State's capital. As of the 2001 population estimates, the City ranked sixth in size among cities in the County. The City had a population of 51,140 as estimated in 2001 by the State Office of Financial Management. The County had an estimated population of 1,758,300 as reported in 2001 by the State Office of Financial Management, an increase of approximately 16.7% since the 1990 Census. The economy of the area is based manufacturing, technology based business, the Port of Seattle, services industry, tourism, fishing and agriculture. (See "Appendix B - County Economic and Demographic Information"herein for a description of the area's economy.) Form of Local Government The City, which was incorporated in 1901, has a strong Mayor form of government. The Mayor is independently elected to a four-year term. The Mayor's job is to manage and implement the policies established by the seven-member Council. Each Council member serves a four-year term and is elected on a staggered two-year cycle. The names of the current members of the City Council as well as the dates in which of their respective terms of office expire are as listed below. Expiration of Name Title Term Jesse Tanner Mayor • 12/31/03 Dan Clawson President 12/31/05 Tern Briere Council Member 12/31/05 Randall Corman Council Member 12/31/05 Kathy Keolker-Wheeler Council Member 12/31/03 Toni Nelson Council Member 12/31/03 King Parker Council Member 12/31/03 Donald Persson Council Member 12/31/03 16 Principal City Officials Jesse Tanner, Mayor. Mr. Tanner was appointed to the Renton City Council in 1989 by his fellow City Council members and was elected to a four-year term in 1991. In November 1995,he was elected to serve as Mayor and was elected to a second term in 1999. Mr. Tanner served in the Federal Aviation Administration("FAA") for 34 years. During his FAA tenure he was appointed to the position of Deputy Director where he served for nine years, overseeing FAA activities in the Northwest Region of the United States. In his capacity as Deputy Director,he had direct authority over a work force of 2,500 personnel and an annual budget in excess of$100 million. Since his retirement from the FAA, Mr. Tanner has been involved in consulting work for several major aerospace companies. Jay Covington, Chief Administrative Officer. Mr. Covington joined City staff in 1990. Prior to joining the City,Mr.Covington served eight years at the City of Vancouver,Washington,in the roles of budget analyst, management analyst and Assistant to the City Manager. During his tenure with the City of Vancouver,Mr. Covington developed a municipal biennial budget as well as improved financial forecasting techniques. Victoria Runkle, Finance &Information Services Administrator. Ms. Runkle joined City staff in 1993. Prior to her tenure with the City she worked in public finance in both the public and private sectors. She began her career as a budget analyst with the City of Redmond. After three years with that entity she began working for the City of Seattle's Office of Management and Budget. During her seven years with the City of Seattle, she was responsible for a variety of assignments including capital budgeting. She left the City of Seattle as the Assistant Budget director for a position with a public finance advisory firm. During her tenure in the private sector,Ms.Runkle helped various types of municipalities develop rating presentations,prepare official statements, and issue various types of debt. City Employment and Primary Services The City had approximately 679 employees as of 2001. The City provides services in accordance with its charter, and operates its own police, fire,park and recreation, utility system,municipal airport and library system. Employee Relations The City has five bargaining units. The commissioned police officers have a guild. The guild also represents, in a separate bargaining unit, the non-commissioned support staff of the Police Department. There are two bargaining units in the Fire Department. The firefighters through the rank of captain are represented as a group. There are six battalion chiefs who are represented by a separate bargaining unit. The greatest number of employees is represented by AFSCME(American Federation of State and City Municipal Employees). State law requires municipalities to bargain collectively with formally recognized collective bargaining units. The management group tends to receive benefits very similar to the AFSCME contract. There are no significant outstanding personnel issues at this time. The City bargains with each of the units every three years. The City has contracts with all the bargaining units through 2002. 17 Pension Plans It is mandatoryfor all permanent City employees, including part time employees who work 70 hours per month during five consecutive months to participate in one of the following statewide local government retirement systems administered by the State Department of Retirement Systems, under cost-sharing multiple-employer public employee retirement systems. The City made the following contributions as of the fiscal year ended December 31, 2001, on behalf of City employees who participated in the pension plans listed below. Number of City Contribution Participants Fiscal Year 2001 Public Employees Retirement System("PERS") PERS Plan I' (hired before 10/1/77) 40 $79,263 PERS Plan If 391 577,117 Total PERS 431 $656,380 Law Enforcement Officers and Firefighters ("LEOFF") LEOFF Plan I3 (hired before 10/1/77) 22 $3,834 LEOFF Plan II4 170 433,021 Total LEOFF 192 $436,855 ' Employees in PERS I are required to contribute 6.00%of their salary to the plan,with a City contribution of 4.67%. 2 Employees in PERS II are required to contribute 2.43%of their salary to the plan,with a City contribution of 4.67%. 3 Employees in LEOFF I are required to contribute 0.00%of their salary to the plan,with a City contribution of 6.23%. 4 Employees in LEOFF II are required to contribute 6.78%of their salary to the plan,with a City contribution of 4.30%. The Budgetary Process The City prepares budgets in accordance with chapter 35.33 RCW. As background to the process,the City prepares a five-year fmancial forecast of general operations. Biennial calendar year budgets (in which annual allocations lapse at year end) are adopted by the City Council for funds providing customary government services. Long-term project-oriented budgets are adopted as required and amended as additional appropriations are needed. Special assessment and certain custodial agency funds are not budgeted. All budgets are accounted for on a line-item basis with control at the object summary total level. Estimated purchase order amounts are encumbered prior to the release of the order to the vendor. Open encumbrances lapse at year end and must be reappropriated or absorbed in the next year's operating budget. Auditing of City Finances Cities and counties of the State must comply with the Budgeting, Accounting, and Reporting System ("BARS")prescribed by the Office of the State Auditor as authorized under RCW 43.09.230 and 43.09.230. State laws also provide for annual independent audits by the Office of the State Auditor and require timely submission of annual financial reports to the State Auditor for review. The financial system of the City incorporates a system of financial and administrative controls that ensure the safeguarding of assets and the reliability of financial reports and consequently are designed to provide reasonable assurance that transactions are executed in accordance with management authorization, recorded in conformity with generally accepted accounting principles ("GAAP") applicable to governmental entities, that there exists accountability of and control over assets and obligations, and that sufficient reporting and review exists to 18 provide adequate information for analysis and comparability of data. Internal control is an area of audit by the State Auditor,as well,and City management receives and takes action upon recommendations made by the State Auditor. The City's financial statements are subject to annual audit by the State Auditor. The last audit covered the year ended December 31,2001 and the report thereon contained an unqualified opinion regarding the City's 2001 financial statements. Copies of the State Auditor's Report may be obtained by contacting the Office of State Auditor in Olympia, Washington or the City. Risk Management The City self-insures its risk exposure through self insurance up to specified levels of risk, and purchases stopgap insurance commercially to cover medium to large losses. The City's risk management program is administered by the Human Resources/Risk Management Administrator, with claims processed by independent claims administrators. Risk Retention Stop Gap Coverage Type Per Occurrence Loss Limit Property $25,000 $500,000,000 Liability 250,000 14,000,000 Auto Liability 250,000 14,000,000 Boiler&Machinery 5,000 50,000,000 Public Officials 250,000 10,000,000 Crime 10,000 1,000,000 Airport Liability - 0 50,000,000 Underground Storage Tank 10,000 1,000,000 Worker's Compensation 225,000 2,000,000 Employee Health 120,000 N/A • Authorized Investments Chapter 35.39 RCW limits the investment by cities and towns of its inactive funds or other funds in excess of current needs to the following authorized investments: United States bonds;United States certificates of indebtedness; bonds or warrants of the State and any local government in the State; its own bonds or warrants of a local improvement district which are within the protection of the local improvement guaranty fund law; and any other investment authorized by law for any other taxing district or the State Treasurer. Under chapter 43.84 RCW, the State Treasurer may invest in non-negotiable certificates of deposit in I I designated qualified public depositories; in obligations of the U.S. government, its agencies and wholly owned corporations;in bankers' acceptances;in commercial paper;in the obligations of the Federal Home Loan Bank,Federal National Mortgage Association and other government corporations subject to statutory provisions; and may enter into repurchase agreements. Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW 35.39.030). • Moneys available for investment may be invested on an individual fund basis or may, unless otherwise restricted by law,be commingled within one common investment portfolio. All income derived from such I investment may be either apportioned to and used by the various participating funds or for the benefit of the 19 general government in accordance with City ordinances or resolutions. Funds derived for the sale of bonds or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances, resolutions or bond covenants may lawfully prescribe. Shown in the following table are the City's investments as of June 30,2001. The City was in compliance . with all statutes pertaining to the investment of City moneys. Carrying � g Amount Market US Government Agency Securities $6,000,000 $6,035,320 Certificates of Deposit 11,000,000 11,657,385 State&County Local Gov't Investment Pools/MIA 42,723,419 42,861,433 U.S. Treasury Strips 4,766,926 6,169,653 Municipal Bonds 98,272 100,726 Total Investments $64,588,617 $66,824,517 APPROVAL OF BOND COUNSEL Legal matters incident to the authorization, issuance and sale of the Bonds by the City are subject to the unqualified approving legal opinion of Gottlieb, Fisher & Andrews, PLLC, Seattle, Washington, Bond Counsel. Fees payable to Gottlieb,Fisher&Andrews, Seattle,PLLC, Washington, as Bond Counsel, are contingent upon the issuance of Bonds. Bond Counsel has reviewed this document only to confirm that the portions of it describing the Bonds and the authority of the City to issue them conform to the Bonds, the applicable laws under which they were issued and the language regarding federal income tax exemption. A form of the legal opinion is included herein in Appendix E. TAX EXEMPTION In the opinion of Gottlieb,Fisher&Andrews,PLLC,Bond Counsel,as of the date of issue of the Bonds(the "Date of Issue"), and provided the city complies with applicable requirements of the Code which must be satisfied subsequent to the issuance thereof, the Bonds are not"private activity bonds,"as defined by the Code; interest on the Bonds is excluded from gross income for federal income tax purposes under existing federal law; and such interest is not an item of tax preference for purposes of determining the alternative minimum tax onindividualsand corporations under existing federal law. However,under existing federal law,interest on the Bonds received by certain corporations is to be taken into account in the computation of adjusted current earnings for purposes of calculating the alternative minimum tax applicable to such corporations; such interest received by certain S corporations may be subject to tax; and such interest received by foreign corporations with United States branches maybe subject to a foreign branch profits tax. Bond Counsel expresses no opinion regarding any other federal tax consequences of receipt of interest on the Bonds. Potential purchasers of the Bonds should consult with their tax advisors as to all possible tax consequences of ownership of the Bonds. See also, "Other Tax Consequences,"herein. The Code contains certain requirements which must be'satisfied subsequent to the issuance of the Bonds in order to maintain the tax treatment described above,including requirements relating to the application of the proceeds of the Bonds, use of facilities which are financed with such proceeds,'limitations on income 20 derived from the investment of gross proceeds ofthe Bonds (as defined in Section 148 of the Code), and rebate to the United States Treasury of certain of such investment income on such gross proceeds. The City has covenanted to comply with these requirements; and the opinion of Bond Counsel described in the preceding paragraph assumes such compliance. However,Bond Counsel has not undertaken and shall not undertake to monitor compliance by the City with such requirements and failure of the City to comply with such requirements could cause the interest on the Bonds to be included in gross income for federal income tax purposes,and could be treated as an item of tax preference for purposes of the alternative minimum tax on individuals and corporations,in each case,retroactive to the Date of Issue. OTHER TAX CONSEQUENCES Under current federal law: • 1. Corporate Alternative Minimum Tax. The interest on tax-exempt obligations received by a corporation is taken into account in the computation of the alternative minimum tax applicable to - corporations (as defined for federal income tax purposes). Under currentfederal law, the alternative minimum taxable income of such a corporation (other than an S corporation, a regulated investment company, a real estate investment trust or a REMIC) is increased by 75% of the amount by which the "adjusted current earnings" of the corporation exceeds the corporation's alternative minimum taxable income determined without regard to such increase and any alternative tax net operating loss deduction. Interest on tax-exempt obligations,whenever issued or acquired,including interest on the Bonds,is included in thecomputation of"adjusted net book income"and"adjusted current earnings." 2. Tax on Excess Passive Investment Income of S Corporations. Certain excess net passive investment income,including interest on the Bonds,received by an S corporation(a corporation treated as a partnership for most federal tax purposes) that has"subchapter C earnings and profits" at the close of its taxable year may be subject to federal income tax at the highest rate applicable to corporations if more than 25%of the gross receipts of such S corporation for such taxable year is passive investment income. I '. 3. Foreign Corporation Branch Profits Tax. Interest on the Bonds received by certain foreign corporations doing business in the United States may be'subject to a branch profits tax applicable to such corporations that is based on their United States source earnings and profits,including tax-exempt interest on obligations such as the Bonds. - t 4. Elimination of Interest Deduction for Financial Institutions. The Bonds are not"qualified tax- exempt obligations"for purposes of the 80 percent financial institution interest expense deduction permitted pursuant to the Code. None of the interest expense incurred by banks and other financial institutions ' allocable to the purchase or carrying of the Bonds may be deducted by such institution. 5. Reduction of Loss Deduction for Property and Casualty Insurance Companies. Interest on tax- exempt obligations,including the Bonds,received by property and casualty insurance companies,will reduce tax deductions for loss reserves otherwise available to such companies by an amount equal to 15 percent of such tax-exempt interest received during the taxable year. 6. Social Security and Tier 1 Railroad Retirement Benefits'Subject to Tax. Interest received or accrued during the year from tax-exempt obligations, such as the Bonds,'is included in the calculation of 21 • "modified adjusted gross income"of recipients of the social security or tier 1 railroad retirement benefits. If the sum of the"modified adjusted gross income"for the taxable year plus one-half of the social security or tier 1 railroad retirement benefits received during the taxable year exceeds a base amount provided by the Code(the"excess amount"),then the lesser of(i)one-half of the social security or tier 1 railroad retirement benefits received during the taxable year or(ii) one-half of the "excess amount", is included in the gross income of the social security or tier 1 railroad retirement benefit recipient. Covenant Against Arbitrage The City has covenanted that it will not take or permit to be taken on its behalf any action that would adversely affect the exclusion of the interest on the Bonds from gross income for purposes of federal income taxation, and will take or require to be taken such acts as may be permitted by State law and as may from time to time be required under applicable law to continue the exclusion of the interest on the Bonds from the gross income for purposes of federal income taxation. Without limiting the generality of the foregoing,the City has covenanted that it will not invest or make or permit any use of the proceeds of the Bonds or of its other money at any time during the term of the Bonds which would cause the Bonds to be"arbitrage bonds" within the meaning of Section 148 of the Code. • The City further covenants that it will not take any action or permit any action to be taken that would cause the Bonds to constitute "private activity bonds"under Section 141 of the Code. NO LITIGATION CONCERNING THE BONDS There is no controversy or litigation of any nature now pending or,to the knowledge of the City,threatened, restraining or enjoining the issuance, sale, execution or delivery of the Bonds, or in any way contesting or affecting the validity of the Bonds, any proceedings of the City taken with respect to the issuance or sale thereof, or affecting the ability of the City to pay the principal of and interest on the Bonds. UNDERWRITING D.A.Davidson&Co.(the"Underwriter")has agreed,subject to the terms of a Bond Purchase Contract,to purchase the Bonds from the City at an aggregate purchase price of %of the par value of the Bonds, (which includes a net [original issue discount] [premium] of$ and an Underwriter's discount of$ ,plus accrued interest. The Bonds are being reoffered for sale to the public at the prices shown on the cover of this Official Statement (for an average price of %). Concessions from the initial offering price may be allowed to selected dealers and special purchasers. The initial offering price is subject to change after the date hereof. RATINGS Standard &Poor's Rating Group, New York, New York, and Fitch Ratings, New York, New York have assigned the municipal rating of"A+" and "AA-", respectively, to this issue of Bonds (the "underlying ratings"). No application was made to any other rating agency for the purpose of obtaining an additional 22 rating on the Bonds. There is no assurance that the underlying ratings will be retained for any given period of time or that the underlying ratings will not be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any downward revision or withdrawal of the underlying ratings would be likely to have an adverse effect on the market price of the Bonds. The rating reflects only the view of Standard&Poor's and Fitch Ratings and an interpretation or further explanation of such rating maybe obtained from Standard&Poor's Rating Group,New York,New York or Fitch Ratings, New York,New York. ENFORCEABILITY The provisions of the Bonds and the Ordinance, constitute contracts between the City and the owner or owners of the Bonds, and such provisions are enforceable by the registered owner or owners in a court of competent jurisdiction in the State by mandamus or other appropriate remedy,subject to judicial discretion and the valid exercise of sovereign police power of the State and may be limited by laws affecting the rights of creditors. COMMITMENT TO PROVIDE CONTINUING DISCLOSURE Pursuant to Rule 15c2-12 under the Securities Exchange Act of 1934 (the "Rule") of the Securities and Exchange Commission (the "SEC"), the City has undertaken for the benefit of holders of the Bonds to provide certain financial information and operating data relating to the City by no later than nine months after the end of each fiscal year, commencing on or before December 31, 2002 (the "Annual Financial Information")and to provide notices of the occurrence of certain enumerated events,if material. The Annual Financial Information will be filed by or on behalf of the City with each Nationally Recognized Municipal Securities Information Repository formally recognized by the SEC ("NRMSIR") and with the State Information Depository for the State,if one is hereafter recognized by the SEC for purposes of the Rule(the "SD"). Notices of material events will be filed by or on behalf of the City with the NRMSIRs or with the Municipal Securities Rulemaking Board and with the SID, if any. The City's undertaking to provide ongoing disclosure is set forth in the Ordinance. See Appendix D hereto for a summary of the City's undertaking. The City has committed to provide ongoing disclosure of information with respect to various outstanding bond issues. The City has not failed to comply with the requirements of any previous undertaking specified in paragraph(b)(5)(i) of the Rule. ADDITIONAL INFORMATION AND MISCELLANEOUS The descriptions herein of the Ordinance and other documents are brief summaries of certain provisions thereof. Such summaries do not purport to be complete, and reference is made to such documents and contracts,copies of which are available,upon request and upon payment to the City of a charge for copying, mailing and handling, from the City, 1055 South Grady Way,Renton,Washington 98055,telephone(425) 430-6858, attention Finance and Information Services Administrator. r The summaries and descriptions contained in this Official Statement and the Appendices hereto of the provisions of the Bonds,the Ordinance and all reference to other materials not purporting to be quoted in full 23 are only brief outlines of some of the provisions thereof and do not purport to summarize or describe all of the provisions thereof. This Official Statement is not to be construed as a contract or agreement between the City and the Underwriter or holders of any of the Bonds. Any statements made in this Official Statement involving matters of opinion or estimates,whether or not so expressly stated,are set forth as such and not as representations of fact. No representation is made that any of such statements will be realized. DISCLOSURE STATEMENT The City will deliver to the Underwriter at the time of the delivery of the Bonds a certificate substantially to the effect that this Official Statement,including any appendices,and any supplements or amendments hereto, delivered by the City(which shall be deemed an original part hereof for the purposes of such statement)did not,at the time the Bonds are issued,contain any untrue statement of a material fact or omit any material fact necessary in order to make the statements made herein,in light of the circumstances under which they were made not misleading in any material respect. APPROVAL OF OFFICIAL STATEMENT The City,through a duly authorized official,has deemed this Preliminary Official Statement"final"as of its date, except for the omission of information dependent on the pricing of this issue, for purposes of compliance with the Rule. The execution and delivery of this.Official Statement have been duly authorized by the City. CITY OF RENTON, WASHINGTON By: Victoria Runkle Finance and Information Services Administrator 24 APPENDIX A Summary of Certain Provisions of the Ordinance I �, j A-1 SUMMARY OF CERTAIN PROVISIONS OF THE ORDINANCE Definitions Certain terms will be defined differently after the New Covenant Date.All such terms are italicized and the phrase"after the New Covenant Date"is included in such definitions.With respect to the summary,the meaning of the term will depend on whether the provision of the Ordinance being summarized is before or after the New Covenant Date. After the New Covenant Date, "Alternate Security"shall mean any bond 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 the Parity Bonds, issued by an institution that has been assigned a credit rating at the time of issuance of such Parity Bonds secured by such Alternate Security equal to or better than the highest then- existing rating for any of the Parity Bonds. "Annual Debt Service"for the Bonds shall mean all the interest plus all principal which will mature or come due in any year. After the New Covenant Date, `Annual Debt Service"for any year shall mean all the interest on plus all principal(except principal of Term Bonds due in any Term Bond Maturity Year)of Parity Bonds,plus all mandatory redemption and sinking fund installments, less all bond interest payable from the proceeds of any such bonds, which will mature or come due in that year. "Average Annual Debt Service"shall mean the sum of the Annual Debt Service for the remaining years to the last scheduled maturity of the applicable bond issue or issues divided by the number of those years. "Beneficial Owner"shall mean,with respect to any Bond,the Person named on the records of the Custodian as having the right,without a physical certificate evidencing such right,to transfer,to hypothecate and to receive the payment of the principal of,premium, if any, and interest on such Bond as the same becomes due and payable. "Bond Fund"shall mean that special fund of the City known as the 2002 Waterworks Revenue Bond Account created by the Ordinance as a separate account in the Waterworks Revenue Parity Bond Fund for the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Bond Fund"shall mean that special fund of the City known as the 2002 Waterworks Revenue Bond Fund created by the Ordinance for the payment of the principal of and interest on the Bonds. ["Bond Insurer"shall mean of New York,New York.] ["Bond Insurance Policy" shall mean the municipal bond insurance policy issued by the Bond Insurer insuring the payment when due of the principal of and interest on the Bonds as provided herein.] "Bond Register"shall mean the registration books on which are maintained the names and addresses of the Owners of the Bonds. "Bond Registrar"shall mean the fiscal agencies of the State in Seattle,Washington, and New York,New York,as the same shall be designated from time to time. "Bonds"shall mean the$ City of Renton Water and Sewer Revenue Bonds,2002,authorized to be issued by the Ordinance. "1977 Bonds"shall mean the Water and Sewer Revenue Refunding Bonds, 1977,Issue.No. 3. "1988 Bonds"shall mean the Water and Sewer Revenue Bonds, 1988. "1989 Bonds"shall mean the Water and Sewer Revenue Bonds, 1989. "1989 Refunding Bonds"shall mean the Water and Sewer Revenue Refunding Bonds, 1989. "1992 Bonds"shall mean the Water and Sewer Refunding and Improvement Revenue Bonds, 1992. A-2 "1993Water and Sewer Refundingand Improvement Revenue Refunding Bonds"shall mean the outstanding Bonds, 1993. "1994 Bonds"shall mean the outstanding Water and Sewer Revenue Bonds, 1994. "1998 Bonds"shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 1998. "Book-Entry Termination Date"shall mean the fifth business day following the date of receipt by the Bond Registrar of the City's request to terminate the book-entry system of registering the beneficial ownership of the Bonds. "City"shall mean the City of Renton,Washington,a duly organized and legally existing noncharter code city under the laws of the State. "City Finance Director" shall mean the City's Finance and Information Services Administrator or the successor to such officer. "Closing" shall mean the date of the delivery of the Bonds by the City to the Purchaser and the payment therefor by the Purchaser. "Code" shall mean the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. After the New Covenant Date, "Coverage Requirement"shall mean in any calendar year 1.25 times the Maximum Annual Debt Service. "Custodian" shall mean (a)The Depository Trust Company, New York, New York, or (b)any successor thereto engaged by the City to operate a book-entry system for recording, through electronic or manual means,the beneficial ownership of the Bonds,in which system no physical certificates are issued to the Beneficial Owners of the Bonds,but in which a limited number of physical certificates are issued to and registered in the name of the Custodian or its nominee,and delivered to the Custodian;provided,that such book-entry system operated by the Custodian may include the use of subsystems of recording the beneficial ownership of Bonds which are operated by parties other than the Custodian and the use of a nominee for the Custodian;and the term"Custodian,"as used herein,includes any party operating any such subsystem. "Future Parity Bonds"shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on Gross Revenue on a parity with the lien and charge on such Revenue for the payment of the principal of and interest on the Outstanding Parity Bonds and the Bonds. After the New Covenant Date, "Future Parity Bonds"shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on Net Revenue on a parity with the lien and charge on Net Revenue for the payment of the principal of and interest on the Bonds. "Gross Revenue"shall mean Revenue of the Waterworks Utility. "Letter of Representations"shall mean the Blanket Issuer Letter of Representations from the City and the Bond Registrar to the Custodian dated April 15, 1997,pertaining to the payment of the Bonds and the"book-entry" system for evidencing the beneficial ownership of the Bonds prior to the Book-Entry Termination Date(as it may be amended from time to time). "Maintenance and Operation Expense" shall mean all expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair,working order and condition,which shall not include any depreciation expenses or taxes or charges in lieu of taxes levied or imposed by the City. After the New Covenant Date, `Maintenance and Operation Expense"shall mean all reasonable expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair, working order and condition, including payments made to any other municipal corporation or private entity for water service and for sewage treatment and disposal service or other utility service in the event the City combines such service in the Waterworks Utility and enters into a contract for such service, and including pro-rata budget charges for the City's administration expenses where those represent a reasonable distribution and share of actual costs, but not including any depreciation or taxes levied or imposed by the City or payments to the City in lieu of taxes, or capital additions or capital replacements to the Waterworks Utility. A-3 After the New Covenant Date, "Maximum Annual Debt Service"shall mean, 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 calendar year on the outstanding Parity Bonds. "MSRB"shall mean the Municipal Securities Rulemaking Board. "Net Revenue"shall mean Gross Revenue less Maintenance and Operation Expense. "New Covenant Date"shall mean the date on which all 1977 Bonds(other than the 1977 Refunded Bonds), 1988 Bonds, 1989 Bonds, 1989 Refunding Bonds, 1990 Bonds, 1992 Bonds, 1993 Refunding Bonds and 1994 Bonds (other than the 1994 Refunded Bonds)are fully redeemed,refunded or defeased. "NRMSIR"shall mean a nationally recognized municipal securities information repository designated by the SEC. "Outstanding Parity Bonds"shall mean the 1993 Refunding Bonds and the 1994 Bonds. "Owner"shall mean the person named as the registered owner of a Bond on the Bond Register. "Parity Bonds"shall mean the 1998 Bonds,the Bonds and any Future Parity Bonds. After the New Covenant Date, "Parity Bond Fund" shall mean any fund created for the payment and redemption of Parity Bonds. "Principal and Interest Account"shall mean the subaccount of that name created in the Bond Fund for the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Professional Utility Consultant" shall mean an independent licensed professional engineer, certified public accountant or other independent person or firm selected by the City having a favorable reputation for skill and experience with municipal utilities of comparable size and character to the Waterworks Utility in such areas as are relevant to the purposes for which such consultant is retained. ,- "Project"shall mean the following project to be financed,in whole or in part,with proceeds of the Bonds: (1)the undertaking of the additions, betterments or extensions to the Waterworks Utility described in the Comprehensive Water System Plan or the Comprehensive Sanitary Sewer Plan,including,but not limited to,the capital improvements described in Exhibit A to the Ordinance, (2)making a deposit to the Reserve Account, and (3)paying the incidental costs and costs of issuing the Bonds. "Project Fund"shall mean "Purchase Agreement"shall mean the Bond Purchase Agreement for the Bonds,dated 2002,by and between the City and the Purchaser. "Purchaser"shall mean D.A.Davidson&Co. "Rate Stabilization Fund"shall mean the fund of that name created for the purposes described in Ordinance No. 4709. "Reserve Account"shall mean the subaccount of that name created in the Bond Fund by Ordinance No.4709 for the purpose of securing the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Reserve Fund" shall mean that special fund of the City known as the Waterworks Revenue Bond Reserve Fund created by Ordinance No. 4709 for purpose of securing the payment of the principal of and interest on all bonds to which Net Revenue is pledged. After the New Covenant Date, `Reserve Insurance"shall mean, in lieu of cash and investments, insurance obtained by the City equal to part or all of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained, issued by an institution that has been assigned a credit rating equal to or better than the highest then-existing rating for any of the Parity Bonds. After the New Covenant Date, "Reserve Requirement"shall mean the Maximum Annual Debt Service. "Revenue of the Waterworks Utility"shall mean all the earnings and revenue received by the Waterworks A-4 � I Utility from any source whatsoever,including payments received under contract with other municipal corporations for water service, except general taxes, charges in lieu of taxes, assessments in any utility local improvement district hereafter created,proceeds from the sale of City property,bond proceeds and earnings subject to a federal tax or rebate requirement. After the New Covenant Date, `Revenue of the Waterworks Utility"shall mean all of the earnings and revenues received by the City from the maintenance and operation of the Waterworks Utility and all earnings from the investment of money in the Reserve Fund or any Parity Bond Fund,and connection and capital improvement charges collected for the purpose of defraying the cost of capital facilities of the Waterworks Utility, except government grants, proceeds from the sale of Waterworks Utility property (other than timber), City taxes collected by or through the Waterworks Utility,principal proceeds of bonds and earnings or proceeds from any investments in a trust,defeasance or escrow fund created to defease or refund Waterworks Utility obligations(until commingled with other earnings and revenues of the Waterworks Utility)or held in a special account for the purpose ofpaying a rebate to the United States Government under the Code. "Rule"shall mean SEC Rule 15c2-12. "SEC"shall mean the United States Securities and Exchange Commission. "SID"shall mean a state information depository. "State"shall mean the State of Washington. "Term Bonds" shall mean any Outstanding Parity Bonds and/or Parity Bonds identified as such in the ordinance authorizing the issuance thereof, the payment of which is provided for by a requirement for mandatory deposits of money into the principal and interest account of the bond redemption fund created for the payment of such issue of bonds in accordance with a mandatory sinking fund requirement. "Term Bond Maturity Year"shall mean any calendar year in which Term Bonds are scheduled to mature. "Water and Sewer Revenue Parity Bond Fund"shall mean the fund of that name created by Ordinance No. 3896. "Waterworks Revenue Parity Bond Fund"shall mean the Water and Sewer Revenue Parity Bond Fund,as renamed by Ordinance No.4709. "Waterworks Utility"shall mean the combined water and sewerage systems,including the storm and surface water sewers,of the City as the same may be added to,improved and extended for as long as any of the Outstanding Parity Bonds or Parity Bonds are outstanding. "Waterworks Utility Fund"shall mean that special fund of the City into which all Gross Revenue(except for earnings in any special fund for the redemption of revenue obligations of the Waterworks Utility)shall be deposited. New Covenant Date The City currently has outstanding $10,185,000 Water and Sewer Refunding and Improvement Revenue Bonds, 1993 (the"1993 Refunding Bonds"),$610,000 Water and Sewer Revenue Bonds, 1994(the"1994 Bonds"), and $5,545,000 Water and Sewer Revenue Refunding Bonds (the "1998 Bonds"). Upon the date of the full redemption,refunding or defeasance of the 1993 Refunding Bonds and the 1994 Bonds(the"New Covenant Date"), certain new covenants will take effect with respect to the 1998 Bonds,the Bonds and any Future Parity Bonds issued prior to the New Covenant Date. After the New Covenant Date,certain covenants affecting Parity Bonds may be superceded or amended by the City. While some of those covenants are presented here both as they are currently exist and as they will exist after the New Covenant Date,reference is made to the Ordinance for a complete presentation of potential changes after the New Covenant Date. A-5 Pledge of Revenue After the New Covenant Date,the Net Revenue is pledged to the payment of the Parity Bonds,and the Parity Bonds will constitute a lien and charge upon such Net Revenue prior and superior to any other charge whatsoever. Bond Fund After the New Covenant Date, all money in the Principal and,Interest Account of the 2002 Waterworks Revenue Bond Account will be transferred into the 2002 Waterworks Revenue Bond Fund(heretofore defined as the Bond Fund). So long as Bonds are outstanding against the Bond Fund,the City will set aside and pay into the Bond Fund out of Net Revenue a fixed amount,without regard to any fixed proportion,namely,one day before each interest or principal and interest payment date,an amount which,together with other money then on deposit therein,shall be sufficient to meet the debt service on the Bonds required on the next interest or principal and interest payment date;and Reserve Fund After the New Covenant Date, all money in the Reserve Account of the 2002 Waterworks Revenue Bond Account will be transferred into the Waterworks Revenue Bond Reserve Fund (heretofore defined as the Reserve Fund). After the New Covenant Date,the City will set aside and pay into the Reserve Fund out of the Net Revenue (or from any other money which the CitymaY have available for that purpose), in three annual approximately equal deposits,any additional money necessary to bring the amount deposited in the Reserve Fund attributable to the Bonds up to the amount equal to the increase in the Reserve Requirement,from Average Annual Debt Service to Maximum Annual Debt Service, attributable to the Bonds. The Reserve Requirement may be met by the deposit of cash and investments into the Reserve Fund or by Reserve Insurance or a combination thereof. Except for authorized withdrawals therefrom,the Reserve Fund will be maintained at the Reserve Requirement at all times so long as any Parity Bonds are outstanding. When the total amount in the Bond Fund equals the total amount of principal and interest for all outstanding Bonds,no further payment need be made into the Bond Fund. If there is a deficiency in the Bond Fund to meet maturing installments of either principal or interest,as the case maybe,on the Bonds,that deficiency will be made up from the Reserve Fund by the withdrawal of cash therefrom for that purpose. Any deficiency created in the Reserve Fund by reason of any such withdrawal will then be made up from Net Revenue first available after making necessary provisions for the required payments into the Bond Fund. Any money in the Reserve Fund in excess of the Reserve Requirement may be withdrawn and deposited in any Parity Bond Fund and spent for the purpose of retiring Parity Bonds or may be deposited in any other fund and spent for any other lawful Waterworks Utility purpose. • Rate Stabilization Fund After the New Covenant Date,a Rate Stabilization Fund may be created. Deposits to the Rate Stabilization Fund may be made from Gross Revenue of the Waterworks Utility,see"Flow of Funds"below. For the purposes of calculating compliance with the Rate Covenant, deposits to the Rate Stabilization Fund will be deducted from Net Revenue of the Waterworks Utility in the year of such deposit,and withdrawals from the Rate Stabilization Fund will be added to Net Revenue of the Waterworks Utility in the year of such withdrawal. Rate Covenant After the New Covenant Date,the City has covenanted to establish,maintain and collect rates and charges for all services and facilities provided by the Waterworks Utility which will be fair and nondiscriminatory,and will adjust those rates and charges from time to time so that: A-6 (a) Gross Revenue will at all times be sufficient to(1)pay all Maintenance and Operation Expense on a current basis,(2)pay when due all amounts that the City is obligated to pay into the Reserve Fund and any Parity Bond Funds and(3)pay all taxes,assessments or other governmental charges lawfully imposed upon the Waterworks Utility or other revenue therefrom or payments in lieu thereof and any and all other amounts which the City may now or hereafter become obligated to pay from Gross Revenue by law or contract; and (b) Net Revenue in each calendar year will be at least equal to the 1.25 times Maximum Annual Debt Service(the"Coverage Requirement"). Flow of Funds All Gross Revenue of the Waterworks Utility will be deposited into the Waterworks Utility Fund as collected, and will be held separate and apart from all other funds and accounts of the City. After the New Covenant Date,the amounts deposited therein will be used only for the following purposes and in the following order of priority: First,to pay Maintenance and Operation Expense; Second,to pay interest on the Outstanding Parity Bonds and Parity Bonds; Third,to pay the principal of the Outstanding Parity Bonds and Parity Bonds; Fourth,to make all payments required to be made into any sinking fund or bond redemption fund created for the payment of Future Parity Bonds which are Term Bonds; Fifth,after the New Covenant Date,to make all payments required to be made into the Reserve Fund; Sixth,to make all payments required to be made into any revenue bond redemption fund or warrant redemption fund and debt service account or reserve account created to pay and secure the payment of the principal of and interest on any revenue bonds or revenue warrants of the City having a lien upon Gross Revenue junior and inferior to the lien thereon for the payment of the principal of and interest on the Outstanding Parity and Parity Bonds; and Seventh,to retire by optional redemption or purchase in the open market any outstanding revenue bonds or revenue warrants of the City,to make necessary additions,betterments,improvements and repairs to or extensions and replacements of the Waterworks Utility,and after the New Covenant Date,to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. Additional Covenants Maintenance of the Utility. It will at all times maintain and keep the Waterworks Utility in good repair, working order and condition and also will at all times operate such Utility and the business in connection therewith in an efficient manner and at a reasonable cost. Disposition of the Waterworks Utility. Prior to the New Covenant Date,it will not sell,lease,mortgage or in any manner encumber or dispose (as used herein "dispose") of all the property of the Waterworks Utility unless provision is made for payment into each of the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the 1998 Bonds and into the Bond Fund of sums sufficient to pay,respectively,the principal of and interest on all Outstanding Parity Bonds,the 1998 Bonds and the Bonds at any time outstanding,and that it will not or dispose of any part of the property of the Waterworks Utility that is used,useful and material to the operation thereof,unless provision is made for replacement thereof,or for payment into the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the 1998 Bonds and into the Bond Fund of the total amount of revenue received which will not be less than an amount which bears the same ratio to the amount of the Outstanding Parity Bonds, the 1998 Bonds and Bonds,respectively,as the revenue available for debt service for such outstanding bonds for the twelve months preceding such disposal from the portion of the disposed of bears to the revenue available for debt service for A-7 such bonds from the entire utility for the same period. Any such money so paid into such funds will be used to retire such outstanding bonds at the earliest possible date. After the New Covenant Date, it will not dispose of the Waterworks Utility in its entirety unless, simultaneously with such disposition,all Parity Bonds are defeased pursuant to the provisions of the Ordinance.It will not dispose of any part of the Waterworks Utility(other than timber),including all additions and improvements thereto and extensions thereof at any time made,that are used,useful or material in the operation of the Waterworks Utility, unless provision is made for the replacement thereof or for payment into the Bond Fund of the greatest of the following: (a) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding(defined as the total amount of those bonds less the amount of cash and investments in the Reserve Fund and any Parity Bond Funds) that Gross Revenue from the portion of the Waterworks Utility disposed of for the preceding year bears to the total Gross Revenue for that period; (b) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding(as defined above)that the Net Revenue from the portion of the Waterworks Utility disposed of for the preceding year bears to the total Net Revenue for that period; or (c) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding(as defined above)that the depreciated cost value of the facilities disposed of bears to the depreciated cost value of the entire Waterworks Utility immediately prior to such sale or disposition. Notwithstanding any other provision of the Ordinance concerning such disposition,(a)the City in its discretion may dispose of any of the works,plant,properties or facilities of the Waterworks Utility or any real or personal property comprising a part of the same which becomes unserviceable,inadequate,obsolete or unfit to be used in the operation of the Waterworks Utility,or no longer necessary,material to or useful to the operation of the Waterworks Utility,without making any deposit into the Bond Fund, and(b)the City may transfer the Waterworks Utility to another municipal corporation so long as Net Revenue of the portion of the Waterworks Utility so transferred is used for payment of debt service on the Parity Bonds prior to any other purpose. Such proceeds will not be treated as Gross Revenue. Books and Accounts. Prior to the New Covenant Date,it will,while any of the Bonds remain outstanding, keep proper and separate accounts and records in which complete and separate entries will be made of all transactions relating to the Waterworks Utility,and it will furnish the owner or owners of the Bonds at the written request of such owner or owners complete operating and income statements of such utility in reasonable detail issued in any calendar year not more than ninety days after the close of such calendar year,and it will grant any owner or owners of at least twenty-five percent of the outstanding Bonds the right at all reasonable times to inspect the entire Waterworks Utility and all records,accounts and data of the City relating thereto. Upon request of any owner of any of the Bonds,it also will furnish to such owner a copy of the most recently completed audit of the City's accounts by the State Auditor. After the New Covenant Date,the City has covenanted that it will keep proper books,records and accounts with respect to the operations,income and expenditures of the Waterworks Utility in accordance with proper accounting - - procedures and any applicable rules and regulations prescribed by the State. 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 Waterworks Utility 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 Reserve Fund and into any and all special funds or accounts created pursuant to the 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 Waterworks Utility. Such statements will be sent to the owner of any Parity Bonds upon written request therefor being made to the City. No Free Service. Prior to the New Covenant Date,it will not furnish water,sanitary sewage disposal service or storm and surface water drainage service to any customer whatsoever free of charge and promptly will take legal action to enforce collection of all delinquent accounts. A-8 After the New Covenant Date,the City has covenanted that 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 operation of the Waterworks Utility free of charge to any person,firm or corporation,public or private,other than the City,so long as any Parity Bonds are outstanding. On at least an annual basis,it will determine all accounts that are delinquent and will take all necessary action to enforce payment of such accounts against those property owners whose accounts are delinquent. Insurance. Prior to the New Covenant Date,it will carry the types of insurance on the Waterworks Utility properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems,and the cost of such insurance will be considered a part of operating and maintaining such utility. If, as,and when the United States of America or some agency thereof will provide for war risk insurance,the City further agrees to take out and maintain such insurance on all or such portions of such utility on which such war risk insurance may be written in an amount or amounts to cover adequately the value thereof. After the New Covenant Date,it at all times will carry fire and extended coverage and such other forms of insurance,including public liability and property damage insurance,with responsible insurers and with policies payable to or on behalf of the City and any additional insureds on such of the buildings,equipment,works,plants,facilities and properties of the Waterworks Utility, and against such claims for damages, as are ordinarily carried by municipal or privately owned utilities engaged in the operation of like systems,or will implement and maintain a self-insurance or an insurance pool program with reserves adequate, in the reasonable judgment of the City, to protect the Waterworks Utility and the Owners of the Parity Bonds against loss. Obligations. It will pay all Maintenance and Operation Expense and the debt service requirements for the Outstanding Parity Bonds,the outstanding 1998 Bonds and the outstanding Bonds,and otherwise meet the obligations of the City as set forth in the Ordinance. Preservation of Tax Exemption. It will take all actions necessary to prevent interest on the 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 Bonds or other funds of the City treated as proceeds of the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross income for federal income tax purposes. It will, to the extent arbitrage rebate requirements of Section 148 of the Code are applicable to the Bonds, take all action necessary to comply(or to be treated as having complied) with those requirements in connection with the Bonds, including the calculation and payment of any penalties that the City has elected to pay as an alternative to calculating rebatable arbitrage,and the payment of any other penalties if required under Section 148 of the Code to prevent interest on the Bonds from being included in gross income for federal income tax purposes. Future Parity Bonds After the New Covenant Date,the City will no longer have the right to issue Bonds on a parity with the 1993 Refunding Bonds and the 1994 Bonds.The City reserves the right to issue Future Parity Bonds with a lien upon the Revenue of the Waterworks Utility equal to the lien of the 1998 Bonds and the Bonds,so long as there is not deficiency in the Parity Bond Fund and if the following conditions are met and complied with at the time of issuance of the Future Parity Bonds: (a) A certificate is delivered certifying that the Net Revenue will be at least equal to the Coverage Requirement. If Net Revenue from any 12 consecutive months of the preceding 36 months prior to the date of issuance of additional bonds is equal to the Coverage Requirement,the City Finance Director will be entitled to deliver such certification. If Net Revenue includes adjustments to reflect changes in the schedule of rates and charges,customers added to the Utility,or changes to revenues and expenses reflecting completion of any facilities under construction or to be acquired, constructed or installed from proceeds of any Future Parity Bonds,the certification will be signed by a Professional Utility Consultant. For the purposes of calculating the Coverage Requirement for the issuance of Future Parity Bonds,in neither case will Net Revenue reflect deposits into or withdrawals from the Rate Stabilization Fund. A-9 (b) The ordinance authorizing the issuance of Future Parity Bonds will provide that an amount equal to the increase in the Reserve Requirement attributable to the Future Parity Bonds to be issued be deposited to the Reserve Fund from proceeds of the Future Parity Bonds or other available funds. If then existing federal tax law precludes the deposit of sufficient funds from proceeds of the Future Parity Bonds,the remaining amount will be accumulated in not less than three years from the date of issuance of the Future Parity Bonds in approximately equal annual deposits.The Reserve Requirement can be met by the purchase of Reserve Insurance or Alternate Security. A-10 j I I ' APPENDIX B 2001 Audited Financial Statements of the Waterworks Utility ! 11 i B-1 ENTER RISE FUNDS COMBINING STATT:MENT.OF REVENUES.EXPENSES.AND CHANGES IN FUND EQUITY FOR THE YEAR ENDED DECEMBER 31,2001 • WITH COMPARATIVE TOTALS FOR DECEMBER 31,2000 • (PAGE 1 O 2) r WATERWORKS SOLID WASTE -- k UTILITY AIRPORT UT11JNY OPERATING REVENUES: Charges forSetvices $ 20.495.611 $ 841,730 $ 8.409.534 - _ Other Other Operating Revenue 1.203.480 14.010 4.838 TOTAL OPERATING REVENUE 21399,091 855.740 • 8.414,372 OPERATING EXPENSES: Operations and Mantenance 12,463.725 471,211 7.692.256 ''Administrative and General 1.853.671 148.875 0 . Insurance 0 18,000 0 'Foxes 1.734.324 0 1.078.777 - Depreciation 3.661.458 181.268 25.931 TOTAL OPERATING EXPENSES 19,713.178 819,354 8.796.964 OPERATING INCOME(LOSS) 1.985.913 36.386 - (382.592) • -- NON-OPERATING REVENUE(EXPENSE): Interest Revenue 295.154 209.575 28,507 • Gain(Loss)on Sale of Assets 0 198 0 Other Non-operating Revenue -• 59.573 0 40,757 Interest expense (1.093.550) 0 • . 0 ,_ Amortization of Debt Discount and 6cpense (77,166) 0 0 NON-OPERATING REVENUE NET OF EXPENSES (786.989) 209.773 69.264 - INCOME(LOSS)BEFORE OPERATING TRANSFERS 1.198.924 246.159 (313.3281 Operating Transfers In(Out) (77.650) 0 0 - NET INCOME(LOSS) 1.121.274 246.159 (313.328) • Deprecation Reducing Grant Contributed Capital 0 167.010 0 INCREASE(DECREASE)IN RETAINED EARNINGS 1.121.274 413.169 (313.328) RETAINED EARNINGS.JANUARY 1 26.001.632 6.106.846 1,050.962 RETAINED EARNINGS.DECEMBER 31 . 27.122.906 6.529.015 737.634 CONTRIBUTED CAPITAL JANUARY 1 104,721.467 2.062.520 166.166 Capitol Grants • 0 634.243 0 Amortization on Capital Grants 0 (167.010) 0 Other Contributed Capital 7.395.079 0- 0 CONTRIBUTED CAPITAL DECEMBER 31 112.116.546 2.529.753 166.166 FUND EQUITY.DECEMBER 31 $ 139.239.439 $ 3 z 903.800 J • • • • 27 ENTERPRISE FUNDS COMBINING STATEMENT Of REVENUES.EXPENSES.AND CHANGES IN FUND EQUITY • FOR THE TEAR ENDED DECEMBER 31,2001 WITH COMPARATIVE TOTALS FOR DECEMBER 31.2000 (PAGE 2 OF 2) • TOTALS • GOLF ' COURSE 2001 2000 $ 2.122363 $ 31,869.238 3 32.488.173 I 1 192.633 1.414.961 1.617.301 2,314,996 33.284.199 34.105,476 1,466,738 22.093,930 21.041,065 O 2,002.54.6 1.946,945 0 18,000 20.000 13,286 2,826.387 2,930.181 _379.653 4,248.310 3.840.277 1.859.677 31.189,173 29,778.468 455,319 I 2.095.026 4.327.008 61.001 594.237 928.049 1.200 1,398 0 O 129,330 194.780 1261.1071 (1.354,657) (1.482.023) 0 (77.1661 (80.472) (198,906) (706.858) (439.666) 216.413 1.3x8.168 3.887.342 0 (77.650) 15,248 I 256.413 1.310.518" 3.902.590 0 167.010 171.356 256,413 1.477.328 4.073.946 4.878,3.13 38.037.753 33.963.807 5.134.726 39515,281 38.037,753 1.412225 108.362,378 102.017.808 O 634.243 128.087 0 (167.010) (171.356) O 7.395.079 6.387.839 1.412.225 116.224.690 108.362.378_ { 3 6.546.951 3 155.739,971` 3 1 . • II I , 28 ENTERPRISE FUNDS COMBINING BALANCE SHEET DECEMBER 31.2001 WITH COMPARATIVE TOTALS FOR DECEMBER 31,2000 (PAGE 1 OF 2) WATERWORKS AIRPORT SOLID WASTE ASSETS: UTILTn UTILITY Current Assets: Cash and Cash Equivalents S 2.017,438 $ 3.360,738 S 411.454 Investments at Fair value 0 0 0 Receivables Accounts 3,796.581 143.949 641,785 Interest on Investments 4.276 39.116 2,566 Notes Receivable-Current 0 0 0 Due From Other Funds 0 0 0 Due From Other Governmental Units 309,205 599.210 40,757 Inventory of Material and yuppies 272,493 0 0 Total Current Assets 6,401,993 4.143,013 1.096,562 ' Restricted Assets: Deposits - 25,439 0 0 Revenue Band Debt Service 4,232,670 0 0 Construction Account 0 0 0 ' Total Restricted Assets 4,258.109 0 0 Note Receivable•Non-Currant 0 0 0 Property.Plant and Equipment: Rxed Assets(Net) 152.040.666 4.488.593 51.410 Construction In Progress 4.030.837 909.760 0 Total Property.Plant and Equipment 156.071.503 5.398,353 51.410 Deferred Charges and Other Assets 32.000 0 0 TOTAL ASSETS 3 166.7` ; 9 541 366 1 3 1.147.972 L1.4BIUTIE5 AND RIND EQUITY: • LIABILITIES: Current Liobi66es: vouchers/Contracts Payable S 611,920 5 346.161 3 208.537 Retainage Payable 301,755 • 5.989 0 Due To Other Funds 4,409 4,346 0 Due To Other Governmental Units 504,807 0 0 Accrued interest Payable 220,138 0 1.098 ACCru d Wages Payable 24,897 . 1.363 227 ' Accred B'nplayee Benefits Payable - 2,345 129 21 Accrued Taxef Payable 56,069 37.331 32.008 Deferred Revenues 92,330 59,916 0 I Capital Leases Payable•Current 0 0 0 Total Current Uabl1tles • 1.818.670 455,235 241.891 Liabilities Payable from Restricted Assets: Deposits Payable 25.439 0 0 Revenue Bonds Payable-Current Portion . 1.805,000 . 0 0 Total Liabilities Payable from Restricted Assets 1.830.439 0 0 Long Term Liabilities: • Revenue Bonds Payable 16.935.000 0 0 • Unamorited Discounts on Revenue Bond (783463) 0 0 Accrued Employee Leave Benefits 333,957 36,363 2.281 Capital Leases Payable 0 0 0 Pubic Works Trust Pund Loan Payable 7.389.550 0 0 Total Long Term Liabilities 23.875.044 36.363 2.281 • TOTAL LIABILITIES 27.524.153 491.598 244,172 FUND EQuiTY: • Contributed Copited 112116,546 2,529,753• 166,166 c Retained Earnings: Reserved 8,182761 0 0 Unreserved 18.940.145 6420,015 737,634 1 TOTAL FUND EQUITY , 13�9� 9.049.768 903.800 TOTAL LIABILITIES AND FUND EQUITY $._a(1,6262ALL $ 9.541366 $ I.147.977 104 ENTERPRISE FUNDS COMBINING BALANCE SHEET DECEMBER 31.2001 WITH COMPARATIVE TOTALS FOR DECEMBER 31,2000 (PAGE 2 OF 2) COMPARATIVE TOTALS GOU' COURSE 2001 2000 , 1,019,460 $ 6.809.090 5 6,330.546 . 0 0 4,080,313 83.240 4,667.555 4.048.519 4.276 50.234 85.100 21.041 21.041 23,472 0 0 87 0 949.172 416.394 85.807 358.300 389.063 1.213.824 12.855 392 15,373,494 0 25.439 32.329 441.358 4.674,028 4,991.315 0 0 1.260,390 441.358 4499,467 6,284,034 0 0 21.041 8.875.290 165.455.959 154,448,185 28.787 4.969.384 5,119,753 3,904,077 170,425,343 159.567,938 • 62464 94.464 48.000 5 10421.723 5 188.Q74.666 S 181.294.507 5 18,790 S 1,185.408 3 1.283.900 510 308.254 85.256 0 3,755 1.904 • 0 504.807 706.124 17.546 238.782 260.553 3.254 29,741 27.370 306 2.801 3,372 3.986 129,394 102,817 0 152.246 171,515 38.418 38.418 40,954 82.810 2.598.606 26833,765 74.859 100.298 160.569 • 225.000 2030,000 1,950.000 299.859 2.130.298 2110569 • 4.105,000 21.040,000 23.070,000 (454.6871 11,238,1501 (1.412.476) 34.552 407.153 387.037 7.238 7.238 45.656 0 7.389.550 &C09.825 • 3.692.103 27.605.791 30,100.042 4.074.772 32,334495 34,894.376 i I 1.412225 116.224.690 108,362,378 441.358 8,624,119 10,972.088 4,693,368 30.891.162 27.115,665 6.546,951 155,739,971 146,400,131 10421,723 $ 188,074,666 $ 181,294,507 • 105 ENTERPRISE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR BIDED DECEMBER 31.MT wow COMPARATIVE TOTALS FOR DECEMBER 31.2000 (PAGE T OF 4) SOLID WASTE WATERWORKS AIRPORT UTILITY CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received From Customers $ 19,636,504 $ 738.505 $ 8,396.547 Cash Received from Other Funds for Services • 399,652,,, 0 0 Cosh Paid to Suppliers for Goods and Services (8.988.506)' (30.040) (7,927,809) Cash Paid to Other Funds for Goods and Services (2.966.221) (57,187) (277,004) Cash Paid to Employees (2,961.087) (206,236) (136.003) Cosh Paid for City Utility Taxes (1.205.021) 0 (486.291) Other Operating Receipts 1.203.480 14.010 4,838 Other Non-Operating Receipts 88.573 0 72,515 . NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES 5.207.374 459.052 (353.207) CASH FLOWS FROM NONCAPITAL FINANCING ACTMTIFS: Operating Transfers From Other Funds 0 0 0 Operating Transfers To Other Funds (77,650) 0 0 NET CASH PROVIDED(USED)BY NONCAPITAL FINANCING ACTIVMES (77.650) 0 0 CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES: Proceeds From Sole of Equipment 0 0 0 Acquisition and Construction of Capital Assets (14.035.783) (856.667) 0 1 Capitol Contnbutions 7,395.079 0 0 Copilot Grants 0 53.030 0 Rlncloal Payments on Bonds (1,730.000) 0 0 Interest Payments on Bonds (1,114,588) 0 0 Payments on State Long-Term Loons 1821.5921 0 0 NET CASH PROVIDED(USED)BY CAPITAL FINANCING ACTMTIES • (10.306.8841 1803,637) 0 CASH FLOWS FROM INVESTING ACTIVMES: Proceeds From Sate of Investments 1.903.876 2.3389.930 252.609 Payments for Investments (34.293). (776.793) (2.450) Interest on Investments 342.134 202.092 26.119 NET CASH PROVIDED(USED)BY INVESTING ACTIVITIES 2.211,717 1.815.229 276.278 NET INCREASE(DECREASE)IN CASH ANO CASH EQUIVALENTS 12.965.443) 1.470.644 (76.9291 CASH ANO CASH EQUIVALENTS.JANUARY 1 9.240.990 1.590.094 488.383 CASH AND CASH EQUIVALENTS.DECEMBER 31 S 6.275.547 5 3360.738 $ 411,454 4 CASH AT THE ENO OF THE YEAR CONSISTS OF: Cash and Cosh Equivalents $ 2.017.438 $ 3.360.738 $ 411.454 Cash Roshicted fcr, Deposits 25.439 0 0 Revenue Bond Debt Service 4,232.570 0 0 Constnrctton Account 0 0 0 TOTAL CASH AT THE END OF THE YEAR ; 6.275.547 $ 1360.738 $ _ 411.454 - • • 108 ENTERPRISE FUNDS COMBINING STATEMENT OF CASH FLOWS OR THE YEAR ENDED DECEMBER 31.2001 WITH COMPARATNE TOTALS FOR DECEMBER 31.2000 (PAGE 2 OF 4) I � TOTALS • GOLF COURSE 2001 2000 1 2.009,614 5 30.781.170 5 • 31.009.998 0 399.652 407.330 (489,883) (17.436.238) (16.419,322) (235,472) (3.535.884) (3.658.490) (746,875) 14,050,201) (3.852.116) 0 (1,691.322) 11.788.619) 192.633 1.414,961 1.617.301 0 161,088 248.593 730,017 6.043.236 7.564.675 , I 0 0 92,898 0 (77.650) (77.650) j- - 0 (77.6501 15,248 24,672 24,672 . 21.671 1207.079) ((5.099.529) (11.734.828) 0 7.395.079 6.387,839 0 53.030 110.090 (260.954) (1.990.954) 11.795.666) (227.144) (1.341.732) (1.510.382) 0 1821.592) 1445,048) (670405) (11.781.026) (8.366.321) 351.333 4.897.748 3.150.000 (3.898) (817.434) (1.749.579) 58.758 629.103 902.956 406,193 4,709.417 2.303.377 465.705 11.106.0231 1.516.979 995.1131�2.614.580 11.097.601 $, 1.460.818,$ 11.508.557 $ 12.614.580 1.019.460 ; 6.809.090 $ 6.330.546 0 25.439 32.329 441,358 1.674.028 4,991.315 0. 0 1,260.390 $ 1.460.818 5 11.508.557 S 12614.580 ' . 109 ENTERPRISE RINDS COMBINING STATEMENT OP CASH FLOWS FOR THE YEAR ENDED DECeMBPR 31.2001 WITH COMPARATIVE TOTALS POR DECEMBER 31,2000 (PAGE 3 OF 4) SOLID WASTE WATERWORKS AIRPORT UTILITY RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES: Operating Income(loss) $ 1.985,913 $ 36.386 3 (382.592) Adjustments to Reconcile Operating Income(Lou) to Net Cash Provided(Used)By Operating Activities: Depreciation and Amortization of Deferred Charge 3.677,458 181,268 25.931 Other Non-Operating Revenue 88.573 0 40.757 (Increase)Decrease In Accounts Receivable 1420.020) (133.254) (11.124) (Increase)Decrease In Oue Prom Other Funds/Governmental 16.764 0 31,758 (hawse)Decrease In Inventory/Prepaid Items 13.182 0 0 Increase(Decrease)In Vouchers/Retainage Payable (165.991) 339,122 (57.743) Increase(Decrease)in Due to Other Funds/Governmental 2505 4,346 0 Increase(Decrease)in Payables/Other Short Term Liabilities 13.388 18.933 176 Increase(Decrease)In Customer Deposits (6.890) 0 0 Increase(Decrease)In Deferred Revenues (30,243) 10.974 0 Increase(Decrease)in Accrued Employee Leave Benefits 32.73.5 1.277 1370) Total Adjustments 3.221.461 422.666 29,385 NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES $ 5.207.374 5 459.052 S 1353.2071 SCHEDULE OF NONCASH CAPITAL AND RELATED FINANCING ACTIITIE: 11 Foxed Assets Contributed By Oevelopers $ 5.969.070 3 0 S 0 Change In Fair value of investments 4.345 39.930 2.607 TOTAL NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES $ 5.973-4,15 $=i•m®3 2.607 110 ENTERPRISE FUNDS- COMBINING STATEMENT OP CASH FLOWS FOR TN!TEAR ENDED DECEMBER 31.2001 WITH COMPARATIVE TOTALS FOR DECEMBER 31.2000 (PAGE 4OF4) TOTALS GOLF COURSE 2001 Y000 5 455.319 $2.0950265 .3274 .008 379,653 4.264.310 3,856,277 0 129.330 194.780' (54.638) 1619.036) ` (910,768) 0 48.522 469.101 17,581 30.763 269,299 3,129 118.517 (410.9641 0 6.85) (43,787) (4,120) 25.377 (2352) (53.381) (60.271) 19.284 0 (19.269) 1194386) (13.5261 20.116 (8.817) 274,698 3.948.210 3.237,667 f 730.017 3 _6.043236 $=07,411,41,12. f 0 f 5.969.070 S 4,558,340 4.345 51.227 98.207 $=m:me= w 5 6.020.297 $ 4.656.547 111 [This Page Intentionally Left Blank] • APPENDIX C • ! King County Economic and Demographic • Information • I C-1 KING COUNTY ECONOMIC AND DEMOGRAPHIC INFORMATION Local Economic Overview The City is located in northwestern Washington in County. The City is located approximately 20 miles southeast of the City of Seattle and approximately 60.miles northeast of the City of Olympia, the State's capital. The County,with a population of 1,758,300, encompasses 2,128 square miles,ranking 11th in geographical size of Washington's 39 counties but first in population. Seattle is the largest city in the Pacific Northwest and serves as the County seat. The County and Snohomish and Island Counties to the north together comprise the Seattle Primary Metropolitan Statistical Area (the "Seattle PMSA"), which is the fourth-largest metropolitan center on the Pacific Coast. In addition to the City and the City of Seattle,principal cities of the Seattle PMSA include Auburn, Bellevue,Bothell, Burien, Federal Way, Issaquah, Kent,Kirkland,Mercer Island, Redmond, Shoreline, and Woodinville, all of which are in the County, and Everett, Edmonds, Mountlake Terrace and Lynnwood in Snohomish County. These communities serve as residential, commercial, and industrial satellites of Seattle. Seattle PMSA's employment base is well diversified, with strengths in manufacturing, trade services and government sectors. In 2000,manufacturing comprised about 10.5%of the area's employment,with aircraft production representing the largest component. In the non-manufacturing sectors, services was the largest sector with over 34.5% of the total employment, wholesale and retail trade comprised almost 21.9% and government and public education 11.0%. The services industry contributed 38.9% of the total earnings by industries in the County, the most of all industries, followed by wholesale and retail trade with 15.7% and manufacturing with 13.1%.The U.S.Defense Department is one of the largest employers in the Puget Sound region. Major facilities include Fort Lewis Army Base in Pierce County,the Puget Sound Naval Shipyard in Bremerton (Kitsap County), Bangor Naval Submarine Base in Kitsap County,McChord Air Force Base in Pierce County and Naval Station Everett. The area's universities and research institutions serve as catalysts in the expansion of high tech industries. Other key factors that support continued growth include the existing industry base;a well-trained labor force; relatively low cost power; and a progressive business climate with excellent transportation access to worldwide markets. Aircraft Manufacturing—The Boeing Company Manufacturing in the area consists primarily of aircraft manufacturing by the Boeing Company("Boeing"). Boeing is the largest aerospace company in the world,as measured by total sales,and is consistently one of the nation's top three exporters. In May 2001,Boeing moved its world headquarters and approximately 1,200 employees from Seattle to Chicago to allow the corporate staff to focus on the direction of the company rather than day-to-day operations. Boeing remains the area's largest employer with several locations in the Puget Sound region. In 2001, Boeing reported total revenues of $58 billion. While the primary activity of Boeing is the manufacture of commercial aircraft, Boeing has played leading roles in the aerospace and military missile programs of the United States human space flight, launch services and has undertaken a broad program of C-2 diversification activities including Boeing Computer Services. Boeing has six major divisions to carry out - business activities, which include Air Traffic Management, Boeing Capital Corporation, Commercial Airplanes, Connexion by Boeing,Military Aircraft and Missile Systems, and Space and Communications. In 1996,Boeing acquired the aerospace and defense operations of Rockwell International Corporation and in 1997 merged with McDonnell Douglas,its only U.S.commercial airline rival and the world's largest builder of military aircraft, for approximately $16.3 billion. In recent years, Boeing has strived to streamline workforce operations and facilities. Since 1998, Boeing has reduced its total workforce from231,260 to - 176,200(as of May 2002), a decrease of approximately 55,060(23.8%)employees. Since 1998,Boeing has reduced the total work force in Washington from 98,440 to 66,900 (as of May 2002), a decrease of approximately 31,540(32.0%)employees. Boeing's Washington employees are located largely in the Puget Sound Region,which currently has 19 Boeing sites/locations, including the Renton Plant at Renton Field. As of 2001, Boeing employed 19,463 people at its Renton Plant, a decrease from approximately 20,000 (2.8%) employees as of 1998. As of the date of this Official Statement,it cannot be predicted if there will be further Boeing layoffs that will impact the Renton Plant or other Puget Sound Region operations. The Renton Plant is one of Boeing's major production sites with a 330-acre site encompassing approximately 7.7 million square feet of building space. Over the years,the Airplane Programs site in Renton has been home to many of commercial aviation's most famous airplanes,including the 707, 727, 737 and 757. Approximately 40%of the world's commercial jetliner fleet is produced at the Renton Plant. The ground floor of Renton's final assembly building for the Boeing 737 and 757 covers 760,000 square feet.Activities at other main buildings at the Renton site include sub-assembly, wing-line production and a paint hangar. The remaining buildings house administrative and engineering personnel and materiel handling. Renton Airport, located west of the main site,is used by Boeing to perform pre-flight tests on all 737s and 757s before they make their initial test - flight. After the flight tests, the airplanes land at Boeing Field in Seattle,where final preparations are made before they are delivered to customers. In September 2001,Boeing announced that it planned to lay off 30,000 employees in the next year. Boeing planned to cut 10%of its total commercial airplane workforce by December 2001, and then would consider laying off an additional 10%by mid 2002 and another 10%by the end of 2002 until the target of 25,000 to 30,000 jobs are cuts from operations. Technology The Seattle PMSA has experienced a substantial development of high technology,electronics and computer- related enterprises particularly over the last decade. More than 1,500 computer development firms are located in the Seattle PMSA. Microsoft, which is headquartered in Redmond,. Washington, is the largest microcomputer software company in the world,with 2001 gross sales worldwide of$25.3 billion,increasing from$23.0 billion in 2000. Other leading employers include Sundstrand Data Control,Inc. (electronics and aerospace systems), ELDEC Corporation (electronic equipment), John Fluke Manufacturing Company (electronic testing and calibrating instruments),Fred Hutchinson Cancer Research Center(cancer research and treatment),Nintendo of North America(electronic games),Advanced Technology Laboratories(medical ultra- sound equipment), Heath Techna Aerospace Co. (aerospace and defense specialties and architectural equipment), Alliant Techsystems Inc. (sonar systems and signal processing equipment), and Intermec Corporation(bar coding equipment). C-3 Transportation Seattle is bordered on the west by Elliott Bay, a natural harbor on Puget Sound,which is one of the nation's leading seaports. The Port of Seattle (the "Port"), a County-wide port district, promotes maritime trade, particularly foreign trade and the employment of containerized cargo facilities, and has developed and is continually improving a system of marine terminals,piers and associated facilities on Seattle's waterfront.The Port is the fifth largest container port in the U.S. and the 20th largest in the world. Served by 26 regularly scheduled steamship lines, it is the top U.S. port in container tonnage exports to Asia. In 1997, the Port completed construction of an$87.8 million multiple-use development on the downtown Seattle waterfront,. which includes a transient moorage, fish processing, and cruise ship berthing support facilities, a marine museum, an international conference center and a public plaza. The Port also operates the Seattle-Tacoma International Airport ("SeaTac") which serves-21 major air carriers and five commuter airlines and is the leading air travel and shipping center of the Pacific Northwest. SeaTac is located approximately seven miles west of the City King County International Airport ("Boeing Field"), a general aviation facility operated by the County, is located in Seattle. With about 410,000 annual operations(takeoffs and landings),Boeing Field is the busiest such facility in the region and ranks among the top 15 busiest in the nation. It serves as the primary inclement weather alternate for SeaTac. Seattle is the western terminus of two primary east-west freeway systems: Interstate Route 90 and State Route 520,and is traversed by north-south Interstate Route 5 and State Route 99. The portion of I-90 that connects Seattle with eastside communities across Lake Washington was expanded to eight lanes at a cost of$1.2 billion in the early 1990's. In addition to the highway system, the Washington State Ferry System provides convenient transportation between Seattle and points across Puget Sound to the west. In 1996,voters in King,Pierce and Snohomish counties approved a$3.9 billion regional transit measure. The transit system is currently under construction, expected to take ten years to build and will consist of electric light rail, commuter rail and express buses. A four-mile-long light rail tunnel from downtown Seattle to the University District is the most expensive component at$865 million. The transit system will be funded in large part with increases in local sales taxes and vehicle license fees. Some federal funds will be contributed. Fishing,Agriculture and Forest Products Seattle is the homeport for a major salmon and halibut fishing fleet. Approximately 700 fishing boats are based at the Port's Fishermen's Terminal on Salmon Bay,part of the fresh-water system of lakes and canals connected to Puget Sound by the Hiram M. Chittenden Locks,which are operated by the US Army Corps of Engineers. Fish received in Seattle are largely for fresh market distribution and for freeze processing. Seattle is also a warehousing and distribution center for fish processed elsewhere in the Northwest,principally in Alaska. • Agriculture in the County consists primarily of dairy farming,truck gardening,horticulture and the raising of livestock and poultry. The Seattle area is a major center in the Northwest for agricultural supply,distribution and marketing as well as for food handling and processing and the manufacture of food packaging and containers. C-4 The local forest products industry includes the manufacture of lumber, plywood,paper products, furniture, acoustical materials and specialty wood products. Timber in the region is harvested under sustained-yield programs on federal,state and private timberlands. The leading forest products employer is the Weyerhaeuser Company,which operates lumber mills locally and has its corporate headquarters and a major research and - development center in southwestern portion of the County. Employment and production levels within this industry locally have been and are expected to be further impacted by recent decisions by the federal government and the courts concerning the exporting of raw logs and restrictions on the harvesting of trees on federal lands in"old growth"forests. The extent of such impact is unknown at this time. The wood and paper products industry accounts for approximately one percent of the total Seattle PMSA employment. Higher Education The University of Washington(the"University")is one of the oldest and largest state assisted universities on the West Coast. Its primary campus is located in Seattle with satellite campuses located in Bothell and Tacoma. Established in 1861,the University has 16 schools and colleges offering instruction in more than 200 academic disciplines. Undergraduate and graduate student enrollment for winter semester 2001-02 was 39,017. The University has a biennial operating budget of approximately$3.27 billion and consistently ranks among the top five institutions of higher learning in the United States when measured by the receipt of federal grants. The largest share of this funding goes to the University of Washington School of Medicine. I Harborview Medical Center is the University's teaching hospital. Every physician practicing at Harborview is a member of the University's School of Medicine faculty. This relationship has been essential to Harborview's development of outstanding patient care services including the region's burn,trauma,epilepsy, and spinal cord rehabilitation centers. Other higher education facilities in the Seattle area include two private four-year universities,Seattle Pacific University(3,615 enrollment)and Seattle University(5,903 enrollment), _ and seven community colleges. Services,Tourism,Recreation and Conventions The Seattle area is the health care center of the Pacific Northwest. There are 26 general-acute and four special purpose hospitals,more than 4,500 beds, and approximately 3,000 physicians. The State's fourth largest industry is tourism. There are over 8,000 hotel rooms in over 50 hotels and motels in downtown Seattle. Seattle ranks in the top five cities in the nation in terms of hotel occupancy with 2001 occupancy rates of 73.4%with room rates averaging$147.54 per night. According to the Seattle-King County Convention and Visitors Bureau, .398,000 convention goers added approximately $366 million to the economy. The Washington State Convention and Trade Center currently occupies 102,000 square feet of heavy load exhibition space and an expansion of approximately 105,000 square feet of which 70,000 square feet is designed as clear span,column-free space is almost complete. The Convention Center has the capacity to hold events involving as many as 11,000 people. In 2001,the Convention Center held 535 total events, including national and local events. It is estimated that the Convention Center generates direct spending by visitors of over$200 million annually on hotels,restaurants,entertaining,transportation and retail shopping. Bordered on the west by Puget Sound and the Olympic Mountains and on the east by the Cascade Mountain range,the 2,128 square miles in the County offer many types of outdoor recreation. The County and the City of Seattle maintain over 9,000 acres of parkland. The Seattle area has several symphony orchestras, five C-5 theaters, an opera company, and four resident dance groups. The area is also the home to more than 3,000 artists and 1,300 arts organizations. The Kingdome,former home to the National Football League's Seattle Seahawks and the American Baseball League's Seattle Mariners,was demolished in March 2000 to make way for a new stadium/exhibition center. The Kingdome, which was located adjacent to Seattle's central business district, served as a major sports, concert and convention center for the Northwest for over 20 years.A public facilities district was created in 1996 to build a new world-class football/soccer stadium for use by the Seahawks as well as parking facilities, an exhibition hall, and demolition of the Kingdome. In 1997, voters statewide approved the issuance of general obligation bonds by the State to pay for the project,which is expected to cost$425 million,with$300 r million paid from public sources. The stadium design includes a 72,000 seat capacity(including 7,000 club seats and 82 suites) and an open-air, natural grass facility that will provide 70% of the fans with roof protection. The exhibition center was completed in November 1999 and the stadium is to be completed in July 2002 with the first game scheduled to be played in the stadium in August 2002. Seattle's new ballpark for the Mariners (SAFECO Field) was completed in July 1999. The ballpark was constructed for $518 million,has a baseball capacity of 46,621 fans, and includes real grass and a retractable roof that covers the ballpark but does not enclose it. The Seattle Center,located one mile north of the central business district of Seattle,was the site for the 1962 World's Fair and it continues to be a popular attraction for residents and tourists alike. The 74-acre, year- round convention and family entertainment center includes the Pacific Science Center, Coliseum, Seattle Opera House,Key Arena,Memorial Stadium, Space Needle,the Experience Music Project and a number of meeting and display rooms. Key Arena serves as the home of Seattle's third major league sports team, the National Basketball Association's Seattle Supersonics. A major renovation project was recently completed at the Coliseum. Population Trends The area's population has grown significantly in recent years and based on recent population trends is expected to continue to grow. The County is the most populated county in the State. Historical population trends are presented below for the City,the County and the State of Washington to represent population trends in the area. City of Percent King Percent State of Percent Year Renton Change County Change Washington Change 2001' 51,140 22.7% 1,758,300 16.7% 5,974,900 22.8% 1990 41,688 36.2 1,507,305 18.7 4,866,663 17.8 1980 30,612 -- 1,269,898 -- 4,132,353* -- i Intercensus estimate as of April 2001 reported by the State Office of Financial Management. Source: U.S.Bureau of the Census and Washington State Office of Financial Management. C-6 Trends in Building Permits The following table reveals the trends in the number of building permits issued by the City for the years shown. Residential Total Number Total Valuation Year Permits Issued of Permits Issued of Permits Issued 2001 737 4,756 $50,486,000 2000 885 4,642 142,179,000 1999 447 3,483 84,017,000 1998 888 4,317 125,317,000 1997 n/a - 4,234 191,898,000 Source: The City of Renton Historical Taxable Retail Sales The following table lists the taxable retail sales for all industries within the City and the County since 1997. Figures shown are in(000's). Year City of Renton King County 2001 $1,699,541 $36,169,382 2000 1,695,021 37,383,541 1999 1,504,764 34,517,504 1998 1,520,500 31,498,687 1997 1,350,937 29,154,617 Source: Washington State Department of Revenue Major Employers—City of Renton The major employers in the City as of 2001 are as follows. Trade Area Employer Employment Type of Business Activity The Boeing Company 19,463 Aerospace Valley Medical Center 1,488 Healthcare Renton School District 1,307 Public Education Federal Aviation Administration 1,234 Federal Government City of Renton 679 City Government Wizards of the Coast 609 Retail PACCAR 589 Heavy Manufacturing Multiple Zones International 571 Computer Hardware&Software Retail Wal-Mart 356 Retail K&L Distributors 338 Wholesale Distributor Source: The City of Renton C-7 Major Employers—Central Puget Sound Region The major employers in the Central Puget Sound Region as of 2000 are as follows: Trade Area Employer Type of Business Activity Employment 1. The Boeing Company Aerospace Manufacturing 67,000 2. Microsoft Corporation* Software 15,400 3. Safeway Grocery Store 9,851 4. Sisters of Providence Systems Health Care 9,423 5. Group Health Cooperative Health Care 8,800 6. Fred Meyer Retail 8,100 7. Nordstrom, Inc.* Retail 6,756 8. Alaska Air Group, Inc. Airline 6,234 - 9. Qwest Communications Telecommunications 6,100 10. The Bon Marche Department Store 5,409 11.Albertson's Grocery Store 5,400 12. Quality Food Centers Grocery Store 5,200 13. Virginia Mason Medical Center Health Care 5,200 14.Multi Care Health System Health Care 4,755 15. The Weyerhaeuser Company* Forestry Products 4,600 16. Swedish Health Systems Health Care 4,444 17. Safeco Corp.* Insurance 4,000 18.Washington Mutual Inc. Bank 4,000 19.Franciscan Health System Health Care 3,900 20. Costco Wholesale,Inc.* _ Warehouse 3,900 *Headquartered in King County Source: Economic Development Council of King County. C-8 Employment by Major Industry The table below sets forth the total number of full-time and part-time employees in the County for the years and industries as shown. - 1996 1997 1998 1999 2000 Employment by Place of Work: Total Employment 1,263,768 1,317,560 1,369,140 1,413,911 1,451,322 By Type: Wage and Salary 1,069,413 1,123,348 1,173,581 1,212,356 1,243,700 Proprietors 194,355 194,212 195,559 201,555 207,622 Farm 1,346 1,321 1,377 1,369 1,368 Non-Farm 193,009 192,891 194,182 200,186 206,254 By Industry: Farm 2,291 2,266 2,310 2,265 2,191 Non-Farm 1,261,477 1,315,294 1,366,830 1,411,646 1,449,131 Private 1,112,664 1,164,611 1,214,196 1,254,548 1,288,945 Ag. Services,Forestry,Fish&Other 13,497 14,008 14,654 15,669 15,929 Mining 1,201 1,298 1,327 1,326 1,390 Construction 62,004 . 67,087 72,047 77,022 82,116 Manufacturing 149,265 162,462 168,372 160,038 152,880 Transportation and Public Utilities 74,810 77,926 80,625 83,811 89,174 Wholesale Trade 83,820 85,651 88,368 88,960 90,044 Retail Trade 203,981 208,776 214,987 223,030 228,093 Finance,Insurance&Real Estate 110,243 110,694 118,604 124,345 128,002 Services 413,843 436,709 455,212 480,347 501,317 Government&Government Enterprises 148,813 150,683 152,634 157,098 160,186 Federal/Civilian 19,961 20,112 20,702 20,928 21,855 Military 7,951 7,617 7,462 7,581 7,572 State and Local 120,901 122,954 124,470 128,589 130,759 Source: U.S.Department of Commerce,Regional Economic Information System,Bureau of Economic Analysis. C-9 Labor Force and Unemployment The following table shows labor force and employment data for the County since 1997 as well as unemployment rates for the State and the United States for the same period. - - - - Unemployment Rates - - - - King State of United Year Labor Force Employed County Washington States 2001 997,700 937,200 6.1% 7.3% 4.8% 2000 1,023,200 986,500 3.6 5.2 4.0 1999 1,028,700 995,900 3.2 4.7 4.2 1998 1,016,000 985,000 3.1 4.8 4.5 1997 990,700 957,800 3.3 4.8 4.9 Source: Washington Employment Department Personal Income Trends The following table shows total and per capita personal income growth in'the County from 1996 through 2000. Total Personal Percent Per Percent Year Income(000's) of Change Capita Income of Change 2000 $79,109,294 5.9% $45,536 5.4% 1999 74,697,744 10.9 43,201 9.8 1998 67,358,052 13.0 39,335 . 11.2 1997 59,609,697 8.1 35,382 6.2 1996 55,135,527 -- 33,316 -- Source: U.S.Department of Commerce,Regional Economic Information Center,Bureau of Economic Analysis C-10 Earnings By Industry The following table shows the County total personal income as well as wage and salary,labor and proprietors' earnings by major industry type for the years 1996 through 2000. Figures shown are in thousands (000's). • 1996 1997 1998 1999 2000 Total Personal Income $55,135,527 $59,609,697 $67,358,052 $74,697,744 $79,109,294 Earnings by Industry 46,922,523 51,802,553 59,143,188 67,484,546 71,151,919 Farm 31,943 29,765 35,371 33,256 27,397 Non-Farm 46,890,580 51,772,788 59,107,817 67,451,290 71,124,522 Private 41,009,023 45,673,769 52,700,174 60,705,123 64,033,991 Ag. Serv.,Forest.,Fishing 382,114 437,676 519,954 602,375 595,648 Mining 29,297 36,837 34,721 40,414 43,112 I , Construction 2,560,859 2,906,960 3,325,906 3,795,139 4,205,669 Manufacturing 7,409,457 8,201,619 8,623,122 9,025,106 9,344,079 Transportation and Utilities 4,357,528 4,041,022 , 4,399,093 4,909,070 5,506,230 Wholesale Trade 3,831,074 3,939,815 4,457,315 4,679,313 5,135,708 Retail Trade 3,897,235 4,291,695 4,716,687 5,411,101 6,064,450 Finance,Insurance&Real Estate 3,650,572 4,199,862 4,866,030 5,143,515 5,474,802 Services 14,890,887 17,618,283 21,757,346 27,099,090 27,664,293 Gov't&Gov't Enterprises 5,881,557 6,099,019 6,407,643 6,746,167 7,090,531 FederalCivilian 1,296,155 1,284,519 1,338,783 1,415,095 1,504,041 Military 150,900 147,840 149,621 160,606 167,092 State and Local 4,434,502 4,666,660 4,919,239 5,170,466 5,419,398 • Source: U.S. Department of Commerce'Regional Economic Information System Bureau of Economic Analysis C-11 [This Page Intentionally Left Blank] APPENDIX D Continuing Disclosure • i ' • • D-1 CONTINUING DISCLOSURE Contract/Undertaking This section, as found in the Ordinance, constitutes the City's written undertaking for the benefit of the owners of the Bonds as required by Section(b)(5)the Rule(the"Undertaking"). Financial Statements/Operating Data In the Ordinance,the City agrees to provide or cause to be provided to each then existing NRMSIR and to the SID, if one is created, the following annual financial information and operating data(collectively,the "Annual Financial Information") for each prior fiscal year, commencing with the fiscal year ending December 31, 2002, on or before the last day of the seventh month following the end of such prior fiscal year: (a) Annual financial statements prepared in accordance with the generally accepted accounting principles applicable to governmental units,as such principles may be changed from time to time and as permitted by State law; which statements will not be audited, except that if and when audited financial statements are otherwise prepared and available to the City,they will be provided(the "Annual Financial Statements"); (b) A statement of authorized,issued and outstanding bonded debt secured by the Gross Revenue or Net Revenue; (c) Debt service coverage ratios; (d) General customer statistics for the Waterworks Utility; and (e) A narrative explanation of the reasons for any amendments to the Ordinance made during the previous fiscal year and the impact of such amendments on the Annual Financial Information being provided. In its provision of such financial information and operating data,the City may cross-reference to any"final official statement" (as defined in the Rule) available from the MSRB or any other documents theretofore provided to each then existing NRMSIR or the SD, if one is created. If not submitted as part of the Annual Financial Information, then when and if available, the City shall provide its Annual Financial Statements, which shall have been audited by such auditor as shall be then required or permitted by the State law,to each then existing NRMSIR and to the SID, if one is created. Material Events The City further agrees to provide or cause to be provided,in a timely manner,to the SID,if any,and to each NRMSIR or to the MSRB notice of the occurrence of any of the following events with respect to the Bonds, if such event is material: (1) principal and interest payment delinquencies; D-2 (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (7) modifications to the rights of Bond holders; (8) optional redemption of Bonds prior to their maturity; (9) defeasances; (10) release, substitution or sale of property, securing repayment of the Bonds; and (11) rating changes. The City also agrees to provide or cause to be provided,in a timely manner,to the SID,if one is created,and to either the MSRB or each then existing NRMSIR, notice of its failure to provide the Annual Financial Information for the prior fiscal year on or before the last day of the seventh month following the end of such prior fiscal year. - After the issuance of the Bonds, so long as the interests of the Owners or Beneficial Owners of the Bonds will not be materially impaired thereby, as determined by a party unaffiliated with the City (including, without limitation, a trustee for the Owners,nationally recognized bond counsel or other counsel familiar with the federal securities law), or.pursuant to a favorable "no-action letter" issued by the SEC, this Undertaking and the provisions with respect thereto in the Ordinance may only be amended in connection with any change in legal requirements, change in law, or change in the identity, nature or status of the obligated person,or type of business conducted,and only in such a manner that the undertaking of the City, as so amended,would have complied with the requirements of the Rule at the time of the primary offering, - ; 'after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. The City's obligations to provide Annual Financial Information and notices of certain events shall terminate without amendment upon the defeasance,prior redemption or payment in full of all of the then outstanding Bonds. This Undertaking and the provisions with respect thereto in the Ordinance shall be null and void if the City (i)obtains an opinion of nationally recognized bond counsel or other counsel familiar with the federal securities laws to the effect that those portions of the Rule which require this Undertaking or any such provision are invalid, have been repealed retroactively or otherwise do not apply to the Bonds; and Ir (ii)notifies and provides the SID,if any,and either the MSRB or each then existing NRMSIR with copies of such opinion. The right of each Owner or Beneficial Owner of Bonds to enforce the provisions of the City's Undertaking D-3 shall be limited to the right to obtain specific enforcement of the City's obligations under the Ordinance with respect thereto, and any failure by the City to comply with the provisions of this Undertaking shall not be a default with respect to the Bonds under the Ordinance. The City Finance and Information Services Administrator is authorized and directed to take such further action on behalf of the City as maybe necessary,appropriate or convenient to carry out the requirements of this Undertaking. g 1_- I- D-4 APPENDIX E Form of Legal Opinion E-1 Form of Approving Opinion of Gottlieb,Fisher&Andrews,PLLC, Bond Counsel [Date of Issue] City of Renton Renton, Washington 98058 Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by the City of Renton, Washington(the"City"), of the bonds described below(the"Bonds"): CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Dated: July 1, 2002 The Bonds are issued pursuant to Ordinance No. of the City(the"Bond Ordinance") and other proceedings duly had and taken in conformity therewith. The Bonds are issued for the purpose of providing a part of the funds necessary to pay the cost of carrying out certain capital improvements of the waterworks utility and paying the costs related to the sale and issuance of the Bonds, all as specified in the Bond Ordinance. The Bonds are issued as fully registered bonds in the denomination of$5,000 each or in any integral multiple thereof within a single maturity. The Bonds bear interest from their date or from the most recent interest payment date to which interest has been paid or duly provided for,whichever is later,payable on December 1,2002, and semiannually thereafter on June 1 and December 1 of each year to the maturity or earlier redemption thereof. The Bonds bear interest at the rates and shall mature on December 1 of each of the years and in the principal amounts set forth below: Maturity Date Principal Interest Rate (December 1) Amount Per Annum ' 'I E-2 1 , The Bonds are'subject to redemption prior to maturity at the times and in the manner described in the Bond Ordinance. In rendering this opinion letter,we have examined the following: (i)the Bond Ordinance; (ii) one executed and authenticated Bond(we assume that all other Bonds are in the same form and have been similarly executed and authenticated); and(iii)the certified proceedings of the City and other certificates of public officials and representatives of the City which have been furnished to us and which — comprise the transcript of proceedings pertaining to the issuance of the Bonds (the"Transcript"). As to questions of fact material to the opinions expressed herein,we have relied upon the certified proceedings of the City and other certificates of public officials and representatives of the City which have been furnished to us as part of the Transcript, all without undertaking to verify the same by independent investigation. Based only upon the foregoing and our examination of such questions of law as we have deemed necessary or appropriate for the purpose of this opinion letter, and subject to the limitations and qualifications expressed below,we are of the opinion that, as of this date: 1. The Bonds are lawfully authorized and issued pursuant to and in full compliance with the Constitution and statutes of the State of Washington, the Bond Ordinance and Ordinance No. 4709 of the City. 2. The Gross Revenue (as defined in the Bond Ordinance) hereafter collected has been pledged to the payments to be made into the"2002 Waterworks Revenue Bond Account" (the "Bond Fund") as set forth in the Bond Ordinance, and the Bonds constitute a lien and charge on that revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense (defined in the Bond Ordinance), except that the lien and charge on such Gross Revenue for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds (defined in the Bond Ordinance),the City's Water and Sewer Revenue Refunding Bonds, 1998, and any Future Parity Bonds (defined in the Bond Ordinance). 3. The Bonds are legal,valid and binding special fund revenue obligations of the City, payable solely out of the Bond Fund, enforceable against the City in accordance with their terms, subject to the limitations as to enforceability of laws relating to bankruptcy, insolvency,reorganization, - moratorium and other similar laws affecting creditors' rights, and also to the exercise of judicial discretion in accordance with general principles of equity. The Bonds are not general obligations of the City. 4. The Bonds are not"private activity bonds,"as defined in the Internal Revenue Code of 1986, as amended(the"Code"). 5. Assuming compliance by the City with applicable requirements of the Code that must be met subsequent to the issuance of the Bonds, the interest on the Bonds is excluded from the gross income for federal income tax purposes under existing federal law, and such interest is not an item of tax preference for purposes of determining alternative minimum taxable income for individuals and corporations under existing federal law. However,under existing federal law, interest on the Bonds received by certain corporations is taken into account in the computation of adjusted current earnings for - purposes of calculating the alternative minimum tax applicable to such corporations; such interest E-3 it received by foreign corporations with United States branches may be subject to a foreign branch profits tax; and such interest received by certain S corporations may be subject to tax. [6. The difference between the principal amount of the Bonds maturing in the years through , inclusive (the"Discount Bonds"), and the initial offering price to the public (excluding bond houses,brokers and similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of such Discount Bonds of the same maturity was sold constitutes original issue discount, which is excluded from gross income for federal income tax purposes to the same extent as interest on the Discount Bonds. Further,this original issue discount accrues over the term of each Discount Bond on the basis of a constant yield to maturity and the basis of each Discount Bond acquired at such initial offering price by an initial purchaser of such Discount Bonds will be increased by the amount of such accrued original issue discount.] Except as stated in the preceding paragraphs 4, 5 and 6,we express no opinion as to any federal or state tax consequences of the ownership or disposition of the Bonds. The Code contains certain requirements which must be satisfied subsequent to the date of issue of the Bonds in order to maintain the exclusion of interest on the Bonds from gross income for federal income tax purposes, including requirements relating to application of the proceeds of the Bonds, use of facilities financed with such proceeds, limitations on income derived from the investment of gross proceeds of the Bonds (as defined in Section 148 of the Code), and rebate to the United States Treasury of certain investment earnings on such gross proceeds. The City has covenanted to comply with these requirements, and the opinions expressed in paragraphs 4, 5 and 6 assume such compliance. However, we have not undertaken and do not undertake to monitor compliance by the City with such requirements; and failure of the City to comply with such requirements could cause interest on the Bonds to be included in gross income for federal income tax purposes and to be treated as an item of tax preference for purposes of the alternative minimum tax on individuals and corporations,in each case, retroactive to the date of issue of the Bonds. We have not been engaged to participate in the preparation or review of, or express any opinion concerning the completeness or accuracy of, the official statement or other disclosure documentation used in connection with the offer or sale of the Bonds, and thus express no opinion concerning the completeness or accuracy thereof.` Copies of this opinion letter may be delivered to the Owners of the Bonds,who may rely on this opinion letter as if it were addressed to them on the date hereof. Subject to the foregoing,this opinion letter may be relied upon by you only in connection with the issuance of the Bonds and may not be used or relied upon by you or any other person for any other purpose whatsoever,without in each instance our prior written consent. We expressly disclaim any responsibility to advise you or any Owners of any developments in areas covered by this opinion letter that occur after the date hereof. Respectfully submitted, GOTTLIEB,FISHER&ANDREWS,PLLC By Judith L.Andrews f:\renton\water&sewer 2002 -- E-4 • ' 1 • • [This Page Intentionally Left Blank] • . OFFICIAL STATEMENT dated July 1,2002 NEW ISSUE INSURANCE: Financial Security Assurance Inc. BOOK-ENTRY RATINGS: Standard&Poor's:AAA(Underlying A+) Fitch IBCA: AAA(Underlying AA-) - (See"Bond Insurance"and"Ratings"herein) In the opinion of Bond Counsel,as of the Date of Issue,and assuming the Cityfulfills its covenant to comply with certain requirements of the Internal Revenue Code of 1986,as amended,that must be met subsequent to the issuance of the Bonds: interest on the Bonds,including any properly allocable original issue discount,is excluded from gross income for purposes of federal income tax purposes and is not an item of tax preference for purposes of determining the alternative minimum tax on individuals and corporations. However,such interest on the Bonds is included in the computation of other taxes on corporations, including,without limitation the alternative minimum tax,and may be subject to other collateral tax consequences. See"Tax Exemption" and"Other Tax Consequences"herein. $11,980,000 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 DATED: July 1,2002 DUE: December 1,as shown below 1 The City of Renton,Washington(the"City")provides this Official Statement in connection with the issuance of its Water and Sewer Revenue Bonds,Series 2002(the"Bonds"). The Bonds mature on December 1,in each of the years and amounts set forth below, subject to optional redemption as hereinafter described,and will bear interest from July 1,2002 to their respective maturities or dates of prior redemption,whichever occurs first,at the rates per annum as shown below. Interest Yield to Price Interest Yield to Price Year Amount Rate Maturity (%of Par) Year Amount Rate Maturity (%of Par) 2003 $115,000 2.50% 1.75% 101.021% 2013 $0 0.00% 0.00% 0.000% 2004 120,000 2.50 2.13 100.855 2014 710,000 4.30 4.42 98.860 2005 135,000 2.75 2.62 100.417 2015 735,000 4.40 4.53 98.701 2006 110,000 3.25 2.93 101.306 2016 765,000 4.50 4.64 98.537 2007 110,000 3.50 3.22 101.372 2017 805,000 4.60 4.74 98.478 2008 110,000 3.50 3.53 99.827 2018 1,000,000 5.25 4.86 103.145 2009 455,000 3.70 3.73 99.804 2019 1,000,000 5.25 4.95 102.407 2010 630,000 3.90 3.92 99.854 2020 1,000,000 5.25 5.05 101.595 2011 1,010,000 4.00 4.05 99.609 2021 1,045,000 5.25 5.11 101.111 I- 2012 1,025,000 4.10 4.15 99.577 2022 1,100,000 5.25 5.17 100.630 The Bonds will be issued under a book-entry system, initially registered to Cede & Co., as nominee of The Depository Trust Company("DTC"),New York,New York,which will act as securities depository for the Bonds. Individual purchases of Bonds will be made in the principal amount of$5,000,or integral multiples thereof within a single maturity. The purchasers will not receive certificates representing their interest in the Bonds. (See"The Bonds-Book-Entry System"). Interest will be payable semi-annually on June 1 and December 1,commencing December 1,2002 to their maturity or prior redemption. The fiscal agent of the State of Washington,currently The Bank of New York,New York,New York,will serve as registrar,paying agent and transfer agent(the "Registrar")for the Bonds. For so long as the Bonds are held by DTC in book-entry format,principal and interest payments will be made as described herein,see"The Bonds-Book-Entry System". The Bonds are special obligations of the City payable solely from the Gross Revenue of the City's combined water and sewerage systems,including the storm and surface water sewers(the"Waterworks Utility")excluding Maintenance and Operations Expense. The Bonds are being issued in accordance with the provisions of the Constitution and laws of the State of Washington. The proceeds of the Bonds will be used to undertake certain capital improvements to the Waterworks Utility and to pay costs related to the issuance and sale of the Bonds (the "Project"). The Bonds maturing in the years 2003 through 2012 are not subject to redemption. Bonds maturing on or after December 1,2014 are subject to optional redemption on or after December 1,2012 at a ' price of par plus accrued interest to the date of redemption. (See"The Bonds-"Authorization,""Security,""Purpose and Source and Application of Funds,"and"Redemption"herein.) The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by FINANCIAL SECURITY ASSURANCE INC. FSA. The Bonds are offered by the Underwriter when,as and if issued by the City,subject to the opinion as to legality and tax-exemption of the Bonds by Gottlieb,Fisher&Andrews,PLLC,Bond Counsel,Seattle,Washington. The fees of Bond Counsel are contingent 1 on the issuance of the Bonds. The Bonds,in book-entry form,are expected to be available through the facilities of DTC for delivery 1 I by Fast Automated Securities Transfer on or about July 12,2002. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire official statement to obtain information essential to making an informed investment decision. D.A. DAVIDSON & CO. CITY OF RENTON 1055 South Grady Way Renton, Washington 98055 (425) 430-6858 www.ci.renton.wa.us Members of the City Council: Mayor Jesse Tanner Council Members Dan Clawson, President Terri Briere Randall Corman Kathy Keolker-Wheeler Toni Nelson King Parker Donald Persson Certain Appointed City Officials: Chief Administrative Officer Jay Covington Finance and Information Services Administrator Victoria Runkle City Attorney Lawrence Warren City Clerk Bonnie Walton Underwriter D. A. DAVIDSON& CO. Columbia SeaFirst Center 701 5th Avenue, Suite 3100 Seattle, Washington 98104 888-389-8001 Bond Counsel Gottlieb, Fisher&Andrews, PLLC 1325 4th Avenue, Suite 1200 Seattle, Washington 98101 NO DEALER,BROKER,SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED BY THE CITY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS OFFICIAL STATEMENT, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CITY. THE INFORMATION IN THIS OFFICIAL STATEMENT WAS OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE,BUT IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS. THE INFORMATION AND EXPRESSIONS OF OPINION HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE AND NEITHER THE DELIVERY OF THE OFFICIAL STATEMENT NOR ANY SALE MADE HEREBY SHALL,UNDER ANY CIRCUMSTANCES,CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CITY SINCE THE DATE THEREOF. OTHER THAN WITH RESPECT TO INFORMATION CONCERNING FINANCIAL SECURITY ASSURANCE INC. ("FINANCIAL SECURITY") CONTAINED UNDER THE CAPTION"BOND INSURANCE"AND APPENDIX F "SPECIMEN MUNICIPAL BOND INSURANCE POLICY"HEREIN, NONE OF THE INFORMATION IN THIS OFFICIAL STATEMENT HAS BEEN SUPPLIED OR VERIFIED BY FINANCIAL SECURITY AND FINANCIAL SECURITY MAKES NO REPRESENTATION OR WARRANTY,EXPRESS OR IMPLIED,AS TO(I)THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION;(II)THE VALIDITY OF THE BONDS;OR(III)THE TAX EXEMPT STATUS OF THE INTEREST ON THE BONDS. TABLE OF CONTENTS SUMMARY STATEMENT 1 THE BONDS 2 Description of the Bonds 2 Redemption 2 Open Market Purchase of the Bonds 3 Book-Entry System 3 Transfer and Exchange of Bonds Upon Discontinuance of Book-Entry System 5 Authorization ' 5 New Covenant Date • 5 Security 6 Purpose and Source and Application of Funds 9 THE WATERWORKS UTILITY 10 General Information 10 Waterworks Utility Major Customers 10 Delinquent Accounts 10 Historical Net Income and Revenue Available for Debt Service 11 Schedule of Waterworks Utility Debt Service 12 Debt Repayment Record 12 Outstanding Bonds and Debt Service Requirements 13 Expected Future Improvements and Borrowings 13 The Water Utility 13 Water Utility Customer Accounts 14 Water Utility Rates 14 The Wastewater Sewer Utility 14 Wastewater Utility Customer Accounts 15 Wastewater Utility Rates 15 Storm Drainage Utility 15 Strom Drainage Utility Rates 16 THE CITY OF RENTON 16 General Information 16 Form of Local Government 16 Principal City Officials 17 City Employment and Primary Services 17 Employee Relations 17 Pension Plans 18 The Budgetary Process 18 Auditing of City Finances 18 Risk Management 19 Authorized Investments 19 APPROVAL OF BOND COUNSEL 20 TAX EXEMPTION 20 OTHER TAX CONSEQUENCES 21 Covenant Against Arbitrage 22 Original Issue Discount 22 Original Issue Premium 22 NO LITIGATION CONCERNING THE BONDS - 23 UNDERWRITING 23 BOND INSURANCE 23 RATINGS 24. - ENFORCEABILITY 24 COMMITMENT TO PROVIDE CONTINUING DISCLOSURE 25 ADDITIONAL INFORMATION AND MISCELLANEOUS • 25 DISCLOSURE STATEMENT 25 APPROVAL OF OFFICIAL STATEMENT 26 APPENDIX A: SUMMARY OF CERTAIN PROVISIONS OF THE ORDINANCE A-1 Definitions A-2 New Covenant Date A-5 Pledge of Revenue A-6 Bond Fund _ A-6 Reserve Fund A-6 Rate Stabilization Fund A-6 Rate Covenant A-6 Flow of Funds A-7 Additional Covenants A-7 Future Parity Bonds A-9 APPENDIX B: 2001 AUDITED FINANCIAL STATEMENTS OF THE WATERWORKS UTILITY B-1. APPENDIX C: KING COUNTY ECONOMIC AND DEMOGRAPHIC INFORMATION C-1 Local Economic Overview C-2 Aircraft Manufacturing-The Boeing Company C-2 Technology C-3 Transportation C-4 Fishing,Agriculture and Forest Products C-4 Higher Education C-5- Services,Tourism,Recreation and Conventions C-5 Population Trends C-6 Trends in Building Permits C-7 Historical Taxable Retail Sales C-7 Major Employers—City of Renton C-7 Major Employers—Central Puget Sound Region C-8 Employment By Major Industry C-9 Labor Force and Unemployment C-10 Personal Income Trends C-10 - Earnings By Industry C-11 APPENDIX D: CONTINUING DISCLOSURE D-1 Contract/Undertaking D-2 Financial Statements/Operating Data D-2 Material Events D-2 APPENDIX E-FORM OF LEGAL OPINION E-1 APPENDIX F—SPECIMEN MUNICIPAL BOND INSURANCE POLICY F-1 $11,980,000 City of Renton,Washington Water and Sewer Revenue Bonds, 2002 SUMMARY STATEMENT The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Official-Statement. No person is authorized to detach this Summary Statement from this Official Statement or to otherwise use it without this entire Official Statement. ISSUER The City of Renton (the "City") is located approximately 20 miles southeast of the City of Seattle and approximately 60 miles northeast of the City of Olympia,the State's capital. The City had a population of 51,140 • as estimated in 2001 by the State of Washington (the "State") Office of Financial Management. (See"The City of Renton"herein.) INTEREST AND REDEMPTION Interest on the Bonds is payable semi=annually on each June 1 and December 1, commencing December 1, 2002 to their maturity or prior redemption. (See "The Bonds -Description of the Bonds"herein.) The Bonds are subject to optional redemption. (See"The Bonds-Redemption" herein.) AUTHORITY FOR ISSUANCE The Bonds will be issued in accordance with the provisions of the Constitution and the laws of the State,particularly chapters 35.41, 35.67 and 39.46 Revised Code of Washington ("RCW"), and pursuant to Ordinance No. 4976 of the City, adopted on July 1, 2002 (the "Ordinance"). (See"The Bonds -Authorization"herein.) SOURCE OF , REPAYMENT The Bonds are special fund revenue obligations of the City. The Gross Revenue of the City's combined water and sewerage systems,including the storm and surface water sewers (the "Waterworks Utility") is pledged to the payment into the 2002 Waterworks Revenue Bond Account(the"Bond Fund") of amounts necessary to pay the principal of and interest on the Bonds. The Bonds constitute a lien and charge on the Gross Revenue prior and superior to any other charges whatsoever,excluding Maintenance and Operations Expense, except that the lien and charge on such revenue for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds(hereinafter defined),the outstanding Water and Sewer.Revenue Refunding Bonds, 1998 and any Future Parity Bonds. The City will maintain a Reserve Account for the sole purpose of providing additional security for the Bonds if Revenue is not sufficient to pay debt service when due. (See"The Bonds- Security"herein.) USE OF PROCEEDS The proceeds of the Bonds will be used to undertake certain capital improvements to the Waterworks Utility and to pay costs related to the issuance and sale of the Bonds(the"Project"). (See"The Bonds-Purpose and Use of Proceeds"herein.) 1 THE BONDS Description of the Bonds The Bonds will be issued in the aggregate amount of$11,980,000 in fully registered form,will be in the denomination of$5,000 each or any integral multiples thereof within a single maturity and will be dated July 1, 2002. The Bonds shall mature on December 1, in the years and amounts set forth on the cover - hereof. The fiscal agent of the State,currently The Bank of New York,New York;New York,will serve as registrar,paying agent and transfer agent(the"Registrar")for the Bonds. The Bonds will bear interest from July 1,2002,or the most recent interest payment date to which interest has been paid or duly provided for, whichever is later, at the.rates per annum set forth on the cover hereof. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months, and will be payable semi-annually on June 1 and December 1,commencing December 1,2002,until the date of maturity or the date of prior redemption of such Bond,whichever occurs first. For so long as the Bonds are held by DTC in book-entry form,principal and interest payments will be made as described herein under the heading "The Bonds-Book-Entry System". Redemption Optional Redemption: Bonds maturing in the years 2003 through 2012, inclusive, are not subject to redemption prior to their stated maturity dates. Bonds maturing on or after December 1,2014 are subject to redemption at the option of the City prior to their stated maturity dates,from funds from any source,at any time,in whole or in part on or after December 1,2012 within one or more maturities selected by the City(by lot in the manner determined by the Registrar or DTC)at the price of par plus interest accrued to the date of redemption. Bonds in the principal amount of greater than $5,000 may be partially redeemed in part in any integral multiple of$5,000. The Registered Owner of any Bond redeemed in part shall receive,upon surrender of such Bond to the Registrar,one or more new Bonds in authorized denominations equal in principal amount to the unredeemed portion of the Bond so surrendered. Notice of Redemption (DTC). So long as the Bonds are in book-entry only form,the Registrar shall notify DTC of an early redemption in accordance with, and shall provide such information as required by, the blanket issuer letter of representations from the City and the Registrar to DTC. See"The Bonds-Book- Entry ? i System"below for a discussion of how redemption notices will be given by DTC to the beneficial owners of the Bonds. The City cannot and does not give any assurances that DTC,its direct participants or others will distribute any redemption notices to the beneficial owners or that they will do so on a timely basis. From and after the date that the Bonds are no longer held in book-entry form,notice of redemption must be given by or on behalf of the City not less than 30 nor more than 60 days prior to the date of redemption in accordance with the Ordinance. Pursuant to the City's continuing disclosure undertaking, the City is required to provide timely notice of redemption of the Bonds to each NRMSIR (or MSRB) and to any SD. See "Commitment to Provide Continuing Disclosure" herein for definitions of the terms. "NRMSIR," "MSRB" and "SID" and a description of the City's undertaking to provide certain notices. 2 • Failure to Redeem Bonds. When so called for redemption,such Bonds shall cease to accrue interest on the specified redemption date provided funds for redemption are on deposit at either of the principal corporate trust offices of the Registrar at that time. Bonds called for redemption shall not be deemed to be outstanding as of such redemption date provided funds for redemption are on deposit with the Registrar at such time. Open Market Purchase of the Bonds The City has reserved the right to purchase any of the Bonds in the open market at any time and at any price. Book-Entry Form When the Bonds are issued, ownership interest will be available to purchasers only through a book-entry system(the"Book-Entry System")maintained by DTC or such other depository institution designated by the City pursuant to the Ordinance. If the Bonds are removed from the Book-Entry System and delivered to the persons named as the registered owners of the Bonds on the registration records maintained by the Registrar (the "Registered Owners")in physical form, as described below, the discussion herein of the Book-Entry System will not apply. The following information has been provided by DTC, and the City makes no representation as to the accuracy or completeness thereof. 1. The Depository Trust Company("DTC"),New York,NY,will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede&Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. 2. DTC,the world's largest depository,is a limited-purpose trust company organized under the New York Banking Law,a"banking organization"within the meaning of the New York Banking Law,a member of the Federal Reserve System, a"clearing corporation"within the meaning of the New York Uniform Commercial Code, and a"clearing agency"registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. ,DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues,corporate and municipal debt issues,and money market instruments from over 85 countries that DTC's participants ("Direct Participants") - deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. "Direct Participants"include both U.S.and non-U.S. securities brokers and dealers,banks,trust companies,clearingcorporations,and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporations ("DTCC"). DTCC,in turn,is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC,GSCC,MBSCC,and EMCC, also subsidiaries of DTCC),as well as by the New York Stock Exchange,Inc.,the American Stock Exchange,Inc.,and the National Association of Securities Dealers,Inc. Access to the DTC system is also available to others,such as U.S.and non-U.S.securities brokers and dealers,banks,and trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard and 3 Poor's highest rating: AAA. The DTC rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. 3. Purchases of Bonds under the DTC system must be made by or through Direct Participants,which credit for the Bonds on DTC's records. The ownershipinterest of each actual -, will receive a purchaser of each Bond("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners are, however, expected to receive written confirmation from DTC of their purchase,but Beneficial Owners are expected to receive written confirmations providing details of the transaction,as well as periodic statements of their holdings,from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct or Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds,except in the event that use of the book- entry system for the Bonds is discontinued. 4. To facilitate subsequent transfers,all Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede &Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede&Co.,or such other DTC nominee,do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited,which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyances of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants,and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. 6. Redemption notices, if any, shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede&Co. (nor such other DTC nominee),will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures,DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede&Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede& Co., or such other nominee as may be requested,by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts,upon DTC's receipt of funds and corresponding detail information from the City on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices,as is the case with securities held for the accounts of customers in bearer form or registered in"street name,"and will be the responsibility of such Participant and 4 not of DTC or the City,subject to any statutory or regulatory requirements as may be in effect from time to time.Payment of redemption proceeds,distributions,and dividend,payments to.Cede&Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to Beneficial Owners shall be the responsibility of Direct and Indirect Participants. 9. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the City. Under such circumstances,in the event that a successor securities depository is not obtained,Bond certificates are required to be printed and delivered. 10. The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event,Bond certificates will be printed and delivered. 11. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the City believes to be reliable,but the City takes no responsibility for the accuracy thereof. Transfer and Exchange of Bonds Upon Discontinuance of Book-Entry System So long as the Bonds are in book-entry only form, the beneficial ownership of the Bonds may only be transferred in the records established and maintained by DTC. Upon discontinuance of the book-entry system,the Bonds may be transferred by Registered Owners upon completion of the assignment form on the Bond(s)in form and substance satisfactory to the Registrar and delivery of the Bond(s)to be transferred to the principal corporate trust office of the Registrar for cancellation and re-issuance. Upon such surrender, the Registrar will cancel the surrendered Bonds and deliver to the new Registered Owner a new Bond or Bonds of the same maturity and interest rate and for the same aggregate principal amount. Upon discontinuance of the book-entry system,any Bond may be surrendered at the principal corporate trust office of the Registrar and exchanged,without charge, for an equal aggregate principal amount of Bonds,in any authorized denomination. The Registrar is not required to transfer or exchange Bonds during the 15 days preceding any principal or interest payment or optional redemption date. Authorization The Bonds are special obligations of the City issued pursuant to the provisions of the Constitution and laws of the State of Washington,particularly chapters 35.41,35.67 and 39.46 RCW and to Ordinance No.4976 to be adopted by the City Council on July 1,2002 (the"Ordinance") authorizing the issuance and sale of the Bonds. New Covenant Date The City, as of the date of issuance of the Bonds, currently has outstanding $9,180,000 Water and Sewer Refunding Improvement Revenue Bonds, 1993 (the "1993 Refunding Bonds") and $610,000 Water and Sewer Revenue Bonds, 1994(the"1994 Bonds")(collectively,the"Outstanding Parity Bonds"). The City also has outstanding$5,545,000 Water and Sewer Revenue Refunding Bonds, 1998 (the"1998 Bonds"), 5 which were issued on a parity of lien with the Outstanding Parity Bonds. Upon the date of the full redemption,refunding or defeasance of the Outstanding Parity Bonds(the"New Covenant Date"),certain new covenants will take effect with respect to the 1998 Bonds,the Bonds and any Future Parity Bonds(the 1998 Bonds,the Bonds and the Future Parity Bonds are collectively referred to as the"Parity Bonds")issued prior to the New Covenant Date. The forepart of this Official Statement presents the covenants as they currently exist. Appendix A,attached hereto, presents the covenants as they will exist after the New Covenant Date. Reference is made to the Ordinance for a complete presentation of covenants prior to and after the New Covenant Date. All capitalized terms used in this Official Statement and not otherwise defined herein have the same meanings as in the Ordinance. See Appendix A for certain definitions. Security Revenue Pledge. In the Ordinance,the Revenue of the Waterworks Utility is pledged to the payment into the 2002 Waterworks Revenue Bond Account(the"Bond Fund")in amounts necessary to pay the principal of and interest on the Bonds. The Bonds are payable solely out of the Bond Fund. The Bonds constitute a lien and charge on the Gross Revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operations Expense,except that the lien and charge on such revenue for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds, the 1998 Bonds and any Future Parity Bonds. See"The Waterworks Utility-Schedule of Waterworks Utility Debt Service"). As of - the date of issuance of the Bonds, the City did not have any outstanding subordinate or junior lien obligations. As used herein, "Revenue of the Waterworks Utility"means all the earnings and revenue received by the Waterworks Utility from any source whatsoever, including payments received under contract with other municipal corporations for water service,except general taxes,charges in lieu of taxes,assessments in any utility local improvement district hereafter created,proceeds from the sale of City property,bond proceeds and earnings subject to a federal tax or rebate requirement. As used herein,"Maintenance and Operation Expense"means all expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair,working order and condition,which shall not include any depreciation expenses or taxes or charges in lieu of taxes levied or imposed by the City. 1-1 The Bonds are not general obligations of the City, and the full faith,credit and resources of the City are not pledged for the payment thereof. See Appendix A hereto for a description of the revenue pledge for the Bonds after the New Covenant Date. Rate Covenant. The City has covenanted in the Ordinance that it will establish,maintain and collect such rates and charges for water,sanitary sewage disposal service and storm and surface water drainage service so long as any Outstanding Parity Bonds, 1998 Bonds and Bonds are outstanding as will make available for the payment of the principal of and interest on such bonds an amount equal to at least 1.3 times the average annual debt service requirements,.both principal and interest, on the Outstanding Parity Bonds, the 1998 -- Bonds and the Bonds after deducting Maintenance and Operation Expense from Gross Revenue. See Appendix A hereto under the caption"Summary of Certain Provisions of the Ordinance"for a description of the rate covenant for the Bonds after the New Covenant Date. 6 Flow of Funds. A special fund of the City(the"Waterworks Utility Fund"),has previously been created pursuant to Ordinance No. 250. All Revenue of the Waterworks Utility shall be deposited into the Waterworks Utility Fund as collected,and shall be held separate and apart from all other funds and accounts " of the City. Funds in the Waterworks Utility Fund (other than in any bond redemption or federal rebate account will be used in the following order of priority: , (1) to pay Maintenance and Operation Expense; (2) to pay interest on the Outstanding Parity Bonds and Parity Bonds; (3) to pay the principal of the Outstanding Parity Bonds and Parity Bonds:_ (4) to make all payments required to be made into any sinking fund or bond redemption fund created for the payment of Future Parity Bonds which are Term Bonds: (5) . to make all payments required to be made into the reserve accounts created to secure the payment of the Outstanding Parity Bonds and Parity Bonds; (6) to make all payments required to be made into any revenue bond redemption fund, revenue warrant redemption fund,debt service account or reserve account created to pay and secure the payment of the principal of and interest on any other revenue bonds or revenue warrants having a lien upon the Revenue of the Waterworks Utility junior and inferior to the lien thereon for the payment of the principal of and interest on the Outstanding Parity Bonds and Parity Bonds; (7) to retire by optional redemption or purchase in the open market any outstanding revenue bonds or revenue warrants of the City, to make necessary additions, betterments, improvements and repairs to or,extensions and replacements of the Waterworks Utility, or for any other lawful City purpose. -- See Appendix A hereto under the caption "Summary of Certain Provisions of the Ordinance" for a description of the"Flow of Funds"after the New Covenant Date. The Bond Fund and Accounts. A special fund of the City known as the 2002 Waterworks Revenue Bond Account (the "Bond Fund") has been created by the Ordinance as a separate account in the Waterworks Revenue Parity Bond Fund for the payment of the principal of and interest on the Bonds. The Principal and Interest Account is the subaccount created by the Ordinance in the Bond Fund for payment of the principal and interest on the Bonds. So long as the Bonds are outstanding against the Bond Fund, on or before the first day of each month, the City will pay into the Principal and Interest Account out of Gross Revenue a fixed amount equal to 1/6 of the'next ensuing six months' requirements for interest on the Bonds and an i ! amount equal to 1/12 of the amount of principal of the Bonds payable on the next ensuing principal payment 1 ' date. These allocations will be adjusted for the first payment dates to account for fewer months until the due date. See Appendix A hereto under the caption "Summary of Certain Provisions of the Ordinance"for a 1 description of the Bond•Fund after the New Covenant Date. The Reserve Account and the Reserve Account Requirement. The Ordinance provides for the funding and maintenance of a Reserve Accountwithin the Bond Fund in an. amount equal to Average Annual Debt --' Service of the Bonds. As used herein, "Average Annual Debt Service"is equal to•the sum of the Annual 7 Debt Service for the remaining years to the last scheduled maturity of the applicable bond issue or issues divided by the number of those remaining years. In the Ordinance,the City agrees that when the required amounts have been paid into the Reserve Account in the Bond Fund,the City will maintain those amounts therein at all times,except for withdrawals therefrom as authorized in the Ordinance, until there is sufficient money in the Bond Fund, including the Reserve Account therein,to pay the principal of and interest to maturity on all outstanding Bonds,at which time no further payments need be made into the Bond Fund,and the money in the Bond Fund,including the Reserve Account,may be used to pay that principal and interest. If there is a deficiency in the Principal and Interest Account for the payment of the principal and interest on the Bonds,the deficiency will be made up from amounts available in the Reserve Account. Any deficiency created in the Reserve Account will be made up from Gross Revenue first available after making necessary provisions for the required payments into the Principal and Interest Account. The Reserve Account will be funded from an initial deposit of approximately$542,300 from the balance in the reserve account created for the City's Water and Sewer Refunding and Improvement Revenue Bonds, 1992 that was fully retired as of June 1,2002 with the remaining balance accumulated from Gross Revenue in substantially equal monthly payments so that by no later than July 2005, there will be an amount on deposit in the Reserve Account not less than Average Annual Debt Service for the Bonds. Additionally, the respective bond funds for Outstanding Parity Bonds and the 1998 Bonds are required to maintain reserve accounts equal to Average Annual Debt Service of each issue of Outstanding Parity Bonds -- and the 1998 Bonds. The reserve accounts for Outstanding Parity Bonds and the 1998 Bonds are currently fully funded in amounts at least equal to Average Annual Debt Service. For a description of the Reserve Fund for Parity Bonds and the Reserve Requirement after the New Covenant Date, see Appendix A—"Summary of Certain Provisions of the Ordinance"hereto. Other Covenants. In the Ordinance,the City makes certain other covenants,including covenants regarding maintenance of the Waterworks Utility, the sale or other disposition of the property of the Waterworks Utility,the payment of Maintenance and Operation Expense,maintenance of tax exemption on the Bonds and the maintenance of insurance on the Waterworks Utility properties. For a description of the covenants on the Bonds after the New Covenant Date,see Appendix A hereto under the caption"Summary of Certain Provisions of the Ordinance." Future Parity Bonds. The City reserves the right to issue Future Parity Bonds which will constitute a lien and charge on the Revenue of the_Waterworks Utility on a parity with the Outstanding Parity Bonds, the 1998 Bonds and the Bonds,if the following conditions are met and complied with at the time of issuance of the Future Parity Bonds: (1) All payments required by any ordinance to be paid into any bond redemption funds and accounts thereof created to secure the payment of Outstanding Parity Bonds shall have been made and no deficiency therein exists; (2) An opinion of a professional engineer experienced in municipal utilities shall be _ delivered certifying that the revenues of the Waterworks Utility shall be sufficient, after the payment of operation and maintenance costs and taxes, based upon the 8 historical experience of the Waterworks Utility or the pro forma revenues under then existing rates over a period of any twenty-four consecutive months out of the thirty- six-months immediately preceding the issuance of additional bonds,to equal at least 1.30 times the average annual.debt service of all Outstanding Parity Bonds and the Future Parity Bonds; and (3) The ordinance authorizing the issuance of Future Parity Bonds will provide that an amount equal to the average annual debt service on such additional Future Parity Bonds shall be accumulated as a reserve in the bond redemption fund. For a description of the terms of issuance of Future Parity Bonds after the New Covenant Dare, see Appendix A under the caption"Summary of Certain Provisions of the Ordinance." • Purpose and Sourceand Application of Funds. The proceeds from the sale of the Bonds will be used to undertake certain capital improvements to the Waterworks Utility and to pay costs related to the issuance and sale of the Bonds(the"Project"). The proceeds of the Bonds will be used by the City for the purpose of financing a portion of the cost of the capital improvement plan of the Waterworks Utility for calendar year 2002 and 2003. Major capital projects identified in the current capital improvement plan are summarized below: Water Utility Improvements: Maplewood Water Treatment Facility $1,000,000 Disinfection Piping for Downtown Wells 1,200,000 - Seismic upgrade of reservoirs 950,000 Water main improvements I 1,495,000 Water pumpstation and well-house improvements 600,000 Water system telemetry upgrades 200,000 Surface Water Utility Improvements 2,200,000 Wastewater Utility Improvements 2,585,000 The estimated sources and application of proceeds of the Bonds are shown in the table as follows: Sources of Funds: • Proceeds from the Sale of the Bonds $11,980,000.00 Reoffering Premium 44,346.40 Total Sources of Funds $12,024,346.40 - Application of Funds: Deposit to the Waterworks Utility Construction Fund $11,810,000.00 Costs of Issuance of the Bonds' 214,346.40 Total Application of Funds $12,024,346.40 1 Includes the Underwriter's discount,Bond Counsel fees, the insurance premium, and rating agency costs,Preliminary and Official Statement printing and mailing expenses,registration costs and any miscellaneous costs. II 9 THE WATERWORKS UTILITY General Information The Waterworks Utility of the City is comprised of three divisions:the Water Utility,the Wastewater Utility and the Storm Drainage Utility. The City maintains separate fund accounting for the three divisions to facilitate financial management,but has combined the divisions for fmancing purposes into the Waterworks Utility. See "The Water Utility,""The Wastewater Utility" and"The Storm Drainage Utility"herein for descriptions of the three divisions of the City's Waterworks Utility. Waterworks Utility Major Customers The Boeing Company ("Boeing") has been the largest single customer of the Waterworks Utility for a number of years. For the year ending December 31, 2001, Boeing represented approximately 11.34% percent of the operating revenue of the Waterworks Utility. See"Appendix C—King County Economic and Demographic Information—Manufacturing—The Boeing Company"herein The largest customers of the Waterworks Utility for the year ended December 31,2001 are summarized in the table below: 1 Water Utility Wastewater Utility Storm Drainage Utility %of Storm %of Water %of Wastewater Drainage Customer Utility Rev Customer Utility Rev Customer Utility Rev Boeing 3.08% Boeing 3.11% City of Renton 6.18% King County 2.27 Public Hospital District No. 1 1.53 Boeing 5.15 City of Kent 1.18 Service Linen Supply 1.48 King County 1.95 Bryn Mawr Water 1.11 Virtue Empire Associates 0.70 Kenworth Truck Co. 1.15 _ Service Linen Supply 1.01 Draper Valley Farms 0.64 State of Washington 1.03 Public Hospital District No. 1 0.95 Sunset Terrace 0.62 Leisure Estates 0.66 Draper Valley Farms 0.40 G&K Services 0.48 Burlington Northern 0.61 Sunset Terrace 0.39 Orca Bay Seafoods 0.38 Valley Medical Center 0.52 G&K Services 0.30 Suntone Hotel Properties 0.37 GE Capital Investors 0.51 Stoneway Rock&Recycling 0.25 Evergreen Healthcare 0.32 Sunnydale Trailer Park 0.47 Total 10.94% Total 9.63% Total 18.23% Source: The City of Renton Delinquent Accounts . After notice of delinquency of a water and/or sewer bill has been provided and the bill remains unpaid for a period of 60 days,the Finance and Information Services Administrator is directed to cut off water service to the premises and enforce a lien upon the property. Such lien is superior to all other liens or encumbrances, except those for general taxes and special assessments. • 10 I - ' Historical Net Income and Revenue Available for Debt Service The following table shows the audited revenues, expenses, net income and revenues available for debt service for the fiscal year ended December 31, 1998 through 2001. See "Appendix B - 2001 Audited Financial Statements of the Waterworks Utility"herein. Audited Audited Audited Audited • 1998 1999 2000 2001 i--, Operating Revenue Charges for Services $19,889,136 $20,176,839 $21,724,688 $20,495,611 Other Operating Revenue 1,147,838 1,303,559 1,411,401 1,203,480 Total Operating Revenues $21,036,974 $21,480,398 . $23,136,089 $21,699,091 i Operating Expenses Operations and Maintenance $11,513,665 $12,923,365 $12,020,228 $12,463,725 Administrative and General 1,637,679 1,756,727 1,826,630 1,853,671 Taxes 1,726,091 .1,727,350 1,806,916 1,734,324 Depreciation 2,725,007 2,998,977 3,217,984 3,661,458 Total Operating Expenses $17,602,442 $ 19,406,419 $18,871,758. $19,713,178 Operating Income(Loss) $3,434,532 $2,073,979 $4,264,331 $1,985,913 Non-Operating Revenue(Expenses) ' Interest Revenue $560,126 $303,912 $546,422 $295,154 Other Non-Operating Revenue 1 14,053 58,726 79,599 88,573 Interest Expense � (1,278,481) (1,313,469) (1,244,246) (1,093,550) Amortization Expense (90,569) (87,839) (80,472) • (77,166) Operating Transfers 1 50,949 (82,080) 15,248 (77,650) Total Non-Operating $(743,922) • $(1,120,750) $(683,449) $(864,639) Revenues/Expenses Net Income $2,690,610 $953,229 $3,580,882 $1,121,274 . Adjustments to Net Income City Utility Tax • . $1,170,276 $1,197,276 $1,271,201 $1,205,729 Amortization Expense 90,569 87,839 80,472 77,166 Depreciation Expense 2,725,007 2,998,977 • 3,217,984 3,661,458 Bond Interest Expense 1,278,481 1,313,469 1,244,246 1,093,550 Connection/System-Development Charges 1,515,221 2,018,123 1,779,699 1,426,008 Total Adjustments $6,779,554 $7,615,684 $7,593,602 $7,463,911 I Net Revenue Available for Debt Service $9,470,164 $8,568,913 $11,174,484 $8,585,185 Debt Service $3,155,670 $3,114,399 . $2,743,138 $2,749,921 ( ! Debt Service Coverage 3.00x • 2.75x 4.07x 3.12x —I Source: The City of Renton , 11 I Schedule of Waterworks Utility Debt Service Set forth in the following table is the debt service schedule for the Outstanding Parity Bonds, the 1998 Bonds and the Bonds. Some of the interest figures have been rounded. Outstanding Bonds' The Bonds Total Debt Year Principal' Interest' Principal Interest Service 2002 $1,805,000 $872,838 $0 $228,804 $2,906,642 2003 1,520,000 732,984 115,000 549,130 2,917,114 2004 1,595,000 655,774 120,000_ 546,255 2,917,029 2005 1,670,000 568,163 135,000 543,255 2,916,418 2006 1,505,000 489,876 110,000 539,542 2,644,418 , 2007 1,585,000 412,608 110,000 535,968 2,643,576 2008 1,670,000 329,696 110,000 532,117 2,641,813 2009 1,410,000 250,858 455,000 528,268 2,644,126 2010 1,320,000 181,294 630,000 511,432 2,642,726 2011 1,020,000 - 121,748 1,010,000 486,863 . 2,638,611 2012 1,075,000 . 68,273 1,025,000 446,462 2,614,735 2013 775,000 20,333 0 404,438 1,199,771 2014 710,000 404,437 1,114,437 2015 735,000 373,908 1,108,908 2016 765,000 341,567 1,106,567 2017 805,000 307,143 1,112,143 2018 1,000,000 270,112. 1,270,112 2019 1,000,000 217,613 1,217,613 2020 1,000,000 165,112 1,165,112 2021 1,045,000 112,613 1,157,613 2022 1,100,000 57,750 1,157,750 Total $16,950,000 $4,704,445 $11,980,000 $8,102,789 $41,737,234 ' Based on fiscal year ending December 31 and includes all payments made and to be made in 2002,including the 1992 Bonds. Source: The City of Renton Debt Repayment Record The City has always met principal and interest payments on all of its bonds when due. . 12 I Outstanding Bonds and Debt Service Requirements • Giving effect to the issuance of the Bonds,the City will have a total of$27,315,000 in principal of Bonds, the 1998 Bonds and Outstanding Parity Bonds. The Annual Debt Service during fiscal year 2002 on the Bonds, the 1998 Bonds and Outstanding Parity Bonds is $2,906,642. The initial Net Revenue (Gross Revenue less Maintenance and Operation Expense)requirement of the Waterworks Utility based on a Net Revenue coverage of 1.30 times the estimated Annual Debt Service,therefore,will be$3,778,635 in fiscal year 2002. Based on the actual Net Revenue figure for fiscal year 2001 of$8,585,185,debt service coverage is anticipated to be 2.95 times. The City may,however,issue Future Parity Bonds to finance capital needs of the Waterworks Utility as described below that would reduce the debt service coverage below such level. (See Appendix A-"Covenants of the Ordinance- Security"herein.) Expected Future Improvements and Borrowings • The City's current Capital Improvement Plan("CIP")identifies system development and major maintenance capital expenditures of$21,415,000 planned for the 2003 and 2004 fiscal years. The amount of Waterworks Utility debt to be issued in support of these CIP elements has not yet been finalized,although the City does expect the issuance of additional Utility debt prior to 2004. The Water Utility The Water Utility system consists of nine wells,one artesian spring,eleven water booster pump stations,and 281.5 miles of water lines. Renton has three sources of water:the Cedar River Aquifer,Springbrook Springs and the Seattle Water Shed. Ninety-five percent of the water is currently from the Cedar River Aquifer, three percent from Seattle, and two percent is from Springbrook Springs. The five wells located in the Cedar River Aquifer are capable of producing 16.3 million gallons per day ("MGD"). The three wells located in the Maplewood Aquifer are capable of producing 7.9 MGD,Well 5A can pump 2.0 MGD and the Springbrook Springs,artesian spring can produce approximately 1.4 MGD. In 2001, the maximum demand for water was 11.96 MGD, and the average day demand was 7.1 MGD. In total, the City's combined water sources can produce 27.6 MGD. It is estimated that this supply will accommodate growth at least until the year 2015. 13 Water Utility Customer Accounts Renton's Water Utility currently serves 14,538 customers. The type and number of accounts are shown in the table below. 1997 1998 1999 2000 2001 Residential' 10,180 10,475 10,633 11,204 11,060 Multi-Family2. 1,264 1,339 1,394 1,364 1,539 Commercial 1,176 1,194 1,229 1,020 1,259 Industrial 102 103 110 81 87 Other; 478 481 527 555 593 13,200 13,592 13,893 14,224 14,538 ' Single Family.Residence 2 Apartment houses,etc. . 3 Schools,City Departments,Fire Protection Source:The City of Renton Water Utility Rates Water rates for metered services inside the City are established in order to charge service accounts for the amount of water used plus a monthly service charge determined by the size of the waterline serving the premises. The following rates and charges were established by Ordinance No. 4567 effective January 1, 1996: . Base Rate: Size of Service Base Charge Size of Service Base Charge 3/4 inch $10.50 4 inch $126.05 1 inch 13.15 6 inch 189.10 1-1/2 inch 16.85 8 inch 262.65 2 inch 29.45 10 inch 378.20 3 inch 87.20 12 inch 525.30 Commodity Charge: $1.76/100 cubic feet("cf') ($1.88/100 cf in excess of 1000 cf for residential only). Water rates for metered service outside the City are 1.5 times the rate fixed for metered service within the , City. Water rates for fire protection service are$3.40 per month per inch of fire meter size. - The Wastewater Sewer Utility • The Wastewater Utility system collects wastewater from residential and commercial customers and delivers it to King County(the"County")for treatment. The existing system consists of 168.1 miles of wastewater pipelines, 23 lift stations and an additional seven lift stations which are privately owned and maintained. - Wastewater is discharged into facilities within the City, from which it is conveyed to and treated by the County's Renton Treatment Plant. Approximately 80 percent of the City area is served by the system. The remaining area within the City is served by septic tanks or is undeveloped. '14 Wastewater Utility Customer Accounts Renton's Wastewater Utility currently serves 12,572 customers. The type and number of accounts are shown in the table below. - 1997 1998 1999 2000 2001 Residential' 8,903 9,234 9,406 9,766 10,089 Multi-Family2 1,173 1,231 1,267 1,323 1,346 Commercial 923 . 929 952 966 983 Industrial '69 71 74 86 76 Other3 83 79 76 243 78 11,151 11,544 11,775 12,384 12,572 ' Single Family Residence 2 Apartment houses,etc. 3 Schools,City Departments,Fire Protection - Source: The City of Renton Wastewater Utility Rates Monthly rates for sewer service within and outside of the City established by Ordinance No.4567 effective January 1, 1996 are as follows: Customer,Type Rate ' Single family residence $12.29/month All other users ! $1.87 base charge,plus$1.39 per each 100 cf of water used In addition to the above monthly rates,a charge of$19.10.per month is payable to the County for each single family residence,or$19.10 for each multiple of 750 cf of water used by all other classes of customers. This charge is paid to the County for the collection and treatment of sewage. Storm Drainage Utility The Storm Drainage Utility system covers a service area within the existing City corporate boundaries of approximately 16 square miles. The area includes rivers, streams, ditches, lakes,wetlands, and manmade facilities. The Storm Drainage Utility owns,maintains and operates all storm and surface water management facilities located within public right-of-ways and easements dedicated for storm and surface water management purposes. The Storm Drainage Utility system consists of 183.7 miles of storm system pipe, - includes 5,537 catch basins,2,547 access manholes, 13 storm water retention/detention facilities and 37.7 miles of ditch systems and channels. The City's Storm Drainage Utility currently serves 12,849 customers. 15 , 1 Storm Drainage Utility Rates Monthly rates for storm drainage service within the City are as follows: Type Monthly Rate Single-family dwelling $5.39 Low intensity 26.70/acre Medium intensity 38.61/acre High intensity 49.80/acre Gravel pits 52.13/acre, City streets 13.00/acre THE CITY OF RENTON General Information The City surrounds the southern end of Lake Washington,southeast of Seattle on Interstate 405. The City is located approximately 20 miles southeast of the City of Seattle and approximately 60 miles northeast of the City of Olympia, the State's capital. As of the 2001 population estimates, the City ranked sixth in size among cities in the County. The City had a population of 51,140 as estimated in 2001 by the State Office of Financial Management. The County had an estimated population of 1,758,300 as reported in 2001 by the State Office of Financial Management, an increase of approximately 16.7% since the 1990 Census. The economy of the area is based manufacturing, technology based business, the Port of Seattle, services industry, tourism, fishing and agriculture. (See "Appendix B - County Economic and Demographic Information"herein for a description of the area's economy.) Form of Local Government -The City, which was incorporated in 1901, has a strong Mayor form of government. The Mayor is independently elected to a four-year term. The Mayor's job is to manage and implement the policies established by the seven-member Council. Each Council member serves a four-year term and is elected on a staggered two-year cycle. The names of the current members of the City Council as well as the dates in which of their,respective terms of office expire are as listed below. Expiration of Name Title Term Jesse Tanner Mayor 12/31/03 Dan Clawson President 12/31/05 Terri Briere. Council Member 12/31/05 Randall Corman Council Member 12/31/05 Kathy Keolker-Wheeler Council Member 12/31/03 Toni Nelson Council Member 12/31/03 King Parker Council Member 12/31/03 Donald Persson Council Member 12/31/03 16 Principal City Officials Jesse Tanner, Mayor. 'Mr. Tanner was appointed to the Renton City Council in 1989 by his fellow City Council members and was elected to a four-year term in 1991. In November 1995,he was elected to serve as Mayor and was elected to a second term in 1999. Mr. Tanner served in the Federal.Aviation Administration("FAA")for 34 Years. Duringhis FAA tenure he was appointed to the position of Deputy Director where he served for nine years,overseeing FAA activities in the Northwest Region of the United States. In his capacity as Deputy Director,he had direct authority over a work force of 2,500 personnel and an annual budget.in excess of$100 million. Since his retirement from the FAA, Mr. Tanner has been involved in consulting work for several major aerospace companies. Jay Covington, Chief Administrative Officer. Mr. Covington joined City staff in 1990. Prior to joining the City,Mr.Covington served eight years at the City of Vancouver,Washington,in the roles ofbudget analyst, management analyst and Assistant to the City Manager. During his tenure with the City of Vancouver,Mr. Covington developed a municipal biennial budget as well as improved financial forecasting techniques. Victoria Runkle, Finance &Information Services Administrator. Ms. Runkle joined City staff in 1993. Prior to her tenure with the City she worked in public finance in both the public and private sectors. She began her career as a budget analyst with the City of Redmond. After three years with that entity she began working for the City of Seattle's Office of Management and Budget. During her seven years with.the City of Seattle, she was responsible for a variety of assignments including capital budgeting. She left the City of Seattle as the Assistant Budget director for a position with a public finance advisory firm. During her tenure in the private sector,Ms.Runkle helped various types of municipalities develop rating presentations,prepare official statements, and issue various types of debt. City Employment and Primary;Services The City had approximately 679 employees as of 2001. The City provides services in accordance with its charter, and operates its own police, fire,park and recreation,utility system,municipal airport and library system. - Employee Relations The City has five bargaining units. The commissioned police officers have a guild. The guild also represents, in a separate bargaining unit, the non-commissioned support staff of the Police Department. There are two bargaining units in the Fire Department. The firefighters through the rank of captain are represented as a group. There are six battalion chiefs who are,represented by a separate bargaining unit. The greatest number of employees is represented by AFSCME(American Federation of State and City Municipal Employees). State law requires municipalities to bargain collectively with formally recognized collective bargaining units. The management group tends to receive benefits very similar to the AFSCME contract. There are no significant outstanding personnel issues at this time. The City bargains with each of the units every three years. The City has'contracts with all the bargaining units through 2002. 17 Pension Plans It is mandatory for all permanent City employees, including part time employees who work 70 hours per month during five consecutive months to participate in one of the following statewide local government retirement systems administered by the State Department of Retirement Systems, under cost-sharing multiple-employer public employee retirement systems. The City made the following contributions as of the - fiscal year ended December 31, 2001, on behalf of City employees who participated in the pension plans listed below. Number of " City Contribution Participants. Fiscal Year 2001 Public Employees Retirement System("PERS") PERS Plan Il (hired before 10/1/77) 40 $79,263 PERS Plan 112 391 577,117 Total PERS 431 $656,380 Law Enforcement Officers and Firefighters("LEOFF") LEOFF Plan I3 (hired before 10/1/77) 22 $3,834 LEOFF Plan 114 170 433,021 Total LEOFF 192 $436,855 Employees in PERS I are required to contribute 6.00%of their salary to the plan,with a City contribution of 4.67%. 2 Employees in PERS II are required to contribute 2.43%of their salary to the plan,with a City contribution of 4.67%. 3 Employees in LEOFF I are required to contribute 0.00%of their salary to the plan,with a City contribution of 6.23%. 4 Employees in LEOFF II are required to contribute 6.78%of their salary to the plan,with a City contribution of 4.30%. The Budgetary Process The City prepares budgets in accordance with chapter 35.33 RCW. As background to the process,the City prepares a five-year financial forecast of general operations. Biennial calendar year budgets (in which annual allocations lapse at year end) are adopted by the City Council for funds providing customary government services. Long-term project-oriented budgets are adopted as required and amended as additional appropriations are needed. Special assessment and certain custodial agency funds are not budgeted. All budgets are accounted for on a line-item basis with control at the object summary total level. Estimated purchase order amounts are encumbered prior to the release of the order to the vendor. Open encumbrances lapse at year end and must be reappropriated or absorbed in the next year's operating budget. Auditing of City Finances Cities and counties of the State must comply with the Budgeting, Accounting, and Reporting System ("BARS")prescribed by the Office of the State Auditor as authorized under RCW43.09.230 and 43.09.230. State laws also provide for annual independent audits by the Office of the State Auditor and require timely submission of annual financial reports to the State Auditor for review. The financial system of the City incorporates a system of financial and administrative controls that ensure the safeguarding.of assets and the reliability of financial reports and consequently are designed to provide reasonable assurance that transactions are executed in accordance with management authorization, recorded in conformity with generally accepted accounting principles ("GAAP") applicable to governmental entities,that there exists accountability of and control over assets and obligations,and that sufficient reporting and review exists to 18 provide adequate information for analysisand comparability of data. Internal control is an area of audit by the State Auditor,as well,and City management receives and takes action upon recommendations made by the State Auditor. The City's financial statements are subject to annual audit by the State Auditor. The last audit covered the year ended December 31,2001 and the report thereon contained an unqualified opinion regarding the City's 2001 financial statements. Copies of the State Auditor's Report may be obtained by contacting the Office of State Auditor in Olympia,Washingtonor the City. • Risk Management The City self-insures its risk exposure through self insurance up to specified levels of risk, and purchases stopgap insurance commercially to cover medium to large losses. The City's risk management program is administered by the Human Resources/Risk Management Administrator, with claims processed by independent claims administrators. - Risk Retention Stop Gap Coverage Type Per Occurrence Loss Limit Property $25,000 $500,000,000 Liability 250,000 14,000,000 Auto Liability 250,000 14,000,000 Boiler&Machinery 5,000 50,000,000 Public Officials; 250,000 10,000,000 Crime 10,000 1,000,000 Airport Liability 0 50,000,000 Underground Storage Tank 10,000 1,000,000 Worker's Compensation 225,000 2,000,000 Employee Health 120,000 N/A Authorized Investments Chapter 35.39 RCW limits the investment by cities and towns of its inactive funds or other funds in excess of current needs to the following authorized investments: United States bonds;United States certificates of indebtedness; bonds or warrants of the State and any local government in the State; its own bonds or warrants of a local improvement district which are within the protection of the local improvement guaranty fund law; and any other investment authorized by law for any other taxing district or the State Treasurer. Under chapter 43.84 RCW, the State Treasurer may invest in non-negotiable certificates of deposit in designated qualified public depositories; in obligations.of the U.S. government, its agencies and wholly - owned corporations;in bankers' acceptances;in commercial paper;in the obligations of the Federal Home Loan Bank,Federal National Mortgage Association and other government corporations subject to statutory provisions; and may enter into repurchase agreements. Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW 35.39.030). Moneys available for investment may be invested on an individual fund basis or may, unless otherwise restricted by law,be commingled within one common investment portfolio. All income derived from such investment may be either apportioned to and used by the various participating funds or for the benefit of the {—+ � 19 general government in accordance with City ordinances or resolutions. Funds derived for the sale of bonds or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances, - 1 resolutions or bond covenants may lawfully prescribe. Shown in the following table are the City's investments as of June 30, 2001. The City was in compliance with all statutes pertaining to the investment of City moneys. Carrying Amount Market Value US Government Agency Securities $6,000,000 $6,035,320 Certificates of Deposit 11,000,000 11,657,385 State&County Local Gov't Investment Pools/MIA 42,723,419 42,861,433 U.S.Treasury Strips 4,766,926 6,169,653 Municipal Bonds 98,272 100,726 Total Investments $64,588,617 $66,824,517 APPROVAL OF BOND COUNSEL Legal matters incident to the authorization, issuance and sale of the Bonds by the City are subject to the unqualified approving legal opinion of Gottlieb, Fisher & Andrews, PLLC, Seattle, Washington, Bond Counsel. Fees payable to Gottlieb,Fisher&Andrews, Seattle,PLLC,Washington, as Bond Counsel, are contingent upon the issuance of Bonds. Bond Counsel has reviewed this document only to confirm that the portions of it describing the Bonds and the authority of the City to issue them conform to the Bonds, the applicable laws under which they were issued and the language regarding federal income tax exemption. A form of the legal opinion is included herein in Appendix E. TAX EXEMPTION In the opinion of Gottlieb,Fisher&Andrews,PLLC,Bond Counsel,as of the date of issue of the Bonds(the "Date of Issue"), and provided the City complies with applicable requirements of the Code which must be satisfied subsequent to the issuance thereof, the Bonds are not"private activity bonds,"as defined by the Code;interest on the Bonds is excluded from gross income for federal income tax purposes under existing federal law; and such interest is not an item of tax preference for purposes of determining the alternative minimum tax on individuals and corporations under existing federal law. However,under existing federal law,interest on the Bonds received by certain corporations is to be taken into account in the computation of adjusted current earnings for purposes of calculating the alternative minimum tax applicable to such corporations; such interest received by certain S corporations may be subject to tax; and such interest received by foreign corporations with United States branches maybe subject to a foreign branch profits tax. Bond Counsel expresses no opinion regarding any other federal tax consequences of receipt of interest on the Bonds. Potential purchasers of the Bonds should consult with their tax advisorsas to all possible tax consequences of ownership of the Bonds. See also, "Other Tax Consequences,"herein. The Code contains certain requirements which must be satisfied subsequent to the issuance of the Bonds in order to maintain the tax treatment described above,including requirements relating to the application of the proceeds of the Bonds, use of facilities which are financed with such proceeds, limitations on income 20 derived from the investment of gross proceeds of the Bonds (as defined in Section 148 of the Code), and - rebate to the United States Treasury of certain of such investment income on such gross proceeds. The City has covenanted to comply with these requirements; and the opinion of Bond Counsel described in the preceding paragraph assumes such compliance. However,Bond Counsel has not undertaken and shall not undertake to monitor compliance by the City with such requirements and failure of the City to comply with r- such requirements could cause the interest on the Bonds to be included in gross income for federal income tax purposes,and could be treated as an item of tax preference for purposes of the alternative minimum tax on individuals and corporations, in each case,retroactive to the Date of Issue. OTHER TAX CONSEQUENCES Under current federal law: . • 1. Corporate Alternative Minimum Tax. The interest on tax-exempt obligations received by a - corporation is taken into account in the computation of the alternative minimum tax applicable to corporations (as defined for federal income tax purposes). Under current federal law, the alternative minimum taxable income of such a corporation (other than an S corporation, a regulated investment company, a real estate investment,trust or a REMIC) is increased by 75% of the amount by which the "adjusted current earnings" of the corporation exceeds the corporation's alternative minimum taxable income determined without regard to such increase and any alternative tax net operating loss deduction. Interest on tax-exempt obligations,'whenever issued or acquired,including,interest on the Bonds,is included in the computation of"adjusted net book income"and"adjusted current earnings." I I 2. Tax on Excess Passive Investment Income of S Corporations. Certain excess net passive - investment income,including interest on the Bonds,received by an S corporation(a corporation treated as a partnership for most federal tax purposes)that has "subchapter C earnings and profits" at the close of its taxable year may be subject to federal income tax at the highest rate applicable to corporations if more than 25% of the gross receipts of such S corporation for such taxable year is passive investment income. 3. Foreign Corporation Branch Profits Tax. Interest on the Bonds received by certain foreign ' corporations doing business in the United States maybe subject to a branch profits tax applicable to such corporations that is based on their United States source earnings and profits,including tax-exempt interest on obligations such as the Bonds. 4. Elimination of Interest Deduction for Financial Institutions. The Bonds are not"qualified tax- exempt obligations"for purposes of the 80 percent financial institution interest expense deduction permitted pursuant to.the Code. None of the interest expense incurred by banks and other financial institutions allocable to the purchase or carrying of the Bonds may be deducted by such institution. 5. Reduction of Loss Deduction for Property and Casualty Insurance Companies. Interest on tax- exempt obligations,including the Bonds,received by property and casualty insurance companies,will reduce tax deductions for loss reserves otherwise available to such companies by an amount equal to 15 percent of such tax-exempt interest received during the taxable year. 6. , Social Security and Tier 1 Railroad Retirement Benefits Subject to Tax. Interest received or accrued during the year from tax-exempt obligations, such as the Bonds, is included in the calculation of • 21 "modified adjusted gross income"of recipients of the social security or tier 1 railroad retirement benefits. If the sum of the"modified adjusted gross income'.'for the taxable year plus one-halfof the social security or tier 1 railroad retirement benefits received during the taxable year exceeds a base amount provided by the Code(the"excess amount"),then the lesser of(i)one-half of the social security or tier 1 railroad retirement benefits received during the taxable year or(ii) one-half of the "excess amount", is included in the gross income of the social security or tier 1 railroad retirement benefit recipient. Covenant Against Arbitrage The City has covenanted that it will not take or permit to be taken on its behalf any action that would adversely affect the exclusion of the interest on the Bonds from gross income for purposes of federal income taxation, and will take or require to be taken such acts as may be permitted by State law and as may from time to time be required under applicable law to continue the exclusion of the interest on the Bonds from the gross income for purposes of federal income taxation. Without limiting the generality of the foregoing,the City has covenanted that it will not invest or make or permit any use of the proceeds of the Bonds or of its other money at any time during the term of the Bonds which would cause the Bonds to be"arbitrage bonds" within the meaning of Section 148 of the Code. . The City further covenants that it will not take any action or permit any action to be taken that would cause the Bonds to constitute"private activity bonds"under Section 141 of the Code. Original Issue Discount The Bonds maturing on December 1 in the years 2008 through 2012,and 2014 through 2017,each inclusive, are"Discount Bonds." In the opinion of Bond Counsel,the difference between the principal amount of the Discount Bonds and the initial offering price to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriter or wholesalers) at which price a substantial amount of such Discount Bonds of the same maturity was sold constitutes original issue discount,which is excluded from gross income for federal income tax purposes to the same extent as interest on the Discount Bonds. Further,this original issue discount accrues over the term of each Discount Bond on the basis of a constant yield to maturity and the basis of each Discount Bond acquired at such initial'offering price by an initial purchaser of such Discount Bonds will be increased by the'amount of such accrued original issue discount. Original Issue Premium The Bonds maturing on December 1 in years 2003 through 2007,and 2018 through 2022,each inclusive,are "Premium Bonds." The difference between the principal amount of Premium Bonds and the initial offering price to the public(excluding bond houses,brokers,or similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of such Premium Bonds of the same maturity was sold constitutes amortizable bond premium,which may not be deducted for federal income tax purposes. For purposes of determining gain or loss on the sale of other disposition of a Premium Bond,the basis of each Premium Bond acquired at such initial offering price by an initial purchaser is decreased by the amount of the bond premium that has been amortized. Further, this amortizable bond premium is determined on the basis of a constant yield to maturity over the term of each Premium Bond. This 22 amortizable bond premium may be taken into account in determining the amount of alternative minimum tax, environmental tax and branch profits tax described below. Owners of Premium Bonds are advised to consult with their own advisors with respect to other federal and state tax consequences of owning the Premium Bonds. NO LITIGATION CONCERNING THE BONDS There is no controversy or litigation of any nature now pending or,to the knowledge of the City,threatened, restraining or enjoining the issuance, sale, execution or delivery of the Bonds, or in any way contesting or affecting the validity of the Bonds, any proceedings of the City taken with respect to the issuance or sale thereof,or affecting the ability of the City to pay the principal of and interest on the Bonds. UNDERWRITING D.A.Davidson&Co.(the"Underwriter")has agreed,subject to the terms of a Bond Purchase Agreement, to purchase the Bonds from the City at an aggregate purchase price of 99.37%of the par value of the Bonds, (which includes a net original issue premium of$44,346.40 and an Underwriter's discount of$119,800.00, plus accrued interest. The Bonds are being reoffered for sale to the public at the prices shown on the cover of this Official Statement(for an average price of 100.370%). Concessions from the initial offering price - may be allowed to selected dealers and special purchasers. The initial offering price is subject to change after the date hereof. BOND INSURANCE Bond Insurance Policy Concurrently with the issuance of the Bonds,Financial Security Assurance Inc. ("Financial Security")will issue its Municipal Bond Insurance Policy for the Bonds(the"Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Financial Security Assurance Inc. Financial Security is a New York domiciled insurance company and a wholly owned subsidiary of Financial Security Assurance Holdings Ltd. ("Holdings"). Holdings is an indirect subsidiary of Dexia,S.A.,a publicly held Belgian corporation. Dexia,S.A.,through its bank subsidiaries,is primarily engaged in the business of public finance in France,Belgium and other European countries. No shareholder of Holdings or Financial Security is liable for the obligations of Financial Security. At March 31, 2002, Financial Security's total policyholders' surplus and contingency reserves were approximately$1,644,743,000 and its total unearned premium reserve was approximately$841,749,000 in , 23 accordance with statutory accounting principles. At March 31,2002,Financial Security's total shareholders' equity was approximately$1,746,106,000 and its total net unearned premium reserve was approximately $693,860,000 in accordance with generally accepted accounting principles. The fmancial statements included as exhibits to the annual and quarterly reports filed by Holdings with the Securities and Exchange Commission are hereby incorporated herein by reference. Also incorporated herein by reference are any such financial statements so filed from the date of this Official Statement until the termination of the offering of the Bonds. Copies of materials incorporated by reference will be provided upon request to Financial Security Assurance Inc.:.350 Park Avenue, New York, New York 10022, Attention: Communications Department(telephone(212) 826-0100). The Policy does not protect investors against changes in market value of the Bonds,which market value may be impaired as a result of changes in prevailing interest rates,changes in applicable ratings or other causes. Financial Security makes no representation regarding the Bonds or the advisability of investing in the Bonds. Financial Security makes no representation regarding the Official Statement,nor has it participated in the preparation thereof,except that Financial Security has provided to the Issuer the information presented under this caption for inclusion in the Official Statement. RATINGS RatingGroup,New New As noted on the cover page of this Official Statement; Standard Poor's& York, York and Fitch Ratings IBCA,New York,New York,have assigned their municipal bond ratings of"AAA" and"AAA",respectively, to the Bonds, with the understanding that upon delivery of the Bonds, a policy insuring the payment when due of the principal of and interest on the Bonds will be issued by Financial Security Assurance Inc. No application was made to any other rating agency for the purpose of obtaining an additional rating on the Bonds. Each rating reflects only the view of the applicable rating organization and an interpretation of such rating may be obtained only from the rating agency furnishing the same. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by the rating agencies,if,in the judgment of such agencies,circumstances so warrant. Any such revision or withdrawal of either such rating may have an adverse effect on the market price of the Bonds. Standard&Poor's has assigned its municipal rating of"A+"to this issue of Bonds(the"underlying rating"). Fitch has assigned its municipal rating of"AA-" to this issue of Bonds (the "underlying rating"). The underlying ratings reflect only the view of Standard &Poor's and Fitch. There is no assurance that the underlying ratings will be retained for any given period of time or that the underlying ratings will not be revised downward or withdrawn entirely by the rating agencies if,in its judgment,circumstances so warrant; Any downward revision or withdrawal of the underlying ratings would be likely to have an adverse effect on the market price of the Bonds. Any further explanation of the underlying ratings may be obtained from Standard&Poor's or Fitch Ratings. ENFORCEABILITY The provisions of the Bonds and the Ordinance, constitute contracts between the City and the owner or owners of the Bonds, and such provisions are enforceable by the registered owner or owners in a court of s 24 competent jurisdiction in the State by mandamus or other appropriate remedy,subject to judicial discretion and the valid exercise of sovereign police power of the State and maybe limited by laws affecting the rights of creditors. i COMMITMENT TO PROVIDE CONTINUING DISCLOSURE Pursuant to Rule 15c2-12 under the Securities Exchange Act of 1934 (the "Rule") of the Securities and Exchange Commission (the "SEC"), the City has undertaken for the benefit of holders of the Bonds to provide certain financial information and operating data relating to the City by no later than nine months after the end of each fiscal year, commencing on or before December 31, 2002 (the "Annual Financial Information")and to provide notices of the occurrence of certain enumerated events,if material. The Annual Financial Information will be filed by or on behalf of the City with each Nationally Recognized Municipal Securities Information Repository: formally recognized by the SEC ("NRMSIR") and with the State Information Depository for the State,if one is hereafter recognized by the SEC for purposes of the Rule(the "SID"). Notices of material events'will be filed by or on behalf of the City with the NRMSIRs or with the Municipal Securities Rulemaking Board and with the SID, if any. The City's undertaking to provide ongoing disclosure is set forth in the Ordinance. See Appendix D hereto for a summary of the City's undertaking. The City has committed to provide ongoing disclosure of information with respect to various outstanding bond issues. The City has not failed to comply with the requirements of any previous undertaking specified in paragraph(b)(5)(i) of the Rule. ADDITIONAL INFORMATION AND MISCELLANEOUS The descriptions herein of the Ordinance and other documents are brief summaries of certain provisions thereof. Such summaries do not purport to be complete, and reference is made to such documents and contracts,copies of which are available,upon request and upon payment to the City of a charge for copying, mailing and handling,from the City, 1055 South Grady Way,Renton,Washington 98055,telephone(425) 430-6858, attention Finance and Information Services Administrator. The summaries and descriptions contained in this Official Statement and the Appendices hereto of the provisions of the Bonds,the Ordinance and all reference to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof and do not purport to summarize or describe all of the provisions thereof. This Official Statement is not to be construed as a contract or agreement between the City and the Underwriter or holders of any of the Bonds. Any statements made in this Official Statement involving matters of opinion or estimates,whether or not so expressly stated,are set forth as such and not as representations of fact. No representation is made that any of such statements will be realized. DISCLOSURE STATEMENT • The City will deliver to the Underwriter at the time of the delivery of the Bonds a certificate substantially to the effect that this Official Statement,including any appendices,and any supplements or amendments hereto, 25 delivered by the City(which shall be deemed an original part hereof for the purposes of such statement)did not,at the time the Bonds are issued,contain any untrue statement of a material fact or omit any material fact necessary in order to make the statements made herein,in light of the circumstances under which they were made not misleading in any material respect. APPROVAL OF OFFICIAL STATEMENT The execution and delivery of this Official Statement have been duly authorized by the City. CITY OF RENTON,WASHINGTON By: - /s/Victoria Runkle Finance and Information Services Administrator • 26 • APPENDIX A Summary of Certain Provisions of the Ordinance 1 ' A-1 SUMMARY OF CERTAIN PROVISIONS OF THE ORDINANCE Definitions Certain terms will be defined differently after the New Covenant Date.All such terms are italicized and the phrase"after the New Covenant Date"is included in such definitions.With respect to the summary,the meaning of the term will depend on whether the provision of the Ordinance being summarized is before or after the New Covenant Date. After the New Covenant Date, `Alternate Security"shall mean any bond 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 the Parity Bonds, issued by an institution that has been assigned a credit rating at the time of issuance of such Parity Bonds secured by such Alternate Security equal to or better than the highest then- existing rating for any of the Parity Bonds. "Annual Debt Service"for the Bonds shall mean all the interest plus all principal which will mature or come due in any year. After the New Covenant Date, `Annual Debt Service"for any year shall mean all the interest on plus all principal(except principal of Term Bonds due in any Term Bond Maturity Year)of Parity Bonds,plus all mandatory redemption and sinking fund installments, less all bond interest payable from the proceeds of any such bonds, which will mature or come due in that year. "Average Annual Debt Service"shall mean the sum of the Annual Debt Service for the remaining years to the last scheduled maturity of the applicable bond issue or issues divided by the number of those years. "Beneficial Owner"shall mean,with respect to any Bond,the Person named on the records of the Custodian as having the right,without a physical certificate evidencing such right,to transfer,to hypothecate and to receive the payment of the principal of,premium,if any,and interest on such Bond as the same becomes due and payable. "Bond Fund"shall mean that special fund of the City known as the 2002 Waterworks Revenue Bond Account created by the Ordinance as a separate account in the Waterworks Revenue Parity Bond Fund for the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Bond Fund"shall mean that special fund of the City known as the 2002 Waterworks Revenue Bond Fund created by the Ordinance for the payment of the principal of and interest on the Bonds. "Bond Insurer"shall mean Financial Security Assurance Inc. of New York,New York. "Bond Insurance Policy"shall mean the municipal bond insurance policy issued by the Bond Insurer insuring the payment when due of the principal of and interest on the Bonds as provided herein. "Bond Register"shall mean the registration books on which are maintained the names and addresses of the Owners of the Bonds. "Bond Registrar"shall mean the fiscal agencies of the State in Seattle, Washington, and New York,New York, as the same shall be designated from time to time. "Bonds"shall mean the$11,980,000 City of Renton Water and Sewer Revenue Bonds,2002,authorized to be issued by the Ordinance. "1977 Bonds"shall mean the Water and Sewer Revenue Refunding Bonds, 1977,Issue.No. 3. "1988 Bonds"shall mean the Water and Sewer Revenue Bonds, 1988. "1989 Bonds"shall mean the Water and Sewer Revenue Bonds, 1989. "1989 Refunding Bonds"shall mean the Water and Sewer Revenue Refunding Bonds, 1989. _ "1992 Bonds"shall mean the Water and Sewer Refunding and Improvement Revenue Bonds, 1992. A-2 "1993 Refunding Bonds"shall mean the outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1993. "1994 Bonds"shall mean the outstanding Water and Sewer Revenue Bonds, 1994. "1998 Bonds"shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 1998. "Book-Entry Termination Date"shall mean the fifth business day following the date of receipt by the Bond Registrar of the City's request to terminate the book-entry system of registering the beneficial ownership of the Bonds. "City"shall mean the City of Renton,Washington,a duly organized and legally existing noncharter code city under the laws of the State. "City Finance Director" shall mean the City's Finance and Information Services Administrator or the successor to such officer. "Closing" shall mean the date of the delivery of the Bonds by the City to the Purchaser and the payment therefor by the Purchaser. "Code" shall mean the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. After the New Covenant Date, "Coverage Requirement"shall mean in any calendar year 1.25 times the Maximum Annual Debt Service. "Custodian" shall mean (a)The Depository Trust Company, New York, New York, or (b)any successor thereto engaged by the City to operate a book-entry system for recording,through electronic or manual means,the beneficial ownership of the Bonds,in which system no physical certificates are issued to the Beneficial Owners of the Bonds,but in which a limited number of physical certificates are issued to and registered in the name of the Custodian or its nominee,and delivered to the Custodian;provided,that such book-entry system operated by the Custodian may include the use of subsystems ofrecording the beneficial ownership of Bonds which are operated by parties other than the Custodian and the use of a nominee for the Custodian;and the term"Custodian,"as used herein,includes any party operating any such subsystem. "Future Parity Bonds"shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on Gross Revenue on a parity with the lien and charge on such Revenue for the payment of the principal of and interest on the Outstanding Parity Bonds and the Bonds. After the New Covenant Date, "Future Parity Bonds"shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on Net Revenue on a parity with the lien and charge on Net Revenue for the payment of the principal of and interest on the Bonds. "Gross Revenue"shall mean Revenue of the Waterworks Utility. "Letter of Representations"shall mean the Blanket Issuer Letter of Representations from the City and the Bond Registrar to the Custodian dated April 15, 1997,pertaining to the payment of the Bonds and the"book-entry" system for evidencing the beneficial ownership of the Bonds prior to the Book-Entry Termination Date(as it may be amended from time to time). "Maintenance and Operation Expense" shall mean all expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair,working order and condition,which shall not include any depreciation expenses or taxes or charges in lieu of taxes levied or imposed by the City. _, After the New Covenant Date, `Maintenance and Operation Expense"shall mean all reasonable expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair, working order and condition, including payments made to any other municipal corporation or private entity for water service and for sewage treatment and disposal service or other utility service in the event the City combines such service in the Waterworks Utility and enters into a contract for such service, and including pro-rata budget charges for the City's, j ! administration expenses where those represent a reasonable distribution and share of actual costs,but not including any depreciation or taxes levied or imposed by the City or payments to the City in lieu of taxes, or capital additions or capital replacements to the Waterworks Utility. A-3 After the New Covenant Date, "Maximum Annual Debt Service"shall mean, 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 calendar year on the outstanding Parity Bonds. "MSRB"shall mean the Municipal Securities Rulemaking Board. "Net Revenue"shall mean Gross Revenue less Maintenance and Operation Expense. "New Covenant Date"shall mean the date on which all 1977 Bonds(other than the 1977 Refunded Bonds), 1988 Bonds, 1989 Bonds, 1989 Refunding Bonds, 1990 Bonds, 1992 Bonds,1993 Refunding Bonds and 1994 Bonds (other than the 1994 Refunded Bonds)are fully redeemed,refunded or defeased. "NRMSIR"shall mean a nationally recognized municipal securities information repository designated by the SEC. "Outstanding Parity Bonds"shall mean the 1993 Refunding Bonds and the 1994 Bonds. "Owner"shall mean the person named as the registered owner of a Bond on the Bond Register. "Parity Bonds"shall mean the 1998 Bonds,the Bonds and any Future Parity Bonds. After the New Covenant Date, "Parity Bond Fund"shall mean any fund created for the payment and redemption of Parity Bonds. "Principal and Interest Account"shall mean the subaccount of that name created in the Bond Fund for the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Professional Utility Consultant" shall mean an independent licensed professional engineer, certified public accountant or other independent person or firm selected by the City having a favorable reputation for skill and experience with municipal utilities of comparable size and character to the Waterworks Utility in such areas as are relevant to the purposes for which such consultant is retained. "Project"shall mean the following project to be financed,in whole or in part,with proceeds of the Bonds: (1)the undertaking of the additions, betterments or extensions to the Waterworks Utility described in the 2002 Comprehensive Water System Plan or the 2002 Comprehensive Sanitary Sewer Plan,including,but not limited to,the capital improvements described in Exhibit A to the Ordinance, (2)making a deposit to the Reserve Account, and (3)paying the incidental costs and costs of issuing the Bonds. "Project Fund"shall mean the Waterworks Utility Construction Fund. "Purchase Agreement"shall mean the Bond Purchase Agreement for the Bonds,dated July 1,2002,by and between the City and the Purchaser. "Purchaser"shall mean D.A.Davidson&Co, Seattle,Washington. "Rate Stabilization Fund"shall mean the fund of that name created for the purposes described in Ordinance No.4709. "Reserve Account"shall mean the subaccount of that name created in the Bond Fund by Ordinance No.4709 for the purpose of securing the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Reserve Fund" shall mean that special fund of the City known as the Waterworks Revenue Bond Reserve Fund created by Ordinance No. 4709 forpurpose of securing the payment of the principal of and interest on all bonds to which Net Revenue is pledged. After the New Covenant Date, `Reserve Insurance"shall mean, in lieu of cash and investments, insurance obtained by the City equal to part or all of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained, issued by an institution that has been assigned a credit rating equal to'or better than the highest then-existing rating for any of the Parity Bonds. After the New Covenant Date, `Reserve Requirement"shall mean the Maximum Annual Debt Service. "Revenue of the Waterworks Utility"shall mean all the earnings and revenue received by the Waterworks A-4 Utility from any source whatsoever,including payments received under contract with other municipal corporations for water service, except general taxes, charges in lieu of taxes, assessments in any utility local improvement district hereafter created;proceeds from the sale of City property,bond proceeds and earnings subject to a federal tax or rebate requirement. After the New Covenant Date,' "Revenue of the Waterworks Utility"shall mean all of the earnings and revenues received by the City from the maintenance and operation of the Waterworks Utility and all earnings from the investment of money in the Reserve Fund or any Parity Bond Fund,and connection and capital improvement charges collected for the purpose of defraying the cost of capital facilities of the Waterworks Utility,except government grants, proceeds from the sale of Waterworks Utility property (other than timber), City taxes collected by or through the sl Waterworks Utility,principal proceeds of bonds and earnings or proceeds from any investments in a trust,defeasance or escrow fund created to defease or refund Waterworks Utility obligations(until commingled with other earnings and revenues of the Waterworks Utility)or held in a special account for the purpose ofpaying a rebate to the United States { i Government under the Code. "Rule"shall mean SEC.Rule 15c2-12. "SEC"shall mean the United States Securities and Exchange Commission. "SID"shall mean a state information depository. "State"shall mean the State of Washington. "Term Bonds" shall mean any Outstanding Parity Bonds and/or Parity Bonds identified as such in the ordinance authorizing the issuance thereof, the payment of which is provided for by a requirement for mandatory deposits of money into the principal and interest account of the bond redemption fund created for the payment of such issue of bonds in accordance with a mandatory sinking fund requirement. "Term Bond Maturity Year"shall mean any calendar year in which Term Bonds are scheduled to mature. "Water and Sewer Revenue'Parity Bond Fund"shall mean the fund of that name created by Ordinance No. 3896. "Waterworks Revenue Parity Bond Fund"shall mean the Water and Sewer Revenue Parity Bond Fund,as renamed by Ordinance No.4709. "Waterworks Utility"shall mean the combined water and sewerage systems,including the storm and surface water sewers,of the City as the same may be added to,improved and extended for as long as any of the Outstanding Parity Bonds or Parity Bonds are outstanding. "Waterworks Utility Fund"shall mean that special fund of the City into which all Gross Revenue(except for earnings in any special fund for the redemption of revenue obligations of the Waterworks Utility)shall be deposited. New Covenant Date The City, as of the date of issuance of the Bonds, currently has outstanding $9,180,000 Water and Sewer Refunding and Improvement Revenue Bonds, 1993 (the "1993 Refunding Bonds"), $610,000 Water and Sewer Revenue Bonds, 1994(the"1994 Bonds"),and$5,545,000 Water and Sewer Revenue Refunding Bonds(the"1998 Bonds"). Upon the date of the full redemption,refunding or defeasance of the 1993 Refunding Bonds and the 1994 Bonds(the"New Covenant Date"),certain new covenants will take effect with respect to the 1998 Bonds,the Bonds and any Future Parity Bonds issued prior to the After the New Covenant Date,certain covenants affecting Parity Bonds maybe superceded or amended by the City. While some of those covenants are presented here both as they are currently exist and as they will exist after the New Covenant Date,reference is made to the Ordinance for a complete presentation of potential changes after the -_` New Covenant Date. 111 -` A-5. Pledge of Revenue After the New Covenant Date,the Net Revenue is pledged to the payment of the Parity Bonds,and the Parity Bonds will constitute a lien and charge upon such Net Revenue prior and superior to any other charge whatsoever. Bond Fund After the New Covenant Date, all money in the Principal and Interest Account of the 2002 Waterworks Revenue Bond Account will be transferred into the 2002 Waterworks Revenue Bond Fund(heretofore defined as the Bond Fund). So long as Bonds are outstanding against the Bond Fund,the City will set aside and pay into the Bond Fund out of Net Revenue a fixed amount,without regard to any fixed proportion,namely,one day before each interest or principal and interest payment date,an amount which,together with other money then on deposit therein,shall be sufficient to meet the debt service on the Bonds required on the next interest or principal and interest payment date;and • I � Reserve Fund After the New Covenant Date, all money in the Reserve Account of the 2002 Waterworks Revenue Bond Account will be transferred into the Waterworks Revenue Bond Reserve Fund (heretofore defined as the Reserve Fund). After the New Covenant Date,the City will set aside and pay into the Reserve Fund out of the Net Revenue (or from any other money which the City may have available for that purpose),in three annual approximately equal deposits,any additional money necessary to bring the amount deposited in the Reserve Fund attributable to the Bonds up to the amount equal to the increase in the Reserve Requirement,from Average Annual Debt Service to Maximum Annual Debt Service, attributable to the Bonds. The Reserve Requirement may be met by the deposit of cash and investments into the Reserve Fund or by Reserve Insurance or a combination thereof. Except for authorized withdrawals therefrom,the Reserve Fund will be maintained at the Reserve Requirement ParityBonds are outstanding. When the total amount in the Bond Fund equals the total at all times so long as any g Q amount of principal and interest for all outstanding Bonds,no further payment need be made into the Bond Fund. If there is a deficiency in the Bond Fund to meet maturing installments of either principal or interest,as the case may be,on the Bonds,that deficiency will be made up from the Reserve Fund by the withdrawal of cash therefrom for that purpose. Any deficiency created in the Reserve Fund by reason of any such withdrawal will then be made up from Net Revenue first available after making necessary provisions for the required payments into the Bond Fund. Any money in the Reserve Fund in excess of the Reserve Requirement may be withdrawn and deposited in any Parity Bond -- Fund and spent for the purpose of retiring Parity Bonds or may be deposited in any other fund and spent for any other lawful Waterworks Utility purpose. Rate Stabilization Fund Covenant Date,a Rate Stabilization Fund maybe created. Deposits to the Rate Stabilization After the New ep Fund may be made from Gross Revenue of the Waterworks Utility,see"Flow of Funds"below. For the purposes of calculating compliance with the Rate Covenant, deposits to the Rate Stabilization Fund will be deducted from Net Revenue of the Waterworks Utility in the year of such deposit,and withdrawals from the Rate Stabilization Fund will be added to Net Revenue of the Waterworks Utility in the year of such withdrawal. Rate Covenant After the New Covenant Date,the City has covenanted to establish,maintain and collect rates and charges for all services and facilities provided by the Waterworks Utility which will be fair and nondiscriminatory,and will adjust -- those rates and charges from time to time so that: - A-6 (a) Gross Revenue will at all times be sufficient to(1)pay all Maintenance and Operation Expense on a current basis,(2)pay when due all amounts that the City is obligated to pay into the Reserve Fund and-any Parity Bond Funds and(3)pay all taxes,assessments or other governmental charges lawfully imposed upon the Waterworks Utility or other revenue therefrom or payments in lieu thereof and any and all other amounts which the City may now or hereafter become obligated to pay from Gross Revenue by law or contract; and (b) Net Revenue in each calendar year will be at least equal to the 1.25 times Maximum Annual Debt Service(the"Coverage Requirement").' Flow of Funds All Gross Revenue of the Waterworks Utility will be deposited into the Waterworks Utility Fund as collected, and will be held separate and apart from all other funds and accounts of the City. After the New Covenant Date,the amounts deposited therein will be used only for the following purposes and in the following order of priority: First,to pay Maintenance and Operation Expense; Second,to pay interest on the Outstanding Parity Bonds and Parity Bonds; Third,to pay the principal of the Outstanding Parity Bonds and Parity Bonds; Fourth,to make all payments required to be made into any sinking fund or bond redemption fund created for the payment of Future Parity Bonds which are Term Bonds; Fifth, after the New Covenant Date,to make all payments required to be,made into the Reserve Fund; Sixth,to make all payments required to be made into any revenue bond redemption fund or warrant redemption fund and debt service account or reserve account created to pay and secure the payment of the principal of and interest on any revenue bonds or revenue warrants of the City having a lien upon Gross Revenue junior and inferior to the lien thereon for the payment of the principal of and interest on the Outstanding Parity and Parity Bonds; and Seventh,to retire by optional redemption or purchase in the open market any outstanding revenue bonds or revenue warrants of the City,to make necessary additions,betterments,improvements and repairs to or extensions and - ` replacements of the Waterworks Utility,and after the New Covenant Date,to make deposits into the Rate Stabilization Fund,or for any other lawful City purpose. _ Additional Covenants • • • Maintenance of the Utility. It will at all times maintain and keep the Waterworks Utility in good repair, working order and condition and also will at all times operate such Utility and the business in connection therewith in an efficient manner and at a reasonable cost. ' Disposition of the Waterworks Utility. Prior to the New Covenant Date,it will not sell,lease,mortgage or in any manner encumber or dispose (as used herein "dispose") of all the property of the Waterworks Utility unless provision is made for payment into each of the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the 1998 Bonds and into the Bond Fund of sums sufficient to pay,respectively,the principal of and interest on all Outstanding Parity Bonds,the 1998 Bonds and the Bonds at any time outstanding,and that it will not or dispose of any part of the property of the Waterworks Utility that is used,useful and material to the operation thereof,unless provision is made for replacement thereof,or for payment into the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the 1998 Bonds and into the Bond Fund of the total amount of revenue received which will not be less than an amount which bears the same ratio to the amount of the Outstanding Parity Bonds, the 1998 Bonds and Bonds,respectively,as the revenue available for debt service for such outstanding bonds for the twelve ' months preceding such disposal from the portion of the disposed of bears to the revenue available for debt service for A-7 _. I r i such bonds from the entire utility for the same period. Any such money so paid into such funds will be used to retire such outstanding bonds at the earliest possible date. After the New Covenant Date, it will not dispose of the Waterworks Utility in its entirety unless, simultaneously with such disposition,all Parity Bonds are defeased pursuant to the provisions of the Ordinance.It will not dispose of any part of the Waterworks Utility(other than timber),including all additions and improvements thereto and extensions thereof at any time made,that are used,useful or material in the operation of the Waterworks Utility, unless provision is made for the replacement thereof or for payment into the Bond Fund of the greatest of the following: (a) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding(defined as the total amount of those bonds less the amount of cash and investments in the Reserve Fund and any Parity Bond Funds) that Gross Revenue from the portion of the Waterworks Utility disposed of for the preceding year bears to the total Gross Revenue for that period; (b) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding(as defined above)that the Net Revenue from the portion of the Waterworks Utility disposed of for the preceding year bears to the total Net Revenue for that period; or (c) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding(as defined above)that the depreciated cost value of the facilities disposed of bears to the depreciated cost I , value of the entire Waterworks Utility immediately prior to such sale or disposition. Notwithstanding any other provision of the Ordinance concerning such disposition,(a)the City in its discretion may dispose of any of the works,plant,properties or facilities of the Waterworks Utility or any real or personal property comprising a part of the same which becomes unserviceable,inadequate,obsolete or unfit to be used in the operation of the Waterworks Utility,or no longer necessary,material to or useful to the operation of the Waterworks Utility,without • making any deposit into the Bond Fund, and(b)the City may transfer the Waterworks Utility to another municipal corporation so long as Net Revenue of the portion of the Waterworks Utility so transferred is used for payment of debt service on the Parity Bonds prior to any other purpose. Such proceeds will not be treated as Gross Revenue. Books and Accounts. Prior to the New Covenant Date,it will,while any of the Bonds remain outstanding, keep proper and separate accounts and records in which complete and separate entries will be made of all transactions relating to the Waterworks Utility,and it will furnish the owner or owners of the Bonds at the written request of such owner or owners complete operating and income statements of such utility in reasonable detail issued in any calendar year not more than ninety days after the close of such calendar year,and it will grant any owner or owners of at least twenty-five percent of the outstanding Bonds the right at all reasonable times to inspect the entire Waterworks Utility and all records,accounts and data of the City relating thereto. Upon request of any owner of any of the Bonds,it also will furnish to such owner a copy of the most recently completed audit of the City's accounts by the State Auditor. After the New Covenant Date,the City has covenanted that it will keep proper books,records and accounts with respect to the operations,income and expenditures of the Waterworks Utility in accordance with proper accounting procedures and any applicable rules and regulations prescribed by the State. 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 Waterworks Utility 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 Reserve Fund and into any and all special funds or accounts created pursuant to the 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 Waterworks Utility. Such statements will be sent to the owner of any Parity Bonds upon written request therefor being made to the City. No Free Service. Prior to the New Covenant Date,it will not furnish water,sanitary sewage disposal service surface water drainage service to anycustomer whatsoever free of charge and promptly will take legal or storm andg g P p Y g action to enforce collection of all delinquent accounts. A-8 • After the New Covenant Date,the City has covenanted that 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 operation of the Waterworks Utility free of charge to any person,firm or corporation,public or private,other than the City,so long as any Parity Bonds are outstanding. On at least an annual basis,it will determine all accounts that are-delinquent and will take all necessary action to enforce payment of such accounts against those property owners whose accounts are delinquent. Insurance. Prior to the New Covenant Date,it will carry the types of insurance on the Waterworks Utility properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems,and the cost of such insurance will be considered a part of operating and maintaining such utility. If, as,and when the United States of America or some agency thereof will provide for war risk insurance,the City further agrees to take out and maintain such insurance on all or such portions of such utility on which such war risk insurance may be written in an amount or amounts to cover adequately the value thereof. After the New Covenant Date,it at all times will carry fire and extended coverage and such other forms of insurance,including public liability and property damage insurance,with responsible insurers and with policies payable _ to or on behalf of the City and any additional insureds on such of the buildings,equipment,works,plants,facilities and properties of the Waterworks Utility,and against such claims for damages, as are ordinarily carried by municipal or privately owned utilities engaged in the operation of like systems,or will implement and maintain a self-insurance or an insurance pool program with reserves adequate, in the reasonable judgment of the City, to protect the Waterworks Utility and the Owners of the Parity Bonds against loss. Obligations. It will pay all Maintenance and Operation Expense and the debt service requirements for the Outstanding Parity Bonds,the outstanding 1998 Bonds and the outstanding Bonds,and otherwise meet the obligations of the City as set forth in the Ordinance. I ' Preservation of Tax Exemption. It will take all actions necessary to prevent interest on the 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 Bonds or other funds of the City treated as proceeds of the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross income for federal income tax purposes. It will, to the extent arbitrage rebate,requirements of Section 148 of the Code are applicable to the Bonds, take all action necessary to comply (or to be treated as having complied) with those requirements in connection with the Bonds, Including the calculation and payment of any penalties that the City has elected to pay as an alternative to calculating rebatable arbitrage,and the payment of any other penalties if required under Section 148 of the Code to prevent interest on the Bonds from being included in gross income for federal income tax purposes. Future Parity Bonds After the New Covenant Date,the City will no longer have the right to issue Bonds on a parity with the 1993 Refunding Bonds and the 1994 Bonds.The City reserves the right to issue Future Parity Bonds with a lien upon the Revenue of the Waterworks Utility equal to the lien of the 1998 Bonds and the Bonds,so long as there is not deficiency 1 in the Parity Bond Fund and if the following conditions are met and complied with at the time of issuance of the Future Parity Bonds: (a) A certificate is delivered certifying that the Net Revenue will be at least equal to the Coverage Requirement If Net Revenue from any 12 consecutive months of the preceding 36 months prior to the date of issuance of additional bonds is equal to the Coverage Requirement,the City Finance Director will be entitled to deliver such certification. If Net Revenue includes adjustments to reflect changes in the schedule of rates and charges,customers added to the Utility,or changes to revenues and expenses reflecting completion of any facilities under construction or to be acquired, constructed or installed from proceeds of any Future Parity Bonds,the certification will be signed by a Professional Utility Consultant. For the purposes of calculating the Coverage Requirement for the issuance of Future Parity Bonds,in neither case will Net Revenue reflect deposits into or withdrawals from the Rate Stabilization Fund. A-9 (b) The ordinance authorizing the issuance of Future Parity Bonds will provide that an amount equal to the 1 increase in the Reserve Requirement attributable to the Future Parity Bonds to be issued be deposited to the Reserve Fund from proceeds of the Future Parity Bonds or other available funds. If then existing federal tax law precludes the deposit of sufficient funds from proceeds of the Future Parity Bonds,the remaining amount will be accumulated in not less than three years from the date of issuance of the Future Parity Bonds in approximately equal annual deposits.The Reserve Requirement can be met by the purchase of Reserve Insurance or Alternate Security. • A-10 i , • • , • APPENDIX B 2001 Audited Financial Statements of the Waterworks Utility • • I ' • • • • it B-1 ENTERPRISE FUNDS —, COMBINING STATEMENT OF REVENUES,EXPENSES,AND CHANGES IN FUND EQUITY FOR THE YEAR ENDED DECEMBER 31.2001 _ WITH COMPARATIVE TOTALS FOR DECEMBER 31,2000 (PAGE 1 OF 2) WATERWORKS SOLID WASTE UTILITY AIRPORT UTILITY OPERATING REVENUES: Charges for Services $ 20,495,611 $ 841,730 $ 8,409,534 Other Operating Revenue 1,203,480 14,010 4,838 TOTAL OPERATING REVENUE 21,699,091 855,740 8,414,372 OPERATING EXPENSES: Operations and Maintenance 12,463,725 471,211 7,692,256 Administrative and General 1,853,671 148,875 0 Insurance 0 18,000 0 Taxes 1,734,324 0 1,078,777 Depreciation 3,661,458 181,268 25,931 TOTAL OPERATING EXPENSES 19,713,178 819,354 8,796,964 OPERATING INCOME(LOSS) 1.985,913 36,386 (382,592) NON-OPERATING REVENUE(EXPENSE): Interest Revenue 295,154 209,575 28,507 I Gain(Loss)on Sale of Assets 0 198• 0 Other Non-operating Revenue 88,573 0 40,757 Interest Expense (1,093,550) 0 0 Amortization of Debt Discount and Expense (77,166) 0 0 NON-OPERATING REVENUE NET OF EXPENSES (786,989) 209,773 69,264 INCOME(LOSS)BEFORE OPERATING TRANSFERS 1,198,924 246,159 (313,328) Operating Transfers In(Out) (77,650) 0 0 NET INCOME(LOSS) 1,121,274 246,159 (313,328) Depreciation Reducing Grant Contributed Capital 0 167,010 0 INCREASE(DECREASE)IN RETAINED EARNINGS 1,121,274 413,169 (313,328) RETAINED EARNINGS,JANUARY 1 26,001,632 6,106,846 1,050,962 RETAINED EARNINGS,DECEMBER 31 27,122,906 6,520,015 737,634 CONTRIBUTED CAPITAL,JANUARY 1 104,721,467 2,062,520 166,166 Capital Grants 0 634,243 0 - Amortization on Capital Grants 0 (167,010) 0 Other Contributed Capital 7,395,079 0 0 CONTRIBUTED CAPITAL,DECEMBER 31 112,116,546 2,529,753 166,166 FUND EQUITY,DECEMBER 31 $ 139,239.452 $ 9,049,768 $ 903,800 . 27 ENTERPRISE FUNDS COMBINING STATEMENT OF REVENUES,EXPENSES,AND CHANGES IN FUND EQUITY FOR THE YEAR ENDED DECEMBER 31,2001 WITH COMPARATIVE TOTALS FOR DECEMBER 31,2000 (PAGE 2 OF 2) TOTALS GOLF COURSE 2001 2000 $ 2,122,363 $ 31.869,238 $ 32,488,175 192,633 '1,414,961 1,617,301 2,314,996 33,284,199 34.105.476 1,466,738 22,093,930 21,041,065 O 2,002,546 1,946,945 O 18,000 20,000 13,286 2,826,387 - 2,930,181 379.653 4,248,310 3,840,277 1,859,677 31,189,173 29,778,468 455,319 2,095,026 4,327,008 61,001 594,237 928,049 1,200 1,398 0 0 129,330 194,780 (261,107) (1,354,657) (1,482,023) O (77,166) (80,472) (198,906) (706,858) (439,666) 256,413 1,388,168 - 3,887,342 O (77,650) 15,248 256.413 1,310,518 3,902,590 O 167,010 171,356 256,413 1,477,528 4,073,946 4,878,313 38,037,753 33,963,807 5,134,726 39,515,281 38,037,753 1,412,225 108,362,378 102,017,808 0 634,243 128,087 O (167,010) (171,356) 0 7,395,079 6,387,839 1,412,225 116,224,690 108,362,378 $ 6.546,951 $ 155,739,971 $ 146,400,131 28 ENTERPRISE FUNDS - COMBINING BALANCE SHEET DECEMBER 31,2001 WITH COMPARATIVE TOTALS FOR DECEMBER 31,2000 (PAGE 1 OF 2) ' WATERWORKS AIRPORT SOLID WASTE UTILITY UTILITY ASSETS: Current Assets: - Cash and Cash Equivalents $ 2,017,438 $ 3,360,738 $ 411,454 Investments at Fair Value 0 0 0 Receivables: Accounts 3,798,581 143,949 641,785 Interest on Investments 4,276 39,116 2,566 Notes Receivable-Current 0 0 0 Due From Other Funds 0 0 0 Due From Other Governmental Units 309,205 599,210 40,757 Inventory of Material and Supplies 272,493 0 0 Total Current Assets 6,401,993 4,143,013 1,096,562 Restricted Assets: Deposits 25,439 0 0 I Revenue Bond Debt Service 4,232,670 0 0 Construction Account 0 0 0 Total Restricted Assets 4,258,109 0 0 Note Receivable-Non-Current 0 0 0 Property,Plant and Equipment: Fixed Assets(Net) 152,040,666 4,488,593 51,410 - Construction In Progress 4,030,837 909,760 0 Total Property,Plant and Equipment 156,071,503 5,398,353 51,410 Deferred Charges and Other Assets 32,000 0 0 TOTAL ASSETS $ 166,763,605 $ 9,541,366 $ 1,147,972 LIABILITIES AND FUND EQUITY: LIABILITIES: Current Liabilities: _ Vouchers/Contracts Payable $ 611,920 $ 346,161 $ 208,537 Retainage Payable 301,755 5,989 0 _ Due To Other Funds 4,409 4,346 0 Due To Other Governmental Units 504,807 0 0 Accrued Interest Payable 220,138 0 1,098 Accrued Wages Payable 24,897 1,363 227 Accrued Employee Benefits Payable 2,345 129 21 Accrued Taxes Payable 56,069 37,331 32,008 Deferred Revenues - 92,330 59,916 0 Capital Leases Payable-Current 0 0 0 Total Current Liabilities 1,818,670 455,235 241,891 Liabilities Payable from Restricted Assets: Deposits Payable 25,439 0 0 Revenue Bonds Payable-Current Portion 1,805,000 - 0 0 Total Liabilities Payable from Restricted Assets 1,830,439 0 0 Long Term Liabilities: Revenue Bonds Payable 16,935,000 0 0 Unamortized Discounts on Revenue Bond (783,463) 0 0 Accrued Employee Leave Benefits 333,957 36,363 2,281 Capital Leases Payable 0 0 0 Public Works Trust Fund Loan Payable 7,389,550 0 0 Total Long Term Liabilities 23,875,044 36,363 2,281 TOTAL LIABILITIES 27,524,153 491,598 244,172 FUND EQUITY: Contributed Capital 112,116,546 2,529,753 166,166 Retained Earnings: Reserved 8,182,761 0 0 Unreserved 18,940,145 6,520,015 737,634 _ TOTAL FUND EQUITY 139,239,452 _ 9,049,768 903,800_ TOTAL LIABILITIES AND FUND EQUITY $ 166,763,605 $ 9,541,366 $_ 1,147,972 104 ENTERPRISE FUNDS COMBINING BALANCE SHEET DECEMBER 31,2001 WITH COMPARATIVE TOTALS FOR DECEMBER 31,2000 (PAGE 2 OF 2) COMPARATIVE TOTALS GOLF COURSE 2001 2000 $ 1,019,460 $ 6,809,090 $ 6,330,546 O 0 4,080,313 83,240 4,667,555 4,048,519 4,276 50,234 85,100 21,041 21,041 23,472 O 0 . 87 O 949,172 416,394 85,807 358,300 389,063 1,213,824 12,855,392 15,373,494 0 25,439 32,329 441,358 4,674,028 4,991,315 O 0 1,260,390 441,358 4,699,467 6,284,034 O 0 21,041 ' 8,875,290 165,455,959 154,448,185 28,787 4,969,384 5,119,753 { 8,904,077 170,425,343 159,567,938 62,464 94,464 48,000 $. 10,621,723 $ 188,074,666 $ 181,294,507 $' 18,790 $ 1,185,408 $ 1,283,900 510 308,254 85,256 0 8,755 1,904 O 504,807 706,124 17,546 238,782 260,553 3,254 29,741 27,370 306 2,801 3,372 3,986 129,394 102,817 O 152,246 171,515 38,418 38,418 40,954 82810 2,598,606 2,683,765 74,859 100,298 160,569 225,000 2,030,000 1,950,000 299,859 2,130,298 • 2,110,569 4,105,000 21,040,000 23,070,000 (454,687) (1,238,150) (1,412,476) 34,552 - 407,153 387,037 7,238 7,238 45,656 0 7,389,550 8,009,825 3,692,103 27,605,791 30,100,042 4,074,772 32,334,695 34,894,376 1,412,225 116,224,690 108,362,378 441,358 8,624,119 10,922,088 4,693,368 30,891,162 27,115,665 6,546,951 155,739,971 146,400,131 $ 10,621,723 $ 188,074 666 $ 181,294,507 i I I 105 ENTERPRISE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,2001 WITH COMPARATIVE TOTALS FOR DECEMBER 31,2000 (PAGE 1 OF 4) SOLID WASTE WATERWORKS AIRPORT UTILITY CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received From Customers $ 19,636,504 $ 738,505 $ 8,396,547 Cash Received From Other Funds for Services 399,652 0 0 • Cash Paid to Suppliers for Goods and Services (8,988,506) (30,040) (7,927,809) Cash Paid to Other Funds for Goods and Services (2,966,221) (57,187) (277,004) Cash Paid to Employees (2,961,087) (206.236) (136,003) Cash Paid for City Utility Taxes (1,205,021) 0 (486,291) Other Operating Receipts 1,203,480 14,010 4,838 Other Non-Operating Receipts 88,573 0 72,515 NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES 5,207,374 459,052 (353207) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: ' Operating Transfers From Other Funds 0 0 0 Operating Transfers To Other Funds (77,650) 0 0 NET CASH PROVIDED(USED)BY NONCAPITAL FINANCING ACTIVITIES (77,650) 0 0 CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES: II Proceeds From Sale of Equipment 0 0 0 Acquisition and Construction of Capital Assets (14,035,783) (856,667) 0 Capital Contributions 7,395,079 0 0 Capital Grants 0 53,030 0 ,- Principal Payments on Bonds (1,730,000) 0 0 Interest Payments on Bonds (1,114,588) 0 0 Payments on State Long-Term Loans (821,592) 0 _ 0 NET CASH PROVIDED(USED)BY CAPITAL FINANCING ACTIVITIES (10,306,884) (803,637) 0 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds From Sale of Investments 1,903,876 2,389,930 252,609 Payments for Investments (34,293) (776,793) (2,450) Interest on Investments 342,134 202,092 26,119 NET CASH PROVIDED(USED)BY INVESTING ACTIVITIES 2,211,717 1,815,229 276,278 NET INCREASE(DECREASE)IN CASH AND CASH EQUIVALENTS (2,965,443) 1,470,644 (76,929) + CASH AND CASH EQUIVALENTS,JANUARY 1 9,240,990 1,890,094 488,383 CASH AND CASH EQUIVALENTS,DECEMBER 31 $ ' 6.275.547 $ 3,360,738 $ 411,454 CASH AT THE END OF THE YEAR CONSISTS OF: Cash and Cash Equivalents $ 2.017,438 $ 3,360,738 $ 411,454 Cash Restricted for: Deposits 25,439 0 0 Revenue Bond Debt Service 4,232,670 0 0 Construction Account 0 0 0 TOTAL CASH AT THE END OF THE YEAR $ 6,275.547 $ 3,360.738 $ 411.454 - 108 ENTERPRISE FUNDS COMBINING STATEMENT OF CASH ROWS • FOR THE YEAR ENDED DECEMBER 31,2001 WITFI COMPARATIVE TOTALS FOR DECEMBER 31,2000 (PAGE 2 OF 4) TOTALS GOLF COURSE 2001 2000 $ 2,009,614 $ 30,781,170 $ 31,009,998 • O 399,652 407.330 (489,883) (17,436,238) (16,419,322) (235,472) (3,535,884) (3,658,490) (746,875) (4,050,201) (3,852,116) 0 (1,691,312) (1,788,619) • 192,633 1,414,961 1,617,301 • 0 161,088 248,593 730,017 6,043,236 7,564,675 O 0 92,898 0 (77,650) (77,650) O (77,650) 15,248 • 24,672 24,672 21,674 (207,079) (15,099,529) (11.134,828) 0 7,395,079 6,387,839 • 0 53,030 110,090 (260,954) (1,990,954) (1,795,666) (227,144) (1,341,732) (1,510,382) 0 (821,592) (445,048) (670,505) (11,781,026) (8,366,321) • 351,333 4,897,748 3,150,000 (3,898) (817,434) (1,749,579) 58,758 629,103 902,956 406,193_ 4,709,417 2,303,377 465,705 (1,106,023) 1,516.979 995,113 12,614,580 11,097,601 $ 1,460,818 $ 11.508.557 $ 12,614,580 $ 1,019,460 $ 6,809,090 $ 6.330,546 O 25,439 32,329 441,358 4,674,028 4,991,315 0 0 1,260,390 $ 1,460,818 $ 11,508,557 $ 12,614,580 109 - • ENTERPRISE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,2001 WITH COMPARATIVE TOTALS FOR DECEMBER 31,2000 (PAGE 3 OF 4) SOLID WASTE WATERWORKS AIRPORT UTILITY RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES: Operating Income(Loss) $ 1,985,913 $ 36,386 $ (382,592) Adjustments to Reconcile Operating Income(Loss) ) to Net Cash Provided(Used)By Operating Activities: Depreciation and Amortization of Deferred Charge 3,677,458 181,268 25,931 Other Non-Operating Revenue 88,573 0 40,757 (Increase)Decrease in Accounts Receivable (420,020) (133,254) (11,124) (Increase)Decrease in Due From Other Funds/Governmental 16,764 0 31,758 (Increase)Decrease in Inventory/Prepaid Items 13,182 0 0 Increase(Decrease)in Vouchers/Retainage Payable (165,991) 339,122 (57,743) Increase(Decrease)in Due to Other Funds/Governmental 2,505 4,346 0 Increase(Decrease)In Payables/Other Short Term Liabilities 13,388 18,933 176 Increase(Decrease)in Customer Deposits (6,890) 0 0 Increase(Decrease)in Deferred Revenues (30,243) 10,974 0 Increase(Decrease)in Accrued Employee Leave Benefits 32,735 1,277 (370) Total Adjustments 3,221,461 422,666 29,385 NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES $ 5,207,374 $ 459.052 $ 1353,207) SCHEDULE OF NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES: Fixed Assets Contributed By Developers $ 5,969,070 $ 0 $ 0• Change in Fair Value of Investments 4,345 39,930 _ _ 2,607 TOTAL NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES $. 5,973,415 $ 39,930 $ 2,607 110 1- _.- ENTERPRISE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,2001 ' WITH COMPARATIVE TOTALS FOR DECEMBER 31,2000 I f (PAGE 4 OF 4) TOTALS GOLF COURSE 2001 2000 i $ 455,319 $ 2,095,026 $ 4,327,008 379,653 4,264,310 3,856;277 0 129,330 194,780• (54,638) (619,036) (910,768) 0 48,522 469,101 17,581 30,763 269,299 3,129 118,517 (410,964) 0 6,851 (43,787) (4,120) 28,377 • (2,352) • (53,381) (60,271) 19,284 0 (19,269) (194,386) (13,526) 20,116 (8,817) • 274,698 3,948,210 3,237,667 • $ 730,017 $ 6,043,236 $ 7,564,675 0 $ 5,969,070 $ 4,558,340 • 4,345 51,227 98,207 $ 4,345 $ 6.020,297 $ 4,656,547 ! i • • • 111 [This Page Intentionally Left Blank] theaters, an opera company, and four resident dance groups. The area is also the home to more than 3,000 artists and 1,300•arts organizations. The Kingdome,former home to the National Football League's Seattle Seahawks and the American Baseball League's Seattle Mariners,was demolished in March 2000 to make way for a new stadium/exhibition center. The Kingdome, which was located adjacent to Seattle's central business district, served as a major sports, concert and convention center for the Northwest for over 20 years.A public facilities district was created in 1996 to build a new world-class football%soccer stadium for use by the Seahawks as well as parking facilities, an exhibition hall, and demolition of the Kingdome. In 1997, voters statewide approved the issuance of general obligation bonds by the State to'pay for the project,which is expected to cost$425 million,with$300 million paid from public sources. The stadium design includes a 72,000 seat capacity(including 7,000 club seats and 82 suites) and an open-air,;natural grass facility that will provide 70% of the fans with roof protection. The exhibition center was completed in November 1999 and the stadium is to be completed in July 2002 with the first game scheduled to be played in the stadium in August 2002. Seattle's new ballpark for the Mariners (SAFECO Field) was completed in July 1999. The ballpark was constructed for $518 million,has a baseball capacity of 46,621 fans, and includes real grass and a retractable roof that covers the ballpark but does not enclose it. The Seattle Center,located one mile north of the central business district of Seattle,was the site for the 1962 World's Fair and it continues to be a popular attraction for residents and tourists alike. The 74-acre, year- round convention and family entertainment center includes the Pacific Science Center, Coliseum, Seattle Opera House,Key Arena,Memorial Stadium, Space Needle,the Experience Music Project and a number of meeting and display rooms: Key Arena serves as the home of Seattle's third major league sports team, the National Basketball Association's Seattle Supersonics. A major renovation project was recently completed at the Coliseum. Population Trends The area's population has grown significantly in recent years and based on recent population trends is expected to continue to grow. The County is the most populated county in the State. Historical population trends are presented below for the City,the County and the State of Washington to represent population trends in the area. City of Percent King Percent State of Percent Year Renton Change County Change , Washington Change 2001* 51,140 22.7% 1,758,300 16.7% 5,974,900 22.8% 1990 41,688 36.2 1,507,305 18.7 4,866,663 17.8 1980 30,612 -- 1,269,898 -- 4,132,353 -- • Intercensus estimate as of April 2001 reported by the State Office of Financial Management. Source: U.S.Bureau of the Census and Washington State Office of Financial Management. C-6 The local forest products industry includes the manufacture of lumber,plywood,paper products,furniture, acoustical materials and specialty wood products. Timber in the region is harvested under sustained-yield programs on federal,state and private timberlands. The leading forest products employer is the Weyerhaeuser Company,which operates lumber mills locally and has its corporate headquarters and a major research and development center in southwestern portion of the County. Employment and production levels within this industry locally have been and are expected to be further impacted by recent decisions by the federal government and the courts concerning the exporting of raw logs and-restrictions on the harvesting of trees on federal lands in"old growth"forests. The extent of such impact is unknown at this time. The wood and paper products industry accounts for approximately one percent of the total Seattle PMSA employment. Higher Education The University of Washington(the"University")is one of the oldest and largest state assisted universities on the West Coast. Its primary campus is located in Seattle with satellite campuses located in Bothell and Tacoma. Established in 1861,the University has 16 schools and colleges offering instruction in more than 200 academic disciplines. Undergraduate and graduate student enrollment for winter semester 2001-02 was 39,017. The University has a biennial operating budget of approximately$3.27 billion and consistently ranks among the top five institutions of higher learning in the United States when measured by the receipt of federal grants. The largest share of this funding goes to the University of Washington School of Medicine. Harborview Medical Center is the University's teaching hospital. Every physician practicing at Harborview is a member of the University's School of Medicine faculty. This relationship has been essential to Harborview's developmentof outstanding patient care services including the region's burn,trauma,epilepsy, ' and spinal cord rehabilitation centers. Other higher education facilities in the Seattle area include two private four-year universities,Seattle Pacific University(3,615 enrollment)and Seattle University(5,903 enrollment), and seven community colleges. Services,Tourism,Recreation and Conventions The Seattle area is the health care center of the Pacific Northwest. There are 26 general-acute and four special purpose hospitals,more than 4,500 beds, and approximately 3,000 physicians. The State's fourth largest industry is tourism. There are over 8,000 hotel rooms in over 50 hotels and motels • in downtown Seattle. Seattle ranks in the top five cities in the nation in terms of hotel occupancy with 2001 occupancy rates of 73.4%with room rates averaging$147.54 per night. According to the Seattle-King County Convention and Visitors Bureau, 398,000 convention goers added approximately $366 million to the economy. The Washington State Convention and Trade Center currently occupies 102,000 square feet of heavy load exhibition space and an expansion of approximately 105,000 square feet of which 70,000 square feet is designed as clear span,column-free space is almost complete. The Convention Center has the capacity to hold events involving as many as 11,000 people. In 2001, the Convention Center held 535 total events, including national and local events. It is estimated that the Convention Center generates direct spending by visitors of over$200 million annually on hotels,restaurants,entertaining,transportation and retail shopping. Bordered on the west by Puget Sound and the Olympic Mountains and on the east by the Cascade Mountain range,the 2,128 square miles in the County offer many types of outdoor recreation. The County and the City of Seattle maintain over 9,000 acres of parkland. The Seattle area has several symphony orchestras, five C-5 Transportation Seattle is bordered on the west by Elliott Bay,a natural harbor on Puget Sound,which is one of the nation's leading seaports. The Port of Seattle (the "Port"), a County-wide port district, promotes maritime trade, ` ' particularly foreign trade and the employment of containerized cargo facilities, and has developed and is continually improving a system of marine terminals,piers and associated facilities on Seattle's waterfront.The Port is the fifth largest container portlin the U.S. and the 20th largest in the world. Served by 26 regularly scheduled steamship lines, it is the top U.S. port in container tonnage exports to Asia. In 1997, the Port completed construction of an$87.8 million multiple-use development on the downtown Seattle waterfront,. which includes a transient moorage, fish processing, and cruise ship berthing support facilities, a marine museum,an international conference center and a public plaza. The Port also operates the Seattle-Tacoma International Airport ("SeaTac") which serves 21 major air carriers and five commuter airlines and is the leading air travel and shipping center!of the Pacific Northwest. SeaTac is located approximately seven miles west of the City King County International Airport (.`Boeing Field"), a general aviation facility operated by the County, is located in Seattle. With about 410,000 annual operations(takeoffs and landings),Boeing Field is the busiest. such facility in the region and ranks among the top 15 busiest in the nation. It serves as the primary inclement weather alternate for SeaTac. Seattle is the western terminus of two primary east-west freeway systems: Interstate Route 90 and State Route 520,and is traversed by north-south Interstate Route 5 and State Route 99. The portion of I-90 that connects Seattle with eastside communities I cross Lake Washington was expanded to eight lanes at a cost of$1.2 billion in the early 1990's. In addition to the highway system,the Washington State Ferry System provides convenient transportation between Seattle and pointsacrossPuget Sound to the west. In 1996,voters in King,Pierce and Snohomish counties approved a$3.9 billion regional transit measure. The transit system is currently under construction,expected to take ten years to build and will consist of electric light rail,commuter rail and express buses. A four-mile-long light rail tunnel from downtown Seattle to the University District is the most expensive component at$865 million. The transit system will be funded in large part with increases in local sales taxes and vehicle license fees. Some federal funds will be contributed. Fishing,Agriculture and Forest Products Seattle is the homeport for a major salmon and halibut fishing fleet. Approximately 700 fishing boats are. based at the Port's Fishermen's Terminal on Salmon Bay,part of the fresh-water system of lakes and canals connected to Puget Sound by the Hiram M. Chittenden Locks,which are operated by the US Army Corps of Engineers. Fish received in Seattle are largely for fresh market distribution and for freeze processing. Seattle is also a warehousing and distribution center for fish processed elsewhere in the Northwest,principally in Alaska. . Agriculture in the County consists primarily of dairy fanning,truck gardening,horticulture and the raising of livestock and poultry. The Seattle area is a major center in the Northwest for agricultural supply,distribution and marketing as well as for food handling and processing and the manufacture of food packaging and containers. C-4 diversification activities including Boeing Computer Services. Boeing has six major divisions to carry out business activities, which include Air Traffic Management, Boeing Capital Corporation, Commercial Airplanes, Connexion by Boeing,Military Aircraft and Missile Systems, and Space and Communications. In 1996,Boeing acquired the aerospace and defense operations of Rockwell International Corporation and in 1997 merged with McDonnell Douglas,its only U.S.commercial airline rival and the world's largest builder of military aircraft, for approximately $16.3 billion. In recent years, Boeing has strived to streamline workforce operations and facilities. Since 1998, Boeing has reduced its total workforce from 231,260 to 176,200(as of May 2002),a decrease of approximately 55,060(23.8%)employees. Since 1998,Boeing has reduced the total work force in Washington from 98,440 to 66,900 (as of May 2002), a decrease of approximately 31,540(32.0%)employees. Boeing's Washington employees are located largely in the Puget Sound Region,which currently has 19 Boeing sites/locations, including the.Renton Plant at Renton Field. As of 2001, Boeing employed 19,463 people at its Renton Plant, a decrease from approximately 20,000 (2.8%)employees as of 1998. As of the date of this Official Statement,it cannot be predicted if there will be further Boeing layoffs that will impact the Renton Plant or other Puget Sound Region operations. The Renton Plant is one of Boeing's major production sites with a 330-acre site encompassing approximately 7.7 million square feet of building space. Over the years,the Airplane Programs site in Renton has been home to many of commercial aviation's most famous airplanes,including the 707,727,737 and 757. Approximately 40%of the world's commercial jetliner fleet is produced at the Renton Plant. The ground floor of Renton's final r assembly building for the Boeing 737 and 757 covers 760,000 square feet.Activities at'other main buildings at the Renton site include sub-assembly, wing-line production and a paint hangar. The remaining buildings house administrative and engineering personnel and materiel handling. Renton Airport, located west of the - main site,is used by Boeing to perform pre-flight tests on all 737s and 757s before they make their initial test flight.After the flight tests,the airplanes land at Boeing Field in Seattle,where final preparations are made before they are delivered to customers. I • In September 2001,Boeing announced that it planned to lay off 30,000 employees in the next year. Boeing planned to cut 10%of its total commercial airplane workforce by December 2001, and then would consider laying off an additional 10%by mid 2002 and another 10%by the end of 2002 until the target of 25,000 to 30,000 jobs are cuts from operations. Technology The Seattle PMSA has experienced a substantial development of high technology,electronics and computer- related enterprises particularly over the last decade. More than 1,500 computer development firms are located in the Seattle PMSA. Microsoft, which is headquartered in Redmond, Washington, is the largest microcomputer software company in the world,with 2001 gross sales worldwide of$25.3 billion,increasing I from$23.0 billion in 2000. Other leading employers include Sundstrand Data Control,Inc. (electronics and aerospace systems), ELDEC Corporation (electronic equipment), John Fluke Manufacturing Company (electronic testing and calibrating instruments),Fred Hutchinson Cancer Research Center(cancer research and treatment),Nintendo of North America(electronic games),Advanced Technology Laboratories(medical ultra- sound equipment), Heath Techna Aerospace Co. (aerospace and defense specialties and architectural equipment), Alliant Techsystems Inc. (sonar systems and signal processing equipment), and Intermec Corporation(bar coding equipment). C-3 I ' KING COUNTY ECONOMIC AND DEMOGRAPHIC INFORMATION Local Economic Overview The City is located in northwestern Washington in County. The City is located approximately 20 miles southeast of the City of Seattle and approximately 60 miles northeast of the City of Olympia, the State's capital. The County,with a population of 1,758,300,encompasses 2,128 square miles,ranking 1 lth in geographical size of Washington's 39 counties but first in population. Seattle is the largest city in the Pacific Northwest and serves as the County seat. The County and Snohomish and Island Counties to the north together comprise the Seattle Primary Metropolitan Statistical Area (the "Seattle PMSA"), which is the fourth-largest metropolitan center on the Pacific Coast. In addition to the City and the City of Seattle,principal cities of the Seattle PMSA include Auburn, Bellevue, Bothell, Burien, Federal Way, Issaquah, Kent, Kirkland, Mercer Island, Redmond, Shoreline, and Woodinville, all of which are in the County, and Everett, Edmonds, Mountlake Terrace and Lynnwood in Snohomish County. These communities serve as residential, commercial, and industrial satellites,of Seattle. Seattle PMSA's employment base is well diversified, with strengths in manufacturing, trade services and government sectors. In 2000,manufacturing comprised about 10.5%of the area's employment,with aircraft production representing the largest component. In the non-manufacturing sectors, services was the largest sector with over 34.5% of the total employment, wholesale and retail trade comprised almost 21.9% and government and public education 11.0%. The services industry contributed 38.9% of the total earnings by industries in the County, the most of all industries, followed by wholesale and retail trade with 15.7% and manufacturing with 13.1%.The U.S.Defense Department is one of the largest employers in the Puget Sound region. Major facilities include Fort Lewis Army Base in Pierce County,the Puget Sound Naval Shipyard in Bremerton(Kitsap County), Bangor Naval Submarine Base in Kitsap County,McChord Air Force Base in Pierce County and Naval Station Everett. The area's universities and research institutions serve as catalysts in the expansion of high tech industries. Other key factors that support continued growth include the existing industry base;a well-trained labor force; relatively low cost power; and a progressive business climate with excellent transportation access to worldwide markets. Aircraft Manufacturing—The Boeing Company Manufacturing in the area consists primarily of aircraft manufacturing by the Boeing Company("Boeing"). Boeing is the largest aerospace company in the world,as measured by total sales,and is consistently one of the nation's top three exporters. In May 2001, Boeing moved its world headquarters and approximately 1,200 employees from Seattle to Chicago to allow the corporate staff to focus on the direction of the company rather than day-to-day operations. Boeing remains the area's largest employer with several locations in the Puget Sound region. In 2001, Boeing reported total revenues of $58 billion. While the primary activity of Boeing is the manufacture of commercial aircraft, Boeing has played leading roles in the aerospace and military missile programs of the United States human space flight, launch services and has undertaken a broad program of C-2 APPENDIX C King County Economic and Demographic ra g p Information C-1 Trends in Building Permits The following table reveals the trends in the number of building permits issued by the City for the years shown. Residential Total Number, Total Valuation Year Permits Issued of Permits Issued of Permits Issued 2001 737 4,756 $50,486,000 2000 885, 4,642 142,179,000 1999 447; 3,483 84,017,000 1998 888' 4,317 125,317,000 1997 n/a 4,234 191,898,000 Source: The City of Renton Historical Taxable Retail Sales The following table lists the taxable retail sales for all industries within the City and the County since 1997. Figures shown are in(000's). Year City of Renton King County 2001 $1,699,541 $36,169,382 2000 1,695,021 37,383,541 1999 1,504,764 34,517,504. 1998 1,520,500 31,498,687 1997 1,350,937 29,154,617 Source: Washington State Department of Revenue Major Employers—City of Renton The major employers in the City as of 2001 are as follows. Trade Area Employer Employment Type of Business Activity The Boeing Company 19,463 Aerospace Valley Medical Center 1,488 Healthcare Renton School District 1,307 Public Education Federal Aviation Administration 1,234 Federal Government City of Renton 679 City Government + Wizards of the Coast 609 Retail I- PACCAR 589 Heavy Manufacturing Multiple Zones International 571 Computer Hardware&Software Retail Wal-Mart 356 Retail K&L Distributors 338 Wholesale Distributor ' Source: The City of Renton C-7 Major Employers—Central Puget Sound Region The major employers in the Central Puget Sound Region as of 2000 are as follows: Trade Area Employer Type of Business Activity Employment 1. The Boeing Company Aerospace Manufacturing 67,000 2. Microsoft Corporation* Software 15,400 3. Safeway Grocery Store 9,851 4. Sisters of Providence Systems Health Care 9,423 5. Group Health Cooperative Health Care 8,800 6. Fred Meyer Retail 8,100 7. Nordstrom,Inc.* Retail 6,756 8. Alaska Air Group, Inc. Airline 6,234 9. Qwest Communications Telecommunications 6,100 10. The Bon Marche Department Store 5,409 11. Albertson's Grocery Store 5,400 12. Quality Food Centers Grocery Store 5,200 13. Virginia Mason Medical Center Health Care 5,200 14. Multi Care Health System Health Care 4,755 15. The Weyerhaeuser Company* Forestry Products 4,600 16. Swedish Health Systems Health Care 4,444 17. Safeco Corp.* Insurance 4,000 18. Washington Mutual Inc. Bank 4,000 19. Franciscan Health System Health Care 3,900 20. Costco Wholesale, Inc.* Warehouse 3,900 *Headquartered in King County Source: Economic Development Council of King County. • C-8 Employment by Major Industry The table below sets forth the total number of full-time and part-time employees in the County for the years and industries as shown. 1996 1997 1998 1999 2000 - Employment by Place of Work: Total Employment 1,263,768 1,317,560 1,369,140 1,413,911 1,451,322 By Type: Wage and Salary _ 1,069,413 1,123,348 1,173,581 1,212,356 1,243,700 Proprietors 194,355 194,212 195,559 201,555 207,622 Farm 1,346 1,321 1,377 1,369 1,368 Non-Farm 193,009 192,891 194,182 200,186 206,254 By Industry: Farm 2,291 2,266 2,310 2,265 2,191 Non-Farm 1,261,477 1,315,294 1,366,830 1,411,646 1,449,131 Private 1,112,664 1,164,611 1,214,196 1,254,548 1,288,945 Ag. Services,Forestry,Fish&Other 13,497 14,008 • 14,654 15,669 15,929 Mining 1,201 1,298 1,327 1,326 1,390 Construction ; 62,004 67,087 72,047 77,022 82,116 Manufacturing 149,265 162,462 168,372 160,038 152,880 Transportation and Public Utilities 74,810 77,926 80,625 83,811 89,174 Wholesale Trade ; 83,820 85,651 88,368 88,960 90,044 Retail Trade 203,981 208,776 214,987 223,030 228,093 Finance,Insurance&Real Estate 110,243 110,694 118,604 124,345 128,002 Services 413,843 436,709 455,212 480,347 501,317 Government&Government Enterprises 148,813 150,683 152,634 157,098 160,186 Federal/Civilian 19,961 20,112 20,702 20,928 21,855 Military 7,951 7,617 7,462 7,581 7,572 State and Local 120,901 122,954 124,470 128,589 130,759 Source: U.S.Department of Commerce,Regional Economic Information System,Bureau of Economic Analysis. C-9 1 Labor Force and Unemployment The following table shows labor force and employment data for the County since 1997 as well as ; unemployment rates for the State and the United States for the same period. - - - - Unemployment Rates - - - - King State of United Year Labor Force Employed County Washington States I 2001 997,700 937,200 6.1% 7.3% 4.8% 2000 1,023,200 986,500 3.6 5.2 4.0 1999 1,028,700 995,900 3.2 4.7 4.2 1998 1,016,000 985,000 3.1 4.8 4.5 1997 990,700 957,800 3.3 4.8 4.9 Source: Washington Employment Department Personal Income Trends The following table shows total and per capita personal income growth in the County from 1996 through 2000. Total Personal Percent Per Percent Year Income(000's) of Change Capita Income of Change 2000 $79,109,294 5.9% $45,536 5.4% 1999 74,697,744 10.9 43,201 9.8 1998 67,358,052 13.0 39,335 11.2 1997 59,609,697 8.1 35,382 6.2 1996 55,135,527 -- 33,316 , -- Source: U.S.Department of Commerce,Regional Economic Information Center,Bureau of Economic Analysis C-10 Earnings By Industry The following table shows the County total personal income as well as wage and salary,labor and proprietors' earnings by major industry type for the years 1996 through 2000. Figures shown are in thousands (000's). 11996 1997 1998 1999. 2000 Total-Personal Income $55,135,527 $59,609,697 $67,358,052 $74,697,744 $79,109,294 Earnings by Industry :146,922,523 51,802,553 59,143,188 67,484,546 71,151,919 Farm 31,943 29,765 35,371 33,256 27,397 Non-Farm , 46,890,580 51,772,788 59,107,817 67,451,290 71,124,522 Private 41,009,023 45,673,769 52,700,174 60,705,123 64,033,991 Ag. Sew.,Forest.,Fishing 382,114 437,676 519,954 602,375 595,648 Mining - 29,297 36,837 34,721 40,414 43,112 Construction ; 2,560,859 2,906,960 3,325,906 3,795,139 4,205,669 Manufacturing 7,409,457 8,201,619 8,623,122 9,025,106 9,344,079 Transportation and Utilities 4,357,528 4,041,022 4,399,093 4,909,070 5,506,230 Wholesale Trade 3,831,074 3,939,815 4,457,315 4,679,313 5,135,708 Retail Trade 3,897,235 4,291,695 4,716,687 5,411,101 6,064,450 Finance,Insurance&Real Estate 3,650,572 4,199,862 4,866,030 5,143,515 5,474,802 Services 14,890,887 17,618,283 21,757,346 27,099,090 27,664,293 Gov't&Gov't Enterprises 5,881,557 6,099,019 6,407,643 6,746,167 7,090,531 Federal/Civilian 1,296,155 1,284,519 1,338,783 1,415,095 1,504,041 Military 150,900 147,840 149,621' 160,606 167,092 State and Local 4,434,502 4,666,660 4,919,239 5,170,466 5,419,398 Source: U.S.Department of Commerce Regional Economic Information System Bureau of Economic Analysis C-11 [This Page Intentionally Left Blank] APPENDIX D Continuing Disclosure I � I 1 - D-1 CONTINUING DISCLOSURE Contract/Undertaking This section, as found in the Ordinance, constitutes the City's written undertaking for the benefit of the owners of the Bonds as required by Section(b)(5)the Rule(the"Undertaking"). Financial Statements/Operating Data P g In the Ordinance,the City agrees to provide or cause to be provided to each then existing NRMSIR and to the SD, if one is created, the following annual financial information and operating data(collectively,the "Annual Financial Information") for each prior-fiscal year, commencing with the fiscal year ending December 31, 2002, on or before the last day of the seventh month following the end of such prior fiscal year: (a) Annual financial statements prepared in accordance with the generally accepted accounting principles applicable to governmental units,as such principles may be changed from time to time and as permitted by State law; which statements will not be audited, except that if and when audited financial statements are otherwise prepared and available to the City,they will be provided(the"Annual Financial Statements"); (b) A statement of authorized,issued and outstanding bonded debt secured by the Gross Revenue or Net Revenue; (c) Debt service coverage ratios; (d) General customer statistics for the Waterworks Utility; and (e) A narrative explanation of the reasons for any amendments to the Ordinance made during the previous fiscal year and the impact of such amendments on the Annual Financial Information being provided. In its provision of such financial information and operating data,the City may cross-reference to any"final official statement" (as defined in the Rule) available from the MSRB or any other documents theretofore provided to each then existing NRMSIR or the SID,if one is created. If not submitted as part of the Annual Financial Information, then when and if available, the City shall - provide its Annual Financial Statements, which shall have been audited by such auditor as shall be then required or permitted by the State law, to each then existing NRMSIR and to the SID,if one is created. Material Events The City further agrees to provide or cause to be provided,in a timely manner,to the SID,if any,and to each NRMSIR or to the MSRB notice of the occurrence of any of the following events with respect to the Bonds, if such event is material: (1) principal and interest payment delinquencies; D-2 (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (7) modifications to the rights of Bond holders; (8) optional redemption of Bonds prior to their maturity; (9) defeasances; (10) release, substitution or sale of property, securing repayment of the Bonds; and (11) rating changes. The City also agrees to provide or cause to be provided,in a timely manner,to the SID,if one is created,and to either the MSRB or each then existing NRMSIR, notice of its failure to provide the Annual Financial Information for the prior fiscal year on or before the last day of the seventh month following the end of such prior fiscal year. After the issuance of the Bonds, so long as the interests of the Owners or Beneficial Owners of the Bonds will not be materially impaired thereby, as determined by a party unaffiliated with the City (including, without limitation, a trustee for the Owners,nationally recognized bond counsel or other counsel familiar '- with the federal securities law), or pursuant to a favorable "no-action letter" issued by the SEC, this Undertaking and the provisions with respect thereto in the Ordinance may only be amended in connection with any change in legal requirements, change in law, or change in the identity, nature or status of the obligated person,or type of business conducted,and only in such a manner that the undertaking of the City, as so amended,would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. The City's obligations to provide Annual Financial Information and notices of certain events shall terminate without amendment upon the defeasance,prior redemption or payment in full of all of the then outstanding Bonds. This Undertaking and the provisions with respect thereto in the Ordinance shall be null and void if the City (i)obtains an opinion of nationally recognized bond counsel or other counsel familiar with the - federal securities laws to the effect that those portions of the Rule which require this Undertaking or any such provision are invalid, have been repealed retroactively or otherwise do not apply to the Bonds; and (ii)notifies and provides the SID,if any,and either the MSRB or each then existing NRMSIR with copies of such opinion. - The right of each Owner or Beneficial Owner of Bonds to enforce the provisions of the City's Undertaking I D-3 shall be limited to the right to obtain specific enforcement of the City's obligations under the Ordinance with respect thereto, and any failure by the City to comply with the provisions of this Undertaking shall not be a default with respect to the Bonds under the Ordinance. The City Finance and Information Services Administrator is authorized and directed to take such further action on behalf of the City as may be necessary,appropriate orconvenient to carry out the requirements of this Undertaking. • } D-4 I ' APPENDIX E Form of Legal Opinion I . E-1 1 Form of Approving Opinion of Gottlieb,Fisher&Andrews,PLLC, Bond Counsel [Date of Issue] City of Renton a Renton,Washington 98058 Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by the City of Renton, Washington(the"City"), of the bonds described below(the"Bonds"): $11,980,000 CITY OF RENTON,WASHINGTON WATER AND SEWER REVENUE BONDS,2002 Dated: July 1, 2002 The Bonds are issued pursuant to Ordinance No. 4976 of the City(the"Bond therewith. The Bonds are Ordinance") and other proceedings duly had and taken in conformity p g Y issued for the purpose of providing a part of the funds necessary to pay the cost of carrying out certain additions to and betterments and extensions of the Waterworks Utility and paying the costs related to the sale and issuance of the Bonds, all as specified in the Bond Ordinance. The Bonds are issued as fully registered bonds in the denomination of$5,000 each or in any integral multiple thereof within a single maturity. The Bonds bear interest from their date or from the most recent interest payment date to which interest has been paid or duly provided for, whichever is later,payable on December 1,2002, and semiannually thereafter on June 1 and December 1 of each year to the maturity or earlier redemption thereof. The Bonds bear interest at the rates and shall mature on December 1 of each of the years and in the principal amounts set forth below: E-2 Maturity Date Principal Interest Rate (December 1) Amount Per Annum 2003 $ 115,000 2.50% 2004 . 120,000 2.50 2005 135,000 2.75 2006 110,000 3.25 2007 110,000 3.50 2008 110,000 3.50 2009 455,000 3.70 2010 630,000 3.90 2011 1,010,000 4.00 2012 1,025,000 4.10 2014 710,000 4.30 2015 735,000 4.40 2016 765,000 4.50 2017 805,000 4.60 2018 1,000,000 5.25 2019 1,000,000 . 5.25 '_! 2020 •1,000,000 5.25 2021 1,045,000 5.25 2022 1,100,000 5.25 The Bonds are subject to'redemption prior to maturity at the times and in the manner described in the Bond Ordinance. In rendering this opinion'letter,we have examined the following: (i)the Bond Ordinance; (ii) one executed and authenticated Bond(we assume that all other Bonds are in the same form and have been similarly executed and authenticated); and(iii) the certified proceedings of the City and other certificates of public officials and representatives of the City which have been furnished to us and which comprise the transcript of proceedings pertaining to the issuance of the Bonds (the"Transcript"). As to questions of fact material to the opinions expressed herein,we have relied upon the certified proceedings of the City and other certificates of public officials and representatives of the City which have been furnished to us as part of the Transcript, all without undertaking to verify the same by independent investigation. Based only upon the foregoing and our examination of such questions of law as we have deemed necessary or appropriate for the purpose of this opinion letter, and subject to the limitations and qualifications expressed below,we are of the opinion that, as of this date: 1. The Bonds are lawfully authorized and issued pursuant to and in full compliance with the Constitution and statutes of the State of Washington,the Bond Ordinance and Ordinance No. 4709 of the City. E-3 1 I � I � I 2. The Gross Revenue(as defined in the Bond Ordinance)hereafter collected has been pledged to the payments to be made into the"2002 Waterworks Revenue Bond Account" (the"Bond Fund") as set forth in the Bond Ordinance, and the Bonds constitute a lien and charge on that revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense(defined in the Bond Ordinance), except that the lien and charge on such Gross Revenue for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds (defined in the Bond Ordinance),the City's Water and Sewer Revenue Refunding Bonds, 1998, and any Future Parity,Bonds (defined in the Bond Ordinance). 3. The Bonds are legal,valid and binding special fund revenue obligations of the City,payable solely out of the Bond Fund, enforceable against the City in accordance with their terms, subject to the limitations as to enforceability of laws relating to bankruptcy, insolvency, reorganization,moratorium and other similar laws affecting creditors' rights, and also to'the exercise of judicial discretion in accordance with general principles of equity. The Bonds are not general obligations of the City. 4. The Bonds are not"private activity bonds," as defined in the Internal Revenue Code of 1986, as amended(the"Code"). 5. Assuming compliance by the City with applicable requirements of the Code that must be met subsequent to the issuance of the Bonds,the interest on the Bonds is excluded from the gross income for federal income tax purposes under existing federal law, and such interest is not an item of tax preference for purposes of determining alternative minimum taxable income for individuals and corporations under existing federal law. However,under existing federal law,interest on the Bonds received by certain corporations is taken into account in the computation of adjusted current earnings for purposes of calculating the alternative minimum tax applicable to such corporations; such interest received by foreign corporations with United States branches may be subject to a foreign branch profits tax; and such interest received by certain S corporations may be subject to tax. 6. The difference between the principal amount of the Bonds maturing in the years 2008 through 2012, and 2014 through 2017, each inclusive(the"Discount Bonds"), and the initial offering price to the public (excluding bond houses,brokers and similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of such Discount Bonds of the same maturity was sold constitutes original issue discount,which is excluded from gross income for federal income tax purposes to the same extent as interest on the Discount Bonds. Further,this original issue discount accrues over the term of each Discount Bond on the basis of a constant yield to maturity and the basis of each Discount Bond acquired at such initial offering price by an initial purchaser of such Discount Bonds will be increased by the amount of such accrued original issue discount. Except as stated in the preceding paragraphs 4, 5 and 6,we express no opinion as to any federal or state tax consequences of the ownership or disposition of the Bonds. • E-4 The Code contains certain requirements which must be satisfied subsequent to the date of issue of the Bonds in order to maintain the exclusion of interest on the Bonds from gross income for federal income tax purposes, including requirements relating to application of the proceeds of the Bonds, use of facilities financed with such proceeds, limitations on income derived from the investment of gross proceeds of the Bonds (as defined in Section 148 of the Code), and rebate to the United States Treasury of certain investment earnings on such gross proceeds. The City has covenanted to comply with these requirements, and the opinions expressed in paragraphs 4, 5 and 6 assume such compliance. However,we have not undertaken and do not undertake to monitor compliance by the City with such requirements; and failure of the City to comply with such requirements could cause interest on the Bonds to be included in gross income for federal income tax purposes and to be treated as an item of tax preference for purposes of the alternative minimum tax on individuals and corporations,in each case,retroactive to the date of issue of the Bonds. We have not been engaged to participate in the preparation or review of, or express any opinion concerning the completeness or accuracy of,the official statement or other disclosure documentation used in connection with the offer or sale of the Bonds, and thus express no opinion concerning the completeness or accuracy thereof. Copies of this opinion letter may be delivered to the Owners of the Bonds,who may rely on this opinion letter as if it were addressed to them on the date hereof. Subject to the foregoing, this opinion letter may be relied upon by you only in connection with the issuance of the Bonds and may not be used or relied upon by you or any other person for any other purpose whatsoever, without in each instance our prior written consent. We expressly disclaim any responsibility to advise you or any Owners of any developments in areas covered by this opinion letter that occur after the date hereof. Respectfully submitted, - GOTTLIEB,FISHER&ANDREWS,PLLC By Daniel S. Gottlieb - f:\renton\water&sewer 2002 I � I � E-5 • APPENDIX F Specimen Municipal Bond Insurance Policy r , • F-1 , •C--''''( p' q -�,N^.•Y,,U`C..� /. �CT�/� /�/�.� ' W� ;G��\''''''z' :- (';:4'i,.4, � gp/G/4 6� � t�, nq• /��♦ ,e � ,N •X y W • J�y.N V p �+ M Ik '`.,,�:: , `•..,- > > ., `F -% `,.✓rr S w C ^ ,,, ::),./-i, iii:'. ,,,, , .'fl .: 'ISS: ,i ,lr� r•' nt' '-..Tr.tl" ,�C ' ` �,' • • ,t, if4C •�U FINANCIAL . .. : • 1.1 - - 4 r SECURITY • MUNICIPAL ; ".; �' ASSURANCE® INSURAN , PtIC }; r ,: "a ISSUER: Policy o.: - tsta - ' Effectiv Date: f \J\ r` I i BONDS: t s ham. .4") •re iu e 06() . • •.� ti,.�;:k' FINANCIAL •SECURITY ASSURA E I C. pial ), •r considera o re•-' ed, �W;'f ,V • hereby UNCONDITIONALLY AND IRREV• ABLY ..gr ;ay o • : t,st a he "Trus -e' 'or .a ing :,,�•'•-w agent (the 'Paying Agent') (as set forth i -he doc - Ion •ro id ; •f.i th; i uanc: •f an 3 s: 'ng \ the Bonds) for the Bonds,for the b- efit a f the Ow - ; • '! e •e. i:n :f F minty,ty, dir: tl` to -��t• 4.3 - ;�� i each Owner,'subject only tot • e s 4 this Pol y ch in•X d .:ch e •or-•-ment h et• , t,at portion of the principal of a inter=•t •' .the Bone \hYII w c: • e �u:: fir P,yment b t s all .e ;� , Y unpaid by reason of Nonp ent by t e s- u- : ;t {< a On the tat- of t!e day on 'h' h - ch r•"nci. dint =si=b ••m=s`Due Pa i-nt •r t •• , j �'�� Business Day n- fo:ow. g the B • n-.s P=y o whi.' a cia; ' -e ur1 s :II have recei et N• ice e• ; tea-- � Nonpayment, - nanci- :curi i 'II di.•bur•e to or fo; :' b ne i of e:.:h u► er of a Bi nt th• face ,..-4'. „ amount of ncipal of . •t int:est on t •': B•nd that is t-- r u- fo 'ay ..t b then unp- d-.,' eason w' ." ' ,t i of Nonpay -nt by the I 'er, ut only u•on eceipt by - i S. : rity, a f: • reasonabl -tisfactory t - ,;1 1 to '. • (a) evidence •• .1 e o,wner' r•ht o- receive :- e o e • cup:I r intere ' en Due for -=.4*- h ; • P=yme a • (b).evide c , i lu.:'. - y -:•propriate . im,nt- al as a :n. that of the Owner's t 1-. 3, - i ghts w h r-sp. o p--, ent:•, suc .•rinc••al o inter at s 'u: fo -=y ,e ; S.• thereupon vest in ,. t, inancia• S.cur A .o ice of No •-•, t wi •-- :-d rev-i ed a �i ' Business Day if it is. ��•'' x received=•n•r t. 0 p. ; (New Yor t e) n s ch -s I a ; :th •se it Will be deemed received t.''f� • Kirke"-; on the n:xt Bu- s I If any N.ti:e o No '•ay : :c:ve, F n-.s- ial Security is incomplete, it . ,i:;,.p s'_: be ;e=me. .t to • e been e ed •y 'na is : u: •,.pu •oses'of the preceding sentence , i';(4`.(1 a:d i ci=I S rity •h.II pro ••+'lyse ad .se e ru• p yi •:ent'orOwner; as appropriate,.who ,t.,*,.'1) • fes -y :"bmi. an .- en•-d No'"e of N•` pa . t. p. • s•:'rs Metit in respect'of a Bond,.Financial N A, - curity sh•II•become'h:-ow er of the Bon., any:p. a . oupon to.the Bond or:right to receipt of # i pa •-nt of.•rincipal • o int.-est on t Bond an s : •• fully subrogated`to the rights.pf the Owner, P.',4 c includi'.• th Owner's 'gh•to -ceive •a ments un•-rtr- =ond,to the extent of any payment by Financial s ' 04•"- Securi he -under. -ay en i by . n .I Secu ' to e Trustee or Paying Agent.for the'benefit of the• cs'I',, Owners h•:I,tot exte the -e ,di<ch.rge the ;bligation of Financial Security under this Policy. t \ •. :x ept to the ext-nt.express', mot'•-':• by an endorsement hereto;the following terms shall have t * ' ii ,,' he mea n.s specified f• 'all purpo--s of this Policy. "Business Day" means any.day_other than'(a) a ..\ .. rday • Sunday or • a day on hich banking institutions in the State of New York or the Insurer's t.t %i Fisc Ag- , are authoriz d or re. ed by law or executive order to remain.closed: "Due for`Payment'` t e• ,t I 's W mea (a hen referring • the • ncipal of a Bond,payable on the stated maturity date'Rhereof or the date ' , ' w ich„h; same shall .v: •een duly called for mandatory sinking fund redemption and`does not refer �`k . &''; ) t .a e=di;r date on w 'payment is due by reason of call•for"redemption (other than by mandatory'. t . 1 s ki g f n c reoerription), acceleration or other advancement of-maturity'unless Financial Security shall' >, ;.V' —1 el , in is ole discretion, to pay such principal due upon such acceleration together-with any accrued , • interest • t e date of acceleration and(b)when referring to interest on-a Bond,.payable on the stated date ;._ :£ "' V.•.• for pay en interest. "Nonpayment" means,.in-reepect•of.'a Bond, the failure of the Issuer to have ::. provid:• su icient funds to the Trustee or, if there is no Trustee,to the Paying Agent for payment in full of . 4.. <,7.i4 all prir ipal and interest that is Due for Payment on such Bond: "Nonpayment' shall also include, in ; y resp: t of a Bond,any payment of principal or interest that is Due for Payment made to an Owner by or on -} -.•:If of the Issuer which has been recovered from such' ,Owner pursuant to the. - t .:1/4 r 4'?",-,_?,,f �' •: r''),,, v. , -1Z �.::.%:3' g�.d a '3c .; a L r s.tg. 5 , � .� f ` 11 o . ,/r r-' .2'N• .1 .. .z.• , S�.\ ,N,ti+ r ri ti `'rte r,,..ti, air ti . .. „44,4„,i.,,,,,.,.: A. t�,,* , ,R"" '�4�Y, ^' ✓Z h y�`�•��4R ^k y� .„,,,..z.,, AN �y 4 Y� �' i.. '4 ; `,� i \_ r\,, \� / >� \ ,-�. Y i ,„...}.:, ,,,-.z.,/lv'! ,: J r.1u`� ,aNN�t , • \‘'''''', .:7r AL-,-'4a':/,- �""'� ‘7';'.,',./N . .:•:s -44.1'', �iss'1- ;i'9?). .'1}'-:r. ..,.<74r.,. .c•;n`: .'?•^la, �•Ir,r, ll7-,, 1 V ,'"r .A�` '.W.' : 'X," k A '$`:0;%•; N. .4 4�,j Vj*Y "N+rlr; rr,.. , ��. "'y,E '''': ,�y `, W V E",_ ' p ,` '''t"46'''\'' yt" : ' '.\f C' .6., • `6 r '4V. it ;tea ',`a r a r t 'v 'f i i' 4)-. ' ' "Af• ,M ,e r44fr ' ' IN,... p '(9'1dui\,•.' •• C� +", ;S:`" ".' i �' ,..' - f /q.a: �� • r j t a. . r.w :''f,'. w.. ... i', +.., i. w.v •11� r.. !Twn 7,•t •! .... ,11 .... ..c wn .•,e 2. -• ,„. ,,,, Vii$ 1 ,.4 ,. .. Page 2 •,,, ' -_ .... ' Polic o. N' f • 4. . United States Bankruptcy Code by a trustee in bankruptcy in accordance with • fi:al; nonapp a ble o,d t - } "t tt t: n▪ � of a court havin competent •urisdiction. Notice means tele honic or t: -«• d notice, ;u��se ue tl' 1 confirmed in a signed writing, or written notice by registered or certified ail, 'o an Ow ••• , t e Trus e• ',A*;.-q., -t or the Paying Agent to Financial Security which notice shall speci (a :the •-r on o , •ntity aking t =� (b)the Policy Number, (c)the claimed amount and (d)the -= s ch cl•i .-d ount b- ame D' t claim, ,. y' .;.• b •t he t:me of No payme 6 w., for Payment. "Owner" means, in respect of a Bond, the perso -••r e;lily,,who, p y ^'�; �, `� is entitled under the terms of such Bond to payment ther:of„excel t ti at "0 n'•r” -hall "t iiiclune t v t 1 %',r Issuer or any person or entity whose direct or indirect o• •• do con-it es the u de i ; s;c ;ity car th°'- - Bonds. X3,3 Financial Security may appoint a . " ;age " (th• sure = is-al g nt")for'pu •••es • this Policy by giving written notice to the Tru -e a '.,• th- P-yi g ,g: t s i:ci i 2 the na :- nd lice • 4 t i3 address of the Insurer's Fiscal Agent. Fro and afti r t - d-.a if r.ce ;of:u. •tice by T,ust:el nd `;ac M the Paying Agent, (a) copies of all n•tice;.required.to le •:Ii era' ti i "nci:I ecus: purs" !:nt o his y i ., Policy shall be simultaneously del• =.-d , the Insu i-14• Fi a A. •n • o 'in•nci• Securi an, s all t '"#:1-.,a,.4 not be deemed received until ' eiv•d both an• ("`) al p-i m=nt- e' ire' b: made b, Fi •.n'ial • I. Securityunder this Policy , be m-•e 'irect, byin•nci I 'ec ityr '• t : i su •is Fisca' A nt'•n s ; : ' g ,r - behalf of Financial Secur' . The In-ur:rs - -I t i- th •a nt,:•f ••ina ci:l S•curity.in a d t e t • Y`„4 • Insurer's Fiscal Agent shall in no eve t 'e li-•le • -n Ower for .n :c if ti a nsu er' i•c-I A.:nt •ir 0`:' �e�-'�. any failure of Fina - I Se.urity to deiio-,t or. au,' to b.• de'o• tec •u ci :tf • •'- to i•. a p:y' e .s d ••y *F (` ,�' under this Polic t • o the fulle t exte t permitt-d b' applicabl la t ar •:aI S:«, ri •rees not t. -rt, and %`t, • t hereb wai s, only for h)be efit of.e-ch t i wner, all"ri!hts w ett : by i'o nt rc -im,setoff ir otherwise) t "'fir a s •: en s (includi , wit out •• it.do the defe se f rani , w : e a quired •; subrogation, "� Its ->' •-sign ent or otierwi e, to h: - I e th:t such rig,is n• def: se a •: av :.le to Financialh; • v I ecurity`to avoi •=ym nt of' obli•:ti•ns. nde i is 'olic i acc• da : wi a press provisions of t {• < 4` = • •this Poli•, . ',, `- 'his •:cy eft forth in II he nd:i a 4 n• of in nc al Se u ' and shall not be modified, ' .° a e •d • aft* by any other •r=-me t o in• me , clod • 'any modification or amendment -",• -5..0,,,,„ °a . t ;-r: o E>cep th ectent :• press;; m dif-d • n d rsem: t hereto, (a) any premium paid in ` / r p: 1 of this • • icy i nQnre' ndable •r a eas'n a i.o , including payment, or provision being ,ti 4.''` :de for payment, of he Bo ids prior • maturity n•t.(b) hi olicy may not be canceled or revoked. ,,,, ,. T -OLICY IS N GOV RED B THE PR•--E';TY ASUALTY INSURANCE SECURITY FUND t {. T:4,..."&,, SPEC!' ED IN ARTI E i 6 O TH ' E YORK I• SU: CE LAW. • Iti wit s who reo'. ,INA CI L SEC RITY ASSURANCE INC. has caused this Policy to be ; 4F 1 r� �= executed.•r its ehalf by s•s Authonz O' cer. ,Ife tp- - r��..yvy �j pv ..z . [ nter-ghatu e] FINANCIAL SECURITY ASSURANCE INC. :),...,..4• ' t By 4 %'t . , .2.: ,, ' Authorized Officer • v --_ „..., ,, ,,„ _ ;`�� A subs iary of Financial Security Assurance Holdings Ltd. (212)826-0100 ;'�',,#1 A`` :. ;,f 350 P rk Avenue, New York, N.Y. 10022-6022i` v . 500NY(5/90) y '"i ,1,",,,, i P v ,tr.,.:.,,- •.i' `....•,,,,,,,:,/ 9 ✓ � ,ii tl dt, 4 , Ya C�1� f` , � 4 � 4 11 4! .+1� tt5 t tr , L � � »5'4 l /$ � riQ ; r�,wi /r '..w�^ ; �u� GN 1Pj�v� r,.` rr ,�y •1:�iti<-,-..z1,,,„...„,„.,,,:,. � sy / b� • �14,, ` J ,.,• T • �' ? 'C .•'a'"'A,.,1.. J' , ,,,,,T i , , I1' Jul-11-02 11:49am From-FSA 14159958080 T-440_ P.002/003 F-810 07/11/02 THU 05:50 FAX 307 754 7995• ri'�'Ln later' FitchRatings 1201 East 7th Street T$07 754 2012/800 853 4824 Powell,WY 82435 www.fitchratin&s.com Mr.Robert P.Cochran Chairman&Chief Executive Officer Financial Security Assurance Inc, Financial Guaranty Group 350 Park Avenue New York,NY 10022 July 11,2002 Dear Mr.Cochran: RE: City of Renton,Waw X11,980,000 in aggregate principal amount of Water and Sewer Revenue Bonds,2002 (29279-N) Fitch Ratings has assigned a rating of'AAA'to the above referenced Bonds.This reflects credit enhancement in the form of a bond insurance policy provided by Financial Security Assurance inc. (FSA), which has an insurer financial strength rating of'AAA'.Fitch Ratings defines companies with'AAA' insurer financial strength ratings as follows: "Companies are viewed as possessing exceptionally strong capacity to meet policyholder and contract obligations.Risk factors are minimal and the impact of any adverse business and economic factors is expected to be extremely small." Ratings assigned by Fitch Ratings are based on information provided to us by FSA,Fitch Ratings does not audit or verify the truth or accuracy of such information.Ratings are not a recommendation to buy,sell,or hold any security. Ratings do not comment on the adequacy of market price,the suitability of any security.for a pear investor,or the tax-exempt nature or taxability of payment made in respect of any security.The insurer financial strength rating assigned to FSA may be changed,withdrawn,suspended,or placed on RatingWatch as a result of changes in FSA's financial condition.The assignment of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement or other filing under U.S.,UK or any other relevant securities laws. Sincerely, .4mcksPN4kS- NaS.%NV \ Becky L.Christenson Manager/Insured Ratings 07/11/02 THU 12:55 [TX/RX NO 8619] Z0021 Jul-11-02 11:49am From-PSA 14159958080 1-440 P.003/003 F-810 Ratings Services Vincent Argo 55 Water Street,38th Floor Administrative Officer New York,NY 10041-0003 Public Finance Ratings Tel 212 438.2074 Reference No,;4U12939U Standard & Poor's A Division of TheMcGraw 1-7111 Colrrpanics July 11,2002 Ms. Sheelagh Flanagan Managing Director Financial Security Assurance Inc. 1550 Spear Tower One Market San Francisco, CA 94105 Re: $11,980,000 City of Renton; Washington, Water and Sewer Revenue Bonds, 2002, dated: July .1,2002, due:December 1, 2003-2022, (POLICY#29279-N) Dear Ms. Flanagan: This is to advise you that we have changed the rating to 'AAA' from `A+' on the subject bonds. The rating change reflects our assessment of the likelihood of repayment of principal and interest based on the bond insurance policy your company is providing. When using the Standard&Poor's rating,include the definition of the rating together with a statement that this maybe changed, suspended or withdrawne�c use it is nott of arecommendation to buy,hold or sell ges in, or unavailability of, information. This rating is not a"market rating", the obligations. If you have any questions,please,contact us_ Very truly yours aw 07/11/02 THU 12:55 [TX/RX NO 8619] E 003 e®p A . MUNICIPAL BOND INSURANCE COMMITMENT FINANCIAL SECURITY ASSURANCE INC. ("Financial Security" or "FSA") hereby commits to issue its Municipal Bond Insurance Policy (the "Policy") relating to whole maturities of the debt obligations described in Exhibit A attached hereto (the "Bonds"), subject to the terms and conditions set forth in this Commitment, of which Commitment Exhibit A is an integrated part, or added hereto (the"Commitment ). To keep this Commitment in effect after the Expiration Date set forth in Exhibit A attached hereto, a request for renewal must be submitted to Financial Security prior to such Expiration Date. Financial Security reserves the right to refuse wholly or in part to grant a renewal. THE MUNICIPAL BOND INSURANCE POLICY SHALL BE ISSUED IF THE FOLLOWING CONDITIONS ARE SATISFIED: 1. The documents to be executed and delivered in connection with the issuance and sale of the Bonds shall not contain any untrue or misleading statement of a material fact and shall not fail to state a material fact necessary in order to make the information contained therein not misleading. 2. No event shall occur which would permit any underwriter or purchaser of the Bonds, otherwise required, not to be required to underwrite or purchase the Bonds on the date scheduled for the issuance and delivery thereof("Closing Date"). 3. There shall be no material change in or affecting the Bonds (including,without limitation,the security for the Bonds) or the financing documents or the Official Statement(or any similar disclosure documents)to be executed and delivered in connection with the issuance and sale of the Bonds from the descriptions or forms thereof approved by Financial Security. 4. The Bonds shall contain no reference to Financial Security, the Policy or the insurance evidenced thereby except as may be approved by Financial Security. BOND PROOFS SHALL HAVE BEEN APPROVED BY FINANCIAL SECURITY PRIOR TO PRINTING. The Bonds shall bear a Statement of Insurance in the form provided by Financial Security. 5. Financial Security shall be provided with: (a) Executed copies of all financing documents, any disclosure document (the "Official Statement") and the various legal opinions delivered in connection with the issuance and sale of the Bonds (which shall be dated the Closing Date and which, except for the opinions of counsel relating to the adequacy of disclosure, shall be addressed to Financial Security or accompanied by a letter of such counsel permitting Financial Security to rely on such opinion as if such opinion were addressed to Financial Security), including, without limitation, the approving opinion of bond counsel. Each of the foregoing shall e in form and substance acceptable to Financial Security. Copies of all drafts of such documents prepared subsequent to the date of the Commitment(blacklined to reflect all revisions from previously reviewed drafts)shall be furnished"to Financial Security for review and approval. Final drafts of such documents shall be provided to Financial Security at least three (3) business days prior to the issuance of the Policy, unless Financial Security shall agree to some shorter period. (b) .Evidence of wire transfer in federal funds of an amount equal to the insurance premium, unless alternative arrangements for the payment of such amount acceptable to Financial Security have been made prior to the delivery date of the Bonds. (c) Standard & Poor's Credit Markets Services, Moody's Investors Service Inc. and Fitch IBCA, Inc. will separately present bills for their respective fees relating to the Bonds. Payment of such bills should be made directly to such rating agency. Payment of the rating fee is not a condition to release of the Policy by Financial Security. 6. Promptly after the closing of the Bonds, Financial Security shall receive three completed sets of executed documents (one original and either(i)two photocopies(each unbound)or(ii)three compact discs). 7. The Official Statement shall contain the language provided by Financial Security and only such other references to Financial Security or otherwise as Financial Security shall supply or approve. FINANCIAL SECURITY SHALL BE PROVIDED WITH SIX PRINTED COPIES OF THE OFFICIAL STATEMENT. EXHIBIT A r ii TERM SHEET FOR MUNICIPAL BOND INSURANCE COMMITMENT I ' 1 Issuer: City of Renton,Washington Principal Amount of Bonds Insured: Not to Exceed$11,980,000 Name of Bonds Insured: Water and Sewer Revenue Bonds,2002 Date of Commitment: June 27,2002 Expiration Date: Friday,August 30,2002 Premium: .27%of total debt service on the Bonds Insured Bond Counsel Opinion--Language Requirements: The approving opinion of Bond Counsel shall be substantively identical, in form and substance, to that set forth in Appendix E of the Preliminary Official Statement dated June 20,2002. Additional Conditions: None FINANCIAL SECURITY ASSURANCE INC. 41, , t.' rized • Icer *To keep the Commitment in effect to the Expiration Date set forth above, Financial Security must receive a duplicate of this Exhibit A executed by an appropriate officer by the earlier of the date on which the Official Statement containing disclosure language about Financial Security is circulated and ten days from the Date of Commitment. The undersigned agrees that if the Bonds are insured by a policy of municipal bond insurance, such insurance shall { be provided by Financial Security in accordance with the terms of the Commitment. CITY OF RENTON,WASHINGTON Authorized Officer 1_I. L:\LEGALWIUNIS\STATES\WA\55236_C.doc I 1 i it PROCEDURES FOR PREMIUM PAYMENT TO FINANCIAL SECURITY ASSURANCE INC. Financial Security's issuance of its;municipal bond insurance policy at bond closing is contingent upon payment and receipt of the premium. NO POLICY MAY BE RELEASED UNTIL PAYMENT OF SUCH AMOUNT HAS BEEN CONFIRMED. Set forth below are the procedures to be followed for confirming the amount of the premium to be paid and for paying such amount: Confirmation of Upon determination of the final debt service Amount to be Paid: schedule, fax such schedule to Financial Security Attention: Jamie J. Shilling, Director Phone No. (415) 995-8015 FaxiNo. (415) 995-8095 • I Confirm with the individual in our underwriting department that you are in agreement with respect to par and premium on the transaction prior to the closing date. 1 - Payment Date: Date of Delivery of the insured bonds. Method of Payment: • Wire transfer of Federal Funds. Wire Transfer Instructions: Bank: The Bank of New York ABA#: 021 000 018 Acct. Name: a Financial Security Assurance Inc. Account No.: 8900297263 Policy No.: [To Be Assigned] CONFIRMATION OF PREMIUM WIRE NUMBER AT CLOSING Financial Security will accept as confirmation of the premium payment a wire transfer number and the name of the sending bank, to be communicated on the closing date to Judith K. Solle, Assistant Vice President, (415) 995-8021. I ` I DISCLOSURE CERTIFICATE I,VICTORIA A. RUNKLE, hereby certify that: 1. I am the duly appointed, qualified and acting Finance and Information Services Administrator of the City of Renton Washington(the"City"). 2. This Certificate is made and delivered in connection with the authorization, sale, issuance and delivery of the $11;,980,000 CITY OF RENTON, WASHINGTON, WATER AND SEWER REVENUE BONDS, 2002 (the"Bonds"). 3. To the best of my knowledge and belief, the representations of the City contained in that certain Bond Purchase Agreement pertaining to the Bonds, dated July 1, 2002,between the City and D.A. Davidson& Co. were true and correct when made, and remain true and correct as of this date. I 4. To the best of my knowledge and belief, the final Official Statement(the"Final Official Statement")pertaining to the Bonds, dated July 1, 2002, does not contain any untrue statement of a material fact or omit any statement or information which is necessary to make the statements therein, in light of the circumstances under which they were made, not misleading in any material respect. 5. Execution of this Certificate shall constitute execution of the Final Official Statement by the City. IN WITNESS WHEREOF, I have hereunto subscribed by official signature as of the 12th day of July, 2002. VICTORIA A. " KLE Finance and Information Services Administrator City of Renton, Washington f:\renton\waters ewer 02 i I DISCLOSURE, NO DEFAULT AND TAX CERTIFICATE OF FINANCIAL SECURITY ASSURANCE INC. The undersigned hereby certifies on behalf of Financial Security Assurance Inc. ("Financial Security"), in connection with the issuance by Financial Security of its Policy No. 29279-N (the "Policy") in respect of the $11,980,000 in aggregate principal amount of City of Renton, Washington Water and Sewer Revenue Bonds, 2002 (the"Bonds")that: (i) the information set forth under the caption "BOND INSURANCE POLICY — Financial Security Assurance Inc." in the official statement dated July 1, 2002 relating to the Bonds is true and correct, (ii) Financial Security is not currently in default nor has Financial Security ever been in default under any policy or obligation guaranteeing the payment of principal of or interest on an obligation, (iii) the Policy is an unconditional and recourse obligation of Financial Security (enforceable by or on behalf of the holders of the Bands)to pay the scheduled principal of and interest on the Bonds in the event of Nonpayment by the Issuer(as set forth in the Policy), (iv) the insurance premium of$54,223.53 (the "Premium") is a charge for the transfer of credit risk and was determined in arm's length negotiations and is required to be paid to Financial Security as a condition to the issuance of the Policy, (v) no portion of such Premium;represents an indirect payment of costs of issuance, including rating agency fees, other than fees paid by Financial Security to maintain its ratings, which, together with all other overhead expenses of Financial Security, are taken into account in the formulation of its rate structure, or for the provision of additional services by us, nor the direct or indirect payment for a cost, risk or other element 1 that is not customarily borne by insurers of tax-exempt bonds (in transactions in which the guarantor has no involvement other than as a guarantor), (vi) Financial Security is not providing any services in connection with the Bonds other than providing the Policy, and except for the Premium, Financial Security will not use any portion of the Bond proceeds, (vii) except for payments under the Policy in the case of Nonpayment by the Issuer, there is no obligation to pay any amount of principal or interest on the Bonds by Financial Security, (viii) Financial Security does not expect that a claim will be made on the Policy, (ix) the Issuer is not entitled to a refund of the premium for the Policy in the event a Bond is retired before the final maturity date, and (x) for Bonds which are secured by a debt service reserve, Financial Security would not have issued the Policy unless the authorizing,or security agreement for the Bonds provided for a debt service reserve account or fund funded and maintained in an amount at least equal to, as of any particular date of computation, the reserve requirement as set forth in such agreement. Financial Security makes no representation as to the nature of the interest to be paid on the Bonds or the treatment of the Policy under Section 1.148-4(f)of the Income Tax Regulations. FINANCIAL SECURITY ASSURANCE INC. "WeAf24,71- ?), 'ato) 21;2_, By: Authorized Officer Dated: July 12, 2002 ([ Economic and Engineering Services, Inc. Certificate Of Consulting Engineer Re: Additional Indebtedness City of Renton 1055 South Grady Way Renton,WA 98055 Ladies and Gentlemen: This Certificate, prepared by Economic and Engineering Services, Inc. (the "Consulting Engineer") at the request of the City of Renton, Washington (the "City"), is issued in conjunction with the sale of $11,980,000 Water and Sewer Revenue Bonds, 2002 (the "2002 Bonds") by the City. The 2002 Bonds are being issued pursuant to Ordinance No. 4976 of the City. The City's right to issue parity bonds is subject to meeting the conditions set forth in Section 15 of Ordinance No. 1450, as modified by the provisions set forth in Section 13 of Ordinance No. 3169. Ordinance No.1450, Section 15, states in part: r "a) The revenues of said waterworks system, including the sewerage system, shall be deemed sufficient after the payment of operation and maintenance costs and taxes, based on the historical experience of said system or the pro forma revenues under then existing rates over a period of any 24 consecutive months out of the 36 months immediately preceding the time of issuance of such additional bonds, to equal at least 1.5 times the average annual principal and interest requirements of the bonds of this issue then outstanding and of the revenue bonds proposed to be so issued. Such determination of the sufficiency of the revenues shall be made and certified by an engineer experienced in municipal utilities." Ordinance 3169, Section 13, modified this condition as follows: "... Provided, however, that after the payment and retirement or provision for such payment and retirement has been irrevocably made pursuant to RCW Chapter 39.53(the "Refunding Bond Act") of all outstanding 1977 Bonds, the 1.5 coverage requirement to be met for the issuance of Future Parity Bonds may be reduced to a 1.3 coverage requirement." 12011 Bel-Red Road,Suite 201 Post Office Box 1989 Bellevue,Washington 98005-2471 Bellevue,Washington 98009-1989 www.ees-1.com Telephone 425 452-8100 Fax 425 454-4189 Bellevue • Olympia • Portland • Tri-Cities • Vancouver, B.C. City of Renton Certificate Page 2 (E, The City of Renton's $3,045,000 Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 3, issued under the authority of Ordinance 3188, provided for the irrevocable payment and retirement of all, outstanding 1977 ,Bonds. Therefore, the coverage requirement to be met as a condition of issuing the proposed 2002 Bonds and as provided in Section 15 of Ordinance No. 1450 is reduced to 1.3. Based on our examination and analysis of the Statement of Revenues and Expenses prepared by the City for the twenty four (24) consecutive months from January, 2000 to December, 2001, out of the last thirty-six (36) months preceding the issuance of the 2002 Bonds (July 1999 through June 2002),EES is of the opinion that: 1. The proposed issuance of the Water and Sewer Revenue Bonds, 2002 on a parity with the Outstanding Parity Bonds is in compliance with provisions of Ordinance No. 1450 and Ordinance No. 3169. Schedule A, Schedule B, Schedule C and Schedule D attached hereto are part of this Certificate. Respectively submitted. ECONOMIC AND ENGINEERING SERVICES, INC. `By: L • P^ -� Gregory Pierson,P.E. Principal WA License Number— 30769 Dated this 11th day of July 2002. RPG:ds El) Schedule A Statement of Waterworks Utility Revenues and Expenses SCHEDULE A (E) CITY OF RENTON,WASHINGTON STATEMENT OF WATERWORKS UTILITY REVENUES AND EXPENSES 24-MONTH PERIOD ENDING DECEMBER 31,2001 Year Ending Year Ending 12/31/01 12/31/00 Operating Revenues: Charges for Services 20,495,611 21,724,688.0 Other Operating Revenue 1,203.480 1,411,401.0 Total Operating Revenue 21,699,091 23,136,089 Operating Expenses: • Operations and Maintenance 12,463,725 12,020,228 Administrative and General 1,853,671 1,826,630 Taxes 1,734,324 1,806,916 Depreciation 3,661,458 3,217,984 Total Operating Expenses 19,713,178 18,871,758 1 Operating Income(Loss) 1,985,913 4264,331 Non-Operating Revenue (Expense): Interest Revenue 295,154 546,422 Other Non-Operating Revenue 88,573 79,599 Interest Expense (1,093,550) (1,244,246) Amortization of Debt Discount and Expense (77,166) (80,472) Operating Transfers (77,650) 15,248 Total Non-Operating Revenue (Net) (864,639) (683,449) Net Income(Loss) 1,121,274 3,580,882 Adjustments to Net Income: City Tax 1,205,729 1,271,201 Amortization Expense 77,166 80,472 Depreciation Expense 3,661,458 3,217,984 Debt Interest Expense 1,093,550 • 1,244,246 Total Adjustments 6,037,903 5,813,903 Net Income Available For Debt Service 7,159,177 9,394,785 Average Net Income Available For Debt Service 8,276,981 Source: City of Renton El, Schedule B Statement of Debt Service Coverage l (E,1 I SCHEDULE B CITY OF RENTON,WASHINGTON STATEMENT OF DEBT SERVICE COVERAGE ON OUTSTANDING AND ADDITIONAL WATER AND SEWER REVENUE BONDS Fiscal Year Net Debt Service Debt Service Annual Ending Available on Outstanding on Total Coverage 12/31 Revenue Parity Bonds 2002 Bonds Debt Service Ratio 2002 8,276,981 2,677,838 228,804 2,906,642 2.85 2003 8,276,981 2,252,984 664,130 2,917,114 2.84 2004 8,276,981 2,250,774 666,255 2,917,029 2.84 2005 8,276,981 2,238,163 678,255 2,916,418 2.84 2006 8,276,981 1,994,876 649,543 2,644,419 3.13 2007 8,276,981 1,997,608 645,968 2,643,576 3.13 2008 8,276,981 1,999,696 642,118 2,641,814 3.13 2009 8,276,981 1,660,858 983,268 2,644,126 3.13 2010 8,276,981 1,501,294 1,141,433 2,642,727 3.13 2011 8,276,981 1,141,748 1,496,863 2,638,611 3.14 2012 8,276,981 1,143,273 1,471,463 2,614,736 3.17 2013 8,276,981 795,333 404,438 1,199,771 6.90 2014 8,276,981 1,114,438 1,114,438 7.43 2015 8,276,981 1,108,908 1,108,908 7.46 2016 s, 8,276,981 1,106,568 1,106,568 7.48 2017 8,276,981 1,112,143 1,112,143 7.44 2018 8,276,981 1,270,113 1,270,113 6.52 2019 8,276,981 1,217,613 1,217,613 6.80 2020 8,276,981 1,165,113 1,165,113 7.10 2021 8,276,981 1,157,613 1,157,613 7.15 2022 8,276,981 1,157,750 1,157,750 7.15 Total Debt Service 41,737,234 Average Annual Debt Service 1,987,487 (F) Schedule C Debt Service Coverage Required by Ordinance No. 1450 and Ordinance No.3169 SCHEDULE C (E, CITY OF RENTON,WASHINGTON • WATER AND SEWER REVENUE REFUNDING BONDS,2002 REQUIRED DEBT SERVICE COVERAGE FACTOR The 12-month average of Revenue of the Waterworks Utility after payment of Maintenance and Operation Expense over the 24-month period ending December 31, 2001 is$8,276,981.00 (See Schedule B). The average annual amount of debt service on Outstanding Parity Bonds proposed to be issued is$1,995,387.00 (See Schedule B). Avg. Net Revenue = 8,276,981 = 4.16 Avg.Annual D/S = 1,987,487 The Revenue of the Waterworks Utility after payment of Maintenance and Operation Expense is at least 1.30x the calculation of average annual debt service. • (E) Schedule D Certificate I, Paul Kusakabe, the Fiscal Service Director, of the City of Renton, Washington (the "City") do hereby certify that I have examined the financial statements for the City's Waterworks Utility provided herein as Schedule A for the years ending December 31, 2000 and December 31, 2001 and find them to be true and accurate representations of the financial statements for the City's Waterworks Utility as contained in the City's Annual Financial Report for the years ending December 31, 2000 and December 31, 2001. City of Renton, Washington By: Paul Kusakabe Fiscal Services Director Dated this_day of July, 2002 i 1 i TAX EXEMPTION AND NONARBITRAGE CERTIFICATE This TAX EXEMPTION AND NONARBITRAGE CERTIFICATE (this "Certificate") is made and delivered by the undersigned in connection with the issuance of the $11,980,000 CITY OF RENTON, WASHINGTON, WATER AND SEWER REVENUE BONDS, 2002 (the "Bonds") the Cityof Renton, Washington(the "City"). This Certificate is also made and by W gt delivered by the undersigned(a) in;furtherance of the tax exemption and covenants of the City contained in Sections 19 and 20 of'Ordinance No. 4976 (the"Bond Ordinance"), duly adopted on July 1, 2002; and(b)pursuant to the Code and Treasury Regulations Sections 1.141-1 through 1.141-6, inclusive, 1.141-9, 1.148-1 through 1.148-11, inclusive, 1.149(b)-1, 1.149(d)-1, 1.149(g)-1, and 1.150-1 through 1.1150-2, inclusive. Section 1. Definitions. Capitalized terms used but not defined herein shall have the meanings set forth in(a) the Bond Ordinance or(b)where not so defined, Exhibit A hereto, 1 which is incorporated herein by this reference. Section 2. Representations. ; ' (a) Responsible Persons. The undersigned is the Finance and Information Services Administrator of the City and one of the persons charged by the City with responsibility for the issuance of the Bonds, and has made due inquiry with respect to and is fully informed as to the matters set forth in Section 3 of this Certificate. (b) Statement as to Facts, Estimates and Circumstances. The facts, estimates and circumstances set forth in Section 3 of this Certificate, on which the expectations of the City as to the Bonds are based, are made'to the best of the knowledge and belief of the undersigned, and such expectations are reasonable and made in good faith. The City understands that, for the purposes of the Code, this Certificate constitutes evidence of the expectations of the City,but does not establish any conclusions of law or any presumptions regarding either the actual expectations of the City, or their;reasonableness. (c) Basis of Representations and Expectations. The representations and expectations of the City set forth herein are based upon: (1) The covenants of the City contained in the Bond Ordinance; and (2) The certifications of D.A. Davidson& Co. (the "Underwriter"), set forth in the Underwriter's Certificate (the "Underwriter's Certificate") executed by the Underwriter and delivered on the Date of Issue. (3) The certifications of Financial Security Assurance Inc. (the "Bond Insurer"), set forth in its Disclosure,No Default and Tax Certificate (the"Bond Insurer's Certificate"), dated and delivered on the Date of Issue, and the commitment letter(the "Commitment") of the Bond Insurer, dated June 27, 2002, setting forth the conditions to issuance of the municipal bond insurance policy with respect to the Bonds (the "Bond Insurance Policy"). f\Renton\water sewer 02 1 The City is not aware of any facts or circumstances that would cause it to question the accuracy, reliability or reasonableness of the certifications in the Underwriter's Certificate or the Bond Insurer's Certificate. (d) Purpose of Certificate. This Certificate is made in part for the purpose of establishing the reasonable expectations of the City as to the amount and application of proceeds of the Bonds. It is intended to be and may be relied on for the purposes of Sections 103, and 141 through 150 of the Code and as a certificate described in Treasury Regulations Section 1.148-2(b)(2). This Certificate is being executed and delivered as part of the record of proceedings prepared in connection with the issuance of the Bonds. The City understands that, despite the representations and statements of expectation made in this Certificate, (1)the taking of any deliberate, intentional action by the City after the Date of Issue in order to earn arbitrage will cause the Bonds to be"arbitrage bonds"within the meaning of Section 148 of the Code if such action, had it been expected on the Date of Issue,would have caused the Bonds to be arbitrage bonds, and that an intent to violate the requirements of Section 148 of the Code is not necessary for an action to be considered intentional within the meaning of the Code; and(2)the taking of any deliberate action subsequent to the Date of Issue that causes the conditions of either the private loan financing test or the private business use and repayment tests under Section 141 of the Code to be met, will cause the Bonds to be private activity bonds within the meaning of Section 141 of the Code, and that an intent to violate the requirements of Section 141 of the Code is not necessary for an action to be considered deliberate within the meaning of the Code. (e) Authorization and Purposes of the Bonds. The Bonds are being issued pursuant to the Bond Ordinance for the purpose of providing a part of the funds necessary to pay the cost of carrying out certain additions to and betterments and extensions of the Waterworks Utility and paying the costs related to the sale and issuance of the Bonds (the "Project"). (f) Security and Source of Payment. The Bonds are special fund revenue obligations of the City. The principal hereof and the interest on the Bonds are payable solely out of the Bond Fund, which shall be (1)the 2002 Waterworks Revenue Bond Account in the Waterworks Revenue Parity Bond Fund created pursuant to the City Ordinance No. 3896 and renamed by City Ordinance No. 4709 (until the New Covenant Date), and(2)the 2002 Waterworks Revenue Bond Fund created pursuant to the Bond Ordinance (from and after the New Covenant Date). - " Pursuant to the Bond Ordinance, the City has pledged and bound itself to set aside and pay into the Bond Fund out of the Gross Revenue fixed amounts without regard to any fixed proportion, sufficient to pay the principal and/or interest payments on the Bonds and to maintain an amount - -- of money and assets in the Reserve Account(until the New Covenant Date) or the Reserve Fund (from and after the New Covenant Date) at the level required by the Bond Ordinance, all within the times provided by the Bond Ordinance. The City has pledged the Gross Revenue to the payments to be made into the Bond Fund as set forth in the Bond Ordinance, and the Bonds shall constitute a lien and charge upon such Gross Revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense, except that the lien and charge on such revenue for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds,the 1998 Bonds and any Future Parity Bonds. f:\Renton\water sewer 02 2 (g) Status of City. The City is a code city duly organized under the laws of the State of Washington. (h) Qualification of Bond Insurance Policy as a Qualified Guaranty. Based upon the Underwriter's Certificate, the premium to be paid to the Bond Insurer for the Bond Insurance Policy(1) was negotiated at arm's length, and is reasonable, and (2)the present value of such ( premium(computed by using the yield-to-maturity on the Bonds, including such premium, as the discount factor) is less than the present value of the interest reasonably expected to be saved on the Bonds as a result of the purchase of the Bond Insurance Policy. Based upon the certifications of the Bond Insurer set forth in the Bond Insurer's Certificate, (A) the Bond Insurance Policy is an unconditional and recourse obligation of the Bond Insurer to pay scheduled payments of principal of and interest on the Bonds in the event of the failure to do so by the City; (B) the premium to be paid for the Bond Insurance Policy was determined in arm's-length negotiations, is required to be paid as a condition to the issuance of the Bond Insurance Policy, and is.a charge for a transfer of credit risk; (C)no portion of such premium represents an indirect payment of costs of issuance of the Bonds, including rating agency fees, other than fees paid by the Bond Insurer to maintain its ratings,which, together with all other overhead expenses of the Bond Insurer, are taken into account in the formulation of its rate structure, or for the provision of additional services by the Bond Insurer,nor the direct or indirect payment for a cost,risk or other element that is not customarily borne by insurers of tax- exempt bonds (in transactions in which the guarantor has no involvement other than as a guarantor); (D) the Bond Insurer is not providing any services in connection with the Bonds other than providing the Bond Insurance Policy, and except for the premium, the Bond Insurer will not use any portion of the Bond proceeds; (E) except for payments under the Bond Insurance Policy in the case of nonpayment by the City, there is no obligation to pay any amount of principal or interest on the Bonds by the Bond Insurer; (F)the City is not entitled to a refund in excess of the unearned portion of the premium for the Bond Insurance Policy in the event a Bond is retired before the final maturity date; and (G) the Bond Insurer would not have issued the Bond Insurance Policy unless the Bond Ordinance provided for a Reserve Account funded at the Reserve Requirement. (i) Ownership and Use of Facilities Financed With Bond Proceeds. The City expects in the future to own and operate,all facilities financed with the proceeds of the Bonds. No more than 10% of the proceeds of the Bonds are to be used, directly or indirectly, for any"private business use" (as defined in Section 141 of the Code); and no more than 5% of the proceeds of the Bonds are to be used with respect to any private business use that is not related to the City's use of such proceeds for governmental purposes, or which is disproportionate to such governmental use. Further, the payment of the principal of and interest on no more than 10% of the proceeds of the Bonds are to be, directly or indirectly, (1) secured by any interest in (A)property to be used for private business use, or(B)payments in respect of such property; or (2) derived from payments in respect of property, or borrowed money, used or to be used for a private business use; and the payment of the principal and interest on no more than 5% of the proceeds of the Bonds are to be so secured by or derived from payments made in respect of private business use of the proceeds of the Bonds in a manner which is unrelated or disproportionate to the City's use for governmental purposes. The"nonqualified amount," as f:\Renton\water sewer 02 3 defined in Section 141(b)(8) of the Code, if any, with respect to the Bonds will not exceed $15,000,000. (j) No Private Loans. None of the proceeds of the Bonds will be used, directly or indirectly, to make or finance loans to any person(including any governmental unit). Section 3. Reasonable Expectations of the City as to Facts, Estimates and Circumstances. The City makes the following representations and statements of fact, estimates and expectation to establish that it is not expected that the proceeds of the Bonds will be used in a manner that will cause the Bonds to be"arbitrage bonds"within the meaning of Section 148 of the Code: (a) Application of Sale Proceeds. (1) General. The amount of Sale Proceeds received by the City from the sale of the Bonds is $12,024,346.40 (principal amount of$11,980,000.00, plus net original issue premium of$44,346.40). In addition, the City will receive$16,778.97 of Pre-Issuance Accrued Interest. (2) Accrued Interest. Pre-Issuance Accrued Interest in the amount of $16,778.97 will be deposited into the Principal and Interest Account on the Date of Issue to be applied to the payment of interest on the Bonds on December 1, 2002, the first interest payment date for the Bonds. (3) Premium for Bond Insurance Policy. Sale Proceeds in the amount of $54,223.53 will be used to pay the Bond Insurer on the Date of Issue for the premium for the Bond Insurance Policy. (4) Issuance Costs. Sale Proceeds in the amount of$119,800.00 will be used to pay Underwriter's discount on the Date of Issue; such amount is equal to the difference between the issue price of the Bonds and the amount paid for the Bonds by the Underwriter. Another$36,822.00 of Sale Proceeds will be deposited into the Project Fund on the Date of Issue to be applied to the payment of the other costs of issuing the Bonds. (5) Project Costs. The remaining Sale Proceeds, in the amount of $11,813,500.87, will be deposited into the Project Fund on the Date of Issue to be applied to the payment of the costs of the Project. (b) Reserve Account Transfer. The City will make no deposit of Sale Proceeds into the Reserve Account,but shall transfer thereto on the Date of Issue the sum of$542,300.00 from the balance in the reserve account created for the City's Water and Sewer Refunding and Improvement Revenue Bonds, 1992, that were fully retired as of June 1, 2002. (c) Investment Earnings. Except for the Reserve Account(until the New Covenant Date) and the Reserve Fund(from and after the New Covenant Date), interest earned(including discount and premium) on any moneys or investments in any Fund or Account will be retained in such Fund or Account and used for the purposes thereof. Until the New Covenant Date, f:\Renton\water sewer 02 4 investment earnings received on the investments in the Reserve Account shall be deposited in and become a part of the Reserve Account until the total required reserve amount shall have been accumulated therein, after which time the interest shall be deposited in the Principal and Interest Account. From and after the New Covenant Date, investment earnings received on the investments in the Reserve Fund shall be deposited in the Reserve Fund until the total Reserve Requirement shall have been accumulated therein, after which time the interest shall be deposited in any Parity Bond Fund. (d) Funds and Accounts. The City has established the following funds and accounts for the Bonds, each to be held separate and apart from all other funds and accounts of the City: Prior to the New Covenant Date: The Waterworks Revenue Parity Bond Fund The 2002 Waterworks Revenue Bond Account(known as the"Bond Fund"until the New Covenant Date) The Principal and Interest Account The Reserve Account The Waterworks Utility Construction Fund(the"Project Fund") The Rate Stabilization Fund After the New Covenant bate: The 2002 Waterworks Revenue Bond Fund(known as the"Bond Fund"from and after the New Covenant Date) The Waterworks Revenue Bond Reserve Fund(the"Reserve Fund") The Project Fundi The Rate Stabilization Fund Pursuant to the Bond Ordinance, on the New Covenant Date, all of the money in the 2002 Waterworks Revenue Bond Account will be transferred to the 2002 Waterworks Revenue Bond Fund, and all of the money in the Reserve Account will be transferred to the Reserve Fund. Pursuant to the Bond Ordinance,there shall be no funds in the Rate Stabilization Fund until the New Covenant Date, and the City has no current intention of funding the Rate Stabilization Fund. Other than the funds and accounts specifically described in this Certificate, no fund or account which secures or otherwise relates to the Bonds has been established, nor are any such funds or accounts expected to be established,pursuant to any instrument. (e) Bona Fide Debt Service Fund. Until the New Covenant Date,the Principal and Interest Account of the Bond Fund shall serve as the bona fide debt service fund for the Bonds. From and after the New Covenant Date, the Bond Fund itself shall serve as the bona fide debt service fund for the Bonds. All payments in respect of debt service on the Bonds will be deposited into the Principal and Interest Account(until the New Covenant Date) or the Bond f:\Renton\water sewer 02 5 Fund(from and after the New Covenant Date). The Principal and Interest Account is intended to achieve a proper matching of Gross Revenue against the scheduled annual debt service on the Bonds prior to the New Covenant Date, and the Bond Fund is intended to achieve a proper matching of Gross Revenue against the scheduled annual debt service on the Bonds thereafter. All amounts in the Principal and Interest Account (prior to the New Covenant Date) and the Bond Fund(from and after the New Covenant Date)will be expended to pay debt service on the Bonds within thirteen months of the date such amounts are first deposited therein. The Principal and Interest Account(prior to the New Covenant Date) and the Bond Fund (from and after the New Covenant Date)will each be depleted at least once each year except for any carryover amounts which will not exceed the greater of(1)the earnings in the Principal and Interest Account(prior to the New Covenant Date) or the Bond Fund(from and after the New Covenant Date) for the immediately preceding Bond Year or(2) one-twelfth of principal and interest payments on the Bonds for the immediately preceding Bond Year. The schedule of payments of interest on and principal of the Bonds has been established on the basis of, and is intended to achieve, a proper matching of revenues with debt service on the Bonds. The City has not created or established, and does not expect to create or establish, any fund in connection with the Bonds that is reasonably expected to be used to pay debt service on the Bonds other than the Principal and Interest Account(prior to the New Covenant Date) and the Bond Fund(from and after the New Covenant Date). (f) Reasonably Required Reserve Fund. Until the New Covenant Date,the Reserve Account of the Bond Fund shall serve as the reasonably required reserve fund for the Bonds. From and after the New Covenant Date, the Reserve Fund shall serve as the reasonably required reserve fund for the Bonds and any Future Parity Bonds. As described in Section 3(b)hereof,the City will make no deposit of Sale Proceeds into the Reserve Account,but shall transfer thereto on the Date of Issue the sum of$542,300.00 from the balance in the reserve account created for the City's Water and Sewer Refunding and Improvement Revenue Bonds, 1992 that were fully retired as of June 1, 2002. Pursuant to the Bond Ordinance,the City has covenanted to set aside and pay into: (1)the Reserve Account (prior to the New Covenant Date), out of Gross Revenue in substantially equal monthly payments such amounts so that by no later than July 1, 2005, there shall have been accumulated in the Reserve Account for the Bonds an amount not less than the Average Annual Debt Service for the Bonds; and(2)the Reserve Fund(from and after the New Covenant Date), out of the Net Revenue, in three annual approximately equal deposits, any additional money necessary to bring the amount deposited in the Reserve Fund attributable to the Bonds up to the amount equal to the increase in the Reserve Requirement attributable to the Bonds. The Underwriter has certified in the Underwriter's Certificate that the City's covenants to maintain the funds in the Reserve Account in an amount at least equal to the Average Annual Debt Service for the Bonds (prior to the New Covenant Date) and to maintain the funds in the Reserve Fund in an amount at least equal to the Reserve Requirement(from and after the New Covenant Date) in an amount at least equal to the Reserve Requirement were necessary, in our judgment, to enable us to market the Bonds successfully. Amounts in the Reserve Account will f:\Renton\water sewer 02 6 be transferred to the Principal and Interest Account(prior to the New Covenant Date) and amounts in the Reserve Fund will be transferred to the Bond Fund(from and after the New Covenant Date), in each case, if needed to make up any deficiency therein. In the event of a temporary interruption of revenues, the Reserve Account is intended to provide for the payment of debt service on the Bonds (including the Bonds) and, as such, constitutes a reasonably required reserve fund for the Bonds to the extent the amounts therein allocable to the Bonds do not exceed the lesser of(1) 1.25 times the average annual debt service of the Bonds; (2)maximum annual debt service;of the Bonds; or(3) 10% of the proceeds of the Bonds. (g) Representations Establishing Eligibility for Temporary Period. (1) Completion Date. It is reasonably expected that Sale Proceeds of the Bonds deposited in the Project Fund will be used to pay the costs of the Project not later than July 11, 2005. (2) Binding Obligations. The City has spent or, within 6 months of the Date of Issue of the Bonds,will spend'(or enter into binding obligations with third parties obligating the City to spend) an amount equal to at least 5% of the Sale Proceeds of the Bonds with respect to the Project. (3) Due Diligence. Work on the Project and the allocation of the Sale Proceeds of the Bonds to expenditures with respect thereto will proceed with due diligence. (h) No Replacement) No portion of the amounts received from the sale of the Bonds will be used as a substitute for any other funds that would otherwise be used as a source of fmancing for any portion of the cost of the Project and that have been or will be used to acquire, directly or indirectly, obligation producing a yield in excess of the yield on the Bonds. (i) No Negative Pledges. There are no amounts held under any agreement to maintain funds at a particular level for the direct or indirect benefit of the Owners of the Bonds, excluding for this purpose (1) amounts in which the City may grant rights that are superior to the rights of the bondholders and(2) amounts that do not exceed the reasonable needs for which they are maintained and that may be spent without any substantial restriction other than a requirement to replenish the amount by a testing date that may occur no more frequently than every six (6) months. (j) No Excess Proceeds. The Gross Proceeds of the Bonds will not exceed the costs of accomplishing the Project. ' The Bonds will not remain outstanding longer than is otherwise reasonably necessary to accomplish the governmental purposes of the Bonds,based on all facts and circumstances. (k) Universal Cap. Notwithstanding any restrictions on the investment of proceeds of the Bonds and other amounts set forth in Section 3(a) of this Certificate,proceeds of the Bonds and other amounts treated as proceeds of the Bonds shall be allocated and remain allocated to the Bonds, and thus be subject to the restrictions contained in this Certificate, only to the extent that f:\Renton\water sewer 02 7 the value of such the Nonpurpose Investments allocated to proceeds does not exceed the value of the outstanding Bonds (the "Universal Cap"). This section shall not apply to amounts on deposit in the Bond Fund. (1) Bond Yield. The yield on the Bonds (the "Bond Yield") generally means the discount rate that,when used in computing the present value as of the Date of Issue of all unconditionally payable payments of principal, interest and fees for qualified guarantees on the Bonds,produces an amount equal to the present value,using the same discount rate, of the aggregate issue price of the Bonds (defined as the initial offering price or yield to the public, excluding bond houses,brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers, at which price or yield a substantial amount of the Bonds of each maturity was sold) as of the Date of Issue. The Bonds maturing on December 1 in the years 2018 through 2022, inclusive, have been treated as redeemed at their respective stated redemption prices on the optional redemption dates that would produce the lowest yield thereon,because such Bonds were issued at an issue price that exceeds the stated redemption price at maturity by more than 0.25%multiplied by the product of the stated redemption'price at maturity and the number of complete years to the first optional redemption date for such Bonds, all in accordance with Treasury Regulations Section 1.148-4(b)(3). The aggregate present value on the Date of Issue of the issue prices of the Bonds, as so defined, and based upon the information in the Underwriter's Certificate is $12,041,125.37, which is equal to the principal amount of the Bonds of$11,980,000.00,plus net original issue premium of$44,346.40,plus Pre-Issuance Accrued Interest of$16,778.97. Based upon the information in the Bond Insurer's Certificate and the Underwriter's Certificate,the premium for the Bond Insurance Policy in the sum of$54,223.53 is a payment by the City to the Bond Insurer for a"qualified guarantee"(as such term is defined in Section 1.148-4(f) of the Treasury Regulations). Based upon the information in the Underwriter's Certificate, the Bond Yield computed in this manner is, as 9f the date hereof, 4.7536664%. The Bond Yield is computed as of the Date of Issue and will not be affected by subsequent unexpected events unless (A)the City either enters into a hedging transaction, within the meaning of Treasury Regulations Section 1.148-4(h)(3) or(B)unless there is a subsequent transfer, waiver,modification or similar transaction affecting any right that is part of the terms of a Bond. Prior to entering into any transaction described in the immediately preceding sentence, the City shall inform Bond Counsel of its intent and shall not enter into such transaction without receiving a prior Opinion of Bond Counsel that such transaction will not adversely affect the exclusion from gross income of interest on the Bonds. (m) Yield Restrictions. Any amounts on deposit in any fund or account established for the Bonds will not be invested at a yield that exceeds the Bond Yield, except as follows: (1) Principal and Interest Account and Bond Fund. Amounts deposited in the Principal and Interest Account(prior to the New Covenant Date) or the Bond Fund(from and after the New Covenant Date) may be invested at an unrestricted yield for a period of 13 months from the date of deposit of such amounts therein. Earnings on such amounts that are retained ' f:\Renton\water sewer 02 8 I i therein may be invested at an unrestricted yield for a period of 13 months from the date of receipt of the amount earned. Such amounts are not subject to the Rebate Requirement. (2) Project Fund. Sale Proceeds of the Bonds on deposit in the Project Fund, together with the investment earnings thereon,may be invested without regard to yield restrictions for a three-year period commencing on the date hereof. Thereafter, such funds may not be invested at a yield that exceeds the Bond Yield. Except as otherwise described in Section 4 hereof, such funds may be subject to the Rebate Requirement. (3) Reserve Account and Reserve Fund. Amounts in the Reserve Account (prior to the New Covenant Date) or the Reserve Fund(from and after the New Covenant Date) allocable to the Bonds will be invested without regard to yield restriction to the extent that they do not exceed the lesser of(1) 1.25 times the average annual debt service of the Bonds; (2)maximum annual debt service of the Bonds; or(3) 10% of the proceeds of the Bonds. To the extent that the amount in the Reserve Account allocable to the Bonds exceeds the lesser of(1) 1.25 times the average annual debt service of the Bonds; (2)maximum annual debt service of the Bonds; or(3) 10% of the proceeds of the Bonds, such excess will be invested at a yield not in excess of the Bond Yield. Except as otherwise described in Section 4 hereof, earnings thereon may be subject to the Rebate Requirement. (4) Investment Earnings. Investment earnings on Sale Proceeds and proceeds of investment in the Reserve Account may be invested without regard to yield restriction to the same extent as other amounts described in Section 3(m)(3)hereof. Investment Earnings on Proceeds in the Reserve Account that may not be invested without regard to yield restriction pursuant to Section 3(m)(3)hereof may be invested without regard to yield restriction for one year from the date of receipt. Ail earnings on Gross Proceeds, other than earnings on amounts described in Section 3(m)(1)hereof and earnings on Replacement Proceeds that do not themselves constitute Replacement Proceeds, are subject to the Rebate Requirement. (5) Yield Reduction Payments. Notwithstanding any of the provisions of Sections 3(m)(1)through 3(m)(4)hereof that require the investment of sale proceeds of the Bonds and investment earnings thereon at a yield not in excess of the Bond Yield, the yield on 1 certain Nonpurpose Investments acquired with proceeds of the Bonds will not be considered to be higher than the applicable yield limitation described in this Section 3(m) if the City makes or causes to be made"yield reduction payments"to the United States Treasury at the times and in the amounts described in Section 1.148-5(c) of the Treasury Regulations. The City agrees to retain and consult with Bond Counsel prior to making any"yield reduction payments"pursuant to Section 1.148-5(c) of the Treasury Regulations. (n) No Qualified Hedges. The City has not identified,nor does either expect to identify, any hedging arrangement or transaction as a"qualified hedge" (as defined in Treasury Regulations Section 1.148-4(h))with respect to the Bonds. (o) No Hedge Bonds. At least 85% of the spendable proceeds of the Bonds will be used to carry out the governmental purposes of the Bonds by July 11, 2005, and not more than j f:\Renton\water sewer 02 9 50% of the proceeds of the Bonds will be invested in Nonpurpose Investments with a substantially guaranteed yield of 4 years or more. (p) Single Issue. No other obligations of the City(1) are reasonably expected to be paid from substantially the same source of funds as the Bonds (determined without regard to guarantees from unrelated parties), (2) are being sold at substantially the same time as the Bonds, (i.e.,within fourteen days of July,l, 2002, the sale date of the Bonds), and(3)are being sold pursuant to the same plan of financing as the Bonds. Section 4. Rebate Requirement Calculations and Payment. The City has been advised by Bond Counsel that the following provisions and procedures also apply to the proceeds of the Bonds. (a) General. Certain Gross Proceeds of the Bonds will be exempt from the Rebate Requirement described in Section 4(e) hereof if the Bonds satisfy the requirements of Section 4(b), Section 4(c) or Section 4(d)hereof. (b) Six Month Exception. The Bonds shall be treated as meeting the Rebate Requirement described in Section 4(e) hereof if the Gross Proceeds thereof are expended for the governmental purposes of such issue within the 6 month period beginning on the Date of Issue; provided, that the 6 month spending period will be extended for an additional 6 months if the Gross Proceeds of the Bonds, as specially defined for purposes of this Section 4(b), are expended within the first six-month spending period except for an amount not exceeding the lesser of 5% of the issue price of the Bonds, or$100,000. For purposes of this Section 4(b), the governmental purposes of the Bonds include (1)payments of interest on but not payments of principal of the Bonds, and(2)payments of interest on or principal of other obligations of the City. For this purpose, Gross Proceeds has the meaning set forth in Exhibit A to this Nonarbitrage Certificate, except that it does not include (A) amounts held in a bona fide debt service fund, (B) amounts held in a reasonably required reserve or replacement fund, (C)amounts that, as of the Date of Issue, are not reasonably expected to be Gross Proceeds,but that become Gross Proceeds after the end of the six-month period, (D) amounts representing sale or investment proceeds derived from payments under any Purpose Investment of the Bonds, and (E) amounts representing repayments of grants financed by the Bonds.Notwithstanding the above, Gross Proceeds of the Bonds shall not be eligible for the exemption from the Rebate Requirement described in this Section 4(b)unless the Rebate Requirement set forth in Section 4(e) is met for Gross Proceeds of such issues not required to be spent within the six-month spending period. In the event that the Bonds satisfy the requirements of this Section 4(b), the City may nevertheless subsequently elect to disregard the availability of the exemption from rebate described in this Section 4(b) and to satisfy the Rebate Requirement with respect to the Bonds. (c) Eighteen Month Exception. The Rebate Requirement described in Section 4(e) hereof shall not apply to the Gross Proceeds of the Bonds if the following percentages (the "Qualifying Expenditures") of such Gross Proceeds are expended for the governmental purposes of the Bonds by the last day of each of the periods identified below(the "Qualifying Dates"). For this purpose,the governmental purposes of the Bonds include (1)payments of interest on but no payments of principal of the Bonds, (2)payments of interest on other obligations of the City, (:\Renton\water sewer 02 10 which interest either(A)accrues on such other obligations during a one-year period including the Date of Issue (B)is a capital expenditure as defined in Treasury Regulations Section 1.150-1(b), or(C) is a de minimis working capital expenditure, and(3)payments of issuance costs of the Bonds made from earnings on Gross Proceeds. For this purpose, Gross Proceeds has the meaning set forth in Exhibit A hereto, except that it does not include (A) amounts held in a bona fide debt service fund, (B)amounts held in a reasonably required reserve or replacement fund, (C)amounts that, as of the Date of Issue,are not reasonably expected to be Gross Proceeds,but that become Gross Proceeds after the end of the eighteen-month period, (D) amounts representing sale or investment proceeds derived from payments under any Purpose Investment of the Bonds; and(E)amounts representing repayments of any grants financed by the Bonds. Required Percentage Expenditure of Gross Proceeds! Qualifying Date 15% January 11, 2003 60% ! July 11, 2003 100% January 11, 2004 The Qualifying Expenditures as of the last of the Qualifying Dates set forth above will be treated as made if, as of the third such date, all such Gross Proceeds have been spent for the governmental purposes of the Bonds, except for a reasonable retainage not exceeding 5% of the Net Sale Proceeds as of such date, and 100% of the Gross Proceeds are actually spent for the governmental purposes of the Bonds within the 30-month period beginning on the Date of Issue. A failure to satisfy the final spending requirement will be disregarded if the City exercises due diligence to complete the Project and the amount of the failure does not exceed the lesser of 3% of the issue price of the Bonds o'r$250,000. For purposes of determining whether the above { Qualifying Expenditures have been made as of the first two Qualifying Dates, earnings reasonably expected as of the Date of Issue to be generated for the entire 18 month spending period shall be included; however, for purposes of determining whether the Qualifying Expenditures have been made as of the third and any subsequent Qualifying Dates, only investment earnings actually generated as of such date shall be included. In the event any of the Qualifying Expenditures are not made as and when required, all Gross Proceeds of the Bonds shall be subject to the Rebate Requirement. (d) Two Year Exception. The City reasonably expects that at least 75% of the Available Construction Proceeds of the Bonds will be expended for Construction Expenditures with respect to property reasonably expected to be owned by a governmental unit. The Rebate Requirement described in Section 4(e)hereof shall not apply to the Available Construction Proceeds of the Bonds or the Gross Proceeds of the Bonds used to pay Issuance Costs if(1) all of the Gross Proceeds of the Bonds to be used to pay Issuance Costs are expended by the fourth Measuring Date (as defined below), and(2)the following percentages (the "Required Expenditures") of such Available Construction Proceeds are expended for the governmental purposes of the Bonds by the last day of each of the periods identified below(the "Measuring Dates"). For this purpose, the governmental purposes of the Bonds include (A) payments of interest on but no payments of principal of the Bonds, and(B)payments of interest £:\Renton\water sewer 02 11 _ on or principal of other obligations of the City, and(C)payments of issuance costs of the Bonds made from earnings on Gross Proceeds. Required Percentage Expenditure of Available Construction Proceeds Measuring Date 10% January 11,2003 45% July 11, 2003 75% January 11, 2004 100% July 11, 2004 The Required Expenditures as of:the last of the Measuring Dates set forth above will be treated as made if, as of the fourth such date, all such Available Construction Proceeds have been spent for the governmental purposes of the Bonds, except for a reasonable retainage not exceeding 5% of the Available Construction Proceeds as of such date, and 100% of the Available Construction Proceeds are actually spent for the governmental purposes of the Bonds within the three-year period beginning on the Date of Issue. A failure to satisfy the final spending requirement will be disregarded if the City exercises due diligence to complete the Project and the amount of the failure does not exceed the lesser of 3%of the issue price of the Bonds or$250,000. For purposes of determining whether the above Required Expenditures have been made as of the first three Measuring Dates,Available Construction Proceeds shall include earnings reasonably expected as of the Date of Issue to be generated for the entire two-year spending period; however, for purposes of determining whether the Required Expenditures have been made as of the fourth and any subsequent Measuring Dates, only investment earnings actually generated as of such date shall be included. In the event any of the Measuring Expenditures are not made as and when required, all Gross Proceeds of the Bonds shall be subject to the Rebate Requirement. (e) Rebate Requirement. The Rebate Requirement as of any Computation Date, subject to such modifications as may be made by Treasury Regulations or rulings, is an amount equal to the excess (if any) of the future value of all Nonpurpose Receipts over the future value of all Nonpurpose Payments. All future values are computed as of the Computation Date using an interest rate equal to the Bond Yield. (f) Future Value. The future value of a Nonpurpose Receipt or Nonpurpose Payment is calculated using the following formula: FV=PV(1 +i)n where FV=The future value of the Nonpurpose Receipt or Nonpurpose Payment; PV=The amount of the Nonpurpose Receipt or Nonpurpose Payment; i = Bond Yield divided by the number of compounding intervals in a Bond Year; and n = The number of compounding intervals from the date of the Nonpurpose Receipt or Nonpurpose'Payment through the Computation Date. f:\Renton\water sewer 02 I 12 (g) Allocation and Accounting Rules. Generally, investments are allocated to the Bonds for the period that (1)begins on the date Gross Proceeds are allocated to the Bonds and to the investment, and(2) ends on the date such Gross Proceeds cease to be allocated to the Bonds or to the investment. (h) Relationship to Yield Restriction. Subject to Section 3(m)(1) and the next paragraph hereof, the requirements of this Section 4 relating to the Rebate Requirement of the Code apply to all Gross Proceeds;regardless of whether such amounts are subject to yield restriction or are unrestricted as to yield. Thus, an amount of Gross Proceeds may be "unrestricted as to yield"but will,notwithstanding that characterization,be subject to the Rebate Requirement of the Code. Similarly, an amount of Gross Proceeds may be "restricted as to yield"but will,notwithstanding that characterization, also be subject to the Rebate Requirement of the Code. Because the average annual debt service on the Bonds is less than $2,500,000, the amounts in the Local Improvement Fund intended for the payment of debt service on the Notes and the earnings thereon are excluded from the calculation of the Rebate Requirement. The City shall comply with the recordkeeping requirements set forth in Section 4(k) of this Certificate with respect to such earnings. (i) Computation and Payment Dates. Except as otherwise provided in Section 4(b), Section 4(c) or Section 4(d)hereof, the Rebate Requirement, net of the Computation Date Credit, must be computed by the City as of each Installment Computation Date and as of the Final Computation Date. Rebate Payments of an amount which,when added to the future value of all previous rebate payments made with respect to the Bonds, equals at least 90% of the Rebate Requirement,must be paid by the City no later than the date 60 days after each Installment Computation Date. The final Rebate Payment of an amount which, when added to the future value of all previous rebate payments made with respect to the Bonds, equals 100% of the Rebate Requirement as of the Final Computation Date,must be paid by the City to the Department of Treasury no later than 60 days after the Final Computation Date. (j) Procedure for Remittance. Each payment to be made by the City pursuant to this Section shall be filed with the Internal Revenue Service Center, 1160 West 1200 South, Ogden, Utah 84201 (or at such other address as maybe designated by the Internal Revenue Service in the future) on or before the date payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T, which shall be executed by the City. (k) Recordkeeping Obligation. (1) In General. The Code requires that the City keep and maintain accurate and complete records of fund balances, any investments thereof and all transactions involving any Fund or Account held under the Bond Ordinance. (2) Retention of Records. The Code further requires that the City retain records of the determination of the Rebate Amounts and of the Rebate Payments actually made until seven years after the retirement of the last Outstanding Bond. £:\Renton\water sewer 02 13 Section 5. Segregation of Proceeds. In order to perform the calculations required by the Code, it is necessary to separately'account for all of the Gross Proceeds and each specific investment acquired therewith. To that end, the City may take appropriate accounting measures in order to account fully and with specificity for all Gross Proceeds and each investment acquired therewith. Section 6. Bond Ordinance Covenants Concerning Arbitrage and Tax Exemption. Section 19 of the Bond O Idinance provides, in pertinent part, as follows: The City covenants and agrees with the Owner of each Bond at any time outstanding as follows: (h) It will take all actions necessary to prevent interest on the Bonds from being included in gross income for federal income tax purposes, and it will neither take any action nor make jor permit any use of proceeds of the Bonds or other funds of the City treated as proceeds of the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross income for federal income tax purposes. It will,to the extent arbitrage rebate requirements of Section 148 of the Code are applicable to the Bonds, take all action necessary to comply(or to be treated as having complied)with those requirements in connection with the Bonds, including the calculation and payment of any penalties that the City has elected to pay as an alternative to calculating rebatable arbitrage, and the payment of any other penalties if required under Section 148 of the Code to prevent interest on the Bonds from being included in gross income for federalincome 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 arbitrage certifications may not be relied upon. Section 20 of the Bond Ordinance further provides as follows: The City covenants that it will take no actions and will make no use of the proceeds of the Bonds or any other funds held under this ordinance which would cause any Bond to be treated as a"private activity bond" (as defined in Section 141(b) of the Code) subject to treatment under said Section 141(b) as an obligation not described in Section 103(a) of the Code,unless the tax exemption thereof is not affected. Section 7. Amendments. Notwithstanding any other provision herein, the covenants and obligations contained herein may be and shall be deemed modified to the extent the City secures a written opinion of Bond Counsel that any action required hereunder is no longer required or � I f:\Renton\water sewer 02 14 that some further action is required in order to maintain the exclusion of interest on the Bonds from gross income for purposes of federal income taxation. Section 8. Supplementation of this Certificate. The City understands the need to supplement this Certificate periodically to reflect further developments in the federal income tax laws governing the exclusion from gross income for federal income tax purposes of interest on the Bonds. The City will comply with any modifications or supplements made to this Certificate in accordance with the written advice of Bond Counsel. Section 9. Reliance by Bond Counsel. The City understands and acknowledges that the opinion of Gottlieb,Fisher&Andrews, PLLC, as Bond Counsel,regarding the exclusion of interest on the Bonds from gross income for federal income tax purposes is rendered in reliance upon the representations and statements of fact, estimates and expectation contained in this Certificate and assumes the continued compliance by the City with its covenants described above, and with the provisions of this Certificate. IN WITNESS WHEREOF, I have hereunto subscribed my official signature as of the 12th day of July, 2002. VICTORIA A. UNKLE Finance and Information Services Administrator City of Renton,Washington (•\Renton\water sewer 02 15 • I EXHIBIT A Definitions Construction Proceeds means the amount equal to the sum of the issue price of the Bonds, earnings on such issue price, and earnings on all of the foregoing earnings, less the amount of the issuance costs financed by the Bonds (including the premium for the Bond Insurance Policy). Bond Counsel means Gottlieb, Fisher& Andrews, PLLC. Bond Year means each 1=year period that ends on a day selected by the City. The first and last Bond Years maybe short periods. If no day is selected by the City before the earlier of the final maturity date or the date that is 5 years after the Date of Issue, Bond Years end on each anniversary of the Date of Issue and on the final maturity date. Computation Date means an Installment Computation Date or the Final Computation Date. Computation Date Credit means,with respect to the Bonds on an eligible Computation Date, a credit of$1,000 on the last day of each Bond Year during which there are amounts allocated to Gross Proceeds of the Bonds that are subject to the Rebate Requirement, and on the final maturity date. Construction Expenditures means capital expenditures (i.e., costs of a type that are properly chargeable to a capital account, or that would be so chargeable with a proper election under general federal income tax principles)that are allocable to the costs of real property or constructive personal property, excluding expenditures for acquisitions of interests in land or other existing real property. Date of Issue means July 12, 2002. Department of the Treasury means the Department of the Treasury of the United States. Fair Market Value, with respect to a Nonpurpose Investment, means, except where otherwise indicated in this Certificate,the following: General. Except with respect to Investment Property that is an obligation of the United States Treasury, the fair market value of an investment means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction. The fair market value of an Investment consisting of an obligation of the United States Treasury that is purchased directly from the United States Treasury shall be its purchase price. f:\Renton\water sewer 02 A-1 Certificates of Deposit. The market price of a certificate of deposit issued by a commercial bank that has a fixed interest rate, a fixed principal payment schedule, a fixed maturity, and a substantial penalty for early withdrawal means its purchase price if the certificate of deposit has a yield not less than(A)the yield on reasonably comparable direct obligations of the United States, and(B)the highest yield that is published or posed by the provider to be currently available from the provider on comparable certificates of deposit offered to the public. Guaranteed Investment Contracts. Except as provided in the definitions of Nonpurpose Payments and Nonpurpose Receipts, in the case of a guaranteed investment contract, the obligations acquired thereunder shall be considered acquired or disposed of for an amount equal to the fair market value of such obligations if all of the following requirements are satisfied': (A) The issuer makes a bona fide solicitation for the purchase of the investment. A bona fide solicitation is a solicitation that satisfies all of the following requirements: (1) The bid specifications are in writing and are timely forwarded to potential providers. (2) The bid specifications include all material terms of the bid. A term is material if it may directly or indirectly affect the yield or the cost of the investment. (3) The bid specifications include a statement notifying potential providers that submission of a bid is a representation that the potential provider did not consult with any,other potential provider about its bid,that the bid was determined without regard to any other formal agreement that the potential provider has with the issuer or any other person (whether or not in connection with the bond issue), and that the bid is not being submitted solely as a courtesy to the issuer or any other person for purposes of satisfying the requirements of paragraph(B)(1) or(B)(2) of this definition. (4) The terms of the bid specifications are commercially reasonable. A term is commercially reasonable if there is a legitimate business purpose for the term other than to increase the purchase price or reduce the yield of the investment. (5) The terms of the solicitation take into account the issuer's reasonably expected deposit and drawdown schedule for the amounts to be invested. (6) All potential providers have an equal opportunity to bid. For example, no potential provider is given the opportunity to review other bids (i.e., at last look)before providing a bid. f\Renton\water sewer 02 A<-2 (7) At least three reasonably competitive providers are solicited for bids. A reasonably competitive provider is a provider that has an established industry reputation as a competitive provider of the type of investments being purchased. (B) The bids received by the issuer meet all of the following requirements: (1) , The issuer receives at least three bids from the providers that the issuer solicited under a bona fide solicitation meeting the requirements of paragraph(A) of this definition and that do not have a material fmancial interest in the issue. A lead underwriter in a negotiated underwriting transaction is deemed to have a material financial interestiin the issue until 15 days after the issue date of the issue. In addition, any entity acting as a financial advisor with respect to the purchase of the investment at the time the bid specifications are forwarded to potential providers has a material financial interest in the issue. A provider that is a related party to a provider that has a material financial interest in the issue is deemed to have a material financial interest in the issue. (2) At least one of the three bids described in paragraph (B)(1) of this definition is from a reasonably competitive provider,with the meaning of the paragraph(A)(7) of this definition. (3) If the issuer uses an agent to conduct the bidding process, the agent did not bid to provide the investment. (C) The winning bid is the highest yielding bona fide bid(determined net of any broker's fees): (D) The obligor on the guaranteed investment contract certifies the administrative costs that it pays(or expects to pay, if any)to third parties in connection with supplying the investment. (E) The issuer retains the following records with the bond documents until three years after the last outstanding bond is redeemed: (1) A copy of the contract. (2) The receipt or other record of the amount actually paid by the issuer for the investments, including records of any administrative costs paid by the issuer, and the certification under paragraph(D) of this definition. (3) For each bid that is submitted, the name of the person and entity submitting the bid, the time and date of the bid, and the bid results. (4) The bid solicitation form and, if the terms of the guaranteed investment contract deviated from the bid solicitation form or a submitted bid is (:\Renton\water sewer 02 A-3 __ I modified, a brief statement explaining the deviation and stating the purpose for the deviation. For example, if the issuer purchases a portfolio of investments for a yield restricted defeasance escrow and, in order to satisfy the yield restriction requirements of section 148, an investment in the winning bid is replaced with an investment with a lower yield, the issuer must retain a record of the substitution and how the price of the substitute investment was determined. If the issuer replaces an investment in the winning bid portfolio with another investment,the purchase price of the new investment is not covered by the safe harbor unless the investment is bid under a bidding procedure meeting the requirements of this definition. Final Computation Date means the date the last obligation on the Bonds is discharged. Gross Proceeds shall have the meaning contained in Treasury Regulations Section 1.148-1(b), and shall generally include amounts which are: (a) Actually or constructively received from the sale of the Bonds, including amounts used to pay underwriters' discount or compensation and accrued interest; i I (b) Investment proceeds (defined in Treasury Regulations Section 1.148-1(b) to include amounts actually or constructively received at any time by the City, such as interest and dividends, from the investment of proceeds of the Bonds); (c) Treated as proceeds under Treasury Regulations Section 1.148-1(c) (which treats amounts in invested sinking funds and pledged funds for an issue as proceeds of an issue), including amounts in the Bond Fund; (d) Invested in a reasonably required reserve or replacement fund(as defined in Treasury Regulations Section 1.148-2(f)); (e) Pledged by the City as security for payment of debt service on the Bonds; (f) Used to pay debt service on the Bonds. Such term shall not include amounts that are not otherwise Gross Proceeds but that are allocated to the Rebate Requirement. The determination of whether an amount is included within this definition shall be made without regard to whether the amount is credited to any fund or account established under the Bond Ordinance. For purposes of(e) above, an amount is pledged to pay principal of or interest on the Bonds if there is reasonable assurance that the amount will be available to be used for such purposes in the event that the City encounters financial difficulties. Installment Computation Date means the last day of the fifth Bond Year and each succeeding fifth Bond Year. Investment Property means any security or obligation(other than tax exempt obligations that are not"specified private activity bonds"within the meaning of Section 57(a)(5)(C) of the Code or a tax-exempt mutual fund that invests in tax-exempt bonds i ! f:\Renton\water sewer 02 A-4 i other than specified private activity bonds), any annuity contract or any other investment type property. Investment-type Property means any property, other than property described in Section 148(b)(2)(A), (B), (C), or(E) of the Code, that is held principally as a passive vehicle for the production of income. Except as otherwise provided, a prepayment for property or services is investment-type property if a principal purpose for prepaying is to receive an investment return from the time the prepayment is made until the time payment otherwise would be made. A prepayment is not investment-type property if-- (a) The prepayment is made for a substantial business purpose other than investment return and the;plan has no commercially reasonable alternative to the prepayment, or (b) Prepayments on substantially the same terms are made by a substantial percentage of persons who are similarly situated to the City but who are not beneficiaries of tax-exempt financing. Nonpurpose Investment means any Investment Property in which Gross Proceeds are invested or to which Gross Proceeds are allocated other than purpose investments. Nonpurpose Investments shall not include: (a) United States Treasury Demand Deposit Securities -- State and Local Government Series; and ' (b) Tax Exempt Obligations. For purposes of this Certificate,the term"Tax-Exempt Obligations" shall include only obligations the interest on which is (i) excluded from gross income for federal income tax purposes, and(ii)not treated as an item of tax preference under Section 57(a)(5) of the Code. The term"Tax-Exempt Obligation" shall,however, include an interest in a regulated investment company(within the meaning of Section 851(a) of the Code)to the extent that at least 95% of the income to the holder is interest that is excluded from gross income by Section 103(a) of the Code. Nonpurpose Payments mean: (a) amounts actually or constructively paid to acquire a Nonpurpose Investment(or treated as paid to acquire a Nonpurpose Investment in a Commingled Fund), (b) for a Nonpurpose Investment that is first allocated to the Bonds on a date after it is actually acquired(e.g., an investment that becomes allocable to Replacement Proceeds) or that become subject to the Rebate Requirement on a date after it is actually acquired,the Value of that investment on that date, (c)for a Nonpurpose Investment that was allocated to the Bonds at the end of the preceding computation period,the Value of that investment at the beginning of the computation period, (d)the Computation Date Credit, and(e) yield reduction payments as described in Section 3(m)(5)hereof. £:\Renton\water sewer 02 ' A-5 i � it Nonpurpose Receipts mean: (a) amounts actually or constructively received from a Nonpurpose Investment, (including amounts treated as received from Nonpurpose Investments held by a Commingled Fund), such as earnings and return of principal, (b) or a Nonpurpose Investment that ceases to be allocated to an issue before its disposition or redemption date or that ceases to be subject to the Rebate Requirement on a date earlier than its disposition or redemption date (e.g., an Investment allocated to a fund initially subject to the Rebate Requirement but that subsequently qualifies as a bona fide debt service fund), the Value of that Nonpurpose Investment on that date, and(c) for a Nonpurpose Investment that is held at the end of a computation period, the Value of that investment at the end of that period. Treasury Regulations Section 1.148-6(e)provides special rules for any fund containing both Gross Proceeds of the Bonds in amounts in excess of$25,000 that are not Gross Proceeds of the Bonds if the amounts in such fund are invested and accounted for collectively, without regard to the source of funds deposited in the fund(a"Commingled Fund"). Plain Par Bond means a bond(a) issued with not more than a de minimis amount of original issue discount or premium, (b) issued for a price that does not include accrued interest, (c)that bears interest from the issue date at a single, stated, fixed rate or that is a variable rate debt instrument within the meaning of Section 1275 of the Code, in each case with interest unconditionally payable at least annually, and(d)that has a lowest stated redemption price that is not less than its outstanding stated principal amount. For this purpose, a"de minimis"amount means,with reference to original issue discount or premium, an amount that does not exceed 2% multiplied by the stated redemption price at maturity,plus any original issue premium that is attributable exclusively to reasonable underwriters' compensation. Plain Par Investment means an investment that is (a) issued with not more than a de minimis amount of original issue discount or premium or, if acquired on a date other than its issue date, acquired with no more than a de minimis amount of market discount or premium, (b) issued for a price that does not include accrued interest, (c)bears interest from its issue date at a single stated, fixed rate or that is a variable rate debt instrument, in each case with interest unconditionally payable at least annually, and(d)has a lowest stated redemption price that is not less than its outstanding stated principal amount. For this purpose, de minimis shall mean, with reference to original issue discount or premium, an amount that does not exceed 2%multiplied by the stated redemption price at maturity plus any original issue premium that is attributable exclusively to reasonable underwriters' compensation and, in reference to market discount or market premium, an amount that does not exceed 2%multiplied by the stated redemption price at maturity. Pre-Issuance Accrued Interest means amounts representing interest that accrued on the Bonds for a period not greater than one year before the Date of Issue,but only if these amounts are paid within one year after the Date of Issue. Present Value means,with respect to an investment, an amount equal to the present value of all unconditionally payable receipts to be received from and payments to be paid for the investment after that date using the yield on the investment as the discount rate, computed under the economic accrual method,using the same compounding interval and financial conventions used to compute the Bond Yield. f:\Renton\water sewer 02 A-6 i ' Rebate Requirement shall have the meaning ascribed thereto in Section 4(e) of this Certificate. Replacement Proceeds means amounts that have a sufficiently direct nexus to the Bonds or to the governmental purpose of the Bonds to conclude that the amounts would have been used for that governmental purpose if the proceeds of the Bonds were not used or to be used for that governmental purpose. For this purpose, governmental purposes include the use of amounts for the payment of debt service on a particular date. Replacement Proceeds include,but are not limited to, sinking funds,pledge funds, and certain other amounts to the extent these funds or amounts are held by or derived from a substantial beneficiary of the Bonds. Sale Proceeds means any,'amounts actually or constructively received from the sale of the Bonds. Treasury Regulations means regulations issued by the United States Treasury pursuant to Sections 103 and 141 through'150 of the Code. Value means,with respect to an investment(including a payment or receipt on an investment) on a date, an amount determined consistently using one of the following methods with respect to such investment for all purposes of Section 148 of the Code: (a) with respect to a Plain Par Investment, its outstanding stated principal amount,plus any accrued interest unpaid on that date, (b) any fixed rate investment may be valued at its Present Value on that date, and (c)any investment may be valued at its Fair Market Value on that date. Any yield-restricted investment must be valued at its Present Value. Except with regard to (i)yield-restricted investments, and(ii) investments allocated or de-allocated as a result of application of the Universal Cap, or(iii)amounts in a Commingled Fund, an investment must be valued at its Fair Market Value on the date that it'is first allocated to the Bonds or first ceases to be allocated to the Bonds as a consequence of a deemed acquisition or deemed disposition. I ! ' f:\Renton\water sewer 02 A-7 I ' II UNDERWRITER'S CERTIFICATE We, D.A. DAVIDSON&CO., as underwriter of the $11,980,000 CITY OF REDMOND, WASHINGTON, WATER AND;SEWER REVENUE BONDS, 2002 (the"Bonds"), hereby certify that: 1. Capitalized terms used but not defined herein shall have the meanings set forth in Ordinance No. 4976 (the"Bond Ordinance") of the City of Renton(the"City"). 2. A substantial amount (i.e., at least 10% of each maturity) of the Bonds was sold to members of the public(excludinOond houses,brokers and other intermediaries) in an initial bona fide public offering, at prices no higher than the prices for the Bonds set forth on the.cover page of the Official Statement pertaining to the Bonds (the"Official Statement"), dated July 1, 2002. 3. In our judgment, the premium to be paid to Financial Security Assurance Inc. for the Bond Insurance Policy for the Bonds(a)was negotiated at arm's length and is reasonable, and (b)the present value of such premium(computed by using the yield-to-maturity on the Bonds, including such premium, as the discount factor)is less than the present value of the interest reasonably expected to be saved on the Bonds as a result of the purchase of the Bond Insurance Policy. 4. The covenants of the City in the Bond Ordinance to maintain the funds in the Reserve Account in an amount at least equal to the Average Annual Debt Service for the Bonds (prior to the New Covenant Date) and to maintain the funds in the Reserve Fund in an amount at least equal to the Reserve Requirement(from and after the New Covenant Date)in an amount at least equal to the Reserve Requirement were necessary, in our judgment, to enable us to market the Bonds successfully. 5. The weighted average maturity of the Bonds is 14.076 years. 6. The yield on the Bonds, computed on the basis of the initial offering prices for the Bonds set forth on the cover pages of the Official Statement, is 4.7536664%. 7. . The City and Gottlieb,Fisher&Andrews,PLLC, as Bond Counsel, may each rely upon the foregoing representations. DATED as of the 12th day of July, 2002. D.A. DAVIDSON& CO. FRED R. EOFF Managing Director f\renton\water sewer 02 i SIGNATURE IDENTIFICATION, INCUMBENCY AND NO LITIGATION CERTIFICATE I, BONNIE WALTON, r ereby certify that: 1. I am the duly sel cted, qualified and acting City Clerk of the City of Renton, Washington(the"City"). 2. This Certificate i made and delivered in connection with the authorization, sale, issuance and delivery of the $11,980,000 CITY OF RENTON,WASHINGTON,WATER AND 1 SEWER REVENUE BONDS, 002 (the "Bonds"). 3. Pursuant to Ordnance No. 4976 of the City(the "Bond Ordinance"), authorizing the issuance and sale of the Bo Ids, each of the Bonds were duly executed on behalf of the City with the manual signature of JE SE TANNER, the Mayor of the City; and with my manual signature, in my capacity as Cit Clerk. Each of such officers was, on the date of execution of the Bonds, the duly elected or ajpointed, qualified and acting officers of the City and such signatures are their genuine si atures. 4. The seal of the ity appearing on the Bonds is the legally adopted,proper and official seal of the City. 5. The following City Council members were incumbent on July 1, 2002, the date on which the City Council adopted the Bond Ordinance, and they remain incumbent in such positions on this date: il Dan Clawson Terri Briere Randall Corman Kathy Keolker-Wheeler Toni Nelson King Parker Donald Persson 6. No litigation or other proceedings are pending or,to the best of my knowledge, threatened in any court or other tribunal of competent jurisdiction, state or federal, in any way: (a) Restraining or enjoining the sale or delivery by the City of the Bonds; (b) Questio1ing in any manner the authority of the City to issue, or the issuance or validity of he Bonds; (c) Questio ing the constitutionality of any statute, ordinance or resolution, or the validity of any proceedings, authorizing the issuance of the Bonds; f:\renton\water sewer 02 1 I I � (d) Questioni g the validity or enforceability of the Bond Ordinance; (e) Contesting in any way the completeness, accuracy or fairness of the Official Statement; (f) Questioning the titles of any officers of the City under the laws of the State of Washington; or (g) Which miight in any material respect adversely affect the transactions contemplated herein and i the Official Statement to be undertaken by the City or the financial condition of the ity. IN WITNESS WHERE IF, I have hereunto subscribed by official signature as of the 12th day of July, 2002. i&—Oznit; Wal.,te7"-} BONNIE WALTON City Clerk City of Renton, Washington L\renton\water sewer 02 2 CERTIFICATE RE AUTHENTICATION AND REGISTRATION OF BONDS THE BANK OF NEW YORK,New York,New York,hereby certifies as follows: 1. As one of the fiscal agents for the State of Washington in accordance with the terms and conditions of that ertain Fiscal Agency Contract(the"Fiscal Agency Contract") effective as of Febru 1, 2002,by and among The Bank of New York and the State of Washington, we hav duly and properly authenticated and registered the CITY OF RENTON, WASHIN TON, WATER AND SEWER REVENUE BONDS, 2002 (the"Bonds"), aggregating$11,980,000 in the principal amount,pursuant to the instructions given to us by D.A. avidson& Co., as the purchaser thereof 2. The persons who a signatures appear on the Certificate of Authentication on the authenticated Bonds are dilly authorized signatories of The Bank of New York. 3. All of said Bonds authenticated by the said authorized signatories bore, in the spaces appropriate for the insertion of such information, the name of the registered owner, the principal amount, the interest rate,the maturity date, the Bond number and the CUSIP number thereof 4. We shall be liable for the performance of our duties and obligations as specifically set forth in the Fiscal Agency Contract. We shall act in good faith, and no implied duties or obligations shall be incurred by us other than those specified in the Fiscal Agency Contract. DATED at New York,N-w York as of the 12th day of July, 2002. THE BANK OF NEW YORK alW By - Title: (6 recro_64-1 REGISTERED REGISTERED NO. 1 $115,000 UNITED STATES OF AMERICA •ITY OF RENTON, WASHINGTON WATE` AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: �° ---...� """ NSIP NO: 2.50% December 1, 2003 •8 67 RC 2 Principal Amount: ONE )RED F'JFIEEN T wi• SA • ND N6 00 DOLLARS p Owner: CEDE & CO. The City of Renton, Wa hingto , h- ity ) fo - rec: -d, promises to pay to the Owner hereof the Principal Am•unt fo •• - ` the 'Date set forth above; and to pay interest thereon (computed •n • basis o`,§.0 4 ear o welve 30-day months) at the Interest Rate per annum set fort .• - om the •.to hereof or from the most recent interest payment date to which interes /t �:- •. • or dul rovi ed for, payable on December 1, 2002, and on June 1 and D-•em•er 1 of eo ther er to the maturity or earlier redemption hereof. If this Bond is dul •res:nted for pay .nd not paid at maturity or earlier redemption as described herein, th�-n in -st shall continua to�: rue at the Interest Rate per annum set forth above until this Bone4l�al . • •al and intere , ' paid in full. Capitali i ords� • ph; ;• not defined herein shall have the meanings set forth in Ordinanc- o 97: ,ie t e "Bond Ordinance"), unless otherwise noted. B• h the •a•o d i. to rt on this Bond shall be payable in lawful money of the P � PY Unite•, of Am:t a. ' • s e Book-Entry Termination Date, the principal of and incet on :end all be p. e by the Bond Registrar to the Custodian as the Owner thereof, f• e • efit •. Beneficial •\ner thereof, in accordance with the Letter of Representations. ' om and of er Te nation Date, principal of this Bond shall be payable upon \p 1 a• ur Q •hof this Bond by the Owner hereof upon maturity or earlier redemption at the s - ipal co,Q•ra'- trust office of either of the fiscal agencies of the State in Seattle, Washington, or Ne York, New York (collectively, the "Bond Registrar"). From and after the Book-Entr, '-emu.• .tion Date, interest on the Bonds shall be paid by check or draft mailed on or before the inte`Ir payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 This Bond is not a ge eral obligation of the City, but is a special fund revenue obligation of the City. The principal he eof and the interest hereon are payable solely out of the "2002 Waterworks Revenue Bond Account" (the "Bond Fund"), a special account in the Waterworks Revenue Parity Bond Fund cr ated pursuant to the Bond Ordinance. Pursuant to the Bond Ordinance, the City has pledg d and bound itself to set aside and pay ' to the Bond Fund out of the Gross Revenue fixed amounts without regard to any fixed prop, • n, sufficient to pay the principal and/or interest paym nts on the Bonds and to maintain arc ambt of money and assets - in the Reserve Account at the evel required by the Bond Ordinance, all wit 'n the times provided by the Bond Ordinance. The City has pledged thePres evenue t •e payments to be made into the Bond Fund as s:t forth in the Bond Ordinance,-: w. •- : • ass allITtitute a _ lien and charge upon such Gro.s Revenue prior and sup,ena. t . other c arge atsoever, excluding Maintenance and 0 aeration Expense, exce 9 t at the lien : d charge on such revenue for the Bonds shall be on a pa ty with the lien and : ge th- on for t' - Outst.nding Parity Bonds, the 1998 Bonds and an Future Parity B.-• d= in l'i- : v• • Ordinance). The. Owner of this Bond shall not h.ye any claim f•r •. me • + e pnncip: eof or the interest hereon against the City except or payment fro and • .nd th- . ount of Gross Revenue pledged thereto,nor s all the Owner of` i :b • hav- . m against the State P gg arising from this Bond. This Bond is one of a d ly. .hiorize• -n`-s •ends o' e City designated as the CITY OF RENTON, WASHINGTO ,'' • ANDWE` RE NUE BONDS, 2002 (the "Bonds"). The Bonds are iss `k• .> e : e ate p •cipa amount of$11,980,000 pursuant to the Bond Ordinance and th- a s of the St „ pay.Dose of providing a part of the funds necessary to carry out cert4 ad•itions to an� nts and extensions of the Waterworks Utility, and to pay the cost -la sed to the sale nd j .uance of the Bonds, all as specified in the Bond Ordinance. (..The Bo i t 'n t ,....__,•+•.__ s -' through 2012, inclusive, are not subject to redemption pnor s .•Ilk- Dk.`at., da es. Bonds maturing on or after December 1, 2014, are subjec v;--e e • '• .t the •ptib of the City prior to their stated maturity dates, from funds from an ource)a . •; i wh a or in part on or after December 1, 2012, within one or more`�� ' ies sele ,:d by's - ►' , (and by lot within a maturity in the manner determined by the ' d ° ar • the Custer'.n) at a price of par plus accrued interest to the date of r:•emp 0n. • : in -\ D ncipal amount of greater than $5,000 may be partially redeemed in - any c al mulAe o)45,000. Prior to the Book-Entry Termination Date, the Bonds shall be I partially redeemed h accordance with the Letter of Representations. From and after the Book- Entry Ter rincation-ri ate, in the event of a partial redemption of a Bond, upon surrender of such . - Bond at the ppal corporate trust office of the Bond Registrar, a new Bond or Bonds (at the option of the Owner) of the same � aturity and interest rate and in the aggregate principal amount _ ._: remainingunredeemed shall be authenticated and delivered to the Owner, without charge to the :. - Owner therefor, in any denomination authorized by the Bond Ordinance and selected by the Owner. :. . 2 � _ _ .... Notice of any such redemption shall be given by or on behalf of the City not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the Owner of any Bond to lie redeemed at the address appearing on the Bond Register on the day notice is mailed. Such no ice requirement shall be deemed to be complied with when notice is mailed as provided in the B nd Ordinance, whether or not it is actually received by the Owner of any Bond. If such notice to the 0 ners shall have been given and the `l have set aside, on the date fixed for redemption, sufficient money for the payment of all Bone called for redemption, the Bonds so called shall cease to accrue interest ft such redemptip date, and all such Bonds shall be deemed net to be outstanding under th r.• • •inanei or..an purposes, except that the Owners thereof shall be entitled to receiv me of the re. rap- rice and accrued interest to the redempt on date from the mone et asi e� ch purpose. P y,��� PrP This Bond may be trans erred by the Ow :r ee or • h 0 n: .uthorized agent but only in the manner and subject to the limit. n• s set • n the on pert nance. Prior to the Book-Entry Termination Date, he beneficial oN ip of - : ends mJJ enly be transferred on the records established and mai tamed by the Cus•e• •n a 1• : e Book-Entry Termination Date, transfer of th's Bond �'�i •e val • on is s' nndered at the principal corporate trust office of the Bo d Re:' tr. • t•- . ign 1311 • appearing on such Bond duly executed by, or accompani-d . writte 'ns b. •- t of tr fer in form satisfactory to such Bond Registrar duly executed b \n,7 or s h Ow -r's my authorized agent, in a manner satisfactory to such Bond Regi. - �U.e u� su der, the Bond Registrar shall cancel the surrendered Bond and shall/ t enticate an•. •- iver, it ut charge to the Owner or transferee therefor(other than any goy rn ental fees or s., •. le on account of such transfer), a new Bond or Bonds (at the •ptio z ef he new Owne%), . • mg as Owner the person or persons listed as the assignee on th-,�X�.� :n form appearing o the surrendered Bond, of the same maturity and interest rate, f.• the s.me .:: gate princip l amount, and in any authorized denomination selected by the • Owne\ 'n :x C _ ufch surrendered and cancelled Bond. The : * \• e`t to lief= "Ice, in whole or in part, in the manner provided in the Bond Ore ance. B�• are d ' sed, then all right and interest of the Owners of the defeas.-e e • ds in t`•ovens is Cf e Ordinance, in Gross Revenue and in funds and accounts obli ed to •a •- t of the jot nds, other than the right to receive the funds so set aside and p ogee y the e 4Vance of the •efeased Bonds (the "Trust Account"), shall cease and become v`d. If this :on•` eased the Owner hereof shall have the right to receive payment of the p w!�i o a• • • erg - eon from the Trust Account and, if the funds in the Trust Account are not a, • a for s p, ment, shall have the residual right to receive payment of the principal of and interest on th defeased Bonds from Gross Revenue without any priority of lien or charge against sue e,v.enu- or covenants with respect thereto except to be paid therefrom. The City and the Bond Re:istrar may deem and treat the Owner hereof as the absolute owner hereof for all purposes and neither the City nor the Bond Registrar shall be affected by any notice to the contrary. 3 Reference is made to t a Bond Ordinance for other covenants and declarations of the City and other terms and condition upon which this Bond has been issued, which terms and conditions are made a part hereof by this reference. The City unconditionally covenants that it will keep and perform all of the covenants of this Bond and the Bond Ordinance. Unless this certificate i presented by an authorized representat' e of The Depository Trust Company, a New York corporation ("DTC"), to the Bond Regj't for registration of transfer, exchange or payment, and any certificate issued is register registei e name of Cede &Co. or in such other name as is req ested by an authorized representative of D and any payment is made to Cede& Co. or to su h other entity as is requested o . '-.authorized re• esentative of DTC), ANY TRANSFER, PT. .DGE OR OTHER USE I ;f"4t V OTHERWISE BY OR TO AN PERSON IS WRONG I" na a uch as the iegis - -e Owner hereof, Cede &Co., has an int rest herein. It is certified that all ac , conditions and trig -• ire the •n q - ion and statutes of the State to have happened, �een done and p `o e• • ' ent t an o e issuance of this Bond have happened, been don and performed, . -•� t the ' .nce of,o's Bond does not violate any constitutional, statu ory or other limita • ash•• the'• •. • •f indebtedness that the City may incur. 4\447), This Bond shall not be ali• •Ibecom- sb f-. • for . purpose unless and until the certificate of authentication her-o h•ve bee anu. ly signed by an authorized signatory of the Bond Registrar. i p � 4 I IN WITNESS WHE OF, the City has caused this Bond to be executed on behalf of the City by the manual signatures of the Mayor and City Clerk, and the City seal to be impressed hereon, as of the 1st day of Ju y, 2002. CERTIFICATE OF AUTHENTICATION - CITY OF RE a ,WASHINGTON DA O AUT NTICATION: 3 . 1 2 2ith‘ B .Amur This Bond is one of the City of Renton, • Washington, Water and Sewer Revenue Bonds, 2002, described :Cu d . z !- I in the Bond Ordinance. Cit �l-rk ,-7 I - WASHINGTON STATE FISCAL AGENCY, N. Bond Registrar [SEAL] s �\�u�wu OFRF�� Y '� A y Authorized Signatory (1 ,�.. SEAL •/ // Wisv1.6:05,/ .,Z .- \ Sir o, • . 5 _- STATEMENT OF INSURANCE Financial Security Ass rance Inc. ("Financial Security"), New York, New York, has delivered its municipal bond i surance policy with respect to the scheduled payments due of principal of and interest on thi. Bond to The Bank of New York, New)York, New York, or its successor, as paying agent for he Bonds (the "Paying Agent"). Saidlicy is on file and available for inspection at the principal office of the Paying Agent ,opy thereof may be Y or obtained from Financial Secu t the Paying Agent. 411111 • „s:27, • Q � Ly 6 ASSIGNMENT For value received, the ndersigned Owner does sell, assign and transfer unto: ii (name,address nd social security or other identifying number of assignee) the within-mentioned Bond an hereby irrevocably constitutes and app ints A to transfer the same on the regi tration books of the Bond Registr it 11 power of substitution in the premises. Dated: Owner (NOTE: The signature above ust corres.ond w •., e o e_ er as it appears on the front of this Bond in every p. cular, w.(b. : terat\sn o _e t or any change whatsoever.) Signature Guaranteed: (NOTE: Signature Abe,: Pt': teed by an elliNSle guarantor.) f:\renton\watersewer200 411 CN)Th • 7 GOT LIEB, FISHER & ANDREWS, PLLC ATTORNEYS AT LAW July 12, 2002 City of Renton Renton, Washington 98058 • Ladies and Gentlemen: )> We have acted as bond counsel in connection =Ni ,Nthe is •• the City of Renton, Washington (the "City"), of th- bonds d- 'b-• bel (lh :•nd' i ,, $11," 0;e§IM` • "QNTO:�WAS` "l G ON WATE RE BONDS, 2002 Dates h 1, 2V The Bonds are i sues rsuant to Ordin3nc�ti.o. 4976 of the City (the "Bond Ordinance") and oth. •,e-"�� :s duly had ails ta' en in conformity therewith. The Bonds are issued for the purp ore of ,art of the unds necessary to pay the cost of carrying out certain addition i i : d bet -1,t en lot -0.. ons of the Waterworks Utility and paying the costs related to e t e Bonds, all as specified in the Bond Ordinance. T Bonds fully :gistered bonds in the denomination of$5,000 each or in any in - ultiple E-reo tingle maturity. The Bonds bear interest from their date or fro ,2 e m• - ent ''terest p. • ent date to which interest has been paid or duly provided for, w `c e= •is la ,.yable on D ecember 1, 2002, and semiannually thereafter on June 1 and ember 1 • ea ,\7--= to the maturity or earlier redemption thereof. The Bonds bear interest att- � � : 1 • •- ori December 1 of each of the years and in the principal amounts set forth . •• : 1325 Fourth Avenue,Suite 1200 . Seattle,WA 98101-2531 (206) 654-1999 Phone . (206) 654-8725 Fax City of Renton, Washington July 12, 2002 Page 2 Maturity Date Principal Interest Rate (December 1) Amount Per Annum 2003 $ 115,000 2.50% 2004 120,000 2.50 2005 135,000 .4 2.75 2006 110,000 3.25 2007 110,000 3.50 12008 110,000 .-0 2009 455,000 - 2010 630,000 f__ . 3.91 2011 1,010,000 4.00 2012 1,025,00E 4.10 b' 2014 710,1Se 4.30 2015 735,111 4.40 2016 765,011 4.50 1 2017 : 00 4.60 2018 1,.e 1 11 5.25 2019 1,00112 5.25 2020 ,000,00I 5.25 2021 i'' �1 5,000 5.25 2022 171,4C0 ' 5.25 The Bonds are A4kbje• • redemption pn r t+ aturity at the times and in the manner described in the Bon ale ssIN.,. . .. In rende ',, R is o i '• let i examined the following: (i) the Bond Ordinance; (ii •�e r te4 •..ut ticated Bond (we assume that all other Bonds are in the same form . -1411.1 : D?. ''• 'lady e 4- ted and authenticated); and (iii) the certified proceed of the C ' r ce ,fates of public officials and representatives of the City which r •-en fumlV ed tos. : i• hich comprise the transcript of proceedings pertaining to the ' .nce e - B• ds (the `V script"). -sti• • fa t material to the opinions expressed herein, we have relied upon the ce\,,........,......0...As s • o : ,s o '. City and other certificates of public officials and representatives of the Ci , ich hay: •e-•► furnihed to us as part of the Transcript, all without undertaking to verify the same by ii •ependent investigation. Nior Based on upon the foregoing and our examination of such questions of law as we have deemed necessary or appropriate for the purpose of this opinion letter, and subject to the limitations and qualifications expressed below, we are of the opinion that, as of this date: 1 City of Renton, Washington - July 12, 2002 Page 3 i , 1. The Bonds are lawfully authorized and issued pursuant to and in full compliance with the Constitution and statues of the State of Washington, the Bond Ordinance and Ordinance No. 4709 of the City. 2. The Gross Reve ue (as defined in the Bond Ordinance) ereafter collected has been pledged to the payments t be made into the "2002 Waterwork 4venue Bond Account" (the "Bond Fund") as set forth n the Bond Ordinance, and the Bones co 'tute a lien and charge on that revenue.prior and supe 'or to any other charges whatsoever, excludin aintenance and Operation Expense (defined in the Bond Ordinance), except ta he-lien and ch.1 s on such Gross Revenue for the Bonds s all be on a parity with the 'en-a 4 g:that:- 4n fe the Outstanding Parity Bonds (defined in the Bond Ordinan - t►jCi• s Water an. e - Revenue Refunding Bonds, 1998, and a y Future Parity Bonds refine in the':l.nd Ordinance). 3. The Bonds are 1-gal, valid and bi • ng .e i lqf ve\- c• 'gations of the City, payable solely out of the :and Fund, enf el c,\a•le a. ,:', he City i 4. ordance with their terms, subject to the limitation as to enforceabili\ .i$ws r- • to b.',+ ptcy, insolvency, reorganization, moratorium ane other simlar laws\ • cre:" . �•hts, and also to the exercise of judicial discretion i accord >: • Qe : al:4 'elesN3i equity. The Bonds are not general obligations of the City. 4. The Bonds are o. .t- .ctivity ponds,' as defined in the Internal Revenue Code of 1986, as amended (t y'-4%d ). 5. Assuming c• k *Hance by the Cit h pplicable requirements of the Code that must be met subseque ' to t ssuance of the n•:, the interest on the Bonds is excluded from the income for - .i` ` • ••e tax purpose under existing federal law, and such interest is grossPrP not an item of tax)! efere, e fq s b u•eses of d) rmining alternative minimum taxable income for individuals . a erpora ,s un•sr-- ,;ya>.g federal law. However, under existing federal law, interest o. le : •+e • - '',,,,d1:, ertain corporations is taken into account in the computatio a :re-MX. e. e t earni I:, for purposes of calculating the alternative minimum tax applicab c o such co a era '` •• such.terest received by foreign corporations with United States a branc - pelt, be subj lel to a 'e = • . 'ranch profits tax; and such interest received by certain S co e.o ions u,*. bject to to . 6. he o, - en e between the principal amount of the Bonds maturing in the years 20N •• M• �! an•y, 4 through 2017, each inclusive (the "Discount Bonds"), and the initial o ering pric: o ore pubic (excluding bond houses, brokers and similar persons or or anizatiens acting the capcity of underwriters or wholesalers) at which price a substantial g g P Y amount of s k -•ount Bonds of the same maturity was sold constitutes original issue discount, which excluded from gross income for federal income tax purposes to the same extent as interest on the Discoid nt Bonds. Further, this original issue discount accrues over the term of each Discount Bond obi the basis of a constant yield to maturity and the basis of each Discount Bond acquired at such initial offering price by an initial purchaser of such Discount Bonds will be increased by the amount of such accrued original issue discount. City of Renton, Washington July 12, 2002 Page 4 Except as stated in the receding paragraphs 4, 5 and 6, we express no opinion as to any federal or state tax consequenc s of the ownership or disposition of the Bonds. The Code contains cert in requirements which must be satisfied subsequent to the date of issue of the Bonds in order to aintain the exclusion of interest on the onds from gross income for federal income tax purpose , including requirements relating to a cation of the proceeds of the Bonds, use of facilities fin.nced with such proceeds, limitations onme derived from the investment of gross proceeds .f the Bonds (as defined in Section 148 of the de), and rebate to the United States Treasury of •ertain investment earnings on_'j e . ocees The City has covenanted to comply with thee requirements, and the op'. + x n • • :b : .hs 4, 5 and 6 assume such compliance However, we have not -yt�'• .ke d do not un•ert •e to monitor compliance by the Cit, with such requireme .;� and ailure o he City to comply with such requirements could cause interest on the Bon•. • .e inc\Led in : • inc• e for federal income tax purposes and to be treated as an item •' t• - er-i 1 ■■•) FINANCIAL MUNICIPAL BOND ■■r' SECURITY lir ASSURANCE INSURANCE POLICY A ISSUER: City of Renton,Washingt n olicy No.: 29279-N BONDS: $11,980,000 in aggregate principal amount of Effective Dat- July 12,2002 Water and Sewer Reven i e Bonds,2002 `PPemiu ,,223.53 FINANCIAL SECURITY ASSURANCE INC. "r :ncial Sia rity") for Qnsidey�tion received, hereby UNCONDITIONALLY AND IRREVOCABLY a : o eay to ' . Q.istek(th: tee") or paying agent (the "Paying Agent") (as set forth in the dot -ntatib •C• i ir1 1 ikthe i ua of and securing the Bonds) for the Bonds,for the benefit of the Ower or, at b tion of Fin �. Security,directly to each Owner, subject only to the terms of this Poi h`h in h each a prsement hereto), that portion of the principal of and interest on the Bonds ha -II bec e1.1Z.Lai f Payment but shall be unpaid by reason of Nonpayment iiy the Issuer.ss On the later of the day do whi6li"st�`� 'rainy-at_ nod irate iz . •- mes Due for Payment or the Business Day next following the Busip 'ss Day'T h'c Fi a\ncial Se iry shall have received Notice of Nonpayment, Financial Security N /d'� urse to for enefit each Owner of a Bond the face amount of principal of and interes 6riRk nd that i en Du -for Payment but is then unpaid by reason of Nonpayment by the Issuer Att oMyN Qn receip by Financial Security, in a form reasonably satisfactory to it, of (a) evide -i: - wwrre `tilght to r et ayment of the principal or interest then Due for Payment and (b) e dente, including 'appropri nstruments of assignment, that all of the Owner's rights with respeb to 'payment of suc prcipa or interest that is Due for Payment shall thereupon vest in Financial Security. A NoticeCC Inp yment will be deemed received on a given Business Day if it is r ceivA rior to 1:00 p.m. (NI' wi(<time) on such Business Day; otherwise, it will be deemed receiv 'b_ tth� e Business Day. Ify Notice of Nonpayment received by Financial Security is incom. eet , i s II kmed not to ha been received by Financial Security for purposes of the preceding ntence 4Qd Fi ial ecurity 3 5 II promptly so advise the Trustee, Paying Agent or Owner, as ap. rQ riate, w jp y i biYlit-an� ended Notice of Nonpayment. Upon disbursement in respect of a< 6.?id ancial-Security s alrbecome the owner of the Bond, any appurtenant coupon to the Bond or r:••o o. i /eayn1T elft of a cipal of or interest on the Bond and shall be fully subrogated to the rig : .'• - a �0ry udi g the i} -r's right to receive payments under the Bond, to the extent of any •1 ment b nca - rity he -ander. Payment by Financial Security to the Trustee or Paying Ag-.Y�er the ben- i of the c ers all, to the extent thereof, discharge the obligation of Financial S-cur der this '¢icy. E :@ the extent a pressly modified by an endorsement hereto, the following terms shall have the meal ecified for all purposes of this Policy. "Business Day"means any day other than (a) a Saturday-or ' y r(b aid day on which banking institutions in the State of New York or the Insurer's �iscal-Ag}he7 ,ri 9d or required by law or executive order to remain closed. "Due for Payment" :ea w nefer)� to the principal of a Bond, payable on the stated maturity date thereof or the date on which the\,a e shall have been duly called for mandatory sinking fund redemption and does not refer to any earli date on which payment is due by reason of call for redemption (other than by manda`to�yinkir, fund red mption), acceleration or other advancement of maturity unless Financial Security sli' iect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b)when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond,any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the I I Page 2 of 2 Policy No.29279-N United States Bankruptcy Code by arustee in bankruptcy in accordance w))' final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic orae a ed notice, subsequently confirmed in a signed writing, or wri en notice by registered or certified mail,from n Owner,the Trustee or the Paying Agent to Financial Se urity which notice shall specify (a) the person"ocentity making the claim, (b)the Policy Number, (c)the claimed amount and (d)theatesm uch claimed at became Due for Payment. "Owner" means, in respect of a Bond,the person ote i h10- atfi time-o onpayment, is entitled under the terms of such Bond to payment thereof,Ace wner.�sha olude the Issuer or any person or entity whose direct or indirect obliga'pn�b stit s the underlying sec ty for the Bonds. Financial Security may a point a fiscal age • @"Insur Kai 'g urposes of this Policy by giving written notice to he Trustee and • - l•• A. ci I�g ame and notice address of the Insurers Fiscal Agent. From and af`t- the d. - - uch . i by the Trustee and the Paying Agent, (a) copies of all notices require\:t. •e deli - • tp Financia - urity pursuant to this Policy shall be simultaneously deli ered to the Ins�[[�� 171 A.-�t'a d to Fi ncial Security and shall not be deemed received until received by both and�`(b I ayment e.• ire o be made by Financial Security under this Policy may beade irectly by Fi -no S'',bunty"'��o �t a Insurer's Fiscal Agent on behalf of Financial Security. The made otoFiscal 'ge s th- -i-n of r(ancial Security only and the Insurer's Fiscal Agent shall in no e er2y be lid• an.� • er for: of the Insurer's Fiscal Agent or any failure of Financial Security to e osit or - `sa•=t b eposite. bfficient funds to make payments due under this Policy. Ar To the fullest exte _/:1i itte�� plicabl-.(aw, Financial Security agrees not to assert, and hereby waives,only for the •- e it o h e �r.,\all right Other by counterclaim, setoff or otherwise) and defenses (including, Jvithout l limitation, e` ense No/fraud), whether acquired by subrogation, assignment or otherwise to the extent that sucht nd defenses may be available to Financial Security to avoid paymen �. its obligations uncle" th i y in accordance with the express provisions of this Policy. ,x,,_Tsets f•r . ulI the unde king of Financial Security, and shall not be modified, altered oray oth1 g -e neent o Jmstrument, including any modification or amendment N. thereto. Exce.t the e qt expre t• suoddied by an endorsement hereto, (a) any premium paid in respect oft is -:ii is rjp fdab , for any reason whatsoever, including payment, or provision being made f n , tite Bond pr4 maturity and (b) this Policy may not be canceled or revoked. THIS parO. 1 66VER4D HE PROPERTY/CASUALTY INSURANCE SECURITY FUND SP`SIFIED IN ' - CL NO 7HEi W YORK INSURANCE LAW. In witne:- whereo T . NCIAL SECURITY ASSURANCE INC. has caused this Policy to be .+.,-, -cute• •, ' b-•alf by its Au).razed Officer. FINANCIAL SECURITY ASSURANCE INC. -. ::;;7- By ;� `,u,, Aut a ized Officer A subsidiary of Financial Security Assurance Holdings Ltd. (212)826-0100 350 Park Avenue, New York, N.Y. 10022-6022 Form 500NY(5/90) I CERTIFICATE OF DELIVERY AND PAYMENT I,VICTORIA A. RUN E,hereby certify that: 1. I am the duly appointed, qualified and acting Finance and Information Services Administrator of the City of Renton, Washington(the "City"). 2. This Certificate is made and delivered in connection with the authorization, sale, issuance and delivery of the $11980,000 CITY OF RENTON, WASHINGTON, WATER AND SEWER REVENUE BONDS, 2002 (the"Bonds"). 3. On this date, D. . Davidson& Co., as underwriter of the Bonds (the "Underwriter")paid, on behalf f the City, to Financial Security Assurance Inc., the issuer of the municipal bond insurance polic for the Bonds (the "Bond Insurance Policy"),by means of a wire transfer, the premium for t e Bond Insurance Policy in the amount of$54,223.53. On this date, the City delivered all of th Bonds to the Underwriter. At the time of delivery of the Bonds, the City received from the Unde iter the sum of$11,867,101.84, said sum being full payment of the balance of the purchase price therefor, computed as follows: Principal Amount of the Bonds $11,980,000.00 Plus: Original Issue Pre ium 44,346.40 Plus: Accrued Interest om 7/1/02 16,778.97 Less: Underwriter's Dis ount (119,800.00) Purchase Price of the Bo ds $11 921 325 37 Less: Premium for Bon. Insurance Policy (54,223.53) Balance $11,$67,101.84 IN WITNESS WHERE•F, I have hereunto subscribed my official signature this 12th day of July, 2002. ,� VICTORIA A. R KLE Finance and Information Services Administrator City of Renton, Washington f:\renton\water sewer 02 Form 8038-G Information Return for Tax-Exempt Governmental Obligations II. Under Internal Revenue Code section 149(e) OMB No.1545-0720 (Rev. November 2000) ► See separate Instructions. Department of the Treasury Caution:If the issue price is under$100,000, use Form 8038-GC. Internal Revenue Service Part I Reporting Authority I If Amended Return, check here ► ❑ 1 Issuer's name 2 Issuers employeridentification number City of Renton,Washington I 91 i 6001271 3 Number and street(or P.O. box if mail is not deli(rered to street address) Room/suite 4 Report number i 1055 South Grady Way 3 01 • 5 City,town,or post office,state,and ZIP code 6 Date of issue Renton,Washington 98058 July 12,2002 7 Name of issue 8 CUSIP number CITY OF RENTON,WASHINGTON,WAT R AND SEWER REVENUE BONDS,2002 760167 RX 6 • 9 Name and title of officer or legal representative Whom the IRS may call for more information 10 Telephonernberofofficeorlegate(sesetative Victoria A.Runkle,Finance and Information Systems Administrator ( 425 )430-6858 Part II Type of Issue (check applicable box(es) and enter the issue price) See instructions and attach schedule 11 ❑ Education 11 12 ❑ Health and hospital 12 13 ❑ Transportation 13 14 ❑ Public safety 14 15 ❑ Environment(including sewage bonds) 15 16 ❑ Housing 16 17 WI Utilities 17 12,024,346.40 18 CIOther. Describe 11- 18 19 If obligations are TANs or RANs, check bbx ► ❑ If obligations are BANs, check box ► ❑ j 20 If obligations are in the form of a lease or installment sale, check box ► 1=1 ' Part III Description of Obligations. Complete for the entire issue for which this form is being filed. (a)Final maturity date (b)Issue Fireprice Stated redemption (d)Weighted (e)Yield I price at maturity average maturity -- 21 12/1/2022 $ 12,024,346.40 $ 11,980,000.00 14.076 years 4.7537 Part IV Uses of Proceeds of Bond (issue (including underwriters' discount) 22 Proceeds used for accrued interest I 22 16,778.97 23 Issue price of entire issue(enter amount from line 21, column(b)) 23 12,024,346.40 r 24 Proceeds used for bond issuance costs(i cluding underwriters'discount) 24 156,622.00 j 25 Proceeds used for credit enhancement 25 54,223.53 26 Proceeds allocated to reasonably required reserve or replacement fund . 26 27 Proceeds used to currently refund prio issues 27 28 Proceeds used to advance refund prion issues 28 j 29 Total(add lines 24 through 28) ' 29 210,845.53 30 Nonrefunding proceeds of the issue(subtract line 29 from line 23 and enter amount here). . . 30 11,813,500.87 Part V Description of Refunded Bonds (Complete this part only for refunding bonds.) 31 Enter the remaining weighted average maturity of the bonds to be currently refunded . . . ► years 32 Enter the remaining weighted average maturity of the bonds to be advance refunded . . ► years 33 Enter the last date on which the refunded bonds will be called ► 34 Enter the date(s)the refunded bonds were issued 11,- Part Part VI Miscellaneous 35 Enter the amount of the state volume'cap allocated to the issue under section 141(b)(5) . . , 35 36a Enter the amount of gross p-creeds invested or to be invested in a guaranteed investment contract(see irtstiuctions) 366�aa, b Enter the final maturity date of the guaranteed investment contract 11- VA 37 Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units 37a b If this issue is a loan made from th proceeds of another tax-exempt issue, check box ► ❑ and enter the name of the 1 issuer ► and the date of the issue 10- 38 38 If the issuer has designated the issue under section 265(b)(3)(B)(i)(III) (small issuer exception), check box . . ► ❑ 39 If the issuer has elected to pay a pe i alty in lieu of arbitrage rebate, check box ► ❑ 40 If the issuer has identified a hedge, check box ► ❑ Under penalties of perjury,I declare tiat I have examined this return and accompanying schedules and statements,and to the best of my knowledge and belief,they are true,correct,and complete. Sign VICTORIA A.RUNKLE,Finance and Here Di / /0; July 12,2002 Information Systems Administrator ' Signature of issuer's a orized;representative Date 'Type or print name and title For Paperwork Reduction Act Notice,see page 2 of the Instructions. Cat.No.63773S Form 8038-G (Rev. 11-2000) FIDAVIT OF MAILING STATE OF WASHINGTON ) ) ss. COUNTY OF KING ) The undersigned,being first suly sworn on oath, deposes and states that on the Z qday of July, 2002, she caused to be depo ited in the U.S. mail, certified mail,return receipt requested, with postage prepaid, an envelope a+dressed to: Internal Reve ue Service 1160 West 1.00 South Ogden, Utah 84201 containing the original Form 8038- regarding the issuance of the following bonds: $11,980,000 CIT OF RENTON, WASHINGTON WATER IP SEWER REVENUE BONDS, 2002 0#14)//14 Eliz eth Pollack SIGNED AND SWORN 0 before me on this / day of July, 2002,by Elizabeth Pollack. (Seal or stain %%A !yo t i % .-,4$°....464,,,,,,,,, Notary Signature /- skcuonk %, (/LitPrint/Type Name �, o�,,%% '9► ''' 7o, s I. Public in and for the State of - %%%%% �►r Notary ''I ola WASO° Washington,residing at sedie,, �' ,„%,�..�'� My appointment expires /0-0--03 E\renton\water sewer 02 BOND REPORT FORM 101 WASHINGTON STATE OFFICE OF COMMUNITY DEVELOPMENT ATTN: Bond Users Clearinghouse Office Use Only: 906.COLUMBIA STREET SW Date Received: POST OFFICE BOX 48350 OLYMPIA,WASHINGTON 98504-8350 FAX: 360.586.4162 Control Number: 360.725.3010 Chapter 39.44 RCW requires information on newlyissued bonds to be supplied to the Office of p q PP Community Development within 20 days of issuance. The Underwriter should submit information on the report form provided by the Office. In cases where an issue is made without an underwriter, the issuer or its representative should supply the information. A summary of the collected information will be published on a onthly basis. NOTE: The issuer may opt to hav an agent, such as an underwriter or bond attorney, complete the form or appropriate portions the eof. For issues that the state fiscal agency registers, the state fiscal agency should submit this fo , with the issuer supplying necessary information. 1. Name and address of issuer: City of Renton, Washington 1055 S. Grady Renton, WA. 98058 2. County in which entity using bond proceeds is located: King County 3. Principal User (if different than issuer): N/A 4. Exact title of bond (or "typof debt," if no title): Water and Sewer Revenue bonds, 2002 5. Was the bond issue "voter-approved"? Yes X No 6. Par value: PrLmium: Discount: $11,980,000 $44,346.40 $ 7. (a) Dated date of bond: Jul 1, 2002 (b) Date of bond sale: June 27, 2012 8. Net interest cost: 4.7512% - (See instructions for formul h. If this rate is dependent on a variable factor, rather than fixed, simply indicate "vari.ble.") 9. What is the underlying sec rity on which this bond issue is based (i.e., taxes or other revenue stream which supjort the debt)? The Bonds are secured by gross operating revenues of the Waterworks Utility subject only to the 10. Name of financial advisor: N/A 11. Name of bond counsel: Gottlieb Fisher&Andrew (Seattle) 12. Name of lead underwriter( ): D.A. Davidson &Co. 13. Name of company insuring bond: FSA 14. Name of registrar: The Bank of New York 15. Name of trustee: None it -2- 16. Purpose for which procee s will be used: Proceeds are to be used for con truction of repairs,replacements and extensions to the water,sewer and stormwater s stems of the City and to pay related costs of issuance of the Bonds. 17. Schedule of maturity (if sc edule information is attached, it may be omitted here): See attached Official State ent dated July 1, 2001. 18. Method of bond sale: Competitive bids X negotiated sale private placement 19. If it was a competitive sale how many bids were received? N/A 20. If the bond sale was negoti.ted,express the gross underwriting spread (see instructions for definition) either by: (a) dollars per housand $ or (b) total amou t for the issue $ 119,800.00 21. State the fee for bond counsel service. If this figure is an estimate or incomplete, designate with an asterisk (*) after the figure: $ 14,222.00 22. Indicate other fees and costs associated with the bond issuance 0121 included as part of the costs in questions#20 and 21). For figures which are estimates or incomplete, designate with an asterisk (*). legal counsel $ N/A Parity certificate $ feasibility study N/A financial advisor N/A rating agencies (2) 19,100.00 title insurance N/A trustee N/A advertising/printing certificates N/A official statements 3,000 bond insurance 54,223.53 Miscellaneous 1,000 -3- 23. Was the bond rated? X Yes No If yes, state the rating give by each agency. Standard&Poor's AA A Moody's N/A Fitch AA 24. IMPORTANT: RCW 39. 4.210 requires a copy of the bond covenants to be submitted with this report form. Have you submitted such copy? X Yes No If not, state the reason an• or your intended submission date. Is a copy of the official sta ement or offering circular available? If yes, it should be included with this report. X Yes No 25. This information has been submitted by (Name/title and affiliation/address): D.A. Davidson & C... 701 Fifth Avenue, S ite 3100 Seattle, Washington 98104 (206) 903-8680 Banker: Fred Eoff, Managing Director Date: July 10, 2001 -4- GOTTLI:B FISHER ? ANDREWS PLLC ATTORNEYS AT LAW July 12, 2002 City of Renton Renton, Washington 98058 Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by the City of Renton, Washington(the"City"), of the onds described below (the"Bonds"): $11,980,000 CI Y OF RENTON, WASHINGTON - WATER SEWER REVENUE BONDS, 2002 Dated: July 1, 2002 The Bonds are issued pu suant to Ordinance No. 4976 of the City(the "Bond Ordinance") and other proceedi gs duly had and taken in conformity therewith. The Bonds are issued for the purpose of provid ng a part of the funds necessary to pay the cost of carrying out certain additions to and betterm nts and extensions of the Waterworks Utility and paying the costs related to the sale and iss ance of the Bonds, all as specified in the Bond Ordinance. The Bonds are issued a fully registered bonds in the denomination of$5,000 each or in any integral multiple thereof w thin a single maturity. The Bonds bear interest from their date or from the most recent interest pyment date to which interest has been paid or duly provided for, whichever is later,payable on December 1, 2002, and semiannually thereafter on June 1 and December 1 of each year to th�maturity or earlier redemption thereof. The Bonds bear interest at the rates and shall mature on December 1 of each of the years and in the principal amounts set forth below: 1325 Furth Avenue,Suite 1200 . Seattle,WA 98101-2531 ( 06) 654-1999 Phone . (206) 654-8725 Fax • City of Renton, Washington July 12, 2002 Page 2 Maturity Date Principal Interest Rate (December 1) Amount Per Annum 2003 115 000 ° $ 2.50% 2004 • 120,000 2.50 2005 135,000 2.75 2006 110,000 3.25 2007 110,000 3.50 2008 110,000 3.50 2009 455,000 3.70 2010 630,000 3.90 2011. 1,010,000 4.00 2012 1,025,000 4.10 2014 710,000 4.30 2015 735,000 4.40 2016 765,000 4.50 2017 805,000 4.60 2018 1,000,000 5.25 2019 1,000,000 5.25 2020 1,000,000 5.25 - 2021 1,045,000 5.25 2022 1,100,000 5.25 The Bonds are subject to redemption prior to maturity at the times and in the manner described in the Bond Ordinance. In rendering this opinion letter,we have examined the following: (i)the Bond Ordinance; (ii) one executed and authenticated Bond (we assume that all other Bonds are in the same form and have been similarly executed and authenticated); and(iii)the certified proceedings of the City and(Allier certificates of public officials and representatives of the City which have been furnished to uand which comprise the transcript of proceedings pertaining to the issuance of the Bonds (the`Transcript"). As to questions of fact aterial to the opinions expressed herein,we have relied upon the certified proceedings of the Ci and other certificates of public officials and representatives of the City which have been furnished to us as part of the Transcript, all without undertaking to verify the same by independen investigation. Based only upon the fo egoing and our examination of such questions of law as we have deemed necessary or appropriate for the purpose of this opinion letter, and subject to the limitations and qualifications expressed below,we are of the opinion that, as of this date: City of Renton, Washington July 12, 2002 Page 3 1. The Bonds are law lly authorized and issued pursuant to and in full compliance with the Constitution and statutes of the State of Washington, the Bond Ordinance and Ordinance No. 4709 of the City. 2. The Gross Revenu (as defined in the Bond Ordinance)hereafter collected has been pledged to the payments to e made into the "2002 Waterworks Revenue Bond Account" (the"Bond Fund") as set forth in he Bond Ordinance, and the Bonds constitute a lien and charge on that revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense (defined in thb Bond Ordinance), except that the lien and charge on such Gross Revenue for the Bonds sh hl be on a parity with the lien and charge thereon for the Outstanding Parity Bonds (defin d in the Bond Ordinance),the City's Water and Sewer Revenue Refunding Bonds, 1998, and any Future Parity Bonds (defined in the Bond Ordinance). 3. The Bonds are le al, valid and binding special fund revenue obligations of the City,payable solely out of the B nd Fund, enforceable against the City in accordance with their terms, subject to the limitations s to enforceability of laws relating to bankruptcy, insolvency, reorganization, moratorium and ther similar laws affecting creditors' rights, and also to the exercise of judicial discretion in accordance with general principles of equity. The Bonds are not general obligations of the City. 4. The Bonds are n?t"private activity bonds," as defined in the Internal Revenue Code of 1986, as amended(the `Code"). 5. Assuming comp iance by the City with applicable requirements of the Code that must be met subsequent to the i suance of the Bonds, the interest on the Bonds is excluded from the gross income for federal income tax purposes under existing federal law, and such interest is not an item of tax preference for purposes of determining alternative minimum taxable income for individuals and corporations under existing federal law. However, under existing federal law, interest on the Bonds received by certain corporations is taken into account in the computation of adjusted current earnings for purposes of calculating the alternative minimum tax applicable to such corporations1; such interest received by foreign corporations with United States branches may be subject to a f reign branch profits tax; and such interest received by certain S corporations may be subject to tax. 6. The difference between the principal amount of the Bonds maturing in the years 2008 through 2012, and 2014 through 2017, each inclusive(the"Discount Bonds"), and the initial offering price to the public (excluding bond houses,brokers and similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of such Discount Bonds of the same maturity was sold constitutes original issue discount, which is excluded from gross income for federal income tax purposes to the same extent as interest on the Discount Bonds. Further, this original issue discount accrues over'the term of each Discount Bond oil the basis of a constant yield to maturity and the basis of each Discount Bond acquired at such initial offering price by an initial purchaser of such Discount Bonds will be increased by the amount of such accrued original issue discount. City of Renton, Washington July 12, 2002 Page 4 Except as stated in the prec ding paragraphs 4, 5 and 6,we express no opinion as to any federal or state tax consequences of the ownership or disposition of the Bonds. The Code contains certain requirements which must be satisfied subsequent to the date of q q issue of the Bonds in order to maintain the exclusion of interest on the Bonds from gross income for federal income tax purposes, including requirements relating to application of the proceeds of the Bonds,use of facilities finance with such proceeds, limitations on income derived from the investment of gross proceeds of th Bonds (as defined in Section 148 of the Code), and rebate to the United States Treasury of cert 'n investment earnings on such gross proceeds. The City has covenanted to comply with these r quirements, and the opinions expressed in paragraphs 4, 5 and 6 assume such compliance. H wever,we have not undertaken and do not undertake to monitor compliance by the City w th such requirements; and failure of the City to comply with such requirements could cause intrest on the Bonds to be included in gross income for federal income tax purposes and to be trefted as an item of tax preference for purposes of the alternative minimum tax on individuals and c rporations, in each case, retroactive to the date of issue of the Bonds. We have not been engage to participate in the preparation or review of, or express any opinion concerning the completeness or accuracy of, the official statement or other disclosure documentation used in connection with the offer or sale of the Bonds, and thus express no opinion concerning the complete less or accuracy thereof. Copies of this opinion lett r may be delivered to the Owners of the Bonds, who may rely on this opinion letter as if it were addressed to them on the date hereof. Subject to the foregoing, this opinion letter may be relied Li on by you only in connection with the issuance of the Bonds and may not be used or relied updn by you or any other person for any other purpose whatsoever, . without in each instance our prioi written consent. We expressly disclaim any responsibility to � advise you or any Owners of any developments in areas covered by this opinin letter that occur after the date hereof. Respectfully submitted, GOTTLIEB,FISHE' : ANDREWS, PLLC By j ir Daniet S. Gottlieb E\renton\water&sewer 2002 ' i 1 I* FSA A Dexia Company July 12,2002 Municipal Bond Insurance Policy No.29279-N With Respect to . $11,980/000 In Aggregate Principal Amount of City of Renton,Washington Wate and Sewer Revenue Bonds,2002 I Ladies and Gentlemen: I am Associate General Counsel of Financial Security Assurance Inc., a New York stock insurance company ("Financial Security"). You have requested my opinion in such capacity as to the matters set forth below in connection with the issuance by Financial Security of its above-referenced policy (the "Policy"). In that regard, and for purposes of this opinion, I have examin d such corporate records, documents and proceedings as I have deemed necessary and appropriate. Based upon the foregoing, I am of the opinion that: 1. Financial Security is a sto,k insurance company duly organized and validly existing under the laws of the State of New York and authorized to transact financial guaranty insurance business therein. 2. The Policy has been duly uthorized, executed and delivered by Financial Security. 3. The Policy constitutes the valid and binding obligation of Financial Security, enforceable in accordance with its terms, ubject, as to the enforcement of remedies, to bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other similar laws affecting the enforceability of creditors' rights generally applicable in the event of the bankruptcy or insolvency of Financial Security and to the application of general principles of equity. In addition, please be advised thl t I have reviewed the description of the Policy under the caption "BOND INSURANCE POLICY — Bond Insurance Policy" in the official statement relating to the above-referenced Bonds dated July 1,2002 (the"Official Statement"). There has not come to my attention any information which would cause me to believe that the description of the Policy referred to above, as of the date of the Official Statement or as of the date of this opinion, contains any untru statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Please be advised that I express no opinion with respect to any information contained in, referred to or omitted from under the caption"BOND INSURANCE POLICY—Financial Security Assurance Inc." I am a member of the Bar of the State of Texas, and do not express any opinion as to the law of any other state except for the matters expressly set forth in the foregoing opinion. Very truly yours, .-002/6../.. -6 opw: iQ...„ Robert J. David Associate General Counsel City of Renton, 1055 S. Grady, Renton,Washington 98058. D.A. Davidson&Co., Bank of America Tower, 701 Fifth Avenue, Suite 1200, Seattle,Washington 98101. Financial Security Assurance One Market•1550 Spear Tower•San Franci co,California 94105•Tel:415.995.8000•Fax:415.995.8008 New York•Dallas•San Francisco•London•Madrid•Paris•Singapore•Sydney•Tokyo CL SING MEMORANDUM $11,980,000 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 CL SING DATE: July 12, 2002 This memorandum outlineshe actions taken in connection with the issuance and delivery of the above-referenced bonds (the Bonds"). The issuance and delivery of the Bonds, in exchange for payment in full therefor(the"Closing"), was held at the offices of Gottlieb, Fisher &Andrews,PLLC ("Bond Counsel!'), 1325 Fourth Avenue, Suite 1200, Seattle, Washington 98101, commencing at 9:00 a.m., on July 12, 2002. The delivery of all docume is and all other actions taken at the Closing were considered to have been made and taken simultaneously, and no delivery or action was considered to have been made or taken until all deliveries and actions constituting a part of the Closing were completed. Capitalized terms defined ' Ordinance No. 4976 (the"Ordinance") of the City of Renton, Washington(the"City"), rid used herein shall have the same meanings when used in this memorandum, unless the context otherwise directs. I. cctions Taken Prior to Closing A. ' Authorization of Issuance and Sale of the Bonds. On July 1, 2002, pursuan to the Bond Ordinance, the City, authorized, inter alia, the issuance and delivery of the Bon s to provide funds to pay part of the costs of(1) carrying out • certain capital improvements of to waterworks utility; fixing the date, form, denominations, maturities, interest rates, terms and covenants of the bonds; providing for bond insurance, and (2)provided for the sale and delivery of the Bonds to D.A. Davidson & Co., Seattle, Washington (the"Underwriter") and the execution and delivery, on behalf of the City, of the Bond Purchase Agreement. B. Execution of Bond Purchase Agreement. The Bond Purchase Agreement was executed by the City and the Underwriter on July 1, 2002. f:\renton\water sewer 02 1 i C. Commitment for Bond Insurance. On June 27, 2002, Financial Security Assurance Inc. (the"Bond Insurer") issued its commitment to issue a municipal bolnd insurance policy for the Bonds (the"Bond Insurance Policy"), upon the payment of a pre ium of$54,223.53 and the satisfaction of certain conditions set forth in the commitment. D. Preparation and Execution of the Bonds. it The Bonds, in form prescri led by the Bond Ordinance and approved by the Underwriter, were prepared by Bond Counsel, manually executed by the Mayor and the City Clerk of the City and impressed with the seal of the ity. E. Authentication of the Bonds. The executed Bonds were authenticated byThe Bank of New York, the Fiscal Agency of g Y the State of Washington in New Ylork,New York (the"Bond Registrar"), and were and were held by the Bond Registrar in escr w for The Depository Trust Company("DTC"),New York, New York, pending the completio of the Closing.. F. Delivery of Documents to Bond Counsel. All of the other agreements, certificates, letters, opinions and documents listed on Exhibit A hereto were prepared by the persons listed under the heading"Responsibility" on Exhibit A, _ and were delivered by such persons to Bond Counsel to be held in escrow by Bond Counsel pending the completion of the Closing. II. Actions Taken at Closing A. Review of Documents. All of the agreements, certificates, letters, opinions and other documents listed on Exhibit A hereto were reviewed (to the extent each deemed necessary)by the City,the Underwriter and all other persons having executed or having any interest in any document listed on Exhibit A hereto, and all of said persons i 4 dicated to Bond Counsel their approval of the form and substance of such documents. B. Execution of Documents. All of the agreements, certificates, letters, opinions and other documents listed on Exhibit A hereto which required execution and had not previously been executed,were executed by the appropriate persons an delivered to Bond Counsel and were held in escrow by Bond Counsel pending the completi n of the Closing. f:\renton\water sewer 02 2 C. No Litigation. The City confirmed that no litigation or other proceedings were pending or threatened regarding the Bonds or affecting the transaction. D. Payment of Purchase Price. On the date of Closing, theI nderwriter paid, on behalf of the City, to the Bond Insurer, by means of a wire transfer, the premium for the Bond Insurance Policy in the amount of $54,223.53. The Underwriter paid o the City the sum of$11,867,101.84, said sum being full payment of the balance of the purchase price therefor, computed as follows: Principal Amount of the Bonds $11,980,000.00 Plus: Original Issu?Premium 44,346.40 Plus: Accrued Interest from 7/1/02 16,778.97 Less: Underwriter's Discount (119,800.00) Purchase Price of t e Bonds $11,921,325.37 Less: Premium fo Bond Insurance (54,223.53) Policy Balance $11,867,101.84 Said amount was paid in ame day funds by means of a federal funds wire transfer. E. Application of Purchase Price Proceeds. Immediately upon receip of the net purchase price of the Bonds, the City made the following deposits, as required pursuant to the Bond Ordinance: 1. The accmied interest on the Bonds, in the amount of$16,778.97, was deposited into the Princiial and Interest Account to be applied to the payment of interest on the Bonds on Decem1Ser 1, 2002. 2. The remaining net proceeds of the Bonds, in the amount of $11,850,322.87 was deposited into the Project Fund to be applied to pay the costs of the Project, including Bon issuance costs. F. Reserve Account Transfer. 'deposit ut shall The City will make no of Sale Proceeds into the Reserve Account,b transfer thereto on the Date of/Issue the sum of$542,300.00 from the balance in the reserve account created for the City's Water and Sewer Refunding and Improvement Revenue Bonds, 1992, that were fully retired as of June 1, 2002. f:\renton\water sewer 02 3 G. Release of Bond Documents. The City, the Underwriter, t e Bond Insurer and all other persons having executed or having an interest in any document isted on Exhibit A hereto, or their authorized representatives, authorized Bond Counsel to release and deliver to the persons entitled to the same, the agreements, certificates, letters, opi ions and other documents listed on Exhibit A hereto which had been held in escrow by Bond C unsel pending the completion of the Closing. H. Delivery of the Bon s; Completion of Closing. Bond Counsel called the Bdnd Registrar and authorized them to authorize DTC to release the Bonds upon order from the Underwriter. Bond Counsel then declared that the Closing was completed. III Actions Taken After Closing A. Loose Transcript . Three loose copies of the Transcript of Proceedings were delivered to the Bond Insurer, sho ly after the completion of Closing. B. Bound Transcripts. Bound Transcripts of Proceedings were distributed by Bond Counsel after Closing, as follows! City of Renton 1 D.A. Davidson& Co. 1 Gottlieb, Fisher&Andrews,PLLC 1 TOTAL 6 f:\renton\water sewer 02 4 EXHIBIT A $11,980,000 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 DOCUMENT RESPONSIBILITY Certificate as to Transcript Bond Counsel Ordinance No. 1450 authorizing th sale City and issuance of the 1953 Bonds Ordinance No. 3188 authorizing t e sale and issuance of the 1977 Bonds City Ordinance No. 3720 authorizing t e sale and issuance of the 1983 Bonds City Ordinance Nos. 4410, 4480 and 4709 authorizing the sale and issuance of the 1993, 1994 and 1998 Bonds, respectively City Ordinance No. 4976 authorizingt he sale and issuance of the Bonds City Excerpts from Minutes of City Council Meeting re Ordinance No. 4976 City Affidavit of Publication of Ordinance No. 4976 City Letter of Representations Bond Counsel Bond Purchase Agreement Bond Counsel Preliminary Official Statement Underwriter Official Statement Underwriter Rating Letters Rating Agencies Commitment Letter Bond Insurer Disclosure Certificate Bond Counsel Disclosure,No Default and Tax Certificate of Bond Insurer Bond Insurer f:\renton\water sewer 02 A-1 Parity Debt Certificate City Engineer Tax Exemption and Nonarbitrage Certificate Bond Counsel Underwriter's Certificate Bond Counsel Signature, Incumbency and No Liti ation Certificate Bond Counsel Certificate Re Authentication and egistration of the Bonds Bond Counsel Specimen Bond Bond Counsel Specimen Insurance Policy Bond Insurer Certificate of Delivery and Payment Bond Counsel Underwriter's Receipt Bond Counsel IRS Form 8038-G G and Affidavit o Mailing Bond Counsel Bond Report Form 101 Underwriter Approving Opinion of Bond Counsel Bond Counsel Opinion of Counsel to Bond Insulrer Bond Insurer Closing Memorandum Bond Counsel f:\renton\water sewer 02 A-2 GOTTLIE , FISHER & ANDREWS, PLLC ie ATTORNEYS AT LAW . CITY OF RENTON OCT 1 8 2002 RECEIVED MEMORANDUM CITY CLERK'S OFFICE - TO: Members of the Fin•ncing Team (see attached list) FROM: Shawna Holma iv'I: Legal Assistant RE: $11,980,000 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 DATE: October 15, 2002 Enclosed please find yourbound transcript(s)for the above-referenced financing. If you have any questions, please give e then Judy Andrews or me a call at (206) 654-1999. Enclosure • City of Renton 'OCT 1 0 2002 Finance& IS Administration i I 1325 Fourth Avenue,Suite 1200 . Seattle,WA 98101-2531 (206) 654-1999 Phone . (206) 654-8725 Fax $11,980,000 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Distribution List Ms. Victoria Runkle Mr. Fred Eoff Director of Finance &Information Systems D.A. Davidson &Co. City of Renton Bank of America Tower 1055 South Grady Way 701 Fifth Avenue, Suite 3100 Renton, Washington 98058 Seattle, WA 98104 • 0 o, 44i CIT )F RENTON _ �c , ma/ qCity Clerk Jesse Tanner,Mayor Bonnie I.Walton September 10, 2002 • • • Shawna Holman, Legal Assistant Gottlieb,Fisher &Andrews, PLLC 1325 Fourth Avenue, Suite 1200 Seattle, WA 98101-2531 • Re: Document Request Dear Ms. Holman: • Per our conversation and your e-mail of September 6'2002, I enclose the following . documents: For.Limited Tax General Obligation Bonds, 2002: • Copy of Minutes of City Council,Meeting adopting Ordinance 4977 (7/15/2002) • Copy of Affidavit of ublication of Ordinance No: 4977 • ForWater and=SewerRevenue.B:onds;2002:::i'; • Ordinance No. 1450 luthorj.zing the sale and issuance of the 1953 Bonds; • • Ordinance No. 3720 authorizing the'sale,and issuance of the 1977 Bonds; • Ordinance No. 4410 authorizing the sale,and issuance of the 1993 Bonds; . • Ordinance No. 4480 aluthoriaing.the sale and issuance of the 1994 Bonds; • Minutes of City Council Meeting adopting Ordinance 4.976 (7/1/2002) • • Copy of Affidavit of!iublication of-Ordinance No. 4976. . • If I can be of further assistance, P lease feel free to contact me. • Sincerely, I )66`r1 i'Ltd'JJ Watt, ' _ . Bonnie I. Walton . . • City Clerk . Enclosures i cc: Victoria Runkle,Finance &IS Administrator 1055 South Grady Way-Renton,Washington 98055-(425)430-6510/FAX(425)430-6516 RENTON Calk OF THE CURVE Cyt This paper contains 50%recycled material,30%post consumer y1,.;: i� t f x�-..' CITY'"OF''RENTi�N= .�`>,: ;- AFFIDAVIT OF PUBLICATION •1:,e►;; :01.TED BY�'RE•N7QN_:.r:., �r` '.Followlri9j�;� 0,0it;sumiOrNit� < Barbara Alther,first duly sworn on oath states that he/she is the Legal Clerk of the :ordinarices;adopted'by,file Renton pity 406:1nc1arituly 1-;'2002:'sy, 7q,. R :.:sc SOUTH COUNTY JOURNAL .l-.. ORDINANCE•N0 4s75 ;_ •:'=- An; GOTTLIEB, FISHER & ANDREWS, PLLC ATTORNEYS AT LAW CIN OF RENTON OCT 1 8 2002 RECEIVED MEMORANDUM CITY CLERKS OFFICE TO: Members of the Financing Team (see attached list) FROM: Shawna Holma •A Legal Assistant RE: $11,980,000 CITYIOF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 DATE: October 15, 2002 Enclosed please find your bound transcript(s) for the above-referenced financing. If you have any questions, please give either Judy Andrews or me a call at(206) 654-1999. Enclosure • • city of Renton OCT 1 .8 2002 Finance& IS Administration 1325 Fourth Avenue,Suite 1200 . Seattle,WA 98101-2531 (206) 654-1999 Phone . (206) 654-8725 Fax 1 . • • $11,980,000 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Distribution List Ms. Victoria Runkle Mr. Fred Eoff Director of Finance &Information Systems D.A. Davidson &Co. City of Renton Bank of America Tower 1055 South Grady Way 701 Fifth Avenue, Suite 3100 Renton, Washington 98058 Seattle, WA 98104 • CITI 3F RENTON or < City Clerk Jesse Tanner,Mayor Bonnie I.Walton September 10, 2002 Shawna Holman, Legal Assistant Gottlieb, Fisher &Andrews, PLLC 1325 Fourth Avenue, Suite 1200 • Seattle, WA 98101-2531 Re: Document Request Dear Ms. Holman: Per our conversation and your e-mail of September 6'2002, I enclose the following documents: For.Limited Tax General Obligation Bonds; 2002: • Copy of Minutes of City Council,Meeting adopting Ordinance 4977 (7/15/2002) • Copy of Affidavit of Publication of Ordinance No. 4977 For Water and;°.S:ewer.RevenueiBonds;2002: • Ordinance No. 1450 authorizing the sale and issuance of the 1953 Bonds; • Ordinance No. 3720 authorizing the' 'arid issuance`of the 1977 Bonds; • Ordinance No. 4410 authorizing the sale.,and issuance of the 1993 Bonds; • Ordinance No. 4480 authorizing the sale and issuance,of the 1994 Bonds; • Minutes of City COuncil Meeting adopting Ordinance 4976 (7/1/2002) • Copy of Affidavit of Publication of Ordinance No. 4976. If I can be of further assistance, please feel free to contact me. Sincerely, rrintt I LUa,t Bonnie I. Walton City Clerk Enclosures cc: Victoria Runkle, Finance &IS Administrator • 1055 South Grady Way-Renton,Washington 98055-(425)430-6510/FAX(425)430-6516 RENTON �� AHEAD OF THE CURVE 0 This paper contains 50%recycled material,30%post consumer SITY�dF^RSNT45N:„�-:i�;"''.-,;3 : ,l = filOt'Terr t3ribFiDlt7Ah1GES b t'% AFFIDAVIT OF PUBLICATION ;, ;4 O110E OF ORD oov..t ,:v.�r =;.x tir . 4- 1 CokuNCt .';W7 ',t<t€ �. •Followingi:,,$$,,§,.. isurrtimaryaof:;. Barbara Alther,first duly sworn on oath states that he/she is the Legal Clerk of the ordinarices;adbped'by fhe R}erifon City �a0'oiiricil?ori�J'dly?1�L�O�,:. , SOUTH COUNTY JOURNAL r."-OR.DINANCE NO:4J7b°,.? • An'orditQance;ot the>City-ofi::Renton;: 600 S.Washington Avenue,Kent,Washington 98032 Wast ington,=::amendin Chapters 4=9' :an l 4=9;:;0 5,itie_�IV4r�(Deye,.lopm96f. Regulations 'of.,,,Ordinance:No. 4260., a daily newspaper published seven(7)times a week. Said newspaper is a legal newspaper of entitled.`Code"of Ge'ner'a1.00rd'inances general publication and is now and has been for more than six months prior to the date of -of'thb City'of3'Rento'n;°-Was`hirigtor.Y;to' publication, referred to, printed and published in the English language continually as a daily implementsRCW;:36_t70A,470,:.;,,0�: ,. T.: �� - newspaper in Kent, King County,Washington. The South County Journal has been approved as a .governing_:,;;Dgvelppragnt:�3,,Regulation. ,amerdmrC:cycles.��t,��`i',.-,�trt:i,�s:�':,. ____ _-- - legal newspaper by order of the Superior Court of the State of Washington for King County. .Effecti,3e:'8/$/,200 :' .;:.r The notice in the exact form attached,was published-in the South County Journal-(and -- - - - ' '11,-`'P--':ORDINANCE'NO 497iyV4-'0'°P not in supplemental form)which was regularly distributed to the subscribers during the below '•An'tordinance ofithe;City?of•.Renton,: stated period. The annexed notice,a washingto,1149. ating;tg;;the,w,eterworks.• util' of;' the:>,Gityi„incibd ng e the. rte`.+•'r-..� ,,, t�,.' •, Ord 4975&4976 ae Vedai.ge sfor?mtie aissb cee&eo'} • :',$1 980 0O 3r agg eg to fi:pqncipalt as published on: 7/5/02 i'am9 n't'bLWater a-r�§o.k- eve er riuee Bonds,-..f2002°',ofe the;;Cit' q ori;th The full amount of the fee charged for said foregoing publication is the sum of$87.00,charged to purpgse;fof�;ab-amtngathe,fu prig'-th• 9 9 9 9 which,�to,pay;th ;costs`�of carrying'ouf Acct. No.8050640. ,certlriPOa°pital,rimproGemerits'-.of the• water,woe s't4iiiiiMixidglljOate form; The cost above includes a$6.00 fee for the printing of the affidavits. ,denomiaativ0P{n: mat, i,ies;; ;interest.i nates;;;terms:;:(a;n df,cove nants,-,of:the: librid;:poding' or bQnnsuraried;: Legal Number 10554 ;� `' i - lT ; iandacovn tsae=andi•,proyaing Y:forth '.dli(eryfroale= onds'.!!tD.A. . gayidsoh&CoSeattle;lNashingtn. 1 Legal Clerk, South County Journal :Effectve let//goo :;ach.3.1,5 c-=e`: • f:;A-coinpleto.4di,;:of.each curpoce>s available.,at`'R'enfon%'.City,iHall 1055' )• �� "°Southe:G'rady.Ways and=posted at',th& Subscribed and sworn before me on thi> �E%`7 day o.1...�/ ,2002 •Renton:!4-Public:-<Librar"ies;'°;1`00.1;Mill' � iAvenue r,Sgutt lx and;{.29,02::NE:;.1.2t ;: 0,011111,H/0, /'/ ' , Street';;;::.U,pon'„ce`quest,$toA�,tt g:.City; c 2 ). 'p py: ��``,\�,�N L' C,g,S 1//i, / � I wie Iso tie mai ed;fo�a�ee51.0'.a'co s N Notary Pu lic of the State of Washington : t - •:r; ; ` SIO fk �p � ;Bonnie I:fWOOt1`;;,. ..,,. •, ; ' ;'Z' '0i1,Z. residing in Renton :Ci ioferwcableManageris f tV ,; Piz. . . .•ifJ� �OTAgy `.i 9 County,Washingtonu �:... ,,; Kin Coun ,Wa ,. Sogthr,;,iCounty.= •?....,..,•••.,,•,,-,�` li§Ke'da�ln�:�-the�-. ; u'_rl`July 5;20 2'10554` , ..;;: s- w.:6,rf rm`n_.st 1%4.._ f'i (�kav',r::r {. •• '°UB L\b �;' = �ict+A��9 c.......1.• �o��o. ` , U -, \--, 4 _ \ , • SIGNATURE IDENTIFICATION, INCUMBENCY AND NO LITIGATION CERTIFICATE I,BONNIE WALTON, hereby certify that: I1 1. I am the duly selected qualified and acting City Clerk of the City of Renton, Washington(the "City"). 2. This Certificate is made and delivered in connection with the authorization, sale, issuance and delivery of the $11,980,000 CITY OF RENTON,WASHINGTON,WATER AND SEWER REVENUE BONDS, 2002 (the "Bonds"). 3. Pursuant to Ordinance N .. 4976 of the City(the"Bond Ordinance"), authorizing the issuance and sale of the Bonds, each of the Bonds were duly executed on behalf of the City with the manual signature of JESSE TANNER, the Mayor of the City; and with my manual signature, in my capacity as City Clerk. Each of such officers was, on the date of execution of the Bonds, the duly elected or appointed, qualified and acting officers of the City and such signatures are their genuine signatures. 4. The seal of the City appearing on the Bonds is the legally adopted,proper and official seal of the City. 5. The following City Council members were incumbent on July 1, 2002,the date on which the City Council adopted the Bond Ordinance, and they remain incumbent in such , positions on this date: Dan Clawson Terri,Briere Randall Corman Kathy Keolker-Wheeler Toni Nelson King Parker Donald Persson 6. No litigation or other proceedings are pending or,to the best of my knowledge, threatened in any court or other tribunal of competent jurisdiction, state or federal, in any way: (a) Restraining or enjoining the sale or delivery by the City of the Bonds; (b) Questioning in any manner the authority of the City to issue, or the issuance or validity of the Bonds; (c) Questioning the constitutionality,of any statute, ordinance or resolution, or the validity of any proceedings, authorizing the issuance of the Bonds; 'er 02 1 1 (d) Questioning the validity or enforceability of the Bond Ordinance; (e) Contesting in any way the completeness, accuracy or fairness of the Official Statement; (0 Questioning the titles of any officers of the City under the laws of the State of Washington; or (g) Which might in any material respect adversely affect the transactions contemplated herein and in the Official Statement to be undertaken by the City or the financial condition of the City. IN WITNESS WHEREOF, I have hereunto subscribed by official signature as of the 12th day of July, 2002. /64-74,1411.; WL2 t to BONNIE WALTON City Clerk City of Renton, Washington f:\renton\water sewer 02 I 2 i REGISTERED REGISTERED NO. 1 $115,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: ; Maturity Date: CUSIP NO: 2.50% ! December 1, 2003 760167 RC 2 Principal Amount: ONE HUNDRED FIFTEEN THOUSAND AND NO/100 DOLLARS Owner: CEDE&CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond, both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of:the City(the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 This Bond is not a general obligation of the City, but is a special fund revenue obligation of the City. The principal hereof and the interest hereon are payable solely out of the "2002 Waterworks Revenue Bond Account" (the "Bond Fund"), a special account in the Waterworks Revenue Parity Bond Fund created pursuant to the Bond Ordinance. Pursuant to the Bond Ordinance, the City has pledged and bound itself to set aside and pay into the Bond Fund out of the Gross Revenue fixed amounts without regard to any fixed proportion, sufficient to pay the principal and/or interest payments;on the Bonds and to maintain an amount of money and assets in the Reserve Account at the level required by the Bond Ordinance, all within the times provided by the Bond Ordinance. /The City has pledged the Gross Revenue to the payments to be made into the Bond Fund as set forth in the Bond Ordinance, and the Bonds shall constitute a lien and charge upon such Gross Revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense, except that the lien and charge on such revenue for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds, the 1998 Bonds and any Future Parity Bonds (all as defined in the Bond Ordinance). The Owner of this Bond shall not have any claim for payment of the principal hereof or the interest hereon against the City except for payment from the Bond Fund and the amount of Gross Revenue pledged thereto, nor shall the Owner of this Bond have any claim against the State arising from this Bond. This Bond is one of a duly authorized series of bonds of the City designated as the CITY OF RENTON, WASHINGTON,.WATER AND SEWER REVENUE BONDS, 2002 (the "Bonds"). The Bonds are issued in the aggregate principal amount of$11,980,000 pursuant to the Bond Ordinance and the laws of the State for the purpose of providing a part of the funds necessary to carry out certain additions to and betterments and extensions of the Waterworks Utility, and to pay the costs related to the sale and issuance of the Bonds, all as specified in the Bond Ordinance. The Bonds maturing in the years 2003 through 2012, inclusive, are not subject to redemption prior to their stated maturity dates. Bonds maturing on or after December 1, 2014, are subject to redemption at the:option of the City prior to their stated maturity dates, from funds from any source, at any time, in:whole or in part on or after December 1, 2012, within one or more maturities selected by the'City (and by lot within a maturity in the manner determined by the Bond Registrar or the Custodian) at a price of par plus accrued interest to the date of redemption. Any Bond in the principal amount of greater than$5,000 may be partially redeemed in any integral multiple of$5,000. Prior to the Book-Entry Termination Date, the Bonds shall be partially redeemed in accordance with the Letter of Representations. From and after the Book- Entry Termination Date, in the event of a partial redemption of a Bond, upon surrender of such Bond at the principal corporate trust office of the Bond Registrar, a new Bond or Bonds (at the option of the Owner) of the same maturity and interest rate and in the aggregate principal amount remaining unredeemed shall be authenticated and delivered to the Owner, without charge to the Owner therefor, in any denomination authorized by the Bond Ordinance and selected by the Owner. 2 Notice of any such redemption shall be given by or on behalf of the City not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the Owner of any Bond to be redeemed at the address appearing on the Bond Register on the day notice is mailed. Such notice requirement shall be deemed to be complied with when notice is mailed as provided in the Bond Ordinance, whether or not it is actually received by the Owner of any Bond. If such notice to the Owners shall have been given and the City shall have set aside, on the date fixed for redemption, sufficient money for the payment of all Bonds called for redemption, the Bonds so called shall cease to accrue interest after such redemption date, and all such Bond's shall be deemed not to be outstanding under the Bond Ordinance for any purposes, except that the Owners thereof shall be entitled to receive payment of the redemption price and accrued interest to the redemption date from the money set aside for such purpose. This Bond may be transferred by the Owner hereof or by such Owner's authorized agent but only in the manner and subject to the limitations set forth in the Bond Ordinance. Prior to the Book-Entry Termination Date, the beneficial ownership of the Bonds may only be transferred on the records established and maintained by the Custodian. On and after the Book-Entry Termination Date, transfer of this Bond shall be valid only if it is surrendered at the principal corporate trust office of the Bond Registrar, with the assignment form appearing on such Bond • duly executed by, or accompanie,'d by a written instrument of transfer in form satisfactory to such Bond Registrar duly executed by, the Owner or such Owner's duly authorized agent, in a manner satisfactory to such Bond Registrar. Upon such surrender, the Bond Registrar shall cancel the surrendered Bond and shall authenticate and deliver, without charge to the Owner or transferee therefor(other than any governmental fees or taxes payable on account of such transfer), a new Bond or Bonds (at the option of lithe new Owner), naming as Owner the person or persons listed as the assignee on the assignment form appearing on the surrendered Bond, of the same maturity and interest rate, for the same aggregate principal amount, and in any authorized denomination selected by the new Owners, in exchange for such surrendered and cancelled Bond. The Bonds are subject to defeasance, in whole or in part, in the manner provided in the Bond Ordinance. If the Bonds are defeased, then all right and interest of the Owners of the defeased Bonds in the covenants of the Ordinance, in Gross Revenue and in funds and accounts obligated to the payment of the Bonds, other than the right to receive the funds so set aside and pledged to the defeasance of the defeased Bonds (the "Trust Account"), shall cease and become void. If this Bond is defeased the Owner hereof shall have the right to receive payment of the principal of and interest hereon from the Trust Account and, if the funds in the Trust Account are not available for such payment, shall have the residual right to receive payment of the principal of and interest on the defeased Bonds from Gross Revenue without any priority of lien or charge against such revenue or covenants with respect thereto except to be paid therefrom. The City and the Bond Registrar may deem and treat the Owner hereof as the absolute owner hereof for all purposes and neither the City nor the Bond Registrar shall be affected by any notice to the contrary. 3 Reference is made to the Bond Ordinance for other covenants and declarations of the City and other terms and conditions upon which this Bond has been issued, which terms and conditions are made a part hereof by this reference. The City unconditionally covenants that it will keep and perform all of the covenants of this Bond and the Bond Ordinance. Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Bond Registrar for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment • is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL,inasmuch as the registered Owner hereof, Cede &Co., has an interest herein. It is certified that all acts, conditions and things required by the Constitution and statutes of the State to have happened, been done and performed precedent to and in the issuance of this Bond have happened,been done and performed, and that the issuance of this Bond does not violate any constitutional, statutory or other limitation upon the amount of indebtedness that the City may incur. This Bond shall not be vapid or become obligatory for any purpose unless and until the certificate of authentication hereon shall have been manually signed by an authorized signatory of the Bond Registrar. 4 lN WITNESS WHEREOF,Ithe City has caused this Bond to be executed on behalf of the City by the manual signatures of the Mayor and City Clerk, and the City seal to be impressed hereon, as of the 1st day of July, 2002. CERTIFICATE OF AUTHENTICATION CITY OF RENTON,WASHINGTON DATE OF AUTHENTICATION: By. •Mayor 01' This Bond is one of the City of R nton, Washington, Water and Sewer Revenue By 6071/12(.14 ZI)GLith&- Bonds, 2002, described in the Bond Ordinance. City Clerk WASHINGTON STATE FISCAL AGENCY, Bond Registrar [SEAL] 0.4 OF 06‘ By Authorized Signatory 434 ,* sEAL "Yr 6, 1E-D510. olliminnwoo 5 STATEMENT OF INSURANCE Financial Security Assurance Inc. ("Financial Security"), New York, New York, has delivered its municipal bond insurance policy with respect to the scheduled payments due of principal of and interest on this Bond to The Bank of New York, New York, New York, or its successor, as paying agent for the Bonds (the "Paying Agent"). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from Financial Security or the Paying Agent. 6 ASSIGNMENT For value received, the undersigned Owner does sell, assign and transfer unto: (name,address and social security or other identifying number of assignee) the within-mentioned Bond and hereby irrevocably constitutes and appoints to transfer the same on the registration books of the Bond Registrar with full power of substitution in the premises. Dated: Owner (NOTE: The signature above must correspond with the name of the Owner as it appears on the front of this Bond in every particular, without alteration or enlargement or any change whatsoever.) Signature Guaranteed: (NOTE: Signature must be guaranteed by an eligible guarantor.) f:\renton\watersewer2002 7 GISTERED NO. 2 REGISTERED UNITED STATES OF AMERICA $120,000 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: 2.50% •CUSIP NO: December 1, 2004 760167 RD 0 Principal Amount: ONE HUNDRED TWENTY THOUSAND AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June 1 and December;l of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond, both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City (the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior tothe Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 REGISTERED REGISTERED NO. 3 $135,000 UNITED STATES OF AMERICA • CITY:OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: CUSIP NO: 2.75% ' December 1, 2005 760167 RE 8 Principal Amount: ONE HUNDRED THIRTY-FIVE THOUSAND AND NO/100 DOLLARS Owner: CEDE&CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond, both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City(the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 REGISTERED REGISTERED NO. 4 $110,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: : Maturity Date: CUSIP NO: 3.25% December 1, 2006 760167 RF 5 Principal Amount: ONE HUNDRED TEN THOUSAND AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forthi above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for,payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest'shall continue to accrue at the Interest Rate per annum set forth above until this Bond,both principal and interest, is paid in full. Capitalized words and phrases used but not defined hereinshall have the meanings set forth in Ordinance No. 4976 of the City (the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York(collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 TERED REGISTERED N W. 5 $110,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: ! Maturity Date: CUSIP NO: 3.50% ! December 1, 2007 760167 RG 3 Principal Amount: ONE HUNDRED TEN THOUSAND AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton, Washington (the "City"), for value received,promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest hall continue to accrue at the Interest Rate per annum set forth above until this Bond, both principal and interest, is paid in full. • I , Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City (the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 -I f / i REGISTE' D REGISTERED NO. 6 $110,000 UNITED STATES OF AMERICA CITY OF RENTON,WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: CUSIP NO: 3.50% i December 1, 2008 760167 RH 1 'Principal Amount: ONE HUNDRED TEN THOUSAND AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed Ion the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond, both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City (the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York(collectively, the "Bond Registrar"). From and after the • Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 GISTERED REGISTERED NO. 7 $455,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATERS AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: CUSIP NO: 3.70% December 1, 2009 760167 RJ 7 Principal Amount: FOUR HUNDRED FIFTY-FIVE THOUSAND AND NO/100 DOLLARS Owner: CEDE & CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond, both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City (the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall bepaid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. I 1 _ I • REGISTERED REGISTERED NO. 8 $630,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: CUSIP NO: 3.90% December 1, 2010 760167 RK 4 • Principal Amount: SIX HUNDRED THIRTY THOUSAND AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; arid.to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest lias been paid or duly provided for; payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond,both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City(the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date,' to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar (the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 • i . . i REGISTERED REGISTERED NO. 9 $1,010,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: CUSIP NO: 4.00% I December 1, 2011 760167 RL 2 Principal Amount: ONE MILLION TEN THOUSAND AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed',on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond,both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City(the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York(collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the"Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 r i i I • REGISTERED REGISTERED NO. 10 $1,025,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: CUSIP NO: 4.10% December 1, 2012 760167 RM 0 Principal Amount: ONE MILLION TWENTY-FIVE THOUSAND AND NO/100 DOLLARS Owner: CEDE & CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months).at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond,both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No._4976 of the City (the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon. presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date,interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date,by wire transfer on the interest payment date to an account within the United States. 1 r REGISTERED REGISTERED NO. 11 $710,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 I r Interest Rate: Maturity Date: CUSIP NO: 4.30% December 1, 2014 760167 RP 3 Principal Amount: SEVEN HUNDRED TEN THOUSAND AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond,both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City(the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, • for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York,New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 REGISTERED REGIS 1'ERED NO. 12 $735,000 UNITED STATES OF AMERICA • CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: CUSIP NO: 4.40% December 1, 2015 760167 RQ 1 Principal Amount: SEVEN HUNDRED THIRTY-FIVE THOUSAND AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June.1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest,shall continue to accrue at the Interest Rate per annum set forth above until this Bond, both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City(the "Bond Ordinance"),unless otherwise noted. Both the principal of and'interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and, interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall.be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten 1 i \I\ 1 REGISTERED REGISTERED NO. 13 $765,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: CUSIP NO: 4.50% December 1, 2016 760167 RR 9 Principal Amount: SEVEN HUNDRED SIXTY-FIVE THOUSAND AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton,Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interestas been paid or duly provided for,payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond,both principal and interest, is paid in full. Capitalized words and pirases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City (the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or,if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 REGISTERED REGISTERED NO. 14 $805,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: CUSIP NO: 4.60% December 1, 2017 760167 RS 7' Principal Amount: EIGHT HUNDRED FIVE THOUSAND AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed,on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interesthas been paid or duly provided for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond, both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City (the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York(collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date,,interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar (the "Bond Register"), or,if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 REGISTERED/ 1 / , _ i .. REGISTERED $1,000,000 NO. 15 UNITED STATES OF AMERICA CITY OF RENTON,WASHINGTON 1 WATER SAND SEWER REVENUE BONDS, 2002 Maturity Date: CUSIP NO: Interest Rate: 5.25% December 1, 2018 760167 RT 5 I Principal Amount: ONE MILLION AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton,Washington (the"City"), for value received, promises to pay to the Owner hereof the Principal Aml unt set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed lion the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided_for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond,both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City (the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York,New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar (the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date,by wire transfer on the interest payment date to an account within the United States. 1 REGISTERED REGISTERED NO. 16 $1,000,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: i Maturity Date: CUSIP NO: 5.25% December 1, 2019 760167 RU 2 Principal Amount: ONE MILLION AND NO/100 DOLLARS Owner: CEDE&CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein,then interest'shall continue to accrue at the Interest Rate per annum set forth above until this Bond, both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City(the "Bond Ordinance"), unless otherwise noted. Both the principal of andjinterest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New'York(collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date,to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar (the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 REGISTERED REGISTERED NO. 17 $1,000,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: CUSIP NO: 5.25% December 1, 2020 760167 RV 0 Principal Amount: ONE MILLION AND NO/100 DOLLARS Owner: CEDE & CO. The City of Renton, Washington (the "City"), for value received,promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for,payable on December 1, 2002, and on June 1 and Decemlier 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond,both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City(the "Bond Ordinance"), unless otherwise noted. Both the principal of and'interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 REGISTERED REGISTERED NO. 18 I $1,045,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date:_ CUSIP NO: 5.25% December 1, 2021 760167 RW 8 Principal Amount: ONE MILLION FORTY-FIVE THOUSAND AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computed on the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond, both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City(the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York (collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. 1 i I REGISTERED REGISTERED NO. 19 $1,100,000 UNITED STATES OF AMERICA CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, 2002 Interest Rate: Maturity Date: CUSIP NO: 5.25% December 1, 2022 760167 RX 6 Principal Amount: ONE MILLION ONE HUNDRED THOUSAND AND NO/100 DOLLARS Owner: CEDE &CO. The City of Renton, Washington (the "City"), for value received, promises to pay to the Owner hereof the Principal Amount set forth above, on the Maturity Date set forth above; and to pay interest thereon (computedion the basis of a 360-day year of twelve 30-day months) at the Interest Rate per annum set forth above from the date hereof or from the most recent interest payment date to which interest has been paid or duly provided for, payable on December 1, 2002, and on June 1 and December 1 of each year thereafter to the maturity or earlier redemption hereof. If this Bond is duly presented for payment and not paid at maturity or earlier redemption as described herein, then interest shall continue to accrue at the Interest Rate per annum set forth above until this Bond,both principal and interest, is paid in full. Capitalized words and phrases used but not defined herein shall have the meanings set forth in Ordinance No. 4976 of the City (the "Bond Ordinance"), unless otherwise noted. Both the principal of and interest on this Bond shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owner thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date,principal of this Bond shall be payable upon presentation and surrender of this Bond by the Owner hereof upon maturity or earlier redemption at the principal corporate trust office of either of the fiscal agencies of the State in Seattle, Washington, or New York, New York(collectively, the "Bond Registrar"). From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the registration books for the Bonds maintained by the Bond Registrar(the "Bond Register"), or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date,by wire transfer on the interest payment date to an account within the United States. 1 (SY Ce n + N CITY OF RENTON CITY CLERK DIVISION MEMORANDUM DATE: July 3, 2002 TO: Victo 'a Runkle cc: Paul Kusakabe �/^ / FROM: Suzann Lombard x6521 S ✓ SUBJECT: Ordinance No. 4976 Water and Sewer Revenue Bonds 2002 The attached ordinance has been fully executed. Please transmit copies to bond counsel and retain a copy for your file. A certified copy of the ordinance is also attached, along with two original Bond Purchase Agreements. Thank you. Enclosures: (4) DAVIDSON COMPANIES D.A. Davidson & Co. member SIPC $11,980,000 CITY:OF RENTON,WASHINGTON Waterland Sewer Revenue Bonds,2002 BOND PURCHASE AGREEMENT July 1, 2002 City of Renton,Washington 1055 South Grady Way Renton,WA 98055 On the date hereof, the City Council (the"Council")of the City of Renton, Washington (the"City") adopted an ordinance (the "Ordinance") authorizing the sale, issuance and delivery of the City's Water and Sewer Revenue Bonds,2002 (the"Bonds"), and the City's execution and delivery of this Bond Purchase Agreement (the"Agreement"). In light of such authority, D. A. Davidson & Co. (the "Underwriter")hereby offers to enter into this Agreement with the City. Upon your acceptance, this Agreement shall be in full force and effect in accordance with its terms and shall be binding upon the City and the Underwriter. 1) Upon the terms and conditions and in reliance upon the representations set forth herein, the Underwriter hereby agrees to purchase from the City and the City hereby agrees to sell to the Underwriter all (but not less than all) of the Bonds in the aggregate principal amount of $11,980,000, at an aggregate purchase price of$11,904,546.40, which accounts for the (i) underwriter's discount of'$119,800.00 ($10.00/$1,000 of the par value of the Bonds) and(ii) original issue premium of$44,346.40,together with accrued interest on the Bonds from July 1,2002 to the Closing Date defined herein. The Bonds shall be issued and secured under and pursuant the Ordinance dated July 1, 2002 and shall mature, bear interest and be subject to redemption as set forth in Exhibit A hereto. The Underwriter agrees to make a public offering of the Bonds at the initial offering prices set forth in the Official Statement referred to in Section 2 herein,which prices may be changed from time to time by the Underwriter. Public Finance D.A.Davidson&Co. Old City Hall/Suite 400/221 N.Wall Street/Spokane,WA 99201 Telephone Local 456-8323/Outside Spokane(800)676-8323/Telefax(509)456-6692 Other Washington Offices in Spokane Valley,Spokane South Hill,Pullman,Colville,Kennewick,Wenatchee,Redmond,Friday Harbor,Everett, ahoriioan o.,A CPottb. 2) The City shall deliver or cause to be delivered to the Underwriter, promptly after acceptance hereof, five copies of the Official Statement, substantially in the form of the Preliminary Official Statement dated June 20, 2002' (the "Preliminary Official Statement") with only such changes therein as shall have been accepted by us(such Preliminary Official Statement with such changes, if any, and including the cover page and all appendices, exhibits and statements included therein or attached thereto being called the "Official Statement"). The Official Statement is to be dated July 1, 2002. The City hereby authorizes the distribution by the Underwriter of the Preliminary Official Statement in offering the Bonds for sale to prospective purchasers of the Bonds. 3) On July 12, 2002, or at such other time, or on such earlier or later date as the Underwriter and the City may mutually agree(the"Closing Date"), the Underwriter will accept delivery of the Bonds and pay the purchase price thereof as set forth in Section 1 herein by Federal Reserve System wire transfer in immediately available Federal funds or by any other form of immediately available Federal funds. The Bonds shall be delivered through The Depository Trust Company, New York, New York ("DTC") in definitive form, bearing CUSIP numbers and issued under a book-entry system. 4) The City makes the following representations and warranties: a) The City is a municipal corporation organized and existing under the laws of the State of Washington and is authorized to issue the Bonds, to enter into this Agreement and all other agreements contemplated hereby and to adopt the Ordinance. b) The City has complied to date with all applicable provisions of the laws of the State of Washington in connection with the execution and issuance of the Bonds. c) The Ordinance and this Agreement have been, duly and validly authorized and executed by the City. d) The City has authorized all necessary action to be taken by it for(i)the issuance and sale of the Bonds upon lthe terms set forth herein, in the Official Statement and in the Ordinance; (ii) the execution, delivery, receipt and due performance of this Agreement, the Bonds and the Ordinance and all other agreements contemplated hereby or,required in order to carry out, give effect to and consummate the transactions contemplated hereby; and (iii) carrying out, giving effect to and consummation of the transactions contemplated hereby. e) The Bonds when issued, delivered and paid for as provided for herein and in the Ordinance, will have been duly and validly authorized and issued and will constitute special obligations of the City secured as provided in the Ordinance and as described in the Official Statement. f) To the best knowledge of the City, there are no legal or governmental proceedings pending or threatened, or any basis therefore, wherein an unfavorable decision, ruling or finding would have a material adverse effect on the validity or security of the Bonds, the Ordinance, this Agreement or the transactions contemplated thereby or the power of the City to execute and deliver the Bonds or this Agreement,or adopt the Ordinance. g) As of the date hereof, the Preliminary Official Statement does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made,not misleading. h) The Preliminary Official Statement is deemed "final" in accordance with Rule 15c2- 12(b)(1)under the Securities Exchange Act of 1934. 5) The Underwriter enters into this Agreement in reliance upon the representations and warranties of the City contained herein and in the Ordinance and in reliance upon the representations and warranties to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the City and its obligations hereunder both on and as of the date hereof and as of the Closing Date. Accordingly, the Underwriter's obligation under this Agreement to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the City of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions: a) the representations and warranties of the City contained herein shall be true and correct on the date hereof and of the Closing, as if made on and at the Closing; b) at or prior to the Closing,the Underwriter shall receive the following documents: i) certified copies of the Ordinance; ii) the opinion of Gottlieb, Fisher & Andrews, PLLC, as Bond Counsel, dated the Closing Date,substantially in the form of Appendix E to the Official Statement; iii) evidence of the insurance policy issued by Financial Security Assurance Inc. (FSA); iv) evidence satisfactory to the Underwriter that Standard and Poor's Corporation and Fitch, Inc. have issued ratings for the Bonds not lower than 'AAA' (underlying `A+') and 'AAA' (underlying `AA-'), respectively, and that such ratings have not been withdrawn; and v) such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter or Bond Counsel may reasonably request. If the conditions to the Underwriter's obligations contained in this Agreement are not satisfied (unless otherwise waived in writing by the Underwriter) or if the Underwriter's obligations shall be terminated for any reason permitted herein, this Agreement shall terminate and neither the Underwriter nor the City shall have any further obligation hereunder except to reimburse the Underwriter for expenses related to the preparation, printing and mailing of the preliminary and final official statements. 6) During the initial public offering of the Bonds (a period of concluding the'final date the Underwriter is charged with furnishing a copy of the Official Statement to a potential customer under SEC Rule 15c2-12 but no later than six months after the Closing Date),the City will (a)not consent to the distribution of any amendment of'or supplement to the Official Statement to which, after having been furnished with a copy, the Underwriter shall object in writing or which shall be disapproved by counsel for the Underwriter and(b)if any event shall occur as a result of which it is necessary, in the opinion of the Underwriter,to amend or supplement the Official Statement in order to make the Official Statement not misleading in light of the circumstances existing at the time it is delivered to a purchaser, consent to the distribution of an amendment of or supplement to the Official Statement,prepared without expense to the City(in form and substance satisfactory to the Underwriter)in a reasonable number of copies which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser,not misleading. 7) The Underwriter shall have the'right to cancel its obligation to purchase the Bonds if between the date hereof and the Closing, (i)legislation shall have been enacted by the Congress of the United States or the legislature of the State of Washington or legislation shall have been reported out of committee of either body or be'pending in committee of either body, or a decision shall have been rendered by a court of the United States or of the State of Washington or the Tax Court of the United States, or a ruling shall have been made or a regulation or temporary regulation shall have been proposed or made or any other release or announcement shall have been made by the Treasury Department of the United States or the Internal Revenue Service, with respect to federal taxation upon revenues or other income of the general.character of the Bonds which, in the reasonable judgment of the of the Underwriter, materially adversely affects the market for the Bonds, or (ii) there shall exist any event which, in the reasonable judgment of the Underwriter, either (a) makes untrue or incorrect in any material aspect as of such time any statement or information contained in the Official Statement or(b)is not reflected in the Official Statement but should be reflected therein in order to make the statements and information contained therein not misleading in any material respect, or(iii)there shall have occurred any outbreak of hostilities or any other national or international calamity or crisis, the effect of which outbreak, calamity or crisis on the financial market§ of the United States is such as, in the reasonable judgment of the Underwriter, would make it impracticable for the Underwriter to market or enforce contracts for the sale of the Bonds, or (iv)'there shall be in force a general suspension of trading on the New York Stock Exchange or minimum or maximum prices for trading shall have been fixed and in force, or maximum ranges for prices for securities shall have been required and be in force on the New York Stock Exchange, whether by virtue of a determination by that Exchange or by order of the Securities and Exchange Commission or any other governmental authority having jurisdiction, or (v) a general banking moratorium shall have been declared by either Federal, State of Washington or New York authorities having jurisdiction and be in force, or (vi) there shall be established any new restriction on transactions in securities materially affecting the free market for securities (including the imposition of any limitation on interest rates) or extension of credit by, or charge to the net capital requirements of, Underwriter established by the New York Stock Exchange, the Securities and Exchange Commission, any other federal or'state agency or the Congress of the United States,or by Executive Order. 8) All fees, expenses and costs incident to the execution and performance of this Agreement and to the authorization, issuance and sale of the Bonds to the Underwriter, including,but not limited to, the cost of printing the Bonds,if any(and full execution thereof),the fees and charges of Standard & Poor's, the fees and charges of Fitch, the municipal insurance policy premium of FSA, the preparation, printing and distribution of the Preliminary Official Statement and the Official Statement, and the fees and expenses of Bond Counsel shall be paid by the City. All expenses to be paid by the City pursuant to this Agreement may be paid from Bond proceeds to the extent permitted by the Ordinance. The obligation of the City under this Section 8 shall survive the payment of the Bonds. 9) Any notice or other communication to be given to the City under this Agreement may be given by delivering the same in writing at the address set forth above and any such notice or other communications to be given to the Underwriter may be given by delivering the same in writing to D.A. Davidson & Co., 701 Fifth Avenue, Suite 3100, Seattle, Washington 98194, Attention: Public Finance. The approval of the Underwriter when required hereunder or the determination of its satisfaction as to any document referred to herein shall be in writing signed by the Underwriter and delivered to you. 10) This Agreement is made solely for the benefit of the City and the Underwriter (including successors or assigns of the Underwriter, but excluding any purchaser, as such purchaser, of Bonds from the Underwriter) and,to the extent expressed herein, controlling persons thereof, and no other persons, partnership, association or corporation shallacquire to have any right hereunder or by virtue hereof. All representations and agreements of the parties to this Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Underwriter and shall survive the delivery of and payment for the Bonds. Time shall be of the essence of this Agreement This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Washington. This Agreement may be executed in any number of counterparts each of which shall be an original but all of which together will constitute one and the same instrument. Very truly yours, D.A. DAVIDSON&CO. By: .-40/1 .' Fred R.Eoff Managing Director Aro Accepted and Agreed to: CITY OF RENTON,WASHINGTON, acting by and through its City Council By: f Tanner Mayor Alia 4347144-L1 . 6/ 1)4116') . �r��►c�lant 7-I-02 � I • EXHIBIT A TERMS OF THE BONDS Purchase Price: Par Amount of Bonds: $11,980,000.00 Plus:Reoffering!Premium: 44,346.40 Less:Underwriter's Discount: (119,800.00) Purchase Price: $11,904,546.40 Dated Date: July 1,2002 Delivery Date: July 12,2002 Denominations: $5,000 each or'integral multiples thereof Form: The Bonds will be fully registered in Book-Entry only through the facilities of The Depository Trust Company("DTC")in New York,New York. Interest Payable: Interest on the Bonds from their dated date will be payable semi-annually on June 1 and December 1,commencing December 1,2002 to their maturity or prior redemption. - i Maturity Schedule: The Bonds mature on December 1, in each of the years and amounts set forth below, subject to optional redemption as hereinafter described, and will bear interest from July 1, 2002 to their respective maturities or dates of prior redemption, whichever occurs first,at the rates as shown below: Interest' Yield to Price Interest Yield to Price Year Amount Rate Maturity (%of Par) Year Amount Rate Maturity (%of Par) 2003 $115,000 2.50% 1.75% j 101.021% 2013 2004 120,000 2.50 2.13 ! 100.855 2014 $710,000 4.30% 4.42% 98.860% 2005 135,000 2.75 2.62 100.417 2015 735,000 4.40 4.53 98.701 2006 110,000 3.25 2.93 101.306 2016 765,000 4.50 4.64 98.537 2007 110,000 3.50 3.22 101.372 2017 805,000 4.60 4.74 98.478 2008 110,000 3.50 3.53 1 99.827 2018 1,000,000 5.25 4.86 103.145 2009 455,000 3.70 3.73 99.804 2019 1,000,000 5.25 4.95 102.407 2010 630,000 3.90 3.92 99.854 2020 1,000,000 5.25 5.05 101.595 2011 1,010,000 4.00 4.05 99.609 2021 1,045,000 5.25 5.11 101.111 2012 1,025,000 4.10 4.15 99.577 2022 1,100,000 5.25 5.17 100.630 True Interest Cost: 4.82203% Optional Redemption: Bonds maturing in the years 2003 through 2012, inclusive, are not subject to redemption prior to their stated maturity dates. Bonds maturing on or after December 1, 2014 are subject to redemption at the option of the City prior to their stated maturity dates, from funds from any source, at any time, in whole or in part on or after December 1, 2012 within one or more maturities selected by the City(by lot within a maturity in the manner determined by the Registrar or DTC) at the price of par plus interest accrued to the date of redemption. Bond Counsel: Gottlieb Fisher&Andrews,PLLC,Seattle,Washington Registrar: The Bank of New York,New York,New York Offer Expires: July 1,2002 at 11:59 PM Pacific Time \ i CITY OF RENTON, WASHINGTON ORDINANCE NO. 4976 AN ORDINANCE relating to the waterworks utility of the City, including the sewerage system as a part thereof; providing for the issuance of$11,980,000 aggregate principal amount of Water and Sewer Revenue Bonds, 2002, of the City for the purpose of jobtaining the funds with which to pay the costs of carrying out certain capital improvements of the waterworks utility; fixing the date, form, denominations, maturities, interest rates,terms and covenants of the bonds; providing for bond insurance; and approving the sale and providing for the delivery of the bonds)to D.A. Davidson& Co., Seattle, Washington. ORDINANCE NO. 4976 Section 1. Definitions 3 Section 2. Findings Regarding Parity Provisions 12 Section 3. Authorization and Description of Bonds 12 Section 4. Registration of Bonds and Book-Entry System 14 Section 5. Payment of Bonds 16 Section 6. Optional Redemption and Open Market Purchase of Bonds 17 Section 7. Notice of Redemption 17 Section 8. Failure to Redeem Bonds 18 Section 9. Form of Bonds 19 Section 10. Execution of Bonds 19 Section 11. Authentication and Delivery of Bonds by Bond Registrar 19 Section 12. Registration, Transfer and Exchange 20 Section 13. Lost, Stolen or Destroyed Bonds 22 Section 14. Creation of Account 22 Section 15. Deposits into Funds and Accounts 23 Section 16. Flow of Funds 27 Section 17. Pledge of Revenue and Lien Position 27 Section 18. Findings Regarding Sufficiency of Revenue 28 Section 19. Covenants 29 Section 20. No Private Activity Bonds 33 Section 21. Defeasance of the Bonds 33 Section 22. Provision for Future Parity Bonds 34 Section 23. Approval of Purchase Agreement 37 Section 24. Bond Insurance 38 i ORDINANCE NO. 4 9 7 6 Section 25. Delivery of Bonds; Temporary Bonds 38 Section 26. Application of Bond Proceeds 39 Section 27. Undertaking to Provide Continuing Disclosure 40 Section 28. Preliminary Official Statement Deemed Final 43 Section 29. Effective Date of Ordinance 44 - I - I 11 1 ORDINANCE NO. 4 9 7 6 AN ORDINANCE relating to the waterworks utility of the City, including the sewerage system as a part thereof; providing for the issuance of $11,980,000 aggregate principal amount of Water and Sewer Revenue Bonds, 2002, of the City for the purpose of obtaining the funds with which to pay the costs of carrying out certain capital improvements of the waterworks utility; fixing the date, form, denominations,maturities, interest rates,terms and covenants of the bonds; providing for bond insurance; and approving the sale and providing for the delivery of the bonds to D.A. Davidson&Co., Seattle, Washington. WHEREAS,the City of Renton (the"City")has heretofore created and operated a waterworks utility of the City, including the sewerage system of the City and within that system a system of storm and surface water sewers (defined herein as the"Waterworks Utility"); and WHEREAS, by Ordinance No. 1450,the City provided for the issuance of its Water and Sewer Refunding and Improvement Revenue Bonds, 1953 (the"1953 Bonds"), and,by Section 15 of that ordinance, established certain conditions for the issuance of additional water and sewer revenue bonds on a parity of lien with the 1953 Bonds; and WHEREAS, all of the water and sewer revenue bonds of the City issued on a parity of lien with the 1953 Bonds pursuant to the original provisions of Section 15 of Ordinance No. 1450 have been paid and redeemed, or irrevocable provision for their payment and redemption has been made; and WHEREAS, by Ordinance No. 3188, the City authorized the issuance of its Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 3 (the"1977 Bonds"), all of which 1977 Bonds have been paid and redeemed, and by Section 13 of that ordinance incorporated Section 15 of Ordinance No. 1450, as modified by Section 13 of Ordinance No. 3169; and WHEREAS, by Ordinance No. 3720, the City authorized the issuance of its Water and Sewer Revenue Bonds, 1983 (the"1983 Bonds"), all of which 1983 Bonds have been paid and 1 ORDINANCE NO. 4976 redeemed, and by Section 12 of that ordinance further modified and strengthened the provisions of Section 15 of Ordinance No. 1450, as:modified by Section 13 of Ordinance No. 3169; and WHEREAS, the City curiently has outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1993 (the"1993 Refunding Bonds"), issued pursuant to Ordinance No. 4410; Water and Sewer Revenue Bonds, 1994 (the"1994 Bonds"), issued pursuant to Ordinance No. 4480; and Water and Sewer Revenue Refunding Bonds, 1998 (the "1998 Bonds"),issued pursuant to Ordinance No. 4709, all of which bonds were issued on a parity of lien with the 1977 Bonds; and WHEREAS,the parity provisions of Section XXIII of Ordinance No. 4709, which incorporated therein Section 13,of Ordinance No. 3188 as modified and strengthened by Section 12 of Ordinance No. 3720,provide that the City may issue additional water and sewer revenue bonds which will constitute a charge and lien upon the revenue of the Waterworks Utility of the City on a parity with the 1993 Refunding Bonds,the 1994 Bonds,the 1998 Bonds and any bonds issued thereafter if such additional bonds are issued in compliance with the conditions set forth therein: WHEREAS, By Resolution No. 2897, passed in 1992,the City adopted its Comprehensive Water Plan and by Resolution No. 3417,passed in 1998,the City adopted the Long Range Wastewater Plan; and WHEREAS,the City Council has determined that it is necessary and in the best interests of the City that certain additional improvements described in the Comprehensive Water Plan and the Long Range Wastewater Plan be made and there be adopted a system or plan of additions to and betterments and extensions of the Waterworks Utility; and 2 ORDINANCE NO. 4 9 7 6 WHEREAS,pursuant to Chapter 35.92 RCW, the City is authorized to sell and issue, without an election,revenue bonds of the City to make additions, betterments or extensions to the Waterworks Utility; and WHEREAS,the City Council has determined that it is necessary to issue and sell $11,980,000 of Water and Sewer Revenue Bonds, 2002 (the"Bonds")to provide part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility and to pay the costs of issuance and sale of the Bonds; and WHEREAS, Financial Security Assurance Inc., of New York,New York, has made a commitment to issue an insurance policy insuring the payment when due of the principal of and interest on the Bonds as provided therein, and the City Council deems that the purchase of such policy is in the best interest of the City; and WHEREAS,D.A. Davidson& Co., Seattle, Washington, has offered to purchase the Bonds under the terms and conditions hereinafter set forth;NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON, DO ORDAIN as follows: Section 1. Definitions. As used in this ordinance,the following words shall have the following meanings: After the New Covenant Date, "Alternate Security"shall mean any bond 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 the Parity Bonds, issued by an institution that has been assigned a credit rating at the time of issuance of 3 ORDINANCE NO. 4 9 7 6 such Parity Bonds secured by such Alternate Security equal to or better than the highest then- existing rating for any of the Parity Bonds. "Annual Debt Service" for the Bonds shall mean all the interest plus all principal which will mature or come due in any year. After the New Covenant Date, "Annual Debt Service"for any year shall mean all the interest on plus all principal (except principal of Term Bonds due in any Term Bond Maturity Year) of Parity Bonds,plus all mandatory redemption and sinking fund installments, less all bond interest payable from the proceeds of any such bonds, which will mature or come due in that year. "Average Annual Debt Service" shall mean the sum of the Annual Debt Service for the remaining years to the last scheduled maturity of the applicable bond issue or issues divided by the number of those years. "Beneficial Owner" shall mean,with respect to any Bond, the Person named on the records of the Custodian as having the right, without a physical certificate evidencing such right, to transfer, to hypothecate and to receive the payment of the principal of, premium, if any, and interest on such Bond as the same becomes due and payable. "Bond Fund" shall mean that special fund of the City known as the 2002 Waterworks Revenue Bond Account created by this ordinance as a separate account in the Waterworks Revenue Parity Bond Fund for the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Bond Fund"shall mean that special fund of the City known as the 2002 Waterworks Revenue Bond Fund created by this ordinance for the payment of the principal of and interest on the Bonds. 4 ORDINANCE NO. 4 9 7 6 "Bond Insurer" shall mean Financial Security Assurance Inc.,New York,New York. "Bond Insurance Policy" shall mean the municipal bond insurance policy issued by the Bond Insurer insuring the payment when due of the principal of and interest on the Bonds as provided herein. "Bond Register" shall mean the registration books on which are maintained the names and addresses of the Owners of the Bonds. "Bond Registrar" shall mean the fiscal agencies of the State in Seattle, Washington, and New York,New York, as the same shall be designated from time to time. "Bonds" shall mean the $11,980,000 City of Renton Water and Sewer Revenue Bonds, 2002, authorized to be issued by this ordinance. "1977 Bonds" shall mean the Water and Sewer Revenue Refunding Bonds, 1977, Issue. No. 3. "1988 Bonds" shall mean the Water and Sewer Revenue Bonds, 1988. "1989 Bonds" shall mean the Water and Sewer Revenue Bonds, 1989. "1989 Refunding Bonds" shall mean the Water and Sewer Revenue Refunding Bonds, 1989. "1992 Bonds" shall mean the Water and Sewer Refunding and Improvement Revenue Bonds, 1992. "1993 Refunding Bonds" shall mean the outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1993. "1994 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1994. 5 ORDINANCE NO. 4976 "1998 Bonds" shall mean!the outstanding Water and Sewer Revenue Refunding Bonds, 1998. "Book-Entry Termination Date" shall mean the fifth business day following the date of receipt by the Bond Registrar of the City's request to terminate the book-entry system of registering the beneficial ownership of the Bonds. "City" shall mean the City of Renton, Washington, a duly organized and legally existing noncharter code city under the laws of the State. "City Finance Director" shall mean the City's Finance and Information Services. Administrator or the successor to such officer. "Closing" shall mean the date of the delivery of the Bonds by the City to the Purchaser and the payment therefor by thel Purchaser. "Code" shall mean the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. After the New.Covenant Date, "Coverage Requirement"shall mean in any calendar year 1.25 times the Maximum Annual Debt Service. "Custodian" shall mean (a) The Depository Trust Company,New York,New York, or (b) any successor thereto engaged by the City to operate a book-entry system for recording, through electronic or manual means,the beneficial ownership of the Bonds, in which system no physical certificates are issued to the Beneficial Owners of the Bonds, but in which a limited number of physical certificates are issued to and registered in the name of the Custodian or its nominee, and delivered to the Custodian; provided, that such book-entry system operated by the Custodian may include the use of subsystems of recording the beneficial ownership of Bonds 6 ORDINANCE NO. 4 9 7 6 which are operated by parties other than the Custodian and the use of a nominee for the Custodian; and the term"Custodian," as used herein, includes any party operating any such subsystem. "Future Parity Bonds" shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on Gross Revenue on a parity with the lien and charge on such Revenue for the payment of the principal of and interest on the Outstanding Parity Bonds and the Bonds. After the New Covenant Date, "Future Parity Bonds"shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on Net Revenue on a parity with the lien and charge on Net Revenue for the payment of the principal of and interest on the Bonds. "Gross Revenue" shall mean Revenue of the Waterworks Utility. "Letter of Representations" shall mean the Blanket Issuer Letter of Representations from the City and the Bond Registrar to the Custodian dated April 15, 1997,pertaining to the payment of the Bonds and the"book-entry" system for evidencing the beneficial ownership of the Bonds prior to the Book-Entry Termination Date(as it may be amended from time to time). "Maintenance and Operation Expense" shall mean all expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair, working order and condition, which shall not include any depreciation expenses or taxes or charges in lieu of taxes levied or imposed by the City. After the New Covenant Date, "Maintenance and Operation Expense"shall mean all reasonable expenses incurred by the City in causing the Waterworks Utility to be operated and 7 ORDINANCE NO. 4976 maintained in good repair, working order and condition, including payments made to any other municipal corporation or private entity for water service and for sewage treatment and disposal service or other utility service in the event the City combines such service in the Waterworks Utility and enters into a contract for such service, and including pro-rata budget charges for the City's administration expenses where those represent a reasonable distribution and share of actual costs, but not including any depreciation or taxes levied or imposed by the City or payments to the City in lieu of taxes, or capital additions or capital replacements to the Waterworks Utility. After the New Covenant Date, "Maximum Annual Debt Service"shall mean, 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 calendar year on the outstanding Parity Bonds. "MSRB" shall mean the'Municipal Securities Rulemaking Board. "Net Revenue" shall mean Gross Revenue less Maintenance and Operation Expense. "New Covenant Date" 'shall mean the date on which all 1977 Bonds (other than the 1977 Refunded Bonds), 1988 Bonds, 1989 Bonds, 1989 Refunding Bonds, 1990 Bonds, 1992 Bonds , 1993 Refunding Bonds and 1994 Bonds (other than the 1994 Refunded Bonds) are fully redeemed,refunded or defeased. "NRMSIR" shall mean a nationally recognized municipal securities information repository designated by the SEC. "Outstanding Parity Bonds" shall mean the 1993 Refunding Bonds and the 1994 Bonds. 8 ORDINANCE NO. 4976 "Owner" shall mean the person named as the registered owner of a Bond on the Bond Register. "Parity Bonds" shall mean the 1998 Bonds,the Bonds and any Future Parity Bonds. After the New Covenant Date, "Parity Bond Fund"shall mean any fund created for the payment and redemption of Parity Bonds. "Principal and Interest Account" shall mean the subaccount of that name created in the Bond Fund for the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Professional Utility Consultant"shall mean an independent licensed professional engineer, certified public accountant or other independent person or firm selected by the City having a favorable reputation for skill and experience with municipal utilities of comparable size and character to the Waterworks Utility in such areas as are relevant to the purposes for which such consultant is retained. "Project" shall mean the following project to be financed, in whole or in part,with proceeds of the Bonds: (1)the undertaking of the additions, betterments or extensions to the Waterworks Utility described in the 2002 Comprehensive Water System Plan or the 2002 Comprehensive Sanitary Sewer Plan, including,but not limited to,the capital improvements described in Exhibit A to this ordinance, (2) making a deposit to the Reserve Account, and (3)paying the incidental costs and costs of issuing the Bonds. "Project Fund" shall mean the Waterworks Utility Construction Fund. "Purchase Agreement" shall mean the Bond Purchase Agreement for the Bonds, dated July 1, 2002,by and between the City and the Purchaser. "Purchaser" shall mean D.A. Davidson & Co., Seattle, Washington. 9 ORDINANCE NO. 4 9 7 6 "Rate Stabilization Fund" shall mean the fund of that name created for the purposes described in Ordinance No. 4709J "Reserve Account" shall'mean the subaccount of that name created in the Bond Fund by Ordinance No. 4709 for the purpose of securing the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Reserve Fund"shall mean that special fund of the City known as the Waterworks Revenue Bond Reserve Fund created by Ordinance-No. 4709 for purpose of securing the payment of the principal of and interest on all bonds to which Net Revenue is pledged After the New Covenant Date, "Reserve Insurance"shall mean, in lieu of cash and investments, insurance obtained by the City equal to part or all of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained, issued by an institution =- that has been assigned a creditjrating equal to or better than the highest then-existing rating for any of the Parity Bonds. After the New Covenant Date, "Reserve Requirement"shall mean the Maximum Annual Debt Service. "Revenue of the Waterworks Utility" shall mean all the earnings and revenue received by the Waterworks Utility from any source whatsoever, including payments received under contract with other municipal corporations for water service, except general taxes, charges in lieu of taxes, assessments in any utility local improvement district hereafter created,proceeds from the sale of City property, bond proceeds and earnings subject to a federal tax or rebate requirement. 10 ORDINANCE NO. 4 9 7 6 After the New Covenant Date, "Revenue of the Waterworks Utility"shall mean all of the earnings and revenues received by the City from the maintenance and operation of the Waterworks Utility and all earnings from the investment of money in the Reserve Fund or any Parity Bond Fund, and connection and capital improvement charges collected for the purpose of defraying the cost of capital facilities of the Waterworks Utility, except government grants, proceeds from the sale of Waterworks Utility property (other than timber), City taxes collected by or through the Waterworks Utility,principal proceeds of bonds and earnings or proceeds from any investments in a trust, defeasance or escrow fund created to defease or refund Waterworks Utility obligations (until commingled with other earnings and revenues of the Waterworks Utility) or held in a special account for the purpose ofpaying a rebate to the United States Government under the Code. "Rule" shall mean SEC Rule 15c2-12. "SEC" shall mean the United States Securities and Exchange Commission. "SID" shall mean a state information depository. "State" shall mean the State of Washington. "Term Bonds" shall mean any Outstanding Parity Bonds and/or Parity Bonds identified as such in the ordinance authorizing the issuance thereof, the payment of which is provided for by a requirement for mandatory deposits of money into the principal and interest account of the bond redemption fund created for the payment of such issue of bonds in accordance with a mandatory sinking fund requirement. "Term Bond Maturity Year" shall mean any calendar year in which Term Bonds are scheduled to mature. 11 ORDINANCE NO. 4 9 7 6 "Water and Sewer Revenue Parity Bond Fund" shall mean the fund of that name created by Ordinance No. 3896. "Waterworks Revenue Parity Bond Fund" shall mean the Water and Sewer Revenue Parity Bond Fund, as renamed by,' Ordinance No. 4709. "Waterworks Utility" shall mean the combined water and sewerage systems, including the storm and surface water sewers, of the City as the same may be added to, improved and extended for as long as any of the Outstanding Parity Bonds or Parity Bonds are outstanding. "Waterworks Utility Fund" shall mean that special fund of the City into which all Gross Revenue (except for earnings in'any special fund for the redemption of revenue obligations of the Waterworks Utility) shall be deposited. Section 2. Findings Regarding Parity Provisions The City Council finds that all payments required by Ordinance Nos. 4410, 4480 and 4709 for the Outstanding Parity Bonds - have been made into the respective bond redemption funds and accounts therein for the Outstanding Parity Bonds, that;provision hereinafter is made for the accumulation of the amounts required in the Reserve Account of the Bond Fund, and that there will be on file prior to the issuance and delivery of the B9nds a certificate of an engineer experienced in municipal utilities that Gross Revenue is sufficient to meet the 1.3 coverage requirement of such ordinances. Therefore, the Bonds shall be issued on a parity of lien with the Outstanding Parity Bonds and the 1998 Bonds. Section 3. Authorization and Description of Bonds. For the purpose of obtaining part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility and to pay the costs of issuance and sale of the Bonds,the 12 ORDINANCE NO. 4 9 7 6 City shall issue the Bonds in the aggregate principal amount of$11,980,000. The Bonds shall be designated City of Renton, Washington Water and Sewer Revenue Bonds, 2002; shall be dated July 1, 2002; shall be in the denomination of$5,000 or any integral multiple thereof within a single maturity; shall be numbered separately, in the manner and with any additional designation as the Bond Registrar deems necessary for purpose of identification; shall bear interest (computed on the basis of a 360-day yearof twelve 30-day months),payable semiannually on each June 1 and December 1, commencing December 1,2002,to the maturity or earlier redemption of the Bonds; and shall mature on December 1 in the years and amounts and bear interest at the rates per annum as follows: Maturity Years Interest (December 1) Amounts Rates 2003 $ 115,000 2.50% 2004 120,000 2.50 2005 135,000 2.75 2006 110,000 3.25 2007 110,000 3.50 2008 110,000 3.50 2009 455,000 3.70 2010 630,000 3.90 2011 1,010,000 4.00 2012 1,025,000 4.10 2014 710,000 4.30 2015 735,000 4.40 2016 765,000 4.50 2017 805,000 4.60 2018 1,000,000 5.25 2019 1,000,000 5.25 2020 1,000,000 5.25 2021 1,045,000 5.25 2022 1,100,000 5.25 13 ORDINANCE NO. 4976 If any Bond is duly presented for payment upon maturity or earlier redemption and is not paid, then interest thereon shall continue to accrue thereafter at the rate stated therein until such Bond is paid. The Bonds shall be negotiable instruments to the extent provided by RCW 62A.8-105. Section 4. Registration of Bonds and Book-Entry System. The Bonds shall be issued only in registered form as to both principal and interest and 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. On the date of issue of the Bonds, all Bonds maturing in the same maturity year shall be issued in the form of a single certificate, which certificate shall be registered in the name of the Custodian or its nominee, and delivered to the Custodian. The Custodian shall hold each such Bond certificatein fully immobilized form for the benefit of the Beneficial Owners pursuant to the Letter of Representations until the earliest to occur of either(1)the date of maturity of the Bonds evidenced by such certificate, at which time the Custodian shall surrender such certificate to the Bond Registrar for payment of the principal of and interest on such Bonds coming due on such date, and the cancellation thereof; (2)the Book-Entry Termination Date; or (3)the date the City determines to utilize a new Custodian for the Bonds, at which time the old Custodian shall (provided the City is not then in default of any payment then due on the outstanding Bonds) surrender the immobilized certificates to the Bond Registrar for transfer to the new Custodian and cancellation as herein provided. For so long as any outstanding Bonds are registered in the name of the Custodian or its nominee and held by the Custodian in fully immobilized form as described in this Section 4, the 14 ORDINANCE NO. 4 9 7 6 rights of the Beneficial Owners shall be evidenced solely by an electronic and/or manual entry made from time to time on the records established and maintained by the Custodian in accordance with the Letter of Representations, and no certificates evidencing such Bonds shall be issued and registered in the name of any Beneficial Owner or such Beneficial Owner's nominee. The City may terminate the "book-entry" system of registering ownership of the Bonds at any time (provided the City is not then in default of any payment then due on the outstanding Bonds)by delivering to the Bond Registrar: (a) a written request that it issue and deliver Bond certificates to each Beneficial Owner or such Beneficial Owner's nominee on the Book-Entry Termination Date; (b) a list identifying the Beneficial Owners as to both name and address; and (c) a supply of Bond certificates, if necessary for such purpose. Upon surrender to the Bond Registrar of the immobilized certificates evidencing all of the then outstanding Bonds, the Bond Registrar shall issue and deliver new certificates to each Beneficial Owner or such Beneficial Owner's duly appointed agent, naming such Beneficial Owner or such Beneficial Owner's nominee as the Owner thereof. Such certificates may be in any integral multiple of$5,000 within a single maturity. Following such issuance,the Owners of such Bonds may transfer and exchange such Bonds in accordance with Section 12 hereof. Neither the City nor the Bond Registrar shall have at any time any responsibility or liability to any Beneficial Owner of Bonds or to any other person for any error, omission, action or failure to act on the part of the Custodian with respect to payment, when due, to the Beneficial Owner of the principal and interest on the Bonds,proper recording of beneficial ownership of 15 ORDINANCE NO. 4 9 7 6 Bonds,proper transfers of such beneficial ownership, or any notices to Beneficial Owners or any other matter pertaining to the Bonds. Section 5. Payment of Bonds. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date,the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owners thereof, in accordance with the Letter of.Representations. From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date,to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the Bond Register, or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire • transfer on the interest payment date to an account within the United States. From and after the Book-Entry Termination Date,principal of the Bonds shall be payable upon presentation and surrender of the Bonds by the Owners at the principal corporate trust office of the Bond Registrar. The Bonds shall be payable solely out of the Bond Fund and shall be a valid claim of the registered owners thereof only as against the Bond Fund and the amount of Gross Revenue pledged to that fund and shall not be general obligations of the City. After the New Covenant Date, the Bonds shall be payable solely out of the Bond Fund and the Reserve Fund and shall be a valid claim of the Owners thereof only as against the Bond 16 ORDINANCE NO. 4 9 7 6 Fund, Reserve Fund and the amount of Net Revenue pledged to those funds and shall not be general obligations of the City. Section 6. Optional Redemption and Open Market Purchase of Bonds. Bonds maturing in the years 2003 through 2012, inclusive, are not subject to redemption prior to their stated maturity dates. Bonds maturing on or after December 1,2014, are subject to redemption at the option of the City prior to their stated maturity dates, from funds from any source, at any time, in whole or in part on or after December 1, 2012,within one or more maturities selected by the City (and by lot within a maturity in the manner determined by the Bond Registrar or the Custodian) at a price of par plus accrued interest to the date of redemption. Any Bond in the principal amount of greater than$5,000 may be partially redeemed in any integral multiple of$5,000. Prior to the Book-Entry Termination Date, Bonds shall be partially redeemed in accordance with the Letter of Representations. From and after the Book- Entry Termination Date, in the event of a partial redemption of a Bond,upon surrender of such Bond at the principal corporate trust office of the Bond Registrar, a new Bond or Bonds (at the option of the Owner) of the same maturity and interest rate and in the aggregate principal amount remaining unredeemed shall be authenticated and delivered to the Owner, without charge to the Owner therefor, in any denomination authorized by this ordinance and selected by the Owner. The City reserves the right to purchase any or all of the Bonds on the open market at any time and at any price. All Bonds purchased or redeemed under this Section shall be canceled. Section 7. Notice of Redemption. The City shall cause notice of any intended redemption of Bonds to be given not less than 30 nor more than 60 days prior to the date fixed 17 ORDINANCE NO. 4 9 7 6 for redemption by first-class mail,postage prepaid,to the Owner of any Bond to be redeemed at the address appearing on the Bond Register on the day notice is mailed, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the Owner of any Bond. If such notice to the Owners shall have been given and the City shall have set aside, on the date fixed for redemption, sufficient money for the payment of all Bonds called for redemption,the Bonds so called shall cease to accrue interest after such redemption date, and all such Bonds shall be deemed not to be outstanding under this ordinance'for any purposes, except that the Owners thereof shall be entitled to receive payment of the redemption price and accrued interest to the redemption date from the money set aside for such purpose. In addition, the redemption notice shall be mailed within the same period, postage'prepaid,to Standard & Poor's Ratings Services and Fitch IBCA at their offices in New York,New York, or their successors,to the Purchaser at its principal office in Seattle, Washington, or its successor, and to such other persons and with such additional information as the City Finance Director shall determine, but these additional mailings shall not be a condition precedent to the redemption of Bonds. Notwithstanding the foregoing,prior to the Book-Entry Termination Date, notice of redemption shall be given in accordance with the Letter of Representations. Section 8. Failure to Redeem Bonds. If any Bond is not redeemed when properly presented at its maturity or redemption date, the City shall be obligated to pay interest on such Bond at the same rate provided in the Bond from and after its maturity or redemption date until such Bond, both principal and interest, is paid in full or until sufficient money for its payment in 18 ORDINANCE NO. 4 9 7 6 full is on deposit in the Bond Fund, and the Bond has been called for redemption by giving notice of that redemption to the Owner of each of such unpaid Bonds. Section 9. Form of Bonds. The Bonds shall be typewritten, word processed, printed, lithographed or multicopied on good bond paper in a form consistent with this ordinance and Washington law. Section 10. Execution of Bonds. The Bonds shall be executed on behalf of the City by the facsimile or manual signatures of the Mayor and the City Clerk and shall have the seal of the City impressed or a facsimile thereof imprinted thereon. In the event any officer who shall have signed or whose facsimile signatures appear on any of the Bonds shall cease to be such officer of the City before said Bonds shall have been authenticated or delivered by the Bond Registrar or issued by the City, such Bonds may nevertheless be authenticated, delivered and issued and,upon such authentication, delivery and issuance, shall be as binding upon the City as though said person had not ceased to be such officer. Any Bond may be signed and attested on behalf of the City by such persons who, at the actual date of execution of such Bond shall be the proper officer of the City, although at the original date of such Bond such persons were not such officers of the City. Section 11. Authentication and Delivery of Bonds by Bond Registrar. The Bond Registrar is authorized and directed, on behalf of the City,to authenticate and deliver Bonds initially issued or transferred or exchanged in accordance with the provisions of such Bonds and this ordinance. Only such Bonds as shall bear thereon a "Certificate of Authentication" manually executed by an authorized representative of the Bond Registrar shall be valid or obligatory for 19 ORDINANCE NO. 4976 any purpose or entitled to the benefits of this ordinance. Such Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this ordinance. The Bond Registrar shall;be responsible for its representations contained in the Certificate of Authentication on the Bonds. Section 12. Registration,'Transfer and Exchange. The Bond Registrar shall keep, or cause to be kept, at its principal corporate trust office, the Bond Register. The Bond Registrar is authorized, on behalf of the City,lto authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of the Bonds and this ordinance,to serve as the City's paying agent for the Bonds and to carry out all of the Bond Registrar's powers and duties under this ordinance and City Ordinance No. 3755 establishing a system of registration for the City's bonds and obligations. The City and the Bond Registrar, in its discretion, may deem and treat the Owner of each Bond as the absolute owner thereof for all purposes, and neither the City nor the Bond Registrar shall be affected by any notice to the contrary. Payment of any such Bond shall be made only as described in Section 5 hereof,but such registration may be transferred as herein provided. All such payments made as described in Section 5 hereof shall be valid and effectual to satisfy and discharge the liability of the City upon such Bond to the extent of the amount or amounts so paid. The registered ownership of the Bonds may be transferred. Prior to the Book-Entry Termination Date, the beneficial ownership of the Bonds may only be transferred on the records established and maintained by the Custodian. On and after the Book-Entry Termination Date, 20 ORDINANCE NO. 4976 transfer of any Bond shall be valid only if it is surrendered at the principal corporate trust office of either Bond Registrar,with the assignment form appearing on such Bond duly executed by, or accompanied by a written instrument of transfer in form satisfactory to such Bond Registrar duly executed by,the Owner or such Owner's duly authorized agent, in a manner satisfactory to such Bond Registrar. Upon such surrender,the Bond Registrar shall cancel the surrendered Bond and shall authenticate and deliver, without charge to the Owner or transferee therefor (other than any governmental fees or taxes payable on account of such transfer), a new Bond or Bonds (at the option of the new Owner),naming as Owner the person or persons listed as the assignee on the assignment form appearing on the surrendered Bond, of the same maturity and interest rate,for the same aggregate principal amount, and in any authorized denomination selected by the new Owners, in exchange for such surrendered and cancelled Bond. On and after the Book-Entry Termination Date, any Bond may be surrendered at the principal corporate trust office of the Bond Registrar and exchanged,without charge, for an equal aggregate principal amount of Bonds of the same maturity and interest rate, in any authorized denomination as selected by the Owner. The Bond Registrar shall not be obligated to transfer or exchange any Bond during the fifteen days preceding any principal or interest payment or redemption date. The Bond Registrar may become the Owner of any Bond 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 a member of, or in any other capacity with respect to, any committee formed to protect the rights of the Owners of the Bonds. 21 ORDINANCE NO. 4 9 7 6 The City covenants that,until all Bonds shall have been surrendered and cancelled, it shall maintain a system of recording the ownership of each Bond that complies with the provisions of the Code. Section 13. Lost, Stolen'or Destroyed Bonds. If any Bond becomes mutilated, lost, stolen or destroyed,the Bond Registrar may authenticate and deliver a new Bond of the same interest rate and maturity and of alike tenor and effect in substitution therefor, all in accordance with applicable law. If such mutilated, lost, stolen or destroyed Bond has matured,the City may, at its option,pay the same without the surrender thereof. However,no such substitution or payment shall be made unless and until the applicant shall furnish (a) evidence satisfactory to the Bond Registrar of the destruction or loss of the original Bond and of the ownership thereof, and (b) such additional security, indemnity or evidence as may be required by or on behalf of the City. No substitute Bond shall be furnished unless the applicant shall reimburse the City and the • Bond Registrar for their respective expenses in the furnishing thereof. Any such substitute Bond so furnished shall be equally and 'proportionately entitled to the security of this ordinance with all other Bonds issued hereunder. ' Section 14. Creation of Account. There is hereby created the 2002 Waterworks Revenue Bond Account(heretofore defined, until the New Covenant Date, as the Bond Fund), which shall be a separate bond redemption account within the Waterworks Revenue Parity Bond Fund. The Bond Fund is divided into two subaccounts,the Principal and Interest Account and the Reserve Account. There is hereby created in the City Treasury the 2002 Waterworks Revenue Bond Fund (heretofore defined, after the New Covenant Date, as the Bond Fund). 22 • • ORDINANCE NO. 4 9 7 6 Section 15. Deposits into Funds and Accounts. So long as Bonds are outstanding against the Bond Fund, the City shall: (a) Set aside and pay into the Principal and Interest Account out of Gross Revenue a fixed amount, without regard to any fixed proportion, namely, monthly, on or before the first day of each month, amounts,together with the accrued interest received on the delivery of the Bonds to the initial purchaser thereof or other money on deposit therein, as follows: Beginning with the month of August 2002 and continuing thereafter until November, 2002, 1/4 of the next ensuing four months' requirements for interest on the Bonds; and beginning with the month of December, 2002 and continuing thereafter until the Bonds, both principal and interest, are paid, 1/6 of the next ensuing six months' requirements for interest on the Bonds; and Beginning with the month of August 2002 and continuing thereafter until November, 2003, 1/16 of the next ensuing 16 months' requirements for principal on the Bonds; and beginning with the month of December, 2003 and continuing thereafter until the Bonds, both principal and interest, are paid, 1/12 of the amount of principal of the Bonds payable on the next ensuing principal payment date; and (b) Set aside and pay into the Reserve Account out of Gross Revenue in substantially equal monthly payments such amounts so that by no later than July 1, 2005, there shall have been accumulated in the Reserve Account for the Bonds an amount not less than the Average Annual Debt Service for the Bonds. The Reserve Account in the Bond Fund may be accumulated from any other money which the City may have available for that purpose in addition to or in lieu of using revenue therefor. The City further agrees that when the required amounts have been paid into the Reserve Account in the Bond Fund,the City will maintain those amounts therein at all times, except for withdrawals therefrom as authorized herein,until there is sufficient money in the Bond Fund, including the Reserve Account therein, to pay the principal of and interest to maturity on all outstanding Bonds, at which time no further payments need be made into the Bond Fund, and the 23 ORDINANCE NO. 4 9 7 6 money in the Bond Fund, including the Reserve Account, may be used to pay that principal and interest. If there shall be a deficiency in the Principal and Interest Account to meet maturing installments of either principal or interest, as the case may be, on the Bonds,the deficiency shall be made up from the Reserve Account by the withdrawal of cash therefrom for that purpose. Any deficiency created in the Reserve Account by reason of any withdrawal shall then be made up from Gross Revenue first available after making necessary provisions for the required • payments into the Principal and:Interest Account. All money in the Reserve Account not needed to meet the payments of principal and interest when due may be kept on deposit in the official bank depository of the City or in any - national bank or may be invested in any legal investment for City funds. Interest on any of those investments or on that bank acciunt shall be deposited in and become a part of the Reserve Account until the total required rIeserve amount shall have been accumulated therein, after which time the interest shall be deposited in the Principal and Interest Account. Notwithstanding the provisions for the deposit or maintenance of earnings in accounts of the Bond Fund, any earnings which are subject to a federal tax or rebate requirement may be withdrawn from the Bond Fund for deposit into a separate fund or account for that purpose. If the City shall fail to set aside and pay into the Bond Fund the amounts set forth above, the Owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. After the New Covenant Date, this Section shall be amended to read as follows: All money in the Principal and Interest Account of the 2002 Waterworks Revenue Bond Account 24 ORDINANCE NO. 4976 shall be transferred into the 2002 Waterworks Revenue Bond Fund (heretofore defined as the Bond Fund). All money in the Reserve Account of the 2002 Waterworks Revenue Bond Account shall be transferred into the Waterworks Revenue Bond Reserve Fund (heretofore defined as the Reserve Fund). So long as Bonds are outstanding against the Bond Fund,the City shall: (a) Set aside and pay into the Bond Fund out of Net Revenue a fixed amount, without regard to any fixed proportion, namely, one day before each interest or principal and interest payment date, an amount which, together with other money then on deposit therein, shall be sufficient to meet the debt service on the Bonds required on the next interest or principal and interest payment date; and (b) Set aside and pay into the Reserve Fund out of the Net Revenue, in three annual approximately equal deposits, any additional money necessary to bring the amount deposited in the Reserve Fund attributable to the Bonds up to the amount equal to the increase in the Reserve Requirement attributable to the Bonds. The Reserve Fund may be accumulated from any other money which the City may have available for that purpose in addition to or in lieu of using Net Revenue therefor. Except for withdrawals therefrom as authorized herein, the Reserve Fund shall be maintained at the Reserve Requirement at all times so long as any Parity Bonds are outstanding. When the total amount in the Bond Fund shall equal the total amount of principal and interest for all outstanding Bonds, no further payment need be made into the Bond Fund. Notwithstanding the first sentence of this paragraph,the Reserve Requirement may be decreased for any issue of Parity Bonds when and to the extent the City has provided for an Alternate Security or Reserve Insurance. If there shall be a deficiency in the Bond Fund to meet maturing installments of either principal or interest, as the case may be, on the Bonds,that deficiency shall be made up from the Reserve Fund by the withdrawal of cash therefrom for that purpose. Any deficiency created in 25 ORDINANCE NO. 4976 the Reserve Fund by reason of any such withdrawal shall then be made up from Net Revenue first available after making necessary provisions for the required payments into the Bond Fund. Any money in the Reserve Fund in excess of the Reserve Requirement may be withdrawn and deposited in any Parity Bond Fund and spent for the purpose of retiring Parity Bonds or may be deposited in any other fund and,spent for any other lawful Waterworks Utility purpose. The City may provide for the purchase, redemption or defeasance of Parity Bonds by the use of money on deposit in the Bond Fund or the Reserve Fund as long as the money remaining in those funds is sufficient to satisfy the required deposits in those funds for the remaining Parity Bonds. All money in the Bond Fund or Reserve Fund may be kept in cash or on deposit in the official bank depository of the City or in any national bank or may be invested in any legal investment for City funds. Interest on any of those investments or on that bank account shall be deposited in the Reserve Fund until the total Reserve Requirement shall have been accumulated therein, after which time the interest shall be deposited in any Parity Bond Fund. Notwithstanding the provisions for the deposit or maintenance of earnings in the Bond Fund or the Reserve Fund, any earnings which are subject to a federal tax or rebate requirement may be withdrawn from the Bond Fund or the Reserve Fund for deposit into a separate fund or account for that purpose. If the City fails to set aside and pay into the Bond Fund or the Reserve Fund the amounts set forth above,the Owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. 26 ORDINANCE NO. 4 9 7 6 Section 16. Flow of Funds. Funds in the Waterworks Utility Fund (other than in any bond redemption or federal rebate account) shall be used in the following order of priority: (a) To pay Maintenance and Operation Expense; • (b) To pay the interest on the Outstanding Parity Bonds and Parity Bonds; (c) To pay the principal of the Outstanding Parity Bonds and Parity Bonds; (d) To make all payments required to be made into any sinking fund or bond redemption fund hereafter created for the payment of Future Parity Bonds which are Term Bonds; (e) To make all payments required to be made into the reserve accounts created to secure the payment of the Outstanding Parity Bonds and Parity Bonds; After the New Covenant Date, subsection(e) of this Section shall be amended to read as follows: To make all payments required to be made into the Reserve Fund; (f) To make all payments required to be made into any revenue bond redemption fund or warrant redemption fund and debt service account or reserve account created to pay and secure the payment of the principal of and interest on any revenue bonds or revenue warrants of the City having a lien upon Gross Revenue junior and inferior to the lien thereon for the payment of the principal of and interest on the Outstanding Parity Bonds and Parity Bonds; and (g) To retire by optional redemption or purchase in the open market any outstanding revenue bonds or revenue warrants of the City,to make necessary additions, betterments, improvements and repairs to or extensions and replacements of the Waterworks Utility, after the New Covenant Date,to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. • Section 17. Pledge of Revenue and Lien Position. The Gross Revenue is pledged to the payments set forth in Section 15, and the Bonds shall constitute a lien and charge on that revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense, except that the lien and charge on such revenue for the Bonds shall be on a parity with 27 ORDINANCE NO. 4 9 7 6 the lien and charge thereon for the Outstanding Parity Bonds, the 1998 Bonds and any Future Parity Bonds. After the New Covenant Date, this Section shall be amended to read as follows: The Net Revenue is pledged to the payment of the Parity Bonds, and the Parity Bonds shall constitute a lien and charge upon such Net Revenue prior and superior to any other charge whatsoever. Section 18. Findings Regarding Sufficiency of Revenue. In the judgment of the City Council, Gross Revenue and benefits to be derived from the operation and maintenance of the Waterworks Utility, at the rates to be charged for water, sanitary sewage disposal service and storm and surface water drainage service in the entire utility, will be more than sufficient to meet all Maintenance and Operation Expense (and cost of maintenance and operation of the Waterworks Utility as that term is used in RCW 35.92.100) and the debt service requirements of the Outstanding Parity Bonds and the 1998 Bonds and to permit the setting aside in the Bond - i Fund, and after the New Covenant Date,the Bond Fund and the Reserve Fund, out of the revenue of the entire utility, of amounts sufficient to pay the interest on the Bonds as that interest becomes payable and to pay and redeem all of the Bonds at maturity. The City Council further declares that in creating the Bond Fund and in fixing the amounts to be paid into the Bond Fund, and after the New Covenant Date,the Bond Fund and the Reserve Fund, as aforesaid, it has exercised due regard for the Maintenance and Operation Expense (and costs of maintenance and operation as used in RCW 35.92.100) and the debt service requirements of the currently outstanding Outstanding Parity Bonds and 1998 Bonds, and the City has not bound and obligated itself to set aside and pay into the Bond Fund, and after the New Covenant Date, the Bond Fund and the Reserve Fund, a greater amount or proportion of the revenue of that utility than in the 28 ORDINANCE NO. 4 97 6 judgment of the City Council will be available over and above Maintenance and Operation Expense (and such costs of maintenance and operation of the Waterworks Utility as that term is used in RCW 35.92.100) and debt service requirements of the Outstanding Parity Bonds and the 1998 Bonds and that no portion of the Gross Revenue has been previously pledged for any unrefunded indebtedness other than the payment of the currently outstanding Outstanding Parity Bonds and 1998 Bonds. Section 19. Covenants. The City covenants and agrees with the Owner of each Bond at any time outstanding as follows: (a) It will establish,maintain and collect such rates and charges for water, sanitary sewage disposal service and storm and surface water drainage service so long as any Outstanding Parity Bonds, 1998 Bonds and Bonds are outstanding as will make available for the payment of the principal of and interest on such bonds an amount equal to at least 1.3 times the average annual debt service requirements, both principal and interest, on the Outstanding Parity Bonds, the 1998 Bonds and the Bonds after deducting Maintenance and Operation Expense from Gross Revenue. After the New Covenant Date, subsection(a) of this Section shall be amended to read as follows: It will establish,maintain and collect rates and charges for all services and facilities provided by the Waterworks Utility which will be fair and nondiscriminatory, and will adjust those rates and charges from time to time so that: (1) Gross Revenue will at all times be sufficient to (A)pay all Maintenance and Operation Expense on a current basis, (B)pay when due all amounts that the City is obligated to pay into the Reserve Fund and any Parity Bond Funds and(C)pay all taxes, assessments or other governmental charges lawfully imposed upon the Waterworks Utility or other revenue therefrom or payments in lieu thereof and any and all other amounts which the City may now or hereafter become obligated to pay from Gross Revenue by law or contract; and (2) Net Revenue in each calendar year will be at least equal to the Coverage Requirement. (b) It will at all times maintain and keep the Waterworks Utility in good repair,working order and condition and also will at all times operate such Utility and the business in connection therewith in an efficient manner and at a reasonable cost. 29 ORDINANCE NO. 4 9 7 6 (c) It will not sell, lease, mortgage or in any manner encumber or dispose of all the property of the Waterworks Utility unless provision is made for payment into each of the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the 1998 Bonds and the Bond Fund of sums sufficient to pay, respectively,the principal of and interest on all Outstanding Parity Bonds, 1998 Bonds and the Bonds at any time outstanding, and that it will not sell, lease,mortgage, or in any manner encumber or dispose ofi any part of the property of the Waterworks Utility that is used, useful and material to the operation thereof,unless provision is made for replacement thereof, or for payment into the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the 1998 Bonds and the Bond Fund of the total amount of revenue received which shall not be less than an amount which shall bear the same ratio to the amount of the Outstanding Parity Bonds, 1998 Bonds and Bonds,respectively, as the revenue available for debt service for such outstanding bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the utility sold, leased, encumbered or disposed of bears to the revenue available for debt service for such bonds from the entire utility for the same period. Any such money so paid into such funds shall be used to retire such outstanding bonds at the earliest possible date. After the New Covenant Date, subsection(c) of this Section shall be amended to read as follows: It will not sell or otherwise dispose of the Waterworks Utility in its entirety unless, simultaneously with such sale or other disposition, all Parity Bonds are defeased pursuant to the provisions of this ordinance. It will not sell, lease,mortgage or in any manner encumber or otherwise dispose of any part of the Waterworks Utility(other than timber), including all additions and improvements thereto and extensions thereof at any time made,that are used, useful or material in the operation of the Waterworks Utility, unless provision is made for the replacement thereof or for payment into the Bond Fund of the greatest of the following: (1) An amount which will be in the same proportion to the net amount � P P of any Parity Bonds then outstanding (defined as the total amount of those bonds less the amount of cash and investments in the Reserve Fund and any Parity Bond Funds)that Gross Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Gross Revenue for that period; (2) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (as defined above)that the Net Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Net Revenue for that period; or (3) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (as defined above) that the depreciated cost 30 ORDINANCE NO. 4 9 7 6 value of the facilities sold or disposed of bears to the depreciated cost value of the entire Waterworks Utility immediately prior to such sale or disposition. Notwithstanding any other provision of this subsection, (1)the City in its discretion may sell or otherwise dispose of any of the works,plant, properties or facilities of the Waterworks Utility 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 Waterworks Utility, or no longer necessary, material to or useful to the operation of the Waterworks Utility, without making any deposit into the Bond Fund, and (2) the City may transfer the Waterworks Utility to another municipal corporation so long as Net Revenue of the portion of the Waterworks Utility so transferred is used for payment of debt service on the Parity Bonds prior to any other purpose. In no event shall such proceeds be treated as Gross Revenue for purposes of this ordinance. (d) It will, while any of the Bonds remain outstanding,keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to the Waterworks Utility, and it will furnish the original purchaser or purchasers of the Bonds or any subsequent owner or owners thereof at the written request of such owner or owners complete operating and income statements of such utility in reasonable detail issued in any calendar year not more than ninety days after the close of such calendar year, and it will grant any Owner or Owners of at least twenty-five percent of the outstanding Bonds the right at all reasonable times to inspect the entire Waterworks Utility and all records, accounts and data of the City relating thereto. Upon request of any Owner of any of the Bonds, it also will furnish to such Owner a copy of the most recently completed audit of the City's accounts by the State Auditor of Washington. After the New Covenant Date, subsection (d) of this Section shall be amended to read as follows: It will keep proper books, records and accounts with respect to the operations, income and expenditures of the Waterworks Utility in accordance with proper accounting procedures and any applicable rules and regulations prescribed by the State. 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 Waterworks Utility 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 Reserve Fund and into any and all special funds or accounts created pursuant to 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 Waterworks Utility. Such statements shall be sent to the Owner of any Parity Bonds upon written request therefor being made to the City. (e) It will not furnish water, sanitary sewage disposal service or storm and surface water drainage service to any customer whatsoever free of charge and promptly will take legal action to enforce collection of all delinquent accounts. 31 • • ORDINANCE NO. 4 9 7 6 After the New Covenant Date, subsection (e) of this Section shall be amended to read as follows: 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 operation of the Waterworks Utility free of charge to any person, firm or corporation, public or private, other than the City, so long as any Parity Bonds are outstanding. On at least an annual basis, it;will determine all accounts that are delinquent and will take all necessary action to enforce payment of such accounts against those property owners whose accounts are delinquent. (f) It will carry the types of insurance on the Waterworks Utility properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems, and the cost of such insurance shall be considered a part of operating and maintaining such utility. If, as, and when the United States of America or some agency thereof shall provide for war risk insurance,the City further agrees to take out and maintain such insurance on all or such portions of such utility on which such war risk insurance may be written in an amount or amounts to cover adequately the value threof. After the New Covenant Date, subsection (f) of this Section shall beamended to read as follows: It at all times will carry fire and extended coverage and such other forms of insurance, including'public liability and property damage insurance, with responsible insurers and with policies payable to or on behalf of the City and any additional insureds = on such of the buildings, equipment, works, plants, facilities and properties of the Waterworks Utility, and against such claims for damages, as are ordinarily carried by municipal or privately owned utilities engaged in the operation of like systems, or will implement and maintain a self-insurance or an insurance pool program with reserves adequate, in the reasonable judgment of the City,to protect the Waterworks Utility and the Owners of the Parity Bonds against loss. (g) It will pay all Maintenance and Operation Expense and the debt service requirements for the Outstanding Parity Bonds,the outstanding 1998 Bonds and the outstanding Bonds, and otherwise meet the obligations of the City as herein set forth. (h) It will take all actions necessary to prevent interest on the 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 Bonds or other funds of the City treated as proceeds of the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross income for federal income tax purposes. It will,to the extent arbitrage rebate requirements of Section 148 of the Code are applicable to the Bonds,take all action necessary to comply (or to be treated as having complied) with those requirements in connection with the Bonds, including the calculation and payment of any penalties that the City has elected to pay as an alternative 32 • ORDINANCE NO. 4 9 7 6 to calculating rebatable arbitrage, and the payment of any other penalties if required under Section 148 of the Code to prevent interest on the Bonds from being 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 arbitrage certifications may not be relied upon. Section 20. No Private Activity Bonds. The City covenants that it will take no actions and will make no use of the proceeds of the Bonds or any other funds held under this ordinance which would cause any Bond to be treated as a"private activity bond" (as defined in Section 141(b) of the Code) subject to treatment under said Section 141(b) as an obligation not described in Section 103(a) of the Code, unless the tax exemption thereof is not affected. Section 21. Defeasance of the Bonds. The City may issue refunding bonds pursuant to State law 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 direct obligations of the United States of America maturing at a time or times and bearing interest in amounts (together with money, if necessary) sufficient to redeem and retire,refund or decrease 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, in Gross Revenue and in funds and accounts obligated to the payment of the defeased Bonds, other than the right to receive the funds so set 33 • ORDINANCE NO. 4976 aside and pledged, 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 and, if the funds in the trust account are not available for such payment, shall have the residual right to receive payment of the principal of and interest on the defeased Bonds from Gross Revenue without any priority of lien or charge against such revenue or covenants with respect thereto except to be paid therefrom. After the establishing and full funding of the trust account,the City may then 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 owners of any other bonds then outstanding. If the refunding plan provides that the defeased Bonds or the refunding bonds to be issued be secured by cash and/or direct obligations of the United States of America or other legal investments pending the prior redemption of the defeased Bonds and if such refunding plan also provides that certain cash and/or direct obligations of the Untied States of America or other legal investments are pledged irrevocably for the prior redemption of the defeased Bonds included in that refunding plan,then only the debt service on the Bonds which are not defeased Bonds and the refunding bonds,the payment of which is not so secured by the refunding plan, shall be included in the computation of coverage for determining compliance with the rate covenants. Section 22. Provision for Future Parity Bonds. The City reserves the right to issue Future Parity Bonds which will constitute a lien and charge on Gross Revenue on a parity with the Outstanding Parity Bonds,the 1998 Bonds and the Bonds if the conditions set forth in Section 13 of Ordinance No. 3188, as modified and strengthened by Section 12 of Ordinance 34 ORDINANCE NO. 4 9 7 6 No. 3720, are met and complied with at the time of the issuance of those Future Parity Bonds, which sections are by this reference incorporated herein and made a part hereof and shall continue to be applicable even though the 1953 Bonds have been paid and retired. After the New Covenant Date, this Section shall be amended to read as follows: The right of the City to issue bonds on a parity of lien with the 1977 Bonds, the 1988 Bonds,the 1989 Bonds,the 1989 Refunding Bonds, the 1990 Bonds, the 1992 Bonds, the 1993 Refunding Bonds and the 1994 Bonds is permanently revoked. The City reserves the right to issue Future Parity Bonds if the following conditions are met and complied with at the time of issuance of those additional bonds: (a) There shall be no deficiency in any Parity Bond Fund. (b) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the payment of the principal thereof and interest thereon out of a Parity Bond Fund. (c) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds of(1) an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or(2) Reserve Insurance or Alternate Security or an amount plus Reserve Insurance or Alternate Security equal to the increase in the Reserve Requirement attributable to those Future Parity Bonds. For federal income tax purposes, at the discretion of the City, to the extent that the Reserve Requirement cannot be funded from Future Parity Bond proceeds,the City shall provide for deposit into the Reserve Fund other legally available money from Net Revenue or Reserve Insurance or Alternate Security within three years from the date of issuance of the Future Parity Bonds in three 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 applicable Parity 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 to their maturity date from money in the applicable Parity Bond Fund. (f) There shall be on file the City either: 35 ORDINANCE NO. 4976 (1) a certificate of the City Finance Director demonstrating that during any 12 consecutive calendar months out of the immediately preceding 36 calendar months Net Revenue, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least the Coverage Requirement for all Parity Bonds plus the Future Parity Bonds proposed to be issued; or (2) a certificate of a Professional Utility Consultant that in such consultant's opinion Revenue for any 12 consecutive calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to the Coverage Requirement for each year thereafter. The certificate, in estimating Net Revenue available for debt services, may adjust Net Revenue to reflect: (A) Any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; (B) Income derived from customers of the Waterworks Utility who have become customers during the 12 consecutive month period or thereafter adjusted to reflect one year's Net Revenue from those customers; (C) Income from any customers to be connected to the Waterworks Utility who have paid the required connection charges; (D) The Professional Utility Consultant's estimate of the Net Revenue,to be derived from customers anticipated to connect for whom building permits have been issued; (E) Income received or to be received which is derived from any person, firm corporation or municipal corporation under any executed contract for water, sewage disposal or other utility service, which revenue was not included in the historical Net Revenue; (F) The Professional Utility Consultant's estimate of the Net Revenue to be derived from customers with existing homes or buildings which will be required to connect to any additions to and improvements and extensions of the Waterworks Utility 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 Waterworks Utility when such additions, improvements and extensions are not completed; and 36 ORDINANCE NO. 4976 (G) Any increases or decrease in Net Revenue as a result of any actual or reasonably anticipated changes in Maintenance and Operation Expense subsequent to the 12-month period. If Future Parity Bonds proposed to be so issued are for the sole purpose of refunding outstanding bonds payable from any Parity Bond Fund, such certification of coverage shall not be required if the amount required for the payment of the principal and interest in each year for therefunding bonds is not increased more than $5,000 over the amount for that same year required for the bonds or the portion of that bond issue to be refunded thereby and if the maturities of such refunding bonds are not extended beyond the maturities of the bonds to be refunded thereby. Nothing contained herein shall prevent the City from issuing Future Parity Bonds to refund maturing Bonds or Future Parity Bonds then outstanding,money for the payment of which is not otherwise available. Nothing contained herein shall prevent the City from issuing revenue bonds that are a charge upon Gross Revenue subordinate to the payments required to be made therefrom into any Parity Bond Fund. Section 23. Approval of Purchase Agreement. The Purchaser has presented the Purchase Agreement to the City pursuant to which the Purchaser has offered to purchase the Bonds. The City Council finds that entering into the Purchase Agreement is in the best interests of the City, and therefore accepts the offer contained in the Purchase Agreement and authorizes and directs the execution of the Purchase Agreement on behalf of the City by City officials, and delivery of the same to the Purchaser. The Bonds will be delivered to the Purchaser in accordance with the Purchase Agreement with a copy of the approving legal opinion of Gottlieb,Fisher &Andrews, PLLC, bond counsel, Seattle, Washington, relative to the issuance of the Bonds, attached to each Bond. Bond counsel has not been engaged to review or express any opinion concerning the completeness or accuracy 37 ORDINANCE NO. 4976 of the official statement or other disclosure documentation used in connection with the offer or sale of the Bonds by any person, and bond counsel's opinion shall so state. Bond counsel has not been retained to monitor, and shall not be responsible for monitoring, the City's compliance with any federal law or regulations to maintain the tax-exempt status of the interest on the Bonds. Section 24. Bond Insurance. The City is authorized to purchase from the Bond Insurer the Bond Insurance Policy insuring the prompt payment of the principal of and interest on the Bonds and agrees to the conditions for obtaining that policy, including the payment of the premium therefor. Any notice required to be given to the Bond Insurer shall be sent by certified or registered mail to Financial Security Assurance Inc., One Market, 1550 Spear Tower, San Francisco, California 94105. Section 25. Delivery of Bonds; Temporary Bonds. The proper City officials, including, but not limited to,the City Finance Director, are authorized and directed (a)to execute all documents necessary to complete the issuance and delivery of the Bonds to the Purchaser, including, but not limited to,the final official statement pertaining to the Bonds; and (b)to do everything necessary for (1)the preparation and delivery of a transcript of proceedings pertaining to the Bonds, and (2)the preparation, execution and delivery of definitive Bonds to 1 the Purchaser, each without unreasonable delay. I If definitive Bonds are not ready for delivery by the date of Closing agreed to by the City and the Purchaser, the City, upon the approval of the Purchaser,may cause to be issued and delivered to the Purchaser one or more temporary Bonds with appropriate omissions, changes and additions. Any temporary Bonds shall be entitled and subject to the same benefits and provisions of this ordinance with respect to the payment, security and obligation thereof as 38 ORDINANCE NO. 4 9 7 6 definitive Bonds authorized hereby. Such temporary Bond or Bonds shall be exchangeable without cost to the Owner thereof for definitive Bonds when the latter are ready for delivery. Section 26. Application of Bond Proceeds. The accrued interest received by the City at Closing shall be deposited into the Principal and Interest Account and shall be applied to the payment of interest first coming due on the Bonds. The remaining proceeds of the sale of the Bonds, less the underwriter's discount and the bond insurance premium to be paid by the Purchaser on behalf of the City,plus the net original issue premium, in the amount of$11,850,322.87 shall be deposited,upon receipt,to the "Waterworks Utility Construction Fund" (the "Project Fund"), established in the office of the City Finance Director, to pay part of the costs of the Project. Except as provided by the Code and Section 18(h) of this ordinance,the interest and profits derived from the investment of Bond proceeds shall be deposited in the Project Fund and applied as described in the preceding paragraph. Except as provided by the Code and Section 18(h) of this Ordinance, if any money allocable to the Bond proceeds remains in the Project Fund after payment of all the costs of the Project or after termination of the Project by the City, such money shall be transferred to the Bond Fund and applied to the payment of the principal of and interest on the Bonds. Pending application as described in this Section 30 and subject to the requirements of the Code and Section 18(h) of this ordinance,money allocable to the Bond proceeds in the Project Fund may betemporarily deposited in such institutions or invested in such investments as may be lawful for the investment of City funds. 39 ORDINANCE NO. 4 9 7 6 Section 27. Undertaking to Provide Continuing Disclosure. This section constitutes the City's written undertaking for the benefit of the Owners and Beneficial Owners of the Bonds required by subsection(b)(5)(i) of the Rule. The City hereby agrees to provide or cause to be provided to each then existing NRMSIR and to the SID, if one is created,the following annual financial information and operating data (collectively,the "Annual Financial Information") for each prior fiscal year, commencing with the calendar year ending December 31, 2002, on or before the last day of the seventh month following the end of such prior fiscal year: (a) Annual financial statements prepared in accordance with the generally accepted accounting principles applicable to governmental units, as such principles may be changed from time to time and as permitted by State law; which statements will not be audited, except that if and when audited financial statements are otherwise prepared and available to the City, they will • be provided (the"Annual Financial Statements"); (b) A statement of authorized, issued and outstanding bonded debt secured by the Gross Revenue or Net Revenue; (c) Debt service coverage ratios; (d) General customer statistics for the Waterworks Utility; and (e) A narrative explanation of the reasons for any amendments to this Section 27 made during the previous fiscal year and the impact of such amendments on the Annual Financial Information being provided. In its provision of such financial information and operating data,the City may cross- reference to any"final official statement" (as defined in the Rule) available from the MSRB or 40 ORDINANCE NO. 4 9 7 6 any other documents theretofore provided to each then existing NRMSIR or the SID, if one is created. If not submitted as part of the Annual Financial Information, then when and if available, the City shall provide its Annual Financial Statements, which shall have been audited by such auditor as shall be then required or permitted by the State law, to each then existing NRMSIR and to the SID, if one is created. The City further agrees to provide or cause to be provided, in a timely manner,to the SID, if one is created, and to either the MSRB or each then existing NRMSIR,notice of any of the following events with respect to the Bonds, if material: 1. Principal and interest payment delinquencies; 2. Non-payment related defaults; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions or events affecting the tax-exempt status of the Bonds; 7. Modifications to rights of the Owners of the Bonds; 8. Optional redemptions of the Bonds; 9. Defeasances of the Bonds; 10. Release, substitution or sale of property securing repayment of the Bonds; and 11. Rating changes. The City also agrees to provide or cause to be provided, in a timely manner,to the SID, if one is created, and to either the MSRB or each then existing NRMSIR, notice of its failure to 41 • ORDINANCE NO. 4 9 7 6 provide the Annual Financial Information for the prior fiscal year on or before the last day of the seventh month following the en d of such prior fiscal year. After the issuance of the Bonds, so long as the interests of the Owners or Beneficial Owners of the Bonds will not be materially impaired thereby, as determined by a party unaffiliated with the City(including, without limitation, a trustee for the Owners, nationally recognized bond counsel or other counsel familiar with the federal securities law), or pursuant to a favorable "no-action letter"issued by the SEC, this Section 27 may only be amended in connection with any change in legal requirements, change in law, or change in the identity, nature or status of the obligated person, or type of business conducted, and only in such a manner that the undertaking of the City, as so amended,would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. The City's obligations to provide Annual Financial Information and notices of certain events shall terminate without I endment upon the defeasance,prior redemption or payment in full of all of the then outstanding Bonds. This Section 27 or any provision hereof, shall be null and void if the City(i) obtains an opinion of nationally recognized bond counsel or other counsel familiar with the federal securities laws to the effect that those portions of the Rule which require this Section 27 or any such provision are invalid, have been repealed retroactively or otherwise do not apply to the Bonds; and (ii)notifies and provides the SID, if any, and either the MSRB or each then existing NRMSIR with copies of such opinion. The right of each Owner or Beneficial Owner of Bonds to enforce the provisions of this Section 27 shall be limited to the right to obtain specific enforcement of the City's obligations 42 • • ORDINANCE NO. 4 9 7 6 under this Section 27, and any failure by the City to comply with the provisions of this undertaking shall not be a default with respect to the Bonds under this ordinance. The City Finance Director is authorized and directed to take such further action on behalf of the City as may be necessary, appropriate or convenient to carry out the requirements of this Section 27. Section 28. Preliminary Official Statement Deemed Final. The City Council has been provided with copies of a preliminary official statement dated June 20, 2002 (the"Preliminary Official Statement"),prepared in connection with the sale of the Bonds. For the solepurpose of the Bond purchaser's compliance with paragraph (b) (1) of the Rule, 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. 43 ORDINANCE NO. 4 9 7 6 Section 29. Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval and five days after publication. PASSED by the City Council this 1st day of July, 2002. 6)011-DYk- Bonnie Walton, City Clerk APPROVED BY THE MAYOR this 1st day of July, 2002. el CI:StPits9 *- Je• anner, Mayor Approved as to Form: Bond Co 4sel- — Date of Publication: 7/5/0 2 (Summary) 44 July 1,2002 Renton City Council Minutes Page 264 SECONDED BY CLAWSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Councilwoman Keolker-Wheeler requested that pictures of the art be displayed at the July 8th Council meeting. ORDINANCES AND The following resolutions were presented for reading and adoption: RESOLUTIONS Resolution#3577 A resolution was read approving the McTighe(also known as Honeybrooke) Plat: McTighe(Honeybrooke), Final Plat consisting of approximately 4.67 acres located in the vicinity of NE NE 4th PI&Ilwaco Ave NE 4th Pl. and Ilwaco Ave. NE(FP-02-016). MOVED BY KEOLKER- (FP-02-016) WHEELER, SECONDED BY CORMAN, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. Resolution#3578 A resolution was read updating the City's Six-Year Transportation Transportation: Six-Year TIP Improvement Program(TIP),2003—2008. MOVED BY PERSSON, (2003-2008) SECONDED BY CORMAN, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. Resolution#3579 A resolution was read rescinding a development agreement dated January 4, Development Services: Boeing 2001,between The Boeing Company and the City of Renton,and authorizing Longacres Office Park the Mayor and City Clerk to execute an updated development agreement with Development Agreement The Boeing Company for future development of Longacres Office Park. MOVED BY KEOLKER-WHEELER, SECONDED BY BRIERE,COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. The following ordinances were presented for second and final reading and adoption: Ordinance#4975 An ordinance was read amending Chapters 4-8 and 4-9 of Title IV Planning: Title IV (Development Regulations)of City Code to implement RCW(Revised Code of Development Regulation Washington)36.70A.470 governing development regulation amendment cycles. Revision Process MOVED BY KEOLKER-WHEELER, SECONDED BY BRIERE, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. Ordinance#4976 An ordinance was read relating to the waterworks utility of the City, including Finance: Bond Issuance,Water the sewerage system as a part thereof; providing for the issuance of &Sewer Projects $11,980,000 aggregate principal amount of Water and Sewer Revenue Bonds, �� 2002, of the City for the purpose of obtaining the funds with which to pay the 0 costs of carrying out certain capital improvements of the waterworks utility; fixing the date, form, denominations, maturities, interest rates, terms and covenants of the bonds;providing for bond insurance; and approving the sale and providing for the delivery of the bonds to D.A. Davidson&Co., Seattle, . Washington. MOVED BY CLAWSON, SECONDED BY PERSSON, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. NEW BUSINESS MOVED BY CLAWSON, SECONDED BY KEOLKER-WHEELER, Budget: 2002 Amendment, COUNCIL INSTRUCT ADMINISTRATION TO PREPARE AN Additional Police&Fire ORDINANCE FOR FIRST READING AT THE JULY 8, 2002, COUNCIL Department Positions MEETING ADDING TWO STAFF POSITIONS: AN EVIDENCE TECHNICIAN TO THE POLICE DEPARTMENT AND A SECRETARY 1 TO THE FIRE DEPARTMENT.* Councilman Parker expressed his preference for adding the evidence technician and crime analyst positions as those positions are part of the long-range forecast I` June 24,2002 Renton City Council Minutes Page 246 four sections corresponding to the groups who utilize pedestrian facilities: school children,elderly people, transit riders, and all others. Many of the projects defined in the 1991 study have been designed and constructed, some as elements of the City's newly established Neighborhood Program. At this juncture, it has been ten years since the City of Renton's last formal walkway needs analysis. As part of the City of Renton's ongoing commitment to insure that future investment continues to be both responsive to contemporary needs and it is fiscally sound,a current study is necessary. The Committee recommended that Council authorize the Mayor and City Clerk to sign the contract with Transportation Planning&Engineering,Inc. to carry out the Comprehensive Citywide Walkway Study. MOVED BY PERSSON, SECONDED BY CORMAN, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance: Water&Sewer Bond Finance.and Information Services Administrator Victoria Runkle stated that the Rating Upgrade City is going to sell$12,150,000 of water and sewer revenue bonds and • $3,800,000 of LTGO bonds,and announced that Fitch Ratings has upgraded the K� water and sewer bonds from A+to AA-, a one step increase. The rating submitted by Standard&Poors remained the same. She reported that both rating agencies remarked on the excellent work the City has done by diversifying its economic base, sustaining lower utility rates, increasing all other economic indicators such as assessed valuation, and maintaining healthy reserves: Councilman Clawson commented that the City's water rates now rank in the bottom third of the Puget Sound jurisdiction. Councilman Corman stated that it is amazing to see a rating upgrade in these economic times and it is a credit to the Finance Department,Economic Development Department and the Utilities Division. Mayor Tanner pointed out that despite tight financial management, not one project has been delayed that was necessary for economic development in the City. Finance Committee Finance Committee Chair Parker presented a report recommending adoption of Finance: Bond Issuance,Water the ordinance that authorizes the sale of water and sewer revenue bonds in the &Sewer Projects amount of$12,150,000. The bonds are for the purpose of utility construction and refinancing outstanding debt. The Committee further recommended that the ordinance regarding this matter be presented for first reading. MOVED BY PARKER, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See page 247 for ordinance.) Finance: Bond Issuance,Fire Finance Committee Chair Parker presented a report recommending adoption of Station#12 Construction the ordinance that authorizes the sale of Limited Tax General Obligation Bonds in the amount of$3,800,000. The bonds are for the purpose of design and construction of Fire Station#12. The Committee further recommended that the ordinance regarding this matter be presented for first reading on July 8, 2002. MOVED BY PARKER, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. City Clerk: AT&T Broadband Finance Committee Chair Parker presented a report regarding the AT&T &Comcast Corporation Cable Broadband merger with Comcast Corporation. The Committee has reviewed TV Franchise Merger the recommendations from staff and the City's cable consultant regarding a change of control of AT&T Broadband to AT&T Comcast Corporation, and recommended approval of the franchise merger, subject to the conditions contained in the resolution. The conditions require that the franchisee complies _ I CITY OF RENTON ma Finance& Information Services Department MEMORANDUM Date: June 24, 2002 To: Mayor Tanner ' Jay Covington CC: Council Members From: Victoria Runkle Subject Ratings on our bonds Attached are the credit reports from Standard and Poor's and Fitch rating agencies. Bottom line: Fitch gave us an actual upgrade Ion our Water/Sewer bonds from an A+ to a AA-. While I appreciate an A+ may seem better; receiving a double AA is excellent. Also, Fitch changed their outlook from"stable"to"positive." his is a significant change in the area of credit ratings. Also, while S&P did not upgrade us, they also did not downgrade us. They are well aware of the Boeing issues. In our conversations, they are quite excited about the fact we are working proactively with Boeing on the future of that property. Cities that have a wide base of economic health are always considered better risks. Both rating agencies remarked on the excellent work you have done in several areas. While the report highlights many things, the following are important: a) Diversifying our economic base; b) Sustaining lower utility rates — we are now in the middle of the regional rates — as opposed to being the highest; c) Increasing all other economic indicators such as assessed valuation; and d) Maintaining healthy reserves. All of these types of things state that we are working on expanding our base. These ratings are extremely good in relation to the current economic situation of our region. Receiving an upgrade was beyond our goals. During my presentations with the agencies, I wanted to point out that we were planning for contingencies. They were quite impressed with the fact that you have set monies aside for "rainy days" as well as the 8 percent in the InguIance Fund and the operating monies. Further, they were interested in the fact we had $1.5 million set aside for Highlands redevelopment. They were told of the 2001 year end balances, and your choice to build a swimming pool. They noted that purchasing "amenities" with cash while preserving the debt capacity for basic services illustrated fiscal prudence. In summary, you should be quite pleased with these rating reports. It demonstrates to the world that Renton is indeed focusing on the important elements of its financial health. Please feel free to call with any questions you have regarding these reports. Attachments Fitch Corporate Page 1 c ,j'% :? Text 'Y{ �' ,L . . J .�-.c — _, Search by: �._.....____.. • —�-:' • ' l`L •;. - for. ` GO! 1 4, r Home Products Sectors Media About Fitch Links FitchResearch Logged in as:varunkle[Log Fitch Upgrades Renton, WA, Water & Sewer Rev Bonds To 'AA-' 20 Jun 2002 4:28 PM 1 Fitch Ratings-San Francisco-June 20, 20d2: Fitch Ratings assigns'AA-' rating to the City of Renton,Washington's $12,150,000 water and sewer revenue bonds. The bonds are scheduled to sell on June 27, 2002 through negotiation by D.A. Davidson &Co.Additionally, the city's approximately$28.5 million in outstanding Water and Sewer Revenue Bonds are upgraded to'AA-'from 'A+'. 1 In addition to its sound financial performance, system strengths include a strong indigenous water supply and capital management program. The rating upgrade reflects the waterworks utility's strong financial performance and conservative fiscal policy of funding a significant 50% of the capital program with cash. The utility's water supply and wastewater capacity will serve system needs over the near and medium terms. The capital program is manageable and near-term requirements will be primarily cash financed. The Boeing Corp., the largest employer in Renton, represents about 11.3%of total utility revenue. While susceptible to Boeing's downsizing during economic downturns, utility revenue from this source has not varied significantly. Nevertheless, the local economy's relative dependence on Boeing is a credit issue. Renton is located in King County in close proximity to downtown Seattle, SeaTac Airport, and the Port of Seattle and is bisected by several major traffic corridors. It covers an area of 16.9 square miles,with an estimated population of 51,140. In the past decade, the city has seen sound economic, housing, employment and assessed valuation growth. Boeing and PACCAR have been solid economic engines in Renton. Boeing accounts for 41%of the city's employment and represents 13.1%of the total assessed valuations. The Waterworks Utility is divided into threedivisions, the Water Utility, the Wastewater Utility, and the Storm Drainage Utility. The three divisions have been combined for financing purposes:The Wastewater Utility provides water service to 14,538 customers and wastewater service to 12,572 customers.The storm drainage utility owns, maintains, and operates all storm and surface water management facilities located within public rights of way and easements dedicated for storm and surface water management purposes. Residential customers pay an average monthly bill of$69.18,which is competitive with neighboring jurisdictions. The utility has not raised rates over the past six years and does not have solid plans to do so in the near term. Financial flexibility is good with ample revenues sufficient to support its capital program and related debt. Debt service coverage has been strong in recent years,well exceeding 2.7 times (x). Projected debt service coverage is also strong, even when including$10 million of additional debt. Through the forecasted period of2602-2006, debt service coverage should be in excess of 2.6x. The Waterworks system's balance sheet is strong,with debt-to-net plant of about 20%.While leverage may increase as the capital plan is financed, it should remain well at satisfactory levels for the rating category. Contact: Jeffrey B. Burger, 1-415-732-5618, or Scott A.Andreson, 1-415-732-5620, San Francisco. Media Relations: Matt Burkhard 1-212-908-0540, New York. Copyright©2002 by Fitch,Inc.,One State Street Plaza,New York,New York 10004. All rights reserved. Terms of Use Disable Popup Menus http://www.fitchratings.com/corporate/events/press_releases detail.cfm?pr id=64911 6/24/20( Fitch Corporate Page 1 o: • i�•-- . _ I •' ; r Searchby: Text 1 : l� �'I l �`i' .III I =r''`1�' for .._.____.._.._.. _ GO[ } Home Products Sectors Media About Fitch Links FitchResearcll Logged in as:varunkle[Logo Fitch Rates City of Renton, Washington $4.0MM GOs 'A+' 20 Jun 2002 10:35 AM Fitch Ratings-San Francisco-June 20, 2002: City of Renton, Washington's$4,000,000 limited tax general obligation, series 2002, are rated 'A+' by Fitch Ratings. The city's Rating Outlook is changed to Positive from Stable. The bonds are scheduled to sell on July 11 through negotiation by D.A. Davidson&Co. The rating reflects Renton's(the city)strong financial position, low debt burden, and good economy. Recent assessed valuation (AV)trends and rising building permit activity also contribute to the overall credit strength. These factors are somewhat offset by the Boeing Co.'ssignificant presence in the local area economy. The city's financial position is strong, demonstrated by high reserve levels, sound fiscal management practices and operating surpluses. Debt levels are low as a result of pay-as-you-go financing and limited debt issuance. Renton is located in King County in close proximity to downtown Seattle, Sea-Tac Airport, and the Port of Seattle and is bisected by several major traffic corridors.11t covers an area of 16.9 square miles,with a,population of 51,140. In the last decade, the city has seen sound economic, housing, employment, and assessed valuation growth. In addition, the city has seen significant growth to their retail base with the addition of several major new retailers. Nonetheless,the area remains dominated by Boeing, although the city is less dependent upon Boeing for its overall economic health than in the recent past. Boeing is Renton's largest employer and largest taxpayer at 13.1% of fiscal 2002 assessed valuation. Taxable valuation gains have been good, the result of significant new building, as well as rising property values. Assessed value rose a remarkable 9.1% per year on average from 1997-2002. Building permit activity remains strong, suggesting good gains at least for the next year. City wealth indicators are above state and national averages. Renton and King County enjoy below-average unemployment rates. - The city's financial position is strong with above average reserve levels that provide financial flexibility. In fiscal 2001, general fund ended with a high unreserved fund balance of 14.7%of spending, or$6.4 million, and has averaged a strong 15.5% over the past four fiscal years.Approximately 74.7% of fiscal 2001 general fund revenue came from taxes, 10.0%from charges for services, and 5.0%from licenses and permits.Taxes are diverse and include property, sales, utility, gambling, and real estate excise tax; each demonstrating good annual growth. Projections for fiscal year-end 2002 are an ending fund balance similar to,the current year's level. Direct debt levels are low. Direct debt, including this issue is a low$651 per capita and 0.6%of assessed valuation. Overall debt, including King County and Renton School District, is moderate at$2,926 per capita, or 2.7%of assessed valuation. Contact: Scott A.Andreson 1-415-732-5620 or Jeffrey B. Burger 1-415-732-5618, San Francisco. Media Relations: Matt Burkhard 1-212-90810540, New York. Copyright©2002 by Fitch,Inc.;One State Street Plaza,New York,New York 10004. All rights reserved. Terms of Use Disable Popua Menus http://www.fitchratings.com/corporate/event's/press_releases detail.cfin?pr id=64848 6/24/20C [24-Jun-2002] Summary: Renton, "L; Utility, Water/Sewer Page 1 o • STANDARD RATINGS DIRECT &POOR'S Research: Returnto Regular Format Summary: Renton, WA; Utility, Water/Sewer Publication date:24-Jun-2002 Analyst: Ian Carroll,San Francisco(1)415-371-5060; Edward R McGlade, New York(1)212-438-2061 Credit Profile $12.5 mil muni debt muni issue due 2022 A+ Sale date: 27-JUN-2002 AFFIRMED $6.120 mil. Renton wtr&swr rev rfdg bnds ser 1998 dtd 03/01/1998 due 06/01/1998-2013 AAA/A+(SPUR) OUTLOOK: STABLE Rationale The'A+' rating on Renton,Wash.'s water and sewer revenue bonds reflects: • Plentiful water supply sufficient to accommodate growth; • Good system liquidity provided by cash reserves in three of the past four years; • Historic net revenues that cover maximum annual debt service more than 2 times(x); and • A manageable capital plan that will require additional debt. The bonds are secured by a pledge of gross revenues of the waterworks utility, including water, sewer, and storm water utility revenues but excluding operations and maintenance. Plentiful water supply accessed primarily by wells to the natural aquifer will accommodate growth well into the future. Maximum capacity of 30 million gallons per day (mgd) is more than 4x the average daily demand of 7 mgd, and well over twice the;maximum demand of 12 mgd. Some customer concentration exists as the leading customer is the Boeing Corp.,which represents about 11%of the system's total revenue. Most of the customers are residential, however, providing long-term stability to the utility as the city's population is a growing 51,400. The utility's liquidity measured by cash on,hand dipped in fiscal 2001 as a result of pay-as-you-go spending for the capital plan, to the equivalent of 46 days of operations. The cash position has rebounded in fiscal 2002, to over$5 million or 128 days of operating expenses,which is more consistent with historic levels. The.combined utility bill for a single-family residence is about$75 per month, including sewer rates at $31.39 per month, along with a monthly storm drainage rate of$5.39. Rates have not increased in seven years. The bonds will fund a portion of the utility's capital plan,with up to$21.4 million of capital needs during 2003 and 2004.Additional debt is expected to be issued in 2004 to fund remaining capital needs. Combined with existing parity bonds, $16.3 million of which remain outstanding, total debt service requirements will start with maximum annual debt service (MADS) occurring in 2003 at just under$3 million. Even if net revenues were frozen at fiscal 2001 levels, they would be sufficient to cover MADS more than 2x. Historic debt service coverage has also been strong, at over 2x in three of the past four years. Outlook The stable outlook reflects the anticipation that the utility will maintain healthy cash liquidity as it f le://C:\Documents%20and%20Settings\vrunide\Local%20Settings\Temp\[24-Jun-2002]%20Summary%2.. 6/24/20C [24-Jun-2002] Summary: Renton, W" TJtility, Water/Sewer •Page''2 of: executes its capital plan. . Copyright©1994-2002 Standard&Poors,a division of The McGraw-Hill Companies.All Rights SO Reserved.Privacy Policy A Divi"m ThC'j&Ore"°'FftfiC olen rs • • file://C:\Documents%20and%20Settings\vrunkle\Loca1%20Settings\Temp\[24-Jun-20021%20Summary%:... 6/24/20C 1 [24-Jun-2002] Summary: Renton, 1; Tax Secured, General Obligation Page 1 c • i i IANDAFZD gr 00 t �►� ra �� f aesid zx.kss,.r4'.. •Gi '-a``>.,' ,Sy..,,.,.,,, �,. .,kd" r-•.iT.`;af ..uzx« " s,���,�.- -'; .' ¢^ M+xrs' ri'a t?`r ,es 't 1114:- SEARCH Research: Print ready/ft LIVE HE ..w._-..._._..__.,.._.. __. Summary: Renton, WA; Tax Secured, General IAu Sectors jyr Obligation I?i Ratings Publication date: '24-Jun-2002 F Research G° Analyst: Ian Carroll, San Francisco (1)415-371-5060; Edward R McGlade, I ADVANCED SEARCH'> York(1)212-438-2061 BROWSE Global Issuers Credit Profile Public Finance Structured Finance $4 mil muff!!debt muni issue due 2022 A+ QUICKLIST Sale date: 27-JUN-2002 MY PORTFOLIOS>> MY ALERTS *> UPGRADED To From $19.505 mil. Renton ltd tax GO & rfdg bnds ser 2001 Table of Contents dtd 11/01/2001 due 12/01/2001 2007-2019 2021 AAA/A+(SPUR) A •Rationale •Outlook OUTLOOK: STABLE •Current Ratings M Rationale The'A+' rating on Renton, Wash.'s GO bonds reflects the following strengths: • Excellent access to King County employment centers; • A diversifying tax base and above-average wealth and income indicators; • Strong financial performance indicated by high fund balances; and • Affordable debt levels. These strengths are offset by concentration and vulnerability in both assessed value(A\ and employment. The GO bonds are secured by the city's unlimited pledge of ad valorem taxes. Located in southeastern King County, Renton surrounds the southern end of Lake Washington, southeast of Seattle on Interstate 405. As of 2001 population estimates, the population was 51,140.AV is about$5.5 billion after a five-year period, when growth averaged 9.9%, driven largely by new construction. The median home price was$209,01 The economy remains concentrated, with the leading taxpayer,the Boeing Company, representing 13%of the city's AV; this is a vulnerability as the company continues downsizing its Renton operations. The Boeing plant is also the leading employer, providi more than 19,000 jobs, a decrease from 20,000 in 1998. Declines are likely to continue, with the company announcing in 2001 employment reductions of as many as 30,000 positions companywide. Approximately one-third of Boeing's workforce is in Renton. The leading 10 taxpayers represent just over 20%of the tax base.Wealth levels are high, at 141%of the US level. Financial management has been strong, demonstrated by high ending fund balances. Tt fiscal 2001 unreserved fund balance totaled $6.4 million, or 16.8%of expenditures, a decline from fiscal 2000's 21%, but still strong. The city started the year with a general fu balance of$12.8 million.The largest portion of Renton's general fund revenues comes fr taxes, adding up to$48 million in fiscal 2001, while total revenues from all sources combined were$62 million. Combined expenditures totaled$55.8 million, and a transfer of$7 million was made for capital projects. The fiscal 2001 ending balance was$11.6 file://C ADoctunents%20and%20S ettings\vrunde\Local%20Settings\Temp\[24-Jun-2002]%20Stunmary%:... 6/24/20( [24-Jun-2002] Summary: Renton, WA• Tax Secured, General Obligation page`l of r.. ;;n. - .. The city has a five-year capital plan, consisting of routing maintenance and infrastructure upgrades totaling $40 million, which will be partly debt financed. Overall debt is moderate at a little under$3,000 per capita, and 2.7% of the market value t property in the city. The city previously issued$20 million of GO bonds in late 2001. These bonds will mature fairly rapidly,with 40% paid down in 10 years. 11 back to tc Outlook The stable outlook reflects the expectation that the city will maintain good fund balances and that the city, with its excellent access to employment centers throughout King County, will maintain a healthy economy. 11back to tc home I my account I criteria I contact us I help I log out Copyright©1994-2002 Standard&Poors,a division of The McGraw-Hill Companies.All Rights Reserved.Privacy Policy Division i 7104 w 0.oi • • file://CADocuments%20and%20Settings\vnmkle\Local%20Settings\Temp\f 24-Jun-20021%20Summary%:... 6/24/200 • APPROVED y CiTY COUNCIL FINANCE ''// COMMITTEE REPORT Date �-�7=X0002 June 24, 2002 WATER & SEWER REVENUE BOND ORDINANCE (June 17, 2002) The Finance Committee reco i mends adoption of the Ordinance that authorizes the sale of Water &.Sewer Revenue Bonds in the amount of $12,150,000 million. The bonds are for the purpose of utility construction and refinancing outstanding bonds. The Committee further recommends that the Ordinance regarding this matter be presented for first reading. King P . -Don Persson, Vice Chair Dan Clawson, Member cc: Victoria Runkle,Finance&IS Administrator Paul Kusakabe,Fiscal Services Director Lys Horsby,Utility Systems Director Gregg Zimmerman, P/B/PW Administrator Sylvia Doerschel,Finance Analyst Supervisor,Budget Gina Jarvis,Finance Analyst Supervisor,Accounting June 24,2002 Renton City Council Minutes Page 247 with all valid local laws, franchise requirements and agreements consistent with applicable Federal and State law; and that the Franchise Authority's consent to the transactions shall not be construed to constitute a waiver or release of any rights the Franchise Authority has under the franchise, whether those rights arise before or after the change in control to AT&T Comcast. The Committee recommended that the City Council authorize adoption of the resolution. MOVED BY PARKER, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. ORDINANCES AND The following resolutions were presented for reading and adoption: RESOLUTIONS Resolution#3575 A resolution was read consenting to a change of control of TCI Cablevision of City Clerk: AT&T Broadband Washington,Inc., also known as AT&T Broadband, from AT&T Corporation &Comcast Corporation Cable to AT&T Comcast Corporation. MOVED BY PARKER,SECONDED BY TV Franchise Merger CLAWSON, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. Resolution#3576 A resolution was read authorizing the temporary closure of SW 7th St.,Lind Streets: Temporary Closures Ave. SW at SW 40th St.,Mill Ave. S. at Houser Way S., and Bronson Way N. for Railroad Grade Crossing at Houser Way S., for a period of seven days (consecutive or non-consecutive) Reconstruction between July 10 and September 30, 2002, for Burlington Northern Santa Fe (BNSF)to replace six existing railroad crossings with concrete. MOVED BY PERSSON, SECONDED BY KEOLKER-WHEELER, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. The following ordinance was presented for first reading and referred to the Council meeting of 7/1/2002 for second and final reading: Planning: Title IV An ordinance was read amending Chapters 4-8 and 4-9 of Title IV Development Regulation (Development Regulations)of City Code to implement RCW (Revised Code of Revision Process Washington)36.70A.470 governing development regulation amendment cycles. MOVED BY CORMAN, SECONDED BY NELSON, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 7/1/2002. CARRIED. Finance: Bond Issuance,Water An ordinance was read relating to the waterworks utility of the City, including &Sewer Projects the sewerage system as a part thereof; providing for the issuance of $12,150,000 aggregate principal amount of Water and Sewer Revenue Bonds, 2002, of the City for the purpose of obtaining funds with which to pay the costs of carrying out certain capital improvements of the waterworks utility; fixing the date, form, denominations, maturities, interest rates, terms and covenants of the bonds;providing for bond insurance; and approving the sale and providing for the delivery of the bonds to D.A. Davidson &Co., of Seattle,Washington. MOVED BY PARKER, SECONDED BY CORMAN, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 7/1/2002. CARRIED. The following ordinances were presented for second and final reading and adoption: Ordinance#4974 An ordinance was read amending Chapter 8, Permits and Decisions, of Title IV Development Services: Permit (Development Regulations) of City Code by providing for a 120-day time goal Review Process, 120-Day Goal to process permits after the date of the letter of completeness, except for Exemptions appeals, which may take more time. MOVED BY KEOLKER-WHEELER, SECONDED BY CORMAN, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. DAVIDSON D.A. Davidson & Co. COMPANIES member SIPC Crystal L.Vogl Of Associate,Public Finance J Renton c U�2 , 2002 epi S�arhini June 20, 2002 CITY 6orTON Victoria Runkle JUN 2 1 2002 Finance Administrator RECEIVED City of Renton CITY CLERK'S OFFICE 1055 S. Grady Renton, WA 98058 Re: Preliminary Official Statements for $12,150,000 City of Renton, Washington, Water and Sewer Revenue Bonds, 2092 Dear Victoria: Enclosed please find ten copies of the Preliminary Official Statement(POS)per the City's issuance of the above referenced issue for your records and for the records of the City, and any other interested official. Please let me know if you would like additional copies. Shortly after the bond purchase contract is signed,you will receive several copies of the final Official Statements, which will contain the final interest rates on the Bonds and will be distributed to the individual investors in the Bonds. If before this time you find additional revisions that should be made within the document, please call me and I will make the necessary changes for the final Official Statement. If you have any questions concerning the document or any other matter,please call me at(406)791- 7214. We look forward to a successful bond sale. Sincerely yours, 6,4,p,„„Lv,„/ Crystal L. Vogl Associate Public Finance Enclosures Great Falls Office Davidson Building • 8 Third St.N. • P.O.Box 5015 • Great Falls,MT 59403 • (406) 727-4200 • 1-800-332-5915 • FAX(406)791-7238 Montana• Washington• Idaho• Wyoming• Oregon• Utah• California www.dadavidson.com Y � June 17,2002 `+✓ Renton City Council Minutes ``Nue Page 231 Community Services: Community Services Department recommended approval of a contract with Downtown Parking Garage Cascade Testing Laboratory, Inc. for inspection and testing services for the Inspection &Testing Services, Downtown Parking Garage project in an amount not to exceed $51,232.20. Cascade Testing Laboratory Council concur. Finance: Bond Issuance, Fire Finance and Information Services Department requested approval of an Station#12 Construction ordinance authorizing the issuance of Limited Tax General Obligation Bonds in the amount of$3,800,000 for the design and construction of Fire Station#12. Refer to Finance Committee. Finance: Bond Issuance,Water Finance and Information Services Department requested approval of an & Sewer Projects ordinance authorizing the issuance of revenue bonds in the amount of ct\tl $12,150,000 for construction of various water, sewer, and storm water utility projects; and to refinance existing debt. Refer to Finance Committee. City Clerk: AT&T Broadband Legal Division recommended approving the merger of the existing cable &Comcast Corporation Cable television franchise between AT&T Broadband and Comcast Corporation. TV Franchise Merger Refer to Finance Committee. Transportation: Citywide Transportation Systems Division recommended approval of a contract with Walkway Study, Transportation Planning&Engineering, Inc. in the amount of$60,000 to Transportation Planning& conduct a Citywide Comprehensive Walkway Study. Refer to Transportation Engineering (Aviation) Committee. Airport: Security Gate Transportation Systems Division requested authorization to use$200,000 from Replacement,Fund the Airside/Landside Separation Improvement Program for the Renton Appropriation Municipal Airport Gate and Security Fencing Project. Refer to Transportation (Aviation) Committee. Streets: Temporary Closures Transportation Systems Division requested authorization for the temporary for Railroad Grade Crossing closure of SW 7th St.,Lind Ave. SW, and Mill Ave. S. for a period of seven Reconstruction days (consecutive or non-consecutive)between July 10 and September 30, 2002, for Burlington Northern Santa Fe to replace six existing railroad crossings. Refer to Transportation (Aviation) Committee. Transportation: Six-Year TIP Transportation Systems Division submitted the annual update of the Six-Year (2003-2008) Transportation Improvement Program(TIP). Refer the TIP to the Transportation (Aviation) Committee; set a public hearing on 7/1/2002 to consider the TIP. MOVED BY NELSON, SECONDED BY CLAWSON, COUNCIL APPROVE THE CONSENT AGENDA AS PRESENTED. CARRIED. Added The following correspondence was read into the record in support of the CORRESPONDENCE Whitworth Ave. S. street vacation request by St. Anthony Parish(VAC-00- Citizen Comment: Various— 003): John&Annette Hightower, 3903 NE l lth Ct.,Renton, 98056; Eric & Whitworth Ave S Vacation, St. Tracy Hajek, 10405 SE 187th P1., Renton, 98055; George &Sylvia Miller, Anthony Church(VAC-00- 3901 Meadow Ave. N.,Renton, 98056; Wema Fairhart Slyter, 23424 134th 003) Lane SE, Kent,98042; four form letters received from parents of students at St. Anthony School; and 348 form letters received from parishioners of St. Anthony Parish. MOVED BY CORMAN, SECONDED BY PARKER, COUNCIL REFER THE CORRESPONDENCE TO PLANNING& DEVELOPMENT COMMITTEE. CARRIED. CIlmf OF RENTON COUNCIL AGENDA IITtL AI#: s• e • Submitting Data: For Agenda of: June 17, 2002 Dept/Div/Board.. Finance & IS Department Staff Contact Victoria Runkle, FIS Administrator Agenda Status Consent..x X Subject: Public Hearing.. Correspondence.. X Ordinance.x Water Sewer Bond Ordinance Resolution Old Business Exhibits: New Business X 1. Issue Memorandum Study Sessions Information 2. DRAFT Ordinance Recommended Action: Approvals: Refer to Finance Committee Legal Dept FJune 24, 2002 Other Dept Other Fiscal Impact: Expenditure Required... $12,150,000 Transfer/Amendment Amount Budgeted Revenue Generated $12,150,000 Total Project Budget City Share Total Project.. SUMMARY OF ACTION: This ordinance will permit the Finance Department to sell $10,000,000 in new bonds for water, sewer, and storm water construction projects, and $2,150,000 in refunding bonds. Given our expenditure pattern, we do not anticipate the need to sell additional bonds for at least two years. STAFF RECOMMENDATION: Recommend Council adoption of the Bond Ordinance. Revised March 8,2002 91 ® CITY OF RENTON 441. Finance & Information Services Department MEMORANDUM Date: June 12, 2002 To: Toni Nelson, Council President City Council Members Via: Mayor Jesse Tanner _ci Staff Contact: ' Victoria Runkle, FIS Administrator Subject Revenue Bonds (Utility Construction and Refinancing Outstanding Bonds Background Utility construction projects are funded from rate proceeds set aside for that purpose. Depending on the size and scope of the construction projects included in our work plan, bonding is necessary to smooth the impact on utility rates. Each year, as part of the budget process, Council approves our annual construction work plan. Before Council are two elements of a revenue bond proposal, totaling $12,150,000. The bond is for $10,000,000 of new money for Water/Sewer construction projects, with the remaining amount for the purpose of refunding outstanding bonds. Revenue Bonds (Utility Construction and Refinancing Outstanding Bonds) This revenue bond issue will fund construction projects in our water, sewer and storm water utilities. The total issue will total $12,150,000 million. We currently pay approximately $2.7 million a year in debt service. These bonds are structured to maintain a level debt service in the next few years. However, as you can see in the table below, the current debt service, without this new issue, is retired in 2013. Because we have not issued debt for some time, we have a very good debt picture. This allows us to structure the new bond payments in a way that maintains a more even payment schedule after 2012, and this also permits us to issue debt in the future without forcing significant rate increases due to maintenance needs. Current New Year Debt Service Debt Service 2002 $2,733,300 $2,277,996 2003 2,756,763 2,925,801 2004 2,754,179 2,920,142 2005 2,743,970 2,924,080 2006 2,505,593 2,651,744 2007 1,997,608 2,650,900 2008 1 ,999,700 2,649,139 2009 1 ,660,859 2,646,175 To: Toni Nelson, CounciT'President City Council Members Via: Mayor Jesse Tanner June 12, 2002 Page 2 2010 1,501,295 2,648,612 2011 1 ,141,748 2,648,235 2012 1,143,273 2,652,131 2013 795,333 1,198,610 2014 1,163,278 2015 1,164,077 2016 1,167,500 2017 1,162,845 2018 1,166,085 2019 1,161,250 2020 1,163,500 2021 1,163,250 2022 1,165,500 The average annual interest rate on these bonds is expected to be 4.9 percent. At this point, we will be saving more than $120,000 over the next four years by refunding the outstanding debt. We have had discussions with Fitch and Standard and Poor's rating agencies. They have not indicated any significant issues. We do expect to have their rating decisions by June 19. We will then make a decision on the cost advantage, if any, of purchasing insurance. Our goal is to have the DRAFT ordinance read into the record on June 24. We plan on pricing bonds June 27, and having a final purchase agreement and final numbers for adoption on July 1, 2002. This is a fairly routine bond issuance. We have not sold water/sewer bonds since 1994. We did do a refunding in 1998. We have now refunded everything we can refund unless, of course, the market changes even more, and we can refund the $10,000,000 of this issue. I cannot imagine that occurring, at this time. We sold LTGO bonds last October for the garage. The rating agencies had few questions or issues because of the timing. Please feel free to call me with any questions. We will, of course, have firm numbers for you on July 1 . Recommendation Council adopt an ordinance authorizing the sale of revenue bonds in an amount up to $12,150,000 for the purposes of constructing various water, sewer and storm water utility projects, and to refinance existing debt. VAR/dlf cc: Jay Covington, Chief Administrative Officer Bonnie Walton, City Clerk Paul Kusakabe, Fiscal Services Director ... 3RD DRAFT 5/23/02 For Discussion Purposes Only CITY OF RENTON, WASHINGTON ORDINANCE NO. AN ORDINANCE relating to the waterworks utility of the City, including the sewerage system as a part thereof; providing for the issuance of$ /a,/54 000, aggregate principal amount of Water and Sewer Revenue Bonds, 2002, of the City for the purpose of obtaining the funds with which to pays the costs of carrying out certain capital improvements of the waterworks utility, and making a deposit to the reserve account; fixing the date, form, denominations, maturities, interest rates, terms and covenants of the bonds; [providing for bond insurance]; and approving the sale and providing for the delivery of the bonds to D..A. Davidson& Co., of Seattle, Washington. 1 ifirse 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. Section 1. Definitions 6 Section 2. Findings Regarding Parity Provisions 15 Section 3. Authorization and Description of Bonds 16 Section 4. Registration of Bonds and Book-Entry System 17 Section 5. Payment of Bonds 19 Section 6. Optional Redemption and Open Market Purchase of Bonds 20 Section 7. Notice of Redemption 21 Section 8. Failure to Redeem Bonds 22 Section 9. Form of Bonds 22 Section 10. Execution of Bonds 22 Section 11. Authentication and Delivery of Bonds by Bond Registrar 23 Section 12. Registration, Transfer and Exchange 23 Section 13. Lost, Stolen or Destroyed Bonds 25 Section 14. Creation of Account 26 Section 15. Deposits into Funds and Accounts 26 Section 16. Flow of Funds 30 Section 17. Pledge of Revenue and Lien Position 31 Section 18. Findings Regarding Sufficiency of Revenue 31 Section 19. Covenants 32 Section 20. No Private Activity Bonds 36 Section 21. Defeasance of the Bonds 36 Section 22. Provision for Future Parity Bonds 38 Section 23. Approval of Bond Purchase Contract 40 Section 24. Bond Insurance 41 2 "" 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. Section 25. Delivery of Bonds; Temporary Bonds 41 Section 26. Application of Bond Proceeds 42 Section 27. Undertaking to Provide Continuing Disclosure 43 Section 28. Preliminary Official Statement Deemed Final 46 Section 29. Effective Date of Ordinance 47 3 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. AN ORDINANCE relating to the waterworks utility of the City, including the sewerage system as a part thereof; providing for the issuance of$ aggregate principal amount of Water and Sewer Revenue Bonds, 2002, of the City for the purpose of obtaining the funds with which to pay the costs of carrying out certain capital improvements of the waterworks utility, and making a deposit to the reserve account; fixing the date, form, denominations, maturities, interest rates, terms and covenants of the bonds; [providing for bond insurance]; and approving the sale and providing for the delivery of the bonds to D.A. Davidson & Co., of Seattle, Washington. WHEREAS, the City of Renton (the "City")has heretofore created and operated a waterworks utility of the City, including the sewerage system of the City and within that system a system of storm and surface water sewers (defined herein as the "Waterworks Utility"); and WHEREAS, by Ordinance No. 1450,the City provided for the issuance of its Water and Sewer Refunding and Improvement Revenue Bonds, 1953 (the "1953 Bonds"), and,by Section 15 of that ordinance, established certain conditions for the issuance of additional water and sewer revenue bonds on a parity of lien with the 1953 Bonds; and WHEREAS, all of the water and sewer revenue bonds of the City issued on a parity of lien with the 1953 Bonds pursuant to the original provisions of Section 15 of Ordinance No. 1450 have been paid and redeemed, or irrevocable provision for their payment and redemption has been made; and WHEREAS, by Ordinance No. 3188,the City authorized the issuance of its Water and Sewer Revenue Refunding Bonds, 1977, Issue No. 3 (the "1977 Bonds"), all of which 1977 Bonds have been paid and redeemed, and by Section 13 of that ordinance incorporated Section 15 of Ordinance No. 1450, as modified by Section 13 of Ordinance No. 3169; and 4 ""` 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. WHEREAS, by Ordinance No. 3720, the City authorized the issuance of its Water and Sewer Revenue Bonds, 1983 (the "1983 Bonds"), all of which 1983 Bonds have been paid and redeemed, and by Section 12 of that ordinance further modified and strengthened the provisions of Section 15 of Ordinance No. 1450, as modified by Section 13 of Ordinance No. 3169; and WHEREAS, the City currently has outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1993 (the "1993 Refunding Bonds"), issued pursuant to Ordinance No. 4410; Water and Sewer Revenue Bonds, 1994 (the"1994 Bonds"), issued pursuant to Ordinance No. 4480; and Water and Sewer Revenue Refunding Bonds, 1998 (the "1998 Bonds"), issued pursuant to Ordinance No. 4709, all of which bonds were issued on a parity of lien with the 1977 Bonds; and WHEREAS, the parity provisions of Section XXIII of Ordinance No. 4709, which incorporated therein Section 13 of Ordinance No. 3188 as modified and strengthened by Section 12 of Ordinance No. 3720, provide that the City may issue additional water and sewer revenue bonds which will constitute a charge and lien upon the revenue of the Waterworks Utility of the City on a parity with the 1993 Refunding Bonds, the 1994 Bonds,the 1998 Bonds and any bonds issued thereafter if such additional bonds are issued in compliance with the conditions set forth therein: WHEREAS, on ,the City Council passed and the Mayor approved Resolution Nos. adopting the Comprehensive Sanitary Sewer Plan and the Comprehensive Water System Plan, respectively, for the City, and for the purpose of financing facilities in those plans it is necessary to specify and adopt them by ordinance; and 5 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. WHEREAS, the City Council has determined that it is necessary and in the best interests of the City that certain additional improvements described in the Comprehensive Water System Plan and the Comprehensive Sanitary Sewer Plan be made and there be adopted a system or plan of additions to and betterments and extensions of the Waterworks Utility; and WHEREAS,the City Council has determined that it is necessary to issue and sell $ of Water and Sewer Revenue Bonds, 2002 (the "Bonds")to provide part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks uUtility, and to pay the costs of issuance and sale of the Bonds; and WHEREAS, of New York,New York, has made a commitment to issue an insurance policy insuring the payment when due of the principal of and interest on the Bonds as provided therein, and the City Council deems that the purchase of such policy is in the best interest of the City; and WHEREAS, D.A. Davidson& Co., Seattle, Washington, has offered to purchase the Bonds under the terms and conditions hereinafter set forth;NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON, DO ORDAIN as follows: Section 1. Definitions. As used in this ordinance, the following words shall have the following meanings: After the New Covenant Date, "Alternate Security"shall mean any bond 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 the Parity 6 r..w 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. Bonds, issued by an institution that has been assigned a credit rating at the time of issuance of such Parity Bonds secured by such Alternate Security equal to or better than the highest then- existing rating for any of the Parity Bonds. "Annual Debt Service" for the Bonds shall mean all the interest plus all principal which will mature or come due in any year. After the New Covenant Date, "Annual Debt Service"for any year shall mean all the interest on plus all principal (except principal of Term Bonds due in any Term Bond Maturity Year) of Parity Bonds,plus all mandatory redemption and sinking fund installments, less all bond interest payable from the proceeds of any such bonds, which will mature or come due in that year. "Average Annual Debt Service" shall mean the sum of the Annual Debt Service for the remaining years to the last scheduled maturity of the applicable bond issue or issues divided by the number of those years. "Beneficial Owner" shall mean, with respect to any Bond, the Person named on the records of the Custodian as having the right, without a physical certificate evidencing such right, to transfer,to hypothecate and to receive the payment of the principal of, premium, if any, and interest on such Bond as the same becomes due and payable. "Bond Fund" shall mean that special fund of the City known as the 2002 Waterworks Revenue Bond Account created by this ordinance as a separate account in the Waterworks Revenue Parity Bond Fund for the payment of the principal of and interest on the Bonds. 7 tore 44,10 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. After the New Covenant Date, "Bond Fund"shall mean that special fund of the City known as the 49982002 Waterworks Revenue Refunding-Bond Fund created by this Oordinance No. 4709 for the payment of the principal of and interest on Paritythe Bonds. ["Bond Insurer" shall mean of New York,New York.] ["Bond Insurance Policy" shall mean the municipal bond insurance policy issued by the Bond Insurer insuring the payment when due of the principal of and interest on the Bonds as provided herein.] "Bond Register" shall mean the registration books on which are maintained the names and addresses of the Owners of the Bonds. "Bond Registrar" shall mean the fiscal agencies of the State in Seattle, Washington, and New York, New York, as the same shall be designated from time to time. "Bonds" shall mean the $ City of Renton Water and Sewer Revenue Bonds, 2002, authorized to be issued by this ordinance. "1977 Bonds" shall mean the Water and Sewer Revenue Refunding Bonds, 1977, Issue. No. 3. "1988 Bonds" shall mean the Water and Sewer Revenue Bonds, 1988. "1989 Bonds" shall mean the Water and Sewer Revenue Bonds, 1989. "1989 Refunding Bonds" shall mean the Water and Sewer Revenue Refunding Bonds, 1989. "1992 Bonds" shall mean the outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1992. 8 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. "1993 Refunding Bonds" shall mean the outstanding Water and Sewer Refunding and Improvement Revenue Bonds, 1993. "1994 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 1994. "1998 Bonds" shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 1998. "Book-Entry Termination Date" shall mean the fifth business day following the date of receipt by the Bond Registrar of the City's request to terminate the book-entry system of registering the beneficial ownership of the Bonds. "City" shall mean the City of Renton, Washington, a duly organized and legally existing noncharter code city under the laws of the State. "City Finance Director" shall mean the City's Finance and Information Services Administrator or the successor to such officer. "Closing" shall mean the date of the delivery of the Bonds by the City to the Purchaser and the payment therefor by the Purchaser. "Code" shall mean the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. After the New Covenant Date, "Coverage Requirement" shall mean in any calendar year 1.25 times the Maximum Annual Debt Service. "Custodian" shall mean(a) The Depository Trust Company, New York,New York, or (b) any successor thereto engaged by the City to operate a book-entry system for recording, through electronic or manual means, the beneficial ownership of the Bonds, in which system no physical certificates are issued to the Beneficial Owners of the Bonds, but in which a limited 9 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. number of physical certificates are issued to and registered in the name of the Custodian or its nominee, and delivered to the Custodian; provided, that such book-entry system operated by the Custodian may include the use of subsystems of recording the beneficial ownership of Bonds which are operated by parties other than the Custodian and the use of a nominee for the Custodian; and the term "Custodian," as used herein, includes any party operating any such subsystem. "Future Parity Bonds" shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on Gross Revenue on a parity with the lien and charge on such Revenue for the payment of the principal of and interest on the Outstanding Parity Bonds and the Bonds. After the New Covenant Date, "Future Parity Bonds"shall mean all water and sewer revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien and charge on Net Revenue on a parity with the lien and charge on Net Revenue for the payment of the principal of and interest on the Parity Bonds-and-the-Bends. "Gross Revenue" shall mean Revenue of the Waterworks Utility. "Letter of Representations" shall mean the Blanket Issuer Letter of Representations from the City and the Bond Registrar to the Custodian dated April 15, 1997, pertaining to the payment of the Bonds and the "book-entry" system for evidencing the beneficial ownership of the Bonds prior to the Book-Entry Termination Date (as it may be amended from time to time). "Maintenance and Operation Expense" shall mean all expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair, working order and 10 .•- �► 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. condition, which shall not include any depreciation expenses or taxes or charges in lieu of taxes levied or imposed by the City. After the New Covenant Date, "Maintenance and Operation Expense"shall mean all reasonable expenses incurred by the City in causing the Waterworks Utility to be operated and maintained in good repair, working order and condition, including payments made to any other municipal corporation or private entity for water service and for sewage treatment and disposal service or other utility service in the event the City combines such service in the Waterworks Utility and enters into a contract for such service, and including pro-rata budget charges for the City's administration expenses where those represent a reasonable distribution and share of actual costs, but not including any depreciation or taxes levied or imposed by the City or payments to the City in lieu of taxes, or capital additions or capital replacements to the Waterworks Utility. After the New Covenant Date, "Maximum Annual Debt Service"shall mean, 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 calendar year on the outstanding Parity Bonds. "MSRB" shall mean the Municipal Securities Rulemaking Board. "Net Revenue" shall mean Gross Revenue less Maintenance and Operation Expense. "New Covenant Date" shall mean the date on which all 1977 Bonds (other than the 1977 Refunded Bonds), 1988 Bonds, 1989 Bonds, 1989 Refunding Bonds, 1990 Bonds, 1992 Bonds , 1993 Refunding Bonds and 1994 Bonds (other than the 1994 Refunded Bonds) are fully redeemed, refunded or defeased. 11 tire NO 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. "NRMSIR" shall mean a nationally recognized municipal securities information repository designated by the SEC. "Outstanding Parity Bonds" shall mean the 1993 Refunding Bonds and the 1994 Bonds. "Owner" shall mean the person named as the registered owner of a Bond on the Bond Register. "Parity Bonds" shall mean the 1998 Bonds,the Bonds and any Future Parity Bonds. After the New Covenant Date, "Parity Bond Fund"shall mean any fund created for the payment and redemption of Parity Bonds. "Principal and Interest Account" shall mean the subaccount of that name created in the Bond Fund for the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Professional Utility Consultant" shall mean an independent licensed professional engineer, certified public accountant or other independent person or firm selected by the City having a favorable reputation for skill and experience with municipal utilities of comparable size and character to the Waterworks Utility in such areas as are relevant to the purposes for which such consultant is retained. "Project" shall mean the following project to be financed, in whole or in part, with proceeds of the Bonds: (1)the undertaking of the additions, betterments or extensions to the Waterworks Utility described in the Comprehensive Water System Plan or the Comprehensive Sanitary Sewer Plan, including, but not limited to,the capital improvements described in Exhibit A to this ordinance, (2) making a deposit to the Reserve Account, and (3) paying the incidental costs and costs of issuing the Bonds. 12 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. "Project Fund" shall mean the Waterworks Utility Construction Fund. "Purchase Agreement" shall mean the Bond Purchase Agreement for the Bonds, dated , 2002, by and between the City and the Purchaser. "Purchaser" shall mean D.A. Davidson & Co. "Rate Stabilization Fund" shall mean the fund of that name created for the purposes described in Ordinance No. 4709. "Reserve Account" shall mean the subaccount of that name created in the Bond Fund by Ordinance No. 4709 for the purpose of securing the payment of the principal of and interest on the Bonds. After the New Covenant Date, "Reserve Fund" shall mean that special fund of the City known as the Waterworks Revenue Bond Reserve Fund created by Ordinance No. 4709 for - purpose of securing the payment of the principal of and interest on all bonds to which Net Revenue is pledged. After the New Covenant Date, "Reserve Insurance"shall mean, in lieu of cash and investments, insurance obtained by the City equal to part or all of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained, issued by an institution that has been assigned a credit rating equal to or better than the highest then-existing rating for any of the Parity Bonds. After the New Covenant Date, "Reserve Requirement" shall mean the Maximum Annual Debt Service. 13 NO 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. "Revenue of the Waterworks Utility" shall mean all the earnings and revenue received by the Waterworks Utility from any source whatsoever, including payments received under contract with other municipal corporations for water service, except general taxes, charges in lieu of taxes, assessments in any utility local improvement district hereafter created,proceeds from the sale of City property, bond proceeds and earnings subject to a federal tax or rebate requirement. After the New Covenant Date, "Revenue of the Waterworks Utility"shall mean all of the earnings and revenues received by the City from the maintenance and operation of the Waterworks Utility and all earnings from the investment of money in the Reserve Fund or any Parity Bond Fund, and connection and capital improvement charges collected for the purpose of defraying the cost of capital facilities of the Waterworks Utility, except government grants, proceeds from the sale of Waterworks Utility property (other than timber), City taxes collected by or through the Waterworks Utility,principal proceeds of bonds and earnings or proceeds from any investments in a trust, defeasance or escrow fund created to defease or refund Waterworks Utility obligations (until commingled with other earnings and revenues of the Waterworks Utility) or held in a special account for the purpose of paying a rebate to the United States Government under the Code. "Rule" shall mean SEC Rule 15c2-12. "SEC" shall mean the United States Securities and Exchange Commission. "SID" shall mean a state information depository. "State" shall mean the State of Washington. 14 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. "Term Bonds" shall mean any Outstanding Parity Bonds and/or Parity Bonds identified as such in the ordinance authorizing the issuance thereof, the payment of which is provided for by a requirement for mandatory deposits of money into the principal and interest account of the bond redemption fund created for the payment of such issue of bonds in accordance with a mandatory sinking fund requirement. "Term Bond Maturity Year" shall mean any calendar year in which Term Bonds are scheduled to mature. "Water and Sewer Revenue Parity Bond Fund" shall mean the fund of that name created by Ordinance No. 3896. "Waterworks Revenue Parity Bond Fund" shall mean the Water and Sewer Revenue Parity Bond Fund, as renamed by Ordinance No. 4709. "Waterworks Utility" shall mean the combined water and sewerage systems, including the storm and surface water sewers, of the City as the same may be added to, improved and extended for as long as any of the Outstanding Parity Bonds or Parity Bonds are outstanding. "Waterworks Utility Fund" shall mean that special fund of the City into which all Gross Revenue (except for earnings in any special fund for the redemption of revenue obligations of the Waterworks Utility) shall be deposited. Section 2. Findings Regarding Parity Provisions The City Council finds that all payments required by Ordinance Nos. 4410, 4480 and 4709 for the Outstanding Parity Bonds have been made into the respective bond redemption funds and accounts therein for the Outstanding Parity Bonds, that provision hereinafter is made for the accumulation of the amounts required in the Reserve Account of the Bond Fund, and that there will be on file prior to the 15 *se 400 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. issuance and delivery of the Bonds a certificate of an engineer experienced in municipal utilities that Gross Revenue is sufficient to meet the 1.3 coverage requirement of such ordinances. Therefore, the Bonds shall be issued on a parity of lien with the Outstanding Parity Bonds and the 1998 Bonds. Section 3. Authorization and Description of Bonds. For the purpose of obtaining part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility. to make a deposit to the Reserve Account and to pay the costs of issuance and sale of the Bonds, the City shall issue the Bonds in the aggregate principal amount of$ . The Bonds shall be designated City of Renton, Washington Water and Sewer Revenue Bonds, 2002; shall be dated , July 1, 2002; shall be in the denomination of$5,000 or any integral multiple thereof within a single maturity; shall be numbered separately, in the manner and with any additional designation as the Bond Registrar deems necessary for purpose of identification; shall bear interest(computed on the basis of a 360-day year of twelve 30-day months), payable semiannually on each June 1 and December 1, commencing December 1, 2002,to the maturity or earlier redemption of the Bonds; and shall mature on JneDecember 1 in the years and amounts and bear interest at the rates per annum as follows: 16 * 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. Maturity Interest Years (December 1) Amounts Rates If any Bond is duly presented for payment upon maturity or earlier redemption and is not paid, then interest thereon shall continue to accrue thereafter at the rate stated therein until such Bond is paid. The Bonds shall be negotiable instruments to the extent provided by RCW 62A.8-105. Section 4. Registration of Bonds and Book-Entry System. The Bonds shall be issued only in registered form as to both principal and interest and 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. On the date of issue of the Bonds, all Bonds maturing in the same maturity year shall be issued in the form of a single certificate, which certificate shall be registered in the name of the Custodian or its nominee, and delivered to the Custodian. The Custodian shall hold each such Bond certificate in fully immobilized form for the benefit of the Beneficial Owners pursuant to the Letter of Representations until the earliest to occur of either(1)the date of maturity of the 17 ` Nio10 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. Bonds evidenced by such certificate, at which time the Custodian shall surrender such certificate to the Bond Registrar for payment of the principal of and interest on such Bonds coming due on such date, and the cancellation thereof; (2)the Book-Entry Termination Date; or (3)the date the City determines to utilize a new Custodian for the Bonds, at which time the old Custodian shall (provided the City is not then in default of any payment then due on the outstanding Bonds) surrender the immobilized certificates to the Bond Registrar for transfer to the new Custodian and cancellation as herein provided. For so long as any outstanding Bonds are registered in the name of the Custodian or its nominee and held by the Custodian in fully immobilized form as described in this Section 4, the rights of the Beneficial Owners shall be evidenced solely by an electronic and/or manual entry made from time to time on the records established and maintained by the Custodian in accordance with the Letter of Representations, and no certificates evidencing such Bonds shall be issued and registered in the name of any Beneficial Owner or such Beneficial Owner's nominee. The City may terminate the "book-entry" system of registering ownership of the Bonds at any time (provided the City is not then in default of any payment then due on the outstanding Bonds) by delivering to the Bond Registrar: (a) a written request that it issue and deliver Bond certificates to each Beneficial Owner or such Beneficial Owner's nominee on the Book-Entry Termination Date; (b) a list identifying the Beneficial Owners as to both name and address; and (c) a supply of Bond certificates, if necessary for such purpose. Upon surrender to the Bond Registrar of the immobilized certificates evidencing all of the then outstanding Bonds, the Bond Registrar shall issue and deliver new certificates to each Beneficial Owner or such Beneficial 18 `•► 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. Owner's duly appointed agent, naming such Beneficial Owner or such Beneficial Owner's nominee as the Owner thereof. Such certificates may be in any integral multiple of$5,000 within a single maturity. Following such issuance,the Owners of such Bonds may transfer and exchange such Bonds in accordance with Section 9-12 hereof. Neither the City nor the Bond Registrar shall have at any time any responsibility or liability to any Beneficial Owner of Bonds or to any other person for any error, omission, action or failure to act on the part of the Custodian with respect to payment, when due, to the Beneficial Owner of the principal and interest on the Bonds, proper recording of beneficial ownership of Bonds,proper transfers of such beneficial ownership, or any notices to Beneficial Owners or any other matter pertaining to the Bonds. Section 5. Payment of Bonds. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. Prior to the Book-Entry Termination Date, the principal of and interest on the Bonds shall be paid by the Bond Registrar to the Custodian as the Owner thereof, for the benefit of the Beneficial Owners thereof, in accordance with the Letter of Representations. From and after the Book-Entry Termination Date, interest on the Bonds shall be paid by check or draft mailed on or before the interest payment date, to the persons identified as the Owners on the fifteenth day of the month preceding the interest payment date at the addresses shown for the Owners on the Bond Register, or, if requested in writing by an Owner of$100,000 or more in principal amount of Bonds at least ten days before an interest payment date, by wire transfer on the interest payment date to an account within the United States. From and after the Book-Entry Termination Date, principal of the Bonds shall be payable upon presentation and 19 Nise 'VP 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. surrender of the Bonds by the Owners at the principal corporate trust office of the Bond Registrar. The Bonds shall be payable solely out of the Bond Fund and shall be a valid claim of the registered owners thereof only as against the Bond Fund and the amount of Gross Revenue pledged to that fund and shall not be general obligations of the City. After the New Covenant Date, the Bonds shall be payable solely out of the Bond Fund and the Reserve Fund and shall be a valid claim of the Owners thereof only as against the Bond Fund, Reserve Fund and the amount of Net Revenue pledged to those funds and shall not be general obligations of the City. Section 6. Optional Redemption and Open Market Purchase of Bonds. Bonds maturing in the years 2003 through 2012, inclusive, shall be issued without the right or option of the City to redeem those Bonds prior to their stated maturity dates. The City reserves the right and option to redeem the Bonds maturing on or after JuneDecember 1, 2013, prior to their stated maturity dates, from funds from any source, at any time on or after 3uneDecember 1, 2012, as a whole or in part within one or more maturities selected by the City(and by lot within a maturity in such manner as the Bond Registrar shall determine) at a price of par plus accrued interest to the date fixed for redemption. Any Bond in the principal amount of greater than $5,000 may be partially redeemed in any integral multiple of$5,000. Prior to the Book-Entry Termination Date, Bonds shall be partially redeemed in accordance with the Letter of Representations. From and after the Book- Entry Termination Date, in the event of a partial redemption of a Bond, upon surrender of such Bond at the principal corporate trust officesoffice of the Bond Registrar, a new Bond or Bonds 20 141, 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. (at the option of the Owner) of the same maturity and interest rate and in the aggregate principal amount remaining unredeemed shall be authenticated and delivered to the Owner, without charge to the Owner therefor, in any denomination authorized by this ordinance and selected by the Owner. The City reserves the right to purchase any or all of the Bonds on the open market at any time and at any price. All Bonds purchased or redeemed under this Section shall be canceled. Section 7. Notice of Redemption. The City shall cause notice of any intended redemption of Bonds to be given not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the Owner of any Bond to be redeemed at the address appearing on the Bond Register at the time the Bond Registrar prepares the notice on the day notice is mailed, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the Owner of any Bond. Interest on Bonds called for redemption shall cease to accrue on the date to the call. If such notice to the Owners shall have been given and the City shall have set aside, on the date fixed for redemption, sufficient money for the payment of all Bonds called for redemption, the Bonds so called shall cease to accrue interest after such redemption date, and all such Bonds shall be deemed not to be outstanding under this ordinance for any purposes, except that the Owners thereof shall be entitled to receive payment of the redemption price and accrued interest to the redemption date from the money set aside for such purpose. In addition, the redemption notice shall be mailed within the same period, postage prepaid, to Standard& Poor's 21 >'wrr ` 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. Ratings Services and Fitch IBCA at their offices in New York, New York, or their successors, to the Purchaser at its principal office in Seattle, Washington, or its successor, and to such other persons and with such additional information as the City Finance Director shall determine, but these additional mailings shall not be a condition precedent to the redemption of Bonds. Notwithstanding the foregoing, prior to the Book-Entry Termination Date, notice of redemption shall be given in accordance with the Letter of Representations. Section 8. Failure to Redeem Bonds. If any Bond is not redeemed when properly presented at its maturity or redemption date, the City shall be obligated to pay interest on such Bond at the same rate provided in the Bond from and after its maturity or redemption date until such 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 redemption by giving notice of that redemption to the Owner of each of such unpaid Bonds. Section 9. Form of Bonds. The Bonds shall be typewritten, word processed,printed, lithographed or multicopied on good bond paper in a form consistent with this ordinance and Washington law. Section 10. Execution of Bonds. The Bonds shall be executed on behalf of the City by the facsimile or manual signatures of the Mayor and the City Clerk and shall have the seal of the City impressed or a facsimile thereof imprinted thereon. In the event any officer who shall have signed or whose facsimile signatures appear on any of the Bonds shall cease to be such officer of the City before said Bonds shall have been authenticated or delivered by the Bond Registrar or issued by the City, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and 22 .r 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. issuance, shall be as binding upon the City as though said person had not ceased to be such officer. Any Bond may be signed and attested on behalf of the City by such persons who, at the actual date of execution of such Bond shall be the proper officer of the City, although at the original date of such Bond such persons were not such officers of the City. Section 11. Authentication and Delivery of Bonds by Bond Registrar. The Bond Registrar is authorized and directed, on behalf of the City, to authenticate and deliver Bonds initially issued or transferred or exchanged in accordance with the provisions of such Bonds and this ordinance. Only such Bonds as shall bear thereon a "Certificate of Authentication" manually executed by an authorized representative of the Bond Registrar shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance. Such Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this ordinance. The Bond Registrar shall be responsible for its representations contained in the Certificate of Authentication on the Bonds. Section 12. Registration, Transfer and Exchange. The Bond Registrar shall keep, or cause to be kept, at its principal corporate trust office, the Bond Register. The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of the Bonds and this ordinance,to serve as the City's paying agent for the Bonds and to carry out all of the Bond Registrar's powers and duties under this ordinance and City Ordinance No. 3755 establishing a system of registration for the City's bonds and obligations. 23 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. The City and the Bond Registrar, in its discretion, may deem and treat the Owner of each Bond as the absolute owner thereof for all purposes, and neither the City nor the Bond Registrar shall be affected by any notice to the contrary. Payment of any such Bond shall be made only as described in Section 5 hereof, but such registration may be transferred as herein provided. All such payments made as described in Section 5 hereof shall be valid and effectual to satisfy and discharge the liability of the City upon such Bond to the extent of the amount or amounts so paid. The registered ownership of the Bonds may be transferred. Prior to the Book-Entry Termination Date,the beneficial ownership of the Bonds may only be transferred on the records established and maintained by the Custodian. On and after the Book-Entry Termination Date, transfer of any Bond shall be valid only if it is surrendered at the principal corporate trust office of either Bond Registrar, with the assignment form appearing on such Bond duly executed by, or accompanied by a written instrument of transfer in form satisfactory to such Bond Registrar duly executed by,the Owner or such Owner's duly authorized agent, in a manner satisfactory to such Bond Registrar. Upon such surrender, the Bond Registrar shall cancel the surrendered Bond and shall authenticate and deliver,without charge to the Owner or transferee therefor(other than any governmental fees or taxes payable on account of such transfer), a new Bond or Bonds(at the option of the new Owner), naming as Owner the person or persons listed as the assignee on the assignment form appearing on the surrendered Bond, of the same maturity and interest rate, for the same aggregate principal amount, and in any authorized denomination selected by the new Owners, in exchange for such surrendered and cancelled Bond. 24 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. On and after the Book-Entry Termination Date, any Bond may be surrendered at the principal corporate trust office of the Bond Registrar and exchanged, without charge, for an equal aggregate principal amount of Bonds of the same maturity and interest rate, in any authorized denomination as selected by the Owner. The Bond Registrar shall not be obligated to transfer or exchange any Bond during the fifteen days preceding any principal or interest payment or redemption date. The Bond Registrar may become the Owner of any Bond 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 a member of, or in any other capacity with respect to, any committee formed to protect the rights of the Owners of the Bonds. The City covenants that, until all Bonds shall have been surrendered and cancelled, it shall maintain a system of recording the ownership of each Bond that complies with the provisions of the Code. Section 13. Lost, Stolen or Destroyed Bonds. If any Bond becomes mutilated, lost, stolen or destroyed, the Bond Registrar may authenticate and deliver a new Bond of the same interest rate and maturity and of like tenor and effect in substitution therefor, all in accordance with applicable law. If such mutilated, lost, stolen or destroyed Bond has matured, the City may, at its option, pay the same without the surrender thereof However,no such substitution or payment shall be made unless and until the applicant shall furnish(a) evidence satisfactory to the Bond Registrar of the destruction or loss of the original Bond and of the ownership thereof, and (b) such additional security, indemnity or evidence as may be required by or on behalf of the City. No substitute Bond shall be furnished unless the applicant shall reimburse the City and the 25 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. Bond Registrar for their respective expenses in the furnishing thereof Any such substitute Bond so furnished shall be equally and proportionately entitled to the security of this ordinance with all other Bonds issued hereunder. Section 14. Creation of Account. There is hereby created the 2002 Waterworks Revenue and Refunding Bond Account (heretofore defined, until the New Covenant Date, as the Bond Fund), which shall be a separate bond redemption account within the Waterworks Revenue Parity Bond Fund. The Bond Fund is divided into two subaccounts, the Principal and Interest Account and the Reserve Account. There is hereby created in the City Treasury the 2002 Waterworks Revenue Bond Fund (heretofore defined, after the New Covenant Date, as the Bond Fund). Section 15. Deposits into Funds and Accounts. So long as Bonds are outstanding against the Bond Fund,the City shall: (a) Set aside and pay into the Principal and Interest Account out of Gross Revenue a fixed amount, without regard to any fixed proportion, namely, monthly, on or before the first day of each month, amounts, together with the accrued interest received on the delivery of the Bonds to the initial purchaser thereof or other money on deposit therein, as follows: Beginning with the month of August 2002 and continuing thereafter until November, 2002, 1/4 of the next ensuing four months' requirements for interest on the Bonds; and beginning with the month of December, 2002 and continuing thereafter until the Bonds, both principal and interest, are paid, 1/6 of the next ensuing six months' requirements for interest on the Bonds; and Beginning with the month of August 2002 and continuing thereafter until MayNovember, 2003,4-401/16 of the next ensuing tenl6 months' requirements for principal on the Bonds; and beginning with the month of 3meDecember, 2003 and continuing thereafter until the Bonds, both principal and interest, are paid, 1/12 of the amount of principal of the Bonds payable on the next ensuing principal payment date; and 26 N ''"" 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. (b) Set aside and pay into the Reserve Account out of Gross Revenue in substantially equal monthly payments such amounts so that by no later than July 1, 2005 , there shall have been accumulated in the Reserve Account for the Bonds an amount not less than the Average Annual Debt Service for the Bonds. The Reserve Account in the Bond Fund may be accumulated from any other money which the City may have available for that purpose in addition to or in lieu of using revenue therefor. The City further agrees that when the required amounts have been paid into the Reserve Account in the Bond Fund, the City will maintain those amounts therein at all times, except for withdrawals therefrom as authorized herein, until there is sufficient money in the Bond Fund, including the Reserve Account therein, to pay the principal of and interest to maturity on all outstanding Bonds, at which time no further payments need be made into the Bond Fund, and the money in the Bond Fund, including the Reserve Account, may be used to pay that principal and interest. If there shall be a deficiency in the Principal and Interest Account to meet maturing installments of either principal or interest, as the case may be, on the Bonds, the deficiency shall be made up from the Reserve Account by the withdrawal of cash therefrom for that purpose. Any deficiency created in the Reserve Account by reason of any withdrawal shall then be made up from Gross Revenue first available after making necessary provisions for the required payments into the Principal and Interest Account. All money in the Reserve Account not needed to meet the payments of principal and interest when due may be kept on deposit in the official bank depository of the City or in any national bank or may be invested in any legal investment for City funds. Interest on any of those investments or on that bank account shall be deposited in and become a part of the Reserve 27 11110 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. Account until the total required reserve amount shall have been accumulated therein, after which time the interest shall be deposited in the Principal and Interest Account. Notwithstanding the provisions for the deposit or maintenance of earnings in accounts of the Bond Fund, any earnings which are subject to a federal tax or rebate requirement may be withdrawn from the Bond Fund for deposit into a separate fund or account for that purpose. If the City shall fail to set aside and pay into the Bond Fund the amounts set forth above, the Owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. After the New Covenant Date, this Section shall be amended to read as follows: All money in the Principal and Interest Account of the 2002 Waterworks Revenue and Refunding Bond Account shall be transferred into the 4-9-982002 Waterworks Revenue Refunding Bond Fund (heretofore defined as the Bond Fund). All money in the Reserve Account of the 2002 Waterworks Revenue and Refunding Bond Account shall be transferred into the Waterworks Revenue Bond Reserve Fund (heretofore defined as the Reserve Fund). So long as Bonds are outstanding against the Bond Fund, the City shall: (a) Set aside and pay into the Bond Fund out of Net Revenue a fixed amount, without regard to any fixed proportion, namely, one day before each interest or principal and interest payment date, an amount which,together with other money then on deposit therein, shall be sufficient to meet the debt service on the Bonds required on the next interest or principal and interest payment date; and (b) Set aside and pay into the Reserve Fund out of the Net Revenue, in three annual approximately equal deposits, any additional money necessary to bring the amount deposited in the Reserve Fund attributable to the Bonds up to the amount equal to the increase in the Reserve Requirement attributable to the Bonds. The Reserve Fund may be accumulated from any other money which the City may have available for that purpose in addition to or in lieu of using Net Revenue therefor. 28 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. Except for withdrawals therefrom as authorized herein, the Reserve Fund shall be maintained at the Reserve Requirement at all times so long as any Parity Bonds are outstanding. When the total amount in the Bond Fund shall equal the total amount of principal and interest for all outstanding Bonds, no further payment need be made into the Bond Fund. Notwithstanding the first sentence of this paragraph, the Reserve Requirement may be decreased for any issue of Parity Bonds when and to the extent the City has provided for an Alternate Security or Reserve Insurance. If there shall be a deficiency in the Bond Fund to meet maturing installments of either principal or interest, as the case may be, on the Bonds, that deficiency shall be made up from the Reserve Fund by the withdrawal of cash therefrom for that purpose. Any deficiency created in the Reserve Fund by reason of any such withdrawal shall then be made up from Net Revenue first available after making necessary provisions for the required payments into the Bond Fund. Any money in the Reserve Fund in excess of the Reserve Requirement may be withdrawn and deposited in any Parity Bond Fund and spent for the purpose of retiring Parity Bonds or may be deposited in any other fund and spent for any other lawful Waterworks Utility purpose. The City may provide for the purchase,redemption or defeasance of Parity Bonds by the use of money on deposit in the Bond Fund or the Reserve Fund as long as the money remaining in those funds is sufficient to satisfy the required deposits in those funds for the remaining Parity Bonds. All money in the Bond Fund or Reserve Fund may be kept in cash or on deposit in the official bank depository of the City or in any national bank or may be invested in any legal investment for City funds. Interest on any of those investments or on that bank account shall be 29 ` '" Nei, 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. deposited in the Reserve Fund until the total Reserve Requirement shall have been accumulated therein, after which time the interest shall be deposited in any Parity Bond Fund. Notwithstanding the provisions for the deposit or maintenance of earnings in the Bond Fund or the Reserve Fund, any earnings which are subject to a federal tax or rebate requirement may be withdrawn from the Bond Fund or the Reserve Fund for deposit into a separate fund or account for that purpose. If the City fails to set aside and pay into the Bond Fund or the Reserve Fund the amounts set forth above,the Owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. Section 16. Flow of Funds. Funds in the Waterworks Utility Fund (other than in any bond redemption or federal rebate account) shall be used in the following order of priority: (a) To pay Maintenance and Operation Expense; (b) To pay the interest on the Outstanding Parity Bonds and Parity Bonds; (c) To pay the principal of the Outstanding Parity Bonds and Parity Bonds; (d) To make all payments required to be made into any sinking fund or bond redemption fund hereafter created for the payment of Future Parity Bonds which are Term Bonds; (e) To make all payments required to be made into the reserve accounts created to secure the payment of the Outstanding Parity Bonds and Parity Bonds; After the New Covenant Date, subsection(e) of this Section shall be amended to read as follows: To make all payments required to be made into the Reserve Fund; (f) To make all payments required to be made into any revenue bond redemption fund or warrant redemption fund and debt service account or reserve account created to pay and secure the payment of the principal of and interest on any revenue bonds or revenue warrants of the City having a lien upon Gross Revenue 30 •... 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. junior and inferior to the lien thereon for the payment of the principal of and interest on the Outstanding Parity Bonds and Parity Bonds; and (g) To retire by optional redemption or purchase in the open market any outstanding revenue bonds or revenue warrants of the City, to make necessary additions, betterments, improvements and repairs to or extensions and replacements of the Waterworks Utility, after the New Covenant Date, to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. Section 17. Pledge of Revenue and Lien Position. The Gross Revenue is pledged to the payments set forth in Section 15, and the Bonds shall constitute a lien and charge on that revenue prior and superior to any other charges whatsoever, excluding Maintenance and Operation Expense, except that the lien and charge on such revenue for the Bonds shall be on a parity with the lien and charge thereon for the Outstanding Parity Bonds, the 1998 Bonds and any Future Parity Bonds. After the New Covenant Date, this Section shall be amended to read as follows: The Net Revenue is pledged to the payment of the Parity Bonds, and the Parity Bonds shall constitute a lien and charge upon such Net Revenue prior and superior to any other charge whatsoever. Section 18. Findings Regarding Sufficiency of Revenue. In the judgment of the City Council, Gross Revenue and benefits to be derived from the operation and maintenance of the Waterworks Utility, at the rates to be charged for water, sanitary sewage disposal service and storm and surface water drainage service in the entire utility, will be more than sufficient to meet all Maintenance and Operation Expense (and cost of maintenance and operation of the Waterworks Utility as that term is used in RCW 35.92.100) and the debt service requirements of the Outstanding Parity Bonds and the 1998 Bonds and to permit the setting aside in the Bond Fund, and after the New Covenant Date, the Bond Fund and the Reserve Fund, out of the revenue of the entire utility, of amounts sufficient to pay the interest on the Bonds as that interest 31 `wi/' 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. becomes payable and to pay and redeem all of the Bonds at maturity. The City Council further declares that in creating the Bond Fund and in fixing the amounts to be paid into the Bond Fund, and after the New Covenant Date,the Bond Fund and the Reserve Fund, as aforesaid, it has exercised due regard for the Maintenance and Operation Expense (and costs of maintenance and operation as used in RCW 35.92.100) and the debt service requirements of the currently outstanding Outstanding Parity Bonds and 1998 Bonds, and the City has not bound and obligated itself to set aside and pay into the Bond Fund, and after the New Covenant Date,the Bond Fund and the Reserve Fund, a greater amount or proportion of the revenue of that utility than in the judgment of the City Council will be available over and above Maintenance and Operation Expense (and such costs of maintenance and operation of the Waterworks Utility as that term is used in RCW 35.92.100) and debt service requirements of the Outstanding Parity Bonds and the 1998 Bonds and that no portion of the Gross Revenue has been previously pledged for any unrefunded indebtedness other than the payment of the currently outstanding Outstanding Parity Bonds and 1998 Bonds. Section 19. Covenants. The City covenants and agrees with the Owner of each Bond at any time outstanding as follows: (a) It will establish, maintain and collect such rates and charges for water, sanitary sewage disposal service and storm and surface water drainage service so long as any Outstanding Parity Bonds, 1998 Bonds and Bonds are outstanding as will make available for the payment of the principal of and interest on such bonds an amount equal to at least 1.3 times the average annual debt service requirements, both principal and interest, on the Outstanding Parity Bonds,the 1998 Bonds and the Bonds after deducting Maintenance and Operation Expense from Gross Revenue. After the New Covenant Date, subsection (a) of this Section shall be amended to read as follows: It will establish, maintain and collect rates and charges for all services and facilities provided by the Waterworks Utility which will be fair and nondiscriminatory, and will adjust those rates and charges from time to time so that: 32 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. (1) Gross Revenue will at all times be sufficient to (A ) pay all Maintenance and Operation Expense on a current basis, (B)pay when due all amounts that the City is obligated to pay into the Reserve Fund and any Parity Bond Funds and (C) pay all taxes, assessments or other governmental charges lawfully imposed upon the Waterworks Utility or other revenue therefrom or payments in lieu thereof and any and all other amounts which the City may now or hereafter become obligated to pay from Gross Revenue by law or contract; and (2) Net Revenue in each calendar year will be at least equal to the Coverage Requirement. (b) It will at all times maintain and keep the Waterworks Utility in good repair, working order and condition and also will at all times operate such Utility and the business in connection therewith in an efficient manner and at a reasonable cost. (c) It will not sell, lease, mortgage or in any manner encumber or dispose of all the property of the Waterworks Utility unless provision is made for payment into each of the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the 1998 Bonds and the Bond Fund of sums sufficient to pay, respectively, the principal of and interest on all Outstanding Parity Bonds, 1998 Bonds and the Bonds at any time outstanding, and that it will not sell, lease, mortgage, or in any manner encumber or dispose of any part of the property of the Waterworks Utility that is used, useful and material to the operation thereof, unless provision is made for replacement thereof, or for payment into the respective bond redemption funds or accounts for the Outstanding Parity Bonds and the 1998 Bonds and the Bond Fund of the total amount of revenue received which shall not be less than an amount which shall bear the same ratio to the amount of the Outstanding Parity Bonds, 1998 Bonds and Bonds, respectively, as the revenue available for debt service for such outstanding bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the utility sold, leased, encumbered or disposed of bears to the revenue available for debt service for such bonds from the entire utility for the same period. Any such money so paid into such funds shall be used to retire such outstanding bonds at the earliest possible date. After the New Covenant Date, subsection(c) of this Section shall be amended to read as follows: It will not sell or otherwise dispose of the Waterworks Utility in its entirety unless, simultaneously with such sale or other disposition, all Parity Bonds are defeased pursuant to the provisions of this ordinance. It will not sell, lease, mortgage or in any manner encumber or otherwise dispose of any part of the Waterworks Utility (other than timber), including all additions and improvements thereto and extensions thereof at any time made, that are used, useful or material in the operation of the Waterworks Utility, unless provision is made for the replacement thereof or for payment into the Bond Fund of the greatest of the following: 33 *iv Ns 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. (1) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding(defined as the total amount of those bonds less the amount of cash and investments in the Reserve Fund and any Parity Bond Funds)that Gross Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Gross Revenue for that period; (2) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (as defined above)that the Net Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Net Revenue for that period; or (3) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding(as defined above)that the depreciated cost value of the facilities sold or disposed of bears to the depreciated cost value of the entire Waterworks Utility immediately prior to such sale or disposition. Notwithstanding any other provision of this subsection, (1)the City in its discretion may sell or otherwise dispose of any of the works,plant, properties or facilities of the Waterworks Utility 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 Waterworks Utility, or no longer necessary, material to or useful to the operation of the Waterworks Utility, without making any deposit into the Bond Fund, and (2)the City may transfer the Waterworks Utility to another municipal corporation so long as Net Revenue of the portion of the Waterworks Utility so transferred is used for payment of debt service on the Parity Bonds prior to any other purpose. In no event shall such proceeds be treated as Gross Revenue for purposes of this ordinance. (d) It will, while any of the Bonds remain outstanding, keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to the Waterworks Utility, and it will furnish the original purchaser or purchasers of the Bonds or any subsequent owner or owners thereof at the written request of such owner or owners complete operating and income statements of such utility in reasonable detail issued in any calendar year not more than ninety days after the close of such calendar year, and it will grant any Owner or Owners of at least twenty-five percent of the outstanding Bonds the right at all reasonable times to inspect the entire Waterworks Utility and all records, accounts and data of the City relating thereto. Upon request of any Owner of any of the Bonds, it also will furnish to such Owner a copy of the most recently completed audit of the City's accounts by the State Auditor of Washington. After the New Covenant Date, subsection (d) of this Section shall be amended to read as follows: It will keep proper books, records and accounts with respect to the 34 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. operations, income and expenditures of the Waterworks Utility in accordance with proper accounting procedures and any applicable rules and regulations prescribed by the State. 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 Waterworks Utility 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 Reserve Fund and into any and all special funds or accounts created pursuant to 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 Waterworks Utility. Such statements shall be sent to the Owner of any Parity Bonds upon written request therefor being made to the City. (e) It will not furnish water, sanitary sewage disposal service or storm and surface water drainage service to any customer whatsoever free of charge and promptly will take legal action to enforce collection of all delinquent accounts. After the New Covenant Date, subsection (e) of this Section shall be amended to read as follows: 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 operation of the Waterworks Utility free of charge to any person, firm or corporation, public or private, other than the City, so long as any Parity Bonds are outstanding. On at least an annual basis, it will determine all accounts that are delinquent and will take all necessary action to enforce payment of such accounts against those property owners whose accounts are delinquent. (f) It will carry the types of insurance on the Waterworks Utility properties in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems, and the cost of such insurance shall be considered a part of operating and maintaining such utility. If, as, and when the United States of America or some agency thereof shall provide for war risk insurance, the City further agrees to take out and maintain such insurance on all or such portions of such utility on which such war risk insurance may be written in an amount or amounts to cover adequately the value thereof. After the New Covenant Date, subsection(f) of this Section shall be amended to read as follows: It at all times will carry fire and extended coverage and such other forms of insurance, including public liability and property damage insurance, with responsible insurers and with policies payable to or on behalf of the City and any additional insureds on such of the buildings, equipment, works, plants, facilities and properties of the Waterworks Utility, and against such claims for damages, as are ordinarily carried by municipal or privately owned utilities engaged in the operation of like systems, or will implement and maintain a self-insurance or an insurance pool program with reserves 35 IOW vid 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. adequate, in the reasonable judgment of the City, to protect the Waterworks Utility and the Owners of the Parity Bonds against loss. (g) It will pay all Maintenance and Operation Expense and the debt service requirements for the Outstanding Parity Bonds,the outstanding 1998 Bonds and the outstanding Bonds, and otherwise meet the obligations of the City as herein set forth. (h) It will take all actions necessary to prevent interest on the 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 Bonds or other funds of the City treated as proceeds of the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross income for federal income tax purposes. It will, to the extent arbitrage rebate requirements of Section 148 of the Code are applicable to the Bonds,take all action necessary to comply (or to be treated as having complied) with those requirements in connection with the Bonds, including the calculation and payment of any penalties that the City has elected to pay as an alternative to calculating rebatable arbitrage, and the payment of any other penalties if required under Section 148 of the Code to prevent interest on the Bonds from being 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 arbitrage certifications may not be relied upon. Section 20. No Private Activity Bonds. The City covenants that it will take no actions and will make no use of the proceeds of the Bonds or any other funds held under this ordinance which would cause any Bond to be treated as a"private activity bond" (as defined in Section 141(b) of the Code) subject to treatment under said Section 141(b) as an obligation not described in Section 103(a) of the Code, unless the tax exemption thereof is not affected. Section 21. Defeasance of the Bonds. The City may issue refunding bonds pursuant to State law 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 36 NSW %NOW 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. called the "defeased Bonds") and to pay the costs of the refunding or defeasance. If money and/or direct obligations of the United States of America maturing at a time or times and bearing interest in amounts (together with money, if necessary) sufficient to redeem and retire, refund or decrease 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, in Gross Revenue and in funds and accounts obligated to the payment of the defeased Bonds, other than the right to receive the funds so set aside and pledged, 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 and, if the funds in the trust account are not available for such payment, shall have the residual right to receive payment of the principal of and interest on the defeased Bonds from Gross Revenue without any priority of lien or charge against such revenue or covenants with respect thereto except to be paid therefrom. After the establishing and full funding of the trust account, the City may then 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 owners of any other bonds then outstanding. If the refunding plan provides that the defeased Bonds or the refunding bonds to be issued be secured by cash and/or direct obligations of the United States of America or other legal investments pending the prior redemption of the defeased Bonds and if such refunding plan also provides that certain cash and/or direct obligations of the Untied States of America or other legal 37 NG 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. investments are pledged irrevocably for the prior redemption of the defeased Bonds included in that refunding plan, then only the debt service on the Bonds which are not defeased Bonds and the refunding bonds,the payment of which is not so secured by the refunding plan, shall be included in the computation of coverage for determining compliance with the rate covenants. Section 22. Provision for Future Parity Bonds. The City reserves the right to issue Future Parity Bonds which will constitute a lien and charge on Gross Revenue on a parity with the Outstanding Parity Bonds, the 1998 Bonds and the Bonds if the conditions set forth in Section 13 of Ordinance No. 3188, as modified and strengthened by Section 12 of Ordinance No. 3720, are met and complied with at the time of the issuance of those Future Parity Bonds, which sections are by this reference incorporated herein and made a part hereof and shall continue to be applicable even though the 1953 Bonds have been paid and retired. After the New Covenant Date, this Section shall be amended to read as follows: The right of the City to issue bonds on a parity of lien with the 1977 Bonds, the 1988 Bonds, the 1989 Bonds,the 1989 Refunding Bonds,the 1990 Bonds,the 1992 Bonds, the 1993 Refunding Bonds and the 1994 Bonds is permanently revoked. The City reserves the right to issue Future Parity Bonds if the following conditions are met and complied with at the time of issuance of those additional bonds: (a) There shall be no deficiency in any Parity Bond Fund. (b) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the payment of the principal thereof and interest thereon out of a Parity Bond Fund. (c) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds of(1) an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or(2) Reserve Insurance or Alternate Security or an 38 *ear "401 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. amount plus Reserve Insurance or Alternate Security equal to the increase in the Reserve Requirement attributable to those Future Parity Bonds. For federal income tax purposes, at the discretion of the City, to the extent that the Reserve Requirement cannot be funded from Future Parity Bond proceeds, the City shall provide for deposit into the Reserve Fund other legally available money from Net Revenue or Reserve Insurance or Alternate Security within three years from the date of issuance of the Future Parity Bonds in three 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 applicable Parity 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 to their maturity date from money in the applicable Parity Bond Fund. (f) There shall be on file the City either: (1) a certificate of the City Finance Director demonstrating that during any 12 consecutive calendar months out of the immediately preceding 36 calendar months Net Revenue, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least the Coverage Requirement for all Parity Bonds plus the Future Parity Bonds proposed to be issued; or (2) a certificate of a Professional Utility Consultant that in such consultant's opinion Revenue for any 12 consecutive calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to the Coverage Requirement for each year thereafter. The certificate, in estimating Net Revenue available for debt services, may adjust Net Revenue to reflect: (A) Any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; (B) Income derived from customers of the Waterworks Utility who have become customers during the 12 consecutive month period or thereafter adjusted to reflect one year's Net Revenue from those customers; (C) Income from any customers to be connected to the Waterworks Utility who have paid the required connection charges; (D) The Professional Utility Consultant's estimate of the Net Revenue to be derived from customers anticipated to connect for whom building permits have been issued; 39 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. (E) Income received or to be received which is derived from any person, firm corporation or municipal corporation under any executed contract for water, sewage disposal or other utility service, which revenue was not included in the historical Net Revenue; (F) The Professional Utility Consultant's estimate of the Net Revenue to be derived from customers with existing homes or buildings which will be required to connect to any additions to and improvements and extensions of the Waterworks Utility 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 Waterworks Utility when such additions, improvements and extensions are not completed; and (G) Any increases or decrease in Net Revenue as a result of any actual or reasonably anticipated changes in Maintenance and Operation Expense subsequent to the 12-month period. If Future Parity Bonds proposed to be so issued are for the sole purpose of refunding outstanding bonds payable from any Parity Bond Fund, such certification of coverage shall not be required if the amount required for the payment of the principal and interest in each year for the refunding bonds is not increased more than$5,000 over the amount for that same year required for the bonds or the portion of that bond issue to be refunded thereby and if the maturities of such refunding bonds are not extended beyond the maturities of the bonds to be refunded thereby. Nothing contained herein shall prevent the City from issuing Future Parity Bonds to refund maturing Bonds or Future Parity Bonds then outstanding, money for the payment of which is not otherwise available. Nothing contained herein shall prevent the City from issuing revenue bonds that are a charge upon Gross Revenue subordinate to the payments required to be made therefrom into any Parity Bond Fund. Section 23. Approval of Bond Purchase Contract. The Purchaser has presented the Purchase Agreement to the City pursuant to which the Purchaser has offered to purchase the Bonds. The City Council finds that entering into the Purchase Agreement is in the best interests 40 • *sr Name 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. of the City, and therefore accepts the offer contained in the Purchase Agreement and authorizes and directs the execution of the Purchase Agreement on behalf of the City by City officials, and delivery of the same to the Purchaser. The Bonds will be delivered to the Purchaser in accordance with the Purchase Agreement with a copy of the approving legal opinion of Gottlieb, Fisher&Andrews, PLLC, bond counsel, Seattle, Washington, relative to the issuance of the Bonds, attached to each Bond. Bond counsel has not been engaged to review or express any opinion concerning the completeness or accuracy of the official statement or other disclosure documentation used in connection with the offer or sale of the Bonds by any person, and bond counsel's opinion shall so state. Bond counsel has not been retained to monitor, and shall not be responsible for monitoring, the City's compliance with any federal law or regulations to maintain the tax-exempt status of the interest on the Bonds. Section 24. Bond Insurance. The City is authorized to purchase from the Bonds Insurer the Municipal Bond Insurance Policy insuring the prompt payment of the principal of and interest on the Bonds and agrees to the conditions for obtaining that policy, including the payment of the premium therefor. Any notice required to be given to the Bond Insurer shall be sent by certified or registered mail to Section 25. Delivery of Bonds; Temporary Bonds. The proper City officials, including, but not limited to,the City Finance Director, are authorized and directed (a)to execute all documents necessary to complete the issuance and delivery of the Bonds to the Purchaser, including, but not limited to,the final official statement pertaining to the Bonds; and (b)to do everything necessary for (1) the preparation and delivery of a transcript of proceedings 41 Now wr+i 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. pertaining to the Bonds, and (2) the preparation, execution and delivery of definitive Bonds to the Purchaser, each without unreasonable delay. If definitive Bonds are not ready for delivery by the date of Closing agreed to by the City and the Purchaser,the City, upon the approval of the Purchaser, may cause to be issued and delivered to the Purchaser one or more temporary Bonds with appropriate omissions, changes and additions. Any temporary Bonds shall be entitled and subject to the same benefits and provisions of this ordinance with respect to the payment, security and obligation thereof as definitive Bonds authorized hereby. Such temporary Bond or Bonds shall be exchangeable without cost to the Owner thereof for definitive Bonds when the latter are ready for delivery. Section 26. Application of Bond Proceeds. The accrued interest received by the City at Closing shall be deposited into the Principal and Interest Account and shall be applied to the payment of interest first coming due on the Bonds. The remaining proceeds of the sale of the Bonds, less the underwriter's discount [and the bond insurance premium to be paid by the Purchaser on behalf of the City] [plus/less the net original issue premium/discount], in the amount of$ shall be deposited, upon receipt,to the " Waterworks Utility Construction Fund" (the "Project Fund"), established in the office of the City Finance Director,to pay part of the costs of the Project. Except as provided by the Code and Section 18(h) of this ordinance,the interest and profits derived from the investment of Bond proceeds shall be deposited in the Project Fund and applied as described in the preceding paragraph. 42 .., .rr 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. Except as provided by the Code and Section 18(h) of this Ordinance, if any money allocable to the Bond proceeds remains in the Project Fund after payment of all the costs of the Project or after termination of the Project by the City, such money shall be transferred to the Bond Fund and applied to the payment of the principal of and interest on the Bonds. Pending application as described in this Section 30 and subject to the requirements of the Code and Section 18(h) of this ordinance, money allocable to the Bond proceeds in the Project Fund may be temporarily deposited in such institutions or invested in such investments as may be lawful for the investment of City funds. Section 27. Undertaking to Provide Continuing Disclosure. This section constitutes the City's written undertaking for the benefit of the Owners and Beneficial Owners of the Bonds required by subsection (b)(5)(i) of the Rule. The City hereby agrees to provide or cause to be provided to each then existing NRMSIR and to the SID, if one is created, the following annual financial information and operating data (collectively,the "Annual Financial Information") for each prior fiscal year, commencing with the calendar year ending December 31, 2002, on or before the last day of the seventh month following the end of such prior fiscal year: (a) Annual financial statements prepared in accordance with the generally accepted accounting principles applicable to governmental units, as such principles may be changed from time to time and as permitted by State law; which statements will not be audited, except that if and when audited financial statements are otherwise prepared and available to the City, they will be provided (the "Annual Financial Statements"); 43 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. (b) A statement of authorized, issued and outstanding bonded debt secured by the Gross Revenue or Net Revenue; (c) Debt service coverage ratios; (d) General customer statistics for the Waterworks Utility; and (e) A narrative explanation of the reasons for any amendments to this Section 31 27 made during the previous fiscal year and the impact of such amendments on the Annual Financial Information being provided. In its provision of such financial information and operating data,the City may cross- reference to any"final official statement" (as defined in the Rule) available from the MSRB or any other documents theretofore provided to each then existing NRMSIR or the SID, if one is created. If not submitted as part of the Annual Financial Information, then when and if available, the City shall provide its Annual Financial Statements, which shall have been audited by such auditor as shall be then required or permitted by the State law,to each then existing NRMSIR and to the SID, if one is created. The City further agrees to provide or cause to be provided, in a timely manner, to the SID, if one is created, and to either the MSRB or each then existing NRMSIR, notice of any of the following events with respect to the Bonds, if material: 1. Principal and interest payment delinquencies; 2. Non-payment related defaults; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 44 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. 5. Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions or events affecting the tax-exempt status of the Bonds; 7. Modifications to rights of the Owners of the Bonds; 8. Optional redemptions of the Bonds; 9. Defeasances of the Bonds; 10. Release, substitution or sale of property securing repayment of the Bonds; and 11. Rating changes. The City also agrees to provide or cause to be provided, in a timely manner,to the SID, if one is created, and to either the MSRB or each then existing NRMSIR, notice of its failure to provide the Annual Financial Information for the prior fiscal year on or before the last day of the seventh month following the end of such prior fiscal year. After the issuance of the Bonds, so long as the interests of the Owners or Beneficial Owners of the Bonds will not be materially impaired thereby, as determined by a party unaffiliated with the City(including, without limitation, a trustee for the Owners,nationally recognized bond counsel or other counsel familiar with the federal securities law), or pursuant to a favorable "no-action letter" issued by the SEC, this Section 27 may only be amended in connection with any change in legal requirements, change in law, or change in the identity, nature or status of the obligated person, or type of business conducted, and only in such a manner that the undertaking of the City, as so amended, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. 45 ii,00 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. The City's obligations to provide Annual Financial Information and notices of certain events shall terminate without amendment upon the defeasance, prior redemption or payment in full of all of the then outstanding Bonds. This Section 27 or any provision hereof, shall be null and void if the City (i) obtains an opinion of nationally recognized bond counsel or other counsel familiar with the federal securities laws to the effect that those portions of the Rule which require this Section 27 or any such provision are invalid, have been repealed retroactively or otherwise do not apply to the Bonds; and(ii)notifies and provides the SID, if any, and either the MSRB or each then existing NRMSIR with copies of such opinion. The right of each Owner or Beneficial Owner of Bonds to enforce the provisions of this Section 27 shall be limited to the right to obtain specific enforcement of the City's obligations under this Section 27, and any failure by the City to comply with the provisions of this undertaking shall not be a default with respect to the Bonds under this ordinance. The City Finance Director is authorized and directed to take such further action on behalf of the City as may be necessary, appropriate or convenient to carry out the requirements of this Section 27. Section 28. Preliminary Official Statement Deemed Final. The City Council has been provided with copies of a preliminary official statement dated , 2002 (the "Preliminary Official Statement"), prepared in connection with the sale of the Bonds. For the sole purpose of the Boni purchaser's compliance with paragraph(b) (1) of the Rule,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 46 ...,> ••r 3RD DRAFT 5/23/02 For Discussion Purposes Only ORDINANCE NO. amount, principal amount per maturity, maturity dates, options of redemption, delivery dates, ratings and other terms of the Bonds dependent on such matters. Section 29. Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval and five days after publication. PASSED by the City Council this day of , 2002. Marilyn J. PetersenBonnie Walton, City Clerk APPROVED BY THE MAYOR this day of , 2002. Jesse Tanner, Mayor Approved as to Form: Bond Counsel Date of Publication: (Summary) 47