Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
Water & Sewer Revenue Bonds, Series 2008A and Series 2008B (Taxable) - 2008
CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, SERIES 2008A $9,975,000 WATER AND SEWER REVENUE BONDS, SERIES 2008B (TAXABLE) - $2,035,000 Bonds Dated: January 4, 2008 Opinion Dated: January 4,2008 K&L PRESTON GATES ELLIS LLP CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, SERIES 2008A — $9,975,000 WATER AND SEWER REVENUE BONDS, SERIES 2008B (TAXABLE) — $2,035,000 RECORD OF PROCEEDINGS ORGANIZATIONAL DOCUMENTS 1. Certificate for Transcript. 2. Certificate of the King County Records, Elections and Licensing Services Division setting forth the names and terms of office of the Mayor and City Council. 3. Certificate of the Mayor setting forth the name of the City Clerk. 4. Certified copy of the proceedings of the City Council last fixing the time, date and place of regular meetings of the City Council. 5. Certificate of the City Clerk stating the official newspaper of the City. AUTHORIZING DOCUMENTS 6. Certified copy of Ordinance No. 5313 passed on October 22, 2007 (the “Bond Ordinance”). 7. Certified copy of the minutes of the meeting of the City Council held on October 15, 2007, showing the first reading of the Bond Ordinance. 8. Certified copy of the minutes of the meeting of the City Council held on October 22, 2007, showing the second reading and passage of the Bond Ordinance. 9. Certified copy of Resolution No. 3919 authorizing the sale of the Bonds (the “Sale Resolution”). 10. Certified copy of the minutes of the meeting of the City Council held on November 26, 2007, showing the adoption of the Sale Resolution. 11. Affidavit of publishing a summary of the Bond Ordinance. 12. Bond Purchase Agreement. 13. Preliminary Official Statement. 14. Official Statement. 15. Rule 15c2-12 Certificate of the Finance & Information Services Administrator. -2- P:\20358_DG\20358_0GM 03/24/08 INSURANCE DOCUMENTS 16. Commitment for Bond Insurance and a Reserve Surety Bond from MBIA Insurance Corporation (the “Insurer”). 17. Bond Insurance Policies and Receipts. 18. Debt Service Reserve Surety Bond and Receipt 19. Financial Guaranty Agreement 20. Certificates of the Insurer. 21. Opinion of Insurer regarding the Bond Insurance Policy and Reserve Surety Bond. 22. Rating letters. CLOSING DOCUMENTS 23. The Depository Trust Company Blanket Issuer Letter of Representations. 24. Parity Certificate. 25. Closing Certificate of the City of Renton. 26. Signature Identification Certificate. 27. Federal Tax Certificate relating to the Series 2008A Bonds, Certificate of Underwriter and Financing Summary (revised final numbers). 28. Certificates of Manual Signature with Certificate of Mailing. 29. Certificate of Authorization of Authorized Signer for The Bank of New York. 30. Certificate Regarding Authentication, Registration and Delivery of Bonds for the Series 2008A Bonds. 31. Certificate Regarding Authentication, Registration and Delivery of Bonds for the Series 2008B Bonds. 32. Internal Revenue Service Form 8038-G relating to the Series 2008A Bonds and Affidavit of Mailing. 33. Receipt for Bond Proceeds. 34. Receipt for Bonds. 35. Closing Memorandum. -3- P:\20358_DG\20358_0GM 03/24/08 36. Bond Form 101. 37. Specimen Bonds. OPINIONS 38. Final approving legal opinion of K&L Preston Gates Ellis LLP and reliance letter to the Insurer for the Series 2008A Bonds. 39. Final approving legal opinion of K&L Preston Gates Ellis LLP and reliance letter to the Insurer for the Series 2008B Bonds. CERTIFICATE FOR TRANSCRIPT I, Bonnie I. Walton, the City Clerk of the City of Renton, Washington, do hereby certify that the within and attached documents are in each case true and correct copies of the originals of such documents and that none of the resolutions, ordinances, proceedings, statements or certificates contained herein have been repealed, rescinded or canceled and all of the officers last certified as holding City offices have continued to hold their respective offices from such date to and including the date of this certificate. Dated this 4th day of January, 2008. Bonnie I. Walton, City Clerk City of Renton, Washington Elections Elections Division Department of Executive Services ELE-ES-0100 919 SW Grady Way Renton, WA 98057-2906 206-296-VOTE (8683) Fax 206-296-0108 TTY Relay: 711 STATE OF WASHINGTON 1 )SS. COUNTY OF KING 1 This is to certify that I, Sherril Huff, am the Director of the Elections Division, King County, Washington; and I That the following officials serve as Council members for the City of Renton, King County, I Washington, as determined from the official election records of King County, their terms of office included, as now on file in the Elections Division. Office Mayor Council Member Pos. No. 1 Council Member Pos. No. 2 Council Member Pos. No. 3 Council Member Pos. No. 4 Council Member Pos. No. 5 Council Member Pos. No. 6 Council Member Pos. No. 7 Incumbent Denis W. Law Randy Corman Dan Clawson Marcie Palmer Greg Taylor King Parker Terri Briere Don Persson Term Expiration December 3 1,201 1 December 31,2009 December 3 1,2009 December 3 1,201 1 December 3 1,201 1 December 3 1,201 1 December 3 1,2009 December 3 1,201 1 Dated at Seattle, King County, Washington this 28th day of December 2007. kherril Huff, Director CERTIFICATE I, Denis Law , Mayor of the City of Renton, Washington, do hereby certify that Bonnie I. Walton is the duly appointed City Clerk of the City of Renton. Dated this 4th day of January, 2008. ldJ?aU& Denis Law. Mayor City of Renton, Washington CERTIFICATE I, Bonnie I. Walton, City Clerk of the City of Renton, do hereby certify that the attached is a true and correct copy of the proceedings setting the date, time and place for regular meetings of the City Council. Dated this 4th day of January, 2008. b.\d. LuL&%J Bonnie I. Walton, City Clerk City of Renton, Washington L 1.0 PURPOSE: POLICY & PROCEDURE To establish the time and location of the various City Council meetings. Subject: MEETINGS OF THE CITY COUNCIL 2.0 ORGANIZATIONS AFFECTED: City Council 3.0 REFERENCES: RCW 42.30 (Open Public Meetings act); RCW 35A.12.100; RCW 35A.12.110 Index: LEGISLATIVE Number: 800-02 4.0 POLICY: 4.1 Regular business meetings of the City Council shall be held the first four Mondays of each month commencing at 7:00 pm in the Council Chambers of City Hall, or at another location determined by the City Council. The City Council will not meet when a regular meeting falls on a holiday acknowledged as such by official Council action; all pending business and agenda items will be carried forward to the next regularly scheduled meeting. Effective Date 8/13/2007 4.2 There shall be regular Council meetings held the first four Mondays of each month except where a City holiday falls on a Monday. Committee of the Whole meetings (Council work sessions) may be held prior to weekly Council meetings. No final disposition shall be taken at any Council work session; rather, recommendations shall be offered for final action at a succeeding regular business meeting of the Council. 4.3 At all meetings of the City Council, a majority of the Councilmembers shall constitute a quorum for the transaction of business, hut a less number may adjourn from time to time and may compel the attendance of absent members as prescribed by ordinance. 4.4 Except as provided for in law, all regular and special meetings of the City Council shall be open to the public as set forth inRCW 42.30.010. Approved By -7--'zZ&%: Supersedes 1/27/1992 4.5 The Mayor shall be the presiding officer at all meetings of the City Council except Council work sessions. The Council President shall preside in the mayor's absence and shall be notified when the mayor leaves the state. In the absence of both the Mayor and the Council President, the Council President Pro Tern shall preside. Page 1 of3 Staff Contact Jay Covington 800-02 Page 2 4.511 The Mayor shall have a vote only in the case of a ti& in the votes of the councilmembers with respect to matters other than the passage of any ordinance, grant, revocation of a franchise or license, or any resolution for the payment of any money. 4.5.2 The Mayor or other presiding officer may require any person addressing the City Council to be sworn as a witness and to testify under oath; the presiding officer shall so require, if directed to do so by a majority vote of the City Council. 4.6 The Council President shall preside at all Council work sessions of the City Council. The President Pro Tem of the Council shall preside in the absence of the Council President. 5.0 DEFINITIONS: 6.0 PROCEDURES: 6.1 Special meetings may be called by the Mayor or any four members of the City Council to discuss issues or business items provided that written notice is delivered to each member of the Council at least 24 hours before the time specified for the proposed meeting. 6.1 .I he notice shall specify the time and place of the special meeting and the business to be transacted. 6.1.2 In addition, the city clerk shall give notice of such special meeting as further provided for in RCW 42.30.080. 6.1.3 No final disposition shall be taken on any other matter at such special meeting by the governing body. 6.1.3.1 Written notice may be dispensed with for any Councilmember who,. at or prior to the time the meeting convenes, files a written waiver of such notice with the city clerk. 6.1.3.2 Written notice may also be dispensed with for any member who is actually present at the meeting at the time it convenes. 6.1.3.3 Notice may be dispensed with in the event that a special meeting is called to deal with an emergency involving injury or damage to persons or property or the likelihood of such injury or damage when. time requirements would make notice impractical and increase the likelihood of such injury or damage. 6.2 The President or majority of the members of the City Council may hold executive sessions during a regular or special meeting to consider: a. matters affecting national security; b. the selection of a site or the acquisition of real estate by lease or purchase when public knowledge regarding such consideration could cause a . likelihood of an increased price to the city; 800-02 Page 3 c. the appointment, employment or dismissal of a public officer or employee; d. complaints or charges brought against a public officer or employee by another public officer, employee or member of the public; e. any proceeding concerned with the formal issuance of an order granting, suspending, revoking or denying a license, permit or certificate to engage in any business, occupation or profession, or to any disciplinary proceedings involving a member of such business, occupation or profession; f. that portion of a meeting when the Council sits as a quasi-judicial body which relates to a quasi-judicial matter between named parties as distinguished from a matter having a general effect on the public or on a class or group; g. planning or adopting the strategy or position to be taken during the course of any collective bargaining, professional negotiations, grievance or mediation proceedings, or the review of proposals made in such negotiations or proceedings; h. input from the city attorney concerning settlements, avoidance or contemplated litigation, settlement offers and like matters which are subject to the statutory attorney-client privilege. 6.2.1 No official action shall be taken at any executive session; however, nothing shall prevent the Council, when permitted by law, from taking an informal vote on any matter under discussion. 6.2.2 No member of the City Council, employee of the city or any person present during an executive session shall disclose to any other person the content or substance of discussion or action which took place during the session, unless a majority of the Council authorizes such disclosure. 6.2.3 Executive sessions, to the extent permitted by law, shall be limited to the Mayor and the members of the City Council unless the presence of non- members is requested by a majority of the City Councilmembers. RENTON CITY COUNCIL Regular Meeting August 13,2007 Monday, 7 p.m. MINUTES Council Chambers Renton City Hall CALL TO ORDER Mayor Kathy Keolker called the meeting of the Renton City Council to order and led the Pledge of Allegiance to the flag. ROLL CALL OF TONI NELSON, Council President; RANDY CORMAN; DON PERSSON; COUNCILMEMBERS MARCIE PALMER; TERN BRIERE; DENIS LAW; DAN CLAWSON. CITY STAFF IN KATHY KEOLKER, Mayor; JAY COVINGTON, Chief Administrative ATTENDANCE Officer; LAWRENCE J. WARREN, City Attorney; MICHELE NEUMANN, Deputy City Clerk; PETER HAHN, Deputy PlanninglBuildingiPublic Works Administrator - Transoortation: ALEX PIETSCH. Economic Develo~ment Administrator; SUZA~E DALE ESTEY, ~conomic Development Directof; MICHAEL BAILEY, Finance and Information Services Administrator; SPECIAL PRESENTATION Finance: Distinguished Budget Presentation Award ADMINISTRATIVE REPORT Streets: Rainier Ave S & Shattuck Ave S & Hardie Ave SW Closures for RR Bridge Replacements DEPUTY CHIEF CHUCK DUFFY and FIRE MARSHALLIBATTALION CHIEF STAN ENGLER, Fire Department; COMMANDERS FLOYD ELDRIDGE and KATIE MCCLINCY, Police Department. Mike Bailey, Finance and Information Services Administrator, announced that the City of Renton had once again received the Distinguished Budget Presentation Award from the Government Finance Officers Association (GFOA), for the fiscal year beginning 1/1/2007. He noted that the City has a long tradition of earning the award. Mr. Bailey presented a plaque from the GFOA, congratulated staff members who worked on the budget, and thanked the Mayor and Council for their support. Mayor Keolker announced that Rainier Ave. S., which was closed for BNSF Railway Company's railroad bridge replacement project, reopened ahead of schedule. She invited Peter Hahn, Deputy PlanninglBuilding/Public Works Administrator - Transportation, to speak on the matter. Mr. Hahn presented photos illustrating the progress of work that occurred at various railroad bridge construction sites. He noted that local residents and businesses did provide some positive feedback about the various disruptions. Concluding, Mr. Hahn thanked City officials, staff, and the contractor for their hard work on the project. Councilmember Palmer also extended her thanks to City staff for their hard work. Continuing, Chief Administrative Officer Covington reviewed a written administrative report summarizing the City's recent progress towards goals and work programs adopted as part of its business plan for 2007 and beyond. Items noted included: r$ Maplewood Golf Course hosted the 55th GSWPGA State Tournament last week. Eighty women competed in this very successful three-day event, with a member from Maplewood winning the championship. r$ The Downtown Wayfinding Project will unveil preliminary designs for signage, gateways, and kiosks for downtown Renton. Citizens are invited to provide input on the wayfinding elements at two public meetings on August 16. AUDIENCE COMMENT Citizen Comment: Russell - Index PI NE, A&D Quality Construction Company, VAC- 07-001 Citizen Comment: McOmber - Index PI NE, A&D Quality Construction Company, VAC- 07-001 Citizen Comment: Ellifrits - T- Mobile Monopole Placement, SE 3rd PI, CU-07-065 CONSENT AGENDA Appointment: Airport Advisory Committee Renton City Council Minutes Page 279 Kevie Russell, 2906 NE 7th St., Renton, 98056, spoke on the topic of the vacation of a portion of Index PI. NE. He objected to the City's retainage of a 15-foot-wide strip, which is to be used for a walkway, out of the east portion of the right-of-way that is to be vacated. He noted the existence of a pedestrian right-of-way one building lot away from his house, saying that two parallel walkways are not necessary. Pointing out that the vacation will make an unattractive, junk-car and litter-attracting area, a productive area, Mr. Russell requested that the Council equally divide the right-of-way. Howard McOmber, 425 Olympia Ave. NE, Renton, 98056, displayed photographs of the portion of Index PI. NE under consideration for vacation. Mr. McOmber asked Council to vacate the entire area and to accelerate the process. He stated that Index PI. NE is not an asset for the Highlands neighborhood and objected to the current proposal to retain a 15-foot-wide easement for a pedestrian right-of-way when another pedestrian walkway already exists near the vacation area. (See page 281 and 283 for further discussion on this matter.) Newton Ellifrits, 4218 SE 3rd PI., Renton, 98059, expressed his opposition to T-Mobile's proposal to locate a cell phone tower in his neighborhood. Mr. Ellifrits also asked if there were any ordinances restricting the placement of cell phone towers in residential neighborhoods. City Attorney Warren commented that the Environmental Review Committee is currently reviewing the application for the cell phone tower. He indicated that a decision from the Development Services Director should be available within the next couple of weeks. Chief Administrative Officer Covington stated that an ordinance does not exist that specifically prohibits monopoles from residential neighborhoods, but noted that staff reviews each application for potential impacts to neighborhoods. Councilmember Corman reflected on the past and present efforts of Council and staff to enforce rules regarding cell phone towers as allowed by Federal regulations. He stated his assumption that companies applying for these types of permits would know that placement of monopoles in commercial areas was preferred over residential areas. Items on the consent agenda are adopted by one motion which follows the listing. As requested by Councilmember Persson, item 6.e. was removed for separate consideration. Mayor Keolker reappointed the following individuals to the Airport Advisory Committee for three year terms expiring on 5/7/2010: Highlands neighborhood representative Michael O'Halloran, 4420 SE 4th St., Renton, 98059, primary; North Renton neighborhood representative Richard Zwicker, 446 Pelly Ave. N., Renton, 98057, primary; Renton HilliMonterey Terrace neighborhood representatives Michael Schultz, 150 Monterey Dr. NE, Renton, 98056, primary, and Dina Davis, 433 Cedar Ave. S., Renton, 98057, alternate; Airport Leaseholders representatives Michael O'Leary, 22823 NE 54th St., Redmond, 98053, primary, and Frank Marshall, 3521 SW 327th St., Federal Way, 98023, alternate; and Airport-at-Large representative Diane Paholke, 325 Edmonds Ave. SE, Renton, 98056, primary. Council concur. August 13,2007 Appointment: Planning I Commission Development Services: Hunny Short Plat, ROW Dedication, Thomas Ave SW, SHP-06-154 Annexation: Anthone', Talbot Rd S & S 55th St Police: Red Light School Zone Photo Enforcement, American Traffic Solutions Transportation: 2007 Walkway Improvement Project, Pacific Engineering Design Airport: Noise Study Cost Sharing, Mercer Island Airport: Noise Study, Harris Miller Miller & Hanson Utility: Benson Rd S Water Line Relocation, WSDOT Added Item 6.k. CAG: 07-140, Benson Rd S Water Line Relocation, Ceccanti Separate Consideration Item 6.e. Transportation: Roads & Transit Ballot Measure, November 2007 Renton City Council Minutes Page 280 Mayor Keolker appointed the following individuals to the Planning Commission: Casey Bui, 1150 Sunset Blvd. NE, #216, Renton, 98056 (tenn expires 613012010); Yong Lee, 2103 Kennewick PI. NE, Renton, 98056 (to fill the unexpired term, 113 112008, of Joshua Shearer who resigned); and Brad Miller, 1807 NE 26th PI., Renton, 98056 (term expires 613012010). Refer to Community Services Committee. Development Services Division recommended acceptance of a deed of dedication for additional right-of-way at the southeast comer of Thomas Ave. SW and SW 3rd PI. to fulfill a requirement of the Hunny Short Plat (SHP-06- 154). Council concur. Economic Development, Neighborhoods and Strategic Planning Department recommended setting a public hearing on 911012007 to consider the proposed Anthone' Annexation and R-4 zoning of the 4.85-acre site located south of S. 55th St. and Talbot Rd. S. Council concur. Police Department recommended approval of a contract in the amount of $306,000 (full year) with American Traffic Solutions, Inc. for red light school zone photo enforcement services. Council concur. Transportation Systems Division requested approval of a contract in the amount of $152,056.63 with Pacific Engineering Design, LLC, for the 2007 Walkway Improvement Project. Refer to Transportation (Aviation) Committee. Transportation Systems Division recommended approval of an agreement with the City of Mercer Island regarding cost sharing for an airport noise study. Council concur. (See page 282 for resolution.) Transportation Systems Division requested approval to transfer $149,000 from the Airport 608 Hangar Expansion and Airport 622 Hangar Rehabilitation projects to the Airport Layout Plan project for a noise study, and approval of a contract in the amount of $131,050 with Harris Miller Miller & Hanson, Inc, to conduct the airport noise study. Council concur. Utilities Systems Division recommended approval of an agreement with Washington State Department of Transportation regarding the construction of the relocation of the water line at Benson Rd. S. and 1-405. City's estimated share of the construction cost is $580,000. Refer to Utilities Committee. City Clerk reported bid opening on 81912007 for CAG-07-140, Water Line Relocation for Realignment of Benson Rd. S. and 1-405 Overpass Project; six bids; engineer's estimate $958,918.95; and submitted staff recommendation to award the contract to the low bidder, Ceccanti, Inc., in the amount of $869,42 1.66. Refer to Utilities Committee. MOVED, BY NELSON, SECONDED BY CORMAN, COUNCIL APPROVE THE CONSENT AGENDA AS AMENDED TO ADD ITEM 6.k. AND REMOVE ITEM 6.e. FOR SEPARATE CONSIDERATION. CARRIED. Economic Development, Neighborhoods and Strategic Planning Department recommended a public meeting be set on 812012007 to consider supporting the regional Roads and Transit ballot measure.* In response to Councilmember Persson's inquiry, City Attorney Warren stated that parties representing both sides of the issue would be present at the public meeting. August 13,2007 UNFINISHED BUSINESS Committee of the Whole Council: Policies Finance Committee Finance: Vouchers Finance: Water Shut Off Charge Adjustments for Special Circumstances Finance: Capital Expenditure Reimbursement from Utility Bond Revenue Court Case: Scoccolo Construction, CRT-98-008 Plannine & Development Committee Vacation: Index PI NE, A&D Quality Constmction Company, VAC-07-001 Renton City Council Minutes Page 28 1 *MOVED BY PERSSON, SECONDED BY NELSON, COUNCIL APPROVE ITEM 6.e. AS PRESENTED. CARRIED. Council President Nelson presented a Committee of the Whole report regarding the Council policies. The Committee recommended that Council adopt the revisions to City of Renton Policies and Procedures 800-01, 800-02, 800-03, and 800-04. MOVED BY NELSON, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance Committee Chair Persson presented a report recommending approval of Claim Vouchers 262337-262809 and four wire transfers totaling $4,378,309.53; and approval of 315 Payroll Vouchers, two wire transfers, and 733 direct deposits totaling $3,368,501.48. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance Committee Chair Persson presented a report recommending concurrence with the staff recommendation that the Finance and Information Services Administrator, or hisher designee, be given authority to adjust $60 water shut off charges on utility accounts, under special circumstances. The committee hrther recommended that the ordinance regarding this matter be presented for first reading. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See page 282 for ordinance.) Finance Committee Chair Persson presented a report recommending concurrence in the staff recommendation to declare the City's intent that certain capital expenditures be made for water, wastewater and surface water utility projects, and that reimbursement be made from utility revenue bonds to be issued in the Fall of 2007. The projects are as follows: Utilitv Proiect Budget Timinp Water Highlands 565 $3,280,000 200712008 Wastewater Central Plateau $2,225,000 2007/2008 Surface Water SW 34th $1,335,000 200712008 Renton Village $1,115,000 200712008 The Committee further recommended that the resolution regarding this matter be presented for reading and adoption. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See page 282 for resolution.) Finance Committee Chair Persson presented a report regarding the Scoccolo lawsuit costs. The Committee was briefed on 8/13/2007 and recommended closure of the referral. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Noting that the report concerning the vacation of Index PI. NE is being held in Committee, Councilmember Briere commented on the location of the 15-foot walkway easement, the agreement between the two affected property owners, the existence of other walkways in the area, and the Trails and Bicycle Master Plan study. She indicated that within approximately one year, the City should know the results of the trail study, and at that point affected property owner Kevie Russell could petition for a vacation of the easement-affected property if it was found that the City did not need the easement. August 13,2007 Renton City Council Minutes Page 282 RESOLUTIONS AND ORDINANCES Resolution #3899 Ailport: Noise Study Cost Sharing, Mercer Island Resolution #3900 Finance: Capital Expenditure Reimbursement from Utility Bond Revenue Finance: Water Shut Off Charge Adjustments for Special Circumstances Ordinance #5298 Human Services: Summer Lunch & Housing Repair Assistance Programs, Budget Amend Ordinance #5299 Utility: Upper Springbrook Creek Restoration, King Conservation District Number 9, Budget Amend NEW BUSINESS Community Services: Maplewood Golf Course, RiverRock Restaurant Noise Responding to Councilmember Corman's questions, Ms. Briere confirmed that by upholding Council's approval of the vacation petition, which includes retention of an easement for a walkway, one property owner can move forward with his project and the other must wait. Ms. Briere noted that she wants the Committee report to reflect that the filing fees for Mr. Russell's future vacation petition will be waived. Councilmember Clawson noted that neither party would benefit if the property were vacated down the middle. (See page 283 for further discussion on this matter.) The following resolutions were presented for reading and adoption: A resolution was read authorizing the Mayor and City Clerk to enter into an interlocal agreement between the cities of Renton and Mercer Island regarding an Aviation Noise Study. MOVED BY PALMER, SECONDED BY LAW, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. A resolution was read approving certain expenditures for reimbursement from the' proceeds of debt to be issued in the future. MOVED BY PERSSON, SECONDED BY CLAWSON, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. The following ordinance was presented for first reading and referred to the Council meeting of 8120/2007 for second and final reading: An ordinance was read amending Section 8-4-34 of City Code by adding Subsection C. providing for discretion in administration of the fees provided for therein. MOVED BY PERSSON, SECONDED BY CLAWSON, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 8/20/2007. CARRIED. The following ordinances were presented for second and final reading and adoption: An ordinance was read amending the 2007 General Fund Budget to appropriate $37,734 for the 2007 Summer Lunch and Housing Repair Assistance Programs, which are funded by grant revenues. MOVED BY PERSSON, SECONDED BY CLAWSON, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. An ordinance was read amending the 2007 Budget by increasing the amount of funds in the Surface Water revenue account and expenditure account by $50,000 pursuant to the Upper Springbrook Creek Restoration project agreement with the King Conservation District Number 9. MOVED BY CLAWSON, SECONDED BY BRIERE, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. Councilmember Persson inquired about the status of the complaint of noise emanating from the RiverRock Restaurant at Maplewood Golf Course. Chief Administrative Officer Covington stated that numerous attempts to measure the noise level from the complainant's property have been unsuccessful due to the complainant not allowing City employees on his property. Mayor Keolker reported that City employees had been sent to the area at 1:00 a.m. on a night when music was playing and they could not hear the music. City Attomey Warren stated that a sound barrier was being installed to further reduce noise emissions from the band area. August 13,2007 Renton City Council Minutes Page 283 Public Works: Graffiti on Private Property Development Services: Driveway Widths AUDIENCE COMMENT Citizen Comment: Demps - Index PI NE, A&D Quality Construction Company, VAC- 07-00 1 ADJOURNMENT In response to Councilmember Persson's inquiry, City Attorney Warren stated that there is no specific ordinance regulating the removal of graffiti from private property. Mayor Keolker pointed out that the City does have a policy regarding removal of graffiti from public property. MOVED BY LAW, SECONDED BY PERSSON, COUNCIL REFER THE TOPIC OF GRAFFITI ON PRIVATE PROPERTY TO THE PUBLIC SAFETY COMMITTEE. CARRIED. Councilmember Law voiced concerns over the width of allowed driveways, and access in and out of the driveways. MOVED BY LAW, SECONDED BY PALMER, COUNCIL REFER THE TOPIC OF THE WIDTH OF DRIVEWAYS TO THE PLANNING & DEVELOPMENT COMMITTEE.* Councilmember Persson noted the safety issues related to accessing the driveways. *MOTION CARRIED. Keith Demps, 2308 NE 24th St., Renton, 98056, spoke on the issue of his request to vacate a portion of Index PI. NE. Indicating that.he has already gone through the vacation process, Mr. Demps asked Council to consider vacating the entire area, rather than retaining a portion for a walkway, as it is holding up his development project. He also noted the existence of another trail that is approximately 150 feet away from the vacation area. Discussion ensued regarding the appropriateness of vacating the entire area while the Trails and Bicycle Master Plan study is pending, the need for two walkways in the area, concern about short-circuiting the study, providing for input from the Highlands neighborhood, accelerating the walkway study, the benefits of the potential development projects, the possibility of allowing a variance due to the lot sizes, the underlying ownership of the property, and the need for the City to clean up and maintain the property. Chief Administrative Officer Covington stated that the Trails and Bicycle Master Plan study is to be discussed at the Committee of the Whole meeting on August 20, and staff will be prepared to discuss this specific area. MOVED BY PERSSON, SECONDED BY NELSON, COUNCIL ADJOURN. CARRIED. Time: 8:03 p.m. Michele Neumann, Deputy City Clerk Recorder: Jason Seth August 13,2007 RENTON CITY COUNCIL COMMITTEE MEETING CALENDAR Office of the City Clerk COUNCIL COMMITTEE MEETINGS SCHEDULED AT CITY COUNCIL MEETING August 13,2007 COMMITTEE OF THE WHOLE MON., 8/20 Public Defense Contract & Standards; (Nelson) 5:30 p.m. Bike Path & Trails Master Plan Update; Valley Communications Status Report COMMUNITY SERVICES (Corman) FINANCE (Persson) MON., 8/20 4:30 p.m. MON., 8/20 3:00 p.m. Library Master Plan Process (briefing only); Planning Commission Appointments Vouchers; IKEA Performing Arts Center Funding; City's Official Newspaper Designation; Fund Balance Reserves and Annual Capital Improvement Plan PLANNING & DEVELOPMENT TMURS., 8/16 Vacation Petition for Portion of (Briere) 1:30 p.m. Whitwodh Ave. S. (VAC-07-002); 2007 Comprehensive Plan Amendments PUBLIC SAFETY (Law) MON., 8/20 Pipelines in Renton (briefing only) 4:00 p.m. TRANSPORTATION (AVIATION) WED., 811 5 (Palmer) 4:00 p.m. UTILITIES (Clawson) Six Year Transportation Improvement Plan; 2007 Walkway Improvement Contract with Pacific Engineering Design; Local & Regional Transportation Issues Update THURS., 8/16 Relocation of Benson Hill Water Line 3:00 p.m. Cost Sharing Agreement with WSDOT; Benson Hill Water Line Project Bid Award NOTE: Committee of the Whole meclings are held in the Council Chamben unlcjs othcnuise noted. All other conmince lneetings ale held in the Council Conference Roam unless othcnvire noted. CERTIFICATE I, Bonnie I. Walton, City Clerk of the City of Renton, Washington, do hereby certify that the Renton Reporter is the official newspaper for publishing City Council's action and business. Dated this 4th day of January, 2008. !k%mU.L.d l.d* Bonnie I. Walton, City Clerk City of Renton, Washington CERTIFICATE REGARDING ORDINANCE I, Bonnie I. Walton, City Clerk of the City of Renton, Washington (the "City"), do hereby certify: 1. That the attached Ordinance No. 53 13 (the "Ordinance") is a true and correct copy of an ordinance of the City Council, as finally adopted at a regular meeting of the City Council held on October 22, 2007, and duly recorded in my office, and that such Ordinance has not been amended or superseded. 2. That the meeting was duly convened and held in all respects in accordance with law, and to the extent required by law, due and proper notice of the meeting was given; that a legal quorum was present throughout the meeting and a legally sufficient number of members of the City Council voted in the proper manner for the adoption of the Ordinance; that all other requirements and proceedings incident to the proper adoption of the Ordinance have been duly fulfilled, carried out and otherwise observed; and that I am authorized to execute this certificate. Dated this 4th day of January, 2008. &'$ /J& Bonnie I. Walton, City Clerk City of Renton, Washington CITY OF RENTON, WASHINGTON ORDINANCE NO. 53 13 AN ORDINANCE of the City of Renton, Washington, authorizing the issuance of three series of water and sewer revenue bonds of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, in the aggregate principal amounts of not to exceed $10,000,000, $10,000,000 and $3,000,000, respectively; providing the form, terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle-Northwest Securities Corporation, Seattle, Washington. ORDINANCE NO . 53 13 TABLE OF CONTENTS . . Section 1 . Definitions ..................................................................................................................... 2 Section 2 . Findings Regarding Parity Provisions and the Project ............................................. 9 Section 3 . Authorization and Description of Bonds ......................... ... .................................... 9 Section 4 . Registration of Bonds and Book-Entry System ............................................................ 9 Section 5 . Payment of Bonds ....................................................................................................... 12 Section 6 . Redemption; Open Market Purchase of Bonds ........................................................... 12 Section 7 . Notice of Redemption ................................................................................................. 13 Section 8 . Failure to Redeem Bonds ............................................................................................ 14 Section 9 . Form of Bonds ...................................... ......................................................... 14 Section 10 . Execution of Bonds ................................................................................................. 14 Section 11 . Authentication and Delivery of Bonds by Bond Registrar ..................................... 14 Section 12 . Lost, Stolen or Destroyed Bonds .............................................................................. 15 Section 13 . Creation of Fund ................................. .... ............................................................... 15 Section 14 . Deposits into Funds ................................ .... .......................................................... 15 ... Section 15 . Rate Stabihzation Fund .......................................................................................... 16 Section 16 . Flow of Funds ........................................................................................................... 16 Section 17 . Pledge of Revenue and Lien Position ....................................................................... 17 Section 18 . Findings Regarding Sufficiency of Revenue ....................................................... 17 Section 19 . Covenants .................................................................................................................. 18 Section 20 . Tax Covenants .......................................................................................................... 20 Section 21 . Defeasance of the Bonds ........................................................................................... 21 Section 22 . Provision for Future Parity Bonds ............................................................................ 22 Section 23 . Sale of Bonds ............................................................................................................ 24 Section 24 . Delivery of Bonds; Temporary Bonds ...................................................................... 25 Section 25 . Application of Bond Proceeds .................................... ... ........................................... 25 Section 26 . Plan of Refunding ..................................................................................................... 26 Section 27 . Undertaking to Provide Continuing Disclosure ................................................ 27 Section 28 . Preliminary Official Statement ................................................................................. 30 Section 29 . Amendments .......................................................................................................... 30 Section 30 . Contract: Savings Clause .......................................................................................... 32 Section 31 . General Authorization, Ratification of Prior Acts .............................................. 32 Section 32 . Effective Date of Ordinance ..................................................................................... 32 Exhibit A Project Description Exhibit B Form of Bonds ORDINANCE NO. 53 13 AN ORDINANCE of the City of Renton, Washington, authorizing the issuance of three series of water and sewer revenue bonds of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, in the aggregate principal amounts of not to exceed $10,000,000, $10,000,000 and $3,000,000, respectively; providing the form, terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle-Northwest Securities Corporation, Seattle, Washington. WHEREAS, the City of Renton, Washington (the "City") has heretofore created and operated a waterworks utility of the City, including the water, sewer, wastewater and storm drainage systems (defined herein as the "Waterworks Utility"); and WHEREAS, the City Council has determined that it is necessary and in the best interests of the City that certain improvements for the Waterworks Utility described in the Capital Improvement Program be made and there be adopted a system or plan of additions to and betterments and extensions of the Waterworks Utility; and WHEREAS, pursuant to chapter 35.92 RCW, the City is authorized to issue and sell, without an election, revenue bonds of the City to make additions, betterments or extensions to the Waterworks Utility; and WHEREAS, by Section XXIII of Ordinance No. 4709, the City also provided that it 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 City's Water and Sewer Revenue Refunding Bonds, 1998 (the "1998 Bonds") and any bonds issued thereafter if such additional bonds are issued in compliance with the conditions set forth therein; and WHEREAS, by Ordinance No. 4976, the City issued its Water and Sewer Revenue Bonds, 2002 (the "2002 Bonds") on a parity of lien with the 1998 Bonds; and WHEREAS, by Ordinance No. 5019, as amended by Ordinance No. 5020, the City issued its Water and Sewer Revenue Refunding Bonds, 2003 (the "2003 Bonds") on a parity of lien with the 1998 Bonds and the 2002 Bonds; and WHEREAS, by Ordinance No. 5098, the City issued its Water and Sewer Revenue Bonds, 2004 (the "2004 Bonds") on a parity of lien with the 1998 Bonds, the 2002 Bonds, and the 2003 Bonds; and WHEREAS, Ordinance No. 4976 provides that the City may redeem the 2002 Bonds maturing on and after December 1, 2014 on and after December 1, 2012, in whole or in part, on any interest payment date at a price of par plus accrued interest, if any, to the date of redemption; and ORDINANCE NO. 5313 WHEREAS, as a result of changed market conditions, it appears to the City Council that debt service savings may be obtained by refunding the 2002 Bonds maturing on and after December 1, 2014 (the "Refunded Bonds") through the issuance of a series of water and sewer refunding bonds; and WHEREAS, the City Council has determined that it is in the best interests of the City to issue and sell three series of water and sewer revenue bonds on a parity of lien with the outstanding 1998 Bonds, 2002 Bonds, 2003 Bonds and 2004 Bonds; and WHEREAS, the first series of bonds shall be designated the City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007 and issued in the aggregate principal amount of not to exceed $10,000,000 (the "2007 Bonds"), for the purpose of providing part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility, to refund the Refunded Bonds, and to pay the costs of issuance and sale of the 2007 Bonds, as further provided in the sale resolution for the 2007 Bonds; and WHEREAS, the second and third series of bonds shall be designated the City of Renton, Washington Water and Sewer Bonds, Series 2008A and City of Renton, Washington Water and Sewer Bonds, Series 2008B (Taxable) and issued in the aggregate principal amounts of not to exceed $10,000,000 and $3,000,000, respectively (together, the "2008 Bonds"), for the purpose of providing part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility, to fulfill the Reserve Requirement and to pay the costs of issuance and sale of the 2008 Bonds, as further provided in the sale resolution for the 2008 Bonds; and WHEREAS, Seattle-Northwest Securities Corporation, Seattle, Washington, has offered to purchase the 2007 Bonds and the 2008 Bonds under the terms and conditions set forth herein and in the applicable sale resolution; 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: "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 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. ORDINANCE NO. 5313 - "Beneficial Owner" shall mean any person that has or shares the power, directly or indirectly to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries). "Bond Fund" shall mean that special fund of the City known as the Waterworks Revenue Bond Fund created by this ordinance for the payment of the principal of and interest on the Bonds. "Bond Register" means the registration books showing the name, address and tax identification number of each Registered Owner of the Bonds, maintained pursuant to Section 149(a) of the Code. "Bond Registrar" means the fiscal agency of the State of Washington, for the purposes of registering and authenticating the Bonds, maintaining the Bond Register, effecting transfer of ownership of the Bonds, and paying the principal of, premium, if any, and interest on the Bonds. "Bonds" shall mean the 2007 Bonds and the 2008 Bonds. "Capital Improvement Program" shall mean the plan of additions and betterments to the Waterworks Utility approved by the City in the 2007 City Budget adopted by the City Council pursuant to Ordinance No. 5245 adopted on December 11,2006. "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 2007 Bonds or the 2008 Bonds, as applicable, by the City to the Underwriter and the payment therefor by the Underwriter. "Code" shall mean the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. "Coverage Requirement" shall mean in any calendar year 1.25 times the Maximum Annual Debt Service; provided, that once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, the term "Coverage Requirement" shall mean in any calendar year 1.25 times the Annual Debt Service for such year. "DTC" means The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York, as depository for the Bonds pursuant to this ordinance. "Escrow Agent" means U.S. Bank National Association, Seattle, Washington. "Escrow Agreement" means the Escrow Deposit Agreement to be dated as of the date of Closing of the 2007 Bonds authorized to be entered into pursuant to Section 26 of this ordinance. ORDINANCE NO. 5313 - "Fitch" means Fitch, Inc., organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such organization shall be dissolved or liquidated or shall no longer perfom the functions of a securities rating agency, "Fitch" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. "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. "Government Obligations" means those obligations now or hereafter defined as such in chapter 39.53 RCW. "Gross Revenue" 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. "Letter of Representations" shall mean the Blanket Issuer Letter of Representations from the City to DTC dated April 15, 1997. "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. "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. "Moody's" means Moody's Investors Service, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. ORDINANCE NO. 5313 - "MSRB" shall mean the Municipal Securities Rulemaking Board. , "Net Proceeds," when used with reference with the Bonds, means the principal amount of the Bonds, plus accrued interest and original issue premium, if any, and less original issue discount, if any. "Net Revenue" shall mean Gross Revenue less Maintenance and Operation Expense. "1998 Bonds" shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 1998. "NRMSIR shall mean a nationally recognized municipal securities information repository designated by the SEC. "Outstanding" means, as of any particular time, all Parity Bonds issued theretofore except (a) Parity Bonds theretofore canceled by the Bond Registrar afler purchase by the City in the open market or because of payment at, or redemption prior to, maturity; (b) Parity Bonds for which funds have been deposited into a trust account pursuant to the ordinances authorizing the issuance of the Parity Bonds, but only to the extent that the principal of and interest on such Parity Bonds are payable from such trust account; (c) temporary, mutilated, lost, stolen or destroyed Parity Bonds for which new Parity Bonds have been issued pursuant to the ordinance authorizing their issuance; and (d) Parity Bonds exchanged for new Parity Bonds pursuant to the ordinances authorizing their issuance. "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 2002 Bonds, the 2003 Bonds, the 2004 Bonds, the 2007 Bonds, the 2008 Bonds and any Future Parity Bonds. "Parity Bond Fund" shall mean any fund created for the payment and redemption of Parity Bonds. "Private Person" means any natural person engaged in a trade or business or any trust, estate, partnership, association, company or corporation. "Private Person Use" means the use of property in a trade or business by a Private Person if such use is other than as a member of the general public. Private Person Use includes ownership of the property by the Private Person as well as other arrangements that transfer to the Private Person the actual or beneficial use of the property (such as a lease, management or incentive payment contract or other special arrangement) in such a manner as to set the Private Person apart from the general public. Use of property as a member of the general public includes attendance by the Private Person at municipal meetings or business rental of property to the Private Person on a day-to-day basis if the rental paid by such Private Person is the same as the rental paid by any Private Person who desires to rent the property. Use of property by nonprofit community groups or community recreational groups is not treated as Private Person Use if such use is incidental to the governmental uses of property, the property is made available for such ORDINANCE NO. 5313 - use by all such community groups on an equal basis and such community groups are charged only a de minimis fee to cover custodial expenses. "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 additions, betterments or extensions to the Waterworks Utility described in the Capital Improvement Program, including, but not limited to, the capital improvements described in Exhibit A to this ordinance. "Project Fund" shall mean the Waterworks Utility Construction Fund previously created by the City, and the subaccounts contained therein, for the purpose of paying costs of the Project. "Purchase Agreement" shall mean the Bond Purchase Agreement for the 2007 Bonds or 2008 Bonds, as applicable, by and between the City and the Underwriter. "Qualified Insurance" means any non-cancelable municipal bond insurance policy or surety bond issued by any insurance company licensed to conduct an insurance business in any state of the United States (or by a service corporation acting on behalf of one or more such insurance companies) which insurance company or companies, as of the time of issuance of such policy or surety bond, are currently rated in one of the two highest Rating Categories by both Moody's and S&P. "Qualified Letter of Credit" means any irrevocable letter of credit issued by a financial institution for the account of the City on behalf of registered owners of the Bonds, which institution maintains an office, agency or branch in the United States and as of the time of issuance of such letter of credit, is currently rated in one of the two highest Rating Categories by either Moody's or S&P. "Rate Stabilization Fund" shall mean the Waterworks Rate Stabilization Fund created by the City pursuant to Ordinance No. 4709. "Refunded Bonds" mean the 2002 Bonds maturing on and after December 1,2014. "Refunding Account" means the account by that name established pursuant to Section 26 of this ordinance. "Registered Owner" means the person named as the registered owner of a Bond in the Bond Register. For so long as the Bonds are held in book-entry only form, DTC shall be deemed to be the sole Registered Owner. "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. ORDINANCE NO. 5313 "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. "Reserve Requirement" shall mean the Maximum Annual Debt Service; provided, that once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outs'tanding, the term "Reserve Requirement" shall mean with respect to any issue of Parity Bonds, the lesser of (a) Maximum Annual Debt Service on all Outstanding Parity Bonds, and (b) 125% of average Annual Debt Service on all Outstanding Parity Bonds; provided, that the amount required to be deposited hereunder with respect to any Future Parity Bonds in order to meet the Reserve Requirement shall not exceed 10% of the net proceeds of such Future Parity Bonds under the Code. "Rule" shall mean SEC Rule 15~2-12, "S&P means Standard & Poor's, a Division of The McGraw Hill Companies, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. "Sale Resolution" means the resolutions of the City Council approving the sale of the 2007 Bonds or the 2008 Bonds, as applicable, in accordance with Section 23 of this ordinance. "SEC" shall mean the United States Securities and Exchange Commission "SID" shall mean a state information depository for the State (if one is created). "State" shall mean the State of Washington. "Tax-Exempt Bonds" shall mean the 2007 Bonds and the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A authorized to be issued by this ordinance. "Taxable Bonds" shall mean the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) authorized to be issued by this ordinance. "Term Bonds" shall mean any 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. "2008 Bonds" shall mean the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A, and the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) authorized to be issued by this ordinance. ORDINANCE NO. 5313 "2004 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 2004 "2007 Bonds" shall mean the City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007, authorized to be issued by this ordinance. "2003 Bonds" shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 2003. "2002 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 2002. "Underwriter" shall mean Seattle-Northwest Securities Corporation, Seattle, Washington. "Waterworks Utility" shall mean the combined water, sewer, wastewater and storm drainage systems of the City as the same may be added to, improved and extended for as long as any of the 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. Rules of Interpretation. In this ordinance, unless the context otherwise requires: (a) The terms "hereby," "hereof," "hereto," "herein, "hereunder" and any similar terms, as used in this ordinance, refer to this ordinance as a whole and not to any particular article, section, subdivision or clause hereof, and the term "hereafter" shall mean after, and the term "heretofore" shall mean before, the date of this ordinance; (b) Words of the masculine gender shall mean and include correlative words of the feminine and neuter genders and words importing the singular number shall mean and include the plural number and vice versa; (c) Words importing persons shall include firms, associations, partnerships (including limited partnerships), trusts, corporations and other legal entities, including public bodies, as well as natural persons; (d) Any headings preceding the text of the several sections of this ordinance, and any table of contents or marginal notes appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this ordinance, nor shall they affect its meaning, construction or effect; (e) All references herein to "articles," "sections" and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof, and (f) Words importing the singular number include the plural number and vice versa. ORDINANCE NO. - 5313 Section 2. Findings Regarding Parity Provisions and the Proiect. The City Council hereby finds that there is no deficiency in any Parity Bond Fund, that provisions hereinafter meet the conditions for the issuance of Future Parity Bonds as set forth in Section 23 of Ordinance No. 4709, Section 22 of Ordinance No. 4976, Section 20 of Ordinance No. 5019, as amended, and Section 22 of Ordinance No. 5098 and that there will be on file prior to the issuance and delivery of the Bonds a certificate of the City Finance Director that satisfies the conditions for such certificate as set forth in Ordinance Nos. 4709,4976,5019 and 5098. The City Council further finds that the additions, betterments or extensions to the Waterworks Utility, described in Exhibit A attached hereto (the "Project"), are consistent with the system or plan of additions to and betterments and extensions of the Waterworks Utility as described in the Capital Improvement Program. Therefore, the Bonds shall be issued on a parity of lien with the Parity Bonds. Section 3. Authorization and Description of Bonds. For the purpose of obtaining part of the funds necessary to carry out the Project and to refund the Refunded Bonds, the City shall issue the 2007 Bonds and the 2008 Bonds. The 2007 Bonds shall be designated "City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007" and shall be issued in the aggregate principal amount of not to exceed $10,000,000. The 2008 Bonds shall be designated the "City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A" and the "City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable)" in the aggregate principal amounts of not to exceed $10,000,000 and $3,000,000, respectively. The Bonds shall be dated as of their respective dates of initial issuance and delivery or such other date set forth in the applicable Sale Resolution; shall be issued in fully registered form in the denomination of $5,000 or any integral multiple thereof within a series, provided that no Bond shall represent more than one maturity of a series; shall be numbered separately and in such manner and with any additional designation as the Bond Registrar deems necessary for purposes of identification and control; shall bear interest (calculated based on a 360-day year of 12 30-day months) at the rates set forth in the applicable Sale Resolution, until the Bonds have been paid or their payment duly provided for, and shall mature on the dates in the years and amounts and shall bear interest from their date payable semiannually at the rates on the dates set forth in the applicable Sale Resolution. The Bonds shall be negotiable instruments to the extent provided by RCW 62A.8-105. Section 4. Registration of Bonds and Book-Entry System. (a) Registrar/Bond Register. The City hereby specifies and adopts the system of registration approved by the Washmgton State Finance Committee from time to time through the appointment of state fiscal agencies. The City shall cause a Bond Register to be maintained by the Bond Registrar. So long as any Bonds remain outstanding, the Bond Registrar shall make all necessary provisions to permit the exchange or registration or transfer of Bonds at its principal corporate trust office. The Bond Registrar may be removed at any time at the option of the City Finance Director upon prior notice to the Bond Registrar and a successor Registrar appointed by the City Finance Director. No resignation or removal of the Bond Registrar shall be effective ORDINANCE NO. 5313 - until a successor shall have been appointed and until the successor Registrar shall have accepted the duties of the Bond Registrar hereunder. (b) Registered Ownership. The City and the Bond Registrar, each in its discretion, may deem and treat the Registered Owner of each Bond as the absolute owner thereof for all purposes (except as provided in Section 24 of this ordinance), 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 Bond may be transferred as herein provided. All such payments made as described in Section 7 shall be valid and shall satisfy and discharge the liability of the City upon such Bond to the extent of the amount or amounts so paid. (c) DTC Acceptance/Letters of Representations. The Bonds initially shall be held in fully immobilized form by DTC acting as depository. To induce DTC to accept the Bonds as eligible for deposit at DTC, the City has executed and delivered to DTC a Blanket Issuer Letter of Representations. Neither the City nor the Bond Registrar will have any responsibility or obligation to DTC participants or the persons for whom they act as nominees (or any successor depository) with respect to the Bonds in respect of the accuracy of any records maintained by DTC (or any successor depository) or any DTC participant, the payment by DTC (or any successor depository) or any DTC participant of any amount in respect of the principal of or interest on Bonds, any notice which is permitted or required to be given to Registered Owners under this ordinance (except such notices as shall be required to be given by the City to the Bond Registrar or to DTC (or any successor depository)), or any consent given or other action taken by DTC (or any successor depository) as the Registered Owner. For so long as any Bonds are held in fully-immobilized form hereunder, DTC or its successor depository shall be deemed to be the Registered Owner for all purposes hereunder, and all references herein to the Registered Owners shall mean DTC (or any successor depository) or its nominee and shall not mean the owners of any beneficial interest in such Bonds. If any Bond shall be duly presented for payment and funds have not been duly provided by the City on such applicable date, then interest shall continue to accrue thereafter on the unpaid principal thereof at the rate stated on such Bond until it is paid. (d) Use of Depository. (i) The Bonds shall be registered initially in the name of "Cede & Co.", as nominee of DTC, with one Bond maturing on each of the maturity dates for the Bonds in a denomination corresponding to the total principal therein designated to mature on such date. Registered ownership of such immobilized Bonds, or any portions thereof, may not thereafter be transferred except (A) to any successor of DTC or its nominee, provided that any such successor shall be qualified under any applicable laws to provide the service proposed to be provided by it; (B) to any substitute depository appointed by the City Finance Director pursuant to subsection (ii) below or such substitute depository's successor; or (C) to any person as provided in subsection (iv) below. ORDINANCE NO. - 5313 (ii) 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 Finance Director to discontinue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the City Finance Director may hereafter 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. (iii) In the case of any transfer pursuant to clause (A) or (B) of subsection (i) above, the Bond Registrar shall, upon receipt of all outstanding Bonds, together with a written request of the City Finance Director, issue a single new Bond for each maturity then outstanding, registered in the name of such successor or such substitute depository, or their nominees, as the case may be, all as specified in such written request of the City Finance Director. (iv) In the event that (A) DTC or its successor (or substitute depository or its successor) resigns from its functions as depository, and no substitute depository can be obtained, or (B) the City Finance Director determines that it is in the best interest of the beneficial owners of the Bonds that such owners be able to obtain such bonds in the form of Bond certificates, the ownership of such Bonds may then be transferred to any person or entity as herein provided, and shall no longer be held in fully-immobilized form. The City Finance Director shall deliver a written request to the Bond Registrar, together with a supply of definitive Bonds, to issue Bonds as herein provided in any authorized denomination. Upon receipt by the Bond Registrar of all then outstanding Bonds together with a written request of the City Finance Director to the Bond Registrar, new Bonds shall be issued in the appropriate denominations and registered in the names of such persons as are requested in such written request. (e) Registration of Transfer of Ownership or Exchange; Change in Denominations. 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 transfer of any Bond may be registered and Bonds may be exchanged, but no transfer of any such Bond shall be valid unless it is surrendered to the Bond Registrar with the assignment form appearing on such Bond duly executed by the Registered Owner or such Registered Owner's duly authorized agent in a manner satisfactory to the Bond Registrar. Upon such surrender, the Bond Registrar shall cancel the surrendered Bond and shall authenticate and deliver, without charge to the Registered Owner or transferee therefor, a new Bond (or Bonds at the option of the new Registered Owner) of the same date, maturity and interest rate and for the same aggregate principal amount in any authorized denomination, naming as Registered Owner the person or persons listed as the assignee on the assignment form appearing on the surrendered Bond, in exchange for such surrendered and cancelled Bond. Any Bond may be surrendered to the Bond Registrar and exchanged, without charge, for an equal aggregate principal amount of Bonds of the same date, maturity and interest rate, in any authorized denomination. The Bond Registrar shall not be obligated to register the transfer or to exchange any Bond during the 15 days preceding any interest payment or principal payment date any such Bond is to be redeemed. ORDINANCE NO. 5313 - (f) Registrar's Ownership of Bonds. The Bond Registrar may become the Registered 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 member of, or in any other capacity with respect to, any committee formed to protect the right of the Registered Owners of Bonds. (g) Registration Covenant. The City covenants that, until all Bonds have been surrendered and canceled, it will maintain a system for recording the ownership of each Bond that complies with the provisions of Section 149 of the Code. 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. For so long as all Bonds are in fully immobilized form, payments of principal and interest thereon shall be made as provided in accordance with the operational arrangements of DTC referred to in the Letter of Representations. In the event that the Bonds are no longer in fully immobilized form, interest on the Bonds shall be paid by check or draft mailed to the Registered Owners at the addresses for such Registered Owners appearing on the Bond Register on the fifteenth day of the month preceding the interest payment date, or upon the written request of a Registered Owner of more than $100,000 of Bonds (received by the Bond Registrar at least 10 days prior to the applicable payment date), such payment shall be made by the Bond Registrar by wire transfer to the account within the continental United States designated by the Registered Owner. Principal of the Bonds shall be payable upon presentation and surrender of such Bonds by the Registered Owners at the principal office of the Bond Registrar. 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. Redemption: Open Market Purchase of Bonds. The City reserves the right to redeem the Bonds prior to their maturing as set forth in the applicable Sale Resolution. If less than all of the 2007 Bonds or 2008 Bonds subject to optional redemption are called for redemption, then the City shall choose the maturities of such series to be redeemed. The City reserves the right to designate certain maturities of the 2007 Bonds andlor the 2008 Bonds as term bonds ("Term Bonds") in the applicable Sale Resolution, and, if not previously purchased by the City in the open market or optionally redeemed as provided in the applicable Sale Resolution, will be subject to mandatory sinking fund redemption prior to maturity, in part and by lot (in such manner as the Bond Registrar shall determine), at a price of par plus accrued interest to the date of redemption as provided in the applicable Sale Resolution. If the City shall optionally redeem Term Bonds or purchase Term Bonds in the open market, the par amount of the Term Bonds so redeemed or purchased (irrespective of their actual redemption or purchase prices) shall be credited against one or more scheduled mandatory redemption amounts for such Term Bonds (as allocated by the City) beginning not earlier than 60 days after the date of the optional redemption or purchase, and the City shall promptly notify the Bond Registrar in writing of the manner in which the credit for the Term Bonds so redeemed or purchased has been allocated. ORDINANCE NO. 5313 - Any Bond in the principal amount of greater than $5,000 may be partially redeemed in any integral multiple of $5,000. For as long as the Bonds are held in book-entry only form, the selection of particular Bonds within a maturity to be redeemed shall be made in accordance with the operational arrangements then in effect at DTC. If the Bonds are no longer held in uncertificated form, the selection of such Bonds to be redeemed and the surrender and reissuance thereof, as applicable, shall be made as provided in the following provisions of this paragraph. If the City redeems at any one time fewer than all of the Bonds having the same maturity date, the particular Bonds or portions of Bonds of such maturity to be redeemed shall be selected by lot (or in such manner determined by the Bond Registrar) in increments of $5,000. In the case of a Bond of a denomination greater than $5,000, the City and Registrar shall treat each Bond as representing such number of separate Bonds each of the denomination of $5,000 as is obtained by dividing the actual principal amount of such Bond by $5,000. 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 umedeemed shall be authenticated and delivered to the Owner, without charge to the Owner therefore, 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 under this Section shall be canceled. Section 7. Notice of Redemption. For so long as the Bonds are held in uncertificated form, notice of redemption shall be given in accordance with the operational arrangements of DTC as then in effect, and neither the City nor the Bond Registrar will provide any notice of redemption to any Beneficial Owners. Thereafter, notice of redemption shall be given by or on behalf of the City not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the Owner of any Bond to be redeemed at the address appearing on the Bond Register on the day notice is mailed, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the Owner of any Bond. All official notices of redemption shall be dated and shall state: (A) the redemption date, (B) the redemption price, (C) if fewer than all outstanding Bonds are to be redeemed, the identification by maturity (and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed, (D) that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and (E) the place where such Bonds are to be surrendered for payment of the redemption price, which place of payment shall be the principal office of the Bond Registrar. 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. ORDINANCE NO. 5313 In addition, further notice shall be given by the City as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption given hereunder shall contain the information required above for an official notice of redemption plus (A) the CUSIP numbers of all Bonds being redeemed; (B) the date of issue of the Bonds as originally issued; (C) the rate of interest borne by each Bond being redeemed; (D) the maturity date of each Bond being redeemed; and (E) any other descriptive information needed to identify accurately the Bonds being redeemed. Each further notice of redemption may be sent at least 35 days before the redemption date to the Bond Insurer, if any, to party entitled to receive notice pursuant to Section 27, and to such persons (including securities repositories who customarily at the time receive notices of redemption in accordance with rules promulgated by the SEC) and with such additional information as the City shall deem appropriate, but such mailings shall not be a condition precedent to the redemption of such Bonds. 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 in substantially the form set forth in Exhibit B attached hereto. 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 Deliverv 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, this ordinance and the applicable Sale Resolution. 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 ORDINANCE NO. - 5313 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. Lost. Stolen or Destroyed Bonds. In case ani~onds shall be lost, stolen or destroyed, the Bond Registrar may authenticate and deliver a new Bond or Bonds of like amount, date and tenor to the Owner thereof upon the Owner's paying the expenses and charges of the Bond Registrar and the City in connection therewith and upon hs filing with the Bond Registrar and the City evidence satisfactory to both that such Bond or Bonds were actually lost, stolen or destroyed and of his ownership thereof, and upon furnishing the City and the Registrar with indemnity satisfactory to both. Section 13. Creation of Fund. There is hereby created in the City Treasury the Waterworks Revenue Bond Fund (the "Bond Fund"), which shall be a subaccount of the Waterworks Utility Fund. Section 14. Deposits into Funds. The Bond Fund shall be maintained for the purpose of paying the principal of and interest on the Bonds. As long as any Bond remains outstanding, the City hereby irrevocably obligates and binds itself to set aside and pay from the Waterworks Utility Fund into the Bond Fund those amounts necessary, together with such other funds as are on hand and available in the Bond Fund, to pay the interest or principal and interest next coming due on outstanding Bonds. Such payments from the Waterworks Utility Fund to the Bond Fund shall be made in a fixed amount without regard to any fixed proportion following the closing and delivery of the Bonds on or before each date on which an installment of interest or principal and interest falls due on the Bonds equal to the installment of interest or principal and interest. There has heretofore been created by the City a special fund of the City known as the Waterworks Revenue ~ond Reserve Fund (the "Reserve Fund") for purpose of securing the payment of the principal of and interest on all bonds to which Net Revenue is pledged. The City hereby i~~evocably covenants and agrees that on or prior to the date of issuance of the Bonds, the amount on deposit in the Reserve Fund will be at least equal to the Reserve Requirement for the Parity Bonds. The City shall satisfy the Reserve Requirement to the extent necessary upon the issuance of the 2007 Bonds and the 2008 Bonds by depositing proceeds of such Bonds or other funds available therefor into the Reserve Fund or by obtaining Reserve Insurance. 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 redeemed or otherwise defeased any Outstanding Parity Bonds. 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 ORDINANCE NO. 5313 - Reserve Fund by the withdrawal of cash therefrom for that purpose and after all cash has been depleted, then by draws on the Alternate Security or Reserve Insurance 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 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, the City also may transfer out of the Bond Fund or Reserve Fund any money required in order to prevent any Parity Bonds from becoming "arbitrage bonds" under the Code. 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 15. Rate Stabilization Fund. The City has previously created a Waterworks Rate Stabilization Fund (the "Rate Stabilization Fund"). The City may, at any time, as determined by the City and as consistent with Section 16 of this ordinance, deposit Gross Revenue into 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 in Gross Revenue for any fiscal year of the City. 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 will be made into the Rate Stabilization Fund to the extent that such deposit would prevent the City from meeting the Coverage Requirement. Section 16. Flow of Funds. Gross Revenue on deposit 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; ORDINANCE NO. 5313 - (b) To pay the interest on the Parity Bonds, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (c) To pay the principal of the Parity Bonds, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (d) To make all payments required to be made into any sinking fund or bond redemption fund hereafter created for thepayment of Future Parity Bonds which are Term Bonds; (e) To make all payments required to be made into the Reserve Fund, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (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 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, to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. Section 17. Pledge of Revenue and Lien Position. 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 to permit the setting aside in 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 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 Parity Bonds, ORDINANCE NO. 5313 - and the City has not bound and obligated itself to set aside and pay into 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 currently outstanding Parity 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 Parity Bonds. Section 19. Covenants. The City covenants and agrees with the Owner of each Bond at any time outstanding as follows: (a) Rate Covenant. 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 ana 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. @) Maintenance and Repair. 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) Disposal of Waterworks Utility. It will not sell, lease, mortgage or in any manner encumber 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 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 ORDINANCE NO. 5313 - 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) Books and Records. 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 wihn 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) No Free Service. Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish or supply or permit the furnishing or supplying of any service or facility in connection with the 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) Insurance. It at all times will cany fire and extended coverage and such other forms of insurance, including public liability and property damage insurance, with responsible insurers and with p61icies 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. ORDINANCE NO. 5313 - (g) Maintenance and Operation Expense. It will pay all Maintenance and Operation Expense and the debt service requirements for the outstanding Parity Bonds, and otherwise meet the obligations of the City as herein set forth. Section 20. Tax Covenants. The City covenants that it will not take or permit to be taken on its behalf any action that would adversely affect the exemption from federal income taxation of the interest on the Tax-Exempt Bonds and will take or require to be taken such acts as may reasonably be within its ability and as may from time to time be required under applicable law to continue the exemption from federal income taxation of the interest on the Tax-Exempt Bonds. (a) Arbitrage Covenant. Without limiting the generality of the foregoing, the City covenants that it will not take any action or fail to take any action with respect to the proceeds of sale of the Tax-Exempt Bonds or any other funds of the City which may be deemed to be proceeds of the Tax-Exempt Bonds pursuant to Section 148 of the Code and the regulations promulgated thereunder which, if such use had been reasonably expected on the date of delivery of the Tax-Exempt Bonds to the initial purchasers thereof, would have caused the Tax-Exempt Bonds as "arbitrage bonds" within the meaning of such term as used in Section 148 of the Code. The City represents that it has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is an issuer whose arbitrage certifications may not be relied upon. The City will comply with the requirements of Section 148 of the Code and the applicable regulations thereunder throughout the term of the Tax-Exempt Bonds. @) Private Person Use Limitation for Bonds. The City covenants that for as long as the Tax-Exempt Bonds are outstanding, it will not permit: (1) More than 10% of the Net Proceeds of the Tax-Exempt Bonds to be used for any Private Person Use; and (2) More than 10% of the principal or interest payments on the Tax-Exempt Bonds in a bond year to be directly or indirectly: (A) secured by any interest in property used or to be used for any Private Person Use or secured by payments in respect of property used or to be used for any Private Person Use, or (B) derived from payments (whether or not made to the City) in respect of property, or borrowed money, used or to be used for any Private Person Use. The City further covenants that, if: (3) More than five percent of the Net Proceeds of the Tax-Exempt Bonds are to be used for any Private Person Use; and (4) More than five percent of the principal or interest payments on the Tax- Exempt Bonds in a bond year are (under the terms of this ordinance or any underlying arrangement) directly or indirectly: (A) secured by any interest in property used or to be used for any Private Person Use or secured by payments in respect of property used or to be used for any Private Person Use, or ORDINANCE NO. 5313 - (B) derived from payments (whether or not made to the City) in respect of property, or borrowed money, used or to be used for any Private Person Use, then, (i) any Private Person Use of the projects described in subsection (3) hereof or Private Person Use payments described in subsection (4) hereof that is in excess of the five percent limitations described in such subsections (3) or (4) will be for a Private Person Use that is related to the state or local governmental use of the Project, and (ii) any Private Person Use will not exceed the amount of Net Proceeds of the Tax-Exempt Bonds used for the state or local govemmental use portion of the project to which the Private Person Use of such portion of the Project relates. The City further covenants that it will comply with any limitations on the use of the projects by other than state and local govemmental users that are necessary, in the opinion of its bond counsel, to preserve the tax exemption of the interest on the Tax-Exempt Bonds. (c) Modrfication of Tar Covenanfs. The covenants of this Section are specified solely to assure the continued exemption from regular income taxation of the interest on the Tax- Exempt Bonds. To that end, the provisions of this Section may be modified or eliminated without any requirement for formal amendment thereof upon receipt of an opinion of the City's bond counsel that such modification or elimination will not adversely affect the tax exemption of interest on any Tax-Exempt Bonds. (d) Qualrfied Tar-Exempt Obligation. The City hereby designates the Tax-Exempt Bonds as "qualified tax-exempt obligations" under Section 265(b)(3) of the Code for banks, thrift institutions and other financial institutions. The City does not anticipate that it will issue more than $10,000,000 in qualified tax-exempt obligations during 2007 or 2008, respectively. 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 andlor Governmental Obligations 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 ORDINANCE NO. 5313 - Bonds to any lawful purposes as it shall determine, subject only to the rights, if any, of the owners of any other Parity Bonds then outstanding. If the refunding plan provides that the defeased Bonds or the refunding bonds to be issued be secured by cash andor Governmental Obligations pending the prior redemption of the defeased Bonds and if such refunding plan also provides that certain cash andor Governmental Obligations 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. Within 45 days of any defeasance of Bonds, the City shall provide notice of defeasance of Bonds to Registered Owners of Bonds being defeased, and to the Bond Insurer, if any, and to each party entitled to receive notice in accordance with Section 27. Section 22. Provision for Future Parity Bonds. 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 aimual payments. After the 1998 Bonds, the 2002 Bonds, and the 2003 Bonds are no longer Outstanding, this subsection shall be amended to read as follows: (c) The ordinance providing for the issuance of such Future Parity Bonds shall provide for the deposit into the Reserve Fund ftom 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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security either on or prior to the date of issuance of such Future Parity Bonds or within three years from the date of issuance of the Future Parity Bonds in three approximately equal annual payments and in such event, the ordinance providing for the issuance of such Future Parity Bonds shall provide for such deposit. ORDINANCE NO. - 5313 After the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this subsection shall be amended to read as follows: (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 ~eserve. 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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security on or prior to the date of issuance of such Future Parity Bonds. (d) 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. (e) There shall be on file with 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 &om the Rate Stabilization Fund, is equal to at least 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this Section shall be amended to read as follows: a certificate of the City Finance Director demonstrating that during any 12 consecutive calendar months out of the immediately preceding 24 calendar months Net Revenue, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least 1.25 times the Maximum Annual Debt Service 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, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this Section shall be amended to read as follows: 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 24 calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued. 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; ORDINANCE NO. 5313 - (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 (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. Sale of Bonds. The City Finance Director is hereby authorized to enter into negotiations with the Underwriter for the sale of the 2007 Bonds and the 2008 Bonds on terms consistent with the terms of this ordinance. The City Council shall by the applicable Sale Resolution approve a Purchase Agreement for the purchase and sale of the 2007 Bonds and the 2008 Bonds, approve the terms of the 2007 Bonds and the 2008 Bonds (including the schedule of maturities, interest rates, redemption times and prices), and may approve the purchase of bond ORDINANCE NO. 5313 - insurance pursuant to a recommendation of the City Finance. Director. The City Finance Director is hereby authorized to enter into negotiations with potential bond insurers to provide a bond insurance policy guaranteeing the payment when due of principal of and interest on the 2007 Bonds andlor the 2008 Bonds. Section 24. Delivew of Bonds; Temporarv 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 as of their respective Closing to the Underwriter, including, but not limited to, the final official statement pertaining to the 2007 Bonds and the 2008 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 Underwriter, each without unreasonable delay. If definitive Bonds are not ready for delivery by the date of the applicable Closing agreed to by the City and the Underwriter, the City, upon the approval of the Underwriter, may cause to be issued and delivered to the Underwriter 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 25. Apvlication of Bond Proceeds. The accrued interest, if any, received by the City at the Closing of the 2007 Bonds and the 2008 Bonds shall be deposited into the Bond Fund and shall be applied to the payment of interest first coming due on the 2007 Bonds or the 2008 Bonds, as applicable. The remaining proceeds of the sale of the 2007 Bonds and the 2008 Bonds, less the underwriter's discount and the bond insurance premium to be paid by the Underwriter on behalf of the City or any other costs of issuance, if any, plus the original issue premium, if any, shall be applied, upon receipt after each Closing, as follows: (a) the amount required to meet the Reserve Requirement for the 2007 Bonds, if any, or the 2008 Bonds, if any, shall be deposited into the Reserve Fund or used to acquire Qualified Insurance, @) the proceeds of sale of the 2007 Bonds necessary to refund the Refunded Bonds shall be deposited into the Refunding Account, (c) the remaining proceeds of the Tax-Exempt Bonds shall be deposited into the tax- exempt bond subaccount hereby authorized to be created in the Project Fund (the "Tax-Exempt Subaccount") to pay part of the costs of the Project, and (d) the proceeds of the Taxable Bonds shall be deposited into the taxable bond subaccount hereby authorized to be created in the Project Fund (the "Taxable Subaccount") to pay part of the costs of the Project. ORDINANCE NO. - 5313 Except as provided by the Code and Section 20 of this ordinance, the interest and profits derived from the investment of Bond proceeds shall be deposited in the applicable Tax-Exempt or Taxable Subaccount created within the Project Fund and applied as described in the preceding paragraph. . Except as provided by the Code and Section 20 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 and subject to the requirements of the Code and Section 20 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 26. Plan of Refunding. (a) Refunding Plan. For the purpose of realizing a debt service savings, the City Council proposes to issue refunding bonds for the purpose of providing for the payment of the principal of and interest on and the redemption price of the Refunded Bonds on December 1, 2012 (the "Refunding Plan"). (b) Refunding Account. There is created an account known as the "2002 Bond Refunding Account" (the "Refunding Account") to be held by the Escrow Agent, which account is to be drawn upon for the sole purpose of paying the principal of and interest on the Refunded Bonds until their date of redemption and of paying costs related to the refunding of these bonds. The proceeds of sale of the 2007 Bonds necessary to refund the Refunded Bonds shall be credited to the Refunding Account. Money in the Refunding Account shall be used immediately upon receipt to defease the Refunded Bonds as authorized by this ordinance and Ordinance No. 4976 and to pay costs of issuance for the 2007 Bonds. The City shall defease the Refunded Bonds and discharge such obligations by the use of money in the Refunding Account to purchase certain Government Obligations (which obligations so purchased, are herein called "Acquired Obligations"), bearing such interest and maturing as to principal and interest in such amounts and at such times which, together with any necessary beginning cash balance, will provide for the payment of: (i) interest on the Refunded Bonds to and including December 1,2012; (ii) the redemption price of the Refunded Bonds (100% of the principal amount thereof) on December 1,2012; Such Acquired Obligations shall be purchased at a yield not greater than the yield permitted by the Code and regulations relating to acquired obligations in connection with refunding bond issues. ORDINANCE .NO. 5313 - (c) Escrow Agent/Escrow Agreement. To carry out the refunding and defeasance of the Refunded Bonds, the City hereby appoints U.S. Bank National Association as escrow agent (the "Escrow Agent"). A beginning cash balance, if any, and Acquired Obligations shall be deposited irrevocably with the Escrow Agent in an amount sufficient to defease the Refunded Bonds. The proceeds of the 2007 Bonds remaining in the Refunding Account after acquisition of the Acquired Obligations and provision for the necessary beginning cash balance shall be utilized to pay expenses of the acquisition and safekeeping of the Acquired Obligations and expenses of the issuance of the 2007 Bonds. In order to cany out the purposes of this Section, the Mayor, the City Finance Director and other appropriate officers of the City are authorized and directed to execute and deliver to the Escrow Agent, an Escrow Deposit Agreement, substantially in the form on file with the City. (d) Implementation of Refunding Plan. The City hereby irrevocably sets aside sufficient funds out of the purchase of Acquired Obligations from proceeds of the Refunded Bonds to make the payments described in subsection @) of this Section. The City hereby irrevocably calls the Refunded Bonds for redemption on December 1, 2012 in accordance with the provisions of Ordinance No. 4976 authorizing the redemption and retirement of the Refunded Bonds prior to their fixed maturities. Said call for redemption of the Refunded Bonds shall be irrevocable after the final establishment of the escrow account and delivery of the Acquired Obligations to the Escrow Agent. The Escrow Agent is hereby authorized and directed to provide for the giving of notices of the redemption of the Refunded Bonds in accordance with the applicable provisions of Ordinance No. 4976. The City Finance Director is authorized and requested to provide whatever assistance is necessary to accomplish such redemption and the giving of notices therefor. The costs of publication of such notices shall be an expense of the City. The Escrow Agent is hereby authorized and directed to pay to the Bond Registrar, sums sufficient to pay, when due, the payments specified in of subsection (a) of this Section. All such sums shall be paid from the money and Acquired Obligations deposited with said Escrow Agent pursuant to the previous section of this ordinance, and the income therefrom and proceeds thereof. All such sums so paid to said Bond Registrar shall be credited to the Refunding Account. All money and Acquired Obligations deposited with the bank and any income therefrom shall be held, invested (but only at the direction of the City Finance Director) and applied in accordance with the provisions of this ordinance and with the laws of the State of Washington for the benefit of the City and owners of the Refunded Bonds. The City will take such actions as are found necessary to ensure that all necessary and proper fees, compensation and expenses of the Escrow Agent for the Refunded Bonds shall be paid when due. 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)(S)(i) of the Rule. ORDINANCE NO. - 5313 The City hereby agrees to provide or cause to be provided to each then existing NRMSIR and to the SID, if one is created, in each case as designated by the SEC, the following annual financial information and operating data (collectively, the "Annual Financial Information") for each prior fiscal year, commencing in 2008 with the calendar year ending December 3 1, 2007 with respect to the 2007 Bonds, and commencing in 2008 with the calendar year ending December 31,2008 with respect to the 2008 Bonds: (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 by the Washington State Auditor pursuant to RCW 43.09.200, 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 Net Revenue; (c) Debt service coverage ratios; (d) General customer statistics for the Waterworks Utility contained in the final official statement for the Bonds under the heading "The Waterworks Utility-Number of Water Customers," "-Water Billing," "-Number of Wastewater Customers," '-Wastewater Billing," "-Number of Storm Drainage Customers," and "-Storm Drainage Billing" and (e) A narrative explanation of the reasons for any amendments to this Section made during the previous fiscal year and-the impact of such amendments on the Annual Financial Information being provided. The Annual Financial Information shail be provided on or before the last day of the seventh month following the end of such prior fiscal year; provided, after the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding the City shall provide the following Annual Financial Information on or before the last day of the ninth month following the end of the prior fiscal year. The City's current fiscal year ends December 3 1. The City may adjust such fiscal year by providing written notice of the change of fiscal year to each then existing NRMSIR and the SID, if any. In lieu of providing such Annual Financial Information, 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 any. The City further agrees to provide or cause to be provided, in a timely manner, to the SID, if any, and to each then existing NRMSIR, notice of any of the following events with respect to the Bonds, if material: 1. Principal and interest payment delinquencies; ORDINANCE NO. - 5313 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 Tax-Exempt Bonds; 7. Modifications to rights of the Owners of the Bonds; 8. Bond calls (optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34-23856); 9. Defeasances of the Bonds; 10. Release, substitution or sale of property securing repayment of the Bonds; and 1 1. Rating changes. Solely for pulposes of disclosure, and not intending to modify this undertaking, the City advises that there is no property securing repayment of the Bonds and that interest earned on the TaxableBonds will not be excluded from gross income of the owners of the Taxable Bonds for federal income tax purposes. The City also agrees to provide or cause to be provided, in a timely manner, to the SID, if any, and to each then existing NRMSIR, notice of its failure to provide the Annual Financial Information for the prior fiscal year on or before the date set forth above. 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 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 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 ORDINANCE NO. 5313 - this Section 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 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 shall be limited to the right to obtain specific enforcement of the City's obligations under this Section, 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 cq out the requirements of this Section. The City may elect to submit the information required by this Section to be filed with the NRMSIRs and the SID, if any, directly to DisclosureUSA.org unless or until the SEC withdraws its approval of this submission process. Section 28. Preliminary Official Statement. The City authorizes the City Finance Director to approve preliminary official statements for the 2007 Bonds and the 2008 Bonds and authorizes the distribution of such preliminary official statements in connection with the offering of the 2007 Bonds and 2008 Bonds. Pursuant to the Rule, the City Finance Director may deem the preliminary official statements as final as of their respective dates except for the omission of information dependent upon the pricing of the applicable series of Bonds and the completion of the applicable Bond Purchase Agreement. The City agrees to cooperate with the Underwriter to deliver or cause to be delivered, within seven business days from the date of the sale of the 2007 Bonds and the2008 Bonds, as applicable, copies of a final official statement in sufficient quantity to comply with paragraph (b)(4) of the Rule and the rules of the MSRB. Following the sale of the 2007 Bonds and the 2008 Bonds in accordance with this ordinance, the City authorizes the use the final official statements, substantially in the form of the applicable preliminary official statements, in connection with the sale of the 2007 Bonds and 2008 Bonds. The City Finance Director is hereby authorized to review and approve on behalf of the City the final Official Statements for the Bonds with such additions and changes as may be deemed necessary or advisable Section 29. Amendments. (a) The City Council from time to time and at any time may pass an ordinance or ordinances supplemental hereof, which ordinance or ordinances thereafter shall become a part of this ordinance, for any one or more or all of the following purposes: (1) To add to the covenants and agreements of the City in this ordinance, other covenants and agreements thereafter to be observed, which shall not adversely affect the interests of the owners of any Bonds, or to surrender any right or power herein reserved. (2) To make such provisions for the purpose of curing any ambiguities or of curing, correcting or supplementing any defective provision contained in this ordinance in regard to matters or questions arising under such ordinances as the City Council may deem necessary or ORDINANCE NO. - 5313 desirable and not inconsistent with such ordinances and which shall not adversely affect, in any material respect, the interest of the owners of Bonds. In any such supplemental ordinance may be adopted without the consent of the owners of any Bonds at any time outstanding, notwithstanding any of the provisions of subsection (b) of this section. (b) With the consent of the owners of not less than sixty-five percent (65%) in aggregate principal amount of the Bonds at the time outstanding, the City Council may pass an ordinance or ordinances supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this ordinance or of any supplemental ordinance; provided, however, that no such supplemental ordinance shall: (1) Extend the fixed maturity of any Bonds, or reduce the rate of interest thereon, or extend the time of payment of interest from their due date, or reduce the amount of the principal thereof, or reduce any premium payable on the redemption thereof, without the consent of the Owner of each Bond so affected; or (2) Reduce the aforesaid percentage of Bondowners required to approve any such supplemental ordinance, without the consent of the owners of all of the Bonds then outstanding. It shall not be necessary for the consent of Bondowners under thls subsection (b) to approve the particular form of any proposed supplemental ordinance, but it shall be sufficient if such consent shall approve the substance thereof. For the purpose of consenting to amendments under this subsection (b), the Insurer shall be deemed to be the sole Registered Owner of the Bonds then outstanding. (c) Upon the adoption of any supplemental ordinance pursuant to the provisions of this Section, this ordinance shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations of the City under this ordinance and all owners of Bonds outstanding hereunder shall thereafter be determined, exercised and enforced thereunder, subject in all respects to such modifications and amendments, and all terms and conditions of any such supplemental ordinance shall be deemed to be part of the terms and conditions of this ordinance for any and all purposes. (d) Bonds executed and delivered afier the execution of any supplemental ordinance passed pursuant to the provisions of this section may have a notation as to any matter provided for in such supplemental ordinance, and if such supplemental ordinance shall so provide, new Bonds so modified as to conform, in the opinion of the City Council, to any modification of this ordinance contained in any such supplemental ordinance, may be prepared and delivered without cost to the owners of any affected Bonds then outstanding, upon surrender for cancellation of such Bonds in equal aggregate principal amounts. (e) Exclusion of Bonds Owned by City. Bonds owned or held by or for the account of the City shall not be deemed outstanding for the purpose of any vote or consent or other action or any calculation of outstanding Bonds in this ordinance provided for, and shall not be entitled to vote or consent or take any other action in this ordinance provided for. ORDINANCE NO. 5313 - (f) Bonds Held by Securities Repositories. For so long as the Bonds are held in book entry only form, communications with the owners shall be made with the securities depository who is the "Registered Owner" of the Bonds and communications with (and obtaining consents from) beneficial owners shall be made in accordance with the operational procedures of the securities depository that is the "Registered Owner" of the Bonds. Section 30. Contract: Savings Clause. The covenants contained in this ordinance and in the Bonds shall constitute a contract between the City and the Owner of each and every Bond. If any one or more of the covenants or agreements provided in this ordinance to be performed on the part of the City shall be declared by any court of competent jurisdiction and after final appeal (if any appeal be taken) to be contrary to law, then such covenant or covenants, agreement or agreements, shall be null and void and shall be deemed separable from the remaining covenants and agreements in this ordinance and shall in no way affect the validity of the other provisions of this ordinance or of the Bonds. Section 31. General Authorization: Ratification of Prior Acts. The Mayor, the City Finance Director and other appropriate officers of the City are authorized to take any actions and to execute documents as in their judgment may be necessary or desirable in order to carry out the terms of, and complete the transactions contemplated by, this ordinance. All acts taken pursuant to the authority of this ordinance but prior to its effective date are hereby ratified. Section 32. Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval and five days after publication. PASSED by the City Council this 22"* day of October, 2007. &d- 1Ja Bonnie Walton, City Clerk APPROVED BY THE MAYOR this 22" day of October, 2007 X& I&/ Kathy ~eolkkr, Mayor Approved as to Form: - - --7 ' -. . .. ~6nd Counsel Date of Publication: October 2,7 , 2007 ORDINANCE NO. 5313 - .EXHIBIT A Proiect Description Proceeds of the Bonds are expected to be used for the following Projects: Renton Village Storm System Improvement - planning, designing and constructing a storm system to increase capacity. Gypsy BasinIRipley Lane Storm System Improvement - replacing an existing culvert which will connect into a 60-inch storm system on the new Seahawks headquartersltraining facility site. SW 34th Street Culvert Replacement - replacing existing culvert to improve conveyance activity, reduce upstream flooding and improve fish passage. Hazen 565 Zone Reservoir - designing and constructing a 4.2 million gallon reservoir. Emergency Power to Pump Stations - installing emergency electrical power generation facilities. SummerwindIStougate Lift Station Replacement - constructing a new station to ensure sufficient capacity in a rapidly growing area. Central Plateau Interceptor Phase 2 - constructing an interceptor to serve eastern portion of service area. ORDINANCE NO. 5313 - EXHIBIT B Form of Bonds The Bonds shall be in substantially the following form: UNITED STATES OF AMERICA [statement of Insurance] No. STATE OF WASHINGTON CITY OF RENTON WATER AND SEWER REVENUE [AND REFUNDING] BOND, [SERIES][2007/2008] [ABI[(TAXABLE)I INTEREST RATE: MATURITY DATE: CUSIP NO.: REGISTERED OWNER: CEDE & Co. PRWCIPAL AMOUNT: The City of Renton, Washington, a municipal corporation organized and existing under and by virtue of the laws of the State of Washington (herein called the "City") hereby acknowledges itself to owe and for value received promises to pay, but only from the sources and as hereinafter provided, to the Registered Owner identified above, or registered assigns, on the Maturity Date identified above, the Principal Amount indicated above and to pay interest thereon from the date of delivery, or the most recent date to which interest has been paid or duly provided for, at the Interest Rate set forth above, payable on , 20-, and semiannually thereafter on the first days of each December and June until such principal sum is paid or payment has been duly provided for. Both principal of and interest on tlus bond are payable in lawful money of the United States of America. Interest and principal shall be paid as provided in the Blanket Issuer Letter of Representations (the "Letter of Representations") by the City to The Depository Trust Company ("DTC"). The fiscal agency of the State of Washington has been appointed by the City as the authenticating agent, paying agent and registrar for the bonds of this issue (the "Bond Registrar"). Capitalized terms used in this bond that are not specifically defined have the meanings given such terms in Ordinance No. 5313 of the City adopted on October 22, 2007 and Resolution No. - of the City adopted on , 20- (together, the "Bond Ordinance"). Reference is made to the Bond Ordinance and any and all modifications and amendments thereto for a description of the nature and extent of the security for the bonds of this issue, the funds or revenues pledged, and the terms and conditions upon which such bonds are issued. ORDINANCE NO. 5313 This bond is one of an authorized issue of bonds of the City of like date and tenor except as to number, amount, rate of interest and date of maturity in the aggregate principal amount of $ . This issue of bonds is authorized by the Bond Ordinance for the purposes of providing money to pay part of the cost of construction and acquisition of certain improvements to the Waterworks Utility[, refund certain outstanding water and sewer revenue bonds of the City], fund the Reserve Fund, and to pay costs of issuance of the bonds of this issue, all as specified in the Bond Ordinance. [Simultaneously with the issuance of this bond, the City is also issuing its Water and Sewer Revenue Bonds, Series 2008[AB][(Taxable)] for the purposes specified in the Bond Ordinance.] This bond and the bonds of this issue are payable solely from the special funds of the City defined as the "Bond Fund" and the "Reserve Fund" in the Bond Ordinance. The City has irrevocably obligated and bound itself to pay into the Bond Fund out of the Net Revenue or from such other moneys as may be provided therefor certain amounts necessary to pay and secure the payment of the principal and interest on such bonds. The bonds of this issue are not general obligations of the City. [The bonds of this issue are not "private activity bonds" as such term is defined in the Internal Revenue Code of 1986, as amended (the "Code"). The bonds of this issue have been designated by the City as "qualified tax-exempt obligations" under Section 265(b) of the Code.] The bonds of this issue are issued under and in accordance with the provisions of the Constitution and applicable statutes of the State of Washington and duly adopted ordinances of the City. The City hereby covenants and agrees with the owner of this bond that it will keep and perform all the covenants of this bond and of the Bond Ordinance to be by it kept and performed, and reference is hereby made to the Bond Ordinance for a complete statement of such covenants. The City does hereby pledge and bind itself to set aside from the Waterworks Utility Fund out of the revenue of the Waterworks Utility and to pay into the Bond Fund and the Reserve Fund the various amounts required by the Bond Ordinance to be paid into and maintained in such Funds, all within the times provided by the Bond Ordinance. To the extent more particularly provided by the Bond Ordinance, the amounts so pledged to be paid from the Waterworks Utility Fund out of the revenue of the Waterworks Utility into the Bond Fund and the account therein shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the amounts required to pay and secure the payment of the outstanding 1998 Bonds, the 2002 Bonds, the 2003 Bonds, [and] the 2004 Bonds[, and the 2007 Bonds] and any revenue bonds of the City hereafter issued on a parity with the bonds of this issue and superior to all other liens and charges of any kind or nature except Maintenance and Operation Expense. The pledge of Net Revenue and other obligations of the City under the Bond Ordinance may be discharged at or prior to the maturity or redemption of the bonds of this issue upon the making of provision for the payment thereof on the terms and conditions set forth in the Bond Ordinance. ORDINANCE NO. 5313 - The bonds of this issue are subject to redemption prior to their scheduled maturities as provided in the Bond Ordinance. This bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Ordinance until the Certificate of Authentication hereon shall have been manually signed by the Bond Registrar. It is hereby certified that all acts, conditions, and things required by the Constitution and statutes of the State of Washington to exist, to have happened, been done, and performed precedent to and in the issuance of this bond have happened, been done, and performed. IN WITNESS WHEREOF, the City of Renton, Washington has caused this bond to be signed with the facsimile or manual signature of the Mayor, to be attested by the facsimile or manual signature of the City Clerk, all as of this - day of ,20-. CITY OF RENTON, WASHNGTON BY 1st facsimile or manual Mayor ATTEST: IS/ facsimile or manual City Clerk The Bond Registrar's certificate authentication on the Bonds shall be in substantially the following form: CERTIFICATE OF AUTHENTICATION Date of Authentication: , 20 - This bond is one of the bonds described in the within-mentioned Bond Ordinance and is one of the Water and Sewer Revenue [and Refunding] Bonds, [Series][2007/2008] [A/B][(Taxable)] of the City of Renton, Washington, dated ,20-. WASHINGTON STATE FISCAL AGENCY, Registrar BY Authorized Signer CERTIFICATE REGARDING ORDINANCE I, Bonnie I. Walton, City Clerk of the City of Renton, Washington (the "City"), do hereby certify: 1. That the attached Ordinance No. 53 13 (the "Ordinance") is a true and correct copy of an ordinance of the City Council, as finally adopted at a regular meeting of the City Council held on October 22, 2007, and duly recorded in my office, and that such Ordinance has not been amended or superseded. 2. That the meeting was duly convened and held in all respects in accordance with law, and to the extent required by law, due and proper notice of the meeting was given; that a legal quorum was present throughout the meeting and a legally sufficient number of members of the City Council voted in the proper manner for the adoption of the Ordinance; that all other requirements and proceedings incident to the proper adoption of the Ordinance have been duly fulfilled, canied out and otherwise observed; and that I am authorized to execute this certificate. Dated this 6th day of November, 2007. !&,wLU'd. 1J& Bonnie I. Walton, City Clerk City of Renton, Washington CERTIFICATE I, Bonnie I. Walton, City Clerk of the City of Renton, Washington, do hereby certify that the attached is a full, true and correct copy of the minutes of the October 15, 2007 regular meeting of the City Council which reflect the first reading of Ordinance No. 5313 (the "Bond Ordinance"). Dated this 4th day of January, 2008. b\d d* Bonnie I. Walton, City Clerk City of Renton, Washington RENTON CITY COUNCIL Regular Meeting October 15, 2007 Monday, 7 p.m. CALL TO ORDER ROLL CALL OF COUNCILMEMBERS CITY STAFF IN ATTENDANCE SPECIAL PRESENTATION EDNSP: 2007 Neighborhood Program PUBLIC MEETING EDNSP: Downtown Wayfinding System MINUTES Council Chambers Renton City Hall Mayor Kathy Keolker called the meeting ofthe Renton City Council to order and led the Pledge of Allegiance to the flag. TONI NELSON, Council President; RANDY CORMAN; DON PERSSON; MARCIE PALMER; TERRl BRIERE; DENIS LAW; DAN CLAWSON. KATHY KEOLKER, Mayor; JAY COVINGTON, Chief Administrative Officer; LAWRENCE J. WARREN, City Attorney; BONNIE WALTON, City Clerk; GREGG ZIMMERMAN, Planning/Building/Public Works Administrator; ALEX PIETSCH, Economic Development Administrator; SUZANNE DALE ESTEY, Econonlic Development Director; JENNIFER DAVIS-HAYES, Development Manager; NORMA MCQUILLER, Neighborhood Program Coordinator; DEBORAH NEEDHAM, Emergency Management Director; DEPUTY CHIEF ROBERT VAN HORNE, Fire Department; COMMANDER CHARLES MARSALISI, Police Department. Neighborhood Program Coordinator McQuiller reported on the Neighborhood Program, saying that five new neighborhoods were added to the program for a total of 34 officially recognized neighborhoods. She noted the participation of the City employees who volunteer as neighborhood liaisons, and the participation of more than 1,800 residents representing 22 neighborhoods who attended the 14 neighborhood picnics held during 2007. Ms. McQuiller stated that more than $75,000 in neighborhood grants were awarded in the first halfof 2007 for eight neighborhood projects and two newsletters. The budgeted amount is $50,000, but funds in the amount of $33,000 were carried over from the 2006 fund balance. She indicated that a second round of funding was just conducted for the remaining $7,000. Ms. McQuiller displayed photographs of the neighborhood projects, and in acknowledgement of the project grants that were awarded, Mayor Keolker and Council President Nelson presented certificates to representatives of the neighborhood groups. Mayor Keolker expressed appreciation to Ms. McQuiller for all her hard work, and Councilmember Persson recognized the participation of her family. This being the date set and proper notices having been posted and published in accordance with local and State laws, Mayor Keolker opened the public meeting to consider the signs, design, and color scheme for the downtown wayfinding system that will improve the system of signage into and around downtown ...' ,.,...... (. ... Renton. '..,..."OF .P CE," .,, CERTIFjC,&,TE . . -....% eu.&lopment Manager Davis-Hayes explained that at the open house, held prior . the ""dersignkd city Clp>..bftk L '@the Council meeting, citizens provided feedback on the wayfinding system. s '. :ity of ~~~t~~, washingtgnj M~ Those comments, as well as other comments received via the City's website, hat this is a true and correctc$f4b -$&farwarded to the Council. MS. Davis-Hayes reported that the next steps of 10/15/07 Minutes , subscribd ..the project are to finalize the design, and begin to install the advance directional 2dvf~20@i$fls along Logan and Rainier Avenues South. W.D,.:..~+I;'~blic comment was invited. City C:ler!r Bcnnie I. Wtcn October 15. 2007 ADMINISTRATIVE REPORT AUDIENCE COMMENT Citizen Comment: Knickerbocker - North Renton Neighborhood CONSENT AGENDA Council Meeting Minutes of 10/8/2007 Renton City Council Minutes Page 359 Angela Laulainen (Renton) stated that she agrees with the placement of the signs to direct traffic down Logan Ave. S., and with the look of the signs. She voiced her hope that the signs will all be in place in time for an unveiling at the next Renton River Days festival. Rod Stewart (Renton) said he owns an antique store in Renton and encouraged the City to move forward with this project. He noted the importance of directing people from The Landing to downtown Renton and vice versa. Pat Pepper (Black Diamond) stated that she is involved with the Evergreen City Ballet and is the chair of the Renton Municipal Arts Commission. She indicated that the signs are invitational, informative, beautiful, and durable; reflective of the designers' research; and reflective of the flavor of the City. Ms. Pepper noted that the wayfinding system will expand as Renton grows and strengthen Renton as an interactive community. Linda Middlebrooks (Renton) suggested that Renton follow the lead of other communities and install a permanent sign for its farmers market. Bill Taylor (Renton) commended the City's decision to install a wayfinding system, and encouraged the swift completion of the much needed system. Councilmember Persson pointed out that the Council has already authorized the expenditure for the downtown wayfinding system. There being no further public comment, it was MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL CLOSE THE PUBLIC MEETING. CAmlED. Councilmembers Corman and Clawson commented on the need for signs directing people to 1-405, and the need to move forward with working on the I- 405 signage with the Washington State Department of Transportation. Mayor Keolker stated that the Administration will pursue this, and will also review what can be done in conjunction with the wayfinding signs. Chief Administrative Officer Covington reviewed a written administrative report summarizing the City's recent progress towards goals and work programs adopted as part of its business plan for 2007 and beyond. Items noted included: rB A community art project entitled "Cedar Salmon" and sponsored by Friends ofthe Cedar River Watershed is on display at the Renton Public Library now through November 3. rB The second edition of the Renton Community Marketing Campaign's television show called "The Curve" is now airing on cable channel 21 and is available via streaming video at www.rentonwa.gov. The show features segments highlighting Renton businesses, trends, and happenings. Jennifer Knickerbocker (Renton) thanked Planning Manager Rebecca Lind for answering her questions and addressing her concerns re arding the North Renton neighborhood in which she resides. r3A .... .,.. $C. .. . . . Items on the consent agenda are adopted by one motioa whichfo!lows the . - .. listing. Approval of Council meeting minutes of 10/8/2007. Council concur. : .II 0- " October 15, 2007 Renton City Council Minutes Page 360 Appointment: Library Board City Clerk: Quarterly Contract List, 712007 to 912007 CAG: 07- 156, Fire Station #l l Fire Sprinkler System, Ace Fire Protection Systems Court Case: First Mercury Insurance Company, CRT-07- 010 Development Services: Hoquiam Court Short Plat, ROW Dedication, NE 8th St, SHP-05-099 Annexation: Marshall, Duvall Ave NE & NE Sunset Blvd Finance: Finance Analyst Position, Temporarily Fill as Full Time CAG: 03-1 3 1, Duvall Ave NE Improvements, BergerIAbam Engineers Utility: Capital Expenditures Funding, Budget Amend UNFINISHED BUSINESS Committee of the Whole Legal: Settlement Agreement, Plat Application, MT Development Finance: Bond Issuance, Utility Capital Projects Mayor Keolker appointed Catherine Ploue-Smith to the Library Board for a five-year term expiring on 61112012. Refer to Community Services Committee. City Clerk submitted Quarterly Contract List for period of 71112007 to 913012007; 42 contracts and 17 addenda totaling $12,961,116.66. Information. City Clerk reported bid opening on 101312007 for CAG-07-156, Fire Station #I l Fire Sprinkler System; two bids; engineer's estimate $70,000; and submitted staff recommendation to award the contract to the low bidder, Ace Fire Protection Systems, Inc., in the amount of $28,959.13. Refer to Finance Committee. Court Case filed on behalf of First Mercury Insurance Company by Lee Smart, P.S., Inc. related to the claim filed on the First Mercury policy for damage to self-storage units on NE Sunset Blvd. as a result of sewer discharge that occurred in November 2006 during Sanders General Construction's work on City contract CAG-05-165. Refer to City Attorney and Insurance Services. Development Services Division recommended acceptance of a deed of dedication for additional right-of-way in the vicinity of NE 8th St. and Hoquiam Ave. NE to fulfill a requirement of the Hoquiam Court Short Plat. Council concur. Economic Development, Neighborhoods and Strategic Planning ~epartment recommended a public hearing be set on 11/5/2007 to consider the proposed Marshall Annexation and R-8 zoning of the 7.6-acre site located west of Duvall Ave. NE and north of NE Sunset Blvd. Council concur. Finance and lnforn~ation Services Department recommended approval to temporarily fill a half-time Finance Analyst position with a full-time employee until 313 112008. Refer to Finance Committee. Transportation Systems Division requested approval of Supplemental Agreement No. 7 to CAG-03-131, agreement with BergerlAbam Engineers, inc., for services in the amount of $386,000 for the Duvall Ave. NE Widening I Project. Refer to Transoortation (Aviation) Committee. Utility Systems Division recommended approval to transfer $1,800,000 from Water Utility Fund 405 to Fund 425; $963,000 from Wastewater Utility Fund 406 to Fund 426; and $410,000 from Surface Water Utility Fund 407 to Fund 427 for the funding of utilities capital expenditures. Refer to Finance Committee. MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL APPROVE THE CONSENT AGENDA AS PRESENTED. CARRIED. Council President Nelson presented a Committee of the Whole report regarding the settlement agreement with MT Development. The Committee recommended that Council authorize the settlement of the MT Development lawsuit (CRT-05-011) as outlined in the agenda bill (dated 1018/2007). MOVED BY NELSON, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Council President Nelson presented a Committee of the Whole report recommending concurrence in the staff recommendation to issue bonds in the approximate amount of $21.2 million to finance the cost of construction of various capital projects within the utility systems as well as to refinance outstanding bonds to lower overall costs. The Committee further recommended ! that the ordinance regarding this matter be presented for first reading. MOVED Public Safety Committee Police: Regional Misdemeanant Jail Facility RESOLUTIONS AND ORDINANCES Finance: Bond Issuance, Utility Capital Projects Ordinance #5312 Fire: Defibrillators & Renton Heart Month Campaign Funding, Budget Amend NEW BUSINESS Citizen Comment: Campbell - Junk Vehicles Renton City Council Minutes Page 361 BY NELSON, SECONDED BY CLAWSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See later this page for ordinance.) Public Safety Committee Chair Law presented a report regarding the misdemeanant jail facility study. There is insufficient space for misdemeanant inmates in King County and the City of Renton has been unable to secure additional beds in the quantity that are needed from contract providers. Additionally, all of the cities in King County have a contractual obligation to remove misdemeanor inmates from King County Jail by 1213 112012. The combination of these challenges is forcing cities to look at alternatives forjail needs. As a result of these conditions, Renton is joining with the cities of Des Moines, Tukwila, and Federal Way to fund a feasibility study in the amount of $161,000 to examine the feasibility of the construction and operation of a 500-bed multi- jurisdictional misdemeanant jail facility. The City of Renton is acting as the lead agency and will execute the contract with DLR Group. Renton's financial contribution to the study is $78,890. The Committee recommended concurrence in the staff recommendation to contract with DLR Group to complete the feasibility study. The Committee also recommended preparation of the resolution for reading and adoption at the next Council meeting authorizing the interlocal agreement between the cities to pay for the feasibility study. MOVED BY LAW, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. The following ordinance was presented for first reading and referred to the Council meeting of 10122/2007 for second and final reading: An ordinance was read authorizing the issuance of three series of water and sewer revenue bonds of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, in the aggregate principal amounts of not to exceed $10,000,000, $10,000,000 and $3,000,000, respectively; providing the form, terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle- Northwest Securities Corporation, Seattle, Washington. MOVED BY CLAWSON, SECONDED BY BRIERE, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 1012212007. CARRIED. The following ordinance was presented for second and final reading and adoption: An ordinance was read amending the 2007 Budget by using $29,200 from Fund 010 fund balance for the purpose of funding the City of Renton's 2007 and 2008 Renton Heart Month campaigns ($19,200) and for purchasing six public access defibrillators ($10,000). MOVED BY LAW, SECONDED BY CORMAN, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. Councilmember Persson noted receipt of an e-mail from Alan Campbell (Renton) regarding the prevalence ofjunk vehicles parked on lots and on the streets in the Highlands area. He referred the matter to the Administration. October 15, 2007 Renton City Council Minutes Page 362 Planning: Low Impact Councilmember Clawson encouraged attendance at the upcoming CH2M Hill Development Regulations workshop for elected officials regarding low impact development, noting that the matter has been referred to the Planning and Development Committee. ADJOURNMENT MOVED BY PERSSON, SECONDED BY NELSON, COUNCIL ADJOURN. CARRIED. Time: 7:54 p.m. Bonnie I. Walton, CMC, City Clerk Recorder: Michele Neumann October 15, 2007 RENTON CITY COUNCIL COMMITTEE MEETING CALENDAR Office of the City Clerk COUNCIL COMMITTEE MEETINGS SCHEDULED AT CITY COUNCIL. MEETING October 15,2007 I COMMITTEEICHAIRMAN DATEtTIME AGENDA COMMITTEE OF THE WHOLE MON., 10122 Beclan Place Preliminary Plat Appeal; (Nelson) 5 p.m. Utility Revenue Bond Sale Results; Benson Hill Interlocal Agreement Briefing COMMUNITY SERVICES (Corman) FINANCE (Persson) MON., 10122 Issaquah and Kent School District Impact 3:15 p.m. Fees; Temporary Finance Analyst Position; Fire Station #11 Fire Sprinkler System Bid Award; Funding for Utilities Capital Expenditures; Vouchers PLANNING & DEVELOPMENT THURS., 10118 CANCELLED (Briere) PUBLIC SAFETY (Law) TRANSPORTATION (AVIATION) WED., 101 17 Duvall Ave. NE Widening Project (Palmer) 4 p.m. Supplemental Agreement; Local and Regional Transportation Issues Update UTILITIES (Clawson) THURS., 1011 8 CANCELLED NOTE: Committee of the Whole meetings are held in the Council Chamben unless otherwise noted. All other committee meetings are held in rhe Council Conference Room unless otherwise noted. CERTIFICATE I, Bonnie I. Walton, City Clerk of the City of Renton, Washington, do hereby certify that the attached is a full, true and correct copy of the minutes of the October 22, 2007 regular meeting of the City Council which reflect the second reading and passage of Ordinance No. 53 13 (the "Bond Ordinance"). Dated this 4th day of January, 2008. \A. bJ& Bonnie I. Walton, City Clerk City of Renton, Washington RENTON CITY COUNCIL Regular Meeting October 22,2007 Monday, 7 p.m. MINUTES Council Chambers Renton City Hall CALL TO ORDER Mayor Kathy Keolker called the meeting of the Renton City Council to order and led the Pledge of Allegiance to the flag. ROLL CALL OF TONI NELSON, Council President; RANDY CORMAN; DON PERSSON; COUNCILMEMBERS MARCIE PALMER; DENIS LAW; DAN CLAWSON. MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL EXCUSE ABSENT COUNCILMEMBER TERN BRIERE. CARRIED. CITY STAFF IN KATHY KEOLKER, Mayor; JAY COVINGTON, Chief Administrative ATTENDANCE Officer; ZANETTA FONTES, Assistant City Attorney; BONNIE WALTON, City Clerk; MARTY WINE, Assistant CAO; GREGG ZIMMERMAN, Planning/Building/Public Works Administrator; ALEX PIETSCH, Economic Development Administrator; TERRY HIGASHIYAMA, Community Services Administrator; MIKE WEBBY, Human Resources Administrator; GERALD RERECICH, Recreation Director; PREETI SHRIDHAR, Communications Director; SONJA MEJLAENDER, Community Relations & Event Coordinator; DEPUTY CHIEF ROBERT VAN HORNE and BATTALION CHIEFISHIFT COMMANDER KRIS HANSON, Fire Department; COMMANDER KATIE MCCLINCY, Police Department. PROCLAMATION A proclamation by Mayor Keolker was read declaring the day of October 27, Make a Difference Day - 2007, to be "Make a Difference Day" in the City of Renton, and urging fellow 10/27/2007 citizens to observe this day by connecting with friends, fellow employees, and relatives, and with religious, school, and civic groups to engage in projects benefiting the community. MOVED BY NELSON, SECONDED BY PALMER, COUNCIL CONCUR IN THE PROCLAMATION. CARRIED. SPECIAL PRESENTATION Community Relations & Event Coordinator Sonja Mejlaender introduced Vicki Community Event: Renton Hart, IKEA Renton River Days Board of Directors Chairman, who presented a River Days Wrap Up Report report on the 2007 City of Renton community festival held during the week of July 25 through July 29. Ms. Hart thanked the City of Renton, sponsors and contributors, the media partners, and the Renton service clubs for their support and assistance. She reviewed the festival events, activities, entertainment, and exhibitions that took place, such as Kids' Day, the Chalk Art Contest, Nibble of Renton, and the Boatstock and Wakeboard Invitational. In conclusion, Ms. Hart expressed her appreciation for the many volunteers who contributed over 7,000 hours in planning for and assisting with the festival. APPEAL Council President Nelson reported that the appeal had been heard during the Committee of the Whole preceding Committee of the Whole meeting and the Committee report will be Report - Appeal: Beclan Place presented at the 1 1/5/2007 Council meeting. Preliminary Plat, Steve Beck, PP-07-04 1 ......'""' ADMINISTR&~~YER C* Chief Administrative Officer Covington reviewed a written administrative RT. ....'. .'. @~~FIL.&&.-.. . - adopted as part of its business plan for 2007 and beyond. Items noted included: ,- report summarizing the City's recent progress towards goals and work programs . the undersigned cikel r f he ;itr of ~~~m~, Warhingt&ghfy j * Children ages 2 to 8 years. accompanied by an adult, are invited to the annual Boo Carnival on Saturday, October 27, from 10:OO a.m. to 12:30 p.m., for a spirited time of crafts, games, and inflatables. City C!erk October 22,2007 Renton City Council Minutes Page 369 AUDIENCE COMMENT Citizen Comment: Roberts - 200712008 Women of the Year Award Citizen Comment: McOmber - Emergency Preparedness Citizen Comment: Puckett - Wonderland Estates Mobile Home Park, Annexation CONSENT AGENDA Council Meeting Minutes of 10/15/2007 AJLS: Human Resources/Risk Management Administrator Recruitment, Waldron & Company Court Case: Meagan K. Norlin, CRT-07-011 Utility: Oversizing Reimbursement for Sanitary Sewer Lift Station, Skochdopole Finance: 2006 State of Washington Audit Report Community Services: Holiday Lights Program, Sun Lighting &, A community art project entitled Cedar Salmon and sponsored by Friends of the Cedar River Watershed is on display at the Renton Public Library now through November 3. The project involves ten life-sized salmon silhouettes created from cedar planks by local artists, which will be displayed at a series of sites along the salmon's migration route from Puget Sound to the Cedar River Education Center in North Bend. Irene Roberts (Renton), President, National Federation of Business and Professional Women's Organization - Renton Chapter, presented the 2007/2008 Women of the Year Award to Mayor Keolker for her dedication and leadership toward the betterment of the community. Ms. Roberts encouraged women members of Council and the audience to join the Renton chapter of the organization. Mayor Keolker thanked Ms. Roberts for the award. Howard McOmber (Renton) invited members of Council and the public to attend an emergency preparedness class being held at the Highlands Neighborhood Center, 800 Edmonds Ave. NE, on November 14,2007 at 7.90 p.m. Mr. McOmber reflected on last year's power outage and stressed the importance of being prepared during an emergency. Jerry Puckett (Sea-Tac) expressed his continued support for the proposed annexation of the area surrounding the Wonderland Estates Mobile Home Park. He announced that King County Housing Authority had signed a purchase and sale agreement for the park and inquired about the progress of the annexation effort. Items on the consent agenda are adopted by one motion which follows the listing. At the request of Councilmember Law, item 8.c. was removed for separate consideration. Approval of Council meeting minutes of 1011512007. Council concur Administrative, Judicial and Legal Services Department recommended approval of an agreement in the amount of $25,500 with Waldron & Company for services related to the recruitment and selection of the Human ResourcesIRisk Management Administrator position. Council concur. Court Case filed in King County District Court - East Division by Meagan K. Nodin, who seeks compensation in the amount of $196.02 for damage to windshield allegedly caused by errant golf ball from Maplewood Golf Course. Refer to City Attomev and Insurance Services. City Clerk submitted request by John R. "Barney" Skochdopole for reimbursement in the amount of $259,944 for oversizing a sanitary sewer lift station, serving a new neighborhood across the street from Maplewood Heights Elementary School, at the City's request. Refer to Utilities Committee. City Clerk submitted the 2006 Washington State Auditor's Office Audit Report for the period of January 1 through December 3 I, 2006. Information. Community Services Department recommended approval of a contract in the amount of $69,385 with Sun Lighting for the 2007/2008,Holi4,&y Lights Program. Council concur. .. .!. . : i I r October 22, 2007 CAG: 06-165, Tiffany Park Activity Building, Danneko Construction Budget: 2008, Annual City of Renton Plat: Benson Ridge, Benson Rd S & Cedar Ave S, PP-07- 056 Airport: Lane Hangar Condominium Owners' Association Lease, Addendum #3, LAG-99-003 Airport: AT&T Lease, Addendum #4, PAG-001-87 Transportation: Sounder Transit Tukwila Station, WSDOT Mobility Grant CAG: 06-065, Rainier Ave S Improvements (4th PI to 7th) Design, DMJM Harris Utility: Hazen 565-Zone Reservoir Inspection Services, Otto Rosnau &Associates Separate Consideration Item 8.c. Annexation: Benson Hill Communities, S 200th St & 128th Ave SE UNFINISHED BUSINESS Committee ofthe Whole Finance: Bond Issuance, Utility Capital Projects Renton City Council Minutes Page 370 Community Services Department submitted CAG-06-165, Tiffany Park Activity Building; and requested approval of the project, authorization for final pay estimate in the amount of $1,125.61, commencement of the 60-day lien period and release of the retained amount of $22,577.79 to Danneko Construction, contractor, if all required releases are obtained. Council concur. Finance and Information Services Department recommended a public hearing be set on 11/19/2007 to consider 2008 Revenue Sources and Preliminary Budget, and a public hearing be set on 12/3/2007 to consider the 2008 Budget. Refer to Committee of the Whole; set public hearing dates on 11/19/2007 and 12/3/2007. Hearing Examiner recommended approval, with conditions, of the Benson Ridge Preliminary Plat; nine-lot subdivision totaling 1.72 acres located at 3401 Benson Rd. S. and 3451 Cedar Ave. S. Council concur. Transportation Systems Division reco.mmended approval of an addendum to airport lease LAG-99-003 with Lane Hangar Condominium Owners' Association, to increase the ground rate from $13,597 to $15,181.32 annually, which will remain in effect through 7/31/2010. Council concur. Transportation Systems Division recommended approval of an addendum to airport lease PAG-001-87 with AT&T, to increase the rate from $10,533.14 to $17,287.33 annually, to remain in effect until 10/31/2012. Council concur. Transportation Systems Division recommended approval of the Regional Mobility Grant with Washington State Department of Transportation to accept funds in the amount of $5,500,000 for the Sounder Transit Tukwila Station project. Council concur. (See page 372 for resolution.) Transportation Systems Division recommended approval of Supplemental Agreement No. 2 to CAG-06-065, agreement with DMJM Hamis, in the amount of $433,889 for design services for the stormwater diversion pipe in Shattuck Ave. S. from S. 4th PI. to SW 7th St. Council concur. Utility Systems Division recommended approval of an agreement with Otto Rosnau & Associates, Inc. in the amount of $79,187 for inspection and material testing services for the Hazen 565-Zone Reservoir project. Council concur. MOVED BY NELSON, SECONDED BY PERSSON, COUNCIL APPROVE THE CONSENT AGENDA AS AMENDED TO REMOVE ITEM 8.c. FOR SEPARATE CONSIDERATION. CARRIED. Administrative, Judicial and Legal Services Department recommended approval of an agreement with King County regarding transfer of properties, effective annexation date and availability of $1.7 million in the event of an affirmative vote for the Benson Hill Communities Annexation. MOVED BY LAW, SECONDED BY CORMAN, COUNCIL REFER CONSENT AGENDA ITEM 8.c. TO COMMITTEE OF THE WHOLE. CARRIED. Council President Nelson presented a Committee of the Whole report recommending concurrence in the staff recommendation to adopt a resolution authorizing the sale of Water and Sewer Revenue and Refunding Bonds, 2007, in the aggregate amount of $9,750,000, specifying the par amount, terms, interest rates, redemption provisions, and insurance language. The Committee further recommended that the resolution be adopted immediately following the adoption of the 2007 Water and Sewer Revenue and Refunding Bonds ordinance. October 22, 2007 Finance Committee Finance: Vouchers Finance: Issaquah and Kent School District Impact Fees Finance: Temporary Finance ~nal~st Position Finance: Fund Transfers, Utilities Capital Expenditures, Budget Amend Finance: Fire Station #I 1 Sprinkler System Bid Award Transoortation (Aviation) Committee Transportation: Duvall Ave NE Improvements, BergerIAbam Engineers Renton City Council Minutes Page 371 MOVED BY NELSON, SECONDED BY CLAWSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See page 372 for ordinance and resolution.) Finance Committee Chair Persson presented a report recommending approval of Claim Vouchers 265076 - 265553 and two wire transfers totaling $3,681,922.96; and approval of 133 Payroll Vouchers, one wire transfer, and 680 direct deposits totaling $2,166,325.41. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance Committee Chair Persson presented a report recommending adoption of the 2007 Issaquah School District Capital Facilities Plan, including an impact fee of $6,021 per new single-family unit. The Committee also recommended that the City adopt the 2007-2008 - 2012-2013 Kent School District Capital Facilities Plan, including an impact fee of $5,110 per new single-family unit and an impact fee of $3,146 per new multi-family unit. The Committee further recommended that an ordinance regarding this matter be prepared and presented for first reading. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance Committee Chair Persson presented a report recommending concurrence in the staff recommendation to approve temporarily filling a half time Finance Analyst position with a full time employee effective November 1, 2007, and terminating March 3 1,2008. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance Committee Chair Persson presented a report recommending concurrence in the staff recommendation to approve the ordinance authorizing transfers of $1,800,000 from Water Utility Fund 405 to Fund 425; $963,000 from Wastewater Utility Fund 406 to Fund 426; and $410,000 from Surface Waster Utility Fund 407 to Fund 427. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See page 372 for ordinance.) Finance Committee Chair Persson presented a report recommending concurrence in the staff recommendation to award the Fire Sprinkler System for Renton Fire Station #I 1 project to the lowest bidder, ACE Fire Protection, Inc., in the amount of $28,959.13. The Committee had reviewed the minor informalities associated with the lowest bidder. The Committee further recommended that the Mayor and City Clerk be authorized to the sign the contract. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Transportation (Aviation) Committee Chair Palmer presented a report recommending concurrence in the staff recommendation to authorize the Mavor and City Clerk to execute Supplemental Agreement #7 with BergerIAbam, Inc. in the amount of $386,000, and extend the completion date from April 30, 2007 to December 3 1,2008. MOVED BY PALMER, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Ms. Palmer noted that due to project delays the effective date for the Merritt I1 Annexation might have to be extended in order to receive funding from King County. October 22, 2007 RESOLUTIONS AND ORDINANCES Resolution #3910 Transportation: Sounder Transit Tukwila Station, WSDOT Mobility Grant Resolution #3911 Police: Regional Misdemeanant Jail Facility, Interlocal Agreement Finance: Fund Transfers, Utilities Capital Expenditures, Budget Amend Ordinance #5313 Finance: Bond Issuance, Utility Capital Projects Added RESOLUTION #3912 Finance: Bond Issuance, Utility Capital Projects EXECUTIVE SESSION AND ADJOURNMENT Renton City Council Minutes Page 372 The following resolutions were presented for reading and adoption: A resolution was read authorizing the Mavor and Citv Clerk to enter into an interlocal cooperative agreement with the Washington State Department of Transportation entitled "Public Transportation Regional Mobility Grant Program State Funding Agreement Work by Public Agencies." MOVED BY PERSSON, SECONDED BY PALMER, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. A resolution was read authorizing the Mayor and Citv Clerk to enter into an interlocal agreement with the Cities of Des Moines, Federal Way, and Tukwila for a feasibility study for the construction and operation of a misdemeanant jail facility. MOVED BY LAW, SECONDED BY NELSON, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. The following ordinance was presented for first reading and referred to the Council meeting of 1 1/5/2007 for second and final reading. An ordinance was read amending the 2007 Budget by transferring funds in the amount of $3,173,000 from the 2006 year-end fund balance for the purpose of funding capital expenditures by Water, Wastewater, and Surface Water Utilities. MOVED BY PERSSON, SECONDED BY CLAWSON, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 11/5/2007. CARRIED. The following ordinance was presented for second and final reading and adoption: An ordinance was read authorizing the issuance of three series of water and sewer revenue bonds of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, in the aggregate principal amounts of not to exceed $10,000,000, $10,000,000 and $3,000,000, respectively; providing the form, terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle- Northwest Securities Corporation, Seattle, Washington. MOVED BY CLAWSON, SECONDED BY PERSSON, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. In conjunction with the bond ordinance approved above, a resolution was read approving the sale of the City's Water and Sewer Revenue and Refunding Bonds, 2007, in the aggregate principal amount of $9,750,000 to provide funds for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City; and approving the sale of such bonds to Seattle-Northwest Securities Corporation, all in accordance with Ordinance No. 5313 of the City. MOVED BY CLAWSON, SECONDED BY NELSON, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL RECESS INTO EXECUTIVE SESSION FOR APPROXIMATELY 30 MINUTES TO DISCUSS POTENTIAL LITIGATION WITH NO OFFICIAL ACTION TO BE TAKEN AND THAT THE COUNCIL MEETING BE ADJOURNED WHEN THE EXECUTIVE SESSION IS ADJOURNED. CARRIED. Time: 750 p.m. October 22, 2007 Renton City Council Minutes Page 373 Executive session was conducted. There was no action taken. The executive session and the Council meeting adjourned at 756 p.m. b J. LJdz%-' Bonnie I. Walton, CMC, City Clerk Recorder: Jason Seth October 22,2007 RENTON CITY COUNCIL COMMITTEE MEETING CALENDAR Office of the City Clerk COUNCIL COMMITTEE MEETINGS SCHEDULED AT CITY COUNCIL MEETING October 22,2007 I COMMITTEEICHAIRMAN DATEITIME AGENDA COMMITTEE OF THE WHOLE MON., 10129 No Meeting (5th Monday) (Nelson) MON., 1115 3rd Quarter Financial Report; 6:00 p.m. 2008 Revenue Estimates; Benson Hill Interlocal Agreement COMMUNITY SERVICES MON., 1115 Catherine Ploue-Smith Appointment to (Corman) 5:30 p.m. Library Board; Cominunity Services Aquatics and Fees (briefing only) FINANCE (Persson) MON., 1115 Vouchers 5:00 p.m. PLANNING & DEVELOPMENT THURS., 1111 CANCELLED (Briere) PUBLIC SAFETY (Law) MON.. 1115 CANCELLED TRANSPORTATION (AVIATION) WED., 10124 Airport Leasing Policy (Palmer) 4 p.m. UTILITIES (Clawson) THURS., 1111 Conner Homes' Request for Oversizing 3:00 p.m. Reimbursement NOTE: Cornminee of the Whole mcetings are held in the Council Chambers unless otherwise noted. AU other committee meetings are held in the Council Conference Rwm unless otherwise noted. CITY OF RENTON, WASHINGTON RESOLUTION NO. 391 9 A RESOLUTION of the City Council of the City of Renton, Washington, approving the sale of the City's Water and Sewer Revenue Bonds, Series 2008A, and Water and Sewer Revenue Bonds, Series 2008B (Taxable), in thc aggregate principal amounts of $9,975,000 and $2,035,000, respectively, to provide funds for the pulpose of financing the costs of carrying out certain capital improvements of the waterworks utility; and approving the sale of such bonds to Seattle-Northwest Securities Corporation, all in accordance with Ordinance No. 5313 of the City. WHEREAS the City Council by Ordinance No. 5313 passed on October 22, 2007 (the "Bond Ordinance"), authorized the issuance and sale of three series of water and sewer revenue bonds of the City in the aggregate principal amount of not to exceed $23,000,000 (the "Bonds") for the pulpose of financing the costs of caqing out certain capital improvements of the watenvorks utility and refunding certain outstanding water and sewer revenue bonds of the City, and WHEREAS, the Bond Ordinance authorized the City Finance Director to enter into negotiations for the sale of the Bonds and to present a bond purchase agreement to the City Council for approval by resolution, cstablishing tlie tenns of each series of Bonds, and WHEREAS, Seattle-Northwest Seculities Corporation (the "Underwriter") has purchased the first series of Bonds designated the City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007 in the aggregate principal amount of $9,750,000, and WHEREAS, tlle Underwriter has offered to purchase the second and third series of Bonds designated the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A and Water and Sewer Revenue Bonds, Series 2008B (Taxable) in the aggregate principal amounts of $9,975,000 and $2,035,000, respectively (together, the "2008 Bonds") on the terms set forth in the bond purchase agreement attached hereto as Exhibit A hereto (the "Purchase Agreement"), and WHEREAS, it is in the best interests of the City to sell the 2008 Bonds to the Underwriter on the terms and conditions set forth in the Bond Ordinance, this resolution and the Purchase Agreement, and WHEREAS, in accordance with the Bond Ordinance, the City Council wishes to authorize and approve the sale of the 2008 Bonds to the Undenvriter and the final principal maturity amounts, interest rates, bond insurance provisions, and redemption rights for the 2008 Bonds, all as set forth herein, • CEKTIFIi.?2~E .' !. tl!e cndersigned City Clerk of the . -. 'City of Renton, Washington, certify tk t this is a true and correct copy of - $_s&tiOA XI. 3919 . Subscribed ... ., and sealed thisaday of UBU. ,2007 .- , -. h.d. Ic/m- Bonnie I. ~a'lton, City Clerk RESOLUTION NO. 3919 BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON: Section 1. Definitions. Except as otherwise defined herein, capitalized terms used in this resolution have the meanings set forth in the Bond Ordinance. Section 2. Authorization of Issuance and Sale of the 2008 Bonds. The issuance of the 2008 Bonds, designated as the "City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A" and "City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable)," in the aggregate principal amounts of $9,975,000 and $2,035,000, respectively, each dated as of their date of delivery, is hereby approved. The 2008 Bonds 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 from their date (computed on the basis of a 360-day year of twelve 30-day months), payable semiannually on each June 1 and December 1, commencing June 1,2008, to the maturity or prior redemption of the 2008 Bonds. The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A 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 2016 $480,000 4.00% 2017 695,000 4.00 2018 565,000 5.00 2019 645,000 4.00 2020 720,000 4.00 202 1 760,000 4.00 2022 790,000 4.00 2023 980,000 4.10 2024 1,020,000 4.15 2025 1,060,000 4.20 2026 1,105,000 4.25 2027 1,155,000 4.30 The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) 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 2013 $610,000 4.70% 2014 600,000 4.85 2015 630,000 5.10 2016 195,000 5.25 RESOLUTION NO. 3919 If any Bond is duly presented for payment upon maturity and is not paid, then interest thereon shall continue to accrue thereafter at the rate stated therein until such Bond is paid. The 2008 Bonds shall conform in all other respects to the terms and conditions set forth in the Bond Ordinance, except as expressly provided herein. Section 3. Optional Redemption. The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A maturing on or after December 1, 2018 shall be subject to optional redemption prior to maturity on and after December 1, 201 7, in whole or in part on any date (maturities to be selected by the City and by lot within a maturity in such manner as DTC or the Bond Registrar, as appropriate, shall determine), at par plus accrued interest to the date of redemption. The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) are not subject to optional redemption prior to maturity. Section 4. Insurance (a) Acceptance of Insurance. In accordance with the offer of the Underwriter to purchase the 2008 Bonds, the City Council hereby approves the commitment of MBIA Insurance Corporation (the "Bond Insurer") to provide a bond insurance policy guaranteeing the payment when due of principal of and interest on the 2008 Bonds (the "Bond Insurance Policy"). The City Council further authorizes and directs all proper officers, agents, attorneys and employees of the City to cooperate with the Bond Insurer in preparing such additional agreements, certificates, and other documentation on behalf of the City as shall be necessary or advisable in providing for the Bond Insurance Policy. (b) Payments Under the Bond Insurance Policy and Rights of the Bond Ittsurer. (1) In the event that, on the second business day, and again on the business day, prior to the payment date on the 2008 Bonds, the Bond Registrar has not received sufficient money to pay all principal of and interest on the 2008 Bonds due on the second following or following, as the case may be, business day, the Bond Registrar shall immediately notify the Bond Insurer or its designee on the same business day by telephone or telegraph, confirmed in writing by registered or certified mail, of the amount of the deficiency. (2) If the deficiency is made up in whole or in part prior to or on the payment date, the Bond Registrar shall so notify the Bond Insurer or its designee. (3) In addition, if the Bond Registrar has notice that any bondowner has been required to disgorge payments of principal or interest on the 2008 Bonds to a trustee in bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such bondowner within the meaning of any applicable bankruptcy laws, then the Bond Registrar shall notify the Bond Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail. RESOLUTION NO. 391 9 (4) The Bond Registrar is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for owners of the 2008 Bonds as follows: a. If and to the extent there is a deficiency in amounts required to pay interest on the 2008 Bonds, the Bond Registrar shall (i) execute and deliver to U.S. Bank Trust National Association, or its successors under the Bond Insurance Policy (the "Insurance Paying Agent"), in form satisfactory to the Insurance Paying Agent, an instrument appointing the Bond Insurer as agent for such owners in any legal proceeding related to the payment of such interest and an assignment to the Bond Insurer of the claims for interest to which such deficiency relates and which are paid by the Bond Insurer, (ii) receive as designee of the respective owners (and not as Bond Registrar) in accordance with the tenor of the Bond Insurance Policy payment from the Insurance Paying Agent with respect to the claims for interest so assigned, and (iii) disburse the same to such respective owners; and b. If and to the extent of a deficiency in amounts required to pay principal of the 2008 Bonds, the Bond Registrar shall (i) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the Bond Insurer as agent for such owner in any legal proceeding relating to the payment of such principal and an assignment to the Bond Insurer of any of the 2008 Bonds surrendered to the Insurance Paying Agent of so much of the principal amount thereof as has not previously been paid or for which moneys are not held by the Bond Registrar and available for such payment (but such assignment shall be delivered only if payment from the Insurance Paying Agent is received), (ii) receive as designee of the respective owners (and not as Bond Registrar) in accordance with the tenor of the Bond Insurance Policy payment therefor from the Insurance Paying Agent, and (iii) disburse the same to such owner. (5) Payments with respect to claims for interest on and principal of 2008 Bonds disbursed by the Bond Registrar from proceeds of the Bond Insurance Policy shall not be considered to discharge the obligation of the City with respect to such 2008 Bonds, and the Bond Insurer shall become the owner of such unpaid Bonds and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. (6) Irrespective of whether any such assignment is executed and delivered, the City and the Bond Registrar hereby agree for the benefit of the Bond Insurer that: a. They recognize that to the extent the Bond Insurer makes payments, directly or indirectly (as by paying through the Bond Registrar), on account of principal of or interest on the 2008 Bonds, the Bond Insurer will be subrogated to the rights of such owners to receive the amount of such principal and interest from the City, with interest thereon as provided and solely from the sources stated in this resolution and the 2008 Bonds; and b. They will accordingly pay to the Bond Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Bond Insurance Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in this resolution and the RESOLUTION NO. 391 9 2008 Bonds, but only from the sources and in the manner provided herein for the payment of principal of and interest on the 2008 Bonds to owners, and will otherwise treat the Bond Insurer as the owner of such rights to the amount of such principal and interest. (c) Rights of Bond Insurer. (1) In connection with the issuance of Future Parity Bonds, the City shall deliver to the Bond Insurer a copy of the disclosure document, if any, circulated with respect to such Future Parity Bonds. (2) The Bond Insurer shall receive copies of the City's audited financial statements and annual budget. (3) Copies of any amendments made to the documents executed in connection with the issuance of the 2008 Bonds which are consented to by the Bond Insurer shall be sent to Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc. (4) The Bond Insurer shall receive notice of the resignation or renewal of the Bond Registrar and the appointment of a successor, other than the designated state fiscal agent. (5) Any notices required to be given by any party under this resolution shall also be given to the Bond Insurer and sent by registered or certified mail addressed to: MBIA Insurance Corporation, 113 King Street, Annonk, New York 10504, Attention: Surveillance. (6) The City agrees to reimburse the Bond lnsurer immediately and unconditionally upon demand, to the extent permitted by law, for all reasonable expenses, including reasonable attorneys' fees and expenses, incurred by the Bond Insurer in connection with (i) enforcement by the Bond Insurer of the City's obligations, or the preservation or defense of any rights of the Bond Insurer, under this resolution and any other document executed in connection with the issuance of the 2008 Bonds, and (ii) any consent, amendment, waiver or other action with respect to this resolution or any related document, whether or not granted or approved, together with interest on all such expenses from and including the date incurred to the date of payment at Citibank's Prime Rate plus 3% or the maximum interest rate permitted by law, whichever is less. In addition, the Bond Insurer reserves the right to charge a reasonable fee in connection with its review of any such consent, amendment or waiver, whether or not granted or approved. (7) The City agrees not to use the Bond Insurer's name in any published document including, without limitation, a press release or presentation, announcement or forum without the Bond Insurer's prior consent; provided that the City may use the Bond Insurer's name in any general or particular factual statement to the effect that the Bond Insurer insures certain outstanding City bonds. In the event that the City is advised by counsel that it has a legal obligation to disclose the Bond Insurer's name in any press release, public announcement or other published document, the City shall provide the Bond Insurer with at least three (3) business days' prior written notice of its intent to use the Bond Insurer's name together with a copy of the proposed use of the Bond Insurer's name and of any description of a transaction with the Bond RESOLUTION NO. 3919 Insurer and shall obtain the Bond Insurer's prior consent as to the form and substance of the proposed use of the Bond Insurer's name and any such description. The foregoing shall not apply to any request for public records duly received by the City pursuant to chapter 42.17 RCW, and the City shall not be obligated to notify the Bond Insurer of its intent to comply with any public disclosure request. (8) The City shall not enter into any agreement nor shall it consent to or participate in any arrangement pursuant to which 2008 Bonds are tendered or purchased for any purpose other than the redemption and cancellation or legal defeasance of such 2008 Bonds without the prior consent of the Bond Insurer. The provisions of this section shall be in effect only so long as the Bond Insurance Policy is in full force and effect. Section 7. Acceptance of Offer. The City Council hereby finds that the offer of the Underwriter to purchase the 2008 Bonds under the terms set forth in the Purchase Agreement is fair and reasonable and it is in the best interest of the City that the 2008 Bonds shall be sold upon the terms and conditions set forth in the Purchase Agreement and upon the basis of the representations therein set forth. The City Council further finds that all conditions precedent to or concurrent with the acceptance of the Purchase Agreement by the City Council have been met. The City Council hereby accepts the Purchase Agreement and authorizes the City Finance Director to execute the Purchase Agreement and deliver it to the Underwriter. The 2008 Bonds shall be issued and delivered to the Underwriter upon payment of the purchase price specified in the Purchase Agreement. Section 8. Approval of Official Statement. The City Finance Director is authorized and directed to execute and deliver to the Underwriter copies of an official statement for the 2008 Bonds, in substantially the form of the Preliminary Official Statement dated November 16, 2007; provided, however, that the City Finance Director is authorized to supplement or amend the Official Statement as he deems necessary or appropriate. The City Council hereby ratifies the City Finance Director's determination that the Preliminary Official Statement was deemed final for purposes of Rule 15~2-12 promulgated under the Securities Exchange Act of 1934 (except for the omission of certain final pricing, rating and related information as permitted by such rule). Section 9. Further Authority. The City officials, their agents, and representatives are hereby authorized and directed to do everything necessary for the prompt issuance and delivery of the 2008 Bonds and for the proper use and application of the proceeds of such sale. Section 10. Severability. The covenants contained in this resolution shall constitute a contract between the City and the owners of each and every 2008 Bond. If any one or more of the covenants or agreements provided in this resolution to be performed on the part of the City shall be declared by any court of competent jurisdiction to be contrary to law, then such covenant or covenants, agreement or agreements, shall be null and void and shall be deemed separable from the remaining covenants and agreements of this resolution and shall in no way affect the validity of the other provisions of this resolution or of the 2008 Bonds. RESOLUTION NO. 3919 Section 11. Effective Date. This resolution shall be effective after its passage as provided by law. Passed November 26,2007. Kathy ~eol&r, Mayor Attest: 4. Wdw Bonnie I. Walton, Cily Clerk Approved as to form and legality: K&L PRESTON GATES ELLIS LLP Bond Counsel to the City of Renton Attachment: Exhibit A - Bond Purchase Agreement RESOLUTION NO. 39 19 EXHLBIT A Bond Purchase Agreement RESOLUTION NO. 3919 - SEATTLE-NORTHWEST I.. SECURITIES CORPORATION - The Rcgion'r Prr,?$icr I!tvrsrmen, Barikirry Fir,?? Since 1970 1420 Fifth Avellue Suite 4300 Seattle, Washir~gton 98101 November 26,2007 Honorable Mayor and City Council City of Renton 1055 South Grady Way Renton, Washington 98055 Re: City of Renton, Washington $9,975,000 Water and Sewer Revenue Bonds, Series 2008A $2,035,000 Water and Sewer Revenue Bonds, Series 2008B (Taxable) Honorable Mayor and City Council: Seattle-Northwest Securities Corporation (the "Underwriter") offers to enter into this purchase agreement (the "Purchase Agreement") with the City of Renton, Washington (the "Issuer"), (each of the Underwriter and the Issuer may be referred to herein as a "Party" or collectively as the "Parties"). This offer is contingent upon acceptance by the Issuer by execution and delivery of this Purchase Agreement to the Underwriter at or prior to 11:59 p.m. Pacific Time on the date hereof, by means of hand delivery, facsimile or other secure electronic transmission, such as a PDF file. Upon execution of this Purchase Agreement by the Parties, this Purchase Agreement will constitute a binding agreement between the Issuer and the Underwriter. Capitalized terms in this Purchase Agreement that are not otherwise defined herein shall have the meanings given to such terms in the Ordinance as defined below: 1. Authorization and Documents The issuance, sale and delivery of the Bonds (as defined below) shall be authorized by Ordinance No. 53 13 passed by the Mayor and City Council of the Issuer on October 22, 2007 and Sale Resolution No. 3919 adopted by the Mayor and City Council of the Issuer on November 26, 2007 (together, the "Ordinance"). The transaction at which the Bonds are delivered by the Issuer to the Underwriter and paid for by the Underwriter is referred to herein as the "Closing" and the date of such transaction, the "Closing Date." The Ordinance includes an undertaking to provide certain information to nationally recognized municipal securities information repositories and regulatory bodies or their designees or, if the City so chooses, to DAC Bond or DisclosureUSA (so long as such RESOLUTION NO. 3919 Honorable Mavor and Citv Council City of ent to;, ~ashin~tbn November 26,2007 Page 2 method of disclosure continues to be approved by the Securities and Exchange Commission for such uurposes). The Ordinance and this Purchase Agreement are . . - collectively referred to herein as the "Documents." 2. Purchase and Sale Subject to the terms and conditions of this Purchase Agreement, the Underwriter hereby agrees to purchase from the Issuer for offering to the public and the Issuer hereby agrees to sell to the Underwriter all, but not less than all of the $9,975,000 aggregate principal amount of Water and Sewer Revenue Bonds, Series 2008A (the "Series 2008A Bonds") and $2,035,000 aggregate principal amount of Water and Sewer Revenue Bonds, Series 2008B (Taxable) (the "Series 2008B Bonds") (the Series 2008A Bonds and Series 2008B Bonds are together, the "Bonds"). The Bonds shall be dated, shall mature, shall bear interest, shall be payable, and shall have redemption provisions, all as set forth in Exhibit C attached hereto. The Underwriter's purchase price for the Bonds also is set forth in Exhibit C. 3. Fiscal Agent; Enhancement; Insurance a) As provided in the Ordinance, the fiscal agent of the State of Washington shall be the fiscal agent for the Bonds, serving as registrar, authenticating agent and paying agent (the "Bond Registrar"). The Bonds shall be payable and shall be secured as provided in the Ordinance and as described in the document entitled Preliminary Official Statement, which is dated November 16, 2007 and which describes the Issuer and the Bonds (the "POS"). b) Payment when due of the regularly scheduled principal of and interest on the Bonds shall be insured by a municipal bond insurance policy (the "Policy") issued by MBIA Insurance Corporation (the "Insurer"). 4. Offering The Underwriter agrees to make a bonafide public offering of all the Bonds, at prices not in excess of the initial public offering prices or at yields not lower than the initial yields as set forth in Exhibit C attached hereto. 5. Official Statement a) In the Ordinance, the Issuer has ratified and "deemed final" the POS for purposes of Rule 15~2-12 of the Securities Exchange Act of 1934, as amended (the "Rule"). The Issuer approves and ratifies the use and distribution by the Underwriter of the POS in connection with the public offering for sale of the Bonds by the Underwriter. RESOLUTION NO. - 3919 Honorable Mayor and City Council City of Renton, Washington November 26,2007 Page 3 b) The final official statement shall be substantially in the form of the POS with only such changes permitted by the Rule as shall have been reviewed by the Underwriter (such final official statement, incorporating such changes, if any, shall be referred to herein as the "Final Official Statement"). The Issuer shall cooperate with the Undenvriter in the preparation of the Final Official Statement for delivery within seven (7) business days after the date hereof and, in any event, for delivery in sufficient time to accompany any order confirmation from the Underwriter to its customer, and in sufficient time to permit the Underwriter to comply with the provisions of the Rule and with all applicable rules of the Municipal Securities Rulemaking Board. c) The Issuer will not amend or supplement the Final Official Statement without the consent of the Underwriter. The Issuer agrees to notify the Underwriter promptly if, on or prior to the 2~'~ day after the End of the Underwriting Period (as defined below), any event shall occur, or information come to the attention of the Issuer, that would cause the Final Official Statement (whether or not previously supplemented or amended), as of its date, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If, in the opinion of the Issuer, such event requires the preparation and distribution of a supplement or amendment to the Final Official Statement, the Issuer at its expense and with Underwriter's assistance, shall amend or supplement the Final Official Statement in a form and manner approved by the Underwriter and will provide such number of copies of the supplement or amendment to the Final Official Statement, as the Underwriter may reasonably request. For purposes of this Purchase Agreement, the "End of the Underwriting Period" shall occur on the Closing Date. 6. Representations, Warranties and Covenants The Issuer represents, warrants and covenants to the Underwriter that as of the date hereof and as of the Closing Date: a) The Issuer is a municipal corporation duly organized and validly existing under the laws and Constitution of the State of Washington; b) The Issuer has duly adopted the Ordinance and it is a valid, legal and binding ordinance of the Issuer; c) The Issuer is duly authorized and has full legal right, power, and authority to issue, sell and deliver the Bonds and perform its obligations under the Documents; d) The Ordinance is in full force and effect and has not been superseded, rescinded or amended; RESOLUTION NO. 3919 Honorable Mayor and City Council - City of ent ton, washington November 26,2007 Page 4 e) The Issuer has full legal right, power and authority to and will apply or cause to be applied the proceeds of the Bonds as described in the Ordinance; f) The execution of and performance by the Issuer of its obligations under the Documents will not cause the Issuer to be (i) in violation of any constitutional provision, law, court decree, administrative regulation or judgment or (ii) in material default under any loan agreement, indenture, bond, note, resolution or other material agreement or instrument to which the Issuer is a party or to which the Issuer or any of its properties or assets is otherwise subject; g) All governmental approvals or authorizations required to be obtained by the Issuer prior to the Closing in connection with the issuance and delivery of the Bonds or the performance by the Issuer of its obligations under the Documents have been or will be obtained prior to Closing; h) No filing or registration of the Ordinance or other instrument or financing statement is required to be made to create, protect or preserve the pledge of revenues under the Ordinance or is required for the validity and enforceability of the Ordinance; i) As of the Closing, the Bonds will be legal, valid and binding obligations of the Issuer, and, subject only to the laws of bankruptcy and insolvency, will be enforceable in accordance with their terms and will be in full force and effect; j) Except as described in the Final Official Statement there is no action, suit, proceeding, inquiry or investigation before or by any court, governmental agency, public board or body pending or, to the knowledge of the Issuer, threatened against the Issuer, (i) in any way questioning the legal existence of the Issuer or the titles of the officers of the Issuer to their respective offices; (ii) in any way affecting or contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of the Bonds; (iii) wherein an unfavorable decision, ruling, or finding would have a material adverse effect on the collection and application of revenues that may be collected for the benefit of the Issuer for the payment of the Bonds, the financial condition of the Issuer, or would have an adverse effect on the validity or enforceability of the Bonds or the Ordinance, or which would in any way adversely affect the exclusion of interest on the Series 2008A Bonds from gross income for federal income tax purposes; or (iv) contesting the completeness or accuracy of the POS or the Final Official Statement; and (v) to the actual knowledge of the Issuer, there is no reasonable basis for any action, proceeding, inquiry or investigation of the nature described in the foregoing clauses (i) through (iv); k) The financial statements of the Issuer contained in the Final Official Statement fairly present the financial position of the Issuer as of the dates and for the periods therein set forth in accordance with the accounting standards applicable to the RESOLUTION NO. - 3919 Honorable Mayor and City Council City of Renton, Washington November 26,2007 Page 5 Issuer, and since the date thereof, there has been no material adverse change in the financial position of the Issuer; I) In connection with the financing process, the Underwriter may have provided the format for and certain of the content for inclusion in the POS and may have assumed principal drafting responsibility for the preparation of the POS and may coordinate the preparation and dissemination of the Final Official Statement. The Issuer understands and acknowledges, however, that the ultimate responsibility for the POS and the Final Official Statement with respect to content, accuracy and completeness is the responsibility of the Issuer as an issuer of municipal securities. The Issuer hereby represents and warrants to the Underwriter that the POS did not, as of its date, and the Final Official Statement will not, as of its date and at the Closing Date, contain any untrue statement of material fact nor 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; provided, however, that no representation or warranty is made with respect to information within the POS or the Final Official Statement relating to DTC, the book entry system, the Insurer or the Underwriter; and m) The Issuer has not failed to comply with any prior undertaking under the Rule in the past five years. 7. Termination The Underwriter may terminate its obligation under this Purchase Agreement, without liability therefor, by notifying the Issuer of its election to do so in writing if, after the execution of this Purchase Agreement and prior to the Closing, any one or more of the following events shall have occurred such event, in the reasonable opinion of the Undenvriter (i) would materially and adversely affect the marketability of the Bonds or the prices or yields of the Bonds as set forth in Exhibit C, or (ii) would materially and adversely affect the Underwriter's ability to enforce contracts for the sale of the Bonds: a) A material disruption in commercial banking or securities settlement or clearance services; or b) The United States shall have become engaged in hostilities or existing hostilities shall have escalated or a national emergency or other national or international calamity, including but not limited to terrorist attack(s) or other event; or c) A general suspension of trading or other material restrictions not in force as of the date of this Purchase Agreement on the New York Stock Exchange or other national securities exchange; or d) Declaration of a general banking moratorium by the United States, New York State or Washington State authorities; or RESOLUTION NO. 3919 Honorable Mayor and City Council City of Renton, Washington November 26,2007 Page 6 e) Legislation with respect to eliminating or reducing the exemption from federal or state taxation for interest income received on obligations of the general character of Series 2008A Bonds shall be introduced or enacted by the legislature of the State of Washington or by Congress of the United States or adopted by either the United States House of Representatives or the United States Senate or shall have been recommended to the Congress or otherwise endorsed for passage by the Treasury Department of the United States, the Internal Revenue Service or by the chairman of the Senate Finance Committee or a decision or an order or ruling with respect to eliminating or reducing such exemption, shall have been issued by a court of the United States, including the United States Tax Court, or by or on behalf of the Treasury Department of the United States or the Internal Revenue Service; or f) Legislation shall hereafter be enacted, or actively considered for enactment, or a decision by a court of the United States shall hereafter be rendered, or a ruling, stop order or regulation by the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter shall hereafter be made, the effect of which is or would be that the offering and sale of the Bonds would be illegal or that: i) The Bonds are not exempt from the registration, qualification or similar requirements of the Securities Act of 1933, as amended and as then in effect (the "33 Act") or distribution of the Bonds, as contemplated herein or in the Final Official Statement, is in violation of or not exempt from the registration, qualification or other requirements of the 33 Act, as amended and as then in effect, or the Securities Exchange Act of 1934, as amended and then in effect or the Investment Company Act of 1940, as amended and then in effect (the "Investment Company Act") or, in each case, the rules or regulations promulgated thereunder as then in effect; or ii) The Ordinance is not exempt from the registration, qualification or other requirements of the Trust Indenture Act of 1939, as amended and as then in effect; or iii) This Purchase Agreement is subject to the Investment Company Act or requires any registration under the Investment Company Act; or g) Any litigation, except as described in the Final Official Statement, shall be instituted or pending at Closing to restrain or enjoin the authorization, issuance, execution, sale or delivery of the Bonds or the execution and delivery of any of the Documents, or in any way contesting or affecting any authority for or the validity or enforceability of the Bonds, the Ordinance or any of the other Documents, any moneys or securities provided for the payment of the Bonds or the existence or powers of the Issuer; or RESOLUTION NO. 3919 Honorable Mayor and City Council City of Renton. Washington November 26,2007 Page 7 h) Any legislation, ordinance, rule or regulation shall be introduced in or enacted by any governmental body, board, department or agency of Washington State or of the United States, or a decision by any court of competent jurisdiction within Washington State or any court of the United States shall be rendered materially affecting the Issuer or the Bonds; or i) There shall have been established any new restrictions on transactions in securities materially affecting the free market for securities or the extension of credit by, or the charge to the net capital requirements of the Underwriter, including without limitation, the fixing of minimum or maximum prices for trading or maximum ranges of prices, by any exchange, the Securities and Exchange Commission, any other federal or state agency or the Congress of the United States, or by Executive Order; or j) Except for such changes to the Final Official Statement as provided in Section 5(c) of this Purchase Agreement, there shall have been a material adverse change in the affairs of the Issuer or there shall exist any event or fact or set of facts that either (a) makes untrue or incorrect in any material respect any statement or information contained in the Final Official Statement or (b) is not reflected in the Final Official Statement but should be reflected therein to make the statements and information contained therein under the circumstances in which made not misleading in any material respect; or k) The withdrawal or downgrading of any rating of the Bonds by a national rating agency from those shown in (c)(i) of Exhibit B. 8. Closing; Conditions of Closing The Closing shall occur on such date and at such time and place as is set forth in Exhibit C or otherwise agreed between the Issuer and the Underwriter, and subject to the satisfaction of the terms and conditions of this Purchase Agreement. At Closing, the following shall occur: the Issuer will deliver the duly executed Bonds or cause to be delivered to the fiscal agent for re-delivery through Fast Automated Transfer System to DTC and will deliver or cause to be delivered to the Underwriter the Ordinance; the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in Exhibit C hereof in same day funds. The Issuer shall cause the applicable CUSIP identification numbers to be printed on the Bonds of each maturity, but neither the failure to print such number on any such Bond nor any error with respect thereto shall constitute cause for a failure or refusal by the Underwriter to accept delivery of and to pay for the Bonds. The Bonds shall be prepared and delivered to the Bond Registrar at or prior to the Closing Date. In addition to the other requirements of this Purchase Agreement, Underwriter's obligations hereunder are subject to and conditioned upon Issuer, at or prior to the RESOLUTION NO. 3919 - Honorable Mayor and City Council City of Renton, Washington November 26,2007 Page 8 Closing Date, delivering or making available to Underwriter copies of the Documents and such items as are listed in Exhibit B attached hereto and incorporated herein. 9. Fees and Expenses The Issuer will pay the cost of preparing, printing and executing the Bonds; the fees and disbursements of Bond Counsel and Financial Advisor; bond registration and rating fees and expenses; the bond insurance premium; the financial advisor fee; the cost of printing and distributing the POS and Final Official Statement; travel and lodging expenses of the Issuer's employees and representatives; and other expenses of the Issuer. The Underwriter will pay fees and disbursements of its counsel, if any, the cost of preparation and filing of blue sky and legal investment surveys where necessary, the Underwriter's travel expenses, and other expenses of the Underwriter. As a convenience to the Issuer, the Underwriter may from time to time, but only upon the prior written direction from the Issuer, make arrangements for certain items for which Issuer is responsible hereunder, such as printing of the POS and the Final Official Statement and travel or lodging arrangements for the Issuer's representatives. The Underwriter also may advance for the Issuer's account when appropriate and when directed in advance in writing by the Issuer, the cost of the items for which the Issuer is responsible by making payments to third-party vendors. In such cases, the Issuer shall pay such costs or expenses directly, upon submission of appropriate invoices by the Underwriter, or promptly reimburse the Underwriter in the event the Underwriter has advanced such costs or expenses for the Issuer's account. It is understood that the Issuer shall be primarily responsible for payment of all such items and that the Underwriter may agree to advance the cost of such items from time to time solely as an accommodation to the Issuer and on the condition that it shall be reimbursed in full by the Issuer. 10. Miscellaneous a) All matters relating to the Purchase Agreement shall be governed by the laws of the state of Washington. b) This Purchase Agreement is intended to benefit only the parties hereto. Unless it can be shown that the untruth of any representation or warranty of the Issuer or the violation of any agreement of the Issuer hereunder actually was or should have been discovered by the Underwriter through its review of the information in the Final Official Statement in accordance with and as a part of its responsibilities under federal securities laws as applied to the facts and circumstances of this transaction, all representations and warranties and agreements of the Issuer in this Purchase Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of the Underwriter, (ii) delivery of and payment for the Bonds hereunder, or (iii) any termination of this Purchase Agreement. If the Issuer fails to satisfy any of the foregoing conditions or covenants, or if the Underwriter's obligations are terminated for any reason permitted under this Purchase Agreement, then neither the Underwriter nor the RESOLUTION NO. 3919 - Honorable Mayor and City Council City of ent to", washington November 26,2007 Page 9 Issuer shall have any further obligations under this Purchase Agreement, except that any expenses incurred shall be borne in accordance with the Fees and Expenses Section hereof. c) Any notice or other communication to be given to the Issuer by the Underwriter under this Purchase Agreement may be given by delivering the same in writing to the Finance & Information Services Administrator or other authorized official of the Issuer at 1055 South Grady Way, Renton, Washington 98055; and any notice or other communication to be given to the Underwriter by the Issuer under this Purchase Agreement may be given by delivering the same in writing to the attention of the officer of the Underwriter executing this Purchase Agreement at Seattle-Northwest Securities Corporation, 1420 Fifth Avenue, Suite 4300, Seattle, Washington, 98101. Written communications may be delivered by electronic means. d) This Purchase Agreement may be executed in any number of counterparts, all of which shall be one and the same instrument, and either Party hereto may execute this Purchase Agreement by signing any such counterpart. e) This Purchase Agreement, including all documents incorporated herein by reference, constitutes the entire agreement between and among the Parties, supersedes any other representations, understandings or communications between the Parties or their representatives, and may be amended only in a writing signed by both Parties. This Purchase Agreement is intended solely for the benefit of the Parties (including any successors and assigns thereof but not any holder of any Bonds). No other person shall acquire or have any rights hereunder or by virtue hereof. Respecthlly submitted, SEATTLE-NORTHWEST SECURITIES CORPORATION, as Purchaser Accepted November 26,2007 City of Renton, Washington By: Mr. Michael E. Bailey Finance & Information Services Administrator Time Signed RESOLUTION NO. 3919 - EXHIBIT A FINAL PRICING NUMBERS ~ RESOLUTION NO. 3919 BOND DEBT SERVICE City of Renton Water & Se~\,er Revenue Bonds, Series 2008A & 20088 Final Numben Dated Date 01/04/2008 Delivery Date 0110412008 Period Arlr~ual Ending Principal Coupon Interest Debt Service Debt Scrvice Nov 26,2007 10:43 am Prepared by Seattle-Northwest Securities - TI-l (k:\analysis\dbc\city\RENTON:2008WV) Page 5 BOND PRICING hlatunty Bond Component Dae City of Renton Water & Sewer Revenue Bonds, Series 2008A & 20088 Final Numbers Yield to Call Call Call Date Call Price Premium Amount Rate Yield Price hlatunty Date Price for Arb Yield for Arb Yield (-Discount) Serial Bonds (Series 20088 -Taxable): 12101/2013 610,000 4.700% 4.850% 99.233 12/01/2014 600.000 4.850% 5.000% 99128 Serial Bonds (Series 2008A - Exempt): 1210112016 1210112017 I210112018 I2101/2019 IUOll2020 IUO1/2021 .- w 12,010,000 12.851.65 I:: Dated Date Delivery Date Fist Coupon Par Amount Premium Production 12,022,851.65 100.107008% Underwriter's Dircoet -67.61630 -0.563000% Purchase Price Accrued Interest Nel Proceeds 11,955,235.35 Nov 26,2007 l0:43 am Prepared by Seattle-Northwest Securities - TH (k:\analysis\dbc\city\RENTON:2008REV) Page 2 RESOLUTION NO. 3919 SOURCES AND USES OF FUNDS City of Renton Water & Sewer Revenue Bonds, Series 2008A & 20088 Final Numbers Dated Date 01/04/2008 Delivew Date 0 110412008 Sources: OXREV 08REVTX Total Bond Proceeds: Par Amount Original lssuc Discount Premium Other Sources ofFunds: Reserve Fund Contribution 3,145,209.00 Uses: O8KEV 08REVTX Total Project Fund Deposits: Project Fund Delivery Date Expenses: Cost of Issuance 38,537.89 7,8621 l 46,400.00 Underwriter's 1)iscount 56,15925 11,45705 67,616.30 Bond Insurance (MBIA 18.2 bps) 28,820.36 5,879.64 34,700.00 - Surety Policy (15%) Nov 26,2007 10:43 am Prepared by Seattle-North\vest Securilies - TH (k:\analysis\dbc\city\WNTON:2008REV) Page I RESOLUTION NO. 3919 - EXHIBIT B CLOSING DOCUMENTS Issuer's Closing Documents At Closing, Issuer shall provide the following: a) Copies of the Ordinance and the Blanket Issuer Letter of Representation; b) The approving opinions of Bond Counsel dated as of the Closing Date and addressed to the Issuer, substantially in the forms set forth in Appendix B to the Final Official Statement and two letters addressed to the Insurer to the effect that the Insurer may rely upon such opinion as if they were addressed to the Insurer; c) Evidence of each of the following: i) That Standard & Poor's ("S&P) has assigned its (i) underlying rating of "AA-" to the Bonds and that such rating is in full force and effect on and as of the date of Closing and (ii) insured rating of "AAA, based upon the Issuer's purchase of the Policy issued by the Insurer; ii) That Fitch Ratings ("Fitch") has assigned its (i) underlying rating of "AA-" to the Bonds and that such rating is in full force and effect on and as of the date of Closing and (ii) insured rating of "AAA, based upon the Issuer's purchase of the Policy issued by the Insurer; iii) Issuer's purchase of the Policy, including a copy of the Policy and an opinion of counsel to the Insurer in form and substance satisfactory to the Underwriter; and iv) designation of the Series 2008A Bonds as "qualified tax-exempt obligations" for banks, thrift institutions and other financial institutions, as defined in Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. d) A copy of completed Form 8038-G; e) The following certifications, which may be combined, executed by an authorized officer of the Issuer and dated as of the Closing Date, to the effect that: i) The representations, warranties and covenants of the Issuer contained herein and in the Ordinance are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; ii) No litigation or other proceedings are pending or, to the knowledge of the Issuer, threatened in any court in any way (a) affecting the position or title of the authorized officers of the Issuer, or (b) seeking to restrain or to enjoin the authorization, issuance, sale or delivery of, or security for, any of the Bonds, or (c) contesting or affecting the validity or enforceability of the Bonds, the Ordinance, this Purchase Agreement, or (d) contesting the completeness or RESOLUTION NO. 3919 - accuracy of the POS or the Final Official Statement, or (e) contesting the powers of the Issuer or its authority with respect to the Bonds, the Ordinance or this Purchase Agreement, or (f) materially affecting the finances of the Issuer. For the purpose of this subparagraph, the Issuer may rely upon a certificate of the Issuer's legal counsel with respect to the legal matters set forth therein; iii) No event affecting the Issuer has occurred since the date of the Final Official Statement which should be disclosed in the Final Official Statement for the purpose for which it is to be used or which is necessary to disclose therein in order to make the statements therein not misleading, and the Final Official Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; f) Such additional certificates, instruments or opinions or other evidence as the Underwriter or Bond Counsel may deem reasonably necessary or desirable to evidence the due authorization, issuance, execution, authentication and delivery of the Bonds, the truth and accuracy as of the time of the Closing of the representations and warranties contained in this Purchase Agreement, and the conformity of the Bonds and Ordinance with the terms thereof as summarized in the POS and the Final Official Statement, and to cover such other matters as the Underwriter or Bond Counsel reasonably requests. Underwriter's Closing Documents At Closing, Underwriter shall deliver or cause to be delivered to the Issuer or Bond Counsel a receipt for the Bonds including therein a representation that all closing conditions set forth in this Purchase Agreement have been provided to the satisfaction of the Underwriter or waived by it. RESOLUTION NO. 3919 - EXHIBIT C DESCRIPTION OF THE BONDS (a) Principal Amount (Series 2008A Bonds): $9,975,000 Principal Amount (Series 2008B Bonds): $2,035,000 (b) Purchase Price (Series 2008A Bonds): $9,943,133.25 ($99.680534 per $loo), representing a net original issue premium of $24,292.50 and an underwriter's discount of $56,159.25. Purchase Price (Series 2008B Bonds): $2,012,102.10 ($98.874796 per $1 OO), representing a net original issue discount of $1 1,440.85 and an underwriter's discount of $1 1,457.05. (c) Denominations: $5,000, or integral multiples thereof (d) Form: Registered; Book-entry only (e) Interest Payment Dates: June 1 and December 1, commencing June 1,2008. (f) Maturity and Interest Rates: The Bonds shall mature on December 1 of each year and bear interest as follows: Series 200SA Bonds 2017 695,000 4.00 3.85 760167TV8 2018"' 565,000 5.00 3.90 760167TW6 2019 "' 645,000 4.00 3.95 760167K4 2020 720,WO 4.00 4.00 760167TY 2 2021 760,000 4.00 4.05 76016i~29 2022 790,000 4.00 4.10 760167UA2 2023 980,000 4.10 4.15 760167UBG 2024 1,020,000 4.15 4.20 760167UC8 2025 1,060,MX) 4.20 4.25 760167UD6 2026 1,105,000 4.25 4.30 760167UE4 2027 1,155,WO 4.30 4.34 760167UF1 :I) Priced to the caU. RESOLUTION NO. - 3919 Series 2008B Bonds (g) Optional Redemption: The Series 2008A Bonds maturing on December 1 in years 2016 and 2017 are not subject to redemption prior to maturity. The Series 2008A Bonds maturing on or after December 1, 2018 are subject to redemption at the option of the Issuer, in whole or in part on any date on or after December 1, 2017 at a price of par plus accrued interest, if any, to the date of redemption. The Series 2008B Bonds are not subject to redemption prior to maturity. (h) Dated Date: (i) Offer Expires: (1) Bond Counsel: (k) Closing: (I) Delivery: (m) Bond Insurance: (n) Ratings: Date of Delivery, expected to be January 4, 2008 11 :59 p.m. Pacific Time, November 26, 2007 K&L Preston Gates Ellis LLP Via conference call initiated by Bond Counsel on January 4, 2008, at 9:00 a.m. To the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer. Payment of the principal of and interest on the Bonds, when due, will be insured by the Policy to be issued by the Insurer (MFiIA Insurance Corporation) simultaneously with the delivery of the Bonds. S&P and Fitch will assign their ratings of "AAA and "AAA" respectively, to the Bonds based on the Issuer's purchase of the Policy described above. Further, S&P and Fitch have assigned their underlying ratings of "AA-" and "AA-," respectively, to the Bonds. RESOLUTION NO. 3919 CERTIFICATE I, the undersigned, Clerk of the City of Renton, Washington (the "City"), DO HEREBY CERTIFY: 1. That the attached Resolution No. 3919 (the "Resolution"), is a true and correct copy of a resolution of the City, as finally adopted at a regular meeting of the City Council of the City (the "City") held on the 26th day ofNovember, 2007, and duly recorded in my office. 2. That said meeting was duly convened and held in all respects in accordance with law, and to the extent required by law, due and proper notice of such meeting was given; that a quorum of the City Council was present throughout the meeting and a legally sufficient number of members of the City Council voted in the proper manner for the adoption of the Resolution; that all other requirements and proceedings incident to the proper adoption of the Resolution have been duly fulfilled, carried out and othenvise observed, and that I am authorized to execute this certificate. IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of November, 2007. fT.fmu !A. IJ* Bonnie I. Walton, City Clerk CERTIFICATE I, Bonnie I. Walton, City Clerk of the City of Renton, Washington, do hereby certify that the attached is a full, true and correct copy of the minutes of the November 26, 2007 regular meeting of the City Council which reflect the adoption of Resolution No. 3919 (the "Sale Resolution"). Dated this 4th day of January, 2008. &'d U& Bonnie I. Walton, City Clerk City of Renton, Washington November 26,2007 Monday, 7 p.m. CALL TO ORDER ROLL CALI, OF COUNCILMEMBERS CITY STAFF IN ATTENDANCE SPECIAL PRESENTATION Community Event: July 4th Celebration ADMINISTRATIVE REPORT AUDIENCE COMMENT Citizen Comment: Wagner - Street Renaming, SE Petrovitsky Rd & Smithers Ave S CERTIFICATE I. the undersigned City Clerk of the Regular,Mceti~y , . ... - '- . - - .. Mayor Kathy Keolker called the meeting of the Renton City Council to order and led the Pledge of Allegiance to the flag. TONI NELSON, Council President; DENIS LAW; TERRl BRIERE; MARCIE PALMER; DON PERSSON; RANDY CORMAN. MOVED BY NELSON, SECONDED BY LAW, COUNCIL EXCUSE ABSENT COUNCILMEMBER DAN CLAWSON. CARRIED. KATHY KEOLKER, Mayor; JAY COVINGTON, Chief Administrative Officer; LAWRENCE J. WARREN, City Attorney; BONNIE WALTON, City Clerk; GREGG ZIMMERMAN, Planning/Building/Public Works Administrator; ALEX PIETSCH, Economic Development Administrator; SUZANNE DALE ESTEY, Economic Development Director; MICHAEL BAILEY, Finance and Information Services Administrator; GERALD RERECICH, Recreation Director; SONJA MEJLAENDER, Community Relations and Event Coordinator; DEPUTY CHIEF CHUCK DUFFY, Fire Department; COMMANDER DAVID LEIBMAN, Police Department. Community Relations and Event Coordinator Mejlaender presented a report on the 2007 Revo225's Fabulous 4th of July celebration held at Gene Coulon Memorial Beach Park. She stated that the event focused on features for the whole family, including children's activities, live entertainment, professional fireworks display, on-site concessions, and free shuttle service. Ms. Mejlaender recognized the efforts of the City departments that contributed their expertise and resources for the safe and successful event. Ms. Mejlaender reported that the cost of the 4th of July event to the City, which was offset by $28,000 in sponsorship revenue, totaled $55,294.56. She noted that the event directly relates to the increase in community business revenue, the decline in fire-related incidents, and the opportunity for spin-off events such as the 4th of July Fireworks Paddle. Ms. Mejlaender concluded by listing the future plans for the 2008 celebration. Responding to Councilmember Briere's inquiry, Ms. Mejlaender reported that approximately 25,000 people attended the 4th of July event. Chief Administrative Officer Covington reviewed a written administrative report summarizing the City's recent progress towards goals and work programs adopted as part of its business plan for 2007 and beyond. Items noted included: P Ivar's Clam Lights at Gene Coulon Memorial Beach Park begins November 30 and runs through January 1. ibi Visit Santa at his house at the southwest comer of S. 3rd St. and Wells Ave. S. on Fridays and Saturdays from December 7 to 22. Christopher Wagner (Benson Hill Communities Annexation area in King County) requested the renaming of two roadways upon successful annexation into the City of Renton. He reported that the various names of the first roadway, known as SE Petrovitsky Rd., SE 176th St., SE Carr Rd., S. 43rd St., SW 43rd St., and SE 180th St., cause confusion to those who visit residents and November 26.2007 Citizen Comment: Young - Congressional Outreach, Dave Reichert CONSENT AGENDA Council Meeting Minutes of 11 11 912007 Plat: Honeybrook Circle Division 11, NE 7th St, PP-07- 085 Airport: T-Hangar Lease Rate Increase Added Item 6.d. Appointment: Municipal Arts Commission UNFINISHED BUSINESS Committee of the Whole Finance: Bond Issuance, Utility Capital Projects Public Safetv Committee CAG: 95-087, King County Fire Protection District #25 * Renton City Council Minutes Page 405 - -. . . . .. 4 :- husi:ies&s located on this road. For consistency, Mr. Wagner recommended . .- . that:oaq:name-bw~d'fiom the eastern to western City limits. 2 -: r,: co$iding, ~r..~a~r!& stated that the second roadway is known as Smithers ~~.?~lbof~d.>:,~e"son Dr. S., 108th Ave. SE, and Benson Rd. S. He J.%. noted thepr6bie$,jie&s had in explaining to emergency dispatch the differend~b&een the two Bensons. To create a greater distinction between Benson Dr. and Benson Rd., Mr. Wagner reconlmended renaming the roadway SE Benson Ave. MOVED BY PERSSON, SECONDED BY PALMER, COUNCIL REFER THE ISSUE OF RENAMING THE ROADWAYS TO THE TRANSPORTATION (AVIATION) COMMITTEE. CARRIED. Tom Young (Mercer Island) introduced himself as the Constituents Services Manager for Congressman Dave Reichert, and reported on the services offered to constituents and cities in an official capacity, which include assisting citizens who have issues with federal agencies such as the Veterans Administration, assisting citizens to find grant opportunities, and assisting cities with appropriation requests. Items on the consent agenda are adopted by one motion which follows the listing. Approval of Council meeting minutes of 11/19/2007. Council concur. Hearing Examiner recommended approval, with conditions, of the Honeybrook Circle Division I1 Preliminary Plat; 26 single-family lots located at 4915 NE 7th St. Council concur. Transportation Systems Division requested approval of a rent increase for all City-owned T-Hangar units at the airport from $285 to $301.3 1 per month plus leasehold excise tax. Council concur. Mayor Keolker appointed the following individuals to the Municipal Arts Commission: Doug Kyes, to fill a vacated unexpired term expiring on 1213 1/2008 (position previously held by Roosevelt Lewis); and Frederick Lund, to fill a term expiring on 12/31/2010 (position previously held by Patricia Riggs). Refer to Coniniunitv Services Committee. MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL APPROVE THE CONSENT AGENDA AS PRESENTED. CARRIED. MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL AUTHORIZE THAT THE 2008 BOND SALE RESOLUTION BE READ LATER IN THE MEETING. CARRIED. (See page 406 for resolution.) Public Safety Committee Chair Law presented a report recommending concurrence in the staff recommendation to approve the contract addendum to extend Renton's operating agreement with King County Fire District #25 for two additional years, through 2009. The Committee further recommended that the resolution regarding this matter be presented for reading and adoption. MOVED BY LAW, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See page 406 for resolution.) November 26,2007 Renton City Council Minutes Page 406 AJLS: Public Defender Services, Kameron C Cayce & Associates Finance Committee Budget: 2007 Year-End Amendments RESOLUTIONS AND ORDINANCES Resolution #3919 Finance: Bond Issuance, Utility Capital Projects Resolution #3920 CAG: 95-087. King County Fire Protection District #25 Budget: 2007 Year-End Amendments Ordinance #5319 Utility: 2008 Rates Public Safety Committee Chair Law presented a report recommending concurrence in the staffrecom~nendation to authorize the Mayor and Citv Clerk to enter into an agreement with Kameron C. Cayce & Associates for public defense services for the years 2008-2010. MOVED BY LAW, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance Committee Chair Persson presented a report recommending adoption of the 2007 year-end budget amendments ordinance, which appropriates funds from fund balance and new revenue increasing the 2007 expenditures in various funds and departments. This ordinance increases the 2007 budgeted expenditures by $3,584,104 and increases the revenue estimates by $7,726,095 for a net change of $4,141,991. The Committee further recommended that the ordinance regarding this matter be presented for first reading. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See later this page for ordinance.) The following resolutions were presented for reading and adoption: A resolution was read approving the sale of the City's Water and Sewer Revenue Bonds, Series 2008A, and Water and Sewer Revenue Bonds, Series 2008B (Taxable), in the aggregate principal amounts of $9,975,000 and $2,035,000, respectively, to provide funds for the purpose of financing the costs of canying out certain capital improvements of the waterworks utility; and approving the sale of such bonds to Seattle-Northwest Securities Corporation, all in accordance with Ordinance 5313. MOVED BY NELSON, SECONDED BY BRIERE, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. A resolution was read authorizing the Mayor and City Clerk to enter into an addendum to the interlocal cooperative agreement with King County Fire District #25 regarding continuing operation of Fire District #25 by the Renton Fire Department. MOVED BY LAW, SECONDED BY PERSSON, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. The following ordinance was presented for first reading and referred to the Council meeting of 12/3/2007 for second and final reading: An ordinance was read providing for the 2007 year-end budget amendments in the total amount of $4,141,991. MOVED BY NELSON, SECONDED BY LAW, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 12/3/2007. CARRIED. The following ordinances were presented for second and final reading and adoption: An ordinance was read amending Chapter 2, Stonn and Surface Water, Chapter 4, Water, and Chapter 5, Sewer, of Title VII (Health and Sanitation) of City Code to allow for adjustments to current utility rates. MOVED BY BIUERE, SECONDED BY PALMER, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. November 26, 2007 Communities Annexation, Budget Amend Ordinance #5321 Community Services: Maplewood Golf Course Fees Ordinance #5322 Budget: 2008 Property Tax Levy Renton City Council Minutes Page 407 An ordinance was read amending the 2007 Budget for purchase of equipment and recruitment and hiring of personnel in the total amount of $763,438, for the Benson Hill Communities Annexation, conditioned on official notice of an affirmative vote. MOVED BY LAW, SECONDED BY BRIERE, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. An ordinance was read amending Chapter 1, Fee Schedule, of Title V (Finance and Business Regulations) of City Code by increasing certain golf course green fees and adding a driving range fee. MOVED BY NELSON, SECONDED BY PALMER, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. An ordinance was read establishing the property tax levy for the year 2008 for both general purposes and for voter approved bond issues. MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. MOVED BY NELSON, SECONDED BY PERSSON, COUNCIL ADJOURN. CARRIED. Time: 7:38 p.m. Bonnie I. Walton, CMC, City Clerk Recorder: Michele Neumann November 26,2007 . RENTON CITY COUNCIL COMMITTEE MEETING CALENDAR Office of the City Clerk COUNCIL COMMITTEE MEETINGS SCHEDULED AT CITY COUNCIL MEETING November 26,2007 I COMMITTEE/CHAIRMAN DATElTIME AGENDA 1 COMMITTEE OF THE WHOLE MON., 12/03 Grant Ave. Townhomes Site Plan Appeal (Nelson) 5 p.m. "Council Chambers* Approximately Emerging Issues (Regional Issues) 6 p.m. *Council Conference Room* Approximately 2008 Budget 6:30 p.m. "Council Chambers* COMMUNITY SERVICES MON., 12/03 Neighborhood Grant Awards; (Corman) 4 p.m. City Code Revisions Regarding Municipal Arts Commission; Municipal Arts Commission Appointments (Kyes & Lund) FINANCE (Persson) MON., 12/03 Vouchers 3:30 p.m. PLANNING & DEVELOPMENT THURS., 11/29 2007 Co~nprehensive Plan Amendments (Briere) 2 p.m. (Benson Map Issues); Highlands Study Area Zoning Designation Correction; Development Regulations (City Code Title IV) 2006 Docket Review PUBLIC SAFETY (Law) MON., 12103 CANCELLED TRANSPORTATION (AVIATION) WED., 11/28 Duvall Ave. Widening Project (briefing (Palmer) 4 p.m. only); Airport Leasing Policy; Local & Regional Transportation Issues Update UTILITIES (Clawson) NOTE: Committee of the Whole meelings are held in the Council Chambers unless otherwise noted. All other cornmillee meetings are held in the Council Conference Room unless othenvise noted. STATE OF WASHINGTON, COUNTY OF KING } AFFIDAVIT OF PUBLICATION PUBLIC NOTICE Linda M Mills, being first duly sworn on oath that she is the Legal Advertising Representative of the Renton Reporter a bi-weekly newspaper, which newspaper is a legal newspaper of general circulation and is now and has been for more than six months prior to the date of publication hereinafter referred to, published in the English language continuously as a bi-weekly newspaper in King County, Washington. The Renton Reporter has been approved as a Legal Newspaper by order of the Superior Court of the State of Washington for King County. The notice in the exact form annexed was published in regular issues of the Renton Reporter (and not in supplement forin) which was regularly distributed to its subscribers during the below stated period. The annexed notice, a: Public Notice was published on October 27,2007. The full amount of the fee charged for said foregoing publication is the sum of $109.20.. Legal Advertising Representative, Renton Reporter Subscribed and sworn to me this 27Ih day of October, 2007. :\!i:''!l!t,, k 11 rm&f~m :: ,,,\\tG Q..~~~~~~..?+ b17e( /0,0 + B D Cantelon 2 8 ..,i.- ,n .. 5 '+ .", Notary Public for the State of Washington, Residing insentiwashin ton V., P. 0. Number: - :o -. N~T~RY : - = = 2:: PUBLIC ; L2 - -. ; A?: %%=...:?Lo, 5.6 ...... ,?.D;:... - ,\,+,+ (3p /,,,OF ,\ J111,,,,\\\\'' CITY OF RENTON NOTICE OF ORDINANCE ADOPTED BY REhTON CITY COUNCIL Following ia n summary of an odinance adopted by the Rpnton City Council on Odoher 22,2007. ORDINANCE NO. 5313 An ordinan- of the City of Fknton. Washington, authorizing the iseuanco of three series of water and sewer revenue bonds of the City for the purpose of financing the wsts of encrying out certain eopitnl impmvements of the n~aterworks utility and refnnding certain outstanding water and sewer revenue bonds of the City, in thc aggcgato ! rindpal amounts of not to exceed 10,000,000. $10,000,000 and $3,00O,OM), roepcetivcly; pmviding the form, terms and wvenants of the bonds; fulfilling the Reseme Requirement; authorizing the appointment of an esmw agent and the execution of an escmw npment relating to the refunding bnds; and appmving the seal end pmviding for the delivery of the bonds to Seattle- Northwest Securities Corporation. Seattle, Washin&". ERcctive: 11/1/2001 Complete text of these ordinances is nvailable at Rentnn City Hall, 1055 South Grndy Way; and pasted at the Rentnn Public Libraries, 100 Mill Avenue South and 2902 NE 12th Stnct. Upon request to the City Clerk's 06~. (4261 430-6510. wpies will also be mailed for a fee. Ronnie 1. Waltnn City Clerk Published in the &"ton Reporter October 27,2007. #864353. Honorable Mayor and City Council City of Renton, Washington November 26,2007 Page 2 method of disclosure continues to be approved by the Securities and Exchange Commission for such purposes). The Ordinance and this Purchase Agreement are collectively referred to herein as the "Documents." 2. Purchase and Sale Subject to the terms and conditions of this Purchase Agreement, the Underwriter hereby agrees to purchase from the Issuer for offering to the public and the Issuer hereby agrees to sell to the Underwriter all, but not less than all of the $9,975,000 aggregate principal amount of Water and Sewer Revenue Bonds, Series 2008A (the "Series 2008A Bonds") and $2,035,000 aggregate principal amount of Water and Sewer Revenue Bonds, Series 2008B (Taxable) (the "Series 2008B Bonds") (the Series 2008A Bonds and Series 2008B Bonds are together, the "Bonds"). The Bonds shall be dated, shall mature, shall bear interest, shall be payable, and shall have redemption provisions, all as set forth in Exhibit C attached hereto. The Underwriter's purchase price for the Bonds also is set forth in Exhibit C. 3. Fiscal Agent; Enhancement; Insurance a) As provided in the Ordinance, the fiscal agent of the State of Washington shall be the fiscal agent for the Bonds, serving as registrar, authenticating agent and paying agent (the "Bond Registrar"). The Bonds shall be payable and shall be secured as provided in the Ordinance and as described in the document entitled Preliminary Official Statement, which is dated November 16, 2007 and which describes the Issuer and the Bonds (the "POS"). b) Payment when due of the regularly scheduled principal of and interest on the Bonds shall be insured by a municipal bond insurance policy (the "Policy") issued by MBIA Insurance Corporation (the "Insurer"). 4. Offering The Underwriter agrees to make a bonafide public offering of all the Bonds, at prices not in excess of the initial public offering prices or at yields not lower than the initial yields as set forth in Exhibit C attached hereto. 5. Official Statement a) In the Ordinance, the Issuer has ratified and "deemed final" the POS for purposes of Rule 15c2-12 of the Securities Exchange Act of 1934, as amended (the "Rule"). The Issuer approves and ratifies the use and distribution by the Underwriter of the POS in connection with the public offering for sale of the Bonds by the Underwriter. Honorable Mayor and City Council City of Renton, Washington November 26,2007 Page 3 b) The final official statement shall be substantially in the form of the POS with only such changes permitted by the Rule as shall have been reviewed by the Underwriter (such final official statement, incorporating such changes, if any, shall be referred to herein as the "Final Official Statement"). The Issuer shall cooperate with the Underwriter in the preparation of the Final Official Statement for delivery within seven (7) business days after the date hereof and, in any event, for delivery in sufficient time to accompany any order confirmation from the Underwriter to its customer, and in sufficient time to permit the Underwriter to comply with the provisions of the Rule and with all applicable rules of the Municipal Securities Rulemaking Board. c) The Issuer will not amend or supplement the Final Official Statement without the consent of the Underwriter. The Issuer agrees to notify the Underwriter promptly if, on or prior to the 25Ih day after the End of the Underwriting Period (as defined below), any event shall occur, or information come to the attention of the Issuer, that would cause the Final Official Statement (whether or not previously supplemented or amended), as of its date, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If, in the opinion of the Issuer, such event requires the preparation and distribution of a supplement or amendment to the Final Official Statement, the Issuer at its expense and with Underwriter's assistance, shall amend or supplement the Final Official Statement in a form and manner approved by the Underwriter and will provide such number of copies of the supplement or amendment to the Final Official Statement, as the Underwriter may reasonably request. For purposes of this Purchase Agreement, the "End of the Underwriting Period" shall occur on the Closing Date. 6. Representations, Warranties and Covenants The Issuer represents, warrants and covenants to the Underwriter that as of the date hereof and as of the Closing Date: a) The Issuer is a municipal corporation duly organized and validly existing under the laws and Constitution of the State of Washington; b) The Issuer has duly adopted the Ordinance and it is a valid, legal and binding ordinance of the Issuer; c) The Issuer is duly authorized and has full legal right, power, and authority to issue, sell and deliver the Bonds and perform its obligations under the Documents; d) The Ordinance is in full force and effect and has not been superseded, rescinded or amended; Honorable Mayor and City Council City of Renton, Washington November 26,2007 Page 4 e) The Issuer has full legal right, power and authority to and will apply or cause to be applied the proceeds of the Bonds as described in the Ordinance; f) The execution of and performance by the Issuer of its obligations under the Documents will not cause the Issuer to be (i) in violation of any constitutional provision, law, court decree, administrative regulation or judgment or (ii) in material default under any loan agreement, indenture, bond, note, resolution or other material agreement or instrument to which the Issuer is a party or to which the Issuer or any of its properties or assets is otherwise subject; g) All governmental approvals or authorizations required to be obtained by the Issuer prior to the Closing in connection with the issuance and delivery of the Bonds or the performance by the Issuer of its obligations under the Documents have been or will be obtained prior to Closing; h) No filing or registration of the Ordinance or other instrument or financing statement is required to be made to create, protect or preserve the pledge of revenues under the Ordinance or is required for the validity and enforceability of the Ordinance; i) As of the Closing, the Bonds will be legal, valid and binding obligations of the Issuer, and, subject only to the laws of bankruptcy and insolvency, will be enforceable in accordance with their terms and will be in full force and effect; j) Except as described in the Final Official Statement there is no action, suit, proceeding, inquiry or investigation before or by any court, governmental agency, public board or body pending or; to the knowledge of the Issuer, threatened against the Issuer, (i) in any way questioning the legal existence of the Issuer or the titles of the officers of the Issuer to their respective offices; (ii) in any way affecting or contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of the Bonds; (iii) wherein an unfavorable decision, ruling, or finding would have a material adverse effect on the collection and application of revenues that may be collected for the benefit of the Issuer for the payment of the Bonds, the financial condition of the Issuer, or would have an adverse effect on the validity or enforceability of the Bonds or the Ordinance, or which would in any way adversely affect the exclusion of interest on the Series 2008A Bonds from gross income for federal income tax purposes; or (iv) contesting the completeness or accuracy of the POS or the Final Official Statement; and (v) to the actual knowledge of the Issuer, there is no reasonable basis for any action, proceeding, inquiry or investigation of the nature described in the foregoing clauses (i) through (iv); k) The financial statements of the Issuer contained in the Final Official Statement fairly present the financial position of the Issuer as of the dates and for the periods therein set forth in accordance with the accounting standards applicable to the Honorable Mayor and City Council City of Renton, Washington November 26,2007 Page 5 Issuer, and since the date thereof, there has been no material adverse change in the financial position of the Issuer; 1) In connection with the financing process, the Underwriter may have provided the format for and certain of the content for inclusion in the POS and may have assumed principal drafting responsibility for the preparation of the POS and may coordinate the preparation and dissemination of the Final Official Statement. The Issuer understands and acknowledges, however, that the ultimate responsibility for the POS and the Final Official Statement with respect to content, accuracy and completeness is the responsibility of the Issuer as an issuer of municipal securities. The Issuer hereby represents and warrants to the Underwriter that the POS did not, as of its date, and the Final Official Statement will not, as of its date and at the Closing Date, contain any untrue statement of material fact nor 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; provided, however, that no representation or warranty is made with respect to information within the POS or the Final Official Statement relating to DTC, the book entry system, the Insurer or the Underwriter; and m) The Issuer has not failed to comply with any prior undertaking under the Rule in the past five years. 7. Termination The Underwriter may terminate its obligation under this Purchase Agreement, without liability therefor, by notifying the Issuer of its election to do so in writing if, after the execution of this Purchase Agreement and prior to the Closing, any one or more of the following events shall have occurred such event, in the reasonable opinion of the Underwriter (i) would materially and adversely affect the marketability of the Bonds or the prices or yields of the Bonds as set forth in Exhibit C, or (ii) would materially and adversely affect the Underwriter's ability to enforce contracts for the sale of the Bonds: a) A material disruption in commercial banking or securities settlement or clearance services; or b) The United States shall have become engaged in hostilities or existing hostilities shall have escalated or a national emergency or other national or international calamity, including but not limited to terrorist attack(s) or other event; or c) A general suspension of trading or other material restrictions not in force as of the date of this Purchase Agreement on the New York Stock Exchange or other national securities exchange; or d) Declaration of a general banking moratorium by the United States, New York State or Washington State authorities; or Honorable Mayor and City Council City of Renton, Washington November 26,2007 Page 6 e) Legislation with respect to eliminating or reducing the exemption fiom federal or state taxation for interest income received on obligations of the general character of Series 2008A Bonds shall be introduced or enacted by the legislature of the State of Washington or by Congress of the United States or adopted by either the United States House of Representatives or the United States Senate or shall have been recommended to the Congress or otherwise endorsed for passage by the Treasury Department of the United States, the Internal Revenue Service or by the chairman of the Senate Finance Committee or a decision or an order or ruling with respect to eliminating or reducing such exemption, shall have been issued by a court of the United States, including the United States Tax Court, or by or on behalf of the Treasury Department of the United States or the Internal Revenue Service; or f) Legislation shall hereafter be enacted, or actively considered for enactment, or a decision by a court of the United States shall hereafter be rendered, or a ruling, stop order or regulation by the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter shall hereafter be made, the effect of which is or would be that the offering and sale of the Bonds would be illegal or that: i) The Bonds are not exempt from the registration, qualification or similar requirements of the Securities Act of 1933, as amended and as then in effect (the "33 Act") or distribution of the Bonds, as contemplated herein or in the Final Official Statement. is in violation of or not exemvt from the registration, qualification or other requirements of the 33 Act, as amended and as then in effect, or the Securities Exchange Act of 1934, as amended - and then in effect or the Investment Company Act of 1940, as amended and then in effect (the "Investment Company Act") or, in each case, the rules or regulations promulgated thereunder as then in effect; or ii) The Ordinance is not exempt from the registration, qualification or other requirements of the Trust Indenture Act of 1939, as amended and as then in effect; or iii) This Purchase Agreement is subject to the Investment Company Act or requires any registration under the Investment Company Act; or g) Any litigation, except as described in the Final Official Statement, shall be instituted or pending at Closing to restrain or enjoin the authorization, issuance, execution, sale or delivery of the Bonds or the execution and delivery of any of the Documents, or in any way contesting or affecting any authority for or the validity or enforceability of the Bonds, the Ordinance or any of the other Documents, any moneys or securities provided for the payment of the Bonds or the existence or powers of the Issuer; or Honorable Mayor and City Council City of Renton, Washington November 26,2007 Page 7 h) Any legislation, ordinance, rule or regulation shall be introduced in or enacted by any governmental body, board, department or agency of Washington State or of the United States, or a decision by any court of competent jurisdiction within Washington State or any court of the United States shall be rendered materially affecting the Issuer or the Bonds; or i) There shall have been established any new restrictions on transactions in securities materially affecting the free market for securities or the extension of credit by, or the charge to the net capital requirements of the Underwriter, including without limitation, the fixing of minimum or maximum prices for trading or maximum ranges of prices, by any exchange, the Securities and Exchange Commission, any other federal or state agency or the Congress of the United States, or by Executive Order; or j) Except for such changes to the Final Official Statement as provided in Section 5(c) of this Purchase Agreement, there shall have been a material adverse change in the affairs of the Issuer or there shall exist any event or fact or set of facts that either (a) makes untrue or incorrect in any material respect any statement or information contained in the Final Official Statement or (b) is not reflected in the Final Official Statement but should be reflected therein to make the statements and information contained therein under the circumstances in which made not misleading in any material respect; or k) The withdrawal or downgrading of any rating of the Bonds by a national rating agency from those shown in (c)(i) of Exhibit B. 8. Closing; Conditions of Closing The Closing shall occur on such date and at such time and place as is set forth in Exhibit C or otherwise agreed between the Issuer and the Underwriter, and subject to the satisfaction of the terms and conditions of this Purchase Agreement. At Closing, the following shall occur: the Issuer will deliver the duly executed Bonds or cause to be delivered to the fiscal agent for re-delivery through Fast Automated Transfer System to DTC and will deliver or cause to be delivered to the Underwriter the Ordinance; the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in Exhibit C hereof in same day funds. The Issuer shall cause the applicable CUSIP identification numbers to be printed on the Bonds of each maturity, but neither the failure to print such number on any such Bond nor any error with respect thereto shall constitute cause for a failure or refusal by the Underwriter to accept delivery of and to pay for the Bonds. The Bonds shall be prepared and delivered to the Bond Registrar at or prior to the Closing Date. In addition to the other requirements of this Purchase Agreement, Underwriter's obligations hereunder are subject to and conditioned upon Issuer, at or prior to the Honorable Mayor and City Council City of Renton, Washington November 26,2007 Page 8 Closing Date, delivering or making available to Underwriter copies of the Documents and such items as are listed in Exhibit B attached hereto and incorporated herein. 9. Fees and Expenses The Issuer will pay the cost of preparing, printing and executing the Bonds; the fees and disbursements of Bond Counsel and Financial Advisor; bond registration and rating fees and expenses; the bond insurance premium; the financial advisor fee; the cost of printing and distributing the POS and Final Official Statement; travel and lodging expenses of the Issuer's employees and representatives; and other expenses of the Issuer. The Underwriter will pay fees and disbursements of its counsel, if any, the cost of preparation and filing of blue sky and legal investment surveys where necessary, the Underwriter's travel expenses, and other expenses of the Underwriter. As a convenience to the Issuer, the Underwriter may from time to time, but only upon the prior written direction from the Issuer, make arrangements for certain items for which Issuer is responsible hereunder, such as printing of the POS and the Final Official Statement and travel or lodging arrangements for the Issuer's representatives. The Underwriter also may advance for the Issuer's account when appropriate and when directed in advance in writing by the Issuer, the cost of the items for which the Issuer is responsible by making payments to third-party vendors. In such cases, the Issuer shall pay such costs or expenses directly, upon submission of appropriate invoices by the Underwriter, or promptly reimburse the Underwriter in the event the Underwriter has advanced such costs or expenses for the Issuer's account. It is understood that the Issuer shall be primarily responsible for payment of all such items and that the Underwriter may agree to advance the cost of such items from time to time solely as an accommodation to the Issuer and on the condition that it shall be reimbursed in full by the Issuer. 10. Miscellaneous a) All matters relating to the Purchase Agreement shall be governed by the laws of the state of Washington. b) This Purchase Agreement is intended to benefit only the parties hereto. Unless it can be shown that the untruth of any representation or warranty of the Issuer or the violation of any agreement of the Issuer hereunder actually was or should have been discovered by the Underwriter through its review of the information in the Final Official Statement in accordance with and as a part of its responsibilities under federal securities laws as applied to the facts and circumstances of this transaction, all representations and warranties and agreements of the Issuer in this Purchase Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of the Underwriter, (ii) delivery of and payment for the Bonds hereunder, or (iii) any termination of this Purchase Agreement. If the Issuer fails to satisfy any of the foregoing conditions or covenants, or if the Underwriter's obligations are terminated for any reason permitted under this Purchase Agreement, then neither the Underwriter nor the Honorable Mayor and City Council City of Renton, Washington November 26,2007 Page 9 Issuer shall have any Wher obligations under this Purchase Agreement, except that any expenses incurred shall be borne in accordance with the Fees and Expenses Section hereof. c) Any notice or other communication to be given to the Issuer by the Underwriter under this Purchase Agreement may be given by delivering the same in writing to the Finance & Information Services Administrator or other authorized official of the Issuer at 1055 South Grady Way, Renton, Washington 98055; and any notice or other communication to be given to the Underwriter by the Issuer under this Purchase Agreement may be given by delivering the same in writing to the attention of the officer of the Underwriter executing this Purchase Agreement at Seattle-Northwest Securities Corporation, 1420 Fifth Avenue, Suite 4300, Seattle, Washington, 98 101. Written communications may be delivered by electronic means. d) This Purchase Agreement may be executed in any number of counterparts, all of which shall be one and the same instrument, and either Party hereto may execute this Purchase Agreement by signing any such counterpart. e) This Purchase Agreement, including all documents incorporated herein by reference, constitutes the entire agreement between and among the Parties, supersedes any other representations, understandings or communications between the Parties or their representatives, and may be amended only in a writing signed by both Parties. This Purchase Agreement is intended solely for the benefit of the Parties (including any successors and assigns thereof but not any holder of any Bonds). No other person shall acquire or have any rights hereunder or by virtue hereof. Respectfully submitted, SEATTLE-NORTHWEST SECURITIES CORPORATION, as Purchaser BY \d r!v2~ Title: skior Vice ~rsident Accepted November 26,2007 City of Renton, Washington By: MY. hilichael E. Bailev \ '7; 35 Time Signed Finance & ~nformatidn Services Administrator EXHIBIT A FINAL PRICING NUMBERS BOND DEBT SERVICE City of Renton Water & Sewer Revenue Bonds, Series 2008A & 2008B Final Numbers Dated Date 01/04/2008 Delivery Date 01/04/2008 Period Ending Principal Coupon Interest 210,555.04 257,822.50 257,822.50 257,822.50 257,822.50 257,822.50 257,822.50 257,822.50 Annual Debt Service Debt Service 210,555.04 257,822.50 468,377.54 257,822.50 257,822.50 5 15,645.00 257,822.50 Nov 26, 2007 10:43 am Prepared by Seattle-Nonhwest Securities - TH (k:\analysis\dbc\city\RENTON:2008REV) Page 5 BOND PRICING City of Renton Water & Sewer Revenue Bonds, Series 2008A & 2008B Final Numbers Maturity Yicld to Call Call Call Date Call Price Premium Band Component Date Amount Rate Yield Pricc Maturity Date Price for Arb Yield for Arb Yield (-Discount) Serial Bands (Series 20088 -Taxable): Serial Bonds (Series 2008A - Exempt): 12/01/2016 12/01/2017 Dated Date Delivery Datc First Coupon Par Amount 12.010,OOO.OO Premium 12,85165 Production 12,022,85165 100.107008% Underwriter's Discount -67.61630 -0.563000% Purchase Price Accrued Interest Net Proceeds 11,955,235.35 Nov 26, 2007 10:43 am Prepared by Seattle-Northwest Securities - TH (k:\analysis\dbc\city\RENTON:2008REV) Page 2 SOURCES AND USES OF FUNDS City of Renton Water & Sewer Revenue Bonds, Series 2008A & 20088 Final Numbers Dated Date 01/04/2008 Delivery Date 01/04/2008 Sources: 08REV 08REVTX Total Bond Proceeds: Par Amount Orininal Issue Discount - Premium Other Sources of Funds: Reserve Fund Contribution 3,145,309.00 3_ 145,309.00 Uses: O8REV OBREVTX Total Project Fund Deposits: Project Fund Delivery Date Expenses: Cost of Issuance Underwriter's Discount 56i159.25 11;457.05 67i616.30 Bond Insurance (MBIA @ 18.2 bps) 28,820.36 5,879.64 34,700.00 Surely Policy (1.5%) 45,431.52 9,268.48 54,700.00 168,949.02 34,467.28 203,416.30 Nov 26, 2007 10:43 am Prepared by Seattle-Nonhwest Securities - TH (k:\analysis\dbc\city\RENTON:2008REV) Page I EXHIBIT B CLOSING DOCUMENTS Issuer's Closing Documents At Closing, Issuer shall provide the following: a) Copies of the Ordinance and the Blanket Issuer Letter of Representation; b) The approving opinions of Bond Counsel dated as of the Closing Date and addressed to the Issuer, substantially in the forms set forth in Appendix B to the Final Official Statement and two letters addressed to the Insurer to the effect that the Insurer may rely upon such opinion as if they were addressed to the Insurer; c) Evidence of each of the following: i) That Standard & Poor's ("S&P") has assigned its (i) underlying rating of "AA-" to the Bonds and that such rating is in full force and effect on and as of the date of Closing and (ii) insured rating of "AAA", based upon the Issuer's purchase of the Policy issued by the Insurer; ii) That Fitch Ratings ("Fitch") has assigned its (i) underlying rating of "AA-" to the Bonds and that such rating is in full force and effect on and as of the date of Closing and (ii) insured rating of "AAA", based upon the Issuer's purchase of the Policy issued by the Insurer; iii) Issuer's purchase of the Policy, including a copy of the Policy and an opinion of counsel to the Insurer in form and substance satisfactory to the Underwriter; and iv) designation of the Series 2008A Bonds as "qualified tax-exempt obligations" for banks, thrift institutions and other financial institutions, as defined in Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. d) A copy of completed Form 8038-G; e) The following certifications, which may be combined, executed by an authorized officer of the Issuer and dated as of the Closing Date, to the effect that: i) The representations, warranties and covenants of the Issuer contained herein and in the Ordinance are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; ii) No litigation or other proceedings are pending or, to the knowledge of the Issuer, threatened in any court in any way (a) affecting the position or title of the authorized officers of the Issuer, or (b) seeking to restrain or to enjoin the authorization, issuance, sale or delivery of, or security for, any of the Bonds, or (c) contesting or affecting the validity or enforceability of the Bonds, the Ordinance, this Purchase Agreement, or (d) contesting the completeness or accuracy of the POS or the Final Official Statement, or (e) contesting the powers of the Issuer or its authority with respect to the Bonds, the Ordinance or this Purchase Agreement, or (f) materially affecting the finances of the Issuer. For the purpose of this subparagraph, the Issuer may rely upon a certificate of the Issuer's legal counsel with respect to the legal matters set forth therein; iii) No event affecting the Issuer has occurred since the date of the Final Official Statement which should be disclosed in the Final Official Statement for the purpose for which it is to be used or which is necessary to disclose therein in order to make the statements therein not misleading, and the Final Official Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; f) Such additional certificates, instruments or opinions or other evidence as the Underwriter or Bond Counsel may deem reasonably necessary or desirable to evidence the due authorization, issuance, execution, authentication and delivery of the Bonds, the truth and accuracy as of the time of the Closing of the representations and warranties contained in this Purchase Agreement, and the conformity of the Bonds and Ordinance with the terms thereof as summarized in the POS and the Final Official Statement, and to cover such other matters as the Underwriter or Bond Counsel reasonably requests. Underwi-iter's Closing Documents At Closing, Underwriter shall deliver or cause to be delivered to the Issuer or Bond Counsel a receipt for the Bonds including therein a representation that all closing conditions set forth in this Purchase Agreement have been provided to the satisfaction of the Underwriter or waived by it. EXHIBIT C DESCRIPTION OF THE BONDS (a) Principal Amount (Series 2008A Bonds): $9,975,000 Principal Amount (Series 2008B Bonds): $2,035,000 (b) Purchase Price (Series 2008A Bonds): $9,943,133.25 ($99.680534 per $loo), representing a net original issue premium of $24,292.50 and an underwriter's discount of $56,159.25. Purchase Price (Series 2008B Bonds): $2,012,102.10 ($98.874796 per $loo), representing a net original issue discount of $1 1,440.85 and an underwriter's discount of $1 1,457.05. (c) Denominations: $5,000, or integral multiples thereof (d) Form: Registered; Book-entry only (e) Interest Payment Dates: June 1 and December 1, commencing June 1,2008. (f) Maturity and Interest Rates: The Bonds shall mature on December 1 of each year and bear interest as follows: Series 2OO8A Bonds Due December 1 2016 Amounts 480,000 695,000 565,000 645,000 720,000 760,000 790,000 980,000 1,020,000 1,060,000 1,105,000 1,155,000 Interest Rates - -- - - - - 4.00% 4.00 5.00 4.00 4.00 4.00 4.00 4.10 4.15 4.20 4.25 4.30 1) Priced to the call. Series 2008B Bonds (g) Optional Redemption: The Series 2008A Bonds maturing on December 1 in years 2016 and 2017 are not subject to redemption prior to maturity. The Series 2008A Bonds maturing on or after December 1, 2018 are subject to redemption at the option of the Issuer, in whole or in part on any date on or after December 1, 201 7 at a price of par plus accrued interest, if any, to the date of redemption. The Series 2008B Bonds are not subject to redemption prior to maturity. (h) Dated Date: (i) Offer Expires: 6) Bond Counsel: (k) Closing: (1) Delivery: (m) Bond Insurance: (n) Ratings: Date of Delivery, expected to be January 4,2008. 11:59 p.m. Pacific Time, November 26,2007. K&L Preston Gates Ellis LLP Via conference call initiated by Bond Counsel on January 4,2008, at 9:00 a.m. To the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer. Payment of the principal of and interest on the Bonds, when due, will be insured by the Policy to be issued by the Insurer (MBIA Insurance Corporation) simultaneously with the delivery of the Bonds. S&P and Fitch will assign their ratings of "AAA" and "AAA" respectively, to the Bonds based on the Issuer's purchase of the Policy described above. Further, S&P and Fitch have assigned their underlying ratings of "AA-" and "AA-," respectively, to the Bonds. PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 16, 2007 City of Renton, Washington $10,000,000 (1) Water and Sewer Revenue Bonds, Series 2008A $2,020,000 (1) Water and Sewer Revenue Bonds, Series 2008B (Taxable) DATED: Date of Delivery DUE: December 1, as shown on the inside cover STANDARD & POOR’S RATING—AA-, underlying; AAA, insured (see “Security for the Bonds – Bond Insurance” and “Ratings” herein). FITCH RATING—AA-, underlying; AAA, insured (see “Security for the Bonds – Bond Insurance” and “Ratings” herein). SERIES 2008A BONDS BANK QUALIFIED—The City has designated the 2008A Bonds as “qualified tax-exempt obligations” for purposes of Section 265(b)(3)(B) of the Code. See “Tax Matters.” BOOK-ENTRY ONLY—The Bonds will be issued as fully registered bonds in denominations of $5,000, or integral multiples thereof, and will be registered in the name of Cede & Co., as bond owner and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Purchasers will not receive certificates representing their interest in the Bonds purchased. PRINCIPAL AND INTEREST PAYMENTS—Interest on the Bonds will be payable on June 1, 2008 and semiannually thereafter on December 1 and June 1 of each year to their maturity or earlier redemption of the Bonds. Principal of and interest on the Bonds will be payable by the fiscal agency of the State of Washington, currently The Bank of New York, New York, New York, as further described herein. For so long as the Bonds remain in a “book-entry only” transfer system, the fiscal agent will make such payments only to DTC, which in turn will remit such principal and interest to its Participants for subsequent disbursement to Beneficial Owners of the Bonds as further described herein in Appendix C. MATURITY SCHEDULE LOCATED ON INSIDE COVER REDEMPTION—The Series 2008A Bonds are subject to redemption prior to their stated maturities as further described herein. See “Description of the Bonds – Redemption Provisions.” SECURITY—The principal of and interest on the Bonds are payable solely from and secured by the Net Revenue of the City’s combined Waterworks Utility, consisting of the water, wastewater and storm drainage systems. The Bonds are issued on a parity of lien with the Outstanding Parity Bonds and the City has reserved the right to issue Future Parity Bonds. For so long as the Bonds are outstanding, no bonds may be issued subsequent to the issuance of the Bonds with a lien and charge on the Net Revenues superior to the lien and charge of the Bonds. The Bonds are special obligations of the City payable only from amounts on deposit in the Bond Fund and the Reserve Fund. The Bonds are not general obligations of the City, the State of Washington (the “State”), or any other municipal corporation or political subdivision thereof, and neither the full faith and credit nor the taxing power of the City or the State of Washington are pledged to the payment of the Bonds. See “Security for the Bonds.” 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 MBIA INSURANCE CORPORATION TAX EXEMPTION—In the opinion of K&L Preston Gates Ellis LLP, (“Bond Counsel”), assuming compliance with certain covenants of the City, interest on the Series 2008A Bonds is excludable from gross income for federal income tax purposes under existing law. Interest on the Series 2008A Bonds is not an item of tax preference for purposes of either individual or corporate alternative minimum tax. Interest on the Series 2008A Bonds may be indirectly subject to corporate alternative minimum tax and certain other taxes imposed on certain corporations. See “Tax Matters – Series 2008A Bonds” herein for a discussion of the opinion of Bond Counsel. The City has taken no action to cause interest on the Bonds to be excluded from gross income for the purposes of federal income taxation. See “Tax Matters – Series 2008B Bonds” herein. DELIVERY—The Bonds are offered for sale to the original purchaser subject to the final approving legal opinions of Bond Counsel. It is expected that the Bonds will be available for delivery to the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer on or about January 4, 2008. (1) Preliminary, subject to change. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. This is a Preliminary Official Statement, subject to correction and change. The City has authorized the distribution of the Preliminary Official Statement to prospective purchasers and others. Upon the sale of the Bonds, the City will complete and deliver an Official Statement substantially in this form. PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 16, 2007 City of Renton, Washington $10,000,000 (1) Water and Sewer Revenue Bonds, Series 2008A $2,020,000 (1) Water and Sewer Revenue Bonds, Series 2008B (Taxable) DATED: Date of Delivery DUE: December 1, as shown on inside cover Maturity Schedule $10,000,000 (1) Water and Sewer Revenue Bonds, Series 2008A Due Interest Price or Due Interest Price or Dec. 1 Amount(1) Rate Yield CUSIP Dec. 1 Amount(1) Rate Yield CUSIP 2016 $ 525,000 % 2022 $ 785,000 % 2017 700,000 2023 975,000 2018 570,000 2024 1,020,000 2019 640,000 2025 1,055,000 2020 720,000 2026 1,100,000 2021 760,000 2027 1,150,000 $2,020,000 (1) Water and Sewer Revenue Bonds, Series 2008B (Taxable) Due Interest Price or Due Interest Price or Dec. 1 Amount(1) Rate Yield CUSIP Dec. 1 Amount(1) Rate Yield CUSIP 2013 $ 615,000 % 2015 $ 640,000 % 2014 610,000 2016 155,000 (1) Preliminary, subject to change. City of Renton, Washington 1055 South Grady Way Renton, Washington 98055 Phone: (425) 430-6400 Fax: (425) 430-6516 www.rentonwa.gov* Mayor and City Council Denis W. Law Mayor Terri Briere Councilmember Dan Clawson Councilmember Randy Corman Councilmember Marcie Palmer Councilmember King Parker Councilmember Don Persson Councilmember Greg Taylor Councilmember City Officials Jay Covington Chief Administrative Officer Michael E. Bailey Finance & Information Services Administrator Bonnie Walton City Clerk Gregg Zimmerman Public Works Administrator Bond Counsel K&L Preston Gates Ellis LLP Seattle, Washington Financial Advisor Piper Jaffray & Co. Seattle, Washington Bond Registrar The Bank of New York New York, New York * The City’s website is not part of this Official Statement, and investors should not rely on information presented in the City’s website in determining whether to purchase the Bonds. This inactive textual reference to the City’s website is not a hyperlink and does not incorporate the City’s website by reference. This Official Statement does not constitute an offer to sell the Bonds in any jurisdiction in which or to a person to whom it is unlawful to make such an offer. No dealer, salesperson or other person has been authorized by the City the Financial Advisor, or the Underwriter to give any information or to make any representations, other than those contained herein, in connection with the offering of the Bonds and, if given or made, such information or representations must not be relied upon. The City makes no representation regarding the accuracy or completeness of the information provided in Appendix C—Book Entry Transfer System, which has been furnished by DTC. Estimates and opinions are included and should not be interpreted as statements of fact. Summaries of documents do not purport to be complete statements of the provisions. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of the City since the date hereof. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The City will “deem final,” for the sole purpose of the Underwriter’s compliance with Securities and Exchange Commission (“SEC”) Rule 15c2-12(b)(1), this Preliminary Official Statement as of its date, except for the omission of information as to offering prices, interest rates, selling compensation, aggregate principal amount, principal amount per maturity, maturity dates, options of redemption, delivery dates, and other terms of the Bonds dependent on such matters. In connection with this offering, the Underwriter may over-allot or effect transactions that stabilize or maintain the market price of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The CUSIP numbers are included on the inside cover of this Official Statement for convenience of the holders and potential holders of the Bonds. No assurance can be given that the CUSIP numbers for the Bonds will remain the same after the date of issuance and delivery of the Bonds. i This page left blank intentionally. ii Table of Contents Page Description of the Bonds ...................................................................................................................................................1 Authorization for Issuance .........................................................................................................................................1 Principal Amount, Date, Interest Rates and Maturities .............................................................................................1 Bond Registrar and Registration Features .................................................................................................................2 Book-Entry Bonds ......................................................................................................................................................2 Redemption Provisions ..............................................................................................................................................2 Purchase .....................................................................................................................................................................3 Purpose and Use of Proceeds ............................................................................................................................................3 Purpose.......................................................................................................................................................................3 Estimated Sources and Uses of Funds .......................................................................................................................3 Security for the Bonds .......................................................................................................................................................4 Rate Covenant ............................................................................................................................................................4 Flow of Funds.............................................................................................................................................................4 Funds and Accounts...................................................................................................................................................5 Additional Covenants ................................................................................................................................................6 Future Parity Bonds ...................................................................................................................................................7 Junior Lien Obligations ..............................................................................................................................................8 Defeasance of the Bonds ............................................................................................................................................8 Bond Insurance...........................................................................................................................................................9 Indebtedness of the Waterworks Utility .........................................................................................................................12 Outstanding Long-Term Borrowings ......................................................................................................................12 Subordinate Lien Debt .............................................................................................................................................13 Water and Sewer Revenue Bonds – Debt Service Requirements ....................................................................................13 Debt Payment Record ..............................................................................................................................................13 Future Financings.....................................................................................................................................................13 Authorized Investments ..................................................................................................................................................14 Local Government Investment Pool ........................................................................................................................14 Authorized Investments for Bond Proceeds ............................................................................................................14 The Waterworks Utility ...................................................................................................................................................15 The Water Utility......................................................................................................................................................15 The Wastewater Utility ............................................................................................................................................17 Waterworks Utility Capital Improvement Plan.......................................................................................................21 Delinquent Accounts................................................................................................................................................21 Endangered Species Act ...........................................................................................................................................21 The City ...........................................................................................................................................................................24 City Staff ...................................................................................................................................................................24 Labor Relations ........................................................................................................................................................25 Pension System.........................................................................................................................................................25 Other Post Employment Benefits .............................................................................................................................27 Budgetary Policies....................................................................................................................................................28 Risk Management.....................................................................................................................................................28 Auditing of City Finances ........................................................................................................................................28 Demographic Information ...............................................................................................................................................29 Initiative and Referendum ..............................................................................................................................................32 State Initiatives .........................................................................................................................................................32 Tax Matters – Series 2008A Bonds...................................................................................................................................33 Qualified Tax-Exempt Obligations ..........................................................................................................................34 Tax Matters – Series 2008B Bonds ...................................................................................................................................34 Ratings .............................................................................................................................................................................38 Continuing Disclosure Undertaking ...............................................................................................................................38 Legal and Underwriting ..................................................................................................................................................39 Approval of Counsel ................................................................................................................................................39 Litigation ..................................................................................................................................................................40 Official Statement .....................................................................................................................................................40 Underwriting............................................................................................................................................................40 Financial Advisor .....................................................................................................................................................40 Concluding Statement ..............................................................................................................................................40 Bond Ordinance..........................................................................................................................................................Appendix A Opinions of Bond Counsel......................................................................................................................................... Appendix B Book-Entry Transfer System......................................................................................................................................Appendix C 2006 Audited Financial Statements ..........................................................................................................................Appendix D Municipal Bond Insurance Policy Specimen........................................................................................................... Appendix E iii This page left blank intentionally. iv OFFICIAL STATEMENT City of Renton, Washington $10,000,000* Water and Sewer Revenue Bonds, Series 2008A $2,020,000* Water and Sewer Revenue Bonds, Series 2008B (Taxable) The City of Renton, Washington (the “City”), a municipal corporation duly organized and existing under and by virtue of the laws of the State of Washington (the “State”) furnishes this Official Statement in connection with the offering of $10,000,000* aggregate principal amount of Water and Sewer Revenue Bonds, Series 2008A (the “Series 2008A Bonds”) and $2,020,000* aggregate principal amount of Water and Sewer Revenue Bonds, Series 2008B (Taxable) (the “Series 2008B Bonds”). The Series 2008A Bonds and Series 2008B Bonds are together, the “Bonds.” This Official Statement provides information concerning the City, the Bonds and the City’s waterworks utility, including the water, wastewater and storm drainage systems (together, the “Waterworks Utility”). The Bonds are issued on a parity of lien with the City’s outstanding $3,485,000 Water and Sewer Revenue Refunding Bonds, 1998 (the “1998 Bonds”); $3,340,000 Water and Sewer Revenue Bonds, 2002 (the “2002 Bonds”); $3,800,000 Water and Sewer Revenue Refunding Bonds, 2003 (the “2003 Bonds”); $10,335,000 Water and Sewer Revenue Bonds, 2004 (the “2004 Bonds”); and $9,750,000 Water and Sewer Revenue and Refunding Bonds, 2007 (the “2007 Bonds”). The 1998 Bonds, the 2002 Bonds, the 2003 Bonds, the 2004 Bonds and the 2007 Bonds are referred to herein as “Outstanding Parity Bonds.” The City has reserved the right in the Bond Ordinance (as defined herein) to issue additional bonds on a parity of lien with the Outstanding Parity Bonds and the Bonds, subject to certain conditions described herein. The Outstanding Parity Bonds, the Bonds and any Future Parity Bonds are referred to herein as “Parity Bonds.” Certain capitalized words and phrases used in this Official Statement have the meanings as defined in the Bond Ordinance attached hereto in Appendix A. Description of the Bonds Authorization for Issuance The Bonds are issued pursuant to Ordinance No. 5313 adopted by the City Council (the “Council”) on October 22, 2007 (the “Bond Ordinance”), and Resolution No. _____ adopted by the Council on ___________, 2007 and under and in accordance with the laws and provisions of the State, including chapters 35.92, 39.46 and 39.53 Revised Code of Washington (“RCW”). The Bond Ordinance authorized the issuance of the 2007 Bonds and the Bonds for the purpose of financing a plan of improvements to the Waterworks Utility. The Bonds will be issued on a parity of lien with the Outstanding Parity Bonds. Principal Amount, Date, Interest Rates and Maturities The Series 2008A Bonds will be issued in the aggregate principal amount of $10,000,000 * and the Series 2008B Bonds will be issued in the aggregate principal amount of $2,020,000* and will be dated and bear interest from the date of initial delivery to the Underwriter. The Bonds will mature on the dates and in the principal amounts and will bear interest (payable semiannually on June 1 and December 1, first interest payable June 1, 2008) at the respective rates as set forth on the inside cover of this Official * Preliminary, subject to change. Statement. Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30- day months. Bond Registrar and Registration Features The Bonds will be issued as fully registered bonds and, when issued, will be registered in the name of Cede & Co. as Bond Owner and as nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Individual purchases and sales of the Bonds may be made in book-entry form only in minimum denominations of $5,000 within a single maturity and integral multiples thereof. Purchasers (“Beneficial Owners”) will not receive certificates representing their interest in the Bonds. Principal of and interest on the Bonds will be payable by the State fiscal agent, currently The Bank of New York (the “Bond Registrar”). So long as Cede & Co. is the registered owner of the Bonds, principal of and interest on the Bonds are payable by wire transfer by the Bond Registrar to DTC, which, in turn, is obligated to remit such principal and interest to its participants for subsequent disbursement to the Beneficial Owners of the Bonds, as further described herein in Appendix C. Book-Entry Bonds DTC will act as securities depository for the Bonds. The ownership of one fully registered Bond for each maturity of the Bonds, as set forth on the cover of this Official Statement, each in the aggregate principal amount of such maturity, will be registered in the name of Cede & Co., as nominee for DTC. See Appendix C attached hereto for additional information. Procedure in the Event of Revisions of Book-Entry Transfer System. If DTC resigns as the securities depository and the City is unable to retain a qualified successor to DTC, or the City has determined that it is in the best interest of the City not to continue the book-entry system of transfer or that interests of the Beneficial Owners of the Bonds might be adversely affected if the book-entry system of transfer is continued, the City will execute, authenticate and deliver at no cost to the Beneficial Owners of the Bonds or their nominees, Bonds in fully registered form, in the denomination of $5,000 or any integral multiple thereof within a maturity. In the event the Bonds are transferred by the City to fully registered form, the payments of principal and interest on the Bonds will be made by the Bond Registrar. Principal of the Bonds will be payable upon due presentment and surrender thereof at the office designated by the Bond Registrar. Under the State’s current fiscal agency agreement, the Bonds also may be presented for payment in the State of Washington at any office of Wells Fargo Bank, National Association. Interest on the Bonds will be payable by check or draft mailed to the owners of the Bonds at the address appearing on the Bond Register on the 15th day of the month preceding an interest payment date, and the Bonds will be transferable as provided in the Bond Ordinance. Redemption Provisions Optional Redemption. The Series 2008A Bonds maturing on or prior to December 1, 2017 are not subject to redemption prior to their scheduled maturity. The Series 2008A Bonds maturing on or after December 1, 2018 are subject to redemption at the option of the City on and after December 1, 2017, in whole or in part (maturities to be selected by the City and by lot within a maturity in such manner as the Bond Registrar shall determine) on any date, at a price of par plus accrued interest, if any, to the date of redemption. For as long as the Series 2008A Bonds are in book-entry only form, if fewer than all of the Series 2008A Bonds of a maturity are called for redemption, the selection of Series 2008A Bonds within a maturity to be redeemed shall be made by DTC in accordance with its operational procedures then in effect. See Appendix C attached hereto. If the Series 2008A Bonds are no longer held in book-entry only form, then the Bond Registrar would select Series 2008A Bonds for redemption as provided in the Bond Ordinance. The Series 2008B Bonds are not subject to redemption prior to maturity. 2 Notice of Redemption. For so long as the Series 2008A Bonds are held in book-entry only form, notice of redemption shall be given in accordance with the operational arrangements of DTC as then in effect, and neither the City nor the Bond Registrar will provide any notice of redemption to any Beneficial Owners. It is the sole responsibility of the DTC Participants to provide notice of redemption to individual Beneficial Owners of the Series 2008A Bonds. If the Series 2008A Bonds are no longer held in book-entry form, notice of redemption shall be given by or on behalf of the City not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the Owner of any Bond to be redeemed at the address appearing on the Bond Register on the day notice is mailed, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the Owner of any Bond. Purchase The City reserves the right in the Bond Ordinance to purchase any of the Bonds offered to the City at any price deemed reasonable by the City at any time. Purpose and Use of Proceeds Purpose A portion of the proceeds of the Bonds will be used, together with the proceeds of the 2007 Bonds issued on November 6, 2007, to finance the following improvements to the Wastewater Utility (together, the “Projects”): (i) the design and construction of electrical power generators in critical water pumping facilities for emergency uses; (ii) the design and construction of a 4.2 million gallon reservoir; (iii) the construction of a new lift station; (iv) the planning, designing and construction of a storm system; (v) the replacement of an existing culvert; and (vi) other miscellaneous projects of the Waterworks Utility. Estimated Sources and Uses of Funds The proceeds from the Bonds are estimated to be applied as follows: Sources of Funds Par Amount of Series 2008A Bonds (1) $ 10,000,000 Net Premium/(Discount) Par Amount of Series 2008B Bonds (1) 2,020,000 Net Premium/(Discount) Reserve Fund Contribution Total Sources of Funds $ Uses of Funds Series 2008A Bonds Series 2008A Project Requirements $ Series 2008A Costs of Issuance (2) Series 2008A Total Series 2008B Bonds Series 2008B Project Requirements Series 2008B Costs of Issuance (2) Series 2008B Total Total Uses of Funds $ (1) Preliminary, subject to change. (2) Includes a portion of the following costs of issuance allocable to the relevant series: bond counsel fee, rating fee, bond insurance, Reserve Fund surety, underwriter’s discount, and other costs associated with the issuance of the Bonds. 3 Security for the Bonds The Bonds are payable from the Gross Revenue of the Waterworks Utility subject only to the payment of the Maintenance and Operation Expenses. The Bonds constitute and lien and charge on the Net Revenue prior and superior to any other charges whatsoever except that the lien and charge on such revenue for the Bonds will be on a parity with the lien and charge thereon for the Outstanding Parity Bonds. The City has reserved the right in the Bond Ordinance to issue Future Parity Bonds on a parity of lien with the Bonds and the Outstanding Parity Bonds. The Bonds are a special limited obligation of the City payable only from amounts on deposit in the Waterworks Revenue Bond Fund (the “Bond Fund”) and the Waterworks Revenue Bond Reserve Fund (the “Reserve Fund”). See “Funds and Accounts” below. The Bond Fund will at all times be completely segregated and set apart from all other funds and accounts of the City for the security and the payment of the principal of and interest on the Parity Bonds, as they become due. The Bonds are not an obligation of the State or any political subdivision thereof other than the City, and neither the full faith and credit nor the taxing power of the City or the State are pledged to the payment of the Bonds. Rate Covenant The City has covenanted that 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: Gross Revenue will at all times be sufficient to pay all Maintenance and Operation Expense on a current basis, pay when due all amounts that the City is obligated to pay into the Reserve Fund and any Parity Bond Funds and 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 Net Revenue in each calendar year will be at least equal to 1.25 times the Maximum Annual Debt Service (the “Coverage Requirement”). Once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, the term “Coverage Requirement” will mean 1.25 times the Annual Debt Service in any calendar year. Flow of Funds Gross Revenue of the Waterworks Utility will be deposited into the Waterworks Utility Fund (the “Waterworks Utility Fund”), previously created by the City pursuant to Ordinance No. 250. Gross Revenue on deposit in the Waterworks Utility Fund (other than in any bond redemption or federal rebate account) will be held separate and apart from all other funds and accounts of the City and will be used in the following order of priority: (1) To pay Maintenance and Operation Expense; (2) To pay the interest on the Parity Bonds, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (3) To pay the principal of the Parity Bonds, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (4) To make all payments required to be made into any sinking fund or bond redemption fund created by ordinance for the payment of Future Parity Bonds which are Term Bonds; (5) To make all payments required to be made into the Reserve Fund, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or 4 Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (6) 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 Parity Bonds; and (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, to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. Funds and Accounts Bond Fund. The Bond Fund will be maintained for the purpose of paying the principal of and interest on the Bonds. As long as any Bond remains outstanding, the City irrevocably obligates and binds itself in the Bond Ordinance to set aside and pay from the Waterworks Utility Fund into the Bond Fund those amounts necessary, together with such other funds as are on hand and available in the Bond Fund, to pay the interest or principal and interest next coming due on outstanding Bonds. Such payments from the Waterworks Utility Fund to the Bond Fund will be made in a fixed amount without regard to any fixed proportion following the closing and delivery of the Bonds on or before each date on which an installment of interest or principal and interest falls due on the Bonds equal to the installment of interest or principal and interest. Reserve Fund. The Reserve Fund has previously been created by the City for purpose of securing the payment of the principal of and interest on all bonds to which Net Revenue is pledged. The City covenants and agrees in the Bond Ordinance that on or prior to the date of issuance of the Bonds, the amount on deposit in the Reserve Fund will be at least equal to the Reserve Requirement. The “Reserve Requirement” is currently defined as Maximum Annual Debt Service which means, at the time of calculation, the maximum amount of annual debt service that will mature or come due in the current calendar year or any future calendar year on the outstanding Parity Bonds. Once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, the term “Reserve Requirement” with respect to any issue of Parity Bonds will mean the lesser of (a) Maximum Annual Debt Service on all Outstanding Parity Bonds and (b) 125% of average Annual Debt Service on all Outstanding Parity Bonds; provided, that the amount required to be deposited with respect to any Future Parity Bonds in order to meet the Reserve Requirement will not exceed 10% of the net proceeds of such Future Parity Bonds. Except for withdrawals therefrom as authorized herein, 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. The City may, in lieu of cash and investments, obtain all or part of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained, to be issued by an institution that has been assigned a credit rating equal to or better then the highest then-existing rating for any of the Parity Bonds (“Reserve Insurance”). Upon delivery of the Bonds, the City will acquire Reserve Insurance with MBIA Insurance Corporation (“MBIA”) in the amount of $___________, which is an amount sufficient to, together with amounts on deposit in the Reserve Fund, satisfy the Reserve Requirement for all Outstanding Parity Bonds including the Bonds of this issue (see “Security for the Bonds – Bond Insurance: MBIA Surety Bond” herein). If there is 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 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 5 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. The City may, at any time, deposit Gross Revenue into 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 in Gross Revenue for any fiscal year of the City. 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 will be made into the Rate Stabilization Fund to the extent that such deposit would prevent the City from meeting the Coverage Requirement. The Rate Stabilization Fund is currently unfunded. Additional Covenants So long as any Parity Bonds are outstanding, the City has covenanted and agreed as follows: Maintenance and Repair. 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. Disposal of Waterworks Utility. It will not sell, lease, mortgage or in any manner encumber 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 the Bond Ordinance. Books and Records. 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 Bond 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. No Free Service. Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish or supply or permit the furnishing or supplying of any service or facility in connection with the 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. 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. Maintenance and Operation Expense. It will pay all Maintenance and Operation Expense and the debt service requirements for the outstanding Parity Bonds, and otherwise meet the obligations of the City as herein set forth. 6 Tax Covenants. It will undertake all actions required to maintain the tax-exempt status of interest on the Series 2008A Bonds under Section 103 of the Code. Future Parity Bonds In the Bond Ordinance the City reserves the right to issue Future Parity Bonds which will constitute a lien and charge on the Net Revenue of the Waterworks Utility on a parity with the Outstanding Parity Bonds and the Bonds, if the following conditions are met and complied with at the time of issuance of the Future Parity Bonds: (1) There is no deficiency in any Parity Bond Fund. (2) The ordinance providing for the issuance of such Future Parity Bonds provides for the payment of the principal thereof and interest thereon out of a Parity Bond Fund. (3) The ordinance providing for the issuance of such Future Parity Bonds provides for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds of (a) an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or (b) 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, or under certain circumstances, the City may 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. After the 1998 Bonds, the 2002 Bonds, and the 2003 Bonds are no longer outstanding, this subsection (3) will be amended to read as follows: (3) the ordinance providing for the issuance of such Future Parity Bonds provides for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds of (a) an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or (b) 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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security either on or prior to the date of issuance of such Future Parity Bonds or within three years from the date of issuance of the Future Parity Bonds in three approximately equal annual payments and in such event, the ordinance providing for the issuance of such Future Parity Bonds provides for such deposit. After the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, this subsection (3) will be further amended to read as follows: (3) the ordinance providing for the issuance of such Future Parity Bonds will provide for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds of (a) an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or (b) 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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security on or prior to the date of issuance of such Future Parity Bonds. (4) The ordinance authorizing the issuance of such Future Parity Bonds will 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. (5) There will be on file with the City either: (a) 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 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the 7 Future Parity Bonds proposed to be issued; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, a certificate of the City Finance Director demonstrating that during any 12 consecutive calendar months out of the immediately preceding 24 calendar months Net Revenue, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; or (b) a certificate of a Professional Utility Consultant that in such consultant's opinion Net Revenue for any 12 consecutive calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund, will be equal to 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, 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 24 calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund, will be equal to 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued. The certificate, in estimating Net Revenue available for debt services, may adjust Net Revenue to reflect: (i) any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; (ii) 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; (iii) income from any customers to be connected to the Waterworks Utility who have paid the required connection charges; (iv) 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; (v) 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; (vi) 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 (vii) 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 will 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. Junior Lien Obligations The City has reserved the right to issue revenue bonds or other obligations which would be a charge upon the Revenue Fund junior or inferior to that of any Outstanding Parity Bonds. As of September 1, 2007, the City had approximately $10,451,271 in outstanding subordinate lien debt. See “City Indebtedness – Subordinate Lien Debt.” Defeasance of the Bonds In the event that money and/or “Government Obligations,” as defined in the Bond Ordinance, maturing at such time or times and bearing interest to be earned thereon in amounts sufficient to redeem and retire the Bonds or any of them in accordance with their terms are set aside in a special account to effect such redemption or retirement and such money and the principal of and interest on such obligations are set aside irrevocably and pledged for such purpose, then no further payments need be made into the Bond Fund for the payment of the principal of and interest on the Bonds so provided for and such Bonds will cease to be entitled to any lien, benefit or security of the Bond Ordinance except the right to receive the funds so set aside and pledged, and such Bonds will be deemed not to be outstanding. 8 Bond Insurance The following information has been furnished by MBIA Insurance Corporation (“MBIA”) for use in this Official Statement, and the City and the Underwriter make no representations as to the accuracy or completeness thereof. Reference is made to Appendix E for a specimen of the Municipal Bond Insurance Policy for the Bonds (the “Policy”). The MBIA Insurance Corporation Insurance Policy MBIA does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Policy and MBIA set forth under the heading “The MBIA Insurance Corporation Insurance Policy”. Additionally, MBIA makes no representation regarding the Bonds or the advisability of investing in the Bonds. The MBIA Policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the City to the Paying Agent or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Bonds as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the MBIA Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless MBIA elects in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any Owner of the Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Owner within the meaning of any applicable bankruptcy law (a “Preference”). MBIA's Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Bonds. MBIA's Policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Bonds upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. MBIA's Policy also does not insure against nonpayment of principal of or interest on the Bonds resulting from the insolvency, negligence or any other act or omission of the Paying Agent or any other paying agent for the Bonds. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by MBIA from the Paying Agent or any owner of a Bond the payment of an insured amount for which is then due, that such required payment has not been made, MBIA on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such Bonds or presentment of such other proof of ownership of the Bonds, together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Bonds as are paid by MBIA, and appropriate instruments to effect the appointment of MBIA as agent for such owners of the Bonds in any legal proceeding related to payment of insured amounts on the Bonds, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or the Paying Agent payment of the insured amounts due on such Bonds, less any amount held by the Paying Agent for the payment of such insured amounts and legally available therefor. 9 MBIA Insurance Corporation MBIA Insurance Corporation (“MBIA”) is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company (the “Company”). The Company is not obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the State of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam. MBIA, either directly or through subsidiaries, is licensed to do business in the Republic of France, the United Kingdom and the Kingdom of Spain and is subject to regulation under the laws of those jurisdictions. In February 2007, MBIA Corp. incorporated a new subsidiary, MBIA México, S.A. de C.V. (“MBIA Mexico”), through which it intends to write financial guarantee insurance in Mexico beginning in 2007. The principal executive offices of MBIA are located at 113 King Street, Armonk, New York 10504 and the main telephone number at that address is (914) 273-4545. Regulation As a financial guaranty insurance company licensed to do business in the State of New York, MBIA is subject to the New York Insurance Law which, among other things, prescribes minimum capital requirements and contingency reserves against liabilities for MBIA, limits the classes and concentrations of investments that are made by MBIA and requires the approval of policy rates and forms that are employed by MBIA. State law also regulates the amount of both the aggregate and individual risks that may be insured by MBIA, the payment of dividends by MBIA, changes in control with respect to MBIA and transactions among MBIA and its affiliates. The Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Strength Ratings of MBIA Moody's Investors Service, Inc. rates the financial strength of MBIA “Aaa.” Standard & Poor's, a division of The McGraw-Hill Companies, Inc., rates the financial strength of MBIA “AAA.” Fitch Ratings rates the financial strength of MBIA “AAA.” Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of MBIA and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold the Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Bonds. MBIA does not guaranty the market price of the Bonds nor does it guaranty that the ratings on the Bonds will not be revised or withdrawn. MBIA Financial Information As of December 31, 2006, MBIA had admitted assets of $10.9 billion (audited), total liabilities of $6.9 billion (audited), and total capital and surplus of $4.0 billion (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of June 30, 2007, MBIA had admitted assets of $10.8 billion (unaudited), total liabilities of $6.8 billion (unaudited), and total capital and surplus of $4.0 billion (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. For further information concerning MBIA, see the consolidated financial statements of MBIA and its subsidiaries as of December 31, 2006 and December 31, 2005 and for each of the three years in the period 10 ended December 31, 2006, prepared in accordance with generally accepted accounting principles, included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2006 and the consolidated financial statements of MBIA and its subsidiaries as of June 30, 2007 and for the six month periods ended June 30, 2007 and June 30, 2006 included in the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2007, which are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof. Copies of the statutory financial statements filed by MBIA with the State of New York Insurance Department are available over the Internet at the Company’s web site at http://www.mbia.com and at no cost, upon request to MBIA at its principal executive offices. Incorporation of Certain Documents by Reference The following documents filed by the Company with the Securities and Exchange Commission (the “SEC”) are incorporated by reference into this Official Statement: (1) The Company’s Annual Report on Form 10-K for the year ended December 31, 2006; and (2) The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007. Any documents, including any financial statements of MBIA and its subsidiaries that are included therein or attached as exhibits thereto, filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the Company’s most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, and prior to the termination of the offering of the Bonds offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof from the respective dates of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Official Statement, shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. The Company files annual, quarterly and special reports, information statements and other information with the SEC under File No. 1-9583. Copies of the Company’s SEC filings (including (1) the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, and (2) the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2007 and June 30, 2007) are available (i) over the Internet at the SEC’s web site at http://www.sec.gov; (ii) at the SEC’s public reference room in Washington D.C.; (iii) over the Internet at the Company’s web site at http://www.mbia.com; and (iv) at no cost, upon request to MBIA at its principal executive offices. MBIA Surety Bond The City has obtained a commitment from MBIA to issue a surety policy (the “MBIA Surety Bond”) to meet the Reserve Requirement for the Outstanding Parity Bonds and the Bonds ($3,145,309). The MBIA Surety Bond will provide that upon notice from the Bond Registrar to MBIA to the effect that insufficient amounts are on deposit in the Bond Fund to pay the principal of (at maturity or pursuant to mandatory redemption requirements) and interest on the Outstanding Parity Bonds and the Bonds, MBIA will promptly deposit with the Bond Registrar an amount sufficient to pay the principal of and interest on the Outstanding Parity Bonds and the Bonds or the available amount of the MBIA Surety Bond, whichever is less. Upon the later of: (i) three days after receipt by MBIA of a Demand for Payment in the form attached to the MBIA Surety Bond, duly executed by the Bond Registrar or (ii) the payment date of the Bonds as specified in the Demand for Payment presented by the Bond Registrar to MBIA, MBIA will make a deposit of funds in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment to the Bond Registrar, of amounts which are then due to the Bond Registrar (as specified in the Demand for Payment) subject to the Surety Bond Coverage. 11 The available amount of the MBIA Surety Bond is the initial face amount of the MBIA Surety Bond less the amount of any previous deposits by MBIA with the Bond Registrar which have not been reimbursed by the City. The City and MBIA will enter into a Financial Guaranty Agreement dated as of the date of issuance of the Bonds (the “Agreement”). Pursuant to the Agreement, the City is required to reimburse MBIA, within one year of any deposit, the amount of such deposit made by MBIA with the Bond Registrar under the MBIA Surety Bond. Such reimbursement shall be made only after payment of Operating Expenses and required deposits to the Bond Fund have been made. Under the terms of the Agreement, the City is required to reimburse MBIA, with interest, until the face amount of the MBIA Surety Bond is reinstated before any deposit is made to the Bond Fund. No optional redemption of Bonds may be made until the MBIA Surety Bond is reinstated. The MBIA Surety Bond will be held in the Reserve Account and is provided as an alternative to the City depositing funds equal to the Reserve Requirement for Outstanding Parity Bonds and the Bonds. The MBIA Surety Bond will be issued in the face amount equal to the Reserve Requirement for the City and the premium therefor will be fully paid by the City at the time of delivery of the Bonds. Indebtedness of the Waterworks Utility The City may issue revenue bonds “…if it deems it advisable to purchase, lease, condemn, or otherwise acquire, construct, develop, improve, extend or operate any land, building, facility, or utility and adopts an ordinance which has been ratified by the voters of the city or town in those instances where it is required to be ratified by the voters…such city or town my issue revenue bonds against the special fund or funds created solely from revenues…” pursuant to chapter 35.41 RCW (the Municipal Revenue Bond Act). Outstanding Long-Term Borrowings The outstanding long term debt of the Waterworks Utility is composed of the following bond issues: Date of Maturity Amount of Outstanding Water and Sewer Revenue Bonds Issue Date Original Issue at 01/04/08 1998 Bonds 03/01/98 06/01/13 $ 6,120,000 $ 3,485,000 2002 Bonds 07/02/02 12/01/12 11,980,000 3,230,000 2003 Bonds 09/15/03 06/01/13 8,035,000 3,800,000 2004 Bonds 11/01/04 12/01/24 10,335,000 10,335,000 2007 Bonds 11/06/07 12/01/22 9,750,000 9,750,000 Series 2008A Bonds 01/04/08 12/01/27 10,000,000 (1) 10,000,000 (1) Series 2008B Bonds 01/04/08 12/01/16 2,020,000 (1) 2,020,000 (1) Total Parity Bonds Outstanding $ 58,240,000 $ 42,620,000 (1) Preliminary, subject to change. 12 Subordinate Lien Debt The following describes the City’s subordinate lien debt that are a charge upon the Net Revenue of the Waterworks Utility, outstanding as of September 1, 2007: Date of Maturity Amount of Outstanding Subordinate Lien Debt (1) Issue Date Original Issue at 09/01/07 Sierra Heights Sewer Improvements 01/20/92 2012 $ 888,462 $ 135,905 Central Renton Sewer Replacement 05/24/93 2015 1,631,800 655,111 East Renton Interceptor 06/07/93 2013 2,542,704 835,680 Dayton Avenue NE 05/12/94 2014 96,957 38,577 NE 27th/Aberdeen Drainage Imprvmnts. 05/15/95 2015 731,000 356,050 East Kennydale Interceptor 01/24/98 2016 2,093,740 1,104,275 Honeycreek Interceptor 12/04/95 2016 1,840,568 1,075,280 Corrosion Control Treatment Facilities 01/06/97 2017 1,106,000 520,715 Maplewood Water Improvements 01/22/02 2021 567,831 440,118 Const. CT Pipeline for Wells 11/05/02 2022 814,527 715,069 Maplewood Water Improvements 06/03/04 2024 4,892,500 4,574,491 Total Subordinate Lien Debt Outstanding $ 17,206,089 $ 10,451,271 (1) See “Historical Operating Results – Debt Service Coverage” for further information. Water and Sewer Revenue Bonds – Debt Service Requirements (1) Cal.Total Debt Years Principal Interest Principal Interest Principal Interest Service 2008 1,810,000$ 1,335,309$ 0$ 367,341$ 0$ 88,622$ 3,601,273$ 2009 1,890,000 1,242,944 0 404,413 0 97,566 3,634,922 2010 1,955,000 1,173,810 0 404,413 0 97,566 3,630,789 2011 2,030,000 1,100,720 0 404,413 0 97,566 3,632,699 2012 2,115,000 1,013,615 0 404,413 0 97,566 3,630,594 2013 1,000,000 929,988 0 404,413 615,000 97,566 3,046,966 2014 1,060,000 905,053 0 404,413 610,000 67,862 3,047,327 2015 1,100,000 863,475 0 404,413 640,000 38,399 3,046,286 2016 1,135,000 820,100 525,000 404,413 155,000 7,487 3,046,999 2017 1,200,000 763,350 700,000 384,725 0 0 3,048,075 2018 1,415,000 703,350 570,000 358,125 0 0 3,046,475 2019 1,425,000 645,450 640,000 336,180 0 0 3,046,630 2020 1,430,000 586,600 720,000 311,220 0 0 3,047,820 2021 1,480,000 526,950 760,000 282,780 0 0 3,049,730 2022 1,545,000 465,100 785,000 252,380 0 0 3,047,480 2023 1,450,000 400,500 975,000 220,588 0 0 3,046,088 2024 1,520,000 328,000 1,020,000 180,613 0 0 3,048,613 2025 1,600,000 252,000 1,055,000 138,283 0 0 3,045,283 2026 1,680,000 172,000 1,100,000 94,500 0 0 3,046,500 2027 1,760,000 88,000 1,150,000 48,300 0 0 3,046,300 Totals 30,600,000$ 14,316,313$ 10,000,000$ 6,210,334$ 2,020,000$ 690,199$ 63,836,846$ Outstanding Parity Bonds Series 2008B Bonds (3)Series 2008A Bonds (2) (1) Totals may not foot due to rounding. (2) Preliminary, subject to change; assumed interest rates range from 3.75% to 4.20%. (3) Preliminary, subject to change; assumed interest rates range from 4.83% to 5.17%. Debt Payment Record The City has promptly met all debt service payments on outstanding obligations. No refunding bonds have been issued to avoid an impending default. Future Financings Other than the Bonds, the City does not have current plans to issue any Future Parity Bonds within the next twelve months. 13 Authorized Investments Chapter 35.39 RCW limits the investment by cities and towns of its inactive funds or other funds in excess of current needs to the following authorized investments: United States bonds; United States certificates of indebtedness; bonds or warrants of the State and any local government in the State; its own bonds or warrants of a local improvement district which are within the protection of the local improvement guaranty fund law; and any other investment authorized by law for any other taxing district or the State Treasurer. Under chapter 43.84 RCW, the State Treasurer may invest in non-negotiable certificates of deposit in designated qualified public depositories; in obligations of the US government, its agencies and wholly owned corporations; in bankers’ acceptances; in commercial paper; in the obligations of the federal home loan bank, federal national mortgage association and other government corporations subject to statutory provisions and may enter into repurchase agreements. Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW 35.39.030). Money available for investment may be invested on an individual fund basis or may, unless otherwise restricted by law, be commingled within one common investment portfolio. All income derived from such investment may be either apportioned to and used by the various participating funds or for the benefit of the general government in accordance with city ordinances or resolutions. Funds derived from the sale of bonds or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances, resolutions or bond covenants may lawfully prescribe. Local Government Investment Pool The State Treasurer’s Office administers the Washington State Local Government Investment Pool (the “LGIP”), a fund that invests money on behalf of more than 350 cities, counties and special taxing districts. In its management of LGIP, the State Treasurer is required to adhere, at all times, to the principles appropriate for the prudent investment of public funds. These are, in priority order, (i) the safety of principal; (ii) the assurance of sufficient liquidity to meet cash flow demands; and (iii) to attain the highest possible yield within the constraints of the first two goals. Historically, the LGIP has had sufficient liquidity to meet all cash flow demands. The LGIP, authorized by chapter 43.250 RCW, is a voluntary pool which provides its participants the opportunity to benefit from the economies of scale inherent in pooling. It is also intended to offer participants increased safety of principal and the ability to achieve a higher investment yield than would otherwise be available to them. The pool is restricted to investments with maturities of one year or less, and the average life typically is less than 90 days. Investments permitted under the pool’s guidelines include U.S. government and agency securities, bankers’ acceptances, high quality commercial paper, repurchase and reverse repurchase agreements, motor vehicle fund warrants, and certificates of deposit issued by qualified Washington State depositories. As of October 1, 2007, the City’s investments at market value totaled $80,993,758, 41 percent of which was invested in certificates of deposit, 32 percent of which was invested in U.S. Federal Agency Securities and 27 percent of which was invested in the LGIP. Authorized Investments for Bond Proceeds In addition to the eligible investments discussed above, bond proceeds may also be invested in mutual funds with portfolios consisting of U.S. government and guaranteed agency securities with average maturities of less than four years; municipal securities rated in one of the four highest categories; and money market funds consisting of the same, so long as municipal securities held in the fund(s) are in one of the two highest rating categories of a nationally recognized rating agency. Bond proceeds may also be invested in shares of money market funds with portfolios of securities otherwise authorized by law for investment by local governments (RCW 39.59.030). 14 The Waterworks Utility 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. In November 2007, voters within the City approved an annexation of unincorporated land bordering the City which will increase the geographic size of the City by about one-third. City management does not expect any impacts to the Water Utility or the Wastewater Utility. The City will take over King County’s portion of the Storm Drainage Utility, but does not expect any significant impacts to the operations of the Waterworks Utility. The Water Utility Description. The Water Utility provides water service for fire protection and for domestic uses to an area approximately 16 square miles and to 16,699 customer accounts. In addition, the City supplies water on a wholesale basis to Skyway Water District through a single metered connection. The Water Utility consists of nine reservoirs with 18 million gallons of storage, 19 pump stations, two water treatment facilities, 300 miles of water mains, 3,440 fire hydrants and 16,669 water meters. Water treatment consists of chlorination, fluoridation and corrosion control for all active production wells, along with the removal of manganese, hydrogen sulfide, and ammonia from the raw water from the Maplewood wells. Current active and primary water supply sources include five wells, and one emergency well, drawing water from the Cedar Valley aquifer; three wells from the Maplewood aquifer; and one artesian spring, Springbrook Springs. The wells provide 85 percent of the City’s water production. In addition, the City maintains seven metered backup water supply interties with Seattle Public Utilities, one emergency intertie with the City of Kent and one emergency intertie with the City of Tukwila. Together, active, standby and emergency wells provide 18,900 gallons per minute (“GPM”) or 27.2 million gallons per day (“MGD”). Emergency interties with neighboring cities and water districts can provide 12,000 GPM or 17.3 MGD. In 2006, the maximum demand for water was 15.3 MGD and the average day demand was 8.0 MGD. Based on growth forecasts, the City has sufficient on-line supply capacity to meet demands through at least 2020, with the practice of water conservation efforts. The City’s historic water demands are shown in the following table: Water Utility Usage Average Daily Peak Day Usage (MGD) Usage (MGD) 2006 7.99 15.27 2005 7.31 13.03 2004 7.64 14.25 2003 7.58 14.08 2002 7.23 12.48 Source: City of Renton. Water Utility Customers. The City provides water to 16,699 customers of which approximately 77 percent are residential. Customer data by class for the last five years is presented below, as well as current revenues of the water system. 15 Number of Water Customers 2006 2005 2004 2003 2002 Single Family 12,786 12,656 11,927 11,742 11,357 Multi-Family, Commercial, Industrial, Other 2,725 2,766 2,699 2,755 2,700 Irrigation 651 637 561 480 427 Fire Service 500 495 474 475 474 Other (1) 37 31 24 39 44 Total 16,699 16,585 15,685 15,491 15,002 (1) Includes wholesale water provided to Skyway Water District through a single metered connection. Source: City of Renton. Water Billing 2006 2005 2004 2003 2002 Single Family $ 3,945,033 $ 3,583,975 $ 3,610,012 $ 3,499,510 $ 3,314,750 Multi-Family, Commercial, Industrial, Other 4,666,104 4,203,586 4,425,994 4,344,029 4,004,196 Fire Service 123,105 118,736 109,343 110,661 104,781 Boeing Seattle 101,106 81,294 123,037 122,235 136,675 Skyway Wholesale 98,666 91,961 96,373 99,476 100,661 Other 6,341 7,305 (690) (1) 6,921 6,145 Total $ 8,940,355 $ 8,086,857 $ 8,364,069 $ 8,182,832 $ 7,667,208 (1) Represent an inter-period billing adjustment. Source: City of Renton. The following table shows the City’s ten major water customers by annual revenue. Major 2006 Water Customers Total Amount Percent of Total Customer Billed for Water Water Billing Boeing $ 285,348 3.19% King County Metro 187,087 2.09 City of Renton 164,432 1.84 Public Hospital District No. 1 109,844 1.23 Skyway Water & Sewer District (1) 100,172 1.12 Service Linen Supply Inc. 83,736 0.94 Renton School District 64,762 0.72 Kenworth Truck Co. 63,308 0.71 Crestwood Park 58,526 0.65 HSC Real Estate/Axis Grand 57,097 0.64 Total $ 1,174,312 13.13% (1) Wholesale user. Source: City of Renton. Water Utility Rates and Charges. 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. On a historical basis, the City raised rates in 2004 for the first time since 1996 and implemented a water rate increase of five percent in 2007 over 2006. The City will raise rates an additional six percent in 2008. The City’s monthly water bills are calculated based on meter size and volume of water in hundreds of cubic feet (“ccf”) consumed. Effective January 1, 2007, monthly water service charges are as follows: 16 2007 Monthly Water Service Charge Meter Size Monthly Charge 3/4” $ 11.93 1” 14.94 1 ½” 19.14 2” 33.46 3” 99.08 4” 143.22 6” 214.86 8” 298.43 10” 429.72 12” 596.86 Source: City of Renton. 2007 Commodity Rates: 100 cf = 748 gallons Single Family/Duplex Monthly Charge 0 – 1,000 cf/month $2.01/100 cf Over 1,000 cf/month 2.14/100 cf All other users 2.01/100 cf Water rates for metered service outside of the City are 1.5 times the rate for metered service within the City. Water rates for fire protection service are $3.86 per month per meter inch. Rate Comparison of Neighboring Water Systems. Shown below are comparative water rate charges of other water utilities near the City: 2007 Single Family Monthly Water Rate Comparison Water System Monthly Rate (1) City of Issaquah $42.54 Cedar River Water & Sewer District 41.70 City of Redmond 36.55 Woodinville Water District 36.24 Coal Creek Utility District 34.50 City of Bellevue 34.25 City of Renton 32.03 NE Sammamish Sewer & Water District 28.06 City of Auburn 26.80 City of Tukwila 25.20 (1) Rate per 1,000 cubic feet. Source: Websites of individual municipalities. The Wastewater Utility Description. The Wastewater Utility system collects wastewater from residential and commercial customers and delivers it to King County through King County Metro (“Metro”) for treatment. The agreement between Metro and the City will terminate on July 1, 2056 with optional extensions. The existing system consists of 205 miles of wastewater pipelines, 26 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 Metro’s Renton Treatment Plant. Approximately 85 percent of the City is served by the system. The remaining area within the City is served by septic tanks or is undeveloped. 17 Wastewater Utility Customers. The City provides wastewater service to 17,246 accounts, 75 percent of which are residential. Customer data and usage by class for the last five years is presented below. Number of Wastewater Customers 2006 2005 2004 2003 2002 Single Family 12,979 12,463 11,910 11,265 10,653 Multi-Family, Commercial, Industrial, Other 4,210 4,202 4,193 4,101 4,053 Other 57 59 57 64 75 Total 17,246 16,724 16,160 15,430 14,781 Source: City of Renton. Wastewater Billing 2006 2005 2004 2003 2002 Single Family $ 2,098,330 $ 1,917,349 $ 1,762,487 $ 1,612,173 $ 1,494,207 Multi-Family, Commercial, Industrial, Other 2,186,926 2,071,222 2,032,966 1,962,503 1,855,133 Sewer Meter 116,652 21,795 32,185 91,915 102,389 Other 124,902 109,926 65,042 84,319 82,256 Total $ 4,526,810 $ 4,120,292 $ 3,892,680 $ 3,750,910 $ 3,533,985 Source: City of Renton. The following table shows the City’s ten major wastewater customers by annual revenue and volume. Major 2006 Wastewater Customers Total Amount Percent of Total Customer Billed for Wastewater Wastewater Billing Boeing $ 96,913 2.14% Public Hospital District No. 1 81,183 1.79 Service Linen Supply Inc. 60,226 1.33 Maplewood LLC 38,945 0.86 Crestwood Park 38,578 0.85 HSC Real Estate/Axis Grand 33,401 0.74 City of Renton 31,402 0.69 Draper Valley Farms 30,584 0.68 Royal Hills Preservation LP 30,207 0.68 Eagle Point Apartments 29,054 0.64 Total $ 470,494 10.39% Source: City of Renton. Wastewater Utility Rates and Charges. Effective January 1, 2007, the City increased Wastewater Utility rates by five percent over 2006. An additional 11 percent increase was assessed in 2007 for charges collected to pay Metro for wastewater treatment services. The City will raise rates an additional six percent beginning in 2008. Monthly rates for wastewater service within and outside the City effective January 1, 2007 are as follows: 18 2007 Monthly Wastewater Utility Rates Customer Type City of Renton Metro Single Family $ 14.67 $ 28.51 Other Users: Base Charge 2.22 N/A Per 100 cf 1.66 N/A Per 750 cf N/A 28.51 Source: City of Renton. Wastewater rates for metered service outside of the City are 1.5 times the rate for metered service within the City. As shown in the table above, in addition to the above monthly rates, a charge of $28.51 per month is payable to Metro for each single-family residence, or $28.51 per month for each multiple of 750 cf of water used by other classes of customers. This charge is paid to Metro for the collection and treatment of sewage. Rate Comparison of Neighboring Sewer Systems. Shown below are comparative sewer rate charges of other sewer utilities near the City: 2007 Single Family Monthly Sewer Base Rate Comparison Sewer System Monthly Rate City of Issaquah $49.65 Woodinville Water District 48.31 NE Sammamish Sewer & Water District 47.98 Cedar River Water & Sewer District 44.85 City of Renton 43.18 Coal Creek Utility District 40.86 City of Redmond 38.89 City of Bellevue 38.16 City of Auburn 37.76 City of Tukwila 36.75 Source: Websites of individual municipalities. Storm Drainage Utility Description. The Storm Drainage Utility system covers a service area within the existing City corporate boundaries of approximately 17.2 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 facilities located within public right-of-ways and easements dedicated for storm and surface water management purposes. The Storm Drainage Utility system consists of 215 miles of storm system pipe, includes 5,549 catch basins, 2,191 access manholes, 26 storm water retention/detention facilities and 40 miles of ditch systems and channels. The City’s Storm Drainage Utility currently serves 15,752 customers. Storm Drainage Utility Customers. The City provides storm drainage service to 15,744 customers of which approximately 90 percent are residential. Customer data by class for the last five years is presented below, as well as current revenues of the storm drainage system. Number of Storm Drainage Customers 2006 2005 2004 2003 2002 Single Family 14,137 13,636 12,930 12,380 11,855 Other 1,607 1,611 1,593 1,593 1,586 Total 15,744 15,247 14,523 13,973 13,441 Source: City of Renton. 19 Storm Drainage Billing 2006 2005 2004 2003 2002 Single Family $ 912,417 $ 847,402 $ 805,763 $ 773,503 $ 745,167 High Intensity 868,579 879,110 870,057 876,500 867,554 Medium Intensity 598,059 543,388 540,395 532,670 524,975 Low Intensity 337,816 293,425 329,854 325,927 306,241 Other 186,607 167,187 176,729 188,964 192,961 Total $ 2,903,478 $ 2,730,512 $ 2,722,798 $ 2,697,564 $ 2,636,898 Source: City of Renton. The following table shows the City’s ten major storm drainage customers by annual revenue. Major 2006 Storm Drainage Customers Total Amount Percent of Total Customer Billed for Storm Storm Billing City of Renton $ 218,867 7.54% Boeing 142,897 4.92 Renton School District 38,831 1.34 King County Dept. of Transportation 32,471 1.12 Washington State DOT 32,295 1.11 Kenworth Truck Co. 31,435 1.08 King County Metro 31,192 1.07 Stoneway Rock & Recycling 25,295 0.87 Roundup Co. Inc. 20,409 0.70 Valley Medical Center 18,865 0.65 Total $ 592,558 20.41% Source: City of Renton. Storm Drainage Utility Rates and Charges. Effective January 1, 2007, the City increased Storm Drainage Utility rates by three percent over 2006. The City will raise rates an additional 6.5 percent in 2008. There will also be a rate increase of 28.5 percent in 2008 to manage the National Pollutant Discharge Elimination System permit program. The permit, which was issued on January 17, 2007, is a requirement of the Federal Clean Water Act and requires certain actions of the City to maintain compliance. These include maintenance of the Storm Drainage Utility system, public education, mapping of outfalls and the implementation of an illicit discharge detection and elimination program. The City will be adding of 4.7 new full-time equivalent employees in 2008 to accomplish this work. Monthly rates for storm drainage service within and outside the City effective January 1, 2007 are as follows: 2007 Monthly Storm Drainage Utility Rates Type Monthly Charge Single Family $ 5.39 Low Intensity – less than 0.5 acres 14.16/acre Low Intensity – greater than 0.5 acres 28.33/acre Medium Intensity – less than 0.5 acres 20.49/acre Medium Intensity – greater than 0.5 acres 40.96/acre High Intensity – less than 0.5 acres 26.42/acre High Intensity – greater than 0.5 acres 52.83/acre Source: City of Renton. 20 Waterworks Utility Capital Improvement Plan The following is a list of future projects the City is undertaking as a part of its capital improvement plan for the years 2008 through 2013 for the Waterworks Utility system: Project Description Est. Cost (000s) Water Utility Development $ 16,050 Major Maintenance 11,620 Regulatory Compliance 1,260 Total Six-Year Water Utility Project Costs 28,930 Wastewater Utility Development 3,700 Major Maintenance 12,530 Regulatory Compliance 20 Total Six-Year Wastewater Utility Project Costs 16,250 Storm Drainage Utility Development 9,375 Major Maintenance 4,735 Regulatory Compliance 1,090 Total Six-Year Storm Drainage Utility Project Costs 15,200 Total Six-Year Waterworks Utility Project Costs $ 60,380 Summary of Funding Sources Operating $ 10,922 Bonds(1)/Loans 32,305 System Development Charges/Sewer Assessment District (2) 9,223 Undetermined 7,930 Total Six-Year Summary of Funding Sources $ 60,380 (1) Includes the Bonds. (2) A funding mechanism for sewer extensions. Source: 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. Endangered Species Act In planning future projects, the City evaluates the construction and operation of the facilities to determine if there will be any impact on endangered species through the use of site evaluations, special environmental studies, and preparation of State Environmental Policy Act (“SEPA”) checklists or environmental impact statements, as appropriate. Alternatives are developed to minimize or avoid impacts on endangered species. Where federal permits or funding are involved, the City also complies with the Endangered Species Act’s “consultation” requirement, which serves to evaluate and address any potential effect on endangered species. Best management practices are employed during routine operation and maintenance activities to minimize impacts on the environment. 21 Water-Sewer Fund Historical Operating Results – Debt Service Coverage (Years Ending December 31) 2006 2005 2004 2003 2002 Operating Revenues Charges for services 25,982,868$ 26,427,386$ 26,003,272$ 24,551,329$ 22,123,070$ Other operating revenue 1,114,349 1,142,062 1,099,530 1,227,428 1,686,652 Total Operating Revenues 27,097,217 27,569,448 27,102,802 25,778,757 23,809,722 Operating Expenses (1) Operations and maintenance 4,899,649 4,410,143 4,487,536 3,962,259 13,193,177 Administrative and general 13,388,969 12,645,317 11,968,588 10,501,393 2,560,881 Taxes 1,989,785 1,837,664 1,869,739 2,526,867 1,741,414 Total Operating Expenses 20,278,403 18,893,124 18,325,863 16,990,519 17,495,472 Net Income from Operations 6,818,814 8,676,324 8,776,939 8,788,238 6,314,250 Non-Operating Revenues (2) Interest revenues 653,291 319,912 198,428 155,363 135,938 Other non-operating revenues (expenses)160,233 523,411 (3)19,586 142,290 44,757 Transfers in (out)68,446 9,300 10,300 40,000 (10,079) Total Non-Operating Income 881,970 852,623 228,314 337,653 170,616 Net Income 7,700,784 9,528,947 9,005,253 9,125,891 6,484,866 Adjustment to Revenues Connection/system development charges 1,030,460 1,089,394 1,548,762 914,091 1,181,830 Available for Parity Bond Debt Service 8,731,244 10,618,341 10,554,015 10,039,982 7,666,696 Parity Debt Service 1993 Bonds 0 0 0 0 1,268,452 1994 Bonds 0 0 0 0 200,925 1998 Bonds 725,428 723,141 499,765 500,643 311,973 2002 Bonds 649,543 678,255 666,255 664,130 228,804 2003 Bonds 1,227,748 1,198,248 1,319,248 48,608 0 2004 Bonds 507,480 507,480 42,290 0 0 Parity Bond Debt Service 3,110,198 3,107,124 2,527,558 1,213,381 2,010,154 Available for Other Purposes 5,621,046$ 7,511,217$ 8,026,458$ 8,826,601$ 5,656,543$ Parity Bond Debt Service Coverage 2.81 3.42 4.18 8.27 3.81 PWTF Loans 889,143$ 889,143$ 631,643$ 670,172$ 620,274$ Debt Service Coverage including PWTF Loans 2.18 2.66 3.34 5.33 2.91 Audited (1) Excludes Depreciation. (2) Excludes Interest Expense and Amortization of Debt. (3) Approximately $500,000 of this amount was from a State tax refund. Source: City of Renton. The Maximum Annual Debt Service for the Outstanding Parity Bonds, including the Bonds, is projected to be $3,657,521 in 2009. Based on the 2006 audited financial statement for the Waterworks Utility, debt service coverage is calculated at 2.39 times the Maximum Annual Debt Service. 22 Water-Sewer Fund Historical Statement of Net Assets (Years Ending December 31) 2006 2005 2004 2003 2002 Assets Current assets: Cash & cash equivalents 12,479,315$ 8,505,117$ 7,299,781$ 6,170,463$ 2,297,256$ Investments at fair value 520,000 1,970,979 3,722,272 755,491 6,666,250 Receivables (net)3,257,279 5,131,540 4,756,799 4,451,097 4,301,063 Due from other funds 56,328 115,389 40,199 48,137 45,505 Due from other governmental units 197,446 203,238 225,073 245,455 291,415 Inventory of materials and supplies 271,754 301,512 316,643 331,434 316,062 Noncurrent assets: Restricted cash 3,114,332 3,114,332 3,114,332 2,606,852 4,265,423 Special assessments deferred 62,966 68,269 54,200 61,325 0 Capital assets (net)205,585,486 200,918,126 191,635,436 176,376,760 167,573,971 Deferred charges and other assets 761,729 812,857 888,729 769,107 221,039 Total Assets 226,306,635$ 221,141,359$ 212,053,464$ 191,816,121$ 185,977,984$ Liabilities Current liabilities: Accounts payable 1,148,019$ 298,397$ 406,419$ 479,194$ 379,627$ Retainage payable 52,481 72,452 55,674 118,482 117,163 Due to other funds 50,676 103,865 51,919 47,563 45,546 Due to other governmental units (1)0 0 2,095,948 674,336 726,743 Accrued interest payable 161,874 167,338 106,955 481,279 237,978 Accured employee wages 181,740 176,081 157,062 31,813 30,962 Accrued taxes payable 35,147 25,989 48,305 49,741 47,821 Custodial accounts 37,919 30,659 27,299 24,829 28,519 Deferred revenue 280,764 138,805 125,884 83,308 183,469 Revenue bonds payable 1,740,000 1,680,000 1,630,000 1,475,000 1,635,000 Long-term liabilities: Revenue bonds payable 29,010,000 30,750,000 32,430,000 23,725,000 25,490,000 Unamortized premium 468,747 533,445 533,491 177,953 0 Unamortized discount (401,585) (474,931) (552,031) (629,130) (705,211) Deferred amount on rev. bond rfdg.84,903 97,482 110,060 122,638 0 Accrued employee wages 371,552 344,139 343,312 265,857 379,648 PWTF loan payable (1)10,692,020 11,581,165 6,254,360 6,909,275 7,495,393 Total Liabilties 43,914,257$ 45,524,886$ 43,824,657$ 34,037,138$ 36,092,658$ Net Assets Invested in capital assets 164,143,466$ 156,906,961$ 149,225,132$ 144,267,485$ 112,116,546$ Restricted 3,114,332 3,114,332 3,114,332 2,606,852 9,620,966 Unrestricted 15,134,580 15,595,180 15,889,343 10,904,646 28,147,814 Total Net Assets 182,392,378$ 175,616,473$ 168,228,807$ 157,778,983$ 149,885,326$ Total Liabilities and Net Assets 226,306,635$ 221,141,359$ 212,053,464$ 191,816,121$ 185,977,984$ Audited (1) Public Works Trust Fund loans were previously categorized as “Due to other governments,” but were re- allocated as a long-term liability in 2005 and 2006. Source: City of Renton. 23 The City The City was incorporated in 1901 and operates under State laws applicable to a non-charter code city with a mayor-council form of government. The council is comprised of seven members plus the mayor. Councilmembers are elected to four-year terms on a staggered schedule through citywide elections. Councilmembers are part-time elected officials who exercise legislative authority and determine matters of policy for the City. Member Position Term Expires Denis W. Law Mayor December 31, 2011 (1) Terri Briere Councilmember December 31, 2009 Dan Clawson Councilmember December 31, 2009 Randy Corman Councilmember December 31, 2009 Marcie Palmer Councilmember December 31, 2011 (2) King Parker Councilmember December 31, 2011 (1) Don Persson Councilmember December 31, 2011 (2) Greg Taylor Councilmember December 31, 2011 (1) (1) Term effective January 1, 2008. (2) Re-elected. The City provides a range of municipal services authorized by State law, including police, fire, ambulance service, streets, sanitation, health, recreation, library, public improvements, planning and zoning, water supply treatment and distribution, and sewage collection and treatment services. City Staff 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. Mr. Covington earned a Bachelor’s degree in Business and Masters in Public Administration from Brigham Young University. Mr. Covington is a past President and Board Member of the Washington City/County Management Association as well as a past Board Member of the Association of Washington Cities. In 2005, Mr. Covington received the Public Official of the Year Award from the Seattle Municipal League. Michael E. Bailey, Finance & Information Services Administrator. Mr. Bailey joined City staff as Finance & Information Services Administrator in 2005. Mr. Bailey is a certified public accountant and prior to being appointed to his current position with the City, Mr. Bailey was employed as the Finance Director for the City of Lynwood since 1999, and previously served as the Finance Director for the cities of Everett and Wenatchee and the Metropolitan Park District of Tacoma. Mr. Bailey earned a Bachelor’s degree in Business Administration and Accounting and a Master’s degree in Public Administration, both from the University of Puget Sound. Mr. Bailey is a past President of the Washington Finance Officers Association, a past representative for the State of Washington to the National Finance Officers Association and was named “Business Person of the Year” by the National Future Business Leaders of America in 1998. Currently, Mr. Bailey is the Chair of the Government Finance Officers Association Technology Committee and Local Government Representative of the National Streamlined Sales Tax Governing Board. Gregg Zimmerman, Public Works Administrator. Mr. Zimmerman joined City staff as Public Works Administrator in 1992. In addition to managing the Waterworks Utility whose responsibilities include planning and designing the City’s water, wastewater, surface water, and solid waste utilities and setting utility rates, Mr. Zimmerman also manages the Maintenance Services Division (operates and maintains the City’s utilities and streets and the City vehicle fleet), the Transportation Systems Division (plans, designs, builds transportation projects; installs and maintains street signalization system; manages the Renton Municipal Airport) and the Development Services Division (in charge of reviewing and issuing 24 permits for private development projects and other land use actions within the City). Prior to joining the City, Mr. Zimmerman worked for consulting engineering firms in Seattle and Illinois. Mr. Zimmerman received his Bachelor’s degree in Civil Engineering from the University of Illinois and his current memberships include the American Water Works Association and the American Public Works Association. Labor Relations The City currently has approximately 592 full-time employees and 507 seasonal and part-time employees. The City enters into written bargaining agreements with represented employees. The agreements contain provisions regarding salaries, vacation, sick leave, medical and dental insurance, working conditions, and grievance procedures. The City strives to complete agreements with all groups in a timely manner, consistent with all applicable State law, and to promote labor relation policies mutually beneficial to management and employees. The City considers labor relations with its bargaining units to be good. There have been no recent strikes or major labor relations problems. Number of Bargaining Unit Employees Expiration Date AFSCME 293 December 31, 2008 Renton Police Officers’ Guild 89 December 31, 2008 Renton Police Officers’ Guild Non-Commissioned 41 December 31, 2008 Renton Firefighters Local 864 96 December 31, 2008 Renton Firefighters Local 864 Batalion Chiefs 7 December 31, 2008 Pension System Public Employees’ Retirement System (“PERS”). Substantially all of the City’s full-time and qualifying part- time employees, other than those covered under union plans, participate in PERS. This is a statewide local government retirement system administered by the Washington State Department of Retirement Systems, under cost-sharing, multiple-employer defined benefit public employee retirement plans. The PERS system includes three plans. Participants who joined the system by September 30, 1977, are PERS Plan I members. Those joining thereafter are enrolled in PERS Plan II. A third plan, entitled PERS Plan III, provides members with a defined benefit plan similar to PERS Plan II and the opportunity to invest their retirement contributions in a defined contribution plan. PERS Plan I members are eligible for retirement at any age after 30 years of service, at age 60 with five years of service, or at age 55 with 25 years of service. The annual pension is two percent of the average final compensation per year of service, capped at 60 percent. The average final compensation is based on the greatest compensation earned during any 24 eligible consecutive compensation months. PERS Plan II members may retire at age 65 with five years of service or at 55 with 20 years of service. The annual pension is two percent of the average final compensation per year of service. PERS Plan II retirements prior to 65 are actuarially reduced. On July 1 of each year following the first full year of retirement service, the benefit will be adjusted by the percentage change in the Consumer Price Index (“CPI”) of Seattle, capped at three percent annually. PERS Plan III is structured as a dual benefit program that will provide members with the following benefits: • A defined benefit allowance similar to PERS Plan II calculated as one percent of the average final compensation per year of service (versus a two percent formula) and funded entirely by employer contributions. • A defined contribution account consisting of member contributions plus the full investment return on those contributions. 25 Each biennium, the State Pension Funding Council adopts PERS Plan I employer contribution rates and PERS Plan II employer and employee contribution rates. Employee contribution rates for PERS Plan I are established by statute at six percent and do not vary from year to year. The employer and employee contribution rates for PERS Plan II are set by the director of the Department of Retirement Systems, based on recommendations by the Office of the State Actuary, to continue to fully fund PERS Plan II. Unlike PERS Plan II, which has a single contribution rate (which is currently 2.25 percent), with PERS Plan III, the employee chooses how much to contribute from one to six contribution rate options. Once an option has been selected, the contribution rate choice is irrevocable unless the employee changes employers. All employers are required to contribute at the level established by State law. The methods used to determine the contribution requirements are established under State statute in accordance with chapters 41.40 and 41.26 RCW. For the year ending December 31, 2006, the City’s contribution of $759,728, or 3.69 percent of covered payrolls, represents its full liability under the system, except that future rates may be adjusted to meet the system needs. Adopted PERS Employer Contribution Rates Effective Effective Effective Effective 7/1/06 1/1/07 7/1/07 7/1/08 Normal Rate 3.50% 3.50% 4.15% 4.83% PERS I Unfunded Liability 0.01 1.78 1.69 2.57 Gain Sharing 0.00 0.00 0.62 0.62 DRS Admin. Expense Rate 0.18 0.18 0.18 0.18 Total PERS Employer Rate 3.69% 5.46% 6.64% 8.20% Law Enforcement Officers’ and Fire Fighters’ Retirement System (“LEOFF”). LEOFF is a cost-sharing multiple- employer defined benefit pension plan. Membership in the plan includes all full-time, fully compensated local law enforcement officers, and fire fighters. The LEOFF system includes two plans. Participants who joined the system by September 30, 1977, are LEOFF Plan I members. Those joining thereafter are enrolled in LEOFF Plan II. Retirement benefits are financed from employee and employer contributions, investment earnings, and State contributions. Retirement benefits in both LEOFF Plan I and LEOFF Plan II are vested after completion of five years of eligible service. LEOFF Plan I members are eligible to retire with five years of service at age 50. The service retirement benefit is dependent upon the final average salary and service credit years at retirement. On April 1 of each year following the first full year of retirement service, the benefit will be adjusted by the percentage change in the CPI of Seattle. Term of Service Percent of Final Average 5-9 Years 1.0% 10-19 Years 1.5 20 or more years 2.0 LEOFF Plan II members are eligible to retire at the age of 50 with 20 years of service or at 53 with five years of service. Retirement benefits prior to age 53 are actuarially reduced at a rate of three percent per year. The benefit is two percent of the final average salary per year of service. The final average salary is determined as the 60 highest paid consecutive service months. There is no limit on the number of service credit years, which may be included in the benefit calculation. On July 1 of each year following the first full year of retirement service, the benefit will be adjusted by the percentage change in the CPI of Seattle, capped at three percent annually. 26 LEOFF Plan I employer and employee contribution rates are established by statute, and the State is responsible for the balance of the funding at rates set by the Pension Funding Council to fully amortize the total costs of the plan. Employer and employee rates for LEOFF Plan II are set by the director of the Department of Retirement Systems, based on recommendations by the Office of the State Actuary, to continue to fully fund the plan. LEOFF Plan II employers and employees are required to contribute at the level required by State law. The methods used to determine the contribution rates are established under State statute in accordance with chapters 41.26 and 41.45 RCW. For the year ending December 31, 2006, the City’s contribution to LEOFF I (for participants who joined the system by September 30, 1977) of 0.18 percent and to LEOFF II (participants who joined after September 30, 1977) of 4.9 percent of covered payroll totaled $718,633, representing its full liability under the system, except that future rates may be adjusted to meet the system needs. Historical trend information regarding all of these plans is presented in Washington State’s Department of Retirement Systems’ annual financial report. A copy of this report may be obtained at: Department of Retirement Systems Point Plaza West 1025 East Union Street P.O. Box 48380 Olympia, WA 98504-8380 Internet Address: www.drs.wa.gov According to information provided by the Office of State Actuary, the LEOFF System currently has no unfunded actuarial accrued liability. Other Post Employment Benefits The Government Accounting Standards Board (“GASB”) has issued a new standard concerning Accounting and Financial Reporting by Employers for Post Employment Benefits Other than Pensions (“GASB 45”). In addition to pensions, many state and local governmental employers provide other post employment benefits (“OPEB”) as a part of total compensation to attract and retain the services of qualified employees. OPEB includes post employment healthcare, as well as other forms of post employment benefits when provided separately from a pension plan. The new standard provides for the measurement, recognition and display of OPEB expenses/expenditures, related liabilities (assets), note disclosures, and if applicable, required supplementary information in the financial reports. This pronouncement is effective for the City for the fiscal year ending on December 31, 2007. The City provides medical benefits to retired firefighters and police officers who were hired prior to 1978 as required by chapter 41.26 RCW. Entry into this benefit system is closed. An actuarial study was completed by Nicolay Consulting on January 4, 2005. At that time, there were 106 participants in the system. The study found that the City’s Annual Required Contribution to fully fund the anticipated costs of $25,864,528 would be an average of $1,495,748 annually until 2035. Currently there are 98 LEOFF I retirees who receive necessary medical and hospitalization coverage and five retirees who are covered solely by the Fire Pension Plan and receive medical coverage limited to treatment of service-related disabilities only. The City does not have a funding policy at this time and no assets are designated for this purpose. During 2006, the City’s payment of $1,151,205 was recognized for post employment healthcare. State statute provides that the City’s responsibility for medical payments of LEOFF I retirees is secondary to any other coverage retirees receive or are eligible to receive. The City recognizes a potential savings exists when retirees utilize Medicare as primary coverage and the City for secondary coverage and ineligible expenses. Therefore, upon reaching age 65, the City requires the retirees to apply for and 27 utilize Medicare Part B coverage. The City reimburses these Medicare premiums at an average cost of approximately $88.50 per month for 47 LEOFF I retirees and five Fire Pension retirees. Budgetary Policies The City budgets it funds in accordance with chapter 35A.33 RCW. Annual appropriated budgets are adopted for the general, special revenue, debt service, and capital projects funds on the cash basis of accounting and include fund balances. The City provides a reconciliation of the differences between the budgetary basis and GAAP each year in its Comprehensive Annual Financial Report. The City Council annually adopts a budget by ordinance establishing appropriations for City funds, and during the year may authorize supplemental appropriations. Administrative and legal budgetary control is established at the fund level, i.e., expenditures for a fund may not exceed the total appropriation amount. The Mayor or Chief Administrative Officer may authorize transfers of appropriations within a fund however interfund transfers must be approved by ordinance of the Council. Risk Management The City insures its risk exposure up to specified levels of risk as determined by the City, and purchases excess 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. The City is a member of the Washington Cities Insurance Authority comprised of approximately 121 public agencies located in the State of Washington. Shown below are the City’s insurance limits through the Washington Cities Insurance Authority. Coverage Type Risk Retention Per Occurrence Stop Gap Loss Limit Property $ 25,000 $ 500,000,000* Liability 250,000 14,000,000* Auto Liability 250,000 14,000,000* Equipment Breakdown 5,000 50,000,000 Public Officers 250,000 10,000,000 Crime 10,000 1,000,000 Airport Liability 0 100,000,000 Underground Storage Tank 5,000 1,000,000 Worker’s Compensation 350,000 1,000,000 Employee Health 140,000 N/A __________________ * Stop Gap Loss Limit is per occurrence with the property coverage subject to limits. Auditing of City Finances Accounting systems and budgetary controls are prescribed by the Office of the State Auditor in accordance with RCW 43.09.200 and RCW 43.09.230. State statutes require audits for cities the size of the City to be conducted by the Office of the State Auditor. The City complies with the systems and controls prescribed by the Office of the State Auditor and establishes procedures and records which reasonably assure safeguarding of assets and the reliability of financial reporting. The State Auditor is required to examine the affairs of cities at least once every two years, however the City requests annual audits. The examination must include, among other things, the financial condition and resources of the City, whether the laws and constitution of the State are being complied with, and the methods and accuracy of the accounts and reports of the City. Reports of the auditor’s examinations are required to be filed in the office of the State Auditor and in the finance department of the City. The audited financial statements of the City for the year ended December 31, 2006, attached as Appendix D, are incorporated by reference to this Official Statement. 28 Demographic 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 2007 population estimates, the City ranked fifth in size among cities in King County (the “County”). The City had a population of 60,290 as estimated in 2007 by the State Office of Financial Management, an increase of 20 percent since the 2000 Census reporting a population of 50,052. The County had an estimated population of 1,861,300 as reported in 2007. King County Washington Established in 1852, the County covers more than 2,200 square miles and is nearly twice as large as the average county in the United States. A part of the Seattle-Bellevue-Everett Primary Metropolitan Statistical Area (PMSA), the County is the largest metropolitan county in the State in terms of population, number of cities, and employment. Major contributors to the area’s economy are manufacturing, technology-based business, the Port of Seattle, services industry, tourism, fishing and agriculture. Population King County and Cities of Seattle and Renton King City of City of Year County Seattle Renton 2007 1,861,300 586,200 60,290 2006 1,835,300 578,700 58,360 2005 1,808,300 573,000 56,840 2004 1,788,300 572,600 55,360 2003 1,779,300 571,900 54,900 Source: Washington State Office of Financial Management, August 2007. Income. Historic personal income and per capita income levels for the County and the State are shown below: King County and State of Washington Total Personal and Per Capita Income King County State of Washington Total Personal Per Capita Total Personal Per Capita Year Income (in thousands) Income Income (in thousands) Income 2006(1) N/A N/A $239,347,900 $37,423 2005 $86,746,632 $48,216 223,232,089 35,479 2004 87,417,911 49,118 216,921,198 34,596 2003 79,199,166 44,821 202,924,123 33,105 2002 77,940,608 44,250 197,451,578 32,528 2001 76,883,017 43,800 193,498,304 32,274 (1) Preliminary Estimate. Source: U.S. Department of Commerce, Bureau of Economic Analysis, August 2007. 29 Taxable Retail Sales. Taxable retail sales reflect only those sales subject to retail sales tax. Historic taxable retail sales for the County and the City are shown below: King County Taxable Retail Sales King County City of Renton 2007(1) $ 10,735,910,943 $ 499,266,271 2006 43,993,478,514 2,093,200,107 2005 40,498,328,830 1,951,188,125 2004 37,253,103,540 1,853,297,141 2003 35,370,831,017 1,763,639,632 (1) Through first quarter only. Source: Washington State Department of Revenue, August 2007. Building Permits. The number and valuation of new single-family and multi-family residential building permits in the City and the County are listed below: City of Renton Residential Building Permits New Single Family Units New Multi Family Units Total Year Number Valuation Number Valuation Valuation 2007 (1) 268 $ 65,881,875 953 $ 74,581,770 $ 140,463,645 2006 433 100,418,576 251 18,244,980 118,663,556 2005 514 113,996,463 412 35,282,590 149,279,052 2004 501 100,307,946 128 10,806,586 110,114,532 2003 556 117,062,111 243 18,281,882 135,343,993 (1) Data through August 2007 only. Source: City of Renton. King County Residential Building Permits New Single Family Units New Multi Family Units Total Year Number Valuation Number Valuation Valuation 2007 (1) 2,881 $ 813,731,989 4,407 $ 535,778,130 $ 1,349,470,119 2006 5,771 1,620,408,964 8,456 970,209,237 2,590,618,201 2005 6,363 1,732,705,365 5,750 553,712,849 2,286,418,214 2004 6,720 1,569,090,378 5,021 450,235,452 2,019,325,830 2003 6,354 1,543,557,962 3,503 309,101,770 1,852,659,732 (1) Data through June 2007 only. Source: U.S. Census Bureau, August 2007. 30 Employment. The major employers within the City include the following: Full-Time Employer Employees The Boeing Company 11,942 Valley Medical Center 2,346 PACCAR Inc. 1,749 Renton School District 1,353 Federal Aviation Administration 860 City of Renton 620 ER Solutions, Inc. 428 Young’s – Columbia of Washington, LLC 402 Wal-Mart 378 IKEA 361 Source: City of Renton. State-wide employment figures (rounded) for major employers located primarily within the central Puget Sound region (King, Pierce and Snohomish Counties) include the following: Puget Sound Major Employers Full-Time Employer Employees (1) The Boeing Company 68,570 (2) Microsoft 30,300 University of Washington 21,358 (2) King County Government 12,400 City of Seattle 10,392 (2) Group Health Cooperative 9,800 Weyerhaeuser 7,300 Providence Health 6,800 Costco 6,500 Nordstrom Inc. 5,400 Swedish Health 5,100 Seattle School District 5,000 Safeway 4,700 Qwest Communications International 4,200 (1) Does not include part-time or seasonal employment figures. (2) From entity. Source: Puget Sound Business Journal, Book of Lists, 2007. 31 Civilian Labor Force data is based on household surveys of residents. NAICS data are estimates based on surveys of employers and benchmarked based on covered employment as reported by all employers. King County Nonagricultural Wage & Salary Workers and Labor Force and Employment Data Annual Average 2007(1) 2006 2005 2004 2003 Civilian Labor Force 1,059,450 1,044,340 1,010,950 994,800 989,690 Total Employment 1,016,520 1,000,640 963,640 943,420 928,460 Total Unemployment 42,930 43,700 47,310 51,380 61,230 Percent of Labor Force 4.1 4.2 4.7 5.2 6.2 **NAICS INDUSTRY 2007(1) 2006 2005 2004 2003 Total Nonfarm 1,204,800 1,176,567 1,143,675 1,119,167 1,111,192 Total Private 1,042,686 1,014,708 982,475 957,008 948,600 Goods Producing 188,900 183,058 170,850 163,667 164,233 Natural Resources and Mining 657 642 658 825 842 Construction 75,086 70,092 62,808 58,992 57,050 Manufacturing 113,143 112,308 106,900 103,392 105,867 Services Providing 1,015,886 993,525 973,300 955,950 946,950 Trade, Transportation and Utilities 227,629 224,275 222,858 222,700 222,092 Information 75,871 72,500 69,283 67,717 67,892 Financial Activities 77,486 77,525 76,467 77,242 78,458 Professional and Business Services 190,400 182,233 173,225 163,708 160,217 Educational and Health Services 128,214 124,708 122,750 118,142 114,917 Leisure and Hospitality 111,557 108,583 106,092 103,783 100,900 Other Services 42,629 41,808 41,392 40,533 39,892 Government 162,114 161,867 161,208 162,150 162,567 (1) Data through July 2007. Source: Washington State Employment Security Department, August 2007. Initiative and Referendum State Initiatives Under the State Constitution, the voters of the State have the ability to initiate legislation and require the Legislature to refer legislation to the voters through the powers of initiative and referendum, respectively. The initiative power in Washington may not be used to amend the State Constitution. Initiatives and referenda are submitted to the voters upon receipt of a petition signed by at least eight percent (initiative) and four percent (referenda) of the number of voters registered and voting for the office of Governor at the preceding regular gubernatorial election. Any law approved in this manner by a majority of the voters may not be amended or repealed by the Legislature within a period of two years following enactment, except by a vote of two-thirds of all the members elected to each house of the Legislature. After two years, the law is subject to amendment or repeal by the Legislature in the same manner as other laws. Current and Future Initiative Legislation. Tax and fee initiative measures have been and may be filed from time to time. It cannot be predicted whether any such initiatives might gain sufficient signatures to qualify for submission to the Legislature and/or the voters or, if submitted, whether they ultimately would be approved. 32 Tax Matters – Series 2008A Bonds In the opinion of Bond Counsel, interest on the Series 2008A Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Series 2008A Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Federal income tax law contains a number of requirements that apply to the Series 2008A Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the use of proceeds of the Series 2008A Bonds and the facilities financed or refinanced with proceeds of the Series 2008A Bonds and certain other matters. The City has covenanted to comply with all applicable requirements. Bond Counsel’s opinion is subject to the condition that the City comply with the above-referenced covenants and, in addition, will rely on representations by the City and its advisors with respect to matters solely within the knowledge of the City and its advisors, respectively, which Bond Counsel has not independently verified. If the City fails to comply with such covenants or if the foregoing representations are determined to be inaccurate or incomplete, interest on the Series 2008A Bonds could be included in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2008A Bonds, regardless of the date on which the event causing taxability occurs. Except as expressly stated above, Bond Counsel expresses no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Series 2008A Bonds. Owners of the Series 2008A Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Series 2008A Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements. Prospective purchasers of the Series 2008A Bonds should be aware that ownership of the Series 2008A Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income,” foreign corporations subject to the branch profits tax, life insurance companies and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Series 2008A Bonds. Bond Counsel expresses no opinion regarding any collateral tax consequences. Prospective purchasers of the Series 2008A Bonds should consult their tax advisors regarding collateral federal income tax consequences. Payments of interest on tax-exempt obligations such as the Series 2008A Bonds, are in many cases required to be reported to the Internal Revenue Service (the “IRS”). Additionally, backup withholding may apply to any such payments made to any owner who is not an ”exempt recipient” and who fails to provide certain identifying information. Individuals generally are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients. Bond Counsel’s opinion is not a guarantee of result and is not binding on the IRS; rather, the opinion represents Bond Counsel’s legal judgment based on its review of existing law and in reliance on the representations made to Bond Counsel and the City’s compliance with its covenants. The IRS has established an ongoing program to audit tax-exempt obligations to determine whether interest on such obligations is includable in gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS will commence an audit of the Series 2008A Bonds. Owners of the Series 2008A Bonds are advised that, if the IRS does audit the Series 2008A Bonds, under current IRS procedures, at least during the early stages of an audit, the IRS will treat the City as the taxpayer, and the owners of the Series 2008A Bonds may have limited rights to participate in the audit. The commencement of an audit could adversely affect the market value and liquidity of the Series 2008A Bonds until the audit is concluded, regardless of the ultimate outcome. 33 Qualified Tax-Exempt Obligations The City has designated the Series 2008A Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3)(B) of the Code. Tax Matters – Series 2008B Bonds This advice was written to support the promotion or marketing of the Series 2008B Bonds. This advice is not intended or written by K&L Preston Gates Ellis LLP to be used, and may not be used, by any person or entity for the purpose of avoiding any penalties that may be imposed on any person or entity under the Internal Revenue Code. Prospective purchasers of the Series 2008B Bonds should seek advice based on their particular circumstances from an independent tax advisor. The following discussion describes aspects of the principal U.S. federal tax treatment of U.S. persons that are beneficial owners (“Owners”) of Series 2008B Bonds. This summary is based on the Code, published revenue rulings, administrative and judicial decisions, and existing and proposed Treasury regulations, including regulations concerning the tax treatment of debt instruments issued with original issue discount (the “OID Regulations”) (all as of the date hereof and all of which are subject to change, possibly with retroactive effect). This summary discusses only Series 2008B Bonds held as capital assets within the meaning of Section 1221 of the Code. It does not discuss all of the tax consequences that may be relevant to an Owner in light of its particular circumstances or to Owners subject to special rules, such as certain financial institutions, insurance companies, tax-exempt organizations, foreign taxpayers, taxpayers who may be subject to the alternative minimum tax or personal holding company provisions of the Code, dealers in securities or foreign currencies, Owners holding the Series 2008B Bonds as part of a hedging transaction, “straddle,” conversion transaction, or other integrated transaction, or Owners whose functional currency (as defined in Section 985 of the Code) is not the U.S. dollar. Except as stated herein, this summary describes no federal, state or local tax consequences resulting from the ownership of, receipt of interest on, or disposition of, the Series 2008B Bonds. ACCORDINGLY, INVESTORS WHO ARE OR MAY BE DESCRIBED WITHIN THIS PARAGRAPH SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO SUCH INVESTORS, AS WELL AS TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY, OF PURCHASING, HOLDING, OWNING AND DISPOSING OF THE SERIES 2008B BONDS, INCLUDING THE ADVISABILITY OF MAKING ANY OF THE ELECTIONS DESCRIBED BELOW, BEFORE DETERMINING WHETHER TO PURCHASE THE SERIES 2008B BONDS. For purposes of this discussion, a “U.S. person” means an individual who, for U.S. federal income tax purposes, is (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source of income, or (iv) a trust, if either: (A) a United States court is able to exercise primary supervision over the administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust or (B) a trust has a valid election in effect to be treated as a United States person under the applicable treasury regulations. The term also includes nonresident alien individuals, foreign corporations, foreign partnerships, and foreign estates and trusts (“Foreign Owners”) to the extent that their ownership of the Series 2008B Bonds is effectively connected with the conduct of a trade or business within the United States, as well as certain former citizens and residents of the United States who, under certain circumstances, are taxed on income from U.S. sources as if they were citizens or residents. It should also be noted that certain “single member entities” are disregarded for U.S. federal income tax purposes. Such Foreign Owners and Owners who are single member non-corporate entities, should consult with their own tax advisors to determine the U.S. federal, state, local, and other tax consequences that may be relevant to them. 34 In General. Interest derived from a Series 2008B Bond by an Owner is subject to U.S. federal income taxation. In addition, a Series 2008B Bond held by an individual who, at the time of death, is a U.S. person is subject to U.S. federal estate tax. Payments of Interest. Qualified Stated Interest (and other original issue discount), including additional amounts of cash and interest, if any, paid on the Series 2008B Bonds will generally be taxable to Owners as ordinary interest income at the time it accrues or is received, in accordance with the Owner’s method of accounting for U.S. federal income tax purposes. For purposes of this discussion “Qualified Stated Interest” is stated interest that is unconditionally payable in cash or in property (other than debt instruments of the issuer), or that will be constructively received under Section 451 of the Code, at least annually at a single fixed rate (within the meaning of Treasury Regulation § 1.1273-1(c)(1)(iii)), as defined in Treasury Regulation § 1.1273-1(c). Special rules governing the treatment of original issue discount, acquisition premium, market discount or amortizable premium are described below. Original Issue Discount. If the issue price of the Series 2008B Bonds is less than the stated redemption price at maturity of such Series 2008B Bonds (the “Discount Bonds”) then such Series 2008B Bonds may be original issue discount obligations. Accordingly, as provided in the Code and the OID Regulations, the excess of the “stated redemption price at maturity” of each Discount Bond over its “issue price” (defined as the initial offering price to the public, excluding bond houses and brokers, at which a substantial amount of the Series 2008B Bonds have been sold) will be original issue discount. Except as described below, Owners of Discount Bonds will have to include in gross income (irrespective of their method of accounting) a portion of such original issue discount for each year during which such Series 2008B Bonds are held, without regard to the time at which the cash to which such income is attributable will be received. The amount of original issue discount included in income for each year will be calculated under a constant yield to maturity formula that results in the allocation of less original issue discount to earlier years of the term of such Series 2008B Bonds and more original issue discount to the later years. The foregoing summary is based on the assumptions that (a) the Underwriter has purchased the Discount Bonds for contemporaneous sale to the general public and not for investment purposes, (b) all of the Discount Bonds have been offered, and a substantial amount of each maturity thereof has been sold to the general public in arm’s-length transactions for a cash price (and with no other consideration being included) equal to the initial offering prices thereof stated on the inside cover page of this Official Statement, and (c) the respective initial offering prices of the Discount Bonds to the general public are equal to the fair market value thereof. Neither the City nor Bond Counsel warrants that the Series 2008B Bonds will be offered and sold in accordance with such assumptions. Acquisition Premium. In the event that an Owner purchases a Series 2008B Bond at an acquisition premium (i.e., at a price in excess of its “adjusted issue price” but less than its stated redemption price at maturity), the amount includable in income in each taxable year as original issue discount is reduced by that portion of the acquisition premium properly allocable to such year. (For Series 2008B Bonds that are purchased at a price in excess of the stated redemption price at maturity, see the discussion below under the heading “Amortizable Premium.”) The adjusted issue price is defined as the sum of the issue price of the Series 2008B Bond and the aggregate amount of previously accrued original issue discount, less any prior payments of amounts included in its stated redemption price at maturity. Unless an Owner makes the accrual method election described below, acquisition premium is allocated on a pro rata basis to each accrual of original issue discount (i.e., to each six-month accrual period), so that the Owner is allowed to reduce each accrual of original issue discount by a constant fraction. Market Discount. An Owner who purchases a Series 2008B Bond at a “market discount” will be subject to provisions in the Code that convert certain capital gain on the redemption, sale, exchange or other disposition of the Series 2008B Bond into ordinary income. A Series 2008B Bond will have market discount to the extent the “revised issue price” of such Series 2008B Bond exceeds, by more than a de minimis amount, the Owner’s tax basis in the Series 2008B Bond immediately after the Owner acquires the Series 2008B Bond. The “revised issue price” generally equals the issue price of the Series 2008B Bond plus the amount of original issue discount (computed without regard to any “acquisition premium” 35 described above) that had accrued on such Series 2008B Bond as of the date the Owner acquired the Series 2008B Bond and reduced by the stated interest previously paid with respect to such Series 2008B Bond as of such date. An Owner may elect to include market discount in income as it accrues, but such an election will apply to all market discount bonds or notes acquired by such Owner on or after the first day of the first taxable year to which such election applies and is revocable only with permission from the IRS. Unless a Series 2008B Bond Owner elects to include market discount in income as it accrues, any partial principal payments on, or any gain realized upon the sale, exchange, disposition, redemption or maturity of a Series 2008B Bond will be taxable as ordinary income to the extent any market discount has accrued on such Series 2008B Bond. Market discount on a Series 2008B Bond would accrue ratably each day between the date an Owner purchases the Series 2008B Bond and the date of maturity. In the alternative, an Owner irrevocably may elect to use a constant interest accrual method under which marginally less market discount would accrue in early years and marginally greater amounts would accrue in later years. If a Series 2008B Bond purchased with market discount is disposed of in a nontaxable transaction (other than a nonrecognition transaction described in Section 1276(d) of the Code), accrued market discount will be includable as ordinary income to the Owner as if such Owner had sold the Series 2008B Bond at its then fair market value. An Owner of a Series 2008B Bond that acquired it at a market discount and that does not elect to include market discount in income on a current basis also may be required to defer the deduction for a portion of the interest expense on any indebtedness incurred or continued to purchase or carry the Series 2008B Bond until the deferred income is realized. Amortizable Premium. An Owner who purchases a Series 2008B Bond for any amount in excess of its principal amount, or in the case of a Discount Bond, its stated redemption price at maturity, will be treated as having premium with respect to such Series 2008B Bond in the amount of such excess. An Owner who purchases a Discount Bond at a premium is not required to include in income any original issue discount with respect to such Series 2008B Bond. If an Owner makes an election under Section 171(c)(2) of the Code to treat such premium as “amortizable bond premium,” the amount of interest that must be included in such Owner’s income for each accrual period will be reduced by the portion of the premium allocable to such period based on the Series 2008B Bond’s yield to maturity. If an Owner makes the election under Section 171(c)(2), the election also shall apply to all taxable bonds held by the Owner at the beginning of the first taxable year to which the election applies and to all such taxable bonds thereafter acquired by such Owner, and it is irrevocable without the consent of the IRS. If such an election under Section 171(c)(2) of the Code is not made, such an Owner must include the full amount of each interest payment in income in accordance with its regular method of accounting and will receive a tax benefit from the premium only in computing its gain or loss upon the sale of other disposition or retirement of the Series 2008B Bond. The existence of bond premium and the benefits associated with the amortization of bond premium vary with the facts and circumstances of each Owner. Accordingly, each Owner of a Series 2008B Bond should consult his own tax advisor concerning the existence of bond premium and the associated election. Accrual Method Election. Under the OID Regulations, an Owner who uses an accrual method of accounting would be permitted to elect to include in gross income its entire return on a Series 2008B Bond (i.e., the excess of all remaining payments to be received on the Series 2008B Bond over the amount paid for the Series 2008B Bond by such Owner) based on the compounding of interest at a constant rate. Such an election for a Series 2008B Bond with amortizable bond premium (or market discount) would result in a deemed election for all of the Owner’s debt instruments with amortizable bond premium (or market discount) and could be revoked only with the permission of the IRS with respect to debt instruments acquired after revocation. Disposition or Retirement. Upon the sale, exchange or other disposition of a Series 2008B Bond, or upon the retirement of a Series 2008B Bond (including by redemption), an Owner will recognize capital gain or loss equal to the difference, if any, between the amount realized upon the disposition or retirement (reduced by any amounts attributable to accrued but unpaid interest, which will be taxable as such) and the 36 Owner’s adjusted tax basis in the Series 2008B Bond. Any such gain or loss will be United States source gain or loss for foreign tax credit purposes. The Series 2008B Bonds are subject to defeasance at any time prior to their stated maturities. If the City defeases any Series 2008B Bonds, such Series 2008B Bonds may be deemed to be retired and “reissued” for federal income tax purposes as a result of the defeasance. In such event, the Owner of a Series 2008B Bond would recognize a gain or loss on the Series 2008B Bond at the time of defeasance. An Owner’s tax basis for determining gain or loss on the disposition or retirement of a Series 2008B Bond will be the cost of such Series 2008B Bond to such Owner, increased by the amount of original issue discount and any market discount includable in such Owner’s gross income with respect to such Series 2008B Bond, and decreased by the amount of any payments under the Series 2008B Bond that are part of its stated redemption price at maturity (i.e., all stated interest payments with respect to the Series 2008B Bonds previously paid) and by the portion of any premium applied to reduce interest payments as described above. Such gain or loss will be capital gain or loss (except to the extent the gain represents accrued original issue discount or market discount on the Series 2008B Bond not previously included in gross income, to which extent such gain would be treated as ordinary income). Any capital gain or loss will be long-term capital gain or loss if at the time of disposition or retirement the Series 2008B Bond has been held for more than one year. The deductibility of capital losses is subject to limitations. Information Reporting and Backup Withholding. Payments of interest and accruals of original issue discount (if any) on Series 2008B Bonds held of record by U.S. persons other than corporations and other exempt Owners must be reported to the IRS. Such information will be filed each year with the IRS on Form 1099, which will reflect the name, address, and taxpayer identification number of the Owner. A copy of Form 1099 will be sent to each Owner of a Series 2008B Bond for federal income tax reporting purposes. The amount of original issue discount required to be reported by the Bond Registrar may not be equal to the amount required to be reported as taxable income by an Owner of a Discount Certificate that acquired such Series 2008B Bond subsequent to its original issuance. Interest paid to an Owner of a Series 2008B Bond ordinarily will not be subject to withholding of federal income tax if such Owner is a U.S. person. Backup withholding of federal income tax at a rate of 28 percent (2007) may apply, however, to payments made in respect of the Series 2008B Bonds, as well as payments of proceeds from the sale of Series 2008B Bonds, to Owners who are not “exempt recipients” and who fail to provide certain identifying information. This withholding generally applies if the Owner of a Series 2008B Bond (who is not an exempt recipient) (i) fails to furnish such Owner’s social security number or other taxpayer identification number (“TIN”), (ii) furnishes an incorrect TIN, (iii) fails to properly report interest, dividends or other “reportable payments” as defined in the Code, or (iv) under certain circumstances, fails to provide a certified statement, signed under penalty of perjury, that the TIN provided is correct and that such Owner is not subject to backup withholding. Individuals generally are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients. To prevent backup withholding, each prospective Owner will be requested to complete an appropriate form. Any amounts withheld under the backup withholding rules from a payment to a person would be allowed as a refund or a credit against such person’s U.S. federal income tax, provided that the required information is furnished to the IRS. Furthermore, certain penalties may be imposed by the IRS on an Owner who is required to supply information but who does not do so in the proper manner. The federal tax discussion set forth above is included for general information only and may not be applicable depending upon an owner’s particular situation. Investors should consult their own tax advisors concerning the tax implications of holding and disposing of the Series 2008B Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not U.S. persons. 37 Ratings As noted on the cover page of this Official Statement, City has received ratings for the Bonds from Standard & Poor’s, a division of The McGraw Hill Companies, Inc. and Fitch Ratings. Standard & Poor’s has assigned its rating of “AAA” and Fitch has assigned its rating of “AAA” and to the Bonds with the understanding that, upon delivery of the Bonds, the Financial Guaranty Insurance Policy will be issued by MBIA. Additionally, an underlying rating of “AA-” by Standard & Poor’s and “AA-“ by Fitch has been assigned to the Bonds. The ratings reflect only the views of the rating agencies and an explanation of the significance of the ratings may be obtained from the rating agencies. There is no assurance that the ratings will be retained for any given period of time or that the ratings will not be revised downward or withdrawn entirely by the rating agencies if, in their judgment, circumstances so warrant. Any such downward revision or withdrawal of the ratings will be likely to have an adverse effect on the market price of the Bonds. Continuing Disclosure Undertaking In accordance with Section (b)(5) of Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as the same may be amended from time to time (the “Rule”), the City has agreed in the Bond Ordinance for the benefit of the Bond Owners or Beneficial Owners of the Bonds to provide or cause to be provided to each NRMSIR and to the state information depository for the State of Washington (if one is created) (“SID”), in each case as designated by the Securities and Exchange Commission (the “Commission”) in accordance with the Rule, the following annual financial information and operating data for the prior fiscal year (commencing in 2009 for the fiscal year ended December 31, 2008): (i) annual financial statements prepared in accordance with the generally accepted accounting principles applicable to governmental units, as such principles may be changed from time to time by the Washington State Auditor pursuant to RCW 43.09.200, 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”) (ii) a statement of authorized, issued and outstanding bonded debt secured by the Net Revenue;; (iii) debt service coverage ratios; (iv) general customer statistics for the Waterworks Utility contained in the final official statement for the Bonds under the heading “The Waterworks Utility;” and (v) a narrative explanation of the reasons for any amendments to this Section made during the previous fiscal year and the impact of such amendments on the Annual Financial Information being provided. The annual financial information shall be provided on or before the last day of the seventh month following the end of such prior fiscal year; provided, after the 1998 Bonds, 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding the City shall provide the following Annual Financial Information on or before the last day of the ninth month following the end of the prior fiscal year. The City’s current fiscal year ends December 31. The City may adjust such fiscal year by providing written notice of the change of fiscal year to each then existing NRMSIR and the SID, if any. In lieu of providing such Annual Financial Information, 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 provided as part of the annual financial information discussed above, the City shall provide the City’s audited 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 any. Material Events. The City agrees to provide or cause to be provided, in a timely manner, to the SID, if any, and to each NRMSIR notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Principal and interest payment delinquencies; (2) Non-payment related defaults; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; 38 (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 owners; (8) Bond calls (optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34-238560); (9) Defeasances; (10) Release, substitution or sale of property, securing repayment of the Bonds; and (11) Rating changes. Solely for purposes of disclosure, and not intending to modify the undertaking, the City advises that there is no property securing repayment of the Bonds. Notification Upon Failure to Provide Financial Data. The City has agreed in the Bond Ordinance to provide or cause to be provided, in a timely manner, to each NRMSIR and to the SID, if any, notice of its failure to provide the annual financial information, as described above, on or prior to the date as set forth above. Termination/Modification. The City’s obligations to provide notices of material events shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. Any provision of this section shall be null and void if the City (1) obtains an opinion of nationally recognized bond counsel to the effect that the portion of the Rule that requires that provision is invalid, has been repealed retroactively or otherwise does not apply to the Bonds, and (2) notifies each NRMSIR and the SID, if any, of such opinion and the cancellation of this section. Bondowner’s Remedies Related to Continuing Disclosure Undertaking. A Bondowner’s or a Beneficial Owner’s right to enforce the provisions related to continuing disclosure undertaking shall be limited to a right to obtain specific enforcement of the City’s obligations related thereto, and any failure by the City to comply with the provisions of this undertaking shall not be an Event of Default with respect to the Bonds under the Bond Ordinance. For purposes of this section, “Beneficial Owner” means any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds, including persons holding Bonds through nominees or depositories. 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. DisclosureUSA. The City may elect to submit the information required to be filed with the NRMSIRs and the SID, if any, directly to DisclosureUSA.org unless or until the Commission withdraws its approval of this submission process. Prior Continuing Disclosure Undertakings of the City. The City entered into undertakings under the Rule with respect to its obligations issued after July 3, 1995 and is in compliance with its obligations thereunder. Legal and Underwriting Approval of Counsel Legal matters incident to the authorization, issuance and sale of the Bonds by the City are subject to the approving legal opinions of Bond Counsel. Forms of the opinions of Bond Counsel are attached hereto in Appendix B. Bond Counsel will be compensated only upon the issuance and sale of the Bonds. Bond Counsel will not offer an opinion on the Official Statement. 39 Litigation There is no litigation pending or threatened questioning the validity of the Bonds nor the power and authority of the City to issue the Bonds. There is no litigation pending or threatened which would materially affect the finances of the City or affect the City’s ability to meet debt service requirements on the Bonds. Official Statement In the Bond Ordinance, the City will deem final this Preliminary Official Statement as of its date for the purpose of the Rule. Underwriting The Bonds are being purchased by Seattle-Northwest Securities Corporation, the Underwriter. The purchase contract provides that the Underwriter will purchase all of the Series 2008A Bonds, if any are purchased, at a price of _____ percent of the par value of the Series 2008A Bonds. The Series 2008A Bonds will be reoffered at an average price of _____ percent of the par value of the Series 2008A Bonds. After the initial public offering, the public offering prices may be varied from time to time. Additionally, the purchase contract provides that the Underwriter will purchase all of the Series 2008B Bonds, if any are purchased, at a price of _____ percent of the par value of the Series 2008B Bonds. The Series 2008B Bonds will be reoffered at an average price of _____ percent of the par value of the Series 2008B Bonds. After the initial public offering, the public offering prices may be varied from time to time. Financial Advisor In connection with the authorization and issuance of the Bonds, the City has retained Piper Jaffray & Co., Seattle, Washington, as its financial advisor (the “Financial Advisor”). The Financial Advisor is not obligated to undertake, and has not undertaken, either to make an independent verification of or to assume responsibility for, the accuracy, completeness, or fairness of the information contained in this Official Statement. Concluding Statement So far as any statement herein includes matters of opinion, or estimates of future expenses and income, whether or not expressly so stated, they are intended merely as such and not as representations of fact. The information contained herein should not be construed as representing all conditions affecting the City or the Bonds. Additional information may be obtained from the City. The statements relating to the Bond Ordinance are in summarized form, and in all respects are subject to and qualified in their entirety by express reference to the provisions of such document in its complete form. The agreements of the City are set forth in such documents, and the information assembled herein is not to be construed as a contract with Owners of the Bonds. 40 Appendix A Bond Ordinance This page left blank intentionally. CITY OF RENTON, WASHINGTON ORDINANCE NO. 5313 AN ORDINANCE of the City of Renton, Washington, authorizing the issuance of three series of water and sewer revenue bonds of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, in the aggregate principal amounts of not to exceed $10,000,000, $10,000,000 and $3,000,000, respectively; providing the form, terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle-Northwest Securities Corporation, Seattle, Washington. -i- ORDINANCE NO. 5313 TABLE OF CONTENTS Section 1. Definitions.................................................................................................................2 Section 2. Findings Regarding Parity Provisions and the Project ................................................9 Section 3. Authorization and Description of Bonds ....................................................................9 Section 4. Registration of Bonds and Book-Entry System ..........................................................9 Section 5. Payment of Bonds....................................................................................................12 Section 6. Redemption; Open Market Purchase of Bonds.........................................................12 Section 7. Notice of Redemption..............................................................................................13 Section 8. Failure to Redeem Bonds.........................................................................................14 Section 9. Form of Bonds.........................................................................................................14 Section 10. Execution of Bonds................................................................................................14 Section 11. Authentication and Delivery of Bonds by Bond Registrar ......................................14 Section 12. Lost, Stolen or Destroyed Bonds............................................................................15 Section 13. Creation of Fund....................................................................................................15 Section 14. Deposits into Funds ...............................................................................................15 Section 15. Rate Stabilization Fund..........................................................................................16 Section 16. Flow of Funds........................................................................................................16 Section 17. Pledge of Revenue and Lien Position.....................................................................17 Section 18. Findings Regarding Sufficiency of Revenue...........................................................17 Section 19. Covenants..............................................................................................................18 Section 20. Tax Covenants.......................................................................................................20 Section 21. Defeasance of the Bonds........................................................................................21 Section 22. Provision for Future Parity Bonds..........................................................................22 Section 23. Sale of Bonds.........................................................................................................24 Section 24. Delivery of Bonds; Temporary Bonds....................................................................25 Section 25. Application of Bond Proceeds................................................................................25 Section 26. Plan of Refunding..................................................................................................26 Section 27. Undertaking to Provide Continuing Disclosure ......................................................27 Section 28. Preliminary Official Statement...............................................................................30 Section 29. Amendments..........................................................................................................30 Section 30. Contract: Savings Clause .......................................................................................32 Section 31. General Authorization, Ratification of Prior Acts...................................................32 Section 32. Effective Date of Ordinance...................................................................................32 Exhibit A Project Description Exhibit B Form of Bonds ORDINANCE NO. 5313 AN ORDINANCE of the City of Renton, Washington, authorizing the issuance of three series of water and sewer revenue bonds of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, in the aggregate principal amounts of not to exceed $10,000,000, $10,000,000 and $3,000,000, respectively; providing the form, terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle-Northwest Securities Corporation, Seattle, Washington. WHEREAS, the City of Renton, Washington (the “City”) has heretofore created and operated a waterworks utility of the City, including the water, sewer, wastewater and storm drainage systems (defined herein as the “Waterworks Utility”); and WHEREAS, the City Council has determined that it is necessary and in the best interests of the City that certain improvements for the Waterworks Utility described in the Capital Improvement Program be made and there be adopted a system or plan of additions to and betterments and extensions of the Waterworks Utility; and WHEREAS, pursuant to chapter 35.92 RCW, the City is authorized to issue and sell, without an election, revenue bonds of the City to make additions, betterments or extensions to the Waterworks Utility; and WHEREAS, by Section XXIII of Ordinance No. 4709, the City also provided that it 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 City’s Water and Sewer Revenue Refunding Bonds, 1998 (the “1998 Bonds”) and any bonds issued thereafter if such additional bonds are issued in compliance with the conditions set forth therein; and WHEREAS, by Ordinance No. 4976, the City issued its Water and Sewer Revenue Bonds, 2002 (the “2002 Bonds”) on a parity of lien with the 1998 Bonds; and WHEREAS, by Ordinance No. 5019, as amended by Ordinance No. 5020, the City issued its Water and Sewer Revenue Refunding Bonds, 2003 (the “2003 Bonds”) on a parity of lien with the 1998 Bonds and the 2002 Bonds; and WHEREAS, by Ordinance No. 5098, the City issued its Water and Sewer Revenue Bonds, 2004 (the “2004 Bonds”) on a parity of lien with the 1998 Bonds, the 2002 Bonds, and the 2003 Bonds; and WHEREAS, Ordinance No. 4976 provides that the City may redeem the 2002 Bonds maturing on and after December 1, 2014 on and after December 1, 2012, in whole or in part, on any interest payment date at a price of par plus accrued interest, if any, to the date of redemption; and -2- WHEREAS, as a result of changed market conditions, it appears to the City Council that debt service savings may be obtained by refunding the 2002 Bonds maturing on and after December 1, 2014 (the “Refunded Bonds”) through the issuance of a series of water and sewer refunding bonds; and WHEREAS, the City Council has determined that it is in the best interests of the City to issue and sell three series of water and sewer revenue bonds on a parity of lien with the outstanding 1998 Bonds, 2002 Bonds, 2003 Bonds and 2004 Bonds; and WHEREAS, the first series of bonds shall be designated the City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007 and issued in the aggregate principal amount of not to exceed $10,000,000 (the “2007 Bonds”), for the purpose of providing part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility, to refund the Refunded Bonds, and to pay the costs of issuance and sale of the 2007 Bonds, as further provided in the sale resolution for the 2007 Bonds; and WHEREAS, the second and third series of bonds shall be designated the City of Renton, Washington Water and Sewer Bonds, Series 2008A and City of Renton, Washington Water and Sewer Bonds, Series 2008B (Taxable) and issued in the aggregate principal amounts of not to exceed $10,000,000 and $3,000,000, respectively (together, the “2008 Bonds”), for the purpose of providing part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility, to fulfill the Reserve Requirement and to pay the costs of issuance and sale of the 2008 Bonds, as further provided in the sale resolution for the 2008 Bonds; and WHEREAS, Seattle-Northwest Securities Corporation, Seattle, Washington, has offered to purchase the 2007 Bonds and the 2008 Bonds under the terms and conditions set forth herein and in the applicable sale resolution; 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: “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 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. -3- “Beneficial Owner” shall mean any person that has or shares the power, directly or indirectly to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries). “Bond Fund” shall mean that special fund of the City known as the Waterworks Revenue Bond Fund created by this ordinance for the payment of the principal of and interest on the Bonds. “Bond Register” means the registration books showing the name, address and tax identification number of each Registered Owner of the Bonds, maintained pursuant to Section 149(a) of the Code. “Bond Registrar” means the fiscal agency of the State of Washington, for the purposes of registering and authenticating the Bonds, maintaining the Bond Register, effecting transfer of ownership of the Bonds, and paying the principal of, premium, if any, and interest on the Bonds. “Bonds” shall mean the 2007 Bonds and the 2008 Bonds. “Capital Improvement Program” shall mean the plan of additions and betterments to the Waterworks Utility approved by the City in the 2007 City Budget adopted by the City Council pursuant to Ordinance No. 5245 adopted on December 11, 2006. “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 2007 Bonds or the 2008 Bonds, as applicable, by the City to the Underwriter and the payment therefor by the Underwriter. “Code” shall mean the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. “Coverage Requirement” shall mean in any calendar year 1.25 times the Maximum Annual Debt Service; provided, that once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, the term “Coverage Requirement” shall mean in any calendar year 1.25 times the Annual Debt Service for such year. “DTC” means The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York, as depository for the Bonds pursuant to this ordinance. “Escrow Agent” means U.S. Bank National Association, Seattle, Washington. “Escrow Agreement” means the Escrow Deposit Agreement to be dated as of the date of Closing of the 2007 Bonds authorized to be entered into pursuant to Section 26 of this ordinance. -4- “Fitch” means Fitch, Inc., organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such organization shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. “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. “Government Obligations” means those obligations now or hereafter defined as such in chapter 39.53 RCW. “Gross Revenue” 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. “Letter of Representations” shall mean the Blanket Issuer Letter of Representations from the City to DTC dated April 15, 1997. “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. “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. “Moody’s” means Moody’s Investors Service, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. -5- “MSRB” shall mean the Municipal Securities Rulemaking Board. “Net Proceeds,” when used with reference with the Bonds, means the principal amount of the Bonds, plus accrued interest and original issue premium, if any, and less original issue discount, if any. “Net Revenue” shall mean Gross Revenue less Maintenance and Operation Expense. “1998 Bonds” shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 1998. “NRMSIR” shall mean a nationally recognized municipal securities information repository designated by the SEC. “Outstanding” means, as of any particular time, all Parity Bonds issued theretofore except (a) Parity Bonds theretofore canceled by the Bond Registrar after purchase by the City in the open market or because of payment at, or redemption prior to, maturity; (b) Parity Bonds for which funds have been deposited into a trust account pursuant to the ordinances authorizing the issuance of the Parity Bonds, but only to the extent that the principal of and interest on such Parity Bonds are payable from such trust account; (c) temporary, mutilated, lost, stolen or destroyed Parity Bonds for which new Parity Bonds have been issued pursuant to the ordinance authorizing their issuance; and (d) Parity Bonds exchanged for new Parity Bonds pursuant to the ordinances authorizing their issuance. “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 2002 Bonds, the 2003 Bonds, the 2004 Bonds, the 2007 Bonds, the 2008 Bonds and any Future Parity Bonds. “Parity Bond Fund” shall mean any fund created for the payment and redemption of Parity Bonds. “Private Person” means any natural person engaged in a trade or business or any trust, estate, partnership, association, company or corporation. “Private Person Use” means the use of property in a trade or business by a Private Person if such use is other than as a member of the general public. Private Person Use includes ownership of the property by the Private Person as well as other arrangements that transfer to the Private Person the actual or beneficial use of the property (such as a lease, management or incentive payment contract or other special arrangement) in such a manner as to set the Private Person apart from the general public. Use of property as a member of the general public includes attendance by the Private Person at municipal meetings or business rental of property to the Private Person on a day-to-day basis if the rental paid by such Private Person is the same as the rental paid by any Private Person who desires to rent the property. Use of property by nonprofit community groups or community recreational groups is not treated as Private Person Use if such use is incidental to the governmental uses of property, the property is made available for such -6- use by all such community groups on an equal basis and such community groups are charged only a de minimis fee to cover custodial expenses. “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 additions, betterments or extensio ns to the Waterworks Utility described in the Capital Improvement Program, including, but not limited to, the capital improvements described in Exhibit A to this ordinance. “Project Fund” shall mean the Waterworks Utility Construction Fund previously created by the City, and the subaccounts contained therein, for the purpose of paying costs of the Project. “Purchase Agreement” shall mean the Bond Purchase Agreement for the 2007 Bonds or 2008 Bonds, as applicable, by and between the City and the Underwriter. “Qualified Insurance” means any non-cancelable municipal bond insurance policy or surety bond issued by any insurance company licensed to conduct an insurance business in any state of the United States (or by a service corporation acting on behalf of one or more such insurance companies) which insurance company or companies, as of the time of issuance of such policy or surety bond, are currently rated in one of the two highest Rating Categories by both Moody’s and S&P. “Qualified Letter of Credit” means any irrevocable letter of credit issued by a financial institution for the account of the City on behalf o f registered owners of the Bonds, which institution maintains an office, agency or branch in the United States and as of the time of issuance of such letter of credit, is currently rated in one of the two highest Rating Categories by either Moody’s or S&P. “Rate Stabilization Fund” shall mean the Waterworks Rate Stabilization Fund created by the City pursuant to Ordinance No. 4709. “Refunded Bonds” mean the 2002 Bonds maturing on and after December 1, 2014. “Refunding Account” means the account by that name established pursuant to Section 26 of this ordinance. “Registered Owner” means the person named as the registered owner of a Bond in the Bond Register. For so long as the Bonds are held in book-entry only form, DTC shall be deemed to be the sole Registered Owner. “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. -7- “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. “Reserve Requirement” shall mean the Maximum Annual Debt Service; provided, that once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, the term “Reserve Requirement” shall mean with respect to any issue of Parity Bonds, the lesser of (a) Maximum Annual Debt Service on all Outstanding Parity Bonds, and (b) 125% of average Annual Debt Service on all Outstanding Parity Bonds; provided, that the amount required to be deposited hereunder with respect to any Future Parity Bonds in order to meet the Reserve Requirement shall not exceed 10% of the net proceeds of such Future Parity Bonds under the Code. “Rule” shall mean SEC Rule 15c2-12. “S&P” means Standard & Poor’s, a Division of The McGraw Hill Companies, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. “Sale Resolution” means the resolutions of the City Council approving the sale of the 2007 Bonds or the 2008 Bonds, as applicable, in accordance with Section 23 of this ordinance. “SEC” shall mean the United States Securities and Exchange Commission. “SID” shall mean a state information depository for the State (if one is created). “State” shall mean the State of Washington. “Tax-Exempt Bonds” shall mean the 2007 Bonds and the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A authorized to be issued by this ordinance. “Taxable Bonds” shall mean the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) authorized to be issued by this ordinance. “Term Bonds” shall mean any 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. “2008 Bonds” shall mean the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A, and the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) authorized to be issued by this ordinance. -8- “2004 Bonds” shall mean the outstanding Water and Sewer Revenue Bonds, 2004. “2007 Bonds” shall mean the City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007, authorized to be issued by this ordinance. “2003 Bonds” shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 2003. “2002 Bonds” shall mean the outstanding Water and Sewer Revenue Bonds, 2002. “Underwriter” shall mean Seattle-Northwest Securities Corporation, Seattle, Washington. “Waterworks Utility” shall mean the combined water, sewer, wastewater and storm drainage systems of the City as the same may be added to, improved and extended for as long as any of the 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. Rules of Interpretation. In this ordinance, unless the context otherwise requires: (a) The terms “hereby,” “hereof,” “hereto,” “herein, “hereunder” and any similar terms, as used in this ordinance, refer to this ordinance as a whole and not to any particular article, section, subdivision or clause hereof, and the term “hereafter” shall mean after, and the term “heretofore” shall mean before, the date of this ordinance; (b) Words of the masculine gender shall mean and include correlative words of the feminine and neuter genders and words importing the singular number shall mean and include the plural number and vice versa; (c) Words importing persons shall include firms, associations, partnerships (including limited partnerships), trusts, corporations and other legal entities, including public bodies, as well as natural persons; (d) Any headings preceding the text of the several sections of this ordinance, and any table of contents or marginal notes appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this ordinance, nor shall they affect its meaning, construction or effect; (e) All references herein to “articles,” “sections” and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof; and (f) Words importing the singular number include the plural number and vice versa. -9- Section 2. Findings Regarding Parity Provisions and the Project. The City Council hereby finds that there is no deficiency in any Parity Bond Fund, that provisions hereinafter meet the conditions for the issuance of Future Parity Bonds as set forth in Section 23 of Ordinance No. 4709, Section 22 of Ordinance No. 4976, Section 20 of Ordinance No. 5019, as amended, and Section 22 of Ordinance No. 5098 and that there will be on file prior to the issuance and delivery of the Bonds a certificate of the City Finance Director that satisfies the conditions for such certificate as set forth in Ordinance Nos. 4709, 4976, 5019 and 5098. The City Council further finds that the additions, betterments or extensions to the Waterworks Utility, described in Exhibit A attached hereto (the “Project”), are consistent with the system or plan of additions to and betterments and extensions of the Waterworks Utility as described in the Capital Improvement Program. Therefore, the Bonds shall be issued on a parity of lien with the Parity Bonds. Section 3. Authorization and Description of Bonds. For the purpose of obtaining part of the funds necessary to carry out the Project and to refund the Refunded Bonds, the City shall issue the 2007 Bonds and the 2008 Bonds. The 2007 Bonds shall be designated “City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007” and shall be issued in the aggregate principal amount of not to exceed $10,000,000. The 2008 Bonds shall be designated the “City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A” and the “City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable)” in the aggregate principal amounts of not to exceed $10,000,000 and $3,000,000, respectively. The Bonds shall be dated as of their respective dates of initial issuance and delivery or such other date set forth in the applicable Sale Resolution; shall be issued in fully registered form in the denomination of $5,000 or any integral multiple thereof within a series, provided that no Bond shall represent more than one maturity of a series; shall be numbered separately and in such manner and with any additional designation as the Bond Registrar deems necessary for purposes of identification and control; shall bear interest (calculated based on a 360-day year of 12 30-day months) at the rates set forth in the applicable Sale Resolution, until the Bonds have been paid or their payment duly provided for, and shall mature on the dates in the years and amounts and shall bear interest from their date payable semiannually at the rates on the dates set forth in the applicable Sale Resolution. The Bonds shall be negotiable instruments to the extent provided by RCW 62A.8-105. Section 4. Registration of Bonds and Book-Entry System. (a) Registrar/Bond Register. The City hereby specifies and adopts the system of registration approved by the Washington State Finance Committee from time to time through the appointment of state fiscal agencies. The City shall cause a Bond Register to be maintained by the Bond Registrar. So long as any Bonds remain outstanding, the Bond Registrar shall make all necessary provisions to permit the exchange or registration or transfer of Bonds at its principal corporate trust office. The Bond Registrar may be removed at any time at the option of the City Finance Director upon prior notice to the Bond Registrar and a successor Registrar appointed by the City Finance Director. No resignation or removal of the Bond Registrar shall be effective -10- until a successor shall have been appointed and unt il the successor Registrar shall have accepted the duties of the Bond Registrar hereunder. (b) Registered Ownership. The City and the Bond Registrar, each in its discretion, may deem and treat the Registered Owner of each Bond as the absolute owner thereof for all purposes (except as provided in Section 24 of this ordinance), 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 Bond may be transferred as herein provided. All such payments made as described in Section 7 shall be valid and shall satisfy and discharge the liability of the City upon such Bond to the extent of the amount or amounts so paid. (c) DTC Acceptance/Letters of Representations. The Bonds initially shall be held in fully immobilized form by DTC acting as depository. To induce DTC to accept the Bonds as eligible for deposit at DTC, the City has executed and delivered to DTC a Blanket Issuer Letter of Representations. Neither the City nor the Bond Registrar will have any responsibility or obligation to DTC participants or the persons for whom they act as nominees (or any successor depository) with respect to the Bonds in respect of the accuracy of any records maintained by DTC (or any successor depository) or any DTC participant, the payment by DTC (or any successor depository) or any DTC participant of any amount in respect of the principal of or interest on Bonds, any notice which is permitted or required to be given to Registered Owners under this ordinance (except such notices as shall be required to be given by the City to the Bond Registrar or to DTC (or any successor depository)), or any consent given or other action taken by DTC (or any successor depository) as the Registered Owner. For so long as any Bonds are held in fully-immobilized form hereunder, DTC or its successor depository shall be deemed to be the Registered Owner for all purposes hereunder, and all references herein to the Registered Owners shall mean DTC (or any successor depository) or its nominee and shall not mean the owners of any beneficial interest in such Bonds. If any Bond shall be duly presented for payment and funds have not been duly provided by the City on such applicable date, then interest shall continue to accrue thereafter on the unpaid principal thereof at the rate stated on such Bond until it is paid. (d) Use of Depository. (i) The Bonds shall be registered initially in the name of “Cede & Co.”, as nominee of DTC, with one Bond maturing on each of the maturity dates for the Bonds in a denomination corresponding to the total principal therein designated to mature on such date. Registered ownership of such immobilized Bonds, or any portions thereof, may not thereafter be transferred except (A) to any successor of DTC or its nominee, provided that any such successor shall be qualified under any applicable laws to provide the service proposed to be provided by it; (B) to any substitute depository appointed by the City Finance Director pursuant to subsection (ii) below or such substitute depository’s successor; or (C) to any person as provided in subsection (iv) below. -11- (ii) 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 Finance Director to discontinue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the City Finance Director may hereafter 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. (iii) In the case of any transfer pursuant to clause (A) or (B) of subsection (i) above, the Bond Registrar shall, upon receipt of all outstanding Bonds, together with a written request of the City Finance Director, issue a single new Bond for each maturity then outstanding, registered in the name of such successor or such substitute depository, or their nominees, as the case may be, all as specified in such written request of the City Finance Director. (iv) In the event that (A) DTC or its successor (or substitute depository or its successor) resigns from its functions as depository, and no substitute depository can be obtained, or (B) the City Finance Director determines that it is in the best interest of the beneficial owners of the Bonds that such owners be able to obtain such bonds in the form of Bond certificates, the ownership of such Bonds may then be transferred to any person or entity as herein provided, and shall no longer be held in fully-immobilized form. The City Finance Director shall deliver a written request to the Bond Registrar, together with a supply of definitive Bonds, to issue Bonds as herein provided in any authorized denomination. Upon receipt by the Bond Registrar of all then outstanding Bonds together with a written request of the City Finance Director to the Bond Registrar, new Bonds shall be issued in the appropriate denominations and registered in the names of such persons as are requested in such written request. (e) Registration of Transfer of Ownership or Exchange; Change in Denominations. 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 transfer of any Bond may be registered and Bonds may be exchanged, but no transfer of any such Bond shall be valid unless it is surrendered to the Bond Registrar with the assignment form appearing on such Bond duly executed by the Registered Owner or such Registered Owner’s duly authorized agent in a manner satisfactory to the Bond Registrar. Upon such surrender, the Bond Registrar shall cancel the surrendered Bond and shall authenticate and deliver, without charge to the Registered Owner or transferee therefor, a new Bond (or Bonds at the option of the new Registered Owner) of the same date, maturity and interest rate and for the same aggregate principal amount in any authorized denomination, naming as Registered Owner the person or persons listed as the assignee on the assignment form appearing on the surrendered Bond, in exchange for such surrendered and cancelled Bond. Any Bond may be surrendered to the Bond Registrar and exchanged, without charge, for an equal aggregate principal amount of Bonds of the same date, maturity and interest rate, in any authorized denomination. The Bond Registrar shall not be obligated to register the transfer or to exchange any Bond during the 15 days preceding any interest payment or principal payment date any such Bond is to be redeemed. -12- (f) Registrar’s Ownership of Bonds. The Bond Registrar may become the Registered 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 member of, or in any other capacity with respect to, any committee formed to protect the right of the Registered Owners of Bonds. (g) Registration Covenant. The City covenants that, until all Bonds have been surrendered and canceled, it will maintain a system for recording the ownership of each Bond that complies with the provisions of Section 149 of the Code. 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. For so long as all Bonds are in fully immobilized form, payments of principal and interest thereon shall be made as provided in accordance with the operational arrangements of DTC referred to in the Letter of Representations. In the event that the Bonds are no longer in fully immobilized form, interest on the Bonds shall be paid by check or draft mailed to the Registered Owners at the addresses for such Registered Owners appearing on the Bond Register on the fifteenth day of the month preceding the interest payment date, or upon the written request of a Registered Owner of more than $100,000 of Bonds (received by the Bond Registrar at least 10 days prior to the applicable payment date), such payment shall be made by the Bond Registrar by wire transfer to the account within the continental United States designated by the Registered Owner. Principal of the Bonds shall be payable upon presentation and surrender of such Bonds by the Registered Owners at the principal office of the Bond Registrar. 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. Redemption; Open Market Purchase of Bonds. The City reserves the right to redeem the Bonds prior to their maturing as set forth in the applicable Sale Resolution. If less than all of the 2007 Bonds or 2008 Bonds subject to optional redemption are called for redemption, then the City shall choose the maturities of such series to be redeemed. The City reserves the right to designate certain maturities of the 2007 Bonds and/or the 2008 Bonds as term bonds (“Term Bonds”) in the applicable Sale Resolution, and, if not previously purchased by the City in the open market or optionally redeemed as provided in the applicable Sale Resolution, will be subject to mandatory sinking fund redemption prior to maturity, in part and by lot (in such manner as the Bond Registrar shall determine), at a price of par plus accrued interest to the date of redemption as provided in the applicable Sale Resolution. If the City shall optionally redeem Term Bonds or purchase Term Bonds in the open market, the par amount of the Term Bonds so redeemed or purchased (irrespective of their actual redemption or purchase prices) shall be credited against one or more scheduled mandatory redemption amounts for such Term Bonds (as allocated by the City) beginning not earlier than 60 days after the date of the optional redemption or purchase, and the City shall promptly notify the Bond Registrar in writing of the manner in which the credit for the Term Bonds so redeemed or purchased has been allocated. -13- Any Bond in the principal amount of greater than $5,000 may be partially redeemed in any integral multiple of $5,000. For as long as the Bonds are held in book-entry only form, the selection of particular Bonds within a maturity to be redeemed shall be made in accordance with the operational arrangements then in effect at DTC. If the Bonds are no longer held in uncertificated form, the selection of such Bonds to be redeemed and the surrender and reissuance thereof, as applicable, shall be made as provided in the following provisions of this paragraph. If the City redeems at any one time fewer than all of the Bonds having the same maturity date, the particular Bonds or portions of Bonds of such maturity to be redeemed shall be selected by lot (or in such manner determined by the Bond Registrar) in increments of $5,000. In the case of a Bond of a denomination greater than $5,000, the Cit y and Registrar shall treat each Bond as representing such number of separate Bonds each of the denomination of $5,000 as is obtained by dividing the actual principal amount of such Bond by $5,000. 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 therefore, 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 under this Section shall be canceled. Section 7. Notice of Redemption. For so long as the Bonds are held in uncertificated form, notice of redemption shall be given in accordance with the operational arrangements of DTC as then in effect, and neither the City nor the Bond Registrar will provide any notice of redemption to any Beneficial Owners. Thereafter, notice of redemption shall be given by or on behalf of the City not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the Owner of any Bond to be redeemed at the address appearing on the Bond Register on the day notice is mailed, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the Owner of any Bond. All official notices of redemption shall be dated and shall state: (A) the redemption date, (B) the redemption price, (C) if fewer than all outstanding Bonds are to be redeemed, the identification by maturity (and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed, (D) that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and (E) the place where such Bonds are to be surrendered for payment of the redemption price, which place of payment shall be the principal office of the Bond Registrar. 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. -14- In addition, further notice shall be given by the City as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption given hereunder shall contain the information required above for an official notice of redemption plus (A) the CUSIP numbers of all Bonds being redeemed; (B) the date of issue of the Bonds as originally issued; (C) the rate of interest borne by each Bond being redeemed; (D) the maturity date of each Bond being redeemed; and (E) any other descriptive information needed to identify accurately the Bonds being redeemed. Each further notice of redemption may be sent at least 35 days before the redemption date to the Bond Insurer, if any, to party entitled to receive notice pursuant to Section 27, and to such persons (including securities repositories who customarily at the time receive notices of redemption in accordance with rules promulgated by the SEC) and with such additional information as the City shall deem appropriate, but such mailings shall not be a condition precedent to the redemption of such Bonds. 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 in substantially the form set forth in Exhibit B attached hereto. 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, this ordinance and the applicable Sale Resolution. 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 -15- 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. Lost, Stolen or Destroyed Bonds. In case any Bonds shall be lost, stolen or destroyed, the Bond Registrar may authenticate and deliver a new Bond or Bonds of like amount, date and tenor to the Owner thereof upon the Owner’s paying the expenses and charges of the Bond Registrar and the City in connection therewith and upon his filing with the Bond Registrar and the City evidence satisfactory to both that such Bond or Bonds were actually lost, stolen or destroyed and of his ownership thereof, and upon furnishing the City and the Registrar with indemnity satisfactory to both. Section 13. Creation of Fund. There is hereby created in the City Treasury the Waterworks Revenue Bond Fund (the “Bond Fund”), which shall be a subaccount of the Waterworks Utility Fund. Section 14. Deposits into Funds. The Bond Fund shall be maintained for the purpose of paying the principal of and interest on the Bonds. As long as any Bond remains outstanding, the City hereby irrevocably obligates and binds itself to set aside and pay from the Waterworks Utility Fund into the Bond Fund those amounts necessary, together with such other funds as are on hand and available in the Bond Fund, to pay the interest or principal and interest next coming due on outstanding Bonds. Such payments from the Waterworks Utility Fund to the Bond Fund shall be made in a fixed amount without regard to any fixed proportion following the closing and delivery of the Bonds on or before each date on which an installment of interest or principal and interest falls due on the Bonds equal to the installment of interest or principal and interest. There has heretofore been created by the City a special fund of the City known as the Waterworks Revenue Bond Reserve Fund (the “Reserve Fund”) for purpose of securing the payment of the principal of and interest on all bonds to which Net Revenue is pledged. The City hereby irrevocably covenants and agrees that on or prior to the date of issuance of the Bonds, the amount on deposit in the Reserve Fund will be at least equal to the Reserve Requirement for the Parity Bonds. The City shall satisfy the Reserve Requirement to the extent necessary upon the issuance of the 2007 Bonds and the 2008 Bonds by depositing proceeds of such Bonds or other funds available therefor into the Reserve Fund or by obtaining Reserve Insurance. 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 redeemed or otherwise defeased any Outstanding Parity Bonds. 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 -16- Reserve Fund by the withdrawal of cash therefrom for that purpose and after all cash has been depleted, then by draws on the Alternate Security or Reserve Insurance 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 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, the City also may transfer out of the Bond Fund or Reserve Fund any money required in order to prevent any Parity Bonds from becoming “arbitrage bonds” under the Code. 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 15. Rate Stabilization Fund. The City has previously created a Waterworks Rate Stabilization Fund (the “Rate Stabilization Fund”). The City may, at any time, as determined by the City and as consistent with Section 16 of this ordinance, deposit Gross Revenue into 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 in Gross Revenue for any fiscal year of the City. 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 will be made into the Rate Stabilization Fund to the extent that such deposit would prevent the City from meeting the Coverage Requirement. Section 16. Flow of Funds. Gross Revenue on deposit 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; -17- (b) To pay the interest on the Parity Bonds, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (c) To pay the principal of the Parity Bonds, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (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 Fund, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (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 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, to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. Section 17. Pledge of Revenue and Lien Position. 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 to permit the sett ing aside in 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 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 Parity Bonds, -18- and the City has not bound and obligated itself to set aside and pay into 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 currently outstanding Parity 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 Parity Bonds. Section 19. Covenants. The City covenants and agrees with the Owner of each Bond at any time outstanding as follows: (a) Rate Covenant. 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) Maintenance and Repair. 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) Disposal of Waterworks Utility. It will not sell, lease, mortgage or in any manner encumber 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 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 -19- 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) Books and Records. 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) No Free Service. Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish or supply or permit the furnishing or supplying of any service or facility in connection with the 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) Insurance. 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. -20- (g) Maintenance and Operation Expense. It will pay all Maintenance and Operation Expense and the debt service requirements for the outstanding Parity Bonds, and otherwise meet the obligations of the City as herein set forth. Section 20. Tax Covenants. The City covenants that it will not take or permit to be taken on its behalf any action that would adversely affect the exemption from federal income taxation of the interest on the Tax-Exempt Bonds and will take or require to be taken such acts as may reasonably be within its ability and as may from time to time be required under applicable law to continue the exemption from federal income taxation of the interest on the Tax-Exempt Bonds. (a) Arbitrage Covenant. Without limiting the generality of the foregoing, the City covenants that it will not take any action or fail to take any action with respect to the proceeds of sale of the Tax-Exempt Bonds or any other funds of the City which may be deemed to be proceeds of the Tax-Exempt Bonds pursuant to Sectio n 148 of the Code and the regulations promulgated thereunder which, if such use had been reasonably expected on the date of delivery of the Tax-Exempt Bonds to the initial purchasers thereof, would have caused the Tax-Exempt Bonds as “arbitrage bonds” within the meaning of such term as used in Section 148 of the Code. The City represents that it has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is an issuer whose arbitrage certifications may not be relied upon. The City will comply with the requirements of Section 148 of the Code and the applicable regulations thereunder throughout the term of the Tax-Exempt Bonds. (b) Private Person Use Limitation for Bonds. The City covenants that for as long as the Tax-Exempt Bonds are outstanding, it will not permit: (1) More than 10% of the Net Proceeds of the Tax-Exempt Bonds to be used for any Private Person Use; and (2) More than 10% of the principal or interest payments on the Tax-Exempt Bonds in a bond year to be directly or indirectly: (A) secured by any interest in property used or to be used for any Private Person Use or secured by payments in respect of property used or to be used for any Private Person Use, or (B) derived from payments (whether or not made to the City) in respect of property, or borrowed money, used or to be used for any Private Person Use. The City further covenants that, if: (3) More than five percent of the Net Proceeds of the Tax-Exempt Bonds are to be used for any Private Person Use; and (4) More than five percent of the principal or interest payments on the Tax- Exempt Bonds in a bond year are (under the terms of this ordinance or any underlying arrangement) directly or indirectly: (A) secured by any interest in property used or to be used for any Private Person Use or secured by payments in respect of property used or to be used for any Private Person Use, or -21- (B) derived from payments (whether or not made to the City) in respect of property, or borrowed money, used or to be used for any Private Person Use, then, (i) any Private Person Use of the projects described in subsection (3) hereof or Private Person Use payments described in subsection (4) hereof that is in excess of the five percent limitations described in such subsections (3) or (4) will be for a Private Person Use that is related to the state or local governmental use of the Project, and (ii) any Private Person Use will not exceed the amount of Net Proceeds of the Tax-Exempt Bonds used for the state or local governmental use portion of the project to which the Private Person Use of such portion of the Project relates. The City further covenants that it will comply with any limitations on the use of the projects by other than state and local governmental users that are necessary, in the opinion of its bond counsel, to preserve the tax exemption of the interest on the Tax-Exempt Bonds. (c) Modification of Tax Covenants. The covenants of this Section are specified solely to assure the continued exemption from regular income taxation of the interest on the Tax- Exempt Bonds. To that end, the provisions of this Section may be modified or eliminated without any requirement for formal amendment thereof upon receipt of an opinion of the City’s bond counsel that such modification or elimination will not adversely affect the tax exemption of interest on any Tax-Exempt Bonds. (d) Qualified Tax-Exempt Obligation. The City hereby designates the Tax-Exempt Bonds as “qualified tax-exempt obligations” under Section 265(b)(3) of the Code for banks, thrift institutions and other financial institutions. The City does not anticipate that it will issue more than $10,000,000 in qualified tax-exempt obligations during 2007 or 2008, respectively. 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 Governmental Obligations 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 -22- Bonds to any lawful purposes as it shall determine, subject only to the rights, if any, of the owners of any other Parity 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 Governmental Obligations pending the prior redemption of the defeased Bonds and if such refunding plan also provides that certain cash and/or Governmental Obligations 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. Within 45 days of any defeasance of Bonds, the City shall provide notice of defeasance of Bonds to Registered Owners of Bonds being defeased, and to the Bond Insurer, if any, and to each party entitled to receive notice in accordance with Section 27. Section 22. Provision for Future Parity Bonds. 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. After the 1998 Bonds, the 2002 Bonds, and the 2003 Bonds are no longer Outstanding, this subsection shall be amended to read as follows: (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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security either on or prior to the date of issuance of such Future Parity Bonds or within three years from the date of issuance of the Future Parity Bonds in three approximately equal annual payments and in such event, the ordinance providing for the issuance of such Future Parity Bonds shall provide for such deposit. -23- After the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this subsection shall be amended to read as follows: (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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security on or prior to the date of issuance of such Future Parity Bonds. (d) 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. (e) There shall be on file with 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 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this Section shall be amended to read as follows: a certificate of the City Finance Director demonstrating that during any 12 consecutive calendar months out of the immediately preceding 24 calendar months Net Revenue, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least 1.25 times the Maximum Annual Debt Service 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, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this Section shall be amended to read as follows: 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 24 calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued. 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; -24- (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 t he 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. Sale of Bonds. The City Finance Director is hereby authorized to enter into negotiations with the Underwriter for the sale of the 2007 Bonds and the 2008 Bonds on terms consistent with the terms of this ordinance. The City Council shall by the applicable Sale Resolution approve a Purchase Agreement for the purchase and sale of the 2007 Bonds and the 2008 Bonds, approve the terms of the 2007 Bonds and the 2008 Bonds (including the schedule of maturities, interest rates, redemption times and prices), and may approve the purchase of bond -25- insurance pursuant to a recommendation of the City Finance Director. The City Finance Director is hereby authorized to enter into negotiations with potential bond insurers to provide a bond insurance policy guaranteeing the payment when due of principal of and interest on the 2007 Bonds and/or the 2008 Bonds. Section 24. 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 as of their respective Closing to the Underwriter, including, but not limited to, the final official statement pertaining to the 2007 Bonds and the 2008 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 Underwriter, each without unreasonable delay. If definitive Bonds are not ready for delivery by the date of the applicable Closing agreed to by the City and the Underwriter, the City, upon the approval of the Underwriter, may cause to be issued and delivered to the Underwriter 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 25. Application of Bond Proceeds. The accrued interest, if any, received by the City at the Closing of the 2007 Bonds and the 2008 Bonds shall be deposited into the Bond Fund and shall be applied to the payment of interest first coming due on the 2007 Bonds or the 2008 Bonds, as applicable. The remaining proceeds of the sale of the 2007 Bonds and the 2008 Bonds, less the underwriter’s discount and the bond insurance premium to be paid by the Underwriter on behalf of the City or any other costs of issuance, if any, plus the original issue premium, if any, shall be applied, upon receipt after each Closing, as follows: (a) the amount required to meet the Reserve Requirement for the 2007 Bonds, if any, or the 2008 Bonds, if any, shall be deposited into the Reserve Fund or used to acquire Qualified Insurance, (b) the proceeds of sale of the 2007 Bonds necessary to refund the Refunded Bonds shall be deposited into the Refunding Account, (c) the remaining proceeds of the Tax-Exempt Bonds shall be deposited into the tax- exempt bond subaccount hereby authorized to be created in the Project Fund (the “Tax-Exempt Subaccount”) to pay part of the costs of the Project, and (d) the proceeds of the Taxable Bonds shall be deposited into the taxable bond subaccount hereby authorized to be created in the Project Fund (the “Taxable Subaccount”) to pay part of the costs of the Project. -26- Except as provided by the Code and Section 20 of this ordinance, the interest and profits derived from the investment of Bond proceeds shall be deposited in the applicable Tax-Exempt or Taxable Subaccount created within the Project Fund and applied as described in the preceding paragraph. Except as provided by the Code and Section 20 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 and subject to the requirements of the Code and Section 20 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 26. Plan of Refunding. (a) Refunding Plan. For the purpose of realizing a debt service savings, the City Council proposes to issue refunding bonds for the purpose of providing for the payment of the principal of and interest on and the redemption price of the Refunded Bonds on December 1, 2012 (the “Refunding Plan”). (b) Refunding Account. There is created an account known as the “2002 Bond Refunding Account” (the “Refunding Account”) to be held by the Escrow Agent, which account is to be drawn upon for the sole purpose of paying the principal of and interest on the Refunded Bonds until their date of redemption and of paying costs related to the refunding of these bonds. The proceeds of sale of the 2007 Bonds necessary to refund the Refunded Bonds shall be credited to the Refunding Account. Money in the Refunding Account shall be used immediately upon receipt to defease the Refunded Bonds as authorized by this ordinance and Ordinance No. 4976 and to pay costs of issuance for the 2007 Bonds. The City shall defease the Refunded Bonds and discharge such obligations by the use of money in the Refunding Account to purchase certain Government Obligations (which obligations so purchased, are herein called “Acquired Obligations”), bearing such interest and maturing as to principal and interest in such amounts and at such times which, together with any necessary beginning cash balance, will provide for the payment of: (i) interest on the Refunded Bonds to and including December 1, 2012; (ii) the redemption price of the Refunded Bonds (100% of the principal amount thereof) on December 1, 2012; Such Acquired Obligations shall be purchased at a yield not greater than the yield permitted by the Code and regulations relating to acquired obligations in connection with refunding bond issues. -27- (c) Escrow Agent/Escrow Agreement. To carry out the refunding and defeasance of the Refunded Bonds, the City hereby appoints U.S. Bank National Association as escrow agent (the “Escrow Agent”). A beginning cash balance, if any, and Acquired Obligations shall be deposited irrevocably with the Escrow Agent in an amount sufficient to defease the Refunded Bonds. The proceeds of the 2007 Bonds remaining in the Refunding Account after acquisition of the Acquired Obligations and provision for the necessary beginning cash balance shall be utilized to pay expenses of the acquisition and safekeeping of the Acquired Obligations and expenses of the issuance of the 2007 Bonds. In order to carry out the purposes of this Section, the Mayor, the City Finance Director and other appropriate officers of the City are authorized and directed to execute and deliver to the Escrow Agent, an Escrow Deposit Agreement, substantially in the form on file with the City. (d) Implementation of Refunding Plan. The City hereby irrevocably sets aside sufficient funds out of the purchase of Acquired Obligations from proceeds of the Refunded Bonds to make the payments described in subsection (b) of this Section. The City hereby irrevocably calls the Refunded Bonds for redemption on December 1, 2012 in accordance with the provisions of Ordinance No. 4976 authorizing the redemption and retirement of the Refunded Bonds prior to their fixed maturities. Said call for redemption of the Refunded Bonds shall be irrevocable after the final establishment of the escrow account and delivery of the Acquired Obligations to the Escrow Agent. The Escrow Agent is hereby authorized and directed to provide for the giving of notices of the redemption of the Refunded Bonds in accordance with the applicable provisions of Ordinance No. 4976. The City Finance Director is authorized and requested to provide whatever assistance is necessary to accomplish such redemption and the giving of notices therefor. The costs of publication of such notices shall be an expense of the City. The Escrow Agent is hereby authorized and directed to pay to the Bond Registrar, sums sufficient to pay, when due, the payments specified in of subsection (a) of this Section. All such sums shall be paid from the money and Acquired Obligations deposited with said Escrow Agent pursuant to the previous section of this ordinance, and the income therefrom and proceeds thereof. All such sums so paid to said Bond Registrar shall be credited to the Refunding Account. All money and Acquired Obligations deposited with the bank and any income therefrom shall be held, invested (but only at the direction of the City Finance Director) and applied in accordance with the provisions of this ordinance and with the laws of the State of Washington for the benefit of the City and owners of the Refunded Bonds. The City will take such actions as are found necessary to ensure that all necessary and proper fees, compensation and expenses of the Escrow Agent for the Refunded Bonds shall be paid when due. 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. -28- The City hereby agrees to provide or cause to be provided to each then existing NRMSIR and to the SID, if one is created, in each case as designated by the SEC, the following annual financial information and operating data (collectively, the “Annual Financial Information”) for each prior fiscal year, commencing in 2008 with the calendar year ending December 31, 2007 with respect to the 2007 Bonds, and commencing in 2008 with the calendar year ending December 31, 2008 with respect to the 2008 Bonds: (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 by the Washington State Auditor pursuant to RCW 43.09.200, 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 Net Revenue; (c) Debt service coverage ratios; (d) General customer statistics for the Waterworks Utility contained in the final official statement for the Bonds under the heading “The Waterworks Utility—Number of Water Customers,” “—Water Billing,” “—Number of Wastewater Customers,” “—Wastewater Billing,” “—Number of Storm Drainage Customers,” and “—Storm Drainage Billing” and (e) A narrative explanation of the reasons for any amendments to this Section made during the previous fiscal year and-the impact of such amendments on the Annual Financial Information being provided. The Annual Financial Information shall be provided on or before the last day of the seventh month following the end of such prior fiscal year; provided, after the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding the City shall provide the following Annual Financial Information on or before the last day of the ninth month following the end of the prior fiscal year. The City’s current fiscal year ends December 31. The City may adjust such fiscal year by providing written notice of the change of fiscal year to each then existing NRMSIR and the SID, if any. In lieu of providing such Annual Financial Information, 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 any. The City further agrees to provide or cause to be provided, in a timely manner, to the SID, if any, and to each then existing NRMSIR, notice of any of the following events with respect to the Bonds, if material: 1. Principal and interest payment delinquencies; -29- 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 Tax-Exempt Bonds; 7. Modifications to rights of the Owners of the Bonds; 8. Bond calls (optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34-23856); 9. Defeasances of the Bonds; 10. Release, substitution or sale of property securing repayment of the Bonds; and 11. Rating changes. Solely for purposes of disclosure, and not intending to modify this undertaking, the City advises that there is no property securing repayment of the Bonds and that interest earned on the Taxable Bonds will not be excluded from gross income of the owners of the Taxable Bonds for federal income tax purposes. The City also agrees to provide or cause to be provided, in a timely manner, to the SID, if any, and to each then existing NRMSIR, notice of its failure to provide the Annual Financial Information for the prior fiscal year on or before the date set forth above. 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 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 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 -30- this Section 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 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 shall be limited to the right to obtain specific enforcement of the City’s obligations under this Section, 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. The City may elect to submit the information required by this Section to be filed with the NRMSIRs and the SID, if any, directly to DisclosureUSA.org unless or until the SEC withdraws its approval of this submission process. Section 28. Preliminary Official Statement. The City authorizes the City Finance Director to approve preliminary official statements for the 2007 Bonds and the 2008 Bonds and authorizes the distribution of such preliminary official statements in connection with the offering of the 2007 Bonds and 2008 Bonds. Pursuant to the Rule, the City Finance Director may deem the preliminary official statements as final as of their respective dates except for the omission of information dependent upon the pricing of the applicable series of Bonds and the completion of the applicable Bond Purchase Agreement. The City agrees to cooperate with the Underwriter to deliver or cause to be delivered, within seven business days from the date of the sale of the 2007 Bonds and the 2008 Bonds, as applicable, copies of a final official statement in sufficient quantity to comply with paragraph (b)(4) of the Rule and the rules of the MSRB. Following the sale of the 2007 Bonds and the 2008 Bonds in accordance with this ordinance, the City authorizes the use the final official statements, substantially in the form of the applicable preliminary official statements, in connection with the sale of the 2007 Bonds and 2008 Bonds. The City Finance Director is hereby authorized to review and approve on behalf of the City the final Official Statements for the Bonds with such additions and changes as may be deemed necessary or advisable. Section 29. Amendments. (a) The City Council from time to time and at any time may pass an ordinance or ordinances supplemental hereof, which ordinance or ordinances thereafter shall become a part of this ordinance, for any one or more or all of the following purposes: (1) To add to the covenants and agreements of the City in this ordinance, other covenants and agreements thereafter to be observed, which shall not adversely affect the interests of the owners of any Bonds, or to surrender any right or power herein reserved. (2) To make such provisions for the purpose of curing any ambiguities or of curing, correcting or supplementing any defective provision contained in this ordinance in regard to matters or questions arising under such ordinances as the City Council may deem necessary or -31- desirable and not inconsistent with such ordinances and which shall not adversely affect, in any material respect, the interest of the owners of Bonds. In any such supplemental ordinance may be adopted without the consent of the owners of any Bonds at any time outstanding, notwithstanding any of the provisions of subsection (b) of this section. (b) With the consent of the owners of not less than sixty-five percent (65%) in aggregate principal amount of the Bonds at the time outstanding, the City Council may pass an ordinance or ordinances supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this ordinance or of any supplemental ordinance; provided, however, that no such supplemental ordinance shall: (1) Extend the fixed maturity of any Bonds, or reduce the rate of interest thereon, or extend the time of payment of interest from their due date, or reduce the amount of the principal thereof, or reduce any premium payable on the redemption thereof, without the consent of the Owner of each Bond so affected; or (2) Reduce the aforesaid percentage of Bondowners required to approve any such supplemental ordinance, without the consent of the owners of all of the Bonds then outstanding. It shall not be necessary for the consent of Bondowners under this subsection (b) to approve the particular form of any proposed supplemental ordinance, but it shall be sufficient if such consent shall approve the substance thereof. For the purpose of consenting to amendments under this subsection (b), the Insurer shall be deemed to be the sole Registered Owner of the Bonds then outstanding. (c) Upon the adoption of any supplemental ordinance pursuant to the provisions of this Section, this ordinance shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations of the City under this ordinance and all owners of Bonds outstanding hereunder shall thereafter be determined, exercised and enforced thereunder, subject in all respects to such modifications and amendments, and all terms and conditions of any such supplemental ordinance shall be deemed to be part of the terms and conditions of this ordinance for any and all purposes. (d) Bonds executed and delivered after the execution of any supplemental ordinance passed pursuant to the provisions of this section may have a notation as to any matter provided for in such supplemental ordinance, and if such supplemental ordinance shall so provide, new Bonds so modified as to conform, in the opinion of the City Council, to any modification of this ordinance contained in any such supplemental ordinance, may be prepared and delivered without cost to the owners of any affected Bonds then outstanding, upon surrender for cancellation of such Bonds in equal aggregate principal amounts. (e) Exclusion of Bonds Owned by City. Bonds owned or held by or for the account of the City shall not be deemed outstanding for the purpose of any vote or consent or other action or any calculation of outstanding Bonds in this ordinance provided for, and shall not be entitled to vote or consent or take any other action in this ordinance provided for. -32- (f) Bonds Held by Securities Repositories. For so long as the Bonds are held in book entry only form, communications with the owners shall be made with the securities depository who is the “Registered Owner” of the Bonds and communications with (and obtaining consents from) beneficial owners shall be made in accordance with the operational procedures of the securities depository that is the “Registered Owner” of the Bonds. Section 30. Contract: Savings Clause. The covenants contained in this ordinance and in the Bonds shall constitute a contract between the City and the Owner of each and every Bond. If any one or more of the covenants or agreements provided in this ordinance to be performed on the part of the City shall be declared by any court of competent jurisdiction and after final appeal (if any appeal be taken) to be contrary to law, then such covenant or covenants, agreement or agreements, shall be null and void and shall be deemed separable from the remaining covenants and agreements in this ordinance and shall in no way affect the validity of the other provisions of this ordinance or of the Bonds. Section 31. General Authorization; Ratification of Prior Acts. The Mayor, the City Finance Director and other appropriate officers of the City are authorized to take any actions and to execute documents as in their judgment may be necessary or desirable in order to carry out the terms of, and complete the transactions contemplated by, this ordinance. All acts taken pursuant to the authority of this ordinance but prior to its effective date are hereby ratified. Section 32. Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval and five days after publication. PASSED by the City Council this 22nd day of October, 2007. Bonnie Walton, City Clerk APPROVED BY THE MAYOR this 22nd day of October, 2007. Kathy Keolker, Mayor Approved as to Form: Bond Counsel Date of Publication: _________________________ A-1 EXHIBIT A Project Description Proceeds of the Bonds are expected to be used for the following Projects: • Renton Village Storm System Improvement – planning, designing and constructing a storm system to increase capacity. • Gypsy Basin/Ripley Lane Storm System Improvement – replacing an existing culvert which will connect into a 60-inch storm system on the new Seahawks headquarters/training facility site. • SW 34th Street Culvert Replacement – replacing existing culvert to improve conveyance activity, reduce upstream flooding and improve fish passage. • Hazen 565 Zone Reservoir – designing and constructing a 4.2 million gallon reservoir. • Emergency Power to Pump Stations – installing emergency electrical power generation facilities. • Summerwind/Stongate Lift Station Replacement – constructing a new station to ensure sufficient capacity in a rapidly growing area. • Central Plateau Interceptor Phase 2 – constructing an interceptor to serve eastern portion of service area. B-1 EXHIBIT B Form of Bonds The Bonds shall be in substantially the following form: UNITED STATES OF AMERICA [Statement of Insurance] No. _____ STATE OF WASHINGTON CITY OF RENTON WATER AND SEWER REVENUE [AND REFUNDING] BOND, [SERIES][2007/2008] [A/B][(TAXABLE)] INTEREST RATE: MATURITY DATE: CUSIP NO.: REGISTERED OWNER: CEDE & Co. PRINCIPAL AMOUNT: The City of Renton, Washington, a municipal corporation organized and existing under and by virtue of the laws of the State of Washington (herein called the “City”) hereby acknowledges itself to owe and for value received promises to pay, but only from the sources and as hereinafter provided, to the Registered Owner identified above, or registered assigns, on the Maturity Date identified above, the Principal Amount indicated above and to pay interest thereon from the date of delivery, or the most recent date to which interest has been paid or duly provided for, at the Interest Rate set forth above, payable on _______, 20__, and semiannually thereafter on the first days of each December and June until such principal sum is paid or payment has been duly provided for. Both principal of and interest on this bond are payable in lawful money of the United States of America. Interest and principal shall be paid as provided in the Blanket Issuer Letter of Representations (the “Letter of Representations”) by the City to The Depository Trust Company (“DTC”). The fiscal agency of the State of Washington has been appointed by the City as the authenticating agent, paying agent and registrar for the bonds of this issue (the “Bond Registrar”). Capitalized terms used in this bond that are not specifically defined have the meanings given such terms in Ordinance No. 5313 of the City adopted on October 22, 2007 and Resolution No. ____ of the City adopted on __________, 20__ (together, the “Bond Ordinance”). Reference is made to the Bond Ordinance and any and all modifications and amendments thereto for a description of the nature and extent of the security for the bonds of this issue, the funds or revenues pledged, and the terms and conditions upon which such bonds are issued. B-2 This bond is one of an authorized issue of bonds of the City of like date and tenor except as to number, amount, rate of interest and date of maturity in the aggregate principal amount of $_________. This issue of bonds is authorized by the Bond Ordinance for the purposes of providing money to pay part of the cost of construction and acquisition of certain improvements to the Waterworks Utility[, refund certain outstanding water and sewer revenue bonds of the City], fund the Reserve Fund, and to pay costs of issuance of the bonds of this issue, all as specified in the Bond Ordinance. [Simultaneously with the issuance of this bond, the City is also issuing its Water and Sewer Revenue Bonds, Series 2008[A/B][(Taxable)] for the purposes specified in the Bond Ordinance.] This bond and the bonds of this issue are payable solely from the special funds of the City defined as the “Bond Fund” and the “Reserve Fund” in the Bond Ordinance. The City has irrevocably obligated and bound itself to pay into the Bond Fund out of the Net Revenue or from such other moneys as may be provided therefor certain amounts necessary to pay and secure the payment of the principal and interest on such bonds. The bonds of this issue are not general obligations of the City. [The bonds of this issue are not “private activity bonds” as such term is defined in the Internal Revenue Code of 1986, as amended (the “Code”). The bonds of this issue have been designated by the City as “qualified tax-exempt obligations” under Section 265(b) of the Code.] The bonds of this issue are issued under and in accordance with the provisions of the Constitution and applicable statutes of the State of Washington and duly adopted ordinances of the City. The City hereby covenants and agrees with the owner of this bond that it will keep and perform all the covenants of this bond and of the Bond Ordinance to be by it kept and performed, and reference is hereby made to the Bond Ordinance for a complete statement of such covenants. The City does hereby pledge and bind itself to set aside from the Waterworks Utility Fund out of the revenue of the Waterworks Utility and to pay into the Bond Fund and the Reserve Fund the various amounts required by the Bond Ordinance to be paid into and maintained in such Funds, all within the times provided by the Bond Ordinance. To the extent more particularly provided by the Bond Ordinance, the amounts so pledged to be paid from the Waterworks Utility Fund out of the revenue of the Waterworks Utility into the Bond Fund and the account therein shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the amounts required to pay and secure the payment of the outstanding 1998 Bonds, the 2002 Bonds, the 2003 Bonds, [and] the 2004 Bonds[, and the 2007 Bonds] and any revenue bonds of the City hereafter issued on a parity with the bonds of this issue and superior to all other liens and charges of any kind or nature except Maintenance and Operation Expense. The pledge of Net Revenue and other obligations of the City under the Bond Ordinance may be discharged at or prior to the maturity or redemption of the bonds of this issue upon the making of provision for the payment thereof on the terms and conditions set forth in the Bond Ordinance. B-3 The bonds of this issue are subject to redemption prior to their scheduled maturities as provided in the Bond Ordinance. This bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Ordinance until the Certificate of Authentication hereon shall have been manually signed by the Bond Registrar. It is hereby certified that all acts, conditions, and things required by the Constitution and statutes of the State of Washington to exist, to have happened, been done, and performed precedent to and in the issuance of this bond have happened, been done, and performed. IN WITNESS WHEREOF, the City of Renton, Washington has caused this bond to be signed with the facsimile or manual signature of the Mayor, to be attested by the facsimile or manual signature of the City Clerk, all as of this _____ day of ____________, 20__. CITY OF RENTON, WASHINGTON By /s/ facsimile or manual Mayor ATTEST: /s/ facsimile or manual City Clerk The Bond Registrar’s certificate authentication on the Bonds shall be in substantially the following form: CERTIFICATE OF AUTHENTICATION Date of Authentication: ___________, 20__ This bond is one of the bonds described in the within-mentioned Bond Ordinance and is one of the Water and Sewer Revenue [and Refunding] Bonds, [Series][2007/2008] [A/B][(Taxable)] of the City of Renton, Washington, dated ___________, 20__. WASHINGTON STATE FISCAL AGENCY, Registrar By Authorized Signer Appendix B Opinions of Bond Counsel This page left blank intentionally. January __, 2008 City of Renton Renton, Washington Seattle-Northwest Securities Corporation Seattle, Washington Re: City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A —$___________ Ladies and Gentlemen: We have acted as bond counsel to the City of Renton, Washington (the “City”) and have examined a certified transcript of the proceedings taken in the matter of the issuance by the City of its Water and Sewer Revenue Bonds, Series 2008A (the “Bonds”), issued pursuant to Ordinance No. 5313 of the City and Resolution No. _____ of the City (together, the “Bond Ordinance”), for the purpose of financing certain improvements to the Waterworks Utility of the City. Capitalized terms not otherwise defined herein shall have the meanings given such terms in the Bond Ordinance. The Bonds are subject to redemption prior to maturity as provided in the Bond Ordinance. Regarding questions of fact material to our opinion, we have relied on representations of the City in the Bond Ordinance and in the certified proceedings and on other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Concurrently with the issuance of the Bonds the City is issuing its Water and Sewer Revenue Bonds, Series 2008B (Taxable) to also finance certain improvements to the Waterworks Utility. Based on the foregoing, we are of the opinion that, under existing law: 1. The Bonds have been legally issued and constitute valid special obligations of the City, both principal thereof and interest thereon being payable solely out of a special fund of the City known as the “Waterworks Revenue Bond Fund” (the “Bond Fund”), except to the extent that the enforcement of the rights and remedies of such owners of the Bonds may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, also by the application of equitable principles and the exercise of judicial discretion. 2. The Bond Ordinance is a legal, valid and binding obligation of the City, has been duly authorized, executed and delivered and is enforceable in accordance with its terms, except to the extent that enforcement may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise of judicial discretion. 3. The City has irrevocably bound itself to set aside and pay into the Bond Fund and the Waterworks Revenue Bond Reserve Fund (the “Reserve Fund”) out of Gross Revenue amounts necessary to pay the principal of and interest on the Bonds as the same become due. 4. The City has pledged that the payments to be made into the Bond Fund and the Reserve Fund out of Gross Revenue shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the Outstanding Parity Bonds, the amounts required to pay and secure the payment of the Bonds and any water and sewer revenue bonds of the City hereafter issued on a parity with the Bonds and superior to all other liens and charges, except Maintenance and Operation Expenses of the Waterworks Utility. The City has reserved the right to issue Future Parity Bonds on the terms set forth in the Bond Ordinance. 5. Interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The opinion set forth in the preceding sentence is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The City has covenanted to comply with all applicable requirements. Failure to comply with certain of such covenants may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. Except as expressly stated above, we express no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements. The City has designated the Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code. We have not been engaged nor have we undertaken to review the accuracy, completeness or sufficiency of the official statement or other offering material related to the Bonds (except to the extent, if any, stated in the official statement), and we express no opinion relating thereto, or relating to the undertaking by the City to provide ongoing disclosure pursuant to Securities and Exchange Commission Rule 15c2-12. This opinion is given as of the date hereof, and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Very truly yours, K&L PRESTON GATES ELLIS LLP This page left blank intentionally. January __, 2008 City of Renton Renton, Washington Seattle-Northwest Securities Corporation Seattle, Washington Re: City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) —$___________ Ladies and Gentlemen: We have acted as bond counsel to the City of Renton, Washington (the “City”) and have examined a certified transcript of the proceedings taken in the matter of the issuance by the City of its Water and Sewer Revenue Bonds, Series 2008B (Taxable), dated as of the date of their delivery, in the aggregate principal amount of $________ (the “Bonds”), issued pursuant to Ordinance No. 5313 of the City and Resolution No. _____ of the City (together, the “Bond Ordinance”), for the purpose of financing certain improvements to the Waterworks Utility of the City. Capitalized terms not otherwise defined herein shall have the meanings given such terms in the Bond Ordinance. The Bonds are not subject to redemption prior to maturity as provided in the Bond Ordinance. Regarding questions of fact material to our opinion, we have relied on representations of the City in the Bond Ordinance and in the certified proceedings and on other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Concurrently with the issuance of the Bonds the City is issuing its Water and Sewer Revenue Bonds, Series 2008A to also finance certain improvements to the Waterworks Utility. Based on the foregoing, we are of the opinion that, under existing law: 1. The Bonds have been legally issued and constitute valid special obligations of the City, both principal thereof and interest thereon being payable solely out of a special fund of the City known as the “Waterworks Revenue Bond Fund” (the “Bond Fund”), except to the extent that the enforcement of the rights and remedies of such owners of the Bonds may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, also by the application of equitable principles and the exercise of judicial discretion. 2. The Bond Ordinance is a legal, valid and binding obligation of the City, has been duly authorized, executed and delivered and is enforceable in accordance with its terms, except to the extent that enforcement may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise of judicial discretion. 3. The City has irrevocably bound itself to set aside and pay into the Bond Fund and the Waterworks Revenue Bond Reserve Fund (the “Reserve Fund”) out of Gross Revenue amounts necessary to pay the principal of and interest on the Bonds as the same become due. 4. The City has pledged that the payments to be made into the Bond Fund and the Reserve Fund out of Gross Revenue shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the Outstanding Parity Bonds, the amounts required to pay and secure the payment of the Bonds and any water and sewer revenue bonds of the City hereafter issued on a parity with the Bonds and superior to all other liens and charges, except Maintenance and Operation Expenses of the Waterworks Utility. The City has reserved the right to issue Future Parity Bonds on the terms set forth in the Bond Ordinance. Except as expressly stated above, we express no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements. The City has taken no action to cause interest on the Bonds to be excluded from gross income for purposes of federal income taxation. We have not been engaged nor have we undertaken to review the accuracy, completeness or sufficiency of the official statement or other offering material related to the Bonds (except to the extent, if any, stated in the official statement), and we express no opinion relating thereto, or relating to the undertaking by the City to provide ongoing disclosure pursuant to Securities and Exchange Commission Rule 15c2-12. This opinion is given as of the date hereof, and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Very truly yours, K&L PRESTON GATES ELLIS LLP Appendix C Book-Entry Transfer System This page left blank intentionally. T H E D E P O S I T O R Y T R U S T C O M P A N Y SAMPLE OFFERING DOCUMENT 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 $500 million, one certificate will be issued with respect to each $500 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.] 2. DTC, the world’s largest 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 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instrument from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as 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 both U.S. and non- U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other 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. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of 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 unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts 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[nor its nominee], Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. [9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Securities to [Tender/Remarketing] Agent’s DTC account.] 10. DTC may discontinue providing its services as 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-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 12. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. [5/07] Appendix D 2006 Audited Financial Statements This page left blank intentionally. 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-1MANAGEMENT’S DISCUSSION AND ANALYSIS The City of Renton’s discussion and analysis provides a narrative overview of the City’s financial activities for the fiscal year ended December 31, 2006. The intent of the discussion and analysis is to review the City’s financial performance as a whole. This Management’s Discussion and Analysis (MD&A) combined with the Transmittal Letter, the Financial Statements, and the Notes to the Financial Statements represent the complete 2006 financial activities for the City of Renton. These are all intended to help the reader understand the City’s significant financial issues. This MD&A provides an overview of the City’s financial records. The data in this financial report also identifies any material deviations from the financial plan and the adopted annual budget. Finally, the intent of the MD&A and other financial information is to isolate and identify individual fund issues or concerns.FINANCIAL INFORMATION Since 2003, the City of Renton prepared its financial records in accordance to what is known as Government Accounting Standards Board Statement 34 (GASB 34) with a phase in of the infrastructure component in 2004. The City’s general Government-wide Financial Statements were prepared on the full accrual basis of accounting in conformity with generally accepted accounting principles (GAAP). The City’s Fund Financial Statements for its major and non-major governmental funds were prepared on the modified accrual basis of accounting in conformity with GAAP. The City’s major and non-major enterprise funds, internal service funds and pension funds were accounted for on the accrual basis. The City of Renton, along with all cities, counties and other governmental entities in Washington, must comply with the Budgeting, Accounting, and Reporting System (BARS) as defined by the Washington State Office of the Auditor (SAO). The SAO audits the financial records of all cities and other governmental units within the State. The City of Renton’s financial system integrates financial and administrative controls that ensure the safeguarding of assets and the reliability of financial reports. These controls are designed to provide:1. reasonable assurance that transactions are executed in accordance to management understanding and approval;2. reasonable assurance that transactions are executed in accordance to GAAP principles;3. accountability for control of assets and obligations; and4. assurance that sufficient reporting and review exists to provide adequate information for analysis and comparability of data. Internal control is a high priority for the City. The State Office of the Auditor reviews the City’s internal controls, and the City receives and takes action on all the recommendations made. 2006 Comprehensive Annual Financial Report City of Renton, Washington3-2 Management’s Discussion and AnalysisThe City maintains strong budgetary controls in order to ensure compliance with legal provisions embodied in the annual appropriated budget as approved by the City Council. The City Council must authorize any budget increase or decrease to any fund.Financial Highlights •The City’s total assets as of December 31, 2006, exceeded liabilities by over $486 million. •As of December 31, 2006, the City’s Governmental Activities reported net assets of $282 million. Of this total, $26 million is defined as unrestricted and can be used for needs the Mayor and Council deem necessary. These monies are intended to provide a cushion against significant economic downturns in revenues and to maintain sufficient working capital and cash flow to meet daily financial needs. •Investments in capital assets comprise $213 million of the $282 million in Governmental Activities net assets. •The business type activities have total net assets of $204 million. Eighty-eight (88%) percent of this total, $180 million, represents the City’s investments in capital assets. An unrestricted balance of $20 million remains and is used to meet day to day cash flow requirements and to ensure we can meet all obligations of the utilities and other funds if the revenues do not meet expectations. •The City’s total outstanding long-term debt as of December 31, 2006, was $96 million. Of this amount, $41.4 million are revenue bonds and PWTF loans dedicated to the water works projects. Another $1.4 million is for outstanding bonds for Senior Housing. These bonds have a special taxing authority. The Golf Course has $3.09 million outstanding in debt service. Employee leave balances total $4.6 million. The balance of $45.5 million of our debt is dedicated for general governmental purposes, including the purchase of City Hall, the construction of the downtown parking garage and a replacement of a fire station (our share of a regional E-911), Communications Center, and other small projects, including municipal-bonds sold for fire equipment. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis provides an introduction and overview to the City of Renton’s basic financial statements. The basic financial statements are comprised of three components: 1. Government-wide Financial Statements; 2. Fund Financial Statements; and 3. Notes to the Financial Statements. The graphic representation below illustrates the required components of the City’s annual financial report and how the required parts are arranged and relate to one another. This illustration helps explain the City’s financial presentation in 2006. This graphic representation should be used in conjunction with the following explanations to help guide the reader in understanding the financial condition of the City of Renton. 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-3Figure 1REQUIRED COMPONENTS OF THE ANNUAL FINANCIAL REPORT In addition to the required components shown in Figure 1, the City’s annual report also includes other voluntary supplementary information. The most significant section is the Combining Statements. These provide Balance Sheets, Statement of Revenues, Expenditures, and Changes in Fund Balances with Budget to Actual comparisons, Statement of Net Assets, and Cash Flows for all Non-Major Funds.The next section of information, the Statistical Section, provides a ten-year view of the City’s Revenue, Expenditures, Debt Obligations, and Debt Capacity, the City’s largest taxpayers, and those entities with the largest employment within the City of Renton. This section provides a long-term perspective on the City’s economy.BASIC FINANCIAL STATEMENTS Government-wide Financial Statements provide readers with a broad overview of the City of Renton’s finances in a manner similar to a private sector business. They provide both short-term and long-term information about the City’s overall financial status. The government-wide statements distinguish between functions of the City that are principally supported by taxes and intergovernmental revenues (referred to as “governmental activities”) from functions that are intended to recover all or a significant portion of their costs through user fees and charges (referred to as “business-type activities.”) The governmental activities of the City include a full range of local government services provided to the public such as police and fire protection; road maintenance and construction; community planning and economic development; libraries, parks and recreational opportunities; and other community services. The business-type activities of the City include water, sewer, surface water, solid waste management and services, golf course, and airport. 2006 Comprehensive Annual Financial Report City of Renton, Washington3-4 Management’s Discussion and AnalysisThe Statement of Net Assets presents information on all of the City’s assets and liabilities with the difference between the two reported as net assets. This statement combines and consolidates governmental funds’ current financial resources (short term available resources) with capital assets and long-term obligations, which is primarily debt. The Statement of Net Assets serves a purpose similar to that of the Balance Sheet of a private-sector business. Over time, increases or decreases in net assets may serve as one indicator of whether the financial position of the City is improving or deteriorating. Other indicators to consider when evaluating the financial position of the City includes changes to the property tax base, general economic conditions as demonstrated through business licenses fees or sales tax revenue, and the condition of the City’s infrastructure (roads, drainage systems, bridges, water infrastructure.) The Statement of Activities focuses upon both the gross and net cost of various activities that are provided by the government’s general tax and other revenues. This is intended to summarize and simplify the user’s analysis of cost to various governmental services and/or subsidy to various business-type activities. By separating program revenue from general revenue, users of the financial statements can identify the extent to which each program relies on taxes for funding. The Governmental Activities reflect the City’s basic functions: General Government, Security of Person and Property, Physical Environment, Mental and Physical Health, and Culture and Recreation. Property, sales, and utility taxes finance the majority of these functions. All changes in net assets are reported using accrual basis of accounting, which is similar to the accounting used in the private sector. The accrual basis of accounting requires that revenues are reported when earned and expenses are reported when incurred, no matter when the revenue will actually be received or the obligation will be paid. For example, property taxes are shown as a receivable as revenue even though some amount of these taxes will not be available to the City for several years. All unpaid vendor obligations are illustrated as an accounts payable obligation as of December 31. Fund Financial Statements The City uses funds to ensure and demonstrate fiscal integrity and compliance with finance related legal requirements with a focus on Major Funds. A fund is a group of related accounts that is used to maintain control over resources that have been segregated for specific activities and objectives. There are three types of funds: governmental, proprietary, and fiduciary. A Major Fund has three elements as defined by GASB 34:•Total assets, liabilities, revenues, or expenditures of that individual governmental or enterprise funds are at least ten percent (10%) of the corresponding total (assets, liabilities,etc.) for all funds of that category or type (i.e., governmental, proprietary, or fiduciary); and•Total assets, liabilities, revenues, or expenditures/expenses of the individual government fund or enterprise funds are at least five percent (5%) of the corresponding total for all governmental and enterprise funds combined; or •Any other governmental or enterprise fund that the government’s officials believe is particularly important. Governmental Funds present most of a government’s tax-supported activities. The Proprietary Funds describe and financially manage the government’s business-type activities where all or part 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-5of the activities’ costs are supported by fees and charges that are paid directly by those who benefit from the activities. Fiduciary Funds control resources held by the government as a trustee or agent for parties outside of the government. The resources of Fiduciary Funds cannot be used to support the government’s own programs. Governmental Funds The Governmental Fund Balance Sheet and Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances present separate columns of financial data for the General, Parks, and Municipal Facilities CIP Funds (new major fund in 2006). These comprise the City’s major governmental funds. Data from the remaining governmental funds are combined and presented in a single, aggregated column in the fund statements. Individual fund data for each of the non-major governmental funds is provided in the form of combining statements. Governmental Funds are used to account for essentially the same functions reported as governmental activities in the Government-wide Financial Statements. The focus of governmental Fund Financial Statements is on near-term inflows and outflows of available resources and on balances of resources available at the end of the fiscal year. Such information is useful in evaluating whether there are more or less financial resources that can be spent in the near future to finance City services.Because the focus of governmental Fund Financial Statements is a narrower view than that of the Government-wide Financial Statements, it is useful to compare information presented for governmental funds with similar information presented for governmental activities in the Government-wide Financial Statements. This gives the reader a better understanding of the long-term impact of the government’s near-term financing decisions. The Governmental Fund Balance Sheet and the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances provide reconciliation to the governmental activities column in the government-wide statements to facilitate this comparison. The City maintains budgetary controls over its governmental funds. Budgetary controls ensure compliance with legal provisions embodied in the annual appropriated budget. Governmental fund budgets are established in accordance with state law and are adopted on a fund level. General Fund budget variances are reviewed later in this discussion and analysis.Proprietary Funds These types of funds consist of two types of funds: Enterprise and Internal Service. They have always been operated as private business activity. Enterprise Funds are used to report the same functions as business-type activities in the Government-wide Financial Statements. Internal Service Funds are used to report activities that provide supplies and services to various City departments and to accumulate and allocate the associated costs of providing these services to the various functions. The revenues and expenses of internal service funds that are duplicated in other funds are eliminated in the government-wide statements. Because the remaining balances primarily benefit governmental, rather than business-type activities, they have been included within Governmental Activities in the Government-wide Statements. The City of Renton has two major proprietary funds: Waterworks Utility (water, wastewater, and stormwater) and Solid Waste. All other activities are combined in Other Enterprise Funds. Governmental Activities Internal Service Funds are reported separately in this section.2006 Comprehensive Annual Financial Report City of Renton, Washington3-6 Management’s Discussion and AnalysisThe Proprietary Fund Balance Sheet and the Proprietary Fund Statement of Revenues, Expenses, and Changes in Fund Equity present separate columns of financial data for the Waterworks Utility and Solid Waste. Data from the remaining Enterprise Funds are combined and presented in a single, aggregated column in the fund statements. Governmental Activities Internal Service Funds are reported separately in this section.Proprietary Fund statements provide the same type of information as the Government-wide Financial Statements, only in more detail, since both apply the accrual basis of accounting. In comparing the total assets and total liabilities between the two statements, only slight differences will be noticed. One notable difference is that the “due from other funds” (asset) and the “due to other funds” (liability) in the proprietary fund statements are combined in a single line called “internal balances” in the asset section of the Government-wide Statement of Net Assets. Fiduciary Funds Fiduciary Funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reported in the Government-wide Financial Statements because the resources of those funds are not available to support the City’s own operations. All of the City’s fiduciary activities are reported in a separate Statement of Fiduciary Net Assets and a Statement of Changes in Fiduciary Net Assets. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided, and are an integral part of the Government-wide and Fund Financial Statements. Combining statements for non-major Governmental and Enterprise Funds, as well as Internal Service Funds, are presented immediately following the required supplementary information on pensions.GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Assets Changes in Net Assets may serve as a useful indicator of a government’s financial position. The overall financial position has improved for the City of Renton over the prior year. Changes in Net Assets from 2005 to 2006 shows an increase in total net assets of $27.9 million. 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-7Table 1 is a condensed version of the Government-wide Statement of Net Assets. Table 1 NET ASSETS Total TotalGovernmental Governmental Business-type Business-type Primary PrimaryActivities Activities Activities Activities Government Government2005 2006 2005 2006 2005 2006Current and other assets $69,083,752 $89,914,383 $27,021,623 $38,029,290 $96,105,375 $127,943,673 Capital assets (net of accumulated depreciation) 234,312,957 253,366,212 219,207,529 213,959,532 453,520,486 467,325,744 TOTAL ASSETS $303,396,709 $343,280,595 $246,229,152 $251,988,822 $549,625,861 $595,269,417 Long term liabilities $34,448,776 $51,093,508 $47,794,739 $44,994,968 $82,243,515 $96,088,476 Other liabilities 7,799,762 10,620,578 1,509,414 2,564,530 9,309,176 13,185,108 TOTAL LIABILITIES $42,248,538 $61,714,086 $49,304,153 $47,559,498 $91,552,691 $109,273,584 NET ASSETS Invested in capital assets, net of related debt $203,297,293 $209,964,556 $171,827,746 $181,515,939 $375,125,039 $391,480,495 Restricted 28,578,305 42,261,663 3,555,690 3,555,690 32,133,995 45,817,353 Unrestricted 29,272,573 29,340,290 21,541,563 19,357,695 50,814,136 48,697,985 TOTAL NET ASSETS $261,148,171 $281,566,509 $196,924,999 $204,429,324 $458,073,170 $485,995,833 The majority of the City’s net assets (81%) are investments in capital assets (e.g., streets, drainage, construction in progress, buildings, equipment, water and sewer pipes) less any related outstanding debt used to acquire these assets. The City’s capital assets are used to provide services to citizens. It should be noted that although the investment in capital assets is reported net of related debt, resources needed to repay this debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities. Investments in capital assets net of related debt increased from 2005 to 2006 by $16.4 million. In 2006, the City issued $17,980,000 Limited Tax obligation bonds. The proceeds of the bonds were used to finance the construction of South Lake Washington infrastructure improvements. Chart 1CATEGORIES OF NET ASSETS$0$75,000,000$150,000,000$225,000,000$300,000,000$375,000,000$450,000,000$525,000,0002005GovernmentalActivities2006GovernmentalActivities2005 BusinessTypeActivities2006 BusinessTypeActivities2005 TotalPrimaryGovernment2006 TotalPrimaryGovernmentUnrestrictedRestrictedInvested in capital assets2006 Comprehensive Annual Financial Report City of Renton, Washington3-8 Management’s Discussion and AnalysisRestricted assets, representing resources that are subject to external restrictions on how they may be used, equate to nine percent (9%) of total net assets, up from seven percent (7%) in 2005. The remaining balance (unrestricted net assets) of $48.7 million may be used to meet the City’s ongoing obligations. Chart 1 provides a graphical comparison of the three categories of net assets for 2005 and 2006.As of December 31, 2006, the City reports positive balances in all three categories of net assets, for the government as a whole, as well as for separate governmental and business-type activities.Statement of Change in Net Assets The City’s total net assets (before prior period adjustments and changes in accounting principles) increased in 2006 by $27.9 million. Governmental activities generated seventy percent (73%) of this total or $20.4 million, while business-type activities generated $7.5 million of this total. Chart 2 below illustrates the various sources and amounts of revenue received by the government as a whole. Table 2 follows the chart. This is a condensed version of the Statement of Activities for the City. Comparable data is available and provided in the 2006 Annual Report.Chart 22006 TOTAL REVENUES BY SOURCEProperty Taxes15%Sales Taxes 13%Excise Taxes5%Interest/Investment earnings3%Operating Grants & Contributions 3%Capital Grants/Contribution8%Charges for Services 45%Business Taxes7%Miscellaneous1% 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-9Table 2 CHANGE OF NET ASSETS Governmental Activities 2005 Governmental Activities 2006 Business-Type Activities 2005 Business-Type Activities 2006 Total Primary Government 2005 Total Primary Government 2006 REVENUES: Program revenues: Charges for services $27,101,167 $31,340,523 $40,029,830 $40,056,079 $67,130,997 $71,396,602 Operating grants & contributions 4,979,601 4,596,836 196,974 77,688 5,176,575 4,674,524 Capital grants & contributions 1,227,503 5,909,870 5,101,699 6,317,203 6,329,202 12,227,073 GENERAL REVENUES: Property taxes 21,523,818 23,600,131 21,523,818 23,600,131 Sales taxes 18,910,823 20,869,595 18,910,823 20,869,595 Business taxes 10,643,068 11,219,303 10,643,068 11,219,303 Other taxes 6,938,265 7,718,945 6,938,265 7,718,945 Penalties and interest 49 3,799 49 3,799 Interest and investment earnings 1,449,001 3,251,975 458,797 881,486 1,907,798 4,133,461 Miscellaneous 1,958,217 689,243 639,646 282,808 2,597,863 972,051 TOTAL REVENUES $94,731,512 $109,200,220 $46,426,946 $47,615,264 $141,158,458 $156,815,484 PROGRAM EXPENSES GOVERNMENTAL ACTIVITIES: General government services $21,137,856 $19,977,086 $21,137,856 $19,977,086 Judicial 1,380,816 1,434,134 1,380,816 1,434,134 Security of persons and property 29,496,791 30,749,762 29,496,791 30,749,762 Physical environment 2,208,340 2,618,832 2,208,340 2,618,832 Transportation 4,183,880 15,798,138 4,183,880 15,798,138 Economic environment 5,899,796 6,372,118 5,899,796 6,372,118 Mental and physical health 300,171 295,072 300,171 295,072 Culture and recreation 9,744,692 9,695,924 9,744,692 9,695,924 Interest on long-term debt 1,710,346 1,772,370 1,710,346 1,772,370 Business-type activities Water $25,884,227 $27,220,132 25,884,227 27,220,132 Airport 1,226,810 1,196,363 1,226,810 1,196,363 Solid waste 9,327,525 9,706,016 9,327,525 9,706,016 Golf 2,132,077 2,056,874 2,132,077 2,056,874 TOTAL EXPENSES $76,062,688 $88,713,436 $38,570,639 $40,179,385 $114,633,327 $128,892,821 Increase in net assets before transfers $18,668,824 $20,486,784 $7,856,307 $7,435,879 $26,525,131 $27,922,663 Transfers (9,300) (68,446) $9,300 $68,446 0 0 Increase in net assets 18,659,524 20,418,338 7,865,607 7,504,325 26,525,131 27,922,663 Net Assets - beginning 242,488,646 261,148,171 189,059,392 196,924,999 431,548,038 458,073,170 Net Assets -ending $261,148,171 $281,566,509 $196,924,999 $204,429,324 $458,073,170 $485,995,833 Seventy percent (70%) of the City of Renton’s total revenue activities are for general governmental activities such as providing police, fire, parks, libraries, recreational, building safety, and planning services.The largest business type activities include water, sewer, surface water, solid waste, and golf activities.Governmental Activities Analysis Governmental activities cost a total of $89 million in 2006, up $12.6 million from 2005. Of this amount, $42 million was paid for either by those who directly benefited from the programs or by other governments and organizations that subsidized certain programs with grants Chart 3 2006 COMPARISON OF TOTAL GOVERNMENTAL vs BUSINESS TYPE EXPENSESGovernmental Activities69%Business Type Activities31%2006 Comprehensive Annual Financial Report City of Renton, Washington3-10 Management’s Discussion and Analysisand contribution. The net expense (total expenses less program revenues) of $47 million was the cost of governmental services City taxpayers primarily paid through various taxes. Chart 4 portrays the cost of each of the City’s major governmental programs along with each program’s generated revenues (fees and intergovernmental revenues specifically related to that program.) Chart 4 GOVERNMENTAL ACTIVITIES PROGRAM REVENUES AND EXPENSES2005 vs 2006-$1,500,000$3,000,000$7,500,000$12,000,000$16,500,000$21,000,000$25,500,000$30,000,0002005GeneralGovt2006GeneralGovt2005Judicial2006Judicial2005SecurityofPersonsandProperty2006SecurityofPersonsandProperty2005PhysicalEnvironment2006PhysicalEnvironment2005Transportation2006Transportation2005EconomicEnvironment2006EconomicEnvironment2005MentalandPhysicalHealth2006MentalandPhysicalHealth2005CultureandRecreation2006CultureandRecreation2005InterestonDebt2006InterestonDebtExpensesRevenuesChart 5 depicts the sources of revenues that fund governmental activities. Approximately fifty-seven percent (57%) is from various taxes. Charges for services, grants, and interest earnings generate forty-two percent (42%) of total revenue for general governmental activities. 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-11Chart 5 GOVERNMENTAL ACTIVITIES REVENUES BY SOURCEProperty Taxes21%Capital Grants5%Operating Grants4%Charges for Services30%Excise Taxes7%Interest Earnings3%Miscellaneous1%Business Taxes10%Retail Sales Ta19%Business-Type Activities Analysis Charts 6 and 7 present the same information on business-type activities as illustrated for general governmental type activities. Chart 6 shows the expense of each of the City’s business-type programs along with each program’s generated revenues (fees and intergovernmental revenues specifically related to that program.) Chart 6 BUSINESS TYPE ACTIVITIES PROGRAM REVENUES AND EXPENSES$0$5,000,000$10,000,000$15,000,000$20,000,000$25,000,000$30,000,000$35,000,0002005Waterworks2006Waterworks2005 Airport 2006 Airport 2005 SolidWaste2006 SolidWaste2005 GolfCourse2006 GolfCourseExpensesRevenuesThe Waterworks Utility had a positive net change of $6.8 million at the end of 2006 compared to $7.4 million in 2005. The City generated $34 million in various fees for services and other sources from waterworks activities above the $27.2 million in expenses. 2006 Comprehensive Annual Financial Report City of Renton, Washington3-12 Management’s Discussion and AnalysisThe Airport’s total expenses were $1.2 million. Grant revenues for 2006 were $282,130 with total revenues of $1.2 million. The Solid Waste Utility’s revenues were $9.9 million generated from fees for services and $76,293 in grants. The total expenses were $9.7 million. The Golf Course generated a total of $2.3 million in green fees, driving range charges, and other user fees. The total expenses for the Golf Course were $2.1 million. Thus, the Golf Course generated a net asset change of $291,908 for the year.Business-type activities are supported primarily from charges for services. In the City of Renton, $40 million was generated from charges for services in the business-type activities. These comprise eighty-four percent (84%) of the total financial support for these activities. Grant revenues increased 20.6% or $1.1 million from 2005 to 2006. Chart 7 BUSINESS TYPE ACTIVITIES REVENUES BY SOURCESCharges for Services84%Grants13%Interest & Miscellaneous3%FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS Governmental Funds AnalysisThe focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the fiscal year, the City’s governmental funds reported combined ending fund balances of $60 million, an increase of $17 million in comparison to last year. Approximately 8% constitutes unreserved, undesignated fund balance, which is available for spending at the government’s discretion. The remainder of the fund balance is reserved or designated to indicate that it is not available for new spending because it has already been committed for operating reserves. The General Fund is the chief operating fund of the City. At the end of the current year, unreserved, undesignated fund balance of the general fund was $4.9 million, while total fund balance reached $10.7 million. The fund balance total increased 1.5 million during the fiscal year. Transfers to other funds decreased by $2.6 million in 2007, significantly contributing to this increase. The Parks Fund at year-end had an unreserved, designated fund balance of $1,285,989. The overall fund balance increased $448,175 over the prior year. The Parks Fund received $1.3 million more in 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-13property taxes to help offset the increase in expenditures in the fund for culture and recreation programs. The Municipal Fund was a new major fund in 2007. An increase in revenues of $2.3 in property taxes, as well as increased interest earnings helped contribute toward the overall fund balance increase of 1.9 million. A total of $1.1 million was spent on the Heather Downs. Proprietary Funds Analysis The fund financial statements for the proprietary funds are presented in more detail, but essentially provide the same type of information found in the business-type activities in the government-wide financial statements. Unrestricted net assets in the Waterworks Utility Fund and the Solid Waste Fund were $15 million and $2.5 million respectively. This represents a decrease in Waterworks Utility Fund of $460,600 and an increase in the Solid Waste Fund of $351,483 in unrestricted net assets. Total Net Assets increase in both funds $6.7 million and $347,544 respectfully. Other factors concerning the finances of these two funds have already been addressed in the discussion of business-type activities.CAPITAL ASSET AND DEBT ADMINISTRATION Capital AssetsThe City of Renton’s investment in capital assets, including construction in progress, for its governmental and business-type activities as of December 31, 2006, amounts to $478.4 million as presented on the following table.Table 3 CAPITAL ASSETS (Net of Accumulated Depreciation) Governmental Activities Business Type Activities Total Activities 1/1/2006 12/31/2006 1/1/2006 12/31/2006 1/1/2006 12/31/2006 Land $81,997,215 $85,936,207 $6,976,321 $ 6,976,321 $88,973,536 $92,912,528 Construction in progress 15,819,455 24,371,783 2,512,285 4,126,115 18,331,740 28,497,898Buildings and structures 55,442,027 53,544,216 11,467,501 11,131,546 66,909,528 64,675,762Other improvements 70,441,585 77,247,581 197,274,995 201,871,536 267,716,580 279,119,117Machinery and equipment 10,612,674 12,266,422 976,424 956,451 11,589,098 13,222,873 $234,312,956 $253,366,209 $219,207,526 $225,061,969 $453,520,482 $478,428,178General government infrastructure includes streets, bridges, overlays, and traffic controls. More detail about the City’s Capital Assets can be found in Note 5 to the financial statements. 2006 Comprehensive Annual Financial Report City of Renton, Washington3-14 Management’s Discussion and AnalysisDebt Administration As shown in Table 4, the City’s total outstanding debt at December 31, 2006, was $96.1 million. This was a net increase (new issues less principal payments and refundings) of $14.4 million. Table 4 OUTSTANDING DEBT General Activities Business Type Activities Total Activities 1/1/2006 12/31/2006 1/1/2006 12/31/2006 1/1/2006 12/31/2006 General obligation bonds $29,107,664 $46,899,513 $29,107,664 $46,899,513Revenue debt $35,790,000 $33,840,000 35,790,000 33,840,000 Other long term debt 11,589,783 10,692,018 11,589,789 10,692,018 Employee leave benefits 4,690,510 4,193,995 411,340 462,947 5,101,850 4,656,942 $33,798,174 $51,093,508 $47,791,123 $44,994,965 $81,589,297 $96,088,473 In 2006 the City issued $17,980,000 of Limited Tax General Obligation Bonds. The proceeds of the bonds will be used for the purpose of providing funds for construction of transportation and utility infrastructure and improvements. In addition, the City included $1,315,199 in accreted interest for the 1997 Capital Appreciation Bonds.The Water & Sewer Revenue Bond underlying ratings remain AA- at both rating agencies. More detailed information about the City’s long-term debt can be found in Note 14 to the financial statements. FUTURE YEAR’S BUDGETARY IMPACTS The City continues to benefit from progressive economic development activities allowing the City to continue to grow.xSeattle Seahawks moving their headquarters to Renton xProvidence Health Systems establishing its offices in the Southgate Office Park, which will employ over 1,000 workers xThe Evergreen City Ballet occupying the old McLendon building xWizards of the Coast have relocated to new offices in Renton xThe FAA expanding its facilities in Renton xThe Landing project includes Fairfield Residential, a 900 apartment complex xTarget will open in October of 2007 xConner Homes has begun development of 20-acres of luxury lakefront residential property For more information regarding the factors affecting the future year’s budgetary impacts, please refer to the Transmittal Letter within this document under: Factors Affecting Financial Condition - Economic Condition and Outlook and Update from Budget Document - Outlook. 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-15REQUESTS FOR FINANCIAL INFORMATION This financial report is designed to provide our citizens, creditors, investors, and others interested in the City’s finances with a general overview of the City’s finances and to show the City’s accountability for financial resources it receives. If you have any questions about this report or need additional information, please contact Mike Bailey, Finance and Information Services Administrator, 1055 South Grady Way, Renton, WA 98057 or visit our web site at www.ci.renton.wa.us.2006 Comprehensive Annual Financial Report City of Renton, Washington 3-16 Management’s Discussion and Analysis This page is intentionally left blank. 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTAL BUSINESS-TYPEACTIVITIES ACTIVITIES TOTALASSETSCash and cash equivalents$ 32,835,943 $ 15,969,931 $ 48,805,874 Investments at fair value38,653,773 1,420,000 40,073,773 Receivables (net of allowancefor uncollectibles)13,388,628 4,800,050 18,188,678 Internal balances2,749 (2,749) - Inventories- 318,691 318,691 Prepayments114,038 - 114,038 Other non-current assets4,919,252 865,242 5,784,494 Restricted assets:Cash and cash equivalents- 1,805,690 1,805,690 Investments at fair value- 1,750,000 1,750,000 Land 85,936,207 6,976,320 92,912,527 Construction in progress24,371,783 4,126,115 28,497,898 Capital assets (net of accumulateddepreciation)143,058,222 213,959,532 357,017,754 Total assets $ 343,280,595 $ 251,988,822 $ 595,269,417 LIABILITIESAccounts payable andother liabilities $ 9,711,138 $ 2,170,529 $ 11,881,667 Interest payable190,550 174,904 365,454 Unamortized (discount)/premium 648,229 (120,748) 527,481 Unearned revenue70,661 339,845 410,506 Non-current liabilities:Due within one year3,994,780 3,024,159 7,018,939 Due in more than one year47,098,728 41,970,809 89,069,537 Total liabilities $ 61,714,086 $ 47,559,498 $ 109,273,584 NET ASSETSInvestment in capital assets, net of related debt$ 209,964,556 $ 181,515,939 $ 391,480,495 Restricted for:Promotional programs 988,260 - 988,260 Construction projects41,273,403 - 41,273,403 Debt service - 3,555,690 3,555,690 Unrestricted 29,340,290 19,357,695 48,697,985 Total net assets $ 281,566,509 $ 204,429,324 $ 485,995,833 PRIMARY GOVERNMENTSTATEMENT OF NET ASSETSDecember 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-1 2006 Comprehensive Annual Financial Report City of Renton, WashingtonOPERATINGCHARGES FOR GRANTS AND CAPITAL GRANTFUNCTIONS/PROGRAMS EXPENSES SERVICES CONTRIBUTIONS & CONTRIBUTIONSPrimary government:Governmental activities:General government$ 19,977,086 $ 21,852,465 $ 4,195,348 $ 18,329Judicial 1,434,134 831,485 - -Security of persons and property30,749,762 517,151 254,865 -Physical environment2,618,832 400,798 - -Transportation 15,798,138 1,628,154 - 1,469,926 Economic environment6,372,118 4,368,399 44,369 4,418,865 Mental and physical health295,072 - 78,256 2,750Culture and recreation 9,695,924 1,742,071 23,998 -Interest on long-term debt 1,772,370 - - -Total governmental activities $ 88,713,436 $ 31,340,523 $ 4,596,836 $ 5,909,870 Business-type activities:Waterworks utility $ 27,220,132 $ 27,036,324 $ 1,395 $ 6,035,073 Airport1,196,363 909,425 - 282,130Solid waste utility9,706,016 9,837,915 76,293 -Golf course 2,056,874 2,272,415 - -Total business-type activities$ 40,179,385 $ 40,056,079 $ 77,688 $ 6,317,203 Total primary government$ 128,892,821 $ 71,396,602 $ 4,674,524 $ 12,227,073 PROGRAM REVENUESSTATEMENT OF ACTIVITIESFor the Year Ended December 31, 2006Page 1 of 2General revenues:Taxes:Property taxesTimber taxesRetail sales taxesBusiness taxesExcise taxesPenalties and interestInterest and investment earningsMiscellaneousTransfersTotal general revenues and transfersChange in net assetsNet assets - beginning Net assets - endingThe notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-2 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTAL BUSINESS-TYPEACTIVITIES ACTIVITIES TOTAL$ 6,089,056 $ 6,089,056(602,649) (602,649)(29,977,746) (29,977,746)(2,218,034) (2,218,034)(12,700,058) (12,700,058)2,459,515 2,459,515(214,066) (214,066)(7,929,855) (7,929,855)(1,772,370) (1,772,370)$ (46,866,207) $ (46,866,207)$ 5,852,660 $ 5,852,660(4,808) (4,808)208,192 208,192215,541 215,541$ 6,271,585 $ 6,271,585$ (46,866,207) $ 6,271,585 $ (40,594,622)$ 23,600,131 $ - $ 23,600,131- - -20,869,595 - 20,869,59511,219,303 - 11,219,3037,718,945 - 7,718,9453,799 - 3,7993,251,975 881,486 4,133,461689,243 282,808 972,051(68,446) 68,446 -$ 67,284,545 $ 1,232,740 $ 68,517,285$ 20,418,338 $ 7,504,325 $ 27,922,663$ 261,148,171 $ 196,924,999 $ 458,073,170$ 281,566,509 $ 204,429,324 $ 485,995,833CHANGES IN NET ASSETSPRIMARY GOVERNMENTNET (EXPENSE) REVENUE ANDPage 2 of 2The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-3 2006 Comprehensive Annual Financial Report City of Renton, WashingtonMUNICIPALFACILITIES GENERAL PARKS CIPASSETSCash & cash equivalents$ 5,333,644 $ 1,368,825 $ 4,027,976 Investments 3,000,000 - 10,750,000 Receivables (net of allowances)Taxes 414,752 - 472,947 Customer accounts 1,294,924 425,984 - Accrued interest & penalty99,201 - 311,332 Due from other funds330 - - Due from other governmental units4,296,279 58,924 11,792 Prepayments8,000 - - Restricted assets:Advances due from other funds- - 63,900 TOTAL ASSETS $ 14,447,130 $ 1,853,733 $ 15,637,947 BALANCE SHEETGOVERNMENTAL FUNDSDecember 31, 2006Page 1 of 4The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-4 2006 Comprehensive Annual Financial Report City of Renton, WashingtonOTHER TOTAL GOVERNMENTAL GOVERNMENTAL FUNDS FUNDSASSETSCash & cash equivalents$ 13,833,927 $ 24,564,372Investments 15,373,773 29,123,773Receivables (net of allowances)Taxes 485,536 1,373,235Customer accounts 679,388 2,400,296Accrued interest & penalty449,220 859,753Due from other funds62,898 63,228Due from other governmental units4,114,926 8,481,921Prepayments- 8,000Restricted assets:Advances due from other funds- 63,900TOTAL ASSETS $ 34,999,668 $ 66,938,478BALANCE SHEETGOVERNMENTAL FUNDSDecember 31, 2006Page 2 of 4The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-5 2006 Comprehensive Annual Financial Report City of Renton, WashingtonMUNICIPALFACILITIESGENERAL PARKS CIPLIABILITIES AND FUND BALANCESLiabilitiesAccounts payable$ 849,363 $ 178,340 $ 145,551 Taxes payable10,567 4,494 - Retainage payable- 367 34,383 Due to other funds15,000 - - Custodial accounts 69,707 39,500 - Deposits 34,739 - - Deferred revenue803,681 5,687 - Accrued employee wages and leave payable1,918,976 339,356 - Interfund advances - non-current- - - Total liabilities $ 3,702,033 $ 567,744 $ 179,934 Fund balancesReserved for:Advances to other funds$- $ - $ 63,900 Prepaid items 8,000 - - Unreserved, designated for:General fund contingency 5,761,257 - - Special revenue funds contingency - 949,909 - Special revenue funds- 336,080 - Capital project fund - - 15,394,113 Unreserved reported in:General fund 4,975,840 - - Total fund balances $ 10,745,097 $ 1,285,989 $ 15,458,013 TOTAL LIABILITIES AND FUND BALANCES $ 14,447,130 $ 1,853,733 $ 15,637,947 BALANCE SHEETGOVERNMENTAL FUNDSDecember 31, 2006Page 3 of 4The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-6 2006 Comprehensive Annual Financial Report City of Renton, WashingtonOTHER TOTAL GOVERNMENTAL GOVERNMENTAL FUNDS FUNDSLIABILITIES AND FUND BALANCESLiabilitiesAccounts payable$ 1,469,163 $ 2,642,417Taxes payable1,991 17,052 Retainage payable308,530 343,280 Due to other funds37,624 52,624 Custodial accounts - 109,207 Deposits 32,981 67,720 Deferred revenue7,404 816,772 Accrued employee wages and leave payable293,964 2,552,296Interfund advances - non-current63,900 63,900 Total liabilities $ 2,215,557 $ 6,665,268Fund balancesReserved for:Advances to other funds$- $ 63,900 Prepaid items - 8,000 Unreserved, designated for:General fund contingency - 5,761,257Special revenue funds contingency 941,029 1,890,938Special revenue funds2,016,171 2,352,251Capital project fund 26,758,324 42,152,437Debt service funds3,068,587 3,068,587Unreserved reported in:General fund - 4,975,840Total fund balances $ 32,784,111 $ 60,273,210TOTAL LIABILITIES AND FUND BALANCES $ 34,999,668 $ 66,938,478Page 4 of 4BALANCE SHEETGOVERNMENTAL FUNDSDecember 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-7 2006 Comprehensive Annual Financial Report City of Renton, WashingtonFUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ 60,273,210 Amounts reported for governmental activities in the statement of net assets aredifferent because:Capital assets used in governmental activities are not financial resourcesand therefore are not reported in the governmental funds.Capital assets (net) and other non-current assets.$ 258,285,461The focus of governmental funds is on short-term financing, assets areoffset by deferred revenue and are not included in fund balancesDeferred revenue$ 746,111Long-term liabilities, including bonds payable are not due and payable in thecurrent period and therefore are not reported in the governmental fundsInterest payable$ (199,806)Long-term liabilities (51,595,172)Internal service funds are used by management to charge the costs ofcertain activities to individual funds.Total assets and liabilities of the internal service funds that are reported with governmental activities, less capital assets reported above.$ 14,056,705NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 281,566,509 RECONCILIATION OF THE BALANCE SHEETTO THE STATEMENT OF NET ASSETSDecember 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-8 2006 Comprehensive Annual Financial Report City of Renton, WashingtonMUNICIPALFACILITIES GENERAL PARKS CIPREVENUESTaxes $ 39,260,540 $ 9,503,672 $ 4,514,285 Licenses and permits 3,132,587 - - Intergovernmental revenues 2,846,753 7,331 - Charges for services 2,246,722 2,272,314 - Fines and forfeits 860,819 - - Interfund revenues 1,791,180 - - Special assessments - - - Contributions 66,781 30,791 23,001 Interest 661,481 47,641 788,103 Miscellaneous revenues 215,804 6,891 - TOTAL REVENUES $ 51,082,667 $ 11,868,640 $ 5,325,389 EXPENDITURESCurrent:General government $ 10,698,791 $ 2,830,626 $ - Security of persons and property 31,157,303 - - Physical environment 2,609,452 - - Transportation - - - Economic environment 4,709,745 481,227 33,969 Mental & physical health 9,231 - - Culture & recreation - 8,108,612 - Capital outlay 80,343 - 2,924,322 Debt service:Principal payment - - - Interest payment - - - TOTAL EXPENDITURES $ 49,264,865 $ 11,420,465 $ 2,958,291 EXCESS (DEFICIENCY) OF REVENUESOVER EXPENDITURES $ 1,817,802 $ 448,175 $ 2,367,098 OTHER FINANCING SOURCES (USES)Proceeds of long-term debt$- $ - $ - Transfer in - - - Transfer (out) (272,000) - (462,000) Sale of capital assets 1,424 - - TOTAL OTHER FINANCE SOURCES (USES) $ (270,576) $ - $ (462,000) NET CHANGE IN FUND BALANCE $ 1,547,226 $ 448,175 $ 1,905,098 FUND BALANCE JANUARY 1 9,197,871 837,814 13,552,915 FUND BALANCE DECEMBER 31 $ 10,745,097 $ 1,285,989 $ 15,458,013 Page 1 of 2 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESGOVERNMENTAL FUNDSFor the Year Ended December 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-9 2006 Comprehensive Annual Financial Report City of Renton, WashingtonOTHER TOTAL GOVERNMENTAL GOVERNMENTAL FUNDS FUNDSREVENUESTaxes $ 10,727,070 $ 64,005,567 Licenses and permits 1,829,920 4,962,507 Intergovernmental revenues 6,915,141 9,769,225 Charges for services 2,024,253 6,543,289 Fines and forfeits 45,866 906,685 Interfund revenues 1,051,967 2,843,147 Special assessments 511,932 511,932 Contributions 93,814 214,387 Interest 1,073,457 2,570,682 Miscellaneous revenues 1,213 223,908 TOTAL REVENUES $ 24,274,633 $ 92,551,329 EXPENDITURESCurrent:General government $ 443,175 $ 13,972,592 Security of persons and property - 31,157,303 Physical environment - 2,609,452 Transportation 5,097,449 5,097,449 Economic environment 294,278 5,519,219 Mental & physical health - 9,231 Culture & recreation 1,825,242 9,933,854 Capital outlay 18,112,860 21,117,525 Debt service:Principal payment 1,503,350 1,503,350 Interest payment 2,129,656 2,129,656 TOTAL EXPENDITURES $ 29,406,010 $ 93,049,631 EXCESS (DEFICIENCY) OF REVENUESOVER EXPENDITURES $ (5,131,377) $ (498,302) OTHER FINANCING SOURCES (USES)Proceeds of long-term debt$ 18,490,029 $ 18,490,029 Transfer in 2,962,895 2,962,895 Transfer (out) (2,971,341) (3,705,341) Sale of capital assets 12,040 13,464 TOTAL OTHER FINANCE SOURCES (USES) $ 18,493,623 $ 17,761,047 NET CHANGE IN FUND BALANCE $ 13,362,246 $ 17,262,745 FUND BALANCE JANUARY 1 19,421,865 43,010,465 FUND BALANCE DECEMBER 31 $ 32,784,111 $ 60,273,210 Page 2 of 2GOVERNMENTAL FUNDSFor the Year Ended December 31, 2006STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESThe notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-10 2006 Comprehensive Annual Financial Report City of Renton, WashingtonNET CHANGES IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ 17,262,745 Amounts reported for governmental activities in the statement of activities are different because:Governmental funds report capital outlays as expenditures;however, in the statement of activities, the cost of thoseassets are depreciated over their estimated useful lives.Expenditures for capital assets$ 25,035,636Less current year depreciation(6,671,845)Repayment of long-term debt is an expenditure in governmen-tal funds, but the repayment reduces long-term liabilitiesin the statement of net assets. Loan or bond proceeds provide current financial resources to governmentalfunds, but the repayment reduces long-term liabilitiesin the statement of net assets.Principal payments$ 1,503,350Some revenues or expenditures reported in the statement of activities are not yet available or expensed and therefore arenot reported as revenue or expenses in governmental funds $ (19,299,349)Net Pension Obligation over funded / (under funded)773,166Internal service funds or activities are used by management tocharge the costs of certain activities to individual funds.The net (expense) of the internal service fund andinternal balances reported with governmental activities.$ 1,814,635CHANGES IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 20,418,338 For the Year Ended December 31, 2006RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDSTO THE STATEMENT OF ACTIVITIESGOVERNMENTAL FUNDSThe notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-11 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTALOTHER TOTAL ACTIVITIESWATERWORKS ENTERPRISE ENTERPRISE INTERNAL SERVICE UTILITYSOLID WASTE FUNDS FUNDS FUNDSASSETSCurrent assets:Cash & cash equivalents$ 12,479,315 $ 1,576,549 $ 1,914,067 $ 15,969,931 $ 8,271,571Investments at fair value520,000 150,000 750,000 1,420,000 9,530,000Receivables (net of allowances):Customer accounts 3,165,593 1,132,065 45,529 4,343,187 30,519Special assessments - current33,894 - - 33,894 -Interest - investments57,792 3,062 12,400 73,254 241,027Due from other funds56,328 - - 56,328 -Due from other governmental units197,446 101,930 50,339 349,715 1,876Inventory of materials and supplies271,754 - 46,937 318,691 -Prepayments- - - - 106,038Total current assets$ 16,782,122 $ 2,963,606 $ 2,819,272 $ 22,565,000 $ 18,181,031Noncurrent assets:Restricted cash, cash equivalents, andinvestments at fair value $ 3,114,332 $ - $ 441,358 $ 3,555,690 $ -Special assessments deferred 62,966 - - 62,966 -Capital assets (net)205,585,486 1,313 19,475,168 225,061,967 5,317,155Deferred charges and other assets761,729 - 40,547 802,276 -Total noncurrent assets209,524,513 1,313 19,957,073 229,482,899 5,317,155TOTAL ASSETS $ 226,306,635 $ 2,964,919 $ 22,776,345 $ 252,047,899 $ 23,498,186BUSINESS-TYPE ACTIVITIESENTERPRISE FUNDSSTATEMENT OF NET ASSETSPROPRIETARY FUNDSDecember 31, 2006Page 1 of 2The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-12 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTALOTHER TOTAL ACTIVITIESWATERWORKS ENTERPRISE ENTERPRISE INTERNAL SERVICE UTILITYSOLID WASTE FUNDS FUNDS FUNDSLIABILITIESCurrent liabilities:Accounts payable$ 1,148,019 $ 349,787 $ 97,530 $ 1,595,336 $ 1,128,528Retainage payable52,481 - 41,634 94,115 -Due to other funds50,676 - 8,400 59,076 7,855Accrued interest payable161,874 - 13,030 174,904 -Accrued employee wages and benefits payable181,740 202 51,469 233,411 45,085Accrued taxes payable35,147 38,561 30,258 103,966 616Custodial Accounts 37,919 - 105,783 143,702 -Deferred revenue280,764 - 59,081 339,845 -Revenue bonds payable$ 1,740,000 $ - $ 285,000 $ 2,025,000 $ -Capital leases payable- - - - -Total current liabilities $ 3,688,620 $ 388,550 $ 692,185 $ 4,769,355 $ 1,182,084Long-term liabilities:Revenue bonds payable$ 29,010,000 $ - $ 2,805,000 $ 31,815,000 $ -Unamortized premium on revenue bonds468,747 - - 468,747 -Unamortized discount on revenue bonds (401,585) - (272,813) (674,398) -Deferred amount on revenue bond refunding84,903 - - 84,903 -Accrued employee wages and benefits payable371,552 18,179 73,217 462,948 314,460Claims incurred but not reported- - - - 2,627,782Public works trust fund loan payable10,692,020 - - 10,692,020 -Total long-term liabilities $ 40,225,637 $ 18,179 $ 2,605,404 $ 42,849,220 $ 2,942,242TOTAL LIABILITIES $ 43,914,257 $ 406,729 $ 3,297,589 $ 47,618,575 $ 4,124,326NET ASSETSInvestment in capital assets, net of related debt$ 164,143,466 $ 1,313 $ 16,385,168 $ 180,529,947 $ 5,317,155Restricted 3,114,332 - 441,358 3,555,690 -Unrestricted 15,134,580 2,556,877 2,652,230 20,343,687 14,056,705TOTAL NET ASSETS $ 182,392,378 $ 2,558,190 $ 19,478,756 $ 204,429,324 $ 19,373,860BUSINESS-TYPE ACTIVITIESENTERPRISE FUNDSSTATEMENT OF NET ASSETSPROPRIETARY FUNDSDecember 31, 2006Page 2 of 2The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-13 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTALOTHER TOTAL ACTIVITIESWATERWORKS ENTERPRISE ENTERPRISE INTERNAL SERVICE UTILITYSOLID WASTE FUNDS FUNDS FUNDSOPERATING REVENUES:Charges for services$ 25,982,868 $ 9,904,371 $ 3,181,840 $ 39,069,079 $ 9,449,690Interdepartmental services712,956 3,606 - 716,562 -Other services 401,393 76,293 190 477,876 7,901,626TOTAL OPERATING REVENUES $ 27,097,217 $ 9,984,270 $ 3,182,030 $ 40,263,517 $ 17,351,316OPERATING EXPENSES:Operations and maintenance$ 4,899,649 $ 575,672 $ 1,490,530 $ 6,965,851 $ 1,343,695Benefit payments1,001,583 75,292 344,846 1,421,721 10,918,350Professional services 264,348 7,962,741 46,738 8,273,827 657,388Administrative and general 12,060,638 44,632 453,022 12,558,292 1,492,481Insurance62,400 - 25,300 87,700 2,159,518Taxes 1,989,785 1,043,740 10,811 3,044,336 -Depreciation 5,462,690 3,939 648,595 6,115,224 876,839TOTAL OPERATING EXPENSES $ 25,741,093 $ 9,706,016 $ 3,019,842 $ 38,466,951 $ 17,448,271OPERATING INCOME (LOSS)$ 1,356,124 $ 278,254 $ 162,188 $ 1,796,566 $ (96,955)NON-OPERATING REVENUES(EXPENSES):Intergovernmental revenues$- $ - $ 282,130 $ 282,130 $ 11,163Interest revenues653,291 69,290 158,905 881,486 681,292Gain (loss) on sale of capital assets- - 4,009 4,009 86,244Other non-operating revenues (expenses)160,233 - 7,039 167,272 458,889Interest expense(1,428,178) - (167,782) (1,595,960) -Amortization of debt discount and expense(50,862) - (65,613) (116,475) -NON-OPERATING REVENUE NET OF EXPENSE $ (665,516) $ 69,290 $ 218,688 $ (377,538) $ 1,237,588INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS $ 690,608 $ 347,544 $ 380,876 $ 1,419,028 $ 1,140,633Capital contributions6,016,851 - - 6,016,851 -Transfers in (out)68,446 - - 68,446 674,000CHANGE IN NET ASSETS $ 6,775,905 $ 347,544 $ 380,876 $ 7,504,325 $ 1,814,633FUND BALANCE JANUARY 1 $ 175,616,473 $ 2,210,646 $ 19,097,880 $ 196,924,999 $ 17,559,227NET ASSETS, DECEMBER 31 $ 182,392,378 $ 2,558,190 $ 19,478,756 $ 204,429,324 $ 19,373,860BUSINESS-TYPE ACTIVITIESENTERPRISE FUNDSSTATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETSPROPRIETARY FUNDSFor the Year Ended December 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-14 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTALOTHER TOTAL ACTIVITIESWATERWORKS ENTERPRISE ENTERPRISE INTERNAL SERVICE UTILITY SOLID WASTE FUNDS FUNDS FUNDSCASH FLOWS FROM OPERATING ACTIVITIES:Cash received for services $ 28,223,157 $ 9,881,546 $ 3,304,156 $ 41,408,859 $ 17,342,303 Cash received from other funds for services 777,809 - - 777,809 - Cash paid to suppliers for goods & services (18,259,034) (9,194,176) (2,043,023) (29,496,233) (3,331,790) Cash paid to other funds for goods & services (53,189) 654 (52,535) - Cash paid to employees (968,511) (71,190) (333,350) (1,373,051) (10,440,402) Other operating receipts - (347,544) - (347,544) (1,269,500) Other non-operating receipts 160,233 - (156,734) 3,499 - NET CASH PROVIDED (USED) BYOPERATING ACTIVITIES $ 9,880,465 $ 268,636 $ 771,703 $ 10,920,804 $ 2,300,611CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIESTransfers from other funds $ 68,446 $ - $ 282,130 $ 350,576 $ 272,000 NET CASH PROVIDED (USED) BYNONCAPITAL FINANCING ACTIVITIES $ 68,446 $ - $ 282,130 $ 350,576 $ 272,000CASH FLOWS FROM CAPITALFINANCING ACTIVITIES:Acquisition & construction of capital assets $ (10,130,051) $ - $ (1,840,220) $ (11,970,271) $ (1,153,134) Capital contributions 6,016,851 - - 6,016,851 - Principal payments on debt (2,569,145) - (285,000) (2,854,145) - Interest payments on debt (1,431,843) - 13,965 (1,417,878) - NET CASH PROVIDED (USED) BYCAPITAL FINANCING ACTIVITIES $ (8,114,188) $ - $ (2,111,255) $ (10,225,443) $ (1,153,134)CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of investments $ 2,139,475 $ - $ - $ 2,139,475 $ - Payments for investments - - 988,821 988,821 (394,871) Interest on investments - 74,013 200,146 274,159 710,153 NET CASH PROVIDED (USED) BYINVESTING ACTIVITIES $ 2,139,475 $ 74,013 $ 1,188,967 $ 3,402,455 $ 315,282 NET INCREASE (DECREASE) IN CASH &CASH EQUIVALENTS $ 3,974,198 $ 342,649 $ 131,545 $ 4,448,392 $ 1,734,759 CASH & CASH EQUIVALENTS, JANUARY 1 8,505,117 1,233,900 1,782,522 11,521,539 6,536,812CASH & CASH EQUIVALENTS, DECEMBER 31 $ 12,479,315 $ 1,576,549 $ 1,914,067 $ 15,969,931 $ 8,271,571BUSINESS-TYPE ACTIVITIESENTERPRISE FUNDSSTATEMENT OF CASH FLOWSPROPRIETARY FUNDSPage 1 of 2For the Year Ended December 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-15 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTALACTIVITIESOTHER TOTAL INTERNALWATERWORKS SOLID ENTERPRISE ENTERPRISE SERVICE UTILITYWASTE FUNDS FUNDS FUNDSRECONCILIATION OF OPERATING INCOME(LOSS) TO NET CASH PROVIDED (USED)BY OPERATING ACTIVITIES:Operating income (loss)$ 1,356,124 $ 278,254 $ 162,188 $ 1,796,566 $ (96,955)Adjustments to reconcile operating income(loss) to net cash provided (used)by operating activities:Depreciation & amortization ofdeferred charges$ 5,462,690 $ 3,939 $ 648,595 $ 6,115,224 $ 876,839Other non-operating revenue160,233 - (156,734) 3,499 545,133(Increase) decrease inaccounts receivable1,838,896 (102,724) 152,535 1,888,707 (9,013)(Increase) decrease in due fromother funds/governmental units64,853 65,853 (42,633) 88,073 4,849(Increase) decrease in inventory& prepaid items 29,758 - 6,164 35,922 (10,922)Increase (decrease) in vouchersretainage payable(19,971) 19,526 (16,017) (16,462) 495,371Increase (decrease) in due toother governmental units(53,189) - 654 (52,535) -Increase (decrease) in payables& other short-term liabilities866,040 (314) (1,606) 864,120 6,439Increase (decrease) in customer deposits - - 16,692 16,692 -Increase (decrease) in deferred revenues141,959 - (9,631) 132,328 -Increase (decrease) in accruedemployee leave benefits33,072 4,102 11,496 48,670 488,870Total adjustments $ 8,524,341 $ (9,618) - 609,515$ $ 9,124,238 $ 2,397,566NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 9,880,465 $ 268,636 $ 771,703 $ 10,920,804 $ 2,300,611NONCASH INVESTING, CAPITAL, ANDFINANCING ACTIVITIESCapital disposal and retirement31,237$ -$ -$ 31,237$ -$Contributions of capital assets6,016,851 - - 6,016,851 -Net amort. bond prem. discount & bond issue costs3,931 - 65,005 68,936 -Increase in fair value of investments29,022 - 2,821 31,843 - Depreciation 5,462,690 3,939 645,867 6,112,496 876,839BUSINESS-TYPE ACTIVITIESENTERPRISE FUNDSSTATEMENT OF CASH FLOWSPROPRIETARY FUNDSPage 2 of 2For the Year Ended December 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-16 2006 Comprehensive Annual Financial Report City of Renton, WashingtonPENSION TRUST AGENCYFIREFIGHTER'S SPECIAL PENSION DEPOSITSASSETSCash & cash equivalents$ 921,296 $ 471,522Investments at fair value:Federal National Mortgage Association127,020 - US Treasury Strips4,316,554 - Receivables (net of allowances)Interest on investments2,498,379 - TOTAL ASSETS $ 7,863,249 $ 471,522LIABILITIESVouchers & contracts payable$- $ 80,380Deposits payable391,142TOTAL LIABILITIES $ - $ 471,522NET ASSETSHeld is trust for pension benefits& other purposes$ 7,863,249 $ - STATEMENT OF FIDUCIARY NET ASSETSFIDUCIARY FUNDSDecember 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-17 2006 Comprehensive Annual Financial Report City of Renton, WashingtonPENSION TRUSTFIREMEN'S PENSIONADDITIONS:Other contributions:Fire insurance premiums $ 77,821Investment incomeInvestment earnings202,598TOTAL ADDITIONS $ 280,419DEDUCTIONS:Benefit payments$ 414,281Medical benefit payments11,537Administrative and general 7,216TOTAL DEDUCTIONS $ 433,034NET INCREASE (DECREASE) $ (152,615)NET ASSETS - JANUARY 1 $ 8,015,864NET ASSETS - DECEMBER 31 $ 7,863,249STATEMENT OF CHANGES IN FIDUCIARY NET ASSETSFIREMEN'S PENSION FUNDFor the Year Ended December 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-18 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-19 NOTES TO THE FINANCIAL STATEMENTS January 1, 2006 through December 31, 2006 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe City of Renton was incorporated on September 6, 1901, and operates under the laws of the State of Washington applicable to a Non-Charter code city with a Mayor/Council form of government. A full-time Mayor and seven part-time Council members serve the City, all elected at large to four-year terms. The City provides the full range of municipal services authorized by state statues, together with a Municipal Airport, a Waterworks Utility, a Solid Waste Utility, and a Municipal Golf Course. The accounting and reporting policies of the City related to the funds included in the accompanying financial statements conform to generally accepted accounting principles (GAAP) applicable to state and local governments. GAAP for local governments include those principles prescribed by the Governmental Accounting Standards Board (GASB), the Financial Accounting Standards Board (FASB), when applicable, and the American Institute of Certified Public Accountants (AICPA) pronouncements that have been made applicable by GASB Statements or Interpretations. In accordance with GASB Statement 20 the City has not applied to its enterprise activities FASB Statements and Interpretations, Accounting Principles Board opinions, and Accounting Research Bulletins of the Committee of Accounting Procedure issued after November 30, 1989. The City had implemented all applicable GASB Statements through Statement No. 47 with the exception of Statement No. 45: Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. During 2006, the City implemented, if applicable, Statement No. 43: Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, Statement No. 46: Net Asset Restricted by Enabling Legislation – an amendment of GASB Statement No. 34, and Statement No. 47: Accounting for Terminated Benefits. All other applicable statements were implemented prior to 2006. A. REPORTING ENTITY As required by GAAP the City’s financial statements present the City of Renton – the primary government. The City of Renton’s Mayor appoints the Governing Board for the Renton Housing Authority, which is not considered a component unit of the City. The City is under no obligation to subsidize, nor does it exercise any other prerequisite for inclusion. The City of Renton has no component units (either blended or discretely presented) included in these statements. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-20 B. BASIC FINANCIAL STATEMENTS – GASB 34 PRESENTATION The City’s basic financial statements include both Government-wide (reporting the City as a whole) and fund financial statements (reporting the City’s major funds). Both the Government-wide and fund financial statements categorize primary activities as either government or business-type.GOVERNMENT-WIDE STATEMENTS In the Government-wide Statement of Net Assets, both the governmental and business-type activities columns (a) are presented on a consolidated basis by column, and (b) are reported on a full accrual, economic resource basis, which recognized all long-term assets and receivables as well as long-term debt and obligations. The City’s net assets are reported in three parts – investment in capital assets, net of related debt; restricted net assets; and unrestricted net assets. The City first utilizes restricted resources to finance qualifying activities. The Government-wide Statement of Activities reports both the gross and net cost of each of the City’s functions and business-type activities (general government, judicial, security of persons and property, physical environment, transportation, economic environment, mental and physical health, culture and recreation, waterworks utility, airport, solid waste utility, and golf course). General government revenues (property taxes, timber taxes, retail sales and use taxes, business taxes, excise taxes, and other taxes) also support the functions. The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants and contributions. Program revenues must be directly associated with the function or a business-type activity. Operating grants include operating specific and discretionary (either operating or capital) grants while the capital grants column reflects capital specific grants. General revenues normally cover the net cost, by function or business-type activity. The Government-wide focus is more on the sustainability of the City as an entity and the change in the City’s net assets resulting from the current year’s activities.FUND FINANCIAL STATEMENTS In the fund financial statements, the financial transactions are recorded in individual funds, each accounted for by a separate set of self-balancing accounts that comprise assets, liabilities, reserves, fund equity, revenues, and expenditures or expenses. The presentation is by major funds in either the governmental or business-type categories. GASB Statement 34 sets forth the minimum criteria for the determination of a major fund. The non-major funds are combined in the fund financial statements and are detailed in the combining section. The governmental major fund statements in the fund financial statement are presented on current financial resources and modified accrual basis of accounting. Since governmental fund statements are presented on a different measurement focus and basis of accounting than the Government-wide statements’ governmental column, a reconciliation is presented at the end of 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-21 the statement, which briefly explains the adjustments necessary to transform the fund statements into the Government-wide presentation.Internal service funds of a government are presented in summary form as part of the proprietary fund financial statements. Since the principal users of the internal services are the City’s governmental activities, financial statements for internal service funds are consolidated into the governmental column when presented at the governmental level. These services are reflected in the appropriate functional activity (general government, judicial, security of persons and property, physical environment, transportation, economic environment, mental and physical health, culture and recreation). Interfund fund activity has been eliminated from the Government-wide financial statements. Exceptions are payments in lieu of taxes, external type transactions within the internal service funds (revenue and expenses for interest or services provided to other governmental organizations), and other charges for waterworks utility or storm water utility. Elimination of these charges would distort the direct cost and program revenues for these functions.The City’s fiduciary funds are presented in the fund financial statements. Since the assets are being held for the benefit of a third party and cannot be used for obligations of the City, they are not included in the Government-wide statements. The following describes each fund as presented in the fund financial statements.MAJOR FUNDS GOVERNMENTAL FUNDS GENERAL FUND The General Fund is the primary operating fund of the city. It is used to account for the resources and disbursements of ordinary City operations that are not required to be accounted for in another fund. These include the costs of public safety, building, planning, human services, and general administration. The major sources of revenue are property taxes, utility taxes, and sales taxes. Licenses and permits, charges for services, and fines and forfeits provide additional support. The Community Development Block activities are accounted for within this fund, which is federally funded. PARKSThe Parks Fund accounts for the City’s parks and recreation programs: operations, maintenance, and improvements for municipal park buildings, and landscaping and street tree functions. Resources are primarily from general tax revenues and charges for services. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-22 MUNICIPAL FACILITIES CONSTRUCTION FUND The Municipal Facilities Construction Fund accounts for the acquisition and development of municipal facilities. Resources included general and special revenue taxes and Council-approved general obligation bonds. ENTERPRISE FUNDS WATERWORKS UTILITY The Waterworks Utility Fund accounts for all operation and capital improvement programs for water, wastewater, and storm water services within the City. The activities primarily supported by user fees include: administration, billings and collections, debt service, engineering and operation, maintenance and repairs. The primary resources for the capital improvement programs are revenue bond proceeds, grants (as available), and utility collection charges. SOLID WASTE Solid waste, recycling, and yard waste collection services for the City are accounted for in this fund, supported entirely by service fees. The expenses include payment to the City’s garbage contractor and other service charges. NON-MAJOR FUNDS ARTERIAL STREET FUND The Arterial Street Fund was established pursuant to state law allocating the one-half cent State Gasoline Tax revenue to cities and towns for construction, improvements, and major repair of streets.STREET FUND The Street Fund was established pursuant to state law to account for maintenance and improvements of the City’s street and traffic control systems. Major sources of support are general revenues and state levied taxes on motor vehicle fuels distributed to the City of Renton. LIBRARY FUND The Library Fund accounts for operation of the City’s library system, including central and branch facilities. Resources to the fund are mainly general tax revenues and library fines. HOTEL/MOTEL TAX FUND Accounts for monies collected through an increase of one percent in hotel/motel taxes for the purpose of increasing tourism in the City of Renton. PATHS AND TRAILS RESERVE FUND The Paths and Trails Reserve Fund was created for the purpose of planning, accommodating, and establishing and maintaining certain paths and trails within the City of Renton. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-23 1% FOR ART FUND The City of Renton established this fund by contributing one percent of general governmental capital project funding for art projects. CABLE COMMUNICATIONS DEVELOPMENT FUND The Cable Communications Development Fund accounts for funding for promotion and development of cable communications as established by City ordinance. 1997 LIMITED GENERAL OBLIGATION BOND REDEMPTION FUND Accounts for debt service on a Council-approved bond issue, which provided funding for the purchase of Renton City Hall. 1978 LIMITED GENERAL OBLIGATION BOND REDEMPTION FUND This fund accounts for debt service on a Council-approved bond issue, which provided partial funding for construction of the Renton Senior Activity Center. GENERAL GOVERNMENTAL MISCELLANEOUS DEBT SERVICE FUND Accounts for debt service on installment contracts for equipment, City Shop land purchase, the 1984 and 1985 Limited General Obligation Bond issues for equipment and the 1986 Limited Bond issued to finance a community center, library improvements, permanent financing for purchase of a golf course, acquisition of wetland property, and equipment.1989 UNLIMITED GENERAL OBLIGATION BOND REDEMPTION FUND Accounts for debt service on a voter-approved bond issue, which provided financing to: acquire, construct, rehabilitate, equip and develop low-income housing for the elderly. DOWNTOWN PARKING GARAGE Accounts for resources and expenditures related to the construction of a downtown parking facility. COMMUNITY DEVELOPMENT IMPACT MITIGATION FUND Accounts for monies collected from developers to offset impacts created by their developments to City facilities. FIRE IMPACT MITIGATION FUND Accounts for monies collected from developers to offset impacts created by their developments to City facilities. TRANSPORTATION IMPACT MITIGATION FUND Accounts for monies collected from developers to offset impacts created by their developments to City facilities. LEASED CITY PROPERTIES Accounts for revenue and expenditures related to City property leased to outside entities. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-24 AQUATIC CENTER FUND Accounts for resources and expenditures related to the construction of the Henry Moses Family Aquatic Center. GENERAL GOVERNMENT CAPITAL IMPROVEMENT FUND The General Government Capital Improvement Fund accounts for revenues and expenditures for numerous capital improvements projects, to provide infrastructure necessary for controlled growth, and to address general City needs. Primary resources include: general tax revenues, business licenses fees, federal and state grants, general obligation bond proceeds, and transfers from various cumulative reserve funds. SOUTH LAKE WASHINGTON INFRASTRUCTURE PROJECT FUNDThe South Lake Washington Infrastructure Project Fund accounts for the infrastructure improvements at the south end of Lake Washington. Primary resources include: REET, sales tax, grants, and GO Bonds that will provide for the design, construction, labor wages and benefits, and equipment required to implement the project. AIRPORT FUND Provides accounting for revenues and expenses, which provides administration, debt services, operation, capital improvements, and maintenance of the Renton Municipal Airport and Will Rodger-Wily Post Memorial Seaplane Base. Sources of support to the fund are leases, fuel charges, investment interest, and grant funding as available. GOLF COURSE FUND The Golf Course Fund was created after the City acquired the Maplewood Golf Course. It accounts for the operation, maintenance, debt service, and capital improvements of the facility. OTHER FUND TYPES INTERNAL SERVICE FUNDS EQUIPMENT RENTAL The Equipment Rental Fund accounts for the costs of maintaining and replacing all City vehicles, computers, and auxiliary equipment except for fire apparatus and replacement of police patrol vehicles. The fund also accounts for communication, data support, and printing services provided to City employees. All equipment costs, including depreciation, are factors in calculating the rates, which are charged to each user department. INSURANCE FUND The Insurance Fund provides accounting for self-insurance services to all City departments, including provisions for losses on property, liability, worker’s compensation, unemployment compensation, and the health care program. The Insurance Fund pays expenses and rates are charged to departments based on use and/or coverage requirements. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-25 FIDUCIARY FUNDS Fiduciary funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governmental units and/or other funds. The City has one Pension Trust Fund and one Agency Fund.PENSION TRUST FUND FIREMEN’S PENSION FUND The Firemen’s Pension Fund accounts for the payment of administrative costs and benefits for retired firefighters and their beneficiaries, who were employed prior to March 1, 1970. Primary revenues sources are general property tax allocations in accordance with actuarial calculations, the fire premium tax, and investment income. AGENCY FUND SPECIAL DEPOSIT FUND The Special Deposit Fund was established for the purpose of holding or retaining cash deposits or other securities pending fulfillment of certain conditions and/or requirements by the depositor. Refunds are made when all obligations have been met and only upon authorization from the transmitting department. C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING Basis of Accounting refers to the point at which revenues or expenditures/expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of the measurement made regardless of the measurement focus applied: 1. AccrualBoth governmental and business-type activities in the Government-wide financial statements and the proprietary and fiduciary fund financial statements are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred. Substantially all government fund revenues are accrued. Property taxes are billed and collected within the same period in which taxes are levied. Subsidies and grants to proprietary funds, which finance either capital or current operations, are reported as non-operating revenue based on GASB Statement 33. In applying GASB Statement 33 to grant revenues, the provider recognizes liabilities and expenses and the recipient recognizes receivables and revenue when the eligibility requirements, including time requirements, are met. Resources transmitted before the eligibility requirements are met, are reported as advances by the provider and deferred revenue by the recipient. 2. Modified Accrual The governmental funds financial statements are presented on the modified basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual: i.e., both measurable and available. “Available” means collectible within the current 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-26 period or soon enough thereafter to be used to pay liabilities of the current period. The City considers all revenue reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are generally recognized under the modified accrual basis of accounting when the related liability is incurred. The exception to this general rule is that principal and interest on general obligation long-term debt, if any, is recognized when due. D. ASSETS, LIABILITIES, AND FUND EQUITY 1. Cash and Cash Equivalents The City has defined cash and cash equivalents as cash on hand, demand deposits, and all highly liquid investments (including restricted assets) with maturity of three months or less when purchased. These amounts are classified on the balance sheet or in the statement of net assets as cash and cash equivalents or investments in the various funds. The interest on these investments is prorated to the applicable funds. Included in this category are all funds invested in the Local Government Investment Pool and Municipal Investor Account. Excluded from this category are cash balances held by Fiscal Agents since the City does not have discretionary use of these funds.2. Investments (refer to Note 3B.) 3. Receivables and Payables – Amounts owed/payable to/by the City at year-end. Taxes receivable consists of property taxes and related interest and penalties (refer to Note 4). Accrued interest receivable consists of amounts earned on investments, notes, and contracts. Accrued interest payable consists of amounts owed on notes, loans, and contracts. Customer accounts receivable/payable consists of amounts owed from/to private individuals or organizations for goods and services. If the transactions are with another governmental unit, it is accounted for within “due from/to other governments.”Special assessments are recorded when levied and are liens against the property benefited. Special assessments receivable consist of current and delinquent assessments and related interest and penalties.Deferred assessments consist of special assessments not due within one year. Receivables have been reported net of estimated uncollectible accounts. Because property taxes, special assessments, and utility billings are considered liens on property, no estimated uncollectible amounts are established. Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between the governmental activities and business-type activities are reported in the Government-wide financial statements as “internal balances”(Refer to Note 10). 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-27 Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. In the Government-wide financial statements, and proprietary fund types in the fund financial statements, long-term liabilities are reported in applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Unamortized Premium – the unamortized portion of the excess of bonds proceeds over their face value (excluding accrued interest and issuance costs). Deferred Amount-Refunding – The difference between the carrying amount of redeemed/defeased debt and its reacquisition price. This amount is deferred and amortized over the remaining life of the debt, or the life of the new debt, whichever is shorter. 4. Inventories and prepaid items All City inventories are maintained on a consumption basis of accounting where items are purchased for inventory and charged to the budgetary accounts as the items are consumed. Any material inventories at year-end are included in the balance sheet of the appropriate fund. Inventories are carried at cost on the first in, first out – FIFO basis. Certain payments to vendors reflect costs applicable to future accounting periods and are reported as prepaid items in both the Government-wide and fund statements. 5. Capital Assets and Depreciation (refer to Note 5). 6. Deferred Revenues This account includes amounts recognized as receivables but not revenues in the governmental funds because the revenue recognition criterion has not been met. 7. Custodial Accounts This account reflects the liability for net monetary assets being held by the City in its agency capacity.8. Compensated Absences The City accrues accumulated unpaid vacation and other leave and associated employee-related costs when earned (or estimated to be earned) by the employee. The non-current portion (the amount estimated to be used in subsequent fiscal years) for governmental funds is maintained separately and represents a reconciling item between the fund and Government-wide presentations.9. Fund Balance Designations and Reservations In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. The City has the following reserved or designated fund balances. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-28 Fund Reserved Purpose of Reservation Amount General Fund Prepaid items $8,000 Municipal Facilities Advances to other funds 63,900 TOTAL $71,900 Fund Designated Purpose of Designation Amount General Fund Operating cash reserves $5,761,257 Parks Fund Operating cash reserves 949,909 Parks Fund Special revenue funds 336,080 Municipal Facilities Capital project fund 15,394,113 Street Fund Operating cash reserves 734,828 Library Fund Operating cash reserves 206,201 TOTAL $23,382,388 10. Net Assets (refer to Note 11). 11. Encumbrances An encumbrance system is maintained to account for commitments resulting from approved purchase orders, contracts, and other commitments. Encumbrances remaining at year-end lapse and are canceled. Upon request by the department and approval of the City Council, encumbrances may be re-appropriated in the following year. E. REVENUES, EXPENDITURES, AND EXPENSES 1. Program Revenues Program revenues include charges for services to customers for goods and services provided, operating grants and contributions, and non-operating grants and contributions within the Government-wide Statement of Activities. Charges for services include business licenses, construction permits, and weapon permits. 2. General Revenues Property taxes, timber taxes, retail taxes, business taxes, excise taxes, and associated penalties and interest, and interest and investment earnings are classified as general revenues within the Government-wide Statement of Activities. 3. Interfund Transfers Permanent reallocation of resources between funds of the reporting entity are classified as interfund transfers. For purposes of the Government-wide Statement of Activities, all interfund transfers between individual governmental funds have been eliminated. 4. Expenditures/ExpensesExpenses in the Government-wide Statement of Activities are reported by function as a governmental activity (general government, judicial, security of persons and property, physical environment, transportation, economic environment, culture and recreation, or interest on long-term debt) or business-type activity (waterworks utility, airport, solid waste utility, or golf course). In the fund financial statements, expenditures of governmental funds are classified by: function, debt service principle and interest payments, or purchases of capital items. Proprietary expenditures are classified as operating or non-operating. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-29 5. Operating and Non-operating Revenues and Expenses Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering goods and/or services in connection to the proprietary fund’s principle ongoing operations. It includes all revenue and expenses not related to capital and related financing, non-capital financing, or investing activities. All revenues and expenses not meeting this definition are non-operating revenues and expenses. NOTE 2. COMPLIANCE AND ACCOUNTABILITYThe City of Renton budgets its funds on the cash basis of accounting at the fund level. Annual appropriated budgets are adopted for governmental funds. Budgets for proprietary funds are “management budgets” and are not legally required to be reported. Included in the Required Supplemental and Combining sections of the CAFR are Schedules of Revenues, Expenditures, and Changes in Fund Balances (Budget to Actual) reporting the Actual Budgetary Basis (cash basis) verses Actual GAAP Basis of Accounting (modified basis) for all legally adopted budgets. There have been no material violations of finance-related legal or contractual provisions, and there have been no expenditures exceeding legal appropriations in any of the funds of the City. A. PROCEDURES FOR ADOPTING THE ORIGINAL BUDGET The City of Renton’s budget procedures are mandated by the Chapter 35A.33 of the Revised Code of Washington (RCW). The steps in the budget process are as follows: 1. Prior to November 1, the Mayor submits a proposed budget to the City Council. This budget is based on priorities established by the Council; estimates provided by the City departments during the preceding months; balanced by revenue estimates made by the Mayor. 2. The City Council conducts public hearings on the proposed budget in November and December. 3. The Council makes their adjustments to the proposed budget and adopts, by ordinance, a final balanced budget no later than December 31. 4.The final operating budget, as adopted, is published and distributed within the first four months of the following year.B. AMENDING THE BUDGET The budget, as adopted, constitutes the legal authority for expenditures. Budgets are adopted on the cash basis of accounting; therefore, any comparisons between budget and actual revenues and expenditures are reported under the budgetary basis. The annual budget is adopted with budgetary control at the fund level, so expenditures may not legally exceed appropriations at that level of detail. Transfers or revisions within funds are allowed, but only the City Council has the legal authority to increase or decrease a given fund’s annual budget. This is accomplished by City ordinance. The budget was amended thirteen times during 2006. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-30 Original budgeted inflows as compared to the final budgeted inflows are as follows:IncreaseOriginal Final (Decrease)Budgeted Budgeted BudgetedFund Inflows Inflows InflowsGeneral Fund $50,358,513 $50,935,621 $577,108Park Fund 11,260,376 11,299,136 38,760Arterial Street Fund 440,000 440,000 0Street Fund 6,738,878 6,763,878 25,000Library Fund 1,809,862 1,809,862 0Hotel/Motel Tax Fund 220,000 242,500 22,500Paths and Trails Reserve Fund 0 0 01% for Art Fund 60,000 60,000 0Cable Communications Development Fund 38,900 38,900 0Park Memorial Fund 0 0 01997 LGO Bond Fund 986,253 986,253 01978 LGO Bond Fund 21,000 21,000 0General Government Miscellaneous Debt Service Fund 1,799,400 1,799,400 01989 UGO Bond Redemption Fund 518,400 518,400 0Special Assessment Debt Fund 9,500 0 (9,500)Community Development Impact Mitigation Fund 255,000 255,000 0Fire Impact Mitigation Fund 525,000 525,000 0Transportation Impact Mitigation Fund 600,000 600,000 0Leased City Properties Fund 904,902 904,902 0Aquatic Center Fund 0 0 0Municipal Facilities Construction Fund 2,100,000 2,100,000 0General Government Capital Improvement Fund 16,597,600 17,552,990 955,390South Lake Washington Infrastructure Project Fund 0 24,925,587 24,925,587Airport Fund 1,921,817 1,921,817 0Solid Waste Utility Fund 9,104,429 9,104,429 0Golf Course Fund 2,421,880 2,421,880 0Waterworks Utility Fund 38,014,220 41,594,146 3,579,926Equipment Repair and Replacement Fund 3,201,900 3,201,900 0Information Services Fund 3,431,550 3,833,550 402,000Insurance Fund 3,007,503 3,007,503 0Medical Insurance Fund 8,961,109 8,961,109 0TOTAL $165,307,992 $195,824,763 $30,516,771 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-31 Original budgeted outflows as compared to the final budgeted outflows are as follows:IncreaseOriginal Final (Decrease)Budgeted Budgeted BudgetedFund Outflows Outflows OutflowsGeneral Fund $50,323,513 $51,700,002 $1,376,489Park Fund 11,260,376 11,433,136 172,760Arterial Street Fund 440,000 440,000 0Street Fund 6,738,878 6,791,878 53,000Library Fund 1,809,862 1,821,929 12,067Hotel/Motel Tax Fund 220,000 302,500 82,500Paths and Trails Reserve Fund 0 0 01% for Art Fund 60,000 60,000 0Cable Communications Development Fund 143,900 143,900 0Park Memorial Fund 0 0 01997 LGO Bond Fund 990,300 990,300 01978 LGO Bond Fund 21,500 21,500 0General Government Miscellaneous Debt Service Fund 1,800,800 1,800,800 01989 UGO Bond Redemption Fund 518,400 518,400 0Special Assessment Debt Fund 32,025 68,000 35,975Community Development Impact Mitigation Fund 0 0 0Fire Impact Mitigation Fund 525,000 525,000 0Transportation Impact Mitigation Fund 1,984,800 1,984,800 0Leased City Properties Fund 896,432 939,248 42,816Aquatic Center Fund 0 0 0Municipal Facilities Construction Fund 3,177,000 5,621,096 2,444,096General Government Capital Improvement Fund 18,283,700 22,093,600 3,809,900South Lake Washington Infrastructure Project Fund 0 24,925,587 24,925,587Airport Fund 2,416,800 2,654,043 237,243Solid Waste Utility Fund 9,510,248 9,670,248 160,000Golf Course Fund 2,421,880 2,441,880 20,000Waterworks Utility Fund 39,027,041 47,824,239 8,797,198Equipment Repair and Replacement Fund 3,255,110 3,255,110 0Information Services Fund 3,431,550 3,690,550 259,000Insurance Fund 2,986,001 4,386,001 1,400,000Medical Insurance Fund 8,773,034 8,773,034 0TOTAL $171,048,150 $214,876,781 $43,828,631NOTE 3. DEPOSITS AND INVESTMENTSA. DepositsThe City’s deposits and certificates of deposit are insured by the Federal Depository Insurance Corporation (FDIC) and the State of Washington Public Deposit Protection Commission (WPDPC) Act of 1969.B. Investments The City invests excess and inactive funds in accordance with the City’s Investment Policy (updated and approved on June 5, 2006), which complies with the guidelines within Chapter 35A.40.050 RCW allows for investment of excess cash and inactive cash, directs that the 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-32 responsibility for determining available cash for investment is placed upon the department administering the funds, and allows for pooling of the cash provided that the allocation of income is proportionate to the investment of each fund. Currently, the City invests in obligations of the U.S. Government, U.S. agency issues, Certificates of Deposit with Washington State banks and savings and loan institutions, the State of Washington Local Government Investment Pool (LGIP), and general obligations of Washington State municipalities. The LGIP, managed by the Washington State Office of the Treasurer, is comparable to a Rule 2a7-pools recognized by the Securities and Exchange Commission. A 2a7-like-pool is an external investment pool that is not registered with the SEC as an investment company, but nevertheless has a policy that it will, and does, operate in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940. Rule 2a7 allows SEC-registered mutual funds to use amortized cost rather than market value to report net assets and compute share prices. Investments are shown on the entity-wide Statement of Net Assets at fair value or for 2a7-like pools at amortized cost, which approximates fair value. Investments are reported within Cash and Investments of Governmental Activities and within Cash and Cash Equivalents or Investments of Business-type Activities. C. Deposit and Investment Schedule As of December 31, 2006, the City of Renton had the following investments: Security Type Cost Fair Value Weighted Average Maturity (in years) US Agencies $2,845,807 $2,823,773 3.364 Certificates of Deposit (within WPDPC) 39,000,000 39,000,000 1.140 Local Governmental Investment Pool (LGIP) 32,130,605 32,130,605 0.003 Municipal Investor Account (MIA) 10,030,148 10,030,148 0.003 TOTAL $84,006,560 $83,984,526 0.644 Credit risk. Credit Risk is the risk that an issuer or other counter party to an investment will not fulfill its obligations. All Agency securities in the City’s portfolio are rated “Aaa” by Moody’s Investors Service and “AAA” by Standard & Poor – each rating is the highest possible. Certificates of Deposit are insured by the FDIC up to $100,000 and, additionally, by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission (WPDPC). The Washington State Local Government Investment Pool (LGIP) is a 2a7-like-pool and is operated in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-33 Security Type Cost Fair Value Moody's S&P Federal National Mortgage Association $2,845,807 $2,823,773 Aaa AAA Certificates of Deposit (within WPDPC) 39,000,000 39,000,000 unrated unrated Local Governmental Investment Pool (LGIP) 32,130,605 32,130,605 unrated unrated Municipal Investor Account (MIA) 10,030,148 10,030,148 unrated unrated TOTAL$84,006,560 $83,984,526 The City’s Investment Policy directs that the standard of prudence for investment activities shall be the Prudent Investor Standard that states: “Investments shall be made with judgment and care, under circumstances then prevailing, which person of prudence, discretion, and intelligence would use in the management of their own affairs, not for speculation, but for investment purposes, considering the probable safety of their capital as well as the probable income to be derived.”Custodial credit risk. Custodial credit risk for investments is the risk that, in the event of the failure of the counter party to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. All security transactions, including collateral for repurchase agreements, entered into by the City are conducted on a delivery-versus-payment (DVP) basis. Securities held by a third-party custodian are designated by the City’s Finance and Information Services Administrator. Certificates of Deposit are delivered to and held by the Finance Division.Concentration of credit risk. Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s investment in a single issuer. The City diversifies its investment instruments to avoid incurring unreasonable risk inherent in over-investing in instruments and issuers as follows: Maximum’s per Policy InstrumentMaximumIssuerMaximumU.S. Treasuries 100% 100% U.S. Agencies 75% 50% Certificates of Deposit (within WPDPC) 50% 25% Local Governmental Investment Pool (LGIP) 50% 50% Commercial Paper 25% 5% Interest Rate Risk. Interest rate risk is the risk that changes in interest rates over time, adversely affecting the fair value of an investment. The City’s portfolio is managed within the parameters established by the Investment Policy, which limits the weighted average maturity of the portfolio to five years.2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-34 Security Type 0-6 months6 months – 1 year 1-3 years 3+years Totals US Agencies $0 $0 $0 $2,823,773 $2,823,773 Certificates of Deposit (within WPDPC) 0 31,000,000 8,000,000 0 39,000,000 Local Governmental Investment Pool (LGIP)32,130,605 0 0 0 32,130,605 Municipal Investor Account (MIA) 10,030,148 0 0 0 10,030,148 TOTAL $42,160,753 $31,000,000 $8,000,000 $2,823,773 $83,984,527 NOTE 4. PROPERTY TAXESThe King County Finance Director acts as an agent to collect property taxes levied in the county for all taxing authorities. Taxes are levied annually, January 1, on property value listed as of the prior August 31. Assessed values are established by the King County Assessor at 100 percent of fair market value. A revaluation of all property is required every two years; however, King County has the ability to revalue annually. Property taxes levied by the King County Assessor and collected by the King County Finance Director become a lien on the first day of the levy year and may be paid in two equal installments if the total amount exceeds $30. The first half of real property taxes is due on April 30 and the balance is due October 31. Delinquent taxes bear interest at the rate of 12 percent and are subject to additional penalties if not paid as scheduled. No allowance for uncollectible taxes is established because delinquent taxes are considered fully collectible. At year-end, property taxes are recorded as a receivable with the portion not expected to be collected within 60 days offset by deferred revenue. During the year, property tax revenues are recognized when cash is received. The tax rate for general City operations is limited to $3.375 per $1,000 of assessed value (RCW 84.52.043). Of this amount, up to .45 cents per thousand dollars may be designated for contribution to the Firemen’s Pension Fund. If a report by a qualified actuary on the condition of the Firemen’s Pension Fund establishes that this amount (or portion of) is not necessary to maintain the actuarial soundness of the fund, the amount can be used for any other municipal purpose (RCW 41.16.060). The tax rate limit may be reduced for any of the following reasons: 1. The Levy Limit: the levy limit calculation applies to a taxing district’s budget, and not to increases in the assessed value or tax bill of individual properties. Initiative 747 restricts individual taxing districts from collecting, in any year, more than a one percent increase in their regular, non-voted, levy over the highest levy amount since 1985. New construction, annexations, and excess levies approved by the voters are not included in the levy limit calculation. If the assessed valuation increases by more than one percent due to revaluation, the levy rate will be decreased. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-35 2. The One Percent Constitution Limit: The Washington State Constitution limits the regular (non-voted) combined property tax rate applied to an individual’s property to one percent ($10 per $1,000) on the market valuation. Voters may approve special levies that are added to this figure. If the taxes of all districts exceed this amount, each is proportionately reduced until the total is at or below the one percent limit. 3. The City may voluntarily levy taxes below the legal limit. Special levies approved by the voters are not subject to the above limitations. The City’s regular levy for 2006 is $3.04482 and the excess levy for General Obligation Bond debt is $.07088 for a total of $3.1157, per the King County Assessor’s 2006 Annual Report.NOTE 5. CAPITAL ASSETS AND DEPRECIATIONA. GENERAL POLICES Major expenditures for capital assets, including capital leases and major repairs that increase the useful life, are capitalized. The capitalization threshold applied to the City’s assets is $5,000. Maintenance, repairs, and minor renewals are accounted for as expenditures or expenses when incurred.All capital assets are valued at historical cost (or estimated cost, where historical cost is not known/or estimated market value for donated assets /or the lower of cost or fair market value when transferred between proprietary and governmental funds.) The City has acquired certain assets with funding provided by federal financial assistance programs. Depending on the terms of the agreements involved, the federal government could retain an interest in these assets. However, the City has sufficient legal interest to accomplish the purposes for which the assets were acquired, and has included such assets within the applicable statements. The City capitalizes art and historical treasures. Art and historical treasures are expected to be maintained or enhanced over time and thus, are not depreciated. B. GOVERNMENTAL CAPITAL ASSETS Governmental long-lived assets of the City purchased, leased, or constructed are recorded as expenditures in the governmental funds and are capitalized, net of depreciation, in the Government-wide statements. C. PROPRIETARY FUND CAPITAL ASSETS Capital assets of proprietary funds are capitalized in their respective statement of net assets, net of depreciation. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-36 D. DEPRECIATION Depreciation on all depreciable assets is provided on the straight-line basis over the following useful lives: Type of Asset Estimated Service Life Buildings and structures, except utility plant 25-50 years Other improvements 25-50 years Utility plant 25-75 years Machinery and equipment 3-20 years Infrastructure 25-50 years Depreciation Expense was charged to governmental and business-type activities as follows: Governmental Activities Amount General government $3,329,655 Judicial 0 Security of persons and property 647,608 Physical environment 15,652 Transportation 2,075,736 Economic development 293,107 Culture and recreation 1,256,455 Health and human services 54,598 TOTAL Governmental Activities Depreciation Expense $7,672,811 Business-type Activities Amount Waterworks $5,462,690 Airport 381,043 Solid waste 3,939 Golf course 267,552 TOTAL Business-type Activities Depreciation Expense $6,115,224 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-37 E. SUMMARY OF CHANGES DescriptionBeginningBalance Increases Decreases EndingBalance GOVERNMENTAL ACTIVITIES Capital assets not being depreciated:Land and land improvements $81,997,215 $3,938,992 $0 $85,936,207 Construction in progress 15,819,455 14,496,673 5,944,345 24,371,783 TOTAL capital not being depreciated $97,816,670$18,435,665$5,944,345$110,307,990Other capital assets: Buildings and structures $73,605,992 $17,772 $0 $73,623,764 Other improvements 102,371,218 9,673,029 0 112,044,247 Machinery and equipment 23,955,401 4,750,082 1,941,785 26,763,698 TOTAL other capital assets at capitalized cost $199,932,611$14,440,883$1,941,785$212,431,709Less accumulated depreciation for: Buildings and structures $18,163,965 $1,915,583 $0 $20,079,548 Other improvements 31,929,633 2,867,033 0 34,796,666 Machinery and equipment 13,342,727 2,890,195 1,735,646 14,497,276 TOTAL accumulated depreciation $63,436,325$7,672,811$1,735,646$69,373,490Governmental activities capital assets, net of depreciation$234,312,956$25,203,737$6,150,484$253,366,209BUSINESS-TYPE ACTIVITIES Capital assets not being depreciated: Land and land improvements $6,976,321 $0 $0 $6,976,321 Construction in progress 2,512,285 2,860,487 1,246,657 4,126,115 TOTAL capital assets not being depreciated $9,488,606$2,860,487$1,246,657$11,102,436Other capital assets Buildings and structures $15,032,621 $0 $0 $15,032,621 Other improvements 259,558,408 10,220,868 31,237 269,748,039 Machinery and equipment 5,729,498 134,965 0 5,864,463 TOTAL other capital assets at capitalized cost $280,320,527$10,355,833$31,237$290,645,123Less accumulated depreciation for: Buildings and structures $3,565,120 $335,959 $4 $3,901,075 Other improvements 62,283,413 5,624,327 31,237 67,876,503 Machinery and equipment 4,753,074 154,938 0 4,908,012 TOTAL accumulated depreciation $70,601,607$6,115,224$31,241$76,685,590Business-type capital assets, net of depreciation $219,207,526 $7,101,096$1,246,653$225,061,969At the end of 2006, 65 projects comprise the Construction in Progress. Upon completion, the projects will be capitalized in the Government-wide statements in their appropriate categories and in the fund statements for proprietary funds, if applicable. Construction commitments at December 31, 2006, are as follows: 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-38 Fund – Funding Source Cost to Date Estimated RemainingCost Estimated Total Cost FutureFunding RequiredWaterworks – charges for services $3,073,672 $58,340,000 $61,413,672 None Airport – charges for services 1,052,443 7,215,000 8,267,443 None General governmental – taxes, charges for services, grants 24,371,783 179,348,000 203,719,783 None Golf course – charges for services 1,300,000 1,300,000 None NOTE 6. PENSIONSWith the exception of firefighters employed prior to March 1, 1970, substantially all City’s full-time and qualifying part-time employees participate in one of the following statewide retirement systems administered by the Washington State Department of Retirement Systems, under cost-sharing multiple-employer public employee defined benefit and defined contribution retirement plans. The Department of Retirement Systems (DRS), a department within the primary government of the State of Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of Retirement Systems, Communications Unit, PO Box 48380, Olympia, WA 98504-8380. The City is the administrator of the Firefighter Pension Plan for all firefighters employed prior to March 1, 1970. The Firefighter Pension Plan is included within the City of Renton’s statements as a pension trust fund. There is no separate GAAP-based audited report. A schedule of employer contributions for six years, prepared by Milliman, Consultants and Actuaries, is included in the Required Supplemental Information section. Additional information from the actuarial report prepared for the Firefighter Pension Plan, by Milliman, Consultants and Actuaries, may be obtained by contacting the City of Renton, Finance Division, 1055 South Grady Way, Renton, WA 98057. The following disclosures are made pursuant to GASB Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans and GASB Statement No. 27, Accounting for Pensions by State and Local Government Employers.Public Employees Retirement System (PERS) Plans 1, 2, and 3Plan DescriptionPERS is a cost-sharing multiple-employer retirement system comprised of three separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a defined benefit plan with a defined contribution component. Membership in the system includes: elected officials; state employees; employees of the Supreme, Appeals, and Superior courts (other than judges currently in a judicial retirement system); employees of legislative committees; community and technical colleges, college and university employees not participating in national higher education retirement programs; judges of district and municipal courts; and employees of local governments. PERS participants, who joined the PERS system by September 30, 1977, are Plan 1 members. Those who joined on or after October 1, 1977; and by either, February 28, 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-39 2002 for state and higher education employees, or August 31, 2002 for local government employees, are Plan 2 members unless they exercise an option to transfer their membership to Plan 3. PERS participants joining the system on or after March 1, 2002 for state and higher education employees, or September 1, 2002 for local government employees, have the irrevocable option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. An employee is reported in Plan 2 until a choice is made. Employees who fail to choose within 90 days default to PERS Plan 3. PERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. PERS retirement benefit provisions are established in state statute and may be amended only by the State Legislature.Plan 1 retirement benefits are vested after an employee completes five years of eligible service. Plan 1 members are eligible for retirement at any age after 30 years of service, or at age 60 with five years of service, or at age 55 with 25 years of service. The annual benefit is 2 percent of the average final compensation per year of service, capped at 60 percent. The average final compensation is based on the greatest compensation during any 24 eligible consecutive compensation months. If qualified, after reaching age 66, a cost-of-living allowance is granted based on years of service credit and is capped at 3 percent annually. Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2 members may retire at age 65 with five years of service, or at 55 with 20 years of service, with an allowance of 2 percent of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-month period. Plan 2 retirements prior to age 65 receive reduced benefits. If retirement is at age 55 or older with 30 years of service, a 3 percent per year reduction applies; otherwise an actuarial reduction will apply. There is no cap on years of service credit; and a cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index), capped at 3 percent annually. Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions finance a defined contribution component. The defined benefit portion provides a benefit calculation at 1 percent of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-month period. Effective June 7, 2006, Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or after five years if twelve months that were earned after age 44; or after five service credit years earned in PERS 2 prior to June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. Vested Plan 3 members are eligible to retire with full benefits at age 65, or at age 55 with 10 years of service. Retirements prior to age 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years if service, a 3 percent per year reduction applies; otherwise an actuarial reduction will apply. The benefit is also actuarially reduced to reflect the choice of a survivor option. There is no cap on years of service credit; and Plan 3 provides the same cost-of-living allowance as Plan 2. The defined contribution portion can be distributed in accordance with an option selected by the member, either as a lump sum or pursuant to other options authorized by the Employee Retirement Benefits Board. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-40 There are 1,181 participating employers in PERS. Membership in PERS consisted of the following as of the latest actuarial valuation date for the plans of September 30, 2005: Retirees and beneficiaries receiving benefits 68,609 Terminated plan members entitled to but not yet receiving benefits 22,567 Active plan members vested 104,574 Active plan members non-vested 51,004 TOTAL 246,754 Funding PolicyEach biennium the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer and employee contributions rates, and Plan 3 employer contribution rates. Employee contribution rates for Plan 1 are established by statute at 6 percent for state agencies and local government unit employees, and 7.5 percent for state government elected officers. The employer and employee rates for Plan 2 and the employer contribution rates for Plan 3 are developed by the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. All employers are required to contribute at the level established by the Legislature.Under PERS 3, employer contributions finance the defined benefit portion of the plan, and member contributions finance the defined contribution portion. The Employee Retirement Benefits Board sets Plan 3 employee contribution rates. Six rate options are available ranging from 5 to 15 percent; two of the options are graduated rates dependent on the employee’s age. The methods used to determine the contribution requirements are established under state statute in accordance with Chapters 41.40 and 41.45 RCW.The required contribution rates expressed as a percentage of current-year covered payroll, as of December 31, 2006, were as follows: Contributor PERS Plan 1 PERS Plan 2 PERS Plan 3 Employer* 3.69 %** 3.69% 3.69%**** Employee 6.00%*** 3.50% ***** * The employer rates include the employer administration expense fee currently at .18%. ** The employer rate for state elected officials is 5.44%. *** The employee rate for state elected officials is 7.50%. **** Plan 3 defined benefit portion only. ***** Variable from 5.0% minimum to 15.0% maximum based on rate selected by the PERS 3 member. Both the City and the employees made the required contributions. The City’s required contributions for years ended December 31, were as follows: Year PERS Plan 1 PERS Plan 2 PERS Plan 3 2006 $50,609 $616,903 $92,216 2005 33,340 367,240 51,521 2004 25,977 252,464 35,737 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-41 Law Enforcement Officers’ and Firefighters’ Retirement System (LEOFF) Plans 1 and 2Plan DescriptionLEOFF is a cost-sharing multiple-employer retirement system comprised of two separate defined benefit plans. LEOFF participants who joined the system by September 30, 1977, are Plan 1 members. Those who joined on or after October 1, 1977, are Plan 2 members. Membership in the system includes all full-time, fully compensated; local law enforcement officers and firefighters. LEOFF membership is comprised primarily of non-state employees, with the exception of the Department of Fish and Wildlife enforcement officers, who were first included prospectively effective July 27, 2003, being an exception. In addition, effective July 24, 2005, current members of PERS who are emergency medical technicians can elect to become members of LEOFF Plan 2. Effective July 1, 2003, the LEOFF Plan 2 Retirement Board was established to provide governance of LEOFF Plan 2. The Board’s duties include adopting contribution rates and recommending policy changes to the Legislature for the LEOFF Plan 2 retirement plan. LEOFF defined benefits are financed from a combination of investment earnings, employer and employee contributions, and a special funding situation in which the state pays the remainder through state legislative appropriations. LEOFF retirement benefit provisions are established in state statute and may be amended by the State Legislature. Plan 1 retirement benefits are vested after an employee completes five years of eligible service. Plan 1 members are eligible for retirement with five years of service at the age of 50. The benefit per year of service calculated as a percent of final average salary is as follows: Term of Service Percent of FinalAverage Salary 20 or more years 2.0% 10 but less than 20 years 1.5% 5 but less than 10 years 1.0% The final average salary is the basic monthly salary received at the time of retirement, provided a member has held the same position or rank for 12 months preceding the date of retirement. Otherwise, it is the average of the highest consecutive 24 months’ salary within the last 10 years of service. If membership was established in LEOFF after February 18, 1974, the service retirement benefit is capped at 60 percent of final average salary. A cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index.) Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2 members may retire at the age of 50 with 20 years of service, or at age 53 with five years of service, with an allowance of 2 percent of the final average salary per year of service. The final average salary is based on the highest consecutive 60 months. Plan 2 retirements prior to age 53 are reduced 3 percent for each year that the benefit commences prior to age 53 and to reflect the choice of a survivor option. There is no cap on years of service credit; and a cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index), capped at 3 percent annually.2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-42 There are 376 participating employers in LEOFF. Membership in LEOFF consisted of the following as of the latest actuarial valuation date for the plans of September 30, 2005: Retirees and beneficiaries receiving benefits 8,723 Terminated plan members entitled to but not yet receiving benefits 577 Active plan members vested 12,348 Active plan members non-vested 3,543 TOTAL 25,191 Funding PolicyStarting on July 1, 2000, Plan 1 employers and employees will contribute zero percent as long as the plan remains fully funded. Employer and employee contribution rates are developed by the Office of the State Actuary to fully fund the plan. Plan 2 employer and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board in accordance with Chapter 41.45 RCW. All employers are required to contribute at the level required by state law. The Legislature has the ability, by means of a special funding arrangement, to appropriated money from the state General Fund to supplement the current service liability and fund the prior service cost of Plan 1 and 2 in accordance with the requirements of the Pension Funding Council. However, this special funding situation is not mandated by the state constitution and this funding requirement could be returned to the employers by a change in statute. The required contribution rates expressed as a percentage of current-year covered payroll, as of December 31, 2006, were as follows: Contributor LEOFF Plan 1 LEOFF Plan 2 Employer* .18% 4.90%** Employee .00% 7.85% State N/A 3.13% * The employer rates include the employer administration expense fee currently at .18%. ** The employer rate for ports and universities is 8.03%. Both the City and the employees made the required contributions. The City’s required contributions for years ended December 31, were as follows: Year LEOFF Plan 1 LEOFF Plan 2 2006 $2,050 $716,583 2005 2,554 549,001 2004 3,128 433,463 Firefighter’s PensionPlan DescriptionThe Firefighter’s Pension Plan is a closed, single-employer, defined benefit pension plan established in accordance with RCW 41.18 and Renton Municipal Code. This plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. This system was established for firefighters employed prior to March 1, 1970, when the LEOFF retirement system was established. The retirement benefits 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-43 vest after 20 years of service. Members may retire after 25 years of service regardless of age, and after age 50 with 20 or more years of service. At December 31, 2006, there were 42 members in the System: Retirees and beneficiaries receiving benefits 38 Retirees and beneficiaries currently receiving full retirement through LEOFF 4 Active plan members vested 0 Active plan members non-vested 0 TOTAL 42 Funding PolicyUnder state law, the Firefighter’s Pension Plan is provided an allocation of all monies received by the state from taxes on fire insurance premiums; interest earnings; member contributions made prior to the inception of LEOFF; and City contributions required to meet projected future pension obligations. Costs of administering the Firefighter’s Pension Plan are paid by the Plan. For 2006, this cost was $7,216. An actuarial valuation is done every two years and was completed as of January 1, 2007. TheActuarial Valuation of Firefighters’ Pension Fund table is reported in the Required Supplemental Information section, and a recap of the Schedule of Funding Progress for the last five valuations is as follows: Valuation Date January 1 Actuarial Value of Assets(rounded to thousands) Actuarial AccruedLiabilities Entry Age (rounded to thousands) Unfunded Actuarial AccruedLiabilities (UAAL) (rounded to Funded Ratio CoveredPayroll (rounded to thousands) UAAL asa % of CoveredPayroll 1997 $5,238 $6,444 $1,206 81% $260 464% 2001 7,067 6,780 (287) 104% 0 - 2003 9,189 6,472 (2,717) 142% 0 - 2005 7,777 6,254 *(1,523) 124% 0 - 2007 7,847 6,364 (1,483) 123% 0 - * A $29 decrease in the actuarial accrued liabilities was made after the City’s financial report was published and before the valuation was released. Significant actuarial assumptions used in the January 1, 2007, valuation include: Valuation date: January 1, 2007 Actuarial cost method: entry age normal Amortization method: 30-year, closed as of January 1, 2000 Remaining amortization period: 23 years Asset valuation method: fair value Actuarial assumptions: 1) investment rate of return – 5%; 2) projected salary increases – 4%; 3) inflation – 3%; and, 4) cost-of-living adjustments – based upon salary increase assumption for FPF benefits, inflation assumption for LEOFF benefits. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-44 The Annual Required Contribution (ARC) was computed using the Entry Age Normal Cost Method. Under this method the projected benefits are allocated on a level basis as a percentage of salary over the earnings of each individual between entry age and assumed exit age. The amount allocated to each year is called the Normal Cost and the portion of the Actuarial Present Value of all benefits not provided for by future Normal Cost payments is called the Actuarial Accrued Liability. Since all members have already retired, the amount of the Normal Cost is zero. The Unfunded Actuarial Accrued Liability (UAAL) is the Actuarial Accrued Liability minus the actuarial value of the Fund’s assets. The following Annual Pension Cost and Net Pension Obligation table presents the annual Normal Cost and the ARC as of January 1, 2007, assuming the UAAL is amortized over a closed 30-year period beginning January 1, 2000. Annual required contribution (ARC) 12/31/2005 Fiscal YearEnding12/31/2006 Fiscal Year Ending12/31/2007 Annual normal cost (BOY) $0 $0 $0 Amortization of UAAL (BOY) (107,622) (107,622) (104,731) Interest to end of year (EOY)* (5,919) (5,919) (5,237) ARC at EOY ($113,541) ($113,541) ($109,968) Interest on NPO ($24,553) ($33,604) ($38,658) Adjustment to ARC (31,545) (44,035) (54,591) Annual pension cost (APC) ($106,649) ($103,110) ($94,035) Employer contributions*** $58,029 $59,068 **$60,000 Change in NPO (164,578) (162,178) (154,035) NPO at BOY prior year ($446,410) ($610,988) ($733,166) NPO at EOY ($610,988) ($773,166) ($927,201) * Assumed interest rate: 5.5% in 2005 and 2006, 5.0% in 2007 ** Estimated amount to be replaced at year-end with actual *** Employer contributions are total contributions to the fund net of disbursements for medical and administrative expenses. The Annual Development of Pension Cost is recapped as follows:Fiscal Year Ending12/31 ARC @ EOY* Interest onNPOARC Adjustment Annual PensionCost (APC) Total Employer Contributions ChangeinNPO2002 $0 ($3,781) ($4,435) $654 $55,730 $(55,076) 2003 0 (7,088) (8,433) 1,347 63,088 (61,741) 2004 (205,680) (10,790) (13,047) (203,423) 63,151 (266,574) 2005 (113,541) (24,553) (31,545) (106,549) 58,029 (164,578) 2006 (113,541) (33,604) (44,035) (103,110) 59,068 (162,178) 2007 (109,868) (38,658) (54,591) (94,035) 60,000 (154,035) 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-45 Fiscal Year EndingDecember 31NPOBalance(Gain)/ LossAmort. Factor*** Amort. of (Gain)/ LossEndingBalance2002 ($118,095) ($55,730) 14.2105 ($4,435) ($118,095) 2003 (179,836) (63,088) 14.0032 (8,433) (179,836) 2004 (446,410) (268,831) 13.7834 (13,047) (446,410) 2005 (610,988) (171,570) 14.1517 (31,545) (610,988) 2006 (733,166) (172,609) 13.8750 (44,035) (773,166) 2007 (927,201) (189,988) 14.1630 (54,591) (927,201) Three year trend information is recapped as follows: Fiscal Year EndingDecember 31 Annual Pension Cost (APC) Contribution as a Percentage of APC Net Pension Obligation (NPO) 2005 ($106,549) N/A ($610,988) 2006 (103,110) N/A (773,166) 2007 (94,035)* N/A* (927,201)* *Amounts will be replaced at year-end with actual amounts. Employees are not required to make contributions. The contributions to the System for 2006 include $77,821 from fire insurance premiums and $202,598 of investment income. Benefits and refunds of the defined benefit pension plan are recognized when due and payable in accordance with the terms of the plan. For 2006, $414,281 was paid for benefit payments and $11,537 for medical payments. The Net Pension Obligation moves from ($610,988) to ($773,166) and is included, as an asset, in the City of Renton’s Governmental-wide Statement of Net Assets. NOTE 7. OTHER POST EMPLOYMENT BENEFITSIn addition to the pension benefits described in Note 6, the City is required to pay post employment benefits in accordance with State statute to all LEOFF 1 (law enforcement officers and firefighters hired prior to October 1, 1977) and Fire Pension (firefighters hired prior to March 1, 1970) retirees. Currently there are 98 LEOFF 1 retirees who receive necessary medical and hospitalization coverage and five retirees who are covered solely by the Fire Pension Plan and receive medical coverage limited to treatment of service-related disabilities only. Expenditures for post employment health care benefits are recognized as retirees report claims. The City does not have a funding policy at this time and no assets are designated for this purpose. During the year, expenditures of $1,151,205 were recognized for post employment health care. State statute provides that the City's responsibility for medical payments of LEOFF I retirees is secondary to any other coverage retirees receive or are eligible to receive. The City recognizes a potential savings exists when retirees utilize Medicare as primary coverage and the City for secondary coverage and ineligible expenses. Therefore, upon reaching age 65, the City requires 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-46 the retirees to apply for and utilize Medicare Part B coverage. The City reimburses these Medicare premiums at an average cost of approximately $88.50 per month for 47 LEOFF I retirees and five Fire Pension retirees. NOTE 8. CONTINGENCIESLitigationThe City has recorded in its financial statements all material liabilities, including an estimate for situations that are not yet resolved but where, based on available information, management believes it is probable that the City will have to make payment. In the opinion of management, the City’s insurance policies and/or self-insurance reserves are adequate to pay all known or pending claims. Contingencies under Grant ProvisionsThe City participates in a number of federal and state assisted programs. These grants are subject to audit by the grantors of their representatives. Such audits could result in requests for reimbursement to grantor agencies for expenditures disallowed under the terms of the grants. The City’s management believes that such disallowances, if any, will be immaterial. Bond IndenturesThe City is in compliance with all significant bond indenture and restrictions. Construction CommitmentsRefer to Note 5. NOTE 9. RISK MANAGEMENTThe City of Renton is exposed to various risks of loss related to tort; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City of Renton protects itself against unforeseen losses by utilizing a three-pronged risk management approach. First, the City self-funds first level losses through its Insurance Fund. Second, excess insurance is purchased to cover medium and large losses. Third, the City reserves the right to utilize the provisions of Chapter 35A.31.060 RCW to fund catastrophic or uninsured losses. This State statute allows cities to levy a non-voted property tax increase to pay for uninsured claims. An analysis of the self-insurance retention levels, limits of insurance, and claims administrator for the major types of coverage are as follows: 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-47 Type of Coverage Risk Retention Occurrence Claims Administrator Aggregate Amount Carrier Property $25,000 WA Cities Ins Authority $500,000,000 (per occurrence subject to sub-limits) WA Cities Ins Authority Liability 250,000 WA Cities Ins Authority 14,000,000(per occurrence) WA Cities Ins Authority Auto Liability 250,000 WA Cities Ins Authority 14,000,000(per occurrence) WA Cities Ins Authority Equipment breakdown 5,000* Arthur J. Gallagher 50,000,000 Zurich Public officers 250,000 WA Cities Ins Authority 10,000,000 WA Cities Ins Authority Crime 10,000 Arthur J. Gallagher 1,000,000 Travelers Casualty & Surety Airport liability 0 Arthur J. Gallagher 100,000,000 Ace Property & Casualty Underground storage tank 5,000 Arthur J. Gallagher 1,000,000 Commerce & Industry Worker’s comp 350,000 Berkley Risk 1,000,000 Midwest Casualty Employee health 140,000 HMA, Inc N/A SunLife * There is a 4-hour utility interruption clause, prior to the deductible becoming applicable. During 2006, there were no reductions in insurance coverage, and settlements for the last three years have not exceeded insurance coverage. The City of Renton is a member of the Washington Cities Insurance Authority (WCIA). Utilizing Chapter 48.62 RCW (self-insurance regulation) and Chapter 39.34 RCW (Interlocal Cooperation Act), nine cities originally formed WCIA on January 1, 1981. WCIA was created for the purpose of providing a pooling mechanism for jointly purchasing insurance, jointly self-insuring, and/or jointly contracting for risk management services. WCIA has a total of 121 members. New members initially contract for a three-year term and thereafter automatically renew on an annual basis. A one-year withdrawal notice is required before membership can be terminated. Termination does not relieve a former member from its unresolved loss history incurred during membership.Liability coverage is written on an occurrence basis, without deductibles. Coverage includes general, automobile, police, public officials’ errors or omissions, stopgap, and employee benefits liability. Limits are $3 million per occurrence self insured layer, and $12 million per occurrence in the re-insured excess layer with no annual aggregate except $10 million per member for public officials’ errors and omissions. The excess layer is insured by the purchase of reinsurance and insurance. Total limits are $15 million per occurrence subject to aggregate sublimits in the excess layers. The Board of Directors determines the limits and terms of coverage annually.Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and machinery are purchased on a group basis. Various deductibles apply by type of coverage. Property insurance and auto physical damage are self-funded from the members’ deductible to 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-48 $500,000 for all perils other than flood and earthquake, and insured above that amount by the purchase of reinsurance. In-house services include risk management consultation, loss control field services, claims and litigation administration, and loss analyses. WCIA contracts for the claims investigation consultants for personnel issues and land use problems, insurance brokerage and lobbyist services.WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as determined by an outside, independent actuary. The assessment covers loss, loss adjustment, and administrative expenses. As outlined in the interlocal agreement, WCIA retains the right to additionally assess the membership for any funding shortfall. An investment committee, using investment brokers, produces additional revenue by investment of WCIA’s assets in financial instruments, which comply with all State guidelines. These revenues directly offset portions of the membership’s annual assessment. A Board of Directors governs WCIA, which is comprised of one designated representative from each member. The Board elects an Executive Committee and appoints a Treasurer to provide general policy direction for the organization. The WCIA Executive Director reports to the Executive Committee and is responsible for conducting the day-to-day operations of WCIA. The City's Risk Management Program is administered by the Human Resources and Risk Management Administrator, with claims being processed by the independent claims administrators noted above. As of December 31, 2006, the City had accrued the following amounts for outstanding claims: Coverage Total Claims Payable 12/31/2006 Property & liability $537,693 Worker’s compensation 765,089 Employee health 1,325,000 TOTAL $2,627,782 2006 Property & Liability Worker’s Compensation Employee HealthTotals IBNR claims at beginning of the year $610,044 $765,089 $1,050,700 $2,425,833 Current year and changes in estimates 1,840,667 987,554 2,584,817 5,413,038 Claims payments (1,913,018) (987,554) (2,310,517) (5,211,089) IBNR claims at end of the year $537,693 $765,089 $1,325,000 $2,627,782 2005 Property & Liability Worker’s Compensation Employee Health Totals IBNR claims at beginning of the year $583,617 $695,930 $1,258,170 $2,537,717 Current year and changes in estimates 792,048 418,609 5,222,493 6,433,150 Claims payments (765,621) (349,450) (5,429,963) (6,545,034) IBNR claims at end of the year $610,044 $765,089 $1,050,700 $2,425,833 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-49 NOTE 10. INTERFUND TRANSACTIONSInterfund transactions are classified as follows: 1. Services Provided – Transactions that would be treated as revenues, expenditures, or expenses if they involve external organizations, such as buying goods and services or payments in lieu of taxes, are similarly treated when they involve other funds of the City of Renton. 2. Transfers – Transactions to support the operations of other funds are recorded as “Transfers” and classified with “Other Financing Sources or Uses” in the fund statements. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the Government-wide financial statements. 3. Contributions – Contributions to the capital of enterprise or internal service funds, transfers of capital assets between proprietary and governmental funds, transfers to establish or reduce working capital in other funds, and transfers remaining balances when funds are closed are classified non-operating revenue. 4. Loans/Advances – Loans between funds are classified as interfund loans receivable and payable or as advances to and from other funds in the fund statements. Interfund loans do not affect total fund equity, but advances to other funds are offset by a reservation of fund equity. Loans and advances are subject to elimination upon consolidation. As of December 31, 2006, outstanding interfund balances (resulting from various interfund transactions) were as follows: FundReceivablesDue From Other FundsPayablesDue To Other FundsPurposeGeneral fund $330 $15,000 To accrue 2006 interfund services provide, paid for in 2007 Street 47,898 0 To accrue 2006 interfund services provide, paid for in 2007 Hotel / motel 15,000 0 To accrue 2006 interfund services provide, paid for in 2007 General CIP 0 32,038 To accrue 2006 interfund services provide, paid for in 2007 South Lake WA infrastructure 0 5,586 To accrue 2006 interfund services provide, paid for in 2007 Waterworks utility 56,328 50,676 To accrue 2006 interfund services provide, paid for in 2007 Golf 0 5,666 To accrue 2006 interfund services provide, paid for in 2007 Airport 0 2,734 To accrue 2006 interfund services provide, paid for in 2007 Insurance 0 7,855 To accrue 2006 interfund services provide, paid for in 2007 TOTAL* $119,556 $119,555 *Difference is the result of rounding individual fund numbers in the aggregate. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-50 The following is a recap of interfund advances (expected to be paid by 2007): FundAdvancesDue From Other FundsAdvancesDue To Other Funds Purpose Leased property $0 $63,900 Loan from Municipal Facilities to fund Tenant Improvements Municipal facilities 63,900 0 Loan to Leased Property to fund Tenant Improvements TOTAL $63,900 $63,900 Transfers for 2006 were as follows: FundTransferInTransferOutPurposeGeneral $0 $272,000 Contribution for LEOFF 1 LT Care Arterial street 0 440,000 Contribution for CIP Overlay Projects 1% for Art 17,505 0 From Transportation CIP for Art General debt 525,000 0 Contribution in for Fire Impact Debt. SAD/LID 0 68,446 Transfer Fund Balance to Waterwork Close out the SAD/LID Debt Service Fund Fire impact 0 525,000 Contribution for Fire Impact Debt Payments Transportation impact 0 965,000 Contribution to Transportation CIP Transportation CIP 2,360,390 17,505 Contribution for Capital Improvements Contribution for 1% Art project Municipal CIP 0 402,000 Transfer IS Fund Balance South Lake WA infrastructure 0 955,390 Reimbursement for CIP Costs Waterworks 68,446 0 Transfer SAD/LID Fund Balance Municipal CIP 60,000 Interfund Loan Correction Leased property services 60,000 0 Interfund Loan Correction Information services 402,000 0 Transfer IS Fund Balance previously in Municipal CIP Fund Insurance fund 272,000 0 From General Fund for LEOFF 1 LT Care TOTAL $ 3,705,341 $ 3,705,341 NOTE 11. NET ASSETSThe Government-wide and business type fund financial statements utilize a net asset presentation. Net assets are the difference between assets and liabilities. Net assets are categorized as investments in capital assets (net of related debt), restricted, and unrestricted. A. Investment in Capital Assets (net of related debt) is intended to reflect the portion of net assets that are associated with non-liquid, capital assets less outstanding capital asset related debt.The net related debt is the debt less the outstanding liquid assets and any associated unamortized costs. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-51 B. Restricted assets are liquid assets (generated from revenues and not bond proceeds), which have third party (statutory, bond covenant, or granting agency) limitations on their use. The City would typically use restricted assets first, as appropriated opportunities arise, but reserve the right to selectively defer the use thereof to a future project or replacement equipment acquisition. Restricted assets are as follows: Fund Purpose Amount Hotel / Motel Tax Tourism $325,404 Arterial Street Road construction 477,844 Cable Communications Cable development 185,012 Community Development Impact Mitigation for park development 895,404 Municipal Facilities Capital projects 15,458,013 Capital Projects General governmental capital projects 8,465,556 South Lake Washington Construction infrastructure for SLW 11,651,706 Fire Impact Mitigation for fire improvements 1,163,853 Transportation Impact Mitigation for transportation projects 3,638,871 Waterworks Debt service reserves 3,114,332 Golf Course Debt service reserves 441,358 TOTAL $45,817,353 C. Unrestricted assets represent unrestricted liquid assets. The City’s management may have plans or tentative commitments to expend resources certain purposes in future periods. Further legal action will be required to authorize the actual expenses or expenditures. NOTE 12. PRIOR YEAR RESTATEMENTSThe City had no prior period adjustments to beginning fund balances or net assets. NOTE 13. SHORT TERM DEBTShort-term debt is defined as debt with maturity of one year or less from the date of issuance. The City had no short-term debt in 2006. NOTE 14. LONG TERM DEBTThe City of Renton's long-term debt consists of General Obligation Debt, repaid mainly from general governmental revenue sources and Proprietary Debt, repaid from proprietary revenues. These debts are accounted for in the following areas: 1) The outstanding general obligation debt is reported in the Government-wide financial statements; 2) The repayment, or debt service of the same, is recorded in the Debt Service Funds; and, 3) The proprietary debt liability and repayment of the same are reported in individual Proprietary Funds.2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-52 Outstanding debt issues as of December 31, 2006, are as follows: Type of Debt Interest Rates IssuedDate Maturity Date OriginalIssuedAmountGOVERNMENTAL DEBT: General Obligation Bonds: Limited1997 GO Bonds 5.55%-5.75% 05/01/97 12/01/17 $14,697,744 2000 GO Valley Comm Bonds 4.30%-5.38% 09/15/00 12/01/15 2,551,600 2001 GO Refunding Bonds 2.10%-5.25% 11/01/01 12/01/17 13,505,000 2001 GO Bonds 5.0%-5.25% 11/01/01 12/01/21 6,000,000 2002 GO Bonds 2.50%-5.00% 7/15/02 12/01/22 3,895,000 2006 GO Bonds 4.25%-5.00% 8/08/06 12/01/28 17,980,000 SUBTOTAL LIMITED GO 58,629,344 Unlimited 1993 GO Refunding Bonds - Senior Housing 5.20%-61.0% 09/01/93 02/01/09 4,270,000 SUBTOTAL UNLIMITED GO 4,270,000 TOTAL GENERAL OBLIGATION BONDS 62,899,344 Installment Contracts: Certificates of Participation 4.51% 09/01/98 06/01/08 278,172 TOTAL INSTALLMENT CONTRACTS 278,172 TOTAL GOVERNMENTAL-TYPE DEBT ISSUANCE 63,177,516 BUSINESS-TYPE DEBT: Revenue Bonds:1998 Water/Sewer Refunding 4.46% 03/01/98 06/01/13 6,120,000 1999 Golf System Refunding 4.96% 04/01/99 12/01/15 5,040,000 2002 Water/Sewer 4.80% 07/01/02 12/01/22 11,980,000 2003 Water/Sewer Refunding 3.20% 09/15/03 06/01/13 8,035,000 2004 Water/Sewer 4.33% 11/01/04 12/01/27 10,335,000 TOTAL REVENUE BONDS 41,510,000 Public Works Trust Fund Loans: Sierra Heights Sewer Improvements 2.00% 01/20/92 07/01/12 888,462 Central Renton Sewer Replacement 1.00% 05/04/93 07/01/15 1,631,800 East Renton Interceptor 1.00% 06/07/93 07/01/13 2,542,704 Dayton Avenue NE 2.00% 05/12/94 07/01/14 96,958 NE 27th/Aberdeen Drainage Improvements 1.00% 05/15/95 07/01/15 731,000 East Kennydale Interceptor 2.00% 01/24/98 07/01/16 2,093,740 Honeycreek Interceptor 2.00% 12/04/95 07/01/16 1,840,568 Corrosion Control Treatment Facilities 1.00% 01/06/97 07/01/17 1,106,000 Maplewood Water Treatment Improvement 0.50% 1/22/02 07/01/21 567,831 Construct CT Pipeline for Wells 0.50% 11/5/02 7/1/22 814,527 Maplewood Water Treatment Improvement 0.50% 06/03/04 07/01/24 4,892,500 TOTAL PUBLIC WORKS TRUST FUND LOANS 17,206,090 Leases:Golf Course Operating Lease 3.81% 4/1/03 4/1/06 78,192 TOTAL LEASES 78,192TOTAL BUSINESS-TYPE DEBT ISSUANCE 58,794,282 TOTAL AMOUNT ISSUED ON OUTSTANDING DEBT AS OF DECEMBER 31, 2006 $121,971,798 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-53 For outstanding debt additions and retirements are summarized as follows: Type of Debt Balanced Owed 01/01/2006 Additions Deductions BalancedOwed 12/31/2006Due WithinOne Year GOVERNMENTAL DEBT: General Obligation Bonds: Limited1996 GO Bonds $111,670 $0 $111,670 $0 $0 1997 GO Refunding Bonds 429,033 0 429,033 0 0 1997 GO Bonds 2,037,744 0 198,243 1,839,501 693,926 1997 GO Bonds – CAB Long Term Interest 0 1,315,199 0 1,315,199 0 2000 GO Valley Comm Bonds 1,908,000 0 153,000 1,755,000 160,000 2001 GO Refunding Bonds 13,195,000 0 0 13,195,000 75,000 2001 GO Bonds 6,000,000 0 0 6,000,000 0 2002 GO Bonds 3,475,000 0 150,000 3,325,000 150,000 2006 GO Bonds 0 17,980,000 17,980,000 0 SUBTOTAL LIMITED GO 27,156,447 19,295,199 1,041,946 45,409,700 1,078,926 Unlimited 1993 GO Refunding Bonds-Senior Housing 1,870,000 0 430,000 1,440,000 455,000 SUBTOTAL UNLIMITED GO 1,870,000 0 430,000 1,440,000 455,000 TOTAL GENERAL OBLIGATION BONDS 29,026,447 19,295,199 1,471,946 46,849,700 1,533,926 Installment Contracts: Certificates of Participation 81,217 0 31,404 49,813 32,837 TOTAL INSTALLMENT CONTRACTS 81,217 0 31,404 49,813 32,837 Employee Leave Benefits (Primarily General Fund Obligations) 5,341,112 3,566,437 4,713,554 4,193,995 2,428,017 TOTAL GENERAL OBLIGATION DEBT 34,448,776 22,861,636 6,216,904 51,093,508 3,994,780 BUSINESS-TYPE DEBT: Revenue Bonds: 1998 Water/Sewer Refunding 4,550,000 0 520,000 4,030,000 545,000 1999 Golf System Refunding 3,360,000 0 270,000 3,090,000 285,000 2002 Water/Sewer 11,610,000 0 110,000 11,500,000 110,000 2003 Water/Sewer Refunding 5,935,000 0 1,050,000 4,885,000 1,085,000 2004 Water/Sewer 10,335,000 0 0 10,335,000 0 TOTAL REVENUE BONDS 35,790,000 0 1,950,000 33,840,000 2,025,000 Public Works Trust Fund Loans: Sierra Heights Sewer Improvements 179,500 0 25,642 153,858 25,642 Central Renton Sewer Replacement 803,903 0 87,483 716,420 87,483 East Renton Interceptor 1,076,560 0 134,570 941,990 134,570 Dayton Avenue NE 45,928 0 5,103 40,825 5,103 NE 27th/Aberdeen Drainage Improvements 425,897 0 42,590 383,307 42,590 East Kennydale Interceptor 1,285,398 0 116,855 1,168,543 116,855 Honeycreek Interceptor 1,065,592 0 96,872 968,720 96,872 Corrosion Control Treatment Facilities 592,283 0 49,357 542,926 49,357 Maplewood Water Improvement 484,815 0 30,301 454,514 30,301 Const. CT Pipeline for Wells 728,787 0 42,870 685,917 42,870 Maplewood Water Improvements 4,892,500 0 257,500 4,635,000 257,500 TOTAL PUBLIC WORKS TRUST FUND LOANS 11,581,161 0 889,143 10,692,018 889,143 OPERATING LEASES: Golf Course Cart lease 8,622 0 8,622 0 0 TOTAL OPERATING LEASES 0 0 8,622 0 0 Employee Leave Benefits 385,699 487,123 409,874 462,947 110,016 TOTAL BUSINESS-TYPE DEBT 47,765,482 487,123 3,257,639 44,994,965 3,024,159 GRAND TOTALS $82,214,258 $23,348,759 $9,474,543 $96,088,473 $7,018,939 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-54 DEEP DISCOUNT DEBT The 1997 Limited General Obligation Bond issue included capital appreciation bonds that are issued at a deep discount. The deep-discount debt will mature in the years 2007, 2008, and 2009 with an accreted value of $1,245,000, $1,250,000, and 1,000,000 respectively. The deep-discount debt is reported in the Government-wide financial statements in the amount of $1,839,501, net of the remaining unamortized discount. SPECIAL ASSESSMENT DEBT WITH GOVERNMENTAL COMMITMENT As of December 31, 2006, the City of Renton has no special assessment debt outstanding. DEBT LIMIT CAPACITIES State law provides that debt cannot be incurred in excess of the following percentages of the value of the taxable property of the City: 1.5 percent without a vote of the people provided the indebtedness with a vote is 1 percent or less; 2.5 percent with a vote of the people; 5.0 percent with a vote of the people, provided the indebtedness in excess of 2.5 percent is for utilities; and 7.5 percent with a vote of the people provided the indebtedness in excess of 5.0 percent is for open space development and parks facilities. Table 12 in the Statistical Section shows the computation of legal debt margin for general and special purpose capacities for the City of Renton.ANNUAL DEBT SERVICE REQUIREMENTS The annual debt service requirements to maturity, including principal and interest, for long-term debt as of December 31, 2006, are as follows: Governmental Activities Business-type Activities Year Ending December 31 Principle Interest Principle Interest 2007 $1,566,763 $2,702,284 $2,914,143 $1,619,071 2008 2,079,551 2,698,249 2,994,143 1,527,344 2009 2,205,000 2,549,448 3,074,143 1,440,494 2010 2,269,000 1,975,553 3,154,143 1,348,254 2011 2,353,000 1,883,688 3,244,143 1,251,000 2012-2016 13,326,000 7,612,869 11,298,228 4,899,474 2017-2021 13,390,000 4,175,483 7,647,712 3,360,272 2022-2026 5,785,000 1,534,414 8,445,370 1,632,689 2027-2028 2,610,000 197,250 1,760,000 88,000 TOTAL $45,584,314 $25,329,238 $44,532,025 $17,166,598 AMOUNT AVAILABLE FOR DEBT SERVICE Fund balances that have been reserved for debt repayment are $3,068,584 in the debt service funds.NOTE 15 - DEFERRED CHARGES IN PROPRIETARY FUNDS As of December 31, 2006, the Waterworks Utility Fund had deferred charges and other assets in the amount of $761,729 for debt issue costs on the 2002-2004 Revenue Bonds. This amount will be fully amortized by 2022. The Golf Course Fund amount was $40,547 for the 1999 Refunded Bond debt issue costs and discount. This amount will be fully amortized by 2016. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-55 NOTE 16. SEGMENT INFORMATIONAn identifiable activity (or grouping of activities) required to be accounted for separately, which (a) is reported as or within an enterprise fund; (b) for which one or more revenue bonds are outstanding; and, (c) where the revenue stream is pledged for payment of, are required to disclose segment information. The City of Renton has no required segment information to disclose for 2006. NOTE 17. JOINT VENTURESA joint venture is a legal entity or other organization that results from a contractual agreement and that is owned, operated, or governed by two or more participants as a separate and specific activity subject to joint control in which the participants retain (a) an on-going financial interest or (b) an on-going financial responsibility. The City participates in one joint venture. VALLEY COMMUNICATIONS CENTER The “Valley Communications Center” was established August 20, 1976, when an Interlocal Agreement was entered into by four original participating municipal corporations, including the cities of Renton, Kent, Auburn, and Tukwila. Federal Way was formally admitted in 2000. The agreement is sanctioned by the provisions and terms of the Interlocal Cooperation Act pursuant to Chapter 39.34 RCW. The initial duration of the agreement was five years, and thereafter is automatically extended for consecutive five-year periods. The purpose of the joint operation, hereafter referred to as Valley Comm, is to provide improved consolidated emergency communications (dispatch) services for police, fire, and medical aid, to the five participating cities and to several subscribing agencies that include: King County Fire Districts 2, 17 (Black Diamond), 20, 26, 40, 43, 44, 47; City of Pacific Police and Fire Departments; City of Black Diamond Police Department; City of Des Moines Police Department; SeaTac Fire Department; North Highline Fire Department; King County EMS Units; and Vashon Island Fire Department. Separate agreements between Valley Comm and the subscribing agencies have been executed, which set forth conditions of services and rates charged.The City of Renton reports its share of equity interest in the Governmental Activities column within the Government-wide financial statements under non-current assets. The following is condensed (unaudited) financial information as of December 31, 2006, on Valley Comm: Valley Comm Renton Interest Assets $22,055,273 Liabilities 718,868 22.51%* TOTAL Equity $21,336,405 $3,981,550 *After removing $3,642,531 in assets not subject to the equity interest calculations. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-56 Completed Financial Statements for Valley Comm can be obtained from the Valley Communications Center, 23807 – 98th Avenue South, Kent, WA 98031.NOTE 18. SUBSEQUENT EVENTSThe City of Renton, on March 16, 2007, signed an agreement obligating the City of Renton’s golf course to purchase, through a capital lease agreement, 50 golf carts. The terms of the agreement commence on June 15, 2007, and consist of 48 monthly payments of $2,022.14 at an interest rate of 5.25%. The final payment to purchase the golf carts is $50. Appendix E Municipal Bond Insurance Policy Specimen This page left blank intentionally. FINANCIAL GUARANTY INSURANCE POLICY MBIA Insurance Corporation Armonk, New York 10504 Policy No. [NUMBER] MBIA Insurance Corporation (the "Insurer"), in consideration of the payment of the premium and subject to the terms of this policy, hereby unconditionally and irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment required to be made by or on behalf of the Issuer to [PAYING AGENT/TRUSTEE] or its successor (the "Paying Agent") of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Obligations (as that term is defined below) as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless the Insurer elects, in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence shall be referred to herein collectively as the "Insured Amounts." "Obligations" shall mean: [PAR] [LEGAL NAME OF ISSUE] Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and surrender of such Obligations or presentment of such other proof of ownership of the Obligations, together with any appropriate instruments of assignment to evidence the assignment of the Insured Amounts due on the Obligations as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners, or the Paying Agent payment of the Insured Amounts due on such Obligations, less any amount held by the Paying Agent for the payment of such Insured Amounts and legally available therefor. This policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation. As used herein, the term "owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party whose agreement with the Issuer constitutes the underlying security for the Obligations. Any service of process on the Insurer may be made to the Insurer at its offices located at 113 King Street, Armonk, New York 10504 and such service of process shall be valid and binding. This policy is non-cancellable for any reason. The premium on this policy is not refundable for any reason including the payment prior to maturity of the Obligations. IN WITNESS WHEREOF, the Insurer has caused this policy to be executed in facsimile on its behalf by its duly authorized officers, this [DAY] day of [MONTH, YEAR]. MBIA Insurance Corporation President Attest: Assistant Secretary STD-R-7 01/05 OFFICIAL STATEMENT DATED NOVEMBER 26, 2007 City of Renton, Washington $9,975,000 Water and Sewer Revenue Bonds, Series 2008A $2,035,000 Water and Sewer Revenue Bonds, Series 2008B (Taxable) DATED: Date of Delivery DUE: December 1, as shown on the inside cover STANDARD & POOR’S RATING—AA-, underlying; AAA, insured (see “Bond Insurance” and “Ratings” herein). FITCH RATING—AA-, underlying; AAA, insured (see “Security for the Bonds – Bond Insurance” and “Ratings” herein). SERIES 2008A BONDS BANK QUALIFIED—The City has designated the Series 2008A Bonds as “qualified tax-exempt obligations” for purposes of Section 265(b)(3)(B) of the Code. See “Tax Matters.” BOOK-ENTRY ONLY—The Bonds will be issued as fully registered bonds in denominations of $5,000, or integral multiples thereof, and will be registered in the name of Cede & Co., as bond owner and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Purchasers will not receive certificates representing their interest in the Bonds purchased. PRINCIPAL AND INTEREST PAYMENTS—Interest on the Bonds will be payable on June 1, 2008 and semiannually thereafter on December 1 and June 1 of each year to their maturity or earlier redemption of the Bonds. Principal of and interest on the Bonds will be payable by the fiscal agency of the State of Washington, currently The Bank of New York, New York, New York, as further described herein. For so long as the Bonds remain in a “book-entry only” transfer system, the fiscal agent will make such payments only to DTC, which in turn will remit such principal and interest to its Participants for subsequent disbursement to Beneficial Owners of the Bonds as further described herein in Appendix C. MATURITY SCHEDULE LOCATED ON INSIDE COVER REDEMPTION—The Series 2008A Bonds are subject to redemption prior to their stated maturities as further described herein. See “Description of the Bonds – Redemption Provisions.” SECURITY—The principal of and interest on the Bonds are payable solely from and secured by the Net Revenue of the City’s combined Waterworks Utility, consisting of the water, wastewater and storm drainage systems. The Bonds are issued on a parity of lien with the Outstanding Parity Bonds and the City has reserved the right to issue Future Parity Bonds. For so long as the Bonds are outstanding, no bonds may be issued subsequent to the issuance of the Bonds with a lien and charge on the Net Revenues superior to the lien and charge of the Bonds. The Bonds are special obligations of the City payable only from amounts on deposit in the Bond Fund and the Reserve Fund. The Bonds are not general obligations of the City, the State of Washington (the “State”), or any other municipal corporation or political subdivision thereof, and neither the full faith and credit nor the taxing power of the City or the State of Washington are pledged to the payment of the Bonds. See “Security for the Bonds.” 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 MBIA INSURANCE CORPORATION TAX EXEMPTION—In the opinion of K&L Preston Gates Ellis LLP (“Bond Counsel”), assuming compliance with certain covenants of the City, interest on the Series 2008A Bonds is excludable from gross income for federal income tax purposes under existing law. Interest on the Series 2008A Bonds is not an item of tax preference for purposes of either individual or corporate alternative minimum tax. Interest on the Series 2008A Bonds may be indirectly subject to corporate alternative minimum tax and certain other taxes imposed on certain corporations. See “Tax Matters – Series 2008A Bonds” herein for a discussion of the opinion of Bond Counsel. The City has taken no action to cause interest on the Series 2008B Bonds to be excluded from gross income for the purposes of federal income taxation. See “Tax Matters – Series 2008B Bonds” herein. DELIVERY—The Bonds are offered for sale to the original purchaser subject to the final approving legal opinions of Bond Counsel. It is expected that the Bonds will be available for delivery to the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer on or about January 4, 2008. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. OFFICIAL STATEMENT DATED NOVEMBER 26, 2007 City of Renton, Washington $9,975,000 Water and Sewer Revenue Bonds, Series 2008A $2,035,000 Water and Sewer Revenue Bonds, Series 2008B (Taxable) DATED: Date of Delivery DUE: December 1, as shown on inside cover Maturity Schedule $9,975,000 Water and Sewer Revenue Bonds, Series 2008A Due Interest Price or Due Interest Price or Dec. 1 Amount Rate Yield CUSIP Dec. 1 Amount Rate Yield CUSIP 2016 $480,000 4.00% 3.80% 760167TU0 2022 $ 790,000 4.00% 4.10% 760167UA2 2017 695,000 4.00 3.85 760167TV8 2023 980,000 4.10 4.15 760167UB0 2018 (1) 565,000 5.00 3.90 760167TW6 2024 1,020,000 4.15 4.20 760167UC8 2019 (1) 645,000 4.00 3.95 760167TX4 2025 1,060,000 4.20 4.25 760167UD6 2020 720,000 4.00 4.00 760167TY2 2026 1,105,000 4.25 4.30 760167UE4 2021 760,000 4.00 4.05 760167TZ9 2027 1,155,000 4.30 4.34 760167UF1 $2,035,000 Water and Sewer Revenue Bonds, Series 2008B (Taxable) Due Interest Price or Due Interest Price or Dec. 1 Amount Rate Yield CUSIP Dec. 1 Amount Rate Yield CUSIP 2013 $610,000 4.70% 4.85% 760167TN6 2015 $630,000 5.10% 5.14 760167TQ9 2014 600,000 4.85 5.00 760167TP1 2016 195,000 5.25 5.24 760167TR7 (1) Priced to the call date of December 1, 2017. City of Renton, Washington 1055 South Grady Way Renton, Washington 98055 Phone: (425) 430-6400 Fax: (425) 430-6516 www.rentonwa.gov* Mayor and City Council Denis W. Law Mayor Terri Briere Councilmember Dan Clawson Councilmember Randy Corman Councilmember Marcie Palmer Councilmember King Parker Councilmember Don Persson Councilmember Greg Taylor Councilmember City Officials Jay Covington Chief Administrative Officer Michael E. Bailey Finance & Information Services Administrator Bonnie Walton City Clerk Gregg Zimmerman Public Works Administrator Bond Counsel K&L Preston Gates Ellis LLP Seattle, Washington Financial Advisor Piper Jaffray & Co. Seattle, Washington Bond Registrar The Bank of New York New York, New York * The City’s website is not part of this Official Statement, and investors should not rely on information presented in the City’s website in determining whether to purchase the Bonds. This inactive textual reference to the City’s website is not a hyperlink and does not incorporate the City’s website by reference. This Official Statement does not constitute an offer to sell the Bonds in any jurisdiction in which or to a person to whom it is unlawful to make such an offer. No dealer, salesperson or other person has been authorized by the City the Financial Advisor, or the Underwriter to give any information or to make any representations, other than those contained herein, in connection with the offering of the Bonds and, if given or made, such information or representations must not be relied upon. The City makes no representation regarding the accuracy or completeness of the information provided in Appendix C—Book Entry Transfer System, which has been furnished by DTC. Estimates and opinions are included and should not be interpreted as statements of fact. Summaries of documents do not purport to be complete statements of the provisions. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of the City since the date hereof. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. In connection with this offering, the Underwriter may over-allot or effect transactions that stabilize or maintain the market price of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The CUSIP numbers are included on the inside cover of this Official Statement for convenience of the holders and potential holders of the Bonds. No assurance can be given that the CUSIP numbers for the Bonds will remain the same after the date of issuance and delivery of the Bonds. i This page left blank intentionally. ii Table of Contents Page Description of the Bonds ...................................................................................................................................................1 Authorization for Issuance .........................................................................................................................................1 Principal Amount, Date, Interest Rates and Maturities .............................................................................................1 Bond Registrar and Registration Features .................................................................................................................2 Book-Entry Bonds ......................................................................................................................................................2 Redemption Provisions ..............................................................................................................................................2 Purchase .....................................................................................................................................................................3 Purpose and Use of Proceeds ............................................................................................................................................3 Purpose.......................................................................................................................................................................3 Sources and Uses of Funds.........................................................................................................................................3 Security for the Bonds .......................................................................................................................................................4 Rate Covenant ............................................................................................................................................................4 Flow of Funds.............................................................................................................................................................4 Funds and Accounts...................................................................................................................................................5 Additional Covenants ................................................................................................................................................6 Future Parity Bonds ...................................................................................................................................................7 Junior Lien Obligations ..............................................................................................................................................8 Defeasance of the Bonds ............................................................................................................................................8 Bond Insurance ..................................................................................................................................................................9 The MBIA Insurance Corporation Insurance Policy ..................................................................................................9 MBIA Insurance Corporation...................................................................................................................................10 Regulation ................................................................................................................................................................10 Financial Strength Ratings of MBIA ........................................................................................................................10 MBIA Financial Information ....................................................................................................................................10 Incorporation of Certain Documents by Reference .................................................................................................11 MBIA Surety Bond ...................................................................................................................................................11 Indebtedness of the Waterworks Utility .........................................................................................................................12 Outstanding Long-Term Borrowings ......................................................................................................................12 Subordinate Lien Debt .............................................................................................................................................13 Water and Sewer Revenue Bonds – Debt Service Requirements ....................................................................................13 Debt Payment Record ..............................................................................................................................................13 Future Financings.....................................................................................................................................................13 Authorized Investments ..................................................................................................................................................14 Local Government Investment Pool ........................................................................................................................14 Authorized Investments for Bond Proceeds ............................................................................................................14 The Waterworks Utility ...................................................................................................................................................15 The Water Utility......................................................................................................................................................15 The Wastewater Utility ............................................................................................................................................17 Waterworks Utility Capital Improvement Plan.......................................................................................................21 Delinquent Accounts................................................................................................................................................22 Endangered Species Act ...........................................................................................................................................22 The City ...........................................................................................................................................................................24 City Staff ...................................................................................................................................................................24 Labor Relations ........................................................................................................................................................25 Pension System.........................................................................................................................................................25 Other Post Employment Benefits .............................................................................................................................27 Budgetary Policies....................................................................................................................................................28 Risk Management.....................................................................................................................................................28 Auditing of City Finances ........................................................................................................................................28 Demographic Information ...............................................................................................................................................29 Initiative and Referendum ..............................................................................................................................................32 State Initiatives .........................................................................................................................................................32 Tax Matters – Series 2008A Bonds...................................................................................................................................33 Qualified Tax-Exempt Obligations ..........................................................................................................................34 Premium ...................................................................................................................................................................34 Original Issue Discount............................................................................................................................................34 Tax Matters – Series 2008B Bonds ...................................................................................................................................34 Ratings .............................................................................................................................................................................38 Continuing Disclosure Undertaking ...............................................................................................................................38 Legal and Underwriting ..................................................................................................................................................40 Approval of Counsel ................................................................................................................................................40 Litigation ..................................................................................................................................................................40 Underwriting............................................................................................................................................................40 Financial Advisor .....................................................................................................................................................41 Concluding Statement ..............................................................................................................................................41 Bond Ordinance..........................................................................................................................................................Appendix A Opinions of Bond Counsel......................................................................................................................................... Appendix B Book-Entry Transfer System......................................................................................................................................Appendix C 2006 Audited Financial Statements ..........................................................................................................................Appendix D Municipal Bond Insurance Policy Specimen........................................................................................................... Appendix E iii This page left blank intentionally. iv OFFICIAL STATEMENT City of Renton, Washington $9,975,000 Water and Sewer Revenue Bonds, Series 2008A $2,035,000 Water and Sewer Revenue Bonds, Series 2008B (Taxable) The City of Renton, Washington (the “City”), a municipal corporation duly organized and existing under and by virtue of the laws of the State of Washington (the “State”) furnishes this Official Statement in connection with the offering of $9,975,000 aggregate principal amount of Water and Sewer Revenue Bonds, Series 2008A (the “Series 2008A Bonds”) and $2,035,000 aggregate principal amount of Water and Sewer Revenue Bonds, Series 2008B (Taxable) (the “Series 2008B Bonds”). The Series 2008A Bonds and Series 2008B Bonds are together, the “Bonds.” This Official Statement provides information concerning the City, the Bonds and the City’s waterworks utility, including the water, wastewater and storm drainage systems (together, the “Waterworks Utility”). The Bonds are issued on a parity of lien with the City’s outstanding $3,485,000 Water and Sewer Revenue Refunding Bonds, 1998 (the “1998 Bonds”); $3,340,000 Water and Sewer Revenue Bonds, 2002 (the “2002 Bonds”); $3,800,000 Water and Sewer Revenue Refunding Bonds, 2003 (the “2003 Bonds”); $10,335,000 Water and Sewer Revenue Bonds, 2004 (the “2004 Bonds”); and $9,750,000 Water and Sewer Revenue and Refunding Bonds, 2007 (the “2007 Bonds”). The 1998 Bonds, the 2002 Bonds, the 2003 Bonds, the 2004 Bonds and the 2007 Bonds are referred to herein as “Outstanding Parity Bonds.” The City has reserved the right in the Bond Ordinance (as defined herein) to issue additional bonds on a parity of lien with the Outstanding Parity Bonds and the Bonds, subject to certain conditions described herein. The Outstanding Parity Bonds, the Bonds and any Future Parity Bonds are referred to herein as “Parity Bonds.” Certain capitalized words and phrases used in this Official Statement have the meanings as defined in the Bond Ordinance attached hereto in Appendix A. Description of the Bonds Authorization for Issuance The Bonds are issued pursuant to Ordinance No. 5313 adopted by the City Council (the “Council”) on October 22, 2007 (the “Bond Ordinance”), and Resolution No. 3919 adopted by the Council on November 26, 2007 and under and in accordance with the laws and provisions of the State, including chapters 35.92, 39.46 and 39.53 Revised Code of Washington (“RCW”). The Bond Ordinance authorized the issuance of the 2007 Bonds and the Bonds for the purpose of financing a plan of improvements to the Waterworks Utility. The Bonds will be issued on a parity of lien with the Outstanding Parity Bonds. Principal Amount, Date, Interest Rates and Maturities The Series 2008A Bonds will be issued in the aggregate principal amount of $9,975,000 and the Series 2008B Bonds will be issued in the aggregate principal amount of $2,035,000 and will be dated and bear interest from the date of initial delivery to the Underwriter. The Bonds will mature on the dates and in the principal amounts and will bear interest (payable semiannually on June 1 and December 1, first interest payable June 1, 2008) at the respective rates as set forth on the inside cover of this Official Statement. Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30- day months. Bond Registrar and Registration Features The Bonds will be issued as fully registered bonds and, when issued, will be registered in the name of Cede & Co. as Bond Owner and as nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Individual purchases and sales of the Bonds may be made in book-entry form only in minimum denominations of $5,000 within a single maturity and integral multiples thereof. Purchasers (“Beneficial Owners”) will not receive certificates representing their interest in the Bonds. Principal of and interest on the Bonds will be payable by the State fiscal agent, currently The Bank of New York (the “Bond Registrar”). So long as Cede & Co. is the registered owner of the Bonds, principal of and interest on the Bonds are payable by wire transfer by the Bond Registrar to DTC, which, in turn, is obligated to remit such principal and interest to its participants for subsequent disbursement to the Beneficial Owners of the Bonds, as further described herein in Appendix C. Book-Entry Bonds DTC will act as securities depository for the Bonds. The ownership of one fully registered Bond for each maturity of the Bonds, as set forth on the cover of this Official Statement, each in the aggregate principal amount of such maturity, will be registered in the name of Cede & Co., as nominee for DTC. See Appendix C attached hereto for additional information. Procedure in the Event of Revisions of Book-Entry Transfer System. If DTC resigns as the securities depository and the City is unable to retain a qualified successor to DTC, or the City has determined that it is in the best interest of the City not to continue the book-entry system of transfer or that interests of the Beneficial Owners of the Bonds might be adversely affected if the book-entry system of transfer is continued, the City will execute, authenticate and deliver at no cost to the Beneficial Owners of the Bonds or their nominees, Bonds in fully registered form, in the denomination of $5,000 or any integral multiple thereof within a maturity. In the event the Bonds are transferred by the City to fully registered form, the payments of principal and interest on the Bonds will be made by the Bond Registrar. Principal of the Bonds will be payable upon due presentment and surrender thereof at the office designated by the Bond Registrar. Under the State’s current fiscal agency agreement, the Bonds also may be presented for payment in the State of Washington at any office of Wells Fargo Bank, National Association. Interest on the Bonds will be payable by check or draft mailed to the owners of the Bonds at the address appearing on the Bond Register on the 15th day of the month preceding an interest payment date, and the Bonds will be transferable as provided in the Bond Ordinance. Redemption Provisions Optional Redemption. The Series 2008A Bonds maturing on or prior to December 1, 2017 are not subject to redemption prior to their scheduled maturity. The Series 2008A Bonds maturing on or after December 1, 2018 are subject to redemption at the option of the City on and after December 1, 2017, in whole or in part (maturities to be selected by the City and by lot within a maturity in such manner as the Bond Registrar shall determine) on any date, at a price of par plus accrued interest, if any, to the date of redemption. For as long as the Series 2008A Bonds are in book-entry only form, if fewer than all of the Series 2008A Bonds of a maturity are called for redemption, the selection of Series 2008A Bonds within a maturity to be redeemed shall be made by DTC in accordance with its operational procedures then in effect. See Appendix C attached hereto. If the Series 2008A Bonds are no longer held in book-entry only form, then the Bond Registrar would select Series 2008A Bonds for redemption as provided in the Bond Ordinance. The Series 2008B Bonds are not subject to redemption prior to maturity. 2 Notice of Redemption. For so long as the Series 2008A Bonds are held in book-entry only form, notice of redemption shall be given in accordance with the operational arrangements of DTC as then in effect, and neither the City nor the Bond Registrar will provide any notice of redemption to any Beneficial Owners. It is the sole responsibility of the DTC Participants to provide notice of redemption to individual Beneficial Owners of the Series 2008A Bonds. If the Series 2008A Bonds are no longer held in book-entry form, notice of redemption shall be given by or on behalf of the City not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the Owner of any Bond to be redeemed at the address appearing on the Bond Register on the day notice is mailed, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the Owner of any Bond. Purchase The City reserves the right in the Bond Ordinance to purchase any of the Bonds offered to the City at any price deemed reasonable by the City at any time. Purpose and Use of Proceeds Purpose A portion of the proceeds of the Bonds will be used, together with the proceeds of the 2007 Bonds issued on November 6, 2007, to finance the following improvements to the Wastewater Utility (together, the “Projects”): (i) the design and construction of electrical power generators in critical water pumping facilities for emergency uses; (ii) the design and construction of a 4.2 million gallon reservoir; (iii) the construction of a new lift station; (iv) the planning, designing and construction of a storm system; (v) the replacement of an existing culvert; and (vi) other miscellaneous projects of the Waterworks Utility. Sources and Uses of Funds The proceeds from the Bonds will be applied as follows: Sources of Funds Par Amount of Series 2008A Bonds $ 9,975,000 Net Premium 24,293 Par Amount of Series 2008B Bonds 2,035,000 Net Discount (11,441) Reserve Fund Contribution 3,145,309 Total Sources of Funds $ 15,168,161 Uses of Funds Series 2008A Bonds Series 2008A Project Requirements $ 12,975,653 Series 2008A Costs of Issuance (1) 168,949 Series 2008A Total 13,144,602 Series 2008B Bonds Series 2008B Project Requirements 1,989,092 Series 2008B Costs of Issuance (1) 34,467 Series 2008B Total 2,023,559 Total Uses of Funds $ 15,168,161 (1) Includes a portion of the following costs of issuance allocable to the relevant series of Bonds: bond counsel fee, rating fee, bond insurance, Reserve Fund surety, underwriter’s discount, and other costs associated with the issuance of each series of Bonds. 3 Security for the Bonds The Bonds are payable from the Gross Revenue of the Waterworks Utility subject only to the payment of the Maintenance and Operation Expenses. The Bonds constitute and lien and charge on the Net Revenue prior and superior to any other charges whatsoever except that the lien and charge on such revenue for the Bonds will be on a parity with the lien and charge thereon for the Outstanding Parity Bonds. The City has reserved the right in the Bond Ordinance to issue Future Parity Bonds on a parity of lien with the Bonds and the Outstanding Parity Bonds. The Bonds are a special limited obligation of the City payable only from amounts on deposit in the Waterworks Revenue Bond Fund (the “Bond Fund”) and the Waterworks Revenue Bond Reserve Fund (the “Reserve Fund”). See “Funds and Accounts” below. The Bond Fund will at all times be completely segregated and set apart from all other funds and accounts of the City for the security and the payment of the principal of and interest on the Parity Bonds, as they become due. The Bonds are not an obligation of the State or any political subdivision thereof other than the City, and neither the full faith and credit nor the taxing power of the City or the State are pledged to the payment of the Bonds. Rate Covenant The City has covenanted that 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: Gross Revenue will at all times be sufficient to pay all Maintenance and Operation Expense on a current basis, pay when due all amounts that the City is obligated to pay into the Reserve Fund and any Parity Bond Funds and 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 Net Revenue in each calendar year will be at least equal to 1.25 times the Maximum Annual Debt Service (the “Coverage Requirement”). Once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, the term “Coverage Requirement” will mean 1.25 times the Annual Debt Service in any calendar year. Flow of Funds Gross Revenue of the Waterworks Utility will be deposited into the Waterworks Utility Fund (the “Waterworks Utility Fund”), previously created by the City pursuant to Ordinance No. 250. Gross Revenue on deposit in the Waterworks Utility Fund (other than in any bond redemption or federal rebate account) will be held separate and apart from all other funds and accounts of the City and will be used in the following order of priority: (1) To pay Maintenance and Operation Expense; (2) To pay the interest on the Parity Bonds, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (3) To pay the principal of the Parity Bonds, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (4) To make all payments required to be made into any sinking fund or bond redemption fund created by ordinance for the payment of Future Parity Bonds which are Term Bonds; (5) To make all payments required to be made into the Reserve Fund, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or 4 Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (6) 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 Parity Bonds; and (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, to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. Funds and Accounts Bond Fund. The Bond Fund will be maintained for the purpose of paying the principal of and interest on the Bonds. As long as any Bond remains outstanding, the City irrevocably obligates and binds itself in the Bond Ordinance to set aside and pay from the Waterworks Utility Fund into the Bond Fund those amounts necessary, together with such other funds as are on hand and available in the Bond Fund, to pay the interest or principal and interest next coming due on outstanding Bonds. Such payments from the Waterworks Utility Fund to the Bond Fund will be made in a fixed amount without regard to any fixed proportion following the closing and delivery of the Bonds on or before each date on which an installment of interest or principal and interest falls due on the Bonds equal to the installment of interest or principal and interest. Reserve Fund. The Reserve Fund has previously been created by the City for purpose of securing the payment of the principal of and interest on all bonds to which Net Revenue is pledged. The City covenants and agrees in the Bond Ordinance that on or prior to the date of issuance of the Bonds, the amount on deposit in the Reserve Fund will be at least equal to the Reserve Requirement. The “Reserve Requirement” is currently defined as Maximum Annual Debt Service which means, at the time of calculation, the maximum amount of annual debt service that will mature or come due in the current calendar year or any future calendar year on the outstanding Parity Bonds. Once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, the term “Reserve Requirement” with respect to any issue of Parity Bonds will mean the lesser of (a) Maximum Annual Debt Service on all Outstanding Parity Bonds and (b) 125% of average Annual Debt Service on all Outstanding Parity Bonds; provided, that the amount required to be deposited with respect to any Future Parity Bonds in order to meet the Reserve Requirement will not exceed 10% of the net proceeds of such Future Parity Bonds. Except for withdrawals therefrom as authorized herein, 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. The City may, in lieu of cash and investments, obtain all or part of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained, to be issued by an institution that has been assigned a credit rating equal to or better then the highest then-existing rating for any of the Parity Bonds (“Reserve Insurance”). Upon delivery of the Bonds, the City will acquire Reserve Insurance with MBIA Insurance Corporation (“MBIA”) in the amount of $3,648,589, which is an amount sufficient to satisfy the Reserve Requirement for all Outstanding Parity Bonds including the Bonds of this issue (see “Security for the Bonds – Bond Insurance: MBIA Surety Bond” herein). If there is 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 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 5 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. The City may, at any time, deposit Gross Revenue into 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 in Gross Revenue for any fiscal year of the City. 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 will be made into the Rate Stabilization Fund to the extent that such deposit would prevent the City from meeting the Coverage Requirement. The Rate Stabilization Fund is currently unfunded. Additional Covenants So long as any Parity Bonds are outstanding, the City has covenanted and agreed as follows: Maintenance and Repair. 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. Disposal of Waterworks Utility. It will not sell, lease, mortgage or in any manner encumber 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 the Bond Ordinance. Books and Records. 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 Bond 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. No Free Service. Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish or supply or permit the furnishing or supplying of any service or facility in connection with the 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. 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. Maintenance and Operation Expense. It will pay all Maintenance and Operation Expense and the debt service requirements for the outstanding Parity Bonds, and otherwise meet the obligations of the City as herein set forth. 6 Tax Covenants. It will undertake all actions required to maintain the tax-exempt status of interest on the Series 2008A Bonds under Section 103 of the Code. Future Parity Bonds In the Bond Ordinance the City reserves the right to issue Future Parity Bonds which will constitute a lien and charge on the Net Revenue of the Waterworks Utility on a parity with the Outstanding Parity Bonds and the Bonds, if the following conditions are met and complied with at the time of issuance of the Future Parity Bonds: (1) There is no deficiency in any Parity Bond Fund. (2) The ordinance providing for the issuance of such Future Parity Bonds provides for the payment of the principal thereof and interest thereon out of a Parity Bond Fund. (3) The ordinance providing for the issuance of such Future Parity Bonds provides for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds of (a) an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or (b) 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, or under certain circumstances, the City may 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. After the 1998 Bonds, the 2002 Bonds, and the 2003 Bonds are no longer outstanding, this subsection (3) will be amended to read as follows: (3) the ordinance providing for the issuance of such Future Parity Bonds provides for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds of (a) an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or (b) 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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security either on or prior to the date of issuance of such Future Parity Bonds or within three years from the date of issuance of the Future Parity Bonds in three approximately equal annual payments and in such event, the ordinance providing for the issuance of such Future Parity Bonds provides for such deposit. After the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, this subsection (3) will be further amended to read as follows: (3) the ordinance providing for the issuance of such Future Parity Bonds will provide for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds of (a) an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or (b) 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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security on or prior to the date of issuance of such Future Parity Bonds. (4) The ordinance authorizing the issuance of such Future Parity Bonds will 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. (5) There will be on file with the City either: (a) 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 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the 7 Future Parity Bonds proposed to be issued; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, a certificate of the City Finance Director demonstrating that during any 12 consecutive calendar months out of the immediately preceding 24 calendar months Net Revenue, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; or (b) a certificate of a Professional Utility Consultant that in such consultant's opinion Net Revenue for any 12 consecutive calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund, will be equal to 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, 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 24 calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund, will be equal to 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued. The certificate, in estimating Net Revenue available for debt services, may adjust Net Revenue to reflect: (i) any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; (ii) 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; (iii) income from any customers to be connected to the Waterworks Utility who have paid the required connection charges; (iv) 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; (v) 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; (vi) 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 (vii) 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 will 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. Junior Lien Obligations The City has reserved the right to issue revenue bonds or other obligations which would be a charge upon the Revenue Fund junior or inferior to that of any Outstanding Parity Bonds. As of September 1, 2007, the City had approximately $10,451,271 in outstanding subordinate lien debt. See “City Indebtedness – Subordinate Lien Debt.” Defeasance of the Bonds In the event that money and/or “Government Obligations,” as defined in the Bond Ordinance, maturing at such time or times and bearing interest to be earned thereon in amounts sufficient to redeem and retire the Bonds or any of them in accordance with their terms are set aside in a special account to effect such redemption or retirement and such money and the principal of and interest on such obligations are set aside irrevocably and pledged for such purpose, then no further payments need be made into the Bond Fund for the payment of the principal of and interest on the Bonds so provided for and such Bonds will cease to be entitled to any lien, benefit or security of the Bond Ordinance except the right to receive the funds so set aside and pledged, and such Bonds will be deemed not to be outstanding. 8 Bond Insurance The following information has been furnished by MBIA Insurance Corporation (“MBIA”) for use in this Official Statement, and the City and the Underwriter make no representations as to the accuracy or completeness thereof. Reference is made to Appendix E for a specimen of the Municipal Bond Insurance Policy for the Bonds (the “Policy”). The MBIA Insurance Corporation Insurance Policy MBIA does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Policy and MBIA set forth under the heading “The MBIA Insurance Corporation Insurance Policy”. Additionally, MBIA makes no representation regarding the Bonds or the advisability of investing in the Bonds. The MBIA Policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the City to the Paying Agent or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Bonds as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the MBIA Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless MBIA elects in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any Owner of the Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Owner within the meaning of any applicable bankruptcy law (a “Preference”). MBIA's Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Bonds. MBIA's Policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Bonds upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. MBIA's Policy also does not insure against nonpayment of principal of or interest on the Bonds resulting from the insolvency, negligence or any other act or omission of the Paying Agent or any other paying agent for the Bonds. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by MBIA from the Paying Agent or any owner of a Bond the payment of an insured amount for which is then due, that such required payment has not been made, MBIA on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such Bonds or presentment of such other proof of ownership of the Bonds, together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Bonds as are paid by MBIA, and appropriate instruments to effect the appointment of MBIA as agent for such owners of the Bonds in any legal proceeding related to payment of insured amounts on the Bonds, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or the Paying Agent payment of the insured amounts due on such Bonds, less any amount held by the Paying Agent for the payment of such insured amounts and legally available therefor. 9 MBIA Insurance Corporation MBIA Insurance Corporation (“MBIA”) is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company (the “Company”). The Company is not obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the State of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam. MBIA, either directly or through subsidiaries, is licensed to do business in the Republic of France, the United Kingdom and the Kingdom of Spain and is subject to regulation under the laws of those jurisdictions. In February 2007, MBIA Corp. incorporated a new subsidiary, MBIA México, S.A. de C.V. (“MBIA Mexico”), and in September 2007, MBIA Mexico became licensed to write financial guarantee insurance in Mexico. The principal executive offices of MBIA are located at 113 King Street, Armonk, New York 10504 and the main telephone number at that address is (914) 273-4545. Regulation As a financial guaranty insurance company licensed to do business in the State of New York, MBIA is subject to the New York Insurance Law which, among other things, prescribes minimum capital requirements and contingency reserves against liabilities for MBIA, limits the classes and concentrations of investments that are made by MBIA and requires the approval of policy rates and forms that are employed by MBIA. State law also regulates the amount of both the aggregate and individual risks that may be insured by MBIA, the payment of dividends by MBIA, changes in control with respect to MBIA and transactions among MBIA and its affiliates. The Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Strength Ratings of MBIA Moody's Investors Service, Inc. rates the financial strength of MBIA “Aaa.” Standard & Poor's, a division of The McGraw-Hill Companies, Inc., rates the financial strength of MBIA “AAA.” Fitch Ratings rates the financial strength of MBIA “AAA.” Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of MBIA and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold the Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Bonds. MBIA does not guaranty the market price of the Bonds nor does it guaranty that the ratings on the Bonds will not be revised or withdrawn. MBIA Financial Information As of December 31, 2006, MBIA had admitted assets of $10.9 billion (audited), total liabilities of $6.9 billion (audited), and total capital and surplus of $4.0 billion (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of September 30, 2007, MBIA had admitted assets of $11.0 billion (unaudited), total liabilities of $6.8 billion (unaudited), and total capital and surplus of $4.2 billion (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. 10 For further information concerning MBIA, see the consolidated financial statements of MBIA and its subsidiaries as of December 31, 2006 and December 31, 2005 and for each of the three years in the period ended December 31, 2006, prepared in accordance with generally accepted accounting principles, included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2006 and the consolidated financial statements of MBIA and its subsidiaries as of September 30, 2007 and for the nine month periods ended September 30, 2007 and September 30, 2006 included in the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2007, which are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof. Copies of the statutory financial statements filed by MBIA with the State of New York Insurance Department are available over the Internet at the Company’s web site at http://www.mbia.com and at no cost, upon request to MBIA at its principal executive offices. Incorporation of Certain Documents by Reference The following documents filed by the Company with the Securities and Exchange Commission (the “SEC”) are incorporated by reference into this Official Statement: (1) The Company’s Annual Report on Form 10-K for the year ended December 31, 2006; and (2) The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007. Any documents, including any financial statements of MBIA and its subsidiaries that are included therein or attached as exhibits thereto, filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the Company’s most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, and prior to the termination of the offering of the Bonds offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof from the respective dates of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Official Statement, shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. The Company files annual, quarterly and special reports, information statements and other information with the SEC under File No. 1-9583. Copies of the Company’s SEC filings (including (1) the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, and (2) the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007) are available (i) over the Internet at the SEC’s web site at http://www.sec.gov; (ii) at the SEC’s public reference room in Washington D.C.; (iii) over the Internet at the Company’s web site at http://www.mbia.com; and (iv) at no cost, upon request to MBIA at its principal executive offices. MBIA Surety Bond The City has obtained a commitment from MBIA to issue a surety policy (the “MBIA Surety Bond”) to meet the Reserve Requirement for the Outstanding Parity Bonds and the Bonds ($3,648,589). The MBIA Surety Bond will provide that upon notice from the Bond Registrar to MBIA to the effect that insufficient amounts are on deposit in the Bond Fund to pay the principal of (at maturity or pursuant to mandatory redemption requirements) and interest on the Outstanding Parity Bonds and the Bonds, MBIA will promptly deposit with the Bond Registrar an amount sufficient to pay the principal of and interest on the Outstanding Parity Bonds and the Bonds or the available amount of the MBIA Surety Bond, whichever is less. Upon the later of: (i) three days after receipt by MBIA of a Demand for Payment in the form attached to the MBIA Surety Bond, duly executed by the Bond Registrar or (ii) the payment date of the Bonds as specified in the Demand for Payment presented by the Bond Registrar to MBIA, MBIA will make a deposit of funds in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment to the Bond Registrar, of amounts which are then due to the Bond Registrar (as specified in the Demand for Payment) subject to the Surety Bond Coverage. 11 The available amount of the MBIA Surety Bond is the initial face amount of the MBIA Surety Bond less the amount of any previous deposits by MBIA with the Bond Registrar which have not been reimbursed by the City. The City and MBIA will enter into a Financial Guaranty Agreement dated as of the date of issuance of the Bonds (the “Agreement”). Pursuant to the Agreement, the City is required to reimburse MBIA, within one year of any deposit, the amount of such deposit made by MBIA with the Bond Registrar under the MBIA Surety Bond. Such reimbursement shall be made only after payment of Operating Expenses and required deposits to the Bond Fund have been made. Under the terms of the Agreement, the City is required to reimburse MBIA, with interest, until the face amount of the MBIA Surety Bond is reinstated before any deposit is made to the Bond Fund. No optional redemption of Bonds may be made until the MBIA Surety Bond is reinstated. The MBIA Surety Bond will be held in the Reserve Account and is provided as an alternative to the City depositing funds equal to the Reserve Requirement for Outstanding Parity Bonds and the Bonds. The MBIA Surety Bond will be issued in the face amount equal to the Reserve Requirement for the City and the premium therefor will be fully paid by the City at the time of delivery of the Bonds. Indebtedness of the Waterworks Utility The City may issue revenue bonds “…if it deems it advisable to purchase, lease, condemn, or otherwise acquire, construct, develop, improve, extend or operate any land, building, facility, or utility and adopts an ordinance which has been ratified by the voters of the city or town in those instances where it is required to be ratified by the voters…such city or town my issue revenue bonds against the special fund or funds created solely from revenues…” pursuant to chapter 35.41 RCW (the Municipal Revenue Bond Act). Outstanding Long-Term Borrowings The outstanding long term debt of the Waterworks Utility is composed of the following bond issues: Date of Maturity Amount of Outstanding Water and Sewer Revenue Bonds Issue Date Original Issue at 01/04/08 1998 Bonds 03/01/98 06/01/13 $ 6,120,000 $ 3,485,000 2002 Bonds 07/02/02 12/01/12 11,980,000 3,230,000 2003 Bonds 09/15/03 06/01/13 8,035,000 3,800,000 2004 Bonds 11/01/04 12/01/24 10,335,000 10,335,000 2007 Bonds 11/06/07 12/01/22 9,750,000 9,750,000 Series 2008A Bonds 01/04/08 12/01/27 9,975,000 9,975,000 Series 2008B Bonds 01/04/08 12/01/16 2,035,000 2,035,000 Total Parity Bonds Outstanding $ 58,230,000 $ 42,610,000 12 Subordinate Lien Debt The following describes the City’s subordinate lien debt that are a charge upon the Net Revenue of the Waterworks Utility, outstanding as of September 1, 2007: Date of Maturity Amount of Outstanding Subordinate Lien Debt (1) Issue Date Original Issue at 09/01/07 Sierra Heights Sewer Improvements 01/20/92 2012 $ 888,462 $ 135,905 Central Renton Sewer Replacement 05/24/93 2015 1,631,800 655,111 East Renton Interceptor 06/07/93 2013 2,542,704 835,680 Dayton Avenue NE 05/12/94 2014 96,957 38,577 NE 27th/Aberdeen Drainage Imprvmnts. 05/15/95 2015 731,000 356,050 East Kennydale Interceptor 01/24/98 2016 2,093,740 1,104,275 Honeycreek Interceptor 12/04/95 2016 1,840,568 1,075,280 Corrosion Control Treatment Facilities 01/06/97 2017 1,106,000 520,715 Maplewood Water Improvements 01/22/02 2021 567,831 440,118 Const. CT Pipeline for Wells 11/05/02 2022 814,527 715,069 Maplewood Water Improvements 06/03/04 2024 4,892,500 4,574,491 Total Subordinate Lien Debt Outstanding $ 17,206,089 $ 10,451,271 (1) See “Historical Operating Results – Debt Service Coverage” for further information. Water and Sewer Revenue Bonds – Debt Service Requirements (1) Cal.Total Debt Years Principal Interest Principal Interest Principal Interest Service 2008 1,810,000$ 1,335,309$ 0$ 377,419$ 0$ 90,958$ 3,613,687$ 2009 1,890,000 1,242,944 0 415,508 0 100,138 3,648,589 2010 1,955,000 1,173,810 0 415,508 0 100,138 3,644,455 2011 2,030,000 1,100,720 0 415,508 0 100,138 3,646,365 2012 2,115,000 1,013,615 0 415,508 0 100,138 3,644,260 2013 1,000,000 929,988 0 415,508 610,000 100,138 3,055,633 2014 1,060,000 905,053 0 415,508 600,000 71,468 3,052,028 2015 1,100,000 863,475 0 415,508 630,000 42,368 3,051,350 2016 1,135,000 820,100 480,000 415,508 195,000 10,238 3,055,845 2017 1,200,000 763,350 695,000 396,308 0 0 3,054,658 2018 1,415,000 703,350 565,000 368,508 0 0 3,051,858 2019 1,425,000 645,450 645,000 340,258 0 0 3,055,708 2020 1,430,000 586,600 720,000 314,458 0 0 3,051,058 2021 1,480,000 526,950 760,000 285,658 0 0 3,052,608 2022 1,545,000 465,100 790,000 255,258 0 0 3,055,358 2023 1,450,000 400,500 980,000 223,658 0 0 3,054,158 2024 1,520,000 328,000 1,020,000 183,478 0 0 3,051,478 2025 1,600,000 252,000 1,060,000 141,148 0 0 3,053,148 2026 1,680,000 172,000 1,105,000 96,628 0 0 3,053,628 2027 1,760,000 88,000 1,155,000 49,665 0 0 3,052,665 Totals 30,600,000$ 14,316,313$ 9,975,000$ 6,356,499$ 2,035,000$ 715,718$ 63,998,531$ Outstanding Parity Bonds Series 2008B BondsSeries 2008A Bonds (1) Totals may not foot due to rounding. Debt Payment Record The City has promptly met all debt service payments on outstanding obligations. No refunding bonds have been issued to avoid an impending default. Future Financings Other than the Bonds, the City does not have current plans to issue any Future Parity Bonds within the next twelve months. 13 Authorized Investments Chapter 35.39 RCW limits the investment by cities and towns of its inactive funds or other funds in excess of current needs to the following authorized investments: United States bonds; United States certificates of indebtedness; bonds or warrants of the State and any local government in the State; its own bonds or warrants of a local improvement district which are within the protection of the local improvement guaranty fund law; and any other investment authorized by law for any other taxing district or the State Treasurer. Under chapter 43.84 RCW, the State Treasurer may invest in non-negotiable certificates of deposit in designated qualified public depositories; in obligations of the US government, its agencies and wholly owned corporations; in bankers’ acceptances; in commercial paper; in the obligations of the federal home loan bank, federal national mortgage association and other government corporations subject to statutory provisions and may enter into repurchase agreements. Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW 35.39.030). Money available for investment may be invested on an individual fund basis or may, unless otherwise restricted by law, be commingled within one common investment portfolio. All income derived from such investment may be either apportioned to and used by the various participating funds or for the benefit of the general government in accordance with city ordinances or resolutions. Funds derived from the sale of bonds or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances, resolutions or bond covenants may lawfully prescribe. Local Government Investment Pool The State Treasurer’s Office administers the Washington State Local Government Investment Pool (the “LGIP”), a fund that invests money on behalf of more than 350 cities, counties and special taxing districts. In its management of LGIP, the State Treasurer is required to adhere, at all times, to the principles appropriate for the prudent investment of public funds. These are, in priority order, (i) the safety of principal; (ii) the assurance of sufficient liquidity to meet cash flow demands; and (iii) to attain the highest possible yield within the constraints of the first two goals. Historically, the LGIP has had sufficient liquidity to meet all cash flow demands. The LGIP, authorized by chapter 43.250 RCW, is a voluntary pool which provides its participants the opportunity to benefit from the economies of scale inherent in pooling. It is also intended to offer participants increased safety of principal and the ability to achieve a higher investment yield than would otherwise be available to them. The pool is restricted to investments with maturities of one year or less, and the average life typically is less than 90 days. Investments permitted under the pool’s guidelines include U.S. government and agency securities, bankers’ acceptances, high quality commercial paper, repurchase and reverse repurchase agreements, motor vehicle fund warrants, and certificates of deposit issued by qualified Washington State depositories. As of October 1, 2007, the City’s investments at market value totaled $80,993,758, 41 percent of which was invested in certificates of deposit, 32 percent of which was invested in U.S. Federal Agency Securities and 27 percent of which was invested in the LGIP. Authorized Investments for Bond Proceeds In addition to the eligible investments discussed above, bond proceeds may also be invested in mutual funds with portfolios consisting of U.S. government and guaranteed agency securities with average maturities of less than four years; municipal securities rated in one of the four highest categories; and money market funds consisting of the same, so long as municipal securities held in the fund(s) are in one of the two highest rating categories of a nationally recognized rating agency. Bond proceeds may also be invested in shares of money market funds with portfolios of securities otherwise authorized by law for investment by local governments (RCW 39.59.030). 14 The Waterworks Utility 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. In November 2007, voters within the City approved an annexation of unincorporated land bordering the City which will increase the geographic size of the City by about one-third. City management does not expect any impacts to the Water Utility or the Wastewater Utility. The City will take over King County’s portion of the Storm Drainage Utility, but does not expect any significant impacts to the operations of the Waterworks Utility. The Water Utility Description. The Water Utility provides water service for fire protection and for domestic uses to an area approximately 16 square miles and to 16,699 customer accounts. In addition, the City supplies water on a wholesale basis to Skyway Water District through a single metered connection. The Water Utility consists of nine reservoirs with 18 million gallons of storage, 19 pump stations, two water treatment facilities, 300 miles of water mains, 3,440 fire hydrants and 16,669 water meters. Water treatment consists of chlorination, fluoridation and corrosion control for all active production wells, along with the removal of manganese, hydrogen sulfide, and ammonia from the raw water from the Maplewood wells. Current active and primary water supply sources include five wells, and one emergency well, drawing water from the Cedar Valley aquifer; three wells from the Maplewood aquifer; and one artesian spring, Springbrook Springs. The wells provide 85 percent of the City’s water production. In addition, the City maintains seven metered backup water supply interties with Seattle Public Utilities, one emergency intertie with the City of Kent and one emergency intertie with the City of Tukwila. Together, active, standby and emergency wells provide 18,900 gallons per minute (“GPM”) or 27.2 million gallons per day (“MGD”). Emergency interties with neighboring cities and water districts can provide 12,000 GPM or 17.3 MGD. In 2006, the maximum demand for water was 15.3 MGD and the average day demand was 8.0 MGD. Based on growth forecasts, the City has sufficient on-line supply capacity to meet demands through at least 2020, with the practice of water conservation efforts. The City’s historic water demands are shown in the following table: Water Utility Usage Average Daily Peak Day Usage (MGD) Usage (MGD) 2006 7.99 15.27 2005 7.31 13.03 2004 7.64 14.25 2003 7.58 14.08 2002 7.23 12.48 Source: City of Renton. 15 Water Utility Customers. The City provides water to 16,699 customers of which approximately 77 percent are residential. Customer data by class for the last five years is presented below, as well as current revenues of the water system. Number of Water Customers 2006 2005 2004 2003 2002 Single Family 12,786 12,656 11,927 11,742 11,357 Multi-Family, Commercial, Industrial, Other 2,725 2,766 2,699 2,755 2,700 Irrigation 651 637 561 480 427 Fire Service 500 495 474 475 474 Other (1) 37 31 24 39 44 Total 16,699 16,585 15,685 15,491 15,002 (1) Includes wholesale water provided to Skyway Water District through a single metered connection. Source: City of Renton. Water Billing 2006 2005 2004 2003 2002 Single Family $ 3,945,033 $ 3,583,975 $ 3,610,012 $ 3,499,510 $ 3,314,750 Multi-Family, Commercial, Industrial, Other 4,666,104 4,203,586 4,425,994 4,344,029 4,004,196 Fire Service 123,105 118,736 109,343 110,661 104,781 Boeing Seattle 101,106 81,294 123,037 122,235 136,675 Skyway Wholesale 98,666 91,961 96,373 99,476 100,661 Other 6,341 7,305 (690) (1) 6,921 6,145 Total $ 8,940,355 $ 8,086,857 $ 8,364,069 $ 8,182,832 $ 7,667,208 (1) Represent an inter-period billing adjustment. Source: City of Renton. The following table shows the City’s ten major water customers by annual revenue. Major 2006 Water Customers Total Amount Percent of Total Customer Billed for Water Water Billing Boeing $ 285,348 3.19% King County Metro 187,087 2.09 City of Renton 164,432 1.84 Public Hospital District No. 1 109,844 1.23 Skyway Water & Sewer District (1) 100,172 1.12 Service Linen Supply Inc. 83,736 0.94 Renton School District 64,762 0.72 Kenworth Truck Co. 63,308 0.71 Crestwood Park 58,526 0.65 HSC Real Estate/Axis Grand 57,097 0.64 Total $ 1,174,312 13.13% (1) Wholesale user. Source: City of Renton. Water Utility Rates and Charges. 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. 16 On a historical basis, the City raised rates in 2004 for the first time since 1996 and implemented a water rate increase of five percent in 2007 over 2006. The City will raise rates an additional six percent in 2008. The City’s monthly water bills are calculated based on meter size and volume of water in hundreds of cubic feet (“ccf”) consumed. Effective January 1, 2007, monthly water service charges are as follows: 2007 Monthly Water Service Charge Meter Size Monthly Charge 3/4” $ 11.93 1” 14.94 1 ½” 19.14 2” 33.46 3” 99.08 4” 143.22 6” 214.86 8” 298.43 10” 429.72 12” 596.86 Source: City of Renton. 2007 Commodity Rates: 100 cf = 748 gallons Single Family/Duplex Monthly Charge 0 – 1,000 cf/month $2.01/100 cf Over 1,000 cf/month 2.14/100 cf All other users 2.01/100 cf Water rates for metered service outside of the City are 1.5 times the rate for metered service within the City. Water rates for fire protection service are $3.86 per month per meter inch. Rate Comparison of Neighboring Water Systems. Shown below are comparative water rate charges of other water utilities near the City: 2007 Single Family Monthly Water Rate Comparison Water System Monthly Rate (1) City of Issaquah $42.54 Cedar River Water & Sewer District 41.70 City of Redmond 36.55 Woodinville Water District 36.24 Coal Creek Utility District 34.50 City of Bellevue 34.25 City of Renton 32.03 NE Sammamish Sewer & Water District 28.06 City of Auburn 26.80 City of Tukwila 25.20 (1) Rate per 1,000 cubic feet. Source: Websites of individual municipalities. The Wastewater Utility Description. The Wastewater Utility system collects wastewater from residential and commercial customers and delivers it to King County through King County Metro (“Metro”) for treatment. The agreement between Metro and the City will terminate on July 1, 2056 with optional extensions. The existing system consists of 205 miles of wastewater pipelines, 26 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 Metro’s Renton Treatment Plant. Approximately 17 85 percent of the City is served by the system. The remaining area within the City is served by septic tanks or is undeveloped. Wastewater Utility Customers. The City provides wastewater service to 17,246 accounts, 75 percent of which are residential. Customer data and usage by class for the last five years is presented below. Number of Wastewater Customers 2006 2005 2004 2003 2002 Single Family 12,979 12,463 11,910 11,265 10,653 Multi-Family, Commercial, Industrial, Other 4,210 4,202 4,193 4,101 4,053 Other 57 59 57 64 75 Total 17,246 16,724 16,160 15,430 14,781 Source: City of Renton. Wastewater Billing 2006 2005 2004 2003 2002 Single Family $ 2,098,330 $ 1,917,349 $ 1,762,487 $ 1,612,173 $ 1,494,207 Multi-Family, Commercial, Industrial, Other 2,186,926 2,071,222 2,032,966 1,962,503 1,855,133 Sewer Meter 116,652 21,795 32,185 91,915 102,389 Other 124,902 109,926 65,042 84,319 82,256 Total $ 4,526,810 $ 4,120,292 $ 3,892,680 $ 3,750,910 $ 3,533,985 Source: City of Renton. The following table shows the City’s ten major wastewater customers by annual revenue and volume. Major 2006 Wastewater Customers Total Amount Percent of Total Customer Billed for Wastewater Wastewater Billing Boeing $ 96,913 2.14% Public Hospital District No. 1 81,183 1.79 Service Linen Supply Inc. 60,226 1.33 Maplewood LLC 38,945 0.86 Crestwood Park 38,578 0.85 HSC Real Estate/Axis Grand 33,401 0.74 City of Renton 31,402 0.69 Draper Valley Farms 30,584 0.68 Royal Hills Preservation LP 30,207 0.68 Eagle Point Apartments 29,054 0.64 Total $ 470,494 10.39% Source: City of Renton. 18 Wastewater Utility Rates and Charges. Effective January 1, 2007, the City increased Wastewater Utility rates by five percent over 2006. An additional 11 percent increase was assessed in 2007 for charges collected to pay Metro for wastewater treatment services. The City will raise rates an additional six percent beginning in 2008. Monthly rates for wastewater service within and outside the City effective January 1, 2007 are as follows: 2007 Monthly Wastewater Utility Rates Customer Type City of Renton Metro Single Family $ 14.67 $ 28.51 Other Users: Base Charge 2.22 N/A Per 100 cf 1.66 N/A Per 750 cf N/A 28.51 Source: City of Renton. Wastewater rates for metered service outside of the City are 1.5 times the rate for metered service within the City. As shown in the table above, in addition to the above monthly rates, a charge of $28.51 per month is payable to Metro for each single-family residence, or $28.51 per month for each multiple of 750 cf of water used by other classes of customers. This charge is paid to Metro for the collection and treatment of sewage. Rate Comparison of Neighboring Sewer Systems. Shown below are comparative sewer rate charges of other sewer utilities near the City: 2007 Single Family Monthly Sewer Base Rate Comparison Sewer System Monthly Rate City of Issaquah $49.65 Woodinville Water District 48.31 NE Sammamish Sewer & Water District 47.98 Cedar River Water & Sewer District 44.85 City of Renton 43.18 Coal Creek Utility District 40.86 City of Redmond 38.89 City of Bellevue 38.16 City of Auburn 37.76 City of Tukwila 36.75 Source: Websites of individual municipalities. Storm Drainage Utility Description. The Storm Drainage Utility system covers a service area within the existing City corporate boundaries of approximately 17.2 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 facilities located within public right-of-ways and easements dedicated for storm and surface water management purposes. The Storm Drainage Utility system consists of 215 miles of storm system pipe, includes 5,549 catch basins, 2,191 access manholes, 26 storm water retention/detention facilities and 40 miles of ditch systems and channels. The City’s Storm Drainage Utility currently serves 15,752 customers. 19 Storm Drainage Utility Customers. The City provides storm drainage service to 15,744 customers of which approximately 90 percent are residential. Customer data by class for the last five years is presented below, as well as current revenues of the storm drainage system. Number of Storm Drainage Customers 2006 2005 2004 2003 2002 Single Family 14,137 13,636 12,930 12,380 11,855 Other 1,607 1,611 1,593 1,593 1,586 Total 15,744 15,247 14,523 13,973 13,441 Source: City of Renton. Storm Drainage Billing 2006 2005 2004 2003 2002 Single Family $ 912,417 $ 847,402 $ 805,763 $ 773,503 $ 745,167 High Intensity 868,579 879,110 870,057 876,500 867,554 Medium Intensity 598,059 543,388 540,395 532,670 524,975 Low Intensity 337,816 293,425 329,854 325,927 306,241 Other 186,607 167,187 176,729 188,964 192,961 Total $ 2,903,478 $ 2,730,512 $ 2,722,798 $ 2,697,564 $ 2,636,898 Source: City of Renton. The following table shows the City’s ten major storm drainage customers by annual revenue. Major 2006 Storm Drainage Customers Total Amount Percent of Total Customer Billed for Storm Storm Billing City of Renton $ 218,867 7.54% Boeing 142,897 4.92 Renton School District 38,831 1.34 King County Dept. of Transportation 32,471 1.12 Washington State DOT 32,295 1.11 Kenworth Truck Co. 31,435 1.08 King County Metro 31,192 1.07 Stoneway Rock & Recycling 25,295 0.87 Roundup Co. Inc. 20,409 0.70 Valley Medical Center 18,865 0.65 Total $ 592,558 20.41% Source: City of Renton. 20 Storm Drainage Utility Rates and Charges. Effective January 1, 2007, the City increased Storm Drainage Utility rates by three percent over 2006. The City will raise rates an additional 6.5 percent in 2008. There will also be a rate increase of 28.5 percent in 2008 to manage the National Pollutant Discharge Elimination System permit program. The permit, which was issued on January 17, 2007, is a requirement of the Federal Clean Water Act and requires certain actions of the City to maintain compliance. These include maintenance of the Storm Drainage Utility system, public education, mapping of outfalls and the implementation of an illicit discharge detection and elimination program. The City will be adding of 4.7 new full-time equivalent employees in 2008 to accomplish this work. Monthly rates for storm drainage service within and outside the City effective January 1, 2007 are as follows: 2007 Monthly Storm Drainage Utility Rates Type Monthly Charge Single Family $ 5.39 Low Intensity – less than 0.5 acres 14.16/acre Low Intensity – greater than 0.5 acres 28.33/acre Medium Intensity – less than 0.5 acres 20.49/acre Medium Intensity – greater than 0.5 acres 40.96/acre High Intensity – less than 0.5 acres 26.42/acre High Intensity – greater than 0.5 acres 52.83/acre Source: City of Renton. Waterworks Utility Capital Improvement Plan The following is a list of future projects the City is undertaking as a part of its capital improvement plan for the years 2008 through 2013 for the Waterworks Utility system: Project Description Est. Cost (000s) Water Utility Development $ 16,050 Major Maintenance 11,620 Regulatory Compliance 1,260 Total Six-Year Water Utility Project Costs 28,930 Wastewater Utility Development 3,700 Major Maintenance 12,530 Regulatory Compliance 20 Total Six-Year Wastewater Utility Project Costs 16,250 Storm Drainage Utility Development 9,375 Major Maintenance 4,735 Regulatory Compliance 1,090 Total Six-Year Storm Drainage Utility Project Costs 15,200 Total Six-Year Waterworks Utility Project Costs $ 60,380 Summary of Funding Sources Operating $ 10,922 Bonds(1)/Loans 32,305 System Development Charges/Sewer Assessment District (2) 9,223 Undetermined 7,930 Total Six-Year Summary of Funding Sources $ 60,380 (1) Includes the Bonds. (2) A funding mechanism for sewer extensions. Source: City of Renton. 21 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. Endangered Species Act In planning future projects, the City evaluates the construction and operation of the facilities to determine if there will be any impact on endangered species through the use of site evaluations, special environmental studies, and preparation of State Environmental Policy Act (“SEPA”) checklists or environmental impact statements, as appropriate. Alternatives are developed to minimize or avoid impacts on endangered species. Where federal permits or funding are involved, the City also complies with the Endangered Species Act’s “consultation” requirement, which serves to evaluate and address any potential effect on endangered species. Best management practices are employed during routine operation and maintenance activities to minimize impacts on the environment. Water-Sewer Fund Historical Operating Results – Debt Service Coverage (Years Ending December 31) 2006 2005 2004 2003 2002 Operating Revenues Charges for services 25,982,868$ 26,427,386$ 26,003,272$ 24,551,329$ 22,123,070$ Other operating revenue 1,114,349 1,142,062 1,099,530 1,227,428 1,686,652 Total Operating Revenues 27,097,217 27,569,448 27,102,802 25,778,757 23,809,722 Operating Expenses (1) Operations and maintenance 4,899,649 4,410,143 4,487,536 3,962,259 13,193,177 Administrative and general 13,388,969 12,645,317 11,968,588 10,501,393 2,560,881 Taxes 1,989,785 1,837,664 1,869,739 2,526,867 1,741,414 Total Operating Expenses 20,278,403 18,893,124 18,325,863 16,990,519 17,495,472 Net Income from Operations 6,818,814 8,676,324 8,776,939 8,788,238 6,314,250 Non-Operating Revenues (2) Interest revenues 653,291 319,912 198,428 155,363 135,938 Other non-operating revenues (expenses)160,233 523,411 (3)19,586 142,290 44,757 Transfers in (out)68,446 9,300 10,300 40,000 (10,079) Total Non-Operating Income 881,970 852,623 228,314 337,653 170,616 Net Income 7,700,784 9,528,947 9,005,253 9,125,891 6,484,866 Adjustment to Revenues Connection/system development charges 1,030,460 1,089,394 1,548,762 914,091 1,181,830 Available for Parity Bond Debt Service 8,731,244 10,618,341 10,554,015 10,039,982 7,666,696 Parity Debt Service 1993 Bonds 0 0 0 0 1,268,452 1994 Bonds 0 0 0 0 200,925 1998 Bonds 725,428 723,141 499,765 500,643 311,973 2002 Bonds 649,543 678,255 666,255 664,130 228,804 2003 Bonds 1,227,748 1,198,248 1,319,248 48,608 0 2004 Bonds 507,480 507,480 42,290 0 0 Parity Bond Debt Service 3,110,198 3,107,124 2,527,558 1,213,381 2,010,154 Available for Other Purposes 5,621,046$ 7,511,217$ 8,026,458$ 8,826,601$ 5,656,543$ Parity Bond Debt Service Coverage 2.81 3.42 4.18 8.27 3.81 PWTF Loans 889,143$ 889,143$ 631,643$ 670,172$ 620,274$ Debt Service Coverage including PWTF Loans 2.18 2.66 3.34 5.33 2.91 Audited (1) Excludes Depreciation. (2) Excludes Interest Expense and Amortization of Debt. (3) Approximately $500,000 of this amount was from a State tax refund. Source: City of Renton. 22 The Maximum Annual Debt Service for the Outstanding Parity Bonds, including the Bonds, is projected to be $3,648,589 in 2009. Based on the 2006 audited financial statement for the Waterworks Utility, debt service coverage is calculated at 2.39 times the Maximum Annual Debt Service. Water-Sewer Fund Historical Statement of Net Assets (Years Ending December 31) 2006 2005 2004 2003 2002 Assets Current assets: Cash & cash equivalents 12,479,315$ 8,505,117$ 7,299,781$ 6,170,463$ 2,297,256$ Investments at fair value 520,000 1,970,979 3,722,272 755,491 6,666,250 Receivables (net)3,257,279 5,131,540 4,756,799 4,451,097 4,301,063 Due from other funds 56,328 115,389 40,199 48,137 45,505 Due from other governmental units 197,446 203,238 225,073 245,455 291,415 Inventory of materials and supplies 271,754 301,512 316,643 331,434 316,062 Noncurrent assets: Restricted cash 3,114,332 3,114,332 3,114,332 2,606,852 4,265,423 Special assessments deferred 62,966 68,269 54,200 61,325 0 Capital assets (net)205,585,486 200,918,126 191,635,436 176,376,760 167,573,971 Deferred charges and other assets 761,729 812,857 888,729 769,107 221,039 Total Assets 226,306,635$ 221,141,359$ 212,053,464$ 191,816,121$ 185,977,984$ Liabilities Current liabilities: Accounts payable 1,148,019$ 298,397$ 406,419$ 479,194$ 379,627$ Retainage payable 52,481 72,452 55,674 118,482 117,163 Due to other funds 50,676 103,865 51,919 47,563 45,546 Due to other governmental units (1)0 0 2,095,948 674,336 726,743 Accrued interest payable 161,874 167,338 106,955 481,279 237,978 Accured employee wages 181,740 176,081 157,062 31,813 30,962 Accrued taxes payable 35,147 25,989 48,305 49,741 47,821 Custodial accounts 37,919 30,659 27,299 24,829 28,519 Deferred revenue 280,764 138,805 125,884 83,308 183,469 Revenue bonds payable 1,740,000 1,680,000 1,630,000 1,475,000 1,635,000 Long-term liabilities: Revenue bonds payable 29,010,000 30,750,000 32,430,000 23,725,000 25,490,000 Unamortized premium 468,747 533,445 533,491 177,953 0 Unamortized discount (401,585) (474,931) (552,031) (629,130) (705,211) Deferred amount on rev. bond rfdg.84,903 97,482 110,060 122,638 0 Accrued employee wages 371,552 344,139 343,312 265,857 379,648 PWTF loan payable (1)10,692,020 11,581,165 6,254,360 6,909,275 7,495,393 Total Liabilties 43,914,257$ 45,524,886$ 43,824,657$ 34,037,138$ 36,092,658$ Net Assets Invested in capital assets 164,143,466$ 156,906,961$ 149,225,132$ 144,267,485$ 112,116,546$ Restricted 3,114,332 3,114,332 3,114,332 2,606,852 9,620,966 Unrestricted 15,134,580 15,595,180 15,889,343 10,904,646 28,147,814 Total Net Assets 182,392,378$ 175,616,473$ 168,228,807$ 157,778,983$ 149,885,326$ Total Liabilities and Net Assets 226,306,635$ 221,141,359$ 212,053,464$ 191,816,121$ 185,977,984$ Audited (1) Public Works Trust Fund loans were previously categorized as “Due to other governments,” but were re- allocated as a long-term liability in 2005 and 2006. Source: City of Renton. 23 The City The City was incorporated in 1901 and operates under State laws applicable to a non-charter code city with a mayor-council form of government. The council is comprised of seven members plus the mayor. Councilmembers are elected to four-year terms on a staggered schedule through citywide elections. Councilmembers are part-time elected officials who exercise legislative authority and determine matters of policy for the City. Member Position Term Expires Denis W. Law Mayor December 31, 2011 (1) Terri Briere Councilmember December 31, 2009 Dan Clawson Councilmember December 31, 2009 Randy Corman Councilmember December 31, 2009 Marcie Palmer Councilmember December 31, 2011 (2) King Parker Councilmember December 31, 2011 (1) Don Persson Councilmember December 31, 2011 (2) Greg Taylor Councilmember December 31, 2011 (1) (1) Term effective January 1, 2008. (2) Re-elected. The City provides a range of municipal services authorized by State law, including police, fire, ambulance service, streets, sanitation, health, recreation, library, public improvements, planning and zoning, water supply treatment and distribution, and sewage collection and treatment services. City Staff 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. Mr. Covington earned a Bachelor’s degree in Business and Masters in Public Administration from Brigham Young University. Mr. Covington is a past President and Board Member of the Washington City/County Management Association as well as a past Board Member of the Association of Washington Cities. In 2005, Mr. Covington received the Public Official of the Year Award from the Seattle Municipal League. Michael E. Bailey, Finance & Information Services Administrator. Mr. Bailey joined City staff as Finance & Information Services Administrator in 2005. Mr. Bailey is a certified public accountant and prior to being appointed to his current position with the City, Mr. Bailey was employed as the Finance Director for the City of Lynwood since 1999, and previously served as the Finance Director for the cities of Everett and Wenatchee and the Metropolitan Park District of Tacoma. Mr. Bailey earned a Bachelor’s degree in Business Administration and Accounting and a Master’s degree in Public Administration, both from the University of Puget Sound. Mr. Bailey is a past President of the Washington Finance Officers Association, a past representative for the State of Washington to the National Finance Officers Association and was named “Business Person of the Year” by the National Future Business Leaders of America in 1998. Currently, Mr. Bailey is the Chair of the Government Finance Officers Association Technology Committee and Local Government Representative of the National Streamlined Sales Tax Governing Board. Gregg Zimmerman, Public Works Administrator. Mr. Zimmerman joined City staff as Public Works Administrator in 1992. In addition to managing the Waterworks Utility whose responsibilities include planning and designing the City’s water, wastewater, surface water, and solid waste utilities and setting utility rates, Mr. Zimmerman also manages the Maintenance Services Division (operates and maintains the City’s utilities and streets and the City vehicle fleet), the Transportation Systems Division (plans, designs, builds transportation projects; installs and maintains street signalization system; manages the Renton Municipal Airport) and the Development Services Division (in charge of reviewing and issuing 24 permits for private development projects and other land use actions within the City). Prior to joining the City, Mr. Zimmerman worked for consulting engineering firms in Seattle and Illinois. Mr. Zimmerman received his Bachelor’s degree in Civil Engineering from the University of Illinois and his current memberships include the American Water Works Association and the American Public Works Association. Labor Relations The City currently has approximately 592 full-time employees and 507 seasonal and part-time employees. The City enters into written bargaining agreements with represented employees. The agreements contain provisions regarding salaries, vacation, sick leave, medical and dental insurance, working conditions, and grievance procedures. The City strives to complete agreements with all groups in a timely manner, consistent with all applicable State law, and to promote labor relation policies mutually beneficial to management and employees. The City considers labor relations with its bargaining units to be good. There have been no recent strikes or major labor relations problems. Number of Bargaining Unit Employees Expiration Date AFSCME 293 December 31, 2008 Renton Police Officers’ Guild 89 December 31, 2008 Renton Police Officers’ Guild Non-Commissioned 41 December 31, 2008 Renton Firefighters Local 864 96 December 31, 2008 Renton Firefighters Local 864 Batalion Chiefs 7 December 31, 2008 Pension System Public Employees’ Retirement System (“PERS”). Substantially all of the City’s full-time and qualifying part- time employees, other than those covered under union plans, participate in PERS. This is a statewide local government retirement system administered by the Washington State Department of Retirement Systems, under cost-sharing, multiple-employer defined benefit public employee retirement plans. The PERS system includes three plans. Participants who joined the system by September 30, 1977, are PERS Plan I members. Those joining thereafter are enrolled in PERS Plan II. A third plan, entitled PERS Plan III, provides members with a defined benefit plan similar to PERS Plan II and the opportunity to invest their retirement contributions in a defined contribution plan. PERS Plan I members are eligible for retirement at any age after 30 years of service, at age 60 with five years of service, or at age 55 with 25 years of service. The annual pension is two percent of the average final compensation per year of service, capped at 60 percent. The average final compensation is based on the greatest compensation earned during any 24 eligible consecutive compensation months. PERS Plan II members may retire at age 65 with five years of service or at 55 with 20 years of service. The annual pension is two percent of the average final compensation per year of service. PERS Plan II retirements prior to 65 are actuarially reduced. On July 1 of each year following the first full year of retirement service, the benefit will be adjusted by the percentage change in the Consumer Price Index (“CPI”) of Seattle, capped at three percent annually. PERS Plan III is structured as a dual benefit program that will provide members with the following benefits: • A defined benefit allowance similar to PERS Plan II calculated as one percent of the average final compensation per year of service (versus a two percent formula) and funded entirely by employer contributions. • A defined contribution account consisting of member contributions plus the full investment return on those contributions. 25 Each biennium, the State Pension Funding Council adopts PERS Plan I employer contribution rates and PERS Plan II employer and employee contribution rates. Employee contribution rates for PERS Plan I are established by statute at six percent and do not vary from year to year. The employer and employee contribution rates for PERS Plan II are set by the director of the Department of Retirement Systems, based on recommendations by the Office of the State Actuary, to continue to fully fund PERS Plan II. Unlike PERS Plan II, which has a single contribution rate (which is currently 2.25 percent), with PERS Plan III, the employee chooses how much to contribute from one to six contribution rate options. Once an option has been selected, the contribution rate choice is irrevocable unless the employee changes employers. All employers are required to contribute at the level established by State law. The methods used to determine the contribution requirements are established under State statute in accordance with chapters 41.40 and 41.26 RCW. For the year ending December 31, 2006, the City’s contribution of $759,728, or 3.69 percent of covered payrolls, represents its full liability under the system, except that future rates may be adjusted to meet the system needs. Adopted PERS Employer Contribution Rates Effective Effective Effective Effective 7/1/06 1/1/07 7/1/07 7/1/08 Normal Rate 3.50% 3.50% 4.15% 4.83% PERS I Unfunded Liability 0.01 1.78 1.69 2.57 Gain Sharing 0.00 0.00 0.62 0.62 DRS Admin. Expense Rate 0.18 0.18 0.18 0.18 Total PERS Employer Rate 3.69% 5.46% 6.64% 8.20% Law Enforcement Officers’ and Fire Fighters’ Retirement System (“LEOFF”). LEOFF is a cost-sharing multiple- employer defined benefit pension plan. Membership in the plan includes all full-time, fully compensated local law enforcement officers, and fire fighters. The LEOFF system includes two plans. Participants who joined the system by September 30, 1977, are LEOFF Plan I members. Those joining thereafter are enrolled in LEOFF Plan II. Retirement benefits are financed from employee and employer contributions, investment earnings, and State contributions. Retirement benefits in both LEOFF Plan I and LEOFF Plan II are vested after completion of five years of eligible service. LEOFF Plan I members are eligible to retire with five years of service at age 50. The service retirement benefit is dependent upon the final average salary and service credit years at retirement. On April 1 of each year following the first full year of retirement service, the benefit will be adjusted by the percentage change in the CPI of Seattle. Term of Service Percent of Final Average 5-9 Years 1.0% 10-19 Years 1.5 20 or more years 2.0 LEOFF Plan II members are eligible to retire at the age of 50 with 20 years of service or at 53 with five years of service. Retirement benefits prior to age 53 are actuarially reduced at a rate of three percent per year. The benefit is two percent of the final average salary per year of service. The final average salary is determined as the 60 highest paid consecutive service months. There is no limit on the number of service credit years, which may be included in the benefit calculation. On July 1 of each year following the first full year of retirement service, the benefit will be adjusted by the percentage change in the CPI of Seattle, capped at three percent annually. 26 LEOFF Plan I employer and employee contribution rates are established by statute, and the State is responsible for the balance of the funding at rates set by the Pension Funding Council to fully amortize the total costs of the plan. Employer and employee rates for LEOFF Plan II are set by the director of the Department of Retirement Systems, based on recommendations by the Office of the State Actuary, to continue to fully fund the plan. LEOFF Plan II employers and employees are required to contribute at the level required by State law. The methods used to determine the contribution rates are established under State statute in accordance with chapters 41.26 and 41.45 RCW. For the year ending December 31, 2006, the City’s contribution to LEOFF I (for participants who joined the system by September 30, 1977) of 0.18 percent and to LEOFF II (participants who joined after September 30, 1977) of 4.9 percent of covered payroll totaled $718,633, representing its full liability under the system, except that future rates may be adjusted to meet the system needs. Historical trend information regarding all of these plans is presented in Washington State’s Department of Retirement Systems’ annual financial report. A copy of this report may be obtained at: Department of Retirement Systems Point Plaza West 1025 East Union Street P.O. Box 48380 Olympia, WA 98504-8380 Internet Address: www.drs.wa.gov According to information provided by the Office of State Actuary, the LEOFF System currently has no unfunded actuarial accrued liability. Other Post Employment Benefits The Government Accounting Standards Board (“GASB”) has issued a new standard concerning Accounting and Financial Reporting by Employers for Post Employment Benefits Other than Pensions (“GASB 45”). In addition to pensions, many state and local governmental employers provide other post employment benefits (“OPEB”) as a part of total compensation to attract and retain the services of qualified employees. OPEB includes post employment healthcare, as well as other forms of post employment benefits when provided separately from a pension plan. The new standard provides for the measurement, recognition and display of OPEB expenses/expenditures, related liabilities (assets), note disclosures, and if applicable, required supplementary information in the financial reports. This pronouncement is effective for the City for the fiscal year ending on December 31, 2007. The City provides medical benefits to retired firefighters and police officers who were hired prior to 1978 as required by chapter 41.26 RCW. Entry into this benefit system is closed. An actuarial study was completed by Nicolay Consulting on January 4, 2005. At that time, there were 106 participants in the system. The study found that the City’s Annual Required Contribution to fully fund the anticipated costs of $25,864,528 would be an average of $1,495,748 annually until 2035. Currently there are 98 LEOFF I retirees who receive necessary medical and hospitalization coverage and five retirees who are covered solely by the Fire Pension Plan and receive medical coverage limited to treatment of service-related disabilities only. The City does not have a funding policy at this time and no assets are designated for this purpose. During 2006, the City’s payment of $1,151,205 was recognized for post employment healthcare. State statute provides that the City’s responsibility for medical payments of LEOFF I retirees is secondary to any other coverage retirees receive or are eligible to receive. The City recognizes a potential savings exists when retirees utilize Medicare as primary coverage and the City for secondary coverage and ineligible expenses. Therefore, upon reaching age 65, the City requires the retirees to apply for and 27 utilize Medicare Part B coverage. The City reimburses these Medicare premiums at an average cost of approximately $88.50 per month for 47 LEOFF I retirees and five Fire Pension retirees. Budgetary Policies The City budgets it funds in accordance with chapter 35A.33 RCW. Annual appropriated budgets are adopted for the general, special revenue, debt service, and capital projects funds on the cash basis of accounting and include fund balances. The City provides a reconciliation of the differences between the budgetary basis and GAAP each year in its Comprehensive Annual Financial Report. The City Council annually adopts a budget by ordinance establishing appropriations for City funds, and during the year may authorize supplemental appropriations. Administrative and legal budgetary control is established at the fund level, i.e., expenditures for a fund may not exceed the total appropriation amount. The Mayor or Chief Administrative Officer may authorize transfers of appropriations within a fund however interfund transfers must be approved by ordinance of the Council. Risk Management The City insures its risk exposure up to specified levels of risk as determined by the City, and purchases excess 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. The City is a member of the Washington Cities Insurance Authority comprised of approximately 121 public agencies located in the State of Washington. Shown below are the City’s insurance limits through the Washington Cities Insurance Authority. Coverage Type Risk Retention Per Occurrence Stop Gap Loss Limit Property $ 25,000 $ 500,000,000* Liability 250,000 14,000,000* Auto Liability 250,000 14,000,000* Equipment Breakdown 5,000 50,000,000 Public Officers 250,000 10,000,000 Crime 10,000 1,000,000 Airport Liability 0 100,000,000 Underground Storage Tank 5,000 1,000,000 Worker’s Compensation 350,000 1,000,000 Employee Health 140,000 N/A __________________ * Stop Gap Loss Limit is per occurrence with the property coverage subject to limits. Auditing of City Finances Accounting systems and budgetary controls are prescribed by the Office of the State Auditor in accordance with RCW 43.09.200 and RCW 43.09.230. State statutes require audits for cities the size of the City to be conducted by the Office of the State Auditor. The City complies with the systems and controls prescribed by the Office of the State Auditor and establishes procedures and records which reasonably assure safeguarding of assets and the reliability of financial reporting. The State Auditor is required to examine the affairs of cities at least once every two years, however the City requests annual audits. The examination must include, among other things, the financial condition and resources of the City, whether the laws and constitution of the State are being complied with, and the methods and accuracy of the accounts and reports of the City. Reports of the auditor’s examinations are required to be filed in the office of the State Auditor and in the finance department of the City. The audited financial statements of the City for the year ended December 31, 2006, attached as Appendix D, are incorporated by reference to this Official Statement. 28 Demographic 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 2007 population estimates, the City ranked fifth in size among cities in King County (the “County”). The City had a population of 60,290 as estimated in 2007 by the State Office of Financial Management, an increase of 20 percent since the 2000 Census reporting a population of 50,052. The County had an estimated population of 1,861,300 as reported in 2007. King County Washington Established in 1852, the County covers more than 2,200 square miles and is nearly twice as large as the average county in the United States. A part of the Seattle-Bellevue-Everett Primary Metropolitan Statistical Area (PMSA), the County is the largest metropolitan county in the State in terms of population, number of cities, and employment. Major contributors to the area’s economy are manufacturing, technology-based business, the Port of Seattle, services industry, tourism, fishing and agriculture. Population King County and Cities of Seattle and Renton King City of City of Year County Seattle Renton 2007 1,861,300 586,200 60,290 2006 1,835,300 578,700 58,360 2005 1,808,300 573,000 56,840 2004 1,788,300 572,600 55,360 2003 1,779,300 571,900 54,900 Source: Washington State Office of Financial Management, August 2007. Income. Historic personal income and per capita income levels for the County and the State are shown below: King County and State of Washington Total Personal and Per Capita Income King County State of Washington Total Personal Per Capita Total Personal Per Capita Year Income (in thousands) Income Income (in thousands) Income 2006(1) N/A N/A $239,347,900 $37,423 2005 $86,746,632 $48,216 223,232,089 35,479 2004 87,417,911 49,118 216,921,198 34,596 2003 79,199,166 44,821 202,924,123 33,105 2002 77,940,608 44,250 197,451,578 32,528 2001 76,883,017 43,800 193,498,304 32,274 (1) Preliminary Estimate. Source: U.S. Department of Commerce, Bureau of Economic Analysis, August 2007. 29 Taxable Retail Sales. Taxable retail sales reflect only those sales subject to retail sales tax. Historic taxable retail sales for the County and the City are shown below: King County Taxable Retail Sales King County City of Renton 2007(1) $ 10,735,910,943 $ 499,266,271 2006 43,993,478,514 2,093,200,107 2005 40,498,328,830 1,951,188,125 2004 37,253,103,540 1,853,297,141 2003 35,370,831,017 1,763,639,632 (1) Through first quarter only. Source: Washington State Department of Revenue, August 2007. Building Permits. The number and valuation of new single-family and multi-family residential building permits in the City and the County are listed below: City of Renton Residential Building Permits New Single Family Units New Multi Family Units Total Year Number Valuation Number Valuation Valuation 2007 (1) 268 $ 65,881,875 953 $ 74,581,770 $ 140,463,645 2006 433 100,418,576 251 18,244,980 118,663,556 2005 514 113,996,463 412 35,282,590 149,279,052 2004 501 100,307,946 128 10,806,586 110,114,532 2003 556 117,062,111 243 18,281,882 135,343,993 (1) Data through August 2007 only. Source: City of Renton. King County Residential Building Permits New Single Family Units New Multi Family Units Total Year Number Valuation Number Valuation Valuation 2007 (1) 2,881 $ 813,731,989 4,407 $ 535,778,130 $ 1,349,470,119 2006 5,771 1,620,408,964 8,456 970,209,237 2,590,618,201 2005 6,363 1,732,705,365 5,750 553,712,849 2,286,418,214 2004 6,720 1,569,090,378 5,021 450,235,452 2,019,325,830 2003 6,354 1,543,557,962 3,503 309,101,770 1,852,659,732 (1) Data through June 2007 only. Source: U.S. Census Bureau, August 2007. 30 Employment. The major employers within the City include the following: Full-Time Employer Employees The Boeing Company 11,942 Valley Medical Center 2,346 PACCAR Inc. 1,749 Renton School District 1,353 Federal Aviation Administration 860 City of Renton 620 ER Solutions, Inc. 428 Young’s – Columbia of Washington, LLC 402 Wal-Mart 378 IKEA 361 Source: City of Renton. State-wide employment figures (rounded) for major employers located primarily within the central Puget Sound region (King, Pierce and Snohomish Counties) include the following: Puget Sound Major Employers Full-Time Employer Employees (1) The Boeing Company 68,570 (2) Microsoft 30,300 University of Washington 21,358 (2) King County Government 12,400 City of Seattle 10,392 (2) Group Health Cooperative 9,800 Weyerhaeuser 7,300 Providence Health 6,800 Costco 6,500 Nordstrom Inc. 5,400 Swedish Health 5,100 Seattle School District 5,000 Safeway 4,700 Qwest Communications International 4,200 (1) Does not include part-time or seasonal employment figures. (2) From entity. Source: Puget Sound Business Journal, Book of Lists, 2007. 31 Civilian Labor Force data is based on household surveys of residents. NAICS data are estimates based on surveys of employers and benchmarked based on covered employment as reported by all employers. King County Nonagricultural Wage & Salary Workers and Labor Force and Employment Data Annual Average 2007(1) 2006 2005 2004 2003 Civilian Labor Force 1,059,450 1,044,340 1,010,950 994,800 989,690 Total Employment 1,016,520 1,000,640 963,640 943,420 928,460 Total Unemployment 42,930 43,700 47,310 51,380 61,230 Percent of Labor Force 4.1 4.2 4.7 5.2 6.2 **NAICS INDUSTRY 2007(1) 2006 2005 2004 2003 Total Nonfarm 1,204,800 1,176,567 1,143,675 1,119,167 1,111,192 Total Private 1,042,686 1,014,708 982,475 957,008 948,600 Goods Producing 188,900 183,058 170,850 163,667 164,233 Natural Resources and Mining 657 642 658 825 842 Construction 75,086 70,092 62,808 58,992 57,050 Manufacturing 113,143 112,308 106,900 103,392 105,867 Services Providing 1,015,886 993,525 973,300 955,950 946,950 Trade, Transportation and Utilities 227,629 224,275 222,858 222,700 222,092 Information 75,871 72,500 69,283 67,717 67,892 Financial Activities 77,486 77,525 76,467 77,242 78,458 Professional and Business Services 190,400 182,233 173,225 163,708 160,217 Educational and Health Services 128,214 124,708 122,750 118,142 114,917 Leisure and Hospitality 111,557 108,583 106,092 103,783 100,900 Other Services 42,629 41,808 41,392 40,533 39,892 Government 162,114 161,867 161,208 162,150 162,567 (1) Data through July 2007. Source: Washington State Employment Security Department, August 2007. Initiative and Referendum State Initiatives Under the State Constitution, the voters of the State have the ability to initiate legislation and require the Legislature to refer legislation to the voters through the powers of initiative and referendum, respectively. The initiative power in Washington may not be used to amend the State Constitution. Initiatives and referenda are submitted to the voters upon receipt of a petition signed by at least eight percent (initiative) and four percent (referenda) of the number of voters registered and voting for the office of Governor at the preceding regular gubernatorial election. Any law approved in this manner by a majority of the voters may not be amended or repealed by the Legislature within a period of two years following enactment, except by a vote of two-thirds of all the members elected to each house of the Legislature. After two years, the law is subject to amendment or repeal by the Legislature in the same manner as other laws. Current and Future Initiative Legislation. Tax and fee initiative measures have been and may be filed from time to time. It cannot be predicted whether any such initiatives might gain sufficient signatures to qualify for submission to the Legislature and/or the voters or, if submitted, whether they ultimately would be approved. 32 Tax Matters – Series 2008A Bonds In the opinion of Bond Counsel, interest on the Series 2008A Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Series 2008A Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Federal income tax law contains a number of requirements that apply to the Series 2008A Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the use of proceeds of the Series 2008A Bonds and the facilities financed or refinanced with proceeds of the Series 2008A Bonds and certain other matters. The City has covenanted to comply with all applicable requirements. Bond Counsel’s opinion is subject to the condition that the City comply with the above-referenced covenants and, in addition, will rely on representations by the City and its advisors with respect to matters solely within the knowledge of the City and its advisors, respectively, which Bond Counsel has not independently verified. If the City fails to comply with such covenants or if the foregoing representations are determined to be inaccurate or incomplete, interest on the Series 2008A Bonds could be included in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2008A Bonds, regardless of the date on which the event causing taxability occurs. Except as expressly stated above, Bond Counsel expresses no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Series 2008A Bonds. Owners of the Series 2008A Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Series 2008A Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements. Prospective purchasers of the Series 2008A Bonds should be aware that ownership of the Series 2008A Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income,” foreign corporations subject to the branch profits tax, life insurance companies and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Series 2008A Bonds. Bond Counsel expresses no opinion regarding any collateral tax consequences. Prospective purchasers of the Series 2008A Bonds should consult their tax advisors regarding collateral federal income tax consequences. Payments of interest on tax-exempt obligations such as the Series 2008A Bonds, are in many cases required to be reported to the Internal Revenue Service (the “IRS”). Additionally, backup withholding may apply to any such payments made to any owner who is not an ”exempt recipient” and who fails to provide certain identifying information. Individuals generally are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients. Bond Counsel’s opinion is not a guarantee of result and is not binding on the IRS; rather, the opinion represents Bond Counsel’s legal judgment based on its review of existing law and in reliance on the representations made to Bond Counsel and the City’s compliance with its covenants. The IRS has established an ongoing program to audit tax-exempt obligations to determine whether interest on such obligations is includable in gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS will commence an audit of the Series 2008A Bonds. Owners of the Series 2008A Bonds are advised that, if the IRS does audit the Series 2008A Bonds, under current IRS procedures, at least during the early stages of an audit, the IRS will treat the City as the taxpayer, and the owners of the Series 2008A Bonds may have limited rights to participate in the audit. The commencement of an audit could adversely affect the market value and liquidity of the Series 2008A Bonds until the audit is concluded, regardless of the ultimate outcome. 33 Qualified Tax-Exempt Obligations The City has designated the Series 2008A Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3)(B) of the Code. Premium An amount equal to the excess of the purchase price of a Series 2008A Bond over its stated redemption price at maturity constitutes premium on that Series 2008A Bond. A purchaser of a Series 2008A Bond must amortize any premium over that Series 2008A Bond’s term using constant yield principles, based on the Series 2008A Bond’s yield to maturity. As premium is amortized, the purchaser’s basis in the Series 2008A Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the purchaser. This will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on sale or disposition of the Series 2008A Bond prior to its maturity. Even though the purchaser’s basis is reduced, no federal income tax deduction is allowed. Purchasers of Series 2008A Bonds at a premium, whether at the time of initial issuance or subsequent thereto, should consult their tax advisors with respect to the determination and treatment of premium for federal income tax purposes and the state and local tax consequences of owning such Series 2008A Bonds. Original Issue Discount The initial public offering price of certain Series 2008A Bonds (the "Original Issue Discount Series 2008A Bonds"), is less than the stated redemption price at maturity. In such case, the difference between (i) the stated amount payable at the maturity of an Original Issue Discount Series 2008A Bond and (ii) the initial public offering price of that Original Issue Discount Series 2008A Bond constitutes original issue discount with respect to that Original Issue Discount Series 2008A Bond in the hands of the owner who purchased that Original Issue Discount Series 2008A Bond at the initial public offering price in the initial public offering of the Series 2008A Bonds. The initial owner is entitled to exclude from gross income (as defined in Section 61 of the Code) an amount of income with respect to an Original Issue Discount Series 2008A Bond equal to that portion of the amount of the original issue discount allocable to the period that such Original Issue Discount Series 2008A Bond continues to be owned by the initial owner. In the event of the redemption, sale or other taxable disposition of an Original Issue Discount Series 2008A Bond prior to its stated maturity, however, the amount realized by the initial owner in excess of the basis of the Original Issue Discount Series 2008A Bond in the hands of its initial owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Series 2008A Bond was held by the initial owner) is includable in gross income. Purchasers of Original Issue Discount Series 2008A Bonds should consult their tax advisors regarding the determination and treatment of original issue discount for federal income tax purposes and the state and local tax consequences of owning Original Issue Discount Series 2008A Bonds. Tax Matters – Series 2008B Bonds This advice was written to support the promotion or marketing of the Series 2008B Bonds. This advice is not intended or written by K&L Preston Gates Ellis LLP to be used, and may not be used, by any person or entity for the purpose of avoiding any penalties that may be imposed on any person or entity under the Internal Revenue Code. Prospective purchasers of the Series 2008B Bonds should seek advice based on their particular circumstances from an independent tax advisor. The following discussion describes aspects of the principal U.S. federal tax treatment of U.S. persons that are beneficial owners (“Owners”) of Series 2008B Bonds. This summary is based on the Code, published revenue rulings, administrative and judicial decisions, and existing and proposed Treasury regulations, including regulations concerning the tax treatment of debt instruments issued with original issue discount (the “OID Regulations”) (all as of the date hereof and all of which are subject to change, possibly with retroactive effect). 34 This summary discusses only Series 2008B Bonds held as capital assets within the meaning of Section 1221 of the Code. It does not discuss all of the tax consequences that may be relevant to an Owner in light of its particular circumstances or to Owners subject to special rules, such as certain financial institutions, insurance companies, tax-exempt organizations, foreign taxpayers, taxpayers who may be subject to the alternative minimum tax or personal holding company provisions of the Code, dealers in securities or foreign currencies, Owners holding the Series 2008B Bonds as part of a hedging transaction, “straddle,” conversion transaction, or other integrated transaction, or Owners whose functional currency (as defined in Section 985 of the Code) is not the U.S. dollar. Except as stated herein, this summary describes no federal, state or local tax consequences resulting from the ownership of, receipt of interest on, or disposition of, the Series 2008B Bonds. ACCORDINGLY, INVESTORS WHO ARE OR MAY BE DESCRIBED WITHIN THIS PARAGRAPH SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO SUCH INVESTORS, AS WELL AS TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY, OF PURCHASING, HOLDING, OWNING AND DISPOSING OF THE SERIES 2008B BONDS, INCLUDING THE ADVISABILITY OF MAKING ANY OF THE ELECTIONS DESCRIBED BELOW, BEFORE DETERMINING WHETHER TO PURCHASE THE SERIES 2008B BONDS. For purposes of this discussion, a “U.S. person” means an individual who, for U.S. federal income tax purposes, is (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source of income, or (iv) a trust, if either: (A) a United States court is able to exercise primary supervision over the administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust or (B) a trust has a valid election in effect to be treated as a United States person under the applicable treasury regulations. The term also includes nonresident alien individuals, foreign corporations, foreign partnerships, and foreign estates and trusts (“Foreign Owners”) to the extent that their ownership of the Series 2008B Bonds is effectively connected with the conduct of a trade or business within the United States, as well as certain former citizens and residents of the United States who, under certain circumstances, are taxed on income from U.S. sources as if they were citizens or residents. It should also be noted that certain “single member entities” are disregarded for U.S. federal income tax purposes. Such Foreign Owners and Owners who are single member non-corporate entities, should consult with their own tax advisors to determine the U.S. federal, state, local, and other tax consequences that may be relevant to them. In General. Interest derived from a Series 2008B Bond by an Owner is subject to U.S. federal income taxation. In addition, a Series 2008B Bond held by an individual who, at the time of death, is a U.S. person is subject to U.S. federal estate tax. Payments of Interest. Qualified Stated Interest (and other original issue discount), including additional amounts of cash and interest, if any, paid on the Series 2008B Bonds will generally be taxable to Owners as ordinary interest income at the time it accrues or is received, in accordance with the Owner’s method of accounting for U.S. federal income tax purposes. For purposes of this discussion “Qualified Stated Interest” is stated interest that is unconditionally payable in cash or in property (other than debt instruments of the issuer), or that will be constructively received under Section 451 of the Code, at least annually at a single fixed rate (within the meaning of Treasury Regulation § 1.1273-1(c)(1)(iii)), as defined in Treasury Regulation § 1.1273-1(c). Special rules governing the treatment of original issue discount, acquisition premium, market discount or amortizable premium are described below. Original Issue Discount. If the issue price of the Series 2008B Bonds is less than the stated redemption price at maturity of such Series 2008B Bonds (the “Discount Bonds”) then such Series 2008B Bonds may be original issue discount obligations. Accordingly, as provided in the Code and the OID Regulations, the excess of the “stated redemption price at maturity” of each Discount Bond over its “issue price” (defined as the initial offering price to the public, excluding bond houses and brokers, at which a substantial amount of the Series 2008B Bonds have been sold) will be original issue discount. Except as 35 described below, Owners of Discount Bonds will have to include in gross income (irrespective of their method of accounting) a portion of such original issue discount for each year during which such Series 2008B Bonds are held, without regard to the time at which the cash to which such income is attributable will be received. The amount of original issue discount included in income for each year will be calculated under a constant yield to maturity formula that results in the allocation of less original issue discount to earlier years of the term of such Series 2008B Bonds and more original issue discount to the later years. The foregoing summary is based on the assumptions that (a) the Underwriter has purchased the Discount Bonds for contemporaneous sale to the general public and not for investment purposes, (b) all of the Discount Bonds have been offered, and a substantial amount of each maturity thereof has been sold to the general public in arm’s-length transactions for a cash price (and with no other consideration being included) equal to the initial offering prices thereof stated on the inside cover page of this Official Statement, and (c) the respective initial offering prices of the Discount Bonds to the general public are equal to the fair market value thereof. Neither the City nor Bond Counsel warrants that the Series 2008B Bonds will be offered and sold in accordance with such assumptions. Acquisition Premium. In the event that an Owner purchases a Series 2008B Bond at an acquisition premium (i.e., at a price in excess of its “adjusted issue price” but less than its stated redemption price at maturity), the amount includable in income in each taxable year as original issue discount is reduced by that portion of the acquisition premium properly allocable to such year. (For Series 2008B Bonds that are purchased at a price in excess of the stated redemption price at maturity, see the discussion below under the heading “Amortizable Premium.”) The adjusted issue price is defined as the sum of the issue price of the Series 2008B Bond and the aggregate amount of previously accrued original issue discount, less any prior payments of amounts included in its stated redemption price at maturity. Unless an Owner makes the accrual method election described below, acquisition premium is allocated on a pro rata basis to each accrual of original issue discount (i.e., to each six-month accrual period), so that the Owner is allowed to reduce each accrual of original issue discount by a constant fraction. Market Discount. An Owner who purchases a Series 2008B Bond at a “market discount” will be subject to provisions in the Code that convert certain capital gain on the redemption, sale, exchange or other disposition of the Series 2008B Bond into ordinary income. A Series 2008B Bond will have market discount to the extent the “revised issue price” of such Series 2008B Bond exceeds, by more than a de minimis amount, the Owner’s tax basis in the Series 2008B Bond immediately after the Owner acquires the Series 2008B Bond. The “revised issue price” generally equals the issue price of the Series 2008B Bond plus the amount of original issue discount (computed without regard to any “acquisition premium” described above) that had accrued on such Series 2008B Bond as of the date the Owner acquired the Series 2008B Bond and reduced by the stated interest previously paid with respect to such Series 2008B Bond as of such date. An Owner may elect to include market discount in income as it accrues, but such an election will apply to all market discount bonds or notes acquired by such Owner on or after the first day of the first taxable year to which such election applies and is revocable only with permission from the IRS. Unless a Series 2008B Bond Owner elects to include market discount in income as it accrues, any partial principal payments on, or any gain realized upon the sale, exchange, disposition, redemption or maturity of a Series 2008B Bond will be taxable as ordinary income to the extent any market discount has accrued on such Series 2008B Bond. Market discount on a Series 2008B Bond would accrue ratably each day between the date an Owner purchases the Series 2008B Bond and the date of maturity. In the alternative, an Owner irrevocably may elect to use a constant interest accrual method under which marginally less market discount would accrue in early years and marginally greater amounts would accrue in later years. If a Series 2008B Bond purchased with market discount is disposed of in a nontaxable transaction (other than a nonrecognition transaction described in Section 1276(d) of the Code), accrued market discount will be includable as ordinary income to the Owner as if such Owner had sold the Series 2008B Bond at its then fair market value. An Owner of a Series 2008B Bond that acquired it at a market discount and that does not elect to include market discount in income on a current basis also may be required to defer the 36 deduction for a portion of the interest expense on any indebtedness incurred or continued to purchase or carry the Series 2008B Bond until the deferred income is realized. Amortizable Premium. An Owner who purchases a Series 2008B Bond for any amount in excess of its principal amount, or in the case of a Discount Bond, its stated redemption price at maturity, will be treated as having premium with respect to such Series 2008B Bond in the amount of such excess. An Owner who purchases a Discount Bond at a premium is not required to include in income any original issue discount with respect to such Series 2008B Bond. If an Owner makes an election under Section 171(c)(2) of the Code to treat such premium as “amortizable bond premium,” the amount of interest that must be included in such Owner’s income for each accrual period will be reduced by the portion of the premium allocable to such period based on the Series 2008B Bond’s yield to maturity. If an Owner makes the election under Section 171(c)(2), the election also shall apply to all taxable bonds held by the Owner at the beginning of the first taxable year to which the election applies and to all such taxable bonds thereafter acquired by such Owner, and it is irrevocable without the consent of the IRS. If such an election under Section 171(c)(2) of the Code is not made, such an Owner must include the full amount of each interest payment in income in accordance with its regular method of accounting and will receive a tax benefit from the premium only in computing its gain or loss upon the sale of other disposition or retirement of the Series 2008B Bond. The existence of bond premium and the benefits associated with the amortization of bond premium vary with the facts and circumstances of each Owner. Accordingly, each Owner of a Series 2008B Bond should consult his own tax advisor concerning the existence of bond premium and the associated election. Accrual Method Election. Under the OID Regulations, an Owner who uses an accrual method of accounting would be permitted to elect to include in gross income its entire return on a Series 2008B Bond (i.e., the excess of all remaining payments to be received on the Series 2008B Bond over the amount paid for the Series 2008B Bond by such Owner) based on the compounding of interest at a constant rate. Such an election for a Series 2008B Bond with amortizable bond premium (or market discount) would result in a deemed election for all of the Owner’s debt instruments with amortizable bond premium (or market discount) and could be revoked only with the permission of the IRS with respect to debt instruments acquired after revocation. Disposition or Retirement. Upon the sale, exchange or other disposition of a Series 2008B Bond, or upon the retirement of a Series 2008B Bond (including by redemption), an Owner will recognize capital gain or loss equal to the difference, if any, between the amount realized upon the disposition or retirement (reduced by any amounts attributable to accrued but unpaid interest, which will be taxable as such) and the Owner’s adjusted tax basis in the Series 2008B Bond. Any such gain or loss will be United States source gain or loss for foreign tax credit purposes. The Series 2008B Bonds are subject to defeasance at any time prior to their stated maturities. If the City defeases any Series 2008B Bonds, such Series 2008B Bonds may be deemed to be retired and “reissued” for federal income tax purposes as a result of the defeasance. In such event, the Owner of a Series 2008B Bond would recognize a gain or loss on the Series 2008B Bond at the time of defeasance. An Owner’s tax basis for determining gain or loss on the disposition or retirement of a Series 2008B Bond will be the cost of such Series 2008B Bond to such Owner, increased by the amount of original issue discount and any market discount includable in such Owner’s gross income with respect to such Series 2008B Bond, and decreased by the amount of any payments under the Series 2008B Bond that are part of its stated redemption price at maturity (i.e., all stated interest payments with respect to the Series 2008B Bonds previously paid) and by the portion of any premium applied to reduce interest payments as described above. Such gain or loss will be capital gain or loss (except to the extent the gain represents accrued original issue discount or market discount on the Series 2008B Bond not previously included in gross income, to which extent such gain would be treated as ordinary income). Any capital gain or loss will be long-term capital gain or loss if at the time of disposition or retirement the Series 2008B Bond has been held for more than one year. The deductibility of capital losses is subject to limitations. 37 Information Reporting and Backup Withholding. Payments of interest and accruals of original issue discount (if any) on Series 2008B Bonds held of record by U.S. persons other than corporations and other exempt Owners must be reported to the IRS. Such information will be filed each year with the IRS on Form 1099, which will reflect the name, address, and taxpayer identification number of the Owner. A copy of Form 1099 will be sent to each Owner of a Series 2008B Bond for federal income tax reporting purposes. The amount of original issue discount required to be reported by the Bond Registrar may not be equal to the amount required to be reported as taxable income by an Owner of a Discount Certificate that acquired such Series 2008B Bond subsequent to its original issuance. Interest paid to an Owner of a Series 2008B Bond ordinarily will not be subject to withholding of federal income tax if such Owner is a U.S. person. Backup withholding of federal income tax at a rate of 28 percent (2007) may apply, however, to payments made in respect of the Series 2008B Bonds, as well as payments of proceeds from the sale of Series 2008B Bonds, to Owners who are not “exempt recipients” and who fail to provide certain identifying information. This withholding generally applies if the Owner of a Series 2008B Bond (who is not an exempt recipient) (i) fails to furnish such Owner’s social security number or other taxpayer identification number (“TIN”), (ii) furnishes an incorrect TIN, (iii) fails to properly report interest, dividends or other “reportable payments” as defined in the Code, or (iv) under certain circumstances, fails to provide a certified statement, signed under penalty of perjury, that the TIN provided is correct and that such Owner is not subject to backup withholding. Individuals generally are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients. To prevent backup withholding, each prospective Owner will be requested to complete an appropriate form. Any amounts withheld under the backup withholding rules from a payment to a person would be allowed as a refund or a credit against such person’s U.S. federal income tax, provided that the required information is furnished to the IRS. Furthermore, certain penalties may be imposed by the IRS on an Owner who is required to supply information but who does not do so in the proper manner. The federal tax discussion set forth above is included for general information only and may not be applicable depending upon an owner’s particular situation. Investors should consult their own tax advisors concerning the tax implications of holding and disposing of the Series 2008B Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not U.S. persons. Ratings As noted on the cover page of this Official Statement, City has received ratings for the Bonds from Standard & Poor’s, a division of The McGraw Hill Companies, Inc. and Fitch Ratings. Standard & Poor’s has assigned its rating of “AAA” and Fitch has assigned its rating of “AAA” and to the Bonds with the understanding that, upon delivery of the Bonds, the Financial Guaranty Insurance Policy will be issued by MBIA. Additionally, an underlying rating of “AA-” by Standard & Poor’s and “AA-“ by Fitch has been assigned to the Bonds. The ratings reflect only the views of the rating agencies and an explanation of the significance of the ratings may be obtained from the rating agencies. There is no assurance that the ratings will be retained for any given period of time or that the ratings will not be revised downward or withdrawn entirely by the rating agencies if, in their judgment, circumstances so warrant. Any such downward revision or withdrawal of the ratings will be likely to have an adverse effect on the market price of the Bonds. Continuing Disclosure Undertaking In accordance with Section (b)(5) of Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as the same may be amended from time to time (the “Rule”), the City has agreed in the Bond Ordinance for the benefit of the Bond Owners or Beneficial Owners of the Bonds to provide or cause to be provided to each NRMSIR and to the state information depository for the State of 38 Washington (if one is created) (“SID”), in each case as designated by the Securities and Exchange Commission (the “Commission”) in accordance with the Rule, the following annual financial information and operating data for the prior fiscal year (commencing in 2009 for the fiscal year ended December 31, 2008): (i) annual financial statements prepared in accordance with the generally accepted accounting principles applicable to governmental units, as such principles may be changed from time to time by the Washington State Auditor pursuant to RCW 43.09.200, 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”) (ii) a statement of authorized, issued and outstanding bonded debt secured by the Net Revenue;; (iii) debt service coverage ratios; (iv) general customer statistics for the Waterworks Utility contained in the final official statement for the Bonds under the heading “The Waterworks Utility;” and (v) a narrative explanation of the reasons for any amendments to this Section made during the previous fiscal year and the impact of such amendments on the Annual Financial Information being provided. The annual financial information shall be provided on or before the last day of the seventh month following the end of such prior fiscal year; provided, after the 1998 Bonds, 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding the City shall provide the following Annual Financial Information on or before the last day of the ninth month following the end of the prior fiscal year. The City’s current fiscal year ends December 31. The City may adjust such fiscal year by providing written notice of the change of fiscal year to each then existing NRMSIR and the SID, if any. In lieu of providing such Annual Financial Information, 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 provided as part of the annual financial information discussed above, the City shall provide the City’s audited 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 any. Material Events. The City agrees to provide or cause to be provided, in a timely manner, to the SID, if any, and to each NRMSIR notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Principal and interest payment delinquencies; (2) Non-payment related defaults; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions or events affecting the tax-exempt status of the Series 2008A Bonds; (7) Modifications to the rights of Bond owners; (8) Bond calls (optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34-238560); (9) Defeasances; (10) Release, substitution or sale of property, securing repayment of the Bonds; and (11) Rating changes. Solely for purposes of disclosure, and not intending to modify the undertaking, the City advises that there is no property securing repayment of the Bonds and that interest earned on the Series 2008B Bonds will not be excluded from gross income of the owners of the Series 2008B Bonds for federal income tax purposes. 39 Notification Upon Failure to Provide Financial Data. The City has agreed in the Bond Ordinance to provide or cause to be provided, in a timely manner, to each NRMSIR and to the SID, if any, notice of its failure to provide the annual financial information, as described above, on or prior to the date as set forth above. Termination/Modification. The City’s obligations to provide notices of material events shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. Any provision of this section shall be null and void if the City (1) obtains an opinion of nationally recognized bond counsel to the effect that the portion of the Rule that requires that provision is invalid, has been repealed retroactively or otherwise does not apply to the Bonds, and (2) notifies each NRMSIR and the SID, if any, of such opinion and the cancellation of this section. Bondowner’s Remedies Related to Continuing Disclosure Undertaking. A Bondowner’s or a Beneficial Owner’s right to enforce the provisions related to continuing disclosure undertaking shall be limited to a right to obtain specific enforcement of the City’s obligations related thereto, and any failure by the City to comply with the provisions of this undertaking shall not be an Event of Default with respect to the Bonds under the Bond Ordinance. For purposes of this section, “Beneficial Owner” means any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds, including persons holding Bonds through nominees or depositories. 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. DisclosureUSA. The City may elect to submit the information required to be filed with the NRMSIRs and the SID, if any, directly to DisclosureUSA.org unless or until the Commission withdraws its approval of this submission process. Prior Continuing Disclosure Undertakings of the City. The City entered into undertakings under the Rule with respect to its obligations issued after July 3, 1995 and is in compliance with its obligations thereunder. Legal and Underwriting Approval of Counsel Legal matters incident to the authorization, issuance and sale of the Bonds by the City are subject to the approving legal opinions of Bond Counsel. Forms of the opinions of Bond Counsel are attached hereto in Appendix B. Bond Counsel will be compensated only upon the issuance and sale of the Bonds. Bond Counsel will not offer an opinion on the Official Statement. Litigation There is no litigation pending or threatened questioning the validity of the Bonds nor the power and authority of the City to issue the Bonds. There is no litigation pending or threatened which would materially affect the finances of the City or affect the City’s ability to meet debt service requirements on the Bonds. Underwriting The Bonds are being purchased by Seattle-Northwest Securities Corporation, the Underwriter. The purchase contract provides that the Underwriter will purchase all of the Series 2008A Bonds, if any are purchased, at a price of 99.680534 percent of the par value of the Series 2008A Bonds. The Series 2008A Bonds will be reoffered at an average price of 100.243534 percent of the par value of the Series 2008A Bonds. After the initial public offering, the public offering prices may be varied from time to time. Additionally, the purchase contract provides that the Underwriter will purchase all of the Series 2008B Bonds, if any are purchased, at a price of 98.874796 percent of the par value of the Series 2008B Bonds. The Series 2008B Bonds will be reoffered at an average price of 99.437796 percent of the par value of the 40 Series 2008B Bonds. After the initial public offering, the public offering prices may be varied from time to time. Financial Advisor In connection with the authorization and issuance of the Bonds, the City has retained Piper Jaffray & Co., Seattle, Washington, as its financial advisor (the “Financial Advisor”). The Financial Advisor is not obligated to undertake, and has not undertaken, either to make an independent verification of or to assume responsibility for, the accuracy, completeness, or fairness of the information contained in this Official Statement. Concluding Statement So far as any statement herein includes matters of opinion, or estimates of future expenses and income, whether or not expressly so stated, they are intended merely as such and not as representations of fact. The information contained herein should not be construed as representing all conditions affecting the City or the Bonds. Additional information may be obtained from the City. The statements relating to the Bond Ordinance are in summarized form, and in all respects are subject to and qualified in their entirety by express reference to the provisions of such document in its complete form. The agreements of the City are set forth in such documents, and the information assembled herein is not to be construed as a contract with Owners of the Bonds. 41 This page left blank intentionally. 42 Appendix A Bond Ordinance This page left blank intentionally. CITY OF RENTON, WASHINGTON ORDINANCE NO. 5313 AN ORDINANCE of the City of Renton, Washington, authorizing the issuance of three series of water and sewer revenue bonds of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, in the aggregate principal amounts of not to exceed $10,000,000, $10,000,000 and $3,000,000, respectively; providing the form, terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle-Northwest Securities Corporation, Seattle, Washington. -i- ORDINANCE NO. 5313 TABLE OF CONTENTS Section 1. Definitions.................................................................................................................2 Section 2. Findings Regarding Parity Provisions and the Project ................................................9 Section 3. Authorization and Description of Bonds ....................................................................9 Section 4. Registration of Bonds and Book-Entry System ..........................................................9 Section 5. Payment of Bonds....................................................................................................12 Section 6. Redemption; Open Market Purchase of Bonds.........................................................12 Section 7. Notice of Redemption..............................................................................................13 Section 8. Failure to Redeem Bonds.........................................................................................14 Section 9. Form of Bonds.........................................................................................................14 Section 10. Execution of Bonds................................................................................................14 Section 11. Authentication and Delivery of Bonds by Bond Registrar ......................................14 Section 12. Lost, Stolen or Destroyed Bonds............................................................................15 Section 13. Creation of Fund....................................................................................................15 Section 14. Deposits into Funds ...............................................................................................15 Section 15. Rate Stabilization Fund..........................................................................................16 Section 16. Flow of Funds........................................................................................................16 Section 17. Pledge of Revenue and Lien Position.....................................................................17 Section 18. Findings Regarding Sufficiency of Revenue...........................................................17 Section 19. Covenants..............................................................................................................18 Section 20. Tax Covenants.......................................................................................................20 Section 21. Defeasance of the Bonds........................................................................................21 Section 22. Provision for Future Parity Bonds..........................................................................22 Section 23. Sale of Bonds.........................................................................................................24 Section 24. Delivery of Bonds; Temporary Bonds....................................................................25 Section 25. Application of Bond Proceeds................................................................................25 Section 26. Plan of Refunding..................................................................................................26 Section 27. Undertaking to Provide Continuing Disclosure ......................................................27 Section 28. Preliminary Official Statement...............................................................................30 Section 29. Amendments..........................................................................................................30 Section 30. Contract: Savings Clause .......................................................................................32 Section 31. General Authorization, Ratification of Prior Acts...................................................32 Section 32. Effective Date of Ordinance...................................................................................32 Exhibit A Project Description Exhibit B Form of Bonds ORDINANCE NO. 5313 AN ORDINANCE of the City of Renton, Washington, authorizing the issuance of three series of water and sewer revenue bonds of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, in the aggregate principal amounts of not to exceed $10,000,000, $10,000,000 and $3,000,000, respectively; providing the form, terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle-Northwest Securities Corporation, Seattle, Washington. WHEREAS, the City of Renton, Washington (the “City”) has heretofore created and operated a waterworks utility of the City, including the water, sewer, wastewater and storm drainage systems (defined herein as the “Waterworks Utility”); and WHEREAS, the City Council has determined that it is necessary and in the best interests of the City that certain improvements for the Waterworks Utility described in the Capital Improvement Program be made and there be adopted a system or plan of additions to and betterments and extensions of the Waterworks Utility; and WHEREAS, pursuant to chapter 35.92 RCW, the City is authorized to issue and sell, without an election, revenue bonds of the City to make additions, betterments or extensions to the Waterworks Utility; and WHEREAS, by Section XXIII of Ordinance No. 4709, the City also provided that it 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 City’s Water and Sewer Revenue Refunding Bonds, 1998 (the “1998 Bonds”) and any bonds issued thereafter if such additional bonds are issued in compliance with the conditions set forth therein; and WHEREAS, by Ordinance No. 4976, the City issued its Water and Sewer Revenue Bonds, 2002 (the “2002 Bonds”) on a parity of lien with the 1998 Bonds; and WHEREAS, by Ordinance No. 5019, as amended by Ordinance No. 5020, the City issued its Water and Sewer Revenue Refunding Bonds, 2003 (the “2003 Bonds”) on a parity of lien with the 1998 Bonds and the 2002 Bonds; and WHEREAS, by Ordinance No. 5098, the City issued its Water and Sewer Revenue Bonds, 2004 (the “2004 Bonds”) on a parity of lien with the 1998 Bonds, the 2002 Bonds, and the 2003 Bonds; and WHEREAS, Ordinance No. 4976 provides that the City may redeem the 2002 Bonds maturing on and after December 1, 2014 on and after December 1, 2012, in whole or in part, on any interest payment date at a price of par plus accrued interest, if any, to the date of redemption; and -2- WHEREAS, as a result of changed market conditions, it appears to the City Council that debt service savings may be obtained by refunding the 2002 Bonds maturing on and after December 1, 2014 (the “Refunded Bonds”) through the issuance of a series of water and sewer refunding bonds; and WHEREAS, the City Council has determined that it is in the best interests of the City to issue and sell three series of water and sewer revenue bonds on a parity of lien with the outstanding 1998 Bonds, 2002 Bonds, 2003 Bonds and 2004 Bonds; and WHEREAS, the first series of bonds shall be designated the City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007 and issued in the aggregate principal amount of not to exceed $10,000,000 (the “2007 Bonds”), for the purpose of providing part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility, to refund the Refunded Bonds, and to pay the costs of issuance and sale of the 2007 Bonds, as further provided in the sale resolution for the 2007 Bonds; and WHEREAS, the second and third series of bonds shall be designated the City of Renton, Washington Water and Sewer Bonds, Series 2008A and City of Renton, Washington Water and Sewer Bonds, Series 2008B (Taxable) and issued in the aggregate principal amounts of not to exceed $10,000,000 and $3,000,000, respectively (together, the “2008 Bonds”), for the purpose of providing part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility, to fulfill the Reserve Requirement and to pay the costs of issuance and sale of the 2008 Bonds, as further provided in the sale resolution for the 2008 Bonds; and WHEREAS, Seattle-Northwest Securities Corporation, Seattle, Washington, has offered to purchase the 2007 Bonds and the 2008 Bonds under the terms and conditions set forth herein and in the applicable sale resolution; 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: “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 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. -3- “Beneficial Owner” shall mean any person that has or shares the power, directly or indirectly to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries). “Bond Fund” shall mean that special fund of the City known as the Waterworks Revenue Bond Fund created by this ordinance for the payment of the principal of and interest on the Bonds. “Bond Register” means the registration books showing the name, address and tax identification number of each Registered Owner of the Bonds, maintained pursuant to Section 149(a) of the Code. “Bond Registrar” means the fiscal agency of the State of Washington, for the purposes of registering and authenticating the Bonds, maintaining the Bond Register, effecting transfer of ownership of the Bonds, and paying the principal of, premium, if any, and interest on the Bonds. “Bonds” shall mean the 2007 Bonds and the 2008 Bonds. “Capital Improvement Program” shall mean the plan of additions and betterments to the Waterworks Utility approved by the City in the 2007 City Budget adopted by the City Council pursuant to Ordinance No. 5245 adopted on December 11, 2006. “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 2007 Bonds or the 2008 Bonds, as applicable, by the City to the Underwriter and the payment therefor by the Underwriter. “Code” shall mean the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. “Coverage Requirement” shall mean in any calendar year 1.25 times the Maximum Annual Debt Service; provided, that once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, the term “Coverage Requirement” shall mean in any calendar year 1.25 times the Annual Debt Service for such year. “DTC” means The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York, as depository for the Bonds pursuant to this ordinance. “Escrow Agent” means U.S. Bank National Association, Seattle, Washington. “Escrow Agreement” means the Escrow Deposit Agreement to be dated as of the date of Closing of the 2007 Bonds authorized to be entered into pursuant to Section 26 of this ordinance. -4- “Fitch” means Fitch, Inc., organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such organization shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. “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. “Government Obligations” means those obligations now or hereafter defined as such in chapter 39.53 RCW. “Gross Revenue” 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. “Letter of Representations” shall mean the Blanket Issuer Letter of Representations from the City to DTC dated April 15, 1997. “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. “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. “Moody’s” means Moody’s Investors Service, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. -5- “MSRB” shall mean the Municipal Securities Rulemaking Board. “Net Proceeds,” when used with reference with the Bonds, means the principal amount of the Bonds, plus accrued interest and original issue premium, if any, and less original issue discount, if any. “Net Revenue” shall mean Gross Revenue less Maintenance and Operation Expense. “1998 Bonds” shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 1998. “NRMSIR” shall mean a nationally recognized municipal securities information repository designated by the SEC. “Outstanding” means, as of any particular time, all Parity Bonds issued theretofore except (a) Parity Bonds theretofore canceled by the Bond Registrar after purchase by the City in the open market or because of payment at, or redemption prior to, maturity; (b) Parity Bonds for which funds have been deposited into a trust account pursuant to the ordinances authorizing the issuance of the Parity Bonds, but only to the extent that the principal of and interest on such Parity Bonds are payable from such trust account; (c) temporary, mutilated, lost, stolen or destroyed Parity Bonds for which new Parity Bonds have been issued pursuant to the ordinance authorizing their issuance; and (d) Parity Bonds exchanged for new Parity Bonds pursuant to the ordinances authorizing their issuance. “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 2002 Bonds, the 2003 Bonds, the 2004 Bonds, the 2007 Bonds, the 2008 Bonds and any Future Parity Bonds. “Parity Bond Fund” shall mean any fund created for the payment and redemption of Parity Bonds. “Private Person” means any natural person engaged in a trade or business or any trust, estate, partnership, association, company or corporation. “Private Person Use” means the use of property in a trade or business by a Private Person if such use is other than as a member of the general public. Private Person Use includes ownership of the property by the Private Person as well as other arrangements that transfer to the Private Person the actual or beneficial use of the property (such as a lease, management or incentive payment contract or other special arrangement) in such a manner as to set the Private Person apart from the general public. Use of property as a member of the general public includes attendance by the Private Person at municipal meetings or business rental of property to the Private Person on a day-to-day basis if the rental paid by such Private Person is the same as the rental paid by any Private Person who desires to rent the property. Use of property by nonprofit community groups or community recreational groups is not treated as Private Person Use if such use is incidental to the governmental uses of property, the property is made available for such -6- use by all such community groups on an equal basis and such community groups are charged only a de minimis fee to cover custodial expenses. “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 additions, betterments or extensio ns to the Waterworks Utility described in the Capital Improvement Program, including, but not limited to, the capital improvements described in Exhibit A to this ordinance. “Project Fund” shall mean the Waterworks Utility Construction Fund previously created by the City, and the subaccounts contained therein, for the purpose of paying costs of the Project. “Purchase Agreement” shall mean the Bond Purchase Agreement for the 2007 Bonds or 2008 Bonds, as applicable, by and between the City and the Underwriter. “Qualified Insurance” means any non-cancelable municipal bond insurance policy or surety bond issued by any insurance company licensed to conduct an insurance business in any state of the United States (or by a service corporation acting on behalf of one or more such insurance companies) which insurance company or companies, as of the time of issuance of such policy or surety bond, are currently rated in one of the two highest Rating Categories by both Moody’s and S&P. “Qualified Letter of Credit” means any irrevocable letter of credit issued by a financial institution for the account of the City on behalf o f registered owners of the Bonds, which institution maintains an office, agency or branch in the United States and as of the time of issuance of such letter of credit, is currently rated in one of the two highest Rating Categories by either Moody’s or S&P. “Rate Stabilization Fund” shall mean the Waterworks Rate Stabilization Fund created by the City pursuant to Ordinance No. 4709. “Refunded Bonds” mean the 2002 Bonds maturing on and after December 1, 2014. “Refunding Account” means the account by that name established pursuant to Section 26 of this ordinance. “Registered Owner” means the person named as the registered owner of a Bond in the Bond Register. For so long as the Bonds are held in book-entry only form, DTC shall be deemed to be the sole Registered Owner. “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. -7- “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. “Reserve Requirement” shall mean the Maximum Annual Debt Service; provided, that once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, the term “Reserve Requirement” shall mean with respect to any issue of Parity Bonds, the lesser of (a) Maximum Annual Debt Service on all Outstanding Parity Bonds, and (b) 125% of average Annual Debt Service on all Outstanding Parity Bonds; provided, that the amount required to be deposited hereunder with respect to any Future Parity Bonds in order to meet the Reserve Requirement shall not exceed 10% of the net proceeds of such Future Parity Bonds under the Code. “Rule” shall mean SEC Rule 15c2-12. “S&P” means Standard & Poor’s, a Division of The McGraw Hill Companies, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. “Sale Resolution” means the resolutions of the City Council approving the sale of the 2007 Bonds or the 2008 Bonds, as applicable, in accordance with Section 23 of this ordinance. “SEC” shall mean the United States Securities and Exchange Commission. “SID” shall mean a state information depository for the State (if one is created). “State” shall mean the State of Washington. “Tax-Exempt Bonds” shall mean the 2007 Bonds and the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A authorized to be issued by this ordinance. “Taxable Bonds” shall mean the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) authorized to be issued by this ordinance. “Term Bonds” shall mean any 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. “2008 Bonds” shall mean the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A, and the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) authorized to be issued by this ordinance. -8- “2004 Bonds” shall mean the outstanding Water and Sewer Revenue Bonds, 2004. “2007 Bonds” shall mean the City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007, authorized to be issued by this ordinance. “2003 Bonds” shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 2003. “2002 Bonds” shall mean the outstanding Water and Sewer Revenue Bonds, 2002. “Underwriter” shall mean Seattle-Northwest Securities Corporation, Seattle, Washington. “Waterworks Utility” shall mean the combined water, sewer, wastewater and storm drainage systems of the City as the same may be added to, improved and extended for as long as any of the 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. Rules of Interpretation. In this ordinance, unless the context otherwise requires: (a) The terms “hereby,” “hereof,” “hereto,” “herein, “hereunder” and any similar terms, as used in this ordinance, refer to this ordinance as a whole and not to any particular article, section, subdivision or clause hereof, and the term “hereafter” shall mean after, and the term “heretofore” shall mean before, the date of this ordinance; (b) Words of the masculine gender shall mean and include correlative words of the feminine and neuter genders and words importing the singular number shall mean and include the plural number and vice versa; (c) Words importing persons shall include firms, associations, partnerships (including limited partnerships), trusts, corporations and other legal entities, including public bodies, as well as natural persons; (d) Any headings preceding the text of the several sections of this ordinance, and any table of contents or marginal notes appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this ordinance, nor shall they affect its meaning, construction or effect; (e) All references herein to “articles,” “sections” and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof; and (f) Words importing the singular number include the plural number and vice versa. -9- Section 2. Findings Regarding Parity Provisions and the Project. The City Council hereby finds that there is no deficiency in any Parity Bond Fund, that provisions hereinafter meet the conditions for the issuance of Future Parity Bonds as set forth in Section 23 of Ordinance No. 4709, Section 22 of Ordinance No. 4976, Section 20 of Ordinance No. 5019, as amended, and Section 22 of Ordinance No. 5098 and that there will be on file prior to the issuance and delivery of the Bonds a certificate of the City Finance Director that satisfies the conditions for such certificate as set forth in Ordinance Nos. 4709, 4976, 5019 and 5098. The City Council further finds that the additions, betterments or extensions to the Waterworks Utility, described in Exhibit A attached hereto (the “Project”), are consistent with the system or plan of additions to and betterments and extensions of the Waterworks Utility as described in the Capital Improvement Program. Therefore, the Bonds shall be issued on a parity of lien with the Parity Bonds. Section 3. Authorization and Description of Bonds. For the purpose of obtaining part of the funds necessary to carry out the Project and to refund the Refunded Bonds, the City shall issue the 2007 Bonds and the 2008 Bonds. The 2007 Bonds shall be designated “City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007” and shall be issued in the aggregate principal amount of not to exceed $10,000,000. The 2008 Bonds shall be designated the “City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A” and the “City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable)” in the aggregate principal amounts of not to exceed $10,000,000 and $3,000,000, respectively. The Bonds shall be dated as of their respective dates of initial issuance and delivery or such other date set forth in the applicable Sale Resolution; shall be issued in fully registered form in the denomination of $5,000 or any integral multiple thereof within a series, provided that no Bond shall represent more than one maturity of a series; shall be numbered separately and in such manner and with any additional designation as the Bond Registrar deems necessary for purposes of identification and control; shall bear interest (calculated based on a 360-day year of 12 30-day months) at the rates set forth in the applicable Sale Resolution, until the Bonds have been paid or their payment duly provided for, and shall mature on the dates in the years and amounts and shall bear interest from their date payable semiannually at the rates on the dates set forth in the applicable Sale Resolution. The Bonds shall be negotiable instruments to the extent provided by RCW 62A.8-105. Section 4. Registration of Bonds and Book-Entry System. (a) Registrar/Bond Register. The City hereby specifies and adopts the system of registration approved by the Washington State Finance Committee from time to time through the appointment of state fiscal agencies. The City shall cause a Bond Register to be maintained by the Bond Registrar. So long as any Bonds remain outstanding, the Bond Registrar shall make all necessary provisions to permit the exchange or registration or transfer of Bonds at its principal corporate trust office. The Bond Registrar may be removed at any time at the option of the City Finance Director upon prior notice to the Bond Registrar and a successor Registrar appointed by the City Finance Director. No resignation or removal of the Bond Registrar shall be effective -10- until a successor shall have been appointed and unt il the successor Registrar shall have accepted the duties of the Bond Registrar hereunder. (b) Registered Ownership. The City and the Bond Registrar, each in its discretion, may deem and treat the Registered Owner of each Bond as the absolute owner thereof for all purposes (except as provided in Section 24 of this ordinance), 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 Bond may be transferred as herein provided. All such payments made as described in Section 7 shall be valid and shall satisfy and discharge the liability of the City upon such Bond to the extent of the amount or amounts so paid. (c) DTC Acceptance/Letters of Representations. The Bonds initially shall be held in fully immobilized form by DTC acting as depository. To induce DTC to accept the Bonds as eligible for deposit at DTC, the City has executed and delivered to DTC a Blanket Issuer Letter of Representations. Neither the City nor the Bond Registrar will have any responsibility or obligation to DTC participants or the persons for whom they act as nominees (or any successor depository) with respect to the Bonds in respect of the accuracy of any records maintained by DTC (or any successor depository) or any DTC participant, the payment by DTC (or any successor depository) or any DTC participant of any amount in respect of the principal of or interest on Bonds, any notice which is permitted or required to be given to Registered Owners under this ordinance (except such notices as shall be required to be given by the City to the Bond Registrar or to DTC (or any successor depository)), or any consent given or other action taken by DTC (or any successor depository) as the Registered Owner. For so long as any Bonds are held in fully-immobilized form hereunder, DTC or its successor depository shall be deemed to be the Registered Owner for all purposes hereunder, and all references herein to the Registered Owners shall mean DTC (or any successor depository) or its nominee and shall not mean the owners of any beneficial interest in such Bonds. If any Bond shall be duly presented for payment and funds have not been duly provided by the City on such applicable date, then interest shall continue to accrue thereafter on the unpaid principal thereof at the rate stated on such Bond until it is paid. (d) Use of Depository. (i) The Bonds shall be registered initially in the name of “Cede & Co.”, as nominee of DTC, with one Bond maturing on each of the maturity dates for the Bonds in a denomination corresponding to the total principal therein designated to mature on such date. Registered ownership of such immobilized Bonds, or any portions thereof, may not thereafter be transferred except (A) to any successor of DTC or its nominee, provided that any such successor shall be qualified under any applicable laws to provide the service proposed to be provided by it; (B) to any substitute depository appointed by the City Finance Director pursuant to subsection (ii) below or such substitute depository’s successor; or (C) to any person as provided in subsection (iv) below. -11- (ii) 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 Finance Director to discontinue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the City Finance Director may hereafter 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. (iii) In the case of any transfer pursuant to clause (A) or (B) of subsection (i) above, the Bond Registrar shall, upon receipt of all outstanding Bonds, together with a written request of the City Finance Director, issue a single new Bond for each maturity then outstanding, registered in the name of such successor or such substitute depository, or their nominees, as the case may be, all as specified in such written request of the City Finance Director. (iv) In the event that (A) DTC or its successor (or substitute depository or its successor) resigns from its functions as depository, and no substitute depository can be obtained, or (B) the City Finance Director determines that it is in the best interest of the beneficial owners of the Bonds that such owners be able to obtain such bonds in the form of Bond certificates, the ownership of such Bonds may then be transferred to any person or entity as herein provided, and shall no longer be held in fully-immobilized form. The City Finance Director shall deliver a written request to the Bond Registrar, together with a supply of definitive Bonds, to issue Bonds as herein provided in any authorized denomination. Upon receipt by the Bond Registrar of all then outstanding Bonds together with a written request of the City Finance Director to the Bond Registrar, new Bonds shall be issued in the appropriate denominations and registered in the names of such persons as are requested in such written request. (e) Registration of Transfer of Ownership or Exchange; Change in Denominations. 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 transfer of any Bond may be registered and Bonds may be exchanged, but no transfer of any such Bond shall be valid unless it is surrendered to the Bond Registrar with the assignment form appearing on such Bond duly executed by the Registered Owner or such Registered Owner’s duly authorized agent in a manner satisfactory to the Bond Registrar. Upon such surrender, the Bond Registrar shall cancel the surrendered Bond and shall authenticate and deliver, without charge to the Registered Owner or transferee therefor, a new Bond (or Bonds at the option of the new Registered Owner) of the same date, maturity and interest rate and for the same aggregate principal amount in any authorized denomination, naming as Registered Owner the person or persons listed as the assignee on the assignment form appearing on the surrendered Bond, in exchange for such surrendered and cancelled Bond. Any Bond may be surrendered to the Bond Registrar and exchanged, without charge, for an equal aggregate principal amount of Bonds of the same date, maturity and interest rate, in any authorized denomination. The Bond Registrar shall not be obligated to register the transfer or to exchange any Bond during the 15 days preceding any interest payment or principal payment date any such Bond is to be redeemed. -12- (f) Registrar’s Ownership of Bonds. The Bond Registrar may become the Registered 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 member of, or in any other capacity with respect to, any committee formed to protect the right of the Registered Owners of Bonds. (g) Registration Covenant. The City covenants that, until all Bonds have been surrendered and canceled, it will maintain a system for recording the ownership of each Bond that complies with the provisions of Section 149 of the Code. 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. For so long as all Bonds are in fully immobilized form, payments of principal and interest thereon shall be made as provided in accordance with the operational arrangements of DTC referred to in the Letter of Representations. In the event that the Bonds are no longer in fully immobilized form, interest on the Bonds shall be paid by check or draft mailed to the Registered Owners at the addresses for such Registered Owners appearing on the Bond Register on the fifteenth day of the month preceding the interest payment date, or upon the written request of a Registered Owner of more than $100,000 of Bonds (received by the Bond Registrar at least 10 days prior to the applicable payment date), such payment shall be made by the Bond Registrar by wire transfer to the account within the continental United States designated by the Registered Owner. Principal of the Bonds shall be payable upon presentation and surrender of such Bonds by the Registered Owners at the principal office of the Bond Registrar. 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. Redemption; Open Market Purchase of Bonds. The City reserves the right to redeem the Bonds prior to their maturing as set forth in the applicable Sale Resolution. If less than all of the 2007 Bonds or 2008 Bonds subject to optional redemption are called for redemption, then the City shall choose the maturities of such series to be redeemed. The City reserves the right to designate certain maturities of the 2007 Bonds and/or the 2008 Bonds as term bonds (“Term Bonds”) in the applicable Sale Resolution, and, if not previously purchased by the City in the open market or optionally redeemed as provided in the applicable Sale Resolution, will be subject to mandatory sinking fund redemption prior to maturity, in part and by lot (in such manner as the Bond Registrar shall determine), at a price of par plus accrued interest to the date of redemption as provided in the applicable Sale Resolution. If the City shall optionally redeem Term Bonds or purchase Term Bonds in the open market, the par amount of the Term Bonds so redeemed or purchased (irrespective of their actual redemption or purchase prices) shall be credited against one or more scheduled mandatory redemption amounts for such Term Bonds (as allocated by the City) beginning not earlier than 60 days after the date of the optional redemption or purchase, and the City shall promptly notify the Bond Registrar in writing of the manner in which the credit for the Term Bonds so redeemed or purchased has been allocated. -13- Any Bond in the principal amount of greater than $5,000 may be partially redeemed in any integral multiple of $5,000. For as long as the Bonds are held in book-entry only form, the selection of particular Bonds within a maturity to be redeemed shall be made in accordance with the operational arrangements then in effect at DTC. If the Bonds are no longer held in uncertificated form, the selection of such Bonds to be redeemed and the surrender and reissuance thereof, as applicable, shall be made as provided in the following provisions of this paragraph. If the City redeems at any one time fewer than all of the Bonds having the same maturity date, the particular Bonds or portions of Bonds of such maturity to be redeemed shall be selected by lot (or in such manner determined by the Bond Registrar) in increments of $5,000. In the case of a Bond of a denomination greater than $5,000, the Cit y and Registrar shall treat each Bond as representing such number of separate Bonds each of the denomination of $5,000 as is obtained by dividing the actual principal amount of such Bond by $5,000. 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 therefore, 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 under this Section shall be canceled. Section 7. Notice of Redemption. For so long as the Bonds are held in uncertificated form, notice of redemption shall be given in accordance with the operational arrangements of DTC as then in effect, and neither the City nor the Bond Registrar will provide any notice of redemption to any Beneficial Owners. Thereafter, notice of redemption shall be given by or on behalf of the City not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the Owner of any Bond to be redeemed at the address appearing on the Bond Register on the day notice is mailed, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the Owner of any Bond. All official notices of redemption shall be dated and shall state: (A) the redemption date, (B) the redemption price, (C) if fewer than all outstanding Bonds are to be redeemed, the identification by maturity (and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed, (D) that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and (E) the place where such Bonds are to be surrendered for payment of the redemption price, which place of payment shall be the principal office of the Bond Registrar. 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. -14- In addition, further notice shall be given by the City as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption given hereunder shall contain the information required above for an official notice of redemption plus (A) the CUSIP numbers of all Bonds being redeemed; (B) the date of issue of the Bonds as originally issued; (C) the rate of interest borne by each Bond being redeemed; (D) the maturity date of each Bond being redeemed; and (E) any other descriptive information needed to identify accurately the Bonds being redeemed. Each further notice of redemption may be sent at least 35 days before the redemption date to the Bond Insurer, if any, to party entitled to receive notice pursuant to Section 27, and to such persons (including securities repositories who customarily at the time receive notices of redemption in accordance with rules promulgated by the SEC) and with such additional information as the City shall deem appropriate, but such mailings shall not be a condition precedent to the redemption of such Bonds. 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 in substantially the form set forth in Exhibit B attached hereto. 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, this ordinance and the applicable Sale Resolution. 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 -15- 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. Lost, Stolen or Destroyed Bonds. In case any Bonds shall be lost, stolen or destroyed, the Bond Registrar may authenticate and deliver a new Bond or Bonds of like amount, date and tenor to the Owner thereof upon the Owner’s paying the expenses and charges of the Bond Registrar and the City in connection therewith and upon his filing with the Bond Registrar and the City evidence satisfactory to both that such Bond or Bonds were actually lost, stolen or destroyed and of his ownership thereof, and upon furnishing the City and the Registrar with indemnity satisfactory to both. Section 13. Creation of Fund. There is hereby created in the City Treasury the Waterworks Revenue Bond Fund (the “Bond Fund”), which shall be a subaccount of the Waterworks Utility Fund. Section 14. Deposits into Funds. The Bond Fund shall be maintained for the purpose of paying the principal of and interest on the Bonds. As long as any Bond remains outstanding, the City hereby irrevocably obligates and binds itself to set aside and pay from the Waterworks Utility Fund into the Bond Fund those amounts necessary, together with such other funds as are on hand and available in the Bond Fund, to pay the interest or principal and interest next coming due on outstanding Bonds. Such payments from the Waterworks Utility Fund to the Bond Fund shall be made in a fixed amount without regard to any fixed proportion following the closing and delivery of the Bonds on or before each date on which an installment of interest or principal and interest falls due on the Bonds equal to the installment of interest or principal and interest. There has heretofore been created by the City a special fund of the City known as the Waterworks Revenue Bond Reserve Fund (the “Reserve Fund”) for purpose of securing the payment of the principal of and interest on all bonds to which Net Revenue is pledged. The City hereby irrevocably covenants and agrees that on or prior to the date of issuance of the Bonds, the amount on deposit in the Reserve Fund will be at least equal to the Reserve Requirement for the Parity Bonds. The City shall satisfy the Reserve Requirement to the extent necessary upon the issuance of the 2007 Bonds and the 2008 Bonds by depositing proceeds of such Bonds or other funds available therefor into the Reserve Fund or by obtaining Reserve Insurance. 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 redeemed or otherwise defeased any Outstanding Parity Bonds. 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 -16- Reserve Fund by the withdrawal of cash therefrom for that purpose and after all cash has been depleted, then by draws on the Alternate Security or Reserve Insurance 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 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, the City also may transfer out of the Bond Fund or Reserve Fund any money required in order to prevent any Parity Bonds from becoming “arbitrage bonds” under the Code. 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 15. Rate Stabilization Fund. The City has previously created a Waterworks Rate Stabilization Fund (the “Rate Stabilization Fund”). The City may, at any time, as determined by the City and as consistent with Section 16 of this ordinance, deposit Gross Revenue into 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 in Gross Revenue for any fiscal year of the City. 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 will be made into the Rate Stabilization Fund to the extent that such deposit would prevent the City from meeting the Coverage Requirement. Section 16. Flow of Funds. Gross Revenue on deposit 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; -17- (b) To pay the interest on the Parity Bonds, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (c) To pay the principal of the Parity Bonds, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (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 Fund, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (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 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, to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. Section 17. Pledge of Revenue and Lien Position. 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 to permit the sett ing aside in 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 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 Parity Bonds, -18- and the City has not bound and obligated itself to set aside and pay into 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 currently outstanding Parity 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 Parity Bonds. Section 19. Covenants. The City covenants and agrees with the Owner of each Bond at any time outstanding as follows: (a) Rate Covenant. 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) Maintenance and Repair. 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) Disposal of Waterworks Utility. It will not sell, lease, mortgage or in any manner encumber 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 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 -19- 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) Books and Records. 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) No Free Service. Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish or supply or permit the furnishing or supplying of any service or facility in connection with the 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) Insurance. 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. -20- (g) Maintenance and Operation Expense. It will pay all Maintenance and Operation Expense and the debt service requirements for the outstanding Parity Bonds, and otherwise meet the obligations of the City as herein set forth. Section 20. Tax Covenants. The City covenants that it will not take or permit to be taken on its behalf any action that would adversely affect the exemption from federal income taxation of the interest on the Tax-Exempt Bonds and will take or require to be taken such acts as may reasonably be within its ability and as may from time to time be required under applicable law to continue the exemption from federal income taxation of the interest on the Tax-Exempt Bonds. (a) Arbitrage Covenant. Without limiting the generality of the foregoing, the City covenants that it will not take any action or fail to take any action with respect to the proceeds of sale of the Tax-Exempt Bonds or any other funds of the City which may be deemed to be proceeds of the Tax-Exempt Bonds pursuant to Sectio n 148 of the Code and the regulations promulgated thereunder which, if such use had been reasonably expected on the date of delivery of the Tax-Exempt Bonds to the initial purchasers thereof, would have caused the Tax-Exempt Bonds as “arbitrage bonds” within the meaning of such term as used in Section 148 of the Code. The City represents that it has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is an issuer whose arbitrage certifications may not be relied upon. The City will comply with the requirements of Section 148 of the Code and the applicable regulations thereunder throughout the term of the Tax-Exempt Bonds. (b) Private Person Use Limitation for Bonds. The City covenants that for as long as the Tax-Exempt Bonds are outstanding, it will not permit: (1) More than 10% of the Net Proceeds of the Tax-Exempt Bonds to be used for any Private Person Use; and (2) More than 10% of the principal or interest payments on the Tax-Exempt Bonds in a bond year to be directly or indirectly: (A) secured by any interest in property used or to be used for any Private Person Use or secured by payments in respect of property used or to be used for any Private Person Use, or (B) derived from payments (whether or not made to the City) in respect of property, or borrowed money, used or to be used for any Private Person Use. The City further covenants that, if: (3) More than five percent of the Net Proceeds of the Tax-Exempt Bonds are to be used for any Private Person Use; and (4) More than five percent of the principal or interest payments on the Tax- Exempt Bonds in a bond year are (under the terms of this ordinance or any underlying arrangement) directly or indirectly: (A) secured by any interest in property used or to be used for any Private Person Use or secured by payments in respect of property used or to be used for any Private Person Use, or -21- (B) derived from payments (whether or not made to the City) in respect of property, or borrowed money, used or to be used for any Private Person Use, then, (i) any Private Person Use of the projects described in subsection (3) hereof or Private Person Use payments described in subsection (4) hereof that is in excess of the five percent limitations described in such subsections (3) or (4) will be for a Private Person Use that is related to the state or local governmental use of the Project, and (ii) any Private Person Use will not exceed the amount of Net Proceeds of the Tax-Exempt Bonds used for the state or local governmental use portion of the project to which the Private Person Use of such portion of the Project relates. The City further covenants that it will comply with any limitations on the use of the projects by other than state and local governmental users that are necessary, in the opinion of its bond counsel, to preserve the tax exemption of the interest on the Tax-Exempt Bonds. (c) Modification of Tax Covenants. The covenants of this Section are specified solely to assure the continued exemption from regular income taxation of the interest on the Tax- Exempt Bonds. To that end, the provisions of this Section may be modified or eliminated without any requirement for formal amendment thereof upon receipt of an opinion of the City’s bond counsel that such modification or elimination will not adversely affect the tax exemption of interest on any Tax-Exempt Bonds. (d) Qualified Tax-Exempt Obligation. The City hereby designates the Tax-Exempt Bonds as “qualified tax-exempt obligations” under Section 265(b)(3) of the Code for banks, thrift institutions and other financial institutions. The City does not anticipate that it will issue more than $10,000,000 in qualified tax-exempt obligations during 2007 or 2008, respectively. 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 Governmental Obligations 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 -22- Bonds to any lawful purposes as it shall determine, subject only to the rights, if any, of the owners of any other Parity 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 Governmental Obligations pending the prior redemption of the defeased Bonds and if such refunding plan also provides that certain cash and/or Governmental Obligations 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. Within 45 days of any defeasance of Bonds, the City shall provide notice of defeasance of Bonds to Registered Owners of Bonds being defeased, and to the Bond Insurer, if any, and to each party entitled to receive notice in accordance with Section 27. Section 22. Provision for Future Parity Bonds. 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. After the 1998 Bonds, the 2002 Bonds, and the 2003 Bonds are no longer Outstanding, this subsection shall be amended to read as follows: (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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security either on or prior to the date of issuance of such Future Parity Bonds or within three years from the date of issuance of the Future Parity Bonds in three approximately equal annual payments and in such event, the ordinance providing for the issuance of such Future Parity Bonds shall provide for such deposit. -23- After the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this subsection shall be amended to read as follows: (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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security on or prior to the date of issuance of such Future Parity Bonds. (d) 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. (e) There shall be on file with 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 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this Section shall be amended to read as follows: a certificate of the City Finance Director demonstrating that during any 12 consecutive calendar months out of the immediately preceding 24 calendar months Net Revenue, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least 1.25 times the Maximum Annual Debt Service 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, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this Section shall be amended to read as follows: 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 24 calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued. 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; -24- (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 t he 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. Sale of Bonds. The City Finance Director is hereby authorized to enter into negotiations with the Underwriter for the sale of the 2007 Bonds and the 2008 Bonds on terms consistent with the terms of this ordinance. The City Council shall by the applicable Sale Resolution approve a Purchase Agreement for the purchase and sale of the 2007 Bonds and the 2008 Bonds, approve the terms of the 2007 Bonds and the 2008 Bonds (including the schedule of maturities, interest rates, redemption times and prices), and may approve the purchase of bond -25- insurance pursuant to a recommendation of the City Finance Director. The City Finance Director is hereby authorized to enter into negotiations with potential bond insurers to provide a bond insurance policy guaranteeing the payment when due of principal of and interest on the 2007 Bonds and/or the 2008 Bonds. Section 24. 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 as of their respective Closing to the Underwriter, including, but not limited to, the final official statement pertaining to the 2007 Bonds and the 2008 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 Underwriter, each without unreasonable delay. If definitive Bonds are not ready for delivery by the date of the applicable Closing agreed to by the City and the Underwriter, the City, upon the approval of the Underwriter, may cause to be issued and delivered to the Underwriter 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 25. Application of Bond Proceeds. The accrued interest, if any, received by the City at the Closing of the 2007 Bonds and the 2008 Bonds shall be deposited into the Bond Fund and shall be applied to the payment of interest first coming due on the 2007 Bonds or the 2008 Bonds, as applicable. The remaining proceeds of the sale of the 2007 Bonds and the 2008 Bonds, less the underwriter’s discount and the bond insurance premium to be paid by the Underwriter on behalf of the City or any other costs of issuance, if any, plus the original issue premium, if any, shall be applied, upon receipt after each Closing, as follows: (a) the amount required to meet the Reserve Requirement for the 2007 Bonds, if any, or the 2008 Bonds, if any, shall be deposited into the Reserve Fund or used to acquire Qualified Insurance, (b) the proceeds of sale of the 2007 Bonds necessary to refund the Refunded Bonds shall be deposited into the Refunding Account, (c) the remaining proceeds of the Tax-Exempt Bonds shall be deposited into the tax- exempt bond subaccount hereby authorized to be created in the Project Fund (the “Tax-Exempt Subaccount”) to pay part of the costs of the Project, and (d) the proceeds of the Taxable Bonds shall be deposited into the taxable bond subaccount hereby authorized to be created in the Project Fund (the “Taxable Subaccount”) to pay part of the costs of the Project. -26- Except as provided by the Code and Section 20 of this ordinance, the interest and profits derived from the investment of Bond proceeds shall be deposited in the applicable Tax-Exempt or Taxable Subaccount created within the Project Fund and applied as described in the preceding paragraph. Except as provided by the Code and Section 20 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 and subject to the requirements of the Code and Section 20 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 26. Plan of Refunding. (a) Refunding Plan. For the purpose of realizing a debt service savings, the City Council proposes to issue refunding bonds for the purpose of providing for the payment of the principal of and interest on and the redemption price of the Refunded Bonds on December 1, 2012 (the “Refunding Plan”). (b) Refunding Account. There is created an account known as the “2002 Bond Refunding Account” (the “Refunding Account”) to be held by the Escrow Agent, which account is to be drawn upon for the sole purpose of paying the principal of and interest on the Refunded Bonds until their date of redemption and of paying costs related to the refunding of these bonds. The proceeds of sale of the 2007 Bonds necessary to refund the Refunded Bonds shall be credited to the Refunding Account. Money in the Refunding Account shall be used immediately upon receipt to defease the Refunded Bonds as authorized by this ordinance and Ordinance No. 4976 and to pay costs of issuance for the 2007 Bonds. The City shall defease the Refunded Bonds and discharge such obligations by the use of money in the Refunding Account to purchase certain Government Obligations (which obligations so purchased, are herein called “Acquired Obligations”), bearing such interest and maturing as to principal and interest in such amounts and at such times which, together with any necessary beginning cash balance, will provide for the payment of: (i) interest on the Refunded Bonds to and including December 1, 2012; (ii) the redemption price of the Refunded Bonds (100% of the principal amount thereof) on December 1, 2012; Such Acquired Obligations shall be purchased at a yield not greater than the yield permitted by the Code and regulations relating to acquired obligations in connection with refunding bond issues. -27- (c) Escrow Agent/Escrow Agreement. To carry out the refunding and defeasance of the Refunded Bonds, the City hereby appoints U.S. Bank National Association as escrow agent (the “Escrow Agent”). A beginning cash balance, if any, and Acquired Obligations shall be deposited irrevocably with the Escrow Agent in an amount sufficient to defease the Refunded Bonds. The proceeds of the 2007 Bonds remaining in the Refunding Account after acquisition of the Acquired Obligations and provision for the necessary beginning cash balance shall be utilized to pay expenses of the acquisition and safekeeping of the Acquired Obligations and expenses of the issuance of the 2007 Bonds. In order to carry out the purposes of this Section, the Mayor, the City Finance Director and other appropriate officers of the City are authorized and directed to execute and deliver to the Escrow Agent, an Escrow Deposit Agreement, substantially in the form on file with the City. (d) Implementation of Refunding Plan. The City hereby irrevocably sets aside sufficient funds out of the purchase of Acquired Obligations from proceeds of the Refunded Bonds to make the payments described in subsection (b) of this Section. The City hereby irrevocably calls the Refunded Bonds for redemption on December 1, 2012 in accordance with the provisions of Ordinance No. 4976 authorizing the redemption and retirement of the Refunded Bonds prior to their fixed maturities. Said call for redemption of the Refunded Bonds shall be irrevocable after the final establishment of the escrow account and delivery of the Acquired Obligations to the Escrow Agent. The Escrow Agent is hereby authorized and directed to provide for the giving of notices of the redemption of the Refunded Bonds in accordance with the applicable provisions of Ordinance No. 4976. The City Finance Director is authorized and requested to provide whatever assistance is necessary to accomplish such redemption and the giving of notices therefor. The costs of publication of such notices shall be an expense of the City. The Escrow Agent is hereby authorized and directed to pay to the Bond Registrar, sums sufficient to pay, when due, the payments specified in of subsection (a) of this Section. All such sums shall be paid from the money and Acquired Obligations deposited with said Escrow Agent pursuant to the previous section of this ordinance, and the income therefrom and proceeds thereof. All such sums so paid to said Bond Registrar shall be credited to the Refunding Account. All money and Acquired Obligations deposited with the bank and any income therefrom shall be held, invested (but only at the direction of the City Finance Director) and applied in accordance with the provisions of this ordinance and with the laws of the State of Washington for the benefit of the City and owners of the Refunded Bonds. The City will take such actions as are found necessary to ensure that all necessary and proper fees, compensation and expenses of the Escrow Agent for the Refunded Bonds shall be paid when due. 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. -28- The City hereby agrees to provide or cause to be provided to each then existing NRMSIR and to the SID, if one is created, in each case as designated by the SEC, the following annual financial information and operating data (collectively, the “Annual Financial Information”) for each prior fiscal year, commencing in 2008 with the calendar year ending December 31, 2007 with respect to the 2007 Bonds, and commencing in 2008 with the calendar year ending December 31, 2008 with respect to the 2008 Bonds: (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 by the Washington State Auditor pursuant to RCW 43.09.200, 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 Net Revenue; (c) Debt service coverage ratios; (d) General customer statistics for the Waterworks Utility contained in the final official statement for the Bonds under the heading “The Waterworks Utility—Number of Water Customers,” “—Water Billing,” “—Number of Wastewater Customers,” “—Wastewater Billing,” “—Number of Storm Drainage Customers,” and “—Storm Drainage Billing” and (e) A narrative explanation of the reasons for any amendments to this Section made during the previous fiscal year and-the impact of such amendments on the Annual Financial Information being provided. The Annual Financial Information shall be provided on or before the last day of the seventh month following the end of such prior fiscal year; provided, after the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding the City shall provide the following Annual Financial Information on or before the last day of the ninth month following the end of the prior fiscal year. The City’s current fiscal year ends December 31. The City may adjust such fiscal year by providing written notice of the change of fiscal year to each then existing NRMSIR and the SID, if any. In lieu of providing such Annual Financial Information, 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 any. The City further agrees to provide or cause to be provided, in a timely manner, to the SID, if any, and to each then existing NRMSIR, notice of any of the following events with respect to the Bonds, if material: 1. Principal and interest payment delinquencies; -29- 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 Tax-Exempt Bonds; 7. Modifications to rights of the Owners of the Bonds; 8. Bond calls (optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34-23856); 9. Defeasances of the Bonds; 10. Release, substitution or sale of property securing repayment of the Bonds; and 11. Rating changes. Solely for purposes of disclosure, and not intending to modify this undertaking, the City advises that there is no property securing repayment of the Bonds and that interest earned on the Taxable Bonds will not be excluded from gross income of the owners of the Taxable Bonds for federal income tax purposes. The City also agrees to provide or cause to be provided, in a timely manner, to the SID, if any, and to each then existing NRMSIR, notice of its failure to provide the Annual Financial Information for the prior fiscal year on or before the date set forth above. 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 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 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 -30- this Section 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 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 shall be limited to the right to obtain specific enforcement of the City’s obligations under this Section, 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. The City may elect to submit the information required by this Section to be filed with the NRMSIRs and the SID, if any, directly to DisclosureUSA.org unless or until the SEC withdraws its approval of this submission process. Section 28. Preliminary Official Statement. The City authorizes the City Finance Director to approve preliminary official statements for the 2007 Bonds and the 2008 Bonds and authorizes the distribution of such preliminary official statements in connection with the offering of the 2007 Bonds and 2008 Bonds. Pursuant to the Rule, the City Finance Director may deem the preliminary official statements as final as of their respective dates except for the omission of information dependent upon the pricing of the applicable series of Bonds and the completion of the applicable Bond Purchase Agreement. The City agrees to cooperate with the Underwriter to deliver or cause to be delivered, within seven business days from the date of the sale of the 2007 Bonds and the 2008 Bonds, as applicable, copies of a final official statement in sufficient quantity to comply with paragraph (b)(4) of the Rule and the rules of the MSRB. Following the sale of the 2007 Bonds and the 2008 Bonds in accordance with this ordinance, the City authorizes the use the final official statements, substantially in the form of the applicable preliminary official statements, in connection with the sale of the 2007 Bonds and 2008 Bonds. The City Finance Director is hereby authorized to review and approve on behalf of the City the final Official Statements for the Bonds with such additions and changes as may be deemed necessary or advisable. Section 29. Amendments. (a) The City Council from time to time and at any time may pass an ordinance or ordinances supplemental hereof, which ordinance or ordinances thereafter shall become a part of this ordinance, for any one or more or all of the following purposes: (1) To add to the covenants and agreements of the City in this ordinance, other covenants and agreements thereafter to be observed, which shall not adversely affect the interests of the owners of any Bonds, or to surrender any right or power herein reserved. (2) To make such provisions for the purpose of curing any ambiguities or of curing, correcting or supplementing any defective provision contained in this ordinance in regard to matters or questions arising under such ordinances as the City Council may deem necessary or -31- desirable and not inconsistent with such ordinances and which shall not adversely affect, in any material respect, the interest of the owners of Bonds. In any such supplemental ordinance may be adopted without the consent of the owners of any Bonds at any time outstanding, notwithstanding any of the provisions of subsection (b) of this section. (b) With the consent of the owners of not less than sixty-five percent (65%) in aggregate principal amount of the Bonds at the time outstanding, the City Council may pass an ordinance or ordinances supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this ordinance or of any supplemental ordinance; provided, however, that no such supplemental ordinance shall: (1) Extend the fixed maturity of any Bonds, or reduce the rate of interest thereon, or extend the time of payment of interest from their due date, or reduce the amount of the principal thereof, or reduce any premium payable on the redemption thereof, without the consent of the Owner of each Bond so affected; or (2) Reduce the aforesaid percentage of Bondowners required to approve any such supplemental ordinance, without the consent of the owners of all of the Bonds then outstanding. It shall not be necessary for the consent of Bondowners under this subsection (b) to approve the particular form of any proposed supplemental ordinance, but it shall be sufficient if such consent shall approve the substance thereof. For the purpose of consenting to amendments under this subsection (b), the Insurer shall be deemed to be the sole Registered Owner of the Bonds then outstanding. (c) Upon the adoption of any supplemental ordinance pursuant to the provisions of this Section, this ordinance shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations of the City under this ordinance and all owners of Bonds outstanding hereunder shall thereafter be determined, exercised and enforced thereunder, subject in all respects to such modifications and amendments, and all terms and conditions of any such supplemental ordinance shall be deemed to be part of the terms and conditions of this ordinance for any and all purposes. (d) Bonds executed and delivered after the execution of any supplemental ordinance passed pursuant to the provisions of this section may have a notation as to any matter provided for in such supplemental ordinance, and if such supplemental ordinance shall so provide, new Bonds so modified as to conform, in the opinion of the City Council, to any modification of this ordinance contained in any such supplemental ordinance, may be prepared and delivered without cost to the owners of any affected Bonds then outstanding, upon surrender for cancellation of such Bonds in equal aggregate principal amounts. (e) Exclusion of Bonds Owned by City. Bonds owned or held by or for the account of the City shall not be deemed outstanding for the purpose of any vote or consent or other action or any calculation of outstanding Bonds in this ordinance provided for, and shall not be entitled to vote or consent or take any other action in this ordinance provided for. -32- (f) Bonds Held by Securities Repositories. For so long as the Bonds are held in book entry only form, communications with the owners shall be made with the securities depository who is the “Registered Owner” of the Bonds and communications with (and obtaining consents from) beneficial owners shall be made in accordance with the operational procedures of the securities depository that is the “Registered Owner” of the Bonds. Section 30. Contract: Savings Clause. The covenants contained in this ordinance and in the Bonds shall constitute a contract between the City and the Owner of each and every Bond. If any one or more of the covenants or agreements provided in this ordinance to be performed on the part of the City shall be declared by any court of competent jurisdiction and after final appeal (if any appeal be taken) to be contrary to law, then such covenant or covenants, agreement or agreements, shall be null and void and shall be deemed separable from the remaining covenants and agreements in this ordinance and shall in no way affect the validity of the other provisions of this ordinance or of the Bonds. Section 31. General Authorization; Ratification of Prior Acts. The Mayor, the City Finance Director and other appropriate officers of the City are authorized to take any actions and to execute documents as in their judgment may be necessary or desirable in order to carry out the terms of, and complete the transactions contemplated by, this ordinance. All acts taken pursuant to the authority of this ordinance but prior to its effective date are hereby ratified. Section 32. Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval and five days after publication. PASSED by the City Council this 22nd day of October, 2007. Bonnie Walton, City Clerk APPROVED BY THE MAYOR this 22nd day of October, 2007. Kathy Keolker, Mayor Approved as to Form: Bond Counsel Date of Publication: _________________________ A-1 EXHIBIT A Project Description Proceeds of the Bonds are expected to be used for the following Projects: • Renton Village Storm System Improvement – planning, designing and constructing a storm system to increase capacity. • Gypsy Basin/Ripley Lane Storm System Improvement – replacing an existing culvert which will connect into a 60-inch storm system on the new Seahawks headquarters/training facility site. • SW 34th Street Culvert Replacement – replacing existing culvert to improve conveyance activity, reduce upstream flooding and improve fish passage. • Hazen 565 Zone Reservoir – designing and constructing a 4.2 million gallon reservoir. • Emergency Power to Pump Stations – installing emergency electrical power generation facilities. • Summerwind/Stongate Lift Station Replacement – constructing a new station to ensure sufficient capacity in a rapidly growing area. • Central Plateau Interceptor Phase 2 – constructing an interceptor to serve eastern portion of service area. B-1 EXHIBIT B Form of Bonds The Bonds shall be in substantially the following form: UNITED STATES OF AMERICA [Statement of Insurance] No. _____ STATE OF WASHINGTON CITY OF RENTON WATER AND SEWER REVENUE [AND REFUNDING] BOND, [SERIES][2007/2008] [A/B][(TAXABLE)] INTEREST RATE: MATURITY DATE: CUSIP NO.: REGISTERED OWNER: CEDE & Co. PRINCIPAL AMOUNT: The City of Renton, Washington, a municipal corporation organized and existing under and by virtue of the laws of the State of Washington (herein called the “City”) hereby acknowledges itself to owe and for value received promises to pay, but only from the sources and as hereinafter provided, to the Registered Owner identified above, or registered assigns, on the Maturity Date identified above, the Principal Amount indicated above and to pay interest thereon from the date of delivery, or the most recent date to which interest has been paid or duly provided for, at the Interest Rate set forth above, payable on _______, 20__, and semiannually thereafter on the first days of each December and June until such principal sum is paid or payment has been duly provided for. Both principal of and interest on this bond are payable in lawful money of the United States of America. Interest and principal shall be paid as provided in the Blanket Issuer Letter of Representations (the “Letter of Representations”) by the City to The Depository Trust Company (“DTC”). The fiscal agency of the State of Washington has been appointed by the City as the authenticating agent, paying agent and registrar for the bonds of this issue (the “Bond Registrar”). Capitalized terms used in this bond that are not specifically defined have the meanings given such terms in Ordinance No. 5313 of the City adopted on October 22, 2007 and Resolution No. ____ of the City adopted on __________, 20__ (together, the “Bond Ordinance”). Reference is made to the Bond Ordinance and any and all modifications and amendments thereto for a description of the nature and extent of the security for the bonds of this issue, the funds or revenues pledged, and the terms and conditions upon which such bonds are issued. B-2 This bond is one of an authorized issue of bonds of the City of like date and tenor except as to number, amount, rate of interest and date of maturity in the aggregate principal amount of $_________. This issue of bonds is authorized by the Bond Ordinance for the purposes of providing money to pay part of the cost of construction and acquisition of certain improvements to the Waterworks Utility[, refund certain outstanding water and sewer revenue bonds of the City], fund the Reserve Fund, and to pay costs of issuance of the bonds of this issue, all as specified in the Bond Ordinance. [Simultaneously with the issuance of this bond, the City is also issuing its Water and Sewer Revenue Bonds, Series 2008[A/B][(Taxable)] for the purposes specified in the Bond Ordinance.] This bond and the bonds of this issue are payable solely from the special funds of the City defined as the “Bond Fund” and the “Reserve Fund” in the Bond Ordinance. The City has irrevocably obligated and bound itself to pay into the Bond Fund out of the Net Revenue or from such other moneys as may be provided therefor certain amounts necessary to pay and secure the payment of the principal and interest on such bonds. The bonds of this issue are not general obligations of the City. [The bonds of this issue are not “private activity bonds” as such term is defined in the Internal Revenue Code of 1986, as amended (the “Code”). The bonds of this issue have been designated by the City as “qualified tax-exempt obligations” under Section 265(b) of the Code.] The bonds of this issue are issued under and in accordance with the provisions of the Constitution and applicable statutes of the State of Washington and duly adopted ordinances of the City. The City hereby covenants and agrees with the owner of this bond that it will keep and perform all the covenants of this bond and of the Bond Ordinance to be by it kept and performed, and reference is hereby made to the Bond Ordinance for a complete statement of such covenants. The City does hereby pledge and bind itself to set aside from the Waterworks Utility Fund out of the revenue of the Waterworks Utility and to pay into the Bond Fund and the Reserve Fund the various amounts required by the Bond Ordinance to be paid into and maintained in such Funds, all within the times provided by the Bond Ordinance. To the extent more particularly provided by the Bond Ordinance, the amounts so pledged to be paid from the Waterworks Utility Fund out of the revenue of the Waterworks Utility into the Bond Fund and the account therein shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the amounts required to pay and secure the payment of the outstanding 1998 Bonds, the 2002 Bonds, the 2003 Bonds, [and] the 2004 Bonds[, and the 2007 Bonds] and any revenue bonds of the City hereafter issued on a parity with the bonds of this issue and superior to all other liens and charges of any kind or nature except Maintenance and Operation Expense. The pledge of Net Revenue and other obligations of the City under the Bond Ordinance may be discharged at or prior to the maturity or redemption of the bonds of this issue upon the making of provision for the payment thereof on the terms and conditions set forth in the Bond Ordinance. B-3 The bonds of this issue are subject to redemption prior to their scheduled maturities as provided in the Bond Ordinance. This bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Ordinance until the Certificate of Authentication hereon shall have been manually signed by the Bond Registrar. It is hereby certified that all acts, conditions, and things required by the Constitution and statutes of the State of Washington to exist, to have happened, been done, and performed precedent to and in the issuance of this bond have happened, been done, and performed. IN WITNESS WHEREOF, the City of Renton, Washington has caused this bond to be signed with the facsimile or manual signature of the Mayor, to be attested by the facsimile or manual signature of the City Clerk, all as of this _____ day of ____________, 20__. CITY OF RENTON, WASHINGTON By /s/ facsimile or manual Mayor ATTEST: /s/ facsimile or manual City Clerk The Bond Registrar’s certificate authentication on the Bonds shall be in substantially the following form: CERTIFICATE OF AUTHENTICATION Date of Authentication: ___________, 20__ This bond is one of the bonds described in the within-mentioned Bond Ordinance and is one of the Water and Sewer Revenue [and Refunding] Bonds, [Series][2007/2008] [A/B][(Taxable)] of the City of Renton, Washington, dated ___________, 20__. WASHINGTON STATE FISCAL AGENCY, Registrar By Authorized Signer Appendix B Opinions of Bond Counsel This page left blank intentionally. January 4, 2008 City of Renton Renton, Washington Seattle-Northwest Securities Corporation Seattle, Washington Re: City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A — $9,975,000 Ladies and Gentlemen: We have acted as bond counsel to the City of Renton, Washington (the “City”) and have examined a certified transcript of the proceedings taken in the matter of the issuance by the City of its Water and Sewer Revenue Bonds, Series 2008A, dated as of the date of their delivery, in the aggregate principal amount of $9,975,000 (the “Bonds”), issued pursuant to Ordinance No. 5313 of the City and Resolution No. 3919 of the City (together, the “Bond Ordinance”), for the purpose of financing certain improvements to the Waterworks Utility of the City. Capitalized terms not otherwise defined herein shall have the meanings given such terms in the Bond Ordinance. The Bonds are subject to redemption prior to maturity as provided in the Bond Ordinance. Regarding questions of fact material to our opinion, we have relied on representations of the City in the Bond Ordinance and in the certified proceedings and on other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Concurrently with the issuance of the Bonds, the City is issuing its Water and Sewer Revenue Bonds, Series 2008B (Taxable) to also finance certain improvements to the Waterworks Utility. Based on the foregoing, we are of the opinion that, under existing law: 1. The Bonds have been legally issued and constitute valid and binding special obligations of the City, both principal thereof and interest thereon being payable solely out of a special fund of the City known as the “Waterworks Revenue Bond Fund” (the “Bond Fund”), except to the extent that the enforcement of the rights and remedies of such owners of the Bonds may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, also by the application of equitable principles and the exercise of judicial discretion. City of Renton Seattle-Northwest Securities Corporation January 4, 2008 Page 2 2. The Bond Ordinance is a legal, valid and binding obligation of the City, has been duly authorized, executed and delivered and is enforceable in accordance with its terms, except to the extent that enforcement may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise of judicial discretion. 3. The City has irrevocably bound itself to set aside and pay into the Bond Fund and the Waterworks Revenue Bond Reserve Fund (the “Reserve Fund”) out of Gross Revenue amounts necessary to pay the principal of and interest on the Bonds as the same become due. 4. The City has pledged that the payments to be made into the Bond Fund and the Reserve Fund out of Gross Revenue shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the Outstanding Parity Bonds, the amounts required to pay and secure the payment of the Bonds and any water and sewer revenue bonds of the City hereafter issued on a parity with the Bonds and superior to all other liens and charges, except Maintenance and Operation Expenses of the Waterworks Utility. The City has reserved the right to issue Future Parity Bonds on the terms set forth in the Bond Ordinance. 5. Interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The opinion set forth in the preceding sentence is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The City has covenanted to comply with all applicable requirements. Failure to comply with certain of such covenants may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. Except as expressly stated above, we express no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements. The City has designated the Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code. We have not been engaged nor have we undertaken to review the accuracy, completeness or sufficiency of the official statement or other offering material related to the Bonds (except to City of Renton Seattle-Northwest Securities Corporation January 4, 2008 Page 3 the extent, if any, stated in the official statement), and we express no opinion relating thereto, or relating to the undertaking by the City to provide ongoing disclosure pursuant to Securities and Exchange Commission Rule 15c2-12. This opinion is given as of the date hereof, and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Very truly yours, K&L PRESTON GATES ELLIS LLP This page left blank intentionally. January 4, 2008 City of Renton Renton, Washington Seattle-Northwest Securities Corporation Seattle, Washington Re: City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) — $2,035,000 Ladies and Gentlemen: We have acted as bond counsel to the City of Renton, Washington (the “City”) and have examined a certified transcript of the proceedings taken in the matter of the issuance by the City of its Water and Sewer Revenue Bonds, Series 2008B (Taxable), dated as of the date of their delivery, in the aggregate principal amount of $2,035,000 (the “Bonds”), issued pursuant to Ordinance No. 5313 of the City and Resolution No. 3919 of the City (together, the “Bond Ordinance”), for the purpose of financing certain improvements to the Waterworks Utility of the City. Capitalized terms not otherwise defined herein shall have the meanings given such terms in the Bond Ordinance. The Bonds are not subject to redemption prior to maturity as provided in the Bond Ordinance. Regarding questions of fact material to our opinion, we have relied on representations of the City in the Bond Ordinance and in the certified proceedings and on other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Concurrently with the issuance of the Bonds, the City is issuing its Water and Sewer Revenue Bonds, Series 2008A to also finance certain improvements to the Waterworks Utility. Based on the foregoing, we are of the opinion that, under existing law: 1. The Bonds have been legally issued and constitute valid and binding special obligations of the City, both principal thereof and interest thereon being payable solely out of a special fund of the City known as the “Waterworks Revenue Bond Fund” (the “Bond Fund”), except to the extent that the enforcement of the rights and remedies of such owners of the Bonds may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, also by the application of equitable principles and the exercise of judicial discretion. 2. The Bond Ordinance is a legal, valid and binding obligation of the City, has been duly authorized, executed and delivered and is enforceable in accordance with its terms, except City of Renton Seattle-Northwest Securities Corporation January 4, 2008 Page 2 to the extent that enforcement may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise of judicial discretion. 3. The City has irrevocably bound itself to set aside and pay into the Bond Fund and the Waterworks Revenue Bond Reserve Fund (the “Reserve Fund”) out of Gross Revenue amounts necessary to pay the principal of and interest on the Bonds as the same become due. 4. The City has pledged that the payments to be made into the Bond Fund and the Reserve Fund out of Gross Revenue shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the Outstanding Parity Bonds, the amounts required to pay and secure the payment of the Bonds and any water and sewer revenue bonds of the City hereafter issued on a parity with the Bonds and superior to all other liens and charges, except Maintenance and Operation Expenses of the Waterworks Utility. The City has reserved the right to issue Future Parity Bonds on the terms set forth in the Bond Ordinance. Except as expressly stated above, we express no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements. The City has taken no action to cause interest on the Bonds to be excluded from gross income for purposes of federal income taxation. We have not been engaged nor have we undertaken to review the accuracy, completeness or sufficiency of the official statement or other offering material related to the Bonds (except to the extent, if any, stated in the official statement), and we express no opinion relating thereto, or relating to the undertaking by the City to provide ongoing disclosure pursuant to Securities and Exchange Commission Rule 15c2-12. This opinion is given as of the date hereof, and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Very truly yours, K&L PRESTON GATES ELLIS LLP Appendix C Book-Entry Transfer System This page left blank intentionally. T H E D E P O S I T O R Y T R U S T C O M P A N Y SAMPLE OFFERING DOCUMENT 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 $500 million, one certificate will be issued with respect to each $500 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.] 2. DTC, the world’s largest 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 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instrument from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as 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 both U.S. and non- U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other 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. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of 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 unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts 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[nor its nominee], Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. [9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Securities to [Tender/Remarketing] Agent’s DTC account.] 10. DTC may discontinue providing its services as 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-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 12. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. [5/07] Appendix D 2006 Audited Financial Statements This page left blank intentionally. 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-1MANAGEMENT’S DISCUSSION AND ANALYSIS The City of Renton’s discussion and analysis provides a narrative overview of the City’s financial activities for the fiscal year ended December 31, 2006. The intent of the discussion and analysis is to review the City’s financial performance as a whole. This Management’s Discussion and Analysis (MD&A) combined with the Transmittal Letter, the Financial Statements, and the Notes to the Financial Statements represent the complete 2006 financial activities for the City of Renton. These are all intended to help the reader understand the City’s significant financial issues. This MD&A provides an overview of the City’s financial records. The data in this financial report also identifies any material deviations from the financial plan and the adopted annual budget. Finally, the intent of the MD&A and other financial information is to isolate and identify individual fund issues or concerns.FINANCIAL INFORMATION Since 2003, the City of Renton prepared its financial records in accordance to what is known as Government Accounting Standards Board Statement 34 (GASB 34) with a phase in of the infrastructure component in 2004. The City’s general Government-wide Financial Statements were prepared on the full accrual basis of accounting in conformity with generally accepted accounting principles (GAAP). The City’s Fund Financial Statements for its major and non-major governmental funds were prepared on the modified accrual basis of accounting in conformity with GAAP. The City’s major and non-major enterprise funds, internal service funds and pension funds were accounted for on the accrual basis. The City of Renton, along with all cities, counties and other governmental entities in Washington, must comply with the Budgeting, Accounting, and Reporting System (BARS) as defined by the Washington State Office of the Auditor (SAO). The SAO audits the financial records of all cities and other governmental units within the State. The City of Renton’s financial system integrates financial and administrative controls that ensure the safeguarding of assets and the reliability of financial reports. These controls are designed to provide:1. reasonable assurance that transactions are executed in accordance to management understanding and approval;2. reasonable assurance that transactions are executed in accordance to GAAP principles;3. accountability for control of assets and obligations; and4. assurance that sufficient reporting and review exists to provide adequate information for analysis and comparability of data. Internal control is a high priority for the City. The State Office of the Auditor reviews the City’s internal controls, and the City receives and takes action on all the recommendations made. 2006 Comprehensive Annual Financial Report City of Renton, Washington3-2 Management’s Discussion and AnalysisThe City maintains strong budgetary controls in order to ensure compliance with legal provisions embodied in the annual appropriated budget as approved by the City Council. The City Council must authorize any budget increase or decrease to any fund.Financial Highlights •The City’s total assets as of December 31, 2006, exceeded liabilities by over $486 million. •As of December 31, 2006, the City’s Governmental Activities reported net assets of $282 million. Of this total, $26 million is defined as unrestricted and can be used for needs the Mayor and Council deem necessary. These monies are intended to provide a cushion against significant economic downturns in revenues and to maintain sufficient working capital and cash flow to meet daily financial needs. •Investments in capital assets comprise $213 million of the $282 million in Governmental Activities net assets. •The business type activities have total net assets of $204 million. Eighty-eight (88%) percent of this total, $180 million, represents the City’s investments in capital assets. An unrestricted balance of $20 million remains and is used to meet day to day cash flow requirements and to ensure we can meet all obligations of the utilities and other funds if the revenues do not meet expectations. •The City’s total outstanding long-term debt as of December 31, 2006, was $96 million. Of this amount, $41.4 million are revenue bonds and PWTF loans dedicated to the water works projects. Another $1.4 million is for outstanding bonds for Senior Housing. These bonds have a special taxing authority. The Golf Course has $3.09 million outstanding in debt service. Employee leave balances total $4.6 million. The balance of $45.5 million of our debt is dedicated for general governmental purposes, including the purchase of City Hall, the construction of the downtown parking garage and a replacement of a fire station (our share of a regional E-911), Communications Center, and other small projects, including municipal-bonds sold for fire equipment. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis provides an introduction and overview to the City of Renton’s basic financial statements. The basic financial statements are comprised of three components: 1. Government-wide Financial Statements; 2. Fund Financial Statements; and 3. Notes to the Financial Statements. The graphic representation below illustrates the required components of the City’s annual financial report and how the required parts are arranged and relate to one another. This illustration helps explain the City’s financial presentation in 2006. This graphic representation should be used in conjunction with the following explanations to help guide the reader in understanding the financial condition of the City of Renton. 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-3Figure 1REQUIRED COMPONENTS OF THE ANNUAL FINANCIAL REPORT In addition to the required components shown in Figure 1, the City’s annual report also includes other voluntary supplementary information. The most significant section is the Combining Statements. These provide Balance Sheets, Statement of Revenues, Expenditures, and Changes in Fund Balances with Budget to Actual comparisons, Statement of Net Assets, and Cash Flows for all Non-Major Funds.The next section of information, the Statistical Section, provides a ten-year view of the City’s Revenue, Expenditures, Debt Obligations, and Debt Capacity, the City’s largest taxpayers, and those entities with the largest employment within the City of Renton. This section provides a long-term perspective on the City’s economy.BASIC FINANCIAL STATEMENTS Government-wide Financial Statements provide readers with a broad overview of the City of Renton’s finances in a manner similar to a private sector business. They provide both short-term and long-term information about the City’s overall financial status. The government-wide statements distinguish between functions of the City that are principally supported by taxes and intergovernmental revenues (referred to as “governmental activities”) from functions that are intended to recover all or a significant portion of their costs through user fees and charges (referred to as “business-type activities.”) The governmental activities of the City include a full range of local government services provided to the public such as police and fire protection; road maintenance and construction; community planning and economic development; libraries, parks and recreational opportunities; and other community services. The business-type activities of the City include water, sewer, surface water, solid waste management and services, golf course, and airport. 2006 Comprehensive Annual Financial Report City of Renton, Washington3-4 Management’s Discussion and AnalysisThe Statement of Net Assets presents information on all of the City’s assets and liabilities with the difference between the two reported as net assets. This statement combines and consolidates governmental funds’ current financial resources (short term available resources) with capital assets and long-term obligations, which is primarily debt. The Statement of Net Assets serves a purpose similar to that of the Balance Sheet of a private-sector business. Over time, increases or decreases in net assets may serve as one indicator of whether the financial position of the City is improving or deteriorating. Other indicators to consider when evaluating the financial position of the City includes changes to the property tax base, general economic conditions as demonstrated through business licenses fees or sales tax revenue, and the condition of the City’s infrastructure (roads, drainage systems, bridges, water infrastructure.) The Statement of Activities focuses upon both the gross and net cost of various activities that are provided by the government’s general tax and other revenues. This is intended to summarize and simplify the user’s analysis of cost to various governmental services and/or subsidy to various business-type activities. By separating program revenue from general revenue, users of the financial statements can identify the extent to which each program relies on taxes for funding. The Governmental Activities reflect the City’s basic functions: General Government, Security of Person and Property, Physical Environment, Mental and Physical Health, and Culture and Recreation. Property, sales, and utility taxes finance the majority of these functions. All changes in net assets are reported using accrual basis of accounting, which is similar to the accounting used in the private sector. The accrual basis of accounting requires that revenues are reported when earned and expenses are reported when incurred, no matter when the revenue will actually be received or the obligation will be paid. For example, property taxes are shown as a receivable as revenue even though some amount of these taxes will not be available to the City for several years. All unpaid vendor obligations are illustrated as an accounts payable obligation as of December 31. Fund Financial Statements The City uses funds to ensure and demonstrate fiscal integrity and compliance with finance related legal requirements with a focus on Major Funds. A fund is a group of related accounts that is used to maintain control over resources that have been segregated for specific activities and objectives. There are three types of funds: governmental, proprietary, and fiduciary. A Major Fund has three elements as defined by GASB 34:•Total assets, liabilities, revenues, or expenditures of that individual governmental or enterprise funds are at least ten percent (10%) of the corresponding total (assets, liabilities,etc.) for all funds of that category or type (i.e., governmental, proprietary, or fiduciary); and•Total assets, liabilities, revenues, or expenditures/expenses of the individual government fund or enterprise funds are at least five percent (5%) of the corresponding total for all governmental and enterprise funds combined; or •Any other governmental or enterprise fund that the government’s officials believe is particularly important. Governmental Funds present most of a government’s tax-supported activities. The Proprietary Funds describe and financially manage the government’s business-type activities where all or part 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-5of the activities’ costs are supported by fees and charges that are paid directly by those who benefit from the activities. Fiduciary Funds control resources held by the government as a trustee or agent for parties outside of the government. The resources of Fiduciary Funds cannot be used to support the government’s own programs. Governmental Funds The Governmental Fund Balance Sheet and Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances present separate columns of financial data for the General, Parks, and Municipal Facilities CIP Funds (new major fund in 2006). These comprise the City’s major governmental funds. Data from the remaining governmental funds are combined and presented in a single, aggregated column in the fund statements. Individual fund data for each of the non-major governmental funds is provided in the form of combining statements. Governmental Funds are used to account for essentially the same functions reported as governmental activities in the Government-wide Financial Statements. The focus of governmental Fund Financial Statements is on near-term inflows and outflows of available resources and on balances of resources available at the end of the fiscal year. Such information is useful in evaluating whether there are more or less financial resources that can be spent in the near future to finance City services.Because the focus of governmental Fund Financial Statements is a narrower view than that of the Government-wide Financial Statements, it is useful to compare information presented for governmental funds with similar information presented for governmental activities in the Government-wide Financial Statements. This gives the reader a better understanding of the long-term impact of the government’s near-term financing decisions. The Governmental Fund Balance Sheet and the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances provide reconciliation to the governmental activities column in the government-wide statements to facilitate this comparison. The City maintains budgetary controls over its governmental funds. Budgetary controls ensure compliance with legal provisions embodied in the annual appropriated budget. Governmental fund budgets are established in accordance with state law and are adopted on a fund level. General Fund budget variances are reviewed later in this discussion and analysis.Proprietary Funds These types of funds consist of two types of funds: Enterprise and Internal Service. They have always been operated as private business activity. Enterprise Funds are used to report the same functions as business-type activities in the Government-wide Financial Statements. Internal Service Funds are used to report activities that provide supplies and services to various City departments and to accumulate and allocate the associated costs of providing these services to the various functions. The revenues and expenses of internal service funds that are duplicated in other funds are eliminated in the government-wide statements. Because the remaining balances primarily benefit governmental, rather than business-type activities, they have been included within Governmental Activities in the Government-wide Statements. The City of Renton has two major proprietary funds: Waterworks Utility (water, wastewater, and stormwater) and Solid Waste. All other activities are combined in Other Enterprise Funds. Governmental Activities Internal Service Funds are reported separately in this section.2006 Comprehensive Annual Financial Report City of Renton, Washington3-6 Management’s Discussion and AnalysisThe Proprietary Fund Balance Sheet and the Proprietary Fund Statement of Revenues, Expenses, and Changes in Fund Equity present separate columns of financial data for the Waterworks Utility and Solid Waste. Data from the remaining Enterprise Funds are combined and presented in a single, aggregated column in the fund statements. Governmental Activities Internal Service Funds are reported separately in this section.Proprietary Fund statements provide the same type of information as the Government-wide Financial Statements, only in more detail, since both apply the accrual basis of accounting. In comparing the total assets and total liabilities between the two statements, only slight differences will be noticed. One notable difference is that the “due from other funds” (asset) and the “due to other funds” (liability) in the proprietary fund statements are combined in a single line called “internal balances” in the asset section of the Government-wide Statement of Net Assets. Fiduciary Funds Fiduciary Funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reported in the Government-wide Financial Statements because the resources of those funds are not available to support the City’s own operations. All of the City’s fiduciary activities are reported in a separate Statement of Fiduciary Net Assets and a Statement of Changes in Fiduciary Net Assets. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided, and are an integral part of the Government-wide and Fund Financial Statements. Combining statements for non-major Governmental and Enterprise Funds, as well as Internal Service Funds, are presented immediately following the required supplementary information on pensions.GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Assets Changes in Net Assets may serve as a useful indicator of a government’s financial position. The overall financial position has improved for the City of Renton over the prior year. Changes in Net Assets from 2005 to 2006 shows an increase in total net assets of $27.9 million. 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-7Table 1 is a condensed version of the Government-wide Statement of Net Assets. Table 1 NET ASSETS Total TotalGovernmental Governmental Business-type Business-type Primary PrimaryActivities Activities Activities Activities Government Government2005 2006 2005 2006 2005 2006Current and other assets $69,083,752 $89,914,383 $27,021,623 $38,029,290 $96,105,375 $127,943,673 Capital assets (net of accumulated depreciation) 234,312,957 253,366,212 219,207,529 213,959,532 453,520,486 467,325,744 TOTAL ASSETS $303,396,709 $343,280,595 $246,229,152 $251,988,822 $549,625,861 $595,269,417 Long term liabilities $34,448,776 $51,093,508 $47,794,739 $44,994,968 $82,243,515 $96,088,476 Other liabilities 7,799,762 10,620,578 1,509,414 2,564,530 9,309,176 13,185,108 TOTAL LIABILITIES $42,248,538 $61,714,086 $49,304,153 $47,559,498 $91,552,691 $109,273,584 NET ASSETS Invested in capital assets, net of related debt $203,297,293 $209,964,556 $171,827,746 $181,515,939 $375,125,039 $391,480,495 Restricted 28,578,305 42,261,663 3,555,690 3,555,690 32,133,995 45,817,353 Unrestricted 29,272,573 29,340,290 21,541,563 19,357,695 50,814,136 48,697,985 TOTAL NET ASSETS $261,148,171 $281,566,509 $196,924,999 $204,429,324 $458,073,170 $485,995,833 The majority of the City’s net assets (81%) are investments in capital assets (e.g., streets, drainage, construction in progress, buildings, equipment, water and sewer pipes) less any related outstanding debt used to acquire these assets. The City’s capital assets are used to provide services to citizens. It should be noted that although the investment in capital assets is reported net of related debt, resources needed to repay this debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities. Investments in capital assets net of related debt increased from 2005 to 2006 by $16.4 million. In 2006, the City issued $17,980,000 Limited Tax obligation bonds. The proceeds of the bonds were used to finance the construction of South Lake Washington infrastructure improvements. Chart 1CATEGORIES OF NET ASSETS$0$75,000,000$150,000,000$225,000,000$300,000,000$375,000,000$450,000,000$525,000,0002005GovernmentalActivities2006GovernmentalActivities2005 BusinessTypeActivities2006 BusinessTypeActivities2005 TotalPrimaryGovernment2006 TotalPrimaryGovernmentUnrestrictedRestrictedInvested in capital assets2006 Comprehensive Annual Financial Report City of Renton, Washington3-8 Management’s Discussion and AnalysisRestricted assets, representing resources that are subject to external restrictions on how they may be used, equate to nine percent (9%) of total net assets, up from seven percent (7%) in 2005. The remaining balance (unrestricted net assets) of $48.7 million may be used to meet the City’s ongoing obligations. Chart 1 provides a graphical comparison of the three categories of net assets for 2005 and 2006.As of December 31, 2006, the City reports positive balances in all three categories of net assets, for the government as a whole, as well as for separate governmental and business-type activities.Statement of Change in Net Assets The City’s total net assets (before prior period adjustments and changes in accounting principles) increased in 2006 by $27.9 million. Governmental activities generated seventy percent (73%) of this total or $20.4 million, while business-type activities generated $7.5 million of this total. Chart 2 below illustrates the various sources and amounts of revenue received by the government as a whole. Table 2 follows the chart. This is a condensed version of the Statement of Activities for the City. Comparable data is available and provided in the 2006 Annual Report.Chart 22006 TOTAL REVENUES BY SOURCEProperty Taxes15%Sales Taxes 13%Excise Taxes5%Interest/Investment earnings3%Operating Grants & Contributions 3%Capital Grants/Contribution8%Charges for Services 45%Business Taxes7%Miscellaneous1% 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-9Table 2 CHANGE OF NET ASSETS Governmental Activities 2005 Governmental Activities 2006 Business-Type Activities 2005 Business-Type Activities 2006 Total Primary Government 2005 Total Primary Government 2006 REVENUES: Program revenues: Charges for services $27,101,167 $31,340,523 $40,029,830 $40,056,079 $67,130,997 $71,396,602 Operating grants & contributions 4,979,601 4,596,836 196,974 77,688 5,176,575 4,674,524 Capital grants & contributions 1,227,503 5,909,870 5,101,699 6,317,203 6,329,202 12,227,073 GENERAL REVENUES: Property taxes 21,523,818 23,600,131 21,523,818 23,600,131 Sales taxes 18,910,823 20,869,595 18,910,823 20,869,595 Business taxes 10,643,068 11,219,303 10,643,068 11,219,303 Other taxes 6,938,265 7,718,945 6,938,265 7,718,945 Penalties and interest 49 3,799 49 3,799 Interest and investment earnings 1,449,001 3,251,975 458,797 881,486 1,907,798 4,133,461 Miscellaneous 1,958,217 689,243 639,646 282,808 2,597,863 972,051 TOTAL REVENUES $94,731,512 $109,200,220 $46,426,946 $47,615,264 $141,158,458 $156,815,484 PROGRAM EXPENSES GOVERNMENTAL ACTIVITIES: General government services $21,137,856 $19,977,086 $21,137,856 $19,977,086 Judicial 1,380,816 1,434,134 1,380,816 1,434,134 Security of persons and property 29,496,791 30,749,762 29,496,791 30,749,762 Physical environment 2,208,340 2,618,832 2,208,340 2,618,832 Transportation 4,183,880 15,798,138 4,183,880 15,798,138 Economic environment 5,899,796 6,372,118 5,899,796 6,372,118 Mental and physical health 300,171 295,072 300,171 295,072 Culture and recreation 9,744,692 9,695,924 9,744,692 9,695,924 Interest on long-term debt 1,710,346 1,772,370 1,710,346 1,772,370 Business-type activities Water $25,884,227 $27,220,132 25,884,227 27,220,132 Airport 1,226,810 1,196,363 1,226,810 1,196,363 Solid waste 9,327,525 9,706,016 9,327,525 9,706,016 Golf 2,132,077 2,056,874 2,132,077 2,056,874 TOTAL EXPENSES $76,062,688 $88,713,436 $38,570,639 $40,179,385 $114,633,327 $128,892,821 Increase in net assets before transfers $18,668,824 $20,486,784 $7,856,307 $7,435,879 $26,525,131 $27,922,663 Transfers (9,300) (68,446) $9,300 $68,446 0 0 Increase in net assets 18,659,524 20,418,338 7,865,607 7,504,325 26,525,131 27,922,663 Net Assets - beginning 242,488,646 261,148,171 189,059,392 196,924,999 431,548,038 458,073,170 Net Assets -ending $261,148,171 $281,566,509 $196,924,999 $204,429,324 $458,073,170 $485,995,833 Seventy percent (70%) of the City of Renton’s total revenue activities are for general governmental activities such as providing police, fire, parks, libraries, recreational, building safety, and planning services.The largest business type activities include water, sewer, surface water, solid waste, and golf activities.Governmental Activities Analysis Governmental activities cost a total of $89 million in 2006, up $12.6 million from 2005. Of this amount, $42 million was paid for either by those who directly benefited from the programs or by other governments and organizations that subsidized certain programs with grants Chart 3 2006 COMPARISON OF TOTAL GOVERNMENTAL vs BUSINESS TYPE EXPENSESGovernmental Activities69%Business Type Activities31%2006 Comprehensive Annual Financial Report City of Renton, Washington3-10 Management’s Discussion and Analysisand contribution. The net expense (total expenses less program revenues) of $47 million was the cost of governmental services City taxpayers primarily paid through various taxes. Chart 4 portrays the cost of each of the City’s major governmental programs along with each program’s generated revenues (fees and intergovernmental revenues specifically related to that program.) Chart 4 GOVERNMENTAL ACTIVITIES PROGRAM REVENUES AND EXPENSES2005 vs 2006-$1,500,000$3,000,000$7,500,000$12,000,000$16,500,000$21,000,000$25,500,000$30,000,0002005GeneralGovt2006GeneralGovt2005Judicial2006Judicial2005SecurityofPersonsandProperty2006SecurityofPersonsandProperty2005PhysicalEnvironment2006PhysicalEnvironment2005Transportation2006Transportation2005EconomicEnvironment2006EconomicEnvironment2005MentalandPhysicalHealth2006MentalandPhysicalHealth2005CultureandRecreation2006CultureandRecreation2005InterestonDebt2006InterestonDebtExpensesRevenuesChart 5 depicts the sources of revenues that fund governmental activities. Approximately fifty-seven percent (57%) is from various taxes. Charges for services, grants, and interest earnings generate forty-two percent (42%) of total revenue for general governmental activities. 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-11Chart 5 GOVERNMENTAL ACTIVITIES REVENUES BY SOURCEProperty Taxes21%Capital Grants5%Operating Grants4%Charges for Services30%Excise Taxes7%Interest Earnings3%Miscellaneous1%Business Taxes10%Retail Sales Ta19%Business-Type Activities Analysis Charts 6 and 7 present the same information on business-type activities as illustrated for general governmental type activities. Chart 6 shows the expense of each of the City’s business-type programs along with each program’s generated revenues (fees and intergovernmental revenues specifically related to that program.) Chart 6 BUSINESS TYPE ACTIVITIES PROGRAM REVENUES AND EXPENSES$0$5,000,000$10,000,000$15,000,000$20,000,000$25,000,000$30,000,000$35,000,0002005Waterworks2006Waterworks2005 Airport 2006 Airport 2005 SolidWaste2006 SolidWaste2005 GolfCourse2006 GolfCourseExpensesRevenuesThe Waterworks Utility had a positive net change of $6.8 million at the end of 2006 compared to $7.4 million in 2005. The City generated $34 million in various fees for services and other sources from waterworks activities above the $27.2 million in expenses. 2006 Comprehensive Annual Financial Report City of Renton, Washington3-12 Management’s Discussion and AnalysisThe Airport’s total expenses were $1.2 million. Grant revenues for 2006 were $282,130 with total revenues of $1.2 million. The Solid Waste Utility’s revenues were $9.9 million generated from fees for services and $76,293 in grants. The total expenses were $9.7 million. The Golf Course generated a total of $2.3 million in green fees, driving range charges, and other user fees. The total expenses for the Golf Course were $2.1 million. Thus, the Golf Course generated a net asset change of $291,908 for the year.Business-type activities are supported primarily from charges for services. In the City of Renton, $40 million was generated from charges for services in the business-type activities. These comprise eighty-four percent (84%) of the total financial support for these activities. Grant revenues increased 20.6% or $1.1 million from 2005 to 2006. Chart 7 BUSINESS TYPE ACTIVITIES REVENUES BY SOURCESCharges for Services84%Grants13%Interest & Miscellaneous3%FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS Governmental Funds AnalysisThe focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the fiscal year, the City’s governmental funds reported combined ending fund balances of $60 million, an increase of $17 million in comparison to last year. Approximately 8% constitutes unreserved, undesignated fund balance, which is available for spending at the government’s discretion. The remainder of the fund balance is reserved or designated to indicate that it is not available for new spending because it has already been committed for operating reserves. The General Fund is the chief operating fund of the City. At the end of the current year, unreserved, undesignated fund balance of the general fund was $4.9 million, while total fund balance reached $10.7 million. The fund balance total increased 1.5 million during the fiscal year. Transfers to other funds decreased by $2.6 million in 2007, significantly contributing to this increase. The Parks Fund at year-end had an unreserved, designated fund balance of $1,285,989. The overall fund balance increased $448,175 over the prior year. The Parks Fund received $1.3 million more in 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-13property taxes to help offset the increase in expenditures in the fund for culture and recreation programs. The Municipal Fund was a new major fund in 2007. An increase in revenues of $2.3 in property taxes, as well as increased interest earnings helped contribute toward the overall fund balance increase of 1.9 million. A total of $1.1 million was spent on the Heather Downs. Proprietary Funds Analysis The fund financial statements for the proprietary funds are presented in more detail, but essentially provide the same type of information found in the business-type activities in the government-wide financial statements. Unrestricted net assets in the Waterworks Utility Fund and the Solid Waste Fund were $15 million and $2.5 million respectively. This represents a decrease in Waterworks Utility Fund of $460,600 and an increase in the Solid Waste Fund of $351,483 in unrestricted net assets. Total Net Assets increase in both funds $6.7 million and $347,544 respectfully. Other factors concerning the finances of these two funds have already been addressed in the discussion of business-type activities.CAPITAL ASSET AND DEBT ADMINISTRATION Capital AssetsThe City of Renton’s investment in capital assets, including construction in progress, for its governmental and business-type activities as of December 31, 2006, amounts to $478.4 million as presented on the following table.Table 3 CAPITAL ASSETS (Net of Accumulated Depreciation) Governmental Activities Business Type Activities Total Activities 1/1/2006 12/31/2006 1/1/2006 12/31/2006 1/1/2006 12/31/2006 Land $81,997,215 $85,936,207 $6,976,321 $ 6,976,321 $88,973,536 $92,912,528 Construction in progress 15,819,455 24,371,783 2,512,285 4,126,115 18,331,740 28,497,898Buildings and structures 55,442,027 53,544,216 11,467,501 11,131,546 66,909,528 64,675,762Other improvements 70,441,585 77,247,581 197,274,995 201,871,536 267,716,580 279,119,117Machinery and equipment 10,612,674 12,266,422 976,424 956,451 11,589,098 13,222,873 $234,312,956 $253,366,209 $219,207,526 $225,061,969 $453,520,482 $478,428,178General government infrastructure includes streets, bridges, overlays, and traffic controls. More detail about the City’s Capital Assets can be found in Note 5 to the financial statements. 2006 Comprehensive Annual Financial Report City of Renton, Washington3-14 Management’s Discussion and AnalysisDebt Administration As shown in Table 4, the City’s total outstanding debt at December 31, 2006, was $96.1 million. This was a net increase (new issues less principal payments and refundings) of $14.4 million. Table 4 OUTSTANDING DEBT General Activities Business Type Activities Total Activities 1/1/2006 12/31/2006 1/1/2006 12/31/2006 1/1/2006 12/31/2006 General obligation bonds $29,107,664 $46,899,513 $29,107,664 $46,899,513Revenue debt $35,790,000 $33,840,000 35,790,000 33,840,000 Other long term debt 11,589,783 10,692,018 11,589,789 10,692,018 Employee leave benefits 4,690,510 4,193,995 411,340 462,947 5,101,850 4,656,942 $33,798,174 $51,093,508 $47,791,123 $44,994,965 $81,589,297 $96,088,473 In 2006 the City issued $17,980,000 of Limited Tax General Obligation Bonds. The proceeds of the bonds will be used for the purpose of providing funds for construction of transportation and utility infrastructure and improvements. In addition, the City included $1,315,199 in accreted interest for the 1997 Capital Appreciation Bonds.The Water & Sewer Revenue Bond underlying ratings remain AA- at both rating agencies. More detailed information about the City’s long-term debt can be found in Note 14 to the financial statements. FUTURE YEAR’S BUDGETARY IMPACTS The City continues to benefit from progressive economic development activities allowing the City to continue to grow.xSeattle Seahawks moving their headquarters to Renton xProvidence Health Systems establishing its offices in the Southgate Office Park, which will employ over 1,000 workers xThe Evergreen City Ballet occupying the old McLendon building xWizards of the Coast have relocated to new offices in Renton xThe FAA expanding its facilities in Renton xThe Landing project includes Fairfield Residential, a 900 apartment complex xTarget will open in October of 2007 xConner Homes has begun development of 20-acres of luxury lakefront residential property For more information regarding the factors affecting the future year’s budgetary impacts, please refer to the Transmittal Letter within this document under: Factors Affecting Financial Condition - Economic Condition and Outlook and Update from Budget Document - Outlook. 2006 Comprehensive Annual Financial Report City of Renton, Washington Management’s Discussion and Analysis 3-15REQUESTS FOR FINANCIAL INFORMATION This financial report is designed to provide our citizens, creditors, investors, and others interested in the City’s finances with a general overview of the City’s finances and to show the City’s accountability for financial resources it receives. If you have any questions about this report or need additional information, please contact Mike Bailey, Finance and Information Services Administrator, 1055 South Grady Way, Renton, WA 98057 or visit our web site at www.ci.renton.wa.us.2006 Comprehensive Annual Financial Report City of Renton, Washington 3-16 Management’s Discussion and Analysis This page is intentionally left blank. 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTAL BUSINESS-TYPEACTIVITIES ACTIVITIES TOTALASSETSCash and cash equivalents$ 32,835,943 $ 15,969,931 $ 48,805,874 Investments at fair value38,653,773 1,420,000 40,073,773 Receivables (net of allowancefor uncollectibles)13,388,628 4,800,050 18,188,678 Internal balances2,749 (2,749) - Inventories- 318,691 318,691 Prepayments114,038 - 114,038 Other non-current assets4,919,252 865,242 5,784,494 Restricted assets:Cash and cash equivalents- 1,805,690 1,805,690 Investments at fair value- 1,750,000 1,750,000 Land 85,936,207 6,976,320 92,912,527 Construction in progress24,371,783 4,126,115 28,497,898 Capital assets (net of accumulateddepreciation)143,058,222 213,959,532 357,017,754 Total assets $ 343,280,595 $ 251,988,822 $ 595,269,417 LIABILITIESAccounts payable andother liabilities $ 9,711,138 $ 2,170,529 $ 11,881,667 Interest payable190,550 174,904 365,454 Unamortized (discount)/premium 648,229 (120,748) 527,481 Unearned revenue70,661 339,845 410,506 Non-current liabilities:Due within one year3,994,780 3,024,159 7,018,939 Due in more than one year47,098,728 41,970,809 89,069,537 Total liabilities $ 61,714,086 $ 47,559,498 $ 109,273,584 NET ASSETSInvestment in capital assets, net of related debt$ 209,964,556 $ 181,515,939 $ 391,480,495 Restricted for:Promotional programs 988,260 - 988,260 Construction projects41,273,403 - 41,273,403 Debt service - 3,555,690 3,555,690 Unrestricted 29,340,290 19,357,695 48,697,985 Total net assets $ 281,566,509 $ 204,429,324 $ 485,995,833 PRIMARY GOVERNMENTSTATEMENT OF NET ASSETSDecember 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-1 2006 Comprehensive Annual Financial Report City of Renton, WashingtonOPERATINGCHARGES FOR GRANTS AND CAPITAL GRANTFUNCTIONS/PROGRAMS EXPENSES SERVICES CONTRIBUTIONS & CONTRIBUTIONSPrimary government:Governmental activities:General government$ 19,977,086 $ 21,852,465 $ 4,195,348 $ 18,329Judicial 1,434,134 831,485 - -Security of persons and property30,749,762 517,151 254,865 -Physical environment2,618,832 400,798 - -Transportation 15,798,138 1,628,154 - 1,469,926 Economic environment6,372,118 4,368,399 44,369 4,418,865 Mental and physical health295,072 - 78,256 2,750Culture and recreation 9,695,924 1,742,071 23,998 -Interest on long-term debt 1,772,370 - - -Total governmental activities $ 88,713,436 $ 31,340,523 $ 4,596,836 $ 5,909,870 Business-type activities:Waterworks utility $ 27,220,132 $ 27,036,324 $ 1,395 $ 6,035,073 Airport1,196,363 909,425 - 282,130Solid waste utility9,706,016 9,837,915 76,293 -Golf course 2,056,874 2,272,415 - -Total business-type activities$ 40,179,385 $ 40,056,079 $ 77,688 $ 6,317,203 Total primary government$ 128,892,821 $ 71,396,602 $ 4,674,524 $ 12,227,073 PROGRAM REVENUESSTATEMENT OF ACTIVITIESFor the Year Ended December 31, 2006Page 1 of 2General revenues:Taxes:Property taxesTimber taxesRetail sales taxesBusiness taxesExcise taxesPenalties and interestInterest and investment earningsMiscellaneousTransfersTotal general revenues and transfersChange in net assetsNet assets - beginning Net assets - endingThe notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-2 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTAL BUSINESS-TYPEACTIVITIES ACTIVITIES TOTAL$ 6,089,056 $ 6,089,056(602,649) (602,649)(29,977,746) (29,977,746)(2,218,034) (2,218,034)(12,700,058) (12,700,058)2,459,515 2,459,515(214,066) (214,066)(7,929,855) (7,929,855)(1,772,370) (1,772,370)$ (46,866,207) $ (46,866,207)$ 5,852,660 $ 5,852,660(4,808) (4,808)208,192 208,192215,541 215,541$ 6,271,585 $ 6,271,585$ (46,866,207) $ 6,271,585 $ (40,594,622)$ 23,600,131 $ - $ 23,600,131- - -20,869,595 - 20,869,59511,219,303 - 11,219,3037,718,945 - 7,718,9453,799 - 3,7993,251,975 881,486 4,133,461689,243 282,808 972,051(68,446) 68,446 -$ 67,284,545 $ 1,232,740 $ 68,517,285$ 20,418,338 $ 7,504,325 $ 27,922,663$ 261,148,171 $ 196,924,999 $ 458,073,170$ 281,566,509 $ 204,429,324 $ 485,995,833CHANGES IN NET ASSETSPRIMARY GOVERNMENTNET (EXPENSE) REVENUE ANDPage 2 of 2The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-3 2006 Comprehensive Annual Financial Report City of Renton, WashingtonMUNICIPALFACILITIES GENERAL PARKS CIPASSETSCash & cash equivalents$ 5,333,644 $ 1,368,825 $ 4,027,976 Investments 3,000,000 - 10,750,000 Receivables (net of allowances)Taxes 414,752 - 472,947 Customer accounts 1,294,924 425,984 - Accrued interest & penalty99,201 - 311,332 Due from other funds330 - - Due from other governmental units4,296,279 58,924 11,792 Prepayments8,000 - - Restricted assets:Advances due from other funds- - 63,900 TOTAL ASSETS $ 14,447,130 $ 1,853,733 $ 15,637,947 BALANCE SHEETGOVERNMENTAL FUNDSDecember 31, 2006Page 1 of 4The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-4 2006 Comprehensive Annual Financial Report City of Renton, WashingtonOTHER TOTAL GOVERNMENTAL GOVERNMENTAL FUNDS FUNDSASSETSCash & cash equivalents$ 13,833,927 $ 24,564,372Investments 15,373,773 29,123,773Receivables (net of allowances)Taxes 485,536 1,373,235Customer accounts 679,388 2,400,296Accrued interest & penalty449,220 859,753Due from other funds62,898 63,228Due from other governmental units4,114,926 8,481,921Prepayments- 8,000Restricted assets:Advances due from other funds- 63,900TOTAL ASSETS $ 34,999,668 $ 66,938,478BALANCE SHEETGOVERNMENTAL FUNDSDecember 31, 2006Page 2 of 4The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-5 2006 Comprehensive Annual Financial Report City of Renton, WashingtonMUNICIPALFACILITIESGENERAL PARKS CIPLIABILITIES AND FUND BALANCESLiabilitiesAccounts payable$ 849,363 $ 178,340 $ 145,551 Taxes payable10,567 4,494 - Retainage payable- 367 34,383 Due to other funds15,000 - - Custodial accounts 69,707 39,500 - Deposits 34,739 - - Deferred revenue803,681 5,687 - Accrued employee wages and leave payable1,918,976 339,356 - Interfund advances - non-current- - - Total liabilities $ 3,702,033 $ 567,744 $ 179,934 Fund balancesReserved for:Advances to other funds$- $ - $ 63,900 Prepaid items 8,000 - - Unreserved, designated for:General fund contingency 5,761,257 - - Special revenue funds contingency - 949,909 - Special revenue funds- 336,080 - Capital project fund - - 15,394,113 Unreserved reported in:General fund 4,975,840 - - Total fund balances $ 10,745,097 $ 1,285,989 $ 15,458,013 TOTAL LIABILITIES AND FUND BALANCES $ 14,447,130 $ 1,853,733 $ 15,637,947 BALANCE SHEETGOVERNMENTAL FUNDSDecember 31, 2006Page 3 of 4The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-6 2006 Comprehensive Annual Financial Report City of Renton, WashingtonOTHER TOTAL GOVERNMENTAL GOVERNMENTAL FUNDS FUNDSLIABILITIES AND FUND BALANCESLiabilitiesAccounts payable$ 1,469,163 $ 2,642,417Taxes payable1,991 17,052 Retainage payable308,530 343,280 Due to other funds37,624 52,624 Custodial accounts - 109,207 Deposits 32,981 67,720 Deferred revenue7,404 816,772 Accrued employee wages and leave payable293,964 2,552,296Interfund advances - non-current63,900 63,900 Total liabilities $ 2,215,557 $ 6,665,268Fund balancesReserved for:Advances to other funds$- $ 63,900 Prepaid items - 8,000 Unreserved, designated for:General fund contingency - 5,761,257Special revenue funds contingency 941,029 1,890,938Special revenue funds2,016,171 2,352,251Capital project fund 26,758,324 42,152,437Debt service funds3,068,587 3,068,587Unreserved reported in:General fund - 4,975,840Total fund balances $ 32,784,111 $ 60,273,210TOTAL LIABILITIES AND FUND BALANCES $ 34,999,668 $ 66,938,478Page 4 of 4BALANCE SHEETGOVERNMENTAL FUNDSDecember 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-7 2006 Comprehensive Annual Financial Report City of Renton, WashingtonFUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ 60,273,210 Amounts reported for governmental activities in the statement of net assets aredifferent because:Capital assets used in governmental activities are not financial resourcesand therefore are not reported in the governmental funds.Capital assets (net) and other non-current assets.$ 258,285,461The focus of governmental funds is on short-term financing, assets areoffset by deferred revenue and are not included in fund balancesDeferred revenue$ 746,111Long-term liabilities, including bonds payable are not due and payable in thecurrent period and therefore are not reported in the governmental fundsInterest payable$ (199,806)Long-term liabilities (51,595,172)Internal service funds are used by management to charge the costs ofcertain activities to individual funds.Total assets and liabilities of the internal service funds that are reported with governmental activities, less capital assets reported above.$ 14,056,705NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 281,566,509 RECONCILIATION OF THE BALANCE SHEETTO THE STATEMENT OF NET ASSETSDecember 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-8 2006 Comprehensive Annual Financial Report City of Renton, WashingtonMUNICIPALFACILITIES GENERAL PARKS CIPREVENUESTaxes $ 39,260,540 $ 9,503,672 $ 4,514,285 Licenses and permits 3,132,587 - - Intergovernmental revenues 2,846,753 7,331 - Charges for services 2,246,722 2,272,314 - Fines and forfeits 860,819 - - Interfund revenues 1,791,180 - - Special assessments - - - Contributions 66,781 30,791 23,001 Interest 661,481 47,641 788,103 Miscellaneous revenues 215,804 6,891 - TOTAL REVENUES $ 51,082,667 $ 11,868,640 $ 5,325,389 EXPENDITURESCurrent:General government $ 10,698,791 $ 2,830,626 $ - Security of persons and property 31,157,303 - - Physical environment 2,609,452 - - Transportation - - - Economic environment 4,709,745 481,227 33,969 Mental & physical health 9,231 - - Culture & recreation - 8,108,612 - Capital outlay 80,343 - 2,924,322 Debt service:Principal payment - - - Interest payment - - - TOTAL EXPENDITURES $ 49,264,865 $ 11,420,465 $ 2,958,291 EXCESS (DEFICIENCY) OF REVENUESOVER EXPENDITURES $ 1,817,802 $ 448,175 $ 2,367,098 OTHER FINANCING SOURCES (USES)Proceeds of long-term debt$- $ - $ - Transfer in - - - Transfer (out) (272,000) - (462,000) Sale of capital assets 1,424 - - TOTAL OTHER FINANCE SOURCES (USES) $ (270,576) $ - $ (462,000) NET CHANGE IN FUND BALANCE $ 1,547,226 $ 448,175 $ 1,905,098 FUND BALANCE JANUARY 1 9,197,871 837,814 13,552,915 FUND BALANCE DECEMBER 31 $ 10,745,097 $ 1,285,989 $ 15,458,013 Page 1 of 2 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESGOVERNMENTAL FUNDSFor the Year Ended December 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-9 2006 Comprehensive Annual Financial Report City of Renton, WashingtonOTHER TOTAL GOVERNMENTAL GOVERNMENTAL FUNDS FUNDSREVENUESTaxes $ 10,727,070 $ 64,005,567 Licenses and permits 1,829,920 4,962,507 Intergovernmental revenues 6,915,141 9,769,225 Charges for services 2,024,253 6,543,289 Fines and forfeits 45,866 906,685 Interfund revenues 1,051,967 2,843,147 Special assessments 511,932 511,932 Contributions 93,814 214,387 Interest 1,073,457 2,570,682 Miscellaneous revenues 1,213 223,908 TOTAL REVENUES $ 24,274,633 $ 92,551,329 EXPENDITURESCurrent:General government $ 443,175 $ 13,972,592 Security of persons and property - 31,157,303 Physical environment - 2,609,452 Transportation 5,097,449 5,097,449 Economic environment 294,278 5,519,219 Mental & physical health - 9,231 Culture & recreation 1,825,242 9,933,854 Capital outlay 18,112,860 21,117,525 Debt service:Principal payment 1,503,350 1,503,350 Interest payment 2,129,656 2,129,656 TOTAL EXPENDITURES $ 29,406,010 $ 93,049,631 EXCESS (DEFICIENCY) OF REVENUESOVER EXPENDITURES $ (5,131,377) $ (498,302) OTHER FINANCING SOURCES (USES)Proceeds of long-term debt$ 18,490,029 $ 18,490,029 Transfer in 2,962,895 2,962,895 Transfer (out) (2,971,341) (3,705,341) Sale of capital assets 12,040 13,464 TOTAL OTHER FINANCE SOURCES (USES) $ 18,493,623 $ 17,761,047 NET CHANGE IN FUND BALANCE $ 13,362,246 $ 17,262,745 FUND BALANCE JANUARY 1 19,421,865 43,010,465 FUND BALANCE DECEMBER 31 $ 32,784,111 $ 60,273,210 Page 2 of 2GOVERNMENTAL FUNDSFor the Year Ended December 31, 2006STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESThe notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-10 2006 Comprehensive Annual Financial Report City of Renton, WashingtonNET CHANGES IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ 17,262,745 Amounts reported for governmental activities in the statement of activities are different because:Governmental funds report capital outlays as expenditures;however, in the statement of activities, the cost of thoseassets are depreciated over their estimated useful lives.Expenditures for capital assets$ 25,035,636Less current year depreciation(6,671,845)Repayment of long-term debt is an expenditure in governmen-tal funds, but the repayment reduces long-term liabilitiesin the statement of net assets. Loan or bond proceeds provide current financial resources to governmentalfunds, but the repayment reduces long-term liabilitiesin the statement of net assets.Principal payments$ 1,503,350Some revenues or expenditures reported in the statement of activities are not yet available or expensed and therefore arenot reported as revenue or expenses in governmental funds $ (19,299,349)Net Pension Obligation over funded / (under funded)773,166Internal service funds or activities are used by management tocharge the costs of certain activities to individual funds.The net (expense) of the internal service fund andinternal balances reported with governmental activities.$ 1,814,635CHANGES IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 20,418,338 For the Year Ended December 31, 2006RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDSTO THE STATEMENT OF ACTIVITIESGOVERNMENTAL FUNDSThe notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-11 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTALOTHER TOTAL ACTIVITIESWATERWORKS ENTERPRISE ENTERPRISE INTERNAL SERVICE UTILITYSOLID WASTE FUNDS FUNDS FUNDSASSETSCurrent assets:Cash & cash equivalents$ 12,479,315 $ 1,576,549 $ 1,914,067 $ 15,969,931 $ 8,271,571Investments at fair value520,000 150,000 750,000 1,420,000 9,530,000Receivables (net of allowances):Customer accounts 3,165,593 1,132,065 45,529 4,343,187 30,519Special assessments - current33,894 - - 33,894 -Interest - investments57,792 3,062 12,400 73,254 241,027Due from other funds56,328 - - 56,328 -Due from other governmental units197,446 101,930 50,339 349,715 1,876Inventory of materials and supplies271,754 - 46,937 318,691 -Prepayments- - - - 106,038Total current assets$ 16,782,122 $ 2,963,606 $ 2,819,272 $ 22,565,000 $ 18,181,031Noncurrent assets:Restricted cash, cash equivalents, andinvestments at fair value $ 3,114,332 $ - $ 441,358 $ 3,555,690 $ -Special assessments deferred 62,966 - - 62,966 -Capital assets (net)205,585,486 1,313 19,475,168 225,061,967 5,317,155Deferred charges and other assets761,729 - 40,547 802,276 -Total noncurrent assets209,524,513 1,313 19,957,073 229,482,899 5,317,155TOTAL ASSETS $ 226,306,635 $ 2,964,919 $ 22,776,345 $ 252,047,899 $ 23,498,186BUSINESS-TYPE ACTIVITIESENTERPRISE FUNDSSTATEMENT OF NET ASSETSPROPRIETARY FUNDSDecember 31, 2006Page 1 of 2The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-12 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTALOTHER TOTAL ACTIVITIESWATERWORKS ENTERPRISE ENTERPRISE INTERNAL SERVICE UTILITYSOLID WASTE FUNDS FUNDS FUNDSLIABILITIESCurrent liabilities:Accounts payable$ 1,148,019 $ 349,787 $ 97,530 $ 1,595,336 $ 1,128,528Retainage payable52,481 - 41,634 94,115 -Due to other funds50,676 - 8,400 59,076 7,855Accrued interest payable161,874 - 13,030 174,904 -Accrued employee wages and benefits payable181,740 202 51,469 233,411 45,085Accrued taxes payable35,147 38,561 30,258 103,966 616Custodial Accounts 37,919 - 105,783 143,702 -Deferred revenue280,764 - 59,081 339,845 -Revenue bonds payable$ 1,740,000 $ - $ 285,000 $ 2,025,000 $ -Capital leases payable- - - - -Total current liabilities $ 3,688,620 $ 388,550 $ 692,185 $ 4,769,355 $ 1,182,084Long-term liabilities:Revenue bonds payable$ 29,010,000 $ - $ 2,805,000 $ 31,815,000 $ -Unamortized premium on revenue bonds468,747 - - 468,747 -Unamortized discount on revenue bonds (401,585) - (272,813) (674,398) -Deferred amount on revenue bond refunding84,903 - - 84,903 -Accrued employee wages and benefits payable371,552 18,179 73,217 462,948 314,460Claims incurred but not reported- - - - 2,627,782Public works trust fund loan payable10,692,020 - - 10,692,020 -Total long-term liabilities $ 40,225,637 $ 18,179 $ 2,605,404 $ 42,849,220 $ 2,942,242TOTAL LIABILITIES $ 43,914,257 $ 406,729 $ 3,297,589 $ 47,618,575 $ 4,124,326NET ASSETSInvestment in capital assets, net of related debt$ 164,143,466 $ 1,313 $ 16,385,168 $ 180,529,947 $ 5,317,155Restricted 3,114,332 - 441,358 3,555,690 -Unrestricted 15,134,580 2,556,877 2,652,230 20,343,687 14,056,705TOTAL NET ASSETS $ 182,392,378 $ 2,558,190 $ 19,478,756 $ 204,429,324 $ 19,373,860BUSINESS-TYPE ACTIVITIESENTERPRISE FUNDSSTATEMENT OF NET ASSETSPROPRIETARY FUNDSDecember 31, 2006Page 2 of 2The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-13 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTALOTHER TOTAL ACTIVITIESWATERWORKS ENTERPRISE ENTERPRISE INTERNAL SERVICE UTILITYSOLID WASTE FUNDS FUNDS FUNDSOPERATING REVENUES:Charges for services$ 25,982,868 $ 9,904,371 $ 3,181,840 $ 39,069,079 $ 9,449,690Interdepartmental services712,956 3,606 - 716,562 -Other services 401,393 76,293 190 477,876 7,901,626TOTAL OPERATING REVENUES $ 27,097,217 $ 9,984,270 $ 3,182,030 $ 40,263,517 $ 17,351,316OPERATING EXPENSES:Operations and maintenance$ 4,899,649 $ 575,672 $ 1,490,530 $ 6,965,851 $ 1,343,695Benefit payments1,001,583 75,292 344,846 1,421,721 10,918,350Professional services 264,348 7,962,741 46,738 8,273,827 657,388Administrative and general 12,060,638 44,632 453,022 12,558,292 1,492,481Insurance62,400 - 25,300 87,700 2,159,518Taxes 1,989,785 1,043,740 10,811 3,044,336 -Depreciation 5,462,690 3,939 648,595 6,115,224 876,839TOTAL OPERATING EXPENSES $ 25,741,093 $ 9,706,016 $ 3,019,842 $ 38,466,951 $ 17,448,271OPERATING INCOME (LOSS)$ 1,356,124 $ 278,254 $ 162,188 $ 1,796,566 $ (96,955)NON-OPERATING REVENUES(EXPENSES):Intergovernmental revenues$- $ - $ 282,130 $ 282,130 $ 11,163Interest revenues653,291 69,290 158,905 881,486 681,292Gain (loss) on sale of capital assets- - 4,009 4,009 86,244Other non-operating revenues (expenses)160,233 - 7,039 167,272 458,889Interest expense(1,428,178) - (167,782) (1,595,960) -Amortization of debt discount and expense(50,862) - (65,613) (116,475) -NON-OPERATING REVENUE NET OF EXPENSE $ (665,516) $ 69,290 $ 218,688 $ (377,538) $ 1,237,588INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS $ 690,608 $ 347,544 $ 380,876 $ 1,419,028 $ 1,140,633Capital contributions6,016,851 - - 6,016,851 -Transfers in (out)68,446 - - 68,446 674,000CHANGE IN NET ASSETS $ 6,775,905 $ 347,544 $ 380,876 $ 7,504,325 $ 1,814,633FUND BALANCE JANUARY 1 $ 175,616,473 $ 2,210,646 $ 19,097,880 $ 196,924,999 $ 17,559,227NET ASSETS, DECEMBER 31 $ 182,392,378 $ 2,558,190 $ 19,478,756 $ 204,429,324 $ 19,373,860BUSINESS-TYPE ACTIVITIESENTERPRISE FUNDSSTATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETSPROPRIETARY FUNDSFor the Year Ended December 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-14 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTALOTHER TOTAL ACTIVITIESWATERWORKS ENTERPRISE ENTERPRISE INTERNAL SERVICE UTILITY SOLID WASTE FUNDS FUNDS FUNDSCASH FLOWS FROM OPERATING ACTIVITIES:Cash received for services $ 28,223,157 $ 9,881,546 $ 3,304,156 $ 41,408,859 $ 17,342,303 Cash received from other funds for services 777,809 - - 777,809 - Cash paid to suppliers for goods & services (18,259,034) (9,194,176) (2,043,023) (29,496,233) (3,331,790) Cash paid to other funds for goods & services (53,189) 654 (52,535) - Cash paid to employees (968,511) (71,190) (333,350) (1,373,051) (10,440,402) Other operating receipts - (347,544) - (347,544) (1,269,500) Other non-operating receipts 160,233 - (156,734) 3,499 - NET CASH PROVIDED (USED) BYOPERATING ACTIVITIES $ 9,880,465 $ 268,636 $ 771,703 $ 10,920,804 $ 2,300,611CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIESTransfers from other funds $ 68,446 $ - $ 282,130 $ 350,576 $ 272,000 NET CASH PROVIDED (USED) BYNONCAPITAL FINANCING ACTIVITIES $ 68,446 $ - $ 282,130 $ 350,576 $ 272,000CASH FLOWS FROM CAPITALFINANCING ACTIVITIES:Acquisition & construction of capital assets $ (10,130,051) $ - $ (1,840,220) $ (11,970,271) $ (1,153,134) Capital contributions 6,016,851 - - 6,016,851 - Principal payments on debt (2,569,145) - (285,000) (2,854,145) - Interest payments on debt (1,431,843) - 13,965 (1,417,878) - NET CASH PROVIDED (USED) BYCAPITAL FINANCING ACTIVITIES $ (8,114,188) $ - $ (2,111,255) $ (10,225,443) $ (1,153,134)CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of investments $ 2,139,475 $ - $ - $ 2,139,475 $ - Payments for investments - - 988,821 988,821 (394,871) Interest on investments - 74,013 200,146 274,159 710,153 NET CASH PROVIDED (USED) BYINVESTING ACTIVITIES $ 2,139,475 $ 74,013 $ 1,188,967 $ 3,402,455 $ 315,282 NET INCREASE (DECREASE) IN CASH &CASH EQUIVALENTS $ 3,974,198 $ 342,649 $ 131,545 $ 4,448,392 $ 1,734,759 CASH & CASH EQUIVALENTS, JANUARY 1 8,505,117 1,233,900 1,782,522 11,521,539 6,536,812CASH & CASH EQUIVALENTS, DECEMBER 31 $ 12,479,315 $ 1,576,549 $ 1,914,067 $ 15,969,931 $ 8,271,571BUSINESS-TYPE ACTIVITIESENTERPRISE FUNDSSTATEMENT OF CASH FLOWSPROPRIETARY FUNDSPage 1 of 2For the Year Ended December 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-15 2006 Comprehensive Annual Financial Report City of Renton, WashingtonGOVERNMENTALACTIVITIESOTHER TOTAL INTERNALWATERWORKS SOLID ENTERPRISE ENTERPRISE SERVICE UTILITYWASTE FUNDS FUNDS FUNDSRECONCILIATION OF OPERATING INCOME(LOSS) TO NET CASH PROVIDED (USED)BY OPERATING ACTIVITIES:Operating income (loss)$ 1,356,124 $ 278,254 $ 162,188 $ 1,796,566 $ (96,955)Adjustments to reconcile operating income(loss) to net cash provided (used)by operating activities:Depreciation & amortization ofdeferred charges$ 5,462,690 $ 3,939 $ 648,595 $ 6,115,224 $ 876,839Other non-operating revenue160,233 - (156,734) 3,499 545,133(Increase) decrease inaccounts receivable1,838,896 (102,724) 152,535 1,888,707 (9,013)(Increase) decrease in due fromother funds/governmental units64,853 65,853 (42,633) 88,073 4,849(Increase) decrease in inventory& prepaid items 29,758 - 6,164 35,922 (10,922)Increase (decrease) in vouchersretainage payable(19,971) 19,526 (16,017) (16,462) 495,371Increase (decrease) in due toother governmental units(53,189) - 654 (52,535) -Increase (decrease) in payables& other short-term liabilities866,040 (314) (1,606) 864,120 6,439Increase (decrease) in customer deposits - - 16,692 16,692 -Increase (decrease) in deferred revenues141,959 - (9,631) 132,328 -Increase (decrease) in accruedemployee leave benefits33,072 4,102 11,496 48,670 488,870Total adjustments $ 8,524,341 $ (9,618) - 609,515$ $ 9,124,238 $ 2,397,566NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 9,880,465 $ 268,636 $ 771,703 $ 10,920,804 $ 2,300,611NONCASH INVESTING, CAPITAL, ANDFINANCING ACTIVITIESCapital disposal and retirement31,237$ -$ -$ 31,237$ -$Contributions of capital assets6,016,851 - - 6,016,851 -Net amort. bond prem. discount & bond issue costs3,931 - 65,005 68,936 -Increase in fair value of investments29,022 - 2,821 31,843 - Depreciation 5,462,690 3,939 645,867 6,112,496 876,839BUSINESS-TYPE ACTIVITIESENTERPRISE FUNDSSTATEMENT OF CASH FLOWSPROPRIETARY FUNDSPage 2 of 2For the Year Ended December 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-16 2006 Comprehensive Annual Financial Report City of Renton, WashingtonPENSION TRUST AGENCYFIREFIGHTER'S SPECIAL PENSION DEPOSITSASSETSCash & cash equivalents$ 921,296 $ 471,522Investments at fair value:Federal National Mortgage Association127,020 - US Treasury Strips4,316,554 - Receivables (net of allowances)Interest on investments2,498,379 - TOTAL ASSETS $ 7,863,249 $ 471,522LIABILITIESVouchers & contracts payable$- $ 80,380Deposits payable391,142TOTAL LIABILITIES $ - $ 471,522NET ASSETSHeld is trust for pension benefits& other purposes$ 7,863,249 $ - STATEMENT OF FIDUCIARY NET ASSETSFIDUCIARY FUNDSDecember 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-17 2006 Comprehensive Annual Financial Report City of Renton, WashingtonPENSION TRUSTFIREMEN'S PENSIONADDITIONS:Other contributions:Fire insurance premiums $ 77,821Investment incomeInvestment earnings202,598TOTAL ADDITIONS $ 280,419DEDUCTIONS:Benefit payments$ 414,281Medical benefit payments11,537Administrative and general 7,216TOTAL DEDUCTIONS $ 433,034NET INCREASE (DECREASE) $ (152,615)NET ASSETS - JANUARY 1 $ 8,015,864NET ASSETS - DECEMBER 31 $ 7,863,249STATEMENT OF CHANGES IN FIDUCIARY NET ASSETSFIREMEN'S PENSION FUNDFor the Year Ended December 31, 2006The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-18 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-19 NOTES TO THE FINANCIAL STATEMENTS January 1, 2006 through December 31, 2006 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe City of Renton was incorporated on September 6, 1901, and operates under the laws of the State of Washington applicable to a Non-Charter code city with a Mayor/Council form of government. A full-time Mayor and seven part-time Council members serve the City, all elected at large to four-year terms. The City provides the full range of municipal services authorized by state statues, together with a Municipal Airport, a Waterworks Utility, a Solid Waste Utility, and a Municipal Golf Course. The accounting and reporting policies of the City related to the funds included in the accompanying financial statements conform to generally accepted accounting principles (GAAP) applicable to state and local governments. GAAP for local governments include those principles prescribed by the Governmental Accounting Standards Board (GASB), the Financial Accounting Standards Board (FASB), when applicable, and the American Institute of Certified Public Accountants (AICPA) pronouncements that have been made applicable by GASB Statements or Interpretations. In accordance with GASB Statement 20 the City has not applied to its enterprise activities FASB Statements and Interpretations, Accounting Principles Board opinions, and Accounting Research Bulletins of the Committee of Accounting Procedure issued after November 30, 1989. The City had implemented all applicable GASB Statements through Statement No. 47 with the exception of Statement No. 45: Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. During 2006, the City implemented, if applicable, Statement No. 43: Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, Statement No. 46: Net Asset Restricted by Enabling Legislation – an amendment of GASB Statement No. 34, and Statement No. 47: Accounting for Terminated Benefits. All other applicable statements were implemented prior to 2006. A. REPORTING ENTITY As required by GAAP the City’s financial statements present the City of Renton – the primary government. The City of Renton’s Mayor appoints the Governing Board for the Renton Housing Authority, which is not considered a component unit of the City. The City is under no obligation to subsidize, nor does it exercise any other prerequisite for inclusion. The City of Renton has no component units (either blended or discretely presented) included in these statements. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-20 B. BASIC FINANCIAL STATEMENTS – GASB 34 PRESENTATION The City’s basic financial statements include both Government-wide (reporting the City as a whole) and fund financial statements (reporting the City’s major funds). Both the Government-wide and fund financial statements categorize primary activities as either government or business-type.GOVERNMENT-WIDE STATEMENTS In the Government-wide Statement of Net Assets, both the governmental and business-type activities columns (a) are presented on a consolidated basis by column, and (b) are reported on a full accrual, economic resource basis, which recognized all long-term assets and receivables as well as long-term debt and obligations. The City’s net assets are reported in three parts – investment in capital assets, net of related debt; restricted net assets; and unrestricted net assets. The City first utilizes restricted resources to finance qualifying activities. The Government-wide Statement of Activities reports both the gross and net cost of each of the City’s functions and business-type activities (general government, judicial, security of persons and property, physical environment, transportation, economic environment, mental and physical health, culture and recreation, waterworks utility, airport, solid waste utility, and golf course). General government revenues (property taxes, timber taxes, retail sales and use taxes, business taxes, excise taxes, and other taxes) also support the functions. The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants and contributions. Program revenues must be directly associated with the function or a business-type activity. Operating grants include operating specific and discretionary (either operating or capital) grants while the capital grants column reflects capital specific grants. General revenues normally cover the net cost, by function or business-type activity. The Government-wide focus is more on the sustainability of the City as an entity and the change in the City’s net assets resulting from the current year’s activities.FUND FINANCIAL STATEMENTS In the fund financial statements, the financial transactions are recorded in individual funds, each accounted for by a separate set of self-balancing accounts that comprise assets, liabilities, reserves, fund equity, revenues, and expenditures or expenses. The presentation is by major funds in either the governmental or business-type categories. GASB Statement 34 sets forth the minimum criteria for the determination of a major fund. The non-major funds are combined in the fund financial statements and are detailed in the combining section. The governmental major fund statements in the fund financial statement are presented on current financial resources and modified accrual basis of accounting. Since governmental fund statements are presented on a different measurement focus and basis of accounting than the Government-wide statements’ governmental column, a reconciliation is presented at the end of 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-21 the statement, which briefly explains the adjustments necessary to transform the fund statements into the Government-wide presentation.Internal service funds of a government are presented in summary form as part of the proprietary fund financial statements. Since the principal users of the internal services are the City’s governmental activities, financial statements for internal service funds are consolidated into the governmental column when presented at the governmental level. These services are reflected in the appropriate functional activity (general government, judicial, security of persons and property, physical environment, transportation, economic environment, mental and physical health, culture and recreation). Interfund fund activity has been eliminated from the Government-wide financial statements. Exceptions are payments in lieu of taxes, external type transactions within the internal service funds (revenue and expenses for interest or services provided to other governmental organizations), and other charges for waterworks utility or storm water utility. Elimination of these charges would distort the direct cost and program revenues for these functions.The City’s fiduciary funds are presented in the fund financial statements. Since the assets are being held for the benefit of a third party and cannot be used for obligations of the City, they are not included in the Government-wide statements. The following describes each fund as presented in the fund financial statements.MAJOR FUNDS GOVERNMENTAL FUNDS GENERAL FUND The General Fund is the primary operating fund of the city. It is used to account for the resources and disbursements of ordinary City operations that are not required to be accounted for in another fund. These include the costs of public safety, building, planning, human services, and general administration. The major sources of revenue are property taxes, utility taxes, and sales taxes. Licenses and permits, charges for services, and fines and forfeits provide additional support. The Community Development Block activities are accounted for within this fund, which is federally funded. PARKSThe Parks Fund accounts for the City’s parks and recreation programs: operations, maintenance, and improvements for municipal park buildings, and landscaping and street tree functions. Resources are primarily from general tax revenues and charges for services. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-22 MUNICIPAL FACILITIES CONSTRUCTION FUND The Municipal Facilities Construction Fund accounts for the acquisition and development of municipal facilities. Resources included general and special revenue taxes and Council-approved general obligation bonds. ENTERPRISE FUNDS WATERWORKS UTILITY The Waterworks Utility Fund accounts for all operation and capital improvement programs for water, wastewater, and storm water services within the City. The activities primarily supported by user fees include: administration, billings and collections, debt service, engineering and operation, maintenance and repairs. The primary resources for the capital improvement programs are revenue bond proceeds, grants (as available), and utility collection charges. SOLID WASTE Solid waste, recycling, and yard waste collection services for the City are accounted for in this fund, supported entirely by service fees. The expenses include payment to the City’s garbage contractor and other service charges. NON-MAJOR FUNDS ARTERIAL STREET FUND The Arterial Street Fund was established pursuant to state law allocating the one-half cent State Gasoline Tax revenue to cities and towns for construction, improvements, and major repair of streets.STREET FUND The Street Fund was established pursuant to state law to account for maintenance and improvements of the City’s street and traffic control systems. Major sources of support are general revenues and state levied taxes on motor vehicle fuels distributed to the City of Renton. LIBRARY FUND The Library Fund accounts for operation of the City’s library system, including central and branch facilities. Resources to the fund are mainly general tax revenues and library fines. HOTEL/MOTEL TAX FUND Accounts for monies collected through an increase of one percent in hotel/motel taxes for the purpose of increasing tourism in the City of Renton. PATHS AND TRAILS RESERVE FUND The Paths and Trails Reserve Fund was created for the purpose of planning, accommodating, and establishing and maintaining certain paths and trails within the City of Renton. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-23 1% FOR ART FUND The City of Renton established this fund by contributing one percent of general governmental capital project funding for art projects. CABLE COMMUNICATIONS DEVELOPMENT FUND The Cable Communications Development Fund accounts for funding for promotion and development of cable communications as established by City ordinance. 1997 LIMITED GENERAL OBLIGATION BOND REDEMPTION FUND Accounts for debt service on a Council-approved bond issue, which provided funding for the purchase of Renton City Hall. 1978 LIMITED GENERAL OBLIGATION BOND REDEMPTION FUND This fund accounts for debt service on a Council-approved bond issue, which provided partial funding for construction of the Renton Senior Activity Center. GENERAL GOVERNMENTAL MISCELLANEOUS DEBT SERVICE FUND Accounts for debt service on installment contracts for equipment, City Shop land purchase, the 1984 and 1985 Limited General Obligation Bond issues for equipment and the 1986 Limited Bond issued to finance a community center, library improvements, permanent financing for purchase of a golf course, acquisition of wetland property, and equipment.1989 UNLIMITED GENERAL OBLIGATION BOND REDEMPTION FUND Accounts for debt service on a voter-approved bond issue, which provided financing to: acquire, construct, rehabilitate, equip and develop low-income housing for the elderly. DOWNTOWN PARKING GARAGE Accounts for resources and expenditures related to the construction of a downtown parking facility. COMMUNITY DEVELOPMENT IMPACT MITIGATION FUND Accounts for monies collected from developers to offset impacts created by their developments to City facilities. FIRE IMPACT MITIGATION FUND Accounts for monies collected from developers to offset impacts created by their developments to City facilities. TRANSPORTATION IMPACT MITIGATION FUND Accounts for monies collected from developers to offset impacts created by their developments to City facilities. LEASED CITY PROPERTIES Accounts for revenue and expenditures related to City property leased to outside entities. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-24 AQUATIC CENTER FUND Accounts for resources and expenditures related to the construction of the Henry Moses Family Aquatic Center. GENERAL GOVERNMENT CAPITAL IMPROVEMENT FUND The General Government Capital Improvement Fund accounts for revenues and expenditures for numerous capital improvements projects, to provide infrastructure necessary for controlled growth, and to address general City needs. Primary resources include: general tax revenues, business licenses fees, federal and state grants, general obligation bond proceeds, and transfers from various cumulative reserve funds. SOUTH LAKE WASHINGTON INFRASTRUCTURE PROJECT FUNDThe South Lake Washington Infrastructure Project Fund accounts for the infrastructure improvements at the south end of Lake Washington. Primary resources include: REET, sales tax, grants, and GO Bonds that will provide for the design, construction, labor wages and benefits, and equipment required to implement the project. AIRPORT FUND Provides accounting for revenues and expenses, which provides administration, debt services, operation, capital improvements, and maintenance of the Renton Municipal Airport and Will Rodger-Wily Post Memorial Seaplane Base. Sources of support to the fund are leases, fuel charges, investment interest, and grant funding as available. GOLF COURSE FUND The Golf Course Fund was created after the City acquired the Maplewood Golf Course. It accounts for the operation, maintenance, debt service, and capital improvements of the facility. OTHER FUND TYPES INTERNAL SERVICE FUNDS EQUIPMENT RENTAL The Equipment Rental Fund accounts for the costs of maintaining and replacing all City vehicles, computers, and auxiliary equipment except for fire apparatus and replacement of police patrol vehicles. The fund also accounts for communication, data support, and printing services provided to City employees. All equipment costs, including depreciation, are factors in calculating the rates, which are charged to each user department. INSURANCE FUND The Insurance Fund provides accounting for self-insurance services to all City departments, including provisions for losses on property, liability, worker’s compensation, unemployment compensation, and the health care program. The Insurance Fund pays expenses and rates are charged to departments based on use and/or coverage requirements. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-25 FIDUCIARY FUNDS Fiduciary funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governmental units and/or other funds. The City has one Pension Trust Fund and one Agency Fund.PENSION TRUST FUND FIREMEN’S PENSION FUND The Firemen’s Pension Fund accounts for the payment of administrative costs and benefits for retired firefighters and their beneficiaries, who were employed prior to March 1, 1970. Primary revenues sources are general property tax allocations in accordance with actuarial calculations, the fire premium tax, and investment income. AGENCY FUND SPECIAL DEPOSIT FUND The Special Deposit Fund was established for the purpose of holding or retaining cash deposits or other securities pending fulfillment of certain conditions and/or requirements by the depositor. Refunds are made when all obligations have been met and only upon authorization from the transmitting department. C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING Basis of Accounting refers to the point at which revenues or expenditures/expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of the measurement made regardless of the measurement focus applied: 1. AccrualBoth governmental and business-type activities in the Government-wide financial statements and the proprietary and fiduciary fund financial statements are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred. Substantially all government fund revenues are accrued. Property taxes are billed and collected within the same period in which taxes are levied. Subsidies and grants to proprietary funds, which finance either capital or current operations, are reported as non-operating revenue based on GASB Statement 33. In applying GASB Statement 33 to grant revenues, the provider recognizes liabilities and expenses and the recipient recognizes receivables and revenue when the eligibility requirements, including time requirements, are met. Resources transmitted before the eligibility requirements are met, are reported as advances by the provider and deferred revenue by the recipient. 2. Modified Accrual The governmental funds financial statements are presented on the modified basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual: i.e., both measurable and available. “Available” means collectible within the current 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-26 period or soon enough thereafter to be used to pay liabilities of the current period. The City considers all revenue reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are generally recognized under the modified accrual basis of accounting when the related liability is incurred. The exception to this general rule is that principal and interest on general obligation long-term debt, if any, is recognized when due. D. ASSETS, LIABILITIES, AND FUND EQUITY 1. Cash and Cash Equivalents The City has defined cash and cash equivalents as cash on hand, demand deposits, and all highly liquid investments (including restricted assets) with maturity of three months or less when purchased. These amounts are classified on the balance sheet or in the statement of net assets as cash and cash equivalents or investments in the various funds. The interest on these investments is prorated to the applicable funds. Included in this category are all funds invested in the Local Government Investment Pool and Municipal Investor Account. Excluded from this category are cash balances held by Fiscal Agents since the City does not have discretionary use of these funds.2. Investments (refer to Note 3B.) 3. Receivables and Payables – Amounts owed/payable to/by the City at year-end. Taxes receivable consists of property taxes and related interest and penalties (refer to Note 4). Accrued interest receivable consists of amounts earned on investments, notes, and contracts. Accrued interest payable consists of amounts owed on notes, loans, and contracts. Customer accounts receivable/payable consists of amounts owed from/to private individuals or organizations for goods and services. If the transactions are with another governmental unit, it is accounted for within “due from/to other governments.”Special assessments are recorded when levied and are liens against the property benefited. Special assessments receivable consist of current and delinquent assessments and related interest and penalties.Deferred assessments consist of special assessments not due within one year. Receivables have been reported net of estimated uncollectible accounts. Because property taxes, special assessments, and utility billings are considered liens on property, no estimated uncollectible amounts are established. Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between the governmental activities and business-type activities are reported in the Government-wide financial statements as “internal balances”(Refer to Note 10). 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-27 Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. In the Government-wide financial statements, and proprietary fund types in the fund financial statements, long-term liabilities are reported in applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Unamortized Premium – the unamortized portion of the excess of bonds proceeds over their face value (excluding accrued interest and issuance costs). Deferred Amount-Refunding – The difference between the carrying amount of redeemed/defeased debt and its reacquisition price. This amount is deferred and amortized over the remaining life of the debt, or the life of the new debt, whichever is shorter. 4. Inventories and prepaid items All City inventories are maintained on a consumption basis of accounting where items are purchased for inventory and charged to the budgetary accounts as the items are consumed. Any material inventories at year-end are included in the balance sheet of the appropriate fund. Inventories are carried at cost on the first in, first out – FIFO basis. Certain payments to vendors reflect costs applicable to future accounting periods and are reported as prepaid items in both the Government-wide and fund statements. 5. Capital Assets and Depreciation (refer to Note 5). 6. Deferred Revenues This account includes amounts recognized as receivables but not revenues in the governmental funds because the revenue recognition criterion has not been met. 7. Custodial Accounts This account reflects the liability for net monetary assets being held by the City in its agency capacity.8. Compensated Absences The City accrues accumulated unpaid vacation and other leave and associated employee-related costs when earned (or estimated to be earned) by the employee. The non-current portion (the amount estimated to be used in subsequent fiscal years) for governmental funds is maintained separately and represents a reconciling item between the fund and Government-wide presentations.9. Fund Balance Designations and Reservations In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. The City has the following reserved or designated fund balances. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-28 Fund Reserved Purpose of Reservation Amount General Fund Prepaid items $8,000 Municipal Facilities Advances to other funds 63,900 TOTAL $71,900 Fund Designated Purpose of Designation Amount General Fund Operating cash reserves $5,761,257 Parks Fund Operating cash reserves 949,909 Parks Fund Special revenue funds 336,080 Municipal Facilities Capital project fund 15,394,113 Street Fund Operating cash reserves 734,828 Library Fund Operating cash reserves 206,201 TOTAL $23,382,388 10. Net Assets (refer to Note 11). 11. Encumbrances An encumbrance system is maintained to account for commitments resulting from approved purchase orders, contracts, and other commitments. Encumbrances remaining at year-end lapse and are canceled. Upon request by the department and approval of the City Council, encumbrances may be re-appropriated in the following year. E. REVENUES, EXPENDITURES, AND EXPENSES 1. Program Revenues Program revenues include charges for services to customers for goods and services provided, operating grants and contributions, and non-operating grants and contributions within the Government-wide Statement of Activities. Charges for services include business licenses, construction permits, and weapon permits. 2. General Revenues Property taxes, timber taxes, retail taxes, business taxes, excise taxes, and associated penalties and interest, and interest and investment earnings are classified as general revenues within the Government-wide Statement of Activities. 3. Interfund Transfers Permanent reallocation of resources between funds of the reporting entity are classified as interfund transfers. For purposes of the Government-wide Statement of Activities, all interfund transfers between individual governmental funds have been eliminated. 4. Expenditures/ExpensesExpenses in the Government-wide Statement of Activities are reported by function as a governmental activity (general government, judicial, security of persons and property, physical environment, transportation, economic environment, culture and recreation, or interest on long-term debt) or business-type activity (waterworks utility, airport, solid waste utility, or golf course). In the fund financial statements, expenditures of governmental funds are classified by: function, debt service principle and interest payments, or purchases of capital items. Proprietary expenditures are classified as operating or non-operating. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-29 5. Operating and Non-operating Revenues and Expenses Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering goods and/or services in connection to the proprietary fund’s principle ongoing operations. It includes all revenue and expenses not related to capital and related financing, non-capital financing, or investing activities. All revenues and expenses not meeting this definition are non-operating revenues and expenses. NOTE 2. COMPLIANCE AND ACCOUNTABILITYThe City of Renton budgets its funds on the cash basis of accounting at the fund level. Annual appropriated budgets are adopted for governmental funds. Budgets for proprietary funds are “management budgets” and are not legally required to be reported. Included in the Required Supplemental and Combining sections of the CAFR are Schedules of Revenues, Expenditures, and Changes in Fund Balances (Budget to Actual) reporting the Actual Budgetary Basis (cash basis) verses Actual GAAP Basis of Accounting (modified basis) for all legally adopted budgets. There have been no material violations of finance-related legal or contractual provisions, and there have been no expenditures exceeding legal appropriations in any of the funds of the City. A. PROCEDURES FOR ADOPTING THE ORIGINAL BUDGET The City of Renton’s budget procedures are mandated by the Chapter 35A.33 of the Revised Code of Washington (RCW). The steps in the budget process are as follows: 1. Prior to November 1, the Mayor submits a proposed budget to the City Council. This budget is based on priorities established by the Council; estimates provided by the City departments during the preceding months; balanced by revenue estimates made by the Mayor. 2. The City Council conducts public hearings on the proposed budget in November and December. 3. The Council makes their adjustments to the proposed budget and adopts, by ordinance, a final balanced budget no later than December 31. 4.The final operating budget, as adopted, is published and distributed within the first four months of the following year.B. AMENDING THE BUDGET The budget, as adopted, constitutes the legal authority for expenditures. Budgets are adopted on the cash basis of accounting; therefore, any comparisons between budget and actual revenues and expenditures are reported under the budgetary basis. The annual budget is adopted with budgetary control at the fund level, so expenditures may not legally exceed appropriations at that level of detail. Transfers or revisions within funds are allowed, but only the City Council has the legal authority to increase or decrease a given fund’s annual budget. This is accomplished by City ordinance. The budget was amended thirteen times during 2006. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-30 Original budgeted inflows as compared to the final budgeted inflows are as follows:IncreaseOriginal Final (Decrease)Budgeted Budgeted BudgetedFund Inflows Inflows InflowsGeneral Fund $50,358,513 $50,935,621 $577,108Park Fund 11,260,376 11,299,136 38,760Arterial Street Fund 440,000 440,000 0Street Fund 6,738,878 6,763,878 25,000Library Fund 1,809,862 1,809,862 0Hotel/Motel Tax Fund 220,000 242,500 22,500Paths and Trails Reserve Fund 0 0 01% for Art Fund 60,000 60,000 0Cable Communications Development Fund 38,900 38,900 0Park Memorial Fund 0 0 01997 LGO Bond Fund 986,253 986,253 01978 LGO Bond Fund 21,000 21,000 0General Government Miscellaneous Debt Service Fund 1,799,400 1,799,400 01989 UGO Bond Redemption Fund 518,400 518,400 0Special Assessment Debt Fund 9,500 0 (9,500)Community Development Impact Mitigation Fund 255,000 255,000 0Fire Impact Mitigation Fund 525,000 525,000 0Transportation Impact Mitigation Fund 600,000 600,000 0Leased City Properties Fund 904,902 904,902 0Aquatic Center Fund 0 0 0Municipal Facilities Construction Fund 2,100,000 2,100,000 0General Government Capital Improvement Fund 16,597,600 17,552,990 955,390South Lake Washington Infrastructure Project Fund 0 24,925,587 24,925,587Airport Fund 1,921,817 1,921,817 0Solid Waste Utility Fund 9,104,429 9,104,429 0Golf Course Fund 2,421,880 2,421,880 0Waterworks Utility Fund 38,014,220 41,594,146 3,579,926Equipment Repair and Replacement Fund 3,201,900 3,201,900 0Information Services Fund 3,431,550 3,833,550 402,000Insurance Fund 3,007,503 3,007,503 0Medical Insurance Fund 8,961,109 8,961,109 0TOTAL $165,307,992 $195,824,763 $30,516,771 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-31 Original budgeted outflows as compared to the final budgeted outflows are as follows:IncreaseOriginal Final (Decrease)Budgeted Budgeted BudgetedFund Outflows Outflows OutflowsGeneral Fund $50,323,513 $51,700,002 $1,376,489Park Fund 11,260,376 11,433,136 172,760Arterial Street Fund 440,000 440,000 0Street Fund 6,738,878 6,791,878 53,000Library Fund 1,809,862 1,821,929 12,067Hotel/Motel Tax Fund 220,000 302,500 82,500Paths and Trails Reserve Fund 0 0 01% for Art Fund 60,000 60,000 0Cable Communications Development Fund 143,900 143,900 0Park Memorial Fund 0 0 01997 LGO Bond Fund 990,300 990,300 01978 LGO Bond Fund 21,500 21,500 0General Government Miscellaneous Debt Service Fund 1,800,800 1,800,800 01989 UGO Bond Redemption Fund 518,400 518,400 0Special Assessment Debt Fund 32,025 68,000 35,975Community Development Impact Mitigation Fund 0 0 0Fire Impact Mitigation Fund 525,000 525,000 0Transportation Impact Mitigation Fund 1,984,800 1,984,800 0Leased City Properties Fund 896,432 939,248 42,816Aquatic Center Fund 0 0 0Municipal Facilities Construction Fund 3,177,000 5,621,096 2,444,096General Government Capital Improvement Fund 18,283,700 22,093,600 3,809,900South Lake Washington Infrastructure Project Fund 0 24,925,587 24,925,587Airport Fund 2,416,800 2,654,043 237,243Solid Waste Utility Fund 9,510,248 9,670,248 160,000Golf Course Fund 2,421,880 2,441,880 20,000Waterworks Utility Fund 39,027,041 47,824,239 8,797,198Equipment Repair and Replacement Fund 3,255,110 3,255,110 0Information Services Fund 3,431,550 3,690,550 259,000Insurance Fund 2,986,001 4,386,001 1,400,000Medical Insurance Fund 8,773,034 8,773,034 0TOTAL $171,048,150 $214,876,781 $43,828,631NOTE 3. DEPOSITS AND INVESTMENTSA. DepositsThe City’s deposits and certificates of deposit are insured by the Federal Depository Insurance Corporation (FDIC) and the State of Washington Public Deposit Protection Commission (WPDPC) Act of 1969.B. Investments The City invests excess and inactive funds in accordance with the City’s Investment Policy (updated and approved on June 5, 2006), which complies with the guidelines within Chapter 35A.40.050 RCW allows for investment of excess cash and inactive cash, directs that the 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-32 responsibility for determining available cash for investment is placed upon the department administering the funds, and allows for pooling of the cash provided that the allocation of income is proportionate to the investment of each fund. Currently, the City invests in obligations of the U.S. Government, U.S. agency issues, Certificates of Deposit with Washington State banks and savings and loan institutions, the State of Washington Local Government Investment Pool (LGIP), and general obligations of Washington State municipalities. The LGIP, managed by the Washington State Office of the Treasurer, is comparable to a Rule 2a7-pools recognized by the Securities and Exchange Commission. A 2a7-like-pool is an external investment pool that is not registered with the SEC as an investment company, but nevertheless has a policy that it will, and does, operate in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940. Rule 2a7 allows SEC-registered mutual funds to use amortized cost rather than market value to report net assets and compute share prices. Investments are shown on the entity-wide Statement of Net Assets at fair value or for 2a7-like pools at amortized cost, which approximates fair value. Investments are reported within Cash and Investments of Governmental Activities and within Cash and Cash Equivalents or Investments of Business-type Activities. C. Deposit and Investment Schedule As of December 31, 2006, the City of Renton had the following investments: Security Type Cost Fair Value Weighted Average Maturity (in years) US Agencies $2,845,807 $2,823,773 3.364 Certificates of Deposit (within WPDPC) 39,000,000 39,000,000 1.140 Local Governmental Investment Pool (LGIP) 32,130,605 32,130,605 0.003 Municipal Investor Account (MIA) 10,030,148 10,030,148 0.003 TOTAL $84,006,560 $83,984,526 0.644 Credit risk. Credit Risk is the risk that an issuer or other counter party to an investment will not fulfill its obligations. All Agency securities in the City’s portfolio are rated “Aaa” by Moody’s Investors Service and “AAA” by Standard & Poor – each rating is the highest possible. Certificates of Deposit are insured by the FDIC up to $100,000 and, additionally, by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission (WPDPC). The Washington State Local Government Investment Pool (LGIP) is a 2a7-like-pool and is operated in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-33 Security Type Cost Fair Value Moody's S&P Federal National Mortgage Association $2,845,807 $2,823,773 Aaa AAA Certificates of Deposit (within WPDPC) 39,000,000 39,000,000 unrated unrated Local Governmental Investment Pool (LGIP) 32,130,605 32,130,605 unrated unrated Municipal Investor Account (MIA) 10,030,148 10,030,148 unrated unrated TOTAL$84,006,560 $83,984,526 The City’s Investment Policy directs that the standard of prudence for investment activities shall be the Prudent Investor Standard that states: “Investments shall be made with judgment and care, under circumstances then prevailing, which person of prudence, discretion, and intelligence would use in the management of their own affairs, not for speculation, but for investment purposes, considering the probable safety of their capital as well as the probable income to be derived.”Custodial credit risk. Custodial credit risk for investments is the risk that, in the event of the failure of the counter party to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. All security transactions, including collateral for repurchase agreements, entered into by the City are conducted on a delivery-versus-payment (DVP) basis. Securities held by a third-party custodian are designated by the City’s Finance and Information Services Administrator. Certificates of Deposit are delivered to and held by the Finance Division.Concentration of credit risk. Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s investment in a single issuer. The City diversifies its investment instruments to avoid incurring unreasonable risk inherent in over-investing in instruments and issuers as follows: Maximum’s per Policy InstrumentMaximumIssuerMaximumU.S. Treasuries 100% 100% U.S. Agencies 75% 50% Certificates of Deposit (within WPDPC) 50% 25% Local Governmental Investment Pool (LGIP) 50% 50% Commercial Paper 25% 5% Interest Rate Risk. Interest rate risk is the risk that changes in interest rates over time, adversely affecting the fair value of an investment. The City’s portfolio is managed within the parameters established by the Investment Policy, which limits the weighted average maturity of the portfolio to five years.2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-34 Security Type 0-6 months6 months – 1 year 1-3 years 3+years Totals US Agencies $0 $0 $0 $2,823,773 $2,823,773 Certificates of Deposit (within WPDPC) 0 31,000,000 8,000,000 0 39,000,000 Local Governmental Investment Pool (LGIP)32,130,605 0 0 0 32,130,605 Municipal Investor Account (MIA) 10,030,148 0 0 0 10,030,148 TOTAL $42,160,753 $31,000,000 $8,000,000 $2,823,773 $83,984,527 NOTE 4. PROPERTY TAXESThe King County Finance Director acts as an agent to collect property taxes levied in the county for all taxing authorities. Taxes are levied annually, January 1, on property value listed as of the prior August 31. Assessed values are established by the King County Assessor at 100 percent of fair market value. A revaluation of all property is required every two years; however, King County has the ability to revalue annually. Property taxes levied by the King County Assessor and collected by the King County Finance Director become a lien on the first day of the levy year and may be paid in two equal installments if the total amount exceeds $30. The first half of real property taxes is due on April 30 and the balance is due October 31. Delinquent taxes bear interest at the rate of 12 percent and are subject to additional penalties if not paid as scheduled. No allowance for uncollectible taxes is established because delinquent taxes are considered fully collectible. At year-end, property taxes are recorded as a receivable with the portion not expected to be collected within 60 days offset by deferred revenue. During the year, property tax revenues are recognized when cash is received. The tax rate for general City operations is limited to $3.375 per $1,000 of assessed value (RCW 84.52.043). Of this amount, up to .45 cents per thousand dollars may be designated for contribution to the Firemen’s Pension Fund. If a report by a qualified actuary on the condition of the Firemen’s Pension Fund establishes that this amount (or portion of) is not necessary to maintain the actuarial soundness of the fund, the amount can be used for any other municipal purpose (RCW 41.16.060). The tax rate limit may be reduced for any of the following reasons: 1. The Levy Limit: the levy limit calculation applies to a taxing district’s budget, and not to increases in the assessed value or tax bill of individual properties. Initiative 747 restricts individual taxing districts from collecting, in any year, more than a one percent increase in their regular, non-voted, levy over the highest levy amount since 1985. New construction, annexations, and excess levies approved by the voters are not included in the levy limit calculation. If the assessed valuation increases by more than one percent due to revaluation, the levy rate will be decreased. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-35 2. The One Percent Constitution Limit: The Washington State Constitution limits the regular (non-voted) combined property tax rate applied to an individual’s property to one percent ($10 per $1,000) on the market valuation. Voters may approve special levies that are added to this figure. If the taxes of all districts exceed this amount, each is proportionately reduced until the total is at or below the one percent limit. 3. The City may voluntarily levy taxes below the legal limit. Special levies approved by the voters are not subject to the above limitations. The City’s regular levy for 2006 is $3.04482 and the excess levy for General Obligation Bond debt is $.07088 for a total of $3.1157, per the King County Assessor’s 2006 Annual Report.NOTE 5. CAPITAL ASSETS AND DEPRECIATIONA. GENERAL POLICES Major expenditures for capital assets, including capital leases and major repairs that increase the useful life, are capitalized. The capitalization threshold applied to the City’s assets is $5,000. Maintenance, repairs, and minor renewals are accounted for as expenditures or expenses when incurred.All capital assets are valued at historical cost (or estimated cost, where historical cost is not known/or estimated market value for donated assets /or the lower of cost or fair market value when transferred between proprietary and governmental funds.) The City has acquired certain assets with funding provided by federal financial assistance programs. Depending on the terms of the agreements involved, the federal government could retain an interest in these assets. However, the City has sufficient legal interest to accomplish the purposes for which the assets were acquired, and has included such assets within the applicable statements. The City capitalizes art and historical treasures. Art and historical treasures are expected to be maintained or enhanced over time and thus, are not depreciated. B. GOVERNMENTAL CAPITAL ASSETS Governmental long-lived assets of the City purchased, leased, or constructed are recorded as expenditures in the governmental funds and are capitalized, net of depreciation, in the Government-wide statements. C. PROPRIETARY FUND CAPITAL ASSETS Capital assets of proprietary funds are capitalized in their respective statement of net assets, net of depreciation. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-36 D. DEPRECIATION Depreciation on all depreciable assets is provided on the straight-line basis over the following useful lives: Type of Asset Estimated Service Life Buildings and structures, except utility plant 25-50 years Other improvements 25-50 years Utility plant 25-75 years Machinery and equipment 3-20 years Infrastructure 25-50 years Depreciation Expense was charged to governmental and business-type activities as follows: Governmental Activities Amount General government $3,329,655 Judicial 0 Security of persons and property 647,608 Physical environment 15,652 Transportation 2,075,736 Economic development 293,107 Culture and recreation 1,256,455 Health and human services 54,598 TOTAL Governmental Activities Depreciation Expense $7,672,811 Business-type Activities Amount Waterworks $5,462,690 Airport 381,043 Solid waste 3,939 Golf course 267,552 TOTAL Business-type Activities Depreciation Expense $6,115,224 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-37 E. SUMMARY OF CHANGES DescriptionBeginningBalance Increases Decreases EndingBalance GOVERNMENTAL ACTIVITIES Capital assets not being depreciated:Land and land improvements $81,997,215 $3,938,992 $0 $85,936,207 Construction in progress 15,819,455 14,496,673 5,944,345 24,371,783 TOTAL capital not being depreciated $97,816,670$18,435,665$5,944,345$110,307,990Other capital assets: Buildings and structures $73,605,992 $17,772 $0 $73,623,764 Other improvements 102,371,218 9,673,029 0 112,044,247 Machinery and equipment 23,955,401 4,750,082 1,941,785 26,763,698 TOTAL other capital assets at capitalized cost $199,932,611$14,440,883$1,941,785$212,431,709Less accumulated depreciation for: Buildings and structures $18,163,965 $1,915,583 $0 $20,079,548 Other improvements 31,929,633 2,867,033 0 34,796,666 Machinery and equipment 13,342,727 2,890,195 1,735,646 14,497,276 TOTAL accumulated depreciation $63,436,325$7,672,811$1,735,646$69,373,490Governmental activities capital assets, net of depreciation$234,312,956$25,203,737$6,150,484$253,366,209BUSINESS-TYPE ACTIVITIES Capital assets not being depreciated: Land and land improvements $6,976,321 $0 $0 $6,976,321 Construction in progress 2,512,285 2,860,487 1,246,657 4,126,115 TOTAL capital assets not being depreciated $9,488,606$2,860,487$1,246,657$11,102,436Other capital assets Buildings and structures $15,032,621 $0 $0 $15,032,621 Other improvements 259,558,408 10,220,868 31,237 269,748,039 Machinery and equipment 5,729,498 134,965 0 5,864,463 TOTAL other capital assets at capitalized cost $280,320,527$10,355,833$31,237$290,645,123Less accumulated depreciation for: Buildings and structures $3,565,120 $335,959 $4 $3,901,075 Other improvements 62,283,413 5,624,327 31,237 67,876,503 Machinery and equipment 4,753,074 154,938 0 4,908,012 TOTAL accumulated depreciation $70,601,607$6,115,224$31,241$76,685,590Business-type capital assets, net of depreciation $219,207,526 $7,101,096$1,246,653$225,061,969At the end of 2006, 65 projects comprise the Construction in Progress. Upon completion, the projects will be capitalized in the Government-wide statements in their appropriate categories and in the fund statements for proprietary funds, if applicable. Construction commitments at December 31, 2006, are as follows: 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-38 Fund – Funding Source Cost to Date Estimated RemainingCost Estimated Total Cost FutureFunding RequiredWaterworks – charges for services $3,073,672 $58,340,000 $61,413,672 None Airport – charges for services 1,052,443 7,215,000 8,267,443 None General governmental – taxes, charges for services, grants 24,371,783 179,348,000 203,719,783 None Golf course – charges for services 1,300,000 1,300,000 None NOTE 6. PENSIONSWith the exception of firefighters employed prior to March 1, 1970, substantially all City’s full-time and qualifying part-time employees participate in one of the following statewide retirement systems administered by the Washington State Department of Retirement Systems, under cost-sharing multiple-employer public employee defined benefit and defined contribution retirement plans. The Department of Retirement Systems (DRS), a department within the primary government of the State of Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of Retirement Systems, Communications Unit, PO Box 48380, Olympia, WA 98504-8380. The City is the administrator of the Firefighter Pension Plan for all firefighters employed prior to March 1, 1970. The Firefighter Pension Plan is included within the City of Renton’s statements as a pension trust fund. There is no separate GAAP-based audited report. A schedule of employer contributions for six years, prepared by Milliman, Consultants and Actuaries, is included in the Required Supplemental Information section. Additional information from the actuarial report prepared for the Firefighter Pension Plan, by Milliman, Consultants and Actuaries, may be obtained by contacting the City of Renton, Finance Division, 1055 South Grady Way, Renton, WA 98057. The following disclosures are made pursuant to GASB Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans and GASB Statement No. 27, Accounting for Pensions by State and Local Government Employers.Public Employees Retirement System (PERS) Plans 1, 2, and 3Plan DescriptionPERS is a cost-sharing multiple-employer retirement system comprised of three separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a defined benefit plan with a defined contribution component. Membership in the system includes: elected officials; state employees; employees of the Supreme, Appeals, and Superior courts (other than judges currently in a judicial retirement system); employees of legislative committees; community and technical colleges, college and university employees not participating in national higher education retirement programs; judges of district and municipal courts; and employees of local governments. PERS participants, who joined the PERS system by September 30, 1977, are Plan 1 members. Those who joined on or after October 1, 1977; and by either, February 28, 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-39 2002 for state and higher education employees, or August 31, 2002 for local government employees, are Plan 2 members unless they exercise an option to transfer their membership to Plan 3. PERS participants joining the system on or after March 1, 2002 for state and higher education employees, or September 1, 2002 for local government employees, have the irrevocable option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. An employee is reported in Plan 2 until a choice is made. Employees who fail to choose within 90 days default to PERS Plan 3. PERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. PERS retirement benefit provisions are established in state statute and may be amended only by the State Legislature.Plan 1 retirement benefits are vested after an employee completes five years of eligible service. Plan 1 members are eligible for retirement at any age after 30 years of service, or at age 60 with five years of service, or at age 55 with 25 years of service. The annual benefit is 2 percent of the average final compensation per year of service, capped at 60 percent. The average final compensation is based on the greatest compensation during any 24 eligible consecutive compensation months. If qualified, after reaching age 66, a cost-of-living allowance is granted based on years of service credit and is capped at 3 percent annually. Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2 members may retire at age 65 with five years of service, or at 55 with 20 years of service, with an allowance of 2 percent of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-month period. Plan 2 retirements prior to age 65 receive reduced benefits. If retirement is at age 55 or older with 30 years of service, a 3 percent per year reduction applies; otherwise an actuarial reduction will apply. There is no cap on years of service credit; and a cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index), capped at 3 percent annually. Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions finance a defined contribution component. The defined benefit portion provides a benefit calculation at 1 percent of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-month period. Effective June 7, 2006, Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or after five years if twelve months that were earned after age 44; or after five service credit years earned in PERS 2 prior to June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. Vested Plan 3 members are eligible to retire with full benefits at age 65, or at age 55 with 10 years of service. Retirements prior to age 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years if service, a 3 percent per year reduction applies; otherwise an actuarial reduction will apply. The benefit is also actuarially reduced to reflect the choice of a survivor option. There is no cap on years of service credit; and Plan 3 provides the same cost-of-living allowance as Plan 2. The defined contribution portion can be distributed in accordance with an option selected by the member, either as a lump sum or pursuant to other options authorized by the Employee Retirement Benefits Board. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-40 There are 1,181 participating employers in PERS. Membership in PERS consisted of the following as of the latest actuarial valuation date for the plans of September 30, 2005: Retirees and beneficiaries receiving benefits 68,609 Terminated plan members entitled to but not yet receiving benefits 22,567 Active plan members vested 104,574 Active plan members non-vested 51,004 TOTAL 246,754 Funding PolicyEach biennium the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer and employee contributions rates, and Plan 3 employer contribution rates. Employee contribution rates for Plan 1 are established by statute at 6 percent for state agencies and local government unit employees, and 7.5 percent for state government elected officers. The employer and employee rates for Plan 2 and the employer contribution rates for Plan 3 are developed by the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. All employers are required to contribute at the level established by the Legislature.Under PERS 3, employer contributions finance the defined benefit portion of the plan, and member contributions finance the defined contribution portion. The Employee Retirement Benefits Board sets Plan 3 employee contribution rates. Six rate options are available ranging from 5 to 15 percent; two of the options are graduated rates dependent on the employee’s age. The methods used to determine the contribution requirements are established under state statute in accordance with Chapters 41.40 and 41.45 RCW.The required contribution rates expressed as a percentage of current-year covered payroll, as of December 31, 2006, were as follows: Contributor PERS Plan 1 PERS Plan 2 PERS Plan 3 Employer* 3.69 %** 3.69% 3.69%**** Employee 6.00%*** 3.50% ***** * The employer rates include the employer administration expense fee currently at .18%. ** The employer rate for state elected officials is 5.44%. *** The employee rate for state elected officials is 7.50%. **** Plan 3 defined benefit portion only. ***** Variable from 5.0% minimum to 15.0% maximum based on rate selected by the PERS 3 member. Both the City and the employees made the required contributions. The City’s required contributions for years ended December 31, were as follows: Year PERS Plan 1 PERS Plan 2 PERS Plan 3 2006 $50,609 $616,903 $92,216 2005 33,340 367,240 51,521 2004 25,977 252,464 35,737 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-41 Law Enforcement Officers’ and Firefighters’ Retirement System (LEOFF) Plans 1 and 2Plan DescriptionLEOFF is a cost-sharing multiple-employer retirement system comprised of two separate defined benefit plans. LEOFF participants who joined the system by September 30, 1977, are Plan 1 members. Those who joined on or after October 1, 1977, are Plan 2 members. Membership in the system includes all full-time, fully compensated; local law enforcement officers and firefighters. LEOFF membership is comprised primarily of non-state employees, with the exception of the Department of Fish and Wildlife enforcement officers, who were first included prospectively effective July 27, 2003, being an exception. In addition, effective July 24, 2005, current members of PERS who are emergency medical technicians can elect to become members of LEOFF Plan 2. Effective July 1, 2003, the LEOFF Plan 2 Retirement Board was established to provide governance of LEOFF Plan 2. The Board’s duties include adopting contribution rates and recommending policy changes to the Legislature for the LEOFF Plan 2 retirement plan. LEOFF defined benefits are financed from a combination of investment earnings, employer and employee contributions, and a special funding situation in which the state pays the remainder through state legislative appropriations. LEOFF retirement benefit provisions are established in state statute and may be amended by the State Legislature. Plan 1 retirement benefits are vested after an employee completes five years of eligible service. Plan 1 members are eligible for retirement with five years of service at the age of 50. The benefit per year of service calculated as a percent of final average salary is as follows: Term of Service Percent of FinalAverage Salary 20 or more years 2.0% 10 but less than 20 years 1.5% 5 but less than 10 years 1.0% The final average salary is the basic monthly salary received at the time of retirement, provided a member has held the same position or rank for 12 months preceding the date of retirement. Otherwise, it is the average of the highest consecutive 24 months’ salary within the last 10 years of service. If membership was established in LEOFF after February 18, 1974, the service retirement benefit is capped at 60 percent of final average salary. A cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index.) Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2 members may retire at the age of 50 with 20 years of service, or at age 53 with five years of service, with an allowance of 2 percent of the final average salary per year of service. The final average salary is based on the highest consecutive 60 months. Plan 2 retirements prior to age 53 are reduced 3 percent for each year that the benefit commences prior to age 53 and to reflect the choice of a survivor option. There is no cap on years of service credit; and a cost-of-living allowance is granted (indexed to the Seattle Consumer Price Index), capped at 3 percent annually.2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-42 There are 376 participating employers in LEOFF. Membership in LEOFF consisted of the following as of the latest actuarial valuation date for the plans of September 30, 2005: Retirees and beneficiaries receiving benefits 8,723 Terminated plan members entitled to but not yet receiving benefits 577 Active plan members vested 12,348 Active plan members non-vested 3,543 TOTAL 25,191 Funding PolicyStarting on July 1, 2000, Plan 1 employers and employees will contribute zero percent as long as the plan remains fully funded. Employer and employee contribution rates are developed by the Office of the State Actuary to fully fund the plan. Plan 2 employer and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board in accordance with Chapter 41.45 RCW. All employers are required to contribute at the level required by state law. The Legislature has the ability, by means of a special funding arrangement, to appropriated money from the state General Fund to supplement the current service liability and fund the prior service cost of Plan 1 and 2 in accordance with the requirements of the Pension Funding Council. However, this special funding situation is not mandated by the state constitution and this funding requirement could be returned to the employers by a change in statute. The required contribution rates expressed as a percentage of current-year covered payroll, as of December 31, 2006, were as follows: Contributor LEOFF Plan 1 LEOFF Plan 2 Employer* .18% 4.90%** Employee .00% 7.85% State N/A 3.13% * The employer rates include the employer administration expense fee currently at .18%. ** The employer rate for ports and universities is 8.03%. Both the City and the employees made the required contributions. The City’s required contributions for years ended December 31, were as follows: Year LEOFF Plan 1 LEOFF Plan 2 2006 $2,050 $716,583 2005 2,554 549,001 2004 3,128 433,463 Firefighter’s PensionPlan DescriptionThe Firefighter’s Pension Plan is a closed, single-employer, defined benefit pension plan established in accordance with RCW 41.18 and Renton Municipal Code. This plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. This system was established for firefighters employed prior to March 1, 1970, when the LEOFF retirement system was established. The retirement benefits 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-43 vest after 20 years of service. Members may retire after 25 years of service regardless of age, and after age 50 with 20 or more years of service. At December 31, 2006, there were 42 members in the System: Retirees and beneficiaries receiving benefits 38 Retirees and beneficiaries currently receiving full retirement through LEOFF 4 Active plan members vested 0 Active plan members non-vested 0 TOTAL 42 Funding PolicyUnder state law, the Firefighter’s Pension Plan is provided an allocation of all monies received by the state from taxes on fire insurance premiums; interest earnings; member contributions made prior to the inception of LEOFF; and City contributions required to meet projected future pension obligations. Costs of administering the Firefighter’s Pension Plan are paid by the Plan. For 2006, this cost was $7,216. An actuarial valuation is done every two years and was completed as of January 1, 2007. TheActuarial Valuation of Firefighters’ Pension Fund table is reported in the Required Supplemental Information section, and a recap of the Schedule of Funding Progress for the last five valuations is as follows: Valuation Date January 1 Actuarial Value of Assets(rounded to thousands) Actuarial AccruedLiabilities Entry Age (rounded to thousands) Unfunded Actuarial AccruedLiabilities (UAAL) (rounded to Funded Ratio CoveredPayroll (rounded to thousands) UAAL asa % of CoveredPayroll 1997 $5,238 $6,444 $1,206 81% $260 464% 2001 7,067 6,780 (287) 104% 0 - 2003 9,189 6,472 (2,717) 142% 0 - 2005 7,777 6,254 *(1,523) 124% 0 - 2007 7,847 6,364 (1,483) 123% 0 - * A $29 decrease in the actuarial accrued liabilities was made after the City’s financial report was published and before the valuation was released. Significant actuarial assumptions used in the January 1, 2007, valuation include: Valuation date: January 1, 2007 Actuarial cost method: entry age normal Amortization method: 30-year, closed as of January 1, 2000 Remaining amortization period: 23 years Asset valuation method: fair value Actuarial assumptions: 1) investment rate of return – 5%; 2) projected salary increases – 4%; 3) inflation – 3%; and, 4) cost-of-living adjustments – based upon salary increase assumption for FPF benefits, inflation assumption for LEOFF benefits. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-44 The Annual Required Contribution (ARC) was computed using the Entry Age Normal Cost Method. Under this method the projected benefits are allocated on a level basis as a percentage of salary over the earnings of each individual between entry age and assumed exit age. The amount allocated to each year is called the Normal Cost and the portion of the Actuarial Present Value of all benefits not provided for by future Normal Cost payments is called the Actuarial Accrued Liability. Since all members have already retired, the amount of the Normal Cost is zero. The Unfunded Actuarial Accrued Liability (UAAL) is the Actuarial Accrued Liability minus the actuarial value of the Fund’s assets. The following Annual Pension Cost and Net Pension Obligation table presents the annual Normal Cost and the ARC as of January 1, 2007, assuming the UAAL is amortized over a closed 30-year period beginning January 1, 2000. Annual required contribution (ARC) 12/31/2005 Fiscal YearEnding12/31/2006 Fiscal Year Ending12/31/2007 Annual normal cost (BOY) $0 $0 $0 Amortization of UAAL (BOY) (107,622) (107,622) (104,731) Interest to end of year (EOY)* (5,919) (5,919) (5,237) ARC at EOY ($113,541) ($113,541) ($109,968) Interest on NPO ($24,553) ($33,604) ($38,658) Adjustment to ARC (31,545) (44,035) (54,591) Annual pension cost (APC) ($106,649) ($103,110) ($94,035) Employer contributions*** $58,029 $59,068 **$60,000 Change in NPO (164,578) (162,178) (154,035) NPO at BOY prior year ($446,410) ($610,988) ($733,166) NPO at EOY ($610,988) ($773,166) ($927,201) * Assumed interest rate: 5.5% in 2005 and 2006, 5.0% in 2007 ** Estimated amount to be replaced at year-end with actual *** Employer contributions are total contributions to the fund net of disbursements for medical and administrative expenses. The Annual Development of Pension Cost is recapped as follows:Fiscal Year Ending12/31 ARC @ EOY* Interest onNPOARC Adjustment Annual PensionCost (APC) Total Employer Contributions ChangeinNPO2002 $0 ($3,781) ($4,435) $654 $55,730 $(55,076) 2003 0 (7,088) (8,433) 1,347 63,088 (61,741) 2004 (205,680) (10,790) (13,047) (203,423) 63,151 (266,574) 2005 (113,541) (24,553) (31,545) (106,549) 58,029 (164,578) 2006 (113,541) (33,604) (44,035) (103,110) 59,068 (162,178) 2007 (109,868) (38,658) (54,591) (94,035) 60,000 (154,035) 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-45 Fiscal Year EndingDecember 31NPOBalance(Gain)/ LossAmort. Factor*** Amort. of (Gain)/ LossEndingBalance2002 ($118,095) ($55,730) 14.2105 ($4,435) ($118,095) 2003 (179,836) (63,088) 14.0032 (8,433) (179,836) 2004 (446,410) (268,831) 13.7834 (13,047) (446,410) 2005 (610,988) (171,570) 14.1517 (31,545) (610,988) 2006 (733,166) (172,609) 13.8750 (44,035) (773,166) 2007 (927,201) (189,988) 14.1630 (54,591) (927,201) Three year trend information is recapped as follows: Fiscal Year EndingDecember 31 Annual Pension Cost (APC) Contribution as a Percentage of APC Net Pension Obligation (NPO) 2005 ($106,549) N/A ($610,988) 2006 (103,110) N/A (773,166) 2007 (94,035)* N/A* (927,201)* *Amounts will be replaced at year-end with actual amounts. Employees are not required to make contributions. The contributions to the System for 2006 include $77,821 from fire insurance premiums and $202,598 of investment income. Benefits and refunds of the defined benefit pension plan are recognized when due and payable in accordance with the terms of the plan. For 2006, $414,281 was paid for benefit payments and $11,537 for medical payments. The Net Pension Obligation moves from ($610,988) to ($773,166) and is included, as an asset, in the City of Renton’s Governmental-wide Statement of Net Assets. NOTE 7. OTHER POST EMPLOYMENT BENEFITSIn addition to the pension benefits described in Note 6, the City is required to pay post employment benefits in accordance with State statute to all LEOFF 1 (law enforcement officers and firefighters hired prior to October 1, 1977) and Fire Pension (firefighters hired prior to March 1, 1970) retirees. Currently there are 98 LEOFF 1 retirees who receive necessary medical and hospitalization coverage and five retirees who are covered solely by the Fire Pension Plan and receive medical coverage limited to treatment of service-related disabilities only. Expenditures for post employment health care benefits are recognized as retirees report claims. The City does not have a funding policy at this time and no assets are designated for this purpose. During the year, expenditures of $1,151,205 were recognized for post employment health care. State statute provides that the City's responsibility for medical payments of LEOFF I retirees is secondary to any other coverage retirees receive or are eligible to receive. The City recognizes a potential savings exists when retirees utilize Medicare as primary coverage and the City for secondary coverage and ineligible expenses. Therefore, upon reaching age 65, the City requires 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-46 the retirees to apply for and utilize Medicare Part B coverage. The City reimburses these Medicare premiums at an average cost of approximately $88.50 per month for 47 LEOFF I retirees and five Fire Pension retirees. NOTE 8. CONTINGENCIESLitigationThe City has recorded in its financial statements all material liabilities, including an estimate for situations that are not yet resolved but where, based on available information, management believes it is probable that the City will have to make payment. In the opinion of management, the City’s insurance policies and/or self-insurance reserves are adequate to pay all known or pending claims. Contingencies under Grant ProvisionsThe City participates in a number of federal and state assisted programs. These grants are subject to audit by the grantors of their representatives. Such audits could result in requests for reimbursement to grantor agencies for expenditures disallowed under the terms of the grants. The City’s management believes that such disallowances, if any, will be immaterial. Bond IndenturesThe City is in compliance with all significant bond indenture and restrictions. Construction CommitmentsRefer to Note 5. NOTE 9. RISK MANAGEMENTThe City of Renton is exposed to various risks of loss related to tort; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City of Renton protects itself against unforeseen losses by utilizing a three-pronged risk management approach. First, the City self-funds first level losses through its Insurance Fund. Second, excess insurance is purchased to cover medium and large losses. Third, the City reserves the right to utilize the provisions of Chapter 35A.31.060 RCW to fund catastrophic or uninsured losses. This State statute allows cities to levy a non-voted property tax increase to pay for uninsured claims. An analysis of the self-insurance retention levels, limits of insurance, and claims administrator for the major types of coverage are as follows: 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-47 Type of Coverage Risk Retention Occurrence Claims Administrator Aggregate Amount Carrier Property $25,000 WA Cities Ins Authority $500,000,000 (per occurrence subject to sub-limits) WA Cities Ins Authority Liability 250,000 WA Cities Ins Authority 14,000,000(per occurrence) WA Cities Ins Authority Auto Liability 250,000 WA Cities Ins Authority 14,000,000(per occurrence) WA Cities Ins Authority Equipment breakdown 5,000* Arthur J. Gallagher 50,000,000 Zurich Public officers 250,000 WA Cities Ins Authority 10,000,000 WA Cities Ins Authority Crime 10,000 Arthur J. Gallagher 1,000,000 Travelers Casualty & Surety Airport liability 0 Arthur J. Gallagher 100,000,000 Ace Property & Casualty Underground storage tank 5,000 Arthur J. Gallagher 1,000,000 Commerce & Industry Worker’s comp 350,000 Berkley Risk 1,000,000 Midwest Casualty Employee health 140,000 HMA, Inc N/A SunLife * There is a 4-hour utility interruption clause, prior to the deductible becoming applicable. During 2006, there were no reductions in insurance coverage, and settlements for the last three years have not exceeded insurance coverage. The City of Renton is a member of the Washington Cities Insurance Authority (WCIA). Utilizing Chapter 48.62 RCW (self-insurance regulation) and Chapter 39.34 RCW (Interlocal Cooperation Act), nine cities originally formed WCIA on January 1, 1981. WCIA was created for the purpose of providing a pooling mechanism for jointly purchasing insurance, jointly self-insuring, and/or jointly contracting for risk management services. WCIA has a total of 121 members. New members initially contract for a three-year term and thereafter automatically renew on an annual basis. A one-year withdrawal notice is required before membership can be terminated. Termination does not relieve a former member from its unresolved loss history incurred during membership.Liability coverage is written on an occurrence basis, without deductibles. Coverage includes general, automobile, police, public officials’ errors or omissions, stopgap, and employee benefits liability. Limits are $3 million per occurrence self insured layer, and $12 million per occurrence in the re-insured excess layer with no annual aggregate except $10 million per member for public officials’ errors and omissions. The excess layer is insured by the purchase of reinsurance and insurance. Total limits are $15 million per occurrence subject to aggregate sublimits in the excess layers. The Board of Directors determines the limits and terms of coverage annually.Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and machinery are purchased on a group basis. Various deductibles apply by type of coverage. Property insurance and auto physical damage are self-funded from the members’ deductible to 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-48 $500,000 for all perils other than flood and earthquake, and insured above that amount by the purchase of reinsurance. In-house services include risk management consultation, loss control field services, claims and litigation administration, and loss analyses. WCIA contracts for the claims investigation consultants for personnel issues and land use problems, insurance brokerage and lobbyist services.WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as determined by an outside, independent actuary. The assessment covers loss, loss adjustment, and administrative expenses. As outlined in the interlocal agreement, WCIA retains the right to additionally assess the membership for any funding shortfall. An investment committee, using investment brokers, produces additional revenue by investment of WCIA’s assets in financial instruments, which comply with all State guidelines. These revenues directly offset portions of the membership’s annual assessment. A Board of Directors governs WCIA, which is comprised of one designated representative from each member. The Board elects an Executive Committee and appoints a Treasurer to provide general policy direction for the organization. The WCIA Executive Director reports to the Executive Committee and is responsible for conducting the day-to-day operations of WCIA. The City's Risk Management Program is administered by the Human Resources and Risk Management Administrator, with claims being processed by the independent claims administrators noted above. As of December 31, 2006, the City had accrued the following amounts for outstanding claims: Coverage Total Claims Payable 12/31/2006 Property & liability $537,693 Worker’s compensation 765,089 Employee health 1,325,000 TOTAL $2,627,782 2006 Property & Liability Worker’s Compensation Employee HealthTotals IBNR claims at beginning of the year $610,044 $765,089 $1,050,700 $2,425,833 Current year and changes in estimates 1,840,667 987,554 2,584,817 5,413,038 Claims payments (1,913,018) (987,554) (2,310,517) (5,211,089) IBNR claims at end of the year $537,693 $765,089 $1,325,000 $2,627,782 2005 Property & Liability Worker’s Compensation Employee Health Totals IBNR claims at beginning of the year $583,617 $695,930 $1,258,170 $2,537,717 Current year and changes in estimates 792,048 418,609 5,222,493 6,433,150 Claims payments (765,621) (349,450) (5,429,963) (6,545,034) IBNR claims at end of the year $610,044 $765,089 $1,050,700 $2,425,833 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-49 NOTE 10. INTERFUND TRANSACTIONSInterfund transactions are classified as follows: 1. Services Provided – Transactions that would be treated as revenues, expenditures, or expenses if they involve external organizations, such as buying goods and services or payments in lieu of taxes, are similarly treated when they involve other funds of the City of Renton. 2. Transfers – Transactions to support the operations of other funds are recorded as “Transfers” and classified with “Other Financing Sources or Uses” in the fund statements. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the Government-wide financial statements. 3. Contributions – Contributions to the capital of enterprise or internal service funds, transfers of capital assets between proprietary and governmental funds, transfers to establish or reduce working capital in other funds, and transfers remaining balances when funds are closed are classified non-operating revenue. 4. Loans/Advances – Loans between funds are classified as interfund loans receivable and payable or as advances to and from other funds in the fund statements. Interfund loans do not affect total fund equity, but advances to other funds are offset by a reservation of fund equity. Loans and advances are subject to elimination upon consolidation. As of December 31, 2006, outstanding interfund balances (resulting from various interfund transactions) were as follows: FundReceivablesDue From Other FundsPayablesDue To Other FundsPurposeGeneral fund $330 $15,000 To accrue 2006 interfund services provide, paid for in 2007 Street 47,898 0 To accrue 2006 interfund services provide, paid for in 2007 Hotel / motel 15,000 0 To accrue 2006 interfund services provide, paid for in 2007 General CIP 0 32,038 To accrue 2006 interfund services provide, paid for in 2007 South Lake WA infrastructure 0 5,586 To accrue 2006 interfund services provide, paid for in 2007 Waterworks utility 56,328 50,676 To accrue 2006 interfund services provide, paid for in 2007 Golf 0 5,666 To accrue 2006 interfund services provide, paid for in 2007 Airport 0 2,734 To accrue 2006 interfund services provide, paid for in 2007 Insurance 0 7,855 To accrue 2006 interfund services provide, paid for in 2007 TOTAL* $119,556 $119,555 *Difference is the result of rounding individual fund numbers in the aggregate. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-50 The following is a recap of interfund advances (expected to be paid by 2007): FundAdvancesDue From Other FundsAdvancesDue To Other Funds Purpose Leased property $0 $63,900 Loan from Municipal Facilities to fund Tenant Improvements Municipal facilities 63,900 0 Loan to Leased Property to fund Tenant Improvements TOTAL $63,900 $63,900 Transfers for 2006 were as follows: FundTransferInTransferOutPurposeGeneral $0 $272,000 Contribution for LEOFF 1 LT Care Arterial street 0 440,000 Contribution for CIP Overlay Projects 1% for Art 17,505 0 From Transportation CIP for Art General debt 525,000 0 Contribution in for Fire Impact Debt. SAD/LID 0 68,446 Transfer Fund Balance to Waterwork Close out the SAD/LID Debt Service Fund Fire impact 0 525,000 Contribution for Fire Impact Debt Payments Transportation impact 0 965,000 Contribution to Transportation CIP Transportation CIP 2,360,390 17,505 Contribution for Capital Improvements Contribution for 1% Art project Municipal CIP 0 402,000 Transfer IS Fund Balance South Lake WA infrastructure 0 955,390 Reimbursement for CIP Costs Waterworks 68,446 0 Transfer SAD/LID Fund Balance Municipal CIP 60,000 Interfund Loan Correction Leased property services 60,000 0 Interfund Loan Correction Information services 402,000 0 Transfer IS Fund Balance previously in Municipal CIP Fund Insurance fund 272,000 0 From General Fund for LEOFF 1 LT Care TOTAL $ 3,705,341 $ 3,705,341 NOTE 11. NET ASSETSThe Government-wide and business type fund financial statements utilize a net asset presentation. Net assets are the difference between assets and liabilities. Net assets are categorized as investments in capital assets (net of related debt), restricted, and unrestricted. A. Investment in Capital Assets (net of related debt) is intended to reflect the portion of net assets that are associated with non-liquid, capital assets less outstanding capital asset related debt.The net related debt is the debt less the outstanding liquid assets and any associated unamortized costs. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-51 B. Restricted assets are liquid assets (generated from revenues and not bond proceeds), which have third party (statutory, bond covenant, or granting agency) limitations on their use. The City would typically use restricted assets first, as appropriated opportunities arise, but reserve the right to selectively defer the use thereof to a future project or replacement equipment acquisition. Restricted assets are as follows: Fund Purpose Amount Hotel / Motel Tax Tourism $325,404 Arterial Street Road construction 477,844 Cable Communications Cable development 185,012 Community Development Impact Mitigation for park development 895,404 Municipal Facilities Capital projects 15,458,013 Capital Projects General governmental capital projects 8,465,556 South Lake Washington Construction infrastructure for SLW 11,651,706 Fire Impact Mitigation for fire improvements 1,163,853 Transportation Impact Mitigation for transportation projects 3,638,871 Waterworks Debt service reserves 3,114,332 Golf Course Debt service reserves 441,358 TOTAL $45,817,353 C. Unrestricted assets represent unrestricted liquid assets. The City’s management may have plans or tentative commitments to expend resources certain purposes in future periods. Further legal action will be required to authorize the actual expenses or expenditures. NOTE 12. PRIOR YEAR RESTATEMENTSThe City had no prior period adjustments to beginning fund balances or net assets. NOTE 13. SHORT TERM DEBTShort-term debt is defined as debt with maturity of one year or less from the date of issuance. The City had no short-term debt in 2006. NOTE 14. LONG TERM DEBTThe City of Renton's long-term debt consists of General Obligation Debt, repaid mainly from general governmental revenue sources and Proprietary Debt, repaid from proprietary revenues. These debts are accounted for in the following areas: 1) The outstanding general obligation debt is reported in the Government-wide financial statements; 2) The repayment, or debt service of the same, is recorded in the Debt Service Funds; and, 3) The proprietary debt liability and repayment of the same are reported in individual Proprietary Funds.2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-52 Outstanding debt issues as of December 31, 2006, are as follows: Type of Debt Interest Rates IssuedDate Maturity Date OriginalIssuedAmountGOVERNMENTAL DEBT: General Obligation Bonds: Limited1997 GO Bonds 5.55%-5.75% 05/01/97 12/01/17 $14,697,744 2000 GO Valley Comm Bonds 4.30%-5.38% 09/15/00 12/01/15 2,551,600 2001 GO Refunding Bonds 2.10%-5.25% 11/01/01 12/01/17 13,505,000 2001 GO Bonds 5.0%-5.25% 11/01/01 12/01/21 6,000,000 2002 GO Bonds 2.50%-5.00% 7/15/02 12/01/22 3,895,000 2006 GO Bonds 4.25%-5.00% 8/08/06 12/01/28 17,980,000 SUBTOTAL LIMITED GO 58,629,344 Unlimited 1993 GO Refunding Bonds - Senior Housing 5.20%-61.0% 09/01/93 02/01/09 4,270,000 SUBTOTAL UNLIMITED GO 4,270,000 TOTAL GENERAL OBLIGATION BONDS 62,899,344 Installment Contracts: Certificates of Participation 4.51% 09/01/98 06/01/08 278,172 TOTAL INSTALLMENT CONTRACTS 278,172 TOTAL GOVERNMENTAL-TYPE DEBT ISSUANCE 63,177,516 BUSINESS-TYPE DEBT: Revenue Bonds:1998 Water/Sewer Refunding 4.46% 03/01/98 06/01/13 6,120,000 1999 Golf System Refunding 4.96% 04/01/99 12/01/15 5,040,000 2002 Water/Sewer 4.80% 07/01/02 12/01/22 11,980,000 2003 Water/Sewer Refunding 3.20% 09/15/03 06/01/13 8,035,000 2004 Water/Sewer 4.33% 11/01/04 12/01/27 10,335,000 TOTAL REVENUE BONDS 41,510,000 Public Works Trust Fund Loans: Sierra Heights Sewer Improvements 2.00% 01/20/92 07/01/12 888,462 Central Renton Sewer Replacement 1.00% 05/04/93 07/01/15 1,631,800 East Renton Interceptor 1.00% 06/07/93 07/01/13 2,542,704 Dayton Avenue NE 2.00% 05/12/94 07/01/14 96,958 NE 27th/Aberdeen Drainage Improvements 1.00% 05/15/95 07/01/15 731,000 East Kennydale Interceptor 2.00% 01/24/98 07/01/16 2,093,740 Honeycreek Interceptor 2.00% 12/04/95 07/01/16 1,840,568 Corrosion Control Treatment Facilities 1.00% 01/06/97 07/01/17 1,106,000 Maplewood Water Treatment Improvement 0.50% 1/22/02 07/01/21 567,831 Construct CT Pipeline for Wells 0.50% 11/5/02 7/1/22 814,527 Maplewood Water Treatment Improvement 0.50% 06/03/04 07/01/24 4,892,500 TOTAL PUBLIC WORKS TRUST FUND LOANS 17,206,090 Leases:Golf Course Operating Lease 3.81% 4/1/03 4/1/06 78,192 TOTAL LEASES 78,192TOTAL BUSINESS-TYPE DEBT ISSUANCE 58,794,282 TOTAL AMOUNT ISSUED ON OUTSTANDING DEBT AS OF DECEMBER 31, 2006 $121,971,798 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-53 For outstanding debt additions and retirements are summarized as follows: Type of Debt Balanced Owed 01/01/2006 Additions Deductions BalancedOwed 12/31/2006Due WithinOne Year GOVERNMENTAL DEBT: General Obligation Bonds: Limited1996 GO Bonds $111,670 $0 $111,670 $0 $0 1997 GO Refunding Bonds 429,033 0 429,033 0 0 1997 GO Bonds 2,037,744 0 198,243 1,839,501 693,926 1997 GO Bonds – CAB Long Term Interest 0 1,315,199 0 1,315,199 0 2000 GO Valley Comm Bonds 1,908,000 0 153,000 1,755,000 160,000 2001 GO Refunding Bonds 13,195,000 0 0 13,195,000 75,000 2001 GO Bonds 6,000,000 0 0 6,000,000 0 2002 GO Bonds 3,475,000 0 150,000 3,325,000 150,000 2006 GO Bonds 0 17,980,000 17,980,000 0 SUBTOTAL LIMITED GO 27,156,447 19,295,199 1,041,946 45,409,700 1,078,926 Unlimited 1993 GO Refunding Bonds-Senior Housing 1,870,000 0 430,000 1,440,000 455,000 SUBTOTAL UNLIMITED GO 1,870,000 0 430,000 1,440,000 455,000 TOTAL GENERAL OBLIGATION BONDS 29,026,447 19,295,199 1,471,946 46,849,700 1,533,926 Installment Contracts: Certificates of Participation 81,217 0 31,404 49,813 32,837 TOTAL INSTALLMENT CONTRACTS 81,217 0 31,404 49,813 32,837 Employee Leave Benefits (Primarily General Fund Obligations) 5,341,112 3,566,437 4,713,554 4,193,995 2,428,017 TOTAL GENERAL OBLIGATION DEBT 34,448,776 22,861,636 6,216,904 51,093,508 3,994,780 BUSINESS-TYPE DEBT: Revenue Bonds: 1998 Water/Sewer Refunding 4,550,000 0 520,000 4,030,000 545,000 1999 Golf System Refunding 3,360,000 0 270,000 3,090,000 285,000 2002 Water/Sewer 11,610,000 0 110,000 11,500,000 110,000 2003 Water/Sewer Refunding 5,935,000 0 1,050,000 4,885,000 1,085,000 2004 Water/Sewer 10,335,000 0 0 10,335,000 0 TOTAL REVENUE BONDS 35,790,000 0 1,950,000 33,840,000 2,025,000 Public Works Trust Fund Loans: Sierra Heights Sewer Improvements 179,500 0 25,642 153,858 25,642 Central Renton Sewer Replacement 803,903 0 87,483 716,420 87,483 East Renton Interceptor 1,076,560 0 134,570 941,990 134,570 Dayton Avenue NE 45,928 0 5,103 40,825 5,103 NE 27th/Aberdeen Drainage Improvements 425,897 0 42,590 383,307 42,590 East Kennydale Interceptor 1,285,398 0 116,855 1,168,543 116,855 Honeycreek Interceptor 1,065,592 0 96,872 968,720 96,872 Corrosion Control Treatment Facilities 592,283 0 49,357 542,926 49,357 Maplewood Water Improvement 484,815 0 30,301 454,514 30,301 Const. CT Pipeline for Wells 728,787 0 42,870 685,917 42,870 Maplewood Water Improvements 4,892,500 0 257,500 4,635,000 257,500 TOTAL PUBLIC WORKS TRUST FUND LOANS 11,581,161 0 889,143 10,692,018 889,143 OPERATING LEASES: Golf Course Cart lease 8,622 0 8,622 0 0 TOTAL OPERATING LEASES 0 0 8,622 0 0 Employee Leave Benefits 385,699 487,123 409,874 462,947 110,016 TOTAL BUSINESS-TYPE DEBT 47,765,482 487,123 3,257,639 44,994,965 3,024,159 GRAND TOTALS $82,214,258 $23,348,759 $9,474,543 $96,088,473 $7,018,939 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-54 DEEP DISCOUNT DEBT The 1997 Limited General Obligation Bond issue included capital appreciation bonds that are issued at a deep discount. The deep-discount debt will mature in the years 2007, 2008, and 2009 with an accreted value of $1,245,000, $1,250,000, and 1,000,000 respectively. The deep-discount debt is reported in the Government-wide financial statements in the amount of $1,839,501, net of the remaining unamortized discount. SPECIAL ASSESSMENT DEBT WITH GOVERNMENTAL COMMITMENT As of December 31, 2006, the City of Renton has no special assessment debt outstanding. DEBT LIMIT CAPACITIES State law provides that debt cannot be incurred in excess of the following percentages of the value of the taxable property of the City: 1.5 percent without a vote of the people provided the indebtedness with a vote is 1 percent or less; 2.5 percent with a vote of the people; 5.0 percent with a vote of the people, provided the indebtedness in excess of 2.5 percent is for utilities; and 7.5 percent with a vote of the people provided the indebtedness in excess of 5.0 percent is for open space development and parks facilities. Table 12 in the Statistical Section shows the computation of legal debt margin for general and special purpose capacities for the City of Renton.ANNUAL DEBT SERVICE REQUIREMENTS The annual debt service requirements to maturity, including principal and interest, for long-term debt as of December 31, 2006, are as follows: Governmental Activities Business-type Activities Year Ending December 31 Principle Interest Principle Interest 2007 $1,566,763 $2,702,284 $2,914,143 $1,619,071 2008 2,079,551 2,698,249 2,994,143 1,527,344 2009 2,205,000 2,549,448 3,074,143 1,440,494 2010 2,269,000 1,975,553 3,154,143 1,348,254 2011 2,353,000 1,883,688 3,244,143 1,251,000 2012-2016 13,326,000 7,612,869 11,298,228 4,899,474 2017-2021 13,390,000 4,175,483 7,647,712 3,360,272 2022-2026 5,785,000 1,534,414 8,445,370 1,632,689 2027-2028 2,610,000 197,250 1,760,000 88,000 TOTAL $45,584,314 $25,329,238 $44,532,025 $17,166,598 AMOUNT AVAILABLE FOR DEBT SERVICE Fund balances that have been reserved for debt repayment are $3,068,584 in the debt service funds.NOTE 15 - DEFERRED CHARGES IN PROPRIETARY FUNDS As of December 31, 2006, the Waterworks Utility Fund had deferred charges and other assets in the amount of $761,729 for debt issue costs on the 2002-2004 Revenue Bonds. This amount will be fully amortized by 2022. The Golf Course Fund amount was $40,547 for the 1999 Refunded Bond debt issue costs and discount. This amount will be fully amortized by 2016. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-55 NOTE 16. SEGMENT INFORMATIONAn identifiable activity (or grouping of activities) required to be accounted for separately, which (a) is reported as or within an enterprise fund; (b) for which one or more revenue bonds are outstanding; and, (c) where the revenue stream is pledged for payment of, are required to disclose segment information. The City of Renton has no required segment information to disclose for 2006. NOTE 17. JOINT VENTURESA joint venture is a legal entity or other organization that results from a contractual agreement and that is owned, operated, or governed by two or more participants as a separate and specific activity subject to joint control in which the participants retain (a) an on-going financial interest or (b) an on-going financial responsibility. The City participates in one joint venture. VALLEY COMMUNICATIONS CENTER The “Valley Communications Center” was established August 20, 1976, when an Interlocal Agreement was entered into by four original participating municipal corporations, including the cities of Renton, Kent, Auburn, and Tukwila. Federal Way was formally admitted in 2000. The agreement is sanctioned by the provisions and terms of the Interlocal Cooperation Act pursuant to Chapter 39.34 RCW. The initial duration of the agreement was five years, and thereafter is automatically extended for consecutive five-year periods. The purpose of the joint operation, hereafter referred to as Valley Comm, is to provide improved consolidated emergency communications (dispatch) services for police, fire, and medical aid, to the five participating cities and to several subscribing agencies that include: King County Fire Districts 2, 17 (Black Diamond), 20, 26, 40, 43, 44, 47; City of Pacific Police and Fire Departments; City of Black Diamond Police Department; City of Des Moines Police Department; SeaTac Fire Department; North Highline Fire Department; King County EMS Units; and Vashon Island Fire Department. Separate agreements between Valley Comm and the subscribing agencies have been executed, which set forth conditions of services and rates charged.The City of Renton reports its share of equity interest in the Governmental Activities column within the Government-wide financial statements under non-current assets. The following is condensed (unaudited) financial information as of December 31, 2006, on Valley Comm: Valley Comm Renton Interest Assets $22,055,273 Liabilities 718,868 22.51%* TOTAL Equity $21,336,405 $3,981,550 *After removing $3,642,531 in assets not subject to the equity interest calculations. 2006 Comprehensive Annual Financial Report City of Renton, Washington The notes to the financial statements are an integral part of this statement. Basic Financial Statements, 4-56 Completed Financial Statements for Valley Comm can be obtained from the Valley Communications Center, 23807 – 98th Avenue South, Kent, WA 98031.NOTE 18. SUBSEQUENT EVENTSThe City of Renton, on March 16, 2007, signed an agreement obligating the City of Renton’s golf course to purchase, through a capital lease agreement, 50 golf carts. The terms of the agreement commence on June 15, 2007, and consist of 48 monthly payments of $2,022.14 at an interest rate of 5.25%. The final payment to purchase the golf carts is $50. Appendix E Municipal Bond Insurance Policy Specimen This page left blank intentionally. FINANCIAL GUARANTY INSURANCE POLICY MBIA Insurance Corporation Armonk, New York 10504 Policy No. [NUMBER] MBIA Insurance Corporation (the "Insurer"), in consideration of the payment of the premium and subject to the terms of this policy, hereby unconditionally and irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment required to be made by or on behalf of the Issuer to [PAYING AGENT/TRUSTEE] or its successor (the "Paying Agent") of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Obligations (as that term is defined below) as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless the Insurer elects, in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence shall be referred to herein collectively as the "Insured Amounts." "Obligations" shall mean: [PAR] [LEGAL NAME OF ISSUE] Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and surrender of such Obligations or presentment of such other proof of ownership of the Obligations, together with any appropriate instruments of assignment to evidence the assignment of the Insured Amounts due on the Obligations as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners, or the Paying Agent payment of the Insured Amounts due on such Obligations, less any amount held by the Paying Agent for the payment of such Insured Amounts and legally available therefor. This policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation. As used herein, the term "owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party whose agreement with the Issuer constitutes the underlying security for the Obligations. Any service of process on the Insurer may be made to the Insurer at its offices located at 113 King Street, Armonk, New York 10504 and such service of process shall be valid and binding. This policy is non-cancellable for any reason. The premium on this policy is not refundable for any reason including the payment prior to maturity of the Obligations. IN WITNESS WHEREOF, the Insurer has caused this policy to be executed in facsimile on its behalf by its duly authorized officers, this [DAY] day of [MONTH, YEAR]. MBIA Insurance Corporation President Attest: Assistant Secretary STD-R-7 01/05 November 16,2007 Lindsay Sovde Seattle-Northwest Securities Corporation 1420 Fifth Avenue, Suite 4300 Seattle, Washington 98101 Re: City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A Water and Sewer Revenue Bonds, Series 2008B (Taxable) Preliminary Official Statement Dear Ms. Sovde: Seattle-Northwest Securities Corporation is serving as underwriter on the above captioned issue. As Finance & Information Services Administrator for the City of Renton (the "Issuer"), I hereby certify as follows: a) To the best of my knowledge and belief, after due review, the Preliminary Official Statement, except for matters relating to DTC, as of the date hereof 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 the light of the circumstances under which made, not misleading; b) The copy of the Preliminary Official Statement attached hereto is hereby "deemed final" (except for the omission of the following information: offering price(s), interest rate(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings, other terms of the securities depending on such matters), for purposes of Securities and Exchange Commission Rule 15~2-12(b)(l); and c) Seattle-Northwest Securities Corporation is authorized to distribute and otherwise utilize the Preliminary Official Statement in connection with the marketing of the Bonds. Sincerely, Michael E. Bailey Finance & Information Services Administrator L m bia WISDOM IN ACTIONm REVISED AS OF NOVEMBER 29,2007 COMMITMENT TO ISSUE A FINANCIAL GUARANTY INSURANCE POLICY Application No.: 2007-008214-002 Sale Date: November 26, 2007 Program Type: Negotiated DP Re: $9,975,000 City of Renton, Washington, Water and Sewer Revenue Bonds, 2008 (the "Obligations") This commitment to issue a financial guaranty insurance policy (the "Commitment") dated November 29, 2007, constitutes an agreement between CITY OF RENTON, WASHINGTON (the "Applicant") and MBIA Insurance Corporation (the "Insurer"), a stock insurance company incorporated under the laws of the State of New York. Based on an approved application dated October 10, 2007, the Insurer agrees, upon satisfaction of the conditions herein, to issue on the earlier of (i) 120 days of said approval date or (ii) on the date of delivery of and payment for the Obligations, a financial guaranty insurance policy (the "Policy") for the Obligations, insuring the payment of principal of and interest on the Obligations when due. The issuance of the Policy shall be subject to the following terms and conditions: 1. Payment by the Applicant, or by the Trustee on behalf of the Applicant, on the date of delivery of and payment for the Obligations, of a nonrefundable premium in the amount of $29,700 [.182% (premium rate) of $16,331,499.31 (total debt service), premium rounded to the nearest hundred]. The premium set out in this paragraph shall be the total premium required to be paid on the Policy issued pursuant to this Commitment. 2. The Obligations shall have received the unqualified opinion of bond counsel with respect to the tax-exempt status of interest on the Obligations. 3. There shall have been no material adverse change in the Obligations or the Resolution, Bond Ordinance, Trust Indenture or other official document authorizing the issuance of the Obligations or in the final official statement or other similar document, including the financial statements included therein. 4. There shall have been no material adverse change in any information submitted to the Insurer as a part of the application or subsequently submitted to be a part of the application to the Insurer. 5. No event shall have occurred which would allow any underwriter or any other purchaser of the Obligations not to be required to purchase the Obligations at closing. 6. A Statement of Insurance satisfactory to the Insurer shall be printed on the Obligations. MBlA Insurance Corporation . 113 King Street . Armonk, NY I0504 +1 914 273 4545 . www.mbia.Com L m bia WISDOM IN ACTION" 7. Prior to the delivery of and payment for the Obligations, none of the information or documents submitted as a part of the application to the Insurer shall be determined to contain any untrue or misleading statement of a material fact or fail to state a material fact required to be stated therein or necessary in order to make the statements contained therein not misleading. 8. No material adverse change affecting any security for the Obligations shall have occurred prior to the delivery of and payment for the Obligations. 9. The Insurer's "Payments Under the Policylother Required Provisions" (see attached) shall be included in the authorizing document. 10. The Applicant agrees not to use the Insurer's name in any public document including, without limitation, a press release or presentation, announcement or forum without the Insurer's prior consent; provided however, such prohibition on the use of the Insurer's name shall not relate to the use of the Insurer's standard approved form of disclosure in public documents issued in connection with the current Obligations to be issued in accordance with the terms of the Commitment; and provided further such prohibition shall not apply to the use of the Insurer's name in order to comply with public notice, public meeting or public reporting requirements. 11. This Commitment may be signed in counterpart by the parties hereto. 12. Compliance with the Insurer's General Document Provisions (see attached). 13. Compliance with the Insurer's List of Permissible Investments for Indentured Funds (see attached). 14. Compliance with the Insurer's General Document Provisions for Surety Bonds and LOCs in Place of DSRFs (see attached). Dated this 29th day of November, 2007. Assistant Secretary CITY OF RENTON, WASHINGTON By: Title: WISDOM IN ACTION'" GENERAL DOCUMENT PROVISIONS A. Notice to the lnsurer The basic legal documents must provide that any notices required to be given by any party should also be given to the insurer, Attn: lnsured Portfolio Management. B. Amendments. In the basic legal document, there are usually two methods of amendment. The first, which typically does not require the consent of the bondholders, is for amendments which will cure ambiguities, correct formal defects or add to the security of the financing. The second, in which bondholder consent is a prerequisite, covers the more substantive types of amendments. For all financings, the lnsurer must be given notice of any amendments that are of the first type and the Insurer's consent must be required for all amendments of the second type. All documents must contain a provision which requires copies of any amendments to such documents which are consented to by the lnsurer to be sent to Standard &Poor's. C. Supplemental Leeal Document. If the basic legal document provides for a supplemental legal document to be issued for reasons other than (1) a refunding to obtain savings; or (2) the issuance of additional bonds pursuant to an additional bonds test, there must be a requirement that the Insurer's consent also be obtained prior to the issuance of any additional bonds and/or execution of such supplemental legal document. D. Events of Default and Remedies. All documents normally contain provisions which define the events of default and which prescribe the remedies that may be exercised upon the occurrence of an event of default. At a minimum, events of default will be defined as follows: 1. the issuerlobligor fails to pay principal when due; 2. the issuerlobligor fails to pay interest when due; 3. the issuerlobligor fails to observe any other covenant or condition of the document and such failure continues for 30 days and 4. the issuerlobligor declares bankruptcy. The Insurer, acting alone, shall have the right to direct all remedies in the event of a default. The lnsurer shall be recognized as the registered owner of each bond which it insures for the purposes of exercising all rights and privileges available to bondholders. For bonds which it insures, the Insurer shall have the right to institute any suit, action, or proceeding at law or in equity under the same terms as a bondholder in accordance with applicable provisions of the governing documents. Other than the usual redemption provisions, any acceleration of principal payments must be subject to the Insurer's prior written consent. E. Defeasance requires the deposit of 1. Cash 2. U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series -- " SLGs") 3. Direct obligations of the Treasury which have been stripped by the Treasury itself, CATS, TlGRS and similar securities WISDOM IN ACTION'T 4. Resolution Funding Corp. (REFCORP) Only the interest component of REFCORP strips which have been stripped by request to the Federal Reserve Bank ofNew York in book entry form are acceptable. 5. Pre-refunded municipal bonds rated "Aaa" by Moody's and "AAA" by S&P. If however, the issue is only rated by S&P (i.e., there is no Moody's rating), then the pre-refunded bonds must have been pre-refunded with cash, direct U.S. or U.S. guaranteed obligations, or AAA rated pre-refunded municipals to satisfy this condition. 6. Obligations issued by the following agencies which are backed by the full faith and credit of the U.S. a. U.S. Exoort-Imoort Bank (Eximbank) Direct obligations or fully guaranteed certificates of beneficial ownership b. Farmers Home Administration (FmHA) Certificates of beneficial ownership c. Federal Financing Bank d. General Services Administration Participation certificates e. U.S. Maritime Administration Guaranteed Title XI financing f. U.S. Deoart~nent of Housing and Urban Develoolnent (HUD) Project Notes Local Authority Bonds New Comlnunities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds The Insurer shall be provided with an opinion of counsel acceptable to the lnsurer that the Obligations have been legally defeased and that the escrow agreement establishing such defeasance operates to legally defease the Obligations within the meaning of the Indenture and the Supplemental Indenture relating to the Obligations. In addition, the lnsurer will be entitled to receive (i) 15 business days notice of any advance refunding of the Obligations and (ii) an accountant's report with respect to the sufficiency of the amounts deposited in escrow to defease the Obligations. 1. In transactions where there is an agent/enhancer (other than the Insurer), the trustee, tender agent (if any), and paying agent (if any) must be commercial banks with trust powers. 2. The remarketing agent must have trust powers if they are responsible for holding moneys or receiving bonds. As an alternative, the documents may provide that if the remarketing agent is removed, resigns or is unable to perform its duties, the trustee must assume the responsibilities of remarketing agent until a substitute acceptable to the lnsurer is appointed. WISDOM IN ACTION'" LIST OF PERMISSIBLE INVESTMENTS FOR INDENTURED FUNDS A. Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. . Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): I. U.S. Exoort-lmoort Bank (Eximbank) Direct obligations or fully guaranteed certificates of beneficial ownership 2. Farmers Home Administration (FmHA) Certificates of beneficial ownership 3. Federal Financing Bank 4. Federal Housin~ Administration Debentures (FHA) 5. General Services Administration Participation certificates 6. Government National Mortgage Association (GNMA or "Ginnie Mae") GNMA - guaranteed mortgage-backed bonds GNMA - guaranteed pass-through obligations (not acceptable for certain cash-flow sensitive issues.) 7. U.S. Maritime Administration Guaranteed Title XI financing 8. U.S. Deoart~nent of Housing and Urban Develooment (HUD) Project Notes Local Authority Bonds New Communities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds C. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): 1. Federal Home Loan Bank System Senior debt obligations 2. Federal Home Loan Mortgage Corooration (FHLMC or "Freddie Mac") Participation Certificates WISDOM IN ACTIONL' Senior debt obligations 3. Federal National Mort~aee Association (FNMA or "Fannie Mae") Mortgage-backed securities and senior debt obligations 4. Resolution Fundine Carp. (REFCORP) obligations 5. Farm Credit Svstem Consolidated systemwide bonds and notes D. Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G; AAA-m; or AA-m and if rated by Moody's rated Aaa, Aal or Aa2. E. Certificates of deposit secured at all times by collateral described in (A) andlor (B) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral. F. Certiticates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF. G. lnvestment Agreements, including GIC's, Forward Purchase Agreements and Reserve Fund Put Agreements acceptable to MBlA (Investment Agreement criteria is available upon request). H. Com~nercial paper rated, at the time of purchase, "Prime - 1" by Moody's and "A-I" or better by S&P. I. Bonds or notes issued by any state or ~nunicipality which are rated by Moody's and S&P in one of the two highest rating categories assigned by such agencies. J. Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of "Prime - I" or "A3" or better by Moody's and "A-I" or "A" or better by S&P. K. Repurchase Agreements for 30 days or less must follow the following criteria. Repurchase Agreements which exceed 30 days must be acceptable to MBlA (criteria available upon request) Repurchase agreements provide for the transfer of securities from a dealer bank or securities firm (sellerlborrower) to a municipal entity (buyerllender), and the transfer of cash from a municipal entity to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the municipal entity in exchange for the securities at a specified date. 1. Re~os must be between the munici~al entity and a dealer bank or securities firm a. Primarv dealers on the Federal Reserve reporting dealer list which are rated A or better by Standard & Poor's Corporation and Moody's lnvestor Services, or b. Banks rated "A" or above by Standard & Poor's Corporation and Moody's Investor Services. L m bia WISDOM IN ACTIONL' 2. The written repo contract must include the follow in^ a. Securities which are acceptable for transfer are: (1)Direct U.S. governments, or (2) Federal agencies backed by the full faith and credit of the U.S. government (and FNMA & FHLMC) b. The term of the repo may be up to 30 days c. The collateral must be delivered to the municipal entity, trustee (if trustee is not supplying the collateral) or third party acting as agent for the trustee (if the trustee is supplying the collateral) beforelsimultaneous with payment (perfection by possession of certificated securities). d. Valuation of Collateral (I) The securities must be valued weeklv. marked-to-market at current market price accrued interest (a) The value of collateral must be equal to 104% of the amount of cash transferred by the municipal entity to the dealer bank or security firm under the rep0 plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by municipality, then additional cash andlor acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%. 3. Legal opinion which must be delivered to the municipal entitv: a. Repo meets guidelines under state law for legal investment of public funds. Additional Notes (i) There is no list of permitted investments for non-indentured funds. Your own credit judgment and the relevant circumstances (e.g., amount of investment and timing of investment) should dictate what is permissible. (ii) Any state administered pool i~ivestment fund in which the issuer is statutorily permitted or required to invest will be deemed a permitted investment. (iii) DSRF investments should be valued at fair market value and marked to market at least once per year. DSRF investments may not have maturities extending beyond 5 years, except for Investment Agreements approved by the Insurer. W1500hl IN ACTION"' GENERAL DOCUMENT PROVISIONS FOR SURETY BONDS AND LOCS IN PLACE OF DSRFS A If the documents provide for the replacement of an existing funded DSRF in the future with either a surety bond or a letter of credit or provide for the use of a surety bond or letter of credit to fund the DSRF on parity issues, then a provision should be added to the documents that no such surety bond or letter of credit may be used without the written consent of the Insurer both as to the provider of such security and to its structure. B As an alternative to 1 and in all cases where a surety bond or letter of credit is replacing a DSRF in an Insurer-insured issue, the following requirements apply: 1. The surety bond must be from an insurance company that is rated in the highest rating category by Standard & Poor's and Moody's, or the letter of credit must be from a bank approved by the Insurer. 2. The Insurer reserves the right to periodically review the LOC bank and if found unacceptable, require that: a. another LOC must be found within 45 days, or b. the issuer must draw upon the LOC to fund the DSR with cash, or c. the issuer must fund the DSR with cash over an acceptable period of time (to be negotiated on a deal-by-deal basis). 3. The surety bond or LOC must be unconditional and irrevocable. If the surety bond or LOC can expire earlier than the final maturity of the bonds, the provisions for funding a reserve should be examined for acceptability. 4. After the surety bond has been drawn down, any monies available to repay the surety bond or LOC provider must first be used to reinstate the surety bond or LOC to its original amount. Any interest or fees due to the surety or LOC provider, other than reinstatement, must be subordinate to any amounts required to be paid for the benefit of the bondholders. WISDOM IN ACTIONm REVISED AS OF NOVEMBER 29,2007 COMMITMENT TO ISSUE A FINANCIAL GUARANTY INSURANCE POLICY Application No.: 2007-0082 14-004 Sale Date: November 26, 2007 Program Type: Negotiated DP Re: $2,035,000 City of Renton, Washington, Water and Sewer Revenue Bonds, 2008 (Taxable) (the "Obligations") This commitment to issue a financial guaranty insurance policy (the "Commitment") dated November 29, 2007, constitutes an agreement between CITY OF RENTON, WASHINGTON (the "Applicant") and MBIA Insurance Corporation (the "Insurer"), a stock insurance company incorporated under the laws of the State of New York. Based on an approved application dated October 10, 2007, the Insurer agrees, upon satisfaction of the conditions herein, to issue on the earlier of (i) 120 days of said approval date or (ii) on the date of delivery of and payment for the Obligations, a financial guaranty insurance policy (the "Policy") for the Obligations, insuring the payment of principal of and interest on the Obligations when due. The issuance of the Policy shall be subject to the following terms and conditions: I. Payment by the Applicant, or by the Trustee on behalf of the Applicant, on the date of delivery of and payment for the Obligations, of a nonrefundable premium in the amount of $5,000 [.182% (premium rate) of $2,750,718.23 (total debt service), premium rounded to the nearest hundred]. The premium set out in this paragraph shall be the total premium required to be paid on the Policy issued pursuant to this Commitment. 2. The Obligations shall have received the unqualified opinion of bond counsel with respect to the validity of the Obligations and other matters customarily provided by the Bond Counsel. 3. There shall have been no material adverse change in the Obligations or the Resolution, Bond Ordinance, Trust Indenture or other official document authorizing the issuance of the Obligations or in the final official statement or other similar document, including the financial statements included therein. 4. There shall have been no material adverse change in any information submitted to the Insurer as a part of the application or subsequently submitted to be a part of the application to the Insurer. 5. No event shall have occurred which would allow any underwriter or any other purchaser of the Obligations not to be required to purchase the Obligations at closing. WISDOM IN ACTION" 6. A Statement of Insurance satisfactory to the Insurer shall be printed on the Obligations. 7. Prior to the delivery of and payment for the Obligations, none of the information or documents submitted as a part of the application to the Insurer shall be determined to contain any untrue or misleading statement of a material fact or fail to state a material fact required to be stated therein or necessary in order to make the statements contained therein not misleading. 8. No material adverse change affecting any security for the Obligations shall have occurred prior to the delivery of and payment for the Obligations. 9. The Insurer's "Payments Under the Policy/Other Required Provisions" (see attached) shall be included in the authorizing document. 10. The Applicant agrees not to use the Insurer's name in any public document including, without limitation, a press release or presentation, announcement or forum without the Insurer's prior consent; provided however, such prohibition on the use of the Insurer's name shall not relate to the use of the Insurer's standard approved form of disclosure in public documents issued in connection with the current Obligations to be issued in accordance with the terms of the Commitment; and provided further such prohibition shall not apply to the use of the Insurer's name in order to comply with public notice, public meeting or public reporting requirements. 11. This Commitment may be signed in counterpart by the parties hereto. 12. Compliance with the Insurer's General Document Provisions (see attached). 13. Compliance with the Insurer's List of Permissible Investments for Indentured Funds (see attached). 14. Compliance with the Insurer's General Document Provisions for Surety Bonds and LOCs in Place of DSRFs (see attached). L m bia WISDOM IN ACTIONW Dated this 29th day of November, 2007. -, Assistant Secretary CITY OF RENTON, WASHINGTON By: Title: WISDOM IN ACTION" GENERAL DOCUMENT PROVISIONS A. Notice to the lnsurer The basic legal documents must provide that any notices required to be given by any party should also be given to the Insurer, Attn: Insured Portfolio Management. B. Amendments. In the basic legal document, there are usually two methods of amendment. The first, which typically does not require the consent ofthe bondholders, is for amendments which will cure ambiguities, correct formal defects or add to the security of the financing. The second, in which bondholder consent is a prerequisite, covers the more substantive types of amendments. For all financings, the Insurer must be given notice of any amendments that are of the first type and the Insurer's consent must be required for all amendments of the second type. All documents must contain a provision which requires copies of any amendments to such documents which are consented to by the Insurer to be sent to Standard & Poor's. C. Sup~lemental Legal Document. If the basic legal document provides for a supplemental legal document to be issued for reasons other than (I) a refunding to obtain savings; or (2) the issuance of additional bonds pursuant to an additional bonds test, there must be a requirement that the Insurer's consent also be obtained prior to the issuance of any additional bonds andlor execution of such supplemental legal document. D. Events of Default and Remedies. All documents normally contain provisions which define the events of default and which prescribe the remedies that may be exercised upon the occurrence of an event of default. At a minimum, events of default will be defined as follows: 1. the issuerlobligor fails to pay principal when due; 2. the issuerlobligor fails to pay interest when due; 3. the issuerlobligor fails to observe any other covenant or condition of the document and such failure continues for 30 days and 4. the issuerlobligor declares bankruptcy. The lnsurer, acting alone, shall have the right to direct all remedies in the event of a default. The lnsurer shall be recognized as the registered owner of each bond which it insures for the purposes of exercising all rights and privileges available to bondholders. For bonds which it insures, the lnsurer shall have the right to institute any suit, action, or proceeding at law or in equity under the same terms as a bondholder in accordance with applicable provisions of the governing documents. Other than the usual redemption provisions, any acceleration of principal payments must be subject to the Insurer's prior written consent. E. Defeasance requires the deposit of: 1. Cash 2. U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series -- " SLGs") 3. Direct obligations of the Treasury which have been stripped by the Treasury itself, CATS, TlGRS and similar securities WISDOM IN ACTION" 4. Resolution Funding Corp. (REFCORP) Only the interest component of REFCORP strips which have been stripped by request to the Federal Reserve Bank of New York in book entry form are acceptable. 5. Pre-refiinded municipal bonds rated "Aaa" by Moody's and "AAA" by S&P. If however, the issue is only rated by S&P (i.e., there is no Moody's rating), then the pre-refunded bonds must have been pre-refunded with cash, direct U.S. or U.S. guaranteed obligations, or AAA rated pre-refunded municipals to satisfy this condition. 6. Obligations issued by the following agencies which are backed by the full faith and credit of the U.S. a. U.S. Export-Import Bank (Eximbank) Direct obligations or fully guaranteed certificates of beneficial ownership b. Farmers Home Administration (FmHA) Certificates of beneficial ownership c. Federal Financing Bank d. General Services Administration Participation certificates e. U.S. Maritime Administration Guaranteed Title XI financing f. U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds New Communities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds The lnsurer shall be provided with an opinion of counsel acceptable to the Insurer that the Obligations have been legally defeased and that the escrow agreement establishing such defeasance operates to legally defease the Obligations within the meaning of the Indenture and the Supplemental Indenture relating to the Obligations. In addition, the lnsurer will be entitled to receive (i) 15 business days notice of any advance refunding of the Obligations and (ii) an accountant's report with respect to the sufficiency of the amounts deposited in escrow to defease the Obligations. 1. In transactions where there is an agentlenhancer (other than the lnsurer), the trustee, tender agent (if any), and paying agent (if any) must be commercial banks with trust powers. 2. The remarketing agent must have trust powers if they are responsible for holding moneys or receiving bonds. As an alternative, the documents may provide that if the remarketing agent is removed, resigns or is unable to perform its duties, the trustee must assume the responsibilities of remarketing agent until a substitute acceptable to the lnsurer is appointed. WISDOM IN ACTIONm LIST OF PERMISSIBLE INVESTMENTS FOR INDENTURED FUNDS A. Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. B. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): 1. U.S. Export-Import Bank (Eximbank) Direct obligations or fully guaranteed certificates of beneficial ownership 2. Farmers Home Adminisrration (FmHA) Certificates of beneficial ownership 3. Federal Financing Bank 4. Federal Housing Administration Debentures (FHA) 5. General Services Administration Participation certificates 6. Government National Morteage Association (GNMA or "Ginnie Mae") GNMA - guaranteed mortgage-backed bonds GNMA - guaranteed pass-through obligations (not acceptable for certain cash-flow sensitive issues.) 7. U.S. Maritime Administration Guaranteed Title XI financing 8. U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds New Coln~nunities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds C. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): 1. Federal Home Loan Bank Svstem Senior debt obligations 2. Federal Home Loan Morteage Corporation (FHLMC or "Freddie Mac") Participation Certificates WISDOM IN ACTION" Senior debt obligations 3. Federal National Mortga~e Association (FNMA or "Fannie Mae") Mortgage-backed securities and senior debt obligations 4. Resolution Fundine Corp. (REFCORP) obligations 5. Farm Credit Svstem Consolidated systemwide bonds and notes D. Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G; AAA-m; or AA-m and if rated by Moody's rated Aaa, Aal or Aa2. E. Certificates of deposit secured at all times by collateral described in (A) andlor (B) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral. F. Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF. G. Investment Agreements, including GIC's, Forward Purchase Agreements and Reserve Fund Put Agreements acceptable to MBlA (Investment Agreement criteria is available upon request). H. Colnmercial paper rated, at the time of purchase, "Prime - I" by Moody's and "A-I" or better by S&P. 1. Bonds or notes issued by any state or municipality which are rated by Moody's and S&P in one of the two highest rating categories assigned by such agencies. J. Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of "Prime - I" or "A3" or better by Moody's and "A-1" or "A" or better by S&P. K. Repurchase Agreements for 30 days or less must follow the following criteria. Repurchase Agreements which exceed 30 days must be acceptable to MBlA (criteria available upon request) Repurchase agreements provide for the transfer of securities from a dealer bank or securities firm (sellerlborrower) to a municipal entity (buyerllender), and the transfer of cash from a municipal entity to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the municipal entity in exchange for the securities at a specified date. I. Repos must be between the municipal entitv and a dealer bank or securities firm a. Primary dealers on the Federal Reserve reporting dealer list which are rated A or better by Standard & Poor's Corporation and Moody's Investor Services, or b. Banks rated "A" or above by Standard & Poor's Corporation and Moody's Investor Services. L m bia WISDOM IN ACTION'" 2. The written rePo contract must include the following: a. Securities which are acceptable for transfer are: (])Direct U.S. governments, or (2) Federal agencies backed by the full faith and credit of the U.S. government (and FNMA & FHLMC) b. The term of the rePo mav be UD to 30 davs c. The collateral must be delivered to the municipal entity, trustee (if trustee is not supplying the collateral) or third party acting as agent for the trustee (if the trustee is supplying the collateral) before/simultaneous with payment (perfection by possession of certificated securities). d. Valuation of Collateral (I) The securities must be valued weekly. marked-to-market at current market price & accrued interest (a) The value of collateral must be equal to 104% of the amount of cash transferred by the municipal entity to the dealer bank or security firm under the rep0 plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by municipality, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%. 3. Legal opinion which must be delivered to the municipal entitv: a. Repo meets guidelines under state law for legal inveshnent of public funds. Additional Notes (i) There is no list of permitted investments for non-indentured funds. Your own credit judgment and the relevant circumstances (e.g., amount of investment and timing of investment) should dictate what is permissible. (ii) Any state administered pool investment fund in which the issuer is statutorily permitted or required to invest will be deemed a permitted investment. (iii) DSRF investments should be valued at fair market value and marked to market at least once per year. DSRF investments may not have maturities extending beyond 5 years, except for investment Agreements approved by the insurer. L m bia WISDOM IN ACTION" GENERAL DOCUMENT PROVISIONS FOR SURETY BONDS AND LOCS IN PLACE OF DSRFS A if the documents provide for the replacement of an existing funded DSRF in the future with either a surety bond or a letter of credit or provide for the use of a surety bond or letter of credit to fund the DSRF on parity issues, then a provision should be added to the documents that no such surety bond or letter of credit may be used without the written consent of the Insurer both as to the provider of such security and to its structure. B As an alternative to I and in all cases where a surety bond or letter of credit is replacing a DSRF in an insurer-insured issue, the following requirements apply: I. The surety bond must be from an insurance company that is rated in the highest rating category by Standard & Poor's and Moody's, or the letter of credit must be from a bank approved by the insurer. 2. The Insurer reserves the right to periodically review the LOC bank and if found unacceptable, require that: a. another LOC must be found within 45 days, or b. the issuer must draw upon the LOC to fund the DSR with cash, or c. the issuer must fund the DSR with cash over an acceptable period of time (to be negotiated on a deal-by-deal basis). 3. The surety bond or LOC must be unconditional and irrevocable. If the surety bond or LOC can expire earlier than the final maturity of the bonds, the provisions for funding a reserve should be examined for acceptability. 4. After the surety bond has been drawn down, any monies available to repay the surety bond or LOC provider must first be used to reinstate the surety bond or LOC to its original amount. Any interest or fees due to the surety or LOC provider, other than reinstatement, must be subordinate to any amounts required to be paid for the benefit of the bondholders. WISDOM IN ACTION'" REVISED AS OF NOVEMBER 29,2007 COMMITMENT TO ISSUE A DEBT SERVICE RESERVE SURETY BOND Application No.: 2007-008214-003 Sale Date: November 26, 2007 Program Type: Negotiated DP RE: $3,648,588.75 Debt Service Reserve Fund for the $9,750,000 City of Renton, Washington, Water and Sewer Revenue and Refunding Bonds, 2007, $9,975,000 City of Renton, Washington, Water and Sewer Revenue Bonds, 2008 and $2,035,000 City of Renton, Washington, Water and Sewer Revenue Bonds, 2008 (Taxable), together with any bonds issued on a parity therewith (the "Obligations") This commitment to issue a debt service reserve surety bond (the "Commitment") constitutes an agreement between CITY OF RENTON, WASHINGTON (the "Applicant"), and MBIA Insurance Corporation (the "Insurer"), a stock insurance company incorporated under the laws of the State of New York. Based on an approved application dated October 10, 2007, the Insurer agrees, upon satisfaction of the conditions herein, to issue on the earlier of (i) 120 days of said approval date or (ii) on the date of delivery of and payment for the Obligations, a debt service reserve surety bond (the "Surety Bond"), for the Obligations, guaranteeing the payment to the issuer of up to $3,648,588.75 on the Obligations. The issuance of the Surety Bond shall be subject to the following terms and conditions: 1. Payment by the Applicant, or by the Trustee on behalf of the Applicant, on the date of delivery of and payment for the Obligations, of a nonrefundable premium in the amount of $54,700 [1.5% (premium rate) of $3,648,588.75 (the total surety bond amount), premium rounded to the nearest hundred]. The premium set out in this paragraph shall be the total premium required to be paid on the Policy issued pursuant to this Commitment. 2. The Obligations shall have received the unqualified opinion of bond counsel with respect to the tax-exempt status of interest on the Obligations. 3. There shall have been no material adverse change in the Obligations or the Resolution, Bond Ordinance, Trust Indenture or other official document authorizing the issuance of the Obligations or in the final official statement or other similar document, including the financial statements included therein. 4. There shall have been no material adverse change in any information submitted to the Insurer as a part of the Application or subsequently submitted to be a part of the Application to the Insurer. 5. No event shall have occurred which would allow any underwriter or any other purchaser of the Obligations not to be required to purchase the Obligations at closing. WISDOM IN ACTION'm 6. Prior to the delivery of and payment for the Obligations, none of the information or documents submitted as a part of the Application to the Insurer shall be determined to contain any untrue or misleading statement of a material fact or fail to state a material fact required to be stated therein or necessary in order to make the statements contained therein not misleading. 7. No material adverse change affecting any security for the Obligations shall have occurred prior to the delivery of and payment for the Obligations. 8. This Commitment may be signed in counterpart by the parties hereto. 9. Compliance with the Insurer's Term Sheet for Debt Service Reserve Fund Program (see Attachment A). Dated this 29th day ofNovember, 2007. CITY OF RENTON, WASHINGTON By: Title: WISDOM IN ACTION" (Attachment A) TERM SHEET FOR DEBT SERVICE RESERVE FUND PROGRAM The Insurer can, under certain circumstances, issue a debt service reserve fund surety bond (the "Surety Bond"), to be used as a replacement for a cash funded reserve, in any amount up to thc full amount of the debt service reserve fund requirement. The Insurer requires that the issuer andor the underlying obligor of the bonds enter into a Financial Guaranty Agreement with the Insurer providing for, among other things, the reimbursement to the Insurer of amounts drawn under the Surety Bond. A sample draft of such an agreement is attached. The Insurer will undertake its standard credit analysis of the issuer and/or obligor which may result in requests for modifications of the structure or certain provisions of the bond documents. These changes would be in addition to the specific changes required in all financings where a Surety Bond will be issued (see Required Terms below). The Surety Bond may be structured to provide debt service reserve fund replacement for the current issue of bonds and any other debt issued on a parity therewith. However, in all cases, the Surety Bond will expire on the final maturity date of the current issue. The program criteria are subject to change by the Insurer. General Terms Provision should be made in the bond documents for the creation of a debt service reserve fund and there should be a requirement to maintain that fund at a certain level. It should also be provided that this requirement may be satisfied by cash or a qualified surety bond or a combination of these two (Note: A "Qualified suretv bond" means a suretv bond issued by an insurance company rated in the highest rating category bv Standard & Poor's and Moody's and, if rated by A.M. Best & Company, must also be rated in the highest rating categorv bv A.M. Best & Company). In those instances where the issuance of parity debt will cause the debt service reserve fund requirement to increase, the lnsurer requires that at the time of issuance of such parity debt, either cash or a qualified surety bond be provided so that the increased requirement will be satisfied. In any event where the debt service reserve fund contains both an the Insurer Surety Bond and cash, the Insurer requires that the cash be drawn down completely before any demand is made on the Surety Bond. In any event where thedebt service reserve fund contains a surety bond from another entity and an INSURER Surety Bond, the documents should provide for a pro-rata draw on each of the surety bonds. WISDOM IN ACTIONLT With regard to replenishment, any available monies, as defined in the Indenture or Resolution, should be used first to reimburse the Insurer, thereby reinstating the Surety Bond, and second to replenish the cash in the debt service reserve fund. The rate covenant should be expanded so that, in addition to all other coverage requirements, there are sufficient monies available to pay all amounts owed to the Insurer under the terms of the Financial Guaranty Agreement. If the documents provide for the issuance of additional bonds that do share a common reserve fund with the current issue, the Insurer can issue a surety bond that is, by its terms, available only as a reserve for the current issue. In such cases, the Insurer would require a covenant that any revenues available for debt service must be distributed between the current issue and any additional bonds on a pro rata basis without regard to the existence of a funded debt service reserve or a surety bond. The bond documents should require the Trustee to deliver a Demand For Payment (see attached form) at least three days prior to the date on which funds are required. Required Terms With respect to any security interest in collateral granted to the bondholders, the Insurer should be granted that same interest subject only to that of the bondholders. This would apply to existing security, if any, as well as any to be granted in the future. The Insurer should receive an opinion from counsel to the issuer/obligor that the Financial Guaranty Agreement is a legal, valid and binding obligation of the issuer/obligor and is enforceable against the issuer/obligor in accordance with its terms. In general terms, the "flow of funds" would be structured as follows: All gross revenues should be paid in the following order with the priority indicated: (I) expenses of operation and maintenance; (2) debt service on the bonds; (3) reimbursement of amounts advanced by the Insurer under the Surety Bond; (4) reimbursement of cash amounts, if any, drawn from the reserve fund; (5) replenishment of Renewal and Replacement Fund; (6) payment to the Insurer of interest on amounts advanced under the Surety Bond; (7) all other lawful uses, including the debt service payment on any subordinate bonds. Provision must be made for the Insurer to be paid all amounts owed to it under the terms of the Financial Guaranty Agreement or any other documents before the bond documents may be terminated. WISDOM IN ACTION'" It will be the responsibility of the trusteelpaying agent to maintain adequate records, verified with the Insurer, as to the amount available to be drawn at any given time under the Surety Bond and as to the amounts paid and owing to the Insurer under the terms of the Financial Guaranty Agreement. There may be no optional redemption of bonds or distribution of funds to the issuer andlor the underlying obligor unless all amounts owed to the Insurer under the terms of the Financial Guaranty Agreement or any other documents have been paid in hll. STANDARD FORM FOR MBlA DISCLOSURE FOR OFFICIAL STATEMENTS [September 30,2007J rhe section entitled "The MBlA lnsurance Corporation lnsurance Policy" is for use in public finance transactions] ~ The MBlA lnsurance Corporation lnsurance Policy The following information has been furnished by MBIA lnsurance Corporation ("MBIA") for use in this Official Statement. Reference is made to Appendix - for a specimen of MBIA's policy [(the "Policy")]. MBlA does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Policy and MBlA set forth under the heading r‘ "I. Additionally, MBIA makes no representation regarding the [BondsISecurities] or the advisability of investing in the [BondslSecurities]. The MBlA Policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the [Issuer] to the Paying Agent or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the [BondsISecurities] as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the MBIA Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless MBlA elects in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any Owner of the [BondsISecurities] pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Owner within the meaning of any applicable bankruptcy law (a "Preference"). MBIA's Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any [Bonds/Securities]. MBIA's Policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of [BondsISecurities] upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. MBIA's Policy also does not insure against nonpayment of principal of or interest on the [Bonds/Securities] resulting from the insolvency, negligence or any other act or omission of the Paying Agent or any other paying agent for the [BondslSecurities]. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by MBIA from the Paying Agent or any owner of a [Bond/Security] the payment of an insured amount for which is then due, that such required payment has not been made, MBIA on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such [Bonds/Securities] or presentment of such other proof of ownership of the [BondslSecurities], logcther with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the [Bonds/Securities] as are paid by MBIA, and appropriate instruments to effect the appointment of MBlA as agent for such owners of the [BondsISecurities] in any legal proceeding related to payment of insured amounts on the [BondslSecurities], such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or the Paying Agent payment of the insured amounts due on such [BondsISecurities], less any amount held by the Paying Agent for the payment of such insured amounts and legally available therefor. I MBlA Insurance Corporation MBIA Insurance Corporation ("MBIA") is the principal operating subsidiary of MBIA Inc., a Ncw York Stock Exchange listed company (the "Company"). The Company is not obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the State of New York and licensed to do business in and subject lo regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Manana Islands, the Virgin lslands of the United States and the Territory of Guam. MBIA, either directly or through subsidiaries, is licensed to do business in the Republic of France, the United Kingdom and the Kingdom of Spain and is subject to regulation under the laws of those jurisdictions. In February 2007, MBIA Corp. incorporated a new subsidiary, MBIA Mixico, S.A. de C.V. ("MBIA Mexico"), and in September 2007, MBlA Mexico became licensed to write financial guarantee insurance in Mexico. The principal executive offices of MBIA are located at 113 King Street, Armonk, New York 10504 and the main telephone number at that address is (914) 273-4545. I Regulation As a financial guaranty insurance company licensed to do business in the State of New York, MBIA is subject to the New York Insurance Law which, among other things, prescribes minimum capital requirements and contingency reserves against liabilities for MBIA, limits the classes and concentrations of investments that are made by MBlA and requires the approval of policy rates and forms that are employed by MBIA. State law also regulates the amount of both the aggregate and individual risks that may be insured by MBIA, the payment of dividends by MBIA, changes in control with respect to MBIA and transactions among MBIA and its affiliates. The Policy is not covered by the PropertyiCasualty lnsurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Strength Ratings of MBlA Moody's Investors Service, Inc. rates the financial strength of MBIA "Aaa." Standard & Poor's, a division of llle McGraw-Mill Companies, Inc., rates the financial strength of MBlA "AAA." Fitch Ratings rates the financial strength of MBIA "AAA." Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating agency's cunent assessment or the creditworthiness of MBIA and its ability to pay claims on its policies of insurance. Any Wher explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold the [BondsISecurities], and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on tlie market price of the [BondslSecurities]. MBlA does not paranty the market price of the [Bonds/Securities] nor does it bwaranty that the ratings on tlie [BondsISecurities] will not be revised or withdrawn. MBlA Financial Information As of December 31, 2006, MBlA had admitted assets of $10.9 billion (audited), total liabilities of $6.9 billion (audited), and total capital and surplus of $4.0 billion (audited) determined in accordance with statutory accounting practiccs prescribed or permitted by insurance regulatory authorities. As of September 30, 2007, MBlA liad admitted assets of $I 1.0 billion (unaudited), total liabilities of $6.8 billion (unaudited), and total capital and surplus of $4.2 billion (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. For further information concerning MBIA, see the consolidated financial statements of MBlA and its subsidiaries as of December 31,2006 and December 3 I, 2005 and for each of the three years in the period ended December 31, 2006, prepared in accordance with generally accepted accounting principles, included in the Annual Report on Form 10-K of the Company for the year ended December 31,2006 and the consolidated financial statements of MBlA and its subsidiaries as of September 30, 2007 and for the nine month periods ended September 30, 2007 and September 30, 2006 included in the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2007, which are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof. Copies of the statutory financial statements filed by MBIA with the State of New York Insurance Department are available over the Internet at the Company's web site at http:llwww.mbia.com and at no cost, upon request to MBlA at its principal executive offices. Incorporation of Certain Documents by Reference The following documents filed by the Company with the Securities and Exchange Commission (the "SEC'') are incorporated by reference into this Official Statement: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 2006; and (2) The Company's Quarterly Report on Forni 10-Q for the quarter ended September 30, 2007. Any documents, including any financial statements of MBIA and its subsidiaries that are included therein or attached as exhibits thereto, filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the Company's most recent Quarterly Report on Form 10-Q or Annual Report on Fonn 10-K, and prior to the termination of the offering of the [BondslSecurities] offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof from the respective dates of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Official Statement, shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. The Con~pany tiles annual, quanerly and special reports, inforn~ation statements and other information with the SEC under File No. 1-9583. Copies of the Company's SEC filings (including (1) the Company's Annual Report on Form 10-K for the year ended December 31,2006, and (2) the Company's Quarterly Reports on Fornl 10-Q for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007) are available (i) over the Internet at the SEC's web site at l~tt~:/lw~vw.sec.eov; (ii) at the SEC's public reference room in Washington D.C.; (iii) over the Internet at the Company's web site at http://www.mbia.coni; and (iv) at no cost, upon request to MBIA at its principal executive offices. STD DEBT SERVICE RESERVE FUND SURETY BOND Application has been made to the MBlA Insurance Corporation (the "lnsurer") for a commitment to issue a surety bond (the "Debt Service Reserve Fund Surety Bond"). The Debt Service Reserve Fund Surety Bond will provide that upon notice from the Paying Agent to the lnsurer to the effect that insufficient amounts are on deposit in the Debt Service Fund to pay the principal of (at maturity or pursuant to mandatory redemption requirements) and interest on the 2000 Obligations, the lnsurer will promptly deposit with the Paying Agent an amount sufficient to pay the principal of and interest on the 2000 Obligations or the available amount of the Debt Service Reserve Fund Surety Bond, whichever is less. Upon the later of: (i) three (3) days after receipt by the lnsurer of a Demand for Payment in the fomi attached to the Debt Service Reserve Fund Surety Bond, duly executed by the Paying Agent; or (ii) the payment date of the Obligations as specified in the Demand for Payment presented by the Paying Agent to the lnsurer, the lnsurer will make a deposit of funds in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment to the Paying Agent, of amounts which are then due to the Paying Agent (as specified in the Demand for Payment) subject to the Surety Bond Coverage. The available amount of the Debt Service Reserve Fund Surety Bond is the initial face amount of the Debt Service Reserve Fund Surety Bond less the amount of any previous deposits by the lnsurer with the Paying Agent which have not been reilnbursed by the a The C& and the lnsurer have entered into a Financial Guaranty Agreement dated [ ] (the "Agreement"). Pursuant to the Agreement, the C& is required to reimburse the Insurer, within one year of any deposit, the amount of such deposit made by the Insurer with the Paying Agent under the Debt Service Reserve Fund Surety Bond. Such reimbursement shall be made only after all required deposits to the Operation and Maintenance Fund and the Debt Service Fund have been made. Under the tenns of the Agreement, the Paying Agent is required to reimburse the lnsurer, with interest, until the face amount of the Debt Service Reserve Fund Surety Bond is reinstated before any deposit is made to the General Fund. No optional redemption of Obligations may be made until the Insurer's Debt Service Reserve Fund Surety Bond is reinstated. The Debt Service Reserve Fund Surety Bond will be held by the Paying Agent in the Debt Service Reserve Fund and is provided as an alternative to the C& depositing funds equal to the Debt Service Reauirement for outstanding Obligations. The Debt Service Reserve Fund Surety Bond will be issued in the face amount equal to Maximum Annual Debt Service for the Obligations and the premium therefor will be fully paid by the C& at the time of delivery of the Obligations. FINANCIAL GUARANTY INSURANCE POLICY MBlA Insurance Corporation Armonk, New York 10504 Policy No. ~WEK] IvfBlA insurance Corporation (the "hum"); in consideration of the payment of the pmhn and subject to the terns of this policy, hereby unconditionally and kvocably guarantees to any owner. as hereinafier defined of the following dmi obligations, the full and complete payment required to be made by or on belmlf of the lssuer to [PAYING AGENI'ilRUSl'EE] or its sucmwr (the "Paying Agent") of an amount equal to (i) the principal of (either at the stated maturity or by any advarlcement of maturity punvant to a mandatory sinking fund payment) and interest oq the Obligations (as that tenn is defmed below) as such paynents shall become due but shall not be so paid (except Out in the event of any accelmtion of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or ohenvise, other than any advancement of maturity pursuant to a mandatoly sinking fund paymenL the payments guaranteed hereby shall be made in such amounts and at such times as such payments ofprincipal would have hi due had there not teen any such acceleration, unles.. the Insurer elects, in its sole dimetion, to pay in wiiole or in part any principal dye by reason of such accelention); and (ii) the reimbursement ofany such payment which is subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment cowtitutes an avoidable preference to such owner within the meaning of any applicable ban!uuptcy law. The amounts refenwl to in clauses (i) and (ii) of the preceding sentence shall be ref& to herein collectively as the "hmd Amounts." "Obligations" shall mean: IPAR1 [LEGAL NAME OF ISSUE] Upon receipt of telephonic or telegmphic notice. such notice subsequently conGrmed in wiling by registered or certified 4 or upon receipt of wn'tten notice by +tered or certified mail; by the Imr from the Paying Agent or any owner of an Obligation the payment of an Inswed Amount for which is then due, that such required payment ha? not teen made, the Insurer on the due date of such payment or within one business day aIler receipt of notice of such nonpayment whichever is later, will make a deposit of funds, in an account with U.S. Bank Ttust National Association, in New Yo* New Yo& or its successor, sufficient for the payment of any such Incured Amounts which are then due. Upon pmtment and s~mder of such Obligations or presentment of such other proof of ownersfup of the Obligations. together uith any appropriate kstruments of migmnent to evidence he assignment of the In& Amounts due on the Obligations as are paid by the Inm, and appropriate inshuments to erect the appointment of the Insurer as agent for such ownem of the Obligations in any legal prcceeding relaled to paynent of Insured Amounts on the Obligations, such insrmments being in a form satisfactory to U.S. BankTmt National Association, U.S. Bank Trust Natiod Association slull disburse to such owners, or the Paying Agent payment of the Ind Amounts due on such Obligations, less any amount held by the Paying Agent for the payment of such !.mured Amounts and legally available therefor. lllis policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation. As used herein, the temi "ownd' shall mean the registered owner of any Obligation as indicated in the books maintained by tlie Paying Age* the Issuer, or any designee of the lssuer for such purpose. The term owner dlaU not include he Issuer or any party whose agreement with tlie Issuer constitutes the underlying security for the Obligations. Any service of process on the Insurer may be made to llle lmvrer at its oflices located at 1 13 King Seeel, honk, New York 10504 and such senice of prcces sM1 be valid and binding. This policy is noncancellable for any reason. The premium on this policy is not refundable for any reason including the payment prior to maturity of the Obligations. IN WITNESS WI-IEREOF, the Insurer ha. cased dlis policy to be exkuted in facsimile on its behalf by its duly authorized otficers, this [DAY] day of [MONTH, YEAR]. MBlA In rance Corporation a* STATEMENT OF INSURANCE MBlA Insurance Corporation (tlie "lnsurer") has issued a policy containing the following provisions, such policy being on file at [INSERT NAME OF 'TRUSTEE OR PAYING AGENT. INCLUDING CITY. STATE]. The Insurer. in consideration of the payment of the premium and subject to the terms of this policy, hereby unconditionally and irrevocably guarantces to any owner, as hereinafter defined, of the following described obligations, the full and complete payment required to be made by or on behalf of the lssucr to IlNSERT NAME OF TRUSTEE OR PAYING AGENT] or its successor (the "Paying Agent") of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and intercst on: the Obligations (as that term is defined below) as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or orhenvise, other than any advancement of maturity pursuant to a mandatory sinking fund payment. the payments guaranteed hereby shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless the Insurer elects in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner pursuant to a final judgment by a coun of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence shall be referred to herein collectively as the "lnsured Amounts." "Obligations" shall mean: [INSERT LEGAL TITLE OF BONDS. CENTERED AS FOLLOWS:] Upon receipt of telephonic or telegraphic notice; such notice subsequently confirmed in writing by registered or cenified mail, or upon receipt of \\rillen notice by registered or cenified mail, by the lnsurer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment has not been made, tlie lnsurer on the due date of snch payment or within one business day after receipt of notice of such nonpayment; whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor. sufficient for the pay~iient of any such lnsured Amounts which are then due. Upon presentment and surrender of such Obligations or presenunent of such other proof of ownership of the Obligations, together with any appropriate instruments of assignment to evidence the assignnient of the Insured Amounts due on the Obligations as are paid by the lnsurer, and appropriate instruments to effect the appointment of the lnsurer as agent for such owners of the Obligations in any legal proceeding related to payment of lnsured Amounts on the Obligations, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or the Paying Agent payment of the lnsured Amounts due on such Obligations, less any amount held by the Paying Agent for the payment of such lnsured Amounts and legally available therefor. This policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation. As used herein. the term "owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent. the Issuer: or any designee of the lssuer for such purpose. The term owner shall not include tlie Issuer or any pany \\,hose agreement with tlie lssuer constitutes the underlying security for the Obligations. Any service of process on the lnsurer may be made to the lnsurer at its offices located at 1 I3 King Street, Armonk; New York I0504 and such sentice of process shall be valid and binding. This policy is non-cancellable for any reason. The premium on this policy is not refundable for any reason including the payment prior to maturity of the Obligations. MBlA INSURANCE CORPORATION 1 PAYMENTS UNDER THE POLICYIOTHER REQUIRED PROVISIONS A. In the event dlat on the .second Business Day. and again on the Business Day. prior to the payment date on the Obligations, die Paying Agenflmtee has not received sullicient moneys to pay all principal of and intemt on the Obligations due on the mond following or following, as the case may be, Busi~ies Day: the Paying AgenliTwtee slk inAediately notify the Insurer or its designee on he same Business Day by telephoneor telegraph conGnned in \witing by registered or ceded mail, of the amount of the deficiency. B. If the deficiency is ~iiade up 111 wliole ar in pan prior to or on dx payment dale, the Paying Agenflmtee shall so no@ the Immr or its designee. C. In addition if die Paying Agenflwtee has notice lhar any Bondholder ha$ bmi & to disgorge payments of principal or inta~? on die Obligatiom to a bustee in banhptcy or creditors or odm pmuant to a final jud~nt by a cow of competent jdictim that such payment constitutes an avoidable preference to such Bondholder within the meaning of any applicable bankruptcy laws, &en tlie Paying Agenflrustee shall no@ the Insurer or its designee ofsuch fact by telephone or telepaphic notice, confirmed in \witing by registered or certified mail. D. Tlie Paying Agenflu5tee is hereby irrevocably designated, appointed, directed and authorized lo act as attorney-in-fact for tlolders of the Obligations as follous: 1. If and to the extent here is a deficiency in amounts re@ to pay int-7 on the Obligations, the Paying Agenflrustee shall (a) execute and deliver to U.S. Bank Tmst Natioml Aciation, or its successors under the Policy (the "hmnce Paying AgenbTrustee"), in form satisfactory to the Immce Paying Agent/Twtee, an insbumen1 appointing the Insurer as agent for such Holders in any legal proceeding related to the paynient of such interejt and at assi-mient to the lmr of the claim for interest to which such deficiency relates and which are paid by die Itw. (b) receive as designee of tlte rnpective Holders (and not as Paying AgMruqee) in acconknce with the tenor of the Policy payment. hm he insurance Paying Agenfl~stee with respect to the claims for in1erest so assigned; and (c) disburse the same to such respectiw Holders; aid 2. If and to the extent of a deticiaicy ui amounts required lo pay principal of the Obligations, the Paying Agenflm shall (a) execute and deliver lo the lncumnce Paying Agenflwtee in form satisfactory lo the hvmnce Paying Agenflmtee an insbument appoiniig the I~~?urer as agent for such Holder in a~y legal pmdg relating to the papent of such principal and an assignment to the insurer of any of the Obligation surrendered to tlie Insurance Paying Agenflnmx of so much of the principal amount thereof as has not previously been paid or for which mone)?; are not held by the Paying Agenfl~stee and a\ailable for such payment (but such assignment shall be delivered only if payment from Ule ln\vrance Paying AgenflMtee is received), (b) receive as designee of the rapective Holders (and not as Paying Agenflwlee) ui accordance with he tenor of the Policy papent therefor from the Insurance Paying AgentrTmtee, and (c) disburje the same to such Holders. E. Payments nlth respect to claims for inmt on and principal of Obligations disbd by the Paying AgentrTm\tee from proceeds of the Policy shall not be comidered to discme the obligation of the Issuer with respect to such Obligations, and the Insurer shall become the owner of such unpaid Obligation and claims for die interest in accordruice with the tenor of the assignment made to it under die provisions of lhis subsection or othenvise. F. Irrespective of ~vltether any such aqsignment is executed and deliwred, the Issuer and the Paying Agenflw hereby ape for the hefit of the Insurer that: I. They nso-g!ize that to tlte extent the Imwer makes payments, directly or iridirectly (as by paying through the Paying Agenflwtee), on accotuit of principal of or interest on the Obligations; the Insurer will be subrogated to the rights of such Holdm to receive the amount of such principal aid inm from d~e Issuer, with uiterest thereon as provided and solely hin the sounes stated in chis lndenm and the Obligauom; and 2. ' n~ey will accordingly pay to Uie hwer the amount of such principal aid interest (including principal and interest recovered wider subparagraph (ii) of the %st paragraph of the Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as probided in [his Indenture and the Obligation, but only from the sow and in the manner provided herein for the payment of principal of and interest on the Obligation5 to 1-loldm, and will otherwise weat the lms as the ouner of such rights to die amount of such principal and interest. G. In com~ection with the issuance of additional Obligations, the Imer shall deliver to the Insurer a wpy of the disclosure document, ifany, circulated with rnpecl to such additional Obligations. M. Copies of any amendmen& made to the document.? executed in connection with the issuance of the Obligations dlich are consented to by the lnnver shall be scnt to Standard 8: Poor's Corporation. 1. The ltrm shall receive notice of tlie resiption or renioval of the Paying Agenflwtee and the appinment of a successor thereto. J. 11~. Insum shall receive copies of all notices required to be delivered to Bondholders and, on an annual bask, copies of the lssue<s audited financial statements and Annual Budget. -: Any notice lhat is required to be given to a holder of the Obligation or to die Paying Agenflrustee pmuant to die Indenture shall also be provided to tl~e Insurer. All notices required to be given to d~e lnwrer under the Indenture shall be in \wiling and shall be sent by registered or cedfied nlail adM to MBIA Imme Corporatio& 1 13 Ki Street. honk, New York 10504 Anention: Surveillance. K. Ihe IsweriObligor am to reimburse the Immr immediately and unconditionally upon daw to the extent permined by law, for all reasonable expenw, including anonie)?;' fees aid expens, inch by the Imwr in connection with (i) the enforcement by the hurer of the issuer's 1Obligor.s obligations, or the pm,ation or defense of any rights of the insurer, under this Resolutionhdnim and any other document executed in connection \nth the kuiulce of the Obligations. and (ii) any consent, amendment, waiver or other action \nth respect to the Resolutionilndenture or any related docun~ent. whether or not pled or approved, together with interest on all such expenses h~n and includiig the date incurred to the date of pa)ment at Citibank's Plime Rate plu5 3% or the maximum intern1 rate pemilted by Ian.; whichever is less. In addition the lnna~r reserves the right to charge a fee in comiecrion with ~LS review ofany such consent, mendmen1 or \\aiver. whether or not mted or approved. L. The Issuer/Obligor apes not to use the insurefs name in any public document including, without limihtioq a press. relea* or pnlientation announcement or folu~n uithout the Inswefs prior consent; provided however, such prohibition on the use of the hfs mie shall not relate to he tw of Uie lnwreis standard approved fonn of discloss in public documents issued in connection with the cwent Obligations to be issued in accordance with thc tm of die Comniitment: and provided funher such prohibition shall not apply to !lie use of the h\ds name in order to comply with public notice, public meeting or public repofling requirements. M. The Issuer /Obligor shall not enter into any aprnent nor shall i~ conmt to or padcipate in any anangement pursuant to which Bonds are tendeed or purclad for any purpose (other chan he dm~ption and cancella~ion or legal defeasance of such Bonds without the prior Gtten conwit of MBlA). Revised 4i01 $ NAME OF ISSUER SERIES DESCRIPTION CERTIFICATE OF ISSUER AS TO MBIA INSURANCE POLICY This Certificate is furnished by the , as issuer (the "Issuer") of its $ , dated (the "Bonds"), and , as paying agent under the Bonds (the 'T'aying Agent"), for use by MBIA Insurance Corporation ("MBIA") in connection with its issuance of a municipal bond insurance policy No. (the "Policy"), guaranteeing the payment of the principal and interest on the Bonds when due. The Issuer and the Paying Agent hereby certify as follows: 1. The undersigned acknowledge receipt and review of MBIA's "Payments Under the Policy" provisions with respect to the Policy, attached hereto as Schedule A. 2. The undersigned hereby agree, during the term of the Policy and to the best of their abilities, to abide by the terms, obligations, and provisions required by Schedule A hereto. IN WITNESS WHEREOF, we have executed this Certificate as of the - day of as Issuer as Paying Agent By: By: FINANCIAL GUARANTY AGREEMENT FINANCIAL GUARANTY AGREEMENT made as of [CLOSNG DATE], by and between [ISSUER] (the "lssuer") and MBlA Insurance Corporation (the "lnsurer"), organized under the laws of the state ofNew York. WITNESSETH: WHEREAS, the Issuer has or will issue the Obligations; and WHEREAS, pursuant to the tams of the Document the lssuer agrees to make certain payments on the Obligations; and WHEREAS, the Insurer will issue its Surety Bond, substantially in the form set forth in Annex A to illis Agreement, guaranteeing certain payments by the Issuer subject to the terms and limitations of the Surety Bond; and WHEREAS, to induce the lnsurer to issue the Surety Bond, the lssuer has agreed to pay the premium for the Surety Bond and to reimburse the Insurer for all payments made by the Insurer under the Surety Bond, all as more hlly set forth in this Agreement; and WHEREAS, the lssuer understands that the Insurer expressly requires the delivery of this Agreement as part of the consideration for the execution by the Insurer of the Surety Bond; and NOW, THEREFORE, in consideration of the premises and of the agreements herein contained and of the execution of the Surety Bond, the lssuer and the lnsurer agree as follows: ARTICLE I DEFINITIONS; SURETY BOND Section 1.01. Definitions. The terms which are capitalized herein shall have the meanings specified in Annex B hereto. Section 1.02. Surety Bond. (a) The lnsurer will issue the Surety Bond in accordance with and subject to the terms and conditions of the Commitment. (b) The maximum liability of the Insurer under the Surety Bond and the coverage and tern1 thereof shall be subject to and limited by the terms and conditions of the Surety Bond. Section 1.03. Premium. In consideration of the lnsurer apxing to issue the Surety Bond hereunder, the lssuer hereby agrees to pay or wuse to be paid the Premium set forth in AM~X B hereto. The Premium on the Surety Bond is not refundable for any reason. Section 1.04. Certain Other Exoenses. The lssuer will pay all reasonable fees and disbursements of the Inswet's special counsel related to any modification of this Ament or the Surety Bond. ARTICI .E 11 . -. . . - - - - - REIRIBURSERIEKT AND INDE\INIFICATIOY OBLlGATlOlVS OF ISSUER ANI) SECURllY THEREFOR Section 2.01. Reimbursenient for Paments Under the Sureh~ Bond and Expenses; Indemnification. (a) The lssuer will reimburse the Insurer, within the Reimbursement Period, without demand or notice by the lnsurer to the lssuer or any other person, to the extent of each Surety Bond Payment with interest on each Surety Bond Payment brn and including the date made to the date of the reimbursement at the lesser of the Reimbursement Rate or the maximum rate of interest permitted by then applicable law. (b) The lssuer also agrees to reimburse the Insurer immediately and unconditionally upon demand, to the extent pennitted by state law, for all reasonable expenses incurred by the Insurer in connection with the Surety Bond aid the enforcement by the Insurer of the Issuer's obligations under this Agreemalt, the Document, and any other document executed in colulection with the issuance of the Obligations, together with interest on all such expenses Corn and including the date incurred to the date of payment at the rate set forth in subsection (a) of this Section 2.01. (c) The lssuer agrees to indemnify the Insurer, to the extent permitted by state law, against any and all liability, claims, loss, costs, damages, fees of attorneys and other expenses which the Insurer may sustain or incur by reason of or in consequence of (i) the failure of the lssuer to perform or comply with the covenants or conditions of this Agreement or (ii) reliance by the Insurer upon representations made by the Issuer or (iii) a default by the lssuer under the terms of the Document or any other documents executed in connection with the issuance of the Obligations. (d) The lssuer agrees that all amounts owing to the lnsurer pursuant to Section 1.03 hereof and dus Section 2.01 must be paid in full prior to any optional redemption or refimding of the Obligations. (e) All payments made to the lnsurer under this Agreement shall be paid in lawful currency of the United States in immediately available fimds at the Insurer's office at 113 King Street, honk, New York 10504, Attention: Accounting and Insured Portfolio Management Departments, or at such other place as shall be designated by the Insurer. Section 2.02. Allocation of Payments. The Insurer and the lssuer hereby agree that each payment received by the lnsurer from or on behalf of the lssuer as a reimbursement to the Insurer as required by Section 2.01 hereof shall be applied by the Insurer first, toward payment of any unpaid premium; second, toward repayment of the aggregate Surety Bond Payments made by the Insurer and not yet repaid, payment of which will reinstate all or a portion of the Surety Bond Coverage to the extent of such repaynent put not to exceed the Surety Bond Litnit); and third, upon full reinstatement of the Surety Bond Coverage to the Surety Bond Limit, toward other amounts, including without limitation, any interest payable with respect to any Surety Bond Payments then due to the Insurer. Section 2.03. Security for Payments; Insbuments of Further Assurance. To the extent, but only to the extent, that the Document, or any related indenture, trust agreement, ordinance, resolution, mortgage, security agreement or similar inshwnent, if any, pledges to the Owners or any trustee therefor, or pts a security interest or lien in or on any collateral, property, revenue or other payments ("Collateral and Revenues") in order to secure the Obligations or provide a source of payment for the Obligations, the lssuer hereby grants to the Insurer a security interest in or lien on, as the case may be, and pledges to the Insurer all such Collateral and Revenues as security for payment of all amounts due hereunder and under the Docutnent or any other document executed in connection with the issuance of the Obligations, which security interest, lien andlor pledge created or granted under tlus Section 2.03 shall be subordinate only to the interests of the Owners and any trustee therefor in such Collateral and Revenues, except as otherwise provided. The lssuer agrees that it will, hm time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, any and all financing statements, if applicable, and all other further inshuments as may be required by law or as shall reasonably be requested by the Insurer for the perfection of the security interest, if any, pted under this Section 2.03 and for the preservation and protection of all rights of the Insurer under this Section 2.03. Section 2.04. Unconditional Obli~ation. The obligations hereunder are absolute and unconditional and will be paid or performed shictly in accordance with this Agreement, subject to the limitations of the Document, irrespective of (a) any lack of validity or enforceability of, or any amendment or other modification of, or waiver with respect to the Obligations, the Document or any other document executed in connection with the issuance of the Obligations; or (b) any exchange, release or nonperfection of any security interest in property secuting the Obligations or this Agreement or any obligations hereunder, or (c) any circumstances that might otherwise constitute a defense available to, or discharge of, the lssuer with respect to the Obligations, the Document or any other document executed in connection with the issuance of the Obligations; or (d) whether or not such obligations are contingent or matured, disputed or undisputed, liquidated or unliquidated. Section 2.05. Insurer's Rights. The lssuer shall repay the Insurer to the extent of payments made and expenses incurred by the lnsurer in connection with the Obligations and this Agreement. The obligation of the lssuer to repay such amounts shall be subordinate only to the rights of the Owners to receive regularly scheduled pincipal and interest on the Obligations. Section 2.06. On-Goina Information Obli~ations of Issuer. (a) Ouarterly Rewrts. The lssuer will provide to the Insurer wih 45 days of the close of each quarter interim financial statements covering all fund balances under the Document, a statement of operations (income statement), balance sheet and changes in fund balances. These statements need not be audited by an independent mtitied public accountant, but if any audited statements are produced, they must be provided to the Insurer, @) Annual Reports. The Issuer will provide to the Insurer annual financial statements audited by an independent certified public accountant within 90 days of the end of each fiscal year, (c) Access to Facilities. Books and Records. The lssuer will gant the insurer reasonable access to the pmject financed by the Obligations and will make available to the insurer, at reasonable times and up011 reasonable notice all books and records relative to the pmject financed by the Obligations; and (d) Com~liance Certificate. On an annual basis the lssuer will provide to the Insurer a certificate confirming compliance with all covenants and obligations hereunder and under the Revenue Agreement, the Document or any other document executed in connection with the issuance of the Obligations. ARTICLE 111 AMENDMENTS TO DOCUMENT So long as this Agreement is in effect, the Issuer agrees that it will not agree to amend the Document or any other document executed in connection with the issuance of the Obligations, without the prior written consent of the insurer. ARTICLE IV EVENTS OF DEFAULT; REMEDIES Section 4.01. Events of Dcfault. The following events shall constitute Events of Default hereunder: (a) The lssuer shall fail to pay to the Insurer when due any amount payable under Sections 1.03; or (b) The lssuer shall fail to pay to the lnsurer any amount payable under Sections 1.04 and 2.01 hereof and such failure shall have continued for a period in excess of the Reimbursement Period;or (c) Any material representation or warranty made by the Issuer under the Document or hereunder or any statement in the application for the Surety Bond or any report, certificate, financial statement, document or other instrument provided in connection with the Colnmitment, the Surety Bond, the Obligations, or herewith shall have been materially false at the time when made; or (d) Except as otherwise provided in this Section 4.01, the Issuer shall fail to perform any of its other obligations under the Document, or any other document executed in connection with the issuance of the Obligations, or hereunder, provided that such failure continues for more than 30 days after receipt by the Issuer of written notice of such failure to perform; or (e) 11e lssuer shall (i) voluntarily commence any proceeding or file any petition seeking relief under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy, inso~vency or similar law, (ii) consent to the institution of, or fail to controvert in a timely and appropriate mama, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestmtor or similar official for such party or for a substantial part of its property, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take action for the purpose of effecting any of the foregoing; or (f) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Issuer, or of a substantial,part of its property, under the United States Bankruptcy Code or any other Federal, state or foreign banknrptcy, insolvency or similar law or (ii) the appointment of a receiver, trustee, custodian, sequestmtor or similar official for the Issuer or for a substantial part of its prom, and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for 30 days. Section 4.02. Remedies. If an Event of Default shall occur and be continuing, then the Insurer may take whatever action at law or in equity may appear necessary or desirable to collect the amounts then due and thereah to become due under this Agreement or to enforce performance of any obligation of the Issuer to the Insurer under the Document or any related instrument, and any obligation, agreement or covenant of the lssuer under this Agreement; provided, however, that the Insurer may not take any action to direct or require acceleration or other early redemption of the Obligations or adversely affect the rights of the Owners. In addition, if an Event of Default shall occur due to the failure to pay to the Insurer the amounts due under Section 1.03 hereof, the Insurer shall have the right to cancel the Surety Bond in accordance with its terms. All rights and remedies of the Insurer under this Section 4.02 are cumulative and the exercise of any one remedy does not preclude the exercise of one or more of the other available remedies. ARTICLE V SEITLEMENT The Insurer shall have the exclusive right to decide and determine whether any claim, liability, suit or judgment made or brought against the Insurer, the lssuer or any other party on the Surety Bond shall or shall not be paid, compromised, resisted, defended, tried or appealed, and the Insurer's decision thereon, if made in good faith, shall be final and binding upon the insurer, the lssuer and any other party on the Surety Bond. An itemized statement of payments made by the Insurer, certified by an officer of the Insurer, or the voucher or vouchers for such payments, shall be prima facie evidence of the liability of the Issuer, and if the lssuer fails to immediately reimburse the lnsurer upon the receipt of such statement of payments, interest shall be computed on such amount fiom the date of any payment made by the Insurer at the rate set forth in subsection (a) of Section 2.01 hereof. ARTICLE W MISCELLANEOUS Section 6.01. Interest Computations. All computations of interest due hereunder shall be made on the basis of the actual number of days elapsed over a year of 360 days. Section 6.02. Exercise of Rights. No failure or delay on the part of the Insurer to exercise any right, power or privilege under hs Apnent and no course of dealing between the Insurer and the lssuer or any other party shall operate as a waiver of any such righf power or privilege, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Insurer would otherwise have pursuant to law or equity. No notice to or demand on any party in any case shall entitle such party to any other or Mer notice or demand in similar or other circumstances, or constitute a waiver of the right of the other party to any other or Mer action in any circumstances without notice or demand. lf to the Paying Agent: If to the Insurer: Section 6.03. Amendment and Waiver. Any provision of tlus Agreement may be amended, waived, supplemented, discharged or terminated only with the prior written consent of the Issuer and the Insurer. The lssuer hereby agrees that upon the written request of the Paying Agent, the Insurer may make or consent to issue any substitute for the Surety Bond to cure any ambiguity or folmal defect or omission in the Surety Bond which does not materially change the terms of the Surety Bond nor adversely affect the rights of the Owners, and this Ageement shall apply to such substituted surety bond. The Insurer agrees to deliver to the [PAYING AGENT] [ADDRESS] [CONTACT] i MBlA Insurance Corporation 1 13 King Street Annonk, New York 10504 Attention: Insured Portfolio Issuer and to the company or companies, if any, rating the Obligations, a copy of such substituted surety bond. Section 6.04. Successors and Assigns; Dacri~tive Headins. (a) Th~s Agreement shall bind, and the benefits thereof shall inure to, the Issuer and the lnsurer and their respective successors and assigns; provided, that the lssuer may not transfer or assign any or all of its rights and obligations hereunder without the prior written consent of the Insurer. (b) The descriptive headings of the various provisions of this Agreement are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof Section 6.05. Other Sureties. If the Insurer shall pmure any other surety to reinsure the Surety Bond, this Agreement shall inure to the benefit of such other surety, its successors and assigns, so as to give to it a di light of action against the lssuer to enforce this Agreement, and "the hs~~er: wherever used herein, shall be deemed to include such reinsuring surety, as its respective interests may appear. Section 6.06. Signature on Bond. The issuer's liability shall not be affected by its failure to sign the Surety Bond nor by any claim that other indemnity or security was to have been obtained nor by the release of any indemnity, nor the return or exchange of any collateral that may have been obtained. Section 6.07. -. The lssuer waives any defense that this Agreement was executed subsequent Management Group Section6.09. Survival of Representations and Wananties. A11 represa~tatiolls, warranties and obligations contained herein shall survive the execution and delively of this Agreement and the Surety Bond. to the date of the Surety Bond, admitting and covenanting that such Surety Bond was executed pursuant to the Issuer's request and in reliance on the issuer's promise to execute this Agreement. Section6.08. Notices, Rauests. Demands. Except as otherwise expressly provided herein, all written notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been given or made when actually received, or in the case of telex or telecopiernotice sent over a telex or a telecopier machine owned or operated by a party hereto, when sent, addressed as specified below or at such other address as any of the parties may hereafter specify in writing to the others: If to the Issuer: [ISSUER] [ADDRESS] [CONTAW Section 6.10. Govemine Law. Tlus Agreement and the rights and obligations of the parties under this Agreement shall be governed by and construed and interpreted in accordance with the laws of the State. Section 6.1 1. Counterparts. This Agreanent may be executed in any number of copies and by the different parties hereto on the same or sepmte counterparts, each of which shall be deemed to be an original inshument. Complete counterparts of this Agreement shall be lodged with the Issuer and the insurer. Section6.12. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 6.13. Survival of Obligations. Notwithstanding anytlung to the contrary contained in this Agreement, the obligation of the Issuer to pay all amounts due hereunder and the rights of the Insurer to pursue all ranedies shall survive the expiration, termination or substitution of the Surety Bond and this Agreement. lli WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. By: Title: MBlA Insurance Corporation President Anal: Assistant Secretary DEBT SERVICE RESERVE SURETY BOND MBIA Insurance Corporation Armonk, New York 10504 Surety Bond No. [POLICY NO.] MBIA Insurance Corporation (the "lnsurer"), in consideration of the payment of the premium and subject to the terms of this Surety Bond. hereby unconditionally and irrevocably guarantees the full and complete payments that are to be applied to payment of principal of and interest on the Obligations (as hereinafter defined) and that are required to be made by or on behalf of PAME OF ISSUER] (the "lssuer") under the [TITLE OF THE DOCUMENT] (the "Document") to [NAME OF PAYING AGENT]: (the "Paying Agent"), as such payments are due but shall not be so paid, in connection with the issuance by the lssuer of [TITLE OF THE OBLIGATIONS] (the "Obligations"), together with any bonds issued on a parity therewith, provided, that the amount available hereunder for payment pursuant to any one Demand for Payment (as hereinafter defined) shall not exceed [a: FIXED COVERAGE [Dollar Amount of Coverage] or the debt service reserve fund requirement for the Obligations, whichever is less (the "Surety Bond Limit"); provided, funher, that the amount available at any particular time to be paid to the Paying Agent under the terms hereof (the "Surety Bond Coverage") shall be reduced and may be reinstated from time to time as set forth herein.] or [b: VARIABLE COVERAGE the annual amount set forth for the applicable bond year on Exhibit A attached hereto (the "Surety Bond Limit"); provided, further, that the amount available at any particular time to be paid to the Paying Agent under the terms hereof (the "Surety Bond Coverage") shall be reduced and may be reinstated from time to time as set fonh herein.] I. As used herein, the tern] "Owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the applicable paying agent, the lssuer or any designee of the lssuer for such purpose. The term "Owner" shall not include the lssuer or any person or entity whose obligation or obligations by agreement constitute the underlying security or source of payment for the Obligations. 2. Upon the later of: (i) three (3) days after receipt by the lnsurer of a demand for payment in the form attached hereto as Attachment 1 (the "Demand for Payment"), duly executed by the Paying Agent; or (ii) the payment date of the Obligations as specified in the Demand for Payment presented by the Paying Agent to the Insurer, the lnsurer will make a deposit of funds in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment to the Paying Agent, of amounts that are then due to the Paying Agent (as specified in the Demand for Payment) subject to the Surety Bond Coverage. 3. Demand for Payment hereunder may be made by prepaid telecopy, telex, TWX or telegram of the executed Demand for Payment c/o the lnsurer. If a Demand for Payment made hereunder does not, in any instance, conform to the terms and conditions of this Surety Bond, the Insurer shall give notice to the Paying Agent, as promptly as reasonably practicable, that such Demand for Payment was not effected in accordance with the terms and conditions of this Surety Bond and briefly state the reason(s) therefor. Upon being notified that such Demand for Payment was not effected in accordance with this Surety Bond, the I'aying Agent may attempt to correct any such nonconforming Demand for Payment if. and to the extent that, the Paying Agent is entitled and able to do so. 4. The amount payable by the Insurer under this Surety Bond pursuant to a particular Demand for Payment shall be limited to the Surety Bond Coverage. The Surety Bond Coverage shall be reduced auto~natically to the extent of each payment made by the lnsurer hereunder and will be reinstated to the extent of each reimbursement of the lnsurer pursuant to the provisions of Article I1 of the Financial Guaranty Agreement dated the date hereof between the lnsurer and the [ISSUER OR OBLIGOR] (the "Financial Guaranty Agreement"); provided, [ANNUAL PREMIUM OPTION: that no premium is due and unpaid on this Surety Bond and] that in no event shall such reinstatement exceed the Surety Bond Limit. The lnsurer will notify the Paying Agent, in writing within five (5) days of such reimbursement, that the Surety Bond Coverage has been reinstated to the extent of such reimbursement pursuant to the Financial Guaranty Agreement and sucli reinstatement shall be effective as of the date the lnsurer gives such notice. The notice to the Paying Agent will be substantially in the form attached hereto as Attachment 2. 5. Any sen~ice of process on the lnsurer or notice to the lnsurer may be made to the lnsurer at its ofices located at I13 King Street: Armonk, New York 10504 and such service of process shall be valid and binding. 6. The term of this Surety Bond shall expire [ANNUAL PREMIUM OPTION: ,unless cancelled pursuant to paragraph 9 hereof.] on the earlier of (i) [MATURITY DATE] (the maturity date of the Obligalions being currently issued), or (ii) the date on which the Issuer has made all payments required to be made on the Obligations pursuant to the Document. 7. The premium payable on this Surety Bond is not refundable for any reason, including tlie payment prior to maturity of the Obligations. 8. [OPTIONAL FIRST SENTENCE: This Surety Bond shall be governed by and interpreted under the laws of the State of (STATE)]. Any suit hereunder in connection with any payment may be brought only by the Paying Agent within [I or 3 years] after (i) a Demand for Payment, with respect to such payment, is made pursuant to the terms of this Surety Bond and the lnsurer has failed to make such payment, or (ii) payment would otherwise have been due hereunder but for the failure on the part of tlie Paying Agent to deliver to the lnsurer a Demand for Payment pursuant to the terms of this Surety Bond, whichever is earlier. WOS. 9 and 11 are OPTIONAL] 9. Subject to the tenns of the Document, the lssuer shall have the right, upon 30 days prior witten notice to the lnsurer and the Paying Agent, to terminate this Surety Bond. In the event of a failure by the lssuer to pay the premium due on this Surety Bond pursuant to the terms of the Financial Guaranty Agreement, the lnsurer shall have tlie right upon [No. of days] days prior written notice to the lssuer and the Paying Agent to cancel this Surety Bond. No Demand for Payment shall be made subsequent to such notice of cancellation unless payments are due but shall not have been so paid in connection with the Obligations. 10. There shall be no acceleration payment due under this Policy unless such acceleration is at the sole option of the lnsurer. I I, This policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. In witness whereof. the lnsurer has caused this Surety Bond to be executed in facsimile on its behalf by its duly authorized officers, this [DATE] day of [MONTH,YEAR]. MBlA INSURANCE CORPOUTION President SB-DSRF-9-[STATE CODE] 4/95 EXHIBIT A Surety Bond No. [POLICY NO.] Bond Year Maximum Annual Debt Service 20 to 20 $ 20 1020 $ 20 to20 $ Attaclunent 1 Surety Bond No. [POLICY NO.] DEMAND FOR PAYMENT MBlA Insurance Corporation 11 3 King Street honk, New York 10504 Attention: President Reference is made to the Surety Bond No. [POLICY NO.] (the "Surety Bond") issued by the MBlA Insurance Corporation (the "Insurer"). The terms which are capitalized herein and not otherwise defined have the meanings specified in the Surety Bond unless the context otherwise requires. The Paying Agent hereby cenifies that: (a) In accordance with the provisions of the Document (attached hereto as Exhibit A), payment is due to the Owners of the Obligations on (the "Due Date") in an amount equal to $- (the "Amount Due"). (b) The [Debt Service Reserve Fund Requirement] for the Obligations is $ (c) The amounts legally available to the Paying Agent on the Due Date will be $- less than the Amount Due (the "Deficiency"). (d) The Paying Agent has not heretofore made demand under the Surety Bond for the Amount Due or any portion thereof. The Paying Agent hereby requests that payment of the Deficiency (subject to the Surety Bond Coverage) , be made by the Insurer under the Surety Bond and directs that payment under the Surety Bond be made to the following account by bank wire transfer of federal or other immediately available funds in accordance with the terms of the Surety Bond: [Paying Agent's Account] [PAYING AGENT] Attachment 2 Surety Bond No. [POLICY NO.] NOTICE OF REINSTATEMENT ,20- [Paying Agent] [Address] Reference is made to the Surety Bond No. [POLICY NO.] (the "Surety Bond") issued by the MBIA Insurance Corporation (the "Insurer"). The terms which are capitalized herein and not otherwise defined have the meanings specified in the Surety Bond unless the context othenvise requires. The Insurer hereby delivers notice that it is in receipt of payment from the Obligor pursuant to Anicle I1 of the Financial Guaranty Agreement and as of the date hereof the Surety Bond Coverage is $ MBIA lnsurance Corporation President Attest: Assistant Secretary ANNEX B DEFINITIONS For all purposes of this Agreement and the Surety Bond, except as othenvise expressly provided herein or unless the context otherwise requires, all capitalized terms shall have the meaning as set out below, which shall be equally applicable to both the singular and plural forms of such terms. "Agreement" means this Financial Guaranty Agreement. "Closing Date" means [CLOSING DATE]. "Commitment" means the commitment to issue Municipal Bond Guaranty Insurance in the form attached hereto as Annex C. "Debt Service Payments" means those payments required to be made by or on behalf of the lssuer which will be applied to payment of principal of and interest on the Obligations. "Demand for Payment" means the certificate submitted to the Insurer for payment under the Surety Bond substantially in the form attached to the Surety Bond as Attachment 1. "Document" means [DOCUMENT]. "Event of Default" shall mean those events of default set forth in Section 4.01 of the Agreement. "!.nmm" has the same meaning as set forth in the first paragraph of this Agreement. "Issuer" means [ISSUER]. "Obligations" means [OBLIGATIONS], together with any bonds issued on a parity therewith. "Owners" means the registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the lssuer or any designee of the lssuer for such purpose. "Paying Agent" means [PAYING AGENT] "Premium" means [PREMIUM]. "Reimbursement Period means, with respect to a particular Surety Bond Payment, the period commencing on the date of such Surety Bond Payment and ending on the earlier of the date of cancellation of the Surety Bond due to nonpayment of Premium when due or on the expiration of [NUMBER OF MONTHS] following such Surety Bond Payment. "Reimbursement Rate" means Citibank's prime rate plus three (3) permit per annum, as of the date of such Surety Bond Payment, said "prime rate" being the rate of interest announced fiom time to time by Citibank, N.A., New Yo&, New York, as its prime rate. The rate of interest shall be calculated on the basis of the actual number of days elapsed over a 360day year. "State" means [STATE]. "Surety Bond means that surety bond attached hereto as Annex A and issued by the Insurer guaranteeing subject to the tms and limitations thereof, Debt Sewice Payments required to be made by the lssuer under the Document. "Surety Bond Coverage'' means the amount available at any particular time to be paid under the terms of the Surety Bond, which amount shall never exceed the Surety Bond Limit. "Surety Bond Limit" means [SURETY BOND LIMIT]. "Surety Bond Payment" means an amount equal to the Debt Service Payment required to be made by the Issuer pursuant to the Document less (i) that portion ofthe Debt Service Payment paid by or on behalf of the issuer, and (ii) other hds legally available for paynent to the Owners, all as certified in a Demand for Payment. n FINANCIAL GUARANTY INSURANCE POLICY MBIA Insurance Corporation L m bia Arrnonk, New ~ork10504 Policy No. 505890 MBIA Insuzlce Coiporation (the "Insurer"), in co~lsideration of the payment of the premiunl wd subject to the terns of this policy, hereby tu~coi~ditio~nlly and uievocably guarantees to any owner, as hereinai'cer defined, of tlle foUo\viig described obligations, the full and conlplete pay~ent required to be nnde by or on behalf of the Issuer to the principal office of the Fixal Agency of the State of Washington, New York New York or its successor (he "Paying Agent") of an amount equal to (i) the pruicipal of (either at die stated nuturity or by aiy advancenrnt of nnttuity ptusuant to a nntldato~y si124ng fuld payment) and interest on, the Obligations (as that tern is defuled below) as such paynients slnll beconx due but slull not be so paid (except dnt in the eved of any acceleration of the due date of such piulcipal by reason of tmndato~y or optio~mal redenpion or acceleiatiotl resulti~lg 6-0111 default or othenvise, other than any advancement ofmahuity pursuant to a nnndatoly sinhlg hu~d payllent, the payments guluanteed hereby shall be nude it1 such anlounts and at such fims as such payments of p~incipal would have been due had there not been any such acceleration, udess the Itlstuer elects, in its sole discretio~> to pay UI whole or in pat any principal due by leason of such acceleration); and (i) the reinh~usenxnt of any such paylent which is subsequently recovetd bm any owner pu~ua~it to a final judgtlxnt by a court of contpetenrj~uidicti011 that such payment collshhltes an avoidable ptefe~ence to such owner within the meaning of any applicable bdmptcy law. 11e amum refelled to in clauses (i) and (ii) of the precediu~g sentence shall be refened to herein collectively as the "hued Anmunts." "Obligatio~ls" shall nlean: $9,975,000 City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A Upon receipt of telephoiuc or telegraphic ilotice, such notice sltbseque~~tly confim~d ul witing by registered or cettified ]mil, or up011 receipt of witten notice by registered or ceitified mail, by the Insurer 6om the Paying Agent or any ommer of an Obligatio~l tl~e payment of an I11~1ued An~ount for which is then due, dnt such required payment has not been made, the IIlsuer on the due date of such paynlent or widin one business day affer receipt of notice of such nonpayn1ent, whichever is later, wiu make a deposit of finds, in an account with U.S. Bank T~ust National Association, in New York, New Yolk, or its successor, sufficient for the paynxnt of any such Insured AmMu~ts which rue then due. Upon pmenhllent and mrel~der ofn~ch Obligatiolls or presenmletlt of such other proof of ownership of the Obligatiolls, togetller with any app~opriate ulshutnents of assignment to evidence the assig~nvnt of tlle Inslued Amoults due on the Obligations as are paid by he Insuer, and approptiate kments to effect the appointment of the It~uer as agent for such ownen of the Obliptions in any legal proceeding related to paylmt of Insued Amounts 011 the Obligations, such itIsb~n~nts being in a fo~m sahfacto~y to U.S. Bank Trust National Associitior!, U.S. Bank Trust National Association shall disbune to such owners, or the Paying Agent payilent of d~e Insured Anloults due 011 such Obligations, less any anlount held by tl~e Paying Agent for the paynent of such Insured Anmu~ts m~d legally available tllelefor. 1is policy does not innrre against loss of any prepaynmt prenuun which tmy at any tinx be papble with lespect to any Obligation. As used hereu4 the term "ommer" shU man the registeled ouner ofany Obligation as uidicated in the books maintained by dle Paying Agent, the Issuer, or any designee of the Issuer for such purpose. 1me teim owner shall not hlclude the Issuer or any patty whose ag.eetnent with the lssuer co~lstin~tes the lu~derlyilg security for tlle Obligations. Any se~vice ofprocess on the her nlay be made to the Insuer at its offices located at 113 King Shxt, hnwnk, New York 1050-2 and such service of plocess shall be valid and binding. This policy is nonsancellable for any reason The prenulun on this policy is not refiu~dable for any reason including the payment ptior to mahuity of the Obligations. IN WITNESS WHEREOF, the Imr has caused rhis policy to be executed in hcsimile on its behalfby its duly authorized ofticets, this 4th day of January, 2008. MBIA At: LW$ Asstslant ec WISDOM IN ACTION'" January 4,2008 The principal office of the Fiscal Agency of the State of Washington New York, New York $9,975,000 City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A Ladies and Gentlemen: In connection with the abovedescribed obligations (the "Obligations") of which you are acting as paying agent (the "Paying Agent"), please be advised that the payment to you of principal of and interest on the Obligations has been guaranteed by a policy of financial guaranty insurance (the "Policy") issued by the MBIA Insurance Corporation (the "Insurer"). U.S. Bank Trust National Association, New York, New York (the "Fiscal Agent") is acting as the fiscal agent for the Insurer. The Policy unconditionally and irrevocably guamntees to any owner or holder of the Obligations or, if applicable, of the coupons appertaining thereto (the "Owner"), the full and complete. payment reqd to be made by or on behalf of the issuer of the Obligations (the "Issuer") to the Paying Agent or its successor of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Obligations as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting hm default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration); and (ii) the reimbursement of any such payment whlch is subsequently recovered fiom any Owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference (a "Preference") to the Owner within the meaning of any applicable badmptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence are referred to collectively in this letter as the "Insured Amounts." The Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligations. The Policy does not, under any circmce, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Obligations upon tender by an Owner thereof; or (iv) any Preference relating to (i) through (i) above. MBIA Insurance Corporation . 113 Kinq Street . Armonk. NY 10504 . +1 914 273 4545 www.rnbia.com WISDOM IN ACTION'm In the event that the Issuer does not make 111 and complete payment when due of the principal of and interest on the Obligations, please immediately not@, by telephone or telegraph, the Insurer, 113 King Street, honk, New Yolk, 10504, (914) 2734545. On the due date or within one business day after receipt of such notice, whichever is later, the Insurer will deposit funds with the Fiscal Agent sufficient to pay the Obligations (or, if applicable, coupons appe&g thereto) then due. Upon presentment and swender of such Obligations (or, if applicable, coupons) or presentment of such other proof of ownership of Obligations together with any appropriate instruments of assignment to evidence the assignment of the Insured Amounts due on the Obligations as are. paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for the Owners in any legal proceeding related to payment of Insured Amounts on the Obligations (or, if applicable, coupons), such instruments being in a fom satisfactory to the Fiscal Agent, the Fiscal Agent shall disburse to you payment of the Insured Amounts due on such Obligations (and, if applicable, coupons), less any amount held by you for the payment of such Insured Amounts and legally available therefor. Forms of such instruments of assignment and instruments to effect the appointment of the Insurer as such agent for the Owners (collectively, the "Claim Documents"), which are currently acceptable to the Fiscal Agent and the Insurer, are. on file with the Fiscal Agent. The Insurer may, fiom time to time, file revised forms of Claim Documents with the Fiscal Agent in substitution for the forms previously filed with the Fiscal Agent, and upon such filing, the revised forms shall supersede all forms of Claim Documents previously filed with the Fiscal Agent, except as othemise kted by the Insurer in writing. In the event that you shall have prior knowledge of an impending failure by the Issuer to make payment on the Obligations (or, if applicable, coupons) when due, please immediately no* the Insurer so that it will be possible to have funds available for you on the due date to make payments against surrendered Obligations (an4 if applicable, coupons). Your cooperation in this matter will be most appreciated and will make it possible for the Owners of Obligations guaranteed by the Insurer to be assured of all payments when due. Gary C. ~;nton President RECEIPT FOR POLICY Receipt of the original, executed Financial Guaranty Insurance Policy No. 505890, issued by MBIA Insurance Corporation, dated January 4, 2008, is hereby acknowledged on behalf of The Bank of New York, in its capacity as Paying Agent, in connection with the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A, in the principal amount of $9,975,000. d Dated as of this 1 0 day o ,2008. THE BANK OF NEW YORK FINANCIAL GUARANTY INSURANCE POLICY MBIA 1nsurance.Corporation Armonk, New York 10504 Policy No. 505900 MBIA haluance Co~po~ation (the "l~mm''), in co~aide~ation of the paynient of the prenuuii a1d subject to the tema of this policy, hereby unconditio~ully and uievocably guarantees to any owner, as hereinafler defmed, of the follonk~g desc~ibed obligations, the fill1 and conlplete payiient required to be nude by or on behalfof the Issuer to the principal office of the Fiscal Agency of the State of Washingon, New York or its successor (the "Paying Agent") of mmunt equal to (i) the p~incipal of (either at the stated nwhuity or by any advancenlent of nwhuity p~usiunt to a nwndato~y si~king find payment) aid uiterest on, the Obligatiom (as that tenii is defined below) as such payilents slnll beco~i~ due but shall not be so paid (except that ui the event ofany acceleration of the due date of such principal by reason of nundato~y or optional ~edenlption or accelention resdting hm default or ohelwise, other hi any advancement of nuhuity purmant to a mwi&to~y su~ig ffiuid payment, die paynlents planteed herby sliall be nude in nsli almunts and at such times as such payments ofpkcipal would have bee11 due had there not been any such acceleration, unless the bauer elects, ui its sole discretion, to pay in whole or in part any plincipal due by reason of such accele~ation); and (u) the ~eimbusenlent of any such payment which is subsequently recovered fiom miy owner pursuant to a 6nal judgment by a cout of conlpetent juisdictio~i that such payirnt constitutes an avoidable p~efe~~nce to such owier aitllui the meaning of any applicable bdauptcy law. n~e anwuits refeued to in clatses (i) and (ii) of the p~eceding sentence shall be ~efe~ied to herein collectively as the "Insud Amounts." "Obligations" sh3U nran: $2,035,000 City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) Upon ~eceipt of telephonic or telegraphic notice, such notice subsequently confimled ui writing by registered or cetdf~ed mail or upon receipt of \witten notice by ~egiste~ed or ce~fied mail, by the Insurer fiom the Payiig Agent or miy owner of a1 Obligation the paynent of an Instu-ed hlio~uit for which is tlien due, tlut s11ch required payment has not been made, the I~lrer on the due date of such paplent or within one business day afler ~eceipt ofnotice of such nonpaynienc whichever is later, \\ill de a deposit of funds, in an account with U.S. B~I& Tn~t National Association, in New York New Yolk, or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presenhixnt and stmender of such Obligatio~a or presenhllelit of such other p~wf of ownaship ofthe Obljgaho~a, together \vith any approp~iate insb~ulients of assignnlent to evidence the assiguiwnt of die Insured Anwults due on the Obligations as a~r paid by the Insurer, and approp~iate inshunlents to effect the appoinhirlit of the hslxer as agent for such owiels of the Obligatio~s in any legal proceeding related to payment of h1s~xed hiw~uits on tbe Obligatio~a, such ilshunlellts beulg in a foml satisfacto~y to U.S. Balk Trust National Association, U.S. Bank Trust Natio~lal Association shall disburse to such owlets, or the Payiig Agent payment of die Instxed Aniounts due on such Obligations, less any anmunt held by tlie Paying Agent for the payment of such Ins~red Anw~uits and legally available dierefor. nk policy does not inswe agaiat loss of any plepayment pre~iuuii ~Iuch nay at any tinle be payable with respect to mly Obligation. As used liereh the telni "owier" shall mean the registe~ed owlet of aiy Obligation as indicated ui tl~e book. maintained by tlle Payi~ig Agent, the Issuer, or any desipee of Uie Issuer for sucll purpose. The tenn owner shall not include the Issuer or any paw whose ageernent with the Issuer constitutes tlle underlying senuity for the Obligations. Any senice of process on the Insurer nwy be made to the Insu~er at its offifices located at 113 King Street, hnmnk, New York 10504 and such sewice of process shall be valid and biding. This policy is non-cancellable for any reason ?he premium on this policy is not refiuldable for any reason including die payiient ptior to mahuity of the Obligations. IN WITNESS WHEREOF, the Insurer 1m caused this policy to be executed in facsiride on its behalf by its duly autho~ized office~s, tlk 4th day of January, 2008. WISDOM IN AClION~ January 4,2008 The principal office of the Fiscal Agency of the State of Washington New York, New York $2,035,000 City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) Ladies and Gentlemen: In connection with the abovedescribed obligations (the "Obligations") of which you are acting as paying agent (the "Paying Agent"), please be advised that the payment to you of principal of and interest on the Obligations has been guaranteed by a policy of hcial guaranty insurance (the "Policy") issued by the MBIA Insurance Corporation (the "Insurer"). U.S. Bank Trust National Association, New York, New York (the "Fiscal gent") is acting as the fiscal agent forthe Insurer. The Policy unconditionally and irrevocably guarantees to any owner or holder of the Obligations or, if applicable, of the coupons appertaining thereto (the "Owner"), the full and complete payment req& to be made by or on behalf of the issuer of the Obligations (the "Issuer") to the Paying Agent or its successor of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking hd payment) and interest on, the Obligations as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandato~y or optional redemption or acceleration resulting fiom default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund paymenf the payments guaranteed by the Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration); and (i) the reimbursement of any such payment which is subsequently recovered hm any Owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference (a "Preference") to the Owner within the meaning of any applicable badauptcy law. The amounts referred to in clauses (i) and (i) of the preceding sentence are referred to collectively in this letter as the "Insured Amounts." The Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligations. The Policy does not, under any circumstance, insure against loss relating to: (i) optional or mandato~y redemptions (other than mandatory sinking hd redemptions); (i) any payments to be made on an accelerated basis; (iii) payments of the pmhase price of Obligations upon tender by an Owner thereof; or (iv) any Preference relating to (i) through (iii) above. MBIA Insurance Corporation - 113 King Street . Armonk. NY 10504 +1 914 273 4545 . www.mbia.com In the event that the Issuer does not make rll and complete payment when due of the principal of and interest on the Obligations, please immediately no*, by telephone or telegraph, the Insurer, 113 King Street, honk, New Yorlc, 10504, (914) 2734545. On the due date or within one business day after receipt of such notice, whichever is later, the Insurer will deposit funds with the Fiscal Agent ficient to pay the Obligations (or, if applicable, coupons appertaining thereto) then due. Upon presentment and surrender of such Obligations (or, if applicable, coupons) or presentment of such other proof of ownership of Obligations together with any appropriate instnunents of assignment to evidence the assignment of the Insured Amounts due on the Obligations as are paid by the Insurer, and appropriate instnunents to effect the appointment of the Insurer as agent for the Owners in any legal proceding related to payment of Insd Amounts on the Obligations (or, if applicable, coupons), such instnunents beiig in a form satisfactory to the Fiscal Agent, the Fiscal Agent shall disburse to you payment of the Insured Amounts due on such Obligations (ad if applicable, coupons), less any amount held by you for the payment of such Insured Amounts and legally available therefor. Forms of such instruments of assignment and instnunents to effect the appointment of the Insurer as such agent for the Owners (collectively, the "Claim Documents"), whlch are currently acceptable to the Fiscal Agent and the Insurer, are on file with the Fiscal Agent. The Insurer may, hm time to time, file revised forms of Claim Documents with the Fiscal Agent in substitution for the forms previously fled with the Fiscal Agent, and upon such filing, the revised forms shall supersede all forms of Claim Documents previously filed with the Fiscal Agent, except as othenvise Med by the Insurer in Writing. In the event that you shall have prior knowledge of an impending failure by the Issuer to make payment on the Obligations (or, if applicable, coupons) when due, please immediately notify the Insurer so that it will be possible to have funds available for you on the due date to make payments against surendered Obligations (and, if applicable, coupons). Your cooperation in this matter will be most appreciated and will make it possible for the Owners of Obligations guaranteed by the Insurer to be assured of all payments when due. Very truly yours, Gary ~.'~unton President RECEIPT FOR POLICY Receipt of the original, executed Financial Guaranty Insurance Policy No. 505900, issued by MBIA Insurance Corporation, dated January 4, 2008, is hereby acknowledged on behalf of The Bank of New York, in its capacity as Paying Agent, in connection with the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable), in the principal amount of $2,035,000. sC Dated as of this / 0 day o ,2008. J THE BANK OF NEW YORK DEBT SERVICE RESERVE SURETY BOND MBIA Insurance Corporation Armonk, New York 10504 Surety Bond No. 505910 MBIA Insurance Corporation (the "Insurer"), in consideration of the payment of the premium and subject to the terms of this Surety Bond, hereby unconditionally and irrevocably guarantees the full and complete payments that are to be applied to payment of principal of and interest on the Obligations (as hereinafter defined) and that are required to be made by or on behalf of the City of Renton, Washington (the "Issuer") under Ordinance No. 5313 adopted by tlie City Council on October 22, 2007 and Resolution No. 3919 adopted by the Council on November 26, 2007 (the "Document") to the principal office of the Fiscal Agency of the State of Washington, New York, New York (the "Paying Agent"), as such payments are due but shall ]lot be so paid, in comiection with the issuance by the Issuer of $9,750,000 City of Renton, Washington, Water and Sewer Revenue and Refunding Bonds, Series 2007, $9,975,000 City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008A and $2,035,000 City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008B (Taxable), together with any bonds issued on a parity therewith (the "Obligations"), provided that the amount available hereunder for payment pursuant to any one Demand for Paymeiit (as hereinafter defined) shall not exceed $3,648,588.75 or the debt service reserve fund requirement for the Obligations, whichever is less (the "Surety Bond Limit"); provided, further, tliat tlie amount available at any particular time to be paid to the Paying Agent under the ternls hereof (the "Surety Bond Coverage") sliall be reduced and may be reinstated from time to time as set fo~th herein. 1. As used herein, the term "Owner" shall mean the registered ouner of any Obligation as indicated in the books maintained by the applicable paying agent, the Issuer or any designee of tlie Issuer for such pulpose. The term "Owner" shall not include the Issuer or any person or entity whose obligatio~i or obligatio~is by agreement co~istitute the underlying security or source ofpayment for the Obligations. 2. Upon the later of: (i) three (3) days after receipt by tlie Insurer of a demand for payment in the for111 attached hereto as Attachment 1 (the "Demand for Payment"), duly executed by the Paying Agent; or (ii) tlie payment date of the Obligatio~is as specified in the Demand for Payment presented by the Paying Agent to tlie Insurer, the Insurer will make a deposit of funds in an account with U.S. Bank Tlust National Association, in New York, New York, or its successor, sufficient for the payment to tlie Paying Agent, of amounts that are then due to the Paying Agent (as specified in the Demand for Payment) subject to the Surety Bond Coverage. 3. Denland for Payment hereunder may be made by prepaid telecopy, telex, TWX or telegram of the executed Demand for Payment c/o the Insurer. If a Demand for Payment made hereunder does not, in any instance, conform to the terms and conditions of this Surety Bond, the I~isurer shall give notice to tlie Paying Agent, as promptly as reasoliably practicable, that such Demand for Payment was not effected in accordance with the terms and conditions of this Surety Bond and briefly state the reason(s) therefor. Upon being notified that such Demand for Payment was not effected in accordance with this Surety Bond, the Paying Agent may atteliipt to correct any such ~~onconformi~ig Demand for Payment if, and to the extent that, the Paying Agent is entitled and able to do so. 4. The amount payable by the Insurer under this Surety Bond pursuant to a particular Demand for Payment shall be limited to the Surety Bond Coverage. The Surety Bond Coverage shall be reduced autonutically to the extent of each payment made by the Insurer hereunder and will be reinstated to the extent of each reinibursement of the Insurer pursuant to the provisions of Article I1 of the Financial Guaranty Agreement dated tlie date hereof between the Insurer and the Issuer (the "Financial Guaranty Agreement"); provided, that no premium is due and unpaid on this Surety Bond and that in no event shall such reinstatement exceed the Surety Bond Limit. The Insurer will notify the Paying Agent, in writing within five (5) days of such reimbursement, that the Surety Bond Coverage has been reinstated to the extent of such reimbursement pursuant to the Financial Guaranty Agreement and such reinstatement shall be effective as of the date the Insurer gives such notice. The notice to the Paying Agent will be substantially in the form anached hereto as Attachment 2. 5. Any service of process on the Insurer or notice to the Insurer may be made to the Insurer at its offices located at 113 King Street, Armonk, New York 10504 and such service of process shall be valid and binding. 6. The term of this Surety Bond shall expire on the earlier of (i) December 1, 2027 (the maturity date of the Obligations being currently issued), or (ii) the date on which tlie Issuer has made all payments required to be made on the Obligations pursuallt to the Document. 7. The premium payable on this Surety Bond is not refundable for ally reason, including tlie pay~iie~it prior to maturity of the Obligations. 8. This Surety Bond shall be governed by and inte~preted under the laws of the State of New Yo1.k. Any suit hereunder in connection with any payment may be brought only by the Paying Agent within one year after (i) a Demand for Payment, with respect to such payment, is made pursuant to the terms of this Surety Bond and the Insurer has failed to make such payment, or (ii) payment would otherwise have been due hereunder but for the failure on the part of the Paying Agent to deliver to the Insurer a Demand for Payment pursuant to the terms of this Surety Bond, whichever is earlier. 9. There shall be no acceleration payment due under this Policy unless such acceleratiotl is at tlie sole option of the Insurer. 10. This policy is not covered by the PropertyICasualty Insurance Security Fu~id specified in Article 76 of the New York Insurance Law. In witness whereof, the Insurer has caused this Surety Bond to be executed in facsimile on its behalf by its duly authorized officers, this 4th day of January, 2008. WISDOM IN ACTION'" January 4,2008 The principal office of the Fiscal Agency of the State of Washington New York, New York $3,648,588.75 Debt Service Reserve Fund for the $9,750,000 City of Renton, Washington, Water and Sewer Revenue and Refunding Bonds, Series 2007, $9,975,000 City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008A and $2,035,000 City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008B (Taxable), together with any bonds issued on a parity therewith Ladies and Gentlemen: In connection with the above-described obligations (the "Obligations") for which you are acting as Paying Agent, please be advised that the payment to you of certain amounts which are to be applied to payment of principal of and interest on the Obligations has been guaranteed by the accompanying Surety Bond No. 505910 (the "Surety Bond") issued by MBIA Insurance Corporation (the "Insurer"). U.S. Bank Trust National Association, New York, New York (the "Fiscal Agent") is acting as the fiscal agent for the Insurer. The maximum amount available under the Surety Bond for payment pursuant to any one demand for payment by you as described below (a "Demand for Payment") shall not exceed the Surety Bond Limit as defined on the first page of the Surety Bond. The amount available at any particular time to be paid to you under the Surety Bond (the "Surety Bond Coverage") shall be reduced and may be reinstated from time to time as set forth in the Surety Bond and as described below. If the Issuer under the Document (as those terms are defined on the first page of the Surety Bond) does not make full and complete payment thereunder when due, please immediately deliver, by prepaid rapifax, telex, TWX or telegram, a complete executed Demand for Payment (substantially in the form of Attachment 1 to the Surety Bond) to the Insurer, MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504 (telephone: (914) 273-4545; telecopy (914) 765-3161 or 3162). Please confirm delivery and receipt of such Demand for Payment by telephone. MBIA Insurance Corporation . 113 King Street - Arrnonk. NY 10504 . +I 914 273 4545 . www.rnbia.com WISDOM IN ACTIONsm Page Two January 4,2008 Upon the later of: (i) three (3) days after receipt by the Insurer of a completed Demand for Payment, duly executed by you certifying that payment due under the Document has not been made to you; or (ii) the payment date of the Obligations as specified in the Demand for Payment presented by you to the Insurer, the Insurer will make a deposit of funds in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment to you, of amounts which are then due to you (as specified in the Demand.for Payment) subject to the Surety Bond Coverage. The amount payable by the Insurer under the Surety Bond pursuant to a particular Demand for Payment shall be limited to the Surety Bond Coverage. The Surety Bond Coverage shall be reduced automatically to the extent of each payment made by the Insurer under the Surety Bond and will be reinstated to the extent of each reimbursement of the Insurer by the Issuer pursuant to Article I1 of the accompanying Financial Guaranty Agreement between the Insurer and the Issuer (the "Financial Guaranty Agreement"). In no event shall such reinstatement exceed the Surety Bond Limit. The Insurer will notify you, in writing within five (5) days of such reimbursement, that the Surety Bond Coverage has been reinstated to the extent of such reimbursement pursuant to the Financial Guaranty Agreement and such reinstatement shall be effective as of the date the Insurer gives such notice. The notice to you will be substantially in the form attached to the Surety Bond as Attachment 2. This letter does not alter the terms of the Surety Bond or the Financial Guaranty Agreement In the event that you shall have prior knowledge of an impending failure by the Issuer to make payment as required by the Document when due, please immediately notify the Insurer so that it will be possible for the Insurer to have funds available for you on the due date to make payments as described above. Your cooperation in this matter will be most appreciated and will make it possible for the holders of Obligations to be assured of all payments when due to the extent of the Surety Bond Coverage. Gary C. Dunton President Attachment 1 Surety Bond No. 505910 DEMAND FOR PAYMENT MBIA Insurance Cotporation 113 King Street Arnionk, New York 10504 Attention: President Reference is made to the Surety Bond No. 505910 (the "Surety Bond") issued by tlie MBIA Insurance Corporation (the "Insurer"). The terms which are capitalized herein and not otherwise defined have the meanings specified in tlie Surety Bond unless the context otherwise requires. The Paying Agent hereby certifies that: (a) In accordance with the provisions of tlie Document (attached hereto as Exhibit A), paynient is due to the Owners of the Obligations on (the "Due Date") in an amount equal to $- (the "Amount Due"). (b) The debt service reserve fund requirement for tlie Obligations is $ (c) The amounts legally available to the Paying Agent on the Due Date will be $- less than the Amount Due (the "Deficiency"). (d) The Paying Agent has not heretofore made demand under the Surety Bond for tlie Amount Due or any portion thereof. The Paying Agent hereby requests that payment of the Deficiency (subject to the Surety Bond Coverage) be made by tlie Insurer under the Surety Bond and directs that paynient under the Surety Bond be made to the following account by bank wire transfer of federal or other immediately available funds in accordance with the terms of the Surety Bond: [Paying Agent's Account] [PAYING AGENT] L m bia Attachment 2 Surety Bond No. 505910 NOTICE OF RETNSTATEMENT [Paying Agent] [Address] Reference is made to the Surety Bond No. 505910 (the "Surety Bond") issued by the MBlA Insurance Corporation (the "Insurer"). The terms which are capitalized herein and not otherwise defined have the meanings specified in the Surety Bond unless the context othetwise requires. The Insurer hereby delivers notice that it is in receipt of paynient from tlie Obligor pursuant to Article I1 of tlie Financial Guaranty Agreement and as of the date hereof the Surety Bond Coverage is $ MBIA Insurance Corporation President Attest: Assistant Secreta~y RECEIPT FOR POLICY Receipt of the original, executed Debt Service Reserve Surety Bond No. 505910, issued by MBIA Insurance Corporation, dated January 4, 2008, is hereby acknowledged on behalf of The Bank of New York, in its capacity as Paying Agent, in connection with the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A and Series 2008B (Taxable). d Dated as of this 1 0 day o J THE BANK OF NEW FINANCIAL GUWITY AGREERIENT FINANCIAL GUARANTY AGREEMENT made as of Jaiuary 4,2008, by and between tlie City of Renton, Washington (the "Issuer") and MBlA Insurance Co~poration (tlie "Insurer"), organized under the laws of the state of New York. WITNESSETH: WHEREAS, tlie Issuer has or will issue the Obligations; ald W&REAS, pursuant to the temis of the Docun~ent the Issuer agrees to malte certain paynents on the Obligations; aid WKEREAS, the Insurer will issue its Surety Bond, substantially in the fo~m set foflli in Annex A to tliis Agreement, gumiteeing certain payiients by the Issuer st~bjecl to the terms aid limitafons of tlie Surety Bond; and WHEREAS, to induce the Insurer to issue the Surety Bond, the Issuer lias agreed to pay tlie premilun for the Surety Bond and to reimburse the Insurer for all pa)mients made by the Insurer under tlie Surety Bond, all as liiore fully set forth in this Agreement; aid WHEREAS, tlie Issuer understands that the I~isuuer expressly requires the delive~y of tliis Agreeriient as part of the consideration for the execution by [he Insurer of the Surety Bond; and NOW, THEREFORE, in consideration of the prenlises aid of tlie agreements herein contained aid of the execution ofthe Surety Bond, the Issuer and the Insurer agree as follows: ARTICLE I DEFINITIONS; SURETY BOND Section 1.01. Definitions. The terms which are capitalized herein shall have the meanings specified in Annex B hereto. Section 1.02. Surety Bond. (a) The Insurer will issue the Surety Bond in accordance with and subject to tlie tenns and conditions of the Commihnent. @) Tlie niaxinium liability of the Insurer under the Surety Bond and the coverage and tenii thereof shall be subject to and liinited by the teilns aid conditions of ihe Surety Bond. Section 1.03. Premium. hi consideration of the Insurer agreeing to issue tl~e Surety Bond hereunder, the Issuer liereby agrees to pay or cause to be paid the Pre~ni~un set forth in Annex B hereto. The Premiunl on the Surety Bond is not rehdable for any reason. Section I .04. Certain Other Expenses. The Issuer will pay all reasonable fees and disbursements of the lnsure~'s special counsel related to any modification of this Agreement or the Surety Bond. ARTICLE I1 ~--~ ~ -~ REIIIBURSEAII~N1'AND INDE\ISI FICATIOS OBLIG,\TIOXS OF ISSUERAYD SECURITY THEREFOR Section 2.01. Reimb~usement for Pawnents Under tlie Surely Bond and Expenses: Indemnification. (a) ale Issuer will reimburse the Insurer, within tlie Reimbursement Pe~iod, without demand or notice by the Insurer to the Issuer or any other person, to the extent of each Surety Bond Paynent with interest on each Surety Bond Paynent hm and including the date made to the date of tlie reimbursement at tile lesser of the Reunb~usement Rate or the maximunl rate of interest permitted by then applicable law. (b) The Issuer also agrees to itunb~use the Insurer unniediately aid unconditionally upon delllaid, to the extent permitted by state law, for all reasonable expenses incurred by the Insurer in connection with the Surety Bond and the enforcement by tlie Insurer of tlie Issuer's obligations under this Agreement, the Document, aid any other document executed in connection with the issuance of the Obligations, together with interest 011 all such expenses from aid including the date incu~red to the date of payment at the rate set forth in subsection (a) of this Section 2.01. (c) The Issuer agrees to indeninify the Insurer, to the extent permitted by state law, against a~y and all liability, claims, loss, costs, danages, fees of attolneys and other expenses which the Insurer may sustain or incur by reason of or in consequence of (i) the failure of the Issuer lo perfomi or coniply with the covenants or conditions of this Agreement or (ii) reliance by the Insurer upon representations made by the Issuer or (iii) a default by tlie Issuer under the teniis of the Document or any other documents executed in connection with the issuaice of the Obligations. (d) The Issuer agrees that all anolults owing to tlie Insurer p~usuant to Section 1.03 hereof and tlus Section 2.01 must be paid in full prior to aiy optional redemption or refunding ofthe Obligations. (e) All payments made to the Insurer under this Ageenlent shall be paid in lawfill cmrency of the United States in immediately available fimds at the lnsuret's office at 113 King Street, A~inonk, New York 10501, Attention: Accounting aid Insured Portfolio Managernent Depatmenls, or at such otlier place as shall be designated by the Insurer. Section 2.02. Allocation of Payments. The Insurer and the Issuer hereby agec that each payment received by the Insurer fY0111 or on behalf of the Issuer as a reinib~menient to the Insill-er as required by Section 2.01 hereof shall be applied by tlie lnsurer first, toward payment of aiy unpaid premium; second, toward repayiient of the aggregate Surety Bond Payments made by the Insurer aid not yet repaid, payment of which will reinstate all or a portion of the Surety Bond Coverage to the extent of such repayment (but not to exceed the Surety Bond Lunit); and third, upon full reinstatement of the Surety Bond Coverage to the Surety Bond Limit, toward other amounts, including, without limitation, any interest payable with respect to aiy Surety Bond Payments then due to the Insurer. Section 2.03. Securitv for Paments; I~isbuments of F~l~ther Assurance. To tlie extent, but only to tlie extent, that the Document, or any related indenture, tnlst ageenielit, ordinance, resolution, mortgage, sec~uity agreement or similar instrument, if any, pledges to the Owners or any hustee therefor, or grants a security interest or lien in or on any collateld, property, revenue or other payments ("Collateral and Revenues") in order to secure the Obligations or provide a source of payment for tl~e Obligations, tlie Issuer hereby grants to the Insurer a security interest in or lien on, as Ule case may be, ald pledges to the Ins~u-er all such Collateral and Revenues as sectuity for payment of all anoiuits due hereunder aid under the Doc~unent or any other document executed in connection with tlie issuaice of die Obligations, which security u~te~tst, lien andfor pledge created or pited under this Section 2.03 shall be subordinate only to the interests of the Owners and any trustee therefor in such Collateral and Revenues, except as otheiwise provided. The Issuer agrees that it will, from time to time, execute, acknowledge and deliver, or cause to be executed, acluiowledged and delivered, any ald all fmancing statements, if applicable, aid all other futher inshun~ents as lnay be required by law or as shall reasonably be requested by die Insurer for die perfection of the security interest, if any, ganted under this Section 2.03 and for the prese~vation and protection of all rights of the Insurer under this Section 2.03. Section 2.04. Unconditional Obligation. The obligations hereunder are absolute and unconditional aid will be paid or performed stictly in accordaice with tlus Agreement, subject to the lin~itatio~ls of the Doc~unent, i~respective of. (a) any lack of validity or enforceability of, or aiy anendment or other niodification of, or waiver with respect to the Obligations, the Document or aiy other document executed ui connection with the issuance of the Obligations; or @) any exchaige, release or nonperfection of aiy security interest in property securi~ig the Obligations or this Agreement or aiy obligations hereunder; or (c) any circumstances that might othenvise co~lstitute a defense available to, or discharge of, the Issuer with respect to the Obligations, the Document or any other document executed in connection with the issuance of the Oblig$ons; or (d) whether or not such obligations are contingent or matured, disputed or undisp~~ted, liquidated or ~uiliquidated. Seclioii 2.05. Insurer's Rights. The Issuer shall repay the hisurer to the extent of papie~~ts made and expenses incurred by tlie Insurer in co~lnection with die Obligations and this Agreement. The obligation of the Issuer to repay such amounts shall be subordiiiate only to the rights of the Owners to receive regularly scheduled p~incipal and uiterest on the Obligatiolls. Section2.06. On-Going lnformation Oblications oflssuer. (a) Ouarterlv Reports. The Issuer will provide to the Insurer within 45 days of the'close of each quarter interim financial statements covering all fhd balaices under die Docuiie~it, a statenient of operations (income statement), balance sheet and clmiges in hd balances. These statements need not be audited by rui uidepende~lt certified public accountant, but if any audited statements are produced, they must be provided to the Insurer; (b) Annual Reports. The Issuer will provide to the Insurer annual financial statements audited by an independent certified public accotuihit within 7 months ofthe end of each fiscal year; (c) Access to Facilities, Books and Records. The Issuer will gait thc Insurer reasonable access to the project financed by the Obligations aid will male available to the Insurer, at reasonable times aid upon reasonable notice all books and records relative to the project finaiced by the Obligations; and (d) Compliance Certificate. On rui annual basis the Issuer will provide to the Insurer a certificate confunling conipliance with all coveliruits and obligations hereunder and under the Revenue Ageenlent, the Document or any other document executed in connection witti the issuance of the Obligatiolls. ARTICLE In AMENDhlENTS TO DOCUMENT So long as this Agreement is in effect, the Issuer agrees that it will not agree to amend the Docunient or any other document executed in connection with the issuance of the Obligations, without the prior witten consent of the hxurer. ARTICLE IV EVENTS OF DEFAULT, REMEDIES Section 4.01. Events ofDefault. The followulg events shall collstihlte Events of Default hereunder: (a) The Issuer shall fail to pay to the Insurer when due any amount payable under Sections 1.03; or (b) The Issuer shall fail to pay to the Lis~rer any aniouuit payable under Sections 1.04 and 2.01 hereof and such failure shall have continued for a period in excess of the Rei~nbulsernent Period; or (c) Any material representation or wmanty made by tlie Issuer under the Document or hereunder or any statement in the application for the Surety Bond or aiy repolt, certificate, financial statenient, document or other insttu~nent provided ui cotu~ection with the Conimnitment, die Surety Bond, the Obligations, or herewith shall have been materially false at the time when made; or (d) Except as othenvise provided in this Section 4.01, tlie Issuer shall fail to perfonii any of its other obligations under the Docu~ie~it, or any other document executed in connection with the issuance of the Obligations, or hereunder, provided tliat such failure continues for 11101.e than 30 days after receipt by the Issuer of writtell notice of such failure to perfomi; or (e) The Issuer shall (i) voluntarily commence any proceeding or file aiy petition seeking relief under the United States Bankruptcy Code or a~y other Fedel-al, state or foreign ballouptcy, h~solvency or similar law, (ii) coilsent to the institution of, or fail to controvert in a timely aid appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consait to the appointment of a receiver, bustee, custodian, sequearator or sim~lar oficial for such party or for a subs~uitial pit of its property, (iv) file an answer ac!m~tting tlic rn~le~id allc:arions of II pctition filed against it in any such procekding, (v) niake a general assignment for the benefit of &edito~s, (vi) become unable, adrmt in writing its inability or fail gene~ally to pay its debts as they become due or (vii) take action for the pupose of effecting any of the foregoing; or ( ,411 invol~uiq proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Issuer, or of a substantial part of its property, under the United States Bankn~ptcy Code or any otlier Federal, state or foreign ba~huptcy, insolvency or similar law or (ii) the appoinh~lent of a receiver, tlustee, custodial, sequestrator or similar official for the Issuer or for a substantial pat of its property; aid such proceedu~g or petition shall continue ~u~disniissed for 60 days or an order or decree approving or ordering my of the foregoing shall continue i~nstayed and in effect for 30 days. Section 4.02. Remedies. If an Event of Default shall occur aid be continuing, then the Ins~ucr may take whatever action at law or in equity !nay appear necessnly or dcsirable to collect the amounts then due mid tllerec&er to beconie due under this Agreement or to enforce perrorniance of any obligation of the Issuer to the Insurer under the Docluiient or any related inshuilent, and any obligation, agreement or co\~enant of the Issuer under this Agreement; provided, however, that the Insurer may not take any action to direct or require acceleration or other early redemption of the Obligations or adversely afFect the rights of the Owners. 111 addition, if an Event of Default shall occur due to the failure to pay to the Insurer die aiiounts due under Section 1.03 hereof, the Insurer shall have the right to cancel the Surety Bond in accordance wit11 its telms. All rights and remedies of the Insurer under this Section 4.02 are cumulative and tl~e exercise of any one remedy does not preclude the exercise of one or more of the other available remedies. ARTICLE V SETTLEMENT The Insurer shall have the exclwive light to dec~de and detennine whether any claim, liability, suit or judgment made or bmugit against the Ins~uer, the Issuer or any other party on the Surety Bond shall or shall not be paid, compromised, resisted, defended, tried or appealed, and the Insluer's decision thereon, if made in good fath, shall be final and binding upon the hisiue~; the Issuer and aiy other paq on the Surety Bond. An itemized statement of payments made by the Insurer, certified by an officer of the Insurer, or the voucher or vouchers for such payments, shall be prima facie evidence of the liability of the Issuer, and if the Issuer fails to immediately reimnhurse the hurer upon the receipt of such statenient of payments, interest shall he computed on such amount 6-0111 the date of any payment made by the Insurer at the rate set forth in subsection (a) of Section 2.01 hereof ARTICLE VI MISCELLANEOUS Section 6.01. Interest Computations. All coniputations of interest due hereunder shall be made on the basis of the actual nuniber of days elapsed over a year of 360 days. Section 6.02. Exercise of Rid~ts. No failure or delay on the part of the Insurer to exercise any right, power or privilege under tlus Agreement and no course of dealing between the Insurer and the Issuer or any other paty shall operate as a waiver of any such light, power or privilege, nor shall any single or partial exercise of any such light, power or privilege preclude any other or further exercise thereof or the exercise of miy other right, power or privilege. The rights and remedies herein expressly provided are cu~nulative aid not exclusive of any rights or remedies which the Insurer would otlie~wise have pursuant to law or equity. No notice to or demand on any party UI any case shall entitle such paty to any other or Mer notice or demand in sinular or other circumstances, or constitute a waiver of the right of the otlier party to any other or fiutlier action in any circumstimces without notice or demand. Section 6.03. Amendment aid Waiver. Any provision of this Agreement may be amended, waived, supplemented, discharged or tem~ated only with tlie prior written consent of tl~e Issuer and the hlsurer. Tile Issuer liereby agees that upon tlle witten request of tlie Paying Agent, the Insurer niay make or consent to issue any substitute for the Suety Bond to cure aiy a~nbiguity or folliial defect or omission in tlie Surety Bond wliicli does not materially change the telms of the Surety Bond nor adveisely affect the rights of tlie Owiers, and this Agreement shall apply to such substih~ted surety bond. The Insurer agrees to deliver to the Issuw and to the company or companies, if my, rating the Obligatio~ls, a copy of s~~ch substih~ted surety bond. Section 6.04. Successors and Assigns: Descriptive Headines. (a) This Agreement shall bind, and the benefits thereof shall inure to, the Issuer and tlie Insurer and their respective successors and assigns; provided, that the Issuer may not transfer or assign any or all of its rights and obligations hereunder without the prior \Mitten consent of the I~xurer. @) The descriptive headings of the va-ious pm\~isions of this Agreement are inscrted for co~ivenience of reference only aid shall not be deemed to affect tlie meaning or constnlction of any of the pmvisio~ls hereof Section 6.05. Other Sureties. If the l~lsurcr shall plocul-e any other surely to reinsure the Surety Bond, this Agreement shall inure to the benefit of such other s~~ety, its successors a~id assigns, so ar to give to it a tlircct i.iglit of action against the Issuer to enforce this Agreemeill, and "the Insurer," where\rer used herein, shall be deemed to include such reinsuling surety, as its respective interests may appear. Section 6.06. Sienature on Bond. The 1ssue1's liability sliilll not be affected by its failure to $31 the Surety Bond nor by any claim that other inde~ii~lity or secuuity was to have been obtained nor by the release of a1y inde~~uuty, nor the rehun or exchange of any collate~al that may have been obtained. Section 6.07. mr. The Issuer waives my defense that this Agreement was executed subsequent to tile date of the Surety Bond, admitting and covenanting that s~~ch Surety Bond was executed pursumit to tlle 1ssue1's request and in reliance on the Issuer's promise to execute this Agreement. Section 6.08. Notices. Rwoests. Demands. Except as othe~wise expressly provided herein, all \Mitten notices, requests, demands or other co~lmiu~lications to or upon the respective paties liereto shall be deemed to have been given or made when achmlly received, or in the case of telex or telecopier notice sent over a teles or a telecopier mache owned or operated by a party hereto, when sent, addressed as specified below or at such other address as any of the parties may hereafter specify in witing to the others: If to the Issuer: City ofRe~lton, W:~Iiington 1055 South G~ady Reliton, Washuigton 98057 Attention: Finance and Irlfonnation Services Administrator If lo the Paying Agent: The p~incipal office of tlie fiscal agency of the State of Waslungton New YOI-k, New Yoi-k Attention: Co~yolilte Tn~st Oflicer If to the Insurer: MBIA hlsuraice Corporation 113 King Street Amionk, New Yorlc 10504 Attention: Insured Portfolio Manage~iient Group Section 6.09. S~uvival of Representations and Wanantics. All representations, \vananties and obligations contained herein shall survive the execution and delivery of this Agreement and the Surety Bond. Section 6.10. Goveminc Law. This Ageenient aid thc ri~hts and obli~ations ofthc panics under this Ag~emcnr sldl be governed by and consnued and ulterpretcd in accordance with the laws of thc State. Section 6.1 1. Counterparts. This Agreement iiiay be executed in any number of copies and by the different paties hereto on the same or separate counteiparts, each of which shall be deemed to be an o~igu~al inst~wnent. Complete countelparts of this Agreement shall be lod~ed wit11 the Issuer iuid the Insurer. Section 6.12. Severability In the event any provision of this Agreement shall be hcld invalid or unenforceable by any court of competent jurisdiction. such holding shall nor invalidate or render ~iiicnforceable my othel.provision llereof Sect1011 6.13. Survival of Obliqations. Notwiths~nding anythhlg to the conrraly contamed in tlus Agreement, the obligation of the Issuer to pay all anounts due 11el.eunder aid d~c I ights ol' the Insurer to pursue all remedies shall survive the expl~ation, teinina~ion or substitution of the Suucty Bond and tlis Agreement. IN WITNESS WHEREOF, each of the parties hereto has caused a countapart of this Agreement to be duly executed and delivered as of the date first above written. City of Renton, Washington - 1 Title: f AA,.i,c,~a,b~ IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Ageement to be duly executed and delivered as of the date first above written. City of Renton, Washington By: Title: ANNEX A SURETY BOND To be provided.] DEBT SERVICE RESERVE SURETY BOND MBIA Insurance Corporation Armonk, New York 10504 Surety Bond No. 505910 MBlA Insurance Corporation (the "Insurer"), in consideration of the payment of the prenlium and subject to the terms of this Surety Bond, hereby unconditionally and irre\,ocably guarantees the full and cornplete paymenrs that are to be applied to payment of principal of and interest on the Obligations (as hereinafter defined) and that are required to be made by or on behalf of the Ciry of Renton, Washington (the "Issuer") under Ordinance No. 53lA adopted by tlie City Council on October 22, 2007 and Resolution No, 3919 adopted by the Council on Noven~bsr 26. 2007 (the "Document") to the principal ofiice of tlie Fiscal Agency of the State of \Vashington, Nc\v York, Ne\v York (tlie "Paying Agent"), as such payliieilts are due but sliall nor be so paid, in connection with the issuance by tlie Issuer of $9,750,000 City of Renton. LVashingtotl, Water and Sewer Rei,eutle and Refunding Bonds, Series 2007, S9,L175,000 City of Kenion, Ll'asllington, Water and Sewer Reve~lue Bonds. Series 2008.4 and %2.035.000 Ciry of Renton. Washington, \\later and Se~vrr Revenue Bonds, Sertrs 200SB (Taxable), togetlisr \ritlt ally honds issued on a parity therewith (the "Obligations"), provided that the amount available hereunder for payment pursuant to any one Demand for Payment (as hereinafter defined) shall not exceed $3,648,588.75 or the debt service reserve fund requirement for the Obligations, vvhiche'i~er is less (tlie "Surety Bond Limit"); provided, further, that the anxount available at any particulnr time to be paid to the Paying Axetit under the terms hereof (the "Surety Bond Coverage") shall be reduced and may be reinstated from time to time as set forth herein. I. As used herein, the term "Owner" shall mean the registered oaxer of any Obligation as indicated in tlie books maintained by the applicable paying agent, the Issuer or any desigtiee of the [ssuer for such purpose. The term "O\\,nerW shall not include the Issuer or any person or entity whose obligation or obligations by agreement constitute tlie underlying security or source of payment for the Obligations. 2. Upon tlie later of: (i) three (3) days after receipt by the Insular of a demand for payment in the form attached hereto as Attachment I (the "Demand for Payment"), duly executed by the Paying Agent; or (ii) the payment date of tlie Obligations as specified in the Demand for Payment presented by the Paying Agent lo the Insurer, the lnsurer will make a deposit of funds in an account with U.S. Bank Tlust National Associalion, in New York, Ne\v York. or its successor, sufficient (br the payment to the Payins Agent, of amounts that are then due to tlle I'aying ..\gent (as specified in the Demand for Payment) subject to the Surety Bond Coverage. 3. Demand for I'ayment hereunder may be made by prepaid telecopy, telex, T\VX or telegram ofthe execi~ted Demand for Payment c/o the lnsurer. Ifa Demand for Paylile~ir made hereunder does not, in any instance, conrorrn to the terms and collditio~ls of this Surety Bond, the Insurer sliall give notice to the Paying Agent, as promptly as 1,easonably practicable, tliat such Demand for Payment was not effected in accordallce \vith the terms and coliditions of this Surety Bond and briefly state tlie reason(s) the]-efor. Upon being notified tliat such Demand for Payment was not effected in accordance with this Sursty Bond, the Payiiig Agent !nay attetvpt to correct any such nonconfortiiing Demand for Payment if, and to the extent that, the Paying Agent is entitled and able to do so. 1. The amount payable by the Insurer under this Surety Bond pursuant to a particular De~uaod for I'aylnenl shall be limited to tlie Surety Bond Coverage. The Surety Bond Coverase shall be reduced auton~atically to the extent of each payment made by the lnsurer hereunder and will be reinstated to the extent of each reimbursement of the Insurer pursuant to tlle provisions of Arlicle 11 of the Financial Guaranty Agreement dated the date hereof betxveen tlie Insurer atid the Issuer (the "Financial Guaranty Agreement"); provided, that no premium is due and unpaid on this Surety Bond and that in no event shall such reins<atemem exceed the Surety Bond Limit. The Insurer \\,ill 1101ify the Paying Agent, in writing within five (5) days of such reimbursement, [hat the Surety Bond Co\,eraze has been reinstated to the extent of sucli reimbursement pursuant to the Financial Guaranty Agreemenl and sucll rei~~statement shall be effective as of the date the 1nsul.er gives sucli notice. The notice to the l'aying Agent \\,ill be substalitially in the form anached hereto as Attachmcnl2. 5. Any service of process on the Insurer or notice to the Insurer may be made to tlie Insurer at its offices located at 113 King Street, Armonk, New York 10504 and such service of process shall be valid and binding. 6. The term of this Surety Bond shall expire on the earlier of (i) December 1, 2027 (the maturity date of the Obligations being currently issued), or (ii) the date on which the Issuer has made all payments required to be made on the Obligations pursuant to the Document. 7. The premium payable on this Surety Bond is not refundable for any reason, including tlie payment prior to maturity of the Obligations. 8. This Surety Bond shall be governed by and interpreted under the laws ofthe State ofNew York. Any suit hereunder in connection with any payment may be brought only by the Paying Agent within one year after (i) a Demand for Payment, with respect to such payment, is made pursuaat to the terns of this Surety Bond and the Insurer has failed to make such payment, or (ii) payment would otherwise have been due hereunder but for the failure on the pan of the Paying Agent to deliver to the Insurer a Demand for Payment pursuant to the ternis of this Surety Bond, whichever is earlier. 9. There shall be no acceleration payment due under this Policy ur~less such acceleration is at the sole option of the Insurer. 10. This policy is not covered by the ProperryiCasualfy 1nsor;rnce Security Fund spscilied in Article 76 of the New York lr~surance Law. In witness whereof, the Insurer has caused this Surety Bond to be executed in facsimile on its behalf by its duly authorized officers, this 4th day of January, 2008. Attest: * Attachment I Surety Bond No. 505910 DEMAND FOR PAYMENT MBlA Insurance Corporation I 13 King Street Armonk, New York 10504 Anention: President Reference is made to the Surety Bond No. 505910 (tlie "Surety Bond") issued by the MBlA l~isurance Corporation (the "Insurer"). The terrns which are capitalized herein and not otlier\r~ise defined have the meanings specified in the Surety Bond unless the context otherwise requires. The Paying Agent hereby certifies that: (a) In accordance with the provisions of tlie Document (attached hereto as Exhibit A), payment is due to the O~vners of the Obligations on (the "Due Date") in an amount equal to $(the "Amount Due"). (b) The debt service reserve fund requirement for tlie Obligations is S (c) Tlie amounts legally available to the Paying Agent on'tlie Due Date \\,ill be S- less than the Amount Due (the "Deficiency"). (d) The Paying Agent has not heretofore made demand under the Surety Bond for the Amount Due or any portion thereof. Tlie Paying Agent hereby requests that payment of the Deficiency (subject to the Surery Bond Coverage) be made by the Insurer under the Surety Bond and directs that payment under the Surety Bond be made to the folloiving account by bank \\,ire transfer of federal or other immediately available funds in accordance with the terms ofthe Surety Bond: [Paying Agent's Account] [PAYING AGENT] Attachment 2 Surely Bond No. 505910 NOTICE OF RER'ISTATEMENT [Paying Agent] [Address] Reference is made to he Surety Bond No. 505910 (the "Surely Bond") issued by the MBlA Insura~ice Corporation (the "Insurer"). The terns which are capitalized herein and not oil~erwise defined have the meanings specified in the Surety Bond unless the context otherwise requires. The insurer hereby delivers notice that it is in receipt of payment from the Obligor pursuant to Article I1 of the Financial Guaranty Agreement and as of the date hereofthe Surety Bond Coverage is $ RlBIA Insurance Corporation President Allest: Assistant Secreta~y ANNEX B DEFIhTTIONS For all ptuposes of this Agreement aid the Surety Bond, except as otlie~~vise expressly provided liereill or unless tlie context otlie~wise requires, all capitalized telnis shall have tlie meaning as set out below, which sliall bc equally applicable to both the singular and plu~al forms of such te~ii-~s. "Agreement" meals this Fiiaicial Gumnty Agreemcnl. "Closing Date" means January4,200S. "Coniniitiiient" means the commihiient to issue Municipal Bond Guaranty insurance iii tlic fonii aHaclied hereto as Annex C. "Debt Sewice Payments" iiieans those payiients requii-ed to be made by or on behalf of tlie Issuer which will be applied to payment of principal of and interest on tlie Oblisations. "Demand for Paymelit" means die certificate submittetl to the Insurer for payiient under tlie Surety Bond substantially in tlie fonil attached to tlie Surety Bond as Attacliiiient I. "Document" means Ordinance No. 5313 adopted by die City Council on October 22, 2007 a~id Resolution No. 3919 adopted by the Council on November 26,2007. "Event ofDefaultV shaU mean those events ofdera~ault set fo~tli ill Section 1.01 oftlie Agreement. "Ins~~rel." has the same meaning as set forth in the fils( pa~-asra*apli of this Agee~iieot. "Issuer" means City of Renton, Washington. "Obligations" meals $9,750,000 City of Renton, M'asliinston, Water and Sewer Revenue and Refi~ncling Bonds, Series 2007, $9,975,000 City of Renton, \Vasliinston, Water and Se\ver Revenue Borlds, Series 200SA aid $2,035,000 City of Renton, Washin~qon, Water aid Sewer Revenue Bonds, Series 2008B (Taxable), together with any bo~ids issued 011 a parity tlierewith. "Ownen" liieans tlie registered owner of iuiy Obligatioii as indicated in the boolts maintained by the Paying Ase~it, the Issuer or any designee oftlie Issuer for such pulyose. "Paying Agent" means the principal ofice oftlie fiscal agency of tlic State of M'ashington, New York, New York. "Premiu~ii" means $54,700 payable to the Illsurer on or prior to the Closiig Date. "Reimbunement Period" means, with respect to a pa~ticular Surety Bond Payiient, tlie pe~iod commencilig on the date of such Surety Bond Payiient and ending on tlie earlier of tlie date of caicellation of tlie Surety Bond due to nonpayment of Premium when due or on the expiration of 12 months following such Surety Bond Papent. "Reimburse~iient Rate" means Citibaik's prime rate plus three (3) percent per ainum, as of the date of such Surety Bond Payment, said "prime rate" being the rate of interest a~uiouiced fio~ii time to time by Citibmk, N.A., New York, New York, as its prime rate. The rate of interest sliall be calculated on tlie basis of llie actual number of days elapsed over a 360-day year. "State" means Washington. "Surety Bond" means that surety bond attached liereto as Annex A and issued by the Insurer guaranteei~ig, subject to the temis and limitations thereoc Debt Sewice Pa)qiie~its required to be made by the Issuer under tlie Doclme~it. "Surety Bond Coverage" means the mount available at any l~a~ticular time to be paid under tlie temis of tlie Surety Bond, which amount sl~all never exceed Uie Surety Bond Linlit. "Sm.etyBond Limit" means $3,648,583.75. "Surety Bond Payment" meals a1 amount ecll~al to the Debt Service Paynent required 10 be tnadc by the Issuer ptusua~t to the Docun~ent less (i) that portion ofthe Debt Setvice Paynent paid by or on behalfof the Issuer, and (ii) other hlds legally available for payment to the Owne~s, all as ce~zified ui a De~nantl for Payn~ent. L m bia WISDOM IN ACTION' TAX CERTIFICATE City of Renton, Washington 1055 South Grady Renton, Washington 98057 RE: $9,975,000 City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008A $3,648,588.75 Debt Service Reserve Fund for the $9,750,000 City of Renton, Washington, Water and Sewer Revenue and Refunding Bonds, Series 2007, $9,975,000 City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008A and $2,035,000 City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008B (Taxable), together with any bonds issued on a parity therewith (the "Obligations") Ladies and Gentlemen: In connection with the issuance of the above-referenced obligations (the "Obligations"), MBIA Insumnce Colporation (the "Insurer") is issuing a 6nancial guaranty insmce policy (the "Policy") and debt service reserve fund surety bond (the "Surety Bond") securing the payment of principal and interest on the Obligations. This is to advise you that: 1. The Policy and Surety Bond are unconditional obligations of the Insurer to pay scheduled payments of principal and interest on the Obligations in the event of a failure to do so by the City of Renton, Washington (the "Issuer"); 2. The insurance premiums in the amounts of $29,700 and $54,700, for the Policy and Surety Bond respectively, represent the charge for a transfer of credit risk and were determined in arm's length negotiations and are required to be paid as a condition to the issuance of the Policy and Surety Bond; 3. No portion of such premiums represents an indirect payment of costs related to the issuance of the Obligations other than for the transfer of credit risk; 4. The Insurer does not reasonably expect that it will be called upon to make any payment under the Policy or the Surety Bond; 5. To the extent the Insurer is called upon to make any payment under the Policy or the Surety Bond, the Insurer reasonably expects to pursue all available legal remedies to secure reimbursement for such payment; and MBiA Insurance Corporation 113 King Street - Armonk. NY 10504 - +1 914 273 4545 . www.mbia.com WISDOM IN ACTION'" 6. The Insurer would not have issued the Policy in the absence of a Debt Service Reserve Fund of the size and type established by the Ordinance No. 5313 adopted by the City Council on October 22, 2007 and Resolution No. 3919 adopted by the Council on November 26, 2007, pursuant to which the Obligations are being issued. Dated: January 4,2008 L m bia WISDOM IN ACTION" CERTIFICATE OF MBIA INSURANCE CORPORATION I, Adam M. Carta, Assistant Secretary of MBIA Insurance Corporation ("MBIA"), do hereby certify on behalf of MBIA that (i) the information set forth under the heading "Bond Insurance" in the Official Statement, dated November 26, 2007, regarding $9,975,000 City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A and $2,035,000 City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable), does not contain an 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 and (ii) the specimen of the municipal bond insurance policy contained in Appendix E to the Official Statement is a true and correct specimen of the policy being issued by MBIA.. IN WITNESS WHE deliver this Certificate on this 4th day of January, 2008. WISDOM IN ACTION' January 4,2008 City of Renton, Washington 1055 South Grady Renton, Washington 98057 Seattle Northwest Securities Corporation 1420 Fifth Avenue, Suite 4300 Seattle, Washington 98101 $9,975,000 City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A $2,035,000 City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) $3,648,588.75 Debt Service Reserve Fund for the $9,750,000 City of Renton, Washington, Water and Sewer Revenue and Refunding Bonds, Series 2007, $9,975,000 City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008A and $2,035,000 City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008B (Taxable), together with any bonds issued on a parity therewith Ladies and Gentlemen: I am Deputy General Counsel of the MBIA Insurance Corporation, a New York corporation (the "Corporation"), and have acted as counsel to the Corporation in connection with the issuance of Financial Guaranty Insurance Policy Nos. 505890 and 505900 relating to $9,975,000 City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008A, $2,035,000 City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008B (Taxable) and Debt Service Reserve Surety Bond No. 505910 in an amount not to exceed $3,648,588.75 relating to the Bonds (collectively, the "Policies"). In so acting, I have examined copies of the Policies and such other relevant documents as I have deemed necessary. Based upon the foregoing, I am of the following opinion: MBIA Insurance Corporation - 113 King Street . Arrnonk. NY 10504 . +I 914 273 4545 . www.mbia.com WISDOM IN ACTION" Page 2 1. The Corporation is a stock insurance corporation, duly incorporated and validly existing under the laws of the State of New York and is licensed and authorized to issue the Policies under the laws of the State of New York. 2. The Policies have been duly executed and are valid and binding obligations of the Corporation enforceable in accordance with its terms except that the enforcement of the Policies may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium, receivership and other similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Very truly yours, r Daniel McManus Deputy General Counsel STANDARD &POOR'S 55 Waler Slreet. 38th Floor New York. NY 10041~0003 tel212 438.2074 reference no.: 878428 MBIA Insurance Corl~oration 113 King Street Arnionk, NY 10504 Attention: Mr. Adam Cam, Assistant Vice President lie: $9,975,000 Cily of Rerttor~, ~i/crs/lirrgtorr, i!'rrlo nrlri SL'II'L'I. R~IJ~IIII~ Boll(/$, Serie.~ 2008A, dnlctl: Dnfe of Delil~ery, (Irrre Decernber I, 2016-2027, (POLICY #jO5890) Dear Mr. Carta: Pursuant to your request for a Standard & Poor's rating o~i the above-referenced obligations, we have reviewed the inforniation submitted to us and, subject lo the enclosed Ten1rs crrrd Corrrliriorrs. liave assigned a rating of "AAA". The rating I-eflects our assess~nent of the likelil~ood of rcyayliient of principal and interest based on tlie bond insurance policy your conipany is providing. Therefore, rating adjust~l~elits may result from changes in tlie fi~>ancial position ofpo~~r company or from alterations in the documents governing the issue. The rating is not investment, financial, or otlier advice a~itl you sliould not and cannot rely ul~on the rating as such. Tlie rating is based on inlomniation supplied to us by you but does not represent an audit. We undertake no duty of due diligence or independent verification of any information. Tlie assignment of a rating does not create a fidociary relationsliip between us and you or between us and other recipients of the rating. We liave not consenled to and will not consent to being ~ialiied an "expert" under tlie applicable securities laws, including \vitliout limitation, Sectio~i 7 of tlie Sccul-ities Act of 1933. The rating is not a "market raling" nor is it a recommendation to buy, hold, or sell the obligations. This letter constitutes Standard & Poor's permissio~i to you to disseminate tlie above-assigned rating to interested parties. Standard & Poor's reserves tlie right to inror~ii its own clients, subscribers, and the public of the rating. Standard & Poor's relies on the issuer and its counsel, accountants, and other experts for tllc accuracy and completeness of the infomiation submitted in connection with the rating. This rating is based 011 fillancia1 infomiation and docunients we received prior to tlie issuance of this lctter. Standard & Poor's must receive complete documentation relaling to this issue no later than 30 days after the date of this letter. Standard & Poor's assumes that t11c documents you have provided to us are final. If any subsequent changes were 111ade in the final documents, you ~iiust notify us of such changes by sending us tlie revised final documents with thc changes clearly marked. Mr. Ada111 Carta I'age 2 Ja11ua1-y 4, 2008 Standard 6: Poor's is pleased to be of service to you. Fot- more information please visit our website at www.standardandvoors.com. If we can be of help in any other way, please contact us. Thank you for choosing Standard & Poor's and we look forward to working wit11 you again. Sincerely yours, Standard 6c Poor's Ratings Services a division of The McGraw-Hill Companies, Inc kb enclosure STANDARD ' 55 Water Slrcet, 38th Floor New York. NY 10041.0003 Id212 438.2074 reference no.: 878431 January 4, 2008 MBlA Insurance Corporation 1 13 King Street Amionk, NY 10504 Attention: Mr. Adam Carta, Assistant Vice President Rc: S2,03.7,000 City ofRerrtorr, FV(rslrirrgtorr, Jfirter nrrd Se111er Reserrrte Bort[l.s, Soics 20088 (T[~.~rrhle), dtrted: Dufe of Delivery, drre: Decevrhcr 1, 2013-2016, (I'OLICI' #505900) Dcar Mr. Carla: Pursuant to your reqoest for a Standard & Poor's rating 011 tlic above-I-cfercnced obligations, \ve have reviewed the information submitted to us and, sul~ject to the enclosed ;rt.rrir.s NIJ~ Co~~dilio~r.~, have assigned a rating of "AAA". The rating reflects our assess~ne~it of the likelihood of repayment of principal and interest based on the bond insurance policy your company is providing. Therefore, rating adjustments may result from changes in [lie financial position of your company or from alterations in the documents governing tlie issue. The rating is not investment, financial, or otlier advice and you should not and cannot rely upon tlie rating as such. The rating is based on inlbmiation supplied to us by yoit but does not re1)rcscnt an audit. We undertake no duty of due diligence or independcnt verification of any information. The assignment of a rating does not create a fiduciary relationsliip between us and you or bchveen us and other recipients of the rating. \Ve have not consented to and will not consent to being named an "expert" under the applicable securities laws, including \vitIiout limi~ation, Section 7 of the Securities Act of 1933. The rating is not a "market ra~ing" nor is it a recommendation to buy, hold, or sell the obligations. This letter co~lstiti~tes Standard & Poor's permission to you to disseminate tlie above-assigned rating to interested parties. Standard & Poor's reserves tlie I-iglit to inrorm its own clients, subscribers, and the public of the rating. Standard & Poor's relies on the issuer and its counsel, accountants, and otlier experts for the accuracy and completeness of the information submilted in connection with tlie rating. This rating is based on financial infoniiation and docl~~nents we received prior to thc issuance of tliis letter. Standard 6( Poor's iiiust receive coniple~e documentation elating to tliis issue no late1 tlia~i 90 days after the date of this letter. Standard & Poor's assumcs that tlie documents yo11 have p~ovidcd to us are final. If any subsequent changes were made in the final documents, you must notify us of such changes by sending us the revised filial documents with tlie clianyes clcarly marked. Mr. Adam Carta Page 2 Janua~y 4,2008 Standard 6r Poor's is pleased to be of service to you. For more infomiation please visit our website at w\vw.standardandpoors.com. If we can be of help in any other way, please contact us. Thank you for choosilig Standard & Poor's and we look for\vard to working with you again. Sincerely yours, Standard 6r Poor's Ratings Services a division of The McGraw-Hill Conlpanies, Inc. FitchRatings 1201 Earl 7111 Street T 307 755 7012 1800 a5 FllCn Powell. WY 82435 ~u*.l~lcllrat~nas.com December 28.2007 Ms. Llsa Wilson MBlA Insuranw Corp 1 13 King Street Armonk. NY 10504 Re: Renton (WA) I Policy# 505890 Dear Ms. Wilson: FIW Ralings has assigned one or more raUng6 andlor othemisc taken rating acUon(s). as detailed on the anached Notice of Raling Acbon. Ratlngs assfgnea oy Fgtcn are based on doc~menls an0 informat on prow oed lo LS Dy SSJem. ob IgOrS, andlor Ine r eroens and aqents. ano ere sub en :o receipl ol tne final cos ng OocLrnonls F.lcn ooes nct aLd.1 or vertfy the truth or'accuracy oisuch information.' Ratinas are not a remmmendatlon or supqestion, directly or indirectly. lo you or any other person, 10 buy, sell. mare or noid any ,nveslmenL loan or secur.ty orlo undemro any inveslment strategy *nth respect to any nnveStmenL lOJn or SOCur.ty or any issuer. Rat~ngs 00 nor commenl on me aoeqdcy of market pr~cc. Ine suluol. ly of any inveslment. loan or sewritv for a oartlwbr inveslor lincludins without limitation. any accounting andlor regulatory treatmenl).'or lhe tai-exekpt natk or taxabilily of hymenti made in respect of any invesunenl, loan Or ~ec~rib'. Filch is not your advlsor, nor is Fitch provlding to you or any other party any financiel advice, or any legal, auditing, accounting, eppraisal, valuation or actuarial services. A retlng should not be viewed as a replacement for such advlce or services. It Is Important that Fitch be provided with all informalion thar may be material to its ralings so that they continue lo 3ccdrate!y reflect me Status of.tne rate0 Issues. Ral.ngs may ae cnanged, wlhdrawn. s.spenoed or P.awo on Rating Watch d-e to cnanges 11, ado trons ID or the inadequacy of information. 931 ngs are not reoommeno~t ons lo OLY. $el or m'd seanles. Rat~ngs do no1 comment on [he adequacy of marxet pnce tho s,113b 3. of any secJr ly lor a parltculer nvestor, or the tax.fxfrnpr n3tJre or taxabi lb of payments made in respect of any security The assignment ofa rating by Filch shall not constitute a consent by Filch to use Its name as an expert in connecllon wilh any registration statement or other filing under U.S., U.K.. or any other relevant securities laws. If you hsve any questions. pleese contact us at any time. Sincerely, Insured &lings ana age) U.S. Public Finance Enc: Ndce of Rating Action (Om 10: 96846) Notice of Rating Adion Bond Oesolptlon Rating Type Rentm (WA) W (i swr rev knds ser ZOOBk (in~ured: Long Term Upgrade MBlA Insurance Corp.) Oulloow -- - Notes bting Watch Eff Date - AAPl RWNsg 2EOec-2007, 1 Kty: RO: RaUng hiuook. RW: Raline Watch: Po$: PmiGve. Neg: Negallva. Sla: Stebla. Evo: Evolvlng Notes - 1 The rating Is based solely on credit enhancement provided by a bond insurana, policy issued by MBlA Insurance Corp.. which has an Insurer Flnancisl StrengUl rating of 'W. (Doc ID: 98848) Page 1 of 1 FitchRatings December 28.2007 Ms. Lisa Wilson MBlA Insurance Corp. 113 King Street Almonk, NY 10504 Re: Renton (WA) I Policy # 505900 Dear Ms. Wilson: Fitch Rallngs has assigned one or more ratings andlor otherwise taken rating action(s), as detslled on the attached NoUce of Rating Action. Rat ngs assfgred by Fntcn are msed on ooc~menk and tnformal8on provtded lo us by ss,ors. ooligo's, andlor tne$r expens ana sqeils ana Jro s.b en to rece pt of lP9 flno costng aocJmenLs F !Cn aoas not a,alt Or 4W.b lne truth or'accuracy oisuch ~nformation.. Ratings are not a recommendelion or sugaeslion, directly or ind~redy, to you or any other parson. to buy, Sell, make or hoid any tnvestment, loan or secvrty ;;to dndemu, any nnveslmenl strategy wftr respecl lo any ~nvShnen1. loan or sec~r.ty or any nssuer. Rat~ngs do not comment on me aoequacy of market place, tho sulWb ily of 3ny investment. loan or securitv for a oaniwlar investor (indudin0 withoul limitation, any eccounlinq andlor regulatory treatment), or 17e lax-exempt nal~re or taxeb'llly of paymen& maao 8n respect 01 any ~nvestmenl, loan or SccLrlty Fnlch not vour advlsor nor is Fltch Drov dlna to YOJ or any olner party any fnanzta aawce. or any ega . auaibng accounting,~appraisal valuation or ac~uarial &rvi&s. A ra6ng should hot be viewed as a replacemenifor such advice or services. It is Imponant that Fitch be provided wlth all information that may be material to its ratings so that bey continue to accurately reflect the status of the rated issues. Ratings may be changed. withdrawn, suspended or placed on Rating Walch due to changes in, additions to or lhe inadequacy of ~nformalion. Ratlngs are not recommendations to buy, sell or hold securities. Ratings do no1 comment on the adequacy of market price. the sulbbility of any security for a panicular investor, or the tax-exempt nature or taxabllliy of paymenls made in respect of any sewriry The assignment of 3 rating by Filch shall not wnstnute a consent by Fitch lo use Its name as an expert in connection with any registration slalemenl or other filing under US., V.K.. or any other relevant securities laws. If you have any questions, please contact us at any time. Sincerely. " Insured Ratings Manager V.S. Public Finance Enc: Notice of Rating Action (Doc ID: 96847) Notice of Rating Action - - - - Ourloow Bond Description RaIlng Type Acllon - -- - Notes RaUng Watch Ht Darn - Rsnlon PA) rrlr (L em re* bonds 501 ZOOBE Onsure4: Long Term Upgrade RW:Neg 28-Dee-2007 1 MBlA ln9uram Corp.) - - Key: RO: Rallng OulI~k. RW. Rating Walch: Pos: PosiBve. Neg: Negative. SLa: Stable. Evo: Evolving Not08 - 1 The rallng is based solely on cmdil enhancement provided by a bond insurancd pollcy Issued by MBlA Insurance &rp.. whlch has an Insurer Finanual SVennlh rallna of 'AAA'. (Doc ID: 96847) Page 1 of 1 Renton, Washington Primary Credit Analysts: Jim Tchou New York US$15.96 mil wtr & swr rev bnds ser 2007 due 12/01/2027 (1)212-438-3821 Long Tern Rating A.4-/Stabin New j~m-thou@ standardandpmrs.com Renton wlr/swr (FSAl Secondary Credit Analysts Unenhanced Raring M4SPUR)iStable Affirmed Chns Morgan San Franc~sco (11 415371-5032 RatingsDirect Publicalion Date October 9.2W7 Rationale Standard & Poor's Ratings Services assigned its 'AA-' standard long-term rating, and stable outlook, to Renton, Wash.'s series 2007 waur and sewer revenue bonds and affirmed its 'AA-' Standard S( Poor's underlying rating (SPUR), with a stable outlook, on the city's parity debt. The ratings reflect the city's: . Solid debt service coverage (DSC), coupled with strong liquidity during the past three years; Planned rate increase to support operational and capital needs; Independent water source, providing a measure of cost control; and * Participation in a broad and deep regional economy, anchored by the Seattle, Wash. ('AAA' GO debt rating) merropolimn area. Boeing Co:s reduced, but still prominent, role as a leading employer and system customer tempers the city's combined water arid sewer system rating. A net revenue pledge of the ciry's watenvorks system secures the bonds. Legal provisions are within the standard range for a net revenue pledge of this type, including a 1.25~ maximum aniiual debt service (MADS) additional bonds test ond a 1.25~ MADS rate covenant. Officials will also fund the debt service reserve at MADS. They will use bond proceeds primarily to finance waterworks system improvements. Annual DSC by the system has been consistently solid over the past five years and well above the ciry's policy of maintaining between 1.25~ and 1.50~ coverage. Annual DSC, net of Renton, Washington nonrecurringconnection and development charges, ranged from 7.52~ in fiscal 2003 to 2.47~ in fiscal 2006. Estimated DSC, net of nonrecurring connection and development charges, is 2.17~ for fiscal 2007. Including connection and development fees, estimated DSC is a more-robust 2.84~. For fiscal 2008, officials are projecting DSC, not including connection and development charges, at 1.91~ and, including connection and development charges, at 2.42~. The waterworks system's cash position has been strong over the past three fiscal years: It ranged from $11 million in 2004, or 220 days' operations, to $13 million in 2006, or 234 days. The typical residential water consumer pays a combined $80.60 per 1,000 cubic-feet monthly to the city: $43.18 for wastewater service, $32.03 for water service, and $5.39 for storm water service. In 2004, city officials began raising rates for the first time since the 1990s. In fiscal 2008, they raised both the water and wastewater rates by 6.0% and the storm water rate by 6.5%. When compared with the current rates of surrounding cines, these increases put the city near the top of the list. City management conducts an independent rate study every six years; the most recent 2006 study was for 2007 rates. Renton's planned watenvorks capital projects consist primarily of trunk line upgrades, new reservoirs, and water pump stations. Combined capital spending should total roughly $60.4 million during fiscals 2008-2013; management plans to use bonds and loans to finance about 53% of projects and surplus cash to support another 18%. Water capacity is solid with primary rights and treatment capacity in place for 18 million gallons per day (mgd), nearly all of which comes from groundwater. This compares favorably to an average daily demand of 8.0 rngd and a peak demand of 15.3 mgd in 2006. The city also has an additional 14.7 mgd in supplemental water rights and emergency well capacity. Sustained housing and retail growth within the city, which has translated into moderate to rapid customer increases, is a key trend regarding system service demand. The water system has increased its customer base by an average of 2.3% annually over the past five years to 16,700 while the wastewater system has added an average of 3.3% annually to 17,250. King County ('M GO debt rating) provides wastewater services to the city through a contract that expires in 2056; officials pass cost increases on to city customers. Officials have set an annexation election for November 2007. If approved, the annexation should add 17,000 to the city's current population but should not have an effect on water or sewer services because an existing utility district will continue to serve most of the affected area; the city storm water system, however, will cxperience an increased need. Renton, ~vidi a populatio~~ estimate of 60,290, surrounds the southern end of Lake Washington in King County, 10 miles southeast of Seattle and five miles east of Seattle-Tacoma International Airport. A regional north-south commuter rail line connects the city to Seattle and Tacoma, Wash. Manufacturing, technology-based businesses, Port of Seattle, the service indtistry, tourism, fishing, and agriculture are leading contributors ro the area economy. Boeing is the city's leading employer, with 11,942 employees, and taxpayer; but the city's recent dependency on Boeing has been decreasing due to a diversifying economy. A robust regional housing market and the city's annexation of unincorporated land have been major factors driving property tax base growth. Income levels for a city of this size are avenge: Median household effective buying income is 104% of the national level. Economic growth within Renton should continue as ciry officials move fonvard with the redevelopment of a former Boeing production site; the new site, known as The Landing, will be a 68-acre, mixed-use development that will consist of retail space, a theater, restaurants, and residential units. Standard @ Poor's I ANALYSIS Renton, Washington Outlook The stable outlook reflects the expectation that the city's watenvorks system will continue to generate net revenues well above its policy and covenanted minimums. In addition, we do not expect a significant change from the city's practice of using a combination of reserves and revenue bonds to support capital projects, allowing management to maintain sound liquidity. RsntonwbEiswrrev bndsser2007due 12DlRO27 Long Term Raring AA-Elable Naw Rating Renton wblswr (FSA) Unenhannd Rating AA.(SPURVStabla Afflmsd Renton wv/swr(MBlA) Unanhanced Raring AA4SPURKStable Allinned Many issuss are enhanced by bond insurance Published by Standard & Pooh. a Oivilim 01 The McGnw.Hill Crmpankr. Inr. Erervlive 0llKS: 1221 Avanvs ol tha imsrical. New Yo*. NY 10020. Mitorial OlSCes: 55 Waler Streel. New Ylxk. NY iW41. Subrrrib~rs~mk 111 21243B7280. Co~rightZDO7 tymeMcGrawHil1 Campmiel. Inc. Rcqmdunion in wh.1~ or in pan prohibitedurrpl ty permission. All mht$reserved. Infomalion has been oblained b(S1sndard & Pmh fm rourres believed robs reliabla. Hum, bemused !ha porribiliryof human amedranicalurwbywrrowcc.. Smndovl&bo/sw @fir& Stsndard&PoorS8 dosanot suanntss maacrvraw,adesq.or cam@aanelr olay inloimationard is notrsrponriblefor anvermrroromialrmorthoraulloblaind lrom ths use01 such inlonation. Raticpr arelatanmtr olopinim, not samenls 01 IM orrlrmmcndalionsle ba hald. cr sell awslruritiar. Slandard & Poor's mes billing and cman data rolieaed lmn lubaribsn lor billing and orderhrifillment pumo!a and orrasiowlhl to inform wbrcribsn about pledzt~ DrSe~~ic~s lmm Sandard & Pods. ourparent, IheMcGraw.Hil1 Cmpaniat, and rppuwla mid parties t@t may be of inteest to hem. All subscriber billina and rontarl data rollertad is stpled ina swum daabass in the U.S. and accea is limiad to authwiud Deisms. Ifveu would ~lelor notlo hava your infoiatim "red as outlined in this noi!a. ilwv wi* to rDviavyour infomation fararruw. m forrmrs information on kr priuar('pra(ices. please wlt usat[11212438-1280 awiim usar phflslanda~dsnd~rn~~rnm, formore inlormation am Tha M6mwHill Cownint Riy Polii plearevisitw~rawhill.~pri~~.html. Analytic services provided by Standard &Pooh Ralinss Sewices I'Aatinss Sawicas'l are the resun of separate acitities designed lo plassrw !be independence and oqcc: i.ty of ratcgs opa;ons. Cred.1 rrtings iss.ed oy Ratln(S Ssn crr are solely slatrrenls ol opnion and not slatemexsol lact or rewrnrran3a: onr to purchase hold. or sell any sac-ntles or mace an) o:ner nvcrmant acc'sions. Accordinalv. anv user of uedit mtinns issued bv Ratinas Services should not rely on anv such ratinqs or olhar opinion issued bv Ratinas -. . . . . . Semcsr icmakmg any ~nwslmrnl3ec1s on Rati~gs are Oaeo on inlotmation rBIa.rM by Rat ngs SeNces Olher 3:v:stons of Sraldard & Pcoh msf nav? mfornat~~n that IS not am 1ab.e to tlat:ngs Senices. Standard & Poor's Inas eslabl~shed policies an3 P'CCWJleS lo maintain the confidentialitq of nonpublic information received during the ratings pmcess. Ralngs SeMces rece~es mrpensalton lot nm la:ngr. SLO mmponsaion is normally paid sober by ['la issu?rs 01 such serdr~t as 01 Ly the rcaelwr:Iem pan!cspating'n :he a sU;bdt[3n Inerect lhe lees genera ly raw lmm USS2.000 to over LSS1.500 OD? Whtle Slandard &Poor's resowes the right to disseminate the rating, it rnceives no payment for doing sa. except for subscriptions lo ils publications Permissions: To reprint. translate, orquole Slandard & Poor's publications, contact Client Senices, 55 Water Sweet New Yak. NY 10041: 111212.438-9823: or by email to: research~requcs~standardandpoors.mm. October 15. 2007 "of qent0,, Mr. Michael Bailey Finance and lnformation Services Adminislrator Renion 20~ & IS& Finance & lnformation Services 1055 South Grady Way "~istratiOr) Renton. WA 98055 Dear Mr. Bailey: Fitch Ratings has assigned one or more ratings and/or otherwise taken rating action(s), as detailed on the attached Notice ol Rating Aclion. Ratings assigned by Fitch are based on documents and information provided to us by issuers, obligors, andlor their experts and agents, and are subject to receipt of the final closing documents. Fitch does not audit or verify the truth or accuracy of such information. Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person. to buy, sell. make or hold any investment, loan or security or to underlake any investment strategy with respect to any investmant. loan or security or any issuer. Ratings do not comment on the adequacy of market price, the suitability of any investment. loan or security lor a particular investor (including without limitation, any accounting andlor regulator/ treatment), or the tax-exempt nature or taxabiliiy of payments made in respect of any inveslment, loan or security. Fitch is not your advisor, nor is Fitch providing to you or any other party any linancial advice, or any legal, auditing. accounting, appraisal, valuation or actuarial services. A rating should not be viewed as a replacement for such advlce or services. It is importanl that Fitch be provided with ail information that may be material to its ratings so that they continue to accurately rellect the status ol the rated issues. Ratings may be changed, withdrawn, suspended or placed on Rating Watch duo to changes in, additions to or the inadequacy of infWrnatlOn. Ratings are not recommendations to buy, sell or hold securities. Ratings do not comment on the adequacy of market price. the suitability oi any security for a particular inveslor, or the tax.exempt nature or taxability Of payments made in respect of any security. The assignment ol a rating by Fitch shall not constitute a consent by Filch to use its name as an expert in connection with any registration statement or other filing under U.S., U.K., or any other relevant Securities laws. We are pleased to have had the opportunity to be of service to you. If we can be of further assistance, please lee1 free to contact us at any time. Sincerely. & ~.-p$OpLd Amy S. Doppelt Managing Director U.S. Public Finance Enc: Notice ol Rating Action (Doc ID: 91626) Notice of Rating Action outlooW Bond Description Rallng Type Rating Watch Eff Dais - -- - Notes Renton (WA) wlr 6 swr rev bonds ser 2007 Long Term New Rating FA R0:Sla 15.0~1-2007 Renlon.(WA) w 8 swr rev bonds Long Term Affirmed AA- R0:Sta 15.0ci-2007 Renton (WA) wir 8 swr rev bonds ser 20M (insured: Long Term ARfmed AA- R0:Sta 15-03-2007 1 Financial Security Assurance Inc. (FSA)) Renlon (WA) wlr 8 swr rev bonds ser ZU4 (insured: Long Term Affirmed AA- R0:Sta 15-0C1-2007 1 MBlA Insurance Coca.) Renton (WA) Wr 8 swr rev rfdg bonds Long Term ARrmed A& R0:Sta 15-021-2007 Renton (WA) wlr 8 swr rev rldg bonds ser 1998 Long Term Affirmed AA- R0:Sta 15-0c1.2007 1 (insured: Financial SeCuriN Assurance Inc. (FSAII Renlon (WA) wlr8 swr rev rtdg bonds se12003 Long Term ARrmed AA- R0:SIa 1542~1-2007 1 (insured: MBlA Insurance Corp.1 Key: RO: Rating Outlook. RW: RaUng Watch; Pos: Posilive. Neg: Negative. Sta: Stable. Evo: EMlving Notes - 1 The rating is an underlying rating, given without consideration 01 credit enhancemen!. SteuartTower, 15th Flwr San Franclrco,CA94105 STANDARD January 7,2008 City of Renton 1055 South Grady Way Renton, WA 98055 Attention: Mr. Michael Bailey, Director of Finance Re: City of Renton, Washington, Water & Sewer Revenue Bonds (SPUR) Dear Mr. Bailey: Standard & Poor's has reviewed the Standard & Poor's underlying rating (SPUR) on the above-referenced obligations. After such review, we have affirmed the "AA-" rating and stable outlook. A copy of the rationale supporting the rating and outlook is enclosed. The rating is not investment, financial, or other advice and you should not and cannot rely upon the rating as such. The rating is based on information supplied to us by you or by your agents but does not represent an audit. We undertake no duty of due diligence or independent verification of any information. The assignment of a rating does not create a fiduciary relationship between us and you or between us and other recipients of the rating. We have not consented to and will not consent to being named an "expert" under the applicable securities laws, including without limitation, Section 7 of the Securities Act of 1933. The rating is not a "market rating" nor is it a recommendation to buy, hold, or sell the obligations. This letter constitutes Standard & Poor's permission to you to disseminate the above- assigned rating to interested parties. Standard & Poor's reserves the right to inform its own clients, subscribers, and the public of the rating. Standard & Poor's relies on the issuer/obligor and its counsel, accountants, and other experts for the accuracy and completeness of the information submitted in connection with the rating. To maintain the rating, Standard & Poor's must receive all relevant financial information as soon as such information is available. Placing us on a distribution list for this information would facilitate the process. You must promptly notify us of all material changes in the financial information and the documents. Standard & Poor's may change, suspend, withdraw, or place on Creditwatch the rating as a result of changes in, or unavailability of, such information. Standard & Poor's reserves the right to request additional information if necessary to maintain the rating. Please send all information to: Standard & Poor's Ratings Services Public Finance Department 55 Water Street New York, NY 10041-0003 If you have any questions, or if we can be of help in any other way, please feel free to call or contact us at nypublicfinance@standardan~oors.com For more information on Standard & Poor's, please visit our website at www.standardandpoors.com. We appreciate the opportunity to work with you and we look forward to working with you again. Sincerely yours, Standard & Poor's Ratings Services a division of The McGraw-Hill Companies, Inc. c f enclosure Blanket Issuer Letter of Representations ro be Compiaec by Issuer] City of Renton, Washington [Rune oi Iser] April IS, 1997 !Dare: Attention: Undedting Depamnent - Eligibility The Depository Ttust Company SZ Water Street; 33th Floor New Yo& PIT 10041-0099 Ladies and Centiemen: This letter sets forth our undemanding with respect to all issues !the 'Securities") that Issuer shall request be made eligible for dep0sit.b~ The Depositoly Tmt Company (*DTC). To induce DTC to accept the Securities as eligible for dept at DTC, and to act m acm&ce with DTC's Rules with respect to the Securities, Issuer represents to DTC that her will comply wirh the requirements stated in DTCr Operational Amangemens, as they may be amended hrn time to time. xote: - Very tdy m. Schedule A mnrsios statemenu that DTC believes DTC, the me of effectin bool;- -rs disibuted ttmugh and City of Reneon, Washington anundadraan~~~. , .. - . Victoria A. Runkle, Finance an8 Received and Accepted: 7 = s~nri me aamr . . C+F= . . COMP 200 Mill Avenue South ismet *) WA 98055 (SWi Ttp) PARITY CERTIFICATE I, Michael E. Bailey, Finance & Information Services Administrator of the City of Renton, Washington (the "City"), do hereby certify in connection with the sale of the City's $9,975,000 Water and Sewer Revenue Bonds, Series 2008A and $2,035,000 Water and Sewer Revenue Bonds, Series 2008B (Taxable) (together, the "Bonds") that: (a) There is no deficiency in any Parity Bond Fund and no event of default has occurred and is continuing. (b) The Bonds are being issued for the purpose of acquiring, constructing and installing additions, betterments and improvements to the Waterworks Utility. (c) Net Revenue, without regard to deposits into or withdrawals from the Rate Stabilization Fund, in the 12 months ended December 31, 2006 as determined from the financial statements of the Waterworks Utility, were not less than 125% of Maximum Annual Debt Service on all then outstanding Parity Bonds and the Bonds, as shown below: 2006 Net Revenue Available for Debt Service $8,73 1,244 Maximum Annual Debt Service $3,648,589 Ratio 2.39~ All capitalized terms used in this certificate shall have the same meaning as defined in Ordinance No. 5313, adopted on October 22, 2007, and Resolution No. 3919, adopted on November 26,2007, authorizing the issuance of the Bonds. Dated as of this 4th day of January, 2008. Michael E. ~ai6v. ~inzkce & Information , , Services Administrator City of Renton, Washington CLOSING CERTIFICATE OF THE CITY OF RENTON The undersigned hereby certifies and represents to Seattle-Northwest Securities Corporation (the "Underwriter") that he is the duly appointed and acting Finance & Information Services Administrator of the City of Renton, Washington (the "City") and is authorized to execute and deliver this certificate and further certifies on behalf of the City to the Underwriter as follows: 1. This certificate is delivered in connection with the offering and sale of the $9,975,000 Water and Sewer Revenue Bonds, Series 2008A and $2,035,000 Water and Sewer Revenue Bonds, Series 2008B (Taxable) (together, the "Bonds"). 2. The representations and covenants of the City set forth in the Bond Purchase Agreement for the Bonds (the "Purchase Agreement"), dated November 26,2007, between the City and the Underwriter, were true and correct when made and remain true and correct as of this date. 3. No litigation or other proceedings are pending or, to my knowledge, threatened in any court in any way (a) affecting the position or title of the authorized officers of the City, or (b) seeking to restrain or to enjoin the authorization, issuance, sale or delivery of, or security for, any of the Bonds, or (c) contesting or affecting the validity or enforceability of the Bonds, the Bond Ordinance, the Purchase Agreement, or (d) contesting the completeness or accuracy of the Preliminary Official Statement or the Final Official Statement, or (e) contesting the powers of the City or its authority with respect to the Bonds, the Bond Ordinance or the Purchase Agreement, or (0 materially affecting the finances of the City. 4. No event affecting the City has occurred since the date of the Final Official Statement which should be disclosed in the Final Official Statement for the purpose for which it is to be used or which is necessary to disclose therein in order to make the statements therein not misleading, and the Final Official Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Capitalized terms not defined herein shall have the meaning set forth in the Purchase Agreement. Dated this 4th day of January, 2008. Michael E. Bailey, ~inande & Information Services Administrator City of Renton, Washington SIGNATURE IDENTIFICATION CERTIFICATE We, Denis Law and Bonnie I. Walton, the Mayor and City Clerk, respectively, of the City of Renton, Washington (the "City"), do hereby certify that the signatures appearing on each of the following-described Water and Sewer Revenue Bonds, Series 2008A (the "Series A Bonds") and Water and Sewer Revenue Bonds, Series 2008B (Taxable) (the "Series B Bonds," and together with the Series A Bonds, the "Bonds") of the City are true and correct facsimiles of our signatures. The Series A Bonds are dated as of their delivery, are in the aggregate principal amount of $9,975,000, are designated the "City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008A," bear interest from their date payable on June 1, 2008 and semiannually thereafter on the first day of each succeeding December and June at the rates, and mature on December 1 in the years and in the principal amounts, as set forth in Ordinance No. 5313 and Resolution No. 3919 of the City (together, the "Bond Ordinance"). The Series B Bonds are dated as of their delivery, are in the aggregate principal amount of $2,035,000, are designated the "City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008B (Taxable)," bear interest from their date payable on June 1, 2008 and semiannually thereafter on the first day of each succeeding December and June at the rates, and mature on December 1 in the years and in the principal amounts, as set forth in the Bond Ordinance. Dated as of this 4th day of January, 2008. Mayor " -. .. .- .. P - -. . -. City Clerk .. ,*-. - - STATE OF WASHINGTON ) ) ss. COUNTY OF KING ) On this day of January, 2008, before me, the undersigned, a Notary Public in and for the State of Washington, duly commissioned and sworn, personally appeared Denis Law , to me known to be the Mayor of the City of Renton, Washington, described in and who executed the within and foregoing instrument; and acknowledged to me that he signed said instrument as his free and voluntary act and deed for the uses rein mentioned. [Printed Name] My appointment expires: P:VZ0358_ffiVZ035_OGM 01/02/08 STATE OF WASHINGTON ) ) ss. COUNTY OF KING 1 On this $&I day of January, 2008, before me, the undersigned, a Notary Public in and for the State of Washington, duly commissioned and sworn, personally appeared Bonnie I. Walton, to me known to be the City Clerk of the City of Renton, Washington, described in and who executed the within and foregoing instrument; and acknowledged to me that she signed said instrument as her free and voluntary act and deed for the uses and purposes therein mentioned. Dm- Nfl$/F u~~~~tvna n v~ [Printed Name] My appointment expires: FEDERAL TAX CERTIFICATE I, the undersigned officer of the City of Renton, Washington (the "City"), make this certification for the benefit of all persons interested in the exclusion from gross income for federal income tax purposes of the interest to be paid on the City's Water and Sewer Revenue Bonds, Series 2008A (the "Bonds"), which are being issued in the aggregate principal amount of $9,975,000 and delivered simultaneously with the delivery of this certificate. I do hereby certify as follows in good faith on the date of issue of the Bonds: 1. Responsible Officer. I am the duly chosen, qualified and acting officer of the City for the office shown below my signature; as such, I am familiar with the facts herein certified and I am duly authorized to execute and deliver this certificate on behalf of the City. I am the officer of the City charged, along with other officers of the City, with responsibility for issuing the Bonds. 2. Code and Regulations. The Bonds are subject to the provisions of sections 141, 148, 149 and 150 of the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations (the "Regulations") heretofore promulgated under sections 141, 148, 149 and 150 of the Code. These provisions of the Code and Regulations impose restrictions on the use of bond-financed facilities and on the investment of bond proceeds. This certificate is being executed and delivered pursuant to sections 1.141-1 through 1.141-15, 1.148-0 through 1.148-1 1, 1.149(b)-1, 1.149(d)-1, 1.149(g)-1, 1.150-1 and 1.150-2 of the Regulations. 3. Definitions. The capitalized terms used in this certificate (unless otherwise defined) that are defined in the Ordinance No. 5313, passed on October 22, 2007 and Resolution No. 3919, adopted on November 26, 2007, authorizing the issuance of the Bonds (together, the "Bond Ordinance") shall for all purposes hereof have the meanings therein specified. All terms defined in the Code or Regulations shall for all purposes of this certificate have the same meanings as given to those terms in the Code and Regulations unless the context clearly requires otherwise. 4. Reasonable Expectations. The facts and estimates that are set forth in this certificate are accurate. The expectations that are set forth in this certificate are reasonable in light of such facts and estimates. There are no other facts or estimates that would materially change such expectations. The undersigned has to the extent necessary reviewed the certifications set forth herein with other representatives of the City as to such accuracy and reasonableness. The undersigned has also relied, to the extent appropriate, on representations set forth in the certificate of Seattle-Northwest Securities Corporation, the underwriter that has purchased the Bonds (the "Underwriter"), attached as Exhibit A to this certificate. The undersigned is aware of no fact, estimate or circumstance that would create any doubt regarding the accuracy or reasonableness of all or any portion of such documents. 5. Description of Governmental Purpose. The City is issuing the Bonds pursuant to the Bond Ordinance for the purposes of funding (a) a portion of the Project (hereinafter defined) as described more fully in the Official Statement prepared in connection with the offering of the Bonds, (b) to purchase a debt service reserve fund surety policy, and (c) the costs of issuance of the Bonds. The primary purpose of each transaction undertaken in connection with the issuance of the Bonds is a bona fide governmental purpose. The Project is described as follows: (i) the design and construction of electrical power generators in critical water pumping facilities for emergency uses; (ii) the design and construction of a 4.2 million gallon reservoir; (iii) the construction of a new lift station; (iv) the planning, designing and construction of a storm system; (v) the replacement of an existing culvert; and (vi) other miscellaneous projects of the Waterworks Utility (collectively, the "Project"). The City has determined to fund its Reserve Fund (as described in paragraph 12(c)) for the Bonds and its outstanding parity bonds through a debt service reserve fund surety policy, and therefore has cash on hand in the Reserve Fund in the amount of $3,145,309.00 (the "Excess Reserve Amount") as of the date hereof. The City has reduced the size of the Bonds by the amount of the Excess Reserve Amount, and the City will use the Excess Reserve Amount to pay a portion of the costs of the Project. Until the Excess Reserve Amount is expended, it will be invested at a yield that does not exceed the yields on the respective issue of Parity Bonds to which such Excess Reserve Amount is allocable. 6. Amount and Expenditure of Sale Proceeds of the Bonds. (a) Amount of Sale Proceeds. The sale proceeds from the issuance of the Bonds are $9,999,292.50, based on the amount set forth on Exhibit A hereto. Such amount represents the stated redemption price at maturity of the Bonds of $9,975,000.00, plus net original issue premium of $24,292.50. No portion of the purchase price of any of the Bonds is provided by the issuance of any other obligations of the City or any other governmental entity. (b) Expenditure of Sale Proceeds. The sale proceeds of the Bonds will be expended as follows: (i) The amount of $56,159.25 will be allocated on the date of issuance of the Bonds to the payment of Underwriter's discount or compensation. (ii) The amount of $38,537.89 will be disbursed to pay other issuance costs of the Bonds (including any rating agency fees charged to the City by the Bond insurer). (iii) The amount of $28,820.36 will be allocated on the date of issuance of the Bonds to the payment of premium for a policy of bond insurance on the Bonds (net of any rating agency fees). (iv) The amount of $6,200.00 will be allocated to purchase a debt service reserve fund surety policy. (v) The amount of $9,869,575.00, together with the Excess Reserve Amount, will be deposited in the Project Fund and is expected to be disbursed to pay or reimburse the costs of acquisition and construction of the Project. The aggregate amount of the costs of acquisition and construction of the Project is anticipated to be not less than such amount. Any costs of the Project not financed out of original or investment proceeds of the Bonds will be financed out of the City's available funds. (c) Reimbursement. Other than to the extent of preliminary expenditures (i.e., architectural, engineering, surveying, soil testing, Bond issuance, and similar costs that are incurred prior to commencement of acquisition, construction, or rehabilitation of the Project, other than land acquisition, site preparation, and similar costs incident to commencement of construction) not in excess of 20% of the aggregate issue price of the Bonds, no portion of the amount described in paragraph 6(b) above will be disbursed to reimburse the City for any expenditures made by the City prior to the date that is 60 days before the earlier of the issue date or the date the City adopted a resolution (the "Declaration"), if any, describing the Project, stating the maximum principal amount of obligations expected to be issued for the Project, and stating the City's reasonable expectation on that date that it would reimburse expenditures for costs of the Project with proceeds of an obligation. The Declaration, if any, is not an official intent to reimburse that was declared as a matter of course, or in an amount substantially in excess of the amount expected to be necessary for the Project. The City has not engaged in a pattern of failure to reimburse original expenditures covered by declarations of official intent. Such reimbursed portion will be treated as spent for purposes of paragraphs 11 and 15 below on the date an allocation is made in writing that evidences the City's use of the proceeds for original expenditure (provided, however, that an allocation made within 30 days of the date of issue may be treated as made on the date of issue). (d) No Working Capital. Except for an amount that does not exceed 5 percent of the sale proceeds of the Bonds (and that is directly related to capital expenditures financed by the Bonds), the City will only expend proceeds of the Bonds for (i) costs that would be chargeable to the capital accounts of the Project if the City's income were subject to federal income taxation and (ii) interest on the Bonds in an amount that does not cause the aggregate amount of interest paid on all of the Bonds to exceed that amount of interest on the Bonds that is attributable to the period that commences on the date hereof and ends on the later of (A) the date that is three years from the issue date of the Bonds or (B) the date that is one year after the date on which the Project is placed in service. (e) No Sale of Conduit Loan. No portion of the sale proceeds of the Bonds has been or will be used to acquire, finance, or refinance any conduit loan to any party. (f) No Overissuance. The proceeds of the Bonds will not exceed by more than a minor portion (as defined in paragraph 13 below) the amount necessary to accomplish the govemmental purposes of the Bonds and, in fact, are not expected to exceed by any amount the amount of proceeds allocated to expenditures for the governmental purposes of the Bonds. (g) Allocations and Accounting. The proceeds of the Bonds will be allocated to expenditures not later than 18 months after the later of the date the expenditure is made or the date the Project is placed in service, but in no event later than the date that is 60 days after the fifth anniversary of the date hereof or the retirement of the last Bond, if earlier. The allocation of proceeds will be made by consistently employing the direct-tracing method of accounting. No proceeds of the Bonds will be allocated to any expenditure to which proceeds of any other obligations have heretofore been allocated. 7. Pre-Issuance Accrued Interest. The Bonds are dated as of the initial date of delivery to the Underwriter, and the City will receive no pre-issuance accrued interest on the Bonds. 8. Expenditure of Investment Proceeds. The best estimate of the City is that investment proceeds resulting from the investment of any proceeds of the Bonds pending expenditure of such proceeds for costs of the Project will be retained in the Project Fund and disbursed to pay or reimburse Project costs in addition to those described in paragraph 6 above. 9. No Replacement Proceeds. Other than amounts described in this certificate, there are no amounts that have a sufficiently direct nexus to the Bonds or to the governmental purposes 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 for that purpose. Specifically, (a) No Sinking Funds. Other than to the extent described in this certificate, there is no debt service fund, redemption fund, reserve fund, replacement fund, or similar fund reasonably expected to be used directly or indirectly to pay principal or interest on the Bonds. (b) No Pledged Funds. Other than amounts described in this certificate, there is no amount that is directly or indirectly pledged to pay principal or interest on the Bonds, or to a guarantor of part or all of the Bonds, such that such pledge provides reasonable assurance that such amount will be available to pay principal or interest on the Bonds if the City encounters financial difficulty. For purposes of this certification, an amount is treated as so pledged if it is held under an agreement to maintain the amount at a particular level for the direct or indirect benefit of the holders or the guarantor of the Bonds. (c) No Other Replacement Proceeds. There are no other replacement proceeds allocable to the Bonds because the City reasonably expects that the term of the Bonds will not be longer than is reasonably necessary for the governmental purposes of the Bonds. Furthermore, if the term of the Bonds is longer than is reasonably necessary for the governmental purposes of the Bonds, the City does not reasonably expect to have available amounts during the portion of such period that is longer than is reasonably necessary. The City reasonably expects that the Bonds would be issued to achieve the govemmental purpose of the Bonds independent of any arbitrage benefit. The Bonds would have been issued if the interest on the Bonds were included in gross income (assuming that the hypothetical taxable interest rate would be the same as the actual tax-exempt interest rate). (d) Weighted Average Economic Life. The weighted average maturity of the Bonds, which has been computed by the Underwriter, will not be greater than 120 percent of the weighted average estimated economic life of the portion of the Project financed, determined in accordance with section 147(b) of the Code. Such weighted average estimated economic life is determined in accordance with the following assumptions: (a) the weighted average was determined by taking into account the respective cost of each of the assets financed by the Bonds; (b) the reasonably expected economic life of an asset was determined as of the later of the date hereof or the date on which such asset is expected to be placed in service (i.e., available for use for the intended purposes of such asset); (c) the economic lives used in making this determination are not greater than the useful lives used for depreciation under section 167 of the Code prior to the enactment of the current system of depreciation in effect under section 168 of the Code (i.e., the "mid-point lives") under the asset depreciation range ("ADR") system of section 167(m) of the Code, as set forth in Revenue Procedure 83-35, 1983-1 C.B. 745, where applicable, and the "guideline lives" under Revenue Procedure 62-21, 1962-2 C.B. 418, in the case of structures; and (d) land or any interest therein has not been taken into account in determining the average reasonably expected economic life of such Project, unless 25 percent or more of the net proceeds of the Bonds is to be used to finance land. 10. Yield on the Bonds. For the purposes of this certificate, the yield on the Bonds is the discount rate that, when used in computing the present value as of the issue date of the Bonds, 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 as of the issue date. For purposes of determining the yield on the Bonds, the issue price of the Bonds is the sum of the issue prices for each group of substantially identical Bonds, plus pre-issuance accrued interest. For each group of substantially identical Bonds, the issue price is the first price at which a substantial amount (i.e., ten percent) is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters and wholesalers). The issue price is based upon the representations of the Underwriter set forth in Exhibit A hereto. No Underwriter's discount, issuance costs, or costs of carrying or repaying the Bonds is taken into account for purposes of computing the yield on the Bonds, except the cost of the bond insurance premium. As set forth in paragraphs 6(b)(iii) and 6(b)(iv) above, proceeds of the Bonds will be allocated on the date of issuance of the Bonds to the payment to MBIA Insurance Corporation (the "Insurer") for municipal bond insurance and a reserve surety policy for the Bonds. The bond insurance premium and reserve surety policy premium paid to the Insurer are qualified guarantee fees because (based on representations of the Underwriter and the Insurer): (a) As of the date hereof, the present value of the bond insurance premium and reserve surety policy premium paid to the Insurer will be less than the present value of the expected interest savings on the Bonds as a result of the guarantee, computed using the yield on the Bonds (determined with regard to such guarantee payments) as the discount rate; (b) The guarantee creates a guarantee in substance because it imposes a secondary liability on the Insurer that unconditionally (except for reasonable procedural or administrative requirements) shifts substantially all of the credit risk for all or part of the payments on the Bonds; (c) The Insurer is not a co-obligor and does not expect to make any payments other than payments for which the Insurer will be reimbursed immediately; (d) The Insurer and any related parties will not use more than ten percent of the gross proceeds of the Bonds that are guaranteed by the Insurer; (e) The bond insurance premium and reserve surety policy premium paid or to be paid to the Insurer do not exceed a reasonable arm's length charge for the transfer of credit risk; (f) The bond insurance premium and reserve surety policy premium paid or to be paid to the Insurer do not include any payment for any direct or indirect services other than the transfer of credit risk (including fees for the Insurer's overhead and other costs relating to the transfer of credit risk); (g) The bond insurance premium and reserve surety policy premium paid or to be paid to the Insurer do not include any payments for the costs of underwriting or remarketing the Bonds or for the cost of casualty insurance to the City's property; (h) No portion of the bond insurance premium and reserve surety policy premium paid or to be paid to the Insurer is refundable upon redemption of the Bonds before the final maturity date in an amount that would exceed the portion of such bond insurance premium or reserve surety policy premium that had not been earned; and (i) The Insurer is reasonably assured that the Bonds will be repaid if the Project is not completed. The yield with respect to that portion of the Bonds subject to optional redemption that are issued at an issue price that exceeds the stated redemption price at maturity by more than one- fourth of one percent multiplied by the product of the stated redemption price at maturity and the number of complete years to the first optional redemption date for the bond is computed by treating such Bonds as redeemed at its stated redemption price on the optional redemption date that would produce the lowest yield on the Bonds. The yield with respect to the remaining portion of the Bonds subject to optional redemption is computed by treating such Bonds as retired at the stated redemption price at the final maturity date because (a) the City has no present intention to redeem prior to maturity the Bonds that are subject to optional redemption; (b) no Bond is subject to optional redemption at any time for a price less than the retirement price at final maturity plus accrued interest; (c) no Bond is subject to optional redemption within five years of the issue date of the Bonds; (d) no Bond subject to optional redemption is issued at an issue price that exceeds the stated redemption price at maturity of such Bond by more than one-fourth of one percent multiplied by the product of the state redemption price at maturity of such Bond and the number of complete years to the first optional redemption date for such Bond; and (e) no Bond subject to optional redemption bears interest at a rate that increases during the term of the Bond. No portion of the Bonds is subject to mandatory redemption. The yield on the Bonds, as calculated in the manner set forth above, is 4.177136 percent. 11. The Proiect. The City has incurred or will incur within six months of the date hereof a binding obligation to a third party which is not subject to any contingencies within the control of the City or a related party pursuant to which the City is obligated to expend at least five percent of the sale proceeds of the Bonds on the Project. The City reasonably expects that work on or acquisition of the Project will proceed with due diligence to completion and that the proceeds of the Bonds will be expended on the Project with reasonable dispatch. The City reasonably expects that 85 percent of the sale proceeds of the Bonds will have been expended on the Project prior to the date that is three years after the issue date. Accordingly, the City may invest the sale proceeds of the Bonds at an unrestricted yield for a three year temporary period. Any sale proceeds not expended prior to the date that is three years after the issue date, will be invested at a yield not "materially higher" than the yield on the Bonds, except as set forth in paragraph 13 below. The City reasonably expects that any amount derived from the investment of sale proceeds of the Bonds and from the investment of such investment income will not be commingled with substantial other receipts or revenues of the City and will be expended prior to the date that is three years after the issue date, or one year after receipt of such investment income, whichever is later. Accordingly, the City may invest such investment proceeds at an unrestricted yield. Any such investment proceeds not expended prior to such date will be invested at a yield not "materially higher" than the yield on the Bonds, except as set forth in paragraph 13 below. (a) Revenue Fund. Pursuant to the Bond Ordinance, the City has confirmed the Waterworks Utility Fund (the "Revenue Fund"). No portion of the Bond proceeds are deposited into the Revenue Fund. Gross Revenues from the operations of the City's water and sewer system are deposited into the Revenue Fund. Amounts on deposit in the Revenue Fund are used to pay Maintenance and Operation Expenses of the City's water and sewer system on a current basis. After Maintenance and Operation Expenses have been paid, amounts on deposit in the Revenue Fund are transferred to the Bond Fund to make payments on the Bond and the City's other obligations to which the Revenue Fund is pledged. Except to the extent that amounts on deposit in the Revenue Fund are transferred to the Bond Fund, there is no assurance that amounts on deposit, if any, in the Revenue Fund will be available to pay debt service on the Bond in the event the City encounters financial difficulties. (b) Bond Fund. Pursuant to the Bond Ordinance, the City has confirmed the debt service fund designated the "Waterworks Revenue Bond Fund" (the "Bond Fund"), which will be used primarily to achieve a proper matching of revenues and debt service on the Bonds, within each Bond Year. The revenues are anticipated to be sufficient to pay debt service each year on the Bonds. The Bond Fund will be depleted at least once each year except for a reasonable carryover amount not to exceed the greater of (a) one year's earnings on the Bond Fund or (b) one-twelfth of annual debt service. The City reasonably expects that any such revenues deposited in the Bond Fund will be disbursed within 13 months of the date of receipt of such revenues by the City. Amounts on deposit in the Bond Fund may be invested for an allowable temporary period of 13 months from the date such amount are deposited into the Bond Fund. Any such amount not expended within such period will be invested at a yield not "materially higher" than the yield on the Bonds, except as set forth in paragraph 13 below. (c) Reserve Fund. The Reserve Fund confirmed in the Bond Ordinance will be used to secure payment of debt service on the Bonds in the event that the monies in the Bond Fund are insufficient. On the date of issuance of the Bonds, the Reserve Requirement will be satisfied by a debt service reserve fund surety policy. To the extent that the portion of the amount in deposit in the Reserve Fund allocable to the Bonds in the aggregate exceeds the least of (a) ten percent of the stated principal amount of the Bonds (or sale proceeds in the event that the amount of original issue discount exceeds two percent multiplied by the stated redemption price at maturity of the Bonds), (b) the maximum annual principal and interest requirements of the Bonds, and (c) 125 percent of average annual principal and interest requirements of the Bonds, such excess will be invested in obligations the yield on which is not in excess of the yield on the Bonds, except as set forth in paragraph 13 below. 13. Minor Portion. All gross proceeds will be invested in accordance with paragraphs 11 and 12 above. To the extent such amounts remain on hand following the periods set forth in paragraphs 11 and 12 above or exceed the limits set forth in paragraph 12 above, the City will invest such amounts at a restricted yield as set forth in such paragraphs; provided, however, that a portion of such amounts, not to exceed in the aggregate the lesser of $100,000 or five percent of the sale proceeds of the Bonds (the "Minor Portion"), may be invested at a yield which is higher than the yield on the Bonds. 14. Issue. Other than the City's Water and Sewer Revenue Bonds, Series 2008B (Taxable), there are no other obligations that (a) are sold at substantially the same time as the Bonds (i.e., within 15 days), (b) are sold pursuant to the same plan of financing with the Bonds, and (c) will be paid out of substantially the same source of funds as the Bonds. 15. Compliance With Rebate Requirements. (a) General. The City has covenanted in the Bond Ordinance that it will take all necessary steps to comply with the requirement that rebatable arbitrage earnings on the investment of the gross proceeds of the Bonds, if any, within the meaning of section 148(f) of the Code be rebated to the federal government. Specifically, the City will (a) maintain records regarding the investment of the gross proceeds of the Bonds as may be required to calculate such rebatable arbitrage earnings separately from records of amounts on deposit in the funds and accounts of the City which are allocable to other bond issues of the City or moneys which do not represent gross proceeds of any bonds of the City, (b) calculate at such intervals as may be required by applicable Regulations, the amount of rebatable arbitrage earnings, if any, earned from the investment of the gross proceeds of the Bonds and (c) pay, not less often than every fifth anniversary date of the delivery of the Bonds and within 60 days following the final maturity of the Bonds, or on such other dates required or permitted by applicable Regulations, all amounts required to be rebated to the federal government. Further, the City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in a smaller profit or a larger loss than would have resulted if the arrangement had been at arm's-length and had the yield on the issue not been relevant to either Party. (b) Two-Year Spending Exception. The City hereby makes the elections, if any, set forth below for purposes of the two-year spending exception from arbitrage rebate: DO NOT ELECT ELECT N/A KI 1. To use actual facts to apply the provisions of paragraphs (e) through (m) of section 1.148-7 of the Regulations. Section 1.148-7(f) (2) of the Regulations. IXI 2. To exclude earnings on a reasonably required reserve or replacement fund from the definition of "available construction proceeds" for purposes of the spending requirements. Section 1.148-7(i) (2) of the Regulations. • 3. To treat the portion of the Tax-Exempt Bonds that is not a refunding issue as two, and only two, separate issues, one of which (a) meets the definition of a construction issue and (b) is reasonably expected as of the date hereof to finance all of the construction expenditures to be financed by the Tax-Exempt Bonds. Section 1.148-76) (1) of the Regulations. KI 4. To pay a penalty (the "1-112% penalty") to the United States in lieu of the obligation to pay arbitrage rebate on available construction proceeds in the event that the Tax- Exempt Bonds fail to satisfy any of the semiannual spending requirements for the two-year rebate exception. Section 1.148-7(k) (1) of the Regulations. The City reasonably expects that at least 75 percent of the "available construction proceeds" of the Bonds, within the meaning of section 1.148-7(i) of the Regulations, will be allocated to "const~ction expenditures," within the meaning of section 1.148-7(g) of the Regulations, for property owned by the City. Under the two-year spending exception, available construction proceeds must be spent for the governmental purposes of the issue according to the following schedule: (1) 10% within the six-month period beginning on the date the Bonds are issued, (2) 45% within the one-year period beginning on the date the Bonds are issued, (3) 75% within the 18-month period beginning on the date the Bonds are issued, and (4) 100% within the two-year period beginning on the date the Bonds are issued. 16. Not an Abusive Transaction. (a) General. No action taken in connection with the issuance of the Bonds will enable the City to (i) exploit, other than during an allowable temporary period, the difference between tax-exempt and taxable interest rates to obtain a material financial advantage (including as a result of an investment of any portion of the gross proceeds of the Bonds over any period of time, notwithstanding that, in the aggregate, the gross proceeds of the Bonds are not invested in higher yielding investments over the tern of the Bonds), and (ii) issue more bonds, issue bonds earlier, or allow bonds to remain outstanding longer than is otherwise reasonably necessary to accomplish the governmental purposes of the Bonds. To the best of our knowledge, no actions have been taken in connection with the issuance of the Bonds other than actions that would have been taken to accomplish the govemmental purposes of the Bonds if the interest on the Bonds were not excludable from gross income for federal income tax purposes (assuming the hypothetical taxable interest rate would be the same as the actual tax- exempt interest rate on the Bonds). (b) No Sinking Fund. No portion of the Bonds has a term that has been lengthened primarily for the purpose of creating a sinking fund or similar fund with respect to the Bonds. 17. No Arbitrage. On the basis of the foregoing facts, estimates and circumstances, it is expected that the gross proceeds of the Bonds will not be used in a manner that would cause anv of the Bonds to be an "arbitrage bond" within the meanine of section 148 of the Code and the Regulations. To the best of theknowledge and belief of th;: undersigned, there are no other facts, estimates or circumstances that would materially change such expectations. 18. No Private Use, Payments or Loan Financing, (a) General. The City reasonably expects, as of the date hereof, that no action or event during the entire stated term of the Bonds will cause either the "private business tests" or the "private loan financing test," as such terms are defined in the Regulations, to be met. Specifically, (i) No portion of the proceeds of the Bonds will be used in a trade or business of a nongovernmental person. For purposes of determining use, the City will apply rules set forth in applicable Regulations and Revenue Procedures promulgated by the Internal Revenue Service, including, among others, the following rules: (A) any activity carried on by a person other than a natural person or a state or local governmental unit will be treated as a trade or business of a nongovernmental person; (B) the use of all or any portion of the Project' is treated as the direct use of proceeds; (C) a nongovernmental person will be treated as a private business user of proceeds of the Bonds as a result of ownership, actual or beneficial use pursuant to a lease, or a management or incentive payment contract, or certain other arrangements such as a take- or-pay or other output-type contract; and (D) the private business use test is met if a nongovernmental person has special legal entitlements to use directly or indirectly the Project. (ii) The City has not taken and will not take any deliberate action that would cause or permit the use of any portion of the Project to change such that such portion will be deemed to be used in the trade or business of a nongovernmental person for so long as any of the Bonds remains outstanding (or until an opinion of nationally recognized bond counsel is received to the effect that such change in use will not adversely affect the excludability from gross income for federal income tax purposes of interest payable on the Bonds). For this purpose, any action within the control of the City is treated as a deliberate action. A deliberate action occurs on the date the City enters into a binding contract with a nongovernmental person for use of the Project that is not subject to any material contingencies. (iii) No portion of the proceeds of the Bonds will be directly or indirectly used to make or finance a loan to any person other than a state or local governmental unit. (b) Dispositions of Personal Property in the Ordinary Course. The City does not reasonably expect that it will sell or otherwise dispose of personal property components of the Project financed with the Bonds other than in the ordinary course of an established governmental program that satisfies the following requirements: (i) The weighted average maturity of the portion of the Bonds financing personal property is not greater than 120 percent of the reasonably expected actual use of such personal property for governmental purposes; (ii) The reasonably expected fair market value of such personal property on the date of disposition will be not greater than 25 percent of its cost; (iii) Such personal property will no longer be suitable for its governmental purposes on the date of disposition; and (iv) The City is required to deposit amounts received from such disposition in a commingled fund with substantial other governmental revenues and the City reasonably expects to spend such amounts on governmental programs within 6 months from the date of commingling. Furthermore, the City will not sell or otherwise dispose of all or any portion of the Project in circumstances in which the foregoing requirements are not satisfied unless it has received an opinion of nationally recognized bond counsel to the effect that such disposition will not adversely affect the treatment of interest on the Bonds as excludable from gross income for federal income tax purposes. (c) Other Agreements. The City will not enter into any agreement with any nongovernmental person regarding the use of all or any portion of the Project during the stated term of the Bonds unless such agreement will not adversely affect the treatment of interest on the Bonds as excludable from gross income for federal income tax purposes. 19. Weighted Average Maturity. The weighted average maturity of the Bonds set forth on Exhibit A attached to this certificate is the sum of the products of the issue price of each group of identical Bonds and the number of years to maturity (determined separately for each group of identical Bonds and taking into account mandatory redemptions), divided by the aggregate sale proceeds of the Bonds. 20. Bonds are not Hedge Bonds. Not more than 50 percent of the proceeds of the Bonds will be invested in nonpurpose investments (as defined in section 148(f)(6)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of section 149(g)(3)(A)(ii) of the Code. Further, the City reasonably expects that at least 85 percent of the spendable proceeds of the Bonds will be used to carry out the governmental purposes of the Bonds within the three-year period beginning on the date the Bonds are issued. EXECUTION PAGE FOLLOWS CITY OF RENTON, WASHINGTON By: Name: Michael E. Bailey - 1 Title: Finance & Information Services Administrator Date: January 4,2008 EXHIBIT A CERTIFICATE OF UNDERWRITER Seattle-Northwest Securities Corporation has acted as underwriter in connection with the sale and delivery of the City of Renton, Washington (the "City") Water and Sewer Revenue Bonds, Series 2008A (the "Bonds"). I, the undersigned, hereby certify as follows on behalf of the Underwriter: 1. I am the duly chosen, qualified and acting officer of the Underwriter for the office shown below my signature; as such, I am familiar with the facts herein certified and I am duly authorized to execute and deliver this certificate on behalf of the Underwriter. I am the officer of the Underwriter charged, along with other officers of the Underwriter, with responsibility for the Bonds. 2. The Undenvriter has made a bona fide public offering to the public of the Bonds of each maturity at the reoffering prices to the public set out on the inside cover of the Official Statement. The reoffering prices set forth on the inside cover of the Official Statement were determined on the date the Bonds were purchased by the Underwriter based on the reasonable expectations regarding the initial public offering prices. The reoffering price for each maturity of the Bonds represents the first price (including original issue premium and discount) of the Bonds at which a substantial amount (at least 10 percent) of each such maturity was sold to the public. The aggregate of such reoffering prices of all of the Bonds is $9,999,292.50. The initial public offering price described above does not exceed the fair market value for the Bonds on the sale date. The term "public," as used herein, does not include bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers. 3. The yield on the Bonds is not less than 4.177136 percent. For purposes of this certificate, the term "yield" means that yield which is computed as described in paragraph 10 of the Federal Tax Certificate. For this purpose, the present value on each such mandatory redemption date is computed using the yield of only such group of identical Bonds to their stated final maturity as the discount rate. 4. The amount of $35,020.36 is the cost of bond insurance and the debt service reserve fund surety policy for the Bonds set forth in the Insurer's commitment. The present value of the debt service savings expected to be realized as a result of the bond insurance and the reserve fund surety policy exceeds the amount of the fee set forth above. For this purpose, present value is computed using the yield on the Bonds, determined by taking into account the amount of the fee set forth above, as the discount rate. 5. The Underwriter computed the weighted average maturity of the Bonds to be 15.2339 years, as set forth in paragraph 19 of the Federal Tax Certificate to which this certificate is attached. 6. To the best of my knowledge the statements set forth in paragraph 16 of the Federal Tax Certificate (to which this certificate is attached) are true. The City may rely on the statements made herein in connection with making the representations set forth in the Federal Tax Certificate and in its efforts to comply with the conditions imposed by the Code on the exclusion of interest on the Bonds from the gross income of their owners. K&L Preston Gates Ellis LLP also may rely on this certificate for purposes of its opinion regarding the treatment of interest on the Bonds as excludable from gross income for federal income tax purposes. SEATTLE-NORTHWEST SECURITIES CORPORATION By: Name: \\IA~A~W A-!\h/cb- Title: Date: January 4,2008 TABLE OF CONTENTS City of Renton Water & Sewer Revenue Bonds, Series 2008A & 2008B Final Numbers Report Page Sources and Uses of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . I Bond Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Bond Debt Service . , . , , . , , , , , , , , , . , , , . . . . . . . . . . . . . 5 Aggregate Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Bond Summary Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Proof of Arbitrage Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Form 8038 Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Cost of Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Jan 2, 2008 10:14 am Prepared by Seattle-Northwest Securities Corp - JMW (k:\analysis\dbc\city\RENTON:2008REV) SOURCES AND USES OF FUNDS City of Renton Water & Sewer Revenue Bonds, Series 2008A & 2008B Final Numbers Dated Date 0 1/04/2008 Delivery Date 0 1/04/2008 Sources: 08REV OXREVTX Total Bond Proceeds: Par Amount 9,975,000.00 2,035,000.00 12,010,000.00 Orieinal Issue Discount -44.639.75 -1 1.567.60 -56.207.35 - Premium Other Sources of Funds: Reserve Fund Contribution Uses: OXREV OXREVTX Total Project Fund Deposits: Project Fund Delivery Date Expenses: Cost of Issuance 38,537.89 7,862. l l 46,400.00 Underwriter's Discount 56,159.25 1 1,457.05 67,616.30 Surety Policy (1.5%) 6,200.00 48,500.00 54,700.00 Bond Insurance (MBIA @ 18.2 bps) 28,820.36 5,879.64 34,700.00 129,717.50 73,698.80 203,416.30 Jan 2, 2008 10:14 am Prepared by Seattle-Northwest Securities Corp - IMW (k:\analysis\dbc\city\RENTON:2008REV) Page I BOND PRICING City of Renton Water & Sewer Revenue Bonds, Series 2008A & 2008B Final Numbers Marurity Yield to Call Call Premium Bond Component Date Amount Rate Yield Price Maturity Date Price (-Discount) Serial Bonds (Series 2008A - Exempt): 12/01/2016 IUOlR017 Serial Bonds (Series 20088 -Taxable): Dated Date Delivery Date First Coupon Par Amount Premium Production 12.022.851.65 100.107008% Unde-iteh Discount -67.616.30 -0.563000% Purchase Price Accrued Interest Net Proceeds 11,955,235.35 Jan 2, 2008 10: 14 am Prepared by Seattle-Northwest Securities Corp - JMW (k:\analysis\dbc\city\RENTON:2008REV) Page 2 BOND PRICING City of Renton WaterISewer Revenue Bonds, Series 2008A (Exempt) Final Numbers Maturity Yield to Call Call Premium Bond Component Date Amount Rate Yield Price Maturity Date Price (-Discount) Serial Bonds (Series 2OO8A - Exempt): 12/01/2016 480,000 4.000% 3.800% 101.496 7,180.80 12/01/2017 695,000 4.000% 3.850% 101.223 8,499.85 12/01/2018 565,000 5.000% 3.900% 108.965 C 3.979% 12/01/2017 100.000 50,652.25 12/01/2019 645,000 4.000% 3.950% 100.403 C 3.957% 12/01/2017 100.000 2,599.35 12/01/2020 720,000 4.000% 4.000% 100.000 12/01/202I 760,000 4.000% 4.050% 99.469 -4,035.60 12/01/2022 790,000 4.000% 4.100% 98.889 -8,776.90 12/01/2023 980,000 4.100% 4.150% 99.418 -5,703.60 12/01/2024 1,020,000 4.150% 4.200% 99.395 -6,171.00 12/01/2025 1,060,000 4.200% 4.250% 99.374 -6,635.60 12/01/2026 1,105,000 4.250% 4.300% 99.353 -7,149.35 12/01/2027 1,155,000 4.300% 4.340% 99.466 -6,167.70 Dated Date Delivery Date First Coupon Par Amount Premium Production 9,999,292.50 100.243534% Underwriter's ~iswunt -56,159.25 -0.563000% Purchase Price 9,943,133.25 99.680534% Accrued Interest Net Proceeds 9,943,133.25 Jan 2,2008 10: 14 am Prepared by Seattle-Northwest Securities Cop - JMW (k:\analysis\dbc\city\RENTON:2008REV) Page 3 BOND PRICING City of Renton WaterISewer Revenue Bonds, Series 2008B (Taxable) Final Numbers Maturity Premium Bond Component Date Amount Rate Yield Pricc (-Discount) Serial Bonds (Series 2008B -Taxable): 12/01/2013 610,000 4.700% 4.850% 99.233 -4,678.70 12/01/2014 600,000 4.850% 5.000% 99. I28 -5,232.00 12/01/2015 630,000 5.100% 5.140% 99.737 -1,656.90 12/01/2016 195,000 5.250% 5.240% 100.065 126.75 Dated Date Delivery Date First Coupon Par Amount Original Issue Discount Production 2,023,559.15 99.437796% Underwriter's Discount -1 1,457.05 -0.563000% Purchase Price Accrued Interest Net Proceeds 2,012,102.10 Jan 2, 2008 10:14 am Prepared by Seattle-Northwest Securities Corp - JMW (k:\analysis\dbc\city\RENTON:2008REV) Page 4 BOND DEBT SERVICE Period Ending 0610 112008 12101/2008 0610 112009 1210 112009 0610112010 1210 1 120 10 0610 1 120 1 1 1210112011 0610 1120 12 12/01/2012 06101 120 13 1210112013 0610112014 1210112014 0610112015 12/01/2015 0610 1120 16 1210112016 0610112017 12/01/2017 0610112018 1210112018 0610112019 1210112019 0610112020 1210112020 0610 11202 1 1210 11202 1 City of Renton Water & Sewer Revenue Bonds, Series 2008A & 2008B Final Numbers Dated Date 0110412008 Delively Date 0110412008 Principal 610,000 600,000 630,000 675,000 695,000 565,000 645,000 720,000 760,000 790,000 980,000 Coupon 4.700% 4.850% 5.100% ** 4.000% 5.000% 4.000% 4.000% 4.000% 4.000% 4.100% Interest Debt Service Annual Debt Service 468,377.54 515,645.00 515,645.00 515,645.00 515,645.00 1,125,645.00 1,086,975.00 1,087,875.00 1,100,745.00 1,091,307.50 933,507.50 985,257.50 1,034,45750 1,045,657.50 1,045,257.50 1,203,657.50 Jan 2, 2008 10:14 am Prepared by Seattle-Northwest Securities Corp - JMW (k:\analysis\dbc\cityRENTON:2008REV) Page 5 BOND DEBT SERVICE City of Renton WaterISewer Revenue Bonds, Series 2008A (Exempt) Final Numbers Dated Date 0 1/04/2008 Delivery Date 0 1/04/2008 Period Annual Ending Principal Coupon Interest Debt Service Debt Service Jan 2, 2008 10:14 am Prepared by Seattle-Northwest Securities Corp - JMW (k:kmalysis\dbc\city\RENTON:2008REV) Page 6 BOND DEBT SERVICE City of Renton Waterisewer Revenue Bonds, Series 2008B (Taxable) Final Numbers Dated Date 01/04/2008 Delivery Date 01/04/2008 Period Annual Ending ~iincipal Coupon Interest Debt Service Debt Service Jan 2,2008 10:14 am Prepared by Seattle-Northwest Securities Corp - JMW (k:\analysis\dbc\city\RENTON:ZOOXREV) Page 7 AGGREGATE DEBT SERVICE Period Ending City of Renton Water & Sewer Revenue Bonds, Series 2008A & 2008B Final Numbers WaterISewer WaterISewer Parity Debt Revenue Bonds, Revenue Bonds, (Incl. 98, Series 2008A Series 20088 OZUnref, 03, Aggregate (Exempt) (Taxable) 04,07) Debt Service Jan 2, 2008 10:14 am Prepared by Seattle-Northwest Securities Corp - IMW (k:\analysis\dbc\city\RENTON:2008REV) Page 8 BOND SUMMARY STATISTICS Bond Component City of Renton Water & Sewer Revenue Bond$, Series 2008A & 2008B Final Numbers Dated Date 0 I10412008 Delively Date 01104/2008 Last Maturity 1210112027 Arbitrage Yield 4.177136% True Interest Cost (TIC) 4.321822% Net Interest Cost (NIC) 4.2721 54% All-In TIC 4.405936% Average Coupon 4.239326% Average Life (years) 13.890 Duration of Issue (years) 10.329 Par Amount 12,010,000.00 Bond Proceeds 12,022,851.65 Total Interest 7,072,217.54 Net Interest 7,126,982.19 Total Debt Service 19,082,217.54 Maximum Annual Debt Service 1,204,665.00 Average Annual Debt Service 958,504.02 Undenvriter's Fees (per $1000) Average Takedown Other Fee Total Underwriter's Discount Bid Price Par Average Average Value Price Coupon Life Serial Bonds (Series 2008B -Taxable) 2,035,000.00 99.438 4.947% 7.1 10 Serial Bonds (Series 2008A - Exempt) 9,975,000.00 100.244 4.172% 15.274 12,010,000.00 13.890 TIC Par Value 12,010,000.00 +Accrued lnterest + Premium (Discount) 12,851.65 - Underwriter's Discount -67,616.30 - Cost of Issuance Expense - Other Amounts -34,700.00 Target Value 11,920,535.35 All-In Arbitrage TIC Yield 12,010,000.00 9,975,000.00 Target Date Yield Ian 2, 2008 10:14 am Prepared by Seattle-Northwest Securities Corp - IMW (k:\analysis\dbc\city\RENTON:2008REV) Page 9 1 BOND SUMMARY STATISTICS City of Renton WaterISewer Revenue Bonds, Series 2008A (Exempt) Final Numbers Dated Date Delivery Date Last Maturity Arbitrage Yield True lnterest Cost (TIC) Net lnterest Cost (NIC) All-In TIC Average Coupon Average Life (years) Duration of Issue (years) Par Amount Bond Proceeds Total lnterest Net lnterest Total Debt Service Maximum Annual Debt Service Average Annual Debt Service Underwriter's Fees (per $1000) Average Takedown Other Fee 5.630000 Total Underwriter's Discount 5.630000 Bid Price 99.680534 Par Average Average Bond Component Value Price Coupon Life Serial Bonds (Series 2008A - Exempt) 9,975,000.00 100.244 4.172% 15.274 Par Value + Accrued lnterest + Premium (Discount) - Undenvriter's Discount - Cost of Issuance Expense - Other Amounts Target Value Target Date Yield All-In Arbitrage TIC TIC Yield 9,975,000.00 9,975,000.00 9,975,000.00 Jan 2, 2008 10:14 am Prepared by Seattle-Northwest Securities Corp - JMW (k:\analysis\dbc\cityRENTON:2008REV) Page 10 BOND SUMMARY STATISTICS City of Renton WaterISewer Revenue Bonds, Series 2008B (Taxable) Final Numbers Dated Date Delivery Date Last Maturity Arbitrage Yield True lnterest Cost (TIC) Net lnterest Cost (NIC) All-In TIC Average Coupon Average Life (years) Duration of Issue (years) Par Amount Bond Proceeds Total lnterest Net lnterest Total Debt Service Maximum Annual Debt Service Average Annual Debt Service Underwriter's Fees (per S1000) Average Takedown Other Fee Total Undenvriter's Discount 5.630000 Bid Price 98.874796 Par Average Average Bond Component Value Price Coupon Life Serial Bonds (Series 2008B -Taxable) 2,035,000.00 99.438 4.947% 7.1 10 Par Value + Accrued lnterest + Premium (Discount) - Underwriter's Discount - Cost of Issuance Expense - Other Amounts Target Value Target Date Yield All-In TIC TIC 2,035,000.00 2,035,000.00 Arbitrage Yield 2,035,000.00 Jan 2, 2008 10:14 am Prepared by Seattle-Northwest Securities Cop - JMW (k:\analysis\dbc\citylRENTON:2008REV) Page I I PROOF OF ARBITRAGE YIELD City of Renton Water & Sewer Revenue Bonds, Series 2008A & 20088 Final Numbers Present Value to 01/04/2008 Date Debt Service Total @ 41771360% Proceeds Summaty Delivery date Par Value Premium (Discount) Arbitrage expenses Target for yield calculation 9,964.272.14 Ian 2, 2008 10:14 am Prepared by Seattle-Northwest Securities Corp - JMW (k:\analysis\dbc\city\RENTON:2008REV) Page 12 PROOF OF ARBITRAGE YIELD City of Renton Water & Sewer Revenue Bonds, Series 2008A & 2008B Final Numbers Assumed CalllCom~utation Dates for Premium Bonds Present Valuc Bond Maturity Call Call to 01/04/2008 Component Date Date Price (3, 4.1771360% SERIAL 12/01/2018 12/01/2017 100.000 -13.222.70 Reiected CallIComuutation Dates for Premium Bonds Prcsent Value Bond Maturity Call Call to 01/M/2008 Increase Component Date Date Price @ 4.1771360% to NPV SERIAL 12/01/2018 -10,230.17 2,992.53 Jan 2, 2008 10:14 am Prepared by Seattle-Northwest Securities Corp - JMW (k:\analysis\dbc\city\RENTON:2008REV) Page 13 FORM 8038 STATISTICS City of Renton Water & Sewer Revenue Bonds, Series 2008A & 20088 Final Numbers Dated Date 01/04/2008 Delivery Date 01/04/2008 Redemption Bond Component Date Principal Coupon Price Issue Price at Maturity Serial Bonds (Series 2008A - Exempt): 12/01/2016 12/01/2017 12/01/2018 12/01/2019 12/01/2020 12/01/2021 12/01/2022 12/01/2023 12/01/2024 12/01/2025 1210 112026 1210 ID027 Stated Weighted Net Maturity Interest Issue Redemption Average Interest Date Rate Price at Maturity Maturity Yield Cost Final Maturity 12/01/2027 4.300% 1,148,832.30 1,155,000.00 Entire Issue 9,999,292.50 9,975,000.00 15.2339 4.1771% 4.1569% Proceeds used for accrued interest Proceeds used for bond issuance costs (including undenvriters' discount) Proceeds used for credit enhancement Proceeds allocated to reasonably required reserve or replacement fund Jan 2,2008 10:14 am Prepared by Seattle-Northwest Securities Carp - IMW (k:\analysis\dbc\cityULENTON:2008REV) Page 14 COST OF ISSUANCE City of Renton Water & Sewer Revenue Bonds. Series 2008A & 20088 Final Numbers Cost of Issuance $1 1000 Amount Bond Counsel 1.82348 21,900.00 Financial Advisor 0.49958 6,000.00 S&P rating fee 0.81 182 9,750.00 Fitch rating fee 0.6661 1 8,000.00 (P)OS printing& mailing 0.06245 750.00 3.86345 46,400.00 -- - Jan 2, 2008 10:14 am Prepared by Seattle-Nonhwest Securities Corp - JMW (k:\analysis\dbc\cilyKENTON:2008REV) Page 15 CERTIFICATE OF MANUAL SIGNATURE STATE OF WASHINGTON ) ) ss: COUNTY OF KING ) I I, the undersigned affiant, being first duly sworn, on oath depose and say: My name is Denis Law (pnnl or rype) I have been duly chosen and am qualified and acting as Mayor (tirle or position) for City of Renton. Washineton (name ofmunicipo/iry) ~ The signature appearing above is my true manual signature. I I This affidavit is made to comply with Ch. 86, Wash. Sess. Laws of 1969 SUBSCRIBED AND SWORN TO before me this day of January, 2008. N0E3Fie" )~ur intmn [Printed Name] MY appointment expires: S//?/BQ 7 CERTIFICATE OF MAILING 1, Chew1 Fountain , the duly chosen (PRINT OR TWE NMIE) qualified and acting Paralegal (posmow of the law firm of K&L Preston Gates Ellis LLP ~MUNICIP*LlTY) DO HEREBY CERTIFY that on the 7" day of January, 2008 I mailed to the Secretary of State of the State of Washington, postage prepaid, certificates of manual signature in the form attached hereto executed by the following officials: Name Position Denis Law Mayor, City of Renton, Washington CERTIFICATE OF MANUAL SIGNATURE STATE OF WASHINGTON ) ) ss: COUNTY OF KIh'G 1 I, the undersigned affiant, being first duly sworn, on oath depose and say: My name is Bonnie I. Walton (pin! or me) I have been duly chosen and am qualified and acting as .,.. . ... . . .. ,. .... .., . . $ - . . :::, ,.. ,<:;.: .-:,. --~,~:~..;.'~. . . V, .< -:,< ..p. Citv Clerk ,.: >; en \&, $: (rille orporition) City of Renton. Washinvton for (name of municipoli09 The signature appearing above is my true manual signature. This affidavit is made to comply with Ch. 86, Wash. Sess. Laws of 1969 SUBSCRIBED AND SWORN TO before me this bk day of &-k~,\ <> [Seal or Stamp] My appointment expires: 2 / 2-3 1 aoio CERTIFICATE OF MAILING 1, Chew1 Fountain , the duly chosen (PRDIT ORTWE NM) qualified and acting Paralegal (POSITION) of the law firm of K&L Preston Gates Ellis LLP (MUNICIPNITY, DO HEREBY CERTIFY that on the 61h day of November, 2007 I mailed to the Secretary of State of the State of Washington, postage prepaid: certificates of manual signature in the fonn attached hereto executed by the following officials: Name Position Bonnie I. Walton City Clerk City of Renton, Washington Kathy Keolker Mayor City of Renton, Washington Dated 1 1/6/07 CERTIFICATE OF AUTHORIZATION OF AUTHORIZED SIGNER FOR THE BANK OF NEW YORK I, Steven Vaccarello, certify that I am a Vice President of THE BANK OF NEW YORK, New York, New York, fiscal agency for the State of Washington and Bond Registrar for the City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008A (the "Series A Bonds") and Water and Sewer Revenue Bonds, Series 2008B (Taxable) (the "Series B Bonds" and together with the Series A Bonds, the "Bonds"), and I further certify that Joann LaBarbera is an Assistant Vice President of The Bank of New York and is authorized by the Bank to sign the above Bonds as the Authorized Signer for the Bank; and I further certify that the signature set forth below is the true and correct signature of such Authorized Signer. Dated as of this 4th day of January, 2008. Jo abarbera Vice President Authorized Signer (4) CUSIP Numbers have been assigned to the Bonds as follows: Maturity Years (December 1) 2016 201 7 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Amounts $ 480,000 695,000 565,000 645,000 720,000 760,000 790,000 980,000 1,020,000 1,060,000 1,105,000 1,155,000 Interest Rates 4.00% 4.00 5.00 4.00 4.00 4.00 4.00 4.10 4.15 4.20 4.25 4.30 CUSP Nos. 7601 67TUO 7601 67TV8 760167TW6 7601 67TX4 7601 67TY2 7601 67T29 7601 67UA2 760167UBO 760 167UC8 7601 67UD6 7601 67UE4 760167UFl Dated at New York, New York, as of this 4th day of January, 2008 THE BANK OF NEW YORK, CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS, SERIES 2008B (TAXABLE) - $2,035,000 CERTIFICATE OF AUTHENTICATION, REGISTRATION AND DELIVERY OF BONDS The Bank of New York, New York, New York (hereinafter sometimes referred to as "Registrar"), hereby certifies as follows: (1) The Registrar hereby acknowledges receipt in New York, New York, of the following numbers of unauthenticated bonds of the following issue: Number of Unauthenticated Bond Issue Bonds Received City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B 4 (Taxable) - $2,035,000 (2) On the date hereof the Registrar authenticated and registered the City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008B (Taxable) (the "Bonds"), in the aggregate principal amount of $2,035,000, by manually executing the Certificate of Authentication and by entering the names and addresses of the bond owners or their nominees in records maintained for such purpose and shall hold the Bonds on behalf of the Depository Trust Company. (3) All unauthenticated bonds delivered to the Registrar shall be held by it and shall be subject to the trust created by the Washington State Fiscal Agency Contract and the duties and obligations created therein. The Registrar shall be liable for the safekeeping thereof and for the performance of its duties and obligations as specifically set forth therein and for the actions and omissions of its agent@). The Registrar shall act in good faith, and no implied duties or obligations shall be incurred by the Registrar other than those specifically in said Fiscal Agency Contract. (4) CUSP Numbers have been assigned to the Bonds as follows: Maturity Years Interest CUSP (December 1) Amounts Rates Nos. 2013 $ 610,000 4.70% 760 167TN6 2014 600,000 4.85 7601 67TP 1 2015 630,000 5.10 7601 67TQ9 2016 195,000 5.25 7601 67TR7 OMB NO. 1545-0720 Form 8038-6 (Rev. November 2000) Deparimenl of the Treasury ~nmna~ ~wenue sew& City of Renton, Washington 3 Number and street (or P.O. box if mail is not delivered to street address) 1055 South Grady Way Reporting Authority If Amended Return, check here t 1 Issuer's name 1 2 Issuer's employer identification number Information Return for Tax-Exempt Governmental Obligations W Under Internal Revenue Code section 149(e) W See separate Instructions. Caution: If the issue price is under $lOO.OW, use Form 8038-GC. ent ton, washington 98055 Michael E. Bailev. Finance and Information Svstems Administrator I ( 425 1430-6400 5 City, tom, or post office, state, and ZIP code 1 6 Date of issue 91 j 6001271 January 4,2008 Water and Sewer Revenue Bonds. Series 2008A ............................ 11 Education ......................... 12 Health and hospital ........................... 13 Transponation ............................ 14 Public safety. 16 Housing ................... 15 Environment (including sewage bonds) l5 16 ............................. 17 Utilities 9,999.293 ............................. . . Rwmlsuite 7 Name of issue 1 8 CUSIP number 760167UFl 18 Other. Describe t 19 If obligations are TANS or RANs, check box t If obligations are BANS, check box t 20 If obligations are in the form of a lease or installment sale, check box ...... t '. Description of Obligations. Complete for the entire issue for which this form is being filed. 4 Repolf number 3 01 9 Name and title of officer or legal representative whom the IRS may call for more information 110 Telephcne numb3 of drrs a legal represembe 1 (c) Stated redemption (d) Weighted I (a) Final maturity date I (b) Issue price mice at matuinv I averaqe malurlty I (e) Yield ..................... 22 Proceeds used for accrued interest 23 Issue price of entire issue (enter amount from line 21, column (b)) ... 24 Proceeds used for bond issuance costs (including underwriters' discount) . 25 Proceeds used for credit enhancement ............ 26 Proceeds allocated to reasonably required reserve or replacement fund . , 27 Proceeds used to currently refund prior issues ......... 28 Proceeds used to advance refund prior issues ......... ... 29 Total (add lines 24 through 28). 129,716 ...................... 30 Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here). .. 30 1 9,869,575 .. 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 F NIA years ... .... - - 32 Enter the remaining weighted average maturity of the bonds to be advance refunded t N /A years ... 33 Enter the last date on which the refunded bonds will be called t NIA ........... 34 Enter the date(s) the refunded bonds were issued t NIA .. Miscellaneous 35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) 35 0 ... 36a Enter the amount of gross proceeds inveued M to be invested in a guaranteed investment contract (see imtructiom) NIA b Enter the final maturity date of the guaranteed investment contract t 37 Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units ,37a NIA b If this issue is a loan made from the proceeds of another tax-exempt issue, check box t and enter the name of the issuer t and the date of the issue t ... 38 If the issuer has designated the issue under section 265(b)(3)(B)(i)(lll) (small issuer exception), check box t 39 If the issuer has elected to oav a oenaltv in lieu of arbitrage rebate, check box ............ t ~ ~ ~ ~ ~~ ,, , ................... 40 If the issuer has identified a hedge, check box ... : b Under penalties af perjury. I declare that I have examined this return and accompanying schedules and statements, and to the best of my knovdedge and belief. they are true. correct. and complete. Sign Here /-Y-&uo~ Michael E. Bailey, Finance & Info Adm Date Type or prmt name and title For Papework Reduction Act Notice, see page 2 of the Instructions. Cat. NO. 63773s Form 8038-G [Rev. 11.2~3) m AFFIDAVIT OF MAILING STATE OF WASHINGTON ) ) ss. COUNTY OF KING ) / eing duly sworn, deposes and says the helshe is a Siat-he age of eighteen years; that heishe is a resident of County, Washington. / That on Januaryz, 2008, at L/:4(-a.m./&, helshe caused IRS Form 8038-G, completed by City of Renton, Washington, to be mailed by depositing the same in the United States mail, in a sealed envelope, certified delivery, first class, postage prepaid, properly addressed to the Internal Revenue Service, Ogden, Utah 84201. < I certify that I know or have satisfactory evidence that ~A)*OM 9Gm& is the person who appeared before me, and said person ackno3edgeduthat heishe signed this instrument, and acknowledged it to be hisfher free and voluntary act for the uses and purposes mentioned in the instrument. Dated: 1 /ES/& I I (UES ~Lis I~TCS for notarial aampireal) ~otary Public PrintName 7wWafl S l- My commission expires S L9-4/ fl Complete items 1, 2, and 3. Also complete A Signature item 4 if Restricted Delivew is desired. 11 Y Agent or on the front if space permits. 1. ARiCle Addressed to: if YES, enter delivery address below: NO Print your name and address on the revene Addressee Internal Revenue Service Ogden, UT 84201-0002 I . , 3. Service Type 1 kceflified Mdl O Expres ~~il so that we can return the card to you. 6. Received by (P"nted Name) I 'd Rwisted 0 Return Rsaricd for Merchandise C. Date of Delivery - Insured Mail C.O.D. 4. Restricted Delively? (Exfra FeeJ Yes Attach this card to the back of the mailpiece. 11 * - - 2. Wtcle Number (rmfer tom service label) "~03 \@Q 0000 lo303 wOQ5 PS Form 381 1, February 2004 Domestic ReNrn Recelpt 10259~2.~1540 j - RECEIPT FOR BOND PROCEEDS I, Michael E. Bailey, Finance & Information Services Administrator of the City of Renton, Washington (the "City"), have received from Seattle-Northwest Securities Corporation, as the underwriter (the "Underwriter"), the City's Water and Sewer Revenue Bonds, Series 2008A (the "2008A Bonds") and Water and Sewer Revenue Bonds, Series 2008B (Taxable) (the "2008B Bonds," and together with the 2008A Bonds, the "Bonds"). Source of Funds: 2008A Bonds 2008B Bonds Total Principal Amount of Bonds $ 9,975,000.00 $ 2,035,000.00 $ 12,010,000.00 Plus: Original Issue Premium 68,932.25 126.75 69,059.00 Less: Original Issue Discount (44,639.75) (1 1,567.60) (56,207.35) Less: Underwriter's Discount (56,159.25) (1 1,457.05) (67,6 16.30) Less: Official Statement Costs to Underwriter (622.92) (127.08) (750.00) Total: $ 9,942,510.33 $ 2,011,975.02 $ 11,954,485.35 - Distribution of Funds: To: MBIA Insurance Corporation for Bond Insurance $ 28,820.36 $ 5,879.64 $ 34,700.00 To: MBIA Insurance Corporation for Reserve Surety Bond 6,200.00 48,500.00 54,700.00 To: City for the Project Fund (Tax- Exempt Subaccount) and Costs of Issuance 9,907,489.97 0.00 9,907,489.97 To: City for the Project Fund (Taxable Subaccount) and Costs of Issuance 0.00 1,957,595.38 1,957,595.38 Total Funds Disbursed: $ 9,942,510.33 $ 2,011,975.02 $ 11,954,485.35 - Dated this 4th day of January, 2008. CITY OF RENTON, WASHINGTON BY Michael E. ?3ailey,.~inancel& Information Services ~dministrator RECEIPT FOR BONDS Receipt of the City of Renton, Washington, Water and Sewer Revenue Bonds, Series 2008A and Water and Sewer Revenue Bonds, Series 2008B (Taxable), dated as of the date hereof, in the aggregate principal amounts of $9,975,000 and $2,035,000, respectively, is hereby acknowledged on behalf of the Purchaser. Dated this 4th day of January, 2008. SEATTLE-NORTHWEST SECURITIES CORPORATION Seattle, Washington Title ?$6) ... SEATTLE-NORTHWEST ... SECURITIES CORPORATION - ?.bc Hrgio,,i Prc,,,irr luvesi,,ierrr 1420 Fifth Avenue Suite 4300 Seattle, Washington 98101 Revised Closing Memorandum Re: City of Renton, Washington $9,975,000 Water and Sewer Revenue Bonds, Series 2008A $2,035,000 Water and Sewer Revenue Bonds, Series 20088 (Taxable) Dated: January 4, 2008 From: Justin Mon Wai, Assistant Vice President Seattle-Northwest Securities Corporation Date: January 3, 2008 Closing Closing will occur at 9 a.m. on Friday, January 4" via conference call initiated by K&L Preston Gates Ellis LLP. Funds Seattle-North~vest Securities Corporafion will initiate the following transactions: Transaction # I: Transfer Amount: To: ABA Number: Account Number: Account Name: Attention: Transaction #2: Transfer Amount: To: ABA Number: Account Name: Account Number: Policy Number (Series 2008A) Policy Number (Series 20088) Surety Policy Number Reference: Attention: $11,865,085.35 (Federal Funds) US Bank Washington 125000105 153500698326 City of Renton Linda Dixon, (425) 430-6888 $89,400.00 (Federal Funds) JP Morgan Chase Bank 02 100002 1 MBlA Insurance Company 910-2-721728 505890 505900 505910 City of Renton Water & Sewer Revenue Bonds, Series 2008A & Series 2008B Ian Petrillo, (9 14) 765-393 1 ** The City of Renton will make an internal transfer of $3,145,309.00 from their Reserve Fund to their Project Fund (Tau-Exempt Subaccount) on the day of closing. The following is a summary of the sources of funds for the Bonds and how the City, Bond Counsel and Bond Insurer will apply those funds: Sources of Funds Series 2008A Series 2008B Total Principal Amount $ 9,975,000.00 $ 2,035,000.00 $ 12,010,000.00 Plus: Premium 68,932.25 126.75 69,059.00 Less: Original Issue Discount (44,639.75) (1 1,567.60) (56,207.35) Less: Underwriter's Discount (56,159.25) (1 1,457.05) (67,616.30) Less: (P)OS Printing & Mailing (622.92) (127.08) (750.00) Total Sources of Funds: -9942.510.33- Distribution of Funds Citv of Renton Deposit to Project Fund (Tax-Exempt Subaccount) $ 9,869,575.00 $ 0.00 Deposit to Project Fund (Taxable Subaccount 1 0.00 1,949,860.35 Costs of Issuance (Deposit to Project Fund) (' 37.914.97 7.735.03 Total to the City: $ 9.907.489.97 $ 1.957.595.38 MBIA Insurance Cornration. Bond Insurer Bond Insurance Premium $ 28,820.36 $ 5,879.64 Surety Bond 6,200.00 48,500.00 Total to the Bond Insurer $ 35,020.36 $ 54,379.64 Total Funds Disbursed: %- (1) See Exhibit A for a list of the costs of issuance to be paid upon receipt of invoice by the City The final debt service schedules and pricing reports for the Bonds are attached as Exhibits B and C. If you have any questions, please contact Lindsay Sovde at (206) 628-2875 or Justin Mon Wai at (206) 689- 2784. Attachments cc: Mr. Michael Bailey, City of Renton Ms. Linda Dixon, City of Renton Mr. Jay Reich, K&L Preston Gates Ellis LLP Ms. Deanna Gregory, K&L Preston Gates Ellis LLP Ms. Cheryl Fountain, K&L Preston Gates Ellis LLP Ms. Jane Towery, Piper Jaffray & Co. Mr. Ian Petrillo, MBlA Insurance Corporation Ms. Sadie Richards, The Bank of New York Ms. Lindsay A. Sovde, Seattle-Northwest Securities Corporation Ms. Dorothy Michak, Seattle-Northwest Securities Corporation Ms. Joan Roddy, Seattle-Northwest Securities Corporation Ms. Rachael Sasse, Seattle-Northwest Securities Corporation Ms. Laura Westphal, Seattle-Northwest Securities Corporation EXHIBIT A City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A Water and Sewer Revenue Bonds, Series 2008B (Taxable) Dated: January 4,2008 Costs of issuance to be paid upon receipt of invoice by the City: Description Firm Total Bond Counsel Fee K&L Preston Gates Ellis LLP $ 21,900.00 Financial Advisor Piper Jaffray & Co. 6,000.00 Rating Fee Standard & Poor's 9,750.00 Rating Fee Fitch Ratings 8.000.00 Subtotal $ 45,650.00 Costs of issuance to be paid directly by Seattle-Northwest at closing: Description Firm Total Oficial Statement Seattle-Northwest Securities Corporation Printing and Mailing $ 750.00 Combined Total $ 46.400.00 EXHIBIT B Aggregate BOND DEBT SERVICE City of Renton Water & Sewer Revenue Bonds, Series 2008A & 20088 Final Numben Dated Drtc 01/04/2008 DCBWIY Date 01104/2W8 Period hual Endiw. Rinci~d Cou~n Interest IXbt Service Dcbt Ssniw Ikc 20, 2007 5:34 prn Prsparsd by Seattle-Northwest Sssuritisa Carp - MW (k:\andysi~\dbC\cityUIENTON:2008~V) Page 1 EXHIBIT B (continued) Series 2008A BOND DEBT SERVICE City of Renton WaterISewer Revenue Bonds Series 2008A (Exernot) . .. Final ~uibers Dated Date 01104/2008 Deliway Date 01lMl2008 Period hual Ending Principal Coupan Intam1 Dsbt Service Debt Ssrvice Des 20,2007 5:34 pm Repared by SsrtU~Notihwsst Sscwitie Carp - JMW (k:\analysi\dbcki~WON:ZW8REV) Page2 EXHIBIT B (continued) Series 2008B BOND DEBT SERVICE City of Renton Waterisewer Revenue Bmds. Series 2008B (Taxable) Final Numbers Period hunl Ending Principal Coup lntncsl Debt Scnicc Debt Ssrriss kc 20, 2007 534 pm Prcprrsd by Ssauls-Nmhwr~t Sscuritics Corp - IMW (k:\andyris\dbs\ciryWKONN..2W8WV) Pagc 3 EXHIBIT C (continued) Series 2008A BOND PRlClNG City of Rmton WatnlSew~ Rmcnuc Bonds, Series 2W8A (Enmpt) Final Nwnbsra MarUnry Yield to Call Call Rcmium Bond Cmponcnr Ble Amount Raw Yicld ice Mamnry Da* Price (-Dircount) Serial Bonds(Scrin 2008A - Exempt): IMI/2016 480.000 4.m 3.800% 101.4% 7,18080 IUOlR017 695,000 4.- 3850% 101.223 8,49985 IUOIR018 565,000 5.003.A 3.900% 108.965 C 3.979% IUOIR017 100,003 50,65225 IUOli2019 645.000 4MX)A 3 950% 100.403 C 3.957% 12l01i2017 I00003 2599.35 IUOIR020 720.000 4.003% 4~x0~ 100.003 IUOlR021 763,000 4.003% 4.050% 99.469 -4,03560 1UOli2022 790,000 4.0% 4.100% 98.889 -8,77690 12!OIRO23 980,000 41W 4 I5W 99.418 -5.703.60 lUOIR024 1.020.000 4.150% 4200% 99.395 -6.17100 1~01ROZS 1,060,000 42W% 4250% 99.374 -6.635.60 IUOIR026 1.105.000 4.250% 43W% 99.353 -7.14935 IUO112027 1.155.000 43W 4340% 99.466 -6.16770 Bled Bte Dsliucv Date Fin1 Coupon Wr Amount Rcmium EXHIBIT C (continued) Series 2008B BOND PRICING City of Renton WateriSewer Revenue Bonds. Series 20088 (Taliable) Final Numbers MaNnly Rsmium Bond Component Date Amaunl Rate Yield Wss (-Discount) Sstial Bonds (Sttics 20088 - Tarable): IUOII2013 610,000 4.700% 4.850% 99.233 -4.678.70 1210112014 600,000 4.850% 5.000% 99.128 -5.232.00 IU0112015 630,000 5.1W% 5.140% 99.737 -1,65690 IU0112016 195.000 5.250% 5.24W 100.065 126.75 Dated Datc Dslivsry Date rim1 coupon Par Amount 2,035,000.00 Oigind Issue Dircovnt -11.440.85 Production 2,023.559.15 99.437796% Underwild8 Discount -11.457.05 4.563000% Purchase Price Accrued Intmsl kc 20, 2007 5:34 pm Prcprrcd by Seattle-Nanhwsat Sssuritisa Cam - JMW (k:bndysis\dbc\ciryWNTON:2008REV) Page6 STATE OF WASHINGTON 906 Columbia Street SW P.O. Box 42525 DEPARTMENT OF COMMUNITY, Olympia, Phone: WA 360n25-5021 98504-2525 TRADE AND ECONOMIC DEVELOPMENT Fax: 360/5864162 Ann: Bond Users Clearinghouse BOND REPORT FORM 101 Is this a revision of a previously submitted report: Yes NO If yes and the debt issue was listed in the Monthly Update, what was its issue number? 1. Name of Issuer: City of Renton Address of Issuer: 1055 South Grady Way Renton, Washington 98055 County in which the entity using the bond proceeds is located: King If two to four counties are using the bond proceeds, type names in the blank field. If more, click on "various counties" or'all counties" . Principal user (if different than issuer): NIA Exact title of bond (or 'type of debt" if no Water and Sewer Revenue Bonds, Series 2008A If not listed: title): Water and Sewer Revenue Bonds, Series 20088 (Taxable) Was the bond issue "voter approved"? yes No [yJ (a) Par value: Tax- $9,975,000 (b) Net interest cost*: Tax- 4.193062 % exempt exempt Taxable $2,035,000 Taxable 5.105009 % See instructions for formula. If either or both interest rates are variable rather than fixed, please check the box(es) to the right of the percentage signs. Discount: $56,207.35 Premium: $69.059.00 Dated date of bond: January 4,2008 Date of bond sale: November 26, 2007 What is the underlying security on which this bond issue is based, such as taxes or other revenue stream(s) that support the debt? (Please answer the question even if an official statement is enclosed.) Name of financial advisor: Piper Jaffray & Co. If not listed: Name of bond counsel: K&L Preston Gates Ellis LLP If not listed: Name of lead underwriter(s): Seattle-Northwest Securities Corporation If not listed: Name of company insuring MBlA Insurance Corporation bond: If not listed: Name of registrar: The Bank of New York If not listed: 15. Name of trustee: If not listed: 16. Purpose of proceeds: (Please answer question even if official statement is enclosed.) A porton of the proceeds of the Bonds will be used to finance a portiin of the following improvements to the City's Wastewater Utility: (i) the design and construction of electrical power generators in critical water pumping facilities for emergency uses; (ii) the design and construction of a 4.2 million gallon reservoir; (iii) the construction of a new lifl station; (iv) the planning, designing and construction of a storm system; (iv) the replacement of an existing culvert: and (v) other miscellaneous projects of the Waterworks Utility. 17. What is the maturity date? 12/1/2027 (Answer question even if officialstatement enclosed.) If official statement is not enclosed, attach maturity schedule including dates, amounts and interest rates. 18. Bond sale method: Competitive Bids Negotiated Sale 5 Private Placement Other 19. If it was a competitive sale, how many bids were received? 20. Express the gross underwriting spread (see instructions for definition). Only leave field blank if there is no fee: $67,616.30 Check box if the above figure is an estimate. 21. List the fee for bond cuunsel service (only leave field blank if there is no fee): $21,900 Check box if the above figure is an estimate. 22. Indicate other fees and costs associated with bond issuance (noJ included as part of the costs in questions #20 and 21). Only leave fields blank if there are no fees. Check boxes when figures are estimates. Legallunderwriter's Counsel Fee: $ Financial Advisor: $ 6,000 AdministrativelCommission Fee: $ Bond Insurance: $ 34,700 Feasibility Study: $ AdvlPrintinglOff Stmt: $ 750 Rating Agencies: $ 17,750 Out-of-State Travel: $ T~Stee: $ Misc: Reserve Surety $ 54,700 Credit Enhancement (lenenofcredill: $ Misc: $ Escrow Verification Costs: $ Misc: $ 23. Was bond rated? If yes, please state the rating given by each agency: Standard 8 Poor's AA- (underlying) Moody's - Fitch AA- (underlying) AAA (insured) AAA (Insured) 24. IMPORTANT: RCW 39.44.210 requires a copy of the bond covenants to be submitted with VIis report form. Have you submitted such a copy? Yes [41 No If not, state the reason andlor your intended submission date. Is a copy of the official statement or offering circular available? ~esm NO If yes, it should be included with this report. 25. This information has been submitted by: Name: Deanna L. Gregory Title: Bond Counsel Affiliation: K&L Preston Gates Ellis LLP Address: 925 Fourth Avenue, Suite 2900 City: Seattle State: WA Zip: 98104-1158 Email: deanna,gregory@klgates.com Phone: (206) 623-7580 Date:' January 4,2008 If this report and supporting.documents are being submitted afler their due date (see instructions), briefly explain reason: 26. Any additional comments, questions or suggestions? K&L Preston Gates Ellis UP 925 Fourth Avenue Suite 2900 Seattle, WA 98104-1158 January 7,2008 State of Washington Department of Community, Trade and Economic Development Attn: Bond Users Clearinghouse 906 Columbia Street SW P.O. Box 42525 Olympia, Washington 98504-2525 Re: City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A - $9,975,000 Water and Sewer Revenue Bonds, Series 2008B (Taxable) - $2,035,000 Ladies and Gentlemen: In compliance with RCW Ch. 39.44, we enclose Bond Report Form 101 in connection with the above-captioned financing. Also enclosed is a copy of the bond covenants and Official Statement. Very truly yours, Cheryl Fountain Paralegal Enclosures KUo3792%momUusZ-CF\2nsZL32FG UNITED STATES OF AMERICA STATEMENl OF INSURANCE MBlA lmu~ce Corpontion (the -1nrmr") has istvcd 8 policy sonmining the fallowing pmGrions, such policy king on file at thc pMcipal ofice of the Fixal Agcncyofthe Stale of Wuhington in New Yoh New York. The Insucr, in canridrnlion of thc paymca afthc premium md tubjxt to the lcrmr of the policy. hmby tmconditianally md imuocably wmfecr to my own. u hminaftm dcfmcd. ofthc following described obligations. ths full and complete payment requircd ur be made by or on behalf of the Ciry of Rmton. Wazhimgton (the-lrrucr") to thc Fiwal Agcnry ofthe State of Wvhinglon. or iu succelror (Lhc "Paying Agmt"), of an mount ewl to (i) Lhc pMcipal of (citho at the rmtrd mlturiN or by my adrrulr~mml ofmanuini pvnwnt to a mandatory sinking fund psymem) md interest os the Obligations (u that term is dcfid below) ar ruL paymen"lhlllbesome doc hut sbll no! be &paid (cxrcp~ that in th; ewnf of my ;rcclmtion of the due date of such principal by maron of mdatary ar ootional redemotion or aaelmtion resultinn fmm default ar othcrwitc. othcr h mv advanwren! of manviw ovnwot lo a mdatorv rinkha fund wmmt, the paymenu guakcd hcreby shall k mad;in ruth amounu md ax such times 8s rich paymenu af principaj wovld haw kcn &c hsd thcinot bm; MY rvsh accelnatian. tmlee the t~urrr clcce in is role dixmtios to pay in whole or in pan my principal dm by -an of NE~ ~~~~lemtion): md (ii) thc mimbvwmcnl of my SUC~ paymmt which is rubwqmnt~y movcred fmm my pvnwnt lo. nnal judmcnt by. ofcompmt juridictition that S~F~ paymrnt ~o~sifute~ an avoidable prefcrenec to such omrr within the meaning of my .pplisabla bhptcy law. The matmu refmd lo in slaws (i) md (ii) of thc presebg xntrnrc shall be refnd lo herein collcrtivcly u the "lnsucd Amatmu." "Obligations" shall mcm: 19.97J.WO ClTY OFRENTON. WASHINGTON WATER AND SEWER REVWUE BONDS. SERIES ZW8A Upon reccipt of telephonic or telepphis notis.. such noti- subscqusntly confirmed in witing by rcgirtcred or cmificd mail, or upon receipt afwitun notire by mgirfrrcd or ccdfied mail. by the lnsurrr tom the Paying Agcnt or my omcr of m Obligation the paymcn! of m lnrmd Amotmf for which is thm duc. that rvsh requimd paymcnt h.l not ken ma&. the lnlur~r on the due date of such payment or within onc buincss day din receipt of notice of such nonpaymml, whichcvcr is Iafcr, will makc a dcporif of fun&, in m account with U.S. Bmk TNI! National Assmiation, in New York. New York. or itr SYEECII(II. ~UAicimf for the paymrnl of my such lnsmd Amovnu which arc thcn due. Upon prerrnmrnt md rurrmder of lush Obligations or prersnmcnt of rvch othcr pmaf of ovnmhip of the Obligations, togther with any appmptiate inamunen~s af usipment fo cvidcnsc the arripmca of thc Insured Amouns due on the Obligations ar arc paid by thc Inruro, md appropriate insrmmcns to effcsf the appoinrmea of the Insurer as agent for such omrrs ofthc Obligations in any lrgal proecsding related to payment of ~nsurcd mounts on the obligations. such insrmments king in a form satisfactory to U.S. ~nr* ~rvrt ~ational ~smciation. U.S. ~ank ~mrt ~ational ~rrmiation shall dirburrc lo such omcrs or the Paying Agmt paymml of the lnrurcd Amounlr due on such Obligations, lcsr any mount held by the Paying Agent for the paym~nt of such Insured Amoun~ md lcgnlly .nilable thrrcfor. This policy dmr not inrm against loss of any prepaymmt premium which may a any time k payable with respot to my Obligatian. As used hnrin. the trrm "omcr" shall mean ihc rrgiaercd ouncr of my Obligdon ar indicated in the boob mainmired by thc Paying Agcnt, thc Issurr. ar my dcsipcc of the Issuer for ~urb pvrparc. Thc term amcr rhall not include tho lrrver or any pany whore agrecmml with thc lrrucr conrtiruter the underlying rccuin/ for the Obligationr. Any IC~GEC of P~OECII on the lnturer may be madc ta Lhr Insurer at iu olliccr located at I13 King Smct, hank New York 105C4 and such wnise of PIOCSSS $hall k validmd binding. This policy is nan cancclablc for any maran. Thc prrmium on this policy ir not refundable for my reason including thc paymcnf prior to mshlnw ofths Obligations. MBlA Lnswansc Covomtion STATE OF WASHINGTON ClTY OF RENTON WATER AND SEWER REVENUE BOND, SERIES 2008A INTEREST RATE: MATURITY DATE: CUSlP NO. 4.00% DECEMBER 1,2016 760167TUO REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: FOUR HUNDRED EIGHTY THOUSAND AND NO1100 DOLLARS The City of Renton, Washington, a municipal corporation organized and existing under and by vinue ofthe laws of the State of Washington (herein called the "City") hereby acknowledges itself to owe and for value received promises to pay, but only from the sources and as hereinaner provided, to the Registered Owner identified above, or registered assigns, on the Maturity Date identified above, the Principal Amount indicated above and to pay interest thereon from the date of delivery, or the most recent date to which interest has been paid or duly provided for, at the Interest Rate set forth above, payable on June 1, 2008, and semiannually thereafter on the first days ofeach December and June until such principal sum is paid or payment has been duly provided for. Both principal of and interest on this bond are payable in lawful money afthe United States of America. Interest and principal shall be paid as provided in the Blanket Issuer Letter of Representations (the "Letter of Representations") by the City to The Depository Trust Company ("DTC). The fiscal agency of he State of Washington has been appointed by the City as the authenticating agent, paying agent and registrar for the bonds of this issue (the "Bond Registrar"). Capitalized terms used in this bond that are not specifically defined have the meanings given such terms in Ordinance No. 5313 of the City adopted on October 22, 2007 and Resolution No. 3919 of the City adopted on November 26, 2007 (togelher, the "Bond Ordinance"). Reference is made to the Bond Ordinance and any and all lnodifications and amendnicets thereto for a description of the nature and extent of the security for the bonds of this issue. the funds or revenues pledged, and the terms and conditions upon which such bonds are issued. This bond is one of an authorized issue ofbonds of the City of like date and tenor except as to number, amount, rate of interest and date of maturity in the aggregate principal amount of $9,975,000. This issue of bonds is authorized by the Bond Ordinance for the purposes of providing moncy to pay part of the cost of construction and acquisition of certain improvements to the Waterworks Utility, to pay the costs of acquiring a Reserve Fund surety policy, and to pay costs of issuance ofthe bonds ofthis issue. 311 as specified in the Bond Ordinance. Simullaneously with the issuancc of this bond, the Cily is also issuing its Water 2nd Sewer Revenue Bonds, Series 20088 (Taxable) (the "200SB Bonds") for the purposes specified in the Bond Ordinance. This bond and the bonds of this issue are payable solely from the special funds of the City defined as the "Bond Fund" and the "Reserve Fund" in the Bond Ordinance. The City has irrevocably obligated and bound itself to pay into the Bond Fund out ofthe Net Revenue or from such other moneys as may be provided therefor certain amounts necessary to pay and secure the payment of the principal and interest on such bands. nle bonds ofthis issue are not general obligations of the City. The bonds of this issue are not "private activity bonds" as such term is defined in the Internal Revenue Code of 1986, as amended (the "Code"). The bonds of this issue have been designated by the City as "qualified tax-excmpt obligations" under Section 265(b) of the Code. The bonds of this issue are issued under and in accordance with the provisions of the Constitution and applicable statutes of the State of Washington and duly adapted ordinances of the City. The Ciry hereby covenants and agrees with the owner of this bond that it will keep and perform all the covenants of this bond and of the Bond Ordinance to be by it kept and performed, and reference is hereby made to the Bond Ordinance for a complete statement of such covenants. The City does hereby pledge and bind itself to set aside from the Waterworks Utility Fund out of the revenue of the Waterworks Utility and to pay into the Bond Fund and the Reserve Fund the various amounts required by the Bond Ordinance lo be paid into and maintained in such Funds, all within the times provided by the Bond Ordinance. To the extent more panicularly provided by the Bond Ordinance, the amounts so pledged to be paid from the Waleworks Utilily Fund oul of the revenue of the Waterworks Utility into the Bond Fund and the account therein shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the amounts rewired to oav and secure the oavment of the outstandine: 1998 Bonds, the 2002 Bonds. the 2003 Bonds. the 2004 Bonds, the 2007 ~onds; the 2008~~onds and any revenue bonds ofthe Cily hkreafler issued on a parity with the bonds of this issue and superior lo all other liens and charges ofany kind or nature except Maintenance and Operation Expense. The pledge of Net Revenue and other obligations of the City under the Bond Ordinance may be discharged at or prior to the rnamrity or redemption of the bonds of this issue upon the making of provision for the payment thereof on the terms and conditions set forth in the Bond Ordinance. The bonds of this issue are subject to redemption prior to their scheduled maturities as provided in the Band Ordinance. This bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Ordinance until the Certificate of Authenlication hereon shall have been manually signed by the Bond Registrar. It is hereby certified that all acts, conditions, and things required by the Constitution and statutes of the State of Washington to exist, to have happened, been done, and performed precedent to and in the issuance of this band have happened, been done, and performed. IN WITNESS WHEREOF, the Cily of Renton, Washington has caused this bond to be signed with the facsimile or nianual signature of the Mayor, to be attested by the facsimile or manual signature of the City Clerk, all as of this 4" day of January, 2008. Mayor ATTEST: Lzcw4.W d.lJ& I]O?<NE I. WALTOX, Cilj Clrrk CERTIFICATE OF AUTHENTICATION Date of Authentication: January 4, 2008 This bond is one of the bonds described in the wilhin-mentioned Bond Ordinance and is one of the Water and Sewer Rcvcnue Bonds, Series 2008A of the City of Reoton, Washington, dated January 4, 2008. January 4,2008 City of Renton Renton, Washington Seattle-Nonhwest Securities Corporation Seattle, Washington Re: City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A - $9,975,000 Ladies and Gentlemen: We have acted as bond counsel to the City of Renton, Washington (the "City") and have examined a certified Wanscript of the proceedings taken in the matter of the issuance by the City of its Water and Sewer Revenue Bonds, Series 2008A, dated as of the dale of their delivery, in the aggregate principal amount of $9,975,000 (the "Bonds"), issued pursuant to Ordinance No. 5313 of the City and Resolution No. 3919 of the City (together, the "Bond Ordinance"), for the purpose of financing cenain improvements to the Waterworks Utility of the City. Capitalized terms not otherwise defined herein shall have the meanings given such terms in the Bond Ordinance. The Bonds are subjed to redemption prior to maturity as provided in the Bond Ordinance. Regarding questions of fact material to our opinion, we have relied on representations of the City in the Bond Ordinance and in the certified proceedings and on other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Concurrently with the issuance of the Bonds, the City is issuing its Water and Sewer Revenue Bonds, Series 20088 (Taxable) to also finance certain improvements to the Waterworks Utility. Based on the foregoing, we are of the opinion that, under existing law: 1. The Bonds have been legally issued and constitute valid and binding special obligations of the City, both principal thereof and interest thereon being payable solely out of a special fund of the City known as the "Waterworks Revenue Bond Fund" (the "Bond Fund"), except to the extent that the enforcement of the rights and remedies of such owners of the Bonds may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, also by the application of equitable principles and the exercise ofjudicial discretion. 2. The Bond Ordinance is a legal, valid and binding obligation of the City, has been duly authorized, executed and delivered and is enforceable in accordance with its terms, except to the extent that enforcement may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise ofjudicial discretion. 3. The City has irrevocably bound itself to set aside and pay into the Bond Fund and the Waterworks Revenue Bond Reserve Fund (the "Reserve Fund") out of Gross Revenue amounts necessary to pay the principal of and interest on the Bonds as the same become due. 4. The City has pledged that the payments to be made into the Bond Fund and the Reserve Fund out of Gross Revenue shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the Outstanding Parity Bonds, the amounts required to pay and secure the payment of the Bonds and any water and sewer revenue bonds of the City hereafter issued on a parity with the Bonds and superior to all other liens and charges, except Maintenance and Operation Expenses of the Waterworks Utility. The City has resewed the right to issue Future Parity Bonds on the terms set fonh in the Bond Ordinance. 5. Interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The opinion set forth in the preceding sentence is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The City has covenanted lo comply with all applicable requirements. Failure to comply with certain of such covenants may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. Except as expressly stated above, we express no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral lax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements. The City has designated the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code. We have not been engaged nor have we undertaken to review the accuracy, completeness or sulficiency of the omcial statement or other offering material related to the Bonds (except to the extent, if any, stated in the official statement), and we express no opinion relating thereto, or relating to the undertaking by the City to provide ongoing disclosure pursuant to Securities and Exchange Commission Rule 15~2-12. This opinion is given as ofthe date hereof, and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Very truly yours, K&L P~_STONL+T'ES ELLIS LLP 7 . By Jay A. eich Page 3 of 3 UNLESS TH16 CERTIRCATP B msm BY WI A~O-D wmzswr~mw OF% DEPM~RI TRUST COMP-, A NEW YOM CORPOR*TION c.uTC), m 1ssm oa rn AOENIPORREOISTATION OPWWER U(CH*NGE.ORPAYMUII. ANDANYCERTmCATPlSSUM IS PZGIS-D INTHE NMOFCSDB E CO. ORINSUCH-R STATEMENT OF INSURANCE MBlA lnrunnss Corporation (Ulc "lnrurci') has issued s policy sonmilung Ulr following provisions, rush policy king on file at Ulc principal ofice 01 the Fiscal Agcncy of Ulr Suts of Warhinglon inNew Yark. New Yo*. The Lnrwcr, in consideration of the paymsnt of Ulr prrmivm md subject to the rrms of Ulr policy, h~reby unconditionally and incvocably guaranrcs to my omcr. as hercinaRcr define4 af Ulc following dcrerikd ohligatiom. the full and camplctc payment rrqvircd to k made by or an khalf of the City of R~nfoh Wuhingon (the "lrsud') lo the Fiscal Agcncy oflhc Smrc of Wuhingloh or itr rurrcrror (the "Paying Agent'> ofm mamr equal to (i) Be principal af(eiUlnnr U~C imf~d malviN or bv mv dvmsement of maarritv omvant to a mdatorv rinkinz fund oavmmP and interest om the Oblimtiom (m that lcrm is dermed blow) . ,, . . . " .. Y ("Ch p.ymms 'h.11 kromr Jue hut shall not k ro pud (.rccp, ih.0 "7 Ulr r,m, ulmy .cc<1<nuan of thc due &,c ur such pmc,pll b) rc..an of rmnd.,or) or opuonal icdcmpoon a, .ccc1cnoan rel~lon& fmm d~fldl or oUlm,,r, olhn lban my .d\mcmml of ""I"",, pvnvan, to. mandator) s"?hng fund pymcoL Ulr pa)rncn!s wmttrd hrrrb, shall k mad? m luch unovnlr utd at such nmcs as such parmcnll of po~nctoal *odd haw kc" dur had lhrrc no! ken m, rurh k=clcntioh unlcrr the insuer elects in its $01. diwrctiah to pay in whole or in put my pti.sipal due by reion of ruch a~celcntion); md (ii) Ulc rcimburrcmmt of my such paymmt which is rvbwqurntly recovered hom my owner pmmt to a find judgmcnl by 8 row ofcomptmt jurisdiction bal svrh payment constimtcr m avoidable prcfcrcncc to rush owner wiUun Ulc mcming of any applicable bhptcy law. Thc mounts rcfcmd to in clrivrer (i) md (ii) of Ulo preceding mmr. rhali bc refcmcd to herein rollcctivrly a Ulc '"lnsurrd Amounu." "Obligations" &all mem: I2.035,WO CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE BONDS. SERIES 20080 (TAXABLE) Upon mceipt of tclcphonis or tclcgnphic notisc. such notis. subscqucny covirmcd in wifing by ngistcrcd or wr6fird mail. or upon mcipt of winm notice by rcgirford or cer6ficd mail, by Ulc inrwcr fram Ulc Pying Agent or my omcr ofm Obligation the paymcnf ofm Lnrwcd Amount for whish is Ulm duc, that ruch required paymcnr has not hen made. Ule wurer on lhc due &tc of such payment or within one burinrrs day &n rrscipt of notice of8urh nonpaymcnL whichever is later. will makc a dcoorit af fun&. in m assaunt with U.S. Bmk Tnvt National Associatioh in Ncw York New Yoh or is successor. rufirimt far Ulc mmmt of my such Inrued ~iounlr which rue Ulcn due. Upon prermmca md rumnder of such Obligations or prescnmenf of rvsh oUlcr proof of owncGhjp of thr Obligationr. togrthrr with any appropriate inrrmments of arignmmt to cvidcncs Ulr assignment ofthe lnrurrd Amounts duc on ihc Obligationr as arc paid by Ulr Inrurcr, md approp".l iinrrmments to cffcct thc appoinunen! oflhc ln~urrr as agcnt for such owncn of Ulc 0hlig.tianr in my lcgd proceeding rclalcd to paymcnt of Insured Amounu on Ulc Obligations, such mrrmmentr king in a form ~alirfanory to US. Bank Trust National Asracialion. US. Bmk Tmrl National Association shall dirburrc to rvsh omen or the Pavins Aacnt Davmcn! of the lnrurcd Amaunts duc on rvch Obliaationr. lcrr mv mount held bv thr Pavina Aecnt for Ulr . - - .. .-- payment af such lnrwrd Amounts md legally a-ilabla Ulrrcfor. This policy does no! inrvrc against lorn af my pmpaymcnt premium whish may at my time bc paysblc wlUl rrrperl lo my Obligation. As wd hcrcih Ulc irrm "omcT shall mem Ule rrginercd omrr of my Obligdon - indicated in Ulc books muinmined by Ulc Paying Agcnf. Ulc luua, or my dcripee afUlc irrucr for such purpow. The tcrm owner rhJl not include Ulc Issuer ar my pw whoa amemen! wiUl Ulc lrrurr sonrtiarcr Ult mdrrlying wcurity for Ulc Ohlil(*Iiiii. Any wnicc of prmrr on Ulc hwcr may bc ma& to Ulc lmvm at itr ofires located at 113 King Strcc~ honk New York lOJlM md such ICMCC of pmsrrr $hall be did md binding This policy is "on rmcclable for my rcuon. The prcmium on &is policy is not refundable for any rcason including Ulr payment prior to maarrity of Ulc Oblig.tianr. MBlA Insurance Corporotian STATE OF WASHINGTON CITY OF RENTON WATER AND SEWER REVENUE BOND, SERIES 20088 (TAXABLE) INTEREST RATE: 4.70% MATURITY DATE: DECEMBER 1,2013 CUSlP NO. 760167TN6 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: SIX HUNDRED TEN THOUSAND AND NO1100 DOLLARS ne City of Renton, Washington, a municipal corporation organized and existing under and by virtue of the laws of the State of Washington (herein called the "City") hereby acknowledges itself to owe and for value received promises to pay, but only from the sources and as hereinafter orovided. to the Reeistered Owner identified above. or reeistered assims. on the Maturity Date identified - - - above. thu Principd Amounl indicated abovc and lo pay intercsl thercon from the date otdeI~$cry. or the most recent dute lo which lnlercsl has been pad or duly provid~.d for. at thc lntercsl Kate set fonh abo\e, payable on June 1, 2008, md semiannually theroaner on the first days of esch ~ecembei and June until such principal sum is paid or has been duly provided for. Both principal ofand interest on this bond are payable in lawful money of the United States of America. Interest and principal shall be paid as provided in the Blanket Issuer Letter of Reuresentations (the "Letter of Representations") by the Cily to The Depository Trust ~okpmy (..DTC", The fiscol agency olthe Slate if Washington. hac heen oppoinled b) the Cily k the auihenlicalingagent. pa)lng ugcnt and reglslrar fur the bonds ofth~s ~ssue (the "Uond Reg~svar") Capllalrzed lcrms used in this bond lhat are not specifically defined have the m<aning given such terms in Ordinance No 5313 oflhe Cit) adoptcd on Ouloher 22, 2007 and Kezolulion No. 3919 of he Paae I of 3 City adopted on November 26, 2007 (together, the "Bond Ordinance"). Reference is made to the Bond Ordinance and any and all modifications and amendments thereto for a description of the nature and extent of the security for the bonds of this issue, the funds or revenues pledged; and the terms and conditions upon which such bonds are issued. This bond is one of an authorized issue of bonds of the City of like date and tenor except as to number, amount, rate of interest and date of maturity in the aggregate principal amount of $2,035,000, This issue of bonds is authorized by the Bond Ordinance for the purposes of providing money to pay pan of the wst of construction and acquisition of certain improvements to the Waterworks Utility, to pay the wsts of acquiring a Reserve Fund surety policy, and to pay costs of issuance ofthe bonds of this issue, all as specified in the Bond Ordinance. Simultaneously with the issuance of this bond, the City is also issuing its Water and Sewer Revenue Bonds, Series 2008A (the "2008A Bonds") for the purposes specified in the Bond Ordinance. This bond and the bonds of this issue are payable solely hm the special funds of the City defined as the "Bond Fund" and the "Reserve Fund" in the Bond Ordinance. The City has irrevocably obligated and bound itself to pay into the Bond Fund out of the Net Revenue or from such other moneys as may be provided therefor certain amounts necessary to pay and secure the payment of the principal and interest on such bonds. The bonds of this issue are not general obligations of the City. The bonds of this issue are issued under and in accordance with the provisions of the Constitution and applicable statutes of the State of Washington and duly adopted ordinances of the City. The City hereby covenants and agrees with the owner of this bond that it will keep and perform all the wvenants of this bond and ofthe Bond Ordinance to be by it kept and performed, and reference is hereby made to the Bond Ordinance for a wmplete statement of such covenants. The City does hereby pledge and bind itself to set aside from the Waterworks Utility Fund out of the revenue of the Waterworks Utility and to pay into the Bond Fund and the Reserve Fund the various amounts required by the Bond Ordinance to be paid into and maintained in such Funds, all within the times provided by the Bond Ordinance. To the extent more particularly provided by the Bond Ordinance, the amounts so pledged to be paid from the Waterworks Utility Fund out of the revenue of the Waterworks Utility into the Bond Fund and the account therein shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the amounts required to pay and secure the payment of the outstanding 1998 Bonds, the 2002 Bonds, the 2003 Bonds, the 2004 Bonds, the 2007 Bonds, the 2008A Bonds and any revenue bonds of the City hereafier issued on a parity with the bonds of this issue and superior lo all other liens and charges of any kind or nature except Maintenance and Operation Expense. The pledge of Net Revenue and other obligations of the City under the Bond Ordinance may be discharged at or prior to the maturity or redemption of the bonds of this issue upon the making of provision for the payment thereof on the terms and conditions set forth in the Bond Ordinance. The bonds of this issue are not subject to redemption prior to their scheduled maturities. This bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Ordinance until the Certificate of Authentication hereon shall have been manually signed by the Bond Registrar. It is hereby certified that all acts, conditions, and things required by the Constitution and statutes of the State of Washington to exist, to have happened, been done, and performed precedent to and in the issuance of this bond have happened, been done, and performed. M WITNESS WHEREOF, the City of Renton, Washington has caused this bond to be signed with the facsimile or manual signature of the Mayor, to be attested by the facsimile or manual signature of the City Clerk, all as ofthis 4" day of January, 2008. CITY OF RENTON, WASHINGTON BY . . . . -. - . LxowWJd. Ic/& BOSNIE I. WALTOS. City Clerk CERTIFICATE OF AUTHENTICATION Date of Authentication: January 4,2008 This bond is one of the bonds described in the within-mentioned Bond Ordinance and is one of the Water and Sewer Revenue Bonds, Series 20088 (Taxable) ofthe City of Renton, Washington, dated January 4,2008. Authoiircd Siqer Paee 2 of3 January 4,2008 City of Renton Renton, Washington Seattle-Northwest Securities Corporation Seattle, Washington Re: City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) - $2,035,000 Ladies and Gentlemen: We have acted as bond counsel to the City of Renton, Washington (the "City") and have examined a certified transcript of the proceedings taken in the matter of the issuance by the City of its Water and Sewer Revenue Bonds, Series 2OOBB (Taxable), dated as of the date of their delivery, in the aggregate principal amount of $2,035,000 (the "Bonds"), issued pursuant to Ordinance No. 5313 of the City and Resolution No. 3919 of the City (together, the "Bond Ordinance"), for the purpose of financing certain improvements to the Waterworks Utility of the City. Capitalized terms not otherwise defined herein shall have the meanings given such terms in the Bond Ordinance. The Bonds are not subject to redemption prior to maturity as provided in the Bond Ordinance. Reeardine ouestions of fact material to our ooinion. we have relied on reoresentations of the Citv in the Bond Ordinance and in the - -. cenified proceedings and on othcr een~ficstions of public ufficials and others turnished to us without undenking to \crify the sme by inde~endcnl invealicaion. Conuurrcaly w~th the ~ssuance uflhe Hond,, lhc City is issuing ils Waler and Searr Rebenuc Bonds, Series 2008~ to also finance certain improvements to the Waterworks Utility. . Based on the foregoing, we are of the opinion thal, under existing law: 1. The Bonds have been legally issued and constitute valid and binding special obligations of the City, both principal thereof and interest thereon being payable solely out of a special fund of the City known as the "Waterworks Revenue Bond Fund" (the "Bond Fund"). exceot to the extent that the enforcement of the ri&u and remedies of such owners of the Bonds may be limited by laws relating ,. . to bankruptcy, insolvency, moratorium, reorganization orother similar laws of general application affecting the rights ofcreditors, also by the application of equitable principles and the exercise ofjudicial discretion. . . . . 2. The Bond Ordinance is a legal, valid and binding obligation of the City, has been duly authorized, executed and delivered and is enforceable in accordance with its terms, except to the extent that enforcement may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise ofjudicial discretion. 3. The City has irrevocably bound itself to set aside and pay into the Bond Fund and the Waterworks Revenue Bond Resewe Fund (the "Reserve Fund") out of Gross Revenue amounts necessary to pay the principal of and interest on the Bonds as the same become due. 4. The City has pledged that the payments to be made into the Bond Fund and the Reserve Fund out of Gross Revenue shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the Outstanding Pkty Bonds, the amounts required to pay and secure the payment of the Bonds and any water and sewer revenue bonds of the City hereafter issued on a parity with the Bonds and superior to all othcr liens and charges, except Maintenance and Operation Expenses of the Waterworks Utility. The City has resewed the right lo issue Future Parity Bonds on the terms set forth in the Bond Ordinance. Exceot as exoresslv stated above. we exwess no opinion rerardina any other federal or state income tax consequences of . . - -. acquiring, carrying, duning or disposing of the Honds. Owners ofthc Bonds should c\msull thcir tax advlsors regarding lhc applicabiliry of any collateral wx consequences of o,mlng the Honk, u.hich may include original issue discount, orlginal Issue premium, purchase at a m&ket discount or at a premium, taxation sale, redemption or other disposition, and various withholding requirements. The City has taken no action to cause interest on the Bonds to be excluded from gross income for purposes of federal income taxation. We have not been engaged nor have we undertaken to review the accuracy, completeness or sufficiency of the official statement or other offering material related lo the Bonds (except to the extent, if any, stated in the official slalement), and we express no opinion relating thereto, or relating to the undertaking by the City to provide ongoing disclosure pursuant to Securities and Exchange Commission Rule 15~2-12. This opinion is given as of the date hereof, and we assume no obligation to update, revise or supplement this opinion lo reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Very truly yours, K&L PRES.ION~TES .,.-- ELLIS LLP BY < Jay A. eich January 4,2008 K&L Preston Gates Ellis LLP 925 Fourth Avenue Suite 2900 Seattle. WA 98104-1158 City of Renton Renton, Washington Seattle-Northwest Securities Corporation Seattle, Washington Re: City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A - $9,975,000 Ladies and Gentlemen: We have acted as bond counsel to the City of Renton, Washington (the "City") and have examined a certified transcript of the proceedings taken in the matter of the issuance by the City of its Water and Sewer Revenue Bonds, Series 2008A, dated as of the date of their delivery, in the aggregate principal amount of $9,975,000 (the "Bonds"), issued pursuant to Ordinance No. 5313 of the City and Resolution No. 3919 of the City (together, the "Bond Ordinance"), for the purpose of financing certain improvements to the Waterworks Utility of the City. Capitalized terms not otherwise defined herein shall have the meanings given such terms in the Bond Ordinance. The Bonds are subject to redemption prior to maturity as provided in the Bond Ordinance. Regarding questions of fact material to our opinion, we have relied on representations of the City in the Bond Ordinance and in the certified proceedings and on other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Concurrently with the issuance of the Bonds, the City is issuing its Water and Sewer Revenue Bonds, Series 2008B (Taxable) to also finance certain improvements to the Waterworks Utility. Based on the foregoing, we are of the opinion that, under existing law: 1. The Bonds have been legally issued and constitute valid and binding special obligations of the City, both principal thereof and interest thereon being payable solely out of a special fund of the City known as the "Waterworks Revenue Bond Fund" (the "Bond Fund"), except to the extent that the enforcement of the rights and remedies of such owners of the Bonds may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, also by the application of equitable principles and the exercise ofjudicial discretion. City of Renton Seattle-Northwest Securities Corporation January 4,2008 Page 2 2. The Bond Ordinance is a legal, valid and binding obligation of the City, has been duly authorized, executed and delivered and is enforceable in accordance with its terms, except to the extent that enforcement may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise ofjudicial discretion. 3. The City has irrevocably bound itself to set aside and pay into the Bond Fund and the Waterworks Revenue Bond Reserve Fund (the "Reserve Fund") out of Gross Revenue amounts necessary to pay the principal of and interest on the Bonds as the same become due. 4. The City has pledged that the payments to be made into the Bond Fund and the Reserve Fund out of Gross Revenue shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the Outstanding Parity Bonds, the amounts required to pay and secure the payment of the Bonds and any water and sewer revenue bonds of the City hereafter issued on a parity with the Bonds and superior to all other liens and charges, except Maintenance and Operation Expenses of the Waterworks Utility. The City has reserved the right to issue Future Parity Bonds on the terms set forth in the Bond Ordinance. 5. lnterest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The opinion set forth in the preceding sentence is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to he, excludable from gross income for federal income tax purposes. The City has covenanted to comply with all applicable requirements. Failure to comply with certain of such covenants may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. Except as expressly stated above, we express no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements. The City has designated the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code. We have not been engaged nor have we undertaken to review the accuracy, completeness or sufficiency of the official statement or other offering material related to the Bonds (except to the extent, if any, stated in the official statement), and we express no opinion relating thereto, or City of Renton Seattle-Northwest Securities Corporation January 4,2008 Page 3 relating to the undertaking by the City to provide ongoing disclosure pursuant to Securities and Exchange Commission Rule 15~2-12. This opinion is given as of the date hereof, and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Very truly yours, Jay A. Reich KBL Preston Gates Ellis ~LP 925 fourth Avenue Suite 2900 Seattle. WA 98104-1158 January 4,2008 MBlA Insurance Corporation Armonk, New York Re: City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A - $9,975,000 Ladies and Gentlemen: This will confirm that you may rely upon our approving legal opinion dated this date and attached hereto as fully and as completely as if the same were addressed to you. Very truly yours, Jay A. Reich January 4,2008 K&L Preston Gates lllis LLP 925 Fourth Avenue Suite 2900 Seattle. WA 98104-1158 City of Renton Renton, Washington Seattle-Northwest Securities Corporation Seattle, Washington Re: City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) - $2,035,000 Ladies and Gentlemen: We have acted as bond counsel to the City of Renton, Washington (the "City") and have examined a certified transcript of the proceedings taken in the matter of the issuance by the City of its Water and Sewer Revenue Bonds, Series 2008B (Taxable), dated as of the date of their delivery, in the aggregate principal amount of $2,035,000 (the "Bonds"), issued pursuant to Ordinance No. 5313 of the City and Resolution No. 3919 of the City (together, the "Bond Ordinance"), for the purpose of financing certain improvements to the Waterworks Utility of the City. Capitalized terms not otherwise defined herein shall have the meanings given such terms in the Bond Ordinance. The Bonds are not subject to redemption prior to maturity as provided in the Bond Ordinance. Regarding questions of fact material to our opinion, we have relied on representations of the City in the Bond Ordinance and in the certified proceedings and on other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Concurrently with the issuance of the Bonds, the City is issuing its Water and Sewer Revenue Bonds, Series 2008A to also finance certain improvements to the Waterworks Utility. Based on the foregoing, we are of the opinion that, under existing law: 1. The Bonds have been legally issued and constitute valid and binding special obligations of the City, both principal thereof and interest thereon being payable solely out of a special fund of the City known as the "Waterworks Revenue Bond Fund" (the "Bond Fund), except to the extent that the enforcement of the rights and remedies of such owners of the Bonds may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, also by the application of equitable principles and the exercise ofjudicial discretion. 2. The Bond Ordinance is a legal, valid and binding obligation of the City, has been duly authorized, executed and delivered and is enforceable in accordance with its terms, except to the extent that enforcement may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise of judicial discretion. City of Renton Seattle-Northwest Securities Corporation January 4,2008 Page 2 3. The City has irrevocably bound itself to set aside and pay into the Bond Fund and the Waterworks Revenue Bond Reserve Fund (the "Reserve Fund") out of Gross Revenue amounts necessary to pay the principal of and interest on the Bonds as the same become due. 4. The City has pledged that the payments to be made into the Bond Fund and the Reserve Fund out of Gross Revenue shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the Outstanding Parity Bonds, the amounts required to pay and secure the payment of the Bonds and any water and sewer revenue bonds of the City hereafter issued on a parity with the Bonds and superior to all other liens and charges, except Maintenance and Operation Expenses of the Waterworks Utility. The City has reserved the right to issue Future Parity Bonds on the terms set forth in the Bond Ordinance. Except as expressly stated above, we express no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements. The City has taken no action to cause interest on the Bonds to be excluded from gross income for purposes of federal income taxation. We have not been engaged nor have we undertaken to review the accuracy, completeness or sufficiency of the official statement or other offering material related to the Bonds (except to the extent, if any, stated in the official statement), and we express no opinion relating thereto, or relating to the undertaking by the City to provide ongoing disclosure pursuant to Securities and Exchange Commission Rule 15c2-12. This opinion is given as of the date hereof, and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Very truly yours, Jay A. Reich KBL Preston Gates Ellis LLP 925 Fourth Avenue Suite 2900 Seattle, WA 98104-1158 January 4,2008 MBlA Insurance Corporation honk, New York Re: City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) - $2,035,000 Ladies and Gentlemen: This will confirm that you may rely upon our approving legal opinion dated this date and attached hereto as fully and as completely as if the same were addressed to you. Very truly yours, Jay A. Reich tiS oCITY: F-•• •RENTON • • City Clerk Kathy Keolker,Mayor NCO November 2, 2007 1 4 Cheryl Fountain, Paralegal : :K.&L:Preston Gates.Ellis LLP 1 925,-Fourth Avenue,'Suite 2900 Seattle;WA 981041158 is Re: -2007 Water-and Sever Revenue and-,Refunding Bonds„ =: •• Dear.Ms:Fountain: • 'Enclosed in triplicate ou will find signed originals.:ofthe followiri 1.:' Cert'ificate for.transcript:.: 2. • Certificate.stating the:name and-terms of office•ofthe Mayor andCity;Council=.; 3 Certificate'of the Mayor settling forth the name.Of'the City Clerk. ' , • • 4. : •Certificate•;regarding]the proceedings of.the City'•Counoil last fixing:the time,date and:place of•; • regular meetings:of.the Coucil and copy'of the proceedings • • Certificate stating the official newspaper of the City • , 6: Certificate certifying_an.attached copy of Ordinance No.5313,pased;on October.22,''2007:(the '«B o nce„) • . 7. Certified:copy ofthee minutes of meeting o f`the City:Council`held,'on,.Octoberr1.5, 2007;..showing .. the'B • the first reading of ond Ordinance. `8: • - "Certified copy of theminutes of meeting of the'-Citytouncil•,held on October.22,:2007;'showing . the second reading acid'passage of,the Bond::Ordinance=ands adoptionResolution No.;39.12 . 9 'Signature Identification Certificate signed-by the Mayor•and.me,and notarized:. • 10. , : 'Certificate of Manual.signature°signedby:rile in._tw4 places and=notarized:: 11. Certificate of Manual Signature signed by the Mayor in two places and notarized. 12: Certified copy of Resolutiopr.No.'39•12:adopted ori:October,22,.-2007: • •.;The'Affi.davit•of Publication of a sumrnary;of Ordinance No.=53;13:'will beprovided at a'l'ater date.:.. . Additionally; from Mike Bailey;Finance&Information Services Administrator,I enclose two signed • 'originals of eachof the:following documents” - - • 1: . Pari certificate' 2'. Closing Certificate 3.,; Receipt W. :gond Bond Proceeds, ' F. 4: Escrow Deposit A -eemeint,- Sc row -,.' Federal Tax:Certificate and Exhibit.A; Certificate of-Underwriter - J • Sincerely, r. I ; : BonnieI Walton I. City Clerk f cc: Michael E. Bailey Finance&IS Administrator" . • : . . • 1055 South Grady Way-Renton,• Washington 98057-..(425),430-651'0/FAX;(425:)430-6516. ,-REN•T O L V',. �. AHEAD OF THE CURVE J This'paper contains 5o/recycled inatorial,30%post consumer . • ... _. ...:, .t:srel.:.. ,.••••....:.,:...,.. T, „ ,•• ,:,,:-.4.,..64.1.•'.)0.,.. ..-,-.,-;,7-.-: -,:: ..,.-•-,..;-!... .'........;.-;--.-....,-;:-...- :11'...2,- i'..'-.%.-:-..-'...'..4-.....,::-..., . . . . ., .... . .. . . . . ., ,,....,.......,...•.,,,.. .-,.:.....:.,-,.'....-...,;'..Y:ri:..'',. ...... ,.--. :.1;1-.".f, .c.....--.-:',; -,...-.,.'----j:--a,-.4 '....,,.- , ., , ,. 1.........-.:;‘.,:!..:.'1:',.:,---::'•,:,....:.'y'r..,?.:.::'..-,::-:::. --- ;:-.....,.. ,.....,.-:.;--.-....:--.J:„: ..-....:,• ... .....e. .....,..!.;..,,-. :,,1,.,ii7f ....:-,..".•..i.:.-;f,..,-:::.....::•'..'•'',.'..-.::.:',--,i.::-.'.; 2 --.,•--..,-;... ,,,,!....,;',...... ..2-.1,..-....;'...:-.--..-,T--,..,- -, -„..--.. ... " ...--',- ..,:l:E:'7';(.. ‹.77':...,1.?:.'-€7....::,...1:-"‹.::., .2.:y,-2..:.... .i..,.:,..,..,- -..-:-..::::,.:-...::..,-;:•:::y::.•:-..---,i • ,..,...,•..,. - -. - ..i.--.: ,:..:.- '''.'.: ...,.'...:..,,...-,.?.'....,:-.--.:,-.',-;..."-..47.%....:-V-:: ',..: .... !L7.-..--':',....1•2"-...,;' .. .--`...: ..-„-:.;, :'...,'..-'.':-:,.?..'.....':::. if.: y.,',.,;, -;;-...., ...1.. '...,1,-.,...,.'-;,.....,.:-,•.::::i.,q,..;' ,..;.,....i..-;.:•..----.:,'...:.;..-,...;.--...,,,:,,,...-z..., ce :::::•.:,-.:'.L.''''::::... ii..e.ttE.:N..:.-1-... .: '' ',.:.-:;-::: ::::, ---.•.. . 2.!::::..': :. ''........:-...:,;!,-,--•••••:. ..:•;.!,'...,: •:,. :-:, 1•1..., .t--.. .:::.:-.:14.-,..;•.:•...Y-...i::.•:..-... ......;.':!. .i.,,.-:.J.7.,:i„.. ... ...........,:,..r.,.... ....44-:::-Y. :6-..-.-..•--i---ihe:;Cifi2-9!t . •. . ,,. .....:,Y.:..,,:;-:,,.." .,:::':7. '.• ..!."* . ... . ;:; -::.',,...,'..•,:,.--.::-::: ::,,.-i.„- -;:',,,,:-.,...',.. ...:,::;,:.., - PT .'" 7-:: ,:': !::'::"‘,,•••:',---.--;--, ,, .. ..-.2..i. :--.,,-*:-.:';::7-.••:',...;-:-....7....4 ,---:_:, --', .:-.- ' .•.:-..'::::,,-.-:•-,-..-...--..n.-'.',-..:.,...,,-..,.:: :,,i''.':'!:.l.':-,,::::,:.7.:::::::::.,-:::.,,'. iir,..-hitigt*M39.,:.,..f....:17-::......":'::.i.:.!- ..`",?/,....',,::::-,:::.--:.:-... '..:::....‘:::-....,Y,,,......... ,'.....,- --,:::;::,......„-1........i....„,,..,:,.,.....,...,,,:.;!: :::-",: p-:2.:::,,,-;;...,;:,:‘..,....,::::.:::..: ,::,,,,..-... r... .!...,-Rentpn1. - .,.: .,/,'.:.•,f.,--!..-..--:,::::±.•.'.---;.;,::ls-,',...:', 17-;,-,!, ?„....,,If-.,.:: ...:- .-......_ :-;',;,',.:-;:,,-,:.',-.q,,:::,,',..,':- ..:,....:'....:'„...-,.•.':::".,--.-:-,:.....,,,: ::,:i.:::::5':,:;',';.:,:•.•'.:.,:...::;:c,:.:,.:„.,.,:',._:1':,-':::', ? did4Y•1/17a77; ..:-::'''.,•.:-:.',::.:‘----,;:, .'-:......;:.-.. .-cc•--,i,-;' .... ....'..... :-:.,•?-....:-....: :7,••.''.:::Y.::;:.,-.,,..*..'' -":„;;;2.,,-'..:,.....,-.,:.<;:'...1„;,'''......1.:.: :'..,:,,,'...-.,'...::...:::::-..::::-:::,....,,,.... ..:-,,1,,,,,,,..7,:;,:!:....-::::...,:..,:i -.,;:::::.... .,:::......-;:,.... ''....:::::.'''''','''c:::::''.':''''','.':.....'','...:':;,....'::::--1‘, '':',:,,'' C':':..."7:if-,-....;Y:'::: ...:-f:'•,:':.''.:.:',..'.''.:-.'.:.-1';--..-!!.t..,;;,-:...,:-.;'.7,...:,',•.;:.:::::::,',....,:;.:r.::.';:--,:•:;:_.:1..F,:'',''.;,..,,,.-.,:.--y, ?':::'..s..•I': 7:,`,-..,:,..;,:::.::::::.',,,1:, ...,,...-,4,-::::.,.,,,,,, :;:....,:',.........',..-.-.... :,:„...,,,,,,,,...,:,`::,.:-.',".1:,...:. ..:7., .-,:,,.,;:',,:,---',-...,::•::,,,',-!..::-.1:.;•::-.:-:---::.,•i:--s',..-... *;T:;''' ••-•;.2:-',!:•:',.:.: '.'f,.'•::::';':7--_,-:,:. ',..,:..,V,....',.;',!‘- •;.;.:.:-..:-.-:'...::-...-t..-..:..,,,,:':.:::,,'-'.'•'"'.:.-..'f'?-:,..'•.,.:::'.:....'-,.:......'.....:'5'.....n'-.,.....;:-.•...,.-.,-''.'.„;.....,::,.2-:.'::.::;f.:..;•.•..'-::.,.,/'..'--,4...,',.:.'-;,-.....:...:-..=,-:....-:1...:i.:-''.:-:-.:..';-.':'.'.-...'-:-:.-..-t,?:'•..,•.---.•;.•,.,,:---;:.-:,2':.j.'":.::-:,!.'-..:"'.,:-..'2-:::::-,.:..::-.:.,::-,:••::1::,,:,1:,.';:''..::;..•:.i..::..•.:-:,...:..:4...,.:..:-.,=.,,:.?..:-:1.:..'-:-,.,',-.-;.,.:,:.-:r.):,....:-;:-....,.t.:..2-..i?•.:,.!;.:..:::...'-..-.....::.:.•;::,.-:'':,'-:'-,;:1.=1.-:'.,-.,",':;;.'-.'..:,•.-....•1.-,`..*-,:":,'-:,:-,,:;..:,7:..:...:..-.,:---:'...-'.-.;::..:...,.,-.--.-..:..-----,-......:.::..--•:1.:,:-..'!:.2..-:,::..:..-i..-::.;...--':.-:;:,'-:,";::•::-',::-....1',...:::...-..;-..::,-:":.:..,:..2•.•:..'.;i.'-..,,s.:':.,,;.::,-,:..Z:-!...';,-.':..;-;:":.:.:.:'•:‘,:'.,,-'`......'..'.:,.':,:,,.':..:',.:-',..-:/,-,.::..1.:,.'-.'.'-,.!..-:.;'....r-.::•-;:,.-:':;;.-:;.'-.::f...-“.1'::-...;-:.'.-.-.'27i,,i--::'....:-;:...•.T,--:s,,::.,:--'.j•:;l.-.:;H;.:•-, Cheryl,-..i-...:•t/:.:-.::-.:.-..,.,'::::...i...;..:...!-,: .....--,?,„'.::.3•:-•:'t-•"7‘;, l1,'s-.,",,•,':.,-':.:-:.',:,.2.2.tt:::::'-,.`:-:'•:.,a.:,...:•'?.;'.....:.k,::',.'i.i:•...:-.-.:.;..'-.•.---,.1,:,-"`.,:,..:.?.....;;:i.••,,..•:':...''Paralegal N91iPidgtOR,YP46e:E, 1§;LE...•,.-.....-..,.'2...:.-.";...",;,.,.'..?.:•R 025,Fop446:Avoty6i. 61te12:..:-:;...9 7..,-9,..!...:'.,-.:.'"!..-'.,-t,..9:.:..:-:.'i:5,:-•1:.-;:.-;.::.-:;-..•-.,-,-Y teattlei: 0A , 0104;145i.,',-.,:.--:.-,-'--,:--:::•:-'.'.,.--'-,'..,.-.,-i-.,::--'.•:.5._'•l,:-,•:-..',:-':,..:--...•::...,:2,..,:.:-,..:.'....-,..';--.:.':...-,-..4;-::,V.!.-:.,,'.,r....'..i•i..::1.,-::'!.-,:c„,.;;:.-:.,::::,..•:..t.;.'..:...,.'-..:.-:._'::s-,''•1.-:,;::-::,:A,..--.:.".-..:::...'t,.".,,'.'s:,:-.;"......•:..:,.•:...':•:'•.,'-:.:'.:.:-,---:'::-i.:-:,:::=:,i:_:-:-;-•:..,.-'::.::.:,.;.--i:.::.:..-;:.:.,:-.':.-.,•.i...-;-:,.:•'.1.:1...:i:.!',4:'::.2,'1•.!',.•,,-.4..•-:'.:1.:,'::'.'....-'.-':;-.-::.,-.,..,',;...,.c,,:;.:,,,:.,?..'..-_..:.:'....,..-,-.„.,...'.-1....;--.:,../:'..1.,;,,...:,:-'.,,.z,--.:4-::.2.-..,..:-•........N:,...:--:'::'.•;,..,::=,:....f-.:::._.:.',.::,.„,.';.,.;':-.•.':•-.:'.,.:-:;•,.":.,..:1,..,::,:,.-.:...:.::::,::-.;-c•.--i-•.•.:.';'-,•.,__:'•-.*-,•::,:.:-:-.';,-..,:-..'-_-„:,i..:,:.,:.,:,:',,.:_.::'.:.:.:.,,,:-1..',:,r.•-,=.,'..':'.;:...:....::f'.,,-:2..--..-..-,,1'....-';,'...,:-..:-.*:-::''-.'.-:::•...:-.„,:-4:.:.!:2....,'.:..'•:.,..:‘;•:..2:•..•:::.•-,.1''yi-.,-::.....,.-.' paper - --:,...:-' ,;-....'..:---::-......:',. ..',..--.•••,.--.:,...,....,.. ...1-•-.... ,--...:.;-.E:..:.':,-:;:..i....;,-:-.. .i:...,:.;:.,-.'..•...:',.......-..-[:::•...' •;::-:.:'•• ...-......,...-5..-:-.: ;....•-:-..._,-..,..1:'.,-.:::;.1;;-.......:-...::,...-.:,...-:-...;..;.:;.,:.T.;.•',...;:...;:-....;.:.:: : :;,:-:.:::...,...... ...:::: :•:":4•:: ::.-.1..7.....?J::::..,-..:•:/....:•••.:1.'•.-:.•......... ;;;•..4.....:.;::::,•-'.....:;:::-:.:•'....,-...?. ..•:.::',:.:....,,,-.'..,,.;-•:-,';.,.:•:-..-...,•. .i...',15;;;.-:•..:!...;•::::-•;!....:•.......:',:',':...-.':- ..:''''.....' '...' - .•:.'•-•,....:...::-..)...„:„:-.,:.. .:::,?; .:-..-;-,..,...: ,;:::.,..,:,...........:::::::-.:c!...-., *,...:,.:::.:,,.-;!7...;:,....::...... .:::,....;,,:.,......::;.•.....!..:-.'1.:•...,,-:.:.,: ::,,,....,...,:-.,T...-....:...i:-:r..,:::,..::.,,,,-:-..,....,.....,,,,;,..,..,..::,;... ii.......',-....-;....'.;..,,::......:..,.....-..;::,....,....,,•..---'=•:•-.-•.•. ' • • .....,-. .....:•.,.... .. ..:,;.:::.......-,-. !. -,,,-...-....... :,.;..:.......;-: .. s?..'-.......:.:.,.....,.::•.-:-.,..,,.:,..,, ',..f:S;'.:::,•,..-,.';',.:,'‘'....:':.'•'-„•.-.,..::,: ','..:::%.'.:.....::::,::,.'.,P,:,-- '''1''''''.-... .....:.2.',:...:-.,'..:::,,i.::•-•:''::,s'_'....‘..-.:;•:..... ..-.1..:::::!'::::!:--;:v-,....-...-;,;:'.f...-,;•.::::''.,',:-„:"..,-..,;:•;...,-,,.-::::.';'.:....:'.:::::.„:'.',..',.'.•,'-::::-.1!,,,.‘,.-'.•'.. '. iatitoiro.517/n , ,„,6iedtkaPI:',.39.-...{11t con urnor '-'i- ''''• ' '''' ".-7-:..;....:"-' •••• . • • . . • • • , • . , � X<" ...:,:CITY--.f F•,REi TON +' City Clerk _u. :Bonnie I:.Walton , .•Katliy:I�eolker,ivlayo>G:.;., . . . .-. .. . . ... .... ,., , ... _- ,. .. , . . . _. , December.3, 2007- • ' - . .Cheryl Fouintain;Paralegal: - . • ' .. K&L Preston GatesEllis•LLP ; . . . . , .t. 925':Fourth,Avenu'e,'S`uite 2900.. Seattle; WA:98104-115'8, ''`' ' '• . .` • • _ , ' . ; . - ..' ' Re: X2007~Water•arid;Sewer•'Revenue"and Re un—ciiiii Bonds ' " e Ms:Fountain: • - , ,, , Co ' osed'.three •3' ',on'`iiials'af'the ResoYutori No'::391�9'fo �.the'$orid� ' u�s:e�:.. fi have encl O., g. Please.feel'free'to call if y ou l ave:apy fur1,i6:questions.o • y , r�concerns: ; • cr el irl e :Bo e•,I: Walton nn ,. ' ,City.Clerk - :is, • . el E:Baile Financ`e:&'IS•Administrator''. tto 0" o F-rle R .. ..1055,Soutti Grady-Way,=.Renton;,Washington 98057';(425),430-6510/FAX.(425).430-6516 ,. .. �v'. . . AHEAD,OF, TH.E',CURVE' . •Thisnaoercontains50%reevcledmaterial.30%pestconsUrimer - .. . `DcA,..c -A-,-J(a., ::," - -_-1 CITY OF RENTON, WASHINGTON RESOLUTION NO. 3919 A RESOLUTION of the City Council of the City of Renton, Washington, approving the sale of the City's Water and Sewer Revenue Bonds, Series 2008A, and Wateij and Sewer Revenue Bonds, Series 2008B (Taxable), in the aggregate principal amounts of $9,975,000 and $2,035,000, respectively, to povide funds for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility; and approving the sle of such bonds to Seattle-Northwest Securities Corporation, all in accordance with Ordinance No. 5313 of the City. WHEREAS the City Council by Ordinance No. 5313 passed on October 22, 2007 (the "Bond Ordinance"), authorized the issuance and sale of three series of water and sewer revenue bonds of the City in the aggregat?principal amount of not to exceed $23,000,000 (the "Bonds") for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding ' ertain outstanding water and sewer revenue bonds of the City, and WHEREAS, the Bond Ordinance authorized the City Finance Director to enter into negotiations for the sale of the Bonds and to present a bond purchase agreement to the City Council for approval by resolution, establishing the terms of each series of Bonds, and WHEREAS, Seattle-Northwest Securities Corporation (the "Underwriter") has purchased the first series of Bonds designated the City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007 in the aggregate principal amount of$9,750,000, and WHEREAS, the Underwriter has offered to purchase the second and third series of Bonds designated the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A and Water and Sewer Revenue Bonds' Series 2008B (Taxable) in the aggregate principal amounts of $9,975,000 and $2,035,000, respectively (together, the "2008 Bonds") on the terms set forth in the bond purchase agreement attached hereto as Exhibit A hereto (the "Purchase Agreement"), and I WHEREAS, it is in the best interests of the City to sell the 2008 Bonds to the Underwriter on the terms and conditions set forth in the Bond Ordinance, this resolution and the Purchase Agreement, and I WHEREAS, in accordance with the Bond Ordinance, the City Council wishes to authorize and approve the sale of the 2008 Bonds to the Underwriter and the final principal maturity amounts, interest rates; bond insurance provisions, and redemption rights for the 2008 Bonds, all as set forth herein, , I 4 RESOLUTION NO. 3919 BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON: Section 1. Definitions. Except as otherwise defined herein, capitalized terms used in this resolution have the meanings set forth in the Bond Ordinance. Section 2. Authorization of Issuance and Sale of the 2008 Bonds. The issuance of the 2008 Bonds, designated as the "City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A" and "City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable)," in the aggregate principal amounts of $9,975,000 and $2,035,000, respectively, each dated as of their date of delivery, is hereby approved. The 2008 Bonds 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 from their date (computed on the basis of a 360-day year of twelve 30-day months), payable semiannually on each June 1 and December 1, commencing June 1, 2008, to the maturity or prior redemption of the 2008 Bonds. The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A 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 2016 $480,000 4.00% 2017 695,000 4.00 2018 565,000 5.00 2019 645,000 4.00 2020 720,000 4.00 2021 760,000 4.00 2022 790,000 4.00 2023 980,000 4.10 2024 1,020,000 4.15 2025 1,060,000 4.20 2026 1,105,000 4.25 2027 1,155,000 4.30 The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) 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 2013 $610,000 4.70% 2014 600,000 4.85 2015 630,000 5.10 2016 195,000 5.25 -2- P:120564 JAR120564 254 07/11/26 RESOLUTION NO. 3919 • If any Bond is duly presented for payment upon maturity and is not paid, then interest thereon shall continue to accrue thereafter at the rate stated therein until such Bond is paid. The 2008 Bonds shall conform in all other respects to the terms and conditions set forth in the Bond Ordinance, except as expressly provided herein. Section 3. Optional Redemption. The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A maturing on or after December 1, 2018 shall be subject to optional redemption prior to maturity on and-after December 1, 2017, in wholeor in part on any date (maturities to be selected by the City and by lot within a maturity in such manner as DTC or the Bond Registrar, as appropriate, shall determine), at par plus accrued interest to the date of redemption. The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) are not subject to optional redemption prior to maturity. Section 4. Insurance. (a) Acceptance of Insurance. In accordance with the offer of the Underwriter to purchase the 2008 Bonds, the City Council hereby approves the commitment of MBIA Insurance Corporation (the "Bond Insurer") to provide a bond insurance policy guaranteeing the payment when due of principal of and interest on the 2008 Bonds (the "Bond Insurance Policy"). The City Council further authorizes and directs all proper officers, agents, attorneys and employees of the City to cooperate with the Bond Insurer in preparing such additional agreements, certificates, and other documentation on behalf of the City as shall be necessary or advisable in providing for the Bond Insurance Policy. (b) Payments Under the Bond Insurance Policy and Rights of the Bond Insurer. (1) In the event that, on the second business day, and again on the business day, prior to the payment date on,the 2008 Bonds, the Bond Registrar has not received sufficient money to pay all principal of and interest on the 2008 Bonds due on the second following or following, as the case may be, business day, the Bond Registrar shall immediately notify the Bond Insurer or its designee on the same business day by telephone or telegraph, confirmed in writing by registered or certified mail, of the amount of the deficiency. (2) If the deficiency is made up in whole or in part prior to or on the payment date, the Bond Registrar shall so notify the Bond Insurer or its designee. (3) In addition;if the Bond Registrar has notice that any bondowner has been required to disgorge payments of principal or interest on the 2008 Bonds to a trustee in bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such bondowner within the meaning of any applicable bankruptcy laws, then the Bond Registrar shall notify the Bond Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail. -3- P:\20564_JAM20564_254 07/11/26 4 RESOLUTION NO. 3919 (4) The Bond Registrar is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for owners of the 2008 Bonds as follows: a. If and to the extent there is a deficiency in amounts required to pay interest on the 2008 Bonds, the Bond Registrar shall (i) execute and deliver to U.S. Bank Trust National Association, or its successors under the Bond Insurance Policy (the "Insurance Paying Agent"), in form satisfactory to the Insurance Paying Agent, an instrument appointing the Bond Insurer as agent for such owners in any legal proceeding related to the payment of such interest and an assignment to the Bond Insurer of the claims for interest to which such deficiency relates and which are paid by the Bond Insurer, (ii)receive as designee of the respective owners (and not as Bond Registrar) in accordance with the tenor of the Bond Insurance Policy payment from the Insurance Paying Agent with respect to the claims for interest so assigned, and (iii) disburse the same to such respective owners; and b. If and to the extent of a deficiency in amounts required to pay principal of the 2008 Bonds, the Bond Registrar shall (i) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the Bond Insurer as agent for such owner in any legal proceeding relating to the payment of such principal and an assignment to the Bond Insurer of any of the 2008 Bonds surrendered to the Insurance Paying Agent of so much of the principal amount thereof as has not previously been paid or for which moneys are not held by the Bond Registrar and available for such payment(but such assignment shall be delivered only if payment from the Insurance Paying Agent is received), (ii) receive as designee of the respective owners (and not as Bond Registrar) in accordance with the tenor of the Bond Insurance Policy payment therefor from the Insurance Paying Agent, and(iii) disburse the same to such owner. (5) Payments with respect to claims for interest on and principal of 2008 Bonds disbursed by the Bond Registrar from proceeds of the Bond Insurance Policy shall not be considered to discharge the obligation of the City with respect to such 2008 Bonds, and the Bond Insurer shall become the owner of such unpaid Bonds and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. (6) Irrespective of whether any such assignment is executed and delivered, the City and the Bond Registrar hereby agree for the benefit of the Bond Insurer that: a. They recognize that to the extent the Bond Insurer makes payments, directly or indirectly (as by paying through the Bond Registrar), on account of principal of or interest on the 2008 Bonds, the Bond Insurer will be subrogated to the rights of such owners to receive the amount of such principal and interest from the City, with interest thereon as provided and solely from the sources stated in this resolution and the 2008 Bonds; and b. They will accordingly pay to the Bond Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Bond Insurance Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in this resolution and the -4- P:120584 JAR120584 254 07/11/26 _ RESOLUTION NO. 3919 2008 Bonds, but only from the sources and in the manner provided herein for the payment of principal of and interest on the 2008 Bonds to owners, and will otherwise treat the Bond Insurer as the owner of such rights to the amount of such principal and interest. (c) Rights of Bond Insurer. (1) In connection with the issuance of Future Parity Bonds, the City shall deliver to the Bond Insurer a copy of the disclosure document, if any, circulated with respect to such Future Parity Bonds. (2) The Bond Insurer shall receive copies of the City's audited financial statements and annual budget. (3) Copies of any amendments made to the documents executed in connection with the issuance of the 2008 Bonds which are consented to by the Bond Insurer shall be sent to Standard &Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc. (4) The Bond Insurer shall receive notice of the resignation or renewal of the Bond Registrar and the appointment of a successor, other than the designated state fiscal agent. (5) Any notices required to be given by any party under this resolution shall also be given to the Bond Insurer and sent by registered or certified mail addressed to: MBIA Insurance Corporation, 113 King Street, Armonk,New York 10504,Attention: Surveillance. (6) The City agrees to reimburse the Bond Insurer immediately and unconditionally upondemand, to the extent permitted by law, for all reasonable expenses, including reasonable attorneys' fees and expenses, incurred by the Bond Insurer in connection with (i) enforcement by the Bond Insurer of the City's obligations, or the preservation or defense of any rights of the Bond Insurer, under this resolution and any other document executed in connection with the issuance of the 2008 Bonds, and (ii) any consent, amendment, waiver or other action with respect to this resolution or any related document, whether or not granted or approved, together with interest on all such expenses from and including the date incurred to the date of payment at Citibank's Prime Rate plus 3% or the maximum interest rate permitted by law,whichever is less. In addition, the Bond Insurer reserves the right to charge a reasonable fee in connection with its review of any such consent, amendment or waiver, whether or not granted or approved. (7) The City agrees not to use the Bond Insurer's name in any published document including, without limitation, a press release or presentation, announcement or forum without the Bond Insurer's priori consent; provided that the City may use the Bond Insurer's name in any general or particular factual statement to the effect that the Bond Insurer insures certain outstanding City bonds. In the event that the City is advised by counsel that it has a legal obligation to disclose the Bond Insurer's name in any press release, public announcement or other published document, the City shall provide the Bond Insurer with at least three (3)business days' prior written notice of its intent to use the Bond Insurer's name together with a copy of the proposed use of the Bond Insurer's name and of any description of a transaction with the Bond -5- P:\20584 JAR\20584 254 07/11/26 1 RESOLUTION NO. 3919 Insurer and shall obtain the Bond Insurer's prior consent as to the form and substance of the proposed use of the Bond Insurer's name and any such description. The foregoing shall not apply to any request for public records duly received by the City pursuant to chapter 42.17 RCW, and the City shall not be obligated to notify the Bond Insurer of its intent to comply with any public disclosure request. (8) The City shall not enter into any agreement nor shall it consent to or participate in any arrangement pursuant to which 2008 Bonds are tendered or purchased for any purpose other than the redemption and cancellation or legal defeasance of such 2008 Bonds without the prior consent of the Bond Insurer. The provisions of this section shall be in effect only so long as the Bond Insurance Policy is in full force and effect. Section 7. Acceptance of Offer. The City Council hereby finds that the offer of the Underwriter to purchase the 2008 Bonds under the terms set forth in the Purchase Agreement is fair and reasonable and it is in the best interest of the City that the 2008 Bonds shall be sold upon the terms and conditions set forth in the Purchase Agreement and upon the basis of the representations therein set forth. The City Council further finds that all conditions precedent to or concurrent with the acceptance of the Purchase Agreement by the City Council have been met. The City Council hereby accepts the Purchase Agreement and authorizes the City Finance Director to execute the Purchase Agreement and deliver it to the Underwriter. The 2008 Bonds shall be issued and delivered to the Underwriter upon payment of the purchase price specified in the Purchase Agreement. Section 8. Approval of Official Statement. The City Finance Director is authorized and directed to execute and deliver to the Underwriter copies of an official statement for the 2008 Bonds, in substantially the form of the Preliminary Official Statement dated November 16, 2007; provided, however, that the City Finance Director is authorized to supplement or amend the Official Statement as he deems necessary or appropriate. The City Council hereby ratifies the City Finance Director's. determination that the'Preliminary Official Statement was deemed final for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (except for the omission of certain final pricing, rating and related information as permitted by such rule). Section 9. Further Authority. The City officials, their agents, and representatives are hereby authorized and directed to do everything necessary for the prompt issuance and delivery of the 2008 Bonds and for the proper use and application of the proceeds of such sale. Section 10. Severability. The covenants contained in this resolution shall constitute a contract between the City and the owners of each and every 2008 Bond. If any one or more of the covenants or agreements provided in this resolution to be performed on the part of the City shall be declared by any court of competent jurisdiction to be contrary to law, then such covenant or covenants, agreement or agreements, shall be null and void and shall be deemed separable from the remaining covenants and agreements of this resolution and shall in no way affect the validity of the other provisions of this resolution or of the 2008 Bonds. -6- P:120584 JAR120584 254 07/11/26 RESOLUTION NO. 3919 Section 11. Effective Date. This resolution shall be effective after its passage as provided by law. Passed November 26, 2007. ee,0-6/7e4. Kathy Keol r,Mayor Attest: ,4 (2 ^-1 Bonnie I. Walton, City Clerk • .F. Approved as to form and legality: '' �• K&L PRESTON GATES ELLIS LP %•.© • _ • Bond Counsel to the City of Renton • Attachment: Exhibit A—Bond Purchase Agreement -7- P:120584 JAR120584 254 07/11/26 v RESOLUTION NO. 3919 EXHIBIT A Bond Purchase Agreement A-1 P:'20584 JAR120564 254 07/11/26 RESOLUTION NO. 3919 MIN SEAT TLE-_N0RTHWT 1420 Fifth Avenue � � 'SECURITIES CORPORESAl`ION Suite 4340 111111WI". T. 9 `he egro a s Premier inyes.4ent Seattle,Washington 98101 i,r.€krrr;Firm Since.1970 November 26, 2007 Honorable Mayor and City Council City of Renton 1055 South Grady Way Renton, Washington 98055 Re: City of Renton,Washington $9,975,000 Water and Sewer Revenue Bonds, Series 2008A $2,035,000 Water and Sewer Revenue Bonds, Series 2008B (Taxable) Honorable Mayor and City Council: Seattle-Northwest Securities Corporation (the "Underwriter") offers to enter into this purchase agreement (the "Purchase Agreement") with the City of Renton, Washington' (the "Issuer"), (each of the Underwriter and the Issuer may be referred to herein as a "Party" or collectively as the "Parties"). This offer is contingent upon acceptance by the Issuer by execution and delivery of this Purchase Agreement to the Underwriter at or prior to 11:59 p.m. Pacific Time on the date hereof, by means of hand delivery, facsimile or other secure electronic transmission, such as a PDF file. Upon execution of this Purchase Agreement by the Parties, this Purchase Agreement will constitute a binding agreement between the Issuer and the Underwriter. Capitalized terms in this Purchase Agreement that are not otherwise defined herein shall have the meanings given to such terms in the Ordinance as defined below: 1 1. Authorization and Documents The issuance, sale and delivery of the Bonds (as defined below) shall be authorized by Ordinance No. 5313 passed by the Mayor and City Council of the Issuer on October 22, 2007 and Sale Resolution No. 3919 adopted by the Mayor and City Council of the Issuer on November 26, 2007 (together, the "Ordinance"). The transaction at which the Bonds are delivered by the Issuer to the Underwriter and paid`for by the Underwriter is referred to herein as the"Closing" and the date of such transaction, the"Closing Date." The Ordinance includes an undertaking to provide certain information to nationally recognized municipal securities information repositories and regulatory bodies or their designees or, if the City s'o chooses, to DAC Bond or DisclosureUSA (so long as such RESOLUTION NO. 3919 Honorable Mayor and Cit' <uncil City of Renton, Washington November 26, 2007 Page 2 method of disclosure continues to be approved by the Securities and Exchange Commission for such purposes). The Ordinance and this Purchase Agreement are collectively referred to herein as the"Documents." 2. Purchase and Sale Subject to the terms and conditions of this Purchase Agreement, the Underwriter hereby agrees to purchase from the Issuer for offering to the public and the Issuer hereby agrees to sell to the Underwriter all, but not less than all of the $9,975,000 aggregate principal amount of Water and Sewer Revenue Bonds, Series 2008A (the "Series 2008A Bonds") and $2,035,000 aggregate principal amount of Water and Sewer Revenue Bonds, Series 2008B (Taxable) (the "Series 2008B Bonds") (the Series 2008A Bonds and Series 2008B Bonds are together, the "Bonds"). The Bonds shall be dated, shall mature, shall bear interest, shall be payable, and shall have redemption provisions, all as set forth in Exhibit C attached hereto. The Underwriter's purchase price for the Bonds also is set forth in Exhibit C. 3. Fiscal Agent; Enhancement; Insurance a) As provided in the Ordinance, the fiscal agent of the State of Washington shall be the fiscal agent for the Bonds, serving as registrar, authenticating agent and paying agent (the "Bond Registrar"). The Bonds shall be payable and shall be secured as provided in the Ordinance and as described in the document entitled Preliminary Official Statement, which is dated November 16, 2007 and which describes the Issuer and the Bonds (the"POS"). b) Payment when due of the regularly scheduled principal of and interest on the Bonds shall be insured by a municipal bond insurance policy (the "Policy")issued by MBIA Insurance Corporation (the "Insurer"). 4. Offering The Underwriter agrees to make a bona fide public offering of all the Bonds, at prices not in excess of the initial public offering prices or at yields not lower than the initial yields as set forth in Exhibit C attached hereto. 5. Official Statement a) In the Ordinance, the Issuer has ratified and "deemed final" the POS for purposes of Rule 15c2-12 of the Securities Exchange Act of 1934, as amended (the "Rule"). The Issuer approves and ratifies the use and distribution by the Underwriter of the POS in connection with the public offering for sale of the Bonds by the Underwriter. -2- RESOLUTION NO. 3919 Honorable Mayor and Cil ,_Ibuncil City of Renton, Washington November 26, 2007 Page 3 b) The final official statement shall be substantially in the form of the POS with only such changes permitted by the Rule as shall have been reviewed by the Underwriter (such final official statement, incorporating such changes, if any, shall be referred to herein as the "Final Official Statement"). The Issuer shall cooperate with the;Underwriter in the preparation of the Final Official Statement for delivery within seven (7)business days after the date hereof and, in any event, for delivery in sufficient time to accompany any order confirmation from the Underwriter to its customer, and in sufficient time to permit the Underwriter to comply with the provisions of the Rule and with all applicable rules of the Municipal Securities Rulemaking Board. c) The Issuer will not amend or supplement the Final Official Statement without the consent of the Underwriter. The Issuer agrees to notify the Underwriter promptly if, on or prior to the 25th day after the End of the Underwriting Period (as defined below), any event'shall occur, or information come to the attention of the Issuer, that would cause; the Final Official Statement (whether or not previously supplemented or amended), as of its date, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If, in the opinion of the Issuer, such event requires the preparation and distribution o a supplement or amendment to the Final Official Statement, the Issuer at its expense and with Underwriter's assistance, shall amend or supplement the Final Official Statement in a form and manner approved by the Underwriter and will provide such number of copies of the supplement or amendment to the Final Official Statement, as the Underwriter may reasonably request. For purposes of this Purchase Agreement, the "End of the Underwriting Period" shall occur on the Closing Date. 6. Representations, Warranties and Covenants The Issuer represents, warrants and covenants to the Underwriter that as of the date hereof and as of the Closing Date: a) The Issuer is a municipal corporation duly organized and validly existing under the laws and Constitution of the State of Washington; b) The Issuer has duly adopted the Ordinance and it is a valid, legal and binding ordinance of the Issuer; c) The Issuer is duly authorized and has full legal right, power, and authority to issue, sell and deliver the Bonds and perform its obligations under the Documents; d) The Ordinance is in full force and effect and has not been superseded, rescinded or amended; -3- RESOLUTION NO. 3919 Honorable Mayor and Cit . �uncil City of Renton, Washington November 26, 2007 Page 4 e) The Issuer has full legal right, power and authority to and will apply or cause to be applied the proceeds of the Bonds as described in the Ordinance; f) The execution of and performance by the Issuer of its obligations under the Documents will not cause the Issuer to be (i) in violation of any constitutional provision, law, court decree, administrative regulation or judgment or (ii) in material default under any loan agreement, indenture, bond, note, resolution or other material agreement or instrument to which the Issuer is a party or to which the Issuer or any of its properties or assets is otherwise subject; g) All governmental approvals or authorizations required to be obtained by the Issuer prior to the Closing in connection with the issuance and delivery of the Bonds or the performance by the Issuer of its obligations under the Documents have been or will be obtained prior to Closing; h) No filing or registration of the Ordinance or other instrument or financing statement is required to be made to create, protect or preserve the pledge of revenues under the Ordinance or is required for the validity and enforceability of the Ordinance; i) As of the Closing, the Bonds will be legal, valid and binding obligations of the Issuer, and, subject only to the laws of bankruptcy and insolvency, will be enforceable in accordance with their terms and will be in full force and effect; j) Except as described in the Final Official Statement there is no action, suit, proceeding, inquiry or investigation before or by any court, governmental agency, public board or body pending or, to the knowledge of the Issuer, threatened against the Issuer, (i) in any way questioning the legal existence of the Issuer or the titles of the officers of the Issuer to their respective offices; (ii) in any way affecting or contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of the Bonds; (iii) wherein an unfavorable decision, ruling, or finding would have a material adverse effect on the collection and application of revenues that may be collected for the benefit of the Issuer for the payment of the Bonds, the financial condition of the Issuer, or would have an adverse effect on the validity or enforceability of the Bonds or the Ordinance, or which would in any way adversely affect the exclusion of interest on the Series 2008A Bonds from gross income for federal income tax purposes; or(iv) contesting the completeness or accuracy of the POS or the Final Official Statement; and (v) to the actual knowledge of the Issuer, there is no reasonable basis for any action, proceeding, inquiry or investigation of the nature described in the foregoing clauses (i) through (iv); k) The financial statements of the Issuer contained in the Final Official Statement fairly present the financial position of the Issuer as of the dates and for the periods therein set forth in accordance with the accounting standards applicable to the -4- RESOLUTION NO. 3919 Honorable Mayor and Cii' _,ouncil City of Renton, Washington November 26, 2007 Page 5 Issuer, and since the date thereof, there has been no material adverse change in the financial position of the Issuer; 1) In connection with the financing process, the Underwriter may have provided the format for and certain of the content for inclusion in the POS and may have assumed principal!drafting responsibility for the preparation of the POS and may coordinate the preparation and dissemination of the Final Official Statement. The Issuer understands and acknowledges, however, that the ultimate responsibility for the POS and the Final Official Statement with respect to content, accuracy and completeness is the responsibility of the Issuer as an issuer of municipal securities. The Issuer hereby represents and warrants to the Underwriter that the POS did not, as of its date, and the Final Official Statement will not, as of its date and at the Closing Date, contain any untrue statement of material fact nor 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; provided, however, that no representation or warranty is made with respect to information within the POS or the Final Official Statement relating to DTC, the book entry system, the Insurer or the Underwriter; and m) The Issuer has notl,failed to comply with any prior undertaking under the Rule in the past five years. 7. Termination The Underwriter may terminate its obligation under this Purchase Agreement, without liability therefor, by notifying the Issuer of its election to do so in writing if, after the execution of this Purchase Agreement and prior to the Closing, any one or more of the following events shall haze occurred and such event, in the reasonable opinion of the Underwriter (i) would materially and adversely affect the marketability of the Bonds or the prices or yields of the' Bonds as set forth in Exhibit C, or (ii) would materially and adversely affect the Underwriter's ability to enforce contracts for the sale of the Bonds: a) A material disruption in commercial banking or securities settlement or clearance services; or b) The United States shall have become engaged in hostilities or existing hostilities shall have escalated or a national emergency or other national or international calamity, including but not limited to terrorist attack(s) or other event; or c) A general suspension of trading or other material restrictions not in force as of the date of this Purchase Agreement on the New York Stock Exchange or other national securities exchange; or d) Declaration of a general banking moratorium by the United States, New York State or Washington State authorities; or -5- , RESOLUTION NO. 3919 Honorable Mayor and Cit., __uncil City of Renton, Washington November 26, 2007 Page 6 e) Legislation with respect to eliminating or reducing the exemption from federal or state taxation for interest income received on obligations of the general character of Series 2008A Bonds shall be introduced or enacted by the legislature of the State of Washington or by Congress of the United States or adopted by either the United States House of Representatives or the United States Senate or shall have been recommended to the Congress or otherwise endorsed for passage by the Treasury Department of the United States, the Internal Revenue Service or by the chairman of the Senate Finance Committee or a decision or an order or ruling with respect to eliminating or reducing such exemption, shall have been issued by a court of the United States, including the United States Tax Court, or by or on behalf of the Treasury Department of the United States or the Internal Revenue Service; or f) Legislation shall hereafter be enacted, or actively considered for enactment, or a decision by a court of the United States shall hereafter be rendered, or a ruling, stop order or regulation by the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter shall hereafter be made, the effect of which is or would be that the offering and sale of the Bonds would be illegal or that: i) The Bonds are not exempt from the registration, qualification or similar requirements of the Securities Act of 1933, as amended and as then in effect (the "33 Act") or distribution of the Bonds, as contemplated herein or in the Final Official Statement, is in violation of or not exempt from the registration, qualification or other requirements of the 33 Act, as amended and as then in effect, or the Securities Exchange Act of 1934, as amended and then in effect or the Investment Company Act of 1940, as amended and then in effect (the "Investment Company Act") or, in each case, the rules or regulations promulgated thereunder as then in effect; or ii) The Ordinance is not exempt from the registration, qualification or other requirements of the Trust Indenture Act of 1939, as amended and as then in effect; or iii) This Purchase Agreement is subject to the Investment Company Act or requires any registration under the Investment Company Act; or g) Any litigation, except as described in the Final Official Statement, shall be instituted or pending at Closing to restrain or enjoin the authorization, issuance, execution, sale or delivery of the Bonds or the execution and delivery of any of the Documents, or in any way contesting or affecting any authority for or the validity or enforceability of the Bonds, the Ordinance or any of the other Documents, any moneys or securities provided for the payment of the Bonds or the existence or powers of the Issuer; or -6- RESOLUTION NO. 3919 Honorable Mayor and City of Renton, Washington November 26, 2007 Page 7 h) Any legislation, ordinance, rule or regulation shall be introduced in or enacted by any governmental body, board, department or agency of Washington State or of the United States, or a decision by any court of competent jurisdiction within Washington State or any court of the United States shall be rendered materially affecting the Issuer or the Bonds; or i) There shall have been established any new restrictions on transactions in securities materially affecting the free market for securities or the extension of credit by, or the charge to the net capital requirements of the Underwriter, including without limitation, the fixing of minimum or maximum prices for trading or maximum ranges of prices, by any exchange, the Securities and Exchange Commission, any other federal or state agency or the Congress of the United States, or by Executive Order; or j) Except for such changes to the Final Official Statement as provided in Section 5(c) of this Purchase Agreement, there shall have been a material adverse change in the affairs of the Issuer or there shall exist any event or fact or set of facts that either (a)makes untrue or incorrect in any material respect any statement or information contained in the Final Official Statement or (b) is not reflected in the Final Official Statement but should be reflected therein to make the statements and information contained therein under the circumstances in which made not misleading in any material respect; or k) The withdrawal or downgrading of any rating of the Bonds by a national rating agency from those shown in (c)(i) of Exhibit B. 8. Closing; Conditions of Closing The Closing shall occur on such date and at such time and place as is set forth in Exhibit C or otherwise agreed between the Issuer and the Underwriter, and subject to the satisfaction of the terms and conditions of this Purchase Agreement. At Closing, the following shall occur: the Issuer will deliver the duly executed Bonds or cause to be delivered to the fiscal agent for re-delivery through Fast Automated Transfer System to DTC and will deliver or cause to be delivered to the Underwriter the Ordinance; the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in Exhibit C hereof in same day funds. The Issuer shall cause the applicable CUSIP identification numbers to be printed on the Bonds of each maturity, but neither the failure to print such number on any such Bond nor any error with respect thereto shall constitute cause for a failure or refusal by the Underwriter to accept delivery of and to pay for the Bonds. The Bonds shall be prepared and delivered to the Bond Registrar at or prior to the Closing Date. In addition to the other requirements of this Purchase Agreement, Underwriter's obligations hereunder are subject to and conditioned upon Issuer, at or prior to the -7- RESOLUTION NO. 3919 Honorable Mayor and Cit, uncil City of Renton, Washington November 26, 2007 Page 8 Closing Date, delivering or making available to Underwriter copies of the Documents and such items as are listed in Exhibit B attached hereto and incorporated herein. 9. Fees and Expenses The Issuer will pay the cost of preparing, printing and executing the Bonds; the fees and disbursements of Bond Counsel and Financial Advisor; bond registration and rating fees and expenses; the bond insurance premium; the financial advisor fee; the cost of printing and distributing the POS and Final Official Statement; travel and lodging expenses of the Issuer's employees and representatives; and other expenses of the Issuer. The Underwriter will pay fees and disbursements of its counsel, if any, the cost of preparation and filing of blue sky and legal investment surveys where necessary, the Underwriter's travel expenses, and other expenses of the Underwriter. As a convenience to the Issuer, the Underwriter may from time to time, but only upon the prior written direction from the Issuer, make arrangements for certain items for which Issuer is responsible hereunder, such as printing of the POS and the Final Official Statement and travel or lodging arrangements for the Issuer's representatives. The Underwriter also may advance for the Issuer's account when appropriate and when directed in advance in writing by the Issuer, the cost of the items for which the Issuer is responsible by making payments to third-party vendors. In such cases, the Issuer shall pay such costs or expenses directly, upon submission of appropriate invoices by the Underwriter, or promptly reimburse the Underwriter in the event the Underwriter has advanced such costs or expenses for the Issuer's account. It is understood that the Issuer shall be primarily responsible for payment of all such items and that the Underwriter may agree to advance the cost of such items from time to time solely as an accommodation to the Issuer and on the condition that it shall be reimbursed in full by the Issuer. 10. Miscellaneous a) All matters relating to the Purchase Agreement shall be governed by the laws of the state of Washington. b) This Purchase Agreement is intended to benefit only the parties hereto. Unless it can be shown that the untruth of any representation or warranty of the Issuer or the violation of any agreement of the Issuer hereunder actually was or should have been discovered by the Underwriter through its review of the information in the Final Official Statement in accordance with and as a part of its responsibilities under federal securities laws as applied to the facts and circumstances of this transaction, all representations and warranties and agreements of the Issuer in this Purchase Agreement shall remain operative and in full force and effect, regardless of(i) any investigation made by or on behalf of the Underwriter, (ii) delivery of and payment for the Bonds hereunder, or (iii) any termination of this Purchase Agreement. If the Issuer fails to satisfy any of the foregoing conditions or covenants, or if the Underwriter's obligations are terminated for any reason permitted under this Purchase Agreement, then neither the Underwriter nor the -8- (RESOLUTION NO. 39. 19 Honorable Mayor and Ci' Duncil City of Renton, Washington November 26, 2007 Page9 Issuer shall have any further obligations under this Purchase Agreement, except that any expenses incurred shall be borne in accordance with the Fees and Expenses Section hereof. c) Any notice or other communication to be given to the Issuer by the Underwriter under this Purchase Agreement may be given by delivering the same in writing to the Finance & Information Services Administrator or other authorized official of the Issuer at 1055 South Grady Way, Renton, Washington 98055; and any notice or other communication to be given to the Underwriter by the Issuer under this Purchase Agreement may be given by delivering the same in writing to the attention of the officer of the Underwriter executing this Purchase Agreement at Seattle-Northwest Securities Corporation, 1420 Fifth Avenue, Suite 4300, Seattle, Washington, 9810 . Written communications may be delivered by electronic means. d) This Purchase Agreement may be executed in any number of counterparts, all of which shall be one and the same instrument, and either Party hereto may execute this Purchase Agreement by signing any such counterpart. e) This Purchase Areement, including all documents incorporated herein by reference, constitutes the entire agreement between and among the Parties, supersedes any other representations, understandings or communications between . . the Parties or theirlrepresentatives, and may be amended only in a writing signed by both Parties. This Purchase Agreement is intended solely for the benefit of the Parties (including any successors and assigns thereof but not any holder of any Bonds). No other person shall acquire or have any rights hereunder or by virtue hereof. Respectfully submitted, SEATTLE-NORTHWEST SECURITIES CORPORATION, as Purchaser B " Title: Senior Vice President Accepted November 26, 2007 City of Renton, Washington By: Mr. Michael E. Bailey Time Signed Finance& Information Services Administrator -9- RESOLUTION NO. 3919 _ EXHIBIT A FINAL PRICING NUMBERS ( ( RESOLUTION NO. 3919 BOND DEBT SERVICE City of Renton Water&Sewer Revenue Bonds,Series 2008A&2008B Final Numbers Dated Date 01/04/2008 Delivery Date 01/04/2008 Period Annual Ending Principal i Coupon Interest Debt Service Debt Service 06/01/2008 - - 210,555.04 210,555.04 - 12/01/2008 - i - 257,822.50 257,822.50 468,377.54 06/01/2009 - - 257,822.50 257,822.50 - 12/01/2009 - - 257,822.50 257,822.50 515,645.00 06/01/2010 - - 257,822.50 257,822.50 - 12/01/2010 - - 257,822.50 257,822.50 515,645.00 06/01/2011 - - 257,822.50 257,822.50 - 12/01/2011 - - 257,822.50 257,822.50 515,645.00 06/01/2012 - i - 257,822.50 257,822.50 - 12/01/2012 - - 257,822.50 257,822.50 515,645.00 06/01/2013 - I - 257,822.50 257,822.50 - 12/01/2013 610,000 4.700% 257,822.50 867,822.50 1,125,645.00 06/01/2014 - - 243,487.50 243,487.50 - 12/01/2014 600,000 i 4.850% 243,487.50 843,487.50 1,086,975.00 06/01/2015 - - 228,937.50 228,937.50 - 12/01/2015 630,000 5.100% 228,937.50 858,937.50 1,087,875.00 06/01/2016 - - 212,872.50 212,872.50 - 12/01/2016 675,000 ** 212,872.50 887,872.50 1,100,745.00 06/01/2017 - - 198,153.75 198,153.75 - 12/01/2017 695,000 4.000% 198,153.75 893,153.75 1,091,307.50 06/01/2018 - - 184,253.75 184,253.75 - 12/01/2018 565,000 5.000% 184,253.75 749,253.75 933,507.50 06/01/2019 - - 170,128.75 170,128.75 - 12/01/2019 645,000 4.000% 170,128.75 815,128.75 985,257.50 06/01/2020 - - 157,228.75 157,228.75 - 12/01/2020 720,000 4.000% 157,228.75 877,228.75 1,034,457.50 06/01/2021 - F - 142,828.75 142,828.75 - 12/01/2021 760,000 4.000% 142,828.75 902,828.75 1,045,657.50 06/01/2022 - - 127,628.75 127,628.75 - 12/01/2022 790,000 4.000% 127,628.75 917,628.75 1,045,257.50 06/01/2023 - - 111,828.75 111,828.75 - 12/01/2023 980,000 4.100% 111,828.75 1,091,828.75 1,203,657.50 06/01/2024 - - 91,738.75 91,738.75 - 12/01/2024 1,020,000 4.150% 91,738.75 1,111,738.75 1,203,477.50 06/01/2025 - - 70,573.75 70,573.75 - 12/01/2025 1,060,000 4.200% 70,573.75 1,130,573.75 1,201,147.50 06/01/2026 - - 48,313.75 48,313.75 - 12/01/2026 1,105,000 4.250% 48,313.75 1,153,313.75 1,201,627.50 06/01/2027 - - 24,832.50 24,832.50 - 12/01/2027 1,155,000 4.300% 24,832.50 1,179,832.50 1,204,665.00 12,010,000 7,072,217.54 19,082,217.54 19,082,217.54 Nov 26,2007 10:43 am Prepared by Seattle-Northwest Securities-TH (k:\analysis\dbc\city\RENTON:2008REV) Page 5 BOND PRICING City of Renton Water&Sewer Revenue Bonds, Series 2008A&2008B Final Numbers Maturity Yield to Call Call Call Date Call Price Premium Bond Component Date Amount Rate Yield Price Maturity Date Price for Arb Yield for Arb Yield (-Discount) Serial Bonds(Series 2008B-Taxable): 12/01/2013 610,000 4.700% 4.850% 99.233 - - - - - -4,678.70 12/01/2014 600,000 4.850% 5.000% 99.128 - - - - - -5,232.00 12/01/2015 630,000 5.100% 5.140% 99.737 - - - - - -1,656.90 12/01/2016 195,000 5.250% 5.240% 100.065 - - - - - 126.75 2,035,000 -11,440.85 Serial Bonds(Series 2008A-Exempt): 12/01/2016 480,000 4.000% 3.800% 101.496 - - - - - 7,180.80 12/01/2017 695,000 4.000% 3.850% 101.223 - - - - - 8,499.85 ') Cli 12/01/2018 565,000 5.000% 3.900% 108.965 C 3.979% 12/01/2017 100.000 12/01/2017 100.000 50,652.25 En 12/01/2019 645,000 4.000% 3.950% 100.403 C 3.957% 12/01/2017 100.000 - - 2,599.35 0 12/01/2020 720,000 4.000% 4.000% 100.000 - - - - - - C 12/01/2021 760,000 4.000% 4.050% 99.469 - - - - - -4,035.60 y 12/01/2022 790,000 4.000% 4.100% 98.889 - - - - - -8,776.90 H 12/01/2023 980,000 4.100% 4.150% 99.418 - - - - - -5,703.60 0 12/01/2024 1,020,000 4.150% 4.200% 99.395 - - - - - -6,171.00 Z 12/01/2025 1,060,000 4.200% 4.250% 99.374 - - - - - -6,635.60 Z 12/01/2026 1,105,000 4.250% 4.300% 99.353 - - - - - -7,149.35 0 12/01/2027 1,155,000 4.300% 4.340% 99.466 - - - - - -6,167.70 9,975,000 24,292.50li-l;'W lCo 12,010,000 12,851.65 Dated Date 01/04/2008 Delivery Date 01/04/2008 i First Coupon 06/01/2008 Par Amount 12,010,000.00 Premium 12,851.65 Production 12,022,851.65 100.107008% Underwriter's Discount -67,616.30 -0.563000% Purchase Price 11,955,235.35 99.544008% Accrued Interest - Net Proceeds 11,955,235.35 Nov 26,2007 10:43 am Prepared by Seattle-Northwest Securities-TH (k:\analysis\dbc\city\RENTON:2008REV) Page 2 • y RESOLUTION NO. 3919 1 SOURCES AND USES OF FUNDS City of Renton Water& Sewer Revenue Bonds, Series 2008A&2008B Final Numbers Dated Date 01/04/2008 Delivery Date 01/04/2008 Sources: 08REV 08REVTX Total • Bond Proceeds: Par Amount 9,975,000.00 2,035,000.00 12,010,000.00 Original Issue Discount -44,639.75 -11,567.60 -56,207.35 Premium 68,932.25 126.75 69,059.00 9,999,292.50 2,023,559.15 12,022,851.65 Other Sources of Funds: Reserve Fund Contribution 3,145,309.00 - 3,145,309.00 13,144,601.50 2,023,559.15 15,168,160.65 Uses: 08REV 08REVTX Total Project Fund Deposits: Project Fund 12,975,652.48 1,989,091.87 14,964,744.35 Delivery Date Expenses: Cost of Issuance 38,537.89 7,862.11 46,400.00 Underwriter's Discount 56,159.25 11,457.05 67,616.30 Bond Insurance(MBIA @ 18.2 bps) 28,820.36 5,879.64 34,700.00 Surety Policy(1.5%) 45,431.52 9,268.48 54,700.00 168,949.02 34,467.28 203,416.30 13,144,601.50 2,023,559.15 15,168,160.65 Nov 26,2007 10:43 am Prepared by Seattle-Northwest Securities-TH (k:\analysis\dbc\city\RENTON:2008REV) Page 1 RESOLUTION NO. 3919 EXHIBIT B CLOSING DOCUMENTS Issuer's Closing Documents At Closing, Issuer shall provide the following: a) Copies of the Ordinance and the Blanket Issuer Letter of Representation; b) The approving opinions of Bond Counsel dated as of the Closing Date and addressed to the Issuer, substantially in the forms set forth in Appendix B to the Final Official Statement and two letters addressed to the Insurer to the effect that the Insurer may rely upon such opinion as if they were addressed to the Insurer; c) Evidence of each of the following: i) That Standard & Poor's ("S&P") has assigned its (i) underlying rating of"AA-" to the Bonds and that such rating is in full force and effect on and as of the date of Closing and (ii) insured rating of"AAA", based upon the Issuer's purchase of the Policy issued by the Insurer; ii) That Fitch Ratings ("Fitch") has assigned its (i) underlying rating of"AA-" to the Bonds and that such rating is in full force and effect on and as of the date of Closing and (ii) insured rating of"AAA", based upon the Issuer's purchase of the Policy issued by the Insurer; iii) Issuer's purchase of the Policy, including a copy of the Policy and an opinion of counsel to the Insurer in form and substance satisfactory to the Underwriter; and iv) designation of the Series 2008A Bonds as "qualified tax-exempt obligations" for banks, thrift institutions and other financial institutions, as defined in Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. d) A copy of completed Form 8038-G; e) The following certifications, which may be combined, executed by an authorized officer of the Issuer and dated as of the Closing Date, to the effect that: i) The representations, warranties and covenants of the Issuer contained herein and in the Ordinance are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; ii) No litigation or other proceedings are pending or, to the knowledge of the Issuer, threatened in any court in any way (a) affecting the position or title of the authorized officers of the Issuer, or (b) seeking to restrain or to enjoin the authorization, issuance, sale or delivery of, or security for, any of the Bonds, or (c) contesting or affecting the validity or enforceability of the Bonds, the Ordinance, this Purchase Agreement, or (d) contesting the completeness or RESOLUTION NO. 3919 accuracy of the POS or the Final Official Statement, or (e) contesting the powers of the Issuer or its authority with respect to the Bonds, the Ordinance or this Purchase Agreement, or(f) materially affecting the finances of the Issuer. For the purpose of this subparagraph, the Issuer may rely upon a certificate of the Issuer's legal counsel with respect to the legal matters set forth therein; iii) No event affecting the Issuer has occurred since the date of the Final Official Statement which should be disclosed in the Final Official Statement for the purpose for which it is to be used or which is necessary to disclose therein in order to make the statements therein not misleading, and the Final Official Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; f) Such additional certificate , instruments or opinions or other evidence as the Underwriter or Bond Counsel may deem reasonably necessary or desirable to evidence the due authorization, issuance, execution, authentication and delivery of the Bonds, the truth and accuracy as of the time of the Closing of the representations and warranties contained in this Purchase Agreement, and the conformity of the Bonds and Ordinance with the terms thereof as summarized in the POS and the Final Official Statement, and to cover such other matters as the Underwriter or Bond Counsel reasonably requests. Underwriter's Closing Documents At Closing, Underwriter shall deliver or cause to be delivered to the Issuer or Bond Counsel a receipt for the Bonds including therein a representation that all closing conditions set forth in this Purchase Agreement have been provided to the satisfaction of the Underwriter or waived by it. - RESOLUTION NO. 3919 EXHIBIT C DESCRIPTION OF THE BONDS (a) Principal Amount (Series 2008A Bonds): $9,975,000 Principal Amount (Series 2008B Bonds): $2,035,000 (b) Purchase Price (Series 2008A Bonds): $9,943,133.25 ($99.680534 per $100), representing a net original issue premium of $24,292.50 and an underwriter's discount of$56,159.25. Purchase Price (Series 2008B Bonds): $2,012,102.10 ($98.874796 per $100), representing a net original issue discount of $11,440.85 and an underwriter's discount of$11,457.05. (c) Denominations: $5,000, or integral multiples thereof (d) Form: Registered;Book-entry only (e) Interest Payment Dates: June 1 and December 1, commencing June 1, 2008. (f) Maturity and Interest Rates: The Bonds shall mature on December 1 of each year and bear interest as follows: Series 2008A Bonds %.��::;��„°;� r�InEerest�-`;:» '';" .vii:„;..v �M1i e v^�t. •�"S•Decemlier 1=" q`Priioiixits ltates:�,:`` 2016 480,000 4.00% 3.80% 760167TU0 2017 695,000 4.00 3.85 760167TV8 2018(') 565,000 5.00 3.90 760167TW6 2019(1) 645,000 4.00 3.95 76016/1•X4 2020 720,000 4.00 4.00 760167TY2 2021 760,000 4.00 4.05 760167TZ9 2022 790,000 4.00 4.10 760167UA2 2023 980,000 4.10 4.15 760167UB0 2024 1,020,000 4.15 4.20 760167UC8 2025 1,060,000 4.20 4.25 760167UD6 2026 1,105,000 4.25 4.30 760167UE4 2027 1,155,000 4.30 4.34 760167UF1 (1) Priced to the call. RESOLUTION NO. 3919 Series 2008B Bonds r',i:•'•'r; s-y. ,i.,� °t,; "'ri,• „Sr >1.f;.,x..r'�° .».;t=;;.:y • ,k q'��.%u:,;,i,€,' 3, •fr, %,Fr. ,f%N'e'r ;,v�'.. ,�5v»EH j%, '�:�';�:,. ./.;',:ri.:'^ai'6a. -,-rk: 'y� t.F',. _=3� ;S I i»` sw,.a i'%:•:;a,-.'.,+ � rx"-"k°%i,,� Fa; 0inbia 3s/ , ,�:4,r z °' °: .,;.•rs..:.�..x....' .�, ;.'�.,".r zz.....P, .rd' ,.r.;LY.ir.w ,,,<' .-.a•a.. ._«,..„e......... ..... °?..,. ,.^....M. ,..........»... ........ c ..... •. ,µ.,,...:...:xz^..x.....y.,<r.....,a'.a,:c'A.^�.:....n...:'a:..z.d.w ...a.c:u ......x�'• ....G.'akw:M...z.. 2013 610,000 4.70% 4.85% 760167TN6 2014 600,000 4.85 5.00 760167TP1 2015 630,000 5.10 5.14 760167TQ9 2016 195,000 5.25 5.24 760167TR7 (g) Optional Redemption: The Series 2008A Bonds maturing on December 1 in years 2016 and 2017 are not subject to redemption prior to maturity. The Series 2008A Bonds maturing on or after December 1, 2018 are subject to redemption at the option of the Issuer, in whole or in part on any date on or after December 1, 2017 at a price of par plus accrued interest, if any, to the date of redemption. The Series 2008B Bonds are not subject to redemption prior to maturity. (h) Dated Date: Date of Delivery, expected to be January 4, 2008. (i) Offer Expires: 11:59 p.m. Pacific Time, November 26, 2007. (j) Bond Counsel: K&L Preston Gates Ellis LLP (k) Closing: Via conference call initiated by Bond Counsel on January 4, 2008, at 9:00 a.m. (1) Delivery: To the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer. (m) Bond Insurance: Payment of the principal of and interest on the Bonds, when due, will be insured by the Policy to be issued by the Insurer (MBIA Insurance Corporation) simultaneously with the delivery of the Bonds. (n) Ratings: S&P and Fitch will assign their ratings of "AAA" and "AAA" respectively, to the Bonds based on the Issuer's purchase of the Policy described above. Further, S&P and Fitch have assigned their underlying ratings of "AA-" and "AA-," respectively, to the Bonds. Ii RESOLUTION NO. 3919 CERTIFICATE I, the undersigned, Clerk of the City of Renton, Washington (the "City"), DO HEREBY CERTIFY: 1. That the attached Resolution No. 3919 (the "Resolution"), is a true and correct copy of a resolution of the City, as finally adopted at a regular meeting of the City Council of the City(the"City")held on the 26th day of November, 2007, and duly recorded in my office. 2. That said meeting was duly convened and held in all respects in accordance with law, and to the extent required by law, due and proper notice of such meeting was given; that a quorum of the City Council was present throughout the meeting and a legally sufficient number of members of the City Council voted in the proper manner for the adoption of the Resolution; that all other requirements and proceedings incident to the proper adoption of the Resolution have been duly fulfilled, carried out and otherwise observed, and that I am authorized to execute this certificate. IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of November, 2007. J. t daL e-0- Bonnie I. Walton, City Clerk P:\20584 JAR120584 254 07/11/26 November 26,2007 Renton City Council Minutes Page 406 AILS: Public Defender Public Safety Committee Chair Law presented a report recommending Services, Kameron C Cayce& concurrence in the staff recommendation to authorize the Mayor and City Clerk Associates to enter into an agreement with Kameron C. Cayce &Associates for public defense services for the years 2008-2010. MOVED BY LAW, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance Committee Finance Committee Chair Persson presented a report recommending adoption of Budget: 2007 Year-End the 2007 year-end budget amendments ordinance,which appropriates funds Amendments from fund balance and new revenue increasing the 2007 expenditures in various funds and departments. This ordinance increases the 2007 budgeted expenditures by $3,584,104 and increases the revenue estimates by $7,726,095 for a net change of$4,141,991. The Committee further recommended that the ordinance regarding this matter be presented for first reading. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See later this page for ordinance.) RESOLUTIONS AND The following resolutions were presented for reading and adoption: ORDINANCES Resolution#3919 A resolution was read approving the sale of the City's Water and Sewer Finance: Bond Issuance, Revenue Bonds, Series 2008A, and Water and Sewer Revenue Bonds, Series Utility Capital Projects 2008BI(Taxable), in the aggregate principal amounts of$9,975,000 and $2,0351,000, respectively, to provide funds for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility; and approving the sale of such bonds to Seattle-Northwest Securities Corporation, all in accordance with Ordinance 5313. MOVED BY NELSON, SECONDED BY BRIERE, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. Resolution #3920 A resolution was read authorizing the Mayor and City Clerk to enter into an CAG: 95-087, King County addendum to the interlocal cooperative agreement with King County Fire Fire Protection District#25 District#25 regarding continuing operation of Fire District#25 by the Renton Fire Department. MOVED BY LAW, SECONDED BY PERSSON, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. The following ordinance was presented for first reading and referred to the Council meeting of 12/3/2007 for second and final reading: Budget: 2007 Year-End An ordinance was read providing for the 2007 year-end budget amendments in Amendments the total amount of$4,141,991. MOVED BY NELSON, SECONDED BY LAW, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 12/3/2007. CARRIED. The following ordinances were presented for second and final reading and adoption: Ordinance#5319 An ordinance was read amending Chapter 2, Storm and Surface Water, Chapter Utility: 2008 Rates 4,Water, and Chapter 5, Sewer, of Title VII (Health and Sanitation) of City Code to allow for adjustments to current utility rates. MOVED BY BRIERE, SECONDED BY PALMER, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. November 26,2007 j Renton City Council Minutes Page 405 businesses located on this road. For consistency, Mr. Wagner recommended that one name be used from the eastern to western City limits. Continuing, Mr. Wagner stated that the second roadway is known as Smithers Ave. S., Talbot Rd. S., Benson Dr. S., 108th Ave. SE, and Benson Rd. S. He noted the problem he has had in explaining to emergency dispatch the difference between the two Bensons. To create a greater distinction between BensonI Dr. and Benson Rd.,Mr. Wagner recommended renaming the roadway SE Benson Ave. MOVED BY PERSSON, SECONDED BY PALMER, COUNCIL REFER THE ISSUE;OF RENAMING THE ROADWAYS TO THE TRANSPORTATION (AVIATION) COMMITTEE. CARRIED. Citizen Comment: Young- Tom Young(Mercer Island) introduced himself as the Constituents Services Congressional Outreach, Dave Manager for Congressman Dave Reichert, and reported on the services offered Reichert to constituents and cities in an official capacity, which include assisting citizens who halve issues with federal agencies such as the Veterans Administration, assisting citizens to find grant opportunities, and assisting cities with appropriation requests. 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 11/19/2007. Council concur. 11/19/2007 Plat: Honeybrook Circle Hearing Examiner recommended approval, with conditions, of the Honeybrook Division II, NE 7th St, PP-07- Circle Division II Preliminary Plat; 26 single-family lots located at 4915 NE 7th 085 St. Council concur. Airport: T-Hangar Lease Rate Transportation Systems Division requested approval of a rent increase for all Increase City-owned T-Hangar units at the airport from$285 to $301.31 per month plus leasehoild excise tax. Council concur. Added Item 6.d. Mayor Keolker appointed the following individuals to the Municipal Arts Appointment: Municipal Arts Commission: Doug Kyes,to fill a vacated unexpired term expiring on Commission 12/31/2008 (position previously held by Roosevelt Lewis); and Frederick Lund, to fill a term expiring on 12/31/2010 (position previously held by Patricia Riggs). Refer to Community Services Committee. MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL APPROVE THE CONSENT AGENDA AS PRESENTED. CARRIED. UNFINISHED BUSINESS MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL Committee of the Whole AUTHORIZE THAT THE 2008 BOND SALE RESOLUTION BE READ Finance: Bond Issuance, LATER IN THE MEETING. CARRIED. (See page 406 for resolution.) Utility Capital Projects Public Safety Committee Public Safety Committee Chair Law presented a report recommending CAG: 95-087, King County concurrence in the staff recommendation to approve the contract addendum to Fire Protection District#25 extend Renton's operating agreement with King County Fire District#25 for two additional years, through 2009. The Committee further recommended that the resolution regarding this matter be presented for reading and adoption. MOVED BY LAW, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See page 406 for resolution.) • 601 Union Street,12th Floor,S' \Washington 98101 �`� Piper, Ef ray. Tel:206 254-7244 I Te _,;77.4737 I Fax 206 287-8895 Piper Jaffrey&Co.Since 1895.Member SIPC and NYSE. C;om,11.v -e gf 1)44 November 26,2007 ///2 ///..24A2a07 Honorable Mayor Keolker and City Council Members City of Renton 1055 S. Grady Way Renton,WA 98055 RE: Financial Advisor Opinion on the 2008 Sale of the $9,975,000 City of Renton Water and Sewer Revenue Bonds,Series 2008A and $2,035,000 City of Renton Water and Sewer Revenue Bonds, Series 2008B Honorable Mayor Keolker and City Council Members: Piper Jaffray & Co. is pleased to present this letter in our role as fmancial advisor to the City of Renton for its $9,975,000 City of Renton Water and Sewer Revenue Bonds, Series 2008A and$2,035,000 City of Renton Water and Sewer Revenue Bonds,Series 2008B. We have worked closely with representatives of the City, its bond counsel and its underwriter, Seattle-Northwest Securities Corporation. In our role,we have reviewed all documents and submitted substantive comments to the participants as appropriate. We have worked closely with the underwriter in the structuring of the 2008 issues to assure the lowest cost of capital to the City. We also have reviewed the pricing of the bonds, as presented fo you this evening; relative to current market conditions and to other similar credits recently traded in the market. We likewise have reviewed the fees of the underwriter. It is our opinion that the 2008 Water and Sewer Revenue and Refunding Bonds, Series 2008A and Series 2008B, were structured and priced to the benefit of the City and the results are consistent with other negotiated bond sales. It is also our opinion that the fees of the underwriter are fair given the level of effort and support they have provided the City. It has been an honor for Piper Jaffray to have worked with the City on this transaction. Should any members of the Council have further questions,;please do not hesitate to contact us. Sincerely, g444-t 46W,-) Jane Towery Managing Director,Investment Banker cc: Mr.Jay Covington,Chief Administrative Officer Mr.Michael E.Bailey,Finance&Information Service Administrator BOND SUMMARY STATISTICS City of Renton Water& Sewer Revenue Bonds, Series 2008A&2008B Final Numbers Dated Date 01/04/2008 Delivery Date 01/04/2008 Last Maturity 12/01/2027 Arbitrage Yield 4.212847% True Interest Cost(TIC) 4.321822% Net Interest Cost(NIC) 4.272154% All-In TIC 4.405936% Average Coupon 4.239326% Average Life(years) 13.890 Duration of Issue(years) 10.329 Par Amount 12,010,000.00 Bond Proceeds 12,022,851.65 Total Interest 7,072,217.54 Net Interest 7,126,982.19 Total Debt Service 19,082,217.54 Maximum Annual Debt Service 1,204,665.00 Average Annual Debt Service 958,504.02 Underwriter's Fees(per$1000) Average Takedown - Other Fee 5.630000 Total Underwriter's Discount 5.630000 Bid Price 99.544008 Par Average Average Bond Component Value Price Coupon Life Duration Serial Bonds(Series 2008B-Taxable) 2,035,000.00 99.438 4.947% 7.110 6.064 Serial Bonds(Series 2008A-Exempt) 9,975,000.00 100.244 4.172% 15.274 11.330 12,010,000.00 13.890 All-In Arbitrage TIC TIC Yield Par Value 12,010,000.00 12,010,000.00 9,975,000.00 +Accrued Interest - - - +Premium(Discount) 12,851.65 12,851.65 24,292.50 -Underwriter's Discount -67,616.30 -67,616.30 -Cost of Issuance Expense -46,400.00 -Other Amounts -34,700.00 -89,400.00 -74,251.88 Target Value 11,920,535.35 11,819,435.35 9,925,040.62 Target Date 01/04/2008 01/04/2008 01/04/2008 Yield 4.321822% 4.405936% 4.212847% Nov 26,2007 10:43 am Prepared by Seattle-Northwest Securities-TH (k:\analysis\dbc\city\RENTON:2008REV) Page 9 / ,,f .o - CITY �)F .REN.TON VV. Cit Clerk.. . , -41j. 'Kathy$eolker,Mayor `'L. j. - . , "Bonnie I:Walton NO November-Ig,.;2.007 • , . ' ,. . • •.. Cheryl Fountain,'Paralegal` , ., , ; , , . . K&LPreston•GatesEllis LLP.',. ' . , 925 Fourth Avenue,`Suite 2900 - Seattle, Washington 981-04-1158 . ' ' Re: Renton 2007 Water arid Sewer;Revenue Bonds - :. .. Dear:lVls. Fountain:.. ' `:.Enclosed'you will:find three`original'Affidavits of;Publication-provided by the City'of. ., Rentori's official newspaper,The Renton Reporter, attesting AO puhlioation of a'summary, • ' ' :of Ordinance No;:.53•13, adopted:by,the:Renton City"Couiicil in:October 22;::-2007; ' - authorizin the:referenced. ond:issue.'•. . _ , . - g b '{ If I Lan •;rovide further:information or.assi '• -' p stance;:;please•feel`free.t'o contact me: _ _. ; Sincerel-. • y,• , AA (:lJ ... B:or nie I. Walton ';,•'.. ,. . Cit y Enclosure :. . :: • . -: cc:-::.'.''Micliael'E.•.B;aleyFinalice and'IS�Adriinistrator•,-' . , .•.Deanna Gregory,Bond,Counsel .- - - . • 1055 South',Grady Way=..Renton,Wash_ington,98057 •-(425)430-65.10 •7 FAX(425•)430-6516 R. E ',T O,.:N _ ,-r' s. .o I''. ;.' . ' ' Ai.-IAD OF:"rYIE. 0 C :RVF , . This papercontains-$0%recycledmatenal;30%,deet porisumer • STATE OF WASHINGTON, COUNTY OF KING } AFFIDAVIT OF PUBLICATION PUBLIC NOTICE Linda M Mills,being first duly sworn on oath that she is the Legal Advertising CITY OF RENTON Representative of the NOTICE OF ORDINANCE ADOPTED BY RENTON CITY COUNCIL Following is a summary of an Renton Reporter ordinance adopted by the Renton City Council on October 22,2007. ORDINANCE NO.5313 a bi-weekly newspaper, which newspaper is a legal newspaper of general An ordinance of the City of Renton, circulation and is now and has been for more than six months prior to the date Washington,authorizing the issuance ofpublication hereinafter referred to, of three series of water and sewer published in the English language revenue bonds of the City for the continuously as.a bi-weekly newspaper in King County, Washington. The purpose of financing the costs of Renton Reporter has been approved as a Legal Newspaper by order of the carrying out certain capital improvements of the waterworks Superior Court of the State of Washington for King County. utility and refunding certain The notice in the exact form annexed was published in regular issues of the outstanding water and sewer revenue Reporter and not in supplement forth which was regularly bonds of the City, in the aggregate Renton pp y rincipal amounts of not to exceed distributed to its subscribers during the below stated period. The annexed $10,000,000, $10,000,000 and notice,a: $3,000,000,respectively;providing the foof the Public Notice bonds; fi fulfilling rms andcA t nen Reserve Requirement; authorizing the appointment of an escrow agent and was published on October 27,2007. the execution of an escrow agreement relating to the refunding bonds; and approving the seal and providing for The full amount of the fee charged for said foregoing publication is the sum the delivery of the bonds to Seattle- of $109.20., Northwest Securities Corporation, Seattle,Washington. Effective: 11/1/2007 -, i da64 Complete text of these ordinances is M.Mills available at Renton City Hall, 1055 South Grady Way; and posted at the Legal Advertising Representative,Renton Reporter Renton Public Libraries, 100 Mill Subscribed and sworn to me this 27th day of October,2007. Avenue South and 2902 NE 12th /1}�� Street. Upon request to the City f7- ,n 7 .f C j�L/o .„,.. G;S;N i 4",, will alsk'so be mailed for a fce, (425) ee. copies �( © ,. s Bonnie I.Walton B D Cantelon co°,.�\5Sti°''E-;ri;e� '. City Clerk Notary Public for the State of Washington,Residing in ienta Washington �(N•"a October 27, inthe Renton353. Reporter P.O.Number: °° NOTARY October 27,2007.#864353. PUBLIC ° 0 7. A% e F,., , ��'�3/0112° ..".-\ % November 19, 2007 Renton City Council Minutes Page 395 • Board/Commission: Municipal Community Services Department recommended approval of the revisions to Arts Commission Revisions City Code regarding the Municipal Arts Commission including the development of a public art conservation plan and a five-year master plan for arts and culture, and clarification of the funding process for the 1% for Art Fund. Refer to Community Services Committee. Plat: Zetterberg, S 21st St, FP- Development Services Division recommended approval, with conditions, of the 07-058 Zetterberg Final Plat; nine single-family lots on 1.4 acres located at 755 S. 21st St. Council concur. (See page 397 for resolution.) Planning: Highlands Study Economic Development,Neighborhoods and Strategic Planning Department Area Zoning Correction, requested authorization to correct the zoning designation to Residential Multi- Monroe Ave NE Familyjof a group of parcels located in the Highlands Study Area between Monroe Ave. NE and Olympia Ave. NE, south of NE 12th St. Refer to Planning and Development Committee. EDNSP: 2007 Neighborhood Economic Development,Neighborhoods and Strategic Planning Department Program Grants reported submission of grant applications for the 2007 Neighborhood Grant Program (second round) and recommended funding two projects and three newsletters in the total amount of$7,317. Refer to Community Services Committee. Annexation: New Life-Aqua Economic Development,Neighborhoods and Strategic Planning Department Barn, Maple Valley Hwy submitted 60%Petition to Annex for the proposed New Life-Aqua Barn Annexation and recommended a public hearing be set on 12/3/2007 to consider the petition; 374 acres located in the vicinity of Maple Valley Hwy. Council concur.) EDNSP: Boeing Pursuit of US Economic Development,Neighborhoods and Strategic Planning Department Tanker Program, Supporting recommended adoption of a resolution supporting The Boeing Company's Resolution pursuit of the United States Tanker Program. Council concur. (See page 397 for resolution.) Finance: Bond Issuance. Finance and Information Services Department recommended approval of a bond Utility Capital Projects sale in the approximate amount of$13.134 million that completes the sale of bonds to finance the cost of construction of various capital projects within the utility systems as provided by Ordinance 5313. Refer to Committee of the Whole. Budget: 2007 Year-End Finance and Information Services Department recommended approval of the Amendments 2007 year-end budget amendment ordinance in the total amount of$4,141,991. Refer to Finance Committee. Finance: Business Systems Finance and Information Services Department requested authorization to hire a Analyst Hire at Step D Business Systems Analyst at Step D of the salary range. Council concur. Airport: Pro-Flight Aviation Transportation Systems Division recommended approval of an addendum to Lease, LAG-99-002 LAG-99-002, airport lease with Pro-Flight Aviation, Inc., for a rent increase from$11,700.08 to $13,063.37 annually. Council concur. Streets: Duvall Ave NE Transportation Systems Division recommended a public hearing be set on Closure, Road Improvements 12/3/2007 to consider the temporary closure of Duvall Ave. NE/Coal Creek Project Parkway SE from NE Sunset Blvd. to SE 95th Way for roadway improvements. Closure to take place from February 2008 to February 2009, with exact dates dependent on work progress. Council concur. C OF RENTON COUNCIL AGENDA `LL AI#: , k` Submitting Data: For Agenda of: Dept/Div/Board.. Finance& IS Department November 19, 2007 Staff Contact Michael E. Bailey Agenda Status Finance/IS Administrator Consent X Subject: iI Public Hearing.. Correspondence.. Bond Sale and Resolution Ordinance X Resolution Old Business Exhibits: New Business Issue Paper Study Sessions Resolution Information Recommended Action: Approvals: Legal Dept Refer to the Committee of the Whole Finance Dept Other Fiscal Impact: Expenditure Required... Transfer/Amendment Amount Budgeted Revenue Generated Total Project Budget City Share Total Project.. SUMMARY OF ACTION: Staff proposes completing the sale i of bonds to finance the cost of construction of various capital projects within the utility systems as provided for in ordinance number 5313. STAFF RECOMMENDATION: Approve the bond sale in an approximate amount of$13.134 million and adopt the resolution. I:\DEBT\2008 Rev Bond\2008_ag Bond Sale Novemberi2007.doc + I y -TM � O FINANCE AND INFORMATION SERVICES ® •; DEPARTMENT •‘e'P'kNrcO� MEMORANDUM DATE: November 7, 2007 TO: Ton Nelson, Committee of the Whole Chair Members of the Committee of the Whole VIA: >C Kat y Keolker, Mayor FROM: Mi e Bailey, Administrator ' SUBJECT: 2008 Bond Sale to Finance the Cost of Constructing Various Capital Projects Issue Should the City sell bonds in 2008 to finance the cost of construction of various capital projects within the utility systems? Discussion On October 22nd,the City Council adopted ordinance 5313 authorizing the sale of bonds in two series. The first occurred that evening. The second sale is anticipated to occur on January 4, 2008. The total transaction remains structured generally as proposed in October and summarized below: Transaction Summary—Millions . October 22 November 7 Financing Needs 2007 -2009 Project Financing Needs $16.4 $16.4 Potential Refinancing Opportunities 8.0 8.5 Cost of Issuance 0.0 0.3 Subtotal $24.4 $25.2 Source of Funds Use of Bond Reserve Cash(replace with surety) $3.2 $3.2 Taxable Debt 1.2 2.0 Tax-Exempt Bonds 20.4 20.0 Net Tax Exempt Debt $24.8 $25.2 2007-2009 Project Financing Needs The Utility Master Plans and the City's Capital Improvement Plan (CIP) contemplate the following list of projects to maintain the City's utility systems in good working order: — Hazen 565 Zone Reservoir - design and construct a 4.2 million gallon reservoir i:\debt\2008 rev bond\2008 memo bond sale_nov 8 2007.doc Toni Nelson,Council Presi. Member of the Renton Cit Ancil November 7,2007 • Page 2 of 3 — Emergency Power to Pump Stations - install emergency electrical power generation facilities — Summerwind/ Stonegate Lift Station Replacement - construct a new station to ensure sufficient capacity in a rapidly growing area — Renton Village Storm System Improvement - planning, designing and construction of a storm system to increase capacity to prevent surcharges and flooding — Gypsy Basin/Ripley Lane Storm System Improvement - replacement of an existing culvert that will connect into a 60-inch storm system on the new Seahawks headquarters/training facility site — Central Plateau Interceptor Phase 2 - construct interceptor to serve eastern portion of service area — SW 34`h Street Culvert Replacement - replace existing culvert to improve conveyance activity, reduce upstream flooding and improve fish passage The total cost of these projects and others within the Utility CIP during 2008 and 2009 are approximately$22.5 million. It is proposed to fund$16.5 million of these projects with the proceeds of Utility Revenue Bonds. Potential Refinancing Opportunities The 2007 bond sale included $8.5 million for refinancing a portion of the 2002 bonds. Use of Bond Reserve Cash (replace with surety) The transaction is able to benefit from the purchase of a surety (insurance policy)to replace the cash reserve requirement in previous bond sales. The cost of the surety was $50,979.50. This replaced a requirement to hold over$3.2 million in cash reserves. Potential Taxable Debt The 2008 transaction will include as much taxable debt as necessary (approximately $2,075,000)to ensure that the tax-exempt debt sold does not exceed $10 million. This reduces the overall cost of borrowing by about$400,000. Relevant Documents Bond Ordinance (adopted October 22, 2007) —Describes the legal obligations to bond holders that the City is agreeing to, as part of the transaction. We have included elements for the"new money"portion,the "refunding,"the taxable element and the substitution of a surety in place of the cash bond reserve. We have also included many changes to past covenants (the legal obligations)that are overly restrictive. These include reducing the coverage requirement to 1.25 times the annual debt service, rather than the highest annual debt service; clarifying the revenue description to mean"gross revenues,"revising the reserve requirement; clarifying the flow of funds to include repayment of principal and interest; and changing the parity test for the issue of future bonds. The ordinance authorizes updating the public works trust fund loans. i:\debt\2008 rev bond\2008 memo bond sale_nov 8 2007.doc Toni Nelson,Council Presi�' i Member of the Renton City',.,.,ancil November 7,2007 . I Page 3 of 3 Official Statement(Preliminary Official Statement) - This is the prospectus that describes the transaction and the conte)4 for the marketplace. It is an official document for which the City becomes responsible It is prepared by the underwriter but is the representation of the City. Bond Purchase Agreement—This is the offer by Seattle Northwest Securities to purchase the bonds through a negotiated sale. As the underwriter, Seattle Northwest Securities will purchase all the bonds at a negotiated price and sell them into the marketplace. They assume interest rate risk once we have agreed to the terms of the Bond Purchase Agreement. This agreement includes all the conditions that the City must meet as required by the underwriter. Financial Advisor Recommendation—This is a memo to the City providing guidance and advice regarding the terms of the Bond Purchase Agreement. Our financial policies call for the use of a financial advisor when the City negotiates a bond sale. The financial advisor works directly for the City for the purpose of assuring the City that the terms of the transaction are in,its best i terest. MEB/dlf cc: Jay Covington,CAO Marty Wine,Assistant CAO Bonnie Walton,City Clerk Gregg Zimmerman,PBPW Administrator i:\debt\2008 rev bond\2008 memo_bor d sale_nov 8 2007.doc RAFT CITY OF RENTON, WASHINGTON RESOLUTION NO. A RESOLUTION of the City Council of the City of Renton, Washington, approving the sale of the City's Water and Sewer Revenue Bonds, Series 2008A, and Water and Sewer Revenue Bonds, Series 2008B (Taxable), in the aggregate principal amounts of $ and $ respectively, to provide funds for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility; and approving the sale of such bonds to Seattle-Northwest Securities Corporation, all in accordance with Ordinance No. 5313 of the City. WHEREAS the City Council by Ordinance No. 5313 passed on October 22, 2007 (the "Bond Ordinance"), authorized the issuance and sale of three series of water and sewer revenue bonds of the City in the aggregate principal amount of not to exceed $23,000,000 (the "Bonds") for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, and WHEREAS, the Bond Ordinance authorized the City Finance Director to enter into negotiations for the sale of the Bonds and to present a bond purchase agreement to the City Council for approval by resolution, establishing the terms of each series of Bonds, and' WHEREAS, Seattle-Northwest Securities Corporation (the "Underwriter") has purchased the first series of Bonds designated the City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007 in the aggregate principal amount of$9,750,000, and WHEREAS,the Underwriter has offered to purchase the second and third series of Bonds designated the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A and Water and Sewer Revenue Bonds, Series 2008B (Taxable) in the aggregate principal amounts of $ and $ , respectively (together, the "2008 Bonds") on the terms set forth in the bond purchase agreement attached hereto as Exhibit A hereto (the "Purchase Agreement"), and WHEREAS, it is in the best interests of the City to sell the 2008 Bonds to the Underwriter on the terms and conditions set forth in the Bond Ordinance, this resolution and the Purchase Agreement, and WHEREAS, in accordance with the Bond Ordinance, the City Council wishes to authorize and approve the sale of the 2008 Bonds to the Underwriter and the final principal maturity amounts, interest rates, bond insurance provisions,, and redemption rights for the 2008 Bonds, all as set forth herein, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON: , ,? � RESOLUTION NO. RAFT Section 1. Definitions. Except as otherwise defined herein, capitalized terms used in this resolution have the meanings set forth in the Bond Ordinance. Section 2. Authorization of Issuance and Sale of the 2008 Bonds. The,issuance of the 2008 Bonds, designated as the "City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A" and "City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable)," in the aggregate principal amounts of $ and $ , respectively, each dated as of their date of delivery, is hereby approved. The 2008 Bonds 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�'dentification; shall bear interest from their date (computed on the basis of a 360-day year of tvelve 30-day months), payable semiannually on each June 1 and December 1, commencing June 1 2008,to the maturity or prior redemption of the 2008 Bonds. The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A 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 *Term Bonds -2- P:120584 JARR20584 254 07/11/07 RESOLUTION NO. btelFr • The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) 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 *Term Bonds If any Bond is duly presented for payment upon maturity and is not paid, then interest thereon shall continue to accrue thereafter at the rate stated therein until such Bond is paid. The 2008 Bonds shall conform in all other respects to the terms and conditions set forth in the Bond Ordinance, except as expressly provided herein. Section 3. Redemption. (a) Mandatory Redemption. The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A maturing on December 1, are term, bonds (the "Term Bonds") and, if not previously purchased by the City in the open market or optionally redeemed as setforth below, are subject to mandatory sinking fund redemption prior'to maturity, in part and by lot (in such manner as the Bond Registrar shall determine), at a price of par plus accrued interest to the date of redemption on December 1 in the following years and in the following amounts: Term Bonds Due December 1, Mandatory Sinking Fund Redemption Dates (December 1) Redemption Amount *Scheduled maturity The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) maturing on December 1, are Term Bonds and, if not previously purchased by the City in the open market or optionally redeemed as set forth below, are subject to mandatory sinking fund redemption prior to maturity, in part and by lot (in such manner as the Bond -3- P:120584 JAR120584 254 07/11/07 RESOLUTION NO. °RAFTRegistrar shall determine), at a price of par plus accrued interest to the date of redemption on December 1 in the following years and in the following amounts: Term Bonds Due December 1, Mandatory Sinking Fund Redemption Dates (December 1) Redemption Amount *Scheduled maturity (b) Optional Redemption. The City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A maturing on or after December 1, 2018 shall be subject to optional redemption prior to maturity on and after December 1, 2017, in whole or in part on any date (maturities to be selected by the City and by lot within a maturity in such manner as DTC or the Bond Registrar, as appropriate, shall determine), at par plus accrued interest to the date of redemption. Section 4. Insurance. (a) Acceptance of Insurance. In accordance with the offer of the Underwriter to purchase the 2008 Bonds, the City Council hereby approves the commitment of MBIA Insurance Corporation (the "Bond Insurer" to provide a bond insurance policy guaranteeing the payment when due of principal of and interest on the 2008 Bonds (the "Bond Insurance Policy"). The City Council further authorizes and directs all proper officers, agents, attorneys and employees of the City to cooperate with the Bond Insurer in preparing such additional agreements, certificates, and other documentation on behalf of the City as shall be necessary or advisable in providing for the Bond Insurance Policy. (b) Payments Under the Bond Insurance Policy and Rights of the Bond Insurer. (1) In the event that, on the second business day, and again on the business day, prior to the payment date ori the 2008 Bonds, the Bond Registrar has not received sufficient money to pay all principal of and interest on the 2008 Bonds due on the second following or following, as the case may be, business day, the Bond Registrar shall immediately notify the Bond Insurer or its designee on the same business day by telephone or telegraph, confirmed in writing by registered or certified 'mail, of the amount of the deficiency. (2) If the deficiency is made up in whole or in part prior to or on the payment date,the Bond Registrar shall so notify the Bond Insurer or its designee. -4- P:120584 JAR120584 254 07/11/07 RESOLUTION NO. DRAFT (3) In addition, if the Bond Registrar has notice that anybondowner has been g required to disgorge payments of principal or interest on the 2008 Bonds to a trustee in bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such bondowner within the meaning of any applicable bankruptcy laws, then the Bond Registrar shall notify the Bond Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail. (4) The Bond Registrar is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for owners of the 2008 Bonds as follows: a. If and to the extent there is a deficiency in amounts required to pay interest on the 2008 Bonds, the Bond Registrar shall (i) execute and deliver to U.S. Bank Trust National Association, or its successors under the Bond Insurance Policy (the "Insurance Paying Agent"), in form satisfactory to the Insurance Paying Agent, an instrument appointing the Bond Insurer as agent for such owners in any legal proceeding related to the payment of such interest and an assignment to the Bond Insurer of the claims for interest to which such deficiency relates and which are paid by the Bond Insurer, (ii)receive as designee of the respective owners (and not as Bond Registrar) in accordance with the tenor of the Bond Insurance Policy payment from the Insurance Paying Agent with respect to the claims for interest so assigned, and (iii) disburse the same to such respective owners; and b. If and to the extent of a deficiency in amounts required to pay principal of the 2008 Bonds, the Bond Registrar shall (i) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the -Bond Insurer as agent for such owner in any legal proceeding relating to the payment of such principal and an assignment to the Bond Insurer of any of the 2008 Bonds surrendered to the Insurance Paying Agent of so much of the principal amount thereof as has-not previously been paid or for which moneys are not held by the Bond Registrar and available for such payment(but such assignment shall be delivered only if payment from the Insurance Paying Agent is received), (ii) receive as designee of the respective owners (and not as Bond Registrar) in accordance with the tenor of the Bond Insurance Policy payment therefor from the Insurance Paying Agent, and (iii) disburse the same to such owner. (5) Payments with respect to claims for interest on and principal of 2008 Bonds disbursed by the Bond Registrar from proceeds of the Bond Insurance Policy shall not be considered to discharge the obligation of the City with respect to such 2008 Bonds, and the Bond Insurer shall become the owner of such unpaid Bonds and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. (6) Irrespective of whether any such assignment is executed and delivered, the City and the Bond Registrar hereby agree for the benefit of the Bond Insurer that: a. They recognize that to the extent the Bond Insurer makes payments, directly or indirectly (as by paying through the Bond Registrar), on account of -5- P:120584 JAR120584 254 07/11/07 RESOLUTION NO. b RAPT • principal of or interest on the 2008 Bonds, the Bond Insurer will be subrogated to the rights of such owners to receive the amount of such principal and interest from the City, with interest thereon as provided and solely from the sources stated in this resolution and the 2008 Bonds; and b. They will accordingly pay to the Bond Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Bond Insurance Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in this resolution and the 2008 Bonds, but only from the sources and in the manner provided herein for the payment of principal of and interest on the 2008 Bonds to owners, and will otherwise treat the Bond Insurer as the owner of such rights to the amount of such principal and interest. (c) Rights of Bond Insurer. (1) In connection with the issuance of Future Parity Bonds, the City shall deliver to the Bond Insurer a copy of the disclosure document, if any, circulated with respect to such Future Parity Bonds. (2) The Bond Insurer shall receive copies of the City's audited financial statements and annual budget. (3) Copies of any amendments made to the documents executed in connection with the issuance of the 2008 Bonds which are consented to by the Bond Insurer shall be sent to Standard&Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc. (4) The Bond Insurer shall receive notice of the resignation or renewal of the Bond Registrar and the appointment of a successor, other than the designated state fiscal agent. (5) Any notices required to be given by any party under this resolution shall also be given to the Bond Insurer and sent by registered or certified mail addressed to: MBIA Insurance Corporation, 113 King Street,Armonk,New York 10504,Attention: Surveillance. (6) The City agrees to reimburse the Bond Insurer immediately and unconditionally upon demand, to the extent permitted by law, for all reasonable expenses, including reasonable attorneys' fees and expenses, incurred by the Bond Insurer in connection with (i) enforcement by the Bond Insurer of the City's obligations, or the preservation or defense of any rights of the Bond Insurr, under this resolution and any other document executed in connection with the issuance of the 2008 Bonds, and (ii) any consent, amendment, waiver or other action with respect to this iresolution or any related document, whether or not granted or approved, together with interest on all such expenses from and including the date incurred to the date of payment at Citibank's Prime Rate plus 3% or the maximum interest rate permitted by law, whichever is less. In addition, the Bond Insurer reserves the right to charge a reasonable fee in connection with its review of any such consent, amendment or waiver, whether or not granted or approved. -6- P:120584 JAR120584 254 07/11/07 RESOLUTION NO. 11 • RA p (7) The City agrees not to use the Bond Insurers name in any published document including, without limitation, a press release or-presentation, announcement or forum without the Bond Insurer's prior consent; provided that the City; may use the Bond Insurer's name in any general or particular factual statement to the effect that the Bond Insurer insures certain outstanding City bonds. In the event that the City is advised by counsel that it has a legal obligation to disclose the Bond Insurer's name in any press release, public announcement or other published document, the City shall provide the Bond Insurer with at least three (3) business days' prior written notice of its intent to use the Bond Insurer's name together with a copy of the proposed use of the Bond Insurer's name and of any description of a transaction with the Bond Insurer and shall obtain the Bond Insurer's prior consent as to the form and substance of the proposed use of the Bond Insurer's name and any such description. The foregoing shall not apply to any request for public records duly received by the City pursuant to chapter 42.17 RCW, and the City shall not be obligated to notify the Bond Insurer of its intent to comply with any public disclosure request. (8) The City shall not enter into any agreement nor shall it consent to or participate in any arrangement pursuant to which 2008 Bonds are tendered or purchased for any purpose other than the redemption and cancellation or legal defeasance of such 2008 Bonds without the prior consent of the Bond Insurer. The provisions of this section shall be in effect only so long as the Bond Insurance Policy is in full force and effect. Section 7. Acceptance of Offer. The City Council hereby finds that the offer of the Underwriter to purchase the 2008 Bonds under the terms set forth in the Purchase Agreement is fair and reasonable and it is in the best interest of the City that the 2008 Bonds shall be sold upon the terms and conditions set forth in the Purchase Agreement and upon the basis of the representations therein set forth. The City Council further finds that all conditions precedent to or concurrent with the acceptance of the Purchase Agreement by the City Council have been met. The City Council hereby accepts the Purchase Agreement and authorizes the City Finance Director to execute the Purchase Agreement and deliver it to the Underwriter. The 2008 Bonds shall be issued and delivered to the Underwriter upon payment of the purchase price specified in the Purchase Agreement. Section 8. Approval of Official Statement. The City Finance Director is authorized and directed to execute and deliver to the Underwriter copies of an official statement for the 2008 Bonds, in substantially the form of the Preliminary Official Statement dated , 2007; provided, however, that the City Finance Director is authorized to supplement or amend the Official Statement as he deems necessary or appropriate. The City Council hereby ratifies the City Finance Director's determination that the Preliminary Official Statement was deemed final for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (except for the omission of certain final pricing, rating and related information as permitted by such rule). -7- P:\20584 JARN20584 254 07/11/07 RESOLUTION NO. °RAFr Section 9. Further Authority. The City officials, their agents, and representatives are hereby authorized and directed to do everything necessary for the prompt issuance and delivery of the 2008 Bonds and for the proper use and application of the proceeds of such sale. Section 10. Severability. The covenants contained in this resolution shall constitute a contract between the City and the owners of each and every 2008 Bond. If any one or more of the covenants or agreements pro ided in this resolution to be performed on the part of the City shall be declared by any court of competent jurisdiction to be contrary to law,then such covenant or covenants, agreement or agrelements, shall be null and void and shall be deemed separable from the remaining covenants and agreements of this resolution and shall in no way affect the validity of the other provisions of this resolution or of the 2008 Bonds. Section 11. Effective Date. This resolution shall be effective after its passage as provided by law. Passed November 26, 2007. Kathy Keolker, Mayor. Attest: Bonnie I. Walton, City Clerk Approved as to formand legality K&L PRESTON GATES ELLIS LLP Bond Counsel to the City of Renton By Attachment: Exhibit A Bond Purchase Agreement -8- P:120584_JAR120584_254 07/11/07 RESOLUTION NO. • EXHIBIT A RAI pr Bond Purchase Agreement A-1 P:\20584 JAR\20584 254 07/11/07 • ,' ; ' RESOLUTION NO. ( i bkotip CERTIFICATE I, the undersigned, Clerk of the City of Renton, Washington (the "City"), DO HEREBY CERTIFY: 1. That the attached Resolution No. (the "Resolution"), is a true and correct copy of a resolution of the City, as finally adopted at a regular meeting of the City Council of the City(the"City")held on the 26th day of November, 2007, and duly recorded in my office. 2. That said meeting was duly convened and held in all respects in accordance with law, and to the extent required by law, due and proper notice of such meeting was given; that a quorum of the City Council was present throughout the meeting and a legally sufficient number of members of the City Council voted in the proper manner for the adoption of the Resolution; that all other requirements and proceedings incident to the proper adoption of the Resolution have been duly fulfilled, carried out and otherwise observed, and.that I am authorized to execute this certificate. IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of November, 2007. Bonnie I. Walton, City Clerk P:120584 JAR120584 254 07/11/07 CITY OF RENTON, WASHINGTON RESOLUTION NO. 3912 A RESOLUTION of the City Council of the City of Renton, Washington, approving the sale; of the City's Water and Sewer Revenue and Refunding Bonds, 2007, in the aggregate principal amount of$9,750,000 to provide funds for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City; and approving the sale of such bonds to Seattle-Northwest Securities Corporation, all in accordance with Ordinance No. 5313 of the City. WHEREAS the City Council by Ordinance No. 5313 passed on October 22, 2007 (the "Bond Ordinance"), authorized the issuance and sale of three series of water and sewer revenue bonds of the City in the aggregate principal amounts of not to exceed $10,000,000, $10,000,000 and $3,000,000, respectively (together, the "Bonds") for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, and WHEREAS, the Bond Ordinance authorized the City Finance Director to enter into negotiations for the sale of the Bonds and to present a bond purchase agreement to the City Council for approval by resolution, establishing the terms of each series of Bonds, and WHEREAS, Seattle-Northwest Securities Corporation (the "Underwriter") has offered to purchase the first series of Bonds designated the City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007 in the aggregate principal amount of$9,750,000 (the"2007 Bonds") on the terms set forth in the bond purchase agreement attached hereto as Exhibit A hereto (the"Purchase Agreement'0, and WHEREAS, it is in the best interests of the City to sell the 2007 Bonds to the Underwriter on the terms and conditions set forth in the Bond Ordinance, this resolution and the Purchase Agreement, and WHEREAS, in accordance with the Bond Ordinance, the City Council wishes to authorize and approve the sale of the 2007 Bonds to the Underwriter and the final principal maturity amounts, interest rates, bond insurance provisions, and redemption rights for the 2007 Bonds, all as set forth herein, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON: Section 1. Definitions. Except as otherwise defined herein, capitalized terms used in this resolution have the meanings set forth in the Bond Ordinance. RESOLUTION NO. 3912 Section 2. Authorization of Issuance and Sale of the 2007 Bonds. The issuance of the 2007 Bonds, designated as the "City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007," in the aggregate principal amount of$9,750,000, dated as of their date of delivery, is hereby approved. The 2007 Bonds shall be dated the date of their initial issuance and delivery; 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 from their date (computed on the basis of a 360-day year of twelve 30-day months), payable semiannually on each June 1 and December 1, commencing June 1, 2008, to the maturity or prior redemption of the 2007 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 2009 $ 15,000 4.00% 2010 15,000 4.00 2011 15,000 4.00 2012 15,000 4.00 2013 20,000 4.00 2014 825,000 4.00 2015 850,000 4.00 • 2016 875,000 5.00 2017 930,000 5.00 2018 1,285,000 4.00 2019 1,240,000 4.00 2020 1,185,000 4.00 2021 1,215,000 4.00 2022 1,265,000 4.00 If any Bond is duly presented for payment upon maturity and is not paid, then interest thereon shall continue to accrue thereafter at the rate stated therein until such Bond is paid. The 2007 Bonds shall conform in all other respects to the terms and conditions set forth in the Bond Ordinance, except as expressly provided herein. Section 3. Redemption. The 2007 Bonds maturing on or after December 1, 2018 shall be subject to optional redemption prior to maturity on and after December 1, 2017, in whole or in part on any date (maturities to be selected by the City and by lot within a maturity in such manner as the Bond Registrar shall determine), at par plus accrued interest to the date of redemption. Section 4. Insurance. (a) Acceptance of Insurance. In accordance with the offer of the Underwriter to purchase the 2007 Bonds, the City Council hereby approves the commitment of MBIA Insurance Corporation (the "Bond Insurer") to provide a bond insurance policy guaranteeing the payment when due of principal of and interest on the 2007 Bonds (the "Bond Insurance Policy"). The -2- P:120584 JAR120584 252 07/10/22 RESOLUTION NO. 3912 City Council further authorizes and directs all proper officers, agents, attorneys and employees of the City to cooperate with the Bond Insurer in preparing such additional agreements, certificates, and other documentation on behalf of the City as•shall be necessary or advisable in providing for the Bond Insurance Policy. (b) Payments Under the Bond Insurance Policy. (1) In the event that, on the second business day, and again on the business day, prior to the payment date on the Bonds; the Bond Registrar has not received sufficient money to pay all principal of and interest on the. Bonds due on the second following or following, as the case may be, liusiness day, the Bond Registrar shall immediately notify the Bond Insurer or its designee on the same business day by telephone or telegraph, confirmed in writing by registered or certified mail, of the amount of the deficiency. (2) If the deficiency is made up in whole or in part prior to or on the payment date, the Bond Registrar shall so notify the Bond Insurer or its designee. (3) In addition, if the Bond Registrar has notice that any bondowner has been required to disgorge payments of principal or interest on the Bonds to a trustee in bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such bondowner within the meaning of any applicable bankruptcy laws, then he Bond Registrar shall notify the Bond Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail. (4) , The Bond Registrar is hereby irrevocably designated,' appointed, directed and authorized to act as attorney-in-fact for owners of the Bonds as follows: a. If and to the extent there is a deficiency in amounts required to pay interest on the Bonds, the Bond Registrar shall (i) execute and deliver to U.S. Bank Trust National Association, or its successors under the Bond Insurance'Policy (the "Insurance Paying Agent"), in form satisfactory to the Insurance Paying Agent, an instrument appointing the Bond Insurer as agent for such owners in any legal proceeding related to the payment of such interest and an assignment to the Bond Insurer of the claims for interest to which such deficiency relates and which are paid by the Bond Insurer, (ii)receive as designee 'of the respective owners (and not as Bond Registrar) in accordance with the tenor of the Bond Insurance Policy payment from the Insurance Paying Agent with respect to the claims for interest so assigned, and (iii)disburse the same to such respective owners; and b. If and to the extent of a deficiency in amounts required to pay principal of the Bonds, the Bond1Registrar shall (i) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the Bond Insurer as agent for such owner in any legal proceeding relating to the payment of such principal and an assignment to the Bond Insurer of any of the Bonds surrendered to the Insurance Paying Agent of so much of the principal amount thereof as has not previously been paid or for which moneys are not held by the Bond 1Registrar and available for such payment (but such assignment -3- P:120584 JAR120584 252 07/10/22 RESOLUTION NO. 3912 shall be delivered only if payment from the Insurance Paying Agent is received), (ii) receive as designee of the respective owners (and not as Bond Registrar) in accordance with the tenor of the Bond Insurance Policy payment therefor from the Insurance Paying Agent, and (iii) disburse the same to such owner. (5) Payments with respect to claims for interest on and principal of Bonds disbursed by the Bond Registrar from proceeds of the Bond Insurance Policy shall not be considered to discharge the obligation of the City with respect to such Bonds, and the Bond Insurer shall become the owner of such unpaid Bonds and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. (6) Irrespective of whether any such assignment is executed and delivered, the City and the Bond Registrar hereby agree for the benefit of the Bond Insurer that: a. They recognize that to the extent the Bond Insurer makes payments, directly or indirectly (as by paying through the Bond Registrar), on account of principal of or interest on the Bonds, the Bond Insurer will be subrogated to the rights of such owners to receive the amount of such principal and interest from.the City, with interest thereon as provided and solely from the sources stated in this resolution and the Bonds; and b. They will accordingly pay to the Bond Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Bond Insurance Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in this resolution and the Bonds, but only from the sources and in the manner provided herein for the payment of principal of and interest on the Bonds to owners, and will otherwise treat the Bond Insurer as the owner of such rights to the amount of such principal and interest. (c) Rights of Bond Insurer. (1) In connection with the issuance of Future Parity Bonds, the City shall deliver to the Bond Insurer a copy of the disclosure document, if any, circulated with respect to such Future Parity Bonds. (2) The Bond Insurer shall receive copies of the City's audited financial statements and annual budget. (3) Copies of any amendments made to the documents executed in connection with the issuance of the Bonds which are consented to by the Bond Insurer shall be sent to Standard&Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc. (4) The Bond Insurer shall receive notice of the resignation or renewal of the Bond Registrar and the appointment of a successor, other than the designated state fiscal agent. -4- P:120584 JAR120584 252 07/10/22 RESOLUTION NO. 3912 (5) Any notices required to be given by any party under this resolution shall also be given to the Bond Insurer and sent by registered or certified mail addressed to: MBIA Insurance Corporation, 113 King Street, Armonk,New York 10504, Attention: Surveillance. (6) The City i agrees to reimburse the Bond Insurer immediately and unconditionally upon demand, to the extent permitted by law, for all reasonable expenses, including reasonable attorneys' fees and expenses, incurred by the Bond Insurer in connection with (i) enforcement by the BondInsurer of the City's obligations, or the preservation or defense of any rights of the Bond Insurer, under this resolution and any other document executed in connection with the issuance of the Bonds, and (ii) any consent, amendment, waiver or other action with respect to this resolution or any related document, whether or not granted or approved, together with interest on all such expenses from and including the date incurred to the date of payment at Citibank's Prime Rate plus 3% or the maximum interest rate permitted by law, whichever is less. In addition, the Bond Insurer reserves the right to charge a reasonable fee in connection with its review of any such consent, amendment or waiver, whether or not granted or approved. (7) The City agrees not to use the Bond Insurer's name in any published document including, without limitation, a press release or presentation, announcement or forum without the Bond Insurer's prior consent; provided that the City may use the Bond Insurer's name in any general or particular factual statement to the effect that the Bond Insurer insures certain outstanding City bonds. In the event that the City is advised by counsel that it has a legal obligation to disclose the Bond Insurer's name in any press release, public announcement or other published document, the City shall provide the Bond Insurer with at least three (3)business days' prior written notice of its intent to use the Bond Insurer's name together with a copy of the proposed use of the Bond Insurer's name and of any description of a transaction with the Bond Insurer and shall obtain the Bor d Insurer's prior consent as to the form and substance of the proposed use of the Bond Insurer's name and any such description. The foregoing shall not apply to any request for public records duly received by the City pursuant to chapter 42.17 RCW, and the City shall not be obligated to notify the Bond Insurer of its intent to comply with any public disclosure request. (8) The City shall not enter into any agreement nor shall it consent to or participate in any arrangement pursuant to which Bonds are tendered or purchased for any purpose other than the redemption and cancellation or legal defeasance of such Bonds without the prior consent of the Bond Insurer. The provisions of this section shall be in effect only so long as the Bond Insurance Policy is in full force and effect. Section 7. Acceptance of Offer. The City Council hereby finds that the offer of the Underwriter to purchase the 2007 Bonds under the terms set forth in the Purchase Agreement is fair and reasonable and it is in the best interest of the City that the 2007 Bonds shall be sold upon the terms and conditions set forth in the Purchase Agreement and upon the basis of the representations therein set forth. The City Council further finds that all conditions precedent to or concurrent with the acceptance of the Purchase Agreement by the City Council have been met. -5- P:120584_JAR\20584_252 07/10/22 RESOLUTION NO. 3912 The City Council hereby accepts the Purchase Agreement and authorizes the City Finance Director to execute the Purchase Agreement and deliver it to the Underwriter. The 2007 Bonds shall be issued and delivered to the Underwriter upon payment of the purchase price specified in the Purchase Agreement. Section 8. Approval of Official Statement. The City Finance Director is authorized and directed to execute and deliver to the Underwriter copies of an official statement for the 2007 Bonds, in substantially the form of the Preliminary Official Statement dated October 17, 2007; provided, however, that the City Finance Director is authorized to supplement or amend the Official Statement as he deems necessary or appropriate. The City Council hereby ratifies the City Finance Director's determination that the Preliminary Official Statement was deemed final for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (except for the omission of certain final pricing, rating and related information as permitted by such rule). Section 9. Further Authority. The City officials, their agents, and representatives are hereby authorized and directed to do everything necessary for the prompt issuance and delivery of the 2007 Bonds and for the proper use and application of the proceeds of such sale. Section 10. Severability. The covenants contained in this resolution shall constitute a contract between the City and the owners of each and every 2007 Bond. If any one or more of the covenants or agreements provided in this resolution to be performed on the part of the City shall be declared by any court of competent jurisdiction to be contrary to law, then such covenant or covenants, agreement or agreements, shall be null and void and shall be deemed separable from the remaining covenants and agreements of this resolution and shall in no way affect the validity of the other provisions of this resolution or of the 2007 Bonds. -6- P:\20584_JAR\20584_252 07/10/22 RESOLUTION NO. 3912 Section 11. Effective Date. This resolution shall be effective after its passage as provided by law. Passed October 22, 2007. qtddlAee,tr Mayor Kat y Keolker Attest: City Clerk Bonnie I . Waltlon � t Q Approved as to form and legality: L� • ,"• K&L PRESTON GATES ELLIS LLP • Bond Counsel to the City of Renton Vuts) Byq,/ Attachment: Exhibit A—Bond Purchase Agreement -7- P:120584 JAR120584 252 07/10/22 RESOLUTION NO. 3912 EXHIBIT A • Bond Purchase Agreement • • A-1 P:120584 JAR120584 252 07/10/22 RESOLUTION NO. 3912 CERTIFICATE I,the undersigned, Clerk of the City of Renton, Washington(the "City"), DO HEREBY CERTIFY: 1. That the attached Resolution No. 3912 (the"Resolution"), is a true and correct copy of a resolution of the City, as finally adopted at a regular meeting of the City Council of the City(the"City") held on the 22nd day of October, 2007, and duly recorded in my office. 2. That said meeting was duly convened and held in all respects in accordance with law, and to the extent required by law, due and proper notice of such meeting was given; that a quorum of the City Council was present throughout the meeting and a legally sufficient number of members of the City Council voted in the proper manner for the adoption of the Resolution; that all other requirements and proceedings incident to the proper adoption of the Resolution have been duly fulfilled, carried but and otherwise observed, and that I am authorized to execute this certificate. IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of October, 2007. 46/61444.u; ci)aztevt-- ,, raai; ,rs�r, ,• City Clerk Bonnie I . Walton 9l . tin ?tie .. . P:120584 JAR120584 252 07/10/22 • CITY OF RENTON, WASHINGTON ORDINANCE NO. 5313 AN ORDINANCE of the City of Renton, Washington, authorizing the issuance of three series of water and sewer revenue bonds of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, in the aggregate principal amounts of not to exceed $10,000,000, $10,000,1000 and $3,000,000, respectively; providing the form, terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle-Northwest Securities Corporation, Seattle, Washington. • ORDINANCE NO. 5313 TABLE OF CONTENTS Section 1. Definitions 2 Section 2. Findings Regarding Parity Provisions and the Project 9 Section 3. Authorization and Description of Bonds 9 Section 4. Registration of Bonds and Book-Entry System 9 Section 5. Payment of Bonds 12 Section 6. Redemption; Open Market Purchase of Bonds 12 Section 7. Notice of Redemption 13 Section 8. Failure to Redeem Bonds 14 Section 9. Form of Bonds 14 Section 10. Execution of Bonds 14 Section 11. Authentication and Delivery of Bonds by Bond Registrar 14 Section 12. Lost, Stolen or Destroyed Bonds 15 Section 13. Creation of Fund 15 Section 14. Deposits into Funds 15 Section 15. Rate Stabilization Fund 16 Section 16. Flow of Funds 16 Section 17. Pledge of Revenue and Lien Position 17 Section 18. Findings Regarding Sufficiency of Revenue 17 Section 19. Covenants 18 Section 20. Tax Covenants 20 Section 21. Defeasance of the Bonds 21 Section 22. Provision for Future Parity Bonds 22 Section 23. Sale of Bonds 24 Section 24. Delivery of Bonds; Temporary Bonds 25 Section 25. Application of Bond Proceeds 25 Section 26. Plan of Refunding 26 Section 27. Undertaking to Provide Continuing Disclosure 27 Section 28. Preliminary Official Statement 30 Section 29. Amendments 30 Section 30. Contract: Savings Clause 32 Section 31. General Authorization, Ratification of Prior Acts 32 Section 32. Effective Date of Ordinance 32 Exhibit A Project Description Exhibit B Form of Bonds -j- P:120584120584 24Q I f ORDINANCE NO. 5313 AN ORDINANCE of the City of Renton, Washington, authorizing the issuance of three series of water and sewer revenue bonds of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, •n the aggregate principal amounts of not to exceed $10,000,000, $10,000,000 and $3,000,000, respectively; providing the form, terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle-Northwest Securities Corporation, Seattle, Washington. WHEREAS, the City of Renton, Washington (the "City") has heretofore created and operated a waterworks utility of the City, including the water, sewer, wastewater and storm drainage systems (defined herein as the"Waterworks Utility"); and WHEREAS, the City Council has determined that it is necessary and in the best interests of the City that certain improvements for the Waterworks Utility described in the Capital Improvement Program be made and there be adopted a system or plan of additions to and betterments and extensions of the Waterworks Utility; and WHEREAS, pursuant to chapter 35.92 RCW, the City is authorized to issue and sell, without an election, revenue bonds of the City to make additions, betterments or extensions to the Waterworks Utility; and WHEREAS, by Section XXIII of Ordinance No. 4709, the City also provided that it 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 City's Water and Sewer Revenue Refunding Bonds, 1998 (the "1998 Bonds") and any bonds issued thereafter if such additional bonds are issued in compliance with the conditions set forth therein; and WHEREAS, by Ordinance No. 4976, the City issued its Water and Sewer Revenue Bonds, 2002 (the"2002 Bonds") on a parity of lien with the 1998 Bonds; and WHEREAS,by Ordinanc'e No. 5019, as amended by Ordinance No. 5020, the City issued its Water and Sewer Revenue Refunding Bonds, 2003 (the "2003 Bonds") on a parity of lien with the 1998 Bonds and the 2002 Bonds; and WHEREAS, by Ordinance No. 5098, the City issued its Water and Sewer Revenue Bonds, 2004 (the "2004 Bonds") on a parity of lien with the 1998 Bonds, the 2002 Bonds, and the 2003 Bonds; and WHEREAS, Ordinance No. 4976 provides that the City may redeem the 2002 Bonds maturing on and after December 1, 2014 on and after December 1, 2012, in whole or in part, on any interest payment date at a price of par plus accrued interest, if any, to the date of redemption; and ORDINANCE NO. 5313 WHEREAS, as a result of changed market conditions, it appears to the City Council that debt service savings may be obtained by refunding the 2002 Bonds maturing on and after December 1, 2014 (the "Refunded Bonds") through the issuance of a series of water and sewer refunding bonds; and WHEREAS, the City Council has determined that it is in the best interests of the City to issue and sell three series of water and sewer revenue bonds on a parity of lien with the outstanding 1998 Bonds, 2002 Bonds, 2003 Bonds and 2004 Bonds; and WHEREAS, the first series of bonds shall be designated the City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007 and issued in the aggregate principal amount of not to exceed $10,000,000 (the "2007 Bonds"), for the purpose of providing part of the funds necessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility, to refund.the Refunded Bonds, and to pay the costs of issuance and sale of the 2007 Bonds, as further provided in the sale resolution for the 2007 Bonds; and WHEREAS, the second and third series of bonds shall be designated the City of Renton, Washington Water and Sewer Bonds, Series 2008A and City of Renton, Washington Water and Sewer Bonds, Series 2008B (Taxable) and issued in the aggregate principal amounts of not to exceed $10,000,000 and $3,000,000, respectively (together, the "2008 Bonds"), for the purpose of providing part of the fundsnecessary to carry out the system or plan for additions to and betterments and extensions of the Waterworks Utility, to fulfill the Reserve Requirement and to pay the costs of issuance and sale of the 2008 Bonds, as further provided in the sale resolution for the 2008 Bonds; and WHEREAS, Seattle-Northwest Securities Corporation, Seattle, Washington, has offered to purchase the 2007 Bonds and the 2008 Bonds under the terms and conditions set forth herein and in the applicable sale resolution; 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: "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 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. -2- P:120584120584 24Q ORDINANCE NO . 5313 "Beneficial Owner" shall mean any person that has or shares the power, directly or indirectly to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees; depositories or other intermediaries). "Bond Fund" shall mean that special fund of the City known as the Waterworks Revenue Bond Fund created by tins ordinance for the payment of the principal of and interest on the Bonds. "Bond Register" means the registration books showing the name, address and tax identification number of each Registered Owner of the Bonds, maintained pursuant to Section 149(a) of the Code. "Bond Registrar" means the fiscal agency of the State of Washington, for the purposes of registering and authenticating the Bonds, maintaining the Bond Register, effecting transfer of ownership of the Bonds, and paying the principal of,premium, if any, and interest on the Bonds. "Bonds" shall mean the 2007 Bonds and the 2008 Bonds. "Capital Improvement Program" shall mean the plan of additions and betterments to the Waterworks Utility approved by the City in the 2007 City Budget adopted by the City Council pursuant to Ordinance No. 5245 adopted on December 11, 2006. "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 2007 Bonds or the 2008 Bonds, as applicable,by the City to the Underwriter and the payment therefor by the Underwriter. "Code" shall mean the Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. "Coverage Requirement" shall mean in any calendar year 1.25 times the Maximum Annual Debt Service; provided, that once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, the term "Coverage Requirement" shall mean in any calendar year 1.25 times the Annual Debt Service for such year. "DTC"means The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York, as depository for the Bonds pursuant to this ordinance. "Escrow Agent"means U.S. Bank National Association, Seattle, Washington. "Escrow Agreement"means the Escrow Deposit Agreement to be dated as of the date of Closing of the 2007 Bonds authorized to be entered into pursuant to Section 26 of this ordinance. -3- P:120584120584 24Q ORDINANCE NO . 5313 "Fitch" means Fitch, Inc., organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such organization shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Fitch" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. "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. "Government Obligations" means those obligations now or hereafter defined as such in chapter 39.53 RCW. "Gross Revenue" 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. "Letter of Representations" shall mean the Blanket Issuer Letter of Representations from the City to DTC dated April 15, 1997. "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. "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. "Moody's" means Moody's Investors Service, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. -4- P:120584120584 24Q • ORDINANCE NO . 5313 "MSRB" shall mean the Municipal Securities Rulemaking Board. "Net Proceeds," when used with reference with the Bonds, means the principal amount of the Bonds, plus accrued interest and original issue premium, if any, and less original issue discount, if any. "Net Revenue" shall mean Gross Revenue less Maintenance and Operation Expense. "1998 Bonds" shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 1998. "NRMSIR" shall mean a nationally recognized municipal securities information repository designated by the SEC. "Outstanding" means, as of any particular time, all Parity Bonds issued theretofore except (a) Parity Bonds theretofore canceled by the Bond Registrar after purchase by the City in the open market or because of payment at, or redemption prior to, maturity; (b) Parity Bonds for which funds have been deposited into a trust account pursuant to the ordinances authorizing the issuance of the Parity Bonds, but only to the extent that the principal of and interest on such Parity Bonds are payable from such trust account; (c) temporary, mutilated, lost, stolen or destroyed Parity Bonds for which new Parity Bonds have been issued pursuant to the ordinance authorizing their issuance; and (d) Parity Bonds exchanged for new Parity Bonds pursuant to the ordinances authorizing their issu Ince. "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 2002 Bonds, the 2003 Bonds, the 2004 Bonds, the 2007 Bonds, the 2008 Bonds and any Future Parity Bonds. "Parity Bond Fund" shall mean any fund created for the payment and redemption of Parity Bonds. "Private Person" means'any natural person engaged in a trade or business or any trust, estate,partnership, association, company or corporation. "Private Person Use" means the use of property in a trade or business by a Private Person if such use is other than as a member of the general public. Private Person Use includes ownership of the property by the Private Person as well as other arrangements that transfer to the Private Person the actual or beneficial use of the property (such as a lease, management or incentive payment contract or other special arrangement) in such a manner as to set the Private Person apart from the general public. Use of property as a member of the general public includes attendance by the Private Person at municipal meetings or business rental of property to the Private Person on a day-to-day basis if the rental paid by such Private Person is the same as the rental paid by any Private Person who desires to rent the property. Use of property by nonprofit community groups or community recreational groups is not treated as Private Person Use if such use is incidental to the governmental uses of property, the property is made available for such -5- P:\20584120584 24Q ORDINANCE NO . 5313 use by all such community groups on an equal basis and such community groups are charged only a de minimis fee to cover custodial expenses. "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 additions, betterments or extensions to the Waterworks Utility described in the Capital Improvement Program, including, but not limited to, the capital improvements described in Exhibit A to this ordinance. "Project Fund" shall mean the Waterworks Utility Construction Fund previously created by the City, and the subaccounts contained therein, for the purpose of paying costs of the Project. "Purchase Agreement" shall mean the Bond Purchase Agreement for the 2007 Bonds or 2008 Bonds, as applicable,by and between the City and the Underwriter. "Qualified Insurance" means any non-cancelable municipal bond insurance policy or surety bond issued by any insurance company licensed to conduct an insurance business in any state of the United States (or by a service corporation acting on behalf of one or more such insurance companies) which insurance company or companies, as of the time of issuance of such policy or surety bond, are currently rated in one of the two highest Rating Categories by both Moody's and S&P. "Qualified Letter of Credit" means any irrevocable letter of credit issued by a financial institution for the account of the City on behalf of registered owners of the Bonds, which institution maintains an office, agency or branch in the United States and as of the time of issuance of such letter of credit, is currently rated in one of the two highest Rating Categories by either Moody's or S&P. "Rate Stabilization Fund" shall mean the Waterworks Rate Stabilization Fund created by the City pursuant to Ordinance No. 4709. "Refunded Bonds"mean the 2002 Bonds maturing on and after December 1, 2014. "Refunding Account" means the account by that name established pursuant to Section 26 of this ordinance. "Registered Owner" means the person named as the registered owner of a Bond in the Bond Register. For so long as the Bonds are held in book-entry only form,DTC shall be deemed to be the sole Registered Owner. "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. -6- P:\20584120584 24Q r ORDINANCE NO . 5313 "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 i ighest then-existing rating for any of the Parity Bonds. Reserve Requirement" shall mean the Maximum Annual Debt Service; provided, that once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, the term "Reserve Requirement" shall mean with respect to any issue of Parity Bonds, the lesser of (a) Maximum Annual Debt Service on all Outstanding Parity Bonds, and (b) 125% of average Annual Debt Service on all Outstanding Parity Bonds; provided, that the amount required to be deposited hereunder with respect to any Future Parity Bonds in order to meet the Reserve Requirement shall not exceed 10% of the net proceeds of such Future Parity Bonds under the Code. "Rule" shall mean SEC Rule 15c2-12. "S&P" means Standard & Poor's, a Division of The McGraw Hill Companies, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. "Sale Resolution" means the resolutions of the City Council approving the sale of the 2007 Bonds or the 2008 Bonds, as applicable, in accordance with Section 23 of this ordinance. "SEC" shall mean the United States Securities and Exchange Commission. "SID" shall mean a state information depository for the State (if one is created). "State" shall mean the State of Washington. "Tax-Exempt Bonds" sliall mean the 2007 Bonds and the City of Renton, Washington Water and Sewer Revenue Bondi, Series 2008A authorized to be issued by this ordinance. "Taxable Bonds" shall mean the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) authorized to be issued by this ordinance. "Term Bonds" shall mean any 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. "2008 Bonds" shall mean the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A, and the City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable) authorized to be issued by this ordinance. -7- P:120584120584 24Q • ORDINANCE NO . 5313 "2004 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 2004. "2007 Bonds" shall mean the City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007, authorized to be issued by this ordinance. "2003 Bonds" shall mean the outstanding Water and Sewer Revenue Refunding Bonds, 2003. "2002 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 2002. "Underwriter" shall mean Seattle-Northwest Securities Corporation, Seattle, Washington. "Waterworks Utility" shall mean the combined water, sewer, wastewater and storm drainage systems of the City as the same may be added to, improved and extended for as long as any of the 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. Rules of Interpretation. In this ordinance, unless the context otherwise requires: (a) The terms "hereby," "hereof," "hereto," "herein, "hereunder" and any similar terms, as used in this ordinance, refer to this ordinance as a whole and not to any particular article, section, subdivision or clause hereof, and the term "hereafter" shall mean after, and the term"heretofore" shall mean before, the date of this ordinance; (b) Words of the masculine gender shall mean and include correlative words of the feminine and neuter genders and words importing the singular number shall mean and include the plural number and vice versa; (c) Words importing persons shall include firms, associations,partnerships (including limited partnerships), trusts, corporations and other legal entities, including public bodies, as well as natural persons; (d) Any headings preceding the text of the several sections of this ordinance, and any table of contents or marginal notes appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this ordinance, nor shall they affect its meaning, construction or effect; (e) All references herein to "articles," "sections" and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof; and (f) Words importing the singular number include the plural number and vice versa. -8- P:120584120584 24Q • ORDINANCE NO . 5313 Section 2. Findings Regarding Parity Provisions and the Project. The City Council hereby finds that there is no deficiency in any Parity Bond Fund, that provisions hereinafter meet the conditions for the issuance of Future Parity Bonds as set forth in Section 23 of Ordinance No. 4709, Section 22 of Ordinance No. 4976, Section 20 of Ordinance No. 5019, as amended, and Section 22 of Ordinance No. 5098 and that there will be on file,prior to the issuance and delivery of the Bonds a certificate of the City Finance Director that satisfies the conditions for such certificate as set forth in Ordinance Nos. 4709, 4976, 5019 and 5098. The City Council further finds that the additions, betterments or extensions to the Waterworks Utility, described in Exhibit A attached hereto (the "Project"), are consistent with the system or plan of additions too and betterments and extensions of the Waterworks Utility as described in the Capital Improvement Program. Therefore, the Bonds shall be issued on a parity of lien with the Parity Bonds. Section 3. Authorization and Description of Bonds. For the purpose of obtaining part of the funds necessary to carry out the Project and to refund the Refunded Bonds, the City shall issue the 2007 Bonds and the 2008 Bonds. The 2007 Bonds shall be designated "City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007" and shall be issued in the aggregate principal amount of not to exceed $10,000,000. The 2008 Bonds shall be designated the"City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008A" and the "City of Renton, Washington Water and Sewer Revenue Bonds, Series 2008B (Taxable)" in the aggregate principal amounts of not to exceed $10,000,000 and$3,000,000, respectively. The Bonds shall be dated as of their respective dates of initial issuance and delivery or such other date set forth in the applicable Sale Resolution; shall be issued in fully registered form in the denomination of$5,000 or any integral multiple thereof within a series, provided that no Bond shall represent more than one maturity of a series; shall be numbered separately and in such manner and with any additional designation as the Bond Registrar deems necessary for purposes of identification and control; shall bear interest (calculated based on a 360-day year of 12 30-day months) at the rates set forth in the applicable Sale Resolution, until the Bonds have been paid or their payment duly provided for, and shall mature on the dates in the years and amounts and shall bear interest from their date payable semiannually at the rates on the dates set forth in the applicable Sale Resolution. The Bonds shall be negotiable instruments to the extent provided by RCW 62A.8-105. Section 4. Registration of Bonds and Book-Entry System. (a) Registrar/Bond Register. The City hereby specifies and adopts the system of registration approved by the Washington State Finance Committee from time to time through the appointment of state fiscal agencies. The City shall cause a Bond Register to be maintained by the Bond Registrar. So long as any Bonds remain outstanding, the Bond Registrar shall make all necessary provisions to permit the exchange or registration or transfer of Bonds at its principal corporate trust office. The Bond Registrar may be removed at any time at the option of the City Finance Director upon prior notice to the Bond Registrar and a successor Registrar appointed by the City Finance Director. No resignation or removal of the Bond Registrar shall be effective -9- P:120584120584 24Q ORDINANCE NO . 5313 until a successor shall have been appointed and until the successor Registrar shall have accepted the duties of the Bond Registrar hereunder. (b) Registered Ownership. The City and the Bond Registrar, each in its discretion, may deem and treat the Registered Owner of each Bond as the absolute owner thereof for all purposes (except as provided in Section 24 of this ordinance), 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 Bond may be transferred as herein provided. All such payments made as described in Section 7 shall be valid and shall satisfy and discharge the liability of the City upon such Bond to the extent of the amount or amounts so paid. (c) DTC Acceptance/Letters of Representations. The Bonds initially shall be held in fully immobilized form by DTC acting as depository. To induce DTC to accept the Bonds as eligible for deposit at DTC, the City has executed and delivered to DTC a Blanket Issuer Letter of Representations. Neither the City nor the Bond Registrar will have any responsibility or obligation to DTC participants or the persons for whom they act as nominees (or any successor depository) with respect to the Bonds in respect of the accuracy of any records maintained by DTC (or any successor depository) or any DTC participant, the payment by DTC (or any successor depository) or any DTC participant of any amount in respect of the principal of or interest on Bonds, any notice which is permitted or required to be given to Registered Owners under this ordinance (except such notices as shall be required to be given by the City to the Bond Registrar or to DTC (or any successor depository)), or any consent given or other action taken by DTC (or any successor depository) as the Registered Owner. For so long as any Bonds are held in fully-immobilized form hereunder, DTC or its successor depository shall be deemed to be the Registered Owner for all purposes hereunder, and all references herein to the Registered Owners shall mean DTC (or any successor depository) or its nominee and shall not mean the owners of any beneficial interest in such Bonds. If any Bond shall be duly presented for payment and funds have not been duly provided by the City on such applicable date, then interest shall continue to accrue thereafter on the unpaid principal thereof at the rate stated on such Bond until it is paid. (d) Use of Depository. (i) The Bonds shall be registered initially in the name of"Cede & Co.", as nominee of DTC, with one Bond maturing on each of the maturity dates for the Bonds in a denomination corresponding to the total principal therein designated to mature on such date. Registered ownership of such immobilized Bonds, or any portions thereof, may not thereafter be transferred except (A)to any successor of DTC or its nominee, provided that any such successor shall be qualified under any applicable laws to provide the service proposed to be provided by it; (B)to any substitute depository appointed by the City Finance Director pursuant to subsection(ii) below or such substitute depository's successor; or (C)to any person as provided in subsection(iv)below. -10- P.\20584\20584 24Q ORDINANCE NO . 5313 (ii) 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 Finance Director to discontinue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the City Finance Director may hereafter 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. (iii) In the case of any transfer pursuant to clause (A) or (B) of subsection(i) above, the Bond Registrar shall, upon receipt of all outstanding Bonds, together with a written request of the City Finance Director, issue a single new Bond for each maturity then outstanding, registered in the name of such successor or such substitute depository, or their nominees, as the case may be, all as specified in such written request of the City Finance Director. (iv) In the event that (A) DTC or its successor (or substitute depository or its successor) resigns from its functions as depository, and no substitute depository can be obtained, or (B) the City Finance Director determines that it is in the best interest of the beneficial owners of the Bonds that such owners be able to obtain such bonds in the form of Bond certificates, the ownership of such Bonds may then be transferred to any person or entity as herein provided, and shall no longer be held in fully-immobilized form. The City Finance Director shall deliver a written request to the Bond Registrar, together with a supply of definitive Bonds, to issue Bonds as herein provided in any authorized denomination. Upon receipt by the Bond Registrar of all then outstanding Bonds together with a written request of the City Finance Director to the Bond Registrar, new Bonds shall be issued in the appropriate denominations and registered in the names of such persons as are requested in such written request. (e) Registration of Transfer of Ownership or Exchange; Change in Denominations. 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 transfer of any Bond may be registered and Bonds may be exchanged, ;but no transfer of any such Bond shall be valid unless it is surrendered to the Bond Registrar with the assignment form appearing on such Bond duly executed by the Registered Owner or such Registered Owner's duly authorized agent in a manner satisfactory to the Bond Registrar. Upon such surrender, the Bond Registrar shall cancel the surrendered Bond and shall authenticate and deliver, without charge to the Registered Owner or transferee therefor, a new Bond (or Bonds at the option of the new Registered Owner) of the same date, maturity and interest rate and for the same aggregate principal amount in any authorized denomination, naming as Registered Owner the person or persons listed as the assignee on the assignment form appearing on the surrendered Bond, in exchange for such surrendered and cancelled Bond. Any Bond may be surrendered to the Bond Registrar and exchanged, without charge, for an equal aggregate principal amount of Bonds of the same date, maturity and interest rate, in any authorized denomination. The Bond Registrar shall not be obligated to register the transfer or to exchange any Bond during the 15 days preceding any interest payment or principal payment date any such Bond is to be redeemed. -11- P:\20584\20584 240 ORDINANCE NO . 5313 (f) Registrar's Ownership of Bonds. The Bond Registrar may become the Registered 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 member of, or in any other capacity with respect to, any committee formed to protect the right of the Registered Owners of Bonds. (g) Registration Covenant. The City covenants that, until all Bonds have been surrendered and canceled, it will maintain a system for recording the ownership of each Bond that complies with the provisions of Section 149 of the Code. 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. For so long as all Bonds are in fully immobilized form, payments of principal and interest thereon shall be made as provided in accordance with the operational arrangements of DTC referred to in the Letter of Representations. In the event that the Bonds are no longer in fully immobilized form, interest on the Bonds shall be paid by check or draft mailed to the Registered Owners at the addresses for such Registered Owners appearing on the Bond Register on the fifteenth day of the month preceding the interest payment date, or upon the written request of a Registered Owner of more than $100,000 of Bonds (received by the Bond Registrar at least 10 days prior to the applicable payment date), such payment shall be made by the Bond Registrar by wire transfer to the account within the continental United States designated by the Registered Owner. Principal of the Bonds shall be payable upon presentation and surrender of such Bonds by the Registered Owners at the principal office of the Bond Registrar. 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. Redemption; Open Market Purchase of Bonds. The City reserves the right to redeem the Bonds prior to their maturing as set forth in the applicable Sale Resolution.. If less than all of the 2007 Bonds or 2008 Bonds subject to optional redemption are called for redemption, then the City shall choose the maturities of such series to be redeemed. The City reserves the right to designate certain maturities of the 2007 Bonds and/or the 2008 Bonds as term bonds ("Term Bonds") in the applicable Sale Resolution, and, if not previously purchased by the City in the open market or optionally redeemed as provided in the applicable Sale Resolution, will be subject to mandatory sinking fund redemption prior to maturity, in part and by lot (in such manner as the Bond Registrar shall determine), at a price of par plus accrued interest to the date of redemption as provided in the applicable Sale Resolution. If the City shall optionally redeem Term Bonds or purchase Term Bonds in the open market, the par amount of the Term Bonds so redeemed or purchased (irrespective of their actual redemption or purchase prices) shall be credited against one or more scheduled mandatory redemption amounts for such Term Bonds (as allocated by the City) beginning not earlier than 60 days after the date of the optional redemption or purchase, and the City shall promptly notify the Bond Registrar in writing of the manner in which the credit for the Term Bonds so redeemed or purchased has been allocated. -12- P:120584120584 24Q ORDINANCE NO . 5313 Any Bond in the principal amount of greater than $5,000 may be partially redeemed in any integral multiple of$5,000. For as long as the Bonds are held in book-entry only form, the selection of particular Bonds within a maturity to be redeemed shall be made in accordance with the operational arrangements then in effect at DTC. If the Bonds are no longer held in uncertificated form, the selection,of such Bonds to be redeemed and the surrender and reissuance thereof, as applicable, shall be made as provided in the following provisions of this paragraph. If the City redeems at any one time fewer than all of the Bonds having the same maturity date, the particular Bonds or portions of Bonds of such maturity to be redeemed shall be selected by lot (or in such manner determined by the Bond Registrar) in increments of$5,000. In the case of a Bond of a denomination greater than $5,000, the City and Registrar shall treat each Bond as representing such number of separate Bonds each of the denomination of$5,000 as is obtained by dividing the actual principal] amount of such Bond by $5,000. 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 therefore, 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 under this Section shall be canceled. Section 7. Notice of Redemption. For so long as the Bonds are held in uncertificated form, notice of redemption shall be given in accordance with the operational arrangements of DTC as then in effect, and neither the City nor the Bond Registrar will provide any notice of redemption to any Beneficial Owners. Thereafter, notice of redemption shall be given by or on behalf of the City not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the Owner of any Bond to be redeemed at the address appearing on the Bond Register on the day notice is mailed, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the Owner of any Bond. All official notices of redemption shall be dated and shall state: (A) the redemption date, (B) the redemption price, (C)if fewer than all outstanding Bonds are to be redeemed, the identification by maturity(and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed, (D)that on the redemption date,the redemption price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and (E)the place where such Bonds are to be surrendered for payment of the redemption price, which place of payment shall be the principal office of the Bond Registrar. 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. -13- P:120584120584 24Q ORDINANCE NO . 5313 In addition, further notice shall be given by the City as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption given hereunder shall contain the information required above for an official notice of redemption plus (A)the CUSIP numbers of all Bonds being redeemed; (B)the date of issue of the Bonds as originally issued; (C) the rate of interest borne by each Bond being redeemed; (D) the maturity date of each Bond being redeemed; and (E) any other descriptive information needed to identify accurately the Bonds being redeemed. Each further notice of redemption may be sent at least 35 days before the redemption date to the Bond Insurer, if any, to party entitled to receive notice pursuant to Section 27, and to such persons (including securities repositories who customarily at the time receive notices of redemption in accordance with rules promulgated by the SEC) and with such additional information as the City shall deem appropriate, but such mailings shall not be a condition precedent to the redemption of such Bonds. 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 in substantially the form set forth in Exhibit B attached hereto. 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, this ordinance and the applicable Sale Resolution. 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 -14- P:\20584\20584 24Q ORDINANCE NO . 5313 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. Lost, Stolen or Destroyed Bonds. In case any Bonds shall be lost, stolen or destroyed, the Bond Registrar may authenticate and deliver a new Bond or Bonds of like amount, date and tenor to the Owner thereof upon the Owner's paying the expenses and charges of the Bond Registrar and the City in connection therewith and upon his filing with the Bond Registrar and the City evidence satisfactory to both that such Bond or Bonds were actually lost, stolen or destroyed and of his ownership thereof, and upon furnishing the City and the Registrar with indemnity satisfactory to both. Section 13. Creation of Fund. There is hereby created in the City Treasury the Waterworks Revenue Bond Fund (the "Bond Fund"), which shall be a subaccount of the Waterworks Utility Fund. Section 14. Deposits into Funds. The Bond Fund shall be maintained for the purpose of paying the principal of and interest on the Bonds. As long as any Bond remains outstanding, the City hereby irrevocably obligates and binds itself to set aside and pay from the Waterworks Utility Fund into the Bond Fund those amounts necessary, together with such other funds as are on hand and available in the Bond Fund, to pay the interest or principal and interest next coming due on outstanding Bonds. Such payments from the Waterworks Utility Fund to the Bond Fund shall be made in a fixed amount without regard to any fixed proportion following the closing and delivery of the Bonds on or before each date on which an installment of interest or principal and interest falls due on the Bonds equal to the installment of interest or principal and interest. There has heretofore been created by the City a special fund of the City known as the Waterworks Revenue Bond Reserve Fund (the "Reserve Fund") for purpose of securing the payment of the principal of and interest on all bonds to which Net Revenue is pledged. The City hereby irrevocably covenants and agrees that on or prior to the date of issuance of the Bonds, the amount on deposit in the Reserve Fund will be at least equal to the Reserve Requirement for the Parity Bonds. The City shall satisfy the Reserve Requirement to the extent necessary upon the issuance of the 2007 Bonds and the 2008 Bonds by depositing proceeds of such Bonds or other funds available therefor into the Reserve Fund or by obtaining Reserve Insurance. 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 redeemed or otherwise defeased any Outstanding Parity Bonds. 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 -15- P:120584120584 24Q ORDINANCE NO . 5313 Reserve Fund by the withdrawal of cash therefrom for that purpose and after all cash has been depleted, then by draws on the Alternate Security or Reserve Insurance 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 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, the City also may transfer out of the Bond Fund or Reserve Fund any money required in order to prevent any Parity Bonds from becoming "arbitrage bonds"under the Code. 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 15. Rate Stabilization Fund. The City has previously created a Waterworks Rate Stabilization Fund (the "Rate Stabilization Fund"). The City may, at any time, as determined by the City and as consistent with Section 16 of this ordinance, deposit Gross Revenue into 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 in Gross Revenue for any fiscal year of the City. 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 will be made into the Rate Stabilization Fund to the extent that such deposit would prevent the City from meeting the Coverage Requirement. Section 16. Flow of Funds. Gross Revenue on deposit 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; -16- P:\20584\20584 24Q ORDINANCE NO . 5313 (b) To pay the interest on the Parity Bonds, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (c) To pay the principal of the Parity Bonds, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (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 Fund, including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (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 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, to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. Section 17. Pledge of Revenue and Lien Position. 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 inthe 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 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 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 Parity Bonds, -17- P:\20584\20584 24Q ORDINANCE NO . 5313 and the City has not bound and obligated itself to set aside and pay into 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 currently outstanding Parity 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 Parity Bonds. • Section 19. Covenants. The City covenants and agrees with the Owner of each Bond at any time outstanding as follows: (a) Rate Covenant. 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) Maintenance and Repair. 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) Disposal of Waterworks Utility. It will not sell, lease, mortgage or in any manner encumber 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 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 -18- P:120584\20584_240 ORDINANCE NO . 5313 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 i 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) Books and Records. 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) No Free Service. Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish or supply or permit the furnishing or supplying of any service or facility in connection with the 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) Insurance. 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. -19- P:120584\20584 24Q ORDINANCE NO . 5313 (g) Maintenance and Operation Expense. It will pay all Maintenance and Operation Expense and the debt service requirements for the outstanding Parity Bonds, and otherwise meet the obligations of the City as herein set forth. Section 20. Tax Covenants. The City covenants that it will not take or permit to be taken on its behalf any action that would adversely affect the exemption from federal income taxation of the interest on the Tax-Exempt Bonds and will take or require to be,taken such acts as may reasonably be within its ability and as may from time to time be required under applicable law to continue the exemption from federal income taxation of the interest on the Tax-Exempt Bonds. (a) Arbitrage Covenant. Without limiting the generality of the foregoing, the City covenants that it will not take any action or fail to take any action with respect to the proceeds of sale of the Tax-Exempt Bonds or any other funds of the City which may be deemed to be proceeds of the Tax-Exempt Bonds pursuant to Section 148 of the Code and the regulations promulgated thereunder which, if such use had been reasonably expected on the date of delivery of the Tax-Exempt Bonds to the initial purchasers thereof, would have caused the Tax-Exempt Bonds as"arbitrage bonds"within the meaning of such term as used in Section 148 of the Code. The City represents that it has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is an issuer whose arbitrage certifications may not be relied upon. The City will comply with the requirements of Section 148 of the Code and the applicable regulations thereunder throughout the term of the Tax-Exempt Bonds. (b) Private Person Use Limitation for Bonds. The City covenants that for as long as the Tax-Exempt Bonds are outstanding, it will not permit: (1) More than 10% of the Net Proceeds of the Tax-Exempt Bonds to be used for any Private Person Use; and (2) More than 10% of the principal or interest payments on the Tax-Exempt Bonds in a bond year to be directly or indirectly: (A) secured by any interest in property used or to be used for any Private Person Use or secured by payments in respect of property used or to be used for any Private Person Use, or(B) derived from payments (whether or not made to the City) in respect of property, or borrowed money, used or to be used for any Private Person Use. The City further covenants that, if: (3) More than five percent of the Net Proceeds of the Tax-Exempt Bonds are to be used for any Private Person Use; and (4) More than five percent of the principal or interest payments on the Tax- Exempt Bonds in a bond year are (under the terms of this ordinance or any underlying arrangement) directly or indirectly: (A) secured by any interest in property used or to be used for any Private Person Use or secured by payments in respect of property used or to be used for any Private Person Use, or -20- P:120584\20584 24Q ORDINANCE NO . 5313 (B) derived from payments (whether or not made to the City) in respect of property, or borrowed money,used or to be used for any Private Person Use, then, (i) any Private Person Use of the projects described in subsection(3) hereof or Private Person Use payments described in subsection(4) hereof that is in excess of the five percent limitations described in such subsections (3) or (4) will be for a Private Person Use that is related to the state or local governmental use of the Project, and (ii) any Private Person Use will not exceed the amount of Net Proceeds of the Tax-Exempt Bonds used for the state or local governmental use portion of the Iproject to which the Private Person Use of such portion of the Project relates. The City further'covenants that it will comply with any limitations on the use of the projects by other than state and local governmental users that are necessary, in the opinion of its bond counsel, to preserve the fax exemption of the interest on the Tax-Exempt Bonds. (c) Modification of Tax Covenants. The covenants of this Section are specified solely to assure the continued exemption from regular income taxation of the interest on the Tax- Exempt Bonds. To that end, the provisions of this Section may be modified or eliminated without any requirement for formal amendment thereof upon receipt of an opinion of the City's bond counsel that such modification or elimination will not adversely affect the tax exemption of interest on any Tax-Exempt Bonds. (d) Qualified Tax-Exempt Obligation. The City hereby designates the Tax-Exempt Bonds as "qualified tax-exempt obligations" under Section 265(b)(3) of the Code for banks, thrift institutions and other financial institutions. The City does not anticipate that it will issue more than$10,000,000 in qualified tax-exempt obligations during 2007 or 2008,respectively. 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 anyiportion 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 Governmental Obligation 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 -21- P.120584\20584_240 ORDINANCE NO . 5313 Bonds to any lawful purposes as it shall determine, subject only to the rights, if any, of the owners of any other Parity 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 Governmental Obligations pending the prior redemption of the defeased Bonds and if such refunding plan also provides that certain cash and/or Governmental Obligations 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. Within 45 days of any defeasance of Bonds, the City shall provide notice of defeasance of Bonds to Registered Owners of Bonds being defeased, and to the Bond Insurer, if any, and to each party entitled to receive notice in accordance with Section 27. Section 22. Provision for Future Parity Bonds. 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. After the 1998 Bonds, the 2002 Bonds, and the 2003 Bonds are no longer Outstanding, this subsection shall be amended to read as follows: (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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security either on or prior to the date of issuance of such Future Parity Bonds or within three years from the date of issuance of the Future Parity Bonds in three approximately equal annual payments and in such event, the ordinance providing for the issuance of such Future Parity Bonds shall provide for such deposit. -22- P:120584120584 24Q ORDINANCE NO . 5313 After the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this subsection shall be amended to read as follows: (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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance o Alternate Security on or prior to the date of issuance of such Future Parity Bonds. (d) 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 Bond's to be issued and for regular payments to be made for the payment of the principal of suchTerm 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. (e) There shall be on file with 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 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this Section shall be amended to read as follows: a certificate of the City Finance Director demonstrating that during any 12 consecutive calendar months out of the immediately preceding 24 calendar months Net Revenue, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least 1.25 times the Maximum Annual Debt Service 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, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this Section shall be amended to read as follows: 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 24 calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued. 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; -23- P:120584120584_24Q ORDINANCE NO . 5313 (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 (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. Sale of Bonds. The City Finance Director is hereby authorized to enter into negotiations with the Underwriter for the sale of the 2007 Bonds and the 2008 Bonds on terms consistent with the terms of this ordinance. The City Council shall by the applicable Sale Resolution approve a Purchase Agreement for the purchase and sale of the 2007 Bonds and the 2008 Bonds, approve the terms of the 2007 Bonds and the 2008 Bonds (including the schedule of maturities, interest rates, redemption times and prices), and may approve the purchase of bond -24- P:\20584\20584_24Q 11 ORDINANCE NO.. 5313 insurance pursuant to a recommendation of the City Finance Director. The City Finance Director is hereby authorized to enter into negotiations with potential bond insurers to provide a bond insurance policy guaranteeing the payment when due of principal of and interest on the 2007 Bonds and/or the 2008 Bonds. Section 24. 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 as of their respective Closing to the Underwriter, including, but not limited to, the final official statement pertaining to the 2007 Bonds and the 2008 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 Underwriter, each without unreasonable delay. If definitive Bonds are not ready for delivery by the date of the applicable Closing agreed to by the City and the Underwriter, the City, upon the approval of the Underwriter, may cause to be issued and delivered to the Underwriter 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 o 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 25. Application of Bond Proceeds. The accrued ,interest, if any, received by the City at the Closing of the 2007 Bonds and the 2008 Bonds shall be deposited into the Bond Fund and shall be applied to the paym nt of interest first coming due on the 2007 Bonds or the 2008 Bonds, as applicable. The remaining proceeds o f the sale of the 2007 Bonds and the 2008 Bonds, less the underwriter's discount and the bond insurance premium to be paid by the Underwriter on behalf of the City or any other costs of issuance, if any, plus the original issue premium, if any, shall be applied, upon receipt after each Closing, as follows: (a) the amount required to meet the Reserve Requirement for the 2007 Bonds, if any, or the 2008 Bonds, if any, shall be deposited into the Reserve Fund or used to acquire Qualified Insurance, (b) the proceeds of sale of the 2007 Bonds necessary to refund the Refunded Bonds shall be deposited into the Refunding Account, (c) the remaining proceeds of the Tax-Exempt Bonds shall be,deposited into the tax- exempt bond subaccount hereby authorized to be created in the Project Fund (the "Tax-Exempt Subaccount")to pay part of the costs of the Project, and (d) the proceeds of the Taxable Bonds shall be deposited into the taxable bond subaccount hereby authorized to be created in the Project Fund (the "Taxable Subaccount") to pay part of the costs of the Project. -25- P:120584120584 24Q ORDINANCE NO . 5313 Except as provided by the Code and Section 20 of this ordinance, the interest and profits derived from the investment of Bond proceeds shall be deposited in the applicable Tax-Exempt or Taxable Subaccount created within the Project Fund and applied as described in the preceding paragraph. Except as provided by the Code and Section 20 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 and subject to the requirements of the Code and Section 20 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 26. Plan of Refunding. (a) Refunding Plan. For the purpose of realizing a debt service savings, the City Council proposes to issue refunding bonds for the purpose of providing for the payment of the principal of and interest on and the redemption price of the Refunded Bonds on December 1, 2012 (the"Refunding Plan"). (b) Refunding Account. There is created an account known as the "2002 Bond Refunding Account" (the "Refunding Account") to be held by the Escrow Agent, which account is to be drawn upon for the sole purpose of paying the principal of and interest on the Refunded Bonds until their date of redemption and of paying costs related to the refunding of these bonds. The proceeds of sale of the 2007 Bonds necessary to refund the Refunded Bonds shall be credited to the Refunding Account. Money in the Refunding Account shall be used immediately upon receipt to defease the Refunded Bonds as authorized by this ordinance 'and Ordinance No. 4976 and to pay costs of issuance for the 2007 Bonds. The City shall defease the Refunded Bonds and discharge such obligations by the use of money in the Refunding Account to purchase certain Government Obligations (which obligations so purchased, are herein called "Acquired Obligations"), bearing such interest and maturing as to principal and interest in such amounts and at such times which, together with any necessary beginning cash balance,will provide for the payment of: (i) interest on the Refunded Bonds to and including December 1, 2012; (ii) the redemption price of the Refunded Bonds (100% of the principal amount thereof) on December 1, 2012; Such Acquired Obligations shall be purchased at a yield not greater than the yield permitted by the Code and regulations relating to acquired obligations in connection with refunding bond issues. -26- P:\20584\20584 24Q ORDINANCE NO . 5313 (c) Escrow Agent/Escrow Agreement. To carry out the refunding and defeasance of the Refunded Bonds, the City hereby appoints U.S. Bank National Association as escrow agent (the "Escrow Agent"). A beginning cash balance, if any, and Acquired Obligations shall be deposited irrevocably with the Escrow Agent in an amount sufficient to defease the Refunded Bonds. The proceeds of the 2007 Bonds remaining in the Refunding Account after acquisition of the Acquired Obligations and provision for the necessary beginning cash balance shall be utilized to pay expenses of the acquisition and safekeeping of the Acquired Obligations and expenses of the issuance of the 2007 Bonds. In order to carry out the purposes of this Section, the Mayor, the City Finance Director and other appropriate officers ail the City are authorized and directed to execute and deliver to the Escrow Agent, an Escrow Deposit Agreement, substantially in the form on file with the City. (d) Implementation of Refunding Plan. The City hereby irrevocably sets aside sufficient funds out of the purchase of Acquired Obligations from proceeds of the Refunded Bonds to make the payments described in subsection(b) of this Section. The City hereby irrevocably calls the Refunded Bonds for redemption on December 1, 2012 in accordance with the provisions of Ordinance No. 4976 authorizing the redemption and retirement of the Refunded Bonds prior to their fixed maturities. Said call for redemption of the Refunded Bonds shall be irrevocable after the final establishment of the escrow account and delivery of the Acquired Obligations to the Escrow Agent. The Escrow Agent is hereby authorized and directed to provide for the giving of notices of the redemption of the Refunded Bonds in accordance with the applicable provisions of Ordinance No. 4976. The City Finance Director is authorized and requested to provide whatever assistance is necessary to accomplish such redemption and the giving of notices therefor. The costs of publication of such notices shall be an expense of the City. The Escrow Agent is hereby authorized and directed to pay to the Bond Registrar, sums sufficient to pay, when due, the payments specified in of subsection(a) of this Section. All such sums shall be paid from the money and Acquired Obligations deposited with said Escrow Agent pursuant to the previous section of this ordinance, and the income therefrom and proceeds thereof. All such sums so paid to said Bond Registrar shall be credited to the Refunding Account. All money and Acquired Obligations deposited with the bank and any income therefrom shall be held, invested (but only at the direction of the City Finance Director) and applied in accordance with the provisions of this ordinance and with the laws of the State of Washington for the benefit of the City and owners of the Refunded Bonds. The City will take such actions as are found necessary to ensure that all necessary and proper fees, compensation and expenses of the Escrow Agent for the Refunded Bonds shall be paid when due. 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. -27- P:120584120584 24Q ORDINANCE NO . 5313 The City hereby agrees to provide or cause to be provided to each then existing NRMSIR and to the SID, if one is created, in each case as designated by the SEC, the following annual financial information and operating data (collectively, the "Annual Financial Information") for each prior fiscal year, commencing in 2008 with the calendar year ending December 31, 2007 with respect to the 2007 Bonds, and commencing in 2008 with the calendar year ending December 31, 2008 with respect to the 2008 Bonds: (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 by the Washington State Auditor pursuant to RCW 43.09.200, 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 Net Revenue; (c) Debt service coverage ratios; (d) General customer statistics for the Waterworks Utility contained in the final official statement for the Bonds under the heading "The Waterworks Utility—Number of Water Customers," "—Water Billing," "—Number of Wastewater Customers," "—Wastewater Billing," "—Number of Storm Drainage Customers," and"—Storm Drainage Billing" and (e) A narrative explanation of the reasons for any amendments to this Section made during the previous fiscal year and-the impact of such amendments on the Annual Financial Information being provided. The Annual Financial Information shall be provided on or before the last day of the seventh month following the end of such prior fiscal year; provided, after the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding the City shall provide the following Annual Financial Information on or before the last day of the ninth month following the end of the prior fiscal year. The City's current fiscal year ends December 31. The City may adjust such fiscal year by providing written notice of the change of fiscal year to each then existing NRMSIR and the SID, if any. In lieu of providing such Annual Financial Information, 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 any. The City further agrees to provide or cause to be provided, in a timely manner, to the SID, if any, and to each then existing NRMSIR, notice of any of the following events with respect to the Bonds, if material: 1. Principal and interest payment delinquencies; -28- P:\20584\20584 240 ORDINANCE NO . 5313 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 Tax-Exempt Bonds; 7. Modifications to rights of the Owners of the Bonds; 8. Bond calls (optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34-23856); 9. Defeasances of the Bonds; 10. Release, substitution or sale of property securing repayment of the Bonds; and 11. Rating changes. Solely for purposes of disIclosure, and not intending to modify this undertaking, the City advises that there is no property securing repayment of the Bonds and that interest earned on the Taxable Bonds will not be excluded from gross income of the owners of the Taxable Bonds for federal income tax purposes. The City also agrees to provide or cause to be provided, in a timely manner, to the SID, if any, and to each then existing NRMSIR, notice of its failure to provide the Annual Financial Information for the prior fiscal year on or before the date set forth above. 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 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 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 -29- P:120584120584_240 • ORDINANCE NO . 5313 this Section 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 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 shall be limited to the right to obtain specific enforcement of the City's obligations under this Section, 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. The City may elect to submit the information required by this Section to be filed with the NRMSIRs and the SID, if any, directly to DisclosureUSA.org unless or until the SEC withdraws its approval of this submission process. Section 28. Preliminary Official Statement. The City authorizes the City Finance Director to approve preliminary official statements for the 2007 Bonds and the 2008 Bonds and authorizes the distribution of such preliminary official statements in connection with the offering of the 2007 Bonds and 2008 Bonds. Pursuant to the Rule, the City Finance Director may deem the preliminary official statements as final as of their respective dates except for the omission of information dependent upon the pricing of the applicable series of Bonds and the completion of the applicable Bond Purchase Agreement. The City agrees to cooperate with the Underwriter to deliver or cause to be delivered, within seven business days from the date of the sale of the 2007 Bonds and the 2008 Bonds, as applicable, copies of a final official statement in sufficient quantity to comply with paragraph (b)(4) of the Rule and the rules of the MSRB. Following the sale of the 2007 Bonds and the 2008 Bonds in accordance with this ordinance, the City authorizes the use the final official statements, substantially in the form of the applicable preliminary official statements, in connection with the sale of the 2007 Bonds and 2008 Bonds. The City Finance Director is hereby authorized to review and approve on behalf of the City the final Official Statements for the Bonds with such additions and changes as may be deemed necessary or advisable. Section 29. Amendments. (a) The City Council from time to time and at any time may pass an ordinance or ordinances supplemental hereof, which ordinance or ordinances thereafter shall become a part of this ordinance, for any one or more or all of the following purposes: (1) To add to the covenants and agreements of the City in this ordinance, other covenants and agreements thereafter to be observed, which shall not adversely affect the interests of the owners of any Bonds, or to surrender any right or power herein reserved. (2) To make such provisions for the purpose of curing any ambiguities or of curing, correcting or supplementing any defective provision contained in this ordinance in regard to matters or questions arising under such ordinances as the City Council may deem necessary or -30- P:120584120584 24Q i I ORDINANCE NO . 5313 desirable and not inconsistent with such ordinances and which shall not adversely affect, in any material respect, the interest of the owners of Bonds. In any such supplemental ordinance may be adopted without the consent of the owners of any Bonds at any time outstanding, notwithstanding any of the provisions of subsection(b) of this section. (b) With the consent of the owners of not less than sixty-five percent (65%) in aggregate principal amount of the Bonds at the time outstanding, the City Council may pass an ordinance or ordinances supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this ordinance or of any supplemental ordinance;provided, however, that no such supplemental ordinance shall: (1) Extend the fixed maturity of any Bonds, or reduce the rate of interest thereon, or extend the time of payment of interest from their due date, or reduce the amount of the principal thereof, or reduce any premium payable on the redemption thereof, without the consent of the Owner of each Bond so affected; or (2) Reduce the aforesaid percentage of Bondowners required to approve any such supplemental ordinance, without the consent of the owners of all of the Bonds then outstanding. It shall not be necessary for the consent of Bondowners under this subsection (b) to approve the particular form of any proposed supplemental ordinance, but it shall be sufficient if such consent shall approve the substance thereof. For the purpose of consenting to amendments under this subsection (b), the Insurer shall be deemed to be the sole Registered Owner of the Bonds then outstanding. (c) Upon the adoption of any supplemental ordinance pursuant to the provisions of this Section, this ordinance shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations of the City under this ordinance and all owners of Bonds outstanding hereunder shall thereafter be determined, exercised and enforced thereunder, subject in alil respects to such modifications and amendments, and all terms and conditions of any such supplemental ordinance shall be deemed to be part of the terms and conditions of this ordinance for any and all purposes. (d) Bonds executed and delivered after the execution of any supplemental ordinance passed pursuant to the provisions of this section may have a notation as to any matter provided for in such supplemental ordinance, and if such supplemental ordinance shall so provide, new • Bonds so modified as to conform, in the opinion of the City Council, to any modification of this ordinance contained in any such supplemental ordinance, may be prepared and delivered without cost to the owners of any affected Bonds then outstanding, upon surrender for cancellation of such Bonds in equal aggregate principal amounts. (e) Exclusion of Bonds Owned by City. Bonds owned or held by or for the account of the City shall not be deemed outstanding for the purpose of any vote or consent or other action or any calculation of outstanding Bonds in this ordinance provided for, and shall not be entitled to vote or consent or take any other action in this ordinance provided for. -31- P:120584\20584 24Q ORDINANCE NO . 5313 (f) Bonds Held by Securities Repositories. For so long as the Bonds are held in book entry only form, communications with the owners shall be made with the securities depository who is the "Registered Owner" of the Bonds and communications with (and obtaining consents from) beneficial owners shall be made in accordance with the operational procedures of the securities depository that is the "Registered Owner"of the Bonds. Section 30. Contract: Savings Clause. The covenants contained in this ordinance and in the Bonds shall constitute a contract between the City and the Owner of each and every Bond. If any one or more of the covenants or agreements provided in this ordinance to be performed on the part of the City shall be declared by any court of competent jurisdiction and after final appeal (if any appeal be taken) to be contrary to law, then such covenant or covenants, agreement or agreements, shall be null and void and shall be deemed separable from the remaining covenants and agreements in this ordinance and shall in no way affect the validity of the other provisions of this ordinance or of the Bonds. Section 31. General Authorization; Ratification of Prior Acts. The Mayor, the City Finance Director and other appropriate officers of the City are authorized to take any actions and to execute documents as in their judgment may be necessary or desirable in order to carry out the terms of, and complete the transactions contemplated by, this ordinance. All acts taken pursuant to the authority of this ordinance but prior to its effective date are hereby ratified. Section 32. Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval and five days after publication. PASSED by the City Council this 22nd day of October, 2007. deltMA..cy l ua,e --- Bonnie Walton, City Clerk APPROVED BY THE MAYOR this 22nd day of October, 2007. ovead4 Kathy Keol r, Mayor Approved as to Form: 441P R Bond Counsel Date of Publication: October 27, 2007 -32- P:\20584\20584_24Q � r ORDINANCE NO . 5313 ' EXHIBIT A Project Description Proceeds of the Bonds are expected to be used for the following Projects: • Renton Village Storm System Improvement—planning, designing and constructing a storm system to increase capacity. • Gypsy Basin/Ripley Lane Storm System Improvement—replacing an existing culvert which will connect into a 60-inch storm system on the new Seahawks • headquarters/training facility site. • SW 34th Street Culvert Replacement—replacing existing culvert to improve conveyance activity, reduce upstream flooding and improve fish passage. • Hazen 565 Zone Reservoir—designing and constructing a 4.2 million gallon reservoir. • Emergency Power to Pump Stations—installing emergency electrical power generation facilities. • Summerwind/Stongate Lift Station Replacement—constructing a new station to ensure sufficient capacity'1.1a rapidly growing area. • Central Plateau Interceptor Phase 2—constructing an interceptor to serve eastern portion of service area. • A-1 1 P:120584120584_24Q ORDINANCE NO . 5313 EXHIBIT B Form of Bonds The Bonds shall be in substantially the following form: UNITED STATES OF AMERICA [Statement of Insurance] No. STATE OF WASHINGTON CITY OF RENTON WATER AND SEWER REVENUE [AND REFUNDING] BOND, [SERIES][2007/2008] [A/B][(TAXABLE)] INTEREST RATE: MATURITY DATE: CUSIP NO.: REGISTERED OWNER: CEDE & Co. PRINCIPAL AMOUNT: The City of Renton, Washington, a municipal corporation organized and existing under and by virtue of the laws of the State of Washington (herein called the "City") hereby acknowledges itself to owe and for value received promises to pay, but only from the sources and as hereinafter provided, to the Registered Owner identified above, or registered assigns, on the Maturity Date identified above, the Principal Amount indicated above and to pay interest thereon from the date of delivery, or the most recent date to which interest has been paid or duly provided for, at the Interest Rate set forth above, payable on , 20_, and semiannually thereafter on the first days of each December and June until such principal sum is paid or payment has been duly provided for. Both principal of and interest on this bond are payable in lawful money of the United States of America. Interest and principal shall be paid as provided in the Blanket Issuer Letter of Representations (the "Letter of Representations") by the City to The Depository Trust Company ("DTC"). The fiscal agency of the State of Washington has been appointed by the City as the authenticating agent, paying agent and registrar for the bonds of this issue (the "Bond Registrar"). Capitalized terms used in this bond that are not specifically defined have the meanings given such terms in Ordinance No. 5313 of the City adopted on October 22, 2007 and Resolution No. of the City adopted on , 20_ (together, the "Bond Ordinance"). Reference is made to the Bond Ordinance and any and all modifications and amendments thereto for a description of the nature and extent of the security for the bonds of this issue, the funds or revenues pledged, and the terms and conditions upon which such bonds are issued. B-1 P:120584120584 24Q 1 ORDINANCE NO . 5313 This bond is one of an authorized issue of bonds of the City of like date and tenor except as to number, amount, rate of interest and date of maturity in the aggregate principal amount of $ . This issue of bonds is authorized by the Bond Ordinance for the purposes of providing money to pay part of the cost of construction and acquisition of certain improvements to the Waterworks Utility[, refund certain outstanding water and sewer revenue bonds of the City], fund the Reserve Fund, and to pay costs of issuance of the bonds of this issue, all as specified in the Bond Ordinance. [Simultaneously with the issuance of this bond, the City is also issuing its Water and Sewer Revenue Bonds, Series 2008[A/B][(Taxable)] for the purposes specified in the Bond Ordinance.] This bond and the bonds of this issue are payable solely from the special funds of the City defined as the "Bond Fund'1 and the "Reserve Fund" in the Bond Ordinance. The City has irrevocably obligated and bound tself to pay into the Bond Fund out of the Net Revenue or from such other moneys as may be provided therefor certain amounts necessary to pay and secure the payment of the principal and interest on such bonds. The bonds of this issue are not general obligations of the City. [The bonds of this issue are not "private activity bonds" as such term is defined in the Internal Revenue Code of 1986, as amended (the "Code"). The bonds of this issue have been designated by the City as "qualified tax-exempt obligations"under Section 265(b) of the Code.] The bonds of this issue are issued under and in accordance with the provisions of the Constitution and applicable statutes of the State of Washington and duly adopted ordinances of the City. The City hereby covenants and agrees with the owner of this bond that,it will keep and perform all the covenants of this bond and of the Bond Ordinance to be by it kept and performed, and reference is hereby made to the Bond Ordinance for a complete statement of such covenants. The City does hereby pledge and bind itself to set aside from the Waterworks Utility Fund out of the revenue of the Waterworks Utility and to pay into the Bond Fund and the Reserve Fund the various amounts required by the Bond Ordinance to be paid into and maintained in such Funds, all within the times provided by the Bond Ordinance. To the extent more particularly provided by the Bond Ordinance, the amounts so pledged to be paid from the Waterworks Utility Fund out of the revenue of the Waterworks Utility into the Bond Fund and the account therein shall be a lien and charge thereon equal in rank to the lien and charge upon said revenue of the amounts required to pay and secure the payment of the outstanding 1998 Bonds, the 2002 Bonds, the 2003 Bonds, [and] the 2004 Bonds[, and the 2007 Bonds] and any revenue bonds of the City hereafter issued on a parity with the bonds of this issue and superior to all other liens and charges of any kind or nature except Maintenance and Operation Expense. The pledge of Net Revenue and other obligations of the City under the Bond Ordinance may be discharged at or prior to ,the maturity or redemption of the bonds of this issue upon the making of provision for the payment thereof on the terms and conditions set forth in the Bond Ordinance. B-2 P:\20584120584 24Q � I ORDINANCE NO . 5313 The bonds of this issue are subject to redemption prior to their scheduled maturities as provided in the Bond Ordinance. This bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Ordinance until the Certificate of Authentication hereon shall have been manually signed by the Bond Registrar. It is hereby certified that all acts, conditions, and things required by the Constitution and statutes of the State of Washington to exist, to have happened, been done, and performed precedent to and in the issuance of this bond have happened, been done, and performed. IN WITNESS WHEREOF, the City of Renton, Washington has caused this bond to be signed with the facsimile or manual signature of the Mayor, to be attested by the facsimile or manual signature of the City Clerk, all as of this day of , 20 . CITY OF RENTON, WASHINGTON By /s/facsimile or manual Mayor ATTEST: /s/facsimile or manual City Clerk The Bond Registrar's certificate authentication on the Bonds shall be in substantially the following form: CERTIFICATE OF AUTHENTICATION Date of Authentication: , 20 This bond is one of the bonds described in the within-mentioned Bond Ordinance and is one of the Water and Sewer Revenue [and Refunding] Bonds, [Series][2007/2008] [A/B][(Taxable)] of the City of Renton, Washington, dated , 20 . WASHINGTON STATE FISCAL AGENCY, Registrar By Authorized Signer B-3 P:120584\20584 24Q • October 22,2007 Renton City Council Minutes Page 372 RESOLUTIONS AND The following resolutions were presented for reading and adoption: ORDINANCES Resolution#3910 A resolution was read authorizing the Mayor and City Clerk to enter into an Transportation: Sounder interlocal cooperative agreement with the Washington State Department of Transit Tukwila Station, Transportation entitled"Public Transportation Regional Mobility Grant WSDOT Mobility Grant Program State Funding Agreement Work by Public Agencies." MOVED BY PERSSON, SECONDED BY PALMER, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. Resolution#3911 A resolution was read authorizing the Mayor and City Clerk to enter into an Police: Regional interlocal agreement with the Cities of Des Moines, Federal Way, and Tukwila Misdemeanant Jail Facility, for a feasibility study for the construction and operation of a misdemeanant jail Interlocal Agreement facility. MOVED BY LAW, SECONDED BY NELSON, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. The following ordinance was presented for first reading and referred to the Council meeting of 11/5/2007 for second and final reading. Finance: Fund Transfers, An ordinance was read amending the 2007 Budget by transferring funds in the Utilities Capital Expenditures, amount of$3,173,000 from the 2006 year-end fund balance for the purpose of Budget Amend funding capital expenditures by Water, Wastewater, and Surface Water Utilities. MOVED BY PERSSON, SECONDED BY CLAWSON, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 11/5/2007. CARRIED. The following ordinance was presented for second and final reading and adoption: Ordinance#5313 An ordinance was read authorizing the issuance of three series of water and Finance: Bond Issuance, sewer revenue bonds of the City for the purpose of financing the costs of Utility Capital Projects carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds-of the City, in the aggregate principal amounts of not to exceed$10,000,000, $10,000,000 and $3,000,000, respectively; providing the form, terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle- Northwest Securities Corporation, Seattle,Washington. MOVED BY CLAWSON, SECONDED BY PERSSON, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. Added In conjunction with the bond ordinance approved above, a resolution was read RESOLUTION#3912 approving the sale of the City's Water and Sewer Revenue and Refunding Finance: Bond Issuance, Bonds,2007, in the aggregate principal amount of$9,750,000 to provide funds Utility Capital Projects for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City; and approving the sale of such bonds to Seattle-Northwest Securities Corporation, all in accordance with Ordinance No. 5313 of the City. MOVED BY CLAWSON, SECONDED BY NELSON, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. EXECUTIVE SESSION MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL RECESS AND ADJOURNMENT INTO EXECUTIVE SESSION FOR APPROXIMATELY 30 MINUTES TO DISCUSS POTENTIAL LITIGATION WITH NO OFFICIAL ACTION TO BE TAKEN AND THAT THE COUNCIL MEETING BE ADJOURNED WHEN THE EXECUTIVE SESSION IS ADJOURNED. CARRIED. Time: 7:50 p.m. October 22,2007 Renton City Council Minutes Page 370 CAG: 06-165, Tiffany Park Community Services Department submitted CAG-06-165, Tiffany Park Activity Activity Building, Danneko Building; and requested approval of the project, authorization for final pay Construction estimate in the amount of$1,125.61, commencement of the 60-day lien period and release of the retained amount of.$22,577.79 to Danneko Construction, contractor, if all required releases are obtained. Council concur. Budget: 2008, Annual City of Finance and Information Services Department recommended a public hearing Renton be set on 11/19/2007 to consider 2008 Revenue Sources and Preliminary Budget? and a public hearing be set on 12/3/2007 to consider the 2008 Budget. Refer to Committee of the Whole; set public hearing dates on 11/19/2007 and 12/3/2007. Plat: Benson Ridge, Benson Hearing Examiner recommended approval, with conditions, of the Benson Rd S&Cedar Ave S, PP-07- Ridge Preliminary Plat; nine-lot subdivision totaling 1.72 acres located at 3401 056 Benson Rd. S. and 3451 Cedar Ave. S. Council concur. Airport: Lane Hangar Transportation Systems Division recommended approval of an addendum to Condominium Owners' airport lease LAG-99-003 with Lane Hangar Condominium Owners' Association Lease, Addendum Association, to increase the ground rate from$13,597 to $15,181.32 annually, #3, LAG-99-003 which will remain in effect through 7/31/2010. Council concur. Airport: AT&T Lease, Transportation Systems Division recommended approval of an addendum to Addendum#4, PAG-001-87 airport lease PAG-001-87 with AT&T, to increase the rate from$10,533.14 to $17,287.33 annually,to remain in effect until 10/31/2012. Council concur. Transportation: Sounder Transportation Systems Division recommended approval of the Regional Transit Tukwila Station, Mobility Grant with Washington State Department of Transportation to accept WSDOT Mobility Grant funds in the amount of$5,500,000 for the Sounder Transit Tukwila Station project. Council concur. (See page 372 for resolution.) CAG: 06-065, Rainier Ave S Transportation Systems Division recommended approval of Supplemental Improvements (4th P1 to 7th) Agreement No. 2 to CAG-06-065, agreement with DMJM Harris, in the amount Design,DMJM Harris of$433,889 for design services for the stormwater diversion pipe in Shattuck Ave. S. from S. 4th P1. to SW 7th St. Council concur. Utility: Hazen 565-Zone Utility;Systems Division recommended approval of an agreement with Otto Reservoir Inspection Services, Rosnau&Associates, Inc. in the amount of$79,187 for inspection and material Otto Rosnau &Associates testing.services for the Hazen 565-Zone Reservoir project. Council concur. MOVED BY NELSON, SECONDED BY PERSSON,COUNCIL APPROVE THE CONSENT AGENDA AS AMENDED TO REMOVE ITEM 8.c. FOR SEPARATE CONSIDERATION. CARRIED. Separate Consideration Administrative, Judicial and Legal Services Department recommended approval Item 8.c. of an agreement with King County regarding transfer of properties, effective Annexation: Benson Hill annexation date and availability of$1.7 million in the event of an affirmative Communities, S 200th St& vote for the Benson Hill Communities Annexation. MOVED BY LAW, • 128th Ave SE SECONDED BY CORMAN, COUNCIL REFER CONSENT AGENDA ITEM 8.c. TO COMMITTEE OF THE WHOLE. CARRIED. UNFINISHED BUSINESS - Council President Nelson presented a Committee of the Whole report Committee of the Whole recommending concurrence in the staff recommendation to adopt a resolution Finance: Bond Issuance, authorizing the sale of Water and Sewer Revenue and Refunding Bonds, 2007, Utility Capital Projects in the aggregate amount of$9,750,000, specifying the par amount, terms, interest rates, redemption provisions, and insurance language. The Committee further recommended that the resolution be adopted immediately following the adoption of the 2007 Water and Sewer Revenue and Refunding Bonds ordinance. October 22,2007 Renton City Council Minutes Page 371 MOVED BY NELSON, SECONDED BY CLAWSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See page 372 for ordinance and resolution.) Finance Committee Finance Committee Chair Persson presented a report recommending approval of Finance: Vouchers Claim Vouchers 265076—265553 and two wire transfers totaling $3,681,922.96; and approval of 133 Payroll Vouchers, one wire transfer, and 680 direct deposits totaling$2,166,325.41. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance: Issaquah and Kent Finance Committee Chair Persson presented a report recommending adoption of School District Impact Fees the 2007 Issaquah School District Capital Facilities Plan, including an impact fee of$6,021 per new single-family unit. The Committee also recommended that the City adopt the 2007-2008—2012-2013 Kent School District Capital Facilities Plan,including an impact fee of$5,110 per new single-family unit and an impact fee of$3,146 per new multi-family unit. The Committee further recommended that an ordinance regarding this matter be prepared and presented for first reading. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance: Temporary Finance Finance Committee Chair,Persson presented a report recommending Analyst Position concurrence in the staff recommendation to approve temporarily filling a half time Finance Analyst position with a full time employee effective November 1, 2007, and terminating March 31, 2008. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance: Fund Transfers, Finance Committee Chair Persson presented a report recommending Utilities Capital Expenditures, concurrence in the staff recommendation to approve the ordinance authorizing Budget Amend transfers of$1,800,000 from Water Utility Fund 405 to Fund 425; $963,000 from Wastewater Utility Fund 406 to Fund 426; and$410,000 from Surface Waster Utility Fund 407 to Fund 427. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See page 372 for ordinance.) Finance: Fire Station#11 Finance Committee Chair Persson presented a report recommending Sprinkler System Bid Award concurrence in the staff recommendation to award the Fire Sprinkler System for Renton Fire Station#11 project to the lowest bidder, ACE Fire Protection,Inc., in the amount of$28,959.13. The Committee had reviewed the minor informalities associated with the lowest bidder. The Committee further recommended that the Mayor and City Clerk be authorized to the sign the contract. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Transportation (Aviation) Transportation(Aviation) Committee Chair Palmer presented a report Committee recommending concurrence in the staff recommendation to authorize the Mayor Transportation: Duvall Ave and City Clerk to execute Supplemental Agreement#7 with Berger/Abam, Inc. NE Improvements, in the amount of$386,000, and extend the completion date from April 30, 2007 Berger/Abam Engineers to December 31, 2008. MOVED BY PALMER, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Ms. Palmer noted that due to project delays the effective date for the Merritt II Annexation might have to be extended in order to receive funding from King County. COMMITTEE OF THE,WHOLE ;,.`COMMITTEE`REPORT: ��t, • iia=aa400.7 . r I' October 22,2007 ',. Water Sewer.'Revenue and.Refuridi ori 007` (October 8;;20:07) . , ; .. : .. ' ' The;;C.oiiim ttee:,o f the Whole recommends concurrence;in the staff recommendatton:•toga o t :' •. • - a'resolution:authoriziig,the sale of Water and Sewer Revenue'and Refunding:Bonds, 200.7•`in.: amour f9;7 0specifying `the; par.:--amount terms,;.'interest 'rates, o '.,$ 5 0,00 : redemption:pro is ons; and ins ance�'language. 'The:cominittee further recommends Resolution be:'adopted.immediately..;followingadoption:of:the 2007 Water"and•Sewer.Revenue;" and Refunding Bonds:'ordinance. ,ti:: tt Y Y / { lt, { - •.tri 'T-'.`.sh;.' .. ' {`i ivn'M`i'Sir :%:Y'i'� ":N..: ,• , rN ••FC '":' :YJ ". - • ,TorulVel`son �Co '1`Pr • e iderit . . cc ~.Mike r; • „, $sile�;�FIs^^^Adtrii�iistrafQ ' October 15,2007 Renton City Council Minutes Page 361 'BY NELSON, SECONDED BY CLAWSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See later this page for ordinance.) Public Safety Committee Public Safety Committee Chair Law presented a report regarding the Police: Regional misdemeanant jail facility study. There is insufficient space for misdemeanant Misdemeanant Jail Facility inmates in King County and the City of Renton has been unable to secure additional beds in the quantity that are needed from contract providers. Additionally, all of the cities in King County have a contractual obligation to remove misdemeanor inmates from King County Jail by 12/31/2012. The combination of these challenges is forcing cities to look at alternatives for jail needs. As a result of these conditions, Renton is joining with the cities of Des Moines, Tukwila, and Federal Way to fund a feasibility study in the amount of$161,000 to examine the feasibility of the construction and operation of a 500-bed multi- jurisdictional misdemeanant jail facility. The City of Renton is acting as the lead agency and will execute the contract with DLR Group. Renton's financial contribution to the study is $78,890. The Committee recommended concurrence in the staff recommendation to contract with DLR Group to complete the feasibility study. The Committee also recommended preparation of the resolution for reading and adoption at the next Council meeting authorizing the interlocal agreement between the cities to pay for the feasibility study. MOVED BY LAW, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. RESOLUTIONS AND The following ordinance was presented for first reading and referred to the ORDINANCES Council meeting of 10/22/2007 for second and final reading: Finance4Bond Issuance, An ordinance was read authorizing the issuance of three series of water and Utility Capital Projects sewer revenue bonds of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, in the • aggregate principal amounts of not to exceed $10,000,000, $10,000,000 and $3,000,000,respectively;providing the form,terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle- Northwest Securities Corporation, Seattle,Washington. MOVED BY CLAWSON, SECONDED BY BRIERE, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 10/22/2007. CARRIED. The following ordinance was presented for second and final reading and adoption: Ordinance#5312 An ordinance was read amending the 2007 Budget by using $29,200 from Fund Fire: Defibrillators &Renton 010 fund balance for the purpose of funding the City of Renton's 2007 and 2008 Heart Month Campaign Renton Heart Month campaigns ($19,200) and for purchasing six public access Funding, Budget Amend defibrillators ($10,000). MOVED BY LAW, SECONDED BY CORMAN, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. NEW BUSINESS Councilmember Persson noted receipt of an e-mail from Alan Campbell Citizen Comment: Campbell- (Renton) regarding the prevalence of junk vehicles parked on lots and on the Junk Vehicles streets in the Highlands area. He referred the matter to the Administration. October 15,2007 Renton City Council Minutes Page 360 Appointment: Library Board Mayor Keolker appointed Catherine Ploue-Smith to the Library Board for a five-year term expiring on 6/1/2012. Refer to Community Services Committee. City Clerk: Quarterly Contract City Clerk submitted Quarterly Contract List for period of 7/1/2007 to List, 7/2007 to 9/2007 9/30/2007; 42 contracts and 17 addenda totaling$12,961,116.66. Information. CAG: 07-156, Fire Station#11 City Clerk reported bid opening on 10/3/2007 for CAG-07-156, Fire Station Fire Sprinkler System,Ace #11,Fire Sprinkler System; two bids; engineer's estimate$70,000; and Fire Protection Systems submitted staff recommendation to award the contract to the low bidder,Ace Fire Protection Systems, Inc., in the amount of$28,959.13. Refer to Finance Committee. Court Case: First Mercury Court Case filed on behalf of First Mercury Insurance Company by Lee Smart, Insurance Company, CRT-07- P.S., Inc. related to the claim filed on the First Mercury policy for damage to 010 self-storage units on NE Sunset Blvd. as a result of sewer discharge that occurred in November 2006 during Sanders General Construction's work on City contract CAG-05-165. Refer to City Attorney and Insurance Services. Development Services: Development Services Division recommended acceptance of a deed of Hoquiam Court Short Plat, dedication for additional right-of-way in the vicinity of NE 8th St. and Hoquiam ROW Dedication,NE 8th St, Ave. NE to fulfill a requirement of the Hoquiam Court Short Plat. Council SHP-05-099 concur.; Annexation: Marshall,Duvall Economic Development,Neighborhoods and Strategic Planning Department Ave NE &NE Sunset Blvd recommended a public hearing be set on 11/5/2007 to consider the proposed Marshall Annexation and R-8 zoning of the 7.6-acre site located west of Duvall Ave.NE and north of NE Sunset Blvd. Council concur. Finance: Finance Analyst Finance and Information Services Department recommended approval to Position, Temporarily Fill as temporarily fill a half-time Finance Analyst position with a full-time employee Full Time until 3/31/2008. Refer to Finance Committee. CAG: 03-131, Duvall.Ave NE Transportation Systems Division requested approval of Supplemental Improvements, Berger/Abam Agreement No. 7 to CAG-03-131, agreement with Berger/Abam Engineers, Engineers Inc., for services in the amount of$386,000 for the Duvall Ave. NE Widening Project. Refer to Transportation(Aviation) Committee. Utility: Capital Expenditures Utility Systems Division recommended approval to transfer$1,800,000 from Funding, Budget Amend Water Utility Fund 405 to Fund 425; $963,000 from Wastewater Utility Fund 406 to Fund 426; and $410,000 from Surface Water Utility Fund 407 to Fund 427 for,the funding of utilities capital expenditures. Refer to Finance Committee. MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL APPROVE THE CONSENT AGENDA AS PRESENTED. CARRIED. UNFINISHED BUSINESS Council President Nelson presented a Committee of the Whole report regarding Committee of the Whole the settlement agreement with MT Development. The Committee Legal: Settlement Agreement, recommended that Council authorize the settlement of the MT Development Plat Application, MT lawsuit(CRT-05-011) as outlined in the agenda bill(dated 10/8/2007). Development MOVED BY NELSON, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance; Bond Issuance, Council President Nelson presented a Committee of the Whole report Utility Capital Projects recommending concurrence in the staff recommendation to issue bonds in the approximate amount of$21.2 million to finance the cost of construction of various capital projects within the utility systems as well as to refinance outstanding bonds to lower overall costs. The Committee further recommended that the ordinance regarding this matter be presented for first reading. MOVED October 15,2007 Renton City Council Minutes Page 361 BY NELSON, SECONDED BY CLAWSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See later this page for ordinance.) Public Safety Committee Public Safety Committee Chair Law presented a report regarding the Police: Regional misdemeanant jail facility study. There is insufficient space for misdemeanant Misdemeanant Jail Facility inmates in King County and the City of Renton has been unable to secure additional beds in the quantity that are needed from contract providers. Additionally, all of the cities in King County have a contractual obligation to remove misdemeanor inmates from King County Jail by 12/31/2012. The combination of these challenges is forcing cities to look at alternatives for jail needs. , As a result of these conditions, Renton is joining with the cities of Des Moines, Tukwila, and Federal Way to fund a feasibility study in the amount of$161,000 to examine the feasibility of the construction and operation of a 500-bed multi- jurisdictional misdemeanant jail facility. The City of Renton is acting as the lead agency and will execute the contract with DLR Group. Renton's financial contribution to the study is $78,890. The Committee recommended concurrence in the staff recommendation to contract with DLR Group to complete the feasibility study. The Committee also recommended preparation of the resolution for reading and adoption at the next Council meeting authorizing the interlocal agreement between the cities to pay for the feasibility study. MOVED BY LAW, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. RESOLUTIONS AND The following ordinance was presented for first reading and referred to the ORDINANCES Council meeting of 10/22/2007 for second and final reading: Finance: Bond Issuance, An ordinance was read authorizing the issuance of three series of water and Utility Capital Projects sewer revenue bonds of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility and refunding certain outstanding water and sewer revenue bonds of the City, in the aggregate principal amounts of not to exceed $10,000,000, $10,000,000 and $3,000,000, respectively;providing the form, terms and covenants of the bonds; fulfilling the Reserve Requirement; authorizing the appointment of an escrow agent and the execution of an escrow agreement relating to the refunding bonds; and approving the sale and providing for the delivery of the bonds to Seattle- Northwest Securities Corporation, Seattle, Washington. MOVED BY CLAWSON, SECONDED BY BRIERE, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 10/22/2007. CARRIED. The following ordinance was presented for second and final reading and adoption: Ordinance#5312 An ordinance was read amending the 2007 Budget by using $29,200 from Fund Fire: Defibrillators &Renton 010 fund balance for the purpose of funding the City of Renton's 2007 and 2008 Heart Month Campaign Renton Heart Month campaigns ($19,200) and for purchasing six public access Funding,Budget Amend defibrillators ($10,000). MOVED BY LAW, SECONDED BY CORMAN, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. NEW BUSINESS Councilmember Persson noted receipt of an e-mail from Alan Campbell Citizen Comment: Campbell- (Renton) regarding the prevalence of junk vehicles parked on lots and on the Junk Vehicles streets in the Highlands area. He referred the matter to the Administration. • . , • COMMITTEE:OF THE WHOLE: '.:. COMMITTEE'iREPORT Qate' /l� I - Q7 �` . • • •October'1.5;:2007 : , A1DbETION'OE QRDiNANCE-AUTHORIZING•BONU'SAIE' ; . (October 8;••2007),.„ •• _ , The'Committee''of the:Whole'recommends concurrence.in the'staff recommendation to;issue' bonds,'in.the 'a .proximate, amount o f $2:1'.2 million to=:fin rice the.cost'of constriction of .: •various capital.projects•within thesystems`as:well>as;torefinance outstandin bonds;to lower.overall;costs: -I g e presented for'... :: The:Commttee.:fiirther•'recommends-that the ordinance°re archn ::,this:matter b. • read .:. - first. ni - " • • ,-., �. ,°.. vy • '..fit - • , •`1 ori Nelson' our il'Pr- `.I is - - .. fj�.' • • cG: { Mike Bailey,FIS Administrator.' j k4 From: Michael Bailey /0/ /7 �0® 7 To: Julia Medzegian; Kathy Keolker Date: 10/11/2007 10:38:41 AM Subject: Utility Bond Sale D icuments Attached is one other document which may be of interest. It is known in the industry as the"Preliminary Official Statement". It is essentially the prospectus for the bond sale. It only references the amount of bonds which we anticipate to sell in 2007(so the amount is less than the total transaction). iLlo tedlo 4-8—ifi available for the upco-mingfdiscussions:i t is 56 pages.. Mike CC: Bonnie Walton; Jay Covington; Marty Wine • 4. • PRELIMINARY OFFICIAL STATEMENT DATED ,2007 $9,945,000* City of Renton, Washington Water and Sewer Revenue and Refunding Bonds, 2007 2 CIgo u9 DATED:Date of Delivery DUE:December 1,as shown below v• ._ E STANDARD&POOR'S RATING—AA-,lunderlying;AAA,insured (see "Security for the Bonds-Bond Insurance" and 0 Td "Ratings"herein). II c Li 0 FITCH RATING—AA-,underlying;AAA,;insured(see"Security for the,Bonds-Bond Insurance"and"Ratings"herein). E m BANK QUALIFIED—The City has designated the Bonds as "qualified tax-exempt obligations"for purposes of Section a• m 265(b)(3)(B)of the Code. See"Tax Matters." fr a BOOK-ENTRY ONLY—The Bonds will be issued as fully registered bonds in denominations of$5,000,or integral multiples o 5 thereof, and will be registered in the name of Cede & Co., as bond owner and nominee for The Depository Trust o- Company ("DTC"),New York,Nev York. DTC will act as securities depository for the Bonds. Purchasers will not a _Ei receive certificates representing their interest in the Bonds purchased. PRINCIPAL AND INTEREST PAYMENTS Interest on the Bonds will be payable on June 1,2008 and semiannually thereafter a cca on December 1 and June 1 of each year to their maturity or earlier redemption of the Bonds. Principal of and interest sac on the Bonds will be payable by the fiscal agency of the State of Washington,currently The Bank of New York,New ti, ' York,New York,as further described herein. For so long as the Bonds remain in a"book-entry only"transfer system, c qz the fiscal agent will make such payments only to DTC, which in turn will remit such principal and interest to its so a Participants for subsequent disbursement to Beneficial Owners of the Bonds as further described herein in s a Appendix C. " a. MATURITY SCHEDULE— s E 6 u Due Interest J Due Interest '§ Dec.1 Amounts* Rates Yields CUSIP Dec.1 Amounts* Rates Yields CUSIP h- z' 2008 $ 15,000 % % 2016 $ 895,000 % % 6 v 2009 35,000 2017 940,000 2010 40,000 2018 1,285,000 .a va 2011 40,000 2019 1,240,000 u 2012 40,000 2020 1,180,000 C2013 40,000 2021 1,215,000 a 2014 - 850,000 2022 1,260,000 n - 2015 870,000 T1 o ED LI <13 REDEMPTION—The Bonds are subject to redemption prior to their stated maturities as further described herein. See o w "Description of the Bonds-Redemption Provisions." o a, (.3 SECURITY—The principal of and interest on the Bonds are payable solely from and secured by the Net Revenue of the City's a' a combined Waterworks Utility,consisting of the water,sewer,wastewater and storm drainage systems. The Bonds are Z0. issued on a parity of lien with the Outstanding Parity Bonds and the City has reserved the right to issue Future Parity i Bonds. For so long as the Bonds are outstanding,no bonds may be issued subsequent to the issuance of the Bonds QD D with a lien and charge on the Net Revenues superior to the lien and charge of the Bonds. The Bonds are special E o obligations of the City payable only from amounts on deposit in the Bond Fund and the Reserve Fund. The Bonds are v9 o not general obligations of the City,the State of Washington,or any other municipal corporation or political subdivision thereof,and neither the full faith and credit nor the taxing power of the City or the State of Washington are pledged to o a the payment of the Bonds. See"Security for the Bonds." o .• a The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance m a policy to be issued concurrently with the delivery of the Bonds by MBIA INSURANCE CORPORATION a a. ..E ' u Dia it aco u 2 TAX EXEMPTION—In the opinion of K&L Preston Gates Ellis LLP("Bond Counsel"),assuming compliance with certain covenants of O ' the City,interest on the Bonds is excludable from gross income for federal income tax purposes under existing law. Interest on the w-- Bonds is not an item of tax preference for purposes of either individual or corporate alternative niininiuni tax. Interest on the Bonds may be indirectly subject to corporate alternative minimum tax and certain other taxes imposed on certain corporations. See"Tax Matters"herein for a discussion of the opinion of Bond Counsel. DELIVERY—The Bonds are offered for sale to the original purchaser subject to the final approving legal opinion of Bond Counsel. It is expected that the Bonds will be available for delivery to the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer on or about November 6,2007. *Preliminary,subject to change. This cover page contains certain information'for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. t • 111111 S'EATTLE-.NIORTHWST Nan SECURITIES CORPORATION: 11111111111.11111 - ,, City of Renton,Washington 1055 South Grady Way Renton,Washington 98055 Phone: (425)430-6400 Fax: (425)430-6516 www.rentonwa.gov* Mayor and City Council Kathy Keolker Mayor Terri Briere Councihnember Dan Clawson Councilmember Randy Corman Councilmember Denis Law Councilmember Toni Nelson Councilmember Marcie Palmer Councilmember Don Persson Councilmember City Officials Jay Covington Chief Administrative Officer Michael E.Bailey Finance&Information Services Administrator Bonnie Walton City Clerk Gregg Zimmerman Public Works Administrator Bond Counsel K&L Preston Gates Ellis LLP Seattle,Washington Financial Advisor Piper Jaffray&Co. Seattle,Washington Bond Registrar The Bank of New York New York,New York * The City's website is not part of this Official Statement,and investors should not rely on information presented in the City's website in determining whether to purchase the Bonds. This inactive textual reference to the City's website is not a hyperlink and does not incorporate the City's website by reference. This Official Statement does not constitute an offer to sell the Bonds in any jurisdiction in which or to a person to whom it is unlawful to make such an offer. No dealer,salesperson or other person has been authorized by the City the Financial Advisor,or the Underwriter to give any information or;to make anyrepresentations, other than those contained herein,in connection with the offering of the Bonds and,if given or made,such inrmation or representations must not be relied upon. The City makes no representation regarding the accuracy or completeness of the information provided in Appendix C—Book Entny Transfer System, which has been furnished by DTC. Estimates and opinions are included and should not be interpreted as statements of fact. Summaries of documents do not purport to be complete statements of the provisions. The information and expressions of opinion herein are subject to change without notice,and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances,create an implication that there has been no change in the affairs of the City since the date hereof. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction,but the Underwriter does not guarantee the accuracy or completeness of such information. The City will "deem final",for the sole purpose of the Underwriter's compliance with Securities and Exchange Commission ("SEC") Rule 15c2-12(b)(1), this Preliminary Official Statement as of its date, except for the omission of information as to offering prices,interest rates,selling compensation,aggregate principal amount,principal amount per maturity,maturity dates, options of redemption,delivery dates,and other terms of the Bonds dependent on such matters. In connection with this offering,the Underwriter may over-allot or effect transactions that stabilize or maintain the market price of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. i The CUSIP numbers are included on the front cover of this Official Statement for convenience of the holders and potential holders of the Bonds. No assurance can be given that the CUSIP numbers for the Bonds will remain the same after the date of issuance and delivery of the Bonds. ii 4 • ., / • Table of Contents Page Description of the Bonds I 1 Authorization for Issuance I 1 Principal Amount,Date,Interest Rates and Maturities 1 Bond Registrar and Registration Features 1 Book-Entry Bonds 2 Redemption Provisions 2 Purchase I 3 Purpose and Use of Proceeds 3 Purpose 3 Plan of Refunding I 3 Refunding Procedure 3 Verification of Mathematical Calculations 4 Estimated Sources and Uses of Funds 4 Security for the Bonds I 4 Rate Covenant I 5 Flow of Funds I 5 Funds and Accounts I 6 Additional Covenants 7 Future Parity Bonds I 7 Junior Lien Obligations I 9 Defeasance of the Bonds I 9 Bond Insurance I 9 Indebtedness of the Waterworks Utility 13 Outstanding Long-Term Borrowings 13 Subordinate Lien Debt 13 Water and Sewer Revenue Bonds-Debt Service Requirements(1) 14 Debt Payment Record I 14 Future Financings I 14 Authorized Investments 14 Local Government Investment Pool 15 Authorized Investments for Bond Proceeds 15 The Waterworks Utility 15 The Water Utility I 16 The Wastewater Utility 18 Waterworks Utility Capital Improvement Plan 22 Delinquent Accounts 22 Endangered Species Act I 23 The City 25 City Staff 25 Labor Relations ' 26 Pension System 26 Other Post Employment Benefits 28 Budgetary Policies 29 Risk Management 29 Auditing of City Finances 29 Demographic Information 30 Initiative and Referendum 33 State Initiatives I 33 Tax Matters 34 Ratings 35 Continuing Disdosure Undertaking . 35 Legal and Underwriting 37 Approval of Counsel 37 Litigation ;: 37 Underwriting 37 Financial Advisor 37 Concluding Statement 37 Bond Ordinance Appendix A Opinion of Bond Counsel Appendix B Book-Entry Transfer System I Appendix C 2006 Audited Financial Statements Appendix D Municipal Bond Insurance Policy Specimen Appendix E iii { • • • This page left blank intentionally. iv • ` I OFFICIAL STATEMENT i City of Renton,Washington $9,945,000* Water and Sewer Revenue and Refunding Bonds,2007 The City of Renton,Washington(the"City"),a municipal corporation duly organized and existing under and by virtue of the laws of the State of Washington (the "State") furnishes this Official Statement in connection with the offering of$9,945,000*aggregate principal amount of Water and Sewer Revenue and Refunding Bonds,2007(the"Bonds"). This Official Statement provides information concerning the City, the Bonds and the City's waterworks utility,including the water,sewer,wastewater and storm drainage systems (together, the "Waterworks Utility"). The Bonds are issued on a parity of lien with the City's outstanding$3,485,000 Water and ewer Revenue Refunding Bonds,1998 (the"1998 Bonds");$3,340,000 Water and Sewer Revenue Bonds, 2002 (the "2002 Bonds"); $3,800,000 Water and Sewer Revenue Refunding Bonds,2003(the"2003 Bonds");$10,335,000 Water and Sewer Revenue Bonds,2004(the"2004 Bonds"). The 1998 Bonds,the 2002 Bonds,the 2003 Bonds and the 2004 Bonds are referred to herein as "Outstanding Parity Bonds." The City has reserved the right in the Bond Ordinance (as defined herein) to issue additional bonds on a parity of lien with the 1998 Bonds, 2002 Bonds, 2003 Bonds, 2004 Bonds and the Bonds,subject to certain conditions described herein. The Outstanding Parity Bonds,the Bonds and any Future Parity Bonds are referred to herein as"Parity Bonds." Certain capitalized words and phrases used in this Official Statement have the meanings as defined in the Bond Ordinance attached hereto in Appendix A. Description of the Bonds Authorization for Issuance The Bonds are issued pursuant to Ordinance No. adopted by the City Council (the "Council") on , 2007 (the "Bond Ordinance"), and Resolution No. adopted by the Council on ,2007 and under and in accordance with the laws and provisions of the State,including chapters 35.92, 39.46 and 39.53 RCW. The Bond Ordinance authorized the issuance of the Bonds and the City's Water and Sewer Revenue Bonds, 2008 and Water and Sewer Revenue Bonds, 2008 (Taxable), in the aggregate principal amount of not to exceed$10,000,000 and$3,000,000,respectively (together,the"2008 Bonds")for the purpose of financing a plan of improvements to the Waterworks Utility. The 2008 Bonds will be issued on a parity of lien with the Outstanding Parity Bonds and the Bonds. The City expects to issue the 2008 Bonds in January 2008. See"City Indebtedness-Future Financing." Principal Amount,Date,Interest Rates and Maturities The Bonds will be issued in the aggregate principal amount of$9,945,000* and will be dated and bear interest from the date of initial delivery to the Underwriter. The Bonds will mature on the dates and in the principal amounts and will bear interest (payable semiannually on June 1 and December 1, first interest payable June 1, 2008) at the respective rates as set forth on the cover of this Official Statement. Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months. Bond Registrar and Registration Features The Bonds will be issued as fully registered bonds and, when issued, will be registered in the name of Cede & Co. as Bond Owner and as nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Bonds. Individual purchases and sales of the Bonds may be made in book-entry form only in minimum denominations of $5,000 within a single *Preliminary,subject to change. 1 • • maturity and integral multiples thereof. Purchasers ("Beneficial Owners") will not receive certificates representing their interest in the Bonds. Principal of and interest on the Bonds will be payable by the State fiscal agent,currently The Bank of New York(the"Bond Registrar"). So long as Cede&Co.is the registered owner of the Bonds,principal of and interest on the Bonds are payable,by wire transfer by the Bond Registrar to DTC, which, in turn, is obligated to remit such principal and interest to its participants for subsequent disbursement to the Beneficial Owners of the Bonds,as further described herein in Appendix C. Book-Entry Bonds DTC will act as securities depository for the Bonds. The ownership of one fully registered Bond for each maturity of the Bonds,as set forth on the cover of this Official Statement,each in the aggregate principal amount of such maturity, will be registered in the name of Cede & Co., as nominee for DTC. See Appendix C attached hereto for additional information. Procedure in the Event of Revisions of Book-Entry Transfer System. If DTC resigns as the securities depository and the City is unable to retain a qualified successor to DTC, or the City has determined that it is in the best interest of the City not to continue the book-entry system of transfer or that interests of the Beneficial Owners of the Bonds might be adversely affected if the book-entry system of transfer is continued, the City will execute, authenticate and deliver at no cost to the Beneficial Owners of the Bonds or their nominees,Bonds in fully registered form,in the denomination of$5,000 or any integral multiple thereof within a maturity. In the event the Bonds are transferred by the City to fully registered form, the payments of principal and interest on the Bonds will be made by the Bond Registrar. Principal of the Bonds will be payable upon due presentment and surrender thereof at the office designated by the Bond Registrar. Under the State's current fiscal agency agreement, the Bonds also may be presented for payment in the State of Washington at any office of Wells Fargo Bank,National Association. Interest on the Bonds will be payable by check or draft mailed to the owners of the Bonds at the address appearing on the Bond Register on the 15th day of the month preceding an interest payment date,and the Bonds will be transferable as provided in the Bond Ordinance. Redemption Provisions Optional Redemption. The Bonds maturing on or prior to December 1,2017 are not subject to redemption prior to their scheduled maturity., The Bonds maturing on or after December 1, 2018 are subject to redemption at the option of the City on and after December 1,2017,in whole or in part(maturities to be selected by the City and by lot within a maturity in such manner as the Bond Registrar shall determine) on any date,at a price of par plus accrued interest,if any,to the date of redemption. For as long as the Bonds are in book-entry only form, if fewer than all of the Bonds of a maturity are called for redemption,the selection;of Bonds within a maturity to be redeemed shall be made by DTC in accordance with its operational procedures then in effect. See Appendix C attached hereto. If the Bonds are no longer held in book-entry only form,then the Bond Registrar would select Bonds for redemption as provided in the Bond Ordinance. Notice of Redemption. For so long as the Bonds are held in book-entry only form,notice of redemption shall be given in accordance with the operational arrangements of DTC as then in effect, and neither the City nor the Bond Registrar will provide any notice of redemption to any Beneficial Owners. It is the sole responsibility of the DTC Participants to provide notice of redemption to individual Beneficial Owners of the Bonds. If the Bonds are no longer held in book-entry form,notice of redemption shall be given by or on behalf of the City not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail,postage prepaid,to the Owner of any Bond to be redeemed at the address appearing on the Bond Register on the day notice is mailed, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided,whether or not it is actually received by the Owner of any Bond. 2 • Purchase The City reserves the right in the Bond Ordinance to purchase any of the Bonds offered to the City at any price deemed reasonable by the City at any time. Purpose and Use of Proceeds Purpose A portion of the proceeds of the Bonds will be used, together with the 2008 Bonds once issued by the City,to finance the following improvements to the Wastewater Utility (together, the"Projects"): (i) the design and construction of electrical power generators in critical water pumping facilities for emergency uses; (ii) the design and construction of a 4.2 million gallon reservoir; (if) the construction of a new lift station; (iv) the planning, designing and construction of a storm system; (iv) the replacement of an existing culvert;and(v)other miscellaneous projects of the Waterworks Utility. A portion of the proceeds of the Bonds will also be used to refund a portion of the City's outstanding water and sewer revenue bonds Ito obtain the benefit of savings in annual and total debt service requirements,and to pay costs of issuance of the Bonds. Plan of Refunding A portion of the proceeds of the Bonds may be used to provide funds to establish an irrevocable trust escrow to refund a portion of the City's outstanding obligations. The candidates authorized to be refunded with the proceeds of the Bonds are identified below. Depending on market conditions on the pricing date and the savings available to the City as a result of such refunding, the City may include none,all or a portion of$8,160,000 of the City's callable 2002 Bonds,maturing on December 1 in the years 2014 through 2022(the"Refunded Bonds"). Information on the Refunded Bonds is as follows: Refunded Amount Redemption Maturities* Refunded* Date Price 2014-2022 $8,160,000 12/01/12 100% *Preliminary,subject to change. Refunded Bonds* Maturity Years Principal Interest CUSIP (December 1) Amounts Rates Numbers 2014 $ 710,000 4.30% 760167RP3 2015 735,000 4.40 760167RQ1 2016 765,000 4.50 760167RR9 2017 805,000 4.60 760167RS7 2018 1,000,000 5.25 760167RT5 2019 1,000,000 5.25 760167RU2 2020 1,000,000 5.25 760167RV0 2021 1,045,000 5.25 760167RW8 2022 1,100,000 5.25 76016710X6 Refunding Procedure To refund the Refunded Bonds, a portion of the net proceeds from the sale of the Bonds and other available funds of the City will be 'deposited in the Refunding Account (the "Refunding Account") and used to purchase Escrow Obligations (as defined below) to be held by U.S. Bank National Association (the "Escrow Agent") under an escrow deposit agreement (the"Escrow Agreement"), dated the date of delivery of the Bonds, between the City and the Escrow Agent. Funds will be irrevocably deposited in the Refunding Account and will be used to purchase direct,noncallable, obligations of the United States of America (the "Escrow Obligations"). The Escrow Obligations will mature at such times and pay 3 7— interest in such amounts so that,with other available funds held by the Escrow Agent under the Escrow Agreement,sufficient money will be available to pay the interest on the Refunded Bonds coming due on and prior to their respective redemption dates and to redeem and retire the Refunded Bonds on the respective redemption dates set forth above. Since all payments of principal of and interest on the Refunded Bonds will thereafter be provided for from money and securities on deposit with the Escrow Agent under the Escrow Agreement, the liens, pledges and covenants of the Refunded Bonds will terminate and be discharged and released. Verification of Mathematical Calculations Grant Thornton LLP,a firm of independent public accountants,will deliver on or before the delivery date of the Bonds,its verification report indicating that it has verified,in accordance with attestation standards established by the American Institute of Certified Public Accountants, the mathematical accuracy of(a) the mathematical computations of the adequacy of the cash and the maturing principal of and interest on the Government Obligations, to pay, when due, the interest on and redemption price of the Refunded Bonds and(b)the mathematical computations supporting the conclusion of Bond Counsel that the Bonds are not"arbitrage bonds"as defined by Section 148 of the Internal Revenue Code of 1986,as amended. The verification performed by Grant Thornton LLP will be solely based upon data, information and documents provided to Grant Thornton LLP by the Underwriter and its representatives. Grant Thornton LLP has restricted its procedures td recalculating the computations provided by the Underwriter and its representatives and will not evaluate or examine the assumptions or information used in the computations. Estimated Sources and Uses of Funds The proceeds from the Bonds are estimated to be applied as follows: Sources of Funds Par Amount of Bonds(1) $ 9,945,000 Net Premium/(Discount) Total Sources of Funds $ Use of Funds Project Costs $ Escrow Requirements Issuance Costs(2) Additional Proceeds Total Use of Funds;. $ (1)Preliminary,subject to change. (2) Includes Bond Counsel fees,financial advisor fee,rating fee,bond insurance premium,underwriter's discount, and other costs associated with the issuance of the Bonds. Security for the Bonds The Bonds are payable from the Gross Revenue of the Waterworks Utility subject only to the payment of the Maintenance and Operation Expenses. The Bonds constitute and lien and charge on the Net Revenue prior and superior to any other charges whatsoever except that the lien and charge on such revenue for the Bonds will be on a parity with the lien and charge thereon for the Outstanding Parity Bonds. The City has reserved the right in the Bond Ordinance to issue Future Parity Bonds on a parity of lien with the Bonds and the Outstanding Parity Bonds. The Bonds are a special limited obligation of the City payable only from amounts on deposit in the Waterworks Revenue Bond Fund (the "Bond Fund") and the Waterworks Revenue Bond Reserve Fund (the"Reserve Fund"). See"Funds and Accounts"below. The Bond Fund will at all times be completely segregated and set apart from all other funds and accounts of the City for the security and the payment of 4 the principal of and interest on the Parity Bonds,as they become due. The Bonds are not an obligation of the State or any political subdivision thereof other than the City,and neither the full faith and credit nor the taxing power of the City or the State are pledged to the payment of the Bonds. Rate Covenant The City has covenanted that 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: Gross Revenue will at all times be sufficient to pay all Maintenance and Operation Experise on a current basis, pay when due all amounts that the City is obligated to pay into the Reserve Fund and any Parity Bond Funds and 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 Net Revenue in each calendar year will be at least equal to 1.25 times the Maximum Annual Debt Service (the"Coverage Requirement"). Once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, the term "Coverage Requirement"will mean 1.25 times the Annual Debt Service in any calendar year. Flow of Funds Gross Revenue of the Waterworks Utility will be deposited into the Waterworks Utility Fund (the "Waterworks Utility Fund"), previously created by the City pursuant to Ordinance No. 250. Gross Revenue on deposit in the Waterworks Utility Fund(other than in any bond redemption or federal rebate account)will be held separate and apart from all other funds and accounts of the City and will be used in the following order of priority: (1) To pay Maintenance and Operation Expense; (2) To pay the interest on the Paritr Bonds,including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (3) To pay the principal of the Parity Bonds,including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (4) To make all payments required to be made into any sinking fund or bond redemption fund created by ordinance for the payment of Future Parity Bonds which are Term Bonds; (5) To make all payments required to be made into the Reserve Fund,including reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the Qualified Letter of Credit or Qualified Insurance secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (6) 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 Parity Bonds;and (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, to make deposits into the Rate Stabilization Fund,or for any other lawful City purpose. 5 Funds and Accounts Bond Fund. The Bond Fund will be'maintained for the purpose of paying the principal of and interest on the Bonds. As long as any Bond remains outstanding, the City irrevocably obligates and binds itself in the Bond Ordinance to set aside and pay from the Waterworks Utility Fund into the Bond Fund those amounts necessary,together with such other funds as are on hand and available in the Bond Fund,to pay the interest or principal and interest next coming due on outstanding Bonds. Such payments from the Waterworks Utility Fund to the Bond Fund will be made in a fixed amount without regard to any fixed proportion following the closing ;and delivery of the Bonds on or before each date on which an installment of interest or principal and interest falls due on the Bonds equal to the installment of interest or principal and interest. Reserve Fund. The Reserve Fund has previously been created by the City for purpose of securing the payment of the principal of and interest on all bonds to which Net Revenue is pledged. The City covenants and agrees in the Bond Ordinance that on or prior to the date of issuance of the Bonds, the amount on deposit in the Reserve Fund will be at least equal to the Reserve Requirement. The"Reserve Requirement" is currently defined as Maximum Annual Debt Service which means, at the time of calculation, the maximum amounts 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. Once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, the term "Reserve Requirement" with respect to any I issue of Parity Bonds will mean the lesser of (a) Maximum Annual Debt Service on all Outstanding Parity Bonds and (b) 125% of average Annual Debt Service on all Outstanding Parity Bonds;provided,that the amount required to be deposited with respect to any Future Parity Bonds in order to meet the lZeserve Requirement will not exceed 10% of the net proceeds of such Future Parity Bonds. Except for withdrawals therefrom] as authorized herein, 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. The City may,in lieu of cash and investments,obtain all or part of the Reserve Requirement for any Parity Bonds then outstanding for which such insurance is obtained,to be issued by an institution that has been assigned a credit rating equal to or better then the highest then-existing rating for any of the Parity Bonds ("Reserve Insurance"). If there is be a deficiency in the Bond Fund to meet maturing installments of either principal or interest, as the case may be, on the Bond's, 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. Upon issuance of the Bonds the Reserve Requirement shall be$ . The balance in the Reserve Account as of October 1,2007 was$3,236,654. Rate Stabilization Fund. The City may, at any time, deposit Gross Revenue into 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 in Gross Revenue for any fiscal year of the City. 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 will be made into the Rate Stabilization Fund to the extent that such deposit would prevent the City from meeting the Coverage Requirement. The Rate Stabilization Fund is currently unfunded. 6 • • /,-- • Additional Covenants • So long as any Parity Bonds are outstanding,the City has covenanted and agreed as follows: Maintenance and Repair. 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. Disposal of Waterworks Utility. It will not sell,lease,mortgage or in any manner encumber 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 the Bond Ordinance. Books and Records. 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 Bond 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: No Free Service. Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish or supply or permit the furnishing or supplying of any service or facility in connection with the 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. 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. Maintenance and Operation Expense. It will pay all Maintenance and Operation Expense and the debt service requirements for the outstanding Parity Bonds,and otherwise meet the obligations of the City as herein set forth. Tax Covenants. It will undertake all actions required to maintain the tax-exempt status of interest on the Bonds under Section 103 of the Code. Future Parity Bonds In the Bond Ordinance the City reserves the right to issue Future Parity Bonds which will constitute a lien and charge on the Net Revenue of the Waterworks Utility on a parity with the Outstanding Parity Bonds and the Bonds, if the following conditions are met and complied with at the time of issuance of the Future Parity Bonds: (1) There is no deficiency in any Parity Bond Fund. (2) The ordinance providing for the issuance of such Future Parity Bonds provides for the payment of the principal thereof and interest thereon out of a Parity Bond Fund. 7 (3) The ordinance providing for the issuance of such Future Parity Bonds provides for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds of(a) an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or (b) 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, or under certain circumstances, the City may 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. After the 1998 Bonds,the 2002 Bonds,and the 2003 Bonds are no longer outstanding,this subsection(3) will be amended to read as follows: (3)the ordinance providing for the issuance of such Future Parity Bonds provides for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds of (a) an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or (b)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. At the discretion of the City,the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security either on or prior to the date of issuance of such Future Parity Bonds or within three years from the date of issuance of the Future Parity Bonds in three approximately equal annual payments and in such event,the ordinance providing for the issuance of such Future Parity Bonds provides for such deposit. After the 1998 Bonds,the 2002 Bonds,the 2003 Bonds and the 2004 Bonds are no longer outstanding, this subsection (3) will be further amended to read as follows: (3) the ordinance providing for the issuance of such Future Parity]Bonds will provide for the deposit into the Reserve Fund from the proceeds of those Future Parity Bonds of (a)an amount equal to the increase in the Reserve Requirement attributable to those Parity Bonds or (b)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. At the discretion of the City, the City may provide for deposit into the Reserve Fund of other legally available money from Net Revenue or Reserve Insurance or Alternate Security on or prior to the date of issuance of such Future Parity Bonds. (4) The ordinance authorizing the issuance of such Future Parity Bonds will 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. (5) There will be on file with the City either: (a) a certificate of the City Finance Director demonstrating that during any 12 consecutie 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;provided,once the 1998 Bonds,the 2002 Bonds,the 2003 Bonds and the 2004 Bonds are no longer outstanding,a certificate of the City Finance Director demonstrating that during any 12 consecutive calendar months out of the immediately preceding 24 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 (b) a certificate of a Professional Utility Consultant that in such consultant's opinion Net Revenue for any 12 consecutive calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund,will be equal to the Coverage Requirement for each year thereafter; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, 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 24 calendar months, without regard to deposits into or withdrawals from the Rate Stabilization Fund, will be equal to the Coverage Requirement for each year thereafter. The certificate, in estimating Net 8 Revenue available for debt services, may adjust Net Revenue to reflect: (i) any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; (ii) 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; (iii)income from any customers to be connected to the Waterworks Utility who have paid the required connection charges; (iv) 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; (v) 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; (vi) 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(vii) 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 Fuiid, such certification of coverage will 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. Junior Lien Obligations The City has reserved the right to issue revenue bonds or other obligations which would be a charge upon the Revenue Fund junior or inferior to that of any Outstanding Parity Bonds. As of September 1, 2007, the City had approximately $10,451,271 in outstanding subordinate lien debt. See "City Indebtedness-Subordinate Lien Debt." Defeasance of the Bonds In the event that money and/or"Government Obligations," as defined in the Bond Ordinance,maturing at such time or times and bearing interest to be earned thereon in amounts sufficient to redeem and retire the Bonds or any of them in accordance with their terms are set aside in a special account to effect such redemption or retirement and such money and the principal of and interest on such obligations are set aside irrevocably and pledged for such purpose, then no further payments need be made into the Bond Fund for the payment of the principal of and interest on the Bonds so provided for and such Bonds will cease to be entitled to any lien,benefit or security of the Bond Ordinance except the right to receive the funds so set aside and pledged,and such Bonds will be deemed not to be outstanding. Bond Insurance The following information has been furnished by MBIA Insurance Corporation("MBIA") for use in this Official Statement, and the City and the Underwriter make no representations as to the accuracy or completeness thereof. Reference is made to Appendix E for a specimen of the Municipal Bond Insurance Policy for the Bonds(the"Policy"). The MBIA Insurance Corporation Insurance Policy MBIA does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Policy and MBIA set forth under the heading "The MBIA Insurance Corporation Insurance Policy". Additionally, MBIA makes no representation regarding the Bonds or the advisability of investing in the Bonds. 9 The MBIA Policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the City to the Paying Agent or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on,the Bonds as such payments shall become due but shall not be so paid(except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the MBIA Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration,unless MBIA elects in its sole discretion,to pay in whole or in part any principal due by reason of such acceleration);and(ii)the reimbursement of any such payment which is subsequently recovered from any Owner of the Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Owner within the meaning of any applicable bankruptcy law(a"Preference"). MBIA's Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Bonds. MBIA's Policy does not,under any circumstance,insure against loss relating to: (i)optional or mandatory redemptions (other than mandatory sinking fund redemptions);(ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Bonds upon tender by an owner thereof;or (iv)!any Preference relating to (i) through (iii) above. MBIA's Policy also does not insure against nonpayment of principal of or interest on the Bonds resulting from the insolvency,negligence or any other act or omission of the Paying Agent or any other paying agent for the Bonds. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by MBIA from the Paying Agent or any owner of a Bond the payment of an insured amount for which is then due, that such required payment has not been made, MBIA on the due date of such payment or within one business day after receipt of notice'of such nonpayment,whichever is later,will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such Bonds or presentment of such other proof of ownership of the Bonds,together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Bonds as are paid by MBIA,and appropriate instruments to effect the appointment of MBIA as agent for such owners of the Bonds in any legal proceeding related to payment of insured amounts on the Bonds, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or the Paying Agent payment of the insured amounts due on such Bonds,less any amount held by the Paying Agent for the payment of such insured amounts and legally available therefor. MBIA Insurance Corporation MBIA Insurance Corporation ("MBIA") is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company (the"Company"). The Company is not obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the State of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico,the Commonwealth of the Northern Mariana Islands,the Virgin Islands of the United States and the Territory of Guam. MBIA,,either directly or through subsidiaries,is licensed to do business in the Republic of France,the United Kingdom and the Kingdom of Spain and is subject to regulation under the laws of those jurisdictions. In February 2007,MBIA Corp.incorporated a new subsidiary,MBIA Mexico, S.A.de C.V. ("MBIA Mexico"),through which it intends to write financial guarantee insurance in Mexico beginning in 2007. The principal executive offices of MBIA are located at 113 King Street,Armonk,New York 10504 and the main telephone number at that address is(914)273-4545. 10 - Regulation As a financial guaranty insurance company licensed to do business in the State of New York, MBIA is subject to the New York Insurance Law which, among other things, prescribes minimum capital requirements and contingency reserves against liabilities for MBIA,limits the classes and concentrations of investments that are made by MBIA and requires the approval of policy rates and forms that are employed by MBIA. State law also regulates the amount of both the aggregate and individual risks that may be insured by MBIA, the payment of dividends by MBIA,changes in control with respect to MBIA and transactions among MBIA and its affiliates. The Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Strength Ratings of MBIA Moody's Investors Service,Inc.rates the financial strength of MBIA"Aaa." Standard&Poor's,a division of The McGraw-Hill Companies,Inc.,rates the financial strength of MBIA"AAA." Fitch Ratings rates the financial strength of MBIA"AAA." Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of MBIA and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold the Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Bonds. MBIA does not guaranty the market price of the Bonds nor does it guaranty that the ratings on the Bonds will not be revised or withdrawn. MBIA Financial Information As of December 31, 2006, MBIA had admitted assets of $10.9 billion (audited), total liabilities of $6.9 billion (audited), and total capital and surplus of $4.0 billion (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of June 30, 2007, MBIA had admitted assets of$10.8 billion (unaudited), total liabilities of$6.8 billion (unaudited), and total capital and surplus of $4.0 billion (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. For further information concerning MBIA, see the consolidated financial statements of MBIA and its subsidiaries as of December 31,2006 and December 31,2005 and for each of the three years in the period ended December 31, 2006, prepared in accordance with generally accepted accounting principles, included in the Annual Report on Form 10-K of the Company for the year ended December 31,2006 and the consolidated financial statements of MBIA and its subsidiaries as of June 30, 2007 and for the six month periods ended June 30,2007 and June 30,2006 included in the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2007, which are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof. Copies of the statutory financial statements filed by MBIA with the State of New York Insurance Department are available over the Internet at the Company's web site at http://www.mbia.com and at no cost,upon request to MBIA at its principal executive offices. Incorporation of Certain Documents by Reference The following documents filed by the Company with the Securities and Exchange Commission (the "SEC")are incorporated by reference into this Official Statement: 11 (1) The Company's Annual Report on Form 10-K for the year ended December 31,2006;and (2) The Company's Quarterly Report on Form 10-Q for the quarter ended June 30,2007. Any documents,including any financial statements of MBIA and its subsidiaries that are included therein or attached as exhibits thereto,filed by the Company pursuant to Sections 13(a),13(c),14 or 15(d) of the Exchange Act after the date of the:Company's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, and prior to the termination of the offering of the Bonds offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof from the respective dates of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein,or contained in this Official Statement,shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed,except as so modified or superseded,to constitute a part of this Official Statement. The Company files annual, quarterly and special reports,information statements and other information with the SEC under File No. 1-9583. Copies of the Company's SEC filings (including(1) the Company's Annual Report on Form 10-K for the year ended December 31, 2006, and (2) the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31,2007 and June 30,2007) are available (i) over the Internet at the SEC's web site at http://www.sec.gov; (ii) at the SEC's public reference room in Washington D.C.; (iii) over the Internet at the Company's web site at http://www.mbia.com;and (iv) at no cost,upon request to MBIA at its principal executive offices. 12 41110 Indebtedness of the Waterworks Utility The City may issue revenue bonds:"...if it deems it advisable to purchase, lease, condemn, or otherwise acquire,construct,develop,improve,extend or operate any land,building,facility,or utility and adopts an ordinance which has been ratified by the voters of the city or town in those instances where it is required to be ratified by the voters...such city or town my issue revenue bonds against the special fund or funds created solely from revenues..."pursuant to chapter 35.41 RCW(the Municipal Revenue Bond Act). Outstanding Long-Term Borrowings The outstanding long term debt of the Waterworks Utility is composed of the following bond issues: Date of Maturity Amount of Outstanding Water and Sewer Revenue Bonds Issue Date Original Issue at 11/06/07 1998 Bonds 03/01/98 06/01/13 $ 6,120,000 $ 3,485,000 2002 Bonds 07/02/02 12/01/12(1) 11,980,000 3,340,000 2003 Bonds 09/15/03 06/01/13 8,035,000 3,800,000 2004 Bonds 11/01/04 12/01/24 10,335,000 10,335,000 The Bonds ! 11/06/07 12/01/26 9,945,000(2) 9,945,000(2) Total Parity Bonds Outstanding $ 46,415,000 $ 30,905,000 (1) The Date of Maturity reflects th redemption of the Refunded Bonds. The December 1, 2007 through 2012 principal payments remain after this refunding. (2) Preliminary,subject to change. Subordinate Lien Debt The following describes the City's(subordinate lien debt that are a charge upon the Net Revenue of the Waterworks Utility,outstanding as of September 1,2007: i Date of Maturity Amount of Outstanding Subordinate Lien Debt(1) Issue Date Original Issue at 09/01/07 Sierra Heights Sewer Improvements 01/20/92 2012 $ 888,462 $ 135,905 Central Renton Sewer Replacement 05/24/93 2015 1,631,800 655,111 East Renton Interceptor 06/07/93 2013 2,542,704 835,680 Dayton Avenue NE 05/12/94 2014 96,957 38,577 NE 27th/Aberdeen Drainage Imprvmnts. 05/15/95 2015 731,000 356,050 East Kennydale Interceptor 01/24/98 2016 2,093,740 1,104,275 Honeycreek Interceptor 12/04/95 2016 1,840,568 1,075,280 Corrosion Control Treatment Facilities 01/06/97 2017 1,106,000 520,715 Maplewood Water Improvements 01/22/02 2021 567,831 440,118 Const.CT Pipeline for Wells 11/05/02 2022 814,527 715,069 Maplewood Water Improvements 06/03/04 2024 4,892,500 4,574,491 Total Subordinate Lien Debt Outstanding $ 17,206,089 $ 10,451,271 (1)See"Historical Operating Results-Debt Service Coverage"for further information. 13 S 41. Water and Sewer Revenue Bonds-Debt Service Requirements(1) Cal. Outstanding Parity Bonds(2) The Bonds(3) Total Debt Years Principal Interest Principal Interest Service 2007 $ 110,000 $ ' 468,606 $ 0 $ 0 $ 578,606 2008 1,810,000 ' 898,923 15,000 410,701 3,134,624 2009 1,875,000 834,894 35,000 383,515 3,128,409 2010 1,940,000 766,360 40,000 382,290 3,128,650 2011 2,015,000 693,870 40,000 380,890 3,129,760 2012 2,100,000 607,365 40,000 379,470 3,126,835 2013 980,000 524,338 40,000 378,030 1,922,368 2014 235,000 500,203 850,000 376,570 1,961,773 2015 250,000 491,625 870,000 345,545 1,957,170 2016 260,000 ' 482,250 895,000 313,355 1,950,605 2017 270,000 469,250 940,000 279,793 1,959,043 2018 130,000 ' 455,750 1,285,000 244,073 2,114,823 2019 185,000 449,250 1,240,000 194,600 • 2,068,850 2020 245,000 440,000 1,180,000 146,240 2,011,240 2021 265,000 427,750 1,215,000 99,630 2,007,380 2022 280,000 ' 414,500 1,260,000 51,030 2,005,530 2023 1,450,000 400,500 0 0 1,850,500 2024 1,520,000 328,000 0 0 1,848,000 2025 1,600,000 252,000 0 0 1,852,000 2026 1,680,000 172,000 0 0 1,852,000 2027 1,760,000 88,000 0 0 1,848,000 Totals $ 20,960,000 $ 10,165,433 $ 9,945,000 $ 4,365,731 $ 45,436,164 (1) Totals may not foot due to rounding. _ (2) Excludes the Refunded Bonds. I (3) Preliminary,subject to change;assumed interest rates range from 3.75%to 5.00%. I Debt Payment Record The City has promptly met all debt service payments on outstanding obligations. No refunding bonds have been issued to avoid an impending default. Future Financings Other than the Bonds, the City has no authorized but unissued bonds outstanding. In the Bond Ordinance the City authorized the issuance of the City's Water and Sewer Revenue Bonds, 2008 and Water and Sewer Revenue Bonds, 2008 (Taxable), in the aggregate principal amount of not to exceed $10,000,000 and$3,000,000,respectively,for the purpose of financing a portion of the costs of the Projects. The 2008 Bonds will be issued on a parity of lien with the Outstanding Parity Bonds and the Bonds. The City expects to issue the 2008 Bonds in January 2008. 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 14 4/0 deposit in designated qualified public depositories;in obligations of the US government,its agencies and wholly owned corporations; in bankers' acceptances; in commercial paper; in the obligations of the federal home loan bank, federal national mortgage association and other government corporations subject to statutory provisions and may enter into repurchase agreements. Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW 35.39.030). Money available for investment may be invested on an individual fund basis or may, unless otherwise restricted by law, be commingled within one common investment portfolio. All income derived from such investment may be either apportioned to and used by the various participating funds or for the benefit of the general government in accordance with city ordinances or resolutions. Funds derived from the sale of bonds or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances,resolutions or bond covenants may lawfully prescribe. Local Government Investment Pool The State Treasurer's Office administers the Washington State Local Government Investment Pool (the "LGIP"),a fund that invests money:on behalf of more than 350 cities,counties and special taxing districts. In its management of LGIP, the State Treasurer is required to adhere, at all times, to the principles appropriate for the prudent investment of public funds. These are, in priority order, (i)the safety of principal; (ii) the assurance of sufficient liquidity to meet cash flow demands; and (iii) to attain the highest possible yield within the constraints of the first two goals. Historically, the LGIP has had sufficient liquidity to meet all cash flow demands. The LGIP, authorized by chapter 43.250 RCW, is a voluntary pool which provides its participants the opportunity to benefit from the economies of scale inherent in pooling. It is also intended to offer participants increased safety of principal and the ability to achieve a higher investment yield than would otherwise be available to them. The pool is restricted to investments with maturities of one year or less, and the average life typically is less than 90 days. Investments permitted under the pool's guidelines include U.S. government and agency securities, bankers' acceptances, high quality commercial paper, repurchase and reverse repurchase agreements,motor vehicle fund warrants, and certificates of deposit issued by qualified Washington State depositories. As of October 1,2007,the City's investments at market value totaled$80,993,758,41 percent of which was invested in certificates of deposit,32 percent of which was invested in U.S.Federal Agency Securities and 27 percent of which was invested in the LGIP. Authorized Investments for Bond Proceeds In addition to the eligible investments discussed above, bond proceeds may also be invested in mutual funds with portfolios consisting of U.S. government and guaranteed agency securities with average maturities of less than four years; municipal securities rated in one of the four highest categories; and money market funds consisting of the same,so long as municipal securities held in the fund(s)are in one of the two highest rating categories of a nationally recognized rating agency. Bond proceeds may also be invested in shares of money market funds with portfolios of securities otherwise authorized by law for investment by local governments(RCW 39.59.030). The Waterworks Utility 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. In November 2007,voters within the City will be asked to approve an annexation of unincorporated land bordering the City which would increase the geographic size of the City by about one-third. If approved, City management does not expect any impacts to the Water Utility or the Wastewater Utility. The City 15 would take over King County's portion of the Storm Drainage Utility,but does not expect any significant impacts to the operations of the Waterworks Utility. The Water Utility Description. The Water Utility provides water service for fire protection and for domestic uses to an area approximately 16 square miles and to 16,699 customer accounts. In addition,the City supplies water on a wholesale basis to Skyway Water District through a single metered connection. The Water Utility consists of nine reservoirs with 18 million gallons of storage, 19 pump stations, two water treatment facilities,300 miles of water mains,3,440 fire hydrants and 16,669 water meters. Water treatment consists of chlorination,fluoridation and corrosion control for all active production wells,along with the removal of manganese, hydrogen sulfide, and ammonia from the raw water from the Maplewood wells. Current active and primary water supply sources include five wells, and one emergency well, drawing water from the Cedar Valley,aquifr; three wells from the Maplewood aquifer; and one artesian spring, Springbrook Springs. The wells provide 85 percent of the City's water production. In addition,the City maintains seven metered backup water supply interties with Seattle Public Utilities, one emergency intertie with the City of Kent and lion emergency intertie with the City of Tukwila. Together, active, standby and emergency wells provide 18,900 gallons per minute("GPM") or 27.2 million gallons per day ("MGD"). Emergency interties with neighboring cities and water districts can provide 12,000 GPM or 17.3 MGD. In 2006, the maximum demand for water was 15.3 MGD and the average day demand was 8.0 MGD. Based on growth forecasts, the Cit) has sufficient on-line supply capacity to meet demands through at least 2020,with the practice of water conservation efforts. The City's historic water demands are shown in the following table: Water Utility Usage Average Daily Peak Day Usage(mgd) Usage(mgd) 2006 , 7.99 15.27 2005 7.31 13.03 2004 7.64 14.25 2003 7.58 14.08 2002 7.23 12.48 Source: City of Renton. Water Utility Customers. The City provides water to 16,699 customers of which approximately 77 percent are residential. Customer data by class for the last five years is presented below, as well as current revenues of the water system. Number of Water Customers 2006 2005 2004 2003 2002 Single Family 12,786 12,656 11,927 11,742 11,357 Multi-Family,Commercial, Industrial,Other 2,725 2,766 2,699 2,755 2,700 Irrigation 651 637 561 480 427 Fire Service 500 495 474 475 474 Other(1) 37 31 24 39 44 Total 16,699 16,585 15,685 15,491 15,002 (1)Includes wholesale water provided to Skyway Water District through a single metered connection. Source: City of Renton. 16 Water Billing 2006 2005 2004 2003 2002 Single Family $3,945,033 $3,583,975 $3,610,012 $3,499,510 $3,314,750 Multi-Family,Commercial, Industrial,Other 4,666,104 4,203,586 4,425,994 4,344,029 4,004,196 Fire Service 123,105 118,736 109,343 110,661 104,781 Boeing Seattle 101,106 81,294 123,037 122,235 136,675 Skyway Wholesale 98,666 91,961 96,373 99,476 100,661 Other 6,341 7,305 (690)(1) 6,921 6,145 Total $8,940,355 $8,086,857 $8,364,069 $8,182,832 $7,667,208 (1)Represent an inter-period billing adjustment. Source: City of Renton. The following table shows the City's ten major water customers by annual revenue. Major 2006 Water Customers Total Amount Percent of Total Customer Billed for Water r Water Billing Boeing $ 285,348 3.19% King County Metro 187,087 2.09 City of Renton 164,432 1.84 Public Hospital District No.1 109,844 1.23 Skyway Water&Sewer District(1) 100,172 1.12 Service Linen Supply Inc. ; 83,736 0.94 Renton School District 64,762 0.72 Kenworth Truck Co. 63,308 0.71 Crestwood Park 58,526 0.65 HSC Real Estate/Axis Grand 57,097 0.64 Total $1,174,312 13.13% (1)Wholesale user. Source: City of Renton. Water Utility Rates and Charges. 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. On a historical basis, the City raised rates in 2004 for the first time since 1996 and implemented a water rate increase of five percent in 2007 over 2006. The City will raise rates an additional six percent in 2008. The City's monthly water bills are calculated based on meter size and volume of water in hundreds of cubic feet("ccf")consumed. Effective January 1,2007,monthly water service charges are as follows: 17 2007 Monthly Water Service Charge Meter Size Monthly Charge 3/4" $ 11.93 1" 14.94 11/2" 19.14 2" 33.46 3" 99.08 4" { 143.22 6" 214.86 8" 298.43 10" 429.72 12" 596.86 Source: City of Renton. 2007 Commodity Rates: 100 cf=748 gallons Single Family/Duplex Monthly Charge 0-1,000 cf/month $2.01/100 cf Over 1,000 cf/month 2.14/100 cf All other users 2.01/100 cf Water rates for metered service outside of the City are 1.5 times the rate for metered service within the City. Water rates for fire protection service are$3.86 per month per meter inch. Rate Comparison of Neighboring Water Systems. Shown below are comparative water rate charges of other water utilities near the City: 2007 Single Family Monthly Water Rate Comparison Water System Monthly Rate(1) City of Issaquah $42.54 Cedar River Water&Sewer District 41.70 City of Redmond 36.55 Woodinville Water District 36.24 Coal Creek Utility District 34.50 City of Bellevue I, 34.25 City of Renton 1 32.03 NE Sammamish Sewer&Water District 28.06 City of Auburn 26.80 City of Tukwila 25.20 (1)Rate per 1,000 cubic feet. Source:Websites of individual municipalities. The Wastewater Utility Description. The Wastewater Utility system collects wastewater from residential and commercial customers and delivers it to King County through King County Metro ("Metro") for treatment. The agreement between Metro and the City will terminate on July 1, 2056 with optional extensions. The existing system consists of 205 miles of wastewater pipelines,26 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 Metro's Renton Treatment Plant. Approximately 85 percent of the City is served by the system. The remaining area within the City is served by septic tanks or is undeveloped. 18 Wastewater Utility Customers. The City provides sewer service to 17,246 accounts,75 percent of which are residential. Customer data and usage by class for the last five years is presented below. Number of Wastewater Customers 2006 2005 2004 2003 2002 Single Family 12,979 12,463 11,910 11,265 10,653 Multi-Family,Commercial, Industrial,Other 4,210 4,202 4,193 4,101 4,053 Other 57 59 57 64 75 Total 17,246 16,724 16,160 15,430 14,781 Source: City of Renton. Wastewater Billing 2006 2005 2004 2003 2002 Single Family $2,098,330 $1,917,349 $1,762,487 $1,612,173 $1,494,207 Multi-Family,Commercial, Industrial,Other 2,18'6,926 2,071,222 2,032,966 1,962,503 1,855,133 Sewer Meter 1116,652 21,795 32,185 91,915 102,389 Other 124,902 109,926 65,042 84,319 82,256 Total $4,526,810 $4,120,292 $3,892,680 $3,750,910 $3,533,985 .Source: City of Renton. The following table shows the City's ten major wastewater customers by annual revenue and volume. Major 2006 Wastewater Customers Total Amount Percent of Total Customer Billed for Sewer Wastewater Billing Boeing $ 96,913 2.14% Public Hospital District No.1 81,183 1.79 Service Linen Supply Inc. 60,226 1.33 Maplewood LLC 38,945 0.86 Crestwood Park 38,578 0.85 HSC Real Estate/Axis Grand 33,401 0.74 City of Renton 31,402 0.69 Draper Valley Farms 30,584 0.68 Royal Hills Preservation LP 30,207 0.68 Eagle Point Apartments 29,054 0.64 Total $ 470,494 10.39% Source: City of Renton. Wastewater Utility Rates and Charges. Effective January 1,2007,the City increased Wastewater Utility rates by five percent over 2006. An additional 11 percent increase was assessed in 2007 for charges collected to pay Metro for wastewater treatment services. The City will raise rates an additional six percent beginning in 2008. Monthly rates for sewer service within and outside the City effective January 1,2007 are as follows: 19 � I 2007 Monthly Wastewater Utility Rates Customer Type City of Renton Metro Single Family $ 14.67 $ 28.51 Other Users: Base Charge 2.22 N/A Per 100 cf 1.66 N/A Per 750 cf N/A 28.51 Source: City of Renton. Wastewater rates for metered service outside of the City are 1.5 times the rate for metered service within the City. As shown in the table above, in addition to the above monthly rates, a charge of$28.51 per month is payable to Metro for each single-family residence, or $28.51 per month for each multiple of 750 cf of water used by other classes of customers. This charge is paid to Metro for the collection and treatment of sewage. Rate Comparison of Neighboring Sewer Systems. Shown below are comparative sewer rate charges of other sewer utilities near the City: 2007 Single Family Monthly Sewer Base Rate Comparison Sewer System Monthly Rate City of Issaquah $49.65 Woodinville Water District 48.31 NE Sammamish Sewer&Water District 47.98 Cedar River Water&Sewer District 44.85 City of Renton 43.18 Coal Creek Utility District 40.86 City of Redmond 38.89 City of Bellevue 38.16 City of Auburn 37.76 City of Tukwila 36.75 Source:Websites of individual municipalities. Storm Drainage Utility Description. The Storm Drainage Utility system covers a service area within the existing City corporate boundaries of approximately 17.21 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 facilities located;within public right-of-ways and easements dedicated for storm and surface water management purposes. The Storm Drainage Utility system consists of 215 miles of storm system pipe, includes 5,549 catch basins, 2,191 access manholes, 26 storm water retention/detention facilities and 40 miles of ditch systems and channels. The City's Storm Drainage Utility currently serves 15,752 customers. Storm Drainage Utility Customers. The City provides storm drainage service to 15,744 customers of which approximately 90 percent are residential. Customer data by class for the last five years is presented below,as well as current revenues of the storm drainage system. 20 Number of Storm Drainage Customers 2006 2005 2004 2003 2002 Single Family 14,137 13,636 12,930 12,380 11,855 Other 1,607 1,611 1,593 1,593 1,586 Total 15,744 15,247 14,523 13,973 13,441 Source: City of Renton. Storm Drainage Billing 2006 2005 2004 2003 2002 Single Family $ 912,417 $ 847,402 $ 805,763 $ 773,503 $ 745,167 High Intensity 868,579 879,110 870,057 876,500 867,554 Medium Intensity 598,059 543,388 540,395 532,670 524,975 Low Intensity 337,816 293,425 329,854 325,927 306,241 Other 186,607 167,187 176,729 188,964 192,961 Total $2,903,478 $2,730,512 $2,722,798 $2,697,564 $2,636,898 Source: City of Renton. The following table shows the City's ten major storm drainage customers by annual revenue. Major 2006 Storm Drainage Customers Total Amount Percent of Total Customer Billed for Storm Storm Billing City of Renton $ 218,867 7.54% Boeing 142,897 4.92 Renton School District 38,831 1.34 King County Dept.of Transportation 32,471 1.12 Washington State DOT 32,295 1.11 Kenworth Truck Co. 31,435 1.08 King County Metro 31,192 1.07 Stoneway Rock&Recycling 25,295 0.87 Roundup Co.Inc. 20,409 0.70 Valley Medical Center 18,865 0.65 Total $ 592,558 20.41% Source: City of Renton. Storm Drainage Utility Rates and Charges. Effective January 1, 2007, the City increased Storm Drainage Utility rates by three percent over 2006. The City will raise rates an additional 6.5 percent in 2008. There will also be a rate increase of 28.5 percent in 2008 to manage the National Pollutant Discharge Elimination System permit program. The permit, which was issued on January 17, 2007, is a requirement of the Federal Clean Water Act and requires certain actions of the City to maintain compliance. These include maintenance of the Storm Drainage Utility system, public education, mapping of outfalls and the implementation of an illicit discharge detection and elimination program. The City will be adding 4.7 new full-time equivalent employees in 2008 to accomplish this work. Monthly rates for sewer service within and outside the City effective January 1,2007 are as follows: 21 2007 Monthly Storm Drainage Utility Rates Tvve Monthly Charge Single Family $ 5.39 Low Intensity_less than 0.5 acres 14.16/acre Low Intensity-greater than 0.5 acres 28.33/acre Medium Intensity-less than 0.5 acres 20.49/acre Medium Intensity-greater than 0.5 acres 40.96/acre High Intensity=less than 0.5 acres 26.42/acre High Intensity greater than 0.5 acres 52.83/acre Source: City of Renton. Waterworks Utility Capital Improivement Plan The following is a list of future projects the City is undertaking as a part of its capital improvement plan for the years 2008 through 2013 for the Waterworks Utility system: Project Description Est.Cost(000s) Water Utility Development $ 16,050 Major Maintenance 11,620 Regulatory Compliance 1,260 Total Six-Year Water Utility Project Costs 28,930 Wastewater Utility Development 3,700 Major Maintenance 12,530 Regulatory Compliance 20 Total Six-Year Wastewater Utility Project Costs 16,250 Storm Drainage Utility Development 9,375 Major Maintenance 4,735 Regulatory Compliance 1,090 Total Six-Year Storm Drainage Utility Project Costs 15,200 Total Six-Year Waterworks Utility Project Costs $ 60,380 Summary of Funding Sources Operating $ 10,922 Bonds(1)/Loans 32,305 System Development Charges/Sewer Assessment District(2) 9,223 Undetermined 7,930 Total Six-Year Summary of Funding Sources $ 60,380 (1)Includes the Bonds. (2)A funding mechanism for sewer extensions. Source: 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. 22 w Endangered Species Act In planning future projects,the City;evaluates the construction and operation of the facilities to determine if there will be any impact on endangered species through the use of site evaluations, special environmental studies, and preparation of State Environmental Policy Act ("SEPA") checklists or environmental impact statements, as appropriate. Alternatives are developed to minimize or avoid impacts on endangered species. Where federal permits or funding are involved, the City also complies with the Endangered Species Act's if consultation"requirement,which serves to evaluate and address any potential effect on endangered species. Best management practices are employed during routine operation and maintenance activities to minimize impacts on the environment. Water-Sewer Fund Historical iOperating Results-Debt Service Coverage (Years Ending December 31) Audited 2006 2005 2004 2003 2002 Operating Revenues Charges for services $ 25,982,868 . $ 26,427,386 $ 26,003,272 $ 24,551,329 $ 22,123,070 Other operating revenue 1,114,349 1,142,062 1,099,530 1,227,428 1,686,652 Total Operating Revenues j 27,097,217 27,569,448 27,102,802 25,778,757 23,809,722 Operating Expenses(1) Operations and maintenance 4,899,649 4,410,143 4,487,536 3,962,259 13,193,177 Administrative and general 13,388,969 12,645,317 11,968,588 10,501,393 2,560,881 Taxes 1,989,785 1,837,664 1,869,739 2,526,867 1,741,414 Total Operating Expenses j 20,278,403 18,893,124 18,325,863 16,990,519 17,495,472 Net Income from Operations 6,818,814 8,676,324 8,776,939 8,788,238 6,314,250 Non-Operating Revenues(2) Interest revenues 653,291 319,912 198,428 155,363 135,938 Other non-operating revenues(expenses) 160,233 523,411 st 19,586 142,290 44,757 Transfers in(out) 68,446 9,300 10,300 40,000 (10,079) Total Non-Operating Income 881,970 852,623 228,314 337,653 170,616 . Net Income 7,700,784 9,528,947 9,005,253 9,125,891 6,484,866 Adjustment to Revenues Connection/system development charges 1,030,460 1,089,394 1,548,762 914,091 1,181,830 Available for Parity Bond Debt Service 8,731,244 10,618,341 10,554,015 10,039,982 7,666,696 Parity Debt Service 1993 Bonds 0 0 0 0 1,268,452 1994 Bonds 0 0 0 0 200,925 1998 Bonds 725,128 723,141 499,765 500,643 311,973 2002 Bonds 649,543 678,255 666,255 664,130 228,804 2003 Bonds 1,227,748 1,198,248 1,319,248 48,608 0 2004 Bonds 507,480 507,480 42,290 0 0 Parity Bond Debt Service 3,110,198 3,107,124 2,527,558 1,213,381 2,010,154 Available for Other Purposes $ 5,621,046 $ 7,511,217 $ 8,026,458 $ 8,826,601 $ 5,656,543 Parity Bond Debt Service Coverage 2.81 3.42 4.18 8.27 3.81 PWTF Loans $ 889,143 $ 889,143 $ 631,643 $ 670,172 $ 620,274 Debt Service Coverage including PWTF Loans 2.18 2.66 3.34 5.33 2.91 (1) Excludes Depreciation. (2) Excludes Interest Expense and Amortization of Debt. (3) Approximately$500,000 of this amount was from a State tax refund. Source:City of Renton. The Maximum Annual Debt Service for the Outstanding Parity Bonds,including the Bonds,is$3,134,624 in 2008. Based on the 2006 audited financial statement for the Waterworks Utility,debt service coverage is calculated at 2.79 times the Maximum Annual Debt Service. 23 • Water-Sewer Fund Historical Statement of Net Assets (Years Ending December 31) Audited '2006 2005 2004 2003 2002 Assets Current assets: Cash&cash equivalents $ 12,479,315 $ 8,505,117 $ 7,299,781 $ 6,170,463 $ 2,297,256 Investments at fair value 520,000 1,970,979 3,722,272 755,491 6,666,250 Receivables(net) 3,257,279 5,131,540 4,756,799 4,451,097 4,301,063 Due from other funds i 56,328 115,389 40,199 48,137 45,505 Due from other governmental units 197,446 203,238 225,073 245,455 291,415 Inventory of materials and supplies 271,754 301,512 316,643 331,434 316,062 Noncurrent assets: Restricted cash 3,114,332 3,114,332 3,114,332 2,606,852 4,265,423 Special assessments deferred 62,966 68,269 54,200 61,325 0 Capital assets(net) 205,585,486 200,918,126 191,635,436 176,376,760 167,573,971 Deferred charges and other assets 761,729 812,857 888,729 769,107 221,039 Total Assets $ 226,306,635 $ 221,141,359 $ 212,053,464 $ 191,816,121 $ 185,977,984 Liabilities Current liabilities: Accounts payable $ 1,148,019 $ 298,397 $ 406,419 $ 479,194 $ 379,627 Retainage payable 52,481 72,452 55,674 118,482 117,163 Due to other funds 50,676 103,865 51,919 47,563 45,546 Due to other governmental units(1) 0 0 2,095,948 674,336 726,743 Accrued interest payable 161,874 167,338 106,955 481,279 237,978 Accured employee wages 181,740 176,081 157,062 31,813 30,962 Accrued taxes payable 35,147 25,989 48,305 49,741 47,821 Custodial accounts 37,919 30,659 27,299 24,829 28,519 Deferred revenue 280,764 138,805 125,884 83,308 183,469 Revenue bonds payable I 1,740,000 1,680,000 1,630,000 1,475,000 1,635,000 Long-term liabilities: Revenue bonds payable 29,010,000 30,750,000 32,430,000 23,725,000 25,490,000 Unamortized premium 468,747 533,445 533,491 177,953 0 Unamortized discount (401,585) (474,931) (552,031) (629,130) (705,211) Deferred amount on rev.bond rfdg. 84,903 97,482 110,060 122,638 0 Accrued employee wages 371,552 344,139 343,312 265,857 379,648 PWTF loan payable(1) 10,692,020 11,581,165 6,254,360 6,909,275 7,495,393 Total Liabilties $ 43,914,257 $ 45,524,886 $ 43,824,657 $ 34,037,138 $ 36,092,658 Net Assets Invested in capital assets $ '164,143,466 $ 156,906,961 $ 149,225,132 $ 144,267,485 $ 112,116,546 Restricted 3,114,332 3,114,332 3,114,332 2,606,852 9,620,966 Unrestricted ' 15,134,580 15,595,180 15,889,343 10,904,646 28,147,814 Total Net Assets $ 1182,392,378 $ 175,616,473 $ 168,228,807 $ 157,778,983 $ 149,885,326 Total Liabilities and Net Assets $ '226,306,635 $ 221,141,359 $ 212,053,464 $ 191,816,121 $ 185,977,984 (1) Public Works Trust Fund loans were previously categorized as"Due to other governments,"but were re- allocated as a long-term liability in 2005 and 2006. Source:City of Renton. 24 The City The City was incorporated in 1901 and operates under State laws applicable to a non-charter code city with a mayor-council form of government. The council is comprised of seven members plus the mayor. Councilmembers are elected to four-year terms on a staggered schedule through citywide elections. Councilmembers are part-time elected officials who exercise legislative authority and determine matters of policy for the City. Member Position Term Expires Kathy Keolker Mayor December 31,2007 Terri Briere Councilmember December 31,2009 Dan Clawson Councilmember December 31,2009 Randy Corman Councilmember December 31,2009 Denis Law Councilmember December 31,2007 Toni Nelson Councilmember December 31,2007 Marcie Palmer Councilmember December 31,2007 Don Persson Councilmember December 31,2007 The City provides a range of municipal services authorized by State law, including police, fire, ambulance service, streets, sanitation, health, recreation, library, public improvements, planning and zoning,water supply treatment and distribution,and sewage collection and treatment services. City Staff 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. Mr. Covington earned a Bachelor's degree in Business and Masters in Public Administration from Brigham Young University. Mr. Covington is a past President and Board Member of the Washington City/County Management Association as well as a past Board Member of the Association of Washington Cities. In 2005,Mr. Covington received the Public Official of the Year Award from the Seattle Municipal League. Michael E. Bailey, Finance &Information Services Administrator. Mr. Bailey joined City staff as Finance & Information Services Administrator in 2005. Mr.Bailey is a certified public accountant and prior to being appointed to his current position with the City,Mr. Bailey was employed as the Finance Director for the City of Lynwood since 1999, and previously served as the Finance Director for the cities of Everett and Wenatchee and the Metropolitan Park District of Tacoma. Mr. Bailey earned a Bachelor's degree in Business Administration and Accounting and a Master's degree in Public Administration,both from the University of Puget Sound. Mr! Bailey is a past President of the Washington Finance Officers Association, a past representative for the State of Washington to the National Finance Officers Association and was named "Business Person of the Year" by the National Future Business Leaders of America in 1998. Currently, Mr. Bailey is the Chair of the Government Finance Officers Association Technology Committee and Local Government Representative of the National Streamlined Sales Tax Governing Board. Gregg Zimmerman, Public Works Administrator. Mr. Zimmerman joined City staff as Public Works Administrator in 1992. In addition to managing the Waterworks Utility whose responsibilities include planning and designing the City's water,wastewater,surface water,and solid waste utilities and setting utility rates, Mr. Zimmerman also manages the Maintenance Services Division (operates and maintains the City's utilities and streets and the City vehicle fleet), the Transportation Systems Division (plans, designs, builds transportation projects; installs and maintains street signalization system; manages the Renton Municipal Airport) and the Development Services Division (in charge of reviewing and issuing permits for private development projects and other land use actions within the City). Prior to joining the City, Mr. Zimmerman worked for consulting engineering firms in Seattle and Illinois. Mr. Zimmerman 25 r received his Bachelor's degree in Civil Engineering from the University of Illinois and his current memberships include the American Water Works Association and the American Public Works Association. Labor Relations The City currently has approximately 592 full-time employees and 507 seasonal and part-time employees. The City enters into written bargaining agreements with represented employees. The agreements contain provisions regarding salaries,vacation,sick leave,medical and dental insurance,working conditions,and grievance procedures. The City strives to complete agreements with all groups in a timely manner, consistent with all applicable State law, and to promote labor relation policies mutually beneficial to management and employees. The City considers labor relations with its bargaining units to be good. There have been no recent strikes or major labor relations problems. Number of Bargaining Unit Employees Expiration Date AFSCME 293 December 31,2008 Renton Police Officers'Guild 89 December 31,2008 Renton Police Officers'Guild Non-Commissioned 41 December 31,2008 Renton Firefighters Local 864 96 December 31,2008 Renton Firefighters Local 864 Batalion Chiefs 7 December 31,2008 Pension System Public Employees'Retirement System("PERS"). Substantially all of the City's full-time and qualifying part- time employees, other than those covered under union plans, participate in PERS. This is a statewide local government retirement system administered by the Washington State Department of Retirement Systems,under cost-sharing,multiple-employer defined benefit public employee retirement plans. The PERS system includes three plans. Participants who joined the system' by September 30, 1977, are PERS Plan I members. Those joining thereafter are enrolled in PERS Plan II. A third plan, entitled PERS Plan III, provides members with a defined benefit plan similar to PERS Plan II and the opportunity to invest their retirement contributions in a defined contribution plan. PERS Plan I members are eligible for retirement at any age after 30 years of service, at age 60 with five years of service, or at age 55 with 25 years of service. The annual pension is two percent of the average final compensation per year of service,capped at 60 percent. The average final compensation is based on the greatest compensation earned during any 24 eligible consecutive compensation months. PERS Plan II members may retire at age 65 with five years of service or at 55 with 20 years of service. The annual pension is two percent oft the average final compensation per year of service. PERS Plan II retirements prior to 65 are actuarially reduced. On July 1 of each year following the first full year of retirement service, the benefit will be adjusted by the percentage change in the Consumer Price Index ("CPI")of Seattle,capped at three percent annually. PERS Plan III is structured as a dual benefit program that will provide members with the following benefits: • A defined benefit allowance similar to PERS Plan II calculated as one percent of the average final compensation per year of service(versus a two percent formula)and funded entirely by employer contributions. • A defined contribution account consisting of member contributions plus the full investment return on those contributions. 26 • Each biennium, the State Pension Funding Council adopts PERS Plan I employer contribution rates and PERS Plan II employer and employee contribution rates. Employee contribution rates for PERS Plan I are established by statute at six percent and do not vary from year to year. The employer and employee contribution rates for PERS Plan II are set by the director of the Department of Retirement Systems,based on recommendations by the Office of the State Actuary, to continue to fully fund PERS Plan II. Unlike PERS Plan II,which has a single contribution rate (which is currently 2.25 percent), with PERS Plan III, the employee chooses how much to contribute from one to six contribution rate options. Once an option has been selected,the contribution rate choice is irrevocable unless the employee changes employers. All employers are required to contribute at the level established by State law. The methods used to determine the contribution requirements are established under State statute in accordance with chapters 41.40 and 41.26 RCW. For the year ending December 31,12006, the City's contribution of $759,728, or 3.69 percent of covered payrolls,represents its full liability under the system,except that future rates may be adjusted to meet the system needs. Adopted PERS Employer Contribution Rates Effective Effective Effective Effective 7/1/06 1/1/07 7/1/07 7/1/08 Normal Rate 3.50% 3.50% 4.15% 4.83% PERS I Unfunded Liability , 0.01 1.78 1.69 2.57 Gain Sharing I 0.00 0.00 0.62 0.62 DRS Admin.Expense Rate 0.18 0.18 0.18 0.18 Total PERS Employer Rate 3.69% 5.46% 6.64% 8.20% Law Enforcement Officers'and Fire Fighters'Retirement System("LEOFF"). LEOFF is a cost-sharing multiple- employer defined benefit pension plan. Membership in the plan includes all full-time,fully compensated local law enforcement officers,and fire fighters. The LEOFF system includes two plans. Participants who joined the system by September 30, 1977, are LEOFF Plan I members. Those joining thereafter are enrolled in LEOFF Plan II. Retirement benefits are financed from employee and employer contributions, investment earnings, and State contributions. Retirement benefits in both LEOFF Plan I and LEOFF Plan II are vested after completion of five years of eligible service. LEOFF Plan I members are eligible,to retire with five years of service at age 50. The service retirement benefit is dependent upon the final average salary and service credit years at retirement. On April 1 of each year following the first full year of retirement service,the benefit will be adjusted by the percentage change in the CPI of Seattle. Percent of Term of Service Final Average 5-9 Years 1.0% 10-19 Years 1.5 20 or more years 2.0 LEOFF Plan II members are eligible to retire at the age of 50 with 20 years of service or at 53 with five years of service. Retirement benefits prior to age 53 are actuarially reduced at a rate of three percent per year. The benefit is two percent of the final average salary per year of service. The final average salary is determined as the 60 highest paid consecutive service months. There is no limit on the number of service credit years,which may be included in the benefit calculation. On July 1 of each year following the first full year of retirement service,the benefit will be adjusted by the percentage change in the CPI of Seattle, capped at three percent annually. 27 LEOFF Plan I employer and employee contribution rates are established by statute, and the State is responsible for the balance of the funding at rates set by the Pension Funding Council to fully amortize the total costs of the plan. Employer and employee rates for LEOFF Plan II are set by the director of the Department of Retirement Systems, based on recommendations by the Office of the State Actuary, to continue to fully fund the plan. LEOFF Plan II employers and employees are required to contribute at the level required by State law. The methods used to determine the contribution rates are established under State statute in accordance with chapters 41.26 and 41.45 RCW. 1 For the year ending December 31,12006, the City's contribution to LEOFF I (for participants who joined the system by September 30, 1977) of 0.18 percent and to LEOFF II (participants who joined after September 30,1977) of 4.9 percent of covered payroll totaled$718,633,representing its full liability under the system,except that future rates;may be adjusted to meet the system needs. Historical trend information regarding all of these plans is presented in Washington State's Department of Retirement Systems'annual financial report.A copy of this report may be obtained at: Department of Retirement Systems Point Plaza West 1025 East Union Street P.O.Box 48380 Olympia,WA 98504-8380 Internet Address:www.drs.wa.gov According to information provide4 by the Office of State Actuary, the LEOFF System currently has no unfunded actuarial accrued liability. Other Post Employment Benefits The Government Accounting Standards Board ("GASB") has issued a new standard concerning Accounting and Financial Reporting by Employers for Post Employment Benefits Other than Pensions ("GASB 45"). In addition to pensions,many state and local governmental employers provide other post employment benefits ("OPEB") as a part of total compensation to attract and retain the services of qualified employees. OPEB includes post employment healthcare, as well as other forms of post employment benefits when provided separately from a pension plan. The new standard provides for the measurement, recognition and display of OPEB expenses/expenditures, related liabilities (assets), note disclosures, and if applicable, required supplementary information in the financial reports. This pronouncement is effective for the City for the fiscal year ending on December 31,2007. The City provides medical benefits to retired firefighters and police officers who were hired prior to 1978 as required by chapter 41.26.RCW. 'Entry into this benefit system is closed. An actuarial study was completed by Nicolay Consulting on January 4,2005. At that time,there were 106 participants in the system. The study found that the City's Annual Required Contribution to fully fund the anticipated costs of$25,864,528 would be an average of$1,495,748 annually until 2035. Currently there are 98 LEOFF I retirees who receive necessary medical and hospitalization coverage and five retirees who are covered solely by the Fire Pension Plan and receive medical coverage limited to treatment of service-related disabilities only. The City does not have a funding policy at this time and no assets are designated for this purpose. During 2006, the City made a payment of $1,151,205 were recognized for post employment healthcare. State statute provides that the City's responsibility for medical payments of LEOFF I retirees is secondary to any other coverage retirees receive or are eligible to receive. The City recognizes a potential savings exists when retirees utilize Medicare as primary coverage and the City for secondary coverage and ineligible expenses. Therefore, upon reaching age 65, the City requires the retirees to apply for and 28 • f � uiili7e Medicare Part B coverage. The City reimburses these Medicare premiums at an average cost of approximately$88.50 per month for 47 LEOFF I retirees and five Fire Pension retirees. Budgetary Policies The City budgets it funds in accordance with chapter 35A.33 RCW. Annual appropriated budgets are adopted for the general, special revenue, debt service, and capital projects funds on the cash basis of accounting and include fund balances. The City provides a reconciliation of the differences between the budgetary basis and GAAP each year in its Comprehensive Annual Financial Report. The City Council annually adopts a budget by ordinance establishing appropriations for City funds,and during the year may authorize supplemental appropriations. Administrative and legal budgetary control is established at the fund level, i.e., expenditures for a fund may not exceed the total appropriation amount. The Mayor or Chief Administrative Officer may authorize transfers of appropriations within a fund however interfund transfers must be approved by ordinance of the Council. Risk Management The City insures its risk exposure up to specified levels of risk as determined by the City, and purchases excess 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 The City is a member of the Washington Cities Insurance Authority comprised of approximately 121 public agencies located in the State of Washington. Shown below are the City's insurance limits through the Washington Cities Insurance Authority. 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* Equipment Breakdown 5,000 50,000,000 Public Officers 250,000 10,000,000 Crime 10,000 1,000,000 Airport Liability 0 100,000,000 Underground Storage Tank 5,000 1,000,000 Worker's Compensation 350,000 1,000,000 Employee Health 140,000 N/A *Stop Gap Loss Limit is per occurrence with the property coverage subject to limits. Auditing of City Finances Accounting systems and budgetary controls are prescribed by the Office of the State Auditor in accordance with RCW 43.09.200 and RCW 43.09.230. State statutes require audits for cities the size of the City to be conducted by the Office of the State Auditor. The City complies with the systems and controls prescribed by the Office of the State Auditor and establishes procedures and records which reasonably assure safeguarding of assets and the reliability of financial reporting. The State Auditor is required to examine the affairs of cities at least once every two years,however the City requests annual audits. The examination must include, among other things,the.financial condition and resources of the City,whether the laws and constitution of the State are being complied with,and the methods and accuracy of the accounts and reports of the City. Reports of the auditor's examinations are required to be filed in the office of the State Auditor and in the finance department of the City. The audited financial statements of the City for the year ended December 31, 2006, attached as Appendix D, are incorporated by reference to this Official Statement. 29 i Demographic Information The end of Lake Washington, southeast of t the g Seattlea t of the s of Seattle southern eCity is located approximately 20 miles Y,_:;:: ,,�j • ; ' Seattle on Interstate 405. The Citysou and approximately 60 miles northeast of the "' tit ty of Olympia, pia,the sizeta among As of the 2007 population estimates,the [.• -, i' Cityg cities in King County (the "County"). The &5L1 - City had a population of 60,290 as estimated in 2007 by the State Office of C,1-------'--i 1._1,;1 ) Financial Management, an increase of 20 percent since the 2000 Census King County reporting a population of 50,052. The County had an estimated population of Washington 1,861,300 as reported in 2007. Established in 1852, the County covers more than 2,200 square miles and is nearly twice as large as the average county in the United States. A part of the Seattle-Bellevue-Everett Primary Metropolitan Statistical Area(PMSA),the County is the largest metropolitan county in the State in terms of population, number of cities, and employment. Major contributors to the area's economy are manufacturing, technology-based business,the Port of Seattle,services industry,tourism,fishing and agriculture. I Population King County and Cities of Seattle and Renton I King City of City of Year County Seattle Renton 2007 11861,300 586,200 \60,290 2006 1!835,300 578,700 58,360 2005 1;808,300 573,000 56,840 2004 1;788,300 572,600 55,360 2003 1;779,300 571,900 54,900 Source: Washington State Office of Financial Management,August 2007. Income. Historic personal income and per capita income levels for the County and the State are shown below: King County and State of Washington Total Personal and Per Capita Income King County State of Washington Total Personal Per Capita Total Personal Per Capita Year Income(in thousands) Income Income(in thousands) Income 2006(1) N/A N/A $239,347,900 $37,423 2005 $86,746,632 $48,216 223,232,089 35,479 2004 87,417,911 49,118 216,921,198 34,596 2003 79,199,166 44,821 202,924,123 33,105 2002 77,940,608 44,250 197,451,578 32,528 2001 76,883,017 43,800 193,498,304 32,274 (1)Preliminary Estimate. Source:U.S.Department of Commerce,Bureau of Economic Analysis,August 2007. 30 �r / Taxable Retail Sales. Taxable retail sales reflect only those sales subject to retail sales tax. Historic taxable retail sales for the County and the City are shown below: King County Taxable Retail Sales King County City of Renton 2007(1) $ 10,735,910,943 $ 499,266,271 2006 43,993,478,514 2,093,200,107 2005 40,498,328,830 1,951,188,125 2004 37,253,103,540 1,853,297,141 2003 35,370,831,017 1,763,639,632 (1)Through first quarter only. Source: Washington State Department of Revenue,August 2007. Building Permits. The number and valuation of new single-family and multi-family residential building permits in the City and the County are listed below: I City of Renton Residential Building Permits New Single Family Units New Multi Family Units Total Year Number j Valuation Number Valuation Valuation 2007 (1) 268 $ 65,881,875 953 $ 74,581,770 $ 140,463,645 2006 433 100,418,576 251 18,244,980 118,663,556 2005 514 113,996,463 412 35,282,590 149,279,052 2004 501 100,307,946 128 10,806,586 110,114,532 2003 556 1 117,062,111 243 18,281,882 135,343,993 (1)Data through August 2007 only. � Source: City of Renton. King County Residential Building Permits New Single Family Units New Multi Family Units Total Year Number Valuation Number Valuation Valuation 2007 (1) 2,881 I$ 813,731,989 4,407 $ 535,778,130 $ 1,349,470,119 2006 5,771 1,620,408,964 8,456 970,209,237 2,590,618,201 2005 6,363 1,732,705,365 5,750 553,712,849 2,286,418,214 2004 6,720 1,569,090,378 5,021 450,235,452 2,019,325,830 2003 6,354 1,543,557,962 3,503 309,101,770 1,852,659,732 2002 5,783 1,339,289,055 4,768 429,323,501 1,768,612,556 (1)Data through June 2007 only. Source: U.S.Census Bureau,August 2007. 31 i Employment. The major employers within the City include the following: Full-Time Employer Employees The Boeing Company 11,942 Valley Medical Center 2,346 PACCAR Inc. 1,749 Renton School District 1,353 Federal Aviation Administration 860 City of Renton 620 ER Solutions,Inc. 428 Young's-Columbia of Washington,LLC 402 Wal-Mart 378 IKEA 361 Source: City of Renton State-wide employment figures (rounded)for major employers located primarily within the central Puget Sound region(King,Pierce and Snohomish Counties)include the following: Puget Sound Major Employers _ Full-Time Employer I Employees (1) The Boeing Company 68,570(2) Microsoft 30,300 University of Washington 21,358(2) King County Government 12,400 City of Seattle 10,392(2) Group Health Cooperative 9,800 Weyerhaeuser 7,300 Providence Health I 6,800 Costco 6,500 Nordstrom Inc. 5,400 Swedish Health I 5,100 Seattle School District 5,000 Safeway 4,700 Qwest Communications International 4,200 (1) Does not include part-time or seasonal employment figures. (2) From entity. Source: Puget Sound Business Journal,Book of Lists,2007. 32 Civilian Labor Force data is based on household surveys of residents. NAICS data are estimates based on surveys of employers and benchmarked based on covered employment as reported by all employers. King County Nonagricultural Wage&Salary Workers and Labor Force and Employment Data Annual Average 2007a1) 2006 2005 2004 2003 Civilian Labor Force 1,059,450 1,044,340 1,010,950 994,800 989,690 Total Employment 1,016,520 1,000,640 963,640 943,420 928,460 Total Unemployment 42,930 43,700 47,310 51,380 61,230 Percent of Labor Force 4.1 4.2 4.7 5.2 6.2 •**NAICS INDUSTRY I 2007(1) 2006 2005 2004 2003 Total Nonfarm 1,204,800 1,176,567 1,143,675 1,119,167 1,111,192 Total Private 1,042,686 1,014,708 982,475 957,008 948,600 Goods Producing 188,900 183,058 170,850 163,667 164,233 Natural Resources and Mining 657 642 658 825 842 Construction 75,086 70,092 62,808 58,992 57,050 Manufacturing 113,143 112,308 106,900 103,392 105,867 Services Providing 1,015,886 993,525 973,300 955,950 946,950 Trade,Transportation and Utilities 227,629 224,275 222,858 222,700 222,092 Information 75,871 72,500 69,283 67,717 67,892 Financial Activities 77,486 77,525 76,467 77,242 78,458 Professional and Business Services 190,400 182,233 173,225 163,708 160,217 Educational and Health Services'i 128,214 124,708 122,750 118,142 114,917 Leisure and Hospitality 111,557 108,583 106,092 103,783 100,900 Other Services 42,629 41,808 41,392 40,533 39,892 Government 162,114 161,867 161,208 162,150 162,567 (1)Data through July 2007. Source: Washington State Employment Security Department,August 2007. Initiative and Referendum State Initiatives Under the State Constitution, the voters of the State have the ability to initiate legislation and require the Legislature to refer legislation to the voters through the powers of initiative and referendum,respectively. The initiative power in Washington may not be used to amend the State Constitution. Initiatives and referenda are submitted to the voters upon receipt of a petition signed by at least eight percent(initiative) and four percent(referenda)of the number of voters registered and voting for the office of Governor at the preceding regular gubernatorial election. Any law approved in this manner by a majority of the voters may not be amended or repealed by the Legislature within a period of two years following enactment, except by a vote of two-thirds of all the members elected to each house of the Legislature. After two years,the law is subject to amendment or repeal by the Legislature in the same manner as other laws. Current and Future Initiative Legislation. Tax and fee initiative measures have been and may be filed from time to time. It cannot be predicted whether any such initiatives might gain sufficient signatures to qualify for submission to the Legislature and/or the voters or, if submitted, whether they ultimately would be approved. 33 Tax Matters In the opinion of Bond Counsel,interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed.on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. ' Federal income tax law contains a number of requirements that apply to the Bonds,including investment restrictions,periodic payments of arbitrage profits to the United States,requirements regarding the use of proceeds of the Bonds and the facilities financed or refinanced with proceeds of the Bonds and certain other matters. The City has covenanted to comply with all applicable requirements. Bond Counsel's opinion is subject to the condition that the City comply with the above-referenced covenants and, in addition, will rely on representations by the City and its advisors with respect to matters solely within the knowledge of the City and its advisors,respectively,which Bond Counsel has not independently verified. If the City fails to comply with such covenants or if the foregoing representations are determined to be inaccurate or incomplete,interest on the Bonds could be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds, regardless of the date on which the event causing taxability occurs. In rendering its opinion, Bond Counsel has relied on the report of Grant Thornton LLP with respect to the accuracy of certain mathematical calculations. Except as expressly stated above,Bond Counsel expresses no opinion regarding any other federal or state income tax consequences of acquiring,carrying,owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium,taxation upon sale,redemption or other disposition,and various withholding requirements. Prospective purchasers of the Bonds should be aware that ownership of the Bonds may result in collateral federal income tax consequences to!certain taxpayers,including,without limitation,financial institutions, property and casualty insurance I companies, individual recipients of Social Security or Railroad Retirement benefits,certain S corporations with"excess net passive income," foreign corporations subject to the branch profits tax,life insurance companies and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Bonds. Bond Counsel expresses no opinion regarding any collateral tax consequences. Prospective purchasers of the Bonds should consult their tax advisors regarding collateral federal income tax consequences. Payments of interest on tax-exempt obligations such as the Bonds, are in many cases required to be reported to the Internal Revenue Service (the "IRS"). Additionally, backup withholding may apply to any such payments made after March 31,2007 to any owner who is not an"exempt recipient" and who fails to provide certain identifying information. Individuals generally are not exempt recipients,whereas corporations and certain other entities generally are exempt recipients. Bond Counsel's opinion is not a guarantee of result and is not binding on the IRS; rather, the opinion represents Bond Counsel's legal judgment based on its review of existing law and in reliance on the representations made to Bond Counsel and the City's compliance with its covenants. The IRS has established an ongoing program to audit tax-exempt obligations to determine whether interest on such obligations is includable in gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS will commence an audit of the Bonds. Owners of the Bonds are advised that,if the IRS does audit the Bonds,under current IRS procedures, at least during the early stages of an audit,the IRS will treat the City as the taxpayer,and the owners of the Bonds may have limited rights to participate in the audit. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until the audit is concluded,regardless of the ultimate outcome. 34 The City has designated the Bonds;as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3)(B)of the Code. Ratings As noted on the cover page of this Official Statement, City has received ratings for the Bonds from Standard&Poor's,a division of The McGraw Hill Companies,Inc. and Fitch Ratings. Standard&Poor's has assigned its rating of"AAA" and Fitch has assigned its rating of"AAA" and to the Bonds with the understanding that,upon delivery of the Bonds, the Financial Guaranty Insurance Policy will be issued by MBIA. Additionally, an underlying rating of"AA-" by Standard & Poor's and "AA- by Fitch has been assigned to the Bonds. The ratings reflect only the views of the rating agencies and an explanation of the significance of the ratings'may be obtained from the rating agencies. There isno assurance that the ratings will be retained for any given period of time or that the ratings will not be revised downward or withdrawn entirely by the rating agencies if, in their judgment, circumstances so warrant. Any such downward revision or withdrawal{of the ratings will be likely to have an adverse effect on the market price of the Bonds. Continuing Disclosure Undertaking In accordance with Section (b)(5)1 of Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934,as the same may be amended from time to time(the"Rule"),the City has agreed in the Bond Ordinance for the benefit of the Bond Owners or Beneficial Owners of the Bonds to provide or cause to be provided to each NRMSIR and to the state information depository for the State of Washington (if one is created) ("SID"), in each case as designated by the Securities and Exchange Commission(the"Commission")in accordance with the Rule,the following annual financial information and operating data for the prior fiscal year(commencing in 2008 for the fiscal year ended December 31, 2007): (i)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 by the Washington State Auditor pursuant to RCW 43.09.200,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") (ii) a statement of authorized, issued and outstanding bonded debt secured by the Net Revenue;; (iii) debt service coverage ratios; (iv) general customer statistics for the Waterworks Utility contained in the final official statement for the Bonds under the heading"The Waterworks Utility;"'and(v)a narrative explanation of the reasons for any amendments to this Section made during the previous fiscal year and the impact of such amendments on the Annual Financial Information being provided. The annual financial information shall be provided on or before the last day of the seventh month following the end of such prior fiscal year;provided, after the 1998 Bonds, 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding the City shall provide the following Annual Financial Information on or before the last day of the ninth month following the end of the prior fiscal year. The City's current fiscal year ends December 31. The City may adjust such fiscal year by providing written notice of the change of fiscal year to each then existing NRMSIR and the SID,if any. In lieu of providing such Annual Financial Information, 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 provided as part of the annual financial information discussed above, the City shall provide the City's audited 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 any. 35 - Material Events. The City agrees to provide or cause to be provided,in a timely manner,to the SID,if any, and to each NRMSIR notice of the occurrence of any of the following events with respect to the Bonds,if material: (1) Principal and interest payment delinquencies; (2) Non-payment related defaults; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers,or their failure to perform; (6) Adverse tax opinions or events affecting the tax-exempt status of the Bonds; (7) Modifications to the rights of Bond owners; (8) Bond calls (optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34-238560); (9) Defeasances; (10) Release,substitution or sale of property,securing repayment of the Bonds;and (11) Rating changes. Solely for purposes of disclosure, and not intending to modify the undertaking, the City advises that there is no property securing repayment of the Bonds. Notification Upon Failure to Provide Financial Data. The City has agreed in the Bond Ordinance to provide or cause to be provided,in a timely manner,to each NRMSIR and to the SID,if any,notice of its failure to provide the annual financial information,as described above,on or prior to the date as set forth above. Termination/Modification. The City's!obligations to provide notices of material events shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. Any provision of this section shall be null and void if the City (1)obtains an opinion of nationally recognized bond counsel to the effect that the portion of the Rule that requires that provision is invalid, has been repealed retroactively or otherwise does not apply to the Bonds,and(2)notifies each NRMSIR and the SID,if any, of such opinion and the cancellation of this section. Bondowner's Remedies Related to Continuing Disclosure Undertaking. A Bondowner's or a Beneficial Owner's right to enforce the provisions related to continuing disclosure undertaking shall be limited to a right to obtain specific enforcement of the City's obligations related thereto,and any failure by the City to comply with the provisions of this undertaking shall not be an Event of Default with respect to the Bonds under the Bond Ordinance. For purposes of this section, "Beneficial Owner" means any person who has the power,directly or indirectly,to vote or consent with respect to,or to dispose of ownership of,any Bonds, including persons holding Bonds through nominees or depositories. 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. Disclosure USA. The City may elect to submit the information required to be filed with the NRMSIRs and the SID,if any,directly to DisclosureUSA.org unless or until the Commission withdraws its approval of this submission process. Prior Continuing Disclosure Undertakings of the City. The City entered into undertakings under the Rule with respect to its obligations issued after July 3, 1995 and is in compliance with its obligations thereunder. 36 Legal and Underwriting Approval of Counsel Legal matters incident to the authorization,issuance and sale of the Bonds by the City are subject to the approving legal opinion of Bond Counsel. A form of the opinion of Bond Counsel is attached hereto in Appendix B. Bond Counsel will be compensated only upon the issuance and sale of the Bonds. Bond Counsel will not offer an opinion on the Official Statement. Litigation There is no litigation pending or threatened questioning the validity of the Bonds nor the power and authority of the City to issue the Bonds. There is no litigation pending or threatened which would materially affect the finances of the'City or affect the City's ability to meet debt service requirements on the Bonds. Underwriting The Bonds are being purchased liy Seattle-Northwest Securities Corporation, the Underwriter. The purchase contract provides that the'Underwriter will purchase all of the Bonds,if any are purchased,at a price of percent of the par value of the Bonds,plus accrued interest. The Bonds will be reoffered at an average price of percent of the par value of the Bonds. After the initial public offering, the public offering prices may be varied from time to time. Financial Advisor In connection with the authorization and issuance of the Bonds,the City has retained Piper Jaffray&Co., Seattle, Washington, as its financial advisor (the "Financial Advisor"). The Financial Advisor is not obligated to undertake, and has not undertaken, either to make an independent verification of or to assume responsibility for, the accuracy, completeness, or fairness of the information contained in this Official Statement. Concluding Statement So far as any statement herein includes matters of opinion, or estimates of future expenses and income, whether or not expressly so stated,they are intended merely as such and not as representations of fact. The information contained herein should not be construed as representing all conditions affecting the City or the Bonds. Additional information may be obtained from the City. The statements relating to the Bond Ordinance are in summarized form,and in all respects are subject to and qualified in their entirety by express reference to the provisions of such document in its complete form. The agreements of the City are set forth in such documents,and the information assembled herein is not to be construed as a contract with Owners of the Bonds. 37 • This page left blank intentionally. II it 38 Appendix A Bond Ordinance r This page left blank intentionally. Appendix B Opinion of Bond Counsel This page left blank intentionally. This page left blank intentionally. • Appendix C Book-Entry Transfer System ' This page left blank intentionally. • THE: -DEPOSITORY, TRUST 'COMPANY SAMPLE OFFERING DOCUMENT 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 principlal amount of [any] issue exceeds $500 million, one certificate will be issued with respect to each$500 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.] 2.DTC,the world's largest 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 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instrument from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations,and certain other organizations.DTC is a wholly-owned subsidiary of The Depository Trust &Clearing Corporation("DTCC"). DTCC,in turn,is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation,Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation(NSCC,FICC,and EMCC,also subsidiaries of DTCC),as well as 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 both U.S. and non- U.S..securities brokers and dealers,,banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard! & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase.Beneficial Owners are,however,expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction.Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities,except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other 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. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of 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 unless authorized by a Direct Participant in accordance with DTC's Procedures.Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts 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[nor its nominee],Agent, or Issuer,subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds,distributions, and dividend payments to Cede &Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such paymerits to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. [9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered,through its Participant,to [Tender/Remarketing]Agent,and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Securities to[Tender/Remarketing]Agent's DTC account.] 10.DTC may discontinue providing its services as 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-only transfers through DTC (or a successor securities depository).In that event,Security certificates will be printed and delivered to DTC. 12.The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable,but Issuer takes no responsibility for the accuracy thereof. [5/07] • Appendix D 2006 Audited Financial Statements This page left blank intentionally. Appendix E Municipal Bond Insurance Policy Specimen October 8,2007 Renton City Council Minutes Page 350 BNSF Railway Company is in the process of replacing four railroad bridges in Renton. The Cedar River Bridge near the library has been rolled to the south and is no longer in position over the river. It will be dismantled and transported away this week. Meanwhile, pile driving for the replacement bridge on Hardie Ave. SW is complete and has moved to Rainier Ave. The Shattuck Ave. Bridge replacement should be completed in the near future. 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 10/1/2007. Council concur. 10/1/2007 Finance: Bond Issuance, Finance and Information Services Department requested approval of the Utility Capital Projects issuance of Water and Sewer Revenue Bonds, 2007, in the approximate amount of$21.2 million for various utility capital projects and to refinance outstanding bonds to lower overall costs. The projects include: Hazen 565-Zone Reservoir, Emergency Power to Pump Stations, Summerwind/Stonegate Lift Station Replacement,Renton Village Storm System Improvement, Gypsy Basin/Ripley Lane Storm System Improvement, Central Plateau Interceptor Phase 2, and SW !34th St. Culvert Replacement. Refer to Committee of the Whole. Finance: King County Finance and Information Services Department recommended approval of a Directors Association Purchase purchasing agreement with King County Directors'Association in order to Agreement, Field Turf for purchase the installation and repair of field turf for the Maplewood Golf Course Maplewood Golf Course from Atlas Track and Tennis. Council concur. (See page 352 for resolution.) Fire: Defibrillators &Renton Fire Department requested authorization for the appropriation and expenditure Heart Month Funding of money to purchase six public access defibrillators ($10,000), and to fund the Campaign, Budget Amend 2007 ($9,200) and 2008 ($10,000) Renton Heart Month campaigns. Council concur. (See page 353 for ordinance.) Transportation: Maple Valley Transportation Systems Division recommended approval of an agreement with Hwy(SR-169) HOV/Queue Washington State Department of Transportation who is providing funding in the Jump Phase 2, WSDOT amount of$292,100 towards the Maple Valley Hwy. (SR-169), HOV/Queue Jump Phase 2 project. Council concur. Added Item Legal Division recommended approval of a settlement agreement with MT 7.f. Development, LLC regarding processing a plat application for 18 single-family Legal: Settlement Agreement, building lots, located in the vicinity of Talbot Rd. S. and S. 55th St.,based upon Plat Application, MT applicable King County development regulations in effect prior to annexation Development (Anthone') of the MT property. Council concur. Refer to Committee of the Whole. Added Item Transportation Systems Division recommended approval of Supplemental 7.g. Agreement No. 9 to CAG-04-013, agreement with W&H Pacific,Inc., for,the CAG: 04-013,North Renton. design of the Logan Ave. N. Bike Lane in the amount of$45,000 for the South Infrastructure Improvements, Lake Washington Roadway Improvements Project. Approval was also sought W&H Pacific to allocate the funding from Fund 318, South Lake Washington Infrastructure Project. Council concur. MOVED BY NELSON, SECONDED BY CORMAN, COUNCIL APPROVE THE CONSENT AGENDA AS AMENDED TO CHANGE ITEM 7.f. FROM "Council concur" TO "Refer to Committee of the Whole." CARRIED. COF'RENTON COUNCIL AGENDA �L Al#: -- — 7, ho Submitting Data: For Agenda of: Dept/Div/Board.. Finance &IS Department October 8, 2007 Staff Contact Michael E. Bailey Agenda Status Finance/IS Administrator Consent X Subject: Public Hearing.. Correspondence.. Bond Sale and Ordinance Ordinance X Resolution Old Business Exhibits: New Business Issue Paper Study Sessions Ordinance Information .\Recommended Action: Approvals: Legal Dept Refer to the Committee of the Whole Finance Dept Other Fiscal Impact: Expenditure Required... Transfer/Amendment Amount Budgeted Revenue Generated Total Project Budget City Share Total Project.. SUMMARY OF ACTION: Staff proposes selling bonds to finance the cost of construction of various capital projects within the utility systems as well as to refinance outstanding bonds to lower overall cost. STAFF RECOMMENDATION: Approve the bond sale in an approximate amount of$21.2 million and adopt the ordinance. • H:\FINANCE\ADMINSUP\O1_AgendaBills\2007_ag_Bond Sale Oct 2007.doc �ti`SY O� FINANCE AND INFORMATION SERVICES ♦ 44 ® ♦ DEPARTMENT ME M O R A N D U M NTO DATE: October 2, 2007 TO: Toni Nelson, Committee of the Whole Chair Members of the Committee of the Whole VIA: Kathy Keolker,Mayor FROM: Mike Bailey, Administrator na SUBJECT: Bond Sale to Finance the Cost of Constructing Various Capital Projects Issue Should the City sell bonds to finance the cost of construction of various capital projects within the utility systems as well as to refinance outstanding bonds to lower overall costs? Discussion Transaction Summary Millions 2007 -2009 Project Financing Needs $16.4 Potential Refinancing Opportunities 8.0 Use of Bond Reserve Cash(replace with surety) (3.2) Subtotal $21.2 Potential Taxable Debt (1.2) Net Tax Exempt Debt $20.0 2007-2009 Project Financing Needs The Utility Master Plans and the City's Capital Improvement Plan(CIP) contemplate the following list of projects to maintain the City's utility systems in good working order: — Hazen 565 Zone Reservir - design and construct a 4.2 million gallon reservoir — Emergency Power to Pump Stations - install emergency electrical power generation facilities — Summerwind / Stonegate Lift Station Replacement - construct a new station to ensure sufficient capacity in a rapidly growing area — Renton Village Storm System Improvement - planning, designing and construction of a storm system to increase capacity to prevent surcharges and flooding h:\finance\adminsup\02_issuepapers_memos to council or mayor\2007_memo_bond sale_oct 2 2007.doc Toni Nelson,Council Presic' Member of the Renton City ,!ncil _ October 2,2007 Page 2 of 3 — Gypsy Basin/Ripley Lane Storm System Improvement - replacement of an existing culvert that will connect into a 60-inch storm system on the new Seahawks headquarters/training facility site — Central Plateau Interceptor Phase 2 - construct interceptor to serve eastern portion of service area — SW 34th Street Culvert Replacement - replace existing culvert to improve conveyance activity, reduce upstream flooding and improve fish passage The total cost of these projects and others within the Utility CIP during 2008 and 2009 are approximately$22.5 million. It is proposed to fund$16.5 million of these projects with the proceeds of Utility Revenue Bonds. Potential Refinancing Opportunities There may be an opportunity to refinance approximately$8 million in past bond issues as a savings to the utility rate payers. The final determination will be made on the date of pricing the proposed bonds. If the refinance of these bonds results in a net present value savings of at least 4%,we will recommend that this component be included in the transaction. If not, we believe that future refinance opportunities may present a better option to the utility. Use of Bond Reserve Cash (replace with surety) In an effort to reduce the size of the bonds to be issued, we reviewed the cash position of the utility, especially the cash dedicated as an additional security to bond holders. This "Bond Reserve" cash can be replaced with a surety (an insurance policy)that would provide an equivalent security to bond holders at a lower real cost to the rate payers. We would need to secure satisfactory bids from a qualified insurer for this surety for this approach to work. With the Utility's strong credit rating,this is a viable option. The amount of the Bond Reserve cash account is approximately$3.2 million. Potential Taxable Debt As a result of the financing plan described below, it may be in the Utility's best interest to issue some portion of the transaction as taxable. A financial analysis will be made to confirm that this approach would result in a net savings to the Utility and its rate payers. Financing Plan There is a financial advantage to issuing no more than$10 million in tax-exempt debt in any one calendar year. As the summary illustrates, if we utilize the bond reserve cash for part of the project costs and use a small portion of taxable debt,we can manage the size of the tax-exempt bond issue down to $20 million. We can spread the issue over the end of the year to result in no more than$10 million in tax-exempt debt being issued in either 2007 or 2008. This allows the transaction to become more affordable to banks who could then participate in the purchase of the bonds (known as bank qualified). This is estimated to save the Utility and its rate payers about 30 basis points on the tax-exempt portion of h:\finance\adminsup\02_issuepapers_memos to council or mayor\2007_memo_bond sale_oct 2 2007.doc Toni Nelson,Council Pres;` Member of the Renton Cit;-__,ancil October 2,2007 Page 3 of 3 the transaction. A financial summary of the savings achieved by this approach will be provided. Relevant Documents Bond Ordinance—Describes the legal obligations to bond holders that the City is agreeing to, as part of the transaction. We have included elements for the"new money" portion,the"refunding,"the taxable element and the substitution of a surety in place of the cash bond reserve. We have also included many changes to past covenants (the legal obligations)that are overly restrictive. These include reducing the coverage requirement to 1.25 times the annual debt service,rather than the highest annual debt service; clarifying the revenue description to mean"gross revenues,"revising the reserve requirement; clarifying the flow of funds to include repayment of principal and interest; and changing the parity test for the issue of future bonds. The ordinance authorizes updating the public works trust fund loans. Official Statement(Preliminary Official Statement) -This is the prospectus that describes the transaction and the context for the marketplace. It is an official document for which the City becomes responsible. It is prepared by the underwriter but is the representation of the City. Bond Purchase Agreement—This is the offer by Seattle Northwest Securities to purchase the bonds through a negotiated sale. As the underwriter, Seattle Northwest Securities will purchase all the bonds at a negotiated price and sell them into the marketplace. They assume interest rate risk once we have agreed to the terms of the Bond Purchase Agreement. This agreement includes all the conditions that the City must meet as required by the underwriter. Financial Advisor Recommendation—This is a memo to the City providing guidance and advice regarding the terms of the Bond Purchase Agreement. Our financial policies call for the use of a financial advisor when the City negotiates a bond sale. The financial advisor works directly for the City for the purpose of assuring the City that the terms of the transaction are in its best interest. MEB/dlf cc: Jay Covington,CAO Marty Wine,Assistant CAO Bonnie Walton,City Clerk Gregg Zimmerman,PBPW Administrator h:\finance\adminsup\02_issuepapers_memos to council or mayor\2007_memobond sale_oct 2 2007.doc • CITY OF RENTON,WASHINGTON ORDENANCk:Na. > b � AN ORDINANCE relating to the';waterworks;$utihity"o f`tl e7City of Renton, Washington providing for the, issuance of: $ 'a 'Y.aggregate principal amount of Water and Sewer Revenue Bond,=2007, of.the City for the purpose of financing the costs of carryrig"` out certain: ap1t 'improvements of the waterworks utility; providin"gr"the form, terms rand covenants of the Bonds; [providing for bond insurance;,1fulfilling the reserve requirement; and approving the sale and providing' Elis gthe-delivery of the Bonds to Seattle-Northwest Securities,C,orpprati~on, Seattle,Washington. F 'iK F A� V�, ORDINANCE NO. TABLE OF CONTENTS Section 1. Definitions 2 Section 2. Findings Regarding Parity Provisions and the Project 8 Section 3. Authorization and Description of Bonds 8 Section 4. Registration of Bonds and Book-Entry System 1! , ',' q; , 9 /4: „ 4: ;:.;,, Section 5. Payment of Bonds 11 Section 6. Redemption; Open Market Purchase of Bons . 11 /:,:4 ,;; Section 7. Notice of Redemption13 Section 8. Failure to Redeem Bonds -' ' --:: 4" 13 , ,;, 'Ef:„: ,4 -v .', = Section 9. Form of Bonds 4 14 Section 10. Execution of Bonds - „ • 14 Section 11. Authentication and Delivery of Bonds by FfOnd keg,iti4i.,:.,, 14 .,' ,--. : w Section 12. Lost, Stolen or Destroyed Bonds , , , : 1,0.•4,,,, 14 Section 13. Creation of Fund 14 Section 14. Deposits into Funds :='51i•iik,. ,, , •‘ ".4. :,:,. 15 f :-,."IC, : ::: !:',-:: •„ „ ± Section 15. Flow of Funds 16 Section 16. Pledge of Revenue and Lien PoitfOif ',,,,:,.,k:: ,,,','4i ••- 16 Section 17. Findings Regarding Sufficiency,Of Revenue': ''' i '' -' 17 Section 18. Covenants , 17 ,-;,•,.., 4 Section 19. Tax Covenants '-::: ,, :,` ': ' 19 : _-4 Section 20. Defeasance of the Bonds ,': 1‘.:,:.,, ,,d, ,&': ' 21 ., :' Section 21. Provision for Future Panty Bonds 21 Section 22. Approval of Purch4e:AgreeMent 24 Section 23. Bond Insurance , -':'..:: • 24 Section 24. Dellyet57fRoncl,s; Temporary Bonds 24 Section 25. AOlication:0,13ond Proceeds:': '' ,'''', 25 Section 26.,,Undertakititto‘PrOide continuingDisclosure 25 Section 21:: .Preliminary Official StateMent Deemed Final 27 ,, ,..,. ;; , Sectio*28h; Amendments 28 Sectibn 29 Contract Savings ClattSe::-:,'! 29 Seale-1'1,50.z General Authorization,kaiification of Prior Acts 29 -::•,,, Section 31."Effeettite.pate of Ordinance 29 • ::4;-,14 4::,4` ,'•, Exhibit A Pibi404criP400i, Exhibit B Form ofBonds 4::y -i- PA20584120584_24Q ORDINANCE NO. AN ORDINANCE relating to the waterworks utility of the City of Renton, Washington providing for the issuance of $ aggregate principal amount of Water and Sewer Revenue Bonds, 2007, of the City for the purpose of financing the costs of carrying out certain capital improvements of the waterworks utility; providing the form, terms and covenants of the Bonds; [providing for bond insurance; ]fulfilling the reserve regtarement;?and approving the sale and providing for the delivery of the Bonds `=to'' Seattle-Northwest Securities Corporation, Seattle,Washington. WHEREAS, the City of Renton, Washington:(the "City")_-has heretofore created and operated a waterworks utility of the City, including the:water,,,:sewer, wasfewater;`and`storm drainage systems (defined herein'as the "Waterworks Utility".)rand • • '°- ,p+• WHEREAS, by Ordinance No. ,passed on:, = , the City adopted its Capital Improvement Program; and WHEREAS, the City Council has determined that it is,necessaryj:and in the best interests of the City that certain improvements for .the• Waterworks;FUtility described in the Capital Improvement Program be made' and there, be adopted a,systeii or plan of additions to and betterments and extensions of the Waterworks Utility;.and' WHEREAS, pursuant to 'chapter 35.92 RCW, the City is authorized to issue and sell, without an election, revenue bonds;`of the City to inake''additions, betterments or extensions to the Waterworks Utility; and ° WHEREAS, by Section" CE of:Ordinance No. 4709, the City also provided that it may issue additional water-and sewer revenue:bonds which will constitute a charge and lien upon the revenue of the-'Waterworks Utility of-tlief City on a parity with the City's Water and Sewer Revenue Ref*ding Bonds 1998.b(the "1998 Bonds") and any bonds issued thereafter if such additional:bonds'',are issued-` t compl ance with thefconditions set forth therein; and =='WHEREAS, by OrdinanQe;No.?4976, the City issued its Water and Sewer Revenue Bonds,120,02 (the "2002 Bonds") on,aparity of lien with the 1998 Bonds; and V;. WHEREAS;by Ordinanc :"l o 5019, as amended by Ordinance No. 5020, the City issued its Water ana" ew'e 'P;evenue,<I :efuri1ing Bonds, 2003 (the "2003 Bonds") on a parity of lien with the 1998 Bonds°and also 2'0Q2:.Bonds; and WHEREAS, by`Ordinarice No. 5098, the City issued its Water and Sewer Revenue Bonds, 2004 (the "2004 Bond"s") on a parity of lien with the 1998 Bonds, the 2002 Bonds, and the 2003 Bonds; and WHEREAS, the City Council has determined that it is in the best interests of the City to issue and sell $ of Water and Sewer Revenue Bonds, 2007 on a parity of lien with the outstanding 1998 Bonds, 2002 Bonds, 2003 Bonds and 2004 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, to fulfill the Reserve Requirement and to pay the costs of issuance and sale of the Bonds; and [WHEREAS, 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, Seattle-Northwest Securities Corporation ;Seattle.Washington, has offered to purchase the Bonds under the terms and conditions hereinafter,set,fortli;=. NOW, THEREFORE, THE CITY COUNCIL OF: THE <CIT ' �,OF RENTON, WASHINGTON,DO ORDAIN as follows: . Section 1. Definitions. As used in this ordinance,.they following words shall have the following meanings: Alternate Security" shall mean any bond insurance, collateral,security, letter of credit, guaranty, surety bond or similar credit enhancement device providingor or securing the payment of all or part of the principal of and interestAdii the Parity Bonds,issued by an institution that has been assigned a credit rating at they time of issuance„=ofsuch Parity Bonds secured by such Alternate Security equal to or better Llai ::the highest then*isting rating for any of the Parity Bonds. "Annual Debt Service" for;any=;,year shalt,mean all the interest on plus all principal (except principal of Term Bonds due in any Term Band°Maturityy Year) of Parity Bonds, plus all mandatoryredemption and sinking fiind installments less"=~all bond interest payable from the P g � . � P Y proceeds of any such bonds,which Will;;xxaature or come due in that year. "Beneficial Y`O wner"~shall meal *ty.person that has or shares the power, directly or indirectly to:Make, nyestment'decisions concerning=ownership of any Bonds (including persons holding Bonds.through noirur ees,depositories or other intermediaries). ai., t✓,r J ,�„,. v : "Band Fund" shall mean;Ytlatsspecial fund of the City known as the 2007 Waterworks Revenue Bond.Fund created by this ordinance for the payment of the principal of and interest on the Bonds ["Bond mean.' .] ["Bond Insurance:;Policy"°shall mean the municipal bond insurance policy issued by the Bond Insurer insuring the; aytient when due of the principal of and interest on the Bonds as provided herein.] "Bond Register" means the registration books showing the name, address and tax identification number of each Registered Owner of the Bonds, maintained pursuant to Section 149(a) of the Code. -2- PA20584\20584 24Q "Bond Registrar" means the fiscal agency of the State of Washington, for the purposes of registering and authenticating the Bonds, maintaining the Bond Register, effecting transfer of ownership of the Bonds, and paying the principal of,premium, if any, and interest on the Bonds. "Bonds" shall mean the $ City of Renton, Washington Water and Sewer Revenue Bonds, 2007, authorized to be issued by this ordinance. "City" shall mean the City of Renton, Washington, a dtly organized and legally existing noncharter code city under the laws of the State. "City Finance Director" shall mean the Cily's Finance"'aid``Information Services Administrator or the successor to such officer. "' :_ . W ; "Closing" shall mean the'date of the delivery of tete Bodsby the City the Underwriter and the payment therefor by the Underwriter. : :: "Code" shall mean the Internal Revenue Code of 1:986, as amen ed, and applicable rules and regulations promulgated thereunder. "Coverage Requirement" shall meanin any` calr.ndayear 1.25 Clines the Maximum Annual Debt Service; provided, that once the.1998 Bonds,the:2O02,Bonds, the 2003 Bonds and the 2004 Bonds are no longer Outstanding, the,term Coverage,Req i ement shall mean in any calendar year 1.25 times the Annual Debt Servieifor such OuCli year;; "DTC" means The DepositoryTrust Company,"New,Yor , New York, a limited purpose trust company organized under the 1avets'of the State';af.NOOYork, as depository for the Bonds pursuant to this ordinance. "Fitch" means Fitch, hie:;;:,organ ed and existing under the laws of the State of Delaware, its;;successors'fid:,their assignst;and, if such organization shall be dissolved or liquidated or'shall;no 1onger;perform the functions't f a securities rating agency, "Fitch" shall be deemed to:refer; toany otherationally recognized securities rating agency designated by the City. :"Future.Parity Bonds" shall;mean all water and sewer revenue bonds of the City issued after the date„of the issuance of the;kinds and having a lien and charge on Net Revenue on a parity with tte;,lz"erd charge gi Net'¢Revenue for the payment of the principal of and interest on the Bonds. n. "Government bb_ligations" means those obligations now or hereafter defined as such in chapter 39.53 RCW. "Gross Revenue" 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 -3- P:\20584120584_24Q 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. "Letter of Representations" shall mean the Blanket Issuer Letter of Representations from the City to DTC dated April 15, 1997. "Maintenance and Operation Expense" shall mean all reasonablelexpenses incurred by the City in causing the Waterworks Utility to be operated mantaired;m good repair, working order and condition, including payments made to any other municipal:vcorppration or private entity for water service and for sewage treatment and;"d sposal,'service=or'other utility service in the event the City combines such service in the Waterworks*lity and enters into a contract for such service, and including pro-rata budget charges fortle 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 Uhe,City in lieu of taxes, or capital additions or capital replacements to the Waterworks Utilityti. <'` V=i= .. "Maximum Annual Debt Service" shall mean, at the,time of calculation, the maximum amount of Annual Debt Service that will mature or come due*the current'calendar year or any future calendar year on the outstanding Panty 5 . "Moody's" means Moody's Investors Service,its successors and their assigns, and, if such corporation shall be dissolved or ai q uidated or':shall no,:longer perform the functions of a securities rating agency, "Moody's",shall, e deemed:to refer,toany other nationally recognized securities rating agency designated;by the City. "MSRB" shall mean the''1V. umeipal°Securities Rulemaking Board. "Net Proceeds,":when,used with,reference with the Bonds, means the principal amount of the Bonds` plus accrued,;.interest and original'issue premium, if any, and less original issue discount,if any: ' "5"Net-Revenue" shall meati Gross Revenue less Maintenance and Operation Expense. 1,998:Bonds shall mean the:,outstanding Water and Sewer Revenue Refunding Bonds, 1998. "NRMSIR" shallp' ncean a nationally recognized municipal securities information repository designated`byY;tleSEC.' "Outstanding" means, as of any particular time, all Parity Bonds issued theretofore except (a) Parity Bonds theretofore canceled by the Bond Registrar after purchase by the City in the open market or because of payment at, or redemption prior to, maturity; (b)Parity Bonds for which funds have been deposited into a trust account pursuant to the ordinances authorizing the issuance of the Parity Bonds, but only to the extent that the principal of and interest on such Parity Bonds are payable from such trust account; (c)temporary, mutilated, lost, stolen or destroyed Parity Bonds for which new Parity Bonds have been issued pursuant to the ordinance -4-- P:\20584\20584 24Q ,=v „ authorizing their issuance; and (d) Parity Bonds exchanged for new Parity Bonds pursuant to the ordinances authorizing their issuance. "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 2002 Bonds, the 2003 Bonds, the 2004 Bonds,the Bonds and any Future Parity Bonds. "Parity Bond Fund" shall mean any fund created forYthe payment and redemption of Parity Bonds. ° ° � ^H,y, "Private Person" means any natural personrengaged in a°trade or-.busi-riess';or:any trust, estate,partnership, association, company or corporation,;;,, s: "Private Person Use" means the use of property n;a trade,-pr business by a Private Person if such use is other than as a member of the general public' P ivatesperson Use includes ownership of the property by the Private Person as well`as,other arrangements spat transfer to the Private Person the actual or beneficial use of(tlie property.,(such as a leasee, management or incentive payment contract or other special arrangement)insuch a manner as to set the Private Person apart from the general public. Use of.pro 3erty as`,a n e 0e,r,,of the general public includes attendance by the Private Person at municipal,meetings or`Yiausiness -rental of property to the Private Person on a day-to-day basis if_tie rental paid by such Pr vate Person is the same as the rental paid by any Private Person whobdeAres to rent"the.property. Use of property by nonprofit community groups or community:rereational groups is,n*treated as Private Person Use if such use is incidental to the governmental. uses of property ,:the>;property is made available for such use by all such community groups on-an equal basis and'such community groups are charged only a de minimis fee to cover custodial'expenses. ti "Professional','Utilit <_Consultaitt"'ffi'all mean an independent licensed professional engineer, certified-public accountant or other.independent person or firm selected by the City having a/0001e reputatiOn'omind experience with municipal utilities of comparable size and character to the Waterworks:=U'tility in such areas as are relevant to the purposes for which suchfconsultant is retained. "Projeet.',:'.shall mean the/11ollotiving project to be financed, in whole or in part, with proceeds of tthe;;Bonds: (1) undertaking the additions, betterments or extensions to the Waterworks Utilityxdescribed,inthe Capital Improvement Program, including, but not limited to, the capital improvements`'described in Exhibit A to this ordinance, (2) fulfilling the Reserve Requirement, and(3)payt-ng the'iincidental costs and costs of issuing the Bonds. "Project Fund" shall mean the Waterworks Utility Construction Fund of the City created by Ordinance No. for purpose of paying costs of the Project. "Purchase Agreement" shall mean the Bond Purchase Agreement for the Bonds, dated October 22, 2007,by and between the City and the Underwriter. -5- P:\20584\20584_24Q "Qualified Insurance" means any non-cancelable municipal bond insurance policy or surety bond issued by any insurance company licensed to conduct an insurance business in any state of the United States (or by a service corporation acting on behalf of one or more such insurance companies) which insurance company or companies, as of the time of issuance of such policy or surety bond, are currently rated in one of the two highest Rating Categories by both Moody's and S&P. "Qualified Letter of Credit" means any irrevocable letter of credit issued by a financial institution for the account of the City on behalf of registered-:0i ier of the Bonds, which institution maintains an office, agency or branch in„the;°United~,States=.and as of the time of issuance of such letter of credit, is currently rated S&P. insone,:ofthe o highest Rating Categories by i ' ; " ,' either Moody's or ,?� - "Rate Stabilization Fund” shall mean the fund''\of that name createdor the purposes described in Ordinance No. 4709. �. "Registered Owner" means the person named as the registeredowner of a Bond in the Bond Register. For so long as the Bonds are held-i n iook-entry onlY'''figlYteonly shall be deemed to be the sole Registered Owner. Reserve Fund" shall mean that spec l fund'wty City°known as the Waterworks i ose of securingthe Revenue Bond Reserve Fund created by�z<.4rcinance��l�0. 4709 �£oir"�=purp�'' evenue is pledged. payment of the principal of and interest on all<tionds,ti ncv�iich Net:;,' p g "Reserve Insurance" shall mean=,in lieu of ash an investments, insurance obtained by the City equal to part or all of the•Reserve Requireme it 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. Reserve€Requirement" shall mean(the�Maximum Annual Debt Service; provided, that once the 199.8';-. Bond's "''the°2002 Bonds the:-2003'43onds and the 2004 Bonds are no longer Outstandig :the'iterm G Reser*Prequirement" shall mean with respect to any issue of Parity Bonds,.the:lesser of (a) MaximumtAnnual Debt Service on all Outstanding Parity Bonds, and (b) 1//25.%'.:of average Annual Debt*Nice on all Outstanding Parity Bonds; provided, that the amount required,to be deposited hereunder with respect to any Future Parity Bonds in order to meet th&lReserve'Requirement shall not exceed 10% of the net proceeds of such Future Parity Bonds underetle=Cod , "Rule" shall %feat':SEC'Rule 15c2-12. "S&P" means Standard & Poor's, a Division of The McGraw Hill Companies, its successors and their assigns,and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. "SEC" shall mean the United States Securities and Exchange Commission. "SID" shall mean a state information depository for the State(if one is created). -6- P:120584120584_24Q "State" shall mean the State of Washington. "Term Bonds" shall mean any 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. `F` E<-' "2004 Bonds" r .. ,; ..;.::..;; shall mean the outstanding Wat0:iiid Sewer Reveirue=B'onds, 2009., "2003 Bonds" shall mean the outstanding Water=,ard�>Sewer Revenue Refuridirig=Bonds, 2003. ;< .a "2002 Bonds" shall mean the outstanding Water and Sewer Revenue Bonds, 2002. "Underwriter" shall mean Seattle-Northwest: q Securities ''Corporation, Seattle, Washington. �. f:Yn "Waterworks Utility" shall meansh =combnt?F':dr:.tewater, .;sw.er , wastewater and storm drainage systems of the City as the same may,be added to, improv'e" and extended for as long as any of the Parity Bonds are outstanding ., Y ` "Waterworks Utility Fundi:°shallmean thatapecial fun•" of the City into which all Gross Revenue (except for earnings in any special fund for the'tedemption of revenue obligations of the Waterworks Utility) shall be= eposited. Rules of Interpretation. In this ord i arise unless the context otherwise requires: 74, (a) 3. eterins‹`:`1 ere'1 y,,.hereof; <;"her to," "herein, "hereunder" and any similar terms, as'usedin this ordinances,refers to this ordinance as a whole and not to any particular article ;sectan, subdivision or clause:lereof, and the term "hereafter" shall mean after, and the term .hOretofore shall mean before,the;. ate of this ordinance; Words of the masculinegender shall mean and include correlative words of the feminine and neuter'genders an -words importing the singular number shall mean and include the plural numberat0'`vice°versa;''`"/. (c) Words importing ersons shall include firms, associations,partnerships (including limited partnerships), trusts,'corporations and other legal entities,including public bodies, as well as natural persons; (d) Any headings preceding the text of the several sections of this ordinance, and any table of contents or marginal notes appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this ordinance, nor shall they affect its meaning, construction or effect; -7- P:\20584\20584_24Q (e) All references herein to "articles," "sections" and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof; and (f) Words importing the singular number include the plural number and vice versa. Section 2. Findings Regarding Parity Provisions anckthe Project. The City Council hereby finds that there is no deficiency in any Parity Bond Funik�that p ovisions hereinafter meet the conditions for the issuance of Future Parity Bonds as set'fortln==.S;edion 23 of Ordinance No. 4709, Section 22 of Ordinance No. 4976, Section 20;:of Ordi440e;'14o. 5019, as amended, and Section 22 of Ordinance No. 5098 and that there%wadi be on:file;prior too,the issuance and delivery of the Bonds a certificate of the City Finapiee;Directpi flat satis"'f"tes~;tl,,,con4ihians for such certificate as set forth in Ordinance Nos. 4709, 4976,"5019'(and 5098. ; c;;'::: ,_.; l The City Council further finds that the additi"oris;: lietterments or extensions to the Waterworks Utility, described in Exhibit A attached hereto'(ihe-"Project"), are consistent with ='3 S' the system or plan of additions to and betterments and extensions� i'of:,tti.p:Materworks Utility as described in the Capital Improvement Program. Therefare the Bond4hal1be issued on a parity of lien with the Parity Bonds. Section 3. Authorization and Description'of Bonds. Forthe'purpose of obtaining part of the funds necessary to carry out the ProjecWthe City,shall**Aid Bonds in the aggregate principal amount of$ . The,Bonds shall;=iedesignate., "'City of Renton, Washington Water and Sewer Revenue Bonds, 1007;shall be`dated the`da e of their initial issuance and delivery; shall be in the denomination o$5,000 or any:integral;multiple thereof within a single maturity; shall be numbered separately,in the manner�and: . I The Bonds shall be negotiable instruments to the extent provided by RCW 62A.8-105. Section 4. Registration of Bonds and Book-Entry System. (a) Registrar/Bond Register. The. City hereby specifies and adopts the system of registration approved by the Wasliington State Finance Committee from time to time through the appointment of state fiscal agencies. The City shall cause a Bond Register to be maintained by the Bond Registrar. So long as any Bonds remain outstanding,ak „Bond Registrar shall make all necessary provisions to permit the exchange or registration or:transfer:.of Bonds at its principal corporate trust office. The Bond Registrar may be removed atany.'time',at4he option of the City Finance Director upon prior notic'eto the Bond Registrar.=and a st[ccessorRegistrar appointed by the City Finance Director. No resignation or removal•_of the;Bond 'Registrar shall be:_effective until a successor shall have been appointed and until tl a<successar`Registrar shall have;accepted the duties of the Bond Registrar hereunder. "° - p' (b) Registered Ownership. The City and the*nd Registrar, each in its discretion, may deem and treat the Registered Owner of eack Bond as the'*lute owner thereof for all purposes (except as provided in Section 23 of thisv'or .i*.c,e), and neither=?the City nor the Bond Registrar shall be affected by any notice to the-;contrary Payment of iuy3such Bond shall be made only as described in Section 5 hereof;tut succi:Bon_ d' may be transferred as herein provided. All such payments made as described in Sections.shall.=be valid and shall satisfy and discharge the liability of the City upon such;B nd t4e extertrczof the amount or amounts so paid. (c) DTC Acceptance/Letters of Representations:;. Tie Bonds initially shall be held in fully immobilized form by DT914efini as depository: To%.induce DTC to accept the Bonds as eligible for deposit at DTC, the Cityl asf?executed and delivered to DTC a Blanket Issuer Letter of Representations. Neither the City;nor the Bond Registrar will have any responsibility or obligation to DTC arta pant sor the`persons for,,whom they act as nominees (or any successor depository) with`o:0,-ect`_to the°;=Bonds inures°ect.1of,the accuracyof anyrecords maintained by DTC (or any succea or DTC (or any y.,°, �depositor ), or any`DT,(r participant, the payment by successor depository) or any`�DTCpa?ticipant ''Of any amount in respect of the principal of or interest'on,Bonds any notice which=;is;H ermitted or required.to be given to Registered Owners under this4inance (except such\fotices as shall be required to be given by the City to the Bond Registrar or to.'DTC (or any successor 3depository)), or any consent given or other action taken by DTC (or aiy:successor.depository);-as_the Registered Owner. For so long as any Bonds are held in fully-immobilized=.fo ,hereuider-,;DTC or its successor depository shall be deemed to be the Registered Ownefi''fk4it'iRrpshereunder,Owner and all references herein to the Registered Owners shall mean DTC (or any successor depository) or its nominee and shall not mean the owners of any beneficial interest in such Bonds. If any Bond shall be duly presented for payment and funds have not been duly provided by the City on such applicable date, then interest shall continue to accrue thereafter on the unpaid principal thereof at the rate stated;on such Bond until it is paid. (d) Use of Depository. -7- P:\20584\20584 240 (i) The Bonds shall be registered initially in the name of"Cede & Co.", as nominee of DTC, with one Bond maturing on each of the maturity dates for the Bonds in a denomination corresponding to the total principal therein designated to mature on such date. Registered ownership of such immobilized Bonds, or any portions thereof, may not thereafter be transferred except (A) to any successor of DTC or its nominee, provided that any such successor shall be qualified under any applicable laws to provide the service proposed to be provided by it; (B)to any substitute depository appointed by the City1,,,Finance Director pursuant to subsection(ii) below or such substitute depository's successor:or(C)ty any person as provided in subsection(iv)below. `4 ' (ii) Upon the resignation of DTC oz 'its;succes or, or an substitute depository or its successor) from its functions as depository or a determination y the;City tinanceeDirector to discontinue the system of book entry transfers through;DTC;or;its successor:(oranysubstitute depository or its successor), the City Finance Director may;•hereafter appoint a :substitute depository. Any such substitute depository shall be<quahfia4irpn der any applicable laws to provide the services proposed to be provided by it. : (iii) In the case of any transferfpursuantteto clause(A) or(B) of subsection(i) above, the Bond Registrar shall, upon receipt,receipt/dt''all,'„9,#*iiiling Bonds,"to :ether with a written request of the City Finance Director, issue a mgle ew ond:;for each maturity then outstanding, registered in the name of such successor ors,,,uch*substitute` positorY;,or their nominees, as the case may be, all as specified in such written'request o f the CityFiniance Director. (iv) In the event that.:(A) DTC of*Successor substitute depository or its successor) resigns from its functiousas depository, *1,14 sitbS/titute depository can be obtained, or (B) the City Finance Director.de.ermines that it is in the besinterest of the beneficial owners of the Bonds that such owners b able to obtain such bonds in the form of Bond certificates, the ownership of such Bonds may then be`transferred to any person or entity as herein provided, and shall no longer°blm, eheh ld i fully-immoliilized:for,.-m. The City Finance Director shall deliver a written request,to'the Bond: Legistrar, together With'a supply of definitive Bonds, to issue Bonds as herein provided in any authorized denomination Upon receipt by the Bond Registrar of all then outstanding Bonds togetheir;with,a written request of the City Finance Director to the Bond Regis,rar;.•,new Bonds shall be�`issued=�in the appropriate denominations and registered in the namesµ'of Bitch-persons as are requested`m such written request. (e) :.;', Registration of Tritisfer-'of Ownership or Exchange; Change in Denominations. The Bond Registrar. ts;-authori 'ed;°an behalf of the City, to authenticate and deliver Bonds transferred or exchanged'in.Uecordance with the provisions of the Bonds and this ordinance, to serve as the City's paying agent fo'r the Bonds and to carry out all of the Bond Registrar's powers and duties under this oridii'*ce and City Ordinance No. 3755 establishing a system of registration for the City's bonds and obligations. The transfer of any Bond may be registered and Bonds may be exchanged, but no transfer of any such Bond shall be valid unless it is surrendered to the Bond Registrar with the assignment form appearing on such Bond duly executed by the Registered Owner or such Registered Owner's duly authorized agent in a manner satisfactory to the Bond Registrar. Upon such surrender, the Bond Registrar shall cancel the surrendered Bond and shall authenticate and deliver,without charge to the Registered Owner -10- P:120584120584 24Q or transferee therefor, a new Bond (or Bonds at the option of the new Registered Owner) of the same date, maturity and interest rate and for the same aggregate principal amount in any authorized denomination, naming as Registered Owner the person or persons listed as the assignee on the assignment form appearing on the surrendered Bond, in exchange for such surrendered and cancelled Bondi Any Bond may be surrendered to the Bond Registrar and exchanged, without charge, for an equal aggregate principal amount of Bonds of the same date, maturity and interest rate, in any authorized denomination. The Bond Registrar shall not be obligated to register the transferi or to exchange any Bondduring the=15 days preceding any interest payment or principal payment date any such Bond is to be.retleemed. (f) Registrar's Ownership of Bonds. The BondrRegist rar:May:become the Registered Owner of any Bond with the same rights it would have<if.it were 4not theBond Registrar,,'.and to the extent permitted by law, may act as depository fora id permit of its of ficers of directors to act as member of, or in any other capacity with respect to,°aaniy, committee formed to protect the right of the Registered Owner's of Bonds. (g) Registration Covenant. The City covenants thaty until> all YBonds have been surrendered and canceled, it will maintain a system for recording the:;ownership of each Bond that complies with the provisions of Section 149<ofthe Code Section 5. Payment of Bonds. Both offand"interest on the Bonds shall be payable in lawful money of the United States'of-\America. ForYsoti long as all Bonds are in fully immobilized form, payments of principal and,interest thereon `shall be made as provided in accordance with the operational i.arrangements..of" D.T,C, referred to in the Letter of Representations. In the event that,,the,Bonds are no longer zn fully immobilized form, interest on the Bonds shall be paid by check-`or draft mailed to the Registered Owners at the addresses for such Registered Owners appearing;'>,on;the Bond Register on the fifteenth day of the month preceding the interest payment date,or`upo „the written request of a Registered Owner of more than $100,000 of Bonds by the°B0i Registrar at least 10 days prior to the applicable payment date).sl c l ayinent shallhe made l y"tlie„Bond Registrar by wire transfer to the account within the continental United States;designatectl y the Registered Owner. Principal of the Bonds shall be;payable upon presentation�andz sun-ender of such Bonds by the Registered Owners at the principal o f fice of the Bond Registrar.` 'I*1300748\ be payable":solely out of the Bond Fund and the Reserve Fund and shall be a valid`"°caii*=of;,the Owners thereofonly as against the Bond Fund, Reserve Fund and the amount of Net-Reveiue;;pledge,d;to'those funds and shall not be general obligations of the City. Section 6. Redemnptiox ,Open Market Purchase of Bonds. The Bonds maturing on \;;z are term bonds (the "Term Bonds") and, if not previously purchased A� by the City in the open market or optionally redeemed as set forth below, are subject to mandatory sinking fund redemption prior to maturity, in part and by lot (in such manner as the Bond Registrar shall determine),at a price of par plus accrued interest to the date of redemption on December 1 in the following years and in the following amounts: Term Bonds Due December 1, -11- P:\20584\20584_24Q • Mandatory Sinking Fund Redemption Dates (December 1) Redemption Amount fia :7 f::.i; (5 J3. .. ".."y %i" Viz..:. ;,:•. *Scheduled maturity max. - The Bonds maturing on or after Deceinher 1` ,,2018 s1-4114e subject to optional redemption prior to maturity on and after De4ember 1,a 2017, in whole or:in part on any date (maturities to be selected by the City and by5 lot',wrtl iii a°maturity in such manner as the Bond Registrar shall determine), at par plus accru `d°"nt rest to't e t ate ofr demption. .. +e. ."zY -� 1. ':9 If •y.to # -:'}x: If the City shall optionally redeem tl 'prm ] o°rids or purchase Term Bonds in the open market, the par amount of the Term Bond iso redeeiriedp puarcbiased (irrespective of their actual redemption or purchase prices) shall be2credited against-zone'or more scheduled mandatory redemption amounts for such Tp n Boi ds (as allocated by;the City) beginning not earlier than 60 days after the date of the optional;relemption or purchase, and the City shall promptly notify the Bond Registrar in writingof tlie� aiuer in which the credit for the Term Bonds so redeemed or purchased has;beenral1ocated. ';`�� ;i 't•'..,mHi:� ;.� ', VHF.•.:.}, ?A:':vim° An, 'Bong in th cipa1'.'amount oftge,4;er than $5,000 may be partially redeemed in any integralm i1tiple of$5,04',:For as long as the Bonds are held in book-entry only form, the selectio i ofparticular Bonds within:,a,maturity to be redeemed shall be made in accordance with the e'l erational arrangements thew iii 'gffect at DTC. If the Bonds are no longer held in uncertificatedform, the selection ofsuchlBonds to be redeemed and the surrender and reissuance thereof, as applicable, shall be made,as,provided in the following provisions of this paragraph. If the City redeems:at anxy o e time fewef than all of the Bonds having the same maturity date, the xY particular Bonds`or portion s4of:Bonds of such maturity to be redeemed shall be selected by lot (or in such manner det m ned by:the Bond Registrar) in increments of$5,000. In the case of a Bond of a denomination .greater than $5,000, the City and Registrar shall treat each Bond as representing such number of'separate Bonds each of the denomination of$5,000 as is obtained by dividing the actual principal amount of such Bond by $5,000. 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 therefore, in any denomination authorized by this ordinance and selected by the Owner. -12- P:120584120584_24Q 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 under this Section shall be canceled. Section 7. Notice of Redemption. For so long as the Bonds are held in uncertificated form, notice of redemption shall be given in accordance with,,`the operational arrangements of DTC as then in effect, and neither the City nor the Bond Registrar will provide any notice of redemption to any Beneficial Ow finers. Thereafter, notice of redemption;shall be given by or on behalf of the City not less than 30 nor more than 60 dais;prioi#:t1 e dat`eXfixed for redemption by first-class mail, postage prepaid, to the Owner of,andto Abey/Bonredeemed at the address appearing on the Bond Register on the day notice:-s s,mailed and tli;requ rorne ts_�of this sentence shall be deemed to have been fulfilled when i oticewhas beenwmai�led°`a lo:,provided, whether or not it is actually received by the Owner;=of a y i:Bond. Allam'°official•„notices of � '. � •ro ,;-,;�+.',fid redemption shall be dated and shall state: (A) the redehiption 'date, (B) the redemption price, (C) if fewer than all outstanding Bonds are to be redeemed,4t he:identification by maturity(and, in the case of partial redemption, the respective principal amounts)'of-tiie Bands to be redeemed, (D)that on the redemption date pie redemption price*ill;;become due,andcpayable upon each such Bond or portion thereof called for redemption;andthatdnterest theredn`shall cease to accrue from and after said date, and (E) the place where`such Bonds.are..to be surrendered for payment of the redemption price, which place of payment sliall 'be:,tlie= cipal office of the Bond Registrar. '' ”'''' s • If such notice to the Owners,rshall.have been.given and;tie City shall have set aside, on the date fixed for redemption, I sufficient money',for:the'<payment of all Bonds called for redemption, the Bonds so called Ia1l cease to accrue'il teres ;after such redemption date, and all such Bonds shall be deemed no`t4to=be:outstanding under this ordinance for any purposes, except that the Owners thereof shall be entitled receive payment of the redemption price and accrued interest to the rede i tion date from the:money set aside for such purpose. In addition furthOr=iiotice'shall be given by the City as set out below, but no defect in said further:-notice nor any fai ure to;_give all or any portion of such further notice shall in any manner;.defeat the effectivenes `of a call for redemption if notice thereof is given as above prescribed: Each further notice, of zeuemption given hereunder shall contain the information required abovelmfor an official notice;offredemption plus (A)the CUSIP numbers of all Bonds being redeemed;'(B)the date of issue':of the Bonds as originally issued; (C)the rate of interest borne by each= orii;'b_eing redeemer, (D)the maturity date of each Bond being redeemed; and (E) any other descriptive..informatioii needed to identify accurately the Bonds being redeemed. Each further notice of edemptioii:may be sent at least 35 days before the redemption date to the Bond Insurer, if any, to c:pay;entitled to receive notice pursuant to Section 26, and to such persons (including securities)' repositories who customarily at the time receive notices of redemption in accordance with rules promulgated by the SEC) and with such additional information as the City shall deem appropriate, but such mailings shall not be a condition precedent to the redemption of such Bonds. 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 -13- P:\20584\20584_24Q 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 in substantially the form set forth in Exhibit B attached hereto. 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`C ty Cl rk''a d1.shall have the seal of the City impressed or a facsimile thereof imprinted.thereon.,' In the event any officer who shall have signeduor 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 a lthentication, delivery and issuance, shall be as binding upon the City as though said person,hadaot ceased to be such officer. Any Bond may be signed and attested n,behalof the Cityyby such,:persons who, at the actual date of execution of such Bond shall be the.bproper?officer of the=:C,ity, although at the original date of such Bond such persons were not:such-officers of;the City. - Section 11. Authentication and Delivery of-B:onds::by :B:ond Registrar. The Bond Registrar is authorized and directed, on behalf`of t e.City, to authenticate and deliver Bonds initially issued or transferred or exchanged in accordance with the provisions of such Bonds and this ordinance. r Only such Bonds as shall=:liear 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 oftlis:ordinance. Such Certificate of Authentication shall be conclusivefevidence,that:;the.Bonds"s `3 authenticated have been duly executed, authenticated and delivered hereunder:'and are entitled to tliO*Otits of this ordinance. 'he;;;Bond Registrar AO,;all=';be\responsible for its representations contained in the Certificate.3of Authentication on t e':Bonds. � ,., Section 12 Lost, Stolen orDestiroyed Bonds. In case'any Bonds shall be lost, stolen or destroyed,"the'Bond Registrar may:authenticate and deliver a new Bond or Bonds of like amount, date and tenor"'"t ,t e;offer thereof;upon the owner's paying the expenses and charges of the Bond Registrar and>the=City i connection therewith and upon his filing with the Bond Registrar and the City evidence`satisfactory to both that such Bond or Bonds were actually lost, stolen or destroyed and of his ownership thereof, and upon furnishing the City and the Registrar with indemnity satisfactory to both Section 13. Creation of Fund. There is hereby created in the City Treasury the 2007 Waterworks Revenue Bond Fund (the "Bond Fund"), which shall be a subaccount of the Waterworks Utility Fund. -14- P:\20584\20584_24Q Section 14. Deposits into Funds. The Bond Fund shall be maintained for the purpose of paying the principal of and interest on the Bonds. As long as any Bond remains outstanding, the City hereby irrevocably obligates and binds itself to set aside and pay from the Waterworks Utility Fund into the Bond Fund those amounts necessary, together with such other hinds as are on hand and available in the Bond Fund, to pay the interest or principal and interest next coming due on outstanding Bonds. Such payments from the Waterworks Utility Fund to the Bond Fund shall be made in a fixed amount without regard to any fixed proportion following the closing and delivery of the Bonds on or before each date on which an installment of interest or principal and interest falls due on the Bonds equal to the installment of interest orprincipal and interest. There has heretofore been created by the City,,i',Oecial,, Ofthe City known as the Waterworks Revenue Bond Reserve Fund (the "Reye v4e Fund. )tfoi puipose=Yof securing the payment of the principal of and interest on all bonds*;'which NetRevenue is. led "ed" The City hereby irrevocably covenants and agrees that on or prior•to;thedate of issuanceo'f.the:Bonds, the amount on deposit in the Reserve Fund will be at least equa1=to,thEReserve Requirement for the Parity Bonds. The City shall satisfy the Reserve Requirement=;by depositing proceeds of the Bonds or other funds available therefor into the Reserve Fund or b'yOl taimrig,Reserve Insurance. Except for withdrawals therefrom ashauthorized.,herein, the Reserve Fund shall be maintained at the Reserve Requirement at all'turierso•Jlong'as< y,Parity Bonds are Outstanding. When the total amount in the Bond Fund shall;:equal th total amour of principal and interest for all outstanding Bonds, no further payment 064: e made:into the Bo d Fund. Notwithstanding the first sentence of this paragraph, thejkeserve Requirement riiay b'e decreased for any issue of Parity Bonds when and to the extentNthe City`,has:edee %ed or otherwise defeased any Outstanding Parity Bonds. , t If there shall be a defic eney,it the Bond Fund to meet maturing installments of either principal or interest, as the case r `ybe,°:on;'the Bonds, that deficiency shall be made up from the Reserve Fund 1:7.,r tl e=withdrawal l of cash;therefrom for that purpose and after all cash has been depleted, then b i 1raws ori,the'Altern t'Secur ty"or Reserve Insurance for that purpose. Any deficiency"created'4h''the,e'serve-;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 n°-theReserve Fund in excess of the Reserve Requirement may be withdraw nkand deposited in any Parity Bond Fund and spent for the purpose of retiring Parity Bonds•°or rnay:3bedeposited in any)other"jfund and spent for any other lawful Waterworks Utility purpose. T .` . The City may:prO i'dej orothe'purchase, redemption or defeasance of Panty Bonds by the use of money on deposit-'in the.BB��'nd 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. ter” 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. -15- P:\20584\20584_240 Notwithstanding the provisions for the deposit or maintenance of earnings in the Bond Fund or the Reserve Fund, the City also may transfer out of the Bond Fund or Reserve Fund any money required in order to prevent any Parity Bonds from becoming "arbitrage bonds"under the Code. 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. xs Section 15. Flow of Funds. Gross Revenue on='`deposit= theWaterworks Utility Fund (other than in any bond redemption or federal rebate :account),,shah.be used in the following order of priority: "> (a) pay p .. ToMaintenance and Operation Ex ease; (b) To pay the interest on the Parity Bonds, including::reimbursements to the issuer of a Qualified Letter of Credit or Qualified Insurance if the'Qualified:;;Letter>>of Credit or Qualified Insurance secures the payment of interest on Parity:Bonds and the ordinance^authorizing such Parity Bonds provides for such reimbursement;, '`:; (c) To pay the principal of the Parity;Bonds, including,yeimbursements to the issuer of a Qualified Letter of Credit or Qualified,, surarice'if the',Qualiffied Letter of Credit or Qualified Insurance secures thepayment, o fnterestr on Pari Bonds and the ordinance � �3'�� authorizing such Parity Bonds providesMfor such reimbursement;..:, (d) To make all paymentrequired to'-* ;made into any sinking fund or bond redemption fund hereafter created,'for,,'�the payment bf,=Futurre Parity Bonds which are Term Bonds; , g,4�* (e) sTo=maket:all,„payments •requi-red :o be made into the Reserve Fund, including reimbursements' to4e issi er::off,a Qualified`:-Let r of Credit or Qualified Insurance if the Qualified Letter;of Credit o;;Qualified Insurance`s”cures the payment of interest on Parity Bonds and the,orditiance authorizing such Parity.Bonds provides for such reimbursement; qo make all payments required. to be made into any revenue bond redemption fund orwwarrant-redemption fund 0-debt service account or reserve account created to pay and secure the`'pay nent:of the principalµ<of and interest on any revenue bonds or revenue warrants of the City having*li:en,upon Gr ssPoRevenue junior and inferior to the lien thereon for the payment of the principal of and intereston e Parity Bonds; and • ..-,y�W,f (g) To retire b`yaoptio`nal 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, to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. Section 16. Pledge of Revenue and Lien Position. 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. -16- P:120584120584 24Q Section 17. 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 to permit the setting aside in,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.oftle;=Bonds at maturity. The City Council further declares that,in creating the Bond Fu id,and'ii nx ng'the amounts to be paid into the Bond Fund and the Reserve Fund, as aforesaid; it has-exercised 4due regard for the Maintenance and Operation Expense (and costs of m intei ance `an ' operation, as=used in RCW 35.92.100) and the debt service requirements;of thecurrxetitly outstanding'}Panty, Bonds, and the City has not bound and obligated itself to set aside and:pay into the B'orid'Fund and the Reserve Fund, a greater amount or proportion of the revethSo f thattntility than in the judgment of the City Council will be available over and above 1Vlaintenance and;Operation Expense (and such costs of maintenance andoperation of the Waterworks Utility`as that term is used in RCW 35.92.100) and debt service requirementOthe=currently outstanc i ig Parity Bonds and that no portion of the Gross Revenue hast beeki previously pledged ;for any unrefunded indebtedness other than the payment of the currently outstanding Parity Bonds. Section 18. Covenants. The City cbyenants aril;agrees.withahe Owner of each Bond at any time outstanding as follows: (a) Rate Covenant. It will:;establish, mamtain,:and'collect rates and charges for all services and facilities provided;•;-*by, the Waterworks Utility which will be fair and nondiscriminatory, and will adjzst`.:those:rates and charges from time to time so that: (1) Goss Revenue will;at;all,times be sufficient to (A)pay all Maintenance and Operation`Expense:.ok:$-'current`basis,f.'(B}pay when due all amounts that the City is obligated tci`pay into`4he Reserv'ex.Fund ant.=;anyr'Parity Bond Funds and (C)pay all taxes, assessments, `,other governmenta',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/ ay ow or hereafter become.oblgagqted to pay from Gross Revenue by law or contract; and Net Revenue1in:each calendar year will be at least equal to the Coverage Requirement r- ; (b) Maiteriarice:and,,Repair. It will at all times maintain and keep the Waterworks Utility in good repair, working and condition and also will at all times operate such Utility and the business in connectioi'therewith in an efficient manner and at a reasonable cost. (c) Disposal of Waterworks Utility. It will not sell, lease, mortgage or in any manner encumber 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. -17-` PA20584120584_24Q 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 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.1444 that Gross Revenue from the portion of the Waterworks Utility sold or disposed of ibr,thezk0. ediniyear bears to the total Gross Revenue for that period; ' e- (2) An amount which will be in theo same;proportion to the;;het:ainount;of any Parity Bonds then outstanding (as defined above) that the,Net,,,I*venue fromtlthe:=portion of the �,R Waterworks Utility sold or disposed of for the preceding:year;beakto the total Net=Revenue for that period; or :�t (3) An amount which will be inythe-same proportio. to,the,3net amount of any Parity Bonds then outstanding (as defined above)that,the:, ,eprreciated cost value of the facilities sold or disposed of bears to the depreciated:`,cost` values;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,<propertiWor facilities of the Waterworks Utility or any real or personal property comprisingapart'of the;same which shall have become unserviceable, inadequate, obsolete;or-i unfit to be used;:=in."the operation of the Waterworks Utility, or no longer necessar material�to or useful to"tleo eration of the Waterworks Utility, YYi":. � p Y without making any deposit into the.Bond:Fund and (2) the City may transfer the Waterworks Utility to another-,municipal corporation soy long as Net Revenue of the portion of the Waterworks Utility':so°transferred is usedfor",payment of debt service on the Parity Bonds prior to any other purpose =rin o event'shall such piouee s be treated as Gross Revenue for purposes of this ordinance /:,(0)":1,1°°; Books and Record's:":=It;will keep proper books, records and accounts with respect . e.4.i p . Utility proper to theKoperahons, income and ex eridi "; es of the Waterworks in accordance with ro er accountingfp . u_res and any applicable rules and regulations prescribed by the State. It will prepare annual;firiancial\and operating'statements within 270 days of the close of each fiscal year showing in reasonabledetail the:fiancial condition of the Waterworks Utility as of the close of the previous year, mn I the,Income=and expenses for such year, including the amounts paid into the Bond Fund and Reser v'',ewFund and into any and all special funds or accounts created pursuant to this ordinance, the status'aall 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) No Free Service. Except to aid the poor or infirm, to provide for resource conservation or to provide for the proper handling of hazardous materials, it will not furnish or -18- P:\20584\20584_24Q 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) Insurance. 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 payabl�to or on behalf of the City and aiyadditional insureds on such of the buildings, equipment, works, plants, facilities and iroperties`of the Waterworks Utility, and against such claims for damlages, as are ordinarily;,carried by municipal;,or privately owned utilities engaged in the operation of like syst*°°,or will ,,;and err iaintain 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 cifthe Parity Bonds agaiist'loss. (g) Maintenance and jOperation Expense. Ita will"pay all';Maintenance and Operation Expense and the debt service requirements for the outstanding Parity and otherwise meet the obligations of the'City as herein set forth. Section 19. Tax Covenants. The City covenai is that it Will not take-Or permit to be taken on its behalf any action that would adversely affect theX0OtiOrlifrom federal income taxation of the interest on the Bonds and twill take or req ire to,11 talt4iinch;acts as may reasonably be within its ability and as may from time Fto time3be required under=applicable law to continue the exemption from federal income taxation of the interest on the Bonds. (a) Arbitrage.Covenant:- Without limiting,;thekgenerality of the foregoing, the City covenants that it will not take any'action`or fail to take any action with respect to the proceeds of sale of the Bonds or any othequinds: of l*e:; City which may be deemed to be proceeds of the Bonds pursuant fto Sect on°4E48 of the\Code:ax d-the regulations promulgated thereunder which, if such use hadt`'beet"'reason=ably°lexpected on::thec date of delivery of the Bonds to the initial purchasers'Iliereq?;,-would have:caused theas me Bonds "arbitrage bonds" within the meaning of such tern'as nse in Section l.4,8:o f the,Code. - /71‘:.elity represents that it`has not been notified of any listing or proposed listing by the Y Internal Revenue,,,Service to the ijeffect that it is an issuer whose arbitrage certifications may not be relied`'upon's?';The;City will comply ,>ith the requirements of Section 148 of the Code and the applicable reitifit604hereundethrouihout the term of the Bonds. (b) Pril7dtePqr4b*V'Se Limitation for Bonds. The City covenants that for as long as the Bonds are outstanding`ii wiltnot permit: (1) More than 10% of the Net Proceeds of the Bonds to be used for any Private Person Use; and (2) More than 10% of the principal or interest payments on the Bonds in a bond year to be directly or indirectly: (A) secured by any interest in property used or to be used for any Private Person Use or secured by payments in respect of property used or to be used for -19- P:120584120584 24Q any Private Person Use, or (B) derived from payments (whether or not made to the City) in respect of property, or borrowed money,used or to be used for any Private Person Use. The City further covenants that, if: (3) More than five percent of the Net Proceeds of the Bonds are to be used for any Private Person Use; and x, (4) More than five percent of the principal or-interest-payments on the Bonds in a bond year are (under the terms of this ordinance pr any underlyir*,arrangement) directly or indirectly: r, ' : . • (A) secured by any interest;in:property used or to-,be-ised;:for any Private Person Use or secured by payments in respect<o -property used or to:be ised''for any Private Person Use, or r r `j :,� (B) derived from payments (whether''dr-not: made to the City) in respect of property, or borrowed money, used or to,;be-used;,for any Pri`vate-.Person Use, .�::. _.. . .;,. then, (i) any Private Person Use of the pro ects,,describbed'inrsubsection(3) hereof or Private Person Use payments described in subsection hereof.that °is in.;excess of the five percent limitations described in such subsections (3):oA4) will be for a:Private Person Use that is related fir. ., k="�:c`•: �'. �`'^ � . to the state or local governmental use;'of th Proje0;0and (ii):any Private Person Use will not exceed the amount of Net Proceeds=of:the Bonds ised::forwthe state or local governmental use portion of the project to which the,Prvate Person serof such,portion of the Project relates. The City further covenants that it will comply with any lim tions on the use of the projects by other than state and local governmental usersthat are necessary, in the opinion of its bond counsel, to preserve the tax exemption of the:nterest;on the Bonds. The covenants of this Section are specified solely0 assure the;,continued;'exen ption from regular income taxation of the interest on the .`%i'.'�.':..gym.. ;:,�. ;�:=Ty��;,' ".� `,`Y,,•�;c-- e: Modi acation o fTax;Covenants. The covenants of this Section are specified solely to assurelthe)continued exempti ;frori regular income taxation of the interest on the Bonds. To that-end;the;provisions of this Sectio. :=may be modified or eliminated without any requirement for formal=pa amendment thereof upon==:receipt of an opinion of the City's bond counsel that such modification oreli ination will not affect the tax exemption of interest on any Bonds., [(d) No :: esignatikkunde'r Section 265(b). The Bonds are not "qualified tax exempt obligations"for investment;by f i.ancial institutions under Section 265(b) of the Code.] [(d) Qualified Tax"Exempt Obligation. The City hereby designates the Bonds as "qualified tax-exempt obligations" under Section 265(b)(3) of the Code for banks, thrift institutions and other financial institutions. The City does not anticipate that it will issue more than$10,000,000 in qualified tax-exempt obligations during 2007.] -20- P:\20584120584_24Q Section 20. 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 d'efease 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 Governmental Obligations maturing at a time or times and bearing interest in amounts (together with money, if necesary) sufficient to redeem and retire, refund or decrease the defeased Bonds in accordance with their terms are set aside in"a speci'al,,trust fund or escrow account irrevocably pledged to that redemption, retirement or" defea=arice of defeased Bonds (hereinafter called the "trust account"), then all right and.'interest, 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=unds so set aside and pledged, shall cease and become void. The owners=,of.defeased%Bonds shall!jha4tlieright to receive payment of the principal of and interest on the ;defeased,,Bonds from<th st7us ,account and, if the funds in the trust account are not available forsuchipayMent, shall have the residual right to receive payment of thel principal of and interest>on;tie'=defeased Bonds from Gross Revenue without any priority of lien or charge against such revenue ar'covenants with respect thereto except to be paid therefrom. After the establishing and full fundingtiofthe`frust=accont, the City may then apply any money in any other fund or account established Tor the:payment'or redemption of the defeased Bonds to any lawful purposes as it shall determine ubji sect'onlyto-'the rights, if any, of the owners of any other Parity Bonds then,outstanding. If the refunding plan provides;;that the defea"sed°>B©nds' or the refunding bonds to be issued be secured by cash and/or Governmental Obligations pending the prior redemption of the defeased Bonds and if such refunding:plan also provides that certain cash and/or Governmental Obligations are pledged irrevocably;for:the prior redemption of the defeased Bonds included in that refunding planten"only, the debt service on the Bonds which are not defeased Bonds and the refunding-.:bonds, the. ,a,::int of which is'®not so secured by the refunding lanshall be included in=thedco riputation o f ooy4ragecoverage fur determining compliance with the rate covenants. Within 45 days of any defeasance of Bonds, the City shall provide notice of defeasance of Bonds to Registered Owners of�Bondds being defeased, and to the Bond Insurer, if any, and to each party entitled to receive notice n accordance with Section 26. Section 21. ;=`Provision for;::Future Parity Bonds. The City reserves the right to issue Future Parity Bonds, f;,tlie, folio wing conditions are met and complied with at the time of issuance of those additional°bonds''' (a) There shall die 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 -21- P:120584\20584 24Q (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. f `y, g<4 After the 1998 Bonds, the 2002 Bonds, and the Bo0ds:;are no longer Outstanding, this subsection shall be amended to read as follows: (c}` The ordinance-providing for the issuance of such Future Parity Bonds shall provide for the Aeposit;intO tl e` 2eserve Fund rom the proceeds of those Future Parity Bonds of (1) an amount equal to the increaseie;in the`Reserve Requirement attributable to those Parity Bonds or (2)Reserve`Insurance or Alternate Security or an amount plus Reserve Insurance or Alternate Securityequal to the increase in`the Reserve Requirement attributable to those Future Parity Bonds. °At"tle-;discretion of the City, the City may provide for deposit into the Reserve Fund of other legally;;avalable money from Net Revenue or Reserve Insurance or Alternate Security;;either.on or prior to:tl e=:date of issuance of such Future Parity Bonds or within three years from.:the date of issuance of the Future Parity Bonds in three approximately equal annual payments and n such event, the ordinance providing forthe issuance of such Future Parity Bondsr*iorprovi 'ksiiCik,4osit. After the 1998 Bonds, the 2002„Bonds ;the 2003: '3onds'andl"the 2004 Bonds are no longer Outstanding, this subsection shall beamended to rea&'as follows: (c) The ordinance providing for the issuance of such'Future Parity B' rias shall p ovide'for the deposit into the Reserve Fund from the proceeds of those Future*P_ar y Bonds of (1 an amount equal to the increase in the Reserve Requirement attributable to,_diose Parity Bonds or (2)Reserve Insurance or Alternate Security or an amount plus Reseive:I sur:.ancp or Alternate Security equal to the increase in the Reserve Requirement:'attributable to thoseFutu'e Parity Bonds. At the discretion of the City, the City may provide,for:deposit unto the Reserve:Fund of other legally available money from Net :e.,.; •,:rain... 'or�Alternate Securiity on or prior to the date of issuance of such Revenue or�Zese�ve"Insurance:= Future Pant: Bonds. 11,;'.41;,:- The ordinance authorizing the issuance of such Future Parity Bonds shall provide for tiles;,ayentof mandatory redemption or sinking fund requirements into the applicable Parity Bond Fund for`anyy,Term Bonds oto,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 jTenn Bonds prior to their maturity date from money in the a',^ applicable Parity Bond:Fund ;; . , (e) There shall b'en file with 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; provided, once the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the -22- P:\20584\20584_24Q 2004 Bonds are no longer Outstanding, this Section shall be amended to read as follows: a certificate of the City Finance Director demonstrating that during any 12 consecutive calendar months out of the immediately preceding 24 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 1 (2) a certificate of a Professional Utility Consultant that in such consultant's opinion Net Revenue for any 12 consecutive calendar months, without,regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to tl e;Coverage Requirement for each year thereafter; provided, once the 1998 Bonds,,the2002'Boinds the 2003 Bonds and the 2004 Bonds are no longer Outstanding, this Section shall be,ai?: ended`tontread as follows: a certificate of a Professional Utility Consultant that i :sueh consulfiai t's'opin on Net Revenue for any 12 consecutive calendar months out of the mnediateiy preceding :24 calendar;months, without regard to deposits into or withdrawals from the Rate7Stabi'ization 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,µeffect and"l e nng ;charged or expressly %committed by ordinance to be made in the future ; ,G _ ` (B) Income derived:from customers'of`the Waterworks Utility who have become customers during the 12 consecutive mcintl•period,or=thereafter adjusted to reflect one year's Net Revenue from those customers,; (C) Incom :`=frorn any customerspobeY connected to the Waterworks Utility who have paid the required:�c9tm ction '>: m ;• i s (D) TheProfessional Utility Consultant's estimate of the Net Revenue to be derived from customers anticipatedto,connect for whom building permits have been issued• ,: „y° I rr (E) -Income;,receive?l or Wto be received which is derived from any person,.gfirrxi corporation or m icipal_corporation under any executed contract for water, sewage disposal`,or,o tier utility service, liidlIff Avenue was not included in the historical Net Revenue; (F) The Professional Utility Consultant's estimate of the Net Revenue to be derived"frori°customers with &isting homes or buildings which will be required to connect to any additions�toa$and=;improvefilients-and extensions of the Waterworks Utility constructed and to be paid for out4of the'procee st of the sale of the additional Future Parity Bonds or other additions to and improvements Viand 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 -23- P:\20584\20584_24Q 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. r: < Nothing contained herein shall prevent the City;rom issuing revenue bonds that are a charge upon Gross Revenue subordinate to the payments:requiredYto, be made therefrominto any Parity Bond Fund. `:ro :. i . Section 22. Approval of Purchase Agreement.';=:'The :Underwriter has`'`pr-esented the Purchase Agreement to the City pursuant to which theVnderwriter=h* offered to purchase the Bonds. The City Council finds that entering into the Purchase Agreemen€;is in the best interests of the City, and therefore accepts the offer contained it:=the Purchase;Aeeent and authorizes and directs the execution of the Purchase Agreement on,behalf of the City City officials, and delivery of the same to the Underwriter. [Section 23. Bond Insurance. ; .:;° yi' (a) Acceptance of Insurance In accordance with tl e offer of the Underwriter to purchase the Bonds, the City Council:::hereby approves,the;commitment of the Bond Insurer to provide a bond insurance policy, arae eeing the payment,when due of principal of and interest on the Bonds (the "Bond Insurance°•Policy'). The City Council further authorizes and directs all proper officers, agents, attorneyswand.employees of the City to cooperate with the Bond Insurer in preparing suchadd it onal;ya,�greements, certificates and other documentation on behalf of the City as shall be necessary-or n pro advisable iv di g for the Bond Insurance Policy. ' :;,ray;,..".;.��.<;..;�,�;•;: .•"` �''�•'.i.A"':. ",.-'a.." ,<�� (b) !:.!Payments Uiiiike'tlie:Bond Insurance Policy and Rights of the Bond Insurer. [TO ��, COME;_ Section 24. Delivery of Bonds`Temporary Bonds. The proper City officials, including, but not``limited:4o the City Finance``Director, are authorized and directed (a)to execute all documents necessary:to complete.thessuance and delivery of the Bonds to the Underwriter, including, but not°=limited to,,.the final official statement pertaining to the Bonds; and (b)to do everything necessary fi,T,,(I).tliy'preparation and delivery of a transcript of proceedings pertaining to the Bonds,°anA`(2)"the preparation, execution and delivery of definitive Bonds to the Underwriter, each without unreasonable delay. If definitive Bonds are not ready for delivery by the date of Closing agreed to by the City and the Underwriter, the City, upon the approval of the Underwriter, may cause to be issued and delivered to the Underwriter 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 -24-- P:\20584\20584 24Q 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. 1 Section 25. Application of Bond Proceeds. The accrued interest, if any, received by the City at Closing shall be depositd into the Bond Fund and shall be applied to the payment of interest first coming due on the Blonds. The remaining proceeds of the sale of the Bonds, less the?underwriter's discount and the bond insurance premium to be paid by the Underwriter on behalf of tle City[, plus the original issue premium,] shall be applied, upon receipt, as follows: the;amount;required to meet the Reserve Requirement shall be deposited into the Reserve Fundor';<40a.::o acquire Qualified Insurance, and the remainder shall be deposited into the'Project tnd\to paypart.of the;,costs of the Project. -..,,; •_: Except as provided by the Code and Section 19 of this ordinance, the interest"sand 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'19,ofthis ordinance;;-,if any money allocable to the Bond proceeds remains in the Project Fund afters, ayment of all the osts of the Project or after termination of the Project by the City. such mone�y'shall=;=be transferred to the Bond Fund and applied to the payment of the principal of ai d interest on'the Bonds Pending application as describd in this Section and subject to the requirements of the Code and Section 19 of this ordinance,,money allocable to`,theBonnd proceeds in the Project Fund may be temporarily deposited in' ch-;1institutions or;investedlin such investments as may be lawful for the investment of Cityffniids.. , Section 26. Undertaking Ito'Provide'Continuing Disclosure. This section constitutes the City's written.�ti`i;dertakir ge for,the benefit"=;of,tl e:,.Owners and Beneficial Owners of the Bonds required byes tb$0i),""n,(bi45);()r o f:the T1.e'ioy hereby agreesk,top;provide or cause to be provided to each then existing NRMSIR and to,the.;SID, if one is created'=iii=leach case as designated by the SEC, the following annual financial jRiphyRation and operating data (collectively, the "Annual Financial Information") for each prioxifscaUear, commencing=in 2008 with the calendar year ending December 31, 2007: (a) `"`Ainiusl'µ financial/stat ments prepared in accordance with the generally accepted accounting princnplsapphcable=;t ;governmental units, as such principles may be changed from time to time by the Wasl ington tate Auditor pursuant to RCW 43.09.200,which statements will not be audited, except thafiifand 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 Net Revenue; (c) Debt service coverage ratios; -25- P:120584120584_24Q (d) General customer statistics for the Waterworks Utility contained in the final official statement for the Bonds under the heading "The Waterworks Utility—Number of Water Customers," "—Water Billing," "—Number of Wastewater Customers," "—Wastewater Billing," "—Number of Storm Drainage Customers," and"—Storm Drainage Billing" and (e) A narrative explanation of the reasons for any amendments to this Section made during the previous fiscal year and-the impact of such amendments on the Annual Financial Information being provided. • ' ` The Annual Financial Information shall be prow ded&o -Yor;bef``re the last day of the seventh month following the end of such prior fiscal'year,'prow ded,after the,1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds,:°are:no longer,,Outst4hug:.,,the City shall provide the following Annual Financial Information;,on.orbefore the last day of°tie"nzth1nonth following the end of the prior fiscal year. The City's'current:.fiscal year ends`December 31. The City may adjust such fiscal year by providing written notice,of the°change of fisc"al--year to each then existing NRMSIR and the SID, if any. In lien iif``povidn such Annual Financial Information, the City may cross-reference to any "final `officiahstate ent" (as defined in the Rule) available from the MSRB or any other,f`docilments theretofore;:prgvided to each then existing NRMSIR or the SID, if one is created If not submitted as part of the Annual'Financia,1:Inforn1ation; then when and if available, the City shall provide its Annual Financial.Statements ; ,hicb-shall` ave been audited by such auditor as shall be then required or permitted 1by the'State law,:to-each then existing NRMSIR and to the SID, if any. The City further agrees to provide or causetto; be projvided, in a timely manner, to the SID, if any, and to each thenx xistzng NRMSIR, notice–of any of the following events with respect to the Bonds, if 1. ,-Principal'and.iiiterest payment;delinquencies; 2. Nero-paymeiiireated defaults;''' ' ,y;, Unscheduled debt service reserves reflecting financial difficulties;. 4: Uns, heduled draws,nn_dredit enhancements reflecting financial difficulties; 5. -=Substitution of credit oyliquidity providers, or their failure to perform; 6. Adveisetax opinions or events affecting the tax-exempt status of the Bonds; 7. Modificatiofsto rights of the Owners of the Bonds; 8. Bond calls (optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34-23856); 9. Defeasances of the Bonds; • -26- P:120584120584 24Q 10. Release, substitution or sale of property securing repayment of the Bonds; and 11. Rating changes. li Solely for purposes of disclosure, and not intending to modify this undertaking, the City advises that there is no property securing repayment of the Bonds. The City also agrees to provide or cause to be provided; n a timely manner, to the SID, if any, and to each then existing NRMSIR, notice of its failure to provide.'the Annual Financial Information for the prior fiscal year on or before the date;set for ;:above After the issuance of they Bonds, so long as the interests of the',O i'ers or Beneficial Owners of the Bonds will not be materially impaired ;thereby, as determined by a'party unaffiliated with the City (including, without limitatior,':a. trustee for the-Owners,;nationally recognized bond counsel or other'counsel familiar with the federa)securities law),or pursuant to a favorable "no-action letter" issued by the SEC, Os:::=Sectioi':<may only be amended in connection with any change in legal requirements, change in`lawor .change in the identity, nature or status of the obligated p�rson, or type of business conducted,and only in such a manner that the undertaking of the City, has so amendek would have:complied with»the requirements of the Rule at the time of the pnmary offering,after-taking,;into account:'any amendments or interpretations of the Rule, as well as any chaiige=in circtrristanees ' _- The City's obligations tol provide Annual Financial Information and notices of certain events shall terminate without aniendiiezt upon thOdefeasanc6,10Tior redemption or payment in full of all of the then outstanding BOOS; Section:This Section or,any provision hereof, shall be null and void if the City (i) obtains an opinionyof nationallyrecagnized bond counsel or other counsel familiar with the federal securiti`eslaws to the effect that those portions of the Rule which require this Section or any such provision;ate invalid, have been repealed retroactively or otherwise do not apply to the Bonds;,-;.,and (ii)1 notifies and':provides the SID, if any, and each then existing NRMSIR with copies of such:opinion. The right-of each Ower.or:.Beneficial'Owner of Bonds to enforce the provisions of this Section shall be limited to therighttoobtain specific enforcement of the City's obligations under this Section,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'Ci finance Director;�s`authorized and directed to take such further action on behalf of the City as may;he:neeessary, appropriate or convenient to carry out the requirements of this Section. far The City may elect'to.submit the information required by this Section to be filed with the NRMSIRs and the SID, if any, directly to DisclosureUSA.org unless or until the SEC withdraws its approval of this submission process. Section 27. Preliminary Official Statement Deemed Final. The City Council has been provided with copies of a preliminary official statement dated , 2007 (the "Preliminary Official Statement's), prepared in connection with the sale of the Bonds. For the sole purpose of the Underwriter's compliance with paragraph (b)(1) of the Rule, the City"deems -27- P:\20584\20584_24Q 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 28. Amendments. (a) The City Council from time to time and at any'time may.,pass an ordinance or ordinances supplemental hereof, which ordinance or ordinances thereafter shall become a part of this ordinance, for any one or more or all of the following purposes: (1) To add to the covenants and agreements of the:City in this ordinance, other covenants and agreements thereafter to be observed*hieh'shall not'.adversely affect the interests of the owners of any Bonds, or to surrender any right or power herein reserved:: (2) To make such provisions for the'purpose:of,curing any ambiguities or of curing, correcting or supplementing any defective provision contained in ths.ordinance in regard to matters or questions arising under such ordinances°as;tYe,City Council may,deem necessary or desirable and not inconsistent with such ordinances andwi ick shall not'adversely affect, in any material respect, the interest of the owners of*Os. _`I ,any such supplemental ordinance may be adopted without the consent of the owners of'-,`any:`,Bonds.`,at; any time outstanding, notwithstanding any of the provisions of subsection(b)"of this section: (b) With the consent of':the:;owners ofnot;4ess';than sixty-five percent (65%) in aggregate principal amount of the,Bonds'at the time outstanding, the City Council may pass an ordinance or ordinances supplemental:hereto for the purpose of adding any provisions to or changing in any manner or elarninating,,any of the provisions of this ordinance or of any supplemental ordinance;provided,xhowever;that no such supplemental ordinance shall: a (l)s< °�E��tea .drthe fixed maturity of>any Bonds, or reduce the rate of interest thereon, or:extend the time;tif;payment of interest from their due date, or reduce the amount of the principal thereof, or reduce,:anny,premium payable on the redemption thereof, without the consent.ofthe owner of each Bond so affected; or (2);. Reduce the aforesaid percentage of Bondowners required to approve any such supplemental"or=dinance, without the consent of the owners of all of the Bonds then outstanding. It shall not be necessary:='for the consent of Bondowners under this subsection (b) to approve the particular form,of;any proposed supplemental ordinance, but it shall be sufficient if such consent shall approve the substance thereof. For the purpose of consenting to amendments under this subsection (b), the Insurer shall be deemed to be the sole Registered Owner of the Bonds then outstanding. (c) Upon the adoption of any supplemental ordinance pursuant to the provisions of this Section, this ordinance shall be deemed to be modified and amended in accordance -28- P:\20584120564 24Q therewith, and the respective rights, duties and obligations of the City under this ordinance and all owners of Bonds outstanding hereunder shall thereafter be determined, exercised and enforced thereunder, subject in all respects to such modifications and amendments, and all terms and conditions of any such supplemental ordinance shall be deemed to be part of the terms and conditions of this ordinance for any and all purposes. (d) Bonds executed arid delivered after the execution of any supplemental ordinance passed pursuant to the provisions! of this section may have a rotation*to, any matter provided for in such supplemental ordinance, and if such supplemental irdiiance°;shall so provide, new Bonds so modified as to conform, in the opinion of theCityCotttl to,;any,modification of this ordinance contained in any such supplemental ordinance.'i iay b prepared:ai d,=delivered without cost to the owners of any affected Bonds then outstanding, nfrpk,SGlindefottaricellation of such Bonds in equal aggregate principal amounts ;';. (e) Exclusion of BondS Owned by City. BondS;oWne4V,e,held by or for the account of the City shall not be deemed outstanding for the purpose offany<vote orconsent or other action or any calculation of outstanding Bonds in this ordinance provided or randy:shall not be entitled to vote or consent or take any other action in this ordi4ride.,pr vvided NV (f) Bonds Held by Securities Repositories. Fpor so;long:as the Bonds are held in book entry only form, communications with the .owners shall-:be':made with Jthe securities depository who is the "Registered Owner" o'f the Bonds,40 communicatiozsfwith (and obtaining consents from) beneficial owners shall be madev>in accordarice;'iwith the°pperational procedures of the securities depository that is the "Registered Owner' atle,Bonds Section 29. Contract: Sa'ings,Clause. The covenants contained in this ordinance and in the Bonds shall constitute a contiract between the City and the Owner of each and every Bond. If any one or more of the,covenants''or;&agreements provided in this ordinance to be performed on the part of the City.=shall be declared byay 040,-,,9f competent jurisdiction and after final appeal al be (if any appeat en)'0,--b& ontrary to law,`then such covenant or covenants, agreement or agreementagreemenfs;!Sliallyberiiill'itid,void and shall be"deemed separable from the remaining covenants and agreen entslin this ordinance`an_ d„sl all in no way affect the validity of the other provisions of this ordinal ce or of the Bonds. s`Section 3(} , General Authorization; Ratification of Prior Acts. The Mayor, the City Finance Director°and`other appropriate officers of the City are authorized to take any actions and to execute doeitiiieritS'asZin,,theiryidkiiient may be necessary or desirable in order to carry out the terms of, and co p etejthe'transactions contemplated by, this ordinance. All acts taken pursuant to the authority of this°0rdinar cebut prior to its effective date are hereby ratified. Section 31. Effective' Date of Ordinance. This ordinance shall be effective upon its passage, approval and five days after publication. PASSED by the City Council this 22nd day of October, 2007. -29- P:\20584\20584_24Q Bonnie Walton, City Clerk APPROVED BY THE MAYOR this 22nd day of October,2007. x),„ • Approved as to Form: ,ftt;t,----,‘X. ri Bond Counsel Date of Publication: • tP,' m•••;•?,itt • ft " 1 er-M: -,• 2.;;;;A, '•.‘X ; a • >- '• -30- P:\2O5842O564_24Q • EXHIBIT A Project Description Proceeds of the Bonds are expected to be used for the following Projects: • Renton Village Storm System Improvement—planning, designing and constructing a storm system to increase capacity. • Gypsy Basin/Ripley Lane Storm System Improvement-:-`rep°lacmg an existing culvert • which will connect into a 60-inch storm system/9,011e ne Seaha „s k'. headquarters/training facility site. Y • SW 34th Street Culvert Replacement—re lacm existiu culvert tejin zone-:=. :-7 conveyance activity,reduce upstream flooding ar4,d improv, fish passage • Hazen 565 Zone Reservoir—designing and constructin a-4 Million gallon reservoir. • Emergency Power to Pump Stations—inistalling;ornergency electncallpower generation facilities. I i ' •...=:iia}`:'=';•3=y, • Summerwind/Stongate Lift Station`Replacement--constructing a new station to ensure sufficient capacity in a rapidly gro' 'ini area. • Central Plateau Interceptor=Phase 2—const .tcting pan i terceptor to serve eastern portion of service area a :_ 14, ' ar J•CT 4sa.•.i=., A-1 P:120584120584 24Q EXHIBIT B Form of Bonds The Bonds shall be in substantially the following form: UNITED STATES OF AMERICA; [Statement of Insurance] STATE OF WASHINGTON ' ;> CITY OF RENTON y WATER AND SEWER REVENUE BOND,°20.07: INTEREST RATE: MATURITWA ;r i'70I,ISIP NO.: REGISTERED OWNER: CEDE & Co. PRINCIPAL AMOUNT: d; r.\ ., ,. 5•', • The City of Renton, Washington1 a municipal,cor oration organized and existing under and by virtue of the laws of tl e f State of Wasi%i gtgn ,(herein called the "City") hereby acknowledges itself to owe an.4:`for'valie received promises to pay, but only from the sources and as hereinafter provided, to the;Rgisteted Owner identified above, or registered assigns, on the Maturity Date-identified above``tIWPAlieipal Amount indicated above and to pay interest thereon from/the date:_pfdpli4ty, or the :ost`ireceht date to which interest has been paid or duly provided for.:at.;Q e-Interest)Rate et forth above ;payable on June 1, 2008, and semiannually thereafter'ott Ihe first days f•each':'DecemberVand June until such principal sum is paid or paymenihas been duly provided <it- P A "`` oth 1principal of and interest o this bond are payable in lawful money of the United States ofAi eii. at Interest and principal shall be paid as provided in the Blanket Issuer Letter of Representations;(the;;"Letter of�„epresentations") by the City to The Depository Trust Company ("DTC"). The fiscal`agetiey,;,,o ,the,State of Washington has been appointed by the City as the authenticating agent; ayiige;pagent and registrar for the bonds of this issue (the "Bond Registrar"). Capitalized tp;i;is/used in this bond that are not specifically defined have the meanings given such term§44n Ordinance No. of the City (the "Bond Ordinance"). Reference is made to the Bond Ordinance and any and all modifications and amendments thereto for a description of the nature and extent of the security for the bonds of this issue, the funds or revenues pledged, and the terms and conditions upon which such bonds are issued. This bond is one of an authorized issue of bonds of the City of like date and tenor except as to number, amount, rate of interest and date of maturity in the aggregate principal amount of B-1 P:\20584\20584_24Q $ . This issue of bonds is authorized by the Bond Ordinance for the purposes of providing money to pay part of the cost of construction and acquisition of certain improvements to the Waterworks Utility, fund the Reserve Fund, and to pay costs of issuance of the bonds of this issue, all as specified in the Bond Ordinance. This bond and the bonds of this issue are payable solely from the special funds of the City defined as the "Bond Fund";and the "Reserve Fund" in the Bond Ordinance. The City has irrevocably obligated and bound itself to pay into the Bond Fund:uout o zthe„Net Revenue or from such other moneys as may be provided therefor certain amounts-recessaiy•to pay and secure the payment of the principal and interest on such bondsr ';.Tlhe,bondss'.of;this;issue are not general obligations of the City. The bonds of this issue are not "private activity fborids",as such terpin:'is-'.defined/in the Internal Revenue Code of 1986, as amended (the "Code").: [The bonds of't:es>issue'are not "qualified tax-exempt obligations” under Section 265(b),4,the Code;;],° 'N The bonds of this issue are issued under and_in accordance';with,thes provisions of the Constitution and applicable statutes of the State.of,Washington andduly adopted ordinances of the City. The City hereby covenants and agrees:with the owrierof this bond/that it will keep and perform all the covenants of this bond and of41:1e.B6nd'0rd11'46 -:to be by it kept and performed, and reference is hereby made to the Bond Ordinance fora completest?atement of such covenants. t. . , The City does hereby pledge,and bind itself:.to`set aside liom the Waterworks Utility Fund out of the revenue of the Waterworks Utility'a id .to pay into the Bond Fund and the Reserve Fund the various amounts° �equired by the; Bond'Ordinance to be paid into and maintained in such Funds, all wf/hiri:the times prove led t y the Bond Ordinance. To the extent more particularly provided by th;;r: 'Ordinance, the amounts so pledged to be paid from the Waterworks Utility Fund out of the>=revenue of the Waterworks Utility into the Bond Fund and the account therein=dealt b a4ien and cl arge thereon equal in rank to the lien and charge upon said revenue 6i `aIn imts req°meed to pay and secure the payment of the 1998 Bonds, the 2002 Bonds, the;'2O03:Borids;'an4 the,2004 Bonds'and,any revenue bonds of the City hereafter issued on a parity w,th�the bonds oPt `is;issue,and superior to all other liens and charges of any kind or nature"except Maintenance and Opiratidn Expense. Thepledge of Net Revenue,and other obligations of the City under the Bond Ordinance may be discharged a nor prior tojthe maturity or redemption of the bonds of this issue upon the making of provision for the payi eiit thereof on the terms and conditions set forth in the Bond Ordinance. • :: , \,'•f=�'•-:.5��< i,,=' ,psi. The bonds of thi0ue'7are subject to redemption prior to their scheduled maturities as provided in the Bond Ordinance. This bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Ordinance until the Certificate of Authentication hereon shall have been manually signed by the Bond Registrar. B-2 P:\20584‘20584_24Q • It is hereby certified that all acts, conditions, and things required by the Constitution and statutes of the State of Washington to exist, to have happened, been done, and performed precedent to and in the issuance of this bond have happened,been done, and performed. IN WITNESS WHEREOF, the City of Renton, Washington has caused this bond to be signed with the facsimile or manual signature of the Mayor, to be attested by the facsimile or manual signature of the City Clerk, all as of this day of ::, , 2007. CITY OF RENTON'WASHINGTON -or."manual ATTEST: } '' /s/facsimile or manual ",, ✓` 9'; w City Clerk :<.+'; J,, ^a+ct kt�kq fi,^i"aN i'„?• ° The Bond Registrar's certificate authentic ation,on,the;Bonds,shall be in substantially the � following form: CERTIFICATES OF AUTT:E mCATION Date of Authentication: a .• , 2007 This bondjs.one<,of the bonds descHbed in the within-mentioned Bond Ordinance and is one of the Water'azd Sewer,Revenue'Bonds;'2007 of the City of Renton, Washington, dated _„ <`= 'r.'• : WASHINGTON STATE FISCAL L ,. AGENCY,Registrar • ... /-;-••,5 44, By Authorized Signer B-3 P:\20584\20584 24Q • CITY OF RENTON, WASHINGTON RESOLUTION NO. 3900 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON APPROVING CERTAIN EXPENDITURES FOR REIMBURSEMENT FROM THE PROCEEDS OF DEBT TO BE ISSUED IN THE FUTURE. WHEREAS, the City anticipates constructing large capital projects for the purpose of maintaining its ability to provide needed utility services; and WHEREAS, the City wil issue utility revenue bonds to provide funds for these capital projects; and WHEREAS, some expenses on the projects will be incurred by the City prior to the issuance of said bonds; and WHEREAS, federal law requires that the City declare its intent to reimburse its expenses from the planned sale of bonds. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON DOES HEREBY RESOLVE: SECTION I. The City of Renton, Washington (the "City") reasonably expects to reimburse the expenditures described herein with the proceeds of debt to be incurred by the City (the "Reimbursement Bonds"). SECTION II. The expep ditures with respect to which the City reasonably expects to be reimbursed from the proceeds of Reimbursement Bonds are for the acquisition, construction and equipping of the following: • Water: Highland 565 in the amount of$3,280,000; • Wastewater: Central Plateau in the amount of$2,225,000; • Surface Water: SW 34th in the amount of$1,335,000 and Renton Village in the amount of$1,115,000; plus the payment of issuance costs. RESOLUTION NO. 3900 SECTION M. The maximum principal amount of debt obligations expected to be issued for the project described in Section II is $8 million. The-expenditures to be reimbursed from bond proceeds will be made from the Utilities Funds. PASSED BY THE CITY COUNCIL this 13th day of August , 2007. --764/11-11'716el/nt-4A/k/. Michele Neumann, Deputy City Clerk APPROVED BY THE MAYOR this 13th day of August , 2007. Kathy Keolker, Mayor ;Ted Lawrence J. Warren, City Attorney RES:1288:07/23/07:ch August 13, 2007 Renton City Council Minutes Page 282 Responding to Councilmember Corman's questions, Ms. Briere confirmed that by upholding Council's approval of the vacation petition, which includes retention of an easement for a walkway, one property owner can move forward with his project and the other must wait. Ms. Briere noted that she wants the Committee report to reflect that the filing fees for Mr. Russell's future vacation petition will be waived. Councilmember Clawson noted that neither party would benefit if the property were vacated down the middle. (See page 283 for further discussion on this matter.) RESOLUTIONS AND The following resolutions were presented for reading and adoption: ORDINANCES Resolution#3899 A resolution was read authorizing the Mayor and City Clerk to enter into an Airport: Noise Study Cost interlocal agreement between the cities of Renton and Mercer Island regarding Sharing, Mercer Island an Aviation Noise Study. MOVED BY PALMER, SECONDED BY LAW, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. Resolution #3900 A resolution was read approving certain expenditures for reimbursement from Finance: Capital Expenditure the proceeds of debt to be issued in the future. MOVED BY PERSSON, Reimbursement from Utility SECONDED BY CLAWSON, COUNCIL ADOPT THE RESOLUTION AS Bond Revenue READ. CARRIED. The following ordinance was presented for first reading and referred to the Council meeting of 8/20/2007 for second and final reading: Finance: Water Shut Off An ordinance was read amending Section 8-4-34 of City Code by adding Charge Adjustments for Subsection C. providing for discretion in administration of the fees provided for Special Circumstances therein: MOVED BY PERSSON, SECONDED BY CLAWSON, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 8/20/2007. CARRIED. The following ordinances were presented for second and final reading and adoption: Ordinance#5298 An ordinance was read amending the 2007 General Fund Budget to appropriate Human Services: Summer $37,734 for the 2007 Summer Lunch and Housing Repair Assistance Programs, Lunch&Housing Repair which are funded by grant revenues. MOVED BY PERSSON, SECONDED Assistance Programs, Budget BY CLAWSON, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL Amend CALL: ALL AYES. CARRIED. Ordinance#5299 An ordinance was read amending the 2007 Budget by increasing the amount of Utility: Upper Springbrook funds in the Surface Water revenue account and expenditure account by Creek Restoration, King $50,000 pursuant to the Upper Springbrook Creek Restoration project Conservation District Number agreement with the King Conservation District Number 9. MOVED BY 9, Budget Amend CLAWSON, SECONDED BY BRIERE, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL: ALL AYES. CARRIED. NEW BUSINESS Councilmember Persson inquired about the status of the complaint of noise • Community Services: emanating from the RiverRock Restaurant at Maplewood Golf Course. Chief Maplewood Golf Course, Administrative Officer Covington stated that numerous attempts to measure the RiverRock Restaurant Noise noise level from the complainant's property have been unsuccessful due to the complainant not allowing City employees on his property. Mayor Keolker reported that City employees had been sent to the area at 1:00 a.m. on a night when music was playing and they could not hear the music. City Attorney Warren stated that a sound barrier was being installed to further reduce noise emissions from the band area. ,/august 13, 2007 Renton City Council Minutes Page 281 r • *MOVED BY PERSSON, SECONDED BY NELSON, COUNCIL APPROVE ITEM 6.e. AS PRESENTED. CARRIED. UNFINISHED BUSINESS Council President Nelson presented a Committee of the Whole report regarding Committee of the Whole the Council policies. The Committee recommended that Council adopt the Council: Policies revisions to City of Renton Policies and Procedures 800-01, 800-02, 800-03, and 800-04. MOVED BY NELSON, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance Committee Finance Committee Chair Persson presented a report recommending approval of Finance: Vouchers Claim Vouchers 262337-262809 and four wire transfers totaling$4,378,309.53; and approval of 315 Payroll Vouchers,two wire transfers, and 733 direct deposits totaling$3,368,501.48. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance: Water Shut Off Finance Committee Chair Persson presented a report recommending Charge Adjustments for concurrence with the staff recommendation that the Finance and Information Special Circumstances Services Administrator, or his/her designee, be given authority to adjust$60 water shut off charges on utility accounts,under special circumstances. The committee further recommended that the ordinance regarding this matter be presented for first reading. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See page 282 for ordinance.) Finance: Capital Expenditure Finance Committee Chair Persson presented a report recommending Reimbursement from Utility concurrence in the staff recommendation to declare the City's intent that certain Bond Revenue capital expenditures be made for water,wastewater and surface water utility �. (l I� projects, and that reimbursement be made from utility revenue bonds to be ryV � issued in the Fall of 2007. The projects are as follows: Utility Project Budget Timing Water Highlands 565 $3,280,000 2007/2008 Wastewater Central Plateau $2,225,000 2007/2008 Surface Water SW 34th $1,335,000 2007/2008 Renton Village $1,115,000 2007/2008 The Committee further recommended that the resolution regarding this matter be presented for reading and adoption. MOVED BY PERSSON, SECONDED . BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See page 282 for resolution.) Court Case: Scoccolo Finance Committee Chair Persson presented a report regarding the Scoccolo Construction, CRT-98-008 lawsuit costs. The Committee was briefed on 8/13/2007 and recommended closure of the referral. MOVED BY PERSSON, SECONDED BY LAW, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Planning&Development Noting that the report concerning the vacation of Index Pl.NE is being held in Committee Committee, Councilmember Briere commented on the location of the 15-foot Vacation: Index P1 NE, A&D walkway easement,the agreement between the two affected property owners, Quality Construction the existence of other walkways in the area, and the Trails and Bicycle Master Company, VAC-07-001 Plan study. She indicated that within approximately one year, the City should know the results of the trail study, and at that point affected property owner Kevie Russell could petition for a vacation of the easement-affected property if it was found that the City did not need the easement. , • :FI'NANCE CO TTE _ iV�1VII E_ ' • i �.CO .T•T• 1VIMY EE'REPORT` 3 - Au t•1;3', 20" 7;:: r . ; 's 0 RE.. S'E1VIE �I N'T:OF";C� TAI;� ,:E XP ND•.' IIVI$LTR �' IT' `' I:JR2✓ FROIv1'P O °EED ,�F:•� ,.: . _..:' ..: . . . . . .... .. • R C S O IJTIL;ITL'�R�V1?NUEBQND .•... .:::: Jut 23-;200.7. • ';. : r.: r•, • ::;:The:,Finance:Committee recon mends concurrencelin::the::staff'reco a 'dationto::decla 'e'th Ci s i e't' - - nt n th�t�'certairi:ca�pital �x eiiditure �ade�.for; ati .:Wastev�atei• �d��iirf�ce' ter uti i ro ects,.. d -Cj = , a�... . .at reixnbursement�:b'e�•' ade=�frpri ;I7ti'1%�`�Re�eiue�`l�oid$•�to��;be` `i's..� ft� K,'tir,� , >cssu . h _ . �. ,:-:::-......-•,..,, d m t e.' all .2007."Th . . . .. ,. e the,:„ pf . e. ro ects�ar � = oilou%s •a 1: =r • yi r, ,.. ,.. ... : ._ t�' � _��_:::.,.-:.. .:;• �Buduet. . ..,...—,.,..,,,..-,--,..7.20071..,209 ::::„. .'. ..,.. .:Tilnin •Wat r: e 14-l a ,,,,..• :5.. .g.. 07`%'2 8`>> 0 0 s,, <r•i 'tyR,'�'. ,-1 a_ 't3".: - xTtk a 4 , �1 t ,,,,...,-.:..;•.-.,•,..-:;,,,-..„,.. .,.. " A to :...-.....,, ,,,!...,,•:-;,,,,.,!,...,e'� 'a1�P e u' 222'` t 1 t a , S,00` � $ Or -•'ZU07L'�200 Ss / f' t: tix•, :J,'Y to i S 4• bf S :fac 'Water. ' ur SW': 4th; e 3 '1 X3'3 - �3� 5000'`: :$ 007''/ •008'�•: e't nVi." -R lla'e�: .1.>Tg , oao � s :��oo�i�%� o� � � os- ..The �..omm tee`'furthe 'tr•,eco 'ends:that e`Resolution re' arrd� M`tlu'-`:'m'• . . , .. t,C.. t s. affe�'1e.:presented for�'� .. d rr • tea i d:ado h �.:�-. `��:. : r . . . y s • • i .• ' i.:t ' 'i .D'on'ArsouC ap. r. :A: • ' " ` Denrus:;'�V::Law=.'V. ceChair:- : ifii. e r' D� 1 S an •an e .e�` mb rr . �yy ooc: 'Micfiael E. •pile •• ria'ce`$c'IS drrii is `t n A r n :Gre Zimm an Pianm uildin u61ic:Works Administrator' gg. Gn??. ,, 48�. �. ,.. • ... . -'Linda P rks:F'iscal S siDre � eivice' 'clot r' a ,s. r. ' July 23,2007 Renton City Council Minutes Page 257 Council and an aide to King County Councilmember Reagan Dunn is looking into the matter. He encouraged the City to take action on this noise problem. 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 7/16/2007. Council concur. 7/16/2007 Appointment: Advisory Mayor Keolker appointed the following individuals to the Advisory Commission on Diversity Commission on Diversity: Serena Aquino,4317 SE 4th Pl., Renton, 98059 (term expires 12/31/2009);Audrey Godwin, 913 S. 32nd St.,Renton, 98055 (term expires 12/31/2009); Raymond Lam, 511 Rosario Pl.NE, Renton, 98059 (to fill the unexpired term, 12/31/2007, of Kelly Roberts who resigned); and Erica Rehberg, 1300 S. Eagle Ridge Dr., R-1119, Renton, 98055 (term expires 12/31/2009). Refer to Community Services Committee. CAG: 07-104, 2007 Street City Clerk reported bid opening on 7/17/2007 for CAG-07-104, 2007 Street Overlay with Curb Ramps, Overlay with Curb Ramps; three bids; engineer's estimate$846,842.21; and Lakeside Industries submitted staff recommendation to award the contract to low bidder, Lakeside Industries, in the amount of$856,702.77. Council concur. i Plat: Monterey Place II,NE Development Services Division recommended approval,with conditions, of the 16th St, FP-07-040 Monterey Place II Final Plat; two single-family lots on an 11,459 square foot parcel located at NE 16th St. and Monterey Ave.NE. Council concur. (See page 25,8 for resolution.) Finance: Capital Expenditure Finance and Information Services Department requested authorization to Reimbursement from Utility reimburse certain capital expenditures from the proceeds of the sale of utility Bond Revenue revenue bonds to be issued in the future. Refer to Finance Committee. Vacation: Index PINE, A&D Technical Services Division reported receipt of appraisal performed for the Quality Construction vacation of a portion of Index Pl.NE, north of NE 7th St. (petitioner A&D Company, VAC-07-001 Quality;Construction, LLC), and requested Council accept the appraisal and set compensation at$57,300 for the right-of-way. Council concur. ' CAG: 01-155, Maple Valley Transportation Systems Division recommended approval of two supplements to Hwy(SR-169)HOV/Queue CAG-01-155, agreement with Washington State Department of Transportation Jump Phase 2, WSDOT for Maple Valley Hwy. (SR-169) HOV/Queue Jump Improvements Phase 2, regarding cost sharing terms and adding $2,500,000 in construction funding and construction management services. Council concur. (See page 259 for resolution.) MOVED BY NELSON, SECONDED BY PALMER, COUNCIL APPROVE THE CONSENT AGENDA AS PRESENTED. CARRIED. CORRESPONDENCE Correspondence was read from Chuck Gitchel,4401 SE 3rd St., Renton, 98059, Citizen Comment: Gitchel - requesting modification to the cell phone tower regulations, claiming that Wireless Communications towers hinder property owners' ability to sell their homes. Facilities Regulations Added Correspondence was entered into the record from the following parties Citizen Comment: Various - expressing concerns regarding the proposal to place a T-Mobile monopole at SE T-Mobile Monopole 3rd Pl.: James Scott Daljleish; Bruce and Ruth Rutledge; Charles D. Gitchel Placement, SE 3rd Pl, CU-07- and Frances L. Gitchel; Stephen T. Ames, Prudential NW Realty; Bonnie 065 Watson, Keller Williams Realty; Joyce M. Crock; Doug Mears;Pauline Blue; Anne Miller; Gail and Anthony Knell; Cory and Lori Foster; Joel and Heidy Barnett; J.E. Telquist; Dennis and Cindy Shimmel; James and Kimberly Stark; { C OF'��RENTON COUNCIL AGEND) LL AI#: e 6 • Submitting Data: For Agenda of: Dept/Div/Board.. Finance & IS Department July 23, 2007 Staff Contact Michael E. Bailey Agenda Status Finance/IS Administrator Consent X Subject: Public Hearing.. Correspondence.. Reimbursement Authority from Bond Proceeds Ordinance Resolution X Old Business Exhibits: New Business Issue Paper Study Sessions Resolution Information Recommended Action: Approvals: Legal Dept Refer to Finance Committee Finance Dept Other Fiscal Impact: Expenditure Required... Transfer/Amendment Amount Budgeted Revenue Generated Total Project Budget City Share Total Project.. SUMMARY OF ACTION: Staff anticipates recommending the issuance of Utility Revenue Bonds to occur in the Fall of 2007. The proceeds of the bond sale would be used for Water, Wastewater, and Surface Water projects, as detailed in the issue paper. IRS regulations require the issuer of municipal bonds to authorize the reimbursement of project costs incurred prior to the sale date of the bonds with a "reimbursement resolution"in the form of the proposed resolution. STAFF RECOMMENDATION: Adopt the resolution authorizing the City to reimburse the capital accounts with proceeds from the bond sale. II H:\FINANCE\ADMINSUP\03_Ordinances_Resolutions\2007_Resolution for Reimbursement Authority from Bond Proceeds.doc • < Q FINANCE Al ;; ® ♦ INFORMATION SERVICES DEPARTMENT MIL ? Nrv(5MEMORANDUM DATE: July 11, 2007 TO: Toni Nelson, Council President Members oifthe Renton City Council VIA: Kathy Keolker,Mayo jfia) G,, l FROM: Michael Bailey, FIS Administrator SUBJECT: Reimbursement Authority from Bond Proceeds ISSUE Should the City adopt a resolution authorizing the reimbursement of capital expenditures from bond proceeds for utility projects? BACKGROUND Staff anticipates recommending the i suance of Utility Revenue Bonds to occur in the Fall of 2007. The proceeds of the bond sale would be used for the following projects: Utility Project Budget Timing Water Highlands 565 $3,280,000 2007/2008 Well 5A $3,420,000 2008 /2009 Wastewater Central Plateau $2,225,000 2007/2008 Summerwind Lift Station $2,200,000 2008/2009 Surface Water SW 34th $1,335,000 2007/2008 Renton Village $1,115,000 2007/2008 Lake Ave. S/Rainier Ave. $650,000 2008 /2009 The debt service related to the bonds'necessary to provide for these projects has been included as a cost in the rate models developed'over the past year. IRS regulations require the issuer of municipal bonds to authorize the reimbursement of project costs incurred prior to the sale date of the bonds with a"reimbursement resolution"in the form of the proposed resolution. RECOMMENDATION Adopt the resolution authorizing the!City to reimburse the capital accounts with proceeds from the bond sale for the above projects. MEB/dlf cc: Jay Covington,CAO Marty Wine,Assistant CAO Gregg Zimmerman,P/B/PW Administrator Linda Parks,Fiscal Services Director i h:\finance\adminsup\02_issuepapers_memos to council or mayor\2007_bond issue reimbursement resolution.doc CITY OF RENTON, WASHINGTON RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON APPROVING CERTAIN EXPENDITURES FOR REIMBURSEMENT FROM THE PROCEEDS OF BONDS TO BE ISSUED IN THE FUTURE. WHEREAS, the City anticipates constructing large capital projects for the purpose of maintaining its ability to provide needed utility services; and WHEREAS, the City will issue utility revenue bonds to provide funds for these capital projects; and WHEREAS, some expenses on the projects will be incurred by the City prior to the issuance of said bonds; and WHEREAS, federal law requires that the City declare its intent to reimburse its expenses from the planned sale of bonds. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON HEREBY RESOLVES: SECTION I. The City of Renton, Washington (the "City") reasonably expects to reimburse the expenditures described herein with the proceeds of bonded indebtedness to be incurred by the City(the "Reimbursement Bonds"). SECTION II. The expenditures with respect to which the City reasonably expects to be reimbursed from the proceeds of Reimbursement Bonds are for the acquisition, construction and equipping of the following: • Water: Highland 565 in the amount of$3,280,000; • Wastewater: Central Plateau in the amount of$2,225,000; • Surface Water: SW 34th in the amount of$1,335,000 and Renton Village in the amount of$1,150,000; plus the payment of issuance costs. RESOLUTION NO. SECTION III. The maximum principal amount of debt obligations expected to be issued for the project described in Section II is $8 million. The expenditures to be reimbursed from bond proceeds will be made from the Utilities Funds. PASSED BY THE CITY'COUNCIL this day of , 2007. Bonnie I. Walton, City Clerk APPROVED BY THE MAYOR this day of , 2007. Kathy Keolker, Mayor Approved as to form: Larry J. Warren, City Attorney c:\docume--1\bwalton\locals---1\temp\2007 reimbursement resolution.doc